Summary of Operations

Net sales of the worldwide equipment operations decreased 30 percent for the quarter and were down 20 percent for the year. Sales included a favorable currency-translation effect of 1 percent for the quarter and an unfavorable currency-translation effect of 4 percent for the year.  Also included in sales was price realization of 3 percent for the quarter and 5 percent for the year. Equipment net sales in the United States and Canada declined 26 percent for the quarter and 14 percent for the year. Net sales outside the United States and Canada were down 35 percent for the quarter and 28 percent for the year, with a favorable currency-translation effect of 1 percent for the quarter and an unfavorable currency-translation effect of 8 percent for the year.

Deere’s equipment operations reported an operating loss of $22 million for the quarter and operating profit of $1.365 billion for the year, compared with operating profit of $549 million and $2.927 billion for the same periods last year. The deterioration in the quarter primarily was due to lower shipment and production volumes, a goodwill impairment charge, unfavorable effects of foreign exchange and voluntary employee-separation expenses. Partially offsetting these factors were lower raw-material costs, improved price realization and lower selling, administrative and general expenses. Full-year results were down primarily due to lower shipment and production volumes, the unfavorable effects of foreign exchange, a goodwill impairment charge, higher raw-material costs and voluntary employee-separation expenses. These factors were partially offset by improved price realization and lower selling, administrative and general expenses.

Equipment operations reported a net loss of $201 million for the quarter and net income of $678 million for the year, compared with net income of $268 million and $1.676 billion last year.  The operating factors mentioned above, in addition to unfavorable tax effects, had an impact on both quarterly and full-year results.

Trade receivables and inventories ended the year at $5.014 billion compared with $6.276 billion in 2008. “As a result of our success aligning factory production with retail activity, trade receivables and inventories remained at 24 percent of full-year sales in spite of a significant decline in demand,” said Allen.

Financial services reported a net loss of $15.3 million for the quarter and net income of $202.5 million for the full year versus net income of $69.9 million and $337.4 million for the

Deere Announces Fourth-Quarter Earnings    6

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

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Summary of Operations

Net sales of the worldwide equipment operations decreased 17 percent for the quarter and 10 percent for six months. Sales for both periods included price increases of 6 percent offset by an unfavorable currency-translation effect of 6 percent. Equipment net sales in the United States and Canada decreased 8 percent for the quarter and 5 percent year to date. Net sales outside the United States and Canada decreased 30 percent for the quarter and 18 percent for six months with an unfavorable currency-translation effect of 13 percent for both periods.

Deere’s equipment operations reported operating profit of $628 million for the quarter and $935 million for six months, compared with $1.102 billion and $1.559 billion last year. The deterioration in both periods primarily was due to lower shipment and production volumes, higher raw-material costs and the unfavorable effects of foreign exchange, partially offset by improved price realization.

Equipment operations reported net income of $406 million for the quarter and $560 million for six months, compared with $666 million and $930 million last year. The same operating factors mentioned above, along with a lower effective tax rate, affected both quarterly and six-month results.

The company’s focus on asset management continued to produce improved results. Trade receivables and inventories at the end of the quarter were $7.924 billion, or 32 percent of previous 12-month sales, compared with $8.200 billion, or 35 percent of sales, a year ago.

Financial services reported net income of $68.9 million for the quarter and $115.8 million for six months compared with $86.4 million and $184.1 million last year. Results were lower for both periods largely due to a higher provision for credit losses, lower commissions from crop insurance and narrower financing spreads. Benefits from investment tax credits related to wind energy projects partially offset these factors.

Summary of Operations

Net sales of the worldwide equipment operations increased 1 percent for the quarter. Included were price changes of 6 percent offset by an unfavorable currency-translation effect of 6 percent. Equipment net sales in the United States and Canada increased 1 percent for the quarter. Net sales outside the United States and Canada were unchanged for the quarter, including an unfavorable currency-translation effect of 14 percent.

Deere’s equipment operations reported operating profit of $307 million for the quarter compared with $457 million last year. The deterioration was due largely to increased raw material costs and unfavorable effects of volatile foreign-currency exchange, partially offset by improved price realization.

The company’s focus on rigorous asset management continued to produce improved results. Trade receivables and inventories at the end of the quarter were $7.312 billion, or 28 percent of previous 12-month sales, compared with $6.488 billion, or 29 percent of sales, a year ago.

