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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file no: 1-4121
DEERE & COMPANY
(Exact name of registrant as specified in its charter)
|
|
|
Delaware |
|
36-2382580 |
One John Deere Place
Moline, Illinois 61265
(Address of principal executive offices)
Telephone Number: (309) 765-8000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading symbol |
|
Name of each exchange on which registered |
Common stock, $1 par value |
|
DE |
|
New York Stock Exchange |
6.55% Debentures Due 2028 |
|
DE28 |
|
New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
|
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
At July 30, 2023, 288,000,577 shares of common stock, $1 par value, of the registrant were outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS |
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||||||||||||
DEERE & COMPANY |
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||||||||||||
STATEMENTS OF CONSOLIDATED INCOME |
|
||||||||||||
For the Three and Nine Months Ended July 30, 2023 and July 31, 2022 |
|
||||||||||||
(In millions of dollars and shares except per share amounts) Unaudited |
|
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
14,284 |
|
$ |
13,000 |
|
$ |
41,765 |
|
$ |
33,565 |
|
Finance and interest income |
|
|
1,253 |
|
|
846 |
|
|
3,326 |
|
|
2,441 |
|
Other income |
|
|
264 |
|
|
256 |
|
|
748 |
|
|
1,035 |
|
Total |
|
|
15,801 |
|
|
14,102 |
|
|
45,839 |
|
|
37,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
9,624 |
|
|
9,511 |
|
|
28,288 |
|
|
25,124 |
|
Research and development expenses |
|
|
528 |
|
|
481 |
|
|
1,571 |
|
|
1,336 |
|
Selling, administrative and general expenses |
|
|
1,110 |
|
|
959 |
|
|
3,392 |
|
|
2,672 |
|
Interest expense |
|
|
623 |
|
|
296 |
|
|
1,671 |
|
|
713 |
|
Other operating expenses |
|
|
310 |
|
|
316 |
|
|
971 |
|
|
954 |
|
Total |
|
|
12,195 |
|
|
11,563 |
|
|
35,893 |
|
|
30,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of Consolidated Group before Income Taxes |
|
|
3,606 |
|
|
2,539 |
|
|
9,946 |
|
|
6,242 |
|
Provision for income taxes |
|
|
636 |
|
|
654 |
|
|
2,164 |
|
|
1,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of Consolidated Group |
|
|
2,970 |
|
|
1,885 |
|
|
7,782 |
|
|
4,878 |
|
Equity in income of unconsolidated affiliates |
|
|
2 |
|
|
|
|
|
5 |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
2,972 |
|
|
1,885 |
|
|
7,787 |
|
|
4,886 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
|
(6) |
|
|
1 |
|
|
(10) |
|
|
1 |
|
Net Income Attributable to Deere & Company |
|
$ |
2,978 |
|
$ |
1,884 |
|
$ |
7,797 |
|
$ |
4,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
10.24 |
|
$ |
6.20 |
|
$ |
26.48 |
|
$ |
15.97 |
|
Diluted |
|
|
10.20 |
|
|
6.16 |
|
|
26.35 |
|
|
15.88 |
|
Dividends declared |
|
|
1.25 |
|
|
1.13 |
|
|
3.70 |
|
|
3.23 |
|
Dividends paid |
|
|
1.25 |
|
|
1.05 |
|
|
3.58 |
|
|
3.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
290.8 |
|
|
304.1 |
|
|
294.4 |
|
|
305.8 |
|
Diluted |
|
|
292.1 |
|
|
305.7 |
|
|
295.9 |
|
|
307.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Interim Consolidated Financial Statements.
2
DEERE & COMPANY |
|
||||||||||||
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME |
|
||||||||||||
For the Three and Nine Months Ended July 30, 2023 and July 31, 2022 |
|
||||||||||||
(In millions of dollars) Unaudited |
|
||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
2,972 |
|
$ |
1,885 |
|
$ |
7,787 |
|
$ |
4,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss), Net of Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefits adjustment |
|
|
(9) |
|
|
79 |
|
|
(267) |
|
|
(137) |
|
Cumulative translation adjustment |
|
|
144 |
|
|
(269) |
|
|
925 |
|
|
(784) |
|
Unrealized gain (loss) on derivatives |
|
|
5 |
|
|
(1) |
|
|
(26) |
|
|
41 |
|
Unrealized gain (loss) on debt securities |
|
|
(13) |
|
|
6 |
|
|
13 |
|
|
(57) |
|
Other Comprehensive Income (Loss), Net of Income Taxes |
|
|
127 |
|
|
(185) |
|
|
645 |
|
|
(937) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income of Consolidated Group |
|
|
3,099 |
|
|
1,700 |
|
|
8,432 |
|
|
3,949 |
|
Less: Comprehensive income (loss) attributable to noncontrolling interests |
|
|
(5) |
|
|
(3) |
|
|
2 |
|
|
(8) |
|
Comprehensive Income Attributable to Deere & Company |
|
$ |
3,104 |
|
$ |
1,703 |
|
$ |
8,430 |
|
$ |
3,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Interim Consolidated Financial Statements.
3
DEERE & COMPANY |
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
(In millions of dollars) Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
6,576 |
|
$ |
4,774 |
|
$ |
4,359 |
|
Marketable securities |
|
|
841 |
|
|
734 |
|
|
719 |
|
Trade accounts and notes receivable – net |
|
|
9,297 |
|
|
6,410 |
|
|
6,696 |
|
Financing receivables – net |
|
|
41,302 |
|
|
36,634 |
|
|
35,056 |
|
Financing receivables securitized – net |
|
|
7,001 |
|
|
5,936 |
|
|
5,141 |
|
Other receivables |
|
|
3,118 |
|
|
2,492 |
|
|
1,999 |
|
Equipment on operating leases – net |
|
|
6,709 |
|
|
6,623 |
|
|
6,554 |
|
Inventories |
|
|
9,350 |
|
|
8,495 |
|
|
9,121 |
|
Property and equipment – net |
|
|
6,418 |
|
|
6,056 |
|
|
5,666 |
|
Goodwill |
|
|
3,994 |
|
|
3,687 |
|
|
3,754 |
|
Other intangible assets – net |
|
|
1,199 |
|
|
1,218 |
|
|
1,281 |
|
Retirement benefits |
|
|
3,573 |
|
|
3,730 |
|
|
3,125 |
|
Deferred income taxes |
|
|
1,360 |
|
|
824 |
|
|
1,110 |
|
Other assets |
|
|
2,659 |
|
|
2,417 |
|
|
2,236 |
|
Total Assets |
|
$ |
103,397 |
|
$ |
90,030 |
|
$ |
86,817 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
$ |
17,143 |
|
$ |
12,592 |
|
$ |
14,176 |
|
Short-term securitization borrowings |
|
|
6,608 |
|
|
5,711 |
|
|
4,920 |
|
Accounts payable and accrued expenses |
|
|
15,340 |
|
|
14,822 |
|
|
12,986 |
|
Deferred income taxes |
|
|
506 |
|
|
495 |
|
|
561 |
|
Long-term borrowings |
|
|
38,112 |
|
|
33,596 |
|
|
32,132 |
|
Retirement benefits and other liabilities |
|
|
2,536 |
|
|
2,457 |
|
|
2,911 |
|
Total liabilities |
|
|
80,245 |
|
|
69,673 |
|
|
67,686 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
101 |
|
|
92 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
Common stock, $1 par value (issued shares at July 30, 2023 – 536,431,204) |
|
|
5,272 |
|
|
5,165 |
|
|
5,139 |
|
Common stock in treasury |
|
|
(28,760) |
|
|
(24,094) |
|
|
(22,976) |
|
Retained earnings |
|
|
48,947 |
|
|
42,247 |
|
|
40,346 |
|
Accumulated other comprehensive income (loss) |
|
|
(2,411) |
|
|
(3,056) |
|
|
(3,476) |
|
Total Deere & Company stockholders’ equity |
|
|
23,048 |
|
|
20,262 |
|
|
19,033 |
|
Noncontrolling interests |
|
|
3 |
|
|
3 |
|
|
3 |
|
Total stockholders’ equity |
|
|
23,051 |
|
|
20,265 |
|
|
19,036 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
103,397 |
|
$ |
90,030 |
|
$ |
86,817 |
|
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Interim Consolidated Financial Statements.
4
DEERE & COMPANY |
|
|
|
|
|
|
|
STATEMENTS OF CONSOLIDATED CASH FLOWS |
|
|
|
|
|
|
|
For the Nine Months Ended July 30, 2023 and July 31, 2022 |
|
|
|
|
|
|
|
(In millions of dollars) Unaudited |
|
|
|
|
|
|
|
|
|
2023 |
|
2022 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
Net income |
|
$ |
7,787 |
|
$ |
4,886 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Provision (credit) for credit losses |
|
|
(64) |
|
|
62 |
|
Provision for depreciation and amortization |
|
|
1,527 |
|
|
1,443 |
|
Impairments and other adjustments |
|
|
173 |
|
|
81 |
|
Share-based compensation expense |
|
|
112 |
|
|
64 |
|
Gain on remeasurement of previously held equity investment |
|
|
|
|
|
(326) |
|
Credit for deferred income taxes |
|
|
(429) |
|
|
(6) |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Receivables related to sales |
|
|
(5,059) |
|
|
(2,357) |
|
Inventories |
|
|
(663) |
|
|
(2,526) |
|
Accounts payable and accrued expenses |
|
|
47 |
|
|
(15) |
|
Accrued income taxes payable/receivable |
|
|
(595) |
|
|
82 |
|
Retirement benefits |
|
|
(116) |
|
|
(1,014) |
|
Other |
|
|
176 |
|
|
44 |
|
Net cash provided by operating activities |
|
|
2,896 |
|
|
418 |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
Collections of receivables (excluding receivables related to sales) |
|
|
17,592 |
|
|
15,774 |
|
Proceeds from sales of equipment on operating leases |
|
|
1,445 |
|
|
1,501 |
|
Cost of receivables acquired (excluding receivables related to sales) |
|
|
(20,714) |
|
|
(18,578) |
|
Acquisitions of businesses, net of cash acquired |
|
|
(82) |
|
|
(488) |
|
Purchases of property and equipment |
|
|
(887) |
|
|
(596) |
|
Cost of equipment on operating leases acquired |
|
|
(1,968) |
|
|
(1,717) |
|
Collateral on derivatives - net |
|
|
240 |
|
|
(193) |
|
Other |
|
|
(189) |
|
|
(133) |
|
Net cash used for investing activities |
|
|
(4,563) |
|
|
(4,430) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
Increase in total short-term borrowings |
|
|
5,040 |
|
|
4,267 |
|
Proceeds from long-term borrowings |
|
|
9,972 |
|
|
6,281 |
|
Payments of long-term borrowings |
|
|
(5,862) |
|
|
(6,578) |
|
Repurchases of common stock |
|
|
(4,663) |
|
|
(2,477) |
|
Dividends paid |
|
|
(1,065) |
|
|
(971) |
|
Other |
|
|
(43) |
|
|
(7) |
|
Net cash provided by financing activities |
|
|
3,379 |
|
|
515 |
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
|
|
125 |
|
|
(143) |
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash |
|
|
1,837 |
|
|
(3,640) |
|
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period |
|
|
4,941 |
|
|
8,125 |
|
Cash, Cash Equivalents, and Restricted Cash at End of Period |
|
$ |
6,778 |
|
$ |
4,485 |
|
|
|
|
|
|
|
|
|
Components of Cash, Cash Equivalents, and Restricted Cash |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
6,576 |
|
$ |
4,359 |
|
Restricted cash (Other assets) |
|
|
202 |
|
|
126 |
|
Total Cash, Cash Equivalents, and Restricted Cash |
|
$ |
6,778 |
|
$ |
4,485 |
|
|
|
|
|
|
|
|
|
See Condensed Notes to Interim Consolidated Financial Statements.
5
DEERE & COMPANY |
|
||||||||||||||||||||||
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY |
|
||||||||||||||||||||||
For the Three and Nine Months Ended July 30, 2023 and July 31, 2022 |
|
||||||||||||||||||||||
(In millions of dollars) Unaudited |
|
||||||||||||||||||||||
|
|
|
|
|
Total Stockholders’ Equity |
|
|
|
|
|
|||||||||||||
|
|
|
|
|
Deere & Company Stockholders |
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|||||||
|
|
Total |
|
|
|
|
|
|
|
Other |
|
|
|
|
Redeemable |
|
|||||||
|
|
Stockholders’ |
|
Common |
|
Treasury |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
|
Noncontrolling |
|
|||||||
|
|
Equity |
|
Stock |
|
Stock |
|
Earnings |
|
Income (Loss) |
|
Interests |
|
|
Interest |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Balance May 1, 2022 |
|
$ |
18,907 |
|
$ |
5,117 |
|
$ |
(21,727) |
|
$ |
38,805 |
|
$ |
(3,291) |
|
$ |
3 |
|
|
$ |
99 |
|
Net income |
|
|
1,884 |
|
|
|
|
|
|
|
|
1,884 |
|
|
|
|
|
|
|
|
|
1 |
|
Other comprehensive loss |
|
|
(185) |
|
|
|
|
|
|
|
|
|
|
|
(185) |
|
|
|
|
|
|
(4) |
|
Repurchases of common stock |
|
|
(1,251) |
|
|
|
|
|
(1,251) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares reissued |
|
|
2 |
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
(343) |
|
|
|
|
|
|
|
|
(343) |
|
|
|
|
|
|
|
|
|
|
|
Share based awards and other |
|
|
22 |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balance July 31, 2022 |
|
$ |
19,036 |
|
$ |
5,139 |
|
$ |
(22,976) |
|
$ |
40,346 |
|
$ |
(3,476) |
|
$ |
3 |
|
|
$ |
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Balance October 31, 2021 |
|
$ |
18,434 |
|
$ |
5,054 |
|
$ |
(20,533) |
|
$ |
36,449 |
|
$ |
(2,539) |
|
$ |
3 |
|
|
|
|
|
Acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
105 |
|
Net income (loss) |
|
|
4,887 |
|
|
|
|
|
|
|
|
4,885 |
|
|
|
|
|
2 |
|
|
|
(1) |
|
Other comprehensive loss |
|
|
(937) |
|
|
|
|
|
|
|
|
|
|
|
(937) |
|
|
|
|
|
|
(9) |
|
Repurchases of common stock |
|
|
(2,477) |
|
|
|
|
|
(2,477) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares reissued |
|
|
34 |
|
|
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
(990) |
|
|
|
|
|
|
|
|
(988) |
|
|
|
|
|
(2) |
|
|
|
|
|
Share based awards and other |
|
|
85 |
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance July 31, 2022 |
|
$ |
19,036 |
|
$ |
5,139 |
|
$ |
(22,976) |
|
$ |
40,346 |
|
$ |
(3,476) |
|
$ |
3 |
|
|
$ |
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Balance April 30, 2023 |
|
$ |
22,399 |
|
$ |
5,227 |
|
$ |
(26,630) |
|
$ |
46,336 |
|
$ |
(2,538) |
|
$ |
4 |
|
|
$ |
102 |
|
Net income (loss) |
|
|
2,978 |
|
|
|
|
|
|
|
|
2,978 |
|
|
|
|
|
|
|
|
|
(6) |
|
Other comprehensive income |
|
|
127 |
|
|
|
|
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
1 |
|
Repurchases of common stock |
|
|
(2,139) |
|
|
|
|
|
(2,139) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares reissued |
|
|
9 |
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
(364) |
|
|
|
|
|
|
|
|
(362) |
|
|
|
|
|
(2) |
|
|
|
|
|
Share based awards and other |
|
|
41 |
|
|
45 |
|
|
|
|
|
(5) |
|
|
|
|
|
1 |
|
|
|
4 |
|
Balance July 30, 2023 |
|
$ |
23,051 |
|
$ |
5,272 |
|
$ |
(28,760) |
|
$ |
48,947 |
|
$ |
(2,411) |
|
$ |
3 |
|
|
$ |
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Balance October 30, 2022 |
|
$ |
20,265 |
|
$ |
5,165 |
|
$ |
(24,094) |
|
$ |
42,247 |
|
$ |
(3,056) |
|
$ |
3 |
|
|
$ |
92 |
|
Net income (loss) |
|
|
7,799 |
|
|
|
|
|
|
|
|
7,797 |
|
|
|
|
|
2 |
|
|
|
(12) |
|
Other comprehensive income |
|
|
645 |
|
|
|
|
|
|
|
|
|
|
|
645 |
|
|
|
|
|
|
12 |
|
Repurchases of common stock |
|
|
(4,696) |
|
|
|
|
|
(4,696) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares reissued |
|
|
30 |
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
|
(1,091) |
|
|
|
|
|
|
|
|
(1,088) |
|
|
|
|
|
(3) |
|
|
|
|
|
Share based awards and other |
|
|
99 |
|
|
107 |
|
|
|
|
|
(9) |
|
|
|
|
|
1 |
|
|
|
9 |
|
Balance July 30, 2023 |
|
$ |
23,051 |
|
$ |
5,272 |
|
$ |
(28,760) |
|
$ |
48,947 |
|
$ |
(2,411) |
|
$ |
3 |
|
|
$ |
101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Interim Consolidated Financial Statements.
6
Condensed Notes to Interim Consolidated Financial Statements (Unaudited)
(1) Organization and Consolidation
Deere & Company has been developing innovative solutions to help its customers become more profitable for more than 185 years. References to Deere & Company, John Deere, Deere, or the Company include its consolidated subsidiaries and consolidated variable interest entities (VIEs). The Company is managed through the following operating segments: production and precision agriculture (PPA), small agriculture and turf (SAT), construction and forestry (CF), and financial services (FS). References to “equipment operations” include production and precision agriculture, small agriculture and turf, and construction and forestry, while references to “agriculture and turf” include both production and precision agriculture and small agriculture and turf.
The Company uses a 52/53 week fiscal year with quarters ending on the last Sunday in the reporting period. The third quarter ends for fiscal year 2023 and 2022 were July 30, 2023 and July 31, 2022, respectively. Both third quarters contained 13 weeks, while both year-to-date periods contained 39 weeks. Unless otherwise stated, references to particular years, quarters, or months refer to the Company’s fiscal years generally ending in October and the associated periods in those fiscal years.
(2) Summary of Significant Accounting Policies and New Accounting Standards
Quarterly Financial Statements
The interim consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All normal recurring adjustments have been included. Management believes the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. It is suggested these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest Annual Report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates.
New Accounting Standards
The Company closely monitors all Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board and other authoritative guidance. ASUs adopted in 2023 did not have a material impact on the Company’s financial statements. ASUs to be adopted in future periods are being evaluated and at this point are not expected to have a material impact on the Company’s financial statements.
7
(3) Revenue Recognition
The Company’s net sales and revenues by primary geographic market, major product line, and timing of revenue recognition in millions of dollars follow:
|
|
Three Months Ended July 30, 2023 |
|
|||||||||||||
|
|
Production & Precision Ag |
|
Small Ag & Turf |
|
Construction |
|
Financial |
|
Total |
|
|||||
Primary geographic markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
3,394 |
|
$ |
2,098 |
|
$ |
2,346 |
|
$ |
860 |
|
$ |
8,698 |
|
Canada |
|
|
397 |
|
|
179 |
|
|
288 |
|
|
165 |
|
|
1,029 |
|
Western Europe |
|
|
833 |
|
|
802 |
|
|
421 |
|
|
35 |
|
|
2,091 |
|
Central Europe and CIS |
|
|
302 |
|
|
85 |
|
|
98 |
|
|
6 |
|
|
491 |
|
Latin America |
|
|
1,326 |
|
|
220 |
|
|
371 |
|
|
117 |
|
|
2,034 |
|
Asia, Africa, Oceania, and Middle East |
|
|
720 |
|
|
422 |
|
|
271 |
|
|
45 |
|
|
1,458 |
|
Total |
|
$ |
6,972 |
|
$ |
3,806 |
|
$ |
3,795 |
|
$ |
1,228 |
|
$ |
15,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major product lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production agriculture |
|
$ |
6,721 |
|
|
|
|
|
|
|
|
|
|
$ |
6,721 |
|
Small agriculture |
|
|
|
|
$ |
2,688 |
|
|
|
|
|
|
|
|
2,688 |
|
Turf |
|
|
|
|
|
964 |
|
|
|
|
|
|
|
|
964 |
|
Construction |
|
|
|
|
|
|
|
$ |
1,745 |
|
|
|
|
|
1,745 |
|
Compact construction |
|
|
|
|
|
|
|
|
614 |
|
|
|
|
|
614 |
|
Roadbuilding |
|
|
|
|
|
|
|
|
987 |
|
|
|
|
|
987 |
|
Forestry |
|
|
|
|
|
|
|
|
334 |
|
|
|
|
|
334 |
|
Financial products |
|
|
89 |
|
|
28 |
|
|
15 |
|
$ |
1,228 |
|
|
1,360 |
|
Other |
|
|
162 |
|
|
126 |
|
|
100 |
|
|
|
|
|
388 |
|
Total |
|
$ |
6,972 |
|
$ |
3,806 |
|
$ |
3,795 |
|
$ |
1,228 |
|
$ |
15,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At a point in time |
|
$ |
6,857 |
|
$ |
3,769 |
|
$ |
3,767 |
|
$ |
30 |
|
$ |
14,423 |
|
Over time |
|
|
115 |
|
|
37 |
|
|
28 |
|
|
1,198 |
|
|
1,378 |
|
Total |
|
$ |
6,972 |
|
$ |
3,806 |
|
$ |
3,795 |
|
$ |
1,228 |
|
$ |
15,801 |
|
|
|
Nine Months Ended July 30, 2023 |
|
|||||||||||||
|
|
Production & Precision Ag |
|
Small Ag & Turf |
|
Construction |
|
Financial |
|
Total |
|
|||||
Primary geographic markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
10,079 |
|
$ |
6,005 |
|
$ |
6,807 |
|
$ |
2,339 |
|
$ |
25,230 |
|
Canada |
|
|
1,303 |
|
|
514 |
|
|
865 |
|
|
468 |
|
|
3,150 |
|
Western Europe |
|
|
2,092 |
|
|
2,254 |
|
|
1,278 |
|
|
95 |
|
|
5,719 |
|
Central Europe and CIS |
|
|
897 |
|
|
420 |
|
|
263 |
|
|
26 |
|
|
1,606 |
|
Latin America |
|
|
4,106 |
|
|
577 |
|
|
1,098 |
|
|
318 |
|
|
6,099 |
|
Asia, Africa, Oceania, and Middle East |
|
|
1,709 |
|
|
1,291 |
|
|
906 |
|
|
129 |
|
|
4,035 |
|
Total |
|
$ |
20,186 |
|
$ |
11,061 |
|
$ |
11,217 |
|
$ |
3,375 |
|
$ |
45,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major product lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production agriculture |
|
$ |
19,565 |
|
|
|
|
|
|
|
|
|
|
$ |
19,565 |
|
Small agriculture |
|
|
|
|
$ |
7,835 |
|
|
|
|
|
|
|
|
7,835 |
|
Turf |
|
|
|
|
|
2,782 |
|
|
|
|
|
|
|
|
2,782 |
|
Construction |
|
|
|
|
|
|
|
$ |
5,040 |
|
|
|
|
|
5,040 |
|
Compact construction |
|
|
|
|
|
|
|
|
1,750 |
|
|
|
|
|
1,750 |
|
Roadbuilding |
|
|
|
|
|
|
|
|
2,939 |
|
|
|
|
|
2,939 |
|
Forestry |
|
|
|
|
|
|
|
|
1,119 |
|
|
|
|
|
1,119 |
|
Financial products |
|
|
149 |
|
|
66 |
|
|
40 |
|
$ |
3,375 |
|
|
3,630 |
|
Other |
|
|
472 |
|
|
378 |
|
|
329 |
|
|
|
|
|
1,179 |
|
Total |
|
$ |
20,186 |
|
$ |
11,061 |
|
$ |
11,217 |
|
$ |
3,375 |
|
$ |
45,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At a point in time |
|
$ |
19,965 |
|
$ |
10,970 |
|
$ |
11,142 |
|
$ |
80 |
|
$ |
42,157 |
|
Over time |
|
|
221 |
|
|
91 |
|
|
75 |
|
|
3,295 |
|
|
3,682 |
|
Total |
|
$ |
20,186 |
|
$ |
11,061 |
|
$ |
11,217 |
|
$ |
3,375 |
|
$ |
45,839 |
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2022 |
|
|||||||||||||
|
|
Production & Precision Ag |
|
Small Ag & Turf |
|
Construction |
|
Financial |
|
Total |
|
|||||
Primary geographic markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
2,904 |
|
$ |
2,177 |
|
$ |
1,789 |
|
$ |
602 |
|
$ |
7,472 |
|
Canada |
|
|
451 |
|
|
185 |
|
|
288 |
|
|
149 |
|
|
1,073 |
|
Western Europe |
|
|
645 |
|
|
646 |
|
|
380 |
|
|
25 |
|
|
1,696 |
|
Central Europe and CIS |
|
|
348 |
|
|
109 |
|
|
111 |
|
|
14 |
|
|
582 |
|
Latin America |
|
|
1,327 |
|
|
155 |
|
|
459 |
|
|
77 |
|
|
2,018 |
|
Asia, Africa, Oceania, and Middle East |
|
|
510 |
|
|
419 |
|
|
296 |
|
|
36 |
|
|
1,261 |
|
Total |
|
$ |
6,185 |
|
$ |
3,691 |
|
$ |
3,323 |
|
$ |
903 |
|
$ |
14,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major product lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production agriculture |
|
$ |
6,019 |
|
|
|
|
|
|
|
|
|
|
$ |
6,019 |
|
Small agriculture |
|
|
|
|
$ |
2,705 |
|
|
|
|
|
|
|
|
2,705 |
|
Turf |
|
|
|
|
|
842 |
|
|
|
|
|
|
|
|
842 |
|
Construction |
|
|
|
|
|
|
|
$ |
1,506 |
|
|
|
|
|
1,506 |
|
Compact construction |
|
|
|
|
|
|
|
|
460 |
|
|
|
|
|
460 |
|
Roadbuilding |
|
|
|
|
|
|
|
|
910 |
|
|
|
|
|
910 |
|
Forestry |
|
|
|
|
|
|
|
|
316 |
|
|
|
|
|
316 |
|
Financial products |
|
|
17 |
|
|
15 |
|
|
6 |
|
$ |
903 |
|
|
941 |
|
Other |
|
|
149 |
|
|
129 |
|
|
125 |
|
|
|
|
|
403 |
|
Total |
|
$ |
6,185 |
|
$ |
3,691 |
|
$ |
3,323 |
|
$ |
903 |
|
$ |
14,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At a point in time |
|
$ |
6,154 |
|
$ |
3,672 |
|
$ |
3,303 |
|
$ |
27 |
|
$ |
13,156 |
|
Over time |
|
|
31 |
|
|
19 |
|
|
20 |
|
|
876 |
|
|
946 |
|
Total |
|
$ |
6,185 |
|
$ |
3,691 |
|
$ |
3,323 |
|
$ |
903 |
|
$ |
14,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2022 |
|
|||||||||||||
|
|
Production & Precision Ag |
|
Small Ag & Turf |
|
Construction |
|
Financial |
|
Total |
|
|||||
Primary geographic markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
6,946 |
|
$ |
5,718 |
|
$ |
5,157 |
|
$ |
1,744 |
|
$ |
19,565 |
|
Canada |
|
|
899 |
|
|
468 |
|
|
975 |
|
|
450 |
|
|
2,792 |
|
Western Europe |
|
|
1,648 |
|
|
1,836 |
|
|
1,202 |
|
|
76 |
|
|
4,762 |
|
Central Europe and CIS |
|
|
954 |
|
|
386 |
|
|
452 |
|
|
36 |
|
|
1,828 |
|
Latin America |
|
|
3,229 |
|
|
393 |
|
|
1,020 |
|
|
218 |
|
|
4,860 |
|
Asia, Africa, Oceania, and Middle East |
|
|
1,118 |
|
|
1,170 |
|
|
833 |
|
|
113 |
|
|
3,234 |
|
Total |
|
$ |
14,794 |
|
$ |
9,971 |
|
$ |
9,639 |
|
$ |
2,637 |
|
$ |
37,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major product lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production agriculture |
|
$ |
14,333 |
|
|
|
|
|
|
|
|
|
|
$ |
14,333 |
|
Small agriculture |
|
|
|
|
$ |
7,305 |
|
|
|
|
|
|
|
|
7,305 |
|
Turf |
|
|
|
|
|
2,286 |
|
|
|
|
|
|
|
|
2,286 |
|
Construction |
|
|
|
|
|
|
|
$ |
4,198 |
|
|
|
|
|
4,198 |
|
Compact construction |
|
|
|
|
|
|
|
|
1,208 |
|
|
|
|
|
1,208 |
|
Roadbuilding |
|
|
|
|
|
|
|
|
2,619 |
|
|
|
|
|
2,619 |
|
Forestry |
|
|
|
|
|
|
|
|
946 |
|
|
|
|
|
946 |
|
Financial products |
|
|
39 |
|
|
35 |
|
|
17 |
|
$ |
2,637 |
|
|
2,728 |
|
Other |
|
|
422 |
|
|
345 |
|
|
651 |
|
|
|
|
|
1,418 |
|
Total |
|
$ |
14,794 |
|
$ |
9,971 |
|
$ |
9,639 |
|
$ |
2,637 |
|
$ |
37,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At a point in time |
|
$ |
14,694 |
|
$ |
9,919 |
|
$ |
9,580 |
|
$ |
77 |
|
$ |
34,270 |
|
Over time |
|
|
100 |
|
|
52 |
|
|
59 |
|
|
2,560 |
|
|
2,771 |
|
Total |
|
$ |
14,794 |
|
$ |
9,971 |
|
$ |
9,639 |
|
$ |
2,637 |
|
$ |
37,041 |
|
9
The Company invoices 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 and telematic services. These advanced customer payments are presented as deferred revenue, a contract liability, in “Accounts payable and accrued expenses” in the consolidated balance sheets. The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 16, was $1,753 million, $1,423 million, and $1,424 million at July 30, 2023, October 30, 2022, and July 31, 2022, respectively. The contract liability is reduced as the revenue is recognized. During the three months ended July 30, 2023 and July 31, 2022, $96 million and $93 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year. During the nine months ended July 30, 2023 and July 31, 2022, $440 million and $488 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of the respective fiscal year.
The amount of unsatisfied performance obligations for contracts with an original duration greater than one year was $1,437 million at July 30, 2023. The estimated revenue to be recognized by fiscal year follows in millions of dollars: remainder of 2023 - $139, 2024 - $403, 2025 - $337, 2026 - $228, 2027 - $136, 2028 - $86 and later years - $108. As permitted, the Company 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 of equipment, service parts, repair services, and certain telematics services.
