What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-27 compared with 2024-08-29 · 161 added, 216 removed, 261 unchanged (59% of the section changed)

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References to “equipment operations” include PPA, SAT, and CF, while references to “agriculture and turf” include both PPA and SAT.

Smart Industrial Operating Model and Leap Ambitions

We announced the Smart Industrial Operating Model in 2020.

This operating model is based on three focus areas:

Production systems:

A strategic alignment of products and solutions around our customers’ operations.

Technology stack:

Investments in technology, as well as research and development, that deliver intelligent solutions to our customers through digital capabilities, automation, autonomy, and alternative power technologies.

Lifecycle solutions:

The integration of our aftermarket and support capabilities to more effectively manage customer equipment, service, and technology needs across the full lifetime of a John Deere product.

Our Leap Ambitions were launched in 2022.

These ambitions are designed to boost economic value and sustainability for our customers.

The ambitions align across our customers’ production systems seeking to optimize their operations to deliver better outcomes with fewer resources.

Trends and Economic Conditions

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Company Trends

Customers seek to improve profitability, productivity, and sustainability through technology.

Integration of technology into equipment is a persistent market trend.

Our Smart Industrial Operating Model and Leap Ambitions are intended to capitalize on this market trend.

Customers seek to improve profitability, productivity, and sustainability through integrating technology into their operations.

Deeper integration of technology into equipment is a persistent market trend.

These technologies are incorporated into products within each of our operating segments.

We expect this trend to persist for the foreseeable future.

Our progress is demonstrated, in part, by the growing use of the John Deere Operations Center (our digital operations management system) engaging more agricultural acres globally.

Engaged acres give us a foundational understanding of customer utilization of John Deere technology.

The investments in these technologies and establishing a Solutions as a Service business model may increase our operating costs and decrease operating margins during the transition period.

Our Smart Industrial Operating Model and Leap Ambitions are intended to capitalize on this market trend.

Engaged acres are an indicator we use to understand customer utilization of our technology.

We are investing in a Solutions as a Service business model to increase technology adoption and utilization by our customers.

Solutions as a Service products did not represent a significant percentage of our revenues.

Company Outlook for 2025

Production volumes are expected to continue to decline during the remainder of 2024 due to reduced demand amid challenges in the global agricultural and turf sectors and construction industry coupled with inventory management through planned underproduction to retail demand.

Sales volumes are expected to decline in 2025 compared to 2024 due to reduced demand.

We are uncertain of the impact potential import tariffs by the U.S.

and retaliatory actions taken by other countries could have on our outlook due to the rapidly evolving environment.

Agriculture and Turf Outlook for 2025

● We expect large and small agricultural equipment sales to be down from 2023 levels across all our major markets.

● Agricultural fundamentals are expected to continue to moderate in 2024 due to rising global grain stocks from excellent growing conditions, lower commodity prices, elevated interest rates, and geopolitical uncertainty.

● Demand in the U.S.

and Canada continues to be affected by declining farm income margins partially offset by stable farm balance sheets.

equipment fleet age is elevated for tractors and in line with historic averages for combines.

However, increases in used inventory levels are impacting purchasing decisions.

● Sales of compact utility tractors in the U.S.

are forecasted to be down due to higher interest rates, partially offset by small and mid-tractor tailwinds from improving dairy and livestock fundamentals.

● In Europe, volatile weather conditions continue to drive uncertainty about crop yields and along with elevated input costs are impacting demand in the region, while the dairy and livestock sector remains steady due to stronger pricing and lower feed costs.

● Demand in Brazil is expected to be down due to strong global yields driving down commodity prices and persistently high interest rates.

● Industry sales in Asia are forecasted to be down moderately due to commodity price changes, inventory reductions, and weather impacts.

and Canada is expected to decline due to market uncertainty, high interest rates, and elevated used inventory levels, partially offset by the impact of U.S.

government subsidies on farm incomes.

● We expect small agricultural equipment sales to be down from 2024 levels in the U.S.

Strong profitability is anticipated to continue in the dairy and livestock segment as dairy and livestock prices remain elevated;

however, this is projected to be more than offset by restrained demand in the turf and compact utility tractor markets amid high interest rates.

● In Europe, the industry is forecasted to be down as farm fundamentals in the region have stabilized at reduced levels as commodity prices have steadied and stronger dairy margins are expected to partially offset continued market uncertainty.

Better wheat prices and lower input costs are expected to support increased farm incomes.

● Demand in South America is expected to be flat.

In Brazil, improving local commodity prices due to the appreciation of the U.S.

dollar against the Brazilian real coupled with strong regional yields and decreasing input costs will offer profitability tailwinds to farmers.

