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Item 1. Financial Statements

2024-02-29 compared with 2023-08-31 · 262 added, 352 removed, 473 unchanged (56% of the section changed)

2 unchanged sentences

STATEMENTS OF CONSOLIDATED INCOME

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

For the Three Months Ended January 28, 2024 and January 29, 2023

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

Three Months Ended

Nine Months Ended

Net Sales and Revenues

10 unchanged sentences

Equity in income of unconsolidated affiliates

Net income (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 and Nine Months Ended July 30, 2023 and July 31, 2022

For the Three Months Ended January 28, 2024 and January 29, 2023

(In millions of dollars) Unaudited

Three Months Ended

Nine Months Ended

Other Comprehensive Income (Loss), Net of Income Taxes

1 unchanged sentence

Cumulative translation adjustment

Unrealized gain (loss) on derivatives

Unrealized gain (loss) on debt securities

Other Comprehensive Income (Loss), Net of Income Taxes

Unrealized loss on derivatives

Unrealized gain on debt securities

Other Comprehensive Income, Net of Income Taxes

Comprehensive Income of Consolidated Group

27 unchanged sentences

Stockholders’ Equity

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

Common stock, $ 1 par value (issued shares at January 28, 2024 – 536,431,204 )

Common stock in treasury

8 unchanged sentences

STATEMENTS OF CONSOLIDATED CASH FLOWS

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

For the Three Months Ended January 28, 2024 and January 29, 2023

(In millions of dollars) Unaudited

Cash Flows from Operating Activities

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

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

Provision (credit) for credit losses

Provision for depreciation and amortization

Impairments and other adjustments

Share-based compensation expense

Gain on remeasurement of previously held equity investment

Credit for deferred income taxes

Provision (credit) for deferred income taxes

Changes in assets and liabilities:

3 unchanged sentences

Retirement benefits

Net cash provided by operating activities

Net cash used for operating activities

Cash Flows from Investing Activities

2 unchanged sentences

Cost of receivables acquired (excluding receivables related to sales)

Acquisitions of businesses, net of cash acquired

Purchases of property and equipment

1 unchanged sentence

Collateral on derivatives – net

Net cash used for investing activities

Net cash provided by investing activities

Cash Flows from Financing Activities

Increase in total short-term borrowings

Proceeds from long-term borrowings

Payments of long-term borrowings

Net proceeds (payments) in short-term borrowings (original maturities three months or less)

Proceeds from borrowings issued (original maturities greater than three months)

Payments of borrowings (original maturities greater than three months)

Repurchases of common stock

Dividends paid

Net cash provided by financing activities

Net cash used for financing activities

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

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

Net Decrease in Cash, Cash Equivalents, and Restricted Cash

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

7 unchanged sentences

STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

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

For the Three Months Ended January 28, 2024 and January 29, 2023

(In millions of dollars) Unaudited

6 unchanged sentences

Income (Loss)

Three Months Ended July 31, 2022

Balance May 1, 2022

Other comprehensive loss

Repurchases of common stock

Treasury shares reissued

Dividends declared

Share based awards and other

Balance July 31, 2022

Nine Months Ended July 31, 2022

Balance October 30, 2022

Net income (loss)

Other comprehensive loss

Repurchases of common stock

Treasury shares reissued

Dividends declared

Share based awards and other

Balance July 31, 2022

Three Months Ended July 30, 2023

Balance April 30, 2023

Net income (loss)

Other comprehensive income

3 unchanged sentences

Share based awards and other

Balance July 30, 2023

Nine Months Ended July 30, 2023

Balance January 29, 2023

Balance October 29, 2023

5 unchanged sentences

Share based awards and other

Balance July 30, 2023

Balance January 28, 2024

See Condensed Notes to Interim Consolidated Financial Statements.

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

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

The Company is managed through the following operating segments:

References to “Deere & Company,” “John Deere,” “we,” “us,” or “our” include our consolidated subsidiaries.

