Deere & Company · NYSE:DE
Deere & — Q4 2006 Earnings Presentation
39 slides from Deere &'s earnings presentation, Nov 21, 2006
Slide 1: Fourth Quarter 2006 Earnings Conference Call
Fourth Quarter 2006 Earnings Conference Call Exhibit 99.3 24
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: Fourth Quarter Overview
Fourth Quarter Overview +19% $232.8 $277.3 Net Income +25% $0.96 $1.20 Diluted EPS +0% $4,486 $4,486 Net Sales +3% $4,992 $5,118 Net Sales and Revenues Change Q4 2005 Q4 2006 (in millions of dollars except per share amounts)
Slide 4: Net income reconciliation, Q4 2006
Net income, as reported $277.3 $1.20 Less income from discontinued operations (Health Care) 0.6 0.00 Income from continuing operations 276.7 1.20 Other special items: Expenses related to tender offer for debt securities 0.0 0.00 Expenses related to Woodstock factory closing 13.6 0.06 Income from con
Slide 5: Fourth Quarter Overview – Worldwide Agricultural Equipment Division
Fourth Quarter Overview – Worldwide Agricultural Equipment Division +151% $57 $143 Operating Profit* -17% Production Tonnage -1% $2,396 $2,370 Net Sales Change Q4 2005 Q4 2006 (in millions of dollars) * Operating Profit impacted by: Strong net price realization Lower warranty costs Offset by higher
Slide 6: Ethanol: Estimated Growth Continues to Expand
Ethanol: Estimated Growth Continues to Expand MM Bushels Used in Ethanol U.S. 1167 995 1323 1600 2200 4800 4700 4300 3900 3100 2002/03 '03/04 '04/05 '05/06F '06/07F '07/08F '08/09F '09/10F '10/11F '11/12F Informa Economics, November 2006 Informa Economics, August 2006 USDA, February 2006
Slide 7: Global Grain Stocks-to-Use Ratios are Low
Global Grain Stocks-to-Use Ratios are Low USDA World Agricultural Supply and Demand Estimates - November 9, 2006 Lowest level since 1972/73 Lowest level in 36-year USDA history Wheat Corn Soybeans Cotton 0.0 10.0 20.0< /font> 30.0 40.0 50.0 60.0 70.0 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 0
Slide 8: Nearby Futures Settlement Prices
Nearby Futures Settlement Prices 03 January 2006 through 14 November 2006 Source: Informa Economics/Chicago Board of Trade 02 Oct 2006 Corn Soybeans Wheat 2.00 3.00 4.00 5.00 6.00 7.00 1/3/2006 1/17/2006 1/31/2006 2/14/2006 2/28/2006 3/14/2006 3/28/2006 4/11/2006 4/25/2006 5/9/2006 5/23/2006 6/6/200
Slide 9: U.S. Commodity Prices
U.S. Commodity Prices $.600 $5.75 $4.10 $2.50 Previous 2006/07 $.470 $5.90 $4.40 $2.95 2006/07 Forecast $.450 $.477 Cotton (per pound) $6.00 $5.66 Soybeans (per bushel) $3.75 $3.42 Wheat (per bushel) $3.05 $2.00 Corn (per bushel) 2007/08 Forecast 2005/06 Deere & Company Estimates as of 10 November 2
Slide 10: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts $256.1 $254.2 $263.3 Total Cash Receipts 11.3 17.0 24.3 Government Payments $250.5 $247.9 $259.8 Previous Total Cash Receipts 119.6 119.7 125.0 Livestock 125.2 117.5 114.0 Crops 2007 Forecast 2006 Forecast 2005 (in billions of dollars) Deere & Company Estimates as of 10 Novem
Slide 11: Brazil Farm Net Income
Brazil Farm Net Income 6.1 .6 .2 1.0 .2 4.1 2004* Net Income (US $ Billion) 5.6 .0 2.0 Total .2 .0 .2 Rice .6 -1.1 .2 Corn 3.5 3.3 .8 Sugar Cane .4 -.2 -.1 Cotton .9 -2.0 .9 Soybeans 2007 Forecast 2006 Forecast 2005 Deere & Company estimates as of 21 November 2006 * NOTE: Weaker Real in 2004 resulte
Slide 12: Industry Outlook – Agricultural Equipment Retail Sales
Industry Outlook – Agricultural Equipment Retail Sales U.S. & Canada: Flat for the fiscal year Anticipates weaker 1H07 sales Anticipates ~60% of DE’s retail sales in 2H07 Higher used equipment levels at Deere dealers ~$200 million* higher at 31 October 2006 vs. 31 October 2005 Farmer uncertainty aro
Slide 13: Industry Outlook – Agricultural Equipment Retail Sales
