Edgar Filing: DEERE & CO

Three Months Ended
January 31

Interest rate contracts *

Borrowings **





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

		FORM 10-Q


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

For the quarterly period ended January 31, 2010

	Commission file no: 1-4121

	DEERE & COMPANY
Delaware			36-2382580
(State of incorporation)			(IRS employer identification no.)
	One John Deere Place
	Moline, Illinois 61265
(Address of principal executive offices)
Telephone Number: (309) 765-8000

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	X	Accelerated Filer


Non-Accelerated Filer		Smaller Reporting Company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

At January 31, 2010, 424,008,363 shares of common stock, $1 par value, of the registrant were outstanding.

Index to Exhibits: Page 40

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEERE & COMPANY
STATEMENT OF CONSOLIDATED INCOME
For the Three Months Ended January 31, 2010 and 2009
(In millions of dollars and shares except per share amounts) Unaudited

	2010			2009

Net Sales and Revenues
Net sales	$	4,237.3		$	4,560.2
Finance and interest income	467.2			466.6
Other income	130.3			119.1
Total	4,834.8			5,145.9

Costs and Expenses
Cost of sales	3,205.5			3,542.5
Research and development expenses	235.7			219.4
Selling, administrative and general expenses	642.1			638.9
Interest expense	218.5			274.5
Other operating expenses	168.7			196.8
Total	4,470.5			4,872.1

Income of Consolidated Group
before Income Taxes	364.3			273.8
Provision for income taxes	109.9			73.5
Income of Consolidated Group	254.4			200.3
Equity in income (loss) of unconsolidated affiliates	(8.8		)	3.7
Net Income	245.6			204.0
Less: Net income attributable to noncontrolling interests	2.4			.1
Net Income Attributable to Deere & Company	$	243.2		$	203.9

Per Share Data
Basic	$	.57		$	.48
Diluted	$	.57		$	.48

Average Shares Outstanding
Basic	423.6			422.5
Diluted	427.5			423.7

See Condensed Notes to Interim Financial Statements.

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

	January 31			October 31			January 31
	2010			2009			2009

Assets
Cash and cash equivalents	$	5,043.3		$	4,651.7		$	5,004.1
Marketable securities	206.4			192.0			230.5
Receivables from unconsolidated affiliates	38.4			38.4			45.3
Trade accounts and notes receivable - net	3,120.5			2,616.9			3,475.4
Financing receivables - net	14,686.7			15,254.7			13,379.3
Restricted financing receivables - net	2,603.9			3,108.4			3,268.9
Other receivables	774.5			864.5			688.8
Equipment on operating leases - net	1,613.1			1,733.3			1,543.7
Inventories	2,752.5			2,397.3			3,836.6
Property and equipment - net	4,424.8			4,532.2			4,149.4
Investments in unconsolidated affiliates	220.4			212.8			213.7
Goodwill	1,010.1			1,036.5			1,241.0
Other intangible assets - net	130.6			136.3			152.0
Retirement benefits	124.0			94.4			1,131.8
Deferred income taxes	2,750.2			2,804.8			1,419.9
Other assets	1,281.3			1,458.4			1,559.2
Total Assets	$	40,780.7		$	41,132.6		$	41,339.6

Liabilities and Stockholders’ Equity
Short-term borrowings	$	7,679.4		$	7,158.9		$	9,333.2
Payables to unconsolidated affiliates	77.4			55.0			118.6
Accounts payable and accrued expenses	4,777.3			5,371.4			5,524.5
Deferred income taxes	155.4			167.3			166.2
Long-term borrowings	17,090.6			17,391.7			16,574.7
Retirement benefits and other liabilities	6,014.6			6,165.5			3,062.7

Total liabilities	35,794.7			36,309.8			34,779.9

Commitments and contingencies (Note 12)

Common stock, $1 par value (issued shares at
January 31, 2010 – 536,431,204)	3,040.1			2,996.2			2,968.2
Common stock in treasury	(5,540.8		)	(5,564.7		)	(5,582.7		)
Retained earnings	11,105.0			10,980.5			10,666.1
Accumulated other comprehensive income (loss)	(3,624.7		)	(3,593.3		)	(1,496.7		)
Total Deere & Company stockholders’ equity	4,979.6			4,818.7			6,554.9
Noncontrolling interests	6.4			4.1			4.8
Total stockholders’ equity	4,986.0			4,822.8			6,559.7

Total Liabilities and Stockholders’ Equity	$	40,780.7		$	41,132.6		$	41,339.6

See Condensed Notes to Interim Financial Statements.

