Deere Reports Third-Quarter Earnings of $420 Million



    
    - Company has profitable quarter in face of global economic slowdown.

    - Operations benefit from solid execution of plans to curb costs and
    inventories.

    - Deere positioned to capitalize on positive long-term trends.






    
    MOLINE, Ill. Aug. 19 /CNW/ -- Deere & Company today announced worldwide
net income of $420.0 million, or $0.99 per share, for the third quarter ended
July 31, compared with $575.2 million, or $1.32 per share, for the same period
last year. For the first nine months of the year, net income was $1.096
billion, or $2.59 per share, compared with $1.708 billion, or $3.89 per share,
last year.

    Worldwide net sales and revenues declined 24 percent, to $5.885 billion,
for the third quarter and were down 15 percent to $17.778 billion for nine
months compared with a year ago. Net sales of the equipment operations were
$5.283 billion for the quarter and $16.030 billion for nine months, compared
with $7.070 billion and $19.070 billion last year.

    "John Deere has completed a solidly profitable quarter in the face of
persistent global economic pressure and made further progress advancing its
competitive position throughout the world," said Samuel R. Allen, president
and chief executive officer. "We have seen continued benefit from strength in
the U.S. market for large farm machinery and from our efforts to keep a tight
rein on costs and inventories. Deere's construction and forestry business, as
an example, is successfully executing carefully designed plans to adjust
expenses and asset levels in response to the severe decline in its markets,"
Allen said.
    

    Summary of Operations

    
    Net sales of the worldwide equipment operations decreased 25 percent for
the quarter and 16 percent for nine months. Sales included an unfavorable
currency-translation effect of 4 percent for the quarter and 5 percent for
nine months and price increases of 6 percent for both periods. Equipment net
sales in the United States and Canada declined 16 percent for the quarter and
9 percent year to date. Net sales outside the United States and Canada were
down 37 percent for the quarter and 26 percent for nine months, with an
unfavorable currency-translation effect of 7 percent for the quarter and 11
percent year to date.

    Deere's equipment operations reported operating profit of $452 million
for the quarter and $1.387 billion for nine months, compared with $818 million
and $2.377 billion last year. The deterioration in both periods primarily was
due to lower shipment and production volumes and the unfavorable effects of
foreign exchange, partially offset by improved price realization and lower
selling, administrative and general expenses. In addition, higher raw-material
costs affected nine-month results.

    Equipment operations reported net income of $319 million for the quarter
and $879 million for nine months, compared with $479 million and $1.408
billion last year. The same operating factors mentioned above, in addition to
a lower current-year effective tax rate, had an impact on both quarterly and
nine-month results.

    The company's focus on asset management continued to support its
performance. Trade receivables and inventories at the end of the quarter were
$6.250 billion, or 28 percent of previous 12-month sales, compared with $7.457
billion, or 30 percent of sales, a year ago.

    Financial services reported net income of $102.1 million for the quarter
and $217.8 million for nine months compared with $83.4 million and $267.5
million last year. Results were higher for the quarter largely due to benefits
from investment tax credits for wind energy projects, foreign exchange gains
and lower selling, administrative and general expenses. Partially offsetting
these factors were a higher provision for credit losses and narrower financing
spreads. Nine-month net income was lower primarily due to a higher provision
for credit losses, narrower financing spreads and lower commissions from crop
insurance, partially offset by benefits from investment tax credits and lower
selling, administrative and general expenses.
    

    Company Outlook & Summary
    
    Company equipment sales are projected to be down about 21 percent for the
full year and down about 34 percent for the fourth quarter, including a
negative currency-translation impact of about 4 percent for the year and about
1 percent for the quarter. Deere's net income is anticipated to be
approximately $1.1 billion for 2009, despite the largest expected single-year
sales decline in at least 50 years. Affecting fourth quarter results will be
significant production cutbacks that are being made in line with retail
demand. The quarter also will include costs for rationalizing operations, as
previously announced.

    In spite of present economic conditions, the company believes underlying
trends remain quite promising for its businesses. "John Deere is
well-positioned to respond to the world's growing need for food, shelter,
infrastructure and energy with a wide range of advanced equipment and
services," Allen said. "Further, we're confident our ability to adjust
production in response to dynamic markets will help us come through today's
challenging times in a strong condition, ready to seize future opportunities
for growth."


