0001558370-20-014042.txt : 20201125 0001558370-20-014042.hdr.sgml : 20201125 20201125060358 ACCESSION NUMBER: 0001558370-20-014042 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 42 CONFORMED PERIOD OF REPORT: 20201125 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20201125 DATE AS OF CHANGE: 20201125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEERE & CO CENTRAL INDEX KEY: 0000315189 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 362382580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1101 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04121 FILM NUMBER: 201346788 BUSINESS ADDRESS: STREET 1: ONE JOHN DEERE PLACE CITY: MOLINE STATE: IL ZIP: 61265-8098 BUSINESS PHONE: (309) 765-8000 MAIL ADDRESS: STREET 1: ONE JOHN DEERE PLACE CITY: MOLINE STATE: IL ZIP: 61265-8098 8-K 1 de-20201125x8k.htm 8-K
0000315189falseDEERE & CO0000315189us-gaap:CommonStockMember2020-11-252020-11-250000315189de:Debentures8.5PercentDue2022Member2020-11-252020-11-250000315189de:Debentures6.55PercentDue2028Member2020-11-252020-11-2500003151892020-11-252020-11-25

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report: November 25, 2020

(Date of earliest event reported)

DEERE & COMPANY

(Exact name of registrant as specified in its charter)

Delaware

1-4121

36-2382580

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

One John Deere Place

MolineIllinois 61265

(Address of principal executive offices and zip code)

(309) 765-8000

(Registrant’s telephone number, including area code)

___________________________________________________

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.

Items 2.02

and 7.01               Results of Operations and Financial Condition and Regulation FD Disclosure (Furnished

herewith)

Deere & Company’s press release dated November 25, 2020 concerning Fourth Quarter of Fiscal 2020 financial results and supplemental financial information (Exhibit 99.1) is furnished under Form 8-K Items 2.02 and 7.01. The attached schedules of Other Financial Information (Exhibit 99.2) and Fourth Quarter 2020 Earnings Conference Call Information (Exhibit 99.3) are furnished under Form 8-K Items 2.02 and 7.01. The information is not filed for purposes of the Securities Exchange Act of 1934 and is not deemed incorporated by reference by any general statements incorporating by reference this report or future filings into any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Deere & Company specifically incorporates the information by reference.

Item 9.01Financial Statements and Exhibits

(d)Exhibits

Number

Description of Exhibit

99.1

Press Release and Supplemental Financial Information (Furnished herewith)

99.2

Other Financial Information (Furnished herewith)

99.3

Fourth Quarter 2020 Earnings Conference Call Information (Furnished herewith)

104

Cover Page Interactive Data File (the cover page XBRL tags are imbedded in the Inline XBRL document)

2

Signature

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 hereunto duly authorized.

DEERE & COMPANY

By:

/s/ Todd E. Davies

Todd E. Davies

Secretary

Dated: November 25, 2020

3

EX-99.1 2 de-20201125xex99d1.htm EX-99.1

Graphic

Exhibit 99.1

(Furnished herewith)

NEWS RELEASE

Jennifer Hartmann

Director, Strategic Public Relations

Deere & Company

309-765-5678

Deere Reports Net Income of $757 Million for Fourth Quarter, $2.751 Billion for Year

Fourth-quarter net income rises 5% aided by strong execution and disciplined cost management.
Improving fundamentals in agricultural sector setting stage for stronger demand in year ahead.
Earnings for 2021 forecast to be $3.6 to $4.0 billion.

MOLINE, Illinois (November 25, 2020) — Deere & Company reported net income of $757 million for the fourth quarter ended November 1, 2020, or $2.39 per share, compared with net income of $722 million, or $2.27 per share, for the quarter ended November 3, 2019. For fiscal 2020, net income attributable to Deere & Company was $2.751 billion, or $8.69 per share, compared with $3.253 billion, or $10.15 per share, in 2019.

Worldwide net sales and revenues decreased 2 percent, to $9.731 billion, for the fourth quarter of 2020 and declined 9 percent, to $35.540 billion, for the full year. Equipment operations net sales were $8.659 billion for the quarter and $31.272 billion for the year, compared with corresponding totals of $8.703 billion and $34.886 billion in 2019.

“John Deere delivered another quarter of strong performance and a solid year despite the challenges associated with managing the pandemic,” said John C. May, chairman and chief executive officer. “In this regard, I would like to pay tribute to the thousands of John Deere employees, dealers and suppliers throughout the world who have helped us safely maintain our operations and serve customers. Because of their contributions, Deere was able to complete a successful year and is positioned to continue providing differentiated solutions and unlocking even greater value for customers.”

