John Deere Committed to Those Linked to the Land

Transcription

1 John Deere Committed to Those Linked to the Land Deere & Company 02 December 2011

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 (23 November 2011). 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 # John Deere Strategy 4 Macro-economic Tailwinds 25 Foundational Success Factors 35 Global Markets and Opportunities 43 John Deere Financial Services 52 John Deere Power Systems 57 Farm Fundamentals 60 Market and Currency Volatility 69 Appendix 72 3

4 John Deere Strategy

5 5

6 Why is the John Deere Strategy evolving? No longer business as usual Global macro-trends present significant opportunities for John Deere Global population and income growth Global infrastructure needs New customer segments Technology advances 6

7 We will help our customers who cultivate, harvest, transform, enrich or build upon the land meet the world s dramatically increasing need for food, fuel, shelter and infrastructure In so doing, we are supporting a higher quality of life around the world 7

8 Sustainable SVA Growth is delivered by distinctively serving our customers, employees and investors In this way, we can extend and enhance our financial and operating achievements of recent years Our challenge: to capture anticipated tailwinds by attracting more customers to the John Deere Experience across our six key geographies (U.S. & Canada, EU 27, Brazil, CIS/Russia, India, China) in a manner that meets local needs while leveraging our global scale 8

9 Integrated portfolio of businesses each with a vital and specific role Global Growth Businesses Invest in global expansion for profitable growth by capitalizing on macro-trends Complementary Businesses Defend and grow share, enhance SVA, strengthen the channel of the Global Growth Businesses Supporting Businesses Strengthen and further differentiate our Global Growth and Complementary Businesses 9

10 Global Growth Businesses Agricultural Equipment Solutions Construction Equipment Solutions 10

11 Complementary Businesses Turf Equipment Solutions Forestry Equipment Solutions 11

12 Supporting Businesses John Deere Financial Services John Deere Power Systems Worldwide Parts Services Intelligent Solutions Group 12

13 Exceptional Operating Performance - Equipment Operations 29.8% OROA in 2011, a record high for the company 35% 30% 25% % 20% 15% 10% 2009, adjusted* % % 12% OROA (SVA Neutral) 5% % 80% Low % Normal % of Normal Volume *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. 120% High 13

14 Net Cash Provided by Operating Activities - Equipment Operations SVA Model: Higher Cash Flow, More Consistently 3,500 Adoption of SVA Model 3,000 2,500 Sale of Trade Receivables to Credit $ Millions 2,000 1,500 1, Over $7 billion in Pension/OPEB contributions,

15 SVA Journey - Equipment Operations, ,800 2,400 2,000 SVA ($ millions) 1,600 1, ,200-1, Note: For reconciliation of SVA to GAAP, please see Equipment Ops SVA Reconciliation to GAAP slide in Appendix 15

16 SVA Journey - Enterprise, SVA in 2011 was ~$2.5 billion a record high for the company 2,800 2,400 2,000 SVA ($ millions) 1,600 1, Note: For reconciliation of SVA to GAAP, please see Equipment Ops SVA Reconciliation to GAAP slide in Appendix 16

17 Aligned High-Performance Teamwork Integral part of strategy, reinforced with compensation Short-Term Incentive (STI) /12 Bonus Calculation Based on individual Division s performance Based on Enterprise performance Metric Weighting 2010 Divisional Metric Equipment Operations: A&T or C&F OROA 70% Divisional performance Corporate Composite 30% Credit Operations: Credit ROE 30% Corporate Composite 70% 2011/12 Enterprise Metric Equipment Ops OROA 50% Ag & Turf OROA 25% C&F OROA 15% Financial Services ROE 10% 17

18 Aligned High-Performance Teamwork Integral part of strategy, reinforced with compensation Global Performance Management reinforces alignment Base pay changes linked to achieving goals STI: Short-Term Incentive Bonus focuses on OROA/ROE Covers most worldwide salaried employees MTI: Mid-Term Incentive Bonus driven by sustained SVA creation About 8,200 management employees eligible LTI: Long-Term Incentive Primarily stock options Top 900 employees eligible Minimum stock holding requirements for senior management (~ top 125) 18

