What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-31 compared with 2023-06-01 · 103 added, 129 removed, 329 unchanged (41% of the section changed)

9 unchanged sentences

Smart Industrial Operating Model and Leap Ambitions

The Company’s Smart Industrial operating model is focused on making significant investments, strengthening the Company’s capabilities in digital, automation, autonomy, and alternative propulsion technologies.

The Company’s Smart Industrial operating model is focused on making significant investments, strengthening the Company’s capabilities in digitalization, automation, autonomy, and alternative propulsion technologies.

These technologies are intended to increase worksite efficiency, improve yields, lower input costs, and ease labor constraints.

5 unchanged sentences

Industry sales of small agricultural and turf equipment in the U.S.

and Canada are expected to be down about 5 percent in 2023.

Industry sales of agricultural machinery in Europe are forecasted to be flat to up 5 percent, while South American industry sales of tractors and combines are expected to be flat in 2023.

Asia industry sales are forecasted to be down moderately in 2023.

On an industry basis, the U.S.

and Canada construction equipment and compact construction equipment sales are both expected to be flat to up 5 percent in 2023.

Global forestry and global roadbuilding industry sales are each expected to be flat.

Company Trends – Customers’ demand for integration of technology into equipment is a market trend underlying the Company’s Smart Industrial operating model and Leap Ambitions framework.

and Canada are expected to be down 5 to 10 percent in 2023.

Industry sales of agricultural machinery in Europe are forecasted to be flat to up 5 percent, while South American industry sales of tractors and combines are expected to be flat to down 5 percent in 2023.

Asia industry sales of agricultural machinery are forecasted to be down moderately in 2023 as volumes in India remain subdued.

On an industry basis, U.S.

and Canada construction, U.S.

and Canada compact construction, and global roadbuilding equipment sales are expected to be flat to up 5 percent in 2023.

Global forestry industry sales are expected to be flat to down 5 percent.

Company Trends – Customers’ demand for integration of technology into equipment is a market trend underlying the Company’s Smart Industrial operating model and Leap Ambitions.

Customers have sought to improve profitability, productivity, and sustainability through technology.

8 unchanged sentences

Demand for the Company’s equipment remains strong, as order books are full throughout 2023.

Agricultural fundamentals are expected to remain solid through 2023, and retail demand will comprise most of 2023 sales.

The North American retail customer fleet age of combines and large tractors is historically high, and dealer inventories are low due to the manufacturing and supply chain constraints over the past few years.

The Company expects elevated demand to continue for the second half of the year as evidenced by retail customer orders that extend into 2024.

Crop prices remain favorable to our customers in part due to a stock-to-use ratio below the 10-year average for key grains.

The Company expects sales volume of large agricultural equipment to be greater in 2023 than 2022 in North America and Europe.

Sales volume for small agriculture and turf equipment is expected to be lower than 2022 due to lower demand for consumer-oriented products, partially offset by stronger demand for mid-sized equipment.

Agricultural fundamentals are expected to remain solid through 2023 with farm net income in the U.S.

and Canada expected to be near historical highs.

Crop prices remain favorable to our customers in part due to weather conditions putting downward pressure on yields.

The Company expects sales volume of large agricultural equipment to be greater in 2023 than 2022 in North America.

Sales volume for small agriculture and turf equipment is expected to be lower compared to 2022 due to less demand for consumer-oriented products, partially offset by stronger demand for mid-sized equipment.

Construction equipment markets are forecasted to be steady.

infrastructure spending, industrial construction, and rental inventory restocking are expected to more than offset moderation in residential home and commercial real estate construction.

Importantly, construction equipment dealer inventory remains below historical averages.

Roadbuilding demand remains strongest in the U.S., largely offset by softening demand in Europe and parts of Asia.

Net income for the Company’s financial services operations is expected to be lower than

fiscal year 2022 due to less-favorable financing spreads, the correction of the accounting treatment for financing incentives offered to John Deere dealers, unfavorable derivative market valuation adjustments, a higher provision for credit losses, higher selling, administrative and general expenses, and lower gains on operating-lease dispositions.

These factors are expected to be partially offset by income earned on higher average portfolio balances.

Additional Trends – Supply chain conditions have improved over 2022;

however, the Company continues to experience disruptions above historical norms.

Supply chain disruptions impacted many aspects of the business starting in 2022, including parts availability, increased production costs, and higher inventory levels.

Past due deliveries from suppliers were at elevated levels during 2022.

