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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14A-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under Rule 14a-12.
DEERE & COMPANY
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO]
DEERE & COMPANY
One John Deere Place
Moline, Illinois 61265
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 28, 2001
The annual meeting of stockholders of Deere & Company will be held at the
principal office of the Company, at One John Deere Place, near Moline, Rock
Island County, Illinois, on Wednesday, February 28, 2001, at 10 a.m.
Directions to the meeting location appear on the back cover of the proxy
statement. The annual meeting is being held to:
1. Elect directors.
2. Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on December 31, 2000, are
entitled to vote at the meeting.
To be sure that your shares are represented at the meeting, please either
complete and promptly mail the enclosed proxy card in the envelope provided
for this purpose or vote through the telephone or Internet voting procedures
described on the proxy card. If your shares are registered in the name of a
bank or brokerage firm, telephone or Internet voting will be available to you
only if offered by your bank or broker and such procedures are described on
the voting form sent to you.
Most stockholders can elect to view future proxy statements and annual reports
over the Internet instead of receiving paper copies in the mail. Please refer
to page 20 of the proxy statement and your proxy card for further information.
For the Board of Directors,
/s/ Michael A. Harring
Moline, Illinois Michael A. Harring
January 18, 2001 Secretary
YOUR VOTE IS IMPORTANT
STOCKHOLDERS ARE URGED TO VOTE BY USING THE CONVENIENCE OF TELEPHONE OR
INTERNET VOTING, IF AVAILABLE, OR BY SIGNING, DATING AND RETURNING THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED
IF MAILED IN THE UNITED STATES.
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TABLE OF CONTENTS
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Page
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Proxy Statement............................................................ 1
Election of Directors...................................................... 2
Other Matters.............................................................. 3
Directors Continuing in Office............................................. 3
Named Executive Officers Who Are Not Directors............................. 4
Certain Business Relationships............................................. 5
Principal Holders of Voting Securities..................................... 5
Committees................................................................. 6
Compensation of Directors.................................................. 7
Audit Review Committee Report.............................................. 8
Committee on Compensation Report on Executive Compensation................. 9
Comparison of Five-Year Cumulative Total Return............................ 13
Compensation of Executive Officers......................................... 14
Stockholder Proposals and Nominations...................................... 19
Cost of Solicitation....................................................... 20
Annual Report.............................................................. 20
Electronic Access to Proxy Statement and Annual Report..................... 20
Appendix A--Audit Review Committee Charter................................. A-1
Appendix B--Financial Statements and Related Financial Information
Statement of Consolidated Income......................................... B-1
Consolidated Balance Sheet............................................... B-3
Statement of Consolidated Cash Flows..................................... B-5
Statement of Changes in Consolidated Stockholders' Equity................ B-7
Report of Management..................................................... B-8
Independent Auditors' Report............................................. B-8
Management's Discussion and Analysis (Unaudited)......................... B-9
Notes to Consolidated Financial Statements............................... B-15
Selected Financial Data.................................................. B-28
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PROXY STATEMENT
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TO THE STOCKHOLDERS: The Board of Directors of Deere & Company solicits your
proxy, and asks that you vote, sign, date, and promptly mail the enclosed
proxy card for use at the annual meeting of stockholders to be held February
28, 2001, and at any adjournment of such meeting. Most stockholders have a
choice of voting by using a toll-free telephone number, by voting over the
Internet or by completing a proxy card and mailing it in the postage-paid
envelope provided. Please refer to your proxy card or the information
forwarded by your bank, broker or other holder of record to see which options
are available to you. The telephone and Internet voting facilities for
stockholders of record will close at 12:01 a.m. eastern standard time on
February 28, 2001. If you vote over the Internet, you may incur costs such as
telephone and Internet access charges for which you will be responsible. The
telephone and Internet voting procedures are designed to authenticate
stockholders by use of a control number and to allow you to confirm that your
instructions have been properly recorded. If your shares are held through the
Company's Savings and Investment Plan or Tax Deferred Savings Plan For Hourly
and Incentive Paid Employees, your proxy instruction card must be received by
February 23, 2001, or the shares represented by the card will not be voted.
Whether you own few or many shares, your proxy is important in helping to
achieve good representation at the meeting.
If you wish, at any time before your proxy is voted, you may revoke it by
written notice to the Company, or by delivery of a later-dated proxy
(including a telephone or Internet vote), or by voting in person at the
meeting.
The shares represented by all properly executed proxies will be voted as
specified by you. In the absence of direction, properly executed proxies will
be voted for the nominees to the Board set forth below.
The holders of a majority of the Company's outstanding shares, present in
person or by proxy, are required for a quorum at the meeting. Abstentions and
broker non-votes are counted as present for purposes of determining the
presence or absence of a quorum for the transaction of business. The Company
had 234,656,260 shares of common stock outstanding on December 31, 2000. Each
share has one vote on each matter to be voted on at the meeting and one vote
for each directorship to be filled on the Board of Directors.
If any nominee for election as a director is unable or declines to accept
nomination or election for any reason, the persons designated in your proxy
may vote for a substitute.
A plurality of the votes cast at the meeting is required to elect
directors. Abstentions and broker non-votes will have no effect on the outcome
of the election of directors.
The Company's policy is to provide stockholders privacy in voting. All
proxy cards and ballots that identify votes of stockholders are held
confidential, except: (i) as may be necessary to meet applicable legal
requirements; (ii) to allow independent third-parties to solicit, receive,
tabulate, and certify the results of the vote; (iii) in cases where
stockholders write comments on their proxy cards; and (iv) in contested proxy
solicitations in which the opposing party does not also agree to comply with
this policy. The tabulator of the votes and at least one of the inspectors of
voting are independent of the Company, its officers and directors. The
tabulator, the Company's proxy solicitation agent, and the inspectors of
voting, including those who are Company employees, are required to comply with
the Company's confidentiality guidelines which prohibit disclosure of votes to
the Company.
Stockholders of record at the close of business on December 31, 2000, are
entitled to vote. This notice of meeting, proxy statement, and proxy card are
being mailed to stockholders on or about January 18, 2001.
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ELECTION OF DIRECTORS
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Four directors are to be elected for terms expiring at the annual meeting
in 2004. The persons named below were recommended by the Corporate Governance
Committee and nominated by the Board of Directors. The nominees' principal
occupations during the past five or more years, positions with the Company,
directorships in other companies, ages, and beneficial ownership of shares,
share units, and of exercisable options to purchase shares of the Company at
December 31, 2000, appear in that order after their names. As used below
"restricted stock" refers to non-transferable stock, issued pursuant to the
John Deere Equity Incentive Plan or the Nonemployee Director Stock Ownership
Plan, which is subject to risk of forfeiture if certain conditions are not
met. "Share units" represent director compensation and earnings thereon
deferred pursuant to the Nonemployee Director Deferred Compensation Plan and
valued as if invested in shares of the Company. No nominee owned beneficially
more than .2% of the shares outstanding on December 31, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE RECOMMENDED NOMINEES
FOR ELECTION AS A DIRECTOR.
NOMINEES FOR TERMS EXPIRING AT ANNUAL MEETING IN 2004
Mr. Robert W. Lane Chairman, President and Chief Executive Officer of Deere
& Company since August 2000; Chief Executive Officer and President of Deere &
Company May 2000 to August 2000; President January 2000 to May 2000;
President, Worldwide Agricultural Equipment Division September 1999 to January
2000; prior thereto, Senior Vice President. Director of Deere & Company since
May 2000; Chairman of Executive Committee. Age 51. Shares owned, 61,284
(includes 11,835 shares of restricted stock); and shares under exercisable
option 251,057.
Mr. Antonio Madero B. Chairman, President and Chief Executive Officer of
SANLUIS Corporacion, S.A. de C. V. (automotive components manufacturing and
mining) since 1979. Director of Deere & Company since 1997; member of Audit
Review and Pension Plan Oversight Committees. Director of a variety of
corporations in Mexico and a member of the International Advisory Council of
J. P. Morgan Chase & Co. Age 63. Shares owned, 3,358 (includes 3,358 shares of
restricted stock). Share units owned 2,943.
Mr. John R. Stafford Chairman and Chief Executive Officer of American Home
Products Corporation (pharmaceuticals and consumer health care) since 1986.
Director of Deere & Company since 1997; Chair of Committee and Special
Subcommittee on Compensation and member of Corporate Governance and Executive
Committees. Director of American Home Products Corporation, Honeywell
International Inc., J. P. Morgan Chase & Co. and Verizon Communications, Inc.
Age 63. Shares owned, 10,509 (includes 3,509 shares of restricted stock).
Share units owned 2,688.
Mr. John R. Walter Chairman of Manpower Inc. (temporary staffing) since
April 1999; President and Chief Operating Officer of AT&T Corp.
(telecommunications) November 1996 to July 1997; prior thereto, Chairman,
President and Chief Executive Officer of R. R. Donnelley & Sons Company (print
and digital information management, reproduction and distribution). Director
of Deere & Company since 1991; member of Committee and Special Subcommittee on
Compensation and Corporate Governance Committee. Director of Abbott
Laboratories, Applied Graphics Technologies, Inc., Celestica Inc., Jones Lang
LaSalle Incorporated, Manpower Inc. and Ultimate Software Group, Inc. Age 53.
Shares owned, 6,959 (includes 6,059 shares of restricted stock).
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OTHER MATTERS
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After the deadline for inclusion of stockholder proposals in the Company's
proxy statement established by Rule 14a-8 ("Rule 14a-8") under the Securities
Exchange Act of 1934 ("Exchange Act") the Company received two proposals. Mr.
Steve Baugher submitted a proposal that the Company provide all stockholders
of record a copy of certain rules and regulations concerning stockholder
proposals. Such rules and regulations are publicly available. Mr. Joseph
Albrecht submitted a proposal requiring that certain customer equipment
problems be settled as specified in his proposal. If properly brought before
the meeting, the persons named in the proxy will vote against each of the
proposals. Mr. David L. Duffek submitted a nomination of Mr. Melroy Buhr for
election to the Board of Directors. The persons named in the proxy will vote
for the individuals nominated by the Board of Directors.
The Board of Directors is not aware of any other matters that will come
before the meeting. However, if any other proper business should come before
the meeting, your proxy, if signed and returned, will give to the persons
designated in it discretionary authority to vote according to their best
judgment.
DIRECTORS CONTINUING IN OFFICE
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The eight persons named below are now serving as directors of the Company
for terms expiring at the annual meetings in 2002 and 2003 as indicated. Their
principal occupations during the past five or more years, positions with the
Company, directorships in other companies, ages, and beneficial ownership of
shares, including restricted shares, share units, and of exercisable options
to purchase shares of the Company at December 31, 2000, appear in that order
after their names. As used below "restricted stock" refers to non-transferable
stock issued pursuant to the Nonemployee Director Stock Ownership Plan, which
is subject to risk of forfeiture if certain conditions are not met. "Share
units" represent director compensation and earnings thereon deferred pursuant
to the Nonemployee Director Deferred Compensation Plan and valued as if
invested in shares of the Company. No director continuing in office owned
beneficially more than .1% of the shares outstanding on December 31, 2000.
TERMS EXPIRING AT ANNUAL MEETING IN 2002
Mr. John R. Block President of Food Distributors International (formerly
the National-American Wholesale Grocers' Association) since 1986; prior
thereto, United States Secretary of Agriculture; part owner and operator of
Block Farms (farming). Director of Deere & Company since 1986: member of
Committee and Special Subcommittee on Compensation and Pension Plan Oversight
Committee. Director of Archer-Daniels-Midland Company and Hormel Foods
Corporation. Age 65. Shares owned, 7,259 (includes 6,659 shares of restricted
stock). Share units owned 8,041.
Mr. T. Kevin Dunnigan Chairman, Chief Executive Officer and President of
Thomas & Betts Corporation (electrical components) since August 2000; Retired
Chairman of Thomas & Betts Corporation May 2000 to August 2000; Chairman 1997
to May 2000; prior thereto, Chairman and Chief Executive Officer. Director of
Deere & Company since May 2000; member of Audit Review and Corporate
Governance Committees. Director of C. R. Bard, Inc. and Thomas & Betts
Corporation. Age 62. Shares owned, 3,225 (includes 1,225 shares of restricted
stock).
Prof. Regina E. Herzlinger Nancy R. McPherson Professor of Business
Administration at the Harvard Business School since 1971. Director of Deere &
Company since 1993; Chair of Corporate Governance Committee and member of
Audit Review and Executive Committees. Director of Cardinal
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Health, Inc., C. R. Bard, Inc., Nanogen, Inc. and Schering-Plough Corporation.
Age 57. Shares owned, 6,659 (includes 6,659 shares of restricted stock). Share
units owned 8,546.
Dr. Arnold R. Weber President Emeritus of Northwestern University,
Evanston, Illinois since 1998; Chancellor of Northwestern University 1995 to
1998; prior thereto, President. Director of Deere & Company since 1994; member
of Committee and Special Subcommittee on Compensation and Pension Plan
Oversight Committee. Director of Aon Corporation, Burlington Northern Santa Fe
Corporation, Diamond Technology Partners Incorporated and Tribune Company. Age
71. Shares owned, 6,359 (includes 5,759 shares of restricted stock). Share
units owned 1,486.
TERMS EXPIRING AT ANNUAL MEETING IN 2003
Mrs. Crandall C. Bowles Chairman, President and Chief Executive Officer of
Springs Industries, Inc. (textiles) since April 1998; President and Chief
Executive Officer of Springs Industries, Inc. December 1997 to April 1998;
President and Chief Operating Officer January to December 1997; prior thereto,
Executive Vice President. Director of Deere & Company from 1990 to 1994 and
since 1999; member of Committee on Compensation and Corporate Governance
Committee. Director of Springs Industries, Inc. Age 53. Shares owned, 3,397
(includes 1,997 shares of restricted stock). Share units owned 781.
Mr. Leonard A. Hadley President and Chief Executive Officer of Maytag
Corporation (appliances) since November 2000; Retired Chairman and Chief
Executive Officer of Maytag Corporation August 1999 to November 2000; prior
thereto, Chairman and Chief Executive Officer. Director of Deere & Company
since 1994; Chair of Audit Review Committee and member of Executive and
Pension Plan Oversight Committees. Director of H Power Corp., Maytag
Corporation and Snap-on Incorporated. Age 66. Shares owned, 5,159 (includes
5,159 shares of restricted stock). Share units owned 11,267.
Mr. Arthur L. Kelly Managing Partner of KEL Enterprises L.P. (holding and
investment partnership) since 1983. Director of Deere & Company since 1993;
Chair of Pension Plan Oversight Committee and member of Audit Review and
Executive Committees. Director of BASF Aktiengesellschaft, Bayerische Motoren
Werke (BMW) A.G., HomePlace of America, Inc., The Northern Trust Corporation,
Snap-on Incorporated and Thyssen-Krupp Industries A.G. Age 63. Shares owned,
11,948 (includes 5,858 shares of restricted stock). Share units owned 2,635.
Mr. Thomas H. Patrick Executive Vice President and Chief Financial Officer
of Merrill Lynch & Co., Inc. (financial services) since February 2000;
Executive Vice President of Merrill Lynch & Co., Inc. 1989 to February 2000;
and Chairman of the Special Advisory Services Group and Member of the Office
of the Chairman of Merrill Lynch & Co., Inc. from 1994 to 1999. Director of
Deere & Company since February 2000; member of Committee on Compensation and
Pension Plan Oversight Committee. Director of Baldwin & Lyons, Inc. and
Comdisco, Inc. Age 57. Shares owned, 11,665 (includes 1,665 shares of
restricted stock). Share units owned 1,316.
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
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The five persons named below are the executive officers named in the
Summary Compensation Table who are not directors of the Company. Their
positions with the Company during the past five or more years, ages and
beneficial ownership of shares, including restricted shares and of exercisable
options to purchase shares of the Company at December 31, 2000, appear in that
order after their names. As used below "restricted stock" refers to non-
transferable stock, issued pursuant to the John Deere Restricted Stock Plan or
the John Deere Equity Incentive Plan, which is subject to risk of forfeiture
if certain conditions are not met. No named executive officer owned
beneficially more than .7% of the shares outstanding on December 31, 2000.
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Mr. Hans W. Becherer Retired Chairman and Chief Executive Officer of Deere
& Company since August 2000; prior thereto, Chairman and Chief Executive
Officer of Deere & Company. Age 66. Shares owned, 219,542 (includes 46,111
shares of restricted stock); and shares under exercisable option 1,284,977.
Mr. Fred F. Korndorf President, Worldwide Agricultural Equipment Division
since January 2000; President, Worldwide Commercial and Consumer Equipment
Division and Deere Power Systems Group 1996 to 2000; President, Worldwide
Industrial Equipment Division 1995 to 1996; prior thereto, Senior Vice
President. Age 51. Shares owned, 78,350 (includes 47,595 shares of restricted
stock); and shares under exercisable option 299,972.
Mr. Pierre E. Leroy President, Worldwide Construction Equipment Division
and Deere Power Systems Group since February 2000; President, Worldwide
Construction Equipment Division 1996 to 2000; prior thereto, Senior Vice
President and Chief Financial Officer. Age 52. Shares owned, 96,600 (includes
47,595 shares of restricted stock); and shares under exercisable option
260,412.
Mr. John K. Lawson Senior Vice President since 1996; prior thereto,
President, Worldwide Lawn & Grounds Care Division and Deere Power Systems
Group. Age 60. Shares owned, 67,268 (includes 26,459 shares of restricted
stock and 8,520 shares over which Mr. Lawson shares the power over voting and
disposition); and shares under exercisable option 256,087.
Mr. Michael P. Orr President, Financial Services Division since 1997; prior
thereto, Vice President of Deere & Company and President and Chief Operating
Officer of John Deere Credit Company. Age 53. Shares owned, 71,641 (includes
47,416 shares of restricted stock); and shares under exercisable option
108,891.
At December 31, 2000, directors and executive officers as a group (20
persons), beneficially owned an aggregate of 1,897,637 shares (0.81%) of
common stock of the Company. This total includes: 187,574 shares held with
sole power over voting and disposition; 65,000 shares held with shared power
over voting or disposition; 129,899 shares of restricted stock under the John
Deere Restricted Stock Plan; 80,367 shares of restricted stock under the John
Deere Equity Incentive Plan; 47,907 shares of restricted stock under the
Nonemployee Director Stock Ownership Plan; and 1,386,890 shares represented by
exercisable stock options.
CERTAIN BUSINESS RELATIONSHIPS
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Mr. Thomas H. Patrick, a director of the Company, is an Executive Vice
President and Chief Financial Officer of Merrill Lynch & Co., Inc. During
fiscal 2000, the Company engaged Merrill Lynch & Co., Inc. and certain of its
subsidiaries to provide, in the ordinary course of business, investment
banking, financial advisory and other services. The Company expects to engage
such firm for similar services during fiscal 2001.
PRINCIPAL HOLDERS OF VOTING SECURITIES
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Listed below are certain persons who, to the knowledge of the Company, own
beneficially more than five percent of the Company's Common Stock. This
information is based on information supplied by such persons and in reports of
institutional investment managers filed with the Securities and Exchange
Commission.
As of September 30, 2000, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071 ("Capital"), held 18,640,000
shares (or approximately 7.9%) of the Company. Capital is not the ultimate
owner of these shares, but holds them on behalf of institutional
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and individual investors. Capital disclaims beneficial ownership of such
shares and has no voting power with respect to such shares. Capital has the
sole power to dispose or direct the disposition of such shares.
As of September 30, 2000, Massachusetts Financial Services Company, 500
Boylston Street, Boston, Massachusetts 02116-3741 ("MFS") beneficially owned,
14,266,516 shares (or approximately 6.1%) of the Company as a result of its
serving as investment advisor to various registered investment companies and
funds. MFS is not the ultimate owner of such shares, but holds them on behalf
of institutional and individual investors. MFS has sole voting power with
respect to 14,098,746 shares and sole dispositive power with respect to
14,264,076 shares.
As of September 30, 2000, FMR Corp., 82 Devonshire Street, Boston,
Massachusetts 02109-3614, beneficially owned, on behalf of its subsidiaries
Fidelity Management & Research Company, Fidelity Management Trust Company and
Fidelity International Limited, 12,545,515 shares (or approximately 5.3%) of
the Company. This number includes: 12,090,370 shares beneficially owned by
Fidelity Management & Research Company, as a result of its serving as
investment adviser to various registered investment companies and funds;
350,345 shares beneficially owned by Fidelity Management Trust Company, as a
result of its serving as investment manager for institutional accounts; and
104,800 shares beneficially owned by Fidelity International Limited, as a
result of it providing investment and advisory services to foreign investment
companies and institutional investors. FMR Corp.'s beneficial ownership of
Company shares arises in the context of passive investment activities only by
various institutional investment accounts managed by FMR Corp. and its
subsidiaries. FMR Corp. has sole voting power with respect to 455,145 shares
and sole dispositive power with respect to all the shares it beneficially
owns.
COMMITTEES
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The Board of Directors of the Company, which met five times during the 2000
fiscal year, has delegated some of its authority to six committees of the
Board. These are the Executive Committee, the Committee on Compensation, the
Special Subcommittee of the Committee on Compensation, the Corporate
Governance Committee, the Pension Plan Oversight Committee, and the Audit
Review Committee. During the 2000 fiscal year, all of the directors attended
75% or more of the meetings of the Board of Directors and Committees on which
they served.
The Committee on Compensation, which met four times during the 2000 fiscal
year, currently consists of John R. Stafford (Chair), John R. Block, Crandall
C. Bowles, Thomas H. Patrick, John R. Walter, and Dr. Arnold R. Weber. The
Committee has responsibility with respect to compensation matters involving
senior officers of the Company. The annual report of the Committee on
Compensation is set forth below.
The Special Subcommittee of the Committee on Compensation, which met four
times during the 2000 fiscal year, currently consists of John R. Stafford
(Chair), John R. Block, John R. Walter, and Dr. Arnold R. Weber. The
Subcommittee was established to assure continued compliance with regulations
regarding executive compensation approval and consists of directors who are
independent of the Company. The Subcommittee has responsibility for reviewing
and approving compensation plans, grants, and awards involving officers of the
Company. The Subcommittee also may consider such other matters as are referred
to it by the Committee on Compensation.
The Corporate Governance Committee, which met twice during the 2000 fiscal
year, currently consists of Regina E. Herzlinger (Chair), Crandall C. Bowles,
T. Kevin Dunnigan, John R. Stafford, and John R. Walter. The responsibilities
of the Corporate Governance Committee are to recommend and monitor policies
and procedures relating to corporate governance, to recommend to the Board
individuals for nomination or election to the Board, to ensure that the Chair
periodically reviews the
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Company's plans regarding succession of senior management with the Committee
and with all other independent directors, to make recommendations concerning
the size, composition, committee structure, and fees for the Board and
criteria relating to tenure and retention of directors and to review and
report to the Board on the performance and effectiveness of the Board. The
Committee will consider individuals recommended for nomination by stockholders
in accordance with the procedures described under "Stockholder Proposals and
Nominations."
The Pension Plan Oversight Committee, which met twice during the 2000
fiscal year, currently consists of Arthur L. Kelly (Chair), John R. Block,
Leonard A. Hadley, Antonio Madero B., Thomas H. Patrick and Dr. Arnold R.
