Deere & Company · NYSE:DE
Deere & — Q2 2007 Earnings Presentation
39 slides from Deere &'s earnings presentation, May 16, 2007
Slide 1: Second Quarter 2007 Earnings Conference Call
Second Quarter 2007 Earnings Conference Call 22 Exhibit 99.3 (Furnished herewith)
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 projections, plans and objectives for the future, including estimates and assumptions with respect to economic, political, technological, weather,
Slide 3: Additional Supplemental Data Fiscal Year 2006
NOTE: Due to the magnitude of the amounts for the items listed above either in the quarter or for the year, management believes the above additional supplemental data provides valuable insight into the operating performance for fiscal year 2006. Management believes this presentation will enhance the
Slide 4: Second Quarter Overview
Second Quarter Overview +21% $517.0 $623.6 Income from Continuing Operations +25% $2.17 $2.72 Diluted EPS from Continuing Operations +4% $6,029 $6,266 Net Sales +5% $6,562 $6,882 Net Sales and Revenues Change Q2 2006 Q2 2007 (in millions of dollars except per share amounts)
Slide 5: Second Quarter Overview Net Sales
Equipment operations net sales: Up 4% in the quarter compared to Q2 2006 Price realization ~ +2 points Currency translation ~ +2 points Second Quarter Overview Net Sales
Slide 6: Production Tonnage Forecast
Production Tonnage* Deere & Company Forecast as of 16 May 2007 (Previous Forecast as of 14 February 2007) -22 +9 +6 -2 +1 -18 +7 +1 Q2 2007 -23 -23 U.S. and Canada C&F +16 +6 U.S. and Canada AG +6 +9 Outside U.S. and Canada -5 -1 Total U.S. and Canada +2 +1 Worldwide CCE -20 -19 Worldwide C&F +4 +11
Slide 7: 2007 Company Outlook
2007 Company Outlook Third Quarter 2007 Forecast Net Sales up ~ 5% vs. 3Q 2006 Net Income $400 – 425 million Fiscal Year 2007 Forecast Net Sales up ~ 6% from FY 2006 Net price realization: 1 to 2 points Currency translation: ~ +2 points Previous forecast net sales up slightly Net Income ~ $1.55 bill
Slide 8: Second Quarter Overview – Worldwide Agricultural Equipment Division
Second Quarter Overview – Worldwide Agricultural Equipment Division +26% $385 $487 Operating Profit* +7% Production Tonnage +14% $3,068 $3,498 Net Sales Change Q2 2006 Q2 2007 (in millions of dollars) * Operating Profit impacted by: Positive price realization Higher sales volumes Partially offset by
Slide 9: U.S. Commodity Price Estimates
U.S. Commodity Price Estimates $.450 $6.35 $4.25 $3.10 Previous 2006/07 $.440 $6.85 $4.30 $3.55 2008/09 Forecast $.420 $7.00 $3.95 $3.25 Previous 2007/08 $.400 $6.65 $4.25 $3.40 2007/08 Forecast $.430 $6.40 $4.40 $3.10 2006/07 Forecast Cotton (per pound) Soybeans (per bushel) Wheat (per bushel) Corn
Slide 10: U.S. Acreage & Yield Estimates
U.S. Acreage & Yield Estimates 825 12.3 43.3 69.5 44.4 59.0 156.0 90.0 2008/09 Forecast 12.1 15.3 Planted Acres Cotton 42.8 42.7 Yield – Bu/Acre 43.5 38.7 Yield – Bu/Acre 152.0 149.1 Yield – Bu/Acre Yield – Lbs/Acre Planted Acres Planted Acres Planted Acres 834 69.5 60.3 89.0 2007/08 Forecast 819 75
Slide 11: U.S. Farm Cash Receipts Estimates
U.S. Farm Cash Receipts Estimates $277.6 12.1 126.6 138.9 2008 Forecast $267.1 11.9 121.9 133.3 Previous 2007 $272.4 12.5 125.1 134.8 2007 Forecast $258.5 15.7 121.4 121.4 Previous 2006 $260.2 Total Cash Receipts 16.4 Government Payments 121.4 Livestock 122.4 Crops 2006 Forecast (in billions of doll
Slide 12: Industry Outlook – Agricultural Equipment Retail Sales U.S. and Canada
Industry Outlook – Agricultural Equipment Retail Sales U.S. and Canada: Up about 5% for the fiscal year Strength in large tractors Flat combine sales Weakness in cotton Anticipates continued market strength Previous outlook flat to up 5% Deere & Company Outlook as of 16 May 2007 (Previous Outlook as
Slide 13: Industry Outlook – Agricultural Equipment Retail Sales Western Europe
Industry Outlook – Agricultural Equipment Retail Sales Western Europe: Flat to up 2% Strength in overall farm economic fundamentals Concern over potential drought in France, Germany and Italy Previous outlook flat Eastern Europe and the Commonwealth of Independent States countries, including Russia:
