DEERE & CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1993

Commission File Number 1-4121
DEERE & COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE 36-2382580
(State of incorporation) (IRS Employer Identification No.)

JOHN DEERE ROAD, MOLINE, ILLINOIS 61265 (309) 765-8000
(Address of principal executive offices) (Zip Code) (Telephone Number)

SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common stock, $1 par value New York Stock Exchange
Chicago Stock Exchange
Frankfurt, Germany Stock Exchange
8.45% Debentures Due 2000 New York Stock Exchange
5-1/2% Convertible Subordinated
Debentures Due 2001 New York Stock Exchange
8% Debentures Due 2002 New York Stock Exchange
8-1/4% Notes Due 1996 New York Stock Exchange
9-1/8% Notes Due 1996 New York Stock Exchange
8.95% Debentures Due 2019 New York Stock Exchange
8-1/2% Debentures Due 2022 New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate quoted market price of voting stock of registrant held by
nonaffiliates at December 31, 1993 was $6,321,507,276. At December 31, 1993,
85,605,030 shares of common stock, $1 par value, of the registrant were
outstanding. DOCUMENTS INCORPORATED BY REFERENCE. Portions of the proxy
statement for the annual meeting of stockholders to be held on February 23, 1994
are incorporated by reference in Part III.

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Page 1 of 67 pages.
Index to exhibits is on pages 61-63.

PART I
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ITEM 1. BUSINESS.

PRODUCTS

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

The Company's worldwide AGRICULTURAL EQUIPMENT segment manufactures and
distributes a full range of equipment used in commercial farming -- including
tractors; tillage, soil preparation, planting and harvesting machinery; and crop
handling equipment.

The Company's worldwide INDUSTRIAL EQUIPMENT segment manufactures and
distributes a broad range of machines used in construction, earthmoving and
forestry -- including backhoe loaders; crawler dozers and loaders;
four-wheel-drive loaders; scrapers; motor graders; excavators; and log skidders.
This segment also includes the manufacture and distribution of engines and
drivetrain components for the original equipment manufacturer (OEM) market.

The Company's worldwide LAWN AND GROUNDS CARE EQUIPMENT segment manufactures and
distributes equipment for commercial and residential uses -- including small
tractors for lawn, garden and utility purposes; riding and walk- behind mowers;
golf course equipment; utility transport vehicles; snowblowers; and other
outdoor power products.

The products produced by the equipment segments are marketed primarily through
independent retail dealer networks.

The Company's CREDIT segment, which operates in the United States and Canada,
purchases and finances retail notes from John Deere's equipment sales branches
in the United States and Canada. The notes are acquired by the sales branches
through John Deere retail dealers and originate in connection with retail sales
by dealers of new John Deere equipment and used equipment. The credit segment
also purchases and finances retail notes unrelated to John Deere equipment,
representing primarily recreational vehicle and recreational marine product
notes acquired from independent dealers of that equipment (recreational product
retail notes). The credit subsidiaries also lease John Deere equipment to
retail customers, finance and service unsecured revolving charge accounts
acquired from merchants in the agricultural, lawn and grounds care and marine
retail markets, and provide wholesale financing for recreational vehicles and
John Deere engine inventories held by dealers of those products.

The Company's INSURANCE AND HEALTH care segment issues policies in the United
States and Canada primarily for: a general line of property and casualty
insurance to John Deere and non-Deere dealers and to the general public; group
life and group accident and health insurance for employees of participating John
Deere dealers; group life and group accident and health insurance for employees
of John Deere; life and annuity products to the general public and credit
physical damage insurance in connection with certain retail sales of John Deere
products financed by the credit subsidiaries. This segment also provides health
management programs and related administrative services in the United States to
corporate customers and employees of John Deere.

The Company's worldwide agricultural, industrial and lawn and grounds care
equipment operations and subsidiaries are sometimes referred to as the
"Equipment Operations." The Company's credit, insurance and health care
subsidiaries are sometimes referred to as "Financial Services."

1

The Company believes that its worldwide sales of agricultural equipment during
recent years have been greater than those of any other business enterprise. It
also believes that John Deere is an important provider of most of the types of
industrial equipment that it markets, and a leader in some size ranges. The
Company also believes it is the largest manufacturer of lawn and garden tractors
and provides the broadest line of grounds care equipment in North America. The
John Deere enterprise has manufactured agricultural machinery since 1837. The
present Company was incorporated under the laws of Delaware in 1958.

MARKET CONDITIONS AND OPERATING RESULTS

North American agricultural economic conditions in 1993 were generally more
favorable than in 1992. Although flooding and excessively wet conditions in
certain areas of the Midwest and drought conditions in parts of the Southeast
resulted in an estimated 31 percent decrease in corn production and a 16 percent
decline in soybean production in 1993, United States farm net cash income is
expected to achieve a record level in 1993. The lower production caused grain
prices to rise above 1992 levels. Livestock producers enjoyed favorable prices
and profit margins during 1993 and farmers boosted their cash flow by selling
inventories accumulated from record corn and soybean yields in 1992.
Additionally, direct government payments to farmers are expected to increase in
1993, aiding farmers most heavily impacted by this year's flooding.
Uncertainties over the passage of a new investment tax credit were resolved in
1993 as the anticipated tax credit was not included in the final tax
legislation. Consequently, many United States farmers who had delayed making
purchases in 1992 bought equipment this year. Sales in Canada were boosted by a
special 13 month investment tax credit in effect from December 1992 to December
1993. As a result of these developments, North American retail sales of John
Deere agricultural equipment were considerably higher in 1993 compared with last
year.

The North American general economy continued its slow expansion in 1993. In the
United States, housing starts increased about five percent during the year with
second-half strength overcoming a very sluggish first half. Real public
construction was up slightly from the previous year's level while
non-residential construction was flat. However, the cumulative effects of the
rebound in economic activity were felt in 1993, as housing starts were up more
than 25 percent from their 1991 level and real public construction was nine
percent larger. Consequently, North American retail sales of industrial and
construction machinery for both the industry and John Deere rose significantly
in 1993.

Consumer spending for durable goods rose briskly in 1993, and North American
retail sales of John Deere lawn and grounds care equipment increased
significantly. Sales were also supported by favorable moisture conditions over
most areas throughout the prime selling season. However, dry conditions did
emerge in portions of the Southeast and Northeast which impeded some late season
buying activity.

Industry retail sales of agricultural equipment in overseas markets in general
remained relatively weak during 1993. However, overseas retail sales of John
Deere agricultural equipment were higher in 1993 than in 1992, reflecting good
acceptance of the Company's new tractors and combines. Despite recessionary
conditions prevailing in most European markets and in Japan, overseas retail
sales of John Deere lawn and grounds care equipment continued to expand in 1993.
Overseas industrial and construction equipment markets were relatively flat in
1993 compared with 1992.

Acquisitions of receivables and leases by the Company's credit subsidiaries were
somewhat higher in 1993 compared with last year due primarily to growth in
revolving charge accounts, leases and wholesale receivables. Although retail
sales of John Deere equipment were higher in 1993, acquisitions of John Deere
retail notes were down slightly compared with last year reflecting a higher
level of cash purchases by John Deere customers and a more competitive financing
environment, particularly during the latter part of 1993. Acquisitions of
recreational product retail notes were substantially lower in 1993 due mainly to
a very competitive financing market. Although relatively soft market conditions
continued during 1993 in the property/casualty insurance

2

industry, John Deere's insurance premium volumes increased in 1993 over 1992.
Health care premium volumes were considerably higher in 1993 reflecting
continued growth in John Deere's health care operations.

Worldwide income in 1993 was $286 million or $3.70 per share before the effects
of special items (accounting changes, restructuring charges and the new United
States income tax law), compared with net income of $37 million or $.49 per
share in 1992. However, 1993 reported results were affected by the special
items described below. After the effects of the restructuring charges, the
incremental expense from the accounting changes and the tax rate change, income
in 1993 was $184 million or $2.39 per share. The Company incurred a worldwide
net loss in 1993 of $921 million or $11.91 per share after all of the special
items including the cumulative effect of the accounting changes. Additional
financial information regarding each of the Company's business segments over the
past three years is presented on pages 34 and 35.

During the second quarter of 1993, the Company announced and initiated plans to
downsize and rationalize its European operations. This resulted in a second
quarter provision for restructuring charges of $80 million after income taxes or
$1.03 per share ($107 million before income taxes), representing costs of
employment reductions to be implemented during 1993 and the next few years.

In the fourth quarter of 1993, effective November 1, 1992, the Company adopted
Financial Accounting Standards Board (FASB) Statement No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, and FASB Statement
No. 112, Employers' Accounting for Postemployment Benefits. These standards
generally require the accrual of these benefits, which are primarily retiree
health care and life insurance benefits, during the employees' years of active
service. The Company elected to recognize the cumulative effect of these
accounting changes as a one-time charge to earnings. The aggregate cumulative
effect of adopting the new standards as of November 1, 1992 was a non-cash
charge of $1,105 million after income taxes or $14.30 per share ($1,728 million
before income taxes). Additionally, the adoption of these standards resulted in
an incremental non-cash after-tax increase in 1993 postretirement and
postemployment benefits expense of $38 million or $.49 per share ($60 million
before income taxes). The incremental postretirement and postemployment
benefits expense relating to the Financial Services subsidiaries was immaterial.
Additional information is presented on pages 36 and 37 of the notes to the
consolidated financial statements.

