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 ~~29, 2018~~28, 2019

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

For the transition period from ____ to ____

Commission file no: 1-4121

DEERE & COMPANY

(Exact name of registrant as specified in its charter)


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

One John Deere Place

Moline, Illinois61265

(Address of principal executive offices)

Telephone Number: ~~(309)~~ (309) 765-8000

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $1 par value	DE	New York Stock Exchange
8½% Debentures Due 2022	DE22	New York Stock Exchange
6.55% Debentures Due 2028	DE28	New York Stock Exchange

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

Yes X ☒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 X ☒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. ~~(Check one):~~


Large accelerated filer	X ☒	Accelerated filer	☐
Non-accelerated filer	~~(Do not check if a smaller reporting company)~~☐	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 X ☒

At July ~~29, 2018, 321,673,523~~28, 2019, 314,872,834 shares of common stock, $1 par value, of the registrant were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Three Months Ended July 29, 2018 and July 30, 2017

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

2018

2017

Net Sales and Revenues

Net sales

$
9,286.4

$
6,833.0

Finance and interest income

786.4

688.8

Other income

235.5

286.0

Total

10,308.3

7,807.8

Costs and Expenses

Cost of sales

7,152.7

5,248.6

Research and development expenses

415.7

336.8

Selling, administrative and general expenses

912.7

799.1

Interest expense

291.1

216.3

Other operating expenses

346.0

317.1

Total

9,118.2

6,917.9

Income of Consolidated Group before Income Taxes

1,190.1

889.9

Provision for income taxes

288.7

253.2

Income of Consolidated Group

901.4

636.7

Equity in income of unconsolidated affiliates

9.9

5.6

Net Income

911.3

642.3

Less: Net income attributable to noncontrolling interests

1.0

.5

Net Income Attributable to Deere & Company

$
910.3

$
641.8

Per Share Data

Basic

$
2.81

$
2.00

Diluted

$
2.78

$
1.97

Average Shares Outstanding

Basic

323.5

320.8

Diluted

328.0

325.1


ITEM 1. FINANCIAL STATEMENTS
DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars and shares except per share amounts) Unaudited
	2019		2018
Net Sales and Revenues
Net sales	$	8,969	$	9,286
Finance and interest income		884		786
Other income		183		236
Total		10,036		10,308

Costs and Expenses
Cost of sales		6,870		7,152
Research and development expenses		431		416
Selling, administrative and general expenses		896		913
Interest expense		374		291
Other operating expenses		352		346
Total		8,923		9,118

Income of Consolidated Group before Income Taxes		1,113		1,190
Provision for income taxes		221		289
Income of Consolidated Group		892		901
Equity in income of unconsolidated affiliates		7		10
Net Income		899		911
Less: Net income attributable to noncontrolling interests				1
Net Income Attributable to Deere & Company	$	899	$	910

Per Share Data
Basic	$	2.84	$	2.81
Diluted	$	2.81	$	2.78

Average Shares Outstanding
Basic		315.9	��	323.5
Diluted		319.8		328.0

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars) Unaudited
	2019		2018

Net Income	$	899	$	911

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		15		40
Cumulative translation adjustment		26		(421)
Unrealized loss on derivatives		(22)		(1)
Unrealized gain on debt securities		10		1
Other Comprehensive Income (Loss), Net of Income Taxes		29		(381)

Comprehensive Income of Consolidated Group		928		530
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive Income Attributable to Deere & Company	$	928	$	530

DEERE & COMPANY

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

For the Three Months Ended July 29, 2018 and July 30, 2017

(In millions of dollars) Unaudited

2018

2017

Net Income

$
911.3

$
642.3

Other Comprehensive Income (Loss), Net of Income Taxes

Retirement benefits adjustment

40.2

44.0

Cumulative translation adjustment

(421.3)

326.1

Unrealized loss on derivatives

(.9)

(.5)

Unrealized gain (loss) on investments

1.3

(53.7)

Other Comprehensive Income (Loss), Net of Income Taxes

(380.7)

315.9

Comprehensive Income of Consolidated Group

530.6

958.2

Less: Comprehensive income attributable to noncontrolling interests

.4

.7

Comprehensive Income Attributable to Deere & Company

$
530.2

$
957.5

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars and shares except per share amounts) Unaudited
	2019		2018
Net Sales and Revenues
Net sales	$	26,182	$	25,007
Finance and interest income		2,537		2,263
Other income		643		672
Total		29,362		27,942

Costs and Expenses
Cost of sales		20,056		19,190
Research and development expenses		1,295		1,188
Selling, administrative and general expenses		2,607		2,557
Interest expense		1,078		881
Other operating expenses		1,063		1,034
Total		26,099		24,850

Income of Consolidated Group before Income Taxes		3,263		3,092
Provision for income taxes		748		1,524
Income of Consolidated Group		2,515		1,568
Equity in income of unconsolidated affiliates		20		18
Net Income		2,535		1,586
Less: Net income attributable to noncontrolling interests		3		2
Net Income Attributable to Deere & Company	$	2,532	$	1,584

Per Share Data
Basic	$	7.98	$	4.90
Diluted	$	7.87	$	4.82

Average Shares Outstanding
Basic		317.3		323.4
Diluted		321.5		328.2

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

For the Nine Months Ended July 29, 2018 and July 30, 2017

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

2018

2017

Net Sales and Revenues

Net sales

$
25,007.4

$
18,790.7

Finance and interest income

2,263.2

2,009.3

Other income

671.2

920.0

Total

27,941.8

21,720.0

Costs and Expenses

Cost of sales

19,190.5

14,457.8

Research and development expenses

1,187.7

974.2

Selling, administrative and general expenses

2,557.0

2,250.0

Interest expense

881.0

651.3

Other operating expenses

1,033.8

999.5

Total

24,850.0

19,332.8

Income of Consolidated Group before Income Taxes

3,091.8

2,387.2

Provision for income taxes

1,523.4

748.7

Income of Consolidated Group

1,568.4

1,638.5

Equity in income of unconsolidated affiliates

17.8

10.0

Net Income

1,586.2

1,648.5

Less: Net income (loss) attributable to noncontrolling interests

2.6

(.3)

Net Income Attributable to Deere & Company

$
1,583.6

$
1,648.8

Per Share Data

Basic

$
4.90

$
5.17

Diluted

$
4.82

$
5.11

Average Shares Outstanding

Basic

323.4

318.8

Diluted

328.2

322.5

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Nine Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars) Unaudited
	2019		2018

Net Income	$	2,535	$	1,586

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		84		205
Cumulative translation adjustment		(218)		(197)
Unrealized gain (loss) on derivatives		(37)		10
Unrealized gain (loss) on debt securities		25		(8)
Other Comprehensive Income (Loss), Net of Income Taxes		(146)		10

Comprehensive Income of Consolidated Group		2,389		1,596
Less: Comprehensive income attributable to noncontrolling interests		3		1
Comprehensive Income Attributable to Deere & Company	$	2,386	$	1,595

DEERE & COMPANY

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

For the Nine Months Ended July 29, 2018 and July 30, 2017

(In millions of dollars) Unaudited

2018

2017

Net Income

$
1,586.2

$
1,648.5

Other Comprehensive Income (Loss), Net of Income Taxes

Retirement benefits adjustment

205.4

120.6

Cumulative translation adjustment

(196.4)

325.1

Unrealized gain on derivatives

9.4

1.5

Unrealized loss on investments

(8.2)

(.8)

Other Comprehensive Income (Loss), Net of Income Taxes

10.2

446.4

Comprehensive Income of Consolidated Group

1,596.4

2,094.9

Less: Comprehensive income (loss) attributable to noncontrolling interests

2.4

(.1)

Comprehensive Income Attributable to Deere & Company

$
1,594.0

$
2,095.0

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions of dollars) Unaudited
	July 28		October 28		July 29
	2019		2018		2018
Assets
Cash and cash equivalents	$	3,383	$	3,904	$	3,923
Marketable securities		565		490		488
Receivables from unconsolidated affiliates		54		22		28
Trade accounts and notes receivable – net		6,758		5,004		6,208
Financing receivables – net		27,049		27,054		25,213
Financing receivables securitized – net		5,200		4,022		4,662
Other receivables		1,535		1,736		1,300
Equipment on operating leases – net		7,269		7,165		6,805
Inventories		6,747		6,149		6,239
Property and equipment – net		5,798		5,868		5,638
Investments in unconsolidated affiliates		219		207		199
Goodwill		3,013		3,101		3,047
Other intangible assets – net		1,444		1,562		1,581
Retirement benefits		1,431		1,298		737
Deferred income taxes		1,088		808		1,645
Other assets		1,977		1,718		1,677
Total Assets	$	73,530	$	70,108	$	69,390

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	11,142	$	11,062	$	11,004
Short-term securitization borrowings		5,048		3,957		4,528
Payables to unconsolidated affiliates		136		129		111
Accounts payable and accrued expenses		9,390		10,111		9,483
Deferred income taxes		507		556		524
Long-term borrowings		29,242		27,237		26,838
Retirement benefits and other liabilities		5,781		5,751		6,522
Total liabilities		61,246		58,803		59,010

Commitments and contingencies (Note 15)
Redeemable noncontrolling interest		14		14		14

Stockholders’ Equity
Common stock, $1 par value (issued shares at July 28, 2019 – 536,431,204)		4,599		4,474		4,451
Common stock in treasury		(17,121)		(16,312)		(15,814)
Retained earnings		29,369		27,553		26,272
Accumulated other comprehensive income (loss)		(4,581)		(4,427)		(4,553)
Total Deere & Company stockholders’ equity		12,266		11,288		10,356
Noncontrolling interests		4		3		10
Total stockholders’ equity		12,270		11,291		10,366
Total Liabilities and Stockholders’ Equity	$	73,530	$	70,108	$	69,390

DEERE & COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(In millions of dollars) Unaudited


July 29

October 29

July 30

2018

2017

2017

Assets

Cash and cash equivalents

$
3,923.3

$
9,334.9

$
6,537.4

Marketable securities

488.2

451.6

426.1

Receivables from unconsolidated affiliates

27.9

35.9

28.5

Trade accounts and notes receivable – net

6,207.9

3,924.9

4,389.8

Financing receivables – net

25,213.0

25,104.1

23,722.1

Financing receivables securitized – net

4,661.7

4,158.8

4,923.1

Other receivables

1,300.0

1,200.0

829.2

Equipment on operating leases – net

6,804.9

6,593.7

6,235.6

Inventories

6,239.3

3,904.1

4,252.9

Property and equipment – net

5,638.5

5,067.7

4,968.5

Investments in unconsolidated affiliates

198.7

182.5

220.8

Goodwill

3,046.5

1,033.3

845.8

Other intangible assets – net

1,580.8

218.0

92.0

Retirement benefits

737.2

538.2

219.1

Deferred income taxes

1,645.0

2,415.0

3,067.7

Other assets

1,677.2

1,623.6

1,591.3

Total Assets

$
69,390.1

$
65,786.3

$
62,349.9

Liabilities and Stockholders’ Equity

Liabilities

Short-term borrowings

$
11,004.5

$
10,035.3

$
9,019.4

Short-term securitization borrowings

4,527.7

4,118.7

4,780.9

Payables to unconsolidated affiliates

110.8

121.9

77.8

Accounts payable and accrued expenses

9,482.7

8,417.0

7,599.0

Deferred income taxes

524.6

209.7

190.0

Long-term borrowings

26,838.0

25,891.3

23,674.3

Retirement benefits and other liabilities

6,521.9

7,417.9

8,419.6

Total liabilities

59,010.2

56,211.8

53,761.0

Commitments and contingencies (Note 14)

Redeemable noncontrolling interest

14.0

14.0

14.0

Stockholders’ Equity

Common stock, $1 par value (issued shares at
July 29, 2018 – 536,431,204)

4,450.8

4,280.5

4,245.1

Common stock in treasury

(15,813.5)

(15,460.8)

(15,477.3)

Retained earnings

26,272.3

25,301.3

24,984.2

Accumulated other comprehensive income (loss)

(4,553.3)

(4,563.7)

(5,179.8)

Total Deere & Company stockholders’ equity

10,356.3

9,557.3

8,572.2

Noncontrolling interests

9.6

3.2

2.7

Total stockholders’ equity

10,365.9

9,560.5

8,574.9

Total Liabilities and Stockholders’ Equity

$
69,390.1

$
65,786.3

$
62,349.9

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Nine Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars) Unaudited
	2019		2018
Cash Flows from Operating Activities
Net income	$	2,535	$	1,586
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for credit losses		58		66
Provision for depreciation and amortization		1,522		1,445
Share-based compensation expense		63		63
Gain on sales of businesses				(25)
Undistributed earnings of unconsolidated affiliates		10		(10)
Provision (credit) for deferred income taxes		(332)		641
Changes in assets and liabilities:
Trade, notes, and financing receivables related to sales		(2,206)		(2,365)
Inventories		(1,168)		(1,539)
Accounts payable and accrued expenses		(306)		213
Accrued income taxes payable/receivable		253		176
Retirement benefits		40		(814)
Other		(65)		(109)
Net cash provided by (used for) operating activities		404		(672)

Cash Flows from Investing Activities
Collections of receivables (excluding receivables related to sales)		12,685		12,162
Proceeds from maturities and sales of marketable securities		72		56
Proceeds from sales of equipment on operating leases		1,171		1,116
Proceeds from sales of businesses, net of cash sold				133
Cost of receivables acquired (excluding receivables related to sales)		(13,662)		(12,586)
Acquisitions of businesses, net of cash acquired				(5,171)
Purchases of marketable securities		(110)		(101)
Purchases of property and equipment		(756)		(571)
Cost of equipment on operating leases acquired		(1,462)		(1,428)
Other		(67)		(103)
Net cash used for investing activities		(2,129)		(6,493)

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings		(336)		1,183
Proceeds from long-term borrowings		7,440		5,739
Payments of long-term borrowings		(4,356)		(4,372)
Proceeds from issuance of common stock		133		209
Repurchases of common stock		(880)		(454)
Dividends paid		(703)		(583)
Other		(82)		(66)
Net cash provided by financing activities		1,216		1,656

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(24)		71

Net Decrease in Cash, Cash Equivalents, and Restricted Cash		(533)		(5,438)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		4,015		9,467
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	3,482	$	4,029

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

For the Nine Months Ended July 29, 2018 and July 30, 2017

(In millions of dollars) Unaudited


2018

2017

Cash Flows from Operating Activities





Net income

$
1,586.2

$
1,648.5

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Provision for credit losses

66.1

76.8

Provision for depreciation and amortization

1,444.8

1,279.0

Share-based compensation expense

62.8

50.7

Gain on sale of affiliates and investments

(25.1)

(375.1)

Undistributed earnings of unconsolidated affiliates

(9.8)

(9.3)

Provision (credit) for deferred income taxes

640.8

(77.5)

Changes in assets and liabilities:

Trade, notes and financing receivables related to sales

(2,365.0)

(1,091.1)

Inventories

(1,538.8)

(1,348.0)

Accounts payable and accrued expenses

213.0

316.2

Accrued income taxes payable/receivable

175.7

167.8

Retirement benefits

(814.7)

173.1

Other

(110.7)

(81.8)

Net cash provided by (used for) operating activities

(674.7)

729.3

Cash Flows from Investing Activities

Collections of receivables (excluding receivables related to sales)

12,161.9

11,334.4

Proceeds from maturities and sales of marketable securities

55.8

388.8

Proceeds from sales of equipment on operating leases

1,115.6

1,086.6

Proceeds from sales of businesses and unconsolidated affiliates, net of cash sold

133.0

113.9

Cost of receivables acquired (excluding receivables related to sales)

(12,585.6)

(11,325.6)

Acquisitions of businesses, net of cash acquired

(5,170.9)

Purchases of marketable securities

(101.4)

(77.0)

Purchases of property and equipment

(570.6)

(373.7)

Cost of equipment on operating leases acquired

(1,427.7)

(1,395.3)

Other

(75.1)

(53.3)

Net cash used for investing activities

(6,465.0)

(301.2)

Cash Flows from Financing Activities

Increase in total short-term borrowings

1,183.4

1,648.9

Proceeds from long-term borrowings

5,739.1

4,364.5

Payments of long-term borrowings

(4,371.8)

(4,205.6)

Proceeds from issuance of common stock

208.7

488.6

Repurchases of common stock

(454.0)

(6.2)

Dividends paid

(582.6)

(571.3)

Other

(66.8)

(62.9)

Net cash provided by financing activities

1,656.0

1,656.0

Effect of Exchange Rate Changes on Cash and Cash Equivalents

72.1

117.5

Net Increase (Decrease) in Cash and Cash Equivalents

(5,411.6)

2,201.6

Cash and Cash Equivalents at Beginning of Period

9,334.9

4,335.8

Cash and Cash Equivalents at End of Period

$
3,923.3

$
6,537.4

See Condensed Notes to Interim Consolidated Financial Statements.


DEERE & COMPANY
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY
For the Three and Nine Months Ended July 28, 2019 and July 29, 2018
(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 29, 2018
Balance April 29, 2018	$	10,420	$	4,423		$	(15,426)	$	25,586	$	(4,173)	$	10	$	14
Net income		911							910				1
Other comprehensive loss		(381)									(380)		(1)
Repurchases of common stock		(394)					(394)
Treasury shares reissued		6					6
Dividends declared		(223)							(223)
Stock options and other		27		28					(1)
Balance July 29, 2018	$	10,366	$	4,451		$	(15,814)	$	26,272	$	(4,553)	$	10	$	14
					��
Nine Months Ended July 29, 2018
Balance October 29, 2017	$	9,560	$	4,281		$	(15,461)	$	25,301	$	(4,564)	$	3	$	14
Net income		1,585							1,584				1		1
Other comprehensive income (loss)		10									11		(1)
Repurchases of common stock		(454)					(454)
Treasury shares reissued		101					101
Dividends declared		(615)							(613)				(2)		(1)
Acquisitions		8											8
Stock options and other		171		170									1
Balance July 29, 2018	$	10,366	$	4,451		$	(15,814)	$	26,272	$	(4,553)	$	10	$	14

Three Months Ended July 28, 2019
Balance April 28, 2019	$	11,924	$	4,559		$	(16,739)	$	28,709	$	(4,610)	$	5	$	14
Net income		899							899
Other comprehensive income		29									29
Repurchases of common stock		(400)					(400)
Treasury shares reissued		18					18
Dividends declared		(241)							(240)				(1)
Stock options and other		41		40					1
Balance July 28, 2019	$	12,270	$	4,599		$	(17,121)	$	29,369	$	(4,581)	$	4	$	14

Nine Months Ended July 28, 2019
Balance October 28, 2018	$	11,291	$	4,474		$	(16,312)	$	27,553	$	(4,427)	$	3	$	14
ASU No. 2016-01 adoption*									8		(8)
Net income		2,535							2,532				3
Other comprehensive loss		(146)									(146)
Repurchases of common stock		(880)					(880)
Treasury shares reissued		71					71
Dividends declared		(727)							(725)				(2)
Stock options and other		126		125					1
Balance July 28, 2019	$	12,270	$	4,599		$	(17,121)	$	29,369	$	(4,581)	$	4	$	14
* See Note 3.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Nine Months Ended July 29, 2018 and July 30, 2017

(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

Balance October 30, 2016

$
6,530.8

$
3,911.8

$
(15,677.1)

$
23,911.3

$
(5,626.0)

$
10.8

$
14.0

Net income (loss)

1,648.5

1,648.8

(.3)

Other comprehensive income

446.4

446.2

.2

Repurchases of common stock

(6.2)

(6.2)

Treasury shares reissued

206.0

206.0

Dividends declared

(577.1)

(575.9)

(1.2)

Stock options and other

326.5

333.3

(6.8)

Balance July 30, 2017

$
8,574.9

$
4,245.1

$
(15,477.3)

$
24,984.2

$
(5,179.8)

$
2.7

$
14.0

Balance October 29, 2017

$
9,560.5

$
4,280.5

$
(15,460.8)

$
25,301.3

$
(4,563.7)

$
3.2

$
14.0

Net income

1,585.1

1,583.6

1.5

1.1

Other comprehensive
income (loss)

10.2

10.4

(.2)

Repurchases of common stock

(454.0)

(454.0)

Treasury shares reissued

101.3

101.3

Dividends declared

(615.7)

(613.0)

(2.7)

(1.1)

Acquisitions (Note 18)

7.5

7.5

Stock options and other

171.0

170.3

.4

.3

Balance July 29, 2018

$
10,365.9

$
4,450.8

$
(15,813.5)

$
26,272.3

$
(4,553.3)

$
9.6

$
14.0

See Condensed Notes to Interim Consolidated Financial Statements.

Condensed Notes to Interim Consolidated Financial Statements (Unaudited)

(1) Organization and Consolidation

~~(1)~~The information in the notes and related commentary are presented in a format which includes data grouped as follows:

Equipment Operations – Includes the Company’s agriculture and turf operations and construction and forestry operations with financial services reflected on the equity basis. On December 1, 2017, the Company acquired the stock and certain assets of substantially all of the business of Wirtgen Group Holding GmbH (Wirtgen). Wirtgen results are included in the construction and forestry operations (see Note 18).

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

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

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 ~~2018~~2019 and ~~2017~~2018 were July ~~29, 2018~~28, 2019 and July ~~30, 2017,~~29, 2018, respectively. Both periods contained 13 weeks.

Variable Interest Entities

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

The Company also has an interest in a joint venture that manufactures construction equipment in Brazil for local and overseas markets. The joint venture is a VIE; however, the Company is not the primary beneficiary. Therefore, the entity’s financial results are not fully consolidated in the Company’s consolidated financial statements, but are included on an equity basis. During the second quarter of 2019, the Company made an additional contribution to the joint venture in exchange for non-voting preferred stock and terminated the loan guarantee. The maximum exposure to losses at July 28, 2019 and October 28, 2018 in millions of dollars follows:


	July 28, 2019		October 28, 2018
Receivables from unconsolidated affiliates	$	3	$	2
Investment in unconsolidated affiliates		20
Loan guarantee				25
Total	$	23	$	27

(2)~~The~~Summary of Significant Accounting Policies and Cash Flow Information

The interim consolidated financial statements of Deere & Company have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that 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 that 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.

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.

Cash Flow Information

All cash flows from the changes in trade accounts and notes receivable are classified as operating activities in the statement of consolidated cash flows as these receivables arise from sales to the Company’s customers. Cash flows from financing receivables that are related to sales to the Company’s customers are also included in operating activities. The remaining financing receivables are related to the financing of equipment sold by independent dealers and are included in investing activities.

The Company had the following non-cash operating and investing activities that were not included in the statement of consolidated cash flows. The Company transferred inventory to equipment on operating leases of approximately ~~$564~~$498 million and ~~$519~~$564 million in the first nine months of ~~2018~~2019 and ~~2017,~~2018, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $70 million and $57 million at July 28, 2019 and ~~$37~~July 29, 2018, respectively.

The Company’s equipment operations held restricted cash of $9 million, $7 million, $7 million, and $6 million at July 28, 2019, October 28, 2018, July 29, 2018, and ~~July 30,~~October 29, 2017, respectively. The equipment operation’s restricted cash relates to miscellaneous operational activities. The Company’s financial services operations held restricted cash of $90 million, $104 million, $99 million, and $126 million at July 28, 2019, October 28, 2018, July 29, 2018, and October 29, 2017, respectively. The financial services operations’ restricted cash primarily relates to securitization of financing receivables (see Note 12). The restricted cash is recorded in other assets in the consolidated balance sheet.

(3) New Accounting Standards

~~(3)~~New ~~accounting standards adopted are as follows:~~Accounting Standards Adopted

In the first quarter of ~~2018,~~2019, the Company ~~early~~ adopted Financial Accounting Standards Board (FASB) Accounting ~~Standard~~Standards Update (ASU) No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends Accounting Standards Codification (ASC) 715, Compensation – Retirement Benefits. This ASU required that employers report only the service cost component of the total defined benefit pension and postretirement benefit cost in the same income statement lines as compensation for the participating employees. The other components of these benefit costs are reported outside of operating profit in the income statement line other operating expenses. The ASU was adopted on a retrospective basis that increased operating profit in the third quarter and first nine months of 2018 by none and $12 million, respectively, and third quarter and first nine months of 2017 by $7 million and $21 million, respectively. The income statement line changes for the third quarter and first nine months of 2017 were cost of sales decreased $17 million and $49 million, research and development expenses increased $2 million and $4 million, selling, administrative and general expenses increased $8 million and

$24 million, and other operating expenses increased $7 million and $21 million, respectively. In addition, only the service cost component of the benefit costs is eligible for capitalization, which was adopted beginning the first quarter of 2018.

