ITEM 1. BUSINESS.

 

Products

 

Deere & Company (Company) and its subsidiaries (collectively called John Deere) have operations which are categorized into four major business segments.

 

The agricultural equipment segment manufactures and distributes a full line of farm equipment and service parts — including tractors; combine, cotton and sugarcane harvesters; tillage, seeding and soil preparation machinery; sprayers; hay and forage equipment; material handling equipment; and integrated agricultural management systems technology.

 

The commercial and consumer equipment segment manufactures and distributes equipment and service parts for commercial and residential uses — including small tractors for lawn, garden, commercial and utility purposes; riding and walk-behind mowers; golf course equipment; utility vehicles; landscape and irrigation equipment; and other outdoor power products.

 

The construction and forestry segment manufactures and distributes a broad range of machines and service parts used in construction, earthmoving, material handling and timber harvesting — including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log skidders, feller bunchers, loaders, forwarders, harvesters and related attachments.

 

The products and services produced by the segments above are marketed primarily through independent retail dealer networks and major retail outlets.

 

The credit segment primarily finances sales and leases by John Deere dealers of new and used agricultural, commercial and consumer, and construction and forestry equipment. In addition, it provides wholesale financing to dealers of the foregoing equipment, provides operating loans and finances retail revolving charge accounts.

 

John Deere is also engaged in special technologies operations and provides managed health care plans. John Deere’s worldwide agricultural equipment; commercial and consumer equipment; construction and forestry; and special technologies operations are sometimes referred to as the “Equipment Operations.” The credit and health care operations are sometimes referred to as “Financial Services.”

 

Additional information is presented in the discussion of business segment and geographic area results on pages 16 and 17. The John Deere enterprise has manufactured agricultural machinery since 1837. The present Company was incorporated under the laws of Delaware in 1958.

 

Market Conditions and Outlook

 

Based on the market conditions outlined below, net equipment sales for the first quarter of 2003 are currently forecast to be up 20 to 25 percent from the same period last year, with company-wide net income from zero to $50 million. The Company expects equipment sales for the full year to be up 8 to 10 percent and enterprise net income to be in a range of $500 million to $600 million. This includes the favorable impact of approximately $53 million, after tax, from the first-quarter adoption of Financial Accounting Standards Board (FASB) Statement No. 142, Goodwill and Other Intangible Assets, eliminating goodwill expense.

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The Company’s yearly earnings estimate also includes higher pension and post-retirement benefit expense of between $250 million to $300 million pretax, as the Company is modifying its assumptions to reflect recent trends in medical inflation, interest rates and equity returns. This compares with an increase in that expense in 2002 of approximately $115 million, before special items.

 

Agricultural Equipment .  Although commodity prices softened this fall, they remain well above year-ago levels and are helping support positive fundamentals in the global farm sector. In the United States and Canada, however, machinery sales have continued to lag mainly due to dry-weather conditions and poor crop production in many key areas. In addition, while recently enacted legislation is generally supportive of higher farm income, some farmers are feeling near-term cash flow pressure due to the absence of emergency government payments. As a result, the Company believes that retail activity may be slow early in 2003 but will gather momentum in conjunction with spring planting and be higher for the year. In other areas, the Company’s sales in Western Europe are expected to grow in 2003 as the Company builds on last year’s strong response to newly introduced products and further increases its presence in this important region. The Company’s sales in Australia are expected to be down due to drought conditions, while South American sales are forecast to be about the same as last year due to the uncertain economic situation in Brazil. As a result of these factors, worldwide sales of John Deere agricultural equipment are forecast to be up about 8 percent for the year.

 

Commercial and Consumer Equipment .  Shipments of John Deere commercial and consumer equipment are projected to be up about 15 percent for the year. Supporting the improved outlook is a recent strengthening in retail activity as well as the expected success of the new 100-series line of John Deere lawn tractors that will be available in the spring. Because of the Company’s efforts in 2001 and 2002 to reduce field inventories, sales are also expected to benefit from producing more in line with retail demand.

