UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 2, 2020~~January 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file no: 1-4121

DEERE & COMPANY

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation)		36-2382580 (IRS employer identification no.)

One John Deere Place

Moline, Illinois 61265

(Address of principal executive offices)

Telephone Number: (309) 765-8000

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $1 par value	DE	New York Stock Exchange
8½% Debentures Due 2022	DE22	New York Stock Exchange
6.55% Debentures Due 2028	DE28	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At ~~February 2, 2020, 313,619,999~~January 31, 2021, 313,438,923 shares of common stock, $1 par value, of the registrant were outstanding.

PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended February 2, 2020 and January 27, 2019
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars and shares except per share amounts) Unaudited
	2020		2019		2021		2020
Net Sales and Revenues
Net sales	$	6,530	$	6,941	$	8,051	$	6,530
Finance and interest income		896		815		834		896
Other income		205		228		227		205
Total		7,631		7,984		9,112		7,631

Costs and Expenses
Cost of sales		5,077		5,432		5,805		5,077
Research and development expenses		425		407		366		425
Selling, administrative and general expenses		809		764		769		809
Interest expense		336		353		271		336
Other operating expenses		415		351		373		415
Total		7,062		7,307		7,584		7,062

Income of Consolidated Group before Income Taxes		569		677		1,528		569
Provision for income taxes		50		184		308		50

Income of Consolidated Group		519		493		1,220		519
Equity in income (loss) of unconsolidated affiliates		(1)		7		4		(1)

Net Income		518		500		1,224		518
Less: Net income attributable to noncontrolling interests		1		2				1
Net Income Attributable to Deere & Company	$	517	$	498	$	1,224	$	517

Per Share Data
Basic	$	1.65	$	1.56	$	3.90	$	1.65
Diluted	$	1.63	$	1.54	$	3.87	$	1.63

Average Shares Outstanding
Basic		313.5		318.5		313.5		313.5
Diluted		317.2		322.7		316.1		317.2

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended February 2, 2020 and January 27, 2019
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited
	2020		2019		2021		2020

Net Income	$	518	$	500	$	1,224	$	518

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		230		20		63		230
Cumulative translation adjustment		43		(162)		396		43
Unrealized loss on derivatives				(9)
Unrealized gain on debt securities		5		8
Unrealized gain on derivatives						4
Unrealized gain (loss) on debt securities						(2)		5
Other Comprehensive Income (Loss), Net of Income Taxes		278		(143)		461		278

Comprehensive Income of Consolidated Group		796		357		1,685		796
Less: Comprehensive income attributable to noncontrolling interests		1		2				1
Comprehensive Income Attributable to Deere & Company	$	795	$	355	$	1,685	$	795

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited
	February 2		November 3		January 27		January 31		November 1		February 2
	2020		2019		2019		2021		2020		2020
Assets
Cash and cash equivalents	$	3,602	$	3,857	$	3,626	$	6,962	$	7,066	$	3,602
Marketable securities		609		581		523		667		641		609
Receivables from unconsolidated affiliates		38		46		36		28		31		38
Trade accounts and notes receivable – net		5,360		5,230		5,497		5,037		4,171		5,360
Financing receivables – net		27,294		29,195		25,150		29,438		29,750		27,294
Financing receivables securitized – net		4,478		4,383		4,563		3,931		4,703		4,478
Other receivables		1,367		1,487		1,651		1,141		1,220		1,367
Equipment on operating leases – net		7,504		7,567		6,904		7,030		7,298		7,504
Inventories		6,482		5,975		7,402		5,956		4,999		6,482
Property and equipment – net		5,900		5,973		5,785		5,741		5,817		5,900
Investments in unconsolidated affiliates		217		215		212		178		193		217
Goodwill		2,945		2,917		3,048		3,194		3,081		2,945
Other intangible assets – net		1,349		1,380		1,507		1,342		1,327		1,349
Retirement benefits		900		840		1,348		906		863		900
Deferred income taxes		1,414		1,466		834		1,556		1,499		1,414
Other assets		2,362		1,899		1,832		2,373		2,432		2,362
Total Assets	$	71,821	$	73,011	$	69,918	$	75,480	$	75,091	$	71,821

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	10,008	$	10,784	$	10,738	$	9,224	$	8,582	$	10,008
Short-term securitization borrowings		4,416		4,321		4,464		3,969		4,682		4,416
Payables to unconsolidated affiliates		147		142		144		119		105		147
Accounts payable and accrued expenses		8,630		9,656		9,086		9,404		10,112		8,630
Deferred income taxes		491		495		525		532		519		491
Long-term borrowings		30,475		30,229		27,855		32,772		32,734		30,475
Retirement benefits and other liabilities		5,710		5,953		5,759		5,374		5,413		5,710
Total liabilities		59,877		61,580		58,571		61,394		62,147		59,877

Commitments and contingencies (Note 16)
Redeemable noncontrolling interest		14		14		14						14

Stockholders’ Equity
Common stock, $1 par value (issued shares at February 2, 2020 – 536,431,204)		4,675		4,642		4,512
Common stock, $1 par value (issued shares at January 31, 2021 – 536,431,204)								4,942		4,895		4,675
Common stock in treasury		(17,549)		(17,474)		(16,422)		(18,377)		(18,065)		(17,549)
Retained earnings		30,129		29,852		27,816		32,596		31,646		30,129
Accumulated other comprehensive income (loss)		(5,329)		(5,607)		(4,578)		(5,078)		(5,539)		(5,329)
Total Deere & Company stockholders’ equity		11,926		11,413		11,328		14,083		12,937		11,926
Noncontrolling interests		4		4		5		3		7		4
Total stockholders’ equity		11,930		11,417		11,333		14,086		12,944		11,930
Total Liabilities and Stockholders’ Equity	$	71,821	$	73,011	$	69,918	$	75,480	$	75,091	$	71,821

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Three Months Ended February 2, 2020 and January 27, 2019

(In millions of dollars) Unaudited

2020

2019

Cash Flows from Operating Activities

Net income

$
518

$
500

Adjustments to reconcile net income to net cash used for operating activities:

Provision for credit losses

15

2

Provision for depreciation and amortization

538

503

Share-based compensation expense

19

20

Undistributed earnings of unconsolidated affiliates

(7)

Credit for deferred income taxes

(29)

(56)

Changes in assets and liabilities:

Trade, notes, and financing receivables related to sales

70

(507)

Inventories

(642)

(1,396)

Accounts payable and accrued expenses

(1,134)

(698)

Accrued income taxes payable/receivable

(53)

98

Retirement benefits

36

(4)

Other

154

(106)

Net cash used for operating activities

(508)

(1,651)

Cash Flows from Investing Activities

Collections of receivables (excluding receivables related to sales)

5,664

5,496

Proceeds from maturities and sales of marketable securities

18

8

Proceeds from sales of equipment on operating leases

426

371

Cost of receivables acquired (excluding receivables related to sales)

(4,303)

(4,213)

Purchases of marketable securities

(34)

(32)

Purchases of property and equipment

(271)

(297)

Cost of equipment on operating leases acquired

(517)

(361)

Other

43

(3)

Net cash provided by investing activities

1,026

969

Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

(473)

476

Proceeds from long-term borrowings

1,702

2,211

Payments of long-term borrowings

(1,651)

(1,941)

Proceeds from issuance of common stock

53

51

Repurchases of common stock

(114)

(144)

Dividends paid

(242)

(220)

Other

(38)

(30)

Net cash provided by (used for) financing activities

(763)

403

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

(1)

(13)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

(246)

(292)

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

3,956

4,015

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

$
3,710

$
3,723


DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited
	2021		2020
Cash Flows from Operating Activities
Net income	$	1,224	$	518
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision (credit) for credit losses		(5)		15
Provision for depreciation and amortization		538		538
Impairment charges		50
Share-based compensation expense		15		19
Undistributed earnings of unconsolidated affiliates		18
Credit for deferred income taxes		(38)		(29)
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		(97)		70
Inventories		(926)		(642)
Accounts payable and accrued expenses		(705)		(1,134)
Accrued income taxes payable/receivable		130		(53)
Retirement benefits		(14)		36
Other		(47)		154
Net cash provided by (used for) operating activities		143		(508)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)		5,999		5,664
Proceeds from maturities and sales of marketable securities		20		18
Proceeds from sales of equipment on operating leases		460		426
Cost of receivables acquired (excluding receivables related to sales)		(5,300)		(4,303)
Acquisitions of businesses, net of cash acquired		(19)
Purchases of marketable securities		(39)		(34)
Purchases of property and equipment		(154)		(271)
Cost of equipment on operating leases acquired		(294)		(517)
Collateral on derivatives - net		(88)		26
Other		(6)		17
Net cash provided by investing activities		579		1,026

Cash Flows from Financing Activities
Decrease in total short-term borrowings		(695)		(473)
Proceeds from long-term borrowings		1,757		1,702
Payments of long-term borrowings		(1,441)		(1,651)
Proceeds from issuance of common stock		71		53
Repurchases of common stock		(352)		(114)
Dividends paid		(242)		(242)
Other		(31)		(38)
Net cash used for financing activities		(933)		(763)

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		103		(1)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash		(108)		(246)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		7,172		3,956
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	7,064	$	3,710

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY	DEERE & COMPANY															DEERE & COMPANY
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY	STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY															STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY
For the Three Months Ended February 2, 2020 and January 27, 2019
For the Three Months Ended January 31, 2021 and February 2, 2020																For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited	(In millions of dollars) Unaudited															(In millions of dollars) Unaudited
				Total Stockholders’ Equity															Total Stockholders’ Equity
				Deere & Company Stockholders															Deere & Company Stockholders
										Accumulated															Accumulated
		Total								Other				Redeemable			Total								Other				Redeemable
		Stockholders’		Common		Treasury		Retained		Comprehensive		Noncontrolling		Noncontrolling			Stockholders’		Common		Treasury		Retained		Comprehensive		Noncontrolling		Noncontrolling
		Equity		Stock		Stock		Earnings		Income (Loss)		Interests		Interest

Balance October 28, 2018		$	11,291	$	4,474	$	(16,312)	$	27,553	$	(4,427)	$	3	$	14
ASU No. 2016-01 adoption									8		(8)
Net income			500						498				2
Other comprehensive loss			(143)								(143)
Repurchases of common stock			(144)				(144)
Treasury shares reissued			34				34
Dividends declared			(243)						(243)
Stock options and other			38		38
Balance January 27, 2019		$	11,333	$	4,512	$	(16,422)	$	27,816	$	(4,578)	$	5	$	14
																	Equity		Stock		Stock		Earnings		Income (Loss)		Interests		Interest

Balance November 3, 2019		$	11,417	$	4,642	$	(17,474)	$	29,852	$	(5,607)	$	4	$	14		$	11,417	$	4,642	$	(17,474)	$	29,852	$	(5,607)	$	4	$	14
Net income			517						517						1			517						517						1
Other comprehensive income			278								278							278								278
Repurchases of common stock			(114)				(114)											(114)				(114)
Treasury shares reissued			39				39											39				39
Dividends declared			(239)						(239)						(1)			(239)						(239)						(1)
Stock options and other			32		33				(1)									32		33				(1)
Balance February 2, 2020		$	11,930	$	4,675	$	(17,549)	$	30,129	$	(5,329)	$	4	$	14		$	11,930	$	4,675	$	(17,549)	$	30,129	$	(5,329)	$	4	$	14


Balance November 1, 2020																	$	12,944	$	4,895	$	(18,065)	$	31,646	$	(5,539)	$	7
ASU No. 2016-13 adoption*																		(35)						(35)
Net income																		1,224						1,224
Other comprehensive income																		461								461
Repurchases of common stock																		(352)				(352)
Treasury shares reissued																		40				40
Dividends declared																		(239)						(239)
Stock options and other																		43		47								(4)
Balance January 31, 2021																	$	14,086	$	4,942	$	(18,377)	$	32,596	$	(5,078)	$	3
* See Note 3

See Condensed Notes to Interim Consolidated Financial Statements.

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1) Organization and Consolidation

The information in the notes and related commentary are presented in a format which includes data grouped as follows:

Equipment Operations – ~~Includes~~Represents the enterprise without financial services, while including the Company’s production and precision agriculture operations, small agriculture and turf operations, ~~and~~ construction and forestry operations, ~~with~~and other corporate assets, liabilities, revenues, and expenses not reflected within financial ~~services reflected on the equity basis.~~services.

Financial Services – Includes primarily the Company’s financing operations.

Consolidated – Represents the consolidation of the equipment operations and financial services. References to ~~"Deere~~“Deere & ~~Company"~~Company” or ~~"the Company"~~“the Company” refer to the entire enterprise.

Beginning in fiscal year 2021, the Company implemented a new strategy, operating model, and reporting structure. With this change, the Company’s agriculture and turf operations were divided into two new segments: production and precision agriculture and small agriculture and turf. There were no changes to the construction and forestry and financial services segments. In addition, at the beginning of fiscal year 2021 the Company also reclassified goodwill from identifiable operating assets to corporate assets for segment reporting, as goodwill is no longer considered in evaluating the operating performance of the segments. Additional information on the new segments and the segment financial results are presented in Note 10. Prior period segment information was recast for a consistent presentation. References to agriculture and turf include both production and precision agriculture and small agriculture and turf.

The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period. The first quarter ends for fiscal year 2021 and 2020 were January 31, 2021 and ~~2019 were~~ February 2, 2020, ~~and January 27, 2019,~~ respectively. Both periods contained 13 weeks.

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 four months of Wirtgen’s activity in the quarter. 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.

Variable Interest Entities

The Company consolidates certain ~~Variable Interest Entities~~variable interest entities (VIEs) related to retail note securitizations (see Note 12).

The Company also has an interest in a joint venture that manufactures construction equipment in Brazil for local and overseas markets. The joint venture is a VIE; however, the Company is not the primary beneficiary. Therefore, the entity’s financial results are not fully consolidated in the Company’s consolidated financial statements, but are included on the equity basis. The maximum exposure to loss was $7 million, $5 million, and $19 million ~~$22 million,~~at January 31, 2021, November 1, 2020, and ~~$27 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively.

(2) Summary of Significant Accounting Policies and Cash Flow Information

The interim consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. It is suggested that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related

disclosures. ~~Actual~~The COVID pandemic has resulted in uncertainties in the Company’s business, which may result in actual results ~~could differ~~differing from those estimates.

Cash Flow Information

All cash flows from the changes in trade accounts and notes receivable are classified as operating activities in the statement of consolidated cash flows as these receivables arise from sales to the Company’s customers. Cash flows from financing receivables that are related to sales to the Company’s customers are also included in operating activities. The remaining financing receivables are related to the financing of equipment sold by independent dealers and are included in investing activities.

The Company had the following non-cash operating and investing activities that were not included in the statement of consolidated cash flows. The Company transferred inventory to equipment on operating leases of approximately ~~$112~~$84 million and ~~$106~~$112 million in the first three months of ~~2020~~2021 and ~~2019,~~2020, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $39 million and $48 million at January 31, 2021 and ~~$33 million at~~ February 2, 2020, ~~and January 27, 2019,~~ respectively.

The Company’s restricted cash held at January 31, 2021, November 1, 2020, February 2, 2020, and November 3, 2019 ~~January 27, 2019, and October 28, 2018~~ was as follows in millions of dollars:


	February 2		November 3		January 27		October 28		January 31		November 1		February 2		November 3
	2020		2019		2019		2018		2021		2020		2020		2019
Equipment operations	$	21	$	21	$	10	$	7	$	11	$	11	$	21	$	21
Financial services		87		78		87		104		91		95		87		78
Total	$	108	$	99	$	97	$	111	$	102	$	106	$	108	$	99

The equipment operations’ restricted cash relates to miscellaneous operational activities. The financial services restricted cash primarily relates to securitization of financing receivables (see Note 12). The restricted cash is recorded in “Other assets” in the consolidated balance sheet.

(3) New Accounting Standards

New Accounting Standards Adopted

In the first quarter of ~~2020,~~2021, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. ~~2016-02, Leases (Topic 842),~~2016-13, Measurement of Credit Losses on Financial Instruments, which ~~supersedes~~establishes Accounting Standards Codification (ASC) ~~840, Leases.~~326, Financial Instruments - Credit Losses. This ASU was adopted using a modified-retrospective approach. The ~~ASU’s primary change is the requirement for lessee entities to recognize a lease liability for payments and a right of use asset during the term of operating lease arrangements. The~~ ASU, did not significantly change the lessee’s recognition, measurement, and presentation of expenses and cash flows from the previous accounting standard. Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard. The ASU adds new disclosures about the Company’s leasing activities. The Company elected the optional practical expedients to not reassess whether existing contracts contain leases, not reassess lease classification, and not reassess initial direct costs for existing leases. The Company did not elect the hindsight practical expedient. In addition, the Company elected to combine lease and non-lease components for all asset classes and to not recognize a right of use asset or lease liability for arrangements that qualify as short-term leases.

The operating lease liabilities are recorded in “Accounts payable and accrued expenses” and the operating lease right of use assets are recorded in “Other assets.” The finance lease liabilities are recorded in “Short-term borrowings” or “Long-term borrowings” based on the remaining lease term, and the finance lease right of use assets are recorded in “Property and equipment - net.” In addition to the lease liabilities and right of use assets, land use rights were reclassified from “Other intangible assets - net” to “Other assets” and finance lease liabilities were reclassified from “Accounts payable and accrued expenses” to “Short-term borrowings” and “Long-term borrowings.” The effect of adopting the ASU on the consolidated balance sheet follows in millions of dollars:

November 3, 2019

Cumulative Effect
from Adoption

November 4, 2019

Assets

Other intangible assets - net

$
1,380

$
(23)

$
1,357

Other assets

1,899

402

2,301

Liabilities

Short-term borrowings

$
10,784

$
11

$
10,795

Accounts payable and accrued expenses

9,656

348

10,004

Long-term borrowings

30,229

20

30,249

~~The Company implemented a new system for lessee accounting~~along with ~~new processes and controls at the time of adopting the ASU. The adoption did not have a material effect on the Company’s operating results or cash flows. See Note 15 for additional information.~~

~~The Company also adopted the following standards in the first quarter of 2020, none of which had a material effect on the Company’s consolidated financial statements:~~

~~Accounting Standards Updates~~


~~2017-08~~	~~Premium Amortization on Purchased Callable Debt Securities, which amends ASC 310-20, Receivables – Nonrefundable Fees and Other Costs~~
~~2018-07~~	~~Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718, Compensation – Stock Compensation~~
~~2019-04~~	Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The adoption was for clarifications to ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities

~~New Accounting Standards to be Adopted~~

~~In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments – Credit Losses. The ASU revises~~related amendments, revised the measurement of credit losses for financial assets measured at amortized cost from an incurred loss to an expected loss methodology. The ASU affects receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. ~~Additional disclosures about significant estimates~~

The Company holds deposits from dealers (dealer deposits), which are recorded in “Accounts payable and accrued liabilities” to absorb certain credit ~~quality are also required. The effective date will be~~losses. Prior to adopting this ASU, the ~~first quarter~~allowance for credit losses was estimated on probable credit losses incurred after consideration of ~~fiscal year 2021.~~recoveries from dealer deposits. The ASU ~~will be adopted using~~considers dealer deposits and certain credit insurance contracts as freestanding credit enhancements. As a ~~modified-retrospective approach. The Company is developing models to estimate expected~~result, after adoption, credit losses ~~assessing appropriate assumptions, designing new procedures~~recovered from dealer deposits and ~~controls,~~certain credit insurance contracts are presented in “Other income” and ~~evaluating~~no longer as part of the ~~potential~~allowance for credit losses or the provision for credit losses. The ASU also modified the treatment of the estimated write-off of delinquent receivables by no longer including the estimated benefit of charges to the dealer deposits in the write-off amount. This change increases the estimated write-offs on delinquent financing receivables with the benefit of credit losses recovered from dealer deposits presented in “Other income.” This benefit, in both situations, is recorded when the dealer deposits are charged and no longer based on estimated recoveries.

