John Deere Committed to Those Linked to the Land. Deere & Company December 2012 / January 2013

Transcription

1 John Deere Committed to Those Linked to the Land Deere & Company December 2012 / January 2013

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 (21 November 2012). 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 in Review 6 Looking Ahead 11 Supplemental Information: Foundational Success Factors 20 Global Markets and Opportunities 30 John Deere Financial Services 48 Farm Fundamentals 51 Appendix 55 3

4 John Deere Strategy

5 5

6 2012 in Review

7 2012 in Review Equipment Operations Exceptional Results Record net sales $ billion Record net income $3.065 billion Attributable to Deere & Company 13.1% operating profit margin Cash flow from operations $2.9 billion SVA $2.602 billion OROA 29.4% 7

8 Net Sales by Major Market Equipment Operations U.S. & Canada 9% CAGR $15.1 $14.8 $13.8 $13.0 $17.4 $20.8 Western Europe 2% CAGR $3.9 $4.6 $4.4 $4.3 $3.4 $3.4 Central Europe & CIS 11% CAGR $1.9 $1.4 $1.7 $1.0 $0.7 $ Asia, Africa & Middle East 21% CAGR $0.8 $1.1 $1.2 $1.4 $1.9 $2.1 Central & South America 18% CAGR $3.6 $3.6 $2.6 $2.6 $1.6 $ Australia & New Zealand 20% CAGR $0.4 $0.6 $0.6 $0.6 $0.8 $

9 2012 in Review Investments in the Business Capex and R&D for equipment operations ~ $2.750 billion Announced three capacity increases in the United States Established financial services operations in Russia, India, Chile, and Thailand Capital Returned to Shareholders Operating cash flow returned to shareholders ~ 75% Quarterly dividend increased to $0.46 per share (+12%) Shares repurchased 20.2 million shares 9

10 Sources and Uses of Cash Fiscal Equipment Operations $27,000 $24,000 $668 = Source of Cash = Use of Cash $21,000 $6,530 $18,000 $1,081 $101 $ Millions $15,000 $12,000 $9,000 $19,326 $3,967 $7,720 $6,000 $3,000 $0 $4,287 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 ~60% of cash from operations returned to shareholders Dividends Share Repurchase, net of Common Stock Issuances (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 $974 Other (1) $3,908 Ending Cash & Cash Equivalents (10/31/12) Source: Deere & Company SEC filings 10

11 Looking Ahead

12 Fiscal Year 2013 Outlook Equipment Operations Strong Company Outlook Net sales up ~ 5% vs. FY 2012 Net income ~ $3.2 billion Attributable to Deere & Company Strong operating profit margins Cash flow from operations ~ $3.4 billion Deere & Company Forecast as of 21 November

13 Global Growth Equipment Operations Absorbing Our Investments to Grow the Business Capital expenditures 2012 ~ $1.3 billion 2013 forecast ~ $1.3 billion SA&G expense 2012 ~ $3.0 billion 2013 forecast up ~ 7% R&D expense 2012 ~ $1.4 billion 2013 forecast up ~ 3% Deere & Company Forecast as of 21 November

14 Global Growth Major Equipment Factory Investments Waterloo, IA, USA A&T Division Foundry Waterloo, IA, USA A&T Division Ag Tractors Domodedovo, Russia A&T and C&F Division Tractors Combine Harvesters Combine Front-End Equipment Backhoes, Loaders, Graders Skidders Orenburg, Russia A&T Division Seeding Equipment Tillage Equipment Spraying Equipment Valley City, ND, USA A&T Division Seeding Equipment Tillage Equipment Des Moines, IA, USA A&T Division Spraying Equipment Cotton Harvesting Equipment Tillage Equipment Seeding Equipment Indaiatuba, Brazil C&F Division Backhoe Loaders 4WD Loaders Moline, IL, USA A&T Division Planting Equipment Moline, IL, USA Cylinder Division Hydraulic Cylinders Davenport, IA, USA C&F Division Articulated Dump Trucks 4WD Loaders Motor Graders Skidders Wheeled Feller Bunchers Harbin, China A&T Division Combine Front-End Equipment Tractors Planters Sprayers Irrigation Products Tianjin (TEDA), China C&F Division 4WD Loaders Excavators Tianjin (TEDA), China John Deere Power Systems Engines Rosario, Argentina A&T Divison and John Deere Power Systems Engines Tractors Combines Indaiatuba, Brazil (JV) C&F Division Excavators Pune, India A&T Division Engines Transmissions Tractors Dewas, India A&T Division Tractors New Factories Major Expansions or Modernizations 14