Industry Outlook – Agricultural Equipment Retail Sales Western Europe: Flat to down slightly Germany value-added tax (VAT) increases from 16% to 19% on 01 January 2007 sales pulled ahead into FY2006 Recovery in France and Spain South America: Down about 10% Uncertainty over 2007 Finame programs Aust
Slide 14: Outlook - Worldwide Agricultural Equipment
Deere & Company Outlook - Worldwide Agricultural Equipment Fiscal Year 2007 Forecast Net sales projected to be up ~4% Production tonnage projected down ~3% First Quarter 2007 Forecast Net sales projected to be up ~10% Production tonnage projected down ~1% US & Canada tonnage projected down ~8% Deere
Slide 15: Fourth Quarter Overview – Worldwide Commercial and Consumer Equipment
Fourth Quarter Overview – Worldwide Commercial and Consumer Equipment -70% -$10 -$3 Operating Profit +4% Production Tonnage -1% $766 $758 Net Sales Change Q4 2005 Q4 2006 (in millions of dollars) * Operating Profit impacted by: Improved price realization Lower shipments
Slide 16: Outlook – Worldwide Commercial & Consumer Equipment
Deere & Company Outlook – Worldwide Commercial & Consumer Equipment Fiscal Year 2007 Forecast Net sales projected to be up ~4% Landscapes operations and new products Production tonnage projected up ~7% First quarter 2007 production tonnage projected down ~1% Deere & Company Forecast as of 21 Novembe
Slide 17: Fourth Quarter Overview – Worldwide Construction and Forestry
Fourth Quarter Overview – Worldwide Construction and Forestry -23% $177 $136 Operating Profit* +15% Production Tonnage +3% $1,324 $1,358 Net Sales Change Q4 2005 Q4 2006 (in millions of dollars) * Operating Profit impacted by: Raw material cost increases Closing of facility in Woodstock, Ontario, Ca
Slide 18: Outlook – Worldwide Construction and Forestry
Deere & Company Outlook – Worldwide Construction and Forestry Fiscal Year 2007 Forecast Net sales projected to be down ~5% Housing weaker Non-residential growth Production tonnage projected down ~11% First quarter 2007 U.S. & Canada production tonnage projected down ~16% Lower shipping and manufactu
Slide 19: Credit
Credit Fourth Quarter 2006 Net income $88.0 million up 8% vs. Q405 Fiscal Year 2007 Forecast Net income ~ $345 million Growth in credit portfolio Higher SA&G expense in support of growth initiatives
Slide 20: Loss History - Credit
Loss History - Credit Low losses driven by strong obligor cash flows, low repossession rates and strong used equipment market Provision for Credit Losses / Average Owned Portfolio 0.00% 0.50% 1.00% 1.50% 2.00% 1990 1991 1992 1993 1994 1995 1996 1997 < /font> 1998 1999 2000 2001 2002 2003 2004 2005 2
Slide 21: Consolidated Trade Receivables & Inventory
Consolidated Trade Receivables & Inventory Change at 31 October: 2006 vs. 2005 Total C&F CCE AG (in millions of dollars) 425 258 125 228 75 61 475 425 2006 Prior Forecast 2006 Actual
Slide 22: Consolidated Trade Receivables & Inventory Forecast
Consolidated Trade Receivables & Inventory Forecasted change at 31 October: 2007 vs. 2006 Total C&F CCE AG (in millions of dollars) 225 100 25 100 2007 Forecast
Slide 23: October Retail Sales – U.S. and Canada
October Retail Sales – U.S. and Canada a single digit in line with industry a single digit a single digit Deere** 15% 4 WD Tractors 13% Combines 10% 5% Industry* Row-Crop Tractors Utility Tractors * As reported by the Association of Equipment Manufacturers ** As reported to the Association of Equipm
Slide 24: Deere Dealer Inventories – U.S. and Canada
Deere Dealer Inventories – U.S. and Canada 2005 2006 3% 2% Combines 19% 24% Row-Crop Tractors As reported to the Association of Equipment Manufacturers at October 31 - as a % of trailing 12 months retail sales
Slide 25: October Retail Sales – Western Europe
