John Deere had a strong year in 2005, and we've started out 2006 on a positive note, as well.

Our actions to build, and grow, a great business are continuing to take shape and are helping drive our performance. This is a real tribute to our dedicated workforce — 47,000 strong, worldwide — and to the leadership of your global management team, many of whose members are with us here today.

Last year, total revenues increased 10 percent and surpassed $20 billion for the first time, while net income rose to $1.447 billion, a new record.

A week ago, we announced higher profits for the first quarter of 2006 and said in our outlook that we expected net income for the full year to exceed what was reported in 2005.

One of the more tangible signs of our progress is that we've increased our quarterly dividend rate on three occasions, by a total of 77 percent, over the last two years, and also repurchased some 20 million shares of stock.

This is not to suggest, however, that we are satisfied with our operating results. Or that we're performing in line with our high aspirations. We are not.

Furthermore, we face a rapidly changing, highly competitive global marketplace. Intensive global competition is part of our daily diet — and we anticipate that it will become more intensive, more global, and more competitive, by the day.

Nevertheless, all of us who lead John Deere are committed to delivering the performance improvements, and the growth, needed to make our financial and operating goals a reality, sustained over many years. We know that strong markets, which we generally have now, are necessary but not sufficient conditions for the highest levels of SVA, or Shareholder Value Added.

So, our goals are aimed at creating an enterprise lean enough, and nimble enough, to produce solid profits throughout the business cycle and take our performance to new highs, especially when our intensely competitive global markets are strong.

Specifically, we're targeting a 20 percent operating return on operating assets at mid-cycle sales.

We're also aiming — even under the weakest conditions — to earn our cost of capital — creating positive SVA. Growth is a big part of our metrics, too, as we aspire to achieve sustainable SVA gains of 6 to 7 percent a year over the course of a cycle.

Deere's performance relative to these measures has been promising, but not up to our stretch expectations.

Last year's SVA, for example, was $938 million. That's more than twice the highest levels of the 1990s. Yet it was short of our target, and short of our own high aspirations.

None of this is meant to shortchange our recent success in controlling costs and assets or to overlook our progress extending the John Deere brand to a wider global audience. Our employees have every right to take pride in these accomplishments — and they deserve our recognition.

But we aim to compete globally and to prosper. And we're managing the company to do precisely that.

With this in mind, Deere is pursuing a vigorous three-part strategy focused on exceptional operating performance, disciplined SVA growth, and aligned, high performance teamwork.

Let's spend a few moments looking at where we stand in relation to these areas.

Exceptional operating performance means making our existing operations more efficient and more effective, as we serve customers at the highest possible level.

It also includes paring excess costs and purging non-productive assets.

The over $100 million multi-year redevelopment project at our Waterloo tractor factory, which we've spoken of in the past, is just one example of what we're doing to drive such results.

Similar projects, though smaller in scale, are under way or have been completed at other major factories worldwide and are delivering benefits of their own to our customers.

Importantly, we're now implementing a new operating system in our factories called the Deere Production System, or DPS. It establishes a common framework of world-class manufacturing practices, designed to help our facilities achieve more flexibility and keep their production schedules in closer alignment with retail-order patterns.

DPS is rapidly gaining momentum in our company. A total of 12 Deere manufacturing locations already have received certification, including two certified at the highest, or gold, level.

By contrast, a year ago there were just six such facilities certified. A year from now, that number is to be about two-dozen.

DPS is just one of the ways Deere is working to restrain costs, improve quality and order fulfillment for customers and extend our success operating with a lean slate of assets.

Our progress on the asset-management front has been encouraging. Asset turns — sales divided by operating assets — have more than doubled since 2001. Last year, field and company-owned inventories reached their lowest point relative to sales in recent memory.

Since 1998 — our peak year from the last decade — Deere sales have increased by $7.5 billion, or better than 60 percent, without a single dollar of system inventory being added.

While this is a good start, we know that in today's competitive marketplace, we can do even better, and we plan to do so. Our progress to date gives us confidence that we can indeed make continuing progress.

Exceptional operating performance will put Deere on track for exceptional financial results. And, it will help the company continue being a strong generator of cash — cash that can be used to promote investor value in any number of ways.

Last year, Deere invested some $500 million in capital projects and spent nearly $700 million on research and development. As referenced earlier, we also devoted $1.2 billion to dividends and stock repurchases.

In addition, over the last two years, Deere has made voluntary contributions of about $2 billion to its pension and retiree health-care plans. Our pension plan remains fully funded and has an outstanding record of investment growth.

Building on our drive for exceptional operating performance, disciplined SVA growth constitutes the second leg of our operating strategy.