Argentina industry sales are forecasted to improve amidst currency stabilization and export tax reductions despite some recent dry weather conditions.

● Industry sales in Asia are forecasted to be down slightly.

Construction and Forestry Outlook for 2025

● Construction equipment industry sales are forecasted to be down from 2023 levels.

● Benefits from strong U.S.

infrastructure spending and increasing manufacturing investment levels are expected to partially offset declines in housing starts, decreases in rental purchases, low levels of commercial real estate construction, and the effect of inventory levels having recovered from historical lows.

● Roadbuilding demand remains strong in the U.S., largely offset by continuing softness in Europe.

● Construction equipment industry sales are forecasted to be down in the U.S.

and Canada from 2024 levels.

The decline is due to further slowdowns in multi-family housing developments and the commercial real estate market and low levels of earthmoving rental purchases, partially offset by high levels of U.S.

government infrastructure spending and projected growth in single family housing starts.

High interest rates are also expected to further pressure equipment sales as market uncertainty persists.

● Global forestry markets are expected to be flat to down as global markets remain challenged.

● Global roadbuilding markets are forecasted to be generally flat with strong market demand.

Financial Services Outlook for 2025

Up moderately

+ Higher average portfolio

+ Prior period special item

+ Prior and current period special items

+ Provision for credit losses

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Agricultural Market Business Cycle.

The agricultural market is affected by various factors including commodity prices, acreage planted, crop yields, and government policies.

These factors affect farmers’ income and may result in lower demand for equipment.

We may experience any of the following effects during unfavorable market conditions:

lower net sales, higher sales discounts, higher receivable write-offs, and losses on equipment on operating leases.

In the third quarter of 2024, we implemented employee-separation programs for our salaried workforce to help meet our strategic priorities while reducing overlap and redundancy in roles and responsibilities.

The programs’ total pretax expenses are estimated to be approximately $150, of which $124 was recorded in the third quarter of 2024.

Annual pretax savings from these programs are estimated to be approximately $230, with $100 estimated to be realized in 2024 (See Note 21).

The agricultural market is affected by various factors including commodity prices, acreage planted, crop yields, government policies, and uncertainty in macroeconomic trends.

These factors affect farmers’ income and sentiment which may result in lower demand for equipment.

In 2025, we expect to continue experiencing the following effects due to unfavorable market conditions:

lower sales volumes, higher sales incentives, and elevated receivable write-offs and expected credit losses.

Interest Rates.

Central bank policy interest rates increased in 2023 and have remained elevated.

Increased rates impacted us in several ways, primarily affecting the demand for our products and financing spreads for the financial services operations.

The markets for our agriculture, turf, and construction products were negatively impacted by elevated interest rates and their effect on borrowing costs for our customers.

Most retail customer receivables are fixed rate.

Wholesale financing receivables generally are variable rate.

Both types of receivables are financed with fixed and floating rate borrowings.

We manage our exposure to interest rate fluctuations by matching our receivables with our funding sources.

We also enter into interest rate swap agreements to match our interest rate exposure.

Rising interest rates have historically impacted our borrowings sooner than the benefit is realized from receivable and lease portfolios.

As a result, our financial services operations experienced $66 (after-tax) less favorable financing spreads in 2024 compared to 2023.

We expect to continue experiencing spread compression in 2024.

Higher interest rates are driven by factors outside of our control, and as a result we cannot reasonably foresee when this condition will subside.

Other Items of Concern and Uncertainties

Other items that could impact our results are:

● global and regional political conditions, including the ongoing war between Russia and Ukraine and the conflict in the Middle East,

● economic, tax, and trade policies,

While interest rates in the U.S.

began to decrease in the fourth quarter of 2024, they remain elevated.

Higher rates impact us in several ways, primarily affecting the demand for our products and financing spreads for the financial services operations.

The markets for our agriculture, turf, and construction products are negatively impacted by elevated interest rates and their effect on borrowing costs for our customers .

Foreign Exchange Rates.

During the first quarter of 2025, the U.S.

dollar strengthened against the primary currencies in which we conduct business overseas.

A stronger U.S.

dollar is expected to have an unfavorable impact on our fiscal year 2025 financial results.

We utilize foreign currency derivatives that are not designated to mitigate the impact of currency fluctuations on our cash flow, which resulted in favorable foreign exchange gains for the quarter.

These derivatives are limited in duration, leaving us exposed to the long-term impact of currency fluctuations on income.