In the first quarter of 2018, the Company adopted ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting, which amends ASC 323, Investments – Equity Method and Joint Ventures, which did not have a material effect on the Company’s consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which amends ASC 740, Income Taxes. In December 2017, the U.S. government enacted new tax legislation (tax reform). This ASU incorporates SEC Staff Accounting Bulletin No. 118, which was also issued in December 2017, into the ASC. The ASU provides guidance on when to record and disclose provisional amounts related to tax reform. In addition, the ASU allows for a measurement period up to one year after the enactment date of tax reform to complete the related accounting requirements and was effective when issued. The Company will complete the adjustments related to tax reform within the allowed period. The effects of tax reform on the Company’s consolidated financial statements are outlined in Note 8.

~~New accounting standards to be adopted are as follows:~~

~~In May 2014, the FASB issued ASU~~ No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ~~ASC~~Accounting Standards Codification (ASC) 605, Revenue Recognition. ~~This~~The ASU was adopted using a modified-retrospective approach to all incomplete contracts as of the adoption date. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A five step model is used to determine the amount and timing of revenue recognized. The ASU also requires ~~additional disclosure about the nature, amount, timing,~~expanded disclosures to include disaggregated revenue by geographic regions and uncertainty of revenue. The FASB issued several amendments clarifying various aspects of the ASU, including revenue transactions that involve a third party, goods or services that are immaterial in the context of the contract, and licensing arrangements. The Company will adopt the ASU effective the first quarter of fiscal year 2019 using a modified retrospective method. The Company’s evaluation of the ASU is largely complete, with the exception of the Wirtgen acquisition (see Note 18). major product lines.

The ASU ~~requires~~required that a gross asset and liability rather than a net liability be recorded for the value of estimated service parts returns and the related refund liability. The gross asset ~~will be~~is recorded in other assets for the inventory value of estimated parts returns and the gross liability ~~will be~~is recorded in accounts payable and accrued ~~expenses. In addition, certain revenue disclosures will be expanded. At this point of~~expenses for the ~~evaluation,~~estimated dealer refund. The table below reflects the ~~Company has not identified an item that will have a material effect on~~change for the ~~Company’s consolidated financial statements. The Company continues to evaluate~~estimated parts returns in the ~~ASU’s potential effects~~affected lines on the consolidated ~~financial statements.~~balance sheet in millions of dollars.


	October 28, 2018		Cumulative Effect from Adoption		October 29, 2018
Assets
Other assets	$	1,718	$	110	$	1,828
Liabilities
Accounts payable and accrued expenses	$	10,111	$	110	$	10,221

There were no significant changes affecting the timing of revenue recognition from the adoption. The Company’s updated revenue policies and additional disclosures are included in Note 4.

In ~~January 2016,~~ the ~~FASB issued~~first quarter of 2019, the Company adopted ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends ASC 825-10, Financial Instruments -– Overall. This ASU ~~changes~~changed the treatment for ~~available-for-sale~~available for sale equity investments by recognizing unrealized fair value changes directly in net income and no longer in ~~Other Comprehensive Income~~other comprehensive income (OCI). The ~~effective date will be~~cumulative effect of adoption resulted in an $8 million after-tax reclassification from OCI to retained earnings.

In the first quarter of ~~fiscal year 2019. Early adoption of the provisions affecting~~2019, the Company ~~is not permitted.~~adopted ASU No. 2016-18, Restricted Cash, which amends ASC 230, Statement of Cash Flows. The ASU ~~will~~requires that restricted cash be included with cash and cash equivalents in the statement of cash flows. The ASU was adopted ~~with~~using a ~~cumulative-effect adjustment~~retrospective transition approach

resulting in an update to the ~~balance sheet in~~2018 consolidated and supplemental consolidating statement of cash flows (see Note 2). The ASU did not have a material effect on the ~~year~~Company’s consolidated financial statements.

In the first quarter of ~~adoption.~~2019, the Company early adopted ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends ASC 815, Derivatives and Hedging. The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosures of hedging arrangements. The adoption did not have a material effect on the Company’s consolidated financial statements (see Note 17). The Company continues to evaluate potential additional hedge accounting relationships provided by the ~~ASU’s potential effects~~new standard to further improve risk management.

The Company also adopted the following standards in the first quarter of 2019, none of which had a material effect on the Company’s consolidated financial ~~statements.~~statements:

Accounting Standards Updates


2016-15	Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows
2016-16	Intra-Entity Transfers of Assets Other Than Inventory, which amends ASC 740, Income Taxes
2017-01	Clarifying the Definition of a Business, which amends ASC 805, Business Combinations
2017-09	Scope of Modification Accounting, which amends ASC 718, Compensation - Stock Compensation
2018-13	Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement
2018-14	Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General
2018-16	Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which amends ASC 815, Derivatives and Hedging

New Accounting Standards to be Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases. The ASU’s primary change is the requirement for lessee entities to recognize a lease liability for payments and a right of use asset during the term of operating lease arrangements. The ASU does not significantly change the lessee’s recognition, measurement, and presentation of expenses and cash flows from the previous accounting standard. Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, ~~Leases. The amendments in the ASU affect specific aspects of the guidance under ASU No. 2016-02~~Leases and ~~are not expected to have a material impact on the Company’s adoption. The ASU requires that lessees and lessors use a modified retrospective transition approach. In July 2018, the FASB issued~~ ASU No. 2018-11, Leases: Targeted ~~Improvements, which amends~~Improvements. Both ASUs amend ASC 842, Leases. ~~This ASU provides for~~The provisions affecting the Company in these ASUs are an ~~adoption~~ option that will not require earlier periods to be restated at the adoption ~~date. In addition, this ASU provides~~date and an option for lessors, if certain criteria are met, to avoid separating the lease and nonlease components (such as preventative maintenance services) in an agreement. In December 2018, the FASB issued ASU No. 2018-20, Narrow-Scope Improvements for Lessors. This ASU provides an election for lessors to exclude sales and related taxes from consideration in the contract, requires lessors to exclude from revenue and expense lessor costs paid directly to a third party by lessees, and clarifies lessors’ accounting for variable payments related to both lease and nonlease components. In March 2019, the FASB issued ASU No. 2019-01, Leases: Codification Improvements. The ~~income is recognized based on~~ASU allows certain lessors, including captive finance companies, to use their cost as the ~~predominant component under either~~fair value of the ~~revenue standard or~~to-be-leased asset. The ASU also clarifies the ~~leasing standard.~~presentation of lease payments in the statement of cash flows and the required transition disclosures. The effective date ~~for the ASUs~~ will be the first quarter of fiscal year ~~2020 with early adoption permitted.~~2020. The Company is implementing a software application for lessee accounting, designing new processes and controls, and evaluating the potential ~~adoption options and the~~ effects on the consolidated financial statements.

The ASU will be adopted using the modified-retrospective approach that will not require earlier periods to be restated.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments - Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19,

Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The effective date will be the first quarter of fiscal year ~~2021, with early adoption permitted beginning in fiscal year 2020.~~2021. The ~~ASU~~ASUs will be adopted using a modified-retrospective approach. The Company is evaluating the potential effects on the ~~consolidated financial statements.~~

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows. This ASU provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted. The ASU will be adopted using a retrospective transition approach. The adoption will not have a material effect on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends ASC 740, Income Taxes. This ASU requires that the income tax consequences of an intra-entity asset transfer other than inventory are recognized at the time of the transfer. The effective date will be the first quarter of fiscal year 2019. The ASU will be adopted using a modified-retrospective transition approach. The adoption will not have a material effect on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which amends ASC 230, Statement of Cash Flows. This ASU requires that a statement of cash flows explain the change during the reporting period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted, and will be adopted using a retrospective transition approach. The adoption will not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which amends ASC 805, Business Combinations. This ASU provides further guidance on the definition of a business to determine whether transactions should be accounted for as acquisitions of assets or businesses. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted in certain cases. The ASU will be adopted on a prospective basis and will not have a material effect on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities, which amends ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. This ASU reduces the amortization period for certain callable debt securities held at a premium to the earliest call date. The treatment of securities held at a discount is unchanged. The effective date is the first quarter of fiscal year ~~2020, with early adoption permitted.~~2020. The ASU will be adopted using a modified-retrospective approach. The adoption will not have a material effect on the Company’s ~~consolidated financial statements.~~

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, which amends ASC 718, Compensation – Stock Compensation. This ASU provides guidance about which changes to the terms of a share-based payment award should be accounted for as a modification. A change to an award should be accounted for as a modification unless the fair value of the modified award is the same as the original award, the vesting conditions do not change, and the classification as an equity or liability instrument does not change. The ASU will be adopted on a prospective basis. The effective date is the first quarter of fiscal year 2019, with early adoption permitted. The adoption will not have a material effect on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends ASC 815, Derivatives and Hedging. The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosures of hedging arrangements. The effective date is fiscal year 2020, with early adoption permitted. The Company is evaluating the potential effects on the consolidated financial statements.

~~In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amends ASC 220, Income Statement – Reporting~~

Comprehensive Income. Included in the provisions of tax reform is a reduction of the corporate income tax rate from 35 percent to 21 percent. Accounting principles generally accepted in the U.S. require that deferred taxes are remeasured to the new corporate tax rate in the period legislation is enacted. The deferred tax adjustment is recorded in the provision for income taxes, including items for which the tax effects were originally recorded in OCI. This treatment results in the items in OCI not reflecting the appropriate tax rate, which are referred to as stranded tax effects. This ASU allows a reclassification from accumulated OCI to retained earnings for stranded tax effects resulting from tax reform. The effective date is fiscal year 2020, with early adoption permitted, including in interim periods. The ASU can be adopted at the beginning of an interim or annual period or retrospectively to each period affected by tax reform. The Company is evaluating the potential effects of the ASU on the consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718, Compensation – Stock Compensation. ~~This~~The ASU requires that most of the guidance related to stock compensation granted to employees be followed for non-employees, including the measurement date, valuation approach, and performance conditions. The expense is recognized in the same period as though cash were paid for the good or service. The effective date is the first quarter of fiscal year ~~2020, with early adoption permitted, including in interim periods.~~2020. The ASU will be adopted using a modified-retrospective ~~transition~~ approach. The adoption will not have a material effect on the consolidated financial statements.

In August 2018, the FASB issued ASU No. ~~2018-13, Disclosure Framework – Changes to the Disclosure Requirements~~2018-15, Customer’s Accounting for ~~Fair Value Measurement,~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC ~~820, Fair Value Measurement.~~350-40, Intangibles – Goodwill and Other – Internal-Use Software. This ASU ~~modifies~~requires customers in a hosting arrangement that is a service contract to evaluate the ~~disclosure requirements for fair value measurements by removing, modifying,~~implementation costs of the hosting arrangement using the guidance to develop internal-use software. The project development stage determines the implementation costs that are capitalized or ~~adding certain disclosures.~~expensed. Capitalized implementation costs are amortized over the term of the service arrangement and are presented in the same income statement line item as the service contract costs. The effective date will be the first quarter of fiscal year 2021, with early adoption permitted. The Company will adopt the ASU on a prospective basis. The Company is evaluating the potential effects on the Company’s consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The effective dates for the separate portions of the ASU and the expected effect on the consolidated financial statements are as follows: (1) clarifications to ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, is the first quarter of fiscal year 2021, which is under evaluation, (2) clarifications to ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, is the first quarter of fiscal year 2020, with early adoption permitted, which will not have a material effect, and (3) clarifications to ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, is the first quarter of fiscal year 2021, with early adoption permitted, for the removed disclosures and delayed adoption until fiscal year 2021 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The adoptionwhich will not have a material ~~effect~~effect.

(4) Revenue Recognition

Sales of equipment and service parts. Sales of equipment and service parts are recognized when each of the following criteria are met: (1) the Company and an independent customer approve a contract with commercial substance, (2) the sales price is determinable and collectability of the payments are probable based on the ~~Company’s consolidated financial statements.~~terms outlined in the contract, and (3) control of the goods has transferred to the customer. Transfer of control generally occurs for equipment and service parts when the good is delivered as specified in the contract and the risks and rewards of ownership are transferred. In the U.S. and most international locations, this transfer occurs primarily when goods are shipped. In Canada and some other international locations, certain goods are shipped to dealers on a consignment basis under which the risks and rewards of ownership are not transferred to the dealer at the time the goods are shipped. Accordingly, in these locations, sales are not recorded until a retail customer has purchased the goods. Generally, no right of return exists on sales of equipment.

In ~~August 2018,~~limited instances, equipment is transferred to a customer or a financial institution with an obligation to repurchase the ~~FASB issued ASU No. 2018-14, Disclosure Framework – Changes to~~equipment for a specified amount, which is exercisable at the ~~Disclosure Requirements for Defined Benefit Plans, which amends ASC 715-20, Compensation – Retirement Benefits – Defined Benefit Plans – General. This ASU modifies~~customer’s option. When the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in accumulated OCIequipment is expected to be repurchased, those arrangements are accounted for as leases. When the operating lease criteria are met, no sale is recorded at the time of the equipment transfer and the difference between sale price and the specified repurchase amount is recognized as revenue on a straight-line basis until the customer’s option expires. When this equipment is not expected to be repurchased, a sale is recorded with a return obligation.

Under the terms of sales agreements with dealers, interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to twelve months for most equipment. Interest-free periods may not be extended. Interest is primarily charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted at the time of the sale to the dealer, until payment is received by the Company. Interest charged may not be forgiven and the past due interest rates exceed market rates. Dealers cannot cancel purchases after the equipment is shipped and are responsible for payment even if the equipment is not sold to retail customers. If the interest-free or below market interest rate period exceeds one year, the Company adjusts the expected sales revenue for the effects of the time value of money using a current market interest rate. The revenue related to the financing component is recognized in finance and interest income using the interest method. The Company elected to not adjust the sales price to account for a financing component if the expected interest-free or below market period is one year or less.

Service parts and certain attachments returns are estimable and accrued at the time a sale is recognized. The estimated parts returns are recorded in other assets for the inventory value of estimated part returns, adjusted for restocking fees. The estimated dealer refund liability, adjusted for restocking fees, is recorded in accounts payable and accrued expenses. The estimated returns are based on historical return rates, current dealer inventory levels, and current economic conditions.

Sales incentives. In certain markets, the Company provides sales incentives to dealers. These incentives may be based on a dealer’s purchase volume, or on retail sales incentive programs for allowances and financing programs that will be due when the dealer sells the equipment to a retail customer. At the time of the sale to a dealer, the Company records an estimated cost of these programs as a reduction to the sales price. The estimated cost is based on historical data, field inventory levels, and forecasted sales volumes. The final cost of these programs is determined at the end of the measurement period for volume based incentives or when the dealer sells the equipment to a retail customer. Actual cost differences from the original cost estimate are recognized in net ~~periodic benefit~~sales.

Product warranties. For most equipment and parts sales, the Company provides a standard warranty to provide assurance that the equipment will function as intended for a specified period. At the time a sale is recognized, the estimated future warranty costs are recorded. The Company generally determines its total warranty liability by applying historical warranty claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is primarily determined by a review of five-year claims costs with consideration of current quality developments. The Company also offers extended warranty arrangements for purchase at the customer’s option. The premiums for extended warranties are recognized in other income in the statement of consolidated income primarily in proportion to the costs expected to be incurred over the ~~next fiscal year~~contract period. The unamortized extended warranty premiums (deferred revenue) are recorded in accounts payable and ~~(b)~~accrued expenses in the ~~effects of~~consolidated balance sheet.

Remanufactured components and parts. The Company remanufactures used engines and components (cores) that are sold to dealers and end customers for maintenance and repair parts. Revenue for remanufactured components is recognized using the same criteria as other parts sales. When a ~~one-percentage-point change~~remanufactured part is sold, the Company collects a deposit that is repaid if the customer returns a core that meets certain specifications within a defined time period. The deposit received from the customer is recognized as a liability in ~~assumed health care cost trend rates on the net periodic benefit costs~~accounts payable and accrued expenses and the ~~benefit~~used component that is expected to be returned is recognized in other assets in the consolidated balance sheet. When a customer returns a core, the deposit is repaid, the liability reversed, and the returned core is recorded in inventory to be remanufactured and sold to another customer. If a core is not returned within the required time as estimated, the deposit is recognized as revenue in net sales, and the estimated core return is recorded as an expense in cost of sales in the statement of consolidated income.

Precision guidance, telematics, and other information enabled solutions. Certain equipment is sold with precision guidance, telematics, and other information gathering and analyzing capabilities. The solutions require hardware, software, and include an obligation to provide telematic services for ~~postretirement health care benefits.~~a specific period of time. These solutions are generally bundled with the sale of the equipment and can also be purchased or renewed separately. The ~~new disclosures include~~revenue related to the ~~interest crediting rates~~hardware and embedded software is generally recognized at the time of the equipment sale and recorded in net sales in the consolidated statement of income. The revenue for ~~cash~~the future services is generally deferred and recognized over the service period. The deferred revenue is recorded as a contract liability in accounts payable and accrued expenses in the consolidated balance ~~plans,~~sheet and is recognized in other income with the associated expenses recognized in other operating expenses in the statement of consolidated income.

Allowance for credit losses. The Company also records an ~~explanation of significant gains and~~allowance for credit losses related to ~~changes~~the receivables from sales (trade receivables and certain financing receivables) in ~~benefit obligations.~~selling, administrative and general expenses. The ~~effective date~~allowance represents an estimate of the losses inherent in the receivable portfolio. The allowance is based on many quantitative and qualitative factors. The adequacy of the allowance is reviewed quarterly.

Sales and transaction taxes. The Company collects and remits taxes assessed by different governmental authorities that are both imposed on and concurrent with revenue producing transactions between the Company and its customers. These taxes include sales, use, value-added, and some excise taxes. The Company elected to exclude these taxes from the determination of sales price (excluded from revenues).

Shipping and handling costs. Shipping and handling costs related to the sales of the Company’s equipment after a customer obtains control of the equipment are accrued at the time of the sale in cost of sales.

Contract costs. The Company elected to recognize the incremental costs of obtaining a contract as an expense when incurred because the asset’s amortization period would be one year or less.

The Company’s revenue by primary geographical market, major product line, and timing of revenue recognition in millions of dollars follow:


Three Months Ended July 28, 2019	Agriculture and Turf		Construction and Forestry		Financial Services		Total
Primary geographical markets:
United States	$	2,870	$	1,594	$	632	$	5,096
Canada		299		260		148		707
Western Europe		1,154		458		22		1,634
Central Europe and CIS		324		229		10		563
Latin America		708		171		66		945
Asia, Africa, Australia, New Zealand, and Middle East		684		375		32		1,091
Total	$	6,039	$	3,087	$	910	$	10,036

Major product lines:
Large Agriculture	$	2,985					$	2,985
Small Agriculture		2,172						2,172
Turf		704						704
Construction			$	1,319				1,319
Compact Construction				320				320
Road Building				1,008				1,008
Forestry				333				333
Financial Products		25		7	$	910		942
Other		153		100				253
Total	$	6,039	$	3,087	$	910	$	10,036

Timing of revenue recognition:
Revenue recognized at a point in time	$	5,988	$	3,055			$	9,043
Revenue recognized over time		51		32	$	910		993
Total	$	6,039	$	3,087	$	910	$	10,036


Nine Months Ended July 28, 2019	Agriculture and Turf		Construction and Forestry		Financial Services		Total
Primary geographical markets:
United States	$	9,411	$	4,495	$	1,810	$	15,716
Canada		784		773		458		2,015
Western Europe		3,362		1,174		63		4,599
Central Europe and CIS		865		555		28		1,448
Latin America		2,028		515		199		2,742
Asia, Africa, Australia, New Zealand, and Middle East		1,784		966		92		2,842
Total	$	18,234	$	8,478	$	2,650	$	29,362

Major product lines:
Large Agriculture	$	8,647					$	8,647
Small Agriculture		6,613						6,613
Turf		2,199						2,199
Construction			$	3,806				3,806
Compact Construction				904				904
Road Building				2,420				2,420
Forestry				1,023				1,023
Financial Products		69		20	$	2,650		2,739
Other		706		305				1,011
Total	$	18,234	$	8,478	$	2,650	$	29,362

Timing of revenue recognition:
Revenue recognized at a point in time	$	18,088	$	8,402			$	26,490
Revenue recognized over time		146		76	$	2,650		2,872
Total	$	18,234	$	8,478	$	2,650	$	29,362

Following is a description of the Company’s major product lines:

Large Agriculture – Includes net sales of tractors with more than approximately 200 horsepower and associated attachments, combines, cotton pickers, cotton strippers, self-propelled forage harvesters and related attachments, and sugarcane harvesters, harvesting front-end equipment, sugarcane loaders and pull behind scrapers, tillage, seeding, and application equipment, including sprayers, nutrient management and soil preparation machinery, and related service parts.

Small Agriculture – Includes net sales of medium and utility tractors with less than approximately 200 horsepower, hay and forage equipment, balers, mowers, and related service parts.

Turf – Includes net sales of turf and utility equipment, including riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles, and commercial mowing equipment, along with a broad line of associated implements, other outdoor power products, and related service parts.

Construction – Includes net sales of a broad range of machines used in construction, earthmoving, and material handling, including backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, related attachments, and related service parts.

Compact Construction – Includes net sales of smaller construction equipment, including compact excavators, compact track loaders, compact wheel loaders, skid steers, landscape loaders, related attachments, and related service parts.

Road Building – Includes net sales of equipment used in road building and renovation, including milling machines, recyclers, slipform pavers, surface miners, asphalt pavers, compactors, tandem and static rollers mobile crushers and screens, mobile and stationary asphalt plants, related attachments, and related service parts.

Forestry – Includes net sales of equipment used in timber harvesting, including log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related logging attachments, and related service parts.

Financial Products – Includes finance and interest income primarily from retail notes related to sales of John Deere equipment to end customers, wholesale financing to dealers of John Deere equipment, and revolving charge accounts; lease income from retail leases of John Deere equipment; and revenue from extended warranties.

Other – Includes sales of certain components to other equipment manufacturers, revenue earned over time from precision guidance, telematics, and other information enabled solutions, revenue from service performed at Company owned dealerships and service centers, gains on disposition of property and businesses, trademark licensing revenue, and other miscellaneous revenue items.

The Company invoices in advance of recognizing the sale of certain products and the revenue for certain services. These items are primarily for premiums for extended warranties, advance payments for future equipment sales, and subscription and service revenue related to precision guidance and telematic services. These advanced customer payments are presented as deferred revenue, a contract liability, in accounts payable and accrued expenses in the consolidated balance sheet. The deferred revenue received, but not recognized in revenue, including extended warranty premiums also shown in Note 15, was $1,022 million and $915 million at July 28, 2019 and October 28, 2018, respectively. The contract liability is reduced as the revenue is recognized. During the third quarter and first nine months of 2019, $101 million and $360 million, respectively, of revenue was recognized from deferred revenue that was recorded as a contract liability at the beginning of 2019.

The Company entered into contracts with customers to deliver equipment and services that have not been recognized at July 28, 2019 because the equipment or services have not been provided. These contracts primarily relate to extended warranty and certain precision guidance and telematic services. The amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $878 million at July 28, 2019. The estimated revenue to be recognized by fiscal year follows in millions of dollars: remainder of 2019 - $133, 2020 - $348, 2021 - $197, 2022 - $116, 2023 - $58, and later years - $26. As permitted, the Company elected only to disclose remaining performance obligations with ~~early adoption permitted.~~an original contract duration greater than one year. The ~~adoption will not have a material effect on the Company’s consolidated financial statements.~~

contracts with an expected duration of one year or less are generally for sales to dealers and end customers for equipment, service parts, repair services, and certain telematics services.

(5)Other Comprehensive Income Items

~~(4)~~The after-tax changes in accumulated other comprehensive income (loss) in millions of dollars follow:

Total

Unrealized

Unrealized

Accumulated

Retirement

Cumulative

Gain (Loss)

Gain (Loss)

Other

Benefits

Translation

on

on

Comprehensive

Adjustment

Adjustment

Derivatives

Investments

Income (Loss)

Balance October 30, 2016

$
(4,409)

$
(1,229)

$
1

$
11

$
(5,626)

Other comprehensive income (loss) items before reclassification

(13)

325

(1)

172

483

Amounts reclassified from accumulated other comprehensive income

134

2

(173)

(37)

Net current period other comprehensive income (loss)

121

325

1

(1)

446

Balance July 30, 2017

$
(4,288)

$
(904)

$
2

$
10

$
(5,180)

Balance October 29, 2017

$
(3,580)

$
(999)

$
5

$
10

$
(4,564)

Other comprehensive income (loss) items before reclassification

81

(196)

12

(7)

(110)

Amounts reclassified from accumulated other comprehensive income

124

(2)

(1)

121

Net current period other comprehensive income (loss)

205

(196)

10

(8)

11

Balance July 29, 2018

$
(3,375)

$
(1,195)

$
15

$
2

$
(4,553)


									Total
					Unrealized		Unrealized		Accumulated
	Retirement		Cumulative		Gain (Loss)		Gain (Loss)		Other
	Benefits		Translation		on		on		Comprehensive
	Adjustment		Adjustment		Derivatives		Debt Securities		Income (Loss)
Balance October 29, 2017	$	(3,580)	$	(999)	$	5	$	10	$	(4,564)
Other comprehensive income (loss) items before reclassification		81		(196)		12		(7)		(110)
Amounts reclassified from accumulated other comprehensive income		124				(2)		(1)		121
Net current period other comprehensive income (loss)		205		(196)		10		(8)		11
Balance July 29, 2018	$	(3,375)	$	(1,195)	$	15	$	2	$	(4,553)

Balance October 28, 2018	$	(3,237)	$	(1,203)	$	15	$	(2)	$	(4,427)
ASU No. 2016-01 adoption*								(8)		(8)
Other comprehensive income (loss) items before reclassification		30		(218)		(33)		26		(195)
Amounts reclassified from accumulated other comprehensive income		54				(4)		(1)		49
Net current period other comprehensive income (loss)		84		(218)		(37)		25		(146)
Balance July 28, 2019	$	(3,153)	$	(1,421)	$	(22)	$	15	$	(4,581)
* See Note 3.