The Company implemented the following mitigation efforts to minimize the impact of supply chain disruptions on its ability to meet customer demand:

• Worked with the supply base to obtain allocations and improve on-time deliveries of parts.

• Multi-sourced some parts and materials.

• Provided resources to suppliers to address constraints.

• Entered into long-term contracts for some critical components.

• Utilized alternative freight carriers to expedite delivery.

The Company has experienced supply chain improvements in the second quarter of 2023.

The reduction in supply chain disruptions contributed to higher levels of production in the second quarter of 2023.

However, remaining constraints in the supply base will limit higher levels of production in the second half of the year.

As a result, the production schedules in 2023 will be more aligned with the customers’ seasonal use of the Company’s products, marking a return to historical seasonal production patterns.

Central bank policy interest rates increased in the first six months of 2023.

infrastructure spending, industrial construction, rental inventory restocking, and housing stabilization are expected to more than offset moderation in office and commercial real estate construction.

Roadbuilding demand remains strongest in the U.S.

and emerging markets in South America and India, largely offsetting flat fundamentals in Europe.

Net income for the Company’s financial services operations is expected to be lower than fiscal year 2022 due to less-favorable financing spreads, a correction of the accounting treatment for financing incentives offered to John Deere dealers recorded in the second quarter of 2023, a higher provision for credit losses, higher selling, administrative and

general expenses, and lower gains on operating lease dispositions.

These factors are expected to be partially offset by income earned on a higher average portfolio.

Additional Trends – The Company has experienced supply chain improvements over 2022 beginning in the second quarter of 2023.

The reduction in supply chain disruptions contributed to higher levels of production compared to 2022.

As a result, the production schedules in 2023 are more aligned with the customers’ seasonal use of the Company’s products, marking a return to historical seasonal production patterns.

Additionally, supply chain improvements have contributed to meaningful reductions in production costs including premium freight and material costs.

Supply chain disruptions impacted many aspects of the business in 2022, including receiving past due deliveries from suppliers, parts availability, increased production costs, and higher inventory levels.

Central bank policy interest rates increased in the first nine months of 2023.

Most retail receivables are fixed rate, while wholesale financing receivables are variable rate.

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Historically, rising interest rates impact the Company’s borrowings sooner than the benefit is realized from the financing receivable and equipment on operating lease portfolios.

As a result, the Company’s financial services operations experienced $84 million (after-tax) of less favorable financing spreads in the first six months of 2023 compared to 2022.

The Company expects spread compression to persist during 2023.

Recent banking sector events have resulted in increased liquidity considerations.

The Company’s deposits are well diversified, and as a result, the Company was not materially exposed to banks that have entered receivership or encountered liquidity issues.

These events have not changed the Company’s access to capital markets.

The Company continues to monitor counterparty exposure through regular reviews of various risk metrics and adjusting exposure limits as needed.

Supply chain disruptions, rising interest rates, and recent banking sector events are driven by factors outside of the Company’s control, and as a result, the Company cannot reasonably foresee when these conditions will subside.

Other Items of Concern and Uncertainties – Other items of concern include global and regional political conditions, failure to raise the U.S.

debt ceiling, economic and trade policies, imposition of new or retaliatory tariffs against certain countries or covering certain products, post-pandemic effects, capital market disruptions, changes in demand and pricing for new and used equipment, significant fluctuations in foreign currency exchange rates, and volatility in the prices of many commodities.

As a result, the Company’s financial services operations experienced $133 million (after-tax) of less favorable financing spreads in the first nine months of 2023 compared to 2022.

The Company expects spread compression to persist for the remainder of 2023.

Remaining supply chain disruptions and rising interest rates are driven by factors outside of the Company’s control, and as a result, the Company cannot reasonably foresee when these conditions will subside.

Other Items of Concern and Uncertainties – Other items of concern include global and regional political conditions, economic and trade policies, imposition of new or retaliatory tariffs against certain countries or covering certain products, capital market disruptions, changes in demand and pricing for new and used equipment, significant fluctuations in foreign currency exchange rates, and volatility in the prices of many commodities.

These items could impact the Company’s results.

The Company is making investments in technology and in strengthening its capabilities in digital, automation, autonomy, and alternative propulsion technologies.

The Company is making investments in technology and in strengthening its capabilities in digitalization, automation, autonomy, and alternative propulsion technologies.

As with most technology investments, marketplace adoption, monetization, and regulation of these features holds an elevated level of uncertainty .

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Deere & Company

3 unchanged sentences

Diluted earnings per share

Net sales and revenues increased for both the quarter and year-to-date periods due to higher shipment volumes and price realization.

