PR Newswire | May 21, 2021 06:46AM EDT

05/21 05:45 CDT

Deere Reports Second Quarter Net Income of $1.790 Billion MOLINE, Ill., May 21, 2021

MOLINE, Ill., May 21, 2021 /PRNewswire/ --

* Second-quarter earnings rise on 34% increase in net sales, reflecting strong market conditions and broad improvement across divisions and geographies. * Equipment-division operating margin of 19.5% demonstrates solid execution, impact of strategy. * Full-year earnings forecast raised to range of $5.3 to $5.7 billion.

Deere & Company (NYSE: DE) reported net income of $1.790 billion for the second quarter ended May 2, 2021, or $5.68 per share, compared with net income of $666 million, or $2.11 per share, for the quarter ended May 3, 2020. For the first six months of the year, net income attributable to Deere & Company was $3.013 billion, or $9.55 per share, compared with $1.182 billion, or $3.73 per share, for the same period last year.

Worldwide net sales and revenues increased 30 percent, to $12.058 billion, for the second quarter of 2021 and rose 25 percent, to $21.170 billion, for six months. Net sales of the equipment operations were $10.998 billion for the quarter and $19.049 billion for six months, compared with $8.224 billion and $14.754 billion last year.

"With another quarter of solid performance, John Deere closed out the first half of the year on a highly encouraging note," said John C. May, chairman and chief executive officer. "Our results received support across our entire business lineup, reflecting healthy worldwide markets for farm and construction equipment. Our smart industrial operating strategy is continuing to have a significant impact on performance while also helping customers do their jobs in a more profitable and sustainable manner."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $5.3 billion to $5.7 billion.

"While the company is clearly performing at a high level, Deere expects to see increased supply-chain pressures through the balance of the year," May said. "We are working closely with key suppliers to secure the parts and components that our customers need to deliver essential food production and infrastructure. Despite these challenges, Deere is on track for a strong year and we believe is well-positioned to unlock greater value for our customers and other stakeholders in the future."



Deere & Company Second Quarter Year to Date

$ in millions 2021 2020 % Change2021 2020 % Change

Net sales and revenues$12,058$9,25330% $21,170$16,88425%

Net income $1,790 $666 169% $3,013 $1,182 155%

Fully diluted EPS $5.68 $2.11 $9.55 $3.73

In last year's second quarter, Deere recorded impairments totaling $114 million pretax. In the first half of 2020, total voluntary employee-separation program expense recognized was $136 million pretax. For further details on special items, see Note 1 of the press release financial statements.



Equipment OperationsSecond Quarter

$ in millions 2021 2020 % Change

Net sales $10,998$8,22434%

Operating profit $2,144 $890 141%

Net income $1,568 $606 159%

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 AgricultureSecond Quarter

$ in millions 2021 2020 % Change

Net sales $4,529$3,36535%

Operating profit $1,007$568 77%

Operating margin 22.2% 16.9%

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 higher shipment volumes / sales mix. These items were partially offset by higher production costs.



Small Agriculture & TurfSecond Quarter

$ in millions 2021 2020 % Change

Net sales $3,390$2,60330%

Operating profit $648 $226 187%

Operating margin 19.1% 8.7%

Small agriculture and turf sales for the quarter increased due to higher shipment volumes, price realization, and the favorable effects of foreign currency translation. Operating profit increased primarily due to higher shipment volumes / sales mix, price realization, and the favorable effects of foreign currency exchange. These items were partially offset by higher production costs.



Construction & ForestrySecond Quarter

$ in millions 2021 2020 % Change

Net sales $3,079$2,25636%

Operating profit $489 $96 409%

Operating margin 15.9% 4.3%

Construction and forestry sales moved higher for the quarter primarily due to higher shipment volumes, price realization, and the favorable effects of foreign currency translation. Operating profit increased due to higher shipment volumes / sales mix and price realization. Results for the prior period were affected by impairments to certain fixed assets and an unconsolidated equipment company.