DEERE & COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Three Months Ended January 31, 2010 and 2009
(In millions of dollars) Unaudited

	2010			2009

Cash Flows from Operating Activities
Net income	$	245.6		$	204.0
Adjustments to reconcile net income to net cash used for operating activities:
Provision for doubtful receivables	25.9			40.0
Provision for depreciation and amortization	241.4			216.9
Share-based compensation expense	40.1			45.7
Undistributed earnings of unconsolidated affiliates	8.7			(3.9		)
Provision for deferred income taxes	39.3			29.9
Changes in assets and liabilities:
Trade, notes and financing receivables related to sales	(205.6		)	(283.0		)
Inventories	(348.2		)	(874.0		)
Accounts payable and accrued expenses	(416.9		)	(882.4		)
Accrued income taxes payable/receivable	4.8			(12.9		)
Retirement benefits	(48.7		)	6.7
Other	95.3			(102.5		)
Net cash used for operating activities	(318.3		)	(1,615.5		)

Cash Flows from Investing Activities
Collections of receivables	3,211.8			3,381.2
Proceeds from sales of financing receivables	.2			5.7
Proceeds from maturities and sales of marketable securities	3.5			764.4
Proceeds from sales of equipment on operating leases	158.9			117.9
Proceeds from sales of businesses, net of cash sold	5.7
Cost of receivables acquired	(2,697.7		)	(2,613.8		)
Purchases of marketable securities	(18.5		)	(7.9		)
Purchases of property and equipment	(162.7		)	(262.1		)
Cost of equipment on operating leases acquired	(54.5		)	(74.6		)
Acquisitions of businesses, net of cash acquired	(18.7		)	(40.9		)
Other	(55.5		)	1.9
Net cash provided by investing activities	372.5			1,271.8

Cash Flows from Financing Activities
Increase in short-term borrowings	571.6			1,157.1
Proceeds from long-term borrowings	335.1			2,842.2
Payments of long-term borrowings	(461.6		)	(653.1		)
Proceeds from issuance of common stock	24.5			3.1
Repurchases of common stock	(3.8		)	(3.2		)
Dividends paid	(118.5		)	(118.2		)
Excess tax benefits from share-based compensation	6.8			.5
Other	(8.3		)	(96.0		)
Net cash provided by financing activities	345.8			3,132.4

Effect of Exchange Rate Changes on Cash and Cash Equivalents	(8.4		)	4.0

Net Increase in Cash and Cash Equivalents	391.6			2,792.7
Cash and Cash Equivalents at Beginning of Period	4,651.7			2,211.4
Cash and Cash Equivalents at End of Period	$	5,043.3		$	5,004.1

See Condensed Notes to Interim Financial Statements.

DEERE & COMPANY

STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

For the Three Months Ended January 31, 2009 and 2010

(In millions of dollars)

				Deere & Company Stockholders
	Total Stockholders’ Equity			Comprehensive Income (Loss)			Common Stock		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- Controlling Interests

Balance October 31, 2008	$	6,537.2					$	2,934.0	$	(5,594.6	)	$	10,580.6		$	(1,387.3	)	$	4.5
Net income	204.0			$	203.9							203.9						.1
Other comprehensive income (loss)
Retirement benefits adjustment	10.5			10.5											10.5
Cumulative translation adjustment	(92.8		)	(93.1		)									(93.1		)	.3
Unrealized loss on derivatives	(32.4		)	(32.4		)									(32.4		)
Unrealized gain on investments	5.6			5.6											5.6
Comprehensive income	94.9			$	94.5													.4

Repurchases of common stock	(3.2		)						(3.2		)
Treasury shares reissued	15.1								15.1
Dividends declared	(118.3		)									(118.3		)
Stock options and other	34.0						34.2					(.1		)				(.1		)
Balance January 31, 2009	$	6,559.7					$	2,968.2	$	(5,582.7	)	$	10,666.1		$	(1,496.7	)	$	4.8



Balance October 31, 2009	$	4,822.8					$	2,996.2	$	(5,564.7	)	$	10,980.5		$	(3,593.3	)	$	4.1
Net income	245.6			$	243.2							243.2						2.4
Other comprehensive income (loss)
Retirement benefits adjustment	71.8			71.8											71.8
Cumulative translation adjustment	(109.9		)	(109.8		)									(109.8		)	(.1		)
Unrealized gain on derivatives	6.3			6.3											6.3
Unrealized gain on investments	.3			.3											.3
Comprehensive income	214.1			$	211.8													2.3

Repurchases of common stock	(3.8		)						(3.8		)
Treasury shares reissued	27.7								27.7
Dividends declared	(118.7		)									(118.7		)
Stock options and other	43.9						43.9
Balance January 31, 2010	$	4,986.0					$	3,040.1	$	(5,540.8	)	$	11,105.0		$	(3,624.7	)	$	6.4

See Condensed Notes to Interim Financial Statements.