The Omnibus Budget Reconciliation Act of 1993, which enacted an increase in the
United States federal statutory income tax rate from 34 percent to 35 percent
effective January 1, 1993, was signed into law during the fourth quarter of
1993. In accordance with FASB Statement No. 109, Accounting for Income Taxes,
income taxes relating to previously reported United States taxable income were
recalculated and the United States deferred income tax assets and liabilities as
of the enactment date were revalued during the fourth quarter of 1993 using the
new tax rate of 35 percent. This resulted in a credit of $16 million or $.21
per share to the provision for income taxes. This tax rate change had an
immaterial effect on the Financial Services subsidiaries. Additional
information is presented on page 39 of the notes to the consolidated financial
statements.

The Company's worldwide Equipment Operations, which exclude income from the
credit, insurance and health care operations, had income of $114 million in
1993 before the effects of the previously mentioned special items, compared with
a net loss of $107 million in 1992. The improved operating results for 1993
were attributable to the Company's North American equipment operations. Sales
and production volumes in North America were higher this year in response to
increased retail demand, and price realization improved in all of the Company's
North American equipment businesses compared with 1992 as sales incentive cost
levels were significantly lower. Additionally, North American productivity
continued to improve during 1993. Including the incremental effect of the
accounting changes, the restructuring charges and the tax rate change, the
worldwide Equipment Operations' net income was $13 million in 1993. The
Equipment Operations incurred a net loss of $1,085 million in 1993 after all of
the special items including the cumulative effect of the accounting changes.
Income of the Company's Financial Services subsidiaries before the cumulative
effect of the accounting changes totaled $164 million in 1993 while net income
after the accounting changes was $157 million, compared with $138 million last
year.

3

Worldwide net sales and revenues, which include net sales of equipment and
revenues from the credit, insurance and health care operations, increased 11
percent to $7,754 million in 1993 compared with net sales and revenues of $6,961
million in 1992. Worldwide net sales of equipment to dealers were $6,479
million in 1993, an increase of 13 percent from sales of $5,723 million last
year. The physical volume of the Company's worldwide sales to dealers increased
approximately nine percent in 1993. Worldwide production tonnage of all John
Deere products in 1993 was 11 percent higher than last year. For further
discussion of results of operations, see the information under the caption
"Management's Discussion and Analysis" on pages 24-35.

EQUIPMENT OPERATIONS

AGRICULTURAL EQUIPMENT

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

A substantial part of new agricultural equipment sales is for replacement of
equipment that is old or is less efficient than newer equipment, or both. When
the farm economy is depressed, farmers tend to postpone the replacement of their
existing equipment. When conditions improve, sales are stimulated by demand for
replacement equipment. During the 1990's, there has been a continuation of the
trend toward minimum tillage agriculture. Minimum tillage agriculture reduces
soil erosion but increases the use of chemical herbicides and pesticides.

Several governmental initiatives have recently been approved that may hold
long-term promise for agricultural markets. The U.S., Canada, and Mexico have
implemented the North American Free Trade Agreement (NAFTA) which reduces
internal trade restrictions between the three countries. For some commodities
and products, free trade commenced January 1, 1994. For other products which
are more sensitive economically and politically, free trade will be achieved
gradually over a 15 year period. U.S. corn exports to Mexico fall into this
second category. The Uruguay round of the General Agreement on Tariffs and
Trade (GATT) also was successfully concluded in 1993. This agreement promises to
reduce agricultural export subsidies over a period of years and grant market
access for many products that were previously restricted. It is the Company's
belief that U.S. and Canadian farmers possess comparative advantages in the
production of certain agricultural products and may benefit from the eventual
implementation of this agreement. This treaty is expected to take effect July
1, 1995. Finally, the Environmental Protection Agency (EPA) agreed in December
1993 that 30 percent of the fuel used in metropolitan areas not reaching
nationally established air quality guidelines should come from renewable fuel
sources. While final approval has not been reached, it is widely believed that
corn producers will benefit from EPA's action.

Since the early 1980s, farmers have experienced cost/price pressures which have
caused them to be more concerned with cost control and maximum productivity. The
John Deere agricultural equipment sold in this environment is high-powered,
versatile and technologically sophisticated. It is built to exacting design,
materials and performance specifications for rugged usage and exposure to
adverse weather conditions.

Large, cost-efficient, highly-mechanized agricultural operations account for an
important share of total United States farm output; 28 percent of United States
farms accounted for 90 percent of agricultural produce sales in 1987 (the latest
year for which data are available).(1) The large-size agricultural equipment
used on such farms has been particularly important to John Deere. A large
proportion of the Equipment Operations' total agricultural equipment sales in
the United States is comprised of tractors over 100 horsepower and
self-propelled combines. During late 1992, John Deere introduced three new
tractor lines: the 5000, 6000 and 7000 series
4

tractors selling in the 40 to 150 PTO horsepower categories. These tractors
represented important changes to John Deere's product offerings. The 6000 and
7000 series tractors have many new design features including modular
configuration permitting lower cost updates to respond to changing customer
needs. The 5000 series tractors are manufactured in the United States and
replace tractors formerly sourced from Germany.

In the United States, farm commodity prices and farm income are heavily
influenced by international supply and demand conditions for food and fiber
products. In general, declining international stock levels boost farm commodity
prices and incomes, while rising stock levels tend to depress prices and
incomes. In 1993, world production of wheat and coarse grains (corn, oats,
barley and sorghum) fell from the levels achieved in 1992. Production decreases
were most notable in the United States, the former Soviet Union and the European
Union (formerly the European Economic Community). The ending worldwide stocks
of wheat are now expected by the United States Department of Agriculture
("USDA") to decrease slightly to 139.1 million metric tons ("MMT") at the end of
the 1993/94 marketing year compared with 141.3 MMT one year earlier. The 139.1
MMT stock level will represent about 25 percent of annual world consumption, a
stock-to-usage ratio that is well below the 33 - 34 percent range that prevailed
in the mid-1980s. This ratio stood at 23 percent in 1989/90 and has been 25 or
26 percent for the past three years. Ending stocks of coarse grains are
expected by the USDA to fall to 114.3 MMT at the end of the 1993/94 marketing
year as consumption is expected to exceed production. This would represent 14
percent of annual world consumption. This ratio is down significantly from
1992/93 (when it was 18%), and represents the lowest level of carryover relative
to usage since 1973/74.(2)

For 1994, USDA has announced zero annual acreage reduction programs for all
crops except cotton, which was raised from 7.5 percent in 1993 to 11 percent in
1994. Total acreage planted in 1994 is expected to rise about 9 million acres
from 1993 levels. United States market share of commodity sales in world
markets rose in the first three years (1986-1988) following passage of the 1985
farm bill. This resulted partly from a weaker dollar in relation to other
currencies, and partly from more competitive United States commodity prices
stemming from the 1985 farm bill. Thereafter, as United States carryover stocks
declined and production was tempered by governmental acreage reduction programs
and drought in various years, United States market shares have generally
declined. Market share for United States wheat has been adversely affected by
higher Canadian and European production.

Direct government payments to farmers were increased significantly by the 1985
farm bill. During 1977-82, government payments represented less than two
percent of United States farm cash receipts. This percentage rose to
10.5 percent in 1987 and, although still high compared to 1977-82, declined
to 4.5 percent in 1991. These direct government payments, combined with
lower production costs incurred by farmers and higher livestock and
commodity prices, resulted in record levels of net cash income to United
States farmers from 1987 to 1990. The 1990 farm bill extended the basic features
of the 1985 farm bill through 1995 with two notable exceptions: (1) target
prices were frozen at their 1990 levels rather than declining two to three
percent annually, and (2) a "triple base" feature was incorporated into the new
legislation. This feature restricts deficiency payments to 85 percent of the
base traditionally paid and is expected to reduce future government outlays.
Government payments are forecasted to increase to 7.0 percent of United States
farm cash receipts for 1993 compared to 5.0 percent in 1992, and farm net cash
income is estimated to have reached a record level in 1993.(3) The 1990 farm
bill is scheduled to remain in effect through the crops grown in 1995.

Seasonal patterns in retail demand for agricultural equipment result in
substantial variations in the volume and mix of products sold to retail
customers during various times of the year. Seasonal demand must be estimated
months in advance, and equipment must be manufactured in anticipation of such
demand in order to achieve efficient utilization of manpower and facilities
throughout the year. The Equipment Operations incur substantial seasonal
indebtedness with related interest expense to finance production and inventory
of equipment, and to finance sales to dealers in advance of seasonal demand. The
Equipment Operations often encourage retail sales by waiving retail finance
charges during off-season periods or in other sales promotions. Sales
promotions and price concessions, including waiver and reduction of finance
charges, were significantly lower in 1992 and 1993 compared with extensive
amounts during recent prior years.

5

An important part of the competition within the agricultural equipment industry
during the past decade has come from a diverse variety of short-line and
specialty manufacturers with differing manufacturing and marketing methods.
Because of industry conditions, especially consolidation among large integrated
competitors, the competitive environment is undergoing important changes, and
the importance of short-line and specialty manufacturers, as well as foreign
suppliers, may continue to increase in the future.

