What changed in this filing

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Item 1. Financial Statements

2023-02-23 compared with 2022-09-01 · 172 added, 440 removed, 570 unchanged (52% of the section changed)

2 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

For the Three and Nine Months Ended July 31, 2022 and August 1, 2021

For the Three Months Ended January 29, 2023 and January 30, 2022

(In millions of dollars and shares except per share amounts) Unaudited

Three Months Ended

Nine Months Ended

Net Sales and Revenues

10 unchanged sentences

Equity in income of unconsolidated affiliates

Net income attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Net Income Attributable to Deere & Company

6 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

For the Three and Nine Months Ended July 31, 2022 and August 1, 2021

For the Three Months Ended January 29, 2023 and January 30, 2022

(In millions of dollars) Unaudited

Three Months Ended

Nine Months Ended

Other Comprehensive Income (Loss), Net of Income Taxes

5 unchanged sentences

Comprehensive Income of Consolidated Group

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive income attributable to noncontrolling interests

Comprehensive Income Attributable to Deere & Company

23 unchanged sentences

Commitments and contingencies (Note 16)

Redeemable noncontrolling interest (Note 19)

Redeemable noncontrolling interest

Stockholders’ Equity

Common stock, $ 1 par value (issued shares at

July 31, 2022 – 536,431,204 )

January 29, 2023 – 536,431,204 )

Common stock in treasury

8 unchanged sentences

STATEMENTS OF CONSOLIDATED CASH FLOWS

For the Nine Months Ended July 31, 2022 and August 1, 2021

For the Three Months Ended January 29, 2023 and January 30, 2022

(In millions of dollars) Unaudited

Cash Flows from Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash used for operating activities:

Provision (credit) for credit losses

Provision for depreciation and amortization

Impairment charges

Share-based compensation expense

Gain on remeasurement of previously held equity investment

Undistributed earnings of unconsolidated affiliates

Credit for deferred income taxes

Provision (credit) for deferred income taxes

Changes in assets and liabilities:

3 unchanged sentences

Retirement benefits

Net cash provided by operating activities

Net cash used for operating activities

Cash Flows from Investing Activities

6 unchanged sentences

Collateral on derivatives - net

Net cash used for investing activities

Net cash provided by investing activities

Cash Flows from Financing Activities

Increase in total short-term borrowings

Increase (decrease) in total short-term borrowings

Proceeds from long-term borrowings

3 unchanged sentences

Dividends paid

Net cash provided by (used for) financing activities

Net cash used for financing activities

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

7 unchanged sentences

STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Three and Nine Months Ended July 31, 2022 and August 1, 2021

For the Three Months Ended January 29, 2023 and January 30, 2022

(In millions of dollars) Unaudited

6 unchanged sentences

Income (Loss)

Three Months Ended August 1, 2021

Balance May 2, 2021

Other comprehensive loss

Repurchases of common stock

Treasury shares reissued

Dividends declared

Stock options and other

Balance August 1, 2021

Nine Months Ended August 1, 2021

Balance November 1, 2020

2016-13 adoption

Other comprehensive income

Repurchases of common stock

Treasury shares reissued

Dividends declared

Stock options and other

Balance August 1, 2021

Three Months Ended July 31, 2022

Balance May 1, 2022

Balance October 31, 2021

Other comprehensive loss

2 unchanged sentences

Dividends declared

Stock options and other

Balance July 31, 2022

Nine Months Ended July 31, 2022

Share based awards and other

Balance January 30, 2022

Balance October 30, 2022

Acquisitions (see Note 19)

Net income (loss)

Other comprehensive loss

Other comprehensive income

Repurchases of common stock

1 unchanged sentence

Dividends declared

Stock options and other

Balance July 31, 2022

Share based awards and other

Balance January 29, 2023

See Condensed Notes to Interim Consolidated Financial Statements.

1 unchanged sentence

(1) Organization and Consolidation

Deere & Company has been developing innovative solutions to help our customers become more profitable for 185 years.

References to Deere & Company, John Deere, Deere, or the Company include our consolidated subsidiaries, including our consolidated variable interest entities (VIEs).

Deere & Company has been developing innovative solutions to help its customers become more profitable for more than 185 years.

References to Deere & Company, John Deere, Deere, or the Company include its consolidated subsidiaries and consolidated variable interest entities (VIEs).

The Company is managed through the following operating segments:

production and precision agriculture (PPA), small agriculture and turf (SAT), construction and forestry (CF), and financial services (FS).

References to agriculture and turf include both production and precision agriculture and small agriculture and turf.

References to “equipment operations” include production and precision agriculture, small agriculture and turf, and construction and forestry, while references to “agriculture and turf” include both production and precision agriculture and small agriculture and turf.

The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period.

The third quarter ends for fiscal year 2022 and 2021 were July 31, 2022 and August 1, 2021, respectively.

Both third quarters contained 13 weeks, while both year-to-date periods contained 39 weeks.

Unless otherwise stated, references to particular years or quarters refer to the Company’s fiscal years generally ending in October and the associated periods in those fiscal years.

Prior to fiscal year 2021, the operating results of the Wirtgen Group (Wirtgen) were incorporated into the Company’s consolidated financial statements using a one-month lag period.

The reporting lag was eliminated resulting in one additional month of Wirtgen activity in both the first quarter and the year-to-date period of 2021.

The effect was an increase to Net sales of $ 270 million, which the Company considers immaterial to construction and forestry’s annual Net sales.

As a result of recent acquisitions (see Note 19), the Company updated the presentation on the consolidated balance sheet to remove the following lines:

Receivables from unconsolidated affiliates, Investments in unconsolidated affiliates, and Payables to unconsolidated affiliates.

