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Deere Announces Third-Quarter Earnings of $851 Million

 MOLINE, Ill., Aug. 13, 2014 /CNW/ -- Net income attributable to Deere &  Company (NYSE: DE) was $850.7 million, or $2.33 per share, for the third  quarter ended July 31, compared with $996.5 million, or $2.56 per share, for  the same period of 2013. For the first nine months of the year, net income  attributable to Deere & Company was $2.513 billion, or $6.79 per share,  compared with $2.730 billion, or $6.97 per share, last year.  Worldwide net sales and revenues decreased 5 percent, to $9.500 billion, for  the third quarter and were down 4 percent, to $27.102 billion, for nine  months. Net sales of the equipment operations were $8.723 billion for the  quarter and $24.918 billion for nine months, compared with $9.316 billion and  $26.373 billion for the same periods last year.  "Deere's third-quarter performance reflected moderating conditions in the  global farm sector, which have negatively affected demand for farm machinery  and contributed to lower sales and profits for our agricultural-equipment  business," said Samuel R. Allen, chairman and chief executive officer. "At the  same time, our construction and forestry and financial services divisions had  higher profit, showing the benefit of a broad-based business lineup. Overall,  it was a quarter of solid performance, with income exceeded only by last  year's record for the corresponding period."  Summary of Operations Net sales of the worldwide equipment operations declined  6 percent for the quarter and nine months compared with the same periods a  year ago. Sales included price realization of 2 percent for the quarter and  nine months.  Additionally, sales included an unfavorable currency-translation  effect of 1 percent for the nine months. Equipment net sales in the United  States and Canada decreased 8 percent for the quarter and 7 percent year to  date. Outside the U.S. and Canada, net sales were down 4 percent for the  quarter, including favorable currency-translation effects of 1 percent, and  down 3 percent for nine months, including unfavorable currency-translation  effects of 1 percent.  Deere's equipment operations reported operating profit of $1.135 billion for  the quarter and $3.387 billion for nine months, compared with $1.443 billion  and $3.943 billion last year. The decline for the quarter was due primarily to  the impact of lower shipment volumes, higher production costs primarily  related to engine-emission requirements, and the unfavorable effects of  foreign currency exchange. The year-to-date decline was largely due to the  impact of lower shipment volumes, unfavorable foreign-exchange effects, higher  production costs, and a less favorable product mix. Declines for both periods  were partially offset by price realization.  Net income of the company's equipment operations was $680 million for the  third quarter and $2.061 billion for the first nine months, compared with $846  million and $2.324 billion in 2013. In addition to the operating factors  mentioned above, a lower effective tax rate benefited both quarterly and  year-to-date results.  Financial services reported net income attributable to Deere & Company of  $162.3 million for the quarter and $452.2 million for nine months compared  with $150.0 million and $407.9 million last year. The improvement for the  quarter was due to growth in the credit portfolio, partially offset by a  higher provision for credit losses and higher selling, administrative and  general expenses. Year-to-date results improved as a result of growth in the  credit portfolio and a more favorable effective tax rate. These factors were  partially offset by lower crop insurance margins, higher selling,  administrative and general expenses and a higher provision for credit losses.  Company Outlook & Summary Company equipment sales are projected to decrease  about 6 percent for fiscal 2014 and to be down about 8 percent for the fourth  quarter compared with the year-ago periods. Included is an unfavorable  currency-translation effect of about 1 percent for the year. For 2014, net  income attributable to Deere & Company is anticipated to be about $3.1 billion.  Although Deere's full-year earnings are forecast to be somewhat lower than in  2013, Allen said the company is looking forward to completing another  successful year and continues to believe the longer-term outlook for its  businesses holds considerable promise. "For the balance of the year, the  company will be scaling back production in line with demand for our  agricultural products," he stated. "These actions illustrate our commitment to  responding with speed and decisiveness to changes in market conditions."  Allen pointed out the company's plans to expand its market presence throughout  the world are on track and continuing to move ahead. "We remain confident the  company is well-positioned to earn solid returns throughout the business cycle  and to realize substantial benefits from the world's growing need for food,  shelter and infrastructure well into the future," he said.  Equipment Division Performance Agriculture & Turf.  Sales fell 11 percent for  the quarter and 8 percent for nine months due largely to lower shipment  volumes, and the previously announced sales of John Deere Landscapes and John  Deere Water. Additionally, year-to-date sales were lower due to the  unfavorable effects of currency translation. These factors were partially  offset by price realization in both the quarter and nine months.  Operating profit was $941 million for the quarter and $2.967 billion year to  date, compared with $1.336 billion and $3.684 billion, respectively, last  year. Lower results for the quarter were driven primarily by the impact of  lower shipment volumes, higher production costs largely related to  engine-emission requirements, and the unfavorable effects of foreign-currency  exchange. The year-to-date decrease was mainly due to lower shipment volumes,  unfavorable currency exchange, higher production costs, and a less favorable  product mix. Declines for both periods were partially offset by price  realization.  