Deere & Company (DE)

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Deere & Company (DE)

F3Q10 Earnings Call

August 18, 2010 9:00 a.m. ET

Executives

Marie Zieglar – Vice President Investor Relations

Susan Karlix – Manager, Investor Communications

James Field – Chief Financial Officer

Analysts

Ann Duignan – JP Morgan

Stephen Volkmann – Jefferies & Co.

Jerry Revich – Goldman Sachs

David Raso - ISI

Henry Kirn – UBS

Meredith Taylor – Barclays Capital

Eli Lustgarten – Longbow Securities

Seth Weber – RBC Capital Markets

Joel Tiss – Buckingham Research

Presentation

Operator

Good morning and welcome to the Deere third quarter earnings conference call. [Operator instructions.] I would now like to turn the call over to Miss Marie Zieglar, vice president, investor relations. Please go ahead.

Marie Zieglar

Good morning. Also on the call today are Jim Field, our chief financial officer as well as Susan Karlix and Justin Marovec from the Deere investor relations staff. This morning we’ll take a closer look at Deere’s third quarter earnings and then spend some time talking about our markets and how we see the last quarter of our fiscal year shaping up. After that, we’ll respond to your questions.

Please note that slides are available to complement the call this morning and can be accessed on our website at www.johndeere.com. First, as usual, a reminder. This call is being broadcast live on the Internet and recorded for future transmission and use by Deere and Thompson 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 may also include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, otherwise known as GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is posted on our website at www.johndeere.com\financial reports under “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 today’s call.

And now, for a closer look at our third quarter, here’s Susan.

Susan Karlix

Thank you Marie. John Deere’s strong performance continued in the third quarter of 2010. Income was up 47%, on a sales increase of 18%. Earnings were the highest for any third quarter in the company’s history, and sales were the second highest.

The gain was led by ag and turf, which had another blockbuster quarter. Construction and forestry had its highest profits in seven quarters, and our credit operations had another solid performance.

The company is being helped by somewhat improved business conditions, but tailwinds are only part of the story. After all, construction markets are still weak by historical standards, and some ag markets, such as Europe and the CIS, remain under pressure.

What our results clearly show is the disciplined execution of our business plan, and our focus on serving customers with advanced products and services. This has allowed us to fully capitalize on the current market conditions.

Now let’s look at the quarter in more detail, starting with slide 3. Net sales and revenues were up 16% to $6.8 billion in the quarter. Net income attributable to Deere & Company was $617 million, and as just mentioned, up 47% compared with the third quarter last year, and our highest ever income for a third quarter.

Turning to slide 4, total worldwide equipment operations net sales were up 18% to $6.2 billion. Currency translation on net sales was flat versus our May forecast for currency to be up about 2 points in the third quarter. Price realization in the quarter was positive by 2 points.

On slide 5, worldwide production tonnage was up 31% in the quarter. The slide illustrates that with one exception, tonnage in each SBU and region, was up in line with the forecast provided a quarter ago. The exception was outside the U.S. and Canada, where tonnage came in lower than anticipated due to continued weakness in Western Europe. For the full year, worldwide production tonnage is now forecast to be up about 14%.

Let’s turn to the company outlook on slide 6. Fourth quarter sales are expected to be up approximately 32% compared with the fourth quarter of 2009. Currency translation on net sales is expected to be negative by about 1 point. Net income attributable to Deere & Company is forecast to be approximately $375 million in the fourth quarter.

For the full year, net equipment sales are forecast to be up about 12% compared with fiscal year 2009. This includes about 2 points of positive currency translation and approximately 2 points of positive price realization.

Turning to a review of our individual businesses, let’s start with agriculture and turf on slide 7. Production tonnage was up 24% in the quarter, on a 12% increase in sales. Operating profits, however, jumped by nearly $345 million, or 72%, to $824 million.

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