Download John Deere Committed to those linked to the land

John Deere
Committed to those linked to the land
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 Deere’s reports filed on Forms 8-K (current), 10-Q (quarterly), and
10-K (annual) for information on factors that could cause actual results to differ
materially from information in this presentation and for information reconciling
financial measures to GAAP.
Guidance noted in the following slides was effective as of the company’s most
recent earnings release and conference call (16 February 2011). Nothing in this
presentation should be construed as reaffirming or disaffirming such guidance.
This presentation is not an offer to sell or a solicitation of offers to buy any of
Deere’s securities.
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FOUNDATIONAL SUCCESS FACTORS
Building on the core strengths that have guided our success
Exceptional Operating Performance
Disciplined SVA Growth
Aligned High-Performance Teamwork
Exceptional Operating Performance
27.7% OROA in 2010, despite weakness in key regions such as Europe,
and key businesses, such as construction equipment
30%
2010
2007
25%
2006
20%
2004
2005
2009
10%
2003
12%
12% OROA (SVA Neutral)
2002
5%
2001
0%
80%
Low
100%
Normal
% of Normal Volume
* Excludes fiscal 2009 expenses related to goodwill impairment and voluntary employee-separation.
For reconciliation to GAAP, see “2009 OROA Reconciliation to GAAP” slide in Appendix.
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28%
20%
2009, adjusted*
15%
2008
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March 23, 2011
120%
High
FOUNDATIONAL SUCCESS FACTORS
Building on the core strengths that have guided our success
Exceptional Operating Performance
Disciplined SVA Growth
Aligned High-Performance Teamwork
SVA Model – Higher Cash Flow, More Consistently
Net Cash Provided by Operating Activities - Equipment Operations
3,000
Sale of Trade
Receivables to Credit
Adoption of SVA Model
2,500
$ Millions
2,000
1,500
1,000
500
0
1991
1993
1995
1997
1999
2001
2003
Over $7 billion in Pension/OPEB contributions, 2001-2010
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2005
2007
2009
Why is the John Deere Strategy Evolving?
Global macro-trends present significant
opportunities for John Deere
• Global population and income growth
• Global infrastructure needs
New Customer Segments
Technology Advances
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Population and Income Growth
Asia and Africa – Most of population growth through 2050
• By 2050, world population will reach 9 billion,
increasing from 6.3 billion today
• Aging population in North America, modest growth
• Shrinking and aging population in Europe
China and India – Developing large middle-class
• 200 million households expected to join the middle class
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Challenges Created by Population Growth
Feeding the World –
Agricultural output must double
by 2050
• Gross output must increase
by 3.4% annually in next 10
years vs. 2.4% annual
growth in the past 10 years
• Natural resources under
strain, especially water
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Challenges Created by Population Growth
Massive Urbanization –
Migration from rural areas creates
need for roads, power grids,
water containment and
distribution systems
• 2010 milestone:
For first time, more than half
the world population lives in
cities
• 2050:
More than 70 percent will live
in cities
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The John Deere Strategy
OUR PURPOSE: Committed to those linked to the land
OUR ASPIRATIONS
Realizing sustainable SVA growth through global expansion
Global Agricultural Equipment
Solutions Preeminence
Globally Diverse Construction
Equipment Solutions
$50B Sales
(2018 @ Mid-Cycle)
12% Operating Margins
(2014 @ Mid-Cycle)
2.5 Asset Turns
(2018 @ Mid-Cycle)
INTEGRATED ENTERPRISE
Leveraging the strengths and unique capabilities of three types of businesses
Global Growth Businesses
Complementary Businesses
Supporting Businesses
CRITICAL SUCCESS FACTORS
Developing the capabilities essential to reaching our goals
Deep Customer
Understanding
Deliver
Customer Value
World-Class Distribution System
Grow Extraordinary Global
Talent
FOUNDATIONAL SUCCESS FACTORS
Building on the core strengths that have guided our success
Exceptional Operating Performance
Disciplined SVA Growth
Aligned High-Performance Teamwork
MEASURES
Delivering results today, within each business, while building for the future
Performance
Health
JOHN DEERE VALUES
Unwavering adherence to the values that unite – and differentiate – us
Integrity
Quality
Commitment
Innovation
Strong Global Tailwinds in Ag & Construction;
Most Growth from Developing Economies
Agriculture and Construction amongst the Top 10 industry
sectors in the G-20 countries . . .
