Deere Reports First-Quarter Net Income of $1.224 Billion
MOLINE, Ill., Feb. 19, 2021 /PRNewswire/ --
-- First-quarter net income more than doubles on 23% gain in net sales,
reflecting successful execution of new operating strategy.
-- Improved conditions in agricultural and construction sectors setting
stage for year of strong performance.
-- Full-year earnings forecast increased to $4.6 to $5.0 billion.
Deere & Company (NYSE:DE) reported net income of $1.224 billion for the first quarter ended January 31, 2021, or $3.87 per share, compared with net income of $517 million, or $1.63 per share, for the quarter ended February 2, 2020. Worldwide net sales and revenues increased 19 percent in the first quarter of 2021 to $9.112 billion. Equipment operations net sales were $8.051 billion for the quarter, compared with $6.530 billion in 2020.
"John Deere started 2021 on a strongly positive note," said John C. May, chairman and chief executive officer. "Our results were aided by outstanding performance across our business lineup and improving conditions in the farm and construction sectors. In addition, our smart industrial operating strategy is making a significant impact on the company's results while it also helps our customers be more profitable and sustainable."
Company Outlook & Summary
Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $4.6 billion to $5.0 billion.
"We are proud of our success executing the strategy and creating a more focused organization that can operate with greater speed and agility," May said. "As our recent performance shows, these steps are leading to improved efficiencies and helping the company target its resources and investments on areas that have the greatest impact. At the same time, even as we ramp up factory production and intensify our efforts to serve customers, we are mindful of the continuing challenges associated with the global pandemic. We remain committed, above all else, to safeguarding the health and well-being of our employees."
Deere & Company
First Quarter
$ in millions 2021 2020
% Change
---
Net sales and revenues $
9,112 $
7,631 19%
Net income $
1,224 $
517 137%
Fully diluted EPS $
3.87 $
1.63
In the first quarter of 2021, the company recorded impairments totaling $50 million pretax to certain long-lived assets. These impairments were offset by a favorable indirect tax ruling in Brazil of $58 million pretax. In the first quarter of 2020, total voluntary employee-separation program expense recognized was $127 million pretax.
Equipment Operations
First Quarter
$ in millions 2021 2020
% Change
---
Net sales $
8,051 $
6,530 23%
Operating profit $
1,380 $
466 196%
Net income $
1,020 $
380 168%
Beginning in fiscal year 2021, the company implemented a new strategy, operating model, and reporting structure. With this change, the company's agriculture and turf operations were divided into two new segments, which are described as follows:
The production and precision agriculture segment is responsible for defining, developing, and delivering global equipment and technology solutions to unlock customer value for production-scale growers of large grains, small grains, cotton, and sugar. Main products include large and certain mid-size tractors, combines, cotton pickers, sugarcane harvesters and loaders, and soil preparation, seeding, application and crop care equipment.
The small agriculture and turf segment is responsible for defining, developing, and delivering market-driven products to support mid-size and small growers and producers globally as well as turf customers. The operations are principally organized to support production systems for dairy and livestock, high-value crops, and turf and utility operators. Primary products include certain mid-size and small tractors, as well as hay and forage equipment, riding and commercial lawn equipment, golf course equipment, and utility vehicles.
There were no reporting changes for the construction and forestry and financial services segments. As a result, the company has four reportable segments.
Production & Precision Ag
First Quarter
$ in millions 2021 2020
% Change
---
Net sales $
3,069 $
2,507 22%
Operating profit $
643 $
218 195%
Operating margin 21.0% 8.7%
Production and precision ag sales for the quarter increased due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. Operating profit rose primarily due to price realization, higher shipment volumes / sales mix, and a favorable indirect tax ruling in Brazil. These items were partially offset by unfavorable effects of foreign-currency exchange. The prior period was affected by voluntary employee-separation expenses.
