AGCO
Annual Report 2014

Plain-text annual report

ALL IN A DAY’S WORK 2014 ANNUAL REPORT Fellow Shareholders Martin Richenhagen — Chairman, President and Chief Executive Officer Like our farmers and producers, we’re focused on making every day at AGCO a productive day. In 2014, this involved innovating new technologies, forging stronger relationships, extending our global reach and investing in what we believe is a future filled with opportunity. 1 ALL IN A DAY’S WORKFellow Shareholders: excluding restructuring and other infrequent expenses farmers to take full advantage of the growing amount around the world. Africa, Brazil and Eastern Europe all Our vision at AGCO is to provide high-tech solutions for of $0.34 per share. Our financial discipline enabled us to of data they now have available. Through Fuse, AGCO present significant growth opportunities. We are investing professional farmers feeding the world. As we design, generate over $130 million in free cash flow after funding is well-positioned to benefit from the technological in new products, improved distribution and enhanced manufacture and support equipment that increases farmers’ significant investments in new product development, revolution now taking place in the agricultural dealer service capabilities to capture growth in these areas. efficiency and productivity, we also help solve one of our Tier 4 emission compliance and a new factory in China. equipment industry. planet’s greatest challenges – feeding a population that is expected to grow from 7 billion today to nearly 10 billion by 2050. To meet this demand, farmers will have to grow as much food over the next 50 years as they have over the full course of recorded history. To support this effort, AGCO must be at its best. Focused on Shareholder Returns Strategic Priorities Remain in Place With a healthy balance sheet, AGCO completed a Despite the market challenges, our priorities remain $500 million share repurchase plan during 2014. unchanged, focusing on margin performance and cash distribution capabilities. I am also pleased to report that a new $500 million generation, while providing superior products and services plan was authorized in December 2014 to support future to our customers. Balancing near-term cost reductions repurchases. We expect to generate strong cash flow with continued investment in longer-term growth initiatives in 2015 and beyond to fund this plan. This new share is our goal. In addition to adjusting our costs and workforce ...we have put initiatives in place to repurchase program demonstrates our commitment to better match the current demand environment, our grow our sales, improve distribution to driving attractive returns for our shareholders. Going ongoing cost reduction efforts focused on materials and and reduce expenses in order to forward, we also are committed to taking a disciplined direct labor productivity remain intact. Through our AGCO enhance margins and produce higher approach to maintaining our investment-grade credit Production Systems initiatives, we are improving direct labor returns on invested capital. rating and growing our dividend. efficiency through our investments in new manufacturing In addition, there are opportunities to grow outside our tractor business. AGCO is a global leader in tractor sales, and we are working to leverage our strong brands with new and improved harvesting products and enhanced Despite the market challenges, our priorities remain unchanged, focusing on margin performance and cash generation, while providing superior products and services to our customers. 2014 Performance The past year was a challenging year for our industry and AGCO due to weakened market demand. The record grain harvest in the U.S., combined with healthy crop production across Western Europe and Brazil, resulted in increased grain inventories, which pressured soft commodity prices. Deteriorating farm economics negatively impacted farmer sentiment, and we experienced softer industry equipment demand in all major markets. We took aggressive actions to manage our working capital and align our cost structure with weaker market conditions. Our disciplined inventory reduction program resulted in year- end inventories below 2013 levels, on a constant currency basis, despite falling demand. These and other actions helped make AGCO a leaner, more focused company better positioned for leadership in our competitive industry. Over the past decades, we have worked to have the right products and the right technology to compete effectively in today’s dynamic marketplace. To support this commitment, we have put initiatives in place to grow our sales, improve distribution and reduce expenses in order to enhance margins and produce higher returns on invested capital. Precision Farming Innovation Increasingly, farmers are operating their farms like modern factories as they accelerate the use of precision farming and fleet management technology to improve productivity. Consequently, adoption rates for our Fuse® Technologies products have increased dramatically over the last 18 months. Our customers view Fuse guidance and telemetry as top-of- the-line technology, and they will expect AGCO to lead the way to further enhance these established technologies. They also will expect us to deliver new technology solutions that help them manage their operations. From implement control to monitoring and improved mobility, AGCO plans AGCO completed 2014 generating net sales of $9.7 billion, to continue to deliver new products in 2015 and beyond. which was approximately 10 percent below 2013 levels. We expect to also begin to integrate technology products Adjusted net income for 2014 was $4.70 per share, and services to create complete solutions that allow 2 technology and continuous improvement efforts. Our More Potential Ahead Global Purchasing Excellence (GPE) program, which AGCO has grown significantly during the past decade, transformed our factory-based