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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-K





ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended October 31, 2002





Commission file number 1-6458





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JOHN DEERE CAPITAL CORPORATION


(Exact name of registrant as specified in its
charter)





Delaware (State of
incorporation)

36-2386361 (IRS
employer identification number)





1 East First Street, Suite 600 Reno, Nevada 89501 (Address of principal executive offices) (Zip Code)

(775) 786-5527 (Telephone
number)





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Securities registered pursuant to Section 12(b) of the act:





Title of each class

Name of each exchange on which registered6 % Debentures Due 2009 8-5/8% Subordinated Debentures Due 2019

New York Stock Exchange New York Stock
Exchange





Securities registered pursuant to Section 12(g) of the act: None





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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  ̈





At December 1, 2002, 2,500 shares of common stock, without par
value, of the registrant were outstanding, all of which were owned by John Deere Credit Company.





The registrant
meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with certain reduced disclosures as permitted by Instruction I(2).





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##### Table of Contents




PART I





Item 1.  Business.





The Company





John Deere Capital Corporation (Capital Corporation) and its subsidiaries are collectively called the Company. John Deere
Credit Company, a wholly-owned finance holding subsidiary of Deere & Company, owns all of the outstanding common stock of the Capital Corporation. See Relationships of the Company with John Deere for additional information regarding agreements
between the Company and Deere & Company. The Company conducts business in Argentina, Australia, France (through a joint venture), Germany, Italy (through a cooperation agreement), Luxembourg, Mexico, New Zealand, Spain, the United Kingdom and
the United States.





The Company provides and administers financing for retail purchases of new equipment
manufactured by Deere & Companys agricultural equipment, commercial and consumer equipment, and construction and forestry divisions and used equipment taken in trade for this equipment. The Company purchases retail installment sales and
loan contracts (retail notes) from Deere & Company and its wholly-owned subsidiaries (collectively called John Deere). John Deere acquires these retail notes through John Deere retail dealers. The Company also purchases and finances a limited
amount of non-Deere retail notes and continues to service a small portfolio of recreational products and other retail notes. In addition, the Company leases John Deere equipment and a limited amount of non-Deere equipment to retail customers
(financing and operating leases). The Company also finances and services revolving charge accounts, in most cases acquired from and offered through merchants in the agricultural, commercial and consumer, and construction and forestry markets
(revolving charge accounts). Further, the Company finances and services operating loans, in most cases acquired from and offered through farm input providers, and provides insured international export financing generally involving John Deere
products (operating loans). The Company also provides wholesale financing for inventories of John Deere engines and John Deere agricultural, commercial and consumer and construction and forestry equipment owned by dealers of those products
(wholesale receivables). In addition, the Company purchases and administers a significant portion of the trade receivables originated by John Deere, which are included in wholesale receivables. Retail notes, revolving charge accounts, operating
loans, financing leases and wholesale receivables are collectively called Receivables. Receivables and operating leases are collectively called Receivables and Leases.





The Capital Corporation was incorporated under the laws of Delaware and commenced operations in 1958. At December 1, 2002, the Company had 1,479 full-time and
part-time employees.





Business of John Deere





John Deeres operations are categorized into four major business segments:





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





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





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




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John Deeres worldwide agricultural equipment, commercial and consumer
equipment, construction and forestry equipment and special technologies operations are commonly referred to as the Equipment Operations. The products and services produced by the segments above are marketed primarily through independent retail
dealer networks and major retail outlets.





The credit operationssegment includes the operations of the
Company (described herein), John Deere Credit Company, John Deere Credit Inc. (Canada), Banco John Deere, S.A. (Brazil) and John Deere Credit Oy (Finland), and primarily finances sales and leases by John Deere dealers of new and used agricultural,
commercial and consumer, and construction and forestry equipment. In addition, it provides wholesale financing to dealers of the foregoing equipment, provides operating loans and finances retail revolving charge accounts.





John Deere had net income of $319 million, or $1.33 per share diluted ($1.34 per share basic), in 2002, compared with a net loss of $64
million, or $.27 per share diluted ($.27 per share basic), in 2001. Special charges of $46 million, or $.18 per share diluted, in 2002 and $217 million, or $.91 per share diluted, in 2001, had a negative impact on the results for the respective
years. These charges were related to the costs of closing and restructuring certain facilities in both years and a voluntary early-retirement program last year. Excluding these costs, income in 2002 more than doubled to $365 million, or $1.51 per
share diluted, compared with income of $153 million, or $0.64 per share diluted, in 2001. Better price realization as well as the favorable impact of John Deeres broad-based cost and expense reduction initiatives were the primary drivers of
the improved results in 2002. In addition, favorable customer response to new products contributed to achieving higher sales and more efficient production levels. These factors, in conjunction with a $323 million reduction in trade receivables and
inventories, helped generate consolidated cash flow from operations of $1.9 billion for the year, well above 2001 levels.





John Deeres net sales and revenues increased 5 percent to $13,947 million in 2002, compared with $13,293 million in 2001, primarily due to higher net sales. Net sales of the Equipment Operations increased 6 percent in 2002 to
$11,703 million from $11,077 million last year. The sales increase reflected higher overseas sales of agricultural equipment, especially in Europe, the impact of acquisitions net of divestitures and higher sales of commercial and consumer equipment.
Sales were down for construction and forestry equipment (excluding acquisitions) and also for agricultural equipment in the United States and Canada. Overseas sales rose by 19 percent in 2002 due to higher agricultural equipment sales mainly in
Europe. Without the effect of foreign exchange rate changes, overseas sales would have been up 18 percent for the year.





The agricultural equipment segment had net sales of $6,738 million in 2002, compared to $6,269 million in 2001. The commercial and consumer equipment segment had net sales of $2,712 million in 2002, compared to $2,527 million in
2001. The construction and forestry segment had net sales of $2,199 million in 2002, compared to $2,226 million in 2001. The credit operations segment had revenues of $1,426 million in 2002, compared to $1,439 million in 2001.





Outlook for John Deere





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





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




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





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





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





Credit Operations.    Credit results for 2003 are expected to benefit from lower write-offs, growth in the loan portfolio and stable margins. On this basis, net income for the year is projected to increase
more than 20 percent, to about $300 million. The Companys net income for 2003, which does not include the credit operations in Canada, Brazil and Finland, is projected to increase more than 20 percent, to about $280 million.





Relationships of the Company with John Deere





The results of operations of the Company are affected by its relationships with John Deere, including among other items, the terms on which the Company acquires Receivables and Leases and borrows funds
from John Deere, the reimbursement for interest waiver and low-rate finance programs from John Deere, the compensation paid by John Deere in connection with the Companys purchase of trade receivables from John Deere and the payment to John
Deere for various expenses applicable to the Companys operations. In addition, the Company and John Deere have joint access to all of the Companys lines of credit.





The Companys acquisition volume of Receivables and Leases is largely dependent upon the level of retail sales and leases of John Deere products. The level of John
Deere retail sales and leases is responsive to a variety of economic, financial, climatic, legislative and other factors that influence demand for its products. All of the Companys businesses are affected by changes in interest rates, demand
for credit and competition.





The Company bears substantially all of the credit risk (net of recovery from
withholdings from certain John Deere dealers, and Farm Plan  and PowerPlan ® merchants) associated with its holding of Receivables and Leases. A small portion of the Receivables and Leases
held (less than 5%) are guaranteed by the Equipment Operations. The Company also performs all servicing and collection functions in North America. John Deere is reimbursed for staff and other administrative services at estimated cost, and for credit
lines provided to the Company based on utilization of those lines.





The terms and the basis on which the Company
acquires retail notes and certain wholesale receivables from




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John Deere are governed by agreements with John Deere, terminable by either John Deere or the Company on 30 days notice. As provided in these
agreements, the Company agrees to the terms and conditions for purchasing the retail notes and wholesale receivables from John Deere. Under these agreements, John Deere is not obligated to sell notes to the Company, and the Company is obligated to
purchase notes from John Deere only if the notes comply with the terms and conditions set by the Company.





The
basis on which John Deere acquires retail notes and wholesale receivables from the dealers is governed by agreements with the John Deere dealers, terminable at will by either the dealers or John Deere. In acquiring these notes from dealers, the
terms and conditions, as set forth in agreements with the dealers, conform with the terms and conditions adopted by the Company in determining the acceptability of retail and certain wholesale notes to be purchased from John Deere. The dealers are
not obligated to sell these notes to John Deere and John Deere is not obligated to accept these notes from the dealers. In practice, retail and wholesale notes are acquired from dealers only if the terms of these notes and the creditworthiness of
the customers are acceptable to the Company for purchase of these notes from John Deere. The Company acts on behalf of both itself and John Deere in determining the acceptability of the notes and in acquiring acceptable notes from dealers.





The basis on which the Company enters into leases with retail customers through John Deere dealers is governed by
agreements between dealers and the Company. Leases are accepted based on the terms and conditions, the lessees creditworthiness, the anticipated residual values of the equipment and the intended uses of the equipment.





Deere & Company has an agreement with the Company pursuant to which it has agreed to continue to own at least 51 percent of the voting
shares of capital stock of the Company and to maintain the Companys consolidated tangible net worth at not less than $50 million. This agreement also obligates Deere & Company to make income maintenance payments to the Company such that
its consolidated ratio of earnings before fixed charges to fixed charges is not less than 1.05 to 1 for any fiscal quarter. For 2002 and 2001, the Companys ratios were 1.97 to 1 and 1.53 to 1, respectively, and never less than 1.81 to 1 and
1.48 to 1 for any fiscal quarter of 2002 and 2001, respectively. Deere & Companys obligations to make payments to the Company under the agreement are independent of whether the Company is in default on its indebtedness, obligations or
other liabilities. Further, Deere & Companys obligations under the agreement are not measured by the amount of the Companys indebtedness, obligations or other liabilities. Deere & Companys obligations to make payments under
this agreement are expressly stated not to be a guaranty of any specific indebtedness, obligation or liability of the Company and are enforceable only by or in the name of the Company.





In October 2001, the Company purchased $2.2 billion of United States wholesale receivables (trade receivables) from John Deere. The Company has continued purchasing a
significant portion of newly originated wholesale receivables from John Deere. In the fourth quarter of 2002, the Company also began purchasing European wholesale receivables (trade receivables) from John Deere. These trade receivables arise from
John Deeres sales of goods to dealers. Under the terms of the sales to dealers, interest is charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of
certain interest-free periods granted to the dealer at the time of the sale, until payment is received by the Company. Dealers cannot cancel purchases after goods are shipped and are responsible for payment even if the equipment is not sold to
retail customers. The interest-free periods are determined based on the type of equipment sold and the time of year of the sale. These periods range from one to 12 months for agricultural tractors, from one to eight months for construction and
forestry equipment, and from one to 24 months for most other equipment. Interest-free periods may not be extended. Interest charged may not be forgiven and interest rates are set based on market factors. John Deere compensates the Company for the
carrying costs related to these interest-free periods.





Description of Receivables and Leases





Receivables and Leases arise mainly from retail and wholesale sales and leases of John Deere products and used equipment accepted in trade
for them, and from retail sales of equipment of unrelated manufacturers. Receivables and Leases also include revolving charge accounts receivable and operating loans. The majority of these Receivables and Leases are derived from retail and wholesale
sales and leases of agricultural equipment, commercial and consumer equipment, and construction and forestry equipment sold by John Deere dealers.




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Deere Credit, Inc., a wholly-owned subsidiary of the Company, holds retail notes, leases and revolving charge receivables
related to mining, transportation and other commercial equipment.





On December 24, 2000, a federal charter was
issued to FPC Financial, f.s.b. (Thrift), a wholly-owned subsidiary of the Company, by the Office of Thrift Supervision. The Thrift is headquartered in Madison, Wisconsin and offers revolving charge products such as John Deere Credit Revolving Plan,
Farm Plan  and PowerPlan ® on a nationwide basis. John Deere Credit Revolving Plan is used primarily by retail customers of John Deere dealers to finance purchases of
commercial and consumer equipment. Through its Farm Plan  product, the Thrift finances revolving
charge accounts offered by approximately 5,000 participating agri-businesses to their retail customers for the purchase of goods and services. Farm Plan  account holders consist mainly of farmers purchasing equipment parts and service at implement dealerships. Farm Plan  is also used by customers patronizing other agri-businesses, including farm supply, feed and seed, parts supply, bulk fuel, building supply
merchants and veterinarians. The PowerPlan ® revolving charge account is used by construction and
forestry customers to finance the purchase of parts and service work performed at John Deere construction dealers. See Note 2 to the Consolidated Financial Statements under Revolving Charge Accounts Receivable.





The Company also offers insured international export financing products to select customers.





The Company also works with several leading farm input providers to offer crop input production loans (operating loans) for materials such
as seeds and fertilizer. Additionally, the Company provides production loans directly to farmers for their total operating needs. These loans are secured by crops and equipment.





The Company finances wholesale inventories of John Deere engines, and John Deere agricultural, commercial and consumer and construction and forestry equipment. A large
portion of the wholesale financing provided by the Company is with dealers from whom it also purchases agricultural, commercial and consumer and construction and forestry retail notes. See Note 2 to the Consolidated Financial Statements under
Wholesale Receivables.





The Company requires that theft and physical damage insurance be carried on
all goods leased or securing retail notes. In most cases, the customers may, at their expense, have the Company or the seller of the goods purchase this insurance or obtain it from other sources. Theft and physical damage insurance is also required
on goods securing wholesale notes and can be purchased through the Company or from other sources. Insurance is not required for goods purchased under revolving charge accounts.





Receivables and Leases are eligible for acceptance if they conform to prescribed finance and lease plan terms. Guidelines relating to down payments and contract terms on
retail notes and leases are described in Note 2 and Note 5 to the Consolidated Financial Statements.





In some
circumstances, Receivables and Leases may be accepted and acquired even though they do not conform in all respects to the established guidelines. The Company determines whether Receivables and Leases should be accepted and how they should be
serviced. These determinations are made according to the finance plans and retail terms, although some exceptions are made. Officers of the Company are responsible for reviewing the performance of the Company in accepting and collecting Receivables
and Leases. The Company normally makes all of its own routine collections, settlements and repossessions on Receivables and Leases.





Retail notes and wholesale receivables provide for retention by John Deere or the Company of security interests in the goods financed under laws such as the Uniform Commercial Code, certain federal statutes and state motor
vehicle laws. Security interest filings are also made for leases. However, filings for operating leases are made for informational purposes only.





Finance Rates on Retail Notes





As of October 31, 2002 and 2001, approximately 24 percent
and 48 percent of the retail notes held by the Company bore a variable finance rate, respectively. This decrease was primarily due to increased securitizations of




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variable rate notes and customer preference for fixed rate notes as a result of the lower interest rate environment in 2002, compared with 2001.
With the exception of agricultural retail notes, a majority of retail notes are fixed rate notes. A portion of the finance income earned by the Company arises from reimbursements from John Deere in connection with financing the retail sales of John
Deere equipment on which finance charges are waived or reduced by John Deere for a period from the date of sale to a specified subsequent date. See Note 2 to the Consolidated Financial Statements for additional information.





