John Deere Financial Portfolio and Funding. Deere & Company May 2012

Transcription

1 John Deere Financial Portfolio and Funding Deere & Company May 2012

2 Safe Harbor Statement & Disclosures This presentation includes forward-looking comments subject to important risks and uncertainties. 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. The following information was current as of the date on the front page. The list of priorities may not be exhaustive. New and different needs and priorities arise from time to time. We cannot predict such new or different priorities or the impacts on our business. Accordingly, we do not assume responsibility for the accuracy or completeness of these statements. Nor do we have or assume any duty to update any of the statements after the date of this presentation. All of the information is qualified in its entirety by the information in any relevant prospectus and related supplemental information. This presentation is not an offer to sell or a solicitation of offers to buy any of Deere s securities. 2

3 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 credit 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 3

4 John Deere Financial $28.1 Billion Owned Portfolio at 31 October 2011 Portfolio Composition by Market Portfolio Composition by Geography Portfolio Composition by Product Ag Financial Services 7% C&F 13% Latin America 6% Europe 7% Australia 3% Leasing 12% Revolving Credit 9% Installment Financing 58% Canada 12% Ag & Turf 80% U.S. 72% Wholesale / Floorplan 21% Information above includes all Deere lending activities iti worldwide. John Deere Capital Corporation is the largest lending operation of Deere & Company. 4

5 John Deere Capital Corporation Profitability and Growth Net Income ($ Millions) Administered Portfolio Growth ($ Billions) Write-offs/Average Owned Portfolio 0.28% 029% 0.29% 033% 0.33% 0.16% 0.22% 0.70% 0.48% 0.12%

6 John Deere Capital Corporation Retail Notes 60+ Days Past Due vs. Write-offs Agriculture & Turf 1 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 The performance and quality of portfolio improved during % 3.95% 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% -0.05% '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 Net Write-offs (Ag) Installments 60+DPD (Ag) 3.45% 2.95% 2.45% 1.95% 1.45% 0.95% 0.45% -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

7 Lending, Collection and Remarketing Practices Contribute to Low Losses Ag & Turf Dealer Reserve Total dealer reserve levels are 1.0% of the portfolio as of 30 April 2012 Dealers have financial interest in performance 1% withheld on each note, pooled reserve Reserve level caps ranging from 0.5% to 3.0% of outstanding portfolio Based on credit performance, avoiding reserve charges Collection Experts in the equipment markets served Strong analytics to support approach Internally serviced / regional assignments Close working relationship with dealers Remarketing Product expertise Best distribution channel Dealer network Dedicated remarketing team Proven inspection process Strong collateral support 7

8 U.S. Resale Value vs. Loan Balance 7830 Tractor and 9670 Combine 7830 Tractor (1) 9670 Combine (2) 110% 110% 100% 100% f Original List Price Resale Value as a % of 90% 80% 70% 60% 50% 40% 30% 20% Loan Balance f Original List Price Resale Value as a % of 90% 80% 70% 60% 50% 40% 30% 20% Loan Balance 10% 10% 0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Time Since Origination Model Year % Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Time Since Origination Model Year (1) In 2007 the 7830 series was introduced to the market replacing the Loan balance assumes a 30% down payment on the highest list price financed for 5 years with annual payments at a rate of 6.50%. (2) Model 9670 replaced Model 9660 in Loan balance assumes a 30% down payment on the highest list price financed for 5 years with annual payments at a rate of 6.50%. Source for equipment values: North American Equipment Dealers Association wholesale prices 8

9 John Deere Financial Funding Strategy Maintain diverse, sustainable funding sources: Term Debt, Asset Backed Securitization, and Commercial Paper Commercial Paper issuances backstopped by a $5 billion credit line Sustain appropriate liquidity profile: Develop redundancy and flexibility in funding options Balance funding cost and refunding risk 9

10 Committed Bank Group Supports Credit Facility Average length of continuous relationship = ~29 Years $5.00 billion credit facility supporting commercial paper $1.50 billion 61-month facility expiring in 2017 $2.75 billion 49-month facility expiring in 2015 $750 million 364-day facility expiring in 2013 Have not drawn on facility $2.7 billion incremental capacity as of 30 April 2012 $6,000 $5,000 Credit Facility Size & Commercial Paper Outstanding $ millions $4,000 $3,000 $2,000 $1,000 $ Total Facility CP Outstanding as of October 31 10

11 Multiple Sources of Liquidity Successful Access to Traditional Markets Commercial Paper Term Asset Backed Securitization Unsecured Term Debt USD EUR CAD Incremental Sources of Liquidity Asset Backed Commercial Paper Conduit Retail Notes 11

12 John Deere Financial External Funding Mix 12

13 Key Funding Entities Deere & Company United States John Deere Capital Corp. United States (Deere Support Agreement) John Deere Cash Mgmt. Luxembourg (Debt guaranteed by Deere) John Deere Canada ULC (Debt guaranteed by Deere) John Deere Financial Ltd. Australia (Debt guaranteed by JDCC) John Deere Bank S.A. Luxembourg (Debt guaranteed by JDCC) John Deere Credit Inc. Canada (Debt guaranteed by JDCC) Support Agreement - Deere agrees to: Maintain JDCC s fixed charge coverage > 1.05 to 1 Own > 51% voting shares of JDCC s capital stock Maintain JDCC net worth > $50 million 13

14 Funding Programs Unsecured Commercial Paper: United States: All key funding entities Europe: All key funding entities Canada: John Deere Canada ULC and John Deere Credit Inc. Australia & New Zealand: John Deere Financial Ltd. Retail Unsecured Term Debt: United States Retail Notes: John Deere Capital Corp. Institutional Unsecured Term Debt: United States: Deere & Company and John Deere Capital Corp. EMTN: All key funding entities Canada: John Deere Credit Inc. Australia & New Zealand: John Deere Financial Ltd. Asset Backed Securitization: United States ABCP & Term Debt ABS: John Deere Capital Corp. (Servicer) Canadian ABCP: John Deere Credit Inc. (Servicer) 14

15 John Deere Financial Maturity Profile 6,000 John Deere Financial Services Unsecured Term Debt Maturities As of 30 April ,500 5,000 4,500 US$ Millio ons 4,000 3,500 3,000 2,500 2,000 1,500 1, FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Currency of Issue: EUR CAD USD 15

16