Changes in the agricultural market business cycle, interest rates, and foreign exchange rates are driven by factors outside of our control, and as a result we cannot reasonably foresee when these conditions will fully subside.

Legal Proceeding – On January 15, 2025, the Federal Trade Commission (FTC), along with the Attorneys General of the States of Illinois and Minnesota filed a lawsuit against us in the United States District Court for the Northern District of Illinois Western Division.

The Attorneys General of the States of Arizona, Michigan, and Wisconsin have since joined the lawsuit.

The lawsuit alleges monopolization and unfair competition in violation of federal and state antitrust laws.

Plaintiffs seek a permanent injunction and other equitable relief to allow owners of our equipment, as well as independent repair providers, access to our repair tools and any other repair resources available to authorized John Deere dealers.

At this stage, we are unable to estimate the potential impact on our business.

Other Items of Concern and Uncertainties – Other items that could impact our results are:

● global and regional political conditions, including the ongoing war between Russia and Ukraine and the conflicts in the Middle East

● shifts in energy, economic, tax, trade policies, and positions on government subsidies of farming

● new or retaliatory tariffs

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● foreign currency and capital control policies

● regulations and legislation regarding right to repair or right to modify,

● right to repair regulations and legislation

● weather conditions

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● our ability to strengthen our digital capabilities, automation, autonomy, and alternative power technologies

● workforce reductions impact on employee retention, morale, and institutional knowledge,

● changes in demand and pricing for new and used equipment

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● significant fluctuations in foreign currency exchange rates

● volatility in the prices of many commodities, and

● slower economic growth or recession.

● volatility in the prices of many commodities

● slower economic growth

consolidated results – 2025 Compared with 2024

Three Months Ended

Nine Months Ended

Deere & Company

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Diluted earnings per share

Net sales and revenues decreased for both the quarter and year-to-date periods primarily due to lower sales volumes.

Net sales and revenues decreased for the quarter primarily due to lower sales volumes.

Net income and diluted EPS decreased driven by lower sales.

The discussion of net sales and operating profit is included in the Business Segment Results below.

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

Net income was impacted by special items.

See Note 20 for additional details.

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Three Months Ended

Nine Months Ended

Deere & Company

Cost of sales to net sales

Increased for both periods mostly due to higher overhead costs from reduced volumes resulting in production inefficiencies, partially offset by sales price realization, lower material cost, and reduced inbound freight costs.

Higher for the first nine months primarily due to investment income earned on international mutual funds securities.

(-) Overhead costs

(+) Material costs

Increased mostly due to higher overhead costs from reduced volumes resulting in production inefficiencies, partially offset by lower material costs.

Lower due to reduced international mutual funds investment income and lower service revenues and miscellaneous income.

Research and development expenses

Higher for both periods due to continued focus on developing and incorporating technology solutions.

Largely unchanged due to continued focus on developing and deploying technology solutions.

Selling, administrative and general expenses

Increased mostly due to a higher provision for credit losses, higher employee pay driven by inflationary conditions and profit sharing incentives, and employee-separation programs’ expenses.

Decreased mostly due to lower employee profit-sharing incentives and the favorable impact of reduced valuation allowance on "Assets held for sale" of Banco John Deere S.A.

(see Note 20), partially offset by a higher provision for credit losses.

Interest expense

Increased for both periods primarily due to higher average borrowing rates and higher average borrowings.

Increased primarily due to higher average borrowing rates and higher average borrowings.

Other operating expenses

Lower in both periods due to higher pension benefits (see Note 6) and lower foreign exchange losses.

Decreased due to current period foreign exchange gains and prior period foreign exchange losses.

Provision for income taxes

Decreased for both periods as a result of lower pretax income, partially offset by the prior periods’ favorable income tax ruling in Brazil.

Decreased as a result of lower pretax income and the favorable impact of discrete tax adjustments (see Note 20).

Business Segment Results – 2025 compared with 2024

Three Months Ended

Nine Months Ended

Production and Precision Agriculture

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Currency translation impact on Net sales

Production and precision agriculture sales decreased for the quarter as a result of lower shipment volumes (primarily in the U.S., Europe, Brazil, and Asia) driven mainly by lower commodity prices and higher interest rates, partially offset by price realization in the U.S.

Operating profit decreased primarily due to lower shipment volumes and employee-separation programs’ expenses, partially offset by price realization and lower warranty expenses.

Production & Precision Agriculture Operating Profit

Third Quarter 2024 Compared to Third Quarter 2023

Sales for the first nine months decreased as a result of lower shipment volumes (primarily in Brazil, the U.S., and Europe) partially offset by price realization in the U.S.