19 Critical to meeting our aspirations of realizing sustainable SVA growth through global expansion Needed to serve a diverse set of global customers more effectively Deep Customer Understanding (DCU) - Understanding our customers most important local needs, and translating these into winning products and services better than any competitor Deliver Customer Value (DCV) - Profitably translating our customers needs into products and services at prices our customers are willing to pay World-Class Distribution System - Enabling our customers around the world to participate in the unique John Deere Experience by developing world-class channels of dealers that are professional, profitable and sustainable businesses, oriented to the customer, aligned with John Deere and achieving market preeminence Grow Extraordinary Global Talent - Enabling preeminent customer value and business results through extraordinary leaders and engaged employees delivering aligned high-performance teamwork globally 19

20 Commitment to execute and monitor all initiatives critical to our success Performance metrics Traditional financial measures based on what we are delivering today to our stakeholders Health metrics Based on the company s Success Factors, are the qualities, attributes and actions being introduced to ensure the sustainability of our performance over time 20

21 Performance Measures Metric Target Sales Net Sales Growth Target $50B* (2018, at mid-cycle) Profitability Return on Sales (Operating Margin) 12% (2014, at mid-cycle) Asset Efficiency Asset Turns 2.5x (2018, at mid-cycle) *Implies a CAGR of ~ 9% ( ) vs. historical CAGR of 7-8% Health Measures Metric Target Exceptional Operating Performance Disciplined SVA Growth Aligned High- Performance Teamwork Quality Sales/SVA Mix by Geography Employee Engagement % JDQPS certification % Non- U.S. & Canada Employee Survey s Engagement Index 21

22 Since 1837, the company has delivered innovative products of superior quality built on a tradition of commitment and integrity How we do business is critical to our continued success 22

23 What does this all mean to John Deere? Sufficient head room for global growth in Agricultural Equipment Solutions and Construction Equipment Solutions John Deere is well-positioned to create solutions that help our customers feed the world, grow alternative fuel stocks, and build major infrastructure We need to maintain our strength in developed markets and grow in developing markets Our current success factors (Exceptional Operating Performance, Disciplined SVA Growth, Aligned High Performance Teamwork) are foundational, and necessary but not sufficient, to meet our growth aspirations 23

24 The John Deere Strategy In Summary Accelerated emphasis on global growth $50 billion mid-cycle sales by 2018 Approximately 50% outside of U.S. & Canada Capitalize on increased global demand for food, shelter and infrastructure Focus on improved profitability 12% mid-cycle margin by 2014 Continued adherence to OROA/SVA model 30% OROA at mid-cycle sales (12% at trough) with improved asset turns Focus on two growth platforms Global pre-eminence in agricultural-equipment solutions Global construction-equipment operations (with presence in China) Complementary/supporting businesses to help drive performance of global growth platforms Revised metrics reflect strategic direction Performance metrics align compensation to strategy Health metrics introduced to monitor underlying factors (e.g., market share, quality) to ensure performance is sustainable 24

25 Macro-economic Tailwinds Support John Deere s Global Growth Businesses

26 Population and Income Growth Most of population growth through 2050 in Asia and Africa By 2050, world population will reach 9 billion, increasing from 6.3 billion today Aging population in North America, modest growth Shrinking and aging population in Europe Large middle-class developing in China and India 200 million households expected to join the middle class 26

27 Challenges Created by Population Growth Feeding the world agricultural output must double by 2050 Gross output must 3.4% annually in next 10 years vs. 2.4% annual growth in past 10 years Natural resources under strain, especially water Massive urbanization migration from rural areas creates need for roads, power grids, water containment and distribution systems 2010 milestone: For first time, more than half the world population lives in cities 2050: More than 70 percent will live in cities 27

28 Strong Global Tailwinds in Ag & Construction Most Growth from Developing Economies Agriculture and Construction amongst the Top 10 industry sectors in the G-20 countries Most of the growth in Agriculture and Construction between will happen in the BRIIC countries Sector Absolute increase in real value added , $ Billions CAGR Percent Sector Share of growth from BRIIC 1 Percent Public Admin, Sanitary & Personal Srvs 1,324 Other Business Activities 1, Agriculture, Hunting, Forestry, Fishing Energy Mining and Quarrying Real Estate & Dwellings 1, Construction 66 Wholesale Trade Medical, Dental, Veterinary, Other Health Transportation & Storage Educational Services 1, Processed Food Electricity, Gas, and Water Transportation & Storage Wholesale Trade Financial Institutions Construction Motor Vehicle and Motorcycle Sales, Repair, Maint. Communications Agriculture, Hunting, Forestry, Fishing Restaurants and Hotels 38 Communications 583 Retail Trade except Motor Vehicle, and Motorcycle Financial Institutions Public Admin, Sanitary & Personal Srvs Restaurants and Hotels 373 Electricity, Gas, and Water 370 Energy Mining and Quarrying 318 Computer and Related Activities Radio, TV, and Communications Equipment Processed Food 231 Insurance 222 Motor Vehicle and Motorcycle Sales, Repair, Maint Radio, TV, and Communications Equipment Educational Services Insurance Real Estate & Dwellings Retail Trade except Motor Vehicle, and Motorcycle Computer and Related Activities Other Business Activities Medical, Dental, Veterinary, Other Health Note: G20 countries account for 70% and 73% of agriculture and construction segments respectively. Total global growth for agriculture is $840B and construction is $850B 1 Brazil, Russia, India, Indonesia, China Source: Global Insight World Industry Monitor Real value-added 2005 USD 28

