Deere & Company · NYSE:DE
Deere & — Q1 2018 Earnings Presentation
43 slides from Deere &'s earnings presentation, Feb 16, 2018
Slide 1: Safe Harbor Statement & Disclosures
Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning the company’s plans and projections for the future, including estimates and assumptions with respect to economic, political, technological, weather, market acce
Slide 2: 1Q 2018 Overview
1Q 2018 Overview ($ millions except where noted) 1Q 2018 1Q 2018 vs. 1Q 2017 Net Sales & Revenues $6,913 23% Net Sales (equipment operations) $5,974 27% Net Income (Loss) (attributable to Deere & Company) ($535)* Diluted EPS ($ per share) ($1.66)* Note: Wirtgen’s results were included in the Company
Slide 3: 1Q 2018 Overview: Equipment Operations
1Q 2018 Overview Equipment Operations 1Q 2018 vs. 1Q 2017 Net Sales 27% Price realization Currency translation Wirtgen Flat 3 points 5 points 26
Slide 4: Worldwide Agriculture & Turf 1Q 2018 Overview
Worldwide Agriculture & Turf 1Q 2018 Overview ($ millions) 1Q 2018 1Q 2018 vs. 1Q 2017 Net Sales $4,243 18% Operating Profit* $387 78% *1Q 2018 operating profit impacted by: + Shipment volumes + Voluntary employee-separation program expenses + Warranty costs Gain on sale of partial interest in SiteO
Slide 5: Global Stocks-to-Use Ratios
Global Stocks-to-Use Ratios Source: USDA, 8 February 2018 Cotton Wheat Corn Soybeans 28 0% 20% 40% 60% 80% 100% 120% 0% 10% 20% 30% 40% 50% 60% 1996 1999 2002 2005 2008 2011 2014 2017P Cotton Ratios
Slide 6: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts Source: 2001–2016: USDA, 7 February 2018 2017F–2018F: Deere & Company forecast as of 16 February 2018 29 $0 $100 $200 $300 $400 $500 2002 2004 2006 2008 2010 2012 2014 2016 2018F $ Billions Crops Livestock Government Payments
Slide 7: Economic Update: EU
Economic Update EU 28 * Includes wheat, barley, corn, sunflower seed, rapeseed, soybean, sugar beet, cotton, rice Source: IHS Global Insight, February 2018 Source: EU Com, LTO, IFCN, January 2018 Deere & Company forecast as of 16 February 2018 30 $0 $30 $60 $90 $120 $150 2009 2012 2015 2018F US$ Bil
Slide 8: Economic Update: Brazil
Economic Update Brazil * Includes key grains, ethanol, sugar Source: IHS Global Insight, February 2018 10.5% 7.5% Note: PSI-FINAME was key credit line for machinery acquisition 2011–2014; Moderfrota is currently the most attractive credit line Source: ABIMAQ (Brazilian Association of Machinery & Equ
Slide 9: Agriculture & Turf Retail Sales Industry Outlook
Fiscal 2018 Forecast Previous Forecast U.S. and Canada Ag ~ 10% 5-10% EU 28 Ag ~ 5% ~ 5% South America Ag (tractors and combines) Flat to up 5% Flat to up 5% Asia Ag ~ Flat ~ Flat U.S. and Canada Turf and Utility Flat to up 5% ~ Flat Agriculture & Turf Retail Sales Industry Outlook Source: Deere & C
Slide 10: Worldwide Agriculture & Turf Deere & Company Outlook
Fiscal 2018 Forecast Previous Forecast Net Sales ~ 15% ~ 9% Currency translation ~ 3 points ~ 2 points Worldwide Agriculture & Turf Deere & Company Outlook Source: Deere & Company forecast as of 16 February 2018 (previous forecast as of 22 November 2017) 33
Slide 11: Worldwide Construction & Forestry 1Q 2018 Overview