(4) Other Comprehensive Income Items
The after-tax components of accumulated other comprehensive income (loss) in millions of dollars follow:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Retirement benefits adjustment |
|
$ |
(656) |
|
$ |
(389) |
|
$ |
(1,171) |
|
Cumulative translation adjustment |
|
|
(1,669) |
|
|
(2,594) |
|
|
(2,262) |
|
Unrealized gain (loss) on derivatives |
|
|
(5) |
|
|
21 |
|
|
(1) |
|
Unrealized gain (loss) on debt securities |
|
|
(81) |
|
|
(94) |
|
|
(42) |
|
Total accumulated other comprehensive income (loss) |
|
$ |
(2,411) |
|
$ |
(3,056) |
|
$ |
(3,476) |
|
Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars. Retirement benefits adjustment reclassifications for actuarial (gain) loss, prior service (credit) cost, and settlements are included in net periodic pension and other postretirement benefit costs (see Note 6).
|
|
Before |
|
Tax |
|
After |
|
|||
|
|
Tax |
|
(Expense) |
|
Tax |
|
|||
Three Months Ended July 30, 2023 |
|
Amount |
|
Credit |
|
Amount |
|
|||
Cumulative translation adjustment |
|
$ |
143 |
|
$ |
1 |
|
$ |
144 |
|
Unrealized gain (loss) on derivatives: |
|
|
|
|
|
|
|
|
|
|
Unrealized hedging gain (loss) |
|
|
24 |
|
|
(5) |
|
|
19 |
|
Reclassification of realized (gain) loss to: |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts – Interest expense |
|
|
(18) |
|
|
4 |
|
|
(14) |
|
Net unrealized gain (loss) on derivatives |
|
|
6 |
|
|
(1) |
|
|
5 |
|
Unrealized gain (loss) on debt securities: |
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) |
|
|
(16) |
|
|
3 |
|
|
(13) |
|
Net unrealized gain (loss) on debt securities |
|
|
(16) |
|
|
3 |
|
|
(13) |
|
Retirement benefits adjustment: |
|
|
|
|
|
|
|
|
|
|
Net actuarial gain (loss) |
|
|
(1) |
|
|
|
|
|
(1) |
|
Reclassification of amortized amounts: |
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss – Other operating expenses |
|
|
(20) |
|
|
5 |
|
|
(15) |
|
Prior service (credit) cost – Other operating expenses |
|
|
9 |
|
|
(2) |
|
|
7 |
|
Net unrealized gain (loss) on retirement benefits adjustment |
|
|
(12) |
|
|
3 |
|
|
(9) |
|
Total other comprehensive income (loss) |
|
$ |
121 |
|
$ |
6 |
|
$ |
127 |
|
10
|
|
Before |
|
Tax |
|
After |
|
|||
|
|
Tax |
|
(Expense) |
|
Tax |
|
|||
Nine Months Ended July 30, 2023 |
|
Amount |
|
Credit |
|
Amount |
|
|||
Cumulative translation adjustment |
|
$ |
914 |
|
$ |
11 |
|
$ |
925 |
|
Unrealized gain (loss) on derivatives: |
|
|
|
|
|
|
|
|
|
|
Unrealized hedging gain (loss) |
|
|
19 |
|
|
(4) |
|
|
15 |
|
Reclassification of realized (gain) loss to: |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts – Interest expense |
|
|
(52) |
|
|
11 |
|
|
(41) |
|
Net unrealized gain (loss) on derivatives |
|
|
(33) |
|
|
7 |
|
|
(26) |
|
Unrealized gain (loss) on debt securities: |
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) |
|
|
17 |
|
|
(4) |
|
|
13 |
|
Net unrealized gain (loss) on debt securities |
|
|
17 |
|
|
(4) |
|
|
13 |
|
Retirement benefits adjustment: |
|
|
|
|
|
|
|
|
|
|
Net actuarial gain (loss) |
|
|
(351) |
|
|
83 |
|
|
(268) |
|
Reclassification of amortized amounts: |
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss – Other operating expenses |
|
|
(61) |
|
|
15 |
|
|
(46) |
|
Prior service (credit) cost – Other operating expenses |
|
|
28 |
|
|
(7) |
|
|
21 |
|
Settlements – Other operating expenses |
|
|
36 |
|
|
(10) |
|
|
26 |
|
Net unrealized gain (loss) on retirement benefits adjustment |
|
|
(348) |
|
|
81 |
|
|
(267) |
|
Total other comprehensive income (loss) |
|
$ |
550 |
|
$ |
95 |
|
$ |
645 |
|
|
|
Before |
|
Tax |
|
After |
|
|||
|
|
Tax |
|
(Expense) |
|
Tax |
|
|||
Three Months Ended July 31, 2022 |
|
Amount |
|
Credit |
|
Amount |
|
|||
Cumulative translation adjustment |
|
$ |
(267) |
|
$ |
(2) |
|
$ |
(269) |
|
Unrealized gain (loss) on derivatives: |
|
|
|
|
|
|
|
|
|
|
Unrealized hedging gain (loss) |
|
|
1 |
|
|
|
|
|
1 |
|
Reclassification of realized (gain) loss to: |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts – Interest expense |
|
|
(3) |
|
|
1 |
|
|
(2) |
|
Net unrealized gain (loss) on derivatives |
|
|
(2) |
|
|
1 |
|
|
(1) |
|
Unrealized gain (loss) on debt securities: |
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) |
|
|
6 |
|
|
(1) |
|
|
5 |
|
Reclassification of realized (gain) loss – Other income |
|
|
1 |
|
|
|
|
|
1 |
|
Net unrealized gain (loss) on debt securities |
|
|
7 |
|
|
(1) |
|
|
6 |
|
Retirement benefits adjustment: |
|
|
|
|
|
|
|
|
|
|
Net actuarial gain (loss) |
|
|
34 |
|
|
(9) |
|
|
25 |
|
Reclassification of amortized amounts: |
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss – Other operating expenses |
|
|
27 |
|
|
(7) |
|
|
20 |
|
Prior service (credit) cost – Other operating expenses |
|
|
8 |
|
|
(2) |
|
|
6 |
|
Settlements/curtailment – Other operating expenses |
|
|
36 |
|
|
(8) |
|
|
28 |
|
Net unrealized gain (loss) on retirement benefits adjustment |
|
|
105 |
|
|
(26) |
|
|
79 |
|
Total other comprehensive income (loss) |
|
$ |
(157) |
|
$ |
(28) |
|
$ |
(185) |
|
11
|
|
Before |
|
Tax |
|
After |
|
|||
|
|
Tax |
|
(Expense) |
|
Tax |
|
|||
Nine Months Ended July 31, 2022 |
|
Amount |
|
Credit |
|
Amount |
|
|||
Cumulative translation adjustment |
|
$ |
(774) |
|
$ |
(10) |
|
$ |
(784) |
|
Unrealized gain (loss) on derivatives: |
|
|
|
|
|
|
|
|
|
|
Unrealized hedging gain (loss) |
|
|
52 |
|
|
(11) |
|
|
41 |
|
Net unrealized gain (loss) on derivatives |
|
|
52 |
|
|
(11) |
|
|
41 |
|
Unrealized gain (loss) on debt securities: |
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) |
|
|
(74) |
|
|
16 |
|
|
(58) |
|
Reclassification of realized (gain) loss – Other income |
|
|
1 |
|
|
|
|
|
1 |
|
Net unrealized gain (loss) on debt securities |
|
|
(73) |
|
|
16 |
|
|
(57) |
|
Retirement benefits adjustment: |
|
|
|
|
|
|
|
|
|
|
Net actuarial gain (loss) and prior service credit (cost) |
|
|
(338) |
|
|
81 |
|
|
(257) |
|
Reclassification of amortized amounts: |
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss – Other operating expenses |
|
|
94 |
|
|
(24) |
|
|
70 |
|
Prior service (credit) cost – Other operating expenses |
|
|
22 |
|
|
(6) |
|
|
16 |
|
Settlements/curtailment – Other operating expenses |
|
|
44 |
|
|
(10) |
|
|
34 |
|
Net unrealized gain (loss) on retirement benefits adjustment |
|
|
(178) |
|
|
41 |
|
|
(137) |
|
Total other comprehensive income (loss) |
|
$ |
(973) |
|
$ |
36 |
|
$ |
(937) |
|
(5) Earnings Per Share
A reconciliation of basic and diluted net income per share attributable to Deere & Company follows in millions (except per share amounts):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
July 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Net income attributable to Deere & Company |
|
$ |
2,978 |
|
$ |
1,884 |
|
$ |
7,797 |
|
$ |
4,885 |
|
Average shares outstanding |
|
|
290.8 |
|
|
304.1 |
|
|
294.4 |
|
|
305.8 |
|
Basic per share |
|
$ |
10.24 |
|
$ |
6.20 |
|
$ |
26.48 |
|
$ |
15.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
|
|
290.8 |
|
|
304.1 |
|
|
294.4 |
|
|
305.8 |
|
Effect of dilutive share-based compensation |
|
|
1.3 |
|
|
1.6 |
|
|
1.5 |
|
|
1.9 |
|
Total potential shares outstanding |
|
|
292.1 |
|
|
305.7 |
|
|
295.9 |
|
|
307.7 |
|
Diluted per share |
|
$ |
10.20 |
|
$ |
6.16 |
|
$ |
26.35 |
|
$ |
15.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares excluded from EPS calculation, as antidilutive |
|
|
.2 |
|
|
.2 |
|
|
.1 |
|
|
.2 |
|
12
(6) Pension and Other Postretirement Employee Benefits
The Company has several defined benefit pension plans and other postretirement employee benefit (OPEB) plans, primarily health care and life insurance plans, covering its U.S. employees and employees in certain foreign countries. The components of net periodic pension and OPEB (benefit) cost consisted of the following in millions of dollars:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
July 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
62 |
|
$ |
86 |
|
$ |
186 |
|
$ |
265 |
|
Interest cost |
|
|
133 |
|
|
85 |
|
|
400 |
|
|
242 |
|
Expected return on plan assets |
|
|
(223) |
|
|
(182) |
|
|
(655) |
|
|
(544) |
|
Amortization of actuarial (gain) loss |
|
|
(5) |
|
|
31 |
|
|
(16) |
|
|
107 |
|
Amortization of prior service cost |
|
|
10 |
|
|
9 |
|
|
30 |
|
|
25 |
|
Settlements/curtailment |
|
|
|
|
|
36 |
|
|
36 |
|
|
44 |
|
Net (benefit) cost |
|
$ |
(23) |
|
$ |
65 |
|
$ |
(19) |
|
$ |
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPEB |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
7 |
|
$ |
11 |
|
$ |
20 |
|
$ |
34 |
|
Interest cost |
|
|
44 |
|
|
25 |
|
|
132 |
|
|
74 |
|
Expected return on plan assets |
|
|
(29) |
|
|
(28) |
|
|
(87) |
|
|
(83) |
|
Amortization of actuarial gain |
|
|
(15) |
|
|
(4) |
|
|
(45) |
|
|
(13) |
|
Amortization of prior service credit |
|
|
(1) |
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
Net cost |
|
$ |
6 |
|
$ |
3 |
|
$ |
18 |
|
$ |
9 |
|
The reduction in the 2023 pension net cost is due to increases in the expected long-term return rates on plan assets and increases in discount rates. The components of net periodic pension and OPEB (benefit) cost excluding the service cost component are included in the line item “Other operating expenses” in the statements of consolidated income.
During the second quarter of 2023, the Canada pension plan paid a premium to an insurance company to irrevocably transfer the benefit obligations and administration for the majority of its retired participants. The transaction did not impact the benefits to be received by the retired participants. In connection with the transaction, the Company recognized a one-time, non-cash, pre-tax pension settlement charge of $36 million in the second quarter of 2023 related to the accelerated recognition of actuarial losses included within “Accumulated other comprehensive income (loss)” in the statements of changes in consolidated stockholders’ equity.
13
(7) Segment Reporting
Worldwide net sales and revenues, operating profit, and identifiable assets by segment were as follows in millions of dollars:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
|
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
July 31 |
|
% |
|
||||
|
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
||||
Net sales and revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production & precision ag net sales |
|
$ |
6,806 |
|
$ |
6,096 |
|
+12 |
|
$ |
19,826 |
|
$ |
14,568 |
|
+36 |
|
Small ag & turf net sales |
|
|
3,739 |
|
|
3,635 |
|
+3 |
|
|
10,886 |
|
|
9,836 |
|
+11 |
|
Construction & forestry net sales |
|
|
3,739 |
|
|
3,269 |
|
+14 |
|
|
11,053 |
|
|
9,161 |
|
+21 |
|
Financial services revenues |
|
|
1,228 |
|
|
903 |
|
+36 |
|
|
3,375 |
|
|
2,637 |
|
+28 |
|
Other revenues |
|
|
289 |
|
|
199 |
|
+45 |
|
|
699 |
|
|
839 |
|
-17 |
|
Total net sales and revenues |
|
$ |
15,801 |
|
$ |
14,102 |
|
+12 |
|
$ |
45,839 |
|
$ |
37,041 |
|
+24 |
|
Operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production & precision ag |
|
$ |
1,782 |
|
$ |
1,293 |
|
+38 |
|
$ |
5,160 |
|
$ |
2,646 |
|
+95 |
|
Small ag & turf |
|
|
732 |
|
|
552 |
|
+33 |
|
|
2,028 |
|
|
1,443 |
|
+41 |
|
Construction & forestry |
|
|
716 |
|
|
514 |
|
+39 |
|
|
2,179 |
|
|
1,599 |
|
+36 |
|
Financial services |
|
|
286 |
|
|
287 |
|
|
|
|
565 |
|
|
864 |
|
-35 |
|
Total operating profit |
|
|
3,516 |
|
|
2,646 |
|
+33 |
|
|
9,932 |
|
|
6,552 |
|
+52 |
|
Reconciling items |
|
|
98 |
|
|
(108) |
|
|
|
|
29 |
|
|
(303) |
|
|
|
Income taxes |
|
|
(636) |
|
|
(654) |
|
-3 |
|
|
(2,164) |
|
|
(1,364) |
|
+59 |
|
Net income attributable to Deere & Company |
|
$ |
2,978 |
|
$ |
1,884 |
|
+58 |
|
$ |
7,797 |
|
$ |
4,885 |
|
+60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment sales and revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production & precision ag net sales |
|
$ |
9 |
|
$ |
5 |
|
+80 |
|
$ |
21 |
|
$ |
15 |
|
+40 |
|
Small ag & turf net sales |
|
|
2 |
|
|
2 |
|
|
|
|
10 |
|
|
8 |
|
+25 |
|
Construction & forestry net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services revenues |
|
|
217 |
|
|
81 |
|
+168 |
|
|
612 |
|
|
214 |
|
+186 |
|
Operating profit for production and precision ag, small ag and turf, and construction and forestry is income from continuing operations before reconciling items and income taxes. Operating profit for financial services includes the effect of interest expense and foreign exchange gains and losses. Reconciling items to net income are primarily corporate expenses, certain interest income and expenses, certain foreign exchange gains and losses, pension and OPEB benefit amounts excluding the service cost component, equity in income of unconsolidated affiliates, and net income attributable to noncontrolling interests.
Identifiable assets were as follows in millions of dollars: |
|
|
|
|
|
|
|
|||
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Production & precision ag |
|
$ |
9,523 |
|
$ |
8,414 |
|
$ |
8,728 |
|
Small ag & turf |
|
|
4,482 |
|
|
4,451 |
|
|
4,361 |
|
Construction & forestry |
|
|
7,415 |
|
|
6,754 |
|
|
6,824 |
|
Financial services |
|
|
68,850 |
|
|
58,864 |
|
|
56,008 |
|
Corporate |
|
|
13,127 |
|
|
11,547 |
|
|
10,896 |
|
Total assets |
|
$ |
103,397 |
|
$ |
90,030 |
|
$ |
86,817 |
|
(8) Financing Receivables
The Company monitors the credit quality of financing receivables based on delinquency status. Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent receivables for which the Company has ceased accruing finance income. The Company ceases accruing finance income when these receivables are generally 90 days delinquent. Generally, when receivables are 120 days delinquent the estimated uncollectible amount from the customer is written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collection is reasonably assured.
14
The credit quality analysis of retail notes, financing leases, and revolving charge accounts (collectively, retail customer receivables) by year of origination was as follows in millions of dollars:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30, 2023 |
|
||||||||||||||||||||||
|
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
Prior Years |
|
Revolving Charge Accounts |
|
Total |
|
||||||||
Retail customer receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
10,554 |
|
$ |
9,701 |
|
$ |
5,792 |
|
$ |
2,779 |
|
$ |
1,080 |
|
$ |
402 |
|
$ |
4,388 |
|
$ |
34,696 |
|
30-59 days past due |
|
|
59 |
|
|
85 |
|
|
53 |
|
|
26 |
|
|
13 |
|
|
4 |
|
|
21 |
|
|
261 |
|
60-89 days past due |
|
|
19 |
|
|
30 |
|
|
17 |
|
|
10 |
|
|
5 |
|
|
1 |
|
|
7 |
|
|
89 |
|
90+ days past due |
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Non-performing |
|
|
19 |
|
|
80 |
|
|
71 |
|
|
36 |
|
|
24 |
|
|
27 |
|
|
8 |
|
|
265 |
|
Construction and forestry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
2,167 |
|
|
2,200 |
|
|
1,284 |
|
|
449 |
|
|
124 |
|
|
39 |
|
|
114 |
|
|
6,377 |
|
30-59 days past due |
|
|
39 |
|
|
46 |
|
|
38 |
|
|
13 |
|
|
5 |
|
|
2 |
|
|
4 |
|
|
147 |
|
60-89 days past due |
|
|
12 |
|
|
23 |
|
|
16 |
|
|
8 |
|
|
2 |
|
|
1 |
|
|
1 |
|
|
63 |
|
90+ days past due |
|
|
|
|
|
2 |
|
|
1 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
Non-performing |
|
|
20 |
|
|
83 |
|
|
61 |
|
|
26 |
|
|
11 |
|
|
5 |
|
|
1 |
|
|
207 |
|
Total |
|
$ |
12,889 |
|
$ |
12,251 |
|
$ |
7,333 |
|
$ |
3,348 |
|
$ |
1,264 |
|
$ |
481 |
|
$ |
4,544 |
|
$ |
42,110 |
|
|
|
October 30, 2022 |
|
||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Prior |
|
Revolving Charge Accounts |
|
Total |
|
||||||||
Retail customer receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
13,500 |
|
$ |
7,984 |
|
$ |
4,091 |
|
$ |
1,875 |
|
$ |
785 |
|
$ |
200 |
|
$ |
4,111 |
|
$ |
32,546 |
|
30-59 days past due |
|
|
46 |
|
|
63 |
|
|
36 |
|
|
17 |
|
|
7 |
|
|
3 |
|
|
19 |
|
|
191 |
|
60-89 days past due |
|
|
14 |
|
|
25 |
|
|
13 |
|
|
6 |
|
|
2 |
|
|
1 |
|
|
5 |
|
|
66 |
|
90+ days past due |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Non-performing |
|
|
27 |
|
|
60 |
|
|
44 |
|
|
28 |
|
|
18 |
|
|
19 |
|
|
8 |
|
|
204 |
|
Construction and forestry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
2,964 |
|
|
1,974 |
|
|
842 |
|
|
292 |
|
|
73 |
|
|
12 |
|
|
108 |
|
|
6,265 |
|
30-59 days past due |
|
|
53 |
|
|
52 |
|
|
23 |
|
|
9 |
|
|
2 |
|
|
1 |
|
|
3 |
|
|
143 |
|
60-89 days past due |
|
|
19 |
|
|
16 |
|
|
7 |
|
|
3 |
|
|
1 |
|
|
|
|
|
1 |
|
|
47 |
|
90+ days past due |
|
|
1 |
|
|
4 |
|
|
1 |
|
|
3 |
|
|
|
|
|
1 |
|
|
|
|
|
10 |
|
Non-performing |
|
|
25 |
|
|
61 |
|
|
34 |
|
|
19 |
|
|
7 |
|
|
3 |
|
|
|
|
|
149 |
|
Total |
|
$ |
16,650 |
|
$ |
10,239 |
|
$ |
5,091 |
|
$ |
2,252 |
|
$ |
895 |
|
$ |
240 |
|
$ |
4,255 |
|
$ |
39,622 |
|
|
|
July 31, 2022 |
|
||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Prior |
|
Revolving Charge Accounts |
|
Total |
|
||||||||
Retail customer receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
9,161 |
|
$ |
9,169 |
|
$ |
4,713 |
|
$ |
2,234 |
|
$ |
935 |
|
$ |
378 |
|
$ |
3,962 |
|
$ |
30,552 |
|
30-59 days past due |
|
|
40 |
|
|
70 |
|
|
38 |
|
|
23 |
|
|
8 |
|
|
4 |
|
|
18 |
|
|
201 |
|
60-89 days past due |
|
|
15 |
|
|
24 |
|
|
15 |
|
|
7 |
|
|
3 |
|
|
1 |
|
|
5 |
|
|
70 |
|
90+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing |
|
|
17 |
|
|
62 |
|
|
48 |
|
|
37 |
|
|
19 |
|
|
27 |
|
|
7 |
|
|
217 |
|
Construction and forestry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
2,336 |
|
|
2,249 |
|
|
1,004 |
|
|
382 |
|
|
106 |
|
|
20 |
|
|
102 |
|
|
6,199 |
|
30-59 days past due |
|
|
47 |
|
|
54 |
|
|
26 |
|
|
12 |
|
|
4 |
|
|
1 |
|
|
3 |
|
|
147 |
|
60-89 days past due |
|
|
14 |
|
|
14 |
|
|
12 |
|
|
4 |
|
|
1 |
|
|
|
|
|
1 |
|
|
46 |
|
90+ days past due |
|
|
|
|
|
11 |
|
|
3 |
|
|
1 |
|
|
|
|
|
3 |
|
|
|
|
|
18 |
|
Non-performing |
|
|
13 |
|
|
63 |
|
|
49 |
|
|
25 |
|
|
9 |
|
|
4 |
|
|
1 |
|
|
164 |
|
Total |
|
$ |
11,643 |
|
$ |
11,716 |
|
$ |
5,908 |
|
$ |
2,725 |
|
$ |
1,085 |
|
$ |
438 |
|
$ |
4,099 |
|
$ |
37,614 |
|
15
The credit quality analysis of wholesale receivables by year of origination was as follows in millions of dollars:
|
|
July 30, 2023 |
|
||||||||||||||||||||||
|
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
Prior |
|
Revolving |
|
Total |
|
||||||||
Wholesale receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
449 |
|
$ |
139 |
|
$ |
28 |
|
$ |
7 |
|
$ |
1 |
|
$ |
1 |
|
$ |
4,940 |
|
$ |
5,565 |
|
30+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
1 |
|
Construction and forestry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
20 |
|
|
6 |
|
|
23 |
|
|
1 |
|
|
|
|
|
1 |
|
|
752 |
|
|
803 |
|
30+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
469 |
|
$ |
145 |
|
$ |
51 |
|
$ |
8 |
|
$ |
2 |
|
$ |
2 |
|
$ |
5,692 |
|
$ |
6,369 |
|
|
|
October 30, 2022 |
|
||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Prior |
|
Revolving |
|
Total |
|
||||||||
Wholesale receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
387 |
|
$ |
64 |
|
$ |
27 |
|
$ |
4 |
|
|
|
|
$ |
2 |
|
$ |
2,371 |
|
$ |
2,855 |
|
30+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Construction and forestry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
7 |
|
|
29 |
|
|
2 |
|
|
1 |
|
|
|
|
|
1 |
|
|
377 |
|
|
417 |
|
30+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
394 |
|
$ |
93 |
|
$ |
29 |
|
$ |
6 |
|
|
|
|
$ |
3 |
|
$ |
2,748 |
|
$ |
3,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2022 |
|
||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Prior |
|
Revolving |
|
Total |
|
||||||||
Wholesale receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture and turf |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
289 |
|
$ |
99 |
|
$ |
34 |
|
$ |
6 |
|
$ |
1 |
|
$ |
1 |
|
$ |
2,022 |
|
$ |
2,452 |
|
30+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Construction and forestry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
11 |
|
|
32 |
|
|
3 |
|
|
1 |
|
|
|
|
|
1 |
|
|
283 |
|
|
331 |
|
30+ days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
Non-performing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
300 |
|
$ |
131 |
|
$ |
37 |
|
$ |
8 |
|
$ |
1 |
|
$ |
3 |
|
$ |
2,305 |
|
$ |
2,785 |
|
16
An analysis of the allowance for credit losses and investment in financing receivables in millions of dollars during the periods follows:
|
|
Retail Notes |
|
Revolving |
|
|
|
|
|
|
|
||
|
|
& Financing |
|
Charge |
|
Wholesale |
|
|
|
|
|||
|
|
Leases |
|
Accounts |
|
Receivables |
|
Total |
|
||||
Three Months Ended July 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period balance |
|
$ |
157 |
|
$ |
19 |
|
$ |
4 |
|
$ |
180 |
|
Provision |
|
|
14 |
|
|
11 |
|
|
|
|
|
25 |
|
Write-offs |
|
|
(23) |
|
|
(18) |
|
|
|
|
|
(41) |
|
Recoveries |
|
|
5 |
|
|
6 |
|
|
|
|
|
11 |
|
Translation adjustments |
|
|
1 |
|
|
|
|
|
|
|
|
1 |
|
End of period balance |
|
$ |
154 |
|
$ |
18 |
|
$ |
4 |
|
$ |
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 30, 2023 |
|
|
|
||||||||||
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period balance |
|
$ |
299 |
|
$ |
22 |
|
$ |
4 |
|
$ |
325 |
|
Provision |
|
|
59 |
|
|
15 |
|
|
1 |
|
|
75 |
|
Provision transferred to held for sale |
|
|
(142) |
|
|
|
|
|
|
|
|
(142) |
|
Provision (credit) subtotal |
|
|
(83) |
|
|
15 |
|
|
1 |
|
|
(67) |
|
Write-offs |
|
|
(60) |
|
|
(36) |
|
|
|
|
|
(96) |
|
Recoveries |
|
|
15 |
|
|
17 |
|
|
|
|
|
32 |
|
Translation adjustments |
|
|
(17) |
|
|
|
|
|
(1) |
|
|
(18) |
|
End of period balance |
|
$ |
154 |
|
$ |
18 |
|
$ |
4 |
|
$ |
176 |
|
Financing receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period balance |
|
$ |
37,566 |
|
$ |
4,544 |
|
$ |
6,369 |
|
$ |
48,479 |
|
|
|
Retail Notes |
|
Revolving |
|
|
|
|
|
|
|
||
|
|
& Financing |
|
Charge |
|
Wholesale |
|
|
|
|
|||
|
|
Leases |
|
Accounts |
|
Receivables |
|
Total |
|
||||
Three Months Ended July 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period balance |
|
$ |
168 |
|
$ |
17 |
|
$ |
5 |
|
$ |
190 |
|
Provision (credit) |
|
|
14 |
|
|
3 |
|
|
(1) |
|
|
16 |
|
Write-offs |
|
|
(12) |
|
|
(10) |
|
|
|
|
|
(22) |
|
Recoveries |
|
|
8 |
|
|
7 |
|
|
|
|
|
15 |
|
Translation adjustments |
|
|
3 |
|
|
|
|
|
|
|
|
3 |
|
End of period balance |
|
$ |
181 |
|
$ |
17 |
|
$ |
4 |
|
$ |
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2022 |
|
|
|
||||||||||
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period balance |
|
$ |
138 |
|
$ |
21 |
|
$ |
7 |
|
$ |
166 |
|
Provision (credit) |
|
|
66 |
|
|
(4) |
|
|
(3) |
|
|
59 |
|
Write-offs |
|
|
(47) |
|
|
(22) |
|
|
|
|
|
(69) |
|
Recoveries |
|
|
17 |
|
|
22 |
|
|
|
|
|
39 |
|
Translation adjustments |
|
|
7 |
|
|
|
|
|
|
|
|
7 |
|
End of period balance |
|
$ |
181 |
|
$ |
17 |
|
$ |
4 |
|
$ |
202 |
|
Financing receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period balance |
|
$ |
33,515 |
|
$ |
4,099 |
|
$ |
2,785 |
|
$ |
40,399 |
|
In the first quarter of 2023, the Company 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 in the first quarter of 2023. These operations were sold in the second quarter of 2023 (see Note 20).
17
The allowance for credit losses decreased slightly in the third quarter of 2023 as strong fundamentals within the agriculture market continued to benefit the portfolio. Excluding the portfolio in Russia, the allowance for the first nine months of 2023 increased slightly as higher portfolio balances and higher expected losses on turf and construction customer accounts offset the favorable benefits in the agricultural customer accounts. The Company continues to monitor the economy as part of the allowance setting process, including potential impacts of inflation and interest rates, among other factors, and qualitative adjustments to the allowance are incorporated as necessary.
(9) Securitization of Financing Receivables
As a part of its overall funding strategy, the Company periodically transfers certain financing receivables (retail notes) into VIEs that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes does not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.
The components of consolidated restricted assets, secured borrowings, and other liabilities related to secured borrowings in securitization transactions were as follows in millions of dollars:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Financing receivables securitized (retail notes) |
|
$ |
7,019 |
|
$ |
5,952 |
|
$ |
5,156 |
|
Allowance for credit losses |
|
|
(18) |
|
|
(16) |
|
|
(15) |
|
Other assets (primarily restricted cash) |
|
|
153 |
|
|
155 |
|
|
136 |
|
Total restricted securitized assets |
|
$ |
7,154 |
|
$ |
6,091 |
|
$ |
5,277 |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term securitization borrowings |
|
$ |
6,608 |
|
$ |
5,711 |
|
$ |
4,920 |
|
Accrued interest on borrowings |
|
|
15 |
|
|
6 |
|
|
4 |
|
Total liabilities related to restricted securitized assets |
|
$ |
6,623 |
|
$ |
5,717 |
|
$ |
4,924 |
|
(10) Inventories
A majority of inventory owned by Deere & Company and its U.S. equipment subsidiaries are valued at cost on the “last-in, first-out” (LIFO) basis. If all of the Company’s inventories had been valued on a “first-in, first-out” (FIFO) basis, estimated inventories by major classification in millions of dollars would have been as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Raw materials and supplies |
|
$ |
4,492 |
|
$ |
4,442 |
|
$ |
4,508 |
|
Work-in-process |
|
|
1,307 |
|
|
1,190 |
|
|
1,621 |
|
Finished goods and parts |
|
|
6,164 |
|
|
5,363 |
|
|
5,434 |
|
Total FIFO value |
|
|
11,963 |
|
|
10,995 |
|
|
11,563 |
|
Less adjustment to LIFO value |
|
|
2,613 |
|
|
2,500 |
|
|
2,442 |
|
Inventories |
|
$ |
9,350 |
|
$ |
8,495 |
|
$ |
9,121 |
|
18
(11) Goodwill and Other Intangible Assets
The changes in amounts of goodwill by operating segments were as follows in millions of dollars:
|
|
Production & |
|
Small Ag |
|
Construction |
|
|
|
|
|||
|
|
Precision Ag |
|
& Turf |
|
& Forestry |
|
Total |
|
||||
Goodwill at October 31, 2021 |
|
$ |
542 |
|
$ |
265 |
|
$ |
2,484 |
|
$ |
3,291 |
|
Acquisitions |
|
|
132 |
|
|
69 |
|
|
597 |
|
|
798 |
|
Translation adjustments |
|
|
(23) |
|
|
(11) |
|
|
(301) |
|
|
(335) |
|
Goodwill at July 31, 2022 |
|
$ |
651 |
|
$ |
323 |
|
$ |
2,780 |
|
$ |
3,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill at October 30, 2022 |
|
$ |
646 |
|
$ |
318 |
|
$ |
2,723 |
|
$ |
3,687 |
|
Acquisitions |
|
|
41 |
|
|
39 |
|
|
|
|
|
80 |
|
Translation adjustments |
|
|
23 |
|
|
8 |
|
|
196 |
|
|
227 |
|
Goodwill at July 30, 2023 |
|
$ |
710 |
|
$ |
365 |
|
$ |
2,919 |
|
$ |
3,994 |
|
There were no accumulated goodwill impairment losses in the reported periods.