29 Developing Economies Growing Faster While developed economies have always accounted for a larger share of GDP their growth will slow significantly, relative to that of developing economies Real GDP 1 $ Trillions CAGR, Percent x 3.3 Real GDP 1 $ Trillions CAGR, Percent x Developing Developed 1 Real GDP (expenditure method) base year 2005 Developed countries include OECD. Developing countries include all developing markets (Regions as defined by Global Insight) Source: Global Insight World Market Monitor 29

30 Dynamics of Food Demand Per Capita Income Services >$10 per day Processed Products $ per day Livestock Products 27% of world s population (Most hunger problems solved at $2.50 threshold) $ per day Commodities 20% of world s population (2/3rds experience hunger & malnutrition) <$1.25 per day Source: World Bank

31 Government Support of Agriculture China 2011F Material Subsidy (basic subsidy for purchase of inputs) Grain Direct Subsidy (for growing encouraged crops) Seed Subsidy (for purchasing high-performing seed) Equipment Subsidy (for purchasing encouraged equipment) RMB (in billions) Source: China Ministry of Agriculture 31

32 Government Support of Agriculture Brazil Tractor Programs 1 Mais Alimentos Pró-Trator Trator Solidário Finame PSI Moderfrota Combine R$123 billion approved for 2011/2012 Agriculture and Livestock Plan R$107 billion targeted towards Agribusiness (large-scale operations) 7% higher than 2010/2011 R$16 billion targeted towards family agriculture (small-scale operations) Government programs to support equipment purchases Engine hp All All Where Brazil SP PR Brazil Brazil Programs 1 Class Where Interest Rate 2% 0% 5.5% Grace Period (Max) Term Maturity 3 Years 6.5% to 8.7% 2 7.5%/9.5% Interest Rate 2 2 Grace 10 Years 5 5 Perennial Dec11 Dec Dec12 Jun12 Period (Max) Term Maturity Mais Alimentos IV Brazil 2% 3 Years 10 Years Perennial Finame PSI Moderfrota All All Brazil Brazil 6.5% to 8.7% 2 7.5%/9.5% Up to Dec12 Jun12 1 Exclusively Finame qualified products. Minimum of 60% local content (weight and value) % if annual gross revenue < R$90 million, 8.7% other farmers 3 7.5% if annual gross revenue < R$500 thousand and 80% of income from agriculture related activities. 9.5% all other farmers 4 Depending if used or new equipment 32

33 Global Construction and Infrastructure Needs Infrastructure is expected to be the fastest growing segment of construction Estimated gross spending as a percent of 2008 global GDP Residential Non-residential Infrastructure WW Construction spending Gross output, $ 2008 Billions CAGR Percent Construction 12% Mining & Quarrying 7% Ag, Hunting, Forestry & Fishing 7% 3.6% 9,915 6,509 2, ,266 3, All Other 2,356 74% 1,888 3, *Note: Construction and Mines & Quarries account for ~5% and ~4% of 2008 value-added WW GDP, respectively Source: IHS Global Insight, March 2009; Off Highway Research; AEM; CCMA; Yengst; Deere analysis 33

34 Global Construction Spending in 2020 Concentrated in a Small Number of Markets Construction spending 2020 absolute, Top 10 (Billions of 2009 $s) Construction spending change, Top 10 (Billions of 2009 $s) China 2,049 China 1,128 U.S. & Canada 1,508 U.S. & Canada 534 India 751 India 437 Japan 592 Infrastructure Brazil 168 Infrastructure U.K. 432 Non-residential Russia 106 Non-residential France Germany Residential All Construction U.K. Japan Residential All Construction Brazil 299 Indonesia 92 Russia 267 Mexico 60 Italy 257 Korea 57 China + U.S. & Canada 36% of 2020 absolute, compared to 30% today China + U.S. & Canada + Brazil, Russia, India 50% of 2020 absolute, compared to 40% today Source: IHS Global Insight, Deere Analysis, August

