Deere & Company · NYSE:DE
Deere & — Q3 2015 Earnings Presentation
41 slides from Deere &'s earnings presentation, Aug 21, 2015
Slide 1: Third Quarter 2015 Earnings Conference Call
Third Quarter 2015 Earnings Conference Call 21 August 2015
Slide 2: 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 3: Third Quarter Overview
Third Quarter Overview (in millions of dollars except per share amounts) Q3 2015 Q3 2014 Change Net Sales and Revenues $7,594 $9,500 -20% Net Sales $6,840 $8,723 -22% Net Income $512 $851 -40% Attributable to Deere & Company Diluted EPS $1.53 $2.33 -34% 3 | 3rd Quarter 2015 Earnings Conference Call
Slide 4: Third Quarter Overview: Net Sales
Third Quarter Overview Net Sales Equipment operations net sales: Down 22% in Q3 2015 vs. Q3 2014 • Price realization: +2 points • Currency translation: (6) points 4 | 3rd Quarter 2015 Earnings Conference Call
Slide 5: Worldwide Agriculture & Turf
Worldwide Agriculture & Turf Third Quarter Overview (in millions of dollars) Q3 2015 Q3 2014 Change Net Sales $5,308 $6,969 -24% Operating Profit* $472 $941 -50% *Q3 2015 operating profit impacted by: Favorable Unfavorable • Price Realization • Shipment Volumes • Production Costs • Product Mix • For
Slide 6: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts $500 $450 $400 $350 $300 $250 $ Billions $200 $150 $100 $50 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F Crops Livestock Government Payments Source: 1999 – 2013: USDA 10 February 2015 2014F – 2016F: Deere & Company Forecast a
Slide 7: World Farm Fundamentals
World Farm Fundamentals Global Stocks-to-Use Ratios 100% 90% 80% 70% Cotton 60% 50% Wheat 40% 30% Corn 20% Soybeans 10% 0% 1994 1997 2000 2003 2006 2009 2012 2015P Source: USDA – 12 August 2015 7 | 3rd Quarter 2015 Earnings Conference Call
Slide 8: Economic Update: EU
Economic Update EU 28 – Fiscal 2015 Economic activity gradually improving Crop prices stabilizing near the long-term average Dairy sector remains under pressure Beef prices remain solid, pork prices at low levels Deere & Company Forecast as of 21 August 2015 8 | 3rd Quarter 2015 Earnings Conference
Slide 9: Economic Update: Other Selected Markets
Economic Update Other Selected Markets – Fiscal 2015 China • Continued slowdown in economic growth • Lower commodity prices impacting agricultural economy, somewhat mitigated by domestic supports • Mechanization trends and ongoing subsidies are supportive of agriculture India • Positive consumer and
Slide 10: Crop Value of Agricultural Production: Brazil
Crop Value of Agricultural Production Brazil Expected to decrease ~ 11% in 2015 over prior season Crop Value of Agricultural Production 2015 Mix by Crop $120 10% $100 US$ Billions $80 15% 43% $60 15% $40 17% $20 Soybeans Ethanol $0 Sugar Corn 2004 2006 2008 2010 2012 2014 2016F Other Grains Source:
Slide 11: Eligible Finance Rates for Ag Equipment
Eligible Finance Rates for Ag Equipment Brazil 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2011 2012 2013 2014 2015 2016 All Farmers Farmers with Annual Revenues <R$90M Farmers with Annual Revenues >R$90M Source: ABIMAQ (Brazilian Association of Machinery and Equipment) and BNDES PSI-FIN
Slide 12: Agriculture & Turf Retail Sales Industry Outlook
Agriculture & Turf Retail Sales Industry Outlook – Fiscal 2015 2015 Forecast Previous Forecast * U.S. and Canada Ag Down ~ 25% EU 28 Ag Down ~ 10% South America Ag Down 20-25% Down 15-20% (Tractors and Combines) Asia Ag Down moderately Down modestly CIS Countries Ag Down significantly U.S. and Canad
Slide 13: Worldwide Agriculture & Turf Outlook
Worldwide Agriculture & Turf Deere & Company Outlook Fiscal Year 2015 Forecast • Net sales: Down ~ 25% • Currency translation: ~ (5) points • Previous forecast: Down ~ 24% • Currency translation: ~ (5) points Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 13 | 3r
Slide 14: Worldwide Construction & Forestry
Worldwide Construction & Forestry Third Quarter Overview (in millions of dollars) Q3 2015 Q3 2014 Change Net Sales $1,532 $1,754 -13% Operating Profit* $129 $194 -34% *Q3 2015 operating profit impacted by: Favorable Unfavorable • Price Realization • Shipment Volumes • Foreign-Currency Exchange 14 |
