Jim Field - Chief Financial Officer Susan Karlix - Investor Relations Justin Marovec - Investor Relations Marie Ziegler - Vice President of Investor Relations

Jamie Cook - Credit Suisse Eli Lustgarten - Longbow Securities Robert Wertheimer - Morgan Stanley Ann Duignan - JP Morgan Henry Kirn - UBS Steve Volkmann - Jefferies & Co. Alex Blanton - Ingalls & Snyder David Raso - ISI Barry Bannister - Stifel Nicolaus Joel Tiss - Buckingham Research Jerry Revich - Goldman Sachs Seth Weber - RBC Mark Koznarek - Cleveland Research Daniel Dowd - Bernstein

Good morning and welcome to the Deere’s first 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 Ms. Marie Ziegler, Vice President of Investor Relations.

Good morning. Also on today’s call are Jim Field, our Chief Financial Officer; and Susan Karlix and Justin Merrimac from the Deere Investor Relations staff. Today we’ll take a closer look at Deere’s first quarter earnings and then spend some time talking about our markets and provide you an update on how we see 2010 shaping up. After that we will open to 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 as usual a reminder, this call is being broadcast live on the internet and recorded for future transmission and use by Deere and Thomson 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-and-A session agree that their likeness and remarks in all media maybe stored and used as part of the earnings call. Today’s 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 also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, otherwise it’s know as GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures is posted on the website at www.johndeere.com/financialreports, under other financial information. Call participants should consider the other information and risks and uncertainties and non-GAAP measures in addition to the information presented on the call. Now for a closer look at our first quarter, here is Susan.