35 Foundational Success Factors Building on Core Strengths That Have Guided Our Success

36 Asset Management Dramatic Reduction in Asset Intensity Avoided ~ $5.5 billion in working capital in 2011 vs Receivable level in 2011 consistent with 1997, with almost 3x the sales Quarterly Receivables & Inventory as a % of Previous 12 Months Sales 60% $35,000 Trade Receivables and Net Sales 55% 50% Prior Year Current Year $30,000 $25,000 45% 40% 35% 30% 25% $ Millions $20,000 $15,000 $10,000 $5,000 20% $0 Trade Receivables Net Sales

37 Deere Quarterly Dividends Declared* Q Q $0.45 $0.40 $0.41 $0.35 $0.35 $0.30 $0.28 $0.30 $0.25 $0.20 $0.20 $0.22 $0.25 $0.15 $0.10 $0.11 $0.14 $0.16 $0.05 $0.00 '03 Q1 Q2 Q3 Q4 '04 Q1 Q2 Q3 Q4 '05 Q1 Q2 Q3 Q4 '06 Q1 Q2 Q3 Q4 '07 Q1 Q2 Q3 Q4 '08 Q1 Q2 Q3 Q4 '09 Q1 Q2 Q3 Q4 '10 Q1 Q2 Q3 Q4 '11 Q1 Q2 Q3 Q4 * Adjusted for 2 for 1 stock split on 26 November

38 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 Net Sales and Revenues per Employee $500 $400 $ Thousands $300 $200 $100 $

39 Manufacturing Efficiencies Waterloo, IA Journey to a 6-Day Drive Train Days Relocation of 412 machines Eliminated 155 machines Days Machining departments based on part families Arranged machines using cellular concepts Started evacuation of multi-story buildings 35 Production Days Days Total evacuation of multi-story buildings New heat treat fully operational Set-up improvement On-site forging storage Insourcing of core processes -2 Days Run size optimization and set-up improvement Daily run size parameters 5 Outsourcing non-core processes 0 Prior to

40 Investment in New Products and Technologies $1,400 R&D as Percent of Net Sales 6.00% $1,200 $1,000 $800 $600 $400 $ % 4.00% 3.00% 2.00% 1.00% $ % Deere R&D $ Deere % Competitor A % Competitor B % Competitor C % Source: Deere & Company and competitor SEC filings 40

41 Committed Bank Group Supports Credit Facility Average length of continuous relationship = ~29 Years $5.00 billion credit facility supporting commercial paper $2.75 billion 49-month facility expiring in 2015 $1.50 billion 37-month facility expiring in 2013 $750 million 364-day facility expiring in 2012 Have not drawn on facility $3.7 billion incremental capacity as of 31 October 2011 $6,000 Credit Facility Size & Commercial Paper Outstanding $5,000 $ Millions $4,000 $3,000 $2,000 $1,000 $ Total Facility CP Outstanding as of October 31 41

42 Net Sales by Product Category Equipment Operations - Fiscal Year 2011 Agriculture & Turf Construction & Forestry Turf Other CWP Other Large Ag Forestry Small Ag Construction 42

43 Global Markets and Opportunities

44 Growing Global Presence FY 2011 equipment net sales outside U.S. & Canada over 4x the level in FY 2000 $14,000 Net Sales Outside U.S. and Canada 50% $12,000 45% $ Millions $10,000 $8,000 $6,000 $4,000 $2,000 40% 35% 30% 25% $ % Net Sales Outside U.S. & Canada % of Total Net Sales 44

45 Net Sales by Major Markets Fiscal Years 2011, 2010, 2009, 2008 (in millions of dollars) % Change United States 15,029 13,026 15% 11,568 13,166 Canada 2,329 1,767 32% 1,454 1,902 Western Europe 4,382 3,360 30% 3,427 4,610 Central Europe & CIS 1, % 749 1,874 Central & South America 3,612 2,623 38% 1,787 2,577 Asia, Africa & Middle East 1,930 1,431 35% 1,166 1,062 Asia Pacific, Australia & New Zealand % Total 29,466 23,573 25% 20,756 25,803 45