The components of other intangible assets were as follows in millions of dollars:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
Customer lists and relationships |
|
$ |
524 |
|
$ |
493 |
|
$ |
507 |
|
Technology, patents, trademarks, and other |
|
|
1,415 |
|
|
1,301 |
|
|
1,320 |
|
Total at cost |
|
|
1,939 |
|
|
1,794 |
|
|
1,827 |
|
Less accumulated amortization: |
|
|
|
|
|
|
|
|
|
|
Customer lists and relationships |
|
|
201 |
|
|
166 |
|
|
162 |
|
Technology, patents, trademarks, and other |
|
|
539 |
|
|
410 |
|
|
384 |
|
Total accumulated amortization |
|
|
740 |
|
|
576 |
|
|
546 |
|
Other intangible assets – net |
|
$ |
1,199 |
|
$ |
1,218 |
|
$ |
1,281 |
|
The amortization of other intangible assets in the third quarter and the first nine months of 2023 was $42 million and $126 million, and for the third quarter and the first nine months of 2022 was $42 million and $104 million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of 2023 – $57, 2024 – $179, 2025 – $147, 2026 – $122, 2027 – $120, and 2028 – $88.
(12) Short-Term Borrowings
Short-term borrowings were as follows in millions of dollars:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Commercial paper |
|
$ |
9,003 |
|
$ |
4,703 |
|
$ |
6,035 |
|
Notes payable to banks |
|
|
352 |
|
|
402 |
|
|
427 |
|
Finance lease obligations due within one year |
|
|
23 |
|
|
21 |
|
|
21 |
|
Long-term borrowings due within one year |
|
|
7,765 |
|
|
7,466 |
|
|
7,693 |
|
Short-term borrowings |
|
$ |
17,143 |
|
$ |
12,592 |
|
$ |
14,176 |
|
19
(13) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses were as follows in millions of dollars:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Accounts payable: |
|
|
|
|
|
|
|
|
|
|
Trade payables |
|
$ |
3,308 |
|
$ |
3,894 |
|
$ |
3,577 |
|
Payables to unconsolidated affiliates |
|
|
4 |
|
|
11 |
|
|
5 |
|
Dividends payable |
|
|
365 |
|
|
343 |
|
|
347 |
|
Operating lease liabilities |
|
|
308 |
|
|
302 |
|
|
251 |
|
Deposits withheld from dealers and merchants |
|
|
158 |
|
|
163 |
|
|
154 |
|
Other |
|
|
173 |
|
|
214 |
|
|
162 |
|
Accrued expenses: |
|
|
|
|
|
|
|
|
|
|
Dealer sales discounts |
|
|
902 |
|
|
1,044 |
|
|
586 |
|
Product warranties |
|
|
1,619 |
|
|
1,427 |
|
|
1,398 |
|
Employee benefits |
|
|
1,808 |
|
|
1,528 |
|
|
1,280 |
|
Accrued taxes |
|
|
1,595 |
|
|
1,255 |
|
|
1,171 |
|
Unearned operating lease revenue |
|
|
428 |
|
|
399 |
|
|
378 |
|
Unearned revenue (contractual liability) |
|
|
754 |
|
|
557 |
|
|
586 |
|
Extended warranty premium |
|
|
999 |
|
|
866 |
|
|
839 |
|
Accrued interest |
|
|
402 |
|
|
288 |
|
|
260 |
|
Derivative liabilities |
|
|
948 |
|
|
1,231 |
|
|
667 |
|
Other |
|
|
1,569 |
|
|
1,300 |
|
|
1,325 |
|
Total accounts payable and accrued expenses |
|
$ |
15,340 |
|
$ |
14,822 |
|
$ |
12,986 |
|
Amounts are presented net of eliminations, which primarily consist of dealer sales incentives with a right of set-off against trade receivables of $2,240 million at July 30, 2023, $1,280 million at October 30, 2022, and $1,370 million at July 31, 2022. Other eliminations were made for accrued taxes and other accrued expenses.
(14) Long-Term Borrowings
Long-term borrowings were as follows in millions of dollars:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Underwritten term debt |
|
|
|
|
|
|
|
|
|
|
U.S. dollar notes and debentures: |
|
|
|
|
|
|
|
|
|
|
2.75% notes due 2025 |
|
$ |
700 |
|
$ |
700 |
|
$ |
700 |
|
6.55% debentures due 2028 |
|
|
200 |
|
|
200 |
|
|
200 |
|
5.375% notes due 2029 |
|
|
500 |
|
|
500 |
|
|
500 |
|
3.10% notes due 2030 |
|
|
700 |
|
|
700 |
|
|
700 |
|
8.10% debentures due 2030 |
|
|
250 |
|
|
250 |
|
|
250 |
|
7.125% notes due 2031 |
|
|
300 |
|
|
300 |
|
|
300 |
|
3.90% notes due 2042 |
|
|
1,250 |
|
|
1,250 |
|
|
1,250 |
|
2.875% notes due 2049 |
|
|
500 |
|
|
500 |
|
|
500 |
|
3.75% notes due 2050 |
|
|
850 |
|
|
850 |
|
|
850 |
|
Euro notes: |
|
|
|
|
|
|
|
|
|
|
.5% notes due 2023 (€500 principal) |
|
|
|
|
|
|
|
|
510 |
|
1.375% notes due 2024 (€800 principal) |
|
|
|
|
|
797 |
|
|
816 |
|
1.85% notes due 2028 (€600 principal) |
|
|
659 |
|
|
598 |
|
|
612 |
|
2.20% notes due 2032 (€600 principal) |
|
|
659 |
|
|
598 |
|
|
612 |
|
1.65% notes due 2039 (€650 principal) |
|
|
713 |
|
|
648 |
|
|
663 |
|
Serial issuances |
|
|
|
|
|
|
|
|
|
|
Medium-term notes: (principal as of: July 30, 2023 - $30,348, October 30, 2022 - $25,629, July 31, 2022 - $22,983) |
|
|
29,355 |
|
|
24,604 |
|
|
22,593 |
|
Other notes and finance lease obligations |
|
|
1,605 |
|
|
1,223 |
|
|
1,191 |
|
Less debt issuance costs and debt discounts |
|
|
(129) |
|
|
(122) |
|
|
(115) |
|
Long-term borrowings |
|
$ |
38,112 |
|
$ |
33,596 |
|
$ |
32,132 |
|
Medium-term notes serially due through 2032 are primarily offered by prospectus and issued at fixed and variable rates. These notes are presented in the table above with fair value adjustments related to interest rate swaps. All outstanding notes and debentures are senior unsecured borrowings and rank equally with each other.
20
(15) Leases - Lessor
The Company leases equipment manufactured or sold by the Company and a limited amount of non-John Deere equipment to retail customers through sales-type, direct financing, and operating leases. Sales-type and direct financing leases are reported in Financing receivables – net on the consolidated balance sheets, while operating leases are reported in Equipment on operating leases – net.
Lease revenues earned by the Company were as follows in millions of dollars:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
July 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Sales-type and direct finance lease revenues |
|
$ |
41 |
|
$ |
39 |
|
$ |
120 |
|
$ |
113 |
|
Operating lease revenues |
|
|
332 |
|
|
326 |
|
|
974 |
|
|
991 |
|
Variable lease revenues |
|
|
|
|
|
6 |
|
|
11 |
|
|
20 |
|
Total lease revenues |
|
$ |
373 |
|
$ |
371 |
|
$ |
1,105 |
|
$ |
1,124 |
|
(16) Commitments and Contingencies
The Company determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is determined by a review of five-year claims costs and current quality developments.
The premiums for extended warranties are recognized in other income in the statements of consolidated income in proportion to the costs expected to be incurred over the contract period. The unamortized extended warranty premiums (deferred revenue) included in the following table totaled $999 million and $839 million at July 30, 2023 and July 31, 2022, respectively.
A reconciliation of the changes in the warranty liability and unearned premiums was as follows in millions of dollars:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
July 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Beginning of period balance |
|
$ |
2,511 |
|
$ |
2,095 |
|
$ |
2,293 |
|
$ |
2,086 |
|
Payments |
|
|
(314) |
|
|
(240) |
|
|
(851) |
|
|
(657) |
|
Amortization of premiums received |
|
|
(75) |
|
|
(70) |
|
|
(221) |
|
|
(200) |
|
Accruals for warranties |
|
|
363 |
|
|
358 |
|
|
1,010 |
|
|
762 |
|
Premiums received |
|
|
123 |
|
|
103 |
|
|
338 |
|
|
277 |
|
Foreign exchange |
|
|
10 |
|
|
(10) |
|
|
49 |
|
|
(32) |
|
End of period balance |
|
$ |
2,618 |
|
$ |
2,236 |
|
$ |
2,618 |
|
$ |
2,236 |
|
At July 30, 2023, the Company had $201 million of guarantees issued to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment. The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At July 30, 2023, the accrued losses under these agreements were not material.
At July 30, 2023, the Company had commitments of $649 million for the construction and acquisition of property and equipment. Also, at July 30, 2023, the Company had restricted assets of $270 million, classified as Other assets.
The Company also had other miscellaneous contingent liabilities and guarantees totaling approximately $115 million at July 30, 2023. The accrued liability for these contingencies was not material at July 30, 2023.
The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, trademark, and antitrust matters. The Company believes the reasonably possible range of losses for these unresolved legal actions would not have a material effect on its consolidated financial statements.
21
(17) Fair Value Measurements
The fair values of financial instruments that do not approximate the carrying values were as follows in millions of dollars. Long-term borrowings exclude finance lease liabilities.
|
|
July 30, 2023 |
|
October 30, 2022 |
|
July 31, 2022 |
|
||||||||||||
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
||||||
Financing receivables – net |
|
$ |
41,302 |
|
$ |
40,675 |
|
$ |
36,634 |
|
$ |
35,526 |
|
$ |
35,056 |
|
$ |
34,158 |
|
Financing receivables securitized – net |
|
|
7,001 |
|
|
6,818 |
|
|
5,936 |
|
|
5,698 |
|
|
5,141 |
|
|
4,990 |
|
Short-term securitization borrowings |
|
|
6,608 |
|
|
6,538 |
|
|
5,711 |
|
|
5,577 |
|
|
4,920 |
|
|
4,862 |
|
Long-term borrowings due within one year |
|
|
7,765 |
|
|
7,568 |
|
|
7,466 |
|
|
7,322 |
|
|
7,693 |
|
|
7,608 |
|
Long-term borrowings |
|
|
38,064 |
|
|
37,121 |
|
|
33,566 |
|
|
31,852 |
|
|
32,101 |
|
|
31,741 |
|
Fair value measurements above were Level 3 for all financing receivables and Level 2 for all borrowings.
Fair values of the financing receivables that were issued long-term were based on the discounted values of their related cash flows at interest rates currently being offered by the Company for similar financing receivables. The fair values of the remaining financing receivables approximated the carrying amounts.
Fair values of long-term borrowings and short-term securitization borrowings were based on current market quotes for identical or similar borrowings and credit risk, or on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings have been swapped to current variable interest rates. The carrying values of these long-term borrowings included adjustments related to fair value hedges.
Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow. The Company’s cash equivalents, which consisted of money market funds and time deposits, are excluded as these assets were carried at cost that approximates fair value.
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Level 1: |
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
International equity securities |
|
$ |
3 |
|
$ |
3 |
|
$ |
2 |
|
U.S. equity fund |
|
|
101 |
|
|
70 |
|
|
75 |
|
U.S. fixed income fund |
|
|
85 |
|
|
|
|
|
|
|
U.S. government debt securities |
|
|
63 |
|
|
62 |
|
|
63 |
|
Total Level 1 marketable securities |
|
|
252 |
|
|
135 |
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
Level 2: |
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
|
|
|
|
|
|
|
|
|
U.S. government debt securities |
|
|
134 |
|
|
121 |
|
|
134 |
|
Municipal debt securities |
|
|
69 |
|
|
63 |
|
|
70 |
|
Corporate debt securities |
|
|
221 |
|
|
200 |
|
|
213 |
|
International debt securities |
|
|
2 |
|
|
60 |
|
|
1 |
|
Mortgage-backed securities |
|
|
163 |
|
|
155 |
|
|
161 |
|
Total Level 2 marketable securities |
|
|
589 |
|
|
599 |
|
|
579 |
|
Other assets - Derivatives |
|
|
324 |
|
|
373 |
|
|
280 |
|
Accounts payable and accrued expenses - Derivatives |
|
|
948 |
|
|
1,231 |
|
|
667 |
|
|
|
|
|
|
|
|
|
|
|
|
Level 3: |
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses - Deferred consideration |
|
|
202 |
|
|
236 |
|
|
252 |
|
22
The contractual maturities of debt securities at July 30, 2023 in millions of dollars are shown below. Actual maturities may differ from contractual maturities because some securities may be called or prepaid. Unrealized losses were not recognized in income due to the ability and intent to hold to maturity. Because of the potential for prepayment on mortgage-backed securities, they are not categorized by contractual maturity.
|
|
|
|
|
|
|
|
|
|
Amortized |
|
Fair |
|
||
|
|
Cost |
|
Value |
|
||
Due in one year or less |
|
$ |
25 |
|
$ |
24 |
|
Due after one through five years |
|
|
130 |
|
|
121 |
|
Due after five through 10 years |
|
|
193 |
|
|
170 |
|
Due after 10 years |
|
|
211 |
|
|
174 |
|
Mortgage-backed securities |
|
|
194 |
|
|
163 |
|
Debt securities |
|
$ |
753 |
|
$ |
652 |
|
Fair value, nonrecurring Level 3 measurements from impairments, excluding financing receivables with specific allowances which were not significant, were as follows in millions of dollars. Inventories and property and equipment – net fair values for October 30, 2022 represent the fair value assessment at July 31, 2022.
|
|
Fair Value |
|
Losses |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
July 30 |
|
October 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
|||||||
|
|
2023 |
|
2022 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|||||||
Inventories |
|
|
|
|
$ |
19 |
|
$ |
13 |
|
|
|
|
$ |
4 |
|
|
|
|
$ |
12 |
|
Property and equipment – net |
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
Other intangible assets – net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 |
|
The following is a description of the valuation methodologies the Company uses to measure certain financial instruments on the balance sheet at fair value:
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 closing prices in the active market in which the investment trades.
Derivatives – The Company’s 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.
Financing receivables – Specific reserve impairments are based on the fair value of the collateral, which is measured using a market approach (appraisal values or realizable values).
Inventories – The impairment was based on net realizable value.
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.
Other intangible assets - net – The Company considered external valuations based on the Company’s probability weighted cash flow analysis.
23
(18) Derivative Instruments
The fair value of the Company’s derivative instruments and the associated notional amounts were as follows in millions of dollars. Assets are recorded in “Other assets” on the consolidated balance sheets, while liabilities are recorded in “Accounts payable and accrued expenses.”
|
|
July 30, 2023 |
|
October 30, 2022 |
|
July 31, 2022 |
|
|||||||||||||||||||||
|
|
|
|
Fair Value |
|
|
|
Fair Value |
|
|
|
Fair Value |
|
|||||||||||||||
|
|
Notional |
|
Assets |
|
Liabilities |
|
Notional |
|
Assets |
|
Liabilities |
|
Notional |
|
Assets |
|
Liabilities |
|
|||||||||
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
1,500 |
|
$ |
48 |
|
$ |
3 |
|
$ |
1,950 |
|
$ |
87 |
|
|
|
|
$ |
2,350 |
|
$ |
59 |
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
12,160 |
|
|
4 |
|
|
729 |
|
|
10,112 |
|
|
|
|
$ |
1,004 |
|
|
8,303 |
|
|
23 |
|
|
433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
13,233 |
|
|
221 |
|
|
109 |
|
|
10,568 |
|
|
212 |
|
|
107 |
|
|
9,880 |
|
|
163 |
|
|
79 |
|
Foreign exchange contracts |
|
|
8,630 |
|
|
51 |
|
|
82 |
|
|
8,185 |
|
|
66 |
|
|
118 |
|
|
7,457 |
|
|
30 |
|
|
149 |
|
Cross-currency interest rate contracts |
|
|
155 |
|
|
|
|
|
25 |
|
|
260 |
|
|
8 |
|
|
2 |
|
|
276 |
|
|
5 |
|
|
5 |
|
The amounts recorded in the consolidated balance sheet related to borrowings designated in fair value hedging relationships were as follows in millions of dollars. Fair value hedging adjustments are included in the carrying amount of the hedged item.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Hedging Relationships |
|
Discontinued Hedging Relationships |
|
||||||||
|
|
Carrying Amount |
|
Cumulative Fair Value |
|
Carrying Amount of |
|
Cumulative Fair Value |
|
||||
|
|
of Hedged Item |
|
Hedging Amount |
|
Formerly Hedged Item |
|
Hedging Amount |
|
||||
July 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
|
|
$ |
2,324 |
|
$ |
25 |
|
Long-term borrowings |
|
$ |
11,379 |
|
$ |
(728) |
|
|
6,319 |
|
|
(265) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
|
|
$ |
2,515 |
|
$ |
15 |
|
Long-term borrowings |
|
$ |
9,060 |
|
$ |
(1,006) |
|
|
5,520 |
|
|
(19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
|
|
|
|
|
$ |
2,605 |
|
$ |
5 |
|
Long-term borrowings |
|
$ |
7,835 |
|
$ |
(430) |
|
|
5,728 |
|
|
39 |
|
24
The classification and gains (losses) including accrued interest expense related to derivative instruments on the statements of consolidated income consisted of the following in millions of dollars:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
July 30 |
|
July 31 |
|
July 30 |
|
July 31 |
|
||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Fair Value Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts - Interest expense |
|
$ |
(375) |
|
$ |
149 |
|
$ |
(146) |
|
$ |
(507) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts - OCI (pretax) |
|
$ |
24 |
|
$ |
1 |
|
$ |
19 |
|
$ |
52 |
|
Reclassified from OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts - Interest expense |
|
|
18 |
|
|
3 |
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Designated as Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts - Net sales |
|
$ |
6 |
|
|
|
|
|
|
|
$ |
44 |
|
Interest rate contracts - Interest expense * |
|
|
48 |
|
$ |
(18) |
|
$ |
45 |
|
|
41 |
|
Foreign exchange contracts - Net sales |
|
|
3 |
|
|
(1) |
|
|
2 |
|
|
(2) |
|
Foreign exchange contracts - Cost of sales |
|
|
(78) |
|
|
(29) |
|
|
(14) |
|
|
(109) |
|
Foreign exchange contracts - Other operating expenses * |
|
|
(142) |
|
|
(20) |
|
|
(157) |
|
|
153 |
|
Total not designated |
|
$ |
(163) |
|
$ |
(68) |
|
$ |
(124) |
|
$ |
127 |
|
* Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts.
Certain of the Company’s derivative agreements contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at July 30, 2023, October 30, 2022, and July 31, 2022, was $865 million, $1,113 million, and $518 million, respectively. In accordance with the limits established in these agreements, the Company posted $435 million, $701 million, and $238 million of cash collateral at July 30, 2023, October 30, 2022, and July 31, 2022, respectively.
Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities related to netting arrangements and any collateral received or paid in millions of dollars follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
Netting |
|
|
|
|
|
|
|||
July 30, 2023 |
|
Recognized |
|
Arrangements |
|
Collateral |
|
Net Amount |
|
||||
Assets |
|
$ |
324 |
|
$ |
(160) |
|
$ |
(28) |
|
$ |
136 |
|
Liabilities |
|
|
948 |
|
|
(160) |
|
|
(435) |
|
|
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
Netting |
|
|
|
|
|
|
|||
October 30, 2022 |
|
Recognized |
|
Arrangements |
|
Collateral |
|
Net Amount |
|
||||
Assets |
|
$ |
373 |
|
$ |
(179) |
|
$ |
(54) |
|
$ |
140 |
|
Liabilities |
|
|
1,231 |
|
|
(179) |
|
|
(701) |
|
|
351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
Netting |
|
|
|
|
|
|
|||
July 31, 2022 |
|
Recognized |
|
Arrangements |
|
Collateral |
|
Net Amount |
|
||||
Assets |
|
$ |
280 |
|
$ |
(125) |
|
$ |
(40) |
|
$ |
115 |
|
Liabilities |
|
|
667 |
|
|
(125) |
|
|
(238) |
|
|
304 |
|
(19) Stock Option and Restricted Stock Unit Awards
In December 2022, the Company granted stock options to employees for the purchase of 161 thousand shares of common stock at an exercise price of $438.44 per share and a binomial lattice model fair value of $136.46 per share at the grant date. At July 30, 2023, options for 1.8 million shares were outstanding with a weighted-average exercise price of $187.53 per share. The Company also granted 125 thousand of service-based restricted stock units and 41 thousand of performance/service-based restricted stock units to employees in the first nine months of 2023. The weighted-average fair value of the service-based restricted stock units at the grant date was $428.49 per unit based on the market price of a share of underlying common stock. The fair value of the performance/service-based restricted stock units at the grant date was $424.93 per unit based on the market price of a share of underlying common stock excluding dividends. At July 30, 2023, the Company was authorized to grant awards for an additional 16.6 million shares under the equity incentive plans.
25
(20) Disposition
On March 7, 2023, the Company sold its 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 million. The operations were included in the Company’s financial services operating segment through the date of sale. At the disposal date, the total assets were $31 million, consisting primarily of financing receivables, the total liabilities were $5 million, and the cumulative translation loss was $10 million. The Company did not incur additional gains or losses upon disposition. At January 29, 2023, the assets and liabilities were classified as “Other assets” and “Accounts payable and accrued expenses”, respectively, which included $100 million of restricted cash. In the first quarter of 2023, the Company reversed the allowance for credit losses and recorded a valuation allowance on the assets held for sale in “Selling, administrative and general expenses.”
(21) Special Items
2023
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 the Company to record a $243 million reduction in the provision for income taxes and $47 million of interest income.
Financial Services Financing Incentives Correction
In the second quarter of 2023, the Company 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 million pretax ($135 million after-tax), was recorded in the second quarter of 2023. Prior period results for Deere & Company were not restated, as the adjustment is considered immaterial to the Company’s financial statements.
2022
Impact of Events in Russia / Ukraine
In the second quarter of 2022, the Company suspended shipments of machines and service parts to Russia. The suspension of shipments to Russia reduced actual and forecasted revenue for the region, which made it probable future cash flows will not cover the carrying value of certain assets. The accounting consequences in 2022 were impairments of most long-lived assets, an increase in reserves of certain financial assets, and an accrual for various contractual uncertainties. In addition, the Company initiated a voluntary separation program for employees in Russia in the third quarter of 2022.
Gain on Previously Held Equity Investment
In the second quarter of 2022, the Company acquired full ownership of three former Deere-Hitachi joint venture factories and began new license and supply agreements with Hitachi Construction Machinery Co., Ltd. The fair value of the previous equity investment resulted in a non-cash gain of $326 million (pretax and after-tax).
UAW Collective Bargaining Agreement
In the first quarter of 2022, employees represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) approved a new collective bargaining agreement. 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.
26
The following table summarizes the operating profit impact, in millions of dollars, of the special items recorded for the three months and nine months ended July 30, 2023 and July 31, 2022:
|
|
Three Months |
|
Nine Months |
|
||||||||||||||||||||||||||
|
|
PPA |
|
SAT |
|
CF |
|
FS |
|
Total |
|
PPA |
|
SAT |
|
CF |
|
FS |
|
Total |
|
||||||||||
2023 Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing incentive – SA&G expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
173 |
|
$ |
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 Expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on remeasurement of equity investment – Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(326) |
|
|
|
|
|
(326) |
|
Total Russia/Ukraine events expense (benefit) |
|
$ |
(1) |
|
|
|
|
$ |
1 |
|
$ |
7 |
|
$ |
7 |
|
$ |
45 |
|
$ |
1 |
|
|
48 |
|
|
33 |
|
|
127 |
|
UAW ratification bonus – Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53 |
|
|
9 |
|
|
28 |
|
|
|
|
|
90 |
|
Total 2022 expense (benefit) |
|
|
(1) |
|
|
|
|
|
1 |
|
|
7 |
|
|
7 |
|
|
98 |
|
|
10 |
|
|
(250) |
|
|
33 |
|
|
(109) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period over period change |
|
$ |
1 |
|
|
|
|
$ |
(1) |
|
$ |
(7) |
|
$ |
(7) |
|
$ |
(98) |
|
$ |
(10) |
|
$ |
250 |
|
$ |
140 |
|
$ |
282 |
|
(22) Subsequent Event
On August 30, 2023, the Company’s Board of Directors declared a quarterly dividend of $1.35 per share payable on November 8, 2023, to stockholders of record on September 29, 2023.
27
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
Organization
The Company generates net sales from the sale of equipment to John Deere dealers and distributors. The Company manufactures and distributes a full line of agricultural equipment; a variety of commercial and consumer equipment; and a broad range of equipment for construction, roadbuilding, and forestry. These operations (collectively known as the “equipment operations”) are managed through the production and precision agriculture, small agriculture and turf, and construction and forestry operating segments. The Company’s financial services segment provides credit services, which finance sales and leases of equipment by John Deere dealers. 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.
Smart Industrial Operating Model and Leap Ambitions
The Company’s Smart Industrial operating model is focused on making significant investments, strengthening the Company’s capabilities in digitalization, automation, autonomy, and alternative propulsion technologies. These technologies are intended to increase worksite efficiency, improve yields, lower input costs, and ease labor constraints. The Company’s Leap Ambitions are goals designed to boost economic value and sustainability for the Company’s customers. The Company anticipates opportunities in this area, as the Company and its customers have a vested interest in sustainable practices.
Trends and Economic Conditions
Industry Trends for Fiscal Year 2023 – Industry sales of large agricultural machinery in the U.S. and Canada for 2023 are forecasted to increase approximately 10 percent compared to 2022. Industry sales of small agricultural and turf equipment in the U.S. and Canada are expected to be down 5 to 10 percent in 2023. Industry sales of agricultural machinery in Europe are forecasted to be flat to up 5 percent, while South American industry sales of tractors and combines are expected to be flat to down 5 percent in 2023. Asia industry sales of agricultural machinery are forecasted to be down moderately in 2023 as volumes in India remain subdued. On an industry basis, U.S. and Canada construction, U.S. and Canada compact construction, and global roadbuilding equipment sales are expected to be flat to up 5 percent in 2023. Global forestry industry sales are expected to be flat to down 5 percent.
Company Trends – Customers’ demand for integration of technology into equipment is a market trend underlying the Company’s Smart Industrial operating model and Leap Ambitions. Customers have sought to improve profitability, productivity, and sustainability through technology. The Company’s approach to technology involves hardware and software; guidance, connectivity and digital solutions; automation and machine intelligence; machine autonomy; and alternative propulsion technologies. This technology is incorporated into products within each of the Company’s operating segments.
Customers continue to adopt technology integrated in the John Deere portfolio of “smart” machines, systems, and solutions. The Company expects this trend to persist for the foreseeable future.
Demand for the Company’s equipment remains strong, as order books are full throughout 2023. Agricultural fundamentals are expected to remain solid through 2023 with farm net income in the U.S. and Canada expected to be near historical highs. Crop prices remain favorable to our customers in part due to weather conditions putting downward pressure on yields. The Company expects sales volume of large agricultural equipment to be greater in 2023 than 2022 in North America. Sales volume for small agriculture and turf equipment is expected to be lower compared to 2022 due to less demand for consumer-oriented products, partially offset by stronger demand for mid-sized equipment. Construction equipment markets are forecasted to be steady. Strong U.S. infrastructure spending, industrial construction, rental inventory restocking, and housing stabilization are expected to more than offset moderation in office and commercial real estate construction. Roadbuilding demand remains strongest in the U.S. and emerging markets in South America and India, largely offsetting flat fundamentals in Europe. Net income for the Company’s financial services operations is expected to be lower than fiscal year 2022 due to less-favorable financing spreads, a correction of the accounting treatment for financing incentives offered to John Deere dealers recorded in the second quarter of 2023, a higher provision for credit losses, higher selling, administrative and general expenses, and lower gains on operating lease dispositions.
28
These factors are expected to be partially offset by income earned on a higher average portfolio.
Additional Trends – The Company has experienced supply chain improvements over 2022 beginning in the second quarter of 2023. The reduction in supply chain disruptions contributed to higher levels of production compared to 2022. As a result, the production schedules in 2023 are more aligned with the customers’ seasonal use of the Company’s products, marking a return to historical seasonal production patterns. Additionally, supply chain improvements have contributed to meaningful reductions in production costs including premium freight and material costs. Supply chain disruptions impacted many aspects of the business in 2022, including receiving past due deliveries from suppliers, parts availability, increased production costs, and higher inventory levels.
Central bank policy interest rates increased in the first nine months of 2023. Most retail receivables are fixed rate, while wholesale financing receivables are variable rate. The Company has both fixed and variable rate borrowings. The Company manages the risk of interest rate fluctuations by balancing the types and amounts of its funding sources to its financing receivable and equipment on operating lease portfolios. Accordingly, the Company enters into interest rate swap agreements to manage its interest rate exposure. Historically, rising interest rates impact the Company’s borrowings sooner than the benefit is realized from the financing receivable and equipment on operating lease portfolios. As a result, the Company’s financial services operations experienced $133 million (after-tax) of less favorable financing spreads in the first nine months of 2023 compared to 2022. The Company expects spread compression to persist for the remainder of 2023.
Remaining supply chain disruptions and rising interest rates are driven by factors outside of the Company’s control, and as a result, the Company cannot reasonably foresee when these conditions will subside.
Other Items of Concern and Uncertainties – Other items of concern include global and regional political conditions, economic and trade policies, imposition of new or retaliatory tariffs against certain countries or covering certain products, capital market disruptions, changes in demand and pricing for new and used equipment, significant fluctuations in foreign currency exchange rates, and volatility in the prices of many commodities. These items could impact the Company’s results. The Company is making investments in technology and in strengthening its capabilities in digitalization, automation, autonomy, and alternative propulsion technologies. As with most technology investments, marketplace adoption, monetization, and regulation of these features holds an elevated level of uncertainty.
