AGCO Reports Third Quarter Results.Working Capital Focus Drives Improved Cash Flow DULUTH, Ga. -- AGCO AGCO Alcohol and Gaming Commission of Ontario AGCO Anderson, Greenwood, & Company AGCO After Google Check-Out Corporation (NYSE NYSE See: New York Stock Exchange :AG), a worldwide manufacturer and distributor of agricultural equipment, reported net income of $0.06 per share for the third quarter of 2006. Adjusted net income, which excludes restructuring and other infrequent in·fre·quent adj. 1. Not occurring regularly; occasional or rare: an infrequent guest. 2. expenses, was $0.07 per share for the third quarter of 2006. For the third quarter of 2005, AGCO reported both net income and adjusted net income of $0.31 per share. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of 2006 were $1.2 billion, a decrease of approximately 4.3% compared to the same period in 2005. For the first nine months of 2006, net income was $0.69 per share compared to $1.01 per share in 2005. Adjusted net income, excluding restructuring and other infrequent expenses, was $0.70 per share for the first nine months of 2006 compared to adjusted net income, excluding restructuring and other infrequent expenses and costs associated with a June 2005 bond redemption, of $1.16 per share in 2005. Net sales for the first nine months of 2006 decreased approximately 6.5% to $3.8 billion. "As we previously announced, our results were negatively impacted by weaker markets in both our North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. and Asia/Pacific segments," stated Martin Richenhagen, Chairman, President and Chief Executive Officer. "In addition, the continued reduction of dealer inventories in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. resulted in lower sales and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in the region. This reduction is part of our plan to reduce both inventory and accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying throughout the year. As of September 30, 2006, our worldwide inventory and accounts receivable were approximately $250 million lower than September 2005 levels. The working capital management also generated an improvement in free cash flow for the first nine months of 2006 of approximately $200 million compared to the same period in 2005. While our balance sheet focus has impacted our current results, we believe these actions, along with our product and distribution initiatives, will provide a foundation for better returns in the future." "AGCO's third quarter sales were led by continued strong performance in the Europe/Africa/Middle East region," Mr. Richenhagen continued. "Despite relatively flat industry sales, our European revenues increased approximately 7.5% in the third quarter of 2006, excluding currency impacts, which demonstrates the value of our products and our strong distribution network." Third Quarter and Year-to-Date Results For the third quarter of 2006, AGCO reported net sales of $1,180.9 million and net income of $5.4 million, or $0.06 per share. Adjusted net income, excluding restructuring and other infrequent expenses, was $6.0 million, or $0.07 per share, for the third quarter of 2006. For the third quarter of 2005, AGCO reported net sales of $1,233.6 million and net income of $27.8 million, or $0.31 per share. Adjusted net income, excluding restructuring and other infrequent income, was $27.7 million, or $0.31 per share, for the third quarter of 2005. For the first nine months of 2006, AGCO reported net sales of $3,801.2 million and net income of $63.6 million, or $0.69 per share. Adjusted net income, excluding restructuring and other infrequent expenses, was $64.3 million, or $0.70 per share for the first nine months of 2006. For the first nine months of 2005, AGCO reported net sales of $4,064.8 million and net income of $95.4 million, or $1.01 per share. Adjusted net income, excluding restructuring and other infrequent income and bond redemption costs, in the first nine months of 2005 was $109.4 million, or $1.16 per share. A reconciliation of adjusted income from operations, net income and earnings per share to reported income from operations, net income and earnings per share for the three and nine months ended September 30, 2006 and 2005 is provided in Note 8 to our Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . AGCO's net sales decreased 4.3% for the third quarter and 6.5% for the first nine months of 2006 compared to the same periods in 2005. Excluding the impact of currency translation, AGCO's net sales decreased 7.6% during the third quarter and 7.0% for the first nine months of 2006 compared to the same periods in 2005. Net sales declined in the North America, South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. and Asia/Pacific regions, partially offset by sales increases in the Europe/Africa/Middle East region. In North America, net sales were significantly lower during 2006 compared to 2005 primarily due to weaker market conditions and lower deliveries to dealers resulting in a reduction in dealer inventory levels. In the South America and Asia/Pacific regions, weaker market conditions contributed to the sales decline. Adjusted income from operations decreased $25.7 million for the third quarter of 2006 and $61.5 million for the first nine months of 2006 compared to 2005 resulting from the decrease in net sales. Gross margins in 2006 were slightly below 2005, due to lower production levels, sales mix sales mix See product mix. and currency impacts. Unit production of tractors and combines for the first nine months of 2006 was approximately 16% below 2005. In AGCO's Europe/Africa/Middle East region, income from operations increased $2.6 million in the third quarter and $11.5 million for the first nine months of 2006 compared to 2005. Income from operations in the third quarter and the first nine months of 2006 increased due to an approximate 3% and 6% increase in net sales, respectively, excluding currency impact, resulting from stronger market conditions in key regions of Europe Europe is often divided into regions due to geographical, cultural or historical criteria. Some common divisions are as follows. Directional divisions Groupings by compass directions are the hardest to define in Europe, since (among other issues) the pure geographical criteria , particularly in Germany. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: remained strong due to new products and productivity improvements. Income from operations in AGCO's South America region decreased $0.9 million for the third quarter and $4.1 million for the first nine months of 2006 compared to 2005. Industry demand in South America was below 2005 levels, resulting in a decline in AGCO's net sales in South America, excluding currency impact, of approximately 4% and 15% for the third quarter and first nine months of 2006, respectively. In North America, income from operations decreased $20.9 million in the third quarter and $46.5 million for the first nine months of 2006 compared to 2005. Income from operations in the third quarter and the first nine months of 2006 was lower primarily due to an approximate 27% and 24% reduction in net sales, respectively, excluding currency impact, compared to 2005. The sales decline is a result of lower retail sales of AGCO products due to weaker industry conditions as well as the impact of dealer inventory reductions, which influence wholesale sales levels. Income from operations in the Asia/Pacific region decreased $4.1 million in the third quarter and $12.0 million for the first nine months of 2006 compared to 2005 primarily due to lower sales in Australia, New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. and Asia. Regional Market Results North America - Industry retail demand softened soft·en v. soft·ened, soft·en·ing, soft·ens v.tr. 1. To make soft or softer. 2. To undermine or reduce the strength, morale, or resistance of. 3. considerably in the third quarter of 2006. Industry unit retail sales of tractors were down nearly 8% and combines were down over 18% compared to the third quarter of 2005. Third quarter 2006 industry retail sales of tractors over 100 horsepower horsepower, unit of power in the English system of units. It is equal to 33,000 foot-pounds per minute or 550 foot-pounds per second or approximately 746 watts. were 24% below those in the third quarter of 2005. Industry unit retail sales of tractors for the first nine months of 2006 decreased approximately 2% over the comparable prior year period resulting from decreases in the compact and high horsepower tractor segments, offset by a slight increase in the utility tractor segment. Industry unit retail sales of combines for the first nine months of 2006 were approximately 8% lower than the prior year period. AGCO's unit retail sales of tractors and combines were also lower in the third quarter and first nine months of 2006 compared to 2005. Europe - Industry unit retail sales of tractors for the first nine months of 2006 increased approximately 1% compared to the prior year period. Retail demand declined in France, Italy, Finland and Spain, but improved in Germany, the United Kingdom, Scandinavia and Central and Eastern Europe The term "Central and Eastern Europe" came into wide spread use, replacing "Eastern bloc", to describe former Communist countries in Europe, after the collapse of the Iron Curtain in 1989/90. . AGCO's unit retail sales for the first nine months of 2006 were higher when compared to the prior year period. South America - Industry unit retail sales of tractors and combines for the first nine months of 2006 decreased approximately 8% and 40%, respectively, compared to the prior year period. Retail sales in the major market of Brazil for tractors increased approximately 7% compared to 2005 and declined approximately 47% for combines during the first nine months of 2006 compared to 2005. AGCO's South American unit retail sales of tractors and combines declined in the first nine months of 2006 compared to 2005. Rest of World Markets - Outside of North America, Europe and South America, AGCO's net sales for the first nine months of 2006 were approximately 25% lower than 2005 due to lower sales in Asia and the Middle East. "Global industry demand in the third quarter showed mixed results," stated Mr. Richenhagen. "In Europe, industry retail sales improved slightly with increases in Germany and Scandinavia. In North America, third quarter industry retail sales were down sharply, especially in the large equipment sectors. In South America, industry demand remains weak overall with some recent improvement in Brazil driven by the sugar cane cane, walking stick cane, walking stick. Probably used first as a weapon, it gradually took on the symbolism of strength and power and eventually authority and social prestige. , coffee, and citrus citrus Any of the plants that make up the genus Citrus, in the rue family, that yield pulpy fruits covered with fairly thick skins. The genus includes the lemon, lime, sweet and sour oranges, tangerine, grapefruit, citron, and shaddock (C. maxima, or C. grandis; also called pomelo). sectors." Outlook Industry retail sales of farm equipment in 2006 in all major markets are expected to be relatively flat or below 2005 levels. In North America, 2006 farm income is projected to be below the prior year resulting in lower demand for equipment. In South America, the strength of the Brazilian currency and high farm debt levels are expected to continue to result in lower retail sales. Industry demand in Europe is expected to be flat to slightly increased compared to 2005. AGCO's net sales for the full year of 2006 are expected to decline 2 to 3% versus 2005 based on lower industry demand and planned dealer inventory reductions. AGCO is targeting full year earnings per share to be approximately $1.00 per share. In addition, improved working capital utilization in 2006 is expected to result in strong free cash flow. AGCO will be hosting a conference call with respect to this earnings announcement at 10:00 a.m. Eastern Time on Wednesday, November 1, 2006. The Company will refer to slides on its conference call. Interested persons can access the conference call and slide presentation via AGCO's website at www.agcocorp.com on the "Investors/Media" page. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for twelve months following the call. A copy of this press release will be available on AGCO's website for at least twelve months following the call. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Statements which are not historical facts, including projections of industry demand, sales, adjusted earnings per share and free cash flow, are forward-looking and subject to risks which could cause actual results to differ materially from those suggested by the statements. These forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. involve a number of risks and uncertainties. The following are among the factors that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statements. Further information concerning these and other factors is included in AGCO's filings with the Securities and Exchange Commission, including its Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005. AGCO disclaims any obligation to update any forward-looking statements. * Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally will adversely affect us. * Our success depends on the introduction of new products which require substantial expenditures. * We depend on suppliers for components and parts for our products, and any failure by our suppliers to provide products as needed as needed prn. See prn order. , or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell our products. * A majority of our sales and manufacturing takes place outside of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , and, as a result, we are exposed to risks related to foreign laws, taxes, economic conditions, labor supply and relations, political conditions and governmental policies. These risks may delay or reduce our realization of value from our international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. . * Currency exchange rate and interest rate changes can adversely affect the profitability 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 our business. * Our labor force is heavily unionized, and our contractual and legal obligations under collective bargaining agreements The contractual agreement between an employer and a Labor Union that governs wages, hours, and working conditions for employees and which can be enforced against both the employer and the union for failure to comply with its terms. and labor laws labor law, legislation dealing with human beings in their capacity as workers or wage earners. The Industrial Revolution, by introducing the machine and factory production, greatly expanded the class of workers dependent on wages as their source of income. subject us to the risks of work interruption or stoppage stoppage - /sto'p*j/ Extreme lossage that renders something (usually something vital) completely unusable. "The recent system stoppage was caused by a fried transformer." and could cause our costs to be higher. * We have significant pension obligations with respect to our employees. * We are subject to fluctuations in raw material prices and availability, which may cause delays in the production of our products or otherwise adversely affect our manufacturing costs. * The agricultural equipment industry is highly seasonal, and seasonal fluctuations significantly impact our results of operations and cash flows. * We face significant competition and, if we are unable to compete successfully against other agricultural equipment manufacturers, we would lose customers and our revenues and profitability would decline. * We have a substantial amount of indebtedness, and, as a result, we are subject to certain restrictive covenants Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. and payment obligations that may adversely affect our ability to operate and expand our business. About AGCO Founded in 1990, AGCO Corporation (NYSE: AG) (www.agcocorp.com) is a global manufacturer of agricultural equipment and related replacement parts. AGCO offers a full product line including tractors, combines, hay tools, sprayers, forage forage Vegetable food, including corn and hay, of wild or domestic animals. Harvested, processed, and stored forage is called silage. Forage should be harvested in early maturity to avoid a decrease in protein and fibre content as crops mature. , tillage equipment and implements, which are distributed through more than 3,600 independent dealers and distributors in more than 140 countries worldwide. AGCO products include the following well-known brands: AGCO([R]), Challenger([R]), Fendt([R]), Gleaner([R]), Hesston([R]), Massey Ferguson Massey Ferguson Limited is a major agricultural equipment manufacturer. Originally started in Canada it became one of the country's largest industrial concerns in the 1960s. ([R]), New Idea([R]), RoGator([R]), Spra-Coupe([R]), Sunflower sunflower, any plant of the genus Helianthus of the family Asteraceae (aster family), annual or perennial herbs native to the New World and common throughout the United States. ([R]), Terra-Gator([R]), Valtra([R]), and White([TM])Planters Planters is an American snack food company under Kraft Foods manufacturing, best known for its nuts and the Mr. Peanut