MOLINE, Ill., Aug. 20, 2021 /CNW/ --

  • Equipment-division operating margin of 19% demonstrates strong execution in face of supply-chain challenges.
  • Full-year earnings forecast raised to range of $5.7 to $5.9 billion, reflecting robust market conditions.
  • Strategic investments reinforce focus on delivering customer value.

Deere & Company (NYSE: DE) reported net income of $1.667 billion for the third quarter ended August 1, 2021, or $5.32 per share, compared with net income of $811 million, or $2.57 per share, for the quarter ended August 2, 2020. For the first nine months of the 2021 fiscal year, net income attributable to Deere & Company was $4.680 billion, or $14.86 per share, compared with $1.993 billion, or $6.30 per share, for the same period last year.

Worldwide net sales and revenues increased 29 percent, to $11.527 billion, for the third quarter of 2021 and rose 27 percent, to $32.697 billion, for nine months. Net sales of the equipment operations were $10.413 billion for the quarter and $29.461 billion for nine months, compared with $7.859 billion and $22.612 billion for the same periods last year, respectively.

"Our strong results, driven by essentially all product categories, are a testament to the exceptional efforts of our employees and dealers to keep our factories running and customers served while enduring significant supply-chain pressures," said John C. May, chairman and chief executive officer. "We also made strategic investments in the quarter aligned with our smart industrial strategy. They will further our efforts to help our customers achieve improved profitability, productivity, and sustainability through the effective use of technology."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2021 is forecasted to be in a range of $5.7 billion to $5.9 billion.

"Looking ahead, we expect demand for farm and construction equipment to continue benefiting from favorable fundamentals," May said. "We are, at the same time, excited by the growing engagement with our digital platform, the John Deere Operations Center, as well as continued adoption of precision technologies, which unlock greater value for our customers."

 



















Deere & Company


Third Quarter


Year to Date


$ in millions


2021


2020


% Change


2021


2020


% Change


Net sales and revenues


$

11,527


$

8,925


29%


$

32,697


$

25,809


27%


Net income


$

1,667


$

811


106%


$

4,680


$

1,993


135%


Fully diluted EPS


$

5.32


$

2.57




$

14.86


$

6.30




 

Results in the third quarter and the first nine months of fiscal 2021 and 2020 were impacted by special items. Refer to Note 1 of the financial statements for an overview of the special items. In addition, the third-quarter 2020 net income was unfavorably affected by discrete income-tax adjustments. 

 











Equipment Operations


Third Quarter


$ in millions


2021


2020


% Change


Net sales


$

10,413


$

7,859


32%


Operating profit


$

1,952


$

1,147


70%


Net income


$

1,440


$

628


129%


 

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


Third Quarter


$ in millions


2021


2020


% Change


Net sales


$

4,250


$

3,289


29%


Operating profit


$

906


$

605


50%


Operating margin



21.3%



18.4%




 

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


 











Small Agriculture & Turf


Third Quarter


$ in millions


2021


2020


% Change


Net sales


$

3,147


$

2,383


32%


Operating profit


$

583


$

337


73%


Operating margin



18.5%



14.1%




 

Small agriculture and turf sales for the quarter increased due to higher shipment volumes and price realization. Operating profit increased primarily due to higher shipment volumes / sales mix and price realization. These items were partially offset by higher production costs. Results for the third quarter in fiscal 2021 and 2020 were affected by special items. Refer to Note 1 of the financial statements.


 











Construction & Forestry


Third Quarter


$ in millions


2021


2020


% Change


Net sales


$

3,016


$

2,187


38%


Operating profit


$

463


$

205


126%


Operating margin



15.4%



9.4%




 

Construction and forestry sales moved higher for the quarter primarily due to higher shipment volumes and price realization. Operating profit increased due to higher shipment volumes / sales mix and price realization, partially offset by higher production costs.

 











Financial Services


Third Quarter


$ in millions


2021


2020


% Change


Net income


$

227


$

183


24%


 

The increase in financial services net income for the quarter was mainly due to an improvement on operating-lease residual values, as well as income earned on a higher average portfolio, a lower provision for credit losses, and more-favorable financing spreads.


