There are many challenges when it comes to global strategic plans for businesses. One involves international cash management, due to the risk of currency fluctuations and interest rate changes in the global market. Review the quarterly financial statements for Deere & Company fromInvestor Relations.

and locate the discussions about fluctuations and risk in interest rates or foreign exchange rates. Then, address the following:

• Indicate whether the foreign exchange translation has increased or decreased profitability for this quarter.
• Explain strategies a company might use to reduce the risk associated with foreign exchange fluctuations.
• Interpret the impact of foreign currency translation on profitability for Deere & Company.

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 Net Sales and Revenues 2019 2018 Net sales Finance and interest income 69 $ Other income 884 ,286 786 Total 183 10.036 0.308 Costs and Expenses Cost of sales Research and development expenses Selling, adminis 6,870 Interest expense strative and general expenses Other operating expenses Total ne of Consolidated Group before Income Taxes Provision for income taxes 1,113 .190 ome of Consolidated Group 221 Equity in income of unconsolidated affiliates 901 Less: Net income attributable to noncontrolling interests 899 911 Net Income Attributable to Deere & Company 899 910 Per Share Data Bazi Diluted 2.81 2.81 Average Shares Outstanding Basic Diluted 315.9 323.5 319.8 328.0 See Condensed Notes to Interim Consolidated Financial Statements. DEERE & COMPANY TEMENT OF CONSOLIDATED INCOME For the Nine Months Ended July 28, 2019 and July 25. more (In millions of dollars and shares except per share amounts) Unaudited Net Sales and Revenues 2019 2018 Net sales Finance and interest income 26,182 $ Other income 2,537 25,00 2763 Total 64 672 29,362 27,942 Costs and Expenses Cost of sales Research and development expenses 20,056 Selling, adminis Interest expense strative and general expenses 2 607 Other operating expenses Total 1,063 1.034 26,099 4.850 ne of Consolidated Group before Income Taxes Provision for income taxes 3,263 ome of Consolidated Group 748 3,092 Equity in income of unconsolidated affiliates 2,515 1,524 1,568 Less: Net income attributable to noncontrolling interests 2,535 1,586 Net Income Attributable to Deere & Company 2,532 1.584 Per Share Data Basic Diluted 98 3 7.87 4 82 Average Shares Outstanding Basic Diluted 317. 323.4 321. 328.2 See Condensed Notes to Interim Consolidated Financial Statements. DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (In millions of dollars) Unaudited July 2 2019 October 28 2018 July 29 Assets 2018 Cash and cash equivalents Marketable securities $ 3,383 $ 3,904 3,923 Receivables from unconsolidated affiliates 565 488 accounts and notes receivable - net Financing receivables - net 5,758 5,004 6,208 Financing receivables securitized - net 27,049 27,054 Other receivables 4,022 25,213 4,662 Equipment on operating leases - net 7,269 1,736 1.300 Inventories 6,747 6,805 Property and equipment - net 6,239 Investments in unconsolidated affiliates 5,798 Goodwill Other intangible assets - net Retirement benefits Deferred income taxes Other assets 1,645 Total Assets 73.530 70,108 1,677 69.390 Liabilities and Stockholders' Equity Liabilities Short-term borrowings Short-term securitization borrowings $ 11,142 $ 11,062 Payables to unconsolidated affil 136 3,957 Accounts payable and accrued expenses ed income taxes ,390 10,111 507 556 9,483 Long-term borrowings Retirement benefits and other liabilities 29,242 17.237 $24 26,838 Total liabilities .781 1246 3.751 58,803 6.522 2010 Redeemable noncontrolling interest 14 14 14 Stockholders' Equity Total Deere & Company stockholders' equity 12,266 rolling interests 11,288 10,356 Total stockholders' equity Total Liabilities and Stockholders' Equity 2,270 73.530 11,291 70, 108 69,390 See Condensed Notes to Interim Consolidated Financial Statements.DEERE & COMPANY TEMENT OF CONSOLIDATED CASH FLOWS For the Nine Months Ended July 28, jagged July 28, 2019 and July 29, 2018 (In millions of dollars) Unaudited Cash Flows from Operating Activities 2019 2018 Net