Following are amounts recorded in and reclassifications out of other comprehensive income (loss), and the income tax effects, in millions of dollars:


	Before		Tax		After
	Tax		(Expense)		Tax
Three Months Ended July 28, 2019	Amount		Credit		Amount
Cumulative translation adjustment	$	27	$	(1)	$	26
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(27)		6		(21)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(1)				(1)
Net unrealized gain (loss) on derivatives		(28)		6		(22)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		13		(2)		11
Reclassification of realized (gain) loss – Other income		(1)				(1)
Net unrealized gain (loss) on debt securities		12		(2)		10
Retirement benefits adjustment:
Pensions
Net actuarial gain (loss)		(3)		1		(2)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		35		(9)		26
Prior service (credit) cost		2				2
Settlements/curtailments		1				1
OPEB
Net actuarial gain (loss)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		4		(1)		3
Prior service (credit) cost		(19)		4		(15)
Net unrealized gain (loss) on retirement benefits adjustment		20		(5)		15
Total other comprehensive income (loss)	$	31	$	(2)	$	29

Before

Tax

After

Tax

(Expense)

Tax

Three Months Ended July 29, 2018

Amount

Credit

Amount

Cumulative translation adjustment

$
(422)

$
1

$
(421)

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

1

1

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

(2)

(2)

Net unrealized gain (loss) on derivatives

(1)

(1)

Unrealized gain (loss) on investments:

Unrealized holding gain (loss)

2

(1)

1

Reclassification of realized (gain) loss – Other income

Net unrealized gain (loss) on investments

2

(1)

1

Retirement benefits adjustment:

Pensions

Net actuarial gain (loss)

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

53

(14)

39

Prior service (credit) cost

3

(1)

2

Settlements/curtailments

1

1

Health care and life insurance

Net actuarial gain (loss)

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

16

(4)

12

Prior service (credit) cost

(19)

5

(14)

Net unrealized gain (loss) on retirement benefits adjustments

54

(14)

40

Total other comprehensive income (loss)

$
(367)

$
(14)

$
(381)

*~~These accumulated other comprehensive income amounts are components of net periodic pension and postretirement costs. See Note 7 for additional detail.~~

Before

Tax

After

Tax

(Expense)

Tax

Nine Months Ended July 29, 2018

Amount

Credit

Amount

Cumulative translation adjustment

$
(196)

$
(196)

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

16

$
(4)

12

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

(3)

1

(2)

Net unrealized gain (loss) on derivatives

13

(3)

10

Unrealized gain (loss) on investments:

Unrealized holding gain (loss)

(9)

2

(7)

Reclassification of realized (gain) loss – Other income

(1)

(1)

Net unrealized gain (loss) on investments

(10)

2

(8)

Retirement benefits adjustment:

Pensions

Net actuarial gain (loss)

46

(11)

35

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

168

(48)

120

Prior service (credit) cost

9

(3)

6

Settlements/curtailments

7

(2)

5

Health care and life insurance

Net actuarial gain (loss)

60

(14)

46

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

47

(13)

34

Prior service (credit) cost

(57)

16

(41)

Net unrealized gain (loss) on retirement benefits adjustments

280

(75)

205

Total other comprehensive income (loss)

$
87

$
(76)

$
11

*~~These accumulated other comprehensive income amounts are components of net periodic pension and postretirement costs. See Note 7 for additional detail.~~

Before

Tax

After

Tax

(Expense)

Tax

Three Months Ended July 30, 2017

Amount

Credit

Amount

Cumulative translation adjustment

$
328

$
(2)

$
326

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

(2)

1

(1)

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

1

1

Foreign exchange contracts – Other operating expenses

Net unrealized gain (loss) on derivatives

(1)

1

Unrealized gain (loss) on investments:

Unrealized holding gain (loss)

11

(4)

7

Reclassification of realized (gain) loss – Other income

(96)

35

(61)

Net unrealized gain (loss) on investments

(85)

31

(54)

Retirement benefits adjustment:

Pensions

Net actuarial gain (loss)

(1)

(1)

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

61

(22)

39

Prior service (credit) cost

3

(1)

2

Settlements/curtailments

1

(1)

Health care and life insurance

Net actuarial gain (loss)

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

25

(9)

16

Prior service (credit) cost

(20)

8

(12)

Net unrealized gain (loss) on retirement benefits adjustments

69

(25)

44

Total other comprehensive income (loss)

$
311

$
5

$
316

*~~These accumulated other comprehensive income amounts are components of net periodic pension and postretirement costs. See Note 7 for additional detail.~~

In the third quarter of 2018 and 2017, the noncontrolling interests’ comprehensive income was $.4 million and $.7 million, respectively, which consisted of net income of $1.0 million and $.5 million and cumulative translation adjustments of $(.6) million and $.2 million, respectively.

Before

Tax

After

Tax

(Expense)

Tax

Nine Months Ended July 30, 2017

Amount

Credit

Amount

Cumulative translation adjustment

$
327

$
(2)

$
325

Unrealized gain (loss) on derivatives:

Unrealized hedging gain (loss)

(2)

1

(1)

Reclassification of realized (gain) loss to:

Interest rate contracts – Interest expense

2

(1)

1

Foreign exchange contracts – Other operating expenses

2

(1)

1

Net unrealized gain (loss) on derivatives

2

(1)

1

Unrealized gain (loss) on investments:

Unrealized holding gain (loss)

273

(101)

172

Reclassification of realized (gain) loss – Other income

(274)

101

(173)

Net unrealized gain (loss) on investments

(1)

(1)

Retirement benefits adjustment:

Pensions

Net actuarial gain (loss)

(10)

3

(7)

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

182

(66)

116

Prior service (credit) cost

9

(3)

6

Settlements/curtailments

2

(1)

1

Health care and life insurance

Net actuarial gain (loss)

(10)

4

(6)

Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *

Actuarial (gain) loss

74

(27)

47

Prior service (credit) cost

(58)

22

(36)

Net unrealized gain (loss) on retirement benefits adjustments

189

(68)

121

Total other comprehensive income (loss)

$
517

$
(71)

$
446

*These accumulated other comprehensive income amounts are included in net periodic pension and ~~postretirement~~OPEB costs. See Note 78 for additional detail.


	Before		Tax		After
	Tax		(Expense)		Tax
Nine Months Ended July 28, 2019	Amount		Credit		Amount
Cumulative translation adjustment	$	(217)	$	(1)	$	(218)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		(42)		9		(33)
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(6)		2		(4)
Net unrealized gain (loss) on derivatives		(48)		11		(37)
Unrealized gain (loss) on debt securities:
Unrealized holding gain (loss)		32		(6)		26
Reclassification of realized (gain) loss – Other income		(1)				(1)
Net unrealized gain (loss) on debt securities		31		(6)		25
Retirement benefits adjustment:
Pensions
Net actuarial gain (loss)		(21)		5		(16)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		106		(26)		80
Prior service (credit) cost		8		(2)		6
Settlements/curtailments		1				1
OPEB
Net actuarial gain (loss)		60		(14)		46
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		12		(3)		9
Prior service (credit) cost		(55)		13		(42)
Net unrealized gain (loss) on retirement benefits adjustment		111		(27)		84
Total other comprehensive income (loss)	$	(123)	$	(23)	$	(146)

*These accumulated other comprehensive income amounts are included in net periodic pension and OPEB costs. See Note 8 for additional detail.


	Before		Tax		After
	Tax		(Expense)		Tax
Three Months Ended July 29, 2018	Amount		Credit		Amount
Cumulative translation adjustment	$	(421)	$	1	$	(420)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		1				1
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(2)				(2)
Net unrealized gain (loss) on derivatives		(1)				(1)
Unrealized gain (loss) on investments:
Unrealized holding gain (loss)		2		(1)		1
Reclassification of realized (gain) loss – Other income
Net unrealized gain (loss) on investments		2		(1)		1
Retirement benefits adjustment:
Pensions
Net actuarial gain (loss)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		53		(14)		39
Prior service (credit) cost		3		(1)		2
Settlements/curtailments		1				1
OPEB
Net actuarial gain (loss)
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		16		(4)		12
Prior service (credit) cost		(19)		5		(14)
Net unrealized gain (loss) on retirement benefits adjustment		54		(14)		40
Total other comprehensive income (loss)	$	(366)	$	(14)	$	(380)

*These accumulated other comprehensive income amounts are included in net periodic pension and OPEB costs. See Note 8 for additional detail.

In the third quarter of 2019 and 2018, the noncontrolling interests’ comprehensive income in both periods was none, which consisted of net income of none and $1 million and cumulative translation adjustments of none and $(1) million, respectively.


	Before		Tax		After
	Tax		(Expense)		Tax
Nine Months Ended July 29, 2018	Amount		Credit		Amount
Cumulative translation adjustment	$	(196)			$	(196)
Unrealized gain (loss) on derivatives:
Unrealized hedging gain (loss)		16	$	(4)		12
Reclassification of realized (gain) loss to:
Interest rate contracts – Interest expense		(3)		1		(2)
Net unrealized gain (loss) on derivatives		13		(3)		10
Unrealized gain (loss) on investments:
Unrealized holding gain (loss)		(9)		2		(7)
Reclassification of realized (gain) loss – Other income		(1)				(1)
Net unrealized gain (loss) on investments		(10)		2		(8)
Retirement benefits adjustment:
Pensions
Net actuarial gain (loss)		46		(11)		35
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		168		(48)		120
Prior service (credit) cost		9		(3)		6
Settlements/curtailments		7		(2)		5
OPEB
Net actuarial gain (loss)		60		(14)		46
Reclassification through amortization of actuarial (gain) loss and prior service (credit) cost to other operating expenses: *
Actuarial (gain) loss		47		(13)		34
Prior service (credit) cost		(57)		16		(41)
Net unrealized gain (loss) on retirement benefits adjustment		280		(75)		205
Total other comprehensive income (loss)	$	87	$	(76)	$	11

*These accumulated other comprehensive income amounts are included in net periodic pension and OPEB costs. See Note 8 for additional detail.

In the first nine months of ~~2018~~2019 and ~~2017,~~2018, the noncontrolling interests’ comprehensive income ~~(loss)~~ was ~~$2.4~~$3 million and ~~$(.1)~~$1 million, respectively, which consisted of net income ~~(loss)~~ of ~~$2.6~~$3 million and ~~$(.3)~~$2 million and cumulative translation adjustments of ~~$(.2) million~~none and ~~$.2~~$(1) million, respectively.

(6)Dividends Declared and Paid

~~(5)~~Dividends declared and paid on a per share basis were as follows:


	Three Months Ended				Nine Months Ended
	July 28		July 29		July 28		July 29
	2019		2018		2019		2018
Dividends declared	$	.76	$	.69	$	2.28	$	1.89
Dividends paid	$	.76	$	.60	$	2.21	$	1.80

Three Months Ended

Nine Months Ended

July 29

July 30

July 29

July 30

   2018

   2017

   2018

   2017

Dividends declared

$
.69

$
.60

$
1.89

$
1.80

Dividends paid

$
.60

$
.60

$
1.80

$
1.80

(7)Earnings Per Share

~~(6)~~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
	Three Months Ended				Nine Months Ended
	July 29		July 30		July 29		July 30
	2018		2017		2018		2017
									July 28		July 29		July 28		July 29
									2019		2018		2019		2018
Net income attributable to Deere & Company	$	910.3	$	641.8	$	1,583.6	$	1,648.8	$	899	$	910	$	2,532	$	1,584
Less income allocable to participating securities		.1		.2		.3		.4
Income allocable to common stock	$	910.2	$	641.6	$	1,583.3	$	1,648.4
Average shares outstanding		323.5		320.8		323.4		318.8		315.9		323.5		317.3		323.4
Basic per share	$	2.81	$	2.00	$	4.90	$	5.17	$	2.84	$	2.81	$	7.98	$	4.90


Average shares outstanding		323.5		320.8		323.4		318.8		315.9		323.5		317.3		323.4
Effect of dilutive share-based compensation		4.5		4.3		4.8		3.7		3.9		4.5		4.2		4.8
Total potential shares outstanding		328.0		325.1		328.2		322.5		319.8		328.0		321.5		328.2
Diluted per share	$	2.78	$	1.97	$	4.82	$	5.11	$	2.81	$	2.78	$	7.87	$	4.82

The income allocable to participating securities was insignificant for all periods and is reflected in the earnings per share.

During the third quarter and first nine months of ~~2018, .5~~2019, .9 million shares and .4.7 million shares, respectively, were excluded from the computation because the incremental shares would have been antidilutive. During the third quarter and first nine months of ~~2017, none~~2018, .5 million shares and .3.4 million shares, respectively, were excluded infrom the above per share computation.

(8)Pension and Other Postretirement Benefits

~~(7)~~The Company has several defined benefit pension plans and ~~defined~~ postretirement benefit (OPEB) plans, primarily health care and life insurance plans, covering ~~many of~~ its U.S. employees and employees in certain foreign countries.

The worldwide components of net periodic pension cost consisted of the following in millions of dollars:


	Three Months Ended				Nine Months Ended
	July 29		July 30		July 29		July 30
	2018		2017		2018		2017

									Three Months Ended				Nine Months Ended
									July 28		July 29		July 28		July 29
									2019		2018		2019		2018
Service cost	$	75	$	68	$	223	$	203	$	65	$	75	$	197	$	223
Interest cost		97		90		292		270		112		97		334		292
Expected return on plan assets		(193)		(197)		(581)		(591)		(200)		(193)		(600)		(581)
Amortization of actuarial loss		53		61		168		182		35		53		106		168
Amortization of prior service cost		3		3		9		9		2		3		8		9
Settlements/curtailments		1		1		7		2		1		1		1		7
Net cost	$	36	$	26	$	118	$	75	$	15	$	36	$	46	$	118

The worldwide components of net periodic ~~postretirement benefits~~OPEB cost ~~(health care and life insurance)~~ consisted of the following in millions of dollars:


	Three Months Ended				Nine Months Ended
	July 29		July 30		July 29		July 30
	2018		2017		2018		2017

									Three Months Ended				Nine Months Ended
									July 28		July 29		July 28		July 29
									2019		2018		2019		2018
Service cost	$	11	$	11	$	33	$	32	$	11	$	11	$	31	$	33
Interest cost		47		48		143		146		53		47		160		143
Expected return on plan assets		(5)		(4)		(16)		(13)		(8)		(5)		(26)		(16)
Amortization of actuarial loss		16		25		47		74		4		16		12		47
Amortization of prior service credit		(19)		(20)		(57)		(58)		(19)		(19)		(55)		(57)
Net cost	$	50	$	60	$	150	$	181	$	41	$	50	$	122	$	150

The components of net periodic pension and ~~postretirement benefits cost~~OPEB costs excluding the service cost component are included in the line item other operating expenses in the ~~Statement~~statement of ~~Consolidated Income.~~consolidated income.

In ~~the second quarter,~~August 2019, a committee of the Company’s Board of Directors approved a voluntary ~~$1,000 million~~ contribution to ~~its~~a U.S. ~~pension and other postretirement benefit plans.~~OPEB plan for up to $500 million. During the first nine months of ~~2018,~~2019, the Company contributed approximately ~~$922~~$47 million to its pension plans and ~~$168~~$97 million to its ~~other postretirement benefit~~OPEB plans. The Company presently

anticipates contributing an additional $20 million to its pension plans and $340 million to its OPEB plans during the remainder of fiscal year 2019. The anticipated OPEB contributions ~~included~~include a voluntary ~~contributions of $870~~$300 million to a U.S. ~~pension plan and $130 million to a U.S. other postretirement benefit~~ plan, which will increase plan assets. The ~~Company presently anticipates contributing an additional $16 million to its~~ pension ~~plans~~ and $2

~~million to its other postretirement benefit plans during the remainder of fiscal year 2018. The~~ remaining ~~anticipated contributions and those~~OPEB contributions exceeding the voluntary amounts primarily include direct benefit payments from Company ~~funds to plan participants.~~funds.

(9)Income Taxes

In 2019, the ~~fourth quarter, a committee~~Company is subject to additional provisions of the ~~Company’s Board of Directors approved an additional, voluntary contribution to a~~ U.S. other postretirement benefit plan to increase plan assets. The amount of this potential contribution will be based on actual and forecasted operating cash flows, which will be determined in October 2018. The contribution, if any, will be made in October 2018.

~~(8)On December 22, 2017, the U.S. government enacted tax reform. The primary provisions of~~ tax reform ~~impacting the Company~~legislation enacted in fiscal year 2018 are a reduction to the corporate income tax rate from 35 percent to 21 percent and a transition from a worldwide corporate tax system to a territorial tax system. The reduction in the corporate income tax rate requires the Company to remeasure its net deferred tax assets to the new corporate tax rate and the transition to a territorial tax system requires payment of a one-time tax on deemed repatriation of undistributed and previously untaxed non-U.S. earnings. The Company currently plans to pay the deemed repatriation tax over an eight year period, as allowed by tax reform.

In December 2017 ~~the SEC issued a staff accounting bulletin that allows for a measurement period up to one year after the enactment date of tax reform to complete the related accounting requirements.~~(tax reform). The ~~provisional income tax expense (benefit) and measurement period adjustments recorded in the third quarter and first nine months of 2018 in millions of dollars follow:~~

Three Months Ended
July 29, 2018

Nine Months Ended
July 29, 2018

Equipment Operations

Financial Services

  Total

Equipment Operations

Financial Services

  Total

Net deferred tax asset remeasurement

$
(58)

$
(4)

$
(62)

$
795

$
(318)

$
477

Deemed earnings repatriation tax

179

85

264

Total discrete tax expense (benefit)

$
(58)

$
(4)

$
(62)

$
974

$
(233)

$
741

~~The third quarter measurement period benefit on the net deferred tax assets primarily resulted from refining the net deferred tax asset position with the completion of the fiscal year 2017~~Company’s 2019 U.S. income tax return and changing tax accounting methods that affected the timing of certain U.S. tax deductions. The provision for income taxes was also affected by other tax reform items, primarily the lower corporate income tax rate on current year income.

~~The 21 percent~~statutory corporate income tax rate is ~~effective January 1, 2018. Based on the Company’s October fiscal year end, the U.S. statutory income tax rate for fiscal year 2018 is~~21 percent and was approximately 23.3 ~~percent.~~

The first nine months of 2018 tax expense is provisional as outlined below and may change during the remaining measurement period. The Company completed a preliminary assessment of earnings that could be repatriated based on reinvestment needs of non-U.S. operations and earnings availablepercent for ~~repatriation.~~2018. The estimated withholding tax that would be incurred from the repatriation of those earnings is included in the first nine months of 2018 provisional income tax expense. The Company continues to analyze the provisions of tax reform ~~addressing the net deferred tax asset remeasurement and the deemed earnings repatriation tax, including the recently issued proposed regulations. In addition,~~affecting the Company is evaluating actions such as repatriating additional non-U.S. earnings. The Company also continues to undergo income tax audits and monitor potential legislative action and regulatory interpretations related to tax reform.

~~Based on the effective date of certain provisions, the Company will be subject to additional requirements of tax reform beginning~~ in ~~fiscal year 2019. Those provisions~~2019 include a tax on global intangible low-taxed income (GILTI), a tax determined by base erosion and anti-abuse tax benefits (BEAT) ~~from~~for certain payments between a U.S. corporation and foreign subsidiaries, a limitation on the deductibility of certain executive compensation, a deduction for foreign derived intangible income (FDII), and interest expense limitations. Based on the current interpretations of tax reform legislation and related regulations, along with the Company’s 2019 forecasts, the Company does not expect the combined effect of these provisions to be significant for the 2019 provision for income taxes.

In 2019 and 2018, the Company recorded discrete tax adjustments related to the remeasurement of the Company’s net deferred tax assets to the new corporate income tax rate and for the deemed earnings repatriation tax (repatriation tax). Those adjustments for the third quarter and first nine months of 2019 and 2018 in millions of dollars follow:


	Three Months Ended July 28, 2019						Nine Months Ended July 28, 2019
	Equipment Operations			Financial Services	Total		Equipment Operations			Financial Services	Total
Net deferred tax asset remeasurement									$	5	$	5
Deemed earnings repatriation tax	$	(24)	$	(8)	$	(32)	$	(24)		(8)		(32)
Total discrete tax expense (benefit)	$	(24)	$	(8)	$	(32)	$	(24)	$	(3)	$	(27)


	Three Months Ended July 29, 2018						Nine Months Ended July 29, 2018
	Equipment Operations			Financial Services	Total		Equipment Operations			Financial Services	Total
Net deferred tax asset remeasurement	$	(58)	$	(4)	$	(62)	$	795	$	(318)	$	477
Deemed earnings repatriation tax								179		85		264
Total discrete tax expense (benefit)	$	(58)	$	(4)	$	(62)	$	974	$	(233)	$	741

The full year 2018 discrete tax expense for the remeasurement of the net deferred tax assets was $414 million and the repatriation tax was $290 million. The full year 2018 repatriation tax included an accrual of approximately $63 million for foreign withholding taxes on earnings of subsidiaries outside the U.S. that were previously expected to be indefinitely reinvested. The repatriation tax determination for the 2018 U.S. income tax return was completed in the third quarter of 2019 and resulted in a discrete tax benefit of approximately $32 million. The discrete benefit was based on adjustments from completing the 2018 income tax returns and the interpretation of the tax law and associated regulations for the repatriation tax, primarily related to fiscal year end companies. The Company ~~has not completed its analysis of those provisions and~~paid the ~~estimated effects. The Company also has not determined its accounting policy to treat the taxes due on GILTI as~~repatriation tax in 2019 with a ~~period cost or include them in the determination of deferred taxes.~~

U.S. income tax overpayment.

The Company’s unrecognized tax benefits at July ~~29, 2018~~28, 2019 were ~~$325~~$630 million, compared to ~~$221~~$279 million at October ~~29, 2017. The increase is primarily due to positions related to liabilities assumed in acquisitions, transfer pricing, and certain tax accounting methods. These positions remain under review.~~28, 2018. The liability at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017~~29, 2018 consisted of approximately ~~$137~~$274 million, ~~$86~~$128 million, and ~~$83~~$137 million, respectively, which would affect the effective tax rate if the tax benefits were recognized. The increase from the previously reported periods primarily relates to the interpretation of a recently issued repatriation tax regulation for fiscal year end companies. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. ~~Based on~~The Company expects that any reasonably possible change in the ~~ongoing review of tax accounting methods affecting the timing of certain U.S. tax deductions, the Company believes a reduction~~amounts of unrecognized tax benefits ~~of approximately $38 million, with a positive impact on the effective tax rate of approximately $13 million,~~ in the next 12 months ~~is reasonably possible.~~would not be significant.

