Tony Huegel - Director-Investor Relations Susan Karlix - Manager, Investor Communications Rajesh Kalathur - Chief Financial Officer & Senior Vice President.

Vishal Shah - Deutsche Bank Securities, Inc. Andrew M. Casey - Wells Fargo Securities LLC Jerry David Revich - Goldman Sachs & Co. Mig Dobre - Robert W. Baird & Co., Inc. (Broker) David Michael Raso - Evercore ISI Institutional Equities Steven M. Fisher - UBS Securities LLC Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker) Ann P.

Duignan - JPMorgan Securities LLC Ross P. Gilardi - Bank of America Merrill Lynch Eli S. Lustgarten - Longbow Research LLC Nicole DeBlase - Morgan Stanley & Co. LLC Rob C. Wertheimer - Vertical Research Partners LLC Michael Shlisky - Global Hunter Securities, LLC Emily G. McLaughlin - RBC Capital Markets LLC Larry T. De Maria - William Blair & Co.

LLC Brian C. Sponheimer - G.research, Inc. Brett W. S. Wong - Piper Jaffray & Co (Broker).

Good morning and welcome to Deere & Company's 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. Tony Huegel, Director of Investor Relations. Thank you. You may begin..

Hello. Also on the call today are Raj Kalathur, our Chief Financial Officer; and Susan Karlix, our 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 outlook for the second half of fiscal 2015. 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 www.johndeere.com. 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 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 8-K and periodic reports filed with the Securities and 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/earnings under Other Financial Information.

Susan?.

price realizations of about two points; favorable raw material costs; an unfavorable mix of product; and Tier 4 product costs. Looking at R&D expense on slide 22, R&D was down about 4% in the second quarter, including about three points of negative currency translation.

Our 2015 forecast calls for R&D to be down about 1% for the full year, including about three points of negative currency translation. The forecast reflects higher R&D spending in the second half of the year which is the typical pattern.

Moving now to slide 23, SA&G expense for the equipment operations was down about 14% in the second quarter, including about four points of currency translation. Our 2015 forecast contemplates SA&G expense being down about 11% with landscapes, water, and currency accounting for about six points of the change.

Similar to the situation with R&D spending, SA&G expense is forecast to be higher in the second half of the year. Turning to slide 24, pension and OPEB expense was up about $15 million in the quarter and is forecast to be up about $70 million in 2015.

On slide 25, the equipment operations tax rate was approximately 30% in the quarter, primarily due to mix of income and discrete items. For the remainder of fiscal 2015, the projected effective tax rate is forecast to be in the range of 34% to 36%. Slide 26 shows our equipment operations history of strong cash flow.

Cash flow from the equipment operations is now forecast to be about $3.4 billion in 2015. The company's third quarter financial outlook is on slide 27. Net sales for the quarter are forecast to be down about 17% compared with 2014. This includes about two points of price realization with unfavorable currency translation of about six points.

Turning to slide 28 and the full-year outlook, the forecast now calls for net sales to be down about 19%. Price realization is expected to be positive by about two points. Currency translation is negative about four points.

Finally, despite strong currency headwinds, our full-year 2015 net income forecast is now about $1.9 billion, an increase from our previous guidance. In closing, John Deere expects to be solidly profitable in 2015.

In fact, the year is forecast to rank among our stronger ones in sales and profits, even with the pullback we're experiencing in the farm sector. Such an achievement says a lot about the progress we've made establishing a wider range of revenue sources and a more durable business model.

All in all, we remain confident in the company's present direction and in its ability to meet customer needs for advanced machinery and services in the future. I'll now turn the call back over to Tony..

Thank you, Susan. Now we're ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. But as a reminder, in considerations of others and our hope to allow more of you to participate on the call, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue.

David?.

Thank you. We will now begin the question-and-answer session. The first question today comes from Vishal Shah of Deutsche Bank Securities. Your line is open..

Hi, thanks for taking my question. Maybe we should start with about how you see the inventory levels at the dealers and what you see in the used equipment pricing market..

So as you think about used equipment, obviously, overall I assume you're referring mostly to large Ag equipment. So, as you....

That's right..

So as you look at dealer inventory, certainly we took – last year, again as a reminder, we pulled a lot of inventory out. As Susan pointed out in the opening comments, we're down pretty significantly year over year. As we ended the quarter this year with receivables and inventory, we're down almost $2 billion year over year for Ag & Turf.