These balances are now immaterial to the Company’s consolidated balance sheet and have been reclassified into Other receivables, Other assets, and Accounts payable and accrued expenses, respectively.

The Company consolidates certain VIEs related to retail note securitizations (see Note 9).

The first quarter ends for fiscal year 2023 and 2022 were January 29, 2023 and January 30, 2022, respectively.

Both periods contained 13 weeks.

Unless otherwise stated, references to particular years, quarters, or months refer to the Company’s fiscal years generally ending in October and the associated periods in those fiscal years.

(2) Summary of Significant Accounting Policies and New Accounting Standards

4 unchanged sentences

have been condensed or omitted as permitted by such rules and regulations.

All adjustments, consisting of normal recurring adjustments, have been included.

All normal recurring adjustments have been included.

Management believes the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented.

5 unchanged sentences

Actual results could differ from those estimates.

Revenue Recognition

Prior to fiscal year 2022, certain goods were shipped to Canadian dealers on a consignment basis under which the risk and rewards of ownership were not transferred to the dealer at the time the goods were delivered.

Accordingly, sales were not recorded until a retail customer purchased the goods.

The dealer contract in Canada was changed for goods delivered after November 1, 2021, resulting in transfer of control and revenue recognition upon delivery.

For certain goods delivered to Canadian dealers prior to November 1, 2021, the dealer consignment terms already in place remain in effect.

As of July 31, 2022 and October 31, 2021, the remaining consigned inventory was $ 26 million and $ 150 million, respectively.

New Accounting Standards

The Company closely monitors all Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board and other authoritative guidance.

ASUs adopted in 2022 did not have a material impact on the Company’s financial statements, and ASUs to be adopted in future periods are being evaluated and at this point are not expected to have a material impact on the Company’s financial statements .

ASUs adopted in 2023 did not have a material impact on the Company’s financial statements.

ASUs to be adopted in future periods are being evaluated and at this point are not expected to have a material impact on the Company’s financial statements.

(3) Revenue Recognition

The Company’s net sales and revenues by primary geographic market, major product line, and timing of revenue recognition in millions of dollars follow:

Three Months Ended July 31, 2022

Production & Precision Ag

Small Ag & Turf

Primary geographic markets:

United States

Western Europe

Central Europe and CIS

Latin America

Asia, Africa, Australia, New Zealand, and Middle East

Major product lines:

Production agriculture

Small agriculture

Compact construction

Financial products

Revenue recognized:

At a point in time

Nine Months Ended July 31, 2022

Production & Precision Ag

Small Ag & Turf

Primary geographic markets:

United States

Western Europe

Central Europe and CIS

Latin America

Asia, Africa, Australia, New Zealand, and Middle East

Major product lines:

Production agriculture

Small agriculture

Compact construction

Financial products

Revenue recognized:

At a point in time

Three Months Ended August 1, 2021

Three Months Ended January 29, 2023

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Primary geographic markets:

3 unchanged sentences

Latin America

Asia, Africa, Australia, New Zealand, and Middle East

Asia, Africa, Oceania, and Middle East

Major product lines:

5 unchanged sentences

At a point in time

Nine Months Ended August 1, 2021

Three Months Ended January 30, 2022

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Primary geographic markets:

3 unchanged sentences

Latin America

Asia, Africa, Australia, New Zealand, and Middle East

Asia, Africa, Oceania, and Middle East

Major product lines:

6 unchanged sentences

The Company invoices in advance of recognizing the sale of certain products and the revenue for certain services.

These items are primarily for premiums for extended warranties, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services.

These relate to 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 sheets.

The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 15, was $ 1,424 million, $ 1,344 million, and $ 1,259 million at July 31, 2022, October 31, 2021, and August 1, 2021, respectively.

The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 16, was $ 1,502 million, $ 1,423 million, and $ 1,348 million at January 29, 2023, October 30, 2022, and January 30, 2022, respectively.

The contract liability is reduced as the revenue is recognized.

During the three months ended July 31, 2022 and August 1, 2021, $ 93 million and $ 108 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 July 31, 2022 and August 1, 2021, $ 488 million and $ 442 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 amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $ 1,167 million at July 31, 2022.

The estimated revenue to be recognized by fiscal year follows in millions of dollars:

During the three months ended January 29, 2023 and January 30, 2022, $ 215 million and $ 265 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 amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $ 1,282 million at January 29, 2023.

The estimated revenue to be recognized by fiscal year in millions of dollars follows:

remainder of 2023 - $ 278 , 2024 - $ 332 , 2025 - $ 260 , 2026 - $ 168 , 2027 - $ 100 , 2028 - $ 61 , and later years - $ 83 .

As permitted, the Company elected only to disclose remaining 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 of equipment, service parts, repair services, and certain telematics services.

The contracts with an expected duration of one year or less are for sales of equipment, service parts, repair services, and certain telematics services.

(4) Other Comprehensive Income Items

2 unchanged sentences

Cumulative translation adjustment

Unrealized loss on derivatives

Unrealized gain (loss) on debt securities

Unrealized gain (loss) on derivatives

Unrealized loss on debt securities

Total accumulated other comprehensive income (loss)

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars.

Retirement benefits adjustment reclassifications for actuarial (gain) loss, prior service (credit) cost, and settlements/curtailment are included in net periodic pension and other postretirement benefit costs (see Note 6).

Three Months Ended July 31, 2022

Cumulative translation adjustment

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

Net unrealized gain (loss) on derivatives

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

Retirement benefits adjustment:

Net actuarial gain (loss)

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

Prior service (credit) cost

Settlements/curtailment

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Nine Months Ended July 31, 2022

Cumulative translation adjustment

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

Net unrealized gain (loss) on derivatives

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

Retirement benefits adjustment:

Net actuarial gain (loss) and prior service (cost)

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

Prior service (credit) cost

Settlements/curtailment

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Three Months Ended August 1, 2021

Retirement benefits adjustment reclassifications for actuarial (gain) loss, prior service (credit) cost, and settlements are included in net periodic pension and other postretirement benefit costs (see Note 6).

