Deere & Company · NYSE:DE
Deere & — Non-Deal Roadshow (December 2014)
53 slides from Deere &'s roadshow presentation, December 2014
Slide 1: John Deere: Committed to Those Linked to the Land
John Deere Committed to Those Linked to the Land 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 2014 in Review 4 2015 Outlook 7 John Deere Strategy 12 Supplemental Information: Foundational Success Factors 16 Global Markets 27 John Deere Financial Services 37 John Deere Power Systems 42 Farm Fundamentals 47 Appendix 51 3 | Deere & Company | December 2014 / January 2015
Slide 4: 2014 in Review
2014 in Review @€ JOHN DEERE
Slide 5: 2014 in Review: Equipment Operations
2014 in Review Equipment Operations Strong results despite double digit decline in large Ag sales… • Net sales… $32.961 billion • Net income attributable to Deere & Company… $3.162 billion • 2nd highest in Company history • Cash flow from operations… $4.532 billion • SVA… $2.437 billion • OROA… 27.7
Slide 6: 2014 in Review: Investments and Capital Returned
2014 in Review Investments in the Business • Capex and R&D for equipment operations… $2.5 billion Capital Returned to Shareholders • Quarterly dividend… increased to $0.60 per share (+18%) • Shares repurchased… 31.5 million shares; $2.7 billion • Fiscal 2004 – 2014… ~ 60% of cash from equipment oper
Slide 7: 2015 Outlook
2015 Outlook
Slide 8: Fiscal Year 2015 Outlook: Agricultural Industry
Fiscal Year 2015 Outlook Expect to remain solidly profitable, despite Ag challenges… Agricultural Industry • U.S. and Canada industry outlook down ~ 25-30% • Slowdown more pronounced for large farm machinery • Large tractors and combines down ~ 55% since 2013 • Positive conditions in livestock suppo
Slide 9: Fiscal Year 2015 Outlook: Construction & Forestry, Financial
Fiscal Year 2015 Outlook Benefiting from broad-based business lineup… Construction & Forestry • Deere worldwide net sales outlook up ~ 5% in 2015, following 12% increase in 2014 • Further economic recovery and higher housing starts in the U.S. • Sales increases outside the U.S. and Canada • Global f
Slide 10: Fiscal Year 2015 Outlook: Better Than Prior Downturns
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 11: Fiscal Year 2015 Outlook: Equipment Operations
Fiscal Year 2015 Outlook Equipment Operations Sound Company Outlook • Net sales… Down ~ 15% vs. FY 2014 • Price Realization… ~ +2 points • Net income… ~ $1.9 billion Attributable to Deere & Company • Respectable profit margins • Cash flow from operations… ~ $2.9 billion • Solid financial performance
Slide 12: John Deere Strategy
John Deere y...4 Strategy y @€ JOHN DEERE
Slide 13: 13 | Deere & Company December 2014 / January 2015
13 | Deere & Company | December 2014 / January 2015
Slide 14: The John Deere Strategy
The John Deere Strategy Adapting to Win Markets worth winning Integrated solutions Industry leading innovation Distinctive quality Developing global talent 14 | Deere & Company | December 2014 / January 2015
Slide 15: 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 16: Supplemental Information: Foundational Success Factors
Supplemental Information Foundational Success Factors
Slide 17: Exceptional Operating Performance: OROA
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 18: 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 19: Disciplined SVA Growth
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 20: Asset Management: Dramatic Reduction in Asset Intensity
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 21: 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 22: 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 22 | Deere & Company | December 2014 / January 2015
Slide 23: 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 24: 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 25: 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 26: 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 27: Supplemental Information: Global Markets
Supplemental Information Global Markets
Slide 28: 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 29: 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 30: 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 31: 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 31 | Deere & Company | December 2014 / January 2015
Slide 32: CIS Factory Locations
CIS Factory Locations Orenburg, Russia • Seeding Equipment • Tillage Equipment Domodedovo, Russia • Tractors • Combine Harvesters 32 | Deere & Company | December 2014 / January 2015
Slide 33: 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 34: 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 34 | Deere & Company | December 2014 / January 2015
Slide 35: 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 36: 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 37: Supplemental Information: John Deere Financial Services
Supplemental Information John Deere Financial Services
Slide 38: 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 38 | Deere & Company | December 2014 / January 2015
Slide 39: John Deere Financial Services: $40.0 Billion Owned Portfolio
John Deere Financial Services $40.0 Billion Owned Portfolio at 31 October 2014 Portfolio Composition by Portfolio Composition by Portfolio Composition by Market Geography Product Australia Revolving 3% Credit 7% C&F Latin America 13% 7% Leasing Europe 14% 6% Canada 11% Wholesale / Floorplan Installm
Slide 40: John Deere Capital Corporation: Profitability and Growth
John Deere Capital Corporation Profitability and Growth 544 Net Income ($ 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 41: 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 42: Supplemental Information: John Deere Power Systems
Supplemental Information John Deere Power Systems
Slide 43: 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 44: 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 45: 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 46: 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 47: Supplemental Information: Farm Fundamentals
Supplemental Information Farm Fundamentals
Slide 48: 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 49: 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 50: 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 50 | Deere & Company | December 2014 / January 2015
Slide 51: Supplemental Information: Appendix
Supplemental Information Appendix
Slide 52: 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 53: 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