Good morning, and welcome to the Deere & Company Fourth Quarter Earnings Conference Call. Your lines have been placed on a listen-only until the question-and-answer session of today’s conference. I would now like to turn the call over to Josh Jepsen, Director of Investor Relations. Thank you. You may begin.

Thanks, Robin. Hello. Also on the call today are Ryan Campbell, our CFO; Jahmy Hindman, our Chief Technology Officer; and Brent Norwood, Manager, Investor Communications. Today we’ll take a closer look at Deere’s fourth quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2021. After that, we’ll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First, a reminder. This call is being broadcast live on the internet and recorded for future transmission and use by Deere & Company. 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 and all media may be stored and used as part of the earnings call. This call includes forward-looking comments concerning the company’s plans and projections 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 8-K and periodic reports filed with the Securities and Exchange Commission. This call may also 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 johndeere.com/earnings under Quarterly Earnings and Events. I’ll now turn the call over to Brent Norwood.

John Deere demonstrated strong execution in the fourth quarter resulting in a 12% margin for the Equipment Operations and net income exceeding our full year forecast. Despite significant uncertainty early in the year for large Ag markets, fundamentals improved throughout the fourth quarter driving growth prospects for 2021. Meanwhile, markets for our Construction & Forestry division also improved in the fourth quarter leading to a solid finish to the year and modest levels of recovery projected for fiscal year 2021. Now, let’s take a closer look at our year end results for 2020 beginning on slide 3. For the full year, net sales and revenue were down 9% to $35.54 billion while net sales for Equipment Operations were down 10% to $31.272 billion. Net income attributable to Deere & Company was $2.751 billion or $8.69 per diluted share. Net income for the year was negatively affected by impairment charges, losses on business disposals, and employee separation costs of $458 million after-tax. For the same period in 2019, the similar charges were $82 million. Slide 4 shows the results for the fourth quarter. Net sales and revenue were down 2% to $9.731 billion while net sales for the Equipment Operation were down 1% to $8.659 billion. Net income attributable to Deere & Company for the quarter was $757 million or $2.39 per diluted share. Fourth quarter net income was negatively affected by impairment charges and employee separation costs of $211 million after-tax compared to $74 million for the same period in 2019. Turning to a review of our individual businesses starting with Agriculture & Turf on slide 5, net sales were up 8% compared to the fourth quarter last year primarily due to price realization and higher shipment volumes partially offset by the unfavorable effects of currency translation. Price realization in the quarter was positive by 5 points, while currency translation was negative by 1 point. Operating profit was $860 million resulting in a 13.9% operating margin for the division. The year-over-year increase was driven by price realization and lower R&D expenses and reduced SG&A, improved shipment volumes and mix, and lower warranty expenses. The items were partially offset by impairments and employee separation expenses which totaled $164 million in the quarter. Please note that the $153 million shown on the waterfall is net of $11 million in separation costs from 2019. For the full year, the Ag & Turf division incurred $286 million in nonrecurring charges including employee separation expenses, impairments, and a loss on a sale. Before reviewing our industry outlook, we’ll first provide commentary on the regional dynamics impacting Ag markets and Deere operations around the globe, starting on slide 6. In the US, farmer sentiment showed improvement over the quarter as the combination of government support and improved commodity prices boosted farm income prospects for the year. Meanwhile, concerns over market access temporarily subsided with exports to China rebounding compared to last year. Stocks to use and carryout estimates for corn and soybeans are now forecast at multiyear lows due to diminished production on account of some regionally dry weather and the derecho storm in August as well as increased export activity. The improvement in fundamentals and farmer sentiment is reflected in the progress of our early order programs. At this time, we’ve concluded all three phases of our planter and sprayer programs, while our combine program recently finished Phase 2. Sales for planters are up 10% compared to last year, with sprayers and combines up even further. Meanwhile, our large Ag tractor order book has strengthened over the last quarter with orders up nicely compared to the previous year. Lastly, retail activity picked up in the fourth quarter leaving new and used inventory positions at multiyear lows. Shifting to South America, record soybean production, higher commodity prices, and favorable exchange rates continue to drive positive producer margins in Brazil this year. As a result, activity accelerated in the fourth quarter and far exceeded our forecast, making a very strong finish to 2020. For fiscal year 2021, the order book is quite strong, reflecting the positive fundamentals with order coverage now extending well into the first half of the year. Similar to North America, the strong finish to the year in Brazil depleted equipment inventory levels below historic averages, keeping momentum for new equipment demand healthy as we begin the year. In Europe, healthy prices for small grains such as wheat have boosted sentiment for arable farmers and spurred demand in the back half of 2020. Overall, arable margins should see modest gains this year, though results vary throughout some regions experiencing lower production due to dry conditions. Meanwhile, dairy and livestock producers may experience some pressure in fiscal year 2021 from soft dairy margins and growing concerns with respect to African swine fever. Importantly, Deere’s operations in Europe have benefited from a more focused strategy and demonstrated an uptick in large Ag market share as well as much improved profitability for the region. Looking ahead, the tractor order book is up relative to last year, providing solid visibility into 2021. Turning to Asia Pacific, key markets like India and Australia rebounded nicely from the early pandemic lockdowns and are expected to resume growth in fiscal year 2021. Meanwhile, operations in other markets are benefiting from some of the disciplined portfolio actions we’ve taken to date. With that context, let’s turn to our 2021 Ag & Turf industry outlook on slide 7. In the US and Canada, we expect Ag industry sales to be up between 5% to 10% for the year. The increase year-over-year reflects improved fundamentals in the Ag sector as well as the historically low inventory levels at the start of the year. Moving on to Europe, the industry outlook is forecast to be flat to up 5% with strength in arable offsetting some weakness in dairy and livestock. In South America, we expect an industry sales increase of about 5% with solid visibility into the first half of the year, especially in Brazil. Industry sales in Asia are forecast to be down slightly, though key markets for Deere are performing slightly better. Lastly, sales of turf and utility equipment are expected to be flat to up 5% following a solid year in 2020. Moving on to our Ag & Turf forecast on slide 8, fiscal year 2021 sales of worldwide Ag & Turf equipment are forecast to be up between 10% and 15%. The incremental increase relative to the industry guidance reflects plans to recover inventory levels in small Ag, which ended the year at historical lows for inventory to sales ratios. The forecast also includes expectations of 3 points of positive price realization as well as a currency tailwind of about 1 point. For the division’s operating margin, our full year forecast is ranged between 15.5% and 16.5%. Now let’s focus on Construction & Forestry on slide 9. For the quarter, net sales of $2.461 billion were down 16% primarily due to lower shipment volumes partially offset by price realization. Operating profit moved lower year-over-year to $196 million due to lower sales volumes and mix, impairments, and employee separation expenses. The decrease in profit was partially offset by price realization and lower R&D expenses and reduced SG&A, lower warranty expenses, and improved production costs. The total costs for impairments and employee separation charges were $76 million for the quarter, while the full year costs were $184 million. Let’s turn to our 2021 Construction & Forestry industry outlook on slide 10. Construction Equipment industry sales in the US and Canada are now forecast to be down about 5% with continued uncertainty expected in the oil & gas and non-residential sectors. Meanwhile, compact construction equipment industry sales are expected to increase about 5% as the housing market fundamentals continue to be positive through 2021. Moving on to Global Forestry, we now expect the industry to be flat to up 5% as the recovery in lumber demand, particularly in North America, should lead to increased production throughout the year. Moving to the C&F division outlook on slide 11, Deere’s Construction & Forestry 2021 net sales are forecast to be up between 5% and 10% compared to last year. Our net sales guidance for the year includes expectations of about 1 point of positive price realization and a currency tailwind of about 1 point. We expect the division’s operating margin to be ranged between 9% to 10% for the year benefiting from price, volume, and nonrecurring expenses from 2020.

