What changed in this filing

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Item 1. Financial Statements

2023-08-31 compared with 2023-06-01 · 115 added, 149 removed, 710 unchanged (27% of the section changed)

2 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

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

For the Three and Nine Months Ended July 30, 2023 and July 31, 2022

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

Three Months Ended

Six Months Ended

Nine Months Ended

Net Sales and Revenues

10 unchanged sentences

Equity in income of unconsolidated affiliates

Net loss 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 Six Months Ended April 30, 2023 and May 1, 2022

For the Three and Nine Months Ended July 30, 2023 and July 31, 2022

(In millions of dollars) Unaudited

Three Months Ended

Six Months Ended

Nine Months Ended

Other Comprehensive Income (Loss), Net of Income Taxes

33 unchanged sentences

Stockholders’ Equity

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

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

Common stock in treasury

8 unchanged sentences

STATEMENTS OF CONSOLIDATED CASH FLOWS

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

For the Nine Months Ended July 30, 2023 and July 31, 2022

(In millions of dollars) Unaudited

Cash Flows from Operating Activities

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

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

Provision (credit) for credit losses

3 unchanged sentences

Gain on remeasurement of previously held equity investment

Provision (credit) for deferred income taxes

Credit for deferred income taxes

Changes in assets and liabilities:

3 unchanged sentences

Retirement benefits

Net cash used for operating activities

Net cash provided by operating activities

Cash Flows from Investing Activities

1 unchanged sentence

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)

8 unchanged sentences

Payments of long-term borrowings

Proceeds from issuance of common stock

Repurchases of common stock

Dividends paid

Net cash provided by (used for) financing activities

Net cash provided by financing activities

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

9 unchanged sentences

STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

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

For the Three and Nine Months Ended July 30, 2023 and July 31, 2022

(In millions of dollars) Unaudited

6 unchanged sentences

Income (Loss)

Three Months Ended May 1, 2022

Balance January 30, 2022

Net income (loss)

Three Months Ended July 31, 2022

Balance May 1, 2022

Other comprehensive loss

3 unchanged sentences

Share based awards and other

Balance May 1, 2022

Six Months Ended May 1, 2022

Balance July 31, 2022

Nine Months Ended July 31, 2022

Balance October 31, 2021

5 unchanged sentences

Share based awards and other

Balance May 1, 2022

Three Months Ended April 30, 2023

Balance January 29, 2023

Balance July 31, 2022

Three Months Ended July 30, 2023

Balance April 30, 2023

Net income (loss)

Other comprehensive income (loss)

Other comprehensive income

Repurchases of common stock

2 unchanged sentences

Share based awards and other

Balance April 30, 2023

Six Months Ended April 30, 2023

Balance July 30, 2023

Nine Months Ended July 30, 2023

Balance October 30, 2022

5 unchanged sentences

Share based awards and other

Balance April 30, 2023

Balance July 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 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.

The third quarter ends for fiscal year 2023 and 2022 were July 30, 2023 and July 31, 2022, respectively.

Both third quarters contained 13 weeks, while both year-to-date periods contained 39 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 April 30, 2023

Three Months Ended July 30, 2023

Production & Precision Ag

13 unchanged sentences

At a point in time

Six Months Ended April 30, 2023

Nine Months Ended July 30, 2023

Production & Precision Ag

13 unchanged sentences

At a point in time

Three Months Ended May 1, 2022

Three Months Ended July 31, 2022

Production & Precision Ag

13 unchanged sentences

At a point in time

Six Months Ended May 1, 2022

Nine Months Ended July 31, 2022

Production & Precision Ag

16 unchanged sentences

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 $ 1,622 million, $ 1,423 million, and $ 1,423 million at April 30, 2023, October 30, 2022, and May 1, 2022, respectively.

The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 16, was $ 1,753 million, $ 1,423 million, and $ 1,424 million at July 30, 2023, October 30, 2022, and July 31, 2022, respectively.

The contract liability is reduced as the revenue is recognized.

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.

During the three months ended July 30, 2023 and July 31, 2022, $ 96 million and $ 93 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 30, 2023 and July 31, 2022, $ 440 million and $ 488 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 $ 1,437 million at July 30, 2023.

