0000315189us-gaap:~~AccountingStandardsUpdate201904Member2021-05-02~~ProductMemberde:ProductionAndPrecisionAgricultureSegmentMember2021-11-012022-05-01

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended May ~~2, 2021~~1, 2022

☐ 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
~~8½% Debentures Due 2022~~	~~DE22~~	~~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 May ~~2, 2021, 311,942,092~~1, 2022, 305,635,672 shares of common stock, $1 par value, of the registrant were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended May 2, 2021 and May 3, 2020

(In millions of dollars and shares except per share amounts) Unaudited


2021

2020

Net Sales and Revenues

Net sales

$
10,998

$
8,224

Finance and interest income

809

849

Other income

251

180

Total

12,058

9,253

Costs and Expenses

Cost of sales

7,928

6,294

Research and development expenses

377

406

Selling, administrative and general expenses

838

906

Interest expense

268

342

Other operating expenses

335

377

Total

9,746

8,325

Income of Consolidated Group before Income Taxes

2,312

928

Provision for income taxes

530

245

Income of Consolidated Group

1,782

683

Equity in income (loss) of unconsolidated affiliates

8

(17)

Net Income

1,790

666

Less: Net income attributable to noncontrolling interests

Net Income Attributable to Deere & Company

$
1,790

$
666

Per Share Data

Basic

$
5.72

$
2.13

Diluted

$
5.68

$
2.11

Average Shares Outstanding

Basic

312.8

313.2

Diluted

315.2

316.2


ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENTS OF CONSOLIDATED INCOME
For the Three Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars and shares except per share amounts) Unaudited
	2022		2021
Net Sales and Revenues
Net sales	$	12,034	$	10,998
Finance and interest income		796		809
Other income		540		251
Total		13,370		12,058

Costs and Expenses
Cost of sales		8,918		7,928
Research and development expenses		453		377
Selling, administrative and general expenses		932		838
Interest expense		187		268
Other operating expenses		328		335
Total		10,818		9,746

Income of Consolidated Group before Income Taxes		2,552		2,312
Provision for income taxes		461		530

Income of Consolidated Group		2,091		1,782
Equity in income of unconsolidated affiliates		6		8

Net Income		2,097		1,790
Less: Net loss attributable to noncontrolling interests		(1)
Net Income Attributable to Deere & Company	$	2,098	$	1,790

Per Share Data
Basic	$	6.85	$	5.72
Diluted	$	6.81	$	5.68
Dividends declared	$	1.05	$	.90
Dividends paid	$	1.05	$	.76

Average Shares Outstanding
Basic		306.2		312.8
Diluted		308.1		315.2

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended May 2, 2021 and May 3, 2020
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars) Unaudited
	2021		2020		2022		2021

Net Income	$	1,790	$	666	$	2,097	$	1,790

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		91		57		129		91
Cumulative translation adjustment		37		(441)		(248)		37
Unrealized gain (loss) on derivatives		3		(8)
Unrealized gain (loss) on debt securities		(13)		6
Unrealized gain on derivatives						28		3
Unrealized loss on debt securities						(48)		(13)
Other Comprehensive Income (Loss), Net of Income Taxes		118		(386)		(139)		118

Comprehensive Income of Consolidated Group		1,908		280		1,958		1,908
Less: Comprehensive income attributable to noncontrolling interests
Less: Comprehensive loss attributable to noncontrolling interests						(5)
Comprehensive Income Attributable to Deere & Company	$	1,908	$	280	$	1,963	$	1,908

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Six Months Ended May 2, 2021 and May 3, 2020

(In millions of dollars and shares except per share amounts) Unaudited

2021

2020

Net Sales and Revenues

Net sales

$
19,049

$
14,754

Finance and interest income

1,644

1,745

Other income

477

385

Total

21,170

16,884

Costs and Expenses

Cost of sales

13,734

11,371

Research and development expenses

743

831

Selling, administrative and general expenses

1,607

1,715

Interest expense

538

678

Other operating expenses

708

792

Total

17,330

15,387

Income of Consolidated Group before Income Taxes

3,840

1,497

Provision for income taxes

838

295

Income of Consolidated Group

3,002

1,202

Equity in income (loss) of unconsolidated affiliates

12

(18)

Net Income

3,014

1,184

Less: Net income attributable to noncontrolling interests

1

2

Net Income Attributable to Deere & Company

$
3,013

$
1,182

Per Share Data

Basic

$
9.62

$
3.77

Diluted

$
9.55

$
3.73

Average Shares Outstanding

Basic

313.1

313.3

Diluted

315.6

316.7


DEERE & COMPANY
STATEMENTS OF CONSOLIDATED INCOME
For the Six Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars and shares except per share amounts) Unaudited
	2022		2021
Net Sales and Revenues
Net sales	$	20,565	$	19,049
Finance and interest income		1,595		1,644
Other income		779		477
Total		22,939		21,170

Costs and Expenses
Cost of sales		15,613		13,734
Research and development expenses		855		743
Selling, administrative and general expenses		1,713		1,607
Interest expense		417		538
Other operating expenses		638		708
Total		19,236		17,330

Income of Consolidated Group before Income Taxes		3,703		3,840
Provision for income taxes		710		838

Income of Consolidated Group		2,993		3,002
Equity in income of unconsolidated affiliates		8		12

Net Income		3,001		3,014
Less: Net income attributable to noncontrolling interests				1
Net Income Attributable to Deere & Company	$	3,001	$	3,013

Per Share Data
Basic	$	9.78	$	9.62
Diluted	$	9.72	$	9.55
Dividends declared	$	2.10	$	1.66
Dividends paid	$	2.10	$	1.52

Average Shares Outstanding
Basic		306.8		313.1
Diluted		308.8		315.6

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Six Months Ended May 2, 2021 and May 3, 2020
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
For the Six Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars) Unaudited
	2021		2020		2022		2021

Net Income	$	3,014	$	1,184	$	3,001	$	3,014

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		154		287		(216)		154
Cumulative translation adjustment		433		(398)		(515)		433
Unrealized gain (loss) on derivatives		7		(8)
Unrealized gain (loss) on debt securities		(15)		11
Unrealized gain on derivatives						42		7
Unrealized loss on debt securities						(63)		(15)
Other Comprehensive Income (Loss), Net of Income Taxes		579		(108)		(752)		579

Comprehensive Income of Consolidated Group		3,593		1,076		2,249		3,593
Less: Comprehensive income attributable to noncontrolling interests		1		2
Less: Comprehensive income (loss) attributable to noncontrolling interests						(4)		1
Comprehensive Income Attributable to Deere & Company	$	3,592	$	1,074	$	2,253	$	3,592

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars) Unaudited
	May 1		October 31		May 2
	2022		2021		2021
Assets
Cash and cash equivalents	$	3,878	$	8,017	$	7,182
Marketable securities		682		728		668
Trade accounts and notes receivable – net		6,258		4,208		6,158
Financing receivables – net		34,085		33,799		30,994
Financing receivables securitized – net		4,073		4,659		4,107
Other receivables		2,306		1,765		1,504
Equipment on operating leases – net		6,465		6,988		7,108
Inventories		9,030		6,781		6,042
Property and equipment – net		5,715		5,820		5,704
Goodwill		3,812		3,291		3,190
Other intangible assets – net		1,352		1,275		1,310
Retirement benefits		3,059		3,601		951
Deferred income taxes		1,104		1,037		1,724
Other assets		2,280		2,145		2,337
Total Assets	$	84,099	$	84,114	$	78,979

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	12,413	$	10,919	$	9,911
Short-term securitization borrowings		4,006		4,605		4,106
Accounts payable and accrued expenses		12,679		12,348		10,682
Deferred income taxes		584		576		533
Long-term borrowings		32,447		32,888		33,346
Retirement benefits and other liabilities		2,964		4,344		5,305
Total liabilities		65,093		65,680		63,883

Commitments and contingencies (Note 15)
Redeemable noncontrolling interest (Note 19)		99

Stockholders’ Equity
Common stock, $1 par value (issued shares at May 1, 2022 – 536,431,204)		5,117		5,054		4,999
Common stock in treasury		(21,727)		(20,533)		(19,052)
Retained earnings		38,805		36,449		34,105
Accumulated other comprehensive income (loss)		(3,291)		(2,539)		(4,960)
Total Deere & Company stockholders’ equity		18,904		18,431		15,092
Noncontrolling interests		3		3		4
Total stockholders’ equity		18,907		18,434		15,096
Total Liabilities and Stockholders’ Equity	$	84,099	$	84,114	$	78,979

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited


May 2

November 1

May 3

2021

2020

2020

Assets

Cash and cash equivalents

$
7,182

$
7,066

$
8,900

Marketable securities

668

641

626

Receivables from unconsolidated affiliates

31

31

32

Trade accounts and notes receivable – net

6,158

4,171

5,986

Financing receivables – net

30,994

29,750

27,256

Financing receivables securitized – net

4,107

4,703

4,685

Other receivables

1,473

1,220

1,212

Equipment on operating leases – net

7,108

7,298

7,245

Inventories

6,042

4,999

6,171

Property and equipment – net

5,704

5,817

5,685

Investments in unconsolidated affiliates

182

193

192

Goodwill

3,190

3,081

2,917

Other intangible assets – net

1,310

1,327

1,311

Retirement benefits

951

863

960

Deferred income taxes

1,724

1,499

1,435

Other assets

2,155

2,432

2,713

Total Assets

$
78,979

$
75,091

$
77,326

Liabilities and Stockholders’ Equity

Liabilities

Short-term borrowings

$
9,911

$
8,582

$
11,179

Short-term securitization borrowings

4,106

4,682

4,640

Payables to unconsolidated affiliates

155

105

91

Accounts payable and accrued expenses

10,527

10,112

9,072

Deferred income taxes

533

519

475

Long-term borrowings

33,346

32,734

34,324

Retirement benefits and other liabilities

5,305

5,413

5,680

Total liabilities

63,883

62,147

65,461

Commitments and contingencies (Note 18)

Stockholders’ Equity

Common stock, $1 par value (issued shares at
May 2, 2021 – 536,431,204)

4,999

4,895

4,713

Common stock in treasury

(19,052)

(18,065)

(17,690)

Retained earnings

34,105

31,646

30,556

Accumulated other comprehensive income (loss)

(4,960)

(5,539)

(5,715)

Total Deere & Company stockholders’ equity

15,092

12,937

11,864

Noncontrolling interests

4

7

1

Total stockholders’ equity

15,096

12,944

11,865

Total Liabilities and Stockholders’ Equity

$
78,979

$
75,091

$
77,326


DEERE & COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars) Unaudited
	2022		2021
Cash Flows from Operating Activities
Net income	$	3,001	$	3,014
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision (credit) for credit losses		45		(24)
Provision for depreciation and amortization		933		1,054
Impairment charges		77		50
Share-based compensation expense		44		45
Gain on remeasurement of previously held equity investment		(326)
Undistributed earnings of unconsolidated affiliates		(2)		11
Provision (credit) for deferred income taxes		37		(213)
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		(1,535)		(1,124)
Inventories		(2,265)		(1,193)
Accounts payable and accrued expenses		(443)		318
Accrued income taxes payable/receivable		(139)		54
Retirement benefits		(1,020)		(5)
Other		(169)		(201)
Net cash provided by (used for) operating activities		(1,762)		1,786

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)		11,190		10,367
Proceeds from sales of equipment on operating leases		1,035		1,011
Cost of receivables acquired (excluding receivables related to sales)		(11,971)		(11,359)
Acquisitions of businesses, net of cash acquired		(473)		(19)
Purchases of property and equipment		(346)		(320)
Cost of equipment on operating leases acquired		(1,004)		(764)
Collateral on derivatives – net		(248)		(255)
Other		(71)		(48)
Net cash used for investing activities		(1,888)		(1,387)

Cash Flows from Financing Activities
Increase in total short-term borrowings		812		212
Proceeds from long-term borrowings		4,298		3,967
Payments of long-term borrowings		(3,625)		(3,157)
Proceeds from issuance of common stock		50		116
Repurchases of common stock		(1,226)		(1,044)
Dividends paid		(649)		(480)
Other		(46)		(55)
Net cash used for financing activities		(386)		(441)

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(110)		151

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash		(4,146)		109
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		8,125		7,172
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	3,979	$	7,281

Components of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	3,878	$	7,182
Restricted cash (Other assets)		101		99
Total cash, cash equivalents, and restricted cash	$	3,979	$	7,281

See Condensed Notes to Interim Consolidated Financial Statements.

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Six Months Ended May 2, 2021 and May 3, 2020

(In millions of dollars) Unaudited


2021

2020

Cash Flows from Operating Activities





Net income

$
3,014

$
1,184

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

Provision (credit) for credit losses

(24)

107

Provision for depreciation and amortization

1,054

1,067

Impairment charges

50

114

Share-based compensation expense

45

48

Undistributed earnings of unconsolidated affiliates

11

(8)

Credit for deferred income taxes

(213)

(61)

Changes in assets and liabilities:

Trade, notes, and financing receivables related to sales

(1,124)

(491)

Inventories

(1,193)

(496)

Accounts payable and accrued expenses

318

(707)

Accrued income taxes payable/receivable

54

(173)

Retirement benefits

(5)

58

Other

(201)

134

Net cash provided by operating activities

1,786

776

Cash Flows from Investing Activities

Collections of receivables (excluding receivables related to sales)

10,367

9,624

Proceeds from maturities and sales of marketable securities

47

39

Proceeds from sales of equipment on operating leases

1,011

898

Cost of receivables acquired (excluding receivables related to sales)

(11,359)

(9,367)

Acquisitions of businesses, net of cash acquired

(19)

Purchases of marketable securities

(74)

(71)

Purchases of property and equipment

(320)

(441)

Cost of equipment on operating leases acquired

(764)

(960)

Collateral on derivatives – net

(255)

319

Other

(21)

(11)

Net cash provided by (used for) investing activities

(1,387)

30

Cash Flows from Financing Activities

Increase in total short-term borrowings

212

1,138

Proceeds from long-term borrowings

3,967

7,275

Payments of long-term borrowings

(3,157)

(3,315)

Proceeds from issuance of common stock

116

70

Repurchases of common stock

(1,044)

(263)

Dividends paid

(480)

(481)

Other

(55)

(81)

Net cash provided by (used for) financing activities

(441)

4,343

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

151

(102)

Net Increase in Cash, Cash Equivalents, and Restricted Cash

109

5,047

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

7,172

3,956

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

$
7,281

$
9,003

~~See Condensed Notes to Interim Consolidated Financial Statements.~~

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended May 2, 2021 and May 3, 2020

(In millions of dollars) Unaudited

Total Stockholders’ Equity

Deere & Company Stockholders

Accumulated

Total

Other

Redeemable

Stockholders’

Common

Treasury

Retained

Comprehensive

Noncontrolling

Noncontrolling


Equity

Stock

Stock

Earnings

Income (Loss)

Interests


Interest

Three Months Ended May 3, 2020

Balance February 2, 2020

$
11,930

$
4,675

$
(17,549)

$
30,129

$
(5,329)

$
4

$
14

Net income

666

666

Other comprehensive loss

(386)

(386)

Repurchases of common stock

(149)

(149)

Treasury shares reissued

8

8

Dividends declared

(241)

(238)

(3)

Noncontrolling interest redemption (Note 22)

(14)

Stock options and other

37

38

(1)

Balance May 3, 2020

$
11,865

$
4,713

$
(17,690)

$
30,556

$
(5,715)

$
1

Six Months Ended May 3, 2020

Balance November 3, 2019

$
11,417

$
4,642

$
(17,474)

$
29,852

$
(5,607)

$
4

$
14

Net income

1,183

1,182

1

1

Other comprehensive loss

(108)

(108)

Repurchases of common stock

(263)

(263)

Treasury shares reissued

47

47

Dividends declared

(480)

(477)

(3)

(1)

Noncontrolling interest redemption (Note 22)

(14)

Stock options and other

69

71

(1)

(1)

Balance May 3, 2020

$
11,865

$
4,713

$
(17,690)

$
30,556

$
(5,715)

$
1

Three Months Ended May 2, 2021

Balance January 31, 2021

$
14,086

$
4,942

$
(18,377)

$
32,596

$
(5,078)

$
3

Net income

1,790

1,790

Other comprehensive income

118

118

Repurchases of common stock

(692)

(692)

Treasury shares reissued

17

17

Dividends declared

(282)

(282)

Stock options and other

59

57

1

1

Balance May 2, 2021

$
15,096

$
4,999

$
(19,052)

$
34,105

$
(4,960)

$
4

Six Months Ended May 2, 2021
��

Balance November 1, 2020

$
12,944

$
4,895

$
(18,065)

$
31,646

$
(5,539)

$
7

ASU No. 2016-13 adoption (Note 3)

(35)

(35)

Net income

3,014

3,013

1

Other comprehensive income

579

579

Repurchases of common stock

(1,044)

(1,044)

Treasury shares reissued

57

57

Dividends declared

(520)

(520)

Stock options and other

101

104

1

(4)

Balance May 2, 2021

$
15,096

$
4,999

$
(19,052)

$
34,105

$
(4,960)

$
4


DEERE & COMPANY
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY
For the Three and Six Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars) Unaudited
			Total Stockholders’ Equity
			Deere & Company Stockholders
									Accumulated
	Total								Other				Redeemable
	Stockholders’		Common		Treasury		Retained		Comprehensive		Noncontrolling		Noncontrolling
	Equity		Stock		Stock		Earnings		Income (Loss)		Interests		Interest

Three Months Ended May 2, 2021
Balance January 31, 2021	$	14,086	$	4,942	$	(18,377)	$	32,596	$	(5,078)	$	3
Net income		1,790						1,790
Other comprehensive income		118								118
Repurchases of common stock		(692)				(692)
Treasury shares reissued		17				17
Dividends declared		(282)						(282)
Stock options and other		59		57				1				1
Balance May 2, 2021	$	15,096	$	4,999	$	(19,052)	$	34,105	$	(4,960)	$	4

Six Months Ended May 2, 2021
Balance November 1, 2020	$	12,944	$	4,895	$	(18,065)	$	31,646	$	(5,539)	$	7
ASU No. 2016-13 adoption		(35)						(35)
Net income		3,014						3,013				1
Other comprehensive income		579								579
Repurchases of common stock		(1,044)				(1,044)
Treasury shares reissued		57				57
Dividends declared		(520)						(520)
Stock options and other		101		104				1				(4)
Balance May 2, 2021	$	15,096	$	4,999	$	(19,052)	$	34,105	$	(4,960)	$	4

Three Months Ended May 1, 2022
Balance January 30, 2022	$	17,808	$	5,066	$	(21,139)	$	37,029	$	(3,152)	$	4
Acquisitions (see Note 19)													$	105
Net income (loss)		2,098						2,098						(1)
Other comprehensive loss		(139)								(139)				(4)
Repurchases of common stock		(603)				(603)
Treasury shares reissued		15				15
Dividends declared		(323)						(322)				(1)
Stock options and other		51		51										(1)
Balance May 1, 2022	$	18,907	$	5,117	$	(21,727)	$	38,805	$	(3,291)	$	3	$	99

Six Months Ended May 1, 2022
Balance October 31, 2021	$	18,434	$	5,054	$	(20,533)	$	36,449	$	(2,539)	$	3
Acquisitions (see Note 19)													$	105
Net income (loss)		3,002						3,001				1		(1)
Other comprehensive loss		(752)								(752)				(4)
Repurchases of common stock		(1,226)				(1,226)
Treasury shares reissued		32				32
Dividends declared		(646)						(645)				(1)
Stock options and other		63		63										(1)
Balance May 1, 2022	$	18,907	$	5,117	$	(21,727)	$	38,805	$	(3,291)	$	3	$	99

See Condensed Notes to Interim Consolidated Financial Statements.

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1) Organization and Consolidation

The information in the notes and related commentary are presented in a format which includes data grouped as follows:

Consolidated – Represents the consolidation of the equipment operations and financial services. References to “Deere & Company” or “the Company” refer to the entire enterprise.

Equipment Operations – Represents the enterprise without financial services (FS), while including the Company’s production and precision agriculture operations (PPA), small agriculture and turf operations (SAT), construction and forestry operations (CF), and other corporate assets, liabilities, revenues, and expenses not reflected within financial services.

Financial Services – ~~Includes primarily~~Represents the Company’s financing operations.

~~Beginning in fiscal year 2021, the Company implemented a new strategy,~~ Assets managed by financial services, including most financing receivables and equipment on operating ~~model, and reporting structure. With this change, the Company’s agriculture~~leases, continue to be evaluated by market (agriculture and turf ~~operations were divided into two new segments: production and precision agriculture and small agriculture and turf. There were no changes to the~~or construction and forestry and financial services segments. In addition, at the beginning of fiscal year 2021 the Company also reclassified goodwill from identifiable operating assets to corporate assets for segment reporting, as goodwill is no longer considered in evaluating the operating performance of the segments. Additional information on the new segments and the segment financial results are presented in Note 10. Prior period segment information was recast for a consistent presentation. References to agriculture and turf include both production and precision agriculture and small agriculture and turf.forestry).

The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period. The second quarter ends for fiscal year ~~2021~~2022 and ~~2020~~2021 were May ~~2, 2021~~1, 2022 and May ~~3, 2020,~~2, 2021, respectively. Both second quarters contained 13 weeks, while both year-to-date periods contained 26 weeks. Unless otherwise stated, references to particular years or quarters refer to the Company’s fiscal years generally ending in October and the associated periods in those fiscal years.

Prior to ~~November 2, 2020,~~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. ~~In the first quarter of 2021, the~~The reporting lag was eliminated resulting in one additional month of Wirtgen activity in both the first quarter and the year-to-date ~~period.~~period of 2021. The effect was an increase to ~~“Net sales”~~Net sales of $270 million, which the Company considers immaterial to construction and forestry’s annual net sales. ~~Prior period results were not restated.~~

~~Variable Interest Entities~~As a result of recent acquisitions (see Note 19), the Company updated the presentation on the consolidated balance sheet to remove the following lines: Receivables from unconsolidated affiliates, Investments in unconsolidated affiliates, and Payables to unconsolidated affiliates. These balances are now immaterial to the Company’s consolidated balance sheet and have been reclassified into Other receivables, Other assets, and Accounts payable and accrued expenses, respectively.

The Company consolidates certain variable interest entities (VIEs) related to retail note securitizations (see Note ~~12)~~9).

The Company also has an interest in a joint venture that manufactures construction equipment in Brazil for local and overseas markets. The joint venture is a VIE; however, the Company is not the primary beneficiary. Therefore, the entity’s financial results are not fully consolidated in the Company’s consolidated financial statements, but are included on the equity basis. The maximum exposure to loss was $7 million, $5 million, and $13 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively.

(2) Summary of Significant Accounting Policies and ~~Cash Flow Information~~New Accounting Standards
Quarterly Financial Statements
The interim consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. It is suggested these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest ~~annual report~~Annual Report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related disclosures. ~~The COVID pandemic has resulted in uncertainties in the Company’s business, which may result in actual~~Actual results ~~differing~~could differ from those estimates.
Revenue Recognition
Prior to fiscal year 2022, certain goods were shipped to Canadian dealers on a consignment basis under which the risk and rewards of ownership were not transferred to the dealer at the time the goods were delivered. Accordingly, sales were not recorded until a retail customer purchased the goods. The dealer contract in Canada was changed for goods delivered after November 1, 2021, resulting in transfer of control and revenue recognition upon delivery. For certain goods delivered to Canadian dealers prior to November 1, 2021, the dealer consignment terms already in place remain in effect. As of May 1, 2022 and October 31, 2021, the remaining consigned inventory was $46 million and $150 million, respectively.

~~Cash Flow Information~~
All cash flows from the changes in trade accounts and notes receivable are classified as operating activities in the statement of consolidated cash flows as these receivables arise from sales to the Company’s customers. Cash flows from financing receivables that are related to sales to the Company’s customers are also included in operating activities. The remaining financing receivables are related to the financing of equipment sold by independent dealers and are included in investing activities.
The Company had the following non-cash operating and investing activities that were not included in the statement of consolidated cash flows. The Company transferred inventory to equipment on operating leases of approximately $267 million and $254 million in the first six months of 2021 and 2020, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $40 million and $46 million at May 2, 2021 and May 3, 2020, respectively.
~~The Company’s restricted cash held at May 2, 2021, November 1, 2020, May 3, 2020, and November 3, 2019 was as follows in millions of dollars:~~

May 2

November 1

May 3

November 3

2021

2020

2020

2019

Equipment operations

$
12

$
11

$
11

$
21

Financial services

87

95

92

78

Total

$
99

$
106

$
103

$
99

The equipment operations’ restricted cash relates to miscellaneous operational activities. The financial services restricted cash primarily relates to securitization of financing receivables (see Note 12). The restricted cash is recorded in “Other assets” in the consolidated balance sheet.

~~(3)~~ New Accounting Standards
~~New~~The Company closely monitors all Accounting ~~Standards Adopted~~
InStandard Updates (ASUs) issued by the ~~first quarter of 2021, the Company adopted~~ Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes Accounting Standards Codification (ASC) 326, Financial Instruments - Credit Losses. This ASU wasand other authoritative guidance. ASUs adopted ~~using a~~ ~~modified-retrospective~~ approach. The ASU, along with related amendments, revised the measurement of credit losses for financial assets measured at amortized cost from an incurred loss to an expected loss methodology. The ASU affects receivables, debt securities, net investment in ~~leases, and most other financial assets that represent a right to receive cash.~~
The Company holds deposits from dealers (dealer deposits), which are recorded in “Accounts payable and accrued liabilities” to absorb certain credit losses. Prior to adopting this ASU, the allowance for credit losses was estimated on probable credit losses incurred after consideration of recoveries from dealer deposits. The ASU considers dealer deposits and certain credit insurance contracts as freestanding credit enhancements. As a result, after adoption, credit losses recovered from dealer deposits and certain credit insurance contracts are presented in “Other income” and no longer as part of the allowance for credit losses or the provision for credit losses. The ASU also modified the treatment of the estimated write-off of delinquent receivables by no longer including the estimated benefit of charges to the dealer deposits in the write-off amount. This change increases the estimated write-offs on delinquent financing receivables with the benefit of credit losses recovered from dealer deposits presented in “Other income.” This benefit, in both situations, is recorded when the dealer deposits are charged and no longer based on estimated recoveries.
~~The effects of adopting the ASU on the consolidated balance sheet were as follows in millions of dollars:~~

November 1

Cumulative Effect

November 2

2020

from Adoption

2020

Assets

Trade accounts and note receivable - net

$
4,171

$
2

$
4,173

Financing receivables - net

29,750

(27)

29,723

Financing receivables securitized - net

4,703

(4)

4,699

Deferred income taxes

1,499

1

1,500

Liabilities

Accounts payable and accrued expenses

$
10,112

$
14

$
10,126

Deferred income taxes

519

(7)

512

Stockholders’ equity

Retained earnings

$
31,646

$
(35)

$
31,611

~~Note 11 contains additional disclosures as well as the Company’s updated allowance for credit losses accounting policy.~~
~~The Company also adopted the following standards in 2021, none of which had~~2022 did not have a material ~~effect~~impact on the Company’s ~~consolidated~~ financial ~~statements:~~

~~No. 2018-15~~
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software

~~No. 2019-04~~
~~Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~

~~No. 2021-01~~
~~Reference Rate Reform (Topic 848): Scope~~

~~New Accounting Standards~~statements, and ASUs to be ~~Adopted~~
~~The Company will adopt the following standards~~adopted in future periods ~~none of which~~ are being evaluated and at this point are not expected to have a material ~~effect~~impact on the Company’s ~~consolidated~~ financial ~~statements:~~statements

~~No. 2019-12~~
~~Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes~~

~~No. 2020-08~~
~~Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs~~

.

