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Wed. 24 Nov 2021, 6:45am ETBenzinga
In: Earnings, Press Releases

MOLINE, Ill., Nov. 24, 2021 /PRNewswire/ --

  • Fourth-quarter net income rises on net sales gain of 19%, demonstrating solid execution and benefits of operating model.
  • UAW contract agreement shows commitment to Deere's workforce.
  • Full-year 2022 earnings forecast to be $6.5 to $7.0 billion, reflecting healthy demand.

Deere & Company (NYSE:DE) reported net income of $1.283 billion for the fourth quarter ended October 31, 2021, or $4.12 per share, compared with net income of $757 million, or $2.39 per share, for the quarter ended November 1, 2020. For fiscal year 2021, net income attributable to Deere & Company was $5.963 billion, or $18.99 per share, compared with $2.751 billion, or $8.69 per share, in fiscal 2020.

Worldwide net sales and revenues increased 16 percent, to $11.327 billion, for the fourth quarter of fiscal 2021 and rose 24 percent, to $44.024 billion, for the full year. Equipment operations net sales were $10.276 billion for the quarter and $39.737 billion for the year, compared with corresponding totals of $8.659 billion and $31.272 billion in 2020.

"Deere's strong fourth-quarter and full-year performance was delivered by our dedicated employees, dealers, and suppliers throughout the world, who have helped safely maintain our operations and serve customers," said John C. May, chairman and chief executive officer. "Our results reflect strong end-market demand and our ability to continue serving customers while managing supply-chain issues and conducting contract negotiations with our largest union. Last week's ratification of a 6-year agreement with the UAW brings our highly skilled employees back to work building the finest products in our industries. The agreement shows our ongoing commitment to delivering best-in-class wages and benefits."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2022 is forecasted to be in a range of $6.5 billion to $7.0 billion.

"Looking ahead, we expect demand for farm and construction equipment to continue benefiting from positive fundamentals, including favorable crop prices, economic growth, and increased investment in infrastructure," May said. "At the same time, we anticipate supply-chain pressures will continue to pose challenges in our industries. We are working closely with our suppliers to address these issues and ensure that our customers can deliver essential food and infrastructure more profitably and sustainably."





































Deere & Company



Fourth Quarter



Full Year



$ in millions



2021



2020



% Change



2021



2020



% Change



Net sales and revenues



$

11,327



$

9,731



16%



$

44,024



$

35,540



24%



Net income



$

1,283



$

757



69%



$

5,963



$

2,751



117%



Fully diluted EPS



$

4.12



$

2.39







$

18.99



$

8.69







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





















Equipment Operations



Fourth Quarter



$ in millions



2021



2020



% Change



Net sales



$

10,276



$

8,659



19%



Operating profit



$

1,393



$

1,056



32%



Net income



$

1,056



$

571



85%



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





















Production & Precision Agriculture



Fourth Quarter



$ in millions



2021



2020



% Change



Net sales



$

4,661



$

3,801



23%



Operating profit



$

777



$

578



34%



Operating margin





16.7%





15.2%







Production and precision agriculture sales increased for the quarter due to higher shipment volumes and price realization. Operating profit rose primarily due to price realization and improved shipment volumes / mix. These items were partially offset by higher production costs. Results for fourth-quarter 2020 were negatively impacted by employee-separation expenses.

 





















Small Agriculture & Turf



Fourth Quarter



$ in millions



2021



2020



% Change



Net sales



$

2,809



$

2,397



17%



Operating profit



$

346



$

282



23%



Operating margin





12.3%





11.8%







Small agriculture and turf sales increased for the quarter due to higher shipment volumes and price realization. Operating profit rose primarily due to improved shipment volumes / mix and price realization. These items were partially offset by higher production costs and higher research and development and selling, administrative, and general expenses. Employee-separation expenses and impairments negatively impacted the fourth quarter of 2020.

 





















Construction & Forestry



Fourth Quarter



$ in millions



2021



2020



% Change



Net sales



$

2,806



$

2,461



14%



Operating profit



$

270



$

196



38%



Operating margin





9.6%





8.0%







Construction & Forestry sales moved higher for the quarter primarily due to higher shipment volumes and price realization. Operating profit improved mainly due to price realization and higher sales volume / mix. Partially offsetting these factors were increases in production costs and higher selling, administrative, and general and research and development expenses. Fourth-quarter 2020 results were adversely affected by employee-separation expenses and impairments.