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

11 unchanged sentences

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 April 30, 2023

Three Months Ended July 30, 2023

Cumulative translation adjustment

12 unchanged sentences

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 April 30, 2023

Nine Months Ended July 30, 2023

Cumulative translation adjustment

15 unchanged sentences

Total other comprehensive income (loss)

Three Months Ended May 1, 2022

Three Months Ended July 31, 2022

Cumulative translation adjustment

6 unchanged sentences

Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

4 unchanged sentences

Prior service (credit) cost – Other operating expenses

Settlements – Other operating expenses

Settlements/curtailment – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Six Months Ended May 1, 2022

Nine Months Ended July 31, 2022

Cumulative translation adjustment

1 unchanged sentence

Unrealized hedging gain (loss)

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

Net unrealized gain (loss) on derivatives

1 unchanged sentence

Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

4 unchanged sentences

Prior service (credit) cost – Other operating expenses

Settlements – Other operating expenses

Settlements/curtailment – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income attributable to Deere & Company

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Interest cost

2 unchanged sentences

Amortization of prior service cost

Settlements/curtailment

Net (benefit) cost

Interest cost

2 unchanged sentences

Amortization of prior service credit

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.

During the second quarter of 2023, the Canada 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.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net sales and revenues:

19 unchanged sentences

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 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:

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

Reconciling items to net income are primarily corporate expenses, certain interest income and 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 were as follows in millions of dollars:

Production & precision ag

9 unchanged sentences

Finance income for non-performing receivables is recognized on a cash basis.

Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

Accrual of finance income is generally resumed when the receivable becomes contractually current and collection is reasonably assured.

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:

April 30, 2023

July 30, 2023

Revolving Charge Accounts

23 unchanged sentences

Non-performing

July 31, 2022

Revolving Charge Accounts

11 unchanged sentences

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

April 30, 2023

July 30, 2023

Wholesale receivables:

13 unchanged sentences

Non-performing

July 31, 2022

Wholesale receivables:

6 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 April 30, 2023

Three Months Ended July 30, 2023

Beginning of period balance

Translation adjustments

End of period balance

Six Months Ended April 30, 2023

Nine Months Ended July 30, 2023

Beginning of period balance

5 unchanged sentences

End of period balance

Three Months Ended May 1, 2022

Three Months Ended July 31, 2022

Beginning of period balance

Provision (credit)

Translation adjustments

End of period balance

Six Months Ended May 1, 2022

Nine Months Ended July 31, 2022

Beginning of period balance

7 unchanged sentences

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.

The allowance for credit losses decreased slightly in the third quarter of 2023 as strong fundamentals within the agriculture market continued to benefit the portfolio.

Excluding the portfolio in Russia, the allowance for the first nine months of 2023 increased slightly as higher portfolio balances and higher expected losses on turf and construction customer accounts offset the favorable benefits in the agricultural customer accounts.

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

(9) Securitization of Financing Receivables

20 unchanged sentences

Less adjustment to LIFO value

(11) Goodwill and Other Intangible Assets – Net

(11) Goodwill and Other Intangible Assets

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

1 unchanged sentence

Translation adjustments

Goodwill at May 1, 2022

Goodwill at July 31, 2022

Goodwill at October 30, 2022

Translation adjustments

Goodwill at April 30, 2023

Goodwill at July 30, 2023

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

9 unchanged sentences

Other intangible assets – net

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 amortization of other intangible assets in the third quarter and the first nine months of 2023 was $ 42 million and $ 126 million, and for the third quarter and the first nine months of 2022 was $ 42 million and $ 104 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 $ 1,979 million at April 30, 2023, $ 1,280 million at October 30, 2022, and $ 1,173 million at May 1, 2022.

Amounts are presented net of eliminations, which primarily consist of dealer sales incentives with a right of set-off against trade receivables of $ 2,240 million at July 30, 2023, $ 1,280 million at October 30, 2022, and $ 1,370 million at July 31, 2022.

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

20 unchanged sentences

(principal as of:

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

July 30, 2023 - $ 30,348 , October 30, 2022 - $ 25,629 , July 31, 2022 - $ 22,983 )

Other notes and finance lease obligations

9 unchanged sentences

Three Months Ended

Six Months Ended

April 30, 2023

Nine Months Ended

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 $ 949 million and $ 809 million at April 30, 2023 and May 1, 2022, respectively.

The unamortized extended warranty premiums (deferred revenue) included in the following table totaled $ 999 million and $ 839 million at July 30, 2023 and July 31, 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

Nine Months Ended

Beginning of period balance

4 unchanged sentences

End of period balance

At April 30, 2023, the Company had $ 207 million of guarantees issued to banks outside the U.S.

At July 30, 2023, the Company had $ 201 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 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.

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

At July 30, 2023, the Company had commitments of $ 649 million for the construction and acquisition of property and equipment.

Also, at July 30, 2023, the Company had restricted assets of $ 270 million, classified as Other assets.

The Company also had other miscellaneous contingent liabilities and guarantees totaling approximately $ 115 million at July 30, 2023.