Thank you, Marie. This morning John Deere reported results for the first quarter of 2010 and what a quarter it was. In spite of a decline in sales, earnings were up 19% from a year ago. The improvement was led by our Ag & Turf and credit businesses, both of which are experiencing improved conditions. Disciplined cost and asset management were again major stories with SA&G expense little changed and trade receivables and inventory down by $1.4 billion. Finally, our full year forecast for earnings has been increased significantly to $1.3 billion. All-in-all it was an impressive performance. Now let’s look at the quarter in more detail starting with slide three. First quarter net income attributable to Deere & Company was $243 million or $0.57 per share, our net sales and revenues of $4.8 billion. It was the second highest earnings total for any first quarter in the company’s history, trailing only the first quarter of 2008. As shown on slide four, total worldwide equipment operations net sales were down 7% in the first quarter, versus first quarter 2009. Currency translation on net sales was positive by about five points with about two points of positive price realization. Turning to slide five, worldwide production tonnage was down 20% in the quarter. However, demand has been better than expected for large Ag and international Forestry products accounting for the improvement in our tonnage forecast. For the full year, projected production tonnage is now forecast to be up about 5%. Lets turn to the company outlook on slide six; second quarter sales are expected to be up 4% to 6% compared with the second quarter of 2009. Currency translation is expected to be positive by about five points, with about two points of positive price realization. For the full year, net equipment sales are forecast to be up 6% to 8% compared with fiscal year 2009. This includes about three points of positive currency translation and one to two points of positive price realization. Net income attributable to Deere & Company is now forecast to be about $1.3 billion for the year. Turning to a review of our individual businesses, let’s start with Agriculture & Turf on slide seven. In the quarter, net sales were down 6%, with production tonnage down 20%. Operating profit was $352 million in the quarter. Lower raw material costs, positive price realizations and the favorable effects of foreign currency translation and product mix offset lower sales volumes and higher post-retirement benefit costs. A&T is starting to see benefits from last year’s organizational realignment resulting in the creation of the Ag & Turf division. Ongoing rationalization of processes, facilities, and resources is allowing the divisions to more efficiently meet customer needs and reduce overall costs. Before we review the sales outlook, let’s look at some of the fundamentals affecting the Ag business starting on slide eight. Commodity prices for the ‘09, ‘10 crops have risen modestly since our last forecast. Corn acreage is expected to increase 1.5 million acres in 2010 to meet growing demand for seed, exports, and ethanol. What’s more, corn is expected to be more profitable this year. According to Informa, profit from corn will be $77 an acre more than soybeans in 2010; this is an additional $15 an acre above the 2009 levels. For soybeans, continued robust export demand will keep prices relatively high in the near term. Finally cotton prices remain well above the year ago levels, driven by lower production in Asia and the rapidly recovering Asian economies. Turning to slide nine, forecast prices as you can see are below the very high levels of 2008, but remains strong on a historical basis. On slide 10, 2010 U.S. Farm Cash Receipts are now forecast to be up about 4% from 2009 levels. The biggest change is in the Livestock sector, where mill prices have continued to climb and things are generally headed in the right direction. Slide 11 highlights farm net income in Brazil and Argentina. Argentina is recovering from the 2009 drought, driving increased demand for tractors, combines, sprayers and forage equipments. In Brazil, 2010 farm net income is expected to double from last year’s level. Normally when we talk about Brazil, we talk about soybeans; however the primary driver of increased farm net income in 2010 is the large improvement in sugar. International sugar prices are extremely strong, demand is higher than production due to a drastic drought driven reduction in sugar output from India and China. Strong demand for sugar is only part of the story in Brazil. Other positive factors include demand for Brazilian commodities globally, as well as government sponsored low rate financed programs like FINAME and [Inaudible]. These are all contributing to positive producer additives, which translate into higher on farm equipments. Putting all of that together, as you can see on slide 12, our outlook for industry sales of agricultural equipment in U.S. and Canada is comparable to 2009. This is up significantly from our previous forecasts of down about 10%. The strength we’ve seen in our order books is driving this increase. For example, the combine early order program ended in January with a significantly higher than expected response rate. Demand for large tractors has been higher than expected as well. On the 8R Series tractors, we have added schedule as orders have come in, effective availability in September of 2010. The story is the same on the 9000 Series tractors with effective availability in May 2010. Conditions in Western Europe are weak, with Ag sales there expected to be down 10% to 15% in the year. Farmer sentiment is low and used equipment inventories remain high due to the lack of product going to Central Europe. We expect sales in Central Europe and the CIS to remain under pressure as well. Things look better in South America, where sales are projected to increase 10% to 15%. Turning to another product category, we expect retail sales of turf equipment and compact tractors in the U.S. and Canada to be flat for the year after a sharp drop in 2009. On slide 13, Deere sales for worldwide Ag & Turf are projected to be up 4% to 6% in the year versus our previous forecast of down about 4%. Currency translation is projected to be positive about four points. As just discussed, demand for large Ag equipment is much stronger than anticipated. Product mix has shifted in our favor as well. In November we talked about product mix, referring to sales of different categories of equipment being a factor in our lower 2010 outlook. At the time, we expected sale of large Ag products to be down almost 10% with the large absorption of these products negatively affecting operating margins and our current forecast. The anticipated improvement in large Ag will change the mix. We now expect mix to be neutral in 2010. The division will benefit some operating improvements made in 2009, as well as from positive price realizations, lower material costs, and the positive effects of currency. Conversely about $300 million of the increase in Pension and OPEB expense will be charged to Ag & Turf. Also, the division will see higher R&D expense, primarily for Interim Tier 4, the regulatory engine emission standards in the U.S. and Stage III B in Europe. In Turf we are encouraged by strong retail demand in commercial mowing and golf course equipment in January. For the year, the A&T divisions operating margin is forecast to be around 10%. Let’s focus now on construction forestry on slide 14. With continuing weak markets in the U.S. and abroad, net sales were down 15% in the quarter, production tonnage was down 22%. The division reported an operating loss of $37 million. Again this quarter, C&F demonstrated commitment to its Turf management plans through tight expense control, but higher Pension and OPEB expense, as well as higher R&D expense mainly associated with Interim Tier 4 spending resulted in a decremental margin of about 50%. Without these two items, C&F decremental margin would have been in the mid 20s. Through the aggressive management of production levels the division has continued to successfully manage inventories. At the end of January based on inventory levels, reported to the association of equipment manufactures, Deere construction dealers in the U.S. and Canada were carrying about one-third less than the