Deere 2012_firstquarter_confcallslides

8/2/2019 Deere 2012_firstquarter_confcallslides

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Fi r st Qu ar t e r20 12 Ea rn ings

Con f er en ce Cal l

15 February 2012


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| 1st Quarter 2012 Earnings Conference Call2

Safe Harbor St a t em ent & D isclosu r es

The earnings call and accompanying material include forward-looking comments

and information concerning the companys projections, plans and objectives forthe future, including estimates and assumptions with respect to economic,political, technological, weather, market acceptance and other factors thatimpact our businesses and customers. They also may include financialmeasures that are not in conformance with accounting principles generallyaccepted in the United States of America (GAAP). Words such as forecast,

projection, outlook, prospects, expected, estimated, will, plan,anticipate, intend, believe, or other similar words or phrases often identifyforward-looking statements. Actual results may differ materially from thoseprojected in these forward-looking statements based on a number of factorsand uncertainties. Additional information concerning factors that could causeactual results to differ materially is contained in the companys most recentForm 8-K and periodic report filed with the U.S. Securities and ExchangeCommission, and is incorporated by reference herein. Investors should refer toand consider the incorporated information on risks and uncertainties in additionto the information presented here. Investors should consider non-GAAPfinancial measures in addition to, and not as a substitute for, financial measures

prepared in accordance with GAAP. The company, except as required by law,undertakes no obligation to update or revise its forward-looking statementswhether as a result of new developments or otherwise. The call andaccompanying materials are not an offer to sell or a solicitation of offers to buyany of the companys securities.


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Fi r s t Quar t e r Overv iew

(in m illions of dollars exceptper share am ounts) Q1 2012 Q1 2011 Change

Net Sales and Revenues $6,767 $6,119 +11%

Net Sales $6,119 $5,514 +11%

Net Income

Attributable to Deere & Company$533 $514 +4%

Diluted EPS $1.30 $1.20 +8%


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Fi r s t Quar t e r Overv iewNet Sales

Equipment operations net sales: Up 11% in Q1 2012 vs. Q1 2011

Price realization: +4 points

Currency translation: (1) point


5/38


20 12 Com pany Ou t look

Second Quarter 2012 Forecast

Net sales: Up ~ 15% vs. Q2 2011 Price realization: ~ +4 points

Currency translation: ~ (3) points

Fiscal Year 2012 Forecast Net sales: Up ~ 15% vs. FY 2011

Price realization: ~ +4 points


Previous forecast: Up ~ 15% vs. FY 2011

Price realization: ~ +4 points

Currency translation: ~ +1 point

Net income attributable to Deere & Company of ~ $3.275 billion

Previous forecast ~ $3.2 billion

Deere & Company Forecast as of 15 February 20 12 ( Previous Forecast as of 23 Novem ber 20 11)


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W o r l d w i d e A gr i cu l t u r e & Tu r fFi rs t Quar t e r Overv iew

(in millions of dollars) Q1 2012 Q1 2011 Change

Net Sales $4,724 $4,371 +8%

Operating Profit* $574 $558 +3%

Production Tonnage +5%

Incremental Margin ~ 5%

*Q1 2012 operating profit impacted by:

Price realization

Higher shipment volumes

Increased production costs related to new products and engine-emission requirements

Higher raw-material costs


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U.S. Com m odi t y Pr ice Est im at es

Deere & Company Forecast as of 15 February 2012 (Previous Forecast as of 23 November 2011)

(dollars per bushel, exceptcotton, which is dollars perpound)

2010/11

Estimate2011/12Forecast

Previous2011/12

2012/13Forecast

Previous2012/13

Corn $5.18 $6.00 $6.40 $5.30 $5.30

Wheat $5.70 $7.20 $7.40 $6.70 $6.60

Soybeans $11.30 $11.75 $13.00 $10.50 $11.25

Cotton $0.82 $0.88 $0.88 $0.75 $0.75


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U.S. Far m Cash Receipt s


(in billions of dollars) 20102011

ForecastPrevious

20112012

ForecastPrevious

2012

Crops $172.9 $207.6 $209.3 $200.4 $207.7

Livestock $141.4 $163.1 $163.1 $162.2 $157.2

GovernmentPayments

$12.4 $10.7 $10.7 $9.3 $9.3

Total Cash

Receipts $326.7 $381.4 $383.1 $371.9 $374.2


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(Yield in bushels peracre, except cotton,which is pounds peracre)

Acres Planted(millions)

Yield

2011/12

Projection

2012/13Forecast

2011/12

Projection

2012/13Forecast

Corn 91.9 93.0 147.2 162.2

Wheat 54.4 56.0 43.7 45.2

Soybeans 75.0 75.5 41.5 44.3

Cotton 14.7 12.0 772 848


U.S. Acr es Plan t ed an d Cr op Yie ld s

Deere & Company Forecast as of 15 February 2012


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Deere & Comp any Forecast as of 1 5 February 20 12

