MOLINE, Ill., Nov. 25, 2020 /PRNewswire/ --

  • Fourth-quarter net income rises 5% aided by strong execution and disciplined cost management.
  • Improving fundamentals in agricultural sector setting stage for stronger demand in year ahead.
  • Earnings for 2021 forecast to be $3.6 to $4.0 billion.

Deere & Company (NYSE: DE) reported net income of $757 million for the fourth quarter ended November 1, 2020, or $2.39 per share, compared with net income of $722 million, or $2.27 per share, for the quarter ended November 3, 2019. For fiscal 2020, net income attributable to Deere & Company was $2.751 billion, or $8.69 per share, compared with $3.253 billion, or $10.15 per share, in 2019.

Worldwide net sales and revenues decreased 2 percent, to $9.731 billion, for the fourth quarter of 2020 and declined 9 percent, to $35.540 billion, for the full year. Equipment operations net sales were $8.659 billion for the quarter and $31.272 billion for the year, compared with corresponding totals of $8.703 billion and $34.886 billion in 2019.

"John Deere delivered another quarter of strong performance and a solid year despite the challenges associated with managing the pandemic," said John C. May, chairman and chief executive officer. "In this regard, I would like to pay tribute to the thousands of John Deere employees, dealers and suppliers throughout the world who have helped us safely maintain our operations and serve customers. Because of their contributions, Deere was able to complete a successful year and is positioned to continue providing differentiated solutions and unlocking even greater value for customers."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $3.6 billion to $4.0 billion.

In the year ahead, Deere expects to benefit from improving conditions in the farm economy and stabilization in construction and forestry markets, according to May. "Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment," he said. "At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers' operations."



















Deere & Company


Fourth Quarter


Full Year


$ in millions


2020


2019


% Change


2020


2019


% Change


Net sales and revenues


$

9,731


$

9,896


-2%


$

35,540


$

39,258


-9%


Net income


$

757


$

722


5%


$

2,751


$

3,253


-15%


Fully diluted EPS


$

2.39


$

2.27




$

8.69


$

10.15




Net income in the fourth quarter and full-year 2020 was negatively affected by impairment charges and employee-separation costs of $211 million and $458 million after-tax, respectively. For the same periods in 2019, the similar charges were $74 million and $82 million. In addition, net income was unfavorably affected by discrete adjustments to the provision for income taxes in both periods of 2020 and favorably impacted in both periods of 2019.











Equipment Operations


Fourth Quarter


$ in millions


2020


2019


% Change


Net sales


$

8,659


$

8,703


-1%


Operating profit


$

1,056


$

788


34%


Net income*


$

571


$

632


-10%


* Includes equity in income (loss) of unconsolidated affiliates.

For a discussion of net sales and operating profit results, see the Agriculture & Turf and Construction & Forestry sections below.











Agriculture & Turf


Fourth Quarter


$ in millions


2020


2019


% Change


Net sales


$

6,198


$

5,756


8%


Operating profit


$

860


$

527


63%


Operating margin



13.9%



9.2%




Agriculture & Turf sales increased for the quarter due to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit rose primarily due to price realization, lower research and development expenses, reduced selling, administrative, and general expenses, improved shipment volumes / mix, and lower warranty expenses. These items were partially offset by employee-separation expenses and impairments.

 











Construction & Forestry


Fourth Quarter


$ in millions


2020


2019


% Change


Net sales


$

2,461


$

2,947


-16%


Operating profit


$

196


$

261


-25%


Operating margin



8.0%



8.9%




Construction & Forestry sales moved lower for the quarter primarily due to lower shipment volumes, partially offset by price realization. Operating profit declined mainly due to lower sales volume / mix, impairments, and employee-separation expenses. The decrease in profit was partially offset by price realization, lower research and development expenses, reduced selling, administrative, and general expenses, lower warranty expenses, and improved production costs.

 











Financial Services


Fourth Quarter


$ in millions


2020


2019


% Change


Net income


$

186


$

90


107%


The increase in financial services net income for the quarter was mainly due to lower impairments and reduced losses on operating-lease residual values and favorable financing spreads, partially offset by a higher provision for credit losses, and employee-separation expenses.









Market Conditions and Outlook (Annual)


Currency


Price


$ in millions


Net Sales


Translation


Realization


Agriculture & Turf


10% to 15%


1%


3%


Construction & Forestry


5% to 10%


1%


1%










John Deere Financial


Net Income


$630




Market Conditions & Outlook

Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to increase by 10 to 15 percent for fiscal-year 2021, including a positive currency-translation effect of 1 percent. Industry sales of agricultural equipment in the U.S. and Canada are forecast to rise 5 to 10 percent driven by gains in larger models. Full-year industry sales in the EU28 member nations are forecast to be flat to up 5%. In South America, industry sales of tractors and combines are forecast to be up about 5 percent while Asian sales are expected to be slightly lower. Industry sales of turf and utility equipment in the U.S. and Canada are forecast to be flat to up 5 percent.

Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are anticipated to be up 5 to 10 percent for 2021 with foreign-currency rates having a favorable translation effect of 1 percent. The outlook reflects some degree of recovery from the pandemic in construction equipment, continued strength in compact construction due to residential building activity, and expected growth in the roadbuilding sector. On an industry basis, North American construction equipment sales are expected to be down about 5 percent with sales of compact equipment up about 5 percent. Global forestry industry sales are forecast to be flat to up 5 percent for the year.

