Farm Compliance

Moline, Illinois - Deere & Company today announced worldwide net income of $763.5 million, or $1.74 per share, for the second quarter ended April 30, compared with $623.6 million, or $1.36 per share, for the same period last year. For the first six months, net income was $1.133 billion, or $2.56 per share, compared with $862.3 million, or $1.88 per share, last year.

Worldwide net sales and revenues increased 18 percent to $8.097 billion for the second quarter and were also up 18 percent to $13.298 billion for the first six months. Net sales of the equipment operations were $7.469 billion for the quarter and $11.999 billion for six months, compared with $6.266 billion and $10.081 billion for the respective periods last year.

Favorable conditions across the global farm sector are helping to drive the company's record financial results even at a time of a slowing U.S. economy. "Advanced offerings that help efficiently meet the world's growing need for farm products are lending strong support to our performance and are bringing John Deere quality and value to a growing global audience," said Robert W. Lane, chairman and chief executive officer. "All our businesses are benefiting from the consistent execution of our plans to create a fundamentally more resilient enterprise. As a result, the company's non-agricultural operations have remained solidly profitable in spite of the economic downturn in the United States, while our performance overall continues on a record pace."

Summary of Operations

Net sales of the worldwide equipment operations increased 19 percent for the quarter and the first six months. Included were positive effects for currency translation and price changes of 8 percent for the quarter and 7 percent year to date. Equipment net sales in the United States and Canada were up 6 percent for the quarter and 7 percent for the six-month period. Net sales outside the U.S. and Canada increased by 46 percent for the quarter and 42 percent for six months, which included a positive currency-translation effect of 14 percent for the quarter and 13 percent year to date.

Deere's equipment divisions reported operating profit of $1.102 billion for the quarter and $1.559 billion for six months, compared with $829 million and $1.099 billion for the respective periods last year. The improvements were largely due to the favorable impact of higher sales and production volumes and improved price realization, partially offset by higher selling, administrative and general expenses and raw-material costs. In addition, 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 $8.200 billion, or 35 percent of previous 12-month sales, compared with $6.970 billion, or 34 percent of sales, a year ago.

Financial services reported net income of $86.4 million for the quarter and $184.1 million for six months versus $86.4 million and $174.6 million last year. Quarterly results were comparable while the year-to-date improvement was primarily due to growth in the credit portfolio and increased crop insurance income. Partially offsetting these factors were an increase in leverage, increased selling, administrative and general expenses, and lower income from receivable sales.

Equipment Division Performance

* Agricultural. Sales increased 34 percent for the quarter and the six months, with the improvement due to higher shipment volumes, the favorable effects of currency translation, and improved price realization. Operating profit was $782 million for the quarter and $1.114 billion for six months, compared with $487 million and $624 million for the respective periods last year. Operating profit for both periods was higher primarily due to the favorable impact of higher sales and production volumes and improved price realization, partially offset by higher selling, administrative and general expenses and higher raw-material costs.

* Commercial & Consumer. Division sales were up 8 percent for the quarter and 11 percent for the year to date. LESCO operations, acquired in the third quarter of 2007, accounted for a sales increase of 12 percent for the quarter and six months. Operating profit was $154 million for the quarter and $162 million year to date, compared with $150 million and $188 million a year ago. Operating profit was up slightly for the quarter due to a more favorable product mix, improved price realization and higher sales volumes, largely offset by higher selling, administrative and general expenses related to the LESCO operations. The six-month decline in operating profit was primarily due to higher selling, administrative and general expenses from LESCO, partially offset by higher sales volumes and a more favorable product mix.

* Construction & Forestry. Sales declined 7 percent for both the quarter and year to date. Operating profit was $166 million for the quarter and $283 million for six months, versus $192 million and $287 million a year ago. The reduction in operating profit for the quarter was due to lower shipment volumes, partially offset by improved price realization. Six-month operating profit was down slightly due to lower shipment volumes and higher raw-material costs, mostly offset by improved price realization.

Market Conditions & Outlook

* Agricultural. With support from continuing strength in the global farm sector, worldwide sales of the company's agricultural equipment are forecast to increase by about 35 percent for full-year 2008. This includes about 7 percent related to currency translation.

On an industry basis, farm machinery sales in the United States and Canada are forecast to be up about 20 percent for the year, led by an increase in large tractors and combines.

Industry sales in Western Europe are forecast to be up 3 to 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 experiencing rapid growth. South American markets are expected to show further improvement in 2008, with industry sales forecast to increase by about 30 percent.

Despite generally positive conditions in the region, farm machinery demand could be affected by uncertainties over government-backed financing programs in Brazil and by an agricultural-commodity export tax in Argentina. Company sales are being helped by an expanded product line and additional tractor capacity in Brazil, and by rising demand for sugarcane harvesting equipment. Deere's sales for the year are also expected to move significantly higher in key Asian markets, such as India and China, as well as 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, including about 6 percent from a full year of LESCO sales. Sales gains from new products are partially offsetting the impact of the U.S. housing slowdown and weakening economy. Division sales to date have been negatively affected by a late spring in much of the United States.

* 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 remain in line with last year's relatively healthy levels. Although the U.S. housing sector is negatively affecting forestry equipment markets in the United States and Canada, forestry sales worldwide are expected to rise in 2008.

In this relatively weak environment, Deere's worldwide sales of construction and forestry equipment are forecast to decline by approximately 3 percent for the year. Company sales are expected to benefit from new products and from factory-production levels in closer alignment with retail demand.

* Credit. Full-year 2008 net income for Deere's credit operations is forecast to be approximately $350 million. The forecast decrease from 2007 is primarily due to an increase in leverage, an increase in the provision for credit losses and higher costs in support of growth initiatives, partially offset by growth in the credit portfolio and increased crop insurance income.