• Third-quarter net sales rise 25%, bolstered by higher rates of production, despite continuing supply-chain pressures.
  • Full-year earnings outlook revised to range of $7.0$7.2 billion.
  • Strong order books and positive customer fundamentals to drive demand in 2023.

MOLINE, Ill., Aug. 19, 2022 /CNW/ -- Deere & Company (NYSE: DE) reported net income of $1.884 billion for the third quarter ended July 31, 2022, or $6.16 per share, compared with net income of $1.667 billion, or $5.32 per share, for the quarter ended August 1, 2021. For the first nine months of the year, net income attributable to Deere & Company was $4.885 billion, or $15.88 per share, compared with $4.680 billion, or $14.86 per share, for the same period last year.

Net sales and revenues increased 22 percent, to $14.102 billion, for the third quarter of 2022 and rose 13 percent, to $37.041 billion, for nine months. Net sales were $13.000 billion for the quarter and $33.565 billion for nine months, compared with $10.413 billion and $29.461 billion last year.

"We're proud of the extraordinary efforts by our employees to increase factory output and get products to customers under challenging circumstances," said John C. May, chairman and chief executive officer. "At the same time, our results reflected higher costs and production inefficiencies driven by the difficult supply-chain situation."

Company Outlook & Summary

Net income attributable to Deere & Company for fiscal 2022 is forecast to be in a range of $7.0 billion to $7.2 billion.

"Looking ahead, we believe favorable conditions will continue into 2023 based on the strong response we have experienced to early-order programs," said May. "We are working closely with our factories and suppliers to meet higher levels of customer demand next year. Additionally, we are confident the company's smart industrial strategy and leap ambitions will continue unlocking new value for customers through Deere's advanced technologies and solutions."

Deere & Company


Third Quarter


Year to Date


$ in millions, except per share amounts


2022


2021


% Change


2022


2021


% Change


Net sales and revenues


$

14,102


$

11,527


22 %


$

37,041


$

32,697


13 %


Net income


$

1,884


$

1,667


13 %


$

4,885


$

4,680


4 %


Fully diluted EPS


$

6.16


$

5.32




$

15.88


$

14.86




Results for the presented periods were affected by special items. See Note 1 of the financial statements in this earnings release for further details.

Production & Precision Agriculture


Third Quarter


$ in millions


2022


2021


% Change


Net sales


$

6,096


$

4,250


43 %


Operating profit


$

1,293


$

906


43 %


Operating margin



21.2 %



21.3 %




Production and precision agriculture sales increased for the quarter due to higher shipment volumes and price realization, partially offset by the unfavorable impact of currency translation. Operating profit rose primarily due to price realization and higher shipment volumes / sales mix. These items were partially offset by higher production costs, higher selling, administrative, and general expenses, increased research and development expenses, and the unfavorable effects of foreign currency exchange.

 

Small Agriculture & Turf


Third Quarter


$ in millions


2022


2021


% Change


Net sales


$

3,635


$

3,147


16 %


Operating profit


$

552


$

583


-5 %


Operating margin



15.2 %



18.5 %




Small agriculture and turf sales for the quarter increased due to higher shipment volumes and price realization partially offset by the unfavorable impact of currency translation. Operating profit decreased primarily due to higher production costs, higher selling, administrative, and general expenses, increased research and development expenses, and the unfavorable effects of foreign currency exchange. These items were partially offset by price realization and higher sales volumes. Results for the prior period included a gain on the sale of a closed factory in China that had produced small agricultural equipment.

 

Construction & Forestry


Third Quarter


$ in millions


2022


2021


% Change


Net sales


$

3,269


$

3,016


8 %


Operating profit


$

514


$

463


11 %


Operating margin



15.7 %



15.4 %




Construction and forestry sales moved higher for the quarter primarily due to price realization. Operating profit increased due to price realization, partially offset by higher production costs.

 

Financial Services


Third Quarter


$ in millions


2022


2021


% Change


Net income


$

209


$

227


-8 %


Financial services net income for the quarter was negatively affected by unfavorable discrete income-tax adjustments, a higher provision for credit losses, and lower gains on operating-lease residual values. These items were partially offset by income earned on a higher average portfolio.