Thanks, Brent. As noted, I recently assumed the newly-created Chief Technology Officer position and I spent the last few months finalizing our organizational design and refining our technology strategy to best enable the smart industrial operating model. I’ve been with Deere for over 20 years in a variety of engineering roles in both the Ag & Turf and Construction & Forestry divisions, and most recently led engineering for the global tractor product family. Most simply put, the Chief Technology Office is responsible for delivering Deere’s technology stack. Think of our tech stack as a full set of components required to deliver technology solutions to our customers. For nearly 25 years, Deere has invested in core technologies and capabilities that can be leveraged across the enterprise. These core competencies are primarily focused around machine guidance, digital connectivity, machine intelligence, and more recently, autonomy. Historically, Deere operated within multiple disparate business units that were spread out throughout the enterprise to pursue innovations in these core technologies. As part of our redesign, we’ve consolidated these units under the CTO organization. This drives a higher degree of focus and unlocks significant efficiencies for our R&D investments. Our approach to precision technology as shown on slide 13 is distinct within the industry, as we’ve maintained end-to-end development responsibility for our tech stack, developing unique solutions from the embedded hardware and software in our equipment, to the digital platforms our customers utilize. While we’ve pursued a vertically integrated path for our core capabilities, we have chosen to partner with others for noncore technologies, things like graphical processing units and cameras. Additionally, we’ve opened up our digital platform to include over 185 API partners. Over time, our philosophy has remained consistent, as depicted on slide 14. We seek to develop or acquire core technologies that add value and are unique to the jobs that our customers do, while outsourcing noncore technologies when partners can bring scale or offer faster speed to market. In any case, we maintain the development responsibility for the final solution to ensure seamless integration into our equipment. This approach has served us well, and traces its genesis back to our acquisition of NavCom in 1999. At that time, we decided to own certain technology competencies starting with satellite guidance. The acquisition delivered a foundational element to our tech stack and it enabled us to lead the industry in innovation from the early days of AutoTrac to turn automation and now AutoPath, which is our latest solution for path planning. Furthermore, by owning this technology, we’ve been able to scale guidance innovation throughout our entire large Ag fleet. We followed similar blueprints with other core technologies from our acquisition of Phoenix International in 1999 to the organic development of the John Deere Operations Center beginning in 2012. Our acquisition of Blue River Technology in 2017 reflects our view that machine learning and computer vision are essential competencies required for the next generation of machine intelligence and automation. Similar to other core technologies, we see wide applicability of Blue River’s competencies across our large Ag product portfolio and also intend to leverage the vision systems for obstacle detection in our Construction & Forestry division. Essentially this technology can be applied to optimize machine use and job outcomes anywhere a human operator controls or adjusts machine settings. Ultimately, we believe that a complete tech stack delivers the most value for our customers when it’s paired with the underlying equipment and a dealer network that can support it. This seamless integration is key to achieving the highest levels of productivity and sustainability and is a requirement for innovations like plant-level management and autonomy.

