Deere & Company · NYSE:DE
Deere & — Q2 2019 Earnings Presentation
32 slides from Deere &'s earnings presentation, May 17, 2019
Slide 1: 2Q 2019 Earnings Call
1 2Q 2019 Earnings Call 17 May 2019 24
Slide 2: Safe Harbor Statement & Disclosures
2 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 ac
Slide 3: 2Q 2019 Overview
3 2Q 2019 Overview ($ millions except where noted) 2Q 2019 2Q 2018 2Q 2019 vs. 2Q 2018 Net Sales & Revenues $11,342 $10,720 6% Net Sales (equipment operations) $10,273 $9,747 5% Net Income (attributable to Deere & Company) $1,135 $1,208 6% Adjusted Net Income (attributable to Deere & Company) $1,135
Slide 4: 2Q 2019 Overview Equipment Operations
4 2Q 2019 Overview Equipment Operations 2Q 2019 vs. 2Q 2018 Net Sales 5% Price realization Currency translation 4 points 4 points 27
Slide 5: Worldwide Agriculture & Turf 2Q 2019 Overview
5 Worldwide Agriculture & Turf 2Q 2019 Overview ($ millions) 2Q 2019 2Q 2019 vs. 2Q 2018 Net Sales $7,282 3% Operating Profit* $1,019 4% *2Q 2019 operating profit impacted by: − Production costs − Foreign currency exchange − Research & development costs + Price realization + Shipment volumes 28
Slide 6: Global Stocks-to-Use Ratios
6 Global Stocks-to-Use Ratios Source: USDA, 10 May 2019 0% 20% 40% 60% 80% 100% 120% 0% 10% 20% 30% 40% 50% 60% 1995 1998 2001 2004 2007 2010 2013 2016 2019P Cotton Ratios Cotton Wheat Corn Soybeans 29
Slide 7: U.S. Principal Crop Cash Receipts
7 U.S. Principal Crop Cash Receipts *Include both rounds of USDA Aid payment Note: USDA authorized a one-time $12B aid package to assist farmers from the trade dispute impact. $8B to be distributed via Market Facilitation Program (MFP). Source: Deere forecast, May 2019 0 20 40 60 80 100 120 140 160
Slide 8: Agriculture & Turf Industry Outlook
8 Fiscal 2019 Forecast Previous Forecast U.S. and Canada Ag Flat to up 5% Flat to up 5% EU 28 Ag ~ Flat ~ Flat South America Ag (tractors and combines) Flat to up 5% Flat to up 5% Asia Ag Flat to slightly down Flat to slightly down U.S. and Canada Turf and Utility Flat to up 5% Flat to up 5% Agricul
Slide 9: Worldwide Agriculture & Turf Deere & Company Outlook
9 Worldwide Agriculture & Turf Deere & Company Outlook Fiscal 2019 Forecast Previous Forecast Net Sales ~ 2% ~ 4% Currency translation ~ 3% ~ 2% Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 32
Slide 10: Innovating Across the Entire Crop Production System
10 001001 1101110 10101 010010 011100 101101 1011000 0100010 0011 010110 001001 001110 INNOVATING ACROSS THE ENTIRE CROP PRODUCTION SYSTEM Cory Reed President, Ag & Turf 33
Slide 11: Worldwide Construction & Forestry 2Q 2019 Overview
11 ($ millions) 2Q 2019 2Q 2019 vs. 2Q 2018 Net Sales $2,991 11% Operating Profit* $347 34% Worldwide Construction & Forestry 2Q 2019 Overview *2Q 2019 operating profit impacted by: + Price realization + Shipment volumes + Wirtgen − Production costs − Product mix 34
Slide 12: Worldwide Construction & Forestry U.S. Economic Indicators
12 Fiscal 2019 Forecast Previous Forecast GDP Growth Housing Starts (thousands) Total Construction Investment Government Construction Investment Global Transportation Investment Crude Oil Price Worldwide Construction & Forestry U.S. Economic Indicators Source: IHS Markit, Calendar Year Estimates – A
Slide 13: Worldwide Construction & Forestry Deere & Company Outlook
13 Fiscal 2019 Forecast* Previous Forecast* Net Sales ~ 11% ~ 13% Currency translation Wirtgen ~ 2 points ~ 4 points ~ 2 points ~ 4 points Worldwide Construction & Forestry Deere & Company Outlook * Includes 12 months of Wirtgen sales, vs 10 months in fiscal 2018 Source: Deere & Company forecast as
Slide 14: Worldwide Financial Services Credit Loss History
14 0.0% 0.5% 1.0% 1.5% 2.0% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019F Worldwide Financial Services Credit Loss History Provision for Credit Losses / Average Owned Portfolio 0.23% 15 Year Average Source: Deere & Company forecast as of 17 May 2019 37
Slide 15: Worldwide Financial Services
15 Worldwide Financial Services ($ millions) 2Q 2019 Fiscal 2019 Forecast Previous Forecast Net Income (attributable to Deere & Company) $121 ~$600 ~ $630 Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 38
Slide 16: Consolidated Trade Receivables & Inventory
16 Consolidated Trade Receivables & Inventory ($ millions) 2Q 2019* Fiscal 2019 Forecast** Previous Forecast** Agriculture & Turf $447 ~ $50 ~ $25 Construction & Forestry $833 ~ $300 ~ $175 Total (as reported) $1,280 ~ $250 ~ $200 Total (constant exchange) $1,813 ~ $375 ~ $175 * Change at 28 April 2
