DEERE & CO - Quarter Report: 2023 January (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 29, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file no: 1-4121

DEERE & COMPANY

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation)		36-2382580 (IRS employer identification no.)

One John Deere Place

Moline, Illinois 61265

(Address of principal executive offices)

Telephone Number: (309) 765-8000

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $1 par value	DE	New York Stock Exchange
6.55% Debentures Due 2028	DE28	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At January 29, 2023, 296,322,273 shares of common stock, $1 par value, of the registrant were outstanding.

PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENTS OF CONSOLIDATED INCOME
For the Three Months Ended January 29, 2023 and January 30, 2022
(In millions of dollars and shares except per share amounts) Unaudited
	2023		2022
Net Sales and Revenues
Net sales	$	11,402	$	8,531
Finance and interest income		994		800
Other income		256		238
Total		12,652		9,569

Costs and Expenses
Cost of sales		7,934		6,695
Research and development expenses		495		402
Selling, administrative and general expenses		952		781
Interest expense		479		229
Other operating expenses		299		311
Total		10,159		8,418

Income of Consolidated Group before Income Taxes		2,493		1,151
Provision for income taxes		537		250

Income of Consolidated Group		1,956		901
Equity in income of unconsolidated affiliates		1		3

Net Income		1,957		904
Less: Net income (loss) attributable to noncontrolling interests		(2)		1
Net Income Attributable to Deere & Company	$	1,959	$	903

Per Share Data
Basic	$	6.58	$	2.94
Diluted		6.55		2.92
Dividends declared		1.20		1.05
Dividends paid		1.13		1.05

Average Shares Outstanding
Basic		297.6		307.4
Diluted		299.1		309.4

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended January 29, 2023 and January 30, 2022
(In millions of dollars) Unaudited
	2023		2022

Net Income	$	1,957	$	904

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		(11)		(345)
Cumulative translation adjustment		681		(267)
Unrealized gain (loss) on derivatives		(13)		14
Unrealized gain (loss) on debt securities		27		(15)
Other Comprehensive Income (Loss), Net of Income Taxes		684		(613)

Comprehensive Income of Consolidated Group		2,641		291
Less: Comprehensive income attributable to noncontrolling interests		6		1
Comprehensive Income Attributable to Deere & Company	$	2,635	$	290

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars) Unaudited
	January 29		October 30		January 30
	2023		2022		2022
Assets
Cash and cash equivalents	$	3,976	$	4,774	$	4,472
Marketable securities		852		734		735
Trade accounts and notes receivable – net		7,609		6,410		4,855
Financing receivables – net		36,882		36,634		33,191
Financing receivables securitized – net		5,089		5,936		3,516
Other receivables		1,992		2,492		1,936
Equipment on operating leases – net		6,502		6,623		6,624
Inventories		10,056		8,495		7,935
Property and equipment – net		6,212		6,056		5,665
Goodwill		3,891		3,687		3,192
Other intangible assets – net		1,255		1,218		1,209
Retirement benefits		3,793		3,730		3,158
Deferred income taxes		914		824		923
Other assets		2,597		2,417		2,203
Total Assets	$	91,620	$	90,030	$	79,614

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	14,129	$	12,592	$	10,990
Short-term securitization borrowings		4,864		5,711		3,482
Accounts payable and accrued expenses		13,108		14,822		10,651
Deferred income taxes		519		495		556
Long-term borrowings		35,071		33,596		32,838
Retirement benefits and other liabilities		2,493		2,457		3,289
Total liabilities		70,184		69,673		61,806

Commitments and contingencies (Note 16)
Redeemable noncontrolling interest		100		92

Stockholders’ Equity
Common stock, $1 par value (issued shares at January 29, 2023 – 536,431,204)		5,191		5,165		5,066
Common stock in treasury		(25,333)		(24,094)		(21,139)
Retained earnings		43,846		42,247		37,029
Accumulated other comprehensive income (loss)		(2,372)		(3,056)		(3,152)
Total Deere & Company stockholders’ equity		21,332		20,262		17,804
Noncontrolling interests		4		3		4
Total stockholders’ equity		21,336		20,265		17,808
Total Liabilities and Stockholders’ Equity	$	91,620	$	90,030	$	79,614

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Three Months Ended January 29, 2023 and January 30, 2022
(In millions of dollars) Unaudited
	2023		2022
Cash Flows from Operating Activities
Net income	$	1,957	$	904
Adjustments to reconcile net income to net cash used for operating activities:
Provision (credit) for credit losses		(130)
Provision for depreciation and amortization		494		486
Share-based compensation expense		23		18
Provision (credit) for deferred income taxes		(56)		210
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		(1,015)		(106)
Inventories		(1,279)		(1,297)
Accounts payable and accrued expenses		(1,577)		(1,554)
Accrued income taxes payable/receivable		199		(184)
Retirement benefits		(48)		(1,010)
Other		186		(20)
Net cash used for operating activities		(1,246)		(2,553)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)		7,198		6,435
Proceeds from sales of equipment on operating leases		497		479
Cost of receivables acquired (excluding receivables related to sales)		(6,322)		(5,603)
Acquisitions of businesses, net of cash acquired				(24)
Purchases of property and equipment		(315)		(193)
Cost of equipment on operating leases acquired		(497)		(391)
Collateral on derivatives - net		345		(13)
Other		(146)		(42)
Net cash provided by investing activities		760		648

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings		697		(1,018)
Proceeds from long-term borrowings		2,505		2,353
Payments of long-term borrowings		(1,925)		(1,940)
Proceeds from issuance of common stock		21		11
Repurchases of common stock		(1,257)		(623)
Dividends paid		(341)		(327)
Other		(39)		(33)
Net cash used for financing activities		(339)		(1,577)

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		62		(74)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash		(763)		(3,556)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		4,941		8,125
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	4,178	$	4,569

Components of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	3,976	$	4,472
Restricted cash (Other assets)		202		97
Total cash, cash equivalents, and restricted cash	$	4,178	$	4,569

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY
For the Three Months Ended January 29, 2023 and January 30, 2022
(In millions of dollars) Unaudited
			Total Stockholders’ Equity
			Deere & Company Stockholders
									Accumulated
	Total								Other				Redeemable
	Stockholders’		Common		Treasury		Retained		Comprehensive		Noncontrolling		Noncontrolling
	Equity		Stock		Stock		Earnings		Income (Loss)		Interests		Interest

Balance October 31, 2021	$	18,434	$	5,054	$	(20,533)	$	36,449	$	(2,539)	$	3
Net income		904						903				1
Other comprehensive loss		(613)								(613)
Repurchases of common stock		(623)				(623)
Treasury shares reissued		17				17
Dividends declared		(323)						(323)
Share based awards and other		12		12
Balance January 30, 2022	$	17,808	$	5,066	$	(21,139)	$	37,029	$	(3,152)	$	4


Balance October 30, 2022	$	20,265	$	5,165	$	(24,094)	$	42,247	$	(3,056)	$	3	$	92
Net income (loss)		1,960						1,959				1		(3)
Other comprehensive income		684								684				8
Repurchases of common stock		(1,257)				(1,257)
Treasury shares reissued		18				18
Dividends declared		(356)						(356)
Share based awards and other		22		26				(4)						3
Balance January 29, 2023	$	21,336	$	5,191	$	(25,333)	$	43,846	$	(2,372)	$	4	$	100

See Condensed Notes to Interim Consolidated Financial Statements.

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1) Organization and Consolidation

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: 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 first quarter ends for fiscal year 2023 and 2022 were January 29, 2023 and January 30, 2022, respectively. Both periods contained 13 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.

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

Quarterly Financial Statements

The 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. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All normal recurring adjustments have been included. 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. 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. 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.

(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 January 29, 2023
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographic markets:
United States	$	2,628	$	1,665	$	1,901	$	713	$	6,907
Canada		360		146		275		150		931
Western Europe		501		564		365		29		1,459
Central Europe and CIS		202		123		75		12		412
Latin America		1,237		156		339		95		1,827
Asia, Africa, Oceania, and Middle East		375		400		300		41		1,116
Total	$	5,303	$	3,054	$	3,255	$	1,040	$	12,652

Major product lines:
Production agriculture	$	5,112							$	5,112
Small agriculture			$	2,194						2,194
Turf				719						719
Construction					$	1,483				1,483
Compact construction						473				473
Roadbuilding						818				818
Forestry						356				356
Financial products		31		18		13	$	1,040		1,102
Other		160		123		112				395
Total	$	5,303	$	3,054	$	3,255	$	1,040	$	12,652

Revenue recognized:
At a point in time	$	5,248	$	3,029	$	3,230	$	23	$	11,530
Over time		55		25		25		1,017		1,122
Total	$	5,303	$	3,054	$	3,255	$	1,040	$	12,652


	Three Months Ended January 30, 2022
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographic markets:
United States	$	1,608	$	1,438	$	1,260	$	573	$	4,879
Canada		139		122		332		152		745
Western Europe		467		532		358		26		1,383
Central Europe and CIS		202		126		195		11		534
Latin America		776		104		228		68		1,176
Asia, Africa, Oceania, and Middle East		241		352		219		40		852
Total	$	3,433	$	2,674	$	2,592	$	870	$	9,569

Major product lines:
Production agriculture	$	3,283							$	3,283
Small agriculture			$	1,932						1,932
Turf				627						627
Construction					$	1,175				1,175
Compact construction						321				321
Roadbuilding						692				692
Forestry						305				305
Financial products		12		11		5	$	870		898
Other		138		104		94				336
Total	$	3,433	$	2,674	$	2,592	$	870	$	9,569

Revenue recognized:
At a point in time	$	3,396	$	2,654	$	2,570	$	24	$	8,644
Over time		37		20		22		846		925
Total	$	3,433	$	2,674	$	2,592	$	870	$	9,569

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 $1,502 million, $1,423 million, and $1,348 million at January 29, 2023, October 30, 2022, and January 30, 2022, respectively. The contract liability is reduced as the revenue is recognized. During the three months ended January 29, 2023 and January 30, 2022, $215 million and $265 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year.

The amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $1,282 million at January 29, 2023. The estimated revenue to be recognized by fiscal year in millions of dollars follows: remainder of 2023 - $278, 2024 - $332, 2025 - $260, 2026 - $168, 2027 - $100, 2028 - $61, and later years - $83. 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.

(4) Other Comprehensive Income Items

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


	January 29		October 30		January 30
	2023		2022		2022
Retirement benefits adjustment	$	(400)	$	(389)	$	(1,379)
Cumulative translation adjustment		(1,913)		(2,594)		(1,745)
Unrealized gain (loss) on derivatives		8		21		(28)
Unrealized loss on debt securities		(67)		(94)
Total accumulated other comprehensive income (loss)	$	(2,372)	$	(3,056)	$	(3,152)

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).


	Before		Tax		After
	Tax		(Expense)		Tax
Three Months Ended January 29, 2023	Amount		Credit		Amount
Cumulative translation adjustment	$	669	$	12	$	681
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(1)				(1)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(15)		3		(12)
Net unrealized gain (loss) on derivatives		(16)		3		(13)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		34		(7)		27
Net unrealized gain (loss) on debt securities		34		(7)		27
Retirement benefits adjustment:
Net actuarial gain (loss)		(1)				(1)
Reclassification to other operating expenses through amortization of:
Actuarial (gain) loss		(21)		5		(16)
Prior service (credit) cost		9		(3)		6
Net unrealized gain (loss) on retirement benefits adjustment		(13)		2		(11)
Total other comprehensive income (loss)	$	674	$	10	$	684


	Before		Tax		After
	Tax		(Expense)		Tax
Three Months Ended January 30, 2022	Amount		Credit		Amount
Cumulative translation adjustment	$	(264)	$	(3)	$	(267)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		15		(3)		12
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		2				2
Net unrealized gain (loss) on derivatives		17		(3)		14
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		(19)		4		(15)
Net unrealized gain (loss) on debt securities		(19)		4		(15)
Retirement benefits adjustment:
Net actuarial gain (loss) and prior service credit (cost)		(500)		120		(380)
Reclassification to other operating expenses through amortization of:
Actuarial (gain) loss		40		(10)		30
Prior service (credit) cost		6		(2)		4
Settlements		1				1
Net unrealized gain (loss) on retirement benefits adjustment		(453)		108		(345)
Total other comprehensive income (loss)	$	(719)	$	106	$	(613)

(5) Earnings Per Share

A reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions, except per share amounts:


	Three Months Ended
	January 29		January 30
	2023		2022
Net income attributable to Deere & Company	$	1,959	$	903
Average shares outstanding		297.6		307.4
Basic per share	$	6.58	$	2.94

Average shares outstanding		297.6		307.4
Effect of dilutive share-based compensation		1.5		2.0
Total potential shares outstanding		299.1		309.4
Diluted per share	$	6.55	$	2.92

Shares excluded from EPS calculation, as antidilutive		.1		.1

(6) Pension and Other Postretirement Benefits

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


	Three Months Ended
	January 29		January 30
	2023		2022
Pension
Service cost	$	60	$	85
Interest cost		133		77
Expected return on plan assets		(212)		(182)
Amortization of actuarial (gain) loss		(5)		39
Amortization of prior service cost		10		7
Settlements				1
Net (benefit) cost	$	(14)	$	27

OPEB
Service cost	$	7	$	12
Interest cost		43		26
Expected return on plan assets		(29)		(28)
Amortization of actuarial (gain) loss		(16)		1
Amortization of prior service credit		(1)		(1)
Net cost	$	4	$	10

The reduction in the 2023 pension net (benefit) cost is due to increases in the expected long-term return rates on plan assets and increases in discount rates. 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.

(7) Segment Reporting

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


	Three Months Ended
	January 29		January 30		%
	2023		2022		Change
Net sales and revenues:
Production & precision ag net sales	$	5,198	$	3,356	+55
Small ag & turf net sales		3,001		2,631	+14
Construction & forestry net sales		3,203		2,544	+26
Financial services revenues		1,040		870	+20
Other revenues		210		168	+25
Total net sales and revenues	$	12,652	$	9,569	+32
Operating profit:
Production & precision ag	$	1,208	$	296	+308
Small ag & turf		447		371	+20
Construction & forestry		625		272	+130
Financial services		238		296	-20
Total operating profit		2,518		1,235	+104
Reconciling items		(22)		(82)	-73
Income taxes		(537)		(250)	+115
Net income attributable to Deere & Company	$	1,959	$	903	+117

Intersegment sales and revenues:
Production & precision ag net sales	$	5	$	4	+25
Small ag & turf net sales		3		2	+50
Construction & forestry net sales
Financial services revenues		204		46	+343

Operating profit for production and precision ag, small ag and turf, and construction and forestry is income from continuing operations before reconciling items and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains and losses. Reconciling items to net income are primarily corporate expenses, certain external interest expenses, certain foreign exchange gains and losses, pension and OPEB benefit amounts excluding the service cost component, and net income attributable to noncontrolling interests.


	January 29		October 30		January 30
	2023		2022		2022
Identifiable assets:
Production & precision ag	$	9,393	$	8,414	$	7,683
Small ag & turf		4,893		4,451		4,260
Construction & forestry		7,232		6,754		6,358
Financial services		59,721		58,864		50,499
Corporate		10,381		11,547		10,814
Total assets	$	91,620	$	90,030	$	79,614

(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 collections are 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:


	January 29, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	2,939	$	12,435	$	7,228	$	3,660	$	1,600	$	823	$	2,753	$	31,438
30-59 days past due		2		39		39		54		13		44		28		219
60-89 days past due		1		15		14		20		5		15		6		76
90+ days past due				1				3		1						5
Non-performing				40		58		41		27		34		8		208
Construction and forestry
Current		674		2,692		1,702		684		224		80		99		6,155
30-59 days past due		2		18		29		36		16		52		5		158
60-89 days past due				9		17		18		8		24		2		78
90+ days past due				1		2		1		2		1				7
Non-performing				46		58		30		16		7		1		158
Total retail customer receivables	$	3,618	$	15,296	$	9,147	$	4,547	$	1,912	$	1,080	$	2,902	$	38,502


	October 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	13,500	$	7,984	$	4,091	$	1,875	$	785	$	200	$	4,111	$	32,546
30-59 days past due		46		63		36		17		7		3		19		191
60-89 days past due		14		25		13		6		2		1		5		66
90+ days past due		1														1
Non-performing		27		60		44		28		18		19		8		204
Construction and forestry
Current		2,964		1,974		842		292		73		12		108		6,265
30-59 days past due		53		52		23		9		2		1		3		143
60-89 days past due		19		16		7		3		1				1		47
90+ days past due		1		4		1		3				1				10
Non-performing		25		61		34		19		7		3				149
Total retail customer receivables	$	16,650	$	10,239	$	5,091	$	2,252	$	895	$	240	$	4,255	$	39,622


	January 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	2,492	$	11,580	$	5,988	$	3,038	$	1,440	$	761	$	2,634	$	27,933
30-59 days past due		5		82		52		30		15		6		25		215
60-89 days past due		1		23		18		10		5		3		5		65
90+ days past due				1												1
Non-performing		1		33		58		52		31		36		6		217
Construction and forestry
Current		764		2,795		1,376		615		204		49		81		5,884
30-59 days past due		8		68		35		21		6		2		3		143
60-89 days past due				30		17		7		3		1		1		59
90+ days past due				2		3		3		1		8				17
Non-performing				33		48		37		14		7		1		140
Total retail customer receivables	$	3,271	$	14,647	$	7,595	$	3,813	$	1,719	$	873	$	2,756	$	34,674

