EXHIBIT 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information is
based on the historical financial statements of AGCO Corporation ("AGCO") and
the Challenger Product Line (a product line of Caterpillar Inc.) ("Challenger")
adjusted to give effect to the acquisition by AGCO of the design, assembly and
marketing of the new MT Series of Challenger tractors. Under the terms of the
Challenger acquisition, AGCO acquired the technology and manufacturing assets
required to produce and market the new MT series of Challenger brand tractors
that first will be sold to customers beginning in mid-2002. AGCO did not acquire
any rights or assume any obligations relating to the prior series of the
Challenger brand tractors which were produced by Caterpillar. However, the
historical financial statements of the prior Challenger tractor series are used
as a basis for the following pro forma combined financial information. In
addition, the historical financial statements of Challenger include intercompany
purchases of components and allocations of expenses from Caterpillar Inc. The
intercompany prices and allocations may not be indicative of the costs and
expenses that would have resulted if the Challenger business were operated as a
separate entity. The following unaudited pro forma combined financial
information also includes the historical financial statements of Ag-Chem
Equipment Co. Inc. ("Ag-Chem") prior to AGCO's acquisition of Ag-Chem on
April 16, 2001.
The pro forma combined financial statements were prepared to illustrate
the estimated effects of the Challenger and Ag-Chem acquisitions, including
acquisition-related debt and equity transactions and other assumptions. The pro
forma combined statements of operations data for the year ended December 31,
2001 give effect to the acquisitions, as if the acquisitions had occurred as of
January 1, 2001. The pro forma combined balance sheet data give effect to the
Challenger acquisition as if it had occurred as of December 31, 2001 and has
been computed by combining AGCO's consolidated balance sheet as of December 31,
2001 and Challenger's balance sheet as of December 31, 2001. The pro forma
adjustments are described in the accompanying notes. The pro forma adjustments
are based upon available information and assumptions that AGCO's management
believes are reasonable. The pro forma financial statements do not purport to
represent AGCO's results of operations or financial position for any future
period or as of any date. The pro forma financial statements should be read in
conjunction with the historical consolidated financial statements of AGCO and
the notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in AGCO's Form 10-K for the year
ended December 31, 2001 and the historical financial statements of Challenger
filed as Exhibit 99.2 to AGCO's Form 8-K/A filed on April , 2002.
The Challenger acquisition will be accounted for under the purchase
method of accounting. Under purchase accounting, the total purchase cost will be
allocated to the tangible and intangible Challenger assets acquired by AGCO
based upon their respective fair values as of the closing of the acquisition
based on valuations and other studies, which are not yet available. A
preliminary allocation of the purchase cost has been made to major categories of
assets in the accompanying pro forma consolidated financial information based on
estimates. The actual allocation of purchase cost and the resulting effect on
income from operations may differ materially from the pro forma amounts included
herein. As explained in Note 3 to the Unaudited Pro Forma Combined Balance
Sheet, AGCO has assumed that the current recorded book values of Challenger's
property, plant and equipment will be written down by the excess of fair value
of the net assets acquired over the purchase cost in accordance with Accounting
Principles Board Opinion ("APB") No. 16. Once AGCO has access to Challenger's
detailed asset records, AGCO will make an allocation of the purchase price to
these assets based on thorough valuations that may change the amount of
currently recorded book values of Challenger's assets acquired by AGCO. In
addition, AGCO will review the estimated remaining lives of the assets, which
may affect the resulting depreciation and amortization relating to these assets,
and accordingly, may affect net earnings and the pro forma results of operations
included herein.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(in millions, except share and per share data)
Pro Forma
Acquisition Pro Forma
AGCO Ag-Chem (1) Challenger(2) Adjustments Combined
