Deere & Company · NYSE:DE
Deere & — Q4 2010 Earnings Presentation
44 slides from Deere &'s earnings presentation, Nov 24, 2010
Slide 1: Fourth Quarter 2010 Earnings Conference Call
Fourth Quarter 2010 Earnings Conference Call 24 November 2010 Exhibit 99.3 (Furnished herewith) 27
Slide 2: Safe Harbor Statement & Disclosures
| 4th Quarter 2010 Earnings Conference Call 2 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 t
Slide 3: Fourth Quarter Overview
| 4th Quarter 2010 Earnings Conference Call 3 Fourth Quarter Overview (in millions of dollars except per share amounts) Q4 2010 Q4 2009 Change Net Sales and Revenues $7,202 $5,334 +35% Net Sales $6,564 $4,726 +39% Net Income (Loss) Attributable to Deere & Company $457 ($223) Diluted EPS $1.07 ($0.53
Slide 4: Supplemental Data – Fiscal 2009
| 4th Quarter 2010 Earnings Conference Call 4 Supplemental Data – Fiscal 2009 NOTE: Due to the magnitude of the amounts for the items listed above, management believes the above additional supplemental data provides valuable insight into the operating performance for fourth quarter 2009 and fiscal y
Slide 5: Fourth Quarter Overview: Net Sales
| 4th Quarter 2010 Earnings Conference Call 5 Fourth Quarter Overview Net Sales Equipment operations net sales: Up 39% in Q4 2010 vs. Q4 2009 Currency translation: +1 point Price realization: +3 points 31
Slide 6: Production Tonnage
| 4th Quarter 2010 Earnings Conference Call 6 Production Tonnage* Approximate % Change Q4 2010 Actual Q4 2010 Previous Forecast FY 2010 Actual FY 2010 Previous Forecast Q1 2011 Forecast FY 2011 Forecast Total Worldwide +59 +53 +15 +14 +39 +8 Worldwide A&T +50 +47 +10 +10 +33 +5 Worldwide C&F +129 +9
Slide 7: Production Tonnage by Quarter
| 4th Quarter 2010 Earnings Conference Call 7 Production Tonnage* *Percentage change from same period in previous year, excluding purchased product Deere & Company Forecast as of 24 November 2010 Approximate % Change Q1 Q2 Q3 Q4 Total Worldwide – Fiscal 2010 (20) +7 +31 +59 Total Worldwide – Fiscal
Slide 8: 2011 Company Outlook
| 4th Quarter 2010 Earnings Conference Call 8 2011 Company Outlook First Quarter 2011 Forecast Net sales up ~ 34% vs. Q1 2010 Currency translation: ~ (2) points Fiscal Year 2011 Forecast Net sales up 10-12% vs. FY 2010 Currency translation: ~ (1) point Price realization: ~ +2 points Net income attri
Slide 9: Worldwide Agriculture & Turf Fourth Quarter Overview
| 4th Quarter 2010 Earnings Conference Call 9 Worldwide Agriculture & Turf Fourth Quarter Overview (in millions of dollars) Q4 2010 Q4 2009 Change Net Sales $5,406 $4,065 +33% Operating Profit*(Loss) $662 ($24) Production Tonnage +50% Incremental Margin ~ 51% ~ 24% excluding Q4 2009 goodwill impairm
Slide 10: U.S. Commodity Price Estimates
| 4th Quarter 2010 Earnings Conference Call 10 U.S. Commodity Price Estimates (dollars per bushel, except cotton, which is dollars per pound) 2009/10 Previous 2009/10 2010/11 Forecast Previous 2010/11 2011/12 Forecast Corn $3.55 $3.55 $5.00 $3.90 $4.35 Wheat $4.87 $4.87 $5.55 $5.25 $5.50 Soybeans $9
Slide 11: U.S. Farm Cash Receipts
| 4th Quarter 2010 Earnings Conference Call 11 U.S. Farm Cash Receipts (in billions of dollars) 2009 Previous 2009 2010 Forecast Previous 2010 2011 Forecast Previous 2011 Crops 163.7 166.3 173.7 171.4 198.1 179.0 Livestock 119.8 118.8 135.9 133.3 136.9 133.0 Government Payments 12.9 12.9 12.4 12.4 1
Slide 12: European (EU-27) Economic Update
| 4th Quarter 2010 Earnings Conference Call 12 European (EU-27) Economic Update Deere & Company Forecast as of 24 November 2010 Farm Economy Grain prices have risen and are expected to stay at attractive levels Milk and beef prices continue to rise Though feed costs are a concern for livestock produ
Slide 13: Farm Net Income (Loss) Brazil and Argentina
| 4th Quarter 2010 Earnings Conference Call 13 Farm Net Income (Loss) Brazil and Argentina Brazil (in billions of U.S. dollars) 2009 2010 Forecast Previous 2010 2011 Forecast Previous 2011 Soybeans 2.7 3.0 1.9 7.3 2.3 Sugarcane 2.3 8.1 6.4 16.8 7.9 Other* (2.6) (2.0) (3.0) 1.4 (1.1) Total 2.4 9.1 5.
