MOLINE, Ill., May 21, 2021 /CNW/ --

  • Second-quarter earnings rise on 34% increase in net sales, reflecting strong market conditions and broad improvement across divisions and geographies.
  • Equipment-division operating margin of 19.5% demonstrates solid execution, impact of strategy.
  • Full-year earnings forecast raised to range of $5.3 to $5.7 billion.

Deere & Company (NYSE: DE) reported net income of $1.790 billion for the second quarter ended May 2, 2021, or $5.68 per share, compared with net income of $666 million, or $2.11 per share, for the quarter ended May 3, 2020. For the first six months of the year, net income attributable to Deere & Company was $3.013 billion, or $9.55 per share, compared with $1.182 billion, or $3.73 per share, for the same period last year.

Worldwide net sales and revenues increased 30 percent, to $12.058 billion, for the second quarter of 2021 and rose 25 percent, to $21.170 billion, for six months. Net sales of the equipment operations were $10.998 billion for the quarter and $19.049 billion for six months, compared with $8.224 billion and $14.754 billion last year.

"With another quarter of solid performance, John Deere closed out the first half of the year on a highly encouraging note," said John C. May, chairman and chief executive officer. "Our results received support across our entire business lineup, reflecting healthy worldwide markets for farm and construction equipment. Our smart industrial operating strategy is continuing to have a significant impact on performance while also helping customers do their jobs in a more profitable and sustainable manner."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $5.3 billion to $5.7 billion.

"While the company is clearly performing at a high level, Deere expects to see increased supply-chain pressures through the balance of the year," May said. "We are working closely with key suppliers to secure the parts and components that our customers need to deliver essential food production and infrastructure. Despite these challenges, Deere is on track for a strong year and we believe is well-positioned to unlock greater value for our customers and other stakeholders in the future."



















Deere & Company


Second Quarter


Year to Date


$ in millions


2021


2020


% Change


2021


2020


% Change


Net sales and revenues


$

12,058


$

9,253


30%


$

21,170


$

16,884


25%


Net income


$

1,790


$

666


169%


$

3,013


$

1,182


155%


Fully diluted EPS


$

5.68


$

2.11




$

9.55


$

3.73




In last year's second quarter, Deere recorded impairments totaling $114 million pretax. In the first half of 2020, total voluntary employee-separation program expense recognized was $136 million pretax. For further details on special items, see Note 1 of the press release financial statements.











Equipment Operations


Second Quarter


$ in millions


2021


2020


% Change


Net sales


$

10,998


$

8,224


34%


Operating profit


$

2,144


$

890


141%


Net income


$

1,568


$

606


159%


For a discussion of net sales and operating profit results, see the production and precision agriculture, small agriculture and turf, and construction and forestry sections below.











Production & Precision Agriculture


Second Quarter


$ in millions


2021


2020


% Change


Net sales


$

4,529


$

3,365


35%


Operating profit


$

1,007


$

568


77%


Operating margin



22.2%



16.9%




Production and precision agriculture sales increased for the quarter due to higher shipment volumes and price realization. Operating profit rose primarily due to price realization and higher shipment volumes / sales mix. These items were partially offset by higher production costs.

 

 











Small Agriculture & Turf


Second Quarter


$ in millions


2021


2020


% Change


Net sales


$

3,390


$

2,603


30%


Operating profit


$

648


$

226


187%


Operating margin



19.1%



8.7%




Small agriculture and turf sales for the quarter increased due to higher shipment volumes, price realization, and the favorable effects of foreign currency translation. Operating profit increased primarily due to higher shipment volumes / sales mix, price realization, and the favorable effects of foreign currency exchange. These items were partially offset by higher production costs.

 

 











Construction & Forestry


Second Quarter


$ in millions


2021


2020


% Change


Net sales


$

3,079


$

2,256


36%


Operating profit


$

489


$

96


409%


Operating margin



15.9%



4.3%




Construction and forestry sales moved higher for the quarter primarily due to higher shipment volumes, price realization, and the favorable effects of foreign currency translation. Operating profit increased due to higher shipment volumes / sales mix and price realization. Results for the prior period were affected by impairments to certain fixed assets and an unconsolidated equipment company.