Slide 14: Brazil Farm Net Income
Brazil Farm Net Income 6.1 .6 .2 1.0 .2 4.1 2004 6.1 5.8 .0 2.0 Total .2 .2 .8 -.1 .9 2005 Net Income (US $ Billion) .2 .0 .0 Rice .8 1.0 -1.1 Corn 3.5 3.5 3.3 Sugar Cane .4 .5 -.2 Cotton 1.2 .8 -2.0 Soybeans Previous 2007 2007 Forecast 2006 Deere & Company Estimates as of 16 May 2007 (Previous Esti
Slide 15: Industry Outlook – Agricultural Equipment Retail Sales South America
Industry Outlook – Agricultural Equipment Retail Sales South America: Up about 20% Brazilian market continues to show signs of recovery Previous outlook flat to up 5% Deere & Company Outlook as of 16 May 2007 (Previous Outlook as of 14 February 2007)
Slide 16: Outlook - Worldwide Agricultural Equipment
Deere & Company Outlook - Worldwide Agricultural Equipment Fiscal Year 2007 Forecast Net sales projected to be up ~13% Currency translation ~ +3 points Previous forecast up ~8% Production tonnage projected up ~11% Deere & Company Forecast as of 16 May 2007 (Previous Forecast as of 14 February 2007)
Slide 17: Second Quarter Overview – Worldwide Commercial & Consumer Equipment
Second Quarter Overview – Worldwide Commercial & Consumer Equipment +18% $127 $150 Operating Profit* +1% Production Tonnage 0% $1,319 $1,318 Net Sales Change Q2 2006 Q2 2007 (in millions of dollars) * Operating Profit impacted by: Positive price realization Favorable product mix Residential zero-tur
Slide 18: Outlook – Worldwide Commercial & Consumer Equipment: LESCO Acquisition
Deere & Company Outlook – Worldwide Commercial & Consumer Equipment Deere & Company Forecast as of 16 May 2007 LESCO, Inc. Acquisition closed on 07 May 2007 Forecasted financial impact on Q3 and Q4 2007 Net Sales: ~ $350 million Q3: ~$120 million Q4: ~$230 million Operating Loss: $5-10 million (most
Slide 19: Outlook – Worldwide Commercial & Consumer Equipment
Deere & Company Outlook – Worldwide Commercial & Consumer Equipment Fiscal Year 2007 Forecast Net sales projected to be up ~11% LESCO adds ~$350 million New products Previous forecast up ~3% Production tonnage projected up ~1% Deere & Company Forecast as of 16 May 2007 (Previous Forecast as of 14 Fe
Slide 20: Second Quarter Overview – Worldwide Construction & Forestry
Second Quarter Overview – Worldwide Construction & Forestry -30% $274 $192 Operating Profit* -18% Production Tonnage -12% $1,642 $1,450 Net Sales Change Q2 2006 Q2 2007 (in millions of dollars) * Operating Profit impacted by: Lower sales volumes Raw material cost increases
Slide 21: Outlook – Worldwide Construction & Forestry
Deere & Company Outlook – Worldwide Construction & Forestry Fiscal Year 2007 Forecast Net sales projected to be down ~11% U.S. housing starts lower; non-residential growth Sales to independent rental channel down significantly Previous forecast down ~9% Production tonnage projected down ~19% U.S. an
Slide 22: Loss History - Credit
Loss History - Credit Low losses driven by strong obligor cash flows, low repossession rates and strong used equipment market * 2007 is an annualized year-to-date April 2007 rate Provision for Credit Losses / Average Owned Portfolio 0.00% 0.50% 1.00% 1.50% 2.00% 1990 1991 1992 1993 1994 1995 1996 19
Slide 23: Credit
Credit Second Quarter 2007 Net income $86.6 million up 6% vs. Q2 2006 Growth in credit portfolio Higher provision for credit losses Fiscal Year 2007 Forecast Net income ~ $355 million Growth in credit portfolio Higher SA&G expense in support of growth initiatives Previous forecast of ~ $355 million
Slide 24: Credit Dividends to Equipment Operations
Credit Dividends to Equipment Operations 1H07 dividends ~ $320 million higher vs. 1H06 Impacts Equipment Operations Cash Flows from Operating Activities Includes $230 million special dividend in Q2 2007 Result of increased leverage of U.S. retail portfolios approved by rating agencies
Slide 25: Consolidated Trade Receivables & Inventory
