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2014oct presentation

The document is an investor presentation by Deere & Company from October 2014. It outlines Deere's strategy, which focuses on exceptional operating performance, disciplined growth in shareholder value added, and using cash flow priorities to invest in growth, pay dividends, and repurchase shares. The presentation also reviews Deere's global markets and opportunities, noting its growing international presence with over 45% of equipment sales outside the US and Canada in 2013.

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John Deere Committed to Those Linked to the Land Investor Presentation Deere & Company October 2014
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 (13 August 2014). 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. | Deere & Company | October 2014 2
Table of Contents | Slide # John Deere Strategy 4 Foundational Success Factors 9 Global Markets and Opportunities 18 John Deere Financial Services 31 John Deere Power Systems 36 Market Fundamentals 41 Appendix 47 3 Deere & Company | October 2014
John Deere Strategy
* SVA: Shareholder Value Added 5 | Deere & Company | October 2014 * *
The John Deere Strategy Foundational Success Factors Exceptional Operating Performance - Equipment Operations − 31.8% OROA* in 2013 12% 2007 2008 2010 2013 35% 30% 25% 20% 15% 10% 5% 0% 12% OROA (SVA** Neutral) * OROA: Operating Return on Operating Assets ** SVA: Shareholder Value Added *** 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. | Deere & Company | October 2014 20% 28% 2001 2002 2003 2004 2006 2005 2009 2009, adjusted*** 2011 2012 -5% % of Normal Volume 80% Low 100% Normal 120% High 6
The John Deere Strategy Foundational Success Factors Exceptional Operating Performance - Equipment Operations − Higher Net Cash Flow, More Consistently 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions * SVA: Shareholder Value Added | Deere & Company | October 2014 Sale of Trade Receivables to Credit Adoption of SVA* Model  Roughly $8.0 billion in Pension/OPEB contributions, 2001-2013 7
The John Deere Strategy Foundational Success Factors Disciplined SVA* Growth - Equipment Operations − SVA Journey, 1992 - 2013 3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 0 -400 -1,200 -1,600 | -800 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Deere & Company | October 2014 SVA ($ millions) * SVA: Shareholder Value Added Note: For reconciliation of SVA to GAAP, please see “SVA* Reconciliation to GAAP” slide in Appendix 8 Adoption of SVA Model
Foundational Success Factors Building on Core Strengths That Have Guided Our Success
Asset Management Dramatic Reduction in Asset Intensity • Avoided ~ $8.5 billion in working capital in 2013 vs. 1998 • Receivable level in 2013 consistent with 1998, with almost 3x the sales *Through 3rd quarter 2014 | Deere & Company | October 2014 60% 55% 50% 45% 40% 35% 30% 25% 20% Prior Year Current Year 20002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Trade Receivables and Net Sales $40,000 $35,000 $30,000 $25,000 $ Millions 1998 2013 $20,000 $15,000 $10,000 $5,000 $0 Trade Receivables Net Sales Quarterly Receivables & Inventory as a % of Previous 12 Months Sales 10
Productivity Improvement ~ 6% CAGR over 30 Years • Deere’s net sales and revenues per employee have increased at a CAGR of ~ 6% over last 30 years $600 $500 $400 $300 $200 $100 | Deere & Company | October 2014 Net Sales and Revenues per Employee $0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 $ Thousands 11
Investment in New Products and Technologies $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 | Deere & Company | October 2014 R&D as Percent of Net Sales Source: Deere & Company and competitor SEC filings 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Deere R&D $ Deere % Competitor A % Competitor B % Competitor C % 12
Net Sales by Product Category Equipment Operations - Fiscal Year 2013 | Agriculture & Turf – $29.1B Construction & Forestry – $5.9B Deere & Company | October 2014 Construction Commercial Worksite Products Forestry Other Large Ag Small Ag Turf Other 13
Deere Use-of-Cash Priorities Cash from Operations | Deere & Company | October 2014  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 Committed to “A” Rating Fund Operating and Growth Needs Common Stock Dividend Share Repurchase  Fund value-creating investments in our businesses  Consistently and moderately raise dividend targeting a 25%- 35% payout ratio of mid-cycle earnings  Consider share repurchase as a means to deploy excess cash to shareholders, once above requirements are met and repurchase is viewed as value-enhancing 14
Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases 2004-3Q2014: ~ $12.3 billion Amount remaining on December 2013 authorization of $8 billion: ~ $7.3 billion 31 July 2014 period ended basic shares: ~ 358.4 million 3Q2014 average diluted shares: ~ 365.1 million Shares repurchased 2004-3Q2014: ~ 197.2 million Average repurchase price 2004-3Q2014: $62.54 15 | Deere & Company | October 2014 Actual Shares Repurchased* (in millions) Total Amount** (in billions) 2004 5.9 $0.2 2005 27.7 $0.9 2006 34.0 $1.3 2007 25.7 $1.5 2008 21.2 $1.7 2009 0.0 $0.0 2010 5.2 $0.4 2011 20.8 $1.7 2012 20.2 $1.6 2013 18.2 $1.5 2014 YTD 18.4 $1.6 * All shares adjusted for two-for-one stock split effective 26 November 2007 ** Rounded totals for each period – sum may not tie to cumulative cost of repurchases 2004-3Q2014