And certainly there's a lot of conversation about used equipment levels as well. And we would tell you, as you look at large Ag in total, certainly, we're always concerned about used equipment. If you ask us are we more concerned today than we were three months ago or six months ago, the answer would be no. We continue to be very focused on that.

We believe we're materially in better position than our competition. But we're really focusing on lowering those used inventory levels, but also protecting resale values as we do that. So we believe we're on the right path.

We feel pretty good about the direction we're heading with used equipment, but certainly we have a lot of work ahead of us in terms of continuing to pull that down..

That's helpful, and just one other question..

Actually, I'm sorry..

Can you maybe talk about what percentage of....

I'm going to have to ask you to get back in the queue. I'm sorry..

Sure..

Next caller?.

Your next question comes from Andy Casey of Wells Fargo Securities. Please go ahead with your question..

Thanks, good morning..

Good morning..

A quick question on the modest improvement in the U.S. and Canada outlook.

Is that all driven by lower horsepower, or are you seeing better order intake than previously expected in the high horsepower equipment sector?.

I would not characterize that as a significant improvement, really, in any of our businesses. I would argue it's a bit of a tweaking, as Susan pointed out, refining the forecast. But certainly, we have not changed our outlook on large Ag business.

We're continuing to see that down closer to the 40% range in the industry, and so not a significant change really anywhere, but certainly not with large Ag..

Okay, thank you..

Okay.

Thank you, next caller?.

Your next question comes from Jerry Revich of Goldman Sachs. Please go ahead with your question..

Hi, good morning..

Good morning..

Tony, can you talk about the raw material benefit that you folks saw in the quarter and what's factored into guidance? And then can you calibrate us on the transactional impact of currency along those lines as well, please?.

Okay, so I'll take the first question. If we want to talk about currency, we'll have to someone get back in, either get back in queue or we'll have someone else pick up on that. As you know, we don't disclose specific guidance in terms of dollar impact from raw materials.

A couple years ago now, we switched and started providing guidance on overall cost of sales. But certainly, that has been a benefit in the first half of the year. I would tell you as you look at the second half of the year, certainly for Ag & Turf, but really on the overall business, it's slightly less benefit in the back half of the year.

Now before anyone gets too excited about that, it's not that we're implying that steel costs and other commodity costs necessarily go up. If you think about the timing of our general purchases and our production on any year, we tend to build inventory in the first half of the year sequentially, and then it comes down in the back half.

So you tend to get the benefit earlier in the year in some of those material costs. So continued benefit from material costs year over year, but if you're looking first half, second half, there is actually a slight difference, a slightly lower benefit in the back half in our implied guidance. Okay..

Thank you..

Thank you, next caller?.

Your next question comes from Mig Dobre of Robert W. Baird. Please go ahead with your question..

Good morning, everyone..

Good morning..

Tony, can you maybe range us in terms of your expectations for full-year margins in construction versus Ag & Turf?.

So if you look at the margin, I think Susan pointed out on the call, we are looking for C&F margins to be about 11%. For the full year, Ag & Turf would be about 8%. So no change on C&F from our prior forecast, a slight increase actually for Ag & Turf; we had previously forecasted about 7%..

Thanks..

Thank you, next caller?.

Your next question comes from David Raso of Evercore ISI. Please go ahead with your question..

Thank you.

Given your new inventory and receivable forecast, where do you see production versus retail heading into 2016? And if you can break it out between Ag & Turf and Construction & Forestry, because obviously, I assume that must have been baked into why you altered some of the receivable and inventory forecasts?.

As you look at receivables and inventory, and specifically we'll start with Ag & Turf, as you look at the change in the forecast from last quarter to this quarter, I would tell you it really – it does not relate to the U.S. and Canada. It relates to receivables and – both receivables and inventory outside of the U.S.

and Canada as well as some FX impact quarter over quarter. But it's mostly about those receivables outside of the U.S. and Canada.

But it's implied already and not to be forgotten that we pulled a lot of receivables and inventory out in 2014 as we ended the year, and certainly in our initial – in our original budget guidance, we had a pretty healthy level of receivables and inventory continuing to come out on Ag & Turf as we seek to under-produce the retail environment through the year.

