Deere Reports Higher Third-Quarter Earnings



    
    - Net income of $575 million reaches record level for period; EPS climbs
    12%.

    - Vigorous global farm sector drives 38% sales gain outside U.S. and
    Canada.

    - Consistent execution aids non-agricultural businesses, which remain
    solidly profitable in spite of U.S. economic downturn.

    
    MOLINE, Ill., Aug. 13 /CNW/ -- Deere & Company (NYSE:   DE) today announced
worldwide net income of $575.2 million, or $1.32 per share, for the third
quarter ended July 31, compared with $537.2 million, or $1.18 per share, for
the same period last year. For the first nine months, net income was $1.708
billion, or $3.89 per share, compared with $1.400 billion, or $3.06 per share,
last year.
    
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20030326/JOHNDEERELOGO)
    
    Worldwide net sales and revenues increased 17 percent, to $7.739 billion,
for the third quarter and were also up 17 percent, to $21.036 billion, for the
first nine months. Net sales of the equipment operations were $7.070 billion
for the quarter and $19.070 billion for nine months, compared with $5.985
billion and $16.066 billion for the respective periods last year.
    A continuation of positive conditions in the global farm sector is
helping the company maintain record financial results at a time of rising raw
material costs and a sluggish U.S. economy. "Though agricultural commodity
prices have moderated, they remain quite favorable by historical standards and
are continuing to provide strong support to farm incomes and to the sale of
productive farm machinery worldwide," said Robert W. Lane, chairman and chief
executive officer. "What's more, Deere's entire business lineup is benefiting
from the consistent execution of our plans to rigorously manage costs and
assets and create a more resilient company overall. Our non-agricultural
operations have remained on a profitable course as a result, in spite of the
economic downturn in the United States."
    
    Summary of Operations
    
    Net sales of the worldwide equipment operations increased 18 percent for
the quarter and 19 percent for the first nine months. Included were positive
effects for currency translation and price changes of 7 percent for the
quarter and year to date. Equipment net sales in the United States and Canada
were up 6 percent for the quarter and 7 percent for the nine-month period. Net
sales outside the United States and Canada increased by 38 percent for the
quarter and 41 percent for nine months, including a positive currency-
translation effect of 13 percent for the quarter and year to date.
    Deere's equipment divisions reported operating profit of $818 million for
the quarter and $2.377 billion for nine months, compared with $708 million and
$1.807 billion for the respective periods last year. The quarterly improvement
was largely due to the favorable impact of higher shipment volumes, partially
offset by higher selling, administrative and general expenses.  Additionally,
an increase in raw material costs offset improved price realization in the
quarter. For nine months, the improvement was primarily due to the favorable
impact of higher shipment volumes and improved price realization, partially
offset by higher selling, administrative and general expenses and increased
raw material costs. A higher effective tax rate had a negative impact on
equipment operations' net income for both periods.
    Trade receivables and inventories at the end of the quarter were $7.457
billion, or 30 percent of previous 12-month sales, compared with $6.227
billion, or 30 percent of sales, a year ago.
    Financial services reported net income of $83.4 million for the quarter
and $267.5 million for nine months versus $92.1 million and $266.8 million
last year. Within financial services, results for the credit operations were
lower for both periods primarily due to higher selling, administrative and
general expenses, an increase in leverage, a higher provision for credit
losses, and lower income from receivable sales. Partially offsetting these
factors were growth in the credit portfolio and higher commissions from crop
insurance. For both periods, the decrease in results for the credit operations
was offset by an improvement in income from other miscellaneous service
operations.
    
    Company Outlook
    
    Company equipment sales are projected to increase by about 21 percent for
the full year and 29 percent for the fourth quarter of 2008. Included in the
forecast is about 5 percent of currency translation impact for the year and
about 3 percent for the quarter. Deere's net income is forecast to be about
$425 million for the fourth quarter. Escalating raw material costs are
expected to have an impact on margins for the quarter.
    
