AGCO 2011 - 3 Q - 10-Q
Table of Contents


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________ 
FORM 10-Q
___________________________________________ 
For the quarter ended September 30, 2011
of
___________________________________________ 
AGCO CORPORATION
___________________________________________  
A Delaware Corporation
IRS Employer Identification No. 58-1960019
SEC File Number 1-12930
4205 River Green Parkway
Duluth, GA 30096
(770) 813-9200
___________________________________________  
AGCO Corporation (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.
AGCO Corporation has submitted electronically and posted on its corporate web site every Interactive Data File for the periods required to be submitted and posted pursuant to Rule 405 of Regulation S-T.
As of October 31, 2011, AGCO Corporation had 97,187,295 shares of common stock outstanding. AGCO Corporation is a large accelerated filer.
AGCO Corporation is a well-known seasoned issuer and is not a shell company.
 
 
 
 
 



Table of Contents


AGCO CORPORATION AND SUBSIDIARIES
INDEX

 
 
 
 
 
Page
Numbers
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 6.
 
 


Table of Contents


PART I.        FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions, except share amounts)

 
September 30,
2011
 
December 31,
2010
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
455.2

 
$
719.9

Accounts and notes receivable, net
902.9

 
908.5

Inventories, net
1,603.2

 
1,233.5

Deferred tax assets
60.0

 
52.6

Other current assets
200.9

 
206.5

Total current assets
3,222.2

 
3,121.0

Property, plant and equipment, net
1,057.8

 
924.8

Investment in affiliates
344.9

 
398.0

Deferred tax assets
42.0

 
58.0

Other assets
110.0

 
130.8

Intangible assets, net
214.3

 
171.6

Goodwill
665.4

 
632.7

Total assets
$
5,656.6

 
$
5,436.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
1.0

 
$
0.1

Convertible senior subordinated notes

 
161.0

Securitization facilities
78.6

 
113.9

Accounts payable
773.5

 
682.6

Accrued expenses
957.0

 
883.1

Other current liabilities
89.1

 
72.2

Total current liabilities
1,899.2

 
1,912.9

Long-term debt, less current portion
456.2

 
443.0

Pensions and postretirement health care benefits
221.9

 
226.5

Deferred tax liabilities
113.3

 
103.9

Other noncurrent liabilities
113.9

 
91.4

Total liabilities
2,804.5

 
2,777.7

Commitments and contingencies (Note 15)
 
 
 
Stockholders’ Equity:
 
 
 
AGCO Corporation stockholders’ equity:
 
 
 
Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2011 and 2010

 

Common stock; $0.01 par value, 150,000,000 shares authorized, 97,186,879 and 93,143,542 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively
1.0

 
0.9

Additional paid-in capital
1,066.8

 
1,051.3

Retained earnings
2,036.4

 
1,738.3

Accumulated other comprehensive loss
(283.8
)
 
(132.1
)
Total AGCO Corporation stockholders’ equity
2,820.4

 
2,658.4

Noncontrolling interests
31.7

 
0.8

Total stockholders’ equity
2,852.1

 
2,659.2

Total liabilities and stockholders’ equity
$
5,656.6

 
$
5,436.9

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents


AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
 
 
Three Months Ended
September 30,
 
2011
 
2010
Net sales
$
2,099.1

 
$
1,657.4

Cost of goods sold
1,691.3

 
1,353.6

Gross profit
407.8

 
303.8

Selling, general and administrative expenses
221.2

 
170.3

Engineering expenses
67.5

 
51.4

Restructuring and other infrequent expenses

 
1.2

Amortization of intangibles
4.8

 
5.0

Income from operations
114.3

 
75.9

Interest expense, net
3.1

 
5.8

Other expense, net
7.1

 
4.9

Income before income taxes and equity in net earnings of affiliates
104.1

 
65.2

Income tax provision
31.6

 
14.1

Income before equity in net earnings of affiliates
72.5

 
51.1

Equity in net earnings of affiliates
12.0

 
11.1

Net income
84.5

 
62.2

Net (income) loss attributable to noncontrolling interests
(0.1
)
 
0.1

Net income attributable to AGCO Corporation and subsidiaries
$
84.4

 
$
62.3

Net income per common share attributable to AGCO Corporation and subsidiaries:
 
 
 
Basic
$
0.88

 
$
0.67

Diluted
$
0.87

 
$
0.65

Weighted average number of common and common equivalent shares outstanding:
 
 
 
Basic
96.4

 
92.9

Diluted
96.9

 
95.8

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents


AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
 
 
Nine Months Ended
September 30,
 
2011
 
2010
Net sales
$
6,255.4

 
$
4,728.6

Cost of goods sold
5,003.4

 
3,879.1

Gross profit
1,252.0

 
849.5

Selling, general and administrative expenses
622.4

 
492.1

Engineering expenses
191.6

 
158.5

Restructuring and other infrequent (income) expenses
(0.7
)
 
3.3

Amortization of intangibles
14.1

 
13.8

Income from operations
424.6

 
181.8

Interest expense, net
21.1

 
23.7

Other expense, net
17.3

 
9.7

Income before income taxes and equity in net earnings of affiliates
386.2

 
148.4

Income tax provision
123.4

 
49.8

Income before equity in net earnings of affiliates
262.8

 
98.6

Equity in net earnings of affiliates
37.2

 
36.4

Net income
300.0

 
135.0

Net (income) loss attributable to noncontrolling interests
(1.9
)
 
0.3

Net income attributable to AGCO Corporation and subsidiaries
$
298.1

 
$
135.3

Net income per common share attributable to AGCO Corporation and subsidiaries:
 
 
 
Basic
$
3.13

 
$
1.46

Diluted
$
3.04

 
$
1.41

Weighted average number of common and common equivalent shares outstanding:
 
 
 
Basic
95.1

 
92.7

Diluted
97.9

 
96.0

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents


AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
 
 
Nine Months Ended
September 30,
 
2011
 
2010
Cash flows from operating activities:
 
 
 
Net income
$
300.0

 
$
135.0

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
110.2

 
97.7

Deferred debt issuance cost amortization
2.3

 
2.1

Amortization of intangibles
14.1

 
13.8

Amortization of debt discount
6.1

 
11.7

Stock compensation
17.9

 
8.5

Equity in net earnings of affiliates, net of cash received
(21.7
)
 
(25.3
)
Deferred income tax benefit
(3.3
)
 
(14.0
)
Other
(1.4
)
 
(0.1
)
Changes in operating assets and liabilities, net of effects from purchase of businesses:
 
 
 
Accounts and notes receivable, net
49.9

 
22.0

Inventories, net
(333.6
)
 
(277.2
)
Other current and noncurrent assets
(15.5
)
 
(62.0
)
Accounts payable
56.9

 
46.3

Accrued expenses
88.8

 
28.7

Other current and noncurrent liabilities
(0.2
)
 
16.9

Total adjustments
(29.5
)
 
(130.9
)
Net cash provided by operating activities
270.5

 
4.1

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(187.2
)
 
(82.8
)
Proceeds from sale of property, plant and equipment
0.9

 
0.5

Purchase of businesses, net of cash acquired
(88.3
)
 

Investments in consolidated affiliate, net of cash acquired
(25.0
)
 

Investments in unconsolidated affiliates, net
(8.3
)
 

Net cash used in investing activities
(307.9
)
 
(82.3
)
Cash flows from financing activities:
 
 
 
Repurchase or conversion of convertible senior subordinated notes
(161.0
)
 
(58.1
)
Repayment of debt obligations, net
(47.3
)
 
(76.0
)
Payment of minimum tax withholdings on stock compensation
(2.5
)
 
(11.1
)
Distribution to noncontrolling interest
(1.0
)
 

Proceeds from issuance of common stock
0.2

 
0.2

Net cash used in financing activities
(211.6
)
 
(145.0
)
Effect of exchange rate changes on cash and cash equivalents
(15.7
)
 
31.0

Decrease in cash and cash equivalents
(264.7
)
 
(192.2
)
Cash and cash equivalents, beginning of period
719.9

 
651.4

Cash and cash equivalents, end of period
$
455.2

 
$
459.2

See accompanying notes to condensed consolidated financial statements.

