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SPECIAL ITEMS

12 Months Ended

Oct. 27, 2024

SPECIAL ITEMS

SPECIAL ITEMS

4. SPECIAL ITEMS

We were impacted by the following items.

2024 Special Items

Legal Settlements

In 2024, we reached legal settlements concerning patent infringement claims. As a result of these settlements, we recognized a total of $57 pretax gain ($45 after-tax) in "Other income," providing a benefit of $17 to PPA and $40 to CF. These settlements resolve the disputes without any admission of liability by the parties involved. We believe that these settlements enhance our ability to protect our intellectual property and reinforce our commitment to innovation and technological advancement.

Impairment

In the fourth quarter of 2024, we recorded a non-cash charge of $28 pretax and after-tax in “Equity in income (loss) of unconsolidated affiliates” for an other than temporary decline in value of an investment recorded in SAT. See Note 25 for fair value measurement information.

Employee-Separation Programs

In the third quarter of 2024, we implemented employee-separation programs for our salaried workforce in several geographic areas, including the United States, Europe, Asia, and Latin America. The programs’ main purpose was to help meet our strategic priorities while reducing overlap and redundancy in roles and responsibilities. The programs were largely involuntary in

nature with the expense 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. For the limited voluntary employee-separation programs, the expense was recorded in the period in which the employee irrevocably accepted a separation offer.

The programs’ total pretax expenses are estimated to be approximately $165. In 2024, we recorded $157 pretax expenses ($124 after-tax) related to the programs, of which $130 was paid in 2024 and $27 is expected to be paid in 2025. The remaining expenses are associated with programs in international locations and are expected to be recorded in 2025.

The programs’ pretax expenses in 2024 were as follows:


	PPA		SAT		CF		FS		Total
Employee-Separation Programs:
Cost of sales	$	21	$	11	$	8			$	40
Research and development expenses		22		9		2				33
Selling, administrative and general expenses		34		23		12	$	10		79
Total operating profit decrease	$	77	$	43	$	22	$	10	$	152
Non-operating profit expenses*										5
Total									$	157

* Relates primarily to corporate expenses.

Banco John Deere S.A.

In August 2024, we entered into a joint venture agreement with a Brazilian bank, Banco Bradesco S.A. (Bradesco), for Bradesco to invest and become 50 percent owner of our wholly-owned subsidiary in Brazil, Banco John Deere S.A. (BJD). BJD is included in our financial services segment and finances retail and wholesale loans for agricultural, construction, and forestry equipment. The transaction is intended to reduce our incremental risk as we continue to grow in the Brazilian market. On the transaction date, which is expected to occur in the first half of 2025, Bradesco will contribute capital equal to our equity investment in BJD. We will retain a 50 percent equity interest in BJD and expect to report the results of the joint venture as an equity investment in unconsolidated affiliates.

The BJD business was reclassified as held for sale in the third quarter of 2024, as the held for sale criteria was met. A reversal of $38 in allowance for credit losses was recorded in the third quarter. At October 27, 2024, a $97 valuation allowance was recorded on the assets held for sale, which was presented in “Impairments and other adjustments” in the statements of consolidated cash flows. The net impact of these entries was a pretax and after-tax loss of $59 recorded in “Selling, administrative and general expenses.”

The major classes of the total consolidated assets and liabilities of BJD classified as held for sale and liabilities of BJD to other intercompany parties at October 27, 2024 follows. See Note 25 for fair value measurement information.


	October 2024
Cash and cash equivalents	$	115
Trade accounts and notes receivable – net		176
Financing receivables – net		2,693
Deferred income taxes		36
Other miscellaneous assets*		21
Valuation allowance		(97)
Assets held for sale	$	2,944

Short-term borrowings	$	534
Accounts payable and accrued expenses		118
Long-term borrowings		1,174
Retirement benefits and other liabilities		1
Liabilities held for sale	$	1,827

Total intercompany payables	$	654

* Includes $1 restricted cash balance.

