Deere & Company · NYSE:DE
Deere & — Investor Presentation (October 2018)
52 slides from Deere &'s investor presentation, October 2018
Slide 1: Investor Presentation August – October 2018
Investor Presentation August – October 2018 1
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 18 Global Markets 23 John Deere Financial Services 34 Agriculture Fundamentals 39 Construction & Forestry Fundamentals 45 Appendix 50 3
Slide 4: John Deere Strategy
John Deere Strategy 4
Slide 5: The John Deere Strategy
THE JOHN DEERE STRATEGY OUR PURPOSE Committed to those linked to the land GLOBAL AGRICULTURAL GLOBAL OUTPACE 12% 25 Sorttameelertis EQUIPMENTSOLUTIONS CONSTRUCTS INDUSTRY OPERATINGMARGIN ASSET TURNS Saar tana vation PREEMINENCE a INGROWTH (ar iD-C¥CLE1 (AT MD-CACLE a a and disciplined expansion CRIT
Slide 6: A Power for Good
A POWER FOR GOOD 2018 Global Citizenship & Sustainability Report https://www.deere.com/en/our-company/citizenship-and- sustainability/global-citizenship-sustainability-report/ 6
Slide 7: Exceptional Operating Performance - OROA
Exceptional Operating Performance - OROA Equipment Operations 21.0% OROA* in 2017 40% 2013 2011 30% 2014 2012 2010 2007 2008 2004 28% 2006 2017 2005 20% 2015 20% 2016 2009 12% OROA (SVA** Neutral) 10% 12% 2003 2002 0% 2001 -10% 80% 100% 120% % of Mid-Cycle Volume * Operating Return on Operating Asse
Slide 8: Exceptional Operating Performance – SVA
Exceptional Operating Performance – SVA Equipment Operations $1.2 billion SVA* in 2017 $4,000 Adoption of SVA Model $3,000 $2,000 $ Millions $1,000 $0 -$1,000 -$2,000 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 * Shareholder Value Added; for reconciliation to GAAP see “SVA* Reco
Slide 9: Exceptional Operating Performance – Net Cash Flow
Exceptional Operating Performance – Net Cash Flow Equipment Operations $2.4 billion Net Cash Flow in 2017 $5,000 Adoption of SVA* Model $4,000 Sale of Trade Receivables to John Deere Financial $3,000 $ Millions $2,000 $1,000 $0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 * Share
Slide 10: Asset Management
Asset Management Receivable level in 2017 lower than 1998, with more than 2x the sales $30,000 $25,000 $20,000 $ Millions $15,000 $10,000 $5,000 $0 Trade Receivables Net Sales 1998 2017 10
Slide 11: Productivity Improvement
Productivity Improvement ~ 5% CAGR* over 30 years Net Sales and Revenues per Employee $700 $600 $500 $ Thousands $400 $300 $200 $100 $0 1989 1993 1997 2001 2005 2009 2013 2017 * Compound Annual Growth Rate 11
Slide 12: Investment in New Products and Technologies
Investment in New Products and Technologies Consistently spending at or above competition on technology and innovation R&D as Percent of Net Sales $1,800 8% $1,500 6% $1,200 $ Millions $900 4% $600 2% $300 $0 0% 2003 2005 2007 2009 2011 2013 2015 2017 Deere R&D $ Deere % Competitor A % Competitor B
Slide 13: Traditional Agriculture, Next Frontier of Agriculture
Traditional Agriculture Next Frontier of Agriculture Bigger. Faster. Stronger. Automated. Easy to Use. More Precise. 13
Slide 14: Precision Ag
Precision Ag The Future of Farming Has Always Been Led by John Deere Our commitment to game-changing innovation makes farming easier, smarter and more precise 14
Slide 15: Precision Ag: Equipment + Technology + Services
Precision Ag Equipment + Technology + Services Better machine performance Better job performance Better agronomic decisions – Ensure machines function as expected – Ensure best outcome for each pass across – See, collaborate and direct information – Maximize machine performance & uptime the field wh
Slide 16: Precision Ag Equipment + Technology + Dealer Support
Precision Ag Precision Ag Dealer Services Equipment + Technology + & Support = 16 15
Slide 17: Net Sales by Product Category
Net Sales by Product Category Equipment Operations – Fiscal 2017 Agriculture & Turf Construction & Forestry $20.2 billion $5.7 billion Other Turf Compact Large Ag Forestry Small Ag Construction 17
Slide 18: Use-of-Cash
Use-of-Cash 18
Slide 19: Deere Use-of-Cash Priorities
Deere Use-of-Cash Priorities Cash from Operations ➢ Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost Committed to “A” Rating and readily available short- and long-term funding mechanisms ➢ Reflects the strategic nature of our financial services oper