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Table of Contents


AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
1.    BASIS OF PRESENTATION
The condensed consolidated financial statements of AGCO Corporation and its subsidiaries (the “Company” or “AGCO”) included herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Results for interim periods are not necessarily indicative of the results for the year. Certain prior period amounts have been reclassified to conform to the current period presentation.
Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-09, “Compensation-Retirement Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer's Participation in a Multiemployer Plan” (“ASU 2011-09”). ASU 2011-09 requires additional disclosures about employers' participation in multiemployer pension plans including information about the plan's funded status if it is readily available. The ASU is effective for annual periods for fiscal years ending after December 15, 2011 and is to be applied retrospectively. The Company is currently evaluating the potential impact of the adoption of ASU 2011-09 on its disclosures for the year ended December 31, 2011.

In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment” (“ASU 2011-08”). ASU 2011-08 permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company plans to adopt this standard for its fiscal year beginning January 1, 2012. The Company is currently evaluating the potential impact of the adoption of ASU 2011-08 on its annual goodwill impairment test.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 eliminates the option to present other comprehensive income and its components in the statement of stockholders' equity. Accordingly, this standard increases the prominence of other comprehensive income in financial statements by requiring comprehensive income to be presented in either a single continuous statement or in two consecutive statements reporting net income and other comprehensive income. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The standard initially required that reclassification adjustments from other comprehensive income be measured and presented by income statement line item on the face of the income statement. On October 21, 2011, the FASB proposed a deferral of this new requirement to present reclassifications of other comprehensive income on the face of the income statement. If finalized as proposed, the deferral would become effective at the same time that ASU 2011-05 is adopted. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011 and is to be applied retrospectively. Early adoption is permitted. The Company will adopt ASU 2011-05 by presenting two separate but consecutive statements reporting net income and other comprehensive income for its first quarter ended March 31, 2012. The Company will continue to evaluate the status of the proposed deferral and its impact on the presentation of reclassification adjustments.
     
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 clarifies existing fair value measurement concepts and continues the convergence towards a uniform framework for applying fair value measurement principles. This standard requires additional disclosures for fair value measurements, primarily Level 3 measurements. ASU 2011-04 is effective for fiscal years and interim periods beginning after December 15, 2011 and is to be applied prospectively. Early adoption is prohibited. The Company does not expect the adoption of ASU 2011-04 to have a material effect on the Company's consolidated financial position or results of operations. The Company is currently evaluating the potential impact of the adoption of ASU 2011-04 on its disclosures.


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Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

2.    ACQUISITIONS
On January 3, 2011, the Company acquired 50% of AGCO-Amity JV, LLC (“AGCO-Amity JV”) for approximately $25.0 million, net of approximately $5.0 million cash acquired, thereby creating a joint venture between the Company and Amity Technology LLC. The joint venture had approximately $6.2 million of indebtedness as of the date of acquisition. AGCO-Amity JV is located in North Dakota and manufactures air-seeding and tillage equipment. The investment was funded with available cash on hand. As the Company has a controlling voting interest to direct the activities that most significantly impact the joint venture, the Company has consolidated the joint venture’s operations in the Company’s results of operations and financial position commencing as of and from the date of the formation of the joint venture. The Company allocated the purchase price to the assets acquired and liabilities assumed based on a preliminary estimate of their fair values as of the acquisition date. The acquired net assets consist primarily of accounts receivable, property, plant and equipment, inventories, trademarks and other intangible assets. The Company recorded approximately $20.1 million of goodwill and approximately $22.9 million of tradename, trademark, technology and distribution network intangible assets, representing 100% of the value of these assets within the joint venture’s financial position. The goodwill is reported within the Company’s North American geographical reportable segment.
The acquired other identifiable intangible assets of AGCO-Amity JV are summarized in the following table (in millions):
 
Intangible Asset
 
Amount
 
Weighted-Average
Useful Life
Tradenames and trademarks
 
$
1.4

 
5

years
Technology
 
17.1

 
15

years
Distribution network
 
4.4

 
5

years
 
 
$
22.9

 
 
 
On March 3, 2011, the Company acquired the remaining 50% of Laverda SpA (“Laverda”) for approximately €63.8 million, net of approximately €1.2 million cash acquired (or approximately $88.3 million, net). Laverda, previously an operating joint venture between AGCO and the Italian ARGO group, is located in Breganze, Italy and manufactures harvesting equipment. In addition to producing Laverda-branded combines, the Breganze factory manufactures mid-range combine harvesters for the Company’s Massey Ferguson, Fendt and Challenger brands for distribution in Europe, Africa and the Middle East. The Company’s 100% ownership of Laverda includes ownership in Fella-Werke GMBH, a German manufacturer of grass and hay machinery. The Company allocated the purchase price to the assets acquired and liabilities assumed based on a preliminary estimate of their fair values as of the acquisition date. The acquired net assets consist primarily of accounts receivable, property, plant and equipment, inventories, tradename and other intangible assets. The Company recorded approximately $40.9 million of goodwill and approximately $33.4 million of trademark and distribution network intangible assets associated with the acquisition. The goodwill recorded is reported within the Company’s Europe/Middle East/Africa geographical reportable segment. In addition, the Company recorded a gain of approximately $0.7 million on the remeasurement of the previously held equity interest during the nine months ended September 30, 2011 within the Company’s Condensed Consolidated Statements of Operations as a result of the acquisition.
 
The acquired other identifiable intangible assets of Laverda are summarized in the following table (in millions):
 
Intangible Asset
 
Amount
 
Weighted-Average
Useful Life
Tradenames
 
$
6.6

 
30
years
Distribution network
 
26.8

 
16
years
 
 
$
33.4

 
 
 
On December 15, 2010, the Company acquired Sparex Holdings Ltd (“Sparex”), a U.K. company, for approximately £51.6 million, net of approximately £2.7 million cash acquired (or approximately $81.5 million, net). Sparex, headquartered in Exeter, United Kingdom, is a global distributor of accessories and tractor replacement parts serving the agricultural aftermarket, with operations in 17 countries. The acquisition was financed with available cash on hand. The Company recorded approximately $25.9 million of goodwill and approximately $28.6 million of preliminary estimated tradename and customer relationship intangible assets associated with the acquisition of Sparex. The results of operations for the Sparex acquisition have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition.


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Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

The following pro forma data summarizes the results of operations for the three months ended September 30, 2010 and nine months ended September 30, 2011 and 2010, respectively, as if the Laverda and Sparex acquisitions had occurred as of January 1, 2010. The unaudited pro forma information has been prepared for comparative purposes only and does not purport to represent what the results of operations of the Company actually would have been had the transaction occurred on the date indicated or what the results of operations may be in any future period (in millions, except per share data):
 
 
Three Months Ended
September 30, 2010
Net sales
$
1,723.1

Net income attributable to AGCO Corporation and subsidiaries
65.8

Net income per common share attributable to AGCO Corporation and subsidiaries:
 
Basic
$
0.71

Diluted
$
0.69

 
 
Nine Months Ended
September 30,
 
2011
 
2010
Net sales
$
6,289.0

 
$
4,955.5

Net income attributable to AGCO Corporation and subsidiaries
298.5

 
144.5

Net income per common share attributable to AGCO Corporation and subsidiaries:
 
 
 
Basic
$
3.14

 
$
1.56

Diluted
$
3.05

 
$
1.51


3.    STOCK COMPENSATION PLANS
The Company recorded stock compensation expense as follows (in millions):
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Cost of goods sold
$
0.4

 
$
0.2

 
$
1.1

 
$
0.5

Selling, general and administrative expenses
6.0

 
3.0

 
17.0

 
8.2

Total stock compensation expense
$
6.4

 
$
3.2

 
$
18.1

 
$
8.7

Stock Incentive Plans
Under the Company’s 2006 Long Term Incentive Plan (the “2006 Plan”), up to 10.0 million shares of AGCO common stock may be issued. The 2006 Plan allows the Company, under the direction of the Board of Directors’ Compensation Committee, to make grants of performance shares, stock appreciation rights, stock options and restricted stock awards to employees, officers and non-employee directors of the Company.