So we have under-produced year-to-date and we would continue, especially as we go into the back half of the year, we'll be under-producing the retail environment and continuing to bring those field inventories down, both on new as well as providing some additional support that way for our dealers on used equipment.

When you think about C&F, remember we talked about it early on, much of that increase and some of that is because of higher sales, of course, so I don't want to imply there isn't any increase in field inventories. But much of that has to do with the change in some of the terms, and we think that will drive some higher levels of receivables.

And really the reduction you saw in the quarter had more to do with a refinement of what we think that impact will be from those terms changes versus really any kind of significant expectation in terms of a change in actual field inventories. So that's really what's driving most of that as we look towards the end of the year..

But to my question, just so I'm clear on the takeaway, is this forecast to set you up going into 2016 that whatever we think retail will be, you expect to produce in line with retail?.

Our expectation for 2015 is certainly to produce under with the hope that in 2016 we will be able to produce to retail next year. Now again, that's making a lot of assumptions on what 2016 would be as well.

But what I don't want to imply is that, as you look at that reduction in receivables and inventory, that there is any kind of signaling of what 2016 may or may not be because, again, that change was not related to the U.S. and Canada..

I totally understand. I just want to make sure the spirit of that forecast is to set you up into 2016 where there isn't necessarily more inventory reduction. The spirit is to enter 2016..

That has been our expectation all year and that has not changed so..

Thank you so much, I appreciate it..

Thank you, next caller?.

Your next question comes from Steve Fisher of UBS Securities. Please go ahead with your question..

Great. Thanks. Good morning. Bigger picture on Ag, we're still seeing most Ag markets down around the world. But looking forward, give us your sense for which Ag market you think has the best potential to turn positive first and why..

That's a great – a tough question at this point. And actually I think if you look at the U.S. and Canada markets, for example, and I think it really implies the overall commodity market in general, if you talk to our Chief Economist, he would tell you we're really in kind of a year-to-year type of mode right now.

And as frustrating as it may be for people to hear, it really is about what happens this summer with the current crop that's in the ground.

If you're going to assume another year of better than average weather, where yields are above trend yield, then certainly it's going to be a challenging argument to make that 2016 would certainly improve really anywhere around the globe.

If you look back at what would the implications be of trend yields or a little less than ideal weather or average weather and you see below trend yield, then that story changes pretty dramatically because we would argue that you're not – while you certainly have ample supply of commodities and you're seeing that reflected in commodity prices, there isn't a glut of commodities either.

And so if you under-produce demand going into – through the 2015 crop and going into 2016, we believe prices will be very responsive to that and cash receipts would recover in that type of environment, you would see sales begin to recover as well.

But that's as close to – and I can't pinpoint a certain geography, specifically, but I would say that's probably a pretty consistent global statement that we would make, okay..

Thank you..

Thank you, next caller?.

Next question comes from Jamie Cook of Credit Suisse. Please go ahead with your question..

Hi, good morning. I guess can you just comment on the order book where we stand today versus expectations and where we were last year by combines and 7R, 8R or 9R, et cetera? Thanks..

You bet. As you think about order book, I think in general we would continue to say, versus our forecast – obviously, we're forecasting a much lower level of orders, but versus that forecast, we continue to be in very, very good shape compared to last year in terms of the order coverage.

And certainly combines at this point in the year with the early order program we're well over 90% covered and the bigger question tends to be things like large tractors.

If you think about 7000 Series tractors, today we would be – really 7000s, 8000s, and 9000s for this year we're out into early October in terms of availability and these are the wheel tractors, not track tractors so across the board on wheel tractors we'd be early October. Last year, on 7000s, that would have been late August.

8000s would have also been early October, so consistent. And on 9000s, it would have been mid-June....

Okay..

...in terms of availability. So our order book is actually – on, again, much lower order level, our much – expectations, but as an availability perspective in very good shape. I didn't mention the track tractors. Those would also be on 8000s would be out into early October.

9000s would be in August, which would be a little bit behind where we were last year. Last year, we would have been out into September..

All right, great. Thank you for the color..

Great.

Thank you, next caller?.

Next question comes from Ann Duignan of JPMorgan. Please go ahead with your question..

Yes, hi. Good morning..

Hi, Ann..