Weber. The Committee reviews asset allocation, actuarial assumptions, funding
policies, and the performance of trustees, investment managers, and actuaries,
for the Company's pension and retirement plans. The Committee also has
authority to make substantive amendments and modifications to the pension and
retirement plans. The Committee reports to the Board on its activities.
The Audit Review Committee, which met three times during the 2000 fiscal
year, currently consists of Leonard A. Hadley (Chair), T. Kevin Dunnigan,
Regina E. Herzlinger, Arthur L. Kelly, and Antonio Madero B. The Committee
recommends to the Board a firm of independent certified public accountants to
audit the annual financial statements, determines whether to recommend that
the financial statements be included in the Company's annual report filed with
the Securities and Exchange Commission, approves in advance the scope of the
audit, reviews the independence of the certified public accountants, reviews
with the independent auditors the financial statements and their audit report,
reviews the Company's procedures relating to business ethics, consults with
the internal audit staff and reviews management's administration of the system
of internal accounting controls, and reviews the adequacy of the Committee
charter. The Committee reports to the Board on its activities and findings.
The Board has adopted a written charter for the Audit Review Committee. A copy
of the charter is attached hereto as an appendix. The annual report of the
Audit Review Committee is set forth below.
In accordance with the recommendation of the Audit Review Committee, the
firm of Deloitte & Touche llp has been appointed by the Board of Directors as
independent certified public accountants to examine the financial statements
of the Company for the 2001 fiscal year. A representative of Deloitte & Touche
llp is expected to be present at the stockholders' meeting. This
representative will have an opportunity to make a statement and will be
available to respond to appropriate questions.
COMPENSATION OF DIRECTORS
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Directors who are not employees of the Company receive a single annual
retainer of $60,000 for serving as directors. There are no additional
committee retainers or meeting fees. Directors may elect to defer a part or
all of their annual retainers pursuant to the Company's Nonemployee Director
Deferred Compensation Plan. Deferrals are invested in an interest-bearing
account or in a Company stock equivalent investment alternative at the
election of the director.
Nonemployee directors also are awarded $60,000 of restricted shares of
common stock of the Company upon election to the Board and annually
thereafter. A person who becomes a nonemployee director between annual
meetings or who serves a partial term will receive a prorated grant. The
restricted shares may not be sold, pledged, assigned, gifted, or otherwise
alienated or hypothecated and are subject to forfeiture until the expiration
of the restriction period, which ends upon the nonemployee directors'
retirement from the Board, permanent and total disability, death or a change
in control of the Company. While the restrictions are in effect, the
nonemployee directors are entitled to vote the shares and receive dividends.
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The report of the Audit Review Committee, the report of the Committee on
Compensation and the performance graph that follow shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement or future filings into any filing under the Securities
Act of 1933 or under the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates the information by reference, and
shall not otherwise be deemed filed under such Acts.
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AUDIT REVIEW COMMITTEE REPORT
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To the Board of Directors: December 6, 2000
The Audit Review Committee consists of the following members of the Board
of Directors: Leonard A. Hadley (Chair), T. Kevin Dunnigan, Regina E.
Herzlinger, Arthur L. Kelly, and Antonio Madero B. Each of the members is
independent as defined under the rules of the New York Stock Exchange.
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended October 31, 2000.
We have discussed with the independent auditors, Deloitte & Touche llp, the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards
Board of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
Deloitte & Touche llp required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in the Company's Annual Report on Form 10-K for the fiscal year ended October
31, 2000 for filing with the Securities and Exchange Commission.
Audit Review Committee
Leonard A. Hadley (Chair)
T. Kevin Dunnigan
Regina E. Herzlinger
Arthur L. Kelly
Antonio Madero B.
8
<PAGE>
COMMITTEE ON COMPENSATION
REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------------------------------
Compensation Philosophy
The Committee on Compensation of the Board (the "Committee") is committed
to providing a total compensation program that supports the Company's business
strategy and culture, and creates a commonality of interest with the Company's
stockholders. The Committee is responsible for the oversight of executive
compensation and reviews the Company's compensation program on an ongoing
basis. No member of the Committee is a former or current officer of the
Company or any of its subsidiaries.
The overall philosophy of the Committee regarding executive compensation
can be summarized as follows:
. Provide a target total reward opportunity that is sufficiently
competitive to attract and retain high caliber executives. In general,
this involves a target total pay structure that is between the median and
75th percentile of pay levels available at a comparable group of large,
diversified companies;
. Link a meaningful portion of the total compensation opportunity to
performance-based incentives consistent with the creation of stockholder
value and the Company's long-term strategic goals;
. Provide for meaningful risk as well as reward in order to penalize
substandard performance while encouraging superior performance and
recognizing the cyclical nature of the Company's core businesses;
. Provide flexibility to recognize, differentiate and reward individual
performance; and
. Structure the program to be positively regarded by the Company's
stockholders, employees, the financial community and the public in
general, as well as by the eligible executive management.
The Revenue Reconciliation Act of 1993 placed certain limits on the tax
deductibility of non-performance-based executive compensation. The Committee
intends that, to the extent practicable, executive compensation be deductible
for federal income tax purposes provided doing so would be consistent with the
other compensation objectives. For this reason, at the 2000 annual meeting
stockholders approved the John Deere Omnibus Equity and Incentive Plan (the
"Omnibus Plan") and re-approved the performance goals under the John Deere
Performance Bonus Plan (the "Bonus Plan") and the John Deere Equity Incentive
Plan (the "Equity Incentive Plan"). Each of these plans was designed to meet
the compensation objectives and to comply with the requirements for tax
deductibility.
The specific practices surrounding each component of the Company's
executive compensation program are described in the following paragraphs.
Base Salary
It is the Committee's policy to position the base salaries of the Company's
executives at approximately the median level of base salaries provided to
comparable positions within a peer group of companies which share some
combination of the following characteristics with the Company: comparable
sales volumes; similar products and services; a similar commitment to
manufacturing as a core activity; and a comparable global presence. Currently,
this peer group consists of 28 companies, two of which are also included among
the four companies, other than the Company, that comprise the
9
<PAGE>
S&P Diversified Machinery Group Index used in the performance graph following
this report. It is the Committee's view that this larger peer group provides a
more appropriate and reliable benchmark for assessing competitive levels of
compensation than the limited number of companies within the S&P Diversified
Machinery Group Index.
The Committee annually reviews the base salary of each executive officer of
the Company, including Mr. Lane, the Chief Executive Officer ("CEO"). In
determining salary adjustments for the Company's executives (including Mr.
Lane and the other executive officers named in the Summary Compensation
Table), the Committee takes into consideration various factors, including
individual performance; the financial and operational performance of the
activities directed by the executive (including profitability under prevailing
business conditions, performance against budget, customer satisfaction, and
innovation); experience; time in position; future potential; responsibility;
and the executive's current salary in relation to the executive's salary range
and the median salary practices of the peer group. These factors are
considered subjectively in the aggregate and none of the factors is accorded a
specific weight. In selected cases, other factors may also be considered. Peer
group salary data for comparable-level positions are provided annually to the
Committee by an outside compensation consultant.
Mr. Lane's base salary for fiscal 2000 was below the peer group median as
it was his initial year as Chairman, President and CEO. Mr. Lane was elected
CEO in May 2000 and received a base salary of $619,076 for fiscal 2000. For
fiscal 2000, the base salaries of Mr. Becherer and the other executive
officers named in the Summary Compensation Table were essentially equal to the
peer group median and generally consistent with the base salary philosophy
established by the Committee. Mr. Becherer retired as Chairman of the Board in
August 2000. Mr. Becherer received a base salary of $1,029,789 for fiscal 1999
and $1,027,347 for fiscal 2000.
Short-Term Incentives
A substantial portion of the Company's executive compensation package is
contingent upon the Company attaining preestablished financial goals under the
Bonus Plan. Each year in which these goals are achieved, the compensation of
all salaried employees (including Mr. Lane and the other executive officers
named in the Summary Compensation Table) is supplemented by fiscal year-end
payments under the Bonus Plan. The amount of these payments (if any) depends
upon the Company's pre-bonus and pre-extraordinary item return on average
assets for the year, the Company's achievement of cost reduction goals, the
position and salary of the employee and any other performance goals
established by the employee's division. For fiscal 2000 and 2001, each of the
equipment divisions also established goals based on increasing sales or market
share. In addition, the Committee can decrease or eliminate awards to
designated senior officers of the Company, and can increase or decrease awards
to other salaried employees.
When added to base salary, target awards under the Bonus Plan for the
Company's executives are structured to provide median annual cash compensation
relative to the peer group companies. The target award is 100% of base salary
for the CEO and 60% to 65% of base salary for other senior officers. For
fiscal 2000, the maximum return on assets goal was 10.5% and the return on
asset calculation was revised to take into account growth through
acquisitions. No bonus payment was available if minimum performance thresholds
were not achieved. For 2000 the Company's return on average consolidated
assets calculated in accordance with the Bonus Plan was 6.14%. The target cost
reduction goal and the target sales and market share goals were exceeded.
Accordingly, for 2000, Mr. Lane and Mr. Becherer received annual performance
bonus payments of $670,932 and $1,210,492 respectively or approximately 111%
and 121% respectively of their base salaries. The other senior officers also
received near target annual performance bonus payments.
10
<PAGE>
For fiscal 2001, the target award under the Bonus Plan for senior officers
other than the CEO has been increased to 65% to 70% of base salary to maintain
competitive market position. In all other respects, the annual performance
Bonus Plan for fiscal 2001 is the same as for fiscal 2000.
In addition to the above performance Bonus Plan payments, the CEO is
authorized to grant discretionary bonuses to selected employees in recognition
of outstanding achievement. Such bonuses may not exceed 20% of annual base
salary except in highly unusual circumstances. No such discretionary bonuses
were granted for fiscal 2000.
Long-Term Incentives
The Company's long-term incentives for executive officers have been
comprised of annual grants of market-priced and premium-priced stock options
under the John Deere Stock Option Plan and the Omnibus Plan and biennial
grants of equity incentive restricted shares under the Equity Incentive Plan.
Grants under these plans are intended to promote the creation of sustained
stockholder value, encourage ownership of Company stock, foster teamwork and
retain high caliber executives.
Under the Equity Incentive Plan, approved by stockholders in 1995, from
fiscal 1995 to 1999 executives received periodic grants of Company stock
subject to vesting and forfeiture provisions based on Company achievement of
long-term performance goals established by the Committee. It is the
Committee's view that the addition of performance features to the executive
stock grants in the Equity Incentive Plan serves to promote greater focus on
actions that enhance stockholder value.
Under each plan, grants to executives are based on criteria established by
the Committee, including responsibility level, base salary, current market
practice and the market price of the Company's stock at the time of grant.
Grant guidelines for market-priced options and equity incentive shares are
established for all participants (including Mr. Lane) with the objective of
providing a target total compensation opportunity, including base salary and
the target annual profit sharing bonus, equal to the 65th to 75th percentile
of the peer group. Depending on stock price performance and Company
performance, actual total compensation for any given year could be at, above
or below the target of the peer group. The number of options or restricted
shares previously granted to or held by an executive is not a factor in
determining individual grants.
Vesting of the biennial target award of equity incentive shares in fiscal
1997 was conditioned on the Company satisfying performance goals based on
revenue growth and return on assets over the four fiscal years commencing
November 1, 1996. For the four years ending October 31, 2000, the Company's
revenue growth relative to other New York Stock Exchange listed companies and
the annual average return on assets resulted in an award equal to 90.7% of the
target award. Accordingly, in December 2000, 90.7% of the equity incentive
shares awarded in fiscal 1997 vested and the balance of the award was
forfeited.
Beginning in fiscal 2000, grants of market-priced options which vest over
several years will be the primary vehicle for long-term incentive awards to
executive officers. Market-priced options are viewed as a method of providing
an incentive opportunity throughout the business cycle and are easier to
compare with the peer group and employment marketplace. In fiscal 2000, the
long-term incentive award to senior executives consisted of market-priced
options which vest in one to three years and have a ten year term. In early
fiscal 2000, Mr. Becherer was awarded 319,500 market-priced options which
became exercisable one year after grant. During fiscal 2000, Mr. Lane was
awarded 79,094 market-priced options which become exercisable in three equal
annual installments beginning in December 2000.
In addition to the long-term incentives for executive officers described
above, in December 1998 the Committee approved a one-time grant of 46,111
shares of restricted stock under the Restricted Stock Plan to each of the five
senior operating officers of the Company other than Mr. Becherer. This
11
<PAGE>
grant is intended as a combination retention plan and communication of the
importance to the Company of their continued service to ensure a smooth
transition in Company leadership. The restricted shares vest in four equal
annual increments beginning in December 2000 and are subject to possible
forfeiture in the event of termination or resignation from the Company prior
to vesting. Upon Mr. Lane's appointment as Chairman of the Board in August
2000, his retention grant was vested by the Committee. Also, in fiscal 2000
the Committee approved a one-time grant of 14,624 shares of restricted stock
under the Restricted Stock Plan to Mr. Lawson. This grant is in recognition of
Mr. Lawson delaying his planned retirement date to assist in ensuring a smooth
transition in Company leadership. These restricted shares will vest in the
event of Mr. Lawson's continued employment through February 2002.
During fiscal 1998, the Committee introduced revised stock ownership
guidelines for members of the Company's senior management team to encourage
the retention of stock acquired through the Company's various equity incentive
plans. These guidelines are based on a multiple of each officer's base salary.
Finally, during fiscal 2000, the Committee and the Board approved a change-
in-control severance program for the executive management of the Company. In
general, the program provides that upon specified events that change the
control of the Company and an involuntary termination of a covered executive,
the executive will receive a severance payment, additional supplemental
retirement service credit, an extension of welfare benefits, and reimbursement
for certain legal fees and taxes. This program furthers the compensation
objectives and is in line with competitive market practice.
CEO Compensation
Mr. Becherer served as Chairman of the Company from 1990 until his
retirement in August 2000 and as President and CEO from 1989 to January 2000
and May 2000, respectively. Mr. Becherer's base salary, annual performance
bonus and option and equity incentive stock grants have been targeted to
provide total compensation, assuming achievement of targeted levels of Company
performance, approximately equal to the 65th percentile of CEO compensation of
the peer group companies. For fiscal 2000, Mr. Becherer's total compensation
was essentially equal to this level and generally consistent with the
compensation philosophy established by the Committee. Mr. Lane has been
President of the Company since January 2000, CEO of the Company since May 2000
and Chairman since August 2000. For fiscal 2000, Mr. Lane's total compensation
fell below the target total compensation level for the CEO position as it was
his initial year as CEO. As explained above, the availability of a fiscal 2000
bonus payment was based exclusively on return on assets, cost reductions,
sales goals and payout levels established by the Committee at the beginning of
the year, as determined by actual 2000 results. It is the Committee's view
that this relationship between pay and performance is appropriate and serves
stockholders' interests.
Committee on Compensation
John R. Stafford (Chair)
John R. Block
Crandall C. Bowles
Thomas H. Patrick
John R. Walter
Dr. Arnold R. Weber
12
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG DEERE & COMPANY, THE S&P 500 INDEX
AND THE S&P DIVERSIFIED MACHINERY GROUP INDEX
--------------------------------------------------------------------------------
The following performance graph compares cumulative total return for Company
stockholders over the past five fiscal years against the cumulative total
return of the Standard & Poor's 500 Stock Index, and against the Standard &
Poor's Diversified Machinery Group Index. The graph assumes $100 is invested in
Company stock and each of the other two indices at the closing market quotation
on October 31, 1995 and that dividends are reinvested. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
[LINE CHART]
1995 1996 1997 1998 1999 2000
-------------------------------------------------------------------------------
Deere & Co. 100.00 143.59 184.14 126.56 131.88 137.12
S&P Mach 100.00 126.92 175.25 144.96 173.88 141.20
S&P 500 100.00 124.10 163.95 200.00 251.35 266.66
13
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
-------------------------------------------------------------------------------
The following table shows the remuneration from the Company and its
subsidiaries during the past three fiscal years to the Company's Chief
Executive Officers (the "CEOs") and each of the four most highly compensated
executive officers of the Company other than the CEOs:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------- -------------------------------------
Awards Payouts
-------------------------- ----------
Restricted Securities
Stock Underlying LTIP All Other
Name and Fiscal Salary(1) Bonus(2) Other Annual Awards(4) Options/SARs(5) Payouts(6) Compensation(7)
Principal Position Year ($) ($) Compensation(3) ($) (#) ($) ($)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Lane, 2000 $ 619,076 $ 670,932 $ 0 $ 0 79,094 $ 0 $ 23,694
Chairman, President & 1999 $ 370,958 $ 0 $ 0 $1,886,867 78,328 $ 0 $ 26,431
Chief Executive Officer 1998 $ 334,857 $ 344,255 $ 0 $ 0 45,458 $ 96,061 $ 17,978
Hans W. Becherer, 2000 $1,027,347 $1,210,492 $ 91,385 $ 0 319,500 $ 0 $158,586
Retired Chairman & Chief 1999 $1,029,789 $ 0 $ 0 $1,501,489 845,380 $ 0 $120,933
Executive Officer (8) 1998 $1,042,313 $1,487,511 $ 0 $ 0 191,149 $1,333,600 $ 71,352
Fred F. Korndorf, 2000 $ 438,335 $ 338,436 $ 0 $ 0 58,459 $ 0 $ 57,358
President, Worldwide 1999 $ 395,681 $ 0 $ 0 $1,925,193 82,270 $ 0 $ 54,094
Agricultural Division 1998 $ 388,231 $ 402,272 $ 0 $ 0 53,792 $ 318,143 $ 42,197
Pierre E. Leroy, 2000 $ 418,440 $ 299,202 $ 0 $ 0 58,459 $ 0 $ 51,421
President, Worldwide 1999 $ 406,245 $ 0 $ 0 $1,925,193 82,270 $ 0 $ 48,386
Construction Division 1998 $ 393,341 $ 403,604 $ 0 $ 0 54,792 $ 368,955 $ 34,234
John K. Lawson, 2000 $ 402,562 $ 279,617 $ 0 $ 497,216 53,677 $ 0 $ 55,564
Senior Vice 1999 $ 374,463 $ 0 $ 0 $ 385,377 72,333 $ 0 $ 48,739
President 1998 $ 362,937 $ 375,276 $ 0 $ 0 49,695 $ 414,562 $ 44,842
Michael P. Orr, 2000 $ 394,580 $ 278,160 $ 0 $ 0 57,826 $ 0 $ 6,570
President, Financial 1999 $ 372,714 $ 0 $ 0 $1,878,042 76,194 $ 0 $ 11,664
Services Division 1998 $ 352,611 $ 364,478 $ 0 $ 0 49,378 $ 0 $ 10,411
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown include cash and non-cash compensation earned and received
by the executive officer as well as amounts earned but deferred at the
election of the officer.
(2) Each year in which performance goals are reached, the compensation of
salaried employees is supplemented by fiscal year-end cash bonus payments. The
amount of the bonus (if any) for the past three fiscal years depended upon the
pre-bonus and pre-extraordinary item return on average assets for the year and
the position and salary of the employee. The amount of the bonus for fiscal
2000 also depended upon achievement of cost reduction goals and division sales
or market share goals.
(3) The amount shown represents the aggregate incremental cost to the Company
of providing various perquisites in fiscal 2000 for those in excess of
reporting thresholds. The amount includes $68,141 for personal use of Company
aircraft.
(4) The 2000 amount reported in the table for Mr. Lawson represents a grant of
14,624 shares under the John Deere Restricted Stock Plan. These shares will
vest on February 27, 2002 and are subject to possible forfeiture in the event
of termination or resignation from the Company prior to vesting. The 1999
amounts reported in the table represent grants under the John Deere Equity
Incentive Plan and the John Deere Restricted Stock Plan. The vesting of shares
under the Equity Incentive Plan is conditioned on satisfying performance goals
based on growth of the Company's revenues and return on the Company's assets
over the performance periods established by the Committee. The shares granted
under the Restricted Stock Plan vest in four equal annual increments beginning
in December 2000 and are subject to possible forfeiture in the event of
termination or resignation from the Company prior to vesting. During fiscal
1999 Mr. Lane was granted under the Restricted Stock Plan 46,111 shares of
restricted stock to vest in four equal annual increments beginning in December
2000. Upon Mr. Lane's
14
<PAGE>
appointment as Chairman of the Board this retention grant was fully vested. No
restricted stock awards were made to the named executive officers during fiscal
1998. The amounts in the table represent the closing market value of the shares
granted on the date of grant, without giving effect to the diminution in value
attributable to the restrictions and performance conditions on such stock.
Dividends are paid on the restricted shares at the same time and rate as
dividends paid to stockholders of unrestricted shares. At October 31, 2000, the
total number and market value (based on the closing market price) of shares of
restricted stock, including equity incentive shares, held by each of the named
executive officers were as follows: Mr. Lane (17,931; $660,040); Mr. Becherer
(75,626; $2,783,793); Mr. Korndorf (67,239; $2,475,068); Mr. Leroy (67,626;
$2,489,313); Mr. Lawson (34,962; $1,286,951); and Mr. Orr (66,507; $2,448,123).
(5) The 2000 amounts represent market-priced options granted in December 1999.
The 1999 and 1998 amounts represent the total of market-priced options and
premium-priced options granted in December 1998 and December 1997,
respectively. Additional details on the fiscal 2000 grant are included in the
"Option/SAR Grants In Last Fiscal Year" table that follows.
(6) The payouts for 1998 represent the award of bonus shares under the John
Deere Equity Incentive Plan approved by stockholders at the 1995 annual
meeting. Under the Equity Incentive Plan, if the Company exceeds the
performance goals established by the Committee at the beginning of a
performance period, participants may receive bonus stock awards based on the
percentage over the performance target achieved by the Company for the
performance period. The amounts in the table represent the average of the high
and low market values of the bonus shares on the date of grant.
(7) Amounts shown for 2000 consist of: (i) vested Company contributions to the
Company 401(k) Savings and Investment Plan during the fiscal year for each of
the named executive officers of $2,205; and (ii) above-market earnings on
deferred compensation for Mr. Lane $21,489, Mr. Becherer $156,381, Mr. Korndorf
$55,153, Mr. Leroy $49,216, Mr. Lawson $53,359, and Mr. Orr $4,365. The
contribution to the Company's 401(k) Savings and Investment Plan for all
employees during the past fiscal year was $24,635,329.
(8) Mr. Becherer retired as Chief Executive Officer of the Company in May 2000
and retired as Chairman of the Company in August 2000.
