Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO 2017 Fourth Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. . Please limit questions to one question and one followup. Thank you. I would now like to turn the call over to Greg Peterson, AGCO's Head of Investor Relations. You may begin your conference.

Thanks, Lisa, and good morning. Welcome to those of you joining us for AGCO's fourth quarter 2017 earnings conference call. We will refer you to a slide presentation this morning that's posted on our website at www.agcocorp.com. The non-GAAP measures used in the slide presentation are reconciled to GAAP metrics in the appendix of the presentation. We will make forward-looking statements this morning including demand, product development, capital expenditure plans, timing of those plans, acquisition expansion and modernization plans and our expectations with respect to the costs and benefits of those plans and timing of those benefits. We'll talk about production levels, share repurchases and our future revenue, price levels, earnings, cash flow, tax rates 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, 2016, 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. We disclaim any obligation to update any forward-looking statements except as required by law. A replay of this call will be available on our corporate website later today. 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, please go ahead.

Thank you, Greg, and good morning, everybody. We appreciate everyone joining us on the call today. My comments start on slide 3. You will find a summary of our fourth quarter and full-year results. 2017 was a year of significant achievement for AGCO. We met our financial targets, launched important new products, completed two strategic acquisitions and made investments to improve our productivity. We also continued to make progress on our cost reduction efforts, which are being balanced with our commitment to customer support and maintaining an aggressive sales and marketing presence. Our fourth quarter sales grew by nearly 15% on a constant currency basis compared to the fourth quarter of 2016 with higher sales across all regions. Adjusted operating earnings climbed 48%, driven by a 100-basis point increase in adjusted operating margin. We also generated $577 million in cash flow from operations and over $370 million of free cash flow in 2017. Our strong cash generation is allowing us to continue making important investments while maintaining our strong balance sheet. Slide 4. This slide details industry unit retail sales, retail results by region for the full year of 2017. As shown on this slide, global industry farm equipment demand increased following three years of severe declines. Another strong crop production year is enabling the world's farmers to keep pace with the growing demand for grain. The USDA is estimating global grain inventories decreased only modestly in 2017, maintaining pressure on commodity prices. North American tractor demand was flat and combine demand was higher compared to last year. Sales of row crop equipment remained relatively weak and sales of hay equipment declined during 2017. Industry retail sales in Western Germany improved from 2016 levels. Growth was strongest in Germany, Italy and the United Kingdom. Recovery in the dairy sector provided…

Thank you, Martin, and good morning. I will start on slide 6, which looks at AGCO's regional net sales performance for the fourth quarter and full year of 2017. AGCO's sales increased 15% compared to the fourth quarter of 2016, excluding the positive impact of currency translation. AGCO benefited from the impact of acquisitions, which increased sales by approximately 2% in the fourth quarter of 2017 compared to the fourth quarter of 2016. The Europe/Middle East segment reported an increase in net sales of approximately 17%, excluding the positive impact of currency translation compared to the fourth quarter of 2016. Excluding acquisition-related sales, EME sales were up about 15%. Sales growth was the strongest in France and Germany. North American sales increased approximately 13%, excluding favorable impact of currency translation and the benefit of acquisitions during the fourth quarter of 2017 compared to the levels experienced in the fourth quarter of 2016. Strong growth in tractors and combines were offset by lower sales of sprayers. AGCO's fourth quarter 2017 net sales in South America increased approximately 3% compared to the fourth quarter of 2016, excluding negative currency translation impacts. Robust demand in Argentina was mostly offset by lower sales in Brazil. Net sales in our Asia/Pacific/Africa segment increased 12% in the fourth quarter of 2017 compared to 2016, excluding the positive impacts of currency and the benefit of acquisitions. Sales growth in China and Australia accounted for much of the increase. Parts sales were approximately $316 million for the fourth quarter of 2017 and were up about 6% compared to the same period in 2016, excluding the positive impact of currency translation. Slide 7 examines AGCO's sales and margin performance. Our fourth quarter results were highlighted by improved operating margin performance in three of our four regions compared to the…

Please limit questions to one question and one followup. Our first question comes from the line of Joe O'Dea from Vertical Research. Your line is open.

Hi. Good morning. This is TJ Toro on behalf of Joe. My first question is regarding 2018 production outlook up 4% year-over-year. Just curious, how does that look at a regional level? And then, also, how that's split between large equipment and small equipment? Thank you.