Econom ic Upda t eEU 2 7

Optimism continues in the Agricultural sector

Farm business climate and mood remain at high levels

Farm income expected to be above long-term average levels

Grain, beef, and milk prices at attractive levels

Demand for agricultural equipment strengthening

Sovereign debt and fiscal issues concentrated in Southern Europe

Not key agricultural markets

Low levels of used equipment


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Deere & Comp any Forecast as of 1 5 February 20 12

Commonwealth of Independent States (CIS)

Farm income and commodity markets expected to be stable in 2012, following astrong 2011

Third-party financing available

Ongoing business optimism is leading to increased investments

Especially in Russia and Kazakhstan

India

Farm income firm due to increased production and sustained exports

Commodity prices expected to soften against 2011 but remain elevated due tostrong demand

Increased credit availability in the agricultural sector

Impact of monsoon favorable for a good harvest

Retail food market and food processing industry is growing

China

Healthy equipment demand continues

Strong government support of agricultural mechanization

Expect increased crop production in 2012

Econom ic Upda t eOt her Se lect ed Mark e ts


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Cl im a t e I m p actBrazi l and Argen t ina

Source: Planalytics

December Several outbreaks of oppressive heat engulfed southern Braziland Argentina

Moderate to severe drought impacts

January Hot, dry conditions dominated southern Brazil and Argentina

Harvest in N. Brazil hampered by wet conditions

February Improved moisture in some regions

Corn and bean production cut

Harvest and second crop corn planting in Mato Grasso impededby wet weather

% No r m a l P r e ci p i t a t i o nUp p e r So u t h Am e r i ca

De ce m b e r 2 0 1 1

% No r m a l P r e ci p i t a t i o nMidd le Sou th Am er i ca

De ce m b e r 2 0 1 1


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Agr icu l t u r e & Tur f Re ta i l Sa lesI n d u st r y Ou t l o o k Fi sca l 2 0 1 2

U.S. and Canada Ag: Up ~ 10%

Previous forecast: Up 5-10%

EU 27 Ag: Flat to up 5% Previous forecast: Flat

CIS countries Ag: Considerably higher Previous forecast: Moderately higher after rising substantially in 2011

Asia Ag: Increase moderately Previous forecast: Up strongly again in 2012

South America Ag: Flat to down 5% Previous forecast: Flat

U.S. and Canada turf and utility equipment: Up slightly No change from previous forecast



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W o r l d w i d e A gr i cu l t u r e & Tu r fDeere & Com pany Ou t look

Fiscal Year 2012 Forecast

Net sales: Up ~ 15%


Previous forecast: Up ~ 15%




15/38


W o r ld w id e Co n st r u ct i o n & Fo re st r yFi rs t Quar t e r Overv iew

(in millions of dollars) Q1 2012 Q1 2011 Change

Net Sales $1,395 $1,143 +22%

Operating Profit* $124 $88 +41%

Production Tonnage +26%

Incremental Margin ~ 14%

*Q1 2012 operating profit impacted by:

Higher shipment volumes Price realization

Higher raw-material costs


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U.S. Economic Indicators

2012

Forecast

GDP Growth (annual percentage rate) +2.0%

Housing Starts (thousands) 726

Non-Residential Spending Growth (annual percentage rate)* +1.7%Government Spending Growth (annual percentage rate)* -5.8%


W o r ld w id e Co n st r u ct i o n & Fo re st r yDeere & Com pany Ou t look

Source: Global Insight , Calendar Year Estimat es February 20 12

* Change from prior year in real dollars

Fiscal Year 2012 Forecast Net sales: Up ~ 18%

Currency translation: ~ (1) point

Previous forecast: Up ~ 16%




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0.02%

0.00%

0.50%

1.00%

1.50%

2.00%

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

2012

*


W or ldw ide Financ ia l Se rv icesCr edi t Loss His t or y

Provision for Credit Losses / Average Owned Portfolio

* Annualized provision for credit losses as of 31 January 2 012


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W or ldw ide Financ ia l Se rv ices

First Quarter 2012

Net income attributable to Deere & Company

$119 million in Q1 2012 vs. $118 million in Q1 2011


Net income attributable to Deere & Company of ~ $460 million

Previous forecast: ~ $450 million



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Conso l ida ted T rade Rece ivab les & I nv en t o r y

(in millions of dollars)