Average Original Term and Average Actual Life of Retail Notes and Leases





Due to prepayments (often from trade-ins and refinancing), the average actual life of retail notes and financing leases is considerably shorter than the average original
term. The following table shows the average original term for retail notes and leases acquired and the average actual life for retail notes and leases liquidated (in months):





Average Original Term

Average Actual Life2002

2001

2002

2001Retail notes

54

72

29

28New equipment:Agricultural equipment

58

57

29

28Construction and forestry equipment

44

44

31

30Commercial and consumer equipment

54

54

28

27Recreational products*



186

170

156Used equipment:Agricultural equipment

57

56

30

26Construction and forestry equipment

42

43

26

25Commercial and consumer equipment

53

51

27

29Recreational products*



175

176

145Financing leases

46

48

41

40Equipment on operating leases

40

39

36

37





*The average actual life for recreational product receivables in 2002 increased from 2001
as a result of the Companys decision to discontinue the origination and sale of notes to several outside financial institutions. There were no acquisitions of recreational product receivables in 2002. The average original term for recreational
product receivables was longer than other equipment notes due to customer preferences and industry convention.




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Maturities





The following table presents the maturities of net Receivables and Leases owned by the Company at October 31, 2002 (in millions of dollars), and a summary of net
Receivables and Leases owned by the Company at the end of the last five years (in millions of dollars).





One year

One to five years

Over five yearsFixed rate

Variable rate

Fixed rate

Variable rate

2002 Total

2001

2000

1999

1998Retail notes:Agricultural equipment

$
994

$
1,449

$
776

$
30

$
56

$
3,305

$
3,610

$
2,983

$
2,602

$
2,285Construction and forestry equipment


479


703


7


9





1,198


1,293


1,000


611


703Commercial and consumer equipment


202


454


10


64





730


611


465


347


270Recreational products


11


33





35





79


111


140


156


581Total retail notes


1,686


2,639


793


138


56


5,312


5,625


4,588


3,716


3,839Revolving charge accounts

















896


814


688


604


554Operating loans

















561


501


422


297


197Wholesale receivables

















2,942


2,996


937


957


804Financing leases

















468


480


457


402


242Equipment on operating leases

















1,180


1,485


1,517


1,255


892Total
















$
11,359

$
11,901

$
8,609

$
7,231

$
6,528




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Write-offs and Recoveries





Total Receivable write-offs and recoveries, by product, were as follows (in millions of dollars):





2002


2001


2000


1999


1998Balance, beginning of year

$
110.4


$
93.3


$
83.6


$
81.3


$
85.9Provision for credit losses


126.9



74.5



52.6



62.3



46.1Write-offs:Retail notes:Agricultural equipment


(6.7
)


(10.0
)


(7.7
)


(15.6
)


(4.2
)Construction and forestry equipment


(17.3
)


(16.9
)


(7.3
)


(5.7
)


(6.0
)Commercial and consumer equipment


(1.2
)


(.5
)


(.5
)


(.3
)


(.7
)Recreational products


(3.3
)


(3.5
)


(4.0
)


(5.4
)


(8.2
)Total retail notes


(28.5
)


(30.9
)


(19.5
)


(27.0
)


(19.1
)Revolving charge accounts


(23.4
)


(17.7
)


(11.5
)


(13.5
)


(15.3
)Operating loans


(47.4
)


(2.5
)


(6.5
)


(1.1
)Wholesale receivables


(7.7
)


(6.8
)


(4.2
)


(2.4
)


(3.2
)Financing leases


(12.0
)


(9.4
)


(8.5
)


(6.7
)


(4.0
)Total write-offs


(119.0
)


(67.3
)


(50.2
)


(50.7
)


(41.6
)Recoveries:Retail notes:Agricultural equipment


3.5



2.4



2.3



1.7



.9Construction and forestry equipment


1.5



.6



.8



1.1



.7Commercial and consumer equipment


.2



.2



.2



.2



.1Recreational products


.9



1.1



1.1



1.9



1.9Total retail notes


6.1



4.3



4.4



4.9



3.6Revolving charge accounts


4.0



3.2



3.3



3.5



4.2Operating loans


1.1



1.6



5.1



.5Wholesale receivables


.8



(.6
)


.7



.5



1.2Financing leases


1.1



.8



.5



1.1



.4Total recoveries


13.1



9.3



14.0



10.5



9.4Total net write-offs


(105.9
)


(58.0
)


(36.2
)


(40.2
)


(32.2
)Transfers primarily related to receivable sales and purchases


(13.1
)


.6



(6.7
)


(19.8
)


(18.5
)Balance, end of year

$
118.3


$
110.4


$
93.3


$
83.6


$
81.3Total net write-offs as a percentage of average Receivables


1.09
%


.79
%


.56
%


.65
%


.54
%Allowance as a percentage of total Receivables, end of year


1.16
%


1.06
%


1.32
%


1.40
%


1.44
%




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##### Table of Contents




Allowance for Credit Losses





The total Receivable allowance for credit losses, by product, at October 31, and the Receivable portfolio, by product, as a percent of
total portfolio is presented below (in millions of dollars):





2002


2001


2000


1999


1998Dollars

Percent


Dollars

Percent


Dollars

Percent


Dollars

Percent


Dollars

PercentRetail notes:Agricultural equipment

$
19.2

32
%

$
20.6

35
%

$
16.3

42
%

$
14.5

44
%

$
11.9

41
%Construction and forestry equipment


33.2

12



23.7

12



22.5

14



15.5

10



17.5

12Commercial and consumer equipment


6.9

7



6.0

6



4.5

7



3.5

6



2.8

5Recreational products


2.5

1



3.5

1



4.6

2



4.7

2



14.0

10Total retail notes


61.8

52



53.8

54



47.9

65



38.2

62



46.2

68Revolving charge accounts


15.9

9



23.2

8



19.0

10



17.4

10



15.7

10Operating loans


7.9

5



6.8

5



7.2

6



5.0

5



3.9

4Wholesale receivables


19.8

29



15.8

29



10.1

13



15.0

16



11.3

14Financing leases


12.9

5



10.8

4



9.1

6



8.0

7



4.2

4Total

$
118.3

100
%

$
110.4

100
%

$
93.3

100
%

$
83.6

100
%

$
81.3

100
%





Competition





The businesses in which the Company is engaged are highly competitive. The Company competes for customers with commercial banks and
finance and leasing companies based upon its service, finance rates charged and other finance terms. The proportion of John Deere equipment retail sales and leases financed by the Company is influenced by conditions prevailing in the agricultural
equipment, commercial and consumer equipment, and construction and forestry equipment industries, in the financial markets, and in business generally. The Company financed a significant portion of John Deere equipment retail sales and leases during
2002 and 2001.





The Company emphasizes convenient service to customers and endeavors to offer terms desired in its
specialized markets such as seasonal schedules of repayment and rentals. The Companys retail note finance rates and lease rental rates are generally believed to be in the range offered by other sales finance and leasing companies, although not
as low as those of some banks and other lenders and lessors.





Regulation





In a number of states, state law limits the maximum finance rate on receivables. The present state limitations have not, thus
far, significantly limited variable-rate finance charges or the fixed-rate finance charges established by the Company. However, if interest rate levels should increase significantly, maximum state rates could affect the Company by preventing the
variable rates on outstanding variable-rate retail notes from increasing above the maximum state rate, and by limiting the fixed rates on new notes. In some states, the Company may be able to qualify new retail notes for a higher maximum rate limit
by using retail installment sales contracts (rather than loan contracts) or by using fixed-rate rather than variable-rate contracts.





In addition to rate regulation, various state and federal laws and regulations apply to some Receivables and Leases, principally retail notes for goods sold for personal, family or household use and Farm Plan TM , PowerPlan ® , and John Deere Credit Revolving Plan accounts receivable for such goods. To date, these laws and regulations have not had a significant adverse effect on the Company.





On December 24, 2000, a federal charter was issued to FPC Financial, f.s.b. (Thrift), a wholly-owned subsidiary of the Company,
by the Office of Thrift Supervision. The Thrift is headquartered in Madison, Wisconsin and




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##### Table of Contents

offers revolving charge products such as John Deere Credit Revolving Plan, Farm Plan  and PowerPlan ® on a nationwide basis.





Financing outside the United States is affected by a variety
of laws, customs and regulations.





Item 2.  Properties.





The Companys properties principally consist of office equipment, a Company-owned office building in Madison, Wisconsin; and leased
office space in Bloomington, Illinois; Johnston, Iowa; Urbandale, Iowa; Reno, Nevada; Pittsburgh, Pennsylvania; Rosario, Argentina; Brisbane, Australia; Gloucester, England; Vignate, Italy; Luxembourg City, Luxembourg; Monterrey, Mexico; and Getafe,
Spain.





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 state and federal laws
and regulations concerning retail credit. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material
effect on its financial statements.





Item 4.  Submission of Matters to a Vote of Security Holders.





Omitted pursuant to instruction I(2).





PART II





Item 5.  Market for
Registrants Common Equity and Related Stockholder Matters.





All of the Companys common stock
is owned by John Deere Credit Company, a finance holding company that is wholly-owned by Deere & Company. In 2002, the Company declared and paid $350 million in cash dividends to John Deere Credit Company. In turn, John Deere Credit Company
declared and paid $350 million in cash dividends to Deere & Company. The Company did not declare or pay cash dividends to John Deere Credit Company in 2001. In 2001, Deere & Company increased its investment in John Deere Credit Company by
$700 million. In turn, John Deere Credit Company increased its investment in the Company by $700 million.





Item
6.  Selected Financial Data.





Omitted pursuant to instruction I(2).




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Item 7.  Managements Discussion and Analysis of Financial Condition and
Results of Operations.





Results of Operations





2002 Compared with 2001





Consolidated net income was $230.6 million for the year, compared with $157.8 million, respectively, last year. The results for this year benefited primarily from higher income earned on wholesale
receivables, increased gains on retail note sales and improved interest rate spreads, partially offset by a higher provision for credit losses and losses related to the peso devaluation in Argentina. The ratio of earnings to fixed charges was 1.97
to 1 for 2002, compared with 1.53 to 1 for 2001.





Revenues totaled $1,356 million in 2002, compared to $1,216
million a year ago. Revenues increased primarily due to a 25 percent increase in the average balance of Receivables and Leases financed during 2002. Finance income earned on retail notes totaled $405 million in 2002, down 12 percent compared to $459
million in 2001. This decrease was primarily due to declining interest rates earned on the average retail note portfolio balance. Lease revenues decreased $26 million to $410 million in 2002, primarily due to a 12 percent decrease in the average
balance of equipment on operating leases. Finance income earned on wholesale receivables increased $143 million, to $221 million in 2002, from $78 million in 2001. This increase was primarily the result of the Company purchasing trade receivables
from Deere & Company, as disclosed in Note 1 to the Consolidated Financial Statements. Revenues earned on revolving charge accounts amounted to $136 million in 2002, an 11 percent increase over revenues of $123 million earned during 2001. The
increase was primarily due to growth of Farm Plan TM and John Deere Credit Revolving Plan receivables in
2002, compared with 2001. Revenues earned on operating loans decreased 26 percent to $26 million in 2002, from $35 million in 2001. This decrease was primarily due to declining interest rates earned on the average operating loan portfolio balance.
Revenues earned from Deere & Company totaled $383 million in 2002 compared to $215 million a year ago. The increase was primarily the result of compensation paid by Deere & Company in connection with the Companys purchase of trade
receivables from John Deere, as described in Note 1. This compensation paid to the Company is market-based and is intended to approximate an amount which a third party would be required to pay.





The net gain on Receivables and Leases sold, including adjustments to prior sales, totaled $82 million during 2002, compared with $26 million for 2001. The higher net
gain for 2002 was primarily due to increased sales of agricultural and construction and forestry retail notes of approximately $2,895 million total principal value during 2002, compared to the sale of agricultural retail notes of approximately $800
million total principal value in 2001. Securitization and servicing fee income totaled $46 million in 2002, compared with $31 million during 2001. The increase was primarily due to a 47% increase in average securitized retail notes outstanding in
2002 compared to 2001. Securitization and servicing fee income relates to Receivables and Leases sold to other financial institutions or limited-purpose business trusts and primarily includes the interest earned on retained interests and reimbursed
administrative expenses received. Additional sales of Receivables and Leases are expected to be made in the future.





Interest expense totaled $363 million in 2002, compared with $453 million in 2001. This decrease was primarily due to a decrease in the weighted-average annual interest rate incurred on all borrowings from 5.9 percent in 2001 to 3.9
percent in 2002, partially offset by a 22 percent increase in average borrowings from $7,611 million in 2001 to $9,278 million in 2002.





Administrative and operating expenses totaled $209 million in 2002, compared with $170 million in 2001. This increase was primarily due to a $22 million loss related to the Argentine peso devaluation and the higher costs
associated with administering a larger Receivable and Lease portfolio. As of October 31, 2002, the Argentine portfolio of Receivables and Leases had a carrying value of approximately $6 million.





Depreciation of equipment on operating leases decreased to $255 million in 2002, compared to $259 million in 2001 as a result of a lower average amount of equipment on
operating leases, partially offset by lower residual values on newly originated operating leases. Interest and support fees paid to John Deere were $30 million in 2002,




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##### Table of Contents

compared to $14 million in 2001. The increase was primarily due to the increased average borrowings from Deere & Company in 2002.





The provision for credit losses was $127 million in 2002, compared with $75 million in 2001. The increase was
primarily due to the loan-loss provisions related to two international trade finance customers, Allied Deals, Inc. and one of its affiliates (collectively called Allied Deals). Of the additional loan-loss provisions, $45 million covered
the Companys exposure on operating lines of credit provided to Allied Deals. The loans became non-performing in April 2002, after some of the underlying receivables collateral went into default in February 2002. During the second quarter of
2002, the Company obtained a judgment against Allied Deals, Inc. on one of the loans in the United States District Court for the Western District of Pennsylvania. Since then, involuntary bankruptcy petitions and other actions have been filed against
Allied Deals, Inc. and some of its affiliates and principals. As a result, the Company has determined that collection of the loans is doubtful. The annualized provision for credit losses, as a percentage of the total average balance of Receivables
financed, was 1.31 percent for 2002 and 1.01 percent for 2001. Total net write-offs of Receivables financed were $106 million during 2002, compared with $58 million in 2001. The increase in net write-offs from 2001 was primarily due to the default
of Allied Deals.