Just a clarification first, if I can. Just on David Raso's question. Your point is that until we get through July and August, July and August make or break the crop, until we get through those months we really cannot even begin to forecast what 2016 might look like. I think you would agree with that..

Yes..

Okay.

And then my real question is if you look at this whole trend in the industry towards leasing, can you talk about the increase in your equipment leasing? It was up about $1 billion, about 31% year over year, talk about the risks of – on residual values, when those leases expire and why this trend towards leasing versus selling?.

Sure, that's a great question. Certainly you're right, we are seeing a move towards more leasing. We think some of that has to do with giving some of the lower margins customers are facing. And as well as – so again, when you purchase the equipment, you tend to get a better advantage from a tax deduction perspective.

So as margins are a bit lower that isn't as attractive always, but then there's also questions around Section 179 and bonus depreciation. Will we really have that or not? And so we think that's factoring into some of those decisions in terms of a move towards leasing.

Really as we look at it, the key here is making sure that residuals – and I think as you imply, making sure that residuals are valued properly. And that tends be what we focus on, as you know. We tend to be relatively conservative on the setting of residual values. We continue to do that. Today, we certainly evaluate those on a regular basis.

We haven't had any kind of write-downs or accruals that we've had to make against the residual values of that leasing portfolio. But that's really where the risk is. It does move some risk to the financial services organization in the sense of if residuals would drop dramatically as they come off of lease that could create some challenges there.

Couple things I would point out, though, related to that is, one, while it's increasing it's still a relatively small part of our total portfolio. So just to keep that in perspective.

And the other thing is, and it's one of the reasons why it's so important for us as we manage used inventories in general to make sure we're protective of the – of pricing on that used equipment. Not only does it help – the value of that used equipment. So it helps certainly our dealers. So it's supportive there.

But it's also supportive of the financial services organization in the sense of making sure we're protecting those residual values as we go through this downturn and as we continue to focus on moving those used equipment levels lower. So it is a balancing act in terms of looking to reduce those and still being protective of those values.

So anyway, thank you. And we'll move onto the next caller..

Next question comes from Ross Gilardi of Bank of America Merrill Lynch. Please go ahead with your question..

Yeah, thanks. Good morning..

Hi, Ross..

I'm just wondering if you could talk a little bit more about Brazil, Tony. I mean, soybean fundamentals seemed pretty poor. You've cut your price outlook there. The borrowing rates were up sharply. You tweaked your outlook a little bit more negative but it doesn't seem like anything major.

So does the situation feel like it's still in the process of deteriorating, or are you seeing any signs of stabilization at the bottom?.

As you think about Brazil on the Ag side, it's an interesting situation this year with the outlook that we have in place. Because if you look at – I would actually turn around a little bit with the soybean prices while in U.S. dollars certainly it's down, and consider the impact of currency. Because remember Brazilian farmers sell in U.S.

dollars and then convert back to local currency. So their cash receipts in local currency and their margins, because most of their inputs were purchased in local currency. And to the extent that they were purchased in U.S. dollars, it would have been before the currency shifted last fall.

And so when you look at margins on the crop that was recently harvested, they're pretty attractive levels, which is in stark contrast to the outlook. Really what we're seeing in our outlook is, in our view, a concern around the general economy in Brazil. Some of the – you're seeing that in some of the increased rates of FINAME financing.

So I would tell you much of that is going to be dependent on what happens as we move forward with that Brazilian economy. There's still some question. You'll note our slides end in June in terms of what the FINAME financing rates are because they haven't been announced beyond that.

So we'll be hearing hopefully in early June is the expectation now, not just what the FINAME financing rates will be for both PSI and Moderfrota, but also what down payment levels they're going to require.

Will they keep Moderfrota at the 10%? And as importantly, what's the overall budget? Will they change that overall budget? And then we'll have a much better feel for what happens as we move forward with Brazil, at least in the short term. But again, I'd remind you this is about as short of a cycle.

Longer term, we continue to believe that we have great opportunity in Brazil as agricultural output continues to grow, as acreage continues to grow, and certainly as our market share continues to grow, Okay, next caller?.

Your next question comes from Eli Lustgarten of Longbow Research. Please go ahead with your questions..

Good morning, everyone. Brilliant quarter, actually. Can we talk a little bit about the change in construction equipment, the lower sales and outlook and what you're seeing in the marketplace? I mean 2% is obviously a little disappointing type of gain in currency.

