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EXHIBIT 99.4
INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Combined Financial Information P-2
Unaudited Pro Forma Combined Statements of Operations P-3
Notes to Unaudited Proforma Combined Statements of Operations P-5
Unaudited Pro Forma Combined Balance Sheet P-6
Notes to Unaudited Pro Forma Combined Balance Sheet P-7
P-1
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial
information is based on our historical financial statements, adjusted to give
effect to the following:
- our acquisition of Valtra;
- the issuance of $201.3 million 1 3/4% Convertible Senior
Subordinated Notes;
- the refinancing of our existing $350.0 million revolving
credit facility with a new $300.0 million revolving credit
facility and a new $450.0 million term loan facility;
- and interim bridge financing of approximately $100.0 million.
The pro forma combined statements of operations data for the
year ended December 31, 2002 and the nine months ended September 30, 2003 give
effect to the above transactions as if the transactions occurred as of January
1, 2002. The pro forma combined balance sheet data gives effect to the above
transactions as if the transactions had occurred on September 30, 2003. The pro
forma financial information has been presented with separate subtotals to show
the effect of the Valtra acquisition and the issuance of the 1 3/4% Convertible
Senior Subordinated Notes and bridge financing as well as the new revolving
credit and term loan facilities.
The pro forma adjustments are described in the accompanying
notes and are based on available information and assumptions that our management
believes are reasonable. The pro forma financial statements do not purport to
represent our 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 our historical consolidated financial statements and the
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in our Annual Report on Form 10-K for the
year ended December 31, 2002, and Valtra's historical combined financial
statements and the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in this document.
The Valtra acquisition will be accounted for in accordance
with Statement of Financial Accounting Standards, or SFAS, No. 141, "Business
Combinations," and accordingly, we will allocate the purchase price to the
assets acquired and liabilities assumed based on their respective fair values as
of the closing of the acquisition which will be determined based on valuations
and other studies that are currently in process. A preliminary allocation of the
purchase price has been made to major categories of assets and liabilities in
the accompanying pro forma combined financial information based on estimates and
preliminary results of valuations and studies performed to date. The actual
allocation of the purchase price and the resulting effect on income from
operations may differ materially from the pro forma amounts included herein.
Except as explained in the notes to the Unaudited Pro Forma Combined Balance
Sheet, we have assumed that the current recorded book value of Valtra's assets
and liabilities approximate their fair value. Once we have access to Valtra's
detailed asset records, we will make an allocation of the purchase price to
these assets based on detailed valuations, which may change the amounts of
currently recorded book values of Valtra's assets and liabilities thereby
changing the amount of goodwill reflected in these pro forma financial
statements. In addition, we 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.
During 2002, Kone Corporation acquired Partek Corporation,
which included Valtra. Under accounting standards generally accepted in Finland,
Kone was not required to push down the purchase accounting adjustments to the
Valtra businesses acquired. As part of the conversion to accounting principles
generally accepted in the United States, the combined historical financial
statements of the Valtra Group were modified to reflect the new basis of
accounting established for the acquired assets and liabilities based upon their
estimated fair values at August 1, 2002 in accordance with Statement of
Financial Accounting Standards No. 141, "Business Combinations."
P-2
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
(IN MILLIONS, EXCEPT PER SHARE DATA)
Valtra Historical
------------------------------
(Predecessor) | (Successor)
January 1, | August 1,
2002 | 2002
through | through Pro Forma Pro Forma
July 31, | December Acquisition Financing Pro Forma
AGCO 2002 | 31, 2002 Adjustments Adjustments Combined