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $3.6 billion to $4.0 billion.

In the year ahead, Deere expects to benefit from improving conditions in the farm economy and stabilization in construction and forestry markets, according to May. “Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment,” he said. “At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers’ operations."

Deere & Company

Fourth Quarter

Full Year

$ in millions

2020

2019

% Change

2020

2019

% Change

Net sales and revenues

$

9,731

$

9,896

-2%

$

35,540

$

39,258

-9%

Net income

$

757

$

722

5%

$

2,751

$

3,253

-15%

Fully diluted EPS

$

2.39

$

2.27

$

8.69

$

10.15

4


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. For the same periods in 2019, the similar charges were $74 million and $82 million. In addition, net income was unfavorably affected by discrete adjustments to the provision for income taxes in both periods of 2020 and favorably impacted in both periods of 2019.

Equipment Operations

Fourth Quarter

$ in millions

2020

2019

% Change

Net sales

$

8,659

$

8,703

-1%

Operating profit

$

1,056

$

788

34%

Net income*

$

571

$

632

-10%

* Includes equity in income (loss) of unconsolidated affiliates.

For a discussion of net sales and operating profit results, see the Agriculture & Turf and Construction & Forestry sections below.

Agriculture & Turf

Fourth Quarter

$ in millions

2020

2019

% Change

Net sales

$

6,198

$

5,756

8%

Operating profit

$

860

$

527

63%

Operating margin

13.9%

9.2%

Agriculture & Turf sales increased for the quarter due to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit rose primarily due to price realization, lower research and development expenses, reduced selling, administrative, and general expenses, improved shipment volumes / mix, and lower warranty expenses. These items were partially offset by employee-separation expenses and impairments.

Graphic

5


Construction & Forestry

Fourth Quarter

$ in millions

2020

2019

% Change

Net sales

$

2,461

$

2,947

-16%

Operating profit

$

196

$

261

-25%

Operating margin

8.0%

8.9%

Construction & Forestry sales moved lower for the quarter primarily due to lower shipment volumes, partially offset by price realization. Operating profit declined mainly due to lower sales volume / mix, impairments, and employee-separation expenses. The decrease in profit was partially offset by price realization, lower research and development expenses, reduced selling, administrative, and general expenses, lower warranty expenses, and improved production costs.

Graphic

Financial Services

Fourth Quarter

$ in millions

2020

2019

% Change

Net income

$

186

$

90

107%

The increase in financial services net income for the quarter was mainly due to lower impairments and reduced losses on operating-lease residual values and favorable financing spreads, partially offset by a higher provision for credit losses, and employee-separation expenses.

Market Conditions and Outlook (Annual)

Currency

Price

$ in millions

Net Sales

Translation

Realization

Agriculture & Turf

10% to 15%

1%

3%

Construction & Forestry

5% to 10%

1%

1%

John Deere Financial

Net Income

$630

Market Conditions & Outlook

Agriculture & Turf. Deere’s worldwide sales of agriculture and turf equipment are forecast to increase by 10 to 15 percent for fiscal-year 2021, including a positive currency-translation effect of 1 percent. Industry sales of agricultural equipment in the U.S. and Canada are forecast to rise 5 to 10 percent driven by gains in larger models. Full-year industry sales in the EU28 member nations are

6


forecast to be flat to up 5%. In South America, industry sales of tractors and combines are forecast to be up about 5 percent while Asian sales are expected to be slightly lower. Industry sales of turf and utility equipment in the U.S. and Canada are forecast to be flat to up 5 percent.

Construction & Forestry. Deere’s worldwide sales of construction and forestry equipment are anticipated to be up 5 to 10 percent for 2021 with foreign-currency rates having a favorable translation effect of 1 percent. The outlook reflects some degree of recovery from the pandemic in construction equipment, continued strength in compact construction due to residential building activity, and expected growth in the roadbuilding sector. On an industry basis, North American construction equipment sales are expected to be down about 5 percent with sales of compact equipment up about 5 percent. Global forestry industry sales are forecast to be flat to up 5 percent for the year.

Financial Services. Fiscal-year 2021 net income attributable to Deere & Company for the financial services operations is forecast to be approximately $630 million. Results are expected to benefit from favorable financing spreads, lower losses on operating-lease residual values, and income earned on a higher average portfolio, partially offset by a higher provision for credit losses.