Small Ag & Turf
First Quarter
$ in millions 2021 2020
% Change
---
Net sales $
2,515 $
1,979 27%
Operating profit $
469 $
155 203%
Operating margin 18.6% 7.8%
Small ag and turf sales for the quarter increased due to higher shipment volumes, price realization, and the favorable effects of currency translation. Operating profit increased primarily due to higher shipment volumes / sales mix and price realization. Results for the prior period were affected by voluntary employee-separation expenses.
Construction & Forestry
First Quarter
$ in millions 2021 2020
% Change
---
Net sales $
2,467 $
2,044 21%
Operating profit $
268 $
93 188%
Operating margin 10.9% 4.5%
Construction and forestry sales moved higher for the quarter primarily due to higher shipment volumes, price realization, and the favorable effects of currency translation. Additionally, the Wirtgen operation's one-month reporting lag was eliminated resulting in four months of Wirtgen activity in the quarter. Operating profit increased mainly due to higher shipment volumes / sales mix and price realization. The increase in profit was partially offset by impairments of long-lived assets and higher production costs. Results last year also included voluntary employee-separation costs.
Financial Services
First Quarter
$ in millions 2021 2020
% Change
---
Net income $
204 $
137 49%
The increase in financial services net income for the quarter was mainly due to favorable financing spreads, lower losses on operating-lease residual values, and a lower provision for credit losses.
Industry Outlook for 2021 (Annual)
---
Agriculture & Turf
U.S. & Canada:
Large Ag Up 15 to 20%
Small Ag & Turf Up ~ 5%
Europe Up ~ 5%
South America (Tractors & Combines) Up ~ 10%
Asia
Down slightly
Construction & Forestry
U.S. & Canada:
Construction Equipment Up ~5%
Compact Construction Equipment Up ~10%
Global Forestry Up 5 to 10%
Deere Segment Outlook (2021)
Currency
Price
$ in millions
Net Sales
Translation
Realization
---
Production & Precision Ag
$15,500 to 16,500 +1% +6%
Small Ag & Turf
$10,500 to 11,500 +3% +2%
Construction & Forestry
$10,500 to 11,000 +2% +2%
Financial Services
Net Income $730
Financial Services. Full-year 2021 results are expected to benefit from income earned from a higher average portfolio, lower losses on lease residual values, and favorable financing spreads.
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.
First Quarter
$ in millions 2021 2020
% Change
---
Revenue $
657 $
719 -9%
Net income $
167 $
99 69%
Ending portfolio balance $
38,372 $
37,146 3%
Results for the quarter were higher than the same period in 2020 primarily due to favorable financing spreads, lower losses on operating-lease residual values, and a lower provision for credit losses.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements under "Company Outlook & Summary," "Industry Outlook," "Deere Segment 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 businesses are subject to a number of uncertainties including the factors that affect farmers' confidence and financial condition. These factors include demand for agricultural products, world grain stocks, weather conditions, soil conditions, harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, trade restrictions and tariffs (e.g., China), global trade agreements, 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.
The production and precision agriculture business is dependent on agricultural conditions, and relies on hardware and software, guidance, connectivity and digital solutions, and automation and machine intelligence. Many factors contribute to the company's precision agriculture sales and results, including the impact to customers' profitability or sustainability outcomes; the rate of adoption and use by customers; availability of technological innovations; speed of research and development; effectiveness of partnerships with third-parties; and the dealer channel's ability to support and service precision technology solutions.
Factors affecting the outlook for the company's small agriculture and turf equipment include agricultural conditions, consumer confidence, weather conditions, customer profitability, labor supply, consumer borrowing patterns, consumer purchasing preferences, housing starts and supply, infrastructure investment, spending by municipalities and golf courses, and consumable input costs.
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 affect sales and results of the company's construction and forestry equipment. Prices for pulp, paper, lumber and structural panels affect sales of forestry equipment.
Many of the factors affecting production and precision agriculture, small agriculture and turf, and construction and forestry segments, have been and may continue to be impacted by global economic conditions, including those resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.