Deere Quarterly Dividends Declared* Q1 2003 – Q4 2014 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 * Adjusted for 2 for 1 stock split on 26 November 2007 ** See slide 5 for John Deere Strategy | Deere & Company | October 2014 16 $0.11 $0.14 $0.16 $0.20 $0.22 $0.25 $0.28 $0.35 $0.30 $0.41 $0.46 $0.51 $0.60 $0.00 Dividend raised 114% since launch of the revised John Deere Strategy in 2010** 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources and Uses of Cash Fiscal 2004–2013 Equipment Operations $4,287 $23,994 $33,000 $30,000 $27,000 $24,000 $21,000 $18,000 $15,000 $12,000 $9,000 $6,000 $3,000 Source: Deere & Company SEC filings 17 | Deere & Company | October 2014 = Source of Cash = Use of Cash $607 $7,685 $1,203 $1,980 $4,720 $9,077 $1,200 (1) Other includes proceeds from maturities and sales of marketable securities and purchases of marketable securities and reconciliation for non-cash items including excess tax benefits from share-based compensation and the effect of exchange rates on cash and cash equivalents $0 Beginning Cash & Cash Equivalents (10/31/03) Cash From Operations Divestitures, net of Acquisitions Capital Expenditures Investment in Financial Services Net Change in Debt and Intercompany Balances Dividends Share Repurchase, net of Common Stock Issuances Other Ending Cash & Cash Equivalents (10/31/13) (1) $ Millions ~58% of cash from operations $3,023 returned to shareholders
Global Markets and Opportunities
Growing Global Presence • FY 2013 equipment net sales outside U.S. & Canada 4.5 times the level in FY 2000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 | Deere & Company | October 2014 50% 45% 40% 35% 30% 25% 20% $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Net Sales Outside U.S. and Canada Net Sales Outside U.S. & Canada % of Total Net Sales 19
Global Growth Invest Resources to Growing Our Core Businesses • April 2014 – $40 million investment in Catalão, Brazil to expand sugarcane harvester and sprayer production capacity by 30% • April 2014 – Introduced over 60 new products in South America • February 2014 – Definitive agreement to sell irrigation operations • October 2013 – $30 million investment in Bruchsal, Germany to expand manufacturing capacity and flexibility • October 2013 – Agreement to sell majority interest in JD Landscapes • September 2013 – Acquisition of Bauer Built Manufacturing to accelerate growth of planter business globally • September 2013 – $40 million investment to create capacity to manufacture 8R tractors in Montenegro, Brazil factory | Deere & Company | October 2014 20
Net Sales by Major Markets Equipment Operations U.S. & Canada 8% CAGR Central & South America 18% CAGR | Deere & Company | October 2014 21 $13.8 $15.1 $13.0 $14.8 $17.4 $20.8 $21.8 2007 2008 2009 2010 2011 2012 2013 $3.9 Western Europe $4.6 2% CAGR $3.4 $3.4 $4.4 $4.3 $4.4 2007 2008 2009 2010 2011 2012 2013 $1.0 Central Europe & CIS $1.9 8% CAGR $0.7 $0.7 $1.4 $1.7 $1.6 2007 2008 2009 2010 2011 2012 2013 $1.6 $2.6 $1.8 $2.6 $3.6 $3.6 $4.3 2007 2008 2009 2010 2011 2012 2013 Asia, Africa & Middle East 17% CAGR $0.8 $1.1 $1.2 $1.4 $1.9 $2.1 $2.1 2007 2008 2009 2010 2011 2012 2013 Australia & New Zealand 12% CAGR $0.4 $0.6 $0.6 $0.6 $0.8 $1.0 $0.8 2007 2008 2009 2010 2011 2012 2013 $ Billions
U.S. and Canada Factory Locations 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 22 | Deere & Company | October 2014 Wisconsin, USA • Lawn & Garden Equipment • Utility Vehicles • Golf & Turf Reel Mowers Illinois, USA • Combine Harvesters • Headers • Planting Equipment • Hydraulic Cylinders North Dakota, USA • Air Seeding Equipment • Electronics • Tillage Equipment Tennessee, USA • Lawn Tractors North Carolina, USA • Commercial Mowers • Golf & Turf Mowers • Utility Vehicles • Hydraulic Excavators Alberta, Canada British Columbia, Canada • Remanufactured Components • Log Loaders & Specialty Products California, USA • Satellite Receivers Kansas, USA • Power Transmission Equipment Missouri, USA • Remanufactured Components Georgia, USA • Utility Tractors • Compact Utility Tractors Louisiana, USA • Sugarcane Harvesting Equipment • Tractor Loaders • Scrapers • Cotton Strippers
EU 28 Factory Locations Horst, The Netherlands • Spraying Equipment Saran, France • Engines | Deere & Company | October 2014 Joensuu, Finland • Wheel Forwarders •Wheel Harvesters • Forestry Attachments Bruchsal, Germany • Tractor, Harvesting & Forestry Cabs Mannheim, Germany • Tractors Zweibrücken, Germany • Combines & Forage Harvesters Arc-les-Gray, France • Forage Equipment • Balers • Ag Loaders Madrid, Spain • Components Stadtlohn, Germany • Headers Gummersbach, Germany • Walk-Behind Mowers 23
Brazil Factory Locations | Catalão, Brazil • Sugarcane Harvesters • Sprayers Montenegro, Brazil • Tractors Horizontina, Brazil • Combine Harvesters • Planters Deere & Company | October 2014 Indaiatuba, Brazil • Backhoe Loaders • 4WD Loaders Indaiatuba, Brazil (JV) • Excavators 24
CIS Factory Locations 25 | Deere & Company | October 2014 Orenburg, Russia • Seeding Equipment • Tillage Equipment Domodedovo, Russia • Tractors • Combine Harvesters
China Factory Locations | Deere & Company | October 2014 Ningbo, China • Tractors (28-70 hp) • Small Combine Harvesters • Hydraulic Cylinders Tianjin (TEDA), China • Tractors (75-135 hp) • Transmissions Jiamusi, China • Large Combine Harvesters • Corn Pickers • Cotton Pickers Harbin, China • Combine Harvesters • Tractors (150+ hp) • Sprayers Tianjin (TEDA), China • 4WD Loaders • Excavators Tianjin (TEDA), China • Engines (50-220 hp) 26
India Factory Locations | Deere & Company | October 2014 Gummidipoondi, India (JV) • Side-Shift Backhoes Pune, India • Engines • Transmissions • Tractors (36-75 hp) • Electronics Sirhind, India • Combine Harvesters Dewas, India • Tractors (36-50 hp) 27