On a regional level, our production should be up in all regions. The biggest increase would likely be in our South America region where, in 2017, we had lower production because we had built up equipment for transitioning to some new emissions compliant products in 2017. That buildup was at the end of 2016. So, we had higher production Q4 2016. And then, what you see in our results this quarter, we had lower production in 2017. As we move into 2018, our production will start out relatively low, but build up throughout the course of the year and overall will be higher because, again, we had low production last year and we need to build up inventory for another round of emissions-related new products in 2019 in South America.

Thank you.

Our next question comes from the line of Sebastian Kuenne from Berenberg. Your line is open. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Hi, gentlemen. My main focus is on your industry retail outlook for the tractor sales. It seems that you are more cautious than both Deere and CNH on North America and also on Europe. Could you maybe explain a bit more if maybe you had seen a deterioration in market sentiment over the past weeks? Or what other reasons you have for being more cautious?

We have not seen a deterioration during the past weeks and we typically want to be realistic/conservative, so that explains the difference. We saw that also in recent years. So, overall, I think it would be great if we would be wrong, but we want to organize ourselves in order to manage our costs according to the market expectations we line out in our guidance or in our budget. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Then, I would have a quick followup. If you expect generally the market to grow a little bit in your regions, but you have 0% volume growth expectations for 2018, how does that fit together? Do you expect a market share loss then or how do I have to read this?

As you can see, 2017, we basically gained market share all over the place, and we don't want to change that.

No, we have a sales forecast increase, as we said, around 9% for the full-year 2018. Again, price is at 1.5% currency, 3.5%, and acquisitions, about 2.5%. So that leaves some growth in there, and we expect to see growth relating to market share growth, a little growth in our GSI business and some parts sales growth as well. So we do expect to grow, despite as we're forecasting at this point, relatively flat market condition. Sebastian Kuenne - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Okay. Thank you.

Our next question comes from the line of Joel Tiss from BMO Capital Markets. Your line is open.

Hey, guys. This is Elliott Simon on for Joel. Are there any new innovations in grain storage that you're focused on currently? We've just been hearing recently that some competitors are making this area a focus given the increased demand for grain storage.

Yes, there are innovations in this area. It's mainly related to the fabrication and the installation of grain elevators. We want to make more efficient and more cost – lower cost, to say. And then, we also add certain improvements. We have basically a liner inside the elevator, which helps reduce mold and things like that. And then, a lot of innovation. We are basically the leader in the area of grain drying already, so we have several important innovations. I did not hear about, let's say, something revolutionary coming from any competitor. I don't know what you talk about here.

Great. Thank you.

Our next question comes from the line of Michael Feniger from Bank of America. Your line is open.

Hey, guys. Thanks for taking my question. Can you guys just talk about, you reported some pretty strong growth in Europe in the fourth quarter. Can you just talk about the Mother Regulation? Did it pull forward any demand from early 2018?

Yes, I think we think it did. So, when you look at tractor registrations in Western Europe, you see some really big numbers. Some of those were pre-registrations prior to the real retail sales to the end-customer in order to get them sellable in 2018. So, I think some dealers did take on some additional inventory here at the end of the year because the fourth quarter in Western Europe was up about 15%. And so I would say that some of that was normal growth, but some of it related to the Mother Regulation transition.

Got it. And on Europe, I mean, the profit margin is still impressive, but we're starting to see those incrementals. They kind of slowed through the year. I'm just curious with forecasting flat retail sales, how should we be thinking about the margins in Europe into 2018?

Right. So, we are expecting to see those margins expand in 2018. Keep in mind when you look at the incrementals that you have to adjust it for the currency movements as that does make a difference. And so as we think about incrementals going forward on an organic basis, we're still thinking around kind of in the low to mid 20s percent for Europe. So, kind of where we've been targeting. And so that should generate to some nice results in 2018 for us.

Yes, that's helpful. If I could just squeeze one more in. I think you said on the operating margin you guys were expecting 50 basis points of improvement there. Can you just help us roughly think about that by region? Is South America above that 50 bps target? Maybe North America as well? Just trying to think about regionally for 2018.

Yes, the way we look at that is, in North America, it should be pretty close or in line to that. Europe as well. The Asia/Pacific/Africa segment we had a very strong year in 2018, so we're looking at that to be a little flatter or maybe even slightly down. And then South America, we would expect the improvement to be larger than our company average.

Perfect. Thanks, guys.