 

Construction and Forestry.   The Company believes that construction equipment markets will continue to be pressured by lagging business investment and general weakness in sales to independent rental companies. Global forestry markets are expected to remain sluggish as well. In this environment, the Company’s sales of construction and forestry equipment are forecast to be up about 2 percent for the year. In May 2002, under a new marketing agreement with Hitachi Construction Machinery Co., Ltd., of Japan (Hitachi), the Company began distributing Hitachi brand construction equipment in the United States and Canada and mining equipment in all of the Americas. Excluding these sales from both years, the division sales are expected to decline approximately 2 percent.

 

Credit Operations.   Credit results for 2003 are expected to benefit from lower write-offs, growth in the loan portfolio and stable margins. On this basis, net income for the year is projected to increase more than 20 percent, to about $300 million.

 

2002 Consolidated Results Compared with 2001

 

The Company had net income in 2002 of $319 million, or $1.33 per share diluted ($1.34 basic), compared with a net loss of $64 million, or $.27 per share diluted ($.27 basic), in 2001. Special charges of $46 million, or $.18 per share diluted, in 2002 and $217 million, or $.91 per share diluted, in 2001, had a negative impact on the results for both years. These charges were related to the costs of closing and restructuring certain facilities in both years and a voluntary early-retirement program last year. Excluding these costs, income in 2002 more than doubled to $365 million, or $1.51 per share diluted, compared with income of $153 million, or $.64 per share diluted, in 2001. Better price realization as well as the favorable impact of the Company’s broad-based cost and expense reduction initiatives were the primary drivers of the improved results in 2002. In addition, favorable customer response to new products contributed to achieving higher sales and more efficient production levels. These factors, in conjunction with a $323 million reduction in trade receivables

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and inventories helped generate consolidated cash flow from operations of $1.9 billion for the year, well above 2001 levels. Net sales and revenues were $13,947 million in 2002, compared to $13,293 million in 2001. Net sales of the Equipment Operations were $11,703 million this year compared to $11,077 million last year.

 

The Company’s Equipment Operations, which exclude the Financial Services operations, had net income of $78 million in 2002, compared to a net loss of $238 million in 2001. Before special items, the income was $124 million in this year compared to a loss of $23 million last year. Income before special items increased primarily due to improved price realization, cost and expense reductions, higher sales of agricultural and commercial and consumer equipment, and the absence of losses from the Homelite consumer products business, which was sold. In addition, the 2002 results benefited from lower interest expense. Partially offsetting these factors were the compensation to credit for financing trade receivables, higher new product start-up costs, and costs associated with Nortrax, Inc., a venture involved in the ownership and development of several construction equipment dealer locations. Also having a negative effect were higher postretirement benefit costs, lower production and sales from core construction and forestry operations in Davenport and Dubuque, Iowa, and a higher tax rate.

 

Net income of the Company’s Financial Services operations in 2002 was $262 million, compared to $192 million in 2001. Additional credit operations information is presented on pages 17, 20 and 21. Health care premiums and fees and related health care claims and costs increased this year, compared to last year, primarily from increases in enrollment, premium increases and medical cost inflation.

 

EQUIPMENT OPERATIONS

 

Agricultural Equipment

 

Sales of agricultural equipment, particularly in the United States and Canada, are affected by total farm cash receipts, which reflect levels of farm commodity prices, acreage planted, crop yields and government payments. Sales are also influenced by general economic conditions, farm land prices, farmers’ debt levels, interest rates, agricultural trends and the levels of costs associated with farming. Weather and climatic conditions can also affect buying decisions of equipment purchasers.

 

Innovations to machinery and technology also influence buying. For example, larger, more productive equipment is well accepted where farmers are striving for more efficiency in their operations. The Company has developed a comprehensive agricultural management systems approach using advanced technology and global satellite positioning that should enable farmers to better control input costs and yields and to improve environmental management.