Other Regions Factory Locations Monterrey, Mexico • Rotary Cutters • Implements • Components 28 | Deere & Company | October 2014 Kibbutz Beit Hashita, Israel • Cotton Picker Components Rosario, Argentina • Engines • Tractors • Combines Ramos, Mexico • Ag Loaders • Compact Utility Tractor Loaders • Utility Tractor Cabs • Hydraulic Cylinders Saltillo, Mexico • Ag Tractors • Transaxles Torreon, Mexico • Axles • Engines • Electronics Tokoroa, New Zealand • Forestry Harvester Heads
Worldwide Parts Services Supporting the Global Growth of Our Equipment Operations Highlights: ● Campinas, Brazil 29 | Deere & Company | October 2014 Expansion of existing facility… to be completed in late 2014 ● Nagpur, India Announced India Parts Distribution Center… targeted to open in late 2014 ● Johannesburg, South Africa New, larger Regional Distribution Center opened 4Q 2012 ● Rosario, Argentina New, larger Regional Distribution Center opened 4Q 2012 ● Stockholm, Sweden New, larger Regional Distribution Center serving C&F and A&T opened May 2012 ● Bruchsal, Germany E-PDC deconsolidation & packaging facility opened Nov 2011 Anchor Parts Distribution Centers Regional Parts Distribution Centers or Depots Distribution Centers under construction
John Deere FarmSightTM Integrated wireless technology linking the equipment, managers, operators, dealers, and agricultural consultants to provide more productivity, efficiency and yield to a farm or business. ● Machine Optimization | Deere & Company | October 2014 30 ● Solutions that get the most out of machinery ● Use of automation and machine sensors ● Increased machine uptime, and higher levels of machine productivity, including the impact machines have on crop productivity & input efficiency ● Logistics Optimization ● Coordination of field activities and resources ● Enable fleet management decisions from web enabled devices ● Machine-to-machine communication for in-field logistics ● Ag Decision Support ● Easy data flow between machines and trusted advisors ● Platform for secure, trusted data sharing ● Enable proactive management decisions through insights
John Deere Financial Services
John Deere Financial Services Supporting the Global Growth of Our Equipment Operations • Expanding EU-28 coverage to majority of countries 32 | Deere & Company | October 2014 Owned Operations Bank/Finance Company Partners Retail programs through JDF not currently offered
John Deere Financial Services $36.8 Billion Owned Portfolio at 31 October 2013 Portfolio Composition by Market Ag & Turf 88% C&F 12% | Deere & Company | October 2014 Portfolio Composition by Geography Portfolio Composition by Product U.S. 74% Latin America 6% Europe 6% Canada 11% Australia 3% Leasing 13% Information above includes all Deere lending activities worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 33 Installment Financing 57% Wholesale / Floorplan 23% Revolving Credit 7%
John Deere Capital Corporation Profitability and Growth Administered Portfolio Growth ($ Billions) | Deere & Company | October 2014 34 383 291 311 Net Income ($ Millions) 282 149 319 364 2006 2007 2008 2009 2010 2011 2012 2013 Write-offs/Average Owned Portfolio 0.22% 0.29% 0.33% 0.70% 0.48% 0.12% 0.05% 0.03% 2006 2007 2008 2009 2010 2011 2012 2013 18.6 19.0 19.1 19.3 21.1 23.3 26.6 30.7 2006 2007 2008 2009 2010 2011 2012 2013 469
John Deere Capital Corporation Retail Notes 60+ Days Past Due vs. Write-offs Agriculture & Turf1 • Continued extremely low write-offs • Average write-offs less than 5 bps over last 10 years 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% -0.05% | Deere & Company | October 2014 Construction & Forestry • Extremely low write-offs in 2013 • Steady decline in write-offs since 2009 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% (1) 1983 – 1985 includes Construction; 1986 - 1994 includes Lawn & Grounds Care; beginning in 2009 includes both Ag and Turf equipment; As % of Owned Losses After Dealer Reserve Charges Source: 1983 – 1994 internal reporting, 1995 - 2011 JDCC 10-K filings, 2012-2013 internal reporting 35 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 13 Net Write-offs (Ag) Installments 60+DPD (Ag) -0.05% '95 '98 '01 '04 '07 '10 13 Net Write-offs (C&F) Installments 60+DPD (C&F)
John Deere Power Systems Engine Emissions and Technology
Tier 4 Engine Implementation Interim Tier 4 (IT4): • 50% Nitrogen Oxide (NOx) reduction • 90% Particulate Matter (PM) reduction 0.50 0.40 0.30 0.20 0.10 | Deere & Company | October 2014 Final Tier 4 (FT4): • 80% NOx reduction Final Tier 4 0 Tier 1 Tier 2 Tier 3 Interim Tier 4 0 2.00 4.00 6.00 8.00 10.00 12.00 NOx, g/kw-hr PM, g/kw-hr 37
Engine Emissions Interim Tier 4/Stage IIIB Successful transition from Tier 3/Stage IIIA • Integrated vehicle solution • Meeting customer performance and reliability requirements • Over 76 million hours in the field* • Single fluid solution well accepted 38 | Deere & Company | October 2014 • No need for Diesel Exhaust Fluid • Deere tractors with 9.0L engine have 1-5% better fuel economy than competitive tractors** • * As of June 2014 •** Per Nebraska Tractor Test Laboratory Results
Engine Emissions Final Tier 4/Stage IV IT4/Stage IIIA creates foundation for FT4/Stage IV delivery • Over 600,000 hours of testing* • FT4/Stage IV technologies to deliver excellent performance and operation costs • More applications to transition to FT4/Stage IV than IT4/Stage IIIB emission programs • Maintain Tier 2/Stage II and Tier 3/Stage IIIA solutions for global markets • * As of June 2014 39 | Deere & Company | October 2014
