Greg Peterson - Director of Investor Relations Martin Richenhagen - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Succession Planning Committee Andrew Beck - Chief Financial Officer and Senior Vice President.

Jamie Cook - Credit Suisse. Jerry Revich - Goldman Sachs Andy Kaplowitz - Barclays Seth Weber - RBC Capital Markets Nicole Deblase - Morgan Stanley Rob Wertheimer - Vertical Research Partners Ross Gilardi - Bank of America Vishal Shah - Deutsche Bank Steven Fisher - UBS.

Good morning. My name is Kevin, and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2014 Fourth Quarter Earnings Release Conference Call. [Operator Instructions] Greg Peterson, Head of Investor Relations, you may begin your conference..

Thanks, Kevin, and good morning to those of you joining us. This morning we are prepared to talk about ADCO’s fourth quarter 2014 earnings results and with that we’ll refer to a slide presentation which is posted on our website at www.agcocorp.com in the quarterly results section.

The non-GAAP measures used in the slide presentation are reconciled to GAAP measures in the last section of the presentation.

We will make forward-looking statements this morning, including demand for our products and the economic and other factors that drive that demand; product development plans, timing of those plans; acquisition, expansion and modernization plans and our expectations with respect to the costs and benefits of those plans and timings of the benefits and also future earnings, future revenues and other financial metrics.

We wish to caution you that these statements are predictions and that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31, 2013 and subsequent Form 10-Qs.

These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. A replay of this call will be available on our corporate website.

On the call with me this morning is Martin Richenhagen, our Chairman, President and Chief Executive Officer; and Andy Beck, our Senior Vice President and Chief Financial Officer. With that, Martin, I’ll turn it over to you..

Thank you, Greg, and good morning. We appreciate you joining us on the call. I'll begin my remarks on Slide 3, where you can see that in the fourth quarter of 2014, AGCO sales were down approximately 13%.

While our products are performing well in the market, our results reflect the impacts from softer industry wide, our resulting production cuts and the negative impact of currency translation. Our quarter was highlighted by the progress we made with – both inventory reduction our expense saving program.

By lowering production approximately 20% compared to the fourth quarter of 2013 inventories declined over $80 million on a constant currency basis from December 31, 2013 levels. We also took steps to address our cost structure in response to lower demand and production levels by lowering our workforce by approximately 9% from year ago levels.

Our cost reduction efforts are being balanced with our commitment to customer support and the need to maintain our market presence. We generated over $130 million of free cash flow in 2014 and we expect to generate a little bit more in 2015. Our balance sheet is in excellent shape and is enabling us to return more cash to our shareholders.

In January we announced a 2015 dividend increase and in December we authorized a new $500 million shared repurchase plan which funds our buyback program to 2016. Slide 4 details industry unit retail sales results by region for the full year of 2014. Nearly ideal growing conditions produced record crop production across the global ag markets in 2014.

The record harvest contributed to an increase in year-end grain inventories. The resulting reduction in commodity prices has negatively impacted the economy for row crop farmers but favorably reduced the input cost for dairy and livestock producers.

In North America, industry sales increased in the lower-horsepower category, which are typically sold to dairy and livestock sectors, while sales of higher-margin, high-horsepower tractors and combines declined significantly in the full year of 2014 compared to the same period of 2013.

Industry unit retail sales of tractors in Western Europe were down about 9% in the full year of 2014 compared to industry sales in the full year of 2013. Market results by country remained mixed with a significant decline in the key market of France.

We are also experiencing lower demand in the important markets of Germany and Scandinavia and South American industry retail tractor volumes decreased significantly during the full year of 2014 compared to the same period in 2013. The decline was most pronounced in Brazil and Argentina.

Demand in Brazil has been negatively impacted by funding delays in the government financing program earlier in the year and by weaker demand from sugar producers. AGCO's tractor and combine production volumes are illustrated on Slide 5.

