EX-99.4 5 g68245ex99-4.txt UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1 EXHIBIT 99.4 2 UNAUDITED FINANCIAL STATEMENTS OF AG-CHEM EQUIPMENT CO., INC. FOR ITS QUARTER ENDED DECEMBER 31, 2000. CONSOLIDATED BALANCE SHEETS Ag-Chem Equipment Co., Inc. and Subsidiaries (Dollars in Thousands except Share Amounts) (UNAUDITED) --------------------------------------------------------------------------------

See accompanying condensed notes to interim consolidated financial statements. 1 3 CONSOLIDATED BALANCE SHEETS Ag-Chem Equipment Co., Inc. and Subsidiaries (Dollars in Thousands except Share Amounts) (UNAUDITED) --------------------------------------------------------------------------------

See accompanying condensed notes to interim consolidated financial statements. 2 4 CONSOLIDATED STATEMENTS OF OPERATIONS Ag-Chem Equipment Co., Inc. and Subsidiaries (Amounts in Thousands except Per Share Amounts) (UNAUDITED) --------------------------------------------------------------------------------

See accompanying condensed notes to interim consolidated financial statements. 3 5 CONSOLIDATED STATEMENTS OF CASH FLOWS Ag-Chem Equipment Co., Inc. and Subsidiaries (Dollars in Thousands) (UNAUDITED) --------------------------------------------------------------------------------

(continued on next page) See accompanying condensed notes to interim consolidated financial statements. 4 6 CONSOLIDATED STATEMENTS OF CASH FLOWS Ag-Chem Equipment Co., Inc. and Subsidiaries (Dollars in Thousands) (UNAUDITED) --------------------------------------------------------------------------------

See accompanying condensed notes to interim consolidated financial statements. 5 7 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS Ag-Chem Equipment Co., Inc. and Subsidiaries (Dollars in Thousands) (UNAUDITED) -------------------------------------------------------------------------------- (1) BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions in Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended September 30, 2000 included in the Company's annual report on Form 10-k. results of the interim periods are not necessarily indicative of the results for an entire year. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Product and service revenues are recognized upon shipment of goods to customers or upon performance of services, respectively. Revenues from rental contracts are earned and recognized based on the customer's usage of the rental equipment or the passage of time pursuant to terms of the rental contracts. The Company periodically receives prepayments from customers to secure either more favorable pricing or a desired delivery date. Customer prepayments are deferred until shipment of goods to customers occurs. Estimated reserves for future returns are established by the Company based on historical experience and current business factors and are charged against revenues in the same period as the corresponding sales are recorded. Estimated warranty costs are recorded in the same period as the corresponding sales based on historical and expected future warranty claim experience. PHANTOM STOCK PLAN Some Ag-Chem employees are in possession of "phantom shares" of Ag-Chem stock pursuant to the Ag-Chem Equipment Co., Inc. 1998 Key Employee Phantom Stock Bonus Plan effective December 1, 1998. Phantom shares do not represent shares of Ag-Chem's common stock. Instead, phantom shares are a method of calculating potential bonus payments to employees. Under the plan, an aggregate of 85,750 phantom shares are outstanding. All phantom shares are required to be redeemed on November 30, 2001 if not sooner called by the Company. On the redemption date, Ag-Chem is required to make a cash payment to the employees equal to the difference between the grant price and the price of shares on the date of redemption. The grant price was $11 15/16, the closing price of Ag-Chem's shares on the date the plan was adopted. if the market price on the date of redemption is lower than the grant price, no cash payment is required to be made. If the price of Ag-Chem's common stock reaches $31 15/16, Ag-Chem has the right to call and redeem the phantom shares at that time. Under the plan, if a participant's employment is terminated, all rights under the plan are forfeited unless such termination is the result of death or permanent total disability, in which case the participant or his/her estate is entitled to receive a cash payment based upon the market price of Ag-Chem's common stock on the date of death or permanent total disability. Pursuant to the merger agreement (see Note 7), Ag-Chem has agreed that upon or prior to closing of the merger to terminate the Phantom Stock Bonus Plan and to make cash payments to its employees of approximately $13.86 per phantom share (the difference between $25.80 and the grant price of $11 15/16), aggregating $1,188. During the three-month period ended December 31, 2000, the Company recorded $1,066 of expense. This expense is related to anticipated merger and termination of this plan. 6 8 NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), effective for the Company on October 1, 2000, establishes new standards for recognizing certain derivatives as either assets or liabilities, and measuring those instruments at fair value. The Company adopted this standard on October 1, 2000 and recorded the fair value of its interest rate swap of $145 as an asset. In December 1999, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). SAB 101 summarizes certain SEC staff views in applying accounting principles generally accepted in the United States of America to revenue recognition in financial statements. SAB 101 will be effective for the Company in the fourth quarter of fiscal year 2001. Ag-Chem is currently evaluating the impact of SAB 101 on its financial condition and results of operations. Reclassifications Certain reclassifications have been made in the fiscal 2000 financial statements to conform to the fiscal 2001 presentation. (3) INVENTORIES Inventories consist of the following:

If the first in, first out (FIFO) method utilizing current costs had been used for inventories valued using the LIFO method, net loss before tax would have been lower by $265 and $219 for the three-month periods ended December 31, 2000 and 1999, respectively. 7 9 (4) ACCRUED EXPENSES Accrued expenses consist of the following:

(5) COMPREHENSIVE LOSS Comprehensive loss and its components, including all changes in equity during a period except those resulting from repurchase of the Company's stock, investments by owners or distributions to owners are as follows:

(6) NOTES PAYABLE TO BANKS The terms of the Company's amended credit line agreement include covenants that the Company must maintain. There are a number of standard affirmative covenants, as well as restrictive negative covenants as to additional borrowings and requirements for the Company to maintain certain financial ratios. These restrictive covenants include a minimum tangible net worth of $57,500 plus 50% of each fiscal year's net earnings, a ratio of total liabilities to tangible net worth, an interest coverage ratio and a working capital coverage ratio. There are additional limitations on mergers, acquisitions, disposal of assets, and capital expenditures. Due to the merger limitation, the line of credit will be due upon the closing of the proposed merger if the proper approvals are not obtained. (See additional discussion on the merger in Note 7). The Company was in violation of certain of these covenants as of December 31, 2000, however, the debt agreements have been amended and the Company obtained waivers of the events of default and is now in compliance. The Company believes it will be in compliance with its debt covenants up to the date of closing of the proposed merger. 8 10 (7) BUSINESS COMBINATIONS On November 20, 2000, the Company announced it had agreed to be acquired by AGCO Corporation (AGCO). AGCO, headquartered in Duluth, Georgia, is a leading worldwide designer, manufacturer and distributor of agricultural equipment. Subject to customary regulatory and Ag-Chem shareholder approval, the transaction will merge the Company with a wholly owned subsidiary of AGCO. The Company's shareholders will receive $25.80 per share consisting of no more than $12.90 in AGCO stock and the remainder in cash. A special shareholder meeting to approve the acquisition is expected to occur on March 14, 2001. Pursuant to the merger agreement, Ag-Chem has agreed that upon or prior to closing of the merger to terminate the Phantom Stock Bonus Plan and to make cash payments to its employees of approximately $13.86 per phantom share (the difference between $25.80 and the grant price of $11 15/16), aggregating $1,188. During the three-month period ended December 31, 2000, the Company recorded $1,066 of expense. This expense is related to anticipated merger and termination of this plan. 9

AG-CHEM EQUIPMENT CO INC 8-K