John Deere Financial Portfolio and Funding. Deere & Company September 2017

Transcription

1 John Deere Financial Portfolio and Funding Deere & Company September 2017

2 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. Past performance may not be representative of future results. Guidance noted in the following slides was effective as of the company s most recent earnings release and conference call (18 August 2017). Nothing in this presentation should be construed as reaffirming or disaffirming such guidance. This presentation is not, nor part of, an offer to sell or a solicitation of offers to buy any of Deere s securities. 2

3 Deere Use-of-Cash Priorities Cash from Operations Committed to A Rating Manage the balance sheet, including liquidity, to support 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 operation Fund Operating and Growth Needs Fund value-creating investments in our businesses Common Stock Dividend Consistently and moderately raise dividend targeting a 25%- 35% payout ratio of mid-cycle earnings Share Repurchase Consider share repurchase as a means to deploy excess cash to shareholders, once above requirements are met and repurchase is viewed as value-enhancing 3

4 John Deere Financial Services $38.1 billion Net Owned Portfolio as of 31 October 2016 Portfolio Composition by Segment Portfolio Composition by Geography Portfolio Composition by Product C&F 15% Latin America 6% Europe 5% Australia 3% Asia 1% Operating Lease 16% Canada 10% Revolving Credit 8% A&T 85% U.S. 75% Wholesale/ Floorplan 19% Installment and Finance Lease 57% Note: Information above includes all John Deere Financial Services lending activities worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 4

5 John Deere Capital Corporation Profitability and Growth Net Income ($ Millions) Administered Portfolio Growth ($ Billions) Write-offs/Average Owned Portfolio 0.33% 0.70% 0.48% 0.12% 0.05% 0.03% 0.09% 0.11% 0.23%

6 John Deere Capital Corporation Retail Notes 60+ Days Past Due vs. Write-offs Agriculture & Turf 1 Continued extremely low write-offs Average write-offs less than 5 bps over last 10 years Construction & Forestry Low write-offs, below 10-year average 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% -0.05% '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 Net Write-offs (Ag) Installments 60+DPD (Ag) -0.05% '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 Net Write-offs (C&F) Installments 60+DPD (C&F) (1) includes Construction; includes Lawn & Grounds Care; beginning in 2009 includes both Ag and Turf equipment; As % of Owned Losses After Dealer Reserve Charges Source: internal reporting, JDCC 10-K filings, internal reporting 6

7 Worldwide Financial Services Credit Loss History 2.0% Provision for Credit Losses / Average Owned Portfolio 1.5% 1.0% 0.23% 0.5% 0.0% 15 Year Average 10 Year Average

8 Effective Management of Risks and Losses by Proven Lending, Collection and Remarketing Practices Ag & Turf Dealer Reserve Dealers have financial interest in performance 1% withheld on each note, pooled reserve Reserve level caps ranging from 0.5% to 3.0% of outstanding portfolio Based on credit performance, avoiding reserve charges, and dealer engagement Collection Experts in the equipment markets served Strong analytics to support approach Internally serviced / regional assignments Close working relationship with dealers Remarketing Product expertise Best distribution channel Dealer network Dedicated remarketing team Proven inspection process Strong collateral support 8

9 John Deere Financial Funding Strategy Maintain diverse, sustainable funding sources: Term Debt, Asset Backed Securitization, and Commercial Paper Commercial Paper issuances backstopped by a $6.75 billion credit facility Sustain appropriate liquidity profile: Develop redundancy and flexibility in funding options Balance funding cost and refunding risk 9

10 Committed Bank Group Supports Credit Facility Average length of continuous relationship = ~30 Years $6.75 billion credit facility supporting commercial paper $2.5 billion tranche expiring in 2022 $2.5 billion tranche expiring in 2021 $1.75 billion 364-day tranche expiring in 2018 Have not drawn on facility $3.6 billion incremental capacity as of 28 July 2017 Credit Facility Size & Commercial Paper Outstanding $8,000 $7,000 $6,000 $ Millions $5,000 $4,000 $3,000 $2,000 $1,000 $ Total Facility CP Outstanding as of October 31 10

11 Multiple Sources of Liquidity Successful Access to Traditional Markets Unsecured Term Debt USD EUR CAD ARS AUD Term Asset Backed Securitization Commercial Paper Incremental Sources of Liquidity Asset Backed Commercial Paper Conduit Retail Notes 11

12 John Deere Financial External Funding Mix Total Debt ($B) $14.8 $17.0 $18.1 $19.7 $20.2 $21.0 $20.9 $22.9 $26.6 $28.5 $31.4 $31.9 $30.8 Percent of Total External Funding 100% 80% 60% 40% 20% 1% 4% 4% 4% 7% 11% 11% 9% 9% 13% 11% 14% 14% 15% 12% 13% 16% 11% 15% 14% 8% 14% 17% 12% 22% 17% 84% 83% 83% 80% 78% 80% 80% 78% 72% 74% 75% 70% 67% 0% Oct FY04 Oct FY05 Oct FY06 Oct FY07 Oct FY08 Oct FY09 Oct FY10 Oct FY11 Oct FY12 Oct FY13 Oct FY14 Oct FY15 Oct FY16 Long Term Debt ABS CP 12

13 Key Funding Entities Support Agreement - Deere agrees to: Maintain JDCC s fixed charge coverage > 1.05 to 1 Own > 51% voting shares of JDCC s capital stock Maintain JDCC net worth > $50 million Deere & Company United States John Deere Capital Corp. United States (Deere Support Agreement) John Deere Cash Mgmt. Luxembourg (Debt guaranteed by Deere*) John Deere Canada ULC (Debt guaranteed by Deere*) John Deere Financial Ltd. Australia (Debt guaranteed by JDCC*) John Deere Bank S.A. Luxembourg (Debt guaranteed by JDCC*) John Deere Credit Compañía Financiera S.A. Argentina (No guarantee) * Debt guarantee applies to specific debt programs for which a guarantee has been executed by the guarantor. John Deere Financial Inc. Canada (Debt guaranteed by JDCC*) John Deere Canada Funding Inc. (Debt guaranteed by JDCC*) 13

14 Funding Programs Institutional Unsecured Term Debt: United States: Deere & Company and John Deere Capital Corporation EMTN: Deere & Company, John Deere Bank S.A., John Deere Cash Mgmt S.A., John Deere Capital Corp Canada: John Deere Canada Funding Inc. Australia & New Zealand: John Deere Financial Ltd. Argentina: John Deere Credit Compañía Financiera S.A. Asset Backed Securitization: United States ABCP & Term Debt ABS: John Deere Capital Corporation (Servicer) Unsecured Commercial Paper: United States: All key funding entities Europe: All key funding entities Canada: John Deere Canada ULC and John Deere Financial Inc. Australia & New Zealand: John Deere Financial Ltd. Retail Unsecured Term Debt: United States Retail Notes: John Deere Capital Corporation 14

15 John Deere Financial Maturity Profile 15

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