DE
$441.81
Deere &
$.81
.18%
Earnings Details
Quarter October 2022
Wednesday, November 23, 2022 6:45:00 AM
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Summary

Deere & Beats

Deere & (DE) reported Quarter October 2022 earnings of $7.44 per share on revenue of $15.5 billion. The consensus earnings estimate was $7.08 per share on revenue of $13.4 billion. The Earnings Whisper number was $7.21 per share. Revenue grew 37.2% on a year-over-year basis.

The company said it expects fiscal 2023 net income of $8.00 billion to $8.50 billion, or earnings of approximately $26.63 to $28.30 per share. The current consensus earnings estimate is $26.65 per share for the year ending October 31, 2023.

Deere & Company operates in three business segments: agriculture/ turf, construction/forestry, & financial services. The Company helps customers to be more productive as they help to improve the quality of life for people around the world.

Results
Reported Earnings
$7.44
Earnings Whisper
$7.21
Consensus Estimate
$7.08
Reported Revenue
$15.54 Bil
Revenue Estimate
$13.39 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Deere Reports Net Income of $2.246 Billion for Fourth Quarter, $7.131 Billion for Fiscal Year

  • Fourth-quarter net income rises sharply on net sales gain of 40%, demonstrating strong execution in face of continued supply-chain constraints.
  • Market environment bolstered by favorable industry fundamentals and continuation of strong demand for farm and construction equipment.
  • Full-year 2023 forecast calls for higher sales and net income of $8.0 to $8.5 billion.

MOLINE, Ill., Nov. 23, 2022 /CNW/ -- Deere & Company (NYSE: DE) reported net income of $2.246 billion for the fourth quarter ended October 30, 2022, or $7.44 per share, compared with net income of $1.283 billion, or $4.12 per share, for the quarter ended October 31, 2021. For fiscal-year 2022, net income attributable to Deere & Company was $7.131 billion, or $23.28 per share, compared with $5.963 billion, or $18.99 per share, in fiscal 2021.

Worldwide net sales and revenues increased 37 percent, to $15.536 billion, for the fourth quarter of fiscal 2022 and rose 19 percent, to $52.577 billion, for the full year. Equipment operations net sales were $14.351 billion for the quarter and $47.917 billion for the year, compared with corresponding totals of $10.276 billion and $39.737 billion in 2021.

"Deere's strong performance for both the fourth quarter and full year is a tribute to our dedicated team of employees, dealers, and suppliers throughout the world," said John C. May, chairman and chief executive officer. "We're proud of their extraordinary efforts to overcome supply-chain constraints, increase factory production, and deliver products to our customers."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2023 is forecast to be in a range of $8.0 billion to $8.5 billion.

"Deere is looking forward to another strong year in 2023 based on positive farm fundamentals and fleet dynamics as well as an increased investment in infrastructure," May said. "These factors are expected to support healthy demand for our equipment. At the same time, we have confidence in the smart industrial operating model and our ability to deliver solutions that help our customers be more profitable, productive, and sustainable."

Deere & Company


Fourth Quarter


Full Year


$ in millions, except per share amounts


2022


2021


% Change


2022


2021


% Change


Net sales and revenues


$

15,536


$

11,327


37 %


$

52,577


$

44,024


19 %


Net income


$

2,246


$

1,283


75 %


$

7,131


$

5,963


20 %


Fully diluted EPS


$

7.44


$

4.12




$

23.28


$

18.99




Results for the periods shown were affected by special items. See Note 1 of the financial statements for further details.

Production & Precision Agriculture


Fourth Quarter


$ in millions


2022


2021


% Change


Net sales


$

7,434


$

4,661


59 %


Operating profit


$

1,740


$

777


124 %


Operating margin



23.4 %



16.7 %




Production and precision agriculture sales increased for the quarter due to higher shipment volumes and price realization. Operating profit rose primarily due to improved shipment volumes / mix and price realization. These items were partially offset by higher production costs, higher R&D and SA&G expenses, and the impact of higher reserves on the remaining assets in Russia.

 

Small Agriculture & Turf


Fourth Quarter


$ in millions


2022


2021


% Change


Net sales


$

3,544


$

2,809


26 %


Operating profit


$

506


$

346


46 %


Operating margin



14.3 %



12.3 %




Small agriculture and turf sales increased for the quarter due to higher shipment volumes and price realization, partially offset by the negative effects of currency translation. Operating profit rose primarily due to price realization and improved shipment volumes / mix. These items were partially offset by higher production costs, higher R&D and SA&G expenses, and the unfavorable effects of foreign exchange.

 

Construction & Forestry


Fourth Quarter


$ in millions


2022


2021


% Change


Net sales


$

3,373


$

2,806


20 %


Operating profit


$

414


$

270


53 %


Operating margin



12.3 %



9.6 %




Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes, partially offset by the negative effects of currency translation. Operating profit improved mainly due to price realization and higher sales volume. Partially offsetting these factors were increases in production costs and the impact of higher reserves on the remaining assets in Russia.