29
2023 Compared with 2022
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
Deere & Company |
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
July 31 |
|
% |
|
||||
(In millions of dollars, except per share amounts) |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
||||
Net sales and revenues |
|
$ |
15,801 |
|
$ |
14,102 |
|
+12 |
|
$ |
45,839 |
|
$ |
37,041 |
|
+24 |
|
Net income attributable to Deere & Company |
|
|
2,978 |
|
|
1,884 |
|
+58 |
|
|
7,797 |
|
|
4,885 |
|
+60 |
|
Diluted earnings per share |
|
|
10.20 |
|
|
6.16 |
|
|
|
|
26.35 |
|
|
15.88 |
|
|
|
Net sales and revenues increased for both the quarter and year-to-date periods primarily due to price realization. See the Business Segment Results for additional details. Net income in each of the periods presented were impacted by special items. See Note 21 for additional details on special items.
An explanation of the cost of sales to net sales ratio and other significant statement of consolidated income changes follows:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
Deere & Company |
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
July 31 |
|
% |
|
||||
(In millions of dollars) |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
||||
Cost of sales to net sales |
|
|
67.4% |
|
|
73.2% |
|
|
|
|
67.7% |
|
|
74.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
$ |
264 |
|
$ |
256 |
|
+3 |
|
$ |
748 |
|
$ |
1,035 |
|
-28 |
|
Research and development expenses |
|
|
528 |
|
|
481 |
|
+10 |
|
|
1,571 |
|
|
1,336 |
|
+18 |
|
Selling, administrative and general expenses |
|
|
1,110 |
|
|
959 |
|
+16 |
|
|
3,392 |
|
|
2,672 |
|
+27 |
|
Other operating expenses |
|
|
310 |
|
|
316 |
|
-2 |
|
|
971 |
|
|
954 |
|
+2 |
|
Provision for income taxes |
|
|
636 |
|
|
654 |
|
-3 |
|
|
2,164 |
|
|
1,364 |
|
+59 |
|
The cost of sales ratio improved in the third quarter and the first nine months of fiscal 2023 due to price realization, partially offset by higher production costs. Other income decreased year-to-date due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture recorded in 2022. Research and development expenses were higher due to continued focus on developing and incorporating technology solutions. Selling, administrative and general expenses increased mostly due to higher employee pay driven by inflationary conditions and profit-sharing incentives. Additionally, the nine-month period was impacted by a cumulative correction of the accounting treatment for financing incentives offered to John Deere dealers and higher commissions paid to dealers. The provision for income taxes was lower in the third quarter of 2023 due to a favorable income tax ruling in Brazil, partially offset by the effect of higher pretax income. The provision for income taxes was higher in the first nine months as a result of higher pretax income and the prior period’s exclusion of the Deere-Hitachi joint-venture remeasurement gain from tax-effected income, which were partially offset by the favorable income tax ruling in Brazil.
Business Segment Results
For the equipment operations, higher production costs were mostly due to elevated cost of purchased components, energy, salaries, and wages.
30
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
Production and Precision Agriculture |
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
July 31 |
|
% |
|
||||
(In millions of dollars) |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
||||
Net sales |
|
$ |
6,806 |
|
$ |
6,096 |
|
+12 |
|
$ |
19,826 |
|
$ |
14,568 |
|
+36 |
|
Operating profit |
|
|
1,782 |
|
|
1,293 |
|
+38 |
|
|
5,160 |
|
|
2,646 |
|
+95 |
|
Operating margin |
|
|
26.2% |
|
|
21.2% |
|
|
|
|
26.0% |
|
|
18.2% |
|
|
|
Price realization |
|
|
|
|
|
|
|
+12 |
|
|
|
|
|
|
|
+17 |
|
Currency translation impact on Net sales |
|
|
|
|
|
|
|
+1 |
|
|
|
|
|
|
|
-1 |
|
Production and precision agriculture sales increased for the quarter as a result of price realization in most end markets. Operating profit rose due to price realization and improved shipment volumes / sales mix. These items were partially offset by higher production costs, increased selling, administrative and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange.
Sales for the first nine months increased as a result of higher shipment volumes (primarily in the U.S., Canada, Europe, and Brazil) and price realization. Operating profit for the first nine months increased primarily from price realization and higher sales volume. Partially offsetting these factors were higher production costs, higher selling, administrative, and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange mostly due to a stronger U.S. dollar.
31
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
Small Agriculture and Turf |
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
July 31 |
|
% |
|
||||
(In millions of dollars) |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
||||
Net sales |
|
$ |
3,739 |
|
$ |
3,635 |
|
+3 |
|
$ |
10,886 |
|
$ |
9,836 |
|
+11 |
|
Operating profit |
|
|
732 |
|
|
552 |
|
+33 |
|
|
2,028 |
|
|
1,443 |
|
+41 |
|
Operating margin |
|
|
19.6% |
|
|
15.2% |
|
|
|
|
18.6% |
|
|
14.7% |
|
|
|
Price realization |
|
|
|
|
|
|
|
+9 |
|
|
|
|
|
|
|
+11 |
|
Currency translation impact on Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-2 |
|
Small agriculture and turf sales increased for the quarter due to price realization in most end markets, partially offset by lower shipment volumes (primarily in the U.S.). Operating profit improved due to price realization, partially offset by higher production costs, lower shipment volumes, and increased selling, administrative and general expenses and research and development expenses.
Sales for the first nine months increased mainly as a result of price realization and higher shipment volumes (primarily in Europe and Mexico), partially offset by the unfavorable impact of currency translation. Operating profit for the first nine months improved primarily as a result of price realization and improved sales volumes / mix. These items were partially offset by higher production costs, higher selling, administrative, and general expenses and research and development expenses, and the unfavorable effects of foreign currency exchange mostly due to a stronger U.S. dollar.
32
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||
Construction and Forestry |
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
July 31 |
|
% |
|
||||
(In millions of dollars) |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
||||
Net sales |
|
$ |
3,739 |
|
$ |
3,269 |
|
+14 |
|
$ |
11,053 |
|
$ |
9,161 |
|
+21 |
|
Operating profit |
|
|
716 |
|
|
514 |
|
+39 |
|
|
2,179 |
|
|
1,599 |
|
+36 |
|
Operating margin |
|
|
19.1% |
|
|
15.7% |
|
|
|
|
19.7% |
|
|
17.5% |
|
|
|
Price realization |
|
|
|
|
|
|
|
+10 |
|
|
|
|
|
|
|
+12 |
|
Currency translation impact on Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-1 |
|
Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes (primarily in the U.S.). Operating profit rose primarily due to price realization and improved sales volumes. These items were partially offset by increased selling, administrative, and general expenses and research and development expenses, higher production costs, and the unfavorable impact of foreign currency exchange.
The segment’s nine-month sales increased due to price realization and higher shipment volumes (primarily in the U.S.) partially offset by the unfavorable impact of currency translation. The first nine-month’s operating profit moved higher due to price realization and higher sales volumes, partially offset by higher production costs. Prior period results benefitted from the non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture.
33
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||
Financial Services |
|
July 30 |
|
July 31 |
|
% |
|
July 30 |
|
|
July 31 |
|
% |
|
||||
(In millions of dollars) |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
|
2022 |
|
Change |
|
||||
Revenue (including intercompany) |
|
$ |
1,445 |
|
$ |
984 |
|
+47 |
|
$ |
3,987 |
|
|
$ |
2,851 |
|
+40 |
|
Interest expense |
|
|
622 |
|
|
223 |
|
+179 |
|
|
1,604 |
|
|
|
493 |
|
+225 |
|
Net income |
|
|
216 |
|
|
209 |
|
+3 |
|
|
429 |
|
|
|
649 |
|
-34 |
|
The average balance of receivables and leases financed was 22 percent higher in the third quarter of 2023, and 18 percent higher in the first nine months of 2023 compared with the same periods last year. Revenue also increased due to higher average financing rates in both periods. Interest expense increased compared to both prior periods as a result of higher average borrowing rates and higher average borrowings. Financial services net income in the third quarter of 2023 increased as a result of income earned on a higher average portfolio, partially offset by less-favorable financing spreads. Net income for the first nine months of 2023 decreased primarily due to a cumulative correction of the accounting treatment for financing incentives offered to John Deere dealers recorded in the second quarter, less-favorable financing spreads, and a higher provision for credit losses. These items were partially offset by income earned on a higher average portfolio. The accounting correction is unrelated to current market conditions or the credit quality of the financial services portfolio, which remains strong. The allowance for credit losses, excluding the portfolio in Russia, was .36 percent of financing receivables as of July 30, 2023, compared with .40 percent as of July 31, 2022.
Critical Accounting Estimates
See the Company’s critical accounting estimates discussed in the Management’s Discussion and Analysis of the most recently filed Annual Report on Form 10-K. There have been no material changes to these policies.
CAPITAL RESOURCES AND LIQUIDITY
Sources of Liquidity, Key Metrics and Balance Sheet Data
The Company has access to most global capital markets at a reasonable cost. Sources of liquidity for the Company include cash and cash equivalents, marketable securities, funds from operations, the issuance of commercial paper and term debt, the securitization of retail notes (both public and private markets), and bank lines of credit. The Company closely monitors its liquidity sources against the cash requirements and expects to have sufficient sources of global funding and liquidity to meet its funding needs in the short term (next 12 months) and long term (beyond 12 months). The Company operates in multiple industries, which have different funding requirements. The production and precision agriculture, small agriculture and turf, and construction and forestry segments are capital intensive and are typically subject to seasonal variations in financing requirements for inventories and certain receivables from dealers. The financial services operations rely on their ability to raise substantial amounts of funds to finance their receivable and lease portfolios.
Key metrics are provided in the following table, in millions of dollars:
|
|
July 30 |
|
October 30 |
|
July 31 |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Cash, cash equivalents, and marketable securities |
|
$ |
7,417 |
|
$ |
5,508 |
|
$ |
5,078 |
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts and notes receivable – net |
|
|
9,297 |
|
|
6,410 |
|
|
6,696 |
|
Ratio to prior 12 month’s net sales |
|
|
17% |
|
|
13% |
|
|
15% |
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
9,350 |
|
|
8,495 |
|
|
9,121 |
|
Ratio to prior 12 month’s cost of sales |
|
|
24% |
|
|
24% |
|
|
28% |
|
|
|
|
|
|
|
|
|
|
|
|
Unused credit lines |
|
|
950 |
|
|
3,284 |
|
|
1,957 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services: |
|
|
|
|
|
|
|
|
|
|
Ratio of interest-bearing debt to stockholder’s equity |
|
|
8.1 to 1 |
|
|
8.5 to 1 |
|
|
8.2 to 1 |
|
The reduction in unused credit lines in 2023 compared to both prior periods relates to an increase in commercial paper outstanding due to growth in financing receivables and funding mix. The Company forecasts higher operating cash flows in 2023 driven by an increase in net income adjusted for non-cash provisions and a favorable change in working capital.
34
There have been no material changes to the contractual and other cash requirements identified in the Company’s most recently issued Annual Report on Form 10-K.
Cash Flows (in millions of dollars)
|
|
Nine Months Ended |
|
||||
|
|
July 30, 2023 |
|
July 31, 2022 |
|
||
Net cash provided by operating activities |
|
$ |
2,896 |
|
$ |
418 |
|
Net cash used for investing activities |
|
|
(4,563) |
|
|
(4,430) |
|
Net cash provided by financing activities |
|
|
3,379 |
|
|
515 |
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
|
125 |
|
|
(143) |
|
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
$ |
1,837 |
|
$ |
(3,640) |
|
Cash inflows from operating activities in the first nine months of 2023 were $2,896 million. This resulted mainly from net income adjusted for non-cash provisions, partially offset by a working capital change and change in accrued income taxes payable. Cash outflows from investing activities were $4,563 million in the first nine months of 2023. The primary drivers were growth in the retail customer receivable portfolio and purchases of property and equipment. Cash inflows from financing activities were $3,379 million in the first nine months of 2023, as higher external borrowings to support working capital requirements and financing receivable growth were offset by repurchases of common stock and dividends paid. Cash, cash equivalents, and restricted cash increased $1,837 million during the first nine months of 2023.
Trade Accounts and Notes Receivable. Trade accounts and notes receivable arise from sales of goods to customers. Trade receivables increased $2,887 million during the first nine months of 2023, primarily due to a seasonal increase and higher sales volumes, as well as the effect of foreign currency translation. These receivables increased $2,601 million, compared to a year ago, primarily due to higher sales volumes. The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 1 percent at each of July 30, 2023, October 30, 2022, and July 31, 2022.
Financing Receivables and Equipment on Operating Leases. Financing receivables and equipment on operating leases consist of retail notes originated in connection with financing of new and used equipment, operating leases, revolving charge accounts, sales-type and direct financing leases, and wholesale notes. Financing receivables and equipment on operating leases increased $5,819 million during the first nine months of 2023 and increased $8,261 million in the past 12 months due to strong retail sales. Total acquisition volumes of financing receivables and equipment on operating leases were 32 percent higher in the first nine months of 2023, compared with the same period last year, as volumes of wholesale notes, retail notes, revolving charge accounts, operating leases, and finance leases were higher compared to July 31, 2022.
Inventories. Inventories increased by $855 million during the first nine months of 2023 and increased by $229 million compared to a year ago. The increases were due to higher forecasted sales volumes. The effect of foreign currency translation also increased inventories during the first nine months of 2023. A majority of these inventories are valued on the last-in, first out (LIFO) method.
Property and Equipment. Property and equipment cash expenditures in the first nine months of 2023 were $887 million, compared with $596 million in the same period last year. Capital expenditures in 2023 are estimated to be approximately $1,650 million.
Accounts Payable and Accrued Expenses. Accounts payable and accrued expenses increased by $518 million in the first nine months of 2023. Accounts payable and accrued expenses increased $2,354 million compared to a year ago due to an increase in accrued expenses associated with employee benefits, accrued taxes, dealer sales discounts, and derivative liabilities.
Borrowings. Total external borrowings have changed generally corresponding with the level of the receivable and the lease portfolio, as well as other working capital requirements.
John Deere Capital Corporation (Capital Corporation), a U.S. financial services subsidiary, has a revolving warehouse facility to utilize bank conduit facilities to securitize retail notes (see Note 9). The facility was renewed in November 2022 with an expiration in November 2023 and increased the total capacity or “financing limit” from $1,000 million to $1,500 million. At July 30, 2023, $1,415 million of securitization borrowings were outstanding under the facility. At the end of the contractual revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected.
35
In the first nine months of 2023, the financial services operations issued $3,207 million and retired $2,309 million of retail note securitization borrowings, which are presented in “Increase (decrease) in total short-term borrowings.”
Lines of Credit. The Company also has access to bank lines of credit with various banks throughout the world. Worldwide lines of credit totaled $10,352 million at July 30, 2023, $950 million of which were unused. For the purpose of computing unused credit lines, commercial paper, and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, were considered to constitute utilization. Included in the total credit lines at July 30, 2023 was a 364-day credit facility agreement of $5,000 million expiring in the second quarter of 2024. In addition, total credit lines included long-term credit facility agreements of $2,500 million expiring in the second quarter of 2027 and $2,500 million expiring in the second quarter of 2028. These credit agreements require Capital Corporation and other parts of the Company to maintain certain performance metrics and liquidity targets. All requirements in the credit agreements have been met during the periods included in the financial statements.
Debt Ratings. To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Company’s 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 Company securities. A credit rating agency may change or withdraw ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, reduced access to debt capital markets, and may adversely impact the Company’s liquidity. The senior long-term and short-term debt ratings and outlook currently assigned to unsecured Company securities by the rating agencies engaged by the Company are as follows:
|
|
Senior |
|
|
|
|
|
|
|
Long-Term |
|
Short-Term |
|
Outlook |
|
Fitch Ratings |
|
A+ |
|
F1 |
|
Stable |
|
Moody’s Investors Service, Inc. |
|
A2 |
|
Prime-1 |
|
Positive |
|
Standard & Poor’s |
|
A |
|
A-1 |
|
Stable |
|
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. Some of these risks and uncertainties could affect all lines of the Company’s operations generally while others could more heavily affect a particular line of business.
Forward-looking statements are based on currently available information and current assumptions, expectations, and projections about future events and should not be relied upon. Except as required by law, the Company expressly disclaims any obligation to update or revise its forward-looking statements. Many factors, risks, and uncertainties could cause actual results to differ materially from these forward-looking statements. Among these factors are risks related to:
| ● | compliance with and changes in U.S. and international laws, regulations, and policies relating to trade, spending, taxing, banking, monetary, environmental (including climate change and engine emission), and farming policies; |
| ● | political, economic, and social instability of the geographies in which the Company operates; |
| ● | wars and other conflicts, including the war between Russia and Ukraine; |
| ● | adverse macroeconomic conditions, including unemployment, inflation, rising interest rates, changes in consumer practices due to slower economic growth or possible recession, and regional or global liquidity constraints; |
| ● | growth and sustainability of non-food uses for crops (including ethanol and biodiesel production); |
| ● | the ability to execute business strategies, including the Company’s Smart Industrial operating model, Leap Ambitions, and mergers and acquisitions; |
| ● | the ability to understand and meet customers’ changing expectations and demand for John Deere products and solutions; |
| ● | accurately forecasting customer demand for products and services and adequately managing inventory; |
| ● | changes to governmental communications channels (radio frequency technology); |
| ● | gaps or limitations in rural broadband coverage, capacity, and speed needed to support technology solutions; |
| ● | the Company’s ability to adapt in highly competitive markets; |
| ● | dealer practices and their ability to manage distribution of John Deere products and support and service precision technology solutions; |
| ● | changes in climate patterns, unfavorable weather events, and natural disasters; |
| ● | higher interest rates and currency fluctuations which could adversely affect the U.S. dollar, customer confidence, access to capital, and demand for our products and solutions; |
36
| ● | changes in the Company’s credit ratings and any failure to comply with financial covenants in credit agreements could impact access to funding; |
| ● | availability and price of raw materials, components, whole goods, and used equipment; |
| ● | delays or disruptions in the Company’s supply chain; |
| ● | the ability to attract, develop, engage, and retain qualified personnel; |
| ● | security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the Company and its products; |
| ● | loss of or challenges to intellectual property rights; |
| ● | investigations, claims, lawsuits, or other legal proceedings; |
| ● | events that damage the Company’s reputation or brand; |
| ● | world grain stocks, available farm acres, soil conditions, harvest yields, prices for commodities and livestock, input costs, and availability of transport for crops; and |
| ● | housing starts and supply, real estate and housing prices, levels of public and non-residential construction, and infrastructure investment. |
Further information concerning the Company and its businesses, including factors that could materially affect the Company’s financial results, is included in the Company’s other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q). 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.
Supplemental Consolidating Information
The supplemental consolidating data presented on the subsequent pages is presented for informational purposes. The equipment operations represents the enterprise without financial services. The equipment operations includes the Company’s production and precision agriculture operations, small agriculture and turf operations, construction and forestry operations, and other corporate assets, liabilities, revenues, and expenses not reflected within financial services. Transactions between the equipment operations and financial services have been eliminated to arrive at the consolidated financial statements.
The equipment operations and financial services participate in different industries. The equipment operations primarily generate earnings and cash flows by manufacturing and selling equipment, service parts, and technology solutions to dealers and retail customers. Financial services finances sales and leases by dealers of new and used equipment that is largely manufactured by the Company. 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.
37
DEERE & COMPANY |
|
|
||||||||||||||||||||||||
SUPPLEMENTAL CONSOLIDATING DATA |
|
|
||||||||||||||||||||||||
STATEMENTS OF INCOME |
|
|
||||||||||||||||||||||||
For the Three Months Ended July 30, 2023 and July 31, 2022 |
|
|
||||||||||||||||||||||||
(In millions of dollars) Unaudited |
|
|
||||||||||||||||||||||||
|
|
EQUIPMENT |
|
FINANCIAL |
|
|
|
|
|
|
||||||||||||||||
|
|
OPERATIONS |
|
SERVICES |
|
ELIMINATIONS |
|
CONSOLIDATED |
|
|
||||||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
||||||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
14,284 |
|
$ |
13,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,284 |
|
$ |
13,000 |
|
|
Finance and interest income |
|
|
210 |
|
|
60 |
|
$ |
1,335 |
|
$ |
905 |
|
$ |
(292) |
|
$ |
(119) |
|
|
1,253 |
|
|
846 |
1 |
|
Other income |
|
|
222 |
|
|
228 |
|
|
110 |
|
|
79 |
|
|
(68) |
|
|
(51) |
|
|
264 |
|
|
256 |
2, 3 |
|
Total |
|
|
14,716 |
|
|
13,288 |
|
|
1,445 |
|
|
984 |
|
|
(360) |
|
|
(170) |
|
|
15,801 |
|
|
14,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
9,630 |
|
|
9,512 |
|
|
|
|
|
|
|
|
(6) |
|
|
(1) |
|
|
9,624 |
|
|
9,511 |
4 |
|
Research and development expenses |
|
|
528 |
|
|
481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
528 |
|
|
481 |
|
|
Selling, administrative and general expenses |
|
|
913 |
|
|
805 |
|
|
199 |
|
|
156 |
|
|
(2) |
|
|
(2) |
|
|
1,110 |
|
|
959 |
4 |
|
Interest expense |
|
|
94 |
|
|
109 |
|
|
622 |
|
|
223 |
|
|
(93) |
|
|
(36) |
|
|
623 |
|
|
296 |
5 |
|
Interest compensation to Financial Services |
|
|
199 |
|
|
83 |
|
|
|
|
|
|
|
|
(199) |
|
|
(83) |
|
|
|
|
|
|
5 |
|
Other operating expenses |
|
|
34 |
|
|
47 |
|
|
336 |
|
|
317 |
|
|
(60) |
|
|
(48) |
|
|
310 |
|
|
316 |
6, 7 |
|
Total |
|
|
11,398 |
|
|
11,037 |
|
|
1,157 |
|
|
696 |
|
|
(360) |
|
|
(170) |
|
|
12,195 |
|
|
11,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes |
|
|
3,318 |
|
|
2,251 |
|
|
288 |
|
|
288 |
|
|
|
|
|
|
|
|
3,606 |
|
|
2,539 |
|
|
Provision for income taxes |
|
|
564 |
|
|
574 |
|
|
72 |
|
|
80 |
|
|
|
|
|
|
|
|
636 |
|
|
654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income after Income Taxes |
|
|
2,754 |
|
|
1,677 |
|
|
216 |
|
|
208 |
|
|
|
|
|
|
|
|
2,970 |
|
|
1,885 |
|
|
Equity in income (loss) of unconsolidated affiliates |
|
|
2 |
|
|
(1) |
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
2,756 |
|
|
1,676 |
|
|
216 |
|
|
209 |
|
|
|
|
|
|
|
|
2,972 |
|
|
1,885 |
|
|
Less: Net income (loss) attributable to noncontrolling interests |
|
|
(6) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
|
1 |
|
|
Net Income Attributable to Deere & Company |
|
$ |
2,762 |
|
$ |
1,675 |
|
$ |
216 |
|
$ |
209 |
|
|
|
|
|
|
|
$ |
2,978 |
|
$ |
1,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Elimination of financial services’ interest income earned from equipment operations.
2 Elimination of equipment operations’ margin from inventory transferred to equipment on operating leases.
3 Elimination of financial services’ income related to intercompany guarantees of investments in certain international markets and intercompany service revenue.
4 Elimination of intercompany service fees.
5 Elimination of equipment operations’ interest expense to financial services.
6 Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.
7 Elimination of equipment operations’ expense related to intercompany guarantees of investments in certain international markets and intercompany service expenses.
38
DEERE & COMPANY |
|
|
||||||||||||||||||||||||
SUPPLEMENTAL CONSOLIDATING DATA (Continued) |
|
|
||||||||||||||||||||||||
STATEMENTS OF INCOME |
|
|
||||||||||||||||||||||||
For the Nine Months Ended July 30, 2023 and July 31, 2022 |
|
|
||||||||||||||||||||||||
(In millions of dollars) Unaudited |
|
|
||||||||||||||||||||||||
|
|
EQUIPMENT |
|
FINANCIAL |
|
|
|
|
|
|
||||||||||||||||
|
|
OPERATIONS |
|
SERVICES |
|
ELIMINATIONS |
|
CONSOLIDATED |
|
|
||||||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
||||||||
Net Sales and Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
41,765 |
|
$ |
33,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
41,765 |
|
$ |
33,565 |
|
|
Finance and interest income |
|
|
444 |
|
|
131 |
|
$ |
3,609 |
|
$ |
2,580 |
|
$ |
(727) |
|
$ |
(270) |
|
|
3,326 |
|
|
2,441 |
1 |
|
Other income |
|
|
639 |
|
|
1,028 |
|
|
378 |
|
|
271 |
|
|
(269) |
|
|
(264) |
|
|
748 |
|
|
1,035 |
2, 3 |
|
Total |
|
|
42,848 |
|
|
34,724 |
|
|
3,987 |
|
|
2,851 |
|
|
(996) |
|
|
(534) |
|
|
45,839 |
|
|
37,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
28,306 |
|
|
25,126 |
|
|
|
|
|
|
|
|
(18) |
|
|
(2) |
|
|
28,288 |
|
|
25,124 |
4 |
|
Research and development expenses |
|
|
1,571 |
|
|
1,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,571 |
|
|
1,336 |
|
|
Selling, administrative and general expenses |
|
|
2,630 |
|
|
2,215 |
|
|
769 |
|
|
463 |
|
|
(7) |
|
|
(6) |
|
|
3,392 |
|
|
2,672 |
4 |
|
Interest expense |
|
|
298 |
|
|
297 |
|
|
1,604 |
|
|
493 |
|
|
(231) |
|
|
(77) |
|
|
1,671 |
|
|
713 |
5 |
|
Interest compensation to Financial Services |
|
|
496 |
|
|
189 |
|
|
|
|
|
|
|
|
(496) |
|
|
(189) |
|
|
|
|
|
|
5 |
|
Other operating expenses |
|
|
172 |
|
|
186 |
|
|
1,043 |
|
|
1,028 |
|
|
(244) |
|
|
(260) |
|
|
971 |
|
|
954 |
6, 7 |
|
Total |
|
|
33,473 |
|
|
29,349 |
|
|
3,416 |
|
|
1,984 |
|
|
(996) |
|
|
(534) |
|
|
35,893 |
|
|
30,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes |
|
|
9,375 |
|
|
5,375 |
|
|
571 |
|
|
867 |
|
|
|
|
|
|
|
|
9,946 |
|
|
6,242 |
|
|
Provision for income taxes |
|
|
2,020 |
|
|
1,142 |
|
|
144 |
|
|
222 |
|
|
|
|
|
|
|
|
2,164 |
|
|
1,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income after Income Taxes |
|
|
7,355 |
|
|
4,233 |
|
|
427 |
|
|
645 |
|
|
|
|
|
|
|
|
7,782 |
|
|
4,878 |
|
|
Equity in income of unconsolidated affiliates |
|
|
3 |
|
|
4 |
|
|
2 |
|
|
4 |
|
|
|
|
|
|
|
|
5 |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
7,358 |
|
|
4,237 |
|
|
429 |
|
|
649 |
|
|
|
|
|
|
|
|
7,787 |
|
|
4,886 |
|
|
Less: Net income (loss) attributable to noncontrolling interests |
|
|
(10) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|
|
1 |
|
|
Net Income Attributable to Deere & Company |
|
$ |
7,368 |
|
$ |
4,236 |
|
$ |
429 |
|
$ |
649 |
|
|
|
|
|
|
|
$ |
7,797 |
|
$ |
4,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Elimination of financial services’ interest income earned from equipment operations.
2 Elimination of equipment operations’ margin from inventory transferred to equipment on operating leases.
3 Elimination of financial services’ income related to intercompany guarantees of investments in certain international markets and intercompany service revenue.
4 Elimination of intercompany service fees.
5 Elimination of equipment operations’ interest expense to financial services.
6 Elimination of financial services’ lease depreciation expense related to inventory transferred to equipment on operating leases.
7 Elimination of equipment operations’ expense related to intercompany guarantees of investments in certain international markets and intercompany service expenses.