Financial ServicesSecond Quarter

$ in millions 2021 2020% Change

Net income $222$60270%

The increase in financial services net income for the quarter was mainly due to a lower provision for credit losses, improvement on operating-lease residual values, and more-favorable financing spreads. Results last year also included impairments on lease residual values.



Industry Outlook for 2021 (Annual)

Agriculture & Turf

U.S. & Canada:

Large Ag Up ~ 25%

Small Ag & Turf Up ~ 10%

Europe Up ~ 10%

South America (Tractors & Combines)Up ~ 20%

Asia Up slightly



Construction & Forestry

U.S. & Canada:

Construction Equipment Up 15 to 20%

Compact Construction Equipment Up 20 to 25%

Global Forestry Up 15 to 20%



Deere Segment Outlook (2021) Currency Price

$ in millions Net Sales TranslationRealization

Production & Precision Ag Up 25 to 30%+2% +7%

Small Ag & Turf Up 20 to 25%+3% +3%

Construction & Forestry Up 25 to 30%+2% +3%



Financial Services Net Income $ 800

Financial Services. Full-year 2021 results are expected to benefit from improvement on operating-lease residual values, income earned on a higher average portfolio, a lower provision for credit losses, and more-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.



Second Quarter Year to Date

$ in millions 2021 2020 % Change2021 2020 % Change

Revenue $675$700-4% $1,332 $1,419 -6%

Net income $177$26 581% $344 $125 175%

Ending portfolio balance $40,613$38,2236%

Results for the quarter and first six months were higher than the same periods in 2020 mainly due to a lower provision for credit losses, improvement on operating-lease residual values, and more-favorable financing spreads. Results last year 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," "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; the availability, acceptance, and effects of vaccines; 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 remains 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, 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.

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).

DEERE & COMPANY SECOND QUARTER 2021 PRESS RELEASE (In millions of dollars) Unaudited



Three Months Ended Six Months Ended

May 2 May 3 % May 2 May 3 %

2021 2020 Change2021 2020 Change

Net sales and revenues:

Production & precision ag net $4,529 $3,365+35 $7,599 $5,872 +29 sales

Small ag & turf net 3,390 2,603+30 5,904 4,583 +29 sales

Construction & 3,079 2,256+36 5,546 4,299 +29 forestry net sales

Financial services 892 875 +2 1,776 1,806 -2 revenues

Other revenues 168 154 +9 345 324 +6

Total net sales and $12,058$9,253+30 $21,170$16,884+25 revenues



Operating profit: *

Production & $1,007 $568 +77 $1,651 $786 +110 precision ag

Small ag & turf 648 226 +187 1,117 381 +193

Construction & 489 96 +409 756 189 +300 forestry

Financial services 295 75 +293 553 254 +118

Total operating 2,439 965 +153 4,077 1,610 +153 profit

Reconciling items ** (119) (54) +120 (226) (133) +70

Income taxes (530) (245)+116 (838) (295) +184

Net income attributable to Deere$1,790 $666 +169 $3,013 $1,182 +155 & Company

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 May 2, 2021 and May 3, 2020 (In millions of dollars and shares except per share amounts) Unaudited



2021 2020

Net Sales and Revenues

Net sales $10,998$8,224

Finance and interest income 809 849

Other income 251 180

Total 12,058 9,253



Costs and Expenses

Cost of sales 7,928 6,294

Research and development expenses 377 406

Selling, administrative and general expenses 838 906

Interest expense 268 342

Other operating expenses 335 377

Total 9,746 8,325



Income of Consolidated Group before Income Taxes 2,312 928

Provision for income taxes 530 245



Income of Consolidated Group 1,782 683

Equity in income (loss) of unconsolidated affiliates 8 (17)