 









Industry Outlook for 2021 (Annual)








Agriculture & Turf








U.S. & Canada:








Large Ag






Up ~ 25%


Small Ag & Turf






Up ~ 10%


Europe






Up 10 to 15%


South America (Tractors & Combines)






Up ~ 20%


Asia






Up significantly










Construction & Forestry








U.S. & Canada:








Construction Equipment






Up 15 to 20%


Compact Construction Equipment






Up 20 to 25%


Global Forestry






Up ~ 15%


 









Deere Segment Outlook (2021)




Currency


Price


$ in millions


Net Sales


Translation


Realization


Production & Precision Ag


Up 25 to 30%


+2%


+8%


Small Ag & Turf


Up ~ 25%


+3%


+5%


Construction & Forestry


Up ~ 30%


+2%


+5%










Financial Services


Net Income


$ 850




 

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

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.

 





















Third Quarter


Year to Date


$ in millions


2021


2020


% Change


2021


2020


% Change


Revenue


$

683


$

696


-2%


$

2,015


$

2,115


-5%


Net income


$

186


$

146


27%


$

530


$

271


96%


Ending portfolio balance










$

41,508


$

38,766


7%


 

Results in both periods were higher mainly due to income earned on a higher average portfolio, improvement on operating-lease residual values, and more-favorable financing spreads. Additionally, a lower provision for credit losses contributed to the improvement for the first nine months of fiscal 2021. Results for the nine-month period 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 for 2021," "Deere Segment Outlook (2021)," 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 certain 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, 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 in part 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 and/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.

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

Many of the factors affecting the 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 coronavirus; 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, financing and repayment practices, and the number and size of customer 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 the company's 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 model 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 the company's other financial services 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
THIRD QUARTER 2021 PRESS RELEASE
(In millions of dollars) Unaudited



Three Months Ended


Nine Months Ended




August 1


August 2


%


August 1


August 2


%




2021


2020


Change


2021


2020


Change


Net sales and revenues:


















Production & precision ag net sales


$

4,250


$

3,289


+29


$

11,848


$

9,161


+29


Small ag & turf net sales



3,147



2,383


+32



9,051



6,966


+30


Construction & forestry net sales



3,016



2,187


+38



8,562



6,485


+32


Financial services revenues



902



892


+1



2,679



2,699


-1


Other revenues



212



174


+22



557



498


+12


Total net sales and revenues


$

11,527


$

8,925


+29


$

32,697


$

25,809


+27




















Operating profit: *


















Production & precision ag


$

906


$

605


+50


$

2,557


$

1,391


+84


Small ag & turf



583



337


+73



1,699



718


+137


Construction & forestry



463



205


+126



1,220



394


+210


Financial services



291



243


+20



844



498


+69


Total operating profit



2,243



1,390


+61



6,320



3,001


+111


Reconciling items **



(85)



(122)


-30



(312)



(256)


+22


Income taxes



(491)



(457)


+7



(1,328)



(752)


+77


Net income attributable to Deere & Company


$

1,667


$

811


+106


$

4,680


$

1,993


+135



*  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 August 1, 2021 and August 2, 2020
(In millions of dollars and shares except per share amounts) Unaudited










2021


2020

Net Sales and Revenues







Net sales


$

10,413


$

7,859

Finance and interest income



825



838

Other income



289



228

Total



11,527



8,925








Costs and Expenses







Cost of sales



7,574



5,835

Research and development expenses



394



370

Selling, administrative and general expenses



841



752

Interest expense



244



290

Other operating expenses



324



408

Total



9,377



7,655








Income of Consolidated Group before Income Taxes



2,150



1,270

Provision for income taxes



491



457








Income of Consolidated Group



1,659



813

Equity in income (loss) of unconsolidated affiliates



8



(2)








