Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 27, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-4121
DEERE & COMPANY
(Exact name of registrant as specified in its charter)
Delaware
36-2382580
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
One John Deere Place, Moline, Illinois
61265
(309) 765-8000
(Address of principal executive offices)
(Zip Code)
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class
Trading symbol
Name of each exchange on which registered
Common stock, $1 par value
DE
New York Stock Exchange
6.55% Debentures Due 2028
DE28
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes ☐ No ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate quoted market price of voting stock of the registrant held by non-affiliates at April 26, 2024 was $108,321,022,524. At November 29, 2024, 271,575,282 shares of common stock, $1 par value, of the registrant were outstanding.
Documents Incorporated by Reference. Portions of the proxy statement for the annual meeting of stockholders to be held on February 26, 2025 are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
Page
PART I
ITEM 1.
BUSINESS
2
ITEM 1A.
RISK FACTORS
13
ITEM 1B.
UNRESOLVED STAFF COMMENTS
23
ITEM 1C.
CYBERSECURITY
ITEM 2.
PROPERTIES
24
ITEM 3.
LEGAL PROCEEDINGS
ITEM 4.
MINE SAFETY DISCLOSURES
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.
[RESERVED]
26
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A.
CONTROLS AND PROCEDURES
ITEM 9B.
OTHER INFORMATION
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
27
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
28
ITEM 16.
FORM 10-K SUMMARY
1
ITEM 1. BUSINESS.
This Annual Report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Annual Report on Form 10-K are forward-looking statements. Forward-looking statements provide our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements as they do not relate to historical or current facts and by words such as “believe,” “expect,” “estimate,” “anticipate,” “will,” “aim,” “should,” “plan,” “forecast,” “target,” “guide,” “project,” “intend,” “could,” and similar words or expressions.
All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, and other important information about forward-looking statements are disclosed under Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Forward-Looking Statements,” in this Annual Report on Form 10-K.
As used herein, the terms “John Deere,” “we,” “us,” “our,” or “the Company” refer collectively to Deere & Company and its subsidiaries, unless designated or identified otherwise. All amounts are presented in millions of dollars, unless otherwise specified.
Products
The John Deere enterprise has manufactured agricultural equipment since 1837. Deere & Company was incorporated under the laws of Delaware in 1958. Our business is managed through the following four business segments: production and precision agriculture (PPA), small agriculture and turf (SAT), construction and forestry (CF), and financial services (John Deere Financial or FS).
BUSINESS SEGMENT
PRODUCTION AND PRECISION AGRICULTURE
SMALL AGRICULTURE AND TURF
CONSTRUCTION AND FORESTRY
FINANCIAL SERVICES
PRODUCTS
Mid-Size Tractors
CROPS/FUNCTION
Smart Industrial Operating Model and Leap Ambitions
Our Smart Industrial Operating Model is based on the following three focus areas:
Our Leap Ambitions are a framework designed to boost economic value and sustainability for our customers. The Leap Ambitions set goals to measure the results of our Smart Industrial Operating Model. The ambitions align across our customers’ production systems, seeking to optimize their operations to deliver better outcomes with fewer resources.
The Leap Ambitions framework has three components: (i) size the incremental market opportunity, quantifying the value that can be created; (ii) identify the key actions required to guide investment in digitalization, autonomy, automation, and alternative power technologies; and (iii) define the desired financial and sustainable outcomes we hope to achieve to help investors and stakeholders understand the opportunities that can be unlocked in the future through present investments. Current financial and sustainability goals for the Leap Ambitions relate to workforce safety, agriculture customer outcomes, product circularity, environmental footprint, Solutions as a Service, and equipment operations operating return on sales (OROS).
We aim to deliver ongoing value across our product lines by digitally connecting certain equipment we produce, enabling our customers to leverage technology for better economic and more sustainable outcomes in their businesses. We are measuring our customers’ utilization of our technology, in part, by the number of engaged acres, which is a measure of our PPA and SAT customers’ use of the John Deere Operations Center (our online farm management system). Engaged acres generally reflects the number of unique acres with at least one operation pass recorded in the Operations Center in the past 12 months. We are also introducing viable alternative power technologies for various product families. Furthermore, we plan to enhance how we deliver value by investing in a Solutions as a Service business model.
We also aim to enable our customers to be more sustainable in their production steps. For example, we provide our agricultural customers with technology solutions that help to improve their crops’ nitrogen use efficiency and increase their crops’ protection efficiency. Across all segments we believe we will deliver ongoing value by continuing to focus on reducing the CO2e emissions from our equipment, including offering hybrid-electric and electric options where feasible in our product families. We also continue to work toward production of a fully autonomous, battery-powered agricultural tractor and have launched several models of electric turf and compact construction products. We also expect to support sustainable outcomes and deliver value through increasing the use of grade management control for earthmoving customers, intelligent boom control for forestry customers, and precision solutions for roadbuilding customers.
Equipment Operations
Our equipment operations consist of three of our business segments: PPA, SAT, and CF. In fiscal year 2024, PPA generated $20,834 net sales, or 47 percent of equipment operations net sales; SAT generated $10,969 net sales, or 24 percent of equipment operations net sales; and CF generated $12,956 net sales, or 29 percent of equipment operations net sales.
Production and Precision Agriculture
The PPA segment is committed to meeting the fundamental needs of our customers through a combination of equipment and technology designed to enable our customers to overcome some of their biggest challenges: doing more with less, labor shortages, volatile input costs, and executing jobs in tighter timeframes. This segment defines, develops, and delivers global equipment and technology solutions for production-scale growers of crops like large grains (such as corn and soy), small grains (such as wheat, oats, and barley), cotton, and sugarcane. Equipment manufactured and distributed by the segment includes large and certain mid-size tractors, combines, cotton pickers, cotton strippers, sugarcane harvesters, and related harvesting front-end equipment. In addition, the segment includes tillage, seeding, and application equipment, including sprayers and nutrient management and soil preparation machinery.
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We continue to invest in the development and production of advanced technology through integrated agricultural solutions and precision technologies across our portfolio of equipment. For example, we have advanced our planting and crop care offerings for corn and soy production systems to better meet customer demands throughout the cultivation cycle.
We have developed a differentiated, production system-level approach that helps us understand how customers operate, focusing on their costs, identifying the opportunities for them to reduce inputs, and improving productivity, crop yields, and sustainability. Advancements such as precise global navigation satellite systems technology, advanced connectivity and telematics, on-board sensors and computing power, automation software, digital tools, applications, and analytics provide seamless integration of information designed to improve customer decision-making and job execution. Our advanced telematics systems remotely connect equipment owners, business managers, and dealers to equipment in the field. This connection provides real-time alerts and information about equipment location, utilization, performance, and maintenance to improve productivity and efficiency, as well as to monitor agronomic job execution.
In fiscal year 2024, we introduced the new S7 Series combines and updated 9RX tractors, designed to enhance customer value and address key agricultural challenges, such as time constraints caused by variable weather, labor shortages, and rising costs. The S7 Series combines feature advanced automation packages and the 9RX tractors come with new engine options, updated technology packages, and modernized cabins.
In addition to John Deere brand names, the table below provides a list of PPA products and their associated brand names:
PRODUCT
BRAND NAME
Sprayers
Hagie, Mazzotti
Planters and Cultivators
Monosem
Sprayers and Planters
PLA
Carbon Fiber Sprayer Booms
King Agro
Sugarcane Harvester Aftermarket Parts
Sunbelt Outdoor Products, Unimil by John Deere
Aftermarket Parts for PPA Products
Vapormatic, A & I, Unimil, Alternatives by John Deere, Frontier
Small Agriculture and Turf
SAT is committed to meeting the needs of our customers through defining, developing, and delivering global equipment and technology solutions designed to unlock value and sustainability for dairy and livestock producers, high-value crop and small acre crop producers, and turf and utility customers. The segment works to provide product leadership while extending integrated agricultural solutions and precision technologies across its portfolio of equipment to unlock incremental value for customers.
Equipment manufactured and distributed by the segment includes certain mid-size, small and utility tractors, and related loaders and attachments; turf and utility equipment, including riding lawn equipment, commercial mowing equipment, golf course equipment, utility vehicles, implements for mowing, tilling, snow and debris handling, aerating, and other residential, commercial, golf, and sports turf care applications; and hay and forage equipment, including self-propelled forage harvesters and attachments, balers, and mowers. SAT equipment is sold primarily through independent retail dealer networks, although the segment also builds turf products for sale by mass retailers, including The Home Depot and Lowe’s. Our turf equipment is sold primarily in North American, Western European, and Australian markets.
In the small agriculture market, we have introduced autonomous solutions, connectivity capabilities, and a path to electrifying our future by delivering a portfolio that helps current customers meet sustainability goals while finding innovative ways to serve new customers and unlock new markets for mechanization at scale.
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In addition to John Deere brand names, the table below provides a list of SAT products and their associated brand names:
Equipment Attachments
Frontier, Kemper, GreenSystem, Smart Apply
Aftermarket Parts for SAT
Vapormatic, A&I, Alternatives by John Deere, Frontier
Agriculture and Turf Operations
Smart Industrial Operating Model. As part of our Smart Industrial Operating Model, the segments are aligned around production systems, enabling focus on delivering equipment, technology, and solutions across all the jobs customers execute during a season. Sales and marketing support for both the PPA and SAT segments is organized around four geographic regions: U.S., Canada, and Australia; Latin America and South America; Europe, and the Commonwealth of Independent States (CIS); and Africa, Asia, and the Middle East.
Business Environment. Sales of agricultural equipment are affected by total farm cash receipts, which reflect levels of farm commodity prices, acreage planted, crop yields, and government policies, including global trade policies, and the amount and timing of government payments. Sales also are influenced by general economic conditions, farmland prices, farmers’ debt levels and access to financing, interest and exchange rates, agricultural trends, including the production of and demand for renewable fuels, labor availability and costs, energy costs and related policies, tax policies, policies related to climate change, and other input costs associated with farming. Other key factors affecting new agricultural equipment sales are the value, age, and level of used equipment, including tractors, harvesting equipment, self-propelled sprayers, hay and forage equipment, and seeding equipment. Weather and climatic conditions also can affect buying decisions of agricultural equipment purchasers.
With challenging economic conditions including higher interest rates and decreasing crop prices, innovations in machinery and technology may have an even greater influence on agricultural equipment purchasing. For example, larger, more productive equipment is well accepted where farmers are striving for more efficiency in their operations to increase profits. Large, cost-efficient, highly mechanized agricultural operations account for an important share of worldwide farm output. These customers are increasingly adopting and integrating precision agricultural technologies like guidance, telematics, automation, and data management in their operations. The large-size agricultural equipment used on such farms has been particularly important to us. A large proportion of the equipment operations’ total agricultural equipment sales in the U.S. and Canada, as well as in many countries outside the U.S. and Canada, are comprised of (1) tractors over 100 horsepower, (2) self-propelled combines, cotton pickers, forage harvesters, and sprayers, and (3) seeding equipment. In addition, small tractors are an important part of our global business.
Retail sales of lawn and garden tractors, compact utility tractors, residential and commercial mowers, utility vehicles, and golf and turf equipment are influenced by the housing market, weather conditions, consumer spending patterns, and general economic conditions like unemployment, interest rates, and inflation.
Seasonality. Seasonal patterns in retail demand for agricultural equipment can result in substantial variations in the volume and mix of products sold to retail customers during the year. Seasonal demand is estimated in advance, and equipment is manufactured in anticipation of such demand to achieve efficient utilization of personnel and facilities throughout the year. The PPA and SAT segments can incur substantial seasonal variations in cash flows to finance production and inventory of agricultural and turf equipment. The segments also incur costs to finance sales to dealers in advance of seasonal demand.
For certain equipment, we offer early order programs, which can include discounts to retail customers who place orders well in advance of the use season. Production schedules are based, in part, on these early order programs; however, during periods of high demand, some factories may still produce after the use season. New combines, cotton harvesting equipment, and sprayers are sold under early order programs with waivers of retail finance charges available to customers who take delivery of machines during non-use seasons.
In Australia, Canada, and the U.S., there are typically several used equipment trade-in transactions that take place in connection with most new agricultural equipment sales. To provide support to our dealers in these countries for carrying and ultimately selling this used inventory to retail customers, we provide these dealers with pools of funds awarded as a percentage of the dealer cost for eligible new equipment sales at the time of the new equipment settlement.
Retail demand for turf and utility equipment is normally higher in the second and third fiscal quarters. We have pursued a strategy of building and shipping such equipment as close to retail demand as possible. Consequently, to increase asset turnover and reduce the average level of field inventories throughout the year, production and shipment schedules of these product lines are normally proportionately higher in the second and third fiscal quarters of each year, corresponding closely to the seasonal pattern of retail sales.
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Construction and Forestry
Our CF segment is committed to meeting the need for smart and more sustainable solutions to help our customers meet industry challenges, including jobsite safety, a shortage of skilled labor, volatile input costs, reducing rework, maximizing uptime, and minimizing their environmental footprint.
To address these challenges and unlock value for customers, we deliver a robust portfolio of construction, roadbuilding, and forestry products with precision technology solutions. Our smart solutions such as SmartWeigh™, grade control offerings, machine and system automation, and Operations Center, are designed to allow customers to complete more functions with fewer inputs, reduce rework and guesswork, and transform data into insights to allow for better decisions. Obstacle detection solutions such as SmartDetect™ supplement operator visibility on the jobsite through a combination of cameras, radar, and machine learning. Additionally, we plan to deliver hybrid-electric and battery electric equipment solutions to help customers reduce tailpipe emissions without sacrificing power and performance.
Our primary construction products include excavators, wheel loaders, motor graders, dozers, backhoes, articulated dump trucks, skid steers, compact excavators, and compact track loaders, along with a variety of attachments. Our Wirtgen roadbuilding products include milling machines, pavers, compactors, rollers, crushers, screens, and asphalt plants. Similar to the construction product lineup, the Wirtgen brand also provides a technology stack aimed at allowing customers to make smarter and more sustainable decisions. Technology offerings include Wirtgen Performance Tracker, Mill Assist, Level Pro, Vögele Roadscan, Smart Compact, WITOS Paving, Spective Connect, AutoTrac™, and John Deere Connected Support™.
In forestry, our primary products include skidders, wheeled and tracked feller bunchers, forwarders, knuckleboom loaders, wheeled and tracked harvesters, swing machines, and precision forestry technology solutions such as Intelligent Boom Control, TimberMatic™ maps, and TimberManager™. These solutions allow customers to closely track jobsite progress and provide visibility into fleet location, utilization, performance, and maintenance information.
We have a number of initiatives in the rent-to-rent, or short-term rental, market for construction, earthmoving, roadbuilding, and material handling equipment. These include specially designed rental programs for our dealers and expanded cooperation with major national equipment rental companies.
We own retail forestry sales operations in Australia, Brazil, Finland, Ireland, New Zealand, Norway, Sweden, and the United Kingdom. In addition, the Wirtgen Group sells its products primarily through company-owned sales and service subsidiaries in many markets worldwide (most significantly in Europe, India, and Australia). In most other geographies, we sell through an independent dealer channel.
The prevailing levels of residential, commercial, and public construction, investment in infrastructure, and the condition of the forestry products industry influence retail sales of our construction, roadbuilding, and forestry equipment. General economic conditions, interest rates, the availability of credit, and certain commodity prices, such as those applicable to oil and gas, pulp, paper, and saw logs, also influence sales.
In addition to John Deere brand names, the table below provides a list of CF products and their associated brand names:
Roadbuilding Equipment
Wirtgen, Vögele, Hamm, Kleemann, Benninghoven, Ciber
Forestry Attachments
Waratah
Competition
The equipment operations sell products and services in a variety of competitive global and regional markets. The principal competitive factors in all markets include product performance, innovation, quality, distribution, sustainability, customer service, and value. John Deere’s brand recognition is a competitive factor in North America and many other parts of the world.
The agricultural equipment industry continues to change and is becoming even more competitive through the emergence and global expansion of many competitors. The competitive environment for the agriculture and turf operations includes some global competitors, such as AGCO Corporation, CLAAS KGaA mbH, CNH Industrial N.V., Kubota Tractor Corporation, Mahindra & Mahindra Limited, and The Toro Company. These competitors have varying numbers of product lines competing with our products and each has varying degrees of regional focus. Additional competition within the agricultural equipment industry has come from a variety of short-line and specialty manufacturers, as well as local or regional competitors, with differing manufacturing and marketing methods. As technology increasingly enables enhanced productivity in agriculture, the industry is also attracting non-traditional competitors, including technology-focused companies and start-up ventures.
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Our forestry and roadbuilding businesses operate globally. The construction business operates in competitive markets in North and South America, as well as other global markets. Global competitors of the CF segment include Caterpillar Inc., CNH Industrial N.V., Doosan Infracore Co., Ltd. and its subsidiary Doosan Bobcat Inc., Fayat Group, GOMACO Corporation, Hitachi Construction Machinery, Komatsu Ltd., Kubota Tractor Corporation, Ponsse Plc, SANY Group Co., Ltd., Terex, Tigercat Industries Inc., Volvo Construction Equipment (part of Volvo Group AB), and XCMG.
Manufacturing and Assembly
Common manufacturing processes and techniques are used in producing components for PPA, SAT, and CF equipment sold by us and our dealers. The equipment operations also pursue external sales of selected parts that can be manufactured and supplied to third parties on a competitive basis, including engines, power train components, and electronic components.
Considerable effort is being directed to manufacturing cost reductions through improvements in process, optimization of factories, including product line relocation, product design, advanced manufacturing technology, and supply management and logistics, as well as compensation incentives related to productivity and organizational structure. Our flexible assembly lines, which can accommodate a wide product mix and deliver products in line with changes in dealer and customer demand, support our process improvements.
See Item 2 “Properties” in this Annual Report on Form 10-K for more information about our manufacturing facilities.
Research and Development; Patents, Trademarks, Copyrights, and Trade Secrets
We make substantial investments in research and development to improve the quality and performance of our products, to develop new products and technologies to meet our customers’ needs, to integrate sustainable solutions into our products, and to comply with government, safety, and engine emissions regulations.
Our research and development activities are a vital component in our Smart Industrial Operating Model as customers seek to improve profitability, productivity, and sustainability through technology. Integration of technology into equipment is a persistent market trend, and we continue to capitalize on this market trend.
We own a significant number of patents, trademarks, copyrights, trade secrets, and intellectual property licenses related to our products and services and expect the number to grow as we continue to pursue technological innovations. We further our competitive position by filing patent and trademark applications in the U.S. and internationally to protect technology, improvements considered important to the business, and our brand. We believe that, taken together, our rights under these patents and licenses are important to our operations and competitive position but do not regard any of our businesses as being dependent upon any single patent or family of patents. See “Risk Factors - Our business could be adversely affected by the infringement or loss of intellectual property rights” for more information.
Sales and Distribution
Through the U.S. and Canada, we market products to approximately 2,050 independent dealer locations. Of these, approximately 1,600 sell agricultural equipment, while approximately 450 sell construction, earthmoving, material handling, roadbuilding, compact construction, and/or forestry equipment. In addition, roadbuilding equipment is sold at approximately 100 roadbuilding-only locations that may carry products that compete with our construction, earthmoving, material handling, and/or forestry equipment. Turf equipment is sold at most John Deere agricultural equipment locations, a few construction, earthmoving, material handling, roadbuilding, and/or forestry equipment locations, and about 280 turf-only locations. In addition, certain lawn and garden and compact construction products are sold through The Home Depot and Lowe’s.
Outside the U.S. and Canada, our agriculture and turf equipment is sold to distributors and dealers for resale in over 100 countries. Sales and administrative offices are located in Argentina, Australia, Brazil, China, France, Germany, India, Italy, Mexico, Poland, Singapore, Sweden, South Africa, Spain, Ukraine, and the United Kingdom. Turf equipment sales outside the U.S. and Canada occur primarily in Western Europe and Australia. Construction, earthmoving, material handling, and forestry equipment is sold to distributors and dealers primarily by sales offices located in Australia, Brazil, Finland, New Zealand, Singapore, and the United Kingdom. Some of these dealers are independently owned while we own others. Roadbuilding equipment is sold directly to retail customers and independent distributors and dealers for resale. The Wirtgen Group operates company-owned sales and service subsidiaries in Australia, Austria, Belgium, Bulgaria, China, Denmark, Estonia, Finland, France, Georgia, Germany, Hungary, India, Ireland, Italy, Japan, Latvia, Lithuania, Malaysia, the Netherlands, Norway, Poland, Romania, South Africa, Sweden, Taiwan, Thailand, Turkey, Ukraine, and the United Kingdom. The equipment operations operate centralized parts distribution warehouses in the U.S., Brazil, and Germany in coordination with regional parts depots and distribution centers in Argentina, Australia, China, India, Mexico, South Africa, Sweden, and the United Kingdom.
We market engines, power trains, and electronic components worldwide through select sales branches or directly to regional and global original equipment manufacturers and independently owned engine distributors.
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Raw Materials
We source raw materials, manufactured components, and replacement parts for our equipment, engines, and other products from leading suppliers both domestically and internationally. These materials and components include a variety of steel products, metal castings, forgings, plastics, hydraulics, electronics, and ready-to-assemble components made to certain specifications. We also source various goods and services used for production, logistics, offices, and research and development. We develop and maintain sourcing strategies for our purchased materials and emphasize long-term supplier relationships at the core of these strategies. We use a variety of agreements with suppliers intended to drive innovation, ensure availability and delivery of raw materials and components, manage costs on a globally competitive basis, protect our intellectual property, and minimize other supply-related risks. We are focused on proactively increasing the resiliency of our supply chain and actively monitoring supply chain risks to minimize the likelihood of business disruptions caused by the supply base, including supplier financial viability, capacity, business continuity, labor availability, quality, delivery, cybersecurity, weather-related events, and natural disasters. We have implemented mitigation efforts to minimize the impact of potential and actual supply chain disruptions on our customers. Examples include working with the supply base to prioritize allocations to improve material availability, multi-sourcing selected parts and materials, entering long-term contracts for some critical components, and using alternative freight carriers to expedite delivery.
Backlog Orders
The dollar amount of backlog orders as of October 27, 2024 was approximately $5.2 billion for the PPA segment and $2.1 billion for the SAT segment, compared with $7.9 billion and $3.3 billion, respectively, at October 29, 2023. The agriculture and turf backlog are generally highest in the second and third quarters due to seasonal buying trends in these industries. The dollar amount of backlog orders for the CF segment was approximately $2.2 billion at October 27, 2024, compared with $6.4 billion at October 29, 2023. Backlog orders for equipment operations include all orders deemed to be firm as of the referenced date. Backlog orders decreased as demand has declined.
Financial Services
U.S. and Canada. The financial services segment primarily provides and administers financing for retail purchases from our dealers of new equipment manufactured by our agricultural and turf and construction and forestry operations, as well as used equipment taken in trade for this equipment. The Company and John Deere Construction & Forestry Company (a wholly-owned subsidiary of the Company) are referred to as the “sales companies.” John Deere Capital Corporation (Capital Corporation), a U.S. financial services subsidiary, generally purchases retail installment sales and loan contracts (retail notes) from the sales companies. In Canada, John Deere Financial Inc., a Canadian financial services subsidiary, purchases and finances retail notes acquired by John Deere Canada ULC, our Canadian sales company. The terms of retail notes and the basis on which the financial services operations acquire retail notes from the sales companies are governed by agreements with the sales companies. The financial services segment also finances and services revolving charge accounts, in most cases acquired from and offered through merchants in the agricultural and turf markets. Additionally, the financial services operations provide wholesale financing to dealers of our agriculture and turf equipment and construction and forestry equipment (wholesale notes), primarily to finance inventories of equipment for those dealers. The various financing options offered by the financial services operations are designed to enhance sales of our products and generate financing income for the financial services operations. In the U.S. and Canada, certain subsidiaries included in the financial services segment offer extended equipment warranties.
Retail notes acquired by the sales companies are immediately sold to the financial services operations. The equipment operations are the financial services operations’ major source of business, although many retail purchasers of our products finance their purchases outside our organization through a variety of sources, including commercial banks and finance and leasing companies.
The financial services operations offer retail leases to equipment users in the U.S. A small number of leases are executed with units of local governments. Leases are usually written for periods ranging from less than one year to seven years, and typically contain an option permitting the customer to purchase the equipment at the end of the lease term. Retail leases also are offered in a generally similar manner to customers in Canada.
The financial services operations’ terms for financing equipment retail sales (other than smaller items financed with unsecured revolving charge accounts) generally provide for retention of a security interest in the equipment financed. Finance charges are sometimes waived for specified periods or reduced on certain John Deere products sold or leased in advance of the season of use or in other sales promotions. The financial services operations generally receive compensation from the sales companies at approximate market interest rates for periods during which finance charges are waived or reduced on the retail notes or leases. The cost is accounted for as a deduction in arriving at net sales by the equipment operations.
We have an agreement with Capital Corporation to make payments to Capital Corporation such that its consolidated ratio of earnings to fixed charges is not less than 1.05 to 1 for any four consecutive fiscal quarterly periods. We also have committed to continuing to own, directly or through one or more wholly-owned subsidiaries, at least 51 percent of the voting shares of capital stock of Capital Corporation and to maintain Capital Corporation’s consolidated tangible net worth at not less than $50 million. Our obligations to make payments to
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Capital Corporation under this agreement are independent of whether Capital Corporation is in default on its indebtedness, obligations, or other liabilities. Further, our obligations under the agreement are not measured by the amount of Capital Corporation’s indebtedness, obligations, or other liabilities. Our obligations to make payments under this agreement are expressly stated not to be a guaranty of any specific indebtedness, obligation, or liability of Capital Corporation and are enforceable only by or in the name of Capital Corporation. As of October 27, 2024, we were in compliance with all of our obligations, and no payments were required under this agreement in fiscal year 2024 or fiscal year 2023. As of October 27, 2024, we indirectly owned 100 percent of the voting shares of Capital Corporation’s capital stock and Capital Corporation’s consolidated tangible net worth was $6,226.2 million.
Outside the U.S. and Canada. The financial services operations also offer financing, primarily for our products, in Argentina, Australia, Brazil, India, Mexico, New Zealand, and in several other countries in Africa, Asia, Europe, and Latin America. In certain markets, financing is offered through cooperation agreements or joint ventures with other financial institutions. For example, in the fourth quarter of fiscal year 2024, we entered into a joint venture agreement with a Brazilian bank, Banco Bradesco S.A. (Bradesco), for Bradesco to invest and become 50 percent owner of our subsidiary in Brazil, Banco John Deere S.A.. The way the financial services operations offer financing is affected by a variety of country-specific laws, regulations, and customs, including those governing property rights and debtor obligations, which are subject to change, and which may introduce greater risk to the financial services operations.
