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SPECIAL ITEMS

12 Months Ended

Oct. 31, 2021

5. SPECIAL ITEMS

In 2021, the company sold a closed factory that previously produced small agricultural equipment in China, resulting in a $27 million pretax gain. The fixed assets in an asphalt plant factory in Germany were impaired by $38 million, pretax and after-tax. The company also continued to assess its manufacturing locations, resulting in additional long-lived asset impairments of $12 million pretax. The impairments were the result of a decline in forecasted financial performance that indicated it was probable future cash flows would not cover the carrying amount of the net assets. The company recognized a favorable indirect tax ruling in Brazil of $58 million pretax. See Note 26 for fair value measurement information.


Expense (benefit):	PPA		SAT		CF		Total
Gain on sale – Other income			$	(27)			$	(27)
Long-lived asset impairments – Cost of sales	$	5		3	$	42		50
Brazil indirect tax – Cost of sales		(53)				(5)		(58)
Total pretax expense (benefit)	$	(48)	$	(24)	$	37	$	(35)

In 2020, the company closed a factory that produced small agricultural equipment in China, recognized impairments in the fixed assets in an asphalt plant factory in Germany, a construction equipment factory in Brazil, and other international locations, recorded impairments of equipment on operating leases and matured lease inventory, as well as impairments of the investment in certain affiliate companies. See Note 26 for a description of the valuation methodologies used to measure these impairments.


	PPA		SAT		CF		FS		Total
Factory closure – Cost of sales			$	20					$	20
Long-lived asset impairments:
Cost of sales				13	$	80				93
SA&G expenses	$	2		2						4
Other operating expenses							$	32		32
Affiliate company impairments – Equity in loss of unconsolidated affiliates						50				50
Total pretax impairments and closure costs	$	2	$	35	$	130	$	32	$	199

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 U.S., 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:


	PPA		SAT		CF		FS		Total
Cost of sales	$	51	$	31	$	22			$	104
Research and development expenses		29		18		8				55
Selling, administrative and general expenses		53		43		24	$	15		135
Total operating profit impact	$	133	$	92	$	54	$	15		294
Non-operating profit impact*										41
Total pretax expense									$	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.

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:


	PPA		SAT		CF		FS		Total
Cost of sales	$	3	$	2					$	5
Research and development expenses		1								1
Selling, administrative and general expenses		7		6	$	2	$	9		24
Total pretax expense	$	11	$	8	$	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 production and precision agriculture segment.