Outside the United States, price stabilization programs conducted by national
governments or groups of national governments, such as the European Union, tend
to exert substantial influence upon commodity prices and agricultural activity,
insulating their agricultural sectors from changes in world market conditions
and restricting imports from the United States and elsewhere. In Western
Europe, the cost of such programs, international disputes with exporting
nations, and international negotiations such as GATT have caused the European
Union to alter and modify its Common Agricultural Policy over time. These
changes have tended to lower real farm income and restrict planted and harvested
acreage. As a result, agricultural machinery sales have fallen substantially in
Western Europe in the last decade. Inflation, slow economic growth, changes in
currency relationships and price controls have been prevalent in many of the
countries in which the Equipment Operations compete outside the United States,
Canada and Europe.

In addition to the agricultural equipment manufactured by the Equipment
Operations, a number of products are purchased from other manufacturers for
resale by John Deere, including four models of small utility tractors sourced
from a Japanese manufacturer. These tractors are marketed primarily in the
United States and Canada.

INDUSTRIAL EQUIPMENT

The industrial equipment industry is broadly defined as including construction,
earthmoving and forestry equipment, as well as some materials handling
equipment, cranes, off-highway trucks and a variety of machines for specialized
industrial applications, including uses in the mining industry. The Equipment
Operations provide types and sizes of equipment that compete for approximately
two-thirds of the estimated total United States market for all types and sizes
of industrial equipment (other than the market for cranes and specialized mining
equipment). Retail sales of John Deere industrial equipment are influenced by
prevailing levels of residential, industrial and public construction and the
condition of the forest products industry. Sales are also influenced by general
economic conditions and the level of interest rates.

United States housing starts are forecasted to have been 1.26 million units in
1993, about 4 percent higher than 1992, and 25 percent higher than 1991.
Nonresidential and public construction in the United States are both expected
to be unchanged in 1993 as compared to 1992, but together were up about nine
percent from 1991 activity. Environmental and ecological issues slowed logging
activities in various parts of the United States in 1993, while late year
housing activity boosted the demand for lumber products and lumber prices rose
significantly as a result of these developments. North American industry retail
sales of industrial and construction machinery rose significantly in 1993
compared with 1992.

John Deere industrial equipment falls into three broad categories: utility
tractors and smaller earthmoving equipment, medium capacity construction and
earthmoving equipment, and forestry machines. The Equipment Operations'
industrial equipment business began in the late 1940s with wheel and crawler
tractors of a size and horsepower range similar to agricultural tractors,
utilizing common components. Through the years, the Equipment Operations
substantially increased production capacity for industrial equipment, adding to
the line larger machines such as crawler loaders and dozers, log skidders, motor
graders, hydraulic excavators and four-wheel-drive loaders. These products
incorporate technology and many major components similar to those used in
agricultural equipment, including diesel engines, transmissions and
sophisticated hydraulics and electronics.

6

The Company and Hitachi Construction Machinery Co., Inc. of Japan have a joint
venture for the manufacture of hydraulic excavators in the United States and for
the distribution of excavators primarily in North, Central and South America.
The Company also has supply agreements with Hitachi under which a broad range of
industrial products manufactured by the Company in the United States, including
four-wheel-drive loaders, are distributed by Hitachi in Japan and other Far East
markets. In addition, Hitachi is manufacturing certain models of
four-wheel-drive loaders for distribution by John Deere primarily in North,
Central and South America.

The Equipment Operations manufacture and distribute diesel engines and
drivetrain components both for use in John Deere products and for sale to other
original equipment manufacturers (OEM).

LAWN AND GROUNDS CARE EQUIPMENT

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

Even though the recovery of the general economy has been slow, the length of the
upturn, the gradual improvement in housing starts and sales of existing homes,
and generally favorable weather conditions stimulated purchases of lawn and
grounds care equipment in 1993. Retail sales of John Deere lawn and grounds
care equipment increased significantly in 1993.

ENGINEERING AND RESEARCH

John Deere makes large expenditures for engineering and research to improve the
quality and performance of its products, and to develop new products. Such
expenditures were $270 million, or four percent of net equipment sales in 1993,
and $288 million in 1992.

MANUFACTURING

MANUFACTURING PLANTS. In the United States and Canada, the Equipment Operations
own and operate 15 factory locations, which contain approximately 29.5 million
square feet of floor space. Six of the factories are devoted primarily to the
manufacture of agricultural equipment, two to industrial equipment, one to
engines, one to hydraulics and power train components, one to gray iron and
nodular castings, three to lawn and grounds care equipment, and one to power
train components manufactured mostly for OEM markets. The Equipment Operations
own and operate tractor factories in Germany, Spain and Argentina; agricultural
equipment factories in France, Germany and South Africa; and an engine factory
in France. These overseas factories contain approximately 6.1 million square
feet of floor space. The Equipment Operations also have financial interests in
a combine manufacturer in Brazil, in a tractor and implement manufacturer in
Mexico, in a lawn and grounds care equipment manufacturer in Germany and the
Netherlands, and in a joint venture to build industrial excavators in the United
States.

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

The Equipment Operations manufacture many of the components included in their
products. The principle raw materials required for the manufacture of their
products are purchased from numerous suppliers. The Company

7

believes that available sources of supply will generally be sufficient for its
needs for the foreseeable future. Although the Equipment Operations depend upon
outside sources of supply for a substantial amount of components, manufacturing
operations are extensively integrated. Similar or common manufacturing
facilities and techniques are employed in the production of components for
industrial, agricultural and lawn and grounds care equipment.

Although production levels in 1993 were ten percent higher than in 1992,
production continues to be well below capacity levels. The Equipment
Operations' manufacturing strategy involves the implementation of appropriate
levels of technology and automation, so that manufacturing processes can remain
viable at relatively low production levels and can be flexible enough to
accommodate many of the product design changes required to meet market
requirements.

In order to utilize manufacturing facilities and technology more effectively,
the Equipment Operations continue to pursue improvements in manufacturing
processes. Manufacturing activities judged not competitively advantageous for
the Equipment Operations on a long-term basis are being shifted to outside
suppliers, while many of those manufacturing activities that do offer long-term
competitive advantages are being restructured. Improvements include the
creation of flow-through manufacturing cells which reduce costs and inventories,
increase quality and require less space, and the establishment of flexible
assembly lines which can handle a wider range of product mix and deliver
products at the times when dealers and customers demand them. Additionally,
considerable effort is being directed to manufacturing cost reduction through
product design, the introduction of advanced manufacturing technology and
improvements in organizational structure. The Equipment Operations are also
pursuing the sale to other companies of selected parts and components which can
be manufactured and supplied to third parties on a competitive basis.

CAPITAL EXPENDITURES. The Equipment Operations' capital expenditures were $196
million in 1993 compared with $269 million in 1992 and $295 million in 1991.
Provisions for depreciation applicable to the Equipment Operations' property,
plant and equipment during these years were $222 million, $213 million and $186
million, respectively. The Equipment Operations' capital expenditures for 1994
are currently estimated to approximate $230 million. As in recent years, the
1994 expenditures will be primarily associated with new product and operations
improvement programs. The future level of capital expenditures will depend on
business conditions.

PATENTS AND TRADEMARKS

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

MARKETING

In the United States and Canada, the Equipment Operations distribute equipment
and service parts through six agricultural equipment sales branches, one
industrial equipment sales and administration office and one lawn and grounds
care equipment sales and administration office (collectively called sales
branches). In addition, the Equipment Operations operate a centralized parts
distribution warehouse in coordination with several regional parts depots in the
United States and Canada.

The sales branches in the United States and Canada market John Deere products to
approximately 3,250 retail dealers, all of which are independently owned except
for one retail store owned and operated by the Company. Of these dealers,
approximately 1,550 sell agricultural equipment, 382 sell industrial equipment,
and 26 sell both agricultural and industrial equipment. Smaller industrial
equipment is sold by nearly all of the industrial equipment dealers. Larger
industrial equipment, forestry equipment and a line of light industrial
equipment are

8

sold by most of them. Lawn and grounds care equipment is sold by most John
Deere agricultural equipment dealers, a few industrial equipment dealers, and
about 1,300 lawn and grounds care equipment dealers, many of whom also handle
competitive brands and dissimilar lines of products.

Outside North America, John Deere agricultural equipment is sold to distributors
and dealers for resale in over 110 countries by sales branches located in six
European countries, South Africa, Argentina and Australia, by export sales
branches in Europe and the United States, and by associated companies in Mexico
and Brazil. Lawn and grounds care equipment sales overseas occur primarily in
Europe and Australia. Outside North America, industrial equipment is sold
primarily by an export sales branch located in the United States.

WHOLESALE FINANCING

The Equipment Operations provide wholesale financing to dealers in the United
States for extended periods, to enable dealers to carry representative
inventories of equipment and to encourage the purchase of goods by dealers in
advance of seasonal retail demand. Down payments are not required, and interest
is not charged for a substantial part of the period for which the inventories
are financed. A security interest is retained in dealers' inventories, and
periodic physical checks are made of dealers' inventories. Generally, terms to
dealers require payments as the equipment which secures the indebtedness is sold
to retail customers. Variable market rates of interest are charged on balances
outstanding after certain interest-free periods, which currently are 6 to 9
months for agricultural tractors, 6 months for industrial equipment, and from 6
to 24 months for most other equipment. Financing is also provided to dealers on
used equipment accepted in trade, on repossessed equipment, and on approved
equipment from other manufacturers. A security interest is obtained in such
equipment. Equipment dealer defaults incurred in recent years by John Deere
have not been significant.