Thanks, Jahmy. Slide 16 outlines our guidance for net income, our effective tax rate, and operating cash flow. For fiscal year 2021, our full year outlook for net income is forecast to be between $3.6 billion to $4 billion. It’s important to note that constraints in the supply base and labor force availability due to COVID-19 remain key risks to our fiscal year 2021 guide. The guidance incorporates an effective tax rate projected to be 26% to 28%. Lastly, cash flow from the Equipment Operations is expected to be in the range of $3.8 billion to $4.2 billion and contemplates a $700 million voluntary contribution to our OPEB plan. Before we respond to your questions, I’d like to offer some perspective on 2020, the prospects ahead of us, and a few thoughts on our portfolio and capital allocation strategy. As we look back on 2020, it’s important to acknowledge the exceptional efforts taken by our employees, suppliers, and dealer channel this year. Employees across our company logged extra hours and adapted to an ever-changing environment to create safe working conditions and ensure the supply of parts and equipment to our customers so that they could continue their essential work. Similarly, our dealers quickly adjusted to the pandemic and played a critical role keeping our customers’ businesses operating. This year served as a reminder of just how impressive our dealer group is, and we are grateful for the tremendous performance they put forth. And as a result of the effort put forth by employees, suppliers, and dealers, we posted one of the strongest fourth quarter performances in company history. Excluding costs associated with employee separations and impairments, our Construction & Forestry division achieved 11% margins, the highest fourth quarter since 2014. Similarly, Ag & Turf fourth quarter margins excluding special items were approximately 16.5%, which is the highest fourth quarter in the division’s history, eclipsing results from 2013 despite around $1 billion less in net sales. While encouraged by our recent results, we are even more excited by the opportunity ahead of us. In the midst of addressing a global pandemic, we also instituted a new strategy for the company over the year. In doing so, we accomplished three primary objectives. One, we’ve reorganized the company around production systems to mirror the way our customers do business. Two, we’ve taken significant strides towards optimizing our cost structure. And three, we’ve adapted our investment priorities to ensure a greater degree of focus on the products and solutions that are most differentiated and unlock the highest value to our customers. A more focused R&D investment strategy is essential to realizing the value of the technology stack that Jahmy just described. While we spent decades investing in the core competencies to comprise our current technology stack, we see significant runway ahead to build on what we have done and advance technology for our next generation of solutions, and our new strategy plays a vital role in unlocking the necessary capital to achieve the potential we believe is possible.

Thanks, Ryan. Now we’re ready to begin the Q&A portion of the call. The operator will instruct you on the procedures. In consideration of others and our hope to allow more of you to participate, please limit yourself to one question. If you have additional questions, we’d ask that you please rejoin the queue. Robin?

Thank you. Our first question is from Jerry Revich with Goldman Sachs.

