Deere & Company · NYSE:DE
Deere & — Q1 2015 Earnings Presentation
42 slides from Deere &'s earnings presentation, Feb 20, 2015
Slide 1: First Quarter 2015 Earnings Conference Call
First Quarter 2015 Earnings Conference Call 20 February 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: First Quarter Overview
First Quarter Overview (in millions of dollars except per share amounts) Q1 2015 Q1 2014 Change Net Sales and Revenues $6,383 $7,654 -17% Net Sales $5,605 $6,949 -19% Net Income $387 $681 -43% Attributable to Deere & Company Diluted EPS $1.12 $1.81 -38% 3 | 1st Quarter 2015 Earnings Conference Call
Slide 4: First Quarter Overview: Net Sales
First Quarter Overview Net Sales Equipment operations net sales: Down 19% in Q1 2015 vs. Q1 2014 • Price realization: +1 point • JD Landscapes and JD Water: (2) points • Currency translation: (2) points 4 | 1st Quarter 2015 Earnings Conference Call
Slide 5: Worldwide Agriculture & Turf
Worldwide Agriculture & Turf First Quarter Overview (in millions of dollars) Q1 2015 Q1 2014 Change Net Sales $4,081 $5,596 -27% Operating Profit* $268 $797 -66% *Q1 2015 operating profit impacted by: Favorable Unfavorable • Selling, Administrative, and General Expenses • Shipment Volumes • Price Re
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 2013E 2014F 2015F Crops Livestock Government Payments Source: 1999 – 2012: USDA 10 February 2015 2013E – 2015F: Deere & Company Forecast as of
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% 1993 1996 1999 2002 2005 2008 2011 2014P Source: USDA – 10 February 2015 7 | 1st Quarter 2015 Earnings Conference Call
Slide 8: Economic Update: EU
Economic Update EU 28 – Fiscal 2015 Economic growth continues at slow rate Crop prices have weakened but are stabilizing at levels close to the long-term average Livestock margins lower but at sound levels • Beef prices have stabilized • Feed costs have eased • Downward pressure on dairy margins Dee
Slide 9: Economic Update: Other Selected Markets
Economic Update Other Selected Markets – Fiscal 2015 Commonwealth of Independent States (CIS) • Strong headwinds persist • Increasing economic pressure and tightening credit conditions • Geopolitical uncertainty impacting Western manufacturers China • Economic growth slower than expected • Lower com
Slide 10: Crop Value of Agricultural Production: Brazil
Crop Value of Agricultural Production Brazil Expected to decrease ~ 12% in 2015 over prior season Crop Value of Agricultural Production 2014 Mix by Crop $120 10% $100 US$ Billions 13% $80 46% $60 17% $40 14% $20 Soybeans Ethanol $0 Corn Sugar 2003 2005 2007 2009 2011 2013 2015F 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 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-FINAME w
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 25-30% No change EU 28 Ag Down ~ 10% No change South America Ag Down 10-15% Down ~ 10% (Tractors and Combines) CIS Countries Ag Down significantly Further deterioration Asia Ag Down
Slide 13: Worldwide Agriculture & Turf Outlook
Worldwide Agriculture & Turf Deere & Company Outlook Fiscal Year 2015 Forecast • Net sales: Down ~ 23% • Currency translation: ~ (4) points • Previous forecast: Down ~ 20% • Currency translation ~ (2) points Deere & Company Forecast as of 20 February 2015 (Previous Forecast as of 26 November 2014) 1
Slide 14: Worldwide Construction & Forestry
Worldwide Construction & Forestry First Quarter Overview (in millions of dollars) Q1 2015 Q1 2014 Change Net Sales $1,524 $1,353 +13% Operating Profit* $146 $94 +55% Incremental Margin ~ 30% *Q1 2015 operating profit impacted by: Favorable Unfavorable • Shipment Volumes • Sales-Incentive Costs • For