Financial Services. Fiscal-year 2021 net income attributable to Deere & Company for the financial services operations is forecast to be approximately $630 million. Results are expected to benefit from favorable financing spreads, lower losses on operating-lease residual values, and income earned on a higher average portfolio, partially offset by a higher provision for credit losses.

John Deere Capital Corporation

The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.





















Fourth Quarter


Full Year


$ in millions


2020


2019


% Change


2020


2019


% Change


Revenue


$

693


$

785


-12%


$

2,808


$

2,890


-3%


Net income


$

154


$

68


126%


$

425


$

419


1%


Ending portfolio balance










$

38,726


$

38,251


1%


Net income for the current quarter was higher than in the fourth quarter of 2019 primarily due to lower impairments and reduced losses on operating-lease residual values, favorable financing spreads, and a lower provision for credit losses, partially offset by employee-separation expenses. Full year 2020 net income was about the same as in 2019 with lower impairments and reduced losses on operating-lease residual values, and income from a higher average portfolio, largely offset by a higher provision for credit losses and unfavorable financing spreads. The full year 2019 was also affected by favorable discrete adjustments to the provision for income taxes.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  Statements under "Company Outlook & Summary," "Market Conditions & Outlook," and other forward-looking statements herein that relate to future events, expectations, and trends involve factors that are subject to change, and risks and uncertainties that could cause actual results to differ materially.  Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the company's businesses.

The company's agricultural equipment business is subject to a number of uncertainties including the factors that affect farmers' confidence and financial condition.  These factors include demand for agricultural products, world grain stocks, weather conditions, soil conditions, harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, trade restrictions and tariffs (e.g., China), global trade agreements, the level of farm product exports (including concerns about genetically modified organisms), the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of governments, changes in government farm programs and policies, international reaction to such programs, changes in and effects of crop insurance programs, changes in environmental regulations and their impact on farming practices, animal diseases (e.g., African swine fever) and their effects on poultry, beef and pork consumption and prices and on livestock feed demand, and crop pests and diseases and the impact of the COVID pandemic on the agricultural industry including demand for, and production and exports of, agricultural products, and commodity prices.

Factors affecting the outlook for the company's turf and utility equipment include consumer confidence, weather conditions, customer profitability, labor supply, consumer borrowing patterns, consumer purchasing preferences, housing starts and supply, infrastructure investment, spending by municipalities and golf courses, and consumable input costs.  Many of these factors have been and may continue to be impacted by global economic effects, including the downturn resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.

Consumer spending patterns, real estate and housing prices, the number of housing starts, interest rates, commodity prices such as oil and gas, the levels of public and non-residential construction, and investment in infrastructure are important to sales and results of the company's construction and forestry equipment.  Prices for pulp, paper, lumber and structural panels are important to sales of forestry equipment.  Many of these factors affecting the outlook for the company's construction and forestry equipment have been and may continue to be impacted by global economic effects, including the downturn resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.

All of the company's businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates (including the availability of IBOR reference rates); inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics (including the COVID pandemic) and government and industry responses to epidemics such as travel restrictions and extended shut down of businesses.

Uncertainties related to the magnitude and duration of the COVID pandemic may significantly adversely affect the company's business and outlook.  These uncertainties include: prolonged reduction or closure of the company's operations, or a delayed recovery in our operations; additional closures as mandated or otherwise made necessary by governmental authorities; disruptions in the supply chain and a prolonged delay in resumption of operations by one or more key suppliers, or the failure of any key suppliers; the company's ability to meet commitments to customers on a timely basis as a result of increased costs and supply challenges; the ability to receive goods on a timely basis and at anticipated costs; increased logistics costs; delays in the company's strategic initiatives as a result of reduced spending on research and development; additional operating costs at facilities that remain open due to remote working arrangements, adherence to social distancing guidelines and other COVID-related challenges; increased risk of cyber attacks on network connections used in remote working arrangements; increased privacy-related risks due to processing health-related personal information; legal claims related to personal protective equipment designed, made, or provided by the company or alleged exposure to COVID on company premises; absence of employees due to illness; the impact of the pandemic on the company's customers and dealers, and their delays in their plans to invest in new equipment; requests by the company's customers or dealers for payment deferrals and contract modifications; the impact of disruptions in the global capital markets and/or continued declines in the company's financial performance, outlook or credit ratings, which could impact the company's ability to obtain funding in the future; the duration and impact of the resurgence in COVID cases in any country, state, or region; and the impact of the pandemic on demand for our products and services as discussed above.  It is unclear when a sustained economic recovery could occur and what a recovery may look like.  All of these factors could materially and adversely affect our business, liquidity, results of operations and financial position.

Significant changes in market liquidity conditions, changes in the company's credit ratings and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company's earnings and cash flows.  Financial market conditions could also negatively impact customer access to capital for purchases of the company's products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults.  A debt crisis, in Europe or elsewhere, could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and company operations and results.  The company's investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.

The withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere.  The economic conditions and outlook could be further adversely affected by (i) uncertainty regarding any new or modified trade arrangements between the United Kingdom and the European Union and/or other countries, (ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iii) the risk that the euro as the single currency of the Eurozone could cease to exist.  Any of these developments, or the perception that any of these developments are likely to occur, could affect economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions, and political, financial and monetary systems.  Any of these developments could affect our businesses, liquidity, results of operations and financial position.

Additional factors that could materially affect the company's operations, access to capital, expenses and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other areas; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws and regulations and company actions related thereto; changes to and compliance with privacy regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.

Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights whether through theft, infringement, counterfeiting or otherwise; the availability and prices of strategically sourced materials, components and whole goods; delays or disruptions in the company's supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of customers, dealers, suppliers or the company to comply with laws, regulations and company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection and other ethical business practices; events that damage the company's reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; start-up of new plants and products; the success of new product initiatives; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity and speed needed to support technology solutions; oil and energy prices, supplies and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts; changes in the ability to attract, train and retain qualified personnel; acquisitions and divestitures of businesses; greater than anticipated transaction costs; the integration of new businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures or divestitures; the implementation of organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures and other disruptions to the company's and suppliers' information technology infrastructure; changes in company declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount and mortality rates which impact retirement benefit costs; and significant changes in health care costs.

The liquidity and ongoing profitability of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products.  If general economic conditions deteriorate or capital markets become more volatile, including as a result of the COVID pandemic, funding could be unavailable or insufficient.  Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.

The company's forward-looking statements are based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies.  Such estimates and data are often revised.  The company, except as required by law, undertakes no obligation to update or revise its forward-looking statements, whether as a result of new developments or otherwise.  Further information concerning the company and its businesses, including factors that could materially affect the company's financial results, is included in the company's other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q).

 

 

Fourth Quarter 2020 Press Release

(in millions of dollars)

Unaudited




Three Months Ended


Twelve Months Ended



November 1


November 3


%


November 1


November 3


%



2020


2019


Change


2020


2019


Change

Net sales and revenues:

















Agriculture and turf


$

6,198


$

5,756


+8


$

22,325


$

23,666


-6

Construction and forestry



2,461



2,947


-16



8,947



11,220


-20

Total net sales



8,659



8,703


-1



31,272



34,886


-10

Financial services



891



971


-8



3,589



3,621


-1

Other revenues



181



222


-18



679



751


-10

Total net sales and revenues


$

9,731


$

9,896


-2


$

35,540


$

39,258


-9


















Operating profit: *

















Agriculture and turf


$

860


$

527


+63


$

2,969


$

2,506


+18

Construction and forestry



196



261


-25



590



1,215


-51

Financial services



249



128


+95



746



694


+7

Total operating profit



1,305



916


+42



4,305



4,415


-2

Reconciling items **



(219)



(90)


+143



(472)



(310)


+52

Income taxes



(329)



(104)


+216



(1,082)



(852)


+27

Net income attributable to Deere & Company


$

757


$

722


+5


$

2,751


$

3,253


-15


* Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses.


** Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.


 

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended November 1, 2020 and November 3, 2019

(In millions of dollars and shares except per share amounts) Unaudited 




2020


2019

Net Sales and Revenues







Net sales


$

8,659


$

8,703

Finance and interest income



867



956

Other income



205



237

Total



9,731



9,896








Costs and Expenses







Cost of sales



6,470



6,735

Research and development expenses



443



488

Selling, administrative and general expenses



1,011



945

Interest expense



278



388

Other operating expenses



414



515

Total



8,616



9,071








Income of Consolidated Group before Income Taxes



1,115



825

Provision for income taxes



329



104








Income of Consolidated Group



786



721

Equity in income (loss) of unconsolidated affiliates



(28)



1








Net Income



758



722

Less: Net income attributable to noncontrolling interests



1




Net Income Attributable to Deere & Company


$

757


$

722








Per Share Data







Basic


$

2.41


$

2.30

Diluted


$

2.39


$

2.27








Average Shares Outstanding







Basic



314.1



313.9

Diluted



317.1



317.9


See Condensed Notes to Consolidated Financial Statements.


 

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Years Ended November 1, 2020 and November 3, 2019

(In millions of dollars and shares except per share amounts) Unaudited



2020


2019

Net Sales and Revenues







Net sales


$

31,272


$

34,886

Finance and interest income



3,450



3,493

Other income



818



879

Total



35,540



39,258








Costs and Expenses







Cost of sales



23,677



26,792

Research and development expenses



1,644



1,783

Selling, administrative and general expenses



3,477



3,551

Interest expense



1,247



1,466

Other operating expenses



1,612



1,578

Total



31,657



35,170








Income of Consolidated Group before Income Taxes



3,883



4,088

Provision for income taxes



1,082



852








Income of Consolidated Group



2,801



3,236

Equity in income (loss) of unconsolidated affiliates



(48)



21








Net Income



2,753



3,257

Less: Net income attributable to noncontrolling interests



2



4

Net Income Attributable to Deere & Company


$

2,751


$

3,253








Per Share Data







Basic


$

8.77


$

10.28

Diluted


$

8.69


$

10.15








Average Shares Outstanding







Basic



313.5



316.5

Diluted



316.6



320.6


See Condensed Notes to Consolidated Financial Statements.


