Deere 2012 sept oct Presentation[1]

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Deere's September October Investor Presentation 2012

Transcript

John Deere

Committed to Those Linked to the Land

Deere & Company September / October 2012

Safe Harbor Statement & DisclosuresThis 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 Deeres 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 companys most recent earnings release and conference call (15 August 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 Deeres securities.

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Table of Contents Slide #John Deere Strategy Macroeconomic Tailwinds Foundational Success Factors Global Markets and Opportunities John Deere Financial Services John Deere Power Systems Farm Fundamentals Market and Currency Volatility Appendix 4 19 26 38 69 75 78 87 90

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September / October 2012

John Deere Strategy

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September / October 2012

The John Deere Strategy

Our Purpose: Committed to those linked to the land

No longer business as usual Global macro-trends present significant

opportunities for John Deere Global infrastructure needs

Global population and income growth8360R Tractor

New customer segments Technology advances744K Wheel Loader S690 Combine

460E Articulated Dump Truck

843K Wheeled Feller Buncher

X728 Riding Mower

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September / October 2012

The John Deere Strategy

Realizing Sustainable Growth Through Global Expansion

Sustainable SVA growth is delivered by distinctively serving our customers, employees, and investors 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 (US/Canada, EU 27, Brazil, CIS/Russia, India, China) in a manner that meets local needs while leveraging our global scale

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The John Deere Strategy

Agricultural and Construction Equipment Aspirations

Agricultural Equipment Solutions Strategy Defend and grow market share in developed markets Grow market share in developing markets

9530T Tractor - USA

6488 Combine - China

Construction Equipment Solutions Strategy Continue to grow strong #2 position in North America Globalize the business755K Crawler Loader - USA 435 Backhoe Loader - India

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The John Deere Strategy

Performance Target Aspirations

Sales Enterprise net sales of $50 billion at mid-cycle by 20182010 Normal Volume $25 billion 2018 Normal Volume $50 billion

U.S. & Canada BRIC Rest of World

ProfitabilityEquipment Operations

12.3% 6.6% 2009 2010

13.0%

Operating margins of no less than 12% at mid-cycle by 2014

2011

Equipment Operations

Asset Efficiency Asset turns of 2.5 times at midcycle by 2018

1.9

2.2

2.3

2009

2010

2011

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The John Deere StrategyIntegrated EnterpriseIntegrated portfolio of businesses, each with a vital and specific roleGlobal Growth BusinessesAgricultural and Construction Equipment Solutions Invest in global expansion for profitable growth by capitalizing on macro-trends

Complementary BusinessesTurf and Forestry Equipment Solutions Defend and grow share, enhance SVA, strengthen the channel of the Global Growth Businesses

S660i Combine

310SJ Backhoe Loader

Supporting BusinessesFinancial Services, Power Systems, Worldwide Parts, and Intelligent Solutions Group Strengthen and further differentiate our Global Growth and Complementary Businesses

XUV 550 Gator

1170E Wheeled Harvester

Financial Services

Power Systems

Worldwide Parts

Intelligent Solutions

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The John Deere StrategyBoth Foundational and Critical Success Factors necessary

Foundational and Critical Success Factorsto ensure that Deere is the provider of choice across the world

Building on the core strengths that have guided our success

FOUNDATIONAL SUCCESS FACTORS Exceptional Operating Performance Disciplined SVA Growth Aligned High-Performance Teamwork

Developing the capabilities essential to reaching our goals

CRITICAL SUCCESS FACTORS Deep Customer Understanding Deliver Customer Value World-Class Distribution System Grow Extraordinary Talent

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September / October 2012

The John Deere StrategyFoundational Success Factors

Exceptional Operating Performance - Equipment Operations 29.8% OROA in 2011, a record high for the company35% 30% 25% 20% 2009, adjusted* 15% 10% 5% 0% 80% Low 2001 100% Normal % of Normal Volume 120% High 2009 2011 2010 2007 2006 2008 2004 2005

28%

20%12% OROA (SVA Neutral)

12%2002

2003

*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.

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September / October 2012

The John Deere StrategyFoundational Success Factors

Exceptional Operating Performance - Equipment Operations SVA Model: Higher Net Cash Flow, More Consistently3,500

Adoption of SVA Model Sale of Trade Receivables to Credit

3,000

2,500

$ Millions

2,000

1,500

1,000

500

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Over $7 billion in Pension/OPEB contributions, 2001-2011

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September / October 2012

The John Deere StrategyFoundational Success Factors

Disciplined SVA Growth - Equipment Operations SVA Journey, 1991 - 20112,800 2,400 2,000

SVA ($ millions)

1,600 1,200 800 400 0 -400 -800 -1,200 -1,6001991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Note: For reconciliation of SVA to GAAP, please see Equipment Ops SVA Reconciliation to GAAP slide in Appendix