 

 











Financial Services


Second Quarter


$ in millions


2021


2020


% Change


Net income


$

222


$

60


270%


The increase in financial services net income for the quarter was mainly due to a lower provision for credit losses, improvement on operating-lease residual values, and more-favorable financing spreads. Results last year also included impairments on lease residual values.









Industry Outlook for 2021 (Annual)








Agriculture & Turf








U.S. & Canada:








Large Ag






Up ~ 25%


Small Ag & Turf






Up ~ 10%


Europe






Up ~ 10%


South America (Tractors & Combines)






Up ~ 20%


Asia






Up slightly










Construction & Forestry








U.S. & Canada:








Construction Equipment






Up 15 to 20%


Compact Construction Equipment






Up 20 to 25%


Global Forestry






Up 15 to 20%


 









Deere Segment Outlook (2021)




Currency


Price


$ in millions


Net Sales


Translation


Realization


Production & Precision Ag


Up 25 to 30%


+2%


+7%


Small Ag & Turf


Up 20 to 25%


+3%


+3%


Construction & Forestry


Up 25 to 30%


+2%


+3%










Financial Services


Net Income


$ 800




 

Financial Services. Full-year 2021 results are expected to benefit from improvement on operating-lease residual values, income earned on a higher average portfolio, a lower provision for credit losses, and more-favorable financing spreads.  

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.





















Second Quarter


Year to Date


$ in millions


2021


2020


% Change


2021


2020


% Change


Revenue


$

675


$

700


-4%


$

1,332


$

1,419


-6%


Net income


$

177


$

26


581%


$

344


$

125


175%


Ending portfolio balance










$

40,613


$

38,223


6%


Results for the quarter and first six months were higher than the same periods in 2020 mainly due to a lower provision for credit losses, improvement on operating-lease residual values, and more-favorable financing spreads. Results last year also included impairments on lease residual values.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  Statements under "Company Outlook & Summary," "Industry Outlook," "Deere Segment 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 businesses are 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.

The production and precision agriculture business is dependent on agricultural conditions, and relies on hardware and software, guidance, connectivity and digital solutions, and automation and machine intelligence.  Many factors contribute to the company's precision agriculture sales and results, including the impact to customers' profitability or sustainability outcomes; the rate of adoption and use by customers; availability of technological innovations; speed of research and development; effectiveness of partnerships with third-parties; and the dealer channel's ability to support and service precision technology solutions.

Factors affecting the outlook for the company's small agriculture and turf equipment include agricultural conditions, 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.

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 affect sales and results of the company's construction and forestry equipment.  Prices for pulp, paper, lumber and structural panels affect sales of forestry equipment.

Many of the factors affecting production and precision agriculture, small agriculture and turf, and construction and forestry segments, have been and may continue to be impacted by global economic conditions, including those 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: the duration and impact of any resurgence in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of COVID; the availability, acceptance, and effects of vaccines; 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 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 declines in the company's financial performance, outlook or credit ratings, which could impact the company's ability to obtain funding in the future; and the impact of the pandemic on demand for our products and services as discussed above.  It remains 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, Latin America, 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 or business strategies; 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, develop, engage, 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 inability to deliver precision technology and agricultural solutions to customers; the implementation of the smart industrial operating strategy and other 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).

 


 

DEERE & COMPANY
SECOND QUARTER 2021 PRESS RELEASE
(In millions of dollars) Unaudited




Three Months Ended


Six Months Ended




May 2 


May 3 


%


May 2 


May 3 


%




2021


2020


Change


2021


2020


Change


Net sales and revenues:


