As I mentioned earlier, we made a 20% reduction to our production schedule during the fourth quarter of 2014 compared to the fourth quarter of 2013 in response to softer market conditions. Production of our high horse power equipment was down more significantly and was partially offset by increased production of smaller horsepower tractors.

Globally, our order book for tractors was down about 10% at the end of December compared to December 31, 2013 with more pronounced declines in North America and more modest declines in Europe and South America.

We expect production volumes to be down again for the full year of 2015 versus 2014 levels with more significant reductions in the first half of the year. Bigger declines in higher-horsepower equipment are expected to be partially offset by increases in lower-horsepower machines.

I will now turn the call over to Andy Beck, who will provide you more information on our third quarter results..

Thank you, Martin, and good morning to everyone. I will start with a look at AGCO's regional net sales performance for the fourth quarter and full year of 2014, which are outlined on Slide 6.

The euro and Brazilian real both weakened during the fourth quarter and currency translation negatively impacted net sales by about 0.7% during the quarter and about 2.4% for the full year of 2014. Softer market conditions are pressuring sales results across all of our regions.

The Europe/Africa/Middle East segment reported a decrease in net sales of approximately 5%, excluding the negative impact of currency translation during the third quarter of 2014 compared to the third quarter of 2013. With softer demand from the arable farming sector, France and Finland reported the largest declines.

North American sales were down approximately 16%, excluding unfavorable impact of currency translation during the fourth quarter of 2014 compared to the higher levels experienced in the fourth quarter of 2013. Lower sales of high-horsepower tractors, sprayers and implements were partially offset by growth in GSI products and in hay tools.

AGCO's fourth quarter 2014 net sales in South America were up 2% compared to the fourth quarter of 2013, excluding negative currency translation impacts. Sales declines in Brazil were offset by increased sales in other South American markets.

Net sales in our Asia/Pacific segment increased approximately 13% in the fourth quarter of 2014 compared to 2013, excluding negative impacts of currency. The improvement resulted from sales growth in the Australia/New Zealand market.

Parts sales were $312 million for the fourth quarter of 2014, which were up about 7% compared to the same period in 2013, excluding the impact of currency. Parts sales increased approximately 5% in the full year of 2014 compared to 2013 on a constant currency basis. Slide 7 details AGCO's sales and margin performance.

Our margins held up reasonably well in the fourth quarter considering the lower demand and production environment. Our expense reduction efforts provided much of the effort [ph] lowering our operating expenses as a percentage of sales in the fourth quarter of 2014 compared to the fourth quarter of 2013.

On a consolidated basis, adjusted operating margins declined about 50 basis points compared to the fourth quarter of 2013.

Europe/Africa/Middle East margins were stable at 9.8% in the fourth quarter of 2014 compared to the same period in 2013, the early benefit of our cost saving program offset the negative impacts of lower sales and production volumes.

North America's operating income declined about $23 million in the fourth quarter of 2014 compared to the fourth quarter of 2013. Sales declines and a weaker product mix contributed to the lower operating income.

In South America region, operating income increased about $7 million as the benefit of higher margin export sales outsider of Brazil was partially offset by lower sales and production volumes as well as material cost inflation in Brazil. Margins in the Asia Pacific region were impacted by startup cost associated with our new factory in China.

Slide 8 details GSI sales by region and by product. GSI sales were up about 10% for the full year of 2014 compared to the same period in 2013. The largest increases occurred with grain storage sales in Europe, North America and Brazil. We are forecasting GSI sales to be up again in 2015 compared to 2014.

Longer term, the global trends of population growth and changing diets are generating demand for additional grain storage and protein production capacity. Slide 9 looks at our depreciation and capital expenditure trends.

We increased the investment in some of our plant productivity project and new products over the last few years to support our growth and margin ambitions. As the weaker demand environment unfolded during 2014, we reduced our CapEx program.

In 2015 we expect to modestly increase as we continue to make strategic investments to refresh and expand our product line, upgrade our system capabilities and improve our factory productivity. Slide 10 addresses AGCO's free cash flow, which represents cash from operating activities less capital expenditures.