income S Adjustments to reconcile net income to net cash provided by (used for) operating activities: 2,535 $ 1,586 Provision for credit losses Provision for depreciation and amortization Share-based compensation 522 63 ,445 Gain on sales of businesses 63 Undistributed earnings of unconsolidated affiliates (25) (credit) for deferred inc 10 Provision ( (332) and liabilities: Trade, notes, and financing receivables related to sales nventories (2,206) (2,365) Accounts payable and accrued expenses 1,168) (306) (1,539) 213' Accrued income taxes payable/receivable Retirement benefits 253 176 Other (814) Net cash provided by (used for) operating activities ( 65 ) (109) (672) Cash Flows from Investing Activities Collections of receivables (excluding les (excluding receivables related to sales) Proceeds from maturities and sales of marketable securities 12,685 12,162 Proceeds from sales of equipment on operating lene Proceeds from sales of businesses, net of cash sold 1,171 56 Cost of receivables acquired (excluding receivables related to sales) Acquisitions of businesses, net of cash acquired (13,662 12,586) Purchases of marketable securities (5,171) Purchases of property and equipment Cost of equipment on operating leases acquired 756) Other 462) (67) Net cash used for investing activities (2,129 (6.493) Cash Flows from Financing Activities Increase (decrease) in total short-term om long-term borr (336) 1,183 3,739 Proceeds from issu ng-term borrowings 7,440 (4,356) (4,372) Repurchases of common stock (880) 209 Dividends paid Other 703) (454) (82) (583) Net cash provided by financing activities 216 (66) 1.656 Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash ( 24 ) Net Decrease in Cash, Cash Equivalents, and Restricted Cash Cash at Beginning of Period Cash, Cash Equivalents, and Restricted Cash at Begin (533 ) 5,438 Cash, Cash Equivalents, and Restricted Cash at End of Period 3:482 9.467 4.029 See Condensed Notes to Interim Consolidated Financial Statements. Condensed Notes to Interim Consolidated Financial Statements (Unaudited) (1) Dividends declared and paid on a per share basis were as follows: Three Months Ended July 28 July 29 Nine Months Ended July 28 July 29 2019 2018 9019 2018 Dividends declared Dividends paid .76 S .60 2.28 2.21 S 1.80 2) The calculation of basic net income per share is based on the average number of shares outstanding. The calculation of diluted net income per share ome per share recognizes any diluti zes any dilutive effect of share-based compensation. 3) In the first quarter of 2019, the Company adopted Financial Accounting Standards Board Accounting Standards Update (ASU) No. 2016-18, which amends ASC 230, Statement of Cash Flows. The ASU requires that restricted cash be included with cash and cash equivalents in the statement of cash flows. The ASU was adopted on a retrospective basis. As a result, the 2018 consolidated statement of cash flows was updated to add $132 million and $106 million of restricted cash in the beginning period and ending period balances, respectively. The 2018 supplemental consolidating statement of cash flows was updated to add $6 million and $7 milli cash in the equipment operations' beginning and ending period balances, respectively, and $126 million and $99 million in the financial services' beginning and ending perio g and ending period balances, respectively. The quipment operations' restricted cash at October 28, 2018 and July 28, 2019 was $7 million and $9 million, respectively. The financial services' restricted cash for the same periods was $104 million and $90 million, respectively. 