 

Financial Services


Fourth Quarter


$ in millions


2022


2021


% Change


Net income


$

232


$

227


2 %


Financial services net income for the quarter rose mainly due to income earned on a higher average portfolio partially offset by less-favorable financing spreads. The provision for credit losses increased, reflecting economic uncertainty in Russia. Financial services received an intercompany benefit from the equipment operations, which guarantees financial services' investments in certain international markets, including Russia.

 

Industry Outlook for Fiscal 2023








Agriculture & Turf








U.S. & Canada:








Large Ag






Up 5 to 10%


Small Ag & Turf






Flat to Down 5%


Europe






Flat to Up 5%


South America (Tractors & Combines)






Flat to Up 5%


Asia






Down moderately










Construction & Forestry








U.S. & Canada:








Construction Equipment






Flat to Up 5%


Compact Construction Equipment






Flat to Up 5%


Global Forestry






~ Flat


Global Roadbuilding






~ Flat


 

Deere Segment Outlook for Fiscal 2023                             


Currency


Price


$ in millions


Net Sales


Translation


Realization


Production & Precision Ag


Up 15 to 20%


-1 %


+11 %


Small Ag & Turf


Flat to Up 5%


-2 %


+7 %


Construction & Forestry


Up ~ 10%


-1 %


+8 %










Financial Services


Net Income


$900




 

Financial Services. Fiscal-year 2023 net income attributable to Deere & Company for the financial services operations is forecast to be $900 million. Results are expected to be slightly higher in fiscal 2023 due to income earned on a higher average portfolio, partially offset by less-favorable financing spreads and lower gains on operating-lease residual values. Excluding the portfolio in Russia, a higher provision for credit losses is forecast for 2023.

John Deere Capital Corporation

The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market.



Fourth Quarter


Full Year


$ in millions


2022


2021


% Change


2022


2021


% Change


Revenue


$

776


$

673


15 %


$

2,759


$

2,688


3 %


Net income


$

184


$

181


2 %


$

704


$

711


-1 %


Ending portfolio balance










$

47,228


$

41,488


14 %


Net income for the fourth quarter of fiscal 2022 was higher than in the previous fourth quarter primarily due to income earned on higher average portfolio balances, partially offset by less-favorable financing spreads. Full-year 2022 net income moved lower than 2021 due to less-favorable financing spreads, a higher provision for credit losses, higher SA&G expenses, and unfavorable discrete income-tax adjustments. These factors were partially offset by income earned on a higher average portfolio. 

FORWARD-LOOKING STATEMENTS

Certain statements contained herein, including in the sections entitled "Company Outlook & Summary," "Industry Outlook for Fiscal 2023," and "Deere Segment Outlook for Fiscal 2023," 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. 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 the company's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q).

Factors Affecting All Lines of Business

All of the company's businesses and their results are affected by general global macroeconomic conditions, including but not limited to inflation, including rising costs for materials used in our production, slower growth or recession, higher interest rates and currency fluctuations which could adversely affect the U.S. dollar and customer confidence, customer access to capital, and overall demand for our products; delays or disruptions in the company's supply chain, including work stoppages or disputes by suppliers with their unionized labor; shipping delays; government spending and taxing; changes in weather and climate patterns; the political and social stability of the markets in which the company operates; the effects of, or response to, wars and other conflicts, including the current conflict between Russia and Ukraine; natural disasters; and the spread of major epidemics or pandemics (including the COVID-19 pandemic).

Significant changes in market liquidity conditions, changes in the company's credit ratings, and any failure to comply with financial covenants in credit agreements could impact our access to or terms of future funding, which could reduce the company's earnings and cash flows. A debt crisis in Europe (including the recent volatility of the United Kingdom's bond market), Latin America, or elsewhere could negatively impact currencies, global financial markets, funding sources and costs, asset and obligation values, customers, suppliers, and demand for equipment. The company's investment management activities could be impaired by changes in the equity, bond, and other financial markets, which would negatively affect earnings.

Additional factors that could materially affect the company's operations, financial condition, and results include changes in governmental trade, banking, monetary, and fiscal policies, including policies and tariffs for the benefit of certain industries or sectors; actions by environmental, health, and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, and the effects of climate change; changes to GPS radio frequency bands and their permitted uses; speed of research and development; effectiveness of partnerships with third parties; the dealer channel's ability to support and service precision technology solutions; changes to accounting standards; changes to and compliance with economic sanctions and export controls laws and regulations (including those in place for Russia); and compliance with evolving U.S. and foreign laws when expanding to new markets and otherwise.

Other factors that could materially affect the company's results and operations include security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the company and its suppliers and dealers; security breaches with respect to the company's products; the loss of or challenges to intellectual property rights; the availability and prices of strategically sourced materials, components, and whole goods; introduction of legislation that could affect the company's business model and intellectual property, such as so-called right to repair or right to modify legislation; events that damage the company's reputation or brand; significant investigations, claims, lawsuits, or other legal proceedings; the success or failure of new product initiatives or business strategies; changes in product preferences, sales mix, and take rates of products and life cycle solutions; gaps or limitations in rural broadband coverage, capacity, and speed needed to support technology solutions; oil and energy prices, supplies, and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices, especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; the inability to deliver precision technology and agricultural solutions to customers; labor relations and contracts, including work stoppages and other disruptions; changes in the ability to attract, develop, engage, and retain qualified personnel; and the integration of acquired businesses.

Production & Precision Agriculture and Small Agriculture & Turf Operations

The company's agricultural equipment operations are subject to a number of uncertainties, including customer profitability; consumer purchasing preferences; housing starts and supply; infrastructure investment; and consumable input costs. Additionally, these operations are subject to certain factors that affect farmers' confidence and financial condition. These factors include demand for agricultural products; world grain stocks; soil conditions; harvest yields; prices for commodities and livestock; availability and cost of fertilizer; availability of transport for crops; the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production); real estate values; availability of technological innovations; available acreage for farming; changes in government farm programs and policies; changes in and effects of crop insurance programs; changes in environmental regulations and their impact on farming practices; animal diseases and their effects on poultry, beef, and pork consumption and prices on livestock feed demand; and crop pests and diseases.

Production and Precision Agriculture Operations

In addition to the uncertainties discussed above, the production and precision agriculture operations rely in part on hardware and software, guidance, connectivity and digital solutions, and automation and machine intelligence. Many factors contribute to the company's precision agriculture sales and results, including the impact to customers' profitability and/or sustainability outcomes.

Small Agriculture and Turf Equipment

In addition to the uncertainties discussed above, factors affecting the company's small agriculture and turf equipment operations include spending by municipalities and golf courses.

Construction and Forestry

Factors affecting the company's construction and forestry equipment operations include real estate and housing prices; the number of housing starts; commodity prices such as oil and gas; the levels of public and non-residential construction; and investment in infrastructure, while prices for pulp, paper, lumber, and structural panels affect sales of forestry equipment.

John Deere Financial

The liquidity and ongoing profitability of John Deere Capital Corporation and the company's other financial services subsidiaries depend on timely access to capital to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products. If general economic conditions deteriorate further or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.

 

DEERE & COMPANY
FOURTH QUARTER 2022 PRESS RELEASE
(In millions of dollars) Unaudited



Three Months Ended


Years Ended



October 30


October 31


%


October 30


October 31


%



2022


2021


Change


2022


2021


Change

Net sales and revenues:

















Production & precision ag net sales


$

7,434


$

4,661


+59


$

22,002


$

16,509


+33

Small ag & turf net sales



3,544



2,809


+26



13,381



11,860


+13

Construction & forestry net sales



3,373



2,806


+20



12,534



11,368


+10

Financial services revenues



988



869


+14



3,625



3,548


+2

Other revenues



197



182


+8



1,035



739


+40

Total net sales and revenues


$

15,536


$

11,327


+37


$

52,577


$

44,024


+19


















Operating profit: *

















Production & precision ag


$

1,740


$

777


+124


$

4,386


$

3,334


+32

Small ag & turf



506



346


+46



1,949



2,045


-5

Construction & forestry



414



270


+53



2,014



1,489


+35

Financial services



297



299


-1



1,159



1,144


+1

Total operating profit



2,957



1,692


+75



9,508



8,012


+19

Reconciling items **



(68)



(79)


-14



(370)



(391)


-5

Income taxes



(643)



(330)


+95



(2,007)



(1,658)


+21

Net income attributable to
     Deere & Company


$

2,246


$

1,283


+75


$

7,131


$

5,963


+20

*

Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses.



**

Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.

 

DEERE & COMPANY
STATEMENTS OF CONSOLIDATED INCOME
For the Three Months and Years Ended October 30, 2022 and October 31, 2021
(In millions of dollars and shares except per share amounts) Unaudited



Three Months Ended


Years Ended



2022


2021


2022


2021

Net Sales and Revenues













Net sales


$

14,351


$

10,276


$

47,917


$

39,737

Finance and interest income



925



828



3,365



3,296

Other income



260



223



1,295



991

Total



15,536



11,327



52,577



44,024














Costs and Expenses













Cost of sales



10,214



7,809



35,338



29,116

Research and development expenses



576



450



1,912



1,587

Selling, administrative and general expenses



1,192



936



3,863



3,383

Interest expense



348



210



1,062



993

Other operating expenses



320



309



1,275



1,343

Total



12,650



9,714



43,450



36,422














Income of Consolidated Group before Income Taxes



2,886



1,613



9,127



7,602

Provision for income taxes



643



330



2,007



1,658














Income of Consolidated Group



2,243



1,283



7,120



5,944

Equity in income of unconsolidated affiliates



1



1



10



21














Net Income



2,244



1,284



7,130



5,965

Less: Net income (loss) attributable to noncontrolling interests



(2)



1



(1)



2

Net Income Attributable to Deere & Company


$

2,246


$

1,283


$

7,131


$

5,963














Per Share Data













Basic


$

7.48


$

4.15


$

23.42


$

19.14

Diluted


$

7.44


$

4.12


$

23.28


$

18.99

Dividends declared


$

1.13


$

1.05


$

4.36


$

3.61

Dividends paid


$

1.13


$

.90


$

4.28


$

3.32














Average Shares Outstanding













Basic



300.4



309.1



304.5



311.6

Diluted



302.1



311.5



306.3



314.0


See Condensed Notes to Consolidated Financial Statements.

 

DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of October 30, 2022 and October 31, 2021
(In millions of dollars) Unaudited 










2022


2021

Assets







Cash and cash equivalents


$

4,774


$

8,017

Marketable securities



734



728

Trade accounts and notes receivable - net



6,410



4,208

Financing receivables - net



36,634



33,799

Financing receivables securitized - net



5,936



4,659

Other receivables



2,492



1,765

Equipment on operating leases - net



6,623



6,988

Inventories



8,495



6,781

Property and equipment - net



6,056



5,820

Goodwill



3,687



3,291

Other intangible assets - net



1,218



1,275

Retirement benefits



3,730



3,601

Deferred income taxes



824



1,037

Other assets



2,417



2,145

Total Assets


$

90,030


$

84,114








Liabilities and Stockholders' Equity














Liabilities







Short-term borrowings


$

12,592


$

10,919

Short-term securitization borrowings



5,711



4,605

Accounts payable and accrued expenses



14,822



12,348

Deferred income taxes



495



576

Long-term borrowings



33,596



32,888

Retirement benefits and other liabilities



2,457



4,344

Total liabilities



69,673



65,680








Redeemable noncontrolling interest



92











Stockholders' Equity







Total Deere & Company stockholders' equity



20,262



18,431

Noncontrolling interests



3



3

Total stockholders' equity



20,265



18,434

Total Liabilities and Stockholders' Equity


$

90,030


$

84,114


See Condensed Notes to Consolidated Financial Statements.

 

DEERE & COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended October 30, 2022 and October 31, 2021
(In millions of dollars) Unaudited



2022


2021

Cash Flows from Operating Activities







Net income


$

7,130


$

5,965

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







Provision (credit) for credit losses



192



(6)

Provision for depreciation and amortization



1,895



2,050

Impairment charges



88



50

Share-based compensation expense



85



82

Gain on remeasurement of previously held equity investment



(326)




Credit for deferred income taxes



(66)



(441)

Changes in assets and liabilities:







Trade, notes, and financing receivables related to sales



(2,483)



969

Inventories



(2,091)



(2,497)

Accounts payable and accrued expenses



1,133



1,884

Accrued income taxes payable/receivable



141



11

Retirement benefits



(1,015)



29

Other



16



(370)

Net cash provided by operating activities



4,699



7,726








Cash Flows from Investing Activities







Collections of receivables (excluding receivables related to sales)



20,907



18,959

Proceeds from sales of equipment on operating leases



2,093



2,094

Cost of receivables acquired (excluding receivables related to sales)



(26,300)



(23,653)

Acquisitions of businesses, net of cash acquired



(498)



(244)

Purchases of property and equipment



(1,134)



(848)

Cost of equipment on operating leases acquired



(2,654)



(1,732)

Collateral on derivatives - net



(642)



(281)

Other



(257)



(45)

Net cash used for investing activities



(8,485)



(5,750)








Cash Flows from Financing Activities







Increase in total short-term borrowings



3,852



818

Proceeds from long-term borrowings



10,358



8,722

Payments of long-term borrowings



(8,445)



(7,090)

Proceeds from issuance of common stock



63



148

Repurchases of common stock



(3,597)



(2,538)

Dividends paid



(1,313)



(1,040)

Other



(92)



(98)

Net cash provided by (used for) financing activities



826



(1,078)








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



(224)



55








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



(3,184)



953

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



8,125



7,172

Cash, Cash Equivalents, and Restricted Cash at End of Year


$

4,941


$

8,125


See Condensed Notes to Consolidated Financial Statements.

 

DEERE & COMPANY
Condensed Notes to Consolidated Financial Statements
(In millions of dollars) Unaudited


(1)

Acquisitions
In the second quarter of 2022, the company acquired majority ownership in Kreisel Electric Inc., a pioneer in the development of immersion-cooled battery technology. The total cash purchase price, net of cash acquired, was $276 million. Most of the consideration was allocated to Goodwill and Other intangible assets.




In the second quarter of 2022, the company acquired full ownership of three Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi Construction Machinery. The two companies also ended their joint venture manufacturing and marketing agreements. The total invested capital was $690 million, which consists of net cash consideration and the fair value of the previously held equity investment in the joint venture. The fair value of the previous equity investment created a non-cash gain of $326 million (pretax and after-tax), which was recorded in Other income and included in the construction and forestry segment's operating profit. The invested capital was primarily allocated to Goodwill, Inventories, and Property and equipment.




Special Items
As a result of the events in Russia / Ukraine, the company has suspended shipments to Russia, which will reduce forecasted revenue for the region, and initiated a voluntary employee-separation program. The accounting consequences during 2022 were an increase in reserves of financial assets, impairments of most long-lived assets, and an increase in inventory reserves. The company continues to closely monitor all financial risks to its operations in the region. During the fourth quarter, the company increased its allowance for credit losses, reflecting economic uncertainty in Russia. The financial services received an intercompany benefit from the equipment operations, which guarantees the financial services' investment in certain international markets, including Russia. As of October 30, 2022, the company's net exposure in Russia / Ukraine was approximately $266 million, primarily related to financial assets and inventory. Net sales from the company's Russian operations represented 2 percent of consolidated annual net sales from 2017 to 2021. A summary of the reserves and impairments recorded in 2022 follows in millions of dollars:

 



Three Months Ended Oct. 30, 2022


Year Ended Oct. 30, 2022


Expense (benefit):


PPA


SAT


CF


FS


Total


PPA


SAT


CF


FS


Total


Inventory reserve – Cost of sales


$

7











$

7


$

14


$

2


$

3





$

19


Fixed asset impairment –
     Cost of sales


















30






11






41


Intangible asset impairment –
     Cost of sales
























28






28


Allowance for credit losses –
     Financing receivables –
     SA&G expenses











$

121



121











$

153



153


Voluntary-separation program –
     Cost of sales



2












2



3












3


Voluntary-separation program –
     SA&G expenses



1





$

2






3



4






6



1



11


Contingent liabilities – Other
      operating expenses



(3)






(2)






(5)

















Intercompany agreement



63


$

8



50



(121)






82



9



62



(153)





Total Russia/Ukraine events
     pretax expense


$

70


$

8


$

50






128


$

133


$

11


$

110


$

1



255


































Net tax impact















(32)















(40)


Total Russia/Ukraine events
     after-tax expense














$

96














$

215


 

In the first quarter of 2022, the company had a one-time payment related to the ratification of the UAW collective bargaining agreement, totaling $90 million.

In the third quarter of 2021, the company sold a closed factory that previously produced small agriculture equipment in China, resulting in a $27 million pretax gain. During the first quarter of 2021, the fixed assets in an asphalt plant factory in Germany were impaired by $38 million, pretax and after-tax. The company also continued to assess its manufacturing locations, resulting in additional long-lived asset impairments of $12 million pretax. The impairments were the result of a decline in forecasted financial performance that indicated it was probable future cash flows would not cover the carrying amount of the net assets. These impairments were offset by a favorable indirect tax ruling in Brazil of $58 million pretax. There were no special items in the fourth quarter of 2021.

The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months and fiscal years ended October 30, 2022 and October 31, 2021:



Three Months


Fiscal Years




PPA


SAT


CF


FS


Total


PPA


SAT


CF


FS


Total


2022 Expense (benefit):
































Gain on remeasurement of equity
      investment – Other income























$

(326)





$

(326)


Total Russia/Ukraine events
      pretax expense


$

70


$

8


$

50





$

128


$

133


$

11



110


$

1



255


UAW ratification bonus –
     Cost of sales


















53



9



28






90


Total expense (benefit)



70



8



50






128



186



20



(188)



1



19


































2021 Expense (benefit):
































Gain on sale – Other income





















(27)









(27)


Long-lived asset impairments –
     Cost of sales


















5



3



42






50


Brazil indirect tax – Cost of sales


















(53)






(5)






(58)


Total expense (benefit)


















(48)



(24)



37






(35)


































Period over period change


$

70


$

8


$

50





$

128


$

234


$

44


$

(225)


$

1


$

54


 

(2)

Prior to fiscal year 2021, the operating results of the Wirtgen Group (Wirtgen) were incorporated into the company's consolidated financial statements using a one-month lag period. The reporting lag was eliminated resulting in one additional month of Wirtgen activity in the first quarter and fiscal year of 2021. The effect was an increase to Net sales of $270 million, which the company considers immaterial to construction and forestry's annual net sales.



(3)

The calculation of basic net income per share is based on the average number of shares outstanding. The calculation of diluted net income per share recognizes any dilutive effect of share-based compensation.



(4)

The consolidated financial statements represent the consolidation of all Deere & Company's subsidiaries. The supplemental consolidating data is presented for informational purposes. Transactions between the Equipment Operations and Financial Services have been eliminated to arrive at the consolidated financial statements. In the supplemental consolidating data in Note 5 to the financial statements, the "Equipment Operations" represents the enterprise without "Financial Services", which include the company's production and precision agriculture operations, small agriculture and turf operations, and construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within "Financial Services."

 

DEERE & COMPANY
(5) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENTS OF INCOME
For the Three Months Ended October 30, 2022 and October 31, 2021
(In millions of dollars) Unaudited 








EQUIPMENT


FINANCIAL


















OPERATIONS


SERVICES


ELIMINATIONS


CONSOLIDATED






2022


2021


2022


2021


2022


2021


2022


2021




Net Sales and Revenues




























Net sales


$

14,351


$

10,276














$

14,351


$

10,276




Finance and interest income



83



39


$

1,003


$

859


$

(161)


$

(70)



925



828


1


Other income



233



229



231



84



(204)



(90)



260



223


2, 3


Total



14,667



10,544



1,234



943



(365)



(160)



15,536



11,327
































Costs and Expenses




























Cost of sales



10,215



7,811









(1)



(2)



10,214



7,809


 4


Research and development expenses



576



450















576



450




Selling, administrative and general expenses



922



798



272



140



(2)



(2)



1,192



936


 4


Interest expense



93



81



306



148



(51)



(19)



348



210


 5


Interest compensation to Financial Services



110



51









(110)



(51)








 5


Other operating expenses



163



40



358



355



(201)



(86)



320



309


6, 7


Total



12,079



9,231



936



643



(365)



(160)



12,650



9,714
































Income before Income Taxes



2,588



1,313



298



300









2,886



1,613




Provision for income taxes



576



256



67



74









643



330
































Income after Income Taxes



2,012



1,057



231



226









2,243



1,283




Equity in income of unconsolidated affiliates









1



1









1



1
































Net Income



2,012



1,057



232



227









2,244



1,284




Less: Net income (loss) attributable to
     noncontrolling interests



(2)



1















(2)



1




Net Income Attributable to Deere & Company


$

2,014


$

1,056


$

232


$

227








$

2,246


$

1,283





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.

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.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENTS OF INCOME
For the Years Ended October 30, 2022 and October 31, 2021
(In millions of dollars) Unaudited










EQUIPMENT


FINANCIAL


















OPERATIONS


SERVICES


ELIMINATIONS


CONSOLIDATED






2022


2021


2022


2021


2022


2021


2022


2021




Net Sales and Revenues




























Net sales


$

47,917


$

39,737














$

47,917


$

39,737




Finance and interest income



213



133


$

3,583


$

3,442


$

(431)


$

(279)



3,365



3,296


 1


Other income



1,261



941



502



352



(468)



(302)



1,295



991


2, 3


Total



49,391



40,811



4,085



3,794



(899)



(581)



52,577



44,024
































Costs and Expenses




























Cost of sales



35,341



29,119









(3)



(3)



35,338



29,116


 4


Research and development expenses



1,912



1,587















1,912



1,587




Selling, administrative and general expenses



3,137



2,887



735



504



(9)



(8)



3,863



3,383


 4


Interest expense



390



368



799



687



(127)



(62)



1,062



993


 5


Interest compensation to Financial Services



299



217









(299)



(217)








 5


Other operating expenses



350



181



1,386



1,453



(461)



(291)



1,275



1,343


6, 7


Total



41,429



34,359



2,920



2,644



(899)



(581)



43,450



36,422
































Income before Income Taxes



7,962



6,452



1,165



1,150









9,127



7,602




Provision for income taxes



1,718



1,386



289



272









2,007



1,658
































Income after Income Taxes



6,244



5,066



876



878









7,120



5,944




Equity in income of unconsolidated affiliates



6



18



4



3









10



21
































Net Income



6,250



5,084



880



881









7,130



5,965




Less: Net income (loss) attributable to
     noncontrolling interests



(1)



2















(1)



2




Net Income Attributable to Deere & Company


$

6,251


$

5,082


$

880


$

881








$

7,131


$

5,963






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.

