Deere Posts Record Third-Quarter Earnings of $537 Million



    
    - EPS from continuing operations climbs 28%; net sales and revenues up 6%.

    - Ongoing actions to manage costs and assets producing strong results.

    - Agricultural, commercial and consumer equipment businesses pace
    improvement.

    - New products and services receiving positive response from global
    customer base.
    

    MOLINE, Ill., Aug. 15 /CNW/ -- Deere & Company today announced worldwide
net income of $537.2 million, or $2.37 per share, for the third quarter ended
July 31, compared with $436.0 million, or $1.85 per share, for the same period
last year. Income from continuing operations was $537.2 million, or $2.37 per
share, for the third quarter, versus $435.7 million, or $1.85 per share, last
year. Net income was the highest for any third quarter in the company's
history.
    
    (Logo: http://www.newscom.com/cgi-bin/prnh/20030326/JOHNDEERELOGO)
    
    For the first nine months, net income was $1.400 billion, or $6.12 per
share, compared with $1.416 billion, or $5.96 per share, last year. Nine-month
income from continuing operations was $1.400 billion, or $6.12 per share, in
comparison with $1.177 billion, or $4.95 per share, a year ago.
    "Deere's efforts to grow a great business, particularly with the support
of improving conditions across the global farm sector, are gaining strong
momentum and producing powerful results," said Robert W. Lane, chairman and
chief executive officer. "Advanced new products and services are helping
expand the company's market presence throughout the world. At the same time,
our focus on rigorous asset management allows us to serve this growing
customer base at the highest level while maintaining lean, efficient inventory
levels."  With Deere's third-quarter results, trade receivables and
inventories in relation to sales have declined for each of the last 29
quarters, compared with the same period of the prior year.
    Worldwide net sales and revenues increased 6 percent to $6.634 billion
for the third quarter and were up 5 percent to $17.941 billion for the first
nine months. Net sales of the equipment operations were $5.985 billion for the
quarter and $16.066 billion for nine months, versus $5.677 billion and $15.398
billion for the respective periods last year.
    
    Summary of Operations
    
    Net sales of the worldwide equipment operations increased 5 percent for
the quarter and rose 4 percent for nine months. This included positive effects
for currency translation and price changes of 5 percent for the quarter and 4
percent for nine months. Equipment sales in the U.S. and Canada were down 5
percent for the quarter and down 4 percent for the year to date, while net
sales outside the U.S. and Canada increased by 30 percent for the quarter and
25 percent for nine months. Currency translation added 6 percentage points to
sales outside the U.S. and Canada for the quarter and 7 points for nine
months.
    Deere's equipment divisions reported operating profit of $708 million for
the quarter and $1.807 billion for nine months, compared with $583 million and
$1.630 billion for the same periods last year. Higher operating profit for
both periods was primarily the result of improved price realization and, for
the quarter, the favorable impact of higher agricultural-equipment production
volumes. Increased raw-material costs and higher selling and administrative
expenses partially offset the improvement in both periods.
    Deere's ongoing emphasis on rigorous asset management is continuing to
produce solid results. Trade receivables and inventories at the end of the
quarter were $6.227 billion, or 30 percent of previous 12-month sales,
compared with $6.264 billion, or 32 percent of sales, a year ago.
    Financial services reported net income of $92.1 million for the quarter
and $266.8 million year to date versus $90.8 million and $496.8 million for
the comparable periods last year, which included results from the discontinued
health-care business. Income from continuing operations was $92.1 million for
the quarter and $266.8 million for nine months, versus $90.5 million and
$256.9 million a year earlier. The improvement for both periods was primarily
due to growth in the credit portfolio, partially offset for the nine months by
a higher provision for credit losses and increased selling and administrative
expenses.
    
    Company Outlook
    
    Company equipment sales are projected to increase by about 16 percent for
the fourth quarter and 7 percent for the full year. Included in the
fourth-quarter forecast is about 5 percentage points due to sales made by
LESCO, Inc., and 3 points of positive currency translation. LESCO is a
supplier of consumable lawn care, landscape, golf course and pest control
products that was acquired in the third quarter. For the full year, Deere's
net income is forecast to be about $1.700 billion.
    