The following table shows information concerning individual grants of stock
options made during fiscal 2000 to each of the named executive officers of the
Company and the potential realizable values of the grants assuming annually
compounded stock price appreciation rates of five and ten percent per annum
respectively, over the option term. The five and ten percent rates of
appreciation are set by the rules of the Securities and Exchange Commission and
are not intended to forecast possible future appreciation, if any, of the
Company's stock price.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value
at Assumed Annual
Rates of
Stock Price
Appreciation For
Individual Grants Option Term(3)
---------------------------------------------- ----------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration 5% 10%
Name Granted(1)(#) Fiscal Year ($/Sh) Date(2) ($) ($)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Lane.......... 79,094(4) 1.45% $41.47 12/9/09 $2,062,792 $ 5,227,520
Hans W. Becherer........ 319,500(5) 5.85% $41.47 12/9/09 $8,332,643 $21,116,554
Fred F. Korndorf........ 58,459(4) 1.07% $41.47 12/9/09 $1,524,626 $ 3,863,701
Pierre E. Leroy......... 58,459(4) 1.07% $41.47 12/9/09 $1,524,626 $ 3,863,701
John K. Lawson.......... 53,677(4) 0.98% $41.47 12/9/09 $1,399,910 $ 3,547,647
Michael P. Orr.......... 57,826(4) 1.06% $41.47 12/9/09 $1,508,117 $ 3,821,865
----------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
(1) Subject to plan restrictions, the exercise price and tax withholding
obligations related to exercises of options granted in the period may be paid
by delivery of already owned shares or by offset of the underlying shares. No
stock appreciation rights (SARs) were granted during the fiscal year.
(2) The options expire if the option holder's employment with the Company
terminates during the term of the option for any reason other than for death,
disability, or retirement pursuant to disability or retirement plans of the
Company. Upon retirement the options are exercisable within five years of
retirement or within one year of death, if later.
(3) The total potential realizable value for all stockholders as a group based
on 234,561,480 outstanding shares as of October 31, 2000, would be
$6,117,424,425 and $15,502,754,575 at the 5% and 10% assumed annual rate of
appreciation, respectively. Mr. Lane's total potential realizable value is
0.03% of the potential realizable value of all stockholders at the 5% and 10%
assumed annual rates of appreciation. Mr. Becherer's total potential
realizable value is 0.1% of the potential realizable value of all stockholders
at the 5% and 10% assumed annual rates of appreciation. The total potential
realizable value of all the named executives to that of all stockholders is
0.3% at the 5% and 10% assumed annual rates of appreciation.
(4) Market-priced options which become exercisable in three equal increments
one, two and three years after the date of grant. The options have a maximum
term of ten years.
(5) Market-priced options exercisable one year after the date of grant. The
options have a maximum term of ten years.
The following table shows information for the named executives concerning
exercises of options and SARs during fiscal 2000 and the number and value of
unexercised options (and tandem SARs) held at October 31, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/SARs
Year-End(1) (#) at Fiscal Year-End(2) ($)
------------------------- -------------------------
Shares
Acquired on
Exercise Value
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Lane.......... 0 $ 0 224,693 145,920 $ 204,965 $ 0
Hans W. Becherer........ 0 $ 0 754,132 1,096,897 $3,248,157 $942,599
Fred F. Korndorf........ 0 $ 0 280,486 136,195 $1,651,737 $ 0
Pierre E. Leroy......... 0 $ 0 240,926 136,195 $1,036,593 $ 0
John K. Lawson.......... 20,180 $519,231 238,194 124,740 $1,125,493 $ 0
Michael P. Orr.......... 0 $ 0 89,616 126,872 $ 441,215 $ 0
-----------------------------------------------------------------------------------------------------
</TABLE>
(1) Market-priced options and SARs awarded by the Company are not exercisable
until one to three years after grant and have a ten-year term. Premium-priced
options granted in December 1997 and December 1998 may not be exercised until
one year or more after the date of grant depending on if the price of the
Company's shares on the New York Stock Exchange equals or exceeds the premium
exercise price during each of ten consecutive trading days prior to the fifth
anniversary of the grant date. If such price target is achieved, the options
expire on the tenth anniversary of the grant date. If the price target is not
achieved, the options become exercisable on the fifth anniversary of the grant
date and expire three months thereafter.
(2) Represents the difference between the option exercise price and the
closing market price for the Company's stock on October 31, 2000. The in-the-
money options at October 31, 2000, pertain to the market-priced option grants
in December of 1993, 1994, 1995, and 1998 with exercise prices of $23.56,
$21.02, $34.13, and $32.53, respectively and the premium-priced option grant
in December of 1994 with exercise prices of $28.39, $31.23, and $34.07. The
closing market price for the Company's stock at the end of the 2000 fiscal
year was $36.81.
16
<PAGE>
PENSION BENEFITS
Under the Company's pension program, employees in executive salary grades
("executives") are entitled to receive an annual pension determined by adding
the amount obtained by multiplying 1.5% times the employee's number of years
of non-executive service times average pensionable pay to the amount obtained
by multiplying 2.0% times the number of years served as an executive times
average pensionable pay, with a maximum annual pension of 66 2/3% of average
pensionable pay. Average pensionable pay for employees participating in the
executive program prior to 1997 is based on one of the following two options,
as elected by the executive: (1) the executive's compensation for the five
highest years, not necessarily consecutive, during the 10 years immediately
prior to the date of retirement where compensation is calculated by adding the
executive's salary to the larger of (a) the sum of short-term bonuses, or (b)
any payments under the Company's long-term incentive plan, awards under the
restricted stock plan, or after 1998 a prorated amount of awards under the
equity incentive plan, or after 2000 the target amount of short-term bonuses;
or (2) the executive's compensation over his entire career with the Company
where compensation is calculated by adding the executive's salary to any
short-term bonuses. In addition, for salaried employees hired prior to 1997,
career average compensation under the executive pension program generally will
include the average of compensation from the five anniversary years prior to
1997 plus all future compensation until retirement with bonuses paid in 1992
through 1996 phased into the computation over five years. Effective January 1,
1997, for new participants in the executive program, average pensionable pay
is based exclusively on the career average compensation formula described
above. All amounts used in calculating average pensionable pay are determined
before giving effect to any salary or bonus deferral under any plan sponsored
by the Company.
Salaried employees not entitled to the executive pension receive annual
pension benefits determined by multiplying 1.5% times the employee's number of
years of service times average pensionable pay. Average pensionable pay for
employees hired prior to 1997 is based on one of the following two options, as
elected by the employee: (1) the employee's salary for the five highest years
during the 10 years immediately prior to the date of retirement; or (2) the
employee's compensation over his entire career with the Company where
compensation is calculated by adding the employee's salary to any bonus
awarded under the Company's performance bonus plan. In addition, for employees
hired prior to 1997, career average compensation generally will include the
average of compensation from the five anniversary years prior to 1997 plus all
future compensation until retirement with bonuses paid in 1992 through 1996
phased into the computation over five years. Effective January 1, 1997,
average pensionable pay for new salaried employees not entitled to the
executive pension is based exclusively on career average salary and
performance bonuses. For salaried employees participating in the career
average earning option, enhanced Company contributions to the employee's
401(k) retirement savings account will be made and, depending on the
employee's years of service as of January 1, 1997, the minimum age to
retirement with full benefits may be increased.
The estimated annual pensions payable upon retirement at age 65 for each of
the named executive officers of the Company is: Mr. Lane, $940,670, Mr.
Becherer, $1,379,348; Mr. Korndorf, $494,167; Mr. Leroy, $473,032; Mr. Lawson,
$448,323; and Mr. Orr, $429,021. The estimated annual pensions shown are on a
straight-life annuity basis and have been computed assuming (i) that the
Company's pension plans are continued without further amendment; (ii) that
each of the named officers continues as an executive of the Company until
retirement at age 65; (iii) that salaries continue at 2000 levels; and (iv)
that bonuses are paid at target earnings goals. Pension benefits are not
subject to deductions for social security benefits or other offset amounts.
17
<PAGE>
CHANGE IN CONTROL SEVERANCE AGREEMENTS AND OTHER ARRANGEMENTS
The Company has entered into severance agreements with its executive
officers, including each of the currently-employed executive officers named in
the Summary Compensation Table in this proxy statement, which are intended to
provide for continuity of management in the event of a change in control of
the Company. The agreements have an initial term of three years and provide
that they are to be automatically extended in one year increments, unless, not
later than six months prior to expiration, the Company has given prior notice
of termination. In such event, each of the agreements will continue to be
effective until the end of its then remaining term. However, no notice of
termination of the agreement may be given within six months following a
"potential change in control" (as defined in the agreements) and if a "change
in control" ( as defined in the agreements) occurs, the agreements will
continue in effect for the longer of: (i) twenty-four months beyond such
change in control; or (ii) until all obligations of the Company under the
agreements have been satisfied. A change in control is defined generally as
any change in control of the Company that is required to be reported in a
proxy statement by Regulation 14A under the Exchange Act. Change in control
events include, without limitation: (i) any "person", as defined in the
Exchange Act (with certain exceptions), acquiring 30 percent or more of the
Company's voting securities; (ii) a majority of the Company's directors being
replaced during the term of the agreements without the approval of at least
two-thirds of existing directors or directors previously approved by such
directors; (iii) the consummation of any merger or business combination of the
Company unless in any case the voting securities of the Company outstanding
prior to such transaction continue to represent at least 60% of the voting
securities of the resulting entity; or (iv) the complete liquidation of the
Company or the sale or disposal of all or substantially all of the Company's
assets. A potential change in control is defined as (i) the entering into of
an agreement that would result in a change in control as defined above; or
(ii) any person acquiring 15 percent or more of the Company's voting
securities and the Board resolving that a potential change in control has
occurred.
If, within 6 months preceding or within 24 months following a change in
control, the covered executive officer is terminated by the Company for any
reason, other than for death, disability or for cause (as defined in the
agreements), or if, within 24 months following a change in control, such
executive officer terminates his or her employment for good reason (as defined
in the agreements), then the executive officer is entitled to a lump sum
severance payment equal to three times the sum of (a) the executive's then
base salary, and (b) the greater of (i) the mean of the bonuses paid to the
executive under the Company's Performance Bonus Plan for the three complete
fiscal years immediately prior to the termination; and (ii) the target bonus
amount for the fiscal year in which the termination occurs. In addition, the
executive would also receive a pro-rated bonus, calculated through the date of
termination and his earned but unpaid base salary, and vacation pay. Upon
termination the executive will also receive in a single payment an amount
equal to the excess of the supplemental retirement benefit he would have been
entitled to had he remained employed for an additional three years over the
supplemental retirement benefit the executive is entitled to based on his
actual age and credited service. The executive will also receive an amount
equal to three times the Company's contributions on behalf of the executive
under the Company's defined contribution plans for the preceding plan year
(or, if greater, for the plan year immediately prior to the change in
control). In addition, the executive will receive an amount equal to the
number of the executive's then outstanding unexercisable stock options
multiplied by the positive difference, if any, between the price per share of
the Company's stock on the termination date over the per share option exercise
price.
In the event that any payments made in connection with a change in control
would be subjected to the excise tax imposed on excess parachute payments by
the Internal Revenue Code, the aggregate payments to the executive would be
capped at the excise tax threshold, except the Company will "gross-up" the
executive officer's compensation for such excise taxes and any federal, state
and local income tax applicable to such excise tax, penalties and interest
thereon if such gross-up payment would
18
<PAGE>
result in the executive receiving an amount which would exceed the capped
amount by at least ten percent.
For three years from the date of a covered termination, the Company would
continue the executive's coverage under the Company's welfare benefits for
health care, life and accidental death and dismemberment, and disability
insurance coverage. Such benefits may be discontinued if the executive has
substantially similar benefits available from another employer. The agreements
also provide that the Company will pay reasonable legal fees and expenses
incurred by the executive in enforcing the agreement. The executive agrees not
to disclose nor use for his own purposes confidential and proprietary
information of the Company, and for a period of two years not to induce
Company employees to leave the Company nor to interfere in a similar manner
with the business of the Company.
In addition to the above described executive severance agreements, several
of the Company's compensation plans have change in control provisions. The
Company's Bonus Plan provides that employees as of the date of a change in
control will be entitled to the greater of a bonus based on actual performance
results to such date or their target bonus. The Equity Incentive Plan and
Restricted Stock Plan provide that in the event of a change in control, unless
otherwise determined by the Board, the value of restricted shares will be
cashed out in an amount determined under the plans. The Omnibus Plan provides
that in the event of a change in control, unless otherwise determined by the
Board, all vesting requirements terminate, all stock options become
exercisable for the remainder of their term, and the value of other awards
will be cashed out in an amount determined under the Omnibus Plan. The
Supplemental Pension Benefit Plan provides that, in the event of a change in
control, participants who cease being Company employees will be eligible for
benefits under such plan notwithstanding their age at termination of
employment. In the event of certain changes in control, amounts deferred under
the Company's Deferred Compensation Plan may become payable immediately or
such plan may be modified to reflect the impact of the change in control.
STOCKHOLDER PROPOSALS AND NOMINATIONS
-------------------------------------------------------------------------------
Proposals of stockholders submitted pursuant to Rule 14a-8 for inclusion in
the proxy statement for the annual meeting of stockholders to be held February
27, 2002, must be received by the Company at its principal executive offices
not later than September 20, 2001. This notice of the annual meeting date also
serves as the notice by the Company under the advance notice Bylaw described
below.
Under the Company's Bylaws, a stockholder must give timely written notice
to the Secretary of the Company of a nomination or before bringing any
business before any annual or special meeting of stockholders. Stockholder
proposals submitted other than pursuant to Rule 14a-8 and nominations for the
annual meeting to be held February 27, 2002, must be received by the Secretary
not earlier than October 30, 2001, and not later than November 29, 2001. The
notice shall set forth for each matter a brief description of the business to
be brought before the meeting, the reasons therefore, the name, address,
class, and number of shares beneficially owned by, and any material interest
of the stockholder making the proposal. Notice of a nomination shall set forth
the name, address, and the class and number of shares owned by the stockholder
making the nomination; the name, age, business, and residence addresses and
principal occupation of the nominee and the number of shares beneficially
owned by, and such other information concerning, the nominee as would be
required to be disclosed in the solicitation of proxies for election of
directors under Regulation 14A under the Exchange Act, as amended. The
recommendation must also be accompanied by the consent of the individual to be
nominated, to be elected and to serve. The Company may require any nominee to
furnish such other information as may reasonably be required to determine the
eligibility of the nominee. Persons who are age 70 or older are not eligible
for election to the Board. Directors of the Company are required to tender
their resignation from the Board upon any material change in their occupation,
career or principal business activity, including retirement.
19
<PAGE>
Stockholder proposals and recommendations for nomination as a director
should be submitted in writing to the Secretary of the Company, Deere &
Company, One John Deere Place, Moline, Illinois 61265, who will submit them to
the Board or the Corporate Governance Committee, as applicable, for its
consideration.
COST OF SOLICITATION
-------------------------------------------------------------------------------
The Company will bear the cost of soliciting proxies in the form enclosed.
In addition to solicitation by mail, arrangements have been made with
brokerage houses, nominees, and other custodians and fiduciaries to send proxy
material to their principals and the Company will reimburse them for their
expenses in doing so. The Company has engaged Georgeson Shareholder
Communications Inc. to solicit proxies held by brokers and nominees at a cost
of $10,000 plus out-of-pocket expenses. Proxies also may be solicited
personally or by telephone or telegraph by directors, officers, and a few
regular employees of the Company in addition to their usual duties. They will
not be specially compensated for these services.
ANNUAL REPORT
-------------------------------------------------------------------------------
A copy of the Company's Chairman's report for the year ended October 31,
2000, has been mailed to you with this proxy statement. The Company's audited
financial statements, along with other financial information, are included in
the appendix to this proxy statement.
The Company's Form 10-K annual report to the Securities and Exchange
Commission may be obtained without charge by writing to Deere & Company
Stockholder Relations, One John Deere Place, Moline, Illinois 61265-8098. A
copy of the Company's Form 10-K and other periodic filings also may be
obtained from the Securities and Exchange Commission's EDGAR database at
www.sec.gov.
ELECTRONIC ACCESS TO PROXY STATEMENT AND ANNUAL REPORT
-------------------------------------------------------------------------------
This proxy statement and the 2000 Chairman's report are available on the
Company's Internet site at www.deere.com/stock. Most stockholders can elect to
view future proxy statements and Chairman's reports over the Internet instead
of receiving paper copies in the mail.
Stockholders of record can choose this option and save the Company the cost
of producing and mailing these documents by marking the appropriate box on the
proxy card or by following the instructions provided if voting over the
Internet or by telephone. Stockholders can also choose between receiving paper
documents and viewing future documents electronically by calling the Deere &
Company Stockholder Relations Department at (309) 765-4539 or writing to them
at One John Deere Place, Moline, Illinois, 61265-8098.
Stockholders who choose to view future proxy statements and annual reports
over the Internet will receive a proxy card in the mail next year with
instructions containing the Internet address of those materials. The election
will remain in effect until the stockholder writes or calls the Deere &
Company Stockholder Relations Department and tells us otherwise. Stockholders
do not have to elect Internet access each year.
20
<PAGE>
Stockholders who hold their Company stock through a bank, broker or other
holder of record, should refer to the information provided by that entity for
instructions on how to elect to view future proxy statements and Chairman's
reports over the Internet.
Some stockholders who hold their Company stock through a bank, broker or
other holder of record and who elect electronic access will receive an e-mail
next year containing the Internet address to use to access the Company's proxy
statement and Chairman's report.
For the Board of Directors,
/s/ Michael A. Harring
Moline, Illinois Michael A. Harring
January 18, 2001 Secretary
21
<PAGE>
APPENDIX A
Audit Review Committee Charter
as amended May 31, 2000
RESOLVED, that the Audit Review Committee Charter is as follows:
RESOLVED, that there be and hereby is created a committee to be known as
the Audit Review Committee to assist the Board of Directors in fulfilling its
oversight responsibilities of the accounting, auditing and financial reporting
processes of the Company, and that the Audit Review Committee shall consist of
at least three directors who meet the independence and financial expertise
requirements of the New York Stock Exchange. The members of the Audit Review
Committee and the Chairman thereof shall be designated by the Board of
Directors upon the recommendation of the Board Chairman.
FURTHER RESOLVED, that the certified public accountants engaged to audit
the Company shall be ultimately accountable to the Board of Directors and this
Audit Review Committee.
FURTHER RESOLVED, that this Audit Review Committee and the Board of
Directors shall have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the outside auditor.
FURTHER RESOLVED, that the following are the primary responsibilities of
the Audit Review Committee and are set forth only for its guidance. The Audit
Review Committee may, from time to time, adopt procedures as it deems
appropriate in carrying out its oversight functions and may perform such other
functions as may be assigned to it by law, this Charter, the Company's
Articles of Incorporation, or Bylaws, or by the Board of Directors. The Audit
Review Committee shall:
(1) Recommend for approval by the Board of Directors, a firm of certified
public accountants to conduct the audit of the Company's annual
financial statements to be filed with the Securities and Exchange
Commission.
(2) Determine whether to recommend to the Board of Directors that the
Company's financial statements be included in its Annual Report on Form
10-K for filing with the Securities and Exchange Commission. To carry
out this responsibility, the Audit Review Committee shall:
. review and discuss the results of each external audit of the
Company's audited financial statements with management and the
independent auditors;
. discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit;
. review and discuss with the independent auditors the written
disclosures required by Independence Standards Board Standard No. 1
regarding their independence and, where appropriate, recommend that
the Board of Directors take appropriate action in response to the
disclosures to satisfy itself of the independence of the Company's
independent auditors; and
. based upon the reviews and discussions, issue its report for
inclusion in the Company's proxy statement.
(3) Review the scope of, and plans for, the annual audit by certified
public accountants.
(4) Meet from time to time with representatives of the certified public
accountants engaged to make the audit, such meetings to include private
sessions with the independent auditors.
A-1
<PAGE>
(5) Discuss quarterly with management and the certified public accountants
the quarterly financial information prior to the Company's filing of
quarterly reports on Form 10-Q and any matters to be communicated to
the Audit Review Committee under generally accepted auditing standards,
or to authorize the Chairman of the Audit Review Committee to conduct
such discussions.
(6) Review annually the Company's procedures relating to its Code of
Business Principles and its Business Conduct Guidelines and to meet
with the General Counsel concerning litigation and legal and regulatory
compliance.
(7) Meet at a minimum of once each fiscal year with the Comptroller and
representatives of the internal audit department, and also with other
employees or officers associated with the system of internal control
and the internal audit of the books and records of the Company and its
subsidiaries, and to review and discuss the internal audit function and
the system of internal accounting control, which includes audit
procedures with respect to the Company's Business Conduct Guidelines,
such meetings to include private sessions with the senior executive in
charge of internal auditing.
(8) Review and reassess the adequacy of this Charter annually and submit it
to the Board of Directors for approval.
(9) Report Audit Review Committee activities to the full Board of
Directors.
FURTHER RESOLVED, that in discharging its oversight responsibilities, the
Audit Review Committee shall have unrestricted access to the Company's
management, books and records.
FINALLY RESOLVED, that it is the responsibility of executive management of
the Company to prepare financial statements in accordance with generally
accepted accounting principles and of the independent auditors for the Company
to audit those financial statements. The Audit Review Committee's
responsibility is one of oversight. The Audit Review Committee is not
providing any expert or other special assurance as to the Company's financial
statements concerning compliance with laws, regulations or generally accepted
accounting principles.
A-2
<PAGE>
APPENDIX B
DEERE & COMPANY
FINANCIAL STATEMENTS AND RELATED FINANCIAL INFORMATION
[LOGO]
<PAGE>
Deere & Company
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
====================================================================================================================================
CONSOLIDATED
(Deere & Company and
Consolidated Subsidiaries)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31
(In millions of dollars except per share amounts) 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales and Revenues
Net sales of equipment....................................................................... $11,168.6 $ 9,701.2 $11,925.8
Finance and interest income.................................................................. 1,321.3 1,104.4 1,007.1
Insurance and health care premiums........................................................... 473.7 716.1 692.9
Investment income............................................................................ 18.6 61.4 73.1
Other income................................................................................. 154.6 167.8 122.6
--------- --------- ---------
Total...................................................................................... 13,136.8 11,750.9 13,821.5
--------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold........................................................................... 8,936.1 8,177.5 9,233.7
Research and development expenses............................................................ 542.1 458.4 444.4
Selling, administrative and general expenses................................................. 1,504.9 1,362.1 1,309.4
Interest expense............................................................................. 676.5 556.6 519.4
Insurance and health care claims and benefits................................................ 380.5 594.9 579.0
Other operating expenses..................................................................... 319.2 236.3 175.6
--------- --------- ---------
Total...................................................................................... 12,359.3 11,385.8 12,261.5
--------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Income of Consolidated Group before Income Taxes............................................. 777.5 365.1 1,560.0
Provision for income taxes................................................................... 293.8 134.7 553.9
--------- --------- ---------
Income of Consolidated Group................................................................. 483.7 230.4 1,006.1
--------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Equity in Income (Loss) of Unconsolidated Subsidiaries and Affiliates
Credit..................................................................................... .6 (.3) .1
Other...................................................................................... 1.2 9.1 15.2
--------- --------- ---------
Total.................................................................................... 1.8 8.8 15.3
--------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Net Income................................................................................... $ 485.5 $ 239.2 $ 1,021.4
========= ========= =========
------------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net income - basic........................................................................... $ 2.07 $ 1.03 $ 4.20
Net income - diluted......................................................................... $ 2.06 $ 1.02 $ 4.16
Dividends declared........................................................................... $ .88 $ .88 $ .88
====================================================================================================================================
</TABLE>
The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in this
statement conform with the requirements of FASB Statement No. 94. In the
supplemental consolidating data in this statement, "Equipment Operations" (Deere
& Company with Financial Services on the Equity Basis) reflect the basis of
consolidation described in Note 1 to the consolidated financial statements. The
consolidated group data in the "Equipment Operations" income statement reflect
primarily the results of the agricultural equipment, commercial and consumer
equipment, and construction equipment operations. The supplemental "Financial
Services" consolidating data in this statement includes primarily Deere &
Company's credit operations. Transactions between the "Equipment Operations" and
"Financial Services" have been eliminated to arrive at the "Consolidated" data.