4) The consolidated financial statements represent the consolidation of all Deere & Company's subsidiaries. In the supplemental consolidating data in Note 5 to the financial statements, "Equipment Operations" include the Company's agriculture and turf operations and construction and forestry operations with "Financial Services' reflected on the equity basis. (5) 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* Net Sales and Revenues 2019 2018 FINANCIAL SERVICES 2019 2018 Finance and interest income 8,969 9,286 Other income S 952 $ 852 Total 9.548 1,003 Costs and Expenses Cost of sales Research and development expenses theresoministrationd general expenses Interest expense Interest compensation to Financial Services Other operating expenses Total Income of Consolidated Group before Income Taxes Provision for income taxes Income of Consolidated Group Equity in Income of Unconsolidated Subsidiaries and Affiliates al Services 151 Total Net Income Less: Net income attributable to noncontrolling interests 17: 151 Net Income Attributable to Deere & Company 899 910 175 151 * 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 Jilly 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 K 2,535 3 1,586 K 450 K 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) Undistribumd camings 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 Equipmmt Operations' nancing 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 benets 3 5 (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 ofhusinesses, 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 oflongrterm borrowings (194) (1 18) (4,162) (4,254) Proceeds from issuance ot'common stock 133 209 Repurchases of common stock (880) (454) Dividends paid (703) (583) (377) (454) Oil'lcl' (52) (41) (22) (25) Net cash provided by (used for) nancing 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 (lash (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 3 2,703 3 2,810 3 779 3 1,219 * Deere & Company with Financial Services on the equity basis. The supplemental consolidating da is presented for informational purposes. Transactions between the "Equipment Operations" and "Financial Services" have been eliminated to arrive at the consolidated nancial statements. Deere & Company Other Financial Information For the Nine Months Ended Equipment Operations* Agriculture and Turf Construction and Forestry* July 28 July 29 July 28 July 29 July 28 July 29 Dollars in millions 2019 2018 2019 2018 2019 2018 Net Sales 3 26,182 25,007 3 17,909 3 17,585 3 8,273 3 7,422 Net Sales excluding Wirtgen 3 23,762 22,725 3 17,909 3 17,585 3 5,853 3 5,140 Average Identiable Assets With Inventories at LIFO 3 20,984 19,632 3 10,880 3 10,272 3 10,104 3 9,360 With Inventories at LIFO - excluding Wirtgen 3 14,603 13,605 3 10,880 3 10,272 3 3,723 3 3,333 With Inventories at Standard Cost 3 22,359 20,900 3 11,989 3 11,294 3 10,370 3 9,606 With Inventories at Standard Cost - excluding Wirtgen 3 15,977 14,872 3 1 L989 3 11,294 3 3,988 3 3,578 Operating Prot 3 2,932 2.822 3 1,978 3 2,249 3 954 3 573 Operating Prot excluding Wirtgen 3 2,657 2,785 3 1,978 3 2,249 3 679 3 536 Percent of Net Sales - excluding Wirtgen 11.2 % 12.3 % 11.0 % 12 8 "Ar 11.6 % 10.4 "Ar Operating Return on Assets - excluding Wirtgen With Inventories at LIFO - excluding Wirtgen 18.2 % 20.5 % 18.2 % 21.9 % 18.2 % 16.1 % With Inventories at Standard Cost - excluding Wirtgen 16.6 % 18.7 % 16.5 % 19 9 "A: 17.0 % 15.0 "A: SVA Cost of Assets - excluding Wirtgen 3 (1 ,437) (1,339) 3 (1,078) 3 (1,016) 3 (359) 3 (323) SVA - excluding Wirtgen 3 1,220 1,446 3 900 3 1,233 3 320 3 213 For the Nine Months Ended Financial Services July 28 July 29 Dollars in millions 2019 2018" Net Income Attributable to Deere & Company 3 450 681 Net Income Attributable to Deere & Company - Tax Adjusted 402 Average Equity 3 5,018 4,808 Average Equity - Tax Adjusted 4,758 Return on Equity 9.0 % 14.2 % Return on Equity Tax Adjusted 8.4 % Operating Prot 3 566 591 Average Equity 3 5,018 4,758 Cost of Equity 3 (478) (527) SVA 3 88 64 The Company evaluates its business results on the basis of accounting principles generally accepted in the United States. In addition, it uses a metric referred to as Shareholder Value Added (SVA), which management believes is an appropriate measure for the performance of its businesses. SVA is, in effect, the pretax prot left over after subtracting the cost of enterprise capital. The Company is aiming for a sustained creation of SVA and is using this metric for various performance goals. Certain compensation is also detennined on the basis of performance using this measure For purposes of determining SVA, each of the equipment segments is ' 'scd a pretax cost of assets, which