The effects of adopting the ASU on the consolidated ~~financial statements.~~balance sheet follows in millions of dollars:


	November 1		Cumulative Effect		November 2
	2020		from Adoption		2020
Assets
Trade accounts and note receivable - net	$	4,171	$	2	$	4,173
Financing receivables - net		29,750		(27)		29,723
Financing receivables securitized - net		4,703		(4)		4,699
Deferred income taxes		1,499		1		1,500

Liabilities
Accounts payable and accrued expenses	$	10,112	$	14	$	10,126
Deferred income taxes		519		(7)		512

Stockholders’ equity
Retained earnings	$	31,646	$	(35)	$	31,611

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software. This ASU requires customers in a hosting arrangement that is a service contract to evaluate the implementation costs of the hosting arrangement using the guidance to develop internal-use software. The project development stage determines the implementation costs that are capitalized or expensed. Capitalized implementation costs are amortized over the term of the service arrangement and are presented in the same income statement line itemNote 11 contains additional disclosures as well as the ~~service contract costs. The effective date will be the first quarter of~~Company’s updated allowance for credit losses accounting policy.

~~fiscal year 2021, with early adoption permitted.~~ The Company ~~will adopt~~also adopted the ~~ASU on a prospective basis. The Company is evaluating the potential effects on the Company’s consolidated financial statements.~~

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The effective dates for the separate portionsfollowing standards in 2021, none of the ASU and the expected effect on the consolidated financial statements are as follows for the portions that have not yet been adopted: (1) clarifications to ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, is the first quarter of fiscal year 2021, which ~~is under evaluation, and (2) clarifications to ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities is the first quarter of fiscal year 2021, which will not have~~had a material effect on the Company’s consolidated financial ~~statements.~~statements:

~~In December 2019,~~


No. 2018-15	Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software
No. 2019-04	Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
No. 2021-01	Reference Rate Reform (Topic 848): Scope

New Accounting Standards to be Adopted

The Company will adopt the ~~FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes,~~following standards in future periods, none of which amends ASC 740, Income Taxes. This ASU simplifies the accounting for income taxes by modifying the treatment of intraperiod tax allocation in certain circumstances, eliminating an exception to recognizing deferred tax liabilities for outside basis differences for foreign equity method investments and foreign subsidiaries when ownership or control changes, and modifying interim period tax calculations when a loss is forecast. In addition, the ASU also provides guidance for the accounting of a franchise tax that is partially based on income, requires that enacted changes in tax laws or rates be included in the annual effective rate determination in the period that includes the enactment date, and clarifies the tax accounting of a step up in tax basis of goodwill. The effective date will be the first quarter of fiscal year 2022, with early adoption permitted. The guidance related to the foreign equity method investments, foreign subsidiaries, and franchise taxes will be adopted using a modified-retrospective approach. The remaining provisions will be adopted prospectively. The adoption is notare expected to have a material effect on the Company’s consolidated financial ~~statements.~~statements:


No. 2019-12	Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes
No. 2020-08	Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs

(4) Revenue Recognition

The Company’s revenue by primary geographical market, major product line, and timing of revenue recognition in millions of dollars follow:


	Three Months Ended February 2, 2020								Three Months Ended January 31, 2021
	Agriculture and Turf		Construction and Forestry		Financial Services		Total		Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
United States	$	2,500	$	1,020	$	643	$	4,163	$	1,608	$	1,424	$	1,202	$	598	$	4,832
Canada		138		172		156		466		112		79		188		154		533
Western Europe		778		339		22		1,139		449		486		439		24		1,398
Central Europe and CIS		220		159		10		389		161		84		178		9		432
Latin America		455		159		66		680		513		77		170		59		819
Asia, Africa, Australia, New Zealand, and Middle East		504		256		34		794		304		401		353		40		1,098
Total	$	4,595	$	2,105	$	931	$	7,631	$	3,147	$	2,551	$	2,530	$	884	$	9,112

Major product lines:
Large Agriculture	$	2,139					$	2,139
Production Agriculture									$	3,011							$	3,011
Small Agriculture		1,765						1,765			$	1,812						1,812
Turf		468						468				651						651
Construction			$	841				841					$	887				887
Compact Construction				288				288						346				346
Roadbuilding				605				605						910				910
Forestry				274				274						290				290
Financial Products		27		7	$	931		965		16		10		7	$	884		917
Other		196		90				286		120		78		90				288
Total	$	4,595	$	2,105	$	931	$	7,631	$	3,147	$	2,551	$	2,530	$	884	$	9,112

Timing of revenue recognition:
Revenue recognized at a point in time	$	4,540	$	2,079	$	26	$	6,645	$	3,105	$	2,535	$	2,500	$	24	$	8,164
Revenue recognized over time		55		26		905		986		42		16		30		860		948
Total	$	4,595	$	2,105	$	931	$	7,631	$	3,147	$	2,551	$	2,530	$	884	$	9,112


	Three Months Ended January 27, 2019								Three Months Ended February 2, 2020
	Agriculture and Turf		Construction and Forestry		Financial Services		Total		Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
United States	$	2,628	$	1,163	$	575	$	4,366	$	1,433	$	1,067	$	1,020	$	643	$	4,163
Canada		172		248		157		577		75		63		172		156		466
Western Europe		848		337		20		1,205		365		413		339		22		1,139
Central Europe and CIS		148		171		9		328		131		89		159		10		389
Latin America		548		150		64		762		383		72		159		66		680
Asia, Africa, Australia, New Zealand, and Middle East		453		263		30		746		189		315		256		34		794
Total	$	4,797	$	2,332	$	855	$	7,984	$	2,576	$	2,019	$	2,105	$	931	$	7,631

Major product lines:
Large Agriculture	$	2,167					$	2,167
Production Agriculture									$	2,425							$	2,425
Small Agriculture		1,808						1,808			$	1,479						1,479
Turf		506						506				468						468
Construction			$	1,009				1,009					$	841				841
Compact Construction				265				265						288				288
Roadbuilding				598				598						605				605
Forestry				352				352						274				274
Financial Products		20		6	$	855		881		18		9		7	$	931		965
Other		296		102				398		133		63		90				286
Total	$	4,797	$	2,332	$	855	$	7,984	$	2,576	$	2,019	$	2,105	$	931	$	7,631

Timing of revenue recognition:
Revenue recognized at a point in time	$	4,755	$	2,313			$	7,068	$	2,536	$	2,004	$	2,079	$	26	$	6,645
Revenue recognized over time		42		19	$	855		916		40		15		26		905		986
Total	$	4,797	$	2,332	$	855	$	7,984	$	2,576	$	2,019	$	2,105	$	931	$	7,631

~~Following is a description of the~~The Company’s major product ~~lines:~~lines are described as follows:

~~Large~~Production Agriculture– Includes net sales of large and certain mid-size tractors ~~with more than approximately 200 horsepower~~ and associated attachments, combines, cotton pickers, cotton strippers, ~~self-propelled forage harvesters and related attachments,~~ and sugarcane harvesters, ~~harvesting front-end equipment,~~ sugarcane loaders and pull behind scrapers, tillage, seeding, and application equipment, including sprayers, nutrient management and soil preparation machinery, and related attachments and service parts.

Small Agriculture – Includes net sales of ~~medium~~mid-size and utility tractors, ~~with less than approximately 200 horsepower,~~self-propelled forage harvesters, hay and forage equipment, balers, mowers, and related attachments and service parts.

Turf – Includes net sales of turf and utility equipment, including riding lawn equipment, ~~and walk-behind mowers,~~ golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements, other outdoor power products, and related ~~attachments and~~ service parts.

Construction – Includes net sales of a broad range of machines used in construction, earthmoving, and material handling, including backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, and related attachments and service parts.

Compact Construction – Includes net sales of smaller construction equipment, including compact excavators, compact track loaders, compact wheel loaders, skid steers, landscape loaders, and related attachments and service parts.

Roadbuilding – Includes net sales of equipment used in roadbuilding and renovation, including milling machines, recyclers, slipform pavers, surface miners, asphalt pavers, compactors, tandem and static rollers, mobile crushers and screens, mobile and stationary asphalt plants, and related attachments and service parts.

Forestry – Includes net sales of equipment used in timber harvesting, including log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments and service parts.

Financial Products – Includes finance and interest income primarily from retail notes related to sales of John Deere equipment to end customers, wholesale financing to dealers of John Deere equipment, and revolving charge accounts; lease income from retail leases of John Deere equipment; and revenue from extended warranties.

Other – Includes sales of certain components to other equipment manufacturers, revenue earned over time from precision guidance, telematics, and other information enabled solutions, revenue from service performed at ~~company~~Company owned dealerships and service centers, gains on disposition of property and businesses, trademark licensing revenue, and other miscellaneous revenue items.

The Company invoices in advance of recognizing the sale of certain products and the revenue for certain services. These items are primarily for premiums for extended warranties, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services. These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses” in the consolidated balance sheet. The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 16, was $1,169 million, $1,090 million, and $1,070 million ~~$1,010 million,~~at January 31, 2021, November 1, 2020, and ~~$956 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively. The contract liability is reduced as the revenue is recognized. During the three months ended January 31, 2021 and February 2, 2020, ~~and January 27, 2019, $181~~$223 million and ~~$156~~$181 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year.

The Company entered into contracts with customers to deliver equipment and services that have not been recognized at ~~February 2, 2020~~January 31, 2021 because the equipment or services have not been provided. These contracts primarily relate to extended warranty and certain precision guidance and telematic services. The amount of unsatisfied performance obligations for contracts with an original duration greater than one year is ~~$887~~$925 million at ~~February 2, 2020.~~January 31, 2021. The estimated revenue to be recognized by fiscal year ~~follows~~ in millions of ~~dollars:~~dollars follows: remainder of ~~2020~~ ~~- $275,~~ 2021 - $274, 2022 - ~~$182,~~ $291, 2023 - ~~$101,~~ $195, 2024 - ~~$42,~~$104, 2025 - $43, 2026 - $15 and later years - ~~$13.~~$3. The Company discloses unsatisfied performance obligations with an original contract duration greater than one year. The contracts with an expected duration of one year or less are generally for sales to dealers and end customers for equipment, service parts, repair services, and certain telematics services.

During 2020, the Company provided short-term payment relief on trade accounts and notes receivables to independent dealers and certain other customers that were negatively affected by the economic effects of COVID. The relief was provided both in regional programs and case-by-case situations with creditworthy

customers. This relief generally included payment deferrals not exceeding three months, extending interest-free periods for up to an additional three months with the total interest-free period not to exceed one year, or reducing interest rates for a maximum of three months. The trade receivable balance granted relief and remaining outstanding at January 31, 2021 was not material.

(5) Other Comprehensive Income Items

The after-tax changes in accumulated other comprehensive income (loss) in millions of dollars follow:


									Total										Total
					Unrealized		Unrealized		Accumulated						Unrealized		Unrealized		Accumulated
	Retirement		Cumulative		Gain (Loss)		Gain (Loss)		Other		Retirement		Cumulative		Gain (Loss)		Gain (Loss)		Other
	Benefits		Translation		on		on		Comprehensive		Benefits		Translation		on		on		Comprehensive
	Adjustment		Adjustment		Derivatives		Debt Securities		Income (Loss)		Adjustment		Adjustment		Derivatives		Debt Securities		Income (Loss)
Balance October 28, 2018	$	(3,237)	$	(1,203)	$	15	$	(2)	$	(4,427)
ASU No. 2016-01 adoption								(8)		(8)
Other comprehensive income (loss) items before reclassification		1		(162)		(7)		8		(160)
Amounts reclassified from accumulated other comprehensive income		19				(2)				17
Net current period other comprehensive income (loss)		20		(162)		(9)		8		(143)
Balance January 27, 2019	$	(3,217)	$	(1,365)	$	6	$	(2)	$	(4,578)

Balance November 3, 2019	$	(3,915)	$	(1,651)	$	(60)	$	19	$	(5,607)	$	(3,915)	$	(1,651)	$	(60)	$	19	$	(5,607)
Other comprehensive income (loss) items before reclassification		186		43		(1)		5		233		186		43		(1)		5		233
Amounts reclassified from accumulated other comprehensive income		44				1				45		44				1				45
Net current period other comprehensive income (loss)		230		43				5		278		230		43				5		278
Balance February 2, 2020	$	(3,685)	$	(1,608)	$	(60)	$	24	$	(5,329)	$	(3,685)	$	(1,608)	$	(60)	$	24	$	(5,329)

Balance November 1, 2020											$	(3,918)	$	(1,596)	$	(58)	$	33	$	(5,539)
Other comprehensive income (loss) items before reclassification												(1)		396				(2)		393
Amounts reclassified from accumulated other comprehensive income												64				4				68
Net current period other comprehensive income (loss)												63		396		4		(2)		461
Balance January 31, 2021											$	(3,855)	$	(1,200)	$	(54)	$	31	$	(5,078)

~~Following are amounts~~Amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of ~~dollars:~~dollars follow:


	Before		Tax		After		Before		Tax		After
	Tax		(Expense)		Tax		Tax		(Expense)		Tax
Three Months Ended February 2, 2020	Amount		Credit		Amount
Three Months Ended January 31, 2021							Amount		Credit		Amount
Cumulative translation adjustment	$	43			$	43	$	394	$	2	$	396
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(2)	$	1		(1)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		2		(1)		1		5		(1)		4
Net unrealized gain (loss) on derivatives								5		(1)		4
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		6		(1)		5		(3)		1		(2)
Net unrealized gain (loss) on debt securities		6		(1)		5		(3)		1		(2)
Retirement benefits adjustment:
Pensions
Net actuarial gain (loss)		1				1		(1)				(1)
Reclassification to other operating expenses through amortization of: *
Actuarial (gain) loss		62		(26)		36		70		(17)		53
Prior service (credit) cost		3		(1)		2		2		(1)		1
Settlements		3		(1)		2		13		(3)		10
OPEB
Net actuarial gain (loss)		245		(60)		185
Reclassification to other operating expenses through amortization of: *
Actuarial (gain) loss		7		(2)		5
Prior service (credit) cost		(1)				(1)
Net unrealized gain (loss) on retirement benefits adjustment		320		(90)		230		84		(21)		63
Total other comprehensive income (loss)	$	369	$	(91)	$	278	$	480	$	(19)	$	461

~~(continued)~~


	Before		Tax		After		Before		Tax		After
	Tax		(Expense)		Tax		Tax		(Expense)		Tax
Three Months Ended January 27, 2019	Amount		Credit		Amount
Three Months Ended February 2, 2020							Amount		Credit		Amount
Cumulative translation adjustment	$	(162)			$	(162)	$	43			$	43
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(9)	$	2		(7)		(2)	$	1		(1)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(2)				(2)		2		(1)		1
Net unrealized gain (loss) on derivatives		(11)		2		(9)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		10		(2)		8		6		(1)		5
Net unrealized gain (loss) on debt securities		10		(2)		8		6		(1)		5
Retirement benefits adjustment:
Pensions
Net actuarial gain (loss)		1				1		246		(60)		186
Reclassification to other operating expenses through amortization of: *
Actuarial (gain) loss		35		(8)		27		69		(28)		41
Prior service (credit) cost		3		(1)		2		2		(1)		1
OPEB
Reclassification to other operating expense through amortization of: *
Actuarial (gain) loss		5		(1)		4
Prior service (credit) cost		(18)		4		(14)
Settlements								3		(1)		2
Net unrealized gain (loss) on retirement benefits adjustment		26		(6)		20		320		(90)		230
Total other comprehensive income (loss)	$	(137)	$	(6)	$	(143)	$	369	$	(91)	$	278

* These accumulated other comprehensive income amounts are included in net periodic pension and OPEB costs. See Note 8 for additional detail.

In the first quarter of ~~2020~~2021 and ~~2019~~2020, the noncontrolling interests’ comprehensive income was ~~$1 million~~NaN and $2$1 million, respectively, which consisted of net income.

(6) Dividends Declared and Paid

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


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Dividends declared	$	.76	$	.76	$	.76	$	.76
Dividends paid	$	.76	$	.69	$	.76	$	.76

(7) Earnings Per Share

A reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions, except per share amounts:


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Net income attributable to Deere & Company	$	517	$	498	$	1,224	$	517
Average shares outstanding		313.5		318.5		313.5		313.5
Basic per share	$	1.65	$	1.56	$	3.90	$	1.65

Average shares outstanding		313.5		318.5		313.5		313.5
Effect of dilutive share-based compensation		3.7		4.2		2.6		3.7
Total potential shares outstanding		317.2		322.7		316.1		317.2
Diluted per share	$	1.63	$	1.54	$	3.87	$	1.63

During the first quarter of 2021 and 2020, .1 million shares and ~~2019,~~ .2 ~~million and .6~~ million shares, respectively, were excluded from the computation because the incremental shares would have been antidilutive.

(8) Pension and Other Postretirement Benefits

The Company has several defined benefit pension plans and postretirement benefit (OPEB) plans, primarily health care and life insurance plans, covering its U.S. employees and employees in certain foreign countries.

The worldwide components of net periodic pension cost consisted of the following in millions of dollars:


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Service cost	$	84	$	66	$	85	$	84
Interest cost		87		111		69		87
Expected return on plan assets		(205)		(200)		(200)		(205)
Amortization of actuarial loss		62		35		63		62
Amortization of prior service cost		3		3		3		3
Settlements		3				13		3
Net cost	$	34	$	15	$	33	$	34

The worldwide components of net periodic OPEB cost consisted of the following in millions of dollars:


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Service cost	$	12	$	10	$	12	$	12
Interest cost		37		54		26		37
Expected return on plan assets		(12)		(9)		(19)		(12)
Amortization of actuarial loss		7		5		7		7
Amortization of prior service credit		(1)		(18)		(1)		(1)
Curtailments		21						21
Net cost	$	64	$	42	$	25	$	64

The components of net periodic pension and OPEB costs excluding the service cost component are included in the line item “~~Other~~“Other operating ~~expenses~~”expenses” in the statement of consolidated income.

In the first quarter of 2020, the Company remeasured the U.S. salary OPEB health care plans. The wage plan was remeasured due to the U.S. enactment of the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) that repealed the health insurance provider fee effective in 2021. The salary plans ~~were remeasured~~ due to the U.S. voluntary employee-separation program (see Note 20), which resulted in a $21 million curtailment loss. ~~The combined effect of the remeasurements was to reduce the benefit obligation by $245 million.~~

During the first three months of ~~2020,~~2021, the Company contributed approximately ~~$24~~$42 million to its pension plans and ~~$43~~$57 million to its OPEB plans. The Company presently anticipates contributing an additional ~~$68~~$58 million to its pension plans and ~~$397~~$789 million to its OPEB plans during the remainder of fiscal year ~~2020.~~2021. The anticipated OPEB contributions include a voluntary ~~$300~~$700 million in the fourth quarter to a U.S. plan, which will increase plan assets. These pension and remaining OPEB contributions primarily include direct benefit payments from Company funds.