~~(4)~~(3) Revenue Recognition
The Company’s ~~revenue~~net sales and revenues by primary ~~geographical~~geographic market, major product line, and timing of revenue recognition ~~was as follows~~ in millions of ~~dollars:~~dollars follow:

Three Months Ended May 2, 2021

Three Months Ended May 1, 2022


Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total


Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total

Primary geographical markets:





Primary geographic markets:





United States

$
2,211

$
1,838

$
1,481

$
608

$
6,138

$
2,434

$
2,103

$
2,108

$
569

$
7,214

Canada

252

144

320

153

869

309

161

355

149

974

Western Europe

589

738

514

26

1,867

536

658

464

25

1,683

Central Europe and CIS

531

160

209

9

909

404

151

146

11

712

Latin America

700

103

220

60

1,083

1,126

134

333

73

1,666

Asia, Africa, Australia, New Zealand, and Middle East

319

444

393

36

1,192

367

399

318

37

1,121

Total

$
4,602

$
3,427

$
3,137

$
892

$
12,058

$
5,176

$
3,606

$
3,724

$
864

$
13,370

Major product lines:









Production agriculture

$
4,466

$
4,466

$
5,032

$
5,032

Small agriculture

$
2,417

2,417

$
2,668

2,668

Turf

898

898

817

817

Construction

$
1,232

1,232

$
1,516

1,516

Compact construction

396

396

427

427

Roadbuilding

1,066

1,066

1,017

1,017

Forestry

343

343

325

325

Financial products

12

10

5

$
892

919

10

9

6

$
864

889

Other

124

102

95

321

134

112

433

679

Total

$
4,602

$
3,427

$
3,137

$
892

$
12,058

$
5,176

$
3,606

$
3,724

$
864

$
13,370

Timing of revenue recognition:





Revenue recognized at a point in time

$
4,562

$
3,412

$
3,114

$
26

$
11,114

Revenue recognized over time

40

15

23

866

944

Revenue recognized:





At a point in time

$
5,144

$
3,593

$
3,707

$
26

$
12,470

Over time

32

13

17

838

900

Total

$
4,602

$
3,427

$
3,137

$
892

$
12,058

$
5,176

$
3,606

$
3,724

$
864

$
13,370

1110

Six Months Ended May 2, 2021


Six Months Ended May 1, 2022

Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total

Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total

Primary geographical markets:

Primary geographic markets:

United States

$
3,820

$
3,261

$
2,683

$
1,206

$
10,970

$
4,042

$
3,541

$
3,368

$
1,142

$
12,093

Canada

364

223

508

307

1,402

448

283

687

301

1,719

Western Europe

1,038

1,224

953

50

3,265

1,003

1,190

822

51

3,066

Central Europe and CIS

692

244

387

18

1,341

606

277

341

22

1,246

Latin America

1,213

180

390

119

1,902

1,902

238

561

141

2,842

Asia, Africa, Australia, New Zealand, and Middle East

623

845

746

76

2,290

608

751

537

77

1,973

Total

$
7,750

$
5,977

$
5,667

$
1,776

$
21,170

$
8,609

$
6,280

$
6,316

$
1,734

$
22,939

Major product lines:









Production agriculture

$
7,478

$
7,478

$
8,315

$
8,315

Small agriculture

$
4,228

4,228

$
4,600

4,600

Turf

1,549

1,549

1,444

1,444

Construction

$
2,119

2,119

$
2,691

2,691

Compact construction

742

742

748

748

Roadbuilding

1,976

1,976

1,709

1,709

Forestry

633

633

630

630

Financial products

28

20

12

$
1,776

1,836

22

20

11

$
1,734

1,787

Other

244

180

185

609

272

216

527

1,015

Total

$
7,750

$
5,977

$
5,667

$
1,776

$
21,170

$
8,609

$
6,280

$
6,316

$
1,734

$
22,939

Timing of revenue recognition:





Revenue recognized at a point in time

$
7,668

$
5,946

$
5,614

$
50

$
19,278

Revenue recognized over time

82

31

53

1,726

1,892

Revenue recognized:





At a point in time

$
8,540

$
6,247

$
6,277

$
50

$
21,114

Over time

69

33

39

1,684

1,825

Total

$
7,750

$
5,977

$
5,667

$
1,776

$
21,170

$
8,609

$
6,280

$
6,316

$
1,734

$
22,939

Three Months Ended May 3, 2020

Three Months Ended May 2, 2021


Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total


Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total

Primary geographical markets:





Primary geographic markets:





United States

$
1,841

$
1,540

$
1,263

$
604

$
5,248

$
2,211

$
1,838

$
1,481

$
608

$
6,138

Canada

177

89

166

151

583

252

144

320

153

869

Western Europe

540

571

358

22

1,491

589

738

514

26

1,867

Central Europe and CIS

258

80

140

8

486

531

160

209

9

909

Latin America

394

64

135

60

653

700

103

220

60

1,083

Asia, Africa, Australia, New Zealand, and Middle East

221

290

251

30

792

319

444

393

36

1,192

Total

$
3,431

$
2,634

$
2,313

$
875

$
9,253

$
4,602

$
3,427

$
3,137

$
892

$
12,058

Major product lines:









Production agriculture

$
3,280

$
3,280

$
4,466

$
4,466

Small agriculture

$
1,771

1,771

$
2,417

2,417

Turf

806

806

898

898

Construction

$
877

877

$
1,232

1,232

Compact construction

339

339

396

396

Roadbuilding

723

723

1,066

1,066

Forestry

254

254

343

343

Financial products

13

8

6

$
875

902

12

10

5

$
892

919

Other

138

49

114

301

124

102

95

321

Total

$
3,431

$
2,634

$
2,313

$
875

$
9,253

$
4,602

$
3,427

$
3,137

$
892

$
12,058

Timing of revenue recognition:





Revenue recognized at a point in time

$
3,396

$
2,620

$
2,287

$
26

$
8,329

Revenue recognized over time

35

14

26

849

924

Revenue recognized:





At a point in time

$
4,562

$
3,412

$
3,114

$
26

$
11,114

Over time

40

15

23

866

944

Total

$
3,431

$
2,634

$
2,313

$
875

$
9,253

$
4,602

$
3,427

$
3,137

$
892

$
12,058

1211

Six Months Ended May 3, 2020

Six Months Ended May 2, 2021


Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total


Production & Precision Ag

Small Ag & Turf

Construction
& Forestry

Financial
Services

Total

Primary geographical markets:

Primary geographic markets:

United States

$
3,276

$
2,605

$
2,283

$
1,247

$
9,411

$
3,820

$
3,261

$
2,683

$
1,206

$
10,970

Canada

261

143

338

307

1,049

364

223

508

307

1,402

Western Europe

905

984

697

44

2,630

1,038

1,224

953

50

3,265

Central Europe and CIS

389

169

299

18

875

692

244

387

18

1,341

Latin America

778

135

294

126

1,333

1,213

180

390

119

1,902

Asia, Africa, Australia, New Zealand, and Middle East

410

605

507

64

1,586

623

845

746

76

2,290

Total

$
6,019

$
4,641

$
4,418

$
1,806

$
16,884

$
7,750

$
5,977

$
5,667

$
1,776

$
21,170

Major product lines:









Production agriculture

$
5,706

$
5,706

$
7,478

$
7,478

Small agriculture

$
3,249

3,249

$
4,228

4,228

Turf

1,274

1,274

1,549

1,549

Construction

$
1,718

1,718

$
2,119

2,119

Compact construction

627

627

742

742

Roadbuilding

1,328

1,328

1,976

1,976

Forestry

528

528

633

633

Financial products

34

14

13

$
1,806

1,867

28

20

12

$
1,776

1,836

Other

279

104

204

587

244

180

185

609

Total

$
6,019

$
4,641

$
4,418

$
1,806

$
16,884

$
7,750

$
5,977

$
5,667

$
1,776

$
21,170

Timing of revenue recognition:





Revenue recognized at a point in time

$
5,941

$
4,615

$
4,366

$
52

$
14,974

Revenue recognized over time

78

26

52

1,754

1,910

Revenue recognized:





At a point in time

$
7,668

$
5,946

$
5,614

$
50

$
19,278

Over time

82

31

53

1,726

1,892

Total

$
6,019

$
4,641

$
4,418

$
1,806

$
16,884

$
7,750

$
5,977

$
5,667

$
1,776

$
21,170

~~Following is a description of the Company’s major product lines:~~
~~Production agriculture~~ – Includes net sales of large and certain mid-size tractors and associated attachments, combines, cotton pickers, cotton strippers, and sugarcane harvesters, sugarcane loaders and pull behind scrapers, tillage, seeding, and application equipment, including sprayers, nutrient management and soil preparation machinery, and related attachments and service parts.
~~Small agriculture~~ ~~– Includes net sales of mid-size and utility tractors, self-propelled forage harvesters, hay and forage equipment, balers, mowers, and related attachments and service parts.~~
~~Turf~~ – Includes net sales of turf and utility equipment, including riding lawn equipment, golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements, other outdoor power products, and related service parts.
~~Construction~~ – Includes net sales of a broad range of machines used in construction, earthmoving, and material handling, including backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, and related attachments and service parts.
~~Compact construction~~ – Includes net sales of smaller construction equipment, including compact excavators, compact track loaders, compact wheel loaders, skid steers, landscape loaders, and related attachments and service parts.
~~Roadbuilding~~ – Includes net sales of equipment used in roadbuilding and renovation, including milling machines, recyclers, slipform pavers, surface miners, asphalt pavers, compactors, tandem and static rollers, mobile crushers and screens, mobile and stationary asphalt plants, and related attachments and service parts.
~~Forestry~~ ~~– Includes net sales of equipment used in timber harvesting, including log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments and service parts.~~
~~Financial products~~ – Includes finance and interest income primarily from retail notes related to sales of John Deere equipment to end customers, wholesale financing to dealers of John Deere equipment, and revolving charge accounts; lease income from retail leases of John Deere equipment; and revenue from extended warranties.

~~Other~~ – Includes sales of components to other equipment manufacturers that are included in “Net sales”; and revenue earned over time from precision guidance, telematics, and other information enabled solutions, revenue from service performed at Company owned dealerships and service centers, gains on disposition of property and businesses, trademark licensing revenue, and other miscellaneous revenue items that are included in “Other income.”

The Company invoices in advance of recognizing the sale of certain products and the revenue for certain services. These items are primarily for premiums for extended warranties, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services. These advanced customer payments are presented as deferred revenue, a contract liability, in ~~“Accounts~~Accounts payable and accrued ~~expenses”~~expenses in the consolidated balance ~~sheet.~~sheets. The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note ~~18,~~15, was ~~$1,249~~$1,423 million, ~~$1,090~~$1,344 million, and ~~$1,077~~$1,249 million at May 2,1, 2022, October 31, 2021, ~~November 1, 2020,~~ and May ~~3, 2020,~~2, 2021, respectively. The contract liability is reduced as the revenue is recognized. During the three months ended May 1, 2022 and May 2, 2021, ~~and May 3, 2020, $111~~$130 million and ~~$97~~$111 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year. During the six months ended May 1, 2022 and May 2, 2021, ~~and May 3, 2020, $335~~$395 million and ~~$278~~$335 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year.

The Company entered into contracts with customers to deliver equipment and services that have not been recognized at May 2, 2021 because the equipment or services have not been provided. These contracts primarily relate to extended warranty and certain precision guidance and telematic services. The amount of unsatisfied performance obligations for contracts with an original duration greater than one year is ~~$962~~$1,116 million at May ~~2, 2021.~~1, 2022. The estimated revenue to be recognized by fiscal year follows in millions of dollars: remainder of ~~2021~~ ~~- $199,~~ 2022 - ~~$318,~~$173, 2023 - ~~$224,~~$311, 2024 - ~~$130,~~$260, 2025 - ~~$58,~~$168, 2026 - ~~$30~~$87, 2027 - $52 and later years - ~~$3. The~~$65. As permitted, the Company ~~discloses unsatisfied~~elected only to disclose remaining performance obligations with an original contract duration greater than one year. The contracts with an expected duration of one year or less are generally for sales ~~to dealers and end customers for~~of equipment, service parts, repair services, and certain telematics services.

During 2020, and to a much lesser extent in 2021, the Company provided short-term payment relief on trade accounts and notes receivables to independent dealers and certain other customers that were negatively affected by the economic effects of COVID. The relief was provided both in regional programs and case-by-case situations with creditworthy customers. This relief generally included payment deferrals not exceeding three months, extending interest-free periods for up to an additional three months with the total interest-free period not to exceed one year, or reducing interest rates for a maximum of three months. The trade receivable balance granted relief since the beginning of the pandemic that remained outstanding at May 2, 2021 was not material.

~~(5)~~(4) Other Comprehensive Income Items
The after-tax ~~changes in~~components of accumulated other comprehensive income (loss) ~~was as follows~~ in millions of ~~dollars:~~dollars follow:










Total

Unrealized

Unrealized

Accumulated

Retirement

Cumulative

Gain (Loss)

Gain (Loss)

Other

Benefits

Translation

on

on

Comprehensive

Adjustment

Adjustment

Derivatives

Debt Securities

Income (Loss)

Balance November 3, 2019

$
(3,915)

$
(1,651)

$
(60)

$
19

$
(5,607)

Other comprehensive income (loss) items before reclassification

186

(398)

(13)

11

(214)

Amounts reclassified from accumulated other comprehensive income

101

5

106

Net current period other comprehensive income (loss)

287

(398)

(8)

11

(108)

Balance May 3, 2020

$
(3,628)

$
(2,049)

$
(68)

$
30

$
(5,715)

Balance November 1, 2020

$
(3,918)

$
(1,596)

$
(58)

$
33

$
(5,539)

Other comprehensive income (loss) items before reclassification

31

433

(15)

449

Amounts reclassified from accumulated other comprehensive income

123

7

130

Net current period other comprehensive income (loss)

154

433

7

(15)

579

Balance May 2, 2021

$
(3,764)

$
(1,163)

$
(51)

$
18

$
(4,960)

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars. Retirement benefits adjustment reclassifications for actuarial gain (loss), prior service (credit) cost, and settlements are included in net periodic pension and other postretirement benefit costs (see Note 8).


Before

Tax

After

Tax

(Expense)

Tax

Three Months Ended May 2, 2021

Amount

Credit

Amount

Cumulative translation adjustment

$
37

$
37

Unrealized gain (loss) on derivatives:

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

4

$
(1)

3

Net unrealized gain (loss) on derivatives

4

(1)

3

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

(14)

1

(13)

Net unrealized gain (loss) on debt securities

(14)

1

(13)

Retirement benefits adjustment:

Net actuarial gain (loss)

41

(9)

32

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

72

(19)

53

Prior service (credit) cost

2

2

Settlements

5

(1)

4

Net unrealized gain (loss) on retirement benefits adjustment

120

(29)

91

Total other comprehensive income (loss)

$
147

$
(29)

$
118


Before

Tax

After

Tax

(Expense)

Tax

Six Months Ended May 2, 2021

Amount

Credit

Amount

Cumulative translation adjustment

$
431

$
2

$
433

Unrealized gain (loss) on derivatives:

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

9

(2)

7

Net unrealized gain (loss) on derivatives

9

(2)

7

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

(17)

2

(15)

Net unrealized gain (loss) on debt securities

(17)

2

(15)

Retirement benefits adjustment:

Net actuarial gain (loss)

40

(9)

31

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

142

(36)

106

Prior service (credit) cost

4

(1)

3

Settlements

18

(4)

14

Net unrealized gain (loss) on retirement benefits adjustment

204

(50)

154

Total other comprehensive income (loss)

$
627

$
(48)

$
579

May 1

October 31

May 2

2022

2021

2021

Retirement benefits adjustment

$
(1,250)

$
(1,034)

$
(3,764)

Cumulative translation adjustment

(1,993)

(1,478)

(1,163)

Unrealized loss on derivatives

(42)

(51)

Unrealized gain (loss) on debt securities

(48)

15

18

Total accumulated other comprehensive income (loss)

$
(3,291)

$
(2,539)

$
(4,960)

1512

Before

Tax

After

Tax

(Expense)

Tax

Three Months Ended May 3, 2020

Amount

Credit

Amount

Cumulative translation adjustment

$
(441)

$
(441)

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

(15)

$
3

(12)

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

4

4

Net unrealized gain (loss) on derivatives

(11)

3

(8)

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

8

(2)

6

Net unrealized gain (loss) on debt securities

8

(2)

6

Retirement benefits adjustment:

Net actuarial gain (loss)

1

(1)

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

69

(17)

52

Prior service (credit) cost

2

2

Settlements

3

3

Net unrealized gain (loss) on retirement benefits adjustment

75

(18)

57

Total other comprehensive income (loss)

$
(369)

$
(17)

$
(386)

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars. Retirement benefits adjustment reclassifications for actuarial gain (loss), prior service (credit) cost, and settlements are included in net periodic pension and other postretirement benefit costs (see Note 6).


Before

Tax

After

Tax

(Expense)

Tax

Three Months Ended May 1, 2022

Amount

Credit

Amount

Cumulative translation adjustment

$
(243)

$
(5)

$
(248)

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

35

(7)

28

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

1

(1)

Net unrealized gain (loss) on derivatives

36

(8)

28

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

(61)

13

(48)

Net unrealized gain (loss) on debt securities

(61)

13

(48)

Retirement benefits adjustment:

Net actuarial gain (loss)

128

(30)

98

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

27

(7)

20

Prior service (credit) cost

8

(2)

6

Settlements

7

(2)

5

Net unrealized gain (loss) on retirement benefits adjustment

170

(41)

129

Total other comprehensive income (loss)

$
(98)

$
(41)

$
(139)


Before

Tax

After


Before

Tax

After

Tax

(Expense)

Tax

Tax

(Expense)

Tax

Six Months Ended May 3, 2020

Amount

Credit

Amount

Six Months Ended May 1, 2022

Amount

Credit

Amount

Cumulative translation adjustment

$
(398)

$
(398)

$
(507)

$
(8)

$
(515)

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

(17)

$
4

(13)

50

(10)

40

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

6

(1)

5

3

(1)

2

Net unrealized gain (loss) on derivatives

(11)

3

(8)

53

(11)

42

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

14

(3)

11

(80)

17

(63)

Net unrealized gain (loss) on debt securities

14

(3)

11

(80)

17

(63)

Retirement benefits adjustment:

Net actuarial gain (loss)

247

(61)

186

(372)

90

(282)

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

138

(45)

93

67

(17)

50

Prior service (credit) cost

4

(1)

3

14

(4)

10

Settlements

6

(1)

5

8

(2)

6

Net unrealized gain (loss) on retirement benefits adjustment

395

(108)

287

(283)

67

(216)

Total other comprehensive income (loss)

$
(108)

$
(108)

$
(817)

$
65

$
(752)

~~(6)~~~~Dividends Declared and Paid~~
~~Dividends declared and paid on a per share basis were as follows:~~

Three Months Ended

Six Months Ended

May 2

May 3

May 2

May 3

2021

2020

2021

2020

Dividends declared

$
.90

$
.76

$
1.66

$
1.52

Dividends paid

$
.76

$
.76

$
1.52

$
1.52

1613

Before

Tax

After

Tax

(Expense)

Tax

Three Months Ended May 2, 2021

Amount

Credit

Amount

Cumulative translation adjustment

$
37

$
37

Unrealized gain (loss) on derivatives:

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

4

$
(1)

3

Net unrealized gain (loss) on derivatives

4

(1)

3

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

(14)

1

(13)

Net unrealized gain (loss) on debt securities

(14)

1

(13)

Retirement benefits adjustment:

Net actuarial gain (loss)

41

(9)

32

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

72

(19)

53

Prior service (credit) cost

2

2

Settlements

5

(1)

4

Net unrealized gain (loss) on retirement benefits adjustment

120

(29)

91

Total other comprehensive income (loss)

$
147

$
(29)

$
118


Before

Tax

After

Tax

(Expense)

Tax

Six Months Ended May 2, 2021

Amount

Credit

Amount

Cumulative translation adjustment

$
431

$
2

$
433

Unrealized gain (loss) on derivatives:

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

9

(2)

7

Net unrealized gain (loss) on derivatives

9

(2)

7

Unrealized gain (loss) on debt securities:

Unrealized holding gain (loss)

(17)

2

(15)

Net unrealized gain (loss) on debt securities

(17)

2

(15)

Retirement benefits adjustment:

Net actuarial gain (loss)

40

(9)

31

Reclassification to Other operating expenses through amortization of:

Actuarial (gain) loss

142

(36)

106

Prior service (credit) cost

4

(1)

3

Settlements

18

(4)

14

Net unrealized gain (loss) on retirement benefits adjustment

204

(50)

154

Total other comprehensive income (loss)

$
627

$
(48)

$
579

~~(7)~~(5) Earnings Per Share
A reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions, except per share amounts:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2

May 3

May 2

May 3

May 1

May 2

May 1

May 2

2021

2020

2021

2020

2022

2021

2022

2021

Net income attributable to Deere & Company

$
1,790

$
666

$
3,013

$
1,182


$
2,098

$
1,790

$
3,001

$
3,013

Average shares outstanding

312.8

313.2

313.1

313.3

306.2

312.8

306.8

313.1

Basic per share

$
5.72

$
2.13

$
9.62

$
3.77

$
6.85

$
5.72

$
9.78

$
9.62

Average shares outstanding

312.8

313.2

313.1

313.3

306.2

312.8

306.8

313.1

Effect of dilutive share-based compensation

2.4

3.0

2.5

3.4

1.9

2.4

2.0

2.5

Total potential shares outstanding

315.2

316.2

315.6

316.7

308.1

315.2

308.8

315.6

Diluted per share

$
5.68

$
2.11

$
9.55

$
3.73

$
6.81

$
5.68

$
9.72

$
9.55

During the second quarter and first six months of 2022, .2 million shares and .1 million shares, respectively, were excluded from the computation because the incremental shares would have been antidilutive. During the second quarter and first six months of 2021, 0 shares were antidilutive. During the second quarter and first six months of 2020, 1.0 million shares and .6 million shares, respectively, were excluded from the above per share computation because the incremental shares would have been antidilutive.

~~(8)~~(6) Pension and Other Postretirement Benefits
The Company has several defined benefit pension plans and postretirement benefit (OPEB) plans, primarily health care and life insurance plans, covering its U.S. employees and employees in certain foreign countries.
The ~~worldwide~~ components of net periodic pension cost consisted of the following in millions of dollars:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2

May 3

May 2

May 3

May 1

May 2

May 1

May 2

2021

2020

2021

2020

2022

2021

2022

2021

Service cost

$
83

$
77

$
168

$
161


$
94

$
83

$
179

$
168

Interest cost

69

87

138

174

80

69

157

138

Expected return on plan assets

(200)

(204)

(400)

(409)

(180)

(200)

(362)

(400)

Amortization of actuarial loss

65

62

128

124

37

65

76

128

Amortization of prior service cost

3

3

6

6

9

3

16

6

Settlements

5

3

18

6

7

5

8

18

Net cost

$
25

$
28

$
58

$
62

$
47

$
25

$
74

$
58

The ~~worldwide~~ components of net periodic OPEB (benefit) cost consisted of the following in millions of dollars:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2

May 3

May 2

May 3

May 1

May 2

May 1

May 2

2021

2020

2021

2020

2022

2021

2022

2021

Service cost

$
12

$
12

$
24

$
24


$
11

$
12

$
23

$
24

Interest cost

25

35

51

72

23

25

49

51

Expected return on plan assets

(20)

(12)

(39)

(24)

(27)

(20)

(55)

(39)

Amortization of actuarial loss

7

7

14

14

Amortization of actuarial (gain) loss

(10)

7

(9)

14

Amortization of prior service credit

(1)

(1)

(2)

(2)

(1)

(1)

(2)

(2)

Curtailments

21

Net cost

$
23

$
41

$
48

$
105

Net (benefit) cost

$
(4)

$
23

$
6

$
48

The components of net periodic pension and OPEB costs excluding the service cost component are included in the line item ~~“Other~~Other operating ~~expenses”~~expenses in the ~~statement~~statements of consolidated income.

On November 17,

2021, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) approved a new collective bargaining agreement. In the first quarter of ~~2020,~~2022, the Company remeasured the U.S. ~~salary OPEB health care plans~~hourly pension plan due to the ~~U.S. voluntary employee-separation program (see Note 22),~~new collective bargaining agreement, which ~~resulted~~decreased the plan’s funded status by approximately $495 million and will increase pension expense in ~~a $21~~2022 by nearly $80 million ~~curtailment loss.~~with $35 million negatively impacting operating profit in 2022.

During the first six months of ~~2021,~~2022, the Company contributed ~~approximately $68~~$47 million to its pension plans and ~~$85~~$1,085 million to its OPEB plans. The OPEB contributions include a voluntary contribution of $1,000 million to a U.S. plan on November 30, 2021. The Company presently anticipates contributing an additional ~~$33~~$43 million to its pension plans and ~~$757~~$50 million to its OPEB plans during the remainder of fiscal year ~~2021.~~2022. The ~~anticipated OPEB contributions include a voluntary $700 million in the fourth quarter to a U.S. plan, which will increase plan assets. The~~remaining pension and OPEB contributions ~~exceeding the voluntary amount~~are primarily ~~include~~ direct benefit payments from Company funds.

~~(9)~~(7) ~~Income Taxes~~
The Company’s unrecognized tax benefits at May 2, 2021, November 1, 2020, and May 3, 2020 were $751 million, $668 million, and $610 million, respectively. The liability at May 2, 2021, November 1, 2020, and May 3, 2020 consisted of approximately $189 million, $134 million, and $145 million, respectively, which would affect the effective tax rate if the tax benefits were recognized. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. The Company expects that any reasonably possible change in the amounts of unrecognized tax benefits in the next 12 months would not be significant.
~~(10)~~Segment Reporting
Beginning in fiscal year 2021, the Company implemented a new strategy, operating model, and reporting structure. With this change, the Company’s agriculture and turf operations were divided into two new segments, which are described as follows:
~~The~~ ~~production and precision agriculture~~ segment is responsible for defining, developing, and delivering global equipment and technology solutions to unlock customer value for production-scale growers of large grains, small grains, cotton, and sugar. Main products include large and certain mid-size tractors, combines, cotton pickers, sugarcane harvesters and loaders, and soil preparation, seeding, application and crop care equipment.
~~The~~ ~~small agriculture and turf~~ segment is responsible for defining, developing, and delivering market-driven products to support mid-size and small growers and producers globally as well as turf customers. The operations are principally organized to support production systems for dairy and livestock, high-value crops, and turf and utility operators. Primary products include certain mid-size and small tractors, as well as hay and forage equipment, riding and commercial lawn equipment, golf course equipment, and utility vehicles.
~~There were no reporting changes for the construction and forestry and financial services segments. As a result, the Company has four reportable segments.~~

Worldwide net sales and revenues, operating profit, and identifiable assets by segment were as follows in millions of ~~dollars.~~ dollars:

Three Months Ended

Six Months Ended

May 1

May 2

%

May 1

May 2

%

  2022

  2021

Change

   2022

   2021

Change

Net sales and revenues:














Production & precision ag net sales

$
5,117

$
4,529

+13

$
8,473

$
7,599

+12

Small ag & turf net sales

3,570

3,390

+5

6,201

5,904

+5

Construction & forestry net sales

3,347

3,079

+9

5,891

5,546

+6

Financial services revenues

864

892

-3

1,734

1,776

-2

Other revenues

472

168

+181

640

345

+86

Total net sales and revenues

$
13,370

$
12,058

+11

$
22,939

$
21,170

+8

Operating profit:

Production & precision ag

$
1,057

$
1,007

+5

$
1,353

$
1,651

-18

Small ag & turf

520

648

-20

891

1,117

-20

Construction & forestry

814

489

+66

1,085

756

+44

Financial services

279

295

-5

577

553

+4

Total operating profit

2,670

2,439

+9

3,906

4,077

-4

Reconciling items

(111)

(119)

-7

(195)

(226)

-14

Income taxes

(461)

(530)

-13

(710)

(838)

-15

Net income attributable to Deere & Company

$
2,098

$
1,790

+17

$
3,001

$
3,013

Intersegment sales and revenues:

Production & precision ag net sales

$
6

$
7

-14

$
10

$
13

-23

Small ag & turf net sales

4

4

6

8

-25

Construction & forestry net sales

Financial services revenues

87

62

+40

133

112

+19

Operating profit is income from continuing operations before ~~corporate expenses, certain external interest expense, certain foreign exchange gains and losses,~~reconciling items and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains and losses. Reconciling items to net income are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and OPEB benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.