15 Global Growth Investments in New Products 644K Hybrid Loader Industry-first hybrid electric wheel loader 6210R Tractor High HP utility solution for livestock and arable segments R40 STC Combine John Deere s first small track combine S-Series Combine Can harvest 350+ acres per day; available in 45 countries E-Series ADT First entirely Deere-designed articulated dump truck WL56 Loader Lower-priced platform for overseas markets Deere & Company Forecast as of 21 November Sprayer Local production in Brazil; qualifies for FINAME financing 15

16 Global Growth Financial Services and Intelligent Solutions Supporting our Global Growth Financial Services expanding into growth regions Russia, China, India, Chile, and Thailand EU-27 expanding coverage to majority of countries Intelligent Solutions John Deere FarmSight TM JDLink Telematics Connection All large Ag machines Remote Customer Support Remote Display Access Service Advisor Remote Machine Sync John Deere Field Connect John Deere Mobile Farm Manager Deere & Company Forecast as of 21 November

17 Engine Emissions Interim Tier 4 Successful Transition Integrated vehicle solution Meeting customer performance and reliability requirements Nearly 60 applications launched* More than 40,000 engines in the field with >15 million customer hours* Warranty claims on 9.0L engine 33% lower compared to Tier 3 Fuel economy 1-5% better than competitive equipment on tractors with 9.0L engine** * As of 31 October 2012 ** Per Nebraska Tractor Test Laboratory results 17

18 Engine Emissions Final Tier 4 it4 success gives confidence in our ability to meet FT4 challenges Challenge to absorb costs of continuing new emissions technologies SCR introduces packaging and other new challenges DEF freezing can be a concern in colder climates Shorter implementation horizon than it4 More applications to transition to FT4 than past programs Maintain Tier 2 and Tier 3 solutions for global markets 18

19 Feet on the Ground, Eyes on the Horizon Feet on the Ground Cautiously optimistic in the near-term Fiscal Cliff and Euro Zone could prove to be major disruptors to our 2013 plan Prepared to pull levers if needed Eyes on the Horizon Global economy supports our confidence in long-term macroeconomic trends By 2050 World population will reach ~ 9 billion Agricultural output must double Migration from rural areas creates boom for infrastructure Making the global investments to meet these challenges Performance the past three years supports confidence in the John Deere Strategy and our 2018 Ambitions 19

20 Supplemental Information Foundational Success Factors

21 Foundational Success Factors Operating Return on Operating Assets (OROA) Exceptional Operating Performance - Equipment Operations 29.4% OROA in % 30% 25% 20% 15% 10% , adjusted* % % % OROA (SVA Neutral) 28% 5% % % 80% Low 100% 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 21

22 Foundational Success Factors Cash Flow From Operations Exceptional Operating Performance - Equipment Operations Higher Net 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 $7.5 billion in Pension/OPEB contributions,

23 Foundational Success Factors Shareholder Value Added (SVA) Disciplined SVA Growth - Equipment Operations SVA Journey, ,800 2,400 2,000 1,600 SVA ($ millions) 1, ,200-1, Note: For reconciliation of SVA to GAAP, please see Equipment Ops SVA Reconciliation to GAAP slide in Appendix 23

24 Asset Management Dramatic Reduction in Asset Intensity Avoided ~ $7.5 billion in working capital in 2012 vs Receivable level in 2012 consistent with 1998, with almost 3x the sales Quarterly Receivables & Inventory as a % of Previous 12 Months Sales 60% $40,000 Trade Receivables and Net Sales 55% $35,000 50% 45% Prior Year Current Year $30,000 $25,000 40% 35% $ Millions $20,000 $15,000 30% $10,000 25% $5,000 20% $0 Trade Receivables Net Sales

25 Investment in New Products and Technologies $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 R&D as Percent of Net Sales % 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Deere R&D $ Deere % Competitor A % Competitor B % Competitor C % Source: Deere & Company and competitor SEC filings 25

26 Net Sales by Product Category Equipment Operations - Fiscal Year 2012 Agriculture & Turf $27.1B Construction & Forestry $6.4B Turf Other CWP Other Large Ag Forestry Small Ag Construction 26