Engine Emissions 2014 Worldwide Off-Road Emissions Regulations > 75hp U.S. and Canada Transition to Final Tier 4 • 175 - 750 hp: Jan 2014 • 75 - 175 hp: Jan 2015 None Stage II/Tier 2 Stage IIIA/Tier 3/TREM 3A (>50hp) Stage IIIB/Interim Tier 4 • *Includes some non-EU28 countries that follow EU28 emissions regulations 40 | Deere & Company | October 2014 EU28* Transition to Stage IV • 175 – 750 hp: Jan 2014 • 75 - 175 hp: Oct 2014 Russia No set date to transition from Stage II China Anticipated transition to Stage IIIA Oct 2015 Brazil Transition to Stage IIIA: • Construction Equipment: Jan 2015 • Ag Equipment: Jan 2017 India No set date to transition from TREM 3A
Market Fundamentals
U.S. Farm Cash Receipts Projected total cash receipts moderate at historically high levels $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F $ Billions Source: 1999 – 2012: USDA 11 February 2014 2013F – 2015F: Deere & Company Forecast as of 13 August 2014 42 | Deere & Company | October 2014 Government Payments Total Cash Receipts
U.S. Farm Balance Sheet Strong $3,000 1971 $2,500 $2,000 $1,500 $1,000 $500 | Deere & Company | October 2014 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% $0 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F $ Billions Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: 1971 – 2012: USDA 11 February 2014 2013F – 2014F: Deere & Company Forecast as of 13 August 2014 43
World Farm Fundamentals Global Stocks-to-Use Ratios 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1993 1996 1999 2002 2005 2008 2011 2014P Source: USDA – 10 October 2014 44 | Deere & Company | October 2014 Cotton Wheat Corn Soybeans
U.S. Housing Starts 2.500 2.250 2.000 1.750 1.500 1.250 1.000 0.750 0.500 0.250 0.000 Housing Starts (Millions of Units) Multi-Family Housing Starts Single-Family Housing Starts 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014F Source: 1961 – 2012: U.S. Census Bureau July 2014 | Deere & Company | October 2014 45 2013F – 2014F: Deere & Company Forecast as of 13 August 2014
U.S. Construction Spending 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 | Deere & Company | October 2014 46 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% -80% -90% -100% -110% -120% -130% -140% -150% -160% 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F % Total Construction Spend Billions, 2005 Chained $’s U.S. Construction Spending (Billions, 2005 Chained $’s) Residential Investment in Structures Nonresidential Investment in Structures Government Investment in Structures Government Infrastructure Investment Source: 1996 – 2012: U.S. Bureau of Economic Analysis July 2014 2013F – 2014F: Deere & Company Forecast as of 13 August 2014
Appendix
2009 OROA* Reconciliation to GAAP Equipment Operations (millions of dollars unless stated otherwise) Equipment Operations * OROA: Operating Return on Operating Assets | Deere & Company | October 2014 2009, as Reported Exclude Goodwill Impairment & Voluntary Employee- Separation 2009, as Adjusted Net Sales 20,756 20,756 Average Identifiable Assets With Inventories at LIFO 9,647 9,647 With Inventories at Standard Cost 10,950 10,950 Operating Profit 1,365 380 1,745 Percent of Net Sales 6.6% 8.4% Operating Return on Assets With Inventories at LIFO 14.1% 18.1% With Inventories at Standard Cost 12.5% 15.9% 48
SVA* Reconciliation to GAAP Equipment Operations (millions of dollars unless stated otherwise) Equipment Operations 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Net Sales 5,723 6,479 7,663 8,830 9,640 11,082 11,926 9 ,701 11,169 11,077 11,703 Average Identifiable Assets With Inventories at LIFO 5,765 5,449 5,551 6,187 6,502 6,682 7,672 7,724 8,069 8,743 6,229 With Inventories at Standard Cost 6,846 6,442 6,494 7,131 7,488 7,703 8,711 8,739 9,039 9,678 7,147 Operating Profit 77 242 847 1,006 1,125 1,402 1,476 272 693 (46) 401 Percent of Net Sales 1.3% 3.7% 11.1% 11.4% 11.7% 12.6% 12.4% 2.8% 6.2% -0.4% 3.4% Operating Return on Assets With Inventories at LIFO 1.3% 4.4% 15.3% 16.3% 17.3% 21.0% 19.3% 3.5% 8.6% -0.5% 6.4% With Inventories at Standard Cost 1.1% 3.8% 13.0% 14.1% 15.0% 18.2% 16.9% 3.1% 7.7% -0.5% 5.6% SVA Cost of Assets (821) (773) (780) (856) (898) (924) (1,045) (1,049) (1,085) (1,162) (858) SVA (744) (531) 67 150 227 477 431 (776) (392) (1,208) (457) Equipment Operations 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Net Sales 13,349 17,673 19,401 19,884 21,489 25,803 20,756 23,573 29,466 33,501 34,998 Average Identifiable Assets With Inventories at LIFO 5,965 6,482 7,248 7,546 8,092 9,652 9,647 9 ,196 11,516 13,594 14,569 With Inventories at Standard Cost 6,925 7,477 8,312 8,634 9,205 10,812 10,950 10,494 12,875 14,965 15,924 Operating Profit 708 1,905 1,842 1,905 2,318 2,927 1,365 2,909 3,839 4,397 5,058 Percent of Net Sales 5.3% 10.8% 9.5% 9.6% 10.8% 11.3% 6.6% 12.3% 13.0% 13.1% 14.5% Operating Return on Assets With Inventories at LIFO 11.9% 29.4% 25.4% 25.2% 28.6% 30.3% 14.1% 31.6% 33.3% 32.3% 34.7% With Inventories at Standard Cost 10.2% 25.5% 22.2% 22.1% 25.2% 27.1% 12.5% 27.7% 29.8% 29.4% 31.8% SVA Cost of Assets (831) (897) (998) (1,036) (1,094) (1,284) (1,301) (1,259) (1,545) (1,795) (1,911) SVA (123) 1,008 844 869 1,224 1,643 64 1,650 2,294 2,602 3,147 * SVA: Shareholder Value Added | Deere & Company | October 2014 49
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2014oct presentation

  • 1.
    John Deere Committedto Those Linked to the Land Investor Presentation Deere & Company October 2014
  • 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. Guidance noted in the following slides was effective as of the company’s most recent earnings release and conference call (13 August 2014). 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. | Deere & Company | October 2014 2
  • 3.