39
DEERE & COMPANY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
SUPPLEMENTAL CONSOLIDATING DATA (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
CONDENSED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
(In millions of dollars) Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
EQUIPMENT |
|
FINANCIAL |
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
OPERATIONS |
|
SERVICES |
|
ELIMINATIONS |
|
CONSOLIDATED |
|
|
||||||||||||||||||||||||||||
|
|
Jul 30 |
|
Oct 30 |
|
Jul 31 |
|
Jul 30 |
|
Oct 30 |
|
Jul 31 |
|
Jul 30 |
|
Oct 30 |
|
Jul 31 |
|
Jul 30 |
|
Oct 30 |
|
Jul 31 |
|
|
||||||||||||
|
|
2023 |
|
2022 |
|
2022 |
|
2023 |
|
2022 |
|
2022 |
|
2023 |
|
2022 |
|
2022 |
|
2023 |
|
2022 |
|
2022 |
|
|
||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,858 |
|
$ |
3,767 |
|
$ |
3,540 |
|
$ |
1,718 |
|
$ |
1,007 |
|
$ |
819 |
|
|
|
|
|
|
|
|
|
|
$ |
6,576 |
|
$ |
4,774 |
|
$ |
4,359 |
|
|
Marketable securities |
|
|
3 |
|
|
61 |
|
|
2 |
|
|
838 |
|
|
673 |
|
|
717 |
|
|
|
|
|
|
|
|
|
|
|
841 |
|
|
734 |
|
|
719 |
|
|
Receivables from Financial Services |
|
|
5,312 |
|
|
6,569 |
|
|
5,055 |
|
|
|
|
|
|
|
|
|
|
$ |
(5,312) |
|
$ |
(6,569) |
|
$ |
(5,055) |
|
|
|
|
|
|
|
|
|
8 |
|
Trade accounts and notes receivable – net |
|
|
1,589 |
|
|
1,273 |
|
|
1,342 |
|
|
9,991 |
|
|
6,434 |
|
|
6,738 |
|
|
(2,283) |
|
|
(1,297) |
|
|
(1,384) |
|
|
9,297 |
|
|
6,410 |
|
|
6,696 |
9 |
|
Financing receivables – net |
|
|
60 |
|
|
47 |
|
|
45 |
|
|
41,242 |
|
|
36,587 |
|
|
35,011 |
|
|
|
|
|
|
|
|
|
|
|
41,302 |
|
|
36,634 |
|
|
35,056 |
|
|
Financing receivables securitized – net |
|
|
|
|
|
|
|
|
2 |
|
|
7,001 |
|
|
5,936 |
|
|
5,139 |
|
|
|
|
|
|
|
|
|
|
|
7,001 |
|
|
5,936 |
|
|
5,141 |
|
|
Other receivables |
|
|
2,599 |
|
|
1,670 |
|
|
1,676 |
|
|
599 |
|
|
832 |
|
|
371 |
|
|
(80) |
|
|
(10) |
|
|
(48) |
|
|
3,118 |
|
|
2,492 |
|
|
1,999 |
9 |
|
Equipment on operating leases – net |
|
|
|
|
|
|
|
|
|
|
|
6,709 |
|
|
6,623 |
|
|
6,554 |
|
|
|
|
|
|
|
|
|
|
|
6,709 |
|
|
6,623 |
|
|
6,554 |
|
|
Inventories |
|
|
9,350 |
|
|
8,495 |
|
|
9,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,350 |
|
|
8,495 |
|
|
9,121 |
|
|
Property and equipment – net |
|
|
6,385 |
|
|
6,021 |
|
|
5,630 |
|
|
33 |
|
|
35 |
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
6,418 |
|
|
6,056 |
|
|
5,666 |
|
|
Goodwill |
|
|
3,994 |
|
|
3,687 |
|
|
3,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,994 |
|
|
3,687 |
|
|
3,754 |
|
|
Other intangible assets – net |
|
|
1,199 |
|
|
1,218 |
|
|
1,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,199 |
|
|
1,218 |
|
|
1,281 |
|
|
Retirement benefits |
|
|
3,503 |
|
|
3,666 |
|
|
3,062 |
|
|
71 |
|
|
66 |
|
|
65 |
|
|
(1) |
|
|
(2) |
|
|
(2) |
|
|
3,573 |
|
|
3,730 |
|
|
3,125 |
10 |
|
Deferred income taxes |
|
|
1,393 |
|
|
940 |
|
|
1,248 |
|
|
65 |
|
|
45 |
|
|
48 |
|
|
(98) |
|
|
(161) |
|
|
(186) |
|
|
1,360 |
|
|
824 |
|
|
1,110 |
11 |
|
Other assets |
|
|
2,083 |
|
|
1,794 |
|
|
1,727 |
|
|
583 |
|
|
626 |
|
|
510 |
|
|
(7) |
|
|
(3) |
|
|
(1) |
|
|
2,659 |
|
|
2,417 |
|
|
2,236 |
9 |
|
Total Assets |
|
$ |
42,328 |
|
$ |
39,208 |
|
$ |
37,485 |
|
$ |
68,850 |
|
$ |
58,864 |
|
$ |
56,008 |
|
$ |
(7,781) |
|
$ |
(8,042) |
|
$ |
(6,676) |
|
$ |
103,397 |
|
$ |
90,030 |
|
$ |
86,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
$ |
1,773 |
|
$ |
1,040 |
|
$ |
471 |
|
$ |
15,370 |
|
$ |
11,552 |
|
$ |
13,705 |
|
|
|
|
|
|
|
|
|
|
$ |
17,143 |
|
$ |
12,592 |
|
$ |
14,176 |
|
|
Short-term securitization borrowings |
|
|
|
|
|
|
|
|
2 |
|
|
6,608 |
|
|
5,711 |
|
|
4,918 |
|
|
|
|
|
|
|
|
|
|
|
6,608 |
|
|
5,711 |
|
|
4,920 |
|
|
Payables to Equipment Operations |
|
|
|
|
|
|
|
|
|
|
|
5,312 |
|
|
6,569 |
|
|
5,055 |
|
$ |
(5,312) |
|
$ |
(6,569) |
|
$ |
(5,055) |
|
|
|
|
|
|
|
|
|
8 |
|
Accounts payable and accrued expenses |
|
|
14,403 |
|
|
12,962 |
|
|
11,925 |
|
|
3,307 |
|
|
3,170 |
|
|
2,494 |
|
|
(2,370) |
|
|
(1,310) |
|
|
(1,433) |
|
|
15,340 |
|
|
14,822 |
|
|
12,986 |
9 |
|
Deferred income taxes |
|
|
420 |
|
|
380 |
|
|
436 |
|
|
184 |
|
|
276 |
|
|
311 |
|
|
(98) |
|
|
(161) |
|
|
(186) |
|
|
506 |
|
|
495 |
|
|
561 |
11 |
|
Long-term borrowings |
|
|
7,299 |
|
|
7,917 |
|
|
8,481 |
|
|
30,813 |
|
|
25,679 |
|
|
23,651 |
|
|
|
|
|
|
|
|
|
|
|
38,112 |
|
|
33,596 |
|
|
32,132 |
|
|
Retirement benefits and other liabilities |
|
|
2,423 |
|
|
2,351 |
|
|
2,799 |
|
|
114 |
|
|
108 |
|
|
114 |
|
|
(1) |
|
|
(2) |
|
|
(2) |
|
|
2,536 |
|
|
2,457 |
|
|
2,911 |
10 |
|
Total liabilities |
|
|
26,318 |
|
|
24,650 |
|
|
24,114 |
|
|
61,708 |
|
|
53,065 |
|
|
50,248 |
|
|
(7,781) |
|
|
(8,042) |
|
|
(6,676) |
|
|
80,245 |
|
|
69,673 |
|
|
67,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
101 |
|
|
92 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
92 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deere & Company stockholders’ equity |
|
|
23,048 |
|
|
20,262 |
|
|
19,033 |
|
|
7,142 |
|
|
5,799 |
|
|
5,760 |
|
|
(7,142) |
|
|
(5,799) |
|
|
(5,760) |
|
|
23,048 |
|
|
20,262 |
|
|
19,033 |
12 |
|
Noncontrolling interests |
|
|
3 |
|
|
3 |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
3 |
|
|
3 |
|
|
Financial Services’ equity |
|
|
(7,142) |
|
|
(5,799) |
|
|
(5,760) |
|
|
|
|
|
|
|
|
|
|
|
7,142 |
|
|
5,799 |
|
|
5,760 |
|
|
|
|
|
|
|
|
|
12 |
|
Adjusted total stockholders’ equity |
|
|
15,909 |
|
|
14,466 |
|
|
13,276 |
|
|
7,142 |
|
|
5,799 |
|
|
5,760 |
|
|
|
|
|
|
|
|
|
|
|
23,051 |
|
|
20,265 |
|
|
19,036 |
|
|
Total Liabilities and Stockholders’ Equity |
|
$ |
42,328 |
|
$ |
39,208 |
|
$ |
37,485 |
|
$ |
68,850 |
|
$ |
58,864 |
|
$ |
56,008 |
|
$ |
(7,781) |
|
$ |
(8,042) |
|
$ |
(6,676) |
|
$ |
103,397 |
|
$ |
90,030 |
|
$ |
86,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 Elimination of receivables / payables between equipment operations and financial services.
9 Primarily reclassification of sales incentive accruals on receivables sold to financial services.
10 Reclassification of net pension assets / liabilities.
11 Reclassification of deferred tax assets / liabilities in the same taxing jurisdictions.
12 Elimination of financial services’ equity.
40
DEERE & COMPANY |
|
|
||||||||||||||||||||||||
SUPPLEMENTAL CONSOLIDATING DATA (Continued) |
|
|
||||||||||||||||||||||||
STATEMENTS OF CASH FLOWS |
|
|
||||||||||||||||||||||||
For the Nine Months Ended July 30, 2023 and July 31, 2022 |
|
|
||||||||||||||||||||||||
(In millions of dollars) Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUIPMENT |
|
FINANCIAL |
|
|
|
|
|
|
||||||||||||||||
|
|
OPERATIONS |
|
SERVICES |
|
ELIMINATIONS |
|
CONSOLIDATED |
|
|
||||||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
||||||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,358 |
|
$ |
4,237 |
|
$ |
429 |
|
$ |
649 |
|
|
|
|
|
|
|
$ |
7,787 |
|
$ |
4,886 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (credit) for credit losses |
|
|
3 |
|
|
|
|
|
(67) |
|
|
62 |
|
|
|
|
|
|
|
|
(64) |
|
|
62 |
|
|
Provision for depreciation and amortization |
|
|
872 |
|
|
806 |
|
|
757 |
|
|
790 |
|
$ |
(102) |
|
$ |
(153) |
|
|
1,527 |
|
|
1,443 |
13 |
|
Impairments and other adjustments |
|
|
|
|
|
81 |
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
173 |
|
|
81 |
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112 |
|
|
64 |
|
|
112 |
|
|
64 |
14 |
|
Gain on remeasurement of previously held equity investment |
|
|
|
|
|
(326) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(326) |
|
|
Distributed earnings of Financial Services |
|
|
31 |
|
|
368 |
|
|
|
|
|
|
|
|
(31) |
|
|
(368) |
|
|
|
|
|
|
15 |
|
Provision (credit) for deferred income taxes |
|
|
(322) |
|
|
44 |
|
|
(107) |
|
|
(50) |
|
|
|
|
|
|
|
|
(429) |
|
|
(6) |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables related to sales |
|
|
(293) |
|
|
(215) |
|
|
|
|
|
|
|
|
(4,766) |
|
|
(2,142) |
|
|
(5,059) |
|
|
(2,357) |
16, 18, 19 |
|
Inventories |
|
|
(534) |
|
|
(2,415) |
|
|
|
|
|
|
|
|
(129) |
|
|
(111) |
|
|
(663) |
|
|
(2,526) |
17 |
|
Accounts payable and accrued expenses |
|
|
730 |
|
|
491 |
|
|
303 |
|
|
36 |
|
|
(986) |
|
|
(542) |
|
|
47 |
|
|
(15) |
18 |
|
Accrued income taxes payable/receivable |
|
|
(619) |
|
|
52 |
|
|
24 |
|
|
30 |
|
|
|
|
|
|
|
|
(595) |
|
|
82 |
|
|
Retirement benefits |
|
|
(115) |
|
|
(1,020) |
|
|
(1) |
|
|
6 |
|
|
|
|
|
|
|
|
(116) |
|
|
(1,014) |
|
|
Other |
|
|
247 |
|
|
103 |
|
|
(15) |
|
|
(108) |
|
|
(56) |
|
|
49 |
|
|
176 |
|
|
44 |
13, 14, 17 |
|
Net cash provided by operating activities |
|
|
7,358 |
|
|
2,206 |
|
|
1,496 |
|
|
1,415 |
|
|
(5,958) |
|
|
(3,203) |
|
|
2,896 |
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collections of receivables (excluding receivables related to sales) |
|
|
|
|
|
|
|
|
18,440 |
|
|
16,927 |
|
|
(848) |
|
|
(1,153) |
|
|
17,592 |
|
|
15,774 |
16 |
|
Proceeds from sales of equipment on operating leases |
|
|
|
|
|
|
|
|
1,445 |
|
|
1,501 |
|
|
|
|
|
|
|
|
1,445 |
|
|
1,501 |
|
|
Cost of receivables acquired (excluding receivables related to sales) |
|
|
|
|
|
|
|
|
(21,043) |
|
|
(19,069) |
|
|
329 |
|
|
491 |
|
|
(20,714) |
|
|
(18,578) |
16 |
|
Acquisitions of businesses, net of cash acquired |
|
|
(82) |
|
|
(488) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(82) |
|
|
(488) |
|
|
Purchases of property and equipment |
|
|
(885) |
|
|
(595) |
|
|
(2) |
|
|
(1) |
|
|
|
|
|
|
|
|
(887) |
|
|
(596) |
|
|
Cost of equipment on operating leases acquired |
|
|
|
|
|
|
|
|
(2,143) |
|
|
(1,868) |
|
|
175 |
|
|
151 |
|
|
(1,968) |
|
|
(1,717) |
17 |
|
Increase in investment in Financial Services |
|
|
(811) |
|
|
|
|
|
|
|
|
|
|
|
811 |
|
|
|
|
|
|
|
|
|
20 |
|
Increase in trade and wholesale receivables |
|
|
|
|
|
|
|
|
(6,270) |
|
|
(3,318) |
|
|
6,270 |
|
|
3,318 |
|
|
|
|
|
|
16 |
|
Collateral on derivatives – net |
|
|
|
|
|
5 |
|
|
240 |
|
|
(198) |
|
|
|
|
|
|
|
|
240 |
|
|
(193) |
|
|
Other |
|
|
(79) |
|
|
(87) |
|
|
(111) |
|
|
(74) |
|
|
1 |
|
|
28 |
|
|
(189) |
|
|
(133) |
19 |
|
Net cash used for investing activities |
|
|
(1,857) |
|
|
(1,165) |
|
|
(9,444) |
|
|
(6,100) |
|
|
6,738 |
|
|
2,835 |
|
|
(4,563) |
|
|
(4,430) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in total short-term borrowings |
|
|
(152) |
|
|
58 |
|
|
5,192 |
|
|
4,209 |
|
|
|
|
|
|
|
|
5,040 |
|
|
4,267 |
|
|
Change in intercompany receivables/payables |
|
|
1,476 |
|
|
70 |
|
|
(1,476) |
|
|
(70) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings |
|
|
60 |
|
|
137 |
|
|
9,912 |
|
|
6,144 |
|
|
|
|
|
|
|
|
9,972 |
|
|
6,281 |
|
|
Payments of long-term borrowings |
|
|
(116) |
|
|
(1,372) |
|
|
(5,746) |
|
|
(5,206) |
|
|
|
|
|
|
|
|
(5,862) |
|
|
(6,578) |
|
|
Repurchases of common stock |
|
|
(4,663) |
|
|
(2,477) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,663) |
|
|
(2,477) |
|
|
Capital investment from Equipment Operations |
|
|
|
|
|
|
|
|
811 |
|
|
|
|
|
(811) |
|
|
|
|
|
|
|
|
|
20 |
|
Dividends paid |
|
|
(1,065) |
|
|
(971) |
|
|
(31) |
|
|
(368) |
|
|
31 |
|
|
368 |
|
|
(1,065) |
|
|
(971) |
15 |
|
Other |
|
|
4 |
|
|
16 |
|
|
(47) |
|
|
(23) |
|
|
|
|
|
|
|
|
(43) |
|
|
(7) |
|
|
Net cash provided by (used for) financing activities |
|
|
(4,456) |
|
|
(4,539) |
|
|
8,615 |
|
|
4,686 |
|
|
(780) |
|
|
368 |
|
|
3,379 |
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
|
|
108 |
|
|
(148) |
|
|
17 |
|
|
5 |
|
|
|
|
|
|
|
|
125 |
|
|
(143) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash |
|
|
1,153 |
|
|
(3,646) |
|
|
684 |
|
|
6 |
|
|
|
|
|
|
|
|
1,837 |
|
|
(3,640) |
|
|
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period |
|
|
3,781 |
|
|
7,200 |
|
|
1,160 |
|
|
925 |
|
|
|
|
|
|
|
|
4,941 |
|
|
8,125 |
|
|
Cash, Cash Equivalents, and Restricted Cash at End of Period |
|
$ |
4,934 |
|
$ |
3,554 |
|
$ |
1,844 |
|
$ |
931 |
|
|
|
|
|
|
|
$ |
6,778 |
|
$ |
4,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Cash, Cash Equivalents, and Restricted Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,858 |
|
$ |
3,540 |
|
$ |
1,718 |
|
$ |
819 |
|
|
|
|
|
|
|
$ |
6,576 |
|
$ |
4,359 |
|
|
Restricted cash (Other assets) |
|
|
76 |
|
|
14 |
|
|
126 |
|
|
112 |
|
|
|
|
|
|
|
|
202 |
|
|
126 |
|
|
Total Cash, Cash Equivalents, and Restricted Cash |
|
$ |
4,934 |
|
$ |
3,554 |
|
$ |
1,844 |
|
$ |
931 |
|
|
|
|
|
|
|
$ |
6,778 |
|
$ |
4,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Elimination of depreciation on leases related to inventory transferred to equipment on operating leases.
14 Reclassification of share-based compensation expense.
15 Elimination of dividends from financial services to the equipment operations, which are included in the equipment operations’ operating activities.
16 Primarily reclassification of receivables related to the sale of equipment.
17 Reclassification of direct lease agreements with retail customers.
18 Reclassification of sales incentive accruals on receivables sold to financial services.
19 Elimination and reclassification of the effects of financial services partial financing of the construction and forestry retail locations sales and subsequent collection of those amounts.
20 Elimination of investment from equipment operations to financial services.
41
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Company’s most recently filed Annual Report on Form 10-K (Part II, Item 7A). There has been no material change in this information.
Item 4. CONTROLS AND PROCEDURES
The Company’s principal executive officer and its principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) were effective as of July 30, 2023, based on the evaluation of these controls and procedures required by Rule 13a-15(b) or 15d-15(b) of the Exchange Act. During the third quarter of 2023, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, trademark, and antitrust matters. The Company believes the reasonably possible range of losses for these unresolved legal actions would not have a material effect on its consolidated financial statements.
Item 1A. Risk Factors
See the Company’s most recently filed Annual Report on Form 10-K (Part I, Item 1A). There has been no material change in this information. The risks described in the Annual Report on Form 10-K, and the “Forward-Looking Statements” in this report, are not the only risks faced by the Company. Additional risks and uncertainties may also materially affect the Company’s business, financial condition, or operating results. One should not consider the risk factors to be a complete discussion of risks, uncertainties, and assumptions.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company’s purchases of its common stock during the third quarter of 2023 were as follows:
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
Maximum Number of |
|
|
|
|
Total Number of |
|
|
|
|
Part of Publicly |
|
Shares that May Yet Be |
|
|
|
|
Shares |
|
|
|
|
Announced Plans or |
|
Purchased under the |
|
|
|
|
Purchased |
|
Average Price |
|
Programs (1) |
|
Plans or Programs (1) |
|
|
|
Period |
|
(thousands) |
|
Per Share |
|
(thousands) |
|
(millions) |
|
|
|
May 1 to May 28 |
|
1,581 |
|
$ |
375.70 |
|
1,581 |
|
40.0 |
|
|
May 29 to Jun 25 |
|
1,525 |
|
|
385.90 |
|
1,525 |
|
38.6 |
|
|
Jun 26 to Jul 30 |
|
2,285 |
|
|
418.54 |
|
2,285 |
|
36.4 |
|
|
Total |
|
5,391 |
|
|
|
|
5,391 |
|
|
|
|
| (1) | The Company has a share repurchase plan that was announced in December 2022 to repurchase up to $18,000 million of shares of the Company’s common stock. The maximum number of shares that may yet be repurchased under this plan was 36.4 million shares based on the end of the third quarter 2023 closing share price of $427.11 per share. At the end of the third quarter of 2023, $15,556 million of common stock remains to be repurchased under this plan. |
Item 3. Defaults Upon Senior Securities On August 30, 2023, the Board of Directors of the Company adopted amendments to the Company’s bylaws (as amended, the “Amended Bylaws”), effective as of such date.
None.
Item 4. Mine Safety Disclosures
Not applicable.
42
Item 5. Other Information
Amendment to Bylaws
The amendments set forth in the Amended Bylaws, among other things, (1) revise the procedures and disclosure requirements for the nomination of directors and the submission of proposals for consideration at annual meetings of the stockholders of the Company, including, among other things, adding a requirement that a stockholder seeking to nominate director(s) at an annual meeting deliver to the Company reasonable evidence that it has complied with the requirements of Rule 14a-19 of the Exchange Act within eight business days of the meeting; (2) revise the majority voting provision to clarify when an election of directors will be deemed contested; (3) allow for the establishment of rules, regulations, or procedures of a meeting of the Company’s stockholders by the Board of Directors and/or the presiding person of a meeting and clarify the power of the chair of a stockholder meeting to adjourn any meeting of stockholders; (4) adopt gender-neutral terms when referring to particular positions, offices, or title holders; and (5) make certain administrative, modernizing, clarifying, and conforming changes, including making updates to reflect recent amendments to the General Corporation Law of the State of Delaware.
The foregoing description of the Amended Bylaws is qualified in its entirety by reference to the Bylaws, as amended, a copy of which is filed as Exhibit 3.2 hereto and is incorporated herein by reference.
Amended & Restated Change in Control Severance Program
On August 29, 2023, the Compensation Committee of the Board of Directors (the “Committee”) of the Company adopted amendments to the Company’s Amended and Restated Change in Control Severance Program (the “Program”). The amendments to the Program, among other things, reduced the multiplier applicable to cash severance payments in the event of a change in control and a qualifying termination for the Chief Executive Officer of the Company from 3.0x to 2.99x base salary. The multiplier for the Tier 1 and Tier 2 Participants, as those terms are defined in the Program, were unchanged and remain at 2.0x and 1.5x, respectively. The amendments to the Program result from the Committee’s periodic review of the Company’s executive compensation program, which includes consideration of shareholder feedback.
The foregoing description of the amendments to the Program is qualified in its entirety by reference to the Amended & Restated Change in Control Severance Program, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Director and Executive Officer Trading Arrangements
On June 2, 2023, Ryan D. Campbell, President, Worldwide Construction & Forestry and Power Systems adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c). The plan covers the exercise of 6,073 employee stock options and the related sale of such shares. The plan expires on May 31, 2024.
43
Item 6. Exhibits
Certain instruments relating to long-term borrowings constituting less than 10 percent of the registrant’s total assets are not filed as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant will furnish copies of such instruments to the Commission upon request of the Commission.
|
|
3.1 |
|
|
|
3.2 |
|
|
|
10.1 |
Amended & Restated Change in Control Severance Program of Deere & Company, effective August 29, 2023 |
|
|
31.1 |
|
|
|
31.2 |
|
|
|
32 |
|
|
|
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.
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
DEERE & COMPANY |
|||
|
|
|||
|
|
|||
Date: |
August 31, 2023 |
|
By: |
/s/ Joshua A. Jepsen |
|
|
|
|
Joshua A. Jepsen (Principal Financial Officer and Principal Accounting Officer) |
45
Exhibit 3.2
BYLAWS OF
DEERE & COMPANY
(Adopted July 30, 1958; last amended August 30, 2023)
ARTICLE I ― IDENTIFICATION
Section 1. NAME. The name of the Company is Deere & Company (hereinafter referred to as the "Company").
Section 2. OFFICES. The registered office and registered agent of the Company in the State of Delaware shall be as designated from time to time by the appropriate filing by the Company in the office of the Secretary of State of the State of Delaware. The Company may also have offices in such other places in the United States or elsewhere as the Board of Directors may, from time to time, appoint or as the business of the Company may require.
Section 3. SEAL. The seal of the Company shall be circular in form and mounted upon a metal die, suitable for impressing the same upon paper. About the upper periphery of the seal shall appear the words "Deere & Company" and about the lower periphery thereof the word "Delaware". In the center of the seal shall appear a representation of a leaping deer.
Section 4. FISCAL YEAR. The fiscal year of the Company shall be fixed, and shall be subject to change, by the Board of Directors from time to time.
ARTICLE II ― THE STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of the stockholders for any purpose may be held on such Business Day and at such time and at such place, if any, as may be designated by the Chair or by the Board of Directors. The Board of Directors may, in its sole discretion, determine that a special or annual meeting of stockholders shall not be held at any place, but may instead be held in whole or in part by means of remote communication as authorized under the General Corporation Law of the State of Delaware (“DGCL”).
Section 2. ANNUAL MEETING. The annual meeting of the stockholders for the election of directors and the transaction of such other business as may properly be brought before the meeting in accordance with Section 3 of this Article II shall be held at ten o'clock in the morning, local time, on the last Wednesday in February of each year or on such Business Day and at such time and at such place, if any, as may be designated by the Board of Directors.
Section 3. NOMINATION OF DIRECTORS AND PROPOSAL OF OTHER BUSINESS.
(a) |
Nominations of persons for election as directors and the proposal of other business to be considered by stockholders may be made at any annual meeting of stockholders or, in the case of director nominations, at any special meeting of stockholders called for the purpose |
1
of electing directors, only (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) by any person or persons authorized to do so by the Board of Directors (or any duly authorized committee thereof), or (iii) by any stockholder of the Company who is a stockholder of record on the date of the giving of notice in proper form as provided for in this Section 3(a), on the record date for the meeting and on the date of the meeting who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 3(a) (such stockholder of record giving the notice, the “Noticing Stockholder”). Notwithstanding the foregoing, (i) nominations of persons for election as directors may also be made at an annual meeting of stockholders by any Eligible Stockholder (as defined in Section 13(d) of this Article II) pursuant to and in accordance with Section 13 of this Article II and (ii) proposals for business may also be made at a meeting of stockholders pursuant to and in accordance with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition to any other applicable requirements, for a nomination to be made or business to be properly brought by a stockholder pursuant to clause (iii) of the first paragraph of this Section 3(a), the Noticing Stockholder must deliver timely notice thereof in proper written form to the Secretary at the principal executive offices of the Company within the time period specified in Section 3(b) of this Article II and any such proposed business (other than the nominations of persons for election to the Board of Directors) must constitute a proper matter for stockholder action. To be in proper written form, such notice to the Secretary shall set forth:
| (i) | as to each person whom the Noticing Stockholder proposes to nominate for election or re-election as a director, (A) the name, age, business address and residence address of the person, (B) a complete biography and statement of such person’s qualifications, including the principal occupation or employment of the person (at present and for the past five years), (C) the class, series and number of all shares of stock of the Company which are owned beneficially or of record by such person, (D) the Specified Information (as defined below) for the person and any immediate family member of the person, or any Affiliate or Associate of such person, (E)(1) a complete and accurate description of all agreements, arrangements and understandings (whether written or oral, and including promises) between each Holder (as defined below) and any Stockholder Associated Person (as defined below), on the one hand, and such person, on the other hand, including without limitation, (x) to consult or advise on any investment or potential investment in a publicly listed company (including the Company), (y) to nominate, submit, or otherwise recommend (including, without limitation, supporting, advocating for or otherwise taking action to further the consideration of) such person for appointment (or, for the avoidance of doubt, as a candidate for appointment) to any officer, executive officer or director role of any publicly listed company (including the Company) during the past ten years, and (2) a complete and accurate description of the outcome of any situations described pursuant to the foregoing clause (1), (F) whether such person has (1) notified the board of directors of each publicly listed company at which such person serves as an officer, executive officer or director with respect to such person’s proposed nomination for election to the Board of Directors, and (2) as applicable, received all necessary consents to serve on the Board of Directors if so nominated and elected or otherwise appointed (or, if any such consents have not been received, how such person intends to address the failure to receive such necessary consents), (G) whether such person’s |
2
| nomination, election or appointment, as applicable, would violate or contravene a corporate governance policy, including, without limitation, a conflicts of interest or “overboarding” policy of any publicly listed company at which such person serves as an officer, executive officer or director and, if so, a description of how such person intends to address such violation or contravention, (H) the first date of contact between any Holder and/or Stockholder Associated Person, on the one hand, and such person, on the other hand, with respect to the Company, (I) the amount and nature of any direct or indirect economic or financial interest, if any, of such person, or of any immediate family member of such person, in any funds or vehicles managed by, under common management with or affiliated with any Holder and/or Stockholder Associated Person, (J) a complete and accurate description of all direct and indirect compensation and other monetary or non-monetary agreements, arrangements and understandings (whether written or oral) existing presently, that existed during the past three years or were offered during the past three years (whether accepted or declined), and any other material relationships between or among the Holders or any Stockholder Associated Person, on the one hand, and such person, and any immediate family member of such person, and such person’s respective Affiliates and Associates, on the other hand (including the names of such persons) and all biographical, related party transaction and other information that would be required to be disclosed pursuant to the federal securities laws, including Item 404 promulgated under Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”) (or any successor provision), if any Holder or any Stockholder Associated Person were the “registrant” for purposes of such rule and such person were a director or executive officer of such registrant, (K) any other information relating to the person that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election or that is otherwise required pursuant to and in accordance with Regulation 14A of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in proxy statements as a proposed nominee of the Noticing Stockholder and to serve as a director if elected), (L) the executed consent of such person being named in the proxy statement as a nominee and to serving as a director if elected and a completed and signed representation and agreement of such person as required by the third paragraph of Section 1 of Article III of these Bylaws, and (M) a completed and signed questionnaire, representation and agreement and any and all other information required by paragraph (v) of this Section 3(a); |
(ii) |
as to any other business that the Noticing Stockholder proposes to bring before the meeting: (A) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (B) any material interest of each Holder and each Stockholder Associated Person, if any, in such business, (C) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend these Bylaws, the text of the proposed amendment), and (D) a description of all agreements, arrangements and understandings between each Holder and any Stockholder Associated Person and any other person or persons (including their names) in connection with the proposal of such business by the Noticing Stockholder; |
3
(iii) |
as to the Noticing Stockholder and the beneficial owner, if any, on whose behalf the nomination is being made or other business is being proposed (collectively with the Noticing Stockholder, the “Holders” and each a “Holder”): (A) the name and address of each Holder as the name and address appear on the Company’s books, as applicable, and the name and address of each Stockholder Associated Person, if any, (B) as of the date of the notice (1) the class, series and number of all shares of stock of the Company which are, directly or indirectly, owned beneficially or of record by each Holder and any Stockholder Associated Person (provided that, for the purposes of this Section 3(a), any such person shall in all events be deemed to beneficially own any shares of stock of the Company as to which such person has a right to acquire beneficial ownership at any time in the future (whether such right is exercisable immediately or only after the passage of time or the fulfillment of a condition or both)), (2) any short position, profits interest, option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Company, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Company, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Company, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares in the Company, through delivery of cash or other property or otherwise, and without regard to whether the Holder and any Stockholder Associated Person may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned or held, including beneficially, by each Holder and any Stockholder Associated Person, (3) a description of any proxy, contract, arrangement, understanding or relationship pursuant to which each Holder and any Stockholder Associated Person has any right to vote or has granted a right to vote any shares of stock or any other security of the Company, (4) any agreement, arrangement or understanding, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, involving any Holder or any Stockholder Associated Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Company by, manage the risk of share price changes for, or increase or decrease the voting power of, such Holder or any Stockholder Associated Person with respect to any class or series of the shares or other securities of the Company, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares or other securities of the Company (any of the foregoing, a “Short Interest”), and any Short Interest held by each Holder or any Stockholder Associated Person within the last 12 months in any class or series of the shares or other securities of the Company, (5) any rights to dividends or payments in lieu of dividends on the shares of the Company owned |
4
beneficially by each Holder or any Stockholder Associated Person that are separated or separable from the underlying shares of stock or other securities of the Company, (6) any proportionate interest in shares of stock or other securities of the Company or Derivative Instruments held, directly or indirectly, by a general or limited partnership or limited liability company or other entity in which any Holder or any Stockholder Associated Person is a general partner or directly or indirectly beneficially owns an interest in a general partner, is the manager, managing member or directly or indirectly beneficially owns an interest in the manager or managing member of a limited liability company or other entity, (7) any performance-related fees (other than an asset-based fee) that each Holder or any Stockholder Associated Person is or may be entitled to based on any increase or decrease of the value of stock or other securities of the Company or Derivative Instruments, if any, including without limitation, any such interests held by immediate family members of such Holder or any Stockholder Associated Person, (8) any direct or indirect legal, economic or financial interest (including Short Interest) of each Holder and each Stockholder Associated Person, if any, in the outcome of any (x) vote to be taken at any annual or special meeting of stockholders of the Company or (y) any meeting of stockholders of any other entity with respect to any matter that is related, directly or indirectly, to any nomination or business proposed by any Holder under these Bylaws, (9) any direct or indirect interest of each Holder or any Stockholder Associated Person in any contract with the Company, any Affiliate of the Company or any principal competitor of the Company (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) and (10) any material pending or threatened action, suit or proceeding (whether civil, criminal, investigative, administrative or otherwise) in which any Holder or any Stockholder Associated Person is, or is reasonably expected to be made, a party or material participant involving the Company or any of its officers, directors or employees, or any Affiliate of the Company, or any officer, director or employee of such Affiliate (the information described in this Section 3(a)(iii)(B) shall be referred to as the “Specified Information”), (C) a representation by the Noticing Stockholder that such stockholder is a holder of record of stock of the Company entitled to vote at such meeting, will continue to be a stockholder of record of the Company entitled to vote at such meeting through the date of such meeting and intends to appear in person or by proxy at the meeting to propose such nomination or other business, (D) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by each Holder and each Stockholder Associated Person, if any, (E) any other information relating to each Holder and each Stockholder Associated Person, if any, that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or the election of directors in a contested election pursuant to Regulation 14A of the Exchange Act, (F) a representation by the Noticing Stockholder as to whether any Holder and/or Stockholder Associated Person intends or is part of a group which intends: (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding stock required to elect the proposed nominee or approve or adopt the other business being proposed and/or (ii) otherwise to solicit proxies from stockholders in support of such nomination or other business, (G) a certification by the Noticing Stockholder that each Holder and any Stockholder Associated Person has complied with all applicable federal, state and other legal requirements in connection with its acquisition of shares of stock or other securities of the Company and/or such person’s acts or omissions as a stockholder of the Company, (H) with respect to each nomination, the statement required by Rule 14a-19(b)(3) of the Exchange Act (or any successor provision), (I) the names and addresses of other stockholders (including beneficial owners) known by any of the Holder or Stockholder Associated Person to support such proposal(s) or nomination(s) and, to the extent known, the class or series and number of all shares of the Company’s stock beneficially owned or of record by such other stockholder(s) or other beneficial owner(s), and (J) a representation by the Noticing Stockholder as to the accuracy of the information set forth in the notice.