46 Significant Commitments to Important Markets EU 27 Arable land of ~ 104 million hectares 1 Approximately 74 million hectares of permanent crop and pasture / grassland Produced 296 million metric tons of cereal grain in Series Round Baler with 6R Tractor Recent Announcements: June 2011 Largest new product introduction for region Over 100 new products 80% of large (140+ horsepower) tractor and combine models new or updated Focus on Dealer of Tomorrow strategy May 2011 John Deere and Kuhn Group sign strategic cooperation Provides large square balers into Region 2 in 2012 Adds key product offering for livestock, commercial and contractor customers 1 eurostat: Pocket Book 2010 edition, Agricultural Statistics S-Series Combine 900 Series Sprayer with 6R Tractor 46

47 Significant Commitments to Important Markets Brazil Brazil converted ~14 million hectares from pasture land into crop land in last 10 years - Soybeans and sugar cane Deere projects ~20 million hectares will be brought into production in the next decade - Soybeans and corn Deere projects a ~5% CAGR in industry equipment sales over the next decade Montenegro, Brazil Tractor Factory Horizontina, Brazil Combine Factory Catalão, Brazil Sugarcane Harvester Factory Recent Announcements: October 2011 Plan to build two new factories in São Paulo to manufacture construction equipment One solely owned Deere factory to manufacture backhoe loaders and four-wheel drive loaders Partner with Hitachi Construction Machinery Co. to manufacture excavators in a second factory 47

48 Significant Commitments to Important Markets CIS Russian Federation ~1.7 billion hectares of total land mass Approximately million hectares of arable land Approximately million hectares could come back into use Approximately 20 million hectares for production agriculture; remaining 20 million for other agricultural purposes, such as grazing Deere estimates western-style equipment used <25% of farmed hectares > 70 dealer locations Additional ~60 million hectares of arable land in Belarus, Ukraine and Kazakhstan Deere construction dealers and forestry distributors cover majority of Russia market Orenburg, Russia Seeding Assembly Factory Recent Announcements: Domodedovo, Leased Assembly Facility Kaluga Region, Land owned for future expansion March 2011 Plan to double the manufacturing space at the Domodedovo production facility near Moscow and add new products such as log forwarders Plans also include establishing a leasing company in Russia for the sale of agriculture, construction and forestry machinery 48

49 Significant Commitments to Important Markets India Constant land available for Ag (~142 million hectares) Infrastructure investment projected to be ~9% of GDP by 2012 (~4.6% in 2008) Annual industry tractor sales >400,000 units -Launch of 5038D (38 hp) has significantly contributed to John Deere s growth in India -5036C and 5041C tractors introduced in June Designed and developed in India specifically for the India market -Targets the largest segment of the India tractor market (31 40 horsepower) -Export opportunities to select markets John Deere is the largest exporter of tractors from India Pune, India Tractor Factory Recent Announcements: Pune, India Technology Center Sirhind, India Combine Assembly Facility Chennai, India Backhoe and 4-Wheel Drive Loader JV January ~ $100 million investment to build a new tractor factory and expand current tractor facility in Pune 49

50 Significant Commitments to Important Markets China Broad presence in market 5 operations in place Government support of agriculture Central government spending on rural areas and farmers increased by 20% to 716 billion RMB in 2009 The government raised minimum state purchasing prices for grain by 13-15% in 2009 Tianjin, China Drivetrain Factory Tianjin, China Tractor Joint Venture Ningbo, China Tractor Factory Jiamusi, China Combine Factory Xuzhou, China XCG Excavator JV Recent Announcements: May ~ $60 million investment to build new factory at Tianjin location to manufacture engines for use in John Deere equipment built in China May ~ $80 million initial outlay to build new factory to manufacture mid- and large-sized tractors, sprayers, planters and harvesting equipment December ~ $50 million investment to build new factory to manufacture construction equipment 50

51 John Deere FarmSight TM Integrated wireless technology linking the equipment, owners, operators, dealers, and agricultural consultants to provide more productivity to a farm or business. Machine Optimization Solutions that get the most out of machinery Use of precision technology and wireless data networks Higher levels of productivity and increased uptime Logistics Optimization Manage logistics and machinery from remote locations Fleet management solutions Increased machine-to-machine communication Ag Decision Support User-friendly monitors, sensors, wireless networks Easy access to machinery and agronomic data Enable proactive management decisions 51

