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EXHIBIT 99.3
INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Combined Financial Information P-2
Unaudited Pro Forma Combined Statement of Operations P-3
Notes to Unaudited Pro Forma Combined Statement of Operations P-4
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 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, which
occurred on January 5, 2004;
- interim bridge financing of approximately $100.0 million,
which occurred on January 5, 2004; and
- the issuance of $201.3 million 1 3/4% convertible senior
subordinated notes issued on December 23, 2003.
The pro forma combined statement of operations data for the year ended
December 31, 2003 gives effect to the above transactions as if the transactions
occurred as of January 1, 2003. The pro forma combined balance sheet data gives
effect to the above transactions as if the transactions had occurred on December
31, 2003. The pro forma combined balance sheet has been presented with separate
subtotals to show the effect of the Valtra acquisition and the borrowings under
the bridge financing as well as the new revolving credit and term loan
facilities. The pro forma combined statement of operations has been presented
with separate subtotals to show the effect of the Valtra acquisition and the
borrowings under the bridge financing as well as the new revolving credit
facility, term loan facility and convertible senior subordinated notes.
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, 2003, 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 can further analyze
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 income and the pro forma results
of operations included herein.
During 2002, Kone Corporation acquired Partek Corporation, which
included Valtra. Under Finnish GAAP, Kone was not required to push down goodwill
to the Valtra businesses acquired, nor was it required to record the fair values
of intangible assets acquired. As part of the conversion to US GAAP, the
combined financial statements of the Valtra Group were modified to reflect the
new basis for accounting established for the acquired assets and liabilities
based upon the fair values at August 1, 2002 in accordance with SFAS No. 141.
P-2
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Pro Forma Pro Forma
Acquisition Financing Pro Forma
AGCO Valtra Adjustments Adjustments Combined
-------- -------- ----------- ----------- ---------
Net sales $3,495.3 $ 962.4 $ (11.5)(3) $ -- $4,446.2
Cost of goods sold 2,878.9 789.8 0.1 (1) -- 3,662.3
(1.2)(2)
(11.5)(3)
4.3 (5)
3.4 (7)
(1.5)(8)
-------- -------- -------- ------- --------
Gross profit 616.4 172.6 (5.1) -- 783.9
Selling, general and administrative expenses 331.6 101.4 1.2 (2) -- 428.2
(0.1)(4)
(4.3)(5)
(1.6)(8)
Engineering expenses 71.4 19.6 (0.7)(8) -- 90.3
Restricted stock compensation expense 0.6 -- -- -- 0.6
Restructuring and other infrequent expenses 27.6 -- 0.1 (4) -- 27.7
Amortization of intangibles 1.7 13.0 (0.1)(9) -- 14.6
-------- -------- -------- ------- --------
Income from operations 183.5 38.6 0.4 -- 222.5
Interest expense, net 60.0 2.6 -- 34.8 (11) 97.4
Other expense, net 25.2 1.7 (0.1)(1) -- 26.8
-------- -------- -------- ------- --------
Income before income taxes and equity in
net earnings of affiliates 98.3 34.3 0.5 (34.8) 98.3
Income tax provision (benefit) 41.3 53.1 (38.6)(6) (12.2)(12) 43.8
0.2 (10)
-------- -------- -------- ------- --------
Income (loss) before equity in net earnings of
affiliates 57.0 (18.8) 38.9 (22.6) 54.5
Equity in net earnings of affiliates 17.4 0.1 -- -- 17.5
-------- -------- -------- ------- --------
Net income (loss) $ 74.4 $ (18.7) $ 38.9 $ (22.6) $ 72.0
======== ======== ======== ======= ========
Net income per common share:
Basic $ 0.99 $ 0.96
======== ========
Diluted $ 0.98 $ 0.95
======== ========
Weighted average number of common and
common equivalent shares outstanding:
Basic 75.2 75.2
======== ========
Diluted 75.6 75.6
======== ========
See Notes to Unaudited Pro Forma Combined Statement of Operations.
P-3
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) To reclassify Valtra's exchange gains and losses on purchases and sales
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
year.
(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 the reversal of a deferred tax asset associated with the
sale of Valtra's Brazilian operations internally within Kone
Corporation.