Operating profit for the first nine months decreased due to lower sales volume, higher selling, administrative, and general expenses and research and development expenses, partially offset by price realization and lower warranty expenses.

Production and precision agriculture sales decreased for the quarter as a result of lower shipment volumes (primarily in the U.S., Canada, and Europe) driven by overall market uncertainty.

Operating profit decreased primarily due to lower shipment volumes, partially offset by lower selling, administrative and general expenses and research and development expenses driven by a decrease in employee profit-sharing incentives, decreased production costs from lower material costs, and price realization.

Production & Precision Agriculture Operating Profit

First Nine Months 2024 Compared to First Nine Months 2023

First Quarter 2025 Compared to First Quarter 2024

Three Months Ended

Nine Months Ended

Small Agriculture and Turf

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Currency translation impact on Net sales

Small agriculture and turf sales decreased for the quarter due to lower shipment volumes (primarily in Europe, the U.S., and Mexico) driven mainly by uncertainty in commodity prices and higher interest rates, partially offset by price realization in the U.S.

Operating profit decreased due to lower shipment volumes and higher warranty expenses, partially offset by price realization.

Small Agriculture & Turf Operating Profit

Third Quarter 2024 Compared to Third Quarter 2023

Sales for the first nine months decreased as a result of lower shipment volumes (primarily in the U.S., Europe, and Mexico), partially offset by price realization.

Operating profit for the first nine months decreased primarily as a result of lower sales volumes and higher warranty expenses.

These items were partially offset by price realization and lower production costs.

Small agriculture and turf sales decreased for the quarter due to lower shipment volumes (primarily in the U.S., Canada, and Europe) driven mainly by market uncertainty and high interest rates.

Operating profit decreased primarily as a result of lower shipment volumes partially offset by lower production costs, driven by a decrease in material costs and employee profit-sharing incentives.

Small Agriculture & Turf Operating Profit

First Nine Months 2024 Compared to First Nine Months 2023

First Quarter 2025 Compared to First Quarter 2024

Three Months Ended

Nine Months Ended

Construction and Forestry

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Currency translation impact on Net sales

Construction and forestry sales decreased for the quarter due to lower U.S.

shipment volumes, driven by moderating demand and efforts to reduce field inventory.

Operating profit decreased due to lower sales volumes, unfavorable mix, and unfavorable price realization.

Construction & Forestry Operating Profit

Third Quarter 2024 Compared to Third Quarter 2023

Sales for the first nine months decreased due to lower worldwide shipment volumes, partially offset by price realization.

Operating profit for the first nine months decreased due to lower sales volumes, increased production costs driven by low volume inefficiencies, and higher selling, administrative, and general expenses and research and development expenses.

These factors were partially offset by price realization.

Construction and forestry sales were lower for the quarter due to decreased U.S.

shipment volumes, driven by planned underproduction efforts to reduce field inventory and competitive pressures.

Operating profit decreased primarily due to lower shipment volumes, unfavorable price realization, and higher selling, administrative and general expenses in part due to marketing events.

Construction & Forestry Operating Profit

First Nine Months 2024 Compared to First Nine Months 2023

First Quarter 2025 Compared to First Quarter 2024

Three Months Ended

Nine Months Ended

Financial Services

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Interest expense

The average balance of receivables and leases financed was 12 percent higher in the third quarter of 2024 and 16 percent higher in the first nine months of 2024 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 decreased in the third quarter of 2024 due to a higher provision for credit losses and less favorable financing spreads, partially offset by income earned on higher average portfolio balances and favorable discrete tax items.

Excluding the impact of an accounting correction in the prior year, financial services net income decreased in the first nine months of 2024 due to a higher provision for credit losses and less favorable financing spreads, partially offset by income earned on higher average portfolio balances.

Net income for the first nine months of 2023 was affected by a correction of the accounting treatment for financing incentives offered to John Deere dealers.

The cumulative effect of this correction, $173 pretax ($135 after-tax), was recorded in the second quarter of 2023.

The average balance of receivables and leases financed was 3% lower in the first three months of 2025, compared with the same period last year, primarily due to the reclassification of the assets of Banco John Deere S.A.

(BJD) to “Assets held for sale” (see Note 20).

Excluding the impact of this reclassification, revenue increased due to higher average portfolio balances and financing rates.

Net income for the quarter was affected by the decreased valuation allowance on BJD “Assets held for sale” (see Note 20).

Excluding the impact of this special item, net income decreased due to a higher provision for credit losses, partially offset by lower selling, administrative and general expenses.

