2. Letter to Stockholders ............................................. 4 – 5
=
We Are AGCO ........................................................ 6 – 15
Brands + People + Innovation + Opportunity + Strategy
Forward-Looking Statements ..................................... 16
CONTENTS
Financial Review .................................................. 17 – 22
Board of Directors, Stockholder Information ............. 23
( In millions, except per share amounts)
2007 2006 Change From the Brazilian sugar cane fields, to the American corn belt, to the wheat fields of Europe and the emerging markets
MISSION
Net sales $ 6,828.1 $ 5,435.0 + 25.6%
Profitable growth through superior customer of Asia, the Middle East and Africa – demand for AGCO’s quality brands has never been greater. The 2007 annual report
Income from operations 394.8 68.9 + 473.0%
FINANCIAL service, innovation, quality and commitment.
Net income (loss) 246.3 (64.9) ™
HIGHLIGHTS focuses on what’s behind our brands, and it looks at the five key factors that contribute to the growth of AGCO Corporation.
Total assets 4,787.6 4,114.5 + 16.4%
VISION
Stockholders’ equity 2,043.0 1,493.6 + 36.8% With net sales of more than $6.8 billion, AGCO is continuing to broaden into one of the strongest agricultural equipment
High-tech solutions for professional farmers
Earnings (loss) per share (1) 2.55
$ $ (0.71)
feeding the world. companies worldwide.
Adjusted earnings per share (2) $ 2.52 $ 1.12 + 125.0%
(1)
On a diluted basis.
(2)
For a reconciliation of adjusted earnings per share, see footnote 1 on page 17
2 3
3. development efforts. Looking at just our 2007 new product position in the Nordic region and a strong presence in technology to the family of AGCO brands for use in all commitment. Being successful requires consistent
introductions, we launched three new Indian sourced Brazil with innovative solutions and unsurpassed customer markets around the world. To more effectively manage the execution of strategic principles that drive performance
tractors to the North American market, eight new Valtra service. Challenger markets its full line of high-end farm development and introduction of new technologies, we have every year. To ensure AGCO continues to improve its
tractors, 15 new combines, 23 new planter and tillage equipment to customers requiring high performing, separated ATS into three distinct areas of responsibility: competitive position and its performance, we have put
models, the new high horsepower Fendt 900 series and 16 powerful and rugged machinery. Machine Control, defined as automated guidance or strategic initiatives in place aimed at growing our sales,
other new tractor models in Europe. In 2008 and 2009, the steering assist; Precision Farming, which facilitates reducing costs and better utilizing capital. Our growth
People
number of AGCO’s new product introductions is expected to enhanced planting, fertilizer and chemical application and strategies are focused on increasing investments in new
increase by nearly one-third compared to our 2007 activity. At AGCO, the foundation for our success is a work force harvesting operations; and Machine Management, which products to provide leading technology to the family of
that consists of top talent from around the world. We enables farmers to record and manage data to help AGCO brands. We are also working to improve our
AGCO has ambitious plans to take advantage of the strong understand that motivated employees are essential for the increase the efficiency of their operations. distribution network to expand our reach and upgrade our
markets and grow its global presence. We intend to achievement of our corporate goals. By continually customer service. In addition, our cost reduction strategies
Opportunity
maintain and develop our position as a technology leader enhancing the leadership, business and people drive the efficiency and productivity of our manufacturing
and offer outstanding customer service. Our annual report management skills of our current and potential managers, AGCO’s focus for 2008 and beyond includes satisfying the and purchasing functions.
is organized around the five key elements that we feel are we expect to have employees who can provide the needs of a rapidly changing agricultural market. Our
necessary to attain our ambitions for profitable growth. necessary vision, leadership and execution to achieve our challenge is to take advantage of these growing Whether it’s one acre or thousands of hectares, we’re
First, strong brands – demand for our brands has never financial and operational goals. Recognizing that our opportunities by developing new products and innovations, dedicated to improving our customers’ productivity,
been greater and we are working to ensure this momentum employees are critical to the success of our initiatives, we improving distribution and expanding business in emerging efficiency and profitability. We’re confident that the quality
continues. Next, we consider our people our most will continue to invest in market-leading training, knowledge markets. We also have the opportunity to develop tractors of our products, combined with ingenuity of our employees
important resource, and we are making investments to management and human resources programs. We are also and machinery to support the needs of fuel crop growers, and dealer network, will ensure that our customers and
deliver quality products, services and support to our making increased investments in dealer training and parts evolve equipment to comply with bio-fuel requirements and AGCO are Always Growing.