Absolute increase in real
value added 2008-20,
$ Billions
Sector
Public Admin, Sanitary & Personal Srvs
1,324
CAGR
2008-20
Percent
. . . Most of the growth in Agriculture and Construction
between 2008-2020 will happen in the BRIIC countries
3.2
Agriculture, Hunting, Forestry, Fishing
2.9
Energy Mining and Quarrying
Real Estate & Dwellings
1,060
2.1
Construction
Wholesale Trade
1,058
3.2
Processed Food
2.9
Electricity, Gas, and Water
3.4
Transportation & Storage
Other Business Activities
1,136
Medical, Dental, Veterinary, Other Health
826
Transportation & Storage
762
Share of growth
from BRIIC1
Percent
Sector
80
70
66
59
56
52
46
Educational Services
692
2.9
Wholesale Trade
Financial Institutions
657
2.8
Motor Vehicle and Motorcycle Sales, Repair, Maint.
Construction
Agriculture, Hunting, Forestry, Fishing
621
2.4
Communications
588
2.9
Restaurants and Hotels
Communications
583
3.6
Financial Institutions
Retail Trade except Motor Vehicle, and Motorcycle
543
2.6
Public Admin, Sanitary & Personal Srvs
44
39
38
36
35
Restaurants and Hotels
373
2.8
Radio, TV, and Communications Equipment
Electricity, Gas, and Water
370
3.1
Educational Services
Energy Mining and Quarrying
318
2.9
Insurance
32
28
Computer and Related Activities
318
3.5
Real Estate & Dwellings
28
Radio, TV, and Communications Equipment
313
4.5
Retail Trade except Motor Vehicle, and Motorcycle
27
34
Processed Food
231
3.7
Computer and Related Activities
23
Insurance
222
2.4
Other Business Activities
23
Motor Vehicle and Motorcycle Sales, Repair, Maint.
218
2.3
Medical, Dental, Veterinary, Other Health
Note: G20 countries account for 70% and 73% of agriculture and construction segments respectively.
1Brazil,
Total global growth for agriculture is $840B and construction is $850B
Source: Global Insight World Industry Monitor
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Russia, India, Indonesia, China
18
Real value-added 2005 USD
Growth in Construction will be Concentrated
in China from 2009-2020 . . .
Billions of 2009 $
Construction spending 2020 absolute, Top 10
China
1,928
US/Canada
1,472
India
745
Japan
592
UK
412
Infrastructure
Residential
Non-residential
All Construction
Construction spending 2009-2020 change, Top 10
China
1,129
India
438
US/Canada
401
Brazil
146
Indonesia
101
France
365
Russia
94
Germany
311
Japan
86
UK
76
•2020 forecast: $9.6 trillion
Mexico
68
•3.8% CAGR
France
67
Russia
291
Italy
263
Brazil
255
•2009 total: $6.3 trillion
Top 10 countries account for 69% of total
USC / BRIC represent 49%
China / USC account for 35% of total spending
Source: IHS Global Insight, C&FD Analysis, August 2010
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Top 10 growers account for 80% of growth
China / USC represent 47% of total growth
5 of top 10 growers are emerging countries
C&F in China –
Establish a Meaningful Presence
Leverage Enterprise presence in
China and TEDA
• Build new facility to manufacture
4WD loaders and excavators
• Frugal product development
• Distribution
• Some Ag & Turf dealers in large
metro areas
• Sales and Marketing leverage
• Parts Distribution
• Credit
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C&F in India –
Build in the Rapidly Growing Marketplace
Launch and successfully execute
joint venture with Ashok-Leyland
• Complete product testing
• Ramp up production
• Leverage India – TCI in Pune for
product development
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C&F in Russia –
Untapped Resources, Great Opportunities
Leverage John Deere assembly
facility at Domodedovo
• Begin forwarder assembly
• Construction equipment – logistics
savings
Strengthen distribution channel
• Enhanced coverage
• Dealer development
• Develop new markets
• Ukraine, Uzbekistan, Belarus, Georgia
Leverage Enterprise resources
• Parts support
• Credit
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C&F in the U.S. and Canada –
Continue to Grow Customer Base and Market Share
Defend and grow market share
Generate SVA to fuel growth
Strengthened distribution channel
• Continued dealer transitions
• Development of additional
high-performing dealers
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Managing the Downturn U.S. and Canada
120000
Industry Units, US/Canada
100000
31%
80000
60000
66%
40000
Peak to
Trough in 48
Months
20000
0
1998
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2002
2004
2006
2008
2010
1993 – C&F Dealer Owner Groups
Kauai
Kauai
Oahu
Maui
Oahu
Maui
Hawaii
Hawaii
134 Dealer
Groups
