Deere & Co. 10-Q 2024-04-28

Cover and table of contents

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 April 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 ____

Commission file no: 1-4121

DEERE & COMPANY

(Exact name of registrant as specified in its charter)


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

One John Deere Place

Moline**,** Illinois 61265

(Address of principal executive offices)

Telephone Number: (309) 765-8000

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


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

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

Yes ☒ No ☐

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

Yes ☒ No ☐

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


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

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

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

Yes ☐ No ☒

At April 28, 2024, 275,570,318 shares of common stock, $1 par value, of the registrant were outstanding.

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


DEERE & COMPANY
STATEMENTS OF CONSOLIDATED INCOME
For the Three and Six Months Ended April 28, 2024 and April 30, 2023
(In millions of dollars and shares except per share amounts) Unaudited
	Three Months Ended				Six Months Ended
	2024		2023		2024		2023
Net Sales and Revenues
Net sales	$	13,610	$	16,079	$	24,097	$	27,481
Finance and interest income		1,387		1,079		2,746		2,073
Other income		238		229		577		484
Total		15,235		17,387		27,420		30,038

Costs and Expenses
Cost of sales		9,157		10,730		16,357		18,663
Research and development expenses		565		547		1,098		1,043
Selling, administrative and general expenses		1,265		1,330		2,330		2,283
Interest expense		836		569		1,638		1,049
Other operating expenses		295		363		664		660
Total		12,118		13,539		22,087		23,698

Income of Consolidated Group before Income Taxes		3,117		3,848		5,333		6,340
Provision for income taxes		751		991		1,220		1,528

Income of Consolidated Group		2,366		2,857		4,113		4,812
Equity in income of unconsolidated affiliates		2		2		3		3

Net Income		2,368		2,859		4,116		4,815
Less: Net loss attributable to noncontrolling interests		(2)		(1)		(5)		(4)
Net Income Attributable to Deere & Company	$	2,370	$	2,860	$	4,121	$	4,819

Per Share Data
Basic	$	8.56	$	9.69	$	14.80	$	16.26
Diluted		8.53		9.65		14.74		16.18
Dividends declared		1.47		1.25		2.94		2.45
Dividends paid		1.47		1.20		2.82		2.33

Average Shares Outstanding
Basic		276.8		295.1		278.4		296.3
Diluted		277.9		296.5		279.5		297.8

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three and Six Months Ended April 28, 2024 and April 30, 2023
(In millions of dollars) Unaudited
	Three Months Ended				Six Months Ended
	2024		2023		2024		2023

Net Income	$	2,368	$	2,859	$	4,116	$	4,815

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		(87)		(247)		(108)		(258)
Cumulative translation adjustment		(217)		100		57		781
Unrealized gain (loss) on derivatives		8		(18)		(7)		(31)
Unrealized gain (loss) on debt securities		(12)		(1)		1		26
Other Comprehensive Income (Loss), Net of Income Taxes		(308)		(166)		(57)		518

Comprehensive Income of Consolidated Group		2,060		2,693		4,059		5,333
Less: Comprehensive income (loss) attributable to noncontrolling interests		(3)		1		(4)		6
Comprehensive Income Attributable to Deere & Company	$	2,063	$	2,692	$	4,063	$	5,327

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars) Unaudited
	April 28		October 29		April 30
	2024		2023		2023
Assets
Cash and cash equivalents	$	5,553	$	7,458	$	5,267
Marketable securities		1,094		946		856
Trade accounts and notes receivable – net		8,880		7,739		9,971
Financing receivables – net		45,278		43,673		38,954
Financing receivables securitized – net		7,262		7,335		5,659
Other receivables		2,535		2,623		2,593
Equipment on operating leases – net		6,965		6,917		6,524
Inventories		8,443		8,160		9,713
Property and equipment – net		7,034		6,879		6,288
Goodwill		3,936		3,900		3,963
Other intangible assets – net		1,064		1,133		1,222
Retirement benefits		3,056		3,007		3,519
Deferred income taxes		1,936		1,814		1,308
Other assets		2,592		2,503		2,510
Total Assets	$	105,628	$	104,087	$	98,347

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	17,699	$	17,939	$	17,109
Short-term securitization borrowings		6,976		6,995		5,379
Accounts payable and accrued expenses		14,609		16,130		14,716
Deferred income taxes		491		520		511
Long-term borrowings		40,962		38,477		35,611
Retirement benefits and other liabilities

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

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.

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. Our progress is demonstrated, in part, by the growing use of the John Deere Operations Center (our digital operations management system) engaging more agricultural acres globally. Engaged acres give us a foundational understanding of customer utilization of John Deere technology. The investments in these technologies and establishing a Solutions as a Service business model may increase our operating costs and decrease operating margins during the transition period.