Three Months Ended January 29, 2023

Cumulative translation adjustment

14 unchanged sentences

Total other comprehensive income (loss)

Nine Months Ended August 1, 2021

Three Months Ended January 30, 2022

Cumulative translation adjustment

8 unchanged sentences

Retirement benefits adjustment:

Net actuarial gain (loss)

Net actuarial gain (loss) and prior service credit (cost)

Reclassification to other operating expenses through amortization of:

6 unchanged sentences

Three Months Ended

Nine Months Ended

Net income attributable to Deere & Company

5 unchanged sentences

Diluted per share

During both the third quarter and first nine months of 2022, .2 million shares were excluded from the computation because the incremental shares would have been antidilutive.

Shares excluded from EPS calculation, as antidilutive

(6) Pension and Other Postretirement Benefits

1 unchanged sentence

employees and employees in certain foreign countries.

The components of net periodic pension cost consisted of the following in millions of dollars:

The components of net periodic pension and OPEB (benefit) cost consisted of the following in millions of dollars:

Three Months Ended

Nine Months Ended

Interest cost

Expected return on plan assets

Amortization of actuarial loss

Amortization of actuarial (gain) loss

Amortization of prior service cost

Settlements/curtailment

The components of net periodic OPEB cost consisted of the following in millions of dollars:

Three Months Ended

Nine Months Ended

Net (benefit) cost

Interest cost

2 unchanged sentences

Amortization of prior service credit

The components of net periodic pension and OPEB costs excluding the service cost component are included in the line item Other operating expenses in the statements of consolidated income.

On November 17, 2021, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) approved a new collective bargaining agreement.

In the first quarter of 2022, the Company remeasured the U.S.

hourly pension plan due to the new collective bargaining agreement, which decreased the plan’s funded status by approximately $ 495 million and will increase pension expense in 2022 by nearly $ 80 million with $ 35 million negatively impacting operating profit in 2022.

During the third quarter of 2022 , the Company remeasured the U.S.

hourly pension plan when 10 percent of active, eligible employees elected to freeze their defined benefit pension plan benefit for an enhanced defined contribution benefit.

The remeasurement resulted in a $ 34 million curtailment loss, while the impact to the plan’s funded status was not material.

During the first nine months of 2022, the Company contributed $ 67 million to its pension plans and $ 1,109 million to its OPEB plans.

The OPEB contributions include a voluntary contribution of $ 1,000 million to a U.S.

plan on November 30, 2021.

The Company presently anticipates contributing an additional $ 16 million to its pension plans and $ 28 million to its OPEB plans during the remainder of 2022.

The remaining pension and OPEB contributions are primarily direct benefit payments from Company funds.

The reduction in the 2023 pension net (benefit) cost is due to increases in the expected long-term return rates on plan assets and increases in discount rates.

The components of net periodic pension and OPEB (benefit) cost excluding the service cost component are included in the line item “Other operating expenses” in the statements of consolidated income.

(7) Segment Reporting

1 unchanged sentence

Three Months Ended

Nine Months Ended

Net sales and revenues:

18 unchanged sentences

Financial services revenues

Operating profit is income from continuing operations before reconciling items and income taxes.

Operating profit for production and precision ag, small ag and turf, and construction and forestry is income from continuing operations before reconciling items and income taxes.

Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains and losses.

Reconciling items to net income are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and OPEB benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.

Reconciling items to net income are primarily corporate expenses, certain external interest expenses, certain foreign exchange gains and losses, pension and OPEB benefit amounts excluding the service cost component, and net income attributable to noncontrolling interests.

Identifiable assets:

12 unchanged sentences

The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer receivables) by year of origination was as follows in millions of dollars:

July 31, 2022

January 29, 2023

Revolving Charge Accounts

25 unchanged sentences

Total retail customer receivables

August 1, 2021

January 30, 2022

Revolving Charge Accounts

12 unchanged sentences

The credit quality analysis of wholesale receivables by year of origination was as follows in millions of dollars:

July 31, 2022

January 29, 2023

Wholesale receivables:

15 unchanged sentences

Total wholesale receivables

August 1, 2021

January 30, 2022

Wholesale receivables:

7 unchanged sentences

An analysis of the allowance for credit losses and investment in financing receivables in millions of dollars during the periods follows:

Three Months Ended July 31, 2022

Beginning of period balance

Provision (credit)

Translation adjustments

End of period balance

Nine Months Ended July 31, 2022

Three Months Ended January 29, 2023

Beginning of period balance

Provision (credit)

Provision transferred to held for sale

Provision (credit) subtotal

Translation adjustments

2 unchanged sentences

End of period balance

Three Months Ended August 1, 2021

Beginning of period balance

End of period balance

Nine Months Ended August 1, 2021

Three Months Ended January 30, 2022

Beginning of period balance

2016-13 adoption

Provision (credit)

Translation adjustments

End of period balance

1 unchanged sentence

End of period balance

The allowance for credit losses increased in the third quarter and the first nine months of 2022 mainly due to higher reserves related to the events in Russia / Ukraine and higher portfolio balances.

As part of the allowance setting process, the Company continues to monitor the economy, including potential impacts of inflation, commodity prices, and interest rates on portfolio performance and adjustments to the allowance are incorporated, as necessary.

A troubled debt restructuring is the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties.

These modifications may include a reduction of the stated interest rate, an extension of the maturity date, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest.

During the first nine months of 2022, the Company identified 230 receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $ 10 million pre-modification and $ 9 million post-modification.

