Good morning, and welcome to Deere & Company'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 Mr. Josh Jepsen, Director of Investor Relations. Thank you. You may begin.

Thank you. Good morning. Also on the call today are Ryan Campbell, our Chief Financial Officer and Brent Norwood, Manager, Investor Communications. Today, we'll take a closer look at Deere's first quarter earnings, then spend some time talking about our markets and our current outlook for fiscal '21. After that, we'll respond to your questions. Please note, that slides are available to complement the call this morning and can be accessed on our website at johndeere.com/earnings. First, a reminder, this call is being broadcast live on the Internet and recorded for future transmission used by Deere & Company. Any other use, recording or transmission of any portion of this copyrighted broadcast without the expressed written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks and 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 may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America or GAAP. Additionally, information concerning these measures, including reconciliations to comparable GAAP measures is included in the release and posted on our website at johndeere.com/earnings, under Quarterly Earnings and Events. I'll now turn the call over to Brent.

John Deere demonstrated strong execution in the first quarter, resulting in a 17% margin for the Equipment Operations. Ag fundamentals improved significantly throughout the first quarter and the improved sentiment is reflected in the most recent status of our order books and early order programs. Meanwhile, markets for our Construction & Forestry division also improved in the first quarter, leading to improved levels of profitability and a heightened outlook for the rest of the year. Slide 3 shows the results for the first quarter. Net sales and revenue were up 19% to $9.1 billion, while net sales for the Equipment Operations were up 23% to just over $8 billion. Net income attributable to Deere & Company was $1.224 billion, or $3.87 per diluted share. During the first quarter of 2021, the Company recorded impairments totaling $50 million pre-tax to certain long-lived assets. These impairments were more than offset by a favorable indirect tax ruling in Brazil of $58 million pre-tax. In comparison to last year, the quarter also benefited from minimal employee separation costs, which represented $127 million pre-tax in the first quarter of 2020. Before transitioning to review of our business divisions, I'd like to highlight a few changes to our segment reporting as shown on Slide 4. As you probably already noticed in our press release, the Company implemented a new segment reporting structure beginning in fiscal year 2021 to align with the most -- to align with the recent implementation of the new strategy and operating model, which was announced last summer. As a result, the Company's agriculture and turf operation was bifurcated into two new segments. The Production and Precision agriculture segment is responsible for developing and delivering global equipment and technology solutions for production scale growers of large grains, small grains, cotton and sugar. Main…

Before we respond to your questions, I'd like to offer a few thoughts on our fiscal year '21 outlook, as well as address some of the key themes covered in our latest Sustainability Report, published earlier this month. With respect to our outlook, we've seen underlying fundamentals continue to improve since the last quarter. Higher commodity prices and improved market access have boosted sentiment in Ag markets and are reflected in the results of our early order programs and order books. In addition, we've seen further strength and demand for compact utility tractors and turf equipment, as consumers continue to focus on home and landscape projects. Furthermore, those businesses are also benefiting from our channel partners' desire to boost inventory levels from historic lows. Meanwhile, our C&F business has benefited from a very strong housing market, a modest recovery in the oil and gas sector and the industry's proactive inventory management. While we are encouraged by some of the end market tailwinds, it is also important to point out some key risks. Dynamics in our supply base remain tight globally. While trends for COVID rates are improving, many areas are still impacted by high levels of absenteeism and are also facing growing constraints for some electronic components. To date, we've been largely successful keeping our production rates on schedule. However, we acknowledge, the situation is very fluid and will remain so for the foreseeable future. Furthermore, prices for key raw materials such as steel, have risen significantly over the last quarter, while freight and logistics costs have also experienced upward pressure. Our current forecast contemplates the impact of rising input costs and includes an additional $500 million related to material and freight. Despite these challenges, we are encouraged by the strength in our end markets, as well as the execution…

Now, we're ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedures. In consideration of others and our hope to allow more of you to participate, please limit yourself to one question. If you have additional questions, we’ll ask that you rejoin the queue. Sherlyn [ph]?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question or comment comes from Brett Linzey from Vertical Research Partners. Your line is open.