(10)Segment Reporting

~~(9)~~Worldwide net sales and revenues, operating profit, and identifiable assets by segment in millions of dollars follow:


											Three Months Ended					Nine Months Ended
											July 28		July 29		%	July 28		July 29		%
	Three Months Ended					Nine Months Ended
	July 29		July 30		%	July 29		July 30		%
	2018		2017		Change	2018		2017		Change
											2019		2018		Change	2019		2018		Change
Net sales and revenues:
Agriculture and turf	$	6,293	$	5,338	+18	$	17,585	$	14,730	+19	$	5,946	$	6,293	-6	$	17,909	$	17,585	+2
Construction and forestry		2,993		1,495	+100		7,422		4,061	+83		3,023		2,993	+1		8,273		7,422	+11
Total net sales		9,286		6,833	+36		25,007		18,791	+33		8,969		9,286	-3		26,182		25,007	+5
Financial services		830		741	+12		2,402		2,153	+12		910		830	+10		2,650		2,402	+10
Other revenues		192		234	-18		533		776	-31		157		192	-18		530		533	-1
Total net sales and revenues	$	10,308	$	7,808	+32	$	27,942	$	21,720	+29	$	10,036	$	10,308	-3	$	29,362	$	27,942	+5
Operating profit: *
Agriculture and turf	$	806	$	693	+16	$	2,249	$	1,920	+17	$	612	$	806	-24	$	1,978	$	2,249	-12
Construction and forestry		281		111	+153		573		259	+121		378		281	+35		954		573	+66
Financial services		196		198	-1		591		523	+13		204		196	+4		566		591	-4
Total operating profit		1,283		1,002	+28		3,413		2,702	+26		1,194		1,283	-7		3,498		3,413	+2
Reconciling items **		(84)		(107)	-21		(306)		(304)	+1		(74)		(84)	-12		(218)		(305)	-29
Income taxes		(289)		(253)	+14		(1,523)		(749)	+103		(221)		(289)	-24		(748)		(1,524)	-51
Net income attributable to Deere & Company	$	910	$	642	+42	$	1,584	$	1,649	-4	$	899	$	910	-1	$	2,532	$	1,584	+60


Intersegment sales and revenues:
Agriculture and turf net sales	$	14	$	12	+17	$	38	$	29	+31	$	9	$	14	-36	$	27	$	38	-29
Construction and forestry net sales																	1
Financial services		89		67	+33		234		178	+31		93		89	+4		261		234	+12


Equipment operations outside the U.S. and Canada:
Net sales	$	4,232	$	2,925	+45	$	11,036	$	7,785	+42	$	4,026	$	4,232	-5	$	10,985	$	11,036
Operating profit		398		354	+12		1,079		821	+31		430		398	+8		1,088		1,079	+1


	July 29		October 29
	2018		2017

						July 28		October 28
						2019		2018
Identifiable assets:
Agriculture and turf	$	10,152	$	9,359	+8	$	10,629	$	10,161	+5
Construction and forestry		9,920		3,212	+209		10,161		9,855	+3
Financial services		45,038		42,596	+6		48,444		45,720	+6
Corporate		4,280		10,619	-60		4,296		4,372	-2
Total assets	$	69,390	$	65,786	+5	$	73,530	$	70,108	+5

*Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains and losses.

**Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and ~~postretirement benefit~~OPEB costs excluding the service cost component, and net income attributable to noncontrolling interests.

(11)Financing Receivables

~~(10)~~Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. ~~These~~Beginning in the first quarter of 2019, the Company ceased accruing finance income when these receivables are generally 90 days delinquent. Previously, finance income ceased accruing when the receivables were generally 120 days delinquent. This change in estimate was made on a prospective basis and did not have a significant effect on the Company’s consolidated financial statements. Management’s methodology to determine the collectability of delinquent accounts was not affected by the change.

Generally, when receivables are 120 days delinquent ~~and~~ the estimated uncollectible amount, after charging the dealer’s withholding account, if any, ~~has been~~is written off to the allowance for credit losses. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is generally resumed when the receivable becomes contractually current and collections are reasonably assured.

An age analysis of past due financing receivables that are still accruing interest and non-performing financing receivables in millions of dollars follows:


	July 29, 2018
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due

									July 28, 2019
													90 Days
									30-59 Days		60-89 Days		or Greater		Total
									Past Due		Past Due		Past Due		Past Due
Retail Notes:
Agriculture and turf	$	138	$	53	$	54	$	245	$	136	$	63	$	3	$	202
Construction and forestry		105		43		50		198		87		35		2		124
Other:
Agriculture and turf		37		14		12		63		38		22				60
Construction and forestry		12		6		3		21		17		7				24
Total	$	292	$	116	$	119	$	527	$	278	$	127	$	5	$	410

							Total
	Total		Total				Financing
	Past Due		Non-Performing		Current		Receivables

															Total
									Total		Total				Financing
									Past Due		Non-Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	245	$	203	$	17,048	$	17,496	$	202	$	301	$	18,038	$	18,541
Construction and forestry		198		42		2,967		3,207		124		135		3,249		3,508
Other:
Agriculture and turf		63		14		8,009		8,086		60		37		8,833		8,930
Construction and forestry		21		3		1,249		1,273		24		14		1,417		1,455
Total	$	527	$	262	$	29,273		30,062	$	410	$	487	$	31,537		32,434
Less allowance for credit losses								187								185
Total financing receivables – net							$	29,875							$	32,249


	October 28, 2018
					90 Days
	30-59 Days		60-89 Days		or Greater		Total
	Past Due		Past Due		Past Due		Past Due
Retail Notes:
Agriculture and turf	$	133	$	74	$	63	$	270
Construction and forestry		79		45		52		176
Other:
Agriculture and turf		36		16		8		60
Construction and forestry		18		5		3		26
Total	$	266	$	140	$	126	$	532
	��
							Total
	Total		Total				Financing
	Past Due		Non-Performing		Current		Receivables
Retail Notes:
Agriculture and turf	$	270	$	201	$	17,836	$	18,307
Construction and forestry		176		40		3,101		3,317
Other:
Agriculture and turf		60		15		8,274		8,349
Construction and forestry		26		3		1,252		1,281
Total	$	532	$	259	$	30,463		31,254
Less allowance for credit losses								178
Total financing receivables – net							$	31,076

October 29, 2017






90 Days


30-59 Days

60-89 Days

or Greater

Total

Past Due

Past Due

Past Due

Past Due

Retail Notes:

Agriculture and turf

$
118

$
54

$
49

$
221

Construction and forestry

75

33

39

147

Other:

Agriculture and turf

27

14

7

48

Construction and forestry

11

6

2

19

Total

$
231

$
107

$
97

$
435

Total

Total

         Total

Financing

Past Due

Non-Performing

Current

Receivables

Retail Notes:

Agriculture and turf

$
221

$
173

$
17,508

$
17,902

Construction and forestry

147

30

2,618

2,795

Other:

Agriculture and turf

48

12

7,610

7,670

Construction and forestry

19

5

1,059

1,083

Total

$
435

$
220

$
28,795

29,450

Less allowance for credit losses

187

Total financing receivables – net

$
29,263

July 30, 2017






90 Days


30-59 Days

60-89 Days

or Greater

Total

Past Due

Past Due

Past Due

Past Due

Retail Notes:

Agriculture and turf

$
133

$
53

$
58

$
244

Construction and forestry

93

41

40

174

Other:

Agriculture and turf

35

17

8

60

Construction and forestry

7

5

1

13

Total

$
268

$
116

$
107

$
491

Total

Total

         Total

Financing

Past Due

Non-Performing

Current

Receivables

Retail Notes:

Agriculture and turf

$
244

$
218

$
17,025

$
17,487

Construction and forestry

174

34

2,546

2,754

Other:

Agriculture and turf

60

11

7,494

7,565

Construction and forestry

13

16

999

1,028

Total

$
491

$
279

$
28,064

28,834

Less allowance for credit losses

189

Total financing receivables – net

$
28,645


	July 29, 2018
						90 Days
	30-59 Days		60-89 Days			or Greater		Total
	Past Due		Past Due			Past Due		Past Due
Retail Notes:
Agriculture and turf	$	138	$	53		$	54	$	245
Construction and forestry		105		43			50		198
Other:
Agriculture and turf		37		14			12		63
Construction and forestry		12		6			3		21
Total	$	292	$	116		$	119	$	527

								Total
	Total		Total					Financing
	Past Due		Non-Performing			Current		Receivables
Retail Notes:
Agriculture and turf	$	245	$	203		$	17,048	$	17,496
Construction and forestry		198		42			2,967		3,207
Other:
Agriculture and turf		63		14			8,009		8,086
Construction and forestry		21		3	��		1,249		1,273
Total	$	527	$	262		$	29,273		30,062
Less allowance for credit losses									187
Total financing receivables – net								$	29,875

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


	Three Months Ended July 29, 2018
			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total

											Revolving
									Retail		Charge
									Notes		Accounts		Other		Total
Three Months Ended July 28, 2019
Allowance:
Beginning of period balance	$	120	$	40	$	27	$	187	$	115	$	43	$	24	$	182
Provision		8		21		3		32		7		18		1		26
Write-offs		(9)		(26)		(1)		(36)		(9)		(26)		(1)		(36)
Recoveries		3		5				8		5		8				13
Translation adjustments		(4)						(4)		2				(2)
End of period balance *	$	118	$	40	$	29	$	187	$	120	$	43	$	22	$	185

	Nine Months Ended July 29, 2018

Nine Months Ended July 28, 2019
Allowance:
Beginning of period balance	$	121	$	40	$	26	$	187	$	113	$	43	$	22	$	178
Provision		13		29		7		49		21		34		7		62
Write-offs		(23)		(44)		(5)		(72)		(29)		(51)		(5)		(85)
Recoveries		13		15		1		29		15		17		1		33
Translation adjustments		(6)						(6)						(3)		(3)
End of period balance *	$	118	$	40	$	29	$	187	$	120	$	43	$	22	$	185
Financing receivables:
End of period balance	$	20,703	$	3,750	$	5,609	$	30,062	$	22,049	$	3,877	$	6,508	$	32,434
Balance individually evaluated **	$	120	$	1	$	13	$	134	$	145			$	10	$	155

Three Months Ended July 30, 2017

Revolving

Retail

Charge

Notes

Accounts

Other

Total

Allowance:













Beginning of period balance

$
111

$
43

$
23

$
177

Provision

21

18

3

42

Write-offs

(15)

(26)

(1)

(42)

Recoveries

5

5

10

Translation adjustments

1

1

2

End of period balance *

$
123

$
40

$
26

$
189

Nine Months Ended July 30, 2017

Allowance:











Beginning of period balance

$
113

$
40

$
23

$
176

Provision

38

32

6

76

Write-offs

(41)

(47)

(4)

(92)

Recoveries

13

15

28

Translation adjustments

1

1

End of period balance *

$
123

$
40

$
26

$
189

Financing receivables:

End of period balance

$
20,241

$
3,454

$
5,139

$
28,834

Balance individually evaluated **

$
144

$
1

$
27

$
172

*Individual allowances were not significant.

**Remainder is collectively evaluated.


			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total
Three Months Ended July 29, 2018
Allowance:
Beginning of period balance	$	120	$	40	$	27	$	187
Provision		8		21		3		32
Write-offs		(9)		(26)		(1)		(36)
Recoveries		3		5				8
Translation adjustments		(4)						(4)
End of period balance *	$	118	$	40	$	29	$	187

Nine Months Ended July 29, 2018
Allowance:
Beginning of period balance	$	121	$	40	$	26	$	187
Provision		13		29		7		49
Write-offs		(23)		(44)		(5)		(72)
Recoveries		13		15		1		29
Translation adjustments		(6)						(6)
End of period balance *	$	118	$	40	$	29	$	187
Financing receivables:
End of period balance	$	20,703	$	3,750	$	5,609	$	30,062
Balance individually evaluated **	$	120	$	1	$	13	$	134

*Individual allowances were not significant.

**Remainder is collectively evaluated.

Financing receivables are considered impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, or have provided bankruptcy notification, or require significant collection efforts. Receivables that are impaired are generally classified as non-performing.

An analysis of the impaired financing receivables in millions of dollars follows:


			Unpaid				Average
	Recorded		Principal		Specific		Recorded
	Investment		Balance		Allowance		Investment

											Unpaid				Average
									Recorded		Principal		Specific		Recorded
									Investment		Balance		Allowance		Investment
July 28, 2019*
Receivables with specific allowance **									$	37	$	36	$	13	$	37
Receivables without a specific allowance **										35		33				39
Total									$	72	$	69	$	13	$	76
Agriculture and turf									$	51	$	50	$	9	$	52
Construction and forestry									$	21	$	19	$	4	$	24

October 28, 2018*
Receivables with specific allowance **									$	28	$	27	$	10	$	30
Receivables without a specific allowance **										37		35				41
Total									$	65	$	62	$	10	$	71
Agriculture and turf									$	50	$	48	$	9	$	54
Construction and forestry									$	15	$	14	$	1	$	17

July 29, 2018*
Receivables with specific allowance **	$	31	$	30	$	12	$	33	$	31	$	30	$	12	$	33
Receivables without a specific allowance **		37		35				40		37		35				40
Total	$	68	$	65	$	12	$	73	$	68	$	65	$	12	$	73
Agriculture and turf	$	51	$	49	$	10	$	54	$	51	$	49	$	10	$	54
Construction and forestry	$	17	$	16	$	2	$	19	$	17	$	16	$	2	$	19

October 29, 2017*
Receivables with specific allowance **	$	36	$	33	$	10	$	30
Receivables without a specific allowance ***		28		27				24
Total	$	64	$	60	$	10	$	54
Agriculture and turf	$	49	$	46	$	10	$	38
Construction and forestry	$	15	$	14			$	16

July 30, 2017*
Receivables with specific allowance **	$	56	$	51	$	13	$	51
Receivables without a specific allowance ***		30		27				31
Total	$	86	$	78	$	13	$	82
Agriculture and turf	$	54	$	50	$	10	$	50
Construction and forestry	$	32	$	28	$	3	$	32

*Finance income recognized was not material.

**Primarily retail notes.

~~***Primarily retail notes and wholesale receivables.~~27

A troubled debt restructuring is generally the modification of debt in which a creditor grants a concession it would not otherwise consider to a debtor that is experiencing financial difficulties. These modifications may include a reduction of the stated interest rate, an extension of the maturity dates, a reduction of the face amount or maturity amount of the debt, or a reduction of accrued interest. During the first nine months of ~~2018,~~2019, the Company identified ~~410 financing~~416 receivable contracts, primarily trade receivables and retail notes, as troubled debt restructurings with aggregate balances of ~~$22~~$34 million pre-modification and ~~$22~~$33 million post-modification. During the first nine months of ~~2017,~~2018, there were ~~321 financing~~410 receivable contracts, primarily retail notes, identified as troubled debt restructurings with aggregate balances of $9$22 million pre-modification and $8$22 million post-modification. During these same periods, there were no significant troubled debt restructurings that subsequently defaulted and were written off. At July ~~29, 2018,~~28, 2019, the Company had commitments to lend approximately $7$13 million to borrowers whose accounts were modified in troubled debt restructurings.

~~(11)~~(12)Securitization of ~~financing receivables:~~Financing Receivables

The Company, as a part of its overall funding strategy, periodically transfers certain financing receivables (retail notes) into variable interest entities (VIEs) that are special purpose entities (SPEs), or non-VIE banking operations, as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes did not meet the accounting criteria for sales of receivables, and is, therefore, accounted for as a secured borrowing. SPEs utilized in securitizations of retail notes differ from other entities included in the Company’s consolidated statements because the assets they hold are legally isolated. Use of the assets held by the SPEs or the non-VIEs is restricted by terms of the documents governing the securitization transactions.

In these securitizations, the retail notes are transferred to certain SPEs or to non-VIE banking operations, which in turn issue debt to investors. The debt securities issued to the third party investors resulted in secured borrowings, which are recorded as “Short-term securitization borrowings” on the balance sheet. The securitized retail notes are recorded as “Financing receivables securitized – net” on the balance sheet. The total restricted assets on the consolidated balance sheet related to these securitizations include the financing receivables securitized less an allowance for credit losses, and other assets primarily representing restricted cash. Restricted cash results from contractual requirements in securitized borrowing arrangements and serves as a credit enhancement. The restricted cash is used to satisfy payment deficiencies, if any, in the required payments on secured borrowings. The balance of restricted cash is contractually stipulated and is either a fixed amount as determined by the initial balance of the financing receivables securitized or a fixed percentage of the outstanding balance of the securitized financing receivables. The restriction is removed either after all secured borrowing payments are made or proportionally as these receivables are collected and borrowing obligations reduced. For those securitizations in which retail notes are transferred into SPEs, the SPEs supporting the secured borrowings are consolidated unless the Company does not have both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company consolidates the SPEs since it has both the power to direct the activities that most significantly impact the SPEs’ economic performance through its role as servicer of all the receivables held by the SPEs and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the SPEs. The restricted assets (retail notes securitized, allowance for credit losses, and other assets) of the consolidated SPEs totaled ~~$2,971~~$3,425 million, ~~$2,631~~$2,593 million, and ~~$3,139~~$2,971 million at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017,~~29, 2018, respectively. The liabilities (short-term securitization borrowings and accrued interest) of these SPEs totaled ~~$2,860~~$3,316 million, ~~$2,571~~$2,520 million, and ~~$3,018~~$2,860 million at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017,~~29, 2018, respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In certain securitizations, the Company transfers retail notes to non-VIE banking operations, which are not consolidated since the Company does not have a controlling interest in the entities. The Company’s carrying values and interests related to the securitizations with the unconsolidated non-VIEs were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of ~~$592~~$587 million, ~~$478~~$504 million, and ~~$557~~$592 million at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017,~~29, 2018, respectively. The liabilities (short-term securitization borrowings and accrued interest) were ~~$553~~$546 million, ~~$454~~$475 million, and ~~$517~~$553 million at July 28, 2019, October 28, 2018, and July 29, 2018, ~~October 29, 2017, and July 30, 2017,~~ respectively.

In certain securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company does not service a significant portion of the conduits’ receivables, and therefore, does not have the power to direct the activities that most significantly impact the conduits’ economic performance. These conduits provide a funding source to the Company (as well as other transferors into the conduit) as they fund the retail notes through the issuance of commercial paper. The Company’s carrying values and variable interest related to these conduits were restricted assets (retail notes securitized, allowance for credit losses, and other assets) of ~~$1,213~~$1,286 million, ~~$1,155~~$1,033 million, and ~~$1,346~~$1,213 million at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017,~~29, 2018, respectively. The liabilities (short-term securitization borrowings and accrued interest) related to these conduits were ~~$1,118~~$1,190 million, ~~$1,096~~$965 million, and ~~$1,249~~$1,118 million at July 28, 2019, October 28, 2018, and July 29, 2018, ~~October 29, 2017, and July 30, 2017,~~ respectively.

The Company’s carrying amount of the liabilities to the unconsolidated conduits, compared to the maximum exposure to loss related to these conduits, which would only be incurred in the event of a complete loss on the restricted assets, was as follows in millions of dollars:


	July 29, 2018

			July 28
			2019
Carrying value of liabilities	$	1,118	$	1,190
Maximum exposure to loss		1,213		1,286

The total assets of unconsolidated VIEs related to securitizations were approximately ~~$36~~$34 billion at July ~~29, 2018.~~28, 2019.

The components of consolidated restricted assets related to secured borrowings in securitization transactions follow in millions of dollars:


	July 29		October 29		July 30
	2018		2017		2017

							July 28		October 28		July 29
							2019		2018		2018
Financing receivables securitized (retail notes)	$	4,674	$	4,172	$	4,936	$	5,214	$	4,032	$	4,674
Allowance for credit losses		(12)		(13)		(13)		(14)		(10)		(12)
Other assets		114		105		119		98		108		114
Total restricted securitized assets	$	4,776	$	4,264	$	5,042	$	5,298	$	4,130	$	4,776

The components of consolidated secured borrowings and other liabilities related to securitizations follow in millions of dollars:


	July 29		October 29		July 30
	2018		2017		2017

							July 28		October 28		July 29
							2019		2018		2018
Short-term securitization borrowings	$	4,528	$	4,119	$	4,781	$	5,048	$	3,957	$	4,528
Accrued interest on borrowings		3		2		3		4		3		3
Total liabilities related to restricted securitized assets	$	4,531	$	4,121	$	4,784	$	5,052	$	3,960	$	4,531

The secured borrowings related to these restricted securitized retail notes are obligations that are payable as the retail notes are liquidated. Repayment of the secured borrowings depends primarily on cash flows generated by the restricted assets. Due to the Company’s short-term credit rating, cash collections from these restricted assets are not required to be placed into a segregated collection account until immediately prior to the time payment is required to the secured creditors. At July ~~29, 2018,~~28, 2019, the maximum remaining term of all securitized retail notes was approximately six years.

(13)Inventories

~~(12)Most inventories~~A majority of inventory owned by Deere & Company and its U.S. equipment subsidiaries and certain foreign equipment subsidiaries are valued at cost on the “last-in, first-out” (LIFO) method. If all of the Company’s inventories had been valued on a “first-in, first-out” (FIFO) method, estimated inventories by major classification in millions of dollars would have been as follows:

July 29

October 29

July 30

2018

2017

2017

Raw materials and supplies

$
2,126

$
1,688

$
1,571

Work-in-process

795

495

517

Finished goods and parts

4,768

3,182

3,571

Total FIFO value

7,689

5,365

5,659

Less adjustment to LIFO value

1,450

1,461

1,406

Inventories

$
6,239

$
3,904

$
4,253


	July 28		October 28		July 29
	2019		2018		2018
Raw materials and supplies	$	2,365	$	2,233	$	2,126
Work-in-process		815		776		795
Finished goods and parts		5,345		4,777		4,768
Total FIFO value		8,525		7,786		7,689
Less adjustment to LIFO value		1,778		1,637		1,450
Inventories	$	6,747	$	6,149	$	6,239

~~(13)~~

(14)Goodwill and Other Intangible Assets–Net

The changes in amounts of goodwill by operating segments were as follows in millions of dollars:

Agriculture

Construction


and Turf

and Forestry

Total

Goodwill at October 30, 2016

$
323

$
493

$
816

Translation adjustments and other

5

25

30

Goodwill at July 30, 2017

$
328

$
518

$
846

Goodwill at October 29, 2017

$
521

$
512

$
1,033

Acquisitions *

28

2,067

2,095

Divestitures **

(18)

(18)

Translation adjustments

(4)

(59)

(63)

Goodwill at July 29, 2018

$
545

$
2,502

$
3,047

* See Note 18.

** See Note 19.


	Agriculture		Construction
	and Turf		and Forestry		Total
Goodwill at October 29, 2017	$	521	$	512	$	1,033
Acquisitions		28		2,067		2,095
Divestitures				(18)		(18)
Translation adjustments		(4)		(59)		(63)
Goodwill at July 29, 2018	$	545	$	2,502	$	3,047

Goodwill at October 28, 2018	$	583	$	2,518	$	3,101
Translation adjustments		(1)		(87)		(88)
Goodwill at July 28, 2019	$	582	$	2,431	$	3,013

There were no accumulated impairment losses in the reported periods.

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


	Useful Lives *	July 29		October 29		July 30
	(Years)	2018		2017		2017

								Useful Lives *	July 28		October 28		July 29
								(Years)	2019		2018		2018
Amortized intangible assets:
Customer lists and relationships	16	$	562	$	42	$	42	16	$	525	$	542	$	562
Technology, patents, trademarks, and other	18		1,052		139		132	18		1,057		1,080		1,052
Total at cost			1,614		181		174			1,582		1,622		1,614
Less accumulated amortization **			156		86		82			261		183		156
Total			1,458		95		92			1,321		1,439		1,458
Unamortized intangible assets:
In-process research and development			123		123					123		123		123
Other intangible assets – net		$	1,581	$	218	$	92		$	1,444	$	1,562	$	1,581

*Weighted-averages

**Accumulated amortization at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017~~29, 2018 for customer lists and relationships totaled ~~$38~~$71 million, ~~$17~~$46 million, and ~~$16~~$38 million and technology, patents, trademarks, and other totaled $190 million, $137 million, and $118 million, ~~$69 million, and $66 million,~~ respectively.

The amortization of other intangible assets in the third quarter and the first nine months of 2019 was $27 million and $82 million and for 2018 was $27 million and $71 ~~million and for 2017 was $4 million and $13~~ million, respectively. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of ~~2018 – $29,~~ 2019 – ~~$116,~~$26, 2020 – ~~$103,~~$104, 2021 – ~~$99, and~~$103, 2022 – ~~$98.~~$102, and 2023 – $100.

~~(14)~~30

(15)Commitments and ~~contingencies:~~Contingencies

The Company generally determines its total warranty liability by applying historical claims rate experience to the estimated amount of equipment that has been sold and is still under warranty based on dealer inventories and retail sales. The historical claims rate is primarily determined by a review of five-year claims costs and current quality developments.

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. These unamortized extended warranty premiums (deferred revenue) included in the following table totaled ~~$486~~$542 million and ~~$454~~$486 million at July 28, 2019 and July 29, 2018, ~~and July 30, 2017,~~ respectively.

A reconciliation of the changes in the warranty liability and unearned premiums in millions of dollars follows:


	Three Months Ended				Nine Months Ended
	July 29		July 30		July 29		July 30
	2018		2017		2018		2017

									Three Months Ended				Nine Months Ended
									July 28		July 29		July 28		July 29
									2019		2018		2019		2018
Beginning of period balance	$	1,591	$	1,365	$	1,468	$	1,226	$	1,714	$	1,591	$	1,652	$	1,468
Payments		(212)		(197)		(642)		(529)		(252)		(212)		(714)		(642)
Amortization of premiums received		(56)		(53)		(170)		(149)		(57)		(56)		(168)		(170)
Accruals for warranties		250		248		704		717		263		250		772		704
Premiums received		72		58		198		153		75		72		209		198
Acquisitions *						80
Acquisitions																80
Foreign exchange		(21)		17		(14)		20		3		(21)		(5)		(14)
End of period balance	$	1,624	$	1,438	$	1,624	$	1,438	$	1,746	$	1,624	$	1,746	$	1,624

* See Note 18.