Net sales and revenues increased for both the quarter and year-to-date periods primarily due to price realization.

See the Business Segment Results for additional details.

Net income in each of the periods presented were impacted by special items.

See Note 21 for additional details.

See Note 21 for additional details on special items.

An explanation of the cost of sales to net sales ratio and other significant statement of consolidated income changes follows:

Three Months Ended

Six Months Ended

Nine Months Ended

Deere & Company

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Provision for income taxes

The cost of sales ratio improved in the second quarter and the first six months of fiscal 2023 due to price realization, partially offset by higher production costs.

The six months ended May 1, 2022 were also impacted by inefficiencies due to the delayed ratification of the UAW labor agreement and contract-ratification bonus costs (see Note 21).

Other income decreased compared to both prior periods due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture recorded in 2022.

The cost of sales ratio improved in the third quarter and the first nine months of fiscal 2023 due to price realization, partially offset by higher production costs.

Other income decreased year-to-date due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture recorded in 2022.

Research and development expenses were higher due to continued focus on developing and incorporating technology solutions.

Selling, administrative and general expenses increased mostly due to higher employee pay driven by inflationary conditions, profit-sharing incentives, commissions paid to dealers, as well as the cumulative correction of the accounting treatment for financing incentives offered to John Deere dealers.

The provision for income taxes was higher as a result of higher pretax income as well as the prior period exclusion of the Deere-Hitachi joint-venture remeasurement gain from tax-effected income.

Selling, administrative and general expenses increased mostly due to higher employee pay driven by inflationary conditions and profit-sharing incentives.

Additionally, the nine-month period was impacted by a cumulative correction of the accounting treatment for financing incentives offered to John Deere dealers and higher commissions paid to dealers.

The provision for income taxes was lower in the third quarter of 2023 due to a favorable income tax ruling in Brazil, partially offset by the effect of higher pretax income.

The provision for income taxes was higher in the first nine months as a result of higher pretax income and the prior period’s exclusion of the Deere-Hitachi joint-venture remeasurement gain from tax-effected income, which were partially offset by the favorable income tax ruling in Brazil.

Business Segment Results

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Three Months Ended

Six Months Ended

Nine Months Ended

Production and Precision Agriculture

4 unchanged sentences

Currency translation impact on Net sales

Production and precision agriculture sales increased for the quarter as a result of higher shipment volumes (primarily in the U.S., Brazil, Europe, and Canada) and price realization in most end markets.

Operating profit improved primarily due to price realization and improved sales volumes.

These items were partially offset by increased selling, administrative and general expenses and research and development expenses, higher production costs, and the unfavorable effects of foreign currency exchange mostly due to a stronger U.S.

Sales for the first six months increased as a result of higher shipment volumes (primarily in the U.S., Canada, Brazil, and Europe) and price realization.

Operating profit for the first six months increased primarily from price realization and higher sales volume.

Production and precision agriculture sales increased for the quarter as a result of price realization in most end markets.

Operating profit rose due to price realization and improved shipment volumes / sales mix.

These items were partially offset by higher production costs, increased selling, administrative and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange.

Sales for the first nine months increased as a result of higher shipment volumes (primarily in the U.S., Canada, Europe, and Brazil) and price realization.

Operating profit for the first nine months increased primarily from price realization and higher sales volume.

Partially offsetting these factors were higher production costs, higher selling, administrative, and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange mostly due to a stronger U.S.

Three Months Ended

Six Months Ended

Nine Months Ended

Small Agriculture and Turf

4 unchanged sentences

Currency translation impact on Net sales

Small agriculture and turf sales increased for the quarter due to price realization in most end markets and higher shipment volumes (primarily in Europe, Mexico, and China), partially offset by the negative effects of foreign currency translation.

Operating profit improved primarily as a result of price realization and improved sales volumes / mix.

Sales for the first six months increased mainly as a result of price realization and higher shipment volumes (primarily in Europe and Mexico), partially offset by the unfavorable impact of currency translation.

Operating profit for the first six months improved primarily as a result of price realization and improved sales volumes / mix.

Small agriculture and turf sales increased for the quarter due to price realization in most end markets, partially offset by lower shipment volumes (primarily in the U.S.).

Operating profit improved due to price realization, partially offset by higher production costs, lower shipment volumes, and increased selling, administrative and general expenses and research and development expenses.

Sales for the first nine months increased mainly as a result of price realization and higher shipment volumes (primarily in Europe and Mexico), partially offset by the unfavorable impact of currency translation.