 

Large, cost-efficient, highly-mechanized agricultural operations account for an important share of worldwide farm output. The large-size agricultural equipment used on such farms has been particularly important to John Deere. A large proportion of the Equipment Operations’ total agricultural equipment sales in the United States is comprised of tractors over 100 horsepower, self-propelled combines, self-propelled cotton pickers and self-propelled forage harvesters.

 

Seasonality .  Seasonal patterns in retail demand for agricultural equipment result in substantial variations in the volume and mix of products sold to retail customers during various times of the year. Seasonal demand must be estimated in advance, and equipment must be manufactured in anticipation of such demand in order to achieve efficient utilization of manpower and facilities throughout the year. For certain equipment, the Company offers early order discounts to retail customers. Production schedules are based, in part, on these early order programs. The Equipment Operations incur substantial seasonal indebtedness with related interest expense to finance production and inventory of equipment. The Equipment Operations also incur costs to finance sales to dealers in advance of seasonal demand. The Equipment Operations often encourage early

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retail sales decisions for both new and used equipment, by waiving retail finance charges or offering low-rate financing, during off-season periods and in early order promotions.

 

An important part of the competition within the agricultural equipment industry during the past decade has come from a diverse variety of short-line and specialty manufacturers with differing manufacturing and marketing methods. Because of industry conditions, especially the merger of certain large integrated competitors, the agricultural equipment business continues to undergo significant change and may become more competitive.

 

Commercial and Consumer Equipment

 

John Deere commercial and consumer equipment includes rear-engine riding mowers, front-engine lawn tractors, lawn and garden tractors, compact utility tractors, utility tractors, front mowers and small utility vehicles. A broad line of associated implements for mowing, tilling, snow and debris handling, aerating, and many other residential, commercial, golf and sports turf care applications are also included. The product line also includes walk-behind mowers and other outdoor power products. Retail sales of commercial and consumer equipment products are influenced by weather conditions, consumer spending patterns and general economic conditions.

 

The division sells walk-behind mowers in Europe under the SABO brand name and commercial mowing equipment under the Roberine brand name. The division also builds products for sale by mass retailers. Since 1999, the Company has built products for sale through The Home Depot stores.

 

John Deere Landscapes, Inc., a unit of the division, distributes irrigation equipment, nursery products and landscape supplies primarily to landscape service professionals.

 

In 2002, the segment announced a realignment of its manufacturing operations in order to improve asset utilization and lower costs. As part of this effort, the Company closed facilities in Williamsburg, Virginia, and Jeffersonville, Indiana, and streamlined operations at its facility in Horicon, Wisconsin. The Williamsburg production of Gator ^® Utility Vehicles was moved to the Company’s facilities in Welland, Ontario, and Fuquay-Varina, North Carolina, where some of the Gator ^® Utility Vehicle line had been produced, and to the Horicon facility. The Jeffersonville production of Great Dane ^TM commercial mowing equipment was moved to the Company’s primary turf care equipment plant in Fuquay-Varina, North Carolina. In 2001, the segment announced plans to exit the consumer handheld products business. Affected by this decision were consumer products operations in the southeastern United States and Mexico. The company sold its hand-held consumer products operations in Chihuahua, Mexico and other United States facilities related to this business. See Note 2 to the Consolidated Financial Statements for more information on the restructuring costs and employee reductions for the segment.

 

In addition to the equipment manufactured by the commercial and consumer division, John Deere purchases certain products from other manufacturers for resale.

 

Construction and Forestry

 

John Deere construction, earthmoving, material handling and forestry equipment includes a broad range of backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, landscape loaders, skid-steer loaders, log skidders, log feller bunchers, log loaders, log forwarders, log harvesters, and a variety of attachments.