 

 

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

As of November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited



2020


2019

Assets







Cash and cash equivalents


$

7,066


$

3,857

Marketable securities



641



581

Receivables from unconsolidated affiliates



31



46

Trade accounts and notes receivable - net



4,171



5,230

Financing receivables - net



29,750



29,195

Financing receivables securitized - net



4,703



4,383

Other receivables



1,220



1,487

Equipment on operating leases - net



7,298



7,567

Inventories



4,999



5,975

Property and equipment - net



5,817



5,973

Investments in unconsolidated affiliates



193



215

Goodwill



3,081



2,917

Other intangible assets - net



1,327



1,380

Retirement benefits



863



840

Deferred income taxes



1,499



1,466

Other assets



2,432



1,899

Total Assets


$

75,091


$

73,011








Liabilities and Stockholders' Equity














Liabilities







Short-term borrowings


$

8,582


$

10,784

Short-term securitization borrowings



4,682



4,321

Payables to unconsolidated affiliates



105



142

Accounts payable and accrued expenses



10,112



9,656

Deferred income taxes



519



495

Long-term borrowings



32,734



30,229

Retirement benefits and other liabilities



5,413



5,953

Total liabilities



62,147



61,580








Redeemable noncontrolling interest






14








Stockholders' Equity







Total Deere & Company stockholders' equity



12,937



11,413

Noncontrolling interests



7



4

Total stockholders' equity



12,944



11,417

Total Liabilities and Stockholders' Equity


$

75,091


$

73,011


See Condensed Notes to Consolidated Financial Statements.


 

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Years Ended November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited



2020


2019

Cash Flows from Operating Activities







Net income


$

2,753


$

3,257

Adjustments to reconcile net income to net cash provided by operating activities:







Provision for credit losses



110



43

Provision for depreciation and amortization



2,118



2,019

Impairment charges



194



77

Share-based compensation expense



81



82

Loss on sales of businesses and unconsolidated affiliates



24



5

Undistributed earnings of unconsolidated affiliates



(7)



9

Credit for deferred income taxes



(11)



(465)

Changes in assets and liabilities:







Trade, notes, and financing receivables related to sales



2,009



(869)

Inventories



397



(780)

Accounts payable and accrued expenses



(7)



46

Accrued income taxes payable/receivable



8



173

Retirement benefits



(537)



(233)

Other



351



48

Net cash provided by operating activities



7,483



3,412








Cash Flows from Investing Activities







Collections of receivables (excluding receivables related to sales)



17,381



16,706

Proceeds from maturities and sales of marketable securities



93



89

Proceeds from sales of equipment on operating leases



1,783



1,648

Proceeds from sales of business and unconsolidated affiliates, net of cash sold






93

Cost of receivables acquired (excluding receivables related to sales)



(19,965)



(18,873)

Acquisitions of businesses, net of cash acquired



(66)




Purchases of marketable securities



(130)



(140)

Purchases of property and equipment



(820)



(1,120)

Cost of equipment on operating leases acquired



(1,836)



(2,329)

Collateral on derivatives - net



268



59

Other



(27)



(57)

Net cash used for investing activities



(3,319)



(3,924)








Cash Flows from Financing Activities







Decrease in total short-term borrowings



(1,360)



(917)

Proceeds from long-term borrowings



9,271



9,986

Payments of long-term borrowings



(7,383)



(6,426)

Proceeds from issuance of common stock



331



178

Repurchases of common stock



(750)



(1,253)

Dividends paid



(956)



(943)

Other



(133)



(116)

Net cash provided by (used for) financing activities



(980)



509








Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash



32



(56)








Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash



3,216



(59)

Cash, Cash Equivalents, and Restricted Cash at Beginning of Year



3,956



4,015

Cash, Cash Equivalents, and Restricted Cash at End of Year


$

7,172


$

3,956


See Condensed Notes to Consolidated Financial Statements.



Condensed Notes to Consolidated Financial Statements (Unaudited)


(1)

In September 2020, the Company sold its German lawn mower business. At the time of the sale, total assets were $26 million, which were recorded in "Other assets" and total liabilities were $5 million, which were recorded in "Accounts payable and accrued expenses." No cash proceeds were received, resulting in a loss on sale, including transaction costs, of $24 million pretax and after-tax. The loss was recorded with a $24 million pretax and after-tax accrual recognized in the third quarter of 2020 when a definitive sale agreement was finalized. The loss was recorded in "Other operating expenses" in the agriculture and turf operations.



(2)

In the fourth quarter and full year 2020, the Company recorded impairments and other charges as follows:
































Three Months Ended November 1, 2020



Twelve Months Ended November 1, 2020




Agriculture


Construction


Financial





Agriculture


Construction


Financial






and Turf


and Forestry


Services


Total



and Turf


and Forestry


Services


Total


Factory closure



























China – agriculture
equipment *


$

7








$

7



$

20








$

20





























Fixed asset and lease
impairments



























German asphalt plant
factory *


















$

62






62


Brazil construction
equipment factory *





$

16






16







16






16


Other international
fixed assets ****



17



2






19




17



2






19


Equipment on operating
leases **





















$

22



22


Operating lease
inventory **






















10



10





























Affiliate company
impairments



























Minority investment in
construction equipment
company headquartered
in South Africa ***






23






23







43






43


Construction equipment
joint venture located in
Brazil ***






7






7







7






7


Total 1 2


$

24


$

48





$

72



$

37


$

130


$

32


$

199


*      Recorded in "Cost of sales"