5
(iv) |
The Company may also, as a condition to any such nomination or business being deemed properly brought before a meeting of stockholders, require any Holder or any proposed nominee to deliver to the Secretary, within five Business Days of any such request, such other information as may reasonably be requested by the Board of Directors, in its sole discretion, including (A) such other information needed to determine (i) the eligibility of such proposed nominee to serve as a director of the Company, and (ii) whether such proposed nominee qualifies as an “independent director” or “audit committee financial expert” under applicable law, securities exchange rule or regulation or any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence and/or financial expertise of the Company's directors (collectively, the “Independence Standards”), and (B) such other information that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such proposed nominee. |
(v) |
In addition to the other requirements of this Section 3(a), each person who a Noticing Stockholder proposes to nominate for election or re-election as a director of the Company must deliver in writing (in accordance with the time periods prescribed for delivery of notice described herein) to the Secretary at the principal executive offices of the Company (A) a completed written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request of any stockholder of record identified by name within five Business Days of such written request), (B) a written representation and agreement (in the form provided by the Secretary upon written request of any stockholder of record identified by name within five Business Days of such written request) that such person in such person’s individual capacity intends to serve a full term if elected as a director of the Company, and (C) the representations and agreements required by the third paragraph of Section 1 of Article III of these Bylaws. |
(vi) |
A Noticing Stockholder’s notice pursuant to this Section 3(a) shall further be updated and supplemented, if necessary, so that all the information provided in such notice shall be true and correct as of the record date for the annual or special meeting, and as of the date that is ten Business Days prior to the meeting or any adjournment, or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the |
6
Company not later than five Business Days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight Business Days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten Business Days prior to the meeting or any adjournment or postponement thereof. A Noticing Stockholder in his or her original notice shall confirm his or her intention to update and supplement the information provided in his or her notice as required in the preceding sentence. In addition, if the Noticing Stockholder has delivered to the Company a notice relating to the nomination of directors, the Noticing Stockholder shall deliver to the Secretary of the Company no later than eight Business Days prior to the date of the meeting, or any adjournment or postponement thereof, if practicable (or, if not practicable, on the first practicable date prior to the date of the meeting or such adjournment or postponement thereof) reasonable evidence that it has complied with the requirements of Rule 14a-19 of the Exchange Act (or any successor provision). For the avoidance of doubt, the obligation to update and supplement set forth in this paragraph or any other Section of these Bylaws shall not limit the Company’s rights with respect to any deficiencies in any notice provided by a Noticing Stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a Noticing Stockholder who has previously submitted notice hereunder to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of stockholders.
(vii) |
Except as may be otherwise provided in these Bylaws or the Company’s Certificate of Incorporation (as amended and/or restated from time to time, the “Certificate of Incorporation”) with respect to the right of holders of preferred stock of the Company to nominate and elect a specified number of directors in certain circumstances, no person shall be eligible for election as a director of the Company, nor shall any business be conducted at an annual or special meeting of stockholders, unless properly nominated or brought forth in accordance with the procedures set forth in this Section 3(a) or, in the case of nominations, in Section 13 of this Article II and, with respect to proposed nominees, unless qualified under the other provisions of these Bylaws. Except as otherwise provided by law, at any meeting of stockholders, the chair of the meeting (or, in advance of any such meeting, the Board of Directors) shall (a) determine whether a nomination or proposed business was properly made in accordance with the foregoing procedures, as applicable, and (b) if any nomination or proposed business was not made in accordance with the foregoing procedures, as applicable, declare to the meeting that the defective nomination or proposed business shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Company. |
(b) |
To be timely, a Noticing Stockholder's notice of a nomination proposed to be made pursuant to clause (iii) of the first paragraph of Section 3(a) of this Article II, whether for an annual meeting or a special meeting called for the purpose of electing directors, or of other business proposed to brought before an annual meeting of stockholders pursuant to clause (iii) of the first paragraph of Section 3(a) of this Article II, must be delivered to the Secretary at the principal executive offices of the Company, (i) in the case of an annual meeting of stockholders, not later than the Close of Business on the 90th day nor earlier than the Close of Business on the 120th day prior to the anniversary date of the |
7
immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 25 days before or after such anniversary date, notice by the Noticing Stockholder to be timely must be so received not later than the Close of Business on the 15th day following the day on which notice of the date of the annual meeting was mailed or public announcement of the date of the annual meeting was made, whichever first occurs; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the Close of Business on the 15th day following the day on which notice of the date of the special meeting was mailed or public announcement of the date of the special meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of an annual or special meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. Notwithstanding anything in this Section 3(b) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement by the Company naming all of the nominees for director proposed by the Board of Directors or specifying the size of the increased Board of Directors at least 10 days prior to the last day a Noticing Stockholder may deliver a notice of nominations in accordance with the first sentence of this Section 3(b), a Noticing Stockholder’s notice required by this Section 3(b) shall also be considered timely, but only with respect to proposed nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Company not later than the Close of Business on the 10th day following the day on which a public announcement of such increase is first made by the Company.
(c) |
Notwithstanding anything to the contrary set forth herein, if the Noticing Stockholder, or a qualified representative of such stockholder, does not appear at the annual or special meeting, as applicable, to present a proposed nomination or business, such nomination or business shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Company. To be considered a “qualified representative” of the Noticing Stockholder, a person must be a duly authorized officer, manager or partner of such stockholder, or must be authorized by a written document executed by the Noticing Stockholder, or an electronic transmission delivered by such Noticing Stockholder to act for such stockholder as proxy at the annual or special meeting, and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the annual or special meeting. |
(d) |
For purposes of these Bylaws: |
“Affiliates” and “Associates” shall have the meanings attributed to such terms in Rule 12b-2 under the Exchange Act.
“Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in Moline, Illinois or New York, New York are authorized or obligated by law or executive order to close.
“Close of Business” on a particular day shall mean 5:00 p.m. local time at the principal executive offices of the Company, and if an applicable deadline falls on the Close of Business on a day that is not a Business Day, then the applicable deadline shall be deemed to be the Close of Business on the immediately preceding Business Day.
8
“delivered” shall mean and require both (i) hand delivery, overnight courier service, or by United States certified or registered mail, return receipt requested, in each case to the Secretary at the principal executive offices of the Company, and (ii) electronic mail to the Secretary.
“immediate family member” shall mean any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a specified person, and any person (other than a tenant or employee) sharing the household of such specified person.
“public announcement” shall mean disclosure: (i) in a press release released by the Company, provided such press release is released by the Company following its customary procedures, as reported by the Dow Jones News Services, Associated Press or a comparable national news service, or is generally available on internet news sites, or (ii) in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
“Stockholder Associated Person” shall mean, as to any Holder, (i) any person controlling, controlled by or under common control with such Holder or any of their respective Affiliates and Associates and (ii) any immediate family member of such Holder or an Affiliate or Associate of such Holder.
Section 4. SPECIAL MEETINGS.
(a) |
Special meetings of the stockholders may be called by (i) the Chair, (ii) the Chief Executive Officer or (iii) resolution of the Board of Directors, and shall be held at such place, if any, on such date, and at such time as the Board of Directors shall fix. Stockholders' ability to cause a special meeting to be held is described in Section 4(b) below. |
(b) |
Subject to the provisions of this Section 4(b) and all other applicable sections of these Bylaws, a special meeting of stockholders shall be called by the Secretary upon written request in proper form (a "Special Meeting Request") of one or more record holders of shares of stock of the Company representing not less than 25% of the voting power of all outstanding shares of stock of the Company (the "Requisite Percentage") who have held such shares continuously for at least one year prior to the date such request is delivered to the Company (the "One-Year Period"). For purposes of this Section 4(b) and for determining the Requisite Percentage, a stockholder of record or a beneficial owner, as the case may be, shall be deemed to own the shares of stock of the Company that such stockholder or, if such stockholder is a nominee, custodian or other agent that is holding the shares on behalf of another person (the "beneficial owner"), that such beneficial owner would be deemed to own pursuant to Rule 200(b) under the Exchange Act, excluding any shares as to which such stockholder or beneficial owner, as the case may be, does not have the right to vote or direct the vote at the special meeting or as to which such stockholder or beneficial owner, as the case may be, has entered into a derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares. The Board of Directors shall determine in good faith whether all requirements set forth in this Section 4(b) have been satisfied and such determination shall be binding on the Company and its stockholders. |
9
(i) |
A Special Meeting Request must be delivered to the attention of the Secretary at the principal executive offices of the Company. A Special Meeting Request shall be valid only if it is signed and dated by each stockholder of record submitting the Special Meeting Request and the beneficial owners, if any, on whose behalf the Special Meeting Request is being made, or such stockholder's or beneficial owner's duly authorized agent (each, a "Requesting Stockholder"), collectively representing the Requisite Percentage, and includes both the information required by Section 4(b)(ii) below and: (A)(x) the class, series and number of all shares of stock of the Company which are owned beneficially or of record by the Requesting Stockholder, (y) whether and the extent to which any Derivative Instrument or Short Interest has been entered into by or on behalf of such Requesting Stockholder with respect to stock of the Company and (z) whether any other transaction, agreement, arrangement or understanding (including any Short Interest) has been made by or on behalf of such Requesting Stockholder, the effect or intent of which is to mitigate loss to, or to manage risk or benefit of stock price changes for, such Requesting Stockholder or to increase or decrease the voting power or pecuniary or economic interest of such Requesting Stockholder with respect to stock of the Company; (B) a statement of the specific purpose(s) of the special meeting and the reasons for conducting such business at the special meeting and the text of any resolutions proposed for consideration; (C) an agreement by the Requesting Stockholders to notify the Company promptly in the event of any disposition prior to the record date for the special meeting of shares of the Company owned of record and an acknowledgement that any such disposition shall be deemed to be a revocation of such Special Meeting Request with respect to such disposed shares; and (D) appropriate evidence that the Requesting Stockholders own the Requisite Percentage as of the date on which the Special Meeting Request is delivered to the Secretary and have held such shares continuously for the One-Year Period; provided, however, that if the Requesting Stockholders are not the beneficial owners of the shares representing the Requisite Percentage, then to be valid, the Special Meeting Request must also include documentary evidence (or, if not simultaneously provided with the Special Meeting Request, such documentary evidence must be delivered to the Secretary within 10 days after the date on which the Special Meeting Request is delivered to the Secretary) that the beneficial owners on whose behalf the Special Meeting Request is made beneficially own the Requisite Percentage as of the date on which such Special Meeting Request is delivered to the Secretary and have held such shares continuously for the One-Year Period. In addition, the Requesting Stockholders and the beneficial owners, if any, on whose behalf the Special Meeting Request is being made shall (x) further update and supplement the information provided in the Special Meeting Request, if necessary, so that the information provided or required to be provided therein shall be true and correct as of the record date for the special meeting, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Company not later than five Business Days after the later of the record date for the meeting or the date that public announcement of the notice of the record date is first made and (y) promptly provide any other information reasonably requested by the Company. |
(ii) |
In addition to compliance with Section 4(b)(i), to be valid, a Special Meeting Request shall also include as to each Soliciting Stockholder (defined below): (A) in the case of any director nominations proposed to be presented at the special |
10
meeting, the information required by Section 3(a) of this Article II; and (B) in the case of any matter (other than a director nomination) proposed to be conducted at the special meeting, the information that would be required by Section 3(a) of this Article II in order to propose at an annual meeting of stockholders the matters proposed to be brought before the special meeting. "Soliciting Stockholder" shall mean, with respect to any Special Meeting Request, any of the following persons: (x) if the number of stockholders signing the Special Meeting Request delivered to the Company pursuant to Section 4(b)(i) is 10 or fewer, each stockholder signing such Special Meeting Request; (y) if the number of stockholders signing the Special Meeting Request delivered to the Company pursuant to Section 4(b)(i) is more than 10, each person who either was a participant in any solicitation of such Special Meeting Request or, at the time of the delivery to the Company of the Special Meeting Request, had engaged or intended to engage in any solicitation of proxies for the calling of such special meeting or for use at such special meeting (other than a solicitation of proxies on behalf of the Company); or (z) any Affiliate of a person described in (x) or (y) above.
(iii) |
A Special Meeting Request shall not be valid, and a special meeting requested by stockholders shall not be held, if: (A) the Special Meeting Request does not comply with this Section 4(b); (B) the Special Meeting Request relates to an item of business that is not a proper subject for stockholder action under applicable law; (C) the Special Meeting Request is delivered during the period commencing 120 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders and ending on the earlier of (x) the date of the next annual meeting and (y) 30 days after the first anniversary of the date of the previous annual meeting; (D) an identical or substantially similar item (as determined in good faith by the Board, a "Similar Item"), other than the election of directors, was presented at an annual or special meeting of stockholders held not more than 12 months before the Special Meeting Request is delivered; (E) a Similar Item was presented at an annual or special meeting of stockholders held not more than 120 days before the Special Meeting Request is delivered (and, for purposes of this clause (E), the election of directors shall be deemed to be a "Similar Item" with respect to all items of business involving the election or removal of directors, changing the size of the Board of Directors and the filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors); (F) a Similar Item is included in the Company's notice of meeting as an item of business to be brought before an annual or special meeting of stockholders that has been called but not yet held or that is called for a date within 120 days of the receipt by the Company of a Special Meeting Request (and, for purposes of this clause (F), the election of directors shall be deemed to be a "Similar Item" with respect to all items of business involving the election or removal of directors, changing the size of the Board of Directors and the filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors); or (G) the Special Meeting Request was made in a manner that involved a violation of Regulation 14A under the Exchange Act, or other applicable law. |
(iv) |
Special meetings of stockholders called pursuant to this Section 4(b) shall be held at such place, if any, on such date, and at such time as the Board of Directors shall fix; provided, however, that the special meeting shall not be held |
11
more than 120 days after receipt by the Company of a valid Special Meeting Request.
(v) |
The Requesting Stockholders may revoke a Special Meeting Request by written revocation delivered to the Secretary at the principal executive offices of the Company at any time prior to the special meeting. If, following such revocation (or deemed revocation pursuant to clause (C) of Section 4(b)(i)), there are unrevoked requests from Requesting Stockholders holding in the aggregate less than the Requisite Percentage, the Board of Directors, in its discretion, may cancel the special meeting. |
(vi) |
If none of the Requesting Stockholders appear or send a duly authorized agent to present the business to be presented for consideration specified in the Special Meeting Request, the Company need not present such business for a vote at the special meeting, notwithstanding that proxies in respect of such matter may have been received by the Company. |
Business transacted at any special meeting called pursuant to this Section 4(b) shall be limited to (A) the purpose(s) stated in the valid Special Meeting Request received from the Requisite Percentage of stockholders and (B) any additional matters that the Board of Directors determines to include in the Company's notice of the special meeting.
Section 5. NOTICE OF MEETINGS. Written, printed or electronic notice of each meeting of stockholders, stating the place, if any, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, be delivered not less than ten nor more than 60 days before the date of the meeting, either personally, by mail or by electronic transmission, by or at the direction of the Chair or the Secretary to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at his or her address as it appears on the stock transfer books of the Company, with postage thereon prepaid. Notice given by other means including by electronic transmission will be deemed given in accordance with Section 232 of the DGCL.
Attendance of a person at a meeting of stockholders, in person or by proxy, constitutes a waiver of notice of the meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
Section 6. FIXING OF RECORD DATES. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment or postponement thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than ten days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment or postponement of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned or postponed meeting.
12
Section 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Company shall prepare, or cause to be prepared, no later than the tenth day before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Nothing contained in this Section shall require the Company to include the electronic mail addresses or other electronic contact information of stockholders on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of ten days ending on the day before the meeting date, either (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Company. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company.
Section 8. QUORUM AND ADJOURNED MEETINGS. The holders of a majority in voting power of the shares entitled to vote at any meeting of stockholders, present in person or by proxy, shall constitute a quorum at such meeting except as otherwise provided by statute. Whenever a quorum shall be present at any meeting all matters shall be decided by vote of the holders of a majority in voting power of the shares present in person or represented by proxy and entitled to vote thereon, unless a different or minimum vote is required by statute, the Certificate of Incorporation, Section 2 of Article III or any other provisions of these Bylaws, the rules or regulations of any stock exchange applicable to the Company, or any law or regulation applicable to the Company or its securities, in which case such different or minimum vote shall be the applicable vote on the matter.
Meetings of stockholders may be adjourned by the person presiding over such meeting in accordance with these Bylaws for any reason and, if a quorum shall not be present, the holders of the shares entitled to vote thereon present in person or by proxy, may so adjourn the meeting. Unless these Bylaws require otherwise, when a meeting is adjourned to another time or place, if any (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication), notice need not be given of such adjourned meeting if the time, place, if any, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are (i) announced at the meeting at which the adjournment is taken, (ii) displayed during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication or (iii) set forth in the notice of meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting at which a quorum is present or represented, the Company may transact any business which might have been transacted at the original meeting.
Section 9. VOTING AT MEETINGS. Unless otherwise required by the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period.
Section 10. ORGANIZATION. The Chair shall preside at all meetings of the stockholders. In the absence or inability to act of the Chair, the Vice Chair, the Chief Executive Officer, or the President (in that order) shall preside, and in their absence or inability to act, another person chosen by the Board of Directors shall preside.
13
The Secretary of the Company shall act as secretary of each meeting of the stockholders. In the event of his or her absence or inability to act, the chair of the meeting shall appoint a person who need not be a stockholder to act as secretary of the meeting.
Section 11. INSPECTORS OF VOTING. Except as otherwise provided by statute, the Chair or in his or her absence the chair of the meeting, shall appoint inspectors of voting for each meeting of stockholders.
Section 12. MEETING PROCEDURES. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding person of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 13. PROXY ACCESS FOR DIRECTOR NOMINATIONS.
(a) |
Whenever the Board of Directors solicits proxies with respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 13, the Company shall include in its proxy statement for such annual meeting, in addition to any persons nominated for election by or at the direction of the Board of Directors (or any duly authorized committee thereof), the name, together with the Required Information (as defined below), of any person nominated for election to the Board of Directors by an Eligible Stockholder pursuant to and in accordance with this Section 13 (a “Stockholder Nominee”). For purposes of this Section 13, the “Required Information” that the Company will include in its proxy statement is (i) the information provided to the Secretary of the Company concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Company's proxy statement pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, and (ii) if the Eligible Stockholder so elects, a Supporting Statement (as defined in Section 13(h)). For the avoidance of doubt, nothing in this Section 13 shall |
14
limit the Company’s ability to solicit against any Stockholder Nominee or include in its proxy materials the Company’s own statements or other information relating to any Eligible Stockholder or Stockholder Nominee, including any information provided to the Company pursuant to this Section 13. Subject to the provisions of this Section 13, the name of any Stockholder Nominee included in the Company’s proxy statement for an annual meeting of stockholders shall also be set forth on the form of proxy distributed by the Company in connection with such annual meeting.
(b) |
In addition to any other applicable requirements, for a nomination to be made by an Eligible Stockholder pursuant to this Section 13, the Eligible Stockholder must deliver timely notice thereof (a "Notice of Proxy Access Nomination") in proper written form to the Secretary of the Company and must expressly request in the Notice of Proxy Access Nomination to have such nominee included in the Company's proxy materials pursuant to this Section 13. To be timely, the Notice of Proxy Access Nomination must be delivered to the Secretary at the principal executive offices of the Company not less than 120 days nor more than 150 days prior to the anniversary of the date that the Company first distributed its proxy statement to stockholders for the immediately preceding annual meeting of stockholders. In no event shall the public disclosure of an adjournment or postponement commence a new time period for the giving of a Notice of Proxy Access Nomination pursuant to this Section 13. |
(c) |
The maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in the Company's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (i) two or (ii) 20% of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 13 (the "Final Proxy Access Nomination Date") or, if such amount is not a whole number, the closest whole number below 20% (such greater number, as it may be adjusted pursuant to this Section 13(c), the "Permitted Number"). In the event that one or more vacancies for any reason occurs on the Board of Directors after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the Permitted Number shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Company's proxy materials as nominees recommended by the Board of Directors pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Company by such stockholder or group of stockholders) and (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Company's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose re-election at the upcoming annual meeting is being recommended by the Board of Directors. For purposes of determining when the Permitted Number has been reached, any individual nominated by an Eligible Stockholder for inclusion in the Company's proxy materials pursuant to this Section 13 whose nomination is subsequently withdrawn or whom the Board of Directors decides to nominate for election to the Board of Directors shall be counted as one of the Stockholder Nominees. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Company's proxy materials pursuant to this Section 13 shall rank such Stockholder Nominees based on the order in which the Eligible Stockholder |
15
desires such Stockholder Nominees to be selected for inclusion in the Company's proxy materials in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 13 exceeds the Permitted Number. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 13 exceeds the Permitted Number, the highest ranking Stockholder Nominee who meets the requirements of this Section 13 from each Eligible Stockholder will be selected for inclusion in the Company's proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Company each Eligible Stockholder disclosed as Owned in its Notice of Proxy Access Nomination. If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 13 from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of this Section 13 from each Eligible Stockholder will be selected for inclusion in the Company's proxy materials, and this process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached. Notwithstanding anything to the contrary contained in this Section 13, the Company shall not be required to include any Stockholder Nominees in its proxy materials pursuant to this Section 13 for any meeting of stockholders for which the Secretary of the Company receives a notice (whether or not subsequently withdrawn) that a stockholder intends to nominate one or more persons for election to the Board of Directors pursuant to clause (iii) of the first paragraph of Section 3(a) this Article II.
(d) |
An "Eligible Stockholder" is a stockholder or group of no more than 20 stockholders (counting as one stockholder, for this purpose, any two or more funds that are part of the same Qualifying Fund Group (as defined below)) that (i) has Owned (as defined in Section 13(e)) continuously for at least three years (the "Minimum Holding Period") a number of shares of common stock of the Company that represents at least three percent of the outstanding shares of common stock of the Company as of the date the Notice of Proxy Access Nomination is delivered to the Secretary at the principal executive offices of the Company in accordance with this Section 13 (the "Required Shares"), (ii) continues to Own the Required Shares through the date of the annual meeting and (iii) meets all other requirements of and complies with all of the procedures set forth in this Section 13. A "Qualifying Fund Group" means two or more funds that are (A) under common management and investment control, (B) under common management and funded primarily by the same employer or (C) a "group of investment companies" as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended. Whenever the Eligible Stockholder consists of a group of stockholders (including a group of funds that are part of the same Qualifying Fund Group), (1) each provision in this Section 13 that requires the Eligible Stockholder to provide any written statements, representations, undertakings, agreements or other instruments or to meet any other conditions shall be deemed to require each stockholder (including each individual fund) that is a member of such group to provide such statements, representations, undertakings, agreements or other instruments and to meet such other conditions (except that the members of such group may aggregate the shares that each member has Owned continuously for the Minimum Holding Period in order to meet the three percent Ownership requirement of the "Required Shares" definition) and (2) a breach of any obligation, agreement or representation under this Section 13 by any member of such group shall be deemed a breach by the Eligible Stockholder. No stockholder may be a member of more than one group of stockholders constituting an Eligible Stockholder with respect to any annual meeting. |
16
(e) |
For purposes of this Section 13, a stockholder shall be deemed to "Own" only those outstanding shares of common stock of the Company as to which the stockholder possesses both (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (A) sold by such stockholder or any of its Affiliates in any transaction that has not been settled or closed, (B) borrowed by such stockholder or any of its Affiliates for any purposes or purchased by such stockholder or any of its Affiliates pursuant to an agreement to resell, or (C) subject to any option, warrant, forward contract, swap, contract of sale, or other derivative or similar instrument or agreement entered into by such stockholder or any of its Affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Company, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such stockholder's or its Affiliates' full right to vote or direct the voting of any such shares and/or (2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or Affiliate. A stockholder shall "Own" shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's Ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares, provided that the stockholder has the power to recall such loaned shares on five Business Days' notice and includes in the Notice of Proxy Access Nomination an agreement that it (A) will promptly recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Company's proxy materials and (B) will continue to hold such recalled shares through the date of the annual meeting or (ii) the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. The terms "Owned," "Owning" and other variations of the word "Own" shall have correlative meanings. Whether outstanding shares of common stock of the Company are "Owned" for these purposes shall be decided by the Board of Directors. |
(f) |
To be in proper written form, the Notice of Proxy Access Nomination shall set forth or be accompanied by the following: |
(i) |
a statement by the Eligible Stockholder (A) setting forth and certifying as to the number of shares it Owns and has Owned continuously for the Minimum Holding Period, (B) agreeing to continue to Own the Required Shares through the date of annual meeting, (C) indicating whether it intends to continue to own the Required Shares for at least one year following the annual meeting and (D) confirming its intention to notify the Company of any defects in, and otherwise update and supplement, the information provided to the Company pursuant to this Section 13 as required by Section 13(i); |
(ii) |
one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to the Secretary at the principal executive offices of the Company, the |
17
Eligible Stockholder Owns, and has Owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder's agreement to provide, within five Business Days following the later of the record date for the annual meeting or the date that public announcement of the notice of the record date is first made, one or more written statements from the record holder and such intermediaries verifying the Eligible Stockholder's continuous Ownership of the Required Shares through the record date;
(iii) |
a copy of the Schedule 14N that has been or is concurrently being filed with the Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act; |
(iv) |
the information, representations, agreements and other documents that would be required to be set forth in or included with a stockholder's notice of a nomination proposed to be made pursuant to clause (iii) of the first paragraph of Section 3(a) this Article II (including the executed consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected) and a completed and signed representation and agreement of each Stockholder Nominee as required by the third paragraph of Section 1 of Article III of these Bylaws; |
(v) |
the details of any relationship that existed within the past three years and that would have been described pursuant to Item 6(e) of Schedule 14N (or any successor item) if it existed on the date of submission of the Schedule 14N; |
(vi) |
a representation that the Eligible Stockholder (A) did not acquire, and is not holding, any securities of the Company for the purpose or with the intent of changing or influencing control of the Company, (B) has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) it is nominating pursuant to this Section 13, (C) has not engaged and will not engage in, and has not and will not be a "participant" in another person's, "solicitation" within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (D) has not distributed and will not distribute to any stockholder of the Company any form of proxy for the annual meeting other than the form distributed by the Company, (E) has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting and (F) has provided and will provide facts, statements and other information in all communications with the Company and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; |
(vii) |
an undertaking that the Eligible Stockholder agrees to (A) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Company or out of the information that the Eligible Stockholder provided to the Company, (B) indemnify and hold harmless the Company and each of its directors, officers and employees individually against any liability, loss or damages in connection with |
18
any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Company or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 13 or any solicitation or other activity in connection therewith and (C) file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Company relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Exchange Act;
(viii) |
in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders, the designation by all group members of one member of the group that is authorized to receive communications, notices and inquiries from the Company and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 13 (including withdrawal of the nomination); and |
(ix) |
in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Company that demonstrates that the funds are part of the same Qualifying Fund Group. |
(g) |
In addition to the information required or requested pursuant to Section 13(f) or any other provision of these Bylaws, (i) the Company may require any proposed Stockholder Nominee to furnish any other information (A) that may reasonably be requested by the Company to determine whether the Stockholder Nominee would be independent under the Independence Standards, (B) that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee or (C) that may reasonably be requested by the Company to determine the eligibility of such Stockholder Nominee to be included in the Company's proxy materials pursuant to this Section 13 or to serve as a director of the Company, and (ii) the Company may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Company to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting. |
(h) |
The Eligible Stockholder may, at its option, provide to the Secretary of the Company, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a "Supporting Statement"). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in this Section 13, the Company may omit from its proxy materials, or may supplement or correct, any information, including all or any portion of a Supporting Statement, if the Board of Directors in good faith determines that (A) such information is not true and correct in all material respects or omits to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, (B) such information directly or indirectly impugns character, integrity or personal reputation of, or directly or indirectly makes charges concerning improper, |
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illegal or immoral conduct or associations, without factual foundation, with respect to, any person, or (C) the inclusion of such information in the Company's proxy materials would otherwise violate the proxy rules of the Securities and Exchange Commission or any other applicable law, rule or regulation.
(i) |
In the event that any information or communications provided by an Eligible Stockholder or a Stockholder Nominee to the Company or its stockholders is not, when provided, or thereafter ceases to be true and correct in all material respects or omits to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, such Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Company of any such defect and of the information that is required to correct any such defect. Without limiting the forgoing, an Eligible Stockholder shall provide immediate notice to the Company if the Eligible Stockholder ceases to Own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Company pursuant to this Section 13 shall further update and supplement such information, if necessary, so that all such information shall be true and correct as of the record date for the annual meeting, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Company not later than five Business Days following the later of the record date for the annual meeting or the date that public announcement of the notice of the record date is first made. For the avoidance of doubt, no notification, update or supplement provided pursuant to this Section 13(i) or otherwise shall be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Company relating to any such defect (including the right to omit a Stockholder Nominee from its proxy materials pursuant to this Section 13). |
(j) |
Notwithstanding anything to the contrary contained in this Section 13, the Company shall not be required to include in its proxy materials, pursuant to this Section 13, any Stockholder Nominee (i) who would not be an independent director under the Independence Standards, (ii) whose election as a member of the Board of Directors would cause the Company to be in violation of these Bylaws, the Certificate of Incorporation, the rules and listing standards of the securities exchanges upon which the stock of the Company is listed or traded, or any applicable law, rule or regulation, (iii) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, (iv) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten years, (v) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act, or (vi) who shall have provided any information to the Company or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading. |
(k) |
Notwithstanding anything to the contrary set forth herein, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 13 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Company's proxy materials pursuant to this Section 13, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board of Directors (or any duly authorized committee thereof) or the chair of the |
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annual meeting, (A) the Company may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (B) the Company shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (C) the chair of the annual meeting shall declare such nomination to be invalid and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Company. In addition, if the Eligible Stockholder (or a qualified representative thereof) does not appear at the annual meeting to present any nomination pursuant to this Section 13, such nomination shall be declared invalid and disregarded as provided in clause (C) above.