 

Today, this segment provides sizes of equipment that compete for over 90 percent of the estimated total North American market for those categories of construction, earthmoving and material handling

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equipment in which it competes. These construction, earthmoving and material handling machines are distributed under the Deere brand name. This segment also provides the most complete line of forestry machines and attachments available in the world. These forestry machines and attachments are distributed under both the Deere and Timberjack brand names. In addition to the equipment manufactured by the Construction and Forestry division, John Deere purchases certain products from other manufacturers for resale.

 

The prevailing levels of residential, commercial and public construction and the condition of the forest products industry influence retail sales of John Deere construction, earthmoving, material handling and forestry equipment. General economic conditions, the level of interest rates and certain commodity prices such as those applicable to pulp, paper and saw logs also influence sales.

 

The Company and Hitachi have a joint venture for the manufacture of hydraulic excavators and track log loaders in the United States and Canada. Beginning in May 2002, the Company began distributing Hitachi brands of construction and mining equipment in North, Central and South America. As part of the new arrangement, sales formerly split between the Company and Hitachi are now reported solely by the Company. The Company also has supply agreements with Hitachi under which a range of construction, earthmoving, material handling and forestry products manufactured by John Deere in the United States, Canada, Sweden, Finland and New Zealand are distributed by Hitachi in Japan and other Far East markets.

 

The division has a number of initiatives in the rent-to-rent, or short-term rental, market for construction, earthmoving and material handling equipment. These include specially designed rental programs for John Deere dealers, expanded cooperation with major national equipment rental companies and direct participation in the rent-to-rent market through the Company’s minority ownership in Sunstate Equipment Co., LLC and majority ownership of Shanghai Deere Rental Equipment Co. Ltd. in China.

 

The Company also has a minority ownership interest in Nortrax Inc., a venture involved in the ownership and development of several Deere construction-equipment dealers. Nortrax Inc. is, among other things, an authorized John Deere dealer for construction, earthmoving, material handling and forestry equipment in a variety of markets in North America.

 

In 2002, the Company completed the transfer of the engineering, production and marketing of its skid-steer loader product line from its facility in Loudon, Tennessee, to the Company’s factory in Dubuque, Iowa. In 2001, the Company also announced plans to reduce manufacturing and marketing costs in the construction and forestry segment. These plans included employee separations and the closing or sale of certain forestry equipment operations. See Note 2 to the Consolidated Financial Statement for more information on the restructuring costs and employee reductions for the segment.

 

Engineering and Research

 

John Deere makes large expenditures for engineering and research to improve the quality and performance of its products, and to develop new products. Such expenditures were $528 million, or 4.5 percent of net sales of equipment in 2002, $590 million, or 5.3 percent in 2001 and $542 million, or 4.9 percent in 2000.

 

Manufacturing

 

Manufacturing Plants .  In the United States and Canada, the Equipment Operations own and operate 23 factory locations and lease and operate another location, which contain approximately 29.9 million square feet of floor space. Of these 24 factories, ten are devoted primarily to agricultural equipment, five to commercial and consumer equipment, two to non-forestry construction equipment, one to engines, two to hydraulic and power train components, one to special technology equipment and three to forestry equipment.

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Overseas, the Equipment Operations own and operate: agricultural equipment factories in France, Germany, Mexico, The Netherlands, Brazil and South Africa (a factory in Argentina ceased operations on October 31, 2002); engine factories in Argentina, France and Mexico; a component factory in Spain; commercial and consumer equipment factories in Germany and The Netherlands; and forestry equipment factories in Finland, Sweden and New Zealand. These overseas factories contain approximately 10.6 million square feet of floor space. The Equipment Operations also have financial interests in other manufacturing organizations, which include agricultural equipment manufacturers in China, India and the United States, an industrial truck manufacturer in South Africa and the Hitachi joint venture that builds hydraulic excavators and track log loaders in the United States and Canada.

