Deere & Company (DE)
Q3 2009 Earnings Call Transcript
August 19, 2009 10:00 a.m. ET

Executives

Marie Ziegler - Vice President, Investor Relations
Susan Karlix – Manager, Investor Communications
James M. Field - Senior Vice President & Chief Financial Officer,

Analysts

Meredith Taylor - Barclays Capital
Joel Tiss – Buckingham Research Group
David Raso - ISI Group
Jerry Revich - Goldman Sachs
Andrew Casey – Wells Fargo Securities
Alexander Blanton - Ingalls & Snyder
Jamie Cook - Credit Suisse
Henry Kirn - UBS
Ann Duignan - JPMorgan
Charlie Rentschler - Wall Street Access
Mark Koznarek - Cleveland Research
Daniel Dowd - Sanford C. Bernstein & Co.
Robert Wertheimer - Morgan Stanley
Barry Bannister – Stifel Nicolaus & Co.
Andrew Obin – Bank of America/Merrill Lynch

Presentation

Operator

Good morning and welcome to the Deere’s third quarter earnings conference call. Your lines have been placed on listen-only until the question-and-answer session of today’s conference. I would now like to turn the call over to Ms. Marie Ziegler, Vice President, Investor Relations.

Marie Ziegler

Good morning. Also on today’s call are Jim Field, our new Chief Financial Officer, as well as Susan Karlix and Justin Merrimac from the Deere Investor Relations staff.

Today, we will take a closer look at Deere’s third quarter earnings and then spend a few minutes talking about our markets and where we see things headed for the remainder of the year. After that, we will respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at www.johndeere.com.

First a reminder. This call is being broadcast live on the Internet and recorded for future transmission and use by Deere and Thomson Reuters. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call.

This call includes forward-looking comments concerning the company’s projections, plans, and objectives for the future that are subject to important risks and uncertainties. Actual results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially is contained in the company’s most recent Form 8-K and periodic reports filed with the Securities and Exchange Commission. The company, except as required by law, undertakes no obligation to update or revise its forward-looking information. The call and accompanying materials are not an offer to sell or a solicitation of offers to buy any of the company’s securities.

This call also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, or GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is posted on our website at www.johndeere.com/financialreports and the information is under the other financial information. Call participants should consider the other information on risks and uncertainties and non-GAAP measures in addition to the information presented on the call.

And now, for a closer look at the third quarter, here is Susan.

Susan Karlix

Thanks Marie. All things considered, John Deere’s third quarter was a good one. The company reported another solidly profitable performance at a time when overall global market conditions remained challenging. That being said, the market for large farm machinery in the U.S. and Canada has held up reasonably well to the benefit of our Ag and Turf operations. Our construction and forestry business despite a small loss showed impressive resilience in one of the worst market environments in memory. Our credit operations had good results while maintaining sound portfolio quality and access to the credit markets.

In addition, Deere continued to demonstrate sound execution and real discipline throughout the company curbing expenses, curtailing factory production and shrinking inventories and trade receivables in response to conditions in the retail marketplace.

As a result of these factors, beginning with slide three, Deere reported net income for the quarter of $420 million on third quarter net sales and revenues of $5.9 billion. On slide four, total worldwide equipment operations net sales were $5.3 billion, down 25% in the quarter versus third quarter 2008. Currency translation on net sales was negative by approximately four points with about six points of positive price realization. Both divisions had positive price realization in the quarter. Our disciplined approach to asset management has helped support pricing in some extremely tough markets.

Turning to slide five, worldwide production tonnage was down 24% in the quarter reflecting continuing weak conditions in many of our markets and our focus on managing inventories and trade receivables. Worldwide production tonnage is expected to decrease about 43% in the fourth quarter of 2009 and be down about 22% for the full year.