The financial services operations also offer to select customers and dealers credit enhanced international export financing primarily for the purchase of our products.
Additional information on the financial services operations is provided in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) section in this Annual Report on Form 10-K.
Environmental Matters
We are subject to a variety of local, state, and federal environmental laws and regulations in the U.S., as well as the environmental laws and regulations of other countries in which we conduct business. We strive to comply with applicable laws and regulations; however, in the event of noncompliance, we could be subject to fines and other penalties. Compliance with these laws and regulations adds to the cost of our production operations and compliance with emissions regulations adds to the cost of our products. In fiscal year 2024, compliance with environmental controls applicable to us did not have a material effect on our capital expenditures, earnings, or competitive position. At this time, we do not expect to incur material capital expenditures related to environmental controls during fiscal year 2025. In addition to ensuring compliance with laws and regulations, we aim to reduce our environmental footprint through our Leap Ambitions framework and seek opportunities to reduce environmental impacts on the communities where we operate.
The U.S., the European Union (EU), India, and other governments throughout the world have enacted, and continue to enact, laws and regulations to reduce off-road engine emissions. Compliance with these regulations requires significant investments in the development of new engine technologies and after-treatment systems.
Governments also are implementing laws regulating products across their life cycles, including raw material sourcing and the storage, distribution, sale, use, and disposal of products at their end of life. These laws and regulations include requirements to develop less hazardous chemical substances and products, right-to-know, restriction of hazardous substances, and product take-back laws.
We are evaluating, cleaning-up, or conducting corrective action at a limited number of sites. We do not expect that these matters or other expenses or liabilities we may incur in connection with any noncompliance with environmental laws, regulations, or the clean-up of any additional properties, will have a material adverse effect on our consolidated financial position, results of operations, cash flows, or competitive position.
We continue to monitor and review developing sustainability frameworks, standards, and global regulations.
With respect to properties and businesses that have been or will be acquired, we conduct due diligence into potential exposure to environmental liabilities but cannot be certain that we have identified, or will identify, all adverse environmental conditions.
Government Regulations
We are subject to a wide variety of local, state, and federal laws and regulations in the countries where we operate. These laws and regulations include a range of trade, product, anti-bribery, anti-corruption, foreign exchange, employment, tax, environmental, safety, data privacy, telecommunications, antitrust, and other laws and regulations.
Compliance with these laws and regulations often requires the dedication of time and effort of our employees, as well as financial resources. In fiscal year 2024, compliance with the regulations applicable to us did not have a material effect on our capital expenditures, earnings, or competitive position. At this time, we do not expect to incur material capital expenditures related to compliance with regulations during fiscal year 2025. Additional information about the impact of government regulations on our business is included in Item 1A, “Risk Factors – Strategy Risks” and “Compliance Risks.”
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Human Capital
Our employees are guided by a simple principle: We run so life can leap forward. Employees are further guided by our Code of Business Conduct (Code), which helps them to uphold and strengthen the standards of honor and integrity that have defined John Deere since our founding. And while our world and business may change, we continue to be guided by our core values — Integrity, Quality, Humanity, Commitment, and Innovation. Humanity was added as our fifth core value in fiscal year 2024.
Employees
At October 27, 2024, we had approximately 75,800 employees, of which approximately 35,200 are full-time production employees. We had 29,600 total employees in the U.S. of which approximately 13,300 were production employees. We also retain consultants, independent contractors, and temporary and part-time workers.
Unions are certified as bargaining agents for approximately 77 percent of our U.S. production and maintenance employees. Approximately 8,900 of our active U.S. production and maintenance workers are covered by a collective bargaining agreement with the United Auto Workers (UAW), with an expiration date of November 1, 2027. A small number of U.S. production employees are represented by the International Association of Machinists and Aerospace Workers (IAM). Collective bargaining agreements covering our employees in the U.S. expire between 2025 and 2027. Unions also represent the majority of employees at our manufacturing facilities outside the U.S.
There is no guarantee that we will be able to renew collective bargaining agreements or whether such agreements will be on terms satisfactory to us. For further discussion, see “Risk Factors—Disputes with labor unions may adversely affect our ability to operate in our facilities as well as impact our financial results.”
Code of Business Conduct
We are committed to conducting business in accordance with the highest ethical standards. We require all employees to complete training on our Code and also require that employees regularly certify compliance with the Code. The Code provides specific guidance to all our employees outlining how they can and must uphold and strengthen the integrity that has defined John Deere since our founding. In addition, we maintain a global compliance hotline to report concerns of potential violations of the Code, global policies, or the law.
Health and Safety
We strive to achieve safety excellence through increased focus on injury prevention, leading indicators, risk reduction, and health and safety management systems. We have made progress on implementing best practices and leading indicators for enabling employee safety over recent years with our Health and Safety Management System.
We utilize a safety balanced scorecard, which includes leading and lagging indicators, and is designed to enable continuous measurement of safety performance and drive continuous improvement. Leading indicators include incident corrective action closure rates, ergonomic scorecard, and risk reduction from safety and ergonomic risk assessment projects. Lagging indicators include total recordable incident rate, ergonomic recordable case rate, lost time frequency rate, and near-miss rate. Leading and lagging indicators are tracked by most of our manufacturing facilities and internally reported. In fiscal year 2024, we reported a total recordable incident rate of 1.69 and a lost time frequency rate of 0.63. To improve our total recordable incident rate, we will prioritize injury prevention and risk reduction strategies and improve ergonomic programs.
Workplace Practices and Policies
We are an equal opportunity employer committed to providing a workplace free of harassment and discrimination. We believe that a diverse workforce that reflects the communities we serve is essential to our long-term success. For recruiting and development opportunities, we work with a variety of professional organizations to support a diverse pipeline of candidates representing the fields of accounting, agriculture, engineering, general business, science, and technology, and provide development opportunities for employees.
Compensation & Benefits
Our total rewards are intended to be competitive, meet the varied needs of our global workforce, and reinforce our values. We are committed to providing comprehensive and competitive pay and benefits to our employees. We continue to invest in employees through growth and development and well-being initiatives.
Our work environment is designed to promote innovation, well-being, and reward performance. Our total rewards for employees include a variety of components that aim to support our employees in building a strong financial future, including competitive market-based pay and comprehensive benefits. In addition to earning base pay, eligible employees are compensated for their contributions to our goals with both short-term cash incentives and long-term equity-based incentives.
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Eligible full-time employees in the U.S. have access to medical, dental, and vision plans; savings and retirement plans; parental leave and paid time off; and mental health and wellness services. We also offer a variety of working arrangements to eligible employees, including flexible schedules, remote work, and job sharing to help employees manage home and work-life situations. Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices, and negotiations with works councils, trade unions, and other employee representative bodies.
Training and Development
Around the world, we offer internships, training, upskilling, apprenticeships, and leadership development at all stages of an employee’s career. Training programs are tailored to different geographic regions and job functions and include topics such as technical operation of equipment, equipment assembly, relationships with customers and dealers, our culture and values, compliance with the Code, compliance with anti-bribery/corruption laws and policies, compliance with management of private data and cybersecurity, conflicts of interest, discrimination and workplace harassment policies, sexual harassment policies, and leadership development.
Available Information
Our internet address is http://www.deere.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available on our website free of charge as soon as reasonably practicable after they are filed or furnished with the United States Securities and Exchange Commission (SEC or Commission). The information contained on our website is not included in, nor incorporated by reference into, this Annual Report on Form 10-K.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following are our executive officers as of December 3, 2024. All executive officers are elected or appointed by the Board of Directors and hold office until the meeting of the Board of Directors following the annual meeting of stockholders each year.
Name (Age)
Present Deere Position (Effective Date)
Business Experience (Effective Date)
John C. May (55)
Chairman, Chief Executive Officer, and President (2020)
Joshua A. Jepsen (47)
Senior Vice President and Chief Financial Officer (2022)
Ryan D. Campbell (50)
President, Worldwide Construction & Forestry Division and Power Systems (2022)
Jahmy J. Hindman (49)
Senior Vice President and Chief Technology Officer (2023)
Rajesh Kalathur (56)
President, John Deere Financial, and Chief Information Officer (2022)
Deanna M. Kovar (46)
President, Worldwide Agriculture & Turf Division, Small Ag & Turf, Sales and Marketing Regions of Europe, CIS, Asia, and Africa (2023)
Felecia J. Pryor (50)
Senior Vice President and Chief People Officer (2022)
Cory J. Reed (54)
President, Worldwide Agriculture & Turf Division, Production & Precision Ag, Sales and Marketing Regions of the Americas and Australia (2020)
Justin R. Rose (45)
President, Lifecycle Solutions, Supply Management, and Customer Success (2022)
Kellye L. Walker (58)
Senior Vice President and Chief Legal Officer, Global Law Services & Regulatory Affairs (2024)
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RISK FACTORS.
The following risks are considered material to our business based upon current knowledge, information, and assumptions. This discussion of risk factors should be considered closely in conjunction with the MD&A, including the risks and uncertainties described in the Forward-Looking Statements, and the Notes to Consolidated Financial Statements. These risk factors and other forward-looking statements relate to future events, expectations, trends, and operating periods. They involve certain factors that are subject to change and important 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 our businesses. Although the risks are organized by headings and each risk is discussed separately, many are interrelated. The risks described in this Annual Report on Form 10-K and the Forward-Looking Statements in this report are not the only risks we face.
OPERATIONAL RISKS
Our financial results largely depend upon the agricultural market business cycle, as well as general economic conditions and outlook. Negative conditions in the agricultural industry and general economy cause weakened demand for our equipment and services, limit access to funding, and result in higher funding costs.
Our success largely depends on the vitality of the agricultural industry. Historically, the agricultural industry has been cyclical and subject to a variety of economic and other factors. Sales of agricultural equipment, in turn, are also cyclical and generally reflect the economic health of the agricultural industry. The economic health of the agricultural industry is affected by numerous factors, including farm income, farmland values, and debt levels and financing costs, all of which are influenced by the levels of commodity and protein prices, world grain stocks, acreage available and planted, crop yields, agricultural product demand, soil conditions, farm input costs, government policies, and government subsidies. Downturns in the agricultural industry due to these and other factors, which could vary by market, have resulted in decreases in demand for agricultural equipment, adversely affecting our performance.
The demand for our products and services depends on the fundamentals in the markets in which we operate and can be significantly reduced in an economic environment characterized by high unemployment, high interest rates, cautious consumer spending, inflation, lower corporate earnings, and lower business investment. In fiscal year 2024, unfavorable market conditions resulted in lower sales volumes, higher sales discounts, higher receivable write offs, and a higher provision for credit losses. We expect certain of these conditions to persist in fiscal year 2025. Changes in interest rates and the agricultural market business cycle are driven by factors outside of our control, and as a result we cannot reasonably foresee when these conditions will fully subside.
Sustained general negative economic conditions and outlook also affect housing starts, energy prices and demand, and other construction, which dampens demand for certain construction equipment. Our turf operations and our construction and forestry segments are dependent on construction activity and have also been affected by recent adverse economic conditions. Decreases in construction activity and housing starts have had a material adverse effect on our financial results.
Uncertain or negative outlook with respect to pervasive U.S. fiscal issues as well as general economic conditions and outlook, such as market volatility or interest rate changes, have caused and could continue to cause significant changes in market liquidity conditions. Such changes could impact access to funding and associated funding costs, which could reduce our earnings and cash flows.
We may be unable to manage increasing political, economic, and social uncertainty in certain regions of the world, which could significantly change the dynamics of our competition, customer base, and product offerings globally.
Efforts to grow our businesses depend in part upon access to and developing market share and profitability in additional geographic markets, including, but not limited to, Argentina, Brazil, CIS, China, India, and South Africa. There are various risks associated with our global footprint, including, but not limited to, the following:
We may be affected by changing worldwide demand for food and different forms of renewable energy, which could impact the price of farm commodities and consequently the demand for our equipment. This could result in higher research and development costs related to changing machine fuel requirements.
Changing worldwide demand for farm outputs to meet the world’s growing food and renewable energy demands, driven in part by government policies, including those related to climate change, and a growing world population, are likely to result in fluctuating agricultural commodity prices, which directly affect sales of agricultural equipment. Lower agricultural commodity prices directly affect farm incomes, which negatively affect sales of agricultural equipment and result in higher credit losses. While higher commodity prices benefit our crop-producing agricultural equipment customers, they could result in greater feed costs for livestock and poultry producers, which in turn may result in lower levels of equipment purchased by these customers. In addition, changing energy demands may cause farmers to change the types or quantities of the crops they raise, with corresponding changes in equipment demands. Finally, changes in governmental policies regulating fuel utilization, including biofuel, affect commodity demand and commodity prices, demand for our diesel-fueled equipment, and result in higher research and development costs related to equipment fuel standards.
Changes in the availability and price of certain raw materials, components, and whole goods have resulted and could result in disruptions to the supply chain causing production disruptions, increased costs, and lower profits on sales of our products.
We require access to various raw materials, components, and whole goods at competitive prices to manufacture and distribute our products.
We have experienced changes in the availability and prices of raw materials, components, whole goods, and freight over the past several years, especially in fiscal years 2021 and 2022. Global logistics network challenges resulted in delays, shortages of key manufacturing components, increased order backlogs, increased transportation costs, and production inefficiencies from a higher number of partially completed machines in inventory, which increased our overall production and overhead costs. Increases in such costs have had an adverse effect on our business operations. While we have seen stabilization in the supply chain and inflation, we anticipate potential future fluctuations due to continued geopolitical and economic uncertainty, and regulatory and policy instability, including import tariffs and trade agreements. The latter have the potential to significantly increase production and logistics costs and have a material negative effect on the profitability of the business, particularly if we are unable to recover the increased costs due to market considerations or other factors.
We rely on our suppliers to acquire the raw materials, components, and whole goods required to manufacture their products. Significant disruptions to the supply chain resulting from shortages of raw materials, components, and whole goods have and could continue to adversely affect our ability to meet commitments to our customers. Work interruption or union strikes by employees of suppliers could also contribute to disruptions within our supply chain. In addition, certain materials and components used in our products are acquired from a single supplier or are proprietary in nature and cannot be alternatively sourced expeditiously. Furthermore, if our customers are unwilling to accept price increases for our products, or if we are unable to offset the increases in costs, raw material costs or shortages could have a material adverse effect on our operational or financial results.
Failure by our supply base to use ethical business practices and comply with applicable laws and regulations may adversely affect our business, financial condition, and operational results.
While we conduct due diligence on our suppliers and require their compliance with various policies and contractual covenants, we do not control our suppliers’ business practices. Accordingly, we cannot guarantee that our due diligence efforts will reveal that they follow ethical business practices such as fair wage practices and compliance with environmental, safety, labor, human rights, material sourcing, and other laws. A lack of compliance could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages, or other disruptions of our operations. If our suppliers or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, identification and reporting requirements, or ethical standards, our reputation and brand could be harmed, and we could be exposed to litigation, investigations, enforcement actions, monetary liability and additional costs that could have a material adverse effect on our business, financial condition, and results of operations.
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Unfavorable weather conditions or natural catastrophes that reduce agricultural production and demand for agriculture and turf equipment could directly and indirectly affect our business.
The purchasing decisions of our customers, particularly the purchasers of agriculture and turf equipment, can be significantly affected by poor or unusual weather conditions. Such conditions include:
Each of these conditions could negatively affect demand for agricultural and turf equipment and the financial condition and credit risk of our dealers and customers.
Unexpected events have increased and may in the future increase our cost of doing business or disrupt our operations.
The occurrence of one or more unexpected events, including war, acts of terrorism, epidemics and pandemics (such as the COVID pandemic), civil unrest, fires, tornadoes, tsunamis, hurricanes, earthquakes, floods, and other forms of severe weather in the United States or in other countries in which we operate, or in which our suppliers are located, have adversely affected and could in the future adversely affect our operations and financial performance. Such events have caused and could cause complete or partial closure of one or more of our manufacturing facilities or distribution centers, temporary or long-term disruptions in the supply of component products from some local and international suppliers, and disruption and delay in the transport of products to dealers, end-users, and distribution centers. Most recently, Hurricane Helene in the U.S. closed operations at our Augusta, Georgia and Greenville, Tennessee facilities temporarily. Existing insurance coverage may not provide protection from all the costs that may arise from such events.
The potential physical impacts of climate change on our facilities, suppliers, and customers, and therefore on our operations, are highly uncertain and will be particular to the circumstances developing in various geographic regions. These potential physical effects may adversely affect the demand for our products and the cost, production, sales, and financial performance of our operations.
Our business could be adversely affected by the infringement or loss of intellectual property rights.
We protect our intellectual property with a combination of patents, trademarks, copyrights, trade secret laws, and legal agreements. We heavily rely on certain trademarks to protect our identity and customer recognition of our products and services, including, but not limited to, the “John Deere” mark, the leaping deer logo, the “Nothing Runs Like a Deere” slogan, and the green and yellow color combination. These trademarks, as well as the many patents that protect innovations used in our products, are integral to our business, and their loss could have a material adverse effect on us.
Additionally, third parties may initiate legal proceedings to challenge the validity of our intellectual property or allege that we infringe on their intellectual property. We may incur substantial costs if third parties initiate such legal proceedings, or if we initiate legal proceedings to protect or enforce our intellectual property. If the outcome of any such legal proceedings is unfavorable to us, our business could be adversely affected.
Rationalization or restructuring of manufacturing facilities, and plant expansions and updates at our manufacturing facilities may cause capacity constraints, inventory fluctuations, and other issues.
The rationalization or restructuring of our manufacturing facilities, including relocating production or closing facilities, may result in temporary constraints on our ability to produce the quantity of products necessary to fill orders and thereby complete sales in a timely manner. In addition, decisions regarding the rationalization, restructuring or relocation of facilities, such as the recently announced shifting of production of skid steer loaders and compact track loaders from our Dubuque, Iowa factory to Ramos, Mexico, and any similar actions we may undertake in the future, could also subject us to additional or new tariffs, other issues relating to the importation of products, fines, and reputational risks. Finally, the expansion and reconfiguration of existing manufacturing facilities, as well as new or expanded manufacturing operations in emerging markets, such as Brazil, could increase the risk of production delays, as well as require significant investments.
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Changes in tax rates, tax legislation, or exposure to additional tax liabilities could have a negative effect on our business.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions. Tax rates in various jurisdictions may be subject to significant change. Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretations. If our effective tax rates were to increase, or if the ultimate determination of taxes owed is for an amount more than amounts previously accrued, our operating results, cash flows, and financial condition could be adversely affected.
Our consolidated financial results are reported in U.S. dollars while certain assets and other reported items are denominated in foreign currencies, creating currency exchange and translation risk.
We are a global company with transactions denominated in a variety of currencies. We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which we earn our revenues.
Additionally, the reporting currency for our consolidated financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses, and revenues are denominated in other countries’ currencies, which are then translated into U.S. dollars at the applicable exchange rates and reported in our consolidated financial statements. Therefore, fluctuations in foreign exchange rates affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in the original currencies. While the use of currency hedging instruments may provide us with some protection from adverse fluctuations in currency exchange rates, by utilizing these instruments we potentially forego any benefits that may result from favorable fluctuations in such rates. In Argentina, we have employed mechanisms to convert Argentine pesos into U.S. dollars to the extent possible. These mechanisms are short-term in nature, leaving us exposed to long-term currency fluctuations.
Changes in interest rates or market liquidity conditions, as well as changes in government banking, monetary and fiscal policies, could adversely affect our financials and our earnings and/or cash flows.
While central banks began cutting their policy interest rates in the latter part of fiscal year 2024, interest rates remain above recent norms. High interest rates can have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which can negatively affect customer demand for our equipment and customers’ ability to repay their obligations to us. While we strive to match the interest rate characteristics of our financial assets and liabilities, changing interest rates have had an adverse effect on our financing spreads—the difference between the yield we earn on our assets and the interest rates we pay for funding—which has affected our earnings.
In addition, actions by credit rating agencies, such as downgrades or negative changes to ratings outlooks, can affect the availability and cost of funding for us and can increase our costs of capital and hurt our competitive position.
Moreover, policies of the U.S. and other governments regarding banking, monetary, and fiscal policies intended to promote or maintain liquidity, stabilize financial markets, and/or address local deficit or structural economic issues have a material impact on our customers and markets.
Our operations and results could also be affected by financial regulatory reform that could, among other things, have an adverse effect on the financial services segment and on our customers by limiting their ability to enter hedging transactions or to finance purchases of our products. Government policies on spending can also affect us, especially the CF segment, due to the impact of government spending on infrastructure development. Our operations, including those outside of the U.S., may also be affected by non-U.S. regulatory reforms being implemented to further regulate non-U.S. financial institutions and markets.
Because the financial services segment provides financing for a significant portion of our sales worldwide, negative economic conditions in the financial industry could materially impact our operations and financial results.
Negative economic conditions have an adverse effect on the financial industry in which the financial services segment operates. The financial services segment provides financing for a significant portion of our sales worldwide. The financial services segment is vulnerable to customers and others defaulting on contractual obligations, and has experienced, and may continue to experience write-offs and credit losses that, in some cases, exceed our expectations and adversely affect our financial condition and results of operations as a result of elevated delinquencies. The financial services segment’s inability to access funds at cost-effective rates to support our financing activities could have a material adverse effect on our business. The financial services segment’s liquidity and ongoing profitability depend largely on timely access to capital to meet future cash flow requirements and to fund operations and costs associated with engaging in diversified funding activities. The financial services segment may also experience residual value losses that exceed our expectations caused by lower pricing for used equipment and higher-than-expected equipment returns at lease maturity.
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STRATEGY RISKS
We may not realize the anticipated benefits of our Smart Industrial Operating Model and Leap Ambitions.
Failure to realize the anticipated benefits of our Smart Industrial Operating Model and related business strategies in production systems, precision technologies, and aftermarket support, as well as failure to have selected a business strategy that aligns with our customer needs and market trends, could have an adverse effect on our operational and financial results. Several factors could impact our ability to successfully execute our Smart Industrial Operating Model, including, among other things:
Similarly, we may not realize the anticipated benefits of our Leap Ambitions and related goals within the expected timelines, or at all. As part of our Leap Ambitions, we adopted various goals we expect to achieve by 2026 or 2030, but these goals and their timelines might be modified or updated. We may modify or not be able to achieve these goals for a variety of reasons, some of which may be beyond our control. Examples include:
If we are unable to remain competitive and relevant, including by delivering precision technology solutions to our customers, our business, results of operations, and financial condition could be adversely affected.
We compete on product performance, innovation and quality, distribution, sustainability, customer service, and price. Aggressive pricing or other strategies of competitors, unanticipated product or manufacturing delays, our failure to deliver quality products that meet customer needs, or our failure to price products competitively adversely affects our business, results of operations, and financial condition. To remain competitive, we need to have a thorough understanding of our existing and potential customers on a global basis, particularly in growth markets such as Argentina and Brazil.
In addition, if we are unable to remain relevant and effectively develop and deliver technology that customers can easily adopt and utilize, customer adoption rates could reduce, adversely impacting our business operations and future financial performance. Therefore, our ability to deliver precision technology and expand value-driven solutions is critical to our business success. If we fail to stay ahead of both traditional and non-traditional competitors in the technology space, it may hinder our ability to adapt or identify strategic partnerships within our industries in a timely manner. This could result in increased costs and delays in delivering value to our customers, ultimately affecting our competitive position and financial condition.
Furthermore, our approach to precision technology involves hardware and software, guidance, connectivity and digital solutions, automation and machine intelligence, and autonomy. We may make significant investments in research and development, connectivity solutions, digital security for precision technology solutions, and conduct dealer and employee training. These investments may not produce solutions that provide the desired results for customers’ profitability or sustainability outcomes, impacting our competitive position.
We may be unable to accurately forecast customer demand for products and services, and to adequately manage inventory, which could adversely affect our operating results.
To ensure adequate inventory supply, we must forecast inventory needs and expenses and place orders sufficiently in advance with suppliers and contract manufacturers. These forecasts are based on estimates of future demand for products and services. Failure to accurately forecast our needs may result in unmet market demand, parts shortages, manufacturing delays or inefficiencies, increased costs, or excess inventory, such as what we experienced in fiscal year 2022 due to supply chain disruptions. Our ability to accurately forecast demand could be affected by many factors, including changes in customer demand for our products and services, changes in
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demand for the products and services of competitors, unanticipated changes in general market conditions, and the weakening of economic conditions or customer confidence in future economic conditions. If the forecasts used to manage inventory are not accurate, we may experience excess inventory levels, shortage of available products, or reduced manufacturing efficiencies.
We rely on a network of independent dealers to manage the distribution of our products and services. If our dealers are unsuccessful with their sales and business operations, it could have an adverse effect on our overall sales and revenue.
We rely on the capability of our dealers to develop and implement effective sales plans to create demand among purchasers for the equipment and related products and services that dealers purchase from us. If our dealers are unsuccessful in these endeavors, we will be unable to grow our sales and revenue, which would have an adverse effect on our financial condition.
Our dealers carry inventories of finished products as part of their operations and adjust those inventories based on future needs and market conditions, including the level of used equipment inventory. If the inventory levels of our dealers are higher than they desire, they may postpone equipment purchases from us, which could cause our sales to be lower and negatively impact our results. Similarly, our results could be negatively impacted through the loss of time-sensitive sales if our dealers do not maintain inventory levels sufficient to meet customer demand.
In addition, the dealer channel’s ability to support and service precision technology solutions and emerging power solutions may affect customers’ acceptance and adoption rates of these products. The unavailability of specialized technicians to service our equipment may result in overburdening dealers’ servicing capacity.
Dealers may exit or we may seek to terminate relationships with certain dealers if they are unable to meet customer needs. The unplanned loss of any of our dealers could lead to inadequate market coverage or negative customer impressions, and may adversely impact our ability to collect receivables that are associated with that dealer. Dealers could also have trouble funding their day-to-day cash flow needs and paying their obligations due to adverse business conditions resulting from negative economic effects or other factors.
We may not realize anticipated benefits of acquisitions, joint ventures, and divestitures, or these benefits may take longer to realize than expected.
From time to time, we make strategic acquisitions and divestitures and participate in joint ventures. Acquisitions and joint ventures we have entered into, or may enter into in the future, may involve significant challenges and risks, including that the acquisitions or joint ventures do not advance our business strategy, or fail to produce satisfactory returns on investment. Other risks include:
We may also decide to divest businesses and terminate joint ventures before their stated expiration. Divestitures of businesses or dissolutions of joint ventures may involve significant challenges and risks, including failure to advance our business strategy, costs and disruptions to us, and negative effects on our product offerings, which may adversely affect our business, results of operations, and financial condition. Divestitures of businesses and dissolutions of joint ventures may result in ongoing financial or legal involvement in the divested business through indemnifications or other financial arrangements, such as retained liabilities, which could affect our future financial results.