Condensed Notes to Interim Financial Statements (Unaudited)

(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.

Financial Services - Includes the Company’s credit and certain miscellaneous service operations.

Consolidated - Represents the consolidation of the Equipment Operations and Financial Services. References to “Deere & Company” or “the Company” refer to the entire enterprise.

Variable Interest Entities

The Company is the primary beneficiary of and consolidates a supplier that is a variable interest entity (VIE). The Company would absorb more than a majority of the VIE’s expected losses based on a cost sharing supply contract. No additional support beyond what was previously contractually required has been provided during any periods presented. The VIE produces blended fertilizer and other lawn care products for the agriculture and turf segment.

The assets and liabilities of this supplier VIE consisted of the following in millions of dollars:

	January 31 2010		October 31 2009		January 31 2009
Intercompany receivables	$	9	$	32	$	26
Inventory	63		36		79
Property and equipment	5		5		6
Other assets	6		3		3
Total assets	$	83	$	76	$	114

Accounts payable and accrued expenses	$	72	$	59	$	101
Short-term borrowings	15		23		25
Total liabilities	$	87	$	82	$	126

The VIE is financed through its own accounts payable and short-term borrowings. The assets of the VIE can only be used to settle the obligations of the VIE. The creditors of the VIE do not have recourse to the general credit of the Company.

The Company is the primary beneficiary of and consolidates certain wind energy entities that are VIEs, which invest in wind farms that own and operate turbines to generate electrical energy. Although the Company owns less than a majority of the equity voting rights, it owns most of the financial rights that would absorb the VIEs’ expected losses or returns. No additional support to the VIEs beyond what was previously contractually required has been provided during any periods presented.

The assets and liabilities of these wind energy VIEs consisted of the following in millions of dollars:

	January 31 2010		October 31 2009		January 31 2009
Receivables	$	31	$	32	$	2
Property and equipment	139		141		162
Other assets	1		1		1
Total assets	$	171	$	174	$	165

Intercompany borrowings	$	53	$	55	$	57
Accounts payable and accrued expenses	8		6		9
Total liabilities	$	61	$	61	$	66

The VIEs are financed primarily through intercompany borrowings and equity. The VIE’s assets are pledged as security interests for the intercompany borrowings. The remaining creditors of the VIEs do not have recourse to the general credit of the Company.

See Note 9 for VIEs related to securitization of financing receivables.

(2) The consolidated financial statements of Deere & Company and consolidated subsidiaries 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 financial statements be read in conjunction with the 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.

Certain items previously reported in specific financial statement captions in previous periods have been reclassified to conform to the first quarter of 2010 financial statement presentation as a result of the adoption of the guidance in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation (FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements) (See Note 3).

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 $45 million and $34 million in the first three months of 2010 and 2009, respectively. The Company also had accounts payable related to purchases of property and equipment of approximately $25 million and $118 million at January 31, 2010 and 2009, respectively.

(3) New accounting standards adopted in the first three months of 2010 were as follows:

In the first quarter of 2010, the Company adopted FASB ASC 810, Consolidation (FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements). ASC 810 requires that noncontrolling interests are reported as a separate line in stockholders’ equity. The net income for both Deere & Company and the noncontrolling interests are included in “Net Income.” The “Net income attributable to the noncontrolling interests” is deducted from “Net Income” to determine the “Net Income Attributable to Deere & Company,” which will continue to be used to determine earnings per share. ASC 810 also requires certain prospective changes in accounting for noncontrolling interests primarily related to increases and decreases in ownership and changes in control. As required, the presentation and disclosure requirements were adopted through retrospective application, and the consolidated financial statement prior period information has been adjusted accordingly. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2010, the Company adopted FASB ASC 805, Business Combinations (FASB Statement No. 141 (revised 2007), Business Combinations). ASC 805 requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition such as contingencies and research and development. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2010, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures (FASB Statement No. 157, Fair Value Measurements), for nonrecurring measurements of nonfinancial assets and liabilities. The standard requires that these measurements comply with certain guidance for fair value measurements and the disclosure of such measurements. The adoption did not have a material effect on the Company’s consolidated financial statements.

In the first quarter of 2010, the Company adopted FASB ASC 260, Earnings Per Share (FASB Staff Position (FSP) Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities). Based on this guidance, the Company’s nonvested restricted stock awards are considered participating securities since they contain nonforfeitable dividend equivalent rights. The diluted earnings per share are reported as the most dilutive of either the two-class method or the treasury stock method. This requires the Company to compute earnings per share on the two-class method. The adoption did not have a material effect on the Company’s consolidated financial statements (see Note 5).