We finished the year generating over $500 million of pretty cash flow in the fourth quarter and about $150 million for the full year of 2014 excluding a restructuring payments. As a result of the strong free cash flow, AGCO has generated over the last few year our balance sheet and liquidity position remains strong.

We were successful in lowering our inventory in 2014 and we expect to further reduce in 2015 by over $100 million from ending 2014 levels. In 2015 we plan to continue investing for long term growth and profitability improvement as well as additional investments and new products.

After covering spending on aforementioned strategic investments, targeting significantly improved free cash flow for 2015. Other working capital details are as follows. At the end of December 2014 our North America dealer month supply on a trailing 12-month basis was 6.5 to 7-month for tractors and hay equipment and about 5 months for combines.

Losses on sales of receivables associated with our receivable financing facilities, which are included in other expense, net, were approximately $5.8 million during the fourth quarter of 2014 compared to $6.8 million in the same period of 2013.

As we focus on healthy returns for shareholders we expect to make cash returns in important component of our long term capital allocation plan. The new $500 million share repurchase authorization will allow us to continue repurchases through the end of 2016. We are also committed to responsibly growing our dividend in the coming years.

We expect to fund these programs with operating cash flow. Moving to slide 16 highlights the assumptions underlying our 2015 outlook.

While we are optimistic about the long term growth opportunities for our industry and business, the priority for 2015 continues to be reducing our expenses and lowering our dealer and company inventories to better align ourselves with current market demand.

Our 2015 forecast assumes softer industry demand across all regions and a sales decline ranging from 15% to 17%. Our plan includes price increases of approximately 2% on a consolidated basis and at current exchange rates; we expect currency translation to negatively impact sales by about 8%.

In 2015 engineering expenses are expected to run about 3.6% of our sales. We also expect lower sales and production as well as weaker sales mix to negatively impact gross margins. These negative impacts are expected to be partially offset by the benefit of new products or productivity and purchasing initiatives and our restructuring actions.

As a reminder, our restructuring program reorganized our sales marketing, finance, human resources and manufacturing support organizations. By the end of 2014, we reduced headcount in these areas by about 9%. We have also made cuts in other marketing and promotional programs and other operating expenses.

In total we will be reducing expenses by about $150 million or about 10% of the cost in these areas compared to 2014 levels. We are forecasting operating margins ranging from 5.5% to 6% in 2015 and we are targeting an effective tax rate of 36% to 37% for 2015. Our outlook for 2015 for the 3 major regional markets is captured on Slide 13.

This early view anticipates after market conditions in all three regions. In the United States the USCA [ph] estimates that farm income will be down 14% in 2014 and most experts are projecting a similar decline in 2015.

With the decline expected in 2015 row crop equipment is expected to be down more significantly and lower horse power equipment is expected to be relatively flat.

Our North America industry view calls for retail tractor sales to be down 5% to 10% in 2015 compared to 2014 in total with much higher declines in the higher horse power categories and more level sales in the lower horse power category.

While we recently received positive news on the extension of favorable terms on the Brazil government financing programs during the first half of 2015 there is uncertainty on the funding levels of the financing program caused by budgetary constraints.

Unfavorable economics for the sugar producers in Brazil and the impact of lower commodity prices are also expected to contribute to weaker South American industry demand in 2015 compared to 2014.

We also expect further weakening in the Western European market; the new EU subsidy scheme will begin shipping payments from Western states to the newer Eastern members in 2015. With lower commodity prices, the outlook is for reduced farm income in 2015. The weak European economy is also expected to weigh on equipment demand this year.

Slide 14 lists our preliminary view of selected 2015 goal. We are projecting 2015 sales to range from $8.1 billion to $8.3 billion with softer marketing conditions and the negative impact of weaker local currencies reducing both sales and earnings. These factors should be partially offset by pricing and modest market share gains.