    Company Summary
    
    Deere's performance is receiving support from actions to produce more
sustainable financial results, to attract and serve customers throughout the
world, and from positive global economic trends. "We are continuing to make
investments in new products, additional manufacturing capacity, and new
businesses to serve an expanding global customer base," Lane said. "These
steps put the company on an even stronger footing to benefit from powerful
trends sweeping the world such as growing affluence and increasing demand for
food, energy and infrastructure. In our view, these trends have staying power
and should help the company continue delivering a high level of customer value
and strong financial results well into the future."
    
    Equipment Division Performance
    
    Agricultural. Sales increased 35 percent for the quarter and 34 percent
for nine months, with the improvement in both periods due to higher shipment
volumes, the favorable effects of currency translation, and improved price
realization. Operating profit was $634 million for the quarter and $1.748
billion for nine months, compared with $431 million and $1.055 billion last
year. Operating profit for both periods was higher primarily due to the
favorable impact of higher shipment volumes and improved price realization,
partially offset by higher raw material costs and higher selling,
administrative and general expenses.
    Commercial & Consumer. Division sales declined 1 percent for the quarter
and increased 6 percent year to date. A landscape operation, acquired in the
third quarter of 2007, accounted for a sales increase of 5 percent for the
quarter and 9 percent year to date. Operating profit was $91 million for the
quarter and $253 million year to date, compared with $127 million and $315
million a year ago. Operating profit was down for the quarter due to higher
selling, administrative and general expenses, increased raw material costs and
lower sales volumes, partially offset by improved price realization. The nine-
month decline in operating profit was primarily due to higher selling,
administrative and general expenses related to growth in landscape operations
and increased raw material costs. Partially offsetting these factors for nine
months were an increase in shipment volumes, improved price realization and a
more favorable product mix.
    Construction & Forestry. Pressured by U.S. market conditions, sales were
down 7 percent for both the quarter and year to date. Operating profit was $93
million for the quarter and $376 million for nine months, versus $150 million
and $437 million a year ago. Operating profit was lower largely due to lower
shipment volumes for both periods and higher raw material costs for the
quarter. Improved price realization more than offset higher raw material costs
for nine months.
    
    Market Conditions & Outlook
    
    Agricultural. With help from continuing strength in the global farm
sector, worldwide sales of the company's agricultural equipment are forecast
to increase by about 38 percent for full-year 2008. This includes about 8
percent related to currency translation.
    Farm-machinery industry sales in the United States and Canada are
forecast to be up 20 to 25 percent for the year, led by a substantial increase
in large tractors and combines. Agricultural commodity prices remain at
healthy levels and are lending continued support to farm income in the United
States and other areas.
    Industry sales in Western Europe are forecast to be up about 5 percent
for the year.  Greater increases are expected in Central Europe and the CIS
(Commonwealth of Independent States) countries, including Russia, where demand
for productive farm machinery is growing rapidly. South American markets are
showing further improvement with industry sales forecast to increase by about
40 percent for the year. Company sales in Brazil are being helped by an
expanded product line, additional tractor capacity, and rising demand for
sugarcane harvesting equipment. Deere's sales have moved significantly higher
in Australia, where the farm sector is experiencing a strong recovery.
    Commercial & Consumer. John Deere commercial and consumer equipment sales
are projected to be up about 4 percent for the year. The landscapes operation
acquired in third-quarter 2007 is expected to account for about 6 percent of
the yearly improvement. Sales gains from new products are partially offsetting
the impact of the U.S. housing slowdown and weakening economy.
    Construction & Forestry. U.S. markets for construction and forestry
equipment are forecast to remain under continued pressure due to a sharp
decline in housing starts, which are expected to reach 60-year lows in 2008.
Non-residential construction is projected to be somewhat above last year's
relatively healthy rate. Although the U.S. housing sector is negatively
affecting forestry equipment markets in the United States and Canada, forestry
sales in other key markets are expected to rise in 2008.
    In this weak environment, Deere's worldwide sales of construction and
forestry equipment are forecast to decline by approximately 5 percent for the
year. Company sales are receiving benefit from new products and from factory-
production levels being more closely aligned with retail demand. In addition,
company sales outside the United States and Canada are experiencing strong
growth.
    Credit. Full-year 2008 net income for Deere's credit operations is
forecast to be approximately $335 million. The forecast decrease from 2007 is
primarily due to higher selling, administrative and general expenses, as well
as increases in leverage and in the provision for credit losses, partially
offset by growth in the credit portfolio.
    