In the first quarter of 2010, the Company adopted FASB Accounting Standards Update (ASU) No. 2010-09, Amendments to Certain Recognition and Disclosure Requirements, which amends ASC 855, Subsequent Events. This ASU removes the requirement for a SEC filer to disclose a date through which subsequent events have been evaluated. This change removes potential conflicts with SEC requirements. The adoption did not have a material effect on the Company’s consolidated financial statements.

New accounting standards to be adopted are as follows:

In December 2008, the FASB issued ASC 715, Compensation-Retirement Benefits (FSP Financial Accounting Statement (FAS) 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets). ASC 715 requires additional disclosures relating to how investment allocation decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, the levels within the fair value hierarchy in which the measurements fall, a reconciliation of the beginning and ending balances for Level 3 measurements, the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period and significant concentrations of risk within plan assets. The effective date is the end of fiscal year 2010. The adoption will not have a material effect on the Company’s consolidated financial statements.

In December 2009, the FASB issued ASU No. 2009-16, Accounting for Transfers of Financial Assets, which amends ASC 860, Transfers and Servicing (FASB Statement No. 166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140). This ASU eliminates the qualifying special purpose entities from the consolidation guidance and clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. It requires additional disclosures about the risks from continuing involvement in transferred financial assets accounted for as sales. The effective date is the beginning of fiscal year 2011. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2009, the FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amends ASC 810, Consolidation (FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R)). This ASU requires a qualitative analysis to determine the primary beneficiary of a VIE. The analysis identifies the primary beneficiary as the enterprise that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. The ASU also requires additional disclosures about an enterprise’s involvement in a VIE. The effective date is the beginning of fiscal year 2011. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements, which amends ASC 820, Fair Value Measurements and Disclosures. This ASU requires disclosures of transfers into and out of Levels 1 and 2, more detailed roll forward reconciliations of Level 3 recurring fair value measurements on a gross basis, fair value information by class of assets and liabilities, and descriptions of valuation techniques and inputs for Level 2 and 3 measurements. The effective date is the second quarter of fiscal year 2010 except for the roll forward reconciliations, which are required in the first quarter of fiscal year 2012. The adoption will not have a material effect on the Company’s consolidated financial statements.

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

	Three Months Ended January 31
	2010		2009
Dividends declared	$	.28	$	.28
Dividends paid	$	.28	$	.28

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

	Three Months Ended January 31
		2010		2009
Net income attributable to Deere & Company		$	243.2	$	203.9
Less income allocable to participating securities (see Note 3) *		.1
Income allocable to common stock		$	243.1	$	203.9
Average shares outstanding		423.6		422.5
Basic per share		$	.57	$	.48

Average shares outstanding		423.6		422.5
Effect of dilutive stock options		3.9		1.2
Total potential shares outstanding		427.5		423.7
Diluted per share		$	.57	$	.48

Out of the total stock options outstanding during the first quarter of 2010 and 2009, options to purchase 1.9 million shares and 9.4 million shares, respectively, were excluded from the above diluted per share computation because the incremental shares under the treasury stock method for the exercise of these options would have been antidilutive.

* Effect on prior periods was not material.

(6) The Company has several defined benefit pension plans covering its U.S. employees and employees in certain foreign countries. The Company also has several defined benefit postretirement health care and life insurance plans for employees in the U.S. and Canada.

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

	Three Months Ended January 31
		2010			2009
Service cost		$	44		$	29
Interest cost		131			139
Expected return on plan assets		(190		)	(184		)
Amortization of actuarial loss		29			2
Amortization of prior service cost		10			7
Settlements/curtailments		1
Early-retirement benefits					2
Net cost (income)		$	25		$	(5	)

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

	Three Months Ended January 31
	2010			2009
Service cost	$	12		$	8
Interest cost	85			83
Expected return on plan assets	(30		)	(30		)
Amortization of actuarial loss	84			10
Amortization of prior service credit	(4		)	(3		)
Early-retirement benefits				1
Net cost	$	147		$	69

During the first quarter of 2010, the Company contributed approximately $170 million to its pension plans and $37 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $339 million to its pension plans and $40 million to its other postretirement benefit plans during the remainder of fiscal year 2010. These contributions include payments from Company funds to either increase plan assets or make direct payments to plan participants.

(7) The Company’s unrecognized tax benefits at January 31, 2010 were $172 million of which approximately $63 million would affect the effective tax rate if they were recognized. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. Based on worldwide tax audits which closed, the Company had changes related to transfer pricing that caused a decrease of approximately $15 million for settlements, a decrease of $110 million for positions taken during prior years and an increase of approximately $47 million for positions taken during prior years. These changes in unrecognized tax benefits did not have a material impact on the effective tax rate due to compensating adjustments to related tax receivables. Other changes to the unrecognized tax benefits were not significant.

