SPECIAL ITEMS

12 Months Ended

Oct. 31, 2011

SPECIAL ITEMS

SPECIAL ITEMS

5. SPECIAL ITEMS

Restructuring

In September 2008, the company announced it would close its manufacturing facility in Welland, Ontario, Canada, and transfer production to company operations in Horicon, Wisconsin, U.S., and Monterrey and Saltillo, Mexico. The Welland factory manufactured utility vehicles and attachments for the agriculture and turf business. The factory discontinued manufacturing in the fourth quarter of 2009. The move supported ongoing efforts aimed at improved efficiency and profitability.

The closure resulted in total expenses recognized in cost of sales in millions of dollars as follows:

	2008		2009		2010		Total
Pension and other postretirement benefits	$	10	$	27	$	6	$	43
Property and equipment impairments	21		3		1		25
Employee termination benefits	18		7				25
Other expenses			11		8		19
Total	$	49	$	48	$	15	$	112

All expenses were included in the agriculture and turf operating segment. The pretax cash expenditures associated with this closure through 2010 were approximately $60 million. The expenditures in 2011 were not significant. The annual pretax increase in earnings and cash flows due to this restructuring was approximately $40 million in 2011. Property and equipment impairment values were based primarily on market appraisals. The remaining liability for employee termination benefits at October 31, 2011 was not significant.

Voluntary Employee Separations

The company combined the agricultural equipment segment and the commercial and consumer equipment segment into the agriculture and turf segment effective at the beginning of the third quarter of 2009. Voluntary employee separations related to the new organizational structure resulted in pretax expenses of $91 million in 2009. The expenses were approximately 60 percent cost of sales and 40 percent selling, administrative and general expenses.

Goodwill Impairment

In the fourth quarter of 2010, the company recorded a non-cash charge in cost of sales for the impairment of goodwill of $27 million pretax, or $25 million after-tax. The charge was associated with the company’s John Deere Water reporting unit, which is included in the agriculture and turf operating segment. The goodwill impairment was due to a decline in the forecasted financial performance as a result of the global economic downturn and more complex integration activities.

In the fourth quarter of 2009, the company recorded a non-cash charge in cost of sales for the impairment of goodwill of $289 million pretax, or $274 million after-tax. The charge was associated with the company’s John Deere Landscapes reporting unit, which is included in the agriculture and turf operating segment. The key factor contributing to the goodwill impairment was a decline in the reporting unit’s forecasted financial performance as a result of weak economic conditions.

The methods for determining the fair value of the reporting units to measure the fair value of the goodwill included a combination of discounted cash flows and comparable market values for similar businesses (see Note 26).