Construction & Forestry. Construction and forestry sales increased 19 percent  for the quarter and 8 percent for nine months mainly as a result of higher  shipment volumes and price realization. Increased sales for both periods were  partially offset by the unfavorable effects of currency translation.  Operating profit was $194 million for the quarter and $420 million for nine  months, compared with $107 million and $259 million last year. Quarterly  operating profit improved primarily due to higher shipment volumes and price  realization, partially offset by a less favorable product mix. Year-to-date  results increased mainly due to higher shipment volumes, lower production  costs, and lower selling, administrative and general expenses.  Market Conditions & Outlook Agriculture & Turf.  Deere's worldwide sales of  agriculture and turf equipment are forecast to decrease by about 10 percent  for fiscal-year 2014, including a negative currency translation effect of  about 1 percent.  Although the agricultural economy remains in a relatively healthy state,  falling commodity prices are contributing to a reduction in farm income. The  decline is putting pressure on demand for farm equipment, especially larger  models. At the same time, strength in the U.S. livestock sector is providing  support to sales of mid- and smaller-size tractors. Based on these factors,  industry sales for agricultural machinery in the U.S. and Canada are forecast  to be down about 10 percent for the year.  Full-year industry sales in the EU28 are forecast to be down about 5 percent  due to lower crop prices and farm incomes. In South America, industry sales of  tractors and combines are projected to be down about 15 percent from strong  2013 levels. Market conditions in the Commonwealth of Independent States have  deteriorated and industry sales there are expected to be significantly lower  for the year. Asian sales are projected to be about flat.  Industry sales of turf and utility equipment in the U.S. and Canada are  expected to be flat to up 5 percent for 2014.  Construction & Forestry. Deere's worldwide sales of construction and forestry  equipment are forecast to increase by about 10 percent for full-year 2014.   The gain reflects further economic recovery and higher housing starts in the  U.S. as well as sales increases outside the U.S. and Canada. Global forestry  sales are expected to be up for the year due to general economic growth and  improved sales in European markets.  Financial Services. Fiscal-year 2014 net income attributable to Deere &  Company for the financial services operations is expected to be approximately  $600 million. The outlook reflects improvement over last year due primarily to  expected growth in the credit portfolio and a more favorable tax rate. These  factors are projected to be partially offset by higher selling, administrative  and general expenses, an increase in the provision for credit losses from the  low level in 2013, and lower crop insurance margins.  John Deere Capital Corporation The following is disclosed on behalf of the  company's financial services subsidiary, John Deere Capital Corporation  (JDCC), in connection with the disclosure requirements applicable to its  periodic issuance of debt securities in the public market.  Net income attributable to John Deere Capital Corporation was $129.2 million  for the third quarter and $390.0 million year to date, compared with $124.7  million and $335.6 million for the respective periods last year. Results  improved for both periods primarily due to growth in the credit portfolio,  partially offset by a higher provision for credit losses, and higher selling,  administrative and general expenses. In addition, nine-month results benefited  from a more favorable effective tax rate.  Net receivables and leases financed  by JDCC were $33.534 billion at July 31, 2014, compared with $30.096 billion  last year.  Safe Harbor Statement Safe Harbor Statement under the Private Securities  Litigation Reform Act of 1995:  Statements under "Company Outlook & Summary,"  "Market Conditions & Outlook," and other forward-looking statements herein  that relate to future events, expectations, trends and operating periods  involve certain factors that are subject to change, and 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.  The company's agricultural equipment business is subject to a number of  uncertainties including the many interrelated factors that affect farmers'  confidence.  These factors include worldwide economic conditions, demand for  agricultural products, world grain stocks, weather conditions (including its  effects on timely planting and harvesting), soil conditions (including low  subsoil moisture), harvest yields, prices for commodities and livestock, crop  and livestock production expenses, availability of transport for crops, the  growth and sustainability 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 Argentina, Brazil, China, the  European Union, India, Russia and the U.S.), international reaction to such  programs, changes in and effects of crop insurance programs, global trade  agreements, animal diseases and their effects on poultry, beef and pork  consumption and prices, crop pests and diseases, 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, paper,  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 the global markets in which the company  operates, especially material changes in economic activity in these markets;  customer confidence in general economic conditions; foreign currency exchange  rates and their volatility, especially fluctuations in the value of the U.S.  dollar; interest rates; and inflation and deflation rates.  