10-QPeriod: Q1 FY2007

DEERE & CO Quarterly Report for Q1 Ended Jan 31, 2007

Filed March 1, 2007For Securities:DE

Summary

Deere & Company (DE) reported its first quarter results for the period ending January 31, 2007, showcasing a moderate increase in net income to $238.7 million, or $1.04 per diluted share, up from $235.9 million, or $0.99 per diluted share, in the prior year's comparable period. This growth was driven by a 5% increase in total net sales and revenues, reaching $4.425 billion, primarily fueled by strength in the Agricultural Equipment segment and positive contributions from the Financial Services division. Despite a slight decline in Construction and Forestry sales, the company demonstrated resilience through improved pricing and solid performance in its core agricultural markets, which are benefiting from favorable farm economics and increased demand for renewable fuels. Management anticipates continued growth for the full fiscal year, projecting net income around $1.4 billion, supported by a stable outlook for agricultural equipment and commercial/consumer segments, though a slowdown is expected in construction and forestry. Key financial metrics indicate a healthy operational performance, with a slight increase in operating profit for the Equipment Operations to $270 million. The company's balance sheet remains robust, though short-term borrowings increased to $9.05 billion, largely reflecting seasonal working capital needs. Deere & Company's strategic focus on asset management and advanced products appears to be paying off, positioning it well to navigate market fluctuations and capitalize on global economic trends. The company also announced an agreement to acquire LESCO, Inc. in the second quarter of 2007, which is expected to bolster its commercial and consumer equipment segment.

Key Highlights

  • 1Net income increased slightly to $238.7 million ($1.04 per diluted share) for the first quarter of 2007, compared to $235.9 million ($0.99 per diluted share) in the prior year.
  • 2Total net sales and revenues grew by 5% to $4.425 billion, driven by a 10% increase in Agricultural Equipment sales and a 21% rise in Credit revenues.
  • 3The Construction and Forestry segment experienced a 7% sales decline, reflecting market slowdowns in the U.S. and Canada.
  • 4Operating profit for Equipment Operations increased to $270 million, supported by improved price realization and higher sales volumes in agriculture.
  • 5Short-term borrowings rose to $9.05 billion, indicating increased reliance on short-term financing, potentially for seasonal working capital needs.
  • 6Deere & Company announced an agreement to acquire LESCO, Inc., a supplier of consumable products for lawn maintenance, to be integrated into its commercial and consumer equipment segment.
  • 7The company forecasts full-year fiscal 2007 net income to be around $1.4 billion, with positive outlooks for agricultural and commercial/consumer equipment segments, and a projected decline in construction and forestry.

Frequently Asked Questions

Deere & Company's total net sales and revenues increased by 5% to $4.425 billion for the first quarter of 2007, compared to $4.202 billion in the same period of 2006. This growth was primarily driven by a 10% increase in Agricultural Equipment sales and a 21% rise in Credit revenues, though sales in the Construction and Forestry segment decreased by 7%.

Deere & Company forecasts its net income for the full fiscal year 2007 to be around $1.4 billion. The company anticipates moderate growth in the Agricultural Equipment and Commercial and Consumer Equipment segments, while expecting a slowdown in the Construction and Forestry equipment markets.

Yes, Deere & Company announced in February 2007 an agreement to acquire LESCO, Inc. for $14.50 per share. LESCO, a supplier of products for lawn maintenance, is expected to become part of the Commercial and Consumer Equipment segment upon closing, anticipated in the second quarter of 2007.

Deere & Company's short-term borrowings increased to $9.05 billion as of January 31, 2007, up from $6.53 billion a year prior. The company has diverse funding sources, including commercial paper, term debt, and securitization markets, and maintains a $3 billion credit facility. While short-term borrowings have increased, the company expects sufficient liquidity to meet its funding needs.