We manage our business through the following operating segments:

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

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

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

The third quarter ends for fiscal year 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.

References to “agriculture and turf” include both PPA and SAT.

We use a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period.

The first quarter ends for fiscal year 2024 and 2023 were January 28, 2024 and January 29, 2023, respectively.

Both periods contained 13 weeks.

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

All amounts are presented in millions of dollars, unless otherwise specified.

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

Quarterly Financial Statements

T he interim consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S.

T he interim consolidated financial statements of Deere & Company have been prepared by us, without audit, pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (SEC).

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

It is suggested these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest Annual Report on Form 10-K.

It is suggested these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in our latest Annual Report on Form 10-K.

Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

Use of Estimates in Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

requires management to make estimates and assumptions that affect the reported amounts and related disclosures.

Certain accounting policies require management to make estimates and assumptions in determining the amounts reflected in the financial statements and related disclosures.

Actual results could differ from those estimates.

New Accounting Standards

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

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

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

We closely monitor all Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) and other authoritative guidance.

We adopted the following standards in 2024, none of which had a material effect on our consolidated financial statements.

Accounting Standards Adopted

2022-04 — Liabilities – Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations

2022-02 — Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures

2022-01 — Derivatives and Hedging (Topic 815):

Fair Value Hedging – Portfolio Layer Method

2021-08 — Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

Accounting Standards to be Adopted

In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and cash taxes paid both in the U.S.

and foreign jurisdictions.

The effective date of the ASU is fiscal year 2026.

We are assessing the effect of this update on our related disclosures.

We will also adopt the following standards in future periods, none of which are expected to have a material effect on our consolidated financial statements.

2023-07 — Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

2023-06 — Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative

2023-05 — Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement

2022-03 — Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

(3) Revenue Recognition

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

Three Months Ended July 30, 2023

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

Nine Months Ended July 30, 2023

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

Three Months Ended July 31, 2022

Our net sales and revenues by primary geographic market, major product line, and timing of revenue recognition follow:

Three Months Ended January 28, 2024

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Primary geographic markets:

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At a point in time

Nine Months Ended July 31, 2022

Three Months Ended January 29, 2023

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Primary geographic markets:

11 unchanged sentences

At a point in time

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

These relate to extended warranty premiums, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services.

These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses” in the consolidated balance sheets.

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

We invoice in advance of recognizing the sale of certain products and the revenue for certain services.

These relate to extended warranty premiums, advance payments for future equipment sales, and subscription and service revenue related to precision guidance, telematic services, and other information enabled solutions.

These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses.” The deferred revenue received, but not recognized in revenue, was $ 1,747 , $ 1,697 , and $ 1,502 at January 28, 2024, October 29, 2023, and January 29, 2023, respectively.

The contract liability is reduced as the revenue is recognized.

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:

During the three months ended January 28, 2024 and January 29, 2023, $ 230 and $ 215 , 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 $ 1,531 at January 28, 2024.

The estimated revenue to be recognized by fiscal year follows:

remainder of 2024 – $ 373 , 2025 – $ 409 , 2026 – $ 304 , 2027 – $ 179 , 2028 – $ 108 , 2029 – $ 74 , and later years – $ 84 .

As permitted, the Company elected only to disclose remaining performance obligations with an original contract duration greater than one year.

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

As permitted, we elected only to disclose remaining performance obligations with an original contract duration greater than one year.

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

(4) Other Comprehensive Income Items

The after-tax components of accumulated other comprehensive income (loss) in millions of dollars follow:

The after-tax components of accumulated other comprehensive income (loss) follow:

Retirement benefits adjustment

1 unchanged sentence

Unrealized gain (loss) on derivatives

Unrealized gain (loss) on debt securities

Unrealized loss on debt securities

Total accumulated other comprehensive income (loss)

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

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

Three Months Ended July 30, 2023

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

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Nine Months Ended July 30, 2023

The following tables reflect amounts recorded in other comprehensive income (loss), as well as reclassifications out of other comprehensive income (loss).