The notes to consolidated financial statements are an integral part of this
statement.
B-1
<PAGE>
<TABLE>
<CAPTION>
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(Deere & Company with Financial Services on the Equity Basis)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31 Year Ended October 31
2000 1999 1998 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11,168.6 $9,701.2 $11,925.8
99.1 92.5 131.1 $1,245.4 $1,027.1 $ 887.0
493.0 741.9 720.8
7.7 1.1 10.9 60.3 73.1
101.5 86.1 40.4 83.9 110.2 85.9
--------- -------- --------- -------- -------- --------
11,376.9 9,880.9 12,097.3 1,833.2 1,939.5 1,766.8
--------- -------- --------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------------------
8,952.2 8,193.1 9,252.7
542.1 458.4 444.4
1,149.4 953.6 932.5 357.9 411.4 382.8
183.1 161.9 128.0 516.5 409.9 402.3
380.5 602.8 585.8
44.3 28.6 50.4 306.6 235.6 125.2
--------- -------- --------- -------- -------- --------
10,871.1 9,795.6 10,808.0 1,561.5 1,659.7 1,496.1
--------- -------- --------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------------------
505.8 85.3 1,289.3 271.7 279.8 270.7
194.7 42.1 458.1 99.1 92.6 95.8
--------- -------- --------- -------- -------- --------
311.1 43.2 831.2 172.6 187.2 174.9
--------- -------- --------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------------------
161.5 174.9 162.8 .6 (.3) .1
12.9 21.1 27.4 .1 .2
--------- -------- --------- -------- -------- --------
174.4 196.0 190.2 .6 (.2) .3
--------- -------- --------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------------------------
$ 485.5 $ 239.2 $ 1,021.4 $ 173.2 $ 187.0 $ 175.2
========= ======== ========= ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
B-2
<PAGE>
DEERE & COMPANY
CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED
(Deere & Company and Consolidated Subsidiaries)
------------------------------------------------------------------------------------------------------------------------------------
(In millions of dollars except per share amounts) October 31
ASSETS 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and short-term investments.................................................... $ 291.7 $ 295.5
Cash deposited with unconsolidated subsidiaries
--------- ---------
Cash and cash equivalents........................................................ 291.7 295.5
Marketable securities.............................................................. 127.4 315.5
Receivables from unconsolidated subsidiaries and affiliates........................ 230.9 30.2
Trade accounts and notes receivable - net.......................................... 3,169.2 3,251.1
Financing receivables - net........................................................ 8,275.7 6,742.6
Other receivables.................................................................. 395.3 273.9
Equipment on operating leases - net................................................ 1,954.4 1,654.7
Inventories........................................................................ 1,552.9 1,294.3
Property and equipment - net....................................................... 1,912.4 1,782.3
Investments in unconsolidated subsidiaries and affiliates.......................... 190.7 151.5
Intangible assets - net............................................................ 652.2 295.1
Prepaid pension costs.............................................................. 635.3 619.9
Other assets....................................................................... 256.8 185.5
Deferred income taxes.............................................................. 740.4 598.1
Deferred charges................................................................... 84.1 88.0
--------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Total.............................................................................. $20,469.4 $17,578.2
========= =========
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Short-term borrowings.............................................................. $ 5,758.5 $ 4,488.2
Payables to unconsolidated subsidiaries and affiliates............................. 32.7 15.5
Accounts payable and accrued expenses.............................................. 2,976.4 2,432.8
Insurance and health care claims and reserves...................................... 63.4 55.4
Accrued taxes...................................................................... 57.5 144.8
Deferred income taxes.............................................................. 74.6 63.0
Long-term borrowings............................................................... 4,764.3 3,806.2
Retirement benefit accruals and other liabilities.................................. 2,440.1 2,478.0
--------- ---------
Total liabilities.............................................................. 16,167.5 13,483.9
--------- ---------
-----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value (authorized - 600,000,000 shares; issued -
266,042,070 shares in 2000 and 265,760,670 shares in 1999), at stated value..... 1,864.4 1,850.4
Common stock in treasury, 31,486,348 shares in 2000 and 31,995,775 shares
in 1999, at cost................................................................ (1,439.0) (1,469.4)
Unamortized restricted stock compensation.......................................... (10.9) (21.3)
Retained earnings.................................................................. 4,117.2 3,855.3
--------- ---------
Total liabilities............................................................... 4,531.7 4,215.0
--------- ---------
Minimum pension liability adjustment............................................... (8.5) (18.9)
Cumulative translation adjustment.................................................. (222.4) (107.4)
Unrealized gain on marketable securities........................................... 1.1 5.6
--------- ---------
Accumulated other comprehensive income (loss)................................... (229.8) (120.7)
--------- ---------
Total stockholders' equity...................................................... 4,301.9 4,094.3
--------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Total.............................................................................. $20,469.4 $ 17,578.2
========= ==========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in this
statement conform with the requirements of FASB Statement No. 94. In the
supplemental consolidating data in this statement, "Equipment Operations" (Deere
& Company with Financial Services on the Equity Basis) reflect the basis of
consolidation described in Note 1 to the consolidated financial statements. The
supplemental "Financial Services" consolidating data in this statement includes
primarily Deere & Company's credit operations. Transactions between the
"Equipment Operations" and "Financial Services" have been eliminated to arrive
at the "Consolidated" data.
The notes to consolidated financial statements are an integral part of this
statement.
B-3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(Deere & Company with Financial Services on the Equity Basis)
------------------------------------------------------------------------------------------------------------------------------------
October 31 October 31
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 91.4 $ 111.7 $ 200.3 $ 183.8
548.3 117.4
--------- --------- --------- --------
639.7 229.1 200.3 183.8
205.3 127.4 110.1
408.4 266.0 140.0 4.8
3,169.2 3,251.1
125.0 118.4 8,150.7 6,624.2
266.4 129.4 128.9 144.5
5.9 2.6 1,948.5 1,652.2
1,552.9 1,294.3
1,864.6 1,738.8 47.7 43.5
1,561.8 1,362.8 10.1 9.9
651.2 294.8 1.1 .3
635.3 619.9
117.5 95.7 139.3 89.8
736.4 592.9 3.9 5.2
78.4 80.8 5.7 7.2
--------- --------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
$11,812.7 $10,281.9 $10,903.6 $8,875.5
========= ========= ========= ========
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
$ 927.5 $ 642.2 $ 4,831.1 $3,846.0
41.4 15.5 856.9 358.1
2,360.8 1,891.9 615.6 540.8
63.4 55.4
45.5 138.1 11.9 6.8
2.5 7.2 72.1 55.8
1,717.7 1,036.1 3,046.7 2,770.1
2,415.4 2,456.6 24.8 21.3
--------- --------- --------- --------
7,510.8 6,187.6 9,522.5 7,654.3
--------- --------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
1,864.4 1,850.4 258.6 229.1
(1,439.0) (1,469.4)
(10.9) (21.3)
4,117.2 3,855.3 1,152.1 1,005.6
--------- --------- --------- --------
4,531.7 4,215.0 1,410.7 1,234.7
-------- --------- --------- --------
(8.5) (18.9)
(222.4) (107.4) (30.7) (15.0)
1.1 5.6 1.1 1.5
-------- --------- --------- --------
(229.8) (120.7) (29.6) (13.5)
-------- --------- --------- --------
4,301.9 4,094.3 1,381.1 1,221.2
-------- --------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
$11,812.7 $10,281.9 $10,903.6 $8,875.5
======== ========= ========= ========
====================================================================================================================================
</TABLE>
B-4
<PAGE>
Deere & Company
STATEMENT OF CONSOLIDATED CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
CONSOLIDATED
(Deere & Company and Consolidated Subsidiaries)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31
(In millions of dollars) 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income........................................................................... $ 485.5 $ 239.2 $1,021.4
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful receivables................................................ 75.0 73.5 57.0
Provision for depreciation and amortization....................................... 647.9 542.4 463.2
Undistributed earnings of unconsolidated subsidiaries and affiliates.............. (1.2) (5.8) (13.2)
Provision (credit) for deferred income taxes...................................... (132.9) (162.4) 141.9
Changes in assets and liabilities:
Receivables................................................................... (53.8) 802.3 (724 6)
Inventories................................................................... (184.0) 50.7 (192.6)
Accounts payable and accrued expenses......................................... 540.0 (170.8) (40.7)
Other......................................................................... (296.5) 65.4 (295.5)
-------- --------- --------
Net cash provided by operating activities................................... 1,080.0 1,434.5 416.9
-------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Collections of financing receivables................................................. 6,655.1 6,017.1 5,685.3
Proceeds from sales of financing receivables......................................... 978.3 2,481.6 1,859.9
Proceeds from maturities and sales of marketable securities.......................... 247.8 115.4 187.3
Proceeds from sales of equipment on operating leases................................. 334.6 191.3 154.5
Proceeds from sale of a business..................................................... 179.1
Cost of financing receivables acquired............................................... (9,126.5) (8,186.2) (7,521.5)
Purchases of marketable securities................................................... (61.9) (92.9) (224.9)
Purchases of property and equipment.................................................. (426.7) (315.5) (434.8)
Cost of operating leases acquired.................................................... (939.9) (833.5) (752.3)
Acquisitions of businesses, net of cash acquired..................................... (643.3) (215.8) (103.0)
Increase in receivables with unconsolidated affiliates............................... (135.2) (4.8)
Other................................................................................ 7.4 12.4 27.6
-------- --------- --------
Net cash used for investing activities...................................... (3,110.3) (651.8) (1,121.9)
-------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Increase (decrease) in short-term borrowings......................................... 1,785.8 (1,650.7) 802.3
Change in intercompany receivables/payables..........................................
Proceeds from long-term borrowings................................................... 2,814.0 2,902.1 2,067.6
Principal payments on long-term borrowings........................................... (2,377.4) (1,796.2) (1,106.4)
Proceeds from issuance of common stock............................................... 15.9 4.2 22.7
Repurchases of common stock.......................................................... (.6) (49.0) (885.9)
Dividends paid....................................................................... (206.0) (205.4) (212.4)
Other................................................................................ (1.3) (.1) (1.2)
-------- --------- --------
Net cash provided by (used for) financing activities........................ 2,030.4 (795.1) 686.7
-------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash.............................................. (3.9) (1.8) (2.0)
-------- --------- --------
------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents................................. (3.8) (14.2) (20.3)
Cash and Cash Equivalents at Beginning of Year....................................... 295.5 309.7 330.0
-------- --------- --------
Cash and Cash Equivalents at End of Year............................................. $ 291.7 $ 295.5 $ 309.7
======== ========= ========
====================================================================================================================================
</TABLE>
The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in this
statement conform with the requirements of FASB Statement No. 94. In the
supplemental consolidating data in this statement, "Equipment Operations" (Deere
& Company with Financial Services on the Equity Basis) reflect the basis of
consolidation described in Note 1 to the consolidated financial statements. The
supplemental "Financial Services" consolidating data in this statement includes
primarily Deere & Company's credit operations. Transactions between the
"Equipment Operations" and "Financial Services" have been eliminated to arrive
at the "Consolidated" data.
The notes to consolidated financial statements are an integral part of this
statement.
B-5
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(Deere & Company with Financial Services on the Equity Basis)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31 Year Ended October 31
2000 1999 1998 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 485.5 $ 239.2 $1,021.4 $ 173.2 $ 187.0 $ 175.2
11.2 5.6 6.4 63.8 67.9 50.6
359.0 326.4 324.6 318.5 245.0 138.6
(147.0) (117.5) (131.4) (.6) (.4) (.2)
(152.3) (203.2) 115.3 19.5 40.8 26.6
(70.6) 802.4 (739.1) 16.8 14.4
(184.0) 50.7 (192.6)
460.8 (172.1) (70.0) 79.2 1.3 29.3
(295.1) 143.6 (222.7) (31.1) (107.1) (72.7)
------- -------- -------- --------- --------- ---------
467.5 1,075.1 111.9 639.3 434.5 361.8
------- -------- -------- --------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
13.6 23.0 36.1 6,641.5 5,994.1 5,649.2
30.6 978.3 2,481.6 1,859.9
202.8 45.0 115.4 187.3
1.4 65.7 333.2 191.3 88.8
179.1
(20.1) (50.8) (41.0) (9,137.0) (8,135.4) (7,480.5)
(61.9) (92.9) (224.9)
(414.1) (304.4) (421.6) (12.6) (11.1) (13.1)
(4.7) (2.7) (123.5) (935.2) (830.8) (628.8)
(641.8) (151.9) (95.9) (1.5) (63.9) (7.2)
(135.2) (4.8)
(5.1) 19.7 13.3 (4.5) (7.4) 15.6
------- -------- -------- --------- --------- ---------
(837.4) (288.0) (566.9) (2,289.9) (363.9) (553.7)
------- -------- -------- --------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
459.7 (961.9) 1,184.8 1,326.1 (688.8) (382.5)
(26.7) (32.5) (15.0) 457.6 10.2 (195.4)
752.1 499.8 199.4 2,061.8 2,402.3 1,868.2
(208.7) (19.1) (38.9) (2,168.7) (1,777.0) (1,067.5)
15.9 4.2 22.7
(.6) (49.0) (885.9)
(206.0) (205.4) (212.4) (26.8) (75.0) (56.8)
(1.3) (.2) (1.1) 17.1 (1.3)
------- -------- -------- --------- --------- ---------
784.4 (764.1) 253.6 1,667.1 (128.3) 164.7
------- -------- -------- --------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
(3.9) (1.8) (1.9) (.1)
------- -------- -------- --------- --------- ---------
------------------------------------------------------------------------------------------------------------------------------------
410.6 21.2 (203.3) 16.5 (57.7) (27.3)
229.1 207.9 411.2 183.8 241.5 268.8
------- -------- -------- --------- --------- ---------
$ 639.7 $ 229.1 $ 207.9 $ 200.3 $ 183.8 $ 241.5
======= ======== ======== ========= ========= =========
====================================================================================================================================
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
Deere & Company
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
====================================================================================================================================
Unamortized Other
Total Common Treasury Restricted Retained Comprehensive
(In millions of dollars) Equity Stock Stock Stock* Earnings Income (Loss)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance October 31, 1997.......................... $4,147.2 $1,778.5 $ (613.1) $(17.4) $3,048.4 $ (49.2)
--------
Comprehensive income (loss)
Net income.................................... 1,021.4 1,021.4
Other comprehensive income
Minimum pension liability adjustment....... (4.7) (4.7)
Cumulative translation adjustment.......... (23.1) (23.1)
Unrealized gain on marketable securities... 2.3 2.3
--------
Total comprehensive income.................... 995.9
--------
Repurchases of common stock....................... (885.9) (885.9)
Treasury shares reissued.......................... 31.4 31.4
Dividends declared................................ (213.3) (213.3)
Other stockholder transactions.................... 4.5 11.3 10.2 (17.0)
-------- -------- --------- ------ -------- -------
Balance October 31, 1998.......................... 4,079.8 1,789.8 (1,467.6) (7.2) 3,839.5 (74.7)
--------
Comprehensive income (loss)
Net income.................................... 239.2 239.2
Other comprehensive income
Minimum pension liability adjustment....... (.2) (.2)
Cumulative translation adjustment.......... (26.9) (26.9)
Unrealized gain on marketable securities... (18.9) (18.9)
--------
Total comprehensive income.................... 193.2
--------
Repurchases of common stock....................... (49.0) (49.0)
Treasury shares reissued.......................... 47.2 47.2
Dividends declared................................ (204.2) (204.2)
Other stockholder transactions.................... 27.3 60.6 (14.1) (19.2)
-------- -------- --------- ------ -------- -------
Balance October 31, 1999.......................... 4,094.3 1,850.4 (1,469.4) (21.3) 3,855.3 (120.7)
--------
Comprehensive income (loss)
Net income.................................... 485.5 485.5
Other comprehensive income
Minimum pension liability adjustment....... 10.4 10.4
Cumulative translation adjustment.......... (115.0) (115.0)
Unrealized loss on marketable securities... (4.5) (4.5)
--------
Total comprehensive income.................... 376.4
--------
Repurchases of common stock....................... (.6) (.6)
Treasury shares reissued.......................... 31.0 31.0
Dividends declared................................ (205.4) (205.4)
Other stockholder transactions.................... 6.2 14.0 10.4 (18.2)
-------- -------- --------- ------ -------- -------
Balance October 31, 2000.......................... $4,301.9 $1,864.4 $(1,439.0) $(10.9) $4,117.2 $(229.8)
======== ======== ========= ====== ======== =======
====================================================================================================================================
</TABLE>
The notes to consolidated financial statements are an integral part of this
statement.
*Unamortized restricted stock includes restricted stock issued at market price
net of amortization to compensation expense.
B-7
<PAGE>
REPORT OF MANAGEMENT
================================================================================
The consolidated financial statements and other financial information of
Deere & Company in this report were prepared by management, which is responsible
for their contents. They reflect amounts based upon management's best estimates
and informed judgments. In management's opinion, the financial statements
present fairly the financial position, results of operations and cash flows of
the company in conformity with accounting principles generally accepted in the
United States of America.
The company maintains a system of internal accounting controls and
procedures which is intended, consistent with reasonable cost, to provide
reasonable assurance that transactions are executed as authorized, that they are
included in the financial records in all material respects, and that
accountability for assets is maintained. The accounting controls and procedures
are supported by careful selection and training of personnel, examinations by
an internal auditing department and a continuing management commitment to the
integrity of the system.
The financial statements have been audited to the extent required by
auditing standards generally accepted in the United States of America by
Deloitte & Touche LLP, independent auditors. The independent auditors have
evaluated the company's internal control structure and performed tests of
procedures and accounting records in connection with the issuance of their
report on the fairness of the financial statements.
The Board of Directors has appointed an Audit Review Committee composed
entirely of directors who are not employees of the company. The Audit Review
Committee meets with representatives of management, the internal auditing
department and the independent auditors, both separately and jointly.
The Committee discusses with the independent auditors and approves in advance
the scope of the audit, reviews with the independent auditors the financial
statements and their auditors' report, consults with the internal audit staff
and reviews management's administration of the system of internal accounting
controls. The Committee reports to the Board on its activities and findings.
INDEPENDENT AUDITORS' REPORT
================================================================================
Deloitte
& Touche
Deere & Company:
We have audited the accompanying consolidated balance sheets of Deere & Company
and subsidiaries as of October 31, 2000 and 1999 and the related statements of
consolidated income, changes in consolidated stockholders' equity and
consolidated cash flows for each of the three years in the period ended October
31, 2000. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Deere & Company and
subsidiaries at October 31, 2000 and 1999 and the results of their operations
and their cash flows for each of the three years in the period ended October 31,
2000 in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
Chicago, Illinois
November 21, 2000
B-8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
================================================================================
RESULTS OF OPERATIONS FOR THE YEARS ENDED
OCTOBER 31, 2000, 1999 AND 1998
================================================================================
Deere & Company and its subsidiaries manufacture, distribute and finance a full
line of agricultural equipment; a variety of commercial and consumer equipment;
a broad range of equipment for construction and forestry; and other
technological products and services. The company also provides credit services
and managed health care plans. Additional information on these business segments
is presented in Note 24 to the consolidated financial statements.
2000 COMPARED WITH 1999
================================================================================
CONSOLIDATED RESULTS
Net income in 2000 totaled $486 million, or $2.06 per share diluted ($2.07
basic), compared with $239 million, or $1.02 per share diluted ($1.03 basic), in
1999. The earnings more than doubled this year primarily due to improved
manufacturing efficiencies associated with higher sales and production volumes.
Net sales and revenues increased 12 percent to $13,137 million in 2000,
compared with $11,751 million in 1999. Net sales of the Equipment Operations
increased 15 percent in 2000 to $11,169 million from $9,701 million last year.
Despite weakness in the company's major markets, sales rose due to production
and shipments to dealers being better aligned with retail demand this year,
market share gains and the inclusion of Timberjack sales, partially offset by
the impact of weaker European currencies. Overseas net sales increased 8 percent
and excluding the impact of weaker foreign currencies were up 17 percent for the
year. Overall, the company's worldwide physical volume of sales increased 18
percent for the year.
Worldwide equipment operations, which exclude the Financial Services
operations and unconsolidated affiliates, had net income of $311 million in
2000, compared with $43 million in 1999. The operating profit from equipment
operations also increased significantly to $693 million in 2000, compared to
$272 million in 1999. The increases were primarily due to manufacturing
efficiencies associated with higher sales and production volumes, in addition to
lower pension and postretirement health care costs, and the impact of quality
and efficiency improvement initiatives. Partially offsetting these factors were
increases in the cost of promotional programs related to used farm equipment
held by dealers and higher expenses regarding the development of new products
and growth initiatives. Last year's results included a charge for early
retirement programs.
Net income of the company's Financial Services operations in 2000 was $173
million, compared with $187 million in 1999. Additional information is
presented in the following discussion of the credit operations. Insurance and
health care premiums, claims and benefits expenses, and investment income all
decreased this year due to the sale of the insurance subsidiaries in the fourth
quarter of 1999.
BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTS
The following discussion of operating results by reportable segment and
geographic area relates to information in Note 24. Operating profit is income
before interest expense, foreign exchange gains and losses, income taxes and
corporate expenses.
However, operating profit of the credit segment includes the effect of interest
expense.
2000 NET SALES AND REVENUES
BY BUSINESS SEGMENT
--------------------------------
[GRAPH APPEARS HERE]
Agricultural Equipment 45%
Commercial & Consumer Equipment 23%
Construction Equipment 17%
Other 5%
Credit 10%
WORLDWIDE AGRICULTURAL EQUIPMENT
-----------------------------------------
[CHART APPEARS HERE]
Operating
$7.5 $5.1 $5.9 Profit $941 ($51) $400
Net Sales 1998 1999 2000 (Loss) 1998 1999 2000
------------------------------- -------------------------------
(in billions) (in millions)
Sales of the worldwide agricultural equipment segment increased 15 percent
for the year. Operating profit increased to $400 million in 2000, compared with
an operating loss of $51 million in 1999. Despite continued market weakness,
operating profit rose due to improved manufacturing efficiencies associated with
higher sales and production volumes, as the segment was able to better align
production schedules with retail sales. In addition, the segment benefited from
positive customer response to its products, resulting in increased market share
for John Deere farm machinery. Also aiding results were lower pension and
postretirement health care costs and the impact of initiatives aimed at quality
and efficiency improvement. Selling and administrative expenses and research
and development expenses were higher due to growth and other initiatives. These
increases, however, were proportional to the year's rise in sales. In addition,
promotional expenses increased as part of a program that significantly reduced
inventories of used equipment held by John Deere dealers in order to better
position the segment for increased sales volumes in the future. Last year's
results were affected by the $68 million pretax cost of the previously-mentioned
early retirement programs. Overseas operations had lower profit due to the
impact of weaker European currencies, higher sales incentive costs and increased
expenses for the development of new products and for growth initiatives. In
addition, average assets of the agricultural equipment segment declined in 2000,
compared to last year.