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


	January 29, 2023
	2023		2022		2021		2020		2019		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	115	$	285	$	48	$	21	$	4	$	1	$	2,654	$	3,128
30+ days past due
Non-performing								1								1
Construction and forestry
Current		7		7		24		2				1		459		500
30+ days past due
Non-performing
Total wholesale receivables	$	122	$	292	$	72	$	24	$	4	$	2	$	3,113	$	3,629


	October 30, 2022
	2022		2021		2020		2019		2018	Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	387	$	64	$	27	$	4		$	2	$	2,371	$	2,855
30+ days past due
Non-performing								1							1
Construction and forestry
Current		7		29		2		1			1		377		417
30+ days past due
Non-performing
Total wholesale receivables	$	394	$	93	$	29	$	6		$	3	$	2,748	$	3,273


	January 30, 2022
	2022		2021		2020		2019		2018		Prior Years		Revolving		Total
Wholesale receivables:
Agriculture and turf
Current	$	101	$	244	$	56	$	11	$	7	$	2	$	1,426	$	1,847
30+ days past due
Non-performing								7								7
Construction and forestry
Current		5		38		4		3				1		285		336
30+ days past due												1				1
Non-performing
Total wholesale receivables	$	106	$	282	$	60	$	21	$	7	$	4	$	1,711	$	2,191

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


	Three Months Ended January 29, 2023
	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
Allowance:
Beginning of period balance	$	299	$	22	$	4	$	325
Provision (credit)		15		(4)				11
Provision transferred to held for sale		(142)						(142)
Provision (credit) subtotal		(127)		(4)				(131)
Write-offs		(18)		(7)				(25)
Recoveries		4		5		1		10
Translation adjustments		(18)				(1)		(19)
End of period balance	$	140	$	16	$	4	$	160

Financing receivables:
End of period balance	$	35,600	$	2,902	$	3,629	$	42,131


	Three Months Ended January 30, 2022
	Retail Notes		Revolving
	& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total
Allowance:
Beginning of period balance	$	138	$	21	$	7	$	166
Provision (credit)		13		(9)		(2)		2
Write-offs		(17)		(5)				(22)
Recoveries		4		8				12
End of period balance	$	138	$	15	$	5	$	158

Financing receivables:
End of period balance	$	31,918	$	2,756	$	2,191	$	36,865

In the first quarter of 2023, the Company determined that the financial services business in Russia met the held for sale criteria. The financing receivables in Russia were reclassified to “Other assets” and the associated allowance for credit losses was reversed (see Note 20). Excluding the portfolio in Russia, the allowance for credit losses decreased during the first quarter of 2023, as the financing receivables continue to benefit from strong fundamentals within the agricultural market.

(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:


	January 29		October 30		January 30
	2023		2022		2022
Financing receivables securitized (retail notes)	$	5,102	$	5,952	$	3,526
Allowance for credit losses		(13)		(16)		(10)
Other assets (primarily restricted cash)		97		155		100
Total restricted securitized assets	$	5,186	$	6,091	$	3,616

Short-term securitization borrowings	$	4,864	$	5,711	$	3,482
Accrued interest on borrowings		6		6		1
Total liabilities related to restricted securitized assets	$	4,870	$	5,717	$	3,483

(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:


	January 29		October 30		January 30
	2023		2022		2022
Raw materials and supplies	$	4,975	$	4,442	$	4,034
Work-in-process		1,478		1,190		1,460
Finished goods and parts		6,347		5,363		4,790
Total FIFO value		12,800		10,995		10,284
Less adjustment to LIFO value		2,744		2,500		2,349
Inventories	$	10,056	$	8,495	$	7,935

(11) Goodwill and Other Intangible Assets-Net

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


	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Total
Goodwill at October 31, 2021	$	542	$	265	$	2,484	$	3,291
Acquisition		7		7		4		18
Translation adjustments		(5)		(2)		(110)		(117)
Goodwill at January 30, 2022	$	544	$	270	$	2,378	$	3,192

Goodwill at October 30, 2022	$	646	$	318	$	2,723	$	3,687
Translation adjustments		15		7		182		204
Goodwill at January 29, 2023	$	661	$	325	$	2,905	$	3,891

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

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


	January 29		October 30		January 30
	2023		2022		2022
Amortized intangible assets:
Customer lists and relationships	$	522	$	493	$	526
Technology, patents, trademarks, and other		1,387		1,301		1,066
Total at cost		1,909		1,794		1,592
Less accumulated amortization:
Customer lists and relationships		184		166		156
Technology, patents, trademarks, and other		470		410		350
Total accumulated amortization		654		576		506
Amortized intangible assets		1,255		1,218		1,086
Unamortized intangible assets:
In-process research and development						123
Other intangible assets – net	$	1,255	$	1,218	$	1,209

In September 2017, the Company acquired Blue River Technology’s in-process research and development related to machine learning technology to optimize the use of farm inputs. Those research and development activities were completed, and the Company started amortizing the acquired technology in the second quarter of 2022.

The amortization of other intangible assets in the first quarter of 2023 and 2022 was $39 million and $28 million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of 2023 – $132, 2024 – $167, 2025 – $139, 2026 – $119, 2027 – $118, and 2028 – $86.

(12) Short-Term Borrowings

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


	January 29		October 30		January 30
	2023		2022		2022
Commercial paper	$	6,425	$	4,703	$	2,135
Notes payable to banks		303		402		519
Finance lease obligations due within one year		23		21		23
Long-term borrowings due within one year		7,378		7,466		8,313
Short-term borrowings	$	14,129	$	12,592	$	10,990

(13) Accounts Payable and Accrued Expenses

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


	January 29		October 30		January 30
	2023		2022		2022
Accounts payable:
Trade payables	$	3,616	$	3,894	$	3,035
Payables to unconsolidated affiliates		10		11		172
Dividends payable		358		343		325
Operating lease liabilities		305		302		267
Deposits withheld from dealers and merchants		153		163		148
Other		156		214		160
Accrued expenses:
Dealer sales discounts		256		1,044		182
Product warranties		1,444		1,427		1,283
Employee benefits		1,015		1,528		765
Accrued taxes		1,336		1,255		974
Unearned operating lease revenue		406		399		385
Unearned revenue (contractual liability)		601		557		567
Extended warranty premium		901		866		781
Accrued interest		371		288		280
Derivative liabilities		891		1,231		276
Other		1,289		1,300		1,051
Total accounts payable and accrued expenses	$	13,108	$	14,822	$	10,651

Amounts are presented net of eliminations, which primarily consist of dealer sales incentives with a right of set-off against trade receivables of $1,540 million at January 29, 2023, $1,280 million at October 30, 2022, and $983 million at January 30, 2022. 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:


	January 29		October 30		January 30
	2023		2022		2022
Underwritten term debt
U.S. dollar notes and debentures:
2.75% notes due 2025	$	700	$	700	$	700
6.55% debentures due 2028		200		200		200
5.375% notes due 2029		500		500		500
3.10% notes due 2030		700		700		700
8.10% debentures due 2030		250		250		250
7.125% notes due 2031		300		300		300
3.90% notes due 2042		1,250		1,250		1,250
2.875% notes due 2049		500		500		500
3.75% notes due 2050		850		850		850
Euro notes:
.5% notes due 2023 (€500 principal)						557
1.375% notes due 2024 (€800 principal)		871		797		891
1.85% notes due 2028 (€600 principal)		653		598		669
2.20% notes due 2032 (€600 principal)		653		598		669
1.65% notes due 2039 (€650 principal)		708		648		724
Serial issuances:
Medium-term notes: (principal as of: January 29, 2023 - $26,367, October 30, 2022 - $25,629, January 30, 2022 - $22,896)		25,618		24,604		22,947
Other notes and finance lease obligations		1,440		1,223		1,246
Less debt issuance costs and debt discounts		(122)		(122)		(115)
Long-term borrowings	$	35,071	$	33,596	$	32,838

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. 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:


	Three Months Ended
	January 29, 2023		January 30, 2022
Sales-type and direct finance lease revenues	$	41	$	39
Operating lease revenues		321		336
Variable lease revenues		6		7
Total lease revenues	$	368	$	382

(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 $901 million and $781 million at January 29, 2023 and January 30, 2022, respectively.

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


	Three Months Ended
	January 29		January 30
	2023		2022
Beginning of period balance	$	2,293	$	2,086
Payments		(263)		(193)
Amortization of premiums received		(83)		(66)
Accruals for warranties		255		181
Premiums received		106		83
Foreign exchange		37		(27)
End of period balance	$	2,345	$	2,064

At January 29, 2023, the Company had $235 million of guarantees issued to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment. The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At January 29, 2023, the accrued losses under these agreements were not material. The maximum remaining term of the receivables guaranteed at January 29, 2023 was about seven years.

At January 29, 2023, the Company had commitments of $467 million for the construction and acquisition of property and equipment. Also, at January 29, 2023, the Company had restricted assets of $269 million, classified as “Other assets.”