Critical Accounting Estimates

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● the issuance of commercial paper and term debt

● the securitization of retail notes, and

● the securitization of retail notes

● bank lines of credit

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Based on the available sources of liquidity, we expect to meet our funding needs in the short term (next 12 months) and long term (beyond 12 months).

We are forecasting lower operating cash flows from equipment operations in 2024 compared with 2023 driven by a decrease in net income adjusted for non-cash provisions and a reduction in accounts payable and accrued expenses.

We are forecasting lower operating cash flows from equipment operations in 2025 compared with 2024 driven by a decrease in net income adjusted for non-cash provisions and a lower reduction in inventories in 2025 compared with prior period.

We operate in multiple industries, which have unique funding requirements.

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

Banco John Deere S.A.

assets and liabilities were reclassified to held for sale in the third quarter of 2024 (see Note 21).

BJD assets and liabilities were reclassified to held for sale in the third quarter of 2024 and maintain that classification in the first quarter of 2025 (see Note 20);

they are not included within balances at year-end 2024 or at the end of the first quarter of 2025.

Key metrics are provided in the following table:

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Ratio of interest-bearing debt to stockholder’s equity

In 2024, we invested $177 in U.S.

dollar denominated bonds issued by the central bank of Argentina.

The bonds are recorded in “Marketable securities,” classified as “International debt securities.” These bonds can be held until maturity or sold in a secondary market outside of Argentina to settle intercompany debt.

The increase in unused credit lines in 2024 compared to both prior periods relates to a decrease in commercial paper outstanding.

The increase in unused credit lines at January 26, 2025 compared to October 27, 2024 relates to a decrease in commercial paper outstanding.

There have been no material changes to the contractual obligations and other cash requirements identified in our most recently filed Annual Report on Form 10-K.

Nine Months Ended

July 28, 2024

July 30, 2023

Net cash provided by operating activities

Net cash used for investing activities

Net cash provided by (used for) financing activities

Three Months Ended

Net cash used for operating activities

Net cash provided by investing 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

Cash inflows from consolidated operating activities in the first nine months of 2024 were $4,139.

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

Included in the working capital change was a cash outflow of $1,015 from accounts payable and accrued expenses due to less trade payables consistent with our forecasted decrease in production and lower accrued expenses related to dealer sales discounts and employee benefits.

Cash outflows from investing activities were $3,671 in the first nine months of this year.

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

Cash outflows from financing activities were $789 in the first nine months of 2024, as cash returned to shareholders was partially offset by higher external borrowings.

Cash returned to shareholders was $4,429 in the first nine months of 2024.

Cash, cash equivalents, and restricted cash decreased $327 during the first nine months of 2024.

Net decrease in cash, cash equivalents, and restricted cash

Cash outflows from consolidated operating activities in the first three months of 2025 were $1,132.

This resulted mainly from the payout of employee profit-sharing incentives, an increase in inventories, and a reduction in dealer sales incentive accruals, partially offset by net income adjusted for non-cash provisions.

Cash inflows from investing activities were $1,416 in the first three months of this year.

The primary drivers were collections of receivables

(excluding receivables related to sales) exceeding the cost of receivables acquired, partially offset by purchases of property and equipment and a change in collateral on derivatives – net.

Cash outflows from financing activities were $923 in the first three months of 2025 due to repurchases of common stock, dividends paid, and lower borrowings.

Cash returned to shareholders was $844 in the first three months of 2025.

Cash, cash equivalents, and restricted cash decreased $726 during the first three months of this year.

Key Metrics and Balance Sheet Changes

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

Trade receivables decreased $270 during the first nine months of 2024 and decreased $1,828 compared to a year ago, primarily due to lower sales volumes.

The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 3 percent at July 28, 2024, 1 percent at October 29, 2023, and 1 percent at July 30, 2023.

Trade receivables decreased $395 during the first three months of 2025, and decreased $2,864 compared to a year ago, both due to lower sales.

The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 6% at January 26, 2025, 6% at October 27, 2024, and 1% at January 28, 2024.

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 $1,363 during the first nine months of 2024 and increased $4,276 in the past 12 months due to higher dealer inventory levels and an increase in the retail customer receivable portfolio, partially offset by the reclassification of Banco John Deere S.A.

receivables to “Assets held for sale” in the third quarter of 2024 (see Note 21).

Total acquisition volumes of financing receivables and equipment on operating leases were 8 percent higher in the first nine months of 2024, compared with the same period last year, as volumes of wholesale notes, operating leases, financing leases, and retail notes were higher, while revolving charge accounts were flat compared to July 30, 2023.

Inventories decreased by $464 during the first nine months of 2024 and decreased by $1,654 compared to a year ago.