Company Outlook for 2024

Production volumes are expected to continue to decline during the remainder of 2024 due to demand shifts amid challenges in the global agricultural and turf sectors coupled with proactive production and inventory management while the construction industry remains relatively stable.

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.

●	Agricultural fundamentals across all our major markets are expected to moderate in 2024 due to rising global stocks, lower commodity prices, elevated interest rates, and weather volatility. In the U.S. and Canada, this is partially offset by resilient farm balance sheets.

●	The U.S. equipment fleet age is elevated for both tractors and combines. However, increases in used inventory levels are impacting purchasing decisions.

●	In Europe, the dairy and livestock sector is expected to improve due to stronger pricing amid lower feed costs while spring weather conditions have caused uncertainty about winter seeded crop yields. In addition, persistent, elevated input costs have decreased demand in Europe.

●	Demand in Brazil is expected to be down due to strong global yields driving down commodity prices, adverse weather conditions, and high interest rates.

●	Industry sales in Asia are forecasted to be down moderately due to commodity price changes, inventory reductions, and weather impacts.

●	Due to macro-economic trends in U.S. consumer markets including lower levels of home sales, persistently higher interest rates, and inventory reductions, sales of compact utility tractors and riding lawn equipment continue to be lower.

Construction and Forestry Outlook for 2024

●	Construction equipment industry sales are forecasted to be flat to 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 declines in commercial real estate construction and softening rental demand.

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

Financial Services Outlook for 2024


Net Income				Up moderately
+ Higher average portfolio				Favorable
+ Nonrecurring prior period special item				Favorable
(-) Provision for credit losses				Unfavorable
(-) Financing spreads				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, and 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 affect 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 $35 (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 b

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4. CONTROLS AND PROCEDURES

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 April 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 second quarter of 2024, there were no changes that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

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.

Item 1A. Risk Factors

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.

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

Issuer Purchases of Equity Securities

Purchases of our common stock during the second quarter of 2024 were as follows:


				Total Number of
				Shares Purchased as	Maximum Number of
	Total Number of			Part of Publicly	Shares that May Yet Be
	Shares			Announced Plans or	Purchased under the
	Purchased	Average Price		Programs (1)	Plans or Programs (1)
Period	(thousands)	Per Share		(thousands)	(millions)
Jan 29 to Feb 25	1,049	$	383.61	1,049	28.6
Feb 26 to Mar 24	1,330		374.48	1,330	27.3
Mar 25 to Apr 28	505		404.58	505	26.8
Total	2,884			2,884

(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 26.8 million based on the closing price of our common stock on the New York Stock Exchange as of the end of the second quarter of 2024 of $393.33 per share. At the end of the second quarter of 2024, $10.5 billion of common stock remained to be purchased under this plan.

Sales of Unregistered Securities

During the second quarter of 2024, we issued 4,500 deferred stock units under the Deere & Company Nonemployee Director Stock Ownership Plan (“NEDSOP”) to our non-employee directors for their service on our Board of Directors. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in the plan. Deferred stock units and shares of common stock issued under the NEDSOP 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.

During the second quarter of 2024, we distributed 4,399 shares of common stock to a participant account under the 2012 and 2022 NEDSOP.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Director and Executive Officer Trading Arrangements

On February 26, 2024, Cory J. Reed, President, Worldwide Agriculture & Turf Division, Production and Precision Ag, Sales & Marketing Regions of the Americas and Australia adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The plan covers the exercise of 13,370 employee stock options and the related sale of such shares. The plan expires on December 24, 2024.

On March 5, 2024, Rajesh Kalathur, President, John Deere Financial, and Chief Information Officer adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The plan covers the exercise of 24,580 employee stock options and the related sale of such shares. The plan expires on August 29, 2025.

Item 6. Exhibits

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



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

3.2	Bylaws, as amended (Exhibit 3.2 to Form 10-Q of registrant for the quarter ended July 30, 2023, Securities and Exchange Commission File Number 1-4121*)

10.1	364-Day Credit Agreement, dated March 25, 2024, 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

10.2	2028 Credit Agreement, dated March 25, 2024, 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

10.3	2029 Credit Agreement, dated March 25, 2024, 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

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

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

32	Section 1350 Certifications (furnished herewith)

101.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)

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

* Incorporated by reference.

SIGNATURES

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


		DEERE & COMPANY


Date:	May 30, 2024	By:	/s/ Joshua A. Jepsen
			Joshua A. Jepsen Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)