AG-CHEM EQUIPMENT CO INC, 10-K, 2000-12-15

AG-CHEM EQUIPMENT CO INC
10-K, 2000-12-15
FARM MACHINERY & EQUIPMENT

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SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

__X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended September 30, 2000

_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from ________ to ________.

Commission File Number: 0-25360

AG-CHEM EQUIPMENT CO., INC.
(Name of Registrant as Specified in Its Charter)

Minnesota 41-0872842
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
5720 Smetana Drive
Minnetonka, Minnesota 55343-9688
(Address of Principal Executive Offices)

(952) 933-9006
(Registrant's Telephone Number, Including Area Code)

Securities Registered Under Section 12(b) of the Exchange Act: None

Securities Registered Under Section 12(g) of the Exchange Act:

Common stock, $.01 par value
(Title of Class)

Indicate by check mark whether the registrant has:

1. Filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and
2. Been subject to such filing requirements for the past 90 days.

__X__ Yes _____ No

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

As of November 17, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant, computed by reference to the closing
sales price for such stock as reported by the Nasdaq National Market System, was
approximately $42,012,195.

As of the close of business on November 17, 2000, there were
outstanding 9,529,868 shares of the registrant's common stock, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.

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PART 1

ITEM 1. BUSINESS

INTRODUCTION

Ag-Chem Equipment Co., Inc. ("Ag-Chem" or "the Company") manufactures
and distributes off-road equipment primarily for use in fertilizing agricultural
crops, the application of crop protection chemicals to crops, and to a lesser
extent, industrial waste treatment applications and other industrial uses. The
Company was incorporated in Minnesota in 1963. Its principal executive offices
are located at 5720 Smetana Drive, Minnetonka, Minnesota.

Ag-Chem generates a majority of its consolidated revenues from its line
of agricultural equipment which consists of self-propelled, three- and
four-wheeled vehicles and related equipment for use in the application of liquid
and dry fertilizers and crop protection chemicals. Ag-Chem manufactures
equipment for use both prior to planting crops ("pre-emergence") and after crops
emerge from the ground ("post-emergence").

The Company's mission is to position itself as the leading,
state-of-the-art manufacturer of agricultural application equipment, with an
emphasis on "Site-Specific Agriculture" through its SOILTEQ products,
specifically high-tech hardware and software product offerings. In order to
achieve this goal, the Company has implemented a business strategy that is
focused on customer service and training. In addition to its 17 parts and
service centers (discussed below), the Company provides customers with service
by offering an organization of field service repair personnel who are stationed
at various locations throughout the country. Because Ag-Chem believes customer
training in site-specific technology is of paramount importance, the Company
operates a Technology & Education Center in Jackson, Minnesota to meet the
specialized training needs of its customers. Unlike most of its competitors
which sell through distributors, Ag-Chem sells a majority of its products
directly to the end-users of the equipment, which include fertilizer dealers,
farm cooperatives, large growers, municipalities, waste disposal contractors and
mining and construction companies. Farmers are not generally the Company's
direct customers. This distribution strategy enables the Company to maintain
close ties with its customers.

Ag-Chem also maintains a network of 17 parts and service centers
located throughout the major farming regions of the United States and Canada.
These centers, combined with the Company's field service repair team and
in-house support staff, offer customers a high level of service and
responsiveness, thereby averting critical delays during periods of peak usage.
Each parts and service center operates as a separate profit center, selling
parts and servicing equipment manufactured by Ag-Chem as well as selling parts
for equipment manufactured by other companies.

The Company holds certain patents and has designed software related to
its SOILTEQ products. Products offered by SOILTEQ enhance application equipment
capability by allowing it to selectively blend fertilizers, chemicals,
micro-nutrients, seed and crop protection chemicals at the point of application.
This process is computer controlled and based on a digitized map. Variable rate
delivery, based on mapping input data, combined with Global Positioning
Satellite (GPS) navigation, allows site-specific application. Although SOILTEQ
has been a relatively small contributor to the Company's revenues, such revenues
continue to grow. Site-specific agriculture is central to the Company's mission
and may represent significant future revenue over the long term.