--------- ------------ ------------- ----------- ---------
Net sales $ 2,541.5 $ 121.1 $ 55.5 $ -- $ 2,718.1
Cost of goods sold 2,106.7 89.2 107.4 0.2 (3) 2,300.1
(3.4)(4)
--------- --------- --------- ------ ---------
Gross profit 434.8 31.9 (51.9) 3.2 418.0
Selling, general and administrative
expenses 257.0 22.7 13.7 -- 293.4
Engineering expenses 49.6 2.1 26.9 -- 78.6
Restructuring and other infrequent
expenses 13.0 -- -- -- 13.0
Amortization of intangibles 18.5 -- -- 1.2 (5) 19.7
--------- --------- --------- ------ ---------
Income (loss) from operations 96.7 7.1 (92.5) 2.0 13.3
Interest expense, net 58.6 1.3 20.1 2.0 (6) 64.5
0.6 (7)
(18.1)(8)
Other expense, net 23.4 1.6 1.2 0.1 (3) 26.3
--------- --------- --------- ------ ---------
Income (loss) before income taxes, equity
in net earnings of affiliates and
extraordinary loss 14.7 4.2 (113.8) 17.4 (77.5)
Income tax provision (benefit) 1.9 2.3 (45.6) 7.0 (9) (34.4)
--------- --------- --------- ------ ---------
Income (loss) before equity in net
earnings of affiliates and
extraordinary loss 12.8 1.9 (68.2) 10.4 (43.1)
Equity in net earnings of affiliates 10.6 0.5 -- -- 11.1
--------- --------- --------- ------ ---------
Income (loss) before extraordinary loss 23.4 2.4 (68.2) 10.4 (32.0)
Extraordinary loss, net of taxes (0.8) -- -- -- (0.8)
--------- --------- --------- ------ ---------
Net income (loss) $ 22.6 $ 2.4 $ (68.2) $ 10.4 $ (32.8)
========= ========= ========= ====== =========
Net income (loss) per common share:
Basic:
Income (loss) before extraordinary
loss $ 0.34 $ (0.44)
Extraordinary loss, net of taxes (0.01) (0.01)
--------- ---------
Net income (loss) $ 0.33 $ (0.45)
========= =========
Diluted:
Income (loss) before extraordinary
loss $ 0.34 $ (0.44)
Extraordinary loss, net of taxes (0.01) (0.01)
--------- ---------
Net income (loss) $ 0.33 $ (0.45)
========= =========
Weighted average number of common and
common equivalent shares outstanding:
Basic 68.3 4.4 (10) 72.7
========= ====== =========
Diluted 68.5 4.2 (10) 72.7
========= ====== =========
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(1) Represents the unaudited statement of operations for Ag-Chem for the
period from January 1, 2001 to April 16, 2001.
(2) Represents the audited statement of operations of Challenger for 2001.
(3) To reflect the increase in depreciation expense for the period from
January 1, 2001 to April 16, 2001 from adjusting the historical book
value of Ag-Chem's property, plant and equipment to estimated fair
market value.
(4) To reflect the decrease in depreciation expense from adjusting the
historical book value of the Challenger's property, plant and equipment
to its estimated new accounting basis. (See Note 3 to the Unaudited Pro
Forma Combined Balance Sheet).
(5) To reflect an increase in amortization of intangible assets for the
period from January 1, 2001 to April 16, 2001 from the preliminary
purchase price allocation of the net assets of Ag-Chem using
amortization periods ranging from five to forty years.
(6) To reflect the increase in interest expense for the period from
January 1, 2001 to April 16, 2001 for borrowings incurred to fund the
cash portion of the Ag-Chem acquisition consideration of $147.5 million
assuming an interest rate of 4.7%. The actual interest rate related to
such debt may differ from 4.7% resulting from changes in LIBOR and
changes in AGCO's debt agreements. Accordingly, for every 0.125%
variance in the interest rate, interest expense related to this
adjustment would increase by $0.1 million.
(7) To reflect the increase in interest expense for borrowings incurred to
fund the initial purchase of production inventory from Caterpillar in
the amount of $13.0 million assuming an interest rate of 4.7%. The
actual interest rate related to such debt may differ from 4.7%.
Accordingly, for every 0.125% variance in the interest rate, interest
expense related to this adjustment would change less than $0.1 million.
(8) To adjust Challenger interest expense as follows (in millions):
Elimination of Challenger historical interest expense $(20.1)
Assumed interest expense for borrowings to fund
Challenger's 2001 net cash provided by financing activities
of $85.8 million assuming an interest rate of 4.7% 2.0
------
$(18.1)
======
The actual interest rate related to such debt may vary from 4.7%.
Accordingly, for every 0.125% change in interest rate, interest expense
related to this adjustment would change by $0.1 million.
(9) To reflect an income tax provision for the net pro forma adjustments,
after taking into account non-deductible goodwill amortization.