Our reputation and brand could be damaged by negative publicity.
Our brand has worldwide recognition and contributes to the success of our business. Our reputation is critical to growing our customer base. Our brand depends on the ability to maintain a positive customer perception of the business. Negative claims or publicity
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involving us, our products or services, our culture and values, our stance on environmental, social, and governance topics, customer data, or any of our key employees or suppliers, damages our reputation and brand image, regardless of whether such claims are accurate. Furthermore, our shareholders, customers, and other stakeholders have evolving, varied and often times conflicting expectations regarding our culture, values, and our business, which makes it difficult to achieve a uniform positive perception amongst all stakeholders.
Additionally, negative or inaccurate postings, articles, or comments on social media, the internet, or the press about us have generated negative publicity that damages the reputation of our brand. For example, in fiscal year 2024, we experienced negative social media campaigns related to our approach to diversity and inclusion, our customers’ right to maintain and safely repair their equipment, including with respect to our Memorandum of Understanding with American Farm Bureau Federation, reductions in workforce, and production relocation. Further, adverse publicity about regulatory or legal action against us, or legal proceedings initiated by us, also damages our reputation and brand image, undermining customer confidence, and reducing long-term demand for equipment, even if the regulatory or legal action is unfounded or not material to our operations. If the reputation, culture, or image of our brands are damaged, or we receive negative publicity, then our sales, financial condition, and results of operations could be materially and adversely affected.
TALENT RISKS
Our ability to attract, develop, engage, and retain qualified employees could affect our ability to execute our strategy.
Our continued success depends, in part, on our ability to identify and attract qualified candidates with the requisite education, background, and experience, as well as our ability to develop, engage, and retain qualified employees. Failure to attract, develop, engage, and retain qualified employees, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new employees, or inadequate resources to train, integrate, and retain qualified employees, could impair our ability to execute our business strategy and could adversely affect our business, results of operations, and financial condition.
In addition, our culture and our values have been important contributors to our success to date and promote a sense of pride and fulfillment in our employees. Failure to preserve our culture or focus on our values could negatively affect our ability to retain and recruit talent.
While we strive to reduce the impact of the departure of employees, our operations or ability to execute our business strategy may be affected by the loss of employees, such as in connection with the reduction in workforce we conducted in fiscal year 2024. This reduction may adversely affect us as a result of decreased employee morale, the loss of institutional knowledge held by departing employees, the allocation of resources to reorganize and reassign job roles and responsibilities, and the increased risk of litigation from former employees. In addition, we may not realize the expected cost savings from the reduction in workforce. We may also conduct other workforce reductions in the future, if deemed appropriate for our business.
Disputes with labor unions may adversely affect our ability to operate in our facilities as well as impact our financial results.
Many of our production and maintenance employees are represented by labor unions under various collective bargaining agreements with different expiration dates. Our failure to successfully renegotiate labor agreements as they expire has from time to time led, and could in the future lead, to work stoppages or other disputes with labor unions. Certain of our labor agreements expire as early as 2025. Disruptions to our manufacturing and parts-distribution facilities through various forms of labor disputes could adversely affect us. Any strike, work stoppage, or other dispute with a labor union distracts management from operating the business, may displace employees from ordinary job positions to fill in vacant positions, may affect our reputation, and could materially adversely affect our business, results of operations, and financial condition.
DIGITAL RISKS
Security breaches and other disruptions to our information technology infrastructure could interfere with our operations and could compromise our information as well as information of our employees, customers, suppliers, and/or dealers, exposing us to liability that could cause our business and reputation to suffer.
In the ordinary course of business, we rely upon information technology networks and systems, some of which are managed by third parties, to process, transmit, and store electronic information and to manage or support a variety of business processes and activities, including supply chain, manufacturing, distribution, invoicing, and collection of payments from dealers and other purchasers of our equipment and from customers of the financial services segment. We use information technology systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal, and tax requirements.
Additionally, we collect and store confidential data, including intellectual property, proprietary business information, and the proprietary business information of our customers, suppliers, and dealers, as well as personal data of our customers and employees in
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data centers, which are often owned by third parties and maintained on their information technology networks. The secure operation of these information technology networks, and the processing and maintenance of this information, are critical to our business operations and strategy.
Despite security measures, including exercises, tests, incident simulations, and system assessments designed to discover and address potential vulnerabilities, our information technology networks and infrastructure have been and may be vulnerable to intrusion, damage, disruptions, or shutdowns due to attacks by cyber criminals, employees’, suppliers’, or dealers’ error or malfeasance, supply chain compromise, disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, ransomware or other malware, telecommunication or utility failures, terrorist acts, natural disasters, or other events. Although we have not suffered any significant cyber incidents that resulted in material business impact, we have from time to time been, and expect to continue to be, the target of malicious cyber threat actors. The occurrence of any significant event could compromise our networks, and the information stored there could be accessed, obtained, publicly disclosed, lost, altered, misused, or stolen. Any such access, acquisition, disclosure, alteration, misuse, or other loss of information could result in legal claims or proceedings, government investigations, liability or regulatory penalties, disruption or shut down of our operations, disruption or shut down of our dealers’ and customers’ operations, and damage to our reputation, which could adversely affect our business, results of operations, and financial condition. Furthermore, as security threats continue to evolve and increase in frequency and sophistication, we may need to invest additional resources to enhance information security.
Any unauthorized control or manipulation of our products’ systems could result in loss of confidence in us and our products.
Some of our products include connectivity hardware and software typically used for remote system updates. While we have implemented security measures intended to protect against unauthorized remote access to these products, malicious threat actors have attempted, and may attempt in the future, to gain unauthorized access to such products in order to gain control of the products, change the products’ functionality, user interface, or performance characteristics, interfere with the products’ operations, or gain access to data stored in or generated by the products or to systems to which they connect. In addition, reports of unauthorized access to our products, systems, and data, regardless of their reliability, may result in the perception that the products, systems, or data are vulnerable to malicious or unauthorized modifications. Any unauthorized access to or control of our products or systems, any loss of data, or any perception that products, systems, or data are vulnerable could result in loss of sales based on customers’ loss of confidence in our products, legal claims or proceedings against us, government investigation, liability, or regulatory penalties, which could adversely affect our business, results of operations, and financial condition.
Technical or regulatory limitations may impact our ability to effectively implement automation, autonomy, and artificial intelligence solutions.
We utilize automation and machine learning in some of our products, including consumer-facing features, and leverage generative artificial intelligence in our business processes. For example, the automation software, digital tools, applications, and analytics utilized in John Deere’s products are designed to improve customer decision-making, such as the automation package on the S7 Series Combines and the computer vision and machine learning technology that enables our See & Spray™ targeted spraying solution.
While we believe the use of these emerging technologies can present significant benefits, it also creates risks and challenges as the use of artificial intelligence is a novel business model without an established track record. Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, security concerns, and the protection of privacy could impair the adoption and acceptance of autonomous machine solutions.
Furthermore, any confidential information that we input into a third-party generative artificial intelligence platform could be leaked or disclosed to others, including sensitive information that is used to train the third parties’ model. Additionally, if the data used to train the solution or the content, analyses, or recommendations that the machine learning and intelligence applications assist in producing is deemed to be inaccurate, incomplete, biased or questionable, our brand and reputation may be harmed and we may be subject to legal liability claims. The development of our own artificial intelligence applications may require additional investment in the development of proprietary systems, models, or datasets, which are often complex, may be costly and could impact the results of our operations. Developing, testing, and deploying these technologies may also increase the cost profile of our products due to the level of investment needed to enable such initiatives.
Disruption of our technology systems or unexpected network interruption could disrupt our business.
We are increasingly dependent on technology systems to operate on a day-to-day basis. The failure of our technology systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business. These disruptions could result in delays, which could reduce demand for our products and cause our sales to decline. In addition, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth and new technologies, we could lose customers. Any significant disruption
20
in our technology systems could harm our reputation and credibility and could have a material adverse effect on our business, financial condition, and results of operations.
We could be impacted by changes to or reallocation of radio frequency (RF) bands which could disrupt or degrade the reliability of our high precision augmented Global Positioning System (GPS) or other RF technology, which could impair our ability to develop and market GPS- and RF-based technology solutions, as well as significantly reduce agricultural and construction customers’ profitability.
Our current and planned integrated agricultural business and equipment management systems, as well as our fleet management telematics solutions for construction equipment, depend upon the use of RF signals. These signals include, but are not limited to, GPS signals, other GPS-like satellite signals, augmented GPS services, and other RF technologies that link equipment, operations, owners, dealers, and technicians. These radio services depend on frequency allocations governed by international and national government agencies. Any international or national reallocation of frequency bands, including frequency bands segmentation and band spectrum sharing, or other modifications concerning the regulation of frequency bands, could significantly disrupt or degrade the utility and reliability of our GPS-based products, which could negatively affect our ability to develop and market GPS-based technology solutions.
In January 2024, we entered into an agreement with SpaceX and its Starlink network to provide satellite communications (SATCOM) service to farmers facing rural connectivity challenges, with an initial focus on Brazil. Most recently, Brazil’s regulators threatened to sanction Starlink’s broadband coverage based on alleged hate speech and misinformation posted on the X platform, which like Starlink, is owned by Elon Musk. If regulators sanction Starlink or Starlink is otherwise subject to other issues that impair its ability to operate its SATCOM solution either in Brazil or elsewhere, our rural connectivity offering would be adversely affected or impaired.
In addition, disruptions with GPS signals or the failure of telecommunications network operators to supply the bandwidth we need to support our products could interfere with the speed, availability, and usability of our equipment and services. If these GPS signals or RF signals become unavailable, our customers could be unable to use their equipment indefinitely. For our agricultural customers, this could result in lower crop yields, decreased operational efficiency, and higher equipment maintenance, seed, fertilizer, fuel, and wage costs. For construction customers, this could result in higher fuel and equipment maintenance costs, as well as lower construction design and project management efficiencies. These cost increases could significantly reduce customers’ profitability, sustainability, and demand for our products. As a result, our sales and revenue could significantly decrease, which would have a material adverse effect on our results of operations and our business.
COMPLIANCE RISKS
Our global operations are subject to complex and changing laws and regulations, the violation of which could expose us to potential liabilities, increased costs, and other adverse effects.
We are subject to numerous international, federal, state, and local laws and regulations, many of which are complex, frequently changing, and subject to varying interpretations. These laws and regulations cover a variety of subjects, including advertising, anti-money laundering, antitrust, consumer finance, environmental, climate-related, health and safety, foreign exchange controls and cash repatriation restrictions, foreign ownership and investment, import/export and trade, human rights, labor and employment, product liability reporting, cybersecurity, data privacy, telematics, encryption, and telecommunications. Changes to existing laws and regulations, or changes to how they are interpreted, or the implementation of new, more stringent laws or regulations, could adversely affect our business by increasing compliance costs, limiting our ability to offer a product or service, requiring changes to our business practices, or otherwise making our products and services less attractive to customers. Failure to comply with these laws and regulations could result in fines and penalties.
In addition, we must comply with the U.S. Foreign Corrupt Practices Act (FCPA) and all applicable foreign anti-bribery and anti-corruption laws. These laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence government officials or private individuals for the purpose of obtaining or retaining a business advantage, regardless of whether those practices are culturally expected in a particular jurisdiction. Although we have a compliance program in place designed to reduce the likelihood of potential violations of these laws and regulations, our employees, contractors, or agents have violated, and in the future could violate such laws and regulations or our policies and procedures. Violations of these laws and regulations have resulted in, and could result in the future, in criminal or civil sanctions and may have a material adverse effect on our reputation, business, results of operations, and financial condition. In fiscal year 2024, we agreed to pay approximately $10.0 million to the Commission to resolve charges that the Company violated the FCPA arising out of improper payments by our wholly-owned subsidiary, Wirtgen Thailand.
21
We may face risks associated with international, national, and regional trade laws, regulations, and policies, and government farm programs and policies which could significantly impair our profitability and growth prospects.
International, national, and regional laws, regulations, and policies directly or indirectly related to or restricting the import and export of our products, services, and technology, or those of our customers, or for the benefit of favored industries or sectors, could harm our global business. We are subject to various regulatory risks including, but not limited to, the following:
Governmental actions designed to address climate change based on the emergence of new technologies and business models in connection with the transition to a lower-carbon economy could adversely affect John Deere and our customers.
There is global scientific consensus that greenhouse gas (GHG) emissions continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate. These considerations have led to new international, national, regional, and local legislative and regulatory responses. Various stakeholders, including legislators and regulators, shareholders, and non-governmental organizations, as well as companies in many business sectors, including us, are continuing to look for ways to reduce GHG emissions. The regulation of GHG emissions from certain stationary or mobile sources or the imposition of carbon pricing mechanisms could result in additional costs to us in the form of taxes or emission allowances, required facilities improvements, research and development investments, and increased energy costs. These results would increase our operating costs through higher utility, transportation, and materials cost and could prevent us from selling products into certain markets. Increased input costs, such as fuel and fertilizer, and compliance-related costs could also affect customer operations and demand for our equipment.
Regulators in Europe and the U.S. have also focused efforts on increasing disclosures by companies related to climate change and mitigation efforts. These disclosure rules increase compliance burdens and associated regulatory costs. Further, our financial services segment is subject to additional international and national regulations relating to climate and environmental risk, which are continually evolving and could affect the financing operations and climate-risk processes developed by the segment.
Legal proceedings, disputes and government inquiries and investigations could harm our business, financial condition, reputation, and brand.
We routinely are a party to claims and legal actions and the subject of government inquiries and investigations, the most prevalent of which relate to product liability (including asbestos related liability), employment, patent, trademark, and antitrust matters. The defense of lawsuits and government inquiries and investigations has resulted and may result in expenditures of significant financial resources and the diversion of management’s time and attention away from business operations.
We are currently subject to a consolidated multidistrict class action lawsuit in the Northern District of Illinois alleging that we have engaged in attempted monopolization, exclusionary conduct, and restraint of the market for repair services for John Deere brand agricultural equipment by limiting repair resources only to our authorized technicians or independent authorized John Deere dealers. In addition, the Federal Trade Commission (FTC) is investigating whether we have violated laws in connection with the repair of
22
John Deere brand agricultural equipment, as well as our information security practices and statements as they relate to the risk of unauthorized access to our computer systems, products, and services. We are fully cooperating with the FTC. We are currently unable to predict the outcome of these matters. The development and resolution of these matters could have a material adverse effect on our business, operations, and financial results.
Our business may suffer if our equipment fails to perform as expected.
If our equipment does not perform as expected, we may receive warranty claims and may have to perform post-sales repairs or recalls. We may also be subject to regulatory requirements and penalties that will impact our ability to develop, market, and sell equipment. This may result in product delivery delays. It could also lead to product liability, breach of warranty, and consumer protection claims. These claims and warranty expenses could be significant. As a manufacturer of equipment, we must manage the cost and risk associated with product warranties, post-sale repairs and recalls, regulatory penalties, and product liability, breach of warranty, and consumer protection claims with respect to our products. In addition to post-sale repairs or recalls initiated by us for various reasons, investigations into our products by government regulators may compel us to initiate product recalls or may result in negative public perceptions about the safety of our products, even if we disagree with the regulator’s determination. Such post-sale repairs or recalls, whether voluntary or involuntary, could result in significant expense, supply chain complications, and may harm our brand, business, prospects, financial condition, and operating results.
UNRESOLVED STAFF COMMENTS.
None.
CYBERSECURITY.
Cybersecurity is an integral part of our overall risk management program. We take a comprehensive approach by incorporating industry best practices to guide and evaluate our cybersecurity strategy and posture, involving key stakeholders in oversight and decision making, and assessing the program regularly within a dynamically changing environment. We leverage a multifaceted approach to cybersecurity including measures designed to prevent, detect, and respond to cyberthreats while monitoring and adapting to the evolving threat and technology landscapes.
Governance
At the management level, we maintain a dedicated global team of cybersecurity professionals (Cybersecurity Team) led and managed by the Chief Information Security Officer (CISO). The Cybersecurity Team has members with experience in governance, risk management and compliance, threat monitoring, threat emulation, penetration testing, and cyber incident management. Our CISO holds a degree in Management Information Systems and has been with the Company for over ten years. He has over two decades of extensive experience in information technology and cybersecurity and reports directly to the Chief Information Officer.
In addition, a cross-functional team of senior executives from across the enterprise known as the Digital Risk Governance Council (DRGC) provides oversight at the management level of the Company’s structures for managing digital risk, including the Cybersecurity Team. The Audit Review Committee (ARC) of the Board of Directors (Board) shares oversight responsibilities of our cybersecurity program, including oversight of related risks, with the full Board. Information on trends, strategic initiatives, and metrics is presented quarterly to the ARC by the CISO and/or members of the Cybersecurity Team. The ARC also receives periodic updates and information from subject matter experts in areas such as risk management, identity and access management, product security, and information technology.
Risk Management and Strategy
Our cybersecurity program is designed to identify, protect, detect, respond to, and recover from cybersecurity threats and incidents with the goal of protecting the confidentiality, integrity, and availability of our critical systems and information. We use a risk-based, multi-layered information security strategy to assess, identify, and manage risks from cybersecurity threats. Our Cybersecurity Team meets frequently to monitor, assess, and address cybersecurity threats and incidents. We also work with third parties to assess the maturity of our cybersecurity program, leveraging the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF).
We also utilize third-party service providers as a normal part of our business operations. We have established processes to support the Company in identifying and managing cybersecurity risks associated with the use of third parties, which include the completion of due diligence before engaging with a third-party, controls for response to mitigate any significant risks, and assessments and reviews throughout the relationship. Monitoring such risks and threats is integrated into our overall risk management program.
Also, as part of the program, we periodically conduct cybersecurity awareness training including phishing simulations as well as e-learning for employees. We maintain cybersecurity policies, standards, and procedures, which include a cyber incident response plan. These policies and procedures are regularly evaluated and refined with strategies and protocols designed to adapt to changing regulations and emerging security risks. Regular exercises, tests, incident simulations, and system assessments are conducted to discover and address
potential vulnerabilities and improve decision-making, prioritization, monitoring, and overall response effectiveness. As part of our incident response plan, the Cybersecurity Team uses an established protocol to assess the severity of cybersecurity incidents. In addition, a cross-functional Cybersecurity Incident Response Team is responsible for cybersecurity incident oversight and response, as needed, depending on incident severity. Our cyber incident response plan also includes an escalation process to relevant senior management and/or members of the Board if a cybersecurity incident meets specific rating criteria to prompt response to attempt to minimize potential disruptions and protect the integrity of our operations.
Based on the information available as of the date of this Annual Report on Form 10-K, cybersecurity risks, including as a result of any previous cybersecurity incident, have not materially affected, and are not reasonably likely to materially affect, our business strategy, results of operations, or financial condition. However, we have seen an increase in cyberattack volume, frequency, and sophistication in the digital environment.
PROPERTIES.
In the U.S. and Canada, the equipment operations own and operate 23 factory locations and lease and operate another three locations. Outside of the U.S. and Canada, the equipment operations own or lease and operate 45 factory locations in Argentina, Austria, Brazil, China, Finland, France, Germany, India, Israel, Italy, Mexico, the Netherlands, New Zealand, and Spain.
In addition, the equipment operations own or lease 12 facilities comprised of three locations supporting centralized parts distribution and nine regional parts depots and distribution centers throughout the U.S. and Canada. Outside the U.S. and Canada, the equipment operations also own or lease and occupy 11 total facilities with centralized parts distribution centers in Brazil, Germany, and India and regional parts depots and distribution centers in Argentina, Australia, China, India, Mexico, South Africa, Sweden, and the United Kingdom. We also own or lease eight facilities for the manufacture and distribution of other brands of replacement parts.
We own or lease 53 administrative offices and research facilities globally as well as many other smaller, miscellaneous facilities.
Overall, we own approximately 70.0 million square feet of facilities and lease approximately 13.1 million additional square feet in various locations. These properties are adequate and suitable for our business as presently conducted and are well maintained.
LEGAL PROCEEDINGS.
We are subject to various unresolved legal actions and investigations, the most prevalent of which relate to product liability (including asbestos related liability), employment, patent, trademark, and antitrust matters (including class action litigation). Currently we believe the reasonably possible range of losses for unresolved legal actions would not have a material effect on our financial statements; however, the outcome of any current or future proceedings, claims, or investigations cannot be predicted with certainty. Adverse decisions in one or more of these proceedings, claims, or investigations could require us to pay substantial damages or fines, undertake service actions, initiate recall campaigns, or take other costly actions. It is therefore possible that legal judgments or investigations could give rise to expenses that are not covered, or not fully covered by our insurance programs and could affect our financial position and results.
MINE SAFETY DISCLOSURES.
Not applicable.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
ISSUER PURCHASES OF EQUITY SECURITIES
Maximum
Total Number of
Number of Shares
Shares Purchased
that May Yet Be
as Part of Publicly
Purchased under
Shares
Announced Plans
the Plans or
Purchased (2)
Average Price
or Programs (1)
Programs (1)
Period
(thousands)
Per Share
(millions)
Jul 29 to Aug 25
877
$
362.97
876
23.1
Aug 26 to Sept 22
515
390.00
22.6
Sept 23 to Oct 27
651
412.74
21.9
Total
2,043
2,042
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change of Deere & Company’s cumulative total shareholder returns (TSR) for the last five years to that of the S&P 500 Index and the S&P 500 Industrials Index. The S&P 500 Industrials Index represents a focus group of companies across major industrial manufacturing categories that carry similar operational characteristics to us. The graph assumes $100 was invested on November 1, 2019, and that dividends were reinvested. The stock performance shown in the graph is not intended to forecast and does not necessarily indicate future price performance.
25
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
See the information under the caption “Management’s Discussion and Analysis.”
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to a variety of market risks, including interest rates and currency exchange rates. We attempt to actively manage these risks. See the information under “Management’s Discussion and Analysis,” under “Financial Instrument Market Risk Information” and in Note 26 to the Consolidated Financial Statements.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Consolidated Financial Statements and notes thereto and supplementary data.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) were effective as of October 27, 2024, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with generally accepted U.S. accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation in accordance with generally accepted accounting principles.
Management assessed the effectiveness of our internal control over financial reporting as of October 27, 2024, using the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that, as of October 27, 2024, our internal control over financial reporting was effective.
Our independent registered public accounting firm has issued an audit report on the effectiveness of our internal control over financial reporting. That report is included herein.
Changes in Internal Control Over Financial Reporting
During the fourth quarter, there were no changes that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
OTHER INFORMATION.
Director and Executive Officer Trading Arrangements
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information regarding directors required by this Item 10 will be set forth in the definitive proxy statement for our 2025 annual meeting of stockholders (proxy statement) to be filed with the Commission in advance of such meeting. Information regarding executive officers is presented in Item 1 of this report under the caption "Information about our Executive Officers."
We have adopted a code of ethics that applies to our executives, including our principal executive officer, principal financial officer, and principal accounting officer. This code of ethics and our corporate governance policies are posted on our website at http://www.deere.com/governance. We intend to satisfy disclosure requirements regarding amendments to or waivers from our code of ethics by posting such information on this website. The charters of the Audit Review, Corporate Governance, Compensation, and Finance committees of our Board are available on our website as well. This information is also available in print free of charge to any person who requests it.
EXECUTIVE COMPENSATION.
The information required by this Item 11 will be set forth in the proxy statement to be filed with the Commission.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this Item 12 will be set forth in the proxy statement to be filed with the Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item 13 will be set forth in the proxy statement to be filed with the Commission.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Information required by this Item 14, including aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP (PCAOB ID No. 34), will be set forth in the proxy statement to be filed with the Commission.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(1)
Financial Statements
Statements of Consolidated Income for the years ended October 27, 2024, October 29, 2023, and October 30, 2022
44
Statements of Consolidated Comprehensive Income for the years ended October 27, 2024, October 29, 2023, and October 30, 2022
45
Consolidated Balance Sheets as of October 27, 2024 and October 29, 2023
46
Statements of Consolidated Cash Flows for the years ended October 27, 2024, October 29, 2023, and October 30, 2022
47
Statements of Changes in Consolidated Stockholders’ Equity for the years ended October 30, 2022, October 29, 2023, and October 27, 2024
48
Notes to Consolidated Financial Statements
49
(2)
Exhibits
See the “Index to Exhibits” on pages 84 – 87 of this report
Certain instruments relating to long-term borrowings constituting less than 10 percent of registrant’s total assets are not filed as exhibits herewith pursuant to Item 601(b)4(iii)(A) of Regulation S-K. The registrant agrees to file copies of such instruments upon request of the Commission.
Financial Statement Schedules Omitted
The following schedules for the Company and consolidated subsidiaries are omitted because of the absence of the conditions under which they are required: I, II, III, IV, and V.
ITEM 16.FORM 10-K SUMMARY.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of our financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements. All amounts are presented in millions of dollars, unless otherwise specified. For comparison of 2023 to 2022 results, refer to the “Management’s Discussion and Analysis” section of our 2023 Form 10-K.
OVERVIEW
Deere & Company is a global leader in the production of agricultural, turf, construction, and forestry equipment and solutions. John Deere Financial provides financing for John Deere equipment, parts, services, and other inputs customers need to run their operations. Our operations are managed through the production and precision agriculture (PPA), small agriculture and turf (SAT), construction and forestry (CF), and financial services operating segments. References to “equipment operations” include PPA, SAT, and CF, while references to “agriculture and turf” include both PPA and SAT.
Net Sales and Revenues by Segment in 2024
TRENDS & ECONOMIC CONDITIONS
Industry Sales Outlook for Fiscal 2025
Agriculture and Turf
Company Trends
Customers seek to improve profitability, productivity, and sustainability through integrating technology into their operations. Deeper integration of technology into equipment is a persistent market trend. These technologies are incorporated into products within each of our operating segments. We expect this trend to persist for the foreseeable future. Our Smart Industrial Operating Model and Leap Ambitions are intended to capitalize on this market trend. Engaged acres are an indicator we use to understand customer utilization of our technology. We are investing in a Solutions as a Service business model to increase technology adoption and utilization by our customers. Solutions as a Service products did not represent a significant percentage of our revenues in 2024.
Company Outlook for 2025
Agriculture and Turf Outlook for 2025
29
levels are expected to keep industry equipment demand at low levels throughout 2025.
