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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/financialreports under Other Financial Information. Now, please turn to slide three and I’ll turn the call over to our Chief Financial Officer, Jim Field. Jim Field Good morning. Thank you for joining us as we discuss what was a great quarter on most fronts. John Deere reported record sales and profits in the quarter, operating margins in the Ag & Turf division were approximately 14%. We successfully launched new products while continuing the build-out of our global footprint, but our sales increased 16%, was short of our guidance by nine percentage points or about $700 million. This had a corresponding negative impact on the bottomline and it was lower than First Call estimates. The miss was in Ag & Turf; half of the shortfall is due to softening market conditions outside the US; of note, China, India and the EU-27. Additionally, sales were negatively impacted as the granting of import licenses in Argentina continues at a slow pace; timing of and changes to finance programs as well as the weaker Reais affected sales in Brazil and Turf equipment sales in the US were hurt by weather conditions. The other half of the shortfall is manufacturing execution. The good news is, we expect to make-up the bulk of the sales miss related to execution during the fourth quarter. In the third quarter, we had very aggressive production levels as we continue to ramp up our schedules and we experienced some hiccups.
The all new North American Combine line with significant product innovations and IT-4 compliant engines was most challenged and accounts for the bulk of the shortfall. The issue is not quality; in fact we are receiving positive customer views on the machines already in the field. We just had trouble ramping up production to meet the aggressive build schedules in the quarter. As a result, we experienced production delays of up to 14 calendar days.In addition, we are seeing an unprecedented early harvest of up to four to five weeks in some areas. Consequently, some machines will be shipped too late for harvest and we have allowed dealers to cancel orders. This affects only about 3% of harvester’s 2012 production and as reflected in our updated guidance. We know, we know less than stellar execution is not what you expect from John Deere. So what happened? There are 40% more unique part numbers in the new Combine’s than previous models; new parts, required new suppliers and new challenges for existing suppliers. We also had a significant number of new employees requiring extensive training, many of whom were hired as production schedules were sharply ramping up. To catch things off, we are running the factory at full speed so there was no downtime to get caught up once we felt behind. These issues have been addressed. The key is that these are not are quality or customer satisfaction issues. They are execution issues; problems we at John Deere know how to fix. Of course, the sales shortfall is reflected in higher inventories in the third quarter and at year-end; actions have been taken to manage the inventories, but it will take longer than the end of the year to work them off. Read the rest of this transcript for free on seekingalpha.com