But what are you seeing in the marketplace with the impact of oil and gas, and are we basically looking at a flattish environment for you guys for a while?.

I think it's important to point out and remind you, as Susan pointed out I guess in her comments, that the reduction really is not related to the U.S. and Canada. It's more about sales outside of the U.S. and Canada as well as FX. Within the U.S.

and Canada, certainly we're seeing in those areas that are heavily influenced by energy, certainly seeing lower orders and business slowing down somewhat, but the overall market continues to be fairly attractive in terms of what we saw at the beginning of the year as well, again, as a reminder, coming off of a very strong 2014.

So as you see those growth rates slow as we go into the back half of the year, remember we move into much tougher compares in that division. But when you look at markets like Brazil, and I just mentioned that in my last commentary on the Ag sector, and I would say certainly the overall business there is down significantly.

While we have our new facilities and we continue to look for market share increases in Brazil as we go through 2015, those market share increases just are not going to offset the impact of the overall reduction in the industry.

And so again, those are some of the – it's probably the major reduction quarter over quarter is what our expectation is in Brazil. But a variety of overseas locations really have weakened, in our view, over the quarter. So that's primarily what's driving that difference..

But you'll able to hold profitability if you....

Profitability has not – as you look at that, profitability has not changed. We're still forecasting the same 11% margins, so.

Okay?.

All right, thank you..

Let's move on to the next caller. Thank you, Eli..

Your next question comes from Nicole DeBlase of Morgan Stanley Investment Research. Please go ahead with your question..

Hi, thanks. Good morning, guys..

Good morning..

So my question is around the competitive environment. I guess what are you guys seeing on the pricing front out there, both with respect to new and used equipment? I think Vishal asked the question, but I'm not sure if that part of it got answered.

And then not just Ag, but also if you're seeing any increase in competitive pricing within construction..

Yes, so competitive pressure certainly, we talked about that with the Ag & Turf division, and it's not a surprise given the level of inventories that our competition has. And as a reminder, we went into the year on large Ag, as you look at inventory as a percent of sales, about half of where our competition was.

We would continue to say on large Ag equipment that our inventory levels are, as a percent of sales, about half of what the rest of the industry would be. But certainly that puts pressure because those inventories need to come down, and so you do see some pricing pressure. There's a variety of methods that they may choose to use to do that.

And certainly, we continue to see that – we talked about it last year in Construction & Forestry, both on our dealer sales as well as with the independent rental business, a lot of pricing pressure. And I would certainly tell you, year over year, that pricing pressure has not reduced.

Now we still continue to forecast, even in that environment, a two point price realization. That's for the enterprise, but I would tell you both divisions are contributing to that, both Ag and Construction. And so while it's a tough environment, we continue to focus on bringing value to customers and enable us to get some of that price realization..

Okay, thank you..

Thank you, next caller?.

Next question comes from Rob Wertheimer of Vertical Research Partners. Please go ahead with your question..

Hi, good morning..

Hi, Rob..

I'm trying to understand North American row crop inventory, and I totally get that the industry is twice as high as you, I do. But industry dealer inventory I think in units, is up year over year. I think your dealers were up year over year in units for row crops specifically. And sales I think at retail are down like 20%s.

I'm just trying to understand. Why isn't your inventory down? Forgetting the industry is worse, why isn't your inventory down because I thought everything was matched to a farmer? So maybe there's just a pulse I'm not understanding or something like that.

And then how do you get to the down 40% if it seems like you're down 20% or less for the first six months?.

So as you think about row crop tractors, I think the first thing to keep in mind is the data that's made public is 100 horsepower and above for AEM data. And we would view in terms of row crop tractors that breakdown to be more 180 horsepower to 200 horsepower and above.

So when you look at the AEM data, it gets clouded because you have our 6000 Series tractors in those numbers. You have some of our 5000 Series tractors in those numbers. And certainly those are tied much more closely to the livestock industry. We've talked about year over year seeing some strength in livestock, and so that does cloud that picture.

And I would point out those 6000 Series tractors come from Germany. And so while we talk about building to retail order, that is on large Ag, so that would be our 7000s, 8000s and 9000s and that certainly is the case on those. So I think that's part of what is causing maybe some of the confusion.