28 consecutive quarters of year-over-year receivables and inventory reduction relative to sales Consolidated Trade Receivables & Inventory 20% 25% 30% 35% 40% 45% 50% 55% 60% '00 Q3 Q4 '01 Q1 Q2 Q3 Q4 '02 Q1 Q2 Q3 Q4 '03 Q1 Q2 Q3 Q4 '04 Q1 Q2 Q3 Q4 '05 Q1 Q2 Q3 Q4 '06 Q1 Q2 Q3 Q4 '07 Q1 Q2 Inventory
Slide 26: Consolidated Trade Receivables & Inventory Change at April
Consolidated Trade Receivables & Inventory Change at 30 April: 2007 vs. 2006 ↓ 140 Total, as reported Total, constant exchange C&F CCE AG (in millions of dollars) ↓ 300 ↓ 135 ↓ 74 ↑ 69 Q2 Actual
Slide 27: Consolidated Trade Receivables & Inventory Forecasted Change at 31 October
Consolidated Trade Receivables & Inventory Forecasted change at 31 October: 2007 vs. 2006 ↓ 100 ↑ 150 Total* C&F CCE* AG (in millions of dollars) ↓ 100 ↓ 125 Flat ↑ 100 Flat ↑ 175 2007 Prior Forecast 2007 Forecast Deere & Company Forecast as of 16 May 2007 (Previous Forecast as of 14 February 2007)
Slide 28: April Retail Sales – U.S. and Canada
April Retail Sales – U.S. and Canada ↓ more than the industry ↑ double digits; less than industry ↑ double digits; less than industry ↓ a single digit Deere** ↑ 40% 4 WD Tractors ↓ 24% Combines ↑ 14% ↑ 7% Industry* Row-Crop Tractors Utility Tractors * As reported by the Association of Equipment Manu
Slide 29: Deere Dealer Inventories – U.S. and Canada
Deere Dealer Inventories – U.S. and Canada 2006 2007 10% 8% Combines 23% 22% Row-Crop Tractors As reported to the Association of Equipment Manufacturers at April 30 – in units as a % of trailing 12 months retail sales
Slide 30: April Retail Sales – Western Europe
April Retail Sales – Western Europe ↓ double digits ↑ single digit Deere & Company Combines Tractors Based on EU Government Reporting of Registrations
Slide 31: April Retail Sales – U.S. and Canada
April Retail Sales – U.S. and Canada ↓ double digits First-in-the-Dirt ↓ double digits Settlements Construction and Forestry flat Commercial and Consumer Equipment Deere & Company
Slide 32: Raw Material and Freight
Raw Material and Freight Equipment Operations Second Quarter 2007 Up ~ $70 million vs. Q2 2006 Fiscal Year 2007 Forecast Up ~$200 million By Division Agricultural Equipment: ~ $75 million Commercial & Consumer Equipment: ~ $25 million Construction & Forestry: ~ $100 million Deere & Company Forecast
Slide 33: Research & Development Expense
Research & Development Expense Equipment Operations Second Quarter 2007 Up ~ 9% vs. Q2 2006 Fiscal Year 2007 Forecast Up ~ 11% Deere & Company Forecast as of 16 May 2007
Slide 34: Selling, Administrative & General Expenses
Selling, Administrative & General Expenses Equipment Operations Second Quarter 2007 Up ~ 8% vs. Q2 2006 Includes ~ 4 points related to global growth initiatives and currency translation Fiscal Year 2007 Forecast anticipates Up ~ 13% vs. FY2006 Includes ~ 10 points related to global growth initiative
Slide 35: Tax Rate
Tax Rate Equipment Operations Second Quarter 2007 Effective tax rate of 31% Discrete items Fiscal Year 2007 Forecast Assumes a tax rate of ~33% Deere & Company Forecast as of 16 May 2007
Slide 36: Shares Outstanding
Shares Outstanding Second Quarter 2007 Period ending shares outstanding: 225.0 million Average diluted shares outstanding for the quarter: 229.3 million
Slide 37: Share Repurchase as Part of Publicly Announced Plans
Share Repurchase as Part of Publicly Announced Plans $0.1 $0.2 $0.3 1.2 2.3 3.5 Q1 2004 auth. 2005 auth. Total Q1 $1.3 17.0 YTD $0.3 4.5 Q4 $0.4 4.9 Q3 $0.3 4.1 Q2 Total $ Amount (in billions) Shares Repurchased(in millions) FY2006 $0.2 2.1 Q1 $0.6 5.7 YTD Q4 Q3 $0.4 3.6 Q2 Total $ Amount (in billio
Slide 38: Other Information
Other Information Equipment Operations Fiscal Year 2007 Forecast Capital Expenditures About $600 million Depreciation and Amortization $400 – 450 million Pension/OPEB Contributions About $375 million Deere & Company Forecast as of 16 May 2007
Slide 39: Third-quarter 2007 conference call scheduled
Deere’s third-quarter 2007 conference call is scheduled for 9:00 a.m. central time on Wednesday, August 15, 2007.