At July ~~29, 2018,~~28, 2019, the Company had approximately ~~$445~~$325 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere and Wirtgen equipment. The ~~increase from October 29, 2017 primarily relates to the Wirtgen acquisition. The~~ Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At July ~~29, 2018,~~28, 2019, the Company had accrued losses of approximately ~~$20~~$14 million under these agreements. The maximum remaining term of the receivables guaranteed at July ~~29, 2018~~28, 2019 was approximately seven years.

At July ~~29, 2018,~~28, 2019, the Company had commitments of approximately ~~$397~~$452 million for the construction and acquisition of property and equipment. ~~The increase from October 29, 2017 primarily relates to the Wirtgen acquisition.~~ Also, at July ~~29, 2018,~~28, 2019, the Company had restricted assets of ~~$101~~$93 million, ~~primarily restricted~~classified as other assets. See Note 1112 for additional restricted assets associated with borrowings related to securitizations.

The Company also had other miscellaneous contingent liabilities totaling approximately ~~$125~~$70 million at July ~~29, 2018.~~28, 2019. The accrued liability for these contingencies was not material at July ~~29, 2018.~~28, 2019.

(16)Fair Value Measurements

~~(15)~~Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, the Company uses various methods including market and income approaches. The Company utilizes valuation models and techniques that maximize the use of observable inputs. The models are industry-standard models that consider various assumptions including time values and yield curves as well as other economic measures. These valuation techniques are consistently applied.

Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs.

The fair values of financial instruments that do not approximate the carrying values in millions of dollars follow:


	July 29, 2018				October 29, 2017				July 30, 2017
	Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *

													July 28, 2019				October 28, 2018				July 29, 2018
													Carrying Value		Fair Value *		Carrying Value		Fair Value *		Carrying Value		Fair Value *
Financing receivables – net:
Equipment operations **	$	78	$	75
Equipment operations													$	100	$	93	$	93	$	91	$	78	$	75
Financial services		25,135		24,911	$	25,104	$	24,946	$	23,722	$	23,592		26,949		26,921		26,961		26,722		25,135		24,911
Total	$	25,213	$	24,986	$	25,104	$	24,946	$	23,722	$	23,592	$	27,049	$	27,014	$	27,054	$	26,813	$	25,213	$	24,986


Financing receivables securitized – net:
Equipment operations **	$	90	$	89
Equipment operations													$	54	$	52	$	76	$	73	$	90	$	89
Financial services		4,572		4,517	$	4,159	$	4,130	$	4,923	$	4,892		5,146		5,154		3,946		3,895		4,572		4,517
Total	$	4,662	$	4,606	$	4,159	$	4,130	$	4,923	$	4,892	$	5,200	$	5,206	$	4,022	$	3,968	$	4,662	$	4,606


Short-term securitization borrowings:
Equipment operations **	$	90	$	89
Equipment operations													$	53	$	54	$	75	$	75	$	90	$	89
Financial services		4,438		4,426	$	4,119	$	4,118	$	4,781	$	4,786		4,995		5,017		3,882		3,870		4,438		4,426
Total	$	4,528	$	4,515	$	4,119	$	4,118	$	4,781	$	4,786	$	5,048	$	5,071	$	3,957	$	3,945	$	4,528	$	4,515


Long-term borrowings due within one year:
Equipment operations **	$	238	$	239	$	154	$	154	$	142	$	141
Equipment operations													$	1,009	$	1,013	$	970	$	979	$	238	$	239
Financial services		5,955		5,947		6,064		6,079		5,382		5,394		6,922		6,914		5,427		5,411		5,955		5,947
Total	$	6,193	$	6,186	$	6,218	$	6,233	$	5,524	$	5,535	$	7,931	$	7,927	$	6,397	$	6,390	$	6,193	$	6,186


Long-term borrowings:
Equipment operations **	$	5,526	$	5,838	$	5,491	$	6,026	$	4,523	$	5,110
Equipment operations													$	5,364	$	6,017	$	4,714	$	4,948	$	5,526	$	5,838
Financial services		21,312		21,388		20,400		20,606		19,151		19,339		23,878		24,143		22,523		22,590		21,312		21,388
Total	$	26,838	$	27,226	$	25,891	$	26,632	$	23,674	$	24,449	$	29,242	$	30,160	$	27,237	$	27,538	$	26,838	$	27,226

*Fair value measurements above were Level 3 for all financing receivables, Level 3 for equipment operations short-term securitization borrowings, and Level 2 for all other borrowings.

**~~See Note 18.~~

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:~~follow*:


	July 29		October 29		July 30
	2018*		2017*		2017*

							July 28		October 28		July 29
							2019		2018		2018
Level 1:
Marketable securities
Equity fund	$	46	$	48	$	45
Fixed income fund		9		15		15
Equity fund ***							$	59	$	46	$	46
Fixed income fund ***												9
U.S. government debt securities								49		44		39
Total Level 1 marketable securities								108		90		94

Level 2:
Marketable securities
U.S. government debt securities		99		77		77		73		67		60
Municipal debt securities		47		39		39		57		46		47
Corporate debt securities		138		135		120		156		140		138
International debt securities		13		20		22		9		2		3
Mortgage-backed securities **		136		118		108		158		137		136
Total marketable securities		488		452		426
Total Level 2 marketable securities								453		392		384
Other assets
Derivatives:
Interest rate contracts		68		116		142		265		80		68
Foreign exchange contracts		50		108		32		53		83		50
Cross-currency interest rate contracts		6		11		10		2		5		6
Total assets ***	$	612	$	687	$	610
Total Level 2 other assets								320		168		124
Accounts payable and accrued expenses
Derivatives:
Interest rate contracts	$	330	$	131	$	81		99		350		330
Foreign exchange contracts		52		26		95		45		49		52
Cross-currency interest rate contracts		2		1		4		2				2
Total liabilities	$	384	$	158	$	180
Total Level 2 accounts payable and accrued expenses								146		399		384

Level 3:
Marketable securities
International debt securities								4		8		10

*All measurements above were Level 2 measurements except for Level 1 measurements of the equity fund of $46 million, $48 million, and $45 million at July 29, 2018, October 29, 2017, and July 30, 2017, respectively; the fixed income fund of $9 million, $15 million, and $15 million at July 29, 2018, October 29, 2017, and July 30, 2017, respectively; and U.S. government debt securities of $39 million, $44 million, and $46 million at July 29, 2018, October 29, 2017, and July 30, 2017, respectively. In addition, $10 million, $17 million, and $18 million of the international debt securities were Level 3 measurements at July 29, 2018, October 29, 2017, and July 30, 2017, respectively. There were no transfers between Level 1 and Level 2 during the first nine months of 2018 or 2017.

**~~Primarily issued by U.S. government sponsored enterprises.~~

~~***~~Excluded from this table were the Company’s cash equivalents, which were carried at cost that approximates fair value. The cash equivalents consist primarily of money market funds and time deposits.

**Primarily issued by U.S. government sponsored enterprises.

***During the third quarter and first nine months of 2019, $1 million and $7 million, respectively, of net unrealized gains on equity securities were recorded in “Other income”.

The contractual maturities of debt securities at July ~~29, 2018~~28, 2019 in millions of dollars are shown below. Actual maturities may differ from those scheduled as a result of prepayments by the issuers. 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

$
23

$
22

Due after one through five years

118

116

Due after five through 10 years

93

91

Due after 10 years

69

68

Mortgage-backed securities

142

136

Debt securities

$
445

$
433


	Amortized		Fair
	Cost		Value
Due in one year or less	$	30	$	30
Due after one through five years		101		102
Due after five through 10 years		92		96
Due after 10 years		115		120
Mortgage-backed securities		155		158
Debt securities	$	493	$	506

Fair value, recurring Level 3 measurements from available-for-sale marketable securities in millions of dollars follow:


	Three Months Ended				Nine Months Ended
	July 29		July 30		July 29		July 30
	2018		2017		2018		2017

									Three Months Ended				Nine Months Ended
									July 28		July 29		July 28		July 29
									2019		2018		2019		2018
Beginning of period balance	$	14	$	23	$	17	$	28	$	4	$	14	$	8	$	17
Principal payments		(4)		(5)		(7)		(12)				(4)		(5)		(7)
Change in unrealized gain								2
Other														1
End of period balance	$	10	$	18	$	10	$	18	$	4	$	10	$	4	$	10

~~Fair~~There were no fair value, nonrecurring ~~Level 1~~ measurements from impairments in ~~millions of dollars follow:~~

Fair Value *

Losses

Three Months Ended

Nine Months Ended

July 29

October 29

July 30

July 29

July 30

July 29

July 30


2018

2017

2017

2018

2017

2018

2017

Investments in unconsolidated affiliates

$
28

* See financingthe reported periods. Financing receivables with specific allowances are shown in Note ~~10.~~11. Losses were not significant.

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

Derivatives – The Company’s derivative financial instruments consist of interest rate swaps and caps, foreign currency futures, forwards and swaps, and cross-currency interest rate 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). Inputs include a selection of realizable values.

Investment in Unconsolidated Affiliates – Other than temporary impairments for investments are measured as the difference between the implied fair value and the carrying value of the investments. The fair value for publicly traded entities is the share price multiplied by the shares owned.

(17)Derivative Instruments

~~(16)~~It is the Company’s policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. The Company’s financial services operations manage the relationship of the types and amounts of their funding sources to their receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities. The Company also has foreign currency exposures at some of its foreign and domestic operations related to buying, selling, and financing in currencies other than the functional currencies. In addition, the Company has interest rate exposure at certain equipment operations units for below market retail financing programs that are used as sales incentives and are offered for extended periods, along with periodic long-term debt issuances.

All derivatives are recorded at fair value on the balance sheet. Cash collateral received or paid is not offset against the derivative fair values on the balance sheet. Each derivative is designated as a cash flow hedge, a fair value hedge, or remains undesignated. All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy. Both at inception and on an ongoing basis the hedging instrument is assessed as to its effectiveness. If and when a derivative is determined not to be highly effective as a hedge, or the underlying hedged transaction is no longer likely to occur, or the hedge designation is removed, or the derivative is terminated, hedge accounting is discontinued.

~~Any past or future changes in the derivative’s fair value, which will not be effective as an offset to the income effects of the item being hedged, are recognized currently in the income statement.~~

Cash ~~flow hedges~~Flow Hedges

Certain interest rate and cross-currency interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings. The total notional amounts of the receive-variable/pay-fixed interest rate contracts at July 28, 2019, October 28, 2018, and July 29, 2018 ~~October 29, 2017,~~were $2,750 million, $3,050 million, and ~~July 30, 2017 were~~ $2,400 million, ~~$1,700~~respectively. Included in the July 28, 2019 notional amount is $250 million ~~and $1,700 million, respectively.~~for a forecasted debt issuance expected to occur in the fourth quarter of 2019. The total notional ~~amounts~~amount of the

cross-currency interest rate ~~contracts~~contract at July 29, 2018 ~~October 29, 2017, and July 30, 2017 were~~was $11 ~~million, $22 million, and $32 million, respectively. The effective portions of the fair~~million. Fair value gains or losses on these cash flow hedges were recorded in OCI and subsequently reclassified into interest expense or other operating expenses (foreign exchange) in the same periods during which the hedged transactions affected earnings. These amounts offset the effects of interest rate or foreign currency exchange rate changes on the related borrowings. Any ineffective portions of the gains or losses on all cash flow interest rate contracts designated as cash flow hedges were recognized currently in interest expense or other operating expenses (foreign exchange) and were not material during any periods presented. The cash flows from these contracts were recorded in operating activities in the statement of consolidated cash flows.

The amount of ~~gain~~loss recorded in OCI at July ~~29, 2018~~28, 2019 that is expected to be reclassified to interest expense or other operating expenses in the next twelve months if interest rates or exchange rates remain unchanged is approximately $9$6 million after-tax. ~~These contracts mature~~The Company is hedging a portion of its expected exposure to interest rate changes in ~~up to 23 months.~~a forecasted, fourth quarter 2019 debt issuance using an interest rate contract with a term of 30 years. There were no gains or losses reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.

Fair ~~value hedges~~Value Hedges

Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings. The total notional amounts of the receive-fixed/pay-variable interest rate contracts at July 28, 2019, October 28, 2018, and July 29, 2018 ~~October 29, 2017, and July 30, 2017~~ were ~~$7,792~~$9,245 million, ~~$8,661~~$8,479 million, and ~~$7,716~~$7,792 million, respectively. The ~~effective portions of the~~ fair value gains or losses on these contracts were generally offset by fair value gains or losses on the hedged items (fixed-rate borrowings)~~. Any ineffective portions of the gains or losses were recognized currently~~ with both items recorded in interest expense.

The ineffective portions were a loss of $1 million and a gain of $1 million during the third quarter of 2018 and 2017, respectively, and a loss of $4 million and a gain of $3 million during the first nine months of 2018 and 2017, respectively. The cash flows from these contracts wereamounts recorded in ~~operating activities~~the consolidated balance sheet related to borrowings designated in ~~the statement of consolidated cash flows.~~

~~The gains (losses) on these contracts and the underlying borrowings recorded in interest expense follow~~fair value hedging relationships in millions of ~~dollars:~~dollars follow:

Three Months Ended

Nine Months Ended

July 29

July 30

July 29

July 30

2018

2017

2018

2017

Interest rate contracts *

$
(8)

$
5

$
(279)

$
(197)

Borrowings **

7

(4)

275

200


			Cumulative Increase (Decrease) of Fair
			Value Hedging Adjustments Included in
			the Carrying Amount
	Carrying		Active
	Amount of		Hedging		Discontinued
July 28, 2019	Hedged Item		Relationships		Relationships		Total
Long-term borrowings due within one year*	$	187	$	1	$	(5)	$	(4)
Long-term borrowings		9,154		184		(50)		134

*~~Includes changes~~Presented in ~~fair values of interest rate contracts excluding~~ net accrued interest expense of $2 million and net accrued interest income of $16 million during the third quarter of 2018 and 2017, respectively, and net accrued interest income of $15 million and $64 million during the first nine months of 2018 and 2017, respectively.short-term borrowings

**Includes adjustments for fair values of hedged borrowings excluding accrued interest expense of $60 million and $56 million during the third quarter of 2018 and 2017, respectively, and $187 million and $182 million during the first nine months of 2018 and 2017, respectively.

Derivatives not designated as hedging instruments

The Company has certain interest rate contracts (swaps and caps), foreign exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges. These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures, primarily for certain borrowings, ~~and~~ purchases or sales of ~~inventory.~~inventory, and below market retail financing programs. The total notional amounts of these interest rate swaps at July 28, 2019, October 28, 2018, and July 29, 2018 ~~October 29, 2017, and July 30, 2017~~ were ~~$6,519~~$7,607 million, ~~$6,757~~$8,075 million, and ~~$6,715~~$6,519 million, the foreign exchange contracts were ~~$7,752~~$6,362 million, ~~$8,499~~$6,842 million, and

~~$5,111~~ $7,752 million, and the cross-currency interest rate contracts were $90 million, $81 million, and $96 million, ~~$66 million, and $80 million,~~ respectively. The increase in the total notional amounts of foreign exchange contracts at October 29, 2017 primarily relates to the Wirtgen acquisition (see Note 18). At July 29, 2018, October 29, 2017, and July 30, 2017, there were also $92 million, $253 million, and $308 million, respectively, of interest rate caps purchased and the same amounts sold at the same capped interest rate toTo facilitate borrowings through securitization of retail ~~notes.~~notes, interest rate caps were sold with notional amounts of $8 million, $66 million, and $92 million at July 28, 2019, October 28, 2018, and July 29, 2018, respectively. Interest rate caps were also purchased with notional amounts of $8 million, $66 million, and $92 million at the same dates. The fair value gains or losses from the interest rate contracts were recognized currently in interest expense or net sales, and the gains or losses from foreign exchange contracts in cost of sales or other operating expenses, generally offsetting over time the expenses on the exposures being hedged. The cash flows from these non-designated contracts were recorded in operating activities in the statement of consolidated cash flows.

Fair values of derivative instruments in the condensed consolidated balance sheet in millions of dollars follow:


	July 29		October 29		July 30

							July 28		October 28		July 29
Other Assets	2018		2017		2017		2019		2018		2018
Designated as hedging instruments:
Interest rate contracts	$	24	$	74	$	104	$	232	$	29	$	24
Cross-currency interest rate contracts		3		5		6						3
Total designated		27		79		110		232		29		27

Not designated as hedging instruments:
Interest rate contracts		44		42		38		33		51		44
Foreign exchange contracts		50		108		32		53		83		50
Cross-currency interest rate contracts		3		6		4		2		5		3
Total not designated		97		156		74		88		139		97

Total derivative assets	$	124	$	235	$	184	$	320	$	168	$	124

Accounts Payable and Accrued Expenses
Designated as hedging instruments:
Interest rate contracts	$	305	$	112	$	63	$	55	$	321	$	305
Total designated		305		112		63		55		321		305

Not designated as hedging instruments:
Interest rate contracts		25		19		18		44		29		25
Foreign exchange contracts		52		26		95		45		49		52
Cross-currency interest rate contracts		2		1		4		2				2
Total not designated		79		46		117		91		78		79

Total derivative liabilities	$	384	$	158	$	180	$	146	$	399	$	384

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

Expense or

Three Months Ended

Nine Months Ended

OCI

July 29

July 30

July 29

July 30

Classification

2018

2017

2018

2017

Fair Value Hedges:












Interest rate contracts

Interest

$
(10)

$
21

$
(264)

$
(133)

Cash Flow Hedges:

Recognized in OCI

(Effective Portion):

Interest rate contracts

OCI (pretax) *

1

(2)

15

Foreign exchange contracts

OCI (pretax) *

1

(2)

Reclassified from OCI

(Effective Portion):

Interest rate contracts

Interest *

2

(1)

3

(2)

Foreign exchange contracts

Other operating *

(2)

Recognized Directly in Income

(Ineffective Portion)

**

**

**

**

Not Designated as Hedges:

Interest rate contracts

Interest *

$
(3)

$
11

$
(3)

$
11

Foreign exchange contracts

Cost of sales

(10)

(29)

(22)

(41)

Foreign exchange contracts

Other operating *

144

(192)

92

(205)

Total not designated

$
131

$
(210)

$
67

$
(235)


	Three Months Ended				Nine Months Ended
	July 28		July 29		July 28		July 29
	2019		2018		2019		2018
Fair Value Hedges:
Interest rate contracts - Interest expense	$	193	$	(10)	$	468	$	(264)

Cash Flow Hedges:
Recognized in OCI
Interest rate contracts - OCI (pretax) *		(27)		1		(42)		15
Foreign exchange contracts - OCI (pretax) *								1

Reclassified from OCI
Interest rate contracts - Interest expense *		1		2		6		3

Not Designated as Hedges:
Interest rate contracts - Net sales	$	(6)			$	(23)
Interest rate contracts - Interest expense *		(7)	$	(3)		(25)	$	(3)
Foreign exchange contracts - Cost of sales		(8)		(10)		(1)		(22)
Foreign exchange contracts - Other operating *		(12)		144		88		92
Total not designated	$	(33)	$	131	$	39	$	67

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

**~~The amounts are not significant.~~

Counterparty Risk and Collateral

Derivative instruments are subject to significant concentrations of credit risk to the banking sector. The Company manages individual counterparty exposure by setting limits that consider the credit rating of the

counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the Company and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Each master agreement permits the net settlement of amounts owed in the event of default or termination.

Certain of the Company’s derivative agreements contain credit support provisions that may require the Company to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at July 28, 2019, October 28, 2018, and July 29, 2018, ~~October 29, 2017, and July 30, 2017,~~ was ~~$331~~$101 million, ~~$132~~$350 million, and ~~$85~~$331 million, respectively. In accordance with the limits established in these agreements, the Company ~~posted~~paid $59 million and $34 million in cash collateral at October 28, 2018 and July 29, ~~2018.~~2018, respectively. No cash collateral was ~~posted~~paid or received at ~~either October 29, 2017 or~~ July ~~30, 2017.~~

28, 2019.

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		Cash Collateral
July 29, 2018	Recognized		Arrangements		Received/Paid		Net Amount

									Gross Amounts		Netting		Collateral
July 28, 2019									Recognized		Arrangements		Paid	Net Amount
Assets	$	124	$	(67)			$	57	$	320	$	(70)		$	250
Liabilities		384		(67)	$	(34)		283		146		(70)			76


	Gross Amounts		Netting		Cash Collateral
October 29, 2017	Recognized		Arrangements		Received/Paid	Net Amount

								Gross Amounts		Netting		Collateral
October 28, 2018								Recognized		Arrangements		Paid		Net Amount
Assets	$	235	$	(65)		$	170	$	168	$	(65)			$	103
Liabilities		158		(65)			93		399		(65)	$	(59)		275


	Gross Amounts		Netting		Cash Collateral
July 30, 2017	Recognized		Arrangements		Received/Paid	Net Amount

								Gross Amounts		Netting		Collateral
July 29, 2018								Recognized		Arrangements		Paid		Net Amount
Assets	$	184	$	(56)		$	128	$	124	$	(67)			$	57
Liabilities		180		(56)			124		384		(67)	$	(34)		283

~~(17)~~

(18)Stock Option and Restricted Stock Awards

In December ~~2017,~~2018, the Company granted stock options to employees for the purchase of ~~476~~402 thousand shares of common stock at an exercise price of ~~$151.95~~$148.14 per share and a binomial lattice model fair value of ~~$39.11~~$46.96 per share at the grant date. At July ~~29, 2018,~~28, 2019, options for ~~8.9~~7.5 million shares were outstanding with a weighted-average exercise price of ~~$86.82~~$91.97 per share. The Company also granted ~~413~~446 thousand restricted stock units to employees and non-employee directors in the first nine months of ~~2018,~~2019, of which ~~328~~355 thousand are subject to service based only conditions and 8591 thousand are subject to performance/service based conditions. The weighted-average fair value of the service based only units at the grant date was ~~$151.78~~$149.54 per unit based on the market price of a share of underlying common stock. The weighted-average fair value of the performance/service based units at the grant date was ~~$145.33~~$140.49 per unit based on the market price of a share of underlying common stock excluding dividends. At July ~~29, 2018,~~28, 2019, the Company was authorized to grant an additional ~~9.9~~8.3 million shares related to stock option and restricted stock awards.

(19)Acquisitions

~~(18)On December 1, 2017,~~In September 2018, the Company acquired ~~Wirtgen, which was~~PLA, a ~~privately-held international company~~privately held manufacturer of sprayers, planters, and specialty products for agriculture. PLA is ~~the leading manufacturer worldwide of road construction equipment. Headquartered~~based in ~~Germany, Wirtgen has six brands across the road construction sector spanning processing, mixing, paving, compaction,~~Argentina, with manufacturing facilities in Las Roses, Argentina and ~~rehabilitation. Wirtgen sells products in more than 100 countries and had approximately 8,200 employees at the acquisition date.~~

Canoas, Brazil. The total cash purchase price after the final adjustment, net of cash acquired of ~~$197~~$1 million, was ~~$5,130~~$69 million ~~a portion of which is held in~~with $4 million retained by the Company as escrow to secure ~~certain~~ indemnity ~~obligations of Wirtgen.~~obligations. In addition to the cash purchase price, the Company assumed $1,717 million in liabilities, which represented substantially all of Wirtgen’s liabilities. The Company financed the acquisition and associated transaction expenses from a combination of cash and new debt financing, which consisted of medium-term notes, including €850 million issued in September 2017.

The preliminary fair values assigned to the assets and liabilities of the acquired entity in millions of dollars, which is based on information as of the acquisition date and available at July 29, 2018 follows:

Trade accounts and notes receivable

$
457

Financing receivables

43

Financing receivables securitized

125

Other receivables

100

Inventories

1,538

Property and equipment

750

Goodwill

2,067

Other intangible assets

1,458

Deferred income taxes

96

Other assets

221

Total assets

$
6,855

Short-term borrowings

$
285

Short-term securitization borrowings

127

Accounts payable and accrued expenses

726

Deferred income taxes

501

Long-term borrowings

50

Retirement benefits and other liabilities

28

Total liabilities

$
1,717

Noncontrolling interests

$
8

During the third quarter of 2018, measurement period adjustments decreased property and equipment by $7 million and increased goodwill by $7 million. The Company continues to review the fair value of the assets and liabilities acquired, which may be updated during the measurement period.

~~The identifiable intangible assets’ preliminary fair values in millions of dollars and weighted-average useful lives in years follows:~~

Weighted-Average
Useful Lives

Preliminary
Fair Values

Customer lists and relationships

16

$
534

Technology, patents, trademarks, and other

19

$
924

The goodwill was the result of future cash flows and related fair value of Wirtgen exceeding the fair value of the identified assets and liabilities. The goodwill is not expected to be deductible for income tax purposes and is included in the construction and forestry segment.