purchasing function into and I’m proud to be part of our organization’s progress. new global commodity-based purchasing teams, is also We have accomplished a great deal, with much yet to attacking material costs. These commodity-based teams achieve to realize our full potential. AGCO is in an excellent have better market and product knowledge, which, along position to help agriculture meet the daunting challenge with global sourcing expertise, helps us make better of feeding a growing planet. Our high-tech solutions are purchasing decisions and lower costs. making professional farmers more productive, and this bodes well for all of our stakeholders. Growing AGCO around the world also remains a major focus. We are continuing to pursue growth opportunities In closing, I want to thank our customers and dealers with our GSI business. Inefficiencies in handling crops for their business and support, our shareholders for their after harvest create significant opportunities for our grain confidence in our Company and over 20,000 employees storage and handling business, especially in the developing worldwide for their dedication. It is AGCO’s people who markets. On the protein production side of the business, are turning our vision into reality everywhere we do increasing global protein consumption presents a major business, every day. opportunity. Significant differences in productivity levels exist based upon degree of use of modern pork and chicken production practices, including genetics, nutrition, health, housing, feeding and environmental control. We also are targeting growth for our traditional agricultural equipment products. Tremendous opportunity exists for our equipment to help improve yields in emerging agricultural regions Martin Richenhagen Chairman, President and Chief Executive Officer 3 About AGCO On thousands of farms around the world, AGCO helps support those whose daily work is to provide the food, fuel and fiber needed to sustain a growing world. GLOBAL 2014 Sales by Geographic Region DIVERSIFIED 2014 Sales by Product Our five core brands – Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra® – and approximately 3,100 dealers located in over 140 countries make us one of the most respected names in global agriculture. AGCO’s innovative, productive farming equipment includes tractors, combines, hay tools, sprayers, planters, forage equipment, grain storage and protein production solutions, seeding and tillage implements, as well as replacement parts. Beyond making products and parts, we also are doing our part in making the world a better, more sustainable place to be. No job is too big for us. No challenge too daunting. It is with this attitude and spirit that we do what we do, each and every day. For farmers. For our shareholders. For ourselves. For the future. Our Brands 53% – EAME 25% – North America 17% – South America 5% – Asia/Pacific 57% – Tractors 14% – Replacement Parts 9% – Other Machinery 9% – Grain Storage and Protein Production Equipment 6% – Combines 5% – Application Equipment We have an established presence throughout the world’s agricultural growing regions. Our product portfolio provides customers with comprehensive solutions to support their farms. Challenger® Fendt® GSI® Massey Ferguson® Valtra® A comprehensive range of high-performance machines designed and built to maximize returns. From tractors to harvesters to balers, when it comes to Fendt, it’s always high quality; it’s always high-tech. World-class grain storage, material handling, conditioning and structures, as well as a full line of swine and poultry production equipment. From simple performance to high-specification machines, Massey Ferguson is a force in global agriculture. Valtra equipment is specifically designed for farmers and contractors who value close customer relationships as well as solutions that handle demanding working conditions. 4 5 ALL IN A DAY’S WORKSOWING EFFICIENCIES WE ESTIMATE THAT FARMER DOWNTIME HAS IMPROVED BY 31 SINCE 2004 Less downtime means more profit potential for farmers and more food for the world. This is why we are so focused on offering farmers the technology, service, resources and equipment that they need to maximize uptime. 6 7 ALL IN A DAY’S WORKMAXIMIZING OPERATIONAL EFFICIENCY At AGCO, we work hard to have the right products and the right technology to compete effectively in today’s dynamic marketplace. We maintain a strong level of investment new AGCO plant in China. The series of our world markets. It will offer in research, engineering and development comprises a range of modular engines, farmers and producers a modern, to ensure that farmers have the transmissions, rear axles, cabs and competitive and consistent choice leading-edge technology required to operator stations. The modular design of products while allowing us to build maximize productivity and profitability. allows for combinations of units that and assemble locally in all-important We also are dedicated to delivering provide a broad spectrum of modern, markets, together with leveraging the best value to farmers by leveraging cost-efficient tractors, ranging from a the sourcing of critical components manufacturing processes and tools that simple three-cylinder, 55-horsepower and the production volumes globally reduce costs and time-to-market while machine for African markets to a in low-cost country environments. increasing reliability and quality. In 2014, four-cylinder Tier 4/Stage IV-compliant, this effort resulted in the introduction of 130-horsepower cab tractor for a new family of mid-sized tractors based European and North American markets. on a modular design and more flexible This new family of tractors also manufacturing approach. includes full brand differentiation and This new global series of tractors unique positioning to retain traditional consolidates five manufacturing character and operating features platforms for mid-sized tractors and and will replace the diverse portfolio sources major components from our of products sold in a large number A Better Way to Build Utilizing common components is a more effective and efficient way that we can offer more competitive solutions and advance our business and relationships through: The Massey Ferguson Global Series, which debuted in 2014, has been developed to provide dependable operation across a wide range of applications to meet farmer needs. ENHANCED SPEED AND EFFICIENCY IMPROVED TOOLS AND PARTS AVAILABILITY SUPERIOR INNOVATION INCREASED SUSTAINABILITY Improving Sustainability and Innovation This improved way of thinking allows our engineers throughout the globe to provide more game-changing innovation in less time. Likewise, we can positively affect our sustainability – both from an environmental and financial standpoint. 