Hey, good morning, everybody. I was hoping you might be able to put a finer point on the better margin expectations for the production in Precision Ag business, in any way you can bucket that between what's related to be a larger mix of Large Ag versus Precision Ag pull-through and then cost and productivity, anyway to unbundle that?

Thanks, Brett. I would say, I mean, when you think about the -- what we've seen from Production Precision Ag, when you think about mix, it's -- as titled, that's essentially Large Ag and you're seeing the continued integration of Precision Ag in that. So, I think that's one of the things that, as we separated these, and we think about how we're segmenting, is we're seeing a much probably cleaner view of pure -- what is Precision Ag and Production Ag. So, the integration of machinery and technology. I think as it relates to the performance, I mean, certainly, we saw volume pick up. Price, as Brent noted, was a significant driver in the quarter and that was on a number of different variables. But we saw the benefits of above average, just normal price increases, pretty significant adjustments we've made over the last year in overseas markets, as it's related to currency and some new products that came in middle of the year. So we -- you're seeing that impact. And then, as noted, the benefit of low inventory and strong demand driving lower incentive spending. So, as I think about, I think those would be the biggest drivers, particularly in the quarter, as it relates to things like R&D, where timing-wise, we're probably skewed a little bit to the later part of the year, that's just timing on programs and probably worth noting, when you think about that performance, ex the Brazil tax item, Production Precision Ag did about 19.5% and we'll continue to see, as a percent of sales, higher R&D in that segment compared to the rest of the business.

So, thanks, Brett. We'll go ahead and go to our next question.

Thank you. Our next question or comment comes from Jamie Cook from Credit Suisse. Your line is open.

Hi, good morning, and congrats on a nice quarter. Back on the Production and Precision Ag business, is there any way you can help us understand, I mean, obviously, the 6% price is a pretty meaningful price increase for this segment. I'm just trying to understand how you're approaching pricing with Precision Ag this cycle relative to different prior cycles? How much more of that's benefit -- should be benefiting the margins for this segment over time? And I guess just as a follow-up, your order books look pretty good across Large Ag. I'm just wondering how much more opportunity there is, to take up production, assuming markets continue to be favorable? Thanks.

Thanks, Jamie. As it relates to the order book side, we've made adjustments clearly compared to a quarter ago. We've seen sales move up as a result of that. And we've done things. We've added production. We've added some shifts in some of our large facilities, places like Waterloo, for example, and in some of our facilities in South America as well. So, we have made those adjustments. The real challenge and Ryan mentioned this, is on the supply side, there are components and parts that continue to be tight from a supply point of view. So, we're managing those really tightly. Supply management group is working really hard with suppliers day-to-day, some components are week-to-week in terms of what we're seeing from an availability point of view. So, those are tight. So, to the extent, we continue to see demand. We'll try to work to react to that, to the upside, but acknowledge, it's a tight environment as it relates to some key components. Relative to price and I think what we're seeing on the price side, certainly, we see -- we're seeing strong price this year, about 6 points for the year for Production Precision Ag. I think what is happening there, when you think about not just price, but what's happening with price and mix, is we're continuing to see average selling prices of our Large Ag machinery growing and that's through the continued integration of technology and solutions into that business. So, that pattern and trend has continued. And as we continue to be able to deliver those outcomes and we talked a little bit about it from both a sustainability and economic point of view, that is driving real value to customers and we're seeing that, as it relates to adoption and continuing to see the trends across most of our Large Ag machinery in terms of adoption of the latest tools.

Hey, Jamie, it's Ryan. I think what you're seeing there and what we've talked about is, as we've built this Precision infrastructure with the equipment, guidance, telematics, the John Deere Operations Center, now we're stacking on applications that have more of a software content on them, that are focused specifically on the jobs our customers are doing. And as that continues to adopt and our customers continue to adopt that, you get a higher software mix in our margin profile. So, that's another factor. To Josh's point on average selling prices going up, that's true, but also those selling prices include a richer mix of software.