Q1 2012*Actual

2012**Forecast

2012**PreviousForecast

A&T $1,115 $75 $125

C&F $480 $75 $175

Total, as reported $1,595 $150 $50

Total, constant exchange $1,690 $375 $75

* Change at 31 January 2012 vs. 31 January 201 1* * Change at 31 October 2012 v s. 31 October 2011



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Mat er ia l Cost s and Fr e igh tEqu ipm ent Opera t i on s

First Quarter 2012

Up ~ $130 million vs. Q1 2011


Up $400-$500 million vs. FY 2011

Agriculture & Turf $350-$400 million Construction & Forestry $50-$100 million

Previous forecast: Up ~ $500 million vs. FY 2011



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Research & Deve lopm ent Ex penseEqu ipm ent Opera t i on s

First Quarter 2012

Up ~ 16% vs. Q1 2011


Up ~ 12% vs. FY 2011

Currency translation: ~ (2) points Previous forecast: Up ~ 10% vs. FY 2011



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Se l l ing , Adm in is t r a t i ve & Genera l Ex penseEqu ipm ent Opera t i on s

First Quarter 2012

Up ~ 7% vs. Q1 2011

Growth: ~ +6 points


Up ~ 10% vs. FY 2011 Growth: ~ +4 points


Previous forecast: Up ~ 10% vs. FY 2011

Growth: ~ +4 points



23/38

Deer e Use-o f -Cash Pr io r i t ies


Manage the balance sheet, including liquidity, to support a ratingthat provides access to low-cost and readily available short- andlong-term funding mechanisms

Reflects the strategic nature of our financial services operation

Co m m i t t e d t o A Ra t i n g

Cash f rom Opera t i ons

Fund Opera t i ng and Grow th Needs

Com m on Stock D iv idend

Shar e 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 cashto shareholders, once above requirements are met andrepurchase is viewed as value-enhancing


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Con t inued St ron g Ope ra t i ng Pe r fo r m anceEqu ipm ent Opera t i on s

Fiscal Year Cash Flows from Operations

* Previous forecast: ~ $3.6 bil l ionDeere & Company Forecast as of 15 February 20 12 ( Previous Forecast as of 23 Novem ber 20 11)

$2.4

$1.4

$2.5

$3.0

$3.5

2008 2009 2010 2011 2012

Forecast*

$

Billio

ns

~


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Glob al Ex pan sionMajo r Equ ipm en t Facto r y I nvestm en ts

New Fact or ies Maj or Ex pan sio ns o r Mo der nizat io ns

I nda ia tuba , Braz i lC&F Div is ion

Backhoe Loaders 4WD Loaders

I nda ia tub a , Braz i l ( JV)C&F Div is ion

Excavators

Orenburg , Russ iaA&T Div is ion

Seeding Equipment

Tillage Equipment Spraying Equipment

De wa s , I n d i aA&T Div is ion

Tractors

Harb in , Ch inaA&T Div is ion

Combine Front-End Equipment Tractors Planters Sprayers Irrigation Products

Tian j i n ( TEDA) , Ch inaC&F Div is ion

4WD Loaders Excavators

Tian j i n ( TEDA) , Ch inaJ ohn Deer e Power Sy stems

Engines

Des Moines, I A, USAA&T Div is ion

Spraying Equipment Cotton Harvesting Equipment Tillage Equipment Seeding Equipment

Dom odedovo , RussiaA&T and C&F Div is ion

Tractors Combine Harvesters

Combine Front-End Equipment Backhoes, Loaders, Graders Skidders, Log Forwarders

Pu n e , I n d i aA& T

Engines Transmissions Tractors

Rosar io , Argen t inaA&T and

J ohn Deer e Power Sy stems

Engines Tractors Combines

Water loo , I A , USAA&T Div is ion

Foundry

Water loo , IA , USAA&T Div is ion

Ag Tractors

Davenpor t , I A , USAC&F Div is ion

Articulated Dump Trucks 4WD Loaders

Motor Graders Skidders Wheeled Feller Bunchers


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Appendix


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Pr odu ct ion Tonn age

*Percentage change from same period in previous year, excluding purchased productDeere & Company Forecast as of 15 February 2012 (Previous Forecast revised as of 15 February 2012)

Approximate % Change*Q1 2012Actual

Q1 2012PreviousForecast(Revised)

Q2 2012Forecast

FY 2012Forecast

FY 2012PreviousForecast(Revised)

Total Worldwide +8 +13 +10 +12 +7

Worldwide A&T +5 +12 +11 +12 +8

Worldwide C&F +26 +18 +6 +10 +7

U.S. and Canada +2 +1 +6 +10 +3

Outside U.S. and Canada +19 +35 +18 +15 +14

U.S. and Canada A&T -4 -3 +5 +9 +2


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Retail SalesU.S. and Canada Ag Industry* Deere**