Wirtgen’s results were included in the Company’s consolidated financial statements beginning on the acquisition date. The results are incorporated using a 30-day lag period and are included in the construction and forestry segment. The net sales and revenues and operating profit included in the Company’s statement of consolidated income in the third quarter of 2018 and first nine months of 2018 were $1,155 million and $2,282 million, and $88 million and $37 million, respectively. The Company also recognized $1 million of acquisition related costs in the third quarter of 2018, which were recorded in selling, administrative and general expenses. In the first nine months of 2018, the Company recognized $54 million of acquisition related costs, which were recorded $28 million in selling, administrative and general expenses and $26 million in other operating expenses.

~~The unaudited pro forma consolidated net sales and revenues and net income are prepared as if the acquisition closed at the beginning of fiscal year 2017 and follow in millions of dollars:~~

Three Months Ended

Nine Months Ended

July 29

July 30

July 29

July 30

2018

2017

2018

2017

Net sales and revenues

$
10,308

$
8,810

$
28,406

$
24,062

Net income attributable to Deere & Company

$
986

$
731

$
1,862

$
1,673

The pro forma amounts have been calculated using policies consistent with the Company’s accounting policies and include the additional expense from the amortization from the allocated purchase price adjustments. The pro forma results exclude acquisition related costs incurred in both periods and assume the medium-term notes used to fund the acquisition were issued in fiscal year 2016 at the interest rate of the actual notes. In addition, the pro forma results for the third quarter and nine months ended July 30, 2017 include nonrecurring pretax expenses of $22 million and $286 million, for the higher cost basis from the inventory fair value adjustment and $21 million and $63 million for the amortization of identifiable intangible assets. Anticipated synergies or other expected benefits of the acquisition are not included in the pro forma results. As a result, the unaudited pro forma financial information may not be indicative of the results for future operations or the results if the acquisition closed at the beginning of fiscal year 2017.

In March 2018, the Company acquired King Agro, a privately held manufacturer of carbon fiber technology products with headquarters in Valencia, Spain and a production facility in Campana, Argentina. The total cash purchase price before the final adjustment, net of cash acquired of $3 million, was $41 million, excluding a loan to King Agro of $4 million that was forgiven on the acquisition date. In addition to the cash purchase price, the Company assumed $11$29 million of liabilities. The ~~preliminary~~ asset and liability fair values ~~are as follows:~~at the acquisition date in millions of dollars follow:



			September 2018
Trade accounts and notes receivable	$	2	$	2
Other receivables		2		14
Inventories		5		14
Property and equipment		6		1
Goodwill		28		44
Other intangible assets		13		22
Other assets				1
Total assets	$	56	$	98


Short-term borrowings	$	2	$	8
Accounts payable and accrued expenses		4		17
Deferred income taxes		4		4
Long-term borrowings		1
Total liabilities	$	11	$	29

The identifiable ~~intangibles~~intangible assets were primarily related to ~~trade name~~technology, trademarks, and ~~technology,~~customer relationships, which have a weighted-average amortization period of 10five years.

The goodwill was the result of future cash flows and related fair values of the entity exceeding the fair value of the identified assets and liabilities, ~~which~~and is not expected to be deducted for tax purposes. The results of ~~King Agro~~PLA were included in the Company’s consolidated financial statements in the agriculture and turf segment since the date of acquisition. The pro forma results of operations as if the acquisition had occurred at the beginning of the prior fiscal year would not differ significantly from the reported results.

~~(19)~~In November 2017, the Company sold its construction and forestry retail locations in Florida. At the time of the sale, total assets were $93 million and liabilities were $1 million. The assets consisted of inventory of $61 million, property and equipment – net of $21 million, goodwill of $10 million, and $1 million of other assets. The liabilities consisted of $1 million of accounts payable and accrued expenses. The total proceeds from the sale will be approximately $105 million, with $80 million received in the first nine months of 2018. The remaining sales price is due based on standard payment terms of new equipment sales to independent dealers. A pretax gain of $13 million was recorded in other income in the construction and forestry segment.

In May 2018, the Company sold seven construction and forestry retail locations in Michigan, Minnesota, and Wisconsin. At the time of the sale, total assets for these locations were $74 million and liabilities were approximately $2 million. The assets consisted of trade accounts and notes receivable – net of $3 million, inventory of $52 million, property and equipment – net of $11 million, and goodwill of $8 million. The liabilities consisted of $2 million of accounts payable and accrued expenses. The total proceeds from the sale will be approximately $84 million, with $53 million received in the third quarter of 2018. The remaining sales price is due based on standard payment terms of new equipment sales to independent dealers. A pretax gain of $12 million was recorded in other income in the construction and forestry segment.

~~For the retail location sales, the Company sells equipment, service parts, and provides other services to the purchasers as independent dealers.~~


(20) SUPPLEMENTAL CONSOLIDATING DATA
STATEMENT OF INCOME
For the Three Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars) Unaudited	EQUIPMENT OPERATIONS*				FINANCIAL SERVICES
	2019		2018		2019		2018
Net Sales and Revenues
Net sales	$	8,969	$	9,286
Finance and interest income		30		31	$	952	$	852
Other income		185		231		51		67
Total		9,184		9,548		1,003		919

Costs and Expenses
Cost of sales		6,871		7,153
Research and development expenses		431		416
Selling, administrative and general expenses		751		769		147		145
Interest expense		67		52		311		250
Interest compensation to Financial Services		93		86
Other operating expenses		64		80		339		326
Total		8,277		8,556		797		721

Income of Consolidated Group before Income Taxes		907		992		206		198
Provision for income taxes		190		242		31		47
Income of Consolidated Group		717		750		175		151

Equity in Income of Unconsolidated Subsidiaries and Affiliates
Financial Services		175		151
Other		7		10
Total		182		161
Net Income		899		911		175		151
Less: Net income attributable to noncontrolling interests				1
Net Income Attributable to Deere & Company	$	899	$	910	$	175	$	151

(20) SUPPLEMENTAL CONSOLIDATING DATA

STATEMENT OF INCOME

For the Three Months Ended July 29, 2018 and July 30, 2017

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2018

2017

2018

2017

Net Sales and Revenues








Net sales

$
9,286.4

$
6,833.0

Finance and interest income

30.9

20.3

$
851.9

$
744.8

Other income

231.2

266.6

66.8

63.4

Total

9,548.5

7,119.9

918.7

808.2

Costs and Expenses

Cost of sales

7,153.1

5,249.0

Research and development expenses

415.7

336.8

Selling, administrative and general expenses

768.9

645.7

145.6

154.6

Interest expense

51.4

65.8

249.8

161.3

Interest compensation to Financial Services

86.2

65.4

Other operating expenses

80.3

67.2

326.1

292.4

Total

8,555.6

6,429.9

721.5

608.3

Income of Consolidated Group before Income Taxes

992.9

690.0

197.2

199.9

Provision for income taxes

242.3

184.2

46.4

69.0

Income of Consolidated Group

750.6

505.8

150.8

130.9

Equity in Income of Unconsolidated Subsidiaries and Affiliates

Financial Services

151.2

131.2

.4

.3

Other

9.5

5.3

Total

160.7

136.5

.4

.3

Net Income

911.3

642.3

151.2

131.2

Less: Net income attributable to noncontrolling interests

1.0

.5

Net Income Attributable to Deere & Company

$
910.3

$
641.8

$
151.2

$
131.2

*Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the consolidated financial statements.

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF INCOME

For the Nine Months Ended July 29, 2018 and July 30, 2017

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2018

2017

2018

2017

Net Sales and Revenues

Net sales

$
25,007.4

$
18,790.7

Finance and interest income

70.3

60.3

$
2,441.3

$
2,148.6

Other income

630.5

864.2

194.5

182.5

Total

25,708.2

19,715.2

2,635.8

2,331.1

Costs and Expenses

Cost of sales

19,191.9

14,459.1

Research and development expenses

1,187.7

974.2

Selling, administrative and general expenses

2,159.2

1,835.2

403.3

419.2

Interest expense

225.5

199.6

675.0

479.4

Interest compensation to Financial Services

228.5

171.5

Other operating expenses

219.0

215.9

962.1

905.0

Total

23,211.8

17,855.5

2,040.4

1,803.6

Income of Consolidated Group before Income Taxes

2,496.4

1,859.7

595.4

527.5

Provision (credit) for income taxes

1,607.0

569.2

(83.6)

179.5

Income of Consolidated Group

889.4

1,290.5

679.0

348.0

Equity in Income of Unconsolidated Subsidiaries and Affiliates

Financial Services

680.6

349.1

1.6

1.1

Other

16.2

8.9

Total

696.8

358.0

1.6

1.1

Net Income

1,586.2

1,648.5

680.6

349.1

Less: Net income (loss) attributable to noncontrolling interests

2.6

(.3)

Net Income Attributable to Deere & Company

$
1,583.6

$
1,648.8

$
680.6

$
349.1


SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF INCOME
For the Nine Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars) Unaudited	EQUIPMENT OPERATIONS*				FINANCIAL SERVICES
	2019		2018		2019		2018
Net Sales and Revenues
Net sales	$	26,182	$	25,007
Finance and interest income		79		70	$	2,727	$	2,441
Other income		614		631		184		195
Total		26,875		25,708		2,911		2,636

Costs and Expenses
Cost of sales		20,058		19,192
Research and development expenses		1,295		1,188
Selling, administrative and general expenses		2,191		2,159		422		403
Interest expense		182		226		910		675
Interest compensation to Financial Services		254		228
Other operating expenses		203		219		1,008		962
Total		24,183		23,212		2,340		2,040

Income of Consolidated Group before Income Taxes		2,692		2,496		571		596
Provision (credit) for income taxes		625		1,607		123		(83)
Income of Consolidated Group		2,067		889		448		679

Equity in Income of Unconsolidated Subsidiaries and Affiliates
Financial Services		450		681		2		2
Other		18		16
Total		468		697		2		2
Net Income		2,535		1,586		450		681
Less: Net income attributable to noncontrolling interests		3		2
Net Income Attributable to Deere & Company	$	2,532	$	1,584	$	450	$	681

*Deere & Company with Financial Services on the equity basis.

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

CONDENSED BALANCE SHEET

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

July 29

October 29

July 30

July 29

October 29

July 30

2018

2017

2017

2018

2017

2017

Assets



















Cash and cash equivalents

$
2,802.9

$
8,168.4

$
5,338.4

$
1,120.4

$
1,166.5

$
1,199.0

Marketable securities

11.4

20.2

21.4

476.8

431.4

404.7

Receivables from unconsolidated subsidiaries
and affiliates

1,794.4

1,032.1

2,570.9

Trade accounts and notes receivable – net

1,586.2

876.3

758.8

6,079.5

4,134.1

4,828.8

Financing receivables – net

78.0

25,135.0

25,104.1

23,722.1

Financing receivables securitized – net

90.2

4,571.5

4,158.8

4,923.1

Other receivables

1,130.6

1,045.6

708.0

176.1

195.5

147.1

Equipment on operating leases – net

6,804.9

6,593.7

6,235.6

Inventories

6,239.3

3,904.1

4,252.9

Property and equipment – net

5,592.2

5,017.3

4,919.1

46.3

50.4

49.4

Investments in unconsolidated subsidiaries
and affiliates

4,992.1

4,812.3

4,800.4

15.1

13.8

13.8

Goodwill

3,046.5

1,033.3

845.8

Other intangible assets – net

1,580.8

218.0

92.0

Retirement benefits

727.2

538.1

219.1

13.7

16.9

17.9

Deferred income taxes

1,983.9

3,098.8

3,720.6

68.1

79.8

68.8

Other assets

1,148.3

973.9

948.5

530.4

651.4

644.7

Total Assets

$
32,804.0

$
30,738.4

$
29,195.9

$
45,037.8

$
42,596.4

$
42,255.0

Liabilities and Stockholders’ Equity

Liabilities

Short-term borrowings

$
789.5

$
375.5

$
342.8

$
10,215.0

$
9,659.8

$
8,676.6

Short-term securitization borrowings

90.2

4,437.5

4,118.7

4,780.9

Payables to unconsolidated subsidiaries
and affiliates

110.8

121.9

77.8

1,766.5

996.2

2,542.4

Accounts payable and accrued expenses

9,046.9

7,718.1

7,213.5

1,901.8

1,827.1

1,611.2

Deferred income taxes

431.5

115.6

105.2

500.1

857.7

806.5

Long-term borrowings

5,525.7

5,490.9

4,523.6

21,312.3

20,400.4

19,150.7

Retirement benefits and other liabilities

6,429.5

7,341.9

8,344.1

96.1

92.9

93.4

Total liabilities

22,424.1

21,163.9

20,607.0

40,229.3

37,952.8

37,661.7

Commitments and contingencies (Note 14)

Redeemable noncontrolling interest

14.0

14.0

14.0

Stockholders’ Equity

Common stock, $1 par value (issued shares at July 29, 2018 – 536,431,204)

4,450.8

4,280.5

4,245.1

2,099.4

2,099.1

2,099.1

Common stock in treasury

(15,813.5)

(15,460.8)

(15,477.3)

Retained earnings

26,272.3

25,301.3

24,984.2

3,008.9

2,782.0

2,699.2

Accumulated other comprehensive income (loss)

(4,553.3)

(4,563.7)

(5,179.8)

(299.8)

(237.5)

(205.0)

Total Deere & Company stockholders' equity

10,356.3

9,557.3

8,572.2

4,808.5

4,643.6

4,593.3

Noncontrolling interests

9.6

3.2

2.7

Total stockholders’ equity

10,365.9

9,560.5

8,574.9

4,808.5

4,643.6

4,593.3

Total Liabilities and Stockholders’ Equity

$
32,804.0

$
30,738.4

$
29,195.9

$
45,037.8

$
42,596.4

$
42,255.0


SUPPLEMENTAL CONSOLIDATING DATA (Continued)
CONDENSED BALANCE SHEET
(In millions of dollars) Unaudited	EQUIPMENT OPERATIONS*						FINANCIAL SERVICES
	July 28		October 28		July 29		July 28		October 28		July 29
	2019		2018		2018		2019		2018		2018
Assets
Cash and cash equivalents	$	2,694	$	3,195	$	2,803	$	689	$	709	$	1,120
Marketable securities		5		8		11		560		482		477
Receivables from unconsolidated subsidiaries and affiliates		2,395		1,700		1,795
Trade accounts and notes receivable – net		1,606		1,374		1,586		6,807		4,906		6,080
Financing receivables – net		100		93		78		26,949		26,961		25,135
Financing receivables securitized – net		54		76		90		5,146		3,946		4,572
Other receivables		1,428		1,010		1,131		126		776		176
Equipment on operating leases – net								7,269		7,165		6,805
Inventories		6,747		6,149		6,239
Property and equipment – net		5,753		5,821		5,592		45		47		46
Investments in unconsolidated subsidiaries and affiliates		5,309		5,231		4,992		16		15		15
Goodwill		3,013		3,101		3,047
Other intangible assets – net		1,444		1,562		1,581
Retirement benefits		1,374		1,241		727		57		57		14
Deferred income taxes		1,579		1,503		1,984		72		69		68
Other assets		1,269		1,133		1,148		708		587		530
Total Assets	$	34,770	$	33,197	$	32,804	$	48,444	$	45,720	$	45,038

Liabilities and Stockholders’ Equity

Liabilities
Short-term borrowings	$	1,372	$	1,434	$	789	$	9,770	$	9,628	$	10,215
Short-term securitization borrowings		53		75		90		4,995		3,882		4,438
Payables to unconsolidated subsidiaries and affiliates		136		129		111		2,341		1,678		1,766
Accounts payable and accrued expenses		9,422		9,383		9,047		1,641		2,056		1,902
Deferred income taxes		454		497		431		616		823		500
Long-term borrowings		5,364		4,714		5,526		23,878		22,523		21,312
Retirement benefits and other liabilities		5,685		5,660		6,430		97		91		96
Total liabilities		22,486		21,892		22,424		43,338		40,681		40,229

Commitments and contingencies (Note 15)
Redeemable noncontrolling interest		14		14		14

Stockholders’ Equity
Common stock, $1 par value (issued shares at July 28, 2019 – 536,431,204)		4,599		4,474		4,451		2,107		2,100		2,100
Common stock in treasury		(17,121)		(16,312)		(15,814)
Retained earnings		29,369		27,553		26,272		3,338		3,257		3,009
Accumulated other comprehensive income (loss)		(4,581)		(4,427)		(4,553)		(339)		(318)		(300)
Total Deere & Company stockholders’ equity		12,266		11,288		10,356		5,106		5,039		4,809
Noncontrolling interests		4		3		10
Total stockholders’ equity		12,270		11,291		10,366		5,106		5,039		4,809
Total Liabilities and Stockholders’ Equity	$	34,770	$	33,197	$	32,804	$	48,444	$	45,720	$	45,038

*Deere & Company with Financial Services on the equity basis.

The supplemental consolidating data is presented for informational purposes. Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the consolidated financial statements.

SUPPLEMENTAL CONSOLIDATING DATA (Continued)

STATEMENT OF CASH FLOWS

For the Nine Months Ended July 29, 2018 and July 30, 2017

(In millions of dollars) Unaudited

EQUIPMENT OPERATIONS*

FINANCIAL SERVICES

2018

2017

2018

2017

Cash Flows from Operating Activities













Net income

$
1,586.2

$
1,648.5

$
680.6

$
349.1

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

Provision for credit losses

18.8

1.5

47.3

75.3

Provision for depreciation and amortization

740.8

640.1

800.6

725.1

Gain on sale of affiliates and investments

(25.1)

(375.1)

Undistributed earnings of unconsolidated subsidiaries and affiliates

(235.2)

(37.3)

(1.4)

(1.0)

Provision (credit) for deferred income taxes

986.0

(145.1)

(345.2)

67.6

Changes in assets and liabilities:

Trade receivables

(331.0)

(104.2)

Inventories

(975.1)

(829.4)

Accounts payable and accrued expenses

519.4

471.8

66.1

28.9

Accrued income taxes payable/receivable

230.9

150.9

(55.2)

16.9

Retirement benefits

(821.5)

166.6

6.8

6.5

Other

(87.8)

(50.9)

141.1

116.0

Net cash provided by operating activities

1,606.4

1,537.4

1,340.7

1,384.4

Cash Flows from Investing Activities

Collections of receivables (excluding trade and wholesale)

13,245.7

12,275.9

Proceeds from maturities and sales of marketable securities

9.0

296.3

46.8

92.5

Proceeds from sales of equipment on operating leases

1,115.6

1,086.6

Proceeds from sales of businesses and unconsolidated
affiliates, net of cash sold

133.0
��

113.9

Cost of receivables acquired (excluding trade and wholesale)

(13,830.0)

(12,366.5)

Acquisitions of businesses, net of cash acquired

(5,170.9)

Purchases of marketable securities

(101.4)

(77.0)

Purchases of property and equipment

(569.1)

(372.5)

(1.5)

(1.2)

Cost of equipment on operating leases acquired

(2,189.6)

(2,096.2)

Increase in trade and wholesale receivables

(2,329.7)

(1,070.9)

Other

42.1

(55.7)

(33.4)

(18.7)

Net cash used for investing activities

(5,555.9)

(18.0)

(4,077.5)

(2,175.5)

Cash Flows from Financing Activities

Increase in total short-term borrowings

119.0

42.3

1,064.4

1,606.6

Change in intercompany receivables/payables

(796.8)

634.9

796.8

(634.9)

Proceeds from long-term borrowings

159.4

64.8

5,579.7

4,299.7

Payments of long-term borrowings

(117.6)

(44.5)

(4,254.2)

(4,161.1)

Proceeds from issuance of common stock

208.7

488.6

Repurchases of common stock

(454.0)

(6.2)

Dividends paid

(582.6)

(571.3)

(453.7)

(320.2)

Other

(41.7)

(43.2)

(24.8)

.3

Net cash provided by (used for) financing activities

(1,505.6)

565.4

2,708.2

790.4

Effect of Exchange Rate Changes on Cash and Cash Equivalents

89.6

113.1

(17.5)

4.4

Net Increase (Decrease) in Cash and Cash Equivalents

(5,365.5)

2,197.9

(46.1)

3.7

Cash and Cash Equivalents at Beginning of Period

8,168.4

3,140.5

1,166.5

1,195.3

Cash and Cash Equivalents at End of Period

$
2,802.9

$
5,338.4

$
1,120.4

$
1,199.0

*~~Deere & Company with Financial Services on the equity basis.~~


SUPPLEMENTAL CONSOLIDATING DATA (Continued)
STATEMENT OF CASH FLOWS
For the Nine Months Ended July 28, 2019 and July 29, 2018
(In millions of dollars) Unaudited	EQUIPMENT OPERATIONS*				FINANCIAL SERVICES
	2019		2018		2019		2018
Cash Flows from Operating Activities
Net income	$	2,535	$	1,586	$	450	$	681
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		1		19		57		47
Provision for depreciation and amortization		782		741		836		800
Gain on sales of businesses				(25)
Undistributed earnings of unconsolidated subsidiaries and affiliates		(62)		(235)		(1)		(1)
Provision (credit) for deferred income taxes		(123)		986		(209)		(345)
Changes in assets and liabilities:
Trade receivables and Equipment Operations' financing receivables		(248)		(331)
Inventories		(670)		(975)
Accounts payable and accrued expenses		50	��	519		23		66
Accrued income taxes payable/receivable		(282)		231		535		(55)
Retirement benefits		35		(821)		5		7
Other		(59)		(86)		140		141
Net cash provided by operating activities		1,959		1,609		1,836		1,341

Cash Flows from Investing Activities
Collections of receivables (excluding trade and wholesale)						13,807		13,246
Proceeds from maturities and sales of marketable securities		9		9		63		47
Proceeds from sales of equipment on operating leases						1,171		1,116
Proceeds from sales of businesses, net of cash sold				133
Cost of receivables acquired (excluding trade and wholesale)						(14,597)		(13,830)
Acquisitions of businesses, net of cash acquired				(5,171)
Purchases of marketable securities		(3)				(107)		(101)
Purchases of property and equipment		(754)		(569)		(2)		(2)
Cost of equipment on operating leases acquired						(2,135)		(2,190)
Increase in trade and wholesale receivables						(2,551)		(2,330)
Other		(64)		42		12		(61)
Net cash used for investing activities		(812)		(5,556)		(4,339)		(4,105)

Cash Flows from Financing Activities
Increase (decrease) in total short-term borrowings		(119)		119		(217)		1,064
Change in intercompany receivables/payables		(683)		(797)		683		797
Proceeds from long-term borrowings		868		159		6,572		5,580
Payments of long-term borrowings		(194)		(118)		(4,162)		(4,254)
Proceeds from issuance of common stock		133		209
Repurchases of common stock		(880)		(454)
Dividends paid		(703)		(583)		(377)		(454)
Other		(52)		(41)		(22)		(25)
Net cash provided by (used for) financing activities		(1,630)		(1,506)		2,477		2,708

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(16)		89		(8)		(18)

Net Decrease in Cash, Cash Equivalents, and Restricted Cash		(499)		(5,364)		(34)		(74)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		3,202		8,174		813		1,293
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,703	$	2,810	$	779	$	1,219

*Deere & Company with Financial Services on the equity basis.

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

RESULTS OF OPERATIONS

Overview

Organization

The Company’s equipment operations generate revenues and cash primarily from the sale of equipment to John Deere dealers and distributors. The equipment operations manufacture and distribute a full line of agricultural equipment; a variety of commercial and consumer equipment; and a broad range of equipment for construction, road building, and forestry. The Company’s financial services primarily provide credit services, which mainly finance sales and leases of equipment by John Deere dealers and trade receivables purchased from the equipment operations. In addition, financial services offers extended equipment warranties. The information in the following discussion is presented in a format that includes information grouped as consolidated, equipment operations, and financial services. The Company also views its operations as consisting of two geographic areas, the U.S. and Canada, and outside the U.S. and Canada. The Company’s operating segments consist of agriculture and turf, construction and forestry, and financial services.

Trends and Economic Conditions

Industry sales of agricultural ~~machinery~~equipment in the U.S. and Canada ~~are forecast to increase approximately 10 percent~~as well as for ~~2018. Industry sales in~~ the European Union (EU) 28 nations are forecast to ~~increase approximately 5 to 10 percent. In~~be about the same as last year. South ~~America,~~American industry sales of tractors and combines are projected to be about the same ~~or increase about~~to 5 ~~percent.~~percent higher. Asian sales are forecast to be ~~in line with 2017.~~about the same or decrease slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be about the same ~~or increase~~to 5 percent higher for ~~2018.~~2019. The Company’s agriculture and turf segment sales ~~increased 18~~decreased 6 percent in the third quarter and 19increased 2 percent for the first nine months. These sales are forecast to increase about 152 percent for fiscal year ~~2018.~~2019. Construction equipment markets reflect ~~continued improvement in demand driven by higher housing starts in the U.S., increased activity in the oil and gas sector,~~generally positive fundamentals and economic growth worldwide. In forestry, global industry sales are expected to be up about ~~10 percent.~~the same to 5 percent higher. The Company’s construction and forestry segment sales increased ~~100~~1 percent in the third quarter and 8311 percent for the first nine ~~months, with Wirtgen adding 77 percent and 56 percent for the respective periods.~~months. These sales are forecast to increase about 8110 percent in ~~2018,~~2019, with the two additional months of Wirtgen adding 554 percent to ~~the segment’s~~segment sales. Net income attributable to Deere & Company for the Company’s financial services operations is forecast to be approximately ~~$815~~$620 million in ~~2018, which includes a provisional income tax benefit of $232 million associated with tax reform.~~2019.