Thank you. We'll go ahead and go to our next question.

Thank you. Our next question or comment comes from Jerry Revich from Goldman Sachs. Your line is open.

Yes. Hi, good morning, everyone.

Hi, Jerry.

In the -- on that mix comment, Ryan, that you just mentioned, I think in the past you folks have spoken about delivering a 3 point tailwind to essentially the average selling price from rising features and it looks like, based on the adoption rates for Precision Ag technologies that you folks have shared, it feels like that's accelerating closer to maybe 5% this year. I'm wondering if you could just comment on that specifically? And then, can you touch on -- as we think about cycle-over-cycle margin performance for Production and Precision Ag, how much of a tailwind are you folks thinking about in your long-term margin targets from the rising adoption rates of software and Precision Ag that you outlined?

Jerry, I'll start there. As it relates to kind of the incremental benefit we see, I think that couple of points, 2 points 3 points of range is still very, very fair in terms of what we've been experiencing. The opportunities as we go forward to continue to see that or to see that move, I think, are there. As you think about increasing, seeing more sensing and acting in the field. So, you think about things like See & Spray that we've talked a lot about, but we see opportunities to go beyond that, beyond herbicides into things like fungicides, pesticides, other fertilizers and into other jobs, other machine forest planting, for example. And as we've talked about in the past, we were also -- as we continue down the automation journey, we're getting closer and closer to full autonomy. So, I say all those things to point out, as we do those things, those create more opportunity to drive revenue, as well as a more recurring base of revenue that we can add value job to job, pass to pass. As it relates to kind of where we're at cycle wise and what does this mean for Production Precision Ag margins, today, what we say is, we're just above, call it 105% of mid-cycle for Production and Precision Ag and middle of the range margin is around 20%. So, context-wise, we compare that back to 2013, that's when we were at, from a Large Ag perspective, well above peak, with roughly 16% margins at that time. So, we're doing higher margins on lower sales, and I think feel really good about the opportunity and the things I mentioned earlier, in terms of what drives opportunities for us. Those continue to be strong tailwinds with lots of runway.

Thanks, Jerry. We'll go ahead and go to our next question.

Thank you. Our next question or comment comes from Ann Duignan from JP Morgan. Your line is open.

Yes, hi, good morning. Maybe still on the Large Ag sector. How do you plan on managing the cycle this time versus the last cycle? I mean last cycle we saw farmers start to roll equipment annually, we saw multiple unit discount programs and eventually, dealers ended up with excess used equipment. So, new sales increases are great, but how are you going to manage the cycle differently this time around, or is there anything you can do so we don't end up in the same as we did at the bottom of the last cycle?

Thanks, Ann. I think when we think about the cycle, we're certainly coming into this, where we've seen demand inflect here over the, call it the last three, four months, coming into a position of very low new inventories, very low used inventories. So, that dynamic has certainly helped in terms of the starting point and the tightness were seeing in overall inventory levels. I think the lessons learned from the past cycle certainly play into that, how do we make sure we're not pulling additional customers in, pulling ahead demand potentially that would have occurred later on. And I think, as we look at 2021 right now, with demand that we're seeing, our order books, large tractors, for example, are into the fourth quarter and with the early order programs, they account for nearly the entire full year production. So, I think we've got really good visibility, but I think that it's a good indicator of the replacement demand that we've been expecting. And if that, we would see over the last couple of years, coming to fruition here. But, I think we are definitely working very closely with the dealers in terms of how do we manage the cycle, but acknowledge, right now we're early days in terms of seeing some of this demand pick-up.

Annual, it's Ryan. Maybe I'll add to that. I think it's the total industry, including ourselves, having the discipline to make sure that those new customers we're providing new product for them, but also those customers that historically have purchased used and used makes more sense of them, to really be disciplined to continue to provide them with high-quality used equipment, so, we maintain that trade cycle and trade later throughout this upturn that we have.