(10) To adjust the weighted average shares outstanding for the following (in
millions):
Common shares issued in connection with the Ag-Chem
acquisition assuming the 11.8 million shares were issued
on January 1, 2001 3.4
Common shares issued in connection with the Challenger
acquisition 1.0
------
Adjustment to Basic weighted average shares 4.4
Elimination of dilutive shares from AGCO's historical
weighted average shares resulting from pro forma loss (0.2)
------
Adjustment to Diluted weighted average shares 4.2
======
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2001
(in millions)
Pro Forma Pro Forma
AGCO Challenger(1) Adjustments Combined
--------- ------------- ----------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 28.9 $ -- $ -- $ 28.9
Accounts and notes receivable, net 471.9 8.0 (8.0)(2) 471.9
Inventories, net 558.8 17.7 (4.7)(3) 571.8
Other current assets 122.9 9.5 (9.5)(2) 122.9
--------- ------- ------- ---------
Total current assets 1,182.5 35.2 (22.2) $ 1,195.5
Property, plant and equipment, net 316.9 54.0 (32.7)(4) 338.2
Investment in affiliates 69.6 -- - 69.6
Other assets 190.9 -- - 190.9
Intangible assets, net 413.4 -- - 413.4
--------- ------- ------- ---------
Total assets $ 2,173.3 $ 89.2 $ (54.9) $ 2,207.6
========= ======= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 272.2 $ 213.9 $(213.9)(2) $ 272.2
Accrued expenses 350.7 25.1 (25.1)(2) 350.7
Other current liabilities 19.9 -- -- 19.9
--------- ------- ------- ---------
Total current liabilities 642.8 239.0 (239.0) 642.8
Long-term debt 617.7 190.7 (190.7)(2) 630.7
13.0 (5)
Postretirement health care benefits 25.6 4.3 (4.3)(2) 25.6
Other noncurrent liabilities 87.8 0.2 (0.2)(2) 87.8
--------- ------- ------- ---------
Total liabilities 1,373.9 434.2 (421.2) 1,386.9
--------- ------- ------- ---------
Commitments and Contingencies
Stockholders' Equity:
Net parent investment -- (345.0) 345.0 (6) --
Common stock 0.7 -- -- 0.7
Additional paid-in capital 531.5 -- 21.3 (7)(8) 552.8
Retained earnings 645.0 -- -- 645.0
Unearned compensation (0.6) -- -- (0.6)
Accumulated other comprehensive loss (377.2) -- -- (377.2)
--------- ------- ------- ---------
Total stockholders' equity 799.4 (345.0) 366.3 820.7
--------- ------- ------- ---------
Total liabilities and
stockholders' equity $ 2,173.3 $ 89.2 $ (54.9) $ 2,207.6
========= ======= ======= =========
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) Represents the audited balance sheet of Challenger as of December 31,
2001. Certain accounts have been reclassified to conform with AGCO's
presentation.
(2) To eliminate Challenger's accounts receivable, deferred taxes, accounts
and intercompany payables, accrued expenses, intercompany debt and
postretirement benefit liabilities that were not acquired or assumed in
the Challenger acquisition.
(3) To adjust the Challenger inventory balance to equal the amount of
initial production inventory purchased from Caterpillar of $13.0
million.
(4) To adjust the accounting basis for the Challenger property, plant and
equipment by the excess of fair value over the purchase cost of assets
acquired in the Challenger acquisition in accordance with APB No. 16.
(5) To reflect an increase in outstanding borrowings to fund the initial
purchase of production inventory from Caterpillar of $13.0 million.
(6) To reflect the elimination of Challenger's historical net parent
investment.
(7) To reflect the issuance of 1.0 million shares issued in connection with
Challenger acquisition at the market price on the closing date of
$20.85.
(8) Under the terms of the acquisition agreement, the value to Caterpillar
of the AGCO common shares issued in the acquisition is protected for a
period of ninety days after the initial effectiveness of the registration
statement registering the resale of the shares by Caterpillar. If
Caterpillar sells the common shares within the ninety day period,
Caterpillar agrees to pay AGCO any excess of the sales proceeds over
$20.58 per share and AGCO agrees to pay Caterpillar any shortfall of the
sales proceeds under $18.62 per share. To the extent any shares remain
unsold after the ninety day period, Caterpillar is required to pay AGCO
the value of the remaining unsold shares in excess of $20.58 based on a
five day average of the closing price of AGCO's common stock. The
following table reflects the cash to be paid or received by AGCO assuming
all 1.0 million shares issued in the acquisition are sold at one of the
following range of common stock prices:
Common Cash to be
Stock (Paid)/Received
Sales Price By AGCO
----------- ---------------
(in millions)
$17.00 $(1.7)
$18.00 $(0.6)
$18.50 $(0.1)
$21.00 $0.4
$21.50 $0.9
$22.00 $1.4
$22.50 $2.0
These amounts have not been reflected in the Pro Forma Combined Balance
Sheet. In addition, the impact of these amounts to interest expense has
not been reflected in the Pro Forma Combined Statement of Operations.
Assuming the range of common stock prices in the table above, the
impact to interest expense would be less than $0.1 million.