**    Recorded in "Other operating expenses"

***  Recorded in "Equity in income (loss) of unconsolidated affiliate"

****Recorded $15 million in "Cost of sales" and $4 million in "Selling, administrative, and general expenses"

1      The after-tax effect was $62 million and $180 million in the fourth quarter and full year 2020, respectively.

2      The non-cash charges were $72 million and $194 million in the fourth quarter and full year 2020, respectively.





(3)

During first and fourth quarters of 2020, the Company implemented employee-separation programs for the Company's salaried workforce in several geographic areas, including the United States, Europe, Asia, and Latin America. The programs' main purpose was to improve efficiency through a leaner, more flexible organization. The programs were largely voluntary in nature with the expense recorded primarily in the period in which the employees irrevocably accepted a separation offer. For the limited involuntary employee-separation programs, the expense was recorded when management committed to a plan, the plan was communicated to the employees, and the employees were not required to provide service beyond the legal notification period. The programs provided for cash payments based on years of service, and in some countries, subsidized healthcare for a limited period and outplacement services. The total pretax expenses for the fourth quarter and full year of 2020 were as follows:





























Three Months Ended November 1, 2020


Twelve Months Ended November 1, 2020




Agriculture


Construction


Financial





Agriculture


Construction


Financial







and Turf


and Forestry


Services


Total


and Turf


and Forestry


Services


Total


Cost of sales


$

50


$

13





$

63


$

82


$

22





$

104


Research and
   development expenses



32



5






37



47



8






55


Selling, administrative
   and general expenses



58



10


$

11



79



96



24


$

15



135


Other operating expenses












18












41


Total


$

140


$

28


$

11


$

197


$

225


$

54


$

15


$

335




Total program payments will be $301 million with $166 million paid in 2020 and $135 million to be disbursed over two years. Included in total pretax expense are non-cash charges of $13 million and $34 million in the fourth quarter and full year 2020, respectively, resulting from curtailment losses in certain OPEB plans that were recorded outside of operating profit in "Other operating expense." Annual savings from these programs are estimated to be approximately $250 million, of which approximately $85 million was realized in 2020.



(4)

In September 2020, the Company acquired Unimil, a leading Brazilian Company in the after-sales service parts business for sugarcane harvesters, which is based in Piracicaba, Brazil. The total cash purchase price before final adjustments, net of cash acquired of $5 million, was $66 million with $6 million funded to an escrow account to secure certain indemnity obligations. In addition to the cash purchase price, $14 million of liabilities were assumed. The preliminary asset and liability fair values at the acquisition date assigned to the assets and liabilities were approximately $5 million of trade accounts receivables, $2 million of other receivables, $10 million of inventories, $22 million of property and equipment, $28 million of goodwill, $13 million of other intangible assets, $5 million of accounts payable and accrued expenses, and $9 million of net deferred tax liabilities. The goodwill is not expected to be deducted for tax purposes. Unimil is included in the Company's agriculture and turf operating segment.



(5)

Dividends declared and paid on a per share basis were as follows:
















Three Months Ended


Twelve Months Ended



November 1


November 3


November 1


November 3



2020


2019


2020


2019

Dividends declared


$

.76


$

.76


$

3.04


$

3.04

Dividends paid


$

.76


$

.76


$

3.04


$

2.97



(6)

The calculation of basic net income per share is based on the average number of shares outstanding. The calculation of diluted net income per share recognizes any dilutive effect of share-based compensation.



(7)

The consolidated financial statements represent the consolidation of all Deere & Company's subsidiaries. In the supplemental consolidating data in Note 8 to the financial statements, the "Equipment Operations" represents the enterprise without "Financial Services", which include the Company's agriculture and turf operations and construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected  within "Financial Services".

 

 

(8) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended November 1, 2020 and November 3, 2019 

(In millions of dollars) Unaudited


EQUIPMENT OPERATIONS 1


FINANCIAL SERVICES


ELIMINATIONS


CONSOLIDATED






2020


2019


2020


2019


2020


2019


2020


2019




Net Sales and Revenues




























Net sales


$

8,659


$

8,703














$

8,659


$

8,703




Finance and interest income



38



40


$

891


$

1,007


$

(62)


$

(91)



867



956


 2


Other income



211



267



60



50



(66)



(80)



205



237


 3


Total



8,908



9,010



951



1,057



(128)



(171)



9,731



9,896
































Costs and Expenses




























Cost of sales



6,470



6,735















6,470



6,735




Research and development expenses



443



488















443



488




Selling, administrative and general
expenses



890



840



123



106



(2)



(1)



1,011



945


 4


Interest expense



92



75



195



323



(9)



(10)



278



388


 5


Interest compensation to Financial
Services



53



81









(53)



(81)








 5


Other operating expenses



93



96



385



498



(64)



(79)



414



515


 6


Total



8,041



8,315



703



927



(128)



(171)



8,616



9,071
































Income before Income Taxes



867



695



248



130









1,115



825




Provision for income taxes



266



64



63



40









329



104
































Income after Income Taxes



601



631



185



90









786



721




Equity in income (loss) of 
unconsolidated affiliates



(29)



1



1












(28)



1
































Net Income



572



632



186



90









758



722




Less: Net income attributable to
noncontrolling interests



1


















1







Net Income Attributable to
Deere & Company


$

571


$

632


$

186


$

90








$

757


$

722





The supplemental consolidating data is presented for informational purposes. Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the consolidated financial statements.