Yes, I think one other piece that will -- helps us there and we're very early, is in performance upgrades and the ability to upgrade existing machine fleets, which provide the ability to take, take a used machine, it could be a generation or two old and outfit that with updated equipment, which in some cases may alleviate some of the pressure on new, because you can get a significant amount of productivity at a little bit less of a total investment cost for the customer.

Thanks, Ann. We'll go ahead and go to our next question.

Thank you. Our next question or comment is from Stephen Volkmann from Jefferies & Company. Your line is open.

Hi. Good morning, everybody. I appreciate the breakout of the Small and the Production Ag equipment. I'm curious to what your view is going forward relative to any difference in incremental margins we should be thinking about in those two segments, that I assume the Large stuff is bigger. But, just anything you want to kind of give us on that would be great.

Thanks, Steve. As it relates to incremental margins, historically, we've talked about in the past, Ag and Turf being 30% to 35% kind of depending on how our mix sell. I think what we say now is, the Production Precision Ag side pushes at the high end of that range and in Small Ag & Turf, probably towards the lower end of that range. I think generally that's probably a good rule. I think this year, particularly Small Ag & Turf, we were seeing a pretty strong benefit of what was -- as you look at small tractors, in particular, really significant under production last year of retail and we intend to build a little bit of inventory this year. So, you're seeing a little bit of swing there, so that swing from under producing to overproducing definitely benefits the margin profile as well.

Thanks, Steve. We'll go ahead and jump to our next question.

Thank you. Our next question or comment is from Tim Thein from Citigroup. Your line is open.

Thank you. Good morning, Josh and Ryan. The question is on the dividend and how you're thinking about your view of mid-cycle earnings for the Company. Obviously, we're moving into a much higher margin level as you clearly laid out and just tying back to your point earlier about Large Ag being, call it right around your view of -- of normalized levels. So, just kind of tying that all together, I did the kind of $3-ish annualized dividend run rate, how you're thinking about that, relative to your kind of 25% to 35% payout target? Thank you.

Hey, Tim. It's Ryan and as we've said, the -- and you pointed out, we keep our dividend on a 25% to 35% mid-cycle earnings ratio and with the structural improvements that we have, we're probably below that range with the current dividend. And so, it's something that we're certainly thinking about and with overall liquidity situation of the Company, that's something we're going to take a look at, for sure this year.

Thanks, Tim. Go ahead and go to our next question.

All right, thank you. Our next question comes from Ross Gilardi from Bank of America. Your line is open.

Thanks. Good morning, guys. You explained that you think you are at 105% of mid-cycle for Large Ag, can you remind us where you expect to be relative to cycle for your other segments through the end of this year, based on your guidance? And when should we expect you guys to recast your mid-cycle margin targets, just along with that, how does the 20% mid-cycle that you're seeing for Large Ag in fiscal '21 compared to your initial estimate when you put out the 15% target to begin with?

Ross, when we think about present to mid-cycle, so, actually the Production Precision Ag and Small Ag & Turf are pretty much in the same range, kind of right between, call it 105% and 110% of mid-cycle. The C&F business is right around mid-cycle as well, like pretty nearly dead on. There is a little bit of mix impact in there, where compact construction equipment is much higher and we're obviously coming kind of, off of the bottom after 2020, from a construction equipment perspective. So, there is some variation amongst the segments there in C&F, but overall about mid-cycle. I think when you think about kind of our mid-cycle margins, certainly, we've talked a lot about the 15% continuing to focus on executing and I'd say in '21, a very strong first quarter and I'd say there's lots of focus on delivering the guide that we have this year, in the performance that we feel confident in, but I think post that, I think is when we'll start to think about what's next for the Company.

Yes, Josh this is Don Ads [ph]. Can you address at all, how the 20% at mid-cycle for the Large Ag compares to your initial estimate?