Three Months Ended January 28, 2024

Cumulative translation adjustment

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Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

1 unchanged sentence

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

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

Prior service (credit) cost

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Three Months Ended July 31, 2022

Three Months Ended January 29, 2023

Cumulative translation adjustment

6 unchanged sentences

Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

1 unchanged sentence

Net actuarial gain (loss)

Reclassification of amortized amounts:

Actuarial (gain) loss – Other operating expenses

Prior service (credit) cost – Other operating expenses

Settlements/curtailment – Other operating expenses

Net unrealized gain (loss) on retirement benefits adjustment

Total other comprehensive income (loss)

Nine Months Ended July 31, 2022

Cumulative translation adjustment

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

Net unrealized gain (loss) on derivatives

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on debt securities

Retirement benefits adjustment:

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

Reclassification of amortized amounts:

Actuarial (gain) loss – Other operating expenses

Prior service (credit) cost – Other operating expenses

Settlements/curtailment – Other operating expenses

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

Prior service (credit) cost

Net unrealized gain (loss) on retirement benefits adjustment

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Three Months Ended

Nine Months Ended

Net income attributable to Deere & Company

2 unchanged sentences

Average shares outstanding

Effect of dilutive share-based compensation

Effect of dilutive stock options and restricted stock awards

Total potential shares outstanding

1 unchanged sentence

Shares excluded from EPS calculation, as antidilutive

(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.

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

(6) Pension and Other Postretirement Benefits

We have several funded and unfunded defined benefit pension plans and other postretirement benefit (OPEB) plans.

These plans cover U.S.

employees and certain foreign employees.

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

Three Months Ended

Nine Months Ended

Interest cost

Expected return on plan assets

Amortization of actuarial (gain) loss

Amortization of actuarial gain

Amortization of prior service cost

Settlements/curtailment

Net (benefit) cost

Interest cost

2 unchanged sentences

Amortization of prior service credit

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, 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.

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

Worldwide net sales and revenues, operating profit, and identifiable assets by segment were as follows in millions of dollars:

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

During the first three months of 2024, we contributed and expect to contribute the following amounts to our pension and OPEB plans:

Expected contributions remainder of the year

In December 2023, we contributed $ 60 to a U.S.

non-union Voluntary Employees’ Beneficiary Association trust, which is included in the OPEB contributed amount.

The contribution will be used to fund salary postretirement health care benefits during the remainder of 2024.

(7) Segment Data

Information relating to operations by operating segment follows.

Three Months Ended

Nine Months Ended

Net sales and revenues:

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Financial services revenues

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 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:

Operating profit for PPA, SAT, and CF is income from continuing operations before corporate expenses, certain external interest expenses, certain foreign exchange gains and losses, and income taxes.

Operating profit of 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 (cost) amounts excluding the service cost component, equity in income of unconsolidated affiliates, and net income attributable to noncontrolling interests.

Identifiable operating assets were as follows:

Production & precision ag

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(8) Financing Receivables

The Company monitors the credit quality of financing receivables based on delinquency status.

Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date.

Non-performing financing receivables represent receivables for which the Company has ceased accruing finance income.

The Company ceases accruing finance income when these receivables are generally 90 days delinquent.

Generally, when receivables are 120 days delinquent the estimated uncollectible amount from the customer is written off to the allowance for credit losses.

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 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:

July 30, 2023

We monitor the credit quality of financing receivables based on delinquency status, defined as follows:

● Past due balances represent any payments 30 days or more past the due date.

● Non-performing financing receivables represent receivables for which we have stopped accruing finance income.

This generally occurs when receivables are 90 days delinquent.

● Write-offs generally occur when receivables are 120 days delinquent.

In these situations, the estimated uncollectible amount is written off to the allowance for credit losses.