Receivables and Leases Acquired and Held





Receivables and Leases acquired by the Company during 2002 totaled $17,235 million, an increase of 46 percent, compared with volumes of
$11,818 million during 2001. These higher volumes in 2002 resulted mainly from increased volumes of wholesale receivables (see Note 1), agricultural equipment retail notes, operating loans, and revolving charge accounts, partially offset by a
decrease in the volume of operating leases originated and the discontinuation of financing recreational products. Excluding the balance of trade receivables from John Deere at October 31, 2002, acquisitions of receivables and leases were 2 percent
higher in 2002 compared to last year. Receivables and Leases held by the Company at October 31, 2002 totaled $11,359 million, compared with $11,901 million at October 31, 2001. For the 2002 and 2001 fiscal years, Receivable and Lease acquisition
volumes and balances held were as follows (in millions of dollars):





Fiscal Year Volumes


Balance at October 31,2002

2001

% Change


2002

2001

% ChangeRetail notes:Agricultural equipment

$
3,212.6

$
2,945.7

9
%

$
3,304.7

$
3,609.7

(8
)%Construction and forestry equipment


853.1


862.1

(1
)


1,198.2


1,293.0

(7
)Commercial and consumer equipment


414.4


398.5

4



729.8


611.6

19Recreational products





578.0

(100
)


79.0


111.0

(29
)Total


4,480.1


4,784.3

(6
)


5,311.7


5,625.3

(6
)Revolving charge accounts


2,253.5


2,048.1

10



896.0


814.3

10Operating loans


1,070.7


921.4

16



561.2


501.2

12Wholesale receivables


8,888.8


3,299.9

169



2,942.2


2,995.5

(2
)Financing leases


190.0


207.3

(8
)


467.5


479.5

(2
)Equipment on operating leases


351.6


557.1

(37
)


1,180.0


1,484.8

(21
)Total

$
17,234.7

$
11,818.1

46
%

$
11,358.6

$
11,900.6

(5
)%





Retail note volumes decreased by approximately $304 million in
2002, compared with 2001. The decrease was primarily due to a decrease in the volumes of recreational product retail notes, as a result of the Company discontinuing offering financing for recreational vehicles and yachts in 2001. This was partially
offset by an increase in agricultural retail notes, primarily as a result of an increase in John Deere agricultural equipment division sales. Revolving charge account and operating loan volumes increased primarily due to the increased demand for
operating loans, Farm Plan TM and John Deere Credit Revolving Plan products. Wholesale receivable volumes
increased in 2002 primarily as a result of the Company purchasing wholesale receivables (trade receivables) from John Deere throughout 2002 as described in Note 1 to the Consolidated Financial Statements. Lease volumes decreased due to the more
attractive financing options available for retail note products.




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##### Table of Contents




Receivables and Leases administered by the Company, which include retail notes
sold, were as follows (in millions):





October 31, 2002

October 31, 2001Receivables and Leases administered:Owned by the Company

$
11,358.6

$
11,900.6Sold and serviced  with limited recourse*


2,481.6


1,370.8Sold and serviced  without recourse**


51.6


71.6Serviced  without recourse***





9.7Total Receivables and Leases administered

$
13,891.8

$
13,352.7





* The Companys maximum exposure under all Receivable and Lease recourse provisions
at October 31, 2002 and 2001 was $204 million and $166 million, respectively. In addition, the Company has guaranteed letters of credit on behalf of John Deere Credit Inc., the John Deere finance subsidiary in Canada, as part of two retail note
sales. At October 31, 2002 and 2001, exposure under these agreements was approximately $7 million and $9 million, respectively. The Company does not record the recourse obligations as liabilities as they are contingent liabilities that are not
probable at this time. However, the probable loss on receivables that have been sold was accrued at the time of sale, and any subsequent necessary adjustments are made as part of ongoing reviews.





** These receivables represent recreational product retail notes that the Company has sold but continues to administer for a fee until the servicing rights are assumed by their owners.





*** On February 1, 1999, the Company began servicing a receivable portfolio on behalf of Farming and Agricultural Finance Limited. These
servicing rights were obtained in conjunction with the Companys acquisition of John Deere Credit Limited (United Kingdom). This receivable portfolio was sold during the first quarter of 2002.





Retail notes bearing variable finance rates totaled 24 percent of the total retail note portfolio at October 31, 2002, compared with 48
percent at October 31, 2001. This decrease was primarily due to increased securitizations of variable rate notes and customer preference for fixed rate notes as a result of the lower interest rate environment in 2002, compared with 2001.





Total Receivable amounts 60 days or more past due represent the amount of all customer payments past due 60 days
or more. These amounts were $45 million at October 31, 2002, compared with $41 million at October 31, 2001. In addition, these past due amounts represented .44 percent and .40 percent of the total Receivables held at those respective dates. The
increase in Receivable amounts 60 days or more past due was primarily due to increased revolving charge account, operating loan and finance lease past dues. The balance of retail notes held (principal plus accrued interest) with any installment 60
days or more past due represents the total retail note balance for a customer that has any portion of his note 60 days or more past due. These amounts were $111 million and $100 million at October 31, 2002 and 2001, respectively. The balances of
retail notes held on which any installment was 60 days or more past due as a percentage of the ending retail notes receivable was 2.09 percent at October 31, 2002 and 1.78 percent at October 31, 2001. See Note 3 to the Consolidated Financial
Statements for additional past due information.





Deposits withheld from dealers and merchants, representing mainly
the aggregate dealer retail note and lease withholding accounts from individual John Deere dealers to which losses from retail notes and leases originating from the respective dealers can be charged, amounted to $138 million at October 31, 2002,
compared to $134 million at October 31, 2001. The Companys allowance for credit losses on all Receivables financed at October 31, 2002 totaled $118 million and represented 1.16 percent of the total Receivables financed, compared with $110
million and 1.06 percent, respectively, one year earlier. The allowance is subject to an ongoing evaluation based on collection experience, economic conditions, and credit risk quality. The Company believes its allowance is sufficient to provide for
losses in its existing receivable portfolio.





The Companys other assets totaled $350 million at October 31,
2002 and $237 million at October 31, 2001. The increase was primarily the result of an increase in the market values of interest rate swaps made on debt issuances




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##### Table of Contents

in 2002.





2001 Compared with 2000





Consolidated net income for the fiscal year ended October 31, 2001
was $157.8 million, compared with $140.8 million in 2000. The results for 2001 benefited primarily from higher volumes and improved interest rate spreads, partially offset by a higher provision for credit losses. The ratio of earnings to fixed
charges was 1.53 to 1 for 2001, compared with 1.48 to 1 for 2000.





Revenues totaled $1,216 million in 2001,
compared to $1,106 million in 2000. Revenues increased primarily due to a 12 percent increase in the average balance of Receivables and Leases financed. Finance income earned on retail notes totaled $459 million in 2001, up 14 percent compared to
$404 million in 2000. This increase was primarily due to an 18 percent increase in the average balance of retail notes financed. Lease revenues increased $47 million to $436 million in 2001, primarily due to a 6 percent increase in the average
balance of financing and operating leases financed. Finance income earned on wholesale receivables decreased $17 million, to $78 million in 2001, from $95 million in 2000. This decrease was primarily the result of a lower average balance of
wholesale receivables financed and lower interest rates earned on wholesale receivables financed. Revenues earned on revolving charge accounts amounted to $123 million in 2001, a 12 percent increase over revenues of $110 million earned during 2000.
The increase was primarily due to growth of Farm Plan TM receivables in 2001, compared with 2000. Revenues
earned on operating loans increased 9 percent to $35 million in 2001, from $32 million in 2000.





The net gain on
Receivables and Leases sold totaled $26 million during 2001, compared with $21 million for 2000. The higher net gain for 2001 was primarily the result of an increase in Receivables and Leases sold when compared to 2000. Securitization and servicing
fee income totaled $31 million in 2001, compared with $30 million during 2000. Securitization and servicing fee income relates to Receivables and Leases sold to other financial institutions or limited-purpose business trusts and primarily includes
the interest earned on retained interests and reimbursed administrative expenses received.





Interest expense
totaled $453 million in 2001, compared with $440 million in 2000. This increase was primarily due to a 15 percent increase in average borrowings from $6,624 million in 2000 to $7,611 million in 2001, and was partially offset by a decrease in the
weighted-average annual interest rate incurred on all borrowings from 6.6 percent in 2000 to 5.9 percent in 2001.





Administrative and operating expenses increased 9 percent from $156 million in 2000 to $170 million in 2001. These increases were attributable to the higher costs associated with administering a larger Receivable and Lease portfolio.
Depreciation of equipment on operating leases increased to $259 million in 2001, compared to $225 million in 2000 as a result of a higher average outstanding portfolio balance and an increase in the depreciation of equipment on operating leases.
Fees paid to John Deere were lower in 2001, compared to 2000.





The provision for credit losses was $75 million in
2001, compared with $53 million in 2000. Total write-offs of Receivables financed were $58 million during 2001, compared with $36 million in 2000. The increase in write-offs from 2000 was primarily related to the increase in construction and
forestry equipment retail note and revolving charge write-offs.





Receivables and Leases Acquired and Held





Receivables and Leases acquired by the Company during 2001 totaled $11,818 million, an increase of 33 percent,
compared with volumes of $8,909 million during 2000. These higher volumes in 2001 resulted mainly from increased volumes of wholesale receivables, agricultural equipment retail notes, operating loans, and revolving charge accounts, partially offset
by a decrease in the financing of operating leases. Excluding the purchase of $2.2 billion of trade receivables from John Deere at the end of October, acquisitions of receivables and leases were 8 percent higher in 2001, compared to 2000.
Receivables and Leases held by the Company at October 31, 2001 totaled $11,901 million, compared with $8,609 million at October 31, 2000.




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##### Table of Contents




For the 2001 and 2000 fiscal years, Receivable and Lease acquisition volumes and
balances held were as follows (in millions of dollars):





Fiscal Year Volumes


Balance at October 31,2001

2000

% Change


2001

2000

% ChangeRetail notes:Agricultural equipment

$
2,945.7

$
2,600.5

13
%

$
3,609.7

$
2,983.0

21
%Construction and forestry equipment


862.1


752.3

15



1,293.0


1,000.1

29Commercial and consumer equipment


398.5


330.1

21



611.6


465.0

32Recreational products


578.0


339.3

70



111.0


139.6

(20
)Total


4,784.3


4,022.2

19



5,625.3


4,587.7

23Revolving charge accounts


2,048.1


1,784.6

15



814.3


688.2

18Operating loans


921.4


635.7

45



501.2


422.3

19Wholesale receivables


3,299.9


1,517.8

117



2,995.5


937.0

220Financing leases


207.3


224.5

(8
)


479.5


456.4

5Equipment on operating leases


557.1


723.8

(23
)


1,484.8


1,517.1

(2
)Total

$
11,818.1

$
8,908.6

33
%

$
11,900.6

$
8,608.7

38
%





Retail note volumes increased by approximately $762 million in
2001, compared with 2000, primarily due to an increase in the volumes of agricultural equipment and recreational vehicle retail notes. Revolving charge account and operating loan volumes increased primarily due to the increased demand for operating
loans, Farm Plan TM and John Deere Credit Revolving Plan products. Wholesale receivable volumes increased
in 2001 primarily as a result of the Company purchasing $2.2 billion of wholesale receivables (trade receivables) from John Deere in October of 2001.





Receivables and Leases administered by the Company, which include retail notes sold, were as follows (in millions):





October 31, 2001

October 31, 2000Receivables and Leases administered:Owned by the Company

$
11,900.6

$
8,608.7Sold and serviced  with limited recourse*


1,370.8


1,867.4Sold and serviced  without recourse**


71.6


91.4Serviced  without recourse***


9.7


23.7Total Receivables and Leases administered

$
13,352.7

$
10,591.2





* The Companys maximum exposure under all Receivable and Lease recourse provisions
at October 31, 2001 and 2000 was $166 million and $168 million, respectively. In addition, the Company has guaranteed letters of credit on behalf of John Deere Credit Inc., the John Deere finance subsidiary in Canada, as part of three retail note
sales. At October 31, 2001 and 2000, the maximum exposure under these agreements was approximately $9 million and $6 million, respectively.





** These receivables represent recreational product retail notes that the Company has sold but continues to administer for a fee until the servicing rights are assumed by their owners.





*** On February 1, 1999, the Company began servicing a receivable portfolio on behalf of Farming and Agricultural Finance Limited. These servicing rights were
obtained in conjunction with the Companys acquisition of John Deere Credit Limited.





Retail notes bearing
variable finance rates totaled 48 percent of the total retail note portfolio at October 31, 2001, compared with 46 percent at October 31, 2000.




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##### Table of Contents




Total Receivable amounts 60 days or more past due represent the amount of all
customer payments past due 60 days or more. These amounts were $41 million at October 31, 2001, compared with $29 million at October 31, 2000. In addition, these past due amounts represented .40 percent and .41 percent of the total Receivables held
at those respective dates. The balance of retail notes held (principal plus accrued interest) with any installment 60 days or more past due represents the total retail note balance for a customer that has any portion of his note 60 days or more past
due. These amounts were $100 million and $68 million at October 31, 2001 and 2000, respectively. The balances of retail notes held on which any installment was 60 days or more past due as a percentage of the ending retail notes receivable was 1.78
percent at October 31, 2001 and 1.48 percent at October 31, 2000.





Deposits withheld from dealers and merchants,
representing mainly the aggregate dealer retail note and lease withholding accounts from individual John Deere dealers to which losses from retail notes and leases originating from the respective dealers can be charged, amounted to $134 million at
October 31, 2001, compared to $133 million at October 31, 2000. The Companys allowance for credit losses on all Receivables financed at October 31, 2001 totaled $110 million and represented 1.06 percent of the total Receivables financed,
compared with $93 million and 1.32 percent, respectively, one year earlier. The allowance is subject to an ongoing evaluation based on collection experience, economic conditions and credit risk quality. The Company believes the allowance is
sufficient to provide for losses in its existing receivable portfolio.





Capital Resources and Liquidity





The Company relies on its ability to continuously raise substantial amounts of funds to finance its Receivable and Lease portfolios.
During 2002, the Company issued $3,502 million of term debt, maintained an average commercial paper balance of $1,702 million, and received proceeds of $2,968 million from sales of Receivables. At October 31, 2002, the Companys funding profile
included $1,422 million of commercial paper, $654 million of intercompany loans from Deere & Company, $7,540 million of unsecured term debt, $2,410 million of securitizations and $1,812 million of equity capital. For funding diversification
purposes, the Company has historically sought to maintain securitizations at between 20 and 30 percent of its non-equity funding base. Note 4 to the Consolidated Financial Statements provides a summary of retail note securitizations.





The Companys ability to obtain funds is affected by its debt ratings, which are closely related to the outlook for and
the financial condition of Deere & Company, and the nature and availability of support facilities, such as its lines of credit. For information regarding Deere & Company and its business, see Exhibit 99 and Business of John Deere, Outlook
for John Deere and Relationships of the Company with John Deere above.





The Companys ability to meet its
debt obligations is supported in a number of ways. All commercial paper issued is backed by bank credit lines. The assets of the Company are self-liquidating in nature. A strong equity position is available to absorb unusual losses on these assets.
Liquidity is also provided by the Companys ability to sell these assets.





The Companys business is
seasonal, with overall acquisition volumes of Receivables and Leases traditionally higher in the second half of the fiscal year than in the first half, and overall collections of Receivables and Leases traditionally somewhat higher in the first six
months than in the last six months of the fiscal year.