Items of concern include trade agreements, the uncertainty of the effectiveness of governmental actions in respect to monetary and fiscal policies, the impact of sovereign debt, eurozone and Argentine issues, capital market disruptions, ~~trade agreements, labor supply issues,~~ changes in demand and pricing for used equipment, and geopolitical events. Significant fluctuations in foreign currency exchange rates and volatility in the price of many commodities could also impact the Company’s results.

The ~~Company’s~~ third quarter results ~~benefited from favorable~~reflect the uncertainty that continues in the agricultural sector. Concerns about export market ~~conditions. Agricultural machinery sales in North America~~access, near-term demand for commodities, and ~~Europe improved, while~~overall crop conditions have caused farmers to postpone major equipment purchases. General economic conditions remain positive and are contributing to strong results for the construction ~~equipment sales increased sharply with significant support from~~and forestry business. The global customer base continues to expand and the ~~Wirtgen road building unit.~~Company is encouraged by the market’s positive response to its products and services. The Company is ~~experiencing~~assessing its cost ~~pressures~~structure through reviews of organization efficiency, a footprint assessment, and an increased focus on investments with the most opportunity for raw materials and freight, which are being addressed through a combination of cost management and pricing. Replacement demand for large agricultural equipment is driving sales in spite of global trade tensions and other geopolitical issues. With the global population growth trends and increased urbanization, the Company is confident in its position to continue to deliver value to customers and investors.differentiation.

~~2018~~2019 Compared with ~~2017~~2018

~~Net income attributable to Deere & Company was $910.3 million, or $2.78 per share, for~~The following table provides the ~~third quarter of 2018, compared with $641.8 million, or $1.97 per share, for the same period last year. For the first nine months of 2018,~~ net income attributable to Deere & Company ~~was $1,584 million, or $4.82~~in millions of dollars and diluted earnings per share ~~compared with $1,649~~in dollars:


	Three Months Ended				Nine Months Ended
	July 28		July 29		July 28		July 29
	2019		2018		2019		2018
Net income attributable to Deere & Company	$	899	$	910	$	2,532	$	1,584
Diluted earnings per share		2.81		2.78		7.87		4.82

Affecting 2019 and 2018 results were discrete charges or benefits to the provision for income taxes due to U.S. tax reform legislation (tax reform). Net income was favorably impacted by $32 million ~~or $5.11 per share, last year. Affecting~~in the third quarter of 2019 and

$27 million for the nine-month period ended July 28, 2019. Net income was favorably affected by $62 million in the third quarter of 2018 and unfavorably affected by $741 million in the nine-month period ended July 29, 2018. See Note 9 for more information on tax reform.

The worldwide net sales and revenue, price realization, and the effect of currency translation for worldwide, U.S. and Canada, and outside U.S. and Canada in millions of dollars follows:


	Three Months Ended					Nine Months Ended
	July 28		July 29		%	July 28		July 29		%
	2019		2018		Change	2019		2018		Change
Worldwide net sales and revenues	$	10,036	$	10,308	-3	$	29,362	$	27,942	+5
Worldwide equipment operations net sales		8,969		9,286	-3		26,182		25,007	+5
Price realization					+3					+4
Currency translation (unfavorable)					-2					-3
Wirtgen - two additional months										+2

U.S. and Canada equipment operations net sales		4,943		5,054	-2		15,197		13,971	+9
Wirtgen - two additional months										+1

Outside U.S. and Canada equipment operations net sales		4,026		4,232	-5		10,985		11,036
Currency translation (unfavorable)					-4					-6
Wirtgen - two additional months										+3

The Company’s equipment operations operating profit and net income and financial services operations net income follow in millions of dollars:


	Three Months Ended					Nine Months Ended
	July 28		July 29		%	July 28		July 29		%
	2019		2018		Change	2019		2018		Change
Equipment operations operating profit	$	990	$	1,087	-9	$	2,932	$	2,822	+4
Equipment operations net income		717		750	-4		2,067		889	+133
Financial services net income		175		151	+16		450		681	-34

The discussion on net sales and operating profit are included in the Business Segment Results below. Net income in the third quarter and the first nine months of 2019 and 2018 was affected by discrete adjustments to the provision for income taxes. See Note 9 for the discrete income tax adjustments related to tax reform.

Business Segment Results

Agriculture and Turf. The agriculture and turf segment results in millions of dollars follow:


	Three Months Ended					Nine Months Ended
	July 28		July 29		%	July 28		July 29		%
	2019		2018		Change	2019		2018		Change
Net sales	$	5,946	$	6,293	-6	$	17,909	$	17,585	+2
Operating profit		612		806	-24		1,978		2,249	-12
Operating margin		10.3%		12.8%			11.0%		12.8%

Segment sales decreased for the quarter due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Sales for the first nine months increased mainly as a result of price realization and increased shipment volumes, partially offset by the unfavorable effects of currency translation. Operating profit declined for the quarter primarily due to lower shipment volumes, higher production costs, and the unfavorable effects of foreign currency exchange, partially offset by price realization. Operating profit for the first nine months was lower primarily as a result of higher production costs, the unfavorable effects of currency translation, increased research and development costs, and a less favorable sales mix. These factors were partially offset by price realization and higher shipment volumes.

Construction and Forestry. The construction and forestry segment results in millions of dollars follow:


	Three Months Ended					Nine Months Ended
	July 28		July 29		%	July 28		July 29		%
	2019		2018		Change	2019		2018		Change
Net sales	$	3,023	$	2,993	+1	$	8,273	$	7,422	+11
Operating profit		378		281	+35		954		573	+66
Operating margin		12.5%		9.4%			11.5%		7.7%

Segment sales increased for the quarter and first nine months primarily due to price realization, partially offset by the unfavorable effects of currency translation. Nine month sales also benefited from higher shipment volumes. The inclusion of Wirtgen’s sales for two additional months accounted for about 6 percent of the year to date net sales increase. Wirtgen’s operating profit for the third quarter and first nine months ~~of 2018 were provisional adjustments to the provision for income taxes due to tax reform. Third quarter results included a favorable net adjustment to provisional income tax expense of $62~~was $159 million ~~while the first nine months reflected an unfavorable net provisional income tax expense of $741~~and $275 million, ~~(see Note 8).~~

~~Worldwide net sales and revenues increased 32 percent to $10,308 million for the third quarter this year,~~respectively, compared with $7,808 million a year ago, and increased 29 percent to $27,942 million for the first nine months, compared with $21,720 million last year. Net sales of the worldwide equipment operations increased 36 percent to $9,286 million for the third quarter and 33 percent to $25,007 million for the first nine months, compared with $6,833 million and $18,791 million for the same periods last year. The Company’s acquisition of Wirtgen in December 2017 (see Note 18) added 17 percent to net sales for the quarter and 12 percent for the first nine months. Equipment net sales in the U.S. and Canada increased 29 percent for the third quarter and 27 percent year to date, with Wirtgen adding 6 percent and 4 percent for the respective periods. Outside the U.S. and Canada, net sales increased 45 percent for the third quarter and 42 percent for the first nine months, with Wirtgen adding 31 percent and 23 percent for the respective periods. Net sales included an unfavorable currency translation effect of 1 percent for the third quarter and a favorable currency translation effect of 3 percent for the first nine months.

The Company’s equipment operations reported operating profit of $1,087 million for the third quarter of 2018 and $2,822 million for the first nine months, compared with $804 million and $2,179 million, respectively, last year. Wirtgen, whose results are included in these amounts, had operating profit of $88 million ~~for the quarter~~ and $37 million for the ~~first nine months.~~corresponding periods last year. Excluding Wirtgen, ~~results,~~ the improvement ~~for both periods~~in the third quarter was primarily driven by price realization, partially offset by a less favorable sales mix. Year to date operating profit, excluding Wirtgen, increased mainly due to price realization and higher shipment volumes, ~~lower warranty costs, and price realization,~~ partially offset by higher production costs and ~~research~~the unfavorable effects of currency exchange.

Financial Services. The financial services segment revenue, interest expense, and ~~development expenses.~~operating profit in millions of dollars, along with the ratio of earnings to fixed charges follow:


	Three Months Ended					Nine Months Ended
	July 28		July 29		%	July 28		July 29		%
	2019		2018		Change	2019		2018		Change
Revenue (including intercompany revenue)	$	1,003	$	919	+9	$	2,911	$	2,636	+10
Interest expense		311		250	+24		910		675	+35
Operating profit		204		196	+4		566		591	-4
Consolidated ratio of earnings to fixed charges		1.67		1.82	-8		1.63		1.90	-14

Operating profit increased for the quarter due to income earned on a higher average portfolio, partially offset by higher losses on operating lease residual values and unfavorable financing spreads. Nine month operating profit declined due to unfavorable financing spreads and higher losses on operating lease residual values, largely offset by income earned on a higher average portfolio. The ~~corresponding periods~~average balance of ~~2017 included a gain on the sale of SiteOne Landscapes Supply, Inc. (SiteOne).~~

~~Net income of the Company’s equipment operations~~receivables and leases financed was ~~$751 million for~~9 percent higher in the third quarter and ~~$889 million for~~8 percent higher in the first nine months ~~compared with $506 million and $1,291 million for the corresponding periods~~ of 2017. In addition to the operating factors previously mentioned, the quarter was favorably affected by $58 million and the nine month period unfavorably affected by $974 million due to provisional income tax adjustments related to tax reform.

The Company’s financial services operations reported net income attributable to Deere & Company of $151.2 million for the third quarter and $680.6 million for the first nine months, compared with $131.2 million and $349.1 million for the same periods last year. Results for both periods benefited from a higher average portfolio and a lower provision for credit losses, partially offset by less favorable financing spreads. Results for the nine month period also improved from lower losses on lease residual values. Additionally, provisional income tax adjustments related to tax reform had favorable effects of $3.6 million for the quarter and $232.4 million for the first nine months.

~~Business Segment Results~~

~~Agriculture and Turf.~~ Segment sales increased 18 percent for the quarter and 19 percent for first nine months due to higher shipment volumes, lower warranty expenses, and price realization. Foreign currency translation had an unfavorable impact on sales for the quarter and a favorable effect for the first nine months. Operating profit was $806 million for the quarter and $2,249 million year to date, compared with respective totals of $693 million and $1,920 million for the same periods last year. The improvement was driven by higher shipment volumes, lower warranty related expenses, and price realization, partially offset by higher production costs and research and development expenses. Prior year periods benefited from gains on the SiteOne sale.

~~Construction and Forestry.~~ Segment sales increased 100 percent for the quarter and 83 percent for nine months, with Wirtgen adding 77 percent and 56 percent for the respective periods. Foreign currency translation did not have a material effect on sales for the quarter but had a favorable impact for the first nine months. Both periods were favorably affected by lower warranty expenses and negatively affected by high sales incentive expenses. Operating profit was $281 million for the quarter and $573 million for the first nine months, compared with $111 million and $259 million last year. Wirtgen contributed operating profit of $88 million for the quarter and $37 million for the first nine months. Excluding Wirtgen, the improvements were primarily driven by higher shipment volumes and lower warranty expenses, partially offset by higher production costs and sales incentive costs.

~~Financial Services.~~ The operating profit of the financial services segment was $196 million for the third quarter and $591 million for the first nine months of 2018, compared with $198 million and $523 million in the same periods last year. Results for both periods benefited from a higher average portfolio and a lower provision for credit losses, partially offset by less favorable financing spreads. Nine month results also were helped by lower losses on lease residual values. Total financial services revenues, including intercompany revenues, increased 14 percent to $919 million in the current quarter from $808 million in the third quarter of 2017 and increased 13 percent to $2,636 million in the first nine months of 2018 compared to $2,331 million last year. The average balance of receivables and leases financed was 8 percent higher in the third quarter and 7 percent higher in the first nine months of 2018,2019, compared with the same periods last year. Interest expense increased ~~55 percent in the third quarter and 41 percent in the first nine months of 2018 primarily as a result of higher average borrowing~~

rates and higher average borrowings. The financial services’ consolidated ratio of earnings to fixed charges was 1.82 to 1 for the third quarter this year, compared with 2.31 to 1 in the same period last year. The ratio was 1.90 to 1 for the first nine months this year, compared to 2.16 to 1 for the same period last year.

The cost of sales to net sales ratios for the third quarter and first nine months of 2018 were 77.0 percent and 76.7 percent, respectively, compared to 76.8 percent and 76.9 percent for the same periods last year. The increase in the third quarter was primarily driven by the unfavorable effects of purchase accounting related to Wirtgen (see Note 18) and higher production costs, partially offset by lower warranty costs and price realization. The improvement in the first nine months was primarily due to lower warranty costs, price realization, and the expenses incurred in 2017 associated with a voluntary employee-separation program, partially offset by the unfavorable effects of purchase accounting related to Wirtgen and higher production costs.

~~Other income decreased~~ in the third quarter and first nine months of ~~2018~~2019 primarily as a result of higher average borrowing rates and higher average borrowings.

The cost of sales to net sales ratio and other significant statement of consolidated income changes not previously discussed follow:


	Three Months Ended					Nine Months Ended
	July 28		July 29		%	July 28		July 29		%
	2019		2018		Change	2019		2018		Change
Cost of sales to net sales		76.6%		77.0%			76.6%		76.7%

Research and development expenses	$	431	$	416	+4	$	1,295	$	1,188	+9
Selling, administrative and general expenses		896		913	-2		2,607		2,557	+2
Other operating expenses		352		346	+2		1,063		1,034	+3

The cost of sales to net sales ratio decreased in the third quarter and the first nine months due to price realization, partially offset by higher production costs, the ~~gains on the sale~~unfavorable effects of ~~the remaining interest in SiteOne in 2017.~~foreign currency exchange, and a less favorable product mix. Research and development expenses increased in both periods primarily as a result of spending to support new, ~~products and the impact of acquisitions.~~advanced products. Selling, administrative and general expenses ~~increased~~decreased in the third quarter primarily due to lower incentive compensation and the ~~Wirtgen acquisition.~~favorable effects of foreign currency translation. These expenses increased in the first nine months ~~mainly due to~~primarily as a result of the ~~Wirtgen acquisition and acquisition related costs, and higher incentive compensation expenses,~~effect of acquisitions, partially offset by ~~voluntary employee-separation program expenses in 2017~~favorable effects of foreign currency translation and a lower ~~provision for credit losses.~~incentive compensation. Other operating expenses increased in ~~the third quarter~~both periods primarily due to higher depreciation on operating ~~leases. Other operating expenses increased in the first nine months primarily related to higher depreciation~~leases and losses on operating ~~leases and acquisition related costs,~~lease

residual values, partially offset by lower pension and postretirement benefit costs excluding the ~~favorable effect of currency translation and lower losses on lease residual values.~~service cost component.

Market Conditions and Outlook

Company equipment sales are projected to increase by about 304 percent for fiscal ~~2018 and by~~2019 compared with 2018. Included in the forecast are Wirtgen results for the full fiscal year of 2019 compared with 10 months in 2018. This adds about 211 percent to the Company’s net sales for the current year. Also included in the forecast is a negative foreign currency translation effect of about 2 percent for the ~~fourth quarter compared with~~year. Net sales and revenues are projected to increase about 5 percent for fiscal 2019. Net income attributable to Deere & Company is forecast to be about $3,200 million.

Agriculture and Turf. The Company’s worldwide sales of agriculture and turf equipment are forecast to increase about 2 percent for fiscal year 2019, including a negative currency translation effect of about 2 percent. Industry sales of agricultural equipment are expected to be about the same ~~periods~~as last year for the U.S. and Canada as well as for the EU28 member nations. South American industry sales of ~~2017. Of these amounts, Wirtgen is~~tractors and combines are forecast to be about the same to 5 percent higher benefiting from strength in Brazil. Asian sales are forecast to be about the same to down slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to ~~add~~be about 12the same to 5 percent ~~to Deere~~higher for 2019.

Construction and Forestry. The Company’s worldwide sales ~~for both the full year~~of construction and ~~the fourth quarter. Foreign currency rates are not expected to have a material translation effect on~~forestry equipment ~~sales for the year but~~ are anticipated to ~~have~~increase about 10 percent for 2019, with foreign currency rates having an unfavorable translation effect of about 32 percent. The forecast includes a full year of Wirtgen sales, versus 10 months in fiscal 2018, with the two additional months adding about 4 percent to division sales for the ~~fourth quarter. Net~~year. The outlook reflects generally positive fundamentals and economic growth worldwide. In forestry, global industry sales ~~and revenues~~ are expected to ~~increase by~~be about 26the same to 5 percent ~~for fiscal 2018 with~~higher mainly as a result of improved demand in EU28 countries and Russia.

Financial Services. Fiscal year 2019 net income attributable to Deere & Company ~~forecast~~for the financial services segment is expected to be ~~about $2,360~~approximately $620 million. ~~The Company’s~~Excluding the 2018 benefit from tax reform, forecasted net income ~~forecast includes $741 million of provisional income tax expense associated with tax reform, representing discrete items for the remeasurement of the Company’s net deferred tax assets~~is expected to benefit from a higher average portfolio and favorable adjustments to the ~~new U.S. corporate tax rate~~provision for income taxes, largely offset by less favorable financing spreads, higher losses on operating lease residual values, and a ~~one-time deemed earnings repatriation tax. The current outlook~~higher provision for ~~net income compares with previous guidance of $2,300 million, which included $803 million of provisional income tax expense.~~

~~Agriculture and Turf.~~ The Company’s worldwide sales of agriculture and turf equipment are forecast to increase by about 15 percent for fiscal year 2018, with foreign currency rates not expected to have a material translation effect. Industry sales for agricultural equipment in the U.S. and Canada are forecast to be up about 10 percent for 2018, led by higher demand for large equipment. Despite drought concerns in some areas, full year industry sales in the EU28 member nations are forecast to be up 5 to 10 percent as a result of favorable conditions in the dairy and livestock sectors and positive arable farming conditions in certain key markets. South American industry sales of tractors and combines are projected to be flat to up 5 percent benefiting from strength in Brazil. Asian sales are forecast to be in line with last year. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2018.

~~Construction and Forestry.~~ The Company’s worldwide sales of construction and forestry equipment are anticipated to be up about 81 percent for 2018, with foreign currency rates not expected to have a material translation effect. Wirtgen is expected to add about 55 percent to the segment sales for the year. The outlook reflects continued improvement in demand driven by higher housing starts in the U.S., increased activity in the oil and gas sector, and economic growth worldwide. In forestry, global industry sales are expected to be up about 10 percent mainly as a result of improved demand throughout the world, led by North America.

~~Financial Services.~~ Fiscal year 2018 net income attributable to Deere & Company for the financial services segment is expected to be approximately $815 million, including a provisional income tax benefit of $232.4 million associated with tax reform. Results are expected to benefit from a higher average portfolio, a lower provision for credit losses, and lower losses on lease residual values, partially offset by less favorable financing spreads. The financial services net income outlook provided in the second quarter was $800 million. That forecast included a provisional tax benefit estimate of $229 million for remeasurement of the segment’s net deferred tax liability to the new U.S. corporate tax rate and a one-time deemed earnings repatriation tax.

credit losses.

Safe Harbor Statement

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

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

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

Consumer spending patterns, real estate and housing prices, the number of housing starts, interest rates and the levels of public and non-residential construction are important to sales and results of the Company’s construction and forestry equipment. Prices for pulp, paper, lumber and structural panels are important to sales of forestry equipment.

All of the Company’s businesses and its results are affected by general economic conditions in the global markets and industries in which the ~~Company~~company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates; inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the ~~Company~~company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics.

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

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

Additional factors that could materially affect the Company’s operations, access to capital, expenses and results include changes in, uncertainty surrounding and the impact of governmental trade, banking, monetary and fiscal

policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs and other areas, and governmental programs, policies, tariffs and sanctions in particular jurisdictions or for the benefit of certain industries or sectors; retaliatory actions to such changes in trade, banking, monetary and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws and regulations and Company actions related thereto; changes to and compliance with privacy regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies.

Other factors that could materially affect results include production, design and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights whether through theft, infringement, counterfeiting or otherwise; the availability and prices of strategically sourced materials, components and whole goods; delays or disruptions in the Company’s supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations or distribution; the failure of suppliers or the Company to comply with laws, regulations and Company policy pertaining to employment, human rights, health, safety, the environment, anti-corruption, privacy and data protection and other ethical business practices; events that damage the Company’s reputation or brand; significant investigations, claims, lawsuits or other legal proceedings; start-up of new plants and products; the success of new product initiatives; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity and speed needed to support technology solutions; oil and energy prices, supplies and volatility; the availability and cost of freight; actions of competitors in the various industries in which the Company competes, particularly price discounting; dealer practices especially as to levels of new and used field inventories; changes in demand and pricing for used equipmentand resulting impacts on lease residual values; labor relations and contracts; changes in the ability to attract, train and retain qualified personnel; acquisitions and divestitures of businesses; greater than anticipated transaction costs; the integration of new businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures or divestitures; the implementation of organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties

related to the conversion and implementation of enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures and other disruptions to the Company’s and suppliers’ information technology infrastructure; changes in Company declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount and mortality rates which impact retirement benefit costs; and significant changes in health care costs.

The liquidity and ongoing profitability of John Deere Capital Corporation and other credit subsidiaries depend largely on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the Company’s products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.

The Company’s outlook is based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies. Such estimates and data are often revised. The Company, except as required by law, undertakes no obligation to update or revise its outlook, whether as a result of new developments or otherwise. Further information concerning the Company and its businesses, including factors that could materially affect the Company’s financial results, is included in the Company’s other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the Company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q).

Critical Accounting Policies

See the Company’s critical accounting policies discussed in the Management’s Discussion and Analysis of the most recent annual report filed on Form 10-K. There have been no material changes to these policies.

CAPITAL RESOURCES AND LIQUIDITY

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

Consolidated

~~Consolidated~~

Positive cash flows from consolidated operating activities in the first nine months of 2019 were $404 million. This cash inflow resulted primarily from net income adjusted for non-cash provisions, a change in accrued income taxes payable/receivable, and a change in net retirement benefits, partially offset by a seasonal increase in receivables and inventories, along with an increase in overall demand, and a decrease in accounts payable and accrued expenses. Cash outflows from investing activities were $2,129 million in the first nine months of 2019, primarily due to the cost of receivables and equipment on operating leases acquired exceeding collections of receivables (excluding receivables related to sales) and proceeds from sales of equipment on operating leases by $1,268 million, purchases of property and equipment of $756 million, and purchases of marketable securities exceeding proceeds from maturities and sales by $38 million. Positive cash flows from financing activities were $1,216 million in the first nine months of 2019 primarily due to an increase in borrowings of $2,748 million and proceeds from issuance of common stock of $133 million (resulting from the exercise of stock options), partially offset by repurchases of common stock of $880 million and dividends paid of $703 million. Cash, cash equivalents, and restricted cash decreased $533 million during the first nine months of this year.

Negative cash flows from consolidated operating activities in the first nine months of 2018 were ~~$675~~$672 million. This cash outflow resulted primarily from a seasonal increase in ~~trade~~ receivables and inventories, along with an increase in overall demand, and a change in net retirement benefits, partially offset by net income adjusted for non-cash provisions, an increase in accounts payable and accrued expenses, and a change in accrued income taxes payable/receivable. Cash outflows from investing activities were ~~$6,465~~$6,493 million in the first nine months of 2018, primarily due to acquisitions of businesses, net of cash acquired, of $5,171 million, ~~(see Note 18),~~ costs of receivables (excluding receivables related to sales) and equipment on operating leases acquired exceeding the collections of receivables and proceeds from sales of equipment on operating leases acquired by $736 million, purchases of property and equipment of $571 million, and purchases of marketable securities exceeding proceeds from maturities and sales by ~~$46~~$45 million. Partially offsetting these cash outflows were cash inflows from proceeds from sales of businesses and unconsolidated affiliates, net of cash sold, of $133 million. Positive cash flows from financing activities were $1,656 million in the first nine months of 2018 primarily due to an increase in borrowings of ~~$2,551~~$2,550 million and proceeds from issuance of common stock of $209 million (resulting from the exercise of stock options), partially offset by dividends paid of $583 million and repurchases of common stock of $454 million. Cash, ~~and~~ cash equivalents, and

restricted cash decreased ~~$5,412~~$5,438 million during the first nine months of ~~this year.~~

~~In the second quarter of~~ 2018, a committee of the Company’s Board of Directors approved a voluntary $1,000 million contribution to its U.S. pension and postretirement plans in 2018. The Company contributed $50 million of the voluntary amount to its plans in the second quarter and the remaining $950 million during the third quarter. These voluntary contributions resulted in a tax deduction applicable to the 2017 tax year.