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


			Three Months Ended January 31
									%
			2010			2009			Change

	Net sales and revenues: *
	Agriculture and turf *****		$	3,607		$	3,819		-6
	Construction and forestry		630			741			-15
		Total net sales **	4,237			4,560			-7
	Credit revenues		483			474			+2
	Other revenues		115			112			+3
		Total net sales and revenues **	$	4,835		$	5,146		-6

	Operating profit (loss):***
	Agriculture and turf *****		$	352		$	289		+22
	Construction and forestry		(37		)	18
	Credit		94			53			+77
	Other		7			4			+75
		Total operating profit **	416			364			+14
	Other reconciling items ****		(173		)	(160		)	+8
		Net income attributable to Deere & Company	$	243		$	204		+19

	Identifiable assets:
	Agriculture and turf *****		$	6,714		$	7,748		-13
	Construction and forestry		2,084			2,318			-10
	Credit		25,695			26,748			-4
	Other		272			271
	Corporate		6,016			4,255			+41
		Total assets	$	40,781		$	41,340		-1

*		Additional intersegment sales and revenues
		Agriculture and turf net sales *****	$	13		$	8		+63
		Construction and forestry net sales	1			1
		Credit revenues	52			68			-24

**		Includes equipment operations outside the U.S. and Canada as follows:
		Net sales	$	1,711		$	1,817		-6
		Operating profit	118			79			+49

***		Operating profit (loss) 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 credit segment includes the effect of interest expense and foreign exchange gains and losses.

****		Other reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, income taxes and net income attributable to noncontrolling interests.

*****		At the beginning of the third quarter of 2009, the Company combined the agricultural equipment and the commercial and consumer equipment organizations and internal reporting. As a result, these two segments have been combined into the agriculture and turf segment for the first three months ended January 31, 2009.

(9) Securitization of 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) as part of its asset-backed securities programs (securitizations). The structure of these transactions is such that the transfer of the retail notes does not meet the criteria of 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. For bankruptcy analysis purposes, the Company has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Use of the assets held by the SPEs is restricted by terms of the documents governing the securitization transaction.

In securitizations of retail notes related to secured borrowings, the retail notes are transferred to certain SPEs which in turn issue debt to investors. The resulting secured borrowings are included in short-term borrowings on the balance sheet. The securitized retail notes are recorded as “Restricted financing receivables – net” on the balance sheet. The total restricted assets on the balance sheet related to these securitizations include the restricted financing receivables less an allowance for credit losses, and other assets primarily representing restricted cash. The SPEs supporting the secured borrowings to which the retail notes are transferred are consolidated unless the Company is not the primary beneficiary. No additional support to these SPEs beyond what was previously contractually required has been provided during the reporting periods.

In certain securitizations, the Company is the primary beneficiary of the SPEs and, as such, consolidates the entities. The restricted assets (retail notes, allowance for credit losses and other assets) of the consolidated SPEs totaled $1,842 million, $2,157 million and $1,517 million at January 31, 2010, October 31, 2009 and January 31, 2009, respectively. The liabilities (short-term borrowings and accrued interest) of these SPEs totaled $1,827 million, $2,133 million and $1,518 million at January 31, 2010, October 31, 2009 and January 31, 2009, respectively. The credit holders of these SPEs do not have legal recourse to the Company’s general credit.

In other securitizations, the Company transfers retail notes into bank-sponsored, multi-seller, commercial paper conduits, which are SPEs that are not consolidated. The Company is not considered to be the primary beneficiary of these conduits, because the Company’s variable interests in the conduits will not absorb a majority of the conduits’ expected losses, residual returns, or both. This is primarily due to these interests representing significantly less than a majority of the conduits’ total assets and liabilities. 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 interests related to these conduits were restricted assets (retail notes, allowance for credit losses and other assets) of $867 million, $1,059 million and $1,835 million at January 31, 2010, October 31, 2009 and January 31, 2009, respectively. The liabilities (short-term borrowings and accrued interest) related to these conduits were $848 million, $1,004 million and $1,778 million at January 31, 2010, October 31, 2009 and January 31, 2009, 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:

	January 31, 2010

Carrying value of liabilities	$	848
Maximum exposure to loss	867

The assets of unconsolidated conduits related to securitizations in which the Company’s variable interests were considered significant were approximately $31 billion at January 31, 2010.

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

	January 31 2010			October 31 2009			January 31 2009
Restricted financing receivables (retail notes)	$	2,630		$	3,133		$	3,281
Allowance for credit losses	(26		)	(25		)	(12		)
Other assets	105			108			83
Total restricted securitized assets	$	2,709		$	3,216		$	3,352

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

	January 31 2010		October 31 2009		January 31 2009
Short-term borrowings	$	2,673	$	3,132	$	3,292
Accrued interest on borrowings	2		5		4
Total liabilities related to restricted securitized assets	$	2,675	$	3,137	$	3,296

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 restricted collection account until immediately prior to the time payment is required to the secured creditors. At January 31, 2010, the maximum remaining term of all restricted receivables was approximately five years.