B-9
<PAGE>
================================================================================
WORLDWIDE COMMERCIAL AND CONSUMER EQUIPMENT
--------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
$2.2 $2.6 $3.0 Operating $213 $213 $159
Net Sales 1998 1999 2000 Profit 1998 1999 2000
---------------------------------- -------------------------------
(in billions) (in millions)
The commercial and consumer equipment segment had an operating profit of
$159 million in 2000, compared to $213 million in 1999. Although retail demand
for most products in this segment remained strong as sales rose 12 percent,
results were negatively affected by higher expenses related to growth, new
products and other initiatives, higher sales incentive costs, and by costs and
inefficiencies associated with the handheld product and generator operations,
which are experiencing weaker market conditions. A stronger Japanese yen also
had an adverse effect on the year's results.
WORLDWIDE CONSTRUCTION EQUIPMENT
--------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
$2.3 $1.9 $2.2 Operating $326 $149 $191
Net Sales 1998 1999 2000 Profit 1998 1999 2000
---------------------------------- -------------------------------
(in billions) (in millions)
The construction equipment segment had an operating profit of $191 million
in 2000, compared to $149 million in 1999. The increase was primarily due to
higher sales and improved efficiencies, partially offset by higher growth
expenditures. Sales increased 17 percent due to the impact of the acquisition of
Timberjack (see Note 1), an expanded product line and market share gains. Last
year's sales were adversely affected by implementation of the estimate-to-cash
order fulfillment initiative, which has reduced asset levels and cut product
delivery times. Current-year results also were negatively affected by a reversal
of sales and cost of sales related to company equipment held in inventory by
dealers acquired by Nortrax, a recently established venture in which the company
has a minority interest (see Note 1).
WORLDWIDE CREDIT OPERATIONS
--------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
$1.0 $1.1 $1.3 Operating $256 $274 $254
Revenues 1998 1999 2000 Profit 1998 1999 2000
---------------------------------- -------------------------------
(in billions) (in millions)
The operating profit of the credit operations was $254 million in 2000,
compared with $274 million in 1999. Additional information is presented in the
following discussion of the credit operations.
The company's other operations had an aggregate operating loss of $39
million for the year, compared with an operating loss of $33 million in 1999.
Results for both years were adversely affected by costs related to the
development of new products, e-business initiatives and goodwill amortization of
the special technologies group. Health care operations continued to generate
improved results. The 1999 results included the underwriting losses of the
insurance operations, which were sold in that year.
UNITED STATES AND CANADA EQUIPMENT OPERATIONS
--------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
$8.9 $7.0 $8.3 Operating $1,177 $48 $529
Net Sales 1998 1999 2000 Profit 1998 1999 2000
---------------------------------- -------------------------------
(in billions) (in millions)
The United States and Canadian equipment operations had an operating profit
of $529 million in 2000, compared with $48 million last year. The increase was
primarily due to the manufacturing efficiencies associated with higher sales and
production volumes, lower pension and postretirement health care costs and the
impact of quality and efficiency improvement initiatives, partially offset by
expenses related to growth and other initiatives and higher sales incentive
costs. Sales and physical volume increased 18 percent in 2000, compared with
last year.
OVERSEAS EQUIPMENT OPERATIONS
--------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
$3.0 $2.7 $2.9 Operating $299 $224 $164
Net Sales 1998 1999 2000 Profit 1998 1999 2000
---------------------------------- -------------------------------
(in billions) (in millions)
The overseas equipment operations had an operating profit of $164 million
in 2000, compared with $224 million last year. As previously mentioned, the
decline this year was due to weaker European currencies, higher sales incentive
costs and increased expenses related to the development of new products and
growth initiatives. Overseas sales were 8 percent higher than last year, while
the physical volume of sales increased 17 percent in 2000, compared with 1999.
B-10
<PAGE>
================================================================================
MARKET CONDITIONS AND OUTLOOK
Based on a favorable outlook for further growth in the company's equipment
operations, the company's worldwide physical volume of sales is currently
forecast to increase by 28 percent for the first quarter 2001 and 11 percent for
the full year, compared to the same periods in 2000.
Agricultural Equipment. The company expects North American industry retail sales
of farm machinery to be slightly higher next year. Lower than anticipated
global production of grain and oilseeds has resulted in a modest price
improvement for these commodities in recent weeks as well as a reduction in
carryover stocks. At the same time, farmers remain in sound overall financial
condition. In other areas, industry retail sales of farm machinery are expected
to be down 5 percent next year in Europe and flat in Latin America and
Australia. Sales of John Deere farm equipment are expected to move higher next
year due in large part to the continued success of newly introduced products and
this year's reduction in used goods inventories held by dealers. Partially
offsetting these factors will be continued expenditures related to growth.
Commercial and Consumer Equipment. In a slowing economic environment, industry
retail sales for these products -- which include lawn care equipment, and
worksite and utility vehicles -- are expected to be slightly lower in 2001
relative to this year. However, the segment's sales and financial results are
expected to improve on the strength of new products and recent steps to improve
profitability.
Construction Equipment. Housing starts, though remaining high by historical
standards, are expected to be lower in 2001 for the second year in a row. Lumber
production in this environment is expected to be scaled back, but pulp
production should continue to expand in light of global economic growth and
higher pulp prices. As a result of these factors, industry sales of construction
equipment are expected to fall by 7 to 10 percent in 2001. The company's
construction equipment operations are expected to experience further growth next
year, due in large part to the success of new products and the full year
inclusion of Timberjack sales. However, the impact of these factors in the
financial results of the segment will be partially offset by further growth
related expenditures.
Credit Operations. Credit is expected to benefit next year from continued growth
in its receivable portfolio both in North American and international markets.
The company is in position to improve its financial and operating
performance in 2001, and is encouraged by the firming tone of farm commodity
prices. In addition, the company is pleased with the positive customer response
to its many new innovative products, and believes that significant progress has
been made in bringing down used equipment inventories. At the same time, the
company's initiatives aimed at growth and quality improvement remain well on
track.
================================================================================
EURO CONVERSION
The transition period for this change extends through January 1, 2002. The
company has substantially completed the process of testing and converting its
systems to adopt the euro currency in its operations. The currency change has
not had a significant impact on the company's relationships with affected
suppliers, distribution network and financial institutions. The cost of
information systems modifications, effects on product pricing and purchase
contracts, and the impact on foreign currency financial instruments, including
derivatives, has not had a material effect on the company's operations. The
impact on future operations is also not expected to be material.
SAFE HARBOR STATEMENT
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Statements under "Market Conditions and Outlook," "Euro Conversion," and
the "Supplemental Information (Unaudited)" in Note 25 and other statements
herein that relate to future operating periods are subject to important 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 results of the company's agricultural equipment segment are strongly
influenced by the many interrelated factors that affect farmers' confidence,
including worldwide demand for agricultural products, world grain stocks, prices
realized for commodities and livestock, weather conditions, government farm
programs, animal diseases, crop pests and harvest yields. Factors that are
particularly important to the company's outlook for this segment include the
prices realized by farmers for their crops and livestock, which are in turn
strongly impacted by weather and soil conditions and the level of farm product
exports, as well as the level of payments under United States government farm
programs. The success of the fall harvest and the prices realized by farmers for
their crops especially affect retail sales of agricultural equipment in the
winter.
The company's outlook for its commercial and consumer equipment sales
assumes the continuation of current economic conditions in the United States and
is dependent on the level of consumer confidence. Other important assumptions
include continued consumer acceptance of the company's new products and a
continuation of existing consumer borrowing patterns. Sales of commercial and
consumer equipment during the winter are affected by the amount and timing of
snowfall.
The number of housing starts is especially important to sales of the
company's construction equipment. The results of the company's construction
equipment segment are also impacted by levels of public construction and non-
residential construction. Prices for pulp, lumber and structural panels are
important to sales of forestry equipment.
B-11
<PAGE>
================================================================================
All of the company's businesses are affected by general economic conditions
in the global markets in which the company operates, interest and currency
exchange rates, as well as monetary and fiscal policies (including actions by
the Federal Reserve Board); actions of competitors in the various industries in
which the company competes, particularly price cutting; dealer practices,
especially as to levels of new and used field inventories; and legislation
affecting the sectors in which the company operates. Other risks and
uncertainties that, from time to time, could affect the company's results
include production difficulties, such as capacity and supply constraints; labor
relations; technological difficulties; and changes to accounting standards.
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. These estimates and data are often revised. The company,
however, undertakes no obligation to update or revise its outlook, whether as a
result of new developments or otherwise. Further information concerning the
company and its businesses, including factors that potentially could materially
affect the company's financial results, is included in other filings with the
Securities and Exchange Commission.
1999 COMPARED WITH 1998
================================================================================
CONSOLIDATED RESULTS
Net income in 1999 totaled $239 million, or $1.02 per share diluted ($1.03
basic), compared with $1,021 million, or $4.16 per share diluted ($4.20 basic),
in 1998. The decline in profits was largely due to a continuation of weak demand
for agricultural equipment caused by depressed farm commodity prices. Cash flow
from operations, however, was higher due to a reduction in agricultural
equipment receivables of approximately $800 million, and a decline in
construction equipment receivables of approximately $200 million. During 1999,
the company implemented aggressive production schedule reductions in order to
help balance receivables and inventories with forecasted levels of demand.
Net sales and revenues decreased 15 percent to $11,751 million in 1999,
compared with $13,822 million in 1998. Net sales of the Equipment Operations
decreased 19 percent in 1999 to $9,701 million from $11,926 million in 1998.
Overseas net sales were $2,678 million in 1999 compared with $3,049 million in
1998. Overall, the company's worldwide physical volume of sales decreased 18
percent in 1999.
The company's Equipment Operations, which exclude the Financial Services
operations, had operating profit of $272 million in 1999, compared with $1,476
million in 1998. Lower sales and production volumes of agricultural and
construction equipment, an adverse sales mix and the cost of early-retirement
programs affected the 1999 results. Largely due to the reduction in agricultural
and construction trade receivables, equipment operations' assets ended 1999 at
$8,702 million, 4 percent below the level in 1998.
Net income of the company's Financial Services operations improved in 1999
totaling $187 million, compared with $175 million in 1998. Finance and interest
income increased to $1,027 million in 1999, compared with $887 million in 1998.
Additional information is presented in the following discussion of the credit
operations.
BUSINESS SEGMENT RESULTS
The agricultural equipment segment incurred an operating loss of $51 million in
1999, compared with an operating profit of $941 million in 1998. Lower sales and
production volumes, especially of high-horsepower, high-margin agricultural
equipment, were primary reasons for the loss as sales decreased 31 percent in
1999, compared with 1998. Lower production volumes, however, helped achieve a
substantial reduction in trade receivables and improved cash flow. Results were
also affected by the $68 million pretax cost of early-retirement programs and
higher sales incentive costs, with an emphasis on used goods. Overseas
operations, which experienced a more moderate decline in sales than in North
America, continued to be positive contributors to the segment's results. These
operations, as well, benefited from increased market shares and strong response
to innovative products.
The commercial and consumer equipment segment had an operating profit of
$213 million in 1999 and 1998. The 1999 results benefited from a 21 percent
increase in sales and higher production volumes driven by strong retail demand
and market-share gains, offset by higher expenses for the development and
introduction of new products and the start-up of new facilities.
The construction equipment segment had an operating profit of $149 million
in 1999, compared to $326 million in 1998. Sales decreased 18 percent in 1999,
compared to 1998. During the early part of 1999, the segment began
implementation of its estimate-to-cash order fulfillment initiative, which was
aimed at better matching product availability with customer requirements, while
reducing field inventories. Although retail sales remained at favorable levels,
company sales and production volumes declined as dealers reduced field
inventories largely due to this initiative. The reduction, however, also
reflected a weaker business outlook. In addition, the 1999 results were affected
by higher sales incentive costs.
The operating profit of the credit operations improved to $274 million in
1999, compared with $256 million in 1998. Additional credit operations
information follows.
CREDIT OPERATIONS
================================================================================
The credit operations primarily finance sales and leases by John Deere dealers
of new and used agricultural, commercial and consumer, and construction
equipment, and sales by non-Deere dealers of recreational products. In addition,
these operations provide wholesale financing to dealers of the foregoing
equipment, provide operating loans and finance retail revolving charge accounts.
B-12
<PAGE>
================================================================================
Condensed combined financial information of the credit operations in millions of
dollars follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
October 31
Financial Position 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents......................... $ 165 $ 149
------- ------
Financing receivables and leases:
Retail notes................................... 5,444 4,215
Revolving charge accounts...................... 1,133 918
Wholesale notes................................ 1,068 1,052
Financing leases............................... 611 532
Equipment on operating leases.................. 1,949 1,652
------- ------
Total financing receivables and leases...... 10,205 8,369
Less allowance for credit losses............... 106 93
------- ------
Total - net................................. 10,099 8,276
------- ------
Other receivables................................. 232 108
------- ------
Net property and other assets..................... 179 125
------- ------
Total assets................................ $10,675 $8,658
======= ======
Short-term borrowings............................. $ 4,831 $3,846
Payables to Deere & Company....................... 824 318
Deposits withheld from dealers and merchants...... 147 139
Other liabilities................................. 526 433
Long-term borrowings.............................. 3,047 2,770
Stockholder's equity.............................. 1,300 1,152
------- ------
Total liabilities and stockholder's equity.. $10,675 $8,658
======= ======
--------------------------------------------------------------------------------
Year Ended October 31
Summary of Operations 2000 1999 1998
--------------------------------------------------------------------------------
Revenues.......................................... $1,327 $1,137 $ 973
------ ------ -----
Expenses:
Interest....................................... 515 408 400
Selling, administrative and general............ 187 152 142
Provision for credit losses.................... 64 68 50
Depreciation and other......................... 307 234 125
------ ------ -----
Total....................................... 1,073 862 717
------ ------ -----
Income of consolidated group
before income taxes............................. 254 275 256
Provision for income taxes........................ 93 100 93
------ ------ -----
Income of consolidated group...................... 161 175 163
Equity in income of unconsolidated affiliates..... 1
------ ------ -----
Net income........................................ $ 162 $ 175 $ 163
====== ====== =====
Ratio of earnings to fixed charges................ 1.49 1.66 1.63
--------------------------------------------------------------------------------
</TABLE>
Acquisition volumes of financing receivables and leases increased 12
percent in 2000, compared with 1999. The volumes of revolving charge accounts,
leases and retail notes increased 26 percent, 18 percent and 11 percent,
respectively. The credit operations also sold retail notes receiving proceeds of
$978 million during 2000, compared with $2,482 million in 1999 and $1,860
million in 1998. The gains on the sales of these retail notes were $24 million,
$45 million and $41 million during 2000, 1999 and 1998, respectively. At October
31, 2000 and 1999, net financing receivables and leases administered, which
include receivables previously sold but still administered, were $12,223 million
and $10,992 million, respectively. The discussion in Note 7 presents additional
information.
Net income of the credit operations was $162 million in 2000, compared with
$175 million in 1999 and $163 million in 1998. Net income in 2000 was lower than
in 1999 due primarily to a reduced level of receivable sales, resulting in lower
gains, and by higher operating expenses, partially offset by higher earnings
from growth in the receivable and lease portfolio. Total revenues of the credit
operations increased 17 percent in 2000, reflecting the larger average
portfolio, compared with 1999. The average balance of receivables and leases
financed was 11 percent higher in 2000, compared with 1999. An increase in
average borrowings and higher borrowing rates in 2000 resulted in a 26 percent
increase in interest expense, compared with 1999. Depreciation expense
increased this year due to the increase in the equipment on operating leases.
Net income in 1999 was higher than in 1998 due primarily to higher earnings
from a larger average receivable and lease portfolio, a reduction in leverage
and a gain on the sale of the yacht retail note portfolio and related
intangibles, partially offset by higher receivable write-offs, lower financing
spreads and higher operating expenses. Total revenues of the credit operations
increased in 1999, reflecting the larger average portfolio, compared with 1998.
The average balance of receivables and leases financed was 6 percent higher in
1999, compared with 1998. Higher average borrowings in 1999 resulted in a small
increase in interest expense, compared with 1998.
CAPITAL RESOURCES AND LIQUIDITY
================================================================================
The discussion of capital resources and liquidity has been organized to review
separately, where appropriate, the company's Equipment Operations, Financial
Services operations and the consolidated totals.
EQUIPMENT OPERATIONS
The company's equipment businesses are capital intensive and are subject to
large seasonal variations in financing requirements for receivables from dealers
and inventories. Accordingly, to the extent necessary, funds provided by
operations are supplemented from external borrowing sources.
[GRAPH APPEARS HERE]
$1,867 $1,655 $1,140 $936 $890 $624
Primary
Cash Flows
Years 1998-2000 1 2 3 4 5 6
--------------------------------------------------------------------
(in millions)
Cash Inflows Cash Outflows
------------ -------------
1. Increased Borrowings 3. Purchases of Property and Equipment
2. Cash Provided by Operations 4. Repurchases of Common Stock
5. Acquisitions of Businesses
6. Dividends Paid
B-13
<PAGE>
================================================================================
Cash provided by operating activities during 2000 was $468 million,
primarily resulting from net income. The operating cash flows and a $1,003
million increase in borrowings were used primarily to fund acquisitions of
businesses of $642 million, purchases of property and equipment of $414 million
and the payment of dividends to stockholders of $206 million. Cash and cash
equivalents also increased $411 million.
Over the last three years, operating activities have provided an aggregate
of $1,655 million in cash. In addition, borrowings increased $1,867 million.
The aggregate amount of these cash flows was used mainly to fund purchases of
property and equipment of $1,140 million, repurchases of common stock of $936
million, acquisitions of businesses for $890 million and stockholders' dividends
of $624 million.
Trade accounts and notes receivable arise from sales of goods to dealers.
Trade receivables decreased by $82 million during 2000. Agricultural equipment
trade receivables decreased $276 million. Commercial and consumer equipment
receivables increased $124 million, construction equipment receivables
increased $68 million and other equipment receivables increased $2 million. The
ratios of worldwide trade accounts and notes receivable at October 31 to fiscal
year net sales were 28 percent in 2000, compared with 34 percent in 1999 and
1998.
The collection period for trade receivables averages less than 12 months.
The percentage of receivables outstanding for a period exceeding 12 months was 8
percent at October 31, 2000, compared with 12 percent at October 31, 1999 and 8
percent at October 31, 1998.
Inventories increased by $259 million in 2000. Since most of these
inventories are valued on the last-in, first-out (LIFO) method, lower
prevailing costs from prior years are assigned to beginning inventories.
Inventories valued on an approximate current cost basis increased by 8 percent
during 2000, compared to an increase in net sales of 15 percent during the same
period.
Total interest-bearing debt of the Equipment Operations was $2,645 million
at the end of 2000, compared with $1,678 million at the end of 1999 and $2,065
million at the end of 1998. The ratio of total debt to total capital (total
interest-bearing debt and stockholders' equity) at the end of 2000, 1999 and
1998 was 38.1 percent, 29.1 percent and 33.6 percent, respectively.
During 2000, the Equipment Operations issued $500 million of 7.85% notes
due in 2010 and $250 million of 8.10% debentures due in 2030. These operations
also retired $203 million of medium-term notes.
FINANCIAL SERVICES
The Financial Services' credit operations rely on their ability to raise
substantial amounts of funds to finance their receivable and lease portfolios.
Their primary sources of funds for this purpose are a combination of borrowings
and equity capital. Additionally, the credit operations periodically sell
substantial amounts of retail notes.
Cash flows from the company's Financial Services operating activities were
$639 million in 2000. Cash provided by financing activities totaled $1,667
million in 2000, representing mainly an increase in total borrowings of $1,677
million. The cash provided by operating and financing activities was used
primarily to increase total receivables and leases. Cash used for investing
activities totaled $2,290 million in 2000, primarily due to acquisitions of
receivables and leases exceeding collections by $3,431 million, which was
partially offset by proceeds of $978 million from the sale of receivables and
$333 million from the sale of equipment on operating leases.
Over the past three years, the Financial Services operating activities have
provided $1,436 million in cash. In addition, the sale of receivables and an
increase in borrowings have provided $5,320 million and $1,846 million,
respectively. These amounts have been used mainly to fund receivable and lease
acquisitions, which exceeded collections by $8,863 million.
Financing receivables and leases increased by $1,823 million in 2000,
compared with 1999. Additional information is presented in the preceding
discussion of the credit operations.
Total outside interest-bearing debt of the credit operations was $7,878
million at the end of 2000, compared with $6,616 million at the end of 1999 and
$6,049 million at the end of 1998. The credit subsidiaries' ratio of total
interest-bearing debt to total stockholder's equity was 6.7 to 1 at the end of
2000, compared with 6.0 to 1 at the end of 1999 and 6.1 to 1 at the end of 1998.
During 2000, the credit operations issued $1,964 million and retired $1,980
million of medium-term notes.
CONSOLIDATED
The company maintains unsecured lines of credit with various United States and
foreign banks. The discussion in Note 13 provides further information.
The company is naturally exposed to various interest rate and foreign
currency risks. As a result, the company enters into derivative transactions to
manage certain of these exposures that arise 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 fluctuations, while responding to favorable
financing opportunities. Accordingly, from time to time, these operations enter
into interest rate swap agreements to manage their interest rate exposure. 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. The company has entered into agreements related to the
management of these currency transaction risks. The credit and market risks
under these interest rate and foreign currency agreements are not considered to
be significant. Additional detailed financial instrument information is included
in Notes 22 and 25.
Stockholders' equity was $4,302 million at October 31, 2000, compared with
$4,094 million and $4,080 million at October 31, 1999 and 1998, respectively.
The increase in 2000 was caused primarily by net income of $486 million,
partially offset by cash dividends declared of $205 million and a change in the
cumulative translation adjustment of $115 million.
B-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
The consolidated financial statements represent the consolidation of all
companies in which Deere & Company has a controlling interest. Deere & Company
records its investment in each unconsolidated affiliated company (generally 20
to 50 percent ownership) at its related equity in the net assets of such
affiliate. Other investments (less than 20 percent ownership) are recorded at
cost. Consolidated retained earnings at October 31, 2000 include undistributed
earnings of the unconsolidated affiliates of $60 million. Dividends from
unconsolidated affiliates were $3 million in 2000, $6 million in 1999 and $6
million in 1998.
The company's consolidated financial statements and some information in the
notes and related commentary are presented in a format which includes data
grouped as follows:
Equipment Operations - These data include the company's agricultural equipment,
commercial and consumer equipment, construction equipment, and special
technologies operations with Financial Services reflected on the equity basis.
Data relating to the above equipment operations, including the consolidated
group data in the income statement, are also referred to as "Equipment
Operations" in this report.