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The Company supplements its agricultural equipment line by marketing
vehicles for various other industrial uses. Most notably, the Company
manufactures vehicles used for waste application, specifically designed for
subsurface liquid injection and surface spreading of biosolids, i.e., sewage
sludge, manure and other farm or industrial waste that can be safely used for
soil enrichment. The Company has recently developed a version of its industrial
application that utilizes SOILTEQ products. This equipment allows purchasers to
dispose of manure from livestock confinement operations in an environmentally
sound manner.

The Company's business is highly seasonal. Approximately 50% of its net
sales occur during the period from January 1 through April 30. Accordingly, the
Company increases its inventory levels during the quarter ended December 31 to
meet this seasonal demand. The Company periodically receives prepayments from
customers to secure either more favorable pricing or a desired delivery date.
These prepayments partially fund the increase in inventories. If the Company did
not receive customer prepayments, it believes that its line of credit would
provide sufficient liquidity to meet working capital requirements.

As of December 2, 2000, the Company had an order backlog of
approximately $23.5 million compared to $17.7 million on December 1, 1999. The
Company expects that substantially all of such backlog orders will be filled
during the fiscal year ending September 30, 2001.

PRODUCTS AND SERVICES

PRE-EMERGENCE APPLICATION EQUIPMENT - Pre-emergence equipment is used
to apply chemical to fields prior to crops emerging. The Company manufactures
and sells high-flotation, self-propelled vehicles and related equipment which
are used for fertilization and the spraying of crop protection chemicals under
the "Terra-Gator," "Big Wheels," "Easy Rider" and "Magnum" brand names. These
vehicles are primarily used prior to planting crops (i.e. "pre-emergence").
These vehicles are made with extra wide tires to provide maximum traction and a
minimum level of soil compaction which has an adverse effect on crop yield.
Ag-Chem manufactures a full line of three- and four-wheeled vehicles equipped
with various engine sizes.

Unlike most of its competitors' vehicles, which are simply
over-the-road vehicles modified for agricultural use, the Company's Terra-Gator
models have chassis specifically designed for off-road use. Ag-Chem primarily
manufactures three-wheeled vehicles, which offer an advantage over four-wheeled
vehicles because of significantly lower soil compaction (three separate wheel
tracks instead of rear tires following front tires), which has an adverse effect
on crop yield.

The Company manufactures pre-emergence equipment in a variety of model
sizes, engine horsepower and equipment configuration. For example, it builds
larger models with bigger tanks to reduce the need for tank refills. Similarly,
it builds increased horsepower engines to allow its vehicles to navigate rough
terrain at higher speeds and to power add-on equipment. The Company sells this
equipment, including its attachments, for between approximately $100,000 and
$225,000; prices for equipment combined with SOILTEQ products range from
$180,000 to $300,000.

The Company manufactures a variety of application systems that are
normally ordered with a chassis. The systems serve as a means to apply
fertilizer and crop protection chemicals. Ag-Chem produces several liquid and
dry fertilizer systems which offer varying widths of boom size, spraying
accuracy and ease of maintenance. Although liquid systems are often more
accurate in their application

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than dry systems, liquid fertilizer is often more expensive than dry fertilizer.
Liquid crop protection chemicals and fertilizers also tend to break down more
quickly than dry fertilizers.

The Company's Lor*Al subsidiary modifies on-road trucks by adding
heavy-duty rear axles, suspensions and oversized tires. Lor*Al's product
offering consists of various modified Navistar and Ford truck chassis which sell
under the Easy Rider, Magnum and Big Wheel brand names. Lor*Al's converted
on-road vehicles provide diversity to Ag-Chem's product line and provide Ag-Chem
a significant presence in the middle price segment of the fertilizer application
market. Lor*Al models have lower margins than the Terra-Gator model due to the
fact that truck chassis are purchased from other providers and the Company adds
less value during the manufacturing process.

POST-EMERGENCE APPLICATION EQUIPMENT - Post-emergence equipment is used
to apply protective chemicals to crops after they have already emerged. Ag-Chem
markets products for this purpose under the RoGator brand name. The RoGator
models have high crop clearance to avoid crop damage during the application
process. In addition, the RoGator models offer an adjustable wheel track width,
which allows it to operate in a variety of row crop spacings. The RoGator
models, with attachments, sell for between $80,000 and $185,000.