Production & precision ag net sales


$

4,529


$

3,365


+35


$

7,599


$

5,872


+29


Small ag & turf net sales



3,390



2,603


+30



5,904



4,583


+29


Construction & forestry net sales



3,079



2,256


+36



5,546



4,299


+29


Financial services revenues



892



875


+2



1,776



1,806


-2


Other revenues



168



154


+9



345



324


+6


Total net sales and revenues


$

12,058


$

9,253


+30


$

21,170


$

16,884


+25




















Operating profit: *


















Production & precision ag


$

1,007


$

568


+77


$

1,651


$

786


+110


Small ag & turf



648



226


+187



1,117



381


+193


Construction & forestry



489



96


+409



756



189


+300


Financial services



295



75


+293



553



254


+118


Total operating profit



2,439



965


+153



4,077



1,610


+153


Reconciling items **



(119)



(54)


+120



(226)



(133)


+70


Income taxes



(530)



(245)


+116



(838)



(295)


+184


Net income attributable to Deere & Company


$

1,790


$

666


+169


$

3,013


$

1,182


+155




*  

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 May 2, 2021 and May 3, 2020
(In millions of dollars and shares except per share amounts) Unaudited




2021


2020

Net Sales and Revenues







Net sales


$

10,998


$

8,224

Finance and interest income



809



849

Other income



251



180

Total



12,058



9,253








Costs and Expenses







Cost of sales



7,928



6,294

Research and development expenses



377



406

Selling, administrative and general expenses



838



906

Interest expense



268



342

Other operating expenses



335



377

Total



9,746



8,325








Income of Consolidated Group before Income Taxes



2,312



928

Provision for income taxes



530



245








Income of Consolidated Group



1,782



683

Equity in income (loss) of unconsolidated affiliates



8



(17)








Net Income



1,790



666

Less: Net income attributable to noncontrolling interests







Net Income Attributable to Deere & Company


$

1,790


$

666








Per Share Data







Basic


$

5.72


$

2.13

Diluted


$

5.68


$

2.11








Average Shares Outstanding







Basic



312.8



313.2

Diluted



315.2



316.2


See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Six Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars and shares except per share amounts) Unaudited




2021


2020

Net Sales and Revenues







Net sales


$

19,049


$

14,754

Finance and interest income



1,644



1,745

Other income



477



385

Total



21,170



16,884








Costs and Expenses







Cost of sales



13,734



11,371

Research and development expenses



743



831

Selling, administrative and general expenses



1,607



1,715

Interest expense



538



678

Other operating expenses



708



792

Total



17,330



15,387








Income of Consolidated Group before Income Taxes



3,840



1,497

Provision for income taxes



838



295








Income of Consolidated Group



3,002



1,202

Equity in income (loss) of unconsolidated affiliates



12



(18)








Net Income



3,014



1,184

Less: Net income attributable to noncontrolling interests



1



2

Net Income Attributable to Deere & Company


$

3,013


$

1,182








Per Share Data







Basic


$

9.62


$

3.77

Diluted


$

9.55


$

3.73








Average Shares Outstanding







Basic



313.1



313.3

Diluted



315.6



316.7


See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited




May 2 


November 1


May 3 



2021


2020


2020

Assets










Cash and cash equivalents


$

7,182


$

7,066


$

8,900

Marketable securities



668



641



626

Receivables from unconsolidated affiliates



31



31



32

Trade accounts and notes receivable - net



6,158



4,171



5,986

Financing receivables - net



30,994



29,750



27,256

Financing receivables securitized - net



4,107



4,703



4,685

Other receivables



1,473



1,220



1,212

Equipment on operating leases - net



7,108



7,298



7,245

Inventories



6,042



4,999



6,171

Property and equipment - net



5,704



5,817



5,685

Investments in unconsolidated affiliates



182



193



192

Goodwill



3,190



3,081



2,917

Other intangible assets - net



1,310



1,327



1,311

Retirement benefits



951



863



960

Deferred income taxes



1,724



1,499



1,435

Other assets



2,155



2,432



2,713

Total Assets


$

78,979


$

75,091


$

77,326











Liabilities and Stockholders' Equity




















Liabilities










Short-term borrowings


$

9,911


$

8,582


$

11,179

Short-term securitization borrowings



4,106



4,682



4,640

Payables to unconsolidated affiliates



155



105



91

Accounts payable and accrued expenses



10,527



10,112



9,072

Deferred income taxes



533



519



475

Long-term borrowings



33,346



32,734



34,324

Retirement benefits and other liabilities



5,305



5,413



5,680

Total liabilities



63,883



62,147



65,461











Stockholders' Equity










Total Deere & Company stockholders' equity



15,092



12,937



11,864

Noncontrolling interests



4



7



1

Total stockholders' equity



15,096



12,944



11,865

Total Liabilities and Stockholders' Equity


$

78,979


$

75,091


$

77,326


See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Six Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars) Unaudited