27 Deere Use-of-Cash Priorities Cash from Operations Committed to A Rating Manage the balance sheet, including liquidity, to support a rating that provides access to low-cost and readily available short- and long-term funding mechanisms Reflects the strategic nature of our financial services operation Fund Operating and Growth Needs Fund value-creating investments in our businesses Common Stock Dividend Consistently and moderately raise dividend targeting a 25%- 35% payout ratio of mid-cycle earnings Share Repurchase Consider share repurchase as a means to deploy excess cash to shareholders, once above requirements are met and repurchase is viewed as value-enhancing 27

28 Share Repurchase As Part of Publicly Announced Plans Cumulative cost of repurchases : Amount remaining on May 2008 authorization of $5 billion: ~ $9.2 billion ~ $2.5 billion 31 October 2012 period ended shares (basic): ~ million Shares repurchased : (diluted): ~ million ~ million Average repurchase price : $57.10 Actual Shares Repurchased* (in millions) Total Amount** (in billions) $ $ $ $ $ $ $ $ $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

29 Deere Quarterly Dividends Declared* Q Q $0.50 $0.45 $0.40 $0.41 $0.46 $0.35 $0.35 $0.30 $0.28 $0.30 $0.25 $0.20 $0.15 $0.10 $0.11 $0.14 $0.16 $0.20 $0.22 $0.25 Dividend raised 64% since launch of the revised John Deere Strategy in 2010** $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 '12 Q1 Q2 Q3 Q4 * Adjusted for 2 for 1 stock split on 26 November 2007 ** See slide 5 for revised John Deere Strategy 29

30 Supplemental Information Global Markets and Opportunities

31 Net Sales by Major Markets Fiscal Years 2012, 2011, 2010, 2009 (in millions of dollars) % Change United States 18,128 15, % 13,027 11,568 Canada 2,679 2, % 1,767 1,454 Western Europe 4,271 4,382-3% 3,360 3,427 Central Europe & CIS 1,720 1, % Central & South America 3,589 3,613-1% 2,623 1,787 Asia, Africa & Middle East 2,124 1, % 1,430 1,166 Australia & New Zealand % Total 33,501 29, % 23,573 20,756 31

32 U.S. and Canada Factory Locations British Columbia, Canada Log Loaders & Specialty Products Alberta, Canada Remanufactured Components North Dakota, USA Air Seeding Equipment Electronics Wisconsin, USA Lawn & Garden Equipment Utility Vehicles Golf & Turf Reel Mowers Iowa, USA Cotton Harvesting Equipment Planting Equipment Spraying Equipment Tillage Equipment Ag Tractors Components Foundry Engines Hay & Forage Equipment Articulated Dump Trucks 4WD Loaders Motor Graders Skidders Wheeled Feller Bunchers Backhoes Compact Tracked Loaders Crawler Dozers High-Speed Dozers Knuckleboom Loaders Skid Steer Loaders Tracked Feller Bunchers Tracked Harvesters Illinois, USA Combine Harvesters Headers Planting Equipment Hydraulic Cylinders Tennessee, USA Lawn Tractors North Carolina, USA Commercial Mowers Golf & Turf Mowers Utility Vehicles Hydraulic Excavators Georgia, USA Utility Tractors Compact Utility Tractors California, USA Satellite Receivers Kansas, USA Power Transmission Equipment Missouri, USA Remanufactured Components Louisiana, USA Sugarcane Harvesting Equipment Tractor Loaders Scrapers Cotton Strippers 32

33 U.S. and Canada Recent Announcements November 2012 $58 million investment at Moline, IL planter factory to enhance efficiency and quality Waterloo Works Capacity Expansion 2008 to % June 2012 $47 million investment at Moline, IL cylinder operations to expand manufacturing capacity 15% 25% March 2012 Final Tier 4/Stage IV solution to combine proven EGR Interim Tier 4 platform with customized selective catalytic reduction (SCR) system March 2012 $70 million investment at Waterloo, IA factory to expand production of large farm tractors by 10% January 2012 Strategic agreement with MacDon to manufacture self-propelled windrowers December 2011 $85 million in capital improvements at Des Moines, IA factory to expand production of selfpropelled sprayers Deere & Company Forecast as of 21 November

34 EU 27 Factory Locations Horst, The Netherlands Spraying Equipment Zweibrücken, Germany Combine & Forage Harvesters Saran, France Engines Arc-les-Gray, France Forage Equipment Balers Ag Loaders Joensuu, Finland Wheel Forwarders Wheel Harvesters Forestry Attachments Stadtlohn, Germany Forage Harvesters Headers Gummersbach, Germany Walk-Behind Mowers Bruchsal, Germany Tractor, Harvesting & Forestry Cabs Madrid, Spain Components Mannheim, Germany Tractors 34