Since its introduction in 1993, the RoGator models have enabled Ag-Chem
to reduce the seasonal impact of its pre-emergence equipment sales and now
account for a significant portion of sales. The RoGator models are produced in
two sizes - the 854 model and the newest and largest machine, the 1254 which was
first produced in summer 1999.

In September, 2000, the Company issued a safety alert and undertook a
major product improvement program pertaining to a component in specific models
of its RoGator products manufactured in model years 1999 and earlier and a
limited number of model year 2000 RoGator 854's. This safety alert and product
improvement program addressed a serious safety concern surrounding a
vendor-supplied component, specifically the cast iron axle in the BB5 wheel
motors built into such models. In light of the Company's concern for the safety
of owners, operators and bystanders, and in an effort to improve the operational
dependability of these machines, the Company is planning to replace these axles.
Although there have been instances of axle failures, no personal injuries have
been reported to date as a result of these failures. Until such time as the
axles are replaced, operators are being provided a list of steps they should
take to reduce the potential for failure and to reduce the risks if such a
failure does occur. The company currently estimates that it will cost between
$5,300 to $8,100 to replace the axles and related components. In addition to the
actual expense incurred in the fourth quarter, a reserve was set up in
accordance with generally accepted accounting principles in the amount of
$5,100. It is very early in the replacement process and the reserve will be
adjusted, if necessary, in future periods as more information on the actual
costs of replacement is collected. The Company has been informed by the supplier
that it will take until approximately August 2001 to produce all the replacement
axles. A settlement with the supplier of the component has not been reached at
this time.

PARTS AND SERVICE CENTERS - The Company believes that the availability
of parts and service for its equipment is essential to the end-user. Delays
during the planting, growing or harvesting period can be critical to farmers.
Accordingly, potential customers view on-going maintenance of application
equipment as a significant factor in making a purchase decision. The Company's
customers need products that can be serviced in a minimal amount of time. For
this reason, the Company operates 17 parts and service centers across the United
States and Canada. These centers are intended to serve the

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Company's customers by providing parts and technical support on a regional
basis. These parts and service centers exclusively repair the Company's
products. They stock and sell parts manufactured by the Company as well as parts
which are manufactured by other companies which have been incorporated into the
Company's products. The parts and service centers also stock and sell parts for
equipment manufactured by other companies for use in competitors' products. The
Company's parts and service centers also refurbish used Ag-Chem equipment for
resale. The Company believes that its parts and service centers are an important
part of the Company's growth because of the support they provide to its
customers. In August 2000, five parts centers were closed to reduce operating
costs. The costs associated with closing these centers were not material and
were booked in the fourth quarter.

EUROPEAN OPERATIONS - The Company's subsidiary, Ag-Chem Europe B.V., a
corporation organized under the laws of the Netherlands, is engaged in the
importation, manufacture and distribution of agricultural and industrial
equipment throughout Europe. Ag-Chem Europe B.V. imports application equipment
manufactured by the Company, customizes the equipment by adding systems, and
other modifications, and then resells the equipment to European customers. It
also manufactures several models of equipment better suited for European
conditions.

SOILTEQ - The Company holds patents for and has designed software
related to a process that utilizes a variety of input data to develop a
site-specific application map. Through such inputs as soil test data and soil
surveys, software developed and provided by the Company is able to generate a
spreading map for each unique soil plot. The Company has also developed and
markets control systems under the "FALCON" name which provides for site-specific
application of multiple products in a single pass. When the spreading map is
used with a machine such as an applicator equipped with a FALCON (i.e. the
Company's computer-based control system), site specific placement of multiple
crop inputs products is possible.

SOILTEQ technology benefits farmers by ensuring that appropriate
amounts of crop inputs, such as fertilizer, crop protection chemicals,
micronutrients and seed are applied to each section of a field based on selected
criteria. SOILTEQ's systems allow the operator to allocate inputs to areas that
can support high yields and avoid over-application of inputs on soils that are
only capable of producing low yields. With this process, inputs are placed only
in areas where they can be used by the crop, and excess application is
minimized. The effects of such a process are optimal economic performance and
potentially positive environmental benefits.