The other thing to keep in mind, too, is what's reported in AEM is what inventory the dealer owns at the end of the quarter – or at the end of the month. And so you do get some distortion. Not all of that is inventory or stock at the dealer. You can have retail sold inventory or tractors that are marked as retail sold pounded in those numbers.

So from the day it ships from our factory until it's delivered to the customer, it does get reported as dealer inventory. So again, that can distort things. And I'd also caution any time, and we've talked about this for years, to be very careful about looking at any single month.

And especially this year, as you look at year-over-year comparisons through the second quarter, remember last year our 7000 Series tractors and 8000 Series tractors were converting to Final Tier 4. And so you had different levels of inventory as you prepared for that transition and certainly as you came out of that transition.

So it can distort the year-over-year comparison. So we would continue to tell you from a new inventory level perspective, we're quite comfortable in large Ag. We continue to have the lowest levels in the industry. And that's not expected to change as we go through the year.

Now again that being said, as we talked about earlier, we are under-producing retail which we think will help lower inventories even further as we go through the year..

Hey, Rob. This is Raj. Let me add a couple points, okay. So if you just step back think of the industry environment we are facing and what we have done with respect to new and used inventories, we're facing, as you know, the deepest downturn in North American large Ag equipment industry in 25 years.

And as Tony mentioned, we've been working on both used and new. Now, on used combine volumes, our position today is less than where our used combine volumes were a year from now – a year before and two years before. Okay? So we have confidence that we will work down our row crop used inventory as well.

And as for the new row crop equipment sold to the corn and soybean producers in the U.S. and Canada, if you take the 7000 Series and 8000 Series tractors in the first half of this year, our shipments in the U.S. and Canada came down with the decline in retail and a lot further as well.

We actually under-shipped retail sales by over 20% in the first half. We are forecasted to under-ship retail for the second half as well. So the point I'm trying to make is we are managing our inventories aggressively while at the same time, and as Tony mentioned, keeping the long-term in mind. So thanks for the question..

Next caller?.

Thank you. Appreciate it..

Next question comes from Mike Shlisky of Global Hunter Securities. Please go ahead with your question..

Good morning, guys. I wanted to touch on Brazil as well, especially on your combine shipments. Some of the data coming out is showing that your shipments were actually down quite a bit in the second quarter here.

But I was wondering if you could maybe comment on your company's retail sales versus shipments in Brazil and whether it's in line with your expectations for the quarter?.

Yeah, that's a good point. When you think about the information that's available publicly in Brazil, as a reminder, that is shipments not retail sales. While we certainly have continued to push for the industry to move to retail sales, others in the industry haven't been supportive of that change. And so it can distort things.

We would tell you that certainly, from a retail sales perspective, things are moving forward as we would expect. We continue to take market share. It's showing, I think, even in the shipment numbers that certainly from a retail sales perspective our market shares continue to grow in Brazil, especially on tractors.

And so we feel pretty comfortable with where we're at on inventories as well as the retail sales from a market share perspective in Brazil.

Okay?.

Great. Thanks, Tony..

You bet. Thank you..

Next question comes from Seth Weber of RBC Capital Markets. Please go ahead with your question..

Good morning. This is Emily McLaughlin on for Seth..

Hello..

I just wanted – hello? Can you hear me?.

Yes, I can..

Okay.

I just wanted to see if you guys had any update to some of the countries in Europe are any better or worse than what you were thinking three months ago?.

I think probably as you look at Europe from – maybe the most noteworthy thing is you're starting to see at least some glimmers of hope from just a general economy perspective in some countries.

But if you look at the Ag industry, we didn't change the overall outlook, and, I would say, from a country by country perspective, really not any kind of significant changes. It's a year that's really moving forward fairly consistently with what we had anticipated early on.

So again, just not really much noteworthy in terms of a year-over-year change..

Okay, great. Thank you..

Okay. Thanks.

Next caller?.

Next question comes from Larry De Maria of William Blair & Co. Please go ahead with your question..

Okay. Thanks. Good morning. Just curious, you guys have talked a lot about myjohndeere.com and JDLink over the last couple years.

How did the myjohndeere.com platform do this planting season? Have they been collecting data from farmers? Are they using it or blocking the data collection? And related to that, how did the new high speed planter do this year into planting season versus expectations? Thanks..