 





















Financial Services



Fourth Quarter



$ in millions



2021



2020



% Change



Net income



$

227



$

186



22%



Net income for financial services in the quarter rose mainly due to income earned on a higher average portfolio and favorable financing spreads, as well as improvements on operating-lease residual values. These factors were partially offset by a higher provision for credit losses. Results in 2020 also were affected by employee-separation costs.

















Industry Outlook for Fiscal 2022















Agriculture & Turf















U.S. & Canada:















Large Ag











Up ~ 15%



Small Ag & Turf











 ~ Flat



Europe











Up ~ 5%



South America (Tractors & Combines)











Up ~ 5%



Asia











 ~ Flat



















Construction & Forestry















U.S. & Canada:















Construction Equipment











Up 5 to 10%



Compact Construction Equipment











Up 5 to 10%



Global Forestry











Up 10 to 15%



 

















Deere Segment Outlook for Fiscal 2022



Currency



Price



$ in millions



Net Sales



Translation



Realization



Production & Precision Ag



Up 20 to 25%



0%



+9%



Small Ag & Turf



Up 15 to 20%



-1%



+7%



Construction & Forestry



Up 10 to 15%



0%



+8%



















Financial Services



Net Income



$870







Financial Services. Fiscal-year 2022 net income attributable to Deere & Company for the financial services operations is forecast to be approximately $870 million. Results are expected to be slightly lower than fiscal 2021 due to a higher provision for credit losses, lower gains on operating-lease residual values, and higher selling, general, and administrative expenses. These factors are expected to be partially offset by income earned on a higher average portfolio.

John Deere Capital Corporation

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









































Fourth Quarter



Full Year



$ in millions



2021



2020



% Change



2021



2020



% Change



Revenue



$

673



$

693



-3%



$

2,688



$

2,808



-4%



Net income



$

181



$

154



18%



$

711



$

425



67%



Ending portfolio balance



















$

41,488



$

38,726



7%



Net income for the fourth quarter of fiscal 2021 was higher than in the fourth quarter of 2020 primarily due to income earned on higher average portfolio balances and improvements on operating-lease residual values. These factors were partially offset by a higher provision for credit losses. Fourth-quarter 2020 results were also negatively impacted by employee-separation expenses. Full-year 2021 net income was higher than in 2020 due to improvements on operating-lease residual values, a lower provision for credit losses, favorable financing spreads, and income earned on a higher average portfolio. Full-year 2020 results also included impairments on lease residual values.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  Statements under "Company Outlook & Summary," "Industry Outlook for Fiscal 2022," "Deere Segment Outlook (Fiscal 2022)," and other forward-looking statements herein that relate to future events, expectations, and trends involve factors that are subject to change and risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the company's businesses.

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

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

Factors affecting the company's small agriculture and turf equipment operations include agricultural conditions; consumer confidence; weather conditions and the effects of climate change; customer profitability; labor supply; consumer borrowing patterns; consumer purchasing preferences; housing starts and supply; infrastructure investment; spending by municipalities and golf courses; and consumable input costs.

Factors affecting the company's construction and forestry equipment operations include consumer spending patterns; real estate and housing prices; the number of housing starts; interest rates; commodity prices such as oil and gas; the levels of public and non-residential construction; and investment in infrastructure. Prices for pulp, paper, lumber, and structural panels affect sales of forestry equipment.

Many of the factors affecting the production and precision agriculture, small agriculture and turf, and construction and forestry segments have been and may continue to be impacted by global economic conditions, including those resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.

All of the company's businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates (including the availability of IBOR reference rates); inflation and deflation rates; changes in weather and climate 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 or pandemics (including the COVID pandemic) and government and industry responses to such epidemics or pandemics, such as travel restrictions and extended shut downs of businesses.

Continued uncertainties related to the magnitude, duration, and persistent effects of the COVID pandemic may significantly adversely affect the company's business and outlook. These uncertainties include, among other things: the duration and impact of the resurgence in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of virus; the availability, acceptance, and effectiveness of vaccines; additional closures as mandated or otherwise made necessary by governmental authorities; disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and a prolonged delay in resumption of operations by one or more key suppliers, or the failure of any key suppliers; an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by COVID pandemic; the company's ability to meet commitments to customers on a timely basis as a result of increased costs and supply and transportation challenges; increased logistics costs; additional operating costs due to continued 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; and the impact of the pandemic on the company's customers and dealers. The sustainability of the economic recovery observed in 2021 remains unclear and significant volatility could continue for a prolonged period. These factors, and others that are currently unknown or considered immaterial, could materially and adversely affect our business, liquidity, results of operations, and financial position.