Any expected recovery is presented as non-performing.

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

January 28, 2024

Revolving Charge Accounts

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Non-performing

Total retail customer receivables

October 29, 2023

11 unchanged sentences

Non-performing

July 31, 2022

Total retail customer receivables

January 29, 2023

Revolving Charge Accounts

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Non-performing

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

July 30, 2023

Total retail customer receivables

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

January 28, 2024

Wholesale receivables:

5 unchanged sentences

Non-performing

Total wholesale receivables

October 29, 2023

6 unchanged sentences

Non-performing

July 31, 2022

Total wholesale receivables

January 29, 2023

Wholesale receivables:

5 unchanged sentences

Non-performing

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

Three Months Ended July 30, 2023

Beginning of period balance

Translation adjustments

End of period balance

Nine Months Ended July 30, 2023

Total wholesale receivables

An analysis of the allowance for credit losses and investment in financing receivables follows:

Three Months Ended January 28, 2024

Beginning of period balance

Provision transferred to held for sale

Provision (credit) subtotal

Provision (credit)

Translation adjustments

2 unchanged sentences

End of period balance

Three Months Ended July 31, 2022

Three Months Ended January 29, 2023

Beginning of period balance

Provision (credit)

Translation adjustments

End of period balance

Nine Months Ended July 31, 2022

Beginning of period balance

Provision transferred to held for sale

Provision (credit)

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End of period balance

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 in the first quarter of 2023.

The allowance for credit losses remained generally flat in the first quarter of 2024.

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

The financing receivables in Russia were reclassified to “Other assets.” The associated allowance for credit losses was reversed and a valuation allowance for the assets held for sale was recorded.

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

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.

Write-offs by year of origination were as follows:

Three Months Ended January 28, 2024

Revolving Charge Accounts

Retail customer receivables:

Agriculture and turf

Construction and forestry

Total retail customer receivables

Modifications

We occasionally grant contractual modifications to customers experiencing financial difficulties.

Before offering a modification, we evaluate the ability of the customer to meet the modified payment terms.

Modifications offered include payment deferrals, term extensions, or a combination thereof.

Finance charges continue to accrue during the deferral or extension period.

Our allowance for credit losses incorporates historical loss information, including the effects of loan modifications with customers.

Therefore, additional adjustments to the allowance are generally not recorded upon modification of a loan.

The ending amortized cost of modified loans with borrowers experiencing financial difficulty during the three months ended January 28, 2024 were $ 17 , of which $ 16 were current and $ 1 were non-performing.

These modifications represented 0.03 percent of our financing receivable portfolio at January 28, 2024.

Defaults and subsequent write-offs of loans modified in the prior twelve months were not significant during the three months ended January 28, 2024.

In addition, at January 28, 2024, we had no commitments to provide additional financing to these customers.

(9) Securitization of Financing Receivables

As a part of its overall funding strategy, the Company periodically transfers certain financing receivables (retail notes) into VIEs that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations).

The structure of these transactions is such that the transfer of the retail notes does not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing.

SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated.

Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.

The components of consolidated restricted assets, secured borrowings, and other liabilities related to secured borrowings in securitization transactions were as follows in millions of dollars:

Our funding strategy includes receivable securitizations, which allows us to receive cash for financing receivables immediately.

While these securitization programs are administered in various forms, they are accomplished in the following basic steps:

We transfer financing receivables into a bankruptcy-remote special purpose entity (SPE).

The SPE issues debt to investors.

The debt is secured by the financing receivables.

Investors are paid back based on cash receipts from the financing receivables.

As part of step 1, these receivables are legally isolated from the claims of our general creditors.

This ensures cash receipts from the financing receivables are accessible to pay back securitization program investors.

The structure of these transactions does not meet the accounting criteria for a sale of receivables.

As a result, they are accounted for as a secured borrowing.