All of the company's businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates (including the availability of IBOR reference rates); inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics (including the COVID pandemic) and government and industry responses to epidemics such as travel restrictions and extended shut down of businesses.
Uncertainties related to the magnitude and duration of the COVID pandemic may significantly adversely affect the company's business and outlook. These uncertainties include: the duration and impact of any resurgence in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of COVID; prolonged reduction or closure of the company's operations, or a delayed recovery in our operations; additional closures as mandated or otherwise made necessary by governmental authorities; disruptions in the supply chain and a prolonged delay in resumption of operations by one or more key suppliers, or the failure of any key suppliers; the company's ability to meet commitments to customers on a timely basis as a result of increased costs and supply challenges; the ability to receive goods on a timely basis and at anticipated costs; increased logistics costs; delays in the company's strategic initiatives as a result of reduced spending on research and development; additional operating costs due to remote working arrangements, adherence to social distancing guidelines and other COVID-related challenges; increased risk of cyber attacks on network connections used in remote working arrangements; increased privacy-related risks due to processing health-related personal information; legal claims related to personal protective equipment designed, made, or provided by the company or alleged exposure to COVID on company premises; absence of employees due to illness; the impact of the pandemic on the company's customers and dealers, and their delays in their plans to invest in new equipment; requests by the company's customers or dealers for payment deferrals and contract modifications; the impact of disruptions in the global capital markets and/or declines in the company's financial performance, outlook or credit ratings, which could impact the company's ability to obtain funding in the future; and the impact of the pandemic on demand for our products and services as discussed above. It is unclear when a sustained economic recovery could occur and what a recovery may look like. All of these factors could materially and adversely affect our business, liquidity, results of operations and financial position.
Significant changes in market liquidity conditions, changes in the company's credit ratings and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company's earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the company's products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults. A debt crisis, in Europe or elsewhere, could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and company operations and results. The company's investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.
The withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere. The economic conditions and outlook could be further adversely affected by (i) uncertainty regarding any new or modified trade arrangements between the United Kingdom and the European Union and/or other countries, (ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iii) the risk that the euro as the single currency of the Eurozone could cease to exist. Any of these developments, or the perception that any of these developments are likely to occur, could affect economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions, and political, financial and monetary systems. Any of these developments could affect our businesses, liquidity, results of operations and financial position.
Additional factors that could materially affect the company's operations, access to capital, expenses and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other areas; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws and regulations and company actions related thereto; changes to and compliance with privacy regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.
Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights whether through theft, infringement, counterfeiting or otherwise; the availability and prices of strategically sourced materials, components and whole goods; delays or disruptions in the company's supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of customers, dealers, suppliers or the company to comply with laws, regulations and company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection and other ethical business practices; events that damage the company's reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; start-up of new plants and products; the success of new product initiatives or business strategies; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity and speed needed to support technology solutions; oil and energy prices, supplies and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts; changes in the ability to attract, develop, engage, and retain qualified personnel; acquisitions and divestitures of businesses; greater than anticipated transaction costs; the integration of new businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures or divestitures; the inability to deliver precision technology and agricultural solutions to customers; the implementation of the smart industrial operating strategy and other organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures and other disruptions to the company's and suppliers' information technology infrastructure; changes in company declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount and mortality rates which impact retirement benefit costs; and significant changes in health care costs.
The liquidity and ongoing profitability of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products. If general economic conditions deteriorate or capital markets become more volatile, including as a result of the COVID pandemic, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.
The company's 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).