($ millions) 1Q 2018 1Q 2018 vs. 1Q 2017 Net Sales $1,731 57% Operating Profit* $32 14% Worldwide Construction & Forestry 1Q 2018 Overview *1Q 2018 operating profit impacted by: Wirtgen purchase accounting and acquisition costs Excluding Wirtgen: + Shipment volumes + Voluntary employee-separation pr
Slide 12: Worldwide Construction & Forestry U.S. Economic Indicators
(annual percentage rate* except where noted) Fiscal 2018 Forecast Previous Forecast GDP Growth 2.6% 2.4% Housing Starts (thousands) 1,276 1,254 Total Construction Investment 2.2% 1.4% Government Construction Investment 0.6% 0.8% Crude Oil Price (per barrel)** $58.00 $51.25 Worldwide Construction & F
Slide 13: Worldwide Construction & Forestry Deere & Company Outlook
Fiscal 2018 Forecast Previous Forecast Net Sales ~ 80% ~ 69% Currency translation Wirtgen ~ 2 points ~ 56 points ~ 1 point ~ 54 points Worldwide Construction & Forestry Deere & Company Outlook Source: Deere & Company forecast as of 16 February 2018 (previous forecast as of 22 November 2017) 36
Slide 14: Worldwide Financial Services Credit Loss History
Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 0.22% 15 Year Average Source: Deere & Company forecast as of 16 February 2018 37 0.0% 0.5% 1.0% 1.5% 2.0% 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018F
Slide 15: Worldwide Financial Services
Worldwide Financial Services ($ millions) 1Q 2018 Fiscal 2018 Forecast Previous Forecast Net Income (Loss) (attributable to Deere & Company) $425* ~ $840* ~ $515 Source: Deere & Company forecast as of 16 February 2018 (previous forecast as of 22 November 2017) * Adjusted net income of $147 million i
Slide 16: Consolidated Trade Receivables & Inventory
($ millions) 1Q 2018* Fiscal 2018 Forecast** Agriculture & Turf $1,752 ~ $50 Construction & Forestry $2,351 ~ $1,750 Total (as reported) $4,103 ~ $1,700 Total (constant exchange) $3,747 ~ $1,525 Consolidated Trade Receivables & Inventory * Change at 28 January 2018 vs. 29 January 2017 ** Change at 2
Slide 17: Cost of Sales Equipment Operations
1Q 2018 Fiscal 2018 Forecast Previous Forecast COS (percent of Net Sales) 78.8% ~ 75% ~ 75% Cost of Sales Equipment Operations Source: Deere & Company forecast as of 16 February 2018 (previous forecast as of 22 November 2017) 40
Slide 18: Research & Development Expense Equipment Operations
1Q 2018 vs. 1Q 2017 Fiscal 2018 Forecast Previous Forecast R&D Expense 14% ~ 20% ~ 18% Currency translation Acquisition-related activities 2 points 5 points ~ 1 point ~ 9 points ~ 1 point ~ 9 points Research & Development Expense Equipment Operations Source: Deere & Company forecast as of 16 Februar
Slide 19: Selling, Administrative & General Expense Equipment Operations
Selling, Administrative & General Expense Equipment Operations 1Q 2018 vs. 1Q 2017 Fiscal 2018 Forecast Previous Forecast SA&G Expense 8% ~ 23% ~ 26% Acquisition-related activities Incentive compensation Currency translation Voluntary separation program Pension/OPEB Commissions paid to dealers 11 po
Slide 20: Income Taxes Equipment Operations
1Q 2018 Rest of Year 2018 Forecast Fiscal 2018 Forecast* Fiscal 2019 Forecast Effective Tax Rate 422% 25-27% ~ 62% 25-27% Income Taxes Equipment Operations * Previous forecast 31-33% prior to U.S. tax reform, pro-forma 2018 rate ~ 29.5% Source: Deere & Company forecast as of 16 February 2018 (previo
Slide 21: Net Operating Cash Flows Equipment Operations