Redeemable Noncontrolling Interest

In the third quarter of 2024, we exercised our right to purchase the remaining 20 percent interest in SurePoint. The arrangement was accounted for as an equity transaction with no gain or loss recorded in the statements of consolidated income.

2023 Special Items

Sale of Russian Roadbuilding Business

In October 2023, we sold our Russian roadbuilding business, recognizing a loss of $18 (pretax and after-tax). The loss was recorded in “Other operating expenses” in the construction and forestry operations.

Brazil Tax Ruling

In the third quarter of 2023, the Brazil Superior Court of Justice published a favorable tax ruling regarding taxability of local incentives, which allowed us to record a $243 reduction in the provision for income taxes and $47 of interest income.

Financial Services Financing Incentives Correction

In the second quarter of 2023, we corrected the accounting treatment for financing incentives offered to John Deere dealers, which impacted the timing of expense recognition and the presentation of incentive costs in the consolidated financial statements. The cumulative effect of this correction, $173 pretax ($135 after-tax), was recorded in “Selling, administrative and general expenses” in the second quarter of 2023. Prior period results for Deere & Company were not restated, as the adjustment was considered immaterial to our financial statements.

Summary of 2024 and 2023 Special Items

The following table summarizes the operating profit impact of the special items recorded in 2024 and 2023.


	PPA		SAT		CF		FS		Total
2024 Expense (benefit)
Legal settlements	$	(17)			$	(40)			$	(57)
Impairment			$	28						28
Employee-separation programs		77		43		22	$	10		152
BJD measurement								59		59
Total expense (benefit)		60		71		(18)		69		182

2023 Expense
Russian roadbuilding sale						18				18
Financing incentives correction								173		173
Total expense						18		173		191

Year over year change	$	60	$	71	$	(36)	$	(104)	$	(9)

2022 Special Items

UAW Collective Bargaining Agreement

In November 2021, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) approved a new collective bargaining agreement. The agreement, which has a term of six years, covers the wages, hours, benefits, and other terms and conditions of employment for our UAW-represented employees at 14 U.S. facilities. The labor agreement included a lump sum ratification bonus payment of $8,500 per eligible employee, totaling $90 million, and an immediate wage increase of 10 percent plus further wage increases over the term of the contract. The lump sum payment was expensed in the first quarter of 2022.

Impact of Events in Russia / Ukraine

In February 2022, we suspended shipments of machines and service parts to Russia due to the events in Russia / Ukraine. The suspension of shipments reduced the forecasted revenue for the region, which made it probable future cash flows would not cover the carrying value of certain assets. As a result, an impairment was recorded for most long-lived assets in Russia, and our U.S. senior management decided to initiate a voluntary employee-separation program. We also recorded a reserve on inventory, and increased our allowance for credit losses, reflecting economic uncertainty in Russia.

The financial services operations received an intercompany benefit from the equipment operations, which guarantees the financial services’ investments in certain international markets, including Russia.

The Russian government imposed certain restrictions on companies’ abilities to repatriate or remit cash from their Russian-based operations to locations outside of Russia. Cash in excess of what was required to fund operations in Russia was reclassified as restricted. A summary of the reserves, impairments, and voluntary-separation costs recorded in 2022 follows. See Note 25 for fair value measurement information.


	PPA		SAT		CF		FS		Total
Inventory reserve – Cost of sales	$	14	$	2	$	3			$	19
Fixed asset impairment – Cost of sales		30				11				41
Intangible asset impairment – Cost of sales						28				28
Allowance for credit losses – Financing receivables – Selling, administrative and general expenses							$	153		153
Voluntary-separation program: – Cost of sales		3								3
– Selling, administrative and general expenses		4				6		1		11
Intercompany agreement		82		9		62		(153)
Total Russia/Ukraine events pretax expense	$	133	$	11	$	110	$	1		255

Net tax impact										(40)
Total Russia/Ukraine events after-tax expense									$	215

Gain on Previously Held Equity Investment

In March 2022, we acquired full ownership of three former Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi. The fair value of the previous equity investment resulted in a non-cash gain of $326 (pretax and after-tax; see Note 3).