2021


2020

Cash Flows from Operating Activities







Net income


$

3,014


$

1,184

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







Provision (credit) for credit losses



(24)



107

Provision for depreciation and amortization



1,054



1,067

Impairment charges



50



114

Share-based compensation expense



45



48

Undistributed earnings of unconsolidated affiliates



11



(8)

Credit for deferred income taxes



(213)



(61)

Changes in assets and liabilities:







Trade, notes, and financing receivables related to sales



(1,124)



(491)

Inventories



(1,193)



(496)

Accounts payable and accrued expenses



318



(707)

Accrued income taxes payable/receivable



54



(173)

Retirement benefits



(5)



58

Other



(201)



134

Net cash provided by operating activities



1,786



776








Cash Flows from Investing Activities







Collections of receivables (excluding receivables related to sales)



10,367



9,624

Proceeds from maturities and sales of marketable securities



47



39

Proceeds from sales of equipment on operating leases



1,011



898

Cost of receivables acquired (excluding receivables related to sales)



(11,359)



(9,367)

Acquisitions of businesses, net of cash acquired



(19)




Purchases of marketable securities



(74)



(71)

Purchases of property and equipment



(320)



(441)

Cost of equipment on operating leases acquired



(764)



(960)

Collateral on derivatives – net



(255)



319

Other



(21)



(11)

Net cash provided by (used for) investing activities



(1,387)



30








Cash Flows from Financing Activities







Increase in total short-term borrowings



212



1,138

Proceeds from long-term borrowings



3,967



7,275

Payments of long-term borrowings



(3,157)



(3,315)

Proceeds from issuance of common stock



116



70

Repurchases of common stock



(1,044)



(263)

Dividends paid



(480)



(481)

Other



(55)



(81)

Net cash provided by (used for) financing activities



(441)



4,343








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



151



(102)








Net Increase in Cash, Cash Equivalents, and Restricted Cash



109



5,047

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



7,172



3,956

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


$

7,281


$

9,003


See Condensed Notes to Interim Consolidated Financial Statements.


 


DEERE & COMPANY

Condensed Notes to Interim Consolidated Financial Statements

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


(1)

During the first quarter of 2021, the fixed assets in an asphalt plant factory in Germany were impaired by $38 million, pretax and after-tax. The company also continued to assess its manufacturing locations, resulting in additional long-lived asset impairments of $12 million pretax. The impairments were the result of a decline in forecasted financial performance that indicated it was probable future cash flows would not cover the carrying amount of the net assets. These impairments were offset by a favorable indirect tax ruling in Brazil of $58 million pretax.

















Six Months Ended May 2, 2021


Expense (benefit):


Production &
Precision Ag


Small Ag & 
Turf


Construction & 
Forestry


Total


Long-lived asset impairments – Cost of sales


$

5


$

3


$

42


$

50


Brazil indirect tax – Cost of sales



(53)






(5)



(58)


Total expense (benefit)


$

(48)


$

3


$

37


$

(8)



In the second quarter of 2020, the company recorded non-cash asset impairments of $62 million pretax and after-tax of fixed assets of an asphalt plant factory in Germany, $32 million pretax of equipment on operating leases and matured operating lease inventory, and $20 million pretax and after-tax of a minority investment in a construction equipment company headquartered in South Africa.