Employee Plans
The weighted average grant-date fair value of performance awards granted under the 2006 Plan during the nine months ended September 30, 2011 and 2010 was $53.04 and $33.61, respectively.
During the nine months ended September 30, 2011, the Company granted 641,826 awards for the three-year performance period commencing in 2011 and ending in 2013, assuming the maximum target level of performance is achieved. On April 21, 2011, the Company’s shareholders approved the amendment and restatement of the 2006 Plan, including an increase in the number of shares available for issuance under the 2006 Plan by 5.0 million shares, for a total of 10.0 million shares available for grant. During the nine months ended September 30, 2011, the Company granted 804,699 awards for a three- to five-year performance period commencing in 2011 and ending in 2015, assuming the maximum target level of performance is achieved for operating margin improvement. The compensation expense associated with all awards granted under the 2006 Plan is amortized ratably over the vesting or performance period based on the Company’s projected assessment of the level of

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Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

performance that will be achieved and earned. Performance award transactions during the nine months ended September 30, 2011 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan:
 
Shares awarded but not earned at January 1
1,916,254

Shares awarded
1,446,525

Shares forfeited or unearned
(67,000
)
Shares earned

Shares awarded but not earned at September 30
3,295,779

As of September 30, 2011, the total compensation cost related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved and earned, was approximately $48.0 million, and the weighted average period over which it is expected to be recognized is approximately four years.
During the three and nine months ended September 30, 2011, the Company recorded stock compensation expense of approximately $0.6 million and $1.9 million, respectively, associated with stock settled stock appreciation rights (“SSAR”) awards. During the three and nine months ended September 30, 2010, the Company recorded stock compensation expense of approximately $0.6 million and $1.9 million, respectively, associated with SSAR awards. The Company estimated the fair value of the grants using the Black-Scholes option pricing model. The Company utilized the “simplified” method for estimating the expected term of granted SSARs during the nine months ended September 30, 2011 and 2010 as afforded by SEC Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment (SAB Topic 14),” and SAB No. 110, “Share-Based Payment (SAB Topic 14.D.2).” The expected term used to value a grant under the simplified method is the mid-point between the vesting date and the contractual term of the SSAR. As the Company has only been granting SSARs since April 2006, it does not believe it has sufficient relevant experience regarding employee exercise behavior. The weighted average grant-date fair value of SSARs granted and the weighted average assumptions under the Black-Scholes option model were as follows for the nine months ended September 30, 2011 and 2010:
 
 
Nine Months Ended
September 30,
 
2011
 
2010
Weighted average grant date fair value
$
22.54

 
$
14.47

Weighted average assumptions under Black-Scholes option model:
 
 
 
Expected life of awards (years)
5.5

 
5.5

Risk-free interest rate
2.0
%
 
2.4
%
Expected volatility
49.5
%
 
48.5
%
Expected dividend yield

 


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Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)


SSAR transactions during the nine months ended September 30, 2011 were as follows:

 
 
SSARs outstanding at January 1
798,197

SSARs granted
152,800

SSARs exercised
(125,187
)
SSARs canceled or forfeited
(500
)
SSARs outstanding at September 30
825,310

SSAR price ranges per share:
 
Granted
$ 47.89-52.29

Exercised
21.45-37.38

Canceled or forfeited
56.98

Weighted average SSAR exercise prices per share:
 
Granted
$
52.15

Exercised
27.96

Canceled or forfeited
56.98

Outstanding at September 30
36.61

At September 30, 2011, the weighted average remaining contractual life of SSARs outstanding was approximately four years. As of September 30, 2011, the total compensation cost related to unvested SSARs not yet recognized was approximately $5.4 million and the weighted-average period over which it is expected to be recognized is approximately three years.
The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price:
 
 
 
SSARs Outstanding
 
SSARs Exercisable
Range of Exercise Prices
 
Number of
Shares
 
Weighted Average
Remaining
Contractual Life
(Years)
 
Weighted
Average
Exercise
Price
 
Exercisable
as of
September 30,
2011
 
Weighted
Average
Exercise
Price
$21.45 – $23.80
 
261,157

 
4.0
 
$
21.68

 
132,188

 
$
21.99

$26.00 – $37.38
 
309,766

 
4.1
 
$
34.94

 
169,891

 
$
36.26

$44.55 – $56.98
 
254,387

 
5.1
 
$
53.97

 
76,362

 
$
56.83

 
 
825,310

 
 
 
 
 
378,441

 
$
35.43

The total fair value of SSARs vested during the nine months ended September 30, 2011 was $2.2 million. There were 446,869 SSARs that were not vested as of September 30, 2011. The total intrinsic value of outstanding and exercisable SSARs as of September 30, 2011 was $3.6 million and $1.7 million, respectively. The total intrinsic value of SSARs exercised during the nine months ended September 30, 2011 was approximately $3.4 million. The Company realized an insignificant tax benefit from the exercise of these SSARs.

Director Restricted Stock Grants
The 2006 Plan provides for annual restricted stock grants of the Company’s common stock to all non-employee directors. The shares are restricted as to transferability for a period of three years, but are not subject to forfeiture. In the event a director departs from the Company’s Board of Directors, the non-transferability period would expire immediately. The plan allows for the director to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the statutory minimum federal, state and employment taxes which would be payable at the time of grant. The 2011 grant was made on April 21, 2011 and equated to 16,560 shares of common stock, of which 12,034 shares of common stock were issued, after shares were withheld for withholding taxes. The Company recorded stock compensation expense of approximately $0.9 million during the nine months ended September 30, 2011 associated with these grants.


11

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

As of September 30, 2011, of the 10.0 million shares reserved for issuance under the 2006 Plan, approximately 4.3 million shares were available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed above.
Stock Option Plan
There have been no grants under the Company’s Option Plan since 2002, and the Company does not intend to make any grants under the Option Plan in the future. All of the Company’s outstanding stock options are fully vested. Stock option transactions during the nine months ended September 30, 2011 were as follows:
 
 
 
Options outstanding and exercisable at January 1
19,275

Options granted

Options exercised
(11,425
)
Options canceled or forfeited

Options outstanding and exercisable at September 30
7,850

Options available for grant at September 30
1,935,437

Option price ranges per share:
 
Granted
$

Exercised
15.12-20.85

Canceled or forfeited

Weighted average option exercise prices per share:
 
Granted
$

Exercised
15.62

Canceled or forfeited

Outstanding at September 30
17.31

At September 30, 2011, the outstanding and exercisable options had an aggregate intrinsic value of approximately $0.1 million.
 
The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price:
 
 
 
Options Outstanding and Exercisable
as of September 30, 2011
Range of Exercise Prices
 
Number of
Shares
 
Weighted Average
Remaining
Contractual Life
(Years)
 
Weighted
Average
Exercise
Price
$15.12 - $20.85
 
7,850

 
0.3
 
$
17.31

The total intrinsic value of options exercised during the nine months ended September 30, 2011 was approximately $0.4 million. Cash received from stock option exercises was approximately $0.2 million for the nine months ended September 30, 2011. The Company realized an insignificant tax benefit from the exercise of these options.