Industry Outlook for Fiscal 2022








Agriculture & Turf








U.S. & Canada:








Large Ag






Up ~ 15%


Small Ag & Turf






~ Flat


Europe






~ Flat


South America (Tractors & Combines)






Up 10 to 15%


Asia






Down moderately










Construction & Forestry








U.S. & Canada:








Construction Equipment






Up ~ 10%


Compact Construction Equipment






Flat to Down 5%


Global Forestry






Flat to Down 5%


Global Roadbuilding






Flat to Up 5%


 

Deere Segment Outlook for Fiscal 2022




Currency


Price


$ in millions


Net Sales


Translation


Realization


Production & Precision Ag


Up 25 to 30%


-2 %


+14 %


Small Ag & Turf


Up 10 to 15%


-3 %


+9 %


Construction & Forestry


Up ~ 10%


-3 %


+10 %










Financial Services


Net Income


$ 870




Financial Services. Full-year 2022 results are expected to be slightly lower than in fiscal 2021 due to a higher provision for credit losses, less-favorable financing spreads, and higher selling, administrative, and general expenses. These factors are expected to be partially offset by income earned on a higher average portfolio.

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.



Third Quarter


Year to Date


$ in millions


2022


2021


% Change


2022


2021


% Change


Revenue


$

689


$

683


1 %


$

1,984


$

2,015


-2 %


Net income


$

173


$

186


-7 %


$

521


$

530


-2 %


Ending portfolio balance










$

45,185


$

41,508


9 %


Results in the quarter declined due to unfavorable discrete income-tax adjustments, less-favorable financing spreads, and lower gains on operating-lease residual values. Partially offsetting these factors was income earned on a higher average portfolio. For the year-to-date period, net income decreased mainly due to less-favorable financing spreads, a higher provision for credit losses, and unfavorable discrete income-tax adjustments, 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," and "Deere Segment Outlook," 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 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 military conflict between Russia and Ukraine; natural disasters; and the spread of major epidemics or pandemics (including the COVID-19 pandemic). The sustainability of economic recovery from COVID-19 remains unclear and significant volatility could continue for a prolonged period.

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, 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; 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 right to repair or right to modify; 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.

Agricultural Equipment Operations

The company's agricultural equipment operations are subject to a number of uncertainties, including 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; 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

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; availability of technological innovations; speed of research and development; effectiveness of partnerships with third parties; and the dealer channel's ability to support and service precision technology solutions.

Small Agriculture and Turf Equipment

Factors affecting the company's small agriculture and turf equipment operations include customer profitability; consumer purchasing preferences; housing starts and supply; infrastructure investment; spending by municipalities and golf courses; and consumable input costs.

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. 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 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
THIRD QUARTER 2022 PRESS RELEASE
(In millions of dollars) Unaudited









Three Months Ended


Nine Months Ended




July 31


August 1


%


July 31


August 1


%




2022


2021


Change


2022


2021


Change


Net sales and revenues:


















Production & precision ag net sales


$

6,096


$

4,250


+43


$

14,568


$

11,848


+23


Small ag & turf net sales



3,635



3,147


+16



9,836



9,051


+9


Construction & forestry net sales



3,269



3,016


+8



9,161



8,562


+7


Financial services revenues



903



902





2,637



2,679


-2


Other revenues



199



212


-6



839



557


+51


Total net sales and revenues


$

14,102


$

11,527


+22


$

37,041


$

32,697


+13




















Operating profit: *


















Production & precision ag


$

1,293


$

906


+43


$

2,646


$

2,557


+3


Small ag & turf



552



583


-5



1,443



1,699


-15


Construction & forestry



514



463


+11



1,599



1,220


+31


Financial services



287



291


-1



864



844


+2


Total operating profit



2,646



2,243


+18



6,552



6,320


+4


Reconciling items **



(108)



(85)


+27



(303)



(312)


-3


Income taxes



(654)



(491)


+33



(1,364)



(1,328)


+3


Net income attributable to Deere & Company


$

1,884


$

1,667


+13


$

4,885


$

4,680


+4




*

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 and Nine Months Ended July 31, 2022 and August 1, 2021
(In millions of dollars and shares except per share amounts) Unaudited