Financial Services - These data include the company's credit, insurance and
health care operations. The insurance operations were sold in the fourth
quarter of 1999.
Consolidated - These data represent the consolidation of the Equipment
Operations and Financial Services. References to "Deere & Company" or "the
company" refer to the entire enterprise.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and related disclosures. Actual results could differ from those estimates.
Sales of equipment and service parts are recorded when title and all risk
of ownership are transferred to the independent dealer, based on the agreement
in effect with the dealer. In the United States and most international
locations, this transfer occurs when goods are shipped to the dealer. In Canada
and other international locations, certain goods are shipped to dealers on a
consignment basis under which title and risk of ownership are not transferred to
the dealer. Accordingly, sales are not recorded until a retail customer has
purchased the goods. In all cases, when a sale is recorded by the company, no
significant uncertainty exists surrounding the purchaser's obligation to pay and
no right of return exists. The company makes appropriate provisions based on
experience for costs such as doubtful receivables, sales incentives and product
warranty.
The functional currencies for most of the company's foreign operations are
their respective local currencies. The assets and liabilities of these
operations are translated to U.S. dollars at the end of the period exchange
rates, and the revenues and expenses are translated at weighted-average rates
for the period. The gains or losses from these translations are included in
other comprehensive income, which is part of stockholders' equity. Gains or
losses from transactions denominated in a currency other than the functional
currency of the subsidiary involved are included in net income.
In 2000, the company adopted AICPA Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. This SOP requires the capitalization of costs for software developed
internally for internal use, which were previously expensed. The amount of
total capitalized software costs, including purchased and internally developed
software, classified as "Other Assets" at October 31, 2000 was $174 million,
less accumulated amortization of $113 million. Amortization of these software
costs was $29 million in 2000. The SOP's effect on the company's financial
position or net income was not material.
In 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which was amended by Statement No. 138 in
2000. Under the new standards, all derivatives will be recorded at fair value in
the financial statements. The company will adopt these statements in fiscal year
2001 and the effect on the company's financial position or net income will not
be material. In 2000, the FASB issued Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
This standard revises FASB Statement No. 125 and requires additional disclosure.
The Statement will be effective March 31, 2001 and will have no material impact
on the company's financial position or net income. In 1999, the Securities and
Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. The SAB summarizes the SEC staff's
views on applying generally accepted accounting principles to revenue
recognition in financial statements. The company has reviewed its revenue
recognition policies and has determined that they comply with the principles as
set forth in SAB No. 101. Accordingly, the adoption of the SAB will have no
effect on the company's financial position or net income.
On April 28, 2000, the company acquired Timberjack Group, a leading
manufacturer of forestry equipment headquartered in Helsinki, Finland, for $608
million. The acquisition has been accounted for as a purchase with the purchase
price allocated to the assets acquired and liabilities assumed based on the fair
values as of the acquisition date. The excess of this purchase price over the
fair value of the net assets acquired (goodwill) was approximately $430 million,
which is being amortized on a straight-line basis over 30 years. The Timberjack
assets, liabilities and results of operations are included in the consolidated
financial statements from the date of acquisition. Timberjack reported annual
sales of $515 million in 1999. The pro forma results of operations for 2000 and
1999, as if the acquisition had occurred at the beginning of the fiscal year,
would not differ significantly from reported results.
During 2000, the company invested $36 million for 41 and 40 percent
interests in Nortrax, Inc. and Nortrax II, Inc., respectively, both construction
equipment dealers. Among their activities, these Nortrax dealers pursue the
acquisition of other construction equipment dealers to enhance their
profitability. In doing so, they provide a source of liquidity for other dealers
who have chosen to exit the construction equipment business. The company
accounts for its investments in these Nortrax dealers on the equity basis and,
accordingly, does not recognize 41 or 40 percent of the company's sales to these
dealers until the goods are sold to an unaffiliated party. At the time an
acquisition of a dealer by the Nortrax dealers becomes probable, the company
eliminates 41 or 40 percent of the previously recognized company sales related
to remaining inventories held by the dealers. The company has call options to
purchase an additional 57 or 60 percent of these Nortrax dealers from certain
owners beginning in approximately three years. These same owners also have put
options to require the company to purchase their 57 or 60 percent ownership
interests
B-15
<PAGE>
================================================================================
beginning in three to four years. The options may be exercised over a two- to
three-year period. Whether the options will be exercised in the future is
uncertain at this time. The acquisitions of the interests in the Nortrax dealers
and their activities have not had a material effect on the company's financial
position or results of operations and the impact on future financial statements
is uncertain at present.
Certain amounts for prior years have been reclassified to conform with 2000
financial statement presentations.
2. PENSION AND OTHER POSTRETIREMENT BENEFITS
================================================================================
The company has several defined benefit pension plans covering its United States
employees and employees in certain foreign countries. The company also has
several defined benefit health care and life insurance plans for retired
employees in the United States and Canada.
The worldwide components of net periodic pension cost and the significant
assumptions consisted of the following in millions of dollars and in percents:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Pensions
Service cost........................................ $ 106 $ 117 $ 102
Interest cost....................................... 414 396 386
Expected return on assets........................... (543) (497) (456)
Amortization of actuarial loss...................... 1 33 29
Amortization of prior service cost.................. 36 44 43
Amortization of net transition asset................ (8) (8) (11)
Special termination benefits........................ 29 5
Settlements/curtailments............................ 7 (2) 2
----- ----- -----
Net cost............................................ $ 13 $ 112 $ 100
===== ===== =====
Weighted-average Assumptions
Discount rates for obligations...................... 7.4% 7.4% 7.0%
Discount rates for expenses......................... 7.4% 7.0% 7.5%
Assumed rates of compensation increases............. 4.8% 4.9% 4.9%
Expected long-term rates of return.................. 9.7% 9.7% 9.7%
--------------------------------------------------------------------------------
</TABLE>
The worldwide components of net periodic postretirement benefits cost and
the significant assumptions consisted of the following in millions of dollars
and in percents:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Health Care and Life Insurance
Service cost........................................ $ 70 $ 85 $ 74
Interest cost....................................... 189 188 172
Expected return on assets........................... (43) (35) (31)
Amortization of actuarial loss...................... 1 23 2
Amortization of prior service cost.................. (3) (4) (6)
Special termination benefits........................ 5
Settlement.......................................... 3
----- ----- -----
Net cost............................................ $ 214 $ 265 $ 211
===== ===== =====
Weighted-average Assumptions
Discount rates for obligations...................... 7.74% 7.75% 7.26%
Discount rates for expenses......................... 7.75% 7.26% 7.76%
Expected long-term rates of return.................. 9.7% 9.7% 9.7%
--------------------------------------------------------------------------------
</TABLE>
In addition to the special termination benefits included in the pension and
postretirement benefit plans shown above, the company provided $34 million of
other special early-retirement benefits to certain employees in 1999. These
benefits and the special termination benefits included in the benefit plans
totaled $68 million in 1999.
The annual rates of increase in the per capita cost of covered health care
benefits (the health care cost trend rates) used to determine 2000, 1999 and
1998 costs were assumed to be 4.5 percent for 2001 and all future years, 6.0
percent for 2000 and 4.5 percent for 2001 and all future years, and 9.1 percent
for 1999, decreasing gradually to 4.5 percent by the year 2001, respectively. An
increase of one percentage point in the assumed health care cost trend rate
would increase the accumulated postretirement benefit obligations at October 31,
2000 by $270 million and the net periodic postretirement benefits cost for that
year by $31 million. A decrease of one percentage point would decrease the
postretirement benefit obligations by $242 million and the cost by $28 million
for the same period.
A worldwide reconciliation of the funded status of the benefit plans at
October 3l in millions of dollars follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Health Care
and
Pensions Life Insurance
------------ --------------
2000 1999 2000 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligations
Beginning of year balance........... $ (5,795) $ (5,830) $ (2,667) $ (2,517)
Service cost........................ (106) (117) (70) (85)
Interest cost....................... (414) (396) (189) (188)
Actuarial gain (loss)............... (3) 188 148 (37)
Amendments.......................... (6)
Benefits paid....................... 405 364 170 164
Settlements/curtailments............ (7) 2 (3)
Special termination benefits........ (29) (5)
Acquisition of business............. (25) (6)
Foreign exchange and other.......... 72 29 2 4
-------- -------- -------- --------
End of year balance................. (5,873) (5,795) (2,612) (2,667)
-------- -------- -------- --------
Change in plan assets (fair value)
Beginning of year balance........... 6,472 5,661 445 359
Actual return on plan assets........ 1,510 1,143 107 76
Employer contribution............... 42 23 170 168
Benefits paid....................... (405) (364) (170) (158)
Acquisition of business............. 33
Foreign exchange and other.......... (6) 9
-------- -------- -------- --------
End of year balance................. 7,646 6,472 552 445
-------- -------- -------- --------
Plan obligation (more than)
less than plan assets............ 1,773 677 (2,060) (2,222)
Unrecognized actuarial (gain) loss.. (1,609) (638) 82 295
Unrecognized prior service
(credit) cost.................... 151 186 (6) (8)
Remaining unrecognized
transition asset................. (10) (17)
-------- -------- -------- --------
Net amount recognized
in the balance sheet............. $ 305 $ 208 $ (1,984) $ (1,935)
======== ======== ======== ========
Amounts recognized in
balance sheet
Prepaid benefit cost................ $ 635 $ 620
Accrued benefit liability........... (362) (463) $ (1,984) $ (1,935)
Intangible asset.................... 21 25
Accumulated pretax charge to
other comprehensive income....... 11 26
-------- -------- -------- --------
Net amount recognized............... $ 305 $ 208 $ (1,984) $ (1,935)
======== ======== ======== ========
--------------------------------------------------------------------------------
</TABLE>
B-16
<PAGE>
================================================================================
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for pension plans with the accumulated benefit obligations
greater than plan assets at October 31, 2000 were $333 million, $299 million and
none, respectively, and at October 31, 1999 were $425 million, $385 million and
$14 million, respectively.
3. INCOME TAXES
================================================================================
The provision for income taxes by taxing jurisdiction and by significant
component consisted of the following in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States:
Federal....................... $ 264 $ 115 $216
State......................... 26 13 30
Foreign......................... 142 166 164
----- ----- ----
Total current............... 432 294 410
----- ----- ----
Deferred:
United States:
Federal....................... (118) (143) 138
State......................... (14) (13) 10
Foreign......................... (6) (3) (4)
----- ----- ----
Total deferred.............. (138) (159) 144
----- ----- ----
Provision for income taxes........ $ 294 $ 135 $554
===== ===== ====
--------------------------------------------------------------------------------
</TABLE>
Based upon location of the company's operations, the consolidated income
before income taxes in the United States in 2000, 1999 and 1998 was $504
million, $21 million and $1,158 million, respectively, and in foreign countries
was $274 million, $344 million and $402 million, respectively. Certain foreign
operations are branches of Deere & Company and are, therefore, subject to United
States as well as foreign income tax regulations. The pretax income by location
and the preceding analysis of the income tax provision by taxing jurisdiction
are, therefore, not directly related.
A comparison of the statutory and effective income tax provision and
reasons for related differences in millions of dollars follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
United States federal income tax
provision at a statutory rate
of 35 percent......................... $272 $128 $546
Increase (decrease) resulting from:
State and local income taxes, net
of federal income tax benefit......... 8 25
Taxes on foreign income which differ
from the United States statutory
rate.................................. 13 22 3
Benefit of Foreign Sales Corporation... (8) (11) (20)
Other adjustments--net................. 9 (4)
---- ---- ----
Provision for income taxes............. $294 $135 $554
==== ==== ====
--------------------------------------------------------------------------------
</TABLE>
Deferred income taxes arise because there are certain items that are
treated differently for financial accounting than for income tax reporting
purposes. An analysis of the deferred income tax assets and liabilities at
October 31 in millions of dollars follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
--------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred installment sales income.. $211 $317
Tax over book depreciation......... 158 138
Deferred lease income.............. 101 72
Accrual for retirement and
postemployment benefits........... $ 631 $ 619
Accrual for sales allowances....... 283 262
Accrual for vacation pay........... 51 54
Allowance for doubtful
receivables....................... 55 48
Tax loss and tax credit
carryforwards..................... 45 12
Minimum pension liability
adjustment........................ 5 10
Other items........................ 114 44 115 56
Less valuation allowance........... (4) (2)
------ ---- ------ ----
Deferred income tax
assets and liabilities............ $1,180 $514 $1,118 $583
====== ==== ====== ====
--------------------------------------------------------------------------------
</TABLE>
At October 31, 2000, accumulated earnings in certain overseas subsidiaries
totaled $669 million for which no provision for United States income taxes or
foreign withholding taxes has been made, because it is expected that such
earnings will be reinvested overseas indefinitely. Determination of the amount
of unrecognized deferred tax liability on these unremitted earnings is not
practical.
Deere & Company files a consolidated federal income tax return in the
United States, which includes the wholly-owned Financial Services subsidiaries.
These subsidiaries account for income taxes generally as if they filed separate
income tax returns.
At October 31, 2000, certain tax loss and tax credit carryforwards for $45
million were available with $24 million expiring from 2006 through 2019 and $21
million with an unlimited expiration date.
4. OTHER INCOME AND OTHER OPERATING EXPENSES
================================================================================
The major components of other income and other operating expenses consisted of
the following in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Other income
Gains from sales of retail notes....... $ 24 $ 45 $ 41
Securitization and servicing fee
income................................ 31 38 33
Revenues from services................. 40 25
Other.................................. 60 60 49
---- ---- ----
Total................................ $155 $168 $123
==== ==== ====
Other operating expenses
Depreciation on equipment on
operating leases...................... $280 $205 $146
Cost of services....................... 36 23
Other.................................. 3 8 30
---- ---- ----
Total................................ $319 $236 $176
==== ==== ====
</TABLE>
--------------------------------------------------------------------------------
B-17
<PAGE>
================================================================================
5. MARKETABLE SECURITIES
--------------------------------------------------------------------------------
Marketable securities are currently held by the health care subsidiaries. All
marketable securities are classified as available-for-sale under FASB Statement
No. 115, with unrealized gains and losses shown as a component of stockholders'
equity. Realized gains or losses from the sales of marketable securities are
based on the specific identification method.
The amortized cost and fair value of marketable securities in millions of
dollars follow:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Amortized Gross Gross
Cost Unrealized Unrealized Fair
or Cost Gains Losses Value
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 31, 2000
Equity securities.............. $ 8 $ 1 $ 9
U.S. government and agencies... 23 23
Corporate...................... 62 1 $ 1 62
Mortgage-backed securities..... 33 33
---- --- --- ----
Marketable securities.......... $126 $ 2 $ 1 $127
==== === === ====
October 31, 1999
Equity securities.............. $ 86 $18 $ 9 $ 95
U.S. government and agencies... 33 1 34
Corporate...................... 129 1 2 128
Mortgage-backed securities..... 59 1 1 59
---- --- --- ----
Marketable securities.......... $307 $21 $12 $316
==== === === ====
--------------------------------------------------------------------------------
</TABLE>
The contractual maturities of debt securities at October 31, 2000 in
millions of dollars follow:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Amortized Fair
Cost Value
----------------------------------------------------------------------
<S> <C> <C>
Due in one year or less.......................... $ 15 $ 15
Due after one through five years................. 65 65
Due after five through 10 years.................. 28 28
Due after 10 years............................... 10 10
---- ----
Debt securities.................................. $118 $118
==== ====
----------------------------------------------------------------------
</TABLE>
Actual maturities may differ from contractual maturities because some
borrowers have the right to call or prepay obligations. Proceeds from the sales
of available-for-sale securities were $205 million in 2000, $19 million in 1999
and $105 million in 1998. In 2000, realized gains were $20 million and realized
losses were $13 million on these sales. In 1999 and 1998, the gains and losses
were not significant. Proceeds in 2000 include the sale of securities that were
previously transferred to Deere & Company from John Deere Insurance Group, Inc.
prior to the sale of this subsidiary in 1999. The increase (decrease) in the net
unrealized holding gain after income taxes was $(5) million, $(19) million and
$3 million during 2000, 1999 and 1998, respectively.
6. TRADE ACCOUNTS AND NOTES RECEIVABLE
--------------------------------------------------------------------------------
Trade accounts and notes receivable at October 31 consisted of the following in
millions of dollars:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
2000 1999
----------------------------------------------------------------------
<S> <C> <C>
Trade accounts and notes:
Agricultural.................................. $1,819 $2,095
Commercial and consumer....................... 1,120 996
Construction.................................. 215 147
Other......................................... 15 13
------ ------
Trade accounts and notes receivable - net.......... $3,169 $3,251
====== ======
----------------------------------------------------------------------
</TABLE>
At October 31, 2000 and 1999, dealer notes included in the previous table
were $622 million and $856 million, respectively, and the allowance for doubtful
trade receivables included was $34 million for both years.
Trade accounts and notes receivable arise from sales of goods to dealers.
Under the terms of the sales to dealers, interest is charged to dealers on
outstanding balances, from the earlier of the date when goods are sold to retail
customers by the dealer or the expiration of certain interest-free periods
granted to the dealer at the time of the sale, until payment is received by the
company. Dealers cannot cancel purchases after goods are shipped and are
responsible for payment even if the equipment is not sold to retail customers.
The interest-free periods are determined based on the type of equipment sold and
the time of year of the sale. These periods range from one to 12 months for
agricultural tractors, from one to four months for most construction equipment,
and from two to 24 months for most other equipment. Interest-free periods may
not be extended. Interest charged may not be forgiven and interest rates, which
exceed the prime rate, are set based on market factors. The company evaluates
and assesses dealers on an ongoing basis as to their credit worthiness and
generally retains a security interest in the goods associated with these trade
receivables. The company is obligated to repurchase goods sold to a dealer upon
cancellation or termination of the dealer's contract for such causes as change
in ownership, closeout of the business or default. The company may also in
certain circumstances repurchase goods sold to a dealer in order to satisfy a
request for goods from another dealer.
Trade accounts and notes receivable have significant concentrations of
credit risk in the agricultural, commercial and consumer and construction
sectors as shown in the previous table. On a geographic basis, there is not a
disproportionate concentration of credit risk in any area.
7. FINANCING RECEIVABLES
--------------------------------------------------------------------------------
Financing receivables at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
2000 1999
----------------------------------------------------------------------
<S> <C> <C>
Retail notes:
Equipment:
Agricultural................................ $4,342 $3,397
Commercial and consumer..................... 611 457
Construction................................ 1,419 854
Recreational products......................... 327 333
------ ------
Total....................................... 6,699 5,041
Revolving charge accounts........................ 1,133 918
Financing leases................................. 728 633
Wholesale notes.................................. 1,068 1,052
------ ------
Total financing receivables................... 9,628 7,644
------ ------
Less:
Unearned finance income:
Equipment notes............................. 1,020 626
Recreational product notes.................. 110 80
Financing leases............................ 116 102
------ ------
Total..................................... 1,246 808
------ ------
Allowance for doubtful receivables............ 106 93
------ ------
Financing receivables - net...................... $8,276 $6,743
====== ======
----------------------------------------------------------------------
</TABLE>
B-18
<PAGE>
================================================================================
Financing receivables have significant concentrations of credit risk in the
agricultural, construction, commercial and consumer, and recreational product
business sectors as shown in the previous table. On a geographic basis, there is
not a disproportionate concentration of credit risk in any area. The company
retains as collateral a security interest in the equipment associated with
retail notes, wholesale notes and financing leases.
Financing receivable installments, including unearned finance income, at
October 31 are scheduled as follows in millions of dollars:
<TABLE>
<CAPTION>
------------------------------------------------------------------
2000 1999
------------------------------------------------------------------
<S> <C> <C>
Due in months:
0 - 12............................ $4,013 $3,432
13 - 24............................ 2,193 1,670
25 - 36............................ 1,466 1,066
37 - 48............................ 1,016 781
49 - 60............................ 648 485
Thereafter.......................... 292 210
------ ------
Total....................................... $9,628 $7,644
====== ======
------------------------------------------------------------------
</TABLE>
The maximum terms for retail notes are generally eight years for
agricultural equipment, five years for construction equipment, six years for
commercial and consumer equipment and 15 years for recreational products. The
maximum term for financing leases is generally five years, while the maximum
term for wholesale notes is generally 12 months.
At October 31, 2000 and 1999, the unpaid balances of retail notes
previously sold by the credit operations were $2,123 million and $2,716
million, respectively. The company's maximum exposure under all retail note
recourse provisions at October 31, 2000 and 1999 was $174 million and $176
million, respectively. There is no anticipated credit risk related to
nonperformance by the counter-parties. The retail notes sold are collateralized
by security interests in the related equipment sold to customers. At October 31,
2000 and 1999, worldwide financing receivables administered, which include
financing receivables previously sold but still administered, totaled $10,399
million and $9,459 million, respectively.
Total financing receivable amounts 60 days or more past due were $44
million at October 31, 2000, compared with $35 million at October 31, 1999.
These past-due amounts represented .53 percent of the receivables financed at
October 31, 2000 and .52 percent at October 31, 1999. The allowance for doubtful
financing receivables represented 1.26 percent and 1.36 percent of financing
receivables outstanding at October 31, 2000 and 1999, respectively. In addition,
at October 31, 2000 and 1999, the company's credit operations had $147 million
and $139 million, respectively, of deposits withheld from dealers and merchants
available for potential credit losses. An analysis of the allowance for doubtful
financing receivables follows in millions of dollars:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the year...................... $ 93 $ 90 $ 94
Provision charged to operations..................... 64 68 50
Amounts written off................................. (44) (44) (36)
Transfers primarily related to retail note sales.... (7) (21) (18)
---- ---- ----
Balance, end of the year............................ $106 $ 93 $ 90
==== ==== ====
-----------------------------------------------------------------------------
</TABLE>
================================================================================
8. Other Receivables
--------------------------------------------------------------------------------
Other receivables at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Taxes receivable.............................................. $206 $115
Receivables relating to asset backed securitizations.......... 89 89
Health care premiums receivable............................... 22 42
Other......................................................... 78 28
---- ----
Other receivables............................................. $395 $274
==== ====
--------------------------------------------------------------------------------
</TABLE>
The credit operations' receivables related to asset backed securitizations
are equal to the present value of payments to be received for retained interests
and deposits made with other entities for recourse provisions under the retail
note sales agreements.
9. EQUIPMENT ON OPERATING LEASES
================================================================================
Operating leases arise from the leasing of John Deere equipment to retail
customers. Initial lease terms generally range from 36 to 60 months. Equipment
on operating leases was $1,954 million and $1,655 million at October 31, 2000
and 1999, respectively. The equipment is depreciated on a straight-line basis
over the terms of the leases. The accumulated depreciation on this equipment was
$480 million and $352 million at October 31, 2000 and 1999, respectively. The
corresponding depreciation expense was $280 million in 2000, $205 million in
1999 and $146 million in 1998.
Future payments to be received on operating leases totaled $746 million at
October 31, 2000 and are scheduled as follows: 2001 - $324, 2002 - $232, 2003 -
$118, 2004 - $57 and 2005 - $15.
10. INVENTORIES
================================================================================
Most inventories owned by Deere & Company and its United States equipment
subsidiaries are valued at cost, on the "last-in, first-out" (LIFO) basis.