The Company also had other miscellaneous contingent liabilities and guarantees totaling approximately $90 million at January 29, 2023. The accrued liability for these contingencies was not material at January 29, 2023.

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.

(17) Fair Value Measurements

The fair values of financial instruments that do not approximate the carrying values were as follows in millions of dollars. Long-term borrowings exclude finance lease liabilities.


	January 29, 2023				October 30, 2022				January 30, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Financing receivables – net	$	36,882	$	35,894	$	36,634	$	35,526	$	33,191	$	33,033
Financing receivables securitized – net		5,089		4,869		5,936		5,698		3,516		3,530
Short-term securitization borrowings		4,864		4,785		5,711		5,577		3,482		3,468
Long-term borrowings due within one year		7,378		7,220		7,466		7,322		8,313		8,322
Long-term borrowings		35,035		34,149		33,566		31,852		32,806		33,843

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. 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, excluding the Company’s cash equivalents, which were carried at cost that approximates fair value and consisted of money market funds and time deposits.


	January 29		October 30		January 30
	2023		2022		2022
Level 1:
Marketable securities
International equity securities	$	2	$	3	$	2
U.S. equity fund		86		70		72
U.S. fixed income fund		118
U.S. government debt securities		64		62		63
Total Level 1 marketable securities		270		135		137

Level 2:
Marketable securities
U.S. government debt securities		127		121		138
Municipal debt securities		71		63		74
Corporate debt securities		209		200		229
International debt securities		18		60		2
Mortgage-backed securities		157		155		155
Total Level 2 marketable securities		582		599		598
Other assets – Derivatives		360		373		299
Accounts payable and accrued expenses – Derivatives		891		1,231		276

Level 3:
Accounts payable and accrued expenses – Deferred consideration		225		236

The contractual maturities of debt securities at January 29, 2023 in millions of dollars are shown below. Actual maturities may differ from contractual maturities because some securities may be called or prepaid. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.


	Amortized		Fair
	Cost		Value
Due in one year or less	$	35	$	35
Due after one through five years		111		105
Due after five through 10 years		197		176
Due after 10 years		204		173
Mortgage-backed securities		182		157
Debt securities	$	729	$	646

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.


	Fair Value				Losses
					Three Months Ended
	January 29	October 30		January 30	January 29	January 30
	2023	2022		2022	2023	2022
Inventories		$	19
Property and equipment – net			15

The following is a description of the valuation methodologies the Company uses to measure certain financial instruments on the balance sheet 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). 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.

(18) Derivative Instruments

The Company’s policy is to execute derivative transactions to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. The financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities. The Company also has foreign currency exposures at some of its foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies. In addition, the Company has interest rate and foreign currency exposure at certain equipment operations units for sales incentive programs.

All derivatives are recorded at fair value on the balance sheets. Cash collateral received or paid is not offset against the derivative fair values on the balance sheet. The cash flows from the derivative contracts were recorded in operating activities in the statements of consolidated cash flows. Each derivative is designated as a cash flow hedge, a fair value hedge, or remains undesignated. All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy. Both at

inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness. If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, the hedge designation is removed, or the derivative is terminated, hedge accounting is discontinued.

Cash Flow Hedges

Certain interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings. The total notional amounts of the receive-variable/pay-fixed interest rate contracts at January 29, 2023, October 30, 2022, and January 30, 2022 were $1,950 million, $1,950 million, and $2,700 million, respectively. Fair value gains or losses on cash flow hedges were recorded in other comprehensive income (OCI) and are subsequently reclassified into interest expense in the same periods during which the hedged transactions impact earnings. These amounts offset the effects of interest rate changes on the related borrowings.

The amount of gain recorded in OCI at January 29, 2023 that is expected to be reclassified to interest expense in the next twelve months if interest rates remain unchanged is $38 million after-tax. No gains or losses were reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.

Fair Value Hedges

Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings. The total notional amounts of the receive-fixed/pay-variable interest rate contracts at January 29, 2023, October 30, 2022, and January 30, 2022 were $10,802 million, $10,112 million, and $8,307 million, respectively. The fair value gains or losses on these contracts were generally offset by fair value gains or losses on the hedged items (fixed-rate borrowings) with both items recorded in interest expense.

The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships were as follows in millions of dollars. Fair value hedging adjustments are included in the carrying amount of the hedged item.


	Active Hedging Relationships				Discontinued Hedging Relationships
	Carrying Amount		Cumulative Fair Value		Carrying Amount of		Cumulative Fair Value
	of Hedged Item		Hedging Amount		Formerly Hedged Item		Hedging Amount
January 29, 2023
Short-term borrowings					$	1,915	$	15
Long-term borrowings	$	10,088	$	(666)		5,506		(83)

October 30, 2022
Short-term borrowings					$	2,515	$	15
Long-term borrowings	$	9,060	$	(1,006)		5,520		(19)

January 30, 2022
Short-term borrowings	$	177	$	2	$	2,357	$	8
Long-term borrowings		7,966		(130)		5,447		181

Derivatives not designated as hedging instruments

The Company has certain interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges. These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures for certain borrowings, purchases or sales of inventory, and sales incentive programs. The total notional amounts of these interest rate swaps at January 29, 2023, October 30, 2022, and January 30, 2022 were $11,147 million, $10,568 million, and $10,210 million, the foreign exchange contracts were $9,304 million, $8,185 million, and $7,864 million, and the cross-currency interest rate contracts were $234 million, $260 million, and $303 million, respectively. The fair value gains or losses from derivatives not designated as hedging instruments were recorded in the statements of consolidated income, generally offsetting over time the exposure on the hedged item.

Fair values of derivative instruments in the condensed consolidated balance sheets in millions of dollars follow:


	January 29		October 30		January 30
Other Assets	2023		2022		2022
Designated as hedging instruments:
Interest rate contracts	$	90	$	87	$	102

Not designated as hedging instruments:
Interest rate contracts		188		212		82
Foreign exchange contracts		71		66		91
Cross-currency interest rate contracts		11		8		24
Total not designated		270		286		197

Total derivative assets	$	360	$	373	$	299

Accounts Payable and Accrued Expenses
Designated as hedging instruments:
Interest rate contracts	$	678	$	1,004	$	185

Not designated as hedging instruments:
Interest rate contracts		97		107		27
Foreign exchange contracts		110		118		64
Cross-currency interest rate contracts		6		2
Total not designated		213		227		91

Total derivative liabilities	$	891	$	1,231	$	276

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


	Three Months Ended
	January 29		January 30
	2023		2022
Fair Value Hedges
Interest rate contracts - Interest expense	$	239	$	(141)

Cash Flow Hedges
Recognized in OCI:
Interest rate contracts - OCI (pretax)	$	(1)	$	15

Reclassified from OCI:
Interest rate contracts - Interest expense		15		(2)

Not Designated as Hedges
Interest rate contracts - Net sales	$	(7)	$	13
Interest rate contracts - Interest expense *		(8)		(1)
Foreign exchange contracts - Net sales		1
Foreign exchange contracts - Cost of sales		5		(1)
Foreign exchange contracts - Other operating expenses *		(142)		147
Total not designated	$	(151)	$	158

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

Counterparty Risk and Collateral

Derivative instruments are subject to significant concentrations of credit risk to the banking sector. The Company manages individual counterparty exposure by setting limits that consider the credit rating of the counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the Company and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Some of these agreements include credit support provisions. Each master agreement permits the net settlement of amounts owed in the event of default or termination.

Certain of the Company’s derivative agreements contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at January 29, 2023, October 30, 2022, and January 30, 2022 was $781 million, $1,113 million, and $213 million, respectively. In accordance with the limits established in these agreements, the Company posted $349 million, $701 million, and $18 million of cash collateral at January 29, 2023, October 30, 2022, and January 30, 2022, respectively. In addition, the Company paid $8 million of collateral that was outstanding at January 29, 2023, October 30, 2022, and January 30, 2022 to participate in an international futures market to hedge currency exposure, not included in the table below.

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:


	Gross Amounts		Netting
January 29, 2023	Recognized		Arrangements		Collateral		Net Amount
Assets	$	360	$	(162)	$	(47)	$	151
Liabilities		891		(162)		(349)		380

October 30, 2022
Assets	$	373	$	(179)	$	(54)	$	140
Liabilities		1,231		(179)		(701)		351

January 30, 2022
Assets	$	299	$	(91)			$	208
Liabilities		276		(91)	$	(19)		166

(19) Stock Option and Restricted Stock Unit Awards

In December 2022, the Company granted stock options to employees for the purchase of 161 thousand shares of common stock at an exercise price of $438.44 per share and a binomial lattice model fair value of $136.46 per share at the grant date. At January 29, 2023, options for 2.0 million shares were outstanding with a weighted-average exercise price of $178.86 per share. The Company also granted 112 thousand of service-based restricted stock units and 41 thousand of performance/service-based restricted stock units to employees in the first three months of 2023. The weighted-average fair value of the service-based restricted stock units at the grant date was $434.02 per unit based on the market price of a share of underlying common stock. The fair value of the performance/service-based restricted stock units at the grant date was $424.93 per unit based on the market price of a share of underlying common stock excluding dividends. At January 29, 2023, the Company was authorized to grant awards for an additional 16.6 million shares under the equity incentive plans.