Construction and Forestry Outlook for 2025
Financial Services Outlook for 2025
Net Income
Up
+ Provision for credit losses
Favorable
+ Prior period special items
(-) Financing spreads
Unfavorable
Additional Trends
Interest Rates – While interest rates in the U.S. began to decrease in the fourth quarter of 2024, they remained elevated. Increased rates impacted us in several ways, primarily affecting the demand for our products and financing spreads for the financial services operations.
The markets for our agriculture, turf, and construction products were negatively impacted in 2024 by elevated interest rates and their effect on borrowing costs for our customers.
Rising interest rates have historically impacted our borrowing costs sooner than the benefit is realized from receivable and lease portfolios.
Agricultural Market Business Cycle – The agricultural market is affected by various factors including commodity prices, acreage planted, crop yields, and government policies. These factors affect farmers’ income and may result in varying demand for our equipment. In 2024, we experienced unfavorable market
conditions which resulted in lower sales volumes, higher sales incentives, higher receivable write-offs, and an increase in expected credit losses.
We introduced cost reduction measures to manage our profitability and inventory levels. In the third quarter of 2024, we implemented employee-separation programs for our salaried workforce to help meet our strategic priorities while reducing overlap and redundancy in roles and responsibilities. The programs’ total pretax expenses are estimated to be approximately $165, of which $157 was recorded in 2024 (see Note 4). Annual pretax savings from these programs are estimated to be about $220. Approximately $100 of savings was realized in 2024.
Changes in interest rates and the agricultural market business cycle are driven by factors outside of our control, and as a result we cannot reasonably foresee when these conditions will fully subside.
Other Items of Concern and Uncertainties – Other items that could impact our results are:
30
CONSOLIDATED RESULTS
2024 compared to 2023
Highlights
Net Sales and Revenues
Net Sales (Equipment Operations)
Net Income (Attributable to Deere & Company)
Diluted Earnings Per Share (EPS) ($ per share)
Other Significant Statement of Consolidated Income Changes
An explanation of the cost of sales to net sales ratio and other significant statement of consolidated income changes follows:
Deere & Company
2024
2023
% Change
Cost of sales to net sales
68.8%
67.9%
+1
(-) Overhead Costs
+ Price realization
+ Material costs
Increased mostly due to higher overhead costs from reduced volumes resulting in production inefficiencies partially offset by sales price realization, lower material costs, and lower employee profit-sharing incentives.
Finance and interest income
5,759
4,683
+23
Increased primarily due to higher average financing receivable portfolios and higher average financing rates.
Other income
1,198
1,003
+19
Higher primarily due to investment income earned on international marketable securities, legal settlements (see Note 4), and increased revenues from services.
Research and development expenses
2,290
2,177
+5
Higher due to continued focus on developing new technology solutions and product introductions.
Selling, administrative and general expenses
4,840
4,595
Increased mostly due to higher provision for credit losses, employee separation programs' expenses, and higher employee pay driven by merit increases, partially offset by the effect of a prior year accounting treatment correction (see Note 4).
Interest expense
3,348
2,453
+36
Increased due to higher average borrowing rates and higher average borrowings.
Other operating expenses
1,257
1,292
-3
Lower due to foreign exchange, higher pension benefits (see Note 9), and a settlement of an insurance claim recovery at an international location.
Provision for income taxes
2,094
2,871
-27
Decreased as a result of lower pretax income, adjustments to valuation allowance on deferred tax, and the favorable impact of discrete tax benefits. These items were partially offset by prior years' favorable income tax ruling in Brazil.
BUSINESS SEGMENT RESULTS
Each equipment operations segment experienced lower shipment volumes partially offset by price realization during 2024. Rising global grain stocks, lower commodity prices, elevated interest rates, and the effect of inventory management contributed to lower shipment volumes for large and small agriculture. Declines in housing starts, decreases in rental purchases, lower levels of commercial real estate construction, and the effect of inventory management contributed to lower shipment volumes for construction equipment.
Production costs were favorable in 2024 due to lower material and employee profit-sharing incentives costs, partially offset by higher manufacturing overhead costs driven by lower volumes and production inefficiencies.
Production and Precision Agriculture Operations
Net sales
20,834
26,790
-22
Sales volume and other
-24
Price realization
+2
Currency translation
Operating profit
4,514
6,996
-35
Operating margin
21.7%
26.1%
Sales volumes decreased 17 percent in the U.S. and Canada, 40 percent in Brazil, and 30 percent in Europe. Price realization in the U.S. and Canada was 3 percent driven by inflation, which was partially offset by an increase in retail and pool funds sales incentives. Price realization was flat outside the U.S. and Canada
31
due to moderating market conditions. Current period results were impacted by special items (see Note 4).
Production & Precision Agriculture Operating Profit
Small Agriculture and Turf Operations
10,969
13,980
1,627
2,472
-34
14.8%
17.7%
Sales volumes decreased 22 percent in the U.S. and Canada, 28 percent in Europe, and 45 percent in Mexico.
Price realization was 3 percent in the U.S. and Canada and 1 percent outside the U.S. and Canada driven by inflation. Current period results were impacted by special items (see Note 4).
Small Agriculture & Turf Operating Profit
Construction and Forestry Operations
12,956
14,795
-12
2,009
2,695
-25
15.5%
18.2%
Sales volumes decreased 15 percent in the U.S. and Canada and 8 percent outside the U.S. and Canada. Price realization was about flat in the U.S. and Canada driven by moderating market conditions
and 1 percent outside the U.S. and Canada. Current and prior period results were impacted by special items (see Note 4).
Construction & Forestry Operating Profit
Financial Services Operations
Revenue (including intercompany)
6,493
5,554
+17
Average balance of receivables and leases
+12
3,182
2,362
+35
Average borrowing rates
+20
Average borrowings
Net income
696
619
Average wholesale receivables increased 26 percent driven by higher dealer used inventory levels. While new retail note volumes moderated due to reduced retail demand, average retail portfolio levels grew due to higher volumes in recent years resulting in a 9 percent increase. Revenue also increased due to higher average financing rates. Excluding the impact of a one-time correction of the accounting treatment for financing incentives offered to John Deere dealers in 2023 (see Note 4), net income declined as a result of a higher provision for credit losses and less-favorable financing spreads driven primarily by the receivable portfolio mix. These factors were partially offset by income earned on higher average portfolio balances.
Financial Services Net Income
32
2023 compared to 2022
Please refer to the “Management’s Discussion and Analysis” section of our 2023 Form 10-K.
CAPITAL RESOURCES AND LIQUIDITY
We have access to global markets at a reasonable cost. Sources of liquidity include:
We closely monitor our cash requirements. Based on the available sources of liquidity, we expect to meet our funding needs in the short term (next 12 months) and long term (beyond 12 months). We are forecasting lower operating cash flows from equipment operations in 2025 compared with 2024 driven by a decrease in net income adjusted for non-cash provisions, partially offset by higher cash flows generated from inventory reductions.
We operate in multiple industries, which have unique funding requirements. The equipment operations are capital intensive. Historically, these operations have been subject to seasonal variations in financing requirements for inventories and receivables from dealers. The financial services operations rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios.
The assets and liabilities of Banco John Deere S.A. (BJD) were reclassified to held for sale in the third quarter of 2024 and are therefore not included within the 2024 balances reflected below (see Note 4).
Key Metrics and Balance Sheet Changes
Cash, Cash Equivalents and Marketable Securities
Trade Accounts and Notes Receivable – Net
Financing Receivables and Equipment on Operating Leases
Inventories
Property and Equipment
Accounts Payable and Accrued Expenses
Borrowings
Unused Credit Lines
33
Financial Services Ratio of Interest-Bearing Debt to Stockholder’s Equity
CASH FLOWS
2024, 2023, and 2022
2022
Net cash provided by operating activities
9,231
8,589
4,699
Net cash used for investing activities
(6,464)
(8,749)
(8,485)
Net cash provided by (used for) financing activities
(2,717)
2,808
826
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(37)
(224)
Net increase (decrease) in cash, cash equivalents, and restricted cash
2,679
(3,184)
Cash inflows from operating activities were $9.2 billion in 2024, driven by net income adjusted for non-cash provisions and lower inventories and receivables from a decline in sales. These items were partially offset by a decrease in vendor payables and a reduction in dealer sales incentive accruals.
Cash outflows from investing activities were $6.5 billion in 2024 due to growth in the financing receivable and lease portfolios and capital expenditures.
Cash outflows from financing activities were $2.7 billion in 2024, as repurchases of common stock and dividends paid were partially offset by higher borrowings.
Cash Returned to Shareholders
Cash returned to shareholders decreased $3.0 billion in 2024 as we managed cash flows through the declining business cycle in accordance with our use-of-cash priorities.
DEBT RATINGS
To access public debt capital markets, we rely on credit rating agencies to assign short-term and long-term credit ratings to our debt 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 our securities. A credit rating agency may change or withdraw ratings based on its assessment of our 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, reduced access to debt capital markets, and may adversely impact our liquidity.
The senior long-term and short-term debt ratings and outlook currently assigned to unsecured company securities by the rating agencies engaged by us are as follows:
Senior
Long-Term
Short-Term
Outlook
Fitch Ratings
A+
F1
Stable
Moody’s Investors Service, Inc.
A1
Prime-1
Standard & Poor’s
A
A-1
CONTRACTUAL OBLIGATIONS AND CASH REQUIREMENTS
2025 and Beyond
Our material cash requirements include the following:
Borrowings – As of October 27, 2024, we had $17.6 billion of payments due on borrowings and securitization borrowings in the next year, along with interest payments of $2.5 billion. The securitization borrowing payments are based on the expected liquidation of the retail notes. See Notes 12 and 19 for additional borrowing details. These payments will likely be replaced with new borrowings to finance the receivable and lease portfolio, which is expected to be lower in 2025.
Purchase Obligations – As of October 27, 2024, our outstanding purchase obligations were $3.2 billion, with $2.8 billion payable within one year. These purchase obligations are noncancelable.
Other Cash Requirements – In addition to our contractual obligations, we have the following commitments:
Share repurchases will be considered as a means of deploying excess cash to shareholders, once the previously mentioned requirements are met.
CRITICAL ACCOUNTING ESTIMATES
The timely preparation of financial statements requires management to make estimates and assumptions. Those estimates affect reported amounts in these financial statements. Changes in those estimates and assumptions could have a significant effect. The following estimates are the most critical to our financial statements:
34
These items require the most difficult, subjective, or complex judgments. Our accounting policies are described primarily in Note 2 of our consolidated financial statements.
Sales Incentives
We provide sales incentives to dealers. These incentives are offered in two forms:
The estimated cost of these programs is based on:
At the time a sale is recognized, we record an estimate of the sales incentive costs. The final cost is determined at the end of the volume bonus measurement period or at the time of the retail sale.
There are numerous programs available at any time, and new programs may be announced after we record the equipment sale to the dealer. Changes in the mix and types of sales incentive programs affect these estimates, which are reviewed quarterly. Actual cost differences from the original cost estimate are recognized in “Net sales.”
Sales Incentive Accruals
The accruals recorded against receivables relate to programs where we have the contractual right and the intent to offset against existing receivables. The decrease in 2024 resulted from lower sales.
A key assumption of the retail sales incentive accrual is the predictive value of the historical percent of retail sales incentive costs to retail sales. Over the last five fiscal years, this percent has varied by an average of 1.0 percent. Holding other assumptions constant, a 1.0 percent change would have modified the sales incentive accrual by about $135.
Product Warranties
A standard warranty is provided as an assurance that our equipment will function as intended. The standard warranty period varies by product and region.
At the time a sale is recognized, we record an estimate of future warranty costs, based on the following calculation:
The historical claims rate is determined by a review of five-year claims costs. The estimated population is based on dealer inventories and retail sales. These estimates are reviewed quarterly. Adjustments are also made for current quality developments.
Product Warranty Accruals
The decrease in 2024 is the result of lower sales volumes.
Product warranty accrual estimates are affected by the historical percent of warranty claims costs as a percentage of gross sales. Over the last five fiscal years, the percent has varied plus or minus .09 percent. Holding all other assumptions constant, if this estimated cost experience percent would have increased or decreased .09 percent, the warranty accrual at October 27, 2024 would have changed by approximately $50.
Postretirement Benefit Obligations
The pension and OPEB plan obligations (defined benefit) and expenses require the use of estimates. The main estimate is the present value of the projected future benefit payments. These future benefit payments extend several decades.
The estimates are based on existing retirement plan provisions. No assumption is made regarding any potential changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts).
The key assumptions used by our actuaries to calculate the estimates include:
Assumptions are set each year-end. These assumptions are not changed during the year unless there is a significant plan event. Actual results that differ from the assumptions affect future expenses and obligations.
35
The key pension and OPEB amounts follow:
Pension and OPEB net (benefit) cost
(86)
(13)
176
Long-term expected return on pension and OPEB plan assets (as a percent)
6.8
6.2
5.0
Long-term expected return on pension and OPEB plan assets
1,075
995
836
Actual return (loss) on pension and OPEB plan assets
1,962
(395)
(3,565)
Pension assets, net of pension liabilities
2,003
2,076
2,690
OPEB liabilities, net of OPEB assets
1,191
1,001
1,205
The increase in the 2024 pension and OPEB net benefit was due to an increase in the expected long-term rates of return on pension plan assets and the Canadian pension settlement charge recognized in 2023 (see Note 7).
The effect of hypothetical changes to selected assumptions on our major U.S. retirement benefit plans would be as follows:
October 27, 2024
2025
Increase
Percentage
(Decrease)
Assumptions
Change
PBO/APBO*
Expense
Pensions:
Discount rate**
+/-.5
(495)/550
4/7
Expected return on assets
(63)/63
OPEB:
(138)/149
(3)/1
(11)/11
Health care cost trend rate**
+/-1.0
263/(230)
33/(35)
* Projected benefit obligation (PBO) for pension plans and accumulated postretirement benefit obligation (APBO) for OPEB plans.
** Pretax impact on service cost, interest cost, and amortization of gains or losses.
Allowance for Credit Losses
The allowance for credit losses is an estimate of the credit losses expected over the life of the receivable portfolio. The allowance is measured on a collective basis for receivables with similar risk characteristics. Receivables that do not share risk characteristics are evaluated on an individual basis. Risk characteristics include:
We utilize the following loss forecast models to estimate expected credit losses:
Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary to arrive at management’s best estimate of expected credit losses.
During 2024, we determined that the financial services business in Brazil met the held for sale criteria. The receivables in Brazil were reclassified to “Assets held for sale.” The associated allowance for credit losses was reversed and a valuation allowance for the assets held for sale was recorded (see Note 4). Excluding the business in Brazil, the allowance for credit losses increased, primarily due to higher expected losses as a result of elevated delinquencies and a decline in market conditions. This increase was partially offset by a decrease in the allowance on revolving charge accounts, driven by write-offs of seasonal financing program accounts and recoveries expected on those accounts in the future.
While we believe our allowance is sufficient to provide for losses over the life of our existing receivable portfolio, different assumptions would result in changes to the allowance for credit losses. Within the retail customer receivable portfolio, credit loss estimates are dependent on a number of factors, including credit quality at time of application, remaining account balances, current delinquency levels, various economic factors, and estimated recoveries on defaulted accounts. Changes in any of these factors could impact our credit losses. Conversely, changes in economic conditions have historically had limited impact on credit losses within the wholesale receivable portfolio.
Holding all other factors constant, a 10 percent increase in the linear regression models’ forecasted defaults and a simultaneous 10 percent decrease in recovery rates would have resulted in a $70 increase to the allowance for credit losses at October 27, 2024.
Operating Lease Residual Values
Equipment on operating leases is depreciated to the estimated residual value over the lease term. The residual values are based on several factors, including:
36
We review residual value estimates during the lease term. Depreciation is adjusted over the remaining lease term if residual estimates are revised. Impairments are recorded when events or circumstances necessitate.
At the end of the majority of leases, the equipment is disposed in the following sequence:
Hypothetically, if (a) future market values for this equipment were to decrease 10 percent from our present estimates, and (b) all the equipment on operating leases were returned to us for remarketing at the end of the lease term, the total unfavorable impact after consideration of dealer residual value guarantees would be approximately $75. This amount would be recognized as higher depreciation expense over the remaining term of the operating leases, or potentially as an impairment.
Income Taxes
We are subject to federal, state, and foreign income taxes. These tax laws can be complex. Significant judgment and interpretation is required to implement them. Changes in tax laws could materially affect our consolidated financial statements. We record our tax positions in the following categories:
Deferred income taxes represent temporary differences between the tax and the financial reporting basis of assets and liabilities. This will result in taxable or deductible amounts in the future. Loss carryforwards and tax credits are significant components of deferred tax asset balances. These assets are reviewed regularly for the following:
Valuation allowances are established when we determine that the deferred tax benefit may not be realized. The recoverability
analysis requires significant judgment and relies on estimates. The valuation allowance as of October 27, 2024 was $1.6 billion. Changes in foreign income tax laws, income for certain jurisdictions, or our tax structure could impact the valuation allowance balance.
Some tax positions contain significant uncertainties. These positions may be challenged or disallowed by taxing authorities. If it is likely the position will be disallowed, no tax benefit is recorded. If it is likely the position will be sustained, a tax benefit is recognized. The ultimate resolution could take many years. This may result in a payment that is significantly different from the original estimate.
See Note 8 for further information on income taxes.
FORWARD-LOOKING STATEMENTS
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 our 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 and should not be relied upon. Except as required by law, we expressly disclaim any obligation to update or revise our forward-looking statements. Many factors, risks, and uncertainties could cause actual results to differ materially from these forward-looking statements. Among these factors are risks related to:
37
Further information concerning us and our businesses, including factors that could materially affect our financial results, is included in our other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. “Risk Factors” of this Annual Report on Form 10-K). There also may be other factors that we cannot anticipate or that are not described herein because we do not currently perceive them to be material.
38
SUPPLEMENTAL CONSOLIDATING DATA
The supplemental consolidating data presented on the subsequent pages is presented for informational purposes. Equipment operations represent the enterprise without financial services. Equipment operations include 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 and financial services have been eliminated to arrive at the consolidated financial statements.
Equipment operations and financial services participate in different industries. Equipment operations primarily generate earnings and cash flows by manufacturing and selling equipment, service parts, and technology solutions to dealers and retail customers. Financial services finance sales and leases by dealers of new and used equipment that is largely manufactured by equipment operations. 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. The two businesses are capitalized differently and have separate performance metrics. The supplemental consolidating data is also used by management due to these differences.
INCOME STATEMENTS
For the Years Ended October 27, 2024, October 29, 2023, and October 30, 2022
Unaudited
EQUIPMENT
FINANCIAL
OPERATIONS
SERVICES
ELIMINATIONS
CONSOLIDATED
44,759
55,565
47,917
596
636
213
6,035
5,055
3,583
(872)
(1,008)
(431)
3,365
1
1,006
858
1,261
458
499
502
(266)
(354)
(468)
1,295
2, 3, 4
46,361
57,059
49,391
4,085
(1,138)
(1,362)
(899)
51,716
61,251
52,577
Costs and Expenses
Cost of sales
30,803
37,739
35,341
(28)
(24)
(3)
30,775
37,715
35,338
4
1,912
3,791
3,611
3,137
1,059
994
735
(10)
(9)
3,863
396
411
390
799
(230)
(320)
(127)
1,062
Interest compensation to Financial Services
640
687
299
(640)
(687)
(299)
133
217
350
1,354
1,396
1,386
(321)
(461)
1,275
3, 4, 5
38,053
44,842
41,429
5,595
4,752
2,920
42,510
48,232
43,450
Income before Income Taxes
8,308
12,217
7,962
898
802
1,165
9,206
13,019
9,127
1,887
2,685
1,718
207
186
289
2,007
Income after Income Taxes
6,421
9,532
6,244
691
616
7,112
10,148
7,120
Equity in income (loss) of unconsolidated affiliates
(29)
6,392
9,536
6,250
880
7,088
10,155
7,130
Less: Net loss attributable to noncontrolling interests
(12)
(11)
Net Income Attributable to Deere & Company
6,404
9,547
6,251
7,100
10,166
7,131
1 Elimination of intercompany interest income and expense.
2 Elimination of equipment operations’ margin from inventory transferred to equipment on operating leases (see Note 6).
3 Elimination of income and expenses between equipment operations and financial services related to intercompany guarantees of investments in certain international markets.
4 Elimination of intercompany service revenues and fees.
5 Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.
39
SUPPLEMENTAL CONSOLIDATING DATA (continued)
CONDENSED BALANCE SHEETS
As of October 27, 2024 and October 29, 2023
ASSETS
Cash and cash equivalents
5,615
5,720
1,709
1,738
7,324
7,458
Marketable securities
125
104
1,029
842
1,154
946
Receivables from Financial Services
3,043
4,516
(3,043)
(4,516)
6
Trade accounts and notes receivable – net
1,320
6,225
8,687
(2,156)
(2,268)
5,326
7,739
7
Financing receivables – net
78
64
44,231
43,609
44,309
43,673
Financing receivables securitized – net
8,721
7,335
8,723
Other receivables
2,193
1,813
427
869
(75)
(59)
2,545
2,623
Equipment on operating leases – net
7,451
6,917
7,093
8,160
Property and equipment – net
7,546
6,843
7,580
6,879
Goodwill
3,959
3,900
Other intangible assets – net
999
1,133
Retirement benefits
2,839
2,936
83
72
2,921
3,007
8
Deferred income taxes
2,262
2,133
43
68
(219)
(387)
2,086
1,814
9
Other assets
2,194
1,948
715
559
(4)
2,906
2,503
Assets held for sale
2,944
Total Assets
39,205
40,590
73,612
70,732
(5,497)
(7,235)
107,320
104,087
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Short-term borrowings
911
1,230
12,622
16,709
13,533
17,939
Short-term securitization borrowings
8,429
6,995
8,431
Payables to Equipment Operations
Accounts payable and accrued expenses
13,534
14,862
3,243
3,599
(2,234)
(2,331)
14,543
16,130
434
452
263
455
478
520
Long-term borrowings
6,603
7,210
36,626
31,267
43,229
38,477
Retirement benefits and other liabilities
2,250
2,032
105
109
2,354
2,140
Liabilities held for sale
1,827
Total liabilities
23,734
25,786
66,158
63,650
84,395
82,201
Commitments and contingencies (Note 20)
Redeemable noncontrolling interest (Note 3)
82
97
STOCKHOLDERS’ EQUITY
Total Deere & Company stockholders’ equity
22,836
21,785
7,454
7,082
(7,454)
(7,082)
10
Noncontrolling interests
Financial Services' equity
Adjusted total stockholders' equity
15,389
14,707
22,843
21,789
Total Liabilities and Stockholders’ Equity
6 Elimination of receivables / payables between equipment operations and financial services.
7 Primarily reclassification of sales incentive accruals on receivables sold to financial services.
8 Reclassification of net pension assets / liabilities.
9 Reclassification of deferred tax assets / liabilities in the same taxing jurisdictions.
10 Elimination of financial services’ equity.
40
STATEMENTS OF CASH FLOWS
Cash Flows from Operating Activities
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for credit losses
296
(23)
189
310
(16)
192
Provision for depreciation and amortization
1,220
1,123
1,041
1,040
1,016
1,050
(142)
(135)
(196)
2,118
2,004
1,895
11
Impairments and other adjustments
88
173
191
Share-based compensation expense
208
130
85
12
Gain on remeasurement of previously held equity investment
(326)
Distributed earnings of Financial Services
250
215
444
(250)
(215)
(444)
13
Provision (credit) for deferred income taxes
(97)
(959)
(197)
169
(74)
(294)
(790)
(66)
Changes in assets and liabilities:
Receivables related to sales
(58)
(189)
(4,195)
(2,294)
421
(4,253)
(2,483)
14, 16
1,011
474
(1,924)
(223)
(195)
(167)
788
279
(2,091)
15
(1,429)
1,352
1,444
277
449
143
112
(971)
(454)
(1,040)
830
16
Accrued income taxes payable/receivable
(218)
166
95
(31)
(25)
(123)
141
(164)
(1,016)
(6)
(227)
(170)
(1,015)
Other
(38)
367
(51)
(287)
(145)
(64)
53
(143)
252
11, 12, 15
6,905
11,919
6,239
2,332
2,315
1,877
(5,645)
(3,417)
Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)
26,029
24,128
22,400
(867)
(1,077)
(1,493)
25,162
23,051
20,907
14
Proceeds from maturities and sales of marketable securities
99
59
733
127
79
832
Proceeds from sales of equipment on operating leases
1,929
1,981
2,093
Cost of receivables acquired (excluding receivables related to sales)
(29,152)
(29,229)
(26,903)
336
457
603
(28,816)
(28,772)
(26,300)
Acquisitions of businesses, net of cash acquired
(82)
(498)
Purchases of marketable securities
(209)
(173)
(76)
(846)
(318)
(174)
(1,055)
(491)
Purchases of property and equipment
(1,636)
(1,494)
(1,131)
(1,640)
(1,498)
(1,134)
Cost of equipment on operating leases acquired
(3,464)
(3,234)
(2,879)
302
264
225
(3,162)
(2,970)
(2,654)
Decrease (increase) in investment in Financial Services
(870)
870
(7)
17
Decrease (increase) in trade and wholesale receivables
(5,783)
(3,601)
(21)
5,783
3,601
Collateral on derivatives – net
413
(647)
(642)
(125)
(176)
(137)
(8)
(1,867)
(2,737)
(1,830)
(4,349)
(12,312)
(9,621)
(248)
6,300
2,966
Cash Flows from Financing Activities
Net proceeds (payments) in short-term borrowings (original maturities three months or less)
(113)
136
(1,884)
4,121
3,716
(1,856)
4,008
3,852
Change in intercompany receivables/payables
1,459
2,090
(1,633)
(1,459)
(2,090)
1,633
Proceeds from borrowings issued (original maturities greater than three months)
159
342
138
17,937
15,087
10,220
18,096
15,429
10,358
Payments of borrowings (original maturities greater than three months)
(1,123)
(901)
(1,356)
(12,109)
(7,012)
(7,089)
(13,232)
(7,913)
(8,445)
Repurchases of common stock
(4,007)
(7,216)
(3,597)
Capital investment from Equipment Operations
Dividends paid
(1,605)
(1,427)
(1,313)
(46)
(67)
(35)
(73)
(5,135)
(7,232)
(7,619)
2,164
10,695
7,994
254
(655)
451
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash
(15)
(22)
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash
(112)
1,974
(3,419)
705
235
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year
5,755
3,781
7,200
1,865
1,160
925
7,620
4,941
8,125
Cash, Cash Equivalents, and Restricted Cash at End of Year
5,643
1,990
7,633
Components of Cash, Cash Equivalents, and Restricted Cash
3,767
1,007
4,774
Cash, cash equivalents, and restricted cash (Assets held for sale)
116
Restricted cash (Other assets)
165
153
193
162
167
Total Cash, Cash Equivalents, and Restricted Cash
11 Elimination of depreciation on leases related to inventory transferred to equipment on operating leases (see Note 6).
12 Reclassification of share-based compensation expense.
13 Elimination of dividends from financial services to the equipment operations, which are included in the equipment operations operating activities.