(9) Income Taxes

~~The lower effective tax rate in the first quarter of 2020 primarily resulted from two discrete items.~~ In January 2020, the Company changed the corporate structure of two foreign holding subsidiaries to be indirect branches of Deere & Company. The change in tax status generated a capital loss that will be carried back in the Company’s U.S. income tax return, ~~resulting~~which resulted in a $43 million ~~benefit.~~benefit in the first quarter of 2020. In addition, the Company recognized a discrete benefit ~~of $24 million was recognized~~ for the excess tax benefits related to vesting or exercise of share-based compensation ~~awards.~~awards of $39 million and $24 million in the first quarters of 2021 and 2020, respectively.

The Company’s unrecognized tax benefits at January 31, 2021 were $710 million, compared to $668 million at November 1, 2020. The liability at January 31, 2021, November 1, 2020, and February 2, 2020 ~~were $557 million, compared to $553 million at November 3, 2019. The liability at February 2, 2020, November 3, 2019, and January 27, 2019~~ consisted of approximately ~~$105~~$148 million, ~~$153~~$134 million, and ~~$143~~$105 million, respectively, which would affect the effective tax rate if the tax benefits were recognized. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. The changes in the

unrecognized tax benefits for the first three months of ~~2020~~2021 were not significant. The Company expects that any reasonably possible change in the amounts of unrecognized tax benefits in the next 12 months would not be ~~significant.~~

~~(10)~~~~Segment Reporting~~

~~Worldwide net sales and revenues, operating profit, and identifiable assets by segment in millions of dollars follow:~~

Three Months Ended

February 2

January 27

%

2020

2019

Change

Net sales and revenues:







Agriculture and turf

$
4,486

$
4,681

-4

Construction and forestry

2,044

2,260

-10

Total net sales

6,530

6,941

-6

Financial services

931

855

+9

Other revenues

170

188

-10

Total net sales and revenues

$
7,631

$
7,984

-4

Operating profit: *

Agriculture and turf

$
373

$
348

+7

Construction and forestry

93

229

-59

Financial services

179

192

-7

Total operating profit

645

769

-16

Reconciling items **

(78)

(87)

-10

Income taxes

(50)

(184)

-73

Net income attributable to Deere & Company

$
517

$
498

+4

Intersegment sales and revenues:

Agriculture and turf net sales

$
7

$
9

-22

Construction and forestry net sales

1

Financial services

67

72

-7

Equipment operations outside the U.S. and Canada:

Net sales

$
2,780

$
2,818

-1

Operating profit

225

176

+28

February 2

November 3

2020

2019



Identifiable assets:

Agriculture and turf

$
10,817

$
10,379

+4

Construction and forestry

9,376

9,387

Financial services

47,279

48,483

-2

Corporate

4,349

4,762

-9

Total assets

$
71,821

$
73,011

-2

*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 and 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.

material.

1514

(10)Segment Reporting

The production and precision agriculture segment is responsible for defining, developing, and delivering global equipment and technology solutions to unlock customer value for production-scale growers of large grains, small grains, cotton, and sugar. Main products include large and certain mid-size tractors, combines, cotton pickers, sugarcane harvesters and loaders, and soil preparation, seeding, application and crop care equipment.

The small agriculture and turf segment is responsible for defining, developing, and delivering market-driven products to support mid-size and small growers and producers globally as well as turf customers. The operations are principally organized to support production systems for dairy and livestock, high-value crops, and turf and utility operators. Primary products include certain mid-size and small tractors, as well as hay and forage equipment, riding and commercial lawn equipment, golf course equipment, and utility vehicles.

There were no reporting changes for the construction and forestry and financial services segments. As a result, the Company has 4 reportable segments.

Worldwide net sales and revenues, operating profit, and identifiable assets by segment in millions of dollars follow:


	Three Months Ended
	January 31		February 2		%
	2021		2020		Change
Net sales and revenues:
Production & precision ag	$	3,069	$	2,507	+22
Small ag & turf		2,515		1,979	+27
Construction & forestry		2,467		2,044	+21
Total net sales		8,051		6,530	+23
Financial services		884		931	-5
Other revenues		177		170	+4
Total net sales and revenues	$	9,112	$	7,631	+19
Operating profit: *
Production & precision ag	$	643	$	218	+195
Small ag & turf		469		155	+203
Construction & forestry		268		93	+188
Financial services		258		179	+44
Total operating profit		1,638		645	+154
Reconciling items **		(106)		(78)	+36
Income taxes		(308)		(50)	+516
Net income attributable to Deere & Company	$	1,224	$	517	+137

Intersegment sales and revenues:
Production & precision ag net sales	$	6	$	6
Small ag & turf net sales		3		1	+200
Construction & forestry net sales
Financial services		50		67	-25

Equipment operations outside the U.S. and Canada:
Net sales	$	3,522	$	2,780	+27
Operating profit		563		225	+150

** 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.

At the beginning of fiscal year 2021, the Company reclassified goodwill from identifiable operating segment assets to corporate assets for segment reporting, as goodwill is no longer considered in evaluating the operating performance of the segments. Prior period amounts have been restated for a consistent presentation.


	January 31		November 1		February 2
	2021		2020		2020
Identifiable assets:
Production & precision ag	$	6,330	$	5,708	$	6,407
Small ag & turf		3,510		3,266		3,838
Construction & forestry		6,341		6,322		7,002
Financial services		48,378		48,719		47,279
Corporate		10,921		11,076		7,295
Total assets	$	75,480	$	75,091	$	71,821

(11) Financing Receivables

The Company monitors the credit quality of financing receivables based on delinquency status. Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. The Company ceases accruing finance income, and accrued finance income previously recognized is reversed when these receivables are generally 90 days delinquent. Generally, when receivables are 120 days delinquent the estimated uncollectible amount ~~after charging~~from the ~~dealer’s withholding account, if any,~~customer is written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

~~An age~~Due to the economic effects of COVID, the Company provided short-term relief to dealers and retail customers during 2020, and to a much lesser extent in 2021. The relief was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. Financing receivables granted relief represented approximately 4 percent of the financing receivables balance at January 31, 2021. The majority of financing receivables granted short-term relief during 2020 are beyond the deferral period and have either resumed making payments or are reported as delinquent based on the modified payment schedule.

While the Company implemented a new strategy in fiscal year 2021 resulting in new operating segments, assets managed by financial services, including most financing receivables and equipment on operating leases, continue to be evaluated by market (agriculture and turf or construction and forestry).

The credit quality analysis of ~~past due~~retail notes, financing ~~receivables that are still accruing interest~~leases, and ~~non-performing financing receivables~~revolving charge accounts (collectively, customer receivables), in millions of dollars at January 31, 2021 was as follows:


	Year of Origination
	2021		2020		2019		2018		2017		Prior		Revolving Charge Accounts		Total
Customer receivables:
Agriculture and turf
Current	$	2,531	$	9,427	$	5,129	$	2,817	$	1,400	$	686	$	2,564	$	24,554
30-59 days past due		4		65		49		30		13		7		27		195
60-89 days past due				20		17		11		5		3		5		61
90+ days past due						1										1
Non-performing				40		78		57		36		46		7		264
Construction and forestry
Current		737		2,251		1,276		573		164		39		77		5,117
30-59 days past due		5		53		32		17		6		1		3		117
60-89 days past due		1		15		16		7		3		1		1		44
90+ days past due				9		13		5		4		2				33
Non-performing				26		34		26		14		8		1		109
Total customer receivables	$	3,278	$	11,906	$	6,645	$	3,543	$	1,645	$	793	$	2,685	$	30,495

February 2, 2020






90 Days


30-59 Days

60-89 Days

or Greater

Total

Past Due

Past Due

Past Due

Past Due

Retail Notes:

Agriculture and turf

$
150

$
65

$
3

$
218

Construction and forestry

96

36

19

151

Other:

Agriculture and turf

66

21

1

88

Construction and forestry

29

11

40

Total

$
341

$
133

$
23

$
497



Total

Total

         Total

Financing

Past Due

Non-Performing

Current

Receivables

Retail Notes:

Agriculture and turf

$
218

$
283

$
18,514

$
19,015

Construction and forestry

151

131

3,488

3,770

Other:

Agriculture and turf

88

100

7,457

7,645

Construction and forestry

40

28

1,431

1,499

Total

$
497

$
542

$
30,890

31,929

Less allowance for credit losses

157

Total financing receivables – net

$
31,772

November 3, 2019






90 Days


30-59 Days

60-89 Days

or Greater

Total

Past Due

Past Due

Past Due

Past Due

Retail Notes:

Agriculture and turf

$
138

$
73

$
1

$
212

Construction and forestry

79

29

4

112

Other:

Agriculture and turf

39

19

1

59

Construction and forestry

26

7

33

Total

$
282

$
128

$
6

$
416

Total

Total

         Total

Financing

Past Due

Non-Performing

Current

Receivables

Retail Notes:

Agriculture and turf

$
212

$
268

$
18,931

$
19,411

Construction and forestry

112

127

3,450

3,689

Other:

Agriculture and turf

59

28

8,986

9,073

Construction and forestry

33

26

1,496

1,555

Total

$
416

$
449

$
32,863

33,728

Less allowance for credit losses

150

Total financing receivables – net

$
33,578

The credit quality analysis of customer receivables in millions of dollars at November 1, 2020 and February 2, 2020 was as follows:


	November 1, 2020						February 2, 2020
Customer receivables:	Retail Notes & Financing Leases		Revolving Charge Accounts		Total		Retail Notes & Financing Leases		Revolving Charge Accounts		Total
Agriculture and turf
Current	$	21,597	$	3,787	$	25,384	$	19,455	$	2,578	$	22,033
30-59 days past due		135		13		148		162		53		215
60-89 days past due		64		4		68		71		15		86
90+ days past due		2				2		4				4
Non-performing		263		6		269		301		6		307
Construction and forestry
Current		4,859		88		4,947		4,362		75		4,437
30-59 days past due		111		2		113		121		4		125
60-89 days past due		55		1		56		46		1		47
90+ days past due		14				14		19				19
Non-performing		106		1		107		156		1		157
Total customer receivables	$	27,206	$	3,902	$	31,108	$	24,697	$	2,733	$	27,430

The credit quality analysis of wholesale receivables in millions of dollars at January 31, 2021 was as follows:


	January 27, 2019								Year of Origination
					90 Days				2021		2020		2019		2018		2017		Prior		Revolving		Total
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail Notes:
Wholesale receivables:
Agriculture and turf	$	162	$	63	$	1	$	226
Current									$	78	$	226	$	67	$	18	$	8	$	1	$	2,297	$	2,695
30-59 days past due
60-89 days past due
90+ days past due
Non-performing														35										35
Construction and forestry		102		47		1		150
Other:
Agriculture and turf		65		23		1		89
Construction and forestry		16		8				24
Total	$	345	$	141	$	3	$	489

							Total
	Total		Total				Financing
	Past Due		Non-Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	226	$	296	$	17,408	$	17,930
Construction and forestry		150		107		3,092		3,349
Other:
Agriculture and turf		89		28		7,213		7,330
Construction and forestry		24		10		1,247		1,281
Total	$	489	$	441	$	28,960		29,890
Less allowance for credit losses								177
Total financing receivables – net							$	29,713
Current										3		11		20		2		1		2		315		354
30-59 days past due
60-89 days past due
90+ days past due																				1				1
Non-performing
Total wholesale receivables									$	81	$	237	$	122	$	20	$	9	$	4	$	2,612	$	3,085

The credit quality analysis of wholesale receivables in millions of dollars at November 1, 2020 and February 2, 2020 was as follows:


	November 1		February 2
Wholesale receivables:	2020		2020
Agriculture and turf
Current	$	3,010	$	3,938
30-59 days past due				1
60-89 days past due
90+ days past due
Non-performing		47		76
Construction and forestry
Current		472		482
30-59 days past due
60-89 days past due
90+ days past due
Non-performing				2
Total wholesale receivables	$	3,529	$	4,499

The allowance for credit losses is an estimate of the credit losses expected over the life of the Company’s receivable portfolio. The Company measures expected credit losses on a collective basis when similar risk characteristics exist. Risk characteristics considered by the Company include finance product category, market, geography, credit risk, and remaining duration. Receivables that do not share risk characteristics with other receivables in the portfolio are evaluated on an individual basis.

The Company utilizes loss forecast models, which are selected based on the size and credit risk of the underlying pool of receivables, to estimate expected credit losses. Transition matrix models are used for large and complex customer receivable pools, while weighted average remaining maturity models are used for smaller and less complex customer receivable pools. Expected credit losses on wholesale receivables are based on historical loss rates, adjusted for current economic conditions. The modeled expected credit losses are adjusted based on reasonable and supportable forecasts, which may include economic indicators such as commodity prices, industry equipment sales, unemployment rates, and housing starts. Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary.

An analysis of the allowance for credit losses and investment in financing receivables in millions of dollars during the periods follows:


	Three Months Ended February 2, 2020								Three Months Ended January 31, 2021
			Revolving						Retail Notes		Revolving
	Retail		Charge						& Financing		Charge		Wholesale
	Notes		Accounts		Other		Total		Leases		Accounts		Receivables		Total
Allowance:
Beginning of period balance	$	89	$	40	$	21	$	150	$	133	$	43	$	8	$	184
ASU No. 2016-13 adoption										44		(13)				31
Provision (credit)		15		(1)		7		21		5		(10)		(1)		(6)
Write-offs		(17)		(7)		(1)		(25)		(8)		(5)				(13)
Recoveries		2		8				10		5		9				14
Translation adjustments		(1)				2		1		1						1
End of period balance *	$	88	$	40	$	29	$	157
End of period balance									$	180	$	24	$	7	$	211

Financing receivables:
End of period balance	$	22,785	$	2,733	$	6,411	$	31,929	$	27,810	$	2,685	$	3,085	$	33,580
Balance individually evaluated **	$	170			$	86	$	256


	Three Months Ended February 2, 2020
	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
Allowance:
Beginning of period balance	$	107	$	40	$	3	$	150
Provision (credit)		16		(1)		6		21
Write-offs		(18)		(7)				(25)
Recoveries		2		8				10
Translation adjustments		(1)				2		1
End of period balance	$	106	$	40	$	11	$	157

Financing receivables:
End of period balance	$	24,697	$	2,733	$	4,499	$	31,929

Three Months Ended January 27, 2019

Revolving

Retail

Charge

Notes

Accounts

Other

Total

Allowance:













Beginning of period balance

$
113

$
43

$
22

$
178

Provision (credit)

6

(1)

2

7

Write-offs

(11)

(4)

(1)

(16)

Recoveries

4

5

9

Translation adjustments

(1)

(1)

End of period balance *

$
111

$
43

$
23

$
177

Financing receivables:

End of period balance

$
21,279

$
2,737

$
5,874

$
29,890

Balance individually evaluated **

$
118

$
2

$
13

$
133

*~~Individual allowances were not significant.~~

**~~Remainder is collectively evaluated.~~

Financing receivables are considered impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables that are impaired are generally classified as non-performing.

~~An analysis of the impaired financing receivables in millions of dollars follows:~~

Unpaid



Average

Recorded

Principal

Specific

Recorded

Investment

Balance

Allowance

Investment

February 2, 2020*

Receivables with specific allowance ***

$
117

$
116

$
22

$
119

Receivables without a specific allowance **

31

30

32

Total

$
148

$
146

$
22

$
151

Agriculture and turf

$
120

$
120

$
17

$
123

Construction and forestry

$
28

$
26

$
5

$
28

November 3, 2019*

Receivables with specific allowance **

$
40

$
39

$
13

$
40

Receivables without a specific allowance **

32

31

37

Total

$
72

$
70

$
13

$
77

Agriculture and turf

$
49

$
48

$
8

$
52

Construction and forestry

$
23

$
22

$
5

$
25

January 27, 2019*

Receivables with specific allowance **

$
30

$
30

$
12

$
30

Receivables without a specific allowance **

36

34

36

Total

$
66

$
64

$
12

$
66

Agriculture and turf

$
49

$
48

$
9

$
49

Construction and forestry

$
17

$
16

$
3

$
17

*~~Finance income recognized was not material.~~

** ~~Primarily retail notes.~~

*** Primarily retail notes and wholesale receivables.

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first three months of ~~2020,~~2021, the Company identified 98 receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $5 million pre-modification and post-modification. During the first three months of 2020, there were 88 receivable contracts, primarily wholesale receivables in Argentina, identified as troubled debt restructurings with aggregate balances of $85 million pre-modification and $74 million post-modification. ~~During~~The short-term payment relief related to COVID, mentioned earlier, did not meet the ~~first three months~~definition of ~~2019, there were 70 financing receivable contracts, primarily retail notes, identified as~~a troubled debt ~~restructurings with aggregate balances of $2 million pre-modification and $2 million post-modification.~~restructuring. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At ~~February 2, 2020,~~January 31, 2021, the Company had 0 commitments to lend ~~approximately $14 million~~ to borrowers whose accounts were modified in troubled debt restructurings.

1918

(12) Securitization of Financing Receivables

The Company, as a part of its overall funding strategy, periodically transfers certain financing receivables (retail notes) into ~~variable interest entities (VIEs)~~VIEs that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes did not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.

In these securitizations, the retail notes are transferred to certain SPEs or to non-VIE banking operations, which in turn issue debt to investors. The debt securities issued to the third party investors resulted in secured borrowings, which are recorded as “Short-term securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Financing receivables securitized – net” on the balance sheet. The total restricted assets on the consolidated balance sheet related to these securitizations include the financing receivables securitized less an allowance for credit losses, and other assets primarily representing restricted cash. Restricted cash results from contractual requirements in securitized borrowing arrangements and serves as a credit enhancement. The restricted cash is used to satisfy payment deficiencies, if any, in the required payments on secured borrowings. The balance of restricted cash is contractually stipulated and is either a fixed amount as determined by the initial balance of the financing receivables securitized or a fixed percentage of the outstanding balance of the securitized financing receivables. The restriction is removed either after all secured borrowing payments are made or proportionally as these receivables are collected and borrowing obligations reduced. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the receivables held by the SPEs and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes securitized, allowance for credit losses, and other assets) of the consolidated SPEs totaled $2,425 million, $2,898 million, and $2,490 million ~~$2,895 million,~~at January 31, 2021, November 1, 2020, and ~~$2,137 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled $2,403 million, $2,856 million, and $2,442 million ~~$2,847 million,~~at January 31, 2021, November 1, 2020, and ~~$2,092 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In certain securitizations, the Company transfers retail notes to non-VIE banking operations, which are not consolidated since the Company does not have a controlling interest in the entities. The Company’s carrying values and interests related to the securitizations with the unconsolidated non-VIEs were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $481 million, $576 million, and $638 million ~~$491 million,~~at January 31, 2021, November 1, 2020, and ~~$790 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively. The liabilities (short-term securitization borrowings and accrued interest) were $471 million, $554 million, and $609 million ~~$465 million,~~at January 31, 2021, November 1, 2020, and ~~$743 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively.