During the first nine months of 2021, the Company identified 304 receivable contracts, primarily retail notes, as troubled debt

restructurings with aggregate balances of $ 12 million pre-modification and $ 10 million post-modification.

During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off.

At July 31, 2022, the Company had no commitments to lend to borrowers whose accounts were modified in troubled debt restructurings.

In the first quarter of 2023, the Company determined that the financial services business in Russia met the held for sale criteria.

The financing receivables in Russia were reclassified to “Other assets” and the associated allowance for credit losses was reversed (see Note 20).

Excluding the portfolio in Russia, the allowance for credit losses decreased during the first quarter of 2023, as the financing receivables continue to benefit from strong fundamentals within the agricultural market.

(9) Securitization of Financing Receivables

12 unchanged sentences

(10) Inventories

Most inventories owned by Deere & Company and its U.S.

A majority of inventory owned by Deere & Company and its U.S.

equipment subsidiaries are valued at cost on the “last-in, first-out” (LIFO) basis.

6 unchanged sentences

(11) Goodwill and Other Intangible Assets-Net

The changes in amounts of goodwill by operating segments were as follows in millions of dollars:

Goodwill at November 1, 2020

The changes in amounts of goodwill by operating segment were as follows in millions of dollars:

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Goodwill at October 31, 2021

Translation adjustments

Goodwill at August 1, 2021

Goodwill at January 30, 2022

Goodwill at October 30, 2022

Translation adjustments

Goodwill at July 31, 2022

Goodwill at January 29, 2023

There were no accumulated goodwill impairment losses in the reported periods.

8 unchanged sentences

Total accumulated amortization

Amortized intangible assets, net

Amortized intangible assets

Unamortized intangible assets:

3 unchanged sentences

Those research and development activities were completed, and the Company started amortizing the acquired technology in the second quarter of 2022.

The amortization of other intangible assets in the third quarter and the first nine months of 2022 was $ 42 million and $ 104 million, and for 2021 was $ 27 million and $ 89 million, respectively.

The amortization of other intangible assets in the first quarter of 2023 and 2022 was $ 39 million and $ 28 million, respectively.

The estimated amortization expense for the next five years is as follows in millions of dollars:

7 unchanged sentences

Short-term borrowings

(13) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses were as follows in millions of dollars:

Accounts payable:

Trade payables

Payables to unconsolidated affiliates

Dividends payable

Operating lease liabilities

Deposits withheld from dealers and merchants

Accrued expenses:

Dealer sales discounts

Product warranties

Employee benefits

Accrued taxes

Unearned operating lease revenue

Unearned revenue (contractual liability)

Extended warranty premium

Accrued interest

Derivative liabilities

Total accounts payable and accrued expenses

Amounts are presented net of eliminations, which primarily consist of dealer sales incentives with a right of set-off against trade receivables of $ 1,540 million at January 29, 2023, $ 1,280 million at October 30, 2022, and $ 983 million at January 30, 2022.

Other eliminations were made for accrued taxes and other accrued expenses.

(14) Long-Term Borrowings

17 unchanged sentences

Serial issuances:

Medium-term notes (principal as of:

July 31, 2022 - $ 22,983 , October 31, 2021 - $ 22,647 , August 1, 2021 - $ 21,892 )

Medium-term notes:

(principal as of:

January 29, 2023 - $ 26,367 , October 30, 2022 - $ 25,629 , January 30, 2022 - $ 22,896 )

Other notes and finance lease obligations

3 unchanged sentences

These notes are presented in the table above with fair value adjustments related to interest rate swaps.

All outstanding notes and debentures are senior unsecured borrowings and generally rank equally with each other.

In April 2022, the Company issued $ 600 million of sustainability-linked medium-term notes with an initial interest rate of 3.35 percent, which are due in 2029.

This transaction supports the Company’s commitment to environmental sustainability.

Failure to meet the stated sustainability performance target will result in a 25 -basis point increase to the interest rate payable on the 2029 notes from and including April 2026.

All outstanding notes and debentures are senior unsecured borrowings and rank equally with each other.

(15) Leases - Lessor

3 unchanged sentences

Three Months Ended

Nine Months Ended

July 31, 2022

August 1, 2021

July 31, 2022

August 1, 2021

January 29, 2023

January 30, 2022

Sales-type and direct finance lease revenues

2 unchanged sentences

Total lease revenues

Variable lease revenues reported above primarily relate to separately invoiced property taxes on leased equipment in certain markets, late fees, and excess use and damage fees.

Excess use and damage fees are reported in other income on the statements of consolidated income.

Excess use and damage fees were $ 1 million and $ 2 million for the third quarter and first nine months ended July 31, 2022, respectively, compared with $ 2 million and $ 5 million for the same periods last year, respectively.

(16) Commitments and Contingencies

The Company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales.

The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period.

These unamortized extended warranty premiums (deferred revenue) included in the following table totaled $ 839 million and $ 709 million at July 31, 2022 and August 1, 2021, respectively.

A reconciliation of the changes in the warranty liability and unearned premiums was as follows in millions of dollars:

The Company determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales.

The historical claims rate is determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are recognized in Other income in the statements of consolidated income in proportion to the costs expected to be incurred over the contract period.

The unamortized extended warranty premiums (deferred revenue) included in the following table totaled $ 901 million and $ 781 million at January 29, 2023 and January 30, 2022, respectively.

A reconciliation of the changes in the warranty liability and unearned premiums in millions of dollars follows:

Three Months Ended

Nine Months Ended

Beginning of period balance

4 unchanged sentences

End of period balance

At July 31, 2022, the Company had approximately $ 330 million of guarantees issued primarily to banks outside the U.S.