1 The Equipment Operations represents the enterprise without Financial Services. The Equipment Operations includes the Company's agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.

2 Elimination of Financial Services interest income earned from Equipment Operations.

3 Elimination of Equipment Operations' margin from inventory transferred to equipment on operating leases.

4 Elimination of intercompany service fees.

5 Elimination of Equipment Operations interest expense to Financial Services.

6 Elimination of Financial Services lease depreciation expense related to inventory transferred to equipment on operating leases.

 

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF INCOME

For the Years Ended November 1, 2020 and November 3, 2019 

(In millions of dollars) Unaudited


EQUIPMENT OPERATIONS 1


FINANCIAL SERVICES


ELIMINATIONS


CONSOLIDATED






2020


2019


2020


2019


2020


2019


2020


2019




Net Sales and Revenues




























Net sales


$

31,272


$

34,886














$

31,272


$

34,886




Finance and interest income



112



118


$

3,610


$

3,735


$

(272)


$

(360)



3,450



3,493


 2


Other income



808



881



257



234



(247)



(236)



818



879


 3


Total



32,192



35,885



3,867



3,969



(519)



(596)



35,540



39,258
































Costs and Expenses




























Cost of sales



23,679



26,793









(2)



(1)



23,677



26,792


 4


Research and development expenses



1,644



1,783















1,644



1,783




Selling, administrative and general expenses



2,878



3,031



606



528



(7)



(8)



3,477



3,551


 4


Interest expense



329



256



942



1,234



(24)



(24)



1,247



1,466


 5


Interest compensation to Financial Services



248



336









(248)



(336)








 5


Other operating expenses



278



299



1,572



1,506



(238)



(227)



1,612



1,578


 6


Total



29,056



32,498



3,120



3,268



(519)



(596)



31,657



35,170
































Income before Income Taxes



3,136



3,387



747



701









3,883



4,088




Provision for income taxes



899



689



183



163









1,082



852
































Income after Income Taxes



2,237



2,698



564



538









2,801



3,236




Equity in income (loss) of 
unconsolidated affiliates



(50)



20



2



1









(48)



21
































Net Income



2,187



2,718



566



539









2,753



3,257




Less: Net income attributable to noncontrolling interests



2



4















2



4




Net Income Attributable to
Deere & Company


$

2,185


$

2,714


$

566


$

539








$

2,751


$

3,253





The supplemental consolidating data is presented for informational purposes. Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the consolidated financial statements.


1 The Equipment Operations represents the enterprise without Financial Services. The Equipment Operations includes the Company's agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.

2 Elimination of Financial Services interest income earned from Equipment Operations.

3 Elimination of Equipment Operations' margin from inventory transferred to equipment on operating leases.

4 Elimination of intercompany service fees.

5 Elimination of Equipment Operations interest expense to Financial Services.

6 Elimination of Financial Services lease depreciation expense related to inventory transferred to equipment on operating leases.


 

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

As of November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited

EQUIPMENT
OPERATIONS 1


FINANCIAL
SERVICES


ELIMINATIONS


CONSOLIDATED





2020


2019


2020


2019


2020


2019


2020


2019




Assets



























Cash and cash equivalents

$

6,145


$

3,175


$

921


$

682








$

7,066


$

3,857




Marketable securities


7



1



634



580









641



581




Receivables from unconsolidated
affiliates


5,290



2,017








$

(5,259)


$

(1,971)



31



46


 7


Trade accounts and notes receivable
- net


1,013



1,482



4,238



5,153



(1,080)



(1,405)



4,171



5,230


 8


Financing receivables - net


106



65



29,644



29,130









29,750



29,195




Financing receivables securitized -
net


26



44



4,677



4,339









4,703



4,383




Other receivables


1,117



1,376



151



116



(48)



(5)



1,220



1,487


 8


Equipment on operating leases - net








7,298



7,567









7,298



7,567




Inventories


4,999



5,975















4,999



5,975




Property and equipment - net


5,778



5,929



39



44









5,817



5,973




Investments in unconsolidated
affiliates


174



199



19



16









193



215




Goodwill


3,081



2,917















3,081



2,917




Other intangible assets - net


1,327



1,380















1,327



1,380




Retirement benefits


859



836



59



58



(55)



(54)



863



840


 9


Deferred income taxes


1,763



1,896



45



57



(309)



(487)



1,499



1,466


 10


Other assets


1,439



1,158



994



741



(1)






2,432



1,899




Total Assets

$

33,124


$

28,450


$

48,719


$

48,483


$

(6,752)


$

(3,922)


$

75,091


$

73,011































Liabilities and Stockholders'
Equity






















































Liabilities



























Short-term borrowings

$

292


$

987


$

8,290


$

9,797








$

8,582


$

10,784




Short-term securitization borrowings


26



44



4,656



4,277









4,682



4,321




Payables to unconsolidated affiliates


104



142



5,260



1,970


$

(5,259)


$

(1,970)



105



142


 7


Accounts payable and accrued expenses


9,114



9,232



2,127



1,836



(1,129)



(1,412)



