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Item 1. Financial Statements

2023-06-01 compared with 2023-02-23 · 231 added, 114 removed, 628 unchanged (35% of the section changed)

2 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

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

For the Three and Six Months Ended April 30, 2023 and May 1, 2022

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

Three Months Ended

Six Months Ended

Net Sales and Revenues

10 unchanged sentences

Equity in income of unconsolidated affiliates

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net Income Attributable to Deere & Company

6 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

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

For the Three and Six Months Ended April 30, 2023 and May 1, 2022

(In millions of dollars) Unaudited

Three Months Ended

Six Months Ended

Other Comprehensive Income (Loss), Net of Income Taxes

5 unchanged sentences

Comprehensive Income of Consolidated Group

Comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive Income Attributable to Deere & Company

25 unchanged sentences

Stockholders’ Equity

Common stock, $ 1 par value (issued shares at

January 29, 2023 – 536,431,204 )

Common stock, $ 1 par value (issued shares at April 30, 2023 – 536,431,204 )

Common stock in treasury

8 unchanged sentences

STATEMENTS OF CONSOLIDATED CASH FLOWS

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

For the Six Months Ended April 30, 2023 and May 1, 2022

(In millions of dollars) Unaudited

3 unchanged sentences

Provision for depreciation and amortization

Impairments and other adjustments

Share-based compensation expense

Gain on remeasurement of previously held equity investment

Provision (credit) for deferred income taxes

Changes in assets and liabilities:

Trade, notes, and financing receivables related to sales

Receivables related to sales

Accounts payable and accrued expenses

5 unchanged sentences

Proceeds from sales of equipment on operating leases

Proceeds from sales of businesses and unconsolidated affiliates, net of cash sold

Cost of receivables acquired (excluding receivables related to sales)

3 unchanged sentences

Collateral on derivatives - net

Net cash provided by investing activities

Net cash used for investing activities

Cash Flows from Financing Activities

Increase (decrease) in total short-term borrowings

Increase in total short-term borrowings

Proceeds from long-term borrowings

3 unchanged sentences

Dividends paid

Net cash used for financing activities

Net cash provided by (used for) financing activities

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

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

Net Increase (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 Months Ended January 29, 2023 and January 30, 2022

For the Three and Six Months Ended April 30, 2023 and May 1, 2022

(In millions of dollars) Unaudited

6 unchanged sentences

Income (Loss)

Three Months Ended May 1, 2022

Balance January 30, 2022

Net income (loss)

Other comprehensive loss

Repurchases of common stock

Treasury shares reissued

Dividends declared

Share based awards and other

Balance May 1, 2022

Six Months Ended May 1, 2022

Balance October 31, 2021

Net income (loss)

Other comprehensive loss

3 unchanged sentences

Share based awards and other

Balance May 1, 2022

Three Months Ended April 30, 2023

Balance January 29, 2023

Net income (loss)

Other comprehensive income (loss)

Repurchases of common stock

Treasury shares reissued

Dividends declared

Share based awards and other

Balance April 30, 2023

Six Months Ended April 30, 2023

Balance October 30, 2022

5 unchanged sentences

Share based awards and other

Balance January 29, 2023

Balance April 30, 2023

See Condensed Notes to Interim Consolidated Financial Statements.

7 unchanged sentences

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

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

Both periods contained 13 weeks.

The second quarter ends for fiscal year 2023 and 2022 were April 30, 2023 and May 1, 2022, respectively.

Both second quarters contained 13 weeks, while both year-to-date periods contained 26 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.

19 unchanged sentences

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 January 29, 2023

Three Months Ended April 30, 2023

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Primary geographic markets:

11 unchanged sentences

At a point in time

Three Months Ended January 30, 2022

Six Months Ended April 30, 2023

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Primary geographic markets:

11 unchanged sentences

At a point in time

Three Months Ended May 1, 2022

Production & Precision Ag

Small Ag & Turf

Primary geographic markets:

United States

Western Europe

Central Europe and CIS

Latin America

Asia, Africa, Oceania, and Middle East

Major product lines:

Production agriculture

Small agriculture

Compact construction

Financial products

Revenue recognized:

At a point in time

Six Months Ended May 1, 2022

Production & Precision Ag

Small Ag & Turf

Primary geographic markets:

United States

Western Europe

Central Europe and CIS

Latin America

Asia, Africa, Oceania, and Middle East

Major product lines:

Production agriculture

Small agriculture

Compact construction

Financial products

Revenue recognized:

At a point in time

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

1 unchanged sentence

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 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 deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 16, was $ 1,622 million, $ 1,423 million, and $ 1,423 million at April 30, 2023, October 30, 2022, and May 1, 2022, respectively.