In certain securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company does not service a significant portion of the conduits’ receivables, and therefore, does not have the power to direct the activities that most significantly impact the conduits’ economic performance. These conduits provide a funding source to the Company (as well as other transferors into the conduit) as they fund the retail notes through the issuance of commercial paper. The Company’s carrying values and variable interest related to these conduits were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $1,120 million, $1,327 million, and $1,441 million ~~$1,079 million,~~at January 31, 2021, November 1, 2020, and ~~$1,745 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively. The liabilities (short-term securitization borrowings and accrued interest) related to these conduits were $1,097 million, $1,275 million, and $1,370 million ~~$1,015 million,~~at January 31, 2021, November 1, 2020, and ~~$1,632 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively.

2019

The Company’s carrying amount of the liabilities to the unconsolidated conduits, compared to the maximum exposure to loss related to these conduits, which would only be incurred in the event of a complete loss on the restricted assets, was as follows in millions of dollars:


	February 2, 2020		January 31, 2021
Carrying value of liabilities	$	1,370	$	1,097
Maximum exposure to loss		1,441		1,120

The total assets of unconsolidated VIEs related to securitizations were approximately ~~$41 billion.~~$37 billion at January 31, 2021.

The components of consolidated restricted assets related to secured borrowings in securitization transactions follow in millions of dollars:


	February 2		November 3		January 27		January 31		November 1		February 2
	2020		2019		2019		2021		2020		2020
Financing receivables securitized (retail notes)	$	4,487	$	4,395	$	4,573	$	3,946	$	4,716	$	4,487
Allowance for credit losses		(9)		(12)		(10)		(15)		(13)		(9)
Other assets		91		82		109		95		98		91
Total restricted securitized assets	$	4,569	$	4,465	$	4,672	$	4,026	$	4,801	$	4,569

The components of consolidated secured borrowings and other liabilities related to securitizations follow in millions of dollars:


	February 2		November 3		January 27		January 31		November 1		February 2
	2020		2019		2019		2021		2020		2020
Short-term securitization borrowings	$	4,416	$	4,321	$	4,464	$	3,969	$	4,682	$	4,416
Accrued interest on borrowings		5		6		3		2		3		5
Total liabilities related to restricted securitized assets	$	4,421	$	4,327	$	4,467	$	3,971	$	4,685	$	4,421

The secured borrowings related to these restricted securitized retail notes are obligations that are payable as the retail notes are liquidated. Repayment of the secured borrowings depends primarily on cash flows generated by the restricted assets. Due to the Company’s short-term credit rating, cash collections from these restricted assets are not required to be placed into a segregated collection account until immediately prior to the time payment is required to the secured creditors. At ~~February 2, 2020,~~January 31, 2021, the maximum remaining term of all securitized retail notes was approximately ~~seven~~six years.

(13) Inventories

Most inventories owned by Deere & Company and its U.S. equipment subsidiaries and certain foreign equipment subsidiaries are valued at cost on the “last-in, first-out” (LIFO) method. If all of the Company’s inventories had been valued on a “first-in, first-out” (FIFO) method, estimated inventories by major classification in millions of dollars would have been as follows:

February 2

November 3

January 27

2020

2019

2019

Raw materials and supplies

$
2,311

$
2,285

$
2,506

Work-in-process

818

747

1,026

Finished goods and parts

4,946

4,613

5,693

Total FIFO value

8,075

7,645

9,225

Less adjustment to LIFO value

1,593

1,670

1,823

Inventories

$
6,482

$
5,975

$
7,402


	January 31		November 1		February 2
	2021		2020		2020
Raw materials and supplies	$	2,303	$	1,995	$	2,311
Work-in-process		839		648		818
Finished goods and parts		4,485		4,006		4,946
Total FIFO value		7,627		6,649		8,075
Less adjustment to LIFO value		1,671		1,650		1,593
Inventories	$	5,956	$	4,999	$	6,482

2120

(14) Goodwill and Other Intangible Assets-Net

The changes in amounts of goodwill by operating ~~segments~~segment were as follows in millions of dollars:


	Agriculture		Construction
	and Turf		and Forestry		Total
Goodwill at October 28, 2018	$	583	$	2,518	$	3,101
Translation adjustments and other		2		(55)		(53)
Goodwill at January 27, 2019	$	585	$	2,463	$	3,048
							Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Total
Goodwill at November 3, 2019	$	574	$	2,343	$	2,917	$	310	$	264	$	2,343	$	2,917
Translation adjustments and other		(3)		31		28		(2)		(1)		31		28
Goodwill at February 2, 2020	$	571	$	2,374	$	2,945	$	308	$	263	$	2,374	$	2,945

Goodwill at November 1, 2020							$	333	$	268	$	2,480	$	3,081
Acquisition								12						12
Translation adjustments and other								12		(1)		90		101
Goodwill at January 31, 2021							$	357	$	267	$	2,570	$	3,194

There were 0 accumulated goodwill impairment losses in the reported periods.

The components of other intangible assets were as follows in millions of dollars:


	February 2		November 3		January 27		January 31		November 1		February 2
	2020		2019		2019		2021		2020		2020
Amortized intangible assets:
Customer lists and relationships	$	517	$	511	$	538	$	553	$	535	$	517
Technology, patents, trademarks, and other		1,013		1,028		1,053		1,099		1,056		1,013
Total at cost		1,530		1,539		1,591		1,652		1,591		1,530
Less accumulated amortization *		304		282		207		433		387		304
Total		1,226		1,257		1,384		1,219		1,204		1,226
Unamortized intangible assets:
In-process research and development		123		123		123		123		123		123
Other intangible assets – net	$	1,349	$	1,380	$	1,507	$	1,342	$	1,327	$	1,349

* Accumulated amortization at January 31, 2021, November 1, 2020, and February 2, 2020 ~~November 3, 2019, and January 27, 2019~~ for customer lists and relationships totaled ~~$86~~$128 million, ~~$77~~$113 million, and ~~$54~~$86 million and technology, patents, trademarks, and other totaled ~~$218~~$305 million, ~~$205~~$274 million, and ~~$153~~$218 million, respectively.

The amortization of other intangible assets in the first quarter of 2021 and 2020 ~~and 2019~~ was ~~$25~~$34 million and ~~$27~~$25 million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of ~~2020 – $77,~~ 2021 – ~~$101,~~$82, 2022 – ~~$100,~~$109, 2023 – ~~$98, and~~$107, 2024 – ~~$96.~~$103, 2025 – $100, and 2026 – $98.

(15) Leases

The Company is both a lessee and a lessor. The Company leases for its own use, under leases with expected use periods generally ranging from less than one year to 20 years, primarily warehouse facilities, office space, production equipment, information technology equipment, and vehicles. The Company’s financial services segment leases to users equipment produced or sold by the Company. These leases are usually written for periods of less than one year to seven years.

~~The Company determines if an arrangement is or contains a lease at the contract inception.~~

Lessee

~~The Company recognizes on the balance sheet a~~Lessee operating and finance lease ~~liability and a~~ right of use ~~asset for leases with a term greater than 12 months for both operating~~assets and ~~finance leases.~~

~~The amounts~~liabilities follow in millions of the lease liability and right of use asset are determined at lease commencement and are based on the present value of the lease payments over the lease term. The lease payments are discounted using the Company’s incremental borrowing rate since the rate implicit in the lease is generally not readily determinable. The Company determines the incremental borrowing rate for each lease based primarily on the lease term and the economic environment of the country where the asset will be used, adjusted as if the borrowings were collateralized. Leases with contractual periods greater than 12 months and that do not meet the finance lease criteria are classified as operating leases.dollars:


	January 31		November 1		February 2
	2021		2020		2020
Operating leases:
Other assets	$	327	$	324	$	376
Accounts payable and accrued expenses		315		305		361

Finance leases:
Property and equipment – net	$	57	$	63	$	37

Short-term borrowings		20		21		12
Long-term borrowings		36		39		23
Total finance lease liabilities	$	56	$	60	$	35

2221

~~Certain real estate leases contain one or more~~ ~~options~~ to ~~terminate~~ or ~~renew~~, ~~with terms~~ ~~that can generally extend the lease term from~~ ~~one~~ ~~to 10 years. Options that the Company is reasonably certain to exercise are included in the lease term.~~

The Company has elected to combine lease and non-lease components, such as maintenance and utilities costs included in a lease contract, for all asset classes. Leases with an initial term of 12 months or less are expensed on a straight-line basis over the lease term and recorded in short-term lease expense. Variable lease expense primarily includes warehouse facilities leases with payments based on utilization exceeding contractual minimum amounts and leases with payments indexed to inflation when the index changes after lease commencement.

~~The lease expense by type consisted of the following in millions of dollars:~~

Three Months Ended

February 2, 2020

Operating lease expense

$
32

Short-term lease expense

4

Variable lease expense

10

Finance lease depreciation expense

5

Total lease expense

$
51

~~Operating and finance lease right of use assets and liabilities follow in millions of dollars:~~

February 2, 2020

Operating leases

Other assets

$
376

Accounts payable and accrued expenses

361

Finance leases

Property and equipment — net

$
37

Short-term borrowings

12

Long-term borrowings

23

Total finance lease liabilities

$
35

~~The weighted-average remaining lease term in years and discount rates follows:~~


		~~February 2, 2020~~
~~Weighted-average remaining lease terms~~
~~Operating leases~~		7
~~Finance leases~~		3
~~Weighted-average discount rate~~
~~Operating leases~~		~~2.5%~~
~~Finance leases~~		~~3.2%~~

~~Lease payment amounts in each of the next five years at February 2, 2020 follow in millions of dollars:~~

Operating

Finance

February 2, 2020

Leases

Leases

Remainder of 2020

$
93

$
12

2021

80

11

2022

69

8

2023

53

3

2024

38

2

2025

19

Later years

33

1

Total lease payments

385

37

Less imputed interest

24

2

Total lease liabilities

$
361

$
35

~~Future minimum lease payments under the previous lease standard for operating and finance leases at November 3, 2019 follow in millions of dollars:~~

Operating

Capital

November 3, 2019

Leases

Leases

2020

$
111

$
12

2021

77

10

2022

56

6

2023

39

2

2024

28

1

Later years

26

1

Total minimum lease payments

$
337

$
32

~~Cash paid for amounts included in the measurement of lease liabilities:~~

Three Months Ended

February 2, 2020

Operating cash flows from operating leases

$
30

Financing cash flows from finance leases

5

Right of use assets obtained in exchange for lease ~~liabilities:~~liabilities follow in millions of dollars:


	Three Months Ended		Three Months Ended
	February 2, 2020		January 31, 2021		February 2, 2020
Operating leases	$	16	$	22	$	16
Finance leases		9		2		9

Lessor

The Company leases equipment manufactured or sold by the Company and a limited amount of non-Deere equipment to retail customers through sales-type, direct financing, and operating leases. Sales-type and direct financing leases are reported in “Financing receivables -– net” on the consolidated balance ~~sheet. Operating~~sheet, while operating leases are reported in “Equipment on operating leases ~~- net” on the consolidated balance sheet.~~– net.”

~~Leases offered~~Lease revenues earned by the Company ~~may include early termination and renewal options. At the end~~were as follows in millions of ~~a lease, the lessee generally has the option to purchase the underlying equipment for a fixed price or return it~~dollars:


	Three Months Ended
	January 31, 2021		February 2, 2020
Sales-type and direct finance lease revenues	$	36	$	36
Operating lease revenues		363		374
Variable lease revenues		6		5
Total lease revenues	$	405	$	415

Due to the ~~dealer. If the equipment is returned to the dealer, the dealer also has the option to purchase the equipment or return it to~~significant, negative effects of COVID, the Company ~~for remarketing.~~

provided short-term relief to lessees during 2020, and to a much lesser extent in 2021. The ~~Company estimates the residual values for~~relief, which included payment deferrals of three months or less, was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. The operating leases ~~at lease inception based on several factors, including lease term, expected hours of usage, historical wholesale sale prices, return experience, intended use~~granted relief represented approximately 3 percent of the ~~equipment, market dynamics and trends, and dealer residual guarantees. The Company reviews residual value estimates during the lease term and tests the carrying value of its~~Company’s operating lease assets for impairment when events or circumstances necessitate. The depreciation is adjusted on a straight-line basis over the remaining lease term if residual value estimates decline. Lease agreements include usage limits and specifications on machine condition, which allow the Company to assess lessees for excess use or damages to the underlying equipment.portfolio at January 31, 2021.

The Company has elected to combine lease and nonlease components. The nonlease components primarily relate to preventative maintenance and extended warranty agreements financed by the retail customer. The Company has also elected to report consideration related to sales and value added taxes net of the related tax expense. Property taxes on leased assets are recorded on a gross basis in “Finance and interest income” and “Other operating expenses” on the statement of consolidated income. Variable lease revenues primarily relate to property taxes on leased assets in certain markets and late fees.

~~Lease revenues earned by the Company were as follows in millions of dollars:~~

Three Months Ended

February 2, 2020

Sales-type and direct finance lease revenues

$
36

Operating lease revenues

374

Variable lease revenues

5

Total lease revenues

$
415

At the time of accepting a lease that qualifies as a sales-type or direct financing lease, the Company records the gross amount of lease payments receivable, estimated residual value of the leased equipment, and unearned finance income. The unearned finance income is recognized as revenue over the lease term using the interest method.

~~Sales-type and direct financing lease receivables by product category were as follows in millions of dollars:~~

February 2

November 3

2020

2019

Agriculture and turf

$
863

$
897

Construction and forestry

1,007

1,033

Total

1,870

1,930

Guaranteed residual values

152

232

Unguaranteed residual values

98

101

Less unearned finance income

209

212

Financing leases receivables

$
1,911

$
2,051

~~Scheduled payments, including guaranteed residual values, on sales-type and direct financing lease receivables at February 2, 2020 follow in millions of dollars:~~

February 2

2020

Due in:

Remainder of 2020

$
732

2021

614

2022

380

2023

188

2024

86

2025

18

Later years

4

Total

$
2,022

~~Scheduled payments on financing lease receivables under the previous lease standard at November 3, 2019 follow in millions of dollars:~~

November 3

2019

Due in:

2020

$
833

2021

557

2022

321

2023

153

2024

53

Later years

13

Total

$
1,930

Lease payments from operating leases are recorded as income on a straight-line method over the lease terms. Operating lease assets are recorded at cost and depreciated to their estimated residual value on a straight-line method over the terms of the leases.

~~The cost of equipment on operating leases by product category was as follows in millions of dollars:~~

February 2

November 3

2020

2019

Agriculture and turf

$
7,260

$
7,257

Construction and forestry

2,163

2,165

Total

9,423

9,422

Less accumulated depreciation

1,919

1,855

Equipment on operating leases - net

$
7,504

$
7,567

The total operating lease residual values at February 2, 2020 and November 3, 2019 were $5,299 million and $5,259 million, respectively. Certain operating leases are subject to residual value guarantees. The total residual value guarantees were $652 million and $647 million at February 2, 2020 and November 3, 2019, respectively.

~~Lease payments for equipment on operating leases at February 2, 2020 were scheduled as follows in millions of dollars:~~

February 2

2020

Due in:

Remainder of 2020

$
948

2021

871

2022

513

2023

248

2024

80

2025

3

Total

$
2,663

~~Rental payments for equipment on operating leases under the previous lease standard at November 3, 2019 were scheduled as follows in millions of dollars:~~

November 3

2019

Due in:

2020

$
1,086

2021

759

2022

419

2023

193

2024

41

Total

$
2,498

The Company discusses with lessees and dealers options to purchase the equipment or extend the lease prior to lease maturity. Equipment returned to the Company upon termination of leases is remarketed by the Company. The matured operating lease inventory balances at February 2, 2020 and November 3, 2019 were $130 million and $163 million, respectively.

(16) Commitments and Contingencies

The Company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. These unamortized extended warranty premiums (deferred revenue) included in the following table totaled $656 million and $588 million at January 31, 2021 and ~~$514 million at~~ February 2, 2020, ~~and January 27, 2019,~~ respectively.

A reconciliation of the changes in the warranty liability and unearned premiums in millions of dollars follows:


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Beginning of period balance	$	1,800	$	1,652	$	1,743	$	1,800
Payments		(230)		(228)		(215)		(230)
Amortization of premiums received		(59)		(54)		(63)		(59)
Accruals for warranties		222		253		247		222
Premiums received		65		65		73		65
Foreign exchange		(6)		(1)		18		(6)
End of period balance	$	1,792	$	1,687	$	1,803	$	1,792

At ~~February 2, 2020,~~January 31, 2021, the Company had approximately ~~$360~~$398 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment. The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At ~~February 2, 2020,~~January 31, 2021, the Company had accrued losses of approximately ~~$14~~$18 million under these agreements. The maximum remaining term of the receivables guaranteed at ~~February 2, 2020~~January 31, 2021 was approximately seven years.

At ~~February 2, 2020,~~January 31, 2021, the Company had commitments of approximately ~~$264~~$167 million for the construction and acquisition of property and equipment. Also, at ~~February 2, 2020,~~January 31, 2021, the Company had restricted assets of ~~$83~~$72 million, primarily as collateral for borrowings and restricted other assets. See Note 12 for additional restricted assets associated with borrowings related to securitizations.

The Company also had other miscellaneous contingent liabilities totaling approximately ~~$50~~$55 million at ~~February 2, 2020.~~January 31, 2021. The accrued liability for these contingencies was not material at ~~February 2, 2020.~~January 31, 2021.

(17) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, the Company uses various methods including market and income approaches. The Company utilizes valuation models and techniques that maximize the use of observable inputs. The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures. These valuation techniques are consistently applied.

Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs.

2723

The fair values of financial instruments that do not approximate the carrying values in millions of dollars follow:


	February 2, 2020				November 3, 2019				January 27, 2019				January 31, 2021				November 1, 2020				February 2, 2020
	Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *
Financing receivables – net:
Equipment operations	$	130	$	123	$	65	$	61	$	102	$	99	$	103	$	100	$	105	$	103	$	130	$	123
Financial services		27,164		27,177		29,130		29,106		25,048		24,900		29,335		29,591		29,645		29,838		27,164		27,177
Total	$	27,294	$	27,300	$	29,195	$	29,167	$	25,150	$	24,999	$	29,438	$	29,691	$	29,750	$	29,941	$	27,294	$	27,300

Financing receivables securitized – net:
Equipment operations	$	42	$	40	$	44	$	43	$	67	$	65	$	18	$	17	$	26	$	26	$	42	$	40
Financial services		4,436		4,464		4,339		4,362		4,496		4,454		3,913		4,002		4,677		4,773		4,436		4,464
Total	$	4,478	$	4,504	$	4,383	$	4,405	$	4,563	$	4,519	$	3,931	$	4,019	$	4,703	$	4,799	$	4,478	$	4,504

Short-term securitization borrowings:
Equipment operations	$	42	$	42	$	44	$	45	$	67	$	67	$	17	$	17	$	26	$	26	$	42	$	42
Financial services		4,374		4,403		4,277		4,302		4,397		4,391		3,952		3,986		4,656		4,698		4,374		4,403
Total	$	4,416	$	4,445	$	4,321	$	4,347	$	4,464	$	4,458	$	3,969	$	4,003	$	4,682	$	4,724	$	4,416	$	4,445

Long-term borrowings due within one year: **
Equipment operations	$	567	$	567	$	642	$	645	$	928	$	937	$	191	$	198	$	79	$	78	$	567	$	567
Financial services		6,638		6,650		6,786		6,788		5,198		5,186		7,341		7,424		6,870		6,936		6,638		6,650
Total	$	7,205	$	7,217	$	7,428	$	7,433	$	6,126	$	6,123	$	7,532	$	7,622	$	6,949	$	7,014	$	7,205	$	7,217

Long-term borrowings: **
Equipment operations	$	5,544	$	6,403	$	5,415	$	6,138	$	4,712	$	4,989	$	10,103	$	11,813	$	10,085	$	11,837	$	5,544	$	6,403
Financial services		24,908		25,299		24,814		25,122		23,143		23,217		22,633		23,219		22,610		23,170		24,908		25,299
Total	$	30,452	$	31,702	$	30,229	$	31,260	$	27,855	$	28,206	$	32,736	$	35,032	$	32,695	$	35,007	$	30,452	$	31,702

* Fair value measurements above were Level 3 for all financing receivables, Level 3 for equipment operations short-term securitization borrowings, and Level 2 for all other borrowings.