(20) Special Items

In the first quarter of 2022, Net sales from the Company’s Russian operations represented 2 percent of Deere’s consolidated Net sales. Sales in the region were impacted as the Company suspended shipments of machines and service parts to Russia beginning in February 2022. As of January 29, 2023 and October 30, 2022, the Company’s net exposure in Russia / Ukraine was approximately $229 million and $266 million, respectively.

In January 2023, the Company reached an agreement to sell its financial services business in Russia (registered in Russia as a leasing company). The completion of the transaction is expected in the second quarter of 2023. The assets and liabilities were classified as “Other assets” and “Accounts payable and accrued expenses”, respectively, which include $100 million of restricted cash. In the first quarter of 2023, the Company reversed the allowance for credit losses and recorded a valuation allowance on the assets held for sale in “Selling, administrative and general expenses.” The Company does not expect a significant gain or loss upon disposition.

On November 17, 2021, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) approved a new collective bargaining agreement. The agreement, which has a term of six years, covers the wages, hours, benefits, and other terms and conditions of employment for the Company’s UAW-represented employees at 14 U.S. facilities. The labor agreement included a lump sum ratification bonus payment of $8,500 per eligible employee, totaling $90 million, and an immediate wage increase of 10 percent plus further wage increases over the term of the contract. The lump sum payment was expensed in the first quarter of 2022.

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


	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Total
UAW ratification bonus – Cost of sales	$	53	$	9	$	28	$	90

(21) Subsequent Events

In February 2023, the Company entered into two retail note securitization transactions. The first transaction resulted in $307 million of secured borrowings. The second transaction will result in $983 million of secured borrowings and is expected to settle in March 2023.

On February 22, 2023, the Company’s Board of Directors declared a quarterly dividend of $1.25 per share payable on May 8, 2023, to stockholders of record on March 31, 2023.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Overview

Organization

The Company generates net sales from the sale of equipment to John Deere dealers and distributors. The Company manufactures and distributes a full line of agricultural equipment; a variety of commercial and consumer equipment; and a broad range of equipment for construction, roadbuilding, and forestry. These operations (collectively known as the “equipment operations”) are managed through the production and precision agriculture, small agriculture and turf, and construction and forestry operating segments. The Company’s financial services segment provides credit services, which finance sales and leases of equipment by John Deere dealers. In addition, the financial services segment provides wholesale financing to dealers of the foregoing equipment, finances retail revolving charge accounts, and offers extended equipment warranties.

Smart Industrial Operating Model and Leap Ambitions

The Company’s Smart Industrial operating model is focused on making significant investments, strengthening the Company’s capabilities in digital, automation, autonomy, and alternative propulsion technologies. These technologies are intended to increase worksite efficiency, improve yields, lower input costs, and ease labor constraints. The Company’s Leap Ambitions are goals designed to boost economic value and sustainability for the Company’s customers. The Company anticipates opportunities in this area, as the Company and its customers have a vested interest in sustainable practices.

In February 2023, the Company released its 2022 Sustainability Report, available at JohnDeere.com/sustainability. This report identifies important progress on the Company’s Leap Ambitions in fiscal year 2022. The information in our 2022 Sustainability Report is not incorporated by reference into, and does not form a part of, this Form 10-Q.

Trends and Economic Conditions

Industry Trends for Fiscal Year 2023 – Industry sales of large agricultural machinery in the U.S. and Canada for 2023 are forecasted to increase 5 to 10 percent compared to 2022. Industry sales of small agricultural and turf equipment in the U.S. and Canada are expected to be down about 5 percent in 2023. Industry sales of agricultural machinery in Europe are forecasted to be flat to up 5 percent, while South American industry sales of tractors and combines are expected to be flat to up 5 percent in 2023. Asia industry sales are forecasted to be down moderately in 2023. On an industry basis, North American construction equipment and compact construction equipment sales are both expected to be flat to up 5 percent in 2023. Global forestry and global roadbuilding industry sales are each expected to be flat.

Company Trends – Customers’ demand for integration of technology into equipment is a market trend underlying the Company’s Smart Industrial operating model and Leap Ambitions framework. Customers have sought to improve profitability, productivity, and sustainability through technology. The Company’s approach to technology involves hardware and software, guidance, connectivity and digital solutions, automation and machine intelligence, autonomy, and alternative propulsion technologies. This technology is incorporated into products within each of the Company’s operating segments.

Customers continue to adopt technology integrated in the John Deere portfolio of “smart” machines, systems, and solutions. The Company expects this trend to persist for the foreseeable future.

Demand for the Company’s equipment remains strong, as order books are full through a majority of 2023. Agricultural fundamentals are expected to remain solid into 2023, and retail demand will comprise most of 2023 sales. The North American retail customer fleet age of combines and large tractors remains above average, and dealer inventories are historically low due to the manufacturing and supply chain constraints over the past few years. The Company expects the replenishment of dealer stock inventory to occur in 2024. Crop prices remain favorable to our customers in part due to low stock-to-use ratios for key grains. The Company expects to sell more large agricultural equipment in 2023 than 2022 in North America, Europe, and South America. Demand for small agricultural equipment remains stable, while turf and utility equipment product sales are expected to be lower due to the overall U.S. economic conditions. Construction equipment markets are forecasted to be steady. Rental fleets replenishment, the energy industry, and U.S. infrastructure spend are expected to offset moderation in residential

home construction. Roadbuilding demand remains strongest in the U.S., largely offset by softening demand in Europe and parts of Asia. Net income for the Company’s financial services operations is expected to be lower than fiscal year 2022 due to less-favorable financing spreads as a result of heightened interest rates, higher selling, administrative and general expenses, and lower gains on operating-lease dispositions, partially offset by higher average portfolio balances.

Additional Trends – The Company experienced supply chain disruptions and inflationary pressures in 2022. These trends continued into 2023. While these are two distinct issues and discussed separately below, their impact may be intertwined.

Supply chain disruptions impacted many aspects of the business, including parts availability, increased production costs, and higher inventory levels. Past due deliveries from suppliers were at elevated levels during 2022. Although past due deliveries remain elevated, the Company experienced improvement during the first quarter of 2023. The reduction in supply chain disruptions contributed to higher levels of production. The Company implemented the following mitigation efforts to minimize the impact of supply chain disruptions on its ability to meet customer demand:

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

•Multi-sourced some parts and materials.

•Provided resources to suppliers to address constraints.

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

•Utilized alternative freight carriers to expedite delivery.

While supply chain disruptions are expected to persist into 2023, the Company is working diligently to secure the parts and components that customers need to deliver essential food and infrastructure more profitably and sustainably. Although the Company experienced some improvement in this area during the first quarter of 2023, concerns remain and this issue could impact our ability to meet customer demand in the remainder of 2023.

Inflation has continued to be a pervasive feature in 2023, increasing the cost of purchased components, energy, salaries, and wages. Higher costs due to general business inflation were offset by price realization, which mitigated the impact of inflation on the Company’s operating results. The Company expects inflation to continue in 2023 resulting in higher costs. If customers are unwilling to accept increases in cost of John Deere products, or the Company is otherwise unable to offset increases in production costs, inflation could have an adverse effect on the Company’s operations and financial condition.

Central bank policy interest rates increased in the first quarter of 2023 and are projected to continue to increase during 2023 but at a moderating pace compared to 2022. Most retail receivables are fixed rate, while wholesale financing receivables are floating rate. The Company has both fixed and floating rate borrowings. The Company manages the risk of interest rate fluctuations by balancing the types and amounts of its funding sources to its financing receivable and equipment on operating lease portfolios. Accordingly, the Company enters into interest rate swap agreements to manage its interest rate exposure. Historically, rising interest rates impact the Company’s borrowings sooner than the benefit is realized from the financing receivable and equipment on operating lease portfolios. As a result, the Company’s financial services operations experienced $53 million (after-tax) of less favorable financing spreads in the first quarter of 2023 compared to 2022. The Company expects spread compression to persist during 2023.

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

Items of Concern and Uncertainties – Other items of concern include global and regional political conditions, economic and trade policies, imposition of new or retaliatory tariffs against certain countries or covering certain products, post-pandemic effects, capital market disruptions, changes in demand and pricing for new and used equipment, significant fluctuations in foreign currency exchange rates, and volatility in the prices of many commodities. These items could impact the Company’s results. The Company is making investments in technology and in strengthening its capabilities in digital, automation, autonomy, and alternative propulsion technologies. As with most technology investments, marketplace adoption and monetization of these features holds an elevated level of uncertainty.