52 John Deere Financial Services

53 John Deere Financial $28.1 Billion Owned Portfolio at 31 October 2011 Portfolio Composition by Market Portfolio Composition by Geography Portfolio Composition by Product C&F 13% Latin America 6% Australia 3% Revolving Credit 9% Europe 7% Leasing 12% Installment Financing 58% Canada 12% Ag & Turf 87% U.S. 72% Wholesale / Floorplan 21% Information above includes all Deere lending activities worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 53

54 John Deere Capital Corporation Profitability and Growth Net Income ($ Millions) Administered Portfolio Growth ($ Billions) Write-offs/Average Owned Portfolio 0.28% 0.16% 0.22% 0.29% 0.33% 0.70% 0.48% 0.12%

55 John Deere Capital Corporation Retail Notes 60+ Days Past Due vs. Write-offs Agriculture & Turf % 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% Extremely low write-offs; average less than 5 bps over last 10 years Even in severe Ag market of the 1980s, losses were comparatively low Construction & Forestry 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% The performance and quality of portfolio improved during % '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 Net Write-offs (Ag) Installments 60+DPD (Ag) -0.05% '95 '98 '01 '04 '07 '10 Net Write-offs (C&F) Installments 60+DPD (C&F) (1) includes Construction; includes Lawn & Grounds Care; beginning in 2009 includes both Ag and Turf equipment; As % of Owned Losses After Dealer Reserve Charges Source: internal reporting, JDCC 10-K filings, 2011 Deere & Company 8-K filed with SEC 23 November

56 U.S. Resale Value vs. Loan Balance 7830 Tractor and 9670 Combine 7830 Tractor (1) 9670 Combine (2) 110% 110% 100% 100% Resale Value as a % of Original List Price 90% 80% 70% 60% 50% 40% 30% 20% 10% Loan Balance Resale Value as a % of Original List Price 90% 80% 70% 60% 50% 40% 30% 20% 10% Loan Balance 0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Time Since Origination 0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Time Since Origination Model Year Model Year (1) Model 7810 was replaced with Model 7820 in In 2007 the 7830 series was introduced to the market. Loan balance assumes a 30% down payment on the highest list price financed for 5 years with annual payments at a rate of 6.3%. (2) Model 9650 was replaced with Model 9660 in Model 9660 was subsequently replaced with Model 9670 in Loan balance assumes a 30% down payment on the highest list price financed for 5 years with annual payments at a rate of 6.3%. Source for equipment values: North American Equipment Dealers Association 56

57 John Deere Power Systems Engine Emissions and Technology

58 Tier 4 Engine Implementation Interim Tier 4 (IT4): 50% Nitrogen Oxide (NOx) reduction 90% Particulate Matter (PM) reduction 100 hp emission break removed Final Tier 4 (FT4): 80% NOx reduction 175 hp emission break removed Same regulations from hp Tier 1 PM, g/kw-hr Interim Tier 4 Tier 3 Tier 2 Final Tier NOx, g/kw-hr 58

59 Interim Tier 4 Building on Proven Technology & Fuel Efficiency Decision to use cooled exhaust gas recirculation (EGR) with diesel oxidation catalyst (DOC)/diesel particulate filter (DPF) driven by customer focus and needs analysis A simple solution No additional fluids (Urea) More operator friendly Less complex to maintain A fuel efficient solution optimal performance & fuel-choice flexibility Tier 3/Stage IIIA cooled EGR John Deere 8320R rated the most fuel efficient tractor ever reviewed at the Nebraska Test Lab Operate efficiently with low-sulfur diesel and B5-B20 blends A field proven solution Since 2005, John Deere cooled EGR engines have a proven record of reliability in on-the-farm use An integrated vehicle solution John Deere designs, manufactures and services the engine, drivetrain, hydraulics, cooling and electrical systems John Deere Precision Farming Technology delivers input and labor savings to increase yields A fully supported solution John Deere dealers worldwide are highly trained to provide service and support as well as increase productivity / reliability / utilization of Deere machines 59

60 Farm Fundamentals

61 U.S. Farm Cash Receipts Operating Cash Receipts and Government Payments Total cash receipts remain at historically high levels Record levels expected for 2011 $400 $350 $300 $ Billions $250 $200 $150 $100 $50 $ F 2012F Government Payments Total Cash Receipts Source: : USDA 29 November F 2012F: Deere & Company Forecast as of 23 November

