This is a good time to be linked to the land….and a great time to be a part of John Deere.
Last year, fiscal 2012, the company delivered record sales and profits.
We brought the power and value of the John Deere brand to a growing global audience.
And we moved ahead with projects to widen our manufacturing, financing and distribution footprint…improving our ability to serve customers and investors.
As a result, the company remains well-positioned to earn solid profits even in a fragile global economy. Longer term, we stand to benefit from broad trends – such as we saw in the video – that continue to hold great promise.
Today, John Deere is having more success, in more ways and places, with more customers, than ever before.
Last year Deere reported income of nearly $3.1 billion, on net sales and revenues of about $36 billion. Both figures exceeded all-time highs set the previous year. It was the seventh time in the last nine years we have posted record profits.
Things have gotten off to a fast start in 2013.
We announced first-quarter earnings earlier this month, of $650 million, and are forecasting profit for the full year of about $3.3 billion.
John Deere investors have been full partners in our successful performance.
Stockholders realized a total return of about 15 percent for fiscal 2012 compared with a slight decline for the overall U.S. equity market. Deere common-stock dividends totaled almost $700 million, a record, while share repurchases of some $1.6 billion were completed.
No small part of our success is rooted in the concept of keeping our feet on the ground and our eyes on the horizon.
It's more than a tagline: It's the primary theme underscoring how we do business and execute our growth strategy.
Feet on the ground means maintaining a laser-like focus on operational excellence and customer service.
This means doing what John Deere has always done best – meeting production schedules, successfully bringing new products to market, and taking quality to an even higher level.
Eyes on the horizon refers to the investments and products required to help meet the needs of a growing, more prosperous global population.
Here the company has been quite aggressive…with 15 or so major projects under way throughout the world. We also have an unprecedented number of advanced new products coming to market.
Another reason John Deere is performing so well is that the farm economy in much of the world, and certainly in the United States, is flourishing.
Prices for farm commodities such as corn and soybeans have been at or near record levels for some time…and the same holds true for farm incomes.
Farmers have never been in better financial shape. And their good health has translated into strong sales of farm machinery.
We're also reaping benefits from steps the company has taken to maximize performance throughout the business cycle.
Of these, none has had a greater impact than the adoption of economic profit – what we call SVA, or Shareholder Value Added -- as a guiding metric and the basis of our business model.
SVA is the difference between operating profit and an implied cost of capital. Our goal is for every product, and every geography, to earn its cost of capital under all circumstances, even at the bottom of the cycle.
As a close cousin of cash flow, SVA is essential to generating the funds needed to provide current-term and longer-term value to investors.
Last year, enterprise SVA hit a record $2.78 billion. This helped us fund a healthy level of capital projects, pay dividends, and make continued share repurchases.
On that very note, I'm pleased to announce that earlier today, our board of directors approved an increase of 5 cents a share, or 11 percent, in the quarterly dividend rate on Deere common stock.
This will boost the payment from 46 cents a share to 51 cents.
Backed by strong cash flow, the company has now raised the dividend on 11 occasions since 2004, increasing the rate more than four-fold.
We believe Deere's recent success positions the company to compete at a high level in a wide range of markets and market conditions.
And, it provides a firm foundation for the company to pursue its growth plans – plans moving ahead at an encouraging pace.
We've spoken before about the positive trends driving our performance. But given their importance, and the strength they've shown in such a poor general economy, it's hard to stress them too much.
Consider, for example, that as a result of a global population growing in both size and affluence, farm production will need to increase dramatically in coming years.
Our population is adding thousands of new mouths to feed every hour. Already today, the world has grown by over 80,000 people -- and by roughly 12 million in the first two months of the year.
Another phenomenon is that people in emerging markets are leaving the countryside, where farming is a way of life, and migrating to cities in a big way.
This gives rise to a more prosperous consumer-minded middle class and more demand for agricultural products. It also furthers the need for roads, bridges, and buildings – and for the productive equipment required to construct them.
All in all, experts believe agricultural output will need to double by mid-century to satisfy demand and do so with no more land, even less water, and a smaller rural workforce.
Trends like these are more than powerful.
They have the potential to be truly transformative. They are changing the way people live. And they are creating big opportunities for companies with the will and the means to capitalize on them.
Make no mistake: John Deere aims to be one of those companies.
Today's economic travails are indeed real and troubling.
But take shape, they almost surely will – a fact that should support demand for productive farm, forestry, construction and turf-care machinery well into the future.
Forceful tailwinds are one thing; setting our sails to fully capture them is quite another.
With that in mind, in late 2010, John Deere launched an ambitious plan to help meet society's increasing needs.
The John Deere Strategy – as we've discussed in the past -- raises the bar on growth, profitability and asset efficiency. It places even more emphasis on global expansion.
More than two years into this strategic journey, it's clear we're off to a good start. We are making solid progress, especially in gaining sales and growing our international business.
Seizing attractive trends alone, however, won't allow us to reach our goals.