12

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

4.    GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2011 are summarized as follows (in millions):
 
Trademarks
and
Tradenames
 
Customer
Relationships
 
Patents and
Technology
 
Total
Gross carrying amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2010
$
38.4

 
$
124.9

 
$
50.8

 
$
214.1

Acquisitions
7.7

 
33.3

 
17.1

 
58.1

Foreign currency translation
0.3

 
(6.7
)
 
0.2

 
(6.2
)
Balance as of September 30, 2011
$
46.4

 
$
151.5

 
$
68.1

 
$
266.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks
and
Tradenames
 
Customer
Relationships
 
Patents and
Technology
 
Total
Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2010
$
11.0

 
$
73.7

 
$
50.4

 
$
135.1

Amortization expense
1.3

 
11.7

 
1.1

 
14.1

Foreign currency translation
0.1

 
(4.8
)
 
0.1

 
(4.6
)
Balance as of September 30, 2011
$
12.4

 
$
80.6

 
$
51.6

 
$
144.6

 
 
 
 
 
Trademarks
and
Tradenames
 
 
Unamortized intangible assets:
 
 
 
 
 
 Balance as of December 31, 2010
$
92.6

 
Foreign currency translation
0.3

 
Balance as of September 30, 2011
$
92.9

 
 
Changes in the carrying amount of goodwill during the nine months ended September 30, 2011 are summarized as follows (in millions):

 
North
America
 
South
America
 
Europe/Africa/
Middle East
 
Consolidated
Balance as of December 31, 2010
$
3.1

 
$
196.7

 
$
432.9

 
$
632.7

Acquisitions
20.1

 

 
39.1

 
59.2

Adjustments related to income taxes

 

 
(6.9
)
 
(6.9
)
Foreign currency translation

 
(20.8
)
 
1.2

 
(19.6
)
Balance as of September 30, 2011
$
23.2

 
$
175.9

 
$
466.3

 
$
665.4

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of October 1 each fiscal year.
The Company currently amortizes certain acquired intangible assets, primarily on a straight-line basis, over their estimated useful lives, which range from five to 30 years.
During the nine months ended September 30, 2011, the Company reduced goodwill by approximately $6.9 million related to the realization of tax benefits associated with excess tax basis deductible goodwill resulting from its acquisition of Valtra in Finland. 


13

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

5.    INDEBTEDNESS
Indebtedness consisted of the following at September 30, 2011 and December 31, 2010 (in millions):
 
 
September 30, 2011
 
December 31, 2010
6 7/8% Senior subordinated notes due 2014
$

 
$
267.7

4 1/2% Senior unsecured term loan due 2016
269.0

 

1 3/4% Convertible senior subordinated notes due 2033

 
161.0

1 1/4% Convertible senior subordinated notes due 2036
181.4

 
175.2

Securitization facilities
78.6

 
113.9

Other long-term debt
6.8

 
0.2

 
535.8

 
718.0

Less: Current portion of long-term debt
(1.0
)
 
(0.1
)
              1 3/4% Convertible senior subordinated notes due 2033

 
(161.0
)
Securitization facilities
(78.6
)
 
(113.9
)
Total indebtedness, less current portion
$
456.2

 
$
443.0

The Company’s former 1 3/4% convertible senior subordinated notes due December 31, 2033, issued in June 2005, provided for (i) the settlement upon conversion in cash up to the principal amount of the 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 notes had been converted in connection with certain change of control transactions occurring prior to December 10, 2010. The notes were unsecured obligations and were convertible into cash and shares of the Company’s common stock upon satisfaction of certain conditions. Interest was payable on the notes at 1 3/4% per annum, payable semi-annually in arrears in cash on June 30 and December 31 of each year. The notes were convertible into shares of the Company’s common stock at an effective price of $22.36 per share, subject to adjustment. This reflected an initial conversion rate for the notes of 44.7193 shares of common stock per $1,000 principal amount of notes.
During the nine months ended September 30, 2011, holders of the Company’s 1 3/4% convertible senior subordinated notes converted approximately $161.0 million of principal amount of the notes. The Company issued 3,926,574 shares associated with the $195.9 million excess conversion value of the notes. The Company reflected the repayment of the principal of the notes totaling $161.0 million within “Repurchase or conversion of convertible senior subordinated notes” within the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011.
The Company’s $201.3 million of 1 1/4% convertible senior subordinated notes due December 15, 2036, issued in December 2006, provide for (i) the settlement upon conversion in cash up to the principal amount of the 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 notes are converted in connection with certain change of control transactions occurring prior to December 15, 2013. The notes are unsecured obligations and are convertible into cash and shares of the Company’s common stock upon satisfaction of certain conditions. Interest is payable on the notes at 1 1/4% per annum, payable semi-annually in arrears in cash on June 15 and December 15 of each year. The notes are convertible into shares of the Company’s common stock at an effective price of $40.73 per share, subject to adjustment. This reflects an initial conversion rate for the notes of 24.5525 shares of common stock per $1,000 principal amount of notes.

14

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

The following table sets forth as of September 30, 2011 and December 31, 2010 the carrying amount of the equity component, the principal amount of the liability component, the unamortized discount and the net carrying amount of the Company’s convertible senior subordinated notes (in millions):
 
 
September 30,
2011
 
December 31, 2010
1¾% Convertible senior subordinated notes due 2033:
 
 
 
Carrying amount of the equity component
$

 
$
16.1

 
 
 
 
Principal amount of the liability component
$

 
$
161.0

Less: unamortized discount

 

Net carrying amount
$

 
$
161.0

 
 
 
 
1¼% Convertible senior subordinated notes due 2036:
 
 
 
Carrying amount of the equity component
$
54.3

 
$
54.3

 
 
 
 
Principal amount of the liability component
$
201.3

 
$
201.3

Less: unamortized discount
(19.9
)
 
(26.1
)
Net carrying amount
$
181.4

 
$
175.2

The following table sets forth the interest expense recognized relating to both the contractual interest coupon and the amortization of the remaining discount on the liability component, if applicable, for the Company’s convertible senior subordinated notes (in millions):

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
1¾% Convertible senior subordinated notes:
 
 
 
 
 
 
 
Interest expense
$

 
$
2.6

 
$
0.9

 
$
8.5

1¼% Convertible senior subordinated notes:
 
 
 
 
 
 
 
Interest expense
$
2.7

 
$
2.6

 
$
8.0

 
$
7.7


The effective interest rate on the liability component for both notes for the three and nine months ended September 30, 2011 and 2010 was 6.1%. The discount for the 1 3/4% convertible senior subordinated notes was amortized through December 2010 and the unamortized discount for the 1 1/4% convertible senior subordinated notes will be amortized through December 2013, as this is the earliest date the notes holders can require the Company to repurchase the notes.
Holders of the Company’s convertible senior subordinated notes could have converted or may convert the notes, if, during any fiscal quarter, the closing sales price of the Company’s common stock exceeds 120% of the conversion price of $22.36 per share for the 1 3/4% convertible senior subordinated notes and $40.73 per share for the 1 1/4% convertible senior subordinated notes for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter. As of December 31, 2010, the closing sales price of the Company’s common stock had exceeded 120% of the conversion price of the 1 3/4% convertible senior subordinated notes for at least 20 trading days in the 30 consecutive trading days ending December 31, 2010, and, therefore, the Company classified the notes as a current liability. Future classification of the 11/4% convertible senior subordinated notes between current and long-term debt is dependent on the closing sales price of the Company’s common stock during future quarters.
The Company’s €200.0 million of 6 7/8% senior subordinated notes due April 15, 2014, issued in April 2004, were redeemed at a price of 101.146% of their principal amount on May 2, 2011, in accordance with the redemption provisions of the indenture agreement. The Company funded the redemption of the notes with a new €200.0 million senior unsecured term loan with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank.” The new term loan is due May 2, 2016 and bears interest at a fixed rate of 4 1/2%. During the nine months ended September 30, 2011, the Company recorded a loss of approximately $3.1 million associated with the premium paid to the holders of the notes and a write-off of approximately $1.2 million of unamortized deferred debt issuance costs associated with the redemption within “interest expense, net” in the Company’s Condensed Consolidated Statements of Operations.

15

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

At September 30, 2011, the estimated fair value of the Company’s 1 1/4% convertible senior subordinated notes based on its listed market value was approximately $225.1 million compared to its carrying value of $181.4 million. At December 31, 2010, the estimated fair values of the Company’s 6 7/8% senior subordinated notes, 1 3/4% convertible senior subordinated notes and 1 1/4% convertible senior subordinated notes, based on their listed market values, were $271.7 million, $325.1 million and $277.1 million, respectively, compared to their carrying values of $267.7 million, $161.0 million and $175.2 million, respectively.
The Company has arrangements with various banks to issue standby letters of credit or similar instruments, which guarantee the Company’s obligations for the purchase or sale of certain inventories and for potential claims exposure for insurance coverage. At September 30, 2011 and December 31, 2010, outstanding letters of credit issued under the revolving credit facility totaled $10.0 million and $9.8 million, respectively.

