Slide 1: Second Quarter 2014 Financial and Operational Results
Second Quarter 2014 Financial and Operational Results
Slide 2: Forward Looking Statements
Forward Looking Statements Forward-looking statements in this presentation, including statements regarding demand for our products and the economic and other factors that drive that demand, product development plans and timing of those plans, acquisition, expansion and modernization plans and our ex
Slide 3: Financial Summary
Financial Summary $M* Q2 14 v YTD 14 vs Q2 14 YTD 2014 Q2 13 YTD 13 Net Sales $2,750.3 -9.8% $5,083.7 -6.7% Gross margin 23.0% -30 bps 22.6% -30bps Operating income $266.7 -18.5% $422.4 -16.3% Operating margin 9.7% -100bps 8.3% -100bps Diluted EPS $1.77 -$0.38 $2.79 -$0.55 *Except per share amounts
Slide 4: Industry Overview
Industry Overview June Year-to-Date Retail Units North America 2014 vs. 2013 Tractors* • Industry (2%) Combines • Industry (15%) Western Europe 2014 vs. 2013 Tractors • Industry (6%) Combines • Industry (4%) South America 2014 vs. 2013 Tractors • Industry (18%) Combines • Industry (25%) * Excludes c
Slide 5: Tractor/Combine Production
Tractor/Combine Production Production Units -9% -19% • Production down ~19% in Q2 14 vs. Q2 13 − Declines across all regions • Full year 2014 production expected to decrease 10-12% vs. 2013 Q1 Q2 Q3 Q4 2013 Production 2014 Production 5
Slide 6: Regional Net Sales Results
Regional Net Sales Results YTD 2014 $5.1B Q2 14 vs. Q2 13 Net Sales Excluding Currency Translation* North America 26% North South EAME South APAC Consol. America America America EAME 16% 54% APAC 4% -9% -11% -13% -12% -10% YTD 2013 $5.5B YTD 2014 vs. YTD 2013 Net Sales North America Excluding Curren
Slide 7: Net Sales and Operating Margins
Net Sales and Operating Margins Sales Op. June YTD $M Margin $3,500 14% $3,000 12% $505M Sales $422M $2,500 10% 9.3% 8.3% $2,000 8% Op. Margin Op. Margin $1,500 6% Op. Income $1,000 4% $500 2% $0 0% Q213 Q313 Q413 Q114 Q214 2013 2014 7
Slide 8: GSI Results
GSI Results Sales (YTD 2014) $416M EAME • YTD ‘14 sales up ~7% vs YTD 13 Protein SA 30% • 2014 GSI sales expected to be up ~10% vs APAC 2013 • Strong cash flow generation in U.S. • Longer term: Grain NA Storage − Macro trends driving growth in 70% demand for grain storage and protein production − In
Slide 9: Capital Expenditures – Investing for Growth
Capital Expenditures – Investing for Growth Continuing to Invest 2014 Capex Components ~$400M New $392M IT / Other Products Capex Dep. & Amort. $129M Manufacturing 06 07 08 09 10 11 12 13 14E 9
Slide 10: Free Cash Flow
Free Cash Flow* YTD Free Cash Flow Full-Year Free Cash Flow Thousands ● Seasonal working capital YTD 13 YTD 14 $405M build in first half of year ● Second half of year seasonally stronger for free ~$250M cash flow ($109M) ● Extended factory shutdowns in Q3 intended to reduce inventory ● Targeting ~$2
Slide 11: Returning Cash to Shareholders
Returning Cash to Shareholders Cash to be Returned to Shareholders Dividend Share Repurchase • New $500M share repurchase • Initiated in 2013 program announced Dec. 2013 • Increased 10% for 2014 • 4.2M share reduction thru June 2014 • 1.2M reduction in July 2014 11
Slide 12: 2014 Market Outlook
2014 Market Outlook Regional Market Outlook – Industry Unit Retail Tractor Sales (Volume in Units) N. America S. America Western Europe 230K Down ~5%* 153K Down 5-10% 86K Down 15-20% 2013 2014E 2013 2014E 2013 2014E * Excludes compact tractors 12
Slide 13: 2014 Assumptions – Summary
2014 Assumptions – Summary • Sales Down ~5% – softer end markets – ~1.5% pricing – impact of currency translation expected to be neutral • ~$10M increase in engineering expense for new product development, common platform and tier 4 emission requirements • ~$10 million of start-up expense associated
Slide 14: 2014 Outlook
2014 Outlook 2014 Estimates Sales $10.1B to $10.3B EPS ~$5.00 CAPEX ~$400M Free Cash Flow* ~$250M * Free cash flow is defined as net cash from operations less capital expenditures. See reconciliation to GAAP metrics in the appendix of this presentation. 14
Slide 15: Appendix
Appendix A.acco Your Agriculture Company 15
Slide 16: Non-GAAP To GAAP Reconciliation
Non-GAAP To GAAP Reconciliation Free Cash Flow $M Six months Six months ended ended June 30, June 30, 2013 2014 Net cash provided by (used in) operating activities $ 65.0 $ (254.2) Less: Capital expenditures (174.2) (155.5) Free cash flow $ (109.2) $ (409.7) Note: Free cash flow is defined as net ca
Slide 17: Non-GAAP To GAAP Reconciliation
Non-GAAP To GAAP Reconciliation Free Cash Flow $M Year Year ended ended December 31, December 31, 2013 2014 Net cash provided by operating activities $ 797.0 $ 650-675 Less: Capital expenditures (391.8) (400-425) Free cash flow $ 405.2 $ 250 Note: Free cash flow is defined as net cash provided by op
Slide 18: Non-GAAP To GAAP Reconciliation
Non-GAAP To GAAP Reconciliation Net Sales $M Change due to currency Three Months Ended June 30, translation % change 2014 2013 from 2013 $ % North America $ 686.2 $ 788.9 (13.0)% $ (6.3) (0.8 )% South America 440.2 540.0 (18.5)% (42.0) (7.8 )% Europe/Africa/Middle East 1,521.9 1,599.0 (4.8 )% 59.9 3