inventories in the rest of the industry, paced on percent of days on sand. On slide 15, construction and forestry sales are now expected to be up about 21% in 2010, up from the very low levels of 2009 and from our previous forecast of up about 18%. On the construction side as you see from the chart, U.S. economic indicators for 2010 indicate that retail market will remain weak. Non-residential spending is forecast to be down again in 2010, due to ripple effects from the depressed housing sector, coupled with tight credit conditions. Overall we believe the retail market for construction equipment will be down 5% to 10% in 2010. Things are looking a little better, however for global forestry markets, improving global economic conditions, better pulp prices, and low field inventories will benefit the forestry segment in 2010. Again, this is in comparison with very low levels of 2009. Here C&F division will benefit from higher production and sales. However these will be offset by a higher charge of about 100 million per Pension and OPEB expense. Other headwinds include higher R&D expenses, primarily for Interim Tier 4 as well as a possible material cost increase and roughly flat pricing. As a result, the C&F division operating margins are expected to be similar to 2009. Let’s move now to our credit operations. Slide 16 shows the worldwide credit operations provision for credit losses at a present of the total average portfolio. In the first quarter the provision on an annualized base is around 52 basis points. Write-offs in the construction forestry portfolios were lower than expected and lower than a year ago in absolute dollars. While this is encouraging, we aren’t prepared to say we’ve turned the corner. The full year provision is still forecast to run around 89 basis points, roughly the same as last year. On slide 17, past dues for the worldwide credit operations are about flat with last year. Annualized write-offs continue to reflect the excellent performance of our Ag portfolio. The Construction & Forestry rate has increased, but as noted a few moments ago, write-offs in dollars are lower than a year ago. The percentage is higher because the portfolio, the denominator is lower. This reflects the steep decline in U.S. construction equipment sales since 2008. Moving to slide 18, worldwide credit operations net income attributable to Deere & Company was $81 million in the quarter versus $45 million last year. The biggest factor was an improvement in financing spread, resulted from interest rates returning to more historical spreads, following the interest rate volatility in late 2008 and early 2009. Looking ahead, we are projecting worldwide credit operations, net income attributable to Deere & Company at about $250 million in 2010. Now let’s turn our center focus back to the equipment operations and take a look at receivables and inventory on slide 19, where the company as a whole receivables and inventories were down roughly $1.4 billion in the quarter. Since our last outlook, in light of the higher than anticipated production levels expected in the fourth quarter, we are forecasting receivables and inventory to be up about $450 million in 2010. Now let’s discuss the latest on retail sales. Slide 20 presents the product category details for the month of January expressed in units. Utility tractor industrial sales were down 7%; Deere was down less than the industry. Row-Crop Tractors industry sales were up 32%, Deere was up more than the industry. Four wheel drive tractor industries were up 5%; Deere was up a single digit, but more than the industry. Combine industry sales were up 14%, Deere was up more than the industry. Looking at Deere dealer inventories in the bottom chart, for Row-Crop Tractors into January was inventories at 21% of trailing 12 month sales. Combine inventories were at 6% of sales. The January percentage to trailing 12 months retail sales has seen a slight up tick for Row-Crop Tractors year-over-year. At the end of January, the absolute number of units in inventory for both Row-Crop Tractors and Combine as a percent of trailing 12 month sales was lower than a year ago. Turning to slide 21, in Western Europe sales of John Deere tractors were down double digits and Combines were up double digits in January. Deere’s retail sales of selected turf and utility equipment in the U.S. and Canada were up a single-digit in the month. Construction & Forestry sales in the U.S. and Canada and growth in person and settlement basis were down double digit for the month. Slide 22 shows raw material and logistics costs down about $150 million in the quarter. We now forecast material cost decreases of approximately $160 million for the year. This is slightly lower than our previous forecast reflecting higher commodity price projection for input for the deal. This estimate could deteriorate further if commodity prices rise more than anticipated and dollar weakens from the credit level. The Ag & Turf division savings is forecasted at about $150 million. For Construction & Forestry due to the currency impact on partner products, we are now forecasting CNS material costs to be flat to up $25 million. Looking at R&D expense on slide 23, R&D was up about 7% in the first quarter, with currency translation accounting for about two points. R&D expense is expected to be up about 12% in fiscal 2010, with currency accounting for about one point. The bulk of the increase is accounted for Interim Tier 4 emission spending. Moving now to slide 24, pension expense in the first quarter was about $110 million. As discussed last quarter the 2010 forecast calls for an increase of about $400 million in Pension and OPEB expense, primarily due to a change in the discount rates. Of the $400 million change, about $325 million will hit costs of sales, leaving about $75 million in SA&G. Ag & Turf are responsibility for about $300 million of the additional expense, while the increase for C&F is about $100 million. On slide 25, equipment operations SA&G expenses was up about 1% in the quarter. Currency translation accounted for about four points; Pension and OPEB added about three points. Excluding these two items, SA&G expense would have been down about six points in the quarter. For fiscal 2010, we now project SA&G to be up about eight points, Pension and OPEB accounts for about three points, variable incentive compensation contributes about three points for the change and currency about two points. Moving to the tax rate on slide 26, the implied first quarter tax rate for the equipment operations was about 36%. For 2010, the full year effective tax rate is expected to be in the range of 34% to 35%. Before touching on cash flow, currency movements both translation and transactions or trade flows increased operating profit by about $75 million in the first quarter. On slide 27, you see the strong cash flow from our equipment operations, even in years of tough market conditions. This reflects in large part, our success managing assets and controlling working capital levels. We anticipate strong cash flow from the equipment operations in 2010, $1.9 billion up from last year’s $1.4 billion. Such strong cash flow is further a testament to the execution and success of the SVA Model. On slide 28 capital expenditures are now expected to be about $900 million, primarily driven by Interim Tier 4, depreciation and amortization as projected to be about $600 million. Our forecast currently includes about $600 million of Pension and OPEB contributions in the year, and capital spending for financial services is forecasted around $200 million in 2010, primarily for wind projects. In closing, John Deere has started 2010 on a strongly positive note and is looking for further improvement in the year ahead. Our performance in the face of separately week globally economic conditions reflected is solid execution of our operating and marketing plans and our success in taking costs and asset discipline to a new level. We’ve remained squarely focused on our customers as well expanding our global customer base and expanding our competitive position. As a result of these factors, we continue to believe that our company is well prepared to capitalize on an eventual upturn in the economy and well positioned to meet the world’s growing need for food, fuel, shelter and infrastructure in the years to come.

