Deere & Company Law Department One John Deere Place, Moline, IL 61265 USA Phone: 309-765-5161 Fax (309) 749-0085 or (309) 765-5892 Email: DaviesToddE@JohnDeere.com
Todd E. Davies Corporate Secretary & Associate General Counsel |
30 October 2020
Division of Corporation Finance
Office of Technology
Securities and Exchange Commission
Washington, D.C. 20549
Attention: |
| Melissa Kindelan |
|
| Senior Staff Accountant |
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| Eiko Yaoita Pyles |
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| Staff Accountant |
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Subject: |
| Deere & Company |
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| Form 10-Q for the Quarterly Period Ended August 2, 2020 |
|
| Filed August 27, 2020 |
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| Commission File No. 001-04121 |
Dear Ms. Kindelan and Ms. Pyles:
On behalf of Deere & Company, a Delaware corporation (“Deere” or the “Company”), set forth below is the Company’s response to the comment of the Division of Corporation Finance of the Securities and Exchange Commission, dated October 15, 2020, pertaining to the Company’s Form 10-Q for the quarterly period ended August 2, 2020.
Comment:
Form 10-Q for the Quarterly Period Ended August 2, 2020
Condensed Notes to Interim Consolidated Financial Statements (Unaudited)
Note 21. Consolidating Data, page 42
We note your response to prior comment 1. We continue to believe that including the Financial Services segment using the equity method of accounting in your presentation of Equipment Operations is a tailored accounting principle under Question 100.04 of the Non-GAAP Compliance and Disclosure Interpretations. Please remove this presentation in future filings.
Response:
The Company will revise future filings, including the comparative periods in those filings, to remove the equity method of accounting presentation in the Supplemental Consolidating Schedules (Supplemental Schedules).
30 October 2020
A preliminary version of the updated Supplemental Schedules is attached as Appendix 1. The final version that will be included with future filings will have explanatory notes for the elimination amounts.
Should you have additional questions or comments concerning this response to your comment letter, please contact me at (309) 765-5161.
Sincerely,
/s/ Todd E. Davies |
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Todd E. Davies | |
Corporate Secretary |
30 October 2020
Deere & Company |
| Appendix 1 |
Supplemental Income Statement |
| (1 of 3) |
For the Nine Months Ended August 2, 2020 |
|
|
(In millions of dollars) |
|
|
|
| Equipment | 1 | Financial |
| Eliminations |
| Consolidated |
| ||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
| ||||
Net sales |
| $ | 22,612 |
|
|
|
|
| $ | 22,612 |
| ||
Finance and interest income |
| 75 |
| $ | 2,720 |
| $ | (211 | ) | 2,584 |
| ||
Other income |
| 597 |
| 196 |
| (180 | ) | 613 |
| ||||
Total |
| 23,284 |
| 2,916 |
| (391 | ) | 25,809 |
| ||||
|
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|
|
|
|
|
|
| ||||
Costs and Expenses |
|
|
|
|
|
|
|
|
| ||||
Cost of sales |
| 17,208 |
|
|
| (2 | ) | 17,206 |
| ||||
Research and development expenses |
| 1,201 |
|
|
|
|
| 1,201 |
| ||||
Selling, administrative and general expenses |
| 1,989 |
| 483 |
| (5 | ) | 2,467 |
| ||||
Interest expense |
| 237 |
| 747 |
| (15 | ) | 969 |
| ||||
Interest compensation to Financial Services |
| 195 |
|
|
| (195 | ) |
|
| ||||
Other operating expenses |
| 186 |
| 1,187 |
| (174 | ) | 1,199 |
| ||||
Total |
| 21,016 |
| 2,417 |
| (391 | ) | 23,042 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before Income Taxes |
| 2,268 |
| 499 |
|
|
| 2,767 |
| ||||
Provision for income taxes |
| 632 |
| 120 |
|
|
| 752 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income after Income Taxes |
| 1,636 |
| 379 |
|
|
| 2,015 |
| ||||
Equity in income (loss) of unconsolidated affiliates |
| (22 | ) | 2 |
|
|
| (20 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net Income |
| 1,614 |
| 381 |
|
|
| 1,995 |
| ||||
Less: Net income attributable to noncontrolling interests |
| 2 |
|
|
|
|
| 2 |
| ||||
Net Income Attributable to Deere & Company |
| $ | 1,612 |
| $ | 381 |
|
|
| $ | 1,993 |
| |
1 - The equipment operations represents the enterprise without financial services. Includes the company’s agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within financial services.