Yes, I think what we're seeing from that business and what we've seen in the first quarter, kind of ex-items, about 19.5%, I think feels like strong performance for us. I think we're seeing some benefits of things like strong pricing and obviously the volume rebounding and operational leverage coming through, is solid and I think aligned with where we would hope it would be, knowing that we feel like we've got opportunity as we go forward. That businesses sees the majority of the headwind on material and freight, that Ryan mentioned, that weighs on the full year there as well.

Hey, Ross, it's Ryan. I do think it's fair to say, we're probably a little bit ahead of where we thought we would be, but we're heads down and focused on delivering this from a sustainable perspective and then in 2022, we'll take a step back and reflect on what's appropriate going forward.

Thanks, guys.

Thanks, Ross. We'll go ahead and go to our next question.

Thank you. Our next question comes from Rob Wertheimer from Melius Research. Your line is open.

Thank you and good morning. So, I'll -- in the new segments, I think help clarify a lot on and align pretty well with what you're aimed at. And for me, this Small Ag was particularly impressive. I wonder, since we just talk less about it versus all the things we talk about on Large Ag, can you just talk about what the workflows are that have been driving the margin you saw in the quarter? And then maybe just reiterate what gets worse from here for rest of the year, given the outlook. Thanks.

Yes, Rob. When you think about Small Ag and Turf and you're right, I mean it tends to be a little bit less of story. What we've seen here is really, really solid performance and I think a starting point is, some of the actions we've taken from executing the new strategy, I think we're seeing the benefits in Small Ag and Turf. A number of the exits or closures that we did in fiscal '20 are benefiting there and those were mostly in the Small Ag and Turf part of the business. So, that focus is definitely helping. I think we're seeing really strong execution. Again, the benefit of moving from under-producing to slightly over-producing on small tractors, helps, where the pricing point of view is solid as well. I mean, when you think about small tractors and turf, those are going to be pushing much higher than call it that kind of between 105% and 110% of mid cycle. So, there is benefit there as well. Also, embedded in that is a large portion of Small Ag and Turf is in Europe, which is tended to be more stable market. So, we see a little bit less, less volatility there. And we've seen some strength in that market, which have been beneficial as well.

Rob, I think taking them -- taking the two businesses apart, I think, Josh alluded to, we focused on the Small Ag and Turf side with some of our fix and exit strategies and then focusing on markets where our value proposition makes sense, given the industry and market dynamics. I think when you do those things and think about capitalizing, the business is a little bit different, focus in the R&D portfolio a little bit differently. The results show that you can have great a great business in the small side and both of them are equally important for us to drive our strategy going forward.

Yes. And I'm sorry, Rob, I forgot about your potion of your question, kind of what, what are the headwinds in the remainder of the year and not dissimilar, I'd say, all of our businesses have material and freight headwinds, the $500 million of material and freight cost that Ryan mentioned, is all really kind of 2Q through 4Q. I think, so there is a portion of that, that is impacting Small Ag & Turf. Price, we don't expect to be as strong as we move through the year, 2% for the full year compared to a strong first quarter there. And then the other, maybe two things I mentioned, R&D there similarly is a little bit back-end weighted, so you see that be based on timing of programs, impact the rest of the year. And there are some inefficiencies related to overheads with accommodation of COVID and supply challenges that we've got in -- embedded in the forecast, as well.

Thanks, Rob. We'll go ahead and go to our next question.

Thank you. Our next question comes from Steven Fisher from UBS. Your line is open.

Thanks, good morning guys. So, the supply chain challenges, wow, going through an upturn now, kind of remind me of what you experienced in 2017 and 2018 and it was a bit of a struggle back then, but it seems like you are better prepared to handle it this time. Is that a fair assessment or is it maybe just -- it's a stronger up-cycle now than it was back then and that enables you to kind of cover the $500 million of increases that you're seeing, just kind of gauging your confidence that you've kind of got in the supply chain challenges under control, to really capture the benefit of a strong upside here as the cycle plays out?