14 Primarily reclassification of receivables related to the sale of equipment.
15 Reclassification of direct lease agreements with retail customers.
16 Reclassification of sales incentive accruals on receivables sold to financial services.
17 Elimination of change in investment from equipment operations to financial services.
41
SELECTED FINANCIAL DATA
2021
2020
2019
2018
2017
2016
2015
Net sales and revenues
44,024
35,540
39,258
37,358
29,738
26,644
28,863
39,737
31,272
34,886
33,351
25,885
23,387
25,775
3,296
3,450
3,493
3,107
2,732
2,511
2,381
1,587
1,644
1,783
1,658
1,373
1,394
1,410
3,383
3,477
3,551
3,455
3,098
2,791
2,868
993
1,247
1,466
1,204
899
764
680
Net income*
5,963
2,751
3,253
2,368
2,159
1,524
1,940
Return on net sales
15.9%
18.3%
14.9%
15.0%
8.8%
9.3%
7.1%
8.3%
6.5%
7.5%
Return on beginning Deere & Company stockholders’ equity
32.6%
50.2%
38.7%
46.1%
24.1%
28.8%
24.8%
33.1%
22.6%
21.4%
Comprehensive income*
6,508
10,099
6,629
8,963
2,819
2,081
3,222
3,221
627
Net income per share – basic*
25.73
34.80
23.42
19.14
8.77
10.28
7.34
6.76
4.83
5.81
– diluted*
25.62
34.63
23.28
18.99
8.69
10.15
7.24
6.68
4.81
5.77
Dividends declared per share
5.88
5.05
4.36
3.61
3.04
2.58
2.40
Dividends paid per share
5.76
4.28
3.32
2.97
2.49
Average number of common shares outstanding (in millions) – basic
276.0
292.2
304.5
311.6
313.5
316.5
322.6
319.5
315.2
333.6
– diluted
277.1
293.6
306.3
314.0
316.6
320.6
327.3
323.3
336.0
Total assets
90,030
84,114
75,091
73,011
70,108
65,786
57,918
57,883
6,410
4,208
4,171
5,230
5,004
3,925
3,011
3,051
36,634
33,799
29,750
29,195
27,054
25,104
23,702
24,809
5,936
4,659
4,703
4,383
4,022
4,159
5,127
4,835
6,623
6,988
7,298
7,567
7,165
6,594
5,902
4,970
8,495
6,781
4,999
5,975
6,149
3,904
3,341
3,817
6,056
5,820
5,817
5,973
5,868
5,068
5,171
5,181
12,592
10,919
8,582
10,784
11,062
10,035
6,911
8,425
5,711
4,605
4,682
4,321
3,957
4,119
4,998
4,585
33,596
32,888
32,734
30,229
27,237
25,891
23,703
23,775
20,262
18,431
12,937
11,413
11,288
9,557
6,520
6,743
Book value per share*
84.03
77.37
67.82
59.83
41.25
36.45
35.45
29.70
20.71
21.29
Capital expenditures
1,624
1,537
1,176
867
762
1,084
969
586
668
655
Number of employees (at year end)
75,847
82,956
82,239
75,550
69,634
73,489
74,413
60,476
56,767
57,180
* Attributable to Deere & Company.
42
FINANCIAL INSTRUMENT MARKET RISK INFORMATION
We are naturally exposed to various interest rate and foreign currency risks. As a result, we enter into derivative transactions to manage this exposure and not for speculative purposes.
From time to time, we enter into interest rate swap agreements to manage our interest rate exposure. We also have foreign currency exposures at some of our foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies. We have entered into derivative agreements related to the management of these foreign currency transaction risks.
Interest Rate Risk
Results of Operations – Central bank policy rates increased in 2022 and 2023 and have remained elevated. Increased rates impacted us in several ways, primarily affecting the demand for our products and financing spreads for the financial services operations. Increased interest rates have historically impacted our borrowings sooner than the benefit is realized from the financing receivable and equipment on operating lease portfolios.
Fair Value Measurement – Quarterly, we use a combination of cash flow models to assess the sensitivity of our financial instruments with interest rate exposure to changes in market interest rates. The models calculate the effect of adjusting interest rates as follows:
The net impact in these financial instruments’ fair values which would be caused by decreasing or increasing the interest rates by 10 percent from the market rates at October 27, 2024, and October 29, 2023, would have been approximately $75 and $10, respectively.
Reference Rate Reform – We transitioned our financing, funding, and hedging portfolios from the London Interbank Offered Rate (LIBOR) to alternative reference rates in 2023, and in 2024, we transitioned certain portfolios from the Canadian Dollar Offered Rate (CDOR) to an alternative reference rate. These transition activities did not have a material impact on our financial statements.
Foreign Currency Risk
We hedge significant currency exposures for our equipment operations. Worldwide foreign currency exposures are reviewed quarterly. Based on the anticipated and committed foreign currency cash inflows, outflows, and hedging policy for the next twelve months, we estimate that a hypothetical 10 percent strengthening of the U.S. dollar relative to other currencies through 2025 would increase the 2025 expected net cash inflows by approximately $25. At October 29, 2023, a hypothetical 10 percent strengthening of the U.S. dollar under similar assumptions and calculations indicated a potential $25 increase on the 2024 net cash inflows. The estimated impacts on net cash inflows by currency follow:
Australian dollar
Brazilian real
British pound
(50)
Canadian dollar
Euro
100
75
Japanese yen
50
Mexican peso
Polish zloty
All other
Total increase
In the financial services operations, our policy is to manage foreign currency risk through hedging strategies if the currency of the borrowings does not match the currency of the receivable portfolio. As a result, a hypothetical 10 percent adverse change in the value of the U.S. dollar relative to all other foreign currencies would not have a material effect on the financial services cash flows.
STATEMENTS OF CONSOLIDATED INCOME
Income of Consolidated Group before Income Taxes
Income of Consolidated Group
Per Share Data
Basic
Diluted
Dividends declared
Average Shares Outstanding (in millions of shares)
The notes to consolidated financial statements are an integral part of this statement.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment
(429)
(456)
645
Cumulative translation adjustment
(134)
443
(1,116)
Unrealized gain (loss) on derivatives
63
Unrealized gain (loss) on debt securities
(109)
Other Comprehensive Loss, Net of Income Taxes
(591)
(517)
Comprehensive Income of Consolidated Group
6,497
10,097
6,613
Less: Comprehensive loss attributable to noncontrolling interests
Comprehensive Income Attributable to Deere & Company
CONSOLIDATED BALANCE SHEETS
Common stock, $1 par value (authorized – 1,200,000,000 shares;
issued – 536,431,204 shares in 2024 and 2023), at paid-in amount
5,489
5,303
Common stock in treasury, 264,678,912 shares in 2024 and 254,846,927 shares in 2023, at cost
(35,349)
(31,335)
Retained earnings
56,402
50,931
Accumulated other comprehensive income (loss)
(3,706)
(3,114)
Total stockholders’ equity
STATEMENTS OF CONSOLIDATED CASH FLOWS
Credit for deferred income taxes
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY
For the Years Ended October 30, 2022, October 29, 2023, and October 27, 2024
Total Stockholders’ Equity
Deere & Company Stockholders
Accumulated
Redeemable
Stockholders’
Common
Treasury
Retained
Comprehensive
Noncontrolling
Equity
Stock
Earnings
Income (Loss)
Interests
Interest
Balance October 31, 2021
18,434
5,054
(20,533)
36,449
(2,539)
Acquisitions (Note 3)
Net income (loss)
7,133
Other comprehensive loss
Treasury shares reissued
(1,329)
(1,327)
Share based awards and other
111
Balance October 30, 2022
20,265
5,165
(24,094)
42,247
(3,056)
92
10,168
Other comprehensive income (loss)
(7,274)
(1,477)
(1,472)
(5)
132
Balance October 29, 2023
7,102
(14)
(592)
(4,044)
(1,624)
(1,622)
Noncontrolling interest redemption (Note 4)
182
Balance October 27, 2024
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note Listing
1.
Organization and Consolidation
2.
Summary of Significant Accounting Policies and New Accounting Pronouncements
3.
Acquisitions and Dispositions
4.
Special Items
54
5.
Revenue Recognition
56
6.
Supplemental Cash Flow Information
58
7.
Pension and Other Postretirement Benefits
8.
62
9.
Other Income and Other Operating Expenses
10.
Marketable Securities
11.
Receivables
12.
Securitization of Financing Receivables
69
13.
14.
Property and Depreciation
15.
Goodwill and Other Intangible Assets ‒ Net
16.
Other Assets
70
17.
Short-Term Borrowings
18.
19.
Long-Term Borrowings
71
20.
Commitments and Contingencies
21.
Capital Stock
22.
Share-Based Compensation
23.
Other Comprehensive Income Items
73
24.
Leases
74
25.
Fair Value Measurements
76
26.
Derivative Instruments
77
27.
Segment Data
28.
Subsequent Events
1. ORGANIZATION AND CONSOLIDATION
References to “Deere & Company,” “John Deere,” “Deere,” “we,” “us,” or “our” include our consolidated subsidiaries, unless otherwise stated. We manage our business through the following operating segments: production and precision agriculture (PPA), small agriculture and turf (SAT), construction and forestry (CF), and financial services (John Deere Financial or FS). References to “equipment operations” include PPA, SAT, and CF, while references to “agriculture and turf” include both PPA and SAT.
Principles of Consolidation
The consolidated financial statements represent the consolidation of all companies in which Deere & Company has a controlling interest. Certain variable interest entities (VIEs) are consolidated since we are the primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the VIEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. We consolidate certain VIEs related to retail note securitizations (see Note 12).
We record our investment in each unconsolidated affiliated company (20 to 50 percent ownership) at cost, plus or minus our share of the profit or loss after acquisition, and further reduced for any dividends. Other investments (less than 20 percent ownership) are recorded at cost.
Fiscal Year
We use a 52/53 week fiscal year ending on the last Sunday in the reporting period, which generally occurs near the end of October. An additional week is included in the fourth fiscal quarter every five or six years to realign our fiscal quarters with the calendar. The fiscal year ends for 2024, 2023, and 2022 were October 27, 2024, October 29, 2023, and October 30, 2022, respectively. Fiscal years 2024, 2023, and 2022 contained 52 weeks. Unless otherwise stated, references to particular years, quarters, or months refer to our fiscal years and the associated periods in those fiscal years.
Presentation of Amounts
All amounts are presented in millions of dollars, unless otherwise specified. Certain prior period amounts have been reclassified to conform to current period presentation.
Argentina
We have equipment operations and financial services operations in Argentina. The U.S. dollar has historically been the functional currency for our Argentina operations, as our business is indexed to the U.S. dollar due to the highly inflationary conditions. Argentine peso-denominated monetary assets and liabilities are remeasured at each balance sheet date using the official currency exchange rate. The Argentine government has certain capital and currency controls that restrict our ability to access U.S. dollars in Argentina and remit earnings from our Argentine operations. As of October 27, 2024 and October 29, 2023, our net investment in Argentina was $826 and $766, respectively. Net sales and revenues from our Argentine operations represented approximately 1 percent of consolidated net sales and revenues for 2024, 2023, and 2022. We have employed mechanisms to convert Argentine pesos into U.S. dollars to the extent possible. These mechanisms are short-term in nature, leaving us exposed to long-term currency fluctuations. As of October 27, 2024 and October 29, 2023, the gross peso exposure was $69 and $30, respectively, while the net peso exposure (after considering the impact of short-term hedges) was $14 and $5, respectively. In 2024, we invested in U.S. dollar denominated bonds issued by the central bank of Argentina. The bonds are recorded in “Marketable securities” and classified as “International debt securities.” These bonds can be held until maturity or sold in secondary markets outside of Argentina to settle intercompany debt.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS
The following are significant accounting policies in addition to those included in other notes to the consolidated financial statements.
Use of Estimates in Financial Statements
Certain accounting policies require management to make estimates and assumptions in determining the amounts reflected in the financial statements and related disclosures. Actual results could differ from those estimates.
General
Sales of equipment and service parts are recognized when we transfer control of the good to the independent customer, which generally occurs upon shipment. In most situations, the independent customer is a dealer, which subsequently sells the equipment and service parts purchased from us to a retail customer, who can finance the equipment with the financial services segment or another source of financing. In some situations, we sell directly to a retail customer. The term “customer” includes both dealers and retail customers to whom we make direct sales.
Interest-Free Periods and Past-Due Interest
We charge dealers interest on outstanding balances from the earlier of when goods are sold to a retail customer by the dealer or the expiration of the interest-free period granted at the time of the sale to the dealer. Interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to twelve months for most equipment. Interest-free periods may not be extended. Interest charged may not be forgiven, and past due interest rates are charged at higher rates. If the interest-free or below market interest rate period exceeds one year, we adjust the expected sales revenue for the effects of the time value of money using a current market interest rate. The revenue related to the financing component is recognized in “Finance and interest income” using the interest method. We do not adjust the sales price to account for a financing component if the expected interest-free or below market period is one year or less.
Right of Return
Generally, no right of return exists on sales of equipment. Dealers cannot cancel purchases after we recognize a sale and are responsible for payment even if the equipment is not sold to a retail customer. Service parts and certain attachment returns are estimable and accrued at the time a sale is recognized. The estimated returns are based on historical return rates, current dealer inventory levels, and current economic conditions. The estimated returns are recorded in “Other assets” for the inventory value of estimated returns, adjusted for restocking fees. The estimated dealer refund liability, adjusted for restocking fees, is recorded in “Accounts payable and accrued expenses.”
Remanufacturing
We remanufacture used engines and components (cores) that are sold to dealers and retail customers for maintenance and repair parts. Revenue for remanufactured components is recognized using the same criteria as other parts sales. When a remanufactured part is sold, we collect a deposit that is repaid if the customer returns a core that meets certain specifications within a defined time period. The deposit received from the customer is recognized as a liability in “Accounts payable and accrued expenses” and the used component that is expected to be returned is recognized in “Other assets.” When a customer returns a core, the deposit is repaid, the liability reversed, and the returned core is recorded in inventory to be remanufactured and sold to
another customer. If a core is not returned within the required time, the deposit is recognized as revenue in “Net sales,” and the cost of the core is recorded as an expense in “Cost of sales.”
Bundled Technology
Certain equipment is sold with precision guidance, telematics, and other information gathering and analyzing capabilities. These technology solutions require hardware, software, and may include an obligation to provide services for a period of time. These solutions are mostly bundled with the sale of the equipment but can also be purchased or renewed separately. The revenue related to the hardware and embedded software is recognized at the time of the equipment sale and recorded in “Net sales.” The revenue for the future services and usage-based software is deferred and recognized over the service period. The deferred revenue is recorded as a contract liability in “Accounts payable and accrued expenses.”
Financing Revenue and Origination Costs
Financing revenue and deferred costs on the origination of financing receivables are recorded over the lives of the related receivables using the interest method. Deferred costs are recognized as a reduction to “Finance and interest income.” Income and deferred costs on the origination of operating leases are recognized on a straight-line basis over the scheduled lease terms in “Finance and interest income.”
We offer sales incentive programs to promote the sale of our products from the dealer to the retail customer. At the time of the sale to a dealer, we record an estimated cost for the sales incentive programs as a reduction to the sales price. The estimated cost is based on historical data, announced and expected incentive programs, field inventory levels, and forecasted sales volumes. The final cost of these programs is determined at the end of the measurement period for volume-based incentives or when the dealer sells the equipment to a retail customer. One type of sales incentive program offered to dealers is pool funds in which we award dealers funds based on new equipment sales. Dealers can use these funds to incentivize sales from the dealer to the end customer. Pool funds, as well as some other incentive programs, are recorded in “Trade accounts and notes receivable – net” as we have the contractual right and the intent to offset against the existing dealer receivables. Actual cost differences from the original cost estimate are recognized in “Net sales.”
For equipment and service parts sales, we provide a standard warranty. At the time a sale is recognized, the estimated future warranty costs are recorded. The warranty liability is estimated based on historical warranty claims rate experience and the estimated amount of equipment still under warranty. The historical claims rate is primarily determined by a review of five-year claims costs while also taking into consideration current quality developments. The amount of equipment still under warranty is estimated based on dealer inventories and retail sales.
We also offer extended warranty arrangements for purchase at the customer’s option. The premiums for extended warranties are recognized in “Other income” primarily in proportion to the costs expected to be incurred over the contract period. The unamortized extended warranty premiums (deferred revenue) are recorded in “Accounts payable and accrued expenses” (see Note 18).
Sales and Transaction Taxes
We collect and remit taxes for revenue producing transactions as necessary based on various tax laws. These taxes include sales, use, value-added, and some excise taxes. We elected to exclude these taxes from the determination of the sales price. These taxes are not included in revenues.
Contract Costs
Incremental costs of obtaining an equipment revenue contract are recognized as an expense when incurred since the amortization period would be one year or less.
Advertising Costs
Advertising costs are charged to “Selling, administrative and general expenses” as incurred. Advertising costs were $230 in 2024, $244 in 2023, and $227 in 2022.
Depreciation and Amortization
Property and equipment, capitalized software, and other intangible assets are stated at cost less accumulated depreciation or amortization. These assets are depreciated over their estimated useful lives using the straight-line method. Equipment on operating leases is depreciated over the terms of the leases using the straight-line method. Property and equipment expenditures for new and revised products, increased capacity, and the replacement or major renewal of significant items are capitalized. Expenditures for maintenance, repairs, and minor renewals are charged to expense as incurred.
Cash and Cash Equivalents
We consider investments with purchased maturities of three months or less to be cash equivalents.
Receivables and Allowances
All financing and trade receivables are reported on the balance sheet at outstanding principal and accrued interest, adjusted for:
The allowance is a reduction to the receivable balances, and the provision is recorded in “Selling, administrative and general expenses.” The allowance for credit losses is an estimate of the credit losses expected over the life of our receivable portfolio. Non-performing receivables are included in the estimate of expected credit losses. The allowance is measured on a collective basis for receivables with similar risk characteristics. Receivables that do not share risk characteristics are evaluated on an individual basis. Risk characteristics include:
Management reviews each model’s output quarterly, and qualitative adjustments are incorporated as necessary (see Note 11).
Long-Lived Assets, Goodwill, and Other Intangible Asset Impairment
We evaluate the carrying value of long-lived assets (including equipment on operating leases, property and equipment, goodwill, and other intangible assets) when events or circumstances warrant such a review. Goodwill and unamortized intangible assets are tested for impairment annually at the end of the third quarter of each fiscal year, and more often if events or circumstances may have caused the fair value to fall below the carrying value. If the carrying value of the long-lived asset is considered impaired, the long-lived asset is written down to its fair value (see Notes 4 and 25).
Goodwill is allocated and reviewed for impairment by reporting unit. Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. To test for goodwill impairment, the carrying value of each reporting unit is compared with its fair value. If the carrying value of the goodwill is considered impaired, the impairment is measured as the reporting unit’s carrying value minus the fair value.
51
Derivative Financial Instruments
It is our policy to use derivative transactions only to manage exposures from the normal course of business. We do not execute derivative transactions for the purpose of creating speculative positions or trading. Our financial services operations have interest rate and foreign currency exposure between (a) the receivable or lease portfolio and (b) how those portfolios are funded. We also have foreign currency exposures at some of our foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies. In addition, we have interest rate and foreign currency exposure at certain equipment operations units for sales incentive programs.
All derivatives are recorded at fair value on the consolidated balance sheets. Cash collateral received or paid is not offset against the derivative fair values on the balance sheets. The cash flows from the derivative contracts are recorded in operating activities in the statements of consolidated cash flows. Each derivative is designated as a cash flow hedge, fair value hedge, or remains undesignated.
Changes in the fair value of derivatives are recorded as follows:
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 for 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 (see Note 26).
Foreign Currency Translation
The functional currencies for most of our foreign operations are their respective local currencies. The assets and liabilities of these operations are translated into U.S. dollars using the exchange rates at the end of the period. The revenues and expenses are translated at weighted-average rates for the period. The gains or losses from these translations are recorded in OCI.
Foreign currency gains or losses and foreign exchange components of derivative contracts are included in net income, with trade flow activity recorded in “Cost of sales,” sales incentive activity recorded in “Net sales,” and all other activity recorded in “Other operating expenses.” The pretax net loss for foreign exchange in 2024, 2023, and 2022 was $63, $159, and $175, respectively.
New Accounting Pronouncements Adopted
We closely monitor all Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) and other authoritative guidance. We adopted the following standards in 2024, none of which had a material effect on our consolidated financial statements:
No. 2022-04 — Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations
No. 2022-02 — Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
No. 2022-01 — Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method
No. 2021-08 — Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
Accounting Pronouncements to be Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which expands disclosures about specific expense categories presented on the face of the income statement. The effective date of the ASU is fiscal year 2028. We are assessing the effect of this update on our related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and cash income taxes paid both in the U.S. and foreign jurisdictions. The effective date of the ASU is fiscal year 2026. We are assessing the effect of this update on our related disclosures.
We will also adopt the following standards in future periods, none of which are expected to have a material effect on our consolidated financial statements.
No. 2024-04 — Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments
No. 2023-07 — Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
No. 2023-06 — Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative
No. 2023-05 — Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement
No. 2022-03 — Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
52
3. ACQUISITIONS AND DISPOSITIONS
During the presented periods, we completed acquisitions to support our Smart Industrial Operating Model and Leap Ambitions, which focus on advancing our capabilities in technology.
Acquisitions
2023 Acquisitions
In 2023, we acquired SparkAI Inc. (Spark AI) and Smart Apply, Inc. (Smart Apply) to accelerate the integration of smart technology innovation in our products. The combined cost of these acquisitions was $82, net of cash acquired of $2. Spark AI was assigned to the PPA segment, while Smart Apply was assigned to the SAT segment. Most of the purchase price for these acquisitions was allocated to goodwill.
2022 Acquisitions
Kreisel
In February 2022, we 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 us to purchase the holders’ ownership interests 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 our consolidated balance sheets.
The total cash purchase price was $276, consisting of $253 for the acquired equity interests, $21 to reduce the option price, and customary working capital adjustments, net of cash acquired. The fair values assigned to the assets and liabilities of the acquired entity, which are based on information as of the acquisition date and available at October 30, 2022, follows:
February 2022
Trade accounts and notes receivable
Property and equipment
218
Other intangible assets
178
437
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 is allocated amongst the PPA, SAT, and CF segments.
Excavator Factories
In March 2022, we acquired full ownership of three former Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi Construction Machinery Co., Ltd. (Hitachi). The two companies also ended their joint venture manufacturing and marketing agreements. The former joint venture factories continue to manufacture Deere-branded construction excavators and forestry equipment. Through a new supply agreement with Hitachi, Deere continues to offer a full portfolio of excavators. Deere’s marketing arrangement for Hitachi-branded construction excavators and mining equipment in the Americas 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, we now have complete control over the 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. We 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 was as follows:
March 2022
Cash consideration for factories
205
Cash consideration for license agreement
Deferred consideration
271
Total purchase price consideration
546
Less: Cash obtained
(187)
Less: Settlement of intercompany balances
Net purchase price consideration
246
Fair value of previously held equity investment
Total invested capital
690
The total purchase price consideration includes deferred consideration that will be paid as we purchase 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. See Note 25 for fair value measurement information. Excluding inflation adjustments, the price increases for products to be acquired by us from Hitachi are as much as 27 percent higher than the prior supply arrangement. We 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 (pretax and after-tax), which was recorded in “Other income” and included in the CF segment’s operating profit.
Prior to the acquisition, we purchased 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 sales 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 only includes the sale of Deere-branded excavators to John Deere dealers, while Cost of sales reflects market pricing to purchase and manufacture excavators, as well as the related components and service parts.
The fair values assigned to the assets and liabilities of the acquired factories, which are based on information as of the acquisition date and available at October 30, 2022, follow:
286
180
529
1,153
300
163
463
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 are reported in the CF segment.
Other Acquisitions
In 2022, we acquired AgriSync Inc. (AgriSync), a technology service provider; an 80 percent stake in both SureFire Ag Systems, Inc. and SureFire Electronics, LLC, renamed after acquisition and collectively referred to as SurePoint Ag Systems, Inc. (SurePoint), which design and manufacture liquid fertilizer application and spray tendering systems; an equity method investment in GUSS Automation LLC (GUSS Automation), a pioneer in semi-autonomous orchard and vineyard sprayers; LGT, LLC (Light), which specializes in depth sensing and camera-based perception for autonomous vehicles; and an equity method investment in InnerPlant, Inc. (InnerPlant), an early-stage biotech company. The combined cost of these acquisitions was $134, net of cash acquired of $3. The asset and liability fair values at the respective acquisition dates follow:
October 2022
60
154
The identifiable intangible assets were related to trade name, technology, and customer relationships with a weighted average amortization period of 7 years. AgriSync was allocated amongst the PPA, SAT, and CF segments, while SurePoint, Light, and InnerPlant were allocated to the PPA segment. GUSS Automation was assigned to the SAT segment.
Dispositions
In October 2023, we sold our roadbuilding business in Russia. At the time of the sale, total assets were $32, consisting primarily of restricted cash, total liabilities were $1, and the cumulative translation loss was $11. Total proceeds from the sale include $16 of cash and $8 of deferred consideration. A pretax and after-tax loss of $18 was recorded in “Other operating expenses” in the CF segment. As of October 27, 2024, our remaining investments in Russia were not material.
In March 2023, we sold our financial services business in Russia (registered in Russia as a leasing company) to Insight Investment Group. The total proceeds, net of restricted cash sold, were $36. The operations were included in the financial services operating segment through the date of sale. At the disposal date, the total assets were $31, consisting primarily of financing receivables, the total liabilities were $5, and the cumulative translation loss was $10. In the first quarter of 2023, we reversed the allowance for credit losses and recorded a valuation allowance on the assets held for sale in “Selling, administrative and general expenses.” We did not incur additional gains or losses upon disposition.
4. SPECIAL ITEMS
We were impacted by the following items.
2024 Special Items
Legal Settlements
In 2024, we reached legal settlements concerning patent infringement claims. As a result of these settlements, we recognized a total of $57 pretax gain ($45 after-tax) in "Other income," providing a benefit of $17 to PPA and $40 to CF. These settlements resolve the disputes without any admission of liability by the parties involved. We believe that these settlements enhance our ability to protect our intellectual property and reinforce our commitment to innovation and technological advancement.