Our competitors, after all, stand to benefit from the very same factors. They are pursuing the same opportunities and, yes, laying claim to the same customers.
To fulfill our ambitions, John Deere must decisively outdistance the competition in any number of respects:
…Such as developing a more thorough understanding of customers…finding ways to introduce innovative products at lower price points, establishing a first-rate distribution and after-market support system in all markets…and ensuring we attract the right talent throughout the world.
Our goals also require making substantial additions to our capacity and product lineup…which is why the company is investing for the future at a record rate.
In the last two years, Deere has announced plans to establish seven new factories in the developing markets of Brazil, Russia, India and China.
Three of them have begun operation in recent months and the others should be up and running over the next year or so.
These investments build on earlier ones that have added significantly to our capacity and marketing presence worldwide.
One of the best illustrations of our global growth commitment is Deere's extensive investment in China's Tianjin economic-development zone, better known as TEDA. It's located not far from Beijing.
Since the start-up of our transmission factory there in 2005, we've opened a product-testing lab and moved ahead with new factories for construction equipment and engines. The construction factory is currently in the process of beginning operation and the engine plant is scheduled to start production in a few months.
We've also launched a leasing operation and inaugurated a new office complex that brings together employees from various divisions and staff functions.
TEDA is a prime example of how Deere is operating as an integrated enterprise, one of the factors essential to our strategy's success.
By working together in pursuit of common goals, our operations can leverage their strengths and share their insights and perspectives.
This adds momentum to our growth efforts…and it makes John Deere a more formidable competitor.
Even as we extend our global reach, the U.S. and Canadian markets remain vitally important. The region still accounts for the biggest part of our sales, profits, capital spending and employee base.
Deere's domestic manufacturing operations are efficient, profitable and growing – and we're committed to keeping them that way. In recent months, U.S. factory expansions have been announced for tractors, sprayers, cylinders and planters, among other products.
John Deere is becoming a more international company by the day – and this is likely to continue being the case for some time.
By the same token, we have every intention of strengthening our pre-eminent position with production farmers and other customers here in North America.
Regardless of the strength of our markets or the scale of our aspirations, nothing will have more impact on John Deere's future than a supremely talented workforce – such as our 67,000 employees and leaders around the world.
This impact can be especially dramatic when they are united in a common purpose and bound in the pursuit of common goals.
Nowhere is this a higher priority than in emerging parts of the world, where the competition for employee talent is often as intense as the race for customers.
Our goals, wherever we operate, are to attract the very best talent…then to develop and deploy that talent for the ultimate benefit of our customers and investors.
We've adopted rigorous processes to achieve this aim and exacting metrics to make sure we stay on track.
Though there's always room for improvement, we're having good success in key areas such as hiring preferred candidates, finding challenging developmental assignments, and building a high level of employee engagement.
These efforts are earning important recognition.
Over the last year Deere has been named to listings of leading employers or best places to work in several countries, including Mexico, Brazil, Germany, Russia and China.
We also place a high priority on developing the right kind of leaders – those who share our values and have the drive and determination to help fulfill our commitment to those linked to the land.
That's why we take leadership development so seriously…and do everything possible to help our people make the most of their skills and realize their potential.
We're winning accolades for our achievements in this area as well. Deere has been named a top company for leaders in a study published by Fortune magazine, ranking among the ten-best in the U.S. and the top-15 globally.
2012 was a major year for management transition in our company. And our experience handling that transition says a lot about how our leadership-development efforts are working.
As a result of key retirements and expanded business opportunities, four of the senior officers pictured in our latest annual report are new to their roles. No fewer than eight others are listed in our roster of company officers for the first time.
Management changes are common events, of course.
What's noteworthy in our case is that John Deere's management bench is deep-enough, and our leadership-development system rich-enough, to allow for several changes to take place in a short period of time without disrupting our operations.
We're extremely proud of our management team. We believe it stacks up well in relation to both our traditional standards of performance and our very demanding future business requirements.
By almost any measure, John Deere seems poised for growth and success.
Building on our strong results in 2012 and other recent years, our plans for helping meet the world's growing need for advanced equipment are on track and moving along at an accelerated rate.
All of which supports our confidence in the company's present course and our ability to deliver enduring value in the years ahead.
Not long ago, I was asked what I liked best about being John Deere's CEO.
The best part of my job is having the chance to sit down with employees, customers and dealers throughout the world…and seeing firsthand the pride they have in our company and the optimism they hold for its future.
Their pride, I believe, inspires a sense of unity and purpose that transcends the barriers of language, culture and nationality. It gives John Deere a distinctive advantage in building its brand, winning customers, and attracting employees who share our vision and our values.
These experiences, needless to say, reinforce my conviction…that, by working together in a highly aligned fashion…we can ensure that John Deere's best days are still to come!
On behalf of the entire management team, we say thanks to all of you for your continuing encouragement and support.
Now let's proceed with the rest of this year's meeting…