on art annual has . is approximately 12 percent ofthe segment's average identiable operating assets during the applicable period with inventory at standard cost Management believes that valuing inventories at standard cost more closely approximates the current cost of inventory and the Company's investment in the asset. The Financial Services segment is assessed an annual pretax cost of approximately 13 percent of the segments average equity (15 percent in 2018). The cost of assets or equity, as applicable, is deducted from are operating prot or added to the operating loss of each segment to determine die amount of SVA. * On December 1, 2017, the Company acquired the stock and certain assets of substantially all of Wirtgen Group Holding GmbI-I's operations (Wirtgen), the leading manufacturer worldwide of road building equipment. Wirtgen is included in the construction and forestry segment Wirtgen is excluded from the metrics above. ** The 2018 SVA calculation was adjusted for certain effects of US. Tax Reform legislation enacted on December 22, 2017 due to the signicant discrete income tax benet in 2018. The 2019 SVA is calculated with unadjusted U.S. GAAP information. 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 614 184 195 Total 26,875 25,708 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 2.19 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 ,692 2,496 596 Provision (credit) for income taxes 625 .607 123 (83) Income of Consolidated Group ,067 889 448 679 Equity in Income of Unconsolidated Subsidiaries and Affiliates Financial Services 450 681 2 Other 2 18 16 Total 468 697 2 Net Income 2,535 ,586 450 681 Less: Net income attributable to noncontrolling interests Net Income Attributable to Deere & Company 2,532 1,584 450 681 * 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) CONDENSED BALANCE SHEET (In millions of dollars) Unaudited EQUIPMENT OPERATIONS* uly 28 October 28 FINANCIAL SERVICES July 29 2019 July 28 October 28 July 29 2018 2018 2019 2018 2018 Assets Cash and cash equivalents $ 2,694 $ 3,195 $ 2,803 $ 689 S 709 $ 1,120 Marketable securities 11 560 482 477 Receivables from unconsolidated subsidiaries and affiliates 2,395 ,700 1,795 Trade accounts and notes receivable - net 1.606 ,374 586 6,807 4,906 6,080 Financing receivables - net 100 03 78 26,949 26,961 25,135 Financing receivables securitized - net 54 76 90 5.14 3.946 4 572 Other receivables 1.428 1.010 1,131 126 77 176 Equipment on operating leases - net 7,269 7,165 6,805 Inventories 6,74 6,149 6,239 Property and equipment - ne 5,753 5,592 45 47 Investments in unconsolidated subsidiaries and affiliates 5.309 5,821 5.231 4.992 15 46 15 Goodwill 3,013 3,10 3.047 Other intangible assets - net 1,444 1,562 1.581 Retirement benefits 1.374 1.241 727 57 14 Deferred income taxes 1.579 1,503 1,984 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 Accounts payable and accrued expenses 9.422 .383 9.047 2,341 1,678 1.641 1, 766 2,056 1.902 Deferred income taxes 454 497 431 616 823 500 Long-term borrowings 5,364 4.714 5,526 23,878 22,52 Retirement benefits and other liabilities 21,312 5.685 5,660 6,430 97 91 Total liabilities 22,486 21,892 96 22,424 43,338 40,681 40,229 Redeemable noncontrolling interest 14 14 12 Stockholders' Equity Total Deere & Company stockholders' equity 12,266 11,28 10,356 5,106 5,039 4,80 Noncontrolling interests 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.@ JOHN DEERE NEWS RELEASE Ken Golden Director, Global Public Relations Deere & Company 309-765-5678 Deere Reports Third-Quarter Net Income of $899 Million Quarterly sales decline 3% to $8.97 billion. Continued uncertainty in agricultural sector weighs on results. Construction & Forestry reports sharply higher prot. Full-year forecast revised to $3.2 billion of net income on approximately 4% sales gain. MOLINE, Illinois (August 16, 2019) Deere & Company reported net income of $899 million for the third quarter ended July 28, 2019, or $2.81 per share, compared with net income of $910 million, or $2.78 per share, for the quarter ended July 29, 2018. For the first nine months of the year, net income attributable to Deere & Company was $2.532 