In Canada, John Deere products (other than service parts and lawn and grounds
care equipment) in the possession of dealers are inventories of the Equipment
Operations that are consigned to the dealers. Dealers are required to make
deposits on consigned equipment remaining unsold after specified periods.

Sales to overseas dealers are made by the Equipment Operations' overseas and
export sales branches and are, for the most part, financed by John Deere in a
manner similar to that provided for sales to dealers in the United States and
Canada, although maturities tend to be shorter and a security interest is not
always retained in the equipment sold.

Receivables from dealers, which largely represent dealer inventories, were $2.8
billion at October 31, 1993 compared with $2.9 billion at October 31, 1992 and
$3.0 billion at October 31, 1991. At those dates, the ratios of worldwide net
dealer receivables to fiscal year net sales were 43 percent, 51 percent and 51
percent, respectively. The highest month-end balance of such receivables during
each of the past two fiscal years was $3.1 billion at April 30, 1993 and $3.3
billion at April 30, 1992.

FINANCIAL SERVICES

CREDIT OPERATIONS

UNITED STATES AND CANADA. In the United States and Canada, the Company's credit
subsidiaries finance retail sales of John Deere agricultural, industrial and
lawn and grounds care equipment, used equipment accepted by dealers in trade,
and a significant amount of equipment of other manufacturers. John Deere
retail installment loan (and some sale) contracts (collectively called retail
notes) are acquired by the sales branches through John Deere retail dealers.
Criteria for acceptance of retail notes are agreed upon between the sales
branches and the Company's credit subsidiaries in the United States and Canada,
John Deere Capital Corporation (Capital Corporation) and John Deere Finance
Limited, (collectively referred to as Credit Companies). A subsidiary of

9

the Capital Corporation leases John Deere agricultural, industrial and lawn and
grounds care equipment to United States retail customers.

The credit subsidiaries also finance recreational products, primarily
recreational vehicle and recreational marine product retail notes acquired from
independent dealers of that equipment. The United States credit subsidiary also
finances and services unsecured revolving charge accounts acquired from retail
merchants in the agricultural, lawn and grounds care and marine retail markets
and, additionally, provides wholesale financing for recreational vehicles and
John Deere engine inventories held by dealers of those products. The credit
subsidiaries intend to continue to seek additional volumes and types of
non-Deere financing with the objective of broadening their base of business and
increasing their autonomy.

All of the retail notes acquired by the sales branches have been immediately
sold by them to the Credit Companies. The Equipment Operations have been the
Credit Companies' major source of business, and the Credit Companies have been
the sole vehicles for retail financing by the Equipment Operations. In many
cases, retail purchasers of John Deere products finance their purchases outside
the John Deere organization.

The Credit Companies' terms for financing equipment retail sales (other than
smaller items purchased through unsecured revolving charge accounts) provide for
retention of a security interest in the equipment financed. The Credit
Companies' guidelines for minimum down payments, which vary with the types of
equipment and repayment provisions, are generally not less than 20 percent on
agricultural and industrial equipment, 10 percent on lawn and grounds care
equipment used for personal use and 20 percent for recreational vehicles and
marine products. Finance charges are sometimes waived for specified periods or
reduced on certain products sold or leased in advance of the season of use or in
other sales promotions. At the time retail notes are accepted, the Equipment
Operations compensate the Credit Companies in an amount permitting them to earn
approximately the normal net finance charge on the retail notes or leases for
periods during which finance charges are waived or reduced. The cost is
accounted for as a deduction in arriving at net sales by the Equipment
Operations.

Retail leases are offered to equipment users in the United States by John Deere
retail dealers on behalf of the Capital Corporation. A small number of leases
executed between dealers and units of local government are subsequently assigned
to the sales branches, and are in turn offered to and accepted by the Capital
Corporation. Leases are usually written for periods of one to six years, and in
some cases contain an option permitting the customer to purchase the equipment
at the end of the lease term. Retail leases are also offered in a generally
similar manner to customers in Canada through a Canadian subsidiary.

The Company has expressed an intention of conducting its business with the
Capital Corporation on such terms that the Capital Corporation's consolidated
ratio of earnings before fixed charges to fixed charges for each fiscal quarter
will not be less than 1.05 to 1. For 1993, the consolidated ratio of the
Capital Corporation was 1.99 to 1 (excluding the effect of the accounting
changes). This arrangement is not intended to make the Company responsible for
payment of the obligations of the Capital Corporation. Additional information
on the Credit Companies appears under the caption "Credit Operations" on pages
30 and 31.

OVERSEAS. Retail sales and financing outside of the United States and Canada
are affected by a diversity of customs and regulations. The Equipment
Operations retain only a minor part of the obligations arising from retail sales
of their products overseas.

INSURANCE AND HEALTH CARE

The Company's insurance subsidiaries consist of John Deere Insurance Group, Inc.
and its subsidiaries in the United States, and John Deere Insurance Company of
Canada. The Insurance Group is made up of a Property/Casualty Division and a
Life Division. The Property/Casualty Division insures over 4,300 dealership
organizations in the United States. This program provides commercial insurance
for agricultural/ industrial

10

equipment, auto, recreational vehicle and boat dealerships. In addition, the
Property/Casualty Division insures long haul trucking operations and currently
insures approximately 13,000 trucks. Other specialty insurance programs include
insurance on equipment utilized in forestry, construction and agricultural
operations. The Group's involvement in reinsurance takes the form of a
long-term business relationship with Re Capital Reinsurance Corporation as well
as the ownership of approximately 44% of the outstanding shares of Re Capital
Corporation, its parent company. The Life Division had nearly $6 billion of
life insurance in force at October 31, 1993. Marketing efforts are focused on
providing life and health insurance coverages to various commercial markets and
to individuals, nationally.

In 1985, the Company formed John Deere Health Care, Inc. to more fully utilize
the Company's expertise in the field of health care, which was developed from
efforts to control its own health care costs. John Deere Health Care, Inc.
currently provides health management programs and related administrative
services, either directly or through its health maintenance organization
subsidiaries. Heritage National Healthplan and John Deere Family Healthplan,
for companies located in Illinois, Iowa, Wisconsin and Tennessee. At October
31, 1993, 234,931 individuals were enrolled in these programs, of which 69,352
were John Deere employees, retirees and their dependents.

For additional financial information on insurance and health care operations,
see the material under the caption "Insurance and Health Care Operations" on
pages 31 and 32.

ENVIRONMENTAL MATTERS

In 1990, certain Clean Air Act Amendments were adopted by Congress which require
the Environmental Protection Agency (the "EPA") to study emissions from off-road
engines and equipment, including virtually all of the equipment manufactured by
the Company. If the EPA determines such emissions contribute to air quality
problems, the EPA is required to promulgate regulations containing standards
applicable to such emissions. The EPA may promulgate such regulations sometime
during 1994. Although at this time management cannot assess the impact that
such regulations (if promulgated) would have upon the Company, management does
not believe that it is likely to be material.

The Company has been designated a potentially responsible party (PRP), in
conjunction with other parties, in certain government actions associated with
hazardous waste sites. As a PRP, the Company has been and will be required to
pay a portion of the costs of evaluation and cleanup of these sites. Management
does not expect that these matters will have a material adverse effect on the
consolidated financial position or operating results of the Company.

EMPLOYEES

At October 31, 1993, John Deere had 33,070 employees, including 24,942 employees
in the United States and Canada. Unions are certified as bargaining agents for
approximately 95 percent of John Deere's United States employees. Most of the
Company's United States production and maintenance employees are covered by a
contract with the United Automobile Workers with an expiration date of October
1, 1994.

The majority of employees at John Deere facilities overseas are also represented
by unions.

11

EXECUTIVE OFFICERS OF THE REGISTRANT

Following are the names and ages of the executive officers of the Company, their
positions with the Company and summaries of their backgrounds and business
experience. All executive officers are elected or appointed by the Board of
Directors and hold office until the annual meeting of the Board of Directors
following the annual meeting of stockholders in each year.

NAME, AGE AND OFFICE (AT DECEMBER 31, PRINCIPAL OCCUPATION DURING LAST
1993), AND YEAR ELECTED TO OFFICE FIVE YEARS OTHER THAN OFFICE OF
THE COMPANY CURRENTLY HELD

Hans W. Becherer, 58, Chairman, 1990 1990 and prior, President

David H. Stowe, Jr., 57, President, 1990 1990 and prior,
Executive Vice President

Bill C. Harpole, 59, 1990 and prior,
Executive Vice President, 1990 Senior Vice President

Eugene L. Schotanus, 56, 1990 and prior,
Executive Vice President, 1990 Senior Vice President

Joseph W. England, 53, -
Senior Vice President, 1981

J. Michael Frank, 55, 1989 and prior,
Senior Vice President, 1989 Vice President

Bernard L. Hardiek, 53 1990 and prior,
Senior Vice President, 1990 Vice President

John K. Lawson, 53, 1992 and prior,
Senior Vice President, 1992 Vice President

Michael S. Plunkett, 56, -
Senior Vice President, 1983

Pierre E. Leroy, 45, -
Vice President and Treasurer, 1987

Frank S. Cottrell, 51, 1991-1993, Secretary and
Vice President, Secretary and General Counsel
General Counsel, 1993 1987-1991, Secretary and
Associate General Counsel

- -------------------------------------------------------------------------------

ITEM 2. PROPERTIES.