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

Continued effects of the withdrawal of the United Kingdom from the European Union could 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 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; the potential default of the U.S. federal government if Congress fails to pass a fiscal 2022 budget resolution; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health, and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise, and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws, and regulations and company actions related thereto; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.

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

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

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

 

DEERE & COMPANY

FOURTH QUARTER 2021 PRESS RELEASE

(In millions of dollars) Unaudited







































Three Months Ended



Years Ended





October 31



November 1



%



October 31



November 1



%





2021



2020



Change



2021



2020



Change

Net sales and revenues:

































Production & precision ag net sales



$

4,661



$

3,801



+23



$

16,509



$

12,962



+27

Small ag & turf net sales





2,809





2,397



+17





11,860





9,363



+27

Construction & forestry net sales





2,806





2,461



+14





11,368





8,947



+27

Financial services





869





891



-2





3,548





3,589



-1

Other revenues





182





181



+1





739





679



+9

Total net sales and revenues



$

11,327



$

9,731



+16



$

44,024



$

35,540



+24



































Operating profit: *

































Production & precision ag



$

777



$

578



+34



$

3,334



$

1,969



+69

Small ag & turf





346





282



+23





2,045





1,000



+105

Construction & forestry





270





196



+38





1,489





590



+152

Financial services





299





249



+20





1,144





746



+53

Total operating profit





1,692





1,305



+30





8,012





4,305



+86

Reconciling items **





(78)





(219)



-64





(390)





(472)



-17

Income taxes





(331)





(329)



+1





(1,659)





(1,082)



+53

Net income attributable to Deere & Company



$

1,283



$

757



+69



$

5,963



$

2,751



+117





*

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





**

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



 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended October 31, 2021 and November 1, 2020

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





















2021



2020

Net Sales and Revenues













Net sales



$

10,276



$

8,659

Finance and interest income





828





867

Other income





223





205

Total





11,327





9,731















Costs and Expenses













Cost of sales





7,809





6,470

Research and development expenses





450





443

Selling, administrative and general expenses





936





1,011

Interest expense





210





278

Other operating expenses





309





414

Total





9,714





8,616















Income of Consolidated Group before Income Taxes





1,613





1,115

Provision for income taxes





330





329















Income of Consolidated Group





1,283





786

Equity in income (loss) of unconsolidated affiliates





1





(28)















Net Income





1,284





758

Less: Net income attributable to noncontrolling interests





1





1

Net Income Attributable to Deere & Company



$

1,283



$

757















Per Share Data













Basic



$

4.15



$

2.41

Diluted



$

4.12



$

2.39















Average Shares Outstanding













Basic





309.1





314.1

Diluted





311.5





317.1





See Condensed Notes to Consolidated Financial Statements.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Years Ended October 31, 2021 and November 1, 2020

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





















2021



2020

Net Sales and Revenues













Net sales



$

39,737



$

31,272

Finance and interest income





3,296





3,450

Other income





991





818

Total





44,024





35,540















Costs and Expenses













Cost of sales





29,116





23,677

Research and development expenses





1,587





1,644

Selling, administrative and general expenses





3,383





3,477

Interest expense





993





1,247

Other operating expenses





1,343





1,612

Total





36,422





31,657















Income of Consolidated Group before Income Taxes





7,602





3,883

Provision for income taxes





1,658





1,082















Income of Consolidated Group





5,944





2,801

Equity in income (loss) of unconsolidated affiliates





21





(48)















Net Income





5,965





2,753

Less: Net income attributable to noncontrolling interests





2





2

Net Income Attributable to Deere & Company



$

5,963



$

2,751















Per Share Data













Basic



$

19.14



$

8.77

Diluted



$

18.99



$

8.69















Average Shares Outstanding













Basic





311.6





313.5

Diluted





314.0





316.6





See Condensed Notes to Consolidated Financial Statements.