October Retail Sales – Western Europe double digits low double digits Deere & Company Combines Tractors Based on EU Government Reporting of Registrations
Slide 26: October Retail Sales – U.S. and Canada
October Retail Sales – U.S. and Canada Flat First-in-the-Dirt a single digit Settlements Construction and Forestry a single digit Commercial and Consumer Equipment Deere & Company
Slide 27: Other Information – Fourth Quarter 2006
Other Information – Fourth Quarter 2006 Equipment operations net sales: Flat in the quarter compared to Q4 2005 Net price realization ~ +3% Currency translation ~ +1% Period ending shares outstanding: 227 million Average diluted shares outstanding for the quarter: 231 million
Slide 28: Raw Material and Freight
Raw Material and Freight Equipment Operations Fourth Quarter 2006 Up ~ $50 million vs. Q4 2005 Fiscal Year 2006 Up ~ $180 million vs. FY 2005 Fiscal Year 2007 Forecast Up $200 - 250 million By Division Agricultural Equipment: ~ $100 Commercial & Consumer Equipment: ~ $75 Construction & Forestry: ~ $
Slide 29: Pension/OPEB Expense
Pension/OPEB Expense Equipment Operations Fiscal Year 2007 Forecast Down about $20 million vs. 2006 2006 Pension/OPEB costs include about $20 million related to the closing of the factory in Woodstock First Quarter 2007 Forecast Expect down ~ $10 million vs. 1Q 2006
Slide 30: Research & Development Expense
Research & Development Expense Equipment Operations Fourth Quarter 2006 Up ~ 5% vs. Q4 2005 Fiscal Year 2007 Forecast Up ~ 9%
Slide 31: Selling, Administrative & General Expenses
Selling, Administrative & General Expenses Equipment Operations Fourth Quarter 2006 Up ~ 6% vs. Q4 2005 Includes ~ 5 points related to global growth initiatives and option expense Fiscal Year 2007 Forecast anticipates Up ~ 7% vs. FY2006 Includes ~ 3 points related to global growth initiatives
Slide 32: Tax Rate
Tax Rate Equipment Operations Fourth Quarter 2006 Effective tax rate of 27.5% Fiscal Year 2006 Effective tax rate of 34.1% Fiscal Year 2007 Forecast Assumes a tax rate of 34 – 35% Deere & Company Forecast as of 21 November 2006
Slide 33: 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 authorization 2005 authorization 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 Full Year Q4 Q3 Q2 Q1 FY2005 13.9 4.5 2.2 4.9 2.3 S
Slide 34: Production Tonnage
Production Tonnage First Quarter 2007 Forecast Total worldwide tonnage down ~ 4% U.S. & Canada Agricultural Equipment tonnage down ~ 8% Fiscal Year 2007 Forecast Total worldwide tonnage down ~ 4% Deere & Company Forecast as of 21 November 2006
Slide 35: 2007 Company Outlook
2007 Company Outlook First Quarter 2007 Forecast Net Sales up ~ 5% vs. 1Q 2006 Net Income $150 – 175 million Fiscal Year 2007 Forecast Net Sales roughly flat with FY 2006 Net price realization: about 1 – 2% Net Income ~ $1.325 billion Deere & Company Forecast as of 21 November 2006
Slide 36: First-quarter 2007 conference call scheduled
Deere’s first-quarter 2007 conference call is scheduled for 9:00 a.m. central time on Wednesday, February 14, 2007 .
Slide 37: Appendix
Appendix
Slide 38: Net income reconciliation, fiscal year 2006
Net income, as reported $1,693.8 $7.18 Less income from discontinued operations (Health Care) 240.6 1.02 Income from continuing operations 1,453.2 6.16 Other special items: Expenses related to tender offer for debt securities 44.2 0.19 Expenses related to Woodstock factory closing 27.6 0.12 Income f
Slide 39: U.S. Farm Cash Receipts – Previous Forecast
U.S. Farm Cash Receipts – Previous Forecast $250.5 $247.9 $259.8 Total Cash Receipts * 11.2 13.6 24.1 Government Payments 118.3 118.7 122.0 Livestock 121.1 115.6 113.7 Crops 2007 Forecast 2006 Forecast 2005 (in billions of dollars) Deere & Company Estimates as of 10 August 2006 * Totals may not foot