Positive cash flows from consolidated operating activities in the first nine months of 2017 were $729 million. This cash inflow resulted primarily from net income adjusted for non-cash provisions, an increase in accounts payable and accrued expenses, a change in net retirement benefits, and a change in accrued income taxes payable/receivable, which were partially offset by a seasonal increase in inventories and trade receivables, along with an increase in overall demand. Cash outflows from investing activities were $301 million in the first nine months of 2017, primarily due to ~~purchases of property and equipment of $374 million and~~ the cost of receivables (excluding receivables related to sales) and cost of equipment on operating leases exceeding the collections of receivables and the proceeds from sales of equipment on operating leases by $300 million. Partially offsetting these cash outflows were cash inflows from the sales of marketable securities exceeding the purchases of marketable securities by $312 million and the proceeds from the sales of businesses and unconsolidated affiliates, net of cash sold, of $114 million. Positive cash flows from financing activities were $1,656 million in the first nine months of 2017 primarily due to an increase in borrowings of $1,808 million and proceeds from issuance of common stock of $489 million (resulting from the exercise of stock options), partially offset by dividends paid of $571 million. Cash and cash equivalents increased $2,202 million during the first nine months of 2017.Wirtgen acquisition.

The Company has access to most global markets at a reasonable cost and expects to have sufficient sources of global funding and liquidity to meet its funding needs. Sources of liquidity for the Company include cash and cash equivalents, marketable securities, funds from operations, the issuance of commercial paper and term debt, the securitization of retail notes (both public and private markets), and committed and uncommitted bank lines of credit. The Company’s commercial paper outstanding at July 28, 2019, October 28, 2018, and July 29, 2018 ~~October 29, 2017, and July 30, 2017~~ was ~~$4,065~~$2,468 million, ~~$3,439~~$3,857 million, and ~~$3,190~~$4,065 million, respectively, while the total cash and cash equivalents and marketable securities position was $3,948 million, $4,394 million, and $4,412 million, ~~$9,787 million, and $6,964 million,~~ respectively. ~~The decrease of $5,375 million during the first nine months of 2018 is primarily due to the Wirtgen acquisition (see Note 18).~~ The total cash and cash equivalents and marketable securities held by foreign subsidiaries ~~in which earnings are considered indefinitely reinvested,~~ was ~~$1,623~~$2,038 million, ~~$3,386~~$2,433 million, and ~~$4,720~~$2,299 million at July 28, 2019, October 28, 2018, and July 29, 2018, ~~October 29, 2017, and July 30, 2017,~~ respectively.

Lines of Credit. The Company also has access to bank lines of credit with various banks throughout the world. Worldwide lines of credit totaled ~~$8,289~~$8,543 million at July ~~29, 2018, $3,477~~28, 2019, $5,332 million of which were unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding secured borrowings and the current portion of long-term borrowings, were primarily considered to constitute utilization. Included in the total credit lines at July ~~29, 2018 were~~28, 2019 was a 364-day credit facility ~~agreements~~agreement of ~~$750~~$2,800 million expiring in ~~October 2018 and $1,750 million expiring in~~fiscal April ~~2019.~~2020. In addition, total credit lines included long-term credit facility agreements of $2,500 million expiring in April ~~2021~~2023 and $2,500 million expiring in April ~~2022.~~2024. These credit agreements require John Deere Capital Corporation (Capital Corporation) to maintain its consolidated ratio of earnings to fixed charges at not less than 1.05 to 1 for each fiscal quarter and the ratio of senior debt, excluding securitization indebtedness, to capital base (total subordinated debt and stockholder’s equity excluding accumulated other comprehensive income (loss)) at not more than 11 to 1 at the end of any fiscal quarter. The credit agreements also require the equipment operations to maintain a ratio of total debt to total capital (total debt and stockholders’

equity excluding accumulated other comprehensive income (loss)) of 65 percent or less at the end of each fiscal quarter. Under this provision, the Company’s excess equity capacity and retained earnings balance free of restriction at July ~~29, 2018~~28, 2019 was ~~$11,470~~$13,195 million. Alternatively under this provision, the equipment operations had the capacity to incur additional debt of ~~$21,302~~$24,505 million at July ~~29, 2018.~~28, 2019. All of these requirements of the credit agreement have been met during the periods included in the financial statements.

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


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

Trade accounts and notes receivable primarily arise from sales of goods to independent dealers. Trade receivables increased ~~$2,283~~$1,754 million during the first nine months of ~~2018,~~2019, primarily due to a seasonal increase and higher shipment ~~volumes, and the Wirtgen acquisition.~~volumes. These receivables increased ~~$1,818~~$550 million, compared to a year ago, primarily due to higher shipment volumes, ~~and the Wirtgen acquisition.~~partially offset by foreign currency translation. The ratios of worldwide trade accounts and notes receivable to the last 12 months’ net sales were 1920 percent at July ~~29, 2018,~~28, 2019, compared to 15 percent at October ~~29, 2017~~28, 2018 and 1819 percent at July ~~30, 2017.~~29, 2018. Agriculture and turf trade receivables increased ~~$843~~$200 million and construction and forestry trade receivables increased ~~$975~~$350 million, compared to a year ago. The percentage of total worldwide trade receivables outstanding for periods exceeding 12 months was 1 percent at July ~~29,~~28, 2019, 2 percent at October 28, 2018, and 1 percent at ~~October~~July 29, ~~2017, and 2 percent at July 30, 2017.~~2018.

Deere & Company stockholders’ equity was $12,266 million at July 28, 2019, compared with $11,288 million at October 28, 2018 and $10,356 million at July 29, ~~2018, compared with $9,557 million at~~ ~~October 29, 2017 and $8,572 million at July 30, 2017.~~2018. The increase of ~~$799~~$978 million during the first nine months of ~~2018~~2019 resulted primarily from net income attributable to Deere & Company of ~~$1,584~~$2,532 million, an increase in common stock of $125 million, and a change in the retirement benefits adjustment of ~~$205 million, and an increase in common stock of $170~~$84 million, partially offset by ~~a change in the cumulative translation adjustment of $196 million,~~

an increase in treasury stock of ~~$353~~$809 million, ~~and~~ dividends declared of ~~$613~~$725 million, and a change in cumulative translation adjustment of $218 million.

In August 2019, a committee of the Company’s Board of Directors approved a voluntary contribution to its U.S. OPEB plan for up to $500 million, with an anticipated voluntary contribution of $300 million in the fourth quarter of 2019.

Equipment Operations

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

Cash provided by operating activities of the equipment operations, including intercompany cash flows, in the first nine months of 2019 was $1,959 million. This resulted primarily from cash inflows from net income adjusted for non-cash provisions, an increase in accounts payable and accrued expenses, and a change in net retirement benefits. Partially offsetting these operating cash inflows were cash outflows from a seasonal increase in inventories and trade receivables, along with an increase in overall demand, and a change in accrued income taxes payable/receivable. Cash, cash equivalents, and restricted cash decreased $499 million in the first nine months of 2019.

Cash provided by operating activities of the equipment operations, including intercompany cash flows, in the first nine months of 2018 was ~~$1,606~~$1,609 million. This resulted primarily from cash inflows from net income adjusted for non-cash provisions, an increase in accounts payable and accrued expenses, and a change in accrued income taxes payable/receivable. Partially offsetting these operating cash inflows were cash outflows from a seasonal increase in inventories and trade receivables, along with an increase in overall demand, and a change in net retirement benefits. Cash, ~~and~~ cash equivalents, and restricted cash decreased ~~$5,366~~$5,364 million in the first nine months of 2018, primarily due to the Wirtgen acquisition of $5,130 ~~million (see Note 18).~~

~~Cash provided by operating activities of the equipment operations, including intercompany cash flows, in the first nine months of 2017 was $1,537~~ million. This resulted primarily from cash inflows from net income adjusted for non-cash provisions, an increase in accounts payable and accrued expenses, a change in net retirement benefits, and a change in accrued income taxes payable/receivable. Partially offsetting these operating cash inflows were cash outflows from a seasonal increase in inventories and trade receivables, along with an increase in overall demand. Cash and cash equivalents increased $2,198 million in the first nine months of 2017.

Trade receivables held by the equipment operations increased ~~$710~~$232 million during the first nine months and increased ~~$827~~$20 million from a year ago. ~~The increase in both periods was due primarily to the Wirtgen acquisition.~~ The equipment operations sell a significant portion of their trade receivables to financial services. See the previous consolidated discussion of trade receivables.

Inventories increased by ~~$2,335~~$598 million during the first nine months, primarily due to ~~the Wirtgen acquisition and~~ a seasonal increase ~~partially offset by foreign currency translation.~~and higher production volumes based on increased demand. Inventories increased by ~~$1,986~~$508 million compared to a year ago, primarily due to ~~the Wirtgen acquisition and~~ higher production volumes, ~~based on increased demand,~~ partially offset by foreign currency translation. ~~Most~~A majority of these inventories are valued on the last-in, first-out (LIFO) method. The ratios of inventories on a first-in, first-out (FIFO) basis (see Note ~~12)~~13), which approximates current cost, to the last 12 months’ cost of sales were 32 percent at July 28, 2019, compared to 30 percent at October 28, 2018 and 31 percent at July 29, ~~2018, compared to 27 percent at October 29, 2017 and 30 percent at July 30, 2017.~~2018.

Total interest-bearing debt of the equipment operations was $6,789 million at July 28, 2019, compared with $6,223 million at October 28, 2018 and $6,405 million at July 29, ~~2018, compared with $5,866 million at October 29, 2017 and $4,866 million at July 30, 2017.~~2018. The ratios of debt to total capital (total interest-bearing debt and stockholders’ equity) were 3836 percent, 3836 percent, and 3638 percent at July ~~29,~~28, 2019, October 28, 2018, ~~October 29, 2017,~~ and July ~~30, 2017,~~29, 2018, respectively.

Property and equipment cash expenditures for the equipment operations in the first nine months of ~~2018~~2019 were ~~$569~~$754 million, compared with ~~$373~~$569 million in the same period last year. Capital expenditures for the equipment operations in ~~2018~~2019 are estimated to be approximately ~~$925~~$1,100 million.

On July 31, 2018, the Company announced the signing of a definitive agreement to acquire PLA, a privately-held manufacturer of sprayers, planters, and specialty products for agriculture. PLA is based in Argentina, with manufacturing facilities in Argentina and Brazil. The cash purchase price is expected to be approximately $75 million and will be funded with existing cash. The purchase is subject to regulatory approval as well as customary closing conditions and is expected to close in the fourth quarter of 2018.

Financial Services

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

During the first nine months of 2019, the cash provided by operating activities and financing activities was used primarily to increase receivables and leases. Cash flows provided by operating activities, including intercompany cash flows, were $1,836 million in the first nine months. Cash used for investing activities totaled $4,339 million in the first nine months of 2019 primarily due to an increase in trade and wholesale receivables of $2,551 million, the cost of receivables (excluding trade and wholesale) and the cost of equipment on operating leases acquired exceeding the collection of these receivables and proceeds from sales of equipment on operating leases by $1,754 million, and purchases of marketable securities exceeding proceeds from maturities and sales by $44 million. Cash

provided by financing activities totaled $2,477 million, resulting primarily from an increase in external borrowings of $2,193 million and an increase in borrowings from Deere & Company of $683 million, partially offset by dividends paid to Deere & Company of $377 million. Cash, cash equivalents, and restricted cash decreased $34 million in the first nine months of 2019.

During the first nine months of 2018, the cash provided by operating activities and financing activities was used primarily to increase receivables and leases. Cash flows provided by operating activities, including intercompany cash flows, were $1,341 million in the first nine months. Cash used for investing activities totaled ~~$4,078~~$4,105 million in the first nine months of 2018 primarily due to an increase in trade and wholesale receivables of $2,330 million and the cost of receivables (excluding trade and wholesale) and the cost of equipment on operating leases acquired exceeding the collection of these receivables and proceeds from sales of equipment on operating leases by $1,658 million. Cash provided by financing activities totaled $2,708 million, resulting primarily from an increase in external borrowings of $2,390 million and an increase in borrowings from Deere & Company of $797 million, partially offset by dividends paid to Deere & Company of $454 million. Cash, ~~and~~ cash equivalents, and restricted cash decreased ~~$46~~$74 million in the first nine months of 2018.

During the first nine months of 2017, the cash provided by operating activities was used primarily to increase receivables and leases. Cash flows provided by operating activities, including intercompany cash flows, were $1,384 million in the first nine months of 2017. Cash used for investing activities totaled $2,176 million in the first nine months of 2017 primarily due to the cost of receivables (excluding trade and wholesale) and equipment on operating leases acquired exceeding the collection of these receivables and proceeds from sales of equipment on operating leases by $1,100 million and an increase in trade and wholesale receivables of $1,071 million. Cash provided by financing activities totaled $790 million, resulting primarily from an increase in external borrowings of $1,745 million, partially offset by a decrease in borrowings from Deere & Company of $635 million and dividends paid to Deere & Company of $320 million. Cash and cash equivalents increased $4 million in the first nine months of 2017.

Receivables and leases held by the financial services operations consist of retail notes originated in connection with retail sales of new and used equipment by dealers of John Deere products, retail notes from non-Deere equipment customers, trade receivables, wholesale notes, revolving charge accounts, credit enhanced international export financing generally involving John Deere products, and financing and operating leases. Total receivables and leases increased ~~$2,600~~$3,193 million during the first nine months of ~~2018~~2019 and increased ~~$2,881~~$3,579 million in the past 12 months. Acquisition volumes of receivables (excluding trade and wholesale) and leases were 114 percent higher in the first nine months of ~~2018,~~2019, compared with the same period last year, as volumes of retail notes and revolving charge

accounts were higher, while volumes of operating and financing leases ~~and operating leases~~ were ~~all higher.~~lower. The amount of total trade receivables and wholesale notes increased compared to both October ~~29, 2017~~28, 2018 and July ~~30, 2017.~~29, 2018. Total receivables and leases administered by the financial services operations, which include receivables administered but not owned, amounted to $46,177 million at July 28, 2019, compared with $42,985 million at October 28, 2018 and $42,598 million at July 29, 2018, compared with $40,001 million at October 29, 2017 and $39,721 million at July 30, 2017. At July 29, 2018, the unpaid balance of all receivables administered, but not owned, was $7 million, compared with $10 million at October 29, 2017 and $11 million at July 30, 2017.2018.

Total external interest-bearing debt of the financial services operations was $38,643 million at July 28, 2019, compared with $36,033 million at October 28, 2018 and $35,965 million at July 29, ~~2018, compared with $34,179 million at October 29, 2017 and $32,608 million at July 30, 2017.~~2018. Total external borrowings have changed generally corresponding with the level of receivable and lease portfolio, the level of cash and cash equivalents, the change in payables owed to Deere & Company, and the change in investment from Deere & Company. The financial services operations’ ratio of interest-bearing debt to stockholder’s equity was 8.0 to 1 at July 28, 2019, compared with 7.5 to 1 at October 28, 2018 and 7.8 to 1 at July 29, ~~2018, compared with 7.6 to 1 at October 29, 2017 and 7.7 to 1 at July 30, 2017.~~2018.

Capital Corporation has a revolving credit agreement to utilize bank conduit facilities to securitize retail notes (see Note ~~11)~~12). At July ~~29, 2018,~~28, 2019, this facility had a total capacity, or “financing limit,” of $3,500 million of secured financings at any time. After a two-year revolving period, unless the banks and Capital Corporation agree to renew, Capital Corporation would liquidate the secured borrowings over time as payments on the retail notes are collected. At July ~~29, 2018, $1,579~~28, 2019, $1,681 million of secured short-term borrowings was outstanding under the agreement.

In the first nine months of ~~2018,~~2019, the financial services operations issued ~~$2,601~~$3,310 million and retired ~~$2,280~~$2,194 million of retail note securitization borrowings. In addition, during the first nine months of ~~2018,~~2019, the financial services operations issued ~~$5,580~~$6,572 million and retired ~~$4,254~~$4,162 million of long-term borrowings, which were primarily medium-term notes.

Dividends

The Company’s Board of Directors at its meeting on August ~~29, 2018~~27, 2019 declared a quarterly dividend of ~~$.69~~$.76 per share payable November ~~1, 2018,~~8, 2019, to stockholders of record on September ~~28, 2018.~~30, 2019.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the Company’s most recent annual report filed 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 ~~29, 2018,~~28, 2019, 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, there were no changes that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability), retail credit, employment, patent, and trademark matters. Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that the Company reasonably believes could exceed $100,000. The following ~~matters are~~matter is disclosed solely pursuant to that requirement: ~~(a)~~ on ~~July 6, 2017, after self-reporting to~~October 3, 2018, the ~~Iowa Department of Natural Resources, the Company received~~Provincia Santa Fe Ministerio de Medio Ambiente issued a Notice of Violation ~~alleging that one Iowa facility location exceeded permitted emission limits.~~to Industrias John Deere Argentina in connection with alleged groundwater contamination at the site; the Company continues to work with the appropriate authorities to implement corrective actions to remediate the site. The Company ~~responded~~believes the reasonably possible range of losses for this and ~~is actively cooperating with the Iowa Department of Natural Resources to revise the permits and resolve the notice; and (b)~~other unresolved legal actions would not have a material effect on its financial statements. As reported previously, on March 19, 2018, the Secretaria de Estado de Meio Ambiente e Desenvolvimento Sustentável in Minas Gerais, Brazil issued a fine ~~of approximately $105,000 at current exchange rates~~ against John Deere Equipamentos do Brasil in connection with an oil spill that occurred after an April 2016 roadway accident involving a Company truck. ~~An administrative defense has been filed to cancel the fine.~~ The Company ~~believes~~paid approximately $120,000 (based on exchange rates), representing the ~~reasonably possible range~~full amount of ~~losses for these~~such fine (including interest) to settle and ~~other unresolved legal actions would not have a material effect on its financial statements.~~dismiss the proceeding.

Item 1A.Risk Factors

See the Company’s most recent annual report filed 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 “Safe Harbor Statement” 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

The Company’s purchases of its common stock during the third quarter of ~~2018~~2019 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)	Paid Per Share		(thousands)	(millions)
Apr 29 to May 26	626	$	148.28	626	10.3
May 27 to Jun 23	1,322		147.22	1,322	9.2
Jun 24 to Jul 28	682		164.49	682	8.5
Total	2,630			2,630

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)

Paid Per Share

(thousands)

(millions)

Apr 30 to May 27

22.8

May 28 to Jun 24

626

$
147.52

626

22.1

Jun 25 to Jul 29

2,153

139.82

2,153

20.0

Total

2,779

2,779

(1)

During the third quarter of ~~2018,~~2019, the Company had a share repurchase plan that was announced in December 2013 to purchase up to $8,000 million of shares of the Company’s common stock. The maximum number of shares that may yet be purchased under these plans was based on the end of the third quarter closing share price of ~~$140.80~~$170.39 per share. At the end of the third quarter of ~~2018, $2,815~~2019, $1,448 million of common stock remained to be purchased under the plans.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

Item 6.Exhibits

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



3.1	Certificate of Incorporation ~~as amended~~ ~~(Exhibit 3.1 to Form 8-K of registrant dated February 26, 2010*)~~

3.2	Bylaws, as amended (Exhibit ~~3.1~~3.2 to Form ~~8-K~~10-Q of registrant dated September 1, 2016February 27, 2019)

12	~~Computation of ratio of earnings to fixed charges~~

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

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

32	Section 1350 Certifications

~~101~~101.SCH	~~Interactive Data File~~Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

*Incorporated by reference. Copies of these exhibits are available from the Company upon request.

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 ~~30, 2018~~29, 2019	By:	/s/ ~~R. Kalathur~~Ryan D. Campbell
			~~R. Kalathur~~Ryan D. Campbell Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

5354


DEERE & COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
For the Three Months Ended July 29, 2018 and July 30, 2017
(In millions of dollars) Unaudited
	2018		2017

Net Income	$	911.3	$	642.3

Other Comprehensive Income (Loss), Net of Income Taxes
Retirement benefits adjustment		40.2		44.0
Cumulative translation adjustment		(421.3)		326.1
Unrealized loss on derivatives		(.9)		(.5)
Unrealized gain (loss) on investments		1.3		(53.7)
Other Comprehensive Income (Loss), Net of Income Taxes		(380.7)		315.9

Comprehensive Income of Consolidated Group		530.6		958.2
Less: Comprehensive income attributable to noncontrolling interests		.4		.7
Comprehensive Income Attributable to Deere & Company	$	530.2	$	957.5


DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Nine Months Ended July 29, 2018 and July 30, 2017
(In millions of dollars and shares except per share amounts) Unaudited
	2018		2017
Net Sales and Revenues
Net sales	$	25,007.4	$	18,790.7
Finance and interest income		2,263.2		2,009.3
Other income		671.2		920.0
Total		27,941.8		21,720.0

Costs and Expenses
Cost of sales		19,190.5		14,457.8
Research and development expenses		1,187.7		974.2
Selling, administrative and general expenses		2,557.0		2,250.0
Interest expense		881.0		651.3
Other operating expenses		1,033.8		999.5
Total		24,850.0		19,332.8

Income of Consolidated Group before Income Taxes		3,091.8		2,387.2
Provision for income taxes		1,523.4		748.7
Income of Consolidated Group		1,568.4		1,638.5
Equity in income of unconsolidated affiliates		17.8		10.0
Net Income		1,586.2		1,648.5
Less: Net income (loss) attributable to noncontrolling interests		2.6		(.3)
Net Income Attributable to Deere & Company	$	1,583.6	$	1,648.8

Per Share Data
Basic	$	4.90	$	5.17
Diluted	$	4.82	$	5.11

Average Shares Outstanding
Basic		323.4		318.8
Diluted		328.2		322.5


	Three Months Ended July 30, 2017
			Revolving
	Retail		Charge
	Notes		Accounts		Other		Total
Allowance:
Beginning of period balance	$	111	$	43	$	23	$	177
Provision		21		18		3		42
Write-offs		(15)		(26)		(1)		(42)
Recoveries		5		5				10
Translation adjustments		1				1		2
End of period balance *	$	123	$	40	$	26	$	189

	Nine Months Ended July 30, 2017
Allowance:
Beginning of period balance	$	113	$	40	$	23	$	176
Provision		38		32		6		76
Write-offs		(41)		(47)		(4)		(92)
Recoveries		13		15				28
Translation adjustments						1		1
End of period balance *	$	123	$	40	$	26	$	189
Financing receivables:
End of period balance	$	20,241	$	3,454	$	5,139	$	28,834
Balance individually evaluated **	$	144	$	1	$	27	$	172


	Fair Value *				Losses
					Three Months Ended		Nine Months Ended
	July 29	October 29		July 30	July 29	July 30	July 29	July 30
	2018	2017		2017	2018	2017	2018	2017
Investments in unconsolidated affiliates		$	28


	Expense or	Three Months Ended				Nine Months Ended
	OCI	July 29		July 30		July 29		July 30
	Classification	2018		2017		2018		2017
Fair Value Hedges:
Interest rate contracts	Interest	$	(10)	$	21	$	(264)	$	(133)

Cash Flow Hedges:
Recognized in OCI
(Effective Portion):
Interest rate contracts	OCI (pretax) *		1		(2)		15
Foreign exchange contracts	OCI (pretax) *						1		(2)

Reclassified from OCI
(Effective Portion):
Interest rate contracts	Interest *		2		(1)		3		(2)
Foreign exchange contracts	Other operating *								(2)

Recognized Directly in Income
(Ineffective Portion)			**		**		**		**

Not Designated as Hedges:
Interest rate contracts	Interest *	$	(3)	$	11	$	(3)	$	11
Foreign exchange contracts	Cost of sales		(10)		(29)		(22)		(41)
Foreign exchange contracts	Other operating *		144		(192)		92		(205)
Total not designated		$	131	$	(210)	$	67	$	(235)


Trade accounts and notes receivable	$	457
Financing receivables		43
Financing receivables securitized		125
Other receivables		100
Inventories		1,538
Property and equipment		750
Goodwill		2,067
Other intangible assets		1,458
Deferred income taxes		96
Other assets		221
Total assets	$	6,855

Short-term borrowings	$	285
Short-term securitization borrowings		127
Accounts payable and accrued expenses		726
Deferred income taxes		501
Long-term borrowings		50
Retirement benefits and other liabilities		28
Total liabilities	$	1,717

Noncontrolling interests	$	8

Weighted-Average
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