Slide 1: First Quarter 2014 Financial and Operational Results
First 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* Q1 14 v Q1 14 Q1 13 Net Sales $2,333.4 -2.9% Gross margin 22.1% -12bps Operating income $155.7 -12.2% Operating margin 6.7% -71bps Diluted EPS $1.03 -$0.16 *Except per share amounts 3
Slide 4: Industry Overview
Industry Overview March Year-to-Date Retail Units North America 2014 vs. 2013 Tractors • Industry + 5% Combines • Industry (7%) Western Europe 2014 vs. 2013 Tractors • Industry (1%) Combines • Industry +2% South America 2014 vs. 2013 Tractors • Industry (23%) Combines • Industry (23%) 4
Slide 5: Tractor/Combine Production
Tractor/Combine Production Production Units -9% • Production down ~9% in Q1 14 vs. Q1 13 − Declines in both NA and SA regions • Full year 2014 production expected to decrease ~5% vs. 2013 Q1 Q2 Q3 Q4 2013 Production 2014 Production 5
Slide 6: Regional Net Sales Results
Regional Net Sales Results March YTD 2014 $2.3B North America 28% South America EAME 15% 53% APAC Q1 14 vs. Q1 13 Net Sales 4% Excluding Currency Translation* March YTD 2013 $2.4B South North +1% America APAC +5% Consol. America 26% EAME North -9% America -1% South -17% America 19% EAME APAC 50% 5%
Slide 7: Net Sales and Operating Margins
Net Sales and Operating Margins Sales Op. March YTD $M Margin $3,500 14% $3,000 12% $177M Sales $156M $2,500 10% 7.4% 6.7% $2,000 8% Op. Margin Op. Margin $1,500 6% Op. Income $1,000 4% $500 2% $0 0% Q113 Q213 Q313 Q413 Q114 2013 2014 7
Slide 8: GSI Results
GSI Results Sales (Q1 ended March 2014) $177M EAME • Q1 14 sales up ~10% vs Q1 13 SA Protein 32% • 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 68% demand for grain storage and protein produc
Slide 9: Capital Expenditures – Investing for Growth
Capital Expenditures – Investing for Growth Continuing to Invest 2014 Capex Components $400- 425M $392M New 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* Q1 Free Cash Flow Full-Year Free Cash Flow ● Seasonal working capital Q1 13 Q1 14 $405M build in first half of year ● Second half of year seasonally stronger for $250M+ free cash flow ● Targeting $250M+ free cash flow in 2014 after ($355M) funding elevated capex 2013 2014E ($612M) No
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 March 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 ~232K Down 0-5% Down ~145K 0-5% ~83K Down 10-15% 2013 2014E 2013 2014E 2013 2014E 12
Slide 13: 2014 Assumptions – Summary
2014 Assumptions – Summary • Stable Sales – softer end markets – ~2% pricing – impact of currency translation expected to be neutral • ~$15M increase in engineering expense for new product development, Centurion, platform and tier 4 emission requirements • Gross margin improvement • ~$10 million of
Slide 14: 2014 Outlook
2014 Outlook 2014 Estimates Sales $10.8B to $11.0B EPS ~$6.00 CAPEX $400-$425M 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
A.wxGco Your Agriculture Company 15
Slide 16: Non-GAAP To GAAP Reconciliation
Non-GAAP To GAAP Reconciliation Free Cash Flow $M Three months Three months ended ended March 31, March 31, 2013 2014 Net cash used in operating activities $ (261.3) $ (511.0) Less: Capital expenditures (94.0) (101.2) Free cash flow $ (355.3) $ (612.2) Note: Free cash flow is defined as net cash use
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 o
Slide 18: Non-GAAP To GAAP Reconciliation
Non-GAAP To GAAP Reconciliation Net Sales $M Change due to currency Three Months Ended March 31, translation % change 2014 2013 from 2013 $ % North America $ 647.5 $ 624.2 3.7 % $ (9.5 ) (1.5 )% South America 353.6 465.7 (24.1 )% (68.8 ) (14.8 )% Europe/Africa/Middle East 1,235.9 1,193.2 3.6 % 32.7