We expect gross and operating margins to be down from 2014 reflecting the negative impact of lower sales volumes and a weaker sales mix. The benefit of our cost reduction efforts are expected to partially offset the volume related impact. Based on these assumptions we are targeting 2015 earnings per share of approximately $3.

We expect capital expenditures to be approximately $325 million and free cash flow to be about to be approximately $300 million. I’ll finish our prepared remarks on slide 15 which illustrates our 2015 production schedule for tractor and combines production hours.

We are targeting a much lower seasonal build in our company and dealer inventory during the first half of 2015, and the sequential step down in production in the back half of 2015 will be less steep than in 2014.

On our year-over-year basis we expect production to be down between 15% and 20% in the first quarter and down 10% to 15% in the second quarter, while full year production is expected to be down between 7% and 10%.

In the first quarter of 2015, sales and earnings per share expected to be significantly lower than reported for the first quarter of 2014 due to lower production levels outlined on this slide. First quarter 2015 earnings per share are expected to be in the $0.25 range. And with that, operator, we’re ready to open up the call for questions..

[Operator Instructions] Your first question comes from the line of Jamie Cook from Credit Suisse. Your line is open..

Hi, good morning and congrats on the quarter..

Good morning, Jamie..

Congrats on the quarter. I guess my question, I guess the thing that really surprised me in the quarter where your margins in EAME despite the sales – the sales number that you put up there, I mean, I wasn’t expecting a 9.8% number – percent margin on lower sales year-over-year.

So was there anything unusual in that number? Were the majority of the restructuring actions targeted towards that region? And I’m just trying to think about how I should think about margins for the year given what you put up in the fourth quarter? And my second question, Andy on the dealer inventory levels, I think you said 6.5 to 7 months on tractors and hay equipment, 5 on combines.

Can you talk about just any initiatives that you have in 2015 to reduce inventory level at the dealer level and where you expect to be sort of as we exist the year? Thanks..

Yes. The margins in EAME I will take that. They are not a result of some kind of extraordinary event, but the result of a very detailed re-engineering. We started comparably early in time, because we were – we saw basically EAME struggling and being in a difficult situation and so we decided to basically react very, very quickly.

And I think this was exactly right and somewhat rewarded by higher margins. And I think this also the direction we have to take in all other regions..

And Jamie, in terms of dealer inventory as you pointed out when we look at North America our dealer inventories were higher at the end of the 2014 and 2013 indicating that we have some work to do here in 2015 to further reduce those. The dealer inventories were up about 5% in North America.

In Europe and South America actually our dealer inventories are actually down from a year ago. So we are in pretty good shape and our foreign operations and don’t see too much adjustment.

We are anticipating a minor adjustment in dealer inventories in Europe in 2015 and then a more substantial reduction in North America in 2015, which should affect our overall sales by between and 1% and 2% and almost all of that’s in North America..

Jamie, when you benchmarking with the only major family owned European player based in Germany, you would see that their margins in the meantime a half of our in Europe and focused in this region. So this shows that we obviously did good job..

But in terms of I don’t think you answered how we should think about margins in that region for 2015 on an annualized basis?.

That’s your turn..

Well, I’ll hand -- to [indiscernible]..

Martin, I think I’ll like your answer about it. But go ahead Andy..

So, we’re talking overall our margins are going to operative margins that is 5.5 to 6 which is going to be down somewhere between 100 and 150 basis points in total. Europe will do a little better than that probably whereas this year they are just under 10 for 2015, they’ll probably be 8.5 to 9-ish for next year or for 2015..

All right. I’ll let someone else ask about the first quarter earnings. So I'll get back in queue. Thanks..

Your next question comes from the line of Jerry Revich of Goldman Sachs. Your line is open..

Hi. Good morning..

Good morning, Jerry..

I’m wondering if you gentlemen can talk about the margin performance in South America as well, and looks like your volumes were pretty good in the quarter when you back out FX, I’m wondering if that’s new production introduction on the sugarcane harvester.