Thank you, Susan. We are now ready to begin the Q-and-A portion of the call and Laura our operator will instruct us on the polling procedure, but as a reminder and I do very firmly remind you that we are asking for you no more than two questions and multipart question does count as multiple questions; with that Laura.

(Operator Instructions) Your first question comes from Jamie Cook - Credit Suisse Jamie Cook - Credit Suisse: Just two questions; one Marie, can you give anymore color in the first quarter, how much can you quantify what the material costs benefit was in the first quarter when we think about the Ag margins and just how that plays out throughout the year, some perplexed by our flat margin comment for Ag for the full year. Then the other question was, just a little more color on what you are seeing on Western European trends, which inform you didn’t change the top line forecast, but sort how you are thinking about your inventory levels and production relative to the industry, any color you can give by country.

Why don’t we start with Western Europe first. Farmer moves there continues to be pretty somber and as a result you will note we have not changed our guidance; that industry will be down 10% to 15%. We do see some differences in some countries. Because of the currency relationship you do see a little more strength in places like the U.K. and Poland because of their currency translation and these are paid. In Europe their currencies are relatively strong, but generally speaking Livestock is maybe stabilizing some, but stabilizing at pretty low levels and you continue to see backup of used equipment. We’ve sighted this couple of times, it is not yet at worrisome levels, but it does act as a precautionary note in the market. Moving onto margins, our raw material guidance is $150 million for the year, and basically we got it all in the first quarter, generally speaking flat through the rest of the year. You will note too that when we talked about things like R&D and SA&G, they were relatively light in the first quarter. Those costs will increase at least as we move through year and of course Ag is the bigger piece of both of those numbers.

Your next question comes from Eli Lustgarten - Longbow Securities. Eli Lustgarten - Longbow Securities: Can I get one clarification? Did you say, the foreign currency benefit including hedging gains they were $75 million in the quarter, is that what you said?

Yes, that it’s not really the impact of the trade flows, but it is $75 million in the quarter that’s an operating profit. Eli Lustgarten - Longbow Securities: There’s no LIFO or anything like that?

No. Eli Lustgarten - Longbow Securities: Can we talk about construction equipment and I guess I am surprised it is going to lose money for the year. How you expect to make money in the quarters given the scenario. What’s going on; is it because of the Interim Tier 4 investment or what’s going on that’s expecting any sort of operational improvement.

For every three factors, even though their sales are up, basically the incremental margin is absorbed by about $100 million Pension and OPEB increase, which we had talked about last quarter and that’s still in place. They too have higher R&D and it’s actually divisions of a full year. It’s about $40 million, so it’s not as significant and they have one of the factors. This is why we have no material costs; we have a headwind of flat to up about $25 million. So the midpoint of that would be $10 million to $15 million. Eli Lustgarten - Longbow Securities: Final question, you have increased Ag production significantly. I think you referenced that the fourth quarter could be much higher. Can you give us insight as to how the Ag sales will look for the rest of the year? Second, it’ll probably still be the strongest of the year, but probably a stronger fourth quarter than before that was indicated?

I think that really was referencing what we anticipated, but basically versus a year ago, because a year ago we had significant shutdowns. So this year we will be in production at a higher level and that of course it goes on to affect our trade receivables. Eli Lustgarten - Longbow Securities: The same quarter is going to be the strongest of the year, but if you compare it to the second half of the year that’s…?

That’s really more of the issue, absolutely.

Your next question comes from Robert Wertheimer - Morgan Stanley. Robert Wertheimer - Morgan Stanley: I’m going to ask two questions on production schedule. The first is just how you think about it? We’ve been hearing and we believe underlying demand is fairly strong. Have you raised the combine production, and is that done? Pretty much going to produce what you are going to produce, and similar on the large tractor side, would you potentially, if demand continues to be a strong bump up again or are you aiming to hit a certain schedule?

We certainly would do everything that we could to meet our customers demand requirement and to go back to one of your earlier points, yes we have pretty significantly increased our projected productions for our combines and actually for large tractors. As we talked about that, it’s really the single biggest factor driving the change in top line and income tax. Robert Wertheimer - Morgan Stanley: The follow up is we have heard a couple of farmers, not a lot but a couple talking about nervousness about the Tier 4 engine, not so much the price but warning somebody else to take the risk on the engine, and so are you concerned about a pre-buy? Is that fact your production decision for this year and what’s your strategy for showing farmers the engine is going to work; how you are going to roll that out?