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

2020

2019

% Change

2020

2019

% Change

Revenue

$

693

$

785

-12%

$

2,808

$

2,890

-3%

Net income

$

154

$

68

126%

$

425

$

419

1%

Ending portfolio balance

$

38,726

$

38,251

1%

Net income for the current quarter was higher than in the fourth quarter of 2019 primarily due to lower impairments and reduced losses on operating-lease residual values, favorable financing spreads, and a lower provision for credit losses, partially offset by employee-separation expenses. Full year 2020 net income was about the same as in 2019 with lower impairments and reduced losses on operating-lease residual values, and income from a higher average portfolio, largely offset by a higher provision for credit losses and unfavorable financing spreads. The full year 2019 was also affected by favorable discrete adjustments to the provision for income taxes.

7


Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements under “Company Outlook & Summary,” “Market Conditions & 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 subject to a number of uncertainties including the factors that affect farmers’ confidence and financial condition. These factors include demand for agricultural products, world grain stocks, weather conditions, soil conditions, harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, trade restrictions and tariffs (e.g., China), global trade agreements, the level of farm product exports (including concerns about genetically modified organisms), the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of governments, changes in government farm programs and policies, international reaction to such programs, changes in and effects of crop insurance programs, changes in environmental regulations and their impact on farming practices, animal diseases (e.g., African swine fever) and their effects on poultry, beef and pork consumption and prices and on livestock feed demand, and crop pests and diseases and the impact of the COVID pandemic on the agricultural industry including demand for, and production and exports of, agricultural products, and commodity prices.

Factors affecting the outlook for the company’s turf and utility equipment include 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. Many of these factors have been and may continue to be impacted by global economic effects, including the downturn resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.

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 are important to sales and results of the company’s construction and forestry equipment. Prices for pulp, paper, lumber and structural panels are important to sales of forestry equipment. Many of these factors affecting the outlook for the company’s construction and forestry equipment have been and may continue to be impacted by global economic effects, including the downturn resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.

All of the company’s businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates (including the availability of IBOR reference rates); inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics (including the COVID pandemic) and government and industry responses to epidemics such as travel restrictions and extended shut down of businesses.

Uncertainties related to the magnitude and duration of the COVID pandemic may significantly adversely affect the company’s business and outlook. These uncertainties include: 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

8


logistics costs; delays in the company’s strategic initiatives as a result of reduced spending on research and development; additional operating costs at facilities that remain open 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 continued declines in the company’s financial performance, outlook or credit ratings, which could impact the company’s ability to obtain funding in the future; the duration and impact of the resurgence in COVID cases in any country, state, or region; 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; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws and regulations and company actions related thereto; changes to and compliance with privacy regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.

9


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; 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 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 implementation of organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures and other disruptions to the company’s and suppliers’ information technology infrastructure; changes in company declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount and mortality rates which impact retirement benefit costs; and significant changes in health care costs.

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

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

10


Fourth Quarter 2020 Press Release

(in millions of dollars)

Unaudited

Three Months Ended

Twelve Months Ended

 

November 1

  

November 3

  

%

  

November 1

  

November 3

  

%

2020

2019

Change

2020

2019

Change

Net sales and revenues:

Agriculture and turf

$

6,198

$

5,756

 

+8

$

22,325

$

23,666

 

-6

Construction and forestry

 

2,461

 

2,947

 

-16

 

8,947

 

11,220

 

-20

Total net sales

 

8,659

 

8,703

 

-1

 

31,272

 

34,886

 

-10

Financial services

 

891

 

971

 

-8

 

3,589

 

3,621

 

-1

Other revenues

 

181

 

222

 

-18

 

679

 

751

-10

Total net sales and revenues

$

9,731

$

9,896

 

-2

$

35,540

$

39,258

 

-9

Operating profit: *

Agriculture and turf

$

860

$

527

 

+63

$

2,969

$

2,506

 

+18

Construction and forestry

 

196

 

261

 

-25

 

590

 

1,215

 

-51

Financial services

 

249

 

128

 

+95

 

746

 

694

 

+7

Total operating profit

 

1,305

 

916

 

+42

 

4,305

 

4,415

 

-2

Reconciling items **

 

(219)

 

(90)

 

+143

 

(472)

 

(310)

 

+52

Income taxes

 

(329)

 

(104)

 

+216

 

(1,082)

 

(852)

 

+27

Net income attributable to Deere & Company

$

757

$

722

 

+5

$

2,751

$

3,253

 

-15

*       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.