Net Income 1,790 666

Less: Net income attributable to noncontrolling interests

Net Income Attributable to Deere & Company $1,790 $666



Per Share Data

Basic $5.72 $2.13

Diluted $5.68 $2.11



Average Shares Outstanding

Basic 312.8 313.2

Diluted 315.2 316.2

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME For the Six Months Ended May 2, 2021 and May 3, 2020 (In millions of dollars and shares except per share amounts) Unaudited



2021 2020

Net Sales and Revenues

Net sales $19,049$14,754

Finance and interest income 1,644 1,745

Other income 477 385

Total 21,170 16,884



Costs and Expenses

Cost of sales 13,734 11,371

Research and development expenses 743 831

Selling, administrative and general expenses 1,607 1,715

Interest expense 538 678

Other operating expenses 708 792

Total 17,330 15,387



Income of Consolidated Group before Income Taxes 3,840 1,497

Provision for income taxes 838 295



Income of Consolidated Group 3,002 1,202

Equity in income (loss) of unconsolidated affiliates 12 (18)



Net Income 3,014 1,184

Less: Net income attributable to noncontrolling interests 1 2

Net Income Attributable to Deere & Company $3,013 $1,182



Per Share Data

Basic $9.62 $3.77

Diluted $9.55 $3.73



Average Shares Outstanding

Basic 313.1 313.3

Diluted 315.6 316.7

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (In millions of dollars) Unaudited



May 2 November 1May 3

2021 2020 2020

Assets

Cash and cash equivalents $7,182 $7,066 $8,900

Marketable securities 668 641 626

Receivables from unconsolidated affiliates 31 31 32

Trade accounts and notes receivable - net 6,158 4,171 5,986

Financing receivables - net 30,994 29,750 27,256

Financing receivables securitized - net 4,107 4,703 4,685

Other receivables 1,473 1,220 1,212

Equipment on operating leases - net 7,108 7,298 7,245

Inventories 6,042 4,999 6,171

Property and equipment - net 5,704 5,817 5,685

Investments in unconsolidated affiliates 182 193 192

Goodwill 3,190 3,081 2,917

Other intangible assets - net 1,310 1,327 1,311

Retirement benefits 951 863 960

Deferred income taxes 1,724 1,499 1,435

Other assets 2,155 2,432 2,713

Total Assets $78,979$75,091 $77,326



Liabilities and Stockholders' Equity



Liabilities

Short-term borrowings $9,911 $8,582 $11,179

Short-term securitization borrowings 4,106 4,682 4,640

Payables to unconsolidated affiliates 155 105 91

Accounts payable and accrued expenses 10,527 10,112 9,072

Deferred income taxes 533 519 475

Long-term borrowings 33,346 32,734 34,324

Retirement benefits and other liabilities 5,305 5,413 5,680

Total liabilities 63,883 62,147 65,461



Stockholders' Equity

Total Deere & Company stockholders' equity 15,092 12,937 11,864

Noncontrolling interests 4 7 1

Total stockholders' equity 15,096 12,944 11,865

Total Liabilities and Stockholders' Equity$78,979$75,091 $77,326

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY STATEMENT OF CONSOLIDATED CASH FLOWS For the Six Months Ended May 2, 2021 and May 3, 2020 (In millions of dollars) Unaudited



2021 2020

Cash Flows from Operating Activities

Net income $3,014 $1,184

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

Provision (credit) for credit losses (24) 107

Provision for depreciation and amortization 1,054 1,067

Impairment charges 50 114

Share-based compensation expense 45 48

Undistributed earnings of unconsolidated affiliates 11 (8)

Credit for deferred income taxes (213) (61)

Changes in assets and liabilities:

Trade, notes, and financing receivables related to (1,124) (491) sales

Inventories (1,193) (496)

Accounts payable and accrued expenses 318 (707)

Accrued income taxes payable/receivable 54 (173)