35 EU 27 Recent Announcements October 2012 Grand opening of new Polish branch headquarters and training center Represents a $26 million investment in the region November 2011 Awards received at Agritechnica R Tractor of the Year R tractor Machine of the Year Five silver medals June 2011 Largest new product introduction for Region 2* Over 100 new products 80% of large 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 * Region 2: EU 27, CIS (including Russia), Mediterranean countries in Africa, and the Near and Middle East 35

36 Brazil Factory Locations Catalão, Brazil Sugarcane Harvesters Sprayers São Paulo, Brazil (JV) Components Indaiatuba, Brazil Backhoe Loaders 4WD Loaders Horizontina, Brazil Combine Harvesters Planters Indaiatuba, Brazil (JV) Excavators Montenegro, Brazil Tractors Deere & Company Forecast as of 21 November 2012 Existing Under Construction 36

37 Brazil Recent Announcements October 2011 Two new factories in São Paulo to manufacture construction equipment Solely-owned Deere factory Backhoes and four-wheel-drive loaders Partner with Hitachi in second factory Excavators Expect production to begin in 2014 Agriculture portfolio and dealer expansion 50 new or updated products in 2010/2011 Dealer locations roughly doubled since 2007 Achieved about 6 points of tractor market share in 2-year period - FY 2011 and FY Deere & Company Forecast as of 21 November Carta da Anfavea, November 2011 and November

38 CIS Factory Locations Orenburg, Russia Seeding Equipment Tillage Equipment Spraying Equipment Domodedovo, Russia Tractors Combine Harvesters Combine Front-End Equipment Backhoes, Loaders, Graders Skidders Orenburg, Russia Seeding Equipment Tillage Equipment Spraying Equipment Deere & Company Forecast as of 21 November 2012 Existing Under Construction 38

39 CIS Recent Announcements November 2011 Orenburg, Russia Move existing operations to a new, larger facility Increase available manufacturing space by ~ 600 percent Expand product offering from four to fifteen models Expect production to begin in 2013 March 2011 Domodedovo, Russia Double manufacturing space at the factory Expand capacity for existing products Enable addition of new products such as front-end equipment 39

40 India Factory Locations Sirhind, India Combine Harvesters Pune, India Engines Transmissions Tractors (36-75 hp) Electronics Dewas, India Tractors (36-50 hp) Gummidipoondi, India (JV) Side-Shift Backhoes 4WD Loaders (planned production 2014) Deere & Company Forecast as of 21 November 2012 Existing Under Construction 40

41 India Recent Announcements January 2011 New tractor factory in Dewas and expand current tractor facility in Pune ~ $100 million investment Expect production in Dewas to begin in 2013 October 2010 Ashok Leyland John Deere Construction Equipment Company inauguration Production of backhoes commenced in 2011 Four-wheel-drive loader production expected in 2014 September 2010 New combine factory in Sirhind Production commenced February 2012 John Deere has been the largest exporter of tractors from India for past 8 years Deere & Company Forecast as of 21 November

42 China Factory Locations Jiamusi, China Large Combine Harvesters Corn Pickers Cotton Pickers Harbin, China Combine Front-End Equipment Tractors (150+ hp) Planters Sprayers Irrigation Products Tianjin (TEDA), China 4WD Loaders Excavators Tianjin (TEDA), China Engines Xuzhou, China (JV) Excavators Tianjin (TEDA), China Transmissions Tianjin, China (JV) Tractors ( hp) Ningbo, China Tractors (28-70 hp) Small Combine Harvesters Deere & Company Forecast as of 21 November 2012 Existing Under Construction 42

43 China Recent Announcements May 2011 New engine facility in Tianjin ~ $60 million investment Initial occupancy July 2012 Expect production to begin in 2013 May 2011 New factory in Harbin ~ $80 million initial outlay Mid- and large-sized tractors Harvesting front-end equipment Planters and sprayers Irrigation products Opened November 2012 Expect production to begin in 2013 Construction Equipment (New) Drivetrain Office (New) Engines (New) Product Test (PV&V) Tianjin Economic-Technological Development Area (TEDA) Site December 2010 New construction equipment factory in Tianjin ~ $50 million investment Initial occupancy July 2012 Expect production to begin in 2013 Deere & Company Forecast as of 21 November