I’m wondering if you can talk about Ag & Turf incremental margins from here? Obviously, you got to really strong margins much earlier in the cycle than most of us expected. How should we think about operating leverage from here assuming we do get a multiyear Ag & Turf recovery? Can you still, off of these higher levels, deliver 30%-plus incremental margins as we think about what a multiyear recovery could look like?

Yeah, thanks, Jerry. As it relates to the margins and thinking about this next year, 2021, 15.5% to 16.5% absolute margins, we do expect that we can do the roughly 30% to 35% from an incremental basis in kind of the underlying operations. I think when you think about this year, a few things to consider as far as potential or not potential headwinds in the forecast would be incentive compensation has moved up and is a bit higher in 2021 from a company-wide perspective, that’s about $160 million headwind. And then we are seeing a little bit higher overhead costs. Some of that’s related to volume, but certainly still have some of that related to just overall caution as it relates to COVID and the impacts as we’re seeing spread in contagion in a lot of our key geographies.

Yeah, Jerry, it’s Ryan. I think the way to think about it, we structurally improved the profitability of the Equipment Operations including Ag & Turf, but we intend over the long run to still operate with that flexibility that gives us the ability to perform on an incremental basis in the 30% to 35% range.

Thank you. Our next question is from Jamie Cook with Credit Suisse. Your line is open.

I guess my question is if you assume the high end of your guide on the sales and on the margin front, it implies your margins are already almost hitting the 15% mid-cycle margin target that you guys have laid out. So I’m just, what’s embedded in your view of the cycle in your 2021 guidance? And I guess the longer-term question is are we further along than we thought we would be? Do we need to revisit that target? I’m just wondering if the market under appreciates the margin story for Deere longer-term. Thank you.

If you think about where we’re at in the cycle, Ag & Turf this year, we’re projecting to be pretty close to mid-cycle. That said, mix is still not normal. We think large Ag in North America is around 90% of mid-cycle, small Ag overall a little bit above mid-cycle, so relatively close but not there. That’s, I think what we’ve seen is significant progress on the margin front. As Ryan mentioned, feel like we’ve structurally improved our ability to perform and execute and drive that margin level, so we’re continuing to work on that, and as implied with our guidance this next year, expect being above that 15% target for Ag & Turf in 2021.

But in total for the company, is the 15% too low now, I guess I’m asking? Because we’re getting there on a combined basis and we’re not even at mid-cycle.

Yeah, Jamie, the goal was for 2022 kind of at mid-cycle. We’ll continue to execute and deliver on that, and then 2022, we’ll take a step back and reflect on what we want to drive into the future particularly focusing on making the investments that really can change the game for our customers and create value for them. So hang with us and wait until we execute and deliver in 2022, but we’ve got a long runway of things that we can do to make our customers better.

And thank you. Our next question is Steven Fisher with UBS.

Thanks. Good morning. Just curious to ask you about how you’re factoring in raw materials costs for fiscal 2021. We’re seeing some steel price increases, but I notice your COGS percent assumed is lower in the forecast, so just curious what you kind of – how you’ve thought about that in front half versus back half. Thanks.

Steve, when we look at material, we’ve had a tailwind in 2020 from a material point of view, in particular, on steel. That’s after we saw increases in 2018 and into 2019, so it has been favorable at this point. As we look forward into 2021, our contracts, we tend to cover a quarter, a little bit more in terms of the lag time between price movements and when we see those come through, so we have some coverage there. So to your point, to the extent you see some of that inflation, probably more impactful later in the year. That said, as we kind of step back and look at material overall, are seeing some of those trends in terms of prices moving up but we’re also pretty confident in some cost reduction projects and things we have going on that we think about material kind of coming in relatively stable year-over-year. Thanks, Steve.

Thank you. Our next question is from Stephen Volkmann with Jefferies. Your line is open.

Hi. Good morning, everybody. I’m wondering if we can spend a moment on the pricing question? You guys obviously had very good pricing especially in A&T in the fourth quarter, and I guess the outlook is pretty good as well. Can you just kind of describe what you’re seeing there and why it’s as positive as it?

Pricing, Steve, you’re right, was better than expected in the fourth quarter. I think maybe backing up, what hasn’t changed is our philosophy on pricing. You continue to focus on value and the upside that we can create for our customers. I think when you look specifically at what we saw in the fourth quarter for Ag & Turf, there were a few things that drove that level of pricing. One, and we noted, Brent kind of mentioned this in his comments, we had tighter inventory positions kind of across most of our geographies and models in particular on small tractors and turf that drove less spend as a result of tighter levels of inventory. That’s one component. The other piece, and we talked a little bit about this last quarter, we saw more of it this quarter, was the cost for low rate programs, so buying down interest rates to offer low rate programs to our customers, which are pretty prevalent in small tractors and turf. That cost was lower as a result of just lower interest rates in the market. So that was impactful. And then lastly, we saw pricing overseas. We had continued strength in a number of overseas markets that benefited price in the quarter. So we ended the year strong, obviously, and are forecasting about three points next year, so continue to manage that. And I think part of that too, you think about as we go into the year with tighter inventories, we think that lends itself to a little bit lighter incentive spending as we work to recover some of that inventory in 2021.