Net Income



1,667



811

Less: Net income attributable to noncontrolling interests







Net Income Attributable to Deere & Company


$

1,667


$

811








Per Share Data







Basic


$

5.36


$

2.59

Diluted


$

5.32


$

2.57








Average Shares Outstanding







Basic



311.0



313.0

Diluted



313.4



315.8


See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended August 1, 2021 and August 2, 2020
(In millions of dollars and shares except per share amounts) Unaudited



2021


2020

Net Sales and Revenues







Net sales


$

29,461


$

22,612

Finance and interest income



2,468



2,584

Other income



768



613

Total



32,697



25,809








Costs and Expenses







Cost of sales



21,307



17,206

Research and development expenses



1,137



1,201

Selling, administrative and general expenses



2,448



2,467

Interest expense



783



969

Other operating expenses



1,033



1,199

Total



26,708



23,042








Income of Consolidated Group before Income Taxes



5,989



2,767

Provision for income taxes



1,328



752








Income of Consolidated Group



4,661



2,015

Equity in income (loss) of unconsolidated affiliates



21



(20)








Net Income



4,682



1,995

Less: Net income attributable to noncontrolling interests



2



2

Net Income Attributable to Deere & Company


$

4,680


$

1,993








Per Share Data







Basic


$

14.98


$

6.36

Diluted


$

14.86


$

6.30








Average Shares Outstanding







Basic



312.4



313.3

Diluted



314.9



316.4


See Condensed Notes to Interim Consolidated Financial Statements.

 

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



August 1


November 1


August 2



2021


2020


2020

Assets










Cash and cash equivalents


$

7,519


$

7,066


$

8,190

Marketable securities



688



641



640

Receivables from unconsolidated affiliates



29



31



26

Trade accounts and notes receivable - net



5,268



4,171



5,473

Financing receivables - net



31,449



29,750



27,814

Financing receivables securitized - net



5,401



4,703



5,469

Other receivables



1,673



1,220



1,217

Equipment on operating leases - net



6,982



7,298



7,158

Inventories



6,410



4,999



5,650

Property and equipment - net



5,649



5,817



5,754

Investments in unconsolidated affiliates



188



193



199

Goodwill



3,148



3,081



2,984

Other intangible assets - net



1,267



1,327



1,301

Retirement benefits



990



863



1,031

Deferred income taxes



1,767



1,499



1,534

Other assets



2,260



2,432



2,824

Total Assets


$

80,688


$

75,091


$

77,264











Liabilities and Stockholders' Equity




















Liabilities










Short-term borrowings


$

10,404


$

8,582


$

9,075

Short-term securitization borrowings



5,277



4,682



5,361

Payables to unconsolidated affiliates



116



105



80

Accounts payable and accrued expenses



11,091



10,112



9,565

Deferred income taxes



515



519



479

Long-term borrowings



32,280



32,734



34,037

Retirement benefits and other liabilities



5,272



5,413



5,776

Total liabilities



64,955



62,147



64,373











Stockholders' Equity










Total Deere & Company stockholders' equity



15,731



12,937



12,888

Noncontrolling interests



2



7



3

Total stockholders' equity



15,733



12,944



12,891

Total Liabilities and Stockholders' Equity


$

80,688


$

75,091


$

77,264


See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended August 1, 2021 and August 2, 2020
(In millions of dollars) Unaudited



2021


2020

Cash Flows from Operating Activities







Net income


$

4,682


$

1,995

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







Provision (credit) for credit losses



(17)



123

Provision for depreciation and amortization



1,569



1,614

Impairment charges



50



147

Share-based compensation expense



64



63

Undistributed earnings of unconsolidated affiliates



4



(5)

Credit for deferred income taxes



(271)



(160)

Changes in assets and liabilities:







Trade, notes, and financing receivables related to sales



(444)



626

Inventories



(1,817)



(1)

Accounts payable and accrued expenses



742



(572)

Accrued income taxes payable/receivable



34



4

Retirement benefits



13



88

Other



(295)



135

Net cash provided by operating activities



4,314



4,057








Cash Flows from Investing Activities







Collections of receivables (excluding receivables related to sales)