Impairment
In the fourth quarter of 2024, we recorded a non-cash charge of $28 pretax and after-tax in “Equity in income (loss) of unconsolidated affiliates” for an other than temporary decline in value of an investment recorded in SAT. See Note 25 for fair value measurement information.
Employee-Separation Programs
In the third quarter of 2024, we implemented employee-separation programs for our salaried workforce in several geographic areas, including the United States, Europe, Asia, and Latin America. The programs’ main purpose was to help meet our strategic priorities while reducing overlap and redundancy in roles and responsibilities. The programs were largely involuntary in
nature with the expense recorded when management committed to a plan, the plan was communicated to the employees, and the employees were not required to provide service beyond the legal notification period. For the limited voluntary employee-separation programs, the expense was recorded in the period in which the employee irrevocably accepted a separation offer.
The programs’ total pretax expenses are estimated to be approximately $165. In 2024, we recorded $157 pretax expenses ($124 after-tax) related to the programs, of which $130 was paid in 2024 and $27 is expected to be paid in 2025. The remaining expenses are associated with programs in international locations and are expected to be recorded in 2025.
The programs’ pretax expenses in 2024 were as follows:
PPA
SAT
CF
FS
Employee-Separation Programs:
Total operating profit decrease
152
Non-operating profit expenses*
157
* Relates primarily to corporate expenses.
Banco John Deere S.A.
In August 2024, we entered into a joint venture agreement with a Brazilian bank, Banco Bradesco S.A. (Bradesco), for Bradesco to invest and become 50 percent owner of our wholly-owned subsidiary in Brazil, Banco John Deere S.A. (BJD). BJD is included in our financial services segment and finances retail and wholesale loans for agricultural, construction, and forestry equipment. The transaction is intended to reduce our incremental risk as we continue to grow in the Brazilian market. On the transaction date, which is expected to occur in the first half of 2025, Bradesco will contribute capital equal to our equity investment in BJD. We will retain a 50 percent equity interest in BJD and expect to report the results of the joint venture as an equity investment in unconsolidated affiliates.
The BJD business was reclassified as held for sale in the third quarter of 2024, as the held for sale criteria was met. A reversal of $38 in allowance for credit losses was recorded in the third quarter. At October 27, 2024, a $97 valuation allowance was recorded on the assets held for sale, which was presented in “Impairments and other adjustments” in the statements of consolidated cash flows. The net impact of these entries was a pretax and after-tax loss of $59 recorded in “Selling, administrative and general expenses.”
The major classes of the total consolidated assets and liabilities of BJD classified as held for sale and liabilities of BJD to other intercompany parties at October 27, 2024 follows. See Note 25 for fair value measurement information.
October 2024
115
2,693
Other miscellaneous assets*
Valuation allowance
534
118
1,174
Total intercompany payables
654
* Includes $1 restricted cash balance.
Redeemable Noncontrolling Interest
In the third quarter of 2024, we exercised our right to purchase the remaining 20 percent interest in SurePoint. The arrangement was accounted for as an equity transaction with no gain or loss recorded in the statements of consolidated income.
2023 Special Items
Sale of Russian Roadbuilding Business
In October 2023, we sold our Russian roadbuilding business, recognizing a loss of $18 (pretax and after-tax). The loss was recorded in “Other operating expenses” in the construction and forestry operations.
Brazil Tax Ruling
In the third quarter of 2023, the Brazil Superior Court of Justice published a favorable tax ruling regarding taxability of local incentives, which allowed us to record a $243 reduction in the provision for income taxes and $47 of interest income.
Financial Services Financing Incentives Correction
In the second quarter of 2023, we corrected the accounting treatment for financing incentives offered to John Deere dealers, which impacted the timing of expense recognition and the presentation of incentive costs in the consolidated financial statements. The cumulative effect of this correction, $173 pretax ($135 after-tax), was recorded in “Selling, administrative and general expenses” in the second quarter of 2023. Prior period results for Deere & Company were not restated, as the adjustment was considered immaterial to our financial statements.
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Summary of 2024 and 2023 Special Items
The following table summarizes the operating profit impact of the special items recorded in 2024 and 2023.
2024 Expense (benefit)
Legal settlements
(17)
(40)
(57)
Employee-separation programs
BJD measurement
Total expense (benefit)
(18)
2023 Expense
Russian roadbuilding sale
Financing incentives correction
Total expense
Year over year change
(36)
(104)
2022 Special Items
UAW Collective Bargaining Agreement
In November 2021, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (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 our UAW-represented employees at 14 U.S. facilities. The labor agreement included 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.
Impact of Events in Russia / Ukraine
In February 2022, we suspended shipments of machines and service parts to Russia due to the events in Russia / Ukraine. The suspension of shipments reduced the forecasted revenue for the region, which made it probable future cash flows would not cover the carrying value of certain assets. As a result, an impairment was recorded for most long-lived assets in Russia, and our U.S. senior management decided to initiate a voluntary employee-separation program. We also recorded a reserve on inventory, and increased our allowance for credit losses, reflecting economic uncertainty in Russia.
The financial services operations received an intercompany benefit from the equipment operations, which guarantees the financial services’ investments in certain international markets, including Russia.
The Russian government imposed certain restrictions on companies’ abilities to repatriate or remit cash from their Russian-based operations to locations outside of Russia. Cash in excess of what was required to fund operations in Russia was reclassified as restricted. A summary of the reserves, impairments, and voluntary-separation costs recorded in 2022 follows. See Note 25 for fair value measurement information.
Inventory reserve – Cost of sales
Fixed asset impairment – Cost of sales
Intangible asset impairment – Cost of sales
Allowance for credit losses – Financing receivables – Selling, administrative and general expenses
Voluntary-separation program:– Cost of sales
– Selling, administrative and general expenses
Intercompany agreement
(153)
Total Russia/Ukraine events pretax expense
110
255
Net tax impact
Total Russia/Ukraine events after-tax expense
Gain on Previously Held Equity Investment
In March 2022, we 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 (pretax and after-tax; see Note 3).
5. REVENUE RECOGNITION
Our net sales and revenues by primary geographic market, major product line, and timing of revenue recognition follow:
Primary geographic markets:
United States
11,741
6,249
8,086
4,166
30,242
Canada
1,818
605
760
717
Western Europe
2,068
2,203
1,729
6,189
Central Europe and CIS
787
284
381
1,488
Latin America
3,482
433
1,170
453
5,538
Asia, Africa, Oceania, and Middle East
1,530
1,480
1,128
221
4,359
21,426
11,254
13,254
5,782
Major product lines:
Production agriculture
20,574
Small agriculture
7,693
Turf
3,023
Construction
5,523
Compact construction
2,459
Roadbuilding
3,641
Forestry
1,108
Financial products
240
131
67
6,220
612
407
456
1,475
Revenue recognized:
At a point in time
21,059
11,084
13,137
45,413
Over time
170
117
5,649
6,303
13,917
7,796
9,109
3,283
34,105
1,221
641
4,287
2,640
2,824
1,725
7,321
1,218
530
353
2,137
5,608
707
1,429
8,197
2,166
1,679
1,183
5,204
27,287
14,223
15,020
4,721
26,450
10,122
3,505
6,842
2,451
3,794
219
5,094
618
500
446
1,564
26,969
14,092
14,915
56,087
318
4,610
5,164
10,975
7,741
7,103
2,419
28,238
1,387
676
1,238
601
3,902
2,188
2,478
1,576
102
6,344
1,207
488
545
2,289
4,991
578
1,467
303
7,339
1,570
1,608
1,136
151
4,465
22,318
13,569
13,065
3,625
21,685
10,027
3,027
5,864
1,667
3,441
1,308
3,769
573
753
1,789
22,178
13,493
12,980
48,756
140
3,520
3,821
Following is a description of the elements of net sales and revenues for our major product lines:
Production Agriculture – Includes net sales of large and certain mid-size tractors and associated attachments, combines, cotton pickers, cotton strippers, sugarcane harvesters, sugarcane loaders, tillage, seeding, and application equipment, including sprayers and nutrient management and soil preparation machinery, and related attachments and service parts.
Small Agriculture – Includes net sales of certain mid-size tractors, utility and compact 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 attachments and service parts.
Construction – Includes net sales of a broad range of machines used in construction, earthmoving, and material handling, including backhoe loaders, landscape loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, scraper systems, 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, 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 from retail notes related to sales of John Deere equipment to retail 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;” 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.”
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We invoice in advance of recognizing the sale of certain products and the revenue for certain services. These relate to extended warranty premiums, advance payments for future equipment sales, and subscription and service revenue related to precision guidance, telematic services, and other information enabled solutions. These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses.” The deferred revenue received, but not recognized in revenue was $1,923 and $1,697 at October 27, 2024 and October 29, 2023, respectively. The contract liability is reduced as the revenue is recognized. Revenue recognized from deferred revenue that was recorded as a contract liability at the beginning of the fiscal year was $553 in 2024, $547 in 2023, and $609 in 2022.
The amount of unsatisfied performance obligations for contracts with an original duration greater than one year and the estimated revenue to be recognized by fiscal year at October 27, 2024 follows:
Year
512
2026
429
2027
328
2028
2029
Later years
119
1,747
As permitted, we 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 for sales to dealers and retail customers for equipment, service parts, repair services, and certain telematics services.
6. SUPPLEMENTAL CASH FLOW INFORMATION
All cash flows from receivables related to sales are included in operating activities. This includes all changes in trade accounts and notes receivables, as well as some financing receivables (see Note 11). Financing receivables that are related to loans on equipment sold by independent dealers are included in investing activities.
Our short-term borrowings mature or may require payment within three months or less. During 2024, we issued $5.3 billion and retired $3.8 billion of retail note securitization borrowings, which are presented in “Net proceeds (payments) in short-term borrowings (original maturities three months or less).”
Cash, cash equivalents, and restricted cash recorded in “Assets held for sale” relates to BJD (see Note 4). Restricted cash recorded in “Other assets” relates to securitization of financing receivables (see Note 12) and cash held in Russia.
Supplemental cash flow information follows:
Cash paid for interest
3,298
2,227
1,101
Cash paid for income taxes
2,518
3,578
Inventory transferred to equipment on operating leases
223
195
Accounts payable related to purchases of property and equipment
211
7. PENSION AND OTHER POSTRETIREMENT BENEFITS
We have several funded and unfunded defined benefit pension plans and other postretirement benefit (OPEB) plans. These plans cover U.S. employees and certain foreign employees. The measurement date of our plans is October 31. The funded status as of October 31, 2024 of the significant plans follows:
Funded
Enrollment
Status
U.S. salaried qualified
1,314
Closed
U.S. hourly qualified
1,217
Open
(528)
Varies
U.S. salaried
(1,198)
U.S. hourly
101
(94)
(1,191)
The components of net periodic pension and OPEB (benefit) cost excluding the service cost component are included in the line item “Other operating expenses.”
The components of net periodic pension (benefit) cost and the related assumptions consisted of the following:
Service cost
230
349
Interest cost
533
330
Expected return on plan assets
(967)
(878)
(726)
Amortization of actuarial (gain) loss
Amortization of prior service cost
Settlements/curtailments
Net (benefit) cost
(111)
164
Weighted-average assumptions:
Discount rates – service cost
5.8%
5.2%
3.0%
Discount rates – interest cost
5.7%
5.1%
2.6%
Rate of compensation increase
3.8%
3.7%
Expected long-term rates of return
7.0%
6.3%
Interest crediting rate – U.S. cash balance plans
4.8%
4.3%
2.1%
During 2024, curtailment expense of $35 was recognized related to U.S. hourly employee layoffs.
The 2025 net periodic pension benefit is expected to increase by $100 due to an increase in the expected long-term rates of return on pension plan assets (estimated to be 7.1 percent) and the U.S. hourly pension curtailment recognized in 2024, described above.
The components of net periodic OPEB cost and the assumptions related to the cost consisted of the following:
174
(108)
(117)
(110)
Amortization of actuarial gain
(54)
Amortization of prior service credit
Net cost
6.7%
6.1%
3.6%
5.9%
5.4%
2.3%
5.6%
4.4%
The benefit plan obligations, funded status, and the assumptions related to the obligations at October 27, 2024 and October 29, 2023 follow:
Pensions
OPEB
Change in benefit obligations:
Beginning of year balance
(9,928)
(10,529)
(3,029)
(3,341)
(246)
(27)
(545)
(533)
Actuarial gain (loss)
(1,097)
504
(385)
285
Benefits paid
746
838
260
Health care subsidies
Settlement
Foreign exchange and other
End of year balance
(11,077)
(3,362)
Change in plan assets (fair value):
12,004
13,219
2,028
2,136
Plan assets actual gain (loss)
1,703
259
Employer contribution
145
158
(746)
(838)
(263)
(260)
13,080
2,171
Funded status
(1,001)
Discount rates
6.0%
4.1%
4.9%
The actuarial loss for pension for 2024 was due to a decrease in discount rates. The actuarial loss for OPEB for 2024 was due to a decrease in discount rates and changes to health care assumptions. The actuarial gain for pension for 2023 was due to an increase in discount rates. The actuarial gain for OPEB for 2023 was due to changes to health care assumptions.
During 2023, we irrevocably transferred to an insurance company $112 of a Canadian pension plan’s defined benefit obligations and related plan assets. The transaction resulted in no changes to the benefits to be received by the retired participants. We recognized a one-time, non-cash, pretax pension settlement charge of $36 related to the accelerated recognition of actuarial losses included within “Accumulated other comprehensive income (loss).”
The discount rate assumptions used to determine the pension and OPEB obligations for all periods presented were based on hypothetical AA yield curves represented by a series of annualized individual discount rates. These discount rates represent the rates at which our benefit obligations could effectively be settled at the October 31 measurement dates.
The mortality assumptions for the 2024 U.S. benefit plan obligations used the tables based on the plan’s mortality experience and the most recent scales issued by the Society of Actuaries. The mortality assumptions for the 2023 U.S. benefit plan obligations used the most recent tables and scales issued by the Society of Actuaries at that time. The 2024 and 2023 mortality assumptions included an adjustment to the scale related to COVID for some plans.
The weighted-average annual rates of increase in the per capita cost of covered health care benefits (the health care cost trend rates) for medical and prescription drug claims for pre- and post-65 age groups used to determine the October 27, 2024 and October 29, 2023 accumulated postretirement benefit obligations were as follows:
Initial year
16.9% (2024 to 2025)
18.7% (2023 to 2024)
Second year
11.5% (2025 to 2026)
8.8% (2024 to 2025)
Ultimate
4.7% (2033 to 2034)
4.7% (2032 to 2033)
An increase in Medicare Advantage premiums and prescription drug trends impacted the weighted-average annual rates of increase for the initial year in 2024 and 2023.
Information related to pension plans benefit obligations at October 27, 2024 and October 29, 2023 follows:
Total accumulated benefit obligations for all plans
10,441
9,453
Plans with accumulated benefit obligation exceeding fair value of plan assets:
Accumulated benefit obligations
1,405
1,147
Fair value of plan assets
920
704
Plans with projected benefit obligation exceeding fair value of plan assets:
Projected benefit obligations
1,541
951
729
The pension and OPEB amounts recognized in the balance sheet at October 27, 2024 and October 29, 2023 consisted of the following:
Noncurrent asset
2,593
2,608
399
Less: Current liability
66
Less: Noncurrent liability
524
473
1,360
The retirement benefits and other liabilities recognized in the balance sheet at October 27, 2024 and October 29, 2023 consisted of the following:
Deferred compensation – current
Deferred compensation and other – noncurrent
183
Pensions and OPEB – current
Pensions and OPEB – noncurrent
1,833
The amounts recognized in accumulated other comprehensive income ‒ pretax at October 27, 2024 and October 29, 2023 consisted of the following:
Net actuarial (gain) loss
2,011
1,660
(632)
(921)
Prior service (credit) cost
329
406
2,340
2,066
(630)
(922)
Actuarial gains and losses are recorded in accumulated other comprehensive income (loss). To the extent unamortized gains and losses exceed 10 percent of the higher of the market-related value of assets or the benefit obligation, the excess is amortized as a component of net periodic (benefit) cost over the remaining service period of the active participants. For plans in which all or almost all of the plan’s participants are inactive, the amortization period is the remaining life expectancy of the inactive participants.
Contributions
We make any required contributions to the plan assets under applicable regulations and voluntary contributions after evaluating our liquidity position and ability to make tax-deductible contributions. Total contributions to the plans were $241 in 2024 and $228 in 2023, which included both required and voluntary contributions and direct benefit payments.
We expect to contribute approximately $100 to our pension plans and approximately $660 to our OPEB plans in 2025. In November 2024, a committee of our Board of Directors approved a voluntary contribution to a U.S. OPEB plan for up to $520 to be made during the first quarter of 2025. This contribution will increase plan assets. The contributions include required and voluntary contributions and direct benefit payments from company funds. We have no significant required contributions to U.S. pension plan assets in 2025 under applicable funding regulations.
Expected Future Benefit Payments
The expected future benefit payments at October 27, 2024 were as follows:
OPEB*
257
736
267
728
716
273
274
2030 to 2034
3,555
1,331
* Net of prescription drug group benefit subsidy under Medicare Part D.
Plan Asset Information
The fair values of the pension plan assets at October 27, 2024 follow:
Level 1
Level 2
Cash and short-term investments
Equity:
U.S. equity securities
440
International equity securities and funds
238
232
Fixed Income:
Government and agency securities
1,250
932
Corporate debt securities
4,956
Mortgage-backed securities
177
Other investments
Derivative contracts – assets
123
Derivative interest rate contracts – liabilities
(161)
(119)
(42)
Receivables, prepaids, and payables
(171)
Securities lending collateral
662
Securities lending liability
(662)
Securities sold short
(92)
Total of Level 1 and Level 2 assets
7,244
1,664
5,580
Investments at net asset value:
Short-term investments
492
U.S. equity funds
International equity funds
194
Fixed income funds
1,649
Real estate funds
385
Hedge funds
Private equity
1,219
Venture capital
Total net assets
The fair values of the OPEB health care assets at October 27, 2024 follow:
606
561
551
1,337
692
84
348
The fair values of the pension plan assets at October 29, 2023 follow:
Level 3
513
470
199
197
1,017
759
258
4,389
(309)
615
(615)
(69)
Total of Level 1, Level 2, and Level 3 assets
6,347
1,382
4,947
362
1,418
462
491
1,306
1,341
The fair values of the OPEB health care assets at October 29, 2023 follow:
637
89
122
(122)
1,325
677
648
392
Investments at net asset value in the preceding tables are measured at fair value using the net asset value per share practical expedient and are not classified in the fair value hierarchy. Fair value measurement levels in the preceding tables are defined in Note 25.
Fair values are determined as follows:
Cash and Short-Term Investments – The investments include (1) cash accounts that are valued based on the account value, which approximates fair value; (2) investments that are valued at quoted prices in the active markets in which the investment trades or using a market approach (matrix pricing model) in which all significant inputs are observable or can be derived from or corroborated by observable market data; and (3) investment funds that are valued based on a constant fund net asset value, which is based on quoted prices in the active market in which the investment fund trades, or the fund’s net asset value using the net asset value per share practical expedient (NAV), which is based on the fair value of the underlying securities.
Equity Securities and Funds – The values are determined using quoted prices in the active market in which the equity investment trades, Equity funds are valued using the fund’s NAV, which is based on the fair value of the underlying securities.
Fixed Income Securities and Funds and Other Funds – The securities are valued using either 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, or they are valued using the quoted prices in the active market in which the fixed income investment trades. Fixed income and other funds are valued using the fund’s NAV, which is based on the fair value of the underlying securities.
61
Real Estate, Venture Capital, Private Equity, and Hedge Funds – The investments that are structured as limited partnerships, excluding the private equity investment classified as Level 3, are valued at estimated fair value based on their proportionate share of the limited partnership’s fair value that is determined by the respective general partner. These investments are valued using the fund’s NAV, which is based on the fair value of the underlying investments. Valuations may be lagged up to six months. The NAV is adjusted for cash flows (additional investments or contributions, and distributions) and any known substantive valuation changes through year end. The private equity investment classified as Level 3 was valued based on the market pricing received in October 2023 for the assets that were sold in a secondary sale in December 2023. The investment was transferred into Level 3 as of October 29, 2023.
Derivative Instruments – The derivatives are valued using either an income approach (discounted cash flow) using market observable inputs, including swap curves and both forward and spot exchange rates, or a market approach (quoted prices in the active market in which the derivative instrument trades).
The investment objective for the pension and health care plan assets is to fulfill the projected obligations to the beneficiaries over a long period of time, while meeting our fiduciary responsibilities. The asset allocation policy is the most important decision in managing the assets, and it is reviewed regularly. The asset allocation policy considers our long-term asset class risk/return expectations for each plan since the obligations are long-term in nature. The target asset allocations as of October 27, 2024 are as follows:
Pension
Health Care
Assets
7%
12%
Debt
70%
78%
Real estate
3%
20%
The assets are diversified and are managed by professional investment firms as well as by investment professionals who are company employees. As a result of our diversified investment policy, there were no significant concentrations of risk.
A market related value of plan assets is used to calculate the expected return on assets. The market related value recognizes changes in the fair value of pension plan assets systematically over a five-year period. The market related value of the health care plan assets equals fair value.
The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation and for returns in multiple asset classes, while also considering historical returns, asset allocation, and investment strategy. Our approach has emphasized the long-term nature of the return estimate such that the return assumption is not changed significantly unless there are fundamental changes in
capital markets that affect our expectations for returns over an extended period of time (i.e., 10 to 20 years). The average annual return of our U.S. pension fund was approximately 7.2 percent during the past ten years and approximately 8.0 percent during the past 20 years.
We have Voluntary Employees’ Beneficiary Association trusts (VEBAs) for the funding of hourly and salary postretirement health care benefits. The future expected asset returns for the VEBAs are lower than the expected return on the other pension and health care plan assets due to investment in a higher proportion of liquid securities. These assets are in addition to the other postretirement health care plan assets that have been funded under Section 401(h) of the U.S. Internal Revenue Code and maintained in a separate account in the John Deere Pension Trust.
Defined Contribution Plans
We have defined contribution plans related to employee investment and savings plans primarily in the U.S. Our contributions and costs under these plans were $326 in 2024, $288 in 2023, and $263 in 2022. The contribution rate varies based on employee participation in the plans.
8. INCOME TAXES
We are subject to income taxes in a number of jurisdictions. We determine our income tax provision using the asset and liability method. The provision for income taxes by taxing jurisdiction and by significant component consisted of the following:
Current:
U.S.:
Federal
1,253
1,803
514
State
386
Foreign
878
1,472
1,423
Total current
2,388
3,661
2,073
Deferred:
(485)
(65)
(240)
Total deferred
Based upon the location of our operations, the consolidated income before income taxes in the U.S. in 2024, 2023, and 2022 was $5.9 billion, $7.8 billion, and $5.0 billion, respectively, and in foreign countries was $3.3 billion, $5.2 billion, and $4.1 billion, respectively. Certain foreign operations are branches or partnerships of Deere & Company and are subject to U.S. as well as foreign income tax regulations. The pretax income by location and the preceding analysis of the income tax provision by taxing jurisdiction are not directly related.
A comparison of the statutory and effective income tax provision and reasons for related differences follow:
U.S. federal income tax provision at the U.S. statutory rate (21 percent)
1,933
2,734
1,917
State and local taxes, net of federal effect
179
266
Other impacts of Tax Cuts and Jobs Act of 2017
(60)
Rate differential on foreign subsidiaries
142
121
Research and business tax credits
(99)
(107)
Excess tax benefits on equity compensation
(49)
(55)
Valuation allowances
Unrecognized tax benefits
93
Other – net
(70)
At October 27, 2024, undistributed profits of subsidiaries outside the U.S. of approximately $6.0 billion are considered indefinitely reinvested. Determination of the amount of a foreign withholding tax liability on these unremitted earnings is not practicable.
Deferred income taxes arise because there are certain items that are treated differently for financial accounting than for income tax reporting purposes. An analysis of the deferred income tax assets and liabilities at October 27, 2024 and October 29, 2023 follows:
Deferred
Tax
Liabilities
Accrual for employee benefits
439
Accrual for sales allowances
847
884
Allowance for credit losses
Amortization of R&D expenditures
Deferred compensation
Goodwill and other intangible assets
107
Lessee lease transactions
Lessor lease transactions
581
OPEB – net
256
Pension – net
394
424
Share-based compensation
Tax loss and tax credit carryforwards
1,518
Tax over book depreciation
198
Unearned revenue
Other items
337
313
681
278
Less: valuation allowances
(1,598)
(1,612)
3,135
1,527
3,002
1,708
Deere & Company files a consolidated federal income tax return in the U.S., which includes the wholly-owned financial services subsidiaries. These subsidiaries account for income taxes as if they filed separate income tax returns, with a modification for realizability of certain tax benefits.
At October 27, 2024, tax loss and tax credit carryforwards of $1,564 were available with $1,063 expiring from 2025 through 2044 and $501 with an indefinite carryforward period.
A reconciliation of unrecognized tax benefits at October 27, 2024, October 29, 2023, and October 30, 2022 follows:
907
891
811
Increases to tax positions taken during the current year
98
Increases to tax positions taken during prior years
Decreases to tax positions taken during the current year
Decreases to tax positions taken during prior years
Decreases due to lapse of statute of limitations
Foreign exchange
928
The amount of unrecognized tax benefits at October 27, 2024 and October 29, 2023 that would impact the effective tax rate if the tax benefits were recognized was $410 and $329, respectively. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. We expect that any reasonably possible change in the amounts of unrecognized tax benefits in the next twelve months would not be significant.
We file our tax returns according to the tax laws of the jurisdictions in which we operate, which includes the U.S. federal jurisdiction and various state and foreign jurisdictions. The U.S. Internal Revenue Service (IRS) has completed the examination of our federal income tax returns for periods prior to 2015. The federal income tax returns for years 2015 to 2020 are currently under examination. Various state and foreign income tax returns also remain subject to examination by taxing authorities.
9. OTHER INCOME AND OTHER OPERATING EXPENSES
The major components of other income and other operating expenses consisted of the following:
Other income:
Revenues from services
312
283
Extended warranty premiums earned
Trademark licensing income
Operating lease disposition gains
Gain on previously held equity investment
326
Investment income
287
222
Other operating expenses:
Depreciation of equipment on operating leases
874
853
827
Extended warranty claims
340
309
Cost of services
248
227
214
Pension and OPEB benefit, excluding the service cost component
(333)
(286)
Foreign exchange loss
10. MARKETABLE SECURITIES
Most marketable securities are classified as available-for-sale. Realized gains or losses are based on specific identification.