Thank you. Our next question is from Ann Duignan with JPMorgan. Your line is open.

Hi. I just wanted to ask you about your comment that you’re only up about 90% of mid-cycle in large Ag going into fiscal 2021. That seems a little inconceivable to me given that farmers are sitting there with $50 billion in excess government payments this year on top of $24 billion that they received last year, and so the notion that they’re not spending now given the fundamentals and given the extra money they have and with government payments expected to revert to normal going forward, why wouldn’t 2021 represent the new peak, not 90% of normal?

Yeah, so maybe as we think about that, a little bit of a journey. Last year, 2020 we were around 80% of mid-cycle for large Ag in North America, so we’re seeing that step up to about 90%, so we are seeing that. Maybe taking a few of those pieces of your comments there as it relates to what’s going on, government support obviously has been very strong. I think from a customer perspective, the preference would be access to markets over aid. I think that’s underlying and as we’ve seen some of the export markets open up, I think you’re seeing more sentiment improve. But the aid has in large part in our view been used to pay down debt and really manage and shore up our balance sheets, so I think that’s been a positive. And underlying that also, you’re seeing strong land values in the Midwest seeing some upward movement in land values, so I think underpinning there a really strong balance sheet for farmers, particularly as we exit the year. Fundamentals have moved and they’ve moved really over the last six weeks, so it’s been pretty recent on the back of kind of revisions down of ending inventories of commodities, China purchases, and then obviously the aid that you mentioned. All of those, we’ve seen impact sentiment, so those things have been positive. So I think as it relates to looking forward, we don’t expect aid to recur, but we do believe higher commodity prices are going to benefit cash receipts as we go forward, so we don’t expect a huge downward movement in cash receipts for principal crops in 2021. Saying all of that, I think we step back and say we are seeing demand pick up. We’re seeing that in early order programs and the large tractor order book that Brent mentioned, so I think we’re really kind of at an inflection point right now where we’re seeing demand move. We would say there’s still a long runway of replacement demand as you look at the age of the fleet and those sorts of things, so we think we’re a ways off mid-cycle let alone peak. And Josh on that, wouldn’t your normal peak be 20% to 25% above mid-cycle for Ag & Turf? If that’s the case, historically, the trough-to-peak move would be something like a 30%-type number, not a 10% to 15% number, that’s what I was trying to clarify in my question.

Yeah, sorry. I forgot that part of your question. Yeah, we would consider 120%, 20% above as peak, and that’s as we plan and certainly if you go back to 2013, large Ag in North America was 130%, so that was, so we’ve been much higher and higher than even 120%, but that’s the way we plan. So thanks, Ross. We’ll go ahead and try to get one more question.

Thank you. Our next question is from Seth Weber, RBC Capital Markets.

Great, guys. Thanks, and good morning. Happy thanksgiving. Just a question on the South American industry Ag outlook. Up 5% seems kind of conservative. It sounds like you’re messaging that your order book is up materially here at the end of the year. So can you just frame that? Are you expecting something to really sort of drop off in the back half of the year in South America? Is it just uncertainty around financing programs, or any color you’d talk to as to the 5% growth for South America. Thanks.

Yeah, so, I mean, up 5% for all South America, I think your question maybe a little more targeted on Brazil specifically. Fundamentals have been really strong. We saw fourth quarter demand was from a retail perspective was strong and strong enough that you actually saw the year swing from kind of a negative industry to positive, so that’s moved quickly. Brent mentioned our order books were ordered out through March, one thing that does, when you think about the comparison then, the strong fourth quarter is now intercom, so we’ll anniversary that strong industry in 2021, so I think that’s part of it. But I think overall, we’re seeing dynamics there have been favorable and maybe a little bit of caution as it relates to China buying more grains from the US and what exactly does that mean for them but overall, I think very, very positive outlook on Brazil. Well, with that, I think we’re at the top of the hour, so we’ll wrap it up. But appreciate all of the interest. I hope everyone has a good Thanksgiving, and we’ll talk soon. Thank you.

And thank you. This does conclude today’s conference call. You may disconnect your lines, and thank you for your participation.