14,480



13,237

Proceeds from maturities and sales of marketable securities



82



70

Proceeds from sales of equipment on operating leases



1,510



1,310

Cost of receivables acquired (excluding receivables related to sales)



(17,161)



(14,449)

Acquisitions of businesses, net of cash acquired



(19)




Purchases of marketable securities



(115)



(91)

Purchases of property and equipment



(492)



(594)

Cost of equipment on operating leases acquired



(1,210)



(1,312)

Collateral on derivatives – net



(189)



324

Other



12



(12)

Net cash used for investing activities



(3,102)



(1,517)








Cash Flows from Financing Activities







Increase in total short-term borrowings



929



170

Proceeds from long-term borrowings



5,877



8,331

Payments of long-term borrowings



(5,172)



(5,797)

Proceeds from issuance of common stock



136



111

Repurchases of common stock



(1,780)



(263)

Dividends paid



(761)



(718)

Other



(80)



(110)

Net cash provided by (used for) financing activities



(851)



1,724








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



106



80








Net Increase in Cash, Cash Equivalents, and Restricted Cash



467



4,344

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



7,172



3,956

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


$

7,639


$

8,300


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)

2021 Special Items
In the third quarter of 2021, the company sold a closed factory that previously produced small agriculture equipment in China, resulting in a $27 million pretax gain. 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.

 

















Nine Months Ended August 1, 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)


Gain on sale – Other income






(27)






(27)


Total expense (benefit)


$

(48)


$

(24)


$

37


$

(35)


 

2020 Special Items
In the third quarter of 2020, the company closed a factory producing small agricultural equipment in China. In connection with this closure, a non-cash impairment of other receivables, property, and intangible assets of $9 million pretax and after-tax was recorded and $4 million pretax and after-tax for severance payments. 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.

 

















Nine Months Ended August 2, 2020


Expense:


Small Ag & Turf


Construction & Forestry


Financial Services


Total


Factory closure – Cost of sales


$

13








$

13


Long-lived asset impairments – 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


$

13


$

82


$

32


$

127


 

2020 Disposition
In the third quarter of 2020, the company reached a definitive agreement to sell its German walk-behind lawn mower business. This transaction closed in the fourth quarter of 2020. A non-cash impairment of $24 million pretax and after-tax was recorded in "Other operating expenses" to write the operations down to realizable value. This activity was included in the company's small agriculture and turf segment.

 

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




















Nine Months Ended August 2, 2020




Production & Precision Ag


Small Ag & Turf


Construction & Forestry


Financial Services


Total


Cost of sales


$

21


$

11


$

9





$

41


Research and development expenses



8



7



4






19


Selling, administrative and general expenses



19



19



14


$

3



55


Total operating profit impact


$

48


$

37


$

27


$

3



115


Other operating expenses















23


Total expense














$

138


 

(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


Nine Months Ended




August 1


August 2


August 1


August 2




2021


2020


2021


2020


Dividends declared


$

.90


$

.76


$

2.56


$

2.28


Dividends paid


$

.90


$

.76


$

2.42


$

2.28


 

(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 August 1, 2021 and August 2, 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


$

10,413


$

7,859














$

10,413


$

7,859



Finance and interest income



33



25


$

867


$

878


$

(75)


$

(65)



825



838

2


Other income



263



206



96



73



(70)



(51)



289



228

3


Total



10,709



8,090



963



951



(145)



(116)



11,527



8,925






























Costs and Expenses



























Cost of sales



7,574



5,836












(1)



7,574



5,835

4


Research and development expenses



394



370















394



370



Selling, administrative and general expenses



702



616



141



137



(2)



(1)



841



752

4


Interest expense



92



91



169



206



(17)



(7)



244



290

5


Interest compensation to Financial Services



58



58









(58)



(58)







5


Other operating expenses



32



94



360



363



(68)



(49)



324



408

6


Total



8,852



7,065



670



706



(145)



(116)