Financial services reported net income of $46.8 million for the quarter compared with $97.7 million last year. Results were lower primarily due to narrower financing spreads, lower commissions from crop insurance and a higher provision for credit losses.

Summary of Operations

Net sales of the worldwide equipment operations increased 24 percent for the quarter and 20 percent for the year. Included were positive effects for currency translation and price changes of 3 percent for the quarter and 6 percent for the full year. Equipment net sales in the United States and Canada were up 16 percent for the quarter and 9 percent for the full year. Net sales outside the United States and Canada increased by 39 percent for the quarter and 40 percent for the year, including a positive currency-translation effect of 10 percent for the year.

Deere’s equipment operations reported operating profit of $549 million for the quarter and $2.927 billion for the year, compared with $511 million and $2.318 billion for the periods last year. The improvement for both periods was largely due to the favorable impact of higher shipment volumes and improved price realization, partially offset by increased raw material costs and higher research and development expenses. The quarter’s results included pretax expenses of approximately $50 million to close a facility in Canada, while higher selling, administrative and general expenses had an impact on the full year.

Equipment operations reported net income of $268 million for the quarter and $1.676 billion for the year, compared with $319 million and $1.429 billion last year. The same operating factors mentioned above, along with a higher effective tax rate, affected both the quarterly and full-year results. In addition, unfavorable currency translation had a negative effect on the quarter’s performance.

Trade receivables and inventories at the end of the quarter were $6.276 billion, or 24 percent of previous 12-month sales, compared with $5.392 billion, or 25 percent of sales, a year ago.

Financial services reported net income of $69.9 million for the quarter and $337.4 million for the full year versus $96.9 million and $363.7 million for the comparable periods last year. Results were lower for both periods primarily due to higher selling, administrative and general expenses, an increase in average leverage, unfavorable currency translation and a higher provision for credit losses. In addition, quarterly results were lower as a result of narrower financing spreads. Both periods benefited from growth in the average credit portfolio and increased commissions from crop insurance.

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Summary of Operations

Net sales of the worldwide equipment operations increased 18 percent for the quarter and 19 percent for the first nine months. Included were positive effects for currency translation and price changes of 7 percent for the quarter and year to date. Equipment net sales in the United States and Canada were up 6 percent for the quarter and 7 percent for the nine-month period. Net sales outside the United States and Canada increased by 38 percent for the quarter and 41 percent for nine months, including a positive currency-translation effect of 13 percent for the quarter and year to date.

Deere’s equipment divisions reported operating profit of $818 million for the quarter and $2.377 billion for nine months, compared with $708 million and $1.807 billion for the respective periods last year. The quarterly improvement was largely due to the favorable impact of higher shipment volumes, partially offset by higher selling, administrative and general expenses.  Additionally, an increase in raw material costs offset improved price realization in the quarter. For nine months, the improvement was primarily due to the favorable impact of higher shipment volumes and improved price realization, partially offset by higher selling, administrative and general expenses and increased raw material costs. 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 $7.457 billion, or 30 percent of previous 12-month sales, compared with $6.227 billion, or 30 percent of sales, a year ago.

Financial services reported net income of $83.4 million for the quarter and $267.5 million for nine months versus $92.1 million and $266.8 million last year. Within financial services, results for the credit operations were lower for both periods primarily due to higher selling, administrative and general expenses, an increase in leverage, a higher provision for credit losses, and lower income from receivable sales. Partially offsetting these factors were growth in the credit portfolio and higher commissions from crop insurance. For both periods, the decrease in results for the credit operations was offset by an improvement in income from other miscellaneous service operations.

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.

Summary of Operations

Net sales of the worldwide equipment operations increased 19 percent for the quarter, including positive effects for currency translation and price changes of 6 percent. Equipment sales in the United States and Canada were up 9 percent for the quarter. Net sales outside the United States and Canada increased by 37 percent, which included a positive currency-translation effect of 11 percent.

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Summary of Operations

Net sales of the worldwide equipment operations increased 21 percent for the quarter and rose 8 percent for the year. Included were positive effects for currency translation and price changes of 6 percent for the quarter and 5 percent for the year. Equipment sales in the U.S. and Canada were up 15 percent for the quarter and flat for the year, while net sales outside the U.S. and Canada increased by 32 percent for the quarter and 27 percent for the year. Currency translation added 9 percentage points to sales outside the U.S. and Canada for the quarter and 7 points for the year.