Remaining inventories are generally valued at the lower of cost, on the "first-
in, first-out" (FIFO) basis, or market. The value of gross inventories on the
LIFO basis represented 74 percent and 77 percent of worldwide gross inventories
at FIFO value on October 31, 2000 and 1999, respectively. If all inventories had
been valued on a FIFO basis, estimated inventories by major classification at
October 31 in millions of dollars would have been as follows:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------
2000 1999
----------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies................... $ 460 $ 345
Work-in-process.............................. 404 412
Finished machines and parts.................. 1,667 1,591
------ ------
Total FIFO value..................... 2,531 2,348
Adjustment to LIFO basis..................... 978 1,054
------ ------
Inventories.................................. $1,553 $1,294
====== ======
</TABLE>
----------------------------------------------------------------
B-19
<PAGE>
================================================================================
11. PROPERTY AND DEPRECIATION
--------------------------------------------------------------------------------
A summary of property and equipment at October 31 in millions of dollars
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Land $ 58 $ 59
Buildings and building equipment......................... 1,166 1,124
Machinery and equipment.................................. 2,315 2,318
Dies, patterns, tools, etc............................... 678 682
All other................................................ 658 602
Construction in progress................................. 180 105
------- ------
Total at cost.................................... 5,055 4,890
Less accumulated depreciation............................ 3,143 3,108
------ ------
Property and equipment - net............................. $1,912 $1,782
====== ======
--------------------------------------------------------------------------------
</TABLE>
Leased property under capital leases amounting to $11 million and $5
million at October 31, 2000 and 1999, respectively, is included in property and
equipment.
Property and equipment additions in 2000, 1999 and 1998 were $422 million,
$309 million and $442 million and depreciation was $292 million, $281 million
and $279 million, respectively. Property and equipment expenditures for new and
revised products, increased capacity and the replacement or major renewal of
significant items of property and equipment are capitalized. Expenditures for
maintenance, repairs and minor renewals are generally charged to expense as
incurred. Most of the company's property and equipment is depreciated using the
straight-line method for financial accounting purposes. Depreciation for United
States federal income tax purposes is computed using accelerated depreciation
methods.
The cost of compliance with foreseeable environmental requirements has been
accrued and did not have a material effect on the company's financial position
or results of operations.
12. INTANGIBLE ASSETS
--------------------------------------------------------------------------------
Net intangible assets totaled $652 million and $295 million at October 31, 2000
and 1999, respectively. The balance at October 31, 2000 consisted primarily of
unamortized goodwill, which resulted from the purchase cost of assets acquired
exceeding their fair value, and an intangible asset of $21 million related to
the additional minimum pension liability required by FASB Statement No. 87.
Intangible assets, excluding the intangible pension asset, are being
amortized over 30 years or less on the straight-line basis, and the accumulated
amortization was $125 million and $89 million at October 31, 2000 and 1999,
respectively. The intangible pension asset is remeasured and adjusted annually.
The unamortized goodwill is reviewed periodically for potential impairment.
13. SHORT-TERM BORROWINGS
--------------------------------------------------------------------------------
Short-term borrowings at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
2000 1999
----------------------------------------------------------------------------
<S> <C> <C>
Equipment Operations
Commercial paper.......................................... $ 712 $ 316
Notes payable to banks.................................... 143 121
Long-term borrowings due within one year.................. 73 205
------ ------
Total............................................. 928 642
------ ------
Financial Services
Commercial paper.......................................... 3,016 1,699
Notes payable to banks.................................... 7 9
Long-term borrowings due within one year.................. 1,808 2,138
------ ------
Total............................................. 4,831 3,846
------ ------
Short-term borrowings..................................... $5,759 $4,488
====== ======
--------------------------------------------------------------------------------
</TABLE>
The weighted-average interest rates on total short-term borrowings,
excluding current maturities of long-term borrowings, at October 31, 2000 and
1999 were 6.2 percent and 5.3 percent, respectively. All of the Financial
Services' short-term borrowings represent obligations of the credit
subsidiaries.
Unsecured lines of credit available from United States and foreign banks
were $5,197 million at October 31, 2000. Some of these credit lines are
available to both the Equipment Operations and certain credit subsidiaries. At
October 31, 2000, $1,303 million of the worldwide lines of credit were unused.
For the purpose of computing the unused credit lines, commercial paper and
short-term bank borrowings, excluding the current maturities of long-term
borrowings, were considered to constitute utilization.
Included in the above lines of credit is a long-term committed credit
agreement expiring in February 2005 for $2,338 million. The agreement is
mutually extendable and the annual facility fee is not significant. The credit
agreement has various requirements of John Deere Capital Corporation, including
the maintenance of its consolidated ratio of earnings to fixed charges at not
less than 1.05 to 1 for each fiscal quarter and the ratio of senior debt to
total stockholder's equity plus subordinated debt at not more than 8 to 1 at the
end of any fiscal quarter. The credit agreement also contains a provision
requiring Deere & Company to maintain consolidated tangible net worth of $500
million according to accounting principles generally accepted in the United
States of America in effect at October 31, 1998. Under this provision, $3,150
million of the company's retained earnings balance was free of restriction at
October 31, 2000.
Deere & Company has a contractual agreement to conduct business with the
John Deere Capital Corporation on such terms that the Capital Corporation will
continue to satisfy the ratio requirement discussed above for earnings to fixed
charges, the Capital Corporation's tangible net worth will be maintained at not
less than $50 million and Deere & Company will continue to own at least 51
percent of Capital Corporation's voting capital stock. These arrangements are
not intended to make Deere & Company responsible for the payment of obligations
of this credit subsidiary.
B-20
<PAGE>
================================================================================
14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
================================================================================
Accounts payable and accrued expenses at October 31 consisted of the following
in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Equipment Operations
Accounts payable:
Trade payables................................... $1,061 $ 804
Dividends payable................................ 52 51
Other............................................ 46 42
Accrued expenses:
Employee benefits................................ 306 226
Dealer commissions............................... 202 173
Other............................................ 694 596
------ ------
Total.......................................... 2,361 1,892
------ ------
Financial Services
Accounts payable:
Deposits withheld from dealers and merchants..... 147 139
Other............................................ 234 233
Accrued expenses:
Interest payable................................. 61 39
Other............................................ 173 130
------ ------
Total.......................................... 615 541
------ ------
Accounts payable and accrued expenses.............. $2,976 $2,433
====== ======
--------------------------------------------------------------------------------
</TABLE>
15. LONG-TERM BORROWINGS
================================================================================
Long-term borrowings at October 31 consisted of the following in millions of
dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Equipment Operations
Notes and debentures:
Medium-term notes due 2002 -- 2006:
Average interest rate of 7.5% as of year end
2000 and 8.0% as of year end 1999.............. $ 115 $ 181
6.55% notes due 2004............................. 250 250
7.85% debentures due 2010........................ 500
8.95% debentures due 2019........................ 200 200
8-1/2% debentures due 2022....................... 200 200
6.55% debentures due 2028........................ 200 200
8.10% debentures due 2030........................ 250
Other notes...................................... 2 5
------ ------
Total.......................................... $1,717 $1,036
------ ------
--------------------------------------------------------------------------------
</TABLE>
(continued)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Financial Services
Notes and debentures:
Medium-term notes due 2001 -- 2007:
Average interest rate of 7.4% as of year end
2000 and 6.1% as of year end 1999.............. $1,992 $1,373
5.85% notes due 2001............................. 200
5.35% notes due 2001............................. 200
7% notes due 2002: Swapped to variable interest
rate of 7.1% as of year end 2000 and 6.5% as
of year end 1999............................... 300 300
6.125% U.S. dollar notes due 2003: Swapped
to Canadian dollars and a variable interest
rate of 6.1% as of year end 2000 and
5.1% as of year end 1999....................... 142 147
Other notes due up to 2008:
Average rate of 7.8% as of year end 2000 and
7.2% as of year end 1999....................... 163 100
6% notes due 2009: Swapped to variable interest
rate of 6.9% as of year end 2000 and 5.5% as
of year end 1999............................... 300 300
------ ------
Total notes and debentures..................... 2,897 2,620
Subordinated debt:
8-5/8% subordinated debentures due 2019.......... 150 150
------ ------
Total.......................................... 3,047 2,770
------ ------
Long-term borrowings............................... $4,764 $3,806
====== ======
--------------------------------------------------------------------------------
</TABLE>
All of the Financial Services' long-term borrowings represent obligations
of the credit subsidiaries.
The approximate amounts of the Equipment Operations' long-term borrowings
maturing and sinking fund payments required in each of the next five years in
millions of dollars are as follows: 2001 -- $73, 2002 -- $72, 2003 -- $2,
2004 -- $251 and 2005 -- $25. The approximate amounts of the credit
subsidiaries' long-term borrowings maturing and sinking fund payments required
in each of the next five years in millions of dollars are as follows:
2001 -- $1,808, 2002 -- $1,700, 2003 -- $727, 2004 -- $54 and 2005 -- $11.
16. LEASES
================================================================================
At October 31, 2000, future minimum lease payments under capital leases totaled
$8 million. Total rental expense for operating leases was $73 million in 2000,
1999 and 1998. At October 31, 2000, future minimum lease payments under
operating leases amounted to $183 million as follows: 2001 -- $54, 2002 -- $38,
2003 -- $24, 2004 -- $31, 2005 -- $14 and later years $22.
17. COMMITMENTS AND CONTINGENT LIABILITIES
================================================================================
On October 31, 2000, the company's maximum exposure under all credit receivable
recourse provisions was $174 million for retail notes sold by the Financial
Services subsidiaries. Also, at October 31, 2000, the company had commitments
of approximately $123 million for construction and acquisition of property and
equipment.
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, 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
financial position or results of operations.
B-21
<PAGE>
================================================================================
18. CAPITAL STOCK
================================================================================
Changes in the common stock account in 1998, 1999 and 2000 in millions were as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Number of
Shares Issued Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Balance at October 31, 1997.............................. 263.8 $1,779
Other.................................................... .1 11
----- ------
Balance at October 31, 1998.............................. 263.9 1,790
Acquisition of a business................................ 1.5 49
Other.................................................... .4 11
----- ------
Balance at October 31, 1999.............................. 265.8 1,850
Acquisitions of businesses............................... .2 10
Other.................................................... 4
----- ------
Balance at October 31, 2000.............................. 266.0 $1,864
===== ======
--------------------------------------------------------------------------------
</TABLE>
The number of common shares the company is authorized to issue is 600
million and the number of authorized preferred shares, none of which has been
issued, is 9 million.
The company has previously announced it would repurchase up to $1,500
million of Deere & Company common stock. The stock repurchased under the program
to date totals $1,308 million. No purchases related to the repurchase program
were made in 2000.
A reconciliation of basic and diluted net income per share follows in
millions, except per share amounts:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income...................................... $485.5 $239.2 $1,021.4
Average shares outstanding...................... 234.3 232.9 243.3
Basic net income per share...................... $ 2.07 $ 1.03 $ 4.20
====== ====== ========
Average shares outstanding...................... 234.3 232.9 243.3
Effect of dilutive securities:
Stock options................................. 1.7 1.5 2.1
Other......................................... .3
------ ------ --------
Total potential shares outstanding.......... 236.0 234.4 245.7
====== ====== ========
Diluted net income per share.................... $ 2.06 $ 1.02 $ 4.16
====== ====== ========
--------------------------------------------------------------------------------
</TABLE>
Stock options to purchase 2.9 million shares, 4.2 million shares and .5
million shares during 2000, 1999 and 1998, respectively, were outstanding, but
not included in the preceding diluted per share computation because the options'
exercise prices were greater than the average market price of the company's
common stock during the related periods.
19. STOCK OPTION AND RESTRICTED STOCK AWARDS
================================================================================
The company issues stock options and restricted stock to key employees under
plans approved by stockholders. Restricted stock is also issued to nonemployee
directors. Options are generally awarded with the exercise price equal to the
market price and become exercisable in one to three years after grant. Certain
other options have been awarded with the exercise prices greater than the market
price and become exercisable in one year or longer after grant, depending on the
achievement of company performance goals. Options generally expire 10 years
after the date of grant. According to these plans at October 31, 2000, the
company is authorized to grant stock options and restricted stock for an
additional 15.1 million shares.
The company has retained the intrinsic value method of accounting for its
plans in accordance with APB Opinion No. 25, and no compensation expense for
stock options was recognized under this method. For disclosure purposes only
under FASB Statement No. 123, Accounting for Stock Based Compensation, the
Black-Scholes option pricing model was used to calculate the "fair values" of
stock options on the date the options were awarded. Based on this model, the
weighted-average fair values of stock options awarded during 2000, 1999 and 1998
with the exercise price equal to the market price were $12.06, $7.96 and $19.84
per option, respectively, and those awarded during 1999 and 1998 with the
exercise price greater than the market price were $4.26 and $14.81 per option,
respectively.
Pro forma net income and earnings per share, as if the fair value method in
FASB Statement No. 123 had been used to account for stock-based compensation,
and the assumptions used are as follow:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (in millions)
As reported............................. $ 486 $ 239 $ 1,021
Pro forma............................... $ 446 $ 216 $ 997
Net income per share
As reported - basic..................... $ 2.07 $ 1.03 $ 4.20
Pro forma - basic....................... $ 1.91 $ .93 $ 4.10
As reported - diluted................... $ 2.06 $ 1.02 $ 4.16
Pro forma - diluted..................... $ 1.89 $ .92 $ 4.06
Black-Scholes assumptions*
Risk-free interest rate................. 6.2% 4.6% 5.8%
Dividend yield.......................... 2.1% 2.7% 1.6%
Stock volatility........................ 30.4% 27.9% 34.7%
Expected option life.................... 4.5 years 5.0 years 5.3 years
*Weighted-averages
--------------------------------------------------------------------------------
</TABLE>
B-22
<PAGE>
================================================================================
During the last three fiscal years, changes in shares under option in
millions were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
---------------- ---------------- ----------------
Exercise Exercise Exercise
Shares Price* Shares Price* Shares Price*
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year....... 11.9 $38.59 7.6 $39.95 6.2 $30.90
Granted - at market...... 5.5 41.29 3.9 32.75 1.7 56.50
Granted - at premium..... .7 50.97 .5 82.19
Exercised................ (.6) 28.75 (.2) 21.35 (.7) 29.55
Expired or forfeited..... (.1) 42.50 (.1) 40.62 (.1) 48.67
---- ---- ----
Outstanding at
end of year............. 16.7 39.77 11.9 38.59 7.6 39.95
Exercisable at
end of year............. 10.1 36.14 6.8 37.36 3.8 30.52
*Weighted-averages
--------------------------------------------------------------------------------
</TABLE>
Options outstanding and exercisable in millions at October 31, 2000 were as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Options Outstanding Options Exercisable
----------------------------- -------------------
Remaining
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (yrs)* Price* Shares Price*
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$13.63 - $23.56............. 1.4 3.27 $19.91 1.4 $19.91
$28.39 - $34.19............. 5.6 6.70 32.52 5.6 32.52
$35.00 - $47.36............. 6.8 8.48 41.53 1.5 42.43
$50.97 - $56.50............. 2.4 7.39 54.78 1.6 56.50
$82.19...................... .5 7.08 82.19
---- ----
Total....................... 16.7 10.1
*Weighted-averages
--------------------------------------------------------------------------------
</TABLE>
In 2000, 1999, and 1998, the company granted 53,956, 703,914 and 33,239
shares of restricted stock with weighted-average fair values of $37.55, $32.85
and $55.60 per share, respectively. The total compensation expense for the
restricted stock plans, which are being amortized over the restricted periods,
was $9 million, $10 million and $2 million in 2000, 1999 and 1998, respectively.
20. EMPLOYEE STOCK PURCHASE AND SAVINGS PLANS
================================================================================
The company maintains the following significant plans for eligible United States
employees:
John Deere Savings and Investment Plan, for salaried employees
John Deere Stock Purchase Plan, for salaried employees
John Deere Tax Deferred Savings Plan, for hourly and incentive paid employees
Company contributions under these plans were $27 million in 2000, $51
million in 1999 and $45 million in 1998.
21. OTHER COMPREHENSIVE INCOME ITEMS
================================================================================
Other comprehensive income items under FASB Statement No. 130 are transactions
recorded in stockholders' equity during the year, excluding net income and
transactions with stockholders. Following are the items included in other
comprehensive income (loss) and the related tax effects in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Before Tax After
Tax (Expense) Tax
Amount Credit Amount
--------------------------------------------------------------------------------
<S> <C> <C> <C>
1998
Minimum pension liability adjustment.............. $ (8) $ 3 $ (5)
----- --- -----
Cumulative translation adjustment................. (21) (3) (24)
----- --- -----
Unrealized gain on marketable securities:
Holding gain.................................... 11 (4) 7
Reclassification of realized gain
to net income................................. (7) 3 (4)
----- --- -----
Net unrealized gain............................. 4 (1) 3
----- --- -----
Total other comprehensive loss.................... $ (25) $(1) $ (26)
===== === =====
--------------------------------------------------------------------------------
1999
Cumulative translation adjustment................. $ (24) $(3) $ (27)
----- --- -----
Unrealized loss on marketable securities:
Holding loss.................................... (28) 10 (18)
Reclassification of realized gain
to net income................................. (1) (1)
----- --- -----
Net unrealized loss............................. (29) 10 (19)
----- --- -----
Total other comprehensive loss.................... $ (53) $ 7 $ (46)
===== === =====
--------------------------------------------------------------------------------
2000
Minimum pension liability adjustment.............. $ 16 $(5) $ 11
----- --- -----
Cumulative translation adjustment................. (108) (7) (115)
----- --- -----
Unrealized loss on marketable securities:
Holding loss.................................... (1) (1)
Reclassification of realized gain
to net income................................. (7) 3 (4)
----- --- -----
Net unrealized loss............................. (8) 3 (5)
----- --- -----
Total other comprehensive loss.................... $(100) $(9) $(109)
===== === =====
--------------------------------------------------------------------------------
</TABLE>
22. FINANCIAL INSTRUMENTS
================================================================================
The fair values of financial instruments which do not approximate the carrying
values in the financial statements at October 31 in millions of dollars follow:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financing receivables........................ $8,276 $8,254 $6,743 $6,702
====== ====== ====== ======
Long-term borrowings and related swaps:
Equipment Operations borrowings............ $1,717 $1,722 $1,036 $1,045
Financial Services borrowings.............. 3,055 3,036 2,773 2,748
Interest rate and
foreign currency swaps................... (8) 19 (3) 19
------ ------ ------ ------
Total.................................... $4,764 $4,777 $3,806 $3,812
====== ====== ====== ======
--------------------------------------------------------------------------------
</TABLE>
B-23
<PAGE>
================================================================================
Fair Value Estimates
Fair values of the long-term financing receivables with fixed rates 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 with fixed rates were based on the
discounted values of their related cash flows at current market interest rates.
Certain long-term borrowings of the credit operations have been swapped to
current variable interest rates. Fair values of these swaps were also based on
discounted values of their related cash flows at current market interest rates.
Fair values and carrying values of the company's other interest rate swaps
associated with short-term borrowings, foreign exchange forward contracts and
options were not material.
Derivatives
The company enters into derivative transactions only to manage exposures arising
in the normal course of business, and not for the purpose of creating
speculative positions or trading. The following notional or contract amounts do
not represent amounts exchanged by the parties and, therefore, are not
representative of the company's risk. The net amounts exchanged are calculated
on the basis of the notional amounts and other terms of the derivatives such as
interest rates and exchange rates, and represent only a small portion of the
notional amounts. The credit and market risks under these agreements are not
considered to be significant since the counterparties have high credit ratings
and the fair values and carrying values are not material.
Interest Rate Swaps
The company's credit operations enter into interest rate swap agreements related
to their borrowings and certain asset backed securitizations. These swaps are
utilized to more closely match the type of interest rates of the borrowings to
those of the assets being funded or to manage interest rate exposures from
securitizations. The differential to be paid or received on all swap agreements
is accrued as interest rates change and is recognized over the lives of the
agreements in interest expense. The fair value adjustments for swap agreements
related to securitizations are recognized in other income.
At October 31, 2000 and 1999, the total notional principal amounts of
interest rate swap agreements related to short-term borrowings were $1,915
million and $1,037 million, having rates of 4.9 to 7.5 percent and 4.7 to 6.8
percent, terminating in up to 64 months and 59 months, respectively.
The credit operations have entered into interest rate swap agreements with
independent parties that change the effective rate of interest on certain long-
term borrowings. The table in Note 15 reflects the effective year-end variable
interest rates relating to these swap agreements. The notional principal amounts
and maturity dates of these swap agreements are the same as the principal
amounts and maturities of the related borrowings. The credit operations also
have interest rate swap agreements associated with medium-term notes. The table
in Note 15 reflects the interest rates relating to these swap agreements. At
October 31, 2000 and 1999, the total notional principal amounts of these swap
agreements were $1,255 million and $540 million, terminating in up to 100 months
and 92 months, respectively.
At October 31, 2000 and 1999, the total notional principal amounts of
interest rate swap agreements related to asset backed securitizations were $210
million and $361 million, having rates of 4.8 to 5.4 percent and 4.7 to 5.9
percent, terminating in up to 56 months and 68 months, respectively.
Foreign Exchange Forward Contracts, Swaps and Options
The company has entered into foreign exchange forward contracts, swaps and
purchased options in order to manage the currency exposure of certain
receivables, liabilities and expected inventory purchases. The foreign exchange
forward contract and swap gains or losses are accrued as foreign exchange rates
change for contracts related to receivables and liabilities or deferred until
expiration of the contract for future commitments. The contract gains or losses
and premiums are recognized in other operating expenses, cost of sales or
interest expense, and the premiums are either amortized or deferred over the
terms of the contracts depending on the related items. Premiums and gains on the
options related to future inventory purchases are deferred and recognized in
cost of sales. At October 31, 2000 and 1999, the company had foreign exchange
forward contracts of $1,024 million and $778 million maturing in up to 7 months
and 19 months, respectively, and foreign currency swap agreements for $174
million and $147 million maturing in up to 31 months and 43 months,
respectively. At October 31, 2000 and 1999, the company had purchased options
for $202 million and $131 million maturing in up to 14 months and 23 months,
respectively. The total deferred gains or losses on these foreign exchange
options were not material at October 31, 2000 and 1999.
23. CASH FLOW INFORMATION
================================================================================
For purposes of the statement of consolidated cash flows, the company considers
investments with original maturities of three months or less to be cash
equivalents. Substantially all of the company's short-term borrowings mature
within three months or less.
Cash payments for interest and income taxes consisted of the following in
millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Equipment Operations................................. $152 $151 $126
Financial Services................................... 489 428 414
Intercompany eliminations............................ (23) (15) (11)
---- ---- ----
Consolidated........................................... $618 $564 $529
==== ==== ====
Income taxes:
Equipment Operations................................. $393 $135 $449
Financial Services................................... 77 55 80
Intercompany eliminations............................ (57) (43) (63)
---- ---- ----
Consolidated........................................... $413 $147 $466
==== ==== ====
--------------------------------------------------------------------------------
</TABLE>
B-24
<PAGE>
================================================================================
24. SEGMENT AND GEOGRAPHIC AREA DATA FOR THE YEARS ENDED OCTOBER 31, 2000, 1999
AND 1998
================================================================================
The company's operations are organized and reported in four major business
segments described as follows.
