Deere & Company · NYSE:DE
Deere & — Q3 2007 Earnings Presentation
37 slides from Deere &'s earnings presentation, Aug 15, 2007
Slide 1: Third Quarter 2007 Earnings Conference Call
Third Quarter 2007 Earnings Conference Call 23 Exhibit 99.3 (Filed 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: Third Quarter Overview
Third Quarter Overview +23% $435.7 $537.2 Income from Continuing Operations +28% $1.85 $2.37 Diluted EPS from Continuing Operations +5% $5,677 $5,985 Net Sales +6% $6,267 $6,634 Net Sales and Revenues Change Q3 2006 Q3 2007 (in millions of dollars except per share amounts) 25
Slide 4: Third Quarter Overview – Net Sales
Equipment operations net sales: Up 5% in the quarter compared to Q3 2006 Currency translation ~ +3 points Price realization ~ +2 points LESCO added ~ $125 million Third Quarter Overview Net Sales 26
Slide 5: Production Tonnage
Production Tonnage* Deere & Company Forecast as of 15 August 2007 (Previous Forecast as of 16 May 2007) -18 +19 +10 +4 +2 -14 +15 +6 Q3 2007 -22 -23 U.S. and Canada C&F +63 +16 U.S. and Canada AG +9 +9 Outside U.S. and Canada -1 +2 Total U.S. and Canada +1 -1 Worldwide CCE -19 -17 Worldwide C&F +11
Slide 6: 2007 Company Outlook
2007 Company Outlook Fourth Quarter 2007 Forecast Net Sales up ~ 16% vs. 4Q 2006 LESCO sales: ~ +5 points Currency translation: ~ +3 points Fiscal Year 2007 Forecast Net Sales up ~ 7% from FY 2006 Net price realization: ~ +2 points Currency translation: ~ +2 points Previous forecast Net Sales up ~ 6
Slide 7: Third Quarter Overview – Worldwide Agricultural Equipment Division
Third Quarter Overview – Worldwide Agricultural Equipment Division +73% $249 $431 Operating Profit* +15% Production Tonnage +16% $2,899 $3,355 Net Sales Change Q3 2006 Q3 2007 (in millions of dollars) * Operating Profit impacted by: Higher sales and production volumes Improved price realization Part
Slide 8: U.S. Farm Cash Receipts Estimates
U.S. Farm Cash Receipts Estimates $277.6 12.1 126.6 138.9 Previous 2008 $280.2 12.3 128.3 139.6 2008 Forecast $272.4 12.5 125.1 134.8 Previous 2007 $281.9 13.8 133.1 135.0 2007 Forecast $259.4 Total Cash Receipts 16.3 Government Payments 120.9 Livestock 122.2 Crops 2006 Forecast (in billions of doll
Slide 9: U.S. Commodity Price Estimates
U.S. Commodity Price Estimates $.440 $6.85 $4.30 $3.55 Previous 2008/09 $.580 $7.65 $4.00 $3.25 2008/09 Forecast $.430 $6.40 $4.40 $3.10 Previous 2006/07 $.400 $6.65 $4.25 $3.40 Previous 2007/08 $.480 $7.45 $4.85 $2.90 2007/08 Forecast $.476 $6.55 $4.27 $3.00 2006/07 Forecast Cotton (per pound) Soyb
Slide 10: Industry Outlook – Agricultural Equipment Retail Sales
Industry Outlook – Agricultural Equipment Retail Sales U.S. and Canada: Up ~ 5% for the fiscal year (unchanged) Strength in large tractors Flat combine sales South America: Up ~ 30% Higher commodity prices benefit farm incomes in the region Brazilian market continues to show signs of recovery Propos
Slide 11: Brazil Agricultural Financing
Brazil Agricultural Financing Proposed government-backed financing plan 15% discount For 2007 payment brought current or for rescheduling 2007 payment with 30% down payment Applicable to main crops (e.g., soybeans, corn, cotton, rice, and wheat) No discount available with less than 30% payment of 20
Slide 12: Industry Outlook – Agricultural Equipment Retail Sales
Industry Outlook – Agricultural Equipment Retail Sales Western Europe: Up ~ 2% Strength in overall farm economic fundamentals Considerable weather variation affecting numerous market areas Previous outlook flat to up 2% Eastern Europe and the Commonwealth of Independent States countries, including R
Slide 13: Outlook - Worldwide Agricultural Equipment
Deere & Company Outlook - Worldwide Agricultural Equipment Fiscal Year 2007 Forecast Net sales projected to be up ~ 16% Currency translation ~ +3 points Previous forecast up ~ 13% Production tonnage projected up ~ 14% Previous forecast up ~ 11% Deere & Company Forecast as of 15 August 2007 (Previous
Slide 14: Third Quarter Overview – Worldwide Commercial & Consumer Equipment
Third Quarter Overview – Worldwide Commercial & Consumer Equipment +63% $78 $127 Operating Profit* +2% Production Tonnage +15% $1,171 $1,346 Net Sales Change Q3 2006 Q3 2007 (in millions of dollars) * Operating Profit impacted by improved price realization New product introductions well received Res
Slide 15: Outlook – Worldwide Commercial & Consumer Equipment
Deere & Company Outlook – Worldwide Commercial & Consumer Equipment Deere & Company Forecast as of 15 August 2007 LESCO, Inc. Acquisition closed on 07 May 2007 Income statement impact Net Sales ~ $350 million Q3: ~$125 million Q4F: ~$225 million Small profit forecast for year SA&G forecast ~ $100 mi
Slide 16: Outlook – Worldwide Commercial & Consumer Equipment
Deere & Company Outlook – Worldwide Commercial & Consumer Equipment Fiscal Year 2007 Forecast Net sales projected to be up ~ 11% (unchanged) LESCO adds ~ $350 million New products Production tonnage projected down ~ 1% Deere & Company Forecast as of 15 August 2007 (Previous Forecast as of 16 May 200
