Deere & Company

Good morning, and welcome to the Deere and Company Second 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. Josh Jepson, Director of Investor Relations. Thank you. You may begin.

Thank you. Hello. Good morning. Also on the call today are John May, Chairman and CEO, Ryan Campbell, Chief Financial Officer, Corey Reed, Ag and Turf Division President, and Brent Norwood, Manager of Investor Communications. Today, we'll take a closer look at Deere's second quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2020. After that, we'll respond to your questions. Please note, slides are available to complement the call this morning. They can be accessed on our website at johndeere.com slash earnings. First, a reminder, this call is being broadcast live on the Internet and recorded for future transmission and use by Deere and Company. Any other use, recording, transmission of any portion of this copyright broadcast without the express written consent of Deere is strictly prohibited. Participants in the call, including in 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 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 8K and periodic reports filed with the Securities and Exchange Commission. This call may also include financial measures that are not in conformance with the 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 johndeer.com slash earnings under quarterly earnings and events. I'll now turn the call over to John May.

Thanks, Josh. Good morning and welcome to John Deere's second quarter earnings call. Before discussing the details of the quarter, I'd like to begin the call with an overview of our response to COVID-19 and the near-term implications of the pandemic for our business. First off, I sincerely hope that you and your families are safe and healthy and well. These times are challenging for many people, and my thoughts are with those affected by COVID-19. Additionally, I'd like to express my sincere gratitude to those who are serving our communities so that we can all overcome this pandemic. From the courageous medical professionals to those tirelessly working in industries essential to stability and recovery, such as the extraordinary colleagues at John Deere and many of our customers, I want to say thank you. As John Deere has responded to COVID-19, our first priority has been and will always be the health, safety, and overall welfare of our employees. It is only by protecting our workforce that we can ultimately deliver on our commitment to our customers and fulfill our role as an essential business, a designation we are both proud of and humbled by. Over the last two months, we've proactively implemented additional health and safety measures at our operations around the world. Importantly, many of these measures were taken on very early and ahead of regulations or official guidelines. These measures, such as employee health screening, additional personal protective equipment, social distancing guidelines, enhanced cleaning and sanitation efforts, and staggered production schedules. By diligently pursuing health and safety measures, we not only help protect our workforce, but we also provide our employees with peace of mind so that they feel secure coming to work. And consistent with our dedication to health and safety in our workforce, we also provided a number of additional benefits to encourage employees to take care of themselves and their loved ones without fear of financial harm. These additional benefits help support symptomatic employees or those deemed high risk, while also supporting workers who are challenged by the lack of school or daycare options. During this time, our strong partnership with the UAW and other labor organizations across the globe has played a key role In helping us implement these measures, allowing us to answer the call as an essential business, I'm proud to report that substantially all of our global manufacturing base is running, with exception of a few facilities operating at limited capacity, such as those in India. Our commitment to health, safety, and well-being extends outside of our walls and into the communities our employees call home. For instance, John Deere is producing thousands of protective face shields to meet the immediate and ongoing needs of healthcare workers serving our communities. To this, we add our foundation support of our social safety net in our home communities around the world, highlighted by our recent investments in food banks, and their capacity. At the same time, we're also modifying our work to ensure that our customers and dealers can keep their operations running. Underlying Deere's designation by many governments as an essential business is the fundamental recognition of the role our customers play in securing our global food supply and vital infrastructure. One goal has been to maintain customer uptime. To do this, we've kept new equipment shipments moving and parts depots operational around the world. This has been no small task, particularly in light of the economic complexities of the regulatory, economic, and other barriers that have affected our supply chain. As it relates to our dealer channels, The vast majority are operating today and we're able to maintain business safely throughout the last two months. Importantly, they've leveraged our e-commerce tools and connected support capabilities throughout the pandemic, allowing them to remotely service customers, machines, and maintain appropriate social distancing. Ultimately, The measure that we've taken to ensure continuity of operations have enabled our customers to carry out the essential work of promoting food security and providing critical infrastructure. While customers' operations vary around the world, this is an especially critical time for those involved in agriculture. During the last two months, many of our customers have been planting or harvesting a crop. and therefore have required continual support from John Deere and our dealers. Furthermore, John Deere Financial has continued providing financing to customers globally throughout this crisis and has provided flexible terms to customers experiencing disruptions due to COVID-19. To best summarize our efforts over the last two months, We are protecting our employees who, in turn, help ensure that the essential operations of our customers keep running. And where our customers need even further support and financial assistance, John Deere Financial allows us to serve customers in ways that others cannot. In addition to the operational actions, we've also proactively managed our balance sheet and cost structure to ensure we are well capitalized through this period of uncertainty. Over the years, we've built a business with a cost structure that can flex with movements up and down the cycle. So much of this is already in our DNA. In addition to that, we plan to make further structural improvements beyond the typical cost levers we pull throughout the cycle. Lastly, I'd like to revisit the strategy we laid out during our analyst event at CES in January. Regardless of COVID-19, all of the key elements of our strategy continue to direct our efforts. We continue to work on executing our priorities, which have proved more important now than ever. First, we are focusing on capital allocation both investments in R&D and investments to the areas of greatest potential for differentiation and profitability, resulting in intensified precision ag investments, higher penetration in our aftermarket and retrofit business, and an increased emphasis on high-performing product lines while actively addressing any lower-performing product line. Second, we are reorienting our organization design to create a business that is more customer focused across the entire production system in order to better capitalize on the immense opportunity in front of us. As it relates to intensifying our precision ag business, the current environment highlights the importance of Deere's technology stack as a key differentiator in the market. We've been investing in machine connectivity and data platforms for nearly a decade. Having those foundational technologies in our installed base has enabled our connected machines metric to increase significantly year over year, which has provided, in some cases, triple-digit growth in adoption of the services like remote display access, service advisor remote, and expert alerts. In light of the current circumstances, we see it as an obligation to continue investing in precision technologies that support customers and keep them running. We remain convinced of the value of creating a more agile organization to more nimbly respond to ever-changing market conditions. These organizational shifts will ensure our managers are empowered to make decisions and take action as required. At this time, I'd like to turn the call over to Brent Norwood to cover some of the details on the quarter.