Slide 15: Worldwide Construction & Forestry Outlook
Worldwide Construction & Forestry Deere & Company Outlook Fiscal Year 2015 Forecast • Net sales: Up ~ 5% • Currency translation: ~ (2) points • Previous forecast: Up ~ 5% • Currency translation: ~ (1) point 2015 Previous U.S. Economic Indicators Forecast Forecast GDP Growth (annual percentage rate)*
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% 0.02% 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 January 2015
Slide 17: Worldwide Financial Services
Worldwide Financial Services First Quarter 2015 • Net income attributable to Deere & Company • $157 million in Q1 2015 vs. $142 million in Q1 2014 Fiscal Year 2015 Forecast • Net income attributable to Deere & Company of ~ $630 million • Previous forecast: ~ $610 million Deere & Company Forecast as
Slide 18: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory 2015** Q1 2015* 2015** Previous (in millions of dollars) Actual Forecast Forecast A&T $1,423 $525 $375 C&F $23 $625 $775 Total, as reported $1,400 $100 $400 Total, constant exchange $950 $325 $375*** * Change at 31 January 2015 vs. 31 January 2014 ** Foreca
Slide 19: Cost of Sales as a Percent of Net Sales
Cost of Sales as a Percent of Net Sales Equipment Operations First Quarter 2015 • ~ 79% Fiscal Year 2015 Forecast • ~ 78% • No change from previous forecast Deere & Company Forecast as of 20 February 2015 (Previous Forecast as of 26 November 2014) 19 | 1st Quarter 2015 Earnings Conference Call
Slide 20: Research & Development Expense
Research & Development Expense Equipment Operations First Quarter 2015 • Up ~ 3% vs. Q1 2014 • Currency translation: ~ (2) points Fiscal Year 2015 Forecast • Down ~ 1% vs. FY 2014 • Currency translation: ~ (2) points • Previous forecast: ~ Flat vs. FY 2014 Deere & Company Forecast as of 20 February
Slide 21: Selling, Administrative & General Expense
Selling, Administrative & General Expense Equipment Operations First Quarter 2015 • Down ~ 16% vs. Q1 2014 • JD Landscapes and JD Water: ~ (8) points • Currency translation: ~ (2) points Fiscal Year 2015 Forecast • Down ~ 9% vs. FY 2014 • JD Landscapes and JD Water: ~ (2) points • Currency translati
Slide 22: Pension and OPEB Expense
Pension and OPEB Expense First Quarter 2015 • Up ~ $20 million vs. Q1 2014 Fiscal Year 2015 Forecast • Up ~ $80 million vs. FY 2014 • Previous forecast: Up ~ $85 million vs. FY 2014 Deere & Company Forecast as of 20 February 2015 (Previous Forecast as of 26 November 2014) 22 | 1st Quarter 2015 Earni
Slide 23: Income Taxes
Income Taxes Equipment Operations First Quarter 2015 • Effective tax rate: ~ 28% Rest of Year 2015 Forecast • Effective tax rate: 34-36% Deere & Company Forecast as of 20 February 2015 23 | 1st 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 ~ $3.3 $3.0 $2.9 $2.5 $ Billions $2.4 $1.4 2008 2009 2010 2011 2012 2013 2014 2015 Forecast* * Previous forecast ~ $2.9 billion Deere & Company Forecast as of 20 February 2015 (Previous Forecast as of
Slide 25: 2015 Company Outlook: Second Quarter
2015 Company Outlook Second Quarter 2015 Forecast • Net sales: Down ~ 19% vs. Q2 2014 • Price realization: ~ +2 points • Currency translation ~ (4) points Deere & Company Forecast as of 20 February 2015 25 | 1st Quarter 2015 Earnings Conference Call
Slide 26: 2015 Company Outlook: Fiscal Year
2015 Company Outlook Fiscal Year 2015 Forecast • Net sales: Down ~ 17% vs. FY 2014 • Price realization: ~ +2 points • Currency translation: ~ (3) points • Previous forecast: Down ~ 15% vs. FY 2014 • Price realization: ~ +2 points • Currency translation ~ (2) points • Net income attributable to Deere
Slide 27: Fiscal Year 2015 Outlook