30 October 2020
Deere & Company |
| Appendix 1 |
Supplemental Balance Sheet |
| (2 of 3) |
As of August 2, 2020 |
|
|
(In millions of dollars) |
|
|
|
| Equipment | 1 | Financial |
| Eliminations |
| Consolidated |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 7,440 |
| $ | 750 |
|
|
| $ | 8,190 |
| |
Marketable securities |
| 8 |
| 632 |
|
|
| 640 |
| ||||
Receivables from unconsolidated subsidiaries and affiliates |
| 3,619 |
|
|
| $ | (3,593 | ) | 26 |
| |||
Trade accounts and notes receivable - net |
| 1,251 |
| 5,595 |
| (1,373 | ) | 5,473 |
| ||||
Financing receivables - net |
| 111 |
| 27,703 |
|
|
| 27,814 |
| ||||
Financing receivables securitized - net |
| 37 |
| 5,432 |
|
|
| 5,469 |
| ||||
Other receivables |
| 1,083 |
| 162 |
| (28 | ) | 1,217 |
| ||||
Equipment on operating leases - net |
|
|
| 7,158 |
|
|
| 7,158 |
| ||||
Inventories |
| 5,650 |
|
|
|
|
| 5,650 |
| ||||
Property and equipment - net |
| 5,711 |
| 43 |
|
|
| 5,754 |
| ||||
Investments in unconsolidated affiliates |
| 180 |
| 19 |
|
|
| 199 |
| ||||
Goodwill |
| 2,984 |
|
|
|
|
| 2,984 |
| ||||
Other intangible assets - net |
| 1,301 |
|
|
|
|
| 1,301 |
| ||||
Retirement benefits |
| 972 |
| 59 |
|
|
| 1,031 |
| ||||
Deferred income taxes |
| 1,865 |
| 56 |
| (387 | ) | 1,534 |
| ||||
Other assets |
| 1,566 |
| 1,260 |
| (2 | ) | 2,824 |
| ||||
Total Assets |
| $ | 33,778 |
| $ | 48,869 |
| $ | (5,383 | ) | $ | 77,264 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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LIABILITIES |
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Short-term borrowings |
| $ | 853 |
| $ | 8,222 |
|
|
| $ | 9,075 |
| |
Short-term securitization borrowings |
| 37 |
| 5,324 |
|
|
| 5,361 |
| ||||
Payables to unconsolidated subsidiaries and affiliates |
| 80 |
| 3,593 |
| $ | (3,593 | ) | 80 |
| |||
Accounts payable and accrued expenses |
| 8,834 |
| 2,134 |
| (1,403 | ) | 9,565 |
| ||||
Deferred income taxes |
| 398 |
| 468 |
| (387 | ) | 479 |
| ||||
Long-term borrowings |
| 10,217 |
| 23,820 |
|
|
| 34,037 |
| ||||
Retirement benefits and other liabilities |
| 5,671 |
| 105 |
|
|
| 5,776 |
| ||||
Total liabilities |
| 26,090 |
| 43,666 |
| (5,383 | ) | 64,373 |
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Commitments and contingencies |
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STOCKHOLDERS’ EQUITY |
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| ||||
Total Deere & Company stockholders’ equity |
| 12,888 |
| 5,203 |
| (5,203 | ) | 12,888 |
| ||||
Noncontrolling interests |
| 3 |
|
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| 3 |
| ||||
Financial Services equity |
| (5,203 | ) |
|
| 5,203 |
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|
| ||||
Adjusted total stockholders’ equity |
| 7,688 |
| 5,203 |
|
|
| 12,891 |
| ||||
Total Liabilities and Stockholders’ Equity |
| $ | 33,778 |
| $ | 48,869 |
| $ | (5,383 | ) | $ | 77,264 |
|
1 - The equipment operations represents the enterprise without financial services. Includes the company’s agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within financial services.
