CEO Business Overview. December 2017 January 2018

Transcription

1 CEO Business Overview December 2017 January

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 earnings call (22 November 2017). 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. 2

3 Table of Contents Slide Summary Message 4 John Deere Strategy 18 Use-of-Cash 29 Supplemental Information Global Markets 34 John Deere Financial Services 45 Agriculture Fundamentals 50 Construction & Forestry Fundamentals 56 Appendix 60 3

4 4 Summary Message

5 Deere s ability to deliver consistently strong financial results is proof of our success building a more durable business model. Even as we find continued ways to make our operations more efficient and profitable, we are focused on the future through investments in technology and advanced products and selective acquisitions that complement our strengths and expand our global presence. - Sam Allen, Chairman and CEO 5

6 Net Sales and Diluted EPS Deere & Company Strong EPS* performance during recent downturn U.S. & Canada Large Ag** industry down ~ 60% in 2016 vs $40 $10 $30 $8 $ Billions $20 $10 $5 $3 Per Share $0 $0 -$ $3 * Earnings Per Share ** Tractors > 220 hp and combines Source: Association of Equipment Manufacturers, October 2016 Net Sales Diluted EPS 6

7 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, * Shareholder Value Added; for reconciliation to GAAP see SVA* Reconciliation to GAAP slide in Appendix 7

8 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 $ Millions $3,000 $2,000 $1,000 $ * Shareholder Value Added Note: Over $8 billion in Pension/OPEB contributions from

9 Net Sales by Product Category Agriculture & Turf Fiscal 2013 vs. Fiscal 2017 Fiscal 2013 Agriculture & Turf $29.1 billion Turf Other Fiscal 2017 Agriculture & Turf $20.2 billion Turf Large Ag Large Ag Small Ag Small Ag 9

10 Fiscal 2018 Forecast Equipment Operations ($ billions except where noted) Fiscal 2018 Forecast* Net Sales ~ 22% Price realization Currency translation Wirtgen ~ 1 point ~ 2 points ~ 12 points Net Income (attributable to Deere & Company) ~ $2.6 Cash Flow (from operations) ~ $3.8 * Includes estimated data based on the 1Q 2018 close of the Wirtgen acquisition Source: Deere & Company forecast as of 22 November

11 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% $ Millions $1,500 $1,200 $900 $600 $300 6% 4% 2% $ Deere R&D $ Deere % Competitor A % Competitor B % 0% Source: Deere & Company and competitor SEC filings 11

12 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 12

13 Wirtgen Acquisition Strategic rationale: allows market entrance into road construction equipment, providing greater exposure to the transportation sector and enhancing global presence for Deere construction segment Timing: acquisition completed 1 December

14 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 many countries, resulting in a large installed base of equipment Road Construction Equipment Spend Construction vs. Transportation Spend E 2018E 2019E 2020E 2021E 2022E Spending Index (2004=100) Total Construction Spending Total Transportation Transporatation Spending Source: BCG; indexed using 2016 figures Source: IHS Global Insight 14

15 Acquisitions Blue River Technology Strategic rationale: accelerates implementation of machine learning technology that enables farm management decisions at the plant level Timing: acquisition completed 12 September 2017 Mazzotti Strategic rationale: accelerates European market reach with innovative spraying equipment and adds engineering expertise Timing: acquisition completed 26 June

16 Integration Update Monosem Strategic rationale: accelerates European market reach in precision planting equipment and adds engineering expertise Timing: acquisition completed 3 February 2016 Integration Update: Deere Gen 4 Display in Monosem brand; leveraging/combining Deere and Monosem technologies to address additional market opportunities; Deere and Monosem collaboration on cultivator earned silver medal at Agritechnica 2017 Hagie Manufacturing Strategic rationale: allows market entrance into high-clearance spraying equipment that extends window for applying nutrients Timing: Joint Venture announced 29 March 2016; Deere acquired 80% ownership of Hagie Manufacturing Integration Update: Deere engines in STS14 & STS16; factoryinstalled Precision Ag technology 16

