01—Abstract
Summary
Summary of the 10-K filed December 15, 2022. Cited figures are marked; the original filing is the authoritative source.
Deere & Company's fiscal 2022 10-K (fiscal year ended October 30, 2022) shows a year of strong top-line and earnings growth despite supply chain, inflation, and Russia/Ukraine headwinds.
Worldwide net sales and revenues rose 19% to $52.577 billiona, and net income attributable to the company reached $7.131 billion, or $23.28 per diluted share, up from $5.963 billion ($18.99) in 2021. Net sales rose 21% to $47.917 billion on higher shipment volumes and price realization. Results were helped by a $326 million non-cash gain from remeasuring the Deere-Hitachi excavator joint venture stake, and were held back by roughly $255 million of pretax Russia/Ukraine charges, a $90 million UAW ratification bonus, higher production costs, and a cost of sales ratio that rose to 73.7% from 73.3%.
Order books are described as full through most of 2023, with management expecting to sell more large agricultural equipment in North America, Europe, and South America in 2023. Management also flagged continued inflation, ongoing supply chain disruption, and further interest-rate-driven spread compression in the financial services segment. Financial services net income was flat at $880 millionb, while the provision for credit losses rose on Russia exposure.
Backlogs were $9.7 billionc for production and precision agriculture, $4.6 billion for small agriculture and turf, and $6.5 billion for construction and forestry. Capital allocation is shareholder-friendly. Share repurchases totaled $3.6 billion in 2022, dividends paid were $1.3 billion, and the board authorized an additional $18 billion buyback in December 2022 on top of $2.2 billion remaining under the prior program.
The quarterly dividend was set at $1.20d per share. Balance sheet metrics stayed sound, with cash and marketable securities of $5.5 billion and unused credit lines of $3.3 billion, and the company reported an unqualified audit opinion from Deloitte with effective internal control over financial reporting.
02—Key points
Key Highlights
- Net sales and revenues rose 19% to $52.577 billion, with net sales up 21% to $47.917 billion on higher volumes and price realization.
- Net income attributable to Deere reached $7.131 billion ($23.28 diluted EPS), up from $5.963 billion ($18.99) in 2021.
- Production and precision agriculture operating profit rose 32% to $4.386 billion, and construction and forestry operating profit rose 35% to $2.014 billion, while small agriculture and turf operating profit fell 5% to $1.949 billion.
- Russia/Ukraine events produced about $255 million of pretax charges, partly offset by a $326 million non-cash gain on the Deere-Hitachi joint venture remeasurement.
- Management expects full order books through most of 2023, with higher large agricultural equipment sales expected in North America, Europe, and South America.
- Shareholder returns were significant: $3.6 billion of buybacks and $1.3 billion of dividends in 2022, plus a new $18 billion repurchase authorization in December 2022.
- Cost of sales as a percentage of net sales rose to 73.7% from 73.3%, reflecting higher production costs and supply chain inefficiencies that continue into 2023.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed December 15, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $52.58B$44.02B | +19.4% |
| R&D Expenses | $1.91B$1.59B | +20.5% |
| SG&A Expenses | $3.86B$3.38B | +14.2% |
| Operating Expenses | $43.45B$36.42B | +19.3% |
| Operating Income | $9.51B$8.01B | +18.7% |
| Interest Expense | $1.06B$993.00M | +6.9% |
| Net Income | $7.13B$5.96B | +19.6% |
| EPS (Basic) | $23.42$19.14 | +22.4% |
| EPS (Diluted) | $23.28$18.99 | +22.6% |
| Shares Outstanding (Basic) | 304.50M311.60M | −2.3% |
| Shares Outstanding (Diluted) | 306.30M314.00M | −2.5% |
05—Questions
Frequently Asked Questions
How did Deere perform financially in fiscal 2022?
Deere delivered record-level results. Net sales and revenues increased 19% to $52.6 billion, and net income attributable to the company increased about 20% to $7.13 billion, or $23.28 per diluted share. Growth came from price realization and higher shipment volumes, partly offset by higher production costs and Russia-related charges.
What were the main headwinds and one-time items affecting 2022 results?
Key headwinds included supply chain disruption, inflation in materials and freight, and about $255 million of pretax Russia/Ukraine charges (mainly reserves and impairments). A $90 million UAW ratification bonus also weighed on results. These were partly offset by a $326 million non-cash gain from remeasuring the previously held Deere-Hitachi joint venture stake.
What is the outlook for 2023?
Management expects strong retail demand to persist, with order books full through most of 2023 and higher large agricultural equipment sales expected in North America, Europe, and South America. Small agriculture and turf and turf demand are expected to be flat to lower. Inflation, supply chain pressure, and rising interest rates are expected to continue, and financial services income is expected to be slightly higher, with a higher provision for credit losses excluding Russia.
How is Deere returning capital to shareholders?
In 2022 Deere repurchased $3.6 billion of stock and paid $1.3 billion in dividends. In December 2022 the board authorized up to $18 billion of additional buybacks, supplementing $2.2 billion remaining under the 2019 program. The quarterly dividend is $1.20 per share.
What is Deere's exposure to Russia and how is it affecting the business?
Deere suspended shipments to Russia in February 2022, and its net exposure there was about $266 million at year end. The company recorded impairments, inventory reserves, a voluntary employee-separation program, and a $153 million allowance increase on financing receivables. Deere also decided not to renew Russian dealer agreements as of November 1, 2022.
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