Moline, Ill.-based Deere & Co. last week announced worldwide net income of $277.3 million, or $1.20 per share, for the fourth quarter ended Oct. 31, compared with $232.8 million, or 96 cents per share, for the same period last year, a 19.1-percent increase. Income from continuing operations, which excludes the company's discontinued health-care business, was $276.7 million, or $1.20 per share, for the quarter, versus $220.7 million, or 91 cents per share, last year.
For the full year, net income was $1.7 billion, or $7.18 per share, compared with $1.4 billion, or $5.87 per share, a year ago. Full-year income from continuing operations was $1.5 billion, or $6.16 per share, compared with $1.4 billion, or $5.74 per share, last year.
Worldwide net sales and revenues increased 3 percent for the quarter, to $5.1 billion, and increased 5 percent for the year, to $22.1 billion. Net sales of the equipment operations were $4.5 billion for the quarter and $19.9 billion for the year, compared with $4.5 billion and $19.4 billion for the respective periods of 2005.
"Our strong results for the final quarter of 2006, and for the full year, provide mounting evidence of our success in building a fundamentally more agile and profitable business, while introducing advanced new products and services to a growing global customer base," said Robert Lane, chairman and CEO. "We are particularly encouraged that the company achieved record net income for the year and strong cash flow in the face of market conditions that have been relatively weak in many parts of the world."
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 United States 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 $1.9 billion for the year, compared with $224 million and $1.8 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.
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.
Deere's equipment sales are projected to be roughly flat for the full year and to increase approximately 5 percent for the first quarter of 2007. Consistent with ongoing asset-management initiatives, production levels are expected to be down about 4 percent for both the year and first quarter. Construction and forestry production in the U.S. and Canada is expected to be down about 16 percent in the quarter. Based on the above, net income is forecast to be around $1.3 billion for the year and in a range of $150 million to $175 million for the first quarter.
In addition to delivering record earnings in 2006, Deere also funded an aggressive global growth plan, returned $1.6 billion to investors through share repurchases and dividends, and achieved a further reduction in trade receivables and inventories.
"Our focus on rigorous asset management is receiving strong support from major investments at key manufacturing locations, such as the redevelopment of our Waterloo tractor operations," Lane said.
Sales declined 1 percent for the quarter in the Commercial & Consumer division due to lower equipment sales, but were up 8 percent for the year, primarily due to higher sales in the landscapes operations. The division had an operating loss of $3 million for the quarter and operating profit of $221 million for the year, compared with an operating loss of $10 million and operating profit of $183 million for the same periods of 2005.
John Deere commercial and consumer sales are forecast to be up about 4 percent for the year. Growth in the landscapes operations and the successful introduction of new products are expected to more than offset the impact of a softer market for residential housing.
In the Construction & Forestry division, sales rose 3 percent for the quarter and 10 percent for the year. Operating profit was $136 million for the quarter and $802 million for the year, compared with $177 million and $689 million last year. Quarterly operating profit decreased mainly because of higher raw-material costs and expenses to close a facility in Canada, partially offset by improved price realization.
Markets for construction and forestry equipment are expected to see a slowdown in 2007. While nonresidential spending is forecast for further improvement, residential-housing construction is expected to be lower. In this environment, Deere's worldwide sales of construction and forestry equipment are forecast to decrease by about 5 percent for fiscal 2007.