Three Months Ended


Nine Months Ended




2022


2021


2022


2021


Net Sales and Revenues














Net sales


$

13,000


$

10,413


$

33,565


$

29,461


Finance and interest income



846



825



2,441



2,468


Other income



256



289



1,035



768


Total



14,102



11,527



37,041



32,697
















Costs and Expenses














Cost of sales



9,511



7,574



25,124



21,307


Research and development expenses



481



394



1,336



1,137


Selling, administrative and general expenses



959



841



2,672



2,448


Interest expense



296



244



713



783


Other operating expenses



316



324



954



1,033


Total



11,563



9,377



30,799



26,708
















Income of Consolidated Group before Income Taxes



2,539



2,150



6,242



5,989


Provision for income taxes



654



491



1,364



1,328
















Income of Consolidated Group



1,885



1,659



4,878



4,661


Equity in income of unconsolidated affiliates






8



8



21
















Net Income



1,885



1,667



4,886



4,682


Less: Net income attributable to noncontrolling interests



1






1



2


Net Income Attributable to Deere & Company


$

1,884


$

1,667


$

4,885


$

4,680
















Per Share Data














Basic


$

6.20


$

5.36


$

15.97


$

14.98


Diluted


$

6.16


$

5.32


$

15.88


$

14.86


Dividends declared


$

1.13


$

.90


$

3.23


$

2.56


Dividends paid


$

1.05


$

.90


$

3.15


$

2.42
















Average Shares Outstanding














Basic



304.1



311.0



305.8



312.4


Diluted



305.7



313.4



307.7



314.9




See Condensed Notes to Interim Consolidated Financial Statements


 

DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars) Unaudited





July 31


October 31


August 1



2022


2021


2021

Assets










Cash and cash equivalents


$

4,359


$

8,017


$

7,519

Marketable securities



719



728



688

Trade accounts and notes receivable - net



6,696



4,208



5,268

Financing receivables - net



35,056



33,799



31,449

Financing receivables securitized - net



5,141



4,659



5,401

Other receivables



1,999



1,765



1,702

Equipment on operating leases - net



6,554



6,988



6,982

Inventories



9,121



6,781



6,410

Property and equipment - net



5,666



5,820



5,649

Goodwill



3,754



3,291



3,148

Other intangible assets - net



1,281



1,275



1,267

Retirement benefits



3,125



3,601



990

Deferred income taxes



1,110



1,037



1,767

Other assets



2,236



2,145



2,448

Total Assets


$

86,817


$

84,114


$

80,688











Liabilities and Stockholders' Equity




















Liabilities










Short-term borrowings


$

14,176


$

10,919


$

10,404

Short-term securitization borrowings



4,920



4,605



5,277

Accounts payable and accrued expenses



12,986



12,348



11,207

Deferred income taxes



561



576



515

Long-term borrowings



32,132



32,888



32,280

Retirement benefits and other liabilities



2,911



4,344



5,272

Total liabilities



67,686



65,680



64,955











Redeemable noncontrolling interest



95

















Stockholders' Equity










Total Deere & Company stockholders' equity



19,033



18,431



15,731

Noncontrolling interests



3



3



2

Total stockholders' equity



19,036



18,434



15,733

Total Liabilities and Stockholders' Equity


$

86,817


$

84,114


$

80,688


See Condensed Notes to Interim Consolidated Financial Statements.

 

DEERE & COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended July 31, 2022 and August 1, 2021
(In millions of dollars) Unaudited



2022


2021

Cash Flows from Operating Activities







Net income


$

4,886


$

4,682

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







Provision (credit) for credit losses



62



(17)

Provision for depreciation and amortization



1,443



1,569

Impairment charges



81



50

Share-based compensation expense



64



64

Gain on remeasurement of previously held equity investment



(326)




Undistributed earnings of unconsolidated affiliates



(1)



4

Credit for deferred income taxes



(6)



(271)

Changes in assets and liabilities:







Trade, notes, and financing receivables related to sales



(2,357)



(444)

Inventories



(2,526)



(1,817)

Accounts payable and accrued expenses



(15)



742

Accrued income taxes payable/receivable



82



34

Retirement benefits



(1,014)



13

Other



45



(295)

Net cash provided by operating activities



418



4,314








Cash Flows from Investing Activities







Collections of receivables (excluding receivables related to sales)