(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 change 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 $ 46.7 3 to 7 years
Tradenames 1.0 10 years
Trademarks 36.9 indefinite
Dealer Network 56.2 10 years
Customer relationships 16.1 10 years
--------
$ 156.9
========
(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):
Elimination of historical interest expense on the revolving credit
facility at a weighted average borrowing rate of 4.4% $(11.1)
Elimination of amortization of revolving credit facility deferred
financing costs (1.7)
Elimination of amortization of bridge loan deferred commitment fee
financing costs (2.0)
Interest resulting from new revolving credit facility at a weighted
average borrowing rate of 3.5% 11.6
Interest resulting from new term loan facility at a weighted average
borrowing rate of 3.8% 17.2
Interest resulting from 1 3/4% convertible senior subordinated notes 3.5
Interest resulting from bridge loan facility at a weighted average
borrowing rate of 8.375% 8.4
Amortization of the estimated deferred financing costs associated with
the term loan facility and the 1 3/4% convertible senior subordinated
notes 2.6
Amortization of the estimated deferred financing costs associated with
the bridge loan financing 4.1
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 $0.5
million as of December 31, 2003, which was recorded upon the
closing of the new revolving credit facility 2.2
------
$ 34.8
======
P-4
(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 DECEMBER 31, 2003
(IN MILLIONS)
Pro Forma Pro Forma
Acquisition Financing Pro Forma
AGCO Valtra(1) Adjustments Adjustments Combined
-------- -------- ----------- ----------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 147.0 $ 159.2 $ (159.2)(3) $ -- $ --
(147.0)(9)
Accounts and notes receivable, net 553.6 295.9 (3.2)(2) -- 706.9
(139.4)(3)
Inventories, net 803.6 149.1 3.7 (4) -- 956.4
Other current assets 180.3 13.1 -- -- 193.4
-------- -------- -------- -------- --------
Total current assets 1,684.5 617.3 (445.1) -- 1,856.7
Property, plant and equipment, net 434.2 178.6 (7.3)(5) -- 605.5
Investment in affiliates 91.6 2.0 -- -- 93.6
Deferred tax assets 147.5 -- -- -- 147.5
Other assets 63.8 0.4 -- 14.8 (11) 79.0
Intangible assets, net 417.8 200.9 296.7 (6)(9) -- 915.4
-------- -------- -------- -------- --------
Total assets $2,839.4 $ 999.2 $ (155.7) $ 14.8 $3,697.7
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 393.2 $ 74.8 $ (3.2)(2) $ -- $ 464.8
Accrued expenses 490.2 101.4 -- -- 591.6
Other current liabilities 45.7 298.0 (280.1)(3)(7) -- 79.3
15.7 (9)
-------- -------- -------- -------- --------
Total current liabilities 929.1 474.2 (267.6) -- 1,135.7
Long-term debt 711.1 0.9 617.0 (10) 15.3 (11) 1,344.3
Pensions and postretirement health care benefits 197.5 19.0 -- -- 216.5
Other noncurrent liabilities 95.6 -- -- -- 95.6
-------- -------- -------- -------- --------
Total liabilities 1,933.3 494.1 349.4 15.3 2,792.1
Stockholders' Equity:
Common stock 0.8 54.9 (54.9)(8) -- 0.8
Additional paid-in capital 590.3 34.0 (34.0)(8) -- 590.3
Retained earnings 635.0 530.3 (530.3)(8) (0.5)(12) 634.5
Unearned compensation (0.5) -- -- -- (0.5)
Accumulated other comprehensive loss (319.5) (114.1) 114.1 (8) -- (319.5)
-------- -------- -------- -------- --------
Total stockholders' equity 906.1 505.1 (505.1) (0.5) 905.6
-------- -------- ------- -------- --------
Total liabilities and stockholders' equity $2,839.4 $ 999.2 $ (155.7) $ 14.8 $3,697.7
======== ======== ======== ======== ========
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 December 31,
2003. Certain accounts have been reclassified to conform to our
presentation.
(2) To eliminate receivables and payables outstanding as of December 31,
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.
(7) To eliminate deferred tax liabilities 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 600.6 million at Euro 1.2595/US$1.0 as of December 31, 2003) * $ 756.4
Estimated transaction fees and expenses 8.5
-------
Total purchase price 764.9
Actual book value of Valtra net assets as of December 31, 2003 (505.1)
Increase in inventories to estimated fair value (3.7)
Decrease in property, plant and equipment to estimated fair value 7.3
Increase in identifiable intangible assets to estimated fair value (6.3)
Net assets not assumed 17.6
Tax impact on certain acquired intangibles 15.7
-------
Estimated fair value of net assets acquired (474.5)
-------
Estimated goodwill $ 290.4
=======
(*) As of January 5, 2004 the exchange rate was Euro 1.2585/US$1.0
resulting in a purchase price of approximately $755.9 million.
The purchase price was Euro 622.0 million on January 5, 2004,
which included Euro 21.4 million of cash acquired. The
unaudited pro forma balance sheet reflects the net purchase
price of Euro 600.6 million, and therefore does not reflect
cash acquired. The unaudited pro forma balance sheet also
reflects the use of cash on hand of $147.0 million to finance
the purchase of Valtra in addition to the issuance of debt
(see Note 10).
(10) To reflect the net change in long-term debt associated with the
following (in millions):
Borrowing under bridge loan financing $ 100.0
Borrowing under new revolving credit facility and term loan facility 533.2
Valtra long-term liabilities not assumed (0.9)
Deferred fees in connection with the acquisition financing (15.3)
-------
$ 617.0
=======
(11) To reflect the following (in millions):
Deferred debt issuance fees and expenses in connection with bridge loan
financing $ 1.6
Deferred debt issuance fees and expenses in connection with the new revolving
credit facility and term loan facility 13.7
-------
Deferred fees associated with the acquisition financing 15.3
Write-off of unamortized debt issuance costs associated with the existing
revolving credit facility (0.5)
-------
$ 14.8
=======
P-7
(12) To reduce retained earnings for the after-tax effect of a $0.5 million
writedown of unamortized debt issuance costs associated with the
refinancing of the existing revolving credit facility.
P-8