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The John Deere StrategyFoundational Success FactorsDisciplined SVA Growth - Enterprise SVA Journey, 2002 - 2011 SVA in 2011 was ~ $2.5 billion a record high for the company2,800 2,400 2,000

SVA ($ millions)

1,600 1,200 800 400 0 -400 -800 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Note: For reconciliation of SVA to GAAP, please see Equipment Ops SVA Reconciliation to GAAP slide in Appendix

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September / October 2012

The John Deere StrategyFoundational Success FactorsAligned 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 Applies one enterprise-wide bonus metric 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)

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The John Deere StrategyMeasuresCommitment to execute and monitor all initiatives critical to our successPerformance measures Traditional financial measures based on what we are delivering today to our stakeholdersMetric Sales Profitability Asset Efficiency Net Sales Growth Target Return on Sales (Operating Margin) Asset Turns Target $50B* (2018, at mid-cycle) 12% (2014, at mid-cycle) 2.5x (2018, at mid-cycle)

*Implies a CAGR of ~ 9% (2010 2018) vs. historical CAGR of 7-8%

Health measures The qualities, attributes and actions being introduced to ensure the sustainability of our performance over timeMetric Exceptional Operating Performance Disciplined SVA Growth Aligned High- Performance Teamwork Quality Sales/SVA Mix by Geography Employee Engagement Target % JDQPS certification % Non- U.S. & Canada Employee Surveys Engagement Index

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The John Deere StrategyIn SummaryAccelerated 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 profitability12% mid-cycle margin by 2014

Continued adherence to OROA/SVA model30% OROA at mid-cycle sales (12% at trough) with improved asset turns

Focus on two growth platformsGlobal 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 directionPerformance metrics align compensation to strategy Health metrics introduced to monitor underlying factors (e.g., market share, quality) to ensure performance is sustainable

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Macroeconomic TailwindsSupport John Deeres Global Growth Businesses

Long-Term Macroeconomic TailwindsSupport Global Growth OpportunitiesPopulation growing in size and affluence By 2050, world population will reach 9 billion, up from ~7 billion today, with most of population growth in Asia and Africa Large middle class developing in China and India

Opportunity #1: Feeding the world Agricultural output must double by 2050 Gross output must increase 3.4% annually in the next 10 years vs. 2.4% annual growth in past 10 years Natural resources under strain, especially water

Opportunity #2: Massive urbanization Migration from rural areas creates need for infrastructure development 2010: For the first time in history, more than half the world population lives in cities 2050: More than 70 percent will live in cities

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September / October 2012

Strong Global Tailwinds in Ag & ConstructionSignificant Growth from Developing EconomiesAgriculture and Construction amongst the Top 10 industry sectors in the G-20 countries . . .Absolute increase in real value added 2009-18, $ Billions 3,625 2,301 1,805 1,315 1,052 757 647 575 462 381 351 331 321 289 88 CAGR 2009-18 Percent 3.1 2.3 5.3 2.9 5.2 4.0 4.1 3.0 3.2 3.4 2.9 2.7 4.8 3.8 3.8

. . . Significant growth in Agriculture and Construction between 2009-2018 will happen in the BRIC countriesShare of growth from BRIC1 71% 71% 61% 58% 58% 49% 46% 39% 36% 36% 34% 34% 26% 24% 17%

SectorManufacturing Real Estate and Business Activities Wholesale and Retail Trade Transport, Storage and Telecommunication Financial Intermediation Construction Health and Social Services Public Administration and Defense, Compulsory Social Security Education Agriculture Social and Personal Services Utilities Mining Hotels and Restaurants Private Household Services

Sector Private Household Services Agriculture Mining Manufacturing Utilities Transport, Storage and Telecommunication Construction Wholesale and Retail Trade Financial Intermediation Public Administration and Defense, Compulsory Social Security Education Hotels and Restaurants Social and Personal Services Real Estate and Business Activities Health and Social Services

Note: G20 countries account for 73% and 89% of agriculture and construction segments respectively. Total global growth for agriculture is $520B and construction is $854B

1Brazil,

Russia, India, China

Real value-added 2005 USD

Source: Global Insight World Industry Service

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Developing Economies Growing FasterWhile developed economies have always accounted for a larger share of GDP . . .Real GDP1 $ Trillions CAGR, 1970-2008 46.6 Percent

their growth will slow significantly, relative to that of developing economies...

Real GDP1 $ Trillions

3.828.1 5.2 11.3 1.310.0

12.0

6.1 1.9x

3.065.5 46.6 12.034.6

CAGR, 2008-2039 115.3 Percent 53.3 4.9 2.6x62.0

34.6 22.9

3.3

22.543.0

1.9

1970Developing1

1990Developed

2008

2008

2020

2039

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

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Dynamics of Food DemandPer Capita Income

Services

>$10 per day

Processed Products

$2.50-10 per day

Livestock Products

27% of worlds population (Most hunger problems solved at $2.50 threshold)

$1.25-2.50 per day

Commodities

20% of worlds population (2/3rds experience hunger & malnutrition)