Deere & Co. 10-Q 2024-01-28

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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 28, 2024

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 28, 2024, 278,358,210 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 28, 2024 and January 29, 2023	​	​	​	​	​	​	​
(In millions of dollars and shares except per share amounts) Unaudited	​	​	​	​	​	​	​
​		2024			2023
Net Sales and Revenues	​	​	​	​	​	​	​
Net sales		$	10,486	​	$	11,402	​
Finance and interest income	​	​	1,360	​		994	​
Other income	​	​	339	​		256	​
Total	​	​	12,185	​		12,652	​
​	​	​	​	​	​	​	​
Costs and Expenses	​	​	​	​	​	​	​
Cost of sales	​	​	7,200	​		7,934	​
Research and development expenses	​	​	533	​		495	​
Selling, administrative and general expenses	​	​	1,066	​		952	​
Interest expense	​	​	802	​		479	​
Other operating expenses	​	​	369	​		299	​
Total	​	​	9,970	​		10,159	​
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Income of Consolidated Group before Income Taxes	​	​	2,215	​		2,493	​
Provision for income taxes	​	​	469	​		537	​
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Income of Consolidated Group	​	​	1,746	​		1,956	​
Equity in income of unconsolidated affiliates	​	​	2	​		1	​
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Net Income	​	​	1,748	​		1,957	​
Less: Net loss attributable to noncontrolling interests	​	​	(3)	​		(2)	​
Net Income Attributable to Deere & Company		$	1,751	​	$	1,959	​
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Per Share Data	​	​	​	​	​	​	​
Basic		$	6.25	​	$	6.58	​
Diluted		​	6.23	​	​	6.55	​
Dividends declared	​	​	1.47	​	​	1.20	​
Dividends paid	​	​	1.35	​	​	1.13	​
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Average Shares Outstanding	​	​	​	​	​	​	​
Basic	​	​	279.9	​		297.6	​
Diluted	​	​	281.1	​		299.1	​
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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 28, 2024 and January 29, 2023	​	​	​	​	​	​	​
(In millions of dollars) Unaudited	​	​	​	​	​	​	​
​		2024			2023
​	​	​	​	​	​	​
Net Income		$	1,748	​	$	1,957	​
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Other Comprehensive Income (Loss), Net of Income Taxes	​	​	​	​	​	​	​
Retirement benefits adjustment	​	​	(21)	​		(11)	​
Cumulative translation adjustment	​	​	274	​		681	​
Unrealized loss on derivatives	​	​	(15)	​		(13)	​
Unrealized gain on debt securities	​	​	13	​		27	​
Other Comprehensive Income, Net of Income Taxes	​	​	251	​		684	​
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Comprehensive Income of Consolidated Group	​	​	1,999	​		2,641	​
Less: Comprehensive income (loss) attributable to noncontrolling interests	​	​	(2)	​		6	​
Comprehensive Income Attributable to Deere & Company		$	2,001	​	$	2,635	​
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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 28			October 29			January 29
​	​	2024		​	2023		​	2023
Assets	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents		$	5,137	​	$	7,458	​	$	3,976	​
Marketable securities	​	​	1,136	​		946	​		852	​
Trade accounts and notes receivable – net	​	​	7,795	​		7,739	​		7,609	​
Financing receivables – net	​	​	43,708	​		43,673	​		36,882	​
Financing receivables securitized – net	​	​	6,400	​		7,335	​		5,089	​
Other receivables	​	​	2,017	​		2,623	​		1,992	​
Equipment on operating leases – net	​	​	6,751	​		6,917	​		6,502	​
Inventories	​	​	8,937	​		8,160	​

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RESULTS OF OPERATIONS

All amounts are presented in millions of dollars unless otherwise specified.

OVERVIEW

Organization

Deere & Company is a global leader in the production of agricultural, turf, construction, and forestry equipment and solutions. John Deere Financial provides financing for John Deere equipment, parts, services, and other input costs customers need to run their operations. Our operations are managed through the production and precision agriculture (PPA), small agriculture and turf (SAT), construction and forestry (CF), and financial services operating segments. References to “equipment operations” include PPA, SAT, and CF, while references to “agriculture and turf” include both PPA and SAT.

Smart Industrial Operating Model and Leap Ambitions

We announced the Smart Industrial Operating Model in 2020. This operating model is based on three focus areas:

(a)	Production systems: A strategic alignment of products and solutions around our customers’ operations.

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

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

Our Leap Ambitions were launched in 2022. These ambitions are designed to boost economic value and sustainability for our customers. The ambitions align across our customers’ production systems seeking to optimize their operations to deliver better outcomes with fewer resources.

In January 2024, we released our 2023 Business Impact Report, available at JohnDeere.com/sustainability. This report identifies important progress on our Leap Ambitions in fiscal year 2023. The information in our 2023 Business Impact Report is not incorporated by reference into, and does not form a part of, this Quarterly Report on Form 10-Q.

Trends and Economic Conditions

Industry Sales Outlook for Fiscal Year 2024

Agriculture and Turf

Construction and Forestry

Company Trends – Customers seek to improve profitability, productivity, and sustainability through technology. Integration of technology into equipment is a persistent market trend. Our Smart Industrial Operating Model and Leap Ambitions are intended to capitalize on this market trend. These technologies are incorporated into products within each of our operating segments. We expect this trend to persist for the foreseeable future. The investments in these technologies and in establishing a Solutions as a Service business model might increase our operating costs and may decrease operating margins during the transition period. In the first quarter of 2024, we announced an agreement with SpaceX to expand machine connectivity for our customers in rural areas through satellite communication.