Operating profit for the first nine months improved primarily as a result of price realization and improved sales volumes / mix.

These items were partially offset by higher production costs, higher selling, administrative, and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange mostly due to a stronger U.S.

Three Months Ended

Six Months Ended

Nine Months Ended

Construction and Forestry

4 unchanged sentences

Currency translation impact on Net sales

Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes.

Operating profit improved due to price realization and improved sales volumes / mix, partially offset by higher production costs, higher selling, administrative, and general expenses and research and development expenses.

Prior period results benefited from the non-cash gain on the remeasurement of previously held equity investment in the Deere-Hitachi joint venture.

The segment’s six-month sales increased due to higher shipment volumes and price realization partially offset by the unfavorable impact of currency translation.

The first six-month’s operating profit moved higher due to price realization and higher sales volumes, partially offset by higher production costs.

Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes (primarily in the U.S.).

Operating profit rose primarily due to price realization and improved sales volumes.

These items were partially offset by increased selling, administrative, and general expenses and research and development expenses, higher production costs, and the unfavorable impact of foreign currency exchange.

The segment’s nine-month sales increased due to price realization and higher shipment volumes (primarily in the U.S.) partially offset by the unfavorable impact of currency translation.

The first nine-month’s operating profit moved higher due to price realization and higher sales volumes, partially offset by higher production costs.

Prior period results benefitted from the non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture.

Three Months Ended

Six Months Ended

Nine Months Ended

Financial Services

2 unchanged sentences

Interest expense

The average balance of receivables and leases financed was 18 percent higher in the second quarter of 2023, and 17 percent higher in the first six months of 2023 compared with the same periods last year.

The average balance of receivables and leases financed was 22 percent higher in the third quarter of 2023, and 18 percent higher in the first nine months of 2023 compared with the same periods last year.

Revenue also increased due to higher average financing rates in both periods.

Interest expense increased compared to both prior periods as a result of higher average borrowing rates and higher average borrowings.

Financial services net income for both periods decreased primarily due to less-favorable financing spreads and a higher provision for credit losses, partially offset by income earned on a higher average portfolio.

Net income for the first six months of the year was also impacted by unfavorable derivative market valuation adjustments.

Additionally impacting the results for both periods was a $135 million after-tax correction of the accounting treatment for financing incentives offered to John Deere dealers, which affected the timing of expense recognition and the presentation of incentive costs in the consolidated financial statements.

Financial services net income in the third quarter of 2023 increased as a result of income earned on a higher average portfolio, partially offset by less-favorable financing spreads.

Net income for the first nine months of 2023 decreased primarily due to a cumulative correction of the accounting treatment for financing incentives offered to John Deere dealers recorded in the second quarter, less-favorable financing spreads, and a higher provision for credit losses.

These items were partially offset by income earned on a higher average portfolio.

The accounting correction is unrelated to current market conditions or the credit quality of the financial services portfolio, which remains strong.

The allowance for credit losses, excluding the portfolio in Russia, was .40 percent of financing receivables as of April 30, 2023, compared with .42 percent as of May 1, 2022.

The allowance for credit losses, excluding the portfolio in Russia, was .36 percent of financing receivables as of July 30, 2023, compared with .40 percent as of July 31, 2022.

Critical Accounting Estimates

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The production and precision agriculture, small agriculture and turf, and construction and forestry segments are capital intensive and are typically subject to seasonal variations in financing requirements for inventories and certain receivables from dealers.

However, the patterns of seasonality in inventory have been affected by increases in production rates and supply chain disruptions experienced during fiscal year 2022.

Supply chain conditions have begun trending towards more normalized levels in 2023, though disruptions remain above historical performance.

The financial services operations rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios.

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Ratio of interest-bearing debt to stockholder’s equity

The reduction in unused credit lines in 2023 compared to both prior periods relates to an increase in commercial paper outstanding due to changes in receivables and funding mix.

The reduction in unused credit lines in 2023 compared to both prior periods relates to an increase in commercial paper outstanding due to growth in financing receivables and funding mix.

The Company forecasts higher operating cash flows in 2023 driven by an increase in net income adjusted for non-cash provisions and a favorable change in working capital.

1 unchanged sentence

Cash Flows (in millions of dollars)

Six Months Ended

April 30, 2023

Net cash used for operating activities

Nine Months Ended

July 30, 2023

July 31, 2022

Net cash provided by operating activities

Net cash used for investing activities

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

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash outflows from operating activities in the first six months of 2023 were $147 million.