Retirement benefits (5) 58

Other (201) 134

Net cash provided by operating activities 1,786 776



Cash Flows from Investing Activities

Collections of receivables (excluding receivables 10,367 9,624 related to sales)

Proceeds from maturities and sales of marketable 47 39 securities

Proceeds from sales of equipment on operating leases 1,011 898

Cost of receivables acquired (excluding receivables (11,359) (9,367)related to sales)

Acquisitions of businesses, net of cash acquired (19)

Purchases of marketable securities (74) (71)

Purchases of property and equipment (320) (441)

Cost of equipment on operating leases acquired (764) (960)

Collateral on derivatives - net (255) 319

Other (21) (11)

Net cash provided by (used for) investing activities (1,387) 30



Cash Flows from Financing Activities

Increase in total short-term borrowings 212 1,138

Proceeds from long-term borrowings 3,967 7,275

Payments of long-term borrowings (3,157) (3,315)

Proceeds from issuance of common stock 116 70

Repurchases of common stock (1,044) (263)

Dividends paid (480) (481)

Other (55) (81)

Net cash provided by (used for) financing activities (441) 4,343



Effect of Exchange Rate Changes on Cash, Cash 151 (102) Equivalents, and Restricted Cash



Net Increase in Cash, Cash Equivalents, and Restricted 109 5,047 Cash

Cash, Cash Equivalents, and Restricted Cash at 7,172 3,956 Beginning of Period

Cash, Cash Equivalents, and Restricted Cash at End of $7,281 $9,003 Period

See Condensed Notes to Interim Consolidated Financial Statements.



DEERE & COMPANY

Condensed Notes to Interim Consolidated Financial Statements

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



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 (1)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.



Six Months Ended May 2, 2021

ProductionSmallConstruction Expense (benefit): & Ag & & Total Precision Turf Forestry Ag

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)



In the second quarter of 2020, the company recorded non-cash asset impairments of $62 million pretax and after-tax of fixed assets of an asphaltplant factory in Germany, $32 million pretax of equipment on operating leasesand matured operating lease inventory, and $20 million pretax and after-tax of a minority investment in a construction equipment company headquartered inSouth Africa.



Six Months Ended May 3, 2020

Expense: ConstructionFinancialTotal & Forestry Services

German asphalt plant factory - Cost of sales$ 62 $62

Investments in unconsolidated affiliates impairment - Equity in loss of 20 20 unconsolidated affiliate

Equipment on operating leases & matured operating lease inventory impairments - $ 32 32 Other operating expenses

Total expense $ 82 $ 32 $114



During the first quarter of 2020, the company implemented a voluntary employee-separation program with total pretax expenses as follows:



Six Months Ended May 3, 2020

ProductionSmallConstruction & Ag & & FinancialTotal Precision Turf Forestry Services Ag

Cost of sales $ 21 $11 $ 9 $41

Research and development 7 7 4 18 expenses

Selling, administrative 18 19 14 $ 3 54 and general expenses

Total operating profit $ 46 $37 $ 27 $ 3 113impact

Other operating expenses 23

Total expense $136

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(2) reporting lag was eliminated resulting in one additional month of Wirtgen activity in the first quarter and the year-to-date period. 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 EndedSix Months Ended

May 2 May 3 May 2 May 3

2021 2020 2021 2020

Dividends declared $.90 $.76 $1.66 $1.52

Dividends paid $.76 $.76 $1.52 $1.52

The calculation of basic net income per share is based on the average(4) number of shares outstanding. The calculation of diluted net income per share recognizes any dilutive effect of share-based compensation.