We’ve already been at farm shows starting to introduce the product; we are starting to get new magazine articles talking about the production. I would like in this, anytime you have a major change in a machine there is always some customers who want the first in technology. They will approximate some interesting product benefits and some of the products that come along with it and there’s a trend for us to need to continue to improve productivity. We have the long term need to increase route for the world, and so I would say that this is something that we have managed through before. We have a very significant rollout plan in terms of training and education for dealers and technicians and of course for customers. We will have plenty of opportunities Jim.

Let me just add to that a little bit, Marie hit on this training and this is a huge undertaking. We have got 20 different courses we are rolling out, 14 different languages, we have already touched more than 8,000 dealer personnel and so all of that is really about educating the folks that are in the front line interaction with the customers, to help the customers get the level of confident that they need and make sure that we can deliver the John Deere experience, so that it is a huge undertaking.

Your next question comes from Ann Duignan - JP Morgan. Ann Duignan - JP Morgan: Because I think for the first time in the history of my covering John Deere, I have no objection to you. I click for agriculture either in North America or your residents. So let’s take it a different way. Marie it is kind of a double edged sword or who never wants to address this, but currency is a positive and probably impacting your outlook for equipment sales. However the double edged sword is a stronger dollar and could impact both your equipment exports as well as customer exports. Can you talk a little bit about what exactly is in your outlook for currency, particularly Euro dollar exchange rate and what the upside versus down side risk that you see with that forecast?

Specifically, we need to have a practice of not forecasting. We look at the after rate that we have experienced in the quarter, and use that to forecast going forward, and that would have been Euro, 146 was the average…

146 was the average rate for the quarter and that we’ll use going forward.

For the company, in terms of Europe specifically, the primary tractor in Europe is a midsize tractor, and those are manufactured in Europe as the primary source by that, so we do a fairly good job of trying to match production to where the market are.

You did benefit from significant exports of combines in North America into places like Eastern Europe.

Eastern Europe and Russia, that’s a whole different set of circumstances. Go ahead, Jim.

A lot of those transactions would be denominate and dollars as well.

You’re aware the single biggest factor in the outlook there is the circumstances in Russia and we are working to get an assembly facility up and running. We are on time for that we said in the spring and we are working with the Russian Government to make sure we all understand the terms. So we are on track. Ann Duignan - JP Morgan: Then my follow up question is a similar question; interest rates have helped support a very aggressive pricing out there in the marketplace, not just from John Deere but from competitors at large and had been a positive for your financial services business. Can you talk a little bit about your outlook for interest rates going forward and how that might impact your financial services business?

I don’t think really we have been out front with a explicit forecast, but our financial services business is we don’t really take position on rate so much, we try to lock in finance spreads to be a match funded, such that these swing unless they have been very quickly and very violently that they don’t impact the earnings stream too much. Having said that in general, our view would be for an increasing rate environment over the course of the year, and that would be a very, very modest view though and we have factored that into some of our forecasts on the financial services side, but also on the equipment side, because that generally results in higher interest labor charges. Ann Duignan - JP Morgan: Comment on your ability to be pretty aggressive.

That’s two questions.

Your next question comes from Henry Kirn - UBS. Henry Kirn - UBS: Question for you on how much could you flex capacity if we were to get a free buy for the large tractors and combines?

I wouldn’t site it so much as a pre-buy, because we’ve know that the primary drivers of customer demand are good levels of cash receipts because that’s farm income, and we certainly would agree going back to Ann’s comment, low interest rates. Certainly you also helped support that. You are aware that we had put additional capacity on both Harvester and Waterloo last year and actually many, many of our factories are globally, so we have the ability to respond to additional demand. That said, for our combine program in the U.S. and Canada, a round number is 95% of our orders are already in place, and we adjust production accordingly based on the results of our early order program. So we could have some additional flexing there, but we’re pretty well in position there. Henry Kirn - UBS: For my follow-up, you mentioned benefits from the Ag & Turf restructuring, are there anymore benefits that could be had from restructuring the old commercial and consumer segment?

Well, that is included in benefits that we are citing, because as we merge the two divisions together, there were people, redundancies and processes that were improved really out of both sides of the business. We don’t exist in two separate silos anymore, they’re really fully merged. That’s what’s generating for this year a $50 million to $60 million charge. I would just talk about our landscape business too, where they’ve had very difficult market conditions, because they are very focused on housing and driven by housing, and that business has unfortunately also had implied reductions, 800,000 and is close on merge stores locations. So they also are looking for some improvements in their financial results and that is maybe an additional $25 million this year, and then finally we’re aware that we closed our facility and we’re really in the final phases of that. So there’s some operation taking this year the pre-tax out $40 million.