The receivables and borrowings remain on our balance sheet and are separately reported as “Financing receivables securitized – net” and “Short-term securitization borrowings,” respectively.

The components of securitization programs were as follows:

Financing receivables securitized (retail notes)

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(10) Inventories

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

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

If all of the Company’s inventories had been valued on a “first-in, first-out” (FIFO) basis, estimated inventories by major classification in millions of dollars would have been as follows:

A majority of inventories owned by us are valued at cost on the “last-in, first-out” (LIFO) basis.

If all inventories had been valued on a “first-in, first-out” (FIFO) basis, the estimated inventories by major classification would have been as follows:

Raw materials and supplies

2 unchanged sentences

Total FIFO value

Less adjustment to LIFO value

(11) Goodwill and Other Intangible Assets

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

Excess of FIFO over LIFO

(11) Goodwill and Other Intangible Assets – Net

The changes in amounts of goodwill by operating segments were as follows.

There were no accumulated goodwill impairment losses.

Production & Precision Ag

Construction & Forestry

Goodwill at October 30, 2022

Translation adjustments

Goodwill at July 31, 2022

Goodwill at January 29, 2023

Goodwill at October 29, 2023

Translation adjustments

Goodwill at July 30, 2023

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

The components of other intangible assets were as follows in millions of dollars:

Amortized intangible assets:

Goodwill at January 28, 2024

The components of other intangible assets were as follows:

Customer lists and relationships

6 unchanged sentences

Other intangible assets – net

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:

The amortization of other intangible assets in the first quarter of 2024 and 2023 was $ 42 and $ 39 , respectively.

The estimated amortization expense for the next five years is as follows:

remainder of 2024 – $ 131 , 2025 – $ 144 , 2026 – $ 121 , 2027 – $ 119 , 2028 – $ 87 , and 2029 – $ 74 .

(12) Short-Term Borrowings

Short-term borrowings were as follows in millions of dollars:

Short-term borrowings were as follows:

Commercial paper

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(13) Accounts Payable and Accrued Expenses

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

Accounts payable and accrued expenses consisted of the following:

Accounts payable:

Trade payables

Payables to unconsolidated affiliates

Dividends payable

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Deposits withheld from dealers and merchants

Payables to unconsolidated affiliates

Accrued expenses:

Dealer sales discounts

Product warranties

Employee benefits

Product warranties

Accrued taxes

Unearned operating lease revenue

Unearned revenue (contractual liability)

Derivative liabilities

Dealer sales discounts

Extended warranty premium

Unearned revenue (contractual liability)

Unearned operating lease revenue

Accrued interest

Derivative liabilities

Total accounts payable and accrued expenses

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

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 $ 2,410 at January 28, 2024, $ 2,228 at October 29, 2023, and $ 1,540 at January 29, 2023.

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

(14) Long-Term Borrowings

Long-term borrowings were as follows in millions of dollars:

Long-term borrowings consisted of:

Underwritten term debt

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1.65 % notes due 2039 (€ 650 principal)

Serial issuances:

Medium-term notes

(principal as of:

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

Other notes and finance lease obligations

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Long-term borrowings

Medium-term notes serially due through 2032 are primarily offered by prospectus and issued at fixed and variable rates.

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

Medium-term notes due through 2033 are primarily offered by prospectus and issued at fixed and variable rates.

The principal balances of the medium-term notes were $ 31,808 , $ 30,902 , and $ 26,367 at January 28, 2024, October 29, 2023, and January 29, 2023, respectively.

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

(15) Leases - Lessor

The Company leases equipment manufactured or sold by the Company and a limited amount of non-John Deere equipment to retail customers through sales-type, direct financing, and operating leases.

Sales-type and direct financing leases are reported in Financing receivables – net on the consolidated balance sheets, while operating leases are reported in Equipment on operating leases – net.

Lease revenues earned by the Company were as follows in millions of dollars:

We lease equipment manufactured or sold by us through John Deere Financial.