The consolidated financial statements represent the consolidation of all of Deere & Company's subsidiaries. In the supplemental consolidating data in Note 6 to the financial statements, the "Equipment Operations" represents(5) 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 May 2, 2021 and May 3, 2020 (In millions of dollars) Unaudited



EQUIPMENT FINANCIAL

OPERATIONS^1 SERVICES ELIMINATIONS CONSOLIDATED

2021 2020 2021 2020 2021 2020 2021 2020

Net Sales and Revenues

Net sales $10,998$8,224 $10,998$8,224

Finance and interest 29 23 $853$906$(73) $(80) 809 849 ^2income

Other income 228 181 101 61 (78) (62) 251 180 ^3

Total 11,255 8,428 954 967 (151) (142) 12,058 9,253



Costs and Expenses

Cost of sales 7,929 6,294 (1) 7,928 6,294^4

Research and 377 406 377 406 development expenses

Selling, administrative 734 700 107 208 (3) (2) 838 906 ^4and general expenses

Interest expense 100 83 181 266 (13) (7) 268 342 ^5

Interest compensation to 60 73 (60) (73) ^5Financial Services

Other operating expenses 40 21 369 416 (74) (60) 335 377 ^6

Total 9,240 7,577 657 890 (151) (142) 9,746 8,325



Income before Income 2,015 851 297 77 2,312 928 Taxes

Provision for income 454 228 76 17 530 245 taxes



Income after Income Taxes 1,561 623 221 60 1,782 683

Equity in income (loss) of 7 (17) 1 8 (17) unconsolidated affiliates



Net Income 1,568 606 222 60 1,790 666

Less: Net income attributable to noncontrolling interests

Net Income Attributable $1,568 $606 $222$60 $1,790 $666 to Deere & Company



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

The Equipment Operations represents the enterprise without Financial^ Services. The Equipment Operations includes the company's production and1 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.

^ Elimination of Financial Services' interest income earned from Equipment2 Operations.

^ Elimination of Equipment Operations' margin from inventory transferred to3 equipment on operating leases.

^ Elimination of intercompany service fees.4

^ Elimination of Equipment Operations' interest expense to Financial Services.5

^ Elimination of Financial Services' lease depreciation expense related to6 inventory transferred to equipment on operating leases.

DEERE & COMPANY SUPPLEMENTAL CONSOLIDATING DATA (Continued) STATEMENT OF INCOME For the Six Months Ended May 2, 2021 and May 3, 2020 (In millions of dollars) Unaudited



EQUIPMENT FINANCIAL

OPERATIONS^1 SERVICES ELIMINATIONS CONSOLIDATED

2021 2020 2021 2020 2021 2020 2021 2020

Net Sales and Revenues

Net sales $19,049$14,754 $19,049$14,754

Finance and interest 62 49 $1,716$1,841$(134)$(145) 1,644 1,745 ^2income

Other income 447 391 172 124 (142) (130) 477 385 ^3

Total 19,558 15,194 1,888 1,965 (276) (275) 21,170 16,884



Costs and Expenses

Cost of sales 13,735 11,372 (1) (1) 13,734 11,371^4

Research and 743 831 743 831 development expenses

Selling, administrative 1,387 1,373 224 346 (4) (4) 1,607 1,715 ^4and general expenses

Interest expense 195 146 369 541 (26) (9) 538 678 ^5

Interest compensation to 108 137 (108) (137) ^5Financial Services

Other operating expenses 107 92 738 824 (137) (124) 708 792 ^6

Total 16,275 13,951 1,331 1,711 (276) (275) 17,330 15,387



Income before Income 3,283 1,243 557 254 3,840 1,497 Taxes

Provision for income 706 237 132 58 838 295 taxes



Income after Income Taxes 2,577 1,006 425 196 3,002 1,202

Equity in income (loss) of 10 (19) 2 1 12 (18) unconsolidated affiliates



Net Income 2,587 987 427 197 3,014 1,184

Less: Net income attributable to 1 2 1 2 noncontrolling interests

Net Income Attributable $2,586 $985 $427 $197 $3,013 $1,182 to Deere & Company



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

The Equipment Operations represents the enterprise without Financial^ Services. The Equipment Operations includes the company's production and1 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.