billion, or $7.87 per share, compared with $1.584 billion, or $4.82 per share, for the same period last year. Affecting 2019 and 2018 results were charges or benefits to the provision for income taxes due to U.S. tax reform legislation (tax reform). Without these changes, adjusted net income attributable to Deere & Company for the third quarter and first nine months of 2019 and 2018 would have been as presented in the following table: Deere & Company Third Quarter Year to Date $ in millions 2019 2018 % Change 2019 2018 % Change Net income adjusted $ 867 $ 849 2% $ 2,505 $ 2,325 8% Fully diluted EPS adjusted $ 2.71 $ 2.59 $ 7.79 $ 7.08 (Information on non-GAAP financial measures is included in the appendix.) Worldwide net sales and revenues decreased 3 percent, to $10.036 billion, for the third quarter of 2019 and increased 5 percent, to $29.362 billion, for nine months. Net sales of the equipment operations were $8.969 billion for the quarter and $26.182 billion for nine months, compared with $9.286 billion and $25.007 billion last year. "John Deere's third-quarter results reflected the high degree of uncertainty that continues to overshadow the agricultural sector," said Samuel R. Allen, chairman and chief executive officer. "Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases. At the same time, general economic conditions remain positive and are contributing to strong results for Deere's construction and forestry business." Company Outlook & Summam Company equipment sales are projected to increase by about 4 percent for fiscal 2019 compared with 2018. Included in the forecast are Wirtgen results for the full fiscal year of 2019 compared with 10 months Deere Announces Third-Quarter Earnings 1 of the prior year. This adds about 1 percent to the company's net sales forecast for the current year. Also included is a negative foreign-currency translation effect of about 2 percent for the 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 $3.2 billion. "In spite of present challenges, the long-term outlook for our businesses remains healthy and points to a promising future," Allen said. "We continue to expand our global customer base and are encouraged by response to our lineup of advanced products and services. Furthermore, we are fully committed to the successful execution of our strategic plan focused on achieving sustainable protable growth. In support of the strategy, we are conducting a thorough assessment of our cost structure and initiating a series of actions to make the organization more structurally efficient and profitable." Deere & Company Third Quarter Year to Date $ in millions 2019 2018 % Change 2019 2018 % Change Net sales and revenues $ 10,036 $ 10,308 -3% $ 29,362 $ 27,942 5% Net income $ 899 $ 910 -1% $ 2,532 $ 1,584 60% Fully diluted EPS $ 2.81 $ 2.78 $ 7.87 $ 4.82 Net income adjusted $ 867 $ 849 2% $ 2,505 $ 2,325 8% Fully diluted EPS adjusted $ 2.71 $ 2.59 $ 7.79 $ 7.08 Net income in the third quarter and first nine months of 2019 was favorably affected by discrete adjustments to the provision for income taxes related to tax reform of $32 million and $27 million for the respective periods. (Information on non-GAAP financial measures is included in the appendix.) Results were favorably affected by $61 million in the third quarter of 2018 and unfavorably affected by $741 million for the nine-month period due to discrete adjustments to the provision for income taxes related to tax reform. Equipment Operations Third Quarter Year to Date $ in millions 2019 2018 % Change 2019 2018 % Change Net sales $ 8,969 $ 9,286 -3% $ 26,182 $ 25,007 5% Operating profit $ 990 $ 1,087 -9% $ 2,932 $ 2,822 4% Net income $ 717 $ 750 -4% $ 2,067 $ 889 133% Tax reform unfavorable (favorable) adjustments j24j {582 -59% 1242 974 -102% Net income without tax reform 35 693 $ 692 $ 2,043 $ 1,863 10% For a discussion of net sales and operating profit results, see the Agriculture & Turf and Construction & Forestry sections below. Wirtgen results are included for the full year-to-date period of 2019 while the prior year reected seven months of the respective period. The two additional months added about 