The financing of retail purchases and leases of John Deere
products and of trade receivables owned by John Deere dealers represented approximately 79 percent of the Companys acquisition volume for 2002. Any extended reduction or suspension of John Deeres sale or production of products due to a
decline in demand or production, labor actions, technological difficulties, governmental actions or other events could have an adverse effect on the Companys acquisition volume of Receivables and Leases.





The aggregate net cash provided by operating and investing activities was primarily used to decrease borrowings and pay dividends to the
Companys parent company. Net cash provided by operating activities was $652 million in 2002. Investing activities provided $204 million during the same period, primarily due to proceeds from the sale of receivables, partially offset by
Receivable and Lease acquisitions exceeding collections. Net cash used for financing activities totaled $1,209 million resulting from a decrease in total borrowings and dividends paid




16




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##### Table of Contents

to John Deere Credit Company, which in turn paid comparable dividends to Deere & Company. Cash and cash equivalents decreased $354 million
during 2002. See Statements of Consolidated Cash Flows.





Over the past three years, operating
activities provided $1,688 million in cash. In addition, the sale of Receivables and Leases provided $6,423 million and an increase in total net borrowings provided $3,377 million. These amounts were used mainly to fund Receivable and Lease
acquisitions, which exceeded collections by $11,433 million, and to pay $370 million in dividends.





Total
interest-bearing indebtedness amounted to $9,653 million at October 31, 2002, compared with $10,382 million at October 31, 2001, generally corresponding with the level of Receivables and Leases financed and the level of cash and cash equivalents.
Total short-term indebtedness amounted to $4,272 million at October 31, 2002, compared with $6,523 million at October 31, 2001. Total long-term indebtedness amounted to $5,381 million at October 31, 2002 and $3,859 million at October 31, 2001. The
ratio of total interest-bearing debt to stockholders equity was 5.3 to 1 and 5.4 to 1 at October 31, 2002 and 2001, respectively.





The Company maintained unsecured lines of credit with various banks in North America and overseas. See Note 6 to the Consolidated Financial Statements.





During 2002, the Company issued $1,500 million of 7.0% global notes due in 2012 and entered into interest rate swaps related to these notes, which swapped the fixed rate to
a variable rate of 2.8% at October 31, 2002. Additionally, the Company issued $500 million of 4.5% global notes due in 2007 and entered into interest rate swaps related to $450 million of these notes, which swapped the fixed rate to a variable rate
of 2.5% at October 31, 2002. The Company retired $300 million of 7.0% notes due in 2002. The Company also issued $1,502 million and retired $2,234 million of other long-term borrowings, which were primarily medium-term notes.





In December 2002, the Company issued $300 million of 3.1% medium-term notes due in 2005. The Company also entered into interest
rate swaps related to $150 million of these notes, which swapped the fixed rate to a variable rate of 1.7% as of December 11, 2002.





Sources of liquidity for the Company include cash and short-term investments, funds from operations, the issuance of commercial paper and term debt, the securitization and sale of retail notes, loans from Deere & Company
(if Deere & Company agrees to make funds available to the Company) and committed and uncommitted, unsecured bank lines of credit.





To access public debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings to the Companys securities as an indicator of credit quality for fixed income
investors. A credit rating agency may change the Companys ratings based on its assessment of the Companys current and future ability to meet interest and principal repayment obligations. Such rating changes generally impact the
availability and cost of funds.





The short-term and long-term debt ratings assigned to Company securities by
Moodys Investors Service, Inc., Standard & Poors and Fitch Ratings are investment grade ratings. On May 28, 2002, Standard & Poors lowered the long-term rating of the Company to A- from A, and the
short-term rating to A-2 from A-1. At the same time, Standard & Poors removed the ratings from CreditWatch, where they had been placed on March 11, 2002 and assigned a stable outlook. On May 24, 2002, Fitch Ratings
affirmed the Companys A senior long-term and F1 short-term ratings while maintaining a negative rating outlook. On February 15, 2002, Moodys Investors Service lowered the long-term rating of the Company to
A3 from A2, and the short-term rating to Prime-2 from Prime-1. Moodys assigned a stable outlook as part of this rating action. Lower credit ratings generally result in higher borrowing costs and
reduced access to debt capital markets. On each of these dates, the relevant rating agency took similar action with respect to Deere & Companys ratings.





The Company expects to have sufficient sources of liquidity to meet its funding needs. The Companys commercial paper outstanding at October 31, 2002 and October 31,
2001 was approximately $1,422 million and $2,359 million, respectively, while the total cash and short-term investment position was $148 million and $502 million,




17




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##### Table of Contents

respectively. Additionally, the Company had access to approximately $2,639 million and $455 million, respectively, of cash and cash equivalents
held by its parent, Deere & Company (if Deere & Company would have chosen to make these funds available to the Company). In addition, the Company has for many years accessed diverse funding sources, including short-term and long-term
unsecured debt capital markets in the United States, Europe and Australia, as well as public and private securitization markets in the United States. In order to further enhance its liquidity profile, the Company has decreased its commercial paper
balances and increased its use of long-term debt since October 2001. Because of the multiple funding sources that have been and continue to be available to the Company, the lowering of the Companys credit ratings has not had, and is not
expected to have, a material impact on its ability to fund its operations and maintain its liquidity.





Stockholders equity was $1,812 million at October 31, 2002, compared with $1,907 million and $1,108 million at October 31, 2001 and 2000, respectively. The decrease in 2002 was primarily due to dividend payments of $350
million, partially offset by net income of $230 million and a decrease in the unrealized loss on derivatives of $18 million. As a result of the Companys match-funding policy described in Note 16, the Company has entered into interest rate
swaps (pay fixed/receive floating rates) hedging the interest costs of the Companys floating rate borrowings. The impact of decreasing interest rates on these swaps is the primary component of the unrealized loss on derivatives. If interest
rates remain unchanged, the unrealized loss will be realized in income and will be offset by the lower interest expense on the floating rate borrowings, effectively providing fixed rate funding.





The Capital Corporation declared and paid cash dividends of $350 million to John Deere Credit Company in 2002. John Deere Credit Company paid comparable dividends to
Deere & Company. During 2001, the Capital Corporation did not declare or pay cash dividends to John Deere Credit Company.





Safe
Harbor Statement





Statements under the Outlook for John Deere heading above and other statements
herein that relate to future operating periods are subject to important risks and uncertainties that could cause actual results to differ materially. Actions by the United States Federal Reserve Board and other central banks may affect the costs and
expenses of financing the Company and the rates it is able to offer. The Companys business is affected by general economic conditions in and the political instability of the global markets in which the Company operates (including Argentina),
because deteriorating economic conditions and political instability can result in higher loan losses. In addition, the Companys business is closely related to John Deeres business. Further information, including factors that potentially
could materially affect the Companys and John Deeres financial results, is included in the Deere & Company Form 10-K for the fiscal year ended October 31, 2002 filed with the Securities and Exchange Commission and portions of which
are filed with this report as Exhibit 99.





Critical Accounting Policies





The preparation of the Companys consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. Changes in estimates and assumptions in the policies below could have a significant effect on the financial statements.





Allowance for Credit Losses





The allowance for credit losses represents an estimate of the losses expected from the Companys Receivable portfolio for payments that will not be collected. The level of the allowance is based
on many factors, including collection experience, economic conditions and credit risk quality. The adequacy of the allowance is assessed quarterly. Different assumptions or changes in economic conditions would result in changes to the allowance for
credit losses and the provision for credit losses.





Operating Lease Residual Values





The carrying value of the equipment on operating leases is affected by the estimated fair values of the




18




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##### Table of Contents

equipment at the end of the lease (residual values). Upon termination of the lease, the equipment is either purchased by the lessee or sold to a
third party, in which case the Company may record a gain or a loss for the difference between the estimated residual value and the sales price. The residual values are dependent on current economic conditions and are reviewed quarterly. Changes in
residual value assumptions would affect the amount of depreciation expense and the amount of investment in equipment on operating leases.





Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.





Financial
Instrument Risk Information





The Company is naturally exposed to various interest rate and foreign
currency risks. As a result, the Company enters into derivative transactions to manage certain of these exposures that arise in the normal course of business, and not for the purpose of creating speculative positions or trading. The Company manages
the relationship of the types and amounts of its funding sources to its Receivable and Lease portfolios in an effort to diminish risk due to interest rate and foreign currency fluctuations, while responding to favorable financing opportunities.
Accordingly, from time to time, the Company enters into interest rate swap agreements to manage its interest rate exposure. The Company also has foreign currency exposures at some of its foreign and domestic operations related to financing in
currencies other than the local currencies. The Company has entered into agreements related to the management of these currency transaction risks. The credit risk under these interest rate and foreign currency agreements is not considered to be
significant. See Note 16 to the Consolidated Financial Statements for additional detailed financial instrument information.





Interest
Rate Risk





Quarterly, the Company uses a combination of cash flow models to assess the sensitivity of its
financial instruments with interest rate exposure to changes in market interest rates. The models calculate the effect of adjusting interest rates as follows. Cash flows for financing receivables are discounted at the current prevailing rate for
each receivable portfolio. Cash flows for borrowings are discounted at the treasury yield curve plus a market credit spread for similarly rated borrowers. Cash flows for interest rate swaps are projected and discounted using forecasted rates from
the swap yield curve at the repricing dates. The net loss in these financial instruments fair values which would be caused by increasing the interest rates by 10 percent from the market rates at October 31, 2002 and October 31, 2001 would have
been approximately $45 million and $29 million, respectively.





Foreign Currency Risk





The Companys policy is to hedge the foreign currency risk if the currency of the borrowings does not match the currency of the
receivable portfolio. As a result, a hypothetical 10 percent adverse change in the value of the United States dollar relative to all other foreign currencies would not have a material effect on the Companys cash flows.





Item 8.  Financial Statements and Supplementary Data.





See accompanying table of contents of financial statements.





Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.





Not applicable.








PART
III





Item 10.  Directors and Executive Officers of the Registrant.





Omitted pursuant to instruction I(2).




19




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##### Table of Contents




Item 11.  Executive Compensation.





Omitted pursuant to instruction I(2).





Item 12.  Security Ownership of Certain Beneficial Owners and Management.





Omitted pursuant to instruction I(2).





Item 13.  Certain Relationships and Related
Transactions.





Omitted pursuant to instruction I(2).





Item 14.  Controls and Procedures.





(a)Evaluation of disclosure controls and procedures.





The Companys
principal executive officer and its principal financial officer, after an evaluation on December 13, 2002, have concluded that, as of such date, the Companys disclosure controls and procedures were adequate and effective to ensure that
material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities. Disclosure controls and procedures are defined in Exchange Act Rules 13a-14(c) and 15d-14(c).





(b)Changes in internal controls.





There were no significant changes in the Companys internal controls or in other factors that could significantly affect the Companys disclosure controls and
procedures subsequent to the date of their evaluation.





Item 15.  Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.





(a)    (1)      Financial
Statements





(2)      Financial
Statement Schedules





See the table of contents to financial statements and schedules immediately preceding the
financial statements and schedules to consolidated financial statements.





(3)      Exhibits





See the index to exhibits immediately preceding the exhibits filed with this report.





(b)    Reports on Form 8-K





Date of Report

Item

Financial StatementsAugust 13, 2002

Items 5 & 7

Earnings release of John Deere Capital Corporation and press release of Deere & CompanySeptember 30, 2002

Item 5

None







20




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##### Table of Contents

SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





JOHN DEERE CAPITAL CORPORATIONBy:

/s/    R. W. LaneR. W. Lane Chairman and Chief Executive Officer





Date:    December 20, 2002





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.





Each person signing below also hereby appoints
Robert W. Lane, Jon D. Volkert and James H. Becht, and each of them singly, his or her lawful attorney-in-fact with full power to execute and file any and all amendments to this report together with exhibits thereto and generally to do all such
things as such attorney-in-fact may deem appropriate to enable John Deere Capital Corporation to comply with the provisions of the Securities Exchange Act of 1934 and all requirements of the Securities and Exchange Commission.





Signature

Title

Date/s/  R. W. Lane R. W. Lane

Director, Chairman and Chief Executive Officer

) ) )))/s/  James W. Eiler James W. Eiler

Director

) ) )))/s/  David C. Everitt David C. Everitt

Director

) )    December 20, 2002 )))/s/  James A. Israel James A. Israel

Director

) ) )))/s/  John J. Jenkins John J. Jenkins

Director

) ) )




21




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##### Table of Contents

Signature

Title

Date/s/  Nathan J. Jones Nathan J. Jones

Director, Senior Vice President and Principal Financial Officer

) ) )))/s/  Pierre E. Leroy Pierre E. Leroy

Director

) ) ))/s/  H. J. Markley H. J. Markley

Director

) ) )))/s/  M. P. Orr M. P. Orr

Director

) )    December 20, 2002 )))/s/  Stephen Pullin Stephen Pullin

Director

) ) )))/s/  Jon D. Volkert Jon D. Volkert

Director and President

) ) )




22




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##### Table of Contents




CERTIFICATIONS





I, R. W. Lane, certify that:





| | 1. |  | I have reviewed this annual report on Form 10-K of John Deere Capital Corporation;
| | -- |  | ----------------------------------------------------------------------------------




| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------




| | 6. |  | The registrants other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date:

December 20, 2002



By:

/s/    R. W. LaneR. W. Lane Principal Executive Officer




23




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##### Table of Contents




I, Nathan J. Jones, certify that:





| | 1. |  | I have reviewed this annual report on Form 10-K of John Deere Capital Corporation,
| | -- |  | ----------------------------------------------------------------------------------




| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------

| |  |  | in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual
report;
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------




| | 6. |  | The registrants other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date:

December  20,  2002

By:

/s/    Nathan J.  JonesNathan J. Jones Principal Financial Officer




24




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##### Table of Contents

[Letterhead]


Deloitte & Touche LLP


Two Prudential Plaza


180 North Stetson Avenue


Chicago, Illinois 60601





INDEPENDENT AUDITORS REPORT





John Deere Capital Corporation:





We have audited the accompanying consolidated balance sheets of John Deere Capital Corporation and subsidiaries as of October 31, 2002 and 2001 and the related statements of consolidated income and retained earnings, of changes in
consolidated stockholders equity and of consolidated cash flows for each of the three years in the period ended October 31, 2002. These financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.





We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, such consolidated
financial statements present fairly, in all material respects, the financial position of John Deere Capital Corporation and subsidiaries at October 31, 2002 and 2001 and the results of their operations and their cash flows for each of the three
years in the period ended October 31, 2002 in conformity with accounting principles generally accepted in the United States of America.





DELOITTE & TOUCHE LLP


Chicago, Illinois





November 19, 2002




25




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##### Table of Contents




TABLE OF CONTENTS





PageFinancial Statements:John Deere Capital Corporation and Subsidiaries:Statements of Consolidated Income and Retained Earnings For the Years Ended October 31, 2002, 2001 and 2000

27Consolidated Balance Sheets, as of October 31, 2002 and 2001

28Statements of Consolidated Cash Flows For the Years Ended October 31, 2002, 2001 and 2000

29Statement of Changes in Consolidated Stockholders Equity For the Years Ended October 31, 2002, 2001 and 2000

30Notes to Consolidated Financial Statements

31





SCHEDULES OMITTED





The following schedules are omitted because of the absence of conditions under which they are required or because the required information
is included in the Notes to the Consolidated Financial Statements:





I, II, III, IV, and V.