2023 Compared with 2022


	Three Months Ended
Deere & Company	January 29		January 30
(In millions of dollars, except per share amounts)	2023		2022
Net sales and revenues	$	12,652	$	9,569
Net income attributable to Deere & Company		1,959		903
Diluted earnings per share		6.55		2.92

Net income in the first quarter of 2022 was impacted by special items. See Note 20 for additional details. The discussion of net sales and operating profit is included in the Business Segment Results below.

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


	Three Months Ended
Deere & Company	January 29		January 30
(In millions of dollars)	2023		2022		% Change
Cost of sales to net sales		69.6%		78.5%

Other income	$	256	$	238	+8
Research and development expenses		495		402	+23
Selling, administrative and general expenses		952		781	+22
Other operating expenses		299		311	-4
Provision for income taxes		537		250	+115

The cost of sales ratio decreased due to price realization, partially offset by higher production costs. Inefficiencies due to the delayed ratification of the UAW labor agreement and contract-ratification bonus costs affected the prior period cost of sales ratio (see Note 20). Research and development expenses were higher due to continued focus on developing and incorporating technology solutions. Selling, administrative and general expenses increased mostly due to higher employee pay driven by inflationary conditions and profit-sharing incentives. The provision for income taxes was higher as a result of higher pretax income.

Business Segment Results

For the equipment operations, higher production costs were mostly due to elevated cost of purchased components, energy, salaries, and wages.


	Three Months Ended
Production and Precision Agriculture	January 29		January 30
(In millions of dollars)	2023		2022		% Change
Net sales	$	5,198	$	3,356	+55
Operating profit		1,208		296	+308
Operating margin		23.2%		8.8%
Price realization					+22
Currency translation					-1

Production and precision agriculture sales increased for the quarter as a result of higher shipment volumes (primarily in the U.S., Canada, and Latin America) and price realization in most end markets. Operating profit improved primarily due to price realization and improved shipment volume / mix as a result of improved supply chain conditions. These items were partially offset by higher production costs and increased selling, administrative and general expenses and research and development expenses. The UAW contract-ratification bonus costs affected the prior period.


	Three Months Ended
Small Agriculture and Turf	January 29		January 30
(In millions of dollars)	2023		2022		% Change
Net sales	$	3,001	$	2,631	+14
Operating profit		447		371	+20
Operating margin		14.9%		14.1%
Price realization					+11
Currency translation					-4

Small agriculture and turf sales increased for the quarter due to price realization in most end markets and higher shipment volumes (primarily in the U.S., Canada, India, and Mexico), partially offset by the negative effects of foreign currency translation mostly due to a stronger U.S. dollar. Operating profit improved primarily as a result of price realization and improved shipment volumes due to improved supply chain conditions. These items were partially offset by higher production costs, increased selling, administrative and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange.


	Three Months Ended
Construction and Forestry	January 29		January 30
(In millions of dollars)	2023		2022		% Change
Net sales	$	3,203	$	2,544	+26
Operating profit		625		272	+130
Operating margin		19.5%		10.7%
Price realization					+13
Currency translation					-3

Construction and forestry sales moved higher for the quarter primarily due to higher shipment volumes (primarily in the U.S. and Brazil) and price realization, partially offset by the negative effects of foreign currency translation from a stronger U.S. dollar. Operating profit improved due to price realization and improved shipment volumes as a result of improved supply chain conditions, partially offset by higher production costs. The UAW contract-ratification bonus costs affected the prior period.


	Three Months Ended
Financial Services	January 29		January 30
(In millions of dollars)	2023		2022		% Change
Revenue (including intercompany)	$	1,244	$	916	+36
Interest expense		442		158	+180
Net income		185		231	-20

The average balance of receivables and leases financed was 15 percent higher in the first three months of 2023, compared with the same period last year. Revenue also increased due to higher average financing rates. Interest expense increased in the first quarter of 2023 as a result of higher average borrowing rates and higher average borrowings. Net income for the quarter decreased mainly due to less favorable financing spreads as a result of heightened interest rates, higher selling, administrative and general expenses, and lower gains on operating lease dispositions, partially offset by income earned on higher average portfolio balances.

Critical Accounting Estimates

See the Company’s critical accounting estimates discussed in the Management’s Discussion and Analysis of the most recently filed Annual Report on Form 10-K. There have been no material changes to these policies.

CAPITAL RESOURCES AND LIQUIDITY

Sources of Liquidity, Key Metrics and Balance Sheet Data

The Company has access to most global markets at a reasonable cost. Sources of liquidity for the Company include cash and cash equivalents, marketable securities, funds from operations, the issuance of commercial paper and term debt, the securitization of retail notes (both public and private markets), and bank lines of credit. The Company closely monitors its liquidity sources against the cash requirements and expects to have sufficient sources of global funding and liquidity to meet its funding needs in the short term (next 12 months) and long term (beyond 12 months). The Company operates in multiple industries, which have different funding requirements. The production and precision agriculture, small agriculture and turf, and construction and forestry segments are capital intensive and are typically subject to seasonal variations in financing requirements for inventories and certain receivables from dealers. However, the patterns of seasonality in inventory have been affected by increases in production rates and supply chain disruptions experienced during fiscal year 2022, which continue to impact inventory levels during 2023. The financial services operations rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios.

Key metrics are provided in the following table, in millions of dollars:


	January 29		October 30		January 30
	2023		2022		2022
Cash, cash equivalents, and marketable securities	$	4,828	$	5,508	$	5,207

Trade accounts and notes receivable – net		7,609		6,410		4,855
Ratio to prior 12 month’s net sales		15%		13%		12%

Inventories		10,056		8,495		7,935
Ratio to prior 12 month’s cost of sales		27%		24%		26%

Unused credit lines		1,581		3,284		5,865

Financial Services:
Ratio of interest-bearing debt to stockholder’s equity		8.2 to 1		8.5 to 1		7.4 to 1

The reduction in unused credit lines in 2023 compared to both prior periods relates to an increase in commercial paper outstanding to support working capital requirements. The Company forecasts higher operating cash flows in 2023 driven by an increase in net income adjusted for non-cash provisions and a favorable change in working capital.

There have been no material changes to the contractual and other cash requirements identified in the Company’s most recently issued Annual Report on Form 10-K.

Cash Flows


	Three Months Ended
(In millions of dollars)	January 29, 2023		January 30, 2022
Net cash used for operating activities	$	(1,246)	$	(2,553)
Net cash provided by investing activities		760		648
Net cash used for financing activities		(339)		(1,577)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		62		(74)
Net decrease in cash, cash equivalents, and restricted cash	$	(763)	$	(3,556)

Cash outflows from consolidated operating activities in the first three months of 2023 were $1,246 million. This resulted mainly from a working capital change, partially offset by net income adjusted for non-cash provisions. Cash inflows from investing activities were $760 million 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 and a change in collateral on derivatives – net, partially offset by purchases of property and equipment. Cash outflows from financing activities were $339 million in the first three months of 2023. Cash, cash equivalents, and restricted cash decreased by $763 million during the first three months of this year.

Trade Accounts and Notes Receivable – Trade accounts and notes receivable arise from sales of goods to customers. Trade receivables increased by $1,199 million during the first three months of 2023, mostly due to a seasonal increase. These receivables increased $2,754 million, compared to a year ago, due to higher shipment volumes. The

percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 1 percent at each of January 29, 2023, October 30, 2022, and January 30, 2022.

Financing Receivables and Equipment on Operating Leases – Financing receivables and equipment on operating leases consist of retail notes originated in connection with financing of new and used equipment, operating leases, revolving charge accounts, sales-type and direct financing leases, and wholesale notes. Financing receivables and equipment on operating leases decreased by $720 million during the first quarter of 2023, primarily due to seasonal payments, and increased by $5,142 million in the past 12 months, due to strong retail sales. Total acquisition volumes of financing receivables and equipment on operating leases were 31 percent higher in the first three months of 2023, compared with the same period last year, as volumes of wholesale notes, operating leases, retail notes, and revolving charge accounts were higher, while finance leases were lower compared to January 30, 2022.

Inventories – Inventories increased by $1,561 million during the first three months, primarily due to a seasonal increase. Inventories increased $2,121 million, compared to a year ago, due to higher forecasted shipment volumes and supply chain disruptions, partially offset by the effect of foreign currency translation. 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 three months of 2023 were $315 million, compared with $193 million in the same period last year. Capital expenditures in 2023 are estimated to be approximately $1,400 million.

Accounts Payable and Accrued Expenses – Decreased by $1,714 million in the first three months of 2023, primarily due to a decrease in accrued expenses associated with dealer sales discounts, employee benefits, and derivative liabilities. Accounts payable and accrued expenses increased $2,457 million compared to a year ago, due to an increase in accrued expenses associated with derivative liabilities, accrued taxes, and employee benefits, and an increase in accounts payable associated with trade payables.

Borrowings – Total external borrowings increased by $2,165 million in the first three months of 2023 and increased $6,754 million compared to a year ago, generally corresponding with the level of the receivable and the lease portfolio, as well as other working capital requirements.