44 Other Regions Factory Locations Kibbutz Beit Hashita, Israel Cotton Picker Components Monterrey, Mexico Rotary Cutters Implements Components Ramos, Mexico Ag Loaders Compact Utility Tractor Loaders Utility Tractor Cabs Torreon, Mexico Axles Engines Electronics Saltillo, Mexico Ag Tractors Transaxles Tokoroa, New Zealand Forestry Harvester Heads Rosario, Argentina Engines Tractors Combines Richards Bay, South Africa Articulated Dump Trucks Loaders 44

45 Worldwide Parts Services Supporting the Global Growth of Our Equipment Operations Highlights: Nagpur, India Announced India Parts Distribution Center target to open in 4Q 2013 Johannesburg, South Africa New Regional Distribution Center opened 4Q 2012 Rosario, Argentina New, larger Regional Distribution Center opened 4Q 2012 Stockholm, Sweden New 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 45

46 John Deere FarmSight TM Integrated wireless technology linking the equipment, managers, operators, dealers, and agricultural consultants to provide more productivity and efficiency to a farm or business. Machine Optimization 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 46

47 John Deere Water Leveraging our leadership in global agriculture to provide innovative and efficient agricultural water management solutions to enable higher crop yields Innovative solutions A leading producer of drip tape/lines worldwide Fully integrated Field Connect soil sensing system Tailored flow/spacing solutions for unique crop/field types Integration of machinery and technology Field Connect provides agronomic decision support which provides insight into key soil and crop requirements (plant, spray, harvest) Field Connect soil information designed to work in concert with Deere s on-farm eco-system Enables increased yields and higher quality crops Improves water use efficiency and reduces grower input costs Partnering with our customers Supported by our dedicated channel partners Focused on optimizing farm operations and crop output Enabling good stewardship of the environment and water resources 47

48 Supplemental Information John Deere Financial Services

49 John Deere Financial Services $31.9 Billion Owned Portfolio at 31 October 2012 Portfolio Composition by Market Portfolio Composition by Geography Portfolio Composition by Product C&F 13% Latin America 6% Europe 7% Australia 3% Leasing 12% Revolving Credit 8% Canada 12% Ag & Turf 87% U.S. 72% Wholesale / Floorplan 23% Installment Financing 57% Information above includes all Deere lending activities worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 49

50 John Deere Capital Corporation Profitability and Growth Net Income ($ Millions) Administered Portfolio Growth ($ Billions) Write-offs/Average Owned Portfolio 0.70% 0.16% 0.22% 0.29% 0.33% 0.48% 0.12% 0.05%

51 Supplemental Information Farm Fundamentals

52 U.S. Farm Cash Receipts Operating Cash Receipts and Government Payments Total cash receipts remain at historically high levels Record levels forecast for 2013 $450 $400 $350 $300 $ Billions $250 $200 $150 $100 $50 $ F 2013F Government Payments Total Cash Receipts Source: : USDA 28 August F 2013F: Deere & Company Forecast as of 21 November

53 U.S. Farm Balance Sheet Strong $3,000 30% 28% $2,500 26% $2,000 24% 22% $ Billions $1,500 $1,000 20% 18% 16% $500 14% 12% $ F 2013F Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) 10% Source: : USDA 27 November F 2013F: Deere & Company Forecast as of 21 November

54 World Farm Fundamentals Global Stocks-To-Use Ratios 80% 70% 60% Cotton 50% 40% 30% 20% 10% Wheat Corn Soybeans 0% E 2012P Source: USDA - 11 December

55 Supplemental Information Appendix

56 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% 12.6% 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% 19.3% 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% 16.9% 3.1% 7.7% -0.5% SVA Cost of Assets (804) (821) (773) (780) (856) (898) (924) (1,045) (1,049) (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 33,501 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 13,594 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 14,965 Operating Profit ,905 1,842 1,905 2,318 2,927 1,365 2,909 3,839 4,397 Percent of Net Sales 3.4% 5.3% 10.8% 9.5% 9.6% 10.8% 11.3% 6.6% 12.3% 13.0% 13.1% 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% 32.3% 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% 29.4% SVA Cost of Assets (858) (831) (897) (998) (1,036) (1,094) (1,284) (1,301) (1,259) (1,545) (1,795) SVA (457) (123) 1, ,224 1, ,650 2,294 2,602 56

57 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% 57