 

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

As of October 31, 2021 and November 1, 2020

(In millions of dollars) Unaudited 





















2021



2020

Assets













Cash and cash equivalents



$

8,017



$

7,066

Marketable securities





728





641

Receivables from unconsolidated affiliates





27





31

Trade accounts and notes receivable - net





4,208





4,171

Financing receivables - net





33,799





29,750

Financing receivables securitized - net





4,659





4,703

Other receivables





1,738





1,220

Equipment on operating leases - net





6,988





7,298

Inventories





6,781





4,999

Property and equipment - net





5,820





5,817

Investments in unconsolidated affiliates





175





193

Goodwill





3,291





3,081

Other intangible assets - net





1,275





1,327

Retirement benefits





3,601





863

Deferred income taxes





1,037





1,499

Other assets





1,970





2,432

Total Assets



$

84,114



$

75,091















Liabilities and Stockholders' Equity



























Liabilities













Short-term borrowings



$

10,919



$

8,582

Short-term securitization borrowings





4,605





4,682

Payables to unconsolidated affiliates





143





105

Accounts payable and accrued expenses





12,205





10,112

Deferred income taxes





576





519

Long-term borrowings





32,888





32,734

Retirement benefits and other liabilities





4,344





5,413

Total liabilities





65,680





62,147















Stockholders' Equity













Total Deere & Company stockholders' equity





18,431





12,937

Noncontrolling interests





3





7

Total stockholders' equity





18,434





12,944

Total Liabilities and Stockholders' Equity



$

84,114



$

75,091





See Condensed Notes to Consolidated Financial Statements.

 

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Years Ended October 31, 2021 and November 1, 2020

(In millions of dollars) Unaudited



















2021



2020

Cash Flows from Operating Activities













Net income



$

5,965



$

2,753

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













Provision (credit) for credit losses





(6)





110

Provision for depreciation and amortization





2,050





2,118

Impairment charges





50





194

Share-based compensation expense





82





81

Loss on sales of businesses and unconsolidated affiliates











24

Undistributed earnings of unconsolidated affiliates





2





(7)

Credit for deferred income taxes





(441)





(11)

Changes in assets and liabilities:













Trade, notes, and financing receivables related to sales





969





2,009

Inventories





(2,497)





397

Accounts payable and accrued expenses





1,884





(7)

Accrued income taxes payable/receivable





11





8

Retirement benefits





29





(537)

Other





(372)





351

Net cash provided by operating activities





7,726





7,483















Cash Flows from Investing Activities













Collections of receivables (excluding receivables related to sales)





18,959





17,381

Proceeds from maturities and sales of marketable securities





109





93

Proceeds from sales of equipment on operating leases





2,094





1,783

Cost of receivables acquired (excluding receivables related to sales)





(23,653)





(19,965)

Acquisitions of businesses, net of cash acquired





(244)





(66)

Purchases of marketable securities





(194)





(130)

Purchases of property and equipment





(848)





(820)

Cost of equipment on operating leases acquired





(1,732)





(1,836)

Collateral on derivatives - net





(281)





268

Other





40





(27)

Net cash used for investing activities





(5,750)





(3,319)















Cash Flows from Financing Activities













Increase (decrease) in total short-term borrowings





818





(1,360)

Proceeds from long-term borrowings





8,722





9,271

Payments of long-term borrowings





(7,090)





(7,383)

Proceeds from issuance of common stock





148





331

Repurchases of common stock





(2,538)





(750)

Dividends paid





(1,040)





(956)

Other





(98)





(133)

Net cash used for financing activities





(1,078)





(980)















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

  Restricted Cash





55





32















Net Increase in Cash, Cash Equivalents, and Restricted Cash





953





3,216

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





7,172





3,956

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



$

8,125



$

7,172





See Condensed Notes to Consolidated Financial Statements.

 





DEERE & COMPANY

Condensed Notes to Consolidated Financial Statements

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





(1)

2021 Special Items



In the third quarter of 2021, the company sold a closed factory that previously produced small agriculture equipment in China, resulting in a pretax gain. During the first quarter of 2021, the fixed assets in an asphalt plant factory in Germany were impaired. The company also continued to assess its manufacturing locations, resulting in additional long-lived asset impairments. These impairments were offset by a favorable indirect tax ruling in Brazil. There were no special items in the fourth quarter of 2021.