The company's worldwide agricultural equipment segment manufactures and
distributes a full line of farm equipment -- including tractors; combine, cotton
and sugarcane harvesters; tillage, seeding and soil preparation machinery;
sprayers; hay and forage equipment; materials handling equipment; and integrated
precision farming technology.
The company's worldwide commercial and consumer equipment segment
manufactures and distributes equipment for commercial and residential uses --
including small tractors for lawn, garden, commercial and utility purposes;
riding and walk-behind mowers; golf course equipment; snowblowers; handheld
products such as chain saws, string trimmers and leaf blowers; skid-steer
loaders; utility vehicles; and other outdoor power products.
The company's worldwide construction equipment segment manufactures and
distributes a broad range of machines 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; forklifts; landscape loaders; and log skidders, feller
bunchers, loaders, forwarders, harvesters and related attachments.
The products produced by the equipment segments are marketed primarily
through independent retail dealer networks and major retail outlets.
The company's credit segment primarily finances sales and leases by John
Deere dealers of new and used agricultural, commercial and consumer, and
construction equipment and sales by non-Deere dealers of recreational products.
In addition, it provides wholesale financing to dealers of the foregoing
equipment, provides operating loans and finances retail revolving charge
accounts.
Certain operations do not meet the materiality threshold of FASB Statement
No. 131 and have been grouped together as "Other" segments. These include
special technologies, health care and the insurance operations which were sold
in 1999.
Corporate assets are primarily the Equipment Operations' prepaid pension
costs, deferred income tax assets, other receivables and cash and short-term
investments as disclosed in the financial statements, net of certain minor
intercompany eliminations.
Because of integrated manufacturing operations and common administrative
and marketing support, a substantial number of allocations must be made to
determine operating segment and geographic area data. Intersegment sales and
revenues represent sales of components and finance charges which are generally
based on market prices. Overseas operations are defined to include all
activities of divisions, subsidiaries and affiliated companies conducted outside
the United States and Canada.
Information relating to operations by operating segment in millions of
dollars follows with related comments included in Management's Discussion and
Analysis. In addition to the following unaffiliated sales and revenues by
segment, intersegment sales and revenues in 2000, 1999, and 1998 were as
follows: agricultural equipment net sales of $94 million, $106 million and $132
million and credit revenues of $4 million, $1 million and $2 million,
respectively.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
OPERATING SEGMENTS 2000 1999 1998
------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and revenues
Unaffiliated customers:
Agricultural equipment net sales................ $ 5,934 $ 5,138 $ 7,463
Commercial and consumer equipment
net sales..................................... 2,966 2,648 2,182
Construction equipment net sales................ 2,203 1,880 2,281
Other net sales................................. 66 35
------- ------- -------
Total net sales............................... 11,169 9,701 11,926
Credit revenues................................... 1,323 1,136 971
Other revenues.................................... 645 914 925
------- ------- -------
Total............................................. $13,137 $11,751 $13,822
======= ======= =======
------------------------------------------------------------------------------
Operating profit (loss)
Agricultural equipment*........................... $ 400 $ (51) $ 941
Commercial and consumer equipment................. 159 213 213
Construction equipment............................ 191 149 326
Credit**.......................................... 254 274 256
Other**........................................... (39) (33) 11
------- ------- -------
Total operating profit.......................... 965 552 1,747
------- ------- -------
Interest income................................... 40 24 13
Investment income................................. 8 1
Interest expense.................................. (182) (161) (126)
Foreign exchange loss............................. (8) (7) (24)
Corporate expenses - net.......................... (43) (35) (35)
Income taxes...................................... (294) (135) (554)
------- ------- -------
Total........................................... (479) (313) (726)
------- ------- -------
Net income........................................ $ 486 $ 239 $ 1,021
======= ======= =======
</TABLE>
* Includes $68 million of early-retirement costs in 1999.
** Operating profit of the credit business segment includes the effect of
interest expense, which is the largest element of its operating costs.
Operating profit of the "other" category includes health care and insurance
investment income.
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------
Interest income
Agricultural equipment............................ $ 39 $ 51 $ 43
Commercial and consumer equipment................. 11 8 8
Construction equipment............................ 8 9 11
Credit............................................ 791 685 697
Corporate......................................... 40 24 13
Intercompany...................................... (23) (15) (11)
------- ------- -------
Total........................................... $ 866 $ 762 $ 761
======= ======= =======
------------------------------------------------------------------------------
Interest expense
Agricultural equipment............................ $ 1 $ 1 $ 2
Credit............................................ 515 408 400
Other............................................. 2 2 2
Corporate......................................... 182 161 126
Intercompany...................................... (23) (15) (11)
------- ------- -------
Total........................................... $ 677 $ 557 $ 519
======= ======= =======
------------------------------------------------------------------------------
</TABLE>
B-25
<PAGE>
================================================================================
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
OPERATING SEGMENTS 2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation* and amortization
expense
Agricultural equipment....................... $ 199 $ 193 $ 214
Commercial and consumer equipment............ 75 71 57
Construction equipment....................... 60 46 52
Credit....................................... 283 208 129
Other........................................ 31 24 11
------- ------- -------
Total...................................... $ 648 $ 542 $ 463
======= ======= =======
* Includes depreciation for equipment on operating leases.
--------------------------------------------------------------------------------
Equity in income (loss) of
unconsolidated affiliates
Agricultural equipment....................... $ (5) $ 2 $ 2
Commercial and consumer equipment............ 1
Construction equipment....................... 6 10 15
Credit....................................... 1
Other........................................ (3) (3)
------- ------- -------
Total...................................... $ 2 $ 9 $ 15
======= ======= =======
--------------------------------------------------------------------------------
Identifiable assets
Agricultural equipment....................... $ 4,082 $ 4,244 $ 5,324
Commercial and consumer equipment............ 2,216 1,948 1,574
Construction equipment....................... 1,522 757 950
Credit....................................... 10,675 8,658 7,674
Other........................................ 338 327 1,236
Corporate.................................... 1,636 1,644 1,244
------- ------- -------
Total...................................... $20,469 $17,578 $18,002
======= ======= =======
--------------------------------------------------------------------------------
Capital additions
Agricultural equipment....................... $ 214 $ 170 $ 261
Commercial and consumer equipment............ 135 80 97
Construction equipment....................... 53 42 71
Credit....................................... 10 5 9
Other........................................ 10 12 4
------- ------- -------
Total...................................... $ 422 $ 309 $ 442
======= ======= =======
--------------------------------------------------------------------------------
Investment in unconsolidated
affiliates
Agricultural equipment....................... $ 26 $ 23 $ 57
Commercial and consumer equipment............ 2 2 1
Construction equipment....................... 153 116 92
Credit....................................... 10 9 20
Other........................................ 2 2
------- ------- -------
Total...................................... $ 191 $ 152 $ 172
======= ======= =======
--------------------------------------------------------------------------------
</TABLE>
The company views and has historically disclosed its operations as
consisting of two geographic areas, the United States and Canada, and overseas,
shown below in millions of dollars. Operating income for these areas has been
disclosed in addition to the requirements under FASB Statement No. 131. No
individual foreign country's net sales and revenues were material for disclosure
purposes. The percentages shown in the captions for net sales and revenues
indicate the approximate proportion of each amount that relates to the United
States only. The percentages are based upon a three-year average for 2000, 1999
and 1998.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
GEOGRAPHIC AREAS 2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and revenues
Unaffiliated customers:
United States and Canada:
Equipment operations net sales (92%)..... $ 8,272 $ 7,023 $ 8,877
Financial Services revenues (91%)........ 1,731 1,873 1,737
------- ------- -------
Total.................................... 10,003 8,896 10,614
------- ------- -------
Overseas:
Equipment operations net sales........... 2,897 2,678 3,049
Financial Services revenues*............. 79 40
------- ------- -------
Total.................................. 2,976 2,718 3,049
------- ------- -------
Other revenues............................... 158 137 159
------- ------- -------
Total........................................ $13,137 $11,751 $13,822
======= ======= =======
*Overseas Financial Services were not significant in 1998.
--------------------------------------------------------------------------------
Operating profit
United States and Canada:
Equipment operations..................... $ 529 $ 48 $ 1,177
Financial Services....................... 265 277 271
------- ------- -------
Total.................................. 794 325 1,448
------- ------- -------
Overseas:
Equipment operations..................... 164 224 299
Financial Services*...................... 7 3
------- ------- -------
Total.................................. 171 227 299
------- ------- -------
Total........................................ $ 965 $ 552 $ 1,747
======= ======= =======
*Overseas Financial Services were not significant in 1998.
--------------------------------------------------------------------------------
Property and equipment
United States................................ $ 1,322 $ 1,267 $ 1,253
Mexico....................................... 197 194 176
Germany...................................... 121 137 156
Other countries.............................. 272 184 115
------- ------- -------
Total..................................... $ 1,912 $ 1,782 $ 1,700
======= ======= =======
--------------------------------------------------------------------------------
</TABLE>
25. SUPPLEMENTAL INFORMATION (UNAUDITED)
================================================================================
Quarterly information with respect to net sales and revenues and earnings is
shown in the following schedule. Such information is shown in millions of
dollars except for per share amounts.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Net sales and revenues...................... $2,339 $3,790 $3,632 $3,376
Income before income taxes.................. 60 353 270 95
Net income.................................. 38 204 173 71
Net income per share - basic................ .16 .87 .74 .30
Net income per share - diluted.............. .16 .87 .72 .30
Dividends declared per share................ .22 .22 .22 .22
Dividends paid per share.................... .22 .22 .22 .22
--------------------------------------------------------------------------------
</TABLE>
(continued)
B-26
<PAGE>
================================================================================
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Net sales and revenues...................... $2,459 $3,468 $3,036 $2,788
Income (loss) before income taxes........... 76 231 125 (67)
Net income (loss)........................... 50 150 69 (30)
Net income (loss) per share - basic......... .21 .65 .30 (.13)
Net income (loss) per share - diluted....... .21 .65 .29 (.13)
Dividends declared per share................ .22 .22 .22 .22
Dividends paid per share.................... .22 .22 .22 .22
--------------------------------------------------------------------------------
</TABLE>
Common stock per share sales prices from New York Stock Exchange composite
transactions quotations follow:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 Market price
High........................................ $48.31 $44.63 $49.63 $38.94
Low......................................... $35.38 $30.31 $36.31 $30.69
1999 Market price
High........................................ $40.19 $45.94 $45.25 $43.44
Low......................................... $29.44 $31.56 $35.13 $35.13
--------------------------------------------------------------------------------
</TABLE>
At October 31, 2000, there were 33,241 holders of record of the company's
$1 par value common stock and 10 holders of record of the company's 5-1/2%
convertible subordinated debentures due 2001.
Dividend
A quarterly cash dividend of $.22 per share was declared at the board of
directors' meeting held on December 6, 2000, payable on February 1, 2001.
FINANCIAL INSTRUMENT RISK INFORMATION (UNAUDITED)
Sensitivity Analysis
The following is a sensitivity analysis for the company's derivatives and other
financial instruments which have interest rate risk. These instruments are held
for other than trading purposes. The gains or losses in the following table
represent the changes in the financial instruments' fair values which would be
caused by decreasing the interest rates by 10 percent of the current market
rates at October 31, 2000 and 1999. The fair values were determined based on the
discounted values of their related cash flows. The gains or losses in fair
values would have been as follows in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Fair Value
Gains (Losses)
---------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Marketable securities........................................ $ 2 $ 10
Financing receivables........................................ 52 40
Long-term borrowings and related swaps:
Equipment Operations borrowings............................ (79) (48)
Financial Services borrowings.............................. (32) (39)
Interest rate and
foreign currency swaps................................... 14 23
---- ----
Total.................................................... $(43) $(14)
==== ====
--------------------------------------------------------------------------------
</TABLE>
Tabular Information
The following foreign exchange forward contracts were held by the company
related to certain currency exposures. Substantially all contracts have maturity
dates of less than one year. The notional amounts and fair values in millions of
dollars follow:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Average Fair Value
Contractual Notional Gains
Rate* Amount (Losses)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
October 31, 2000
Buy US$ / Sell Canadian dollar................ 1.5011 $ 153 $ 2.4
Buy Deutsche Mark / Sell US$.................. 2.3367 145 (.9)
Buy US$ / Sell Euro........................... 1.1651 137 4.1
Buy US$ / Sell Swedish Krona.................. 9.6095 123 7.4
Buy US$ / Sell British Pound.................. .6873 119 1.5
Buy US$ / Sell Australian dollar.............. 1.8043 118 6.8
Buy US$ / Sell Deutsche Mark.................. 2.3394 87 .5
Other contracts............................... 142 (.4)
------ -----
Total...................................... $1,024 $21.4
====== =====
October 31, 1999
Buy Deutsche Mark / Sell US$.................. 1.8513 $ 157 $(1.3)
Buy US$ / Sell British Pound.................. .6314 133 1.2
Buy US$ / Sell Brazilian Real................. 1.9633 132 .7
Buy US$ / Sell Deutsche Mark.................. 1.8404 120 1.8
Buy US$ / Sell Canadian dollar................ 1.4694 76
Buy US$ / Sell Australian dollar.............. 1.5475 47 (.4)
Other contracts............................... 113 (.6)
------ -----
Total...................................... $ 778 $ 1.4
====== =====
*Currency per United States dollar (US$)
--------------------------------------------------------------------------------
</TABLE>
At October 31, 2000 and 1999, the company had $202 million and $131 million
of foreign exchange purchased options with a deferred premium of $6 million and
$5 million, respectively. The premium is the maximum potential loss on these
options, which are related to expected inventory purchases. Additional
information on financial instruments including derivatives is presented in Note
22.
B-27
<PAGE>
Deere & Company
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
====================================================================================================================================
(Dollars in millions
except per share amounts) 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and revenues.......... $13,137 $11,751 $13,822 $12,791 $11,229 $10,291 $ 8,977 $ 7,696 $ 6,930 $ 7,035
Net sales of equipment.......... 11,169 9,701 11,926 11,082 9,640 8,830 7,663 6,479 5,723 5,848
Finance and interest income..... 1,321 1,104 1,007 867 763 660 548 563 616 654
Research and development
expenses...................... 542 458 445 412 370 327 276 270 288 279
Interest expense................ 677 557 519 422 402 393 303 369 413 450
Income (loss) before changes in
accounting.................... 486 239 1,021 960 817 706 604 184 37 (20)
Net income (loss)............... 486 239 1,021 960 817 706 604 (921) 37 (20)
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) per share before
changes in accounting......... $ 2.07 $ 1.03 $ 4.20 $ 3.78 $ 3.14 $ 2.71 $ 2.34 $ .80 $ .16 $ (.09)
Net income (loss) per share
- basic....................... 2.07 1.03 4.20 3.78 3.14 2.71 2.34 (3.97) .16 (.09)
Net income (loss) per share
- diluted..................... 2.06 1.02 4.16 3.74 3.11 2.69 2.32 (3.97) .16 (.09)
Dividends declared per share.... .88 .88 .88 .80 .80 .75 .68 1/3 .66 2/3 .66 2/3 .66 2/3
Dividends paid per share........ .88 .88 .86 .80 .80 .73 1/3 .66 2/3 .66 2/3 .66 2/3 .66 2/3
Average number of common shares
outstanding (in thousands).... 234,276 232,874 243,315 253,723 260,547 260,494 258,438 231,874 228,822 228,493
------------------------------------------------------------------------------------------------------------------------------------
Total assets.................... $20,469 $17,578 $18,002 $16,320 $14,653 $13,847 $12,781 $11,467 $11,446 $11,649
Trade accounts and notes
receivable - net.............. 3,169 3,251 4,059 3,334 3,153 3,260 2,939 2,794 2,946 2,958
Financing receivables - net..... 8,276 6,743 6,333 6,405 5,912 5,345 4,502 3,755 4,395 4,754
Equipment on operating leases
- net......................... 1,954 1,655 1,209 775 430 259 219 195 168 185
Inventories..................... 1,553 1,294 1,287 1,073 829 721 698 464 525 538
Property and equipment - net.... 1,912 1,782 1,700 1,524 1,352 1,336 1,314 1,240 1,308 1,235
Short-term borrowings:
Equipment Operations........ 928 642 1,512 171 223 396 54 476 856 881
Financial Services.......... 4,831 3,846 3,810 3,604 2,921 2,744 2,583 1,125 2,224 2,590
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total................... 5,759 4,488 5,322 3,775 3,144 3,140 2,637 1,601 3,080 3,471
Long-term borrowings:
Equipment Operations........ 1,718 1,036 553 540 626 703 1,019 1,070 1,234 1,018
Financial Services.......... 3,046 2,770 2,239 2,083 1,799 1,473 1,035 1,478 1,239 1,188
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total................... 4,764 3,806 2,792 2,623 2,425 2,176 2,054 2,548 2,473 2,206
Total stockholders' equity...... 4,302 4,094 4,080 4,147 3,557 3,085 2,558 2,085 2,650 2,836
------------------------------------------------------------------------------------------------------------------------------------
Book value per share............ $ 18.34 $ 17.51 $ 17.56 $ 16.57 $ 13.83 $ 11.78 $ 9.87 $ 8.13 $ 11.58 $ 12.40
Number of employees
(at year end)................. 43,670 38,726 37,002 34,420 33,919 33,375 34,252 33,070 34,852 36,774
====================================================================================================================================
</TABLE>
B-28
<PAGE>
DIRECTIONS TO THE DEERE & COMPANY ADMINISTRATIVE CENTER
One John Deere Place, Moline, Illinois 61265-8098
-------------------------------------------------------------------------------
The annual meeting will be held in the auditorium of the Deere & Company
Administrative Center which is located at One John Deere Place, Moline,
Illinois. John Deere Place intersects the north side of John Deere Road east
of 70th Street, Moline. The entrance to the Administrative Center and parking
are on the east side of the building.
From Chicago (or the east)
Take I-290 (Eisenhower Expressway) west to I-88 West (East-West Tollway)
which turns into IL5/John Deere Road. Follow IL5/John Deere Road to John Deere
Place. Turn right onto John Deere Place. Follow for about 1/4 mile. Turn left
onto the Administrative Center grounds. Follow the signs to parking on the
east side of the building.
From Des Moines (or the west)
Take I-80 east to exit number 298. Exit onto I-74 East. Follow for about 9
1/4 miles to the IL5 East/John Deere Road exit (Exit number 4A). Exit onto IL5
East/John Deere Road. Follow IL5/John Deere Road east for 3.3 miles to John
Deere Place. Turn left onto John Deere Place. Follow for about 1/4 mile. Turn
left onto the Administrative Center grounds. Follow the signs to parking on
the east side of the building.
From Peoria (or the south)
Take I-74 west to the I-280 West exit. Exit onto I-280 West. Follow for
about 10 miles to exit number 18A. Exit onto I-74 West. Follow for about 1/2
mile to the IL5 East/John Deere Road exit (Exit number 4B). Exit onto IL5
East/John Deere Road. Follow IL5/John Deere Road east for 3.3 miles to John
Deere Place. Turn left onto John Deere Place. Follow for 1/4 mile. Turn left
onto the Administrative Center grounds. Follow the signs to parking on the
east side of the building.
[LOGO]
Printed on Recycled Paper
<PAGE>
[LOGO]
Dear Stockholders:
It is a pleasure to invite you to the 2001 Annual Meeting of Stockholders of
Deere & Company. The meeting will be held at 10 A.M. on Wednesday, February 28,
2001 at the Deere & Company Administrative Center, at One John Deere Place,
Moline, Illinois.
The Notice of the meeting and the Proxy Statement enclosed cover the formal
business of the meeting, which includes election of Directors and any other
business to properly come before the meeting. The rules of conduct for the
meeting include the following:
1. No cameras, sound equipment or recording devices may be brought into the
auditorium.
2. There will be a discussion period at the end of the meeting. If you wish to
present a question or comment, please wait for an attendant to provide a
microphone, then begin by stating your name, indicating the city and state
where you reside, and confirming that you are a stockholder.
3. The Chairman is authorized to impose reasonable time limits on the remarks of
individual stockholders and has discretion to rule on any matters which arise
during the meeting. Personal grievances or claims are not appropriate
subjects for the meeting.
4. Voting results announced at the meeting by the Inspectors of Voting are
preliminary. Final results will be included in the Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission for the second quarter
of fiscal 2001.
Detach Proxy Card Here
| |
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DEERE & COMPANY
PROXY-ANNUAL MEETING / 28 FEBRUARY 2001
Solicited by the Board of Directors for use at the Annual Meeting of
Stockholders of Deere & Company on February 28, 2001.
The undersigned appoints each of Robert W. Lane and Michael A. Harring attorney
and proxy, with full power of substitution, on behalf of the undersigned and
with all powers the undersigned would possess if personally present, to vote all
shares of Common Stock of Deere & Company that the undersigned would be entitled
to vote at the above Annual Meeting and any adjournment thereof. The shares
represented by this proxy will be voted as specified and in the discretion of
the proxies on all other matters. If not otherwise specified, shares will be
voted in accordance with the recommendations of the Directors.
Please mark, date and sign your name exactly as it appears on this proxy and
return this proxy in the enclosed envelope. When signing as attorney, executor,
administrator, trustee, guardian or officer of a corporation, please give your
full title as such. For joint accounts, each joint owner should sign.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
DEERE & COMPANY
P.O. BOX 11012
NEW YORK, N.Y. 10203-0012
<PAGE>
[LOGO] VOTE BY TELEPHONE AND INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
TELEPHONE
800-481-9813
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the simple directions.
INTERNET
http://proxy.shareholder.com/de
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your control number, located
in the box below, to create an electronic ballot.
MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided. Make sure the pre-printed address shows through the envelope
window. Do not mail additional cards in the return envelope. The return
envelopes are mechanically opened and additional cards may be accidentally
destroyed.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned the proxy card.
--------------------------------------------------------------------------------
If you have submitted your proxy by telephone or the Internet there is no need
for you to mail back your proxy.
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YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING!
------------------------------
CALL TOLL-FREE TO VOTE . IT'S FAST AND CONVENIENT
CONTROL NUMBER FOR
800-481-9813 TELEPHONE OR INTERNET VOTING
------------------------------
PLEASE MARK YOUR CHOICE
DETACH PROXY CARD HERE IF YOU ARE NOT LIKE THIS IN BLUE OR BLACK INK [X]
VOTING BY TELEPHONE OR INTERNET
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The Directors Recommend a Vote FOR all Nominees.
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1. Election as Directors
FOR all nominees listed below [X]
WITHHOLD AUTHORITY to vote for all nominees listed below [X]
*EXCEPTIONS [X]
Nominees: 01 - Robert W. Lane, 02 - Antonio Madero B., 03 - John R. Stafford and
04 - John R. Walter.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions ____________________________________________________________________
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If you request to access future Proxy Statements and Annual Reports
electronically and agree to do so, please mark this box. [X]
If you are submitting a change of address and or comments please mark here. [X]
Date__________________________________________
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Signature
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Signature
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