Three Months Ended

Six Months Ended

May 2

May 3

%

May 2

May 3

%

  2021

  2020

Change

   2021

   2020

Change

Net sales and revenues:














Production & precision ag net sales

$
4,529

$
3,365

+35

$
7,599

$
5,872

+29

Small ag & turf net sales

3,390

2,603

+30

5,904

4,583

+29

Construction & forestry net sales

3,079

2,256

+36

5,546

4,299

+29

Financial services revenues

892

875

+2

1,776

1,806

-2

Other revenues

168

154

+9

345

324

+6

Total net sales and revenues

$
12,058

$
9,253

+30

$
21,170

$
16,884

+25

Operating profit:

Production & precision ag

$
1,007

$
568

+77

$
1,651

$
786

+110

Small ag & turf

648

226

+187

1,117

381

+193

Construction & forestry

489

96

+409

756

189

+300

Financial services

295

75

+293

553

254

+118

Total operating profit

2,439

965

+153

4,077

1,610

+153

Reconciling items

(119)

(54)

+120

(226)

(133)

+70

Income taxes

(530)

(245)

+116

(838)

(295)

+184

Net income attributable to Deere & Company

$
1,790

$
666

+169

$
3,013

$
1,182

+155

Intersegment sales and revenues:

Production & precision ag net sales

$
7

$
7

$
13

$
14

-7

Small ag & turf net sales

4

1

+300

8

1

+700

Construction & forestry net sales

Financial services

62

93

-33

112

159

-30

Outside the U.S. and Canada:

Net sales and revenues

$
5,051

$
3,422

+48

$
8,798

$
6,424

+37

Operating profit

1,003

232

+332

1,633

533

+206

At the beginning of fiscal year 2021, the Company reclassified goodwill from identifiable operating segment assets to corporate assets for segment reporting, as goodwill is no longer considered in evaluating the operating performance of the segments. Prior period amounts have been restated for a consistent presentation.


May 2

November 1

May 3


May 1

October 31

May 2

2021

2020

2020

2022

2021

2021

Identifiable assets:

Production & precision ag

$
6,602

$
5,708

$
6,328

$
8,680

$
7,021

$
6,602

Small ag & turf

3,605

3,266

3,485

4,431

3,959

3,605

Construction & forestry

6,500

6,322

6,984

6,984

6,457

6,500

Financial services

50,849

48,719

48,664

53,110

51,624

50,849

Corporate

11,423

11,076

11,865

10,894

15,053

11,423

Total assets

$
78,979

$
75,091

$
77,326

$
84,099

$
84,114

$
78,979

~~(11)~~(8) Financing Receivables
The Company monitors the credit quality of financing receivables based on delinquency status. Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent ~~loans~~receivables for which the Company has ceased accruing finance income. The Company ceases accruing finance income ~~and accrued finance income previously recognized is reversed~~ when these receivables are generally 90 days delinquent. Generally, when receivables are 120 days delinquent the estimated uncollectible amount from the customer is written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.
Due to the economic effects of COVID, the Company provided short-term payment relief to dealers and retail customers during 2020, and to a much lesser extent in 2021. The relief was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. Financing receivables granted relief since the beginning of the pandemic that remained outstanding at May 2, 2021 represented approximately 4 percent of the financing receivables balance. The majority of financing receivables granted short-term relief are beyond the deferral period and have either resumed making payments or are reported as delinquent based on the modified payment schedule.
While the Company implemented a new strategy in fiscal year 2021 resulting in new operating segments, assets managed by financial services, including most financing receivables and equipment on operating leases, continue to be evaluated by market (agriculture and turf or construction and forestry).
~~The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, customer receivables), was as follows in millions of dollars at May 2, 2021:~~

Year of Origination

2021

2020

2019

2018

2017

Prior

Revolving Charge Accounts

Total

Customer receivables:

























Agriculture and turf

Current

$
6,017

$
8,375

$
4,436

$
2,402

$
1,136

$
494

$
3,221

$
26,081

30-59 days past due

20

64

41

19

10

5

20

179

60-89 days past due

5

34

18

9

4

2

5

77

90+ days past due

1

1

2

Non-performing

2

51

69

54

29

33

16

254

Construction and forestry

Current

1,568

2,077

1,106

454

118

22

81

5,426

30-59 days past due

21

43

35

14

5

1

3

122

60-89 days past due

6

13

12

7

3

1

1

43

90+ days past due

2

10

5

6

3

26

Non-performing

1

38

37

22

11

7

1

117

Total customer receivables

$
7,640

$
10,697

$
5,765

$
2,987

$
1,322

$
568

$
3,348

$
32,327

2016

The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer ~~receivables~~receivables) by year of origination was as follows in millions of ~~dollars at November 1, 2020 and May 3, 2020:~~dollars:

November 1, 2020

May 3, 2020

May 1, 2022

Retail Notes & Financing Leases

Revolving Charge Accounts

Total

Retail Notes & Financing Leases

Revolving Charge Accounts

Total

2022

2021

2020

2019

2018

Prior
Years

Revolving Charge Accounts

Total

Customer receivables:

Retail customer receivables:

























Agriculture and turf

Current

$
21,597

$
3,787

$
25,384

$
19,178

$
3,282

$
22,460

$
5,540

$
10,141

$
5,318

$
2,684

$
1,286

$
723

$
3,381

$
29,073

30-59 days past due

135

13

148

215

32

247

20

75

36

20

9

5

12

177

60-89 days past due

64

4

68

103

13

116

4

29

14

9

5

2

4

67

90+ days past due

2

2

3

3

1

1

Non-performing

263

6

269

310

42

352

3

40

44

41

25

31

14

198

Construction and forestry

Current

4,859

88

4,947

4,169

78

4,247

1,506

2,404

1,211

577

234

105

91

6,128

30-59 days past due

111

2

113

174

4

178

20

52

33

17

6

2

3

133

60-89 days past due

55

1

56

58

2

60

7

25

15

6

1

1

1

56

90+ days past due

14

14

18

18

1

1

1

1

5

9

Non-performing

106

1

107

176

1

177

3

46

50

29

12

5

1

146

Total customer receivables

$
27,206

$
3,902

$
31,108

$
24,404

$
3,454

$
27,858

Total retail customer receivables

$
7,103

$
12,813

$
6,723

$
3,384

$
1,579

$
879

$
3,507

$
35,988

October 31, 2021

2021

2020

2019

2018

2017

Prior
Years

Revolving Charge Accounts

Total

Retail customer receivables:

























Agriculture and turf

Current

$
12,877

$
6,676

$
3,463

$
1,738

$
728

$
211

$
3,704

$
29,397

30-59 days past due

43

53

29

16

7

3

14

165

60-89 days past due

16

23

12

6

3

1

4

65

90+ days past due

1

1

Non-performing

23

57

53

32

17

23

7

212

Construction and forestry

Current

3,122

1,575

754

273

57

7

92

5,880

30-59 days past due

50

40

27

7

4

1

3

132

60-89 days past due

15

11

9

6

1

1

43

90+ days past due

1

2

3

3

4

2

15

Non-performing

26

56

39

17

7

3

148

Total retail customer receivables

$
16,173

$
8,494

$
4,389

$
2,098

$
828

$
251

$
3,825

$
36,058

May 2, 2021

2021

2020

2019

2018

2017

Prior
Years

Revolving Charge Accounts

Total

Retail customer receivables:

























Agriculture and turf

Current

$
6,017

$
8,375

$
4,436

$
2,402

$
1,136

$
494

$
3,221

$
26,081

30-59 days past due

20

64

41

19

10

5

20

179

60-89 days past due

5

34

18

9

4

2

5

77

90+ days past due

1

1

2

Non-performing

2

51

69

54

29

33

16

254

Construction and forestry

Current

1,568

2,077

1,106

454

118

22

81

5,426

30-59 days past due

21

43

35

14

5

1

3

122

60-89 days past due

6

13

12

7

3

1

1

43

90+ days past due

2

10

5

6

3

26

Non-performing

1

38

37

22

11

7

1

117

Total retail customer receivables

$
7,640

$
10,697

$
5,765

$
2,987

$
1,322

$
568

$
3,348

$
32,327

The credit quality analysis of wholesale receivables by year of origination was as follows in millions of ~~dollars at May 2, 2021:~~dollars:

Year of Origination

May 1, 2022

2021

2020

2019

2018

2017

Prior

Revolving

Total

2022

2021

2020

2019

2018

Prior
Years

Revolving

Total

Wholesale receivables:

















































Agriculture and turf

Current

$
191

$
144

$
55

$
13

$
4

$
1

$
2,146

$
2,554

$
224

$
155

$
43

$
8

$
1

$
2

$
1,605

$
2,038

30-59 days past due

60-89 days past due

90+ days past due

30+ days past due

Non-performing

22

22

5

5

Construction and forestry

Current

5

10

15

1

1

3

341

376

6

35

4

2

1

268

316

30-59 days past due

60-89 days past due

90+ days past due

30+ days past due

1

1

Non-performing

Total wholesale receivables

$
196

$
154

$
92

$
14

$
5

$
4

$
2,487

$
2,952

$
230

$
190

$
47

$
15

$
1

$
4

$
1,873

$
2,360

October 31, 2021

2021

2020

2019

2018

2017

Prior
Years

Revolving

Total

Wholesale receivables:

























Agriculture and turf

Current

$
346

$
80

$
22

$
9

$
3

$
1,696

$
2,156

30+ days past due

Non-performing

12

12

Construction and forestry

Current

41

7

7

1

$
1

340

397

30+ days past due

1

1

Non-performing

Total wholesale receivables

$
387

$
87

$
41

$
9

$
4

$
2

$
2,036

$
2,566

May 2, 2021

2021

2020

2019

2018

2017

Prior
Years

Revolving

Total

Wholesale receivables:

























Agriculture and turf

Current

$
191

$
144

$
55

$
13

$
4

$
1

$
2,146

$
2,554

30+ days past due

Non-performing

22

22

Construction and forestry

Current

5

10

15

1

1

3

341

376

30+ days past due

Non-performing

Total wholesale receivables

$
196

$
154

$
92

$
14

$
5

$
4

$
2,487

$
2,952

~~The credit quality analysis of wholesale receivables was as follows in millions of dollars at November 1, 2020 and May 3, 2020:~~

November 1

May 3

2020

2020

Wholesale receivables:

Agriculture and turf

Current

$
3,010

$
3,704

30-59 days past due

60-89 days past due

90+ days past due

Non-performing

47

62

Construction and forestry

Current

472

510

30-59 days past due

60-89 days past due

90+ days past due

Non-performing

2

Total wholesale receivables

$
3,529

$
4,278

The allowance for credit losses is an estimate of the credit losses expected over the life of the Company’s receivable portfolio. The Company measures expected credit losses on a collective basis when similar risk characteristics exist. Risk characteristics

2118

considered by the Company include finance product category, market, geography, credit risk, and remaining duration. Receivables that do not share risk characteristics with other receivables in the portfolio are evaluated on an individual basis. Non-performing financing receivables are included in the estimate of expected credit losses.
The Company utilizes loss forecast models, which are selected based on the size and credit risk of the underlying pool of receivables, to estimate expected credit losses. Transition matrix models are used for large and complex customer receivable pools, while weighted average remaining maturity models are used for smaller and less complex customer receivable pools. Expected credit losses on wholesale receivables are based on historical loss rates, adjusted for current economic conditions. The modeled expected credit losses are adjusted based on reasonable and supportable forecasts, which may include economic indicators such as commodity prices, industry equipment sales, unemployment rates, and housing starts. Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary.

An analysis of the allowance for credit losses and investment in financing receivables ~~follows~~ in millions of dollars during the ~~periods:~~periods follows:

Retail Notes

Revolving

Retail Notes

Revolving

& Financing

Charge

Wholesale

& Financing

Charge

Wholesale

Leases

Accounts

Receivables

Total

Leases

Accounts

Receivables

Total

Three Months Ended May 2, 2021

Three Months Ended May 1, 2022

Allowance:






















Beginning of period balance

$
180

$
24

$
7

$
211

$
138

$
15

$
5

$
158

Provision (credit)

(17)

(6)

(23)

Provision

39

3

42

Write-offs

(15)

(9)

(24)

(18)

(8)

(26)

Recoveries

4

10

14

5

7

12

Translation adjustments

4

4

End of period balance

$
152

$
19

$
7

$
178

$
168

$
17

$
5

$
190

Six Months Ended May 2, 2021

Six Months Ended May 1, 2022

Allowance:




Beginning of period balance

$
133

$
43

$
8

$
184

$
138

$
21

$
7

$
166

ASU No. 2016-13 adoption

44

(13)

31

Provision (credit)

(13)

(16)

(1)

(30)

52

(7)

(2)

43

Write-offs

(23)

(14)

(37)

(35)

(12)

(47)

Recoveries

10

19

29

9

15

24

Translation adjustments

1

1

4

4

End of period balance

$
152

$
19

$
7

$
178

$
168

$
17

$
5

$
190

Financing receivables:

End of period balance

$
28,979

$
3,348

$
2,952

$
35,279

$
32,481

$
3,507

$
2,360

$
38,348



Retail Notes

Revolving

& Financing

Charge

Wholesale

Retail Notes

Revolving

Leases

Accounts

Receivables

Total

& Financing

Charge

Wholesale

Three Months Ended May 3, 2020

Leases

Accounts

Receivables

Total

Three Months Ended May 2, 2021

Allowance:


























Beginning of period balance

$
106

$
40

$
11

$
157

$
180

$
24

$
7

$
211

Provision

65

20

85

Provision (credit)

(17)

(6)

(23)

Write-offs

(26)

(23)

(49)

(15)

(9)

(24)

Recoveries

3

6

9

4

10

14

Translation adjustments

(7)

(7)

End of period balance

$
141

$
43

$
11

$
195

$
152

$
19

$
7

$
178

Six Months Ended May 3, 2020

Six Months Ended May 2, 2021

Allowance:






















Beginning of period balance

$
107

$
40

$
3

$
150

$
133

$
43

$
8

$
184

Provision

82

18

6

106

ASU No. 2016-13 adoption

44

(13)

31

Provision (credit)

(13)

(16)

(1)

(30)

Write-offs

(45)

(29)

(74)

(23)

(14)

(37)

Recoveries

6

14

20

10

19

29

Translation adjustments

(9)

2

(7)

1

1

End of period balance

$
141

$
43

$
11

$
195

$
152

$
19

$
7

$
178

Financing receivables:

End of period balance

$
24,404

$
3,454

$
4,278

$
32,136

$
28,979

$
3,348

$
2,952

$
35,279

The allowance for credit losses ~~on financing receivables decreased $33 million~~increased in the second quarter ~~of 2021, primarily due to lower expected losses on retail notes~~ and financing leases in the construction and forestry market and better than expected performance of accounts granted payment relief due to the economic effects of COVID. The allowance for credit losses on revolving charge accounts also decreased in the second quarter of 2021, reflecting strong payment performance due to continued improvement in the agricultural market. For the first six months of ~~2021,~~2022 mainly due to higher reserves related to the ~~allowance for credit losses on financing receivables decreased slightly, as the reductions noted above were largely offset by the impact of adopting ASU No. 2016-13.~~events in Russia / Ukraine and higher portfolio balances.

A troubled debt restructuring is ~~generally~~ the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity date, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first six months of 2022, the Company identified 184 receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $8 million pre-modification and $7 million post-modification. During the first six months of 2021, the Company identified 199 receivable contracts, primarily retail notes, as troubled debt restructurings with aggregate balances of $8 million pre-modification and $7 million post-modification. During the first six months of 2020, there were 259 receivable contracts, primarily wholesale receivables in Argentina, identified as troubled debt restructurings with aggregate balances of $94 million pre-modification and $83 million post-modification. The short-term payment relief related to COVID, mentioned earlier, did not meet the definition of a troubled debt restructuring. During these same

periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At May ~~3, 2021,~~1, 2022, the Company had 0 commitments to lend to borrowers whose accounts were modified in troubled debt restructurings.

~~(12)~~(9) Securitization of Financing Receivables
~~The Company, as~~As a part of its overall funding strategy, the Company periodically transfers certain financing receivables (retail notes) into VIEs that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes ~~did~~does not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.
In these securitizations, the retail notes are transferred to certain SPEs or to non-VIE banking operations, which in turn issue debt to investors. The debt securities issued to the third party investors resulted in secured borrowings, which are recorded as “Short-term securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Financing receivables securitized – net” on the balance sheet. The total restricted assets on the consolidated balance sheet related to these securitizations include the financing receivables securitized less an allowance for credit losses, and other assets primarily representing restricted cash. Restricted cash results from contractual requirements in securitized borrowing arrangements and serves as a credit enhancement. The restricted cash is used to satisfy payment deficiencies, if any, in the required payments on secured borrowings. The balance of restricted cash is contractually stipulated and is either a fixed amount as determined by the initial balance of the financing receivables securitized or a fixed percentage of the outstanding balance of the securitized financing receivables. The restriction is removed either after all secured borrowing payments are made or proportionally as these receivables are collected and borrowing obligations reduced. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.
In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the receivables held by the SPEs and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes securitized, allowance for credit losses, and other assets) of the consolidated SPEs totaled $2,875 million, $2,898 million, and $3,017 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled $2,833 million, $2,856 million, and $2,977 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In certain securitizations, the Company transfers retail notes to non-VIE banking operations, which are not consolidated since the Company does not have a controlling interest in the entities. The Company’s carrying values and interests related to the securitizations with the unconsolidated non-VIEs were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $397 million, $576 million, and $542 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively. The liabilities (short-term securitization borrowings and accrued interest) were $383 million, $554 million, and $515 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively.
In certain securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company does not service a significant portion of the conduits’ receivables, and therefore, does not have the power to direct the activities that most significantly impact the conduits’ economic performance. These conduits provide a funding source to the Company (as well as other transferors into the conduit) as they fund the retail notes through the issuance of commercial paper. The Company’s carrying values and variable interest related to these conduits were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of $926 million, $1,327 million, and $1,221 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively. The liabilities (short-term securitization borrowings and accrued interest) related to these conduits were $893 million, $1,275 million, and $1,154 million at May 2, 2021, November 1, 2020, and May 3, 2020, respectively.
The Company’s carrying amount of the liabilities to the unconsolidated conduits, compared to the maximum exposure to loss related to these conduits, which would only be incurred in the event of a complete loss on the restricted assets, was as follows in millions of dollars:


May 2

2021

Carrying value of liabilities

$
893

Maximum exposure to loss

926

~~The total assets of unconsolidated VIEs related to securitizations were approximately $35 billion at May 2, 2021.~~
The components of consolidated restricted assets, secured borrowings, and other liabilities related to secured borrowings in securitization transactions were as follows in millions of dollars:


May 2

November 1

May 3


May 1

October 31

May 2

2021

2020

2020

2022

2021

2021

Financing receivables securitized (retail notes)

$
4,122

$
4,716

$
4,703

$
4,085

$
4,673

$
4,122

Allowance for credit losses

(15)

(13)

(18)

(12)

(14)

(15)

Other assets

91

98

95

Other assets (primarily restricted cash)

124

107

91

Total restricted securitized assets

$
4,198

$
4,801

$
4,780

$
4,197

$
4,766

$
4,198

Short-term securitization borrowings

$
4,006

$
4,605

$
4,106

Accrued interest on borrowings

2

2

3

Total liabilities related to restricted securitized assets

$
4,008

$
4,607

$
4,109

~~The components of consolidated secured borrowings and other liabilities related to securitizations were as follows in millions of dollars:~~


May 2

November 1

May 3

2021

2020

2020

Short-term securitization borrowings

$
4,106

$
4,682

$
4,640

Accrued interest on borrowings

3

3

6

Total liabilities related to restricted securitized assets

$
4,109

$
4,685

$
4,646

The secured borrowings related to these restricted securitized retail notes are obligations that are payable as the retail notes are liquidated. Repayment of the secured borrowings depends primarily on cash flows generated by the restricted assets. Due to the Company’s short-term credit rating, cash collections from these restricted assets are not required to be placed into a segregated collection account until immediately prior to the time payment is required to the secured creditors. At May 2, 2021, the maximum remaining term of all securitized retail notes was approximately six years.

~~(13)~~(10) Inventories
Most inventories owned by Deere & Company and its U.S. equipment subsidiaries ~~and certain foreign equipment subsidiaries~~ are valued at cost on the ~~“last-in, first-out”~~last-in, first-out (LIFO) ~~method.~~basis. If all of the Company’s inventories had been valued on a ~~“first-in, first-out”~~first-in, first-out (FIFO) ~~method,~~basis, estimated inventories by major classification in millions of dollars would have been as follows:


May 2

November 1

May 3


May 1

October 31

May 2

2021

2020

2020

2022

2021

2021

Raw materials and supplies

$
2,469

$
1,995

$
2,394

$
4,384

$
3,524

$
2,469

Work-in-process

967

648

722

1,640

994

967

Finished goods and parts

4,334

4,006

4,646

5,434

4,373

4,334

Total FIFO value

7,770

6,649

7,762

11,458

8,891

7,770

Less adjustment to LIFO value

1,728

1,650

1,591

2,428

2,110

1,728

Inventories

$
6,042

$
4,999

$
6,171

$
9,030

$
6,781

$
6,042

~~(14)~~(11) Goodwill and Other Intangible Assets–Net
The changes in amounts of goodwill by operating segments were as follows in millions of dollars:


Production &

Small Ag

Construction



Production &

Small Ag

Construction


Precision Ag

& Turf

& Forestry

Total

Precision Ag

& Turf

& Forestry

Total

Goodwill at November 3, 2019

$
310

$
264

$
2,343

$
2,917

Translation adjustments and other

(5)

(4)

9

Goodwill at May 3, 2020

$
305

$
260

$
2,352

$
2,917

Goodwill at November 1, 2020

$
333

$
268

$
2,480

$
3,081

$
333

$
268

$
2,480

$
3,081

Acquisition

12

12

12

12

Translation adjustments and other

10

(2)

89

97

Translation adjustments

10

(2)

89

97

Goodwill at May 2, 2021

$
355

$
266

$
2,569

$
3,190

$
355

$
266

$
2,569

$
3,190

Goodwill at October 31, 2021

$
542

$
265

$
2,484

$
3,291

Acquisitions

122

69

600

791

Translation adjustments

(11)

(7)

(252)

(270)

Goodwill at May 1, 2022

$
653

$
327

$
2,832

$
3,812

There were 0 accumulated goodwill impairment losses in the reported periods.
~~The components of other intangible assets were as follows in millions of dollars:~~


May 2

November 1

May 3

2021

2020

2020

Amortized intangible assets:

Customer lists and relationships

$
549

$
535

$
509

Technology, patents, trademarks, and other

1,097

1,056

1,006

Total at cost

1,646

1,591

1,515

Less accumulated amortization:

Customer lists and relationships

136

113

93

Technology, patents, trademarks, and other

323

274

234

Total accumulated amortization

459

387

327

Amortized intangible assets, net

1,187

1,204

1,188

Unamortized intangible assets:

In-process research and development

123

123

123

Other intangible assets – net

$
1,310

$
1,327

$
1,311

The amortization of other intangible assets in the second quarter and the first six months of 2021 was $27 million and $62 million, and for 2020 was $26 million and $51 million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of 2021 – $55, 2022 – $109, 2023 – $107, 2024 – $103, 2025 – $100, and 2026 –$98.

2520

The components of other intangible assets were as follows in millions of dollars:


May 1

October 31

May 2

2022

2021

2021

Amortized intangible assets:

Customer lists and relationships

$
520

$
542

$
549

Technology, patents, trademarks, and other

1,350

1,104

1,097

Total at cost

1,870

1,646

1,646

Less accumulated amortization:

Customer lists and relationships

158

151

136

Technology, patents, trademarks, and other

360

343

323

Total accumulated amortization

518

494

459

Amortized intangible assets, net

1,352

1,152

1,187

Unamortized intangible assets:

In-process research and development

123

123

Other intangible assets – net

$
1,352

$
1,275

$
1,310

In September 2017, the Company acquired Blue River Technology’s in-process research and development related to machine learning technology to optimize the use of farm inputs. Those research and development activities were completed, and the Company started amortizing the acquired technology in the second quarter of 2022.
The amortization of other intangible assets in the second quarter and the first six months of 2022 was $34 million and $62 million, and for 2021 was $27 million and $62 million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of 2022 – $107, 2023 – $167, 2024 – $163, 2025 – $135, 2026 – $116, and 2027 – $114.
~~(15)~~(12) Total Short-Term Borrowings
Total short-term borrowings were as follows in millions of dollars:

May 2

November 1

May 3

May 1

October 31

May 2


2021

2020

2020


2022

2021

2021

Equipment Operations













Commercial paper

$
466

Notes payable to banks

$
122

$
192

439

$
407

$
273

$
122

Finance lease obligations due within one year

24

21

13

21

23

24

Long-term borrowings due within one year

206

79

480

1,126

1,213

206

Total

352

292

1,398

1,554

1,509

352

Financial Services

Commercial paper

2,259

1,238

2,958

3,403

2,230

2,259

Notes payable to banks

89

182

236

148

63

89

Long-term borrowings due within one year

7,211

6,870

6,587

7,308

7,117

7,211

Total

9,559

8,290

9,781

10,859

9,410

9,559

Short-term borrowings

9,911

8,582

11,179

12,413

10,919

9,911

Short-term securitization borrowings













Equipment Operations

14

26

37

5

10

14

Financial Services

4,092

4,656

4,603

4,001

4,595

4,092

Total

4,106

4,682

4,640

4,006

4,605

4,106

Total short-term borrowings

$
14,017

$
13,264

$
15,819

$
16,419

$
15,524

$
14,017

~~(16)~~(13) Long-Term Borrowings
Long-term borrowings were as follows in millions of dollars. The financial services medium-term notes include fair value adjustments related to interest rate swaps.

May 2

November 1

May 3

May 1

October 31

May 2


2021

2020

2020


2022

2021

2021

Equipment Operations













U.S. dollar notes and debentures:

8½% debentures due 2022

$
105

$
105

2.60% notes due 2022

$
1,000

1,000

1,000

$
1,000

2.75% notes due 2025

700

700

700

$
700

$
700

700

6.55% debentures due 2028

200

200

200

200

200

200

5.375% notes due 2029

500

500

500

500

500

500

3.10% notes due 2030

700

700

700

700

700

700

8.10% debentures due 2030

250

250

250

250

250

250

7.125% notes due 2031

300

300

300

300

300

300

3.90% notes due 2042

1,250

1,250

1,250

1,250

1,250

1,250

2.875% notes due 2049

500

500

500

500

500

500

3.75% notes due 2050

850

850

850

850

850

850

Euro notes:

.5% notes due 2023 (€500 principal)

606

584

548

525

584

606

1.375% notes due 2024 (€800 principal)

969

934

876

840

934

969

1.85% notes due 2028 (€600 principal)

727

700

657

630

701

727

2.20% notes due 2032 (€600 principal)

727

700

657

630

701

727

1.65% notes due 2039 (€650 principal)

788

759

712

682

759

788

Finance lease obligations and other notes

115

153

204

50

40

115

Less debt issuance costs and debt discounts

58

61

62

(51)

(54)

(58)

Total

10,124

10,124

9,947

8,556

8,915

10,124

Financial Services












Notes and debentures:

Medium-term notes: (principal as of: May 2, 2021 - $21,800, November 1, 2020 - $20,996, May 3, 2020 - $22,565)

22,161

21,661

23,326

Medium-term notes (principal as of: May 1, 2022 - $23,247, October 31, 2021 - $22,647, May 2, 2021 - $21,800)

22,740

22,899

22,161

Other notes

1,121

1,003

1,111

1,216

1,138

1,121

Less debt issuance costs and debt discounts

60

54

60

(65)

(64)

(60)

Total

23,222

22,610

24,377

23,891

23,973

23,222

Long-term borrowings

$
33,346

$
32,734

$
34,324

$
32,447

$
32,888

$
33,346

In April 2022, the Company’s financial services operations issued $600 million of sustainability-linked medium-term notes with an initial interest rate of 3.35 percent, which are due in 2029. This transaction supports the Company’s commitment to environmental sustainability. Failure to meet the stated sustainability performance target will result in a 25-basis point increase to the interest rate payable on the 2029 notes from and including April 2026.