 

































Year Ended October 31, 2021







Production &



Small Ag



Construction







Expense (benefit):



Precision Ag



& Turf



& Forestry



Total



Gain on sale - Other income









$

(27)









$

(27)



Long-lived asset impairments -

   Cost of sales



$

5





3



$

42





50



Brazil indirect tax - Cost of sales





(53)











(5)





(58)



Total pretax expense (benefit)



$

(48)



$

(24)



$

37



$

(35)



 



2020 Special Items



In 2020, the company closed a factory producing small agricultural equipment in China resulting in one-time costs in the fourth quarter, in addition to costs previously recorded in the third quarter. The company also impaired fixed assets at multiple international locations resulting in one-time costs in the fourth quarter, along with fixed asset impairments recognized in the second quarter. Equipment on operating leases and matured operating lease inventory were impaired in the second quarter of 2020. The company also impaired minority investments resulting in one-time costs in the fourth quarter, in addition to a minority investment impairment in the second quarter.

 































































Three Months Ended Nov. 1, 2020



Year Ended Nov. 1, 2020



Expense:



PPA



SAT



CF



Total



PPA



SAT



CF



FS



Total



Factory closure - Cost of sales









$

7









$

7









$

20















$

20



Long-lived asset impairments:

























































Cost of sales











13



$

18





31











13



$

80











93



SA&G expenses



$

2





2











4



$

2





2

















4



Other operating expenses













































$

32





32



Affiliate company impairments –

 Equity in income (loss) of

 unconsolidated affiliates

















30





30

















50











50



Total pretax expense



$

2



$

22



$

48



$

72



$

2



$

35



$

130



$

32



$

199



 



2020 Disposition



In the fourth quarter of 2020, the company sold its German lawn mower business. A $24 million pretax loss was recorded in the third quarter of 2020 when the definitive sale agreement was finalized. The loss was recorded in "Other operating expenses" in the small agriculture and turf segment.







2020 Employee-Separation Programs



During the first and fourth quarters of 2020, the company implemented employee-separation programs for the company's salaried workforce in several geographic areas, including the U.S., Europe, Asia, and Latin America. The programs' main purpose was to improve efficiency through a leaner, more flexible organization. The total pretax expenses for 2020 were as follows:



 





































































Three Months Ended Nov. 1, 2020



Year Ended Nov. 1, 2020







PPA



SAT



CF



FS



Total



PPA



SAT



CF



FS



Total



Cost of sales



$

31



$

19



$

13









$

63



$

51



$

31



$

22









$

104



Research and

  development expenses





20





12





5











37





29





18





8











55



Selling, administrative and

  general expenses





34





24





10



$

11





79





53





43





24



$

15





135



Total operating profit impact



$

85



$

55



$

28



$

11





179



$

133



$

92



$

54



$

15





294



Non-operating profit impact





























18





























41



Total pretax expense



























$

197



























$

335



 



Included in total pretax expense are non-cash charges of $13 million and $34 million in the fourth quarter and full year 2020, respectively, resulting from curtailment losses in certain OPEB plans that were recorded outside of operating profit in "Other operating expenses."





(2)

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





(3)

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

 































Three Months Ended



Years Ended





October 31



November 1



October 31



November 1





2021



2020



2021



2020

Dividends declared



$

1.05



$

.76



$

3.61



$

3.04

Dividends paid



$

.90



$

.76



$

3.32



$

3.04

 

(4)

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





(5)

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

 

DEERE & COMPANY

(6) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended October 31, 2021 and November 1, 2020

(In millions of dollars) Unaudited 





























































EQUIPMENT



FINANCIAL



































OPERATIONS1



SERVICES



ELIMINATIONS



CONSOLIDATED











2021



2020



2021



2020



2021



2020



2021



2020







Net Sales and Revenues























































Net sales



$

10,276



$

8,659



























$

10,276



$

8,659







Finance and interest income





39





38



$

859



$

891



$

(70)



$

(62)





828





867



 2



Other income





229





211





84





60





(90)





(66)





223





205



 3



Total





10,544





8,908





943





951





(160)





(128)





11,327





9,731































































Costs and Expenses























































Cost of sales





7,811





6,470

















(2)











7,809





6,470



 4



Research and development expenses





450





443





























450





443







Selling, administrative and general expenses





798





890





140





123





(2)





(2)





936





1,011



 4



Interest expense





81





92





148





195





(19)





(9)





210





278



 5



Interest compensation to Financial Services





51





53

















(51)





(53)















 5



Other operating expenses





40





93





355





385





(86)





(64)





309





414



 6



Total





9,231





8,041





643





703





(160)





(128)





9,714





8,616































































Income before Income Taxes





1,313





867





300





248

















1,613





1,115







Provision for income taxes





256





266





74





63

















330





329































































Income after Income Taxes





1,057





601





226





185

















1,283





786







Equity in income (loss) of unconsolidated affiliates











(29)





1





1

















1





(28)































































Net Income





1,057





572





227





186

















1,284





758







Less: Net income attributable to

   noncontrolling interests





1





1





























1





1







Net Income Attributable to Deere & Company



$

1,056



$

571



$

227



$

186















$

1,283



$

757









 

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





1

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

2 

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

3 

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

4 

Elimination of intercompany service fees.