10,112



9,656


 8


Deferred income taxes


385



414



443



568



(309)



(487)



519



495


 10


Long-term borrowings


10,124



5,415



22,610



24,814









32,734



30,229




Retirement benefits and other liabilities


5,366



5,912



102



94



(55)



(53)



5,413



5,953


 9


Total liabilities


25,411



22,146



43,488



43,356



(6,752)



(3,922)



62,147



61,580































Redeemable noncontrolling interest





14


















14































Stockholders' Equity



























Total Deere & Company stockholders'
equity


12,937



11,413



5,231



5,127



(5,231)



(5,127)



12,937



11,413


 11


Noncontrolling interests


7



4















7



4




Financial Services equity


(5,231)



(5,127)









5,231



5,127








 11


Adjusted total stockholders' equity


7,713



6,290



5,231



5,127









12,944



11,417




Total Liabilities and Stockholders'
Equity

$

33,124


$

28,450


$

48,719


$

48,483


$

(6,752)


$

(3,922)


$

75,091


$

73,011





The supplemental consolidating data is presented for informational purposes. Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the consolidated financial statements.


1  The Equipment Operations represents the enterprise without Financial Services. The Equipment Operations includes the Company's agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.

7  Elimination of receivables / payables between Equipment Operations and Financial Services.

8  Reclassification of sales incentive accruals on receivables sold to Financial Services.

9  Reclassification of net pension assets / liabilities.

10 Reclassification of deferred tax assets / liabilities in the same taxing jurisdictions.

11 Elimination of Financial Services equity.

 

 

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

For the Years Ended November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited


EQUIPMENT
OPERATIONS 1


FINANCIAL
SERVICES


ELIMINATIONS


CONSOLIDATED






2020


2019


2020


2019


2020


2019


2020


2019




Cash Flows from Operating Activities




























Net income


$

2,187


$

2,718


$

566


$

539








$

2,753


$

3,257




Adjustments to reconcile net income to net cash
provided by operating activities:




























Provision for credit losses



5



14



105



29









110



43




Provision for depreciation and amortization



1,016



1,015



1,227



1,135


$

(125)


$

(131)



2,118



2,019


 12


Impairment charges



162






32



77









194



77




Share-based compensation expense















81



82



81



82


 13


Loss on sale of businesses and unconsolidated
affiliates



24



5















24



5




Undistributed earnings of unconsolidated
affiliates



381



437



(2)



(2)



(386)



(426)



(7)



9


 14


Provision (credit) for deferred income taxes



105



(222)



(116)



(243)









(11)



(465)




Changes in assets and liabilities:




























Trade, notes, and financing receivables related
to sales



373



(142)









1,636



(727)



2,009



(869)


15, 17, 18


Inventories



1,011



(102)









(614)



(678)



397



(780)


 16


Accounts payable and accrued expenses



(331)



13



(1)



163



325



(130)



(7)



46


 17


Accrued income taxes payable/receivable



(14)



(355)



22



528









8



173




Retirement benefits



(544)



(235)



7



2









(537)



(233)




Other



385



54



136



190



(170)



(196)



351



48


12, 13, 16


Net cash provided by operating activities



4,760



3,200



1,976



2,418



747



(2,206)



7,483



3,412
































Cash Flows from Investing Activities




























Collections of receivables (excluding receivables
related to sales)









18,829



18,190



(1,448)



(1,484)



17,381



16,706


 15


Proceeds from maturities and sales of marketable
securities






12



93



77









93



89




Proceeds from sales of equipment on operating
leases









1,783



1,648









1,783



1,648




Proceeds from sales of businesses and
unconsolidated affiliates, net of cash sold






93


















93




Cost of receivables acquired (excluding
receivables related to sales)









(21,360)



(20,321)



1,395



1,448



(19,965)



(18,873)


 15


Acquisitions of businesses, net of cash acquired



(66)


















(66)







Purchases of marketable securities



(4)



(3)



(126)



(137)









(130)



(140)




Purchases of property and equipment



(816)



(1,118)



(4)



(2)









(820)



(1,120)




Cost of equipment on operating leases acquired









(2,666)



(3,246)



830



917



(1,836)



(2,329)


 16


Increase in investment in Financial Services



(21)



(8)









21



8








 14


Decrease (increase) in trade and wholesale
receivables









1,999



(935)



(1,999)



935








 15


Collateral on derivatives - net



(6)






274



59









268



59




Other



(78)



35



(38)



(54)



89



(38)



(27)



(57)


 18


Net cash used for investing activities



(991)



(989)



(1,216)



(4,721)



(1,112)



1,786



(3,319)



(3,924)
































Cash Flows from Financing Activities




























Decrease in total short-term borrowings



(177)



(149)



(1,183)



(768)









(1,360)



(917)




Change in intercompany receivables/payables



(3,207)



(305)



3,207



305
















Proceeds from long-term borrowings



4,586



1,348



4,685



8,638









9,271



9,986




Payments of long-term borrowings



(607)



(972)



(6,776)



(5,454)









(7,383)



(6,426)




Proceeds from issuance of common stock



331



178















331



178




Repurchases of common stock



(750)



(1,253)















(750)



(1,253)




Capital investment from Equipment Operations









21



8



(21)



(8)








 14


Dividends paid



(956)



(943)