    Table of Contents | Slide # John Deere Strategy 4 Foundational Success Factors 9 Global Markets and Opportunities 18 John Deere Financial Services 31 John Deere Power Systems 36 Market Fundamentals 41 Appendix 47 3 Deere & Company | October 2014
  • 4.
  • 5.
    * SVA: ShareholderValue Added 5 | Deere & Company | October 2014 * *
  • 6.
    The John DeereStrategy Foundational Success Factors Exceptional Operating Performance - Equipment Operations − 31.8% OROA* in 2013 12% 2007 2008 2010 2013 35% 30% 25% 20% 15% 10% 5% 0% 12% OROA (SVA** Neutral) * OROA: Operating Return on Operating Assets ** SVA: Shareholder Value Added *** 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. | Deere & Company | October 2014 20% 28% 2001 2002 2003 2004 2006 2005 2009 2009, adjusted*** 2011 2012 -5% % of Normal Volume 80% Low 100% Normal 120% High 6
  • 7.
    The John DeereStrategy Foundational Success Factors Exceptional Operating Performance - Equipment Operations − Higher Net Cash Flow, More Consistently 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions * SVA: Shareholder Value Added | Deere & Company | October 2014 Sale of Trade Receivables to Credit Adoption of SVA* Model  Roughly $8.0 billion in Pension/OPEB contributions, 2001-2013 7
  • 8.
    The John DeereStrategy Foundational Success Factors Disciplined SVA* Growth - Equipment Operations − SVA Journey, 1992 - 2013 3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 0 -400 -1,200 -1,600 | -800 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Deere & Company | October 2014 SVA ($ millions) * SVA: Shareholder Value Added Note: For reconciliation of SVA to GAAP, please see “SVA* Reconciliation to GAAP” slide in Appendix 8 Adoption of SVA Model
  • 9.
    Foundational Success Factors Building on Core Strengths That Have Guided Our Success
  • 10.
    Asset Management DramaticReduction in Asset Intensity • Avoided ~ $8.5 billion in working capital in 2013 vs. 1998 • Receivable level in 2013 consistent with 1998, with almost 3x the sales *Through 3rd quarter 2014 | Deere & Company | October 2014 60% 55% 50% 45% 40% 35% 30% 25% 20% Prior Year Current Year 20002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Trade Receivables and Net Sales $40,000 $35,000 $30,000 $25,000 $ Millions 1998 2013 $20,000 $15,000 $10,000 $5,000 $0 Trade Receivables Net Sales Quarterly Receivables & Inventory as a % of Previous 12 Months Sales 10
  • 11.
    Productivity Improvement ~6% CAGR over 30 Years • Deere’s net sales and revenues per employee have increased at a CAGR of ~ 6% over last 30 years $600 $500 $400 $300 $200 $100 | Deere & Company | October 2014 Net Sales and Revenues per Employee $0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 $ Thousands 11
  • 12.
    Investment in NewProducts and Technologies $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 | Deere & Company | October 2014 R&D as Percent of Net Sales Source: Deere & Company and competitor SEC filings 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Deere R&D $ Deere % Competitor A % Competitor B % Competitor C % 12
  • 13.
    Net Sales byProduct Category Equipment Operations - Fiscal Year 2013 | Agriculture & Turf – $29.1B Construction & Forestry – $5.9B Deere & Company | October 2014 Construction Commercial Worksite Products Forestry Other Large Ag Small Ag Turf Other 13
  • 14.
    Deere Use-of-Cash Priorities Cash from Operations | Deere & Company | October 2014  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 Committed to “A” Rating Fund Operating and Growth Needs Common Stock Dividend Share Repurchase  Fund value-creating investments in our businesses  Consistently and moderately raise dividend targeting a 25%- 35% payout ratio of mid-cycle earnings  Consider share repurchase as a means to deploy excess cash to shareholders, once above requirements are met and repurchase is viewed as value-enhancing 14
  • 15.
    Share Repurchase AsPart of Publicly Announced Plans Cumulative cost of repurchases 2004-3Q2014: ~ $12.3 billion Amount remaining on December 2013 authorization of $8 billion: ~ $7.3 billion 31 July 2014 period ended basic shares: ~ 358.4 million 3Q2014 average diluted shares: ~ 365.1 million Shares repurchased 2004-3Q2014: ~ 197.2 million Average repurchase price 2004-3Q2014: $62.54 15 | Deere & Company | October 2014 Actual Shares Repurchased* (in millions) Total Amount** (in billions) 2004 5.9 $0.2 2005 27.7 $0.9 2006 34.0 $1.3 2007 25.7 $1.5 2008 21.2 $1.7 2009 0.0 $0.0 2010 5.2 $0.4 2011 20.8 $1.7 2012 20.2 $1.6 2013 18.2 $1.5 2014 YTD 18.4 $1.6 * All shares adjusted for two-for-one stock split effective 26 November 2007 ** Rounded totals for each period – sum may not tie to cumulative cost of repurchases 2004-3Q2014
  • 16.
    Deere Quarterly DividendsDeclared* Q1 2003 – Q4 2014 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 * Adjusted for 2 for 1 stock split on 26 November 2007 ** See slide 5 for John Deere Strategy | Deere & Company | October 2014 16 $0.11 $0.14 $0.16 $0.20 $0.22 $0.25 $0.28 $0.35 $0.30 $0.41 $0.46 $0.51 $0.60 $0.00 Dividend raised 114% since launch of the revised John Deere Strategy in 2010** 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
  • 17.
    Sources and Usesof Cash Fiscal 2004–2013 Equipment Operations $4,287 $23,994 $33,000 $30,000 $27,000 $24,000 $21,000 $18,000 $15,000 $12,000 $9,000 $6,000 $3,000 Source: Deere & Company SEC filings 17 | Deere & Company | October 2014 = Source of Cash = Use of Cash $607 $7,685 $1,203 $1,980 $4,720 $9,077 $1,200 (1) Other includes proceeds from maturities and sales of marketable securities and purchases of marketable securities and reconciliation for non-cash items including excess tax benefits from share-based compensation and the effect of exchange rates on cash and cash equivalents $0 Beginning Cash & Cash Equivalents (10/31/03) Cash From Operations Divestitures, net of Acquisitions Capital Expenditures Investment in Financial Services Net Change in Debt and Intercompany Balances Dividends Share Repurchase, net of Common Stock Issuances Other Ending Cash & Cash Equivalents (10/31/13) (1) $ Millions ~58% of cash from operations $3,023 returned to shareholders
  • 18.