(10) Most inventories owned by Deere & Company and its U.S. 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:

	January 31 2010		October 31 2009		January 31 2009
Raw materials and supplies	$	993	$	940	$	1,346
Work-in-process	448		387		581
Finished goods and parts	2,700		2,437		3,242
Total FIFO value	4,141		3,764		5,169
Less adjustment to LIFO basis	1,388		1,367		1,332
Inventories	$	2,753	$	2,397	$	3,837

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

	Agriculture and Turf			Construction and Forestry			Total
Balance October 31, 2009:
Goodwill	$	698		$	628		$	1,326
Less accumulated impairment losses	289						289
Goodwill-net	409			628			1,037

Translation adjustments	(4		)	(22		)	(26		)
Other				(1		)	(1		)

Balance January 31, 2010:
Goodwill	694			605			1,299
Less accumulated impairment losses	289						289
Goodwill-net	$	405		$	605		$	1,010

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

	Useful Lives * Years	January 31 2010
Amortized intangible assets:
Customer lists and relationships	13	$	96
Technology, patents, trademarks and other	15	98
Total at cost		194
Less accumulated amortization		63		**
Other intangible assets-net		$	131

* Weighted-averages

** Accumulated amortization for customer lists and relationships totaled $37 million and technology, patents and trademarks totaled $26 million.

The amortization of other intangible assets in the first quarter of 2010 was $5 million. The estimated amortization expense for the next five years is as follows in millions of dollars: remainder of 2010 - $13, 2011 - $15, 2012 - $14, 2013 - $13 and 2014 - $12.

(12) Commitments and contingencies:

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

The premiums for extended warranties are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. These unamortized warranty premiums (deferred revenue) included in the following table totaled $208 million and $225 million at January 31, 2010 and 2009, respectively.

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

	Three Months Ended January 31
	2010			2009
Balance, beginning of period	$	727		$	814
Payments	(136		)	(124		)
Amortization of premiums received	(24		)	(26		)
Accruals for warranties	122			117
Premiums received	19			23
Foreign exchange	(8		)	(3		)
Balance, end of period	$	700		$	801

At January 31, 2010, the Company had approximately $167 million of guarantees issued primarily to banks outside the U.S. and Canada related to third-party receivables for the retail financing of John Deere equipment. The Company may recover a portion of any required payments incurred under these agreements from repossession of the equipment collateralizing the receivables. At January 31, 2010, the Company had an accrued liability of approximately $7 million under these agreements. The maximum remaining term of the receivables guaranteed at January 31, 2010 was approximately six years.

The credit operations’ subsidiary, John Deere Risk Protection, Inc., offers crop insurance products through managing general agency agreements (Agreements) with insurance companies (Insurance Carriers) rated “Excellent” by A.M. Best Company. As a managing general agent, John Deere Risk Protection, Inc. will receive commissions from the Insurance Carriers for selling crop insurance to producers. The credit operations have guaranteed certain obligations under the Agreements, including the obligation to pay the Insurance Carriers for any uncollected premiums. At January 31, 2010, the maximum exposure for uncollected premiums was approximately $22 million. Substantially all of the credit operations’ crop insurance risk under the Agreements has been mitigated by a syndicate of private reinsurance companies. These reinsurance companies are rated “Excellent” or higher by A.M. Best Company. In the event of a widespread catastrophic crop failure throughout the U.S. and the default of these highly rated private reinsurance companies on their reinsurance obligations, the credit operations would be required to reimburse the Insurance Carriers for exposure under the Agreements of approximately $32 million at January 31, 2010. The credit operations believe that the likelihood of the occurrence of events that give rise to the exposures under these Agreements is substantially remote and as a result, at January 31, 2010, the credit operations’ accrued liability under the Agreements was not material.

At January 31, 2010, the Company had commitments of approximately $190 million for the construction and acquisition of property and equipment. Also, at January 31, 2010, the Company had pledged or restricted assets of $199 million, primarily as collateral for borrowings. See Note 9 for additional restricted assets associated with borrowings related to securitizations.

The Company also had other miscellaneous contingent liabilities totaling approximately $50 million at January 31, 2010, for which it believes the probability for payment is substantially remote. The accrued liability for these contingencies was not material at January 31, 2010.

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, software licensing, patent and trademark matters. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material effect on its consolidated financial statements.