The amortized cost and fair value of marketable securities at the end of 2024 and 2023 follow:
Gross
Amortized
Unrealized
Fair
Cost
Gains
Losses
Value
445
423
International debt securities
Mortgage-backed securities*
Municipal debt securities
U.S. government debt securities
377
Total debt securities
1,262
International equity securities
International mutual funds securities
U.S. equity fund
86
U.S. fixed income fund
Total equity securities
244
185
87
862
724
* Primarily issued by U.S. government-sponsored enterprises.
The purchases, maturities, and sale proceeds for marketable securities during 2024, 2023, and 2022 follow:
Purchases
1,055
Maturities and sale proceeds
Equity Securities
Unrealized gain (loss) on equity securities during 2024 and 2023 follow:
Net gain recognized on equity securities
Less: Net gain (loss) on equity securities sold
Unrealized gain on equity securities
Debt Securities
The contractual maturities of available-for-sale debt securities at October 27, 2024 follow:
Due in one year or less
Due after one through five years
356
Due after five through 10 years
435
Due after 10 years
171
Debt securities
Actual maturities may differ from contractual maturities because some securities may be called or prepaid. Mortgage-backed securities contain prepayment provisions and are not categorized by contractual maturity.
Proceeds of available-for-sale debt securities sold or matured during 2024, 2023, and 2022 were $619, $37, and $74, respectively. Realized gains and losses on debt securities were not material in 2024, 2023, and 2022.
11. RECEIVABLES
Trade Accounts and Notes Receivable
Trade accounts and notes receivable arise from sales of goods and services to customers. See Note 2 for our revenue recognition policy. We evaluate and assess customers creditworthiness on an ongoing basis. Receivables are secured with collateral or other credit enhancements. Trade accounts and notes receivable at the end of 2024 and 2023 follow:
Trade accounts and notes receivable:
Production & precision ag
1,532
2,642
Small ag & turf
1,657
2,344
Construction & forestry
2,753
These receivables have significant concentrations of credit risk in the agriculture and turf and construction and forestry markets. Credit losses have been historically low. There is not a disproportionate concentration of credit risk with any single customer. On a geographic basis, 51 percent of our trade accounts and notes receivable are located in the U.S. and Canada at October 27, 2024.
At October 27, 2024 and October 29, 2023 trade accounts and notes receivable balances outstanding greater than 12 months were $298 and $107, respectively. The increase was due to higher dealer inventory.
The allowance for credit losses on trade accounts and notes receivable at October 27, 2024, October 29, 2023, and October 30, 2022, as well as the related activity, follow:
Provision
Write-offs
Translation adjustments
End of year balance*
* Individual allowances were not significant.
The equipment operations sell a significant portion of their trade receivables to financial services. Compensation is provided to financial services at market interest rates.
Financing Receivables ‒ Overall
Financing receivables originate under the following circumstances:
Financing receivables at the end of 2024 and 2023 follow:
Unrestricted/Securitized
Retail notes:
Agriculture and turf
25,102
7,203
26,955
6,052
Construction and forestry
4,550
1,754
4,623
1,442
29,652
8,957
31,578
7,494
Wholesale notes
8,951
6,947
Revolving charge accounts
4,730
4,789
Financing leases (direct and sales-type)
3,032
Total financing receivables
46,365
46,220
Less:
Unearned finance income:
Retail notes
187
1,906
137
91
Financing leases
307
1,874
2,372
175
Assets managed by financial services continue to be evaluated by market, rather than by operating segment. Financing receivables have significant concentrations of credit risk in the agriculture and
turf and construction and forestry markets. On a geographic basis, 89 percent of our financing receivables were located in the U.S. and Canada at October 27, 2024. There is no disproportionate concentration of credit risk with any single customer or dealer. We retain as collateral security in the equipment associated with most financing receivables. Theft and physical damage insurance are required for this equipment.
Financing Receivables ‒ Related to the Sale of Equipment
Financing receivables related to the sale of equipment are presented in the operating section of the cash flow statement. The balances at the end of 2024 and 2023 were as follows:
Retail notes*:
376
320
647
1,404
Direct financing and sales-type leases*
295
494
9,893
8,845
Direct financing and sales-type leases
108
Financing receivables related to our sales of equipment
9,785
8,623
* These balances arise from sales and direct financing leases of equipment by company-owned dealers or through direct sales.
Financing Receivables ‒ Contractual Installment Payments
Financing receivable installments, including unearned finance income, at October 27, 2024 and October 29, 2023 were scheduled as follows:
Due in months:
0 – 12
23,872
22,176
2,820
13 – 24
8,187
2,507
8,646
2,089
25 – 36
6,356
1,702
6,692
1,509
37 – 48
4,509
918
4,844
824
49 – 60
2,660
241
Thereafter
781
942
Financing Receivables ‒ Credit Quality Analysis
We monitor the credit quality of financing receivables based on delinquency status, defined as follows:
65
Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is resumed when the receivable becomes contractually current and collections are reasonably assured.
The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer receivables) by year of origination was as follows:
Retail customer receivables:
Agriculture and turf:
Current
14,394
8,305
5,191
2,833
30-59 days past due
60-89 days past due
90+ days past due
Non-performing
Construction and forestry:
3,100
1,841
1,064
94
17,704
10,562
6,513
3,430
Prior Years
Revolving Charge Accounts
992
253
36,433
282
126
288
114
6,724
324
4,654
44,334
October 29, 2023
15,191
8,430
5,120
2,334
2,927
1,961
80
18,340
10,705
280
4,526
36,734
6,557
987
341
4,698
44,283
The credit quality analysis of wholesale receivables by year of origination was as follows:
Wholesale receivables:
650
30+ days past due
671
Revolving
6,718
7,568
1,311
1,358
8,029
8,927
631
160
5,175
6,085
712
236
5,887
6,922
Financing Receivables ‒ Allowance for Credit Losses
An analysis of the allowance for credit losses and investment in financing receivables follows:
Retail Notes
& Financing
Charge
Wholesale
Accounts
Allowance:
172
262
314
Provision reversal for assets held for sale
Provision subtotal
224
276
(186)
(95)
(281)
Recoveries
229
Financing receivables:
39,680
53,261
325
Provision (credit) subtotal
(45)
(84)
(129)
(19)
39,585
51,205
Provision (credit)
(61)
(88)
35,367
4,255
3,273
42,895
We monitor the economy as part of the allowance setting process, including potential impacts of the agricultural market business cycle and rising interest rates. Adjustments to the allowance are incorporated, as necessary.
During 2024, we determined that the financial services business in Brazil met the held for sale criteria. The receivables in Brazil were reclassified to “Assets held for sale.” The associated allowance for credit losses was reversed and a valuation allowance for the assets held for sale was recorded (see Note 4). The allowance for credit losses on retail notes and financing lease receivables increased in 2024 primarily due to higher expected losses as a result of elevated
delinquencies and a decline in market conditions impacting the agriculture receivable portfolio. This increase was partially offset by a decrease in the allowance on revolving charge accounts, driven by write-offs of seasonal financing program accounts and recoveries expected on those accounts in the future.
During 2023, we determined that the financial services business in Russia met the held for sale criteria. The financing receivables in Russia were reclassified to “Other assets” and the associated allowance for credit losses was reversed. These operations were sold in the second quarter of 2023 (see Note 3). Excluding the portfolio in Russia, the allowance increased in 2023, primarily driven by growth in the retail notes and financing lease portfolios and higher expected losses on turf and construction customer accounts.
Write-offs by year of origination were as follows:
281
Financing receivable analysis metrics follow:
Percent of the overall financing receivable portfolio:
Past-due amounts
1.20
1.02
1.01
.92
.43
.38
Deposits held as credit enhancements
Financing Receivables – Modifications
We occasionally grant contractual modifications to customers experiencing financial difficulties. Before offering a modification, we evaluate the ability of the customer to meet the modified payment terms. Modifications offered include payment deferrals, term extensions, or a combination thereof. Finance charges continue to accrue during the deferral or extension period with the exception of modifications related to bankruptcy proceedings. Our allowance for credit losses incorporates historical loss information, including the effects of loan modifications with customers. Therefore, additional adjustments to the allowance are generally not recorded upon modification of a loan.
At October 27, 2024, the ending amortized cost and performance of modified loans with borrowers experiencing financial difficulty in 2024 was as follows:
In 2024, these modifications represented 0.18 percent of our financing receivable portfolio. The financial effects of payment deferrals with borrowers experiencing financial difficulty resulted in a weighted average payment deferral of 8 months to the modified contracts. Term extensions provided to borrowers experiencing financial difficulty added a weighted average of 10 months to the terms of the modified contracts. Additionally, modifications with a combination of both payment deferrals and term extensions resulted in a weighted average payment deferral of 4 months and a weighted average term extension of 7 months.
Defaults and subsequent write-offs of loans modified in the prior twelve months were not significant during 2024. At October 27, 2024, commitments to provide additional financing to these customers were $27.
Financing Receivables – Troubled Debt Restructurings
Prior to adopting ASU 2022-02, modifications of loans to borrowers experiencing financial difficulty were considered troubled debt restructurings when the significant modification of the receivable resulted in a concession we would not otherwise consider.
The following table quantifies troubled debt restructurings:
Number of receivable contracts
209
Pre-modification balance
Post modification balance
Troubled debt restructurings for the presented periods related to retail notes. In 2023 and 2022, there were no significant troubled debt restructurings that subsequently defaulted and were written off.
Other Receivables
Other receivables at the end of 2024 and 2023 consisted of:
Taxes receivable
1,626
Collateral on derivatives
667
Receivables from unconsolidated affiliates
414
327
12. SECURITIZATION OF FINANCING RECEIVABLES
Our funding strategy includes receivable securitizations, which allows us to receive cash for financing receivables immediately. While these securitization programs are administered in various forms, they are accomplished in the following basic steps:
As part of step 1, these receivables are legally isolated from the claims of our general creditors. This ensures cash receipts from the financing receivables are accessible to pay back securitization program investors. The structure of these transactions does not meet the accounting criteria for a sale of receivables. As a result, they are accounted for as a secured borrowing. The receivables and borrowings remain on our balance sheet and are separately reported as “Financing receivables securitized – net” and “Short-term securitization borrowings,” respectively.
We offer securitization programs to institutional investors and other financial institutions through public issuances or privately through a revolving credit agreement. At October 27, 2024, the revolving agreement had a financing limit of up to $2,000. At October 27, 2024, $1,398 of securitization borrowings were outstanding under the revolving agreement. In November 2024, the agreement was renewed for one year with a capacity of $2,500.
Restricted cash held by the SPE serves as a credit enhancement. It would be used to satisfy receivable payment deficiencies, if any. The cash restriction is removed either after all secured borrowing payments are made or proportionally as the secured receivables are collected and the borrowing obligations are reduced.
The components of securitization programs were as follows at the end of 2024 and 2023:
Financing receivables securitized (retail notes)
8,770
7,357
(47)
Other assets (primarily restricted cash)
Total restricted securitized assets
8,910
7,487
Accrued interest on borrowings
Total liabilities related to restricted securitized assets
8,445
7,008
The weighted-average interest rates on short-term securitization borrowings at October 27, 2024 and October 29, 2023 were 5.0 percent and 4.7 percent, respectively.
Although these securitization borrowings are classified as short-term since payment is required if the financing receivables are liquidated early, the payment schedule for these borrowings at October 27, 2024 based on the expected liquidation of the retail notes is as follows: 2025 – $4,036, 2026 – $2,440, 2027 –$1,428, 2028 – $500, 2029 – $37, and later years – $4.
13. INVENTORIES
A majority of inventories owned by us are valued at cost on the “last-in, first-out” (LIFO) basis. If all inventories valued on a LIFO basis had been valued on a “first-in, first-out” (FIFO) basis, the estimated inventories by major classification would have been as follows at the end of 2024 and 2023:
Raw materials and supplies
3,486
4,080
Work-in-process
930
1,010
Finished goods and parts
5,364
5,435
Total FIFO value
9,780
10,525
Excess of FIFO over LIFO
2,687
2,365
Percent valued on LIFO basis
54%
53%
14. PROPERTY AND DEPRECIATION
A summary of property and equipment at October 27, 2024 and October 29, 2023 follows:
Useful Lives*
(Years)
Land
338
Buildings and building equipment
5,168
4,735
Machinery and equipment
7,125
Dies, patterns, tools, etc.
1,797
1,323
Construction in progress
1,313
1,266
Total at cost
17,175
15,933
Less: accumulated depreciation
(9,595)
(9,054)
* Weighted-averages
Property and equipment additions and depreciation follows:
Additions
1,707
1,597
1,197
Depreciation
806
For property and equipment, more than 10 percent resides in the U.S. and Germany, separately disclosed below:
U.S.
4,132
3,807
Germany
1,271
1,192
Other countries
1,880
15. GOODWILL AND OTHER INTANGIBLE ASSETS – NET
The changes in amounts of goodwill by operating segments were as follows. There were no accumulated goodwill impairment losses.
October 30, 2022
646
2,723
3,687
81
Translation adjustments and other
702
363
2,835
701
365
2,893
The components of other intangible assets were as follows:
Customer lists and relationships
508
501
Technology, patents, trademarks, and other
1,931
1,888
Less accumulated amortization:
(231)
(701)
(560)
Total accumulated amortization
(932)
(755)
Actual amortization expense for the past three years and the estimated amortization expense for the next five years follows:
Amortization
Estimated – 2025
146
128
16. OTHER ASSETS
Other assets at October 27, 2024 and October 29, 2023 consisted of the following:
Operating lease asset (Note 24)
Capitalized software, net
450
Investment in unconsolidated affiliates
Deferred charges (including prepaids)
412
426
Derivative assets (Note 26)
357
292
Prepaid taxes
Parts return asset
Restricted cash
Matured lease & repossessed inventory
106
Capitalized software has an estimated useful life of three years. Amortization of these software costs in 2024, 2023, and 2022 was $180, $144, and $117, respectively.
17. SHORT-TERM BORROWINGS
Short-term borrowings at the end of 2024 and 2023 consisted of:
Commercial paper
9,100
Notes payable to banks
483
Finance lease obligations due within one year
Long-term borrowings due within one year
9,115
8,331
The weighted-average interest rates at the end of 2024 and 2023 were:
Short-term borrowings:
11.0%
31.6%
The decrease in the weighted-average interest rates of notes payable to banks is primarily the result of Argentine peso funding representing a smaller portion of the notes outstanding.
Worldwide lines of credit were $10.9 billion at October 27, 2024, consisting primarily of:
At October 27, 2024, $6.5 billion of these worldwide lines of credit were unused. For the purpose of computing the unused credit lines, commercial paper and short-term bank borrowings were considered to constitute utilization. These credit agreements require Capital Corporation and other parts of our business to maintain certain performance metrics and liquidity targets. All requirements in the credit agreements have been met during the periods included in the consolidated financial statements.
18. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at the end of 2024 and 2023 consisted of the following:
Accounts payable:
Trade payables
2,698
3,467
Dividends payable
405
388
Operating lease liabilities
270
Deposits withheld from dealers and merchants
Payables to unconsolidated affiliates
204
Accrued expenses:
Employee benefits
1,925
2,152
Accrued taxes
1,558
Product warranties
1,426
1,610
Dealer sales incentives
996
1,243
Extended warranty premium
1,179
1,021
Derivative liabilities
582
1,130
Unearned revenue (contractual liability)
744
Unearned operating lease revenue
495
Accrued interest
Parts return liability
420
1,077
1,005
Amounts are presented net of eliminations, which primarily consist of dealer sales incentives with a right of set-off against trade receivables of $2,121 at October 27, 2024 and $2,228 at
October 29, 2023. Other eliminations were made for accrued taxes and other accrued expenses.
19. LONG-TERM BORROWINGS
Long-term borrowings at the end of 2024 and 2023 consisted of:
Underwritten term debt:
U.S. dollar notes and debentures:
2.75% notes due 2025
700
6.55% debentures due 2028
200
5.375% notes due 2029
3.10% notes due 2030
8.10% debentures due 2030
7.125% notes due 2031
3.90% notes due 2042
2.875% notes due 2049
3.75% notes due 2050
850
Euro notes:
1.85% notes due 2028 (€600 principal)
634
2.20% notes due 2032 (€600 principal)
1.65% notes due 2039 (€650 principal)
Serial issuances:
Medium-term notes
36,566
29,638
Other notes and finance lease obligations
265
1,769
Less: debt issuance costs and debt discounts
(156)
Medium-term notes due through 2034 are offered by prospectus and issued at fixed and variable rates. All outstanding notes and debentures are senior unsecured borrowings and rank equally with each other. The principal balances and weighted-average interest rates at the end of 2024 and 2023 follow:
Medium-term notes:
Principal
37,141
30,902
Weighted-average interest rates
The principal amounts of our long-term borrowings maturing in each of the next five years are as follows: 2025 – $9,112, 2026 – $8,814, 2027 – $7,720, 2028 – $6,379, and 2029 – $6,078.
20. COMMITMENTS AND CONTINGENCIES
A standard warranty is provided as assurance that the equipment will function as intended. The standard warranty period varies by product and region. At the time a sale is recognized, we record an estimate of future warranty costs based on historical claims rate experience and estimated population under warranty. The reconciliation of the changes in the warranty liability follows:
1,427
Warranty claims paid
(1,181)
New product warranty accruals
1,157
1,347
The costs for extended warranty programs are recognized as incurred. See Note 9 for extended warranty claim costs.
In certain international markets, we provide guarantees to banks for the retail financing of John Deere equipment. At the end of 2024, the notional value of these guarantees was $141. We may repossess the equipment collateralizing the receivables. At October 27, 2024, the accrued losses under these guarantees were not material.
We also had other miscellaneous contingent liabilities totaling approximately $130 at October 27, 2024. The accrued liability for these contingencies was $30 at October 27, 2024.
At October 27, 2024, we had commitments of approximately $435 for the construction and acquisition of property and equipment. Also, at October 27, 2024, we had restricted assets of $253, classified as “Other assets.”
We have commitments to extend credit to customers. The commitments are in the form of lines of credit and other pre-approved credit arrangements. We have the right to cancel or amend the terms of these commitments at any time. These commitments are not expected to be fully drawn upon; therefore, the total commitment amounts likely do not represent a future cash requirement. The commitments to extend credit at October 27, 2024 were:
We are subject to various unresolved legal actions. The accrued losses on these matters were not material at October 27, 2024. We believe the reasonably possible range of losses for these unresolved legal actions would not have a material effect on our financial statements. The most prevalent legal claims relate to:
21. CAPITAL STOCK
Our stock is listed on the New York Stock Exchange under the symbol “DE.” At the end of 2024, there were 16,354 holders of record of our common stock.
The number of common shares we are authorized to issue is 1.2 billion. The common shares issued at October 27, 2024, October 29, 2023, and October 30, 2022 were 536.4 million. 271.8 million common shares were outstanding at October 27, 2024, with the remainder held in treasury stock.
The number of authorized preferred shares is 9 million. No preferred shares have been issued.
In December 2022, the Board of Directors authorized the repurchase of up to $18.0 billion of common stock. At the end of fiscal year 2024, this repurchase program had $8.9 billion (21.9 million shares based on our fiscal year-end closing NYSE common stock price of $407.93 per share) remaining to be
repurchased. Repurchases of our common stock under this plan are made from time to time, at our discretion, in the open market.
A reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions, except per share amounts:
Net income attributable to Deere & Company
Average shares outstanding
Basic per share
Effect of dilutive stock options and unvested restricted stock units
1.1
1.4
1.8
Total potential shares outstanding
Diluted per share
Shares excluded as antidilutive
.3
.1
.2
22. SHARE-BASED COMPENSATION
We issue stock options and restricted stock units (RSU) to key employees. RSUs are also issued to nonemployee directors for their services as directors. RSUs consist of service-based, performance/service-based, and market/service-based awards.
The Long-Term Incentive Cash granted to certain employees is accounted for as share-based compensation. This incentive includes a performance metric based, in part, on the price of our shares. We are authorized to grant shares for equity incentive awards. The outstanding shares authorized were 15.0 million at October 27, 2024. We currently use shares that have been repurchased through our stock repurchase programs to satisfy share option exercises and RSU conversions. The stock awards vesting periods and the dividend equivalents earned during the vesting period follow:
Vesting
Dividend
Equivalents
Stock options
1-3 years
Not included
Service-based RSUs
Included
Performance/service-based RSUs
3 years
Market/service-based RSUs
Stock options expire ten years from the grant date. Performance/service-based awards are subject to a performance metric based on our compound annual revenue growth rate, compared to a benchmark group of companies. Market/service-based awards are subject to a market related metric based on total shareholder return, compared to a benchmark group of companies. The performance/service-based units and market/service-based units award common stock in a range of zero to 200 percent for each unit granted based on the level of the metric achieved.
The fair value of stock options and restricted stock units is determined using our closing price on the grant date. The fair value of the market/service-based RSUs is determined using a Monte Carlo model. These awards are expensed over the shorter of the award vesting period or the employee’s retirement eligibility period. The performance/service-based units’ expense is adjusted quarterly for the probable number of shares to be awarded. We
recognize the effect of award forfeitures as an adjustment to compensation expense in the period the forfeiture occurs.
The total share-based compensation expense, recognized income tax benefits, and total grant-date fair values of stock options and restricted stock units vested consisted of the following:
Income tax benefits
Stock options and restricted stock units vested
At October 27, 2024, there was $110 of total unrecognized compensation cost from share-based compensation arrangements. This compensation is expected to be recognized over a weighted-average period of approximately 1.5 years.
Stock Options
The fair value of each stock option award was estimated on the date of grant using a binomial lattice option valuation model. The assumptions used for the binomial lattice model to determine the fair value of options follow:
Risk-free interest rate*
3.96%
2.68%
1.27%
Expected dividends
1.6%
1.1%
1.2%
Volatility*
27.0%
33.0%
32.0%
Expected term (in years)*
5.1
The risk-free rates are based on U.S. Treasury security yields at the time of grant. Expected volatilities are based on implied volatilities from traded call options on our stock. We use historical data to estimate option exercise behavior representing the weighted-average period that options granted are expected to be outstanding.
The activity for outstanding stock options at October 27, 2024, and changes during 2024 follow:
Remaining
Aggregate
Exercise
Contractual
Intrinsic
Price*
Term
(per share)
(years)
Outstanding at beginning of year
1.7
190.08
Granted
377.01
Exercised
(.4)
102.85
Outstanding at end of year
1.5
242.41
5.04
249.1
Exercisable at end of year
197.53
3.96
239.6
The amounts related to stock options were as follows in millions of dollars unless otherwise noted:
Weighted-average grant date fair value (per share)
98.04
136.46
89.20
Intrinsic value of options exercised
Cash received from exercises
Tax benefit from exercises
Restricted Stock Units
The weighted-average grant date fair values were as follows:
Service-based
377.72
428.35
347.59
Performance/service-based
360.53
424.93
331.47
Market/service-based
370.87
Our RSUs at October 27, 2024 and changes during 2024 in thousands of shares and dollars per share follow:
Grant-Date
Fair Value*
Service-based:
Nonvested at beginning of year
348.82
383
Vested
330.73
Forfeited
(26)
375.41
Nonvested at end of year
471
378.39
Performance/service-based:
331.78
245.73
Performance change
373.35
Market/service-based:
23. OTHER COMPREHENSIVE INCOME ITEMS
The after-tax components of accumulated other comprehensive income (loss) follow:
(1,274)
(845)
(389)
(2,286)
(2,151)
(2,594)
(72)
Unrealized loss on debt securities
The following tables reflect amounts recorded in other comprehensive income (loss), as well as reclassifications out of other comprehensive income (loss).
Before
After
(Expense)
Amount
Credit
(147)
Unrealized gain (loss) on interest rate derivatives:
Unrealized hedging gain (loss)
Reclassification of realized (gain) loss to Interest expense
(71)
(56)
Net unrealized gain (loss) on derivatives
(81)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)
Reclassification of realized (gain) loss to Other income
Net unrealized gain (loss) on debt securities
Retirement benefits adjustment:
Net actuarial gain (loss)
(568)
(432)
Reclassification to Other operating expenses through amortization of:
Actuarial (gain) loss
(53)
Net unrealized gain (loss) on retirement benefits adjustment
(566)
Total other comprehensive income (loss)
(750)
Cumulative translation adjustment:
Unrealized translation gain (loss)
422
Reclassification of realized (gain) loss to:
Net unrealized translation gain (loss)
(62)
(20)
(589)
139
(450)
Settlements
(596)
(208)
150
(1,105)
(140)
(139)
(298)
894
Prior service credit (cost)
124
(393)
Settlements/curtailment
866
(221)
24. LEASES
We are both a lessee and a lessor. We lease for our own use warehouse facilities, office space, production equipment, information technology equipment, and vehicles. The financial services operations lease equipment produced or sold by us and a limited amount of other equipment to retail customers. We determine if an arrangement is or contains a lease at the contract inception.
Lessee
The amounts of the lease liability and right of use asset are determined at lease commencement and are based on the present value of the lease payments over the lease term. The lease payments are discounted using our incremental borrowing rate since the rate implicit in the lease is not readily determinable. We determine the incremental borrowing rate for each lease based on the lease term and the economic environment of the country where the asset will be used, adjusted as if the borrowings were collateralized. Leases with contractual periods greater than one year and that do not meet the finance lease criteria are classified as operating leases.
We have elected to combine lease and nonlease components, such as maintenance and utilities costs included in a lease contract, for all asset classes. Leases with an initial term of one year or less are expensed on a straight-line basis over the lease term and recorded in short-term lease expense. Variable lease expense includes warehouse facilities leases with payments based on utilization exceeding contractual minimum amounts and leases with
payments indexed to inflation when the index changes after lease commencement.
The lease expense by type consisted of the following:
Operating lease expense
129
Short-term lease expense
Variable lease expense
Finance lease:
Depreciation expense
Interest on lease liabilities
Total lease expense
Operating and finance lease right of use assets and lease liabilities follow:
Operating leases:
Finance leases:
Property and equipment — net
Total finance lease liabilities
The weighted-average remaining lease terms in years and discount rates follows:
Weighted-average remaining lease terms:
Operating leases
Finance leases
Weighted-average discount rates:
3.5%
3.1%
Lease payment amounts in each of the next five years at October 27, 2024 follow:
Operating
Finance
Due in:
Total lease payments
Less: imputed interest
Total lease liabilities
Cash paid for amounts included in the measurement of lease liabilities follows:
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
Right of use assets obtained in exchange for lease liabilities follow:
Lessor
We lease equipment manufactured or sold by us through John Deere Financial. Sales-type and direct financing leases are reported in “Financing receivables ‒ net.” Operating leases are reported in “Equipment on operating leases ‒ net.”
