Deere & Company (DE)

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Deere & Company (DE)

Q4 2009 Earnings Call

November 25, 2009 10:00 am ET

Executives

James Field – CFO

Marie Ziegler – VP IR

Susan Karlix – Manager, Investor Communications

Analysts

Steve Volkmann - Jefferies & Co.

Robert Wertheimer - Morgan Stanley

David Raso - ISI Group

Eli Lustgarten - Longbow Research

Meredith Taylor - Barclays Capital

Ann Duignan - JPMorgan

Jamie Cook - Credit Suisse

Andrew Casey – Wells Fargo

Henry Kirn - UBS

Seth Weber - RBC Capital Markets

Andrew Obin - BAS - ML

Presentation

Operator

Good morning and welcome to the Deere’s fourth quarter earnings conference call. (Operator Instructions) 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 James Field, Chief Financial Officer, Susan Karlix and Justin [Merrivac] from the Deere Investor Relations staff. Today we will take a closer look at Deere’s fourth quarter earnings and then spend some time talking about our markets and provide our first look at how things may shape up in 2010. 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 though 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 strictly 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 will also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, otherwise referred to as GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is posted on our website at www.johndeere.com/financialreports, under other financial information and under conference call information slides.

Call participants should consider the other information on risks and uncertainties and non-GAAP measures in addition to the information presented during this call.

Now, for a closer look at our fourth quarter, here is Susan.

Susan Karlix

Thank you Marie, John Deere today announced the completion of a solidly profitable year. We did so in the face of challenging market conditions, effecting virtually every one of the company’s major businesses and major markets.

Earnings alone though tell only part of the story and the fact is 2009 was a year of significant achievements in many ways. In 2009 for example, saw the biggest single year sales decline in company history, over $5 billion. Yet our net income of just under $900 million was the eighth highest ever.

What’s more, John Deere generated a good deal of cash last year, $1.4 billion from the equipment operations. That was more than enough to cover capital expenditures and dividends, both of which continued at healthy rates.

And it leads to another impressive statistic. Company and dealer inventories came down by well over a billion dollars last year. As a result these inventories in relation to sales, finished the year right where they started, at 24%.

That’s quite an accomplishment in light of the magnitude of the sales downturn. What about economic profit or [SVA], one of the primary metrics used to manage the company. SVA was obviously much lower for the year but it actually remained in positive territory for our equipment businesses.

Liquidity was another success story, in spite of the worst financial crisis in memory, the company maintained competitive access to the credit markets. We issued over $9 billion in new debt and have the cash on hand to fund virtually all the maturities coming up through 2010.

Partly as a result our customers were able to experience uninterrupted access to financing from John Deere. No doubt 2009 was one tough year but the company remained on a profitable footing, reinforced its financial position, continued to fund important projects, maintained its dividend rates, and made further progress on a number of other fronts.

Let’s now look at the fourth quarter in more detail, starting with slide three. For the quarter Deere reported a net loss of $223 million, on net sales and revenues of $5.3 billion. On slide four, if you look beyond the headline numbers, and exclude the two items called out in our press release this morning, the goodwill impairment charge for John Deere Landscape and the charge for the voluntary employee separation program, net income as adjusted was $99 million or $0.23 per share for the quarter.

Slide five includes the charges for the closure of our factory in Welland, Ontario, Canada, in the fourth quarter of 2009 and for the full year. Although this number is negligible in the year over year comparisons, we are providing it for those who are tracking the Welland closure expenses.

Read the rest of this transcript for free on seekingalpha.com