CUSTOMER TRAINING - With the growth of site-specific agriculture, the
Company has recognized an increasing demand for customer training related to
this new technology. The Company operates a 40,000 square foot facility in
Jackson, Minnesota. The Ag-Chem Technology & Education Center is staffed with
dedicated instructors and equipped with state-of-the-art computer and control
system training rooms. At the facility, the Company provides a varied curriculum
of site-specific agriculture and other course offerings.

OTHER AGRICULTURAL PRODUCTS - The Company's AgTec division manufactures
and sells: (i) low volume air sprayers used for spraying crop protection
chemicals on orchards, vineyards, field crops and Christmas trees; (ii) low
volume lawn sprayers; (iii) injection systems for use by professional lawn care
contractors; (iv) high volume sprayers used by commercial tree spraying
contractors; (v) boom sprayers used in crop spraying; and (vi) a line of
lawn/garden sprayers. The AgTec Division also distributes heavy-duty flail brush
choppers and swing arm rotary mowing equipment for use by orchards and
nurseries.

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INDUSTRIAL EQUIPMENT - Ag-Chem manufactures a line of equipment that is
used in the waste application industry. This equipment applies or injects sludge
from waste treatment facilities to agricultural land. Direct injection minimizes
odor and runoff problems associated with land disposal. This equipment is sold
to waste disposal companies and municipalities. In addition to its waste
disposal equipment, the Company manufactures other lines of equipment for the
drilling, mining and construction industries. Since 1998, the Company has
offered a map-based application system for its sludge equipment. This technology
has enabled customers to create map-based, variable rate applications of sludge
based on the nutrient needs of the soil.

SALES AND MARKETING

Ag-Chem has one group of sales and marketing employees specifically
devoted to the agricultural market. The Company also has other groups of sales
employees focusing primarily on selling industrial equipment, selling SOILTEQ
equipment, and selling the Company's AgTec division products to retail dealers.
In the United States, the Company sells its Lor*Al product lines to end-users
through three distributors in part of the country and through Ag-Chem's sales
force in other parts of the country. Internationally, Ag-Chem sells its products
through its subsidiary, Ag-Chem Europe, B.V., as well as a network of
distributors. The Company's sales effort consists of national and regional
advertising, a catalog, web-based sales, direct mail programs, and trade shows.

For fiscal 2000, 1999 and 1998 the members of a farming co-op accounted
for 14.6%, 12.6% and 13.8% of net sales, respectively. Such members retain
individual purchasing authority, and the Company does not consider the related
business risks to equate to one single, large customer.

Ag-Chem offers financing to customers through several different
programs that involve third-party lenders and lessors. Although Ag-Chem has no
responsibility or obligation in the event of a default by purchasers or lessors
of such equipment, the Company attempts to assist lenders and lessors in
reselling repossessed equipment.

Ag-Chem also offers its own lease and debt-financing program. Ag-Chem
retains a security interest in the financed equipment, which allows the Company,
at its option, to sell such leases or notes. Ag-Chem maintains a full time
credit and collection staff which conducts credit evaluations and administers
the customer financing activities. Since the Company began financing its own
equipment, it has experienced limited defaults. Moreover, the Company believes
an active market exists for used equipment. Ag-Chem finances equipment for terms
up to SEVEN years. Lessees have the option of converting the rental to a
purchase.

SUPPLIERS

The Company currently relies upon single sources of supply for a number
of components that are used in the manufacture of its off-road machines and
related equipment. The Company believes that alternative sources will become
available within a reasonable time for each of the components currently obtained
from such sources. Ag-Chem generally has supply contracts with its larger
suppliers which are based on price but do not require minimum volume purchases.