Slide 17: Cost and Expenses Equipment Operations
17 ($ millions) 2Q 2019 Fiscal 2019 Forecast Previous Forecast COS (percent of Net Sales) 75% ~76% ~75% Research and Development 10% ~ 6% ~ 5% SA&G Expense 1% ~ 6% ~ 7% Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) Cost and Expenses Equipment Operation
Slide 18: Income Taxes Equipment Operations
18 2Q 2019 Fiscal 2019 Forecast Previous Forecast Effective Tax Rate 22% 24-26% 24-26% Income Taxes Equipment Operations Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) 41
Slide 19: Net Operating Cash Flows Equipment Operations
19 Net Operating Cash Flows Equipment Operations Fiscal 2019 Forecast* ~ $4.1 billion $0 $1,000 $2,000 $3,000 $4,000 $5,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F $ Millions * Previous forecast ~$4.4 billion Note: 2010-2016 adjusted with the adoption of FASB ASU No. 2016-09 “Improvements
Slide 20: Deere & Company Outlook Fiscal 2019 Forecast
20 Source: Deere & Company forecast as of 17 May 2019 (previous forecast as of 15 February 2019) ($ billions except where noted) Fiscal 2019 Forecast Previous Forecast Net Sales (equipment operations) ~ 5% ~ 7% Price realization Currency translation Wirtgen ~ 3 points ~ 3 points ~ 1 point ~ 3 points
Slide 21: Appendix
21 Appendix 44
Slide 22: Share Repurchase
22 Share Repurchase As Part of Publicly Announced Plans * All shares adjusted for two-for-one stock split effective 26 November 2007 2004–2Q 2019: Cumulative cost of repurchases $17.8 billion Shares repurchased 254.0 million December 2013 authorization of $8 billion: Amount remaining $1.8 billion 28
Slide 23: The John Deere Strategy
THE JOHN DEERE STRATEGY (OUR PURPOSE commited otholnhndto thant cea ncmcucninn, ASOLO ge = 7 OUR ASPIRATIONS Amica success AcTORS pcernout water = —— FOUNDATIONAL oma fn supour i reer SUCCESS FACTORS Eerste 7 a sack ees wrecareoeeseast & fener ot cone vauues
Slide 24: Other Information Equipment Operations
24 ($ millions) Fiscal 2019 Forecast Previous Forecast Capital Expenditures ~ $1,150 ~ $1,150 Depreciation & Amortization ~ $1,025 ~ $1,025 Pension/OPEB Expense ~ $125 ~ $120 Pension/OPEB Contributions ~ $200 ~ $200 Other Information Equipment Operations Source: Deere & Company forecast as of 17 May
Slide 25: U.S. Farm Commodity Prices
25 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $0 $4 $8 $12 $16 $20 2004 2006 2008 2010 2012 2014 2016 2018 Cotton - $ per Pound $ per Bushel Cotton Wheat Corn Soybeans Source: USDA, 10 May 2019 U.S. Farm Commodity Prices 48
Slide 26: U.S. Farm Cash Receipts
26 U.S. Farm Cash Receipts $0 $100 $200 $300 $400 $500 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019F $ Billions Crops Livestock Government Payments USDA Aid* *USDA Aid includes only the ~$8B crop aid payment Note: USDA authorized a one-time $12B aid package to assist farmers from the trade disp
Slide 27: Economic Update EU: Dairy, Beef and Pork Prices
27 Economic Update EU 28 €120 €180 €240 €300 €360 €420 €220 €270 €320 €370 €420 €470 2010 2013 2016 2019F Beef meat and Pork meat - € per 100 kg Milk - € per MT Dairy, Beef and Pork Prices Milk Milk 10yr avg Beef meat Beef meat 10yr avg Pork meat Pork meat 10yr avg Source: EU Com, LTO, January 2019
Slide 28: Economic Update Brazil
28 Economic Update Brazil $0 $30 $60 $90 $120 $150 2009 2012 2015 2018F US$ Billions Crop Value of Production Includes key grains, ethanol, sugar Source: IHS Global Insight, May 2019 51
Slide 29: April 2019 Retail Sales and Dealer Inventories
29 April 2019 Retail Sales (Rolling 3 Months) and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** 2WD Tractors (< 40 PTO hp) 13% More than the industry 2WD Tractors (40 < 100 PTO hp) 2% In line with the industry 2WD Tractors (100+ PTO hp) 2% More than the industry 4WD Tractors 2
Slide 30: April 2019 Retail Sales (Rolling 3 Months)
30 Retail Sales U.S. and Canada Deere* Selected Turf & Utility Equipment Double digits Construction & Forestry First-in-the-Dirt Settlements Low double digits Single digit April 2019 Retail Sales (Rolling 3 Months) Retail Sales EU 28 Ag Deere* Tractors Low double digits Combines Single digit * Based
Slide 31: Supplemental Statement of Consolidated Income Information
31 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 exc
Slide 32: 3Q 2019 earnings call scheduled for 16 August 2019
Deere & Company’s 3Q 2019 earnings call is scheduled for 9:00 a.m. central time on Friday, 16 August 2019 55