    John Deere Capital Corporation
    
    The following is disclosed on behalf of the company's credit subsidiary,
John Deere Capital Corporation (JDCC), in connection with the disclosure
requirements applicable to its periodic issuance of debt securities in the
public market.
    JDCC's net income was $70.1 million for the third quarter and $224.6
million year to date, compared with net income of $79.0 million and $228.4
million for the respective periods last year. Quarterly and year-to-date
results were lower primarily due to an increase in leverage, higher selling,
administrative and general expenses, an increase in the provision for credit
losses and lower income from receivable sales, partially offset by growth in
the credit portfolio and increased commissions from crop insurance.
    Net receivables and leases financed by JDCC were $19.289 billion at July
31, 2008, compared with $18.473 billion last year. Net receivables and leases
administered, which include receivables previously sold, totaled $19.454
billion at July 31, 2008, compared with $18.986 billion one year ago.
    
    Safe Harbor Statement
    
    Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995:  Statements under "Company Outlook," "Company Summary," "Market
Conditions & Outlook," and other statements herein that relate to future
operating periods are subject to important risks and uncertainties that could
cause actual results to differ materially. Some of these risks and
uncertainties could affect particular lines of business, while others could
affect all of the Company's businesses.
    Forward-looking statements involve certain factors that are subject to
change, including for the Company's agricultural equipment segment the many
interrelated factors that affect farmers' confidence. These factors include
worldwide demand for agricultural products, world grain stocks, weather
conditions (including floods in the mid-western U.S.), soil conditions,
harvest yields, prices for commodities and livestock, crop and livestock
production expenses, availability of transport for crops, the growth of non-
food uses for some crops (including ethanol and biodiesel production), real
estate values, available acreage for farming, the land ownership policies of
various governments, changes in government farm programs (including those in
the U.S. and Brazil), international reaction to such programs, global trade
agreements, animal diseases and their effects on poultry and beef consumption
and prices (including avian flu and bovine spongiform encephalopathy, commonly
known as "mad cow" disease), crop pests and diseases (including Asian rust),
and the level of farm product exports (including concerns about genetically
modified organisms).
    Factors affecting the outlook for the Company's commercial and consumer
equipment segment include weather conditions, general economic conditions,
customer profitability, consumer confidence, consumer borrowing patterns,
consumer purchasing preferences, housing starts, infrastructure investment,
spending by municipalities and golf courses, and consumable input costs.
    General economic conditions, consumer spending patterns, the number of
housing starts and interest rates are especially important to sales of the
Company's construction equipment. The levels of public and non-residential
construction also impact the results of the Company's construction and
forestry segment. Prices for pulp, lumber and structural panels are important
to sales of forestry equipment.
    All of the Company's businesses and its reported results are affected by
general economic conditions in, and the political and social stability of, the
global markets in which the Company operates; production, design and
technological difficulties, including capacity and supply constraints and
prices, including for supply commodities such as steel, rubber and fuel; the
availability and prices of strategically sourced materials, components and
whole goods, including agricultural equipment tires; delays or disruptions in
the Company's supply chain due to weather or natural disasters; start-up of
new plants and new products; the success of new product initiatives and
customer acceptance of new products; oil and energy prices and supplies;
inflation and deflation rates, interest rates and foreign currency exchange
rates; the availability and cost of freight; trade, monetary and fiscal
policies of various countries; wars and other international conflicts and the
threat thereof; actions by the U.S. Federal Reserve Board and other central
banks; actions by the U.S. Securities and Exchange Commission; actions by
environmental regulatory agencies, including those related to engine emissions
and the risk of global warming; actions by other regulatory bodies; actions by
rating agencies; capital market disruptions; significant changes in capital
market liquidity and associated funding costs; customer borrowing and
repayment practices, the number and size of customer loan delinquencies and
defaults, and the sub-prime credit market crises; actions of competitors in
the various industries in which the Company competes, particularly price
discounting; dealer practices especially as to levels of new and used field
inventories; labor relations; changes to accounting standards; changes in tax
rates; the effects of, or response to, terrorism; and changes in laws and
regulations affecting the sectors in which the Company operates. The spread of
major epidemics (including influenza, SARS, fevers and other viruses) also
could affect Company results. Company results are also affected by changes in
the level of employee retirement benefits, changes in market values of
investment assets and the level of interest rates, which impact retirement
benefit costs, and significant changes in health care costs. Other factors
that could affect results are acquisitions and divestitures of businesses, the
integration of new businesses, changes in Company declared dividends and
common stock issuances and repurchases.
    The Company's outlook is based upon assumptions relating to the factors
described above, which are sometimes based upon estimates and data prepared by
government agencies. Such estimates and data are often revised. The Company,
except as required by law, undertakes no obligation to update or revise its
outlook, whether as a result of new developments or otherwise. Further
information concerning the Company and its businesses, including factors that
potentially could materially affect the Company's financial results, is
included in the Company's most recent annual report on Form 10-K (including
the factors discussed in Item 1A. Risk Factors) and other filings with the
U.S. Securities and Exchange Commission.