First Quarter 2021 Press Release
---
(in millions of dollars)
Unaudited
Three Months Ended
January 31 February 2
%
2021 2020
Change
Net sales and revenues:
Production & precision ag $
3,069 $
2,507 +22
Small ag & turf 2,515 1,979 +27
Construction & forestry 2,467 2,044 +21
Total net sales 8,051 6,530 +23
Financial services 884 931 -5
Other revenues 177 170 +4
Total net sales and revenues $
9,112 $
7,631 +19
Operating profit: *
Production & precision ag $
643 $
218 +195
Small ag & turf 469 155 +203
Construction & forestry 268 93 +188
Financial services 258 179 +44
Total operating profit 1,638 645 +154
Reconciling items ** (106) (78) +36
Income taxes (308) (50) +516
Net income attributable to Deere & Company $
1,224 $
517 +137
* 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 January 31, 2021 and February 2, 2020
(In millions of dollars and shares except per share amounts) Unaudited
---
2021 2020
Net Sales and Revenues
Net sales $
8,051 $
6,530
Finance and interest income 834 896
Other income 227 205
Total 9,112 7,631
Costs and Expenses
Cost of sales 5,805 5,077
Research and development expenses 366 425
Selling, administrative and general expenses 769 809
Interest expense 271 336
Other operating expenses 373 415
Total 7,584 7,062
Income of Consolidated Group before Income Taxes 1,528 569
Provision for income taxes 308 50
Income of Consolidated Group 1,220 519
Equity in income (loss) of unconsolidated affiliates 4 (1)
Net Income 1,224 518
Less: Net income attributable to noncontrolling interests 1
Net Income Attributable to Deere & Company $
1,224 $
517
Per Share Data
Basic $
3.90 $
1.65
Diluted $
3.87 $
1.63
Average Shares Outstanding
Basic 313.5 313.5
Diluted 316.1 317.2
See Condensed Notes to Interim
Consolidated Financial
Statements.
DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited
---
January 31 November 1 February 2
2021 2020 2020
Assets
Cash and cash equivalents $
6,962 $
7,066 $
3,602
Marketable securities 667 641 609
Receivables from unconsolidated affiliates 28 31 38
Trade accounts and notes receivable - net 5,037 4,171 5,360
Financing receivables - net 29,438 29,750 27,294
Financing receivables securitized - net 3,931 4,703 4,478
Other receivables 1,141 1,220 1,367
Equipment on operating leases - net 7,030 7,298 7,504
Inventories 5,956 4,999 6,482
Property and equipment - net 5,741 5,817 5,900
Investments in unconsolidated affiliates 178 193 217
Goodwill 3,194 3,081 2,945
Other intangible assets - net 1,342 1,327 1,349
Retirement benefits 906 863 900
Deferred income taxes 1,556 1,499 1,414
Other assets 2,373 2,432 2,362
Total Assets $
75,480 $
75,091 $
71,821
Liabilities and Stockholders' Equity
Liabilities
Short-term borrowings $
9,224 $
8,582 $
10,008
Short-term securitization borrowings 3,969 4,682 4,416
Payables to unconsolidated affiliates 119 105 147
Accounts payable and accrued expenses 9,404 10,112 8,630
Deferred income taxes 532 519 491
Long-term borrowings 32,772 32,734 30,475
Retirement benefits and other liabilities 5,374 5,413 5,710
Total liabilities 61,394 62,147 59,877
Redeemable noncontrolling interest 14
Stockholders' Equity
Total Deere & Company stockholders' equity 14,083 12,937 11,926
Noncontrolling interests 3 7 4
Total stockholders' equity 14,086 12,944 11,930
Total Liabilities and Stockholders' Equity $
75,480 $
75,091 $
71,821
See Condensed Notes to Interim
Consolidated Financial
Statements.
DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited
---
2021 2020
Cash Flows from Operating Activities
Net income $
1,224 $
518
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision (credit) for credit losses (5) 15
Provision for depreciation and amortization 538 538
Impairment charges 50
Share-based compensation expense 15 19
Undistributed earnings of unconsolidated affiliates 18
Credit for deferred income taxes (38) (29)
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales (97) 70
Inventories (926) (642)
Accounts payable and accrued expenses (705) (1,134)
Accrued income taxes payable/receivable 130 (53)
Retirement benefits (14) 36
Other (47) 154
Net cash provided by (used for) operating activities 143 (508)
Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales) 5,999 5,664
Proceeds from maturities and sales of marketable securities 20 18
Proceeds from sales of equipment on operating leases 460 426
Cost of receivables acquired (excluding receivables related to sales) (5,300) (4,303)
Acquisitions of businesses, net of cash acquired (19)
Purchases of marketable securities (39) (34)
Purchases of property and equipment (154) (271)
Cost of equipment on operating leases acquired (294) (517)
Collateral on derivatives - net (88) 26
Other (6) 17
Net cash provided by investing activities 579 1,026
Cash Flows from Financing Activities
Decrease in total short-term borrowings (695) (473)
Proceeds from long-term borrowings 1,757 1,702
Payments of long-term borrowings (1,441) (1,651)
Proceeds from issuance of common stock 71 53
Repurchases of common stock (352) (114)
Dividends paid (242) (242)
Other (31) (38)
Net cash used for financing activities (933) (763)
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash 103 (1)
Net Decrease in Cash, Cash Equivalents, and Restricted Cash (108) (246)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 7,172 3,956
Cash, Cash Equivalents, and Restricted Cash at End of Period $
7,064 $
3,710
See Condensed Notes to Interim
Consolidated Financial
Statements.
Condensed Notes to Interim Consolidated
Financial Statements (Unaudited)
---
(1) During the first quarter of 2021,
the fixed assets in an asphalt
plant factory in Germany were
impaired by $38 million, pretax
and after-tax. The company also
continued to assess its
manufacturing locations, resulting
in additional long-lived asset
impairments of $12 million pretax.
The impairments were the result of
a decline in forecasted financial
performance that indicated it was
probable future cash flows would
not cover the carrying amount of
the net assets. These impairments
were offset by a favorable
indirect tax ruling in Brazil of
$58 million pretax.
Three Months Ended January 31, 2021
Expense (benefit): Production & Small Ag Construction Total
Precision Ag & Turf & Forestry
Long-lived asset impairments - $
5 $
3 $
42 $
50
Cost of sales
Brazil indirect tax - Cost of sales (53) (5) (58)
Total expense (benefit) $
(48) $
3 $
37 $
(8)
During the first quarter of
2020, the company implemented a
voluntary employee-separation
program with total pretax
expenses as follows:
Three Months Ended February 2, 2020
---
Production & Small Ag Construction Financial Total
Precision Ag & Turf & Forestry Services
Cost of sales $
19 $
11 $
9 $
39
Research and development 6 7 3 16
expenses
Selling, administrative and 17 18 12 $
3 50
general expenses
Total operating profit impact $
42 $
36 $
24 $
3 105
Other operating expenses 22
Total expense $
127
(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
four months of Wirtgen activity
in the quarter. The effect was
an increase to "Net sales" of
$270 million, which the company
considers immaterial to
construction and forestry's
annual net sales. Prior period
results were not restated.
(3) Dividends declared and paid on a
per share basis were as
follows:
Three Months Ended
January 31 February 2
2021 2020
Dividends declared $
.76 $
.76
Dividends paid $
.76 $
.76
(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."
(6) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited EQUIPMENT OPERATIONS(1) FINANCIAL SERVICES
ELIMINATIONS
CONSOLIDATED
---
2021 2020 2021 2020 2021 2020 2021 2020
Net Sales and Revenues
Net sales $
8,051 $
6,530 $
8,051 $
6,530
Finance and interest income 32 27 $
862 $
936 $
(60) $
(67) 834 896 2
Other income 220 209 72 62 (65) (66) 227 205 3
Total 8,303 6,766 934 998 (125) (133) 9,112 7,631
Costs and Expenses
Cost of sales 5,806 5,078 (1) (1) 5,805 5,077 4
Research and development expenses 366 425 366 425
Selling, administrative and general expenses 653 672 117 138 (1) (1) 769 809 4
Interest expense 95 63 188 275 (12) (2) 271 336 5
Interest compensation to Financial Services 48 64 (48) (64) 5
Other operating expenses 67 72 369 408 (63) (65) 373 415 6
Total 7,035 6,374 674 821 (125) (133) 7,584 7,062
Income before Income Taxes 1,268 392 260 177 1,528 569
Provision for income taxes 252 9 56 41 308 50
Income after Income Taxes 1,016 383 204 136 1,220 519
Equity in income (loss) of 4 (2) 1 4 (1)
unconsolidated affiliates
Net Income 1,020 381 204 137 1,224 518
Less: Net income attributable to 1 1
noncontrolling interests
Net Income Attributable to $
1,020 $
380 $
204 $
137 $
1,224 $
517
Deere & Company
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.
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEET
(In millions of dollars) Unaudited
EQUIPMENT OPERATIONS(1)
FINANCIAL SERVICES
ELIMINATIONS
CONSOLIDATED
Jan 31 Nov 1 Feb 2 Jan 31 Nov 1 Feb 2 Jan 31 Nov 1 Feb 2 Jan 31 Nov 1 Feb 2
2021 2020 2020 2021 2020 2020 2021 2020 2020 2021 2020 2020
Assets
Cash and cash equivalents $
6,074 $
6,145 $
2,862 $
888 $
921 $
740 $
6,962 $
7,066 $
3,602
Marketable securities 8 7 4 659 634 605 667 641 609
Receivables from unconsolidated 5,151 5,290 1,425 $
(5,123) $
(5,259) $
(1,387) 28 31 38 7
affiliates
Trade accounts and notes 900 1,013 1,115 5,341 4,238 5,707 (1,204) (1,080) (1,462) 5,037 4,171 5,360 8
receivable - net
Financing receivables - net 103 106 130 29,335 29,644 27,164 29,438 29,750 27,294
Financing receivables securitized - net 18 26 42 3,913 4,677 4,436 3,931 4,703 4,478
Other receivables 1,010 1,117 1,252 151 151 131 (20) (48) (16) 1,141 1,220 1,367 8
Equipment on operating leases - net 7,030 7,298 7,504 7,030 7,298 7,504
Inventories 5,956 4,999 6,482 5,956 4,999 6,482
Property and equipment - net 5,703 5,778 5,857 38 39 43 5,741 5,817 5,900
Investments in unconsolidated affiliates 157 174 200 21 19 17 178 193 217
Goodwill 3,194 3,081 2,945 3,194 3,081 2,945
Other intangible assets - net 1,342 1,327 1,349 1,342 1,327 1,349
Retirement benefits 903 859 871 60 59 58 (57) (55) (29) 906 863 900 9
Deferred income taxes 1,797 1,763 1,821 51 45 56 (292) (309) (463) 1,556 1,499 1,414 10
Other assets 1,485 1,439 1,546 891 994 818 (3) (1) (2) 2,373 2,432 2,362
Total Assets $
33,801 $
33,124 $
27,901 $
48,378 $
48,719 $
47,279 $
(6,699) $
(6,752) $
(3,359) $
75,480 $
75,091 $
71,821
Liabilities and Stockholders' Equity
Liabilities
Short-term borrowings $
394 $
292 $
947 $
8,830 $
8,290 $
9,061 $
9,224 $
8,582 $
10,008
Short-term securitization borrowings 17 26 42 3,952 4,656 4,374 3,969 4,682 4,416
Payables to unconsolidated affiliates 119 104 146 5,123 5,260 1,387 $
(5,123) $
(5,259) $
(1,386) 119 105 147 7
Accounts payable and 8,672 9,114 8,325 1,959 2,127 1,786 (1,227) (1,129) (1,481) 9,404 10,112 8,630 8
accrued expenses
Deferred income taxes 394 385 408 430 443 546 (292) (309) (463) 532 519 491 10
Long-term borrowings 10,139 10,124 5,567 22,633 22,610 24,908 32,772 32,734 30,475
Retirement benefits and other liabilities 5,325 5,366 5,639 106 102 100 (57) (55) (29) 5,374 5,413 5,710 9
Total liabilities 25,060 25,411 21,074 43,033 43,488 42,162 (6,699) (6,752) (3,359) 61,394 62,147 59,877
Redeemable noncontrolling interest 14 14
Stockholders' Equity
Total Deere & Company 14,083 12,937 11,926 5,345 5,231 5,117 (5,345) (5,231) (5,117) 14,083 12,937 11,926 11
stockholders' equity
Noncontrolling interests 3 7 4 3 7 4
Financial Services equity (5,345) (5,231) (5,117) 5,345 5,231 5,117 11
Adjusted total stockholders' equity 8,741 7,713 6,813 5,345 5,231 5,117 14,086 12,944 11,930
Total Liabilities and $
33,801 $
33,124 $
27,901 $
48,378 $
48,719 $
47,279 $
(6,699) $
(6,752) $
(3,359) $
75,480 $
75,091 $
71,821
Stockholders' Equity
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.
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF CASH FLOWS
For the Three Months Ended January 31, 2021 and February 2, 2020
(In millions of dollars) Unaudited
EQUIPMENT OPERATIONS(1)
FINANCIAL SERVICES
ELIMINATIONS
CONSOLIDATED
2021 2020 2021 2020 2021 2020 2021 2020
Cash Flows from Operating Activities
Net income $
1,020 $
381 $
204 $
137 $
1,224 $
518
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Provision (credit) for credit losses (2) 1 (3) 14 (5) 15
Provision for depreciation and amortization 279 261 294 311 $
(35) $
(34) 538 538 12
Impairment charges 50 50
Share-based compensation expense 15 19 15 19 13
Undistributed earnings of unconsolidated affiliates 154 126 (1) (1) (135) (125) 18 14
Credit for deferred income taxes (27) (7) (11) (22) (38) (29)
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales 156 312 (253) (242) (97) 70 15, 17, 18
Inventories (842) (530) (84) (112) (926) (642) 16
Accounts payable and accrued expenses (529) (1,058) (53) (19) (123) (57) (705) (1,134) 17
Accrued income taxes payable/receivable 173 (43) (43) (10) 130 (53)
Retirement benefits (16) 30 2 6 (14) 36
Other (68) 147 31 30 (10) (23) (47) 154 12, 13, 16
Net cash provided by (used for) operating activities 348 (380) 420 446 (625) (574) 143 (508)
Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales) 6,416 6,056 (417) (392) 5,999 5,664 15
Proceeds from maturities and sales of marketable securities 20 18 20 18
Proceeds from sales of equipment on operating leases 460 426 460 426
Cost of receivables acquired (excluding receivables related to sales) (5,559) (4,569) 259 266 (5,300) (4,303) 15
Acquisitions of businesses, net of cash acquired (19) (19)
Purchases of marketable securities (39) (34) (39) (34)
Purchases of property and equipment (154) (271) (154) (271)
Cost of equipment on operating leases acquired (408) (669) 114 152 (294) (517) 16
Increase in trade and wholesale receivables (523) (382) 523 382 15
Collateral on derivatives - net (88) 26 (88) 26
Other (8) (9) (9) (15) 11 41 (6) 17 18
Net cash provided by (used for) investing activities (181) (280) 270 857 490 449 579 1,026
Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings (20) 20 (675) (493) (695) (473)
Change in intercompany receivables/payables 264 572 (264) (572)
Proceeds from long-term borrowings 167 1,757 1,535 1,757 1,702
Payments of long-term borrowings (20) (83) (1,421) (1,568) (1,441) (1,651)
Proceeds from issuance of common stock 71 53 71 53
Repurchases of common stock (352) (114) (352) (114)
Dividends paid (242) (242) (135) (125) 135 125 (242) (242) 14
Other (22) (29) (9) (9) (31) (38)
Net cash provided by (used for) financing activities (321) 344 (747) (1,232) 135 125 (933) (763)
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and 83 3 20 (4) 103 (1)
Restricted Cash
Net Increase (Decrease) in Cash, Cash Equivalents, and (71) (313) (37) 67 (108) (246)
Restricted Cash
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 6,156 3,196 1,016 760 7,172 3,956
Cash, Cash Equivalents, and Restricted Cash at End of Period $
6,085 $
2,883 $
979 $
827 $
7,064 $
3,710
The supplemental consolidating data is presented
for informational purposes. Transactions between
the "Equipment Operations" and "Financial
Services" have been eliminated to arrive at the
consolidated financial statements.
(1) The Equipment Operations represents
the enterprise without Financial
Services. The Equipment Operations
includes the Company's production and
precision agriculture operations,
small agriculture and turf
operations, construction and forestry
operations, and other corporate
assets, liabilities, revenues and
expenses not reflected within
Financial Services.
12 Elimination of depreciation on leases
related to inventory transferred to
equipment on operating leases.
13 Reclassification of share-based
compensation expense.
14 Elimination of dividends from
Financial Services to the Equipment
Operations, which are included in the
Equipment Operations net cash
provided by operating activities, and
capital investments in Financial
Services from the Equipment
Operations.
15 Primarily reclassification of
receivables related to the sale of
equipment.
16 Reclassification of lease agreements
with direct customers.
17 Reclassification of sales incentive
accruals on receivables sold to
Financial Services.
18 Elimination and reclassification of
the effects of Financial Services
partial financing of the construction
and forestry retail locations sales
and subsequent collection of those
amounts.
Deere & Company
Other Financial Information
For the Three Months Ended
Equipment Operations Production & Precision Ag
Small Ag & Turf Construction & Forestry
--- --- --- --- ---
January 31 February 2 January 31 February 2 January 31 February 2 January 31 February 2
Dollars in millions 2021 2020 2021 2020 2021 2020 2021 2020
---
Net Sales $
8,051 $
6,530 $
3,069 $
2,507 $
2,515 $
1,979 $
2,467 $
2,044
Net Sales - excluding Wirtgen $
5,925 $
2,507 $
1,979 $
1,439
Average Identifiable Assets*
With Inventories at LIFO $
15,995 $
17,255 $
6,218 $
6,404 $
3,432 $
3,806 $
6,345 $
7,045
With Inventories at LIFO - $
13,216 $
6,404 $
3,806 $
3,006
excluding Wirtgen
With Inventories at Standard Cost $
17,387 $
18,672 $
6,906 $
7,092 $
3,870 $
4,268 $
6,611 $
7,312
With Inventories at Standard Cost - $
14,633 $
7,092 $
4,268 $
3,273
excluding Wirtgen
Operating Profit $
1,380 $
466 $
643 $
218 $
469 $
155 $
268 $
93
Operating Profit - excluding Wirtgen $
449 $
218 $
155 $
76
Percent of Net Sales** 17.1 7.6 21.0 8.7 18.6 7.8 10.9 5.3
% % % % % % % %
Operating Return on Assets**
With Inventories at LIFO 8.6 3.4 10.3 3.4 13.7 4.1 4.2 2.5
% % % % % % % %
With Inventories at Standard Cost 7.9 3.1 9.3 3.1 12.1 3.6 4.1 2.3
% % % % % % % %
SVA Cost of Assets** $
(522) $
(439) $
(207) $
(213) $
(117) $
(127) $
(198) $
(99)
SVA** $
858 $
10 $
436 $
5 $
352 $
28 $
70 $
(23)
---
For the Three Months Ended
Financial Services
---
January 31 February 2
Dollars in millions 2021 2020
---
Net Income Attributable to $
204 $
137
Deere & Company
Average Equity $
5,298 $
5,119
Return on Equity 3.9 2.7
% %
Operating Profit $
258 $
179
Cost of Equity $
(165) $
(166)
SVA $
93 $
13
---
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.
* 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 (roadbuilding) 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