 

John Deere’s facilities are well maintained, in good operating condition and are suitable for their present purposes. These facilities, together with planned capital expenditures, are expected to meet John Deere’s manufacturing needs in the foreseeable future.

 

Capacity is adequate to satisfy anticipated retail demand. The Equipment Operations’ manufacturing strategy involves the implementation of appropriate levels of technology and automation to allow manufacturing processes to remain viable at varying production levels. Operations are also designed to be flexible enough to accommodate the product design changes required to meet market conditions. Common manufacturing facilities and techniques are employed in the production of components for agricultural, commercial and consumer and construction and forestry equipment.

 

In order to utilize manufacturing facilities and technology more effectively, the Equipment Operations pursue continuous improvements in manufacturing processes. These include steps to streamline manufacturing processes and enhance customer responsiveness. The Company has implemented flexible assembly lines that can handle a wider product mix and deliver products at the times when dealers and customers require them. Additionally, considerable effort is being directed to manufacturing cost reduction through process improvement, product design, advanced manufacturing technology, enhanced environmental management systems, supply management and compensation incentives related to productivity and organizational structure. The Equipment Operations also pursue external sales of selected parts and components that can be manufactured and supplied to third parties on a competitive basis .

 

Capital Expenditures.   The agricultural equipment, commercial and consumer equipment and construction and forestry operations’ capital expenditures totaled $351 million in 2002, compared with $480 million in 2001 and $399 million in 2000. Provisions for depreciation applicable to these operations’ property, plant and equipment during these years were $296 million, $295 million and $280 million, respectively. Capital expenditures for these operations in 2003 are currently estimated to approximate $430 million. The 2003 expenditures will be primarily related to the modernization and restructuring of key manufacturing facilities and will also be related to the development of new products. Future levels of capital expenditures will depend on business conditions.

 

Patents and Trademarks

 

John Deere owns a significant number of patents, licenses and trademarks which have been obtained over a period of years. The Company believes that, in the aggregate, the rights under these patents, licenses and trademarks are generally important to its operations, but does not consider that any patent, license, trademark or related group of them (other than its house trademarks) is of material importance in relation to John Deere’s business.

 

Marketing

 

In the United States and Canada, the Equipment Operations, excluding certain consumer product lines, distribute equipment and service parts through the following facilities (collectively called sales branches):

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one agricultural equipment sales and administration office supported by seven agricultural equipment sales branches; one construction, earthmoving, material handling and forestry equipment sales and administration office; and one commercial and consumer equipment sales and administration office.

 

In addition, the Equipment Operations operate a centralized parts distribution warehouse in coordination with several regional parts depots in the United States and Canada and have an agreement with a third party to operate a high-volume parts warehouse in Indiana.

 

The sales branches in the United States and Canada market John Deere products at approximately 3,200 dealer locations, most of which are independently owned. Of these, approximately 1,600 sell agricultural equipment, while 569 sell construction, earthmoving, material handling and/or forestry equipment. Nortrax Inc., an entity in which the Company has a minority interest, owns some of the 569. Commercial and consumer equipment is sold by most John Deere agricultural equipment dealers, a few construction, earthmoving, material handling and forestry equipment dealers, and about 1,030 commercial and consumer equipment dealers, many of whom also handle competitive brands and dissimilar lines of products. In addition, certain lawn and garden product lines are sold through various general and mass merchandisers, including The Home Depot.

 

Outside North America, John Deere agricultural equipment is sold to distributors and dealers for resale in over 160 countries. Sales branches are located in Germany, France, Italy, Russia, Spain, Switzerland, the United Kingdom, South Africa, Mexico, Brazil, Argentina, Uruguay, Australia and Hong Kong. Export sales branches are located in Europe and the United States. Associated companies doing business in China also sell John Deere agricultural equipment. Commercial and consumer equipment sales overseas occur primarily in Europe and Australia. Outside the United States and Canada, construction, earthmoving, material handling and forestry equipment is sold to distributors and dealers primarily by sales offices located in the United States, Singapore and Finland. Some of these dealers are independently owned while the Company owns others.