15,774



14,480

Proceeds from sales of equipment on operating leases



1,501



1,510

Cost of receivables acquired (excluding receivables related to sales)



(18,578)



(17,161)

Acquisitions of businesses, net of cash acquired



(488)



(19)

Purchases of property and equipment



(596)



(492)

Cost of equipment on operating leases acquired



(1,717)



(1,210)

Collateral on derivatives – net



(193)



(189)

Other



(133)



(21)

Net cash used for investing activities



(4,430)



(3,102)








Cash Flows from Financing Activities







Increase in total short-term borrowings



4,267



929

Proceeds from long-term borrowings



6,281



5,877

Payments of long-term borrowings



(6,578)



(5,172)

Proceeds from issuance of common stock



55



136

Repurchases of common stock



(2,477)



(1,780)

Dividends paid



(971)



(761)

Other



(62)



(80)

Net cash provided by (used for) financing activities



515



(851)








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



(143)



106








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



(3,640)



467

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



8,125



7,172

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


$

4,485


$

7,639


See Condensed Notes to Interim Consolidated Financial Statements.

 



DEERE & COMPANY


Condensed Notes to Interim Consolidated Financial Statements


(In millions of dollars) Unaudited




(1)

Acquisitions


On February 7, 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.




On February 28, 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 the first nine months of 2022 were impairments of most long-lived assets, an increase in reserves of certain financial assets, and an accrual for various contractual uncertainties. No significant reserves were established on trade receivables or complete goods inventory, as the company continues to experience strong payment performance and requires prepayment of existing inventories. However, the situation is fluid, and the company continues to closely monitor all financial and operational risks. As of July 31, 2022, the company's net exposure in Russia / Ukraine was approximately $436 million. 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 the first nine months of 2022 follows in millions of dollars:

 



Nine Months Ended July 31, 2022




PPA


SAT


CF


FS


Total


2022 Expense:

















Inventory reserve – Cost of sales


$

8





$

4





$

12


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











$

32



32


Voluntary-separation program – Cost of sales



1












1


Voluntary-separation program – SA&G expenses



3






4



1



8


Contingent liabilities – Other operating expenses



3


$

1



1






5


Total Russia/Ukraine events pretax expense


$

45


$

1


$

48


$

33



127



















Net tax impact















(8)


Total Russia/Ukraine events after-tax expense














$

119


 

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.

The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months and nine months ended July 31, 2022 and August 1, 2021:



Three Months


Nine Months




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


$

(1)





$

1


$

7


$

7


$

45


$

1



48


$

33



127


UAW ratification bonus – Cost of sales


















53



9



28






90


Total expense (benefit)



(1)






1



7



7



98



10



(250)



33



(109)


































2021 Expense (benefit):
































Gain on sale – Other income





$

(27)









(27)






(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)






(27)









(27)



(48)



(24)



37






(35)


































Period over period change


$

(1)


$

27


$

1


$

7


$

34


$

146


$

34


$

(287)


$

33


$

(74)




(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 both the first quarter and year-to-date period 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 of 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 July 31, 2022 and August 1, 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


$

13,000


$

10,413














$

13,000


$

10,413



Finance and interest income



60



33


$

905


$

867


$

(119)


$

(75)



846



825

1


Other income



228



263



79



96



(51)



(70)



256



289

2


Total



13,288



10,709



984



963



(170)



(145)



14,102



11,527






























Costs and Expenses



























Cost of sales



9,512



7,574









(1)






9,511



7,574

3


Research and development expenses



481



394















481



394



Selling, administrative and general expenses



805



702



156



141



(2)



(2)



959



841

3


Interest expense



109



92



223



169



(36)



(17)



296



244

4


Interest compensation to Financial Services



83



58









(83)



(58)







4


Other operating expenses



47



32



317



360



(48)



(68)



316



324

5


Total



11,037



8,852



696



670



(170)



(145)



11,563



9,377






























Income before Income Taxes



2,251



1,857



288



293









2,539



2,150



Provision for income taxes



574



425



80



66









654



491






























Income after Income Taxes



1,677



1,432



208



227









1,885



1,659



Equity in income (loss) of unconsolidated affiliates



(1)



8



1















8






























Net Income



1,676



1,440



209



227









1,885



1,667



Less: Net income attributable to noncontrolling interests



1


















1






Net Income Attributable to Deere & Company


$

1,675


$

1,440


$

209


$

227








$

1,884


$

1,667






























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 intercompany service fees.