8 9 HARVESTING OPPORTUNITIES BY 2030, DEMAND FOR FOOD WILL BE 60% HIGHER THAN TODAY* An increasing global population is driving food demand, much of which is for protein. As incomes rise in emerging markets, so too does meat consumption. This drives more demand for grain production in the form of feedstock in addition to grain for food. 10 * Source: Solving the Global Food Challenge, 2013. 11 ALL IN A DAY’S WORKEXTENDING OUR GLOBAL REACH We continue to work to expand our presence around the world, including key global growth markets such as South America, Africa, Russia and China. AGCO is already a global leader in working to add new dealers and making through Massey Ferguson on the tractor sales, and we have a significant investments to localize production of African continent enables us to opportunity to leverage our reputable an extended line of high-horsepower leverage alliances with governments brands with new and improved tractors and combines in the country. and foreign investors and to provide harvesting products and improved We’re also improving parts availability leadership in improving agricultural distribution capabilities. Consider Brazil, to ensure that our dealers are providing practices. Last year, Martin Richenhagen, where farm production is expanding. timely service to our retail customers. AGCO’s Chairman, President and Today, Brazil’s Mato Grosso region is responsible for nearly 50 percent of the country’s grain production. Over the next 10 years, that production is expected to increase more than 70 percent, with the planted area In Africa, our strategy is focused on improving distribution and parts support, as well as providing farmers with the tools they need to farm more efficiently, including on-farm training; CEO, was appointed to the U.S. President’s Advisory Council on Doing Business in Africa, which will advise the President through the Secretary of Commerce on strengthening commercial engagement between the United growing by more than 40 percent expanding product offerings; leveraging States and Africa. compared with the most recent growing season. Because farming in Brazil is done mostly by very large professional operations, AGCO is our production capability in Algeria; and promoting international investment by sponsoring an annual Africa Summit in Berlin. Our 50+ years of experience Eighteen Valtra combine harvesters run through soybean fields at Campo Novo do Parecis, Mato Grosso, Brazil. The farmer is one of the most prominent in the region owning more than 55,000 hectares, with 20,000 hectares for corn and soy farming. The “Future Farm” Debuts in Zambia In 2015, we’re officially opening our Future Farm concept in Zambia with a goal to establish new standards for agricultural education in Africa. The farm will educate customers, dealers and distributors on agricultural solutions that meet local needs and how to develop a sustainable food production system by utilizing agricultural resources more efficiently. 12 13 MAXIMIZING YIELD IN 2020, ONE FARMER WILL NEED TO FEED 200 PEOPLE* Compare that to a generation ago. In 1980, one farmer needed to feed just 76 people. With a limited amount of arable land to cultivate, farmers are dependent on more efficient technologies and agribusiness techniques to meet this daunting task. 14 * Source: 2013 Iron Solutions, Inc. 15 ALL IN A DAY’S WORKINNOVATING LEADING-EDGE TECHNOLOGY Our next generation approach to precision agriculture gives mixed fleet farming operations improved access to their farm data so they can make more informed business decisions to enhance productivity and profitability. Across the globe, efforts are underway To meet the increasing demand Fuse’s approach to precision farming to boost farm productivity. These for precision agriculture, we have is differentiated by offering solutions efforts center on the use of improved focused our business priorities for mixed fleets and across product fertilizer and feed technology, upgraded on machinery and, increasingly, categories; working to ensure data storage and handling capabilities the technology that enhances that privacy by separating agronomy data and the adoption of precision farming machinery. We call our strategic from machine data; providing mobile practices. In today’s world, precision approach to precision farming Fuse functionality and diagnostic services farming is essential to reducing costs Technologies, which is designed to that give farmers the flexibility to and improving efficiencies and results. leverage farming data that boosts manage their operations when, where No wonder the precision agriculture agricultural productivity and and how they want; and delivering market is growing by 13 percent profitability. We’re also helping our an open approach that leverages in the U.S. and by double that rate dealers transform themselves into best-in-class partnerships with other outside the U.S., where the need to proactive service providers. This key companies in the industry. improve productivity is even greater. entails providing service packages 16 based on operational and machine data that can help customers optimize their farms by reducing downtime, cutting waste and improving yields. A key goal of the Fuse connected strategy has been to build industry partnerships. In 2014, we announced collaborations with DuPont Pioneer and Appareo Systems, LLC, to enhance data collection and transfer, wireless communication, advanced sensors and intelligent machine control. Maximizing Technology Investments As technology increases its hold in the agricultural industry, AGCO’s customers will need more support and more expertise to learn the best ways to optimize their operations. That’s why AGCO is arming dealers with the information they need to provide effective service to their customers. In addition, AGCO launched the global Fuse Contact Center that helps customers set up, calibrate and receive operational support on AGCO precision and machine communication technology products. 