Deere & Company · NYSE:DE
Deere & — Investor Presentation (March 2015)
48 slides from Deere &'s investor presentation, March 2015
Slide 1: Investor Presentation Deere & Company March 2015
John Deere Committed to Those Linked to the Land Investor Presentation Deere & Company March 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 Use-of-Cash 14 Global Markets 19 John Deere Financial Services 30 John Deere Power Systems 35 Market Fundamentals 39 Appendix 45 3 | Deere & Company | March 2015
Slide 4: John Deere Strategy
John Deere Strategy @€ JOHN DEERE
Slide 5: SVA: Shareholder Value Added
* * * SVA: Shareholder Value Added 5 | Deere & Company | March 2015
Slide 6: The John Deere Strategy: Adapting to Win
The John Deere Strategy Adapting to Win Markets worth winning Integrated solutions Industry leading innovation Distinctive quality Developing global talent 6 | Deere & Company | March 2015
Slide 7: Exceptional Operating Performance - Equipment Operations
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 8: 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 John Deere Financial 3,000 $ Millions 2,500 2,000 1,500 1,000 500 0 1993 1
Slide 9: 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 10: 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 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 % Source: De
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 | March 2015
Slide 14: Use-of-Cash
y | Use-of-Cash @€ JOHN DEERE
Slide 15: 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 16: Deere Quarterly Dividends Declared
Deere Quarterly Dividends Declared* Q1 2003 – Q2 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: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases 2004-1Q2015: ~ $14.0 billion Amount remaining on December 2013 authorization of $8 billion: ~ $5.6 billion 31 January 2015 period ended basic shares: ~ 339.5 million 1Q2015 average diluted shares: ~ 345.7 million Sha
Slide 18: 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 19: Global Markets
Global Markets @€ JOHN DEERE
Slide 20: 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 21: 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 22: 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 23: 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 23 | Deere & Company | March 2015
Slide 24: CIS Factory Locations
CIS Factory Locations Orenburg, Russia • Seeding Equipment • Tillage Equipment Domodedovo, Russia • Tractors • Combine Harvesters • Motor Graders 24 | Deere & Company | March 2015
Slide 25: 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 26: 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 26 | Deere & Company | March 2015
Slide 27: 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 28: 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 29: 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 30: John Deere Financial Services
John Deere Financial Services
Slide 31: 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 31 | Deere & Company | March 2015
Slide 32: $40.0 Billion Owned Portfolio at 31 October 2014
John Deere Financial Services $40.0 Billion Owned Portfolio at 31 October 2014 Portfolio Composition by Portfolio Composition by Portfolio Composition by Market Geography Product Australia Revolving 3% Credit 7% C&F Latin America 13% 7% Leasing Europe 14% 6% Canada 11% Wholesale / Floorplan Installm
Slide 33: John Deere Capital Corporation: Profitability and Growth
John Deere Capital Corporation Profitability and Growth 544 Net Income ($ 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 34: 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 35: John Deere Power Systems
) he i) J) fa) c £ O° _ Power Systems @€ JOHN DEERE
Slide 36: 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 37: Engine Emissions
Engine Emissions Final Tier 4 (FT4)/Stage IV Interim Tier 4 (IT4)/Stage IIIA created foundation for FT4/Stage IV delivery • Over 4 million hours in the field* • FT4/Stage IV technologies deliver excellent performance and low operating costs • More applications transitioning to FT4/Stage IV than IT4/
Slide 38: Engine Emissions: 2015 Worldwide Off-Road Regulations
Engine Emissions 2015 Worldwide Off-Road Emissions Regulations > 75hp Russia EU28* No set date to transition U.S. and Canada Stage IV 75 – 750 hp from Stage II Final Tier 4 75 - 175 hp China Transition to Stage IIIA Oct 2015 India No set date to transition from TREM 3A None Stage II/Tier 2 Brazil St
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 2013E 2014F 2015F Crops Livestock Government Payments Source: 1999 – 2012: USDA 10 February 2015 2013E – 2015F: Deere & Company Forecast as of
Slide 41: U.S. Farm Balance Sheet Strong
U.S. Farm Balance Sheet Strong $3,500 30% 28% $3,000 26% $2,500 24% 22% $2,000 20% $ Billions $1,500 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
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 March 2015 42 | Deere & Company | March 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 January 2015 2014F – 2015F
Slide 44: U.S. Construction Spending
U.S. Construction Spending U.S. Construction Spending (Billions, 2009 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, 2009 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: ~@é JOHN DEERE
~@é JOHN DEERE