    Company Summary
    
    "Deere's recent performance reflects the impact of our focus on economic
profit as a central theme in managing the company," said Lane. "We have shown
significant progress in this regard containing costs and assets while making
disciplined, growth-related investments. As a result, the company is
well-positioned to benefit from secular economic trends taking shape
throughout the world such as growing affluence and increasing demand for food,
feed and biofuels. We remain quite optimistic about these developments and
believe they hold considerable promise for the company, its investors and
others with a stake in our continued success."

    * * *

    
    Equipment Division Performance
    
    Agricultural. Division sales increased 16 percent for the quarter and 14
percent for nine months. Sales increased due to higher volumes, improved price
realization, and the favorable effects of currency translation. Operating
profit was $431 million for the quarter and $1.055 billion for nine months,
compared with $249 million and $739 million for the respective periods last
year. The quarter's operating profit increase was mainly due to higher sales
and production volumes and improved price realization, partially offset by
higher raw-material costs and research and development expenses. Operating
profit was higher for nine months primarily due to improved price realization
and higher sales volumes, partially offset by higher selling and
administrative expenses attributable in large part to the division's growth
initiatives and currency translation.  Also affecting nine-month profit were
increased raw-material costs and higher research and development expenses.
    Commercial & Consumer. Division sales rose 15 percent for the quarter and
6 percent for nine months compared with the prior year. LESCO operations
accounted for 11 percentage points of the quarter's increase and 4 points year
to date. Sales increased primarily due to the higher LESCO volumes and
improved price realization. Operating profit was $127 million for the quarter
and $315 million for nine months, compared with $78 million and $225 million
last year. For both periods, the profit increase was primarily due to improved
price realization. The impact of higher sales volumes, largely associated with
LESCO operations, was mainly offset by higher selling and administrative
expenses attributable to LESCO.
    Construction & Forestry. Sales declined 20 percent for the third quarter
and were down 13 percent for nine months. Operating profit was $150 million
for the quarter and $437 million year to date, compared with $256 million and
$666 million a year ago. Lower operating profit for both periods was primarily
due to lower sales and production volumes and higher raw-material costs,
partially offset by positive price realization. Last year's results included
expenses related to the closure of a Canadian forestry-equipment facility.
    
    Market Conditions & Outlook
    
    Agricultural.  Global farm conditions remain positive, driven by growing
economic prosperity, relatively high commodity prices, and robust demand for
renewable fuels. Ethanol, biodiesel, wind energy and other renewable energy
sources are continuing to receive strong support throughout the world from
government policies and legislative actions. Consistent with the company's
earlier expectations, retail activity in the U.S. and Canada has continued to
gain momentum as the year has progressed. Industry sales for the region are
forecast to be up about 5 percent for the year, led by increases in
high-horsepower tractors.
    European markets are benefiting from solid farm fundamentals, though
difficult weather conditions have had a moderating impact on machinery demand.
Industry sales in Western Europe are forecast to be up about 2 percent for the
year. Markets in Eastern Europe and the CIS (Commonwealth of Independent
States) countries, including Russia, are experiencing higher sales as a result
of increased demand for productive farm machinery. Conditions in South America
have continued to improve with industry sales for the year expected to be up
by about 30 percent. The Brazilian market is receiving support from higher
commodity prices and a proposed resolution of issues concerning
government-backed FINAME financing of farm machinery. Industry sales in
Australia are expected be down 20 to 25 percent largely as a result of extreme
drought conditions earlier in the year. Based on these factors and market
conditions, worldwide sales of the company's agricultural equipment are
forecast to increase by about 16 percent for full-year 2007, including about 3
points of currency impact.
    Commercial & Consumer. John Deere commercial and consumer equipment sales
are projected to be up about 11 percent for the year, including about $350
million of sales from LESCO. Division sales are continuing to benefit from new
lines of residential zero-turn radius mowers, utility vehicles, and compact
tractors, among other products.
    Construction & Forestry. U.S. markets for construction and forestry
equipment are remaining under pressure. Although nonresidential spending is
growing, housing construction has experienced a significant downturn. Further,
sales to the independent rental channel are expected to be well below last
year's levels. In forestry equipment, sales have declined substantially in the
U.S. but moved higher in Europe and other areas. In this environment, Deere's
worldwide sales of construction and forestry equipment are forecast to
decrease by about 12 percent for the year.
    Credit.  Full-year 2007 net income for Deere's credit operations is
forecast to be approximately $355 million. The improvement is being driven by
growth in the credit portfolio, partially offset by increased selling and
administrative expenses in support of the division's growth initiatives and a
higher provision for credit losses.
    