6.    INVENTORIES
Inventories at September 30, 2011 and December 31, 2010 were as follows (in millions):

 
September 30,
2011
 
December 31, 2010
Finished goods
$
587.6

 
$
422.6

Repair and replacement parts
453.4

 
432.4

Work in process
166.8

 
90.2

Raw materials
395.4

 
288.3

Inventories, net
$
1,603.2

 
$
1,233.5


7. PRODUCT WARRANTY
The warranty reserve activity for the three and nine months ended September 30, 2011 and 2010 consisted of the following (in millions):

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Balance at beginning of period
$
237.5

 
$
177.9

 
$
199.5

 
$
181.6

Acquisitions

 

 
2.6

 

Accruals for warranties issued during the period
43.2

 
37.6

 
136.8

 
106.7

Settlements made (in cash or in kind) during the period
(40.5
)
 
(35.4
)
 
(109.9
)
 
(90.9
)
Foreign currency translation
(14.9
)
 
12.9

 
(3.7
)
 
(4.4
)
Balance at September 30
$
225.3

 
$
193.0

 
$
225.3

 
$
193.0

The Company’s agricultural equipment products are generally warranted against defects in material and workmanship for a period of one to four years. The Company accrues for future warranty costs at the time of sale based on historical warranty experience. Approximately $197.8 million and $179.0 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, respectively. Approximately $27.5 million and $20.5 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, respectively.


16

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

8.    NET INCOME PER COMMON SHARE
Basic earnings per common share is computed by dividing net income attributable to AGCO Corporation and its subsidiaries by the weighted average number of common shares outstanding during each period. Diluted earnings per common share assumes exercise of outstanding stock options, vesting of performance share awards, vesting of restricted stock and the appreciation of the excess conversion value of the contingently convertible senior subordinated notes using the treasury stock method when the effects of such assumptions are dilutive. Dilution of weighted shares outstanding will depend on the Company’s stock price for the excess conversion value of the convertible senior subordinated notes using the treasury stock method. A reconciliation of net income attributable to AGCO Corporation and its subsidiaries 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, 2011 and 2010 is as follows (in millions, except per share data):
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Basic net income per share:
 
 
 
 
 
 
 
Net income attributable to AGCO Corporation and subsidiaries
$
84.4

 
$
62.3

 
$
298.1

 
$
135.3

Weighted average number of common shares outstanding
96.4

 
92.9

 
95.1

 
92.7

Basic net income per share attributable to AGCO Corporation and subsidiaries
$
0.88

 
$
0.67

 
$
3.13

 
$
1.46

Diluted net income per share:
 
 
 
 
 
 
 
Net income attributable to AGCO Corporation and subsidiaries for purposes of computing diluted net income per share
$
84.4

 
$
62.3

 
$
298.1

 
$
135.3

Weighted average number of common shares outstanding
96.4

 
92.9

 
95.1

 
92.7

Dilutive stock options, SSARs, performance share awards and restricted stock awards
0.2

 
0.3

 
0.3

 
0.5

Weighted average assumed conversion of contingently convertible senior subordinated notes
0.3

 
2.6

 
2.5

 
2.8

Weighted average number of common and common equivalent shares outstanding for purposes of computing diluted earnings per share
96.9

 
95.8

 
97.9

 
96.0

Diluted net income per share attributable to AGCO Corporation and subsidiaries
$
0.87

 
$
0.65

 
$
3.04

 
$
1.41


There were SSARs to purchase approximately 0.3 million shares of the Company’s common stock for the three and nine months ended September 30, 2011 and approximately 0.5 million shares of the Company’s common stock for the three and nine months ended September 30, 2010 that were excluded from the calculation of diluted earnings per share because the SSARs had an antidilutive impact.
 
9.    INCOME TAXES
At September 30, 2011 and December 31, 2010, the Company had approximately $59.6 million and $48.2 million, respectively, of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. As of September 30, 2011 and December 31, 2010, the Company had approximately $21.6 million and $14.2 million, respectively, of current accrued taxes related to uncertain income tax positions connected with ongoing tax audits in various jurisdictions. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. As of September 30, 2011 and December 31, 2010, the Company had accrued interest and penalties related to unrecognized tax benefits of $6.1 million and $5.2 million, respectively.
Generally, the tax years 2004 through 2010 remain open to examination by taxing authorities in the United States and certain other foreign taxing jurisdictions.


17

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

10.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
All derivatives are recognized on the Company’s Condensed Consolidated Balance Sheets at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either (1) a fair value hedge of a recognized liability, (2) a cash flow hedge of a forecasted transaction, (3) a hedge of a net investment in a foreign operation, or (4) a non-designated derivative instrument.
The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk management objectives and strategy for undertaking various hedge transactions. The Company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items. When it is determined that a derivative is no longer highly effective as a hedge, hedge accounting is discontinued on a prospective basis.
Foreign Currency Risk
The Company has significant manufacturing operations in the United States, France, Germany, Finland and Brazil, and it purchases a portion of its tractors, combines and components from third-party foreign suppliers, primarily in various European countries and in Japan. The Company also sells products in over 140 countries throughout the world. The Company’s most significant transactional foreign currency exposures are the Euro, Brazilian real and the Canadian dollar in relation to the United States dollar, and the Euro in relation to the British pound.
The Company attempts to manage its transactional foreign exchange exposure by hedging foreign currency cash flow forecasts and commitments arising from the anticipated settlement of receivables and payables and from future purchases and sales. Where naturally offsetting currency positions do not occur, the Company hedges certain, but not all, of its exposures through the use of foreign currency contracts. The Company’s translation exposure resulting from translating the financial statements of foreign subsidiaries into United States dollars is not hedged. When practical, the translation impact is reduced by financing local operations with local borrowings.
The foreign currency contracts are primarily forward and options contracts. These contracts’ fair value measurements fall within Level 2 of the fair value hierarchy. Level 2 fair value measurements are generally based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. The fair value of foreign currency forward contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate. The fair value of foreign currency option contracts is based on a valuation model that utilizes spot and forward exchange rates, interest rates and currency pair volatility.
The Company’s senior management establishes the Company’s foreign currency and interest rate risk management policies. These policies are reviewed periodically by the Audit Committee of the Company’s Board of Directors. The policy allows for the use of derivative instruments to hedge exposures to movements in foreign currency and interest rates. The Company’s policy prohibits the use of derivative instruments for speculative purposes.
Cash Flow Hedges
During 2011 and 2010, the Company designated certain foreign currency contracts as cash flow hedges of expected future sales and purchases. The effective portion of the fair value gains or losses on these cash flow hedges are recorded in other comprehensive income (loss) and subsequently reclassified into cost of goods sold during the period the sales and purchases are recognized. The amount of the gain (loss) recorded in other comprehensive income (loss) that was reclassified to cost of goods sold during the nine months ended September 30, 2011 and 2010 was approximately $4.9 million and $(4.3) million, respectively, on an after-tax basis. The outstanding contracts as of September 30, 2011 range in maturity through December 2012.

18

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

The following table summarizes activity in accumulated other comprehensive income loss related to derivatives held by the Company during the nine months ended September 30, 2011 (in millions):
 
 
Before-
Tax
Amount
 
Income
Tax
 
After-Tax
Amount
Accumulated derivative net gains as of December 31, 2010
$
1.7

 
$
0.5

 
$
1.2

Net changes in fair value of derivatives
(0.3
)
 
(1.5
)
 
1.2

Net gains reclassified from accumulated other comprehensive income into income
(5.3
)
 
(0.4
)
 
(4.9
)
Accumulated derivative net losses as of September 30, 2011
$
(3.9
)
 
$
(1.4
)
 
$
(2.5
)
As of September 30, 2011 and December 31, 2010, the Company had outstanding foreign currency contracts with a notional amount of approximately $174.4 million and $111.1 million, respectively, that were entered into to hedge forecasted sale and purchase transactions.
Derivative Transactions Not Designated as Hedging Instruments
During 2011 and 2010, the Company entered into foreign currency contracts to hedge receivables and payables on the Company and its subsidiaries’ balance sheets that are denominated in foreign currencies other than the functional currency. These contracts were classified as non-designated derivative instruments.