See "Manufacturing" in Item 1.

The Equipment Operations also own and operate buildings housing seven sales
branches, one centralized parts depot, five regional parts depots and several
transfer houses and warehouses throughout the United States and Canada. These
facilities contain approximately 4.8 million square feet of floor space. The
Equipment Operations also own and operate buildings housing three sales
branches, one centralized parts depot and three regional parts depots in Europe.
These facilities contain approximately 850,000 square feet of floor space.

The Deere Administrative Center and nearby office facilities for its insurance
and health care activities, all of which are owned by John Deere, together
contain about 733,000 square feet of floor space. John Deere also leases office
space in various locations. John Deere's obligations on these leases are not
material.

12

ITEM 3. LEGAL PROCEEDINGS.

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 and retail credit matters. The Company and certain subsidiaries of
the Capital Corporation are currently involved in legal actions relating to
alleged violations of certain technical provisions of Texas consumer credit
statutes in connection with John Deere Company's financing of the retail
purchase of recreational vehicles and boats in that state. These actions
include: a class action brought by Russell Durrett individually and on behalf
of others against John Deere Company (filed in state court on February 19, 1992
and removed on February 26, 1992 to the United States District Court for the
Northern District of Texas, Dallas Division), which case was certified as a
class action by the court on November 6, 1992; and a class action titled DEERE
CREDIT, INC. V. SHIRLEY Y. MORGAN, ET AL., originally filed on February 20 1992
and certified in the 281st Judicial District Court of Harris County, Texas, on
October 12, 1993 for all persons who opt out of the federal class action. The
Company and the Capital Corporation subsidiaries believe that they have
substantial defenses and intend to defend the actions vigorously. Although it
is not possible to predict the outcome of these unresolved legal actions and the
amounts of claimed damages and penalties are large, the Company believes that
these unresolved legal actions will not have a material adverse effect on the
Company's consolidated financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's common stock is listed on the New York Stock Exchange, the Chicago
Stock Exchange and the Frankfurt, Germany Stock Exchange. See the information
concerning quoted prices of the Company's common stock and the number of
stockholders in the second table and the third paragraph, and the data on
dividends declared and paid per share in the first table, under the caption
"Supplemental 1993 and 1992 Quarterly Information (Unaudited)" on page 47.

13

ITEM 6. SELECTED FINANCIAL DATA

FINANCIAL SUMMARY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

(Millions of dollars except per share amounts)

1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------

For the Year Ended October 31:
Total net sales and revenues $ 7,754 $ 6,961 $ 7,055 $ 7,875 $ 7,220
Income (loss) before changes in
accounting* $ 184 $ 37 $ (20) $ 411 $ 380
Net income (loss) $ (921) $ 37 $ (20) $ 411 $ 380
Income (loss) per share before
changes in accounting -
primary and fully diluted* $ 2.39 $ .49 $ (.27) $ 5.42 $ 5.06
Net income (loss) per share-
primary and fully diluted $(11.91) $ .49 $ (.27) $ 5.42 $ 5.06
Dividends declared per share $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 1.30
At October 31:
Total assets $11,352 $11,446 $11,649 $10,664 $ 9,145
Long-term borrowings $ 2,548 $ 2,473 $ 2,206 $ 1,786 $ 1,676

*See description of accounting changes on pages 36 and 37.
- ----------------------------------------------------------------------------------------------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

See the information under the caption "Management's Discussion and Analysis" on
pages 24-35.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the consolidated financial statements and notes thereto and supplementary
data on pages 18-47 .

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

14

PART III
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information regarding directors in the proxy statement dated January 14,
1994 (the "proxy statement"), under the captions "Election of Directors" and
"Directors Continuing in Office" is incorporated herein by reference.
Information regarding executive officers is presented in Item 1 of this report
under the caption "Executive officers of the registrant".

ITEM 11. EXECUTIVE COMPENSATION.

The information in the proxy statement under the captions "Option/SAR Grants in
Last Fiscal Year", "Summary Compensation Table" and "Aggregate Option/SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values" is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

The information on the security ownership of a certain beneficial
owner contained in the proxy statement under the caption "Principal
Holders of Voting Securities" is incorporated by reference.

(b) SECURITY OWNERSHIP OF MANAGEMENT.

The information on shares of common stock of the Company beneficially
owned by, and under option to (i) each director and (ii) the directors
and officers as a group, contained in the proxy statement under the
captions "Election of Directors", "Directors Continuing in Office" and
"Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values" is incorporated herein by reference.

(c) CHANGE IN CONTROL.

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information on certain relationships and related transactions contained in
the proxy statement under "Certain Business Relationships" is incorporated
herein by reference.

15

PART IV
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.

(a)(1) FINANCIAL STATEMENTS Page

Statement of Consolidated Income for the years ended 18
October 31, 1993, 1992 and 1991

Consolidated Balance Sheet, October 31, 1993 and 1992 20

Statement of Consolidated Cash Flows for the years ended 22
October 31, 1993, 1992 and 1991

Notes to Consolidated Financial Statements 36

(a)(2) SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS

Schedule I - Marketable Securities - Other Investments, 52
October 31, 1993 and 1992

Schedule VIII - Valuation and Qualifying Accounts, 54
for the years ended October 31, 1993, 1992 and 1991

Schedule IX - Short-Term Borrowings, for the years ended 56
October 31, 1993, 1992 and 1991

Schedule X - Supplementary Income Statement Information, 60
for the years ended October 31, 1993, 1992 and 1991

(a)(3) EXHIBITS

SEE THE "INDEX TO EXHIBITS" ON PAGES 61-63 OF THIS REPORT.

Certain instruments relating to long-term borrowings constituting less than 10%
of registrant's total assets, are not filed as exhibits herewith pursuant to
Item 601(b)4(iii)(A) of Regulation S-K. Registrant agrees to file copies of
such instruments upon request of the Commission.

(b) REPORTS ON FORM 8-K.

Current report on Form 8-K dated August 24, 1993 (Items 5 and 7).

FINANCIAL STATEMENTS AND SCHEDULES OMITTED

The following schedules for the Company and consolidated subsidiaries are
omitted because of the absence of the conditions under which they are required:
II, III, IV, V, VI, VII, XI, XII, XIII, and XIV.

16

- -------------------------------------------------------------------------------

FOOTNOTES

1. Derived from data published in 1989 by the U.S. Department of Commerce -
"1987 Census of Agriculture,", Vol. I Part 51, pp. 104-5.

2. U.S. Department of Agriculture, "World Grain Situation and Outlook," Foreign
Agricultural Service Circular, FG-11-93, November, 1993, p.37.

3. U.S. Department of Agriculture, "Agricultural Outlook," Economic Research
Service, November 1993, p.60.

17

DEERE & COMPANY

STATEMENT OF CONSOLIDATED INCOME

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED
(DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------

NET SALES AND REVENUES
Net sales of equipment . . . . . . . . . . . . . . . . . . . . . $6,479.3 $5,723.4 $5,847.8
Finance and interest income. . . . . . . . . . . . . . . . . . . 562.8 615.4 654.4
Insurance and health care premiums . . . . . . . . . . . . . . . 554.2 495.5 444.1
Investment income. . . . . . . . . . . . . . . . . . . . . . . . 97.5 96.4 87.9
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . 59.7 30.0 21.0
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,753.5 6,960.7 7,055.2
-------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 5,374.6 4,891.8 4,894.2
Research and development expenses. . . . . . . . . . . . . . . . 269.8 288.4 279.3
Selling, administrative and general expenses . . . . . . . . . . 845.0 842.8 839.6
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 369.1 413.4 450.0
Insurance and health care claims and benefits. . . . . . . . . . 478.4 440.4 405.5
Other operating expenses . . . . . . . . . . . . . . . . . . . . 37.1 40.4 30.9
Restructuring costs. . . . . . . . . . . . . . . . . . . . . . . 107.2 181.9
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,481.2 6,917.2 7,081.4
-------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) OF CONSOLIDATED GROUP BEFORE INCOME TAXES
AND CHANGES IN ACCOUNTING. . . . . . . . . . . . . . . . . . . 272.3 43.5 (26.2)
Provision (credit) for income taxes. . . . . . . . . . . . . . . 97.2 14.7 (5.2)
-------- -------- --------
INCOME (LOSS) OF CONSOLIDATED GROUP BEFORE CHANGES IN
ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . 175.1 28.8 (21.0)
-------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED SUBSIDIARIES AND
AFFILIATES BEFORE CHANGES IN ACCOUNTING
Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance and health care. . . . . . . . . . . . . . . . . . . 2.2 2.2 1.3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 6.4 (.5)
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 8.6 .8
-------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CHANGES IN ACCOUNTING . . . . . . . . . . . 184.4 37.4 (20.2)
Changes in accounting. . . . . . . . . . . . . . . . . . . . . . (1,105.3)
-------- -------- --------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . . . $ (920.9) $ 37.4 $ (20.2)
-------- -------- --------
-------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Primary and fully diluted:
Income (loss) before changes in accounting . . . . . . . . . . $ 2.39 $ .49 $ (.27)
Changes in accounting. . . . . . . . . . . . . . . . . . . . . (14.30)
-------- -------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $ (11.91) $ .49 $ (.27)
-------- -------- --------
-------- -------- --------
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . $ 2.00 $ 2.00 $ 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------

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 on page 36 of the notes to the consolidated financial
statements. The consolidated group data in the "Equipment Operations" income
statement reflect the results of the agricultural equipment, industrial
equipment and lawn and grounds care equipment operations. The supplemental
"Financial Services" consolidating data in this statement include Deere &
Company's credit, insurance and health care subsidiaries. Transactions between
the "Equipment Operations" and "Financial Services" have been eliminated to
arrive at the "Consolidated" data.