customers. Third, innovation is driving a full roster of and service support to improve the service experience of be part of an industry that sets standards for bio-fuel
award-winning new products designed to deliver our customers. cleanliness and performance. The developing markets of While I am proud of what we achieved in 2007, we have
productivity solutions to farmers. Fourth, AGCO is focused Russia and Eastern Europe provide a significant growth much work to do. I believe our business is well positioned
Innovation
on the many opportunities for growth that exist in our opportunity, and we are making investments to expand our to grow sustainably and profitably. AGCO’s achievements
Fellow Stockholders Martin Richenhagen dynamic industry. Finally, we have a results-driven strategy Our objective is to deliver the highest quality products and distribution footprint in those regions. AGCO is committed in 2007 establish a solid foundation for continued earnings
Chairman, President and Chief Executive Officer to deliver our growth ambitions. services that exceed our customers’ expectations at the to meeting or exceeding increasingly strict emissions growth. I thank our Board of Directors for their continued
right price. We are working to produce innovative products requirements via our substantial product development counsel and guidance. I am grateful for your confidence,
Brands
I am pleased to tell you that AGCO Corporation achieved sales increased approximately 25.6% to $6.8 billion, and that provide our customers with high-tech solutions to meet efforts. We expect to grow AGCO by increasing the and I look forward to the opportunities ahead for AGCO.
record sales and net income in 2007. Over the last 12 our adjusted diluted earnings per share increased over Over the past 17 years, AGCO has been a major force their need for improved efficiency, productivity and breadth of products, delivering technology-based solutions
months, AGCO’s 13,700 employees and 3,000 independent 125% compared to 2006. The strength of our end markets behind industry consolidation. Through a series of profitability. With that aim in mind, we have tripled our to our customers and expanding our presence in the
dealers applied their dedication, creativity and passion to continued to produce very positive results. Brazil’s farm acquisitions, our sales have grown from $200 million in 1990 research and development spending over the last six years emerging markets of the world with investments that drive
the task of providing innovative products and service to our economy improved significantly driving strong growth in to over $6.8 billion in 2007. AGCO acquired many well- to approximately $155 million in 2007. Our spending is market growth and deliver outstanding returns.
customers. The major global markets for agricultural our South American sales. Our Europe/Africa/Middle East known and respected equipment brands that our customers focused on new technology for our high horsepower tractor
Strategy
equipment saw a healthy start in 2007 and most segment delivered another strong performance with our rely on to meet their agricultural equipment needs. With our products, new products that fill regional product niches and Martin Richenhagen
strengthened as the year progressed. Around the globe, Fendt, Valtra and Massey Ferguson brands making multi-brand strategy and product differentiation, AGCO investments in our re-energized harvesting program. The vision that guides our strategy is to provide “high-tech Chairman, President and
there are factors supporting grain prices and providing important contributions. Fendt’s new high horsepower offers more options to satisfy customers’ needs and reward solutions for professional farmers feeding the world” by Chief Executive Officer
opportunities for our industry. The increasing demand for tractor models were enthusiastically received by our their brand loyalty. We differentiate our products by feature, In 2007, we centralized our technology efforts and formed increasing the efficiency and productivity of farmers.
soft commodities from the growing population, improved customers, and the sales of these high margin products functionality and price. In addition, our brands are enhanced AGCO’s Advanced Technology Solutions (ATS) group. This AGCO’s mission is to achieve profitable growth through
diets and increased bio-fuel production has resulted in factored into our improvements in sales and margins in by a network of dealers and distributors that provide group is a global organization responsible for providing superior customer service, innovation, quality and
grain inventories dropping to record lows and grain prices Europe. We also achieved improved sales in both our North superior sales and service support to our customers.