26




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##### Table of Contents




John Deere Capital Corporation and Subsidiaries


Statements of Consolidated Income and Retained Earnings


For the Years Ended October 31, 2002, 2001 and 2000


(in millions)





2002


2001


2000RevenuesFinance income earned on retail notes

$
404.6


$
458.6


$
403.8Lease revenues


410.2



436.3



388.9Revolving charge account income


136.2



122.5



110.0Finance income earned on wholesale receivables


220.7



78.2



95.1Operating loan income


25.8



35.0



31.7Securitization and servicing fee income


46.5



30.9



29.8Net gain on receivables and leases sold


82.1



26.3



20.6Interest income from short-term investments


9.8



11.3



8.4Other income


19.6



16.6



17.6Total revenues


1,355.5



1,215.7



1,105.9ExpensesInterest expense


363.2



453.4



440.2Operating expenses:Administrative and operating expenses


208.7



169.8



156.0Provision for credit losses


126.9



74.5



52.6Fees paid to John Deere


30.4



13.8



15.5Depreciation of equipment on operating leases


255.3



258.5



224.8Total operating expenses


621.3



516.6



448.9Total expenses


984.5



970.0



889.1Income of consolidated group before income taxes


371.0



245.7



216.8Provision for income taxes


136.6



84.6



76.6Income of consolidated group


234.4



161.1



140.2Equity in income (loss) of unconsolidated affiliates


(3.8
)


(3.3
)


0.6Net income


230.6



157.8



140.8Cash dividends declared


(350.0
)






(20.0
)Retained earnings at beginning of the year


1,163.3



1,005.5



884.7Retained earnings at end of the year

$
1,043.9


$
1,163.3


$
1,005.5





The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.




27




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##### Table of Contents




John Deere Capital Corporation and Subsidiaries


Consolidated Balance Sheets


As of October 31, 2002 and 2001


(in millions)





2002


2001AssetsCash and cash equivalents

$
147.8


$
502.2Receivables and leases:Retail notes


5,311.7



5,625.3Revolving charge accounts


896.0



814.3Operating loans


561.2



501.2Wholesale receivables


2,942.2



2,995.5Financing leases


467.5



479.5Total receivables


10,178.6



10,415.8Allowance for credit losses


(118.3
)


(110.4
)Total receivables  net


10,060.3



10,305.4Notes receivable  unconsolidated affiliates


259.9



313.9Other receivables


96.9



77.7Equipment on operating leases  net


1,180.0



1,484.8Investments in unconsolidated affiliates


7.1



5.9Other assets


350.4



236.6Total Assets

$
12,102.4


$
12,926.5Liabilities and Stockholders EquityShort-term borrowings:Commercial paper

$
1,422.0


$
2,358.5Other notes payable


37.5



23.9John Deere


654.0



1,612.4Current maturities of long-term borrowings


2,158.6



2,528.7Total short-term borrowings


4,272.1



6,523.5Accounts payable and accrued liabilities:Accrued interest on debt


52.3



44.4Other payables


446.3



459.0Total accounts payable and accrued liabilities


498.6



503.4Deposits withheld from dealers and merchants


138.4



134.2Long-term borrowings:Senior debt


5,231.3



3,708.8Subordinated debt


150.0



150.0Total long-term borrowings


5,381.3



3,858.8Total liabilities


10,290.4



11,019.9Stockholders equityCommon stock, without par value (issued and outstanding  2,500 shares owned by John Deere Credit
Company)


812.8



812.8Retained earnings


1,043.9



1,163.3Cumulative translation adjustment


(2.2
)


(7.9
)Unrealized loss on derivatives


(44.1
)


(61.6
)Unrealized gain on investments


1.6Total accumulated other comprehensive income (loss)


(44.7
)


(69.5
)Total stockholders equity


1,812.0



1,906.6Total Liabilities and Stockholders Equity

$
12,102.4


$
12,926.5





The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.




28




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##### Table of Contents




John Deere Capital Corporation and Subsidiaries


Statements of Consolidated Cash Flows


For the Years Ended October 31, 2002, 2001 and 2000


(in millions)





2002


2001


2000Cash Flows from Operating Activities:Net income

$
230.6


$
157.8


$
140.8Adjustments to reconcile net income to net cash provided by operating activities:Provision for credit losses


126.9



74.5



52.6Provision for depreciation and amortization


260.8



263.8



228.2Provision for deferred income taxes


20.5



32.1



17.6Undistributed earnings of unconsolidated affiliates


3.8



3.3



(0.6
)Other


9.0



(9.8
)


75.6Net cash provided by operating activities


651.6



521.7



514.2Cash Flows from Investing Activities:Cost of receivables acquired


(16,883.1
)


(11,261.0
)


(8,184.8
)Collections of receivables


14,101.8



6,376.3



6,050.4Cost of operating leases acquired


(351.6
)


(557.1
)


(723.8
)Proceeds from sales of equipment on operating leases


416.9



301.3



228.0Change in notes receivable  unconsolidated affiliates


54.1



(173.9
)


(135.2
)Proceeds from sales of Receivables


2,967.8



1,530.6



978.3Acquisitions of businesses


(9.7
)


(7.2
)Other


(92.1
)


(7.4
)


(13.0
)Net cash provided by (used for) investing activities


204.1



(3,798.4
)


(1,800.1
)Cash Flows from Financing Activities:Change in commercial paper


(970.3
)


(108.2
)


1,209.4Change in extendible commercial notes and other notes payable


16.2



19.8



(2.7
)Change in payable with John Deere


(872.9
)


1,037.0



388.4Proceeds from issuance of long-term borrowings


3,502.1



3,779.8



1,865.0Principal payments on long-term borrowings


(2,533.8
)


(1,804.9
)


(2,147.7
)Dividends paid


(350.0
)






(20.0
)Capital investment from Deere & Company






700.0Net cash provided by (used for) financing activities


(1,208.7
)


3,623.5



1,292.4Effect of exchange rate changes on cash


(1.4
)


(0.5
)Net increase (decrease) in cash and cash equivalents


(354.4
)


346.3



6.5Cash and cash equivalents at the beginning of year


502.2



155.9



149.4Cash and cash equivalents at the end of year

$
147.8


$
502.2


$
155.9





The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.







29




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##### Table of Contents




John Deere Capital Corporation and Subsidiaries


Statement of Changes in Consolidated Stockholders Equity


For the Years Ended October 31, 2002, 2001 and 2000


(in millions)








Total Equity


Common Stock

Retained Earnings


Other Comprehensive Income (Loss)Balance October 31, 1999

$
997.7


$
112.8

$
884.7


$
0.2Comprehensive income (loss)Net income


140.8






140.8Other comprehensive income (loss) Cumulative translation adjustment


(10.4
)









(10.4
)Total comprehensive income


130.4Dividends declared


(20.0
)





(20.0
)Balance October 31, 2000


1,108.1



112.8


1,005.5



(10.2
)Comprehensive income (loss)Net income


157.8






157.8Other comprehensive income (loss)Cumulative translation adjustment


2.3










2.3Unrealized loss on derivatives


(61.6
)









(61.6
)Total comprehensive income


98.5Capital investment from Deere & Company


700.0



700.0Balance October 31, 2001


1,906.6



812.8


1,163.3



(69.5
)Comprehensive income (loss)Net income


230.6






230.6Other comprehensive income (loss)Cumulative translation adjustment


5.7










5.7Unrealized gain on derivatives


17.5










17.5Unrealized gain on investments


1.6










1.6Total comprehensive income


255.4Dividends declared


(350.0
)





(350.0
)Balance October 31, 2002

$
1,812.0


$
812.8

$
1,043.9


$
(44.7
)





The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.




30




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##### Table of Contents




John Deere Capital Corporation and Subsidiaries


Notes to Consolidated Financial Statements





Note 1.   Summary of Significant Accounting
Policies





The following are significant accounting policies in addition to those included in other notes
to the consolidated financial statements.





Corporate Organization





John Deere Capital Corporation (Capital Corporation) and its subsidiaries are collectively called the Company. John Deere Credit Company, a wholly-owned finance holding
subsidiary of Deere & Company, is the parent of the Company. The Company conducts business in Argentina, Australia, France (through a joint venture), Germany, Italy (through a cooperation agreement), Luxembourg, Mexico, New Zealand, Spain, the
United Kingdom and the United States.





Retail notes, revolving charge accounts, operating loans, financing leases
and wholesale receivables are collectively called Receivables. Receivables and operating leases are collectively called Receivables and Leases.





Deere & Company has a minority ownership interest in certain John Deere construction and forestry equipment dealers. Wholesale receivables associated with these dealers
have been classified on the financial statements as Notes receivableunconsolidated affiliates.





The Company bears substantially all of the credit risk (net of recovery from withholdings from certain John Deere dealers, and Farm Plan  and PowerPlan ® merchants) associated with
its holding of Receivables and Leases. A small portion of the Receivables and Leases held (less than 5%) are guaranteed by the Equipment Operations. The Company also performs all servicing and collection functions in North America. John Deere is
reimbursed for staff and other administrative services at estimated cost, and for credit lines provided to the Company based on utilization of those lines.





Principles of Consolidation





The consolidated financial statements include the
financial statements of the Capital Corporation and its subsidiaries. The consolidated financial statements represent the consolidation of all companies in which the Capital Corporation has a controlling interest. The Capital Corporation records its
investment in each unconsolidated affiliated company at its related equity in the net assets of such affiliate. Special purpose entities (SPEs) related to the sale and securitization of financing receivables are not consolidated since the Company
does not control these entities, and they either meet the requirements of qualified SPEs under Financial Accounting Standards Board (FASB) Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, or the Company is not the primary beneficiary of the SPE. See Note 4 for additional information on retail note securitizations.





Certain amounts for prior years have been reclassified to conform to 2002 financial statement presentation. Specifically, the balance sheet caption Equipment on operating leases has been
reclassified and is shown separately from receivables for the current and prior periods.





Use of Estimates in Financial Statements





The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates.




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Foreign Currency Translation





The functional currencies for most of the Companys foreign operations are their respective local currencies. The assets and liabilities of these operations are
translated to United States dollars at the end of the period exchange rates, and the revenues and expenses are translated to United States dollars at weighted-average rates for the period. The gains or losses from these translations are included in
other comprehensive income, which is part of stockholders equity. Gains or losses from transactions denominated in a currency other than the functional currency of the subsidiary involved are included in net income.





New Accounting Pronouncements





In 2001, the Financial Accounting Standards Board issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 141 requires the purchase method of accounting for all
business combinations and eliminates the pooling of interest method effective June 30, 2001. Statement No. 142 requires that goodwill related to acquisitions after June 30, 2001 not be amortized and written down only for impairments. Upon adoption
of this Statement, the same accounting requirements will apply to goodwill related to acquisitions prior to June 30, 2001. The Company will adopt Statement No. 142 in the first quarter of 2003. In 2002, the Company did not have goodwill or goodwill
amortization. This Statement will not have an effect on the Companys financial position or net income. In 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations, which requires legal obligations associated with
the retirement of long-lived assets to be recorded as increases in costs of the related assets. In 2001, the FASB also issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement retains the previous cash
flow test for impairment and broadens the presentation of discontinued operations. In July 2002, the FASB issued Statement No. 146, Accounting for the Costs Associated with Exit or Disposal Activities. Statement No. 146 requires companies to
recognize liabilities and costs associated with exit or disposal activities initiated after December 31, 2002 when they are incurred, rather than when management commits to a plan to exit an activity. The Company does not expect the adoption of
these Statements to have a material effect on the Companys financial position or net income.





Significant Events





In October 2001, the Company purchased $2.2 billion of United States wholesale receivables (trade receivables)
from John Deere. The Company has continued purchasing a significant portion of newly originated wholesale receivables from John Deere. In the fourth quarter of 2002, the Company also began purchasing European wholesale receivables (trade
receivables) from John Deere. John Deere compensated the Company at market rates of interest for these trade receivables during 2002. These trade receivables arise from John Deeres sales of goods to dealers. Under the terms of the sales to
dealers, interest is charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted to the dealer at the time of the sale,
until payment is received by the Company. Dealers cannot cancel purchases after goods are shipped and are responsible for payment even if the equipment is not sold to retail customers. The interest-free periods are determined based on the type of
equipment sold and the time of year of the sale. These periods range from one to 12 months for agricultural tractors, from one to eight months for construction and forestry equipment, and from one to 24 months for most other equipment. Interest-free
periods may not be extended. Interest charged may not be forgiven and interest rates are set based on market factors. John Deere compensates the Company for the carrying costs related to these interest-free periods.





In 2002, the Company through its affiliate, Deere Credit, Inc., became the sole member of iVesta Financial Solutions LLC (iVesta) when the
other initial member withdrew. At October 31, 2002, iVesta was fully consolidated with the Company.




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Note 2.  Receivables





Retail Notes Receivable





The Company provides and administers financing for retail purchases of new equipment manufactured by John Deeres agricultural, construction and forestry, and commercial and consumer equipment
divisions and used equipment taken in trade for this equipment. The Company purchases retail installment sales and loan contracts (retail notes) from John Deere. These retail notes are acquired by John Deere through John Deere equipment retail
dealers. The Company also purchases and finances a limited amount of retail notes unrelated to John Deere.





Retail
notes receivable by product category at October 31 are as follows (in millions of dollars):





2002


2001Agricultural equipment  new

$
2,293.7


$
2,439.1Agricultural equipment  used


1,409.0



1,725.5Construction and forestry equipment  new


1,176.0



1,288.9Construction and forestry equipment  used


142.1



167.8Commercial and consumer equipment  new


804.0



683.9Commercial and consumer equipment  used


47.6



38.4Recreational products


123.3



176.0Total


5,995.7



6,519.6Unearned finance income:Equipment


(639.7
)


(830.0
)Recreational products


(44.3
)


(64.3
)Total


(684.0
)


(894.3
)Retail notes receivable

$
5,311.7


$
5,625.3





Retail notes acquired by the Company during the year ended October
31, 2002 had an estimated average original term (based on dollar amounts) of 54 months. During 2001 and 2000, the estimated average original term was 72 and 64 months, respectively. The decrease in estimated average original term is primarily the
result of the Company discontinuing offering financing for recreational products, which carried a longer average original term. Historically, because of prepayments, the average actual life of retail notes has been considerably shorter than the
average original term. The average actual life for retail notes liquidated in 2002, 2001 and 2000 was 29, 28 and 27 months, respectively.