The information on pages 24 through 47 is an integral part of this statement.
18

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT OPERATIONS
(DEERE & COMPANY WITH FINANCIAL
SERVICES ON THE EQUITY BASIS) FINANCIAL SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31 Year Ended October 31
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) 1993 1992 1991 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------

NET SALES AND REVENUES
Net sales of equipment . . . . . . . . . . . . . . $6,479.3 $5,723.4 $5,847.8
Finance and interest income. . . . . . . . . . . . 84.0 98.5 116.3 $ 482.4 $ 519.1 $ 540.8
Insurance and health care premiums . . . . . . . . 695.3 632.4 568.4
Investment income. . . . . . . . . . . . . . . . . 97.6 96.6 88.1
Other income . . . . . . . . . . . . . . . . . . . 23.3 22.8 21.2 42.0 13.8 6.9
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . 6,586.6 5,844.7 5,985.3 1,317.3 1,261.9 1,204.2
-------- -------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of goods sold . . . . . . . . . . . . . . . . 5,381.1 4,902.2 4,903.9
Research and development expenses. . . . . . . . . 269.8 288.4 279.3
Selling, administrative and general expenses . . . 602.8 588.2 599.1 255.7 268.9 256.4
Interest expense . . . . . . . . . . . . . . . . . 180.3 197.5 192.7 192.5 218.2 260.1
Insurance and health care claims and benefits. . . 605.0 559.1 511.2
Other operating expenses . . . . . . . . . . . . . 18.0 24.6 17.5 19.2 16.0 13.5
Restructuring costs. . . . . . . . . . . . . . . . 107.2 181.9
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . 6,559.2 6,000.9 6,174.4 1,072.4 1,062.2 1,041.2
-------- -------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) OF CONSOLIDATED GROUP BEFORE INCOME TAXES
AND CHANGES IN ACCOUNTING. . . . . . . . . . . . 27.4 (156.2) (189.1) 244.9 199.7 163.0
Provision (credit) for income taxes. . . . . . . . 14.4 (48.9) (57.6) 82.8 63.6 52.5
-------- -------- -------- -------- -------- --------
INCOME (LOSS) OF CONSOLIDATED GROUP BEFORE CHANGES IN
ACCOUNTING . . . . . . . . . . . . . . . . . . . 13.0 (107.3) (131.5) 162.1 136.1 110.5
-------- -------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED SUBSIDIARIES AND
AFFILIATES BEFORE CHANGES IN ACCOUNTING
Credit . . . . . . . . . . . . . . . . . . . . . 122.2 106.0 83.5
Insurance and health care. . . . . . . . . . . . 42.1 32.3 28.3 2.2 2.2 1.3
Other. . . . . . . . . . . . . . . . . . . . . . 7.1 6.4 (.5)
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . 171.4 144.7 111.3 2.2 2.2 1.3
-------- -------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CHANGES IN ACCOUNTING . . . . 184.4 37.4 (20.2) 164.3 138.3 111.8
Changes in accounting. . . . . . . . . . . . . . . (1,105.3) (6.9)
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . $ (920.9) $ 37.4 $ (20.2) $ 157.4 $ 138.3 $ 111.8
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------

19

DEERE & COMPANY
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------

CONSOLIDATED
(DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES)
- -----------------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) OCTOBER 31
ASSETS 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents............................................................... $ 338.2 $ 216.8
Marketable securities carried at cost................................................... 994.8 954.1
Receivables from unconsolidated subsidiaries and affiliates............................. 4.0 21.8
Dealer accounts and notes receivable - net.............................................. 2,793.7 2,945.7
Credit receivables - net................................................................ 3,754.8 4,394.7
Other receivables....................................................................... 288.5 179.3
Equipment on operating leases - net..................................................... 195.4 167.8
Inventories............................................................................. 464.4 524.7
Property and equipment - net............................................................ 1,240.3 1,307.9
Investments in unconsolidated subsidiaries and affiliates............................... 140.6 117.7
Intangible assets - net................................................................. 296.8 337.6
Other assets............................................................................ 42.8 140.5
Deferred income taxes................................................................... 681.7 24.1
Deferred charges........................................................................ 115.9 112.9
------------ ----------
- -----------------------------------------------------------------------------------------------------------------------------------
Total................................................................................... $ 11,351.9 $ 11,445.6
------------ ----------
------------ ----------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Short-term borrowings................................................................... $ 1,601.4 $ 3,080.3
Payables to unconsolidated subsidiaries and affiliates.................................. 32.8 19.7
Accounts payable and accrued expenses................................................... 2,064.3 1,845.0
Insurance and health care claims and reserves........................................... 578.8 567.2
Accrued taxes........................................................................... 71.0 68.7
Deferred income taxes................................................................... 8.6 25.2
Long-term borrowings.................................................................... 2,547.5 2,473.0
Retirement benefit accruals and other liabilities....................................... 2,362.1 716.2
------------ ----------
Total liabilities................................................................... 9,266.5 8,795.3
------------ ----------
- -----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value (authorized - 200,000,000 shares; issued - 85,747,035 shares
in 1993 and 76,524,114 shares in 1992) at stated value................................. 1,436.8 840.0
Retained earnings....................................................................... 926.5 2,004.3
Minimum pension liability adjustment.................................................... (215.5) (156.4)
Cumulative translation adjustment....................................................... (41.5) (19.4)
Unamortized restricted stock compensation............................................... (8.2) (7.3)
Common stock in treasury, 244,934 shares in 1993 and 203,462 shares in 1992, at cost.... (12.7) (10.9)
------------ ----------

Total stockholders' equity.......................................................... 2,085.4 2,650.3
------------ ----------
- -----------------------------------------------------------------------------------------------------------------------------------
Total................................................................................... $ 11,351.9 $ 11,445.6
------------ ----------
------------ ----------
- -----------------------------------------------------------------------------------------------------------------------------------

The "Consolidated" (Deere & Company and Consolidated Subsidiaries) data in
this statement conform with the requirments of FASB Statement No.94. In the
supplemental consolidating data in this statement "Equipment Operations"
(Deere & Company with Financial Services on the Equity Bases) reflect the
basis of consolidation described on page 36 of the notes to the consolidated
financial statements. The supplemental "Financial Services" consolidating data
in this statement include Deere & Company's credit, insurance and health care
subsidiaries. Transactions between the "Equipment Operations" and "Financial
Services" have been eliminated to arrive at the "Consolidated" data.

The information on pages 24 through 47 is an integral part of this statement.

20

- --------------------------------------------------------------------------------

EQUIPMENT OPERATIONS
(DEERE & COMPANY WITH
FINANCIAL SERVICES ON
THE EQUITY BASIS) FINANCIAL SERVICES
- -----------------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) OCTOBER 31 OCTOBER 31
ASSETS 1993 1992 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents............................................ $ 71.7 $ 40.4 $ 266.5 $ 176.4
Marketable securities carried at cost................................ 994.8 954.1
Receivables from unconsolidated subsidiaries and affiliates.......... 511.9 160.7 10.0
Dealer accounts and notes receivable - net........................... 2,793.7 2,945.7
Credit receivables - net............................................. 115.8 80.1 3,639.0 4,314.6
Other receivables.................................................... 14.3 275.3 180.2
Equipment on operating leases - net.................................. 76.2 82.7 119.2 85.1
Inventories.......................................................... 464.4 524.7
Property and equipment - net......................................... 1,215.5 1,286.5 24.8 21.5
Investments in unconsolidated subsidiaries and affiliates............ 1,341.7 1,265.4 52.1 35.3
Intangible assets - net.............................................. 277.8 315.6 19.0 22.0
Other assets......................................................... 24.8 125.0 18.0 15.5
Deferred income taxes................................................ 628.9 52.8 49.6
Deferred charges..................................................... 81.5 81.5 34.4 31.4
-------- -------- -------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
Total................................................................ $7,618.2 $6,908.3 $5,495.9 $ 5,895.7
-------- -------- -------- ---------
-------- -------- -------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Short-term borrowings................................................ $ 476.3 $ 856.2 $1,125.1 $2,224.1
Payables to unconsolidated subsidiaries and affiliates............... 32.8 19.7 507.9 148.9
Accounts payable and accrued expenses................................ 1,533.4 1,319.3 532.0 526.6
Insurance and health care claims and reserves........................ 578.8 567.2
Accrued taxes........................................................ 66.1 65.4 4.9 3.4
Deferred income taxes................................................ 8.4 50.4 .2 .3
Long-term borrowings................................................. 1,069.3 1,234.1 1,478.2 1,238.9
Retirement benefit accruals and other liabilities.................... 2,346.5 712.9 15.6 3.3
-------- -------- -------- ---------
Total liabilities................................................ 5,532.8 4,258.0 4,242.7 4,712.7
-------- -------- -------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value (authorized - 200,000,000 shares; issued
85,747,035 shares in 1993 and 76,524,114 shares in 1992) at
stated value....................................................... 1,436.8 840.0 208.2 204.9
Retained earnings.................................................... 926.5 2,004.3 1,046.5 974.9
Minimum pension liability adjustment................................. (215.5) (156.4)
Cumulative translation adjustment.................................... (41.5) (19.4) (1.5) 3.2
Unamortized restricted stock compensation............................ (8.2) (7.3)
Common stock in treasury, 244,934 shares in 1993 and 203,462 shares
in 1992, at cost................................................... (12.7) (10.9)
-------- -------- -------- ---------
Total stockholders' equity....................................... 2,085.4 2,650.3 1,253.2 1,183.0
-------- -------- -------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
Total................................................................ $7,618.2 $6,908.3 $5,495.9 $ 5,895.7
-------- -------- -------- ---------
-------- -------- -------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------