rising to historic highs. These positive developments drive American and Asia/Pacific segments. Our profitability
more land into crop production and suggest higher visibility improved in 2007 with our operating margins rising 1.3 Through our four core brands, Massey Ferguson, Fendt,
2007 TRACTORS
$2.52 68% 59%
EUROPE/AFRICA/MIDDLE EAST
for future farm cash flows and large farm equipment percentage points compared to 2006. Valtra and Challenger, we are providing high-tech solutions
PARTS 13%
demand. The market outlook for agricultural equipment for the growing sector of professional farmers. Massey
22%
NORTH AMERICA
IMPLEMENTS AND OTHER 7%
remains positive, and AGCO is well-positioned with strong In 2007, one of our primary objectives was to reduce Ferguson is one of the most widely sold tractor brands in
2006 $1.12
brands and quality products to take advantage of the working capital and generate cash flow. AGCO exceeded the world, with more than 150 years of innovation and COMBINES 5%
16%
SOUTH AMERICA
favorable market conditions. expectations by generating over $360 million of free cash experience, and offers one of the most complete lines of APPLICATION EQUIPMENT 4%
flow during 2007, which was also a record for our company. agricultural equipment in the industry. Fendt is a market 3%
EAST ASIA/PACIFIC
2005 HAY AND FORAGE
$1.46 3%
AGCO’s sales and earnings for 2007 both showed The strong cash flow allowed us to reduce debt, improve leader in Europe with a reputation for superior technology
impressive growth compared to 2006. For 2007, AGCO’s our balance sheet and increase our research and and engineering. Valtra has achieved a leading market ADJUSTED EARNINGS PER SHARE SALES BY PRODUCT SALES BY GEOGRAPHIC REGION
4 5
4. AGCO brands provide farmers the world over with a strong foundation for growth. technological leadership. Massey Ferguson, one of the most widely sold tractor
AGCO’s extensive family of brands includes many of the most trusted global names brands in the world, offers a complete, rugged and versatile product line to fit virtually
= Brands in agricultural equipment, including Challenger, Fendt, Massey Ferguson and Valtra. all types of farming applications. Valtra continues to hold a dominant position in both
These four corporate brands, alone, accounted for more than 86 percent of AGCO the Nordic region and the fast-growing Brazilian market with tractors built to deliver
total machinery net sales in 2007. Challenger, a popular and respected full line of the highest levels of performance in some of the toughest working conditions.
The world’s farmers seek greater efficiency and profitability. machinery, delivers high specification, powerful, high technology equipment to Because Valtra tractors are built to individual customer specifications, Valtra proudly
AGCO delivers. professional farmers around the world. Fendt, based in Germany, remains a market hosted more than 3,000 customers at Valtra’s Suolahti, Finland factory to watch their
leader in Europe, positioned on the cutting edge of design, engineering and tractors being built. We like it when customers look over our shoulders.
6 7
5. The people of AGCO share a common mission: to create profitable growth skills. In 2007, AGCO University launched “Cultivating Our Leaders,” a global
through superior customer service, innovation, quality and commitment. training program that provides high potential employees with the tools they
= People In 2007, our mission underscored quality, as we launched AGCO Improvement need to enhance their leadership skills. AGCO also offers employees the
Methods (AIM). AIM provides AGCO employees with a wide range of proven Growing Resources and Opportunity Worldwide (GROW) program, which helps
problem-solving and quality tools. AGCO University, created from just one of a manage performance and develop core competencies necessary to support
Our customers expect high quality products, service and support. series of Human Resources initiatives, continues to train future managers and global growth strategies. Of course, it’s not only our employees that benefit
AGCO people are driven to exceed expectations. leaders – providing employees around the globe with additional education and from all of this training. Our customers do as well.
professional development options and the opportunity to improve leadership
AGCO Participates in Raising Awareness for a Breast Cancer
Challenger’s Revolutionary Track System and Innovative
Charity With a Pink Massey Ferguson Tractor
Chairman’s Award and 2007 Recipients AGCO Parts Supports AGCO Brands Worldwide AGCO Finance Makes Delivery Possible for Farmers Excited Families Watch Assembly of Their Valtra Tractor
Suspension System Help Raise Farm Productivity
8 9
6. Fendt is synonymous with cutting-edge technology and forward-looking design. key group is to develop and incorporate advanced technologies – from the
2007 saw the introduction of the Fendt TRISIX Vario triple-axle concept tractor, latest in satellite-guided machine control to industry-leading precision farming
= Innovation which is one of the most technologically advanced tractors ever developed. A and machine management solutions. All AGCO machinery brands worldwide
Challenger MT875B put its technology to the test, setting a new world record for incorporate these advanced technology products. To help our customers become
cultivation in 2007 – 1,590 acres in 24 hours. And Massey Ferguson introduced increasingly more productive and efficient, AGCO is dedicated to innovation.