Gross retail note installments at October 31 are scheduled to be received as follows (in millions of dollars):





2002

2001Due in:0-12 months

$
1,926.0

$
1,969.213-24 months


1,538.6


1,700.025-36 months


1,121.0


1,317.237-48 months


746.9


873.849-60 months


445.3


461.1Over 60 months


217.9


198.3Total

$
5,995.7

$
6,519.6




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Company guidelines relating to down payment requirements and contract terms on
retail notes are generally as follows:





Down Payment


Contract TermsAgricultural equipment (new and used):Seasonal payments

30
%

4-8 crop yearsMonthly payments

20
%

48-96 monthsConstruction and forestry equipment:New

15
%

48-60 monthsUsed

20
%

36 monthsCommercial and consumer equipment (new and used):Seasonal payments

10
%

3-6 yearsMonthly payments

10
%

36-72 months





During 2002, 2001 and 2000, the Company received proceeds of $2,968
million, $1,531 million and $978 million, respectively, from the sale of Receivables (including securitized sales). The Company acts as agent for the buyers in collection and administration for virtually all of the Receivables and Leases it has
sold. All Receivables and Leases sold are collateralized by security agreements on the related equipment. The Companys estimated maximum exposure under all Receivable and Lease recourse provisions at October 31, 2002, 2001 and 2000 was $204
million, $166 million and $168 million, respectively. In addition, the Company has guaranteed letters of credit on behalf of John Deere Credit Inc., the John Deere finance subsidiary in Canada, as part of two retail note sales. At October 31, 2002
and 2001, the maximum exposure under these agreements was approximately $7 million and $9 million, respectively. The Company does not record the recourse obligations as liabilities as they are contingent liabilities that are not probable at this
time. However, the probable loss on receivables that have been sold was accrued at the time of sale, and any subsequent necessary adjustments are made as part of ongoing reviews. At October 31, 2002, 2001 and 2000, the balance of all Receivables and
Leases previously sold, but still administered by the Company, was $2,533 million, $1,442 million and $1,959 million, respectively.





Finance income is recognized over the lives of the retail notes on the effective-yield basis. During 2002, the average effective yield on retail notes held by the Company was approximately 8.7 percent, compared with 9.7
percent in 2001 and 10.2 percent in 2000. Unearned finance income on variable-rate retail notes is adjusted monthly based on fluctuations in the base rate of a specified bank. Costs incurred in the acquisition of retail notes are deferred and
recognized over the expected lives of the retail notes on the effective-yield basis.





A portion of the finance
income earned by the Company arises from financing of retail sales of John Deere equipment on which finance charges are waived or reduced by John Deere for a period from the date of sale to a specified subsequent date. The Company generally receives
compensation from John Deere equal to a competitive interest rate for periods during which finance charges have been waived or reduced on retail notes and leases. The portions of the Companys finance income earned that were received from John
Deere on retail notes containing waiver of finance charges or reduced rates were 34 percent in 2002, 32 percent in 2001 and 30 percent in 2000.





A deposit equal to one percent of the face amount of certain John Deere agricultural and commercial and consumer equipment retail notes originating from each dealer is withheld by the Company from that
dealer. Any subsequent retail note losses are charged against the withheld deposits. At the end of each calendar quarter, the balance of each dealers withholding account in excess of a specified percent (generally 3 percent, 2 percent for
select dealers) of the total balance outstanding on retail notes originating with that dealer is remitted to the dealer. To the extent that these deposits withheld from the dealer from whom the retail note was acquired cannot absorb a loss on a
retail note, it is charged against the Companys allowance for credit losses. There is no withholding of dealer deposits on John Deere construction and forestry equipment retail notes or recreational product retail notes.





The Company requires that theft and physical damage insurance be carried on all goods leased or securing retail notes and
wholesale receivables. In most cases, the customer may, at his own expense, have the Company or the seller of the goods purchase this insurance or obtain it from other sources.




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Revolving Charge Accounts Receivable





Revolving charge account income is generated primarily by three revolving credit products: Farm Plan TM , PowerPlan ® and the John Deere Credit Revolving Plan. Farm Plan TM is primarily used by
farmers and ranchers to finance day-to-day operating expenses, such as parts and services. Merchants offer Farm Plan TM as an alternative to carrying in-house accounts receivable, and can initially sell existing balances to the Company under a recourse arrangement. Farm Plan TM income includes a discount paid by merchants for transaction processing and support, and finance charges paid by customers on their outstanding
account balances. PowerPlan ® is primarily used by construction companies to finance day-to-day
operating expenses, such as parts and service, and is otherwise similar to Farm Plan TM . Merchants offer
PowerPlan ® as an alternative to carrying in-house accounts receivable, and can initially sell
existing balances to the Company under a recourse arrangement. PowerPlan ® income includes a discount
paid by merchants for transaction processing and support and finance charges paid by customers on their outstanding account balances. The John Deere Credit Revolving Plan is used primarily by retail customers of John Deere dealers to finance
commercial and consumer equipment. Income includes a discount paid by dealers on most transactions and finance charges paid by customers on their outstanding account balances. Revolving charge accounts receivable at October 31, 2002 totaled $896
million, compared with $814 million at October 31, 2001. Generally, account holders may pay the account balance in full at any time, or make payments over a number of months according to a payment schedule.





Operating Loans





Operating loan income is generated primarily by operating loans that are offered through several leading farm input providers to finance the acquisition of seeds and fertilizers. Income on this product is generated from finance
charges paid by customers on their outstanding account balances. Operating loan receivables totaled $561 million at October 31, 2002 compared with $501 million at October 31, 2001.





Financing Leases





The Company leases agricultural, construction and forestry, commercial and consumer and certain other equipment directly to retail customers. At the time of accepting a lease that qualifies as a financing lease under FASB Statement
No. 13, Accounting for Leases, the Company records the gross amount of lease payments receivable, estimated residual value of the leased equipment and unearned finance income. The unearned finance income is equal to the excess of the gross lease
receivable plus the estimated residual value over the cost of the equipment. The unearned finance income is recognized as revenue over the lease term on the effective-yield method. Lease acquisition costs are accounted for in a manner similar to the
procedures for retail notes.





Financing leases receivable by product category at October 31 are as follows (in
millions of dollars):





2002


2001Agricultural equipment

$
169.9


$
155.3Construction and forestry equipment


91.6



240.7Commercial and consumer equipment


101.2



95.1Other equipment


140.1



22.7Total


502.8



513.8Estimated residual values


46.2



57.5Unearned finance income


(81.5
)


(91.8
)Financing leases receivable

$
467.5


$
479.5




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Initial lease terms for financing leases generally range from 36 months to 60
months. Payments on financing leases receivable at October 31 are scheduled as follows (in millions of dollars):





2002

2001Due in:0-12 months

$
195.9

$
168.213-24 months


139.5


143.025-36 months


88.7


97.937-48 months


48.1


60.2Over 48 months


30.6


44.5Total

$
502.8

$
513.8





Deposits withheld from John Deere dealers and related losses on
financing leases are handled in a manner similar to the procedures for retail notes. As with retail notes, there are no deposits withheld on financing leases related to construction and forestry equipment. In addition, a lease payment discount
program, allowing reduced payments over the term of the lease, is administered in a manner similar to finance waiver on retail notes.





Equipment returned to the Company upon termination of leases and held for subsequent sale or lease is recorded at the lower of net book value or estimated market value of the equipment.





Wholesale Receivables





The Company also finances wholesale inventories of John Deere engines, agricultural equipment, commercial and consumer equipment and construction and forestry equipment owned by dealers of those
products in the form of wholesale receivables. Wholesale finance income related to these notes is generally recognized monthly based on the daily balance of wholesale receivables outstanding and the applicable effective interest rate. Interest rates
vary with a bank base rate, the type of equipment financed and the balance outstanding. Wholesale receivables are secured by equipment financed. Generally, the maximum maturity for wholesale notes that are included in wholesale receivables is 12
months. Additional information is presented in Note 1 to the Consolidated Financial Statements.





In October 2001,
the Company purchased $2.2 billion of United States wholesale receivables (trade receivables) from John Deere. The Company has continued purchasing a significant portion of newly originated wholesale receivables from John Deere. In the fourth
quarter of 2002, the Company also began purchasing European wholesale receivables (trade receivables) from John Deere. These trade receivables arise from John Deeres sales of goods to dealers. Under the terms of the sales to dealers, interest
is charged to dealers on outstanding balances, from the earlier of the date when goods are sold to retail customers by the dealer or the expiration of certain interest-free periods granted to the dealer at the time of the sale, until payment is
received by the Company. Dealers cannot cancel purchases after goods are shipped and are responsible for payment even if the equipment is not sold to retail customers. The interest-free periods are determined based on the type of equipment sold and
the time of year of the sale. These periods range from one to 12 months for agricultural tractors, from one to eight months for construction and forestry equipment, and from one to 24 months for most other equipment. Interest-free periods may not be
extended. Interest charged may not be forgiven and interest rates are set based on market factors. John Deere compensates the Company for the carrying costs related to these interest-free periods.





Other Receivables





The Company has sold retail notes to limited-purpose business trusts and to private third parties, which utilize the notes as collateral for asset-backed securities issued. Other receivables related to
securitizations are recorded at net present value and relate to payments to be received for retained interests. These retained interests are subsequently carried at estimated fair value with changes in fair value included in income. Securitization
and servicing fee income includes the interest earned on these retained interests and reimbursed administrative expenses.




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Concentration of Credit Risk





Receivables have significant concentrations of credit risk in the agricultural, construction and forestry, commercial and consumer, and recreational product business
sectors as shown in the previous tables. On a geographic basis, there is not a disproportionate concentration of credit risk in any area in which the Company operates. The Company retains as collateral a security interest in the goods associated
with Receivables other than certain revolving charge accounts.





Note 3.   Allowance for Credit Losses,
Delinquencies and Write-offs





Allowance for Credit Losses





Allowances for credit losses on Receivables are maintained in amounts considered to be appropriate in relation to the Receivables outstanding based on collection
experience, economic conditions and credit risk quality.





An analysis of the allowance for credit losses on total
Receivables follows (in millions of dollars):





2002


2001


2000Balance, beginning of the year

$
110.4


$
93.3


$
83.6Provision for credit losses


126.9



74.5



52.6Total net write-offs


(105.9
)


(58.0
)


(36.2
)Transfers primarily related to receivable sales and purchases


(13.1
)


.6



(6.7
)Balance, end of the year

$
118.3


$
110.4


$
93.3





The allowance for credit losses represented 1.16 percent, 1.06
percent and 1.32 percent of Receivables financed at October 31, 2002, 2001 and 2000, respectively. In addition, the Company had $138 million, $134 million and $133 million at October 31, 2002, 2001 and 2000, respectively, of deposits primarily
withheld from John Deere dealers available for certain potential credit losses originating from those dealers.





Delinquencies





Generally, when retail notes become 120 days delinquent, accrual of finance income is suspended, the collateral
is repossessed or the account is designated for litigation and the estimated uncollectible amount, after charging the dealers withholding account, if any, is written off to the allowance for credit losses. Accrual of revolving charge account
income is suspended generally when the account becomes 120 days delinquent. Accounts are deemed to be uncollectible and written off to the allowance for credit losses when delinquency reaches 120 days for a Farm Plan TM , PowerPlan ® and John Deere Credit Revolving Plan account. When a lease account becomes 120 days delinquent, the accrual of lease revenue is suspended, the equipment is repossessed or the account is
designated for litigation, and the estimated uncollectible amount, after charging the dealers withholding account, if any, is written off to the allowance for credit losses. Generally, when a wholesale receivable becomes 60 days delinquent,
accrual of finance income on interest-bearing wholesale receivables is suspended, the collateral is repossessed or the account is designated for litigation, and the estimated uncollectible amount is written off to the allowance for credit losses.
Although amounts are not withheld from dealers to cover uncollectible wholesale receivables, there are usually repurchase agreements with non-John Deere manufacturers for new inventories held by dealers.




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##### Table of Contents




Total Receivable amounts 60 days or more past due in the table below represent
the amount of all customer payments past due 60 days or more, by product and as a percentage of Receivables. They are as follows (in millions of dollars):





October 31, 2002


October 31, 2001


October 31, 2000Dollars

Percent


Dollars

Percent


Dollars

PercentRetail notes:Agricultural equipment

$
6.9

.21
%

$
13.3

.37
%

$
8.9

.30
%Construction and forestry equipment


6.8

.57



4.9

.38



4.5

.45Commercial and consumer equipment


.6

.08



1.4

.23



.9

.19Recreational products








.3

.27



.1

.07Total retail notes


14.3

.27



19.9

.35



14.4

.31Revolving charge accounts *


14.5

1.62



9.5

1.17



9.3

1.35Operating loans


3.0

.53



.1

.02



.7

.17Wholesale receivables


10.6

.36



9.9

.33



3.0

.32Financing leases


2.6

.56



2.0

.42



1.4

.31Total Receivables

$
45.0

.44


$
41.4

.40


$
28.8

.41





*  Due to the nature of revolving charge accounts, the customer
payments past due 60 days or more also represent the total balance.





Total Receivable non-accrual amounts, which
represent non-performing loans the Company has ceased accruing interest for, by product and as a percentage of year-end total balances were as follows (in millions of dollars):





2002


2001


2000Dollars

Percent


Dollars

Percent


Dollars

PercentRetail notes:Agricultural equipment

$
9.9

.30
%

$
7.0

.19
%

$
8.5

.29
%Construction and forestry equipment


28.8

2.40



3.4

.26



1.7

.17Commercial and consumer equipment


1.2

.16



.8

.13



.6

.13Recreational products


.3

.38



.2

.15



.3

.22Total retail notes


40.2

.76



11.4

.20



11.1

.24Revolving charge accountsOperating loansWholesale receivablesFinancing leases


4.1

.88



3.2

.67



4.4

.96Total Receivables

$
44.3

.44


$
14.6

.14


$
15.5

.22





The increase in non-accrual amounts presented above is primarily
related to the uncertainty of interest collection related to a few John Deere construction, mining and other commercial equipment Receivables.




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##### Table of Contents







Write-offs





Total Receivable net write-off amounts, by product and as a percentage of average balances held during the year were as follows (in
millions of dollars):





2002


2001


2000Dollars

Percent


Dollars

Percent


Dollars

PercentRetail notes:Agricultural equipment

$
3.2

.11
%

$
7.6

.28
%

$
5.4

.20
%Construction and forestry equipment


15.8

1.46



16.3

2.11



6.5

.85Commercial and consumer equipment


1.0

.15



.3

.08



.3

.08Recreational products


2.4

2.58



2.4

1.69



2.9

2.03Total retail notes


22.4

.48



26.6

.66



15.1

.38Revolving charge accounts


19.4

2.17



14.5

1.81



8.2

1.14Operating loans


46.3

11.45



.9

.28



1.4

.66Wholesale receivables


6.9

.21



7.4

.71



3.5

.34Financing leases


10.9

2.37



8.6

1.92



8.0

1.84Total Receivables

$
105.9

1.09


$
58.0

.79


$
36.2

.56





The increase in write-offs was primarily related to two
international trade finance customers, Allied Deals, Inc. and one of its affiliates (collectively called Allied Deals). Of the additional write-offs, $45 million covered the Companys exposure on operating lines of credit provided
to Allied Deals. The loans became non-performing in April 2002, after some of the underlying receivables collateral went into default in February 2002. During the second quarter of 2002, the Company obtained a judgment against Allied Deals, Inc. on
one of the loans in the United States District Court for the Western District of Pennsylvania. Since then, involuntary bankruptcy petitions and other actions have been filed against Allied Deals, Inc. and some of its affiliates and principals. As a
result, the Company has determined that collection of the loans is doubtful.