Slide 15: Worldwide Construction & Forestry Outlook
Worldwide Construction & Forestry Deere & Company Outlook Fiscal Year 2015 Forecast • Net sales: Down ~ 5% • Currency translation: ~ (3) points • Previous forecast: Up ~ 2% • Currency translation: ~ (3) points 2015 Previous U.S. Economic Indicators Forecast Forecast GDP Growth (annual percentage rat
Slide 16: Worldwide Financial Services: Credit Loss History
Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 2.00% 1.50% 1.00% 0.12% 15 Year Average 0.50% 10 Year Average 0.00% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015* * Annualized provision for credit losses as of 31 July 2015 16
Slide 17: Worldwide Financial Services
Worldwide Financial Services Third Quarter 2015 • Net income attributable to Deere & Company • $153 million in Q3 2015 vs. $162 million in Q3 2014 Fiscal Year 2015 Forecast • Net income attributable to Deere & Company of ~ $630 million • No change from previous forecast Deere & Company Forecast as o
Slide 18: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory 2015** Q3 2015* 2015** Previous (in millions of dollars) Actual Forecast Forecast A&T ↓ $1,809 ↓ $725 ↓ $1,000 C&F ↑ $358 ↑ $375 ↑ $400 Total, as reported ↓ $1,451 ↓ $350 ↓ $600 Total, constant exchange ↓ $705 ↑ $75 ↓ $200 * Change at 31 July 2015 vs. 31 Ju
Slide 19: Cost of Sales as a Percent of Net Sales
Cost of Sales as a Percent of Net Sales Equipment Operations Third Quarter 2015 • ~ 78% Fiscal Year 2015 Forecast • ~ 78% • No change from previous forecast Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 19 | 3rd Quarter 2015 Earnings Conference Call
Slide 20: Research & Development Expense
Research & Development Expense Equipment Operations Third Quarter 2015 • Down ~ 4% vs. Q3 2014 • Currency translation: ~ (4) points Fiscal Year 2015 Forecast • Down ~ 2% vs. FY 2014 • Currency translation: ~ (3) points • Previous forecast: Down ~ 1% vs. FY 2014 • Currency translation: ~ (3) points D
Slide 21: Selling, Administrative & General Expense
Selling, Administrative & General Expense Equipment Operations Third Quarter 2015 • Down ~ 7% vs. Q3 2014 • Currency translation: ~ (5) points Fiscal Year 2015 Forecast • Down ~ 11% vs. FY 2014 • JD Landscapes and JD Water: ~ (2) points • Incentive compensation: ~ (3) points • Currency translation:
Slide 22: Pension and OPEB Expense
Pension and OPEB Expense Third Quarter 2015 • Up ~ $25 million vs. Q3 2014 Fiscal Year 2015 Forecast • Up ~ $70 million vs. FY 2014 • No change from previous forecast Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22 May 2015) 22 | 3rd Quarter 2015 Earnings Conference Call
Slide 23: Income Taxes
Income Taxes Equipment Operations Third Quarter 2015 • Effective tax rate: ~ 31% Year to Date 2015 • Effective tax rate: ~ 30% Rest of Year 2015 Forecast • Effective tax rate: 34-36% Deere & Company Forecast as of 21 August 2015 23 | 3rd Quarter 2015 Earnings Conference Call
Slide 24: Strong Operating Performance: Cash Flows from Operations
Strong Operating Performance Equipment Operations Fiscal Year Cash Flows from Operations $4.7 $4.5 $3.0 ~ $3.2 $2.9 $2.5 $ Billions $2.4 $1.4 2008 2009 2010 2011 2012 2013 2014 2015 Forecast* * Previous forecast ~ $3.4 billion Deere & Company Forecast as of 21 August 2015 (Previous Forecast as of 22
Slide 25: 2015 Company Outlook: Fourth Quarter
2015 Company Outlook Fourth Quarter 2015 Forecast • Net sales: Down ~ 24% vs. Q4 2014 • Price realization: ~ +1 point • Currency translation: ~ (5) points Deere & Company Forecast as of 21 August 2015 25 | 3rd Quarter 2015 Earnings Conference Call
Slide 26: 2015 Company Outlook: Fiscal Year
2015 Company Outlook Fiscal Year 2015 Forecast • Net sales: Down ~ 21% vs. FY 2014 • Price realization: ~ +1 point • Currency translation: ~ (4) points • Previous forecast: Down ~ 19% vs. FY 2014 • Price realization: ~ +2 points • Currency translation: ~ (4) points • Net income attributable to Deere
Slide 27: Appendix
Appendix 27 | 3rd Quarter 2015 Earnings Conference Call
Slide 28: The John Deere Strategy