2 percent to the company's year-to-date net sales. Net income in the third quarter and first nine months of 2019 was favorably affected by discrete adjustments to the provision for income taxes. Agriculture & Turf Third Quarter Year to Date $ in millions 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% Agriculture & Turf sales decreased for the quarter due to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization. Year-to-date sales 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, Deere Announces Third-Quarter Earnings 2 higher production costs, and the unfavorable effects of foreign-currency exchange, partially offset by price realization. Nine-month operating profit moved lower resulting from 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 & Forestry Third Quarter Yearto Date $ in millions 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% Construction & Forestry sales were higher for the quarter and 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 was $159 million for the quarter and $275 million for nine months, compared with $88 million and $37 million for the corresponding periods last year. Excluding Wirtgen, the improvement in Construction & Forestry results for the quarter was 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, partially offset by higher production costs and the unfavorable effects of currency exchange. Financial Services Third Quarter Year to Date $ in millions 2019 2018 % Change 2019 2018 % Change Net income $ 175 $ 151 16% $ 450 $ 681 -34% Tax reform unfavorable (favorable) adjustments g8} (31 167% {31 {233) -99% Net income without tax reform $ 167 $ 148 13% $ 447 $ 448 Excluding tax-reform adjustments, the increase in financial services net income for the quarter was due to income earned on a higher average portfolio and favorable discrete adjustments to the provision for income taxes, partially offset by higher losses on operating-lease residual values and unfavorable financing spreads. Nine-month net income, adjusted for the tax-reform items, declined due to unfavorable financing spreads and higher losses on operating-lease residual values, largely offset by income earned on a higher average portfolio and favorable discrete adjustments to the provision for income taxes. Market Conditions and Outlook (annual) $ in millions Agriculture & Turf Net Sales 2% Currency Translation -2% Construction & Forestry Net Sales 10% Currency Translation -2% John Deere Financial Net Income $ 620 Agriculture & Turf. Industry sales of agricultural equipment are expected to be about the same as last year for the U.S. and Canada as well as for the EU28-member nations. 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 flat to down slightly. Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2019. Construction & Forestry. The Construction & Forestry 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 year. The outlook reflects generally positive fundamentals and economic growth worldwide. In forestry, global industry sales are expected to be flat to up 5 percent mainly as a result of improved demand in EU28 countries and Russia. Deere Announces Third-Quarter Earnings 3 Financial Services. Results are expected to benefit from a higher average portfolio and favorable adjustments to the provision for income taxes, largely offset by less-favorable nancing spreads, higher losses on operating-lease residual values, and a higher provision for credit losses. Financial services net income for 2018 was $942 million, which included a tax benefit related to tax reform of $341 million. Without the tax benet, net income would have been $601 million. John Deere Capital Corporation The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market. Third Quarter Year to Date $ in millions 2019 2018 % Change 2019 2018 % Change Revenue $ 742 $ 661 12% $ 2,106 $ 1,864 13% Net income $ 145 $ 120 21% $ 351 $ 639 -45% Ending portfolio balance $ 38,625 $ 35,633 8% Prior-year results for the third quarter and year to date included a favorable provision for income taxes associated with tax reform. Results for the current quarter and first nine months included income from a higher