11


DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended November 1, 2020 and November 3, 2019

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

    

2020

    

2019

Net Sales and Revenues

Net sales

$

8,659

$

8,703

Finance and interest income

 

867

 

956

Other income

 

205

 

237

Total

 

9,731

 

9,896

Costs and Expenses

Cost of sales

 

6,470

 

6,735

Research and development expenses

 

443

 

488

Selling, administrative and general expenses

 

1,011

 

945

Interest expense

 

278

 

388

Other operating expenses

 

414

 

515

Total

 

8,616

 

9,071

Income of Consolidated Group before Income Taxes

 

1,115

 

825

Provision for income taxes

 

329

 

104

Income of Consolidated Group

 

786

 

721

Equity in income (loss) of unconsolidated affiliates

 

(28)

 

1

Net Income

 

758

 

722

Less: Net income attributable to noncontrolling interests

 

1

 

Net Income Attributable to Deere & Company

$

757

$

722

Per Share Data

Basic

$

2.41

$

2.30

Diluted

$

2.39

$

2.27

Average Shares Outstanding

Basic

 

314.1

 

313.9

Diluted

 

317.1

 

317.9

See Condensed Notes to Consolidated Financial Statements.

12


DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Years Ended November 1, 2020 and November 3, 2019

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

    

2020

    

2019

Net Sales and Revenues

Net sales

$

31,272

$

34,886

Finance and interest income

 

3,450

 

3,493

Other income

 

818

 

879

Total

 

35,540

 

39,258

Costs and Expenses

Cost of sales

 

23,677

 

26,792

Research and development expenses

 

1,644

 

1,783

Selling, administrative and general expenses

 

3,477

 

3,551

Interest expense

 

1,247

 

1,466

Other operating expenses

 

1,612

 

1,578

Total

 

31,657

 

35,170

Income of Consolidated Group before Income Taxes

 

3,883

 

4,088

Provision for income taxes

 

1,082

 

852

Income of Consolidated Group

 

2,801

 

3,236

Equity in income (loss) of unconsolidated affiliates

 

(48)

 

21

Net Income

 

2,753

 

3,257

Less: Net income attributable to noncontrolling interests

 

2

 

4

Net Income Attributable to Deere & Company

$

2,751

$

3,253

Per Share Data

Basic

$

8.77

$

10.28

Diluted

$

8.69

$

10.15

Average Shares Outstanding

Basic

 

313.5

 

316.5

Diluted

 

316.6

 

320.6

See Condensed Notes to Consolidated Financial Statements.

13


DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

As of November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited

    

2020

    

2019

Assets

Cash and cash equivalents

$

7,066

$

3,857

Marketable securities

 

641

 

581

Receivables from unconsolidated affiliates

 

31

 

46

Trade accounts and notes receivable - net

 

4,171

 

5,230

Financing receivables - net

 

29,750

 

29,195

Financing receivables securitized - net

 

4,703

 

4,383

Other receivables

 

1,220

 

1,487

Equipment on operating leases - net

 

7,298

 

7,567

Inventories

 

4,999

 

5,975

Property and equipment - net

 

5,817

 

5,973

Investments in unconsolidated affiliates

 

193

 

215

Goodwill

 

3,081

 

2,917

Other intangible assets - net

 

1,327

 

1,380

Retirement benefits

 

863

 

840

Deferred income taxes

 

1,499

 

1,466

Other assets

 

2,432

 

1,899

Total Assets

$

75,091

$

73,011

Liabilities and Stockholders’ Equity

Liabilities

Short-term borrowings

$

8,582

$

10,784

Short-term securitization borrowings

 

4,682

 

4,321

Payables to unconsolidated affiliates

 

105

 

142

Accounts payable and accrued expenses

 

10,112

 

9,656

Deferred income taxes

 

519

 

495

Long-term borrowings

 

32,734

 

30,229

Retirement benefits and other liabilities

 

5,413

 

5,953

Total liabilities

 

62,147

 

61,580

Redeemable noncontrolling interest

14

Stockholders’ Equity

Total Deere & Company stockholders’ equity

 

12,937

 

11,413

Noncontrolling interests

 

7

 

4

Total stockholders’ equity

 

12,944

 

11,417

Total Liabilities and Stockholders’ Equity

$

75,091

$

73,011

See Condensed Notes to Consolidated Financial Statements.