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Company Outlook for 2024

Production volumes are expected to decline in 2024 as demand moderates to more normal levels.

Agriculture and Turf Outlook for 2024

●	We expect large and small agricultural equipment sales to be down from 2023 levels in North America, Europe, and South America.

●	Sales of compact utility tractors continue to be lower as the industry works to bring down inventory levels, while demand for turf products has stabilized.

●	We continue to produce at levels in line with retail demand in North America. To manage inventory in Europe and Brazil, we are producing at levels below retail demand.

●	Agricultural fundamentals are expected to moderate in 2024 due to lower commodity prices and elevated interest rates, offset by resilient farm balance sheets and lower input costs.

●	The U.S. equipment fleet age is above 20-year averages for both tractors and combines.

●	The dairy and livestock sector continues to benefit from elevated cattle and hay prices.

●	Commodity markets remain disrupted in Central and Eastern Europe due to the Russia/Ukraine war. Western Europe equipment demand is moderately impacted by uncertainty related to current cash crop receipts, agriculture policy changes, and high interest rates.

●	Demand in Brazil is expected to moderate due to adverse weather conditions and high interest rates.

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

Construction and Forestry Outlook for 2024

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

●	Benefits from increasing U.S. infrastructure spending, elevated manufacturing investment levels, and improving single family housing starts are expected to partially offset moderation in office and retail construction.

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

Financial Services Outlook for 2024

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Net Income			​	Up moderately			​
+ Nonrecurring prior period special items			​	Favorable			​
+ Higher average portfolio			​	Favorable			​
(-) Financing spreads			​	Unfavorable			​
(-) Provision for credit losses			​	Unfavorable			​

Additional Trends

Agricultural Market Business Cycle. The agricultural market is affected by various factors including commodity prices, acreage planted, crop yields, and government policies. These factors affect farmers’ income and may result in lower demand for equipment. We may experience any of the following effects during unfavorable market conditions: lower net sales, higher sales discounts, higher receivable write-offs, or losses on equipment on operating leases. A potential benefit is that customers may invest in integrated technology solutions and precision agriculture to lower input costs and improve margins.

Interest Rates. Central bank policy interest rates increased in 2023 and have remained elevated. Increased rates impacted us in several ways, primarily affecting the financing spreads for the financial services operations and demand for our products.

The market for our products is negatively impacted by higher interest rates. We expect higher borrowing costs for our customers to primarily affect discretionary and residential product sales in 2024.

Most retail customer receivables are fixed rate. Wholesale financing receivables generally are variable rate. Both types of receivables are financed with fixed and floating rate borrowings. We manage our exposure to interest rate fluctuations by matching our receivables with our funding sources. We also enter into interest rate swap agreements to match our interest rate exposure.

Rising interest rates have historically impacted our borrowings sooner than the benefit is realized from receivable and lease portfolios. As a result, our financial services operations experienced $27 (after-tax) less favorable financing spreads in 2024 compared to 2023. We expect to continue experiencing spread compression in 2024, but at a moderating pace relative to spread compression experienced in 2023.

Higher interest rates are driven by factors outside of our control

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See our most recently filed Annual Report on Form 10-K (Part II, Item 7A). There have been no material changes in this information.

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Our principal executive officer and principal financial officer have concluded that our 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 28, 2024, 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 2024, there were no changes that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

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We are subject to various unresolved legal actions which arise in the normal course of our business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, trademark, and antitrust matters. We believe the reasonably possible range of losses for these unresolved legal actions would not have a material effect on our consolidated financial statements.

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See our most recently filed Annual Report on Form 10-K (Part I, Item 1A). There have been no material changes 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 we face. Additional risks and uncertainties may also materially affect our 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

Purchases of our common stock during the first quarter of 2024 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)	​	Per Share		​	(thousands)	​	(millions)
Oct 30 to Nov 26	​	1,178		$	377.57	​	1,178	​	31.8	​
Nov 27 to Dec 24	​	1,296	​	​	372.25	​	1,259	​	30.7	​
Dec 25 to Jan 28	​	1,050	​	​	393.54	​	1,050	​	29.6	​
Total	​	3,524	​	​	​	​	3,487	​	​	​

	(1)	We have a share repurchase plan that was announced in December 2022 to purchase up to $18.0 billion of shares of our common stock. The maximum number of shares that may yet be purchased under this plan was 29.6 million based on the closing price of our common stock on the New York Stock Exchange as of the end of the first quarter of 2024 of $393.62 per share. At the end of the first quarter of 2024, $11.7 billion of common stock remains to be purchased under this plan.

	(2)	In the first quarter of 2024, 37 thousand shares were acquired from plan participants at a weighted-average market price of $365.60 per share to pay payroll taxes on the vesting of restricted stock awards.

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Sales of Unregistered Securities

During the first quarter of 2024, we distributed 1,333 deferred stock awards to a participant account under the 2012 Deere & Company Nonemployee Director Stock Ownership Plan. The deferred stock awards converted to shares of common stock on a one-for-one basis. Deferred stock units and shares of common stock issued under the 2012 Deere & Company Nonemployee Director Stock Ownership Plan are exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of the SEC’s Regulation D thereunder.

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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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Director and Executive Officer Trading Arrangements

None.

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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 furnish copies of such instruments to the Commission 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 3.2 to Form 10-Q of registrant for the quarter ended July 30, 2023, 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.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
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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 29, 2024	​	By:	/s/ Joshua A. Jepsen
​	​	​	​	Joshua A. Jepsen Senior Vice President and Chief Financial Officer
​	​	​	​	(Principal Financial Officer and Principal Accounting Officer)

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