9,377



7,655






























Income before Income Taxes



1,857



1,025



293



245









2,150



1,270



Provision for income taxes



425



395



66



62









491



457






























Income after Income Taxes



1,432



630



227



183









1,659



813



Equity in income (loss) of unconsolidated affiliates



8



(2)















8



(2)






























Net Income



1,440



628



227



183









1,667



811



Less: Net income attributable to noncontrolling interests



























Net Income Attributable to Deere & Company


$

1,440


$

628


$

227


$

183








$

1,667


$

811































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 Nine Months Ended August 1, 2021 and August 2, 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


$

29,461


$

22,612














$

29,461


$

22,612



Finance and interest income



95



75


$

2,582


$

2,720


$

(209)


$

(211)



2,468



2,584

2


Other income



712



597



269



196



(213)



(180)



768



613

3


Total



30,268



23,284



2,851



2,916



(422)



(391)



32,697



25,809






























Costs and Expenses



























Cost of sales



21,309



17,208









(2)



(2)



21,307



17,206

4


Research and development expenses



1,137



1,201















1,137



1,201



Selling, administrative and general expenses



2,089



1,989



365



483



(6)



(5)



2,448



2,467

4


Interest expense



287



237



539



747



(43)



(15)



783



969

5


Interest compensation to Financial Services



166



195









(166)



(195)







5


Other operating expenses



140



186



1,098



1,187



(205)



(174)



1,033



1,199

6


Total



25,128



21,016



2,002



2,417



(422)



(391)



26,708



23,042






























Income before Income Taxes



5,140



2,268



849



499









5,989



2,767



Provision for income taxes



1,130



632



198



120









1,328



752






























Income after Income Taxes



4,010



1,636



651



379









4,661



2,015



Equity in income (loss) of unconsolidated affiliates



18



(22)



3



2









21



(20)






























Net Income



4,028



1,614



654



381









4,682



1,995



Less: Net income attributable to noncontrolling interests



2



2















2



2



Net Income Attributable to Deere & Company


$

4,026


$

1,612


$

654


$

381








$

4,680


$

1,993































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





Aug 1


Nov 1


Aug 2


Aug 1


Nov 1


Aug 2


Aug 1


Nov 1


Aug 2


Aug 1


Nov 1


Aug 2





2021


2020


2020


2021


2020


2020


2021


2020


2020


2021


2020


2020



Assets







































Cash and cash equivalents


$

6,638


$

6,145


$

7,440


$

881


$

921


$

750











$

7,519


$

7,066


$

8,190



Marketable securities



3



7



8



685



634



632












688



641



640



Receivables from unconsolidated affiliates



5,942



5,290



3,619











$

(5,913)


$

(5,259)


$

(3,593)



29



31



26

7


Trade accounts and notes receivable - net



1,127



1,013



1,251



5,319



4,238



5,595



(1,178)



(1,080)



(1,373)



5,268



4,171



5,473

8


Financing receivables - net



89



106



111



31,360



29,644



27,703












31,449



29,750



27,814



Financing receivables securitized - net



13



26



37



5,388



4,677



5,432












5,401



4,703



5,469



Other receivables



1,516



1,117



1,083



171



151



162



(14)



(48)



(28)



1,673



1,220



1,217

8


Equipment on operating leases - net












6,982



7,298



7,158












6,982



7,298



7,158



Inventories



6,410



4,999



5,650





















6,410



4,999



5,650



Property and equipment - net



5,612



5,778



5,711



37



39



43












5,649



5,817



5,754



Investments in unconsolidated affiliates



166



174



180



22



19



19












188



193



199



Goodwill



3,148



3,081



2,984





















3,148



3,081



2,984



Other intangible assets - net



1,267



1,327



1,301





















1,267



1,327



1,301



Retirement benefits



986



859



972



63



59



59



(59)



(55)






990



863



1,031

9


Deferred income taxes



1,959



1,763



1,865



59



45



56



(251)



(309)



(387)



1,767



1,499



1,534

10


Other assets



1,581



1,439



1,566



680



994



1,260



(1)



(1)



(2)