17 We re confident these steps put Deere in prime position to benefit from the world s increasing need for food, shelter and infrastructure and provide value to customers and investors for years to come. - Sam Allen, Chairman and CEO 17

18 18 John Deere Strategy

19 Long-Term Macroeconomic Tailwinds Still Intact Population growing in size and affluence By 2050, world population will reach ~ 9.8 billion, up from ~ 7.6 billion today Large middle class emerging in China, India and other parts of Asia Opportunity #1: Feeding the world Agricultural output needs to nearly double over the first half of the century Natural resources under strain, especially water and land Opportunity #2: Massive urbanization Migration from rural areas creates need for infrastructure development By 2050, nearly 70% of the global population will live in urban areas, up from more than 50% today Source: UN, June

20 20

21 Traditional Agriculture Precision Agriculture Bigger. Faster. Stronger. Easier. Smarter. More Precise. 21

22 Precision Ag Equipment + Technology + Services Better machine performance Better job performance Better agronomic decisions Ensure machines function as expected Maximize machine performance & uptime John Deere Connected Support uses predictive analytics to generate notifications and repair instructions to minimize machine downtime Ease of use increases operator consistency Achieve quality outcomes for each job Coordinate machines to execute jobs more effectively and efficiently Monitor job progress and adjust operational plans in near real time See, collaborate and direct information when needed and where needed with an online set of tools Automate collection and transfer of data from the machine to platform Manage the farm from anywhere and any device 22

23 Precision Ag Equipment Precision Ag Technology Differentiated Dealer Channel + + = 23

24 Innovative New Products Large Ag Equipment S700 Series Combine Combine Advisor automatically adjusts settings to maintain ideal performance target as conditions change Gen 4 CommandCenter 4600 display provides superior user-friendly interface ActiveYield eliminates time-consuming manual yield sensor calibration 2230 Field Cultivator/ 2330 Mulch Finisher Increased working widths up to 69 6 and working speed up to 10 mph, covering more acres per day during critical tillage and planting windows Delivers level, smooth finish for accurate seed placement and even emergence TruSet tillage technology allows depth and pressure adjustment from cab CP690 Cotton Picker / CS690 Cotton Stripper Integrated moisture sensing technology and round module weighing provide real time crop data to the operator Onboard Harvest ID, Cotton Pro and RFID tags embedded within the round module wrap allow for transfer of crop data wirelessly, providing traceability from the field to ginned bale 24

25 Innovative New Products Tractors 5R Series Tractors 4 models (90 to 125 HP); unique combination in the less than 130 HP segment: comfort, compactness, and capability Proven world-record fuel efficiency (diesel only) measured by the DLG (Powermix); best-ever result under 150 HP segment 3036EN Tractors Narrow platform tractor; well-suited for India vineyard & orchard farming Best-in-class fuel efficiency; excellent combination of power & efficiency Well-positioned vs. competition in target segment 2025R Tractors Mower deck can be installed and removed 3 times faster than competition 37% increase in back-up speed allows users to mow and push snow faster Increased comfort, ease of use, and versatility 25

26 Innovative New Products Small Ag, Turf and Utility Equipment 0 Series Round Balers MegaWideHC 2 : 2.2 meter precutter for 4-ft and industry first for 5-ft balers; precut bales reduce time for processing hay and maintaining feed quality MegaWideHC 2 feed system, larger baffle, twin rotor, self-cleaning drop floor increases throughput to get hay up in the critical window to maximize quality 100 Series Lawn Tractors Most comfortable lawn tractor in its class Patented Easy Change: 30-second oil change system with no tools and no mess Exclusive cut height adjustment that makes it easier to get on and off tractor XUV 835/865 Series Fully-integrated operator station; best-in-class HVAC and comfort Outstanding terrain stability and ride control, cargo volume, and cargo management Available in gas and diesel fuel 26

