Deere & Company · NYSE:DE
Deere & — Investor Presentation (December 2014)
48 slides from Deere &'s investor presentation, December 2014
Slide 1: John Deere Investor Presentation
John Deere Committed to Those Linked to the Land Investor Presentation Deere & Company December 2014 / January 2015
Slide 2: Safe Harbor Statement & Disclosures
Safe Harbor Statement & Disclosures This presentation includes forward-looking comments subject to important risks and uncertainties. It may also contain financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP). Refer to Deer
Slide 3: Table of Contents
Table of Contents Slide John Deere Strategy 4 Foundational Success Factors 9 Global Markets 18 John Deere Financial Services 29 John Deere Power Systems 34 Market Fundamentals 39 Appendix 45 3 | Deere & Company | December 2014 / January 2015
Slide 4: John Deere Strategy
John Deere y...4 Strategy y @€ JOHN DEERE
Slide 5: SVA: Shareholder Value Added
* * * SVA: Shareholder Value Added 5 | Deere & Company | December 2014 / January 2015
Slide 6: The John Deere Strategy: Exceptional Operating Performance
The John Deere Strategy Foundational Success Factors Exceptional Operating Performance - Equipment Operations 27.7% OROA* in 2014 35% 2013 30% 2011 2012 2010 2014 2008 2007 28% 25% 2004 2006 2005 20% 2009, adjusted*** 20% 15% 2009 12% OROA (SVA** Neutral) 10% 12% 2003 2002 5% 0% 2001 -5% 80% 100% 12
Slide 7: Higher Net Cash Flow, More Consistently
The John Deere Strategy Foundational Success Factors Exceptional Operating Performance - Equipment Operations Higher Net Cash Flow, More Consistently 5,000 Adoption of SVA* Model 4,500 4,000 Sale of Trade Receivables to 3,500 Credit 3,000 $ Millions 2,500 2,000 1,500 1,000 500 0 1993 1994 1995 1996
Slide 8: Disciplined SVA Growth - Equipment Operations
The John Deere Strategy Foundational Success Factors Disciplined SVA* Growth - Equipment Operations SVA Journey, 1993 - 2014 3,600 Adoption of SVA Model 3,200 2,800 2,400 2,000 SVA ($ millions) 1,600 1,200 800 400 0 -400 -800 -1,200 -1,600 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 9: Foundational Success Factors
Foundational Success Factors Building on Core Strengths That Have Guided Our Success
Slide 10: Asset Management
Asset Management Dramatic Reduction in Asset Intensity • Avoided ~ $8.8 billion in working capital in 2014 vs. 1998 • Receivable level in 2014 consistent with 1998, with almost 3x the sales Quarterly Receivables & Inventory as a % of Previous 12 Months Sales Trade Receivables and Net Sales 60% $35,0
Slide 11: Productivity Improvement
Productivity Improvement ~ 6% CAGR over 30 Years • Deere’s net sales and revenues per employee have increased at a CAGR of ~ 6% over last 30 years Net Sales and Revenues per Employee $700 $600 $500 $ Thousands $400 $300 $200 $100 $0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20
Slide 12: Investment in New Products and Technologies
Investment in New Products and Technologies R&D as Percent of Net Sales $1,600 6.00% $1,400 5.00% $1,200 4.00% $1,000 $800 3.00% $600 2.00% $400 1.00% $200 $0 0.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Deere R&D $ Deere % Competitor A % Competitor B % Competitor
Slide 13: Net Sales by Product Category
Net Sales by Product Category Equipment Operations - Fiscal Year 2014 Agriculture & Turf – $26.4B Construction & Forestry – $6.6B Other Commercial Other Worksite Turf Products Large Ag Forestry Small Ag Construction 13 | Deere & Company | December 2014 / January 2015
Slide 14: 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 15: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases 2004-2014: ~ $13.4 billion Amount remaining on December 2013 authorization of $8 billion: ~ $6.2 billion 31 October 2014 period ended basic shares: ~ 345.5 million 2014 average diluted shares: ~ 366.1 million Shares
Slide 16: 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 2003 2004 2005 2006 2007 2008 2009 2010 2
Slide 17: 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 18: Global Markets
Global Markets @€ JOHN DEERE
Slide 19: Net Sales by Major Markets
