Deere & Company - Farm and Construction Machinery

1. Deere & Company - Farm and Construction Machinery Bill Dailey 03/17/2014

2. Deere & Company • Segments • Agriculture and Turf - $29.1B • Construction and Forestry - $5.9B • Power Systems (engines) • Parts and Services - $682M • Financial Services - $2.1B • 2013 • Income of $3.54B on revenues of $37.8B • Third consecutive year of record earnings, eighth time in last ten years • Quarterly dividend increased by 11% to $1.99/share

3. Company Comparisons • Caterpillar is most similar • Both have financing operations • Caterpillar’s revenues come mainly from their construction and mining divisions • Joy Global • Operates in the mining industry • Much smaller revenue numbers • Komatsu • Operates mainly in the construction industry • Very small portion in the farming industry • Tractor and Agriculture Machinery Manufacturing • Deere holds 40%, followed by CNH Industrial with 11.7%

4. Cost of Enterprise Capital

5. Assumptions • Sales Growth Rate • Net Sales and Other Income - 2.0% • Stagnant growth in the beginning due to sale of JD Landscapes • ‘Eyes on the Horizon’ initiative - $50B in sales by 2018 • Finance and Interest Income - 5.0% • Successful portfolio of receivables • Low level of uncollectable accounts • Enterprise Profit Margin (EPM) - 10.5% • Leaders within the agriculture industry - pricing premium • Enterprise Asset Turnover (EATO) - .85 • Increasing the size of the financing portfolio • Attempting to localize manufacturing - 7 new factories in 2013

6. Discounted Cash Flow

7. Residual Enterprise Income

8. Abnormal Enterprise Income Growth

9. Value Estimate

10. Future Analysis • Further analyze analyst reports • Predicting a decrease in sales in upcoming years • Look into growth of financial services revenue relative to manufacturing operations • Incorporate Q1 2014 numbers into model

11. Questions?