10-KPeriod: FY2020

DEERE & CO Annual Report, Year Ended Nov 1, 2020

Filed December 17, 2020For Securities:DE

Summary

Deere & Company's (DE) 2020 10-K filing reflects a challenging year impacted by the COVID-19 pandemic, which led to decreased net sales and revenues compared to the prior year. Despite these headwinds, the company demonstrated resilience, with its Financial Services segment showing a modest increase in net income due to improved portfolio performance and reduced losses on leased equipment. The Equipment Operations experienced a decline in sales and operating profit, particularly in the Construction and Forestry segment, which was heavily affected by reduced customer demand. Looking ahead, Deere & Company anticipates a recovery driven by projected increases in industry agricultural machinery sales and stabilization in construction and forestry markets. The company is also focusing on strategic initiatives, including manufacturing location reviews, to enhance efficiency. The company maintained a strong liquidity position throughout the year, supported by cash flows from operations and available credit facilities, while actively managing its debt and capital resources.

Financial Highlights

45 data points
Beta

Revenue

$35.54B

Net Income

$2.75B

7.7% Net Margin

EPS (Diluted)

$8.69

Total Assets

$75.09B

Cash & Equivalents

$7.17B

Free Cash Flow

$6.66B

Financial Statements
Beta
Revenue$35.54B
R&D Expenses$1.64B
SG&A Expenses$3.48B
Operating Expenses$31.66B
Operating Income$4.30B
Interest Expense$1.25B
Net Income$2.75B
EPS (Basic)$8.77
EPS (Diluted)$8.69
Shares Outstanding (Basic)313.50M
Shares Outstanding (Diluted)316.60M

Key Highlights

  • 1Net sales and revenues decreased by 9% to $35,540 million in 2020 compared to $39,258 million in 2019, largely due to lower shipment volumes and unfavorable currency translation, partially offset by price realization.
  • 2Net income attributable to Deere & Company decreased to $2,751 million ($8.69 diluted EPS) in 2020 from $3,253 million ($10.15 diluted EPS) in 2019, impacted by impairment charges and employee-separation costs.
  • 3Agriculture and Turf segment sales decreased by 6% while operating profit increased by 18%, driven by price realization and cost reductions.
  • 4Construction and Forestry segment sales decreased by 20% and operating profit declined by 51%, reflecting lower shipment volumes and unfavorable economic conditions.
  • 5Financial Services segment net income increased by 5% due to lower impairments, reduced losses on operating lease residual values, and income from a higher average portfolio, partially offset by a higher provision for credit losses.
  • 6The company ended the year with a strong liquidity position, with $7,066 million in cash and cash equivalents and undrawn revolving credit facilities.
  • 7Deere & Company continued its share repurchase program, repurchasing $2,156 million of its common stock in the fourth quarter of 2020.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Deere & Company's financial performance, leading to a 9% decrease in net sales and revenues to $35,540 million. This was primarily due to lower shipment volumes and unfavorable currency translation, as containment measures affected operations and customer demand. The Construction and Forestry segment was particularly hard-hit. However, the company was able to mitigate some of these effects through cost reductions and by being designated an 'essential critical infrastructure business' in many regions.

Net income attributable to Deere & Company decreased from $3,253 million in 2019 to $2,751 million in 2020. This reduction was primarily due to impairment charges and employee-separation costs totaling $458 million after-tax, which were incurred in 2020. Additionally, provisions for credit losses increased, and there were unfavorable financing spreads in the Financial Services segment, impacting overall profitability.

Deere & Company anticipates a positive outlook for its Agriculture and Turf segment, with industry sales in the U.S. and Canada forecast to increase by 5-10% for 2021. European industry sales are expected to remain stable or increase slightly, and South American sales of tractors and combines are projected to be about 5% higher. Asian sales are forecast to be slightly lower. The company expects to benefit from improving conditions in the farm economy.

Deere & Company maintained a strong liquidity position throughout 2020. Positive cash flows from consolidated operating activities reached $7,483 million, primarily driven by net income adjusted for non-cash items and changes in working capital. The company also increased its borrowings by $528 million and had $7,066 million in cash and cash equivalents at the end of the year, with undrawn revolving credit facilities, ensuring ample liquidity to navigate the economic uncertainties stemming from the COVID-19 pandemic.