** ~~Carrying values exclude~~Excludes finance lease liabilities ~~that are presented as borrowings beginning in 2020~~ (see ~~Notes 3 and~~Note 15).

Fair values of the financing receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by the Company for similar financing receivables. The fair values of the remaining financing receivables approximated the carrying amounts.

Fair values of long-term borrowings and short-term securitization borrowings were based on current market quotes for identical or similar borrowings and credit risk, or on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings have been swapped to current variable interest rates. The carrying values of these long-term borrowings included adjustments related to fair value hedges.

2824

Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow*:


	February 2		November 3		January 27		January 31		November 1		February 2
	2020		2019		2019		2021		2020		2020
Level 1:
Marketable securities
International equity securities ***	$	3
Equity fund ***		62	$	59	$	51
International equity securities							$	2	$	2	$	3
U.S. equity fund								70		62		62
U.S. government debt securities		52		50		44		60		55		52
Total Level 1 marketable securities		117		109		95		132		119		117

Level 2:
Marketable securities
U.S. government debt securities		87		81		76		119		113		87
Municipal debt securities		62		60		51		71		68		62
Corporate debt securities		173		165		141		197		188		173
International debt securities		4		5		9		8		2		4
Mortgage-backed securities**		165		160		145		140		147		165
Total Level 2 marketable securities		491		471		422		535		518		491
Other assets
Derivatives:
Interest rate contracts		443		363		76		568		669		443
Foreign exchange contracts		37		20		59		34		48		37
Cross-currency interest rate contracts		1		1		3		3		8		1
Total Level 2 other assets		481		384		138		605		725		481
Accounts payable and accrued expenses
Derivatives:
Interest rate contracts		57		65		232		97		88		57
Foreign exchange contracts		40		71		64		76		26		40
Cross-currency interest rate contracts		4		3		2		2		1		4
Total Level 2 accounts payable and accrued expenses		101		139		298		175		115		101

Level 3:
Marketable securities
International debt securities		1		1		6				4		1

* Excluded from this table were the Company’s cash equivalents, which were carried at cost that approximates fair value. The cash equivalents consist primarily of money market funds and time deposits.

** Primarily issued by U.S. government sponsored enterprises.

***During the first quarter of 2020 and 2019 net unrealized gains on equity securities recorded in “Other income” were $6 million and NaN, respectively.

The contractual maturities of debt securities at ~~February 2, 2020~~January 31, 2021 in millions of dollars are shown below. Actual maturities may differ from those scheduled as a result of prepayments by the issuers. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.


	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	28	$	24	$	21	$	22
Due after one through five years		96		99		89		94
Due after five through 10 years		96		103		117		124
Due after 10 years		143		153		203		215
Mortgage-backed securities		159		165		134		140
Debt securities	$	522	$	544	$	564	$	595

2925

Fair value, recurring Level 3 measurements from available-for-sale marketable securities in millions of dollars follow:


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Beginning of period balance	$	1	$	8	$	4	$	1
Principal payments				(3)
Other				1		(4)
End of period balance	$	1	$	6			$	1

Fair value, nonrecurring Level 3 measurements from impairments in millions of dollars follow:


	Fair Value *				Losses		Fair Value *					Losses
					Three Months Ended							Three Months Ended
	February 2	November 3		January 27	February 2	January 27	January 31		November 1		February 2	January 31		February 2
	2020	2019		2019	2020	2019	2021		2020		2020	2021		2020
Other receivables									$	1
Equipment on operating leases – net		$	855						$	371
Property and equipment – net							$	41	$	135		$	44
Investments in unconsolidated affiliates									$	19
Other assets		$	142				$	1	$	59		$	6

* ~~See financing~~Financing receivables with specific allowances ~~in Note 11. Losses~~ were not significant.

The following is a description of the valuation methodologies the Company uses to measure certain financial instruments on the balance sheet at fair value:

Marketable Securities – The portfolio of investments, except for the Level 3 measurement international debt securities, is primarily valued on a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data such as interest rates, yield curves, volatilities, credit risk, and prepayment speeds. Funds are primarily valued using the fund’s net asset value, based on the fair value of the underlying securities. The Level 3 measurement international debt securities are primarily valued using an income approach based on discounted cash flows using yield curves derived from limited, observable market data.

Derivatives – The Company’s derivative financial instruments consist of interest rate swaps and caps, foreign currency futures, forwards and swaps, and cross-currency interest rate swaps. The portfolio is valued based on an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates for currencies.

Financing Receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using a market approach (appraisal values or realizable values). Inputs include a selection of realizable values.

Other Receivables – The impairment was based on the expected realization of value-added tax receivables related to a closed factory operation.

Equipment on Operating Leases –- Net – The impairments are based on an income approach (discounted cash flow), using the contractual payments, plus an estimate of return rates and equipment sale price at lease maturity. Inputs include realized sales values.

Property and Equipment - Net – The impairments are measured at the lower of the carrying amount, or fair value. The valuations were based on cost and market approaches. The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence or quoted prices when available.

Investment in Unconsolidated Affiliates – Other than temporary impairments for investments are measured as the difference between the implied fair value and the carrying value of the investments or the estimated realization amount.

Other Assets – The impairments ~~are~~were measured at the fair value of the matured operating lease ~~inventory.~~inventory or the right of use operating lease asset. The ~~valuations were based on a market approach. The~~ inputs for matured operating lease inventory include sales of comparable assets.

(18) Derivative Instruments

It is the Company’s policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. The Company’s financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities. The Company also has foreign currency exposures at some of its foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies. In addition, the Company has interest rate exposure at certain

equipment operations units for below market retail financing programs that are used as sales incentives and are offered for extended periods.

All derivatives are recorded at fair value on the balance sheet. Cash collateral received or paid is not offset against the derivative fair values on the balance sheet. Each derivative is designated as a cash flow hedge, a fair value hedge, or remains undesignated. All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy. Both at inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness. If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, the hedge designation is removed, or the derivative is terminated, hedge accounting is discontinued.

Cash Flow Hedges

Certain interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings. The total notional amounts of the receive-variable/pay-fixed interest rate contracts at January 31, 2021, November 1, 2020, and February 2, 2020 ~~November 3, 2019, and January 27, 2019~~ were ~~$2,900~~$2,350 million, ~~$3,150~~$1,550 million, and ~~$2,800~~$2,900 million, respectively. Fair value gains or losses on cash flow hedges were recorded in OCI and are subsequently reclassified into interest expense in the same periods during which the hedged transactions affected earnings. These amounts offset the effects of interest rate changes on the related borrowings. The cash flows from these contracts were recorded in operating activities in the statement of consolidated cash flows.

The amount of loss recorded in OCI at ~~February 2, 2020~~January 31, 2021 that is expected to be reclassified to interest expense or other operating expenses in the next twelve months if interest rates or exchange rates remain unchanged is approximately $9$6 million after-tax. There were 0 gains or losses reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.

Fair Value Hedges

Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings. The total notional amounts of the receive-fixed/pay-variable interest rate contracts at January 31, 2021, November 1, 2020, and February 2, 2020 ~~November 3, 2019, and January 27, 2019~~ were ~~$9,424~~$8,333 million, ~~$8,717~~$7,239 million, and ~~$8,622~~$9,424 million, respectively. The fair value gains or losses on these contracts were generally offset by fair value gains or losses on the hedged items (fixed-rate borrowings) with both items recorded in interest expense.

The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships in millions of dollars follow:


			Cumulative Increase (Decrease) of Fair								Cumulative Increase (Decrease) of Fair
			Value Hedging Adjustments Included in								Value Hedging Adjustments Included in
			the Carrying Amount								the Carrying Amount
	Carrying		Active						Carrying		Active
	Amount of		Hedging		Discontinued				Amount of		Hedging		Discontinued
	Hedged Item		Relationships		Relationships		Total		Hedged Item		Relationships		Relationships		Total
January 31, 2021
Long-term borrowings due within one year*									$	159	$	2	$	1	$	3
Long-term borrowings										8,713		435		137		572

November 1, 2020
Long-term borrowings due within one year*									$	155	$	2	$	3	$	5
Long-term borrowings										7,725		543		122		665

February 2, 2020
Long-term borrowings due within one year*	$	220	$	(1)	$	(5)	$	(6)	$	220	$	(1)	$	(5)	$	(6)
Long-term borrowings		9,521		379		(21)		358		9,521		379		(21)		358

November 3, 2019
Long-term borrowings due within one year*	$	412	$	(1)	$	(4)	$	(5)
Long-term borrowings		8,532		295		(32)		263

January 27, 2019
Long-term borrowings due within one year*	$	192	$	1	$	(4)	$	(3)
Long-term borrowings		8,177		(179)		(41)		(220)

* Presented in short-term borrowings

Derivatives not designated as hedging instruments

The Company has certain interest rate contracts (swaps and caps), foreign exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges. These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures, primarily for certain borrowings, purchases or sales of inventory, and below market retail

financing programs. The total notional amounts of these interest rate swaps at January 31, 2021, November 1, 2020, and February 2, 2020 ~~November 3, 2019, and January 27, 2019~~ were ~~$9,102~~$8,801 million, ~~$9,166~~$8,514 million, and ~~$8,225~~$9,102 million, the foreign exchange contracts were ~~$5,249~~$5,478 million, ~~$4,962~~$4,903 million, and ~~$6,500~~$5,249 million, and the cross-currency interest rate contracts were ~~$102~~$145 million, ~~$92~~$113 million, and ~~$87~~$102 million, respectively. The fair value gains or losses from the interest rate contracts were recognized currently in interest expense or net sales and the gains or losses from foreign exchange contracts in cost of sales or other operating expenses, generally offsetting over time the expenses on the exposures being hedged. The cash flows from these non-designated contracts were recorded in operating activities in the statement of consolidated cash flows.

~~Fair values of derivative instruments in the condensed consolidated balance sheet in millions of dollars follow:~~

February 2

November 3

January 27

Other Assets

2020

2019

2019

Designated as hedging instruments:

Interest rate contracts

$
409

$
332

$
47

Total designated
��

409

332

47

Not designated as hedging instruments:

Interest rate contracts

34

31

29

Foreign exchange contracts

37

20

59

Cross-currency interest rate contracts

1

1

3

Total not designated

72

52

91

Total derivative assets

$
481

$
384

$
138

Accounts Payable and Accrued Expenses

Designated as hedging instruments:

Interest rate contracts

$
17

$
28

$
205

Total designated

17

28

205

Not designated as hedging instruments:

Interest rate contracts

40

37

27

Foreign exchange contracts

40

71

64

Cross-currency interest rate contracts

4

3

2

Total not designated

84

111

93

Total derivative liabilities

$
101

$
139

$
298

3228

Fair values of derivative instruments in the condensed consolidated balance sheet in millions of dollars follow:


	January 31		November 1		February 2
Other Assets	2021		2020		2020
Designated as hedging instruments:
Interest rate contracts	$	491	$	586	$	409
Total designated		491		586		409

Not designated as hedging instruments:
Interest rate contracts		77		83		34
Foreign exchange contracts		34		48		37
Cross-currency interest rate contracts		3		8		1
Total not designated		114		139		72

Total derivative assets	$	605	$	725	$	481

Accounts Payable and Accrued Expenses
Designated as hedging instruments:
Interest rate contracts	$	31	$	14	$	17
Total designated		31		14		17

Not designated as hedging instruments:
Interest rate contracts		66		74		40
Foreign exchange contracts		76		26		40
Cross-currency interest rate contracts		2		1		4
Total not designated		144		101		84

Total derivative liabilities	$	175	$	115	$	101

The classification and gains (losses) including accrued interest expense related to derivative instruments on the statement of consolidated income consisted of the following in millions of dollars:


	Three Months Ended				Three Months Ended
	February 2		January 27		January 31		February 2
	2020		2019		2021		2020
Fair Value Hedges:
Interest rate contracts - Interest expense	$	96	$	133	$	(55)	$	96

Cash Flow Hedges:
Recognized in OCI
Interest rate contracts - OCI (pretax)		(2)		(9)				(2)

Reclassified from OCI
Interest rate contracts - Interest expense		(2)		2		(5)		(2)

Not Designated as Hedges:
Interest rate contracts - Net sales	$	(4)	$	(10)			$	(4)
Interest rate contracts - Interest expense *		2		(8)	$	(4)		2
Foreign exchange contracts - Cost of sales		11		(5)		(52)		11
Foreign exchange contracts - Other operating *		(1)		20		(126)		(1)
Total not designated	$	8	$	(3)	$	(182)	$	8

* Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.

Counterparty Risk and Collateral

Derivative instruments are subject to significant concentrations of credit risk to the banking sector. The Company manages individual counterparty exposure by setting limits that consider the credit rating of the counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the Company and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Some of these agreements include credit support provisions. Each master agreement permits the net settlement of amounts owed in the event of default or termination.

Certain of the Company’s derivative agreements contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at January 31, 2021, November 1, 2020, and February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ was ~~$60~~$99 million, ~~$68~~$89 million, and ~~$233~~$60 million, respectively. In accordance with the limits established in these agreements, the Company ~~received $26 million in cash collateral at February 2, 2020 and~~ posted ~~$8 million in~~0 cash collateral at January ~~27, 2019. NaN~~31, 2021, November 1, 2020, and February 2, 2020. In addition, the Company paid $8 million of collateral either in cash ~~collateral~~or pledged securities that was ~~posted or received~~outstanding at both January 31, 2021 and November ~~3, 2019~~.1, 2020 to participate in an international futures market to hedge currency exposure, not included in the table below.

Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities related to netting arrangements and any collateral received or paid in millions of dollars follows:


	Gross Amounts		Netting		Collateral				Gross Amounts		Netting
February 2, 2020	Recognized		Arrangements		Received		Net Amount
January 31, 2021									Recognized		Arrangements		Collateral		Net Amount
Assets	$	481	$	(60)	$	(26)	$	395	$	605	$	(106)	$	(186)	$	313
Liabilities		101		(60)				41		175		(106)				69


	Gross Amounts		Netting		Collateral			Gross Amounts		Netting
November 3, 2019	Recognized		Arrangements		Received/Paid	Net Amount
November 1, 2020								Recognized		Arrangements		Collateral		Net Amount
Assets	$	384	$	(70)		$	314	$	725	$	(93)	$	(274)	$	358
Liabilities		139		(70)			69		115		(93)				22


	Gross Amounts		Netting		Collateral				Gross Amounts		Netting
January 27, 2019	Recognized		Arrangements		Paid		Net Amount
February 2, 2020									Recognized		Arrangements		Collateral		Net Amount
Assets	$	138	$	(75)			$	63	$	481	$	(60)	$	(26)	$	395
Liabilities		298		(75)	$	(8)		215		101		(60)				41

(19) Stock Option and Restricted Stock Awards

In December ~~2019,~~2020, the Company granted stock options to employees for the purchase of ~~495~~269 thousand shares of common stock at an exercise price of ~~$169.70~~$254.83 per share and a binomial lattice model fair value of ~~$35.83~~$62.73 per share at the grant date. At ~~February 2, 2020,~~January 31, 2021, options for ~~6.8~~3.2 million shares were outstanding with a weighted-average exercise price of ~~$99.21~~$122.01 per share. The Company also granted ~~342~~205 thousand restricted stock units to employees in the first three months of ~~2020,~~2021, of which ~~275~~158 thousand are subject to service based only conditions and 6747 thousand are subject to performance/service based conditions. The weighted-average fair value of the service based only units at the grant date was ~~$169.70~~$254.71 per unit based on the market price of a share of underlying common stock. The fair value of the performance/service based units at the grant date was ~~$160.81~~$245.73 per unit based on the market price of a share of underlying common stock excluding dividends. At ~~February 2, 2020,~~January 31, 2021, the Company was authorized to grant an additional ~~6.8~~17.7 million shares ~~related to stock option and restricted stock awards.~~under the equity incentive plan.

(20) Special Items

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.


	Three Months Ended
	January 31, 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)

See Note 17 for fair value measurement information.

Employee-Separation ~~Program~~Programs

During the first quarter of 2020, the Company announced a broad voluntary employee-separation program for the U.S. salaried workforce that continues the efforts to create a more efficient organization structure and reduce operating costs. The program provided for cash payments based on years of service. The expense was recorded primarily in the period in which the employees irrevocably accepted the separation offer. The ~~program’s total estimated pretax expenses are approximately $136 million, of which $127 million was recorded in the first quarter. The~~ payments for the program were also substantially made in the first ~~quarter.~~quarter of 2020. Included in the total pretax expense is a non-cash charge of $21 million resulting from a curtailment in certain OPEB plans (see Note 8), which was recorded outside of operating profit in “Other operating expense.”


	Three Months Ended
	February 2, 2020
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Cost of sales	$	19	$	11	$	9			$	39
Research and development expenses		6		7		3				16
Selling, administrative and general expenses		17		18		12	$	3		50
Total operating profit impact	$	42	$	36	$	24	$	3		105
Other operating expenses										22
Total expense									$	127

” The first quarter 2020 expenses that are included in operating profit of $105 million are allocated 37 percent “Cost of sales,” 15 percent “Research and development,” and 48 percent “Selling, administrative and general.” In addition, the expenses are allocated 75 percent to the agriculture and turf operations, 23 percent to the construction and forestry operations, and 2 percent to the financial services operations. Annual savings from these programs are estimated to be approximately $85 million with about $65 million in 2020.

(21) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended February 2, 2020 and January 27, 2019

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2020

2019

2020

2019

Net Sales and Revenues








Net sales

$
6,530

$
6,941

Finance and interest income

27

23

$
936

$
866

Other income

209

215

62

60

Total

6,766

7,179

998

926

Costs and Expenses

Cost of sales

5,078

5,432

Research and development expenses

425

407

Selling, administrative and general expenses

672

645

138

121

Interest expense

63

71

275

287

Interest compensation to Financial Services

64

69

Other operating expenses

72

71

408

325

Total

6,374

6,695

821

733

Income of Consolidated Group before Income Taxes

392

484

177

193

Provision for income taxes

9

144

41

40

Income of Consolidated Group

383

340

136

153

Equity in Income (Loss) of Unconsolidated Subsidiaries
and Affiliates

Financial Services

137

154

1

1

Other

(2)

6

Total

135

160

1

1

Net Income

518

500

137

154

Less: Net income attributable to noncontrolling interests

1

2

Net Income Attributable to Deere & Company

$
517

$
498

$
137

$
154

*~~Deere & Company with Financial Services on the equity basis.~~

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.