Sales-type and direct financing leases are reported in “Financing receivables – net.” Operating leases are reported in “Equipment on operating leases – net.”

Lease revenues earned by us follow:

Three Months Ended

Nine Months Ended

Sales-type and direct finance lease revenues

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(16) Commitments and Contingencies

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

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

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

The unamortized extended warranty premiums (deferred revenue) included in the following table totaled $ 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:

A standard warranty is provided as assurance that the equipment will function as intended.

The standard warranty period varies by product and region.

At the time a sale is recognized, we record an estimate of future warranty costs based on historical claims rate experience and estimated population under warranty.

The reconciliation of the changes in the warranty liability follows:

Three Months Ended

Nine Months Ended

Beginning of period balance

Amortization of premiums received

Accruals for warranties

Premiums received

Warranty claims paid

New product warranty accruals

Foreign exchange

End of period balance

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 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.

The Company believes the reasonably possible range of losses for these unresolved legal actions would not have a material effect on its consolidated financial statements.

The costs for extended warranty programs are recognized as incurred.

In certain international markets, we provide guarantees to banks for the retail financing of John Deere equipment.

At January 28, 2024, the notional value of these guarantees was $ 166 .

We may repossess the equipment collateralizing the receivables.

At January 28, 2024, the accrued losses under these agreements were not material.

We also had other miscellaneous contingent liabilities and guarantees totaling approximately $ 115 at January 28, 2024.

The accrued liability for these contingencies was not material at January 28, 2024.

At January 28, 2024, we had commitments of $ 597 for the construction and acquisition of property and equipment.

Also, at January 28, 2024, we had restricted assets of $ 214 , classified as “Other assets.”

We are subject to various unresolved legal actions.

The accrued losses on these matters are not material.

We believe the reasonably possible range of losses for these unresolved legal actions would not have a material effect on our financial statements.

The most prevalent legal claims relate to product liability (including asbestos-related liability), retail credit, employment, patent, trademark, and antitrust matters .

(17) Fair Value Measurements

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

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

Long-term borrowings exclude finance lease liabilities.

July 30, 2023

January 28, 2024

October 29, 2023

July 31, 2022

January 29, 2023

Financing receivables – net

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Fair value measurements above were Level 3 for all financing receivables and Level 2 for all borrowings.

Fair values of the financing receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by the Company for similar financing receivables.

Fair values of the financing receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by us for similar financing receivables.

The fair values of the remaining financing receivables approximated the carrying amounts.

Fair values of long-term borrowings and short-term securitization borrowings were based on current market quotes for identical or similar borrowings and credit risk, or on the discounted values of their related cash flows at current market interest rates.

Certain long-term borrowings have been swapped to current variable interest rates.

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.

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.

Assets and liabilities measured at fair value on a recurring basis follow, excluding our cash equivalents, which were carried at a cost that approximates fair value and consisted of money market funds and time deposits.

Marketable securities

International equity securities

International mutual funds securities

fixed income fund

2 unchanged sentences

Marketable securities

government debt securities

Municipal debt securities

Corporate debt securities

1 unchanged sentence

Mortgage-backed securities

Municipal debt securities

government debt securities

Total Level 2 marketable securities

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Accounts payable and accrued expenses – Deferred consideration

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.

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.

The mortgage-backed securities are primarily issued by U.S.

government sponsored enterprises.

The contractual maturities of debt securities at January 28, 2024 follow:

Due in one year or less

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Debt securities

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 July 31, 2022.

Three Months Ended

Nine Months Ended

Property and equipment – net

Other intangible assets – net

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

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

Mortgage-backed securities contain prepayment provisions and are not categorized by contractual maturity.

The following is a description of the valuation methodologies we use to measure certain financial instruments on the balance sheets at fair value:

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

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

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

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

International debt securities are valued using quoted prices for identical assets in inactive markets.