Deere’s equipment divisions reported operating profit of $511 million for the quarter and $2.318 billion for the year, compared with $276 million and $1.905 billion for the same periods last year. The operating profit improvement for the quarter was largely due to the favorable impact of higher sales volumes and improved price realization, partially offset by higher selling, administrative and general expenses, and increased research and development costs. Full-year operating profit rose primarily due to improved price realization and higher sales and production volumes. Higher selling, administrative and general expenses, increased raw-material costs, and higher research and development costs partially offset the improvement for the full year.

Trade receivables and inventories at the end of the quarter were $5.392 billion, or 25 percent of previous 12-month sales, compared with $4.995 billion, or 25 percent of sales, a year ago.

Financial services reported net income of $96.9 million for the quarter and $363.7 million for the full year versus $87.5 million and $584.3 million for the comparable

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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.

Summary of Operations

Net sales of the worldwide equipment operations increased 4 percent for both the quarter and six months. This included positive effects for currency translation and price changes of 4 percent for both the quarter and six months. Equipment net sales in the U.S. and Canada were down 3 percent for the quarter and down 4 percent for the year to date. Net sales outside the U.S. and Canada increased by 22 percent for the quarter and 23 percent for six months, including a positive currency-translation effect of 7 percent for both periods.

Deere’s equipment divisions reported operating profit of $829 million for the quarter and $1.099 billion for six months, compared with $786 million and $1.047 billion for the periods last year. Higher operating profit for the quarter and six months was primarily the result of improved price realization, partially offset by higher selling and administrative expenses and increased raw-material costs. The impact of higher sales volumes from the company’s agricultural-equipment division largely offset lower construction-equipment volumes 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 $6.970 billion, or 34 percent of previous 12-month sales, compared with $7.112 billion, or 36 percent of sales, a year ago.

Financial services reported net income of $86.4 million for the quarter and $174.6 million for six months versus $309.4 million and $406.0 million last year, which included results from the discontinued health-care business. Income from continuing operations was $86.4 million for the quarter and $174.6 million for six months, versus $81.8 million and $166.4 million a year earlier. The improvement for both periods was primarily due to growth in the credit portfolio, partially offset by a higher provision for credit losses and, for the first six months, increased selling and administrative expenses.

Summary of Operations

Net sales of the worldwide equipment operations increased 3 percent for the quarter. Included were positive effects for price changes and currency translation totaling 5 percent. Equipment sales in the U.S. and Canada were 5 percent lower for the quarter. Net sales outside the U.S. and Canada increased by 24 percent for the quarter, which included a positive currency-translation effect of approximately 7 percent.

Deere’s equipment divisions reported operating profit of $270 million for the quarter compared with $261 million last year. Higher operating profit for the quarter was primarily the

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result of improved price realization, partially offset by higher selling and administrative expenses. The impact of lower construction-equipment volumes in the U.S. and Canada was mostly offset by higher volumes outside the region from the company’s agricultural equipment and construction and forestry operations.

Deere’s ongoing emphasis on asset management is continuing to yield positive results. Trade receivables and inventories at the end of the quarter were $5.672 billion, or 28 percent of previous 12-month sales, compared with $5.911 billion, or 30 percent of sales, a year ago.

Financial services reported net income of $88.2 million for the quarter compared with $96.6 million last year. Income from continuing operations was $88.2 million for the quarter versus $84.6 million a year earlier. Income benefited from growth in the credit portfolio, partially offset by a higher provision for credit losses and higher selling and administrative expenses.

Summary of Operations

Net sales of the worldwide equipment operations were essentially unchanged for the quarter and 2 percent higher for the full year. Included were positive effects for currency translation and price changes of 4 percent for the quarter and 3 percent for the year. Equipment sales in the U.S. and Canada were 6 percent lower for the quarter and 3 percent higher for the year. Net sales outside the U.S. and Canada increased by 14 percent for the quarter and 2 percent for the year, including a positive currency-translation effect of 2 percent for the quarter and a negative effect of 1 percent for the year.

Deere’s equipment divisions reported operating profit of $276 million for the quarter and $1.905 billion for the year, compared with $224 million and $1.842 billion for the same periods last year. Higher operating profit for the quarter was primarily the result of improved price realization and lower warranty expenses, partially offset by higher selling and administrative expenses, increased raw-material costs, and the impact of lower shipping and manufacturing volumes. Operating profit for the year was higher due to improved price realization and lower retirement-benefit costs. Partially offsetting these factors were increased raw-material costs, higher selling and administrative expenses, the impact of lower shipping volumes, and increased spending for research and development.

