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SPECIAL ITEMS | 9 Months Ended
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Jul. 28, 2024
SPECIAL ITEMS |
SPECIAL ITEMS | (21) Special ItemS 2024 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. The programs’ total pretax expenses are estimated to be approximately $150, with $124 recorded in the third quarter of 2024. The remaining expenses are expected to be recorded primarily in 2025. Payments made during the third quarter of 2024 with respect to these program expenses totaled $30. The expenses for the three months and nine months ended July 28, 2024 were recorded as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | PPA |  | SAT |  | CF |  | FS |  | Total | ​
Employee-Separation Programs: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cost of sales | ​ | $ | 18 | ​ | $ | 9 | ​ | $ | 8 | ​ | ​ | ​ | ​ | $ | 35 | ​
Research and development expenses | ​ | ​ | 19 | ​ | ​ | 6 | ​ | ​ | 1 | ​ | ​ | ​ | ​ | ​ | 26 | ​
Selling, administrative and general expenses | ​ | ​ | 25 | ​ | ​ | 14 | ​ | ​ | 11 | ​ | $ | 9 | ​ | ​ | 59 | ​
Total operating profit decrease | ​ | $ | 62 | ​ | $ | 29 | ​ | $ | 20 | ​ | $ | 9 | ​ | ​ | 120 | ​
Non-operating profit expenses* | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 4 | ​
Total | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 124 | ​
* Relates primarily to corporate expenses. Banco John Deere S.A. In the third quarter of 2024, our board of directors authorized the sale of 50 percent ownership in our wholly owned subsidiary, Banco John Deere S.A. (BJD). BJD, located in Brazil, is included in our financial services segment and finances retail and wholesale loans for agricultural, construction, and forestry equipment. The transaction will reduce our incremental risk as we continue to grow in the Brazilian market. As a result, we reclassified the BJD business as held for sale, including a reversal of $38 in allowance for credit losses, and the establishment of a $53 valuation allowance on the assets held for sale. The net impact of these entries was a pretax and after-tax loss of $15 recorded in “Selling, administrative and general expenses.” We do not expect a significant gain or loss upon deconsolidation of BJD in 2025. The major classes of the total consolidated assets and liabilities of BJD that were classified as held for sale and liabilities of BJD to other intercompany parties were as follows:
​ | ​ | ​ | ​ | ​
​ | ​ | July 28 | ​
​ | ​ | 2024 | ​
Cash and cash equivalents | ​ | $ | 107 | ​
Trade accounts and notes receivable – net | ​ | ​ | 231 | ​
Financing receivables – net | ​ | ​ | 2,624 | ​
Deferred income taxes | ​ | ​ | 42 | ​
Other miscellaneous assets* | ​ | ​ | 14 | ​
Valuation allowance | ​ | ​ | (53) | ​
Total assets held for sale | ​ | $ | 2,965 | ​
​ | ​ | ​ | ​ | ​
Short-term borrowings | ​ | ​ | 563 | ​
Accounts payable and accrued expenses | ​ | ​ | 101 | ​
Long-term borrowings | ​ | ​ | 1,137 | ​
Retirement benefits and other liabilities | ​ | ​ | 2 | ​
Total liabilities held for sale | ​ | $ | 1,803 | ​
​ | ​ | ​ | ​ | ​
Total intercompany payables | ​ | $ | 673 | ​
* Includes $1 restricted cash balance. In August 2024, we entered into an agreement with a Brazilian bank, Banco Bradesco S.A. (Bradesco), for Bradesco to invest and become 50 percent owner of BJD. On the transaction date, which is expected to occur in the second quarter of 2025, subject to usual and customary regulatory approval, Bradesco will contribute capital equal to our equity investment in BJD. We will retain a 50 percent equity interest in BJD and report the results of the joint venture as an equity investment in unconsolidated affiliates. Redeemable Noncontrolling Interest In the third quarter of 2024, we exercised our right to purchase the remaining 20 percent interest in SurePoint Ag Systems, Inc. The arrangement was accounted for as an equity transaction with no gain or loss recorded in the statements of consolidated income. 2023 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 the second quarter of 2023 in “Selling, administrative and general expenses” by financial services. Prior period results 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 for the three months and nine months ended July 28, 2024 and July 30, 2023.
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​ | ​ | Three Months Ended | ​ | Nine Months Ended | ​
​ | ​ | PPA |  | SAT |  | CF |  | FS |  | Total | ​ | PPA | ​ | SAT |  | CF |  | FS |  | Total | ​
2024 Expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | ​
Employee-separation programs | ​ | $ | 62 | ​ | $ | 29 | ​ | $ | 20 | ​ | $ | 9 | ​ | $ | 120 | ​ | $ | 62 | ​ | $ | 29 | ​ | $ | 20 | ​ | $ | 9 | ​ | $ | 120 | ​
BJD remeasurement | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 15 | ​ | ​ | 15 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 15 | ​ | ​ | 15 | ​
Total 2024 expense | ​ | ​ | 62 | ​ | ​ | 29 | ​ | ​ | 20 | ​ | ​ | 24 | ​ | ​ | 135 | ​ | ​ | 62 | ​ | ​ | 29 | ​ | ​ | 20 | ​ | ​ | 24 | ​ | ​ | 135 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2023 Expense: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financing incentives correction | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 173 | ​ | ​ | 173 | ​
Period over period change | ​ | $ | 62 | ​ | $ | 29 | ​ | $ | 20 | ​ | $ | 24 | ​ | $ | 135 | ​ | $ | 62 | ​ | $ | 29 | ​ | $ | 20 | ​ | $ | (149) | ​ | $ | (38) | ​
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