62 U.S. Farm Balance Sheet Strong $2,500 30% 28% $2,000 26% 24% $1,500 22% $ Billions $1,000 20% 18% 16% $500 14% 12% $ F 2012F Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) 10% Source: : USDA 29 November F 2012F: Deere & Company Forecast as of 23 November

63 Corn, Soybeans, Wheat and Cotton Prices Nearby Futures: 28 November November 2011 Dollars Per Bushel Corn /28/06 11/28/07 11/28/08 11/28/09 11/28/10 11/28/11 Dollars per Bushel Soybeans /28/06 11/28/07 11/28/08 11/28/09 11/28/10 11/28/11 Dollars per Bushel Wheat /28/06 11/28/07 11/28/08 11/28/09 11/28/10 11/28/11 Dollars per Pound Cotton /28/06 11/28/07 11/28/08 11/28/09 11/28/10 11/28/11 Source: Chicago Board of Trade Corn, Soybeans & Wheat; Intercontinental Exchange Cotton 63

64 Agricultural Growth Energy 2007 U.S. Energy Bill Significantly expanded mandatory levels of renewable fuels Gallons (billions) Corn-Based Starch Ethanol Advanced Biofuels Source: Energy Independence and Security Act of

65 Uses of U.S. Corn Crop Bushels (millions) 25,000 20,000 15,000 10,000 5, % 36.5% 36.0% 35.5% 35.0% 34.5% 34.0% 33.5% 33.0% 32.5% 32.0% Feed & residual Food, Seed, & Industrial (Less Ethanol) Ethanol for Fuel as % of Total Corn Usage Source: USDA Agricultural Projections to 2020, February 2011 Ethanol for fuel Exports 65

66 World Farm Fundamentals Global Stocks-To-Use Ratios 70% 60% Cotton 50% 40% Wheat 30% 20% 10% Corn Soybeans 0% E 2011P Source: USDA - 9 November

67 Agricultural Growth Energy U.S. Ethanol 6,000 U.S. Corn Used In Ethanol 5,000 4,000 Bushels (millions) 3,000 2,000 1, /00 01/02 03/04 05/06 07/08 09/10F 11/12F 13/14F 15/16F Source: Informa November

68 Daily Ethanol Margin Per Bushel Corn Grind Based on Nearby Futures Prices (Excl ITDA*) $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 ($0.50) 11/15/07 2/15/08 5/15/08 8/15/08 11/15/08 2/15/09 5/15/09 8/15/09 11/15/09 2/15/10 5/15/10 8/15/10 11/15/10 2/15/11 5/15/11 8/15/11 11/15/11 *Interest, Tax, Depreciation and Amortization (ITDA) totals ~$0.50 and is often disregarded in margin calculations because it does not influence short term production decisions Source: Informa November

69 Market and Currency Volatility

70 Volatility / Uncertainty Metrics Updated as of 31 October 2011 Percentage Points Spread over Treasuries (bps) Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan VIX (Chicago Board Options Exchange Market Volatility Index) Avg.: Aug 08 Avg.: 20 Sep 08-Dec 09 Avg.: Avg.: YTD Avg.: Oct 11: 30 'A' Industrial Index 3-Year Spread Avg.: Aug 08 Avg.: 113 Sep 08-Dec 09 Avg.: Avg.: YTD Avg.: Oct 11: 68 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Spread over T-Bill (bps) Basis Points Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 1, TED Spread (Spread differential between 3M LIBOR and 3M T-Bill) Avg.: Aug 08 Avg.: 95 Sep 08-Dec 09 Avg.: Avg.: YTD Avg.: Oct 11: 42 GECC 5 Yr CDS Avg.: Aug 08 Avg.: 65 Sep 08-Dec 09 Avg.: Avg.: YTD Avg.: Oct 11: Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 70

71 Currency Movement Post Credit Crisis FY 2007 FY 2008 FY 2009 FY 2010 FY2011 Stronger FC Indexed Value Weaker FC EUR GBP AUD JPY CAD BRL 71