    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 $79.0 million for the quarter and $228.4 million
for the year to date, compared with net income of $78.8 million and $217.4
million for the respective periods last year. Results for both periods
benefited from growth in the portfolio, partially offset by a higher provision
for credit losses. The first nine months this year were also affected by
increased selling and administrative expenses.
    Net receivables and leases financed by JDCC were $18.473 billion at July
31, 2007, compared with $17.746 billion one year ago. Net receivables and
leases administered, which include receivables previously sold, totaled
$18.986 billion at July 31, 2007, compared with $18.813 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 drought in Australia and difficult weather conditions in
Western Europe), soil conditions, harvest yields, prices for commodities and
livestock, crop 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 that may result from farm economic conditions in Brazil),
international reaction to such programs, global trade agreements, animal
diseases and their effects on poultry and beef consumption and prices
(including bovine spongiform encephalopathy, commonly known as "mad cow"
disease, and avian flu), 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,
and spending by municipalities and golf courses.
    The number of housing starts, interest rates and consumer spending
patterns 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 and rubber; 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; inflation and deflation rates, interest rate levels 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; customer borrowing and repayment practices, and the number of
customer loan delinquencies and defaults; 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; the effects of,
or response to, terrorism; and legislation 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 changes in Company
declared dividends, acquisitions and divestitures of businesses, 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 2007 Press Release
                              (millions of dollars)
    

    
                                 Three Months Ended    Nine Months Ended
                                      July 31               July 31
                                                 %                        %
                               2007     2006  Change   2007     2006   Change
    Net sales and revenues:
     Agricultural equipment
      net sales               $3,355   $2,899   +16  $8,934   $7,862     +14
     Commercial and consumer
      equipment net sales      1,346    1,171   +15   3,305    3,119      +6
     Construction and
      forestry net sales       1,284    1,607   -20   3,827    4,417     -13
        Total net sales*       5,985    5,677    +5  16,066   15,398      +4
     Credit revenues             533      475   +12   1,527    1,316     +16
     Other revenues              116      115    +1     348      316     +10
        Total net sales and
         revenues*            $6,634   $6,267    +6 $17,941  $17,030      +5
    Operating profit: **
     Agricultural equipment     $431     $249   +73  $1,055     $739     +43
     Commercial and consumer
      equipment                  127       78   +63     315      225     +40
     Construction and
      forestry                   150      256   -41     437      666     -34
     Credit                      141      135    +4     404      388      +4
     Other                         1        3   -67       2        4     -50
        Total operating profit   850      721   +18   2,213    2,022      +9
    Interest, corporate
     expenses and income taxes  (313)    (285)  +10    (813)    (846)     -4
    Income from continuing
     operations                  537      436   +23   1,400    1,176     +19
    Income from discontinued
     operations                                                  240
        Net income              $537     $436   +23  $1,400   $1,416      -1
    


    
     *Includes equipment operations outside the U.S. and Canada as follows:
         Net sales            $2,221   $1,709   +30  $5,645   $4,504     +25
         Operating profit       $229     $146   +57    $562     $389     +44
      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 of Strategic Public 
Relations of Deere & Company, +1-309-765-5678 Web Site: http://www.deere.com


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