Any other changes in the inventories, can you just give us some more color on two items in South America?.

Sure. So, keep in the mind that last year Brazil, the year ended pretty abruptly, so demand in order boards and the whole industry was down in December.

But having said that, our performance in South America in the fourth quarter, we did outperform in Brazil modestly compared to the industry but most of our outperformance happened in the export market, so in the other South American market outside of Brazil.

And that is a positive in terms we think about our margins, our costs being in Real and we had a fairly significant decline in Real valuation versus the currency. So the margin on those sales outside of Brazil helped the overall margins in the South American region. So net-net a little lot of performance – outperformance in Brazil.

But most of it happened in the other countries in South America..

Okay. Thank you.

And I’m wondering if you could just talk about the pricing games, target of 2% for the year? Can you talk about how that might vary by region and I would imagine that might be pretty tough to achieve high horsepower in North America which I know was a smaller part of your portfolio but maybe you can comment on that in light of the just a lower trade-in values..

Jerry, the 2% is the average, but it’s fairly consistently around the regions we expect to get around that amount. Keep in mind that does include Tier 4 price increases as well and so as we look at what increase without Tier 4 as it might be a little more than 1%.

So the amount of pricing for Tier 4 is an important aspect and its carryover of the high horsepower model that were introduced in 2014, and we’ll be introducing lower horsepower Tier 4 models during 2015.

I think that the pricing for the higher horsepower equipment has gone reasonable well for Tier 4 and there’ll be a little more challenging think as we get into the lower horsepower categories..

Also we were in a position to adapt and adjust our capacities on time. So, our inventories and dealer inventories are in pretty good shape and we are not force to dump product in the market as some of our competitors need to do..

Okay. Thank you very much..

Your next question comes from the line Andy Kaplowitz with Barclays. Your line is open..

Guys, Good morning. It’s Alan Fleming standing for Andy, this morning. Nice quarter..

Thank you..

I wanted to follow-up on Jamie’s earlier question on EMAE margin.

Is FX helping you guys in Europe with your European production footprint? And can you talk about your European inventories? Do you guys – was production down more less than 20% in Europe in the quarter?.

I’ll just make a statement to the exchange rate situation and then Andy can go a little bit more in the details with the financials. So the challenge or the opportunity we have in Europe is as you well know, that our all our factories are in euro countries, so that means all due to the lower euro do get more competitive.

And now that doesn’t help you in – within the European Union, but it helps you to do business outside the European Union like in countries like Switzerland, U.K., some of the Scandinavian markets, Africa, and also you need to remember that a lot of components go from Europe to our Jackson tractor assembly factory.

So also there we should see benefits. And now, the ideas to take advantage of this favorable low euro and try to sell more or gain market and be more competitive in the non euro territories..

You said it better myself. Let’s add a little more color to that..

This is why I’m the CEO..

So, to add a little more to color to that, just to make sure it’s clear. The benefits that Martin is talking about will show up in the markets where the product sold.

So it wouldn’t show in the European segment, but the benefit he is talking about, Martin is talking about, like we sell European produced product in North America will show up in the North America results.

So, when you look at the Europe, Africa, Middle East results for the quarter currency transactional currency didn’t have any impact on their result..

Okay. I appreciate that. And then, you touched on FINAME briefly.

Have you started to see any change in your business down in Brazil with the extension of the favorable rates and do you think now that maybe the down 10% could be a little conservative if demand looks a little better in the half first of the year?.

Now, I think our forecast is still pretty consistent with what we see right now. The rates are favorable and that was a positive surprise that they’re maintaining rates for the first, but for the first half of the year, the anticipation is that it won’t be extended for the full year, so it will – should help the first half.

As we mentioned in our remarks, the one of the bigger issues is the level of budget funding of the programs and we’re just starting to see the first deals be funded for 2015, so we’re up to a relatively slow start and we are hoping to see the government get going in terms of getting a steady flow back to normal in terms of buying deals and funding deals.