Deere’s ongoing emphasis on rigorous asset management is continuing to yield positive results. Trade receivables and inventories at the end of the quarter were $4.995 billion, or 25 percent of previous 12-month sales, compared with $5.253 billion, or 27 percent of sales, a year ago. With the company’s fourth-quarter performance, trade receivables and inventories in relation to sales have now declined for 26 consecutive quarters as compared with the same quarter of the prior year.

Financial services reported net income of $87.5 million for the quarter and $584.3 million for the year versus $92.1 million and $345.0 million last year. Income from continuing operations was $86.9 million for the quarter and $343.7 million for the year, versus $80.0 million and $312.2 million a year earlier. For both periods, income from continuing operations benefited from growth in the portfolio, partially offset by a

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Summary of Operations

Excluding the effect of currency translation and price changes, worldwide equipment sales were essentially unchanged for the quarter and first nine months. On a reported basis, equipment sales in the U.S. and Canada increased 6 percent for the quarter and 5 percent for the year to date. Excluding currency translation, sales outside the U.S. and Canada increased 3 percent for the quarter and 2 percent for nine months. As reported, equipment sales outside the U.S. and Canada were up 5 percent for the quarter and down 1 percent for nine months.

Deere’s equipment divisions reported operating profit of $583 million for the quarter and $1.630 billion for nine months, compared with $500 million and $1.618 billion for the periods last year. Higher operating profit for the quarter was primarily the result of improved price realization, partially offset by the impact of planned lower manufacturing volumes in the agricultural division. Nine-month operating profit was higher due to improved price realization and lower retirement benefit costs. Partially offsetting these factors were the negative effect of planned lower manufacturing volumes, higher selling and administrative expenses primarily related to growth and share-based compensation expense, and increased raw-material costs.

Deere’s ongoing emphasis on rigorous asset management is continuing to yield positive results. Trade receivables and inventories at the end of the quarter were $6.264 billion, or 32 percent of previous 12-month sales, compared with $6.526 billion, or 33 percent of sales, a year ago.

Financial services reported net income of $90.8 million for the quarter and $496.8 million year to date versus $90.4 million and $252.9 million last year. Income from continuing operations was $90.5 million for the quarter and $256.9 million for nine months, versus $82.1 million and $232.2 million a year earlier. For both periods, net income from continuing operations benefited from growth in the portfolio, partially offset by a higher provision for credit losses. Narrower financing spreads had a negative effect on net income from continuing operations for nine months.

Income from discontinued operations was $0.3 million for the quarter and $239.9 million year to date versus $8.3 million and $20.7 million last year. Income from discontinued operations relates primarily to this year’s gain on sale of the company’s health-care operations.

Summary of Operations

Excluding the effect of currency translation and price changes, worldwide equipment sales were down 1 percent for the quarter and up 1 percent for six months. On a reported basis, equipment sales in the U.S. and Canada increased 2 percent for the quarter and 5 percent for six months. Outside the U.S. and Canada, sales for the quarter and six months increased by 1 percent excluding currency translation, but were down 4 percent as reported for both periods.

Deere’s equipment divisions reported operating profit of $786 million for the quarter and $1.047 billion for six months, compared with $856 million and $1.118 billion for the same periods last year. Operating profit for the quarter and for six months was negatively affected by planned lower manufacturing volumes and higher raw material costs. Results for both periods benefited from improved price realization and lower retirement benefit costs.

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 $7.112 billion, or 36 percent of previous 12-month sales, compared with $7.280 billion, or 38 percent of sales, a year ago.

Financial services reported net income of $309.4 million for the quarter and $406.0 million for six months versus $74.5 million and $162.5 million last year. Income from continuing operations was $81.8 million for the quarter and $166.4 million for six months, versus $69.8 million and $150.0 million a year earlier. Income from discontinued operations was $227.6 million for the quarter and $239.6 million year to date, related primarily to the gain on sale of the company’s health care operations in the second quarter, compared with $4.7 million and $12.5 million last year. Financial services had higher net income from continuing operations for the quarter and six months, primarily due to growth in the portfolio, partially offset by narrower financing spreads.