Slide 14: Brazil Product Portfolio and Dealer Network Expanded
Brazil Product Portfolio and Dealer Network Expanded to Meet Customer Needs | 4th Quarter 2010 Earnings Conference Call 14 50 new or updated products introduced into the South America market for 2010/2011, including: Tractors Combines and headers Sprayers Seeding equipment Loaders Turf equipment Hay
Slide 15: Agriculture & Turf Retail Sales Industry Outlook – Fiscal 2011
| 4th Quarter 2010 Earnings Conference Call 16 Agriculture & Turf Retail Sales Industry Outlook – Fiscal 2011 U.S. and Canada Ag: ~ Flat Western Europe Ag: Up 5-10% Central Europe and the CIS* countries Ag: Moderate gains from last year’s depressed levels Asia Ag: Sales expected to increase moderate
Slide 16: Worldwide Agriculture & Turf Deere & Company Outlook
| 4th Quarter 2010 Earnings Conference Call 17 Worldwide Agriculture & Turf Deere & Company Outlook Fiscal Year 2011 Forecast Net sales projected to be up 7-9% Deere & Company Forecast as of 24 November 2010 43
Slide 17: Worldwide Construction & Forestry Fourth Quarter Overview
| 4th Quarter 2010 Earnings Conference Call 18 Worldwide Construction & Forestry Fourth Quarter Overview (in millions of dollars) Q4 2010 Q4 2009 Change Net Sales $1,158 $661 +75% Operating Profit* $54 $2 Production Tonnage +129% Incremental Margin ~ 10% *Q4 2010 operating profit impacted by: Higher
Slide 18: Worldwide Credit Operations Credit Loss History
| 4th Quarter 2010 Earnings Conference Call 20 Worldwide Credit Operations Credit Loss History .48% Provision for Credit Losses / Average Owned Portfolio 46
Slide 19: Credit Operations Owned Portfolio Past-Dues and Write-offs
| 4th Quarter 2010 Earnings Conference Call 21 Past-Dues Write-offs Oct 2010 Oct 2009 FY2010 FY2009 A&T – Retail Notes 0.09% 0.24% 0.18% 0.09% C&F – Retail Notes 0.37% 0.72% 1.45% 3.24% Revolving Charge Accounts 0.58% 0.92% 2.29% 2.90% Financing Leases 0.75% 0.74% 1.15% 1.56% Total Owned 0.18% 0.33%
Slide 20: Consolidated Trade Receivables & Inventory
| 4th Quarter 2010 Earnings Conference Call 23 Consolidated Trade Receivables & Inventory (in millions of dollars) 2010* Actual 2010* Previous Forecast 2011** Forecast A&T 1,102 675 750 C&F 411 275 75 Total, as reported 1,513 950 675 Total, constant exchange 1,524 1,150 550 * Change at 31 October 20
Slide 21: Retail Sales and Dealer Inventories
| 4th Quarter 2010 Earnings Conference Call 24 Retail Sales U.S. and Canada Ag Industry* Deere** Utility Tractors 11% more than industry Row-Crop Tractors 40% more than industry 4WD Tractors 63% more than industry Combines 18% more than industry October 2010 Retail Sales and Dealer Inventories * As
Slide 22: October 2010 Retail Sales
| 4th Quarter 2010 Earnings Conference Call 25 October 2010 Retail Sales Western Europe Deere* Tractors double digits Combines double digits U.S. and Canada Deere Selected Turf & Utility Equipment double digits * Based on EU Government Reporting of Registrations U.S. and Canada – Construction & Fore
Slide 23: Material Costs and Freight
| 4th Quarter 2010 Earnings Conference Call 26 Material Costs and Freight Equipment Operations Fourth Quarter 2010 Up ~ $80 million vs. Q4 2009 Fiscal Year 2010 Down ~ $135 million vs. FY 2009 By division Agriculture & Turf ~ $155 million Construction & Forestry ~ $20 million Previous forecast down