17 GROWING RESPONSIBLY FARMING EMISSIONS WILL DECREASE 90%* BY 2015 It’s a farmer’s job to care for the land. More fuel-efficient equipment helps farmers conserve natural resources, lower operating costs and meet emission regulations – all while providing the heavy-duty power needed to get the job done. 18 * Engine Particulate Matter and Nitrous Oxide emissions for new machinery, per U.S. EPA. 19 ALL IN A DAY’S WORKCULTIVATING CHANGE IN OUR BUSINESS As we focus on high-tech solutions to help farmers satisfy the world’s growing need for food, fuel and fiber, we’re also looking for ways to make sustainability part of every area of our organization. We believe that by working smarter Enhancing energy usage is an important Today, 17 AGCO sites are participating and leaner, we can minimize not goal for us, and the key to achieving in the program. Combined, they have only our own environmental footprint, an enterprise-wide energy target implemented projects that have but also the impact of agricultural begins with our facilities around the resulted in more than $300,000 in operations around the world. That’s world. We’ve developed a program to annual energy savings and identified why we’re pleased with our progress help local operational and maintenance additional projects expected to yield against our internal sustainability managers reduce energy usage as we in excess of $2.5 million in savings. targets and goals during 2014. all work toward an overall 10 percent Just as important, the program 2013 progress was reported in our energy intensity reduction by 2017. is proving to be an excellent way third annual Sustainability Report, The program consists of easy ways to engage employees in an energy- which we invite you to download to identify, plan and implement efficient culture. at www.agcocorp.com. energy-reduction projects with little or no direct project costs, along with strategies to share best practices among manufacturing sites. Our “Focus” program is a great example of how we’re working to foster health and safety on the job. Focus emphasizes continuous improvement and individual responsibility and is built around five principles: involvement; prevention; continuous improvement; education and training; promotion and communication. Focus has contributed to the overall reduction of workplace injuries. Leading with Biomass Solutions Biomass is organic material that can be processed into electricity, heat and fuel. There is enough biomass in the U.S. to produce the amount of electricity needed to run half of the homes in the U.S. annually. For over five years, AGCO Biomass Solutions has been refining harvesting practices and equipment solutions – along with the resulting biomass feedstock – for optimum efficiency and reliability. We’re also working with researchers at institutions such as Iowa State and Oklahoma State, as well as supporting industry leaders at DuPont; POET LLC and Abengoa, S.A., to improve biomass feedstock supply chain logistics. 20 21 OFFICERS & DIRECTORS SENIOR MANAGEMENT BOARD OF DIRECTORS Martin H. Richenhagen Chairman, President and Chief Executive Officer AGCO Roy V. Armes Executive Chairman, President and CEO Cooper Tire and Rubber Company Michael C. Arnold President and CEO Ryerson Inc. P. George Benson Former President College of Charleston Wolfgang Deml Former President and Chief Executive Officer BayWa Corporation Luiz Fernando Furlan Former Minister of Development, Industry and Foreign Trade of Brazil George E. Minnich Former Senior Vice President and CFO ITT Corporation Gerald L. Shaheen Former Group President Caterpillar Inc. Mallika Srinivasan Chairman and CEO Tractors and Farm Equipment Limited (TAFE) Hendrikus Visser Chairman Royal Huisman Shipyards N.V. Martin H. Richenhagen Chairman, President and Chief Executive Officer Roger N. Batkin Vice President, General Counsel and Corporate Secretary Andrew H. Beck Senior Vice President, Chief Financial Officer Andre M. Carioba* Former Senior Vice President, General Manager, South America Gary L. Collar Senior Vice President, General Manager, Asia Pacific Robert B. Crain Senior Vice President, General Manager, Americas Helmut R. Endres Senior Vice President, Engineering Eric P. Hansotia Senior Vice President, Global Harvesting and Advanced Technology Solutions Lucinda B. Smith Senior Vice President, Global Business Services Rob Smith Senior Vice President, General Manager, Europe, Africa and Middle East Hans-Bernd Veltmaat Senior Vice President, Chief Supply Chain Officer Thomas F. Welke Senior Vice President, Global Grain and Protein, GSI AGCO 2014 BOARD COMMITTEES Executive Committee Martin H. Richenhagen, Chairman P. George Benson Wolfgang Deml George E. Minnich Gerald L. Shaheen Hendrikus Visser Audit Committee George E. Minnich, Chairman Michael C. Arnold P. George Benson Hendrikus Visser Compensation Committee Gerald L. Shaheen, Chairman Roy V. Armes Luiz Fernando Furlan George E. Minnich Finance Committee Hendrikus Visser, Chairman George E. Minnich Gerald L. Shaheen Governance Committee P. George Benson, Chairman Michael C. Arnold Wolfgang Deml Mallika Srinivasan (Guest) Hendrikus Visser Succession Planning Committee Wolfgang Deml, Chairman Roy V. Armes Luiz Fernando Furlan Martin H. Richenhagen Gerald L. Shaheen Mallika Srinivasan * Mr. Carioba retired from the Company effective December 31, 2014. 