Net Operating Cash Flows Equipment Operations Fiscal 2018 Forecast* ~ $4.4 billion * Previous forecast ~ $3.8 billion Note: 2009-2016 adjusted with the adoption of FASB ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting” Source: Deere & Company forecast as of 16 February 2018 (
Slide 22: Deere & Company Outlook Fiscal 2018 Forecast
($ billions except where noted) 2Q 2018 Forecast Fiscal 2018 Forecast Previous Forecast Net Sales (equipment operations) 30-40% ~ 29% ~ 22% Price realization Currency translation Wirtgen ~ Flat ~ 4 points ~ 16 points ~ 1 point ~ 3 points ~ 12 points ~ 1 point ~ 2 points ~ 12 points Net Income (Loss)
Slide 23: Deere & Company Outlook
Deere & Company Outlook Fiscal 2018 Forecast 2Q 2018 al 2018 ($ billions except where noted) Forecast Forecast Net Sales (equipment operations) B 30-40% «= ~ 20% Price realization > ~ rt Be» 1 point currency translation MA ponts fp ~ 3 poms wigen Bes pois P= 12 pcs A ~ 12 poms Net Income (Loss) (ett
Slide 24: Appendix
Appendix
Slide 25: Deere Use-of-Cash Priorities
Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost and readily available short- and long-term funding mechanisms Reflects the strategic nature of our financial services operation Committed to “A” Rating Cash from Operations Fund Operating and Growth N
Slide 26: Sources and Uses of Cash Fiscal 2004-2017
Sources and Uses of Cash Fiscal 2004-2017 Equipment Operations $ Millions ~ 58% of cash from operations returned to shareholders * Other includes proceeds from maturities and sales of marketable securities and purchases of marketable securities and reconciliation for non-cash items including the eff
Slide 27: Deere Quarterly Dividends Declared 1Q 2004 – 1Q 2018
Deere Quarterly Dividends Declared 1Q 2004 – 1Q 2018 * Adjusted for 2 for 1 stock split on 26 November 2007 Dividend raised 114% since 2010 50 $0.11 $0.28 $0.60 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 2004 2005 2006 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 28: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans * All shares adjusted for two-for-one stock split effective 26 November 2007 2004–1Q 2018: Cumulative cost of repurchases $16.4 billion Shares repurchased 245.0 million Average repurchase price $66.96 December 2013 authorization of $8 billion: Amo
Slide 29: Pension and OPEB Expense
Pension and OPEB Expense ($ millions) 1Q 2018 Fiscal 2018 Forecast Previous Forecast Pension and OPEB Expense $6 ~ $15 ~ $10 Source: Deere & Company forecast as of 16 February 2018 (previous forecast as of 22 November 2017) 52
Slide 30: Other Information Equipment Operations
($ millions) Fiscal 2018 Forecast Previous Forecast Capital Expenditures ~ $925 ~ $925 Depreciation and Amortization ~ $1,050 ~ $1,050 Pension/OPEB Contributions ~ $140 ~ $140 Other Information Equipment Operations Source: Deere & Company forecast as of 16 February 2018 (previous forecast as of 22 N
Slide 31: Economic Update: Other Selected Markets
Economic Update Other Selected Markets * Includes corn, wheat, rice, barley, sorghum, oilseeds, peanut, sugar, cotton Source: IHS Global Insight, February 2018 54 $0 $75 $150 $225 $300 2009 2012 2015 2018F US$ Billions China - Crop Value of Production* $0 $75 $150 $225 $300 2009 2012 2015 2018F US$
Slide 32: U.S. Farm Commodity Prices