John Deere Capital Corporation (Capital Corporation), a U.S. financial services subsidiary, has a revolving warehouse facility to utilize bank conduit facilities to securitize retail notes (see Note 9). The facility was renewed in November 2022 with an expiration in November 2023 and increased the total capacity or “financing limit” from $1,000 million to $1,500 million. At January 29, 2023, $786 million of securitization borrowings were outstanding under the facility. At the end of the contractual revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected.

In the first three months of 2023, the financial services operations retired $849 million of retail note securitization borrowings, which are presented in “Increase (decrease) in total short-term borrowings.”

Lines of Credit – The Company also has access to bank lines of credit with various banks throughout the world. Worldwide lines of credit totaled $8,327 million at January 29, 2023, $1,581 million of which were unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, were considered to constitute utilization. Included in the total credit lines at January 29, 2023 was a 364-day credit facility agreement of $3,000 million, expiring in the second quarter of 2023. In addition, total credit lines included long-term credit facility agreements of $2,500 million, expiring in the second quarter of 2026, and $2,500 million, expiring in the second quarter of 2027. These credit agreements require Capital Corporation and other parts of the Company to maintain certain performance metrics and liquidity targets. The Company expects to extend the terms of these credit facilities. All of these requirements of the credit agreements have been met during the periods included in the financial statements.

Debt Ratings – To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Company’s securities as an indicator of credit quality for fixed income investors. A security rating is not a recommendation by the rating agency to buy, sell, or hold Company securities. A credit rating agency may change or withdraw ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. 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. The senior long-term and short-term debt ratings and

outlook currently assigned to unsecured Company securities by the rating agencies engaged by the Company are as follows:


	Senior
	Long-Term	Short-Term	Outlook
Fitch Ratings	A+	F1	Stable
Moody’s Investors Service, Inc.	A2	Prime-1	Positive
Standard & Poor’s	A	A-1	Stable

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

Forward-looking statements are based on currently available information and current assumptions, expectations, and projections about future events and should not be relied upon. Except as required by law, the Company expressly disclaims any obligation to update or revise its forward-looking statements. Many factors could cause actual results to differ materially from these forward-looking statements. Among these factors are risks related to:

●	changes in U.S. and international laws, regulations, and policies relating to trade, spending, taxing, banking, monetary, environmental (including climate change and engine emission), and farming policies;

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

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

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

●	growth and sustainability of non-food uses for crops (including ethanol and biodiesel production);

●	the Company’s ability to execute business strategies, including the Company’s Smart Industrial operating model, Leap Ambitions, and mergers and acquisitions;

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

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

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

●	gaps or limitations in rural broadband coverage, capacity, and speed needed to support technology solutions;

●	the Company’s ability to adapt in highly competitive markets;

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

●	changes in climate patterns and unfavorable weather events;

●	higher interest rates and currency fluctuations which could adversely affect the U.S. dollar, customer confidence, access to capital, and demand for our products;

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

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

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

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

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

●	security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the Company and its products;

●	loss of or challenges to intellectual property rights;

●	compliance with evolving U.S. and foreign laws, including economic sanctions, data privacy, and environmental laws and regulations;

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

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

●	events that damage the Company’s reputation or brand;

●	world grain stocks, available farm acres, soil conditions, harvest yields, prices for commodities and livestock, input costs (e.g., fertilizer), and availability of transport for crops; and

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

Further information concerning the Company and its businesses, including factors that could materially affect the Company’s financial results, is included in the Company’s other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K).

Supplemental Consolidating Information

The supplemental consolidating data presented on the subsequent pages is presented for informational purposes. The equipment operations represents the enterprise without financial services. The equipment operations includes the Company’s 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.

The equipment operations and financial services participate in different industries. The 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 the Company. 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. The two businesses are capitalized differently and have separate performance metrics. The supplemental consolidating data is also used by management due to these differences.


DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA
STATEMENTS OF INCOME
For the Three Months Ended January 29, 2023 and January 30, 2022
(In millions of dollars) Unaudited
	EQUIPMENT				FINANCIAL
	OPERATIONS				SERVICES				ELIMINATIONS				CONSOLIDATED
	2023		2022		2023		2022		2023		2022		2023		2022
Net Sales and Revenues
Net sales	$	11,402	$	8,531									$	11,402	$	8,531
Finance and interest income		114		34	$	1,067	$	829	$	(187)	$	(63)		994		800	¹
Other income		234		217		177		87		(155)		(66)		256		238	^{2, 3}
Total		11,750		8,782		1,244		916		(342)		(129)		12,652		9,569

Costs and Expenses
Cost of sales		7,940		6,696						(6)		(1)		7,934		6,695	⁴
Research and development expenses		495		402										495		402
Selling, administrative and general expenses		783		657		172		126		(3)		(2)		952		781	⁴
Interest expense		101		90		442		158		(64)		(19)		479		229	⁵
Interest compensation to Financial Services		123		44						(123)		(44)					⁵
Other operating expenses		53		39		392		335		(146)		(63)		299		311	^{6, 7}
Total		9,495		7,928		1,006		619		(342)		(129)		10,159		8,418

Income before Income Taxes		2,255		854		238		297						2,493		1,151
Provision for income taxes		483		182		54		68						537		250

Income after Income Taxes		1,772		672		184		229						1,956		901
Equity in income of unconsolidated affiliates				1		1		2						1		3

Net Income		1,772		673		185		231						1,957		904
Less: Net income (loss) attributable to noncontrolling interests		(2)		1										(2)		1
Net Income Attributable to Deere & Company	$	1,774	$	672	$	185	$	231					$	1,959	$	903

¹ Elimination of financial services’ interest income earned from equipment operations.

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

³ Elimination of financial services’ income related to intercompany guarantees of investments in certain international markets and intercompany service revenue.

⁴ Elimination of intercompany service fees.

⁵ Elimination of equipment operations’ interest expense to financial services.

⁶ Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.

⁷ Elimination of equipment operations’ expense related to intercompany guarantees of investments in certain international markets and intercompany service expenses.


DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEETS
(In millions of dollars) Unaudited
	EQUIPMENT						FINANCIAL
	OPERATIONS						SERVICES						ELIMINATIONS						CONSOLIDATED
	Jan 29		Oct 30		Jan 30		Jan 29		Oct 30		Jan 30		Jan 29		Oct 30		Jan 30		Jan 29		Oct 30		Jan 30
	2023		2022		2022		2023		2022		2022		2023		2022		2022		2023		2022		2022
Assets
Cash and cash equivalents	$	2,665	$	3,767	$	3,596	$	1,311	$	1,007	$	876							$	3,976	$	4,774	$	4,472
Marketable securities		18		61		2		834		673		733								852		734		735
Receivables from Financial Services		5,348		6,569		5,307							$	(5,348)	$	(6,569)	$	(5,307)							⁸
Trade accounts and notes receivable – net		1,342		1,273		996		7,827		6,434		4,843		(1,560)		(1,297)		(984)		7,609		6,410		4,855	⁹
Financing receivables – net		51		47		56		36,831		36,587		33,135								36,882		36,634		33,191
Financing receivables securitized – net						9		5,089		5,936		3,507								5,089		5,936		3,516
Other receivables		1,583		1,670		1,818		489		832		153		(80)		(10)		(35)		1,992		2,492		1,936	⁹
Equipment on operating leases – net								6,502		6,623		6,624								6,502		6,623		6,624
Inventories		10,056		8,495		7,935														10,056		8,495		7,935
Property and equipment – net		6,178		6,021		5,629		34		35		36								6,212		6,056		5,665
Goodwill		3,891		3,687		3,192														3,891		3,687		3,192
Other intangible assets – net		1,255		1,218		1,209														1,255		1,218		1,209
Retirement benefits		3,728		3,666		3,095		67		66		65		(2)		(2)		(2)		3,793		3,730		3,158	¹⁰
Deferred income taxes		1,015		940		1,095		53		45		50		(154)		(161)		(222)		914		824		923	¹¹
Other assets		1,936		1,794		1,730		684		626		477		(23)		(3)		(4)		2,597		2,417		2,203	⁹
Total Assets	$	39,066	$	39,208	$	35,669	$	59,721	$	58,864	$	50,499	$	(7,167)	$	(8,042)	$	(6,554)	$	91,620	$	90,030	$	79,614

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	969	$	1,040	$	1,516	$	13,160	$	11,552	$	9,474							$	14,129	$	12,592	$	10,990
Short-term securitization borrowings						8		4,864		5,711		3,474								4,864		5,711		3,482
Payables to Equipment Operations								5,348		6,569		5,307	$	(5,348)	$	(6,569)	$	(5,307)							⁸
Accounts payable and accrued expenses		11,819		12,962		9,704		2,952		3,170		1,970		(1,663)		(1,310)		(1,023)		13,108		14,822		10,651	⁹
Deferred income taxes		404		380		425		269		276		353		(154)		(161)		(222)		519		495		556	¹¹
Long-term borrowings		8,155		7,917		8,760		26,916		25,679		24,078								35,071		33,596		32,838
Retirement benefits and other liabilities		2,384		2,351		3,182		111		108		109		(2)		(2)		(2)		2,493		2,457		3,289	¹⁰
Total liabilities		23,731		24,650		23,595		53,620		53,065		44,765		(7,167)		(8,042)		(6,554)		70,184		69,673		61,806

Commitments and contingencies (Note 16)
Redeemable noncontrolling interest		100		92																100		92

Stockholders’ Equity
Total Deere & Company stockholders’ equity		21,332		20,262		17,804		6,101		5,799		5,734		(6,101)		(5,799)		(5,734)		21,332		20,262		17,804	¹²
Noncontrolling interests		4		3		4														4		3		4
Financial Services’ equity		(6,101)		(5,799)		(5,734)								6,101		5,799		5,734							¹²
Adjusted total stockholders’ equity		15,235		14,466		12,074		6,101		5,799		5,734								21,336		20,265		17,808
Total Liabilities and Stockholders’ Equity	$	39,066	$	39,208	$	35,669	$	59,721	$	58,864	$	50,499	$	(7,167)	$	(8,042)	$	(6,554)	$	91,620	$	90,030	$	79,614

⁸ Elimination of receivables / payables between equipment operations and financial services.

