Deere & Company announced today that the Patient Protection and Affordable Care Act signed into law this week will adversely impact its expenses for fiscal 2010. As a result of the legislation, the company’s expenses are expected to be about $150 million higher on an after-tax basis, primarily in the second quarter. This impact was not included in the 2010 outlook for net income attributable to Deere & Company of approximately $1.3 billion disclosed in the company’s first-quarter earnings report on February 17th.
According to the Des Moines Register, the company said the impact would be felt primarily in the second quarter, between April 1 and July 1.
Deere spokesman Ken Golden said the charge would be taken as a one-time cost to cover the new tax the Health Care bill imposes on subsidies paid to corporations for retiree prescription costs under a 2003 Medicare bill.
“The 2003 legislation encouraged companies to stay in the game and continue to fund their retirees’ prescriptions,” Golden said. “Otherwise, the retirees would go onto the Medicare prescription program which would cost the government more money.”
Golden said Deere and other companies warned congress in a letter last December that the imposition of a tax on the prescription costs would force publicly-traded corporations like Deere to publicly account for the extra costs.
Deere said the impact of the legislation had not been included in its forecast for a profit of $1.3 billion for this year.
Golden said the fact that President Obama will be in Iowa City today to discuss the health care legislation “was not a factor in the timing of the announcement.”
Deere employs about 12,000 workers in plants at Waterloo, Ankeny, Ottumwa, Davenport and Dubuque and at its credit operations in Johnston.
Last week, Caterpillar, Inc. issued a similar statement stating that the health care bill would impose $100 million penalty on the Peoria-based equipment manufacturer.