Yeah, unfortunately I'll have to take – I'll take the first question. And as you think about the myjohndeere.com, certainly it is being used. Things have gone well with that from our perspective. Obviously, we continue to work with our customers to improve that process, but it is online and it is gathering data.

And I think it's mostly being used, obviously, to gather prescription information and download into the machines given that it's more planting season. And certainly, we'll use that. I would expect customers to use that on the back half of the year as they gather harvesting information as well.

So again we think it's off to a good start and feel pretty confident that that's going be a real value enhancer for our customers as we move forward..

Hey, Larry. This is Raj. I would also add that we watch the metrics on myjohndeere.com, the number of crop acres and a number of other things like that.

So far it is actually – we're very encouraged by the results that we're seeing, okay?.

Okay, great. Can you put some numbers to that in terms of acreage that's been used on....

We at this point have not disclosed any kind of acreage that's covered or anything along that line, so.

Okay, next caller?.

Next question comes from Brian Sponheimer of Gabelli & Company. Please go ahead with your question..

Hi, good morning. Thanks for fitting me in here..

Hi, Brian. Sure..

Just one clarification on the guidance.

It's inclusive of the gain on the landscapes business, right?.

On....

The net income increase is inclusive on the gain on the sale?.

On the sale of the insurance..

I'm sorry, insurance, rather. Yes..

Crop insurance..

The crop insurance..

Crop insurance, rather..

Yes. Yes, it is..

And I'm just curious about from a planning, what type of weather is really kind of the 50% base point....

Brian, I would – Brian....

...for how you do your planning? And what's the plus, minus, and what will constitute a good year or a bad year as it relates to how you see the next six to 12 months shaping up?.

First of all, I want to make sure I point out, by the way that gain was implied in our forecast last quarter as well for the year..

Okay, thank you..

And so that wasn't necessarily a full change as we go into the rest of the year. So the other thing I – at this point, you assume average weather. You assume trend yields until you get data that can potentially change that.

And so we would continue to use trend yields in our internal forecasting at this point, recognizing that you can certainly see variation from that. We'll start adjusting that as we go through the summer and see weather develop, so.

Okay?.

All right. Thanks, Tony..

Yep. Thank you. The next call – our next question will have to be the last question we can take for the call, so..

And your last question today comes from Brett Wong of Piper Jaffray & Co. Please go ahead with your question..

Thanks for fitting me in here at the end, Tony. I appreciate it..

You bet..

I'm just wondering.

I understand there's a lot of uncertainty around what 2016 will look like, and if we do have a strong crop this year pressuring a potential recovery, what other levers can you pull in order to kind of support margins?.

Certainly, we would continue to look at from a cash perspective. Our CapEx would be one area we'd continue to look at, although we did pull that down quite a bit. You continue to look at options with SA&G and R&D.

We talked about, when C&F went through their super-trough in 2009; when you get into levels that you didn't anticipate you tend to also find levers that you didn't necessarily anticipate. And depending on the perspective, we kept R&D pretty flat year over year in our outlook, and so that would be something you would continue to look at.

And that's – as we've said all along, that's something you balance in terms of long-term need. That wouldn't be necessarily a desirable lever, but you – we would continue to look at those things that we could pull out as we go through the year.

But it would – I would also point out if you see a large incremental drop, that creates challenges given where our capacity, where our facilities are at today in terms of percent of capacity utilization.

And so, but again, we certainly – as we look at the outlook for next year, unless you're going to argue for better than average weather, it's hard to argue that you're going to see a significant drop in commodity prices given the strength in demand that we continue to see on commodities.

So that would be one area I would make sure to remind people, so..

Okay, with that, we will conclude the call. And I think it's important maybe to step back a little bit, too, and think about the year that we're forecasting.

As you look at our guidance for 2015 and put that in perspective, in a historical perspective, as you look at what we're forecasting for equipment operations net sales, as you look at what we're forecasting for cash flow from operations in equipment operations, as well as our EPS overall, it puts us in a top five year in all three of those categories in terms of what this guidance provides.

And when you put that in context of where our largest business, where the end markets went this year in terms of the significant drop, we think that's really demonstrating again the power of the overall portfolio, the strength of that SVA model and our ability to continue to drive very solid earnings even in lower end markets.

With that, we'll be around for the rest of the day to take any additional questions you may have. Thank you for participating..

This does conclude today's conference. All parties may disconnect at this time..