~~(17)~~(14) Leases - Lessor
~~Lessee~~
~~Operating and finance lease right of use assets and liabilities were as follows in millions of dollars:~~

May 2

November 1

May 3

2021

2020

2020

Operating leases:

Other assets

$
345

$
324

$
341

Accounts payable and accrued expenses

328

305

319

Finance leases:

Property and equipment - net

$
73

$
63

$
43

Short-term borrowings

$
24

$
21

$
13

Long-term borrowings

45

39

26

Total finance lease liabilities

$
69

$
60

$
39

~~Right of use assets obtained in exchange for lease liabilities were as follows in millions of dollars:~~

Six Months Ended

May 2, 2021

May 3, 2020

Operating leases

$
71

$
10

Finance leases

23

18

~~Lessor~~
The Company leases equipment manufactured or sold by the Company and a limited amount of ~~non-Deere~~non-John Deere equipment to retail customers through sales-type, direct financing, and operating leases. Sales-type and direct financing leases are reported in ~~“Financing~~Financing receivables - ~~net”~~net on the consolidated balance ~~sheet. Operating~~sheets, while operating leases are reported in ~~“Equipment~~Equipment on operating leases - ~~net” on the consolidated balance sheet.~~net.
Lease revenues earned by the Company were as follows in millions of dollars:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2, 2021

May 3, 2020

May 2, 2021

May 3, 2020


May 1, 2022

May 2, 2021

May 1, 2022

May 2, 2021

Sales-type and direct financing lease revenues

$
34

$
32

$
70

$
68

Sales-type and direct finance lease revenues

$
35

$
34

$
74

$
70

Operating lease revenues

358

369

721

743

330

358

665

721

Variable lease revenues

6

6

12

11

7

6

14

12

Total lease revenues

$
398

$
407

$
803

$
822

$
372

$
398

$
753

$
803

The Company estimates the residual values for operating leases at lease inception based on several factors, including lease term, expected hours of usage, historical wholesale sale prices, return experience, intended use of the equipment, market dynamics and trends, and dealer residual guarantees. The Company reviews residual value estimates during the lease term and tests the carrying value of its operating lease assets for impairment when events or circumstances necessitate. In the second quarter of 2020, the Company recorded impairment losses on operating leases of $22 million due to higher expected equipment return rates and lower estimated values of used construction equipment. Operating lease impairments are recorded in “Other operating expenses.”
The Company discusses with lessees and dealers options to purchase the equipment or extend the lease prior to lease maturity. Equipment returned to the Company upon termination of leases is remarketed by the Company. In the second quarter of 2020, the Company recorded impairment losses on matured operating lease inventory of $10 million due to lower estimated values of used construction equipment. These impairment losses are included in “Other operating expenses.”
Due to the significant, negative effects of COVID, the Company provided short-term payment relief to lessees during 2020, and to a much lesser extent in 2021. The relief, which included payment deferrals of three months or less, was provided in regional programs and on a case-by-case basis with customers that were generally current in their payment obligations. The operating leases granted relief since the beginning of the pandemic that remained outstanding at May 2, 2021 represented approximately 3 percent of the Company’s operating lease portfolio.

2722

~~(18)~~(15) Commitments and Contingencies
The Company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments.
The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. These unamortized extended warranty premiums (deferred revenue) included in the following table totaled ~~$681~~$809 million and ~~$602~~$681 million at May ~~2, 2021~~1, 2022 and May ~~3, 2020,~~2, 2021, respectively.
A reconciliation of the changes in the warranty liability and unearned premiums was as follows in millions of dollars:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2

May 3

May 2

May 3

May 1

May 2

May 1

May 2

2021

2020

2021

2020

2022

2021

2022

2021

Beginning of period balance

$
1,803

$
1,792

$
1,743

$
1,800


$
2,064

$
1,803

$
2,086

$
1,743

Payments

(202)

(223)

(417)

(453)

(224)

(202)

(417)

(417)

Amortization of premiums received

(65)

(51)

(128)

(110)

(64)

(65)

(130)

(128)

Accruals for warranties

248

210

495

432

223

248

404

495

Premiums received

90

69

163

134

91

90

174

163

Foreign exchange

2

(30)

20

(36)

5

2

(22)

20

End of period balance

$
1,876

$
1,767

$
1,876

$
1,767

$
2,095

$
1,876

$
2,095

$
1,876

At May ~~2, 2021,~~1, 2022, the Company had approximately ~~$384~~$352 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment. The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At May ~~2, 2021,~~1, 2022, the Company had accrued losses of ~~approximately $16~~$4 million under these agreements. The maximum remaining term of the receivables guaranteed at May ~~2, 2021~~1, 2022 was approximately six years.
At May ~~2, 2021,~~1, 2022, the Company had commitments of ~~approximately $246~~$392 million for the construction and acquisition of property and equipment. Also, at May ~~2, 2021,~~1, 2022, the Company had restricted assets of ~~$70~~$69 million, ~~primarily~~classified as ~~collateral for borrowings and restricted other~~Other assets. See Note 129 for additional restricted assets associated with borrowings related to securitizations.
The Company also had other miscellaneous contingent liabilities totaling approximately ~~$60~~$75 million at May ~~2, 2021.~~1, 2022. The accrued liability for these contingencies was not material at May ~~2, 2021.~~1, 2022.
The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, and trademark matters. The Company believes the reasonably possible range of losses for these unresolved legal actions would not have a material effect on its consolidated financial statements.

~~(19)~~(16) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, the Company uses various methods including market and income approaches. The Company utilizes valuation models and techniques that maximize the use of observable inputs. The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures. These valuation techniques are consistently applied.
Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs.

2823

The fair values of financial instruments that do not approximate the carrying values were as follows in millions of dollars. Long-term borrowings exclude finance lease ~~liabilities (see Note 17).~~liabilities.

May 2, 2021

November 1, 2020

May 3, 2020

May 1, 2022

October 31, 2021

May 2, 2021

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Financing receivables – net:






Equipment operations

$
99

$
94

$
105

$
103

$
118

$
111

Financial services

30,895

31,071

29,645

29,838


27,138

27,317

Total

$
30,994

$
31,165

$
29,750

$
29,941

$
27,256

$
27,428

Financing receivables – net

$
34,085

$
33,540

$
33,799

$
33,718

$
30,994

$
31,165

Financing receivables securitized – net:

Equipment operations

$
15

$
15

$
26

$
26

$
37

$
35

Financial services

4,092

4,173

4,677

4,773

4,648

4,722

Total

$
4,107

$
4,188

$
4,703

$
4,799

$
4,685

$
4,757

Financing receivables securitized – net

$
4,073

$
4,016

$
4,659

$
4,704

$
4,107

$
4,188

Short-term
securitization borrowings:

Equipment operations

$
14

$
15

$
26

$
26

$
37

$
37

$
5

$
6

$
10

$
10

$
14

$
15

Financial services

4,092

4,117

4,656

4,698

4,603

4,632

4,001

3,938

4,595

4,600

4,092

4,117

Total

$
4,106

$
4,132

$
4,682

$
4,724

$
4,640

$
4,669

$
4,006

$
3,944

$
4,605

$
4,610

$
4,106

$
4,132

Long-term borrowings due within one year:

Equipment operations

$
206

$
211

$
79

$
78

$
480

$
477

$
1,126

$
1,128

$
1,213

$
1,222

$
206

$
211

Financial services

7,211

7,293

6,870

6,936

6,587

6,609

7,308

7,270

7,117

7,142

7,211

7,293

Total

$
7,417

$
7,504

$
6,949

$
7,014

$
7,067

$
7,086

$
8,434

$
8,398

$
8,330

$
8,364

$
7,417

$
7,504

Long-term borrowings:

Equipment operations

$
10,079

$
11,391

$
10,085

$
11,837

$
9,921

$
11,192

$
8,519

$
8,546

$
8,877

$
10,244

$
10,079

$
11,391

Financial services

23,222

23,701

22,610

23,170

24,377

24,537

23,891

23,429

23,973

24,262

23,222

23,701

Total

$
33,301

$
35,092

$
32,695

$
35,007

$
34,298

$
35,729

$
32,410

$
31,975

$
32,850

$
34,506

$
33,301

$
35,092

Fair value measurements above were Level 3 for all financing receivables, Level 3 for equipment operations short-term securitization borrowings, and Level 2 for all other borrowings.
Fair values of the financing receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by the Company for similar financing receivables. The fair values of the remaining financing receivables approximated the carrying amounts.
Fair values of long-term borrowings and short-term securitization borrowings were based on current market quotes for identical or similar borrowings and credit risk, or on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings have been swapped to current variable interest rates. The carrying values of these long-term borrowings included adjustments related to fair value hedges.

2924

Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow, excluding the Company’s cash equivalents, which were carried at cost that approximates fair value and consisted primarily of money market funds and time deposits. ~~Level 3 marketable securities were transferred to Level 2 in 2021.~~


May 2

November 1

May 3


May 1

October 31

May 2

2021

2020

2020

2022

2021

2021

Level 1:

Marketable securities

International equity securities

$
2

$
2

$
2

$
2

$
2

$
2

U.S. equity fund

71

62

62

65

75

71

U.S. government debt securities

59

55

50

59

59

59

Total Level 1 marketable securities

132

119

114

126

136

132

Level 2:

Marketable securities

��

U.S. government debt securities

121

113

104

130

139

121

Municipal debt securities

69

68

63

67

73

69

Corporate debt securities

202

188

177

206

224

202

International debt securities

4

2

2

2

2

4

Mortgage-backed securities

140

147

165

151

154

140

Total Level 2 marketable securities

536

518

511

556

592

536

Other assets

Derivatives:

Interest rate contracts

368

669

842

Foreign exchange contracts

30

48

92

Cross-currency interest rate contracts

4

8

17

Total Level 2 other assets

402

725

951

Derivatives

407

275

402

Accounts payable and accrued expenses

Derivatives:

Interest rate contracts

132

88

131

Foreign exchange contracts

89

26

68

Cross-currency interest rate contracts

2

1

Total Level 2 accounts payable and accrued expenses

223

115

199

Derivatives

780

228

223

Level 3:

Marketable securities

International debt securities

4

1

Accounts payable and accrued expenses – Deferred consideration

262

The contractual maturities of debt securities at May ~~2, 2021~~1, 2022 in millions of dollars are shown below. Actual maturities may differ from ~~those scheduled as a result of prepayments by the issuers.~~contractual maturities because some securities may be called or prepaid. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity. Mortgage-backed securities were primarily issued by U.S. government sponsored enterprises. Unrealized losses of debt securities at May 1, 2022 were not recognized in income due to the ability and intent to hold to maturity.

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

Due in one year or less

$
20

$
21

$
27

$
27

Due after one through five years

90

94

92

90

Due after five through 10 years

124

127

171

155

Due after 10 years

207

213

221

192

Mortgage-backed securities

136

140

167

151

Debt securities

$
577

$
595

$
678

$
615

Fair value, nonrecurring Level 3 measurements from impairments, excluding financing receivables with specific allowances which were not significant, were as follows in millions of dollars. ~~Equipment on operating leases~~Property and equipment – net and Other assets fair value for ~~November 1, 2020~~October 31, 2021 represents the fair value assessment at ~~May 3, 2020.~~January 31, 2021.

Fair Value

Losses

Fair Value

Losses

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2

November 1

May 3

May 2

May 3

May 2

May 3

May 1

October 31

May 2

May 1

May 2

May 1

May 2


2021

2020

2020

2021

2020

2021

2020


2022

2021

2021

2022

2021

2022

2021

Other receivables

$
1

Equipment on operating leases – net

$
371

$
371

$
22

$
22

Inventories

$
19

$
8

$
8

Property and equipment – net

$
135

$
70

$
62

$
44

$
62

$
15

$
41

$
41

$
41

$
44

Investments in unconsolidated affiliates

$
19

$
10

$
20

$
20

Other intangible assets – net

$
28

$
28

Other assets

$
59

$
59

$
10

$
6

$
10

$
1

$
6

The following is a description of the valuation methodologies the Company uses to measure certain ~~financial instruments on the~~ balance sheet items at fair value:

Marketable ~~Securities~~securities – The portfolio of investments ~~except for the Level 3 measurement international debt securities,~~ is primarily valued on a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data such as interest rates, yield curves, volatilities, credit risk, and prepayment speeds. Funds are primarily valued using the fund’s net asset value, based on the fair value of the underlying securities. ~~The Level 3 measurement international debt securities are primarily valued using an income approach based on discounted cash flows using yield curves derived from limited, observable market data.~~

Derivatives – The Company’s derivative financial instruments consist of interest rate ~~swaps,~~contracts (swaps), foreign currency ~~futures,~~exchange contracts (futures, forwards, and ~~swaps,~~swaps), and cross-currency interest rate ~~swaps.~~contracts (swaps). The portfolio is valued based on an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates for currencies.

Financing ~~Receivables~~receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using a market approach (appraisal values or realizable values). Inputs include a selection of realizable values.

~~Other Receivables~~Inventories – The service parts inventory impairment was based on ~~the expected realization of value-added tax receivables related to a closed factory operation (see Note 22).~~

~~Equipment on Operating Leases – Net – The impairments are based on an income approach (discounted cash flow), using the contractual payments, plus estimates of return rates~~net realizable value, less reasonably predictable selling and ~~equipment sale price at lease maturity. Inputs include historical return rates and realized sales values (see Note 22).~~disposal costs.

Property and ~~Equipment~~equipment – ~~Net~~net – ~~The impairments are measured at the lower of the carrying amount, or fair value.~~ The valuations were based on cost and market approaches. The inputs include replacement cost estimates adjusted for physical deterioration and economic ~~obsolescence or quoted prices when available (see Note 22).~~

Investment in Unconsolidated Affiliates – Other than temporary impairments for investments are measured as the difference between the implied fair value and the carrying value of the investments or the estimated realization amount (see Note 22).obsolescence.

Other ~~Assets~~intangible assets – net – The Company considered external valuations based on the Company’s probability weighted cash flow analysis.

Other assets – The impairments ~~of matured operating lease inventory are~~were measured at the fair value of ~~that inventory. The valuations were based on a market approach. The inputs include sales~~the right of ~~comparable assets (see Note 22).~~use operating lease asset.

~~(20)~~(17) Derivative Instruments

It is the Company’s policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. The Company’s financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities. The Company also has foreign currency exposures at some of its foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies. In addition, the Company has interest rate ~~exposure~~and foreign currency exposures at certain

equipment operations units for ~~below market retail financing programs that are used as~~ sales ~~incentives and are offered for extended periods.~~incentive programs.
All derivatives are recorded at fair value on the balance sheet. Cash collateral received or paid is not offset against the derivative fair values on the balance sheet. The cash flows from these contracts were recorded in operating activities in the statements of consolidated cash flows. Each derivative is designated as a cash flow hedge, a fair value hedge, or remains undesignated. All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy. Both at inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness. If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, the hedge designation is removed, or the derivative is terminated, hedge accounting is discontinued.
Cash Flow Hedges
Certain interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings. The total notional amounts of the receive-variable/pay-fixed interest rate contracts at May 1, 2022, October 31, 2021, and May 2, 2021 ~~November 1, 2020, and May 3, 2020~~ were ~~$1,850~~$2,450 million, ~~$1,550~~$2,700 million, and ~~$2,450~~$1,850 million, respectively. Fair value gains or losses on cash flow hedges were recorded in ~~OCI~~other comprehensive income (OCI) and are subsequently reclassified into interest expense in the same periods during which the hedged transactions affected earnings. These amounts offset the effects of interest rate changes on the related borrowings. ~~The cash flows from these contracts were recorded in operating activities in the statement of consolidated cash flows.~~
The amount of ~~loss~~gain recorded in OCI at May ~~2, 2021~~1, 2022 that is expected to be reclassified to interest expense ~~or other operating expenses~~ in the next twelve months if interest rates ~~or exchange rates~~ remain unchanged is approximately $4$23 million after-tax. NaN gains or losses were reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.
Fair Value Hedges
Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings. The total notional amounts of the receive-fixed/pay-variable interest rate contracts at May 1, 2022, October 31, 2021, and May 2, 2021 ~~November 1, 2020, and May 3, 2020~~ were ~~$8,340~~$8,655 million, ~~$7,239~~$8,043 million, and ~~$8,983~~$8,340 million, respectively. The fair value gains or losses on these contracts were generally offset by fair value gains or losses on the hedged items (fixed-rate borrowings) with both items recorded in interest expense.
~~The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships were as follows in millions of dollars:~~

Cumulative Increase (Decrease) of Fair

Value Hedging Adjustments Included in

the Carrying Amount

Carrying

Active

Amount of

Hedging

Discontinued

Hedged Item

Relationships

Relationships

Total

May 2, 2021

Long-term borrowings due within one year

$
163

$
1

$
(1)


Long-term borrowings

8,502

190

171

$
361

November 1, 2020

Long-term borrowings due within one year

$
155

$
2

$
3

$
5

Long-term borrowings

7,725

543

122

665

May 3, 2020

Long-term borrowings due within one year

$
214

$
(2)

$
(2)

Long-term borrowings

9,496

$
726

36

762

~~Long-term borrowings due within one year are presented in short-term borrowings.~~

3226

The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships were as follows in millions of dollars:

Cumulative Increase (Decrease) of Fair

Value Hedging Adjustments Included in

the Carrying Amount

Carrying

Active

Amount of

Hedging

Discontinued

Hedged Item

Relationships

Relationships

Total

May 1, 2022

Long-term borrowings due within one year

$
185

$
1

$
7

$
8

Long-term borrowings

7,933

(613)

106

(507)

October 31, 2021

Long-term borrowings due within one year

$
189

$
3

$
(2)

$
1

Long-term borrowings

8,070

29

223

252

May 2, 2021

Long-term borrowings due within one year

$
163

$
1

$
(1)

Long-term borrowings

8,502

190

171

$
361

Long-term borrowings due within one year are presented in short-term borrowings.
Derivatives not designated as hedging instruments
The Company has certain interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges. These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures, primarily for certain borrowings, purchases or sales of inventory, and ~~below market retail financing~~sales incentive programs. The total notional amounts of these interest rate swaps at May 1, 2022, October 31, 2021, and May 2, 2021 ~~November 1, 2020, and May 3, 2020~~ were ~~$8,694~~$9,912 million, ~~$8,514~~$10,848 million, and ~~$7,975~~$8,694 million, the foreign exchange contracts were ~~$6,239~~$7,640 million, ~~$4,903~~$7,584 million, and ~~$4,430~~$6,239 million, and the cross-currency interest rate contracts were ~~$151~~$264 million, ~~$113~~$238 million, and ~~$89~~$151 million, respectively. The fair value gains or losses from derivatives not designated as hedging instruments were recorded in the ~~interest rate contracts were recognized currently in interest expense or net sales and the gains or losses from foreign exchange contracts in cost~~statements of ~~sales or other operating expenses,~~consolidated income, generally offsetting over time the ~~expenses~~exposure on the ~~exposures being hedged. The cash flows from these non-designated contracts were recorded in operating activities in the statement of consolidated cash flows.~~hedged item.
Fair values of derivative instruments in the condensed consolidated balance ~~sheet~~sheets were as follows in millions of dollars:


May 2

November 1

May 3

Other Assets

2021

2020

2020

Designated as hedging instruments:

Interest rate contracts

$
301

$
586

$
758

Not designated as hedging instruments:

Interest rate contracts

67

83

84

Foreign exchange contracts

30

48

92

Cross-currency interest rate contracts

4

8

17

Total not designated

101

139

193

Total derivative assets

$
402

$
725

$
951

Accounts Payable and Accrued Expenses

Designated as hedging instruments:

Interest rate contracts

$
80

$
14

$
30

Not designated as hedging instruments:

Interest rate contracts

52

74

101

Foreign exchange contracts

89

26

68

Cross-currency interest rate contracts

2

1

Total not designated

143

101

169

Total derivative liabilities

$
223

$
115

$
199

~~The classification and gains (losses) including accrued interest expense related to derivative instruments on the statement of consolidated income consisted of the following in millions of dollars:~~

Three Months Ended

Six Months Ended

May 2

May 3

May 2

May 3

2021

2020

2021

2020

Fair Value Hedges:










Interest rate contracts - Interest expense

$
(170)

$
415

$
(225)

$
511

Cash Flow Hedges:

Recognized in OCI

Interest rate contracts - OCI (pretax)

(15)

(17)

Reclassified from OCI

Interest rate contracts - Interest expense

(4)

(4)

(9)

(6)

Not Designated as Hedges:

Interest rate contracts - Net sales

$
5

$
(20)

$
5

$
(24)

Interest rate contracts - Interest expense *

1

(4)

3

Foreign exchange contracts - Cost of sales

(48)

81

(100)

92

Foreign exchange contracts - Other operating *

(78)

175

(204)

174

Total not designated

$
(121)

$
237

$
(303)

$
245

*~~Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.~~


May 1

October 31

May 2

Other Assets

2022

2021

2021

Designated as hedging instruments:

Interest rate contracts

$
63

$
166

$
301

Not designated as hedging instruments:

Interest rate contracts

180

73

67

Foreign exchange contracts

125

31

30

Cross-currency interest rate contracts

39

5

4

Total not designated

344

109

101

Total derivative assets

$
407

$
275

$
402

Accounts Payable and Accrued Expenses

Designated as hedging instruments:

Interest rate contracts

$
591

$
99

$
80

Not designated as hedging instruments:

Interest rate contracts

75

33

52

Foreign exchange contracts

114

94

89

Cross-currency interest rate contracts

2

2

Total not designated

189

129

143

Total derivative liabilities

$
780

$
228

$
223

3327

The classification and gains (losses) including accrued interest expense related to derivative instruments consisted of the following in millions of dollars:

Three Months Ended

Six Months Ended

May 1

May 2

May 1

May 2

2022

2021

2022

2021

Fair Value Hedges:







Interest rate contracts - Interest expense

$
(514)

$
(170)

$
(656)

$
(225)

Cash Flow Hedges:

Recognized in OCI

Interest rate contracts - OCI (pretax)

35

50

Reclassified from OCI

Interest rate contracts - Interest expense

(1)

(4)

(3)

(9)

Not Designated as Hedges:

Interest rate contracts - Net sales

$
31

$
5

$
44

$
5

Interest rate contracts - Interest expense *

61

59

(4)

Foreign exchange contracts - Net sales

(1)

(1)

Foreign exchange contracts - Cost of sales

(79)

(48)

(80)

(100)

Foreign exchange contracts - Other operating expenses *

26

(78)

173

(204)

Total not designated

$
38

$
(121)

$
195

$
(303)

*Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.

Counterparty Risk and Collateral
Derivative instruments are subject to significant concentrations of credit risk to the banking sector. The Company manages individual counterparty exposure by setting limits that consider the credit rating of the counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the Company and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Some of these agreements include credit support provisions. Each master agreement permits the net settlement of amounts owed in the event of default or termination.
Certain of the Company’s derivative agreements contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at May 1, 2022, October 31, 2021, and May 2, 2021, ~~November 1, 2020, and May 3, 2020,~~ was ~~$136~~$673 million, ~~$89~~$135 million, and ~~$130~~$136 million, respectively. In accordance with the limits established in these agreements, the Company posted 0$254 million of cash collateral at May 1, 2022. The Company posted 0 cash collateral in accordance with the limits established in those agreements at either October 31, 2021 or May 2, ~~2021, November 1, 2020, and May 3, 2020.~~2021. In addition, the Company paid $8 million of ~~collateral, either in~~ cash ~~or pledged securities,~~collateral that was outstanding at May 1, 2022, October 31, 2021, and May 2, 2021 to participate in an international futures market to hedge currency exposure, not included in the table below.
Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities related to netting arrangements and any collateral received or paid was as follows in millions of dollars:

Gross Amounts

Netting

Gross Amounts

Netting

May 2, 2021

Recognized

Arrangements

Collateral

Net Amount

May 1, 2022

Recognized

Arrangements

Collateral

Net Amount

Assets

$
402

$
(125)

$
(21)

$
256

$
407

$
(110)

$
297

Liabilities

223

(125)

(1)

97

780

(110)

$
(254)

416

Gross Amounts

Netting

Gross Amounts

Netting

November 1, 2020

Recognized

Arrangements

Collateral

Net Amount

October 31, 2021

Recognized

Arrangements

Collateral

Net Amount

Assets

$
725

$
(93)

$
(274)

$
358

$
275

$
(105)

$
170

Liabilities

115

(93)

22

228

(105)

$
(5)

118


Gross Amounts

Netting





Gross Amounts

Netting




May 3, 2020

Recognized

Arrangements

Collateral

Net Amount

May 2, 2021

Recognized

Arrangements

Collateral

Net Amount

Assets

$
951

$
(125)

$
(319)

$
507

$
402

$
(125)

$
(21)

$
256

Liabilities

199

(125)

74

223

(125)

(1)

97

~~(21)~~(18) Stock Option and Restricted Stock Awards

In December ~~2020,~~2021, the Company granted stock options to employees for the purchase of ~~269~~197 thousand shares of common stock at an exercise price of ~~$254.83~~$343.94 per share and a binomial lattice model fair value of ~~$62.73~~$89.20 per share at the grant date. At May ~~2, 2021,~~1, 2022, options for ~~2.8~~2.2 million shares were outstanding with a weighted-average exercise price of ~~$125.50~~$152.99 per share. The Company also granted ~~212~~160 thousand restricted stock units to employees and non-employee directors in the first six months of ~~2021,~~2022, of which ~~165~~123 thousand are subject to service based only conditions and 4737 thousand are subject to performance/service based conditions. The weighted-average fair value of the service based only units at the grant date was ~~$258.42~~$345.94 per unit based on the market price of a share of underlying common stock. The fair value of the performance/service based units at the grant date was ~~$245.73~~$331.47 per unit based on the market price of a share of underlying common stock excluding dividends. At May ~~2, 2021,~~1, 2022, the Company was authorized to grant an additional ~~17.7~~17.2 million shares under the equity incentive plan.

(19) Acquisitions
Kreisel Acquisition
On February 7, 2022, the Company acquired majority ownership in Kreisel Electric Inc. (Kreisel), a pioneer in the development of immersion-cooled battery technology. The Austrian company manufactures high-density, high-durability electric battery modules and packs for high-performance and off-highway applications and has created a battery-buffered, high-powered charging infrastructure platform.
The transaction includes a call option to purchase the remaining ownership interest in Kreisel in 2027. The minority interest holders also have a put option that would require the Company to purchase the holder’s ownership interest in 2027. The put and call options cannot be separated from the noncontrolling interest. Due to the redemption features, the minority interest is classified as redeemable noncontrolling interest in the Company’s consolidated balance sheets.
The total cash purchase price was $276 million, consisting of $253 million for the acquired equity interests, $21 million to reduce the option price, and customary working capital adjustments, net of cash acquired. The preliminary fair values assigned to the assets and liabilities of the acquired entity in millions of dollars, which is based on information as of the acquisition date and available at May 1, 2022 follows:

February 7

2022

Trade accounts and notes receivable

$
2

Other receivables

11

Inventories

11

Property and equipment

11

Goodwill

217

Other intangible assets

178

Other assets

6

Total assets

$
436

Accounts payable and accrued expenses

$
28

Deferred income taxes

36

Redeemable noncontrolling interest

$
96

The identifiable intangible assets were related to technology, trade name, and customer relationships with a weighted average amortization period of 12 years. The goodwill is not deductible for income tax purposes. Kreisel will be allocated amongst the Company’s production and precision agriculture, small agriculture and turf, and construction and forestry segments.
Acquisition of Excavator Factories
On February 28, 2022, the Company acquired full ownership of three former Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi Construction Machinery (Hitachi). The two companies also ended their joint venture manufacturing and marketing agreements. The former joint venture factories will continue to manufacture Deere-branded construction excavators and forestry equipment. Through a new supply agreement with Hitachi, Deere will continue to offer a full portfolio of excavators. Deere’s marketing arrangement for Hitachi-branded construction excavators and mining equipment in the Americas has ended with Hitachi assuming distribution and support of these products. John Deere dealers may continue to support their existing field population of Hitachi-branded excavators.
With the completion of this acquisition, the Company now has complete control over its excavator design, product, and feature updates, making it possible to more rapidly respond to customer requirements and integrate excavators with other construction products in the John Deere product portfolio. The Company can leverage technology developed for other product lines and

production systems across the enterprise and extend those advanced solutions to Deere-designed excavators, strengthening the entire product portfolio.
The total invested capital follows:

February 28

2022

Cash consideration for factories

$
205

Cash consideration for license agreement

70

Deferred consideration

271

Total purchase price consideration

546

Less: Cash obtained

(187)

Less: Settlement of intercompany balances

(113)

Net purchase price consideration

246

Fair value of previously held equity investment

444

Total invested capital

$
690

The total purchase price consideration includes deferred consideration that will be paid as the Company purchases John Deere-branded excavators, components, and service parts from Hitachi under the new supply agreement with a duration that ranges from 5 to 30 years. The deferred consideration represents the price increases under the new supply arrangement. Excluding inflation adjustments, the price increases for products to be acquired by the Company from Hitachi are as much as 27 percent higher than the prior supply arrangement. At May 1, 2022, the net present value of the deferred consideration was approximately $262 million, subject to changes in market conditions, developments in the Company’s product offerings, and sourcing changes. The Company financed the acquisition and associated transaction expenses from cash on hand. The fair value of the previously held 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.
Prior to the acquisition, the Company purchased John Deere and Hitachi-branded excavators, components, and parts from the Deere-Hitachi joint venture factories for sale to John Deere dealers. These purchases were included in Cost of sales, while the sale to John Deere dealers were included in Net sales. Cost of sales also included profit-sharing payments to Hitachi in accordance with the previous marketing agreements. Following the acquisition, Net sales will only include the sale of John Deere-branded excavators to John Deere dealers, while Cost of sales will reflect market pricing to purchase and manufacture excavators, as well as the related components and service parts.
The preliminary fair values assigned to the assets and liabilities of the acquired factories in millions of dollars, which is based on information as of the acquisition date and available at May 1, 2022 follows:

February 28

2022

Other receivables

$
29

Inventories

286

Property and equipment

182

Goodwill

534

Other intangible assets

70

Deferred income taxes

49

Total assets

$
1,150

Accounts payable and accrued expenses

$
297

Long-term borrowings

163

Total liabilities

$
460

The identifiable intangible assets were related to technology with a 10-year amortization period. The goodwill is not deductible for income tax purposes. The excavator factories will be reported in the Company’s construction and forestry segment.