(l) |
Any Stockholder Nominee who is included in the Company's proxy materials for a particular annual meeting of stockholders but either (i) withdraws from or becomes ineligible or unavailable for election at the annual meeting, or (ii) does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election, will be ineligible to be a Stockholder Nominee pursuant to this Section 13 for the next two annual meetings of stockholders. For the avoidance of doubt, the immediately preceding sentence shall not prevent any stockholder from nominating any person to the Board of Directors pursuant to clause (iii) of the first paragraph of Section 3(a) this Article II. |
ARTICLE III ― THE BOARD OF DIRECTORS
Section 1. NUMBER AND QUALIFICATIONS. The business and affairs of the Company shall be under the direction of or managed by a Board of Directors who need not be residents of the State of Delaware or stockholders of the Company. The number of directors may be increased or decreased from time to time by resolution of the Board of Directors, within the limits set forth in the Certificate of Incorporation, provided no decrease shall have the effect of shortening the term of any incumbent director.
Persons who are or have been officers of the Company, other than persons who hold or have held the offices of Chair, Chief Executive Officer or President, shall not be elected directors of the Company for terms beginning after the date they retire from active employment with the Company. A director shall retire from the Board effective with the first annual meeting of stockholders following such director’s 75th birthday, except in rare circumstances approved by the Board of Directors.
In order to be eligible for election or re-election as a director of the Company, a person must deliver to the Secretary at the principal executive offices of the Company a written representation and agreement that such person (i) is not and will not become a party to (A) any agreement, arrangement or understanding (whether written or oral) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Company, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Company in such representation and agreement or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Company, with such person’s fiduciary duties under applicable law, (ii) is not and will not become a party to (A) any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification (a “Compensation Arrangement”) in connection with such person’s nomination or candidacy for director that has not been disclosed to the Company in such representation and agreement or (B) any Compensation Arrangement in connection with service or action as a director, (iii) would be in compliance, if elected as a director of the Company, and will comply with all applicable rules of the exchanges upon which the securities of the Company are listed and with the Company’s code of business conduct, code of ethics, corporate governance policies, stock ownership and trading policies and guidelines, and any other policies or guidelines of the Company applicable to directors, and (iv) will make such other acknowledgments, enter into such agreements and provide such information as the Board of Directors requires of all directors, including promptly submitting all completed and signed questionnaires required of the Company’s directors.
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The written representation and agreement provided for in this Section 1 shall be in addition to any representations, agreements, certifications and information that a person seeking election or re-election as a director of the Company must deliver or submit to the Company or any officer of the Company under any other provision of these Bylaws, the Certificate of Incorporation or any applicable law, rule or regulation.
Section 2. ELECTION. The directors shall be elected for the terms as specified in the Certificate of Incorporation at the annual meeting of stockholders and each director elected shall hold office during the term for which he or she is elected and until his or her successor is elected and qualified, subject to prior death, resignation, retirement or removal from office. Any director may be removed from office with or without cause.
Except as provided in Section 3 of this Article III, each director shall be elected by the vote of the majority of the votes cast with respect to that director's election at any meeting for the election of directors at which a quorum is present, provided that directors shall be elected by the vote of the plurality of the votes cast at any meeting for the election of directors at which a quorum is present and for which (A) the Secretary of the Company receives notice that one or more stockholders have proposed to nominate one or more persons for election or re-election to the Board of Directors, which notice purports to be in compliance with the requirements for stockholder nominations set forth in these Bylaws, irrespective of whether the Board of Directors at any time determines that any such notice is not in compliance with such requirements, and (B) such nomination or nominations have not been formally and irrevocably withdrawn by such stockholder(s) on or prior to the date that is 10 days in advance of the date that the Company gives notice of the meeting to the stockholders. For purposes of this Section 2, a majority of the votes cast means that the number of shares voted "for" a director must exceed the number of votes cast "against" that director. If a nominee for director is not elected and that nominee is an incumbent director, the director shall promptly tender his or her written resignation to the Board of Directors, subject to the Board of Director’s acceptance. The Corporate Governance Committee will make a recommendation to the Board of Directors on whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors will act on the tendered resignation, taking into account the Corporate Governance Committee's recommendation, and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. The director who tenders his or her resignation will not participate in the decision of the Board of Directors or the Corporate Governance Committee.
Section 3. VACANCIES. Except as required by law, any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, and any other vacancy occurring on the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
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Any director so chosen shall serve until the next annual meeting of stockholders and until his or her successor has been duly elected and qualified, subject, however, to such director's prior death, resignation, retirement or removal from office.
Section 4. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held on at least a quarterly basis. One regular meeting shall be held as soon as practicable following the adjournment of the annual meeting of stockholders, at such time and place, if any, within or outside the State of Delaware as may be designated by the Board of Directors. Other regular meetings of the Board of Directors shall be held on such dates and at such places, if any, within or outside the State of Delaware as may be designated from time to time by the Board of Directors.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held upon call of the Chair at any time; special meetings also shall be called by the Chair or by the Secretary whenever requested by one-third of the directors then in office. Such meetings shall be held at the principal business office of the Company in Rock Island County, Illinois, or at any other place either within or outside the State of Delaware, including by means of remote communication, as is designated in the call and notice for the meeting.
Section 6. NOTICE OF MEETINGS. Notice need not be given of regular meetings of the Board of Directors, nor shall any notice be required for the meeting of the Board of Directors to be held following the annual meeting of stockholders, any of which may be held at such time and at such place, if any, or by means of remote communication, as may from time to time be determined by the Board of Directors.
Notice of special meetings of the Board of Directors shall be provided at least 24 hours before each such meeting. Such notice may be written (including by electronic transmission) or oral (either in person or by telephone), shall include the time, date, and place, if any, of the meeting, and the purpose or purposes for which the meeting is called. Notice of the special meeting shall be given to each director.
Notice of any meeting of the Board of Directors for which a notice is required may be waived in writing or by electronic transmission given by the person or persons entitled to such notice, whether before or after the time of such meeting, and such waiver shall be equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting of the Board of Directors for which a notice is required need be specified in the waiver of notice of such meeting. Attendance of a director at any such meeting (in person or by remote communication) shall constitute a waiver of notice thereof, except attendance for the express purpose of objecting at the beginning of the meeting to the transaction of any business because such meeting is not lawfully called or convened.
Section 7. QUORUM. A majority of the number of directors in office shall constitute a quorum for the transaction of business. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors except as otherwise provided by law or these Bylaws. During an emergency as defined in Section 110 of the DGCL, a majority of the surviving members of the Board of Directors who have not been rendered incapable of acting as the result of physical or mental incapacity or the difficulty of transportation or connection to the place of the meeting or electronic medium shall constitute a quorum for the purpose of filling vacancies in the Board of Directors and among the elected officers of the Company.
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Section 8. ORGANIZATION. The Chair shall preside at all meetings of the Board of Directors. In the absence or inability to act of the Chair, the Vice Chair, the President, if also a director, or another director designated by the Board of Directors (in that order) shall preside.
Section 9. ACTIONS BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or of such committee as the case may be. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of proceedings of the Board of Directors or such committee.
Section 10. MEETINGS BY MEANS OF REMOTE COMMUNICATION. Members of the Board of Directors of the Company, or any committee designated by the Board of Directors, may participate in a meeting by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting.
Section 11. INTERESTED DIRECTORS: QUORUM.
(a) |
No contract or transaction between the Company and one or more of its directors or officers, or between the Company and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: |
(1)The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2)The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3)The contract or transaction is fair as to the Company as of the time it is authorized, approved, or ratified by the Board of Directors, a committee thereof or the stockholders.
(b) |
Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. |
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Section 12. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of the full Board of Directors, and irrespective to any personal interest of its members, shall provide reasonable compensation of all directors for services, ordinary or extraordinary, to the Company as directors, officers or otherwise. Directors shall be paid their actual expenses of attendance at each meeting of the Board of Directors and committees thereof.
ARTICLE IV ― EXECUTIVE COMMITTEE
Section 1. DESIGNATION AND MEMBERS. During the intervals between meetings of the Board of Directors and subject to such limitations as may be imposed by law and these Bylaws, an Executive Committee shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the Company. The membership of such Executive Committee shall include the Chair and the committee chairs of each committee established under Article V of these Bylaws, or such other directors as are designated by the Board of Directors at the recommendation of the Chair.
This designation of the Executive Committee and the delegation of authority granted to it shall not operate to relieve the Board of Directors, or any director, of any responsibility imposed upon it or him or her by law. No member of the Executive Committee shall continue to be a member thereof after he or she ceases to be a director of the Company.
Section 2. LIMITATION OF POWERS. In addition to any authority which may not be delegated to a committee of the Board of Directors pursuant to the DGCL, neither the Executive Committee, nor any other Board Committee, shall have the authority of the Board of Directors in reference to amending the Certificate of Incorporation; adopting an agreement of merger or consolidation with another corporation or corporations; amending, altering or repealing the Bylaws; electing or removing the Chair, Vice Chair, President, any Executive Vice President or any Senior Vice President; declaring dividends; or amending, altering or repealing any resolution of the Board of Directors which by its terms provides that it shall not be amended, altered or repealed by the Executive Committee. Nor, unless specifically authorized by the Board of Directors, shall the Executive Committee have the authority to incur indebtedness for a term of longer than one year except that this limitation shall not apply to indebtedness of up to five years which (i) does not involve registration with the Securities and Exchange Commission and (ii) does not result in a total of indebtedness of $50,000,000 or more for a term longer than one year to any one lender, nor shall this limitation apply to the guaranty of an indebtedness which runs longer than one year.
In any resolution of the Board of Directors providing for action to be taken or approval to be given by, or a report to be made to, the Board of Directors, the term "Board of Directors" standing alone shall not be deemed to mean the Executive Committee.
All minutes of meetings of the Executive Committee shall be submitted to the next succeeding meeting of the Board of Directors, provided that no rights other than those of the Company shall be affected by any revision or alteration by the Board of Directors of actions of the Executive Committee.
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Section 3. PROCEDURE, MEETINGS, QUORUM. The Chair shall preside at all meetings of the Executive Committee. In the absence or inability to act of the Chair, another member of the Executive Committee designated by the Executive Committee shall preside.
The Executive Committee shall keep a record of its acts and proceedings.
Meetings of the Executive Committee shall be called at the request of any member of the Executive Committee with the concurrence of the Chair, or in the absence or inability to act of the Chair, the concurrence of a majority of the remaining members of the Executive Committee. Such meeting shall be held at such location, if any, as shall be stated in the notice for such meetings.
Notice of meetings of the Executive Committee shall be provided at least 24 hours before each such meeting. Such notice may be written (including by electronic transmission) or oral (either in person or by telephone), and shall include the time, date and place, if any, of the meeting. Notice of the meeting shall be given to each member of the Executive Committee.
Notice of any meeting for which notice is required may be waived in writing or by electronic transmission given by the person or persons entitled to such notice, whether before or after the time of such meeting, and such waiver shall be equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of the meeting for which a notice is required need be specified in the waiver of notice of such meeting. Attendance of a member of the Executive Committee at any such meeting (in person or by remote communication) shall constitute a waiver of notice thereof, except attendance for the express purpose of objecting at the beginning of the meeting to the transaction of any business because such meeting is not lawfully called or convened.
A majority of the members of the Executive Committee shall constitute a quorum for the transaction of any business, and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of the Executive Committee.
ARTICLE V ― BOARD COMMITTEES OTHER THAN THE EXECUTIVE COMMITTEE
Section 1. GENERAL PROVISIONS. The Board of Directors may from time to time establish such committees of the Board as it shall deem appropriate in addition to the Executive Committee. The resolution establishing each such committee shall state its powers and duties and the number of directors who shall be members. The membership of and committee chair of each such committee shall be designated by the Board of Directors upon the recommendation of the Chair. No such committee of the Board shall exercise any of the powers of the Board other than those set forth in such resolution establishing the committee, as such resolution may be amended from time to time.
Section 2. PROCEDURES, MEETINGS, QUORUM. Meetings of such committees of the Board of Directors may be held on call of the chair of the committee or upon call issued by the Secretary of the Company at the request of a majority of the members of such committee.
Unless stated otherwise in the resolution establishing a committee, a majority of the members of each such committee shall constitute a quorum for the conduct of business and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee.
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Meetings of such committees may be held at such place, if any, as may be designated in the notice of meeting. Notice of meetings shall be given by the Secretary of the Company or the chair of the committee and may be by telephone or written notice, including by electronic communication, delivered to the office of each committee member at least 24 hours prior to the meeting or, if notice is delivered by mail, mailed no later than four days prior to the meeting date. The notice need not specify the business to be conducted at a meeting.
ARTICLE VI ― THE OFFICERS
Section 1. NUMBER AND QUALIFICATIONS. The principal corporate officers of the Company shall consist of a Chair, a Chief Executive Officer, a President, a Secretary, and a Treasurer; and may include a Vice Chair, one or more Executive Vice Presidents, and one or more Senior Vice Presidents (the “Principal Corporate Officers”). The Company may also have one or more Vice Presidents, a General Counsel, a Comptroller and such other corporate officers, divisional officers, and assistant officers as may be elected or appointed pursuant to these Bylaws. Any number of offices may be held by the same person. The Chair, Vice Chair and Chief Executive Officer shall be members of the Board of Directors, but no other officer need be a director.
Section 2. GENERAL DUTIES. Each officer shall have such authority and perform such duties as officers of the Company as may be provided by or delegated in accordance with Sections 7 through 17 of this Article VI, or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws. All agents and employees of the Company not elected by the Board of Directors may be appointed by the Chair or by persons authorized by him or her to do so, to serve for such time and to have such duties as the appointing authority may determine from time to time.
Section 3. ELECTION AND TERM OF OFFICE. The Principal Corporate Officers and any divisional officers so designated by the Board of Directors (“Designated Divisional Officers”) shall be elected annually by the Board of Directors at its regular meeting in February of each year or at such other time as determined by the Board of Directors. Any other corporate officers, divisional officers, and assistant officers may be appointed by the Chair. Each such officer shall hold office for one year and until his or her successor is elected and qualified, or until he or she shall have resigned, or shall have been removed in the manner provided in Section 4 of this Article VI.
Section 4. REMOVAL. Any Principal Corporate Officer or Designated Divisional Officer may be removed at any time by the Board of Directors, and any other officer may be removed by the Chair, whenever in the judgment of the Board of Directors or the Chair, respectively, the interests of the Company will be served thereby. Such removal shall be without prejudice to the contract rights, if any, of the person removed. Election of an officer shall not of itself create contract rights.
Section 5. RESIGNATIONS. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Chair. Such resignation shall take effect at the time specified therein and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective.
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Section 6. VACANCIES. The Board of Directors may at any time create and fill new offices and may at any time fill the unexpired portion of the term of any vacant office. In addition, as to any corporate office below the rank of Senior Vice President, or any divisional office below the rank of Designated Divisional Officer, the Chair may at any time create and fill new offices and may at any time fill the unexpired term of any such office.
Section 7. CHAIR. The Chair, when present, shall preside at all meetings of the stockholders, of the Board of Directors and of the Executive Committee. He or she may call special meetings of the stockholders and of the Board of Directors.
Section 8. VICE CHAIR. The Vice Chair, if any, shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chair may from time to time delegate to him or her. In the absence or inability to act of the Chair, the Vice Chair, if any, shall perform the duties of the Chair.
Section 9. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have the active executive management of the operations of the Company, and shall see that the orders and resolutions of the Board of Directors and of the Executive Committee are carried into effect. He or she shall have power to execute in the name of the Company all bonds, contracts, other obligations and property conveyances which are duly authorized, and he or she shall have all the powers and perform all duties devolving upon him or her by law and as chief executive officer of the Company. From time to time, he or she shall bring to the attention of the Board of Directors such information or recommendations concerning the business and affairs of the Company as he or she may deem necessary or appropriate. In the absence or inability to act of the Chair and the Vice Chair, the Chief Executive Officer shall perform the duties of the Chair.
Section 10. PRESIDENT. The President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chief Executive Officer may, from time to time, delegate to him or her. In the absence or inability to act of the Chair, the Vice Chair, and the Chief Executive Officer, the President, if also a director, shall perform the duties of Chair.
Section 11. EXECUTIVE VICE PRESIDENTS. Each Executive Vice President, if any, shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chair or Chief Executive Officer may, from time to time, delegate to him or her.
Section 12. SENIOR VICE PRESIDENTS. Each Senior Vice President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chair or Chief Executive Officer may, from time to time, delegate to him or her.
Section 13. VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chair or the Chief Executive Officer may, from time to time, delegate to him or her.
Section 14. SECRETARY. The Secretary shall act as secretary of all meetings of the stockholders, the Board of Directors and the Executive Committee. He or she shall prepare and keep or cause to be kept in books provided for the purpose minutes of all meetings of the stockholders, the Board of Directors and the Executive Committee; shall see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law, shall be custodian of the records and of the seal of the Company and see that the seal is affixed to all documents, the execution of which on behalf of the Company under its seal is duly authorized and, in general, he or she shall perform all duties incident to the office of Secretary and as required by law and such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chair or the Chief Executive Officer.
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Each Assistant Secretary (if any) shall assist the Secretary in his or her duties and shall perform such other duties as the Board of Directors may prescribe from time to time, or the Chair, the Chief Executive Officer or the Secretary may delegate to him or her from time to time. In the event of the absence or inability to act of the Secretary, his or her duties shall be performed by an Assistant Secretary designated by the Chair or the Chief Executive Officer.
Section 15. TREASURER. The Treasurer shall have charge and custody of, and be responsible for, all moneys, notes and securities in the possession of the Company, and deposit all funds in the name of the Company in such banks, trust companies or other depositories as he or she may select; shall receive, and give receipts for, moneys due and payable to the Company from any source whatsoever; and, in general, he or she shall perform all the duties incident to the office of Treasurer and as required by law and such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chair or the Chief Executive Officer.
Each Assistant Treasurer (if any) shall assist the Treasurer in his or her duties and shall perform such other duties as the Board of Directors may prescribe from time to time, or the Chair, the Chief Executive Officer or the Treasurer may delegate to him or her from time to time. In the event of the absence or inability to act of the Treasurer, his or her duties shall be performed by an Assistant Treasurer designated by the Chair or the Chief Executive Officer.
Section 16. GENERAL COUNSEL. The General Counsel shall be the chief legal advisor of the Company as to all matters affecting the Company and its business and, in general, he or she shall perform all the duties incident to the office of General Counsel and such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chair or the Chief Executive Officer.
Section 17. COMPTROLLER. The Comptroller shall direct the preparation and maintenance, on a current basis, of such accounting books, records and reports as may be necessary to permit the directors, officers and executives of the Company to exercise adequate planning and control of the business of the Company or as may be required by law; and in general, he or she shall perform all the duties incident to the office of Comptroller and such other duties as may be assigned to him or her from time to time by the Board of Directors, the Chair or the Chief Executive Officer.
ARTICLE VII ― ACTS WITH RESPECT TO SECURITIES OWNED
Section 1. ACTS WITH RESPECT TO SECURITIES OWNED. Subject always to the specific directions of the Board of Directors, the Chair, the Vice Chair, the Chief Executive Officer, the President, an Executive Vice President, a Senior Vice President, a Vice President, or the Treasurer on behalf of the Company may exercise all the rights, powers and privileges of ownership of any security or securities owned by the Company, and with respect to security or securities owned by the Company of another corporation or other entity, may also exercise the right to vote, by proxy or otherwise.
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The endorsement of such officers may be attested by the Secretary or an Assistant Secretary either with or without affixing thereto the corporate seal.
ARTICLE VIII ― OTHER PROVISIONS
Section 1. CERTIFICATES OF STOCK. The shares of the Company may be represented by a certificate or may be uncertificated. Certificates to evidence ownership of stock of the Company shall be in such form as the Board of Directors shall from time to time approve. The Chair, President, Chief Executive Officer, Chief Financial Officer or the Treasurer is authorized to appoint a transfer agent and registrar for the stock of the Company and to make all other appointments of agents related to the stock of the Company. The Chair, President, Chief Executive Officer, Chief Financial Officer or the Treasurer may adopt such regulations concerning the authority and duties of the transfer agent and registrar, the transfer and registration of certificates of stock and the substitution or replacement of lost, stolen, destroyed or mutilated certificates as such officer shall see fit.
Section 2. LOANS. The Company may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Company or of any of its subsidiaries, including any officer or employee who is a director of the Company or of any of its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Company. The loan, guaranty or other assistance may be with or without interest and may be unsecured or secured in such manner as the Board of Directors shall approve including, without limitation, a pledge of shares of stock of the Company.
Section 3. AMENDMENT OF BYLAWS. In addition to such power of amendment as is vested by law in the stockholders, the Board of Directors is authorized to alter, amend or repeal these Bylaws.
Section 4. INTERPRETATION AND APPLICATION OF THESE BYLAWS. To the fullest extent permitted by law and except as otherwise expressly provided by these Bylaws, the Board of Directors (or any other person or body authorized by the Board of Directors) shall have the power and authority to interpret these Bylaws and make any and all determinations necessary or appropriate to apply any provision of these Bylaws to any persons, facts or circumstances. Any such interpretation or determination made in good faith by the Board of Directors (or any other person or body authorized by the Board of Directors) shall be conclusive and binding on all persons, including the Company and its stockholders.
Section 5. FORUM FOR ADJUDICATION OF CERTAIN DISPUTES. Unless the Company consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee or agent of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company or any director, officer, stockholder, employee or agent of the Company arising out of or relating to any provision of the DGCL or the Company’s Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against the Company or any director, officer, stockholder, employee or agent of the Company governed by the internal affairs doctrine of the State of Delaware, provided, however, that, in the event that the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware, in each such case, unless the Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) has dismissed a prior action by the same plaintiff asserting the same claims because such court lacked personal jurisdiction over an indispensable party named as a defendant therein.
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Failure to enforce the foregoing provisions would cause the Company irreparable harm and the Company shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company shall be deemed to have notice of and consented to the provisions of this Section 5. If any action the subject matter of which is within the scope of this Section 5 is filed in a court other than the Court of Chancery of the State of Delaware (or any other state or federal court located within the State of Delaware, as applicable) (a “Foreign Action”) by or in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the Court of Chancery of the State of Delaware (or such other state or federal court located within the State of Delaware, as applicable) in connection with any action brought in any such court to enforce this Section 5 and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Company’s ongoing consent right as set forth above in this Section 5 with respect to any current or future actions or claims.
ARTICLE IX – INDEMNIFICATION
Section 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 3 of this Article IX, the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company), by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
Section 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
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Subject to Section 3 of this Article IX, the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Section 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this Article IX (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article IX, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Company. To the extent, however, that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.
Section 4. GOOD FAITH DEFINED. For purposes of any determination under Section 3 of this Article IX, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the Company or another enterprise, or on information supplied to such person by the officers of the Company or another enterprise in the course of their duties, or on the advice of legal counsel for the Company or another enterprise or on information or records given or reports made to the Company or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or another enterprise. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article IX, as the case may be.
Section 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary determination in the specific case under Section 3 of this Article IX, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 1 or Section 2 of this Article IX. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article IX, as the case may be.
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Neither a contrary determination in the specific case under Section 3 of this Article IX nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Company promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.
Section 6. EXPENSES PAYABLE IN ADVANCE. Expenses (including attorneys’ fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company as authorized in this Article IX. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Company deems appropriate.
Section 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Company that indemnification of the persons specified in Section 1 and Section 2 of this Article IX shall be made to the fullest extent permitted by law. The provisions of this Article IX shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or Section 2 of this Article IX but whom the Company has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.
Section 8. INSURANCE. The Company may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power or the obligation to indemnify such person against such liability under the provisions of this Article IX.
Section 9. CERTAIN DEFINITIONS. For purposes of this Article IX, references to “the Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article IX with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. The term “another enterprise” as used in this Article IX shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Company as a director, officer, employee or agent.
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For purposes of this Article IX, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article IX.
Section 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IX shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained in this Article IX to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 of this Article IX), the Company shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Company.
Section 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred in this Article IX to directors and officers of the Company.
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Exhibit 10.1
AMENDED & RESTATED
CHANGE IN CONTROL SEVERANCE PROGRAM
OF DEERE & COMPANY
Effective as of 29 August 2023
TABLE OF CONTENTS
AMENDED & RESTATED
CHANGE IN CONTROL SEVERANCE PROGRAM
OF DEERE & COMPANY
1.Purpose
The purposes of the Program are (i) to provide Participants with severance payments and benefits in the event of a Qualifying Termination, (ii) to assure the Company that it will have the continued dedication of the Participants and the availability of their advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and (iii) to provide an additional incentive for the Participants to remain in the employ of the Company. The Program is intended to be a “top-hat” plan for a select group of management or highly compensated employees of the Company, but is not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code of 1986, as amended (the “Code”).
2.Definitions
Whenever used in the Program, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
(a)“Administrator” means the Company’s Senior Vice President and Chief People Officer or such other person designated by the Committee.
(b)“Base Salary” means a Participant’s annual rate of salary, excluding amounts received under incentive or other bonus plans, whether or not deferred.
(c)“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(d)“Board” means the Board of Directors of the Company.
(e)“Bonus” means the target bonus amount for a Participant for the fiscal year in which the Effective Date of Termination occurs pursuant to the John Deere Short -Term Incentive Bonus Plan or any successor plan or arrangement thereto. For purposes of the Program, the term “Bonus” shall not include any payments made pursuant to the Company’s Long-Term Incentive Cash Plan, Long-Term Incentive Plan or any successor plans or arrangements thereto.
(f)“Cause” means (i) a Participant’s willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability or occurring after issuance by a Participant of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to such Participant that specifically identifies the manner in which the Company believes that such Participant has willfully failed to substantially perform his duties, and after such Participant has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (ii) a Participant’s willfully engaging in conduct (other than conduct covered under (i) above) which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (iii) a Participant’s having been convicted of, or having entered a plea of nolo contendere to, a felony.
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For purposes of this definition, no act, or failure to act, on a Participant’s part shall be deemed “willful” unless done, or omitted to be done, by a Participant not in good faith and without reasonable belief that the action or omission was in the best interests of the Company.
(g)“CEO” means the Chief Executive Officer of the Company.
(h)“Change in Control” means a change in control of a nature that would be required to be reported in response to Schedule 14A of Regulation 14A promulgated under the Exchange Act whether or not the Company is then subject to such reporting requirement, provided that, without limitation, such a Change in Control shall be deemed to have occurred if:
(i)any “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act) (other than a Participant or group of Participants, the Company or a subsidiary, any employee benefit plan of the Company including its trustee, or any corporation or similar entity which becomes the Beneficial Owner of securities of the Company in connection with a transaction excepted from the provisions of clause (iii) below) is or becomes the “beneficial owner” (as defined in Rule 13(d-3) under the Exchange Act), directly or indirectly, of securities of the Company (not including the securities beneficially owned or any securities acquired directly from the Company) representing thirty percent (30%) or more of the combined Voting Power of the Company’s then outstanding securities;
(ii)the following individuals shall cease to constitute a majority of the Board: individuals who on the Participation Date constitute the Board and any new director(s) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Participation Date or whose appointment or election or nomination for election was previously so approved but excluding, for this purpose, any such new director whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;
(iii)there is consummated a merger, consolidation or similar business combination transaction of the Company (including, for the avoidance of doubt, any business combination structured as a forward or reverse triangular merger involving any direct or indirect subsidiary of the Company) with any other company, other than a merger, consolidation or similar business combination transaction which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least sixty percent (60%) of the combined Voting Power of the voting securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger, consolidation or similar business combination transaction; or
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(iv)the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
(i)“CIC Agreement” means a change in control agreement entered into between the Company and an executive or other employee.
(j)“Code” means the United States Internal Revenue Code of 1986, as amended, and any successors thereto.
(k)“Committee” means the Compensation Committee of the Board or any other committee of the Board appointed by the Board to perform the functions of the Compensation Committee.
(l)“Company” means Deere & Company, a Delaware corporation, or any successor thereto as provided in Section 13(a) herein.
(m)“Disability” means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed when such disability commenced.
(n)“Divestiture” means a transaction in which (x) the entity that employs a Participant is sold, spun-off or otherwise disposed of by the Company with the result that such entity is no longer a 409A Affiliate, or (y) the business unit or division in which the Participant is employed is spun-off as a separate entity that is not a 409A Affiliate or is sold or otherwise transferred to a third party that is not a 409A Affiliate.
(o)“Effective Date of Termination” means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder.
(p)“Employment” means a Participant’s employment with the Company or any of its 409A Affiliates.
(q)“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(r)“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
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(s)“Good Reason” means, without a Participant’s express written consent, the occurrence of any one or more of the following:
(i)The assignment of a Participant to duties materially inconsistent with such Participant’s authorities, duties, responsibilities, and status (including offices and reporting requirements) as an employee of the Company, or a reduction or alteration in the nature or status of a Participant’s authorities, duties, or responsibilities from the greater of (i) those in effect on the Participation Date; (ii) those in effect during the fiscal year immediately preceding the year of the Change in Control; or (iii) those in effect immediately preceding the Change in Control;
(ii)The Company’s requiring a Participant to be based at a location which is at least fifty (50) miles further from the current primary residence than is such residence from the Company’s current headquarters, except for required travel on the Company’s business to an extent substantially consistent with such Participant’s business obligations as of the Participation Date;
(iii)A reduction by the Company in a Participant’s Base Salary as in effect on the Participation Date or as the same shall be increased from time to time;
(iv)A material reduction in a Participant’s level of participation in any of the Company’s short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which such Participant participates from the levels in place during the fiscal year immediately preceding the Change in Control; provided, however, that reductions in the levels of participation in any such plans shall not be deemed to be “Good Reason” if a Participant’s reduced level of participation in each such program remains substantially consistent with the average level of participation of other executives who have positions commensurate with such Participant’s position;
(v)The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform the obligations under the Program, as contemplated in 13(a) herein; or
(vi)Any involuntary termination of a Participant’s Employment that is not effected pursuant to a Notice of Termination.
The existence of Good Reason shall not be affected by a Participant’s temporary incapacity due to physical or mental illness not constituting a Disability. A Participant’s continued employment shall not constitute a waiver of such Participant’s rights with respect to any circumstance constituting Good Reason.