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2010 – C&F Dealer Owner Groups
Kauai
Kauai
Oahu
Maui
Oahu
Maui
Hawaii
Hawaii
47 Dealer
Updated 10 August 2010
Groups
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Larger, Stronger C&F Dealers
Well-capitalized dealers who make the
investments required to service customer
needs…
Owner Groups
Dealer Locations
1998
YTD
2011
Change
85
45
- 47%
415
415
--
Total Sales
+ 60%
Equipment Sales
+ 41%
Parts Sales
+129%
Service Sales
+133%
Total Assets
+100%
Adjusted Equity $
+188%
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C&F Financials
Worldwide C&F Financial Results
$M
Q1 2011
Q1 2010
Change
$1,143
$630
+81%
$88
($37)
Net Sales
Operating Profit (Loss)*
Production Tonnage
Operating profit impacted by:
+ Significantly higher shipment and production volumes
+ Improved price realization
Increased raw-material costs
Higher incentive-compensation expenses
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+97%
C&F Financial Forecast
Fiscal Year 2011 Forecast
• Net sales projected to be up ~35%
• Previous forecast up 25-30%
U.S. Economic Indicators
GDP Growth
(APR)
Housing Starts
(thousands)
Non-Residential Spending Growth
Government Spending Growth
(APR)
(APR)
2011
Forecast
2012
Forecast
+3.2%
+2.9%
685
1,092
-7.6%
+1.7%
+3.4%
-2.2%
Source: Global Insight, Calendar Year Estimates – January 2011
Deere & Company Forecast as of 16 February 2011 (Previous Forecast as of 24 November 2010)
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Rental utilization continues to increase
and now stands at 60.2%
R12 Industry
R12 Rental Utilization
80%
75%
100,000
70%
80,000
65%
60%
60,000
55%
40,000
50%
20,000
45%
40%
0
2001
2003
2005
Source: Deere & Company Internal Data - March 2011
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2007
2009
2011
R12 Rental Utilization Rate
R12 Industry Settlements
120,000
Appendix
Equipment Ops SVA Reconciliation to GAAP
(millions of dollars unless stated otherwise)
Equipment Operations
Net Sales
Average Identifiable Assets
With Inventories at LIFO
With Inventories at Standard Cost
Operating Profit
Percent of Net Sales
Operating Return on Assets
With Inventories at LIFO
With Inventories at Standard Cost
SVA Cost of Assets
SVA
Equipment Operations
Net Sales
Average Identifiable Assets
With Inventories at LIFO
With Inventories at Standard Cost
Operating Profit
Percent of Net Sales
Operating Return on Assets
With Inventories at LIFO
With Inventories at Standard Cost
SVA Cost of Assets
SVA
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1991
5,848
1992
5,723
1993
6,479
1994
7,663
1995
8,830
1996
9,640
1997
11,082
1998
11,926
1999
9,701
2000
11,169
5,585
6,702
16
0.3%
5,765
6,846
77
1.3%
5,449
6,442
242
3.7%
5,551
6,494
847
11.1%
6,187
7,131
1,006
11.4%
6,502
7,488
1,125
11.7%
6,682
7,703
1,402
12.6%
7,672
8,711
1,476
12.4%
7,724
8,739
272
2.8%
8,069
9,039
693
6.2%
0.3%
0.2%
(804)
(788)
1.3%
1.1%
(821)
(744)
4.4%
3.8%
(773)
(531)
15.3%
13.0%
(780)
67
16.3%
14.1%
(856)
150
17.3%
15.0%
(898)
227
21.0%
18.2%
(924)
477
19.3%
16.9%
(1,045)
431
3.5%
3.1%
(1,049)
(776)
8.6%
7.7%
(1,085)
(392)
2001
11,077
2002
11,703
2003
13,349
2004
17,673
2005
19,401
2006
19,884
2007
21,489
2008
25,803
2009
20,756
2010
23,573
8,743
9,678
(46)
-0.4%
6,229
7,147
401
3.4%
5,965
6,925
708
5.3%
6,482
7,477
1,905
10.8%
7,248
8,312
1,842
9.5%
7,546
8,634
1,905
9.6%
8,092
9,205
2,318
10.8%
9,652
10,812
2,927
11.3%
9,647
10,950
1,365
6.6%
9,196
10,494
2,909
12.3%
-0.5%
-0.5%
(1,162)
(1,208)
6.4%
5.6%
(858)
(457)
11.9%
10.2%
(831)
(123)
29.4%
25.5%
(897)
1,008
25.4%
22.2%
(998)
844
25.2%
22.1%
(1,036)
869
28.6%
25.2%
(1,094)
1,224
30.3%
27.1%
(1,284)
1,643
14.1%
12.5%
(1,301)
64
31.6%
27.7%
(1,259)
1,650
March 23, 2011
2009 OROA Reconciliation to GAAP
Equipment Operations
(millions of dollars unless stated otherwise)
Equipment Operations
Net Sales
Average Identifiable Assets
With Inventories at LIFO
With Inventories at Standard Cost
Operating Profit
Percent of Net Sales
Operating Return on Assets
With Inventories at LIFO
With Inventories at Standard Cost
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2009, as
Reported
20,756
9,647
10,950
1,365
6.6%
14.1%
12.5%
Exclude Goodwill
Impairment &
Voluntary EmployeeSeparation
380
2009, as
Adjusted
20,756
9,647
10,950
1,745
8.4%
18.1%
15.9%
OUR ASPIRATIONS
Realizing sustainable SVA growth through global expansion
Global Agricultural Equipment
Solutions Preeminence
Globally Diverse Construction
Equipment Solutions
$50B Sales
(2018 @ Mid-Cycle)
12% Operating Margins
