Deere & Company (DE)

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Deere & Company (DE)

F4Q11 and Yearend Earnings Call

November 23, 2011 10:00 am ET

Executives

Tony Huegel – Director of Investor Relations

James M. Field – Chief Financial Officer & Senior Vice President

Marie Ziegler – Vice President & Treasurer

Susan Karlix – Manager of Investor Relations

Analysts

Ann Duignan – JP Morgan

Henry Kern – UBS

Jerry Revich – Goldman Sachs

Andy Casey – Wells Fargo Securities, LLC

David Raso – ISI Group

Eli Lustgarten – Longbow Research

Andy Kaplowitz – Barclays Capital

Jamie Cook – Credit Suisse

Seth Weber – RBC Capital Markets

Analyst for [Kim Fine] – Citigroup

Andrew Obin – Bank of America Merrill Lynch

Presentation

Operator

Welcome to Deere’s fourth 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 Mr. Tony Huegel, Director of Investor Relations.

Tony Huegel

Also on the call today are Jim Field, our Chief Financial Officer; Marie Ziegler, Vice President and Treasurer; and Susan Karlix, our Manager of Investor Communications. Today we’ll take a closer look at Deere’s fourth quarter earnings, then spend some time talking about our markets and the outlook for 2012. After that we’ll respond to your questions.

Please note that slides are available to compliment 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 by Deere and [Thompson Riders]. 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. Additional information concerning factors that could cause actual results to differ materially is contained in the company’s most recent Form 8K and periodic reports filed with the Securities & Exchange Commission.

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 included in the release and posted on our website at www.JohnDeere.com/financialreports under other financial information.

Now, here’s Susan.

Susan Karlix

Today John Deere wrapped up 2011 with the announcement of our fourth quarter results. It was an excellent quarter which capped an exceptional year. Profits and sales were the highest ever for a fourth quarter. The improvement was broad based but led by Ag and turf. Our other divisions construction, forestry, and John Deere Financial had dramatically higher results as well. Deere’s performance for both the quarter and full year reflected strong customer demand for our products as well as the skillful execution of our business plans which are aimed at expanding our global competitive position.

During the year these plans moved ahead at an aggressive rate. We introduced an unprecedented number of products, announced plans for new factories in China, Brazil, and India and invested a record amount in future growth, well over $2 billion of spending for R&D and capital projects. For the year as a whole, John Deere registered its highest ever level of sales, earnings, and cash flow.

Operating margin were an impressive 13% resulting in an equally impressive return on operating assets of almost 30% with inventories at standard costs. We also produced a record amount of economic profit or SVA, $2.5 billion. That’s fully $800 million more of our previous best in 2010. There is simply no better testament to our success in delivering a high level of profit from a lean slate of productive assets.

Further, in an endorsement of John Deere’s exceptional talent pool, the company again was named Fortune Magazine List of Top Companies for Leadership Development on both a US and global basis. That says something important about our deep bench of top leaders and the sustainable nature of our talent. 2011 was in summary a memorable year. One that positions John Deere for what we see as an even stronger performance in 2012.

Now, let’s look at the fourth quarter in detail starting with Slide Four. Net sales and revenues were up 20% to $8.6 billion in the quarter. Net income attributable to Deere & Company was $670 million, an increase of 46%. This was the company’s eighth consecutive quarter-over-quarter income record. Total worldwide equipment operations net sales were $7.9 billion, up 20% quarter-over-quarter shown on Slide Five. Price realization in the quarter was positive by three points, while currency translation on net sales was a positive two points.

Production tonnage is shown on Slide Six. Worldwide production tonnage was up 13% in the quarter and up 21% for the year in line with our August guidance. Looking ahead to fiscal year 2012 for the company worldwide production tonnage is expected to be up about 16% in the first quarter and up about 12% for the full year.

Let’s focus on the first quarter for a minute. The projected tonnage increase of about 16% is against a very tough comparison. In the first quarter of 2011 tonnage was up 41%. In the first quarter of 2012 the US and Canada Ag and turf projected increase in tonnage is a modest 4% versus 39% last year. Last year we had higher production schedules in the first quarter to facilitate the transition into interim tier-4 engine regulations. Combine production in particular was much higher than normal.

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