Six Months Ended May 3, 2020


Expense:


Construction & Forestry


Financial Services


Total


German asphalt plant factory – Cost of sales


$

62





$

62


Investments in unconsolidated affiliates impairment – Equity in loss of unconsolidated affiliate



20






20


Equipment on operating leases & matured operating lease inventory impairments – Other operating expenses





$

32



32


Total expense


$

82


$

32


$

114



During the first quarter of 2020, the company implemented a voluntary employee-separation program with total pretax expenses as follows:




Six Months Ended May 3, 2020




Production &
Precision Ag


Small Ag & 
Turf


Construction & 
Forestry


Financial
Services


Total


Cost of sales


$

21


$

11


$

9





$

41


Research and development expenses



7



7



4






18


Selling, administrative and general expenses



18



19



14


$

3



54


Total operating profit impact


$

46


$

37


$

27


$

3



113


Other operating expenses















23


Total expense














$

136




(2)

Prior to November 2, 2020, the operating results of the Wirtgen Group (Wirtgen) were incorporated into the company's consolidated financial statements using a one-month lag period. In the first quarter of 2021, the reporting lag was eliminated resulting in one additional month of Wirtgen activity in the first quarter and the year-to-date period. The effect was an increase to "Net sales" of $270 million, which the company considers immaterial to construction and forestry's annual net sales. Prior period results were not restated.



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




Three Months Ended


Six Months Ended




May 2 


May 3 


May 2 


May 3 




2021


2020


2021


2020


Dividends declared


$

.90


$

.76


$

1.66


$

1.52


Dividends paid


$

.76


$

.76


$

1.52


$

1.52




(4)

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.



(5)

The consolidated financial statements represent the consolidation of all of Deere & Company's subsidiaries. In the supplemental consolidating data in Note 6 to the financial statements, the "Equipment Operations" represents the enterprise without "Financial Services," which include the company's production and precision agriculture operations, small agriculture and turf operations, and construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within "Financial Services."


 

DEERE & COMPANY
(6) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME
For the Three Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars) Unaudited




EQUIPMENT


FINANCIAL









OPERATIONS1


SERVICES


ELIMINATIONS


CONSOLIDATED





2021


2020


2021


2020


2021


2020


2021


2020



Net Sales and Revenues



























Net sales


$

10,998


$

8,224














$

10,998


$

8,224



Finance and interest income



29



23


$

853


$

906


$

(73)


$

(80)



809



849

2


Other income



228



181



101



61



(78)



(62)



251



180

3


Total



11,255



8,428



954



967



(151)



(142)



12,058



9,253






























Costs and Expenses



























Cost of sales



7,929



6,294









(1)






7,928



6,294

4


Research and development expenses



377



406















377



406



Selling, administrative and general expenses



734



700



107



208



(3)



(2)



838



906

4


Interest expense



100



83



181



266



(13)



(7)



268



342

5


Interest compensation to Financial Services



60



73









(60)



(73)







5


Other operating expenses



40



21



369



416



(74)



(60)



335



377

6


Total



9,240



7,577



657



890



(151)



(142)



9,746



8,325






























Income before Income Taxes



2,015



851



297



77









2,312



928



Provision for income taxes



454



228



76



17









530



245






























Income after Income Taxes



1,561



623



221



60









1,782



683



Equity in income (loss) of unconsolidated affiliates



7



(17)



1












8



(17)






























Net Income



1,568



606



222



60









1,790



666



Less: Net income attributable to noncontrolling interests



























Net Income Attributable to Deere & Company


$

1,568


$

606


$

222


$

60








$

1,790


$

666































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 production and precision agriculture operations, small 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.


 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF INCOME
For the Six Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars) Unaudited




EQUIPMENT


FINANCIAL









OPERATIONS1


SERVICES


ELIMINATIONS


CONSOLIDATED





2021


2020


2021


2020


2021


2020


2021


2020



Net Sales and Revenues



























Net sales


$

19,049


$

14,754














$

19,049


$

14,754



Finance and interest income



62



49


$

1,716


$

1,841


$

(134)


$

(145)



1,644



1,745

2


Other income



447



391



172



124



(142)



(130)



477



385

3


Total



19,558



15,194



1,888



1,965



(276)



(275)



21,170



16,884






























Costs and Expenses



























Cost of sales



13,735



11,372









(1)



(1)