This resulted mainly from a working capital change, partially offset by net income adjusted for non-cash provisions.

Cash outflows from investing activities were $1,494 million in the first six months of 2023.

Cash inflows from operating activities in the first nine months of 2023 were $2,896 million.

This resulted mainly from net income adjusted for non-cash provisions, partially offset by a working capital change and change in accrued income taxes payable.

Cash outflows from investing activities were $4,563 million in the first nine months of 2023.

The primary drivers were growth in the retail customer receivable portfolio and purchases of property and equipment.

Cash inflows from financing activities were $2,017 million in the first six months of 2023, as higher external borrowings of $5,293 million to support working capital requirements were offset by repurchases of common stock and dividends paid.

Cash, cash equivalents, and restricted cash increased $446 million during the first six months of 2023.

Cash inflows from financing activities were $3,379 million in the first nine months of 2023, as higher external borrowings to support working capital requirements and financing receivable growth were offset by repurchases of common stock and dividends paid.

Cash, cash equivalents, and restricted cash increased $1,837 million during the first nine months of 2023.

Trade Accounts and Notes Receivable.

Trade accounts and notes receivable arise from sales of goods to customers.

Trade receivables increased $3,561 million during the first six months of 2023, primarily due to a seasonal increase and higher sales volumes, as well as the effect of foreign currency translation.

Trade receivables increased $2,887 million during the first nine months of 2023, primarily due to a seasonal increase and higher sales volumes, as well as the effect of foreign currency translation.

These receivables increased $2,601 million, compared to a year ago, primarily due to higher sales volumes.

The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 1 percent at each of April 30, 2023, October 30, 2022, and May 1, 2022.

The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 1 percent at each of July 30, 2023, October 30, 2022, and July 31, 2022.

Financing Receivables and Equipment on Operating Leases .

Financing receivables and equipment on operating leases consist of retail notes originated in connection with financing of new and used equipment, operating leases, revolving charge accounts, sales-type and direct financing leases, and wholesale notes.

Financing receivables and equipment on operating leases increased $1,944 million during the first six months of 2023 and increased $6,514 million in the past 12 months due to strong retail sales.

Total acquisition volumes of financing receivables and equipment on operating leases were 31 percent higher in the first six months of 2023, compared with the same period last year, as volumes of wholesale notes, retail notes, revolving charge accounts, operating leases, and finance leases were higher compared to May 1, 2022.

Financing receivables and equipment on operating leases increased $5,819 million during the first nine months of 2023 and increased $8,261 million in the past 12 months due to strong retail sales.

Total acquisition volumes of financing receivables and equipment on operating leases were 32 percent higher in the first nine months of 2023, compared with the same period last year, as volumes of wholesale notes, retail notes, revolving charge accounts, operating leases, and finance leases were higher compared to July 31, 2022.

Inventories .

Inventories increased by $1,218 million during the first six months of 2023 and increased by $683 million compared to a year ago.

The increases were due to higher forecasted sales volumes and supply chain disruptions.

The effect of foreign currency translation also increased inventories during the first six months of 2023.

Inventories increased by $855 million during the first nine months of 2023 and increased by $229 million compared to a year ago.

The increases were due to higher forecasted sales volumes.

The effect of foreign currency translation also increased inventories during the first nine months of 2023.

A majority of these inventories are valued on the last-in, first out (LIFO) method.

Property and Equipment .

Property and equipment cash expenditures in the first six months of 2023 were $584 million, compared with $346 million in the same period last year.

Property and equipment cash expenditures in the first nine months of 2023 were $887 million, compared with $596 million in the same period last year.

Capital expenditures in 2023 are estimated to be approximately $1,650 million.

Accounts Payable and Accrued Expenses .

Accounts payable and accrued expenses decreased by $106 million in the first six months of 2023.

Accounts payable and accrued expenses increased $2,037 million compared to a year ago due to an increase in accrued expenses associated with accrued taxes, employee benefits, product warranties, and dealer sales discounts.

Accounts payable and accrued expenses increased by $518 million in the first nine months of 2023.

Accounts payable and accrued expenses increased $2,354 million compared to a year ago due to an increase in accrued expenses associated with employee benefits, accrued taxes, dealer sales discounts, and derivative liabilities.

Total external borrowings have changed generally corresponding with the level of the receivable and the lease portfolio, as well as other working capital requirements.

2 unchanged sentences

The facility was renewed in November 2022 with an expiration in November 2023 and increased the total capacity or “financing limit” from $1,000 million to $1,500 million.