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.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEETS
As of October 30, 2022 and October 31, 2021
(In millions of dollars) Unaudited








EQUIPMENT


FINANCIAL

















OPERATIONS


SERVICES


ELIMINATIONS


CONSOLIDATED





2022


2021


2022


2021


2022


2021


2022


2021




Assets



























Cash and cash equivalents

$

3,767


$

7,188


$

1,007


$

829








$

4,774


$

8,017




Marketable securities


61



3



673



725









734



728




Receivables from Financial Services


6,569



5,564








$

(6,569)


$

(5,564)








 8


Trade accounts and notes
     receivable - net


1,273



1,155



6,434



3,895



(1,297)



(842)



6,410



4,208


 9


Financing receivables - net


47



73



36,587



33,726









36,634



33,799




Financing receivables securitized - net





10



5,936



4,649









5,936



4,659




Other receivables


1,670



1,629



832



159



(10)



(23)



2,492



1,765


 9


Equipment on operating leases - net








6,623



6,988









6,623



6,988




Inventories


8,495



6,781















8,495



6,781




Property and equipment - net


6,021



5,783



35



37









6,056



5,820




Goodwill


3,687



3,291















3,687



3,291




Other intangible assets - net


1,218



1,275















1,218



1,275




Retirement benefits


3,666



3,539



66



64



(2)



(2)



3,730



3,601


 10


Deferred income taxes


940



1,215



45



53



(161)



(231)



824



1,037


 11


Other assets


1,794



1,646



626



499



(3)






2,417



2,145




Total Assets

$

39,208


$

39,152


$

58,864


$

51,624


$

(8,042)


$

(6,662)


$

90,030


$

84,114































Liabilities and Stockholders' Equity






















































Liabilities



























Short-term borrowings

$

1,040


$

1,509


$

11,552


$

9,410








$

12,592


$

10,919




Short-term securitization borrowings





10



5,711



4,595









5,711



4,605




Payables to Equipment Operations








6,569



5,564


$

(6,569)


$

(5,564)








 8


Accounts payable and
     accrued expenses


12,962



11,198



3,170



2,015



(1,310)



(865)



14,822



12,348


 9


Deferred income taxes


380



438



276



369



(161)



(231)



495



576


 11


Long-term borrowings


7,917



8,915



25,679



23,973









33,596



32,888




Retirement benefits and
     other liabilities


2,351



4,239



108



107



(2)



(2)



2,457



4,344


 10


Total liabilities


24,650



26,309



53,065



46,033



(8,042)



(6,662)



69,673



65,680































Redeemable noncontrolling interest


92


















92


































Stockholders' Equity



























Total Deere & Company
     stockholders' equity


20,262



18,431



5,799



5,591



(5,799)



(5,591)



20,262



18,431


 12


Noncontrolling interests


3



3















3



3




Financial Services equity


(5,799)



(5,591)









5,799



5,591








 12


Adjusted total stockholders' equity


14,466



12,843



5,799



5,591









20,265



18,434




Total Liabilities and
     Stockholders' Equity

$

39,208


$

39,152


$

58,864


$

51,624


$

(8,042)


$

(6,662)


$

90,030


$

84,114





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 Years Ended October 30, 2022 and October 31, 2021
(In millions of dollars) Unaudited








EQUIPMENT


FINANCIAL


















OPERATIONS


SERVICES


ELIMINATIONS


CONSOLIDATED






2022


2021


2022


2021


2022


2021


2022


2021




Cash Flows from Operating Activities




























Net income


$

6,250


$

5,084


$

880


$

881








$

7,130


$

5,965




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




























Provision (credit) for credit losses



3



7



189



(13)









192



(6)




Provision for depreciation and amortization



1,041



1,043



1,050



1,140


$

(196)


$

(133)



1,895



2,050


 13


Impairment charges



88



50















88



50




Share-based compensation expense















85



82



85



82


 14


Gain on remeasurement of previously held equity investment



(326)


















(326)







Undistributed earnings of Financial Services



444



555









(444)



(555)








 15


Provision (credit) for deferred income taxes



8



(369)



(74)



(72)









(66)



(441)




Changes in assets and liabilities:




























Trade, notes, and financing receivables related to sales



(189)



(105)









(2,294)



1,074



(2,483)



969


16, 18, 19


Inventories



(1,924)



(1,835)









(167)



(662)



(2,091)



(2,497)


 17


Accounts payable and accrued expenses



1,444



1,589



143



57



(454)



238



1,133



1,884


 18


Accrued income taxes payable/receivable



166



13



(25)



(2)









141



11




Retirement benefits



(1,016)



30



1



(1)









(1,015)



29




Other



250



(162)



(287)



(25)



53



(183)



16



(370)


13, 14, 17


Net cash provided by operating activities



6,239



5,900



1,877



1,965



(3,417)



(139)



4,699



7,726
































Cash Flows from Investing Activities




























Collections of receivables (excluding receivables related
      to sales)









22,400



20,527



(1,493)



(1,568)



20,907



18,959


 16


Proceeds from sales of equipment on operating leases









2,093



2,094









2,093



2,094




Cost of receivables acquired (excluding receivables related
     to sales)









(26,903)



(25,305)



603



1,652



(26,300)



(23,653)


 16


Acquisitions of businesses, net of cash acquired



(498)



(244)















(498)



(244)




Purchases of property and equipment



(1,131)



(845)



(3)



(3)









(1,134)



(848)