    Global Markets and Opportunities
  • 19.
    Growing Global Presence • FY 2013 equipment net sales outside U.S. & Canada 4.5 times the level in FY 2000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 | Deere & Company | October 2014 50% 45% 40% 35% 30% 25% 20% $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Net Sales Outside U.S. and Canada Net Sales Outside U.S. & Canada % of Total Net Sales 19
  • 20.
    Global Growth InvestResources to Growing Our Core Businesses • April 2014 – $40 million investment in Catalão, Brazil to expand sugarcane harvester and sprayer production capacity by 30% • April 2014 – Introduced over 60 new products in South America • February 2014 – Definitive agreement to sell irrigation operations • October 2013 – $30 million investment in Bruchsal, Germany to expand manufacturing capacity and flexibility • October 2013 – Agreement to sell majority interest in JD Landscapes • September 2013 – Acquisition of Bauer Built Manufacturing to accelerate growth of planter business globally • September 2013 – $40 million investment to create capacity to manufacture 8R tractors in Montenegro, Brazil factory | Deere & Company | October 2014 20
  • 21.
    Net Sales byMajor Markets Equipment Operations U.S. & Canada 8% CAGR Central & South America 18% CAGR | Deere & Company | October 2014 21 $13.8 $15.1 $13.0 $14.8 $17.4 $20.8 $21.8 2007 2008 2009 2010 2011 2012 2013 $3.9 Western Europe $4.6 2% CAGR $3.4 $3.4 $4.4 $4.3 $4.4 2007 2008 2009 2010 2011 2012 2013 $1.0 Central Europe & CIS $1.9 8% CAGR $0.7 $0.7 $1.4 $1.7 $1.6 2007 2008 2009 2010 2011 2012 2013 $1.6 $2.6 $1.8 $2.6 $3.6 $3.6 $4.3 2007 2008 2009 2010 2011 2012 2013 Asia, Africa & Middle East 17% CAGR $0.8 $1.1 $1.2 $1.4 $1.9 $2.1 $2.1 2007 2008 2009 2010 2011 2012 2013 Australia & New Zealand 12% CAGR $0.4 $0.6 $0.6 $0.6 $0.8 $1.0 $0.8 2007 2008 2009 2010 2011 2012 2013 $ Billions
  • 22.
    U.S. and Canada Factory Locations 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 22 | Deere & Company | October 2014 Wisconsin, USA • Lawn & Garden Equipment • Utility Vehicles • Golf & Turf Reel Mowers Illinois, USA • Combine Harvesters • Headers • Planting Equipment • Hydraulic Cylinders North Dakota, USA • Air Seeding Equipment • Electronics • Tillage Equipment Tennessee, USA • Lawn Tractors North Carolina, USA • Commercial Mowers • Golf & Turf Mowers • Utility Vehicles • Hydraulic Excavators Alberta, Canada British Columbia, Canada • Remanufactured Components • Log Loaders & Specialty Products California, USA • Satellite Receivers Kansas, USA • Power Transmission Equipment Missouri, USA • Remanufactured Components Georgia, USA • Utility Tractors • Compact Utility Tractors Louisiana, USA • Sugarcane Harvesting Equipment • Tractor Loaders • Scrapers • Cotton Strippers
  • 23.
    EU 28 FactoryLocations Horst, The Netherlands • Spraying Equipment Saran, France • Engines | Deere & Company | October 2014 Joensuu, Finland • Wheel Forwarders •Wheel Harvesters • Forestry Attachments Bruchsal, Germany • Tractor, Harvesting & Forestry Cabs Mannheim, Germany • Tractors Zweibrücken, Germany • Combines & Forage Harvesters Arc-les-Gray, France • Forage Equipment • Balers • Ag Loaders Madrid, Spain • Components Stadtlohn, Germany • Headers Gummersbach, Germany • Walk-Behind Mowers 23
  • 24.
    Brazil Factory Locations | Catalão, Brazil • Sugarcane Harvesters • Sprayers Montenegro, Brazil • Tractors Horizontina, Brazil • Combine Harvesters • Planters Deere & Company | October 2014 Indaiatuba, Brazil • Backhoe Loaders • 4WD Loaders Indaiatuba, Brazil (JV) • Excavators 24
  • 25.
    CIS Factory Locations 25 | Deere & Company | October 2014 Orenburg, Russia • Seeding Equipment • Tillage Equipment Domodedovo, Russia • Tractors • Combine Harvesters
  • 26.
    China Factory Locations | Deere & Company | October 2014 Ningbo, China • Tractors (28-70 hp) • Small Combine Harvesters • Hydraulic Cylinders Tianjin (TEDA), China • Tractors (75-135 hp) • Transmissions Jiamusi, China • Large Combine Harvesters • Corn Pickers • Cotton Pickers Harbin, China • Combine Harvesters • Tractors (150+ hp) • Sprayers Tianjin (TEDA), China • 4WD Loaders • Excavators Tianjin (TEDA), China • Engines (50-220 hp) 26
  • 27.
    India Factory Locations | Deere & Company | October 2014 Gummidipoondi, India (JV) • Side-Shift Backhoes Pune, India • Engines • Transmissions • Tractors (36-75 hp) • Electronics Sirhind, India • Combine Harvesters Dewas, India • Tractors (36-50 hp) 27
  • 28.
