What are the key performance metrics for Deere & Company's fiscal year 2005 bonus plan?

For fiscal year 2005, the John Deere Performance Bonus Plan will use Operating Return on Operating Assets (OROA) for the equipment divisions (Agricultural, Construction & Forestry, Commercial & Consumer) and Return on Equity (ROE) for the financial services divisions (John Deere Credit and John Deere Health Care) as performance measures.

How are the OROA and ROE performance goals adjusted?

The OROA goals for the equipment divisions are adjusted based on the actual sales volume as a percentage of normal sales volumes. For instance, targets are higher when sales are above normal. The ROE goals for the credit division are adjusted based on the actual mix of business, with higher goals for non-subsidized business.

What is the performance measure for the longer-term Mid-Term Incentive Bonus Plan?

The Mid-Term Incentive Bonus Plan, covering a four-year period starting November 1, 2004, uses Shareholder Value Added (SVA) as its key performance measure. SVA is calculated as operating profit less an estimated cost of capital (for equipment divisions) or cost of equity (for financial services).

Are there specific thresholds for payouts under the Mid-Term Incentive Bonus Plan?

Yes, for the Mid-Term Incentive Bonus Plan, a minimum of $1,000,000 in SVA must be generated for any awards to be paid. Target awards are earned at $1,500,000,000 in SVA, and the maximum award is achieved if $3,000,000,000 of SVA is generated during the four-year performance period.

DE 8-K: Material Agreements

Summary

Deere & Company (DE) filed an 8-K on December 13, 2004, detailing the establishment of performance goals for its cash bonus plans for fiscal year 2005 and a four-year performance period starting November 1, 2004. The report outlines the metrics and targets set by the Compensation Committee, which are designed to align executive and employee compensation with key financial and operational achievements. For the fiscal year 2005, bonuses will be tied to Operating Return on Operating Assets (OROA) for the equipment divisions and Return on Equity (ROE) for the financial services divisions. Performance targets are adjusted based on sales volumes for OROA and business mix for ROE. For the longer-term Mid-Term Incentive Bonus Plan, Shareholder Value Added (SVA) is the key performance indicator, calculated as operating profit less a cost of capital for equipment divisions and a cost of equity for financial services over a four-year period. The establishment of these specific performance metrics and their associated targets provides insight into management's strategic priorities and how employee incentives are structured to drive corporate value.

Key Highlights

1Deere & Company established performance goals for fiscal year 2005 under its John Deere Performance Bonus Plan.
2Key performance metrics for fiscal 2005 include Operating Return on Operating Assets (OROA) for equipment divisions and Return on Equity (ROE) for financial services.
3OROA targets are adjusted based on actual sales volumes relative to normal sales volumes for each equipment division.
4ROE targets for the credit division are adjusted for the mix of subsidized versus non-subsidized business.
5A four-year performance period beginning November 1, 2004, has been set for the John Deere Mid-Term Incentive Bonus Plan.
6Shareholder Value Added (SVA) is the primary performance measure for the Mid-Term Incentive Bonus Plan.
7Specific minimum, target, and maximum SVA thresholds ($1,000,000, $1,500,000,000, and $3,000,000,000 respectively) were set for the Mid-Term Incentive Bonus Plan.

DEERE & CO 8-K Report, Material Agreement (Dec 14, 2004)

Summary

Key Highlights

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