    
                                        * * *
    Equipment Division Performance

    
    Agriculture & Turf. Sales declined 21 percent for the quarter and 9
percent for nine months largely due to lower shipment volumes and the
unfavorable effects of currency translation, partially offset by improved
price realization. Operating profit was $480 million for the quarter and
$1.472 billion year to date, compared with $725 million and $2.001 billion for
the respective periods last year. Operating profit was lower in both periods
primarily due to lower shipment and production volumes and unfavorable impacts
of foreign exchange, partially offset by improved price realization and lower
selling, administrative and general expenses. Higher raw-material costs also
had an unfavorable impact on the nine-month results.

    Construction & Forestry. Construction and forestry sales declined 47
percent for the quarter and 45 percent for nine months, resulting in operating
losses of $28 million for the quarter and $85 million year to date. Last year
the division had operating profit of $93 million and $376 million for the same
periods. The profit decreases for both periods were primarily due to
significantly lower shipment and production volumes, partially offset by lower
selling, administrative and general expenses and improved price realization.
Higher raw-material costs also had an unfavorable impact on year-to-date
results.
    

    Market Conditions & Outlook

    
    Agriculture & Turf. Full-year sales of the agriculture and turf division
are forecast to decrease by about 15 percent, including a negative
currency-translation impact of about 5 percent. At the beginning of the third
quarter of 2009, the company combined the agricultural equipment and
commercial and consumer equipment businesses. Voluntary employee separations
related to the new organizational structure resulted in pretax charges of $16
million in the third quarter and will be approximately $85 million in the
fourth quarter. Annual savings from the separation program are expected to be
approximately $50 million to $60 million in 2010.

    On an industry basis, farm machinery sales in the United States and
Canada are forecast to be down slightly for the year, though sales of large
tractors, combines, sprayers and seeding equipment are expected to be higher.
In other parts of the world, industry farm-machinery sales in Western Europe
are forecast to decline 10 to 15 percent for the year while markets in Central
Europe and the Commonwealth of Independent States are expected to be sharply
lower. In South America, industry sales are projected to decrease by 20 to 30
percent for the year. Industry sales of turf equipment and compact utility
tractors in the United States and Canada are expected to be down about 20
percent.

    Construction & Forestry. Deere's worldwide sales of construction and
forestry equipment are forecast to decline by about 47 percent for the year.
The decline is attributable to a slumping global economy, historically low
levels of U.S. construction activity, and further deterioration in forestry
markets worldwide.

    Credit. Full-year 2009 net income for Deere's credit operations is
forecast to be approximately $270 million. The forecast decrease from 2008
primarily is due to narrower financing spreads, a higher provision for credit
losses and lower commissions from crop insurance, partially offset by benefits
from investment tax credits related to wind energy projects.
    

    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 $59.1 million for the third quarter and $128.1
million year to date, compared with net income of $70.1 million and $224.6
million for the respective periods last year. Results were lower for the
quarter due to a higher provision for credit losses and narrower financing
spreads, partially offset by foreign exchange gains and lower selling,
administrative and general expenses. Net income was lower for the nine months
primarily due to narrower financing spreads, a higher provision for credit
losses and lower commissions from crop insurance, partially offset by lower
selling, administrative and general expenses.

    Net receivables and leases financed by JDCC were $19.336 billion at July
31, 2009, compared with $19.289 billion last year. Net receivables and leases
administered, which include receivables administered but not owned, totaled
$19.482 billion at July 31, 2009, compared with $19.454 billion a year ago.
    

    Safe Harbor Statement

    
    Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995:  Statements under "Company Outlook and 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 the many
interrelated factors that affect farmers' confidence.  These factors include
worldwide economic conditions, demand for agricultural products, world grain
stocks, weather conditions, 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 and policies (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 turf and utility
equipment include general economic conditions, consumer confidence, weather
conditions, customer profitability, 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, real estate and
housing prices, the number of housing starts and interest rates are especially
important to sales of the Company's construction and forestry 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, especially material changes in
economic activity in these markets; customer confidence in the general
economic conditions; foreign currency exchange rates, especially fluctuations
in the value of the U.S. dollar, interest rates and inflation and deflation
rates; capital market disruptions; significant changes in capital market
liquidity, access to capital and associated funding costs; delays or
disruptions in the Company's supply chain due to weather, natural disasters or
financial hardship or the loss of liquidity by suppliers (including common
suppliers with the automotive industry); changes in and the impact of
governmental banking, monetary and fiscal policies and governmental programs
in particular jurisdictions or for the benefit of certain sectors; actions by
rating agencies; customer access to capital for purchases of the Company's 
products and borrowing and repayment practices, the number and size of
customer loan delinquencies and defaults, and the housing market credit
crises; changes in the market values of investment assets; production, design
and technological difficulties, including capacity and supply constraints and
prices; the availability and prices of strategically sourced materials,
components and whole goods; 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; the availability and cost of freight;
trade, monetary and fiscal policies of various countries (including
protectionist policies that disrupt international commerce); 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, health and safety regulatory
agencies, including those related to engine emissions (in particular Tier 4
emission requirements), noise and the risk of climate change; actions by other
regulatory bodies; 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 and
regulations; changes to accounting standards; changes in tax rates and
regulations; 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 H1N1 and other influenzas, SARS, fevers
and other viruses) also could affect Company results.  Changes in weather
patterns could impact customer operations and 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, the implementation of organizational changes such as combining of
the agricultural and commercial and consumer equipment segments, changes in
Company declared dividends and common stock issuances and repurchases.