    Other Regions FactoryLocations Monterrey, Mexico • Rotary Cutters • Implements • Components 28 | Deere & Company | October 2014 Kibbutz Beit Hashita, Israel • Cotton Picker Components Rosario, Argentina • Engines • Tractors • Combines Ramos, Mexico • Ag Loaders • Compact Utility Tractor Loaders • Utility Tractor Cabs • Hydraulic Cylinders Saltillo, Mexico • Ag Tractors • Transaxles Torreon, Mexico • Axles • Engines • Electronics Tokoroa, New Zealand • Forestry Harvester Heads
  • 29.
    Worldwide Parts Services Supporting the Global Growth of Our Equipment Operations Highlights: ● Campinas, Brazil 29 | Deere & Company | October 2014 Expansion of existing facility… to be completed in late 2014 ● Nagpur, India Announced India Parts Distribution Center… targeted to open in late 2014 ● Johannesburg, South Africa New, larger Regional Distribution Center opened 4Q 2012 ● Rosario, Argentina New, larger Regional Distribution Center opened 4Q 2012 ● Stockholm, Sweden New, larger Regional Distribution Center serving C&F and A&T opened May 2012 ● Bruchsal, Germany E-PDC deconsolidation & packaging facility opened Nov 2011 Anchor Parts Distribution Centers Regional Parts Distribution Centers or Depots Distribution Centers under construction
  • 30.
    John Deere FarmSightTM Integrated wireless technology linking the equipment, managers, operators, dealers, and agricultural consultants to provide more productivity, efficiency and yield to a farm or business. ● Machine Optimization | Deere & Company | October 2014 30 ● Solutions that get the most out of machinery ● Use of automation and machine sensors ● Increased machine uptime, and higher levels of machine productivity, including the impact machines have on crop productivity & input efficiency ● Logistics Optimization ● Coordination of field activities and resources ● Enable fleet management decisions from web enabled devices ● Machine-to-machine communication for in-field logistics ● Ag Decision Support ● Easy data flow between machines and trusted advisors ● Platform for secure, trusted data sharing ● Enable proactive management decisions through insights
  • 31.
  • 32.
    John Deere FinancialServices Supporting the Global Growth of Our Equipment Operations • Expanding EU-28 coverage to majority of countries 32 | Deere & Company | October 2014 Owned Operations Bank/Finance Company Partners Retail programs through JDF not currently offered
  • 33.
    John Deere FinancialServices $36.8 Billion Owned Portfolio at 31 October 2013 Portfolio Composition by Market Ag & Turf 88% C&F 12% | Deere & Company | October 2014 Portfolio Composition by Geography Portfolio Composition by Product U.S. 74% Latin America 6% Europe 6% Canada 11% Australia 3% Leasing 13% Information above includes all Deere lending activities worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 33 Installment Financing 57% Wholesale / Floorplan 23% Revolving Credit 7%
  • 34.
    John Deere CapitalCorporation Profitability and Growth Administered Portfolio Growth ($ Billions) | Deere & Company | October 2014 34 383 291 311 Net Income ($ Millions) 282 149 319 364 2006 2007 2008 2009 2010 2011 2012 2013 Write-offs/Average Owned Portfolio 0.22% 0.29% 0.33% 0.70% 0.48% 0.12% 0.05% 0.03% 2006 2007 2008 2009 2010 2011 2012 2013 18.6 19.0 19.1 19.3 21.1 23.3 26.6 30.7 2006 2007 2008 2009 2010 2011 2012 2013 469
  • 35.
    John Deere CapitalCorporation Retail Notes 60+ Days Past Due vs. Write-offs Agriculture & Turf1 • Continued extremely low write-offs • Average write-offs less than 5 bps over last 10 years 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% -0.05% | Deere & Company | October 2014 Construction & Forestry • Extremely low write-offs in 2013 • Steady decline in write-offs since 2009 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% (1) 1983 – 1985 includes Construction; 1986 - 1994 includes Lawn & Grounds Care; beginning in 2009 includes both Ag and Turf equipment; As % of Owned Losses After Dealer Reserve Charges Source: 1983 – 1994 internal reporting, 1995 - 2011 JDCC 10-K filings, 2012-2013 internal reporting 35 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 13 Net Write-offs (Ag) Installments 60+DPD (Ag) -0.05% '95 '98 '01 '04 '07 '10 13 Net Write-offs (C&F) Installments 60+DPD (C&F)
  • 36.
    John Deere PowerSystems Engine Emissions and Technology
  • 37.
    Tier 4 EngineImplementation Interim Tier 4 (IT4): • 50% Nitrogen Oxide (NOx) reduction • 90% Particulate Matter (PM) reduction 0.50 0.40 0.30 0.20 0.10 | Deere & Company | October 2014 Final Tier 4 (FT4): • 80% NOx reduction Final Tier 4 0 Tier 1 Tier 2 Tier 3 Interim Tier 4 0 2.00 4.00 6.00 8.00 10.00 12.00 NOx, g/kw-hr PM, g/kw-hr 37
  • 38.
    Engine Emissions InterimTier 4/Stage IIIB Successful transition from Tier 3/Stage IIIA • Integrated vehicle solution • Meeting customer performance and reliability requirements • Over 76 million hours in the field* • Single fluid solution well accepted 38 | Deere & Company | October 2014 • No need for Diesel Exhaust Fluid • Deere tractors with 9.0L engine have 1-5% better fuel economy than competitive tractors** • * As of June 2014 •** Per Nebraska Tractor Test Laboratory Results
  • 39.
    Engine Emissions FinalTier 4/Stage IV IT4/Stage IIIA creates foundation for FT4/Stage IV delivery • Over 600,000 hours of testing* • FT4/Stage IV technologies to deliver excellent performance and operation costs • More applications to transition to FT4/Stage IV than IT4/Stage IIIB emission programs • Maintain Tier 2/Stage II and Tier 3/Stage IIIA solutions for global markets • * As of June 2014 39 | Deere & Company | October 2014
  • 40.