~~(22)~~Other Acquisitions
In the first six months of the year, the Company acquired AgriSync Inc., a technology service provider; an 80 percent stake in SureFire Ag Systems, Inc. and SureFire Electronics, LLC, which design and manufacture liquid fertilizer application and spray tendering systems; and a 40 percent equity method investment in GUSS Automation LLC, a pioneer in semi-autonomous orchard and vineyard sprayers. The combined cost of the acquisitions was $109 million, net of cash acquired of $3 million. The preliminary asset and liability fair values at the respective acquisition dates follow in millions of dollars:

May 1

2022

Trade accounts and notes receivable

$
7

Inventories

8

Property and equipment

4

Goodwill

40

Other intangible assets

20

Other assets

50

Total assets

$
129

Accounts payable and accrued expenses

$
6

Deferred income taxes

5

Total liabilities

$
11

Redeemable noncontrolling interest

$
9

The identifiable intangible assets related to trade name, technology, and customer relationships with a weighted average amortization period of 6 years. AgriSync will be allocated amongst the Company’s production and precision agriculture, small agriculture and turf, and construction and forestry segments, while SureFire will be allocated to the production and precision agriculture segment. GUSS Automation will be assigned to the small agriculture and turf segment.
For all acquisitions, the goodwill was the result of future cash flows and related fair value exceeding the fair value of the identified assets and liabilities. The pro forma results of operations as if these acquisitions had occurred at the beginning of the current or comparative fiscal year would not differ significantly from the reported results.
(20) Special Items

2022 Special Items
Impact of events in Russia / Ukraine
The recent events in Russia / Ukraine have resulted in the Company suspending shipments of machines and service parts to Russia. The Company has equipment operations in Russia / Ukraine, and financial services operations in Russia. As of May 1, 2022, the Company's net exposure in Russia / Ukraine was approximately $454 million. Net sales from the Company’s Russian operations represented 2 percent of consolidated annual net sales from 2017 to 2021. The Ukraine operations were not material to the consolidated financial statements.
The suspension of shipments to Russia will reduce forecasted revenue for the region, which makes it probable future cash flows will not cover the carrying value of certain assets. The accounting consequences during the second quarter 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. A summary of the reserves and impairments recorded in the second quarter of 2022 follows in millions of dollars:

Three Months Ended May 1, 2022

PPA

SAT

CF

FS

Total

2022 Expense:

Inventory reserve – Cost of sales

$
6

$
2

$
8

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

$
26

26

Contingent liabilities – Other operating expenses

10

$
1

6

17

Total Russia/Ukraine events pretax expense

$
46

$
1

$
47

$
26

$
120

Net tax impact

(14)

Total Russia/Ukraine events after-tax expense

$
106

Gain on Previously Held Equity Investment
On February 28, 2022, the Company acquired full ownership of three former Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi. The fair value of the previous equity investment resulted in a non-cash gain of $326 million (pretax and after-tax; see Note 19).
UAW Collective Bargaining Agreement
On November 17, 2021, employees represented by the UAW approved a new collective bargaining agreement. The agreement, which has a term of six years, covers the wages, hours, benefits, and other terms and conditions of employment for the Company’s UAW-represented employees at 14 U.S. facilities. The labor agreement includes a lump sum ratification bonus payment of $8,500 per eligible employee, totaling $90 million, and an immediate wage increase of 10 percent plus further wage increases over the term of the contract. The lump sum payment was expensed in the first quarter of 2022. The Company remeasured the U.S. hourly pension plan as of November 30, 2021 due to the new collective bargaining agreement. See Note 6 for more information on the U.S. hourly plan remeasurement.
2021 Special Items
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. See Note ~~19 for fair value measurement information.~~

Six Months Ended

May 2, 2021

Expense (benefit):

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Total

Long-lived asset impairments – Cost of sales

$
5

$
3

$
42

$
50

Brazil indirect tax – Cost of sales

(53)

(5)

(58)

Total expense (benefit)

$
(48)

$
3

$
37

$
(8)

~~In the second quarter of 2020, the fixed assets in an asphalt plant factory in Germany were impaired by $62 million pretax and~~ ~~after-tax~~. The impairment is 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. The equipment on operating leases and matured operating lease inventory were impaired by $22 million and $10 million pretax, respectively, with an income tax benefit of approximately $9 million. The impairments were the result of higher expected equipment return rates and lower estimated values of used construction equipment than originally estimated with the probable effect that the future cash flows will not cover the carrying amount of the net assets. A minority investment in a construction equipment company headquartered in South Africa was impaired by $20 million pretax and ~~after-tax. The impairment was the result of an other than temporary decline in value. See Note 19~~16 for fair value measurement information.

Six Months Ended

May 3, 2020

Expense:

Construction & Forestry

Financial Services

Total

Long-lived asset impairments – Cost of sales

$
62

$
62

Investments in unconsolidated affiliates impairment – Equity in loss of unconsolidated affiliate

20

20

Equipment on operating leases & matured operating lease inventory impairments – Other operating expenses

$
32

32

Total expense

$
82

$
32

$
114

~~Employee-Separation Programs~~
~~During~~The following table summarizes the ~~first quarter~~operating profit impact, in millions of ~~2020,~~dollars, of the ~~Company announced a broad voluntary employee-separation program~~special items recorded for the ~~U.S. salaried workforce that continues the efforts to create a more efficient organization structure~~three months and reduce operating costs. The program provided for cash payments based on years of service. The expense was recorded primarily in the period in which the employees irrevocably accepted the separation offer. The payments for the program were also substantially made in the first quarter of 2020. Included in the total pretax expense is a non-cash charge of $21 million resulting from a curtailment in certain OPEB plans (see Note 8), which was recorded outside of operating profit in “~~Other operating expense.~~”

Six Months Ended

May 3, 2020

Production & Precision Ag

Small Ag & Turf

Construction & Forestry

Financial Services

Total

Cost of sales

$
21

$
11

$
9

$
41

Research and development expenses

7

7

4

18

Selling, administrative and general expenses

18

19

14

$
3

54

Total operating profit impact

$
46

$
37

$
27

$
3

113

Other operating expenses

23

Total expense

$
136

~~Redeemable Noncontrolling Interest~~
In the second quarter of 2020, the minority interest holder in Hagie Manufacturing Company, LLC exercised its right to sell the remaining 20 percent interest to the Company for $14 million. The arrangement was accounted for as an equity transaction with 0 gain or loss recorded in the statement of consolidated income. This operation is included in the Company’s productionsix months ended May 1, 2022 and ~~precision agriculture segment.~~May 2, 2021:

Three Months

Six Months

PPA

SAT

CF

FS

Total

PPA

SAT

CF

FS

Total

2022 Expense (benefit):

Gain on remeasurement of equity investment – Other income (see Note 19)

$
(326)

$
(326)

$
(326)

$
(326)

Total Russia/Ukraine events pretax expense

$
46

$
1

47

$
26

120

$
46

$
1

47

$
26

120

UAW ratification bonus – Cost of sales

53

9

28

90

Total expense (benefit)

$
46

$
1

$
(279)

$
26

$
(206)

$
99

$
10

$
(251)

$
26

$
(116)

2021 Expense (benefit):

Long-lived asset impairments – Cost of sales

$
5

$
3

$
42

$
50

Brazil indirect tax – Cost of sales

(53)

(5)

(58)

Total expense (benefit)

$
(48)

$
3

$
37

$
(8)

Period over period change

$
46

$
1

$
(279)

$
26

$
(206)

$
147

$
7

$
(288)

$
26

$
(108)

3532

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
Organization
The Company’s equipment operations generate revenues and cash primarily from the sale of equipment to John Deere dealers and distributors. The equipment operations manufacture and distribute a full line of agricultural equipment; a variety of commercial and consumer equipment; and a broad range of equipment for construction, roadbuilding, and forestry. The Company’s financial services primarily provide credit services, which mainly finance sales and leases of equipment by John Deere dealers and trade receivables purchased from the equipment operations. In addition, financial services offers extended equipment warranties. The information in the following discussion is presented in a format that includes information grouped as consolidated, equipment operations, and financial services. The ~~Company also views its operations as consisting of two geographic areas, the U.S. and Canada, and outside the U.S. and Canada. The~~ Company’s operating segments consist of production and precision agriculture, small agriculture and turf, construction and forestry, and financial services.
Trends and Economic Conditions for Fiscal Year 2022
Industry sales of large agricultural machinery in the U.S. and Canada are expected to be up about ~~25 percent for 2021 compared to the prior year.~~20 percent. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be ~~up about 10 percent in 2021.~~flat. Industry sales of agricultural machinery in Europe are ~~also~~ forecast to be up about 105 percent. In South America, industry sales of tractors and combines are projected to be up about ~~20 percent in 2021. Industry~~10 percent. Asia industry sales of agricultural machinery ~~in Asia~~ are forecast to be ~~up slightly.~~down moderately. Construction equipment industry sales in the U.S. and Canada for ~~2021~~2022 are expected to increase about ~~15 to 20~~10 percent, while compact construction equipment industry sales in the U.S. and Canada are ~~forecast~~anticipated to ~~increase about 20~~be flat to 25up 5 percent. ~~In forestry,~~Forestry global industry equipment sales are expected to be 15flat to ~~20 percent higher. The~~up 5 percent. Global industry roadbuilding equipment sales are forecasted to be flat to up 5 percent. Net income for the Company’s financial services operations is expected to be slightly lower than fiscal year 2021 due to a higher provision for credit losses and higher selling, administrative, and general expenses. These factors are expected to ~~benefit from improvement on operating lease residual values,~~be partially offset by income earned on a higher average ~~portfolio, a lower provision for credit losses, and more favorable financing spreads for fiscal year 2021 compared to the prior year.~~portfolio.
Items of concern include ~~uncertainty of~~global and regional political conditions, economic and trade policies, inflationary pressures, the effectiveness of governmental and private sector actions to address COVID, trade agreements, the uncertainty of the results of monetary and fiscal policies, the impact of elevated levels of sovereign and state debt,ongoing pandemic, capital market disruptions, changes in demand and pricing for new and used equipment, ~~geopolitical events,~~ and the other items discussed in the ~~“Safe Harbor Statement”~~“Forward-Looking Statements” below. Significant fluctuations in foreign currency exchange rates, ~~and~~ volatility in the price of many commodities, and supply chain disruptions could also impact the Company’s results. ~~The future financial effects of COVID are unknown due to many factors. As a result, predicting the Company’s forecasted financial performance is subject to many assumptions.~~
The Company’s second quarter results ~~were delivered across its entire business lineup, reflecting~~reflect strong ~~worldwide markets~~demand while enduring supply chain pressures continue to impact production levels and delivery schedules. The Company’s employees, suppliers, and dealers are working to address these challenges. The demand for ~~farm~~agricultural equipment is expected to benefit from positive fundamentals despite availability concerns and ~~construction equipment.~~inflationary pressures affecting customers’ input costs. The Company’s smart industrial operating ~~strategy continues to have a significant impact~~model and recently announced financial and sustainability goals (Leap Ambitions) are focused on ~~performance while also~~ helping customers ~~do their jobs in a more profitable~~manage higher costs and ~~sustainable manner. While the Company is performing well, increased supply-chain pressures are expected~~increasingly scarce inputs, while improving agricultural yields, through the ~~remainder~~use of the ~~year.~~Company’s integrated technologies.
Impact of Events in Russia / Ukraine
The recent events in Russia / Ukraine have impacted the safety, welfare, and well-being of the Company’s employees in the region. The Company’s top priority is to support and maintain close communication with its affected teams, providing necessary resources when possible. The Company ~~is working closely with key suppliers~~has suspended shipments of machines and service parts to ~~secure~~Russia. These events are impacting business continuity, liquidity, and asset values for the parts and components that its customers need to deliver essential food production and infrastructure. Despite these challenges, the Company is on track for a strong year and well positioned to unlock greater value for its customers and other stakeholdersCompany’s operations in ~~the future.~~Russia / Ukraine (see Note 20).

3633

~~COVID Effects and Actions~~

~~The effects of COVID and the related actions of governments and other authorities to contain COVID continue to affect the Company’s operations, results, cash flows, and forecasts.~~2022 Compared with 2021

The U.S. government and many other governments in countries where the Company operates have designated the Company an essential critical infrastructure business. This designation allows the Company to operate in support of its customers to the extent possible.

The Company’s first priority in addressing the effects of COVID continues to be the health, safety, and overall welfare of its employees. The Company effectively activated previously established business continuity plans and proactively implemented health and safety measures at its operations around the world.

The Company broadened its supply base to minimize the impact of potential supply chain disruptions on its ability to meet customer demand. While the impact to operations during the first six months of 2021 was not material, the Company continues to monitor the situation and work closely with suppliers.

The Company continued to work closely with distribution channel and equipment user customers in the first half of 2021 in connection with short-term payment relief on obligations owed to the Company. Financing receivables and operating leases granted relief since the beginning of the pandemic that remained outstanding at May 2, 2021 represented about 4 percent and 3 percent of the portfolio balances, respectively. The trade receivable balance granted relief that remained outstanding at May 2, 2021 was not material. Additional information is presented in Notes 4, 11, and 17.

~~2021 Compared with 2020~~

~~The following table provides the net sales and revenues and net income attributable to Deere & Company in millions of dollars and diluted earnings per share in dollars:~~


	Three Months Ended					Six Months Ended					Three Months Ended					Six Months Ended
	May 2		May 3		%	May 2		May 3		%
	2021		2020		Change	2021		2020		Change
Deere & Company											May 1		May 2		%	May 1		May 2		%
(In millions of dollars, except per share amounts)											2022		2021		Change	2022		2021		Change
Net sales and revenues	$	12,058	$	9,253	+30	$	21,170	$	16,884	+25	$	13,370	$	12,058	+11	$	22,939	$	21,170	+8
Net income attributable to Deere & Company		1,790		666	+169		3,013		1,182	+155		2,098		1,790	+17		3,001		3,013
Diluted earnings per share		5.68		2.11			9.55		3.73			6.81		5.68			9.72		9.55

InResults for the second quarter of ~~2020,~~2022 and year-to-date periods of 2022 and 2021 were impacted by special items. See Note 20 for more information on special items impacting the Company recorded impairments totaling $114 million pretax and $105 million after-tax related to certain fixed assets, operating lease equipment, and a minority investment in a construction equipment company headquartered in South Africa (see Note 22). In the first six months of 2020, total voluntary employee-separation program (VSEP) expense recognized was $136 million pretax.

The worldwide equipment operations net sales, operating profit, and net income in millions of dollars, and price realization and the effect of currency translation are shown below. Also shown are U.S. and Canada, and outside U.S. and Canada equipment operations net sales in millions of dollars, price realization, and currency translation.

Three Months Ended

Six Months Ended

May 2

May 3

%

May 2

May 3

%

Worldwide equipment operations:

2021

2020

Change

2021

2020

Change

Net sales

$
10,998

$
8,224

+34

$
19,049

$
14,754

+29

Operating profit

2,144

$
890

+141

$
3,524

1,356

+160

Net income

1,568

606

+159

2,586

985

+163

Price realization

+7

+6

Currency translation

+3

+2

U.S. and Canada equipment operations:

Net sales

6,157

4,998

+23

10,686

8,748

+22

Price realization

+5

+5

Currency translation

+1

+1

Outside U.S. and Canada equipment operations:

Net sales

4,841

3,226

+50

8,363

6,006

+39

Price realization

+9

��

+8

Currency translation

+7

+4

presented periods. The discussion on net sales and operating profit is included in the Business Segment Results below.
~~The cost of sales to net sales ratio and other significant statement of consolidated income changes were as follows in millions of dollars:~~

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

May 2

May 3

%

May 2

May 3

%

2021

2020

Change

2021

2020

Change

Deere & Company

May 1

May 2

%

May 1

May 2

%

(In millions of dollars)

2022

2021

Change

2022

2021

Change

Cost of sales to net sales

72.1%

76.5%

72.1%

77.1%

74.1%

72.1%

75.9%

72.1%

Other income

$
251

$
180

+39

$
477

$
385

+24

$
540

$
251

+115

$
779

$
477

+63

Research and development expenses

377

406

-7

743

831

-11

453

377

+20

855

743

+15

Selling, administrative and general expenses

838

906

-8

1,607

1,715

-6

932

838

+11

1,713

1,607

+7

Other operating expenses

335

377

-11

708

792

-11

328

335

-2

638

708

-10

Provision for income taxes

461

530

-13

710

838

-15

The cost of sales to net sales ratio ~~decreased~~increased in the second quarter and the first six months of fiscal 2022 primarily due to higher production costs partially offset by price realization. Other income increased in both periods due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture. Research and development expenses were higher for both periods due to continued focus on developing and incorporating technology solutions. Selling, administrative, and general expenses increased in the second quarter and the first six months primarily due to price realization and impairments recorded in 2020 (see Note 22). The first six months of 2020 were also impacted by VSEP costs. Other income increased in both periods due to gains on the disposition of operating lease equipment in 2021 and unrealized gains on equity securities. Research and development expenses decreased in both periods from efficiencies gained and timing of project initiatives. Selling, administrative and general expenses decreased in both periods primarily due to a ~~lower~~higher provision for credit losses, ~~and VSEP costs recorded~~including higher reserves due to the events in ~~2020 (see Note 22), partially offset by higher incentive compensation.~~Russia / Ukraine. Other operating expenses decreased in ~~both periods~~the first six months primarily due to ~~impairments on operating lease residual values and losses on the disposition of operating lease equipment in 2020 and~~ lower depreciation of equipment on operating ~~leases.~~leases and lower retirement benefit costs. The provision for income taxes decreased in both periods due in part to a final U.S. tax regulation resulting in the release of a foreign tax credit valuation allowance.

3834

Business Segment Results

~~Production and Precision Agriculture.~~ ~~The production and precision agriculture segment results were as follows in millions of dollars:~~


	Three Months Ended					Six Months Ended					Three Months Ended					Six Months Ended
	May 2		May 3		%	May 2		May 3		%
	2021		2020		Change	2021		2020		Change
Production and Precision Agriculture											May 1		May 2		%	May 1		May 2		%
(In millions of dollars)											2022		2021		Change	2022		2021		Change
Net sales	$	4,529	$	3,365	+35	$	7,599	$	5,872	+29	$	5,117	$	4,529	+13	$	8,473	$	7,599	+12
Operating profit		1,007		568	+77		1,651		786	+110		1,057		1,007	+5		1,353		1,651	-18
Operating margin		22.2%		16.9%			21.7%		13.4%			20.7%		22.2%			16.0%		21.7%
Price realization															+11					+10
Currency translation																				-1

Production and precision agriculture sales increased for the quarter due to price realization and higher shipment ~~volumes and price realization.~~volumes. Operating profit rose primarily due to price realization and higher shipment volumes / sales mix. These items were partially offset by higher production ~~costs.~~costs, higher research and development and selling, administrative, and general expenses, and impairments related to events in Russia / Ukraine.

Sales for the first six months increased mainly as a result of price realization and higher shipment ~~volumes and price realization.~~volumes. Operating profit for the first six months ~~increased~~decreased primarily resulting from higher production costs, higher research and development and selling, administrative, and general expenses, the UAW contract ratification bonus, and the impact of impairments related to events in Russia / Ukraine. Partially offsetting these factors were price realization and higher shipment volumes / sales ~~mix, and~~mix. The prior year was also impacted by a favorable indirect tax ruling in Brazil. ~~The prior period was also impacted by voluntary employee-separation program expenses. Partially offsetting these factors were higher production costs.~~

3935

~~Small Agriculture and Turf.~~ ~~The small agriculture and turf segment results were as follows in millions of dollars:~~


	Three Months Ended					Six Months Ended					Three Months Ended					Six Months Ended
	May 2		May 3		%	May 2		May 3		%
	2021		2020		Change	2021		2020		Change
Small Agriculture and Turf											May 1		May 2		%	May 1		May 2		%
(In millions of dollars)											2022		2021		Change	2022		2021		Change
Net sales	$	3,390	$	2,603	+30	$	5,904	$	4,583	+29	$	3,570	$	3,390	+5	$	6,201	$	5,904	+5
Operating profit		648		226	+187		1,117		381	+193		520		648	-20		891		1,117	-20
Operating margin		19.1%		8.7%			18.9%		8.3%			14.6%		19.1%			14.4%		18.9%
Price realization															+8					+7
Currency translation															-2					-2

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

Sales for the first six months increased mainly as a result of ~~higher shipment volumes,~~ price realization ~~and~~partially offset by the ~~favorable effects~~unfavorable impact of ~~foreign~~ currency translation. Operating profit for the first six months ~~increased~~decreased primarily resulting from higher ~~shipment volumes /~~production costs, a less favorable sales mix, ~~price realization,~~ and ~~the favorable effects of foreign currency exchange. The prior period was also impacted by voluntary employee-separation program~~higher selling, administrative, and general and research and development expenses. Partially offsetting these factors ~~were higher production costs.~~was price realization.

4036

~~Construction and Forestry.~~ ~~The construction and forestry segment results were as follows in millions of dollars:~~


	Three Months Ended					Six Months Ended					Three Months Ended					Six Months Ended
	May 2		May 3		%	May 2		May 3		%
	2021		2020		Change	2021		2020		Change
Construction and Forestry											May 1		May 2		%	May 1		May 2		%
(In millions of dollars)											2022		2021		Change	2022		2021		Change
Net sales	$	3,079	$	2,256	+36	$	5,546	$	4,299	+29	$	3,347	$	3,079	+9	$	5,891	$	5,546	+6
Operating profit		489		96	+409		756		189	+300		814		489	+66		1,085		756	+44
Operating margin		15.9%		4.3%			13.6%		4.4%			24.3%		15.9%			18.4%		13.6%
Price realization															+10					+9
Currency translation															-2					-2

Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes, ~~price realization, and~~partially offset by the ~~favorable effects~~unfavorable impact of ~~foreign~~ currency translation. Operating profit increased due to ~~higher shipment volumes / sales mix~~a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture and price realization. ~~Results for~~These items were partially offset by higher production costs, impairments related to the ~~prior period were affected by impairments~~events in ~~certain fixed assets~~Russia / Ukraine, and ~~an unconsolidated equipment company headquartered in South Africa (see Note 22).~~a less favorable product mix.

The segment’s six-month sales also increased due to ~~higher shipment volumes,~~ price realization ~~and~~partially offset by the ~~favorable effects~~unfavorable impact of ~~foreign~~ currency translation. The first six-month’s operating profit moved higher mainly due to ~~increased shipment volumes / sales mix~~price realization and ~~price realization. The prior period was also impacted~~a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture, partially offset by ~~voluntary employee-separation program expenses and impairments in certain fixed assets and an unconsolidated equipment company headquartered in South Africa (see Note 22).~~higher production costs.

4137

~~Financial Services.~~ ~~The financial services segment revenue, interest expense, operating profit, and net income was as follows in millions of dollars:~~


	Three Months Ended					Six Months Ended					Three Months Ended					Six Months Ended
	May 2		May 3		%	May 2		May 3		%
	2021		2020		Change	2021		2020		Change
Revenue (including intercompany revenue)	$	954	$	967	-1	$	1,888	$	1,965	-4
Financial Services											May 1		May 2		%	May 1		May 2		%
(In millions of dollars)											2022		2021		Change	2022		2021		Change
Revenue (including intercompany)											$	951	$	954		$	1,867	$	1,888	-1
Interest expense		181		266	-32		369		541	-32		112		181	-38		270		369	-27
Operating profit		295		75	+293		553		254	+118
Net income		222		60	+270		427		197	+117		208		222	-6		439		427	+3

~~Financial services operating profit increased for~~While the quarter and the first six months primarily due to a lower provision for credit losses, improvement on operating lease residual values, and more favorable financing spreads. Results last year also included impairments on lease residual values (see Note 22). The average balance of receivables and leases financed was 46 percent higher in the second quarter and ~~3 percent higher in~~ the first six months of ~~2021,~~2022 compared with the same periods last ~~year.~~year, revenues decreased slightly due to lower financing rates. Gains on operating lease dispositions also benefited revenue in both periods. Interest expense decreased in the second quarter and first six months of ~~2021~~2022 primarily as a result of non-designated derivative gains and lower average borrowing rates.

~~Safe Harbor Statement~~

~~Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:~~ ~~Statements under “Overview~~” and other forward-looking statements herein that relate to future events, expectations, and trends involve factors that are subject to change, and risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the Company’s businesses.

The Company’s agricultural equipment businesses are subject to a number of uncertainties including the factors that affect farmers’ confidence and financial condition. These factors include demand for agricultural products, world grain stocks, weather conditions, soil conditions, harvest yields, prices for commodities and livestock, crop and livestock production expenses, availability of transport for crops, trade restrictions and tariffs (e.g., China), global trade agreements, the level of farm product exports (including concerns about genetically modified organisms), the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production), real estate values, available acreage for farming, the land ownership policies of governments, changes in government farm programs and policies, international reaction to such programs, changes in and effects of crop insurance programs, changes in environmental regulations and their impact on farming practices, animal diseases (e.g., African swine fever) and their effects on poultry, beef and pork consumption and prices and on livestock feed demand, and crop pests and diseases and the impact of the COVID pandemic on the agricultural industry including demand for, and production and exports of, agricultural products, and commodity prices.

The production and precision agriculture business is dependent on agricultural conditions, and relies 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 or sustainability outcomes; the rate of adoption and use by customers; 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.

~~Factors affecting the outlook~~ Net income decreased for the Company’s small agriculture and turf equipment include agricultural conditions, consumer confidence, weather conditions, customer profitability, labor supply, consumer borrowing patterns, consumer purchasing preferences, housing starts and supply, infrastructure investment, spending by municipalities and golf courses, and consumable input costs.

Consumer spending patterns, real estate and housing prices, the number of housing starts, interest rates, commodity prices such as oil and gas, the levels of public and non-residential construction, and investment in infrastructure affect sales and results of the Company’s construction and forestry equipment. Pricesquarter mainly due to higher reserves for ~~pulp, paper, lumber and structural panels affect sales of forestry equipment.~~

Many of the factors affecting production and precision agriculture, small agriculture and turf, and construction and forestry segments, have been and may continue to be impacted by global economic conditions, including those resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities.

All of the Company’s businesses and its results are affected by general economic conditions in the global markets and industries in which the Company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates (including the availability of IBOR reference rates); inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the Company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics (including the COVID pandemic) and government and industry responses to epidemics such as travel restrictions and extended shut down of businesses.

~~Uncertainties~~credit losses related to the ~~magnitude and duration of the COVID pandemic may significantly adversely affect the Company’s business and outlook. These uncertainties include: the duration and impact of any resurgence~~events in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of COVID; the availability, acceptance, and effects of vaccines; prolonged reduction or closure of the Company’s operations, or a delayed recovery in our operations; additional closures as mandated or otherwise made necessaryRussia / Ukraine, partially offset by governmental authorities; disruptions in the supply chain and a prolonged delay in resumption of operations by one or more key suppliers, or the failure of any key suppliers; the Company’s ability to meet commitments to customersincome earned on a ~~timely basis as a result of~~higher average portfolio. Results for the first six months increased costs and supply challenges; the ability to receive goods on a timely basis and at anticipated costs; increased logistics costs; delays in the Company’s strategic initiatives as a result of reduced spending on research and development; additional operating costsslightly due to ~~remote working arrangements, adherence to social distancing guidelines~~income earned on higher average portfolio balances and ~~other COVID-related challenges; increased risk of cyber attacks~~an improvement on network connections used in remote working arrangements; increased privacy-related risks due to processing health-related personal information; legal claims related to personal protective equipment designed, made, or provided by the Company or alleged exposure to COVID on Company premises; absence of employees due to illness; the impact of the pandemic on the Company’s customers and dealers, and their delays in their plans to invest in new equipment; requests by the Company’s customers or dealers for payment deferrals and contract modifications; the impact of disruptions in the global capital markets and/or declines in the Company’s financial performance, outlook or credit ratings, which could impact the Company’s ability to obtain funding in the future; and the impact of the pandemic on demand for our products and services as discussed above. It remains unclear when a sustained economic recovery could occur and what a recovery may look like. All of these factors could materially and adversely affect our business, liquidity, results of operations and financial position.