Note 4.  Retail Note
Securitizations





The Company periodically sells receivables to special purpose entities in securitizations
of retail notes. It retains interest-only strips, servicing rights and, in some cases, cash reserve accounts, all of which are retained interests in the securitized receivables. Gains or losses on sales of the receivables depend in part on the
previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interest based on their relative fair values at the date of transfer. The Company generally estimates fair values based on
the present value of future expected cash flows using managements key assumptions as discussed below. The Company receives annual servicing fees of approximately 1 percent of the outstanding balance, and rights to future cash flows. No
significant balances for servicing assets or liabilities exist because the benefits received for servicing are offset by the costs of providing the servicing. The Companys maximum exposure under recourse provisions related to securitizations
was $202 million and $166 million at October 31, 2002 and 2001, respectively. Except for this exposure, the investors and securitization trusts have no recourse to the Company for failure of debtors to pay when due. The Companys retained
interests, the values of which are included in the recourse provisions, are subordinate to investors interests and their values are subject to certain key assumptions. The total assets and liabilities of the unconsolidated SPEs related to
securitizations at October 31, 2002 were $2,625 million and $2,543 million, respectively.




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##### Table of Contents




The Company recognized pretax gains on retail notes securitized during 2002 and
2001 of $71 million and $7 million, respectively. Key assumptions used to initially determine the fair value of the retained interests in 2002 and 2001 are as follows:





Key Assumptions:





Notes Securitized in 2002

Notes Securitized in 2001Weighted-average maturity

19 Months

20 MonthsAverage annual prepayment rate

22 Percent

20 PercentAverage expected annual credit losses

.42 Percent

.29 PercentDiscount rate on retained interests and subordinate tranches

13 Percent

13 Percent





Cash flows received from securitization trusts in millions of
dollars were as follows:





2002

2001Proceeds from new securitizations

$
2,870

$
800Servicing fees received


28


19Other cash flows received


100


49





The total retained interests, weighted-average life,
weighted-average current key economic assumptions and the sensitivity analysis showing the hypothetical effects on the retained interests from immediate 10 percent and 20 percent adverse changes in those assumptions with dollars in millions were as
follows:





2002


2001Retail Note SecuritizationsCarrying amount/fair value of retained interests

$
107


$
89Weighted-average life (in months)


16



13Prepayment speed assumption (annual rate)


19
%


19
%Impact on fair value of 10% adverse change

$
.8


$
.2Impact on fair value of 20% adverse change

$
1.8


$
.4Expected credit losses (annual rate)


.38
%


.35
%Impact on fair value of 10% adverse change

$
1.0


$
.5Impact on fair value of 20% adverse change

$
2.0


$
.9Residual cash flows discount rate (annual)


13
%


13
%Impact on fair value of 10% adverse change

$
2.5


$
2.1Impact on fair value of 20% adverse change

$
4.9


$
4.2





These sensitivities are hypothetical changes in fair value and
cannot be extrapolated because the relationship of the changes in assumption to the changes in fair value may not be linear. Also, the effect of a variation in a particular assumption is calculated without changing any other assumption, whereas
changes in one factor may result in changes in another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates.




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##### Table of Contents

Principal balances of owned, securitized and total managed retail notes, past due amounts and net credit losses, as of
and for the years ended October 31, 2002 and October 31, 2001 in millions of dollars follow:





Principal Outstanding

Principal 60 Days
or More Past Due

Net Credit Losses2002Owned

$
5,242

$
15

$
23Securitized


2,410


13


9Managed

$
7,652

$
28

$
322001Owned

$
5,400

$
19

$
26Securitized


1,300


12


9Managed

$
6,700

$
31

$
35





The amount of actual and projected future credit losses as a
percent of the original balance of retail notes securitized (expected static pool losses) were as follows:





Notes Securitized in 2002

Notes Securitized in 2001Actual and Projected Credit Losses as of:October 31, 2002

.61%

.54%October 31, 2001



.60%





Note 5.  Equipment on Operating Leases





Rental payments applicable to equipment on operating leases are recorded as income on a straight-line method over the lease
terms. Operating lease assets are recorded at cost and depreciated to their estimated residual value generally on a straight-line method over the terms of the leases. Residual values represent estimates of the value of the leased assets at the end
of the contract terms and are initially determined based upon appraisals and estimates. Residual values are continually reviewed to determine that estimated amounts are appropriate.





The cost of equipment on operating leases by product category at October 31 is as follows (in millions of dollars):





2002


2001Agricultural equipment

$
975.2


$
1,211.9Construction and forestry equipment


466.3



544.1Commercial and consumer equipment


158.3



147.8Other equipment


67.3



45.3Total


1,667.1



1,949.1Accumulated depreciation


(487.1
)


(464.3
)Equipment on operating leases  net

$
1,180.0


$
1,484.8




41




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##### Table of Contents

Initial lease terms for equipment on operating leases generally range from 36 months to 60 months. Rental payments for
equipment on operating leases at October 31 are scheduled as follows (in millions of dollars):





2002

2001Due in:0-12 months

$
229.9

$
280.213-24 months


136.3


187.025-36 months


61.1


92.837-48 months


20.0


33.8Over 48 months


8.2


13.8Total

$
455.5

$
607.6





As with construction and forestry retail notes, there are no
deposits withheld on operating leases related to construction and forestry equipment. In addition, a lease payment discount program, allowing reduced payments over the term of the lease, is administered in a manner similar to finance waiver on
retail notes.





Equipment returned to the Company upon termination of leases and held for subsequent sale or lease
is recorded at the lower of net book value or estimated market value of the equipment.





Total operating
lease amounts 60 days or more past due represent the amount of all customer payments past due 60 days or more. These amounts were $7 million, $6 million and $4 million at October 31, 2002, 2001 and 2000, respectively.





Note 6.  Short-Term Borrowings





On October 31, 2002, short-term borrowings were $4,272 million, $1,422 million of which was commercial paper. Short-term borrowings were $6,524 million on October 31, 2001, $2,359 million of which was
commercial paper. The Companys short-term debt also includes amounts borrowed from John Deere, which totaled $654 million and $1,612 million at October 31, 2002 and 2001, respectively. The Company pays a market rate of interest to John Deere
based on the average outstanding borrowings each month. The weighted-average interest rate on total short-term borrowings at October 31, 2002 and 2001, excluding current maturities of long-term borrowings, was 2.6 percent and 3.0 percent,
respectively.





At October 31, 2002, the Company and Deere & Company jointly maintained $4,058 million of
unsecured lines of credit with various banks in North America and overseas, $2,186 million of which was unused. For the purpose of computing unused credit lines, commercial paper and short-term bank borrowings, excluding the current portion of
long-term borrowings, of the Company and Deere & Company, were considered to constitute utilization. These agreements include a $2,150 million long-term commitment of the banks expiring on February 20, 2006. The credit agreement has various
requirements of the Company, including the maintenance of its consolidated ratio of earnings before fixed charges to fixed charges at not less than 1.05 to 1 for each fiscal quarter (as described below) and the Companys ratio of senior debt to
total stockholders equity plus subordinated debt may not be more than 8 to 1 at the end of any fiscal quarter. Senior debt consists of the Companys total interest-bearing obligations, excluding subordinated debt, but
including borrowings from John Deere. The Companys ratio of senior debt to total stockholders equity plus subordinated debt was 4.8 to 1 at October 31, 2002, compared to 5.0 to 1 at October 31, 2001. The facility fee on these lines of
credit is divided between Deere & Company and the Company based on the proportion of their respective commercial paper outstanding.





Deere & Company has an agreement with the Company pursuant to which it has agreed to continue to own at least 51 percent of the voting shares of capital stock of the Company and to maintain the Companys
consolidated tangible net worth at not less than $50 million. This agreement also obligates Deere & Company to make income maintenance payments to the Company such that its consolidated ratio of earnings before fixed charges to fixed charges is
not less than 1.05 to 1 for any fiscal quarter. For 2002 and 2001, the Companys ratios were 1.97 to 1 and 1.53 to 1, respectively, and never less than 1.81 to 1 and 1.48 to 1 for any fiscal quarter of 2002 and 2001, respectively.




42




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##### Table of Contents




Deere & Companys obligations to make payments to the Company under the agreement are
independent of whether the Company is in default on, its indebtedness, obligations or other liabilities. Further, Deere & Companys obligations under the agreement are not measured by the amount of the Companys indebtedness,
obligations or other liabilities. Deere & Companys obligations to make payments under this agreement are expressly stated not to be a guaranty of any specific indebtedness, obligation or liability of the Company and are enforceable only by
or in the name of the Company.





Note 7.  Long-Term Borrowings





Long-term borrowings of the Company at October 31 consisted of the following (in millions of dollars):





2002


2001Senior Debt:**Medium-term notes due 2004-2007 (principal $2,137 - 2002, $2,555 - 2001):Average interest rate of 2.5% - 2002 and 4.6% - 2001

$
2,144
*

$
2,573
*Floating Rate Notes due 2003Interest rate of 2.7% - 2001






2005.125% Notes due 2006 ($600 principal):Swapped to variable interest rate of 2.5% - 2002 and 3.0% - 2001


625
*


601
*4.5% Notes due 2007 ($500 principal):Swapped $450 million to variable interest rate of 2.5% - 2002


481
*6% Notes due 2009 ($300 principal):Swapped to variable interest rate of 2.0% - 2002 and 3.8% - 2001


329
*


316
*7% Notes due 2012 ($1,500 principal):Swapped to variable interest rate of 2.8% - 2002


1,662
*Other Notes






21Total senior debt


5,241



3,711Unamortized debt discount


(10
)


(2
)Net senior debt


5,231



3,709Subordinated Debt:8-5/8% Subordinated Debentures due 2019


150



150Total subordinated debt


150



150Total

$
5,381


$
3,859





|* |  | Includes fair value adjustments related to interest rate swaps.
|- |  | ---------------------------------------------------------------




**All interest rates are as of year-end.





The approximate amounts
of long-term borrowings maturing and sinking fund payments required in each of the next five years, in millions of dollars, are as follows: 2003 - $2,159, 2004 - $1,537, 2005 - $325, 2006 - $825 and 2007 - $550.





Note 8.  Leases





Total rental expense for operating leases was $6 million for the years 2002, 2001 and 2000. At October 31, 2002, future minimum lease payments under operating leases amounted to $45 million as follows (in millions of
dollars): 2003 - $4, 2004 - $3, 2005 - $3, 2006 - $3, 2007 - $32.





Note 9.  Common Stock





All of the Companys common stock is owned by John Deere Credit Company, a wholly-owned finance holding subsidiary of
Deere & Company. No shares of common stock of the Company were reserved for officers or employees or for options, warrants, conversions or other rights at October 31, 2002 or 2001. At October 31, 2002, the Company had authorized, but not issued,
10,000 shares of $1 par value preferred stock.




43




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##### Table of Contents




Note 10.  Dividends





The Capital Corporation declared and paid $350 million in dividends to John Deere Credit Company in 2002. John Deere Credit Company paid comparable dividends to Deere
& Company. The Capital Corporation did not declare or pay dividends to John Deere Credit Company in 2001.





Note
11.  Pension and Other Retirement Benefits





The Company participates in the Deere &
Company salaried pension plan, which is a defined benefit plan in which benefits are based primarily on years of service and employee compensation. Pension expense is actuarially determined based on the Companys employees included in the plan.
The Companys pension expense amounted to $1.8 million in 2002, $1.3 million in 2001 and $2.5 million in 2000. The Company generally provides defined benefit health care and life insurance plans for retired employees through participation in
Deere & Companys plans. Health care and life insurance benefits expense is actuarially determined based on the Companys employees included in the plans and amounted to $2.1 million in 2002, $1.4 million in 2001 and $1.3 million in
2000. Further disclosure for these plans is included in the notes to the Deere & Company 2002 Annual Report on Form 10-K.





Note
12.  Income Taxes





Taxes on Income and Income Tax Credits





The taxable income of the Company is included in the consolidated United States income tax return of Deere & Company. Provisions for
income taxes are made generally as if the Capital Corporation and each of its subsidiaries filed separate income tax returns.





Deferred Income Taxes





Deferred income taxes arise because certain items are treated
differently for financial accounting than for income tax reporting purposes. An analysis of deferred income tax assets and liabilities at October 31 is as follows (in millions of dollars):





2002

2001Deferred Tax Assets

Deferred Tax Liabilities

Deferred Tax Assets

Deferred Tax LiabilitiesDeferred lease income




$
154.5




$
142.7Securitization income





8.3

$
16.0Deferred retail note finance income





2.7





7.5Allowance for credit losses

$
49.0





41.6Unrealized gain/loss on derivatives


22.4





31.8Accrual for retirement and other benefits


7.2





6.8Net operating loss carry forward


2.9





1.8Miscellaneous accruals and other


1.1








1.1Total

$
82.6

$
165.5

$
98.0

$
151.3




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##### Table of Contents




The provision for income taxes consisted of the following (in millions of
dollars):





2002

2001

2000Current

$
116.1

$
52.5

$
59.0Deferred


20.5


32.1


17.6Total provision for income taxes

$
136.6

$
84.6

$
76.6





Effective Income Tax Provision





A comparison of the statutory and effective income tax provisions and reasons for related differences follows (in millions of dollars):





2002


2001


2000United States federal income tax provision at a statutory rate of 35 percent

$
129.9


$
86.0


$
75.8Municipal lease income not taxable


(1.4
)


(1.7
)


(1.7
)Taxes on foreign activities


(.7
)


(.5
)


.4Nondeductible costs and other  net


8.8



0.8



2.1Total provision for income taxes

$
136.6


$
84.6


$
76.6





Note 13.  Cash Flow Information





For purposes of the statements of consolidated cash flows, the Company considers investments with original maturities of three months or
less to be cash equivalents. Substantially all of the Companys short-term investments mature within three months or less.





Cash payments by the Company for interest incurred on borrowings in 2002, 2001 and 2000 were $356 million, $462 million and $428 million, respectively. Cash payments for income taxes during these same periods were $118 million, $50
million and $55 million, respectively.





Note 14.  Commitments and Contingent Liabilities





At October 31, 2002, the Companys maximum exposure under all financing Receivable and Lease recourse provisions was $204
million. At October 31, 2002, the Company had indemnification agreements totaling $14 million related to various performance bonds. Additionally, at October 31, 2002, the Company had guaranteed $30 million of residual value related to property being
used by the Company under an operating lease. The Company is obligated at the end of the lease term to pay to the lessor any reduction in market value of the leased property up to the guaranteed residual value. The Company recognizes the expense for
this future estimated lease payment over the life of the operating lease.