Your next question comes from Steve Volkmann - Jefferies & Co. Steve Volkmann - Jefferies & Co.: A couple of quick follow-ups; I guess I’m just curious, what happened since your last forecast that you gave that led to such better margin. I guess it was all in the margin. Something must have really changed then the lens you were looking through it. In November it was kind of so far off. How did the quarter evolve?

Really in terms of the sales outlook for the year, the single biggest driver was that our order book developed pretty dramatically over the first quarter and enabled us to improve our outlook for the industry from down 10 to basically flat, plus the single biggest driver. Steve Volkmann - Jefferies & Co.: At a much different level than that; it’s the single digit business driver, but we also experienced a more favorable currency than we would have built into those original estimates in the quarter?

Just to remind everyone that was about the $75 million translating in transaction benefit in the first quarter. Steve Volkmann - Jefferies & Co.: My follow-up, I guess maybe this is for Jim, but whoever wants to take it. We’ve talked a little bit about the lot of liquidity on the balance sheet. You’re obviously continuing to generate a lot of cash. At some point, some of that cash I guess becomes available for things like share repurchases or dividends or even acquisitions, but I think you have said that you wanted to kind of wait and see how things evolve in the financial markets. Has there been any evolution over the last few months?

I would say, first of all you are right on; that’s what we said and let’s say we have this well articulated use of cash policy and one of the uses of cash that we talked about also is making sure our pension plans are fully funded. So we did increase funding to the pension plans by about $250 million in terms of the forecast. In terms of how we view the world, I think still we’re on relatively fragile foundation. On the fourth quarter of ‘09, we were all shocked by the whole situation and what the implications of that may have been for the capital marks and of course then we moved into the first quarter and get them to resolve their own issues. Having said that, we had about a month target as pre-funding at the end of ‘09 and we will be coming off that, moving more into the six to nine month range by the end of this year.

Your next question comes from Alex Blanton - Ingalls & Snyder. Alex Blanton - Ingalls & Snyder: In the last conference call in November, you talked about the Construction & Forestry thing would be up 18%. In factory sales with the retail sales down 5% to 10%, and you basically made the same forecast this time, except saying that the factory sales would approximate be up 21%, and the retail sales down again 5% to 10%. So that is primarily due to a low inventory reduction year-over-year, maybe a flat inventory versus a huge inventory reduction last year at the dealer level. Now, can we then take that concept and talk about the Ag business? What’s happening at the dealer level in Ag inventory and maybe you already mentioned this, but I didn’t hear it. How much of the change in sales of Ag equipment might be due to less inventory reduction at dealer level than last year?

We aren’t expecting any reduction in inventory in the Ag business year-over-year. In fact at the dealer level we will probably, at least our forecast has receivables in inventories up about $415 million with our guidance at year end, and most of that will be in Ag receivables and simply be because we’ll have a little bit more in the pipeline than we did. Alex Blanton - Ingalls & Snyder: No, how much of your factory sales change is due to low inventory reduction than last year?

There’s no inventory reduction. Alex Blanton - Ingalls & Snyder: I know that, you said that, but what’s the difference between this year and last year, in the deal inventory reduction?

We have to look at how much we reduced the receivables by… Alex Blanton - Ingalls & Snyder: This is inventory, not receivables…?

Receivable is the best indication of what’s going on with the field inventory. Alex Blanton - Ingalls & Snyder: I am trying to determine how much of your change in your production forecast for the year is due to low inventory reduction at the dealer level than the year before?

Alex, I don’t have that with me. I would be happy to call you back afterwards and we will get your question addressed.

Your next question comes from David Raso - ISI. David Raso - ISI: My question relates to your Ag & Turf outlook, what you reported for the first quarter and what you think for the full year implies the next three quarters. The rest of the year your Ag & Turf sales are up nearly 8%, but your operating profit margins are down 60 bips year-over-year, and it looks like what you’re implying about cost is generally neutral the rest of the year. On a year-over-year basis, pricing for the whole company is up about $220 million for the rest of the year. We have to assume a lot of that is Ag, not construction? What am I missing; why your margins would be down the rest of the year, year-over-year?

The increase in R&D which was up seven in the first quarter is up 12. Higher SA&G, which was basically, I think it was up by 1% in the quarter and our guidance has been up for the full year. SA&G for the year up 8%, so basically that’s all backend loaded. David Raso - ISI: That would be powerful enough to offset obviously the mix. It sounds like its improving.

It is neutral. David Raso - ISI: Price versus cost sounds like its almost 100 bips to 150 bips year-over-year, and improvement in the rest of the year as well.