22 23 2014 Women in Manufacturing STEP (Science, Technology, Engineering and Production) Award – Washington, D.C., U.S. - Erin Cuellar, Production Supervisor, Beloit, KS, U.S. - Carla Gasparin, Manager, Product Management, ATS Integration/Harvesting, Duluth, GA, U.S. - Peggy Gulick, Director, Continuous Improvement, Jackson, MN, U.S. - Kitae Kim, Global Sustainability Manager, Duluth, GA, U.S. Challenger MT700E Series, AE50 – Outstanding Innovations Award American Society of Agricultural and Biological Engineers Challenger MT775E Tracked Tractor – Tractor of the Year Finalist EIMA 2014 International Agricultural and Gardening Machinery Exhibition – Bologna, Italy Challenger MT800E Steerable 3-Point Hitch – Technical Innovation Award EIMA 2014 International Agricultural and Gardening Machinery Exhibition – Bologna, Italy Fendt 933 Vario Profi Plus – Silver Medal AGROSALON – Moscow, Russia Fendt New Flat-Sealing Hydraulic Coupling System and Integrated Tyre Pressure Regulation System VarioGrip – Novedad Técnica FIMA – Zaragoza, Spain Fendt 800 Vario Tractor Tier 4 Final and Fendt 9490 X Combine – Innovation Award Polagra-Premiery International Fair of Agricultural Mechanization – Poznan, Poland AGCO’s Fuse Technologies and Sustainability – The New Economy Award 2014 Cleantech: Best Agribusiness and Agricultural Solutions Massey Ferguson MF 8737 Tractor – Tractor of the Year Finalist EIMA 2014 International Agricultural and Gardening Machinery Exhibition – Bologna, Italy Massey Ferguson MF 9812 Planter and MF 5611 Tractor – International Premium Awards AGROmashExpo – Budapest, Hungary Massey Ferguson MF 5612 Tractor – Gold Medal Polagra-Premiery International Fair of Agricultural Mechanization – Poznan, Poland AGCO 2014 AWARDS A sampling of honors for AGCO products and people Massey Ferguson MF 6600 Tractor – Silver Award IMMA Awards (International Machinery Manufacturers Awards), Cereals Event – Nr Lincoln, Lincs, UK Agricultural Machinery TOP50 Awards - Massey Ferguson MF 7624 Tractor – Comprehensive Golden Award - Massey Ferguson MF 1844N Small Square Baler – Market Leading Award China Association of Agricultural Machinery Manufacturers (CAAMM), the Chinese Society for Agricultural Machinery (CSAM) and Farm Machinery Magazine – Tianjin, China Massey Ferguson MF 7180 Tractor – Tractor of the Year 2014 Award, Special Category Agrishow – São Paulo, Brazil Valtra A750 Tractor – Gerdau Melhores da Terra 2014 Award Expointer – Rio Grande do Sul, Brazil Valtra’s N103.4 HiTech Dual Fuel Tractor – Silver Medal AGROSALON – Moscow, Russia Valtra S Series Tractor with TwinTrac – Exhibition Medal Ka Pasesi – Kaunas, Lithuania Valtra S354 Tractor – Gold Medal Polagra-Premiery International Fair of Agricultural Mechanization – Poznan, Poland Valtra T Series Tractor – New Product Award Agromek Show – Herning, Denmark In 2014, history repeated itself as AGCO worked with other industry partners to enable Manon Ossevoort (Tractor Girl) to fulfill a lifelong goal of driving a tractor to the South Pole. The feat reprised a similar one by Sir Edmund Hillary, who made history by driving a Ferguson TE20 tractor fitted with tracks to the South Pole in 1958 – the first time it was ever done. Massey Ferguson was the official tractor supplier to Antarctica2. We provided a 110-horsepower MF 5610, specially prepared to weather the harsh conditions. AGCO Parts sent a stock of spare parts for essential maintenance during the mission, and Fuse Technologies provided a Prior to its successful overland trek to the special version of AgCommand® to track South Pole, the MF 5610 tractor underwent and monitor the tractor’s performance. extensive cold-weather testing. Learn more at www.antarcticatwo.com. 24 25 AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDS 2014 AWARDS AGCO ALL IN A DAY’S WORK AGCO ALL IN A DAY’S WORK 2014 AWARDSSELECTED FINANCIAL DATA CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Years Ended December 31 Net sales Cost of goods sold Gross profit Selling, general and administrative expenses Engineering expenses Restructuring and other infrequent expenses Impairment charge Amortization of intangibles Income from operations Interest expense, net Other expense, net Income before income taxes and equity in net earnings of affiliates Income tax provision Income before equity in net earnings of affiliates Equity in net earnings of affiliates Net income Net loss attributable to noncontrolling interests 2014 2013 2012 $ 9,723.7 $ 10,786.9 $ 9,962.2 7,657.4 2,066.3 995.4 337.0 46.4 — 41.0 646.5 58.4 49.1 539.0 187.7 351.3 52.9 404.2 6.2 8,396.3 2,390.6 1,088.7 353.4 — — 47.8 900.7 58.0 40.1 802.6 258.5 544.1 48.2 592.3 4.9 7,839.0 2,123.2 1,041.2 317.1 — 22.4 49.3 693.2 57.6 34.8 600.8 137.9 462.9 53.5 516.4 5.7 Net income attributable to AGCO Corporation and subsidiaries $ 410.4 $ 597.2 $ 522.1 Net income per common share attributable to AGCO Corporation and subsidiaries: Basic Diluted Cash dividends declared and paid per common share Weighted average number of common and common equivalent shares outstanding: Basic Diluted $ $ $ $ $ $ 4.39 4.36 0.44 93.4 94.2 $ $ $ 6.14 6.01 0.40 97.3 99.4 5.38 5.30 — 97.1 98.6 The Consolidated Statements of Operations should be read in conjunction with the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s audited Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K. Years Ended December 31 (in millions, except per share amounts) Operating Data: Net sales Gross profit Income from operations Net income Net loss (income) attributable to noncontrolling interests Net income attributable to AGCO Corporation and subsidiaries Net income per common share — diluted Cash dividends declared and paid per common share Weighted average shares outstanding — diluted