14


DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Years Ended November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited

    

2020

    

2019

Cash Flows from Operating Activities

Net income

$

2,753

$

3,257

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

Provision for credit losses

 

110

 

43

Provision for depreciation and amortization

 

2,118

 

2,019

Impairment charges

194

 

77

Share-based compensation expense

 

81

 

82

Loss on sales of businesses and unconsolidated affiliates

24

5

Undistributed earnings of unconsolidated affiliates

 

(7)

 

9

Credit for deferred income taxes

 

(11)

 

(465)

Changes in assets and liabilities:

Trade, notes, and financing receivables related to sales

 

2,009

 

(869)

Inventories

 

397

 

(780)

Accounts payable and accrued expenses

 

(7)

 

46

Accrued income taxes payable/receivable

 

8

 

173

Retirement benefits

 

(537)

 

(233)

Other

 

351

 

48

Net cash provided by operating activities

 

7,483

 

3,412

Cash Flows from Investing Activities

Collections of receivables (excluding receivables related to sales)

 

17,381

 

16,706

Proceeds from maturities and sales of marketable securities

 

93

 

89

Proceeds from sales of equipment on operating leases

 

1,783

 

1,648

Proceeds from sales of business and unconsolidated affiliates, net of cash sold

 

 

93

Cost of receivables acquired (excluding receivables related to sales)

 

(19,965)

 

(18,873)

Acquisitions of businesses, net of cash acquired

(66)

Purchases of marketable securities

 

(130)

 

(140)

Purchases of property and equipment

 

(820)

 

(1,120)

Cost of equipment on operating leases acquired

 

(1,836)

 

(2,329)

Collateral on derivatives - net

268

59

Other

 

(27)

 

(57)

Net cash used for investing activities

 

(3,319)

 

(3,924)

Cash Flows from Financing Activities

Decrease in total short-term borrowings

 

(1,360)

 

(917)

Proceeds from long-term borrowings

 

9,271

 

9,986

Payments of long-term borrowings

 

(7,383)

 

(6,426)

Proceeds from issuance of common stock

 

331

 

178

Repurchases of common stock

 

(750)

 

(1,253)

Dividends paid

 

(956)

 

(943)

Other

 

(133)

 

(116)

Net cash provided by (used for) financing activities

 

(980)

 

509

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

 

32

 

(56)

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

 

3,216

 

(59)

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

 

3,956

 

4,015

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

$

7,172

$

3,956

See Condensed Notes to Consolidated Financial Statements.

15


Condensed Notes to Consolidated Financial Statements (Unaudited)

(1)In September 2020, the Company sold its German lawn mower business. At the time of the sale, total assets were $26 million, which were recorded in “Other assets” and total liabilities were $5 million, which were recorded in “Accounts payable and accrued expenses.” No cash proceeds were received, resulting in a loss on sale, including transaction costs, of $24 million pretax and after-tax. The loss was recorded with a $24 million pretax and after-tax accrual recognized in the third quarter of 2020 when a definitive sale agreement was finalized. The loss was recorded in “Other operating expenses” in the agriculture and turf operations.
(2)In the fourth quarter and full year 2020, the Company recorded impairments and other charges as follows:

Three Months Ended November 1, 2020

Twelve Months Ended November 1, 2020

Agriculture

Construction

Financial

Agriculture

Construction

Financial

and Turf

and Forestry

Services

Total

and Turf

and Forestry

Services

Total

Factory closure

  

  

  

China – agriculture equipment *

$

7

$

7

$

20

$

20

Fixed asset and lease impairments

German asphalt plant factory *

$

62

62

Brazil construction equipment factory *

$

16

16

16

16

Other international fixed assets ****

17

2

19

17

2

19

Equipment on operating leases **

$

22

22

Operating lease inventory **

10

10

Affiliate company impairments

Minority investment in construction equipment company headquartered in South Africa ***

23

23

43

43

Construction equipment joint venture located in Brazil ***

7

7

7

7

Total 1 2

$

24

$

48

$

72

$

37

$

130

$

32

$

199

* Recorded in "Cost of sales"

** Recorded in "Other operating expenses"

*** Recorded in "Equity in income (loss) of unconsolidated affiliate"

****Recorded $15 million in “Cost of sales” and $4 million in “Selling, administrative, and general expenses”

1 The after-tax effect was $62 million and $180 million in the fourth quarter and full year 2020, respectively.

2 The non-cash charges were $72 million and $194 million in the fourth quarter and full year 2020, respectively.

(3)During first and fourth quarters of 2020, the Company implemented employee-separation programs for the Company’s salaried workforce in several geographic areas, including the United States, Europe, Asia, and Latin America. The programs’ main purpose was to improve efficiency through a leaner, more flexible organization. The programs were largely voluntary in nature with the expense recorded primarily in the period in which the employees irrevocably accepted a separation offer. For the limited involuntary employee-separation programs, the expense was recorded when management committed to a plan, the plan was communicated to the employees, and the employees were not required to provide service beyond the legal notification period. The