    Engine Emissions 2014Worldwide Off-Road Emissions Regulations > 75hp U.S. and Canada Transition to Final Tier 4 • 175 - 750 hp: Jan 2014 • 75 - 175 hp: Jan 2015 None Stage II/Tier 2 Stage IIIA/Tier 3/TREM 3A (>50hp) Stage IIIB/Interim Tier 4 • *Includes some non-EU28 countries that follow EU28 emissions regulations 40 | Deere & Company | October 2014 EU28* Transition to Stage IV • 175 – 750 hp: Jan 2014 • 75 - 175 hp: Oct 2014 Russia No set date to transition from Stage II China Anticipated transition to Stage IIIA Oct 2015 Brazil Transition to Stage IIIA: • Construction Equipment: Jan 2015 • Ag Equipment: Jan 2017 India No set date to transition from TREM 3A
  • 41.
  • 42.
    U.S. Farm CashReceipts Projected total cash receipts moderate at historically high levels $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F $ Billions Source: 1999 – 2012: USDA 11 February 2014 2013F – 2015F: Deere & Company Forecast as of 13 August 2014 42 | Deere & Company | October 2014 Government Payments Total Cash Receipts
  • 43.
    U.S. Farm BalanceSheet Strong $3,000 1971 $2,500 $2,000 $1,500 $1,000 $500 | Deere & Company | October 2014 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% $0 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F $ Billions Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: 1971 – 2012: USDA 11 February 2014 2013F – 2014F: Deere & Company Forecast as of 13 August 2014 43
  • 44.
    World Farm Fundamentals Global Stocks-to-Use Ratios 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1993 1996 1999 2002 2005 2008 2011 2014P Source: USDA – 10 October 2014 44 | Deere & Company | October 2014 Cotton Wheat Corn Soybeans
  • 45.
    U.S. Housing Starts 2.500 2.250 2.000 1.750 1.500 1.250 1.000 0.750 0.500 0.250 0.000 Housing Starts (Millions of Units) Multi-Family Housing Starts Single-Family Housing Starts 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014F Source: 1961 – 2012: U.S. Census Bureau July 2014 | Deere & Company | October 2014 45 2013F – 2014F: Deere & Company Forecast as of 13 August 2014
  • 46.
    U.S. Construction Spending 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 | Deere & Company | October 2014 46 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% -80% -90% -100% -110% -120% -130% -140% -150% -160% 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F % Total Construction Spend Billions, 2005 Chained $’s U.S. Construction Spending (Billions, 2005 Chained $’s) Residential Investment in Structures Nonresidential Investment in Structures Government Investment in Structures Government Infrastructure Investment Source: 1996 – 2012: U.S. Bureau of Economic Analysis July 2014 2013F – 2014F: Deere & Company Forecast as of 13 August 2014
  • 47.
  • 48.
    2009 OROA* Reconciliationto GAAP Equipment Operations (millions of dollars unless stated otherwise) Equipment Operations * OROA: Operating Return on Operating Assets | Deere & Company | October 2014 2009, as Reported Exclude Goodwill Impairment & Voluntary Employee- Separation 2009, as Adjusted Net Sales 20,756 20,756 Average Identifiable Assets With Inventories at LIFO 9,647 9,647 With Inventories at Standard Cost 10,950 10,950 Operating Profit 1,365 380 1,745 Percent of Net Sales 6.6% 8.4% Operating Return on Assets With Inventories at LIFO 14.1% 18.1% With Inventories at Standard Cost 12.5% 15.9% 48
  • 49.
    SVA* Reconciliation toGAAP Equipment Operations (millions of dollars unless stated otherwise) Equipment Operations 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Net Sales 5,723 6,479 7,663 8,830 9,640 11,082 11,926 9 ,701 11,169 11,077 11,703 Average Identifiable Assets With Inventories at LIFO 5,765 5,449 5,551 6,187 6,502 6,682 7,672 7,724 8,069 8,743 6,229 With Inventories at Standard Cost 6,846 6,442 6,494 7,131 7,488 7,703 8,711 8,739 9,039 9,678 7,147 Operating Profit 77 242 847 1,006 1,125 1,402 1,476 272 693 (46) 401 Percent of Net Sales 1.3% 3.7% 11.1% 11.4% 11.7% 12.6% 12.4% 2.8% 6.2% -0.4% 3.4% Operating Return on Assets With Inventories at LIFO 1.3% 4.4% 15.3% 16.3% 17.3% 21.0% 19.3% 3.5% 8.6% -0.5% 6.4% With Inventories at Standard Cost 1.1% 3.8% 13.0% 14.1% 15.0% 18.2% 16.9% 3.1% 7.7% -0.5% 5.6% SVA Cost of Assets (821) (773) (780) (856) (898) (924) (1,045) (1,049) (1,085) (1,162) (858) SVA (744) (531) 67 150 227 477 431 (776) (392) (1,208) (457) Equipment Operations 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Net Sales 13,349 17,673 19,401 19,884 21,489 25,803 20,756 23,573 29,466 33,501 34,998 Average Identifiable Assets With Inventories at LIFO 5,965 6,482 7,248 7,546 8,092 9,652 9,647 9 ,196 11,516 13,594 14,569 With Inventories at Standard Cost 6,925 7,477 8,312 8,634 9,205 10,812 10,950 10,494 12,875 14,965 15,924 Operating Profit 708 1,905 1,842 1,905 2,318 2,927 1,365 2,909 3,839 4,397 5,058 Percent of Net Sales 5.3% 10.8% 9.5% 9.6% 10.8% 11.3% 6.6% 12.3% 13.0% 13.1% 14.5% Operating Return on Assets With Inventories at LIFO 11.9% 29.4% 25.4% 25.2% 28.6% 30.3% 14.1% 31.6% 33.3% 32.3% 34.7% With Inventories at Standard Cost 10.2% 25.5% 22.2% 22.1% 25.2% 27.1% 12.5% 27.7% 29.8% 29.4% 31.8% SVA Cost of Assets (831) (897) (998) (1,036) (1,094) (1,284) (1,301) (1,259) (1,545) (1,795) (1,911) SVA (123) 1,008 844 869 1,224 1,643 64 1,650 2,294 2,602 3,147 * SVA: Shareholder Value Added | Deere & Company | October 2014 49
  • 50.