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SPECIAL ITEMS | 12 Months Ended
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Nov. 01, 2020
SPECIAL ITEMS |
SPECIAL ITEMS | 5. SPECIAL ITEMS Impairments and Other Charges In 2020, the company recorded impairments and other charges as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Agriculture | ​ | Construction | ​ | Financial | ​ | Total | ​
​ | ​ | and Turf | ​ | and Forestry | ​ | Services | ​ | Pretax | ​
Factory closure | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
China - agricultural equipment | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-cash impairments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other receivables, property, and intangible assets * | ​ | $ | 15 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 15 | ​
Severance payments * | ​ | ​ | 5 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 5 | ​
Factory closure | ​ | ​ | 20 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 20 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-cash fixed asset and lease impairments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
German asphalt plant factory * 1 | ​ | ​ | ​ | ​ | $ | 62 | ​ | ​ | ​ | ​ | ​ | 62 | ​
Brazil construction equipment factory * 1 | ​ | ​ | ​ | ​ | ​ | 16 | ​ | ​ | ​ | ​ | ​ | 16 | ​
Other international fixed assets * 1 | ​ | ​ | 13 | ​ | ​ | 2 | ​ | ​ | ​ | ​ | ​ | 15 | ​
Other international fixed assets ** 1 | ​ | ​ | 4 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4 | ​
Equipment on operating leases *** 2 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 22 | ​ | ​ | 22 | ​
Operating lease inventory *** 2 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 10 | ​ | ​ | 10 | ​
Fixed asset and lease - non-cash impairments | ​ | ​ | 17 | ​ | ​ | 80 | ​ | ​ | 32 | ​ | ​ | 129 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-cash affiliate company impairments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Minority investment in construction equipment company headquartered in South Africa **** 3 | ​ | ​ | ​ | ​ | ​ | 43 | ​ | ​ | ​ | ​ | ​ | 43 | ​
Construction equipment joint venture located in Brazil **** 3 | ​ | ​ | ​ | ​ | ​ | 7 | ​ | ​ | ​ | ​ | ​ | 7 | ​
Affiliate impairments | ​ | ​ | ​ | ​ | ​ | 50 | ​ | ​ | ​ | ​ | ​ | 50 | ​
Total impairments and closure costs 4, 5 | ​ | $ | 37 | ​ | $ | 130 | ​ | $ | 32 | ​ | $ | 199 | ​
* Recorded in "Cost of sales" ** Recorded in "Selling, administrative, and general expenses" *** Recorded in "Other operating expenses" ****Recorded in "Equity in income (loss) of unconsolidated affiliate" 1 The impairment was the result of a decline in forecasted financial performance that indicated it was probable future cash flows would not cover the carrying amount of net assets. 2 The impairments were the result of a higher expected equipment return rates and lower estimated values of used construction equipment than originally estimated with the probable effect that future cash flows would not cover the carrying amount of the asset. 3 The impairment was the result of an other-than-temporary decline in value. 4 The after-tax effect was $180 million. 5 See Note 26 for a description of the valuation methodologies used to measure these impairments. ​ ​ In the fourth quarter of 2019, the company recorded non-cash charges in “Other operating expenses” of approximately $59 million pretax for the impairment of equipment on operating leases and approximately $18 million pretax on matured operating lease inventory recorded in “Other assets.” The impairment was the result of lower estimated values of used agriculture and construction equipment than originally estimated with the probable effect that the future cash flows would not cover the carrying amount of the net assets. The assets are part of the financial services operations (see Note 26). Employee-Separation Programs During 2020, the company implemented employee-separation programs for the company’s salaried workforce in several geographic areas, including the United States, Europe, Asia, and Latin America. The programs’ main purpose was to improve efficiency through a leaner, more flexible organization. The programs were largely voluntary in nature with the expense recorded primarily in the period in which the employees irrevocably accepted a separation offer. For the limited involuntary employee-separation programs, the expense was recorded when management committed to a plan, the plan was communicated to the employees, and the employees were not required to provide service beyond the legal notification period. The programs provided for cash payments based on years of service, and in some countries subsidized healthcare for a limited period and outplacement services. The programs’ total pretax expenses in 2020 were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Agriculture | ​ | Construction | ​ | Financial | ​ | ​ | ​
​ | ​ | and Turf | ​ | and Forestry | ​ | Services | ​ | Total | ​
Cost of sales | ​ | $ | 82 |  | $ | 22 |  | ​ | ​ |  | $ | 104 | ​
Research and development expenses | ​ | ​ | 47 | ​ | ​ | 8 | ​ | ​ | ​ | ​ | ​ | 55 | ​
Selling, administrative and general expenses | ​ | ​ | 96 | ​ | ​ | 24 | ​ | $ | 15 | ​ | ​ | 135 | ​
Other operating expenses* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 41 | ​
Total | ​ | $ | 225 | ​ | $ | 54 | ​ | $ | 15 | ​ | $ | 335 | ​
* Relates primarily to non-cash charges of $34 million from curtailments in certain OPEB plans (see Note 8) and other corporate expenses, both of which were recorded outside of operating profit. Approximately $6 million of the curtailment charge was recorded by financial services. ​ Total program payments will be $301 million with $166 million paid in 2020 and $135 million to be disbursed over two years. Annual savings from these programs are estimated to be approximately $250 million, of which $85 million was realized in 2020. During 2019, the company also completed certain employee-separation programs designed for specific functions and geographic areas as part of its on-going efforts to create a more efficient organizational structure. These programs provided for cash payments based on years of service. The expenses were recorded in the period the employees irrevocably accepted the separation offer with the following total pretax expenses: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Agriculture | ​ | Construction | ​ | Financial | ​ | ​ | ​
​ | ​ | and Turf | ​ | and Forestry | ​ | Services | ​ | Total | ​
Cost of sales | ​ | $ | 5 |  | ​ | ​ |  | ​ | ​ |  | $ | 5 | ​
Research and development expenses | ​ | ​ | 1 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1 | ​
Selling, administrative and general expenses | ​ | ​ | 13 | ​ | $ | 2 | ​ | $ | 9 | ​ | ​ | 24 | ​
Total | ​ | $ | 19 | ​ | $ | 2 | ​ | $ | 9 | ​ | $ | 30 | ​
​ Redeemable Noncontrolling Interest In 2020, the minority interest holder in Hagie Manufacturing Company, LLC exercised its right to sell the remaining 20 percent interest to the company for $14 million. The arrangement was accounted for as an equity transaction with no gain or loss recorded in the statement of consolidated income. This operation is included in the company’s agriculture and turf segment.

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