16


programs provided for cash payments based on years of service, and in some countries, subsidized healthcare for a limited period and outplacement services. The total pretax expenses for the fourth quarter and full year of 2020 were as follows:

Three Months Ended November 1, 2020

Twelve Months Ended November 1, 2020

Agriculture

Construction

Financial

Agriculture

Construction

Financial

and Turf

and Forestry

Services

Total

and Turf

and Forestry

Services

Total

Cost of sales

$

50

  

$

13

  

  

$

63

   

$

82

  

$

22

  

  

$

104

Research and development expenses

32

5

37

47

8

55

Selling, administrative and general expenses

58

10

$

11

79

96

24

$

15

135

Other operating expenses

18

41

Total

$

140

$

28

$

11

$

197

$

225

$

54

$

15

$

335

Total program payments will be $301 million with $166 million paid in 2020 and $135 million to be disbursed over two years. 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 expense.” Annual savings from these programs are estimated to be approximately $250 million, of which approximately $85 million was realized in 2020.

(4)In September 2020, the Company acquired Unimil, a leading Brazilian Company in the after-sales service parts business for sugarcane harvesters, which is based in Piracicaba, Brazil. The total cash purchase price before final adjustments, net of cash acquired of $5 million, was $66 million with $6 million funded to an escrow account to secure certain indemnity obligations. In addition to the cash purchase price, $14 million of liabilities were assumed. The preliminary asset and liability fair values at the acquisition date assigned to the assets and liabilities were approximately $5 million of trade accounts receivables, $2 million of other receivables, $10 million of inventories, $22 million of property and equipment, $28 million of goodwill, $13 million of other intangible assets, $5 million of accounts payable and accrued expenses, and $9 million of net deferred tax liabilities. The goodwill is not expected to be deducted for tax purposes. Unimil is included in the Company’s agriculture and turf operating segment.
(5)Dividends declared and paid on a per share basis were as follows:

Three Months Ended

Twelve Months Ended

November 1

November 3

November 1

November 3

    

2020

    

2019

    

2020

    

2019

Dividends declared

$

.76

$

.76

$

3.04

$

3.04

Dividends paid

$

.76

$

.76

$

3.04

$

2.97

(6)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.
(7)The consolidated financial statements represent the consolidation of all Deere & Company’s subsidiaries. In the supplemental consolidating data in Note 8 to the financial statements, the “Equipment Operations” represents the enterprise without “Financial Services”, which include the Company’s agriculture and turf operations and construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within “Financial Services”.

17


(8) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME

For the Three Months Ended November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS 1

FINANCIAL SERVICES

ELIMINATIONS

CONSOLIDATED

2020

2019

2020

2019

2020

2019

2020

2019

Net Sales and Revenues

   

   

    

Net sales

$

8,659

$

8,703

$

8,659

$

8,703

Finance and interest income

38

40

$

891

$

1,007

$

(62)

$

(91)

867

956

2

Other income

211

267

60

50

(66)

(80)

205

237

3

Total

8,908

9,010

951

1,057

(128)

(171)

9,731

9,896

Costs and Expenses

Cost of sales

6,470

6,735

6,470

6,735

Research and development expenses

443

488

443

488

Selling, administrative and general expenses

890

840

123

106

(2)

(1)

1,011

945

4

Interest expense

92

75

195

323

(9)

(10)

278

388

5

Interest compensation to Financial Services

53

81

(53)

(81)

5

Other operating expenses

93

96

385

498

(64)

(79)

414

515

6

Total

8,041

8,315

703

927

(128)

(171)

8,616

9,071

Income before Income Taxes

867

695

248

130

1,115

825

Provision for income taxes

266

64

63

40

329

104

Income after Income Taxes

601

631

185

90

786

721

Equity in income (loss) of 
unconsolidated affiliates

(29)

1

1

(28)

1

Net Income

572

632

186

90

758

722

Less: Net income attributable to noncontrolling interests

1

1

Net Income Attributable to
Deere & Company

$

571

$

632

$

186

$

90

$

757

$

722

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 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.

18


SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF INCOME

For the Years Ended November 1, 2020 and November 3, 2019

(In millions of dollars) Unaudited