 

Trade Accounts and Notes Receivable

 

Trade accounts and notes receivable arise from sales of goods to dealers. To further align its capital structure and incentives with its goals to reduce asset intensity, in the fourth quarter of 2002, Financial Services began purchasing from the Equipment Operations trade receivable portfolios originated in Europe. In 2003, Financial Services anticipates continuing to purchase trade receivable portfolios originated in Europe. These European trade receivables are expected to total the equivalent of about $300 million to $500 million. This move mirrors a similar arrangement in the United States that the Company announced last year. A significant portion of newly originated trade receivables from these European countries will be sold to Financial Services on an ongoing basis. The Equipment Operations will compensate Financial Services at market rates of interest for these receivables. Additional information appears in Notes 1 and 8 to the Consolidated Financial Statements.

 

Special Technologies Group

 

The Special Technologies Group (STG) consists of four operating units that offer a range of electronic, wireless-communication, information-system and Internet-related products and services to the Company and outside customers. STG’s purpose is to integrate advanced technology into John Deere equipment and to make such advancements directly available to customers through a variety of business relationships and ventures. One STG unit, Phoenix International, makes electronic devices that control and monitor a variety of mobile-equipment functions. Another, AGRIS Corporation, is the world’s leading supplier of information-management systems for agribusinesses. NavCom develops systems for tracking the exact position of vehicles, and for transmitting data to and from vehicles on the move. John Deere Information Systems provides information-technology products and services to John Deere dealers.

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FINANCIAL SERVICES

 

Credit Operations

 

United States and Canada .  The Company’s credit subsidiaries (collectively referred to as the Credit Companies) primarily provide and administer financing for retail purchases from John Deere dealers of new equipment manufactured by the Company’s agricultural equipment, commercial and consumer equipment, and construction and forestry divisions and used equipment taken in trade for this equipment. Deere & Company and John Deere Construction & Forestry Company are referred to as the “sales companies.” John Deere Capital Corporation (Capital Corporation), a United States credit subsidiary, purchases retail installment sales and loan contracts (retail notes) from the sales companies. These retail notes are acquired by the sales companies through John Deere retail dealers in the United States. John Deere Credit Inc., a Canadian credit subsidiary, purchases and finances retail notes acquired by John Deere Limited, the Company’s Canadian sales branch. The terms of retail notes and the basis on which the Credit Companies acquire retail notes from the sales companies are governed by agreements with the sales companies. The Credit Companies also finance and service revolving charge accounts, in most cases acquired from and offered through merchants in the agricultural, commercial and consumer and construction and forestry markets (revolving charge accounts). Further, the Credit Companies finance and service operating loans, in most cases acquired from and offered through farm input providers, and provide insured international export financing generally involving John Deere products (operating loans). Additionally, the Credit Companies provide wholesale financing for inventories of John Deere engines and John Deere agricultural, commercial and consumer, and construction and forestry equipment owned by dealers of those products (wholesale notes).

 

Retail notes acquired by the sales companies are immediately sold to the Credit Companies. The Equipment Operations are the Credit Companies’ major source of business, but many retail purchasers of John Deere products finance their purchases outside the John Deere organization.

 

The Credit Companies offer retail leases to equipment users in the United States. A small number of leases are executed with units of local government. Leases are usually written for periods of two to five years, and frequently contain an option permitting the customer to purchase the equipment at the end of the lease term. Retail leases are also offered in a generally similar manner to customers in Canada through John Deere Credit Inc. and John Deere Limited.

