What is the outlook for Deere & Company's different equipment segments for the remainder of fiscal year 2006?

Deere & Company forecasts overall equipment sales to increase by 3% to 5% for fiscal year 2006. Specifically, Agricultural Equipment sales are expected to be flat to down 2% globally, while Commercial and Consumer Equipment sales are projected to rise 7% to 9%. The Construction and Forestry segment is expected to see the strongest growth, with sales forecast to increase 10% to 12%.

How are rising raw material costs impacting Deere's operations?

The company acknowledges that the availability and price of raw materials, particularly steel, are items of concern impacting the Equipment Operations. While the company has been able to secure adequate supplies to date, prices have risen. These higher raw material costs, along with planned lower manufacturing volumes, negatively affected operating profit in the second quarter and first six months, although improved price realization and lower retirement benefit costs provided some offset.

What is the financial performance of Deere's Credit segment?

The Credit segment is expected to report net income of approximately $335 million for the year, reflecting growth in the credit portfolio. In the second quarter, operating profit for the credit segment was $124 million, an increase from $109 million in the prior year. The growth is primarily driven by a larger credit portfolio, though partially offset by narrower financing spreads and increased interest expenses due to higher average borrowings and rates.

What impact did the adoption of the new share-based payment standard have?

Deere & Company adopted FASB Statement No. 123(R) in the first quarter of 2006. This adoption resulted in an additional expense of $11 million pre-tax ($7 million after-tax, or $0.03 per share) in the second quarter and $53 million pre-tax ($33 million after-tax, or $0.14 per share) for the first six months of 2006.

DE 10-Q Quarterly Report Q2 FY2006 — Revenue, Net Income, EPS

Summary

Deere & Company (DE) reported solid financial results for the second quarter and first six months of fiscal year 2006, demonstrating resilience despite some industry headwinds. While agricultural equipment sales saw a slight decline, this was largely offset by robust growth in commercial & consumer and construction & forestry equipment segments. The company also benefited from a significant gain on the sale of its discontinued healthcare operations, boosting net income figures. Management highlighted ongoing efforts in asset management, such as efficient inventory and receivables control, contributing to strong operational performance. The outlook for the remainder of the year remains cautiously optimistic, with continued growth anticipated across most segments, supported by strong crop demand and investments in renewable fuels, though challenges like rising raw material costs and varying global agricultural conditions persist. Financially, the company maintained a strong liquidity position, supported by its credit operations and access to capital markets. The Equipment Operations saw a reduction in interest-bearing debt and improved debt-to-capital ratios. The Credit segment experienced portfolio growth, though financing spreads narrowed. Deere & Company continued its commitment to shareholder returns through dividends and a share repurchase program. The company is also investing in meeting stringent emissions regulations for its engines, underscoring a focus on long-term product development and compliance.

Key Highlights

1Net income for the second quarter reached $744.6 million ($3.13 per share), with income from continuing operations at $517.0 million ($2.17 per share).
2Total net sales and revenues increased by 2% for the second quarter to $6,562 million and 4% for the first six months to $10,764 million.
3Construction and Forestry equipment sales showed strong performance, increasing 10% in Q2 and 13% year-to-date, with a positive outlook for the full year.
4Commercial and Consumer equipment sales also grew, up 7% in Q2 and 11% year-to-date, driven by new products and the landscapes business.
5Agricultural equipment sales declined 7% in Q2 and 6% year-to-date, impacted by lower shipments and currency translation, though price realization improved.
6The company reported a significant gain from discontinued operations ($227.6 million in Q2) related to the sale of its health care business.
7Rigorous asset management resulted in improved ratios of trade receivables and inventories to net sales compared to the prior year.

DEERE & CO Quarterly Report for Q2 Ended Apr 30, 2006

Summary

Key Highlights

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