5 

Elimination of Equipment Operations' interest expense to Financial Services.

6 

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

 

DEERE & COMPANY

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF INCOME

For the Years Ended October 31, 2021 and November 1, 2020

(In millions of dollars) Unaudited





























































EQUIPMENT



FINANCIAL



































OPERATIONS1



SERVICES



ELIMINATIONS



CONSOLIDATED











2021



2020



2021



2020



2021



2020



2021



2020







Net Sales and Revenues























































Net sales



$

39,737



$

31,272



























$

39,737



$

31,272







Finance and interest income





133





112



$

3,442



$

3,610



$

(279)



$

(272)





3,296





3,450



 2



Other income





941





808





352





257





(302)





(247)





991





818



 3



Total





40,811





32,192





3,794





3,867





(581)





(519)





44,024





35,540































































Costs and Expenses























































Cost of sales





29,119





23,679

















(3)





(2)





29,116





23,677



 4



Research and development expenses





1,587





1,644





























1,587





1,644







Selling, administrative and general expenses





2,887





2,878





504





606





(8)





(7)





3,383





3,477



 4



Interest expense





368





329





687





942





(62)





(24)





993





1,247



 5



Interest compensation to Financial Services





217





248

















(217)





(248)















 5



Other operating expenses





181





278





1,453





1,572





(291)





(238)





1,343





1,612



 6



Total





34,359





29,056





2,644





3,120





(581)





(519)





36,422





31,657































































Income before Income Taxes





6,452





3,136





1,150





747

















7,602





3,883







Provision for income taxes





1,386





899





272





183

















1,658





1,082































































Income after Income Taxes





5,066





2,237





878





564

















5,944





2,801







Equity in income (loss) of unconsolidated affiliates





18





(50)





3





2

















21





(48)































































Net Income





5,084





2,187





881





566

















5,965





2,753







Less: Net income attributable to

   noncontrolling interests





2





2





























2





2







Net Income Attributable to Deere & Company



$

5,082



$

2,185



$

881



$

566















$

5,963



$

2,751









 

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





1

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

2 

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

3 

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

4 

Elimination of intercompany service fees.

5 

Elimination of Equipment Operations' interest expense to Financial Services.

6 

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

 

DEERE & COMPANY

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

As of October 31, 2021 and November 1, 2020

(In millions of dollars) Unaudited

























































EQUIPMENT



FINANCIAL

































OPERATIONS1



SERVICES



ELIMINATIONS



CONSOLIDATED









2021



2020



2021



2020



2021



2020



2021



2020







Assets





















































Cash and cash equivalents

$

7,188



$

6,145



$

829



$

921















$

8,017



$

7,066







Marketable securities



3





7





725





634

















728





641







Receivables from unconsolidated affiliates



5,591





5,290















$

(5,564)



$

(5,259)





27





31



 7



Trade accounts and notes receivable - net



1,155





1,013





3,895





4,238





(842)





(1,080)





4,208





4,171



 8



Financing receivables - net



73





106





33,726





29,644

















33,799





29,750







Financing receivables securitized - net



10





26





4,649





4,677

















4,659





4,703







Other receivables



1,602





1,117





159





151





(23)





(48)





1,738





1,220



 8



Equipment on operating leases - net















6,988





7,298

















6,988





7,298







Inventories



6,781





4,999





























6,781





4,999







Property and equipment - net



5,783





5,778





37





39

















5,820





5,817







Investments in unconsolidated affiliates



153





174





22





19

















175





193







Goodwill



3,291





3,081





























3,291





3,081







Other intangible assets - net



1,275





1,327





























1,275





1,327







Retirement benefits



3,539





859





64





59





(2)





(55)





3,601





863



 9



Deferred income taxes



1,215





1,763





53





45





(231)





(309)





1,037





1,499



 10



Other assets



1,493





1,439





477





994











(1)





1,970





2,432







Total Assets

$

39,152



$

33,124



$

51,624



$

48,719



$

(6,662)