21

DEERE & COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------

CONSOLIDATED
(DEERE & COMPANY AND CONSOLIDATED SUBSIDIARIES)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $ (920.9) $ 37.4 $ (20.2)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Changes in accounting, cumulative net adjustment . . . . . . . 1,105.3
Provision for doubtful receivables . . . . . . . . . . . . . . 32.6 55.3 69.6
Provision for depreciation . . . . . . . . . . . . . . . . . . 257.2 250.4 209.2
Provision for restructuring costs. . . . . . . . . . . . . . . 78.5 181.9
Undistributed earnings of unconsolidated subsidiaries
and affiliates. . . . . . . . . . . . . . . . . . . . . . . . (7.7) (7.2) (2.7)
Provision (credit) for deferred income taxes . . . . . . . . . (30.4) (15.9) (100.1)
Changes in assets and liabilities:
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 102.3 13.9 67.7
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 35.4 (3.0) 134.8
Accounts payable and accrued expenses. . . . . . . . . . . . 94.2 (57.3) (65.0)
Insurance and health care claims and reserves. . . . . . . . 8.2 80.8 34.7
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.4 3.9 84.9
--------- --------- ---------
Net cash provided by operating activities. . . . . . . . . 834.1 358.3 594.8
--------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections of credit receivables. . . . . . . . . . . . . . . . 2,995.5 3,008.9 2,642.1
Proceeds from sales of credit receivables. . . . . . . . . . . . 1,148.3 696.7 6.0
Proceeds from sales of marketable securities . . . . . . . . . . 320.9 278.2 136.3
Proceeds from sales of equipment on operating leases . . . . . . 46.5 43.9 32.4
Cost of credit receivables acquired. . . . . . . . . . . . . . . (3,635.1) (3,460.6) (3,537.3)
Purchases of marketable securities . . . . . . . . . . . . . . . (346.5) (372.2) (200.6)
Purchases of property and equipment. . . . . . . . . . . . . . . (206.5) (285.7) (298.0)
Cost of operating leases acquired. . . . . . . . . . . . . . . . (106.3) (63.2) (53.9)
Acquisition of businesses. . . . . . . . . . . . . . . . . . . . (87.4)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.8) 20.3 (.4)
--------- --------- ---------
Net cash provided by (used for) investing activities. . . . 215.0 (133.7) (1,360.8)
--------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings . . . . . . . . . . (1,487.1) (533.9) 453.2
Change in intercompany receivables/payables. . . . . . . . . . .
Proceeds from issuance of long-term borrowings . . . . . . . . . 687.1 772.0 776.5
Principal payments on long-term borrowings . . . . . . . . . . . (546.3) (359.8) (204.8)
Proceeds from issuance of common stock . . . . . . . . . . . . . 586.0 2.4 1.7
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (152.9) (152.5) (152.3)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12.9) (13.8) (13.7)
--------- --------- ---------
Net cash provided by (used for) financing activities. . . . (926.1) (285.6) 860.6
--------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . . . . . (1.6) (.7) (1.5)
--------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . 121.4 (61.7) 93.1
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . 216.8 278.5 185.4
-------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . $ 338.2 $ 216.8 $ 278.5
-------- --------- ---------
-------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------

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 on page 36 of the notes to the consolidated financial
statements. The supplemental "Financial Services" consolidating data in this
statement include Deere & Company's credit, insurance and health care
subsidiaries. Transactions between the "Equipment Operations" and "Financial
Services" have been eliminated to arrive at the "Consolidated" data.

The information on pages 24 through 47 is an integral part of this statement.

22

- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT OPERATIONS FINANCIAL SERVICES
(DEERE & COMPANY WITH FINANCIAL
SERVICES ON THE EQUITY BASIS)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31 YEAR ENDED OCTOBER 31
(IN MILLIONS OF DOLLARS) 1993 1992 1991 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . $ (920.9) $ 37.4 $ (20.2) $ 157.4 $ 138.3 $ 111.8
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Changes in accounting, cumulative net adjustment. . . . 1,105.3 6.9
Provision for doubtful receivables. . . . . . . . . . . 2.3 3.1 1.9 30.3 52.2 67.6
Provision for depreciation. . . . . . . . . . . . . . . 233.5 230.5 192.2 23.6 19.9 17.0
Provision for restructuring costs . . . . . . . . . . . 78.5 181.9
Undistributed earnings of unconsolidated subsidiaries
and affiliates . . . . . . . . . . . . . . . . . . . . (84.5) (43.5) (26.8) (1.6) (1.8) (1.1)
Provision (credit) for deferred income taxes. . . . . . (30.7) (4.1) (80.9) .3 (11.8) (19.2)
Changes in assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . 101.6 13.5 88.4 .6 .9 (20.6)
Inventories . . . . . . . . . . . . . . . . . . . . . 35.4 (3.0) 134.8
Accounts payable and accrued expenses . . . . . . . . 79.7 (90.7) (117.3) 14.7 32.9 52.2
Insurance and health care claims and reserves . . . . 8.2 80.8 34.7
Other . . . . . . . . . . . . . . . . . . . . . . . . 101.6 4.8 95.9 (22.2) (.9) (11.0)
-------- -------- -------- --------- --------- ---------
Net cash provided by operating activities . . . . . 701.8 148.0 449.9 218.2 310.5 231.4
-------- -------- -------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Collections of credit receivables. . . . . . . . . . . . 87.7 78.5 79.7 2,907.8 2,930.5 2,562.4
Proceeds from sales of credit receivables. . . . . . . . 5.7 14.0 6.0 1,161.7 703.6 27.4
Proceeds from sales of marketable securities . . . . . . 320.9 278.2 136.3
Proceeds from sales of equipment on operating leases . . 25.4 27.1 12.2 21.1 16.8 20.2
Cost of credit receivables acquired. . . . . . . . . . . (124.1) (82.5) (76.3) (3,530.1) (3,399.1) (3,488.3)
Purchases of marketable securities . . . . . . . . . . . (346.5) (372.2) (200.6)
Purchases of property and equipment. . . . . . . . . . . (197.4) (275.7) (295.2) (9.2) (10.1) (2.8)
Cost of operating leases acquired. . . . . . . . . . . . (31.8) (31.6) (12.5) (74.5) (31.5) (41.4)
Acquisition of businesses. . . . . . . . . . . . . . . . (71.1) (16.3)
Other . . . . . . . . . . . . . . . . . . . . . . . . 8.4 17.0 (12.8) (10.2) (5.6) .4
-------- -------- -------- --------- --------- ---------
Net cash provided by (used for) investing
activities. . . . . . . . . . . . . . . . . . . . (226.1) (253.2) (370.0) 441.0 110.6 (1,002.7)
-------- -------- -------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings . . . . . . (464.7) 50.1 133.2 (1,022.3) (584.0) 319.9
Change in intercompany receivables/payables. . . . . . . (359.1) 43.9 (121.2) 359.1 (43.9) 121.2
Proceeds from issuance of long-term borrowings . . . . . .1 249.4 350.2 687.0 522.7 426.3
Principal payments on long-term borrowings . . . . . . . (39.4) (132.4) (202.9) (506.9) (227.5) (1.9)
Proceeds from issuance of common stock . . . . . . . . . 586.0 2.4 1.7
Dividends paid . . . . . . . . . . . . . . . . . . . . . (152.9) (152.5) (152.3) (85.9) (100.2) (86.5)
Other . . . . . . . . . . . . . . . . . . . . . . . . (12.9) (13.8) (13.7) 8.9 12.0
-------- -------- -------- --------- --------- ---------
Net cash provided by (used for) financing
activities. . . . . . . . . . . . . . . . . . . . (442.9) 47.1 (5.0) (569.0) (424.0) 791.0
-------- -------- -------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . (1.5) (.6) (1.5) (.1) (.1)
-------- -------- -------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . 31.3 (58.7) 73.4 90.1 (3.0) 19.7
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . 40.4 99.1 25.7 176.4 179.4 159.7
-------- -------- -------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . $ 71.7 $ 40.4 $ 99.1 $ 266.5 $ 176.4 $ 179.4
-------- -------- -------- --------- --------- ---------
-------- -------- -------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------

23

MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS FOR THE YEARS ENDED OCTOBER 31, 1993, 1992 AND 1991
(UNAUDITED)
- -------------------------------------------------------------------------------
BUSINESS AND SEGMENT DESCRIPTION

The company's operations are categorized into five business segments described
below.