4 Elimination of Equipment Operations' interest expense to Financial Services.

5 Elimination of Financial Services' lease depreciation expense related to inventory transferred to equipment on operating leases.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENTS OF INCOME
For the Nine Months Ended July 31, 2022 and August 1, 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


$

33,565


$

29,461














$

33,565


$

29,461



Finance and interest income



131



95


$

2,580


$

2,582


$

(270)


$

(209)



2,441



2,468

1


Other income



1,028



712



271



269



(264)



(213)



1,035



768

2


Total



34,724



30,268



2,851



2,851



(534)



(422)



37,041



32,697






























Costs and Expenses



























Cost of sales



25,126



21,309









(2)



(2)



25,124



21,307

3


Research and development expenses



1,336



1,137















1,336



1,137



Selling, administrative and general expenses



2,215



2,089



463



365



(6)



(6)



2,672



2,448

3


Interest expense



297



287



493



539



(77)



(43)



713



783

4


Interest compensation to Financial Services



189



166









(189)



(166)







4


Other operating expenses



186



140



1,028



1,098



(260)



(205)



954



1,033

5


Total



29,349



25,128



1,984



2,002



(534)



(422)



30,799



26,708






























Income before Income Taxes



5,375



5,140



867



849









6,242



5,989



Provision for income taxes



1,142



1,130



222



198









1,364



1,328






























Income after Income Taxes



4,233



4,010



645



651









4,878



4,661



Equity in income of unconsolidated affiliates



4



18



4



3









8



21






























Net Income



4,237



4,028



649



654









4,886



4,682



Less: Net income attributable to noncontrolling interests



1



2















1



2



Net Income Attributable to Deere & Company


$

4,236


$

4,026


$

649


$

654








$

4,885


$

4,680






























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 intercompany service fees.

4 Elimination of Equipment Operations' interest expense to Financial Services.

5 Elimination of Financial Services' lease depreciation expense related to inventory transferred to equipment on operating leases.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEETS
(In millions of dollars) Unaudited





























EQUIPMENT


FINANCIAL









OPERATIONS


SERVICES


ELIMINATIONS


CONSOLIDATED





Jul 31


Oct 31


Aug 1


Jul 31


Oct 31


Aug 1


Jul 31


Oct 31


Aug 1


Jul 31


Oct 31


Aug 1





2022


2021


2021


2022


2021


2021


2022


2021


2021


2022


2021


2021



Assets







































Cash and cash equivalents


$

3,540


$

7,188


$

6,638


$

819


$

829


$

881











$

4,359


$

8,017


$

7,519



Marketable securities



2



3



3



717



725



685












719



728



688



Receivables from Financial
     Services



5,055



5,564



5,913











$

(5,055)


$

(5,564)


$

(5,913)










6


Trade accounts and notes
     receivable - net



1,342



1,155



1,127



6,738



3,895



5,319



(1,384)



(842)



(1,178)



6,696



4,208



5,268

7


Financing receivables - net



45



73



89



35,011



33,726



31,360












35,056



33,799



31,449



Financing receivables
     securitized - net



2



10



13



5,139



4,649



5,388












5,141



4,659



5,401



Other receivables



1,676



1,629



1,545



371



159



171



(48)



(23)



(14)



1,999



1,765



1,702

7


Equipment on operating leases - net












6,554



6,988



6,982












6,554



6,988



6,982



Inventories



9,121



6,781



6,410





















9,121



6,781



6,410



Property and equipment - net



5,630



5,783



5,612



36



37



37












5,666



5,820



5,649



Goodwill



3,754



3,291



3,148





















3,754



3,291



3,148



Other intangible assets - net



1,281



1,275



1,267





















1,281



1,275



1,267



Retirement benefits



3,062



3,539



986



65



64



63



(2)



(2)



(59)



3,125



3,601



990

8


Deferred income taxes



1,248



1,215



1,959



48



53



59



(186)



(231)



(251)



1,110



1,037



1,767

9


Other assets



1,727



1,646



1,747



510



499



702



(1)






(1)



2,236



2,145



2,448



Total Assets


$

37,485


$

39,152


$

36,457


$

56,008


$

51,624


$

51,647


$

(6,676)