At January 29, 2023, the Company had $ 235 million of guarantees issued to banks outside the U.S.

and Canada related to third-party receivables for the retail financing of John Deere equipment.

The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables.

At July 31, 2022, the Company had accrued losses of $ 4 million under these agreements.

The maximum remaining term of the receivables guaranteed at July 31, 2022 was approximately six years .

At July 31, 2022, the Company had commitments of $ 468 million for the construction and acquisition of property and equipment.

Also, at July 31, 2022, the Company had restricted assets of $ 77 million, classified as Other assets.

See Note 9 for additional restricted assets associated with borrowings related to securitizations.

The Company also had other miscellaneous contingent liabilities totaling approximately $ 90 million at July 31, 2022.

The accrued liability for these contingencies was not material at July 31, 2022.

At January 29, 2023, the accrued losses under these agreements were not material.

The maximum remaining term of the receivables guaranteed at January 29, 2023 was about seven years .

At January 29, 2023, the Company had commitments of $ 467 million for the construction and acquisition of property and equipment.

Also, at January 29, 2023, the Company had restricted assets of $ 269 million, classified as “Other assets.”

The Company also had other miscellaneous contingent liabilities and guarantees totaling approximately $ 90 million at January 29, 2023.

The accrued liability for these contingencies was not material at January 29, 2023.

The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, trademark, and antitrust matters.

1 unchanged sentence

(17) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To determine fair value, the Company uses various methods including market and income approaches.

The Company utilizes valuation models and techniques that maximize the use of observable inputs.

The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures.

These valuation techniques are consistently applied.

Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities.

Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets;

identical assets or liabilities in inactive markets;

observable inputs such as interest rates and yield curves;

and other market-corroborated inputs.

Level 3 measurements include significant unobservable inputs.

The fair values of financial instruments that do not approximate the carrying values were as follows in millions of dollars.

Long-term borrowings exclude finance lease liabilities.

July 31, 2022

January 29, 2023

October 30, 2022

August 1, 2021

January 30, 2022

Financing receivables – net

9 unchanged sentences

The carrying values of these long-term borrowings included adjustments related to fair value hedges.

Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow, excluding the Company’s cash equivalents, which were carried at cost that approximates fair value and consisted primarily of money market funds and time deposits.

Marketable securities

International equity securities

fixed income fund

government debt securities

7 unchanged sentences

Total Level 2 marketable securities

Accounts payable and accrued expenses

Other assets – Derivatives

Accounts payable and accrued expenses – Derivatives

Accounts payable and accrued expenses – Deferred consideration

The contractual maturities of debt securities at July 31, 2022 in millions of dollars are shown below.

The contractual maturities of debt securities at January 29, 2023 in millions of dollars are shown below.

Actual maturities may differ from contractual maturities because some securities may be called or prepaid.

Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.

Mortgage-backed securities were primarily issued by U.S.

government-sponsored enterprises.

Unrealized losses of debt securities at July 31, 2022 were not recognized in income due to the ability and intent to hold to maturity.

Due in one year or less

5 unchanged sentences

Fair value, nonrecurring Level 3 measurements from impairments, excluding financing receivables with specific allowances which were not significant, were as follows in millions of dollars.

Property and equipment – net and Other assets fair values for October 31, 2021 represent the fair value assessments at January 31, 2021.

Three Months Ended

Nine Months Ended

Property and equipment – net

Other intangible assets – net

The following is a description of the valuation methodologies the Company uses to measure certain balance sheet items at fair value:

Marketable securities – The portfolio of investments is primarily valued on a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data such as interest rates, yield curves, volatilities, credit risk, and prepayment speeds.

Funds are primarily valued using the fund’s net asset value, based on the fair value of the underlying securities.

The following is a description of the valuation methodologies the Company uses to measure certain financial instruments on the balance sheet at fair value:

Marketable securities – The portfolio of investments is valued on a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data such as interest rates, yield curves, volatilities, credit risk, and prepayment speeds.

Funds are valued using closing prices in the active market in which the investment trades.

Derivatives – The Company’s derivative financial instruments consist of interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps).

1 unchanged sentence

Financing receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using a market approach (appraisal values or realizable values).

Inputs include a selection of realizable values.

Inventories – The service parts inventory impairment was based on net realizable value, less reasonably predictable selling and disposal costs.

Inventories – The impairment was based on net realizable value.

Property and equipment - net – The valuations were based on cost and market approaches.

The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence.

Other intangible assets – net – The Company considered external valuations based on the Company’s probability weighted cash flow analysis.

Other assets – The impairments were measured at the fair value of the right of use operating lease asset.

(18) Derivative Instruments

It is the Company’s policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading.

The Company’s financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to

diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities.

The Company’s policy is to execute derivative transactions to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading.

The financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities.

The Company also has foreign currency exposures at some of its foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies.

In addition, the Company has interest rate and foreign currency exposures for sales incentive programs.

All derivatives are recorded at fair value on the balance sheet.

In addition, the Company has interest rate and foreign currency exposure at certain equipment operations units for sales incentive programs.

All derivatives are recorded at fair value on the balance sheets.

Cash collateral received or paid is not offset against the derivative fair values on the balance sheet.

The cash flows from these contracts are recorded in operating activities in the statements of consolidated cash flows.

The cash flows from the derivative contracts were recorded in operating activities in the statements of consolidated cash flows.

Each derivative is designated as a cash flow hedge, a fair value hedge, or remains undesignated.

All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy.

Both at inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness.

inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness.

If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, the hedge designation is removed, or the derivative is terminated, hedge accounting is discontinued.

1 unchanged sentence

Certain interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings.

The total notional amounts of the receive-variable/pay-fixed interest rate contracts at July 31, 2022, October 31, 2021, and August 1, 2021 were $ 2,350 million, $ 2,700 million, and $ 1,750 million, respectively.

