- 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 /PRNewswire-FirstCall/ -- 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."

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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.