The decreases were due to lower forecasted shipment volumes.

Financing receivables and equipment on operating leases decreased $3,673 during the first quarter of 2025, primarily due to seasonal payments and lower retail customer receivables and dealer inventories, and decreased $49 in the past 12 months due to reclassification of BJD financing receivables as “Assets held for sale.” Excluding this, financing receivables increased $2,622 due to increased dealer inventories and retail customer receivables.

Total acquisition volumes of financing receivables and equipment on operating leases were 22% lower in the first three months of 2025, compared with the same period last year, as volumes of wholesale notes, retail notes, and operating leases were lower, while revolving charge accounts were higher compared to the same period last year.

Inventories increased by $651 during the first three months, primarily due to a seasonal increase.

Inventories decreased $1,193 compared to a year ago due to lower forecasted demand and inventory management efforts.

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 nine months of 2024 were $1,043 compared with $887 in the same period last year.

Property and equipment cash expenditures in the first three months of 2025 were $352, compared with $362 in the same period last year.

Capital expenditures in 2025 are estimated to be approximately $1,600.

Accounts Payable and Accrued Expenses.

Accounts payable and accrued expenses decreased by $1,733 in the first nine months of 2024, primarily due to decreased accounts payable associated with trade payables, and a decrease in accrued expenses associated with derivative liabilities, dealer sales discounts, and employee benefits.

Accounts payable and accrued expenses decreased $943 compared to a year ago due to a decrease in accounts payable associated with trade payables and a decrease in accrued expenses associated with derivative liabilities, partially offset by an increase in extended warranty liabilities.

Total external borrowings increased by $2,444 in the first nine months of 2024 and increased $3,992 compared to a year ago, generally corresponding with the level of the receivable and lease portfolios, as well as other working capital requirements.

The change in borrowings was also impacted by the reclassification of Banco John Deere S.A.

borrowings to “Liabilities held for sale” in the third quarter of 2024 (see Note 21).

Accounts payable and accrued expenses decreased by $2,381 in the first three months of 2025, primarily due to a decrease in accrued expenses associated with employee benefits, dealer sales discounts, and taxes.

Accounts payable and accrued expenses decreased $1,199 compared to a year ago, due to a decrease in accounts payable associated with trade payables and a decrease in accrued expenses associated with employee benefits.

Total external borrowings decreased by $812 in the first three months of 2025 and increased $1,215 compared to a year ago, generally corresponding with the level of the receivable and lease portfolio, as well as other working capital requirements.

John Deere Capital Corporation (Capital Corporation), a U.S.

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The facility was renewed in November 2024 with an expiration in November 2025 and with an increase in the total capacity or “financing limit” from $2,000 to $2,500.

At July 28, 2024, $1,566 of securitization borrowings were outstanding under the facility.

At January 26, 2025, $1,917 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 nine months of 2024, the financial services operations issued $3,722 and retired $2,849 of retail note securitization borrowings, which are presented in “Net proceeds (payments) in short-term borrowings (original maturities three months or less).”

In the first three months of 2025, the financial services operations issued $725 and retired $1,145 of retail note securitization borrowings, which are presented in “Net proceeds (payments) in total short-term borrowings (original maturities three months or less).”

Lines of Credit.

We have access to bank lines of credit with various banks throughout the world.

Worldwide lines of credit totaled $10,930 at July 28, 2024, consisting primarily of:

We also have access to bank lines of credit with various banks throughout the world.

Worldwide lines of credit totaled $11,061 at January 26, 2025, consisting primarily of:

● a 364-day credit facility agreement of $5,000 expiring in the second quarter of 2025

● a credit facility agreement of $2,750 expiring in the second quarter of 2028, and

● a credit facility agreement of $2,750 expiring in the second quarter of 2028

At July 28, 2024, $4,917 of these worldwide lines of credit were unused.

● a credit facility agreement of $2,750 expiring in the second quarter of 2029

At January 26, 2025, $7,793 of these worldwide lines of credit were unused.

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

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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 our liquidity.

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

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FORWARD-LOOKING STATEMENTS

Certain statements contained herein, including in the section entitled “Overview” relating to future events, expectations, and trends constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 and involve factors that are subject to change, assumptions, risks, and uncertainties that could cause actual results to differ materially.

Certain statements contained herein, including in the sections entitled “Overview” and “Condensed Notes to Interim Consolidated Financial Statements” relating to future events, expectations, and trends constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 and involve factors that are subject to change, assumptions, risks, and uncertainties that could cause actual results to differ materially.