Fair value gains or losses on cash flow hedges were recorded in other comprehensive income (OCI) and are subsequently reclassified into interest expense in the same periods during which the hedged transactions affects earnings.

The total notional amounts of the receive-variable/pay-fixed interest rate contracts at January 29, 2023, October 30, 2022, and January 30, 2022 were $ 1,950 million, $ 1,950 million, and $ 2,700 million, respectively.

These amounts offset the effects of interest rate changes on the related borrowings.

The amount of gain recorded in OCI at July 31, 2022 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is approximately $ 31 million after-tax.

The amount of gain recorded in OCI at January 29, 2023 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is $ 38 million after-tax.

No gains or losses were reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.

1 unchanged sentence

Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings.

The total notional amounts of the receive-fixed/pay-variable interest rate contracts at July 31, 2022, October 31, 2021, and August 1, 2021 were $ 8,303 million, $ 8,043 million, and $ 8,658 million, respectively.

The total notional amounts of the receive-fixed/pay-variable interest rate contracts at January 29, 2023, October 30, 2022, and January 30, 2022 were $ 10,802 million, $ 10,112 million, and $ 8,307 million, respectively.

The fair value gains or losses on these contracts were generally offset by fair value gains or losses on the hedged items (fixed-rate borrowings) with both items recorded in interest expense.

11 unchanged sentences

Hedging Amount

July 31, 2022

January 29, 2023

Short-term borrowings

3 unchanged sentences

Long-term borrowings

August 1, 2021

January 30, 2022

Short-term borrowings

2 unchanged sentences

The Company has certain interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges.

These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures, primarily for certain borrowings, purchases or sales of inventory, and sales incentive programs.

The total notional amounts of these interest rate swaps at July 31, 2022, October 31, 2021, and August 1, 2021 were $ 9,880 million, $ 10,848 million, and $ 9,195 million, the foreign exchange contracts were $ 7,457 million, $ 7,584 million, and $ 6,328 million, and the cross-currency interest rate contracts were $ 276 million, $ 238 million, and $ 197 million, respectively.

These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures for certain borrowings, purchases or sales of inventory, and sales incentive programs.

The total notional amounts of these interest rate swaps at January 29, 2023, October 30, 2022, and January 30, 2022 were $ 11,147 million, $ 10,568 million, and $ 10,210 million, the foreign exchange contracts were $ 9,304 million, $ 8,185 million, and $ 7,864 million, and the cross-currency interest rate contracts were $ 234 million, $ 260 million, and $ 303 million, respectively.

The fair value gains or losses from derivatives not designated as hedging instruments were recorded in the statements of consolidated income, generally offsetting over time the exposure on the hedged item.

Fair values of derivative instruments in the condensed consolidated balance sheets were as follows in millions of dollars:

Fair values of derivative instruments in the condensed consolidated balance sheets in millions of dollars follow:

Designated as hedging instruments:

15 unchanged sentences

Total derivative liabilities

The classification and gains (losses) including accrued interest expense related to derivative instruments consisted of the following in millions of dollars:

The classification and gains (losses) including accrued interest expense related to derivative instruments on the statements of consolidated income consisted of the following in millions of dollars:

Three Months Ended

Nine Months Ended

Fair Value Hedges

20 unchanged sentences

Certain of the Company’s derivative agreements contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings.

The aggregate fair value of all derivatives with

credit-risk-related contingent features that were in a net liability position at July 31, 2022, October 31, 2021, and August 1, 2021, was $ 518 million, $ 135 million, and $ 87 million, respectively.

In accordance with the limits established in these agreements, the Company posted $ 238 million of cash collateral at July 31, 2022.

The Company posted no cash collateral in accordance with the limits established in those agreements at either October 31, 2021 or August 1, 2021.

In addition, the Company paid $ 8 million of cash collateral that was outstanding at July 31, 2022, October 31, 2021, and August 1, 2021 to participate in an international futures market to hedge currency exposure, not included in the table below.

The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at January 29, 2023, October 30, 2022, and January 30, 2022 was $ 781 million, $ 1,113 million, and $ 213 million, respectively.

In accordance with the limits established in these agreements, the Company posted $ 349 million, $ 701 million, and $ 18 million of cash collateral at January 29, 2023, October 30, 2022, and January 30, 2022, respectively.

In addition, the Company paid $ 8 million of collateral that was outstanding at January 29, 2023, October 30, 2022, and January 30, 2022 to participate in an international futures market to hedge currency exposure, not included in the table below.

Derivatives are recorded without offsetting for netting arrangements or collateral.

The impact on the derivative assets and liabilities related to netting arrangements and any collateral received or paid was as follows in millions of dollars:

Gross Amounts

July 31, 2022

The impact on the derivative assets and liabilities related to netting arrangements and any collateral received or paid in millions of dollars follows:

Gross Amounts

January 29, 2023

October 30, 2022

Gross Amounts

August 1, 2021

(18) Stock Option and Restricted Stock Awards

January 30, 2022

(19) Stock Option and Restricted Stock Unit Awards

In December 2022, the Company granted stock options to employees for the purchase of 161 thousand shares of common stock at an exercise price of $ 438.44 per share and a binomial lattice model fair value of $ 136.46 per share at the grant date.

At July 31, 2022, options for 2.1 million shares were outstanding with a weighted-average exercise price of $ 152.12 per share.

The Company also granted 165 thousand restricted stock units to employees and non-employee directors in the first nine months of 2022, of which 128 thousand are subject to service-based only conditions and 37 thousand are subject to performance/service-based conditions.

The weighted-average fair value of the service-based only units at the grant date was $ 346.46 per unit based on the market price of a share of underlying common stock.