Our goal, again, is to deliver average SVA gains of 6 to 7 percent a year over the cycle. Meeting this important SVA aspiration will require smart cost and asset discipline, plus a stepped-up emphasis on sales.

Fortunately, Deere has a number of exciting growth initiatives already evident in the market, especially in the areas of advanced products, breakthrough technologies and in the developing parts of the world. John Deere Credit, building on its strong operating performance, is a vital part of our worldwide growth

John Deere has a growth story to tell. We're serving our traditional customer and product segments better than ever, and using our skill in technology, innovation and global distribution to serve entirely new customers in new ways.

What's more, our growth plans are very much in step with key global-economic trends.

Farm commodity production has been strong across the world in recent years... but demand has been even stronger. Global carryover stocks of corn and wheat have fallen for 4 of the last 5 years, and are projected to do so again for the current crop year.

Demand is being driven by a global population growing in both size and affluence. As for size, the world is gaining 10,000 new people — and new mouths to feed — every hour. That means about 2 billion more people living on this earth by 2030.

Of equal importance, many believe we are on the verge of a prosperity explosion in many parts of the world, which could lead to whole new levels of demand for food and energy. In that case, the resulting demand for our customers' production worldwide could be quite significant. Already being the global leader in both our agricultural and forestry markets will serve us well, especially as these developments accelerate.

Another favorable trend concerns the growing popularity of renewable fuels such as biodiesel, ethanol, and wind. The real news here is that farmers increasingly are becoming producers of energy as well as food.

Ethanol consumption in the U.S. and elsewhere is growing by leaps and bounds. That's having a major impact on demand for agricultural commodities such as corn and sugar. Brazil is a leader in this area.

Well over 10 percent of the U.S. corn crop now goes to the production of ethanol and that percentage could be in the 25 percent range by the end of the decade as a result of legislative mandates.

Needless to say, John Deere is lending its full support to renewable fuel sources. This is based on our conviction that ethanol, and biodiesel, as well as wind energy, are good for our environment and for our customers' bottom line.

Favorable demographics are positive for all of Deere businesses. For example, rising incomes in the U.S. have sparked a major construction boom in recent years, bringing benefits to our construction-contractor customers and supporting much higher results in our construction and forestry division.

In addition, a growing segment of the population is choosing to own acreage in rural or suburban areas — acreage often being maintained with green and yellow equipment.

Along these same lines, we're seeing growing demand for commercial-mowing and commercial-landscaping services today — facts driving business for our contractor customers, while generating sales in our commercial and consumer equipment business.

John Deere employees deserve credit for the strides our company is making. It is, after all, their dedication, their perseverance, and their hard work that have made Deere one of the great names in all of industry, and they are energized about now carrying our aspirations to a higher level.

That brings me to the third point of our performance strategy – which is, aligned, high performance teamwork.

John Deere people — supported, I might add, by a dealer and product-support organization that is second to none — are working harder than ever and they're working with a clear purpose in mind.

Salaried employees worldwide today follow detailed performance plans that spell out how each individual's efforts contribute to the broader picture, of meeting unit and company goals.

Our new compensation system, which is now widely understood and embraced across the company, helps ensure this alignment.

Most hourly employees today are eligible for additional pay based on improved productivity — and what a job they have done! Productivity jumped by 9 percentage points worldwide in the two-year period 2004 through 2005.

On the salaried side, bonus payments are tied to the same financial metrics driving everyday decisions in the company — namely, operating return on operating assets, return on equity, and the sustained creation of SVA.

An emphasis on teamwork stretches throughout our company and includes our global management team.

Since last year's annual meeting, virtually every one of our top officers has assumed significantly different responsibilities. Change of this sort energizes our operations with new insights. It brings about more coordinated approaches. And it says something about how seriously we view the importance of aligned teamwork, even in the senior ranks.

John Deere employees at all levels are known for the dedication to the company and to its success. Now, their efforts are being enhanced through increased alignment with our enterprise strategies. How we do business is at the core of our business model. No smoke, no tricks, no mirrors, it's right down the middle — aiming for the highest levels of integrity.

Whichever way you look at John Deere today — serving customers, tightening our cost and asset structure, or charting a course for sustainable, profitable, growth — we are raising the bar. We are aiming for everyday performance on a par with our previous best — and on a par with the world's greatest businesses.

In today's intensely competitive world, we aim to deliver performance that endures. This is a high aspiration indeed, but one we accept, and one we will do everything possible to deliver on.

As we push ahead, we do so in the belief that our company has what it takes to bring our goals within reach and make John Deere, the business, and John Deere, the investment, as well-regarded as the products that have borne our name with such distinction for such a long time.

Thank you, ladies and gentlemen, for your attention and for your continuing support and confidence in John Deere.