(386)



(427)



386



427



(956)



(943)


 14


Other



(105)



(79)



(28)



(38)






1



(133)



(116)




Net cash provided by (used for) financing
activities



(885)



(2,175)



(460)



2,264



365



420



(980)



509
































Effect of Exchange Rate Changes on Cash,
Cash Equivalents, and Restricted Cash



76



(42)



(44)



(14)









32



(56)
































Net Increase (Decrease) in Cash, Cash
Equivalents, and Restricted Cash



2,960



(6)



256



(53)









3,216



(59)




Cash, Cash Equivalents, and Restricted Cash
at Beginning of Year



3,196



3,202



760



813









3,956



4,015




Cash, Cash Equivalents, and Restricted Cash
at End of Year


$

6,156


$

3,196


$

1,016


$

760








$

7,172


$

3,956





The supplemental consolidating data is presented for informational purposes. Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the consolidated financial statements.


1  The Equipment Operations represents the enterprise without Financial Services. The Equipment Operations includes the Company's agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.

12 Elimination of depreciation on leases related to inventory transferred to equipment on operating leases.

13 Reclassification of share-based compensation expense.

14 Elimination of dividends from Financial Services to the Equipment Operations, which are included in the Equipment Operations net cash provided by operating activities, and capital investments in Financial Services from the Equipment Operations.

15 Primarily reclassification of receivables related to the sale of equipment.

16 Reclassification of lease agreements with direct customers.

17 Reclassification of sales incentive accruals on receivables sold to Financial Services.

18 Elimination and reclassification of the effects of Financial Services partial financing of the construction and forestry retail locations sales and subsequent collection of those amounts.

 

 

Deere & Company

Other Financial Information


For the Twelve Months Ended


Equipment Operations*

Agriculture and Turf

Construction and Forestry*



November 1

November 3

November 1

November 3

November 1

November 3

Dollars in millions


2020

2019

2020

2019

2020

2019

Net Sales


$

31,272


$

34,886


$

22,325


$

23,666


$

8,947


$

11,220


Net Sales - excluding Roadbuilding


$

28,348


$

31,693


$

22,325


$

23,666


$

6,023


$

8,027


Average Identifiable Assets




















With Inventories at LIFO


$

19,567


$

20,761


$

10,305


$

10,748


$

9,262


$

10,013


With Inventories at LIFO - excluding Roadbuilding


$

13,629


$

14,460


$

10,305


$

10,748


$

3,324


$

3,712


With Inventories at Standard Cost


$

20,984


$

22,139


$

11,455


$

11,860


$

9,529


$

10,279


With Inventories at Standard Cost -
excluding Roadbuilding


$

15,046


$

15,838


$

11,455


$

11,860


$

3,591


$

3,978


Operating Profit


$

3,559


$

3,721


$

2,969


$

2,506


$

590


$

1,215


Operating Profit - excluding Roadbuilding


$

3,289


$

3,378


$

2,969


$

2,506


$

320


$

872


Percent of Net Sales - excluding Roadbuilding



11.6

%


10.7

%


13.3

%


10.6

%


5.3

%


10.9

%

Operating Return on Assets - excluding Roadbuilding




















With Inventories at LIFO - excluding Roadbuilding



24.1

%


23.4

%


28.8

%


23.3

%


9.6

%


23.5

%

With Inventories at Standard Cost -
excluding Roadbuilding



21.9

%


21.3

%


25.9

%


21.1

%


8.9

%


21.9

%

SVA Cost of Assets - excluding Roadbuilding


$

(1,806)


$

(1,900)


$

(1,375)


$

(1,423)


$

(431)


$

(477)


SVA - excluding Roadbuilding


$

1,483


$

1,478


$

1,594


$

1,083


$

(111)


$

395






















For the Twelve Months Ended


Financial Services















November 1

November 3













Dollars in millions



2020



2019














Net Income Attributable to Deere & Company


$

566


$

539














Average Equity


$

5,099


$

5,040














Return on Equity



11.1

%


10.7

%













Operating Profit


$

746


$

694














Cost of Equity


$

(673)


$

(657)














SVA


$

73


$

37














 

The Company evaluates its business results on the basis of accounting principles generally accepted in the United States. In addition, it uses a metric referred to as Shareholder Value Added (SVA), which management believes is an appropriate measure for the performance of its businesses. SVA is, in effect, the pretax profit left over after subtracting the cost of enterprise capital. The Company is aiming for a sustained creation of SVA and is using this metric for various performance goals. Certain compensation is also determined on the basis of performance using this measure. For purposes of determining SVA, each of the equipment segments is assessed a pretax cost of assets, which on an annual basis is approximately 12 percent of the segment's average identifiable operating assets during the applicable period with inventory at standard cost. Management believes that valuing inventories at standard cost more closely approximates the current cost of inventory and the Company's investment in the asset. The Financial Services segment is assessed an annual pretax cost of approximately 13 percent of the segment's average equity. The cost of assets or equity, as applicable, is deducted from the operating profit or added to the operating loss of each segment to determine the amount of SVA.

 

* The results and assets related to the Company's Roadbuilding product line are excluded from the calculation of SVA to allow time for integration and assimilation of the 2017 acquisition of Wirtgen Group Holding GmbH's operations.

 

 

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SOURCE Deere & Company

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