The fair value of the performance/service-based units at the grant date was $ 331.47 per unit based on the market price of a share of underlying common stock excluding dividends.

At July 31, 2022, the Company was authorized to grant an additional 17.3 million shares under the equity incentive plan.

(19) Acquisitions

Kreisel Acquisition

On February 7, 2022, the Company acquired majority ownership in Kreisel Electric Inc.

(Kreisel), a pioneer in the development of immersion-cooled battery technology.

The Austrian company manufactures high-density, high-durability electric battery modules and packs for high-performance and off-highway applications and has created a battery-buffered, high-powered charging infrastructure platform.

The transaction includes a call option to purchase the remaining ownership interest in Kreisel in 2027.

The minority interest holders also have a put option that would require the Company to purchase the holder’s ownership interest in 2027.

The put and call options cannot be separated from the noncontrolling interest.

Due to the redemption features, the minority interest is classified as redeemable noncontrolling interest in the Company’s consolidated balance sheets.

The total cash purchase price was $ 276 million, consisting of $ 253 million for the acquired equity interests, $ 21 million to reduce the option price, and customary working capital adjustments, net of cash acquired.

The preliminary fair values assigned

to the assets and liabilities of the acquired entity in millions of dollars, which is based on information as of the acquisition date and available at July 31, 2022 follows:

Trade accounts and notes receivable

Other receivables

Property and equipment

Other intangible assets

Accounts payable and accrued expenses

Deferred income taxes

Redeemable noncontrolling interest

The identifiable intangible assets were related to technology, trade name, and customer relationships with a weighted average amortization period of 12 years .

The goodwill is not deductible for income tax purposes.

Kreisel will be allocated amongst the Company’s production and precision agriculture, small agriculture and turf, and construction and forestry segments.

Acquisition of Excavator Factories

On February 28, 2022, the Company acquired full ownership of three former Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi Construction Machinery (Hitachi).

The two companies also ended their joint venture manufacturing and marketing agreements.

The former joint venture factories will continue to manufacture Deere-branded construction excavators and forestry equipment.

Through a new supply agreement with Hitachi, Deere will continue to offer a full portfolio of excavators.

Deere’s marketing arrangement for Hitachi-branded construction excavators and mining equipment in the Americas has ended with Hitachi assuming distribution and support of these products.

John Deere dealers may continue to support their existing field population of Hitachi-branded excavators.

With the completion of this acquisition, the Company now has complete control over its excavator design, product, and feature updates, making it possible to more rapidly respond to customer requirements and integrate excavators with other construction products in the John Deere product portfolio.

The Company can leverage technology developed for other product lines and production systems across the enterprise and extend those advanced solutions to Deere-designed excavators, strengthening the entire product portfolio.

The total invested capital follows:

Cash consideration for factories

Cash consideration for license agreement

Deferred consideration

Total purchase price consideration

Cash obtained

Settlement of intercompany balances

Net purchase price consideration

Fair value of previously held equity investment

Total invested capital

The total purchase price consideration includes deferred consideration that will be paid as the Company purchases Deere-branded excavators, components, and service parts from Hitachi under the new supply agreement with a duration that ranges from 5 to 30 years .

The deferred consideration represents the price increases under the new supply arrangement.

Excluding inflation adjustments, the price increases for products to be acquired by the Company from Hitachi are as much as 27 percent higher than the prior supply arrangement.

At July 31, 2022, the net present value of the deferred consideration was approximately $ 252 million, subject to changes in market conditions, developments in the Company’s product offerings, and sourcing changes.

The Company financed the acquisition and associated transaction expenses from cash on hand.

The fair value of the previously held equity investment created a non-cash gain of $ 326 million (pretax and after-tax ), which was recorded in Other income and included in the construction and forestry segment’s operating profit.

Prior to the acquisition, the Company purchased Deere and Hitachi-branded excavators, components, and parts from the Deere-Hitachi joint venture factories for sale to John Deere dealers.

These purchases were included in Cost of sales, while the sales to John Deere dealers were included in Net sales.

Cost of sales also included profit-sharing payments to Hitachi in accordance with the previous marketing agreements.

Following the acquisition, Net sales will only include the sale of Deere-branded excavators to John Deere dealers, while Cost of sales will reflect market pricing to purchase and manufacture excavators, as well as the related components and service parts.

The preliminary fair values assigned to the assets and liabilities of the acquired factories in millions of dollars, which are based on information as of the acquisition date and available at July 31, 2022, follows:

Other receivables

Property and equipment

Other intangible assets

Deferred income taxes

Accounts payable and accrued expenses

Long-term borrowings

Total liabilities

The identifiable intangible assets were related to technology with a 10-year amortization period.

The goodwill is not deductible for income tax purposes.

The excavator factories will be reported in the Company’s construction and forestry segment.

Other Acquisitions

In the first nine months of the year, the Company acquired AgriSync Inc.

(AgriSync), a technology service provider;

an 80 percent stake in both SureFire Ag Systems, Inc.

and SureFire Electronics, LLC (together SureFire), which design and manufacture liquid fertilizer application and spray tendering systems;

a 40 percent equity method investment in GUSS Automation LLC (GUSS Automation), a pioneer in semi-autonomous orchard and vineyard sprayers;

and LGT, LLC (Light), which specializes in depth sensing and camera-based perception for autonomous vehicles.

The combined cost of the acquisitions was $ 124 million, net of cash acquired of $ 3 million.

The preliminary asset and liability fair values at the respective acquisition dates follow in millions of dollars:

Trade accounts and notes receivable

Property and equipment

Other intangible assets

Accounts payable and accrued expenses

Deferred income taxes

Total liabilities

Redeemable noncontrolling interest

The identifiable intangible assets were related to trade name, technology, and customer relationships with a weighted average amortization period of 7 years .