At the end of the majority of leases, the lessee has the option to purchase the underlying equipment for the contractual residual value or return it to the dealer. If the equipment is returned to the dealer, the dealer also has the option to purchase the equipment or return it to us for remarketing.
We estimate 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. We review residual value estimates during the lease term and test the carrying value of our operating lease assets for impairment when events or circumstances necessitate. The depreciation is adjusted on a straight-line basis over the remaining lease term if residual value estimates change. Lease agreements include usage limits and specifications on machine condition, which allow us to assess lessees for excess use or damages to the underlying equipment.
We have elected to combine lease and nonlease components. The nonlease components relate to preventative maintenance and extended warranty agreements financed by the retail customer. We have also elected to report consideration related to sales and value added taxes net of the related tax expense. Property taxes on leased assets are recorded on a gross basis in “Finance and interest income” and “Other operating expenses.” Variable lease revenues relate to property taxes on leased assets in certain markets and late fees.
Lease revenues earned by us follow:
Sales-type and direct finance lease revenues
190
Operating lease revenues
1,403
1,312
1,318
Variable lease revenues
Total lease revenues
1,493
1,498
At the time of accepting a lease that qualifies as a sales-type or direct financing lease, we record the gross amount of lease payments receivable, estimated residual value of the leased equipment, and unearned finance income. The unearned finance income is recognized as revenue over the lease term using the interest method.
Sales-type and direct financing lease receivables by market follow:
1,022
1,078
1,034
1,048
2,056
2,126
Guaranteed residual values
921
723
Unguaranteed residual values
Less: unearned finance income
(307)
(350)
Financing lease receivables
2,725
2,556
Scheduled payments, including guaranteed residual values, on sales-type and direct financing lease receivables at October 27, 2024 follow:
1,598
620
389
2,977
Lease payments from operating leases are recorded as income on a straight-line method over the lease terms. Operating lease assets are recorded at cost and depreciated to their estimated residual value on a straight-line method over the terms of the leases.
The cost of equipment on operating leases by market follow:
7,875
7,168
1,142
1,212
9,017
8,380
(1,566)
(1,463)
Operating lease residual values
5,227
4,864
First-loss residual value guarantees
1,393
1,188
The equipment is depreciated on a straight-line basis over the term of the lease. The corresponding depreciation expense was $874 in 2024, $853 in 2023, and $827 in 2022.
Lease payments for operating leases are scheduled as follows:
1,151
865
2,909
25. 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, we use various methods including market and income approaches. We utilize 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.
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 us 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.
The fair values of financial instruments that do not approximate the carrying values at October 27, 2024 and October 29, 2023 follow:
Carrying
Value*
44,336
42,777
8,654
7,056
8,453
6,921
Long-term borrowings due within one year**
9,079
8,156
Long-term borrowings**
43,157
42,804
38,428
36,873
* Fair value measurements above were Level 3 for all financing receivables and Level 2 for all borrowings.
** Values exclude finance lease liabilities that are presented as borrowings (see Note 24).
Assets and liabilities measured at October 27, 2024 and October 29, 2023 at fair value on a recurring basis follow, excluding our cash equivalents, which were carried at a cost that approximates fair value and consisted of money market funds and time deposits:
Level 1:
239
Total Level 1 marketable securities
Level 2:
Total Level 2 marketable securities
915
Other assets - Derivatives
Accounts payable and accrued expenses – Derivatives
Level 3:
Accounts payable and accrued expenses – Deferred consideration
147
* Primarily issued by U.S. government sponsored enterprises.
Fair value, nonrecurring level 3 measurements from impairments at October 27, 2024 and October 29, 2023 follow:
Fair Value
The following is a description of the valuation methodologies we use to measure certain financial instruments on the balance sheets at fair value. For more information on asset impairments, see Note 4.
Marketable securities – The portfolio of investments is 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 valued using the fund’s net asset value, based on the fair value of the underlying securities.
Derivatives – Our derivative financial instruments consist of interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate 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.
Deferred consideration – The total purchase price consideration for three former Deere-Hitachi joint venture factories acquired in 2022 included supply agreement price increases beyond inflation adjustments. This deferred consideration will be paid as we purchase Deere-branded excavators, components, and service parts from Hitachi under the agreement with a duration that ranges from 5 to 30 years (see Note 3). The deferred consideration balance is reduced as purchases are made and valued on a discounted cash flow approach using market rates.
Inventories – The impairment was based on net realizable value, less reasonably predictable selling and disposal costs.
Property and equipment – net – 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.
Other intangible assets – net – In 2022, we considered external valuations based on our probability weighted cash flow analysis.
Other assets (Investment in unconsolidated affiliates) – Other than temporary impairments of investments are measured as the difference between the implied fair value and the carrying value of the investments. The estimated fair value for privately held entities is determined by an income approach (discounted cash flows), which includes inputs such as interest rates and margins (see Note 4).
Assets held for sale – The impairment was measured at the lower of the carrying amount or fair value less costs to sell. Fair value was based on the probable sale price. The inputs included estimates of the final sale price (see Note 4).
26. DERIVATIVE INSTRUMENTS
Fair values of our derivative instruments and the associated notional amounts at the end of 2024 and 2023 were as follows. Assets are recorded in “Other assets,” while liabilities are recorded in “Accounts payable and accrued expenses.”
Notional
Cash flow hedges:
Interest rate contracts
2,875
Fair value hedges:
15,864
467
Cross-currency interest rate contracts
975
Not designated as hedging instruments:
12,518
Foreign exchange contracts
7,533
1,500
12,691
970
13,853
8,117
The amounts recorded, at October 27, 2024 and October 29, 2023, in the consolidated balance sheets related to borrowings designated in fair value hedging relationships were as follows. Fair value hedging adjustments are included in the carrying amount of the hedged item.
Active Hedging
Discontinued Hedging
Relationships
Cumulative
Amount of
Hedged
Hedging
Formerly
Item
Hedged Item
1,782
16,125
(347)
8,626
(228)
11,660
(976)
7,144
(288)
The classification and gains (losses), including accrued interest expense, related to derivative instruments on the statements of consolidated income consisted of the following:
Fair Value Hedges
Interest rate contracts – Interest expense
226
(542)
(1,144)
Cash Flow Hedges
Recognized in OCI:
Interest rate contracts – OCI (pretax)
Reclassified from OCI:
Not Designated as Hedges
Interest rate contracts – Net sales
Foreign exchange contracts – Net sales
Foreign exchange contracts – Cost of sales
Foreign exchange contracts – Other operating expenses
402
Total not designated
(131)
466
The amount of loss recorded in OCI at October 27, 2024 that is expected to be reclassified to “Interest expense” in the next twelve months if interest rates remain unchanged is $6 after-tax. There were no gains or losses reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.
Counterparty Risk and Collateral
Derivative instruments are subject to significant concentrations of credit risk to the banking sector. We manage 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 us 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 our derivative agreements contain credit support provisions that may require us 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 October 27, 2024 and October 29, 2023, was $562 and $1,076, respectively. In accordance with the limits established in these agreements, we posted $245 and $659 of cash collateral at October 27, 2024 and October 29, 2023, respectively. In addition, we paid $8 of collateral that was outstanding at both October 27, 2024 and October 29, 2023 to participate in an international futures market to hedge currency exposure, not included in the following table.
Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities related to netting arrangements and collateral at October 27, 2024 and October 29, 2023 follows:
Gross Amounts
Netting
Net
Recognized
Arrangements
Collateral
(152)
(659)
319
27. SEGMENT DATA
Our operations are presently organized and reported in four business segments. This presentation is consistent with how the chief operating decision maker (the CEO) assesses the performance of the segments and makes decisions about resource allocations.
The PPA segment defines, develops, and delivers global equipment and technology solutions to unlock customer value for production-scale growers of large grains, small grains, cotton, and sugarcane. The segment’s primary products include large and certain mid-size tractors, combines, cotton pickers, sugarcane harvesters and loaders, and soil preparation, seeding, application, crop care equipment, and related attachments and service parts.
The SAT segment defines, develops, and delivers global equipment and technology solutions to unlock customer value for dairy and livestock producers, high-value and small acreage crop producers, and turf and utility customers. The segment’s primary products include certain mid-size tractors, utility and compact utility tractors, as well as hay and forage equipment, riding and commercial lawn equipment, golf course equipment, utility vehicles, and related attachments and service parts.
The CF segment defines, develops, and delivers a broad range of machines and technology solutions organized along the earthmoving, forestry, and roadbuilding production systems. The segment’s primary products include backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, skid-steer loaders, milling machines, log harvesters, and related attachments and service parts.
The products and services produced by the segments above are marketed through independent retail dealer networks and major retail outlets. For roadbuilding products in certain markets outside the U.S. and Canada, the products are sold through company-owned sales and service subsidiaries.
The financial services segment finances sales and leases by John Deere dealers of new and used production and precision agriculture equipment, small agriculture and turf equipment, and construction and forestry equipment. In addition, the financial services segment provides wholesale financing to dealers of the foregoing equipment, finances retail revolving charge accounts, and offers extended equipment warranties.
Because of integrated manufacturing operations and common administrative and marketing support, a substantial number of allocations must be made to determine operating segment data.
Identifiable assets assigned to the operating segments are those the units actively manage, consisting of trade receivables, inventories, property and equipment, intangible assets, and certain other assets. Corporate assets are managed collectively, including cash and cash equivalents, retirement benefit net assets, goodwill, and deferred income tax assets.
Information relating to operations by operating segment follows for the years ended October 27, 2024, October 29, 2023, and October 30, 2022.
OPERATING SEGMENTS
Unaffiliated customers:
Production & precision ag net sales
22,002
Small ag & turf net sales
13,381
Construction & forestry net sales
12,534
Financial services revenues
Other revenues*
1,175
965
1,035
* Other revenues are primarily the PPA, SAT, and CF revenues for finance and interest income and other income.
4,386
1,949
2,014
Financial services*
889
795
1,159
Total operating profit*
9,039
12,958
9,508
Interest income
(396)
(411)
(390)
Foreign exchange loss from equipment operations’ financing activities
(114)
(103)
Pension and OPEB benefit, excluding service cost component
333
Corporate expenses – net
(273)
(252)
(255)
Income taxes
(2,094)
(2,871)
(2,007)
(1,951)
(2,803)
(2,378)
* Operating profit of the financial services business segment includes the effect of its interest income, investment income, interest expense, and foreign exchange gains or losses.
Interest income*
Financial services
4,620
3,731
2,245
Corporate
Intercompany
4,344
3,359
2,027
* Does not include finance rental income for equipment on operating leases.
(1,007)
(426)
Depreciation* and amortization expense
643
523
331
301
* Includes depreciation for equipment on operating leases.
Identifiable operating assets
8,696
8,734
8,414
4,130
4,348
4,451
7,137
7,139
6,754
58,864
13,745
13,134
11,547
Capital additions
1,025
896
649
352
311
28. SUBSEQUENT EVENTS
On December 3, 2024, a quarterly dividend of $1.62 per share was declared at the Board of Directors meeting, payable on February 10, 2025 to stockholders of record on December 31, 2024.
In November 2024, we entered into a retail note securitization transaction resulting in $725 of secured borrowings.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Deere & Company:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Deere & Company and subsidiaries (the "Company") as of October 27, 2024 and October 29, 2023, the related statements of consolidated income, consolidated comprehensive income, changes in consolidated stockholders’ equity and consolidated cash flows for each of the three years in the period ended October 27, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 27, 2024 and October 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended October 27, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 12, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Sales Incentives — Refer to Note 2 to the financial statements
Critical Audit Matter Description
The Company provides retail discount or financing sales incentives programs to dealers that are due when the dealer sells the equipment to a retail customer.
At the time a sale is recognized, the Company records an estimate of the sales incentive costs. The final cost is determined at the time of the retail sale.
There are numerous programs available at any time, and new programs may be announced after the Company records the equipment sale to the dealer. Changes in the mix and types of sales incentive programs affect these estimates, which are reviewed quarterly. Actual cost differences from the original cost estimate are recognized in “Net sales.” A key assumption is the predictive value of the historical percentage of retail sales incentive costs to retail sales.
We identified the United States and Canada retail sales incentive accrual as a critical audit matter because estimating sales incentive costs requires significant judgment by management and changes in historical percentage of sales incentive costs to retail sales by dealers could have a material impact on the sales incentive accrual. Auditing management’s assumptions about the predictive nature of historical sales incentive costs involves a high degree of auditor judgment and an increased extent of effort to evaluate the reasonableness of management’s estimates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing management’s assumption that historical sales incentive costs are predictive of future incentive costs included the following, among others:
Allowance for Credit Losses – Refer to Notes 2 and 11 to the financial statements
The allowance for credit losses is an estimate of the credit losses expected over the life of the Company’s receivable portfolio. Non-performing receivables are included in the estimate of expected credit losses. The allowance is measured on a collective basis for receivables with similar risk characteristics. Receivables that do not share risk characteristics are evaluated on an individual basis. Risk characteristics include:
The Company utilizes linear regression models to estimate the expected credit losses for large and complex retail customer receivable pools, which represent more than 90 percent of retail customer receivables. These statistical models utilize independent variables, or predictive features, to estimate lifetime default rates, which are subsequently adjusted for expected recoveries to arrive at lifetime credit loss estimates. Independent variables included in the models vary by product, but can include credit quality at time of application, remaining account balance, delinquency status, and various economic factors, such as commodity prices, employment levels, and housing data. The economic factors include forward-looking conditions over the reasonable and supportable forecast period.
We identified the allowance for credit losses by the linear regression models and related independent variables and qualitative adjustments used in determining the Company’s United States and Canada retail customer receivable portfolios as a critical audit matter because determining the appropriate methodology and assumptions used in the estimate requires significant judgment by management. Given the subjective nature and judgment applied by management to determine the allowance for credit losses, auditing the methodology and assumptions requires a high degree of auditor judgment and an increased extent of effort, including the need to involve credit specialists.
Our audit procedures to test the allowance for credit losses estimated for the Company’s United States and Canada retail customer receivable portfolio by the linear regression models and related independent variables and qualitative adjustments included the following, among others:
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
December 12, 2024
We have served as the Company’s auditor since 1910.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Deere & Company and subsidiaries (the “Company”) as of October 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended October 27, 2024 of the Company and our report dated December 12, 2024, expressed an unqualified opinion on those financial statements.
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLPChicago, Illinois
Index to Exhibits
3.1
Restated 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
Certificate of Designation Preferences and Rights of Series A Participating Preferred Stock (Exhibit 3.2 to Form 10-K of registrant for the year ended October 31, 1998, Securities and Exchange Commission File Number 1-4121*)
3.3
Bylaws, as amended (Exhibit 3.2 to Form 10-Q of registrant for the quarter ended July 30, 2023, Securities and Exchange Commission File Number 1-4121*)
4.1
Form of common stock certificate (Exhibit 4.6 to Form 10-K of registrant for the year ended October 31, 1998, Securities and Exchange Commission File Number 1-4121*)
4.2
Indenture, dated September 25, 2008, between the registrant and The Bank of New York Mellon, as Trustee (Exhibit 4.1 to the registration statement on Form S-3ASR no. 333-153704 filed September 26, 2008, Securities and Exchange Commission File Number 1-4121*)
4.3
Indenture, dated June 15, 2020, among Deere Funding Canada Corporation, as issuer, the registrant, as guarantor, and The Bank of New York Mellon, as Trustee (Exhibit 4.3 to the registration statement on Form S-3ASR no. 333-239165 filed June 15, 2020, Securities and Exchange Commission File Number 1-4121*)
4.4
Terms and Conditions of the Euro Medium Term Notes, published March 31, 2022, applicable to the U.S. $6,000,000,000 Euro Medium Term Note Programme of the registrant, John Deere Capital Corporation, John Deere Bank S.A., and John Deere Cash Management, as amended on June 12, 2024, to increase the authorization to $9,000,000,000
4.5
Description of Deere & Company’s Common Stock (Exhibit 4.4 to Form 10-K of registrant for the year ended November 3, 2019, Securities and Exchange Commission File number 1-4121*)
4.6
Description of Deere & Company’s 6.55% Debentures Due 2028 (Exhibit 4.6 to Form 10-K of registrant for the year ended November 3, 2019, Securities and Exchange Commission File Number 1-4121*)
Certain instruments relating to long-term debt constituting less than 10 percent of the registrant’s total assets are not filed as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant will furnish copies of such instruments to the Commission upon request.
10.1
Agreement, as amended November 1, 1994, between the registrant and John Deere Capital Corporation concerning agricultural retail notes (Exhibit 10.1 to Form 10-K of registrant for the year ended October 31, 1998, Securities and Exchange Commission File Number 1-4121*)
10.2
Agreement, as amended November 1, 1994, between the registrant and John Deere Capital Corporation concerning lawn and grounds care retail notes (Exhibit 10.2 to Form 10-K of registrant for the year ended October 31, 1998, Securities and Exchange Commission File Number 1-4121*)
10.3
Agreement, as amended November 1, 1994, between John Deere Construction Equipment Company and John Deere Capital Corporation concerning construction retail notes (Exhibit 10.3 to Form 10-K of registrant for the year ended October 31, 1998, Securities and Exchange Commission File Number 1-4121*)
10.4
Agreement, dated July 14, 1997, between John Deere Construction Equipment Company and John Deere Capital Corporation concerning construction retail notes (Exhibit 10.4 to Form 10-K of registrant for the year ended October 31, 2003, Securities and Exchange Commission File Number 1-4121*)
10.5
Second Amended Agreement, dated March 27, 2023, between the registrant and John Deere Capital Corporation relating to fixed charges ratio, ownership, and minimum net worth of John Deere Capital Corporation (Exhibit 10.4 to Form 10-Q of registrant for the quarter ended April 30, 2023, Securities and Exchange Commission File Number 1-4121*)
10.6†
Deere & Company Voluntary Deferred Compensation Plan, as amended October 31, 2024
10.7†
John Deere Short-Term Incentive Bonus Plan, as amended October 27, 2023 (Exhibit 10.1 to Form 8-K of registrant filed October 30, 2023, Securities and Exchange Commission File Number 1-4121*)
10.8†
John Deere Long-Term Incentive Cash Plan (Appendix C to Proxy Statement of registrant filed January 12, 2018, Securities and Exchange Commission File Number 1-4121*)
10.9†
John Deere Omnibus Equity and Incentive Plan, as amended February 25, 2015 (Appendix D to Proxy Statement of registrant filed January 14, 2015, Securities and Exchange Commission File Number 1-4121*)
10.10†
Form of Terms and Conditions for John Deere Nonqualified Stock Options granted fiscal 2024
10.11†
Form of Terms and Conditions for John Deere Restricted Stock Units granted fiscal 2024
10.12†
Form of Terms and Conditions for John Deere Performance Stock Options granted fiscal 2024
10.13†
Form of Terms and Conditions for John Deere Nonqualified Stock Options granted fiscal 2023 (Exhibit 10.10 to Form 10-K of registrant for the year ended October 29, 2023, Securities and Exchange Commission File Number 1-4121*)
10.14†
Form of Terms and Conditions for John Deere Restricted Stock Units and Performance Stock Units granted fiscal 2023 (Exhibit 10.11 to Form 10-K of registrant for the year ended October 29, 2023, Securities and Exchange Commission File Number 1-4121*)
10.15†
Form of Terms and Conditions for John Deere Nonqualified Stock Options granted fiscal 2022. (Exhibit 10.10 to Form 10-K of registrant for the year ended October 31, 2022, Securities and Exchange Commission File Number 1-4121*)
10.16†
Form of Terms and Conditions for John Deere Restricted Stock Units and Performance Stock Units granted fiscal 2022 (Exhibit 10.11 to Form 10-K of registrant for the year ended October 31, 2022, Securities and Exchange Commission File Number 1-4121*)
10.17†
Form of Terms and Conditions for John Deere Nonqualified Stock Options granted fiscal 2021 (Exhibit 10.10 to Form 10-K of registrant for the year ended October 31, 2021, Securities and Exchange Commission File Number 1-4121*)
10.18†
Form of John Deere Restricted Stock Unit Grant for Directors granted fiscal 2023 (Exhibit 10.16 to Form 10-K of registrant for the year ended October 29, 2023, Securities and Exchange Commission File Number 1-4121*)
10.19†
Form of John Deere Restricted Stock Unit Grant for Directors (Exhibit 10.13 to Form 10-K of registrant for the year ended October 31, 2008, Securities and Exchange Commission File Number 1-4121*)
10.20†
Form of Terms and Conditions for Deere & Company Nonemployee Director Stock Ownership Plan (Exhibit 10.13 to Form 10-K of registrant for the year ended October 31, 2021, Securities and Exchange Commission File Number 1-4121*)
10.21†
John Deere Defined Contribution Restoration Plan, as amended October 31, 2024
10.22†
John Deere Supplemental Pension Benefit Plan, as amended December 31, 2020 (Exhibit 10.15 to Form 10-K of registrant for the year ended October 31, 2021, Securities and Exchange Commission File Number 1-4121*)
10.23†
John Deere Senior Supplementary Pension Benefit Plan, as amended October 31, 2022
10.24†
John Deere ERISA Supplementary Pension Benefit Plan, as amended October 31, 2022 (Exhibit 10.1 to Form 10-Q of registrant for the quarter ended January 29, 2023, Securities and Exchange Commission File Number 1-4121*)
10.25†
Deere & Company Nonemployee Director Stock Ownership Plan, as amended February 29, 2012 (Appendix A to Proxy Statement of registrant filed on January 13, 2012, Securities and Exchange Commission File Number 1-4121*)
10.26†
Deere & Company Nonemployee Director Stock Ownership Plan, as amended February 23, 2022 (Appendix C to Proxy Statement of registrant filed on January 7, 2022, Securities and Exchange Commission File Number 1-4121*)
10.27†
Deere & Company Nonemployee Director Deferred Compensation Plan, as amended October 31, 2023 (Exhibit 10.25 to Form 10-K of registrant for the year ended October 29, 2023, Securities and Exchange Commission File Number 1-4121*)
10.28†
Amended and Restated Change in Control Severance Program of Deere & Company, effective August 29, 2023 (Exhibit 10.1 to Form 10-Q of registrant for the quarter ended July 30, 2023, Securities and Exchange Commission File number 1-4121*)
10.29†
John Deere 2020 Equity and Incentive Plan (Appendix C to Proxy Statement of registrant filed January 10, 2020, Securities and Exchange Commission File Number 1-4121*)
10.30
Asset Purchase Agreement, dated October 29, 2001, between the registrant and Deere Capital, Inc. concerning the sale of trade receivables (Exhibit 10.19 to Form 10-K of registrant for the year ended October 31, 2001, Securities and Exchange Commission File Number 1-4121*)
10.31
Second Amendment, dated February 21, 2020, to the Asset Purchase Agreement dated October 29, 2001, between the registrant and Deere Capital, Inc. (including conformed copy of the Asset Purchase Agreement as Exhibit A thereto) (Exhibit 10.1 to Form 10-Q of registrant for the quarter ended February 2, 2020, Securities and Exchange Commission File Number 1-4121*)
10.32
Asset Purchase Agreement, dated October 29, 2001, between John Deere Construction & Forestry Company and Deere Capital, Inc. concerning the sale of trade receivables (Exhibit 10.20 to Form 10-K of registrant for the year ended October 31, 2001, Securities and Exchange Commission File Number 1-4121*)
10.33
Second Amendment, dated February 21, 2020, to the Asset Purchase Agreement dated October 29, 2001, between John Deere Construction & Forestry Company and Deere Capital, Inc. (including conformed copy of the Asset Purchase Agreement as Exhibit A thereto) (Exhibit 10.2 to Form 10-Q of registrant for the quarter ended February 2, 2020, Securities and Exchange Commission File Number 1-4121*)
10.34
2028 Credit Agreement, dated March 25, 2024, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and J.P. Morgan Securities LLC, as Sustainability Structuring Agent (Exhibit 10.2 to Form 10-Q of registrant for the quarter ended April 28, 2024, Securities and Exchange Commission File Number 1-4121*)
10.35
2029 Credit Agreement, dated March 25, 2024, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Citibank, N.A., as Co-Syndication Agents, and J.P. Morgan Securities LLC, as Sustainability Structuring Agent (Exhibit 10.3 to Form 10-Q of registrant for the quarter ended April 28,2024, Securities and Exchange Commission File Number 1-4121*)
10.36
364-Day Credit Agreement, dated March 25, 2024, among the registrant, John Deere Capital Corporation, John Deere Bank S.A., various financial institutions, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America , N.A. and Citibank, N.A., as Co-Syndication Agents, and J.P. Morgan Securities LLC as Sustainability Structuring Agent (Exhibit 10.1 to Form 10-Q of registrant for the quarter ended April 28, 2024, Securities and Exchange Commission File Number 1-4121*)
Global Insider Trader Policy
Subsidiaries
List of Guarantors and Subsidiary Issuers of Guaranteed Securities
Consent of Deloitte & Touche LLP
Power of Attorney (included on signature page)
31.1
Rule 13a-14(a)/15d-14(a) Certification
31.2
32.
Section 1350 Certifications (furnished herewith)
97.
Incentive Compensation Recovery Policy effective August 29, 2023 (Exhibit 10.27 to Form 10-K of registrant for the year ended October 29, 2023, Securities and Exchange Commission File Number 1-4121*)
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Incorporated by reference.
†
Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By:
/s/ John C. May
John C. May
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: December 12, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Each person signing below also hereby appoints John C. May, Joshua A. Jepsen, and Edward R. Berk, and each of them singly, his or her lawful attorney-in-fact with full power to execute and file any and all amendments to this report together with exhibits thereto and generally to do all such things as such attorney-in-fact may deem appropriate to enable Deere & Company to comply with the provisions of the Securities Exchange Act of 1934 and all requirements of the Securities and Exchange Commission.
Signature
Title
Date
/s/ Leanne G. Caret
Director
)
Leanne G. Caret
/s/ Tamra A. Erwin
Tamra A. Erwin
/s/ R. Preston Feight
R. Preston Feight
/s/ Alan C. Heuberger
Alan C. Heuberger
/s/ L. Neil Hunn
L. Neil Hunn
/s/ Joshua A. Jepsen
Senior Vice President and
Joshua A. Jepsen
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
/s/ Michael O. Johanns
Michael O. Johanns
/s/ Clayton M. Jones
Clayton M. Jones
/s/ Gregory R. Page
Gregory R. Page
/s/ Sherry M. Smith
Sherry M. Smith
/s/ Dmitri L. Stockton
Dmitri L. Stockton
/s/ Sheila G. Talton
Sheila G. Talton