Remember, the Ag division will eat about $300 million more of pensions, some of that is close to SA&G, about 60% of that increase actually goes into cost of sales. So it wouldn’t be picking up in SA&G and there is nothing else. It’s very plain and straightforward, those are the items of that additional. David Raso - ISI: I guess related then is the pricing on the products, in backlog in order booked, obviously there’s been no change since price in that last fall generally speaking, right. So if I’m getting better or large equipment, which is where you got the pricing, at least you tried to get the pricing. We think it’s coming through with the order of books the way it is. Again, I’m a little bit surprised that you would think that the offsets from SG&A and so forth would actually give you down margins, when Waterloo Harvester works.

We increased our guidance for the overall Ag division. Our previous guidance has been similar to what we’ve done last year and now we’re seeing about 10%. So it’s a bit where I think it come into the bottom line there. David Raso - ISI: Q2, over the big end of the day, the rest of the year sales are implied up 7.8% for Ag & Turf, while your margins are 10:1 and you did 10:7 the last three quarters of last year.

While we didn’t have the pension in the R&D, it’s as simple as that David.

Your next question comes from Barry Bannister - Stifel Nicolaus Barry Bannister - Stifel Nicolaus: I just want to follow up on David Raso’s question. If as he forecasted the 16 bip declined in operating margin against the 7.8% increase in sales. When I look at the SA&G guidance for last year versus fiscal ‘10 previously, the only real change in variable compensation is now seen up there, whereas it was completely absent from all your forecast. So wasn’t variable compensation a major reason why Ag & Turf didn’t get any margin lift on the additional volume as well.

That would be a factor, but that’s really in the SA&G and then there’s no certain cost of sales as well, but the other thing is that it is somewhat of a timing our SA&G came in last year a little more uniformly than what we are currently projecting this year. Again, we were basic almost flat in the first quarter, and yet you’re looking for again over the course of the year. So you’re going to have a bigger increase year-over-year in quarters two through four. Barry Bannister - Stifel Nicolaus: Yes, but even though you had a plus four prior forecast for FX, now it’s plus two, so what you picked up there was 200 bips, but your variable comp went from zero to plus three, which more…

So the company in a whole, it’s about $100 million. Barry Bannister - Stifel Nicolaus: Where does it lie in Ag & Turf; I mean what’s their tag since they’re obviously doing better than anybody else.

They get the bulk of it and some of it goes into cost of sales and some of it goes into SA&G and there is a little bit R&D, but basically flat.

Your next question comes from Joel Tiss - Buckingham Research. Joel Tiss - Buckingham Research: I just wondered if you could spend a minute to break apart the construction in the forestry and talk about the different trends in those different end markets.

I’d be happy too. Actually forestry accounts for the improvement in the construction and forestry outlook. We originally said our sales would be up 18 hours, end up 21, and really is because we are starting to see a better ordering activity, for principally it’s coming out of Europe, but now we’re talking about extremely low levels. Really in forestry across the globe last year, you’re starting to see a little bit of improvement. On the construction side there were actually no changes from our previous forecasts, so all of the incremental change occurred on the forestry side. Joel Tiss - Buckingham Research: The sources of strengthen in the farmer purchasing, is that all is pre-buy related or is there something else it seems…?

Yes anecdotally, I’ve actually looked through the comments, even they’re talked about good farm income, they’re talking about the need to maintain their normal trading cycles. We hypothesize in fact that maybe some of the very difficult conditions planting in the last two springs and then of course what happened this fall with very late harvest may also be supporting that. We also know that low interest rates are very supportive to farmers purchasing decisions.

Your next question comes from Jerry Revich - Goldman Sachs. Jerry Revich - Goldman Sachs: Marie, you alluded to customer benefits from the new tier farm OEM products. Can you talk about what kind of fuel efficiency gains you’re targeting and any other cost saving features that you’re highlighting customers?

We haven’t rolled those out yet to our customers and our practice is not to run ahead of what we’ve talked about with our dealers and customers, so stay tuned. Jerry Revich - Goldman Sachs: Timing of their rollout to customers…?

Well, engine combined state starts in January of 2011 and then there’ll be a rolling product license from there, but I don’t have any specific announcements on when we’ll be talking about products. Jerry Revich - Goldman Sachs: Marie can you step us through what part of your cost structure was lower than you expected in the first quarter. I understand the point about increasing production in balance of the year, but your production in the first quarter was mostly inline with what you’re looking for and it looks like margins were about, call it 300 to 500 points higher than you anticipated in your guidance last quarter. Was it higher plan efficiency levels, your credit gains from the Ag & Turf combination; can you give us some more color on the drivers’ front?