    
                         Third Quarter 2008 Press Release
                              (millions of dollars)
    

    
                                    Three Months Ended     Nine Months Ended
                                         July 31                July 31
                                                   %                      %
                                   2008    2007  Change   2008    2007  Change
    Net sales and revenues:
      Agricultural equipment
       net sales                  $4,544  $3,355   +35  $12,002   $8,934   +34
      Commercial and consumer
       equipment net sales         1,332   1,346    -1    3,498    3,305    +6
      Construction and
       forestry net sales          1,194   1,284    -7    3,570    3,827    -7
          Total net sales *        7,070   5,985   +18   19,070   16,066   +19
      Credit revenues                550     533    +3    1,632    1,527    +7
      Other revenues                 119     116    +3      334      348    -4
         Total net sales
          and revenues *          $7,739  $6,634   +17  $21,036  $17,941   +17
    

    
    Operating profit: **
      Agricultural equipment        $634    $431   +47   $1,748   $1,055   +66
      Commercial and
       consumer equipment             91     127   -28      253      315   -20
      Construction and
       forestry                       93      15   -38      376      437   -14
      Credit                         111     141   -21      376      404    -7
      Other                            5       1  +400       12        2  +500
        Total operating
         profit *                    934     850   +10    2,765    2,213   +25
    Interest, corporate
     expenses and
     income taxes                   (359)   (313)  +15   (1,057)    (813)  +30
        Net income                  $575    $537    +7   $1,708   $1,400   +22
    

    
    *  Includes equipment operations outside the U.S. and Canada as follows:
         Net sales                $3,072  $2,221   +38   $7,942   $5,645   +41
         Operating profit           $332    $229   +45     $925     $562   +65
       The company views its operations as consisting of two geographic areas,
       the "U.S. and Canada", and "outside the U.S. and Canada".
    

    
    ** Operating profit is income from continuing operations before external
       interest expense, certain foreign exchange gains and losses, income
       taxes and corporate expenses. However, operating profit of the credit
       segment includes the effect of interest expense and foreign exchange
       gains or losses.

    




For further information:

For further information: Ken Golden, Director, Strategic Public
Relations of Deere & Company, +1-309-765-5678 Web Site: http://www.deere.com


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