As of September 30, 2011 and December 31, 2010, the Company had outstanding foreign currency contracts with a notional amount of approximately $876.8 million and $1,002.3 million, respectively, that were entered into to hedge receivables and payables that are denominated in foreign currencies other than the functional currency. Changes in the fair value of these contracts are reported in “Other expense, net.” For the three and nine months ended September 30, 2011, the Company recorded a net loss of approximately $15.7 million and $13.8 million, respectively, under the caption “Other expense, net” related to these contracts. For the three and nine months ended September 30, 2010, the Company recorded a net loss of approximately $20.3 million and a net gain of approximately $23.8 million, respectively, under the caption “Other expense, net” related to these contracts. Gains and losses on such contracts are substantially offset by losses and gains on the remeasurement of the underlying asset or liability being hedged.

The table below sets forth the fair value of derivative instruments as of September 30, 2011 (in millions):
 
 
Asset Derivatives
 
Liability Derivatives
 
As of
September 30,
2011
 
As of
September 30,
2011
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivative instruments designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 
$
0.3

 
Other current liabilities
 
$
3.8

Derivative instruments not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 
5.2

 
Other current liabilities
 
18.7

Total derivative instruments
 
 
$
5.5

 
 
 
$
22.5

The table below sets forth the fair value of derivative instruments as of December 31, 2010 (in millions):
 

19

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

 
Asset Derivatives
 
Liability Derivatives
 
As of
December 31,
2010
 
As of
December 31,
2010
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivative instruments designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 
$
2.3

 
Other current liabilities
 
$

Derivative instruments not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 
12.0

 
Other current liabilities
 
8.7

Total derivative instruments
 
 
$
14.3

 
 
 
$
8.7

Counterparty Risk
The Company regularly monitors the counterparty risk and credit ratings of all the counterparties to the derivative instruments. The Company believes that its exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. If the Company perceives any risk with a counterparty, then the Company would cease to do business with that counterparty. There have been no negative impacts to the Company from any non-performance of any counterparties.
 

11.    CHANGES IN EQUITY AND COMPREHENSIVE (LOSS) INCOME
The following table sets forth changes in equity attributed to AGCO Corporation and its subsidiaries and to noncontrolling interests for the nine months ended September 30, 2011 (in millions):
 
 
AGCO Corporation and subsidiaries
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
Balance, December 31, 2010
$
0.9

 
$
1,051.3

 
$
1,738.3

 
$
(132.1
)
 
$
0.8

 
$
2,659.2

Stock compensation

 
17.9

 

 

 

 
17.9

Issuance of performance award stock

 
(1.5
)
 

 

 

 
(1.5
)
Stock options and SSARs exercised

 
(0.8
)
 

 

 

 
(0.8
)
Conversion of 1 3/4% convertible senior subordinated notes
0.1

 
(0.1
)
 

 

 

 

Investment by noncontrolling interest

 

 

 

 
30.0

 
30.0

Distribution to noncontrolling interest

 

 

 

 
(1.0
)
 
(1.0
)
Comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 
298.1

 

 
1.9

 
300.0

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments

 

 

 
(152.6
)
 

 
(152.6
)
Defined benefit pension plans

 

 

 
4.6

 

 
4.6

Net derivative loss

 

 

 
(3.7
)
 

 
(3.7
)
Balance, September 30, 2011
$
1.0

 
$
1,066.8

 
$
2,036.4

 
$
(283.8
)
 
$
31.7

 
$
2,852.1


20

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

Total comprehensive (loss) income for the three months ended September 30, 2011 and 2010 was as follows (in millions):
 
 
AGCO Corporation and
subsidiaries
 
Noncontrolling Interests
 
Three Months Ended
September 30,
 
Three Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Net income (loss)
$
84.4

 
$
62.3

 
$
0.1

 
$
(0.1
)
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(320.6
)
 
160.8

 
(0.1
)
 
0.1

Defined benefit pension plans
1.5

 
1.6

 

 

Net derivative (loss) gain
(9.0
)
 
8.7

 

 

Total comprehensive (loss) income
$
(243.7
)
 
$
233.4

 
$

 
$

Total comprehensive income (loss) for the nine months ended September 30, 2011 and 2010 was as follows (in millions):
 
 
AGCO Corporation and
subsidiaries
 
Noncontrolling Interests
 
Nine Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Net income (loss)
$
298.1

 
$
135.3

 
$
1.9

 
$
(0.3
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(152.6
)
 
9.7

 

 

Defined benefit pension plans
4.6

 
4.9

 

 

Net derivative (loss) gain
(3.7
)
 
2.5

 

 

Unrealized gain on derivatives held by affiliates

 
0.2

 

 

Total comprehensive income (loss)
$
146.4

 
$
152.6

 
$
1.9

 
$
(0.3
)


21

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

12.    ACCOUNTS RECEIVABLE SALES AGREEMENTS AND SECURITIZATION FACILITIES
At September 30, 2011, the Company’s accounts receivable securitization facilities in Europe had outstanding funding of approximately €58.4 million (or approximately $78.6 million). The Company recognized a liability of approximately $78.6 million equivalent to the funded balance of the European securitization facilities within the Company’s Condensed Consolidated Balance Sheet as of September 30, 2011. The European facility expired in October 2011. Wholesale accounts receivable were sold on a revolving basis to commercial paper conduits under the European facility through a wholly-owned qualified special purpose entity in the United Kingdom. The accrued interest owed to the commercial paper conduits associated with outstanding funding under the European facilities was approximately less than $0.1 million as of September 30, 2011. Losses on sales of receivables under the European securitization facilities were reflected within “Interest expense, net” in the Company’s Condensed Consolidated Statements of Operations.
At September 30, 2011, the Company had accounts receivable sales agreements that permit the sale, on an ongoing basis, of substantially all of its wholesale receivables in North America to AGCO Finance LLC and AGCO Finance Canada, Ltd., its 49% owned U.S. and Canadian retail finance joint ventures. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. The Company reviewed its accounting for the accounts receivable sales agreements in accordance with ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets” (“ASU 2009-16”), and determined that these facilities should be accounted for as off-balance sheet transactions.
As of September 30, 2011, net cash received from receivables sold under the U.S. and Canadian accounts receivable sales agreements was approximately $414.8 million. For the three and nine months ended September 30, 2011, the Company paid AGCO Finance LLC and AGCO Finance Canada, Ltd. both a servicing fee related to the servicing of the sold receivables and a subsidized interest payment. These fees were reflected within losses on the sales of receivables included within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations. The subsidized interest payment was calculated based upon LIBOR plus a margin on any non-interest bearing accounts receivable outstanding and sold under the facilities.
At September 30, 2011, the Company also had accounts receivable sales agreements that permit the sale, on an ongoing basis, of a majority of its wholesale receivables in France, Germany, Denmark, Sweden and Austria to the relevant AGCO Finance entities in those countries. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. The Company reviewed its accounting for the accounts receivable sales agreements in accordance with ASU 2009-16 and determined that these facilities should be accounted for as off-balance sheet transactions. As of September 30, 2011 and December 31, 2010, cash received from receivables sold under these accounts receivable sales agreements in Europe was approximately $216.9 million and $169.2 million, respectively.
For the three and nine months ended September 30, 2011, the Company paid the respective AGCO Finance entities in France, Germany, Denmark, Sweden and Austria both a servicing fee related to the servicing of the sold receivables and a subsidized interest payment. These fees were reflected within losses on the sales of receivables included within “Other expense, net” and “Interest expense, net” in the Company’s Condensed Consolidated Statements of Operations. The subsidized interest payment was calculated based upon LIBOR plus a margin on any non-interest bearing accounts receivable outstanding and sold under the facilities.