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 access to funding and funding costs, which could reduce the Company’s earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the Company’s products and customer confidence and purchase decisions, borrowing and repayment practices, and the number and size of customer loan delinquencies and defaults. A debt crisis in Europe, Latin America, or elsewhere could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and Company operations and results. The Company’s investment management activities could be impaired by changes in the equity, bond and other financial markets, which would negatively affect earnings.

The withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere. The economic conditions and outlook could be further adversely affected by (i) uncertainty regarding any new or modified trade arrangements between the United Kingdom and the European Union and/or other countries, (ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union, or (iii) the risk that the euro as the single currency of the Eurozone could cease to exist. Any of these developments, or the perception that any of these developments are likely to occur, could affect economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions, and political, financial and monetary systems. Any of these developments could affect our businesses, liquidity, results of operations and financial position.

Additional factors that could materially affect the Company’s operations, access to capital, expenses and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other areas; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas

emissions, noise and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws and regulations and Company actions related thereto; changes to and compliance with privacy regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.

Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights whether through theft, infringement, counterfeiting or otherwise; the availability and prices of strategically sourced materials, components and whole goods; delays or disruptions in the Company’s supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of customers, dealers, suppliers or the Company to comply with laws, regulations and Company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection and other ethical business practices; events that damage the Company’s reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; start-up of new plants and products; the success of new product initiatives or business strategies; changes in customer product preferences and sales mix; 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 onoperating lease residual values; labor relations and contracts; changes in the ability to attract, develop, engage, and retain qualified personnel; acquisitions and divestitures of businesses; greater than anticipated transaction costs; the integration of new businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures or divestitures; the inability to deliver precision technology and agricultural solutions to customers; the implementation of the smart industrial operating strategy and other organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficultiesvalues, partially offset by higher reserves for credit losses related to the ~~conversion and implementation~~events in Russia / Ukraine. Both periods of ~~enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures and other disruptions~~the prior year also benefited from a favorable adjustment to the Company’s and suppliers’ information technology infrastructure; changes in Company declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount and mortality rates which impact retirement benefit costs; and significant changes in health care costs.

The liquidity and ongoing profitability of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order 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, including as a result of the COVID pandemic, 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 provisionsprovision for credit losses.

The Company’s forward-looking statements are based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies. Such estimates and data are often revised. The Company, except as required by law, undertakes no obligation to update or revise its forward-looking statements, whether as a result of new developments or otherwise. 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 quarterly reports on Form 10-Q).

Critical Accounting ~~Policies~~Estimates

See the Company’s critical accounting ~~policies~~estimates discussed in the Management’s Discussion and Analysis of the most ~~recent annual report~~recently filed Annual Report on Form 10-K. There have been no material changes to these ~~policies, other than as described below related to the allowance for credit losses, as a result of the adoption of ASU No. 2016-13 during the first quarter of 2021.~~

The allowance for credit losses is an estimate of the credit losses expected over the life of the Company’s receivable portfolio. The Company measures expected credit losses on a collective basis when similar risk characteristics exist. Risk characteristics considered by the Company include finance product category, market, geography, credit risk, and remaining duration. Receivables that do not share risk characteristics with other receivables in the portfolio are evaluated on an individual basis.

The Company utilizes loss forecast models, which are selected based on the size and credit risk of the underlying pool of receivables, to estimate expected credit losses. Transition matrix models are used for large and complex customer receivable pools, while weighted average remaining maturity models are used for smaller and less complex customer receivable pools. Expected credit losses on wholesale receivables are based on historical loss rates, adjusted for current economic conditions. The modeled expected credit losses are adjusted based on reasonable and supportable forecasts, which may include economic indicators such as commodity prices, industry equipment sales, unemployment rates, and housing starts. Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary. While the Company believes its allowance is sufficient to provide for losses over the life of its existing receivable portfolio, different assumptions or changes in economic conditions would result in changes to the allowance for credit losses and the provision for credit losses.estimates.

CAPITAL RESOURCES AND LIQUIDITY

The discussion of capital resources and liquidity has been organized to review separately, where appropriate, the Company’s consolidated totals, equipment operations, and financial services operations.

Consolidated

Cash outflows from consolidated operating activities in the first six months of 2022 were $1,762 million. This resulted mainly from a working capital change and a $1,000 million voluntary contribution to a U.S. OPEB plan. These were partially offset by net income adjusted for non-cash provisions. Cash outflows from investing activities were $1,888 million in the first six months of 2022. The primary driver was the cost of receivables and equipment on operating leases acquired exceeding collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases; acquisition of businesses, net of cash acquired; purchases of property and equipment; and a change in collateral on derivatives – net. Cash outflows from financing activities were $386 million in the first six months of 2022. Cash, cash equivalents, and restricted cash decreased $4,146 million during the first six months of this year.
Positive cash flows from consolidated operating activities in the first six months of 2021 were $1,786 million. This ~~cash inflow~~ resulted primarily from net income adjusted for non-cash provisions ~~an increase in accounts payable and accrued expenses,~~ and a change in net accrued income taxes payable/receivable, partially offset by ~~a seasonal increase~~changes in ~~receivables related to sales and inventories.~~working capital. Cash outflows from investing activities were $1,387 million in the first six months of 2021, primarily due to the cost of receivables and equipment on operating leases acquired exceeding collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases, ~~by $745 million,~~ purchases of property and equipment, ~~of $320 million,~~and a change in collateral on derivatives – ~~net of $255 million, and purchases of marketable securities exceeding proceeds from maturities and sales by $27 million.~~net. Negative cash flows from financing activities were $441 million in the first six months of 2021 primarily due to repurchases of common stock of $1,044 million and dividends paid of $480 million, partially offset by an increase in borrowings of $1,022 million and proceeds from issuance of common stock of $116 million (resulting from the exercise of stock options).2021. Cash, cash equivalents, and restricted cash increased $109 million during the first six months of ~~this year.~~
Positive cash flows from consolidated operating activities in the first six months of 2020 were $776 million. This cash inflow resulted primarily from net income adjusted for non-cash provisions and a change in net retirement benefits, partially offset by a seasonal increase in receivables related to sales and inventories, a decrease in accounts payable and accrued expenses, and a change in accrued income taxes payable/receivable. Cash inflows from investing activities were $30 million in the first six months of 2020, primarily due to a change in collateral on derivatives – net of $319 million, and collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases exceeding the cost of these receivables and the cost of equipment on operating leases acquired by $195 million, partially offset by purchases of property and equipment of $441 million and purchases of marketable securities exceeding proceeds from maturities and sales by $32 million. Positive cash flows from financing activities were $4,343 million in the first six months of 2020 primarily due to an increase in borrowings of $5,098 million and proceeds from issuance of common stock of $70 million (resulting from the exercise of stock options), partially offset by dividends paid of $481 million and repurchases of common stock of $263 million. Cash, cash equivalents, and restricted cash increased $5,047 million during the first six months of 2020. The increase in cash was primarily related to equipment operations long-term borrowing issuances to provide added liquidity due to the financial uncertainty created by COVID in 2020.2021.
The Company has access to most global markets at a reasonable cost and expects to have sufficient sources of global funding and liquidity to meet its funding ~~needs.~~needs in the short term and long term. Sources of liquidity for the Company include cash and cash equivalents, marketable securities, funds from operations, the issuance of commercial paper and term debt, the securitization of retail notes (both public and private markets), and committed and uncommitted bank lines of credit. The Company’s commercial paper outstanding at May 1, 2022, October 31, 2021, and May 2, 2021 ~~November 1, 2020,~~was $3,403 million, $2,230 million, and ~~May 3, 2020 was~~ $2,259 million, ~~$1,238 million, and $3,424 million, respectively, while the~~respectively. The total cash, ~~and~~ cash equivalents, and marketable securities position was ~~$7,850~~$4,560 million, ~~$7,707~~$8,745 million, and ~~$9,526~~$7,850 million, respectively. The total cash and cash equivalents and marketable securities held by foreign subsidiaries was ~~$4,972~~$2,606 million, ~~$5,010~~$5,817 million, and ~~$4,034~~$4,972 million at May 1, 2022, October 31, 2021, and May 2, 2021, ~~November 1, 2020,~~respectively. During the first quarter of 2022, the Company’s foreign subsidiaries returned $3,500 million of cash and cash equivalents to the U.S. In May ~~3, 2020, respectively.~~2022, the Company’s foreign subsidiaries returned $848 million of cash and cash equivalents to the U.S.
Lines of Credit. The Company also has access to bank lines of credit with various banks throughout the world. Worldwide lines of credit totaled ~~$8,211~~$8,568 million at May ~~2, 2021, $5,741~~1, 2022, $4,608 million of which were unused. For the

purpose of computing unused credit lines, commercial paper, and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, were primarily considered to constitute utilization.

Included in the total credit lines at May ~~2, 2021~~1, 2022 was a 364-day credit facility agreement of $3,000 million expiring in ~~fiscal April 2022.~~the second quarter of 2023. In addition, total credit lines included long-term credit facility agreements of $2,500 million expiring in ~~fiscal April 2025~~the second quarter of 2026 and $2,500 million expiring in ~~fiscal March 2026.~~the second quarter of 2027. These credit agreements require John Deere Capital Corporation (Capital Corporation) to maintain its consolidated ratio of earnings to fixed charges at not less than 1.05 to 1 for each fiscal quarter and the ratio of senior debt, excluding securitization indebtedness, to capital base (total subordinated debt and stockholder’s equity excluding accumulated other comprehensive income (loss)) at not more than 11 to 1 at the end of any fiscal quarter. The credit agreements also require the equipment operations to maintain a ratio of total debt to total capital (total debt and stockholders’ equity excluding accumulated other comprehensive income (loss)) of 65 percent or less at the end of each fiscal quarter. Under this provision, the Company’s excess equity capacity and retained earnings balance free of restriction at May ~~2, 2021~~1, 2022 was ~~$14,445~~$16,783 million. Alternatively under this provision, the equipment operations had the capacity to incur additional debt of ~~$26,826~~$31,169 million at May ~~2, 2021.~~1, 2022. All of these credit agreement requirements have been met during the periods included in the financial statements.

Debt Ratings. To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Company’s securities as an indicator of credit quality for fixed income investors. A security rating is not a recommendation by the rating agency to buy, sell, or hold Company securities. A credit rating agency may change or withdraw Company ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, and reduced access to debt capital markets. The senior long-term and short-term debt ratings and outlook currently assigned to unsecured Company debt securities by the rating agencies engaged by the Company are as follows:


	Senior
	Long-Term	Short-Term	Outlook
Fitch Ratings	A	F1	Stable
Moody’s Investors Service, Inc.	A2	Prime-1	Stable
Standard & Poor’s	A	A-1	Stable

Trade Accounts and Notes Receivable.Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Trade receivables increased ~~$1,987~~$2,050 million during the first six months of ~~2021,~~2022, primarily due to a seasonal increase and higher overall ~~demand.~~demand, partially offset by the effect of foreign currency translation. These receivables increased ~~$172~~$100 million, compared to a year ~~ago, primarily due to an increase in demand.~~ago. The ratios of ~~worldwide~~ trade accounts and notes receivable to the last 12 months’ net sales were 15 percent at May 1, 2022, compared to 11 percent at October 31, 2021 and 17 percent at May 2, ~~2021, compared to 13 percent at November 1, 2020 and 18 percent at May 3, 2020.~~2021. Production and precision agriculture trade receivables ~~increased $247~~decreased $6 million, small agriculture and turf trade receivables ~~increased $17~~decreased $83 million, and construction and forestry trade receivables ~~decreased $92~~increased $189 million, compared to a year ago. The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 1 percent at May 1, 2022, 1 percent at October 31, 2021, and 2 percent at May 2, ~~2021, 3 percent at November 1, 2020, and 3 percent at May 3, 2020.~~

Deere & Company stockholders’ equity was $15,092 million at May 2, 2021, compared with $12,937 million at November 1, 2020 and $11,864 million at May 3, 2020. The increase of $2,155 million during the first six months of 2021 resulted primarily from net income attributable to Deere & Company of $3,013 million, a change in the cumulative translation adjustment of $433 million, a change retirement benefits adjustment of $154 million, and an increase in common stock of $104 million, partially offset by dividends declared of $520 million and an increase in treasury stock of $987 million.

~~The Company plans to make a voluntary contribution to its U.S. OPEB plan for $700 million in the fourth quarter of~~ 2021.

Equipment Operations

The Company’s equipment businesses are capital intensive and are subject to seasonal variations in financing requirements for inventories and certain receivables from dealers. The equipment operations sell a significant portion of their trade receivables to financial services. ~~To the extent necessary, funds~~Funds provided from operations are supplemented by external financing ~~sources.~~sources as needed.

Cash used for operating activities of the equipment operations, including intercompany cash flows, in the first six months of 2022 was $646 million. This resulted primarily from a working capital change and a $1,000 million voluntary contribution to a U.S. OPEB plan. Partially offsetting these operating cash outflows were cash inflows from net income adjusted for non-cash provisions. Cash used for financing activities was $2,401 million in the first six months of 2022 primarily due to repurchases of common stock of $1,226 million, dividends paid of $649 million, and a decrease in borrowings of $549 million. Cash, cash equivalents, and restricted cash decreased $4,018 million in the first six months of 2022.

Cash provided by operating activities of the equipment operations, including intercompany cash flows, in the first six months of 2021 was $2,507 million. This resulted primarily from cash inflows from net income adjusted for non-cash provisions, ~~an increase in accounts payable and accrued expenses, and~~partially offset by a change in ~~accrued income taxes payable/receivable. Partially offsetting these operating cash inflows were cash outflows from an increase~~working capital. Cash used for financing activities was $2,118 million in ~~inventories~~the first six months of 2021 primarily due to repurchases of common stock of $1,044 million, a decrease

in borrowings of $676 million, and ~~trade and financing receivables held by the equipment operations.~~dividends paid of $480 million. Cash, cash equivalents, and restricted cash increased $138 million in the first six months of 2021.

Cash provided by operating activities of the equipment operations, including intercompany cash flows, in the first six months of 2020 was $842 million. This resulted primarily from cash inflows from net income adjusted for non-cash provisions and a change in net retirement benefits. Partially offsetting these operating cash inflows were cash outflows from a decrease in accounts payable and accrued expenses, a seasonal increase in inventories and trade and financing receivables held by the equipment operations, and a change in accrued income taxes payable/receivable. Cash, cash equivalents, and restricted cash increased $4,281 million in the first six months of 2020. The increase in cash was primarily related to equipment operations long-term borrowing issuances to provide added liquidity due to the financial uncertainty created by COVID in 2020.

Trade receivables held by the equipment operations increased ~~$212~~$203 million during the first six months of 2022 and ~~decreased $194~~increased $133 million from a year ago. The equipment operations sell a significant portion of their trade receivables to financial services. See the previous consolidated discussion of trade receivables.

Inventories increased by ~~$1,043~~$2,249 million during the first six months ~~primarily reflecting a seasonal increase,~~of 2022 and increased ~~overall demand, and foreign currency translation. Inventories decreased~~ by ~~$129~~$2,988 million compared to a year ago. The higher levels in both periods are due to increased overall demand and the impact of supply chain disruptions, partially offset by foreign currency translation. A majority of these inventories are valued on the last-in, first-out (LIFO) method. The ratios of inventories on a first-in, first-out (FIFO) basis (see Note 13), which approximates current cost, to the last 12 months’ cost of sales were 30 percent at May 2, 2021, compared to 28 percent at November 1, 2020 and 31 percent at May 3, 2020.

Total interest-bearing debt, excluding finance lease liabilities, of the equipment operations was $10,057 million at May 1, 2022, compared with $10,373 million at October 31, 2021 and $10,421 million at May 2, ~~2021, compared with $10,382 million at November 1, 2020 and $11,343 million at May 3, 2020.~~2021. The ratios of debt to total capital (total interest-bearing debt and Deere & Company’s stockholders’ equity) were 4135 percent, 4536 percent, and 4941 percent at May 1, 2022, October 31, 2021, and May 2, 2021, ~~November 1, 2020, and May 3, 2020,~~ respectively.

In the second quarter of 2020, the equipment operations issued three tranches of notes in the U.S. with aggregate principal totaling $2,250 million that are due from 2025 to 2050. The equipment operations also issued Euro-Medium-Term notes with aggregate principal totaling €2,000 million (approximately $2,170 million based on the exchange rate at the issue date) that are due from 2024 to 2032. In the second quarter of 2020, the equipment operations issued commercial paper in the U.S. with aggregate principal totaling $466 million, of which $448 million had an original term greater than 90 days. None of the commercial paper was repaid in the second quarter of 2020 and was presented in “Increase in total short-term borrowings” in the consolidated statement of cash flows.

Property and equipment cash expenditures for the equipment operations in the first six months of ~~2021~~2022 were ~~$319~~$345 million, compared with ~~$440~~$319 million in the same period last year. Capital expenditures for the equipment operations in ~~2021~~2022 are estimated to be approximately ~~$925~~$1,175 million.

Financial Services

The financial services operations rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios. Their primary sources of funds for this purpose are a combination of commercial paper, term debt, securitization of retail notes, equity capital, and borrowings from Deere & Company.

During the first six months of 2022 and 2021, the cash provided by operating and financing activities was used ~~primarily to increase receivables and leases. Cash flows provided by operating activities, including intercompany cash flows, were $948 million in the first six months. Cash used~~ for investing ~~activities totaled $2,544~~activities. Cash, cash equivalents, and restricted cash decreased $128 million in the first six months of ~~2021 primarily due an increase in trade~~2022 and wholesale receivables of $1,246 million, the cost of receivables (excluding trade and wholesale) and cost of equipment on operating leases acquired exceeding the collection of these receivables and proceeds from sales of equipment on operating leases by $1,007 million, a change in collateral on derivatives - net of $254 million, and purchases of marketable securities exceeding proceeds from maturities and sales by $29 million. Cash provided by financing activities totaled $1,540 million, resulting primarily from an increase in external borrowings of $1,136 million and an increase in borrowings from Deere & Company of $562 million, partially offset by dividends paid to Deere & Company of $145 million. Cash, cash equivalents, and restricted cash decreased $29 million in the first six months of 2021.

During the first six months of 2020, the cash provided by operating activities and financing activities was used primarily to increase trade and wholesale receivables. Cash flows provided by operating activities, including intercompany cash flows, were $991 million in the first six months of 2020. Cash used for investing activities totaled $329 million in the first six months of 2020 primarily due to an increase in trade and wholesale receivables of $673 million and purchases of marketable securities exceeding proceeds from maturities and sales by $32 million. These cash outflows were partially offset by cash inflows from a change in collateral on derivatives - net of $319 million, and collections of receivables (excluding trade and wholesale) and proceeds from sales of equipment

on operating leases exceeding the cost of these receivables and the cost of equipment on operating leases acquired by $94 million. Cash provided by financing activities totaled $148 million, resulting primarily from an increase in borrowings from Deere & Company of $292 million and an increase in external borrowings of $94 million, partially offset by dividends paid to Deere & Company of $225 million. Cash, cash equivalents, and restricted cash increased $766 million in the first six months of 2020.

Receivables and leases held by the financial services operations consist of retail notes originated in connection with ~~retail sales~~financing of new and used equipment, ~~by dealers of John Deere products, retail notes from non-Deere equipment customers,~~operating leases, trade receivables, ~~wholesale notes,~~ revolving charge accounts, ~~credit enhanced international export financing generally involving John Deere products,~~ sales-type and direct financing leases, and ~~operating leases. Total~~wholesale notes. Trade and financing receivables and equipment on operating leases increased ~~$2,460~~$1,389 million during the first six months of ~~2021~~2022 and increased ~~$3,236~~$2,330 million in the past 12 ~~months. Acquisition~~months primarily due to higher sales. Total acquisition volumes of receivables (excluding trade and wholesale) and leases were 181 percent higher in the first six months of ~~2021,~~2022, compared with the same period last year, as volumes of ~~retail notes, financing leases, and~~ revolving charge accounts were higher, while volumes of retail notes, financing leases, and operating leases were lower. The amount of total trade receivables and wholesale notes increased compared to ~~November 1, 2020~~October 31, 2021 and decreased compared to May ~~3, 2020.~~2, 2021.

Total external interest-bearing debt of the financial services operations was $38,751 million at May 1, 2022, compared with $37,978 million at October 31, 2021 and $36,873 million at May 2, ~~2021, compared with $35,556 million at November 1, 2020 and $38,761 million at May 3, 2020.~~2021. Total external borrowings have changed generally corresponding with the level of receivable and lease portfolio, the level of cash and cash equivalents, the change in payables owed to Deere & Company, and the change in investment from Deere & Company. The financial services operations’ ratio of interest-bearing debt, including intercompany debt, to stockholder’s equity was 7.8 to 1 at May 1, 2022, compared with 7.8 to 1 at October 31, 2021 and 7.7 to 1 at May 2, ~~2021, compared with 7.8~~2021. The long-term portion of payables due to ~~1 at November 1, 2020 and 8.3 to 1~~Deere & Company was $716 million at May ~~3, 2020.~~1, 2022 and $584 million at October 31, 2021.

Capital Corporation has a revolving ~~credit agreement~~warehouse facility to utilize bank conduit facilities to securitize retail notes (see Note ~~12)~~9). ~~At May 2,~~The facility was renewed in November 2021 ~~this facility had~~with an expiration in November 2022 and a reduction of the total capacity or “financing ~~limit,” of up to~~limit” from $2,000 million to $1,000 million. As a result of ~~secured financings at any time. After a two-year~~the reduced capacity, Capital Corporation repurchased $511 million of outstanding short-term securitization borrowings in November 2021, in addition to the normal payments collected on the retail notes. At May 1, 2022, $760 million of securitization borrowings was outstanding under the facility. At the end of the contractual revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected. ~~At May 2, 2021, $1,261 million of short-term securitization borrowings was outstanding under the agreement.~~

In the first six months of ~~2021,~~2022, the financial services operations issued ~~$1,009~~$1,224 million and retired ~~$1,573~~$1,818 million of retail note securitization ~~borrowings.~~borrowings, which are presented in Increase in total short-term borrowings on the statements of consolidated cash flows. In addition, during the first six months of ~~2021,~~2022, the financial services operations issued ~~$3,967~~$4,243 million and retired ~~$3,127~~$3,317 million of long-term borrowings, which were primarily medium-

term notes. In April 2022, the Company’s financial services operations issued $600 million of sustainability-linked medium-term ~~notes.~~notes with an initial interest rate of 3.35 percent, which are due in 2029. This transaction supports the Company’s commitment to environmental sustainability by linking financing to the achievement of its ambitious and comprehensive environmental, social, and governance (ESG) targets. Failure to meet the stated sustainability performance target will result in a 25-basis point increase to the interest rate payable on the 2029 notes from and including April 2026.

~~Dividends and Other Events~~Subsequent Event

~~The~~On May 25, 2022, the Company’s Board of Directors ~~at its meeting on May 26, 2021~~ declared a quarterly dividend of ~~$.90~~$1.13 per share payable August ~~9, 2021,~~8, 2022 to stockholders of record on June 30, ~~2021.~~2022. The new quarterly rate represents an additional 8 cents per share over the previous level, an increase of approximately 8 percent.

Forward-Looking Statements

~~In May 2021,~~Certain statements contained herein, including in the section entitled “Overview” 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, generally, 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. Except as required by law, the Company undertakes no 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 ~~services operations entered into a retail note securitization using its bank conduit facility that resulted~~results, is included in ~~securitization borrowings~~the Company’s other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. “Risk Factors” of ~~$723 million.~~the Company’s most recent Annual Report on Form 10-K and the Company’s 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 economic conditions in the global markets and industries in which the Company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; changing interest rates; inflation and deflation rates; changes in weather and climate patterns; the political and social stability of the global markets in which the Company operates; the effects of, or response to, terrorism and security threats; 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).

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 access to funding and funding costs, which could reduce the Company’s earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the Company’s products and purchase decisions, financing and repayment practices, and the number and size of customer delinquencies and defaults. 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, access to capital, expenses, and results include changes in, uncertainty surrounding, and the impact of governmental trade, banking, monetary, and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs, governmental programs, policies, and tariffs for the benefit of certain industries or sectors; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; actions by central banks; actions by financial and securities regulators; 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 or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws, and regulations and Company actions related thereto; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions, or countersanctions, and export controls laws and regulations; and compliance with 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; production, design, and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights, whether through theft, infringement, counterfeiting, or otherwise; the availability and prices of strategically sourced materials, components, and whole goods; delays or disruptions in the Company’s supply chain, including work stoppages or disputes by suppliers with their unionized labor; the failure of customers, dealers, suppliers, or the Company to comply with laws, regulations, and Company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection, and other ethical business practices; 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; start-up of new plants and products; the success of new product initiatives or business strategies; changes in customer product preferences and sales mix; 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; labor relations and contracts, including work stoppages and other disruptions; changes in the ability to attract, develop, engage, and retain qualified personnel; acquisitions and divestitures of businesses; greater-than-anticipated transaction costs; the integration of acquired businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures, or divestitures; the inability to deliver precision technology and agricultural solutions to customers; and the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts.

COVID-19

Uncertainties related to the continued effects of the COVID-19 pandemic have adversely affected and may continue to affect the Company’s business and outlook. These uncertainties include, among other things: the duration and impact of any resurgence in COVID-19; disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and continued disruptions in the operations of one or more key suppliers, or the failure of any key suppliers; and an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by the COVID-19 pandemic. The sustainability of the economic recovery from the pandemic remains unclear and significant volatility could continue for a prolonged period.

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; crop and livestock production expenses; availability of fertilizer; availability of transport for crops; trade restrictions and tariffs; global trade agreements; the level of farm product exports; 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; international reaction to such programs; 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; the rate of adoption and use by customers; 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; labor supply; consumer borrowing patterns; 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 consumer spending patterns; real estate and housing prices; the number of housing starts; interest rates; 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 in order 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.

Supplemental Consolidating Information

The supplemental consolidating data presented on the subsequent pages is presented for informational purposes. The equipment operations ~~represents~~represent the enterprise without financial services. The equipment operations ~~includes~~include the Company’s production and precision agriculture operations, small agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within financial services. Transactions between the ~~“equipment operations”~~equipment operations and ~~“financial services”~~financial services have been eliminated to arrive at the consolidated financial statements.

The equipment operations and financial services participate in different industries. The equipment operations primarily generate earnings and cash flows by manufacturing and ~~distributing~~selling equipment, service parts, and technology solutions to dealers and ~~end users.~~retail customers. Financial services primarily finances sales and leases by dealers of new and used equipment that is largely manufactured by the Company. ~~The financial services’~~Those earnings and cash flows generally are the difference between the finance income received from customer payments less interest expense, and depreciation on equipment subject to an operating lease. These two businesses are capitalized differently and have separate performance metrics. The supplemental consolidating data ~~assists~~is also used by management ~~in evaluating~~due to these ~~two businesses.~~

differences.