Fiscal Year 2015 Outlook Forecast projects much better performance than prior Ag downturns… • Responding aggressively to control costs and assets and align production levels with reduced order volumes • Should enable us to respond quickly when markets recover Power of the Portfolio… • Broad-based bu
Slide 28: Appendix
Appendix 28 | 1st Quarter 2015 Earnings Conference Call
Slide 29: 29 | 1st Quarter 2015 Earnings Conference Call
29 | 1st Quarter 2015 Earnings Conference Call
Slide 30: 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 operatio
Slide 31: 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 32: Deere Quarterly Dividends Declared
Deere Quarterly Dividends Declared* Q1 2003 – Q1 2015 $0.70 $0.60 $0.60 $0.51 $0.50 $0.46 $0.41 $0.40 $0.35 $0.30 $0.30 $0.28 $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 '03 Q1 Q2 Q3 Q4 '04 Q1 Q2 Q3 Q4 '05 Q1 Q2
Slide 33: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases 2004-1Q2015: ~ $14.0 billion Amount remaining on December 2013 authorization of $8 billion: ~ $5.6 billion 31 January 2015 period ended basic shares: ~ 339.5 million 1Q2015 average diluted shares: ~ 345.7 million Sha
Slide 34: Other Information
Other Information Equipment Operations Fiscal Year 2015 Forecast • Capital Expenditures: ~ $850 million • Previous forecast: ~ $875 million • Depreciation and Amortization: ~ $800 million • Previous forecast: ~ $850 million • Pension/OPEB Contributions: ~ $100 million • No change from previous forec
Slide 35: U.S. Farm Commodity Prices
U.S. Farm Commodity Prices (dollars per bushel, 2013/14 Previous 2014/15 Previous except cotton, which Estimate 2013/14 2014/15 is dollars per pound) Projection Corn $4.46 $4.45 $3.85 $3.45 Wheat $6.90 $6.90 $6.10 $5.85 Soybeans $13.00 $13.00 $9.85 $9.25 Cotton $.78 $.78 $.62 $.65 Deere & Company Fo
Slide 36: 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 36
Slide 37: U.S. Acres Planted
U.S. Acres Planted Acres Planted (millions) 2014/15 2015/16 Projection Projection Corn 90.6 88.6 Wheat 56.8 55.9 Soybeans 83.7 86.1 Cotton 11.0 10.0 Deere & Company Forecast as of 20 February 2015 37 | 1st Quarter 2015 Earnings Conference Call
Slide 38: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts 2013 2014 Previous 2015 Previous (in billions of dollars) Estimate Forecast 2014 Forecast 2015 Crops $218.5 $198.2 $193.8 $182.8 $184.4 Livestock $182.8 $209.2 $209.4 $199.0 $197.1 Government $11.0 $10.7 $9.3 $12.4 $10.0 Payments Total Cash $412.3 $418.1 $412.5 $394.2 $391.5
Slide 39: U.S. Net Farm Cash Income
U.S. Net Farm Cash Income (in billions of 2013 2014 Previous 2015 2015 dollars) Estimate Forecast 2014 Forecast Forecast Total Cash Receipts $412.3 $418.1 $412.5 $394.2 $391.5 Other Farm- Related Income $31.5 $27.3 $31.8 $25.3 $29.0 Gross Cash Income $443.8 $445.4 $444.3 $419.5 $420.5 Cash Expenses
Slide 40: January 2015 Retail Sales and Dealer Inventories
January 2015 Retail Sales and Dealer Inventories Retail Sales U.S. and Canada Ag Industry* Deere** Utility Tractors 8% in line with the industry Row-Crop Tractors 5% less than the industry 4WD Tractors 65% slightly more than the industry Combines 53% more than the industry Deere Dealer Inventories**
Slide 41: January 2015 Retail Sales
January 2015 Retail Sales EU 28 Deere* Tractors single digit Combines flat U.S. and Canada Deere* Selected Turf & Utility Equipment double digits U.S. and Canada – Construction & Forestry Deere* First-in-the-Dirt double digits Settlements double digits * Based on internal sales reports 41 | 1st Quar
Slide 42: Second quarter 2015 conference call scheduled
Deere’s second quarter 2015 conference call is scheduled for 9:00 a.m. central time on Friday, May 22, 2015