(2014 @ Mid-Cycle)
2.5 Asset Turns
(2018 @Mid-Cycle)
Sustainable SVA Growth is delivered by distinctively serving our
customers, employees and investors
• In this way, we can extend and enhance our financial and
operating achievements of recent years
• Our challenge: to capture anticipated tailwinds by attracting
more customers to the John Deere Experience across our six key
geographies (US-Canada, EU-27, Brazil, CIS/Russia, India, China)
in a manner that meets local needs while leveraging our global
scale
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INTEGRATED ENTERPRISE
Leveraging the strengths and unique capabilities of three types of businesses
Global Growth Businesses
Complementary Businesses
Supporting Businesses
Integrated portfolio of businesses each with a vital and specific role
Global Growth Businesses
• Invest in global expansion for profitable growth by capitalizing on
macro-trends
Complementary Businesses
• Defend and grow share, enhance SVA, strengthen the channel of the
Global Growth Businesses
Supporting Businesses
• Strengthen and further differentiate our Global Growth and
Complementary Businesses
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INTEGRATED ENTERPRISE
Leveraging the strengths and unique capabilities of three types of businesses
Global Growth Businesses
Complementary Businesses
Supporting Businesses
Global Growth Businesses
Agricultural Equipment Solutions
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Construction Equipment Solutions
INTEGRATED ENTERPRISE
Leveraging the strengths and unique capabilities of three types of businesses
Global Growth Businesses
Complementary Businesses
Supporting Businesses
Complementary Businesses
Turf Equipment Solutions
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Forestry Equipment Solutions
INTEGRATED ENTERPRISE
Leveraging the strengths and unique capabilities of three types of businesses
Global Growth Businesses
Complementary Businesses
Supporting Businesses
Supporting Businesses
John Deere
Power Systems
John Deere
Financial Services
Intelligent
Solutions Group
Worldwide
Parts Services
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CRITICAL SUCCESS FACTORS
Developing the capabilities essential to reaching our goals
Deep Customer Understanding
Deliver
Customer Value
World-Class
Distribution System
Grow Extraordinary
Global Talent
Success Factors critical to meeting our aspirations of realizing sustainable
SVA growth through global expansion
Needed to serve a diverse set of global customers more effectively
• Deep Customer Understanding (DCU) - Understanding our customers’ most
important local needs, and translating these into winning products and services better
than any competitor
• Deliver Customer Value (DCV) - Profitably translating our customers’ needs into
products and services at prices our customers are willing to pay
• World-Class Distribution System - Enabling our customers around the world to
participate in the unique John Deere Experience by developing world-class channels of
dealers that are professional, profitable and sustainable businesses, oriented to the
customer, aligned with John Deere and achieving market preeminence
• Grow Extraordinary Global Talent - Enabling preeminent customer value and
business results through extraordinary leaders and engaged employees delivering
aligned high-performance teamwork globally
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MEASURES
Delivering results today, within each business, while building for the future
Performance
Health
Commitment to execute and monitor all initiatives critical to our success
Performance metrics
• Traditional financial measures based on what we are delivering
today to our stakeholders
Health metrics
• Based on the company’s Success Factors, the qualities, attributes
and actions being introduced to ensure the sustainability of our
performance over time
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Unsold New Single Family Home Inventories U.S.
For Sale
Sales
1.0
12
0.8
10
0.6
8
0.4
6
0.2
4
0.0
2
2007
2008
Source: IHS Global Insight - March 2011
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2009
2010
2011
2012
Months of Unsold Home Inventory
Millions of New Single Family Homes
Inventory
Housing Starts – Single & Multi-unit
U.S.
1.8
1.342
0.900
0.554
0.585
0.680
2009
2010
2011
1.094
Millions of Units
1.6
1.4
1.2
1.0
0.8
0.6
0.4
2007
2008
Source: IHS Global Insight – March 2011
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2012