AgriSync will be allocated amongst the Company’s production and precision agriculture, small agriculture and turf, and construction and forestry segments, while SureFire and Light will be allocated to the production and precision agriculture segment.

GUSS Automation will be assigned to the small agriculture and turf segment.

For all acquisitions, the goodwill was the result of future cash flows and related fair value exceeding the fair value of the identified assets and liabilities.

Presenting the pro forma results of operations as if these acquisitions had occurred at the beginning of the current or comparative fiscal year would not differ significantly from the reported results.

At January 29, 2023, options for 2.0 million shares were outstanding with a weighted-average exercise price of $ 178.86 per share.

The Company also granted 112 thousand of service-based restricted stock units and 41 thousand of performance/service-based restricted stock units to employees in the first three months of 2023.

The weighted-average fair value of the service-based restricted stock units at the grant date was $ 434.02 per unit based on the market price of a share of underlying common stock.

The fair value of the performance/service-based restricted stock units at the grant date was $ 424.93 per unit based on the market price of a share of underlying common stock excluding dividends.

At January 29, 2023, the Company was authorized to grant awards for an additional 16.6 million shares under the equity incentive plans.

(20) S pecial Items

2022 Special Items

Impact of Events in Russia / Ukraine

The events in Russia / Ukraine have resulted in the Company suspending shipments of machines and service parts to Russia.

The Company manufactures and markets equipment in Russia / Ukraine, and provides financial services in Russia.

As of July 31, 2022, the Company’s net exposure in Russia / Ukraine was approximately $ 436 million.

Net sales from the Company’s Russian operations represented 2 percent of consolidated annual Net sales from 2017 to 2021.

The Ukraine operations were not material to the consolidated financial statements.

The suspension of shipments to Russia will reduce forecasted revenue for the region, which makes it probable future cash flows will not cover the carrying value of certain assets.

The accounting consequences during the second quarter of 2022 were impairments of most long-lived assets, an increase in reserves of certain financial assets, and an accrual for various contractual uncertainties.

No significant reserves were established on trade receivables or complete goods inventory, as the Company continues to experience strong payment performance and requires prepayment of existing inventories.

During the third quarter of 2022, the Company initiated a voluntary employee-separation program, updated reserves on assets, and reassessed accruals for contractual uncertainties.

The Russian government has 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 is required to fund operations in Russia has been reclassified as restricted and recorded in Other assets.

The Company continues to closely monitor all financial risks to its operations in the region.

A summary of the reserves, impairments, voluntary-separation costs, and contingent liabilities recorded in the first nine months of 2022 follows in millions of dollars:

Nine Months Ended July 31, 2022

2022 Expense:

Inventory reserve – Cost of sales

Fixed asset impairment – Cost of sales

Intangible asset impairment – Cost of sales

Allowance for credit losses – Financing receivables – SA&G expenses

Voluntary-separation program – Cost of sales

Voluntary-separation program – SA&G expenses

Contingent liabilities – Other operating expenses

Total Russia/Ukraine events pretax expense

Net tax impact

Total Russia/Ukraine events after-tax expense

Gain on Previously Held Equity Investment

On February 28, 2022, the Company 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 million (pretax and after-tax ;

see Note 19).

UAW Collective Bargaining Agreement

On November 17, 2021, employees represented by the UAW approved a new collective bargaining agreement.

In the first quarter of 2022, Net sales from the Company’s Russian operations represented 2 percent of Deere’s consolidated Net sales.

Sales in the region were impacted as the Company suspended shipments of machines and service parts to Russia beginning in February 2022.

As of January 29, 2023 and October 30, 2022, the Company’s net exposure in Russia / Ukraine was approximately $ 229 million and $ 266 million, respectively.

In January 2023, the Company reached an agreement to sell its financial services business in Russia (registered in Russia as a leasing company).

The completion of the transaction is expected in the second quarter of 2023.

The assets and liabilities were classified as “Other assets” and “Accounts payable and accrued expenses”, respectively, which include $ 100 million of restricted cash .

In the first quarter of 2023, the Company reversed the allowance for credit losses and recorded a valuation allowance on the assets held for sale in “Selling, administrative and general expenses.” The Company does not expect a significant gain or loss upon disposition.

The agreement, which has a term of six years , covers the wages, hours, benefits, and other terms and conditions of employment for the Company’s UAW-represented employees at 14 U.S.

The labor agreement includes 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 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.

The Company remeasured the U.S.

hourly pension plan as of November 30, 2021 due to the new collective bargaining agreement.

See Note 6 for more information on the U.S.

hourly plan remeasurement.

2021 Special Items

In the third quarter of 2021, the Company sold a closed factory that previously produced small agricultural equipment in China, resulting in a $ 27 million pretax gain.

During the first quarter of 2021, 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.

These impairments were offset by a favorable indirect tax ruling in Brazil of $ 58 million pretax.

See Note 16 for fair value measurement information.

The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months and nine months ended July 31, 2022 and August 1, 2021:

2022 Expense (benefit):

Gain on remeasurement of equity investment – Other income (see Note 19)

Total Russia/Ukraine events pretax expense

The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months ended January 30, 2022:

UAW ratification bonus – Cost of sales

Total expense (benefit)

2021 Expense (benefit):

Gain on sale – Other income

Long-lived asset impairments – Cost of sales

Brazil indirect tax – Cost of sales

Total expense (benefit)

Period over period change

( 21) Subsequent Events

In February 2023, the Company entered into two retail note securitization transactions.

The first transaction resulted in $ 307 million of secured borrowings.

The second transaction will result in $ 983 million of secured borrowings and is expected to settle in March 2023.

On February 22, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 1.25 per share payable on May 8, 2023, to stockholders of record on March 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements