Deere & Co. 10-Q 2022-05-01

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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 May 1, 2022

or

☐ 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)

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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 ☐

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. ☐

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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 ☒

At May 1, 2022, 305,635,672 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 May 1, 2022 and May 2, 2021	​	​	​	​	​	​	​
(In millions of dollars and shares except per share amounts) Unaudited	​	​	​	​	​	​	​
​		2022			2021
Net Sales and Revenues	​	​	​	​	​	​	​
Net sales		$	12,034	​	$	10,998	​
Finance and interest income	​	​	796	​		809	​
Other income	​	​	540	​		251	​
Total	​	​	13,370	​		12,058	​
​	​	​	​	​	​	​	​
Costs and Expenses	​	​	​	​	​	​	​
Cost of sales	​	​	8,918	​		7,928	​
Research and development expenses	​	​	453	​		377	​
Selling, administrative and general expenses	​	​	932	​		838	​
Interest expense	​	​	187	​		268	​
Other operating expenses	​	​	328	​		335	​
Total	​	​	10,818	​		9,746	​
​	​	​	​	​	​	​	​
Income of Consolidated Group before Income Taxes	​	​	2,552	​		2,312	​
Provision for income taxes	​	​	461	​		530	​
​	​	​	​	​	​	​	​
Income of Consolidated Group	​	​	2,091	​		1,782	​
Equity in income of unconsolidated affiliates	​	​	6	​		8	​
​	​	​	​	​	​	​	​
Net Income	​	​	2,097	​		1,790	​
Less: Net loss attributable to noncontrolling interests	​	​	(1)	​		​	​
Net Income Attributable to Deere & Company		$	2,098	​	$	1,790	​
​	​	​	​	​	​	​	​
Per Share Data	​	​	​	​	​	​	​
Basic		$	6.85	​	$	5.72	​
Diluted		$	6.81	​	$	5.68	​
Dividends declared	​	$	1.05	​	$	.90	​
Dividends paid	​	$	1.05	​	$	.76	​
​	​	​	​	​	​	​	​
Average Shares Outstanding	​	​	​	​	​	​	​
Basic	​	​	306.2	​		312.8	​
Diluted	​	​	308.1	​		315.2	​
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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 May 1, 2022 and May 2, 2021	​	​	​	​	​	​	​
(In millions of dollars) Unaudited	​	​	​	​	​	​	​
​		2022			2021
​	​	​	​	​	​	​
Net Income		$	2,097	​	$	1,790	​
​	​	​	​	​	​	​	​
Other Comprehensive Income (Loss), Net of Income Taxes	​	​	​	​	​	​	​
Retirement benefits adjustment	​	​	129	​		91	​
Cumulative translation adjustment	​	​	(248)	​		37	​
Unrealized gain on derivatives	​	​	28	​		3	​
Unrealized loss on debt securities	​	​	(48)	​		(13)	​
Other Comprehensive Income (Loss), Net of Income Taxes	​	​	(139)	​		118	​
​	​	​	​	​	​	​	​
Comprehensive Income of Consolidated Group	​	​	1,958	​		1,908	​
Less: Comprehensive loss attributable to noncontrolling interests	​	​	(5)	​		​	​
Comprehensive Income Attributable to Deere & Company		$	1,963	​	$	1,908	​
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See Condensed Notes to Interim Consolidated Financial Statements.

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DEERE & COMPANY	​	​	​	​	​	​	​
STATEMENTS OF CONSOLIDATED INCOME	​	​	​	​	​	​	​
For the Six Months Ended May 1, 2022 and May 2, 2021	​	​	​	​	​	​	​
(In millions of dollars and shares except per share amounts) Unaudited	​	​	​	​	​	​	​
​		2022			2021
Net Sales and Revenues	​	​	​	​	​	​	​
Net sales		$	20,565	​	$	19,049	​
Finance and interest income	​	​	1,595	​		1,644	​
Other income	​	​	779	​		477	​
Total	​	​	22,939	​		21,170	​
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Costs and Expenses	​	​	​	​	​	​	​
Cost of sales	​	​	15,613	​		13,734	​
Research and development expenses	​	​	855	​		743	​
Selling, administrative and general expenses	​	​	1,713	​		1,607	​
Interest expense	​	​	417	​		538	​
Other operating expenses	​	​	638	​		708	​
Total	​	​	19,236	​		17,330	​
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**Income of Consoli

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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’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 expected to be up about 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 forecast to be up about 5 percent. In South America, industry sales of tractors and combines are projected to be up about 10 percent. Asia industry sales of agricultural machinery are forecast to be down moderately. Construction equipment industry sales in the U.S. and Canada for 2022 are expected to increase about 10 percent, while compact construction equipment industry sales in the U.S. and Canada are anticipated to be flat to up 5 percent. Forestry global industry equipment sales are expected to be flat to up 5 percent. Global industry roadbuilding equipment sales are forecasted to be flat to up 5 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 and higher selling, administrative, and general 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, inflationary pressures, the ongoing pandemic, capital market disruptions, changes in demand and pricing for new and used equipment, and the other items discussed in the “Forward-Looking Statements” 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 second quarter results reflect strong demand while enduring supply chain pressures continue to impact production levels and delivery schedules. The Company’s employees, suppliers, and dealers are working to address these challenges. The demand for agricultural equipment is expected to benefit from positive fundamentals despite availability concerns and inflationary pressures affecting customers’ input costs. The Company’s smart industrial operating model and recently announced financial and sustainability goals (Leap Ambitions) are focused on helping customers manage higher costs and increasingly scarce inputs, while improving agricultural yields, through the use of the Company’s integrated technologies.

Impact of Events in Russia / Ukraine

The recent events in Russia / Ukraine have impacted the safety, welfare, and well-being of the Company’s employees in the region. The Company’s top priority is to support and maintain close communication with its affected teams, providing necessary resources when possible. The Company has suspended shipments of machines and service parts to Russia. These events are impacting business continuity, liquidity, and asset values for the Company’s operations in Russia / Ukraine (see Note 20).

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2022 Compared with 2021

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​	​	Three Months Ended							​	Six Months Ended							​
Deere & Company	​	May 1		​	May 2		​	%	​	May 1		​	May 2		​	%	​
(In millions of dollars, except per share amounts)	​	2022		​	2021		​	Change	​	2022		​	2021		​	Change	​
Net sales and revenues	​	$	13,370	​	$	12,058	​	+11	​	$	22,939	​	$	21,170	​	+8	​
Net income attributable to Deere & Company	​	​	2,098	​	​	1,790	​	+17	​	​	3,001	​	​	3,013	​	​	​
Diluted earnings per share	​	​	6.81	​	​	5.68	​	​	​	​	9.72	​	​	9.55	​	​	​

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Results for the second quarter of 2022 and year-to-date periods of 2022 and 2021 were impacted by special items. See Note 20 for more information on special items impacting the presented periods. The discussion on net sales and operating profit is included in the Business Segment Results below.

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​	​	Three Months Ended							​	Six Months Ended							​
Deere & Company	​	May 1		​	May 2		​	%	​	May 1		​	May 2		​	%	​
(In millions of dollars)	​	2022		​	2021		​	Change	​	2022		​	2021		​	Change	​
Cost of sales to net sales	​	​	74.1%	​	​	72.1%	​	​	​	​	75.9%	​	​	72.1%	​	​	​
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Other income	​	$	540	​	$	251	​	+115	​	$	779	​	$	477	​	+63	​
Research and development expenses	​	​	453	​	​	377	​	+20	​	​	855	​	​	743	​	+15	​
Selling, administrative and general expenses	​	​	932	​	​	838	​	+11	​	​	1,713	​	​	1,607	​	+7	​
Other operating expenses	​	​	328	​	​	335	​	-2	​	​	638	​	​	708	​	-10	​
Provision for income taxes	​	​	461	​	​	530	​	-13	​	​	710	​	​	838	​	-15	​

The cost of sales to net sales ratio increased in the second quarter and the first six months of fiscal 2022 primarily due to higher production costs partially offset by price realization. Other income increased in both periods due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture. Research and development expenses were higher for both periods due to continued focus on developing and incorporating technology solutions. Selling, administrative, and general expenses increased in the second quarter and the first six months primarily due to a higher provision for credit losses, including higher reserves due to the events in Russia / Ukraine. Other operating expenses decreased in the first six months primarily due to lower depreciation of equipment on operating leases and lower retirement benefit costs. The provision for income taxes decreased in both periods due in part to a final U.S. tax regulation resulting in the release of a foreign tax credit valuation allowance.

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Business Segment Results

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​	​	Three Months Ended							​	Six Months Ended							​
Production and Precision Agriculture	​	May 1		​	May 2		​	%	​	May 1		​	May 2		​	%	​
(In millions of dollars)	​	2022

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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.

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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 May 1, 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 second 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

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 “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.

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

Issuer Purchases of Equity Securities

The Company’s purchases of its common stock during the second 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	​	Average Price		​	Programs (1)	​	Plans or Programs (1)
Period	​	(thousands)	​	Paid Per Share		​	(thousands)	​	(millions)
Jan 31 to Feb 27	​	549		$	371.73	​	549	​	13.2	​
Feb 28 to Mar 27	​	496	​	​	389.85	​	496	​	12.7	​
Mar 28 to May 1	​	495	​	​	415.09	​	495	​	12.2	​
Total	​	1,540	​	​	​	​	1,540	​	​	​

	(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 this plan was based on the end of the second quarter closing share price of $377.55 per share. At the end of the second quarter of 2022, $4,599 million of common stock remained to be purchased under the plan.

Sales of Unregistered Securities

During the second quarter of 2022, the Company’s stockholders authorized 500,000 shares under a new Deere & Company Nonemployee Director Stock Ownership Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule of 506 of the SEC’s Regulation D thereunder. Under this new plan, the Company issued 4,250 deferred stock units. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan. Also during the second quarter of 2022, the Company distributed 32,635 deferred stock units and deferred stock awards to participant accounts under the previous Deere & Company Nonemployee Director Stock Ownership Plan. The deferred stock units and deferred stock awards converted to shares of common stock on a one-for-one basis.

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Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

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

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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, during the six-month period ended May 1, 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 may 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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10.1	2026 Credit Agreement, dated March 28, 2022, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and J.P. Morgan Securities LLC, as Sustainability Structuring Agent
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10.2	2027 Credit Agreement, dated March 28, 2022, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and J.P. Morgan Securities LLC, as Sustainability Structuring Agent
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10.3	364-Day Credit Agreement, dated March 28, 2022, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and J.P. Morgan Securities LLC, as Sustainability Structuring Agent
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10.4	Deere & Company Nonemployee Director Stock Ownership Plan, February 23, 2022 (Appendix C to Proxy Statement of registrant filed on January 7, 2022, 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:	May 26, 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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