icon that symbolizes them. Started by Italian immigrants Amedeo Obici and Mario Peruzzi in Wilkes-Barre, Pennsylvania, in 1906, it was incorporated in 1908 . AGCO provides retail financing through AGCO Finance. The company is headquartered in Duluth, Georgia Duluth is a city in Gwinnett County, Georgia, and a suburb of Atlanta located in the Metro Atlanta area. Unincorporated portions of northeast Fulton County and Forsyth County also have Duluth as a mailing address, though this area is technically outside city limits. and, in 2005, had net sales of $5.4 billion. Please visit our website at www.agcocorp.com . AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. (unaudited and in millions) [TABLE OMITTED] See accompanying notes to condensed consolidated financial statements. AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions, except per share data) [TABLE OMITTED] See accompanying notes to condensed consolidated financial statements. AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions, except per share data) [TABLE OMITTED] See accompanying notes to condensed consolidated financial statements. AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in millions) [TABLE OMITTED] See accompanying notes to condensed consolidated financial statements. AGCO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited, in millions, except per share data) 1. STOCK COMPENSATION EXPENSE During the third quarter and first nine months of 2006, the Company recorded approximately $1.4 million and $4.6 million, respectively, of stock compensation expense in accordance with Statement of Financial Accounting Standards ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ") No. 123R (Revised 2004), "Share-Based Payment" ("SFAS No. 123R"). The stock compensation expense was recorded as follows: [TABLE OMITTED] 2. RESTRUCTURING AND OTHER INFREQUENT EXPENSES During the first nine months of 2006, the Company recorded restructuring and other infrequent expenses of approximately $1.0 million. These charges primarily related to severance costs associated with the Company's rationalization rationalization, in psychology: see defense mechanism. of certain parts, sales, marketing and administrative functions in the United Kingdom and Germany, as well as the rationalization of certain Valtra European sales offices located in Denmark, Norway, Germany and the United Kingdom. During the first nine months of 2005, the Company recorded restructuring and other infrequent expenses of approximately $0.2 million. The net charges included a $1.5 million gain on the sale of property, which was recorded during the second quarter of 2005, related to the completion of auctions of machinery and equipment associated with the rationalization of the Randers, Denmark combine manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. . The gain was offset by $0.6 million and $0.3 million of costs recorded in the first quarter and second quarter of 2005, respectively, associated with the Randers rationalization. These charges consisted primarily of employee retention payments and other facility closure costs. During the third quarter of 2005, the Company reversed $0.1 million of previously established provisions related to the Randers rationalization regarding retention payments as employee retention claims were finalized See finalization. during the quarter. In addition, during the first quarter of 2005, the Company incurred and recorded approximately $0.3 million of contract termination Defense procurement: the cessation or cancellation, in whole or in part, of work under a prime contract or a subcontract thereunder for the convenience of, or at the option of, the government, or due to failure of the contractor to perform in accordance with the terms of the contract (default). costs associated with the rationalization of its Valtra European parts distribution operations and $0.1 million of severance costs associated with the rationalization of certain administrative functions of its Finnish tractor manufacturing operations. The Company also recorded approximately $0.4 million and $0.1 million of costs during the second quarter and third quarter of 2005, respectively, associated with the announced closure of several of its Valtra European sales offices. 3. LONG-TERM DEBT Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. Long-term debt consisted of the following at September 30, 2006 and December 31, 2005: [TABLE OMITTED] 4. INVENTORIES Inventories are valued at the lower of cost or market lower of cost or market A method for determining an asset's value such that either the original cost or the current replacement cost, whichever is lowest, is used for financial reporting purposes. using the first-in, first-out first-in, first-out n. A method of inventory accounting in which the oldest remaining items are assumed to have been the first sold. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods sold, a higher gross method. Market is net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. for finished goods and repair and replacement parts. For work in process, production parts and raw materials, market is replacement cost. Inventories at September 30, 2006 and December 31, 2005 were as follows: [TABLE OMITTED] 5. ACCOUNTS RECEIVABLE SECURITIZATION Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. The Company sells wholesale accounts receivable on a revolving basis to commercial paper conduits either on a direct basis or through a wholly-owned special purpose U.S. subsidiary under its United States, Canadian and European securitization facilities. Outstanding funding under these facilities totaled approximately $387.3 million at September 30, 2006 and $462.7 million at December 31, 2005. The funded balance has the effect of reducing accounts receivable and short-term