Our next question comes from the line of Larry De Maria from William Blair. Your line is open. Larry T. De Maria - William Blair & Co. LLC: Hi. Thanks. Good morning, everybody. A couple of quick questions. First of all, what FX are you using, obviously, mostly for the euro? And isn't it more favorable now than it was in December? And, therefore, why would there not be a change to the guidance based on FX? Thank you.

Yes. Well, I think we did raise our sales up just a little here between what we said in December to now. And then, as you say, Larry, that's all related to exchange. So we've updated it closer to where it's running today. I'd say, we're still a little below that. From an earnings standpoint, wasn't enough to really change our results. But it probably helped us a few cents here or there. Larry T. De Maria - William Blair & Co. LLC: Okay. Thank you. And then, what would you be using for the year?

We're about $1.22 or so. Larry T. De Maria - William Blair & Co. LLC: Okay, thanks. South American margins, I know you discussed earlier, so sorry if I missed it. But can you just talk about the cadence? And is this more of a normalized year for South American margins or are there still investments? Obviously, material costs and things can exchange. But excluding that, what kind of investments do we need this year? Or is it more of a normalized year? And how does it look throughout the year?

The very important investments in South America are pretty much in the area of research and development. Basically, the good news is, we have all modern technologies available within AGCO. We have all sizes, also high horsepower tractors and combines available. And so, we decided to launch a project where we invest in localization of those bigger products for the market because the market demand is there now. And we think that this investment in 2018 will show returns very quickly because we think that this is something which will help to increase market share substantially. Larry T. De Maria - William Blair & Co. LLC: Okay. But for the further localization of products, more investment this year in South America. But can you maybe just help us with an annual margin we should be looking at in South America? And what's a normalized margin? I was trying to get an understanding of how much friction there is in the margin and what the real run rate should be once it's done.

Yes, Larry. We're looking at somewhere 150 basis point improvement in our margins in 2018. We're going to start out pretty slow and then in second half hoping to get to a little more – I don't know if I'd call them normalized margins, but decent margins. So we're looking for improvement throughout the 2018 period. I think this is going to be a gradual improvement. As we talk about, we're transitioning another load of new products and localizing new technology that we introduced in 2019 as well. So there's still substantial change and substantial investment going on there, a lot of new products and a lot of new parts that we have to localize. And so, this isn't going to be one quarter and all of a sudden we're done; it's going to be a gradual change and a gradual improvement, I'd say, through 2019. Larry T. De Maria - William Blair & Co. LLC: Okay. Thanks very much, and I'll let it go there. If you could just maybe tell us, is there an organic growth number we should be looking for, for GSI this year? And then, thanks very much and good luck this year.

At GSI, we've got growth of about 3% or 4% this year. Larry T. De Maria - William Blair & Co. LLC: Thank you.

Our next question comes from the line of Mike Shlisky...

(31:08).

...from Seaport Global. Your line is open.

Good morning, guys. Just wanted to ask quickly about Europe and the new Mother Regulation. I was wondering if there is any scale benefit to be had now you have all the countries across Europe with a very similar product kind of going forward. And is that a 2018 story or a 2019 margin story, if you wouldn't mind? Thanks.

Yeah. We're working on platform solutions and platform designs for a lot of our European products. There are more in development in 2018. We start to see some new benefits of that in 2019/2020. We have our global combine, what we call the IDEAL combine, to be selling that in 2019. And then, we also have some new sales of more mid-range high horsepower tractors that will come into the market in 2019 as well.

But this is not caused by the Mother Regulation. It's caused by our own strategy. You should not get too excited about Mother Regulation because the industry overall does a pretty good job in order to make sure that the European Commission doesn't ask for unreasonable things. And so, therefore, let's say the changes to the product so far are rather modest, moderate, and limited.

Got it. Can I also ask secondly about Europe on the dairy industry outlook? Can you guys assess as to what pricing you're thinking dairy and milk might kind of be at for 2018? And if prices do come in a little bit here, come down throughout the year, is there any impact you think going to be to your sort of gross net end market this year? Thanks.

Right. So, good question. So, Mike, as we talked about throughout 2017, the improved economics for the milk producers definitely helped the market. We saw milk prices kind of firm up in the second half of last year around €38. That's kind of the farm gate price and that's for 100 kilograms. We do expect that to kind of move down this year, and we've kind of baked that into our forecast for Europe. So that's a little bit – that's part of the reason that we didn't ask for or didn't forecast, I think, for more growth in Europe is that, that sector had already recovered. And so, we're not looking for any more growth in that dairy sector. So, more stability in 2018.