Losses on sales of receivables associated with the accounts receivable financing facilities discussed above, reflected within “Other expense, net” and “Interest expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $6.9 million and $15.6 million during the three and nine months ended September 30, 2011, respectively, compared to $3.9 million and $11.5 million during the three and nine months ended September 30, 2010, respectively.
The Company’s AGCO Finance retail finance joint ventures in Brazil and Australia also provide wholesale financing to the Company’s dealers. The receivables associated with these arrangements are without recourse to the Company. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. As of September 30, 2011 and December 31, 2010, these retail finance joint ventures had approximately $55.9 million and $50.2 million, respectively, of outstanding accounts receivable associated with these arrangements. The Company reviewed its accounting for these arrangements and determined that these arrangements should be accounted for as off-balance sheet transactions.
In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world. The Company evaluated the sale of such receivables pursuant to the guidelines of ASU 2009-16 and determined that these arrangements should be accounted for as off-balance sheet transactions.


22

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

13.    EMPLOYEE BENEFIT PLANS
Net pension and postretirement cost for the Company’s defined pension and postretirement benefit plans for the three months ended September 30, 2011 and 2010 are set forth below (in millions):

 
Three Months Ended
September 30,
 
2011
 
2010
Pension benefits
 
 
 
Service cost
$
3.9

 
$
4.3

Interest cost
10.0

 
10.3

Expected return on plan assets
(9.0
)
 
(8.5
)
Amortization of net actuarial loss and prior service cost
1.8

 
6.5

Net pension cost
$
6.7

 
$
12.6

 
 
 
 
Postretirement benefits
 
 
 
Interest cost
$
0.4

 
$
0.4

Amortization of prior service credit
(0.1
)
 
(0.1
)
Amortization of unrecognized net loss
0.1

 
0.1

Net postretirement cost
$
0.4

 
$
0.4


Net pension and postretirement cost for the Company’s defined pension and postretirement benefit plans for the nine months ended September 30, 2011 and 2010 are set forth below (in millions):

 
Nine Months Ended
September 30,
 
2011
 
2010
Pension benefits
 
 
 
Service cost
$
11.8

 
$
13.0

Interest cost
30.2

 
30.8

Expected return on plan assets
(27.2
)
 
(25.6
)
Amortization of net actuarial loss and prior service cost
5.3

 
11.0

Net pension cost
$
20.1

 
$
29.2

 
 
 
 
Postretirement benefits
 
 
 
Service cost
$
0.1

 
$
0.1

Interest cost
1.2

 
1.1

Amortization of prior service credit
(0.2
)
 
(0.2
)
Amortization of unrecognized net loss
0.2

 
0.2

Net postretirement cost
$
1.3

 
$
1.2

During the nine months ended September 30, 2011, approximately $26.6 million of contributions had been made to the Company’s defined benefit pension plans. The Company currently estimates its minimum contributions for 2011 to its defined benefit pension plans will aggregate approximately $33.9 million.
During the nine months ended September 30, 2011, the Company made approximately $1.3 million of contributions to its U.S.-based postretirement health care and life insurance benefit plans. The Company currently estimates that it will make approximately $1.7 million of contributions to its U.S.-based postretirement health care and life insurance benefit plans during 2011.


23

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

14.    SEGMENT REPORTING
The Company’s four reportable segments distribute a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each 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 and nine months ended September 30, 2011 and 2010 and assets as of September 30, 2011 and December 31, 2010 are as follows (in millions):
 
Three Months Ended September 30,
 
North
America
 
South
America
 
Europe/Africa/
Middle East
 
Rest of
World
 
Consolidated
2011
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
417.7

 
$
515.7

 
$
1,054.1

 
$
111.6

 
$
2,099.1

Income from operations
 
15.6

 
35.4

 
87.2

 
8.9

 
147.1

Depreciation
 
7.2

 
5.0

 
23.0

 
1.4

 
36.6

Capital expenditures
 
11.0

 
7.6

 
55.4

 
0.8

 
74.8

2010
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
373.4

 
$
487.7

 
$
708.7

 
$
87.6

 
$
1,657.4

Income from operations
 
11.9

 
54.1

 
33.3

 
3.0

 
102.3

Depreciation
 
6.3

 
4.9

 
20.5

 
1.2

 
32.9

Capital expenditures
 
6.9

 
3.2

 
25.5

 
1.9

 
37.5

Nine Months Ended September 30,
 
North
America
 
South
America
 
Europe/Africa/
Middle East
 
Rest of
World
 
Consolidated
2011
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,171.9

 
$
1,423.0

 
$
3,334.4

 
$
326.1

 
$
6,255.4

Income from operations
 
48.3

 
106.7

 
338.3

 
22.0

 
515.3

Depreciation
 
19.9

 
15.0

 
71.6

 
3.7

 
110.2

Capital expenditures
 
25.2

 
20.3

 
138.9

 
2.8

 
187.2

2010
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,026.4

 
$
1,313.2

 
$
2,178.9

 
$
210.1

 
$
4,728.6

Income from operations
 
14.6

 
138.7

 
94.7

 
9.6

 
257.6

Depreciation
 
18.1

 
14.2

 
62.4

 
3.0

 
97.7

Capital expenditures
 
12.0

 
7.8

 
61.0

 
2.0

 
82.8

 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
As of September 30, 2011
 
$
716.1

 
$
626.7

 
$
1,900.9

 
$
226.5

 
$
3,470.2

As of December 31, 2010
 
597.0

 
557.3

 
1,628.2

 
178.0

 
2,960.5


24

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

A reconciliation from the segment information to the consolidated balances for income from operations and total assets is set forth below (in millions):

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2011
 
2010
 
2011
 
2010
Segment income from operations
$
147.1

 
$
102.3

 
$
515.3

 
$
257.6

Corporate expenses
(22.0
)
 
(17.2
)
 
(60.3
)
 
(50.5
)
Stock compensation expense
(6.0
)
 
(3.0
)
 
(17.0
)
 
(8.2
)
Restructuring and other infrequent (expense) income

 
(1.2
)
 
0.7

 
(3.3
)
Amortization of intangibles
(4.8
)
 
(5.0
)
 
(14.1
)
 
(13.8
)
Consolidated income from operations
$
114.3

 
$
75.9

 
$
424.6

 
$
181.8

 
As of
September 30,
2011
 
As of
December 31,
2010
Segment assets
$
3,470.2

 
$
2,960.5

Cash and cash equivalents
455.2

 
719.9

Receivables from affiliates
93.7

 
106.3

Investments in affiliates
344.9

 
398.0

Deferred tax assets, other current and noncurrent assets
412.9

 
447.9

Intangible assets, net
214.3

 
171.6

Goodwill
665.4

 
632.7

Consolidated total assets
$
5,656.6

 
$
5,436.9

 

15.    COMMITMENTS AND CONTINGENCIES
Off-Balance Sheet Arrangements
Guarantees
The Company maintains a remarketing agreement with its U.S. retail finance joint venture, AGCO Finance LLC, whereby the Company is obligated to repurchase repossessed inventory at market values. The Company has an agreement with AGCO Finance LLC which limits the Company’s purchase obligations under this arrangement to $6.0 million in the aggregate per calendar year. The Company believes that any losses that might be incurred on the resale of this equipment will not materially impact the Company’s financial position or results of operations, due to the fair value of the underlying equipment.
At September 30, 2011, the Company guaranteed indebtedness owed to third parties of approximately $132.4 million, primarily related to dealer and end-user financing of equipment. Such guarantees generally obligate the Company to repay outstanding finance obligations owed to financial institutions if dealers or end users default on such loans through 2015. The Company believes the credit risk associated with these guarantees is not material to its financial position or results of operations. Losses under such guarantees have historically been insignificant. In addition, the Company generally would be able to recover any amounts paid under such guarantees from the sale of the underlying financed farm equipment, as the fair value of such equipment would be sufficient to offset a substantial portion of the amounts paid.
Other
The Company sells substantially all of its wholesale accounts receivable in North America to the Company’s U.S. and Canadian retail finance joint ventures and a large portion of its wholesale accounts receivable in Europe to AGCO Finance entities in certain European countries. The Company also sells certain accounts receivable under factoring arrangements to financial institutions around the world. The Company reviewed the sale of such receivables pursuant to the guidelines of ASU 2009-16 and determined that these facilities should be accounted for as off-balance sheet transactions.
Legal Claims and Other Matters
As a result of Brazilian tax legislation impacting value added taxes (“VAT”), the Company recorded a reserve of approximately $34.0 million and $22.3 million against its outstanding balance of Brazilian VAT taxes receivable as of September 30, 2011 and December 31, 2010, respectively, due to the uncertainty of the Company’s ability to collect the

25

Table of Contents
Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)

amounts outstanding.
On June 27, 2008, the Republic of Iraq filed a civil action in a federal court in New York, Case No. 08 CIV 59617, naming as defendants the Company’s French subsidiary and two of its other foreign subsidiaries that participated in the United Nations Oil for Food Program (the “Program”). Ninety-one other entities or companies also were named as defendants in the civil action due to their participation in the Program. The complaint purports to assert claims against each of the defendants seeking damages in an unspecified amount. Although the Company’s subsidiaries intend to vigorously defend against this action, it is not possible at this time to predict the outcome of this action or its impact, if any, on the Company, although if the outcome was adverse, the Company could be required to pay damages. In addition, the French government also is investigating the Company’s French subsidiary in connection with its participation in the Program.
 