The Company is subject to various
unresolved legal actions that arise in the normal course of its business, the most prevalent of which relate to state and federal laws and regulations concerning retail credit. Although it is not possible to predict with certainty the outcome of
these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material effect on its financial position or results of operations.




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##### Table of Contents




Note 15.  Comprehensive Income Items





Comprehensive income includes all changes in the Companys equity during the period, except transactions with the stockholder of the
Company. Comprehensive income for the years ended October 31, 2002, 2001, and 2000 consisted of the following (in millions of dollars):





Before Tax Amount


Tax (Expense) Credit


After Tax Amount2002Change in cumulative translation adjustment

$
5.7






$
5.7Unrealized holding gain and net gain on investments


2.5



(.9
)


1.6Unrealized loss on derivatives:Hedging loss


(57.7
)


20.2



(37.5
)Reclassification of realized net loss to net income


84.6



(29.6
)


55.0Net unrealized loss on derivatives


26.9



(9.4
)


17.5Total other comprehensive income

$
35.1


$
(10.3
)

$
24.82001Change in cumulative translation adjustment

$
2.3






$
2.3Unrealized loss on derivatives:Hedging loss


(130.3
)


44.5



(85.8
)Reclassification of realized net loss to net income


36.9



(12.7
)


24.2Net unrealized loss on derivatives


(93.4
)


31.8



(61.6
)Total other comprehensive loss

$
(91.1
)

$
31.8


$
(59.3
)2000Change in cumulative translation adjustment and total other comprehensive loss

$
(10.4
)





$
(10.4
)





Note 16.  Financial Instruments





The fair values of financial instruments that do not approximate the carrying values in the financial statements at October 31 are as
follows (in millions of dollars):





2002

2001Carrying Value

Fair Value

Carrying Value

Fair ValueReceivables financed

$
10,060

$
10,103

$
10,305

$
10,326Long-term borrowings

$
5,381

$
5,490

$
3,859

$
3,858





Fair Value Estimates





Fair values of the long-term financing receivables with fixed rates were based on the discounted values of their related cash flows at current market interest rates.
The fair values of the remaining financing receivables approximated the carrying amounts.





Fair values of
long-term borrowings with fixed rates were based on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings of the Company have been swapped to current variable interest rates. The carrying
values of these long-term borrowings include adjustments related to fair value hedges under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which was adopted in 2001.




46




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##### Table of Contents




Derivatives





It is the Companys policy that derivative transactions are executed only to manage exposures arising in the normal course of business, and not for the purpose of
creating speculative positions or trading. The Company manages the relationship of the types and amounts of funding sources to the receivable and lease portfolio in an effort to diminish risk due to interest rate and foreign currency fluctuations,
while responding to favorable financing opportunities. The Company also has foreign currency exposures at some of its foreign and domestic operations related to buying, selling and financing in currencies other than the local currencies.





Interest Rate Swaps





The Company enters into interest rate swap agreements primarily to more closely match the fixed or floating interest rates of the borrowings to those of the assets being funded.





Certain interest rate swaps were designated as hedges of future cash flows from commercial paper and variable interest rate
borrowings. The effective portion of the fair value gains or losses on these cash flow hedges are recorded in other comprehensive income and subsequently reclassified into interest expense as payments are accrued and the swaps approach maturity. The
amounts offset the effects of interest rate changes on the related borrowings. The amount of the loss recorded in other comprehensive income at October 31, 2002 that is expected to be reclassified to earnings in the next 12 months if interest rates
remain unchanged is approximately $25 million after-tax. These swaps mature in up to 55 months.





Certain interest
rate swaps were designated as fair value hedges of fixed-rate, long-term borrowings. The effective portion of the fair value gains or losses on these swaps was offset by fair value adjustments in the underlying borrowings.





Any ineffective portions of the gains or losses on all cash flow and fair value interest rate swaps designated as hedges were recognized
immediately in interest expense and were not material in 2002. There were no components of cash flow or fair value hedges that were excluded from the assessment of effectiveness.





Foreign Exchange Forward Contracts





The Company has entered
into foreign exchange forward contracts and currency swaps in order to manage the currency exposure of certain receivables and liabilities. These derivatives generally were not designated as hedges under FASB Statement No. 133. The fair value gains
or losses from the non-designated foreign currency derivatives are recognized directly in earnings, generally offsetting the foreign exchange gains or losses on the exposures being managed.





The Company has designated cross currency interest rate swaps as fair value hedges of certain borrowings. The effective portion of the fair value gains or losses on these
swaps are offset by fair value adjustments in the underlying borrowings and the ineffectiveness was not material. The Company has also designated currency swaps as cash flow hedges of certain borrowings. The effective portion of the fair value gains
or losses on these swaps is recorded in other comprehensive income and subsequently reclassified into earnings as payments are accrued and these instruments approach maturity. This will offset the exchange rate effects on the borrowing being hedged
and the ineffectiveness was not material.




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##### Table of Contents




Note 17.  Geographic Area Information





Based on the way the operations are managed and evaluated by management and materiality considerations, the Company is viewed
as one operating segment. However, geographic area information for revenues and operating profit, which is net income before income taxes, attributed to the United States and foreign countries is disclosed below. The decrease in operating profit for
foreign countries in 2002 was primarily due to losses in Argentina related to the peso devaluation. Geographic area information for the years ended October 31, 2002, 2001, and 2000 is presented below (in millions of dollars):





2002


2001

2000Revenues:United States

$
1,265


$
1,152

$
1,047Foreign countries


91



64


59Total

$
1,356


$
1,216

$
1,106Operating profit (loss):United States

$
379


$
238

$
215Foreign countries


(12
)


4


2Total

$
367


$
242

$
217





Note 18.  Unconsolidated Affiliated Companies





The Capital Corporations affiliated companies are those in which it generally maintains 10 percent to 50 percent
ownership. These companies are not controlled by the Capital Corporation and are accounted for by the equity method. The Companys equity in the income of these affiliates is reported in the consolidated income statement under Equity in
income (loss) of unconsolidated affiliates. The investment in these companies is recorded in the consolidated balance sheet under Investments in unconsolidated affiliates.





Summarized financial information of the affiliated companies is as follows (in millions of dollars):





Year Ended October 31,2002


2001


2000Operations:Finance income

$
3.2


$
5.6


$
13.7Net income (loss)


(3.7
)


(4.1
)


1.5The Companys equity in net income (loss)


(3.8
)*


(3.3
)


.6





October 31,2002


2001Financial Position:Total assets

$
90.1


$
31.6Total external debt


36.3



18.8Total net assets


52.0



10.1The Companys share of net assets


7.1
**


5.9





* The Companys equity in net income (loss) includes 75 percent of iVesta in 2002, as
it was a joint venture accounted for by the equity method until October 31, 2002. See Note 1 for additional information.





** The
Companys share of net assets excludes the assets of iVesta, as it was a fully-consolidated subsidiary at October 31, 2002. See Note 1 for additional information.




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##### Table of Contents




Note 19.  Financial Metrics





The Company evaluates its performance utilizing a financial metric referred to as Shareholder Value Added (SVA). The Company is assessed a
pretax cost of equity, which is approximately 19 percent of its average equity excluding the allowance for credit losses during the year. The cost of equity is deducted from the operating profit of the Company to determine the amount of SVA. For
this purpose, the operating profit for the Company is net income before income taxes and changes to the allowance for credit losses.





A reconciliation of the SVA components follows (in millions of dollars):





2002


2001


2000Operating profit

$
367


$
242


$
217Change in allowance for credit losses


8



17



10SVA income


375



259



227Average equity


1,832



1,158



1,056Average allowance for credit losses


133



97



92SVA Average Equity


1,965



1,255



1,148SVA return on average equity


19.1
%


20.6
%


19.8
%





The Shareholder Value Added (Lost) for the Company was as follows
(in millions of dollars):





2002


2001

2000Shareholder Value Added (Lost)

$
(3
)

$
18

$
6





Supplemental Information (Unaudited)





Quarterly Information





Supplemental quarterly information for the Company follows (in millions of dollars):





First Quarter


Second Quarter


Third Quarter


Fourth Quarter


Fiscal Year2002:Revenues

$
348.9


$
356.1


$
322.6


$
327.9


$
1,355.5Interest expense


97.6



88.4



92.9



84.3



363.2Operating expenses


139.3



195.3



136.3



150.4



621.3Provision for income taxes


39.2



28.7



33.6



35.1



136.6Equity in income (loss) of unconsolidated affiliates


(.9
)


(1.1
)


(.9
)


(.9
)


(3.8
)Net income

$
71.9


$
42.6


$
58.9


$
57.2


$
230.62001:Revenues

$
303.5


$
303.0


$
303.0


$
306.2


$
1,215.7Interest expense


123.4



119.8



113.5



96.7



453.4Operating expenses


113.9



125.1



132.5



145.1



516.6Provision for income taxes


22.2



21.2



20.0



21.2



84.6Equity in income (loss) of unconsolidated affiliates


.5



(1.5
)


(1.0
)


(1.3
)


(3.3
)Net income

$
44.5


$
35.4


$
36.0


$
41.9


$
157.8




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##### Table of Contents




Subsequent Event





In December 2002, the Company issued $300 million of 3.1% medium-term notes due in 2005. The Company also entered into interest rate swaps related to $150 million of these
notes, which swapped the fixed rate to a variable rate of 1.7% as of December 11, 2002.




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##### Table of Contents




Index to Exhibits





2.

Not applicable.3.1

Certificate of Incorporation, as amended (Exhibit 3.1 to Form 10-K of the registrant for the year ended October 31, 1999*).3.2

Bylaws, as amended (Exhibit 3.2 to Form 10-K of the registrant for the year ended October 31, 1999*).4.1

Five-Year Credit Agreement among registrant, Deere & Company, various financial institutions, The Chases Manhattan Bank as administrative agent, Bank of
America, N.A. and Bank One, N.A. as documentation agents, and Deutsche Bank AG, New York Branch as syndication agent, et al, dated as of February 22, 2001. (Exhibit 4.1 to Form 10-Q of Deere & Company for the quarter ended January 31, 2001,
Securities and Exchange Commission file number 1-4121*).4.2

364-Day Credit Agreement among registrant, Deere & Company, various financial institutions, The Chase Manhattan Bank, as administrative agent, Bank of
America, N.A. and Bank One, N.A. as documentation agents, and Deutsche Bank AG, New York Branch as syndication agent, et al, dated as of February 22, 2001. (Exhibit 4.2 to Form 10-Q of Deere & Company for the quarter ended January 31, 2001,
Securities and Exchange Commission file number 1-4121*).4.3

Senior Indenture dated as of March 15, 1997 between the registrant and JP Morgan Chase Bank (formerly The Chase Manhattan Bank National Association, as
Trustee (Exhibit 4.1 to registration statement on Form S-3 no. 333-68355, filed December 4, 1998*).4.4

Subordinated Indenture dated as of March 15, 1997 between the registrant and Bank One Trust Company, National Association (successor by merger to the First
National Bank of Chicago), as Trustee (Exhibit 4.3 to registration statement on Form S-3 no. 333-68355, filed December 4, 1998*).4.5

Terms and Conditions of the Notes, published on May 31, 2002, applicable to the U.S.$3,000,000,000 Euro Medium Term Note Programme of registrant, John Deere
Capital Corporation, John Deere Bank S.A., John Deere Credit Limited, John Deere Limited, John Deere B.V., John Deere Credit Inc. and John Deere Limited. (Exhibit 4.5 to Form 10-K of Deere & Company for the year ended October 31, 2002,
Securities and Exchange Commission file number 1-4121*).Certain instruments relating to long-term debt constituting less than 10% of the registrants total assets may not be filed as exhibits
herewith pursuant to Item 604(b)(4)(iii)(A) of Regulation S-K. The registrant will file copies of such instruments upon request of the Commission.10.1

Agreement as amended November 1, 1994 between the registrant and Deere & Company concerning agricultural retail notes (Exhibit 10.1 to Form 10-K of Deere
& Company for the year ended October 31, 1998*).10.2

Agreement as amended November 1, 1994 between the registrant and Deere & Company concerning lawn and grounds care retail notes (Exhibit 10.2 to the Form
10-K of Deere & Company for the year ended October 31, 1998, Securities and Exchange Commission file number 1-4121*).




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10.3

Agreement as amended November 1, 1994 between the registrant and John Deere Industrial Equipment Company concerning industrial retail notes (Exhibit 10.3 to
the Form 10-K of Deere & Company for the year ended October 31, 1998, Securities and Exchange Commission file number 1-4121*).10.4

Agreement dated October 15, 1996 between the registrant and Deere & Company relating to fixed charges ratio, ownership and minimum net worth (Exhibit
10.5 to Form 10-K of Deere & Company for the year ended October 31, 2002, Securities and Exchange Commission File No. 1-4121*).10.5

Agreement dated July 14, 1997 between the registrant and John Deere Construction Equipment Company concerning construction retail notes (Exhibit 10.8 to Form
10-K of the registrant for the year ended October 31, 1997*).10.6

Asset Purchase Agreement dated October 29, 2001 between Deere & Company and Deere Capital, Inc. concerning the sale of trade receivables (Exhibit 10.6 to
Form 10-K of the registrant for the year ended October 31, 2001*).10.7

Asset Purchase Agreement dated October 29, 2001 between John Deere Construction & Forestry Company and Deere Capital, Inc. concerning the sale of trade
receivables (Exhibit 10.7 to Form 10-K of the registrant for the year ended October 31, 2001*).10.8

Factoring Agreement between John Deere Finance S.A. and John Deere Vertrieb, a branch of Deere & Company, concerning the sale of trade receivables
(Exhibit 10.21 to the Form 10-K of Deere & Company for the year ended October 31, 2002, Securities and Exchange Commission file number 1-4121*).10.9

Receivables Purchase Agreement between John Deere Finance S.A. and John Deere Limited (Scotland) concerning the sale of trade receivables (Exhibit 10.22 to
the Form 10-K of Deere & Company for the year ended October 31, 2002, Securities and Exchange Commission file number 1-4121*).11.

Not applicable.12.

Computation of Ratio of Earnings to Fixed Charges for each of the five years in the period ended October 31, 2002.13.

Not applicable.16.

Not applicable.18.

Not applicable.21.

Omitted pursuant to instruction I(2).22.

Not applicable.23.

Consent of Deloitte & Touche LLP.24.

Power of Attorney (included on signature page).99.1

Parts I and II of the Deere & Company Form 10-K for the fiscal year ended October 31, 2002 (Securities and Exchange Commission file number
1-4121*).




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##### Table of Contents




99.2

Statement of Robert W. Lane, Chairman and Principal Executive Officer of John Deere Capital Corporation, and Nathan J. Jones, Senior Vice President and
Principal Financial Officer of John Deere Capital Corporation, as required by Section 906 of the Sarbanes-Oxley Act of 2002.


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* Incorporated by reference. Copies of these exhibits are available
from the Company upon request.




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