Deere Q1 Reaches $236 in Earnings

MOLINE, Ill. – Deere & Co. announced that the company’s first-quarter income increased nearly 6 percent compared to the same period last year. Worldwide net income for the company was reported at $235.9 million for the quarter ended Jan. 31, compared to $22.8 million for the first quarter of 2005. Along with income, sales and revenue increased 7 percent to just over $4.2 billion, compared with $3.935 billion a year ago.

Positive customer response to Deere's advanced product lineup and a continuing focus on operating efficiency are helping drive the company's results, noted Robert Lane, Deere chairman and chief executive officer. "We're continuing to attract new customers worldwide, who value the productivity and precision that our offerings deliver,” he said. “At the same time, our rigorous management of operating costs and asset levels is helping sustain strong financial performance.”

Operationally, worldwide equipment sales for the company were up 4 percent for the quarter. Deere’s equipment divisions had operating profit of $261 million for the quarter, compared with $262 million last year. The slight decrease is attributed to lower manufacturing volumes and the expensing of stock options. However, Deere says those impacts were mostly offset by higher shipments, improved price realization and lower retirement benefits costs.

For the second quarter, the company expects equipment sales to be flat to up 2 percent and sees an increase of 3 to 5 percent in equipment sales for the full year 2006. Asset-management initiatives within the company are forecast to be down 9 percent for Q2 and 4 percent for the quarter. Altogether, Deere is projecting net income of $1.7 billion for the year, reaching $725 million to $750 million in the next quarter. These net income projections include the impact of two previously announced items: The sale of the company’s health care business, which is expected to add $225 million after-tax to second-quarter and full-year earnings, and the closure of a forestry-equipment plant in Canada, expected to result in an after-tax charge of about $40 million over the year.
 
"Deere's recent performance shows we are continuing our progress toward building and growing a more resilient company," Lane said. "We are providing further value to shareholders in the form of higher dividends and stock repurchases. As a result of these steps, we believe the company is positioned to continue delivering strong financial results and solid investor value for the long term."

Deere’s Consumer & Commercial division showed an impressive sales increase of 20 percent for the quarter, primarily due to higher sales in the landscape business. Compared to a $2 million loss in operating profit for the first quarter of 2005, the division reported 2006 first-quarter operating profit at $19 million. Shipments outside the landscape business were up 9 percent.

The Construction & Forestry division also saw a sales jump of 18 percent for the quarter, reflecting strong activity at the retail level. Higher operating profit of $136 million, compared to $101 million for the same period last year, was primarily due to increased shipments and efficiencies related to stronger production volumes, partially offset by expenses to close a Canadian facility. Improved price realization offset the impact of higher raw material costs for the quarter.

Meanwhile, the Agricultural division’s sales declined 6 percent during the quarter due to lower shipments and currency translation, partially offset by improved price realization. Quarterly profit dropped from $163 million to $106 million year-over-year, due to lower shipments and inefficiencies related to worldwide production volumes.

Deere expects agricultural equipment sales to be down about 5 percent for the year, though its Commerical & Consumer and Construction & Forestry divisions are expected to perform well. The Commercial & Consumer division is forecast to be up 10 to 12 percent for the year with support from newly introduced products, an assumed return to normal weather patterns and higher sales from the company’s landscape business.