In August 2008, as part of a routine audit, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of the Company’s Brazilian operations and the related transfer of certain assets to the Company’s Brazilian subsidiaries. The amount of the tax disallowance through September 30, 2011, not including interest and penalties, was approximately 90.6 million Brazilian reais (or approximately $48.8 million). The amount ultimately in dispute will be greater because of interest and penalties. The Company has been advised by its legal and tax advisors that its position with respect to the deductions is allowable under the tax laws of Brazil. The Company is contesting the disallowance and believes that it is not likely that the assessment, interest or penalties will be required to be paid. However, the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which could take several years.
The Company is a party to various other legal claims and actions incidental to its business. The Company believes that none of these claims or actions, either individually or in the aggregate, is material to its business or financial statements as a whole, including its results of operations and financial condition.

16.    SUBSEQUENT EVENT

On September 30, 2011, the Company agreed to acquire GSI Holdings Corp. (“GSI”) for approximately $940.0 million.  GSI, headquartered in Assumption, Illinois, is a manufacturer of grain storage and protein production systems and sells its products globally through independent dealers. The acquisition of GSI will enable the Company to provide its customers with a wider range of agricultural products and services.  In 2010, GSI had net sales of approximately $713.1 million. The Company plans to fund the purchase price through borrowings from a newly committed bank credit facility and available cash on hand. The transaction is expected to close before the end of 2011, subject to regulatory approval.


26

Table of Contents



ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL
Our operations are subject to the cyclical nature of the agricultural industry. Sales of our equipment have been and are expected to continue to be affected by changes in net cash farm income, farm land values, weather conditions, demand for agricultural commodities, commodity prices and general economic conditions. We record sales when we sell equipment and replacement parts to our independent dealers, distributors or other customers. To the extent possible, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal demands on manufacturing operations and to minimize our investment in inventory. Retail sales by dealers to farmers are highly seasonal and are a function of the timing of the planting and harvesting seasons. As a result, our net sales have historically been the lowest in the first quarter and have increased in subsequent quarters.

RESULTS OF OPERATIONS
For the three months ended September 30, 2011, we generated net income of $84.4 million, or $0.87 per share, compared to net income of $62.3 million, or $0.65 per share, for the same period in 2010. For the first nine months of 2011, we generated net income of $298.1 million, or $3.04 per share, compared to net income of $135.3 million, or $1.41 per share, for the same period in 2010.

Net sales during the third quarter and first nine months of 2011 were $2,099.1 million and $6,255.4 million, respectively, which were approximately 26.7% and 32.3% higher than the third quarter and first nine months of 2010, respectively, due to sales growth in most of our geographical segments, as well as the favorable impact of currency translation and acquisitions completed in December 2010 and the first quarter of 2011.

Income from operations for the third quarter of 2011 was $114.3 million compared to $75.9 million in the third quarter of 2010. Income from operations was $424.6 million for the first nine months of 2011 compared to $181.8 million for the same period in 2010. The increase in income from operations during the third quarter and first nine months of 2011 was a result of an increase in net sales as well as improved gross margins resulting primarily from higher production volumes in Europe and North America, improved pricing and a favorable product mix, which were partially offset by higher material costs and increased engineering and marketing expenses.
Income from operations increased in our Europe/Africa/Middle East (“EAME”) region in the third quarter and first nine months of 2011 compared to the same periods in 2010 primarily due to higher sales and production volumes, favorable pricing and a better product mix. In the South America region, income from operations decreased in the third quarter and first nine months of 2011 compared to the same periods in 2010 as a result of material and labor cost inflation, higher engineering and product introduction expenses as well as a less favorable geographic product sales mix. Income from operations in North America was higher in the third quarter and first nine months of 2011 compared to the same periods in 2010 primarily due to increased sales, the benefit of higher production levels and cost control initiatives. Income from operations in our Rest of World region increased in the third quarter and first nine months of 2011 compared to the same periods in 2010 primarily due to the increased sales resulting from improving market conditions in Eastern Europe, Russia and Australia. The growth in income from operations was partially offset by increased market development expenses.

Industry Unit Retail Sales
In North America, industry unit retail sales of tractors for the first nine months of 2011 increased by approximately 1% compared to the first nine months of 2010, resulting primarily from moderate increases in industry unit retail sales of utility and high horsepower tractors, offset by decreases in industry unit retail sales of lower horsepower tractors. Industry unit retail sales of combines for the first nine months of 2011 decreased by approximately 4% compared to strong levels in the prior year period. Higher commodity prices and the expectation of record farm income resulted in the continued strength in retail sales of tractors and combines.

In Western Europe, industry unit retail sales of tractors and combines for the first nine months of 2011 increased approximately 12% and 38%, respectively, compared to the first nine months of 2010. Retail demand increased in most markets, including Germany, France, Scandinavia and Finland. Higher commodity prices and the improvement in the dairy and livestock sectors in the region contributed to the growth in the first nine months of 2011 compared to weak market conditions in the first nine months of 2010.


27

Table of Contents    
Management's Discussion and Analysis of Financial Condition and Results of Operations
(continued)

South American industry unit retail sales of tractors in the first nine months of 2011 decreased approximately 4% compared to the elevated levels in the same period in 2010. Industry unit retail sales of combines for the first nine months of 2011 were approximately 24% higher than the prior year period. Growth in other South American markets offset industry sales declines in Brazil and Argentina in the first nine months of 2011 compared to record levels in the first nine months of 2010.

STATEMENTS OF OPERATIONS
Net sales for the third quarter of 2011 were $2,099.1 million compared to $1,657.4 million for the same period in 2010. Net sales for the first nine months of 2011 were $6,255.4 million compared to $4,728.6 million for the prior year period. Foreign currency translation positively impacted net sales by approximately $120.9 million, or 7.3%, in the third quarter of 2011 and by $390.0 million, or 8.2%, in the first nine months of 2011. The following table sets forth, for the three and nine months ended September 30, 2011 and 2010, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

 
 
Three Months Ended
September 30,
 
Change
 
Change due to currency
translation
 
 
2011
 
2010
 
$
 
%
 
$
 
%
North America
 
$
417.7

 
$
373.4

 
$
44.3

 
11.9
%
 
$
5.5

 
1.5
%
South America
 
515.7

 
487.7

 
28.0

 
5.7
%
 
30.1

 
6.2
%
EAME
 
1,054.1

 
708.7

 
345.4

 
48.7
%
 
74.5

 
10.5
%
Rest of World
 
111.6

 
87.6

 
24.0

 
27.4
%
 
10.8

 
12.3
%
 
 
$
2,099.1

 
$
1,657.4

 
$
441.7

 
26.7
%
 
$
120.9

 
7.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30,
 
Change
 
Change due to currency
translation
 
 
2011
 
2010
 
$
 
%
 
$
 
%
North America
 
$
1,171.9

 
$
1,026.4

 
$
145.5

 
14.2
%
 
$
16.3

 
1.6
%
South America
 
1,423.0

 
1,313.2

 
109.8

 
8.4
%
 
108.6

 
8.3
%
EAME
 
3,334.4

 
2,178.9

 
1,155.5

 
53.0
%
 
235.8

 
10.8
%
Rest of World
 
326.1