REVENUE RECOGNITION

9 Months Ended

Aug. 01, 2021

REVENUE RECOGNITION

REVENUE RECOGNITION

(4)  Revenue Recognition

The Company’s revenue by primary geographical market, major product line, and timing of revenue recognition was as follows in millions of dollars:

	Three Months Ended August 1, 2021
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
United States	$	1,995	$	1,753	$	1,559	$	605	$	5,912
Canada		253		153		285		162		853
Western Europe		566		679		455		27		1,727
Central Europe and CIS		398		117		241		10		766
Latin America		758		125		227		60		1,170
Asia, Africa, Australia, New Zealand, and Middle East		368		385		308		38		1,099
Total	$	4,338	$	3,212	$	3,075	$	902	$	11,527
Major product lines:
Production agriculture	$	4,179							$	4,179
Small agriculture			$	2,355						2,355
Turf				719						719
Construction					$	1,283				1,283
Compact construction						398				398
Roadbuilding						948				948
Forestry						342				342
Financial products		13		12		5	$	902		932
Other		146		126		99				371
Total	$	4,338	$	3,212	$	3,075	$	902	$	11,527
Timing of revenue recognition:
Revenue recognized at a point in time	$	4,293	$	3,191	$	3,052	$	27	$	10,563
Revenue recognized over time		45		21		23		875		964
Total	$	4,338	$	3,212	$	3,075	$	902	$	11,527

	Nine Months Ended August 1, 2021
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
United States	$	5,814	$	5,014	$	4,242	$	1,812	$	16,882
Canada		617		376		793		469		2,255
Western Europe		1,604		1,903		1,408		77		4,992
Central Europe and CIS		1,090		361		628		28		2,107
Latin America		1,971		305		617		179		3,072
Asia, Africa, Australia, New Zealand, and Middle East		991		1,230		1,054		114		3,389
Total	$	12,087	$	9,189	$	8,742	$	2,679	$	32,697
Major product lines:
Production agriculture	$	11,656							$	11,656
Small agriculture			$	6,583						6,583
Turf				2,268						2,268
Construction					$	3,402				3,402
Compact construction						1,140				1,140
Roadbuilding						2,924				2,924
Forestry						975				975
Financial products		41		32		17	$	2,679		2,769
Other		390		306		284				980
Total	$	12,087	$	9,189	$	8,742	$	2,679	$	32,697
Timing of revenue recognition:
Revenue recognized at a point in time	$	11,960	$	9,137	$	8,666	$	77	$	29,840
Revenue recognized over time		127		52		76		2,602		2,857
Total	$	12,087	$	9,189	$	8,742	$	2,679	$	32,697

	Three Months Ended August 2, 2020
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
United States	$	1,617	$	1,228	$	1,048	$	632	$	4,525
Canada		199		96		194		146		635
Western Europe		517		586		376		22		1,501
Central Europe and CIS		219		100		178		9		506
Latin America		512		90		124		51		777
Asia, Africa, Australia, New Zealand, and Middle East		312		319		318		32		981
Total	$	3,376	$	2,419	$	2,238	$	892	$	8,925
Major product lines:
Production agriculture	$	3,210							$	3,210
Small agriculture			$	1,704						1,704
Turf				651						651
Construction					$	817				817
Compact construction						303				303
Roadbuilding						818				818
Forestry						241				241
Financial products		14		10		5	$	892		921
Other		152		54		54				260
Total	$	3,376	$	2,419	$	2,238	$	892	$	8,925
Timing of revenue recognition:
Revenue recognized at a point in time	$	3,337	$	2,402	$	2,210	$	28	$	7,977
Revenue recognized over time		39		17		28		864		948
Total	$	3,376	$	2,419	$	2,238	$	892	$	8,925