27 Innovative New Products Construction Equipment 950K Crawler Dozer Expands Production Class Dozer line-up with a second offering available in both outside-dozer and power-angle-tilt (PAT) configurations 950K PAT is the industry s largest six-way blade with the capability for mass excavation combined with the versatility to finish grade 620G/GP and 622G/GP Motor Graders Broadens the motor grader line-up with two economical models targeted for smaller contractors and municipalities Dual joystick controls provide precision and comfort during operation as well as customer choice of three control types 1050K PL Crawler Dozer (Pipelayer-Ready) Purpose-built pipelayer-ready crawler dozer ships from the factory ready to accept the customer s choice of side boom Features a bolt-on design that simplifies side boom installation, improving reliability and reducing setup times 27

28 Innovative New Products Forestry Equipment L-Series Skidder Gen 1.5 Horsepower increases across all models has positioned Deere as the most powerful skidder on the market New 17.5 ft 2 grapple is a popular option for 748L customers and delivers the largest range of grapple sizes on the market 1110/1210/1510G Forwarder Timbermatic F-16 or CommandCenter control system, more powerful, efficient engines for improved productivity and lower daily operating costs Configurable joystick patterns have increased adoption of Intelligent Boom Control for North American operators 2144G DHSP Swing Machine Purpose built in Brazil for working in Latin American eucalyptus plantations, the 2144G offers power and agility ideally suited for this application 6.8 liter engine, durable undercarriage, and best-in-class cab design with superior visibility help to differentiate this machine 28

29 29 Use-of-Cash

30 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 30

31 Deere Quarterly Dividends Declared 1Q Q 2017 Dividend raised 114% since 2010 $0.70 $0.60 $0.60 $0.50 $0.40 $0.30 $0.20 $0.28 $0.10 $0.00 $ * * Adjusted for 2 for 1 stock split on 26 November

32 Share Repurchase As Part of Publicly Announced Plans 35% net share reduction since : Cumulative cost of repurchases $16.4 billion Shares repurchased million Average repurchase price $66.96 December 2013 authorization of $8 billion: Amount remaining $3.3 billion Millions of Shares* Share Repurchase $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $ Billions 29 October 2017 period ended basic shares million 2017 average diluted shares million $0.0 Shares Repurchased Amount Spent * All shares adjusted for two-for-one stock split effective 26 November

33 Sources and Uses of Cash Fiscal Equipment Operations $50,000 $40,000 $665 $146 $10,652 ~ 58% of cash from operations returned to shareholders = Source of Cash = Use of Cash $1,345 $ Millions $30,000 $20,000 $37,440 $7,848 $13,904 $10,000 $621 $0 $4,287 Beginning Cash & Cash Equivalents (Fiscal 2004) Cash From Operations Divestitures, net of Acquisitions Net Change in Debt and Intercompany Balances Capital Expenditures Investment in Financial Services Dividends Share Repurchase, net of Common Stock Issuances Other* $8,168 Ending Cash & Cash Equivalents (Fiscal 2017) * Other includes proceeds from maturities and sales of marketable securities and purchases of marketable securities and reconciliation for non-cash items including the effect of exchange rates on cash and cash equivalents Note: Cash from Operations adjusted with the adoption of FASB ASU No Improvements to Employee Share-Based Payment Accounting Source: Deere & Company SEC filings 33

34 34 Global Markets

35 Net Sales by Major Markets Equipment Operations U.S. & Canada* $20.8 $21.8 $20.2 $17.4 $16.6 $14.5 $15.1 Western Europe Latin America $4.4 $4.3 $4.4 $4.4 $3.3 $3.2 $3.3 $3.6 $3.6 $4.3 $4.1 $2.4 $2.4 $ Asia, Africa & Middle East $1.9 $2.1 $2.1 $2.0 $1.9 $1.4 $1.7 Central Europe & CIS $1.4 $1.7 $1.6 $1.4 $1.0 $1.2 $1.7 Asia Pacific, Australia & New Zealand $0.8 $1.0 $0.8 $0.8 $0.6 $0.7 $ $ Billions * U.S. & Canada not to scale with other markets