13,734



11,371

4


Research and development expenses



743



831















743



831



Selling, administrative and general expenses



1,387



1,373



224



346



(4)



(4)



1,607



1,715

4


Interest expense



195



146



369



541



(26)



(9)



538



678

5


Interest compensation to Financial Services



108



137









(108)



(137)







5


Other operating expenses



107



92



738



824



(137)



(124)



708



792

6


Total



16,275



13,951



1,331



1,711



(276)



(275)



17,330



15,387






























Income before Income Taxes



3,283



1,243



557



254









3,840



1,497



Provision for income taxes



706



237



132



58









838



295






























Income after Income Taxes



2,577



1,006



425



196









3,002



1,202



Equity in income (loss) of unconsolidated affiliates



10



(19)



2



1









12



(18)






























Net Income



2,587



987



427



197









3,014



1,184



Less: Net income attributable to noncontrolling interests



1



2















1



2



Net Income Attributable to Deere & Company


$

2,586


$

985


$

427


$

197








$

3,013


$

1,182































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 production and precision agriculture operations, small 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.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEET
(In millions of dollars) Unaudited




EQUIPMENT


FINANCIAL









OPERATIONS1


SERVICES


ELIMINATIONS


CONSOLIDATED





May 2 


Nov 1


May 3 


May 2 


Nov 1


May 3 


May 2 


Nov 1


May 3 


May 2 


Nov 1


May 3 





2021


2020


2020


2021


2020


2020


2021


2020


2020


2021


2020


2020



Assets







































Cash and cash equivalents


$

6,282


$

6,145


$

7,466


$

900


$

921


$

1,434











$

7,182


$

7,066


$

8,900



Marketable securities



5



7



3



663



634



623












668



641



626



Receivables from unconsolidated affiliates



5,986



5,290



2,248











$

(5,955)


$

(5,259)


$

(2,216)



31



31



32

7


Trade accounts and notes receivable - net



1,225



1,013



1,419



6,222



4,238



6,050



(1,289)



(1,080)



(1,483)



6,158



4,171



5,986

8


Financing receivables - net



99



106



118



30,895



29,644



27,138












30,994



29,750



27,256



Financing receivables securitized - net



15



26



37



4,092



4,677



4,648












4,107



4,703



4,685



Other receivables



1,338



1,117



1,072



162



151



148



(27)



(48)



(8)



1,473



1,220



1,212

8


Equipment on operating leases - net












7,108



7,298



7,245












7,108



7,298



7,245



Inventories



6,042



4,999



6,171





















6,042



4,999



6,171



Property and equipment - net



5,667



5,778



5,642



37



39



43












5,704



5,817



5,685



Investments in unconsolidated affiliates



161



174



175



21



19



17












182



193



192



Goodwill



3,190



3,081



2,917





















3,190



3,081



2,917



Other intangible assets - net



1,310



1,327



1,311





















1,310



1,327



1,311



Retirement benefits



947



859



908



61



59



58



(57)



(55)



(6)



951



863



960

9


Deferred income taxes



1,926



1,763



1,796



53



45



52



(255)



(309)



(413)



1,724



1,499



1,435

10


Other assets



1,522



1,439



1,506



635



994



1,208



(2)



(1)



(1)



2,155



2,432



2,713



Total Assets 


$

35,715


$

33,124


$

32,789


$

50,849


$

48,719


$

48,664


$

(7,585)


$

(6,752)


$

(4,127)


$

78,979


$

75,091


$

77,326










































Liabilities and Stockholders' Equity 














































































Liabilities







































Short-term borrowings


$

352


$

292


$

1,398


$

9,559


$

8,290


$

9,781











$

9,911


$

8,582


$

11,179



Short-term securitization borrowings



14



26



37



4,092



4,656



4,603












4,106



4,682



4,640



Payables to unconsolidated affiliates



155



104



91



5,955



5,260



2,216


$

(5,955)


$

(5,259)


$

(2,216)



155



105



91

7


Accounts payable and accrued expenses



9,919



9,114



8,416



1,926



2,127



2,149



(1,318)



(1,129)



(1,493)