The contract liability is reduced as the revenue is recognized.

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:

During the three months ended April 30, 2023 and May 1, 2022, $ 129 million and $ 130 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 six months ended April 30, 2023 and May 1, 2022, $ 343 million and $ 395 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 was $ 1,378 million at April 30, 2023.

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

remainder of 2023 - $ 238 , 2024 - $ 376 , 2025 - $ 294 , 2026 - $ 191 , 2027 - $ 111 , 2028 - $ 68 and later years - $ 100 .

6 unchanged sentences

Unrealized gain (loss) on derivatives

Unrealized loss on debt securities

Unrealized gain (loss) on debt securities

Total accumulated other comprehensive income (loss)

1 unchanged sentence

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

Three Months Ended April 30, 2023

Cumulative translation adjustment

9 unchanged sentences

Net actuarial gain (loss)

Reclassification to other operating expenses through amortization of:

Actuarial (gain) loss

Prior service (credit) cost

Reclassification of amortized amounts:

Actuarial (gain) loss – Other operating expenses

Prior service (credit) cost – Other operating expenses

Settlements – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Three Months Ended January 30, 2022

Six Months Ended April 30, 2023

Cumulative translation adjustment

8 unchanged sentences

Retirement benefits adjustment:

Net actuarial gain (loss)

Reclassification of amortized amounts:

Actuarial (gain) loss – Other operating expenses

Prior service (credit) cost – Other operating expenses

Settlements – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Three Months Ended May 1, 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)

Net unrealized gain (loss) on debt securities

Retirement benefits adjustment:

Net actuarial gain (loss)

Reclassification of amortized amounts:

Actuarial (gain) loss – Other operating expenses

Prior service (credit) cost – Other operating expenses

Settlements – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Six Months Ended May 1, 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)

Net unrealized gain (loss) on debt securities

Retirement benefits adjustment:

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

Reclassification to other operating expenses through amortization of:

Actuarial (gain) loss

Prior service (credit) cost

Reclassification of amortized amounts:

Actuarial (gain) loss – Other operating expenses

Prior service (credit) cost – Other operating expenses

Settlements – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

3 unchanged sentences

Three Months Ended

Six Months Ended

Net income attributable to Deere & Company

6 unchanged sentences

Shares excluded from EPS calculation, as antidilutive

(6) Pension and Other Postretirement Benefits

The Company has several defined benefit pension plans and postretirement benefit (OPEB) plans, primarily health care and life insurance plans, covering its U.S.

(6) Pension and Other Postretirement Employee Benefits

The Company has several defined benefit pension plans and other postretirement employee benefit (OPEB) plans, primarily health care and life insurance plans, covering its U.S.

employees and employees in certain foreign countries.

1 unchanged sentence

Three Months Ended

Six Months Ended

Interest cost

2 unchanged sentences

Amortization of prior service cost

Net (benefit) cost

Interest cost

Expected return on plan assets

Amortization of actuarial (gain) loss

Amortization of actuarial gain

Amortization of prior service credit

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.

Net (benefit) cost

The reduction in the 2023 pension net 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.

During the second quarter of 2023, an international pension plan paid a premium to an insurance company to irrevocably transfer the benefit obligations and administration for the majority of its retired participants.

The transaction did not impact the benefits to be received by the retired participants.

In connection with the transaction, the Company recognized a one-time, non-cash, pre-tax pension settlement charge of $ 36 million in the second quarter of 2023 related to the accelerated recognition of actuarial losses included within “Accumulated other comprehensive income (loss)” in the statements of changes in consolidated stockholders’ equity.

(7) Segment Reporting

1 unchanged sentence

Three Months Ended

Six Months Ended

Net sales and revenues:

20 unchanged sentences

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 expenses, certain foreign exchange gains and losses, pension and OPEB benefit amounts 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, equity in income of unconsolidated affiliates, 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:

January 29, 2023

April 30, 2023

Revolving Charge Accounts

10 unchanged sentences

Non-performing

Total retail customer receivables

October 30, 2022

11 unchanged sentences

Non-performing

Total retail customer receivables

January 30, 2022

Revolving Charge Accounts

10 unchanged sentences

Non-performing

Total retail customer receivables

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

January 29, 2023

April 30, 2023

Wholesale receivables:

5 unchanged sentences

Non-performing

Total wholesale receivables

October 30, 2022

6 unchanged sentences

Non-performing

Total wholesale receivables

January 30, 2022

Wholesale receivables:

5 unchanged sentences

Non-performing

Total wholesale receivables

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

Three Months Ended January 29, 2023

Three Months Ended April 30, 2023

Beginning of period balance

Provision (credit)

End of period balance

Six Months Ended April 30, 2023

Beginning of period balance

Provision transferred to held for sale

4 unchanged sentences

End of period balance

Three Months Ended January 30, 2022

Three Months Ended May 1, 2022

Beginning of period balance

Translation adjustments

End of period balance

Six Months Ended May 1, 2022

Beginning of period balance

Provision (credit)

Translation adjustments

End of period balance

2 unchanged sentences

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.

The financing receivables in Russia were reclassified to “Other assets” and the associated allowance for credit losses was reversed in the first quarter of 2023.

These operations were sold in the second quarter of 2023 (see Note 20).

Excluding the portfolio in Russia, the allowance for credit losses increased in the second quarter and the first six months of 2023 mainly due to higher portfolio balances and higher expected losses on turf and construction financing receivables.

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

(9) Securitization of Financing Receivables

21 unchanged sentences

(11) Goodwill and Other Intangible Assets – Net

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

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

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

Goodwill at October 31, 2021

Translation adjustments

Goodwill at January 30, 2022

Goodwill at May 1, 2022

Goodwill at October 30, 2022

Translation adjustments

Goodwill at January 29, 2023

Goodwill at April 30, 2023

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

8 unchanged sentences

Total accumulated amortization

Amortized intangible assets

Unamortized intangible assets:

In-process research and development

Other intangible assets – net

In September 2017, the Company acquired Blue River Technology’s in-process research and development related to machine learning technology to optimize the use of farm inputs.

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 first quarter of 2023 and 2022 was $ 39 million and $ 28 million, respectively.

The amortization of other intangible assets in the second quarter and the first six months of 2023 was $ 45 million and $ 84 million, and for the second quarter and the first six months of 2022 was $ 34 million and $ 62 million, respectively.

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

26 unchanged sentences

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.

Amounts are presented net of eliminations, which primarily consist of dealer sales incentives with a right of set-off against trade receivables of $ 1,979 million at April 30, 2023, $ 1,280 million at October 30, 2022, and $ 1,173 million at May 1, 2022.

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

20 unchanged sentences

(principal as of:

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

April 30, 2023 - $ 27,428 , October 30, 2022 - $ 25,629 , May 1, 2022 - $ 23,247 )

Other notes and finance lease obligations

9 unchanged sentences

Three Months Ended

January 29, 2023

January 30, 2022

Six Months Ended

April 30, 2023

Sales-type and direct finance lease revenues

6 unchanged sentences

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:

The unamortized extended warranty premiums (deferred revenue) included in the following table totaled $ 949 million and $ 809 million at April 30, 2023 and May 1, 2022, respectively.

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

Three Months Ended

Six Months Ended

Beginning of period balance

4 unchanged sentences

End of period balance

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

At April 30, 2023, the Company had $ 207 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 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.

At April 30, 2023, the accrued losses under these agreements were not material.

At April 30, 2023, the Company had commitments of $ 524 million for the construction and acquisition of property and equipment.

Also, at April 30, 2023, the Company had restricted assets of $ 189 million, classified as Other assets.

The Company also had other miscellaneous contingent liabilities and guarantees totaling approximately $ 65 million at April 30, 2023.

The accrued liability for these contingencies was not material at April 30, 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.

3 unchanged sentences

Long-term borrowings exclude finance lease liabilities.

January 29, 2023

April 30, 2023

October 30, 2022

January 30, 2022

Financing receivables – net

12 unchanged sentences

International equity securities

International mutual funds

fixed income fund

11 unchanged sentences

Accounts payable and accrued expenses - Deferred consideration

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

The contractual maturities of debt securities at April 30, 2023 in millions of dollars are shown below.

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

Unrealized losses were not recognized in income due to the ability and intent to hold to maturity.

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

6 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.

Inventories and property and equipment – net fair values for October 30, 2022 represent the fair value assessment at May 1, 2022.

Three Months Ended

Six 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 financial instruments on the balance sheet at fair value:

7 unchanged sentences

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.

(18) Derivative Instruments

8 unchanged sentences

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

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

Both at 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 January 29, 2023, October 30, 2022, and January 30, 2022 were $ 1,950 million, $ 1,950 million, and $ 2,700 million, respectively.