36 U.S. and Canada Factory Locations British Columbia, Canada Log Loaders & Specialty Products Alberta, Canada Remanufactured Components North Dakota, USA Air Seeding Equipment Electronics Tillage Equipment Wisconsin, USA Lawn & Garden Equipment Utility Vehicles Golf & Turf Reel Mowers Iowa, USA Cotton Harvesting Equipment Planting Equipment Spraying Equipment Tillage Equipment Ag Tractors Components Foundry Engines Hay & Forage Equipment Articulated Dump Trucks 4WD Loaders Motor Graders Skidders Wheeled Feller Bunchers Backhoes Compact Tracked Loaders Crawler Dozers High-Speed Dozers Knuckleboom Loaders Skid Steer Loaders Tracked Feller Bunchers Tracked Harvesters High Clearance Sprayers (JV) Illinois, USA Combine Harvesters Headers Planting Equipment Hydraulic Cylinders Tennessee, USA Lawn Tractors North Carolina, USA Commercial Mowers Golf & Turf Mowers Utility Vehicles Hydraulic Excavators Georgia, USA Utility Tractors Compact Utility Tractors California, USA Satellite Receivers Kansas, USA Power Transmission Equipment Missouri, USA Remanufactured Components Louisiana, USA Sugarcane Harvesting Equipment Tractor Loaders Scrapers Cotton Strippers 36

37 EU 28 Factory Locations Horst, The Netherlands Spraying Equipment Joensuu, Finland Wheel Forwarders Wheel Harvesters Forestry Attachments Saran, France Engines Mannheim Tractors Germany Largeasse, France Planting Equipment Arc-les-Gray, France Balers Ag Loaders Zweibrücken Combines & Forage Harvesters Stadtlohn Headers Bruchsal Tractor & Harvesting Cabs Madrid, Spain Components Ravenna, Italy Sprayers Gummersbach Walk-Behind & Autonomous Mowers Windhagen Wirtgen Milling Machines, Concrete Paving, Recyclers, Surface Miners Tirschenreuth Hamm Compactors Ludwigshafen Vögele Asphalt Paving Göppingen Kleemann Crushers & Screens Mulheim Benninghoven Asphalt Plants 37

38 Brazil Factory Locations Catalão, Brazil Sugarcane Harvesters Sprayers Horizontina, Brazil Combine Harvesters Planters Indaiatuba, Brazil Backhoe Loaders 4WD Loaders Motor Graders Excavators (JV) Montenegro, Brazil Tractors Porto Alegre, Brazil Wirtgen Milling Machines Vögele Pavers Hamm Rollers Ciber Pavers Ciber Asphalt Mixing Plants 38

39 CIS Factory Locations Domodedovo, Russia Tractors Combine Harvesters Motor Graders Orenburg, Russia Seeding Equipment Tillage Equipment 39

40 China Factory Locations Langfang, China Wirtgen Milling Machines Vögele Asphalt Paving Hamm Rollers Jiamusi, China Combine Harvesters Cotton Pickers Tianjin (TEDA), China 4WD Loaders Excavators Engines ( hp) Tractors ( hp) Ningbo, China Tractors (30-55 hp) Cane Harvesters 40

41 India Factory Locations Sirhind, India Combine Harvesters Pune, India Engines Transmissions Tractors (36-75 hp) Electronics Hamm Compactors Kleemann Screens Dewas, India Tractors (36-50 hp) 41

42 Other Regions Factory Locations Ramos, Mexico Ag Loaders Compact Utility Tractor Loaders Utility Tractor Cabs Hydraulic Cylinders Monterrey, Mexico Rotary Cutters Implements Components Kibbutz Beit Hashita, Israel Cotton Picker Components Torreon, Mexico Axles Engines Electronics Saltillo, Mexico Ag Tractors Transaxles Rosario, Argentina Engines Tractors Combines Tokoroa, New Zealand Forestry Harvester Heads 42

43 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 Campinas, Brazil Expansion of existing facility, operational March 2015 Anchor Parts Distribution Centers Regional Parts Distribution Centers or Depots 43

44 Engine Emissions 2018 Worldwide Off-Road Emissions Regulations > 75 hp U.S. and Canada Final Tier 4 EU28* Stage V starting 2019 Russia 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 Stage IV/Final Tier 4 (> hp) Brazil MAR 1: Construction equipment Ag equipment >100hp * Includes some non-eu28 countries that follow EU28 emissions regulations 44