If I could ask on that also though, have farmers in that region, though, cut their costs enough over the last few years given that they no longer have those price controls from a couple years back? If things stay somewhat stable, is there possible upside in Europe for 2018?

The profitability has definitely improved. We did see, in addition to the herd sizes going down obviously that generated a reduction in milk production, we also saw some of the same improvements in terms of automation and some of the upgrades of technology for these dairy producers. And we'll continue to see that going forward. So, very similar to the grain producers who have gotten more efficient. We're seeing the same thing on the dairy side. Thanks, Mike. And operator, we ask you to move on to the next caller.

Thank you.

Our next question comes from the line of Ann Duignan from JPMorgan. Your line is open.

Hi. Good morning, guys.

Good morning, Ann.

Good morning.

Good morning.

Morning. On the back of European dairy, we've written a lot recently about the lack of intervention in the marketplace this year starting in spring. Can you talk about how you have contemplated that in your outlook for dairy prices and for this sector as a whole? And how do you think that's going to impact the...

Right. Yes, good question, Ann. So we did see a buildup in skimmed milk inventory throughout last year, and a lot of that inventory is being carried by the EU through that intervention program you're talking about. Even though those inventory levels are up, it's still only about – represents about half of what gets exported out of the EU on an annual basis. So, they're higher. I don't think they're alarming. The thing to remember, as you know, Ann, is that our customers, the farmers, get paid a price for milk, and then the distributors and the regional producers then make skimmed milk powder, they make butter, and they make many other by-products, they make cheese. And so, some of those other end-products are actually doing much better than skimmed milk powder, which you've talked a lot about. So, overall, we think milk prices are going to trend down next year, but we still think dairy producers will be relatively profitable and will support market demand in 2018.

Yes, but there are two risks to be contemplated: one, what happens to skimmed milk powder prices when the product that's in intervention comes to market; and then, second, how that gets reflected back to farm dairy milk prices? So, I would see the risk skewed to the downside going into 2018 for the industry.

And we agree. This is part of our budget, so that's why our budget is a little conservative in a way.

Okay. That's good to know. Thank you, Martin. And then, can I ask a second more philosophical question? We're looking at, again, overproducing in South America in order to, for lack of a better word, stockpile products ahead of emission standard changes. And looking in Europe, the Mother Regulation drove preregistrations in December to kind of, for lack of a better word, maybe circumvent new rules. Martin, can you just talk about, there's heightened awareness in Europe about circumventing regulations, particularly around diesel and what's happened in the U.S.? Should investors be concerned about the reputation of the industry? Not of AGCO necessarily, but does it concern you that any of this could be considered stockpiling ahead of new emissions to get around new emissions?

Yes. One is we didn't do that, so that means you need to talk to our competitors. And second, I agree. So if you would do that in a very extensive way, this could be criticized. That's why we don't do it. In Brazil, the situation is different because also there we don't – let's say, I'm talking about us, so we don't really plan to find a substitute process in other because we have all the solutions in-house. So therefore, we don't – we really try to be on time with all the legal requirements.

But you did say you were going to pick up production in Q4 in Brazil ahead of emissions standard changes?

Yes. That's right, Ann. It's just the fact that we have a number of new products and in order for us to have as smooth a transition as possible, we can't and we don't want to put all those new products online at the same time. So, it's more of a phasing to make it work for our manufacturing operations than anything else.

Okay. I appreciate the color.

And it's always all within the rules.

Okay. Excellent. Thank you. I appreciate the color.

Our next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open. Corinne Jenkins - Goldman Sachs & Co. LLC: Hi. This is Corinne Jenkins on for Jerry Revich. So, we touched on this a little bit in Europe, but, Andy, you've spoken about incremental margin framework of 20% to 30% depending on the region. If demand this year surprises to the upside, do you expect that framework to hold for incremental sales?

Yes. I think, as Greg pointed out, what you see in our results for 2017, if you strip out the exchange and the impact of new acquisitions, which wouldn't carry that incremental margin that everyone – that you're kind of looking for on true scale growth, our gross margin improvement surround is in the high 20% range, and our operating margin improvement is in the kind of low 20% range. And so I think that's – we've been pretty consistent there. We see that in the fourth quarter of 2017 as well, and we expect that to continue in 2018. But you do have to strip out some of these other changes to our results, which wouldn't be coming in at that incremental margin range. Corinne Jenkins - Goldman Sachs & Co. LLC: Thank you. And then, if I could ask one more, you've made significant investments in engineering over the downturn. As we think about the markets recovering, where do you expect engineering expense as a percent of sales to shake out?

