This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Deere & Company (DE: chart) on November 21, 2007.
Management:
Director, Investor Relations: Bill Ratzburg
Vice President, Investor Relations: Marie Z. Ziegler
Senior Vice President, Chief Financial Officer: Michael J. Mack, Jr.
Key Investors Issues
- EPS were $1.88 per share compared to $1.20 per share last year.
- Earnings climbed to $422.1 million from $277.3 million in the previous year.
- Revenue grew 20% to $6.14 billion from $5.12 billion a year ago.
Fourth Quarter Highlights
Total worldwide equipment operations net sales were up 21% compared to the prior year quarter.
There were about two points of price realization. In fact, all three equipment divisions had positive price realization.
This is particularly gratifying given the impact of the U.S. housing downturn has had on construction, forestry, commercial and consumer sectors. About four points related to positive currency translation and LESCO added about another five points. The remainder is primarily from increased volume with fourth quarter production tonnage up 26%.
Worldwide AG sales were up 35%, with the bulk of the increase resulting from higher volumes.
- Operating profit increased to $388 million, with incremental margins of about 30%.
- The quarter benefited from substantially higher production tonnage, reflecting good market conditions as well as pre-building components globally in preparation for an expected strong 2008 and from improved price realization.
Global AG fundamentals are encouraging.
- Worldwide stocks to use ratios remain at low levels, particularly for corn and wheat. For wheat, corn and soybeans combined, on a global basis use exceeded demand in each of the last three years.
- This supports crop prices which in turn support good levels of farm income globally and for the United States with total cash receipts for 2007 now expected to increase to about $292 billion, a rise of over $35 billion compared to 2006.
- The current Deere U.S. commodity price assumptions from these farm income forecasts reflect the global need for increased production of wheat, corn and soybeans. In the U.S., soybean stocks are low.
Construction and forestry sales were down 11%.
- Despite 19% lower production volumes, quarterly operating profit was relatively strong at $134 million, or over 11% of net sales and basically even with 2006, with some positive price realization. In the fourth quarter of 2006 there were approximately $22 million in expenses for closing a plant in Canada, and that also in the fourth quarter of 2006, raw material costs were higher than usual.
- The primary assumptions in the construction and forestry forecast, with new housing starts declining further to an average of 1.1 million for the year, the lowest level since 1991, with non-residential spending expected to be flat, while at a good level and with very modest GDP growth.
- Credit reported net income was about $96 million, up from about $88 million a year ago, on the strength of a larger credit portfolio and continued excellent past due and write-off experience.
Currency translation accounted for about $200 million, or one-third of the AG division increase.
For commercial and consumer equipment, LESCO added about $165 million. For construction and forestry, the sale of Nortrax South had about a $50 million on trade receivables and inventory.
Housekeeping industry was flat and Deere was down a single digit.
- For row-crop tractors, the industry was up 24% and Deere was up double-digits but less then the industry.
- For four-wheel drive tractors, the industry was up 59% and Deere was up double-digits and more than the industry.
- For combines, the industry was up 8% and Deere was flat.
Deere dealer inventories in the U.S. and Canada remain in good shape as Deere inventories at the end of September remain below industry levels in each of the categories just cited. 