As of December 31 (in millions, except number of employees) Balance Sheet Data: Cash and cash equivalents Total assets Total long-term debt, excluding current portion Stockholders’ equity Other Data: Number of employees 2014 2013 2012 2011 2010 $ 9,723.7 $ 10,786.9 $ 9,962.2 $ 8,773.2 $ 6,896.6 2,066.3 2,390.6 2,123.2 1,776.1 1,258.7 646.5 404.2 6.2 410.4 4.36 0.44 94.2 $ $ $ 900.7 592.3 4.9 597.2 6.01 0.40 99.4 $ $ $ 693.2 516.4 5.7 522.1 5.30 — 98.6 $ $ $ 610.3 585.3 (2.0) 583.3 5.95 — 98.1 $ $ $ 324.2 220.2 0.3 220.5 2.29 — 96.4 $ $ $ 2014 2013 2012 2011 2010 $ 363.7 $ 1,047.2 $ 781.3 $ 724.4 $ 719.9 7,395.9 997.6 3,496.9 8,438.8 938.5 4,044.8 7,721.8 1,035.6 3,481.5 7,257.2 1,409.7 3,031.2 5,436.9 443.0 2,659.2 20,828 22,111 20,320 19,294 14,740 (1) The Company makes reference to adjusted earnings per share, as reconciled below: Net income per common share — diluted $ Restructuring and other infrequent expenses (2)(3) Tax adjustments (4) Impairment charge (2)(5) GSI acquisition (2)(6) 2014 2013 2012 2011 2010 4.36 0.34 — — — $ 6.01 $ 5.30 $ 5.95 $ — — — — — (0.27) 0.22 — — — — (1.47) 2.29 0.03 — — — Net income per common share — adjusted $ 4.70 $ 6.01 $ 5.25 $ 4.48 $ 2.32 The following is a reconciliation of free cash flow to net cash provided by operating activities for the year ended December 31, 2014 (in millions): Net cash provided by operating activities Less: Capital expenditures Free cash flow 2014 $ 438.4 (301.5) $ 136.9 (2) After tax. (3) The restructuring and other infrequent expenses recorded during 2014 related primarily to severance and other related costs associated with the rationalization of the Company’s operations in the United States, Brazil, Argentina, Europe and China. (4) During the fourth quarter of 2012, the Company recorded a non-cash tax gain associated with the recognition of certain U.S. deferred tax assets from the reversal of its U.S. deferred tax valuation allowance and the recognition of certain U.S. research and development tax credits. (5) During the fourth quarter of 2012, the Company recorded an impairment charge of approximately $22.4 million with respect to goodwill and certain other identifiable intangible assets associated with the Company’s Chinese harvesting business. (6) During 2011, the Company recorded a tax benefit of approximately $149.3 million and acquisition expenses of approximately $5.8 million associated with the GSI acquisition. The above notes are more fully described in the Company’s audited Consolidated Financial Statements and Notes to its Consolidated Financial Statement, which are included in the Company’s Annual Report on Form 10-K. 26 27 CONSOLIDATED BALANCE SHEETS (in millions, except share amounts) CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) December 31 ASSETS Current Assets: Cash and cash equivalents Accounts and notes receivable, net Inventories, net Deferred tax assets Other current assets Total current assets Property, plant and equipment, net Investment in affiliates Deferred tax assets Other assets Intangible assets, net Goodwill Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of long-term debt Convertible senior subordinated notes Accounts payable Accrued expenses Other current liabilities Total current liabilities Long-term debt, less current portion Pensions and postretirement health care benefits Deferred tax liabilities Other noncurrent liabilities Total liabilities Commitments and contingencies Stockholders’ Equity: AGCO Corporation stockholders’ equity: Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2014 and 2013 Common stock; $0.01 par value, 150,000,000 shares authorized, 89,146,093 and 97,362,466 shares issued and outstanding at December 31, 2014 and 2013, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total AGCO Corporation stockholders’ equity Noncontrolling interests Total stockholders’ equity Total liabilities and stockholders’ equity 2014 2013 $ 363.7 963.8 1,750.7 217.2 232.5 3,527.9 1,530.4 424.1 25.8 141.1 553.8 $ 1,047.2 940.6 2,016.1 241.2 272.0 4,517.1 1,602.3 416.1 24.4 134.6 565.6 1,192.8 1,178.7 $ 7,395.9 $ 8,438.8 $ 94.3 $ — 670.2 1,244.1 208.3 2,216.9 997.6 269.0 238.8 176.7 110.5 201.2 960.3 1,389.2 150.8 2,812.0 938.5 246.4 251.2 145.9 3,899.0 4,394.0 — 0.9 582.5 3,771.6 (906.5) 3,448.5 48.4 3,496.9 — 1.0 1,117.9 3,402.0 (510.7) 4,010.2 34.6 4,044.8 $ 7,395.9 $ 8,438.8 Years Ended December 31 Cash flows from operating activities: 2014 2013 2012 Net income Adjustments to reconcile net income to net cash provided by operating activities: $ 404.2 $ 592.3 $ 516.4 Depreciation Deferred debt issuance cost amortization Impairment charge Amortization of intangibles Amortization of debt discount Stock compensation (credit) expense Equity in net earnings of affiliates, net of cash received Deferred income tax provision (benefit) Other Changes in operating assets and liabilities, net of effects from purchase of businesses: Accounts and notes receivable, net Inventories, net Other current and noncurrent assets Accounts payable Accrued expenses Other current and noncurrent liabilities Total adjustments Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of businesses, net of cash acquired Investments in consolidated affiliates, net of cash acquired Investments in unconsolidated affiliates Restricted cash and other Net cash used in investing activities Cash flows from financing activities: Proceeds from debt obligations Repayments of debt obligations Purchases and retirement of common stock Repurchase or conversion of convertible senior subordinated notes Payment of dividends to stockholders Payment of minimum tax withholdings on stock compensation Purchase of or distribution to noncontrolling interests Payment of debt issuance costs Excess tax benefit related to stock compensation Other Net cash used in financing activities Effects of exchange rate changes on cash and cash equivalents (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 239.4 2.7 — 41.0 — (10.8) (25.4) 