45 45 John Deere Financial Services

46 John Deere Financial Services Supporting the Growth of Our Equipment Operations Owned Operations Bank/Finance Company Partners Retail programs through JDF not currently offered 46

47 John Deere Financial Services Consistent earnings throughout the cycle $4,000 Net Income $3,000 $ Millions $2,000 $1,000 $0 -$1,000 -$2, John Deere Financial (attributable to Deere & Company) Deere & Company 47

48 John Deere Financial Services $40.0 billion Net Owned Portfolio as of 29 October 2017 Portfolio Composition by Segment C&F 16% Portfolio Composition by Geography Europe 6% Australia Latin 3% Asia America 1% 7% Portfolio Composition by Product Operating Lease 17% Canada 11% Revolving Credit 9% A&T 84% U.S. 72% Wholesale/ Floorplan 19% Installment and Finance Lease 55% Note: Information above includes all Deere & Company lending activities worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 48

49 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% % Net Write-offs (Ag) Installments 60+DPD (Ag) Net Write-offs (C&F) Installments 60+DPD (C&F) * includes construction; includes lawn & grounds care; 2009 forward includes ag & turf equipment; as % of owned losses after dealer reserve charges Source: internal reporting, JDCC 10-K filings, internal reporting 49

50 50 Agriculture Fundamentals

51 Global Stocks-to-Use Ratios 60% 120% 50% 100% 40% Wheat Cotton 80% 30% 20% Corn Soybeans 60% 40% Cotton Ratios 10% 20% 0% P 0% Source: USDA, 9 November

52 Global Grain Supply and Demand 3,000 2,500 Million Metric Tons 2,000 1,500 1, /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 Consumption Production Source: USDA, 9 November

53 Global Grain Demand With and Without Biofuel Use 3,000 3,000 Million Metric Tons 2,000 1,000 Million Metric Tons 2,000 1, F F Consumption with biofuel use Consumption without biofuel use * Compound Annual Growth Rate Source: OECD-FAO Agricultural Outlook , July

54 U.S. Farm Cash Receipts $500 $400 $ Billions $300 $200 $100 $ F Crops Livestock Government Payments Source: : USDA, 30 August F 2018F: Deere & Company forecast as of 22 November

55 U.S. Farm Balance Sheet $3,500 30% $3,000 $2,500 25% $ Billions $2,000 $1,500 20% $1,000 15% $500 $0 10% F Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: : USDA, 30 August F 2018F: Deere & Company forecast as of 22 November

56 56 Construction & Forestry Fundamentals

57 U.S. Housing Starts Millions of Units F Multi-Family Housing Starts Single-Family Housing Starts Source: : U.S. Census Bureau, October F 2018F: Deere & Company forecast as of 22 November

58 U.S. Construction Spending $ Billions* $2,400 $2,000 $1,600 $1,200 $800 $400 60% 40% 20% 0% -20% -40% -60% -80% -100% -120% -140% % Total Construction Spend $0-160% F Government Infrastructure Investment Nonresidential Investment in Structures * 2009$ base Source: : U.S. Bureau of Economic Analysis, October F 2018F: Deere & Company forecast as of 22 November 2017 Government Investment in Structures Residential Investment in Structures 58

59 Transportation Spend Outpacing General Construction Spending Transportation Includes: 2015 Global Construction Spending ($9.5 trillion) Roads & Bridges 17% Transportation Railways Airports 15% Energy & Health 37% Residential Transportation Spending: $1.6 trillion worldwide in % Non-Residential Megatrend Infrastructure Drivers: Rapid Urbanization Rising Incomes Global Construction Spending 14% 17% 19% Capital Investment in Asia 6, % 8, % 81% 13,537.4 Source: IHS Global Insight Total Other Construction Transportation 59

60 60 Appendix

61 Net Sales by Product Category Equipment Operations Fiscal 2017 Agriculture & Turf $20.2 billion Construction & Forestry $5.7 billion Turf Large Ag Compact Other Forestry Small Ag Construction 61