(t)“Multiplier” shall mean (i) 2.99 in the case of the CEO, (ii) 2.0 in the case of a Tier 1 Participant and (ii) 1.5 in the case of a Tier 2 Participant.
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(u)“Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in the Program relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of a Participant’s Employment under the provision so indicated.
(v)“Participant” means the CEO and each person who is designated to be a Tier 1 Participant or Tier 2 Participant under the Program.
(w) “Participation Date” means, with respect to each Participant, the date specified by the Committee or the Administrator as provided in Section 3(a) as of which such individual becomes a Participant in the Program. If (i) a Participant who is designated a Tier 1 Participant is subsequently designated as the CEO, (ii) a Participant who is designated a Tier 2 Participant is subsequently designated a Tier 1 Participant, (iii) or if a Tier 1 Participant is subsequently designated in accordance with Section 3(c) a Tier 2 Participant, then from and after the effective date of such later designation, the Participant’s Participation Date will be such effective date.
(x) “Payment Date” shall have the meaning ascribed to such term in Section 5(a) herein.
(y)“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as provided in Section 13(d).
(z)“Post-Divestiture Employer” means, in the case of a Participant whose employment is with an entity, business unit or division that is the subject of a Divestiture and who immediately following the Divestiture continues to be employed with such entity, business unit or division, the Participant’s employer immediately following the Divestiture (including all entities that are considered to be a single employer with such party under the default provisions in Treasury Regulations Section 1.409A-1(h)).
(aa)“Potential Change in Control” of the Company means the happening of any of the following:
(i)the entering into an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 2(g) hereof; or
(ii)the acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than a Participant or group of Participants, the Company or a subsidiary, or any employee benefit plan of the Company including its trustee) of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of the Program.
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(bb)“Program” means this Change in Control Severance Program of Deere & Company and its Subsidiaries, as subsequently amended from time to time.
(cc)“Release” shall have the meaning ascribed to such term in Section 8 herein.
(dd)“Release Deadline” shall have the meaning ascribed to such term in Section 8 herein.
(ee)“Qualifying Termination” means any of the events described in Section 4(b) herein, the occurrence of which triggers the payment of Severance Benefits hereunder.
(ff) “SEC” means the United States Securities and Exchange Commission.
(gg)“Severance Benefits” means the payment of severance compensation as provided in Section 4(d) herein.
(hh)“Subsidiary” means any corporation or other entity of which ownership interests having ordinary Voting Power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company.
(ii)“Tier 1 Participant” means each person who is designated by the Committee as a Tier 1 Participant.
(jj)“Tier 2 Participant” means each person who is designated by the Administrator as a Tier 2 Participant.
(kk)“Voting Power” of a corporation or other entity means the combined voting power of the then-outstanding voting securities of such corporation or other entity entitled to vote generally in the election of directors.
(ll)“409A Affiliate” means any corporation that is included in a controlled group of corporations (within the meaning of Section 414(b) of the Code) that includes the Company and any trade or business (whether or not incorporated) that is under common control with the Company (within the meaning of Section 414(c) of the Code).
3.Eligibility
(a)Designation of Participants. The CEO shall be a Participant in the Plan. Tier 1 Participants shall be designated in writing from time to time by the Committee in its discretion. Tier 2 Participants shall be designated in writing from time to time by the Committee or the Administrator. At the time an individual is designated as a Participant, the Committee or the Administrator, as the case may be, shall specify such individual’s Participation Date (which may, but need not, be the date of the Committee or the Administrator action designating the individual as a Participant).
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The books and records of the Company shall be definitive for purposes of determining whether and as of when an individual has been designated as a Participant.
(b)Participation Exclusive. Unless and until an individual has been designated as a Participant and the relevant Participation Date has occurred, such individual shall have no rights under the Program, regardless of whether any other individual with a similar position, rate of compensation or responsibilities has become a Participant. No individual shall become a Participant while such individual is party to an effective CIC Agreement, and in no event may any individual have entitlements under both the Program and a CIC Agreement.
(c)Termination of Participation. A Participant’s status in the Program shall cease upon the earlier of (i) the date the Participant provides notice of termination, including, without limitation, notice of their intention to retire or resign, or (ii) the Participant’s cessation of active employment with the Company, provided such cessation of employment is not in connection with any Potential Change of Control or Change in Control. Further, the Committee, with respect to Tier 1 Participants (including, for this purpose, a Tier 1 Participant who is being converted to a Tier 2 Participant), and the Committee or the Administrator, with respect to Tier 2 Participants, may provide notice to a Participant at any time that such Participant shall cease to be a Participant. Any such termination or reduction of Participant status shall become effective on the earliest anniversary of the relevant Participant’s Participation Date that is at least six (6) months from the date of the notice of termination or reduction of Participant status, provided, however, that no such termination or reduction of Participant status shall be effective prior to the second anniversary of the Participant’s Participation Date; provided, further, that no notice of termination or reduction of Participant status shall be given within six (6) months following a Potential Change in Control; and provided, further, that following a Change in Control, no such termination or reduction of Participant status shall be given effect until the later of (i) twenty-four (24) months after the month in which the Change in Control occurs or (ii) if a Participant experiences a Qualifying Termination before the end of such twenty-four (24) month period, until all obligations of the Company under the Program have been fulfilled and all benefits required under the Program have been paid or provided to the Participant.
4.Severance Benefits
(a)Right to Severance Benefits. Subject to Section 8, a Participant shall be entitled to receive from the Company the Severance Benefits described in Section 4(d) if a Qualifying Termination of such Participant has occurred. A Participant shall not be entitled to receive Severance Benefits if he or she is terminated for Cause, or if his or her Employment ends due to death or Disability or due to a voluntary termination of Employment without Good Reason. An individual who has ceased to be a Participant in the Program in accordance with Section 3(c) shall not be entitled to any Severance Benefits under the Program in connection with his or her termination of Employment for any reason, even if such termination of Employment would have qualified as a Qualifying Termination had the individual been a Participant at the time of his or her termination of Employment.
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No Severance Benefits shall be payable under the Program to any individual if the Program has been terminated as to such individual in accordance with Section 14(d) at the time of such individual’s termination of Employment.
(b)Qualifying Termination. Subject to Section 8, the occurrence of any one or more of the following events shall trigger the payment of Severance Benefits to a Participant under the Program:
(i)An involuntary termination of a Participant’s Employment for reasons other than Cause within six (6) months preceding or within twenty-four (24) calendar months following a Change in Control of the Company; any such involuntary termination shall be pursuant to a Notice of Termination (specifying the Effective Date of Termination which shall be not less than five (5) days from the date of the Notice of Termination) delivered to such Participant by the Company; or
(ii)A Participant’s voluntary termination of Employment for Good Reason within twenty-four (24) calendar months following a Change in Control of the Company pursuant to a Notice of Termination delivered to the Company by such Participant.
For purposes of the Program, a Participant’s Employment will be considered to have terminated upon (and only upon) such Participant’s “separation from service” from the Company and its 409A Affiliates as determined under the default provisions in Treasury Regulation Section 1.409A-1(h).
(c)Divestitures. Without limiting the generality of the foregoing Section 4(b), if the entity, business unit or division that employs a Participant is the subject of a Divestiture, the Participant will be considered to have experienced an involuntary termination of Employment as of the date such entity ceases to be a 409A Affiliate or such business unit or division is sold or transferred, regardless of whether the Participant is considered to have experienced a termination of Employment with the Company and its affiliates for any other purpose; provided, however, that if a Divestiture occurs within six (6) months preceding or within twenty-four (24) months following a Change in Control of the Company, then the Divestiture itself will not be considered to cause a termination of the Participant’s employment, and whether the Participant experiences a Qualifying Termination following such Divesture will be determined by reference to the Participant’s employment with the Post-Divestiture Employer (so that, for example, an involuntary termination of the Participant’s employment with the Post-Divestiture Employer for reasons other than Cause within 24 calendar months following a Change in Control of the Company will trigger the payment of Severance Benefits). Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section.
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(d)Description of Severance Benefits. Subject to Section 8, in the event a Participant becomes entitled to receive Severance Benefits, the Company shall pay or provide to the Participant all of the following:
(i)An amount equal to the product of (x) the sum of the Participant’s Base Salary in effect at the Effective Date of Termination (without regard to any decreases therein which constitute Good Reason) plus his Bonus and (y) the Multiplier.
(ii)An amount equal to his unpaid Base Salary, accrued vacation pay, and earned but not taken vacation pay through the Effective Date of Termination.
(iii)An amount equal to his Bonus multiplied by a fraction, the numerator of which is the number of days he was employed by the Company in the then-existing fiscal year through the Effective Date of Termination, and the denominator of which is three hundred sixty-five (365) less, in the case of a Participant who began Employment after the beginning of the fiscal year, the number of days from the beginning of the fiscal year to the date he commenced Employment.
(iv)A continuation of the welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for (A) three (3) full years after the Effective Date of Termination for the CEO, (B) two (2) full years after the Effective Date of Termination for Tier 1 Participants, (C) and eighteen (18) months after the Effective Date of Termination for Tier 2 Participants; provided, however, that the Participant shall pay (or promptly reimburse the Company for the cost of) any portion of the premiums for such coverage that results in taxable income to the Participant attributable to the first six (6) months following the Effective Date of Termination in excess of $5,000, and in such case, the Company shall repay the Participant the amount of such payment or reimbursement at the time provided in Section 5(a) for the payment of Severance Benefits. These benefits shall be provided to the Participant at the same premium cost, and at the same coverage level, as in effect as of his Effective Date of Termination. However, in the event the premium cost and/or level of coverage shall change for all employees of the Company, or for management employees with respect to supplemental benefits, the cost and/or coverage level, likewise, shall change for the Participant in a corresponding manner. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year, two (2) year, or eighteen (18) month period, as applicable, to the extent such Participant has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee.
(v)In a single payment, an amount in cash equal to the amount of the Company’s employer contributions made on behalf of the Participant under all defined contribution plans of the Company for the plan year immediately preceding the Effective Date of Termination (or, if higher, for the plan year immediately prior to the Change in Control).
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(e)Other Benefits. Compensation which has been deferred under the Company’s nonqualified deferred compensation plans, increased with applicable notional interest and adjusted for applicable notional gains and losses, shall be distributed pursuant to the terms of the applicable plan. In addition, the Participant’s benefits, if any, under the John Deere Supplemental Pension Benefit Plan, the John Deere Senior Supplementary Pension Benefit Plan and any other nonqualified defined benefit pension plan will be calculated and distributed pursuant to the terms of the applicable plan.
(f)Termination for Disability. Following a Change in Control of the Company, if a Participant’s Employment is terminated due to Disability, such Participant shall receive his Base Salary through the date of termination, at which point in time such Participant’s benefits shall be determined in accordance with the Company’s disability, retirement, insurance, and other applicable plans and programs then in effect. In the event a Participant’s Employment is terminated due to Disability, such Participant shall not be entitled to the Severance Benefits described in Section 4(d).
(g)Termination for Death. Following a Change in Control of the Company, if a Participant’s Employment is terminated by reason of the Participant’s death, such Participant’s benefits shall be determined in accordance with the Company’s retirement, survivor’s benefits, insurance, and other applicable programs of the Company then in effect. In the event a Participant’s Employment is terminated by reason of his death, such Participant shall not be entitled to the Severance Benefits described in Section 4(d).
(h)Termination for Cause, or Other Than for Good Reason. Following a Change in Control of the Company, if a Participant’s Employment is terminated either (i) by the Company for Cause; or (ii) by such Participant (other than for Good Reason), the Company shall pay such Participant his full Base Salary and accrued vacation through the date of termination, at the rate then in effect, plus all other amounts to which such Participant is entitled under any compensation and benefit plans of the Company, at the time such payments are due, and the Company shall have no further obligations to such Participant under the Program.
(i)Notice of Termination. Any termination of Employment by a Participant for Good Reason shall be communicated by a Notice of Termination.
5.Form and Timing of Severance Benefits
(a)Form and Timing of Severance Benefits. The Severance Benefits described in Section 4(d) (other than those described in Section 4(d)(iv)) herein shall be paid in cash to such Participant in a single lump sum within 74 days following the Effective Date of Termination (or if such date is not a business day, the next business day) (the “Payment Date”).
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(b)Withholding of Taxes. The Company shall be entitled to withhold from any amounts payable under the Program all taxes as legally shall be required (including, without limitation, any United States federal taxes and any other state, city, or local taxes).
6.Excise Tax
(a)Excise Tax. Subject to the last sentence of this Section 6(a), in the event that a Participant becomes entitled to Severance Benefits or any other payment or benefit under the Program, or under any other agreement with or plan of the Company (in the aggregate, the “Total Payments”), if all or any part of the Total Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), and if such Participant would receive a greater net after-tax amount if the Total Payments paid to such Participant were reduced to avoid the imposition of the Excise Tax, then the Total Payments paid to such Participant shall be reduced, such that the value of the aggregate payments that such Participant receives shall be one dollar ($1) less than the maximum amount which such Participant may receive without becoming subject to the Excise Tax, or which the Company may pay without loss of deduction under Section 280G(a) of the Code. The reductions, if applicable, required by this Section 6(a) shall be made only from the following amounts in the following order: first, from the lump sum payment contemplated by Section 5(a); and then, to the extent necessary, from other amounts payable to the Participant that do not constitute deferred compensation for purposes of Section 409A of the Code.
(b)Tax Computation. All calculations done pursuant to Section 6(a), shall be made and determined reasonably and in good faith by the auditing firm which served as the Company’s independent auditors immediately prior to the Change in Control, and all such calculations made reasonably and in good faith shall be final and binding on the Company and such Participant, even if such calculations are subsequently challenged or revised by a court or applicable regulatory authority. For purposes of the calculations done pursuant to Section 6(a), a Participant shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Payment Date occurs and state and local income taxes at the highest marginal rate of taxation in the state and locality of such Participant’s residence on the Payment Date, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(c)Expenses. All of the fees and expenses of the accounting firm in performing the calculations referred to in Sections 6(a) and 6(b) above shall be borne solely by the Company.
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7.The Company’s Payment Obligation
(a)Payment Obligations Absolute. Subject to Section 8, the Company’s obligation to pay or provide the Severance Benefits provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against a Participant or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from a Participant or from whomsoever may be entitled thereto, for any reasons whatsoever.
Notwithstanding anything else herein to the contrary, however, if the Company (or any subsidiary or affiliate of the Company) is obligated by law to pay to a Participant severance pay, a termination indemnity, notice pay, or the like (but excluding for this purpose accrued and unused vacation pay), or is obligated by law to provide to a Participant advance notice of separation (“Notice Period”), then any Severance Benefits hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period.
A Participant shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of the Program, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations to make the payments and arrangements required to be made under the Program, except to the extent provided in Section 4(d)(iv) herein.
(b)Contractual Rights to Benefits. Subject to Sections 3 and 14(d), the Program establishes and vests in a Participant a contractual right to the benefits to which he or she is entitled hereunder. However, nothing herein contained shall require or be deemed to prohibit the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.
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8.Covenants and Release of the Participants. Notwithstanding any other provision of the Program, a Participant’s entitlement to Severance Benefits shall be conditioned on the Participant’s executing a Restrictive Covenant and Release Agreement (the “Release”), substantially in the form attached hereto as Exhibit A, within sixty (60) days after the Participant’s Qualifying Termination (the “Release Deadline”) and such Release remaining in effect and becoming irrevocable after the expiration of any statutory period in which the Participant is permitted to revoke a release. If the Participant fails to execute and deliver the Release by the Release Deadline, or if the Participant thereafter effectively revokes the Release, the Company shall be under no obligation to make any further payments or provide any further benefits to the Participant, and the Participant shall promptly repay the Company any payments made to the Participant and the Company’s direct cost for any benefits provided to the Participant pursuant to the Program.
9.Funding
Benefits payable under the Program shall be unfunded, as that term is used in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA, with respect to unfunded plans maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees, and the Administrator shall administer the Program in a manner that will ensure that benefits are unfunded and that Participants will not be considered to have received a taxable economic benefit prior to the time at which benefits are actually payable hereunder. Accordingly, the Company shall not be required to segregate or earmark any of its assets for the benefit of Participants or their spouses or other beneficiaries, and each such person shall have only a contractual right against the Company for benefits hereunder. The Company may from time to time establish a trust and deposit with the trustee thereof funds to be held in trust for the payment of benefits hereunder; provided, that the use of such funds for such purpose shall be subject to the claims of the Company’s general creditors as set forth in the agreement establishing any such trust. The rights and interests of a Participant under the Program shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by a Participant or any person claiming under or through a Participant, nor shall they be subject to the debts, contracts, liabilities or torts of a Participant or anyone else prior to payment. The Administrator may from time to time appoint an investment manager or managers for the funds held in any such trust.
10.Administration
The Program shall be operated under the direction of the Committee and administered by the Administrator. Subject to Section 6(b), the calculation of all benefits payable under the Program shall be performed by the Administrator, subject to the review of the Committee. The Administrator shall have sole and complete discretionary authority and control to manage the operation and administration of the Plan, including but not limited to, the interpretation of all Plan provisions, determination of the amount of benefits payable to any Participant, spouse, heirs or estate, all legal and factual determinations, and construction of disputed or ambiguous term, and all such determinations shall be binding on all parties.
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Notwithstanding the preceding sentence, all determinations of eligibility for participation and benefits under the Program as a Tier 1 Participant shall be made by the Committee. The Administrator may delegate responsibilities under the Plan. With respect to any instance where the Plan is administered relative to the Administrator, the Chief Executive Officer of the Company shall act as Administrator.
11.Claims Procedure
All claims for benefits under the Program shall be determined under the claims procedure in effect under the Company’s tax-qualified defined benefit pension plan on the date that such claims are submitted, except that the Administrator shall make initial determinations with respect to claims hereunder and the Committee shall decide appeals of such determinations.
In the event that any dispute under the provisions of the Program is not resolved to the satisfaction of the affected Participant through the Program’s claims procedures described in the preceding paragraph, any dispute or controversy arising under or in connection with the Program may, at the sole election of the affected Participant, be settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Participant within fifty (50) miles from the location of his employment with the Company, in accordance with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for a Participant, shall be borne by the Company. If applicable, payment or reimbursement of the Participant’s reasonable attorneys’ fees and expenses shall be made not later than December 31st of the calendar year following the year in which they are incurred.
12.Legal Fees. To the extent permitted by law, the Company shall pay all reasonable legal fees, costs of litigation or arbitration, prejudgment interest, and other expenses incurred in good faith by a Participant as a result of:
(a)the Company’s refusal to provide the Severance Benefits to which a Participant becomes entitled under the Program, or
(b)the Company’s contesting the validity, enforceability, or interpretation of the Program, or
(c)any conflict between the parties pertaining to the Program.
If applicable, payment or reimbursement of the Participant’s reasonable attorneys’ fees and expenses shall be made not later than December 31st of the calendar year following the year in which they are incurred.
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13.Successors and Assignment
(a)Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, a similar business combination transaction or otherwise) of all or substantially all of the business and/or assets of the Company and its affiliates thereof to expressly assume and agree to perform the Company’s obligations under the Program in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. Assuming that such transaction otherwise constitutes a Change in Control, the date on which any such succession becomes effective shall be deemed to be the date of the Change in Control.
(b)Divestitures. In the event of a Divestiture, the Company may, but shall not be obligated to, assign its obligations under the Program with respect to any Participant who immediately following such Divestiture will be employed by the entity that owns the divested entity, business unit or division to the Participant’s Post-Divestiture Employer or any of its affiliates. Upon the effectiveness of the agreement by such Post-Divestiture Employer or one of its affiliates to perform such obligations, the Company shall have no further obligations under the Program to such Participant.
(c)Assignment by a Participant. The Program shall inure to the benefit of and be enforceable by a Participant’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Program to such Participant’s beneficiary. If a Participant has not named a beneficiary, then such amounts shall be paid to such Participant’s devisee, legatee, or other designee, or if there is no such designee, to such Participant’s estate.
14.Miscellaneous
(a)Employment Status. Except as may be provided under any other agreement between a Participant and the Company or one of its 409A Affiliates, a Participant’s Employment is “at will,” and may be terminated by either the Participant or the Participant’s employer at any time, subject to applicable law.
(b)Beneficiaries. The primary and/or contingent beneficiaries designated by a Participant pursuant to Company-provided life insurance benefits shall be the persons or entities who or which are the Beneficiaries of any Severance Benefits owing to such Participant under the Program.
(c)Severability. In the event any provision of the Program shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Program, and the Program shall be construed and enforced as if the illegal or invalid provision had not been included.
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Further, the captions of the Program are not part of the provisions hereof and shall have no force and effect.
(d)Amend, Modify or Terminate. Subject to the restrictions and limitations set forth in this Section 14(d), the Board (or any committee of the Board to whom the Board delegates it authority hereunder) may amend, modify or terminate the Program at any time in whole or in part without prior notice to, or without the consent of, any Participant or other person. Notwithstanding the previous sentence, without the express written consent of an affected Participant, (i) the Board may not amend, modify or terminate the Program in any respect for a Participant for whom a Qualifying Separation has occurred or (ii) amend, modify or terminate the Program in a manner that is adverse to the Participant in any material respect during the twenty-four month period following a Change in Control or the six month period following a Potential Change in Control. In addition, any amendment, modification or termination of the Program that would be precluded under the previous sentence without the express written consent of an affected Participant on or after a Change in Control shall not be given effect without the express written consent of the affected Participant if it is adopted within six months prior to the occurrence of a Potential Change in Control or a Change in Control. Nothing in this Section 14(d) shall preclude a termination or reduction of a Participant’s status in the Program in accordance with Section 3(c).
(e)Applicable Law. TO THE EXTENT NOT PREEMPTED BY THE LAWS OF THE UNITED STATES OR ANY OTHER LAW MANDATORILY APPLYING TO A PARTICIPANT’S EMPLOYMENT, THE LAWS OF THE STATE OF ILLINOIS SHALL BE THE CONTROLLING LAW IN ALL MATTERS RELATING TO THE PROGRAM.
(f)Clawback. Any amounts payable under the Program are subject to any policy (whether in existence as of the date of the Program or later adopted) established by the Company providing for clawback or recovery of amounts that were paid to a Participant. The Company will make any determination for clawback or recovery in its sole discretion and in accordance with any applicable law or regulation.
15.Effect on Prior Agreements. By virtue of a Participant’s participation in the Program, the Participant and the Company acknowledge that: (a) the Program supersedes all prior written or oral agreements between them, including, but not limited to, any Change in Control Agreement or Severance Protection Agreement which a Participant and the Company may have entered into; and (b) as of the Participation Date, any and all such prior agreements are null and void.
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EXHIBIT A
RESTRICTIVE COVENANT AND RELEASE AGREEMENT
This Restrictive Covenant and Release Agreement (this “Agreement”) is entered into by the undersigned effective as of [INSERT DATE]1 (“Effective Date”).
In consideration of the severance benefits to be provided to me under the Change in Control Severance Program of Deere & Company (the “Severance Program”), I agree as follows:
1.Return of Property. All Company files, access keys and codes, desk keys, ID badges, computers, records, manuals, electronic devices, computer programs, papers, electronically stored information or documents, telephones and credit cards, and any other property of the Deere & Company or any of its affiliates (the “Company”) in my possession must be returned no later than the Effective Date.
2.Non-Disclosure and Non-Solicitations Covenants.
(a)Disclosure of Information. As a result of my employment with the Company, I had access to and knowledge of certain confidential and proprietary information of the Company. I shall not, in whole or in part, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, nor shall I make use of any such information for my own purposes.
(b)Covenants Regarding Other Employees. For a period beginning on the date of my Qualifying Termination (as defined in the Severance Program) and ending two (2) years following the payment of the lump sum severance benefits provided for in Section 4(c) of the Severance Program, I agree not to:
(i)attempt to induce any employee of the Company to (i) terminate his or her employment with the Company, or (ii) accept employment with any competitor of the Company; or
(ii)interfere in a similar manner with the business of the Company.
(iii)I acknowledge and agree that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interests of the Company. I further acknowledge and agree that I have the right to consider the terms of this Agreement for at least fourteen (14) days and to consult with an attorney before signing this Agreement.
1 PURSUANT TO SECTION 8 OF PROGRAM, THE EFFECTIVE DATE SHOULD BE NO MORE THAN 60 DAYS FOLLOWING DATE OF QUALIFYING TERMINATION.
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3.General Release and Waiver of Claims.
(a)Release. In consideration of the payments and benefits provided to me under the Severance Program and after consultation with counsel, I and each of my respective heirs, executors, administrators, representatives, agents, insurers, successors and assigns (collectively, the “Releasors”) hereby irrevocably and unconditionally release and forever discharge the Company, its subsidiaries and affiliates and each of their respective officers, employees, directors, shareholders and agents (“Releasees”) from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, that the Releasors may have, or in the future may possess, arising out of (i) my employment relationship with and service as an employee, officer or director of the Company or any subsidiaries or affiliated companies and the termination of such relationship or service, and (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that I does not release, discharge or waive any rights to (i) payments and benefits provided under the Severance Program that are contingent upon my execution of this Agreement and (ii) any indemnification rights I may have in accordance with the Company’s governance instruments or under any director and officer liability insurance maintained by the Company with respect to liabilities arising as a result of my service as an officer and employee of the Company. This Section 3(a) does not apply to any Claims that the Releasors may have as of the date I sign this Agreement arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”). Claims arising under ADEA are addressed in Section 3(b) of this Agreement.
(b)Specific Release of ADEA Claims. In further consideration of the payments and benefits provided to me under the Severance Program, the Releasors hereby unconditionally release and forever discharge the Releasees from any and all Claims arising under ADEA that the Releasors may have as of the date I sign this Agreement. By signing this Agreement, I hereby acknowledge and confirm the following: (i) I was advised by the Company in connection with my termination to consult with an attorney of my choice prior to signing this Agreement and to have such attorney explain to me the terms of this Agreement, including, without limitation, the terms relating to my release of claims arising under ADEA, and I have in fact consulted with an attorney; (ii) I was given a period of not fewer than 21 days to consider the terms of this Agreement and to consult with an attorney of my choosing with respect thereto; (iii) I knowingly and voluntarily accept the terms of this Agreement; and (iv) I am providing this release and discharge only in exchange for consideration in addition to anything of value to which I am already entitled. I also understand that I have seven days following the date on which I sign this Agreement within which to revoke the release contained in this paragraph, by providing the Company with a written notice of my revocation of the release and waiver contained in this paragraph.
(c)No Assignment. I represent and warrant that I have not assigned any of the Claims being released under this Agreement. The Company may assign this
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Agreement, in whole or in part, to any affiliated company or subsidiary of, or any successor in interest to, the Company.
4.Proceedings.
(a)General Agreement Relating to Proceedings. I have not filed, and except as provided in Sections 4(b) and 4(c), I agree not to initiate or cause to be initiated on my behalf, any complaint, charge, claim or proceeding against the Releasees before any local, state or federal agency, court or other body relating to my employment or the termination of my employment, other than with respect to the obligations of the Company to me under the Severance Program (each, individually, a “Proceeding”), and agree not to participate voluntarily in any Proceeding. I waive any right I may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding.
(b)Proceedings Under ADEA. Section 4(a) shall not preclude me from filing any complaint, charge, claim or proceeding challenging the validity of my waiver of Claims arising under ADEA (the ADEA waiver is set forth in Section 3(b) of this Agreement). However, both the Company and I confirm our belief that my waiver of claims under ADEA is valid and enforceable, and my intention is that all claims under ADEA will be waived.
(c)Certain Administrative Proceedings. In addition, Section 4(a) shall not preclude me from filing a charge with or participating in any administrative investigation or proceeding by the Equal Employment Opportunity Commission or another Fair Employment Practices agency. I am, however, waiving my right to recover money in connection with any such charge or investigation. I am also waiving my right to recover money in connection with a charge filed by any other entity or individual, or by any federal, state or local agency.
5.Remedies. In the event I initiate or voluntarily participate in any Proceeding in violation of this Agreement, or if I fail to abide by any of the terms of this Agreement or if I revoke the ADEA release contained in paragraph 3(b) within the seven-day period provided under paragraph 3(b), the Company shall be under no obligation to make any further payments or provide any further benefits to me, and I shall promptly repay the Company any payments made to me and the Company’s direct cost for any benefits provided to me pursuant to the Severance Program, without waiving the release granted herein. I acknowledge and agree that the remedy at law available to the Company for breach of any of my obligations under paragraphs 2, 3 and 4 herein would be inadequate and that damages flowing from such a breach may not readily be susceptible to measurement in monetary terms. Accordingly, I acknowledge, consent and agree that, in addition to any other rights or remedies that the Company may have at law or in equity, the Company shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining me from breaching my obligations under paragraphs 2, 3 and 4 herein. Such injunctive relief in any court shall be available to the Company, in lieu of, or prior to or pending determination in, any arbitration proceeding.
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I understand that by entering into this Agreement I shall be limiting the availability of certain remedies that I may have against the Company and limiting also my ability to pursue certain claims against the Company.
6.Severability Clause. If any provision or part of this Agreement is found to be invalid or unenforceable, only that particular provision or part, and not the entire Agreement, shall be inoperative.
7.GOVERNING LAW AND FORUM. I acknowledge that this agreement has been executed, in whole or in part, in Illinois. Accordingly, I agree that this Agreement and all matters or issues arising out of or relating to my employment with the Company shall be governed by the laws of the State of Illinois applicable to contracts entered into and performed entirely therein. Any action to enforce this Agreement shall be brought solely in the state or federal courts located in the Moline, Illinois.
I ACKNOWLEDGE THAT I HAVE READ THIS AGREEMENT AND THAT I FULLY KNOW, UNDERSTAND AND APPRECIATE ITS CONTENTS, AND THAT I HEREBY EXECUTE THE SAME AND MAKE THIS AGREEMENT AND THE COVENANTS AND RELEASE PROVIDED FOR HEREIN VOLUNTARILY AND OF MY OWN FREE WILL.
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THE EXECUTIVE |
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[Insert name of Executive] |
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Dated: |
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Exhibit 31.1
CERTIFICATIONS
I, John C. May, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Deere & Company; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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August 31, 2023 |
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By: |
/s/ John C. May |
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John C. May |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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Exhibit 31.2
CERTIFICATIONS
I, Joshua A. Jepsen, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Deere & Company; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: |
August 31, 2023 |
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By: |
/s/ Joshua A. Jepsen |
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Joshua A. Jepsen |
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Senior Vice President and Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
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EXHIBIT 32
STATEMENT PURSUANT TO
18 U.S.C. SECTION 1350
AS REQUIRED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Deere & Company (the “Company”) on Form 10-Q for the period ended July 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify that to the best of our knowledge:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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August 31, 2023 |
/s/ John C. May |
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Chairman and Chief Executive Officer |
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John C. May |
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(Principal Executive Officer) |
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Senior Vice President and Chief Financial Officer |
August 31, 2023 |
/s/ Joshua A. Jepsen |
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(Principal Financial Officer and Principal |
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Joshua A. Jepsen |
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Accounting Officer) |