At April 30, 2023, $948 million of securitization borrowings was outstanding

under the facility.

At July 30, 2023, $1,415 million of securitization borrowings were outstanding under the facility.

At the end of the contractual revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected.

In the first six months of 2023, the financial services operations issued $1,289 million and retired $1,622 million of retail note securitization borrowings, which are presented in “Increase (decrease) in total short-term borrowings.”

In the first nine months of 2023, the financial services operations issued $3,207 million and retired $2,309 million of retail note securitization borrowings, which are presented in “Increase (decrease) in total short-term borrowings.”

Lines of Credit .

The Company also has access to bank lines of credit with various banks throughout the world.

Worldwide lines of credit totaled $10,309 million at April 30, 2023, $785 million of which were unused.

Worldwide lines of credit totaled $10,352 million at July 30, 2023, $950 million of which were unused.

For the purpose of computing unused credit lines, commercial paper, and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, were considered to constitute utilization.

Included in the total credit lines at April 30, 2023 was a 364-day credit facility agreement of $5,000 million expiring in the second quarter of 2024.

Included in the total credit lines at July 30, 2023 was a 364-day credit facility agreement of $5,000 million expiring in the second quarter of 2024.

In addition, total credit lines included long-term credit facility agreements of $2,500 million expiring in the second quarter of 2027 and $2,500 million expiring in the second quarter of 2028.

These credit agreements require Capital Corporation and other parts of the Company to maintain certain performance metrics and liquidity targets.

All of the requirements in the credit agreements have been met during the periods included in the financial statements.

All requirements in the credit agreements have been met during the periods included in the financial statements.

Debt Ratings .

3 unchanged sentences

Each agency’s rating should be evaluated independently of any other rating.

Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, and reduced access to debt capital markets.

Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, reduced access to debt capital markets, and may adversely impact the Company’s liquidity.

The senior long-term and short-term debt ratings and outlook currently assigned to unsecured Company securities by the rating agencies engaged by the Company are as follows:

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Among these factors are risks related to:

● changes in U.S.

● compliance with and changes in U.S.

and international laws, regulations, and policies relating to trade, spending, taxing, banking, monetary, environmental (including climate change and engine emission), and farming policies;

● political, economic, and social instability of the geographies in which the Company operates;

● wars and other conflicts, including the current conflict between Russia and Ukraine;

● wars and other conflicts, including the war between Russia and Ukraine;

● adverse macroeconomic conditions, including unemployment, inflation, rising interest rates, changes in consumer practices due to slower economic growth or possible recession, and regional or global liquidity constraints;

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dollar, customer confidence, access to capital, and demand for our products and solutions;

● stress in the banking sector may have adverse impacts on vendors or customers as well as on the Company’s ability to access cash deposits;

● uncertainty related to prolonged negotiations regarding the U.S.

federal debt ceiling or the U.S.

government’s failure to raise the debt ceiling;

● changes in the Company’s credit ratings, and failure to comply with financial covenants in credit agreements could impact access to funding;

● availability and price of raw materials, components, and whole goods;

● changes in the Company’s credit ratings and any failure to comply with financial covenants in credit agreements could impact access to funding;

● availability and price of raw materials, components, whole goods, and used equipment;

● delays or disruptions in the Company’s supply chain;

● labor relations and contracts, including work stoppages and other disruptions;

● the ability to attract, develop, engage, and retain qualified personnel;

1 unchanged sentence

● loss of or challenges to intellectual property rights;

● compliance with evolving U.S.

and foreign laws, including economic sanctions, data privacy, and environmental laws and regulations;

● legislation introduced or enacted that could affect the Company’s business model and intellectual property, such as so-called right to repair or right to modify legislation;

● investigations, claims, lawsuits, or other legal proceedings;

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STATEMENTS OF INCOME

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

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

(In millions of dollars) Unaudited

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Income after Income Taxes

Equity in income of unconsolidated affiliates

Net loss attributable to noncontrolling interests

Equity in income (loss) of unconsolidated affiliates

Net income (loss) attributable to noncontrolling interests

Net Income Attributable to Deere & Company

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STATEMENTS OF INCOME

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

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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

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STATEMENTS OF 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 provided by (used for) operating activities:

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

Provision (credit) for credit losses

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Retirement benefits

Net cash provided by (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)

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Payments of long-term borrowings

Proceeds from issuance of common stock

Repurchases of common stock

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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 2. Management’s Discussion and Analysis