2,260



2,432



2,824



Total Assets 


$

36,457


$

33,124


$

33,778


$

51,647


$

48,719


$

48,869


$

(7,416)


$

(6,752)


$

(5,383)


$

80,688


$

75,091


$

77,264










































Liabilities and Stockholders' Equity 














































































Liabilities







































Short-term borrowings


$

1,376


$

292


$

853


$

9,028


$

8,290


$

8,222











$

10,404


$

8,582


$

9,075



Short-term securitization borrowings



12



26



37



5,265



4,656



5,324












5,277



4,682



5,361



Payables to unconsolidated affiliates



116



104



80



5,913



5,260



3,593


$

(5,913)


$

(5,259)


$

(3,593)



116



105



80

7


Accounts payable and accrued expenses



10,368



9,114



8,834



1,916



2,127



2,134



(1,193)



(1,129)



(1,403)



11,091



10,112



9,565

8


Deferred income taxes



371



385



398



395



443



468



(251)



(309)



(387)



515



519



479

10


Long-term borrowings



8,982



10,124



10,217



23,298



22,610



23,820












32,280



32,734



34,037



Retirement benefits and other liabilities



5,219



5,366



5,671



112



102



105



(59)



(55)






5,272



5,413



5,776

9


Total liabilities



26,444



25,411



26,090



45,927



43,488



43,666



(7,416)



(6,752)



(5,383)



64,955



62,147



64,373










































Stockholders' Equity







































Total Deere & Company stockholders' equity



15,731



12,937



12,888



5,720



5,231



5,203



(5,720)



(5,231)



(5,203)



15,731



12,937



12,888

11


Noncontrolling interests



2



7



3





















2



7



3



Financial Services equity



(5,720)



(5,231)



(5,203)












5,720



5,231



5,203










11


Adjusted total stockholders' equity



10,013



7,713



7,688



5,720



5,231



5,203












15,733



12,944



12,891



Total Liabilities and Stockholders' Equity 


$

36,457


$

33,124


$

33,778


$

51,647


$

48,719


$

48,869


$

(7,416)


$

(6,752)


$

(5,383)


$

80,688


$

75,091


$

77,264











































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 Nine Months Ended August 1, 2021 and August 2, 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


$

4,028


$

1,614


$

654


$

381








$

4,682


$

1,995



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



























Provision (credit) for credit losses



5



6



(22)



117









(17)



123



Provision for depreciation and amortization



803



787



866



925


$

(100)


$

(98)



1,569



1,614

12


Impairment charges



50



115






32









50



147



Share-based compensation expense















64



63



64



63

13


Undistributed earnings of unconsolidated affiliates



246



257



(2)



(1)



(240)



(261)



4



(5)

14


Credit for deferred income taxes



(218)



(57)



(53)



(103)









(271)



(160)



Changes in assets and liabilities:



























Trade, notes, and financing receivables related to sales



(73)



116









(371)



510



(444)



626

15, 17, 18


Inventories



(1,367)



387









(450)



(388)



(1,817)



(1)

16


Accounts payable and accrued expenses



860



(567)



(20)



(38)



(98)



33



742



(572)

17


Accrued income taxes payable/receivable



43



(25)



(9)



29









34



4



Retirement benefits



8



77



5



11









13



88



Other



(200)



145



26



89



(121)



(99)



(295)



135

12, 13, 16


Net cash provided by operating activities



4,185



2,855



1,445



1,442



(1,316)



(240)



4,314



4,057






























Cash Flows from Investing Activities



























Collections of receivables (excluding receivables related to sales)









15,704



14,352



(1,224)



(1,115)



14,480



13,237

15


Proceeds from maturities and sales of marketable securities



4






78



70









82



70



Proceeds from sales of equipment on operating leases









1,510



1,310









1,510



1,310



Cost of receivables acquired (excluding receivables related to sales)









(18,349)



(15,367)



1,188



918



(17,161)



(14,449)

15


Acquisitions of businesses, net of cash acquired



(19)


















(19)






Purchases of marketable securities









(115)



(91)









(115)



(91)



Purchases of property and equipment



(491)