$

(6,752)



$

84,114



$

75,091





























































Liabilities and Stockholders' Equity











































































































Liabilities





















































Short-term borrowings

$

1,509



$

292



$

9,410



$

8,290















$

10,919



$

8,582







Short-term securitization borrowings



10





26





4,595





4,656

















4,605





4,682







Payables to unconsolidated affiliates



143





104





5,564





5,260



$

(5,564)



$

(5,259)





143





105



 7



Accounts payable and accrued expenses



11,055





9,114





2,015





2,127





(865)





(1,129)





12,205





10,112



 8



Deferred income taxes



438





385





369





443





(231)





(309)





576





519



 10



Long-term borrowings



8,915





10,124





23,973





22,610

















32,888





32,734







Retirement benefits and other liabilities



4,239





5,366





107





102





(2)





(55)





4,344





5,413



 9



Total liabilities



26,309





25,411





46,033





43,488





(6,662)





(6,752)





65,680





62,147





























































Stockholders' Equity





















































Total Deere & Company stockholders' equity



18,431





12,937





5,591





5,231





(5,591)





(5,231)





18,431





12,937



 11



Noncontrolling interests



3





7





























3





7







Financial Services equity



(5,591)





(5,231)

















5,591





5,231















 11



Adjusted total stockholders' equity



12,843





7,713





5,591





5,231

















18,434





12,944







Total Liabilities and Stockholders' Equity

$

39,152



$

33,124



$

51,624



$

48,719



$

(6,662)



$

(6,752)



$

84,114



$

75,091









 

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





1 

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

7 

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

8 

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

9 

Reclassification of net pension assets / liabilities.

10 

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

11 

Elimination of Financial Services equity.

 

DEERE & COMPANY

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

For the Years Ended October 31, 2021 and November 1, 2020

(In millions of dollars) Unaudited





























































EQUIPMENT



FINANCIAL



































OPERATIONS1



SERVICES



ELIMINATIONS



CONSOLIDATED











2021



2020



2021



2020



2021



2020



2021



2020







Cash Flows from Operating Activities























































Net income



$

5,084



$

2,187



$

881



$

566















$

5,965



$

2,753







Adjustments to reconcile net income to net cash provided

  by operating activities:























































Provision (credit) for credit losses





7





5





(13)





105

















(6)





110







Provision for depreciation and amortization





1,043





1,016





1,140





1,227



$

(133)



$

(125)





2,050





2,118



 12



Impairment charges





50





162











32

















50





194







Share-based compensation expense





























82





81





82





81



 13



Loss on sale of businesses and unconsolidated affiliates











24



































24







Undistributed earnings of unconsolidated affiliates





560





381





(3)





(2)





(555)





(386)





2





(7)



 14



Provision (credit) for deferred income taxes





(369)





105





(72)





(116)

















(441)





(11)







Changes in assets and liabilities:























































Trade, notes, and financing receivables related to sales





(105)





373

















1,074





1,636





969





2,009



15, 17, 18



Inventories





(1,835)





1,011

















(662)





(614)





(2,497)





397



 16



Accounts payable and accrued expenses





1,589





(331)





57





(1)





238





325





1,884





(7)



 17



Accrued income taxes payable/receivable





13





(14)





(2)





22

















11





8







Retirement benefits





30





(544)





(1)





7

















29





(537)







Other





(167)





385





(22)





136





(183)





(170)





(372)





351



12, 13, 16



Net cash provided by operating activities





5,900





4,760





1,965





1,976





(139)





747





7,726





7,483































































Cash Flows from Investing Activities























































Collections of receivables (excluding receivables related to sales)

















20,527





18,829





(1,568)





(1,448)





18,959





17,381



 15



Proceeds from maturities and sales of marketable securities





4











105





93

















109





93







Proceeds from sales of equipment on operating leases

















2,094





1,783

















2,094





1,783







Cost of receivables acquired (excluding receivables related

  to sales)

















(25,305)





(21,360)





1,652





1,395





(23,653)





(19,965)



 15



Acquisitions of businesses, net of cash acquired





(244)





(66)





























(244)





(66)







Purchases of marketable securities











(4)





(194)





(126)

















(194)





(130)







Purchases of property and equipment





(845)





(816)





(3)





(4)

















(848)





(820)







Cost of equipment on operating leases acquired

















(2,627)





(2,666)





895





830





(1,732)





(1,836)