Slide 24: Research & Development Expense
| 4th Quarter 2010 Earnings Conference Call 27 Research & Development Expense Equipment Operations Fourth Quarter 2010 Up ~ 14% vs. Q4 2009 Currency translation: ~ (2) points Fiscal Year 2010 Up ~ 8% vs. FY 2009 Previous forecast up ~ 10% vs. FY 2009 Fiscal Year 2011 Forecast Up ~ 15% vs. FY 2010 De
Slide 25: Pension and OPEB Expense
| 4th Quarter 2010 Earnings Conference Call 28 Pension and OPEB Expense Fiscal Year 2010 and Forecast 2011 Fourth Quarter 2010 Up ~ $70 million vs. Q4 2009 No change from previous forecast Fiscal Year 2010 Up ~ $345 million vs. FY 2009 Change by category COS ~ $280 million (previous forecast ~ $275
Slide 26: Selling, Administrative & General Expense
| 4th Quarter 2010 Earnings Conference Call 29 Selling, Administrative & General Expense Equipment Operations Fourth Quarter 2010 Up ~ 15% vs. Q4 2009 Variable incentive compensation: ~ +11 points Pension and OPEB expense: ~ +2 points Fiscal Year 2010 Up ~ 10% vs. FY 2009 Variable incentive compensa
Slide 27: Income Taxes
| 4th Quarter 2010 Earnings Conference Call 30 Income Taxes Equipment Operations Fourth Quarter 2010 Effective tax rate of ~ 42% Fiscal Year 2010 Effective tax rate, as reported ~ 41% Tax expense related to U.S. health-care legislation ~ 5% ~ $130 million, recognized in second quarter 2010 Effective
Slide 28: Continued Strong Operating Performance: Cash Flows
| 4th Quarter 2010 Earnings Conference Call 31 Continued Strong Operating Performance Equipment Operations Cash Flows from Operations Fiscal Year 2008: $2.4 billion Fiscal Year 2009: $1.4 billion Fiscal Year 2010: $2.5 billion Previous forecast: ~ $2.4 billion Fiscal Year 2011 Forecast: ~ $3.0 billi
Slide 29: Deere Use-of-Cash Priorities
Deere Use-of-Cash Priorities | 4th Quarter 2010 Earnings Conference Call 32 Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost and readily available short- and long-term funding mechanisms Reflects the strategic nature of our credit operation Committe
Slide 30: Worldwide Credit Operations Unsecured Term Debt Maturities
| 4th Quarter 2010 Earnings Conference Call 33 Worldwide Credit Operations Unsecured Term Debt Maturities* * Maturities as of 31 October 2010 59
Slide 31: Share Repurchase
| 4th Quarter 2010 Earnings Conference Call 34 Share Repurchase As Part of Publicly Announced Plans Actual Shares Repurchased* (in millions) Total $ Amount (in billions) 2004 5.9 $0.2 2005 27.7 $0.9 2006 34.0 $1.3 2007 25.7 $1.5 2008 21.2 $1.7 2009 0.0 $0.0 2010 5.2 $0.4 Cumulative cost of repurchas
Slide 32: Sources and Uses of Cash Fiscal 2004–2010
| 4th Quarter 2010 Earnings Conference Call 35 Sources and Uses of Cash Fiscal 2004–2010 Equipment Operations ~55% of cash from operations returned to shareholders (1) Other includes excess tax benefits from share-based compensation, effect of exchange rates on cash and cash equivalents, proceeds fr
Slide 33: Other Information Fiscal Year 2010
| 4th Quarter 2010 Earnings Conference Call 36 Other Information Fiscal Year 2010 Equipment Operations Capital Expenditures ~ $735 million Previous forecast ~ $850 million Depreciation and Amortization ~ $550 million No change from previous forecast Pension/OPEB Contributions ~ $840 million Previous
