Deere & Co. 10-Q 2022-01-30

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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 30, 2022

or

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

For the transition period from ____ to ____

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Commission file no: 1-4121

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DEERE & COMPANY

(Exact name of registrant as specified in its charter)

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

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One John Deere Place

Moline**,** Illinois 61265

(Address of principal executive offices)

Telephone Number: (309) 765-8000

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

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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

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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 ☐

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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	☐

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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. ☐

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

Yes ☐ No ☒

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At January 30, 2022, 306,784,327 shares of common stock, $1 par value, of the registrant were outstanding.

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PART I. FINANCIAL INFORMATION

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ITEM 1. FINANCIAL STATEMENTS	​	​	​	​	​	​	​
DEERE & COMPANY	​	​	​	​	​	​	​
STATEMENTS OF CONSOLIDATED INCOME	​	​	​	​	​	​	​
For the Three Months Ended January 30, 2022 and January 31, 2021	​	​	​	​	​	​	​
(In millions of dollars and shares except per share amounts) Unaudited	​	​	​	​	​	​	​
​		2022			2021
Net Sales and Revenues	​	​	​	​	​	​	​
Net sales		$	8,531	​	$	8,051	​
Finance and interest income	​	​	800	​		834	​
Other income	​	​	238	​		227	​
Total	​	​	9,569	​		9,112	​
​	​	​	​	​	​	​	​
Costs and Expenses	​	​	​	​	​	​	​
Cost of sales	​	​	6,695	​		5,805	​
Research and development expenses	​	​	402	​		366	​
Selling, administrative and general expenses	​	​	781	​		769	​
Interest expense	​	​	229	​		271	​
Other operating expenses	​	​	311	​		373	​
Total	​	​	8,418	​		7,584	​
​	​	​	​	​	​	​	​
Income of Consolidated Group before Income Taxes	​	​	1,151	​		1,528	​
Provision for income taxes	​	​	250	​		308	​
​	​	​	​	​	​	​	​
Income of Consolidated Group	​	​	901	​		1,220	​
Equity in income of unconsolidated affiliates	​	​	3	​		4	​
​	​	​	​	​	​	​	​
Net Income	​	​	904	​		1,224	​
Less: Net income attributable to noncontrolling interests	​	​	1	​		​	​
Net Income Attributable to Deere & Company		$	903	​	$	1,224	​
​	​	​	​	​	​	​	​
Per Share Data	​	​	​	​	​	​	​
Basic		$	2.94	​	$	3.90	​
Diluted		$	2.92	​	$	3.87	​
Dividends declared	​	$	1.05	​	$	.76	​
Dividends paid	​	$	1.05	​	$	.76	​
​	​	​	​	​	​	​	​
Average Shares Outstanding	​	​	​	​	​	​	​
Basic	​	​	307.4	​		313.5	​
Diluted	​	​	309.4	​		316.1	​
​	​	​	​	​	​	​	​

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See Condensed Notes to Interim Consolidated Financial Statements.

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DEERE & COMPANY	​	​	​	​	​	​	​
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME	​	​	​	​	​	​	​
For the Three Months Ended January 30, 2022 and January 31, 2021	​	​	​	​	​	​	​
(In millions of dollars) Unaudited	​	​	​	​	​	​	​
​		2022			2021
​	​	​	​	​	​	​
Net Income		$	904	​	$	1,224	​
​	​	​	​	​	​	​	​
Other Comprehensive Income (Loss), Net of Income Taxes	​	​	​	​	​	​	​
Retirement benefits adjustment	​	​	(345)	​		63	​
Cumulative translation adjustment	​	​	(267)	​		396	​
Unrealized gain on derivatives	​	​	14	​		4	​
Unrealized loss on debt securities	​	​	(15)	​		(2)	​
Other Comprehensive Income (Loss), Net of Income Taxes	​	​	(613)	​		461	​
​	​	​	​	​	​	​	​
Comprehensive Income of Consolidated Group	​	​	291	​		1,685	​
Less: Comprehensive income attributable to noncontrolling interests	​	​	1	​		​	​
Comprehensive Income Attributable to Deere & Company		$	290	​	$	1,685	​
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See Condensed Notes to Interim Consolidated Financial Statements.

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DEERE & COMPANY	​	​	​	​	​	​	​	​	​	​
CONDENSED CONSOLIDATED BALANCE SHEETS	​	​	​	​	​	​	​	​	​	​
(In millions of dollars) Unaudited	​	​	​	​	​	​	​	​	​	​
​		January 30			October 31			January 31
​	​	2022		​	2021		​	2021
Assets	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents		$	4,472	​	$	8,017	​	$	6,962	​
Marketable securities	​	​	735	​		728	​		667	​
Receivables from unconsolidated affiliates	​	​	33	​		27	​		28	​
Trade accounts and notes receivable – net	​	​	4,855	​		4,208	​		5,037	​
Financing receivables – net	​	​	33,191	​		33,799	​		29,438	​
Financing receivables securitized – net	​	​	3,516	​		4,659	​		3,931	​
Other receivables	​	​	1,903	​		1,738	​		1,141	​
Equipment on operating leases – net	​	​	6,624	​		6,988	​		7,030	​

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RESULTS OF OPERATIONS

Overview

Organization

The Company’s equipment operations generate revenues and cash primarily from the sale of equipment to John Deere dealers and distributors. The equipment operations manufacture and distribute a full line of agricultural equipment; a variety of commercial and consumer equipment; and a broad range of equipment for construction, roadbuilding, and forestry. The Company’s financial services primarily provide credit services, which mainly finance sales and leases of equipment by John Deere dealers and trade receivables purchased from the equipment operations. In addition, financial services offers extended equipment warranties. The information in the following discussion is presented in a format that includes information grouped as consolidated, equipment operations, and financial services. The Company also views its operations as consisting of two geographic areas: the U.S. and Canada and outside the U.S. and Canada. The Company’s operating segments consist of production and precision agriculture, small agriculture and turf, construction and forestry, and financial services.

Trends and Economic Conditions for Fiscal Year 2022

Industry sales of large agricultural machinery in the U.S. and Canada are forecasted to be up 20 percent. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat. Industry sales of agricultural machinery in Europe are forecasted to be about 5 percent higher. In South America, industry sales of tractors and combines are projected to increase 5 to 10 percent. Asia industry sales of agricultural machinery are forecasted to be flat. Construction equipment industry sales in the U.S. and Canada for 2022 are expected to increase 5 to 10 percent, while compact construction equipment industry sales in the U.S. and Canada are anticipated to be flat to up about 5 percent. Forestry global industry equipment sales are expected to be 10 to 15 percent higher. Global industry roadbuilding equipment sales are forecasted to be up 5 to 10 percent. Net income for the Company’s financial services operations is expected to be slightly lower than fiscal year 2021 due to a higher provision for credit losses, lower gains on operating lease residual values, and higher selling, general, and administrative expenses. These factors are expected to be partially offset by income earned on a higher average portfolio.

Items of concern include global and regional political conditions, economic and trade policies, uncertainty of the effectiveness of governmental and private sector actions to address the ongoing pandemic, capital market disruptions, changes in demand and pricing for new and used equipment, and the other items discussed in the “Safe Harbor Statement” below. Significant fluctuations in foreign currency exchange rates, volatility in the price of many commodities, and supply chain disruptions could also impact the Company’s results.

The Company’s first quarter performance was noteworthy given production issues following the delayed ratification of the UAW contract in late November as well as persistent challenges posed by the supply chain and pandemic. These factors contributed to higher production costs. Demand for agriculture and construction equipment is expected to continue to benefit from strong fundamentals. The Company continues to work closely with key suppliers to manage through the dynamic environment and enable the Company’s dealers and customers to deliver food production and critical infrastructure. The Company remains committed, above all else, to safeguarding the health and well-being of its employees.

2022 Compared with 2021

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​	​	Three Months Ended					​
Deere & Company	​	January 30		​	January 31		​
(In millions of dollars, except per share amounts)	​	2022		​	2021		​
Net sales and revenues	​	$	9,569	​	$	9,112	​
Net income attributable to Deere & Company	​	​	903	​	​	1,224	​
Diluted earnings per share	​	​	2.92	​	​	3.87	​

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In the first quarter of 2022, the Company incurred UAW ratification bonus costs of $90 million. See Note 20 for more information on special items impacting both periods.

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​	​	Three Months Ended							​
Equipment Operations	​	January 30		​	January 31		​	​	​
(In millions of dollars)	​	2022		​	2021		​	% Change	​
Worldwide:	​	​	​	​	​	​	​	​	​
Net sales	​	$	8,531	​	$	8,051	​	+6	​
Operating profit	​	​	939	​	​	1,380	​	-32	​
Net income	​	​	672	​	​	1,020	​	-34	​
Price realization	​	​	​	​	​	​	​	+7	​
Currency translation	​	​	​	​	​	​	​	-2	​
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U.S. and Canada:	​	​	​	​	​	​	​	​	​
Net sales	​	​	4,818	​	​	4,529	​	+6	​
Price realization	​	​	​	​	​	​	​	+7	​
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Outside U.S. and Canada:	​	​	​	​	​	​	​	​	​
Net sales	​	​	3,713	​	​	3,522	​	+5	​
Price realization	​	​	​	​	​	​	​	+8	​
Currency translation	​	​	​	​	​	​	​	-4	​

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

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​	​	Three Months Ended							​
Deere & Company	​	January 30		​	January 31		​	​	​
(In millions of dollars)	​	2022		​	2021		​	% Change	​
Cost of sales to net sales	​	​	78.5%	​	​	72.1%	​	​	​
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Other income	​	$	238	​	$	227	​	+5	​
Research and development expenses	​	​	402	​	​	366	​	+10	​
Selling, administrative and general expenses	​	​	781	​	​	769	​	+2	​
Other operating expenses	​	​	311	​	​	373	​	-17	​
Provision for income taxes	​	​	250	​	​	308	​	-19	​

The cost of sales ratio increased due to higher production costs, partially offset by price realization. Research and development expenses were higher due to continued focus on developing and incorporating technology solutions. Other operating expenses decreased primarily as a result of reduced depreciation of equipment on operating leases and lower retirement benefit costs (see Note 7). The provision for income taxes was lower as a result of reduced pretax income.

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Business Segment Results

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​	​	Three Months Ended							​
Production and Precision Agriculture	​	January 30		​	January 31		​	​	​
(In millions of dollars)		2022			2021			% Change	​
Net sales	​	$	3,356	​	$	3,069	​	+9	​
Operating profit	​	​	296	​	​	643	​	-54	​
Operating margin	​	​	8.8%	​	​	21.0%	​	​	​

Production and precision agriculture sales for the quarter increased due to price realization and higher shipment volumes. Operating profit declined primarily due to higher production costs and an unfavorable sales mix. These items were partially offset by price realization and higher shipment volumes. Affecting the most recent quarter was the UAW contract ratification bonus, while the prior period was affected by a favorable indirect tax ruling in Brazil.

![Graphic](https://www.sec.gov/Archives/edgar/data/315189/00015583702

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

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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 30, 2022, 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 2022, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

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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, and trademark 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.

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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 “Safe Harbor Statement” 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.

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

The Company’s purchases of its common stock during the first quarter of 2022 were as follows:

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​		​		​	​		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)	​	Paid Per Share		​	(thousands)	​	(millions)
Nov 1 to Nov 28	​	616		$	354.70	​	616	​	15.0	​
Nov 29 to Dec 26	​	666	​	​	350.83	​	627	​	14.4	​
Dec 27 to Jan 30	​	459	​	​	371.69	​	459	​	13.9	​
Total	​	1,741	​	​	​	​	1,702	​	​	​

	(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 based on the end of the first quarter closing share price of $373.79 per share. At the end of the first quarter of 2022, $5,202 million of common stock remains to be purchased under the plan.

	(2)	In the first quarter of 2022, 39 thousand shares were purchased 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 $358.36.

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Item 3.  Defaults Upon Senior Securities

None.

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Item 4.  Mine Safety Disclosures

Not applicable.

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Disclosure Pursuant to Section 13(r) of the Exchange Act.

Under Section 13(r) of the Exchange Act, the Company is required to disclose in its periodic reports if it or any of its affiliates knowingly conducted transactions or dealings with entities or individuals designated pursuant to certain executive orders issued by the U.S. government. On March 2, 2021, the U.S. Secretary of State designated the Russian Federal Security Service (FSB) as a blocked party under Executive Order 13382. On the same day, the U.S. Department of the Treasury’s Office of Foreign Assets Control updated General License No. 1B to authorize certain transactions and activities with the FSB related to the importation, distribution, or use of certain information technology products in the Russian Federation. In the ordinary course of business, including during the three-month period ended January 30, 2022, certain of the Company’s subsidiaries requested and/or received legally required administrative notifications with the FSB in connection with the importation and/or use of certain of the Company’s products in the Russian Federation, as authorized by General License No. 1B. Neither the Company nor its subsidiaries made any payments, nor did they receive gross revenues or net profits, in connection with these activities. The Company expects that certain of its subsidiaries will continue to engage with the FSB in activities necessary to conduct business in the Russian Federation in accordance with applicable U.S. laws and regulations so long as it remains lawful to do so.

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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.

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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*)
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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*)
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31.1		Rule 13a-14(a)/15d-14(a) Certification
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31.2		Rule 13a-14(a)/15d-14(a) Certification
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32		Section 1350 Certifications (furnished herewith)
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101.SCH		Inline XBRL Taxonomy Extension Schema Document
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101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
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101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
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104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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* Incorporated by reference.

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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.

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​			DEERE & COMPANY
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Date:	February 24, 2022	​	By:	/s/ Ryan D. Campbell
​	​	​	​	Ryan D. Campbell Senior Vice President and Chief Financial Officer
​	​	​	​	(Principal Financial Officer and Principal Accounting Officer)

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