AGCO is always growing. new, big-square baler technology that allows bales to be 30 percent more dense, In 2007, this commitment was demonstrated in part by AGCO’s worldwide
So is our roster of innovative, award-winning machinery. resulting in lower transportation costs for our customers. AGCO also launched engineering team filing the most patent applications in our history. At AGCO,
its Advanced Technology Solutions (ATS) Group. The primary mission of this Always Growing means “always innovating,” too.
Richard Markwell, AGCO EAME, Receives the 2007 SIMA Advanced Technology Solutions (ATS) Group Using Virtual Reality, Engineers Develop Products
Fendt Introduces the TRISIX Vario, a High-Performance Concept Tractor Valtra Recognition for South American Tractors World Record Award Plaque for Challenger Fendt Recognized for Marketing Innovation Palmares de L’Innovation Award for Massey Ferguson Integrates Latest Technology Into All AGCO Brands With Greater Speed and Efficiency
10 11
7. As the world’s population grows at an ever-increasing pace, the amount of technology. And China, with 22 percent of the world’s population and 10 percent
arable land per capita continues to decrease. For AGCO, and for farmers across of the world’s arable land, represents an important growth market. Bio-fuel
= Opportunity the globe, one solution to this paradox lies in increasing farm productivity production is another growth driver. U.S. ethanol production, alone, is expected
through the use of more efficient farm equipment. In short, doing more with less. to double within the next few years. The worldwide focus on renewable energy
At AGCO, we’ve built our vision on that idea – providing high-tech solutions from crops is contributing to the increase in commodity prices. And, in turn, that
The future of farming will provide many challenges. for professional farmers feeding the world. Emerging markets also present new is helping fuel the demand for more advanced and efficient farm equipment.
AGCO is focused on the future. opportunities. Brazil, for example, still has abundant land available for farming. At AGCO, we’re leaving no stone unturned.
Russia, with its aging tractor fleet, has a growing need and appetite for Western
Fendt Wins Demopark Gold Award for
Massey Ferguson and Farmers Feeding the World Sugar Cane in High Demand in South America Outstanding Customer Service Makes Valtra an Easy Choice
Advanced Technology Solutions Improve Productivity and Efficiency
e Product Innovation for the 900 Vario
12 13
8. Always Growing is the philosophical and strategic foundation of all that AGCO equipment design and technology to the farm machinery industry. We are
does. No one is more committed to this than AGCO’s senior management team. reenergizing our harvesting business. In 2007, we strengthened our market
= Strategy
Under its leadership, AGCO ramped up new product development and, over the position, acquiring a 50 percent stake in Laverda S.p.A., a leading European
past six years, has increased R&D spending threefold. We opened a new office in manufacturer of harvesting equipment. We are also growing our Sisu Diesel
Schaffhausen, Switzerland to guide the progress of our growth in the Europe/ business. Today, Sisu Diesel engines power much of AGCO’s equipment, and the
AGCO is focused on growth. Africa/Middle East markets. From this central European location, we are better distribution of these engines outside of AGCO continues to grow. AGCO’s
able to manage key strategic growth initiatives and facilitate the exchange of leadership team is focused on quality, innovation, growth and the satisfaction of
Ours as well as our customers’.
ideas and best practices. The new Massey Ferguson “Technology Centre” also every AGCO machinery customer.