^ Elimination of Financial Services' interest income earned from Equipment2 Operations.

^ Elimination of Equipment Operations' margin from inventory transferred to3 equipment on operating leases.

^ Elimination of intercompany service fees.4

^ Elimination of Equipment Operations' interest expense to Financial Services.5

^ Elimination of Financial Services' lease depreciation expense related to6 inventory transferred to equipment on operating leases.

DEERE & COMPANY SUPPLEMENTAL CONSOLIDATING DATA (Continued) CONDENSED BALANCE SHEET (In millions of dollars) Unaudited



EQUIPMENT FINANCIAL

OPERATIONS^1 SERVICES ELIMINATIONS CONSOLIDATED

May 2 Nov 1 May 3 May 2 Nov 1 May 3 May 2 Nov 1 May 3 May 2 Nov 1 May 3

2021 2020 2020 2021 2020 2020 2021 2020 2020 2021 2020 2020

Assets

Cash and cash $6,282 $6,145 $7,466 $900 $921 $1,434 $7,182 $7,066 $8,900 equivalents

Marketable securities 5 7 3 663 634 623 668 641 626

Receivables from unconsolidated 5,986 5,290 2,248 $(5,955)$(5,259)$(2,216) 31 31 32 ^7 affiliates

Trade accounts and notes 1,225 1,013 1,419 6,222 4,238 6,050 (1,289) (1,080) (1,483) 6,158 4,171 5,986 ^8 receivable - net

Financing receivables 99 106 118 30,895 29,644 27,138 30,994 29,750 27,256 - net

Financing receivables 15 26 37 4,092 4,677 4,648 4,107 4,703 4,685 securitized - net

Other receivables 1,338 1,117 1,072 162 151 148 (27) (48) (8) 1,473 1,220 1,212 ^8

Equipment on operating leases - 7,108 7,298 7,245 7,108 7,298 7,245 net

Inventories 6,042 4,999 6,171 6,042 4,999 6,171

Property and 5,667 5,778 5,642 37 39 43 5,704 5,817 5,685 equipment - net

Investments in unconsolidated 161 174 175 21 19 17 182 193 192 affiliates

Goodwill 3,190 3,081 2,917 3,190 3,081 2,917

Other intangible 1,310 1,327 1,311 1,310 1,327 1,311 assets - net

Retirement benefits 947 859 908 61 59 58 (57) (55) (6) 951 863 960 ^9

Deferred income taxes 1,926 1,763 1,796 53 45 52 (255) (309) (413) 1,724 1,499 1,435 ^10

Other assets 1,522 1,439 1,506 635 994 1,208 (2) (1) (1) 2,155 2,432 2,713

Total Assets $35,715 $33,124 $32,789 $50,849$48,719$48,664$(7,585)$(6,752)$(4,127)$78,979$75,091$77,326



Liabilities and Stockholders' Equity



Liabilities

Short-term borrowings$352 $292 $1,398 $9,559 $8,290 $9,781 $9,911 $8,582 $11,179

Short-term securitization 14 26 37 4,092 4,656 4,603 4,106 4,682 4,640 borrowings

Payables to unconsolidated 155 104 91 5,955 5,260 2,216 $(5,955)$(5,259)$(2,216) 155 105 91 ^7 affiliates

Accounts payable and 9,919 9,114 8,416 1,926 2,127 2,149 (1,318) (1,129) (1,493) 10,527 10,112 9,072 ^8 accrued expenses

Deferred income taxes 390 385 395 398 443 493 (255) (309) (413) 533 519 475 ^10

Long-term borrowings 10,124 10,124 9,947 23,222 22,610 24,377 33,346 32,734 34,324

Retirement benefits 5,253 5,366 5,584 109 102 101 (57) (55) (5) 5,305 5,413 5,680 ^9 and other liabilities

Total liabilities 26,207 25,411 25,868 45,261 43,488 43,720 (7,585) (6,752) (4,127) 63,883 62,147 65,461