$

(6,662)


$

(7,416)


$

86,817


$

84,114


$

80,688










































Liabilities and
     Stockholders' Equity














































































Liabilities







































Short-term borrowings


$

471


$

1,509


$

1,376


$

13,705


$

9,410


$

9,028











$

14,176


$

10,919


$

10,404



Short-term securitization borrowings



2



10



12



4,918



4,595



5,265












4,920



4,605



5,277



Payables to Equipment Operations












5,055



5,564



5,913


$

(5,055)


$

(5,564)


$

(5,913)










6


Accounts payable and
     accrued expenses



11,925



11,198



10,484



2,494



2,015



1,916



(1,433)



(865)



(1,193)



12,986



12,348



11,207

7


Deferred income taxes



436



438



371



311



369



395



(186)



(231)



(251)



561



576



515

9


Long-term borrowings



8,481



8,915



8,982



23,651



23,973



23,298












32,132



32,888



32,280



Retirement benefits and
     other liabilities



2,799



4,239



5,219



114



107



112



(2)



(2)



(59)



2,911



4,344



5,272

8


Total liabilities



24,114



26,309



26,444



50,248



46,033



45,927



(6,676)



(6,662)



(7,416)



67,686



65,680



64,955










































Redeemable noncontrolling interest



95



























95
















































Stockholders' Equity







































Total Deere & Company
     stockholders' equity



19,033



18,431



15,731



5,760



5,591



5,720



(5,760)



(5,591)



(5,720)



19,033



18,431



15,731

10


Noncontrolling interests



3



3



2





















3



3



2



Financial Services equity



(5,760)



(5,591)



(5,720)












5,760



5,591



5,720










10


Adjusted total stockholders' equity



13,276



12,843



10,013



5,760



5,591



5,720












19,036



18,434



15,733



Total Liabilities and Stockholders' Equity


$

37,485


$

39,152


$

36,457


$

56,008


$

51,624


$

51,647


$

(6,676)


$

(6,662)


$

(7,416)


$

86,817


$

84,114


$

80,688










































6  Elimination of receivables / payables between Equipment Operations and Financial Services.

7  Primarily reclassification of sales incentive accruals on receivables sold to Financial Services.

8  Reclassification of net pension assets / liabilities.

9  Reclassification of deferred tax assets / liabilities in the same taxing jurisdictions.

10 Elimination of Financial Services' equity.

 

DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENTS OF CASH FLOWS
For the Nine Months Ended July 31, 2022 and August 1, 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


$

4,237


$

4,028


$

649


$

654








$

4,886


$

4,682



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



























Provision (credit) for credit losses






5



62



(22)









62



(17)



Provision for depreciation and amortization



806



803



790



866


$

(153)


$

(100)



1,443



1,569

11


Impairment charges



81



50















81



50



Share-based compensation expense















64



64



64



64

12


Gain on remeasurement of previously held equity investment



(326)


















(326)






Undistributed earnings of unconsolidated affiliates



370



246



(3)



(2)



(368)



(240)



(1)



4

13


Provision (credit) for deferred income taxes



44



(218)



(50)



(53)









(6)



(271)



Changes in assets and liabilities:



























Trade, notes, and financing receivables related to sales



(215)



(73)









(2,142)



(371)



(2,357)



(444)

14, 16, 17


Inventories



(2,415)



(1,367)









(111)



(450)



(2,526)



(1,817)

15


Accounts payable and accrued expenses



491



860



36



(20)



(542)



(98)



(15)



742

16


Accrued income taxes payable/receivable



52



43



30



(9)









82



34



Retirement benefits



(1,020)



8



6



5









(1,014)



13



Other



101



(200)



(105)



26



49



(121)



45



(295)

11, 12, 15


Net cash provided by operating activities



2,206



4,185



1,415



1,445



(3,203)



(1,316)



418



4,314






























Cash Flows from Investing Activities



























Collections of receivables (excluding receivables related
     to sales)









16,927



15,704



(1,153)



(1,224)



15,774



14,480

14


Proceeds from sales of equipment on operating leases









1,501



1,510









1,501



1,510



Cost of receivables acquired (excluding receivables related
     to sales)









(19,069)



(18,349)