Some of these risks and uncertainties could affect all lines of our operations generally while others could more heavily affect a particular line of business.

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Among these factors are risks related to:

● changes in and compliance with U.S., foreign and international laws, regulations, and policies relating to trade, economic sanctions, data privacy, spending, taxing, banking, monetary, environmental (including climate change and engine emissions), and farming policies;

● political, economic, and social instability of the geographies in which we operate, including the ongoing war between Russia and Ukraine and the conflict in the Middle East;

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

● worldwide demand for food and different forms of renewable energy;

● the ability to execute business strategies, including our Smart Industrial Operating Model, Leap Ambitions, and mergers and acquisitions;

● the ability to understand and meet customers’ changing expectations and demand for John Deere products and solutions;

● accurately forecasting customer demand for products and services and adequately managing inventory;

● the ability to integrate new technology, including automation and machine learning, and deliver precision technology and solutions to customers;

● changes to governmental communications channels (radio frequency technology);

● the ability to adapt in highly competitive markets;

● dealer practices and their ability to manage inventory and distribution of John Deere products and to provide support and service precision technology solutions;

● changes in climate patterns, unfavorable weather events, and natural disasters;

● governmental and other actions designed to address climate change in connection with a transition to a lower-carbon economy;

● the agricultural business cycle, which can be unpredictable and is affected by factors such as world grain stocks, harvest yields, available farm acres, acreage planted, soil conditions, prices for commodities and livestock, input costs, availability of transport for crops as well as adverse macroeconomic conditions, including unemployment, inflation, interest rate volatility, changes in consumer practices due to slower economic growth, ability to export commodities, and regional or global liquidity constraints;

● government policies and actions in respect to global trade, tariffs and trade agreements, and energy, and the uncertainty of our ability to sell products domestically or internationally, continue production at certain international facilities, procure raw materials and components, accurately forecast demand and inventory, manage increased costs of production, absorb or pass on increased pricing, predict financial results, and remain competitive based on these actions and policies;

● higher interest rates and currency fluctuations which could adversely affect the U.S.

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

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

● our ability to adapt in highly competitive markets, including understanding and meeting customers’ changing expectations for products and solutions, including delivery and utilization of precision technology;

● housing starts and supply, real estate and housing prices, levels of public and non-residential construction, and infrastructure investment;

● political, economic, and social instability of the geographies in which we operate, including the ongoing war between Russia and Ukraine and the conflicts in the Middle East;

● worldwide demand for food and different forms of renewable energy impacting the price of farm commodities and consequently the demand for our equipment;

● investigations, claims, lawsuits, or other legal proceedings, including the recent lawsuit filed by the FTC and the Attorneys General of the States of Arizona, Illinois, Michigan, Minnesota, and Wisconsin alleging that we unlawfully withheld self-repair capabilities from farmers and independent repair providers;

● changes in climate patterns, unfavorable weather events, and natural disasters, including potential consequences from the recent California wildfires;

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

● delays or disruptions in our supply chain;

● our equipment fails to perform as expected, which could result in warranty claims, post-sales repairs or recalls, product liability litigation, and regulatory investigations;

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

● the impact of workforce reductions on employee retention, morale, and institutional knowledge;

● security breaches, cybersecurity attacks, technology failures, and other disruptions to John Deere information technology infrastructure and products;

● suppliers’ and manufacturers’ business practices and compliance with applicable laws such as human rights, safety, environmental, and fair wages;

● loss of or challenges to intellectual property rights;

● legislation introduced or enacted that could affect our business model and intellectual property, such as right to repair or right to modify legislation;

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

● events that damage our reputation or brand;

● the agricultural business cycle, which can be unpredictable and is affected by factors such as world grain stocks, available farm acres, acreage planted, soil conditions, harvest yields, prices for commodities and livestock, input costs, and availability of transport for crops;

● housing starts and supply, real estate and housing prices, levels of public and non-residential construction, and infrastructure investment.

● rationalization, restructuring, relocation, expansion, and/or reconfiguration of manufacturing and warehouse facilities;

● the ability to execute business strategies, including our Smart Industrial Operating Model and Leap Ambitions;

● accurately forecasting customer demand for products and services and adequately managing inventory;

● dealer practices and their ability to manage inventory and distribution of our products and to provide support and service for precision technology solutions;

● the ability to realize anticipated benefits of acquisitions and joint ventures, including challenges with successfully integrating operations and internal control processes;

● negative claims or publicity that damage our reputation or brand;

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

● the impact of workforce reductions on company culture, employee retention and morale, and institutional knowledge;

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

● security breaches, cybersecurity attacks, technology failures, and other disruptions to our information technology infrastructure and products;