72 Appendix

73 Enterprise SVA Reconciliation to GAAP (millions of dollars unless stated otherwise) Equipment Operations Net Sales 11,077 11,703 13,349 17,673 19,401 19,884 21,489 25,803 20,756 23,573 29,466 Average Identifiable Assets With Inventories at LIFO 8,743 6,229 5,965 6,482 7,248 7,546 8,092 9,652 9,647 9,196 11,516 With Inventories at Standard Cost 9,678 7,147 6,925 7,477 8,312 8,634 9,205 10,812 10,950 10,494 12,875 Operating Profit (46) ,905 1,842 1,905 2,318 2,927 1,365 2,909 3,839 Percent of Net Sales -0.4% 3.4% 5.3% 10.8% 9.5% 9.6% 10.8% 11.3% 6.6% 12.3% 13.0% Operating Return on Assets With Inventories at LIFO -0.5% 6.4% 11.9% 29.4% 25.4% 25.2% 28.6% 30.3% 14.1% 31.6% 33.3% With Inventories at Standard Cost -0.5% 5.6% 10.2% 25.5% 22.2% 22.1% 25.2% 27.1% 12.5% 27.7% 29.8% SVA Cost of Assets (1,162) (858) (831) (897) (998) (1,036) (1,094) (1,284) (1,301) (1,259) (1,545) SVA (1,208) (457) (123) 1, ,224 1, ,650 2,294 Financial Services Net Income Average Equity 2,115 2,177 2,265 2,227 2,466 2,524 2,355 2,732 3,064 3,194 Return on Equity 12.4% 15.2% 13.6% 15.5% 23.7% 14.4% 14.3% 7.4% 12.2% 14.7% Operating Profit Continuing Change in Allowance for Doubtful Receivables (8) (12) (4) 68 (14) - SVA Income Continuing Average Equity Continuing Operations 2,115 2,177 2,163 2,110 2,424 2,524 2,355 2,732 3,064 3,194 Average Allowance for Doubtful Receivables SVA Average Equity 2,276 2,337 2,328 2,260 2,572 2,691 2,538 2,927 3,296 3,194 Cost of Equity (437) (431) (414) (410) (457) (480) (430) (458) (420) (492) SVA Continuing Operations (148) SVA Discontinued Operations (11) SVA (5) (148) Consolidated SVA (462) (33) 1, ,314 1,702 (84) 1,715 2,527 73

74 Equipment Ops SVA Reconciliation to GAAP (millions of dollars unless stated otherwise) Equipment Operations Net Sales 5,848 5,723 6,479 7,663 8,830 9,640 11,082 11,926 9,701 11,169 11,077 Average Identifiable Assets With Inventories at LIFO 5,585 5,765 5,449 5,551 6,187 6,502 6,682 7,672 7,724 8,069 8,743 With Inventories at Standard Cost 6,702 6,846 6,442 6,494 7,131 7,488 7,703 8,711 8,739 9,039 9,678 Operating Profit ,006 1,125 1,402 1, (46) Percent of Net Sales 0.3% 1.3% 3.7% 11.1% 11.4% 11.7% 12.7% 12.4% 2.8% 6.2% -0.4% Operating Return on Assets With Inventories at LIFO 0.3% 1.3% 4.4% 15.3% 16.3% 17.3% 21.0% 19.4% 3.5% 8.6% -0.5% With Inventories at Standard Cost 0.2% 1.1% 3.8% 13.0% 14.1% 15.0% 18.2% 17.0% 3.1% 7.7% -0.5% SVA Cost of Assets (804) (821) (773) (779) (856) (899) (925) (1,046) (1,048) (1,085) (1,162) SVA (788) (744) (531) (776) (392) (1,208) Equipment Operations Net Sales 11,703 13,349 17,673 19,401 19,884 21,489 25,803 20,756 23,573 29,466 Average Identifiable Assets With Inventories at LIFO 6,229 5,965 6,482 7,248 7,546 8,092 9,652 9,647 9,196 11,516 With Inventories at Standard Cost 7,147 6,925 7,477 8,312 8,634 9,205 10,812 10,950 10,494 12,875 Operating Profit ,905 1,842 1,905 2,318 2,927 1,365 2,909 3,839 Percent of Net Sales 3.4% 5.3% 10.8% 9.5% 9.6% 10.8% 11.3% 6.6% 12.3% 13.0% Operating Return on Assets With Inventories at LIFO 6.4% 11.9% 29.4% 25.4% 25.2% 28.6% 30.3% 14.1% 31.6% 33.3% With Inventories at Standard Cost 5.6% 10.2% 25.5% 22.2% 22.1% 25.2% 27.1% 12.5% 27.7% 29.8% SVA Cost of Assets (858) (831) (897) (998) (1,036) (1,094) (1,284) (1,301) (1,259) (1,545) SVA (457) (123) 1, ,224 1, ,650 2,294 74

75 2009 OROA Reconciliation to GAAP Equipment Operations (millions of dollars unless stated otherwise) Equipment Operations 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, ,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% 75