30 October 2020
Deere & Company |
| Appendix 1 |
Supplemental Statement of Cash Flows |
| (3 of 3) |
For the Nine Months Ended August 2, 2020 |
|
|
(In millions of dollars) |
|
|
|
| Equipment | 1 | Financial |
| Eliminations |
| Consolidated |
| ||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 1,614 |
| $ | 381 |
|
|
| $ | 1,995 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
| ||||
Provision for credit losses |
| 6 |
| 117 |
|
|
| 123 |
| ||||
Provision for depreciation and amortization |
| 787 |
| 925 |
| $ | (98 | ) | 1,614 |
| |||
Impairment charges |
| 115 |
| 32 |
|
|
| 147 |
| ||||
Share-based compensation expense |
|
|
|
|
| 63 |
| 63 |
| ||||
Undistributed earnings of unconsolidated affiliates - 2 |
| 257 |
| (1 | ) | (261 | ) | (5 | ) | ||||
Credit for deferred income taxes |
| (57 | ) | (103 | ) |
|
| (160 | ) | ||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
| ||||
Trade receivables and Equipment Operations’ financing receivables |
| 116 |
|
|
| 510 |
| 626 |
| ||||
Inventories |
| 387 |
|
|
| (388 | ) | (1 | ) | ||||
Accounts payable and accrued expenses |
| (567 | ) | (38 | ) | 33 |
| (572 | ) | ||||
Accrued income taxes payable/receivable |
| (25 | ) | 29 |
|
|
| 4 |
| ||||
Retirement benefits |
| 77 |
| 11 |
|
|
| 88 |
| ||||
Other |
| 145 |
| 89 |
| (99 | ) | 135 |
| ||||
Net cash provided by operating activities |
| 2,855 |
| 1,442 |
| (240 | ) | 4,057 |
| ||||
|
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|
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|
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Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
| ||||
Collections of receivables (excluding trade and wholesale) |
|
|
| 14,352 |
| (1,115 | ) | 13,237 |
| ||||
Proceeds from maturities and sales of marketable securities |
|
|
| 70 |
|
|
| 70 |
| ||||
Proceeds from sales of equipment on operating leases |
|
|
| 1,310 |
|
|
| 1,310 |
| ||||
Cost of receivables acquired (excluding trade and wholesale) |
|
|
| (15,367 | ) | 918 |
| (14,449 | ) | ||||
Purchases of marketable securities |
|
|
| (91 | ) |
|
| (91 | ) | ||||
Purchases of property and equipment |
| (591 | ) | (3 | ) |
|
| (594 | ) | ||||
Cost of equipment on operating leases acquired |
|
|
| (1,836 | ) | 524 |
| (1,312 | ) | ||||
Decrease in trade and wholesale receivables |
|
|
| 423 |
| (423 | ) |
|
| ||||
Collateral on derivatives - net |
| (6 | ) | 330 |
|
|
| 324 |
| ||||
Other |
| (55 | ) | (46 | ) | 89 |
| (12 | ) | ||||
Net cash used for investing activities |
| (652 | ) | (858 | ) | (7 | ) | (1,517 | ) | ||||
|
|
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|
|
|
|
| ||||
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
| ||||
Increase (decrease) in total short-term borrowings |
| (32 | ) | 202 |
|
|
| 170 |
| ||||
Change in intercompany receivables/payables |
| (1,468 | ) | 1,468 |
|
|
|
|
| ||||
Proceeds from long-term borrowings |
| 4,592 |
| 3,739 |
|
|
| 8,331 |
| ||||
Payments of long-term borrowings |
| (179 | ) | (5,618 | ) |
|
| (5,797 | ) | ||||
Proceeds from issuance of common stock |
| 111 |
|
|
|
|
| 111 |
| ||||
Repurchases of common stock |
| (263 | ) |
|
|
|
| (263 | ) | ||||
Dividends paid |
| (718 | ) | (260 | ) | 260 |
| (718 | ) | ||||
Other |
| (86 | ) | (11 | ) | (13 | ) | (110 | ) | ||||
Net cash provided by (used for) financing activities |
| 1,957 |
| (480 | ) | $ | 247 |
| 1,724 |
| |||
|
|
|
|
|
|
|
|
|
| ||||
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
| 95 |
| (15 | ) |
|
| 80 |
| ||||
Net Increase in Cash, Cash Equivalents, and Restricted Cash |
| 4,255 |
| 89 |
|
|
| 4,344 |
| ||||
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period |
| 3,196 |
| 760 |
|
|
| 3,956 |
| ||||
Cash, Cash Equivalents, and Restricted Cash at End of Period |
| $ | 7,451 |
| $ | 849 |
|
|
| $ | 8,300 |
|
1 - The equipment operations represents the enterprise without financial services. Includes the company’s agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues and expenses not reflected within financial services.
2 - The equipment operations net cash provided by operating activities includes dividends received from financial services that are eliminated in consolidation.