10,527



10,112



9,072

8


Deferred income taxes



390



385



395



398



443



493



(255)



(309)



(413)



533



519



475

10


Long-term borrowings



10,124



10,124



9,947



23,222



22,610



24,377












33,346



32,734



34,324



Retirement benefits and other liabilities



5,253



5,366



5,584



109



102



101



(57)



(55)



(5)



5,305



5,413



5,680

9


Total liabilities



26,207



25,411



25,868



45,261



43,488



43,720



(7,585)



(6,752)



(4,127)



63,883



62,147



65,461










































Stockholders' Equity







































Total Deere & Company stockholders' equity



15,092



12,937



11,864



5,588



5,231



4,944



(5,588)



(5,231)



(4,944)



15,092



12,937



11,864

11


Noncontrolling interests



4



7



1





















4



7



1



Financial Services equity



(5,588)



(5,231)



(4,944)












5,588



5,231



4,944










11


Adjusted total stockholders' equity



9,508



7,713



6,921



5,588



5,231



4,944












15,096



12,944



11,865



Total Liabilities and Stockholders' Equity 


$

35,715


$

33,124


$

32,789


$

50,849


$

48,719


$

48,664


$

(7,585)


$

(6,752)


$

(4,127)


$

78,979


$

75,091


$

77,326











































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 production and precision agriculture operations, small 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.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF CASH FLOWS
For the Six Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars) Unaudited




EQUIPMENT


FINANCIAL









OPERATIONS1


SERVICES


ELIMINATIONS


CONSOLIDATED





2021


2020


2021


2020


2021


2020


2021


2020



Cash Flows from Operating Activities



























Net income


$

2,587


$

987


$

427


$

197








$

3,014


$

1,184



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



























Provision (credit) for credit losses



2



9



(26)



98









(24)



107



Provision for depreciation and amortization



543



515



581



621


$

(70)


$

(69)



1,054



1,067

12


Impairment charges



50



82






32









50



114



Share-based compensation expense















45



48



45



48

13


Undistributed earnings of unconsolidated affiliates



158



218



(2)



(1)



(145)



(225)



11



(8)

14


Provision (credit) for deferred income taxes



(170)



9



(43)



(70)









(213)



(61)



Changes in assets and liabilities:



























Trade, notes, and financing receivables related to sales



(170)



(80)









(954)



(411)



(1,124)



(491)

15, 17, 18


Inventories



(926)



(242)









(267)



(254)



(1,193)



(496)

16


Accounts payable and accrued expenses



527



(659)



(1)



30



(208)



(78)



318



(707)

17


Accrued income taxes payable/receivable



77



(154)



(23)



(19)









54



(173)



Retirement benefits



(8)



50



3



8









(5)



58



Other



(163)



107



32



95



(70)



(68)



(201)



134

12, 13, 16


Net cash provided by operating activities



2,507



842



948



991



(1,669)



(1,057)



1,786



776






























Cash Flows from Investing Activities



























Collections of receivables (excluding receivables related to sales)









11,187



10,385



(820)



(761)



10,367



9,624

15


Proceeds from maturities and sales of marketable securities



2






45



39









47



39



Proceeds from sales of equipment on operating leases









1,011



898









1,011



898



Cost of receivables acquired (excluding receivables related to sales)









(12,080)



(9,885)



721



518



(11,359)



(9,367)

15


Acquisitions of businesses, net of cash acquired



(19)


















(19)






Purchases of marketable securities









(74)



(71)









(74)



(71)



Purchases of property and equipment



(319)



(440)



(1)



(1)









(320)



(441)



Cost of equipment on operating leases acquired









(1,125)



(1,304)



361



344



(764)



(960)

16


Increase in trade and wholesale receivables









(1,246)



(673)



1,246



673







15


Collateral on derivatives – net



(1)






(254)



319









(255)



319



Other



(38)



(40)



(7)



(36)



24



65



(21)



(11)

14, 18


Net cash provided by (used for) investing activities



(375)



(480)



(2,544)



(329)



1,532



839



(1,387)