Slide 34: Other Information Fiscal Year 2011 Forecast
| 4th Quarter 2010 Earnings Conference Call 37 Other Information Fiscal Year 2011 Forecast Equipment Operations Capital Expenditures ~ $1.0 billion Depreciation and Amortization ~ $550 million Pension/OPEB Contributions ~ $300 million Deere & Company Forecast as of 24 November 2010 63
Slide 35: Appendix
| 4th Quarter 2010 Earnings Conference Call 38 Appendix 64
Slide 36: Supplemental Data – Fourth Quarter 2010
| 4th Quarter 2010 Earnings Conference Call 39 Supplemental Data – Fourth Quarter 2010 Worldwide Agriculture & Turf Incremental Margins NOTE: Due to the magnitude of the amounts for the items listed above, management believes the above additional supplemental data provides valuable insight into the
Slide 37: U.S. Farm Prices
| 4th Quarter 2010 Earnings Conference Call 40 U.S. Farm Prices Source: Actual Data: USDA Forecast Data: Deere & Company Forecast as of 24 November 2010 66 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 Cotton - Dollars per Pound Dollar
Slide 38: World Farm Fundamentals Global Stocks-To-Use Ratios
| 4th Quarter 2010 Earnings Conference Call 41 World Farm Fundamentals Global Stocks-To-Use Ratios Corn Wheat Soybeans Source: USDA - 9 November 2010 Cotton 67
Slide 39: U.S. Net Farm Cash Income
| 4th Quarter 2010 Earnings Conference Call 42 U.S. Net Farm Cash Income (in billions of dollars) 2009 Previous 2009 2010 Forecast Previous 2010 2011 Forecast Previous 2011 Total Cash Receipts 296.4 298.0 322.0 317.1 346.9 323.9 Other Cash Income 22.0 20.7 22.8 21.6 23.3 22.5 Gross Cash Income 318.4
Slide 40: Brazil: Government Programs
43 Brazil: Government Programs Tractor Programs 5 Engine hp Where Interest Rate Grace Period (Max) Years Term Maturity Mais Alimentos Pró-Trator Trator Solidário <78 <120 75-80 Brazil Sao Paulo Parana 2% 0% 5.5% 3 Years 2 2 10 5 5 Perennial 1 Dec10 2 Dec10 3 Finame PSI Moderfrota All All Brazil Braz
Slide 41: Credit Operations Non-Performing Receivables
| 4th Quarter 2010 Earnings Conference Call 44 Oct 2010 Oct 2009 A&T – Retail Notes* 1.20% 1.56% C&F – Retail Notes 2.23% 2.16% Revolving Charge Accounts 0.05% 0.05% Financing Leases 1.70% 2.66% Total Owned Non-Performing Receivables** 0.98% 1.37% * As of 31 October 2010 and 2009, Brazil non-perform
Slide 42: John Deere Capital Corporation Past-Dues and Write-offs
| 4th Quarter 2010 Earnings Conference Call 45 Past-Dues Write-offs Oct 2010 Oct 2009 FY2010 FY2009 A&T – Retail Notes 0.10% 0.27% 0.03% 0.04% C&F – Retail Notes 0.37% 0.77% 1.62% 3.61% Revolving Charge Accounts 0.56% 0.90% 2.30% 2.97% Financing Leases 1.64% 1.53% 0.52% 1.03% Total Owned 0.20% 0.36%
Slide 43: John Deere Capital Corporation Non-Performing Receivables
| 4th Quarter 2010 Earnings Conference Call 46 Oct 2010 Oct 2009 A&T – Retail Notes 0.46% 0.50% C&F – Retail Notes 2.53% 2.40% Revolving Charge Accounts 0.05% 0.05% Financing Leases 3.71% 4.23% Total Owned Non-Performing Receivables 0.61% 0.81% John Deere Capital Corporation Owned Portfolio Non-Perf
Slide 44: First quarter 2011 conference call scheduled
Deere’s first quarter 2011 conference call is scheduled for 9:00 a.m. central time on Wednesday, February 16, 2011 73