3.6 2.5 (103.9) 111.4 29.1 (219.4) (71.2) 35.2 34.2 438.4 (301.5) 2.8 (130.3) — (3.9) — (432.9) 211.6 3.5 — 47.8 9.2 34.6 (19.0) 21.7 0.3 (36.2) (356.9) 7.0 54.7 123.4 103.0 204.7 797.0 (391.8) 2.6 (9.5) — (10.0) — (408.7) 180.6 3.5 22.4 49.3 8.7 36.8 (25.7) (36.4) 0.6 40.6 (160.9) (71.8) (61.7) 154.5 9.5 150.0 666.4 (340.5) 0.9 (2.9) (20.1) (15.8) 3.7 (374.7) 1,689.4 (1,588.8) (499.7) (201.2) (40.8) (13.2) (6.1) (1.4) — (0.2) (662.0) (27.0) (683.5) 1,047.2 363.7 $ 1,135.9 (1,194.0) (1.0) — (38.9) (17.0) (3.1) (0.1) 11.4 — (106.8) (15.6) 265.9 781.3 $ 1,047.2 926.3 (1,148.8) (17.6) — — (0.3) (1.0) (0.2) — — (241.6) 6.8 56.9 724.4 781.3 $ The Consolidated Balance Sheets should be read in conjunction with the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s audited Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K. The Consolidated Statements of Cash Flows should be read in conjunction with the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s audited Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K. 28 29 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share amounts) Common Stock Accumulated Other Comprehensive Loss Shares Amount Additional Paid-in Capital Retained Earnings Defined Benefit Pension Plans Cumulative Translation Adjustment Deferred (Losses) Gains on Derivatives Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity Temporary Equity Balance, December 31, 2011 Net income (loss) Issuance of restricted stock Stock options and SSARs exercised Stock compensation Investments by redeemable noncontrolling interest Distribution to noncontrolling interest Changes in noncontrolling interests Purchases and retirement of common stock Defined benefit pension plans, net of taxes: Prior service cost arising during year Net actuarial loss arising during year Amortization of prior service cost included in net periodic pension cost Amortization of net actuarial losses included in net periodic pension cost Deferred gains and losses on derivatives, net Reclassification to temporary equity – Equity component of convertible senior subordinated notes Change in cumulative translation adjustment Balance, December 31, 2012 Net income (loss) Payment of dividends to shareholders Issuance of restricted stock Issuance of performance award stock SSARs exercised Stock compensation Excess tax benefit of stock awards Conversion of 1¼% convertible senior subordinated notes Distribution to noncontrolling interest Changes in noncontrolling interest Purchases and retirement of common stock Defined benefit pension plans, net of taxes: Net actuarial gain arising during year Amortization of prior service cost included in net periodic pension cost Amortization of net actuarial losses included in net periodic pension cost Deferred gains and losses on derivatives, net Reclassification to temporary equity – Equity component of convertible senior subordinated notes Change in cumulative translation adjustment Balance, December 31, 2013 Net income (loss) Payment of dividends to shareholders Issuance of restricted stock Issuance of performance award stock SSARs exercised Stock compensation Shortfall in tax benefit of stock awards Conversion of 1¼% convertible senior subordinated notes Investment by noncontrolling interest Distribution to noncontrolling interest Changes in noncontrolling interest Purchases and retirement of common stock Defined benefit pension plans, net of taxes: Net loss recognized due to settlement Net gain recognized due to curtailment Net actuarial loss arising during year Amortization of prior service cost included in net periodic pension cost Amortization of net actuarial losses included in net periodic pension cost Deferred gains and losses on derivatives, net Change in cumulative translation adjustment Balance, December 31, 2014 97,194,732 $ — 13,986 16,287 — — — — (409,007) — — — — — — — 96,815,998 — — 12,059 491,692 61,941 — — 286 — — (19,510) — — — — — — 97,362,466 — — 14,907 367,100 30,477 — — 1,437,465 — — — (10,066,322) — — — — — — — 89,146,093 $ 1.0 $ — — — — — — — — — — — — — — — 1.0 — — — — — — — — — — — — — — — — — 1.0 — — — — — — — — — — — (0.1) — — — — — — — 0.9 $ 1,073.2 — 1.0 (0.3) 35.8 — — — (17.6) — — — — — (9.2) — 1,082.9 — — 0.6 (14.7) (2.2) 34.0 11.4 — — (2.3) (1.0) — — — — 9.2 — 1,117.9 — — 0.9 (11.8) (1.2) (11.7) (0.2) — — — (11.8) (499.6) — — — — — — — 582.5 $ 2,321.6 $ 522.1 — — — — — — — (240.2) $ — — — — — — — — (156.1) $ — — — — — — — — (4.3) $ — — — — — — — — (400.6) $ — — — — — — — — — — — — — — — 2,843.7 597.2 (38.9) — — — — — — — — — — — — — — — 3,402.0 410.4 (40.8) — — — — — — — — — — — — — — — — — (2.5) (28.2) 0.4 7.6 — — — (262.9) — — — — — — — — — — — 45.2 0.6 10.7 — — — (206.4) — — — — — — — — — — — — 0.4 (0.4) (54.8) 0.6 7.3 — — $ 3,771.6 $ (253.3) $ — — — — — — (61.1) (217.2) — — — — — — — — — — — — — — — — (86.9) (304.1) — — — — — — — — — — — — — — — — 5.0 — — 0.7 — — — — — — — — — — — — — — (0.9) — — (0.2) — — — — — — — — — — — — (2.5) (28.2) 0.4 7.6 5.0 — (61.1) (479.4) — — — — — — — — — — — 45.2 0.6 10.7 (0.9) — (86.9) (510.7) — — — — — — — — — — — — — — — — — — (349.0) (653.1) $ — — — — — 0.1 — (0.1) $ 0.4 (0.4) (54.8) 0.6 7.3 0.1 (349.0) (906.5) $ 36.0 3.0 — — — — (1.7) (4.0) — — — — — — — — 33.3 4.4 — — — — — — — (3.1) — — — — — — — — 34.6 0.1 — — — — — — — 16.1 (2.4) — — — — — — — — — 48.4 $ 3,031.2 $ 525.1 1.0 (0.3) 35.8 — (1.7) (4.0) (17.6) (2.5) (28.2) 0.4 7.6 5.0 (9.2) (61.1) 3,481.5 601.6 (38.9) 0.6 (14.7) (2.2) 34.0 11.4 — (3.1) (2.3) (1.0) 45.2 0.6 10.7 (0.9) 9.2 (86.9) 4,044.8 410.5 (40.8) 0.9 (11.8) (1.2) (11.7) (0.2) — 16.1 (2.4) (11.8) (499.7) 0.4 (0.4) (54.8) 0.6 7.3 0.1 (349.0) 3,496.9 $ $ — (8.7) 17.6 9.2 (1.6) 16.5 (9.3) 2.3 (9.2) (0.3) — (6.3) 6.6 (0.3) — 30 The Consolidated Statements of Stockholders’ Equity should be read in conjunction with the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s audited Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K. 31 FORWARD-LOOKING STATEMENTS SHAREHOLDER INFORMATION This