Slide 20: Deere Quarterly Dividends Declared
Deere Quarterly Dividends Declared 1Q 2004 – 3Q 2018 Dividend raised 146% since 2010 $0.80 $0.69 $0.70 $0.60 $0.50 $0.40 $0.30 $0.28 $0.20 $0.10 $0.14 $0.00 2005 2006 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 * Adjusted for 2 for 1 stock split on 26 November 2007 20
Slide 21: Share Repurchase
Share Repurchase As Part of Publicly Announced Plans 35% net share reduction since 2004 2004–3Q 2018: Share Repurchase Cumulative cost of repurchases $16.8 billion 40 $3.0 Shares repurchased 248.0 million Millions of Shares* Average repurchase price $67.91 $2.5 30 $2.0 $ Billions December 2013 autho
Slide 22: Sources and Uses of Cash Fiscal 2004-2017
Sources and Uses of Cash Fiscal 2004-2017 Equipment Operations $50,000 ~ 58% of cash from = Source of Cash operations returned to = Use of Cash $665 $146 shareholders $40,000 $10,652 $1,345 $30,000 $ Millions $7,848 $37,440 $20,000 $13,904 $621 $10,000 $8,168 $4,287 $0 Beginning Cash Cash From Dives
Slide 23: Global Markets
Global Markets 23
Slide 24: Net Sales by Major Markets
Net Sales by Major Markets Equipment Operations U.S. & Canada* $21.8 $20.8 $20.2 $17.4 $16.6 $14.5 $15.1 Western Europe Latin America $4.4 $4.3 $4.4 $4.4 $4.3 $4.1 $3.6 $3.6 $3.3 $3.2 $3.3 $3.2 $2.4 $2.4 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2
Slide 25: 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 • Utility Vehicles • Tillage Equipment • Golf & Turf Reel Mowers
Slide 26: EU Factory Locations
EU 28 Factory Locations Joensuu, Finland • Wheel Forwarders Horst, The Netherlands • Wheel Harvesters • Spraying Equipment • Forestry Attachments Germany Mannheim • Tractors Saran, France Zweibrücken • Engines • Combines & Forage Harvesters Stadtlohn Largeasse, France • Headers • Planting Equipment
Slide 27: Brazil Factory Locations
Brazil Factory Locations Catalão, Brazil • Sugarcane Harvesters • Sprayers Indaiatuba, Brazil • Backhoe Loaders Horizontina, Brazil • 4WD Loaders • Combine Harvesters • Crawler Dozers • Planters • Excavators (JV) Montenegro, Brazil Porto Alegre, Brazil • Tractors • Wirtgen Milling Machines • Vögele
Slide 28: CIS Factory Locations
CIS Factory Locations Orenburg, Russia Domodedovo, Russia • Seeding Equipment • Tractors • Tillage Equipment • Combine Harvesters • Motor Graders 28
Slide 29: China Factory Locations
China Factory Locations Langfang, China Jiamusi, China • Wirtgen Milling Machines • Combine Harvesters • Vögele Asphalt Paving • Cotton Pickers • Hamm Rollers • Round Balers Tianjin (TEDA), China • 4WD Loaders • Excavators • Engines (85-254 hp) • Tractors (85-320 hp) Ningbo, China • Tractors (30-55
Slide 30: India Factory Locations
India Factory Locations Sirhind, India • Combine Harvesters Pune, India • Engines • Transmissions • Tractors (36-75 hp) Dewas, India • Electronics • Tractors (36-50 hp) • Hamm Rollers • Kleemann Screens • Vögele Pavers 30
Slide 31: Other Regions Factory Locations
Other Regions Factory Locations Ramos, Mexico • Ag Loaders • Compact Utility Tractor Loaders • Utility Tractor Cabs • Hydraulic Cylinders Kibbutz Beit Hashita, Israel • Cotton Picker Components Monterrey, Mexico • Rotary Cutters • Implements • Components Saltillo, Mexico • Ag Tractors • Transaxles T
Slide 32: Worldwide Parts Services
Worldwide Parts Services Supporting the Growth of Our Equipment Operations Highlights: – Miami, Florida (United States) – Directly supports the Latin America dealer network, operational November 2017 – China footprint – Strategic distribution locations to support China market, operational 2016 – Cam
Slide 33: Engine Emissions
Engine Emissions 2018 Worldwide Off-Road Emissions Regulations > 75 hp U.S. and Canada EU28* Russia Final Tier 4 Stage V – starting 2019 Ag tractors: Stage II China China NR III India TREM 3A >50hp Stage II/Tier 2 Stage IIIA/Tier 3/TREM 3A/MAR 1/China NR III Brazil Stage IV/Final Tier 4 (> 75-750 hp
Slide 34: John Deere Financial Services
John Deere Financial Services 34
Slide 35: John Deere Financial Services