Stockholders' Equity

Total Deere & Company 15,092 12,937 11,864 5,588 5,231 4,944 (5,588) (5,231) (4,944) 15,092 12,937 11,864^11stockholders' equity

Noncontrolling 4 7 1 4 7 1 interests

Financial Services (5,588) (5,231) (4,944) 5,588 5,231 4,944 ^11equity

Adjusted total 9,508 7,713 6,921 5,588 5,231 4,944 15,096 12,944 11,865 stockholders' equity

Total Liabilities and$35,715 $33,124 $32,789 $50,849$48,719$48,664$(7,585)$(6,752)$(4,127)$78,979$75,091$77,326 Stockholders' Equity



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

The Equipment Operations represents the enterprise without Financial Services. The Equipment Operations includes the company's production and^1 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.

^ Reclassification of deferred tax assets / liabilities in the same taxing10 jurisdictions.

^ Elimination of Financial Services' equity.11

DEERE & COMPANY SUPPLEMENTAL CONSOLIDATING DATA (Continued) STATEMENT OF CASH FLOWS For the Six Months Ended May 2, 2021 and May 3, 2020 (In millions of dollars) Unaudited



EQUIPMENT FINANCIAL

OPERATIONS^1 SERVICES ELIMINATIONS CONSOLIDATED

2021 2020 2021 2020 2021 2020 2021 2020

Cash Flows from Operating Activities

Net income $2,587 $987 $427 $197 $3,014 $1,184

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

Provision (credit) for 2 9 (26) 98 (24) 107 credit losses

Provision for depreciation 543 515 581 621 $(70) $(69) 1,054 1,067 ^12 and amortization

Impairment 50 82 32 50 114 charges

Share-based compensation 45 48 45 48 ^13 expense

Undistributed earnings of 158 218 (2) (1) (145) (225) 11 (8) ^14 unconsolidated affiliates

Provision (credit) for (170) 9 (43) (70) (213) (61) deferred income taxes

Changes in assets and liabilities:

Trade, notes, and financing receivables (170) (80) (954) (411) (1,124) (491) ^15, 17, 18related to sales

Inventories (926) (242) (267) (254) (1,193) (496) ^16

Accounts payable and 527 (659) (1) 30 (208) (78) 318 (707) ^17 accrued expenses

Accrued income taxes payable/ 77 (154) (23) (19) 54 (173) receivable

Retirement (8) 50 3 8 (5) 58 benefits

Other (163) 107 32 95 (70) (68) (201) 134 ^12, 13, 16

Net cash provided by 2,507 842 948 991 (1,669) (1,057) 1,786 776 operating activities



Cash Flows from Investing Activities

Collections of receivables (excluding 11,187 10,385 (820) (761) 10,367 9,624 ^15 receivables related to sales)

Proceeds from maturities and sales of 2 45 39 47 39 marketable securities

Proceeds from sales of equipment on 1,011 898 1,011 898 operating leases

Cost of receivables acquired (excluding (12,080) (9,885) 721 518 (11,359) (9,367)^15 receivables related to sales)

Acquisitions of businesses, net (19) (19) of cash acquired

Purchases of marketable (74) (71) (74) (71) securities

Purchases of property and (319) (440) (1) (1) (320) (441) equipment

Cost of equipment on (1,125) (1,304) 361 344 (764) (960) ^16 operating leases acquired

Increase in trade and (1,246) (673) 1,246 673 ^15 wholesale receivables

Collateral on derivatives - (1) (254) 319 (255) 319 net

Other (38) (40) (7) (36) 24 65 (21) (11) ^14, 18

Net cash provided by (used for) (375) (480) (2,544) (329) 1,532 839 (1,387) 30 investing activities