So it’s a lot to – we have to monitor this fairly closely throughout the year to see what the pace of funding deals will be and that will be a big indication of how the market will go next year – this year..

Okay. I appreciate it. Andy, I’ll pass it on..

Our next question comes from the line of Seth Weber with RBC Capital Markets. Your line is open..

Hey, Seth, did we lose you?.

Seth Weber, your line is open..

Hello, can you hear me?.

Yes. Now, we can..

Sorry, about that. I was wondering, can you help, calibrate a little bit on the – you talk about the high horsepower equipment in North America being down a lot.

Can you calibrate that for us? Is it down 20%, down 30% how you’re thinking about that? And then, can you give us a little bit more color on what’s going on with the dairy and livestock markets. I assume dairy is getting a little bit weaker here, maybe just around the world how you’re seeing the dairy and livestock markets? Thank you..

Seth, on the first question in terms of high horsepower equipment in North America which I’m including high horsepower trackers, combines, sprayers, tillage equipment, things like that. We’re looking at over 20% decline. That’s what we’ve got built into our forecast right now, so the mix of those products over 20% down.

In terms of dairy livestock, we still think fairly strong results on more on the livestock side and the hay business side. And we’re starting to see some weakness in the dairy side due to lower milk prices and some changes in policy in Europe, so that should effect, that’s a negative impact more in Europe for us and probably in the U.S..

So the good thing is for the small tractor business, you remember that we invested quite some money in a complete redesign of our low horsepower models and they are based on components coming from low cost countries or best cost countries as we called them, those tractors will be launched during 2014 and 2015 here in U.S.

and they will make us very, very competitive in this area..

Okay. That’s help..

We will beat the hell out of Kubota..

Okay. Thank you.

And then just quick follow-up for Andy, does the $3 number include benefit from share repurchase or is that exclude any activity for 2015?.

It includes some benefit for share purchase probably somewhere in that $0.07 to $0.10 improvement range..

Okay. Thank you very much guys..

This is from last year’s program, so this….

Including this year’s program..

So, that’s will carryover from 2014 program?.

Carryover plus new repurchase that we’ve assumed..

Right. Okay. Thank you very much..

Your next question comes from the line of Nicole Deblase with Morgan Stanley. Your line is open..

Yes. Thanks guys. Good morning.

So, Greg, maybe you gave that 8.5% to 9% margin range for EAME, is there any chance of you willing to give us some color on the other three segments?.

So, if you’re working again to refresh, we’re going to be down 100 to 150 basis points in total just to put some context around these and I would say, pretty much with exception of our APAC which should be more breakeven as this year. Those 1.5% declines will be pretty consistent across the other regions..

Okay. Got it. That’s helpful. And then just an update on what you’re guys are seeing from used equipment pricing perspective.

I think last time we talked about this last quarter it was down like 45% year-over-year?.

Yes. I believe that we’re still seeing higher inventories across our industry of used equipment. So that is pressuring the prices, and I think that will continue for during 2015. AGCO’s used inventory levels in North America I think are in pretty good shape as a percentage of our total inventories they’re fairy consistent to what we historically have.

And so we work very hard on remarketing our used equipment. We have special programs to help our dealers do that. We were the first in the industry to have a certified program to remarket used equipment and provide warranty support on those. And so I think we’re pretty good shape without used inventories..

Okay. Thanks. I’ll pass it on..

Your next question comes from the line of Ann Duignan with JP Morgan. Your line is open..

Hi. Good morning. This is Tom [indiscernible] on behalf of Ann. Just one question, you cut 570 jobs at Fendt in January and moving to one shift.

Can you just remind how much capacity you added at Fendt over the past few years?.

The good news is that with this one shift we’re now in a position to basically do what we did some years ago in a two shifts in some areas even a three operation with a lot of over time. So that shows that the factory became much more productive and much more efficient..

Okay. Thank you..

Your next question comes from the Rob Wertheimer from Vertical Research Partners. Your line is open..