The total notional amounts of the receive-variable/pay-fixed interest rate contracts at April 30, 2023, October 30, 2022, and May 1, 2022 were $ 2,250 million, $ 1,950 million, and $ 2,450 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 impact earnings.

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

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.

The amount of gain recorded in OCI at April 30, 2023 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is approximately $ 30 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 January 29, 2023, October 30, 2022, and January 30, 2022 were $ 10,802 million, $ 10,112 million, and $ 8,307 million, respectively.

The total notional amounts of the receive-fixed/pay-variable interest rate contracts at April 30, 2023, October 30, 2022, and May 1, 2022 were $ 10,943 million, $ 10,112 million, and $ 8,655 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

January 29, 2023

April 30, 2023

Short-term borrowings

3 unchanged sentences

Long-term borrowings

January 30, 2022

Short-term borrowings

3 unchanged sentences

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 total notional amounts of these interest rate swaps at April 30, 2023, October 30, 2022, and May 1, 2022 were $ 11,956 million, $ 10,568 million, and $ 9,912 million, the foreign exchange contracts were $ 9,163 million, $ 8,185 million, and $ 7,640 million, and the cross-currency interest rate contracts were $ 163 million, $ 260 million, and $ 264 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 in millions of dollars follow:

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

Designated as hedging instruments:

17 unchanged sentences

Three Months Ended

Six 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 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.

The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at April 30, 2023, October 30, 2022, and May 1, 2022, was $ 716 million, $ 1,113 million, and $ 673 million, respectively.

In accordance with the limits established in these agreements, the Company posted $ 308 million, $ 701 million, and $ 254 million of cash collateral at April 30, 2023, October 30, 2022, and May 1, 2022, respectively.

In addition, the Company paid $ 8 million of collateral that was outstanding at April 30, 2023, October 30, 2022, and May 1, 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.

1 unchanged sentence

Gross Amounts

January 29, 2023

April 30, 2023

Gross Amounts

October 30, 2022

January 30, 2022

Gross Amounts

(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 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.

At April 30, 2023, options for 1.9 million shares were outstanding with a weighted-average exercise price of $ 181.91 per share.

The Company also granted 117 thousand of service-based restricted stock units and 41 thousand of performance/service-based restricted stock units to employees in the first six months of 2023.

The weighted-average fair value of the service-based restricted stock units at the grant date was $ 433.30 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.

At April 30, 2023, the Company was authorized to grant awards for an additional 16.6 million shares under the equity incentive plans.

(20) Disposition

On March 7, 2023, the Company sold its financial services business in Russia (registered in Russia as a leasing company) to Insight Investment Group.

The total proceeds, net of restricted cash sold, were $ 36 million.

The operations were included in the Company’s financial services operating segment through the date of sale.

At the disposal date, the total assets were $ 31 million, consisting primarily of financing receivables, the total liabilities were $ 5 million, and the cumulative translation loss was $ 10 million.

The Company did not incur additional gains or losses upon disposition.

At January 29, 2023, the assets and liabilities were classified as “ Other assets ” and “Accounts payable and accrued expenses”, respectively, which included $ 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.”

(21) S pecial Items

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.

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.

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.

Financial Services Financing Incentives Correction

In the second quarter of 2023, the Company 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 million pretax ($ 135 million after-tax), was recorded in the second quarter of 2023.

Prior period results for Deere & Company were not restated, as the adjustment is considered immaterial to the Company’s financial statements.

Impact of Events in Russia / Ukraine

In the second quarter of 2022, the Company suspended shipments of machines and service parts to Russia.

The suspension of shipments to Russia reduced actual and forecasted revenue for the region, which made 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.

Gain on Previously Held Equity Investment

In the second quarter of 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 Co., Ltd.

The fair value of the previous equity investment resulted in a non-cash gain of $ 326 million (pretax and after-tax ).

UAW Collective Bargaining Agreement

In the first quarter of 2022, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) approved a new collective bargaining agreement.

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

The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months and six months ended April 30, 2023 and May 1, 2022:

2023 Expense:

Financing incentive – SA&G expense

2022 Expense (benefit):

Gain on remeasurement of equity investment – Other income

Total Russia/Ukraine events expense

UAW ratification bonus – Cost of sales

Total 2022 expense (benefit)

Period over period change

(22) 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.

On May 22, 2023, the Company entered into a retail note securitization using its revolving warehouse facility that resulted in securitization borrowings of $ 589 million.

On May 31, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 1.25 per share payable on August 8, 2023, to stockholders of record on June 30, 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