Cash Flows from Financing Activities

Increase (decrease) in total (84) 554 296 584 212 1,138 short-term borrowings

Change in intercompany (562) (292) 562 292 receivables/ payables

Proceeds from long-term 4,602 3,967 2,673 3,967 7,275 borrowings

Payments of long-term (30) (152) (3,127) (3,163) (3,157) (3,315) borrowings

Proceeds from issuance of 116 70 116 70 common stock

Repurchases of (1,044) (263) (1,044) (263) common stock

Dividends paid (480) (481) (145) (225) 145 225 (480) (481) ^14

Other (34) (61) (13) (13) (8) (7) (55) (81) ^14

Net cash provided by (used for) (2,118) 3,977 1,540 148 137 218 (441) 4,343 financing activities



Effect of Exchange Rate Changes on Cash, Cash 124 (58) 27 (44) 151 (102) Equivalents, and Restricted Cash



Net Increase (Decrease) in Cash, Cash 138 4,281 (29) 766 109 5,047 Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted 6,156 3,196 1,016 760 7,172 3,956 Cash at Beginning of Period

Cash, Cash Equivalents, and Restricted $6,294 $7,477$987 $1,526 $7,281 $9,003 Cash at End of Period



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

The Equipment Operations represents the enterprise without Financial Services. The Equipment Operations includes the company's production and^1 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.

^ Reclassification of share-based compensation expense.13

Elimination of dividends from Financial Services to the Equipment^ Operations, which are included in the Equipment Operations net cash14 provided by operating activities, and capital investments in Financial Services from the Equipment Operations.

^ Primarily reclassification of receivables related to the sale of equipment.15

^ Reclassification of lease agreements with direct customers.16

^ Reclassification of sales incentive accruals on receivables sold to17 Financial Services.

^ Elimination and reclassification of the effects of Financial Services18 partial financing of the construction and forestry retail locations sales and subsequent collection of those amounts.

DEERE & COMPANYOTHER 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 Six Months EndedOperations Precision Ag & Turf & Forestry

May 2 May 3 May 2 May 3 May 2 May 3 May 2 May 3

Dollars in millions 2021 2020 2021 2020 2021 2020 2021 2020

Net Sales $19,049 $14,754 $7,599 $5,872 $5,904 $4,583 $5,546 $4,299

Net Sales - excluding 13,426 5,872 4,583 2,971 Wirtgen

Average Identifiable Assets*

With Inventories at LIFO$16,292 $17,162 $6,375 $6,390 $3,513 $3,721 $6,404 $7,051

With Inventories at LIFO 13,113 6,390 3,721 3,002 - excluding Wirtgen

With Inventories at 17,681 18,580 7,065 7,074 3,947 4,188 6,669 7,318 Standard Cost

With Inventories at Standard Cost - 14,532 7,074 4,188 3,270 excluding Wirtgen

Operating Profit $3,524 $1,356 $1,651 $786 $1,117 $381 $756 $189

Operating Profit - 1,313 786 381 146 excluding Wirtgen

Percent of Net Sales** 18.5 % 9.8 % 21.7 % 13.4 % 18.9 % 8.3 % 13.6 % 4.9 %

Operating Return on Assets**

With Inventories at LIFO 21.6 % 10.0 % 25.9 % 12.3 % 31.8 % 10.2 % 11.8 % 4.9 %

With Inventories at 19.9 % 9.0 % 23.4 % 11.1 % 28.3 % 9.1 % 11.3 % 4.5 %Standard Cost

SVA Cost of Assets** $(1,062) $(872) $(425) $(425) $(237) $(251) $(400) $(196)

SVA** 2,462 441 1,226 361 880 130 356 (50)



Financial

For the Six Months EndedServices

May 2 May 3

Dollars in millions 2021 2020

Net Income Attributable $427 $197 to Deere & Company

Average Equity 5,376 5,071

Return on Equity 7.9 % 3.9 %

Operating Profit $553 $254

Cost of Equity (349) (330)

SVA 204 (76)



* 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