30






























Cash Flows from Financing Activities



























Increase (decrease) in total short-term borrowings



(84)



554



296



584









212



1,138



Change in intercompany receivables/payables



(562)



(292)



562



292















Proceeds from long-term borrowings






4,602



3,967



2,673









3,967



7,275



Payments of long-term borrowings



(30)



(152)



(3,127)



(3,163)









(3,157)



(3,315)



Proceeds from issuance of common stock



116



70















116



70



Repurchases of common stock



(1,044)



(263)















(1,044)



(263)



Dividends paid



(480)



(481)



(145)



(225)



145



225



(480)



(481)

14


Other



(34)



(61)



(13)



(13)



(8)



(7)



(55)



(81)

14


Net cash provided by (used for) financing activities



(2,118)



3,977



1,540



148



137



218



(441)



4,343






























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



124



(58)



27



(44)









151



(102)






























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



138



4,281



(29)



766









109



5,047



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



6,156



3,196



1,016



760









7,172



3,956



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


$

6,294


$

7,477


$

987


$

1,526








$

7,281


$

9,003































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 production and precision agriculture operations, small 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

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.































Equipment

Production &

Small Ag

Construction 


For the Six Months Ended


Operations

Precision Ag

& Turf

& Forestry



May 2 

May 3 

May 2 

May 3 

May 2 

May 3 

May 2 

May 3 

Dollars in millions


2021

2020

2021

2020

2021

2020

2021

2020

Net Sales


$

19,049


$

14,754


$

7,599


$

5,872


$

5,904


$

4,583


$

5,546


$

4,299


Net Sales - excluding Wirtgen






13,426






5,872






4,583






2,971


Average Identifiable Assets*


























With Inventories at LIFO


$

16,292


$

17,162


$

6,375


$

6,390


$

3,513


$

3,721


$

6,404


$

7,051


With Inventories at LIFO - excluding Wirtgen






13,113






6,390






3,721






3,002


With Inventories at Standard Cost



17,681



18,580



7,065



7,074



3,947



4,188



6,669



7,318


With Inventories at Standard Cost - excluding Wirtgen






14,532






7,074






4,188






3,270


Operating Profit


$

3,524


$

1,356


$

1,651


$

786


$

1,117


$

381


$

756


$

189


Operating Profit - excluding Wirtgen






1,313






786






381






146


Percent of Net Sales**



18.5

%


9.8

%


21.7

%


13.4

%


18.9

%


8.3

%


13.6

%


4.9

%

Operating Return on Assets**


























With Inventories at LIFO



21.6

%


10.0

%


25.9

%


12.3

%


31.8

%


10.2

%


11.8

%


4.9

%

With Inventories at Standard Cost



19.9

%


9.0

%


23.4

%


11.1

%


28.3

%


9.1

%


11.3

%


4.5

%

SVA Cost of Assets**


$

(1,062)


$

(872)


$

(425)


$

(425)


$

(237)


$

(251)


$

(400)


$

(196)


SVA**



2,462



441



1,226



361



880



130



356



(50)






























Financial



















For the Six Months Ended


Services





















May 2 

May 3 



















Dollars in millions


2021

2020



















Net Income Attributable to Deere & Company


$

427


$

197




















Average Equity



5,376



5,071




















Return on Equity



7.9

%


3.9

%



















Operating Profit


$

553


$

254




















Cost of Equity



(349)



(330)




















SVA



204



(76)















































 *  At the beginning of fiscal year 2021, the company reclassified goodwill from the Equipment Operations segments' identifiable assets to corporate assets. Operating return on assets (OROA) and SVA exclude the impact of goodwill. Prior period information has been recast for a consistent presentation.

 ** Beginning in fiscal year 2021, the results and assets related to the Wirtgen Group (Wirtgen) are included in the calculation of OROA and SVA. Due to integration efforts, the 2020 information did not include Wirtgen's results and assets. Prior period information was not recast for this change, which is consistent with the company's internal presentation.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/deere-reports-second-quarter-net-income-of-1-790-billion-301296708.html

SOURCE Deere & Company

Copyright 2021 Canada NewsWire

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