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

	January 31, 2010				October 31, 2009
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financing receivables	$	14,687	$	14,774	$	15,255	$	15,434
Restricted financing receivables	2,604		2,650		3,108		3,146
Short-term secured borrowings	2,673		2,678		3,132		3,162

Long-term borrowings:
Equipment Operations	$	3,050	$	3,288	$	3,073	$	3,303
Financial Services	14,041		14,587		14,319		14,818
Total	$	17,091	$	17,875	$	17,392	$	18,121

Fair values of the long-term financing receivables were based on the discounted values of their related cash flows at current market interest rates. The fair values of the remaining financing receivables approximated the carrying amounts.

Fair values of long-term borrowings and short-term secured borrowings were based 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.

Fair values of derivative financial instruments are included in Note 14. The carrying values and the fair values are the same since they are recorded at fair value.

(14) Assets and liabilities measured at fair value on a recurring basis in millions of dollars follow:

	January 31 2010*		October 31 2009*		January 31 2009*
Marketable securities
U.S. government debt securities	$	56	$	52	$	53
Municipal debt securities	24		24		24
Corporate debt securities	51		43		79
Residential mortgage-backed securities **	75		73		75
Total marketable securities	206		192		231
Other assets
Derivatives:
Interest rate contracts	487		550		746
Foreign exchange contracts	34		17		69
Cross-currency interest rate contracts	7		173		14
Total assets	$	734	$	932	$	1,060

Accounts payable and accrued expenses
Derivatives:
Interest rate contracts	$	99	$	121	$	194
Foreign exchange contracts	13		32		40
Cross-currency interest rate contracts	24		1		25
Total liabilities	$	136	$	154	$	259

* All measurements above were Level 2 measurements except for Level 1 measurements of U.S. government debt securities of $32 million, $32 million and $35 million at January 31, 2010, October 31, 2009 and January 31, 2009, respectively.

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

Assets measured at fair value as Level 3 measurements on a nonrecurring basis and the losses during the periods in millions of dollars were as follows:

	January 31		October 31		January 31		Three Months Ended January 31
	2010		2009		2009		2010	2009
Financing receivables	$	11	$	23	$	16		$	5
Trade receivables			1

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

Fair 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. In determining 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.

The following is a description of the valuation methodologies the Company uses to measure financial instruments at fair value:

Marketable Securities – The portfolio of investments is primarily valued on a 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.

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

Financing and Trade Receivables – Receivables with specific reserves established due to payment defaults are valued based on a discounted cash flow approach, appraisal values or realizable values for the underlying collateral. The related credit allowances represent cumulative adjustments to measure those specific receivables at fair value.

(15) 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 credit 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 local currencies.

All derivatives are recorded at fair value 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, when applicable. 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.

Certain of the Company’s derivative agreements contain credit support provisions that require the Company to post collateral based on reductions in credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a liability position at January 31, 2010, October 31, 2009 and January 31, 2009, was $17 million, $13 million and $37 million, respectively. The Company, due to its credit rating, has not posted any collateral. If the credit-risk-related contingent features were triggered, the Company would be required to post full collateral for this liability position.

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 and the size of other financial commitments and exposures between the Company and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Some of these agreements include collateral support arrangements or mutual put options at fair value. Each master agreement permits the net settlement of amounts owed in the event of early termination. The maximum amount of loss that the Company would incur if counterparties to derivative instruments fail to meet their obligations, not considering collateral received or netting arrangements, was $528 million, $740 million and $829 million as of January 31, 2010, October 31, 2009 and January 31, 2009, respectively. The amount of collateral received at January 31, 2010, October 31, 2009 and January 31, 2009 to offset this potential maximum loss was $50 million, $81 million and $50 million, respectively. The netting provisions of the agreements would reduce the maximum amount of loss the Company would incur if the counterparties to derivative instruments fail to meet their obligations by an additional $74 million, $88 million and $167 million as of January 31, 2010, October 31, 2009 and January 31, 2009, respectively. None of the concentrations of risk with any individual counterparty was considered significant in any periods presented.

Cash 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 amount of the receive-variable/pay-fixed interest rate contracts at January 31, 2010, October 31, 2009 and January 31, 2009 was $2,448 million, $2,492 million and $3,694 million, respectively. The notional amount of cross-currency interest rate contracts was $849 million at January 31, 2010. The effective portions of the fair value gains or losses on these cash flow hedges were recorded in other comprehensive income (OCI) and subsequently reclassified into interest expense or other operating expenses (foreign exchange) in the same periods during which the hedged transactions affect earnings. These amounts offset the effects of interest rate or foreign currency changes on the related borrowings. Any ineffective portions of the gains or losses on all cash flow interest rate contracts designated as hedges were recognized currently in interest expense or other operating expenses and were not material during any periods presented. The cash flows from these contracts were recorded in operating activities in the consolidated statement of cash flows.