-------- ------------- | ----------- ----------- ----------- ---------
Net sales $2,922.7 $ 386.6 | $ 315.6 $ (11.0)(3) $ -- $ 3,613.9
Cost of goods sold 2,390.9 319.1 | 258.7 (0.7)(1) -- 2,958.7
| (2.3)(2)
| (11.0)(3)
| 2.7 (5)
| 2.9 (7)
| (1.6)(8)
-------- ------------- | ----------- ----------- ----------- ---------
Gross profit 531.8 67.5 | 56.9 (1.0) -- 655.2
|
Selling, general and |
administrative expenses 282.4 40.4 | 32.2 2.3 (2) -- 354.8
| (0.1)(4)
| (2.7)(5)
| 0.3 (8)
Engineering expenses 57.2 7.0 | 4.9 (0.1)(8) -- 69.0
Restricted stock compensation |
expense 44.1 -- | -- -- 44.1
Restructuring and other infrequent |
expenses 42.7 -- | -- 0.1 (4) -- 42.8
Amortization of intangibles 1.4 -- | 4.8 7.5 (9) -- 13.7
-------- ------------- | ----------- ----------- ----------- ---------
Income from operations 104.0 20.1 | 15.0 (8.3) -- 130.8
|
Interest expense, net 57.4 1.7 | 1.4 36.1 (11) 96.6
Other expense, net 20.8 0.1 | 1.1 0.7 (1) -- 22.7
-------- ------------- | ----------- ----------- ----------- ---------
Income before income taxes, |
equity in net earnings (loss) of |
affiliates and cumulative effect |
of a change in accounting principle 25.8 18.3 | 12.5 (9.0) (36.1) 11.5
|
Income tax provision (benefit) 99.8 5.8 | (41.2) 36.6 (6) (12.6)(12) 85.2
| (3.2)(10)
-------- ------------- | ----------- ----------- ----------- ---------
(Loss) income before equity in net |
earnings (loss) of affiliates |
and cumulative effect of a change |
in accounting principle (74.0) 12.5 | 53.7 (42.4) (23.5) (73.7)
|
Equity in net earnings (loss) of |
affiliates 13.7 (0.1) | 0.1 -- -- 13.7
-------- ------------- | ----------- ----------- ----------- ---------
(Loss) income before cumulative |
effect of a change in accounting |
principle $ (60.3) $ 12.4 | $ 53.8 $ (42.4) $ (23.5) $ (60.0)
======== ============= | =========== =========== =========== =========
Net (loss) income per common share:
Basic:
(Loss) income before cumulative
effect of a change in
accounting principle $ (0.81) $ (0.81)
======== =========
Diluted:
(Loss) income before
cumulative effect of a
change in accounting principle $ (0.81) $ (0.81)
======== =========
Weighted average number of common
and common equivalent shares
outstanding:
Basic 74.2 74.2
======== =========
Diluted 74.2 74.2
======== =========
See Notes to Unaudited Pro Forma Combined Statements of Operations
P-3
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Pro Forma Pro Forma
Acquisition Offering Pro Forma
AGCO Valtra Adjustments Adjustments Combined
-------- ----------- ----------- ----------- --------
Net sales $2,460.2 $ 695.1 $ (8.6)(3) $ -- $3,146.7
Cost of goods sold 2,019.7 565.5 0.4 (1) -- 2,577.7
(0.7)(2)
(8.6)(3)
3.3 (5)
(1.9)(8)
-------- ----------- ----------- ----------- --------
Gross profit 440.5 129.6 (1.1) -- 569.0
Selling, general and administrative
expenses 239.6 68.7 0.7 (2) -- 305.8
(0.1)(4)
(3.3)(5)
0.2 (8)
Engineering expenses 51.3 13.0 (0.1)(8) -- 64.2
Restricted stock compensation
expense 0.5 -- -- -- 0.5
Restructuring and other infrequent
expenses 27.8 -- 0.1 (4) -- 27.9
Amortization of intangibles 1.3 9.6 1.0 (9) -- 11.9
-------- ----------- ----------- ----------- --------
Income from operations 120.0 38.3 0.4 -- 158.7
Interest expense, net 45.7 2.9 -- 21.9 (11) 70.5
Other expense, net 19.2 1.3 (0.4)(1) -- 20.1
-------- ----------- ----------- ----------- --------
Income before income taxes
and equity in net earnings (loss)
of affiliates 55.1 34.1 0.8 (21.9) 68.1
Income tax provision (benefit) 24.9 16.7 (13.3)(6) (7.7)(12) 20.9
0.3 (10)
-------- ----------- ----------- ----------- --------
Income before equity in net
earnings (loss) of affiliates 30.2 17.4 13.8 (14.2) 47.2
Equity in net earnings (loss) of affiliates 14.4 (0.2) -- -- 14.2
-------- ----------- ----------- ----------- --------
Net income $ 44.6 $ 17.2 $ 13.8 $ (14.2) $ 61.4
======== =========== =========== =========== ========
Net income per common share:
Basic $ 0.59 $ 0.82
======== ========
Diluted $ 0.59 $ 0.81
======== ========
Weighted average number of common and common
equivalent shares outstanding:
Basic 75.1 75.1
======== ========
Diluted 75.6 75.6
======== ========
See Notes to Unaudited Pro Forma Combined Statements of Operations.
P-4
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(1) To reclassify Valtra's exchange gains and losses from cost of goods
sold to other expense, net to conform with our presentation.
(2) To reclassify Valtra's bad debt expense from cost of goods sold to
selling, general and administrative expenses to conform with our
presentation.