annual report includes forward-looking statements, result in the sale of fewer products by us. A large portion including the statements in the Chairman’s Message of the retail sales of our products is financed by our retail and other statements in this report regarding market finance joint ventures with Rabobank, and any difficulty demand, population growth, farm productivity, new product on Rabobank’s part to fund the venture would adversely and technology introductions, strategic initiatives and impact sales if our customers would be required to utilize their effects, energy savings, cash flows, credit rating other retail financing providers. We depend on suppliers for maintenance, dividend growth, margin performance and raw materials, components and parts for our products, and general economic conditions. These statements are subject any failure by our suppliers to provide products as needed, to risks that could cause actual results to differ materially or by us to promptly address supplier issues, will adversely from those suggested by the statements, including: impact our ability to timely and efficiently manufacture Our financial results depend entirely upon the agricultural and sell products. industry, and factors that adversely affect the agricultural A majority of our sales and manufacturing takes place outside industry generally, including declines in the general economy, the United States, and, as a result, we are exposed to risks increases in farm input costs, lower commodity prices and related to foreign laws, taxes, economic conditions, labor changes in the availability of credit for our retail customers, supply and relations, political conditions and governmental will adversely affect us. The poor performance of the general policies. These risks may delay or reduce our realization of economy has adversely impacted our sales and may continue value from our international operations. to have an adverse impact on our sales in the future, the extent of which we are unable to predict, and there can Volatility with respect to currency exchange rates and be no assurance that our results will not continue to be affected by the weakness in global economic conditions. Our success depends on the introduction of new products, which requires substantial expenditures and may not be well received in the marketplace. We face significant competition, and if we are unable to interest rates can adversely affect our reported results of operations and the competitiveness of our products. We are subject to extensive environmental laws and regulations, and our compliance with, or our failure to comply with, existing or future laws and regulations could delay production of our products or otherwise adversely affect compete successfully against other agricultural equipment our business. manufacturers, we would lose customers and our revenues and profitability would decline. We are subject to raw material price fluctuations, which can adversely affect our manufacturing costs. Most of our sales depend on the retail customers’ obtaining financing, and any disruption in their ability to obtain financing, whether due to economic downturns or otherwise, will We disclaim any obligation to update forward-looking statements except as required by law. Form 10-K The Form 10-K Annual Report filed with the Securities and Exchange Commission is available in the “Investors” Section of our corporate website (www.agcocorp.com), under the heading “SEC Filings,” or upon request from the Investor Relations Department at corporate headquarters. Annual Meeting The annual meeting of the Company’s stockholders will be held at 9:00 a.m. ET on April 23, 2015 at the offices of AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096 U.S. Follow us on Twitter @agcocorp. Corporate Headquarters 4205 River Green Parkway Duluth, Georgia 30096 U.S. +1-770-813-9200 Transfer Agent & Registrar Computershare Trust Company, N.A. 211 Quality Circle, Suite 210 College Station, Texas 77845 U.S. +1-800-962-4284 Stock Exchange AGCO Corporation common stock (trading symbol is “AGCO”) is traded on the New York Stock Exchange. Independent Registered Public Accounting Firm KPMG LLP Atlanta, Georgia U.S. © 2015 AGCO Corporation All rights reserved. Incorporated in Delaware. An Equal Opportunity Employer. AGCO®, Fendt®, GSI®, Massey Ferguson®, Valtra® and their respective logos as well as corporate and product identity used herein are trademarks of AGCO or its subsidiaries and may not be used without permission. Challenger® is a registered trademark of Caterpillar, Inc. and may not be used without permission. Comparison of Cumulative Total Return US$ 350 300 250 200 150 100 50 0 AGCO Corporation Custom Peer Group1 S&P Midcap 400 Index 2009 2010 2011 2012 2013 2014 Performance Graph The graph shown (above) is a line graph presentation of the Company’s cumulative stockholder returns on an indexed basis as compared to the S&P Mid-Cap 400 Index and a self-constructed peer group of the companies listed in footnote 1 to the performance graph (“Peer Group”). Returns for the Company in the graph are not necessarily indicative of future performance. Assumes $100 invested on January 1, 2009. Assumes dividends reinvested. Year ending December 31, 2014. (1) Based on information for a self-constructed peer group of companies that includes: Caterpillar Inc., CNH Industrial NV, Cummins Inc., Deere & Company, Eaton Corporation Plc., Ingersoll-Rand Plc., Navistar International Corporation, PACCAR Inc., Parker-Hannifin Corporation and Terex Corporation. 32 33 AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO ALL IN A DAY’S WORK ALL IN A DAY’S WORK ALL IN A DAY’S WORK AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO AGCO 4205 River Green Parkway Duluth, GA 30096 (770) 813-9200 www.AGCOcorp.com ALL IN A DAY’S WORK ALL IN A DAY’S WORK ALL IN A DAY’S WORK 2014 ANNUAL REPORT 

Continue reading text version or see original annual report in PDF format above