    With respect to the recent global economic downturn, changes in
governmental banking, monetary and fiscal policies to restore liquidity and
increase the availability of credit may not be effective and could have a
material impact on the Company's customers and markets.  Significant changes
in market liquidity conditions could impact access to funding and associated
funding costs, which could reduce the Company's earnings and cash flows.  The
Company's investment management operations could be impaired by changes in the
equity and bond markets, which would negatively affect earnings.

    General economic conditions can affect the demand for the Company's
equipment as well. Current negative economic conditions and outlook have
dampened demand for certain  equipment.  Furthermore, governmental programs
providing assistance to certain industries or sectors could negatively impact
the Company's competitive position.

    The recent economic downturn and market volatility have adversely
affected the financial industry in which John Deere Capital Corporation and
other credit subsidiaries (Credit) operate.  Credit's liquidity and ongoing
profitability depend largely on timely access to capital to meet future cash
flow requirements and fund operations and the costs associated with engaging
in diversified funding activities and to fund purchases of the Company's
products.  If market disruption and volatility continue or worsen or access to
governmental liquidity programs decreases, funding could be unavailable or
insufficient.  Additionally, under current market conditions customer
confidence levels may result in declines in credit applications and increases
in delinquencies and default rates, which could materially impact Credit's
write-offs and provisions for credit losses.

    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 2009 Press Release
                               (millions of dollars)
                                    Unaudited
    

    
                       Three Months Ended July 31    Nine Months Ended July 31
                                             %                            %
                       2009     2008       Change    2009      2008     Change
    Net sales and
     revenues:
      Agriculture and
       turf net
       sales ***      $4,651    $5,876       -21   $14,057   $15,500        -9
      Construction
       and forestry
       net sales         632     1,194       -47     1,973     3,570       -45
    

    
          Total net
           sales *     5,283     7,070       -25    16,030    19,070       -16
      Credit revenues    501       550        -9     1,432     1,632       -12
      Other revenues     101       119       -15       316       334        -5
    

    
        Total net
         sales and
         revenues *   $5,885    $7,739       -24   $17,778   $21,036       -15
    

    
    Operating profit
     (loss): **
      Agriculture and
       turf ***         $480      $725       -34    $1,472    $2,001       -26
      Construction and
       forestry          (28)       93                 (85)      376
      Credit              95       111       -14       206       376       -45
      Other                5         5                   9        12       -25
    

    
        Total operating
         profit *        552       934       -41     1,602     2,765       -42
    Interest, corporate
     expenses and income
     taxes              (132)     (359)      -63      (506)   (1,057)      -52
    

    Net income      $420      $575       -27    $1,096    $1,708       -36


    *   Includes equipment operations outside the U.S. and Canada as follows:

    
         Net sales    $1,940    $3,072       -37    $5,912    $7,942       -26
         Operating
          profit         $79      $332       -76      $245      $925       -74
    

    
        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 (loss) 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.
    

    
    *** At the beginning of the third quarter of 2009, the Company combined
        the agricultural equipment and the commercial and consumer equipment
        organizations.  As a result, these two segments have been combined
        into the agriculture and turf segment.  The net sales and operating
        profit for the agriculture and turf segment for the third quarter and
        first nine months of 2009 and 2008 were as shown above.  The
        information for the first two quarters of 2009 and 2008 and fiscal
        years 2008 and 2007 in millions of dollars were as follows:
    


    
    Agriculture and     First Quarter       Second Quarter          Years
     Turf               2009      2008      2009      2008      2008      2007
    

    
    Net sales         $3,819    $3,501    $5,587    $6,124   $20,985   $16,454
    Operating profit     289       340       703       936     2,461     1,747




    




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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