(3) To eliminate sales and purchases between Valtra and AGCO during the
respective periods.
(4) To reclassify restructuring expenses from selling, general and
administrative expenses to restructuring and other infrequent expenses
to conform with our presentation.
(5) To reclassify shipping and handling costs from selling, general and
administrative expenses to cost of goods sold to conform to our
presentation.
(6) To eliminate a deferred tax benefit during 2002 and the related
deferred tax provision during 2003 associated with the sale of Valtra's
Brazilian operations internally within Kone Corporation; this net
deferred tax asset will not be acquired by AGCO.
(7) To reflect the non-recurring charge resulting from the write-up of
inventories to their estimated fair value. See Note 4 to the Unaudited
Pro Forma Combined Balance Sheet.
(8) To reflect the change in depreciation expense from adjusting certain
property, plant and equipment to estimated fair market value.
(9) To reflect the increase in the amortization of certain identifiable
intangible assets resulting from the preliminary purchase price
allocation of the net assets acquired in the acquisition assuming the
following estimated fair values (in millions) and amortization periods
(see Note 6 to the Unaudited Pro Forma Combined Balance Sheet):
Technology and know-how $ 39.2 3.5 to 7 years
Tradenames 1.1 10 years
Trademarks 40.5 indefinite
Dealer network 53.2 10 years
Customer relationships 14.9 10 years
------
$148.9
======
(10) To reflect an income tax provision for the net pro forma acquisition
adjustments.
(11) To adjust interest expense in connection with the issuance of the
1 3/4% Convertible Senior Subordinated Notes, the bridge loan
financing, and the new revolving credit and term loan facilities as
follows (in millions):
2002 2003
------ ------
Elimination of historical interest expense on the Revolving Credit
Facility at a weighted average borrowing rate of 4.8% and 4.0%,
respectively $ (8.6) $ (8.6)
Elimination of amortization of Revolving Credit Facility deferred
financing costs (1.7) (1.3)
Elimination of amortization of Bridge Loan deferred commitment fee
financing costs -- (0.4)
Interest resulting from New Revolving Credit Facility at a weighted
average borrowing rate of 4.0% and 3.5%, respectively 7.2 7.4
Interest resulting from New Term Loan Facility at a weighted average
borrowing rate of 4.3% and 3.7%, respectively 19.1 12.5
Interest resulting from 1 3/4% Convertible Senior Subordinated Notes 3.5 2.6
Interest resulting from Bridge Loan Facility at a weighted average
borrowing rate of 8.375% 8.4 6.3
Amortization of the estimated deferred financing costs associated with
the Term Loan Facility and the 1 3/4% Convertible Senior Subordinated
Notes 2.5 1.9
Amortization of the estimated deferred financing costs associated with
the Bridge Loan financing 3.6 --
Amortization of the estimated deferred financing costs associated with
the New Revolving Credit Facility. The pro forma adjustment
excludes the write-off of unamortized debt issuance costs related
to the existing revolving credit facility of approximately $0.6
million as of September 30, 2003, which will be recorded upon the
closing of the new revolving credit facility. 2.1 1.5
------ ------
$ 36.1 $ 21.9
====== ======
(12) To reflect an income tax provision for the net pro forma adjustments
related to the issuance of the 1 3/4% Convertible Senior Subordinated
Notes, the bridge loan financing, and the new revolving credit and term
loan facilities.