Source: USDA, 8 February 2018 U.S. Farm Commodity Prices 55 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $0 $4 $8 $12 $16 $20 2005 2007 2009 2011 2013 2015 2017 Cotton - $ per Pound $ per Bushel Cotton Wheat Corn Soybeans
Slide 33: U.S. Farm Commodity Prices
($ per bushel except where noted) 2015/16 2016/17 Estimate 2017/18 Projection Previous 2017/18 Corn $3.61 $3.36 $3.30 $3.20 Soybeans $8.95 $9.50 $9.10 $9.10 Wheat $4.89 $3.89 $4.65 $4.60 Cotton ($ per pound) $0.58 $0.68 $0.69 $0.60 U.S. Farm Commodity Prices Source: Deere & Company forecast as of 16
Slide 34: U.S. Acres Planted
(millions) 2016/17 Estimate 2017/18 Projection Corn 94.0 90.2 Soybeans 83.4 90.1 Wheat 50.1 46.0 Cotton 10.1 12.6 Source: Deere & Company forecast as of 16 February 2018 U.S. Acres Planted 57
Slide 35: U.S. Crop Yields
(bushels per acre except where noted) 2016/17 Estimate 2017/18 Projection Corn 174.6 176.6 Soybeans 52.1 49.1 Wheat 52.7 46.3 Cotton (pounds per harvested acre) 867 899 U.S. Crop Yields Source: Deere & Company forecast as of 16 February 2018 58
Slide 36: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts ($ billions) 2016 2017 Forecast 2018 Forecast Previous 2018 Crops $194.4 $189.7 $188.2 $187.6 Livestock $162.9 $175.4 $174.9 $169.6 Government Payments $13.0 $11.4 $9.3 $11.1 Total Cash Receipts $370.2 $376.5 $372.4 $368.3 Source: 2016: USDA, 7 February 2018 2017F–2018F: Deer
Slide 37: U.S. Net Farm Cash Income
U.S. Net Farm Cash Income ($ billions) 2016 2017 Forecast 2018 Forecast Previous 2018 Total Cash Receipts $370.2 $376.5 $372.4 $368.3 Other Farm-Related Income $27.9 $29.7 $31.8 $32.0 Gross Cash Income $398.1 $406.2 $404.2 $400.3 Cash Expenses ($304.1) ($309.3) ($312.2) ($310.0) Net Cash Income $94.
Slide 38: U.S. Farm Balance Sheet
U.S. Farm Balance Sheet Source: 1974–2016: USDA, 7 February 2018 2017F–2018F: Deere & Company forecast as of 16 February 2018 61 10% 15% 20% 25% 30% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018F $ Billions Farm Debt Farm Equity Debt to
Slide 39: January 2018 Retail Sales and Dealer Inventories
January 2018 Retail Sales and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** 2WD Tractors (< 40 PTO hp) 6% Double digits 2WD Tractors (40 < 100 PTO hp) 3% Low double digits 2WD Tractors (100+ PTO hp) 2% In line with the industry 4WD Tractors 33% More than the industry Combines
Slide 40: January 2018 Retail Sales
Retail Sales U.S. and Canada Deere* Selected Turf & Utility Equipment Double digits Construction & Forestry First-in-the-Dirt Settlements Double digits Single digit January 2018 Retail Sales Retail Sales EU 28 Ag Deere* Tractors Double digits Combines Double digits * Based on internal sales reports
Slide 41: Supplemental Statement of Consolidated Income Information
Supplemental Statement of Consolidated Income Information Reconciliation of GAAP to Non-GAAP Financial Measures In addition to reporting financial results in conformity with accounting principles generally accepted in the United States (GAAP), the company also discusses non-GAAP measures that exclud
Slide 42: 2Q 2018 earnings call scheduled for 18 May 2018
Deere & Company’s 2Q 2018 earnings call is scheduled for 9:00 a.m. central time on Friday, 18 May 2018 65
Slide 43: 2Q 2018 earnings call scheduled for 18 May 2018
Deere & Company’s 2Q 2018 earnings call is scheduled for 9:00 a.m. central time on Friday, 18 May 2018 @ JOHN DEERE