Utility Tractors 7% less than the industry

Row-Crop Tractors 2% ~ flat

4WD Tractors 29% more than the industry

Combines 43% more than the industry

Januar y 20 12 Re ta i l Sa les and Deale r I nv en t o r ies

* As report ed by the Association of Equipment Manufactur ers* * As reported to the Association of Equipment Manufacturers* * * At 31 January in units as a % of t rai ling 12 months retai l sales, as reported to t he Association of Equipment Manufactur ers

Deere Dealer Inventories***

U.S. and Canada Ag 2012 2011

Row-Crop Tractors 16% 16%

Combines 5% 11%


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Janu ar y 20 12 Ret a i l Sa les

EU 27 Deere*Tractors a low single digit

Combines double digits

U.S. and Canada Deere*

Selected Turf & Utility Equipment ~ flat

* Based on intern al sales reports

U.S. and Canada Construction & Forestry Deere*

First-in-the-Dirt double digits

Settlements double digits


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I n co m e Tax e sEqu ipm ent Opera t i on s

First Quarter 2012

Effective tax rate: ~ 34%


Projected effective tax rate: 33-35%

No change from previous forecast



31/38


Ot h e r I n f o r m at i o nEqu ipm ent Opera t i on s


Capital Expenditures: ~ $1.3 billion Previous forecast: $1.2 - $1.3 billion

Depreciation and Amortization: ~ $650 million


Pension/OPEB Contributions: ~ $450 million




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Shar e Repu r chaseAs Par t o f Pub l i c ly Annou nced P lans

Actual

SharesRepurchased*

(in mill ions)

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 YTD 4.9 $0.4

Cumulative cost of repurchases 2004-1Q2012: ~ $8.0 billion

Amount remaining on May 2008 authorization of $5 billion: ~ $3.7 billion

31 January 2012 period ended shares (basic): ~ 401.8 million(diluted): ~ 406.3 million

Shares repurchased 2004-1Q2012: ~ 145.4 million

Average repurchase price 2004-1Q2012: $54.86

* 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 2004-1Q2012


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W or ldw ide Financ ia l Se rv ices2 0 1 2 Unsecur ed Term Deb t Mat u r i t i es *

* Matur ities as of 31 January 2012

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

1Q 2Q 3Q 4Q

USD CAD

$

Millions


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Sou r ces and Uses o f Cash Fiscal 2 0 0 4 2 01 1Equ ipm ent Opera t i on s

(1) Other includes proceeds from m aturities and sales of market able securities and pur chases of mark etable securities and reconciliation for non-cashitems including ex cess tax benefits f rom share-based compensation and the effect of exchange rates on cash and cash equivalents

Source: Deer e & Company SEC filing s

$4,287

$16,378

$5,214

$748

$638

$2,411

$3,270

$6,194

$278

$0

$3,000

$6,000

$9,000

$12,000

$15,000

$18,000

$21,000

BeginningCash & CashEquivalents

(10/31/03)

Cash FromOperations

CapitalExpenditures

Investment inFinancialServices

Divestitures,net of

Acquisitions

Net Change inDebt and

Intercompany

Balances

Dividends ShareRepurchase,

net of

CommonStock

Issuances

Other Ending Cash & Cash

Equivalents

(10/31/11)

~58% of cash from operationsreturned to shareholders

( 1 )

$

Millions

$3,188


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U.S. Far m Pr ices


$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12F

Jul-12F

Oct-12F

Cotton

-D

ollarsperPound

Dollar

sperBushel

Wheat

CornSoybeans

Cotton

Source: Actual Data: USDAForecast Data: Deere & Company Forecast as of 15 February 2012


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W o r ld Fa rm Fu n d a m e n t a l sGlob al St ocks- To- Use Rat ios

0%

10%

20%

30%

40%

50%

60%

70%

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011P

Corn

Wheat

Soybeans

Source: USDA - 9 February 2012

Cot ton


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U.S. Net Farm Cash I ncom e

( in billions ofdollars) 2010

2011Forecast

Previous2011

2012Forecast

Previous2012

Total Cash Receipts $326.7 $381.4 $383.1 $371.9 $374.2

Other Cash Income $18.3 $19.5 $18.6 $22.0 $23.0

Gross Cash Income $345.0 $400.9 $401.7 $393.9 $397.2

Cash Expenses ($252.7) ($286.2) ($286.0) ($290.0) ($288.0)

Net Cash Income $92.3 $114.7 $115.7 $103.9 $109.2



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Deere s secon d q uar t e r 20 12 con fe rence ca l li s schedu led fo r 9 :00 a .m . cen t r a l t im e

on W ednesday , May 16 , 201 2

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Deere 2012_firstquarter_confcallslides