John Deere Financial Services Supporting the Growth of Our Equipment Operations Owned Operations Bank/Finance Company Partners Retail programs through JDF not currently offered 35
Slide 36: John Deere Financial Services Net Income
John Deere Financial Services Consistent earnings throughout the cycle Net Income $4,000 $3,000 $2,000 $ Millions $1,000 $0 -$1,000 -$2,000 1989 1993 1997 2001 2005 2009 2013 2017 John Deere Financial (attributable to Deere & Company) Deere & Company 36
Slide 37: John Deere Financial Services Portfolio
John Deere Financial Services $40.0 billion Net Owned Portfolio as of 29 October 2017 Portfolio Composition by Segment Portfolio Composition by Geography Portfolio Composition by Product Australia Operating C&F Latin Asia 3% Lease 16% America 1% 17% 7% Europe 6% Revolving Canada Credit 11% 9% Wholes
Slide 38: John Deere Capital Corporation
John Deere Capital Corporation Continued extremely low write-offs in Agriculture & Turf and Construction & Forestry Agriculture & Turf* Construction & Forestry 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% -1.0% -1.0% 1983 1988 1993 1998 2003 2008 2013 1995 2000 2005 2010 2015 Net Write-offs (Ag
Slide 39: Agriculture Fundamentals
Agriculture Fundamentals 39
Slide 40: Global Stocks-to-Use Ratios
Global Stocks-to-Use Ratios 60% 120% 50% 100% 40% 80% Wheat Cotton Cotton Ratios Corn 30% 60% 20% 40% Soybeans 10% 20% 0% 0% 1994 1997 2000 2003 2006 2009 2012 2015 2018P Source: USDA, 10 August 2018 40
Slide 41: Global Grain Supply and Demand
Global Grain Supply and Demand 3,000 2,500 Million Metric Tons 2,000 1,500 1,000 500 0 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18 Production Consumption Source: USDA, 10 August 2018 41
Slide 42: Global Grain Demand
Global Grain Demand With and Without Biofuel Use 3,000 3,000 2,000 2,000 Million Metric Tons Million Metric Tons 1,000 1,000 0 0 2006 2008 2010 2012 2014 2016 2018F 2006 2008 2010 2012 2014 2016 2018F Consumption with biofuel use Consumption without biofuel use * Compound Annual Growth Rate Source:
Slide 43: U.S. Farm Cash Receipts
U.S. Farm Cash Receipts $500 $400 $300 $ Billions $200 $100 $0 2002 2004 2006 2008 2010 2012 2014 2016 2018F Crops Livestock Government Payments Source: 2001–2016: USDA, 7 February 2018 2017F–2018F: Deere & Company forecast as of 17 August 2018 43
Slide 44: U.S. Farm Balance Sheet
U.S. Farm Balance Sheet $3,500 30% $3,000 25% $2,500 $2,000 $ Billions 20% $1,500 $1,000 15% $500 $0 10% 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018F Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: 1974–2016: USDA, 7 February 2018 2017F–2018F: Deere & C
Slide 45: Construction & Forestry Fundamentals
Construction & Forestry Fundamentals 45
Slide 46: U.S. Housing Starts
U.S. Housing Starts 2.5 2.0 Millions of Units 1.5 1.0 0.5 0.0 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018F Multi-Family Housing Starts Single-Family Housing Starts Source: 1968–2016: U.S. Census Bureau, July 2018 2017F–2018F: Deere & Company forecast as of 17 August 2018 46
Slide 47: U.S. Construction Spending
U.S. Construction Spending $2,400 % Total Construction Spend 60% 40% $2,000 20% 0% $1,600 -20% -40% $1,200 -60% $ Billions* $800 -80% -100% $400 -120% -140% $0 -160% 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018F Government Infrastructure Investment Government Investment in Structures Nonre
Slide 48: Wirtgen Acquisition: Attractive Industry Fundamentals
Wirtgen Acquisition Attractive Industry Fundamentals Transaction provides greater exposure to transportation infrastructure, a faster growing, less cyclical sector than broader construction − Attractive margin opportunity with significant growth tailwinds − Road construction AND repair emphasized in
Slide 49: End to End Road Construction Portfolio
End to End Road Construction Portfolio 49
Slide 50: Appendix
Appendix 50
Slide 51: SVA Reconciliation to GAAP
SVA* Reconciliation to GAAP Equipment Operations ($ millions except where noted) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Net Sales 6,479 7,663 8,830 9,640 11,082 11,926 9,701 11,169 11,077 11,703 13,349 17,673 19,401 Average Identifiable Assets With Inventories at LIFO 5,449
Slide 52: John Deere
@é JOHN DEERE
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