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

February 2

November 3

January 27

February 2

November 3

January 27

2020

2019

2019

2020

2019

2019

Assets



















Cash and cash equivalents

$
2,862

$
3,175

$
2,671

$
740

$
682

$
955

Marketable securities

4

1

8

605

580

515

Receivables from unconsolidated subsidiaries
and affiliates

1,425

2,017

274

Trade accounts and notes receivable – net

1,115

1,482

1,177

5,707

5,153

5,746

Financing receivables – net

130

65

102

27,164

29,130

25,048

Financing receivables securitized – net

42

44

67

4,436

4,339

4,496

Other receivables

1,252

1,376

1,485

131

116

184

Equipment on operating leases – net

7,504

7,567

6,904

Inventories

6,482

5,975

7,402

Property and equipment – net

5,857

5,929

5,739

43

44

46

Investments in unconsolidated subsidiaries and affiliates

5,317

5,326

5,175

17

16

16

Goodwill

2,945

2,917

3,048

Other intangible assets – net

1,349

1,380

1,507

Retirement benefits

871

836

1,291

58

58

57

Deferred income taxes

1,821

1,896

1,507

56

57

70

Other assets

1,546

1,158

1,241

818

741

593

Total Assets

$
33,018

$
33,577

$
32,694

$
47,279

$
48,483

$
44,630

Liabilities and Stockholders’ Equity

Liabilities

Short-term borrowings

$
947

$
987

$
1,494

$
9,061

$
9,797

$
9,244

Short-term securitization borrowings

42

44

67

4,374

4,277

4,397

Payables to unconsolidated subsidiaries and affiliates

146

142

227

1,387

1,970

155

Accounts payable and accrued expenses

8,325

9,232

8,711

1,786

1,836

1,821

Deferred income taxes

408

414

470

546

568

798

Long-term borrowings

5,567

5,415

4,712

24,908

24,814

23,143

Retirement benefits and other liabilities

5,639

5,912

5,666

100

94

93

Total liabilities

21,074

22,146

21,347

42,162

43,356

39,651

Commitments and contingencies (Note 16)

Redeemable noncontrolling interest

14

14

14

Stockholders’ Equity

Common stock, $1 par value (issued shares at February 2, 2020 – 536,431,204)

4,675

4,642

4,512

2,107

2,107

2,099

Common stock in treasury

(17,549)

(17,474)

(16,422)

Retained earnings

30,129

29,852

27,816

3,390

3,378

3,219

Accumulated other comprehensive income (loss)

(5,329)

(5,607)

(4,578)

(380)

(358)

(339)

Total Deere & Company stockholders' equity

11,926

11,413

11,328

5,117

5,127

4,979

Noncontrolling interests

4

4

5

Total stockholders’ equity

11,930

11,417

11,333

5,117

5,127

4,979

Total Liabilities and Stockholders’ Equity

$
33,018

$
33,577

$
32,694

$
47,279

$
48,483

$
44,630

*~~Deere & Company with Financial Services on the equity basis.~~

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.

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

For the Three Months Ended February 2, 2020 and January 27, 2019

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2020

2019

2020

2019

Cash Flows from Operating Activities













Net income

$
518

$
500

$
137

$
154

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Provision (credit) for credit losses

1

(1)

14

3

Provision for depreciation and amortization

261

260

311

276

Undistributed earnings of unconsolidated subsidiaries and affiliates

(11)

39

(1)

Credit for deferred income taxes

(7)

(31)

(22)

(25)

Changes in assets and liabilities:

Trade receivables and Equipment Operations' financing receivables

312

186

Inventories

(530)

(1,290)

Accounts payable and accrued expenses

(1,058)

(535)

(19)

(12)

Accrued income taxes payable/receivable

(43)

(429)

(10)

527

Retirement benefits

30

(6)

6

2

Other

147

(127)

30

47

Net cash provided by (used for) operating activities

(380)

(1,434)

446

972

Cash Flows from Investing Activities

Collections of receivables (excluding trade and wholesale)

6,056

5,885

Proceeds from maturities and sales of marketable securities

3

18

5

Proceeds from sales of equipment on operating leases

426

371

Cost of receivables acquired (excluding trade and wholesale)

(4,569)

(4,448)

Purchases of marketable securities

(2)

(34)

(30)

Purchases of property and equipment

(271)

(297)

Cost of equipment on operating leases acquired

(669)

(505)

Increase in trade and wholesale receivables

(382)

(1,021)

Other

(9)

(6)

11

26

Net cash provided by (used for) investing activities

(280)

(302)

857

283

Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

20

88

(493)

388

Change in intercompany receivables/payables

572

1,526

(572)

(1,526)

Proceeds from long-term borrowings

167

91

1,535

2,120

Payments of long-term borrowings

(83)

(142)

(1,568)

(1,799)

Proceeds from issuance of common stock

53

51

Repurchases of common stock

(114)

(144)

Dividends paid

(242)

(220)

(125)

(200)

Other

(29)

(23)

(9)

(8)

Net cash provided by (used for) financing activities

344

1,227

(1,232)

(1,025)

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

3

(12)

(4)

(1)

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

(313)

(521)

67

229

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

3,196

3,202

760

813

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

$
2,883

$
2,681

$
827

$
1,042

*~~Deere & Company with Financial Services on the equity basis.~~

3731

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Overview

Organization

The Company’s equipment operations generate revenues and cash primarily from the sale of equipment to John Deere dealers and distributors. The equipment operations manufacture and distribute a full line of agricultural equipment; a variety of commercial and consumer equipment; and a broad range of equipment for construction, roadbuilding, and forestry. The Company’s financial services primarily provide credit services, which mainly finance sales and leases of equipment by John Deere dealers and trade receivables purchased from the equipment operations. In addition, financial services offers extended equipment warranties. The information in the following discussion is presented in a format that includes information grouped as consolidated, equipment operations, and financial services. The Company also views its operations as consisting of two geographic ~~areas,~~areas: the U.S. and Canada and outside the U.S. and Canada. The Company’s operating segments consist of production and precision agriculture, small agriculture and turf, construction and forestry, and financial services.

Trends and Economic Conditions

Industry sales of agricultural machinery in the U.S. and Canada are forecast to be ~~down about 5~~up 15 to 20 percent ~~for fiscal year 2020.~~in 2021. Industry sales in Europe are forecast to be up about ~~the same~~5 percent in ~~2020.~~2021. In South America, industry sales of tractors and combines are projected to be ~~approximately the same as 2019 levels.~~up about 10 percent in 2021. Asian sales are forecast to be ~~about the same~~down slightly in ~~2020.~~2021. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be up about ~~the same in 2020. The Company’s agriculture and turf segment sales decreased 4~~5 percent in ~~the first quarter and are forecast to decrease about 5 to 10 percent for fiscal year 2020.~~2021. Construction industry sales in ~~North America~~U.S. and Canada for ~~2020~~2021 are expected to ~~decline~~increase about 5 percent, while compact construction industry sales in the U.S. and Canada are expected to increase about 10 ~~percent.~~percent in 2021. In forestry, global industry sales are expected to be ~~about~~ 5 to 10 percent ~~lower.~~higher. The Company’s construction and forestry segment sales decreased 10 percent in the first quarter, and are forecast to decrease about 10 to 15 percent in 2020 reflecting slowing construction activity as well as efforts to bring down field inventory levels. Net income attributable to Deere & Company for the Company’s financial services operations ~~is forecast~~are expected to ~~be approximately $600 million in 2020.~~benefit from income earned from a higher average portfolio, lower losses on lease residual values, and favorable financing spreads.

Items of concern include uncertainty of the effectiveness of governmental and private sector actions to address COVID, trade agreements, the uncertainty of the ~~effectiveness~~results of ~~governmental actions in respect to~~ monetary and fiscal policies, the impact of elevated levels of sovereign ~~debt, Eurozone~~ and ~~Argentine issues,~~state debt, capital market disruptions, changes in demand and pricing for new and used equipment, ~~potential effects of epidemics,~~geopolitical events, and ~~geopolitical events.~~the other items discussed in the “Safe Harbor Statement” below. Significant fluctuations in foreign currency exchange rates and volatility in the price of many commodities could also impact the Company’s results. The future financial effects of COVID are unknown due to many factors. As a result, predicting the Company’s forecasted financial performance is subject to many assumptions.

The Company’s results reflect ~~early signs of stabilization~~strong performance across its product lines and improving conditions in the ~~U.S.~~ farm ~~sector.~~and construction sectors. The ~~Company~~smart industrial operating strategy is encouraged by the broad use of precision technologies and believes it is well positioned to strengthen its leadership position in this area. For the quarter, construction sector activity slowed leading to lower sales and profit for the construction and forestry division. Actions to reduce factory production and lower inventories in response to construction equipment market conditions also negatively affected results. Additionally, the quarter included costs ofmaking a ~~voluntary employee-separation program, which is intended to improve~~significant impact on the Company’s ~~flexibility.~~results. The ~~Company is also proceeding with a series of measures to create a more focused organizational structure. These steps~~Company’s recent actions are ~~leading to improved~~improving efficiencies and ~~helping the Company focus its~~targeting resources and investments on areas that have the ~~most impact on performance.~~greatest impact. As the Company increases factory production and serves customers, the Company is mindful of the continuing challenges associated with the global pandemic. The Company remains committed, above all else, to safeguarding the health and well-being of its employees.

COVID Effects and Actions

The effects of COVID and the related actions of governments and other authorities to contain COVID continue to affect the Company’s operations, results, cash flows, and forecasts.

The U.S. government and many other governments in countries where the Company operates have designated the Company an essential critical infrastructure business. This designation allows the Company to operate in support of its customers to the extent possible.

The Company’s first priority in addressing the effects of COVID continues to be the health, safety, and overall welfare of its employees. The Company effectively activated previously established business continuity plans and proactively implemented health and safety measures at its operations around the world.

The Company maintained the broadened supply base and increased inventory levels of certain essential materials and components in the first quarter to support the expected demand for equipment in 2021 and to address potential supplier issues throughout COVID.

3832

The Company continued to work closely with distribution channel and equipment user customers in the first quarter

in connection with short-term payment relief on obligations owed to the Company. Financing receivables and operating leases granted relief since the beginning of the pandemic and remaining outstanding at January 31, 2021 represented about 4 percent and 3 percent of the portfolio balances, respectively. The trade receivable balance granted relief and remaining outstanding at January 31, 2021 was not material. Additional information is presented in Notes 4, 11, and 15.

~~2020~~2021 Compared with ~~2019~~2020

The following table provides the net income attributable to Deere & Company in millions of dollars and diluted earnings per share in dollars:


	Three Months Ended					Three Months Ended
	February 2			January 27		January 31		February 2
	2020			2019		2021		2020
Net income attributable to Deere & Company	$	517	��	$	498	$	1,224	$	517
Diluted earnings per share		1.63			1.54		3.87		1.63

~~The voluntary employee-separation program’s total~~In the first quarter of 2021, the Company recorded impairments totaling $50 million pretax ~~expense recognized~~to certain long-lived assets. These impairments were offset by a favorable indirect tax ruling in Brazil of $58 million pretax. In the first quarter of 2020, total voluntary employee-separation program (VSEP) expense recognized was $127 million with another $9 million to be recorded over the remainder of the year. Included in first quarter expense was $22 million for items excluded from operating profit and $3 million recorded by financial services. Annual estimated savings from the separation program are approximately $85 million, with about $65 million expected in 2020 (see Note 20). Discrete income tax benefits also affected the quarter’s net income (see Note 9).pretax.

The worldwide net sales and revenues, and the impact of price realization and the effect of currency translation, for worldwide, U.S. and Canada, and outside U.S. and Canada in millions of dollars follows:


	Three Months Ended					Three Months Ended
	February 2		January 27			January 31		February 2
	2020		2019		% Change	2021		2020		% Change
Worldwide net sales and revenues	$	7,631	$	7,984	-4	$	9,112	$	7,631	+19
Worldwide equipment operations net sales		6,530		6,941	-6		8,051		6,530	+23
Price realization					+2					+6
Currency translation (unfavorable)					-1
Currency translation										+1

U.S. and Canada equipment operations net sales		3,750		4,123	-9		4,529		3,750	+21
Price realization					+2					+5

Outside U.S. and Canada equipment operations net sales		2,780		2,818	-1		3,522		2,780	+27
Price realization					+3					+7
Currency translation (unfavorable)					-3
Currency translation										+1

The Company’s equipment operations operating profit and net income and financial services operations net income follow in millions of dollars:


	Three Months Ended					Three Months Ended
	February 2		January 27			January 31		February 2
	2020		2019		% Change	2021		2020		% Change
Equipment operations operating profit	$	466	$	577	-19	$	1,380	$	466	+196
Equipment operations net income		383		340	+13		1,020		380	+168
Financial services net income		137		154	-11		204		137	+49

The discussion on net sales and operating profit are included in the Business Segment Results below.

~~Business Segment Results~~

~~Agriculture and Turf.~~ ~~The agriculture and turf segment results in millions of dollars follow:~~

Three Months Ended

February 2

January 27


2020

2019

% Change

Net sales

$
4,486

$
4,681

-4

Operating profit

373

348

+7

Operating margin

8.3%

7.4%

Agriculture and turf sales for the quarter declined due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Operating profit increased mainly as a result of price realization, improved production costs, and lower warranty related expenses, partially offset by lower shipment volumes / sales mix and voluntary employee-separation expenses.

~~Construction and Forestry.~~ ~~The construction and forestry segment results in millions of dollars follow:~~

Three Months Ended

February 2

January 27


2020

2019

% Change

Net sales

$
2,044

$
2,260

-10

Operating profit

93

229

-59

Operating margin

4.5%

10.1%

Construction and forestry sales decreased for the quarter primarily due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Operating profit moved lower as a result of lower shipment volumes / sales mix and voluntary employee-separation expenses, partially offset by price realization.

~~Financial Services.~~ ~~The financial services segment revenue, interest expense, and operating profit in millions of dollars, along with the ratio of earnings to fixed charges follow:~~

Three Months Ended

February 2

January 27

2020

2019

% Change

Revenue (including intercompany revenue)

$
998

$
926

+8

Interest expense

275

287

-4

Operating profit

179

192

-7

Consolidated ratio of earnings to fixed charges

1.64

1.68

Operating profit decreased due to higher losses on lease residual values, an increased provision for credit losses, and higher selling, administrative and general expenses, partially offset by income earned on a higher average portfolio. The average balance of receivables and leases financed was 7 percent higher in the first three months of 2020, compared with the same period last year. Interest expense decreased 4 percent in the first quarter of 2020 primarily as a result of lower average borrowing rates, partially offset by higher average borrowings.

4133

The cost of sales to net sales ratio and other significant statement of consolidated income changes ~~not previously discussed follow:~~follow in millions of dollars:

Three Months Ended

February 2

January 27

2020

2019

% Change

Cost of sales to net sales

77.7%

78.3%

Research and development expenses

$
425

$
407

+4

Selling, administrative and general expenses

809

764

+6

Other operating expenses

415

351

+18


	Three Months Ended
	January 31		February 2
	2021		2020		% Change
Cost of sales to net sales		72.1%		77.7%

Research and development expenses	$	366	$	425	-14
Selling, administrative and general expenses		769		809	-5
Other operating expenses		373		415	-10

The cost of sales ratio improved due to price realization and ~~lower production~~the VSEP costs ~~partially offset by costs~~recorded in the first quarter of ~~the voluntary employee-separation program.~~2020. Research and development expenses declined due to the timing of research initiatives and ~~selling,~~the VSEP costs recorded last year. Selling, administrative and general expenses ~~increased~~decreased primarily as a result of ~~voluntary employee-separation costs.~~VSEP costs recorded in the same period last year. Other operating expenses ~~increased~~decreased primarily as a result of ~~higher~~lower losses on operating lease residual values, reduced depreciation of equipment on operating leases, and a curtailment loss in certain OPEB plans recorded in the same period last year (see Note 8).

~~Market Conditions~~Business Segment Results

Production and ~~Outlook~~Precision Agriculture. The production and precision agriculture segment results in millions of dollars follow:


	Three Months Ended
	January 31		February 2
	2021		2020		% Change
Net sales	$	3,069	$	2,507	+22
Operating profit		643		218	+195
Operating margin		21.0%		8.7%

Production and precision agriculture sales for the quarter increased due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. Operating profit rose primarily due to price realization, higher shipment volumes / sales mix, and a favorable indirect tax ruling in Brazil. These items were partially offset by unfavorable effects of foreign-currency exchange. The prior period was affected by voluntary employee-separation expenses.

Small Agriculture and Turf. The small agriculture and turf segment results in millions of dollars follow:


	Three Months Ended
	January 31		February 2
	2021		2020		% Change
Net sales	$	2,515	$	1,979	+27
Operating profit		469		155	+203
Operating margin		18.6%		7.8%

~~Net income attributable~~Small agriculture and turf sales for the quarter increased due to ~~Deere & Company is forecast~~higher shipment volumes, price realization, and the favorable effects of currency translation. Operating profit increased primarily due to behigher shipment volumes / sales mix and price realization. Results for the prior period were affected by voluntary employee-separation expenses.

Construction and Forestry. The construction and forestry segment results in millions of dollars follow:


	Three Months Ended
	January 31		February 2
	2021		2020		% Change
Net sales	$	2,467	$	2,044	+21
Operating profit		268		93	+188
Operating margin		10.9%		4.5%

Construction and forestry sales moved higher for the quarter primarily due to higher shipment volumes, price realization, and the favorable effects of currency translation. Additionally, the Wirtgen operation’s one-month reporting lag was eliminated resulting in four months of Wirtgen activity in the quarter. Operating profit increased mainly due to higher shipment volumes / sales mix and price realization. The increase in profit was partially offset by impairments of long-lived assets and higher production costs. Results last year also included voluntary employee-separation costs.

Financial Services. The financial services segment revenue, interest expense, and operating profit in millions of dollars:


	Three Months Ended
	January 31		February 2
	2021		2020		% Change
Revenue (including intercompany revenue)	$	934	$	998	-6
Interest expense		188		275	-32
Operating profit		258		179	+44

Operating profit increased due to favorable financing spreads, lower losses on operating lease residual values, and a ~~range~~lower provision for credit losses. The average balance of ~~$2,700 million to $3,100 million.~~receivables and leases financed was 1 percent higher in the first three months of 2021, compared with the same period last year. Interest expense decreased 32 percent in the first quarter of 2021 primarily as a result of lower average borrowing rates.

●

~~Agriculture and Turf.~~ The Company’s worldwide sales of agriculture and turf equipment are forecast to decline 5 to 10 percent for fiscal year 2020, including a negative currency translation effect of about 1 percent. Industry sales of agricultural equipment in the U.S. and Canada are forecast to be down about 5 percent, driven by lower demand for large equipment in Canada. Full year industry sales in Europe are forecast to be about the same as are South American industry sales of tractors and combines. Asian sales are forecast to be about the same as the prior year. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be about the same as 2019.