62 Net Sales and Net Income Deere & Company Much-improved performance vs. prior downturns $40 $4 $30 U.S. & Canada Large Ag* Industry Decline ~ 60% ~ 24% ~ 35% ~ 60% $3 Deere Net Sales Decline ~ 35% ~ 16% ~ 19% ~ 33% $ Billions $20 $10 Net Income Decline (attributable to Deere & Company) ~ 191% ~ 91% ~ 77% ~ 57% $2 $1 $ Billions $0 $0 -$ $1 Net Sales Net Income * Tractors > 220 hp and combines Source: Association of Equipment Manufacturers, October

63 Exceptional Operating Performance - OROA Equipment Operations 21.0% OROA* in % % 20% % % 10% 12% % OROA (SVA** Neutral) % % 80% 100% 120% % of Mid-Cycle Volume * Operating Return on Operating Assets ** Shareholder Value Added; for reconciliation to GAAP see SVA* Reconciliation to GAAP slide in Appendix 63

64 Fiscal 2018 Forecast Agriculture & Turf Deere worldwide net sales up ~ 9% U.S. and Canada ag industry up 5-10% EU 28 ag industry up ~ 5% South America ag (tractors and combines) industry flat to up 5% Construction & Forestry Deere worldwide net sales up ~ 69% Wirtgen worldwide net sales up ~ 54 points Fundamentals supportive of increased industry demand Worldwide forestry industry flat to up 5% John Deere Financial Net income attributable to Deere & Company of ~ $515 million Source: Deere & Company forecast as of 22 November

65 The Wirtgen Group 5 Premium Brands Road Technologies Mineral Technologies Milling Machines Concrete Paving Crushers Compactors Asphalt Paving Asphalt Plants 65

66 66 End to End Road Construction Portfolio

67 SVA* Reconciliation to GAAP Equipment Operations ($ millions except where noted) 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 With Inventories at Standard Cost 5,449 6,442 5,551 6,494 6,187 7,131 6,502 7,488 6,682 7,703 7,672 8,711 7,724 8,739 8,069 9,039 8,743 9,678 6,229 7,147 5,965 6,925 6,482 7,477 7,248 8,312 Operating Profit Percent of Net Sales % % 1, % 1, % 1, % 1, % % % (46) (0.4%) % % 1, % 1, % Operating Return on Assets With Inventories at LIFO With Inventories at Standard Cost 4.4% 3.8% 15.3% 13.0% 16.3% 14.1% 17.3% 15.0% 21.0% 18.2% 19.3% 16.9% 3.5% 3.1% 8.6% 7.7% (0.5%) (0.5%) 6.4% 5.6% 11.9% 10.2% 29.4% 25.5% 25.4% 22.2% SVA Cost of Assets (773) (780) (856) (898) (924) (1,045) (1,049) (1,085) (1,162) (858) (831) (897) (998) SVA (531) (776) (392) (1,208) (457) (123) 1, ($ millions except where noted) Net Sales 19,884 21,489 25,803 20,756 23,573 29,466 33,501 34,998 32,961 25,775 23,387 25,885 Average Identifiable Assets With Inventories at LIFO With Inventories at Standard Cost 7,546 8,634 8,092 9,205 9,652 10,812 9,647 10,950 9,196 10,494 11,516 12,875 13,594 14,965 14,569 15,924 14,113 15,493 12,491 13,840 11,816 13,092 12,150 13,421 Operating Profit Percent of Net Sales 1, % 2, % 2, % 1, % 2, % 3, % 4, % 5, % 4, % 2, % 1, % 2, % Operating Return on Assets With Inventories at LIFO With Inventories at Standard Cost 25.2% 22.1% 28.6% 25.2% 30.3% 27.1% 14.1% 12.5% 31.6% 27.7% 33.3% 29.8% 32.3% 29.4% 34.7% 31.8% 30.4% 27.7% 17.4% 15.7% 15.9% 14.4% 23.2% 21.0% SVA Cost of Assets (1,036) (1,094) (1,284) (1,301) (1,259) (1,545) (1,795) (1,911) (1,860) (1,661) (1,570) (1,611) SVA 869 1,224 1, ,650 2,294 2,602 3,147 2, ,210 * Shareholder Value Added 67

68