Just to refresh your memory, actually we don’t have guidance by quarter anymore. So you’re probably looking at compared to other modeling, but we would not have uttered any comments about what we thought our income will be in the first quarter. That said, if you look at year-over-year, the mix I think on which we were thinking would be a bit of a drag for us on the Ag operations, it actually was a positive in the quarter. We’re telling you for the full year it’s neutral, but actually it was about a point positive in the quarter in margins year-over-year. So that would have been an improvement. Material costs came in maybe a little stronger than expected and then the currency which had not been in the forecast, and that’s about a $75 million operating benefit.

Your next question comes from Seth Weber - RBC. Seth Weber - RBC: Can you just talk about your confidence in the supply chain to meet your ways production and do you see any potential bottlenecks out there?

We have worked for a long time very closely with our suppliers and I think our execution in the difficult markets if you go all way back to 2004, certainly as we were ramping up in late 2007, 2008 sort of speaks for itself. We’ll do quarterly calls with our suppliers, we’re working with them to make sure that they have bottlenecks, where we are working through those processes with them in the near term. We can maybe adjust some production to get things in early, like depending to help accommodate their production at this time, and we just checked with our supply management first again, we don’t see any bottlenecks. Seth Weber - RBC: Just a quick separate follow-up, the double-digit increase in Western Europe combined sales, retail sales in January, is there any color behind that?

It’s of essential low base, there is no color. I think it’s just a question of timing of some deliveries that you’re talking a handful of units. Seth Weber - RBC: So we shouldn’t read anything into that?

No, our guidance is still that market is down and Western Europe 10% to 15% and nothing unfortunately we saw on the first quarter which has shaken that outlook.

Your next question comes from Mark Koznarek - Cleveland Research. Mark Koznarek - Cleveland Research: I have a question on the South American outlook, just using Brazil as a proxy for overall South America, which probably is part of the answer of the question, but it looks like unit shipments for the first three months of your fiscal year are up 35% for tractors and 70% for combines. The implication of even the top end of the guidance, 15% for the market for the year actually means Combines would have to be down for the final nine months of the year, and tractors would be up kind of a high single digit. So should we think about your South American outlook being conservative or is there something in the latter part of the year that you’re expecting…?.

I guess two things, one is South American outlook is influenced by conditions in other market and although we see Argentina coming back, it’s coming back since pretty low levels and you have various circumstances in other markets, so that’s one factor. The other thing is that programs at the end of June, our forecast anticipates that they will be renewed, but probably not renewed at the same level right now at 4.5% financing since we don’t know. I think a little more cautious; in particular it is the fourth quarter. Mark Koznarek - Cleveland Research: So even with an election coming up in October down there, do you think they would have a less attractive rate starting in July?

I think we are probably being prudent and I don’t think we will wait and see what the government says.

That’s what our forecast contemplates. Mark Koznarek - Cleveland Research: Just to follow-up with that contemplated less attractive rate, do you expect that drives the market down to sort of a flattish outlook in the second half? I mean like real strong first half?

I wouldn’t be at that prescriptive in terms of how it worked out. Mark Koznarek - Cleveland Research: Some of the steam goes out of the situation is what you are contemplating?

Correct.

Your final question comes from Daniel Dowd - Bernstein. Daniel Dowd - Bernstein: Let me ask first about the facility in Russia. You said it is continuing on plan. I guess my question is even if the credit issues in Russia and Eastern Europe don’t really start to ease in the next six months, when that facility starts to operate are you going to have to stock the dealers or are those dealers actually already stocked and there’s not really demand for tractors out of those facilities until retail demand actually picks up?

So, it would probably depend by product. First of all, that we are talking about getting this, we are going full steam. This facility will be open in the spring. You are going to miss part of the season. So this gives us a time to ramp up. So we’re not looking for high levels of sales candidly as we start to ramp up. We’re going to do one product and make sure, and financing is showing some signs of easing in Russia. It is much more difficult in other countries, but interest rates have comedown, and so there are a few glimmers. Now we’re talking at the margin. So don’t get too excited, but there are some signs here. Our dealers do have some products on that for the liquidity crisis. So there’s some product in country to help facilitate activity in this period of transition if you will. Daniel Dowd - Bernstein: Let me make sure I am clear and this is still my first question. The way to think about this is there’s some dealer restocking in the first half of 2010, probably creating positive year-on-year comps, but the real gain is recovery in 2011 assuming their credit crisis continues to ease?

That’s a fair statement. Daniel Dowd - Bernstein: One last quick one, in your fiscal Q1 in the Construction & Forestry business, did you produce to retail demand or did you under produce retail demand in that quarter?

In the first quarter, we would have been produced to retail demand. Thank you very much. As usual we will be able to answer any follow-up questions you may have after the call. Have a good day everyone.

Thank you. This does conclude today’s conference call. We thank you for your participation. You may disconnect your lines.