opened in 2007 in Beauvais, France. Its purpose: to showcase our advanced
14
Martin H. Richenhagen Norman L. Boyd Andrew H. Beck Randall G. Hoffman Garry L. Ball David L. Caplan Hubertus M. Muehlhaeuser Stephen D. Lupton Andre M. Carioba Gary L. Collar Robert B. Crain
Chairman of the Board Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President
President and Human Resources Chief Financial Officer Global Sales and Marketing Engineering Materials Management, Strategy & Integration and IT Corporate Development General Manager, General Manager, Europe/Africa/ General Manager,
AGCO Senior Management Team Chief Executive Officer Worldwide General Manager, Engines and General Counsel South America Middle East; East Asia/Pacific North America
14 15
9. SELECTED FINANCIAL INFORMATION
( in millions, except percentages, per share amounts and employees )
2007
Years Ended December 31, 2006 2005 2004 2003
Operating Results
$ 6,828.1
Net sales .................................................................................................................................... $ 5,435.0 $ 5,449.7 $ 5,273.3 $ 3,495.3
1,191.0
Gross profit ................................................................................................................................ 927.8 933.6 952.9 616.4
17.4%
Percent of net sales ................................................................................................................... 17.1% 17.1% 18.1% 17.6%
394.8
Income from operations ............................................................................................................ 68.9 274.7 323.5 184.3
5.8%
Percent of net sales ................................................................................................................... 1.3% 5.0% 6.1% 5.3%
Net income (loss) ....................................................................................................................... (64.9)
246.3 31.6 158.8 74.4
Net income (loss) per common share – diluted(1) ....................................................................... (0.71)
$ 2.55 $ $ 0.35 $ 1.71 $ 0.98
96.6
Weighted average shares outstanding – diluted ....................................................................... 90.8 90.7 95.6 75.8
$ 504.3
Cash flows from operations ....................................................................................................... $ 442.2 $ 246.3 $ 265.9 $ 88.0
Balance Sheet Data
$ 638.4
Working capital .......................................................................................................................... $ 685.4 $ 825.8 $ 1,045.5 $ 755.4
4,787.6
Total assets ................................................................................................................................ 4,114.5 3,861.2 4,297.3 2,839.4
294.1
Long-term debt, less current portion ........................................................................................ 577.4 841.8 1,151.7 711.1
2,744.6
Total liabilities ............................................................................................................................ 2,620.9 2,445.2 2,874.9 1,933.3
Beauvais, France
2,043.0
Stockholders’ equity .................................................................................................................. 1,493.6 1,416.0 1,422.4 906.1
Other Data
Forward-Looking Statements 13,720
Number of employees ............................................................................................................... 12,804 13,023 14,313 11,278
This annual report includes forward-looking statements, address supplier issues, will adversely impact our the risks of work interruption or stoppage and could
including the statements in the letter to new stockholders ability to timely and efficiently manufacture and sell cause our costs to be higher.
and other statements herein regarding new products, our products. We have significant pension obligations with
growth, market conditions, strategic initiatives and A majority of our sales and manufacturing takes respect to our employees.
(1)
The Company makes reference to adjusted earnings per share, as reconciled below:
results of operations. These statements are subject to place outside of the United States, and, as a result, We are subject to fluctuations in raw material
risks that could cause actual results to differ materially we are exposed to risks related to foreign laws, taxes, prices and availability, which may cause delays
from those suggested by the statements, including: economic conditions, labor supply and relations, in the production of our products or otherwise 2007 2006 2005 2004 2003
Our financial results depend entirely upon the political conditions and governmental policies. These adversely affect our manufacturing costs. (0.71)
Net income (loss) per common share – diluted ................................................................................................................... $ 2.55 $ $ 0.35 $ 1.71 $ 0.98
agricultural industry, and factors that adversely affect risks may delay or reduce our realization of value We have a substantial amount of indebtedness, Restructuring and other infrequent (income) expenses(2) .................................................................................................... (0.03) 0.01 – 0.04 0.26
the agricultural industry generally will adversely from our international operations. and, as a result, we are subject to certain restrictive Goodwill impairment charge(2) ............................................................................................................................................. – 1.81 – – –
affect us. Currency exchange rate and interest rate changes covenants and payment obligations that may Bond redemption costs(2) ..................................................................................................................................................... – – 0.15 – –
Our success depends on the introduction of new can adversely affect the pricing and profitability of adversely affect our ability to operate and expand
–
Deferred income tax valuation allowance adjustment ........................................................................................................ – 0.95 – –
products, which requires substantial expenditures. our products. our business.
–
Weighted average share impact .......................................................................................................................................... 0.01 – – –
We face significant competition and, if we are We are subject to extensive environmental laws Further information concerning these and other
unable to compete successfully against other and regulations, and our compliance with, or our factors is included in our filings with the Securities
$ 2.52
Net income per common share – adjusted ......................................................................................................................... $ 1.12 $ 1.46 $ 1.75 $ 1.24
agricultural equipment manufacturers, we would lose failure to comply with, existing or future laws and and Exchange Commission, including our Form
customers and our revenues and profitability would regulations could delay production of our products 10-K for the year ended December 31, 2007. The
decline. or otherwise adversely affect our business. Company disclaims any obligation to update any (2)
After tax.
We depend on suppliers for components and parts Our labor force is heavily unionized, and our forward-looking statements.
for our products, and any failure by our suppliers to contractual and legal obligations under collective
provide products as needed, or by us to promptly bargaining agreements and labor laws subject us to
Rounding may impact the summation of certain line items.
16 17