The company's worldwide agricultural equipment segment manufactures and
distributes a full range of equipment used in commercial farming - including
tractors; tillage, soil preparation, planting and harvesting machinery; and
crop handling equipment.

The company's worldwide industrial equipment segment manufactures and
distributes a broad range of machines used in construction, earthmoving and
forestry - including backhoe loaders; crawler dozers and loaders;
four-wheel-drive loaders; scrapers; motor graders; excavators; and log skidders.
This segment also includes the manufacture and distribution of engines and
drivetrain components for the original equipment manufacturer (OEM) market.

The company's worldwide lawn and grounds care equipment segment
manufactures and distributes equipment for commercial and residential uses -
including small tractors for lawn, garden and utility purposes; riding and
walk-behind mowers; golf course equipment; utility transport vehicles;
snowblowers; and other outdoor power products.

The products produced by the equipment segments are marketed primarily
through independent retail dealer networks.

The company's credit segment, which operates in the United States and
Canada, purchases and finances retail notes from John Deere's equipment sales
branches in the United States and Canada. The notes are acquired by the sales
branches through John Deere retail dealers and originate in connection with
retail sales by dealers of new John Deere equipment and used equipment. The
credit segment also purchases and finances retail notes unrelated to John Deere
equipment, representing primarily recreational vehicle and recreational marine
product notes acquired from independent dealers of that equipment (recreational
product retail notes). The credit subsidiaries also lease John Deere equipment
to retail customers, finance and service unsecured revolving charge accounts
acquired from merchants in the agricultural, lawn and grounds care and marine
retail markets, and provide wholesale financing for recreational vehicles and
John Deere engine inventories held by dealers of those products.

The company's insurance and health care segment issues policies in the
United States and Canada primarily for: a general line of property and casualty
insurance to John Deere and non-Deere dealers and to the general public; group
life and group accident and health insurance for employees of participating John
Deere dealers; group life and group accident and health insurance for employees
of the company; life and annuity products to the general public and credit
physical damage insurance in connection with certain retail sales of John Deere
products financed by the credit subsidiaries. This segment also provides health
management programs and related administrative services in the United States to
corporate customers and employees of Deere & Company.

Deere & Company's consolidated financial statements result from
consolidation of the company's agricultural equipment, industrial equipment and
lawn and grounds care equipment businesses with its Financial Services
businesses (credit, insurance and health care). The consolidation procedure is
explained on page 36 in the notes to the consolidated financial statements. The
notes explain how the terms "Equipment Operations", "Financial Services" and
"Consolidated" are used in this report to help readers understand the data
presented. These terms are used in Management's Discussion and Analysis for
clarification or emphasis.

SUMMARY
- ----------------------------------------------------------------------------------------
(In millions of dollars
except per share amounts) 1993 1992 1991
- ----------------------------------------------------------------------------------------

NET SALES AND REVENUES
Net sales:
Agricultural equipment . . . . . . . . . . . . $ 4,078 $3,759 $4,054
Industrial equipment . . . . . . . . . . . . . 1,348 1,068 1,014
Lawn and grounds care equipment. . . . . . . . 1,053 896 780
------- ------ ------
Total net sales. . . . . . . . . . . . . . . 6,479 5,723 5,848
Financial Services revenues . . . . . . . . . . . 1,175 1,124 1,078
Other revenues . . . . . . . . . . . . . . . . . . 100 114 129
------- ------ ------

Total net sales and revenues . . . . . . . . . $ 7,754 $6,961 $7,055
------- ------ ------
------- ------ ------
Income (loss) before
changes in accounting. . . . . . . . . . . . . $ 184* $ 37 $ (20)***
Changes in accounting . . . . . . . . . . . . . . (1,105)**
------- ------ ------
Net income (loss). . . . . . . . . . . . . . . . . $ (921)* $ 37 $ (20)***
------- ------ ------
------- ------ ------
Per share:
Income (loss) before changes
in accounting. . . . . . . . . . . . . . . . . . $ 2.39* $ .49 $ (.27)***
Changes in accounting. . . . . . . . . . . . . . . (14.30)**
------- ------ ------
Net income (loss). . . . . . . . . . . . . . . . . $(11.91)* $ .49 $ (.27)***
------- ------ ------
------- ------ ------

* Includes after-tax restructuring costs of $80 million or $1.03 per share. See
page 37.

** After-tax cumulative adjustment for the adoption of Financial Accounting
Standards Board Statement Nos. 106 and 112. See pages 36 and 37.

***Includes after-tax restructuring costs of $120 million or $1.58 per share.
See page 37.

- ----------------------------------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------

NET SALES BY MAJOR MARKETS
United States. . . . . . . . . . . . . . . . . . . . . . . . . . $4,431 $3,768 $3,968
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 379 381
Europe, Africa and Middle East . . . . . . . . . . . . . . . . . 1,126 1,147 1,148
Central and South America. . . . . . . . . . . . . . . . . . . . 212 251 171
Asia--Pacific Region . . . . . . . . . . . . . . . . . . . . . . 207 178 180
------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,479 $5,723 $5,848
------ ------ ------
------ ------ ------
- -----------------------------------------------------------------------------------------------------------

Net sales of service parts and accessories, which are included in the
previous totals, amounted to $1,358 million in 1993, $1,260 million in 1992 and
$1,243 million in 1991.

1993 COMPARED WITH 1992 (UNAUDITED)
- -------------------------------------------------------------------------------
MARKET CONDITIONS

North American agricultural economic conditions were generally more favorable
than in 1992. Although flooding and excessively wet conditions in certain areas
of the Midwest and drought conditions in parts of the Southeast resulted in an
estimated 31 percent

24

decrease in corn production and a 16 percent decline in soybean production in
1993, United States farm cash income is expected to achieve a record level in
1993. The lower production caused grain prices to rise above 1992 levels.
Livestock producers enjoyed favorable prices and profit margins during 1993 and
farmers boosted their cash flow by selling inventories accumulated from record
corn and soybean yields in 1992. Additionally, direct government payments to
farmers are expected to increase in 1993, aiding farmers most heavily impacted
by this year's flooding. Uncertainties over the passage of a new investment tax
credit were resolved in 1993 as the anticipated tax credit was not included in
the final tax legislation. Consequently, many United States farmers who had
delayed making purchases in 1992 bought equipment this year. Sales in Canada
were boosted by a special 13-month investment tax credit in effect from December
1992 to December 1993. As a result of these developments, North American retail
sales of John Deere agricultural equipment were considerably higher in 1993
compared with last year.

The North American general economy continued its slow expansion in 1993. In
the United States, housing starts increased about five percent during the year
with second-half strength overcoming a very sluggish first half. Real public
construction was up slightly from the previous year's level while nonresidential
construction was flat. However, the cumulative effects of the rebound in
economic activity were felt in 1993, as housing starts were up more than 25
percent from their 1991 level and real public construction was nine percent
larger. Consequently, North American retail sales of industrial and construction
machinery for both the industry and John Deere rose significantly in 1993.

Consumer spending for durable goods rose briskly in 1993, and North
American retail sales of John Deere lawn and grounds care equipment increased
significantly. Sales were also supported by favorable moisture conditions over
most areas throughout the prime selling season. However, dry conditions did
emerge in portions of the Southeast and Northeast which impeded some late season
buying activity.

Industry retail sales of agricultural equipment in overseas markets in
general remained relatively weak during 1993. However, overseas retail sales of
John Deere agricultural equipment were higher in 1993 than in 1992, reflecting
good acceptance of the company's new tractors and combines. Despite recessionary
conditions prevailing in most European markets and in Japan, overseas retail
sales of John Deere lawn and grounds care equipment continued to expand in 1993.
Overseas industrial and construction equipment markets were relatively flat in
1993 compared with 1992.

Acquisitions of receivables and leases by the company's credit subsidiaries
were somewhat higher in 1993 compared with last year due primarily to growth in
revolving charge accounts, leases and wholesale receivables. Although retail
sales of John Deere equipment were higher in 1993, acquisitions of John Deere
retail notes were down slightly compared with last year reflecting a higher
level of cash purchases by John Deere customers and a more competitive financing
environment, particularly during the latter part of 1993. Acquisitions of
recreational product retail notes were significantly lower in 1993 due mainly to
a very competitive financing market. Although relatively soft market conditions
continued during 1993 in the property/casualty insurance industry, John Deere's
insurance premium volumes increased in 1993 over 1992. Health care premium
volumes were considerably higher in 1993 reflecting continued growth in the
company's health care operations.

OPERATING RESULTS

Deere & Company's operating results before the effects of special items
(restructuring charges, changes in accounting standards and tax law changes)
improved significantly in 1993 as a result of substantial improvement in the
company's North American equipment operations and continued strong performance
of the Financial Services subsidiaries. Worldwide income in 1993 was $286
million or $3.70 per share before the effects of the special items, compared
with net income of $37 million or $.49 per share in 1992. However, 1993 reported
results were affected by the special items described below. After the effects of
the restructuring charges, the incremental expense from the accounting changes
and the tax rate change, income in 1993 was $184 million or $2.39 per share. The
company incurred a worldwide net loss in 1