Pretty much on the same level as of this year, so to say, which all account to $300 million to $350 million. Corinne Jenkins - Goldman Sachs & Co. LLC: Okay. Great. Thank you.

Our next question comes from the line of Andy Casey from Wells Fargo. Your line is open.

Hey. This is Jorge Pica on the line for Andy. Just you had some very strong free cash flow conversion this year. Can you talk a little bit about why the stepdown next year?

Yes. So, what we had in 2017, as you said, was a good year in free cash flow. We did end up with higher inventory than we had targeted. So, as we look into 2018, we expect on our core inventory to get some reductions there and to offset some of this transition inventory we've been discussing already for the emissions change. So inventory for next year should be relatively flat year-over-year. We do expect to have some working capital usage, though, probably more in the areas of accounts receivable and accounts payable and accrued expenses. And so, overall, have a working capital usage of about $75 million for next year, and that's where that drives the cash flow forecast for next year.

And then, we also have an increase in CapEx of about $50 million...

Right.

...which will be another use of some of that cash flow, Jorge.

Exactly. The other factor for 2017 was that we got some higher-than-normal dividends out of our Finco JV, and that was to kind of rebalance the capital that we needed based on what the portfolio sizes are. That was kind of a benefit we got in 2017, which obviously was good for our cash flow. But that won't continue for 2018 either.

Okay. Perfect. And if you can just talk about the IDEAL combine. I know you guys are going out to the dealers right now, Western Canada and some of the other dealers in Europe. Can you talk to us about the first impressions, the adoptions? I know there are some CAT dealers that you're going to have to turn over. Thank you.

One is, let's say, we showed the combine first time at the big ag show in Hanover, Germany. So everybody was impressed. This includes competitors. The journalists, the experts; everybody was positive. So the test results show that this combine has the potential to outperform everybody else in the marketplace. We, in 2018, will make around 80 to 100 combines basically for the purpose of demonstration. We will basically do the final test. We'll make final adjustments and go to the market fully in 2019. When it comes to U.S., I don't think that we have a major problem here because in our distribution network we can sell that combine easily. And we don't, let's say, we expect some of our CAT dealers to drop the Lexion product, but we will be very constructive here. We don't worry so much. That's not a competitor for us.

Okay. Thank you.

Our next question comes from the line of Jamie Cook from Credit Suisse. Your line is open. Themis Davris - Credit Suisse Securities (USA) LLC (Broker): Hi. Good morning. This is actually Themis on for Jamie.

Good morning, Themis. Themis Davris - Credit Suisse Securities (USA) LLC (Broker): Just a question on the order book. Europe, I think, was up in the double-digit range in the past two quarters. So just curious as to whether the trend continued or whether you guys noted any softness. And broadly speaking, where does AGCO have the most visibility by geography as we think about the full year?

The trend continued, and the most visibility we have most probably in Western Europe, I would say, because of the high market shares. We have excellent dealers there, and they know what's going on maybe better than in other markets. Themis Davris - Credit Suisse Securities (USA) LLC (Broker): Got it. And then just a question on the North America market. Could you maybe address trends in larger versus smaller tractors so that we can get a better sense as it relates to mix for this year? And how should we think about production relative to retail demand in North America for 2018?

Yes. So 2018, North America, our forecast does assume some modest growth in some of the sectors, some of the higher horsepower equipment, tractors, combines, but with some lower sales expected in small tractors. The small tractor industry is at basically record levels right now. And so, we think the market is going to stay very strong, but are anticipating a little pullback there just because we don't think it's sustainable at that level. And so, that's how we kind of net out to kind of a flat market in North America. As we look about how we're going to manage our production and our wholesale versus retail activity, we do expect to wholesale less than retail again in North America in 2018. We want to continue to reduce dealer inventory levels. In 2017, we reduced our dealer inventory by about 12%, and we're looking for somewhere about a 10% reduction here in 2018. So, we want to continue to drive down dealer inventories and make ourselves more efficient. Themis Davris - Credit Suisse Securities (USA) LLC (Broker): Got it. Thank you very much.

There are no further questions at this time. I'd like to turn the call back to Greg Peterson for closing remarks.

Thanks, Lisa. We appreciate everyone's interest in AGCO. And if you have follow-up questions, I encourage you to contact us today. Thanks, and have a great day.

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