	Nine Months Ended August 2, 2020
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
United States	$	4,892	$	3,833	$	3,331	$	1,880	$	13,936
Canada		460		239		532		453		1,684
Western Europe		1,422		1,570		1,073		66		4,131
Central Europe and CIS		608		269		477		27		1,381
Latin America		1,290		225		418		177		2,110
Asia, Africa, Australia, New Zealand, and Middle East		722		924		825		96		2,567
Total	$	9,394	$	7,060	$	6,656	$	2,699	$	25,809
Major product lines:
Production agriculture	$	8,915							$	8,915
Small agriculture			$	4,953						4,953
Turf				1,925						1,925
Construction					$	2,535				2,535
Compact construction						930				930
Roadbuilding						2,146				2,146
Forestry						769				769
Financial products		48		24		18	$	2,699		2,789
Other		431		158		258				847
Total	$	9,394	$	7,060	$	6,656	$	2,699	$	25,809
Timing of revenue recognition:
Revenue recognized at a point in time	$	9,277	$	7,017	$	6,576	$	80	$	22,950
Revenue recognized over time		117		43		80		2,619		2,859
Total	$	9,394	$	7,060	$	6,656	$	2,699	$	25,809

Following is a description of the Company’s major product lines:

Production agriculture – Includes net sales of large and certain mid-size tractors and associated attachments, combines, cotton pickers, cotton strippers, and sugarcane harvesters, sugarcane loaders and pull behind scrapers, tillage, seeding, and application equipment, including sprayers, nutrient management and soil preparation machinery, and related attachments and service parts.

Small agriculture – Includes net sales of mid-size and utility tractors, self-propelled forage harvesters, hay and forage equipment, balers, mowers, and related attachments and service parts.

Turf – Includes net sales of turf and utility equipment, including riding lawn equipment, golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements, other outdoor power products, and related service parts.

Construction – Includes net sales of a broad range of machines used in construction, earthmoving, and material handling, including backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, and related attachments and service parts.

Compact construction – Includes net sales of smaller construction equipment, including compact excavators, compact track loaders, compact wheel loaders, skid steers, landscape loaders, and related attachments and service parts.

Roadbuilding – Includes net sales of equipment used in roadbuilding and renovation, including milling machines, recyclers, slipform pavers, surface miners, asphalt pavers, compactors, tandem and static rollers, mobile crushers and screens, mobile and stationary asphalt plants, and related attachments and service parts.

Forestry – Includes net sales of equipment used in timber harvesting, including log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments and service parts.

Financial products – Includes finance and interest income primarily from retail notes related to sales of John Deere equipment to end customers, wholesale financing to dealers of John Deere equipment, and revolving charge accounts; lease income from retail leases of John Deere equipment; and revenue from extended warranties.

Other – Includes sales of components to other equipment manufacturers that are included in “Net sales”; and revenue earned over time from precision guidance, telematics, and other information enabled solutions, revenue from service performed at Company owned dealerships and service centers, gains on disposition of property and businesses, trademark licensing revenue, and other miscellaneous revenue items that are included in “Other income.”

The Company invoices in advance of recognizing the sale of certain products and the revenue for certain services. These items are primarily extended warranty premiums, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services. These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses” in the consolidated balance sheet. The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 18, was $1,259 million, $1,090 million, and $1,115 million at August 1, 2021, November 1, 2020, and August 2, 2020, respectively. The contract liability is reduced as the revenue is recognized. During the three months ended August 1, 2021 and August 2, 2020, $108 million and $97 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year. During the nine months ended August 1, 2021 and August 2, 2020, $442 million and $375 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year.

The Company entered into contracts with customers to deliver equipment and services that have not been recognized at August 1, 2021 because the equipment or services have not been provided. These contracts primarily relate to extended warranty and certain precision guidance and telematic services. The amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $957 million at August 1, 2021. The estimated revenue to be recognized by fiscal year follows in millions of dollars: remainder of 2021 - $113, 2022 - $312, 2023 - $242, 2024 - $152, 2025 - $73, 2026 - $44 and later years - $21. The Company discloses unsatisfied performance obligations with an original contract duration greater than one year. The contracts with an expected duration of one year or less are generally for sales to dealers and end customers for equipment, service parts, repair services, and certain telematics services.

During 2020, and to a much lesser extent in 2021, the Company provided short-term payment relief on trade accounts and notes receivables to independent dealers and certain other customers that were negatively affected by the economic effects of COVID. The relief was provided both in regional programs and case-by-case situations with creditworthy customers. This relief generally included payment deferrals not exceeding three months, extending interest-free periods for up to an additional three months with the total interest-free period not to exceed one year, or reducing interest rates for a maximum of three months. The trade receivable balance granted relief since the beginning of the pandemic that remained outstanding at August 1, 2021 was not material.