●

~~Construction and Forestry.~~ The Company’s worldwide sales of construction and forestry equipment are anticipated to be down 10 to 15 percent for 2020, with foreign currency rates having an unfavorable translation effect of about 1 percent. The outlook reflects slowing construction activity as well as efforts to bring down field inventory levels. Industry construction equipment sales in North America are expected to decline by 5 to 10 percent for the year. In forestry, global industry sales are expected to be down 5 to 10 percent due to weaker demand in North America and Russia.

●

~~Financial Services.~~ Fiscal year 2020 results are expected to benefit from lower losses on lease residual values and income earned from a higher average portfolio, partially offset by a higher provision for credit losses and prior year favorable discrete adjustments to the provision for income taxes. Net income attributable to Deere & Company for the financial services operations is expected to be approximately $600 million.

Safe Harbor Statement

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

The Company’s agricultural equipment ~~business is~~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, ~~(e.g., the United States-Mexico-Canada Agreement),~~ 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.~~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.

42The 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 ~~turf~~small agriculture and ~~utility~~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, ~~are important to~~and investment in infrastructure affect sales and results of the Company’s construction and forestry equipment. Prices for pulp, paper, lumber and structural panels ~~are important to~~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 ~~Coronavirus)~~the COVID pandemic) and government and industry responses to epidemics such as ~~government-imposed~~ 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; 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 is unclear when a sustained economic recovery could occur and what a recovery may look like. All of these factors could materially and adversely affect our business, liquidity, results of operations and financial position.

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

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

Additional factors that could materially affect the Company’s operations, access to capital, expenses and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other ~~areas, and~~areas; governmental programs, policies, ~~tariffs~~ and ~~sanctions in particular jurisdictions or~~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;~~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, ~~train~~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 ~~outlook is~~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 ~~outlook,~~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).

Critical Accounting Policies

See the Company’s critical accounting policies discussed in the Management’s Discussion and Analysis of the most recent annual report filed on Form 10-K. There have been no material changes to these ~~policies.~~policies, other than as described below related to the allowance for credit losses, as a result of the adoption of ASU No. 2016-13 during the first quarter of 2021.

CAPITAL RESOURCES AND LIQUIDITY

The discussion of capital resources and liquidity has been organized to review separately, where appropriate, the Company’s consolidated totals, equipment operations, and financial services operations.

Consolidated

Positive cash flows from consolidated operating activities in the first three months of 2021 were $143 million. This resulted primarily from net income adjusted for non-cash provisions and a change in accrued income taxes payable / receivable, which were partially offset by a seasonal increase in inventories and receivables related to sales and a

decrease in accounts payable and accrued expenses. Cash inflows from investing activities were $579 million in the first three months of this year, primarily due to collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases exceeding the cost of receivables and equipment on operating leases acquired by $865 million, partially offset by purchases of property and equipment of $154 million and a change in collateral on derivatives - net of $88 million. Negative cash flows from financing activities were $933 million in the first three months of 2021 primarily due to a decrease in borrowings of $379 million, repurchases of common stock of $352 million, and dividends paid of $242 million, partially offset by proceeds from issuance of common stock of $71 million (resulting from the exercise of stock options). Cash, cash equivalents, and restricted cash decreased $108 million during the first three months of this year.

Negative cash flows from consolidated operating activities in the first three months of 2020 were $508 million. This resulted primarily from a decrease in accounts payable and accrued expenses, a seasonal increase in inventories, and a change in accrued income taxes payable / receivable, which were partially offset by net income adjusted for non-cash provisions and a decrease in receivables related to sales. Cash inflows from investing activities were $1,026 million in the first three months of ~~this year,~~2020, primarily due to collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases exceeding the cost of receivables and equipment on operating leases acquired by $1,270 million, partially offset by purchases of property and equipment of $271 million. Negative cash flows from financing activities were $763 million in the first three months of 2020 primarily due to a decrease in borrowings of $422 million, dividends paid of $242 million, and repurchases of common stock of $114 million, partially offset by proceeds from issuance of common stock of $53 million (resulting from the exercise of stock options). Cash, cash equivalents, and restricted cash decreased $246 million during the first three months of ~~this year.~~

Negative cash flows from consolidated operating activities in the first three months of 2019 were $1,651 million. This resulted primarily from a seasonal increase in inventories, a decrease in accounts payable and accrued expenses, and an increase in receivables related to sales, which were partially offset by net income adjusted for non-

cash provisions and a change in accrued income taxes payable / receivable. Cash inflows from investing activities were $969 million in the first three months of 2019, primarily due to collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases exceeding the cost of receivables and equipment on operating leases acquired by $1,293 million, partially offset by purchases of property and equipment of $297 million. Positive cash flows from financing activities were $403 million in the first three months of 2019 primarily due to an increase in borrowings of $746 million and proceeds from issuance of common stock of $51 million (resulting from the exercise of stock options), partially offset by dividends paid of $220 million and repurchases of common stock of $144 million. Cash, cash equivalents, and restricted cash decreased $292 million during the first three months of 2019.2020.

The Company has access to most global markets at a reasonable cost and expects to have sufficient sources of global funding and liquidity to meet its funding needs. Sources of liquidity for the Company include cash and cash equivalents, marketable securities, funds from operations, the issuance of commercial paper and term debt, the securitization of retail notes (both public and private markets), and committed and uncommitted bank lines of credit. The Company’s commercial paper outstanding at January 31, 2021, November 1, 2020, and February 2, 2020 ~~November 3, 2019, and January 27, 2019~~ was ~~$2,149~~$1,346 million, ~~$2,698~~$1,238 million, and ~~$3,760~~$2,149 million, respectively, while the total cash, ~~and~~ cash equivalents, and marketable securities position was ~~$4,211~~$7,629 million, ~~$4,438~~$7,707 million, and ~~$4,149~~$4,211 million, respectively. The total cash, ~~and~~ cash equivalents, and marketable securities held by foreign subsidiaries, was $4,956 million, $5,010 million, and $2,572 million ~~$2,731 million,~~at January 31, 2021, November 1, 2020, and ~~$2,076 million at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively.

Lines of Credit. The Company also has access to bank lines of credit with various banks throughout the world. Worldwide lines of credit totaled ~~$8,484~~$8,326 million at ~~February 2, 2020, $5,692~~January 31, 2021, $6,654 million of which were unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, were primarily considered to constitute utilization. Included in the total credit lines at ~~February 2, 2020~~January 31, 2021 was a 364-day credit facility agreement of ~~$2,800~~$3,000 million, expiring in fiscal April ~~2020.~~2021. In addition, total credit lines included long-term credit facility agreements of $2,500 million, expiring in fiscal April ~~2023,~~2024, and $2,500 million, expiring in fiscal April ~~2024.~~2025. These credit agreements require John Deere Capital Corporation (Capital Corporation) to maintain its consolidated ratio of earnings to fixed charges at not less than 1.05 to 1 for each fiscal quarter and the ratio of senior debt, excluding securitization indebtedness, to capital base (total subordinated debt and stockholder’s equity excluding accumulated other comprehensive income (loss)) at not more than 11 to 1 at the end of any fiscal quarter. The credit agreements also require the equipment operations to maintain a ratio of total debt to total capital (total debt and stockholders’ equity excluding accumulated other comprehensive income (loss)) of 65 percent or less at the end of each fiscal quarter. Under this provision, the Company’s excess equity capacity and retained earnings balance free of restriction at ~~February 2, 2020~~January 31, 2021 was ~~$13,729~~$13,514 million. Alternatively under this provision, the equipment operations had the capacity to incur additional debt of ~~$25,497~~$25,098 million at ~~February 2, 2020.~~January 31, 2021. All of these requirements of the credit ~~agreement~~agreements have been met during the periods included in the financial statements.

Debt Ratings. To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Company’s securities as an indicator of credit quality for fixed income investors. A security rating is not a recommendation by the rating agency to buy, sell, or hold Company securities. A credit rating agency may change or withdraw Company ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, and reduced access to debt capital markets. The senior long-term and short-term debt ratings

and outlook currently assigned to unsecured Company debt securities by the rating agencies engaged by the Company are as follows:


	Senior
	Long-Term	Short-Term	Outlook
Fitch Ratings	A	F1	Stable
Moody’s Investors Service, Inc.	A2	Prime-1	Stable
Standard & Poor’s	A	A-1	Stable

Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Trade receivables increased ~~$130~~$866 million during the first three months of ~~2020,~~2021, primarily due to a seasonal increase. These receivables decreased ~~$137~~$323 million, compared to a year ~~ago, primarily due to lower shipment volumes and foreign currency translation.~~ago. The ratios of worldwide trade accounts and notes receivable to the last 12 months’ net sales were 15 percent at January 31, 2021, compared to 13 percent at November 1, 2020 and 16 percent at February 2, ~~2020, compared to 15 percent at November 3, 2019~~2020. Production and ~~16 percent at January 27, 2019. Agriculture~~precision agriculture trade receivables decreased $46 million, small agriculture and turf trade receivables ~~decreased $69~~increased $154 million, ~~and~~ construction and forestry trade receivables decreased ~~$68~~$431 million, compared to a year ago. The percentage of total worldwide trade receivables outstanding for

periods exceeding 12 months was 3 percent at January 31, 2021, November 1, 2020, and February 2, ~~2020, 3 percent at November 3, 2019, and 1 percent at January 27, 2019.~~2020.

Deere & Company stockholders’ equity was $14,083 million at January 31, 2021, compared with $12,937 million at November 1, 2020 and $11,926 million at February 2, ~~2020, compared with $11,413 million at November 3, 2019 and $11,328 million at January 27, 2019.~~2020. The increase of ~~$513~~$1,146 million during the first three months of ~~2020~~2021 resulted primarily from net income attributable to Deere & Company of ~~$517~~$1,224 million, a change in the cumulative translation adjustment of $396 million, a change in the retirement benefits adjustment of ~~$230 million, a change in the cumulative translation adjustment of $43~~$63 million, and an increase in common stock of ~~$33~~$47 million, partially offset by ~~dividends declared of $239 million and~~ an increase in treasury stock of ~~$75~~$312 million and dividends declared of $239 million.

Equipment Operations

The Company’s equipment businesses are capital intensive and are subject to seasonal variations in financing requirements for inventories and certain receivables from dealers. The equipment operations sell a significant portion of their trade receivables to financial services. To the extent necessary, funds provided from operations are supplemented by external financing sources.

Cash provided by operating activities of the equipment operations, including intercompany cash flows, in the first three months of 2021 was $348 million. This resulted primarily from cash inflows from net income adjusted for non-cash provisions, a change in accrued income taxes payable / receivable, and a decrease in trade and financing receivables held by the equipment operations. Partially offsetting these operating cash inflows were cash outflows from a seasonal increase in inventories and a decrease in accounts payable and accrued expenses. Cash, cash equivalents, and restricted cash decreased $71 million in the first three months of 2021.

Cash used for operating activities of the equipment operations, including intercompany cash flows, in the first three months of 2020 was $380 million. This resulted primarily from a decrease in accounts payable and accrued expenses, a seasonal increase in inventories, and a change in accrued income taxes payable / receivable. Partially offsetting these operating cash outflows were cash inflows from net income adjusted for non-cash provisions and a decrease in trade and financing receivables held by the equipment operations. Cash, cash equivalents, and restricted cash decreased $313 million in the first three months of 2020.

Cash used for operating activities of the equipment operations, including intercompany cash flows, in the first three months of 2019 was $1,434 million. This resulted primarily from a seasonal increase in inventories, a decrease in accounts payable and accrued expenses, and a change in accrued income taxes payable / receivable. Partially offsetting these operating cash outflows were cash inflows from net income adjusted for non-cash provisions and a decrease in trade and financing receivables held by the equipment operations. Cash, cash equivalents, and restricted cash decreased $521 million in the first three months of 2019.

Trade receivables held by the equipment operations decreased ~~$367~~$113 million during the first three months of ~~2020~~2021 and decreased ~~$62~~$215 million from a year ago. The equipment operations sell a significant portion of their trade receivables to financial services. See the previous consolidated discussion of trade receivables.

Inventories increased by ~~$507~~$957 million during the first three months, primarily due to a seasonal ~~increase.~~increase and the effect of foreign currency translation. Inventories decreased ~~$920~~$526 million, compared to a year ago, primarily due to ~~lower production~~higher shipment volumes, ~~and~~partially offset by the effect of foreign currency translation. A majority of these inventories are valued on the last-in, first-out (LIFO) method. The ratios of inventories on a first-in, first-out (FIFO) basis (see Note 13), which approximates current cost, to the last 12 months’ cost of sales were 31 percent at ~~February 2, 2020,~~January 31, 2021, compared to 2928 percent at November ~~3, 2019~~1, 2020 and 3531 percent at ~~January 27, 2019.~~February 2, 2020.

Total interest-bearing debt, excluding finance lease liabilities, of the equipment operations was ~~$6,556~~$10,494 million at January 31, 2021, compared with $10,382 million at November 1, 2020 and $6,521 million at February 2, ~~2020, compared with $6,446 million at November 3, 2019 and $6,273 million at January 27, 2019.~~2020. The ratios of debt to total capital (total interest-bearing debt and stockholders’ equity) were 43 percent, 45 percent, and 35 percent ~~36 percent,~~at January 31, 2021, November 1, 2020, and ~~36 percent at~~ February 2, 2020, ~~November 3, 2019, and January 27, 2019,~~ respectively.

The Company may from time to time seek to retire portions of its outstanding debt securities through cash repurchases or exchanges for other securities, in open-market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will be subject to and depend on prevailing market conditions, the company’s liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.41

Property and equipment cash expenditures for the equipment operations in the first three months of ~~2020~~2021 were ~~$271~~$154 million, compared with ~~$297~~$271 million in the same period last year. Capital expenditures for the equipment operations in ~~2020~~2021 are estimated to be approximately ~~$1,100~~$900 million.

In October 2019, the Company entered into a definitive agreement to acquire Unimil, a privately held Brazilian company in the aftermarket service parts business for sugarcane harvesters. The expected cash purchase price is R$375 million (or approximately US$90 million based on the exchange rate at the end of the fiscal quarter). The Company expects to fund the acquisition and the transaction expenses with current cash. The transaction requires customary regulatory approval and is expected to close within six months.

Financial Services

The financial services operations rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios. Their primary sources of funds for this purpose are a combination of commercial paper, term debt, securitization of retail notes, equity capital, and borrowings from Deere & Company.

During the first three months of 2021, the cash provided by operating and investing activities was used for financing activities. Cash flows provided by operating activities, including intercompany cash flows, were $420 million in the first three months of 2021. Cash provided by investing activities totaled $270 million in the first three months of 2021 primarily due to the collection of receivables (excluding trade and wholesale) and proceeds from sales of equipment on operating leases exceeding the cost of receivables and equipment on operating leases acquired by $909 million, partially offset by an increase in trade and wholesale receivables of $523 million and a change in collateral on derivatives - net of $88 million. Cash used for financing activities totaled $747 million, resulting primarily from a decrease in external borrowings of $339 million, a decrease in borrowings from Deere & Company of $264 million, and dividends paid to Deere & Company of $135 million. Cash, cash equivalents, and restricted cash decreased $37 million in the first three months of 2021.

During the first three months of 2020, the cash provided by operating and investing activities was used for financing activities. Cash flows provided by operating activities, including intercompany cash flows, were $446 million in the first three months of 2020. Cash provided by investing activities totaled $857 million in the first three months of 2020 primarily due to the collection of receivables (excluding trade and wholesale) and proceeds from sales of equipment on operating leases exceeding the cost of receivables and equipment on operating leases acquired by $1,244 million, partially offset by an increase in trade and wholesale receivables of $382 million. Cash used for financing activities totaled $1,232 million, resulting primarily from a decrease in borrowings from Deere & Company of $572 million, a decrease in external borrowings of $526 million, and dividends paid to Deere & Company of $125 million. Cash, cash equivalents, and restricted cash increased $67 million in the first three months of 2020.

During the first three months of 2019, the cash provided by operating and investing activities was used for financing activities. Cash flows provided by operating activities, including intercompany cash flows, were $972 million in the first three months of 2019. Cash provided by investing activities totaled $283 million in the first three months of 2019 primarily due to the collection of receivables (excluding trade and wholesale) and proceeds from sales of equipment on operating leases exceeding the cost of receivables and equipment on operating leases acquired by $1,303 million, partially offset by an increase in trade and wholesale receivables of $1,021 million. Cash used for financing activities totaled $1,025 million, resulting primarily from a decrease in borrowings from Deere & Company of $1,526 million and dividends paid to Deere & Company of $200 million, partially offset by an increase in external borrowings of $709 million. Cash, cash equivalents, and restricted cash increased $229 million in the first three months of 2019.

Receivables and leases held by the financial services operations consist of retail notes originated in connection with retail sales of new and used equipment by dealers of John Deere products, retail notes from non-Deere equipment customers, trade receivables, wholesale notes, revolving charge accounts, credit enhanced international export financing generally involving John Deere products, sales-type and direct financing leases, and operating leases. Total receivables and leases decreased ~~$1,378~~$238 million during the first quarter of ~~2020~~2021 and increased ~~$2,617~~$808 million in the past 12 months. Acquisition volumes of receivables (excluding trade and wholesale) and leases were 614 percent higher in the first three months of ~~2020,~~2021, compared with the same period last year, as volumes of retail notes, revolving charge accounts, and ~~operating~~sales-type and direct financing leases were higher, while volumes of ~~sales-type and direct financing~~operating leases ~~and revolving charge accounts~~ were lower. The amount of total trade receivables and wholesale notes increased compared to November ~~3, 2019~~1, 2020 and decreased compared to ~~January 27, 2019.~~February 2, 2020.

Total external interest-bearing debt of the financial services operations was $35,415 million at January 31, 2021, compared with $35,556 million at November 1, 2020 and $38,343 million at February 2, ~~2020, compared with $38,888 million at November 3, 2019 and $36,784 million at January 27, 2019.~~2020. Total external borrowings have generally changed corresponding with the level of receivable and lease portfolio, the level of cash and cash equivalents, the change in payables owed to Deere & Company, and the change in investment from Deere & Company. The financial services operations’ ratio of interest-bearing debt to stockholder’s equity was 7.6 to 1 at January 31, 2021, compared with 7.8 to 1 at November 1, 2020 and 7.8 to 1 at February 2, ~~2020, compared with 8.0 to 1 at November 3, 2019 and 7.4 to 1 at January 27, 2019.~~2020.

Capital Corporation has a revolving credit agreement to utilize bank conduit facilities to securitize retail notes (see Note 12). During November ~~2019,~~2020, the agreement was renewed with a total capacity, or “financing limit,” of ~~$3,500~~$2,000 million of secured financings at any time. After a two-year revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected. At ~~February 2, 2020, $1,935~~January 31, 2021, $1,550 million of secured short-term borrowings were outstanding under the agreement.

In the first three months of ~~2020,~~2021, the financial services operations ~~issued $760 million and~~ retired ~~$664~~$706 million of retail note securitization borrowings. In addition, during the first three months of ~~2020,~~2021, the financial services operations issued ~~$1,535~~$1,757 million and retired ~~$1,568~~$1,421 million of long-term borrowings, which were primarily medium-term notes.