average portfolio and favorable discrete adjustments to the provision for income taxes, partially offset by less-favorable nancing spreads and higher losses on operating-lease residual values. Deere Announces Third-Quarter Earnings 4 APPENDIX DEERE & COMPANY SUPPLEMENTAL STATEMENT OF CONSOLIDATED INCOME INFORMATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Millions, except per-share amounts) (Unaudited) In addition to reporting financial results in conformity with accounting principles generally accepted in the United States (GAAP), the company also discusses non-GAAP measures that exclude adjustments related to tax reform. Net income attributable to Deere & Company and diluted earnings per share measures that exclude this item are not in accordance with nor a substitute for GAAP measures. The believes that discussion of results excluding this item provides a useful analysis of ongoing operating trends. The tables below provide a reconciliation of the non-GAAP financial measure with the most directly comparable GAAP financial measure for the three months and nine months ended July 28, 2019, and July 29, 2018. Three Months Ended Nine Months Ended July 28, 2019 July 28, 2019 Net Income Income Attributable to Diluted Attributable to Diluted Deere & Earnings Deere & Earnings Company Per Share Company Per Share GAAP measure $ 899 $ 2.81 $ 2,532 $ 7.87 Discrete tax reform expense (benefit) (32) (.10) (27) .08) Non-GAAP measure $ 867 $ 2.71 $ 2,505 $ 7.79 Three Months Ended Nine Months Ended July 29, 2018 July 29, 2018 Net Income Net Income Attributable to Diluted Attributable to Diluted Deere & Earnings Deere & Earnings Company Per Share Company Per Share GAAP measure $ 910 $ 2.78 $ 1,584 $ 4.82 Discrete tax reform expense (benefit) (61) (.19) 741 2.26 Non-GAAP measure 849 $ 2.59 $ 2,325 $ 7.08 Deere Announces Third-Quarter Earnings 5Safe Harbor Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements under "Company Outlook & Summary," "Market Conditions & Outlook," and other fonrvard-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 (e.g., the North American Free Trade 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 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 US. dollar; interest rates; inflation and deflation rates; changes in weather patterns; the political and social stability of the global markets in which the 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 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 Deere Announces Third-Quarter Earnings 6 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). Deere Announces Third-Quarter Earnings 8 Third Quarter 2019 Press Release (in millions of dollars) Unaudited Three Months Ended Nine Months Ended July 28 July 29 % July 28 July 29 % 2019 2018 Change 2019 2018 Change Net sales and revenues: Agriculture and turf $ 5,946 $ 6,293 6 $ 17,909 $ 17,585 --2 Construction and forestry 3,023 2,993 +1 8,273 7,422 +1 1 Total net sales 8,969 9,286 -3 26,182 25,007 "5 Financial services 910 830 +10 2,650 2,402 +10 Other revenues 157 192 18 530 533 1 Total net sales and revenues $ 10,036 $ 10,308 3 $ 29,362 $ 27,942 "5 Operating prot: * Agriculture and turf $ 612 $ 806 24 $ 1,978 $ 2,249 12 Construction and forestry 378 281 +35 954 573 +66 Financial services 204 196 +4 566 591 -4 Total operating prot 1,194 1,283 -7 3,498 3,413 +2 Reconciling items * * (74) (84) - 12 (218) (305) -29 Income taxes 1221! 1289! 24 {7481 11,524! 51 Net income attributable to Deere & Company $ 899 $ 910 1 $ 2,532 $ 1,5 84 +60 Operating prot is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating prot of the financial services segment includes the effect of interest expense and foreign exchange gains or losses. ** Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benet costs excluding the service cost component, and net income attributable to noncontrolling interests. 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, aws 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 equipment and 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 delinquencyes 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 Deere Announces Third-Quarter Earnings