Steve, when we look at the supply base, I mean I think that our team has learned a significant amount, as we went through what you described in that 2017-18 timeframe, as we went through tariffs with China and the early first round of COVID and we saw some of those impacts. So, I think the team has done a really good job and gotten much deeper in terms of understanding supplier-by-supplier, what are constraints, what are capacities and what are the challenges. So, that certainly helped. I think up to this point, we've been able to mitigate disruptions, but in some cases, I think there is -- we are week-to-week in terms of how things are operating and there are challenges. So, I think we're continuing to work closely there, trying to execute on the forecast and meet customer demand. And we've got ranges in the forecast for that reason, knowing there are certainly challenges that we're facing, we'll continue to face through the remainder of the year.

Yes, it's Ryan. I mean, we're also seeing the benefit and we went through the activity to look at kind of each position in the Company and how those positions worked over the last year and I think we're seeing the benefit, from a more focused and agile organization that we put in place last year and finished effectively with that, towards the end of last year.

Thank you.

Thanks, Steve. We'll go ahead and go to our next question.

Our next question or comment comes from Kristen Owens from Oppenheimer. Your line is open.

Hi, good morning. Thank you for taking my question. I wanted to point back to Slide 15 here in the deck. The $40 an acre and economic value to the customer that you've outlined and that's pretty significant when you think about the impact to net farm income across your connected acres, where do you feel like your customers are at this stage in terms of understanding that potential value? And when you think about the backdrop of this improved commodity prices and land values, how do you see adoption cycles moving forward?

Yes. Thanks, Kristen. It's a great point. I mean, I think as we look across those different technologies, there is a varying range of adoption individually, where at the highest end, you think about something like guidance, which would be very, very highly, adopted and then maybe on the lower end, something like ExactEmerge, which is in the low 40s% so, varying degrees in terms of how deeply engaged our farmers are, across all of those jobs. But we think that's increasingly where we see the opportunity to drive that value. And particularly, when you start to think about additional opportunities, Ryan mentioned this a little bit, you start to think about the combination of carbon markets or differentiating crops because of the practices that are utilized and then our position of, one, executing the jobs, but two, having the operation center that documents those and can provide that information very seamlessly, we think that creates a pretty significant opportunity for our customers. So, when you think about not only the technology that we have in place today, those that are coming and then, what feels like just a burgeoning opportunity for some additional revenue, I think well-positioned our customers and we feel like we're in a really good spot too to be able to unlock and enable that.

Thanks, Kristen. We'll go ahead and go to our next question.

Thank you. Our next question is from Chad Dillard from Bernstein. Your line is open.

Hi, good morning guys. So, I was wondering if you could give us a sense for how far along Latin America and Europe are in adopting Precision Ag, as it may be relative to the US, like so if the US is 100%, where are those two regions lie or if it is your -- talk about if like, engage acre perspective, I think you guys talked about 230 million engage acres globally, like how does that break down from a regional perspective and, what's like the total addressable market in terms of engaged acres that you can get to?

So, when you think about kind of regional performance, certainly for this along in North America, but kind of as we just alluded to and Chris alluded to in the previous question, there's still a long way to go in North America, when you think about actually stacking all of those different technologies on the farm and what that can deliver. So, that's just a bit of a caveat, so there is still a big opportunity in North America. And I think we're seeing it grow, the adoption grow, in places like South America, Brazil in particular, we've seen pretty significant growth in engaged acres last year. I think we were up something like 60% in Latin America, so continuing to grow there. And I think when you think by some of the challenges faced there, double crops, as well as the opportunity to get more efficient there, that will continue to grow and we're seeing our dealers embrace that as well. When you think about -- they've got now over 40 digital operation centers that are supporting their customer fleets. As we unlock the challenge of connectivity, that's a huge opportunity for us and we've done a couple of things over the last couple of years. most recently, an agreement with Qaro [ph] to provide access, better connectivity and bandwidth, we think that unlocks even more potential for the use of those tools. Europe has historically been a lot of guidance and I think we're starting to see some of that turn and shift towards more connectivity, engaged acres grew there last year, significantly like triple digits. And as you think about the potential impact of regulatory environments coming in Europe first, but probably other parts of the world, the appetite for precision agriculture and some of our tools when you think about spraying and others, will be particularly important as we go forward there. So, continuing to grow, feel really good about the position we're in and I think there is a tremendous amount of opportunity.