 

The Credit Companies’ terms for financing equipment retail sales (other than smaller items financed with unsecured revolving charge accounts) provide for retention of a security interest in the equipment financed. The Credit Companies’ guidelines for minimum down payments, which vary with the types of equipment and repayment provisions, are generally not less than 20 percent on agricultural and construction and forestry equipment and 10 percent on lawn and grounds care equipment used for personal use. Finance charges are sometimes waived for specified periods or reduced on certain John Deere products sold or leased in advance of the season of use or in other sales promotions. The Credit Companies generally receive compensation from the sales companies equal to a competitive interest rate for periods during which finance charges are waived or reduced on the retail notes or leases. The cost is accounted for as a deduction in arriving at net sales by the Equipment Operations.

 

The Company has an agreement with the Capital Corporation to make income maintenance payments to the Capital Corporation such that its ratio of earnings before fixed charges to fixed charges is not less than 1.05 to 1 for any fiscal quarter. For 2002 and 2001, the Capital Corporation’s ratios were 1.97 to 1 and 1.53 to 1, respectively. The Company has also committed to continue to own at least 51 percent of the voting shares of capital stock of the Capital Corporation and to maintain the Capital Corporation’s consolidated tangible net worth at not less than $50 million. The Company’s obligations to make payments to the Capital Corporation under the agreement are independent of whether the Capital Corporation is in default on its

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indebtedness, obligations or other liabilities. Further, the Company’s obligations under the agreement are not measured by the amount of the Capital Corporation’s indebtedness, obligations or other liabilities. The Company’s obligations to make payments under this agreement are expressly stated not to be a guaranty of any specific indebtedness, obligation or liability of the Capital Corporation and are enforceable only by or in the name of the Capital Corporation. No payments were necessary under this agreement in 2001 or 2002.

 

Overseas . The Credit Companies offer equipment financing products in Argentina, Australia, Brazil, Finland, France (through a joint venture), Germany, Italy (through a cooperation agreement), Luxembourg, Mexico, New Zealand, Spain, Sweden and the United Kingdom. Retail sales financing outside of the United States and Canada is affected by a diversity of customs and regulations.

 

Additional information on the Credit Companies appears on pages 17, 20 and 21.

 

Health Care

 

In 1985, the Company formed John Deere Health Care, Inc. to commercialize the Company’s expertise in the field of health care, which had been developed from efforts to manage its own health care costs. John Deere Health currently provides health management programs and related administrative services, through its health maintenance organization subsidiary, John Deere Health Plan, Inc., for companies located in Illinois, Iowa, Tennessee and Virginia. At October 31, 2002, approximately 516,000 individuals were enrolled in these programs, of which approximately 71,000 were John Deere employees, retirees and their dependents.

 

ENVIRONMENTAL MATTERS

 

The Company is subject to a wide variety of state, federal and international environmental laws, rules and regulations. These laws, rules and regulations may affect the way the Company conducts its operations, and failure to comply with these regulations could lead to fines and other penalties. The Company is also involved in the evaluation and clean-up of a limited number of sites that it owns. Management does not expect that these matters will have a material adverse effect on the consolidated financial position or results of operations of the Company. With respect to recently acquired properties, the Company cannot be certain that it has identified all adverse environmental conditions. The Company expects that it will acquire additional properties in the future.

 

EMPLOYEES

 

At October 31, 2002, John Deere had approximately 43,000 full-time employees, including approximately 26,900 employees in the United States and Canada. From time to time, John Deere also retains consultants, independent contractors, and temporary and part-time workers. Unions are certified as bargaining agents for approximately 40% percent of John Deere’s United States employees. Most of the Company’s United States production and maintenance workers are covered by a collective bargaining agreement with the United Auto Workers (UAW), with an expiration date of September 30, 2003.

 

The majority of employees at John Deere manufacturing facilities in Canada and overseas are also represented by unions.

 

 

*Effective on January 1, 2003, Michael P. Orr is retiring as President, Financial Services Division, Samuel R. Allen will become President, Global Financial Services and Corporate Human Resources and John J. Jenkins will assume responsibility for John Deere Health.