Thank you. Good morning everybody. So a quick question on Europe, I mean we can see some of the data for Germany and France and even the U.K. which was down, 18%, 20%, 30% for the quarter, obviously Europe is a much more diverse and patchy place and your retail sales are much better than that.

So could you give us sense of how the whole European market trended in the quarter? Do you outperform it by a bunch or was it less bad than those three major markets might indicate?.

Overall in the fourth quarter we have Western European tractors down about – industry is down about 15% and then we did do better than that in our results. The biggest declines were as we’ve said before, in France and Scandinavia, I think were the biggest areas of decline..

So you sort of said your dealer inventory is lower year-over-year, so I guess the implication is that wasn’t channel load but rather retail sell-through that you did better on, right?.

No. We don’t that. In Europe we have very, very professional dealers and they manage their inventories very, very well..

Okay. Perfect.

And then if I ask, do you still have older emissions to your engine? Are you able to say what the inventory draw down was were in 4Q and for the full year and if you any left?.

Rob, as you know the Tier 4 program extends through 2015, so we’ll be introducing all our new lower horsepower Tier 4 products during the 2015. So at the end of 2014 we had a buildup of engines to transition us to the production before key production going until we’re ready to introduce those Tier 4 new models this year.

So the inventory that we had at the end of 2014 was still over a $100 million for related to Tier 4 engine..

Okay. Thank you..

Your next question comes from the line Ross Gilardi with Bank of America. Your line is open..

Yes. Thanks. Good morning. Martin or Andy, I’m just want to talk a little bit more about FINAME for 2015. You were commenting on those favorable that rates were left unchanged, I mean, our understanding that FINAME rates went up 300 basis points, but they left rates for the MotoPhoto [ph] program unchanged.

But our understanding is that program is become a lot less relevant in the last three to five years and accounts for a very small portion Ag equipment purchases in Brazil, is that consistent with your view?.

Well, I think the reason that it hit them less important is that as you say, there is the distinction between the PSI rates and the MotoPhoto [ph], the PSI rates and MotoPhoto rates were consistent over the last few years, so now they’ve deviated and motor floater rates continue to be at to 2014 rates.

So our view is that program will be more heavily utilized in the first half of the year to take advantage of those lower rates..

But the funding as you’d said before still uncertain, I mean, do you have a sense as to what portion of Ag equipment demand has been purchase through that motor floater program MotoPhoto program over the last couple of years?.

I don’t..

We have it some, but we don’t have now. So we will come back to you with this answer..

Okay.

And then, maybe on your forecast for 2015 on the topline, I mean, you guys are guiding down 15% to 17% which seems a lot worse than what you’re expecting if you look at the market outlook by region which of course incorporate all of your different products, but can you help us bridged the gap there a little bit?.

Sure. The biggest impact is the exchange impact which is as we said about 8% of that. So without foreign exchange were down 7% or so something like that. We are pricing at 2% and so from our industry expectations that is somewhere between 5% and 10%.

There is some reduction for dealer inventory as I said between 1% and 2% and then we have some gains and some of our products like GSI we have flatter expectations for products like our part sales and so not everything in our portfolio is going to go down by that the forecast that we said for each market..

Got it. Thanks Andy, that’s helpful. And then back to currency, and some of your procurement initiatives, is there any way to say what portion of your material spend is non-U.S.

dollar denominated? I'm still trying to understand a little bit better whether or not you're getting a big FX margin tailwind by -- because you've obviously been centralizing your procurement a lot more on low cost countries that have seen their currencies battered over the last three to six months..

Well I think what you need to look at is the production by in the local currencies versus how much of the production in each of those factories are imported from have foreign currency exposure. In Europe they are not importing significant amounts from foreign, so foreign sources so it’s relatively euro based. And in the U.S.

there is some importation from Europe that Martin explained. Our Jackson factory is producing high horse power tractors and we’re getting our engines from Europe and we’re getting other components from other European suppliers.