Thanks, Chad. We'll go ahead and go to our next question.

Thank you. Our next question comes from David Raso from Evercore ISI. Your line is open.

Hi, good morning. Given the supply chain constraints and amid the strong farm equipment demand, I'm curious, are you already taking tractor orders beyond fiscal '21? And are you willing to open up your early order programs for other products earlier this year than normal? And the other question is, we don't have the baseline for the new segments within Ag and Turf, of the revenue increase that you put into A&T, I thought was impressive that on those incremental sales, the incremental margin is 44%. So, it's pretty impressive. But of that revenue increase, just so we have a sense of the mix what changed, how much of the increase was the Production and Precision Ag versus how much was Small Ag and Turf? Thank you.

Yes. So first on the order side, I think we -- we haven't opened anything up into '22 -- fiscal '22 at this point. So, we're pushing out into the end of the fiscal year for large tractors, in particular. So we'll, and we haven't adjusted anything at this point, as far as timing of the early order programs, but you bring up a really good point in that, when we -- by the time we close our crop care early order programs, that was -- we were just beginning to see the inflection. So, if you think about kind of the low double-digit increases we saw in planters and sprayers, that was, mostly well ahead of kind of the inflection we saw here in the fall. So, I think, obviously a lot to play out, but that bodes well there, but we haven't adjusted timing at this point. As it relates to the sales increase from a former A&T in the Production and Precision Ag and Small Ag and Turf, really the percentage increases are pretty similar. So, if we look at those businesses year-over-year, they're both up call it roughly 20%. So pretty, pretty balanced between the two in terms of the increase we saw, compared to a quarter ago.

Thank you, David. We'll go ahead and go to our next question.

Our next question or comment comes from Larry De Maria from William Blair. Your line is open.

Hi, thanks and good morning everybody. If we could go just go back to Slide 15. Obviously, we are seeing is the green and green solution can deliver us $40 return and we know there's a lot of mixed fleets out there still. So, there's growth. But, can you give us what is the annual cost, what's the ROI and how does that $40 return stack up, when you're thinking and when you're competing with seed and fertilizer companies. In other words, green and green solution delivers $40, what's the ROI and how does that compare to seed and fertilizer companies?

Yes, I mean when you think from a payback or an ROI perspective, we think about these tools and solutions, we've traditionally been in the year to two-year payback period and I think across those, that would be fair. Some of those are going to be much shorter, that we've seen in months compared to years of payback. So, I think as you look at those technologies that we've got there, I think it would be very fair to say, well under two years would be a reasonable payback period for what we're seeing there. So, I think that's where we're at. And I think what was exciting about it is, there is opportunity as we start to think about kind of what's coming next, to grow that, from both the economic value, but also delivering increased sustainability outcomes as well.

Thanks, Larry. We'll go ahead and jump to our next one.

Thank you. Our next question comes from Nicole DeBlase from Deutsche Bank. Your line is open.

Yes, thanks. Good morning guys.

Hi, Nicole.

Can we just focus a little bit on South America, about the comments that you gave around North America order book as well as Europe and how far it extends was helpful, but there was just a bit less around what you're hearing from South America farmers and maybe how far the order book extends there?