Summary of Operations

Excluding the effect of currency translation and price changes, worldwide equipment sales were up 4 percent for the quarter. On a reported basis, equipment sales in the U.S. and Canada increased 9 percent for the quarter. Outside the U.S. and Canada, sales increased by 1 percent excluding currency translation but were down 5 percent as reported.

Deere’s equipment divisions had operating profit of $261 million for the quarter, compared with $262 million last year. Operating profit was negatively affected by lower manufacturing volumes and the expensing of stock options. These items were mostly offset by higher shipments, improved price realization and lower retirement benefit costs.

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Summary of Operations

Excluding the effect of currency translation and price realization, the company’s worldwide equipment sales were down 5 percent for the quarter and up 5 percent for the year. On a reported basis, equipment sales in the U.S. and Canada declined 2 percent for the quarter and rose 10 percent for the year. Outside the U.S. and Canada, equipment sales declined by 6 percent for the quarter and rose by 6 percent on a full-year basis excluding currency translation. Equipment sales outside the U.S. and Canada on a reported basis fell 5 percent for the quarter and increased 10 percent for the year.

Deere’s equipment divisions reported operating profit of $224 million for the quarter and $1.842 billion for the year, compared with $449 million and $1.905 billion last year. Operating profit for the quarter declined primarily due to lower manufacturing volumes and shipments in the agricultural equipment division, as well as higher warranty costs. The rate of warranty costs for the full year was similar to 2004. Operating profit for the year was down primarily due to higher selling and administrative expenses, increased manufacturing overhead related to production-system improvements, and higher research and development costs. These factors were partially offset by the margin on higher shipments and lower retirement benefit costs. Improved price realization offset higher raw material costs for both periods.

Trade receivables and inventories at the end of the quarter were $5.253 billion, or 27 percent of previous 12-month sales, compared with $5.206 billion, or 29 percent of sales, a year ago.

Financial services, which includes credit and health care operations, reported net income of $92.1 million for the quarter and $345.0 million for the year versus $88.2 million and $309.2 million last year. In the fourth quarter, the company’s credit operations had lower net income due to narrower financing spreads, lower gains on retail-note sales, and a higher provision for credit losses, partially offset by growth in the portfolio. For the full year, credit net income was higher as a result of growth in the portfolio and a lower provision for credit losses, partially offset by narrower financing spreads and lower gains on retail-note sales. Also included in financial services results were improved health-care underwriting margins for both periods.

Summary of Operations

Excluding the effect of currency translation and price changes, the company’s worldwide equipment sales were up 6 percent for the quarter and 8 percent year to date. On a reported basis, equipment sales in the U.S. and Canada rose 11 percent for the quarter and 14 percent for nine months. Outside the U.S. and Canada, sales increased by 8 percent and 11 percent for the respective periods excluding currency translation and by 11 percent and 16 percent as reported.

Deere’s equipment divisions reported operating profit of $500 million for the quarter and $1.618 billion for nine months, compared with $532 million and $1.456 billion last year. Negatively affecting operating profit for the quarter were lower manufacturing volumes in the agricultural equipment and commercial and consumer equipment divisions, where production was reduced in light of changes in demand at the retail level. On a year-to-date basis, operating profit increased primarily due to higher shipments and lower postretirement benefit costs. Improved price realization offset higher raw material costs for both periods.

Deere’s asset-management efforts are continuing to yield positive results. Trade receivables and inventories at the end of the quarter were $6.526 billion, or 33 percent of previous 12-month sales, compared with $5.776 billion, or 35 percent of sales, a year ago.

Financial services reported net income of $90.4 million for the quarter and $252.9 million for nine months versus $79.0 million and $221.0 million last year. The company’s credit operations benefited from growth in the portfolio, reflecting strong demand for John Deere products, as well as a lower loss provision, partially offset by lower financing spreads. Last year, credit operations benefited from gains on retail notes sold during the quarter and first nine months. Also included in financial services results were improved health-care underwriting margins for both periods.

Summary of Operations

Company equipment sales in the U.S. and Canada rose 13 percent for the quarter and 15 percent for the six months. Outside the U.S. and Canada, sales increased by 11 percent and 13 percent for the respective periods excluding currency translation and by 16 percent and 19 percent on a reported basis.

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Summary of Operations

The company’s equipment sales in the U.S. and Canada rose 20 percent for the quarter. Outside the U.S. and Canada, sales increased by 16 percent, excluding currency translation, and by 23 percent on a reported basis.

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