Cost of equipment on operating leases acquired









(2,879)



(2,627)



225



895



(2,654)



(1,732)


 17


Decrease (increase) in trade and wholesale receivables









(3,601)



1,364



3,601



(1,364)








 16


Collateral on derivatives - net



5



(7)



(647)



(274)









(642)



(281)




Other



(206)



62



(81)



(84)



30



(23)



(257)



(45)


15, 19


Net cash used for investing activities



(1,830)



(1,034)



(9,621)



(4,308)



2,966



(408)



(8,485)



(5,750)
































Cash Flows from Financing Activities




























Increase in total short-term borrowings



136



65



3,716



753









3,852



818




Change in intercompany receivables/payables



(1,633)



(354)



1,633



354
















Proceeds from long-term borrowings



138



11



10,220



8,711









10,358



8,722




Payments of long-term borrowings



(1,356)



(94)



(7,089)



(6,996)









(8,445)



(7,090)




Proceeds from issuance of common stock



63



148















63



148




Repurchases of common stock



(3,597)



(2,538)















(3,597)



(2,538)




Dividends paid



(1,313)



(1,040)



(444)



(555)



444



555



(1,313)



(1,040)


 15


Other



(57)



(61)



(42)



(29)



7



(8)



(92)



(98)


 15


Net cash provided by (used for) financing activities



(7,619)



(3,863)



7,994



2,238



451



547



826



(1,078)
































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



(209)



41



(15)



14









(224)



55
































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



(3,419)



1,044



235



(91)









(3,184)



953




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



7,200



6,156



925



1,016









8,125



7,172




Cash, Cash Equivalents, and Restricted Cash at
     End of Year


$

3,781


$

7,200


$

1,160


$

925








$

4,941


$

8,125





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, and capital investments in Financial Services from the Equipment Operations.

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.

 

DEERE & COMPANY
OTHER FINANCIAL INFORMATION

The company evaluates its business results on the basis of accounting principles generally accepted in the United States. In addition, it uses a metric referred to as Shareholder Value Added (SVA), which management believes is an appropriate measure for the performance of its businesses. SVA is, in effect, the pretax profit left over after subtracting the cost of enterprise capital. The company is aiming for a sustained creation of SVA and is using this metric for various performance goals. Certain compensation is also determined on the basis of performance using this measure. For purposes of determining SVA, each of the equipment segments is assessed a pretax cost of assets, which on an annual basis is approximately 12 percent of the segment's average identifiable operating assets during the applicable period with inventory at standard cost. Management believes that valuing inventories at standard cost more closely approximates the current cost of inventory and the company's investment in the asset. The Financial Services segment is assessed an annual pretax cost of approximately 13 percent of the segment's average equity. The cost of assets or equity, as applicable, is deducted from the operating profit or added to the operating loss of each segment to determine the amount of SVA.



Equipment

Production &

Small Ag

Construction


For the Years Ended


Operations

Precision Ag

& Turf

& Forestry




Oct 30

Oct 31

Oct 30

Oct 31

Oct 30

Oct 31

Oct 30

Oct 31


Dollars in millions


2022

2021

2022

2021

2022

2021

2022

2021


Net Sales


$

47,917


$

39,737


$

22,002


$

16,509


$

13,381


$

11,860


$

12,534


$

11,368



Average Identifiable Assets



























With Inventories at LIFO


$

19,420


$

16,680


$

8,336


$

6,640


$

4,349


$

3,625


$

6,735


$

6,415



With Inventories at Standard Cost



20,983



18,045



9,118



7,321



4,795



4,047



7,070



6,677



Operating Profit


$

8,349


$

6,868


$

4,386


$

3,334


$

1,949


$

2,045


$

2,014


$

1,489



Percent of Net Sales



17.4

%


17.3

%


19.9

%


20.2

%


14.6

%


17.2

%


16.1

%


13.1

%


Operating Return on Assets



























With Inventories at LIFO



43.0

%


41.2

%


52.6

%


50.2

%


44.8

%


56.4

%


29.9

%


23.2

%


With Inventories at Standard Cost



39.8

%


38.1

%


48.1

%


45.5

%


40.6

%


50.5

%


28.5

%


22.3

%


SVA Cost of Assets


$

(2,519)


$

(2,165)


$

(1,094)


$

(878)


$

(576)


$

(486)


$

(849)


$

(801)



SVA



5,830



4,703



3,292



2,456



1,373



1,559



1,165



688
































Financial




















For the Years Ended


Services






















Oct 30

Oct 31




















Dollars in millions



2022



2021





















Net Income Attributable to Deere & Company


$

880


$

881





















Average Equity



5,725



5,497





















Return on Equity



15.4

%


16.0

%




















Operating Profit


$

1,159


$

1,144





















Cost of Equity



(760)



(719)





















SVA



399



425





















 

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SOURCE Deere & Company