● leveraging artificial intelligence and machine learning within our business processes;

● changes to governmental communications channels (radio frequency technology);

● changes to existing laws and regulations, including the implementation of new, more stringent laws, as well as compliance with a variety of U.S., foreign, and international laws, regulations, and policies relating to, but not limited to the following:

advertising, anti-bribery and anti-corruption, anti-money laundering, antitrust, consumer finance, cybersecurity, data privacy, encryption, environmental (including climate change and engine emissions), farming, health, and safety, foreign exchange controls and cash repatriation restrictions, foreign ownership and investment, human rights, import / export and trade, tariffs, labor and employment, product liability, telematics, and telecommunications;

● governmental and other actions designed to address climate change in connection with a transition to a lower-carbon economy;

● warranty claims, post-sales repairs or recalls, product liability litigation, and regulatory investigations as a result of the deficient operation of our products.

Further information concerning us and our businesses, including factors that could materially affect our financial results, is included in our other filings with the SEC (including, but not limited to, the factors discussed in Item 1A.

3 unchanged sentences

The supplemental consolidating data presented on the subsequent pages is presented for informational purposes.

Equipment operations represents the enterprise without financial services.

Equipment operations includes production and precision agriculture operations, small agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within financial services.

Equipment operations represent the enterprise without financial services.

Equipment operations include production and precision agriculture operations, small agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within financial services.

Transactions between the equipment operations and financial services have been eliminated to arrive at the consolidated financial statements.

1 unchanged sentence

Equipment operations primarily generate earnings and cash flows by manufacturing and selling equipment, service parts, and technology solutions to dealers and retail customers.

Financial services finances sales and leases by dealers of new and used equipment that is largely manufactured by equipment operations.

Financial services finance sales and leases by dealers of new and used equipment that is largely manufactured by equipment operations.

Those earnings and cash flows generally are the difference between the finance income received from customer payments less interest expense, and depreciation on equipment subject to an operating lease.

4 unchanged sentences

STATEMENTS OF INCOME

For the Three Months Ended July 28, 2024 and July 30, 2023

Net Sales and Revenues

Finance and interest income

Costs and Expenses

Cost of sales

Research and development expenses

Selling, administrative and general expenses

Interest expense

Interest compensation to Financial Services

Other operating expenses

Income before Income Taxes

Provision for income taxes

Income after Income Taxes

Equity in income of unconsolidated affiliates

Net loss attributable to noncontrolling interests

Net Income Attributable to Deere & Company

1 Elimination of intercompany interest income and expense.

2 Elimination of equipment operations’ margin from inventory transferred to equipment on operating leases.

3 Elimination of income and expenses between equipment operations and financial services related to intercompany guarantees of investments in certain international markets and intercompany service revenues and expenses.

4 Elimination of intercompany service fees.

5 Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.

DEERE & COMPANY

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENTS OF INCOME

For the Nine Months Ended July 28, 2024 and July 30, 2023

For the Three Months Ended January 26, 2025 and January 28, 2024

Net Sales and Revenues

8 unchanged sentences

Income before Income Taxes

Provision for income taxes

Provision (credit) for income taxes

Income after Income Taxes

Equity in income of unconsolidated affiliates

Equity in income (loss) of unconsolidated affiliates

Net loss attributable to noncontrolling interests

2 unchanged sentences

2 Elimination of equipment operations’ margin from inventory transferred to equipment on operating leases.

4 Elimination of intercompany service fees.

3 Elimination of income and expenses between equipment operations and financial services related to intercompany guarantees of investments in certain international markets.

4 Elimination of intercompany service revenues and fees.

5 Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.

41 unchanged sentences

STATEMENTS OF CASH FLOWS

For the Nine Months Ended July 28, 2024 and July 30, 2023

For the Three Months Ended January 26, 2025 and January 28, 2024

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 provided by (used for) operating activities:

Provision (credit) for credit losses

3 unchanged sentences

Distributed earnings of Financial Services

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 provided by (used for) operating activities

Cash Flows from Investing Activities

6 unchanged sentences

Cost of equipment on operating leases acquired

Decrease (increase) in investment in Financial Services

Increase in trade and wholesale receivables

Decrease in investment in Financial Services

Decrease (increase) in trade and wholesale receivables

Collateral on derivatives – net

Net cash used for investing activities

Net cash provided by (used for) investing activities

Cash Flows from Financing Activities

4 unchanged sentences

Repurchases of common stock

Capital investment from Equipment Operations

Capital returned to Equipment Operations

Dividends paid

20 unchanged sentences

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