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

The portfolio is valued based on an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates for currencies.

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

Inventories – The impairment was based on net realizable value.

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

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

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

(18) Derivative Instruments

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

Fair values of our derivative instruments and the associated notional amounts were as follows.

Assets are recorded in “Other assets,” while liabilities are recorded in “Accounts payable and accrued expenses.”

January 28, 2024

October 29, 2023

July 31, 2022

January 29, 2023

Cash flow hedges:

6 unchanged sentences

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.

The amounts recorded in the consolidated balance sheets related to borrowings designated in fair value hedging relationships were as follows.

Fair value hedging adjustments are included in the carrying amount of the hedged item.

9 unchanged sentences

Hedging Amount

July 30, 2023

January 28, 2024

Short-term borrowings

3 unchanged sentences

Long-term borrowings

July 31, 2022

January 29, 2023

Short-term borrowings

Long-term borrowings

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:

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

Three Months Ended

Nine Months Ended

Fair Value Hedges

12 unchanged sentences

Total not designated

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

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

The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at July 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.

Certain of our derivative agreements contain credit support provisions that may require us 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 28, 2024, October 29, 2023, and January 29, 2023 was $ 691 , $ 1,076 , and $ 781 , respectively.

In accordance with the limits established in these agreements, we posted $ 368 , $ 659 , and $ 349 of cash collateral at January 28, 2024, October 29, 2023, and January 29, 2023, respectively.

In addition, we paid $ 8 of collateral that was outstanding at January 28, 2024, October 29, 2023, and January 29, 2023 to participate in an international futures market to hedge currency exposure, not included in the table below.

Derivatives are recorded without offsetting for netting arrangements or collateral.

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

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

Gross Amounts

July 30, 2023

January 28, 2024

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 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 July 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

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

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 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

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 and nine months ended July 30, 2023 and July 31, 2022:

2023 Expense:

Financing incentive – SA&G expense

2022 Expense (benefit):

Gain on remeasurement of equity investment – Other income

Total Russia/Ukraine events expense (benefit)

UAW ratification bonus – Cost of sales

Total 2022 expense (benefit)

Period over period change

(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.

January 29, 2023

(19) Share-Based Awards

At January 28, 2024, we were authorized to grant an additional 15.0 million shares related to stock options and restricted stock units.

In December 2023, we granted stock options to employees for the purchase of 216 thousand shares of common stock at an exercise price of $ 377.01 per share and a binomial lattice model fair value of $ 98.04 per share at the grant date.

At January 28, 2024, options for 1.9 million shares were outstanding with a weighted-average exercise price of $ 214.88 per share.

During the three months ended January 28, 2024, the restricted stock units (RSUs) granted in thousands of shares and the weighted-average grant date fair values, using the closing price of our common stock on the grant date, in dollars follow:

Service-based

Performance/service-based

Market/service-based

In December 2023, we granted market/service-based RSUs.

The vesting period for the market/service-based RSUs is three years and dividend equivalents are not earned during the vesting period.

The market/service-based RSUs are subject to a market related metric based on total shareholder return, compared to a benchmark group of companies, and award common stock in a range of zero to 200 percent for each unit granted based on the level of the metric achieved.

The fair value of the market/service based RSUs was determined using a Monte Carlo model .

(20) S pecial Item

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

We reversed the allowance for credit losses and recorded a valuation allowance on the assets held for sale in “Selling, administrative and general expenses.” In March 2023, we sold our financial services business in Russia to Insight Investment Group.

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

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

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

We did not incur additional gains or losses upon disposition.

( 21) Subsequent Events

In February 2024, we entered into a retail note securitization transaction, resulting in $ 529 of secured borrowings.

On February 28, 2024, a quarterly dividend of $ 1.47 per share was declared at the Board of Directors meeting, payable on May 8, 2024, to stockholders of record on March 29, 2024.

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