⁹ Primarily reclassification of sales incentive accruals on receivables sold to financial services.

¹⁰ Reclassification of net pension assets / liabilities.

¹¹ Reclassification of deferred tax assets / liabilities in the same taxing jurisdictions.

¹² Elimination of financial services’ equity.


DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENTS OF CASH FLOWS
For the Three Months Ended January 29, 2023 and January 30, 2022
(In millions of dollars) Unaudited
	EQUIPMENT				FINANCIAL
	OPERATIONS				SERVICES				ELIMINATIONS				CONSOLIDATED
	2023		2022		2023		2022		2023		2022		2023		2022
Cash Flows from Operating Activities
Net income	$	1,772	$	673	$	185	$	231					$	1,957	$	904
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision (credit) for credit losses		1		(2)		(131)		2						(130)
Provision for depreciation and amortization		279		257		252		266	$	(37)	$	(37)		494		486	¹³
Share-based compensation expense										23		18		23		18	¹⁴
Distributed earnings of Financial Services		3		42						(3)		(42)					¹⁵
Provision (credit) for deferred income taxes		(39)		223		(17)		(13)						(56)		210
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		(23)		158						(992)		(264)		(1,015)		(106)	^{16, 18, 19}
Inventories		(1,254)		(1,277)						(25)		(20)		(1,279)		(1,297)	¹⁷
Accounts payable and accrued expenses		(1,458)		(1,346)		145		(66)		(264)		(142)		(1,577)		(1,554)	¹⁸
Accrued income taxes payable/receivable		192		(192)		7		8						199		(184)
Retirement benefits		(49)		(1,012)		1		2						(48)		(1,010)
Other		17		(12)		163		(19)		6		11		186		(20)	^{13, 14, 17}
Net cash provided by (used for) operating activities		(559)		(2,488)		605		411		(1,292)		(476)		(1,246)		(2,553)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)						7,495		6,845		(297)		(410)		7,198		6,435	¹⁶
Proceeds from sales of equipment on operating leases						497		479						497		479
Cost of receivables acquired (excluding receivables related to sales)						(6,375)		(5,719)		53		116		(6,322)		(5,603)	¹⁶
Acquisitions of businesses, net of cash acquired				(24)												(24)
Purchases of property and equipment		(315)		(193)										(315)		(193)
Cost of equipment on operating leases acquired						(531)		(419)		34		28		(497)		(391)	¹⁷
Increase in trade and wholesale receivables						(1,499)		(684)		1,499		684					¹⁶
Collateral on derivatives – net				4		345		(17)						345		(13)
Other		(9)		(22)		(137)		(36)				16		(146)		(42)	¹⁹
Net cash provided by (used for) investing activities		(324)		(235)		(205)		449		1,289		434		760		648

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings		(136)		123		833		(1,141)						697		(1,018)
Change in intercompany receivables/payables		1,469		150		(1,469)		(150)
Proceeds from long-term borrowings		1		18		2,504		2,335						2,505		2,353
Payments of long-term borrowings				(124)		(1,925)		(1,816)						(1,925)		(1,940)
Proceeds from issuance of common stock		21		11										21		11
Repurchases of common stock		(1,257)		(623)										(1,257)		(623)
Dividends paid		(341)		(327)		(3)		(42)		3		42		(341)		(327)	¹⁵
Other		(27)		(22)		(12)		(11)						(39)		(33)
Net cash used for financing activities		(270)		(794)		(72)		(825)		3		42		(339)		(1,577)

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		48		(75)		14		1						62		(74)

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash		(1,105)		(3,592)		342		36						(763)		(3,556)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		3,781		7,200		1,160		925						4,941		8,125
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,676	$	3,608	$	1,502	$	961					$	4,178	$	4,569

Components of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	2,665	$	3,596	$	1,311	$	876					$	3,976	$	4,472
Restricted cash (Other assets)		11		12		191		85						202		97
Total cash, cash equivalents, and restricted cash	$	2,676	$	3,608	$	1,502	$	961					$	4,178	$	4,569

¹³ Elimination of depreciation on leases related to inventory transferred to equipment on operating leases.

¹⁴ Reclassification of share-based compensation expense.

¹⁵ Elimination of dividends from financial services to the equipment operations, which are included in the equipment operations’ operating activities.

¹⁶ Primarily reclassification of receivables related to the sale of equipment.

¹⁷ Reclassification of direct lease agreements with retail customers.

¹⁸ Reclassification of sales incentive accruals on receivables sold to financial services.

¹⁹ Elimination and reclassification of the effects of financial services partial financing of the construction and forestry retail locations sales and subsequent collection of those amounts.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the Company’s most recently filed Annual Report on Form 10-K (Part II, Item 7A). There has been no material change in this information.

Item 4. CONTROLS AND PROCEDURES

The Company’s principal executive officer and its principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) were effective as of January 29, 2023, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act. During the first quarter of 2023, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

See the Company’s most recently filed Annual Report on Form 10-K (Part I, Item 1A). There has been no material change in this information. The risks described in the Annual Report on Form 10-K, and the “Forward-Looking Statements” in this report, are not the only risks faced by the Company. Additional risks and uncertainties may also materially affect the Company’s business, financial condition, or operating results. One should not consider the risk factors to be a complete discussion of risks, uncertainties, and assumptions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s purchases of its common stock during the first quarter of 2023 were as follows:


				Total Number of
				Shares Purchased as	Maximum Number of
	Total Number of			Part of Publicly	Shares that May Yet Be
	Shares			Announced Plans or	Purchased under the
	Purchased (2)	Average Price		Programs (1)	Plans or Programs (1)
Period	(thousands)	Per Share		(thousands)	(millions)
Oct 31 to Nov 27	569	$	402.45	569	47.8
Nov 28 to Dec 25	1,831		436.23	1,774	46.0
Dec 26 to Jan 29	538		427.11	538	45.4
Total	2,938			2,881

(1)

The Company has a share repurchase plan that was announced in December 2019 to purchase up to $8,000 million of shares of the Company’s common stock. The maximum number of shares that may yet be purchased under the December 2019 plan was 2.4 million shares based on the end of the first quarter 2023 closing share price of $418.18 per share. At the end of the first quarter of 2023, $995 million of common stock remains to be purchased under the December 2019 plan. In December 2022, the Board of Directors authorized the repurchase of up to $18,000 million of additional common stock. Based on the first quarter 2023 closing share price, the maximum number of shares that may be repurchased under the December 2022 plan was 43.0 million shares.

(2)

In the first quarter of 2023, 57 thousand shares were acquired from plan participants at a market price to pay payroll taxes on certain restricted stock awards. The shares were valued at a weighted-average market price of $434.88.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Certain instruments relating to long-term borrowings constituting less than 10 percent of the registrant’s total assets are not filed as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant will file copies of such instruments upon request of the Commission.



3.1		Certificate of Incorporation (Exhibit 3.1 to Form 10-Q of registrant for the quarter ended July 28, 2019, Securities and Exchange Commission File Number 1-4121*)

3.2		Bylaws, as amended (Exhibit 3.1 to Form 8-K of registrant filed on December 3, 2020, Securities and Exchange Commission File Number 1-4121*)

10.1		John Deere ERISA Supplementary Pension Benefit Plan, as amended October 31, 2022

31.1		Rule 13a-14(a)/15d-14(a) Certification

31.2		Rule 13a-14(a)/15d-14(a) Certification

32		Section 1350 Certifications (furnished herewith)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Incorporated by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		DEERE & COMPANY


Date:	February 23, 2023	By:	/s/ Joshua A. Jepsen
			Joshua A. Jepsen Senior Vice President and Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)