General economic  conditions can affect demand for the company's equipment as well.  Government  spending and taxing could adversely affect the economy, employment, consumer  and corporate spending, and company results.  Customer and company operations and results could be affected by changes in  weather patterns (including the effects of drought conditions in parts of the  U.S. and drier than normal conditions in certain other markets); the political  and social stability of the global markets in which the company operates; the  effects of, or response to, terrorism and security threats; wars and other  conflicts and the threat thereof; and the spread of major epidemics.  Significant changes in market liquidity conditions and any failure to comply  with financial covenants in credit agreements could impact access to funding  and funding costs, which could reduce the company's earnings and cash flows.   Financial market conditions could also negatively impact customer access to  capital for purchases of the company's products and customer confidence and  purchase decisions; borrowing and repayment practices; and the number and size  of customer loan delinquencies and defaults.  A  debt crisis, in Europe or  elsewhere, could negatively impact currencies, global financial markets,  social and political stability, funding sources and costs, asset and  obligation values, customers, suppliers, and company operations and results.   State debt crises also could negatively impact customers, suppliers, demand  for equipment, and company operations and results.  The company's investment  management activities could be impaired by changes in the equity, bond and  other financial markets, which would negatively affect earnings.  Additional factors that could materially affect the company's operations,  access to capital, expenses and results include changes in and the impact of  governmental trade, banking, monetary and fiscal policies, including financial  regulatory reform and its effects on the consumer finance industry,  derivatives, funding costs and other areas, and governmental programs,  policies, tariffs and sanctions in particular jurisdictions or for the benefit  of certain industries or sectors (including protectionist, economic, punitive  and expropriation policies and trade and licensing restrictions that could  disrupt international commerce); actions by the U.S. Federal Reserve Board and  other central banks; actions by the U.S. Securities and Exchange Commission  (SEC), the U.S. Commodity Futures Trading Commission and other financial  regulators; actions by environmental, health and safety regulatory agencies,  including those related to engine emissions (in particular Interim Tier  4/Stage IIIb and Final Tier 4/Stage IV non-road diesel emission requirements  in the U.S. and European Union), carbon and other greenhouse gas emissions,  noise and the effects of climate change; changes in labor regulations; changes  to accounting standards; changes in tax rates, estimates, and regulations and  company actions related thereto; compliance with U.S. and foreign laws when  expanding to new markets and otherwise; and actions by other regulatory bodies  including changes in laws and regulations affecting the sectors in which the  company operates.  Trade, financial and other sanctions imposed by the U.S.,  the European Union, Russia and other countries could negatively impact company  assets, operations, sales, forecasts and results.  Customer and company  operations and results also could be affected by changes to GPS radio  frequency bands or their permitted uses.  Other factors that could materially affect results include production, design  and technological innovations and difficulties, including capacity and supply  constraints and prices; the availability and prices of strategically sourced  materials, components and whole goods; delays or disruptions in the company's  supply chain or the loss of liquidity by suppliers; the failure of suppliers  to comply with laws, regulations and company policy pertaining to employment,  human rights, health, safety, the environment and other ethical business  practices; events that damage the company's reputation or brand; start-up of  new plants and new products; the success of new product initiatives and  customer acceptance of new products; changes in customer product preferences  and sales mix whether as a result of changes in equipment design to meet  government regulations or for other reasons; gaps or limitations in rural  broadband coverage, capacity and speed needed to support technology solutions;  oil and energy prices and supplies; the availability and cost of freight;  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; acquisitions and  divestitures of businesses, the integration of new businesses; the  implementation of organizational changes; difficulties related to the  conversion and implementation of enterprise resource planning systems that  disrupt business, negatively impact supply or distribution relationships or  create higher than expected costs; security breaches and other disruptions to  the company's information technology infrastructure; changes in company  declared dividends and common stock issuances and repurchases.  Company results are also affected by changes in the level and funding of  employee retirement benefits, changes in market values of investment assets,  the level of interest and discount rates, and compensation, retirement and  mortality rates which impact retirement benefit costs, and significant changes  in health care costs including those which may result from governmental action.  The liquidity and ongoing profitability of John Deere Capital Corporation and  other credit subsidiaries 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 general economic conditions worsen or capital markets  become volatile, funding could be unavailable or insufficient.  