491



1,188



(18,578)



(17,161)

14


Acquisitions of businesses, net of cash acquired



(488)



(19)















(488)



(19)



Purchases of property and equipment



(595)



(491)



(1)



(1)









(596)



(492)



Cost of equipment on operating leases acquired









(1,868)



(1,818)



151



608



(1,717)



(1,210)

15


Increase in trade and wholesale receivables









(3,318)



(481)



3,318



481







14


Collateral on derivatives – net



5



(4)



(198)



(185)









(193)



(189)



Other



(87)



(10)



(74)



(42)



28



31



(133)



(21)

13, 17


Net cash used for investing activities



(1,165)



(524)



(6,100)



(3,662)



2,835



1,084



(4,430)



(3,102)






























Cash Flows from Financing Activities



























Increase (decrease) in total short-term borrowings



58



(93)



4,209



1,022









4,267



929



Change in intercompany receivables/payables



70



(624)



(70)



624















Proceeds from long-term borrowings



137






6,144



5,877









6,281



5,877



Payments of long-term borrowings



(1,372)



(71)



(5,206)



(5,101)









(6,578)



(5,172)



Proceeds from issuance of common stock



55



136















55



136



Repurchases of common stock



(2,477)



(1,780)















(2,477)



(1,780)



Dividends paid



(971)



(761)



(368)



(240)



368



240



(971)



(761)

13


Other



(39)



(50)



(23)



(22)






(8)



(62)



(80)

13


Net cash provided by (used for) financing activities



(4,539)



(3,243)



4,686



2,160



368



232



515



(851)






























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



(148)



77



5



29









(143)



106






























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



(3,646)



495



6



(28)









(3,640)



467



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



7,200



6,156



925



1,016









8,125



7,172



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


$

3,554


$

6,651


$

931


$

988








$

4,485


$

7,639






























11

Elimination of depreciation on leases related to inventory transferred to equipment on operating leases.

12

Reclassification of share-based compensation expense.

13

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.

14

Primarily reclassification of receivables related to the sale of equipment.

15

Reclassification of direct lease agreements with retail customers.

16

Reclassification of sales incentive accruals on receivables sold to Financial Services.

17

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 Nine Months Ended


Operations

Precision Ag

& Turf

& Forestry



Jul 31

Aug 1

Jul 31

Aug 1

Jul 31

Aug 1

Jul 31

Aug 1

Dollars in millions


2022

2021

2022

2021

2022

2021

2022

2021

Net Sales


$

33,565


$

29,461


$

14,568


$

11,848


$

9,836


$

9,051


$

9,161


$

8,562


Average Identifiable Assets


























With Inventories at LIFO


$

19,283


$

16,496


$

8,223


$

6,518


$

4,330


$

3,558


$

6,730


$

6,420


With Inventories at Standard Cost



20,872



17,877



9,017



7,205



4,788



3,988



7,067



6,684


Operating Profit


$

5,688


$

5,476


$

2,646


$

2,557


$

1,443


$

1,699


$

1,599


$

1,220


Percent of Net Sales



16.9

%


18.6

%


18.2

%


21.6

%


14.7

%


18.8

%


17.5

%


14.2

%

Operating Return on Assets


























With Inventories at LIFO



29.5

%


33.2

%


32.2

%


39.2

%


33.3

%


47.8

%


23.8

%


19.0

%

With Inventories at Standard Cost



27.3

%


30.6

%


29.3

%


35.5

%


30.1

%


42.6

%


22.6

%


18.3

%

SVA Cost of Assets


$

(1,878)


$

(1,609)


$

(811)


$

(648)


$

(431)


$

(359)


$

(636)


$

(602)


SVA



3,810



3,867



1,835



1,909



1,012



1,340



963



618






























Financial



















For the Nine Months Ended


Services





















Jul 31

Aug 1



















Dollars in millions


2022

2021



















Net Income Attributable to Deere & Company


$

649


$

654




















Average Equity



5,706



5,468




















Return on Equity



11.4

%


12.0

%



















Operating Profit


$

864


$

844




















Cost of Equity



(576)



(531)




















SVA



288



313




















 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/deere-reports-third-quarter-net-income-of-1-884-billion-301608986.html

SOURCE Deere & Company

Copyright 2022 Canada NewsWire

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