liabilities by the same amount. Losses on sales of receivables primarily from securitization facilities included in other expense, net were $6.5 million and $5.9 million for the three months ended September 30, 2006 and 2005, respectively, and $20.3 million and $16.5 million for the nine months ended September 30, 2006 and 2005, respectively. During the second quarter of 2005, the Company completed an agreement to permit transferring, on an ongoing basis, the majority of its wholesale interest-bearing receivables in North America to AGCO Finance LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control and AGCO Finance Canada, Ltd., its United States and Canadian retail finance joint ventures. The Company has a 49% ownership interest in these joint ventures. The transfer of the receivables is without recourse A phrase used by an endorser (a signer other than the original maker) of a negotiable instrument (for example, a check or promissory note) to mean that if payment of the instrument is refused, the endorser will not be responsible. to the Company, and the Company will continue to service the receivables. As of September 30, 2006, the balance of interest-bearing receivables transferred to AGCO Finance LLC and AGCO Finance Canada, Ltd. under this agreement was approximately $130.6 million compared to approximately $109.9 million as of December 31, 2005. 6. EARNINGS PER SHARE During the fourth quarter of 2004, the Emerging Issues Task Force ("EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation ") reached a consensus on EITF Issue No. 04-08, "Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of ." EITF Issue No. 04-08 requires that contingently convertible debt should be included in the calculation of diluted earnings per share using the if-converted method regardless of whether a market price trigger has been met. The Company adopted the statement during the fourth quarter of 2004 and included approximately 9.0 million additional shares of common stock that may have been issued upon conversion of the Company's former 13/4% convertible senior subordinated notes in its diluted earnings per share calculation for the six months ended June 30, 2005. In addition, diluted earnings per share are required to be restated for each period that the former convertible notes were outstanding. The convertible notes were issued on December 23, 2003. As the Company is not benefiting losses in the United States for tax purposes, the interest expense associated with the convertible notes included in the diluted earnings per share calculation does not reflect a tax benefit. On June 29, 2005, the Company completed an exchange of its $201.3 million aggregate principal amount of 13/4% convertible senior subordinated notes. The Company exchanged its existing convertible notes for new notes that provide for (i) the settlement upon conversion in cash up to the principal amount of the converted new notes with any excess conversion value settled in shares of the Company's common stock, and (ii) the conversion rate to be increased under certain circumstances if the new notes are converted in connection with certain change of control transactions occurring prior to December 10, 2010, but otherwise are substantially the same as the old notes. The impact of the exchange resulted in a reduction in the diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. weighted average shares outstanding of approximately 9.0 million shares on a prospective basis. In the future, dilution of weighted shares outstanding will depend on the Company's stock price once the market price trigger or other specified conversion circumstances are met. A reconciliation of net income and weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the three and nine months ended September 30, 2006 and 2005 is as follows: [TABLE OMITTED] 7. SEGMENT REPORTING segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four The Company has four reportable segments: North America; South America; Europe/Africa/Middle East; and Asia/Pacific. Each regional segment distributes a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each regional segment are based on the location of the third-party customer. The Company's selling, general and administrative expenses and engineering expenses are charged to each segment based on the region and division where the expenses are incurred. As a result, the components of income from operations for one segment may not be comparable to another segment. Segment results for the three months and nine months ended September 30, 2006 and 2005 are as follows: [TABLE OMITTED] [TABLE OMITTED] A reconciliation from the segment information to the consolidated balances for income from operations is set forth below: [TABLE OMITTED] 8. RECONCILIATION OF NON-GAAP MEASURES This earnings release discloses adjusted income from operations, net income and earnings per share, as well as free cash flow, all of which exclude amounts that differ from the most directly comparable measure calculated in accordance with U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included below. The following is a reconciliation of adjusted income from operations, net income and earnings per share to reported income from operations, net income and earnings per share for the three months ended September 30, 2006 and 2005: [TABLE OMITTED] The following is a reconciliation of adjusted income from operations, net income and earnings per share to reported income from operations, net income and earnings per share for the nine months ended September 30, 2006 and 2005: [TABLE OMITTED] The following is a reconciliation of free cash flow to net cash used in operating activities for the nine months ended September 30, 2006 and 2005: [TABLE OMITTED] |
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