4843

DEERE & COMPANY
DEERE & COMPANY

DEERE & COMPANY

SUPPLEMENTAL CONSOLIDATING DATA
SUPPLEMENTAL CONSOLIDATING DATA

SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended May 2, 2021 and May 3, 2020

STATEMENTS OF INCOME
STATEMENTS OF INCOME

For the Three Months Ended May 1, 2022 and May 2, 2021
For the Three Months Ended May 1, 2022 and May 2, 2021

(In millions of dollars) Unaudited
(In millions of dollars) Unaudited

(In millions of dollars) Unaudited

EQUIPMENT

FINANCIAL

EQUIPMENT

FINANCIAL

OPERATIONS¹

SERVICES

ELIMINATIONS

CONSOLIDATED

OPERATIONS

SERVICES

ELIMINATIONS

CONSOLIDATED

2021

2020

2021

2020

2021

2020

2021

2020

2022

2021

2022

2021

2022

2021

2022

2021

Net Sales and Revenues





























Net sales

$
10,998

$
8,224

$
10,998

$
8,224

$
12,034

$
10,998

$
12,034

$
10,998

Finance and interest income

29

23

$
853

$
906

$
(73)

$
(80)

809

849
²

36

29

$
847

$
853

$
(87)

$
(73)

796

809
¹

Other income

228

181

101

61

(78)

(62)

251

180
³

584

228

104

101

(148)

(78)

540

251
²

Total

11,255

8,428

954

967

(151)

(142)

12,058

9,253

12,654

11,255

951

954

(235)

(151)

13,370

12,058

Costs and Expenses

Cost of sales

7,929

6,294

(1)

7,928

6,294
⁴

8,919

7,929

(1)

(1)

8,918

7,928
³

Research and development expenses

377

406

377

406

453

377

453

377

Selling, administrative and general expenses

734

700

107

208

(3)

(2)

838

906
⁴

753

734

181

107

(2)

(3)

932

838
³

Interest expense

100

83

181

266

(13)

(7)

268

342
⁵

97

100

112

181

(22)

(13)

187

268
⁴

Interest compensation to Financial Services

60

73

(60)

(73)

⁵

62

60

(62)

(60)

⁴

Other operating expenses

40

21

369

416

(74)

(60)

335

377
⁶

99

40

377

369

(148)

(74)

328

335
⁵

Total

9,240

7,577

657

890

(151)

(142)

9,746

8,325

10,383

9,240

670

657

(235)

(151)

10,818

9,746

Income before Income Taxes

2,015

851

297

77

2,312

928

2,271

2,015

281

297

2,552

2,312

Provision for income taxes

454

228

76

17

530

245

387

454

74

76

461

530

Income after Income Taxes

1,561

623

221

60

1,782

683

1,884

1,561

207

221

2,091

1,782

Equity in income (loss) of unconsolidated affiliates

7

(17)

1

8

(17)

Equity in income of unconsolidated affiliates

5

7

1

1

6

8

Net Income

1,568

606

222

60

1,790

666

1,889

1,568

208

222

2,097

1,790

Less: Net income attributable to noncontrolling interests

Less: Net loss attributable to noncontrolling interests

(1)

(1)

Net Income Attributable to Deere & Company

$
1,568

$
606

$
222

$
60

$
1,790

$
666

$
1,890

$
1,568

$
208

$
222

$
2,098

$
1,790

¹ The equipment operations represents the enterprise without financial services. The equipment operations includes the Company’s production and precision agriculture operations, small agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within financial services.
² Elimination of financial services’ interest income earned from equipment operations.
³² Elimination of equipment operations’ margin from inventory transferred to equipment on operating ~~leases (see Note 2).~~leases.
⁴³ Elimination of intercompany service fees.
⁵⁴ Elimination of equipment operations’ interest expense to financial services.
⁶⁵ Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.

4944


DEERE & COMPANY	DEERE & COMPANY																		DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)	SUPPLEMENTAL CONSOLIDATING DATA (Continued)																		SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF INCOME
For the Six Months Ended May 2, 2021 and May 3, 2020
STATEMENTS OF INCOME																			STATEMENTS OF INCOME
For the Six Months Ended May 1, 2022 and May 2, 2021																			For the Six Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars) Unaudited	(In millions of dollars) Unaudited																		(In millions of dollars) Unaudited
		EQUIPMENT				FINANCIAL														EQUIPMENT				FINANCIAL
		OPERATIONS¹				SERVICES				ELIMINATIONS				CONSOLIDATED						OPERATIONS				SERVICES				ELIMINATIONS				CONSOLIDATED
		2021		2020		2021		2020		2021		2020		2021		2020				2022		2021		2022		2021		2022		2021		2022		2021
Net Sales and Revenues
Net sales		$	19,049	$	14,754									$	19,049	$	14,754			$	20,565	$	19,049									$	20,565	$	19,049
Finance and interest income			62		49	$	1,716	$	1,841	$	(134)	$	(145)		1,644		1,745	²			70		62	$	1,675	$	1,716	$	(150)	$	(134)		1,595		1,644	¹
Other income			447		391		172		124		(142)		(130)		477		385	³			801		447		192		172		(214)		(142)		779		477	²
Total			19,558		15,194		1,888		1,965		(276)		(275)		21,170		16,884				21,436		19,558		1,867		1,888		(364)		(276)		22,939		21,170

Costs and Expenses
Cost of sales			13,735		11,372						(1)		(1)		13,734		11,371	⁴			15,614		13,735						(1)		(1)		15,613		13,734	³
Research and development expenses			743		831										743		831				855		743										855		743
Selling, administrative and general expenses			1,387		1,373		224		346		(4)		(4)		1,607		1,715	⁴			1,410		1,387		307		224		(4)		(4)		1,713		1,607	³
Interest expense			195		146		369		541		(26)		(9)		538		678	⁵			188		195		270		369		(41)		(26)		417		538	⁴
Interest compensation to Financial Services			108		137						(108)		(137)					⁵			106		108						(106)		(108)					⁴
Other operating expenses			107		92		738		824		(137)		(124)		708		792	⁶			138		107		712		738		(212)		(137)		638		708	⁵
Total			16,275		13,951		1,331		1,711		(276)		(275)		17,330		15,387				18,311		16,275		1,289		1,331		(364)		(276)		19,236		17,330

Income before Income Taxes			3,283		1,243		557		254						3,840		1,497				3,125		3,283		578		557						3,703		3,840
Provision for income taxes			706		237		132		58						838		295				568		706		142		132						710		838

Income after Income Taxes			2,577		1,006		425		196						3,002		1,202				2,557		2,577		436		425						2,993		3,002
Equity in income (loss) of unconsolidated affiliates			10		(19)		2		1						12		(18)
Equity in income of unconsolidated affiliates																					5		10		3		2						8		12

Net Income			2,587		987		427		197						3,014		1,184				2,562		2,587		439		427						3,001		3,014
Less: Net income attributable to noncontrolling interests			1		2										1		2						1												1
Net Income Attributable to Deere & Company		$	2,586	$	985	$	427	$	197					$	3,013	$	1,182			$	2,562	$	2,586	$	439	$	427					$	3,001	$	3,013

¹ The equipment operations represents the enterprise without financial services. The equipment operations includes the Company’s production and precision agriculture operations, small agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within financial services.

² Elimination of financial services’ interest income earned from equipment operations.

³² Elimination of equipment operations’ margin from inventory transferred to equipment on operating ~~leases (see Note 2).~~leases.

⁴³ Elimination of intercompany service fees.

⁵⁴ Elimination of equipment operations’ interest expense to financial services.

⁶⁵ Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.

5045


DEERE & COMPANY	DEERE & COMPANY																										DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)	SUPPLEMENTAL CONSOLIDATING DATA (Continued)																										SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEET
CONDENSED BALANCE SHEETS																											CONDENSED BALANCE SHEETS
(In millions of dollars) Unaudited	(In millions of dollars) Unaudited																										(In millions of dollars) Unaudited
		EQUIPMENT						FINANCIAL																				EQUIPMENT						FINANCIAL
		OPERATIONS¹						SERVICES						ELIMINATIONS						CONSOLIDATED								OPERATIONS						SERVICES						ELIMINATIONS							CONSOLIDATED
		May 2		Nov 1		May 3		May 2		Nov 1		May 3		May 2		Nov 1		May 3		May 2		Nov 1		May 3				May 1		Oct 31		May 2		May 1		Oct 31		May 2		May 1		Oct 31		May 2			May 1		Oct 31		May 2
		2021		2020		2020		2021		2020		2020		2021		2020		2020		2021		2020		2020				2022		2021		2021		2022		2021		2021		2022		2021		2021			2022		2021		2021
Assets
Cash and cash equivalents		$	6,282	$	6,145	$	7,466	$	900	$	921	$	1,434							$	7,182	$	7,066	$	8,900			$	3,167	$	7,188	$	6,282	$	711	$	829	$	900								$	3,878	$	8,017	$	7,182
Marketable securities			5		7		3		663		634		623								668		641		626				2		3		5		680		725		663									682		728		668
Receivables from unconsolidated affiliates			5,986		5,290		2,248							$	(5,955)	$	(5,259)	$	(2,216)		31		31		32	⁷
Receivables from Financial Services																													5,669		5,564		5,955							$	(5,669)	$	(5,564)	$	(5,955)								⁶
Trade accounts and notes receivable – net			1,225		1,013		1,419		6,222		4,238		6,050		(1,289)		(1,080)		(1,483)		6,158		4,171		5,986	⁸			1,358		1,155		1,225		6,079		3,895		6,222		(1,179)		(842)		(1,289)			6,258		4,208		6,158	⁷
Financing receivables – net			99		106		118		30,895		29,644		27,138								30,994		29,750		27,256				49		73		99		34,036		33,726		30,895									34,085		33,799		30,994
Financing receivables securitized – net			15		26		37		4,092		4,677		4,648								4,107		4,703		4,685				6		10		15		4,067		4,649		4,092									4,073		4,659		4,107
Other receivables			1,338		1,117		1,072		162		151		148		(27)		(48)		(8)		1,473		1,220		1,212	⁸			1,944		1,629		1,369		405		159		162		(43)		(23)		(27)			2,306		1,765		1,504	⁷
Equipment on operating leases – net									7,108		7,298		7,245								7,108		7,298		7,245										6,465		6,988		7,108									6,465		6,988		7,108
Inventories			6,042		4,999		6,171														6,042		4,999		6,171				9,030		6,781		6,042															9,030		6,781		6,042
Property and equipment – net			5,667		5,778		5,642		37		39		43								5,704		5,817		5,685				5,678		5,783		5,667		37		37		37									5,715		5,820		5,704
Investments in unconsolidated affiliates			161		174		175		21		19		17								182		193		192
Goodwill			3,190		3,081		2,917														3,190		3,081		2,917				3,812		3,291		3,190															3,812		3,291		3,190
Other intangible assets – net			1,310		1,327		1,311														1,310		1,327		1,311				1,352		1,275		1,310															1,352		1,275		1,310
Retirement benefits			947		859		908		61		59		58		(57)		(55)		(6)		951		863		960	⁹			2,996		3,539		947		65		64		61		(2)		(2)		(57)			3,059		3,601		951	⁸
Deferred income taxes			1,926		1,763		1,796		53		45		52		(255)		(309)		(413)		1,724		1,499		1,435	¹⁰			1,247		1,215		1,926		49		53		53		(192)		(231)		(255)			1,104		1,037		1,724	⁹
Other assets			1,522		1,439		1,506		635		994		1,208		(2)		(1)		(1)		2,155		2,432		2,713				1,767		1,646		1,683		516		499		656		(3)				(2)			2,280		2,145		2,337
Total Assets		$	35,715	$	33,124	$	32,789	$	50,849	$	48,719	$	48,664	$	(7,585)	$	(6,752)	$	(4,127)	$	78,979	$	75,091	$	77,326			$	38,077	$	39,152	$	35,715	$	53,110	$	51,624	$	50,849	$	(7,088)	$	(6,662)	$	(7,585)		$	84,099	$	84,114	$	78,979
																																														��
Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings		$	352	$	292	$	1,398	$	9,559	$	8,290	$	9,781							$	9,911	$	8,582	$	11,179			$	1,554	$	1,509	$	352	$	10,859	$	9,410	$	9,559								$	12,413	$	10,919	$	9,911
Short-term securitization borrowings			14		26		37		4,092		4,656		4,603								4,106		4,682		4,640				5		10		14		4,001		4,595		4,092									4,006		4,605		4,106
Payables to unconsolidated affiliates			155		104		91		5,955		5,260		2,216	$	(5,955)	$	(5,259)	$	(2,216)		155		105		91	⁷
Payables to Equipment Operations																																			5,669		5,564		5,955	$	(5,669)	$	(5,564)	$	(5,955)								⁶
Accounts payable and accrued expenses			9,919		9,114		8,416		1,926		2,127		2,149		(1,318)		(1,129)		(1,493)		10,527		10,112		9,072	⁸			11,370		11,198		10,074		2,534		2,015		1,926		(1,225)		(865)		(1,318)			12,679		12,348		10,682	⁷
Deferred income taxes			390		385		395		398		443		493		(255)		(309)		(413)		533		519		475	¹⁰			454		438		390		322		369		398		(192)		(231)		(255)			584		576		533	⁹
Long-term borrowings			10,124		10,124		9,947		23,222		22,610		24,377								33,346		32,734		34,324				8,556		8,915		10,124		23,891		23,973		23,222									32,447		32,888		33,346
Retirement benefits and other liabilities			5,253		5,366		5,584		109		102		101		(57)		(55)		(5)		5,305		5,413		5,680	⁹			2,855		4,239		5,253		111		107		109		(2)		(2)		(57)			2,964		4,344		5,305	⁸
Total liabilities			26,207		25,411		25,868		45,261		43,488		43,720		(7,585)		(6,752)		(4,127)		63,883		62,147		65,461				24,794		26,309		26,207		47,387		46,033		45,261		(7,088)		(6,662)		(7,585)			65,093		65,680		63,883

Commitments and contingencies (Note 18)
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest (Note 19)																													99																			99

Stockholders’ Equity
Total Deere & Company stockholders’ equity			15,092		12,937		11,864		5,588		5,231		4,944		(5,588)		(5,231)		(4,944)		15,092		12,937		11,864	¹¹			18,904		18,431		15,092		5,723		5,591		5,588		(5,723)		(5,591)		(5,588)			18,904		18,431		15,092	¹⁰
Noncontrolling interests			4		7		1														4		7		1				3		3		4															3		3		4
Financial Services’ equity			(5,588)		(5,231)		(4,944)								5,588		5,231		4,944							¹¹			(5,723)		(5,591)		(5,588)								5,723		5,591		5,588								¹⁰
Adjusted total stockholders’ equity			9,508		7,713		6,921		5,588		5,231		4,944								15,096		12,944		11,865				13,184		12,843		9,508		5,723		5,591		5,588									18,907		18,434		15,096
Total Liabilities and Stockholders’ Equity		$	35,715	$	33,124	$	32,789	$	50,849	$	48,719	$	48,664	$	(7,585)	$	(6,752)	$	(4,127)	$	78,979	$	75,091	$	77,326			$	38,077	$	39,152	$	35,715	$	53,110	$	51,624	$	50,849	$	(7,088)	$	(6,662)	$	(7,585)		$	84,099	$	84,114	$	78,979

⁷⁶ Elimination of receivables / payables between equipment operations and financial services.

⁸⁷ ~~Reclassification~~Primarily reclassification of sales incentive accruals on receivables sold to financial services.

⁹⁸ Reclassification of net pension assets / liabilities.

¹⁰⁹ Reclassification of deferred tax assets / liabilities in the same taxing jurisdictions.

¹¹¹⁰ Elimination of financial services’ equity.

5146


DEERE & COMPANY	DEERE & COMPANY																		DEERE & COMPANY
SUPPLEMENTAL CONSOLIDATING DATA (Continued)	SUPPLEMENTAL CONSOLIDATING DATA (Continued)																		SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF CASH FLOWS
For the Six Months Ended May 2, 2021 and May 3, 2020
STATEMENTS OF CASH FLOWS																			STATEMENTS OF CASH FLOWS
For the Six Months Ended May 1, 2022 and May 2, 2021																			For the Six Months Ended May 1, 2022 and May 2, 2021
(In millions of dollars) Unaudited
		EQUIPMENT				FINANCIAL														EQUIPMENT					FINANCIAL
		OPERATIONS¹				SERVICES				ELIMINATIONS				CONSOLIDATED						OPERATIONS					SERVICES				ELIMINATIONS				CONSOLIDATED
		2021		2020		2021		2020		2021		2020		2021		2020				2022			2021		2022		2021		2022		2021		2022		2021
Cash Flows from Operating Activities
Net income		$	2,587	$	987	$	427	$	197					$	3,014	$	1,184			$	2,562		$	2,587	$	439	$	427					$	3,001	$	3,014
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision (credit) for credit losses			2		9		(26)		98						(24)		107				1			2		44		(26)						45		(24)
Provision for depreciation and amortization			543		515		581		621	$	(70)	$	(69)		1,054		1,067	¹²			518			543		530		581	$	(115)	$	(70)		933		1,054	¹¹
Impairment charges			50		82				32						50		114				77			50										77		50
Share-based compensation expense											45		48		45		48	¹³												44		45		44		45	¹²
Gain on remeasurement of previously held equity investment																					(326)													(326)
Undistributed earnings of unconsolidated affiliates			158		218		(2)		(1)		(145)		(225)		11		(8)	¹⁴			233			158		(3)		(2)		(232)		(145)		(2)		11	¹³
Provision (credit) for deferred income taxes			(170)		9		(43)		(70)						(213)		(61)				75			(170)		(38)		(43)						37		(213)
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales			(170)		(80)						(954)		(411)		(1,124)		(491)	^{15, 17, 18}			(215)			(170)						(1,320)		(954)		(1,535)		(1,124)	^{14, 16, 17}
Inventories			(926)		(242)						(267)		(254)		(1,193)		(496)	¹⁶			(2,201)			(926)						(64)		(267)		(2,265)		(1,193)	¹⁵
Accounts payable and accrued expenses			527		(659)		(1)		30		(208)		(78)		318		(707)	¹⁷			(99)			527		(7)		(1)		(337)		(208)		(443)		318	¹⁶
Accrued income taxes payable/receivable			77		(154)		(23)		(19)						54		(173)				(144)			77		5		(23)						(139)		54
Retirement benefits			(8)		50		3		8						(5)		58				(1,024)			(8)		4		3						(1,020)		(5)
Other			(163)		107		32		95		(70)		(68)		(201)		134	^{12, 13, 16}			(103)			(163)		(114)		32		48		(70)		(169)		(201)	^{11, 12, 15}
Net cash provided by operating activities			2,507		842		948		991		(1,669)		(1,057)		1,786		776
Net cash provided by (used for) operating activities																					(646)			2,507		860		948		(1,976)		(1,669)		(1,762)		1,786

Cash Flows from Investing Activities																						��
Collections of receivables (excluding receivables related to sales)							11,187		10,385		(820)		(761)		10,367		9,624	¹⁵								12,004		11,187		(814)		(820)		11,190		10,367	¹⁴
Proceeds from maturities and sales of marketable securities			2				45		39						47		39
Proceeds from sales of equipment on operating leases							1,011		898						1,011		898									1,035		1,011						1,035		1,011
Cost of receivables acquired (excluding receivables related to sales)							(12,080)		(9,885)		721		518		(11,359)		(9,367)	¹⁵								(12,260)		(12,080)		289		721		(11,971)		(11,359)	¹⁴
Acquisitions of businesses, net of cash acquired			(19)												(19)						(473)			(19)										(473)		(19)
Purchases of marketable securities							(74)		(71)						(74)		(71)
Purchases of property and equipment			(319)		(440)		(1)		(1)						(320)		(441)				(345)			(319)		(1)		(1)						(346)		(320)
Cost of equipment on operating leases acquired							(1,125)		(1,304)		361		344		(764)		(960)	¹⁶								(1,090)		(1,125)		86		361		(1,004)		(764)	¹⁵
Increase in trade and wholesale receivables							(1,246)		(673)		1,246		673					¹⁵								(2,159)		(1,246)		2,159		1,246					¹⁴
Collateral on derivatives – net			(1)				(254)		319						(255)		319				6			(1)		(254)		(254)						(248)		(255)
Other			(38)		(40)		(7)		(36)		24		65		(21)		(11)	^{14, 18}			(46)			(36)		(49)		(36)		24		24		(71)		(48)	^{13, 17}
Net cash provided by (used for) investing activities			(375)		(480)		(2,544)		(329)		1,532		839		(1,387)		30
Net cash used for investing activities																					(858)			(375)		(2,774)		(2,544)		1,744		1,532		(1,888)		(1,387)

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings			(84)		554		296		584						212		1,138				128			(84)		684		296						812		212
Change in intercompany receivables/payables			(562)		(292)		562		292												(424)			(562)		424		562
Proceeds from long-term borrowings					4,602		3,967		2,673						3,967		7,275				55					4,243		3,967						4,298		3,967
Payments of long-term borrowings			(30)		(152)		(3,127)		(3,163)						(3,157)		(3,315)				(308)			(30)		(3,317)		(3,127)						(3,625)		(3,157)
Proceeds from issuance of common stock			116		70										116		70				50			116										50		116
Repurchases of common stock			(1,044)		(263)										(1,044)		(263)				(1,226)			(1,044)										(1,226)		(1,044)
Dividends paid			(480)		(481)		(145)		(225)		145		225		(480)		(481)	¹⁴			(649)			(480)		(232)		(145)		232		145		(649)		(480)	¹³
Other			(34)		(61)		(13)		(13)		(8)		(7)		(55)		(81)	¹⁴			(27)			(34)		(19)		(13)				(8)		(46)		(55)	¹³
Net cash provided by (used for) financing activities			(2,118)		3,977		1,540		148		137		218		(441)		4,343				(2,401)			(2,118)		1,783		1,540		232		137		(386)		(441)

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash			124		(58)		27		(44)						151		(102)				(113)			124		3		27						(110)		151

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash			138		4,281		(29)		766						109		5,047				(4,018)			138		(128)		(29)						(4,146)		109
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			6,156		3,196		1,016		760						7,172		3,956				7,200			6,156		925		1,016						8,125		7,172
Cash, Cash Equivalents, and Restricted Cash at End of Period		$	6,294	$	7,477	$	987	$	1,526					$	7,281	$	9,003			$	3,182		$	6,294	$	797	$	987					$	3,979	$	7,281

Components of cash, cash equivalents, and restricted cash
Cash and cash equivalents																				$	3,167		$	6,282	$	711	$	900					$	3,878	$	7,182
Restricted cash (Other assets)																					15			12		86		87						101		99
Total cash, cash equivalents, and restricted cash																				$	3,182		$	6,294	$	797	$	987					$	3,979	$	7,281

¹²¹¹ Elimination of depreciation on leases related to inventory transferred to equipment on operating ~~leases (see Note 2).~~leases.

¹³¹² Reclassification of share-based compensation expense.

¹⁴¹³ Elimination of dividends from financial services to the equipment operations, which are included in the equipment operations’ ~~net cash provided by~~ operating activities, and capital investments in financial services from the equipment operations.

¹⁵¹⁴ Primarily reclassification of receivables related to the sale of equipment.

¹⁶¹⁵ Reclassification of direct lease agreements with ~~direct~~retail customers.

¹⁷¹⁶ Reclassification of sales incentive accruals on receivables sold to financial services.

¹⁸¹⁷ 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.

5247

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Company’s most ~~recent annual report~~recently filed Annual Report on Form 10-K (Part II, Item 7A). There has been no material change in this information.

Item 4. CONTROLS AND PROCEDURES
The Company’s principal executive officer and its principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) were effective as of May ~~2, 2021,~~1, 2022, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act. During the second quarter of 2022, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, and trademark matters. Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that John Deere reasonably believes could exceed $300,000. The following matter is disclosed solely pursuant to that requirement: on October 3, 2018, the Provincia Santa Fe Ministerio de Medio Ambiente of Argentina issued a Notice of Violation to Industrias John Deere Argentina in connection with alleged groundwater contamination at the site; the Company worked with the appropriate authorities to implement corrective actions to remediate the site. On December 16, 2019, the Provincia Santa Fe Ministerio de Medio Ambiente issued a Notice of Fine. The current amount of the fine is approximately $357,000. The Company has filed an appeal, which is still pending. On March 26, 2021, the Company received a notice from the Provincia Santa Fe Ministerio de Medio Ambiente requesting payment of the fine. The Company is evaluating its response. The Company believes the reasonably possible range of losses for ~~this and other~~these unresolved legal actions would not have a material effect on its consolidated financial statements.

Item 1A. Risk Factors
See the Company’s most ~~recent annual report~~recently filed Annual Report on Form 10-K (Part I, Item 1A). There has been no material change in this information. The risks described in the ~~annual report~~Annual Report on Form 10-K, and the ~~“Safe Harbor Statement”~~“Forward-Looking Statements” in this report, are not the only risks faced by the Company. Additional risks and uncertainties may also materially affect the Company’s business, financial condition, or operating results. One should not consider the risk factors to be a complete discussion of risks, uncertainties, and assumptions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company’s purchases of its common stock during the second quarter of ~~2021~~2022 were as follows:






Total Number of







Total Number of


Shares Purchased as

Maximum Number of

Shares Purchased as

Maximum Number of

Total Number of

Part of Publicly

Shares that May Yet Be

Total Number of

Part of Publicly

Shares that May Yet Be

Shares

Announced Plans or

Purchased under the

Shares

Announced Plans or

Purchased under the

Purchased

Average Price

Programs (1)

Plans or Programs (1)

Purchased

Average Price

Programs (1)

Plans or Programs (1)

Period

(thousands)

Paid Per Share

(thousands)

(millions)

(thousands)

Paid Per Share

(thousands)

(millions)

Feb 1 to Feb 28

587

$
317.53

587

21.1

Mar 1 to Mar 28

677

362.06

677

20.4

Mar 29 to May 2

694

376.30

694

19.7

Jan 31 to Feb 27

549

$
371.73

549

13.2

Feb 28 to Mar 27

496

389.85

496

12.7

Mar 28 to May 1

495

415.09

495

12.2

Total

1,958

1,958

1,540

1,540

(1) ~~During the second quarter of 2021, the~~The Company ~~had~~has a share repurchase plan that was announced in December 2019 to purchase up to $8,000 million of shares of the Company’s common stock. The maximum number of shares that may yet be purchased under this plan was based on the end of the second quarter closing share price of ~~$370.85~~$377.55 per share. At the end of the second quarter of ~~2021, $7,305~~2022, $4,599 million of common stock remained to be purchased under the plan.
Sales of Unregistered Securities
During the second quarter of 2022, the Company’s stockholders authorized 500,000 shares under a new Deere & Company Nonemployee Director Stock Ownership Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule of 506 of the SEC’s Regulation D thereunder. Under this new plan, the Company issued 4,250 deferred stock units. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan. Also during the second quarter of 2022, the Company distributed 32,635 deferred stock units and deferred stock awards to participant accounts under the previous Deere & Company Nonemployee Director Stock Ownership Plan. The deferred stock units and deferred stock awards converted to shares of common stock on a one-for-one basis.

5348

Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
~~Not applicable.~~Disclosure Pursuant to Section 13(r) of the Exchange Act.