(591)



(1)



(3)









(492)



(594)



Cost of equipment on operating leases acquired









(1,818)



(1,836)



608



524



(1,210)



(1,312)

16


Decrease (increase) in trade and wholesale receivables









(481)



423



481



(423)







15


Collateral on derivatives – net



(4)



(6)



(185)



330









(189)



324



Other



(14)



(55)



(5)



(46)



31



89



12



(12)

14, 18


Net cash used for investing activities



(524)



(652)



(3,662)



(858)



1,084



(7)



(3,102)



(1,517)






























Cash Flows from Financing Activities



























Increase (decrease) in total short-term borrowings



(93)



(32)



1,022



202









929



170



Change in intercompany receivables/payables



(624)



(1,468)



624



1,468















Proceeds from long-term borrowings






4,592



5,877



3,739









5,877



8,331



Payments of long-term borrowings



(71)



(179)



(5,101)



(5,618)









(5,172)



(5,797)



Proceeds from issuance of common stock



136



111















136



111



Repurchases of common stock



(1,780)



(263)















(1,780)



(263)



Dividends paid



(761)



(718)



(240)



(260)



240



260



(761)



(718)

14


Other



(50)



(86)



(22)



(11)



(8)



(13)



(80)



(110)

14


Net cash provided by (used for) financing activities



(3,243)



1,957



2,160



(480)



232



247



(851)



1,724






























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



77



95



29



(15)









106



80






























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



495



4,255



(28)



89









467



4,344



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


$

6,651


$

7,451


$

988


$

849








$

7,639


$

8,300






























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 Nine Months Ended


Operations

Precision Ag

& Turf

& Forestry




August 1

August 2

August 1

August 2

August 1

August 2

August 1

August 2


Dollars in millions


2021

2020

2021

2020

2021

2020

2021

2020


Net Sales


$

29,461


$

22,612


$

11,848


$

9,161


$

9,051


$

6,966


$

8,562


$

6,485



Net Sales - excluding Wirtgen






20,466






9,161






6,966






4,339



Average Identifiable Assets*



























With Inventories at LIFO


$

16,496


$

16,930


$

6,518


$

6,341


$

3,558


$

3,619


$

6,420


$

6,970



With Inventories at LIFO - excluding Wirtgen






12,916






6,341






3,619






2,956



With Inventories at Standard Cost



17,877



18,349



7,205



7,049



3,988



4,063



6,684



7,237



With Inventories at Standard Cost - excluding Wirtgen






14,335






7,049






4,063






3,223



Operating Profit


$

5,476


$

2,503


$

2,557


$

1,391


$

1,699


$

718


$

1,220


$

394



Operating Profit - excluding Wirtgen






2,336






1,391






718






227



Percent of Net Sales**



18.6

%


11.4

%


21.6

%


15.2

%


18.8

%


10.3

%


14.2

%


5.2

%


Operating Return on Assets**



























With Inventories at LIFO



33.2

%


18.1

%


39.2

%


21.9

%


47.8

%


19.8

%


19.0

%


7.7

%


With Inventories at Standard Cost



30.6

%


16.3

%


35.5

%


19.7

%


42.6

%


17.7

%


18.3

%


7.0

%


SVA Cost of Assets**


$

(1,609)


$

(1,290)


$

(648)


$

(634)


$

(359)


$

(366)


$

(602)


$

(290)



SVA**



3,867



1,046



1,909



757



1,340



352



618



(63)
































Financial




















For the Nine Months Ended


Services






















August 1

August 2




















Dollars in millions


2021

2020




















Net Income Attributable to Deere & Company


$

654


$

381





















Average Equity



5,468



5,076





















Return on Equity



12.0

%


7.5

%




















Operating Profit


$

844


$

498





















Cost of Equity



(531)



(501)





















SVA



313



(3)


















































*  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:https://www.prnewswire.com/news-releases/deere-reports-third-quarter-net-income-of-1-667-billion-301359603.html

SOURCE Deere & Company

Copyright 2021 Canada NewsWire

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