The amount of loss recorded in OCI at January 31, 2010 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 $34 million after-tax. These contracts mature in up to 48 months. 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

Certain interest rate contracts (swaps) were designated as fair value hedges of fixed-rate, long-term borrowings. The total notional amount of these receive-fixed/pay-variable interest rate contracts at January 31, 2010, October 31, 2009 and January 31, 2009 were $6,872 million, $6,912 million and $5,450 million, respectively. The effective portions of the fair value gains or losses on these contracts were 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 in interest expense and were not material during any periods presented. The cash flows from these contracts were recorded in operating activities in the consolidated statement of cash flows.

The gains (losses) on these contracts and the underlying borrowings recorded in interest expense were as follows in millions of dollars:

* Includes changes in fair values of interest rate contracts excluding accrued interest credits of $62 million and $27 million during the first three months of 2010 and 2009, respectively.

** Includes adjustment for fair values of hedged borrowings excluding accrued interest expense of $88 million and $83 million during the first three months of 2010 and 2009, respectively.

Derivatives not designated as hedging instruments

The Company has certain interest rate contracts (swaps and caps), foreign exchange contracts (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. The total notional amount of these interest rate swaps at January 31, 2010, October 31, 2009 and January 31, 2009 were $2,616 million, $1,745 million and $1,720 million, the foreign exchange contracts were $2,323 million, $2,156 million and $2,063 million and the cross-currency interest rate contracts were $60 million, $839 million and $848 million, respectively. At January 31, 2010, October 31, 2009 and January 31, 2009 there were also $1,447 million, $1,560 million and $1,862 million of interest rate caps purchased and the same amounts sold at the same capped interest rate to facilitate borrowings through securitization of retail notes, respectively. The fair value gains or losses from the interest rate contracts were recognized currently in interest expense 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 consolidated statement of cash flows.

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

Other Assets	January 31 2010		October 31 2009		January 31 2009

Designated as hedging instruments:
Interest rate contracts	$	442	$	507	$	672

Not designated as hedging instruments:
Interest rate contracts	45		43		74
Foreign exchange contracts	34		17		69
Cross-currency interest rate contracts	7		173		14
Total not designated	86		233		157

Total derivatives	$	528	$	740	$	829

	January 31 2010		October 31 2009		January 31 2009
Accounts Payable and Accrued Expenses
Designated as hedging instruments:
Interest rate contracts	$	61	$	77	$	122
Cross-currency interest rate contracts	23
Total designated	84		77		122

Not designated as hedging instruments:
Interest rate contracts	38		44		72
Foreign exchange contracts	13		32		40
Cross-currency interest rate contracts	1		1		25
Total not designated	52		77		137
Total derivatives	$	136	$	154	$	259

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 OCI	Three Months Ended January 31
	Classification	2010				2009
Fair Value Hedges:
Interest rate contracts	Interest		$	61			$	345

Cash Flow Hedges:
Recognized in OCI
(Effective Portion):
Interest rate contracts	OCI (pretax)**			(5	)			(50	)
Foreign exchange contracts	OCI (pretax)**			(23	)

Reclassified from OCI
(Effective Portion):
Interest rate contracts	Interest**			(21	)			(8	)
Foreign exchange contracts	Other**			(17	)

Recognized Directly in Income
(Ineffective Portion):
Interest rate contracts	Interest				*				*
Foreign exchange contracts	Other				*				*

Not Designated as Hedges:
Interest rate contracts	Interest**		$	9			$	(12	)
Foreign exchange contracts	Cost of sales			1				46
Foreign exchange contracts	Other**			(19	)			55
Total			$	(9	)		$	89

* The amount is not material.

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

(16) In December 2009, the Company granted options to employees for the purchase of 4.1 million shares of common stock at an exercise price of $52.25 per share and a binomial lattice model fair value of $15.71 per share. At January 31, 2010, options for 23.0 million shares were outstanding with a weighted-average exercise price of $43.31 per share. The Company also granted .2 million of restricted stock units with a weighted-average fair value of $52.25 per share in the first quarter of 2010. A total of 6.7 million shares remained available for the granting of future options and restricted stock.

(17) In September 2008, the Company announced it would close its manufacturing facility in Welland, Ontario, Canada, and transfer production to Company operations in Horicon, Wisconsin, U.S. and Monterrey and Saltillo, Mexico. The Welland factory manufactured utility vehicles and attachments for the agriculture and turf businesses. The move supports ongoing efforts aimed at improved efficiency and profitability. The factory discontinued manufacturing in the fourth quarter of 2009.

The closure is expected to result in total expenses recognized in cost of sales in millions of dollars as follows:

	2008		2009		First Quarter 2010		Future		Total
Pension and other postretirement benefits	$	10	$	27	$	1	$	7	$	45
Property and equipment impairments