 16



Decrease in trade and wholesale receivables

















1,364





1,999





(1,364)





(1,999)















 15



Collateral on derivatives - net





(7)





(6)





(274)





274

















(281)





268







Other





58





(99)





5





(38)





(23)





110





40





(27)



14, 18



Net cash used for investing activities





(1,034)





(991)





(4,308)





(1,216)





(408)





(1,112)





(5,750)





(3,319)































































Cash Flows from Financing Activities























































Increase (decrease) in total short-term borrowings





65





(177)





753





(1,183)

















818





(1,360)







Change in intercompany receivables/payables





(354)





(3,207)





354





3,207































Proceeds from long-term borrowings





11





4,586





8,711





4,685

















8,722





9,271







Payments of long-term borrowings





(94)





(607)





(6,996)





(6,776)

















(7,090)





(7,383)







Proceeds from issuance of common stock





148





331





























148





331







Repurchases of common stock





(2,538)





(750)





























(2,538)





(750)







Dividends paid





(1,040)





(956)





(555)





(386)





555





386





(1,040)





(956)



 14



Other





(61)





(105)





(29)





(7)





(8)





(21)





(98)





(133)



 14



Net cash provided by (used for) financing activities





(3,863)





(885)





2,238





(460)





547





365





(1,078)





(980)































































Effect of Exchange Rate Changes on Cash, Cash

  Equivalents, and Restricted Cash





41





76





14





(44)

















55





32































































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

  Restricted Cash





1,044





2,960





(91)





256

















953





3,216







Cash, Cash Equivalents, and Restricted Cash at

  Beginning of Year





6,156





3,196





1,016





760

















7,172





3,956







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



$

7,200



$

6,156



$

925



$

1,016















$

8,125



$

7,172









 

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





1 

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

12 

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

13 

Reclassification of share-based compensation expense.

14 

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

15 

Primarily reclassification of receivables related to the sale of equipment.

16 

Reclassification of direct lease agreements with retail customers.

17 

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

18 

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



 

DEERE & COMPANY

OTHER FINANCIAL INFORMATION

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



























































Equipment

Production &

Small Ag

Construction



For the Years Ended



Operations

Precision Ag

& Turf

& Forestry







October 31

November 1

October 31

November 1

October 31

November 1

October 31

November 1



Dollars in millions



2021

2020

2021

2020

2021

2020

2021

2020



Net Sales



$

39,737



$

31,272



$

16,509



$

12,962



$

11,860



$

9,363



$

11,368



$

8,947





Net Sales - excluding Wirtgen











28,348











12,962











9,363











6,023





Average Identifiable Assets*





















































With Inventories at LIFO



$

16,680



$

16,593



$

6,640



$

6,194



$

3,625



$

3,536



$

6,415



$

6,863





With Inventories at LIFO - excluding Wirtgen











12,599











6,194











3,536











2,869





With Inventories at Standard Cost





18,045





18,010





7,321





6,901





4,047





3,979





6,677





7,130





With Inventories at Standard Cost - excluding Wirtgen











14,016











6,901











3,979











3,136





Operating Profit



$

6,868



$

3,559



$

3,334



$

1,969



$

2,045



$

1,000



$

1,489



$

590





Operating Profit - excluding Wirtgen











3,289











1,969











1,000











320





Percent of Net Sales**





17.3

%



11.6

%



20.2

%



15.2

%



17.2

%



10.7

%



13.1

%



5.3

%



Operating Return on Assets**





















































With Inventories at LIFO





41.2

%



26.1

%



50.2

%



31.8

%



56.4

%



28.3

%



23.2

%



11.2

%



With Inventories at Standard Cost





38.1

%



23.5

%



45.5

%



28.5

%



50.5

%



25.1

%



22.3

%



10.2

%



SVA Cost of Assets**



$

(2,165)



$

(1,683)



$

(878)



$

(829)



$

(486)



$

(478)



$

(801)



$

(376)





SVA**





4,703





1,606





2,456





1,140





1,559





522





688





(56)































































Financial







































For the Years Ended



Services











































October 31

November 1







































Dollars in millions





2021





2020









































Net Income Attributable to Deere & Company



$

881



$

566









































Average Equity





5,497





5,099









































Return on Equity





16.0

%



11.1

%







































Operating Profit



$

1,144



$

746









































Cost of Equity





(719)





(673)









































SVA





425





73































































































 

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

 

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



 

 

 

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SOURCE Deere & Company