Slide 17: Third Quarter Overview – Worldwide Construction & Forestry
Third Quarter Overview – Worldwide Construction & Forestry -41% $256 $150 Operating Profit* -14% Production Tonnage -20% $1,607 $1,284 Net Sales Change Q3 2006 Q3 2007 (in millions of dollars) * Operating Profit impacted by: Lower sales and production volumes Higher raw material costs Partially offs
Slide 18: Outlook – Worldwide Construction & Forestry
Deere & Company Outlook – Worldwide Construction & Forestry Fiscal Year 2007 Forecast Net sales projected to be down ~ 12% U.S. housing starts at 1.4 million Non-residential spending up 8% Sales to independent rental channel down significantly Forestry down in U.S. but higher in Europe and other are
Slide 19: Credit
Credit Third Quarter 2007 Net income of ~ $91 million up 3% vs. Q3 2006 Growth in credit portfolio Fiscal Year 2007 Forecast Net income ~ $355 million (unchanged) Growth in credit portfolio Increased SA&G expenses in support of growth initiatives Higher provision for credit losses Deere & Company Fo
Slide 20: 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 July 2007 rate 42 Provision for Credit Losses / Average Owned Portfolio 0.00% 0.50% 1.00% 1.50% 2.00% 1990 1991 1992 1993 1994 1995 1996
Slide 21: Credit Dividends to Equipment Operations
Credit Dividends to Equipment Operations YTD 2007 dividends ~ $448 million higher vs. YTD 2006 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 43
Slide 22: Consolidated Trade Receivables & Inventory
29 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 Q3 Invent
Slide 23: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory Change at 31 July: 2007 vs. 2006 - 37 Total, as reported* Total, constant exchange* C&F CCE* AG (in millions of dollars) 234 241 88 116 Q3 Actual * Includes ~ $170 million related to LESCO inventory and receivables. 45
Slide 24: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory Forecasted change at 31 October: 2007 vs. 2006 150 250 Total, as reported* 80 Total, constant exchange* C&F CCE* AG (in millions of dollars) 125 225 100 100 175 375 2007 Prior Forecast 2007 Forecast Deere & Company Forecast as of 15 August 2007 (Previous Fo
Slide 25: July Retail Sales – U.S. and Canada
July Retail Sales – U.S. and Canada a single digit double digits Flat a single digit Deere** 4% 4 WD Tractors 3% Combines 20% Flat Industry* Row-Crop Tractors Utility Tractors * As reported by the Association of Equipment Manufacturers ** As reported to the Association of Equipment Manufacturers 47
Slide 26: Deere Dealer Inventories – U.S. and Canada
Deere Dealer Inventories – U.S. and Canada 2006 2007 13% 16% Combines 19% 22% Row-Crop Tractors As reported to the Association of Equipment Manufacturers at 31 July – in units as a % of trailing 12 months retail sales 48
Slide 27: July Retail Sales – Western Europe
July Retail Sales – Western Europe ↑ double digits ↑ double digits Deere & Company Combines Tractors Based on EU Government Reporting of Registrations 49
Slide 28: July Retail Sales – U.S. and Canada
July 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 50
Slide 29: Raw Material and Freight
Raw Material and Freight Equipment Operations Third Quarter 2007 Up ~ $75 million vs. Q3 2006 Fiscal Year 2007 Forecast Up ~ $200 million (unchanged) By Division Agricultural Equipment: ~ $80 million Commercial & Consumer Equipment: ~ $20 million Construction & Forestry: ~ $100 million Deere & Compa
Slide 30: Research & Development Expense
Research & Development Expense Equipment Operations Third Quarter 2007 Up ~ 16% vs. Q3 2006 Fiscal Year 2007 Forecast Up ~ 12% Deere & Company Forecast as of 15 August 2007 52
Slide 31: Selling, Administrative & General Expenses
Selling, Administrative & General Expenses Equipment Operations Third Quarter 2007 Up ~ 9% vs. Q3 2006 Entirely related to global growth initiatives and currency translation Fiscal Year 2007 Forecast anticipates up ~ 14% vs. FY2006 Includes ~ 10 points related to global growth initiatives (including
Slide 32: Tax Rate
Tax Rate Equipment Operations Third Quarter 2007 Effective tax rate of 34% Fiscal Year 2007 Forecast Assumes a tax rate of ~ 33% (unchanged) Deere & Company Forecast as of 15 August 2007 54
Slide 33: Shares Outstanding
Shares Outstanding Third Quarter 2007 55 Period ending shares outstanding: 221.9 million Average diluted shares outstanding for the quarter: 226.8 million May 30, 2007: Board authorized new repurchase program for 20 million shares
Slide 34: 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 $1.1 10.0 YTD Q4 $0.5 4.3 Q3 $0.4 3.6 Q2 Total $ Amount
Slide 35: Other Information
Other Information Fiscal Year 2007 Forecast Equipment Operations Capital Expenditures ~ $600 million Depreciation and Amortization $400 – 450 million Pension/OPEB Contributions ~ $525 million Financial Services Capital Expenditures – wind investment ~ $500 million Deere & Company Forecast as of 15 A
Slide 36: 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 37: Fourth-quarter 2007 conference call schedule
Deere’s fourth-quarter 2007 conference call is scheduled for 9:00 a.m. central time on Wednesday, November 21, 2007. 59