P-5
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2003
(IN MILLIONS)
Pro Forma Pro Forma
Acquisition Offering Pro Forma
AGCO Valtra (1) Adjustments Adjustments Combined
-------- ---------- ----------- ----------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 27.2 $ 143.7 $ (143.7)(3) $ -- $ 27.2
Accounts and notes receivable, net 522.8 163.7 (2.3)(2) -- 684.2
Inventories, net 908.8 164.3 2.9 (4) -- 1,076.0
Other current assets 213.9 -- -- -- 213.9
-------- ---------- ----------- ----------- ---------
Total current assets 1,672.7 471.7 (143.1) -- 2,001.3
Property, plant and equipment, net 396.4 167.4 (0.5)(5) -- 563.3
Investment in affiliates 92.2 1.6 -- -- 93.8
Other assets 136.8 7.0 (1.9)(3) 20.8 (11) 162.7
Intangible assets, net 410.8 190.8 265.8 (6)(9) -- 867.4
-------- ---------- ----------- ----------- ---------
Total assets $2,708.9 $ 838.5 $ 120.3 $ 20.8 $ 3,688.5
======== ========== =========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 332.5 $ 99.0 $ (2.3)(2) $ -- $ 429.2
Accrued expenses 450.3 90.7 -- -- 541.0
Other current liabilities 39.4 234.0 (175.2)(3)(7) -- 98.2
-------- ---------- ----------- ----------- ---------
Total current liabilities 822.2 423.7 (177.5) -- 1,068.4
Long-term debt 786.9 2.6 692.9 (10) 21.4 (11) 1,503.8
Pensions and postretirement health 154.5 17.1 -- -- 171.6
care benefits
Other noncurrent liabilities 98.7 1.7 (1.7)(3) -- 98.7
-------- ---------- ----------- ----------- ---------
Total liabilities 1,862.3 445.1 513.7 21.4 2,842.5
Stockholders' Equity:
Common stock 0.8 50.9 (50.9)(8) -- 0.8
Additional paid-in capital 590.1 31.5 (31.5)(8) -- 590.1
Retained earnings 605.2 411.5 (411.5)(8) (0.6)(12) 604.6
Unearned compensation (0.5) -- -- -- (0.5)
Accumulated other comprehensive loss (349.0) (100.5) 100.5 (8) -- (349.0)
-------- ---------- ----------- ----------- ---------
Total stockholders' equity 846.6 393.4 (393.4) (0.6) 846.0
-------- ---------- ----------- ----------- ---------
Total liabilities and stockholders' equity $2,708.9 $ 838.5 $ 120.3 $ 20.8 $ 3,688.5
======== ========== =========== =========== =========
See Notes to Unaudited Pro Forma Combined Balance Sheet.
P-6
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) Represents the combined balance sheet of Valtra as of September 30,
2003. Certain accounts have been reclassified to conform to our
presentation.
(2) To eliminate receivables and payables outstanding as of September 30,
2003 related to sales and purchases made between AGCO and Valtra.
(3) To eliminate cash and cash equivalents as well as certain interest
bearing assets and liabilities that will not be acquired or assumed by
AGCO per the terms of the purchase agreement with Kone Corporation.
(4) To adjust Valtra inventories to their estimated fair value.
(5) To adjust certain property, plant and equipment to estimated fair
values based on preliminary valuations and studies performed to date.
(6) To adjust certain identifiable intangible assets to preliminary
estimated values based upon independent appraisal valuations performed
to date. (See Note 9 of Unaudited Pro Forma Combined Statements of
Operations)
(7) To eliminate deferred tax assets that will not be transferred to AGCO.
(8) To reflect the elimination of Valtra's historical stockholders' equity.
(9) To reflect goodwill from the preliminary purchase price allocation of
the net assets acquired related to the acquisition as follows (in
millions):
Purchase price ((EURO) 600.0 million at(euro)1.1669/US$1.0 as of September 30, 2003) *$ 690.0
Estimated transaction fees and expenses 5.5
---------
Total purchase price 695.5
Actual book value of Valtra net assets as of September 30, 2003 (393.4)
Increase in inventories to estimated fair value (2.9)
Decrease in property, plant and equipment to estimated fair value 0.5
Increase in identifiable intangible assets to estimated fair value (6.0)
Net liabilities not assumed (33.9)
---------
Estimated fair value of net assets acquired (435.7)
---------
Estimated goodwill $ 259.8
=========
(*) As of January 5, 2004 the exchange rate was (euro) 1.2585/
US$1.0 resulting in a purchase price of approximately
$755.1 million. The purchase price was Euro 600.0 million,
net of approximately Euro 22.0 million of cash acquired.
(10) To reflect the net change in long-term debt associated with the
following (in millions):
Issuance of 1 3/4% Convertible Senior Subordinated Notes $ 201.3
Borrowing under bridge loan financing 100.0
Borrowing under new revolving credit facility and term loan facility 692.5
Repayment of old revolving credit facility (276.9)
Valtra long-term debt not assumed (2.6)
Deferred fees in connection with the purchase and offering (21.4)
---------
$ 692.9
=========
(11) To reflect the following (in millions):
Deferred fees and expenses paid in connection with the Issuance of 1 3/4%
Convertible Senior Subordinated Notes $ 7.3
Deferred debt issuance fees and expenses in connection with bridge loan
financing 1.0
Deferred debt issuance fees and expenses in connection with the new revolving
credit facility and term loan facility 13.1
---------
Deferred fees associated with the purchase and offering 21.4
Write-off of unamortized debt issuance costs associated with the existing
revolving credit facility (0.6)
---------
$ 20.8
=========
P-7
(12) To reduce retained earnings for the after-tax effect of a $0.6 million
writedown of unamortized debt issuance costs associated with the
refinancing of the existing revolving credit facility.
P-8