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

April 30, 2023

July 30, 2023

October 30, 2022

July 31, 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 of money market funds and time deposits.

Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow.

The Company’s cash equivalents, which consisted of money market funds and time deposits, are excluded as these assets were carried at cost that approximates fair value.

Marketable securities

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 April 30, 2023 in millions of dollars are shown below.

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

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

8 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.

Inventories and property and equipment – net fair values for October 30, 2022 represent the fair value assessment at July 31, 2022.

Three Months Ended

Six Months Ended

Nine Months Ended

Property and equipment – net

11 unchanged sentences

(18) Derivative Instruments

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 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 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.

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.

The fair value of the Company’s derivative instruments and the associated notional amounts were as follows in millions of dollars.

Assets are recorded in “Other assets” on the consolidated balance sheets, while liabilities are recorded in “Accounts payable and accrued expenses.”

July 30, 2023

October 30, 2022

July 31, 2022

Cash flow hedges:

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 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 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.

Interest rate contracts

Fair value hedges:

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 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.

Interest rate contracts

Not designated as hedging instruments:

Interest rate contracts

Foreign exchange contracts

Cross-currency interest rate contracts

The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships were as follows in millions of dollars.

10 unchanged sentences

Hedging Amount

April 30, 2023

July 30, 2023

Short-term borrowings

3 unchanged sentences

Long-term borrowings

July 31, 2022

Short-term borrowings

Long-term borrowings

Derivatives Not Designated as Hedging Instruments

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 for certain borrowings, purchases or sales of inventory, and sales incentive programs.

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 were as follows in millions of dollars:

Designated as hedging instruments:

Interest rate contracts

Not designated as hedging instruments:

Interest rate contracts

Foreign exchange contracts

Cross-currency interest rate contracts

Total not designated

Total derivative assets

Accounts Payable and Accrued Expenses

Designated as hedging instruments:

Interest rate contracts

Not designated as hedging instruments:

Interest rate contracts

Foreign exchange contracts

Cross-currency interest rate contracts

Total not designated

Total derivative liabilities

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

Six Months Ended

Nine Months Ended

Fair Value Hedges:

13 unchanged sentences

* Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.

Counterparty Risk and Collateral

Derivative instruments are subject to significant concentrations of credit risk to the banking sector.

The Company manages individual counterparty exposure by setting limits that consider the credit rating of the counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the Company and the counterparty banks.

All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation.

Some of these agreements include credit support provisions.

Each master agreement permits the net settlement of amounts owed in the event of default or termination.

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 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.

The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at July 30, 2023, October 30, 2022, and July 31, 2022, was $ 865 million, $ 1,113 million, and $ 518 million, respectively.

In accordance with the limits established in these agreements, the Company posted $ 435 million, $ 701 million, and $ 238 million of cash collateral at July 30, 2023, October 30, 2022, and July 31, 2022, respectively.

Derivatives are recorded without offsetting for netting arrangements or collateral.

1 unchanged sentence

Gross Amounts

April 30, 2023

July 30, 2023

Gross Amounts

1 unchanged sentence

Gross Amounts

July 31, 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 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.

At July 30, 2023, options for 1.8 million shares were outstanding with a weighted-average exercise price of $ 187.53 per share.

The Company also granted 125 thousand of service-based restricted stock units and 41 thousand of performance/service-based restricted stock units to employees in the first nine months of 2023.

The weighted-average fair value of the service-based restricted stock units at the grant date was $ 428.49 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 April 30, 2023, the Company was authorized to grant awards for an additional 16.6 million shares under the equity incentive plans.

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

(20) Disposition

7 unchanged sentences

(21) S pecial Items

Brazil Tax Ruling

In the third quarter of 2023, the Brazil Superior Court of Justice published a favorable tax ruling regarding taxability of local incentives, which allowed the Company to record a $ 243 million reduction in the provision for income taxes and $ 47 million of interest income.

Financial Services Financing Incentives Correction

5 unchanged sentences

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.

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

In addition, the Company initiated a voluntary separation program for employees in Russia in the third quarter of 2022.

Gain on Previously Held Equity Investment

5 unchanged sentences

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 and six months ended April 30, 2023 and May 1, 2022:

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 30, 2023 and July 31, 2022:

2023 Expense:

2 unchanged sentences

Gain on remeasurement of equity investment – Other income

Total Russia/Ukraine events expense

Total Russia/Ukraine events expense (benefit)

UAW ratification bonus – Cost of sales

1 unchanged sentence

Period over period change

(22) Subsequent Events

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.

(22) Subsequent Event

On August 30, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 1.35 per share payable on November 8, 2023, to stockholders of record on September 29, 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