Net Sales by Major Markets Equipment Operations U.S. & Canada 6% CAGR $21.8 Western Europe $20.8 $20.2 2% CAGR $4.6 $4.4 $4.3 $4.4 $4.4 Central Europe & CIS $17.4 $3.9 $3.4 $3.4 5% CAGR $15.1 $14.8 $1.9 $1.7 $1.6 $13.8 $1.4 $1.4 $13.0 $1.0 $0.7 $0.7 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008
Slide 20: U.S. and Canada Factory Locations
U.S. and Canada Factory Locations Alberta, Canada North Dakota, USA • Remanufactured Components • Air Seeding Equipment Wisconsin, USA British Columbia, Canada • Electronics • Lawn & Garden Equipment • Log Loaders & Specialty Products • Tillage Equipment • Utility Vehicles • Golf & Turf Reel Mowers
Slide 21: EU Factory Locations
EU 28 Factory Locations Joensuu, Finland • Wheel Forwarders Horst, The Netherlands • Wheel Harvesters • Spraying Equipment • Forestry Attachments Zweibrücken, Germany • Combines & Forage Harvesters Stadtlohn, Germany • Headers Saran, France • Engines Gummersbach, Germany • Walk-Behind Mowers Arc-les
Slide 22: Brazil Factory Locations
Brazil Factory Locations Catalão, Brazil • Sugarcane Harvesters • Sprayers Indaiatuba, Brazil • Backhoe Loaders • 4WD Loaders Horizontina, Brazil • Combine Harvesters Indaiatuba, Brazil (JV) • Planters • Excavators Montenegro, Brazil • Tractors 22 | Deere & Company | December 2014 / January 2015
Slide 23: CIS Factory Locations
CIS Factory Locations Orenburg, Russia • Seeding Equipment • Tillage Equipment Domodedovo, Russia • Tractors • Combine Harvesters 23 | Deere & Company | December 2014 / January 2015
Slide 24: China Factory Locations
China Factory Locations Jiamusi, China • Large Combine Harvesters • Corn Pickers • Cotton Pickers Tianjin (TEDA), China • 4WD Loaders • Excavators Harbin, China • Combine Harvesters Tianjin (TEDA), China • Tractors (150+ hp) • Engines (50-220 hp) • Sprayers Tianjin (TEDA), China • Tractors (75-135 h
Slide 25: India Factory Locations
India Factory Locations Sirhind, India • Combine Harvesters Pune, India • Engines • Transmissions • Tractors (36-75 hp) • Electronics Dewas, India • Tractors (36-50 hp) Gummidipoondi, India (JV) • Side-Shift Backhoes 25 | Deere & Company | December 2014 / January 2015
Slide 26: Other Regions Factory Locations
Other Regions Factory Locations Kibbutz Beit Hashita, Israel • Cotton Picker Components Ramos, Mexico Monterrey, Mexico • Ag Loaders • Rotary Cutters • Compact Utility Tractor Loaders • Implements • Utility Tractor Cabs • Components • Hydraulic Cylinders Torreon, Mexico Saltillo, Mexico • Axles • Ag
Slide 27: Worldwide Parts Services
Worldwide Parts Services Supporting the Global Growth of Our Equipment Operations Highlights: Campinas, Brazil Expansion of existing facility… to be completed mid-2015 Nagpur, India India Parts Distribution Center opened Nov 2014 Johannesburg, South Africa Anchor Parts Distribution Centers New, larg
Slide 28: John Deere FarmSight Integrated Technology Strategy
John Deere FarmSightTM Integrated Technology Strategy Machine Optimization CROP PRODUCTION EQUIPMENT Ensure that machines function as expected SYSTEM Maximize machine performance Increase operator consistency Job Optimization Achieve quality outcomes for each job TECHNOLOGY Coordinate machines to ex
Slide 29: John Deere Financial Services
John Deere Financial Services
Slide 30: John Deere Financial Services
John Deere Financial Services Supporting the Global Growth of Our Equipment Operations Owned Operations Bank/Finance Company Partners Retail programs through JDF not currently offered 30 | Deere & Company | December 2014 / January 2015
Slide 31: $40.0 Billion Owned Portfolio at 31 October 2014
John Deere Financial Services $40.0 Billion Owned Portfolio at 31 October 2014 Portfolio Composition by Portfolio Composition by Portfolio Composition by Market Geography Product Australia Revolving 3% Credit 7% C&F Latin America 13% 7% Leasing Europe 14% 6% Canada 11% Wholesale / Floorplan Installm
Slide 32: John Deere Capital Corporation: Profitability and Growth
John Deere Capital Corporation Profitability and Growth 544 Net Income ($ Millions) 469 364 383 311 319 291 282 149 2006 2007 2008 2009 2010 2011 2012 2013 2014 Administered Portfolio Growth ($ Billions) 33.1 30.7 26.6 23.3 Write-offs/Average Owned Portfolio 21.1 19.0 19.3 18.6 19.1 0.70% 0.48% 0.33
Slide 33: John Deere Capital Corporation Retail Notes
John Deere Capital Corporation Retail Notes 60+ Days Past Due vs. Write-offs Agriculture & Turf1 Construction & Forestry • Continued extremely low write-offs • Extremely low write-offs in • Average write-offs less than 5 bps over last 2014 10 years 3.95% 3.95% 3.45% 3.45% 2.95% 2.95% 2.45% 2.45% 1.9
Slide 34: John Deere Power Systems: Engine Emissions and Technology
John Deere Power Systems Engine Emissions and Technology
Slide 35: Tier Engine Implementation
Tier 4 Engine Implementation Interim Tier 4 (IT4): Final Tier 4 (FT4): • 50% Nitrogen Oxide (NOx) reduction • 80% NOx reduction • 90% Particulate Matter (PM) reduction 0.50 0.40 Tier 1 PM, g/kw-hr 0.30 0.20 Tier 3 Tier 2 0.10 Interim Tier 4 0 0 2.00 4.00 6.00 8.00 10.00 12.00 Final Tier 4 NOx, g/kw-
Slide 36: Engine Emissions: Interim Tier 4/Stage IIIB
Engine Emissions Interim Tier 4/Stage IIIB Successful transition from Tier 3/Stage IIIA • Integrated vehicle solution • Meeting customer performance and reliability requirements • Over 87 million hours in the field* • Single fluid solution well accepted • No need for Diesel Exhaust Fluid • Deere tra
Slide 37: Engine Emissions: Final Tier 4/Stage IV
Engine Emissions Final Tier 4/Stage IV IT4/Stage IIIA creates foundation for FT4/Stage IV delivery • Over 1.3 million hours in the field* • FT4/Stage IV technologies to deliver excellent performance and operation costs • More applications to transition to FT4/Stage IV than IT4/Stage IIIB emission pr
Slide 38: 2014 Worldwide Off-Road Emissions Regulations
Engine Emissions 2014 Worldwide Off-Road Emissions Regulations > 75hp Russia EU28* No set date to transition U.S. and Canada Transition to Stage IV from Stage II Transition to Final Tier 4 • 175 – 750 hp: Jan 2014 • 175 - 750 hp: Jan 2014 • 75 - 175 hp: Oct 2014 • 75 - 175 hp: Jan 2015 China Transit
Slide 39: Market Fundamentals
Market Fundamentals @€ JOHN DEERE
Slide 40: 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 2013F 2014F 2015F Crops Livestock Government Payments Source: 1999 – 2012: USDA 26 August 2014 2013F – 2015F: Deere & Company Forecast as of 26
Slide 41: U.S. Farm Balance Sheet Strong
U.S. Farm Balance Sheet Strong $3,000 30% 28% $2,500 26% 24% $2,000 22% $1,500 20% $ Billions 18% $1,000 16% 14% $500 12% $0 10% 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2
Slide 42: 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 November 2014 42 | Deere & Company | December 2014 / January 2015
Slide 43: U.S. Housing Starts
U.S. Housing Starts Housing Starts (Millions of Units) 2.500 2.250 2.000 1.750 1.500 1.250 1.000 0.750 0.500 0.250 Multi-Family Housing Starts Single-Family Housing Starts 0.000 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F Source: 1962 – 2013: U.S. Census Bureau October 2014 2014F – 2015F
Slide 44: U.S. Construction Spending
U.S. Construction Spending U.S. Construction Spending (Billions, 2005 Chained $’s) 2,300 70% % Total Construction Spend 2,200 60% 2,100 50% 2,000 40% 1,900 30% 1,800 20% 1,700 10% 1,600 0% 1,500 -10% 1,400 -20% 1,300 -30% 1,200 -40% 1,100 -50% 1,000 -60% Billions, 2005 Chained $’s 900 -70% 800 -80%
Slide 45: Appendix
, Appendix @€ JOHN DEERE
Slide 46: 2009 OROA Reconciliation to GAAP
2009 OROA* Reconciliation to GAAP Equipment Operations (millions of dollars unless stated otherwise) Exclude Goodwill Impairment & 2009, as Voluntary Employee- 2009, as Equipment Operations Reported Separation Adjusted Net Sales 20,756 20,756 Average Identifiable Assets With Inventories at LIFO 9,64
Slide 47: SVA Reconciliation to GAAP
SVA* Reconciliation to GAAP Equipment Operations (millions of dollars unless stated otherwise) Equipment Operations 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Net Sales 6,479 7,663 8,830 9,640 11,082 11,926 9,701 11,169 11,077 11,703 13,349 Average Identifiable Assets With Inventories at
Slide 48: John Deere
~é JOHN DEERE
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