Additionally,  customer confidence levels may result in declines in credit applications and  increases in delinquencies and default rates, which could materially impact  write-offs and provisions for credit losses.  The failure of reinsurers of the  company's insurance business also could materially affect results.  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 other filings with the SEC (including, but not  limited to, the factors discussed in Item 1A. Risk Factors of the company's  most recent annual report on Form 10-K and quarterly reports on Form 10-Q).                                                                 Third Quarter 2014 Press Release                                                          --------------------------------                                                              (in millions of dollars)                                                                     Unaudited                                     Three Months Ended                                  Nine Months Ended                                         July 31                                       July 31                                         -------                                       -------                                                                       %                                                                  %                              2014                 2013                Change                          2014              2013             Change                             ----                 ----                ------                          ----              ----             ------  Net sales and revenues:     Agriculture and turf          $6,969                        $7,847                      -11                       $20,211                  $22,029  -8           Construction and         forestry              1,754                1,469               +19                    4,707               4,344               +8                               =====                =====                                     =====               =====               Total net sales 8,723                9,316                -6                   24,918              26,373               -6        Financial services       656                  587               +12                    1,815               1,650              +10        Other revenues           121                  107               +13                      369                 322              +15                                 ---                  ---                                       ---                 ---          Total net sales and         revenues                   $9,500                       $10,010                       -5                       $27,102                  $28,345  -4  Operating profit: *     Agriculture and turf            $941                        $1,336                      -30                        $2,967                   $3,684 -19           Construction and         forestry                194                  107               +81                      420                 259              +62        Financial services       249                  234                +6                      660                 629               +5                                 ---                  ---                                       ---                 ---          Total operating           profit              1,384                1,677               -17                    4,047               4,572              -11     Reconciling items **       (83)               (127)              -35                    (324)              (333)              -3     Income taxes              (450)               (553)              -19                  (1,210)            (1,509)             -20                                ====                 ====                                    ======              ======          Net income         attributable to              $851                          $997                      -15                        $2,513                   $2,730  -8               Deere & Company              *     Operating                    profit is                    income from                    continuing                    operations                    before                    corporate                    expenses,                    certain                    external                    interest                    expense,                    certain                    foreign                    exchange                    gains and                    losses and                    income taxes.                     Operating                     profit of the                    financial                    services                    segment                    includes the                    effect of                    interest                    expense and                    foreign                    exchange                    gains or                    losses.     **             Reconciling                    items are                    primarily                    corporate                    expenses,                    certain                    external                    interest                    expense,                    certain                    foreign                    exchange                    gains and                    losses and                    net income                    attributable                    to                    noncontrolling                    interests.    SOURCE  Deere & Company  Ken Golden, Director, Global Public Relations, 309-765-5678  CO: Deere & Company ST: Illinois NI: MAC CST ERN EST ERN  
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