So most of the benefit is going to be in our North American operation from importing fully produced product as well as imported components from Europe..

Got it. And then my last one, your margins in Europe and Brazil were quite resilient -- or in Latin America were quite resilient and even in Latin America were even better. In North America, I'm surprised they weren't even better given that GSI had a very good year.

So would you attribute most of that, what seems to be underlying erosion in Europe, X GSI to the mix impact towards small horsepower?.

In North America..

Yes.

Yes in North America, the biggest impact in terms of margin decline relates around mix and the decline in the higher margin high horse power products and an increase in some of the lower margin, lower horse power equipment..

Got it. Okay thanks guys..

Your next question comes from the line of Vishal Shah from Deutsche Bank..

Yes, hi, can you hear me?.

Yes..

Yes I wanted just maybe get a sense of your cost saving experience for 2015 how should we think about first half versus second half cost savings and maybe can you talk a little bit about the outlook for GSI segment in 2015?.

Sure. In terms of cost savings as we said in our comments a lot of the headcount reduction we actually achieved by the end of this year and it certainly helped us in the fourth quarter and should carry fully into 2015.

There are some restructuring actions that will are happening during the first quarter but we expect to have basically everything done by the end of the first quarter. So, from the standpoint of the run rates we should be where we need to be by the second quarter. Greg will talk about GSI. Greg..

Right. So for GSI in total we expect to be up close to 8% to 10% 2015 versus 2014 with growth in all the segments with the exception of Europe and the Middle East where we had pretty heavy sales in Eastern Europe, CIS countries in 2014 that will be lower in 2015. So other than that we expect to see growth across all the regions..

Thank you..

The next question comes from the line of Steven Fisher with UBS. Your line is open..

Thanks, good morning.

To what extent do you guys expect incentives from the players and the industry will cause an increase in brands switching this year relative to what you may see on a normal basis?.

I don’t see the weaker market conditions really having too much of an effect on that. To your point there maybe some discounting going on as the manufacturers are working down inventories that could give a customer a deal they couldn’t pass up.

But for the most part we still believe customers are very loyal to brands and very loyal to their dealers and those are the areas that we continue to work on, our investment in new products and our investment in our distribution network are the real keys to success in our business and we are trying to continue to effort those even in the weaker market conditions we have..

Yes, I think the biggest problem in the U.S. is with case, perhaps some of their biggest dealers are close to bankruptcy and that is basically pricing in the combination with also inventory management and I think they have to do their homework, but that’s not our call..

Okay. And then a bigger picture question and maybe tough at this point.

But do you have any visibility as to which of your markets would turn positive organically first and why on a more sustainable basis rather than just the quarter?.

That’s the million dollar question. Maybe in Europe I could imagine that it could be the U.K. because of the exchange rates. They should maybe do a little better than in previous years. France depends very much, I think it’s more emotions and it’s the overall political situation which makes farmers hold their clear investments.

But they could recover and nobody knows about Eastern Europe, mainly Russia and Ukraine because it is around politics because they will have a certain potential despite the problem in sugarcane which is of course related to the oil and gas price situation so that will be a problem for Brazil to be fixed.

They have basically kept prices for ethanol, sugar cane, ethanol and those kept I think could go down maybe. That would hit them even more, but on the other hand the big sugar mills work on efficiency and productivity and they have some valid promising project in the pipeline. So overall it’s a very difficult question.

I also think that we should have in mind as mentioned doing – and this presentation the harvest conditions in 2014 were excellent. So while commodity prices went down the volume of course went up and the yields went up. So therefore I think farm income was most probably not as bad and I think everybody has the funds and the money to invest.

The question, the big question is will they do so?.

Great. Thanks for the thoughts..

There are no further questions at this time. I will turn the call back over to the presenters..

Thank you, guys. We appreciate your interest today and if you have additional questions, I encourage you to follow back up with me at your convenience. Thanks and have a great afternoon..

This concludes today's conference call. You may now disconnect..