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

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 file copies of such instruments 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 3.1 to Form 8-K of registrant filed on December 3, 2020, Securities and Exchange Commission File Number 1-4121*)

10.1
~~2025~~2026 Credit Agreement, dated March 28, 2022, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as ~~administrative agent,~~Administrative Agent, Bank of America, N.A. and Citibank, N.A., as ~~documentation agent,~~Co-Syndication Agents, and ~~Bank of America, N.A.,~~J.P. Morgan Securities LLC, as ~~syndication agent, dated March 29, 2021~~Sustainability Structuring Agent

10.2
~~2026~~2027 Credit Agreement, dated March 28, 2022, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as ~~administrative agent,~~Administrative Agent, Bank of America, N.A. and Citibank, N.A., as ~~documentation agent,~~Co-Syndication Agents, and ~~Bank of America, N.A.,~~J.P. Morgan Securities LLC, as ~~syndication agent, dated March 29, 2021~~Sustainability Structuring Agent

10.3
364-Day Credit Agreement, dated March 28, 2022, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as ~~administrative agent,~~Administrative Agent, Bank of America, N.A. and Citibank, N.A., as ~~documentation agent,~~Co-Syndication Agents, and ~~Bank~~J.P. Morgan Securities LLC, as Sustainability Structuring Agent

10.4
Deere & Company Nonemployee Director Stock Ownership Plan, February 23, 2022 (Appendix C to Proxy Statement of ~~America, N.A., as syndication agent, dated March 29, 2021~~registrant filed on January 7, 2022, Securities and Exchange Commission File Number 1-4121*)

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.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. ~~Copies of these exhibits are available from the Company upon request.~~

5450

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 ~~27, 2021~~26, 2022

By:
/s/ Ryan D. Campbell

Ryan D. Campbell
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

5551


ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars and shares except per share amounts) Unaudited
	2021		2020
Net Sales and Revenues
Net sales	$	10,998	$	8,224
Finance and interest income		809		849
Other income		251		180
Total		12,058		9,253

Costs and Expenses
Cost of sales		7,928		6,294
Research and development expenses		377		406
Selling, administrative and general expenses		838		906
Interest expense		268		342
Other operating expenses		335		377
Total		9,746		8,325

Income of Consolidated Group before Income Taxes		2,312		928
Provision for income taxes		530		245

Income of Consolidated Group		1,782		683
Equity in income (loss) of unconsolidated affiliates		8		(17)

Net Income		1,790		666
Less: Net income attributable to noncontrolling interests
Net Income Attributable to Deere & Company	$	1,790	$	666

Per Share Data
Basic	$	5.72	$	2.13
Diluted	$	5.68	$	2.11

Average Shares Outstanding
Basic		312.8		313.2
Diluted		315.2		316.2


DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited
	May 2		November 1		May 3
	2021		2020		2020
Assets
Cash and cash equivalents	$	7,182	$	7,066	$	8,900
Marketable securities		668		641		626
Receivables from unconsolidated affiliates		31		31		32
Trade accounts and notes receivable – net		6,158		4,171		5,986
Financing receivables – net		30,994		29,750		27,256
Financing receivables securitized – net		4,107		4,703		4,685
Other receivables		1,473		1,220		1,212
Equipment on operating leases – net		7,108		7,298		7,245
Inventories		6,042		4,999		6,171
Property and equipment – net		5,704		5,817		5,685
Investments in unconsolidated affiliates		182		193		192
Goodwill		3,190		3,081		2,917
Other intangible assets – net		1,310		1,327		1,311
Retirement benefits		951		863		960
Deferred income taxes		1,724		1,499		1,435
Other assets		2,155		2,432		2,713
Total Assets	$	78,979	$	75,091	$	77,326

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	9,911	$	8,582	$	11,179
Short-term securitization borrowings		4,106		4,682		4,640
Payables to unconsolidated affiliates		155		105		91
Accounts payable and accrued expenses		10,527		10,112		9,072
Deferred income taxes		533		519		475
Long-term borrowings		33,346		32,734		34,324
Retirement benefits and other liabilities		5,305		5,413		5,680
Total liabilities		63,883		62,147		65,461

Commitments and contingencies (Note 18)

Stockholders’ Equity
Common stock, $1 par value (issued shares at May 2, 2021 – 536,431,204)		4,999		4,895		4,713
Common stock in treasury		(19,052)		(18,065)		(17,690)
Retained earnings		34,105		31,646		30,556
Accumulated other comprehensive income (loss)		(4,960)		(5,539)		(5,715)
Total Deere & Company stockholders’ equity		15,092		12,937		11,864
Noncontrolling interests		4		7		1
Total stockholders’ equity		15,096		12,944		11,865
Total Liabilities and Stockholders’ Equity	$	78,979	$	75,091	$	77,326


DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Six Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars) Unaudited
	2021		2020
Cash Flows from Operating Activities
Net income	$	3,014	$	1,184
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for credit losses		(24)		107
Provision for depreciation and amortization		1,054		1,067
Impairment charges		50		114
Share-based compensation expense		45		48
Undistributed earnings of unconsolidated affiliates		11		(8)
Credit for deferred income taxes		(213)		(61)
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		(1,124)		(491)
Inventories		(1,193)		(496)
Accounts payable and accrued expenses		318		(707)
Accrued income taxes payable/receivable		54		(173)
Retirement benefits		(5)		58
Other		(201)		134
Net cash provided by operating activities		1,786		776

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)		10,367		9,624
Proceeds from maturities and sales of marketable securities		47		39
Proceeds from sales of equipment on operating leases		1,011		898
Cost of receivables acquired (excluding receivables related to sales)		(11,359)		(9,367)
Acquisitions of businesses, net of cash acquired		(19)
Purchases of marketable securities		(74)		(71)
Purchases of property and equipment		(320)		(441)
Cost of equipment on operating leases acquired		(764)		(960)
Collateral on derivatives – net		(255)		319
Other		(21)		(11)
Net cash provided by (used for) investing activities		(1,387)		30

Cash Flows from Financing Activities
Increase in total short-term borrowings		212		1,138
Proceeds from long-term borrowings		3,967		7,275
Payments of long-term borrowings		(3,157)		(3,315)
Proceeds from issuance of common stock		116		70
Repurchases of common stock		(1,044)		(263)
Dividends paid		(480)		(481)
Other		(55)		(81)
Net cash provided by (used for) financing activities		(441)		4,343

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		151		(102)

Net Increase in Cash, Cash Equivalents, and Restricted Cash		109		5,047
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		7,172		3,956
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	7,281	$	9,003


DEERE & COMPANY
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY
For the Three and Six Months Ended May 2, 2021 and May 3, 2020
(In millions of dollars) Unaudited
				Total Stockholders’ Equity
				Deere & Company Stockholders
										Accumulated
	Total									Other				Redeemable
	Stockholders’			Common		Treasury		Retained		Comprehensive		Noncontrolling		Noncontrolling
	Equity			Stock		Stock		Earnings		Income (Loss)		Interests		Interest

Three Months Ended May 3, 2020
Balance February 2, 2020	$	11,930		$	4,675	$	(17,549)	$	30,129	$	(5,329)	$	4	$	14
Net income		666							666
Other comprehensive loss		(386)									(386)
Repurchases of common stock		(149)					(149)
Treasury shares reissued		8					8
Dividends declared		(241)							(238)				(3)
Noncontrolling interest redemption (Note 22)															(14)
Stock options and other		37			38				(1)
Balance May 3, 2020	$	11,865		$	4,713	$	(17,690)	$	30,556	$	(5,715)	$	1

Six Months Ended May 3, 2020
Balance November 3, 2019	$	11,417		$	4,642	$	(17,474)	$	29,852	$	(5,607)	$	4	$	14
Net income		1,183							1,182				1		1
Other comprehensive loss		(108)									(108)
Repurchases of common stock		(263)					(263)
Treasury shares reissued		47					47
Dividends declared		(480)							(477)				(3)		(1)
Noncontrolling interest redemption (Note 22)															(14)
Stock options and other		69			71				(1)				(1)
Balance May 3, 2020	$	11,865		$	4,713	$	(17,690)	$	30,556	$	(5,715)	$	1

Three Months Ended May 2, 2021
Balance January 31, 2021	$	14,086		$	4,942	$	(18,377)	$	32,596	$	(5,078)	$	3
Net income		1,790							1,790
Other comprehensive income		118									118
Repurchases of common stock		(692)					(692)
Treasury shares reissued		17					17
Dividends declared		(282)							(282)
Stock options and other		59			57				1				1
Balance May 2, 2021	$	15,096		$	4,999	$	(19,052)	$	34,105	$	(4,960)	$	4

Six Months Ended May 2, 2021			��
Balance November 1, 2020	$	12,944		$	4,895	$	(18,065)	$	31,646	$	(5,539)	$	7
ASU No. 2016-13 adoption (Note 3)		(35)							(35)
Net income		3,014							3,013				1
Other comprehensive income		579									579
Repurchases of common stock		(1,044)					(1,044)
Treasury shares reissued		57					57
Dividends declared		(520)							(520)
Stock options and other		101			104				1				(4)
Balance May 2, 2021	$	15,096		$	4,999	$	(19,052)	$	34,105	$	(4,960)	$	4


	November 1		Cumulative Effect		November 2
	2020		from Adoption		2020
Assets
Trade accounts and note receivable - net	$	4,171	$	2	$	4,173
Financing receivables - net		29,750		(27)		29,723
Financing receivables securitized - net		4,703		(4)		4,699
Deferred income taxes		1,499		1		1,500

Liabilities
Accounts payable and accrued expenses	$	10,112	$	14	$	10,126
Deferred income taxes		519		(7)		512

Stockholders’ equity
Retained earnings	$	31,646	$	(35)	$	31,611


~~No. 2018-15~~	Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software
~~No. 2019-04~~	~~Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~
~~No. 2021-01~~	~~Reference Rate Reform (Topic 848): Scope~~


~~No. 2019-12~~	~~Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes~~
~~No. 2020-08~~	~~Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs~~


	Three Months Ended May 2, 2021										Three Months Ended May 1, 2022
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total		Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
Primary geographic markets:
United States	$	2,211	$	1,838	$	1,481	$	608	$	6,138	$	2,434	$	2,103	$	2,108	$	569	$	7,214
Canada		252		144		320		153		869		309		161		355		149		974
Western Europe		589		738		514		26		1,867		536		658		464		25		1,683
Central Europe and CIS		531		160		209		9		909		404		151		146		11		712
Latin America		700		103		220		60		1,083		1,126		134		333		73		1,666
Asia, Africa, Australia, New Zealand, and Middle East		319		444		393		36		1,192		367		399		318		37		1,121
Total	$	4,602	$	3,427	$	3,137	$	892	$	12,058	$	5,176	$	3,606	$	3,724	$	864	$	13,370

Major product lines:
Production agriculture	$	4,466							$	4,466	$	5,032							$	5,032
Small agriculture			$	2,417						2,417			$	2,668						2,668
Turf				898						898				817						817
Construction					$	1,232				1,232					$	1,516				1,516
Compact construction						396				396						427				427
Roadbuilding						1,066				1,066						1,017				1,017
Forestry						343				343						325				325
Financial products		12		10		5	$	892		919		10		9		6	$	864		889
Other		124		102		95				321		134		112		433				679
Total	$	4,602	$	3,427	$	3,137	$	892	$	12,058	$	5,176	$	3,606	$	3,724	$	864	$	13,370

Timing of revenue recognition:
Revenue recognized at a point in time	$	4,562	$	3,412	$	3,114	$	26	$	11,114
Revenue recognized over time		40		15		23		866		944
Revenue recognized:
At a point in time											$	5,144	$	3,593	$	3,707	$	26	$	12,470
Over time												32		13		17		838		900
Total	$	4,602	$	3,427	$	3,137	$	892	$	12,058	$	5,176	$	3,606	$	3,724	$	864	$	13,370


	Six Months Ended May 2, 2021										Six Months Ended May 1, 2022
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total		Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
Primary geographic markets:
United States	$	3,820	$	3,261	$	2,683	$	1,206	$	10,970	$	4,042	$	3,541	$	3,368	$	1,142	$	12,093
Canada		364		223		508		307		1,402		448		283		687		301		1,719
Western Europe		1,038		1,224		953		50		3,265		1,003		1,190		822		51		3,066
Central Europe and CIS		692		244		387		18		1,341		606		277		341		22		1,246
Latin America		1,213		180		390		119		1,902		1,902		238		561		141		2,842
Asia, Africa, Australia, New Zealand, and Middle East		623		845		746		76		2,290		608		751		537		77		1,973
Total	$	7,750	$	5,977	$	5,667	$	1,776	$	21,170	$	8,609	$	6,280	$	6,316	$	1,734	$	22,939

Major product lines:
Production agriculture	$	7,478							$	7,478	$	8,315							$	8,315
Small agriculture			$	4,228						4,228			$	4,600						4,600
Turf				1,549						1,549				1,444						1,444
Construction					$	2,119				2,119					$	2,691				2,691
Compact construction						742				742						748				748
Roadbuilding						1,976				1,976						1,709				1,709
Forestry						633				633						630				630
Financial products		28		20		12	$	1,776		1,836		22		20		11	$	1,734		1,787
Other		244		180		185				609		272		216		527				1,015
Total	$	7,750	$	5,977	$	5,667	$	1,776	$	21,170	$	8,609	$	6,280	$	6,316	$	1,734	$	22,939

Timing of revenue recognition:
Revenue recognized at a point in time	$	7,668	$	5,946	$	5,614	$	50	$	19,278
Revenue recognized over time		82		31		53		1,726		1,892
Revenue recognized:
At a point in time											$	8,540	$	6,247	$	6,277	$	50	$	21,114
Over time												69		33		39		1,684		1,825
Total	$	7,750	$	5,977	$	5,667	$	1,776	$	21,170	$	8,609	$	6,280	$	6,316	$	1,734	$	22,939


	Three Months Ended May 3, 2020										Three Months Ended May 2, 2021
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total		Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
Primary geographic markets:
United States	$	1,841	$	1,540	$	1,263	$	604	$	5,248	$	2,211	$	1,838	$	1,481	$	608	$	6,138
Canada		177		89		166		151		583		252		144		320		153		869
Western Europe		540		571		358		22		1,491		589		738		514		26		1,867
Central Europe and CIS		258		80		140		8		486		531		160		209		9		909
Latin America		394		64		135		60		653		700		103		220		60		1,083
Asia, Africa, Australia, New Zealand, and Middle East		221		290		251		30		792		319		444		393		36		1,192
Total	$	3,431	$	2,634	$	2,313	$	875	$	9,253	$	4,602	$	3,427	$	3,137	$	892	$	12,058

Major product lines:
Production agriculture	$	3,280							$	3,280	$	4,466							$	4,466
Small agriculture			$	1,771						1,771			$	2,417						2,417
Turf				806						806				898						898
Construction					$	877				877					$	1,232				1,232
Compact construction						339				339						396				396
Roadbuilding						723				723						1,066				1,066
Forestry						254				254						343				343
Financial products		13		8		6	$	875		902		12		10		5	$	892		919
Other		138		49		114				301		124		102		95				321
Total	$	3,431	$	2,634	$	2,313	$	875	$	9,253	$	4,602	$	3,427	$	3,137	$	892	$	12,058

Timing of revenue recognition:
Revenue recognized at a point in time	$	3,396	$	2,620	$	2,287	$	26	$	8,329
Revenue recognized over time		35		14		26		849		924
Revenue recognized:
At a point in time											$	4,562	$	3,412	$	3,114	$	26	$	11,114
Over time												40		15		23		866		944
Total	$	3,431	$	2,634	$	2,313	$	875	$	9,253	$	4,602	$	3,427	$	3,137	$	892	$	12,058


	Six Months Ended May 3, 2020										Six Months Ended May 2, 2021
	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total		Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Financial Services		Total
Primary geographical markets:
Primary geographic markets:
United States	$	3,276	$	2,605	$	2,283	$	1,247	$	9,411	$	3,820	$	3,261	$	2,683	$	1,206	$	10,970
Canada		261		143		338		307		1,049		364		223		508		307		1,402
Western Europe		905		984		697		44		2,630		1,038		1,224		953		50		3,265
Central Europe and CIS		389		169		299		18		875		692		244		387		18		1,341
Latin America		778		135		294		126		1,333		1,213		180		390		119		1,902
Asia, Africa, Australia, New Zealand, and Middle East		410		605		507		64		1,586		623		845		746		76		2,290
Total	$	6,019	$	4,641	$	4,418	$	1,806	$	16,884	$	7,750	$	5,977	$	5,667	$	1,776	$	21,170

Major product lines:
Production agriculture	$	5,706							$	5,706	$	7,478							$	7,478
Small agriculture			$	3,249						3,249			$	4,228						4,228
Turf				1,274						1,274				1,549						1,549
Construction					$	1,718				1,718					$	2,119				2,119
Compact construction						627				627						742				742
Roadbuilding						1,328				1,328						1,976				1,976
Forestry						528				528						633				633
Financial products		34		14		13	$	1,806		1,867		28		20		12	$	1,776		1,836
Other		279		104		204				587		244		180		185				609
Total	$	6,019	$	4,641	$	4,418	$	1,806	$	16,884	$	7,750	$	5,977	$	5,667	$	1,776	$	21,170

Timing of revenue recognition:
Revenue recognized at a point in time	$	5,941	$	4,615	$	4,366	$	52	$	14,974
Revenue recognized over time		78		26		52		1,754		1,910
Revenue recognized:
At a point in time											$	7,668	$	5,946	$	5,614	$	50	$	19,278
Over time												82		31		53		1,726		1,892
Total	$	6,019	$	4,641	$	4,418	$	1,806	$	16,884	$	7,750	$	5,977	$	5,667	$	1,776	$	21,170


									Total
					Unrealized		Unrealized		Accumulated
	Retirement		Cumulative		Gain (Loss)		Gain (Loss)		Other
	Benefits		Translation		on		on		Comprehensive
	Adjustment		Adjustment		Derivatives		Debt Securities		Income (Loss)
Balance November 3, 2019	$	(3,915)	$	(1,651)	$	(60)	$	19	$	(5,607)
Other comprehensive income (loss) items before reclassification		186		(398)		(13)		11		(214)
Amounts reclassified from accumulated other comprehensive income		101				5				106
Net current period other comprehensive income (loss)		287		(398)		(8)		11		(108)
Balance May 3, 2020	$	(3,628)	$	(2,049)	$	(68)	$	30	$	(5,715)

Balance November 1, 2020	$	(3,918)	$	(1,596)	$	(58)	$	33	$	(5,539)
Other comprehensive income (loss) items before reclassification		31		433				(15)		449
Amounts reclassified from accumulated other comprehensive income		123				7				130
Net current period other comprehensive income (loss)		154		433		7		(15)		579
Balance May 2, 2021	$	(3,764)	$	(1,163)	$	(51)	$	18	$	(4,960)


	Before		Tax		After
	Tax		(Expense)		Tax
Three Months Ended May 2, 2021	Amount		Credit		Amount
Cumulative translation adjustment	$	37			$	37
Unrealized gain (loss) on derivatives:
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		4	$	(1)		3
Net unrealized gain (loss) on derivatives		4		(1)		3
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		(14)		1		(13)
Net unrealized gain (loss) on debt securities		(14)		1		(13)
Retirement benefits adjustment:
Net actuarial gain (loss)		41		(9)		32
Reclassification to Other operating expenses through amortization of:
Actuarial (gain) loss		72		(19)		53
Prior service (credit) cost		2				2
Settlements		5		(1)		4
Net unrealized gain (loss) on retirement benefits adjustment		120		(29)		91
Total other comprehensive income (loss)	$	147	$	(29)	$	118


	Year of Origination
	2021		2020		2019		2018		2017		Prior		Revolving Charge Accounts		Total
Customer receivables:
Agriculture and turf
Current	$	6,017	$	8,375	$	4,436	$	2,402	$	1,136	$	494	$	3,221	$	26,081
30-59 days past due		20		64		41		19		10		5		20		179
60-89 days past due		5		34		18		9		4		2		5		77
90+ days past due						1		1								2
Non-performing		2		51		69		54		29		33		16		254
Construction and forestry
Current		1,568		2,077		1,106		454		118		22		81		5,426
30-59 days past due		21		43		35		14		5		1		3		122
60-89 days past due		6		13		12		7		3		1		1		43
90+ days past due				2		10		5		6		3				26
Non-performing		1		38		37		22		11		7		1		117
Total customer receivables	$	7,640	$	10,697	$	5,765	$	2,987	$	1,322	$	568	$	3,348	$	32,327


	November 1, 2020						May 3, 2020						May 1, 2022
	Retail Notes & Financing Leases		Revolving Charge Accounts		Total		Retail Notes & Financing Leases		Revolving Charge Accounts		Total		2022		2021		2020		2019		2018		Prior Years		Revolving Charge Accounts		Total
Customer receivables:
Retail customer receivables:
Agriculture and turf
Current	$	21,597	$	3,787	$	25,384	$	19,178	$	3,282	$	22,460	$	5,540	$	10,141	$	5,318	$	2,684	$	1,286	$	723	$	3,381	$	29,073
30-59 days past due		135		13		148		215		32		247		20		75		36		20		9		5		12		177
60-89 days past due		64		4		68		103		13		116		4		29		14		9		5		2		4		67
90+ days past due		2				2		3				3						1										1
Non-performing		263		6		269		310		42		352		3		40		44		41		25		31		14		198
Construction and forestry
Current		4,859		88		4,947		4,169		78		4,247		1,506		2,404		1,211		577		234		105		91		6,128
30-59 days past due		111		2		113		174		4		178		20		52		33		17		6		2		3		133
60-89 days past due		55		1		56		58		2		60		7		25		15		6		1		1		1		56
90+ days past due		14				14		18				18				1		1		1		1		5				9
Non-performing		106		1		107		176		1		177		3		46		50		29		12		5		1		146
Total customer receivables	$	27,206	$	3,902	$	31,108	$	24,404	$	3,454	$	27,858
Total retail customer receivables													$	7,103	$	12,813	$	6,723	$	3,384	$	1,579	$	879	$	3,507	$	35,988


	October 31, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	12,877	$	6,676	$	3,463	$	1,738	$	728	$	211	$	3,704	$	29,397
30-59 days past due		43		53		29		16		7		3		14		165
60-89 days past due		16		23		12		6		3		1		4		65
90+ days past due				1												1
Non-performing		23		57		53		32		17		23		7		212
Construction and forestry
Current		3,122		1,575		754		273		57		7		92		5,880
30-59 days past due		50		40		27		7		4		1		3		132
60-89 days past due		15		11		9		6		1				1		43
90+ days past due		1		2		3		3		4		2				15
Non-performing		26		56		39		17		7		3				148
Total retail customer receivables	$	16,173	$	8,494	$	4,389	$	2,098	$	828	$	251	$	3,825	$	36,058


	May 2, 2021
	2021		2020		2019		2018		2017		Prior Years		Revolving Charge Accounts		Total
Retail customer receivables:
Agriculture and turf
Current	$	6,017	$	8,375	$	4,436	$	2,402	$	1,136	$	494	$	3,221	$	26,081
30-59 days past due		20		64		41		19		10		5		20		179
60-89 days past due		5		34		18		9		4		2		5		77
90+ days past due						1		1								2
Non-performing		2		51		69		54		29		33		16		254
Construction and forestry
Current		1,568		2,077		1,106		454		118		22		81		5,426
30-59 days past due		21		43		35		14		5		1		3		122
60-89 days past due		6		13		12		7		3		1		1		43
90+ days past due				2		10		5		6		3				26
Non-performing		1		38		37		22		11		7		1		117
Total retail customer receivables	$	7,640	$	10,697	$	5,765	$	2,987	$	1,322	$	568	$	3,348	$	32,327


	Retail Notes		Revolving						Retail Notes		Revolving
	& Financing		Charge		Wholesale				& Financing		Charge		Wholesale
	Leases		Accounts		Receivables		Total		Leases		Accounts		Receivables		Total
Three Months Ended May 2, 2021
Three Months Ended May 1, 2022
Allowance:
Beginning of period balance	$	180	$	24	$	7	$	211	$	138	$	15	$	5	$	158
Provision (credit)		(17)		(6)				(23)
Provision										39		3				42
Write-offs		(15)		(9)				(24)		(18)		(8)				(26)
Recoveries		4		10				14		5		7				12
Translation adjustments										4						4
End of period balance	$	152	$	19	$	7	$	178	$	168	$	17	$	5	$	190

Six Months Ended May 2, 2021
Six Months Ended May 1, 2022
Allowance:
Beginning of period balance	$	133	$	43	$	8	$	184	$	138	$	21	$	7	$	166
ASU No. 2016-13 adoption		44		(13)				31
Provision (credit)		(13)		(16)		(1)		(30)		52		(7)		(2)		43
Write-offs		(23)		(14)				(37)		(35)		(12)				(47)
Recoveries		10		19				29		9		15				24
Translation adjustments		1						1		4						4
End of period balance	$	152	$	19	$	7	$	178	$	168	$	17	$	5	$	190
Financing receivables:
End of period balance	$	28,979	$	3,348	$	2,952	$	35,279	$	32,481	$	3,507	$	2,360	$	38,348


	May 2
	2021
Carrying value of liabilities	$	893
Maximum exposure to loss		926


	Production &		Small Ag		Construction				Production &		Small Ag		Construction
	Precision Ag		& Turf		& Forestry		Total		Precision Ag		& Turf		& Forestry		Total
Goodwill at November 3, 2019	$	310	$	264	$	2,343	$	2,917
Translation adjustments and other		(5)		(4)		9
Goodwill at May 3, 2020	$	305	$	260	$	2,352	$	2,917

Goodwill at November 1, 2020	$	333	$	268	$	2,480	$	3,081	$	333	$	268	$	2,480	$	3,081
Acquisition		12						12		12						12
Translation adjustments and other		10		(2)		89		97
Translation adjustments										10		(2)		89		97
Goodwill at May 2, 2021	$	355	$	266	$	2,569	$	3,190	$	355	$	266	$	2,569	$	3,190

Goodwill at October 31, 2021									$	542	$	265	$	2,484	$	3,291
Acquisitions										122		69		600		791
Translation adjustments										(11)		(7)		(252)		(270)
Goodwill at May 1, 2022									$	653	$	327	$	2,832	$	3,812


	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	20	$	21	$	27	$	27
Due after one through five years		90		94		92		90
Due after five through 10 years		124		127		171		155
Due after 10 years		207		213		221		192
Mortgage-backed securities		136		140		167		151
Debt securities	$	577	$	595	$	678	$	615


	Fair Value					Losses							Fair Value					Losses
						Three Months Ended			Six Months Ended									Three Months Ended			Six Months Ended
	May 2	November 1		May 3		May 2	May 3		May 2		May 3		May 1		October 31		May 2	May 1		May 2	May 1		May 2
	2021	2020		2020		2021	2020		2021		2020		2022		2021		2021	2022		2021	2022		2021
Other receivables		$	1
Equipment on operating leases – net		$	371	$	371		$	22			$	22
Inventories													$	19				$	8		$	8
Property and equipment – net		$	135	$	70		$	62	$	44	$	62	$	15	$	41		$	41		$	41	$	44
Investments in unconsolidated affiliates		$	19	$	10		$	20			$	20
Other intangible assets – net																		$	28		$	28
Other assets		$	59	$	59		$	10	$	6	$	10			$	1							$	6


			Cumulative Increase (Decrease) of Fair
			Value Hedging Adjustments Included in
			the Carrying Amount
	Carrying		Active
	Amount of		Hedging		Discontinued
	Hedged Item		Relationships		Relationships		Total
May 2, 2021
Long-term borrowings due within one year	$	163	$	1	$	(1)
Long-term borrowings		8,502		190		171	$	361

November 1, 2020
Long-term borrowings due within one year	$	155	$	2	$	3	$	5
Long-term borrowings		7,725		543		122		665

May 3, 2020
Long-term borrowings due within one year	$	214			$	(2)	$	(2)
Long-term borrowings		9,496	$	726		36		762


	Gross Amounts		Netting						Gross Amounts		Netting
May 2, 2021	Recognized		Arrangements		Collateral		Net Amount
May 1, 2022									Recognized		Arrangements		Collateral		Net Amount
Assets	$	402	$	(125)	$	(21)	$	256	$	407	$	(110)			$	297
Liabilities		223		(125)		(1)		97		780		(110)	$	(254)		416


	February 7
	2022
Trade accounts and notes receivable	$	2
Other receivables		11
Inventories		11
Property and equipment		11
Goodwill		217
Other intangible assets		178
Other assets		6
Total assets	$	436

Accounts payable and accrued expenses	$	28
Deferred income taxes		36

Redeemable noncontrolling interest	$	96


	February 28
	2022
Cash consideration for factories	$	205
Cash consideration for license agreement		70
Deferred consideration		271
Total purchase price consideration		546
Less: Cash obtained		(187)
Less: Settlement of intercompany balances		(113)
Net purchase price consideration		246
Fair value of previously held equity investment		444
Total invested capital	$	690


	Three Months Ended May 1, 2022
	PPA		SAT		CF		FS		Total
2022 Expense:
Inventory reserve – Cost of sales	$	6			$	2			$	8
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							$	26		26
Contingent liabilities – Other operating expenses		10	$	1		6				17
Total Russia/Ukraine events pretax expense	$	46	$	1	$	47	$	26	$	120

Net tax impact										(14)
Total Russia/Ukraine events after-tax expense									$	106


	Six Months Ended
	May 2, 2021
Expense (benefit):	Production & Precision Ag		Small Ag & Turf		Construction & Forestry		Total
Long-lived asset impairments – Cost of sales	$	5	$	3	$	42	$	50
Brazil indirect tax – Cost of sales		(53)				(5)		(58)
Total expense (benefit)	$	(48)	$	3	$	37	$	(8)


	Six Months Ended
	May 3, 2020
Expense:	Construction & Forestry		Financial Services		Total
Long-lived asset impairments – Cost of sales	$	62			$	62
Investments in unconsolidated affiliates impairment – Equity in loss of unconsolidated affiliate		20				20
Equipment on operating leases & matured operating lease inventory impairments – Other operating expenses			$	32		32
Total expense	$	82	$	32	$	114


	Three Months										Six Months
	PPA		SAT		CF		FS		Total		PPA		SAT		CF		FS		Total
2022 Expense (benefit):
Gain on remeasurement of equity investment – Other income (see Note 19)					$	(326)			$	(326)					$	(326)			$	(326)
Total Russia/Ukraine events pretax expense	$	46	$	1		47	$	26		120	$	46	$	1		47	$	26		120
UAW ratification bonus – Cost of sales												53		9		28				90
Total expense (benefit)	$	46	$	1	$	(279)	$	26	$	(206)	$	99	$	10	$	(251)	$	26	$	(116)

2021 Expense (benefit):
Long-lived asset impairments – Cost of sales											$	5	$	3	$	42			$	50
Brazil indirect tax – Cost of sales												(53)				(5)				(58)
Total expense (benefit)											$	(48)	$	3	$	37			$	(8)

Period over period change	$	46	$	1	$	(279)	$	26	$	(206)	$	147	$	7	$	(288)	$	26	$	(108)