So, Latin America and South America, Brazil in particular, really strong, kind of a lot of things coming together there that are driving really strong farm profitability in terms of production, FX, how it's moved, those have all been very positive. So, we saw this inflect in our fourth quarter, we've got orders -- we are ordered out through May into June, so strong, strong activity there and we're coming out of a period with 2020, where we ended with kind of historically low inventory. So, we're pushing there to try to not only meet demand, but if we can, we will try to build a little bit of inventory because we finished quite low. So, I think overall, South American demand, Brazil in particular really strong, customer is feeling good, dealers are very much engaged and the -- I think from a -- as we step back and not just think about South America, but I think the performance that we've seen this year first quarter and as we look at our forecast, we're benefiting from this really strong profitability from a global perspective of our business as well. So, that's helpful.

Thanks, Nicole. We'll go ahead and go to our next question.

Our next question or comment comes from Courtney Yakavonis from Morgan Stanley. Your line is open.

Hi, good morning, guys. If we can just talk a little bit about C&F, I guess it's going be just first a clarification and you have the extra amount of work in the quarter is, are we going to see any difference in fourth quarter of this year or is it to the full year and did that have any impact on the margins, the increase in the margin guidance? And then, I guess my actual question is just in the context that C&F is at mid-cycle, can you help kind of walk us through what's going to get you to the 15% margins in that segment, because I think you've historically talked about that 15% margin target being for both segments. And I think you've historically talked about the work and synergies being back half weighted, so just try to understand if that's flowing through sooner or if that's still going to be a 2022 story? Thanks.

Thanks, Courtney. I think when you think about the working the extra month, I mean it was -- didn't really impact margins as pretty much the extra month was kind of in line with where they are running for the quarter. So, no significant change there, didn't necessarily impact their overall guidance or the division's total guidance. I mean, I think when you think about our Roadbuilding business, I think we feel really good about what we're seeing there. Overall, we expect that to be up about 20% in this fiscal year. About half of that is the extra month, so say, underlying business up about 10% and when we look at the core Roadbuilding business, we feel like the margins that they are delivering are where we'd expect them to be. So, as we talked about feeling like that business is a mid-teens business, we're executing along those lines and feel really good about how that's progressing. I think when you step back, overall C&F, certainly, we think there is an opportunity as Wirtgen continues to perform, that, that will pull -- pull up margins, technology opportunity for us as well. In Construction & Forestry, we're very early on and think about how do we integrate that and we think that will drive performance there as well. We highlighted just an example on grade control and what that can do from a customer economic and sustainable impacts as well. So, those are the types of things we're looking at, obstacle detection, there is a few things that we feel like we can nearly copy paste into that division to drive better performance and continuing to be very focused on operations and executing very, very tightly in what is a volatile, somewhat cyclical business.

With that, I think we've got time for one more question.

Thank you. Our final question comes from Adam Uhlman from Cleveland Research. Your line is open.

Hi guys, thanks for squeezing me in. And congrats on the strong quarter. I wanted to go back to the material costs discussion that we're having before, would you be willing to break down the $500 million by segment and then maybe, perhaps the cadence, I think Josh, you said that it was going to start to hit in the second quarter, is that equally weighted throughout the rest of the year or should we be thinking about this as more of a fourth-quarter impact and then do you think you need to implement any more price increases to offset what's happening with materials and freight costs? Thanks.

Thanks, Adam. I mean I think the -- let me tell you on the $500 million, we haven't gotten to bright line there. But, of the $500 million, the majority are -- well more than half of that is PPA, Production Precision Ag, where we see that on the low end, it's Small Ag & Turf would be -- have the smallest portion of that, but impacting those businesses. As it relates to price, historically, we've not taken price solely based on commodities, we try to do that and be disciplined in our approach to price and pricing for value and those sorts of things. So, at this point, we haven't contemplated that. I mean if we step back and look overall, the price we're getting is offsetting -- more than offsetting the material, but does certainly have a drag on incrementals as we go through the remainder of the year and timing wise, I'd say it's pretty balanced over the course of the remaining three quarters.

So with that, I think we'll wrap up. We appreciate everyone's time, and look forward to catching up with everyone. Thank you.

Thank you. That concludes today's conference call. Thank you for your participation. You may disconnect at this time.