What is the primary reason for the increased tax expense reported by Deere?

The primary reason is the enactment of the Patient Protection and Affordable Care Act, which eliminates the tax deductibility of future Medicare Part D retiree drug subsidy (RDS) reimbursements for the company.

How much is the expected increase in tax expense, and when will it be recorded?

The company expects its tax expenses to be approximately $150 million higher. This impact will be recorded in tax expense in the period the legislation was enacted, primarily impacting the second quarter of fiscal year 2010.

Does this $150 million increase affect Deere's previously stated 2010 net income outlook?

Yes, the previously stated 2010 outlook for net income attributable to Deere & Company of approximately $1.3 billion did not include this additional $150 million tax expense. Investors should expect a revised outlook or understand that actual net income may be lower than initially projected.

Is this a cash impact or an accounting adjustment?

This is an accounting impact related to the tax effects of future retiree drug costs and the retiree health care liabilities. While it affects reported tax expense, it's crucial to understand the nature of the accounting treatment stemming from legislative changes.

DE 8-K: Regulation FD — Mar 25, 2010

Summary

Deere & Company (DE) filed an 8-K on March 25, 2010, to disclose a material impact on its financial performance due to the recently enacted Patient Protection and Affordable Care Act. The new legislation eliminates the tax deductibility of future Medicare Part D retiree drug subsidy (RDS) reimbursements. This change is expected to increase Deere's tax expenses by approximately $150 million, primarily impacting the second quarter of fiscal year 2010. This $150 million increase in tax expense was not factored into the company's previously issued 2010 net income outlook of $1.3 billion. Investors should note that this is a non-cash accounting impact related to future retiree health care liabilities and is a direct consequence of the new healthcare law. The company has duly filed this information to ensure transparency regarding its updated financial expectations.

Key Highlights

1Deere & Company reported an anticipated increase in tax expenses of approximately $150 million due to the Patient Protection and Affordable Care Act.
2The legislation removes the tax deductibility for future Medicare Part D retiree drug subsidy (RDS) reimbursements.
3The full impact of this tax change on retiree health care liabilities will be recorded in tax expense in the period of enactment (fiscal 2010).
4The estimated $150 million expense impact is primarily expected to affect the second quarter of fiscal 2010.
5This increased tax expense was not included in Deere's previously provided 2010 net income outlook of approximately $1.3 billion.
6The disclosure was made via an 8-K filing on March 25, 2010, and is considered an 'Other Event' (Item 8.01).

DEERE & CO 8-K Report, Regulation FD Disclosure (Mar 25, 2010)

Summary

Key Highlights

Frequently Asked Questions