INDUSTRY AND COMPETITION

In general, the agricultural equipment industry is highly competitive.
The industry continues to experience significant consolidation and retrenchment.
While sales of many types of agricultural equipment neared all-time lows in
calendar 1999, it appears the industry may have bottomed out and

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may be beginning an up cycle. Commodity prices for corn, wheat, cotton, and
soybeans leveled out or were beginning to climb toward the end of calendar 1999
and beginning of calendar 2000. In its June 2000 research report, Credit Suisse
First Boston indicated that the agricultural equipment industry may have
bottomed out and that the industry is beginning to see the upside of the cycle.
Additionally, in its May 2000 survey of 210 farm-equipment dealers, Merrill
Lynch reported its most positive results since 1998, with 47 percent of dealers
expecting revenue to increase in calendar 2000 versus 38 percent in its previous
survey, and 20 percent last spring.

The United States market for custom application equipment consists
largely of retail fertilizer dealers, farm cooperatives and some farmers who
operate very large farms. Ag-Chem sells primarily to fertilizer dealers and farm
cooperatives.

The Company believes that the percentage of farmers who apply crop
inputs with their own equipment has decreased and expects it to decline further
due to a number of factors.

Increased productivity is one of the benefits of outsourcing crop input
application to independent fertilizer dealers. Tractors and pull-behind
spreaders commonly used by farmers to apply crop inputs are typically less
accurate and require significantly more time, and operate at lower speeds
(approximately 4 to 5 mph) than Ag-Chem equipment, which fertilizes at a speed
of approximately 16 mph and precisely applies the fertilizer.

Both the trend toward outsourcing crop input application and the
consolidation of the farming industry over the last decade have bolstered the
demand for Ag-Chem's products. The result of such consolidation has been fewer
but larger and financially stronger farms. Farmers are becoming increasingly
sophisticated in agro-economics and more likely to contract for applicator
services. Moreover, heightened competition motivates fertilizer dealers to stay
current with advances in fertilization technology, which can result in replacing
application equipment before the end of its useful life. Accordingly, while the
aggregate United States farm acreage planted has remained relatively stable in
recent years, Ag-Chem, and the custom application equipment industry as a whole,
have continued to grow.

Demand for Ag-Chem's agricultural equipment can be affected by the following
factors, among others:

o Grain prices - commodity prices have an effect on customer attitudes
and purchasing decisions;

o Government regulations - many growers don't want to be concerned with
increasing regulations associated with handling various crop inputs;

o Low-dose chemicals - changes in crop protection chemistry and
formulation have resulted in crop protection chemicals that require
very precise spray systems;

o Rural labor pool - decreasing rural populations make finding seasonal
farm labor more difficult;

o Weather - extreme conditions of drought or flood influence purchasing
decisions in affected areas;

o Trained personnel - the limited number of skilled equipment operators
is a factor for customers considering equipment purchases;

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o Interest rates - the cost of borrowing money is a factor for customers
considering equipment purchases;

o Market conditions for the ag retailer/custom applicator - margins on
crop inputs affect profitability, and therefore influence buying
decisions;

o Mandated capital expenditures - fertilizer dealers in many states have
been or will be required by law to upgrade their facilities with costly
containment measures, potentially delaying equipment purchases; and

o Genetically modified seed - There is uncertainty around genetically
modified seed and as a result there is uncertainty in farmers' ability
to market these crops.

The off-road agricultural application equipment industry, which
excludes "short-line" equipment (i.e. equipment pulled behind or mounted on a
tractor or pickup), consists of numerous manufacturers. Competitors, who at one
time were substantially smaller than Ag-Chem, are now considerably larger. In
the recent past, Deere & Company has entered the post-emergence market, Case New
Holland Corporation (Case) has purchased Tyler Inc. (Tyler), and AGCO Inc.
(AGCO) has purchased Willmar Manufacturing Inc. (Willmar) and Spra-Coupe.
Although each company is smaller in terms of equipment sold in the Company's
industry, they are each supported by a much larger parent company. Deere & Co.,
Willmar and Spra-Coupe manufacture and sell post-emergence vehicles. Tyler, a
Case subsidiary, markets pre-emergence and post-emergence equipment.

With competition based largely on price, quality, technology and
service, Ag-Chem has positioned itself as a supplier of quality products with an
emphasis on service and training, as exemplified by the Company's numerous parts
and service centers and by the training provided at the Ag-Chem Technology &
Education Center.