The John Deere Strategy 28 | 3rd Quarter 2015 Earnings Conference Call
Slide 29: Deere Use-of-Cash Priorities
Deere Use-of-Cash Priorities Cash from Operations Manage the balance sheet, including liquidity, to support a rating Committed to “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 oper
Slide 30: Sources and Uses of Cash Fiscal 2004–2014
Sources and Uses of Cash Fiscal 2004–2014 Equipment Operations $953 $33,000 = Source of Cash = Use of Cash $30,000 $8,731 $27,000 $24,000 $1,269 $3,172 $21,000 $ Millions $18,000 $28,527 $5,506 $15,000 $12,000 $9,000 $11,659 $6,000 $3,000 $861 $4,287 ~60% of cash from operations $2,569 returned to s
Slide 31: Deere Quarterly Dividends Declared
Deere Quarterly Dividends Declared* Q1 2003 – Q3 2015 $0.70 $0.60 $0.60 $0.51 $0.50 $0.46 $0.41 $0.40 $0.35 $0.30 $0.28 $0.30 $0.25 Dividend raised 114% $0.22 since launch of the $0.20 revised John Deere $0.20 Strategy in 2010** $0.16 $0.14 $0.11 $0.10 $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2
Slide 32: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases 2004-3Q2015: ~ $15.3 billion Amount remaining on December 2013 authorization of $8 billion: ~ $4.4 billion 31 July 2015 period ended basic shares: ~ 328.2 million 3Q2015 average diluted shares: ~ 334.1 million Shares
Slide 33: Other Information
Other Information Equipment Operations Fiscal Year 2015 Forecast • Capital Expenditures: ~ $775 million • Previous forecast: ~ $825 million • Depreciation and Amortization: ~ $800 million • No change from previous forecast • Pension/OPEB Contributions: ~ $100 million • No change from previous foreca
Slide 34: U.S. Farm Commodity Prices
U.S. Farm Commodity Prices (dollars per bushel, 2014/15 Previous 2015/16 Previous except cotton, which 2013/14 Estimate 2014/15 Projection 2015/16 is dollars per pound) Corn $4.46 $3.70 $3.65 $3.70 $3.75 Wheat $6.87 $5.99 $6.00 $5.05 $5.10 Soybeans $13.00 $10.05 $10.05 $9.20 $8.90 Cotton $.78 $.61 $
Slide 35: U.S. Farm Commodity Prices
U.S. Farm Commodity Prices $18 $1.00 $16 Wheat $0.90 Corn Soybeans $0.80 $14 Cotton Cotton - Dollars per Pound $0.70 $12 Dollars per Bushel $0.60 $10 $0.50 $8 $0.40 $6 $0.30 $4 $0.20 $2 $0.10 $0 $0.00 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: USDA 35
Slide 36: U.S. Acres Planted and Crop Yields
U.S. Acres Planted and Crop Yields Acres Planted (Yield in bushels per Yield (millions) acre, except cotton, which is pounds per 2014/15 2015/16 2014/15 2015/16 acre) Estimate Projection Estimate Projection Corn 90.6 88.9 171.0 168.5 Wheat 56.8 56.1 43.7 44.1 Soybeans 83.7 84.3 47.8 46.7 Cotton 11.0
Slide 37: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts 2014 Previous 2015 Previous 2016 (in billions of dollars) 2013 Forecast 2014 Forecast 2015 Forecast Crops $218.5 $198.2 $198.2 $180.4 $182.5 $182.6 Livestock $182.8 $209.1 $209.1 $197.7 $198.7 $191.8 Government $11.0 $10.8 $10.8 $12.4 $12.4 $10.6 Payments Total Cash $412.3 $4
Slide 38: U.S. Net Farm Cash Income
U.S. Net Farm Cash Income (in billions of 2014 Previous 2015 Previous dollars) 2013 Forecast 2014 Forecast 2015 Total Cash Receipts $412.3 $418.1 $418.1 $390.5 $393.6 Other Farm- Related Income $31.5 $27.3 $27.3 $26.0 $25.4 Gross Cash Income $443.8 $445.4 $445.4 $416.5 $419.0 Cash Expenses ($312.7)
Slide 39: July 2015 Retail Sales and Dealer Inventories
July 2015 Retail Sales and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** Utility Tractors ↑ 20% ↑ double digits, less than industry 2WD Tractors (100+ hp) ↓ 23% in line with the industry 4WD Tractors ↓ 30% ↓ single digit Combines ↓ 22% in line with the industry Deere Dealer In
Slide 40: July 2015 Retail Sales
July 2015 Retail Sales EU 28 Deere* Tractors ↑ single digit Combines ↑ single digit U.S. and Canada Deere* Selected Turf & Utility Equipment flat U.S. and Canada – Construction & Forestry Deere* First-in-the-Dirt flat Settlements ↑ low double digits * Based on internal sales reports 40 | 3rd Quarter
Slide 41: Fourth quarter 2015 conference call scheduled
Deere’s fourth quarter 2015 conference call is scheduled for 9:00 a.m. central time on Wednesday, November 25, 2015