Dividends

The Company’s Board of Directors at its meeting on February ~~26, 2020~~24, 2021 declared a quarterly dividend of ~~$.76~~$.90 per share payable May ~~8, 2020,~~10, 2021, to stockholders of record on March 31, ~~2020.~~2021.

Supplemental Consolidating Information

The supplemental consolidating data presented on the subsequent pages is presented for informational purposes. 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. Transactions between the “equipment operations” and “financial services” have been eliminated to arrive at the consolidated financial statements.

The equipment operations and financial services participate in different industries. The equipment operations primarily generate earnings and cash flows by manufacturing and distributing equipment, service parts, and technology solutions to dealers and end users. Financial services primarily finances sales and leases by dealers of new and used equipment that is largely manufactured by the Company. Those earnings and cash flows generally are the difference between the finance income received from customer payments less interest expense, and depreciation on equipment subject to an operating lease. The two businesses are capitalized differently and have different performance metrics. The supplemental consolidating data is also used by management due to these differences.


DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited
	EQUIPMENT OPERATIONS¹				FINANCIAL SERVICES				ELIMINATIONS				CONSOLIDATED
	2021		2020		2021		2020		2021		2020		2021		2020
Net Sales and Revenues
Net sales	$	8,051	$	6,530									$	8,051	$	6,530
Finance and interest income		32		27	$	862	$	936	$	(60)	$	(67)		834		896	²
Other income		220		209		72		62		(65)		(66)		227		205	³
Total		8,303		6,766		934		998		(125)		(133)		9,112		7,631

Costs and Expenses
Cost of sales		5,806		5,078						(1)		(1)		5,805		5,077	⁴
Research and development expenses		366		425										366		425
Selling, administrative and general expenses		653		672		117		138		(1)		(1)		769		809	⁴
Interest expense		95		63		188		275		(12)		(2)		271		336	⁵
Interest compensation to Financial Services		48		64						(48)		(64)					⁵
Other operating expenses		67		72		369		408		(63)		(65)		373		415	⁶
Total		7,035		6,374		674		821		(125)		(133)		7,584		7,062

Income before Income Taxes		1,268		392		260		177						1,528		569
Provision for income taxes		252		9		56		41						308		50

Income after Income Taxes		1,016		383		204		136						1,220		519
Equity in income (loss) of unconsolidated affiliates		4		(2)				1						4		(1)

Net Income		1,020		381		204		137						1,224		518
Less: Net income attributable to noncontrolling interests				1												1
Net Income Attributable to Deere & Company	$	1,020	$	380	$	204	$	137					$	1,224	$	517

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 (see Note 2).

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 OPERATIONS¹						FINANCIAL SERVICES							ELIMINATIONS						CONSOLIDATED
	Jan 31		Nov 1		Feb 2		Jan 31			Nov 1		Feb 2		Jan 31		Nov 1		Feb 2		Jan 31		Nov 1		Feb 2
	2021		2020		2020		2021			2020		2020		2021		2020		2020		2021		2020		2020
Assets
Cash and cash equivalents	$	6,074	$	6,145	$	2,862	$	888		$	921	$	740							$	6,962	$	7,066	$	3,602
Marketable securities		8		7		4		659			634		605								667		641		609
Receivables from unconsolidated affiliates		5,151		5,290		1,425								$	(5,123)	$	(5,259)	$	(1,387)		28		31		38	⁷
Trade accounts and notes receivable – net		900		1,013		1,115		5,341			4,238		5,707		(1,204)		(1,080)		(1,462)		5,037		4,171		5,360	⁸
Financing receivables – net		103		106		130		29,335			29,644		27,164								29,438		29,750		27,294
Financing receivables securitized – net		18		26		42		3,913			4,677		4,436								3,931		4,703		4,478
Other receivables		1,010		1,117		1,252		151			151		131		(20)		(48)		(16)		1,141		1,220		1,367	⁸
Equipment on operating leases – net								7,030			7,298		7,504								7,030		7,298		7,504
Inventories		5,956		4,999		6,482															5,956		4,999		6,482
Property and equipment – net		5,703		5,778		5,857		38			39		43								5,741		5,817		5,900
Investments in unconsolidated affiliates		157		174		200		21			19		17								178		193		217
Goodwill		3,194		3,081		2,945															3,194		3,081		2,945
Other intangible assets – net		1,342		1,327		1,349															1,342		1,327		1,349
Retirement benefits		903		859		871		60			59		58		(57)		(55)		(29)		906		863		900	⁹
Deferred income taxes		1,797		1,763		1,821		51			45		56		(292)		(309)		(463)		1,556		1,499		1,414	¹⁰
Other assets		1,485		1,439		1,546		891			994		818		(3)		(1)		(2)		2,373		2,432		2,362
Total Assets	$	33,801	$	33,124	$	27,901	$	48,378		$	48,719	$	47,279	$	(6,699)	$	(6,752)	$	(3,359)	$	75,480	$	75,091	$	71,821

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	394	$	292	$	947	$	8,830		$	8,290	$	9,061							$	9,224	$	8,582	$	10,008
Short-term securitization borrowings		17		26		42		3,952			4,656		4,374								3,969		4,682		4,416
Payables to unconsolidated affiliates		119		104		146		5,123			5,260		1,387	$	(5,123)	$	(5,259)	$	(1,386)		119		105		147	⁷
Accounts payable and accrued expenses		8,672		9,114		8,325		1,959			2,127		1,786		(1,227)		(1,129)		(1,481)		9,404		10,112		8,630	⁸
Deferred income taxes		394		385		408		430			443		546		(292)		(309)		(463)		532		519		491	¹⁰
Long-term borrowings		10,139		10,124		5,567		22,633			22,610		24,908								32,772		32,734		30,475
Retirement benefits and other liabilities		5,325		5,366		5,639		106			102		100		(57)		(55)		(29)		5,374		5,413		5,710	⁹
Total liabilities		25,060		25,411		21,074		43,033			43,488		42,162		(6,699)		(6,752)		(3,359)		61,394		62,147		59,877
									��
Commitments and contingencies (Note 16)
Redeemable noncontrolling interest						14																			14

Stockholders’ Equity
Total Deere & Company stockholders’ equity		14,083		12,937		11,926		5,345			5,231		5,117		(5,345)		(5,231)		(5,117)		14,083		12,937		11,926	¹¹
Noncontrolling interests		3		7		4															3		7		4
Financial Services’ equity		(5,345)		(5,231)		(5,117)									5,345		5,231		5,117							¹¹
Adjusted total stockholders’ equity		8,741		7,713		6,813		5,345			5,231		5,117								14,086		12,944		11,930
Total Liabilities and Stockholders’ Equity	$	33,801	$	33,124	$	27,901	$	48,378		$	48,719	$	47,279	$	(6,699)	$	(6,752)	$	(3,359)	$	75,480	$	75,091	$	71,821

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 Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited
	EQUIPMENT OPERATIONS¹				FINANCIAL SERVICES				ELIMINATIONS				CONSOLIDATED
	2021		2020		2021		2020		2021		2020		2021		2020
Cash Flows from Operating Activities
Net income	$	1,020	$	381	$	204	$	137					$	1,224	$	518
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision (credit) for credit losses		(2)		1		(3)		14						(5)		15
Provision for depreciation and amortization		279		261		294		311	$	(35)	$	(34)		538		538	¹²
Impairment charges		50												50
Share-based compensation expense										15		19		15		19	¹³
Undistributed earnings of unconsolidated affiliates		154		126		(1)		(1)		(135)		(125)		18			¹⁴
Credit for deferred income taxes		(27)		(7)		(11)		(22)						(38)		(29)
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		156		312						(253)		(242)		(97)		70	^{15, 17, 18}
Inventories		(842)		(530)						(84)		(112)		(926)		(642)	¹⁶
Accounts payable and accrued expenses		(529)		(1,058)		(53)		(19)		(123)		(57)		(705)		(1,134)	¹⁷
Accrued income taxes payable/receivable		173		(43)		(43)		(10)						130		(53)
Retirement benefits		(16)		30		2		6						(14)		36
Other		(68)		147		31		30		(10)		(23)		(47)		154	^{12, 13, 16}
Net cash provided by (used for) operating activities		348		(380)		420		446		(625)		(574)		143		(508)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)						6,416		6,056		(417)		(392)		5,999		5,664	¹⁵
Proceeds from maturities and sales of marketable securities						20		18						20		18
Proceeds from sales of equipment on operating leases						460		426						460		426
Cost of receivables acquired (excluding receivables related to sales)						(5,559)		(4,569)		259		266		(5,300)		(4,303)	¹⁵
Acquisitions of businesses, net of cash acquired		(19)												(19)
Purchases of marketable securities						(39)		(34)						(39)		(34)
Purchases of property and equipment		(154)		(271)										(154)		(271)
Cost of equipment on operating leases acquired						(408)		(669)		114		152		(294)		(517)	¹⁶
Increase in trade and wholesale receivables						(523)		(382)		523		382					¹⁵
Collateral on derivatives – net						(88)		26						(88)		26
Other		(8)		(9)		(9)		(15)		11		41		(6)		17	¹⁸
Net cash provided by (used for) investing activities		(181)		(280)		270		857		490		449		579		1,026

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings		(20)		20		(675)		(493)						(695)		(473)
Change in intercompany receivables/payables		264		572		(264)		(572)
Proceeds from long-term borrowings				167		1,757		1,535						1,757		1,702
Payments of long-term borrowings		(20)		(83)		(1,421)		(1,568)						(1,441)		(1,651)
Proceeds from issuance of common stock		71		53										71		53
Repurchases of common stock		(352)		(114)										(352)		(114)
Dividends paid		(242)		(242)		(135)		(125)		135		125		(242)		(242)	¹⁴
Other		(22)		(29)		(9)		(9)						(31)		(38)
Net cash provided by (used for) financing activities		(321)		344		(747)		(1,232)		135		125		(933)		(763)

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		83		3		20		(4)						103		(1)

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash		(71)		(313)		(37)		67						(108)		(246)
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	$	6,085	$	2,883	$	979	$	827					$	7,064	$	3,710

¹² Elimination of depreciation on leases related to inventory transferred to equipment on operating leases (see Note 2).

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.

4746

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the Company’s most recent annual report filed on Form 10-K (Part II, Item 7A). There has been no material change in this information.

Item 4. CONTROLS AND PROCEDURES

The Company’s principal executive officer and its principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) were effective as of ~~February 2, 2020,~~January 31, 2021, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act. The Company implemented a new system for lessee accounting with the adoption of ASU No. 2016-02, Leases. The Company began using this system on November 4, 2019 to account for all lease transactions when the Company is the user of the equipment. In addition, controls were implemented to properly account for leasing arrangements in accordance with the new lease standard. During the first quarter, there were no ~~other~~ changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, and trademark matters. Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that John Deere reasonably believes could exceed ~~$100,000.~~$300,000. The following matter is disclosed solely pursuant to that requirement: on October 3, 2018, the Provincia Santa Fe Ministerio de Medio Ambiente of Argentina issued a Notice of Violation to Industrias John Deere Argentina in connection with alleged groundwater contamination at the site; the Company worked with the appropriate authorities to implement corrective actions to remediate the site. On December 16, 2019, the Provincia Santa Fe Ministerio de Medio Ambiente issued a Notice of ~~Fine~~Fine. The current amount of the fine is approximately ~~$328,000;~~$296,000. The Company has filed an appeal with the ~~Company is determining its response.~~Provincia Santa Fe Ministerio de Medio Ambiente. The Company believes the reasonably possible range of losses for this and other unresolved legal actions would not have a material effect on its financial statements.

Item 1A. Risk Factors

See the Company’s most recent annual report filed on Form 10-K (Part I, Item 1A). There has been no material change in this information. The risks described in the annual report on Form 10-K, and the “Safe Harbor Statement” in this report, are not the only risks faced by the Company. Additional risks and uncertainties may also materially affect the Company’s business, financial condition, or operating results. One should not consider the risk factors to be a complete discussion of risks, uncertainties, and assumptions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s purchases of its common stock during the first quarter of ~~2020~~2021 were as follows:


				Total Number of					Total Number of
				Shares Purchased as	Maximum Number of				Shares Purchased as	Maximum Number of
	Total Number of			Part of Publicly	Shares that May Yet Be	Total Number of			Part of Publicly	Shares that May Yet Be
	Shares			Announced Plans or	Purchased under the	Shares			Announced Plans or	Purchased under the
	Purchased (2)	Average Price		Programs (1)	Plans or Programs (1)	Purchased (2)	Average Price		Programs (1)	Plans or Programs (1)
Period	(thousands)	Paid Per Share		(thousands)	(millions)	(thousands)	Paid Per Share		(thousands)	(millions)
Nov 4 to Dec 1	79	$	175.18	79	6.7
Dec 2 to Dec 29	156		169.97	70	57.1
Dec 30 to Feb 2	426		173.17	426	56.6
Nov 2 to Nov 29						369	$	251.45	369	28.6
Nov 30 to Dec 27						336		257.00	297	28.3
Dec 28 to Jan 31						587		294.36	587	27.7
Total	661			575		1,292			1,253

(1)

During the first quarter of ~~2020,~~2021, the Company had a share repurchase plan that was announced in December 2013 to purchase up to $8,000 million of shares of the Company’s common stock. In December 2019, the Company announced an additional share repurchase plan authorizing the purchase of up to $8,000 million of shares of the Company’s common stock. The share repurchases under the December 2013 plan were completed in January 2021. The maximum number of shares that may yet be purchased under ~~these plans~~the December 2019 plan was based on the end of the first quarter closing share price of ~~$158.58~~$288.80 per share. At the end of the first quarter of ~~2020, $8,975~~2021, $7,997 million of common stock remains to be purchased under the ~~plans.~~plan.

(2)

In the first quarter of ~~2020,~~2021, approximately 8639 thousand shares were purchased from plan participants at a market price to pay payroll taxes on certain restricted stock awards. The shares were valued at a weighted-average market price of ~~$172.51.~~$255.80.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Certain instruments relating to long-term borrowings constituting less than ~~10%~~10 percent of the registrant’s total assets are not filed as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant will file copies of such instruments upon request of the Commission.



3.1		Certificate of Incorporation (Exhibit 3.1 to Form 10-Q of registrant for the quarter ended July 28, 2019, Securities and Exchange Commission File Number 1-4121*)

3.2		Bylaws, as amended (Exhibit ~~3.2~~3.1 to Form ~~10-Q~~8-K of registrant ~~for the quarter ended January 27, 2019,~~filed on December 3, 2020, Securities and Exchange Commission File Number 1-4121*)

~~10.1~~		Second Amendment, dated as of February 21, 2020, to the Asset Purchase Agreement dated October 29, 2001, between registrant and Deere Capital, Inc. (including conformed copy of the Asset Purchase Agreement as Exhibit A thereto)

~~10.2~~		Second Amendment, dated as of February 21, 2020, to the Asset Purchase Agreement dated October 29, 2001, between John Deere Construction & Forestry Company and Deere Capital, Inc. (including conformed copy of the Asset Purchase Agreement as Exhibit A thereto)

31.1		Rule 13a-14(a)/15d-14(a) Certification

31.2		Rule 13a-14(a)/15d-14(a) Certification

32		Section 1350 Certifications

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Incorporated by reference. Copies of these exhibits are available from the Company upon request.

5049

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		DEERE & COMPANY


Date:	February ~~27, 2020~~25, 2021	By:	/s/ Ryan D. Campbell
			Ryan D. Campbell Senior Vice President and Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

5150


	November 3, 2019		Cumulative Effect from Adoption		November 4, 2019
Assets
Other intangible assets - net	$	1,380	$	(23)	$	1,357
Other assets		1,899		402		2,301
Liabilities
Short-term borrowings	$	10,784	$	11	$	10,795
Accounts payable and accrued expenses		9,656		348		10,004
Long-term borrowings		30,229		20		30,249


			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment
February 2, 2020*
Receivables with specific allowance ***	$	117	$	116	$	22	$	119
Receivables without a specific allowance **		31		30				32
Total	$	148	$	146	$	22	$	151
Agriculture and turf	$	120	$	120	$	17	$	123
Construction and forestry	$	28	$	26	$	5	$	28

November 3, 2019*
Receivables with specific allowance **	$	40	$	39	$	13	$	40
Receivables without a specific allowance **		32		31				37
Total	$	72	$	70	$	13	$	77
Agriculture and turf	$	49	$	48	$	8	$	52
Construction and forestry	$	23	$	22	$	5	$	25

January 27, 2019*
Receivables with specific allowance **	$	30	$	30	$	12	$	30
Receivables without a specific allowance **		36		34				36
Total	$	66	$	64	$	12	$	66
Agriculture and turf	$	49	$	48	$	9	$	49
Construction and forestry	$	17	$	16	$	3	$	17


	Three Months Ended
	February 2, 2020
Operating lease expense	$	32
Short-term lease expense		4
Variable lease expense		10
Finance lease depreciation expense		5
Total lease expense	$	51


	February 2, 2020
Operating leases
Other assets	$	376
Accounts payable and accrued expenses		361

Finance leases
Property and equipment — net	$	37

Short-term borrowings		12
Long-term borrowings		23
Total finance lease liabilities	$	35


	Operating		Finance
February 2, 2020	Leases		Leases
Remainder of 2020	$	93	$	12
2021		80		11
2022		69		8
2023		53		3
2024		38		2
2025		19
Later years		33		1
Total lease payments		385		37
Less imputed interest		24		2
Total lease liabilities	$	361	$	35


	Operating		Capital
November 3, 2019	Leases		Leases
2020	$	111	$	12
2021		77		10
2022		56		6
2023		39		2
2024		28		1
Later years		26		1
Total minimum lease payments	$	337	$	32


	Three Months Ended
	February 2, 2020
Operating cash flows from operating leases	$	30
Financing cash flows from finance leases		5


	February 2
	2020
Due in:
Remainder of 2020	$	732
2021		614
2022		380
2023		188
2024		86
2025		18
Later years		4
Total	$	2,022


(21) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME
For the Three Months Ended February 2, 2020 and January 27, 2019
(In millions of dollars) Unaudited	EQUIPMENT OPERATIONS*				FINANCIAL SERVICES
	2020		2019		2020		2019
Net Sales and Revenues
Net sales	$	6,530	$	6,941
Finance and interest income		27		23	$	936	$	866
Other income		209		215		62		60
Total		6,766		7,179		998		926

Costs and Expenses
Cost of sales		5,078		5,432
Research and development expenses		425		407
Selling, administrative and general expenses		672		645		138		121
Interest expense		63		71		275		287
Interest compensation to Financial Services		64		69
Other operating expenses		72		71		408		325
Total		6,374		6,695		821		733

Income of Consolidated Group before Income Taxes		392		484		177		193
Provision for income taxes		9		144		41		40
Income of Consolidated Group		383		340		136		153

Equity in Income (Loss) of Unconsolidated Subsidiaries and Affiliates
Financial Services		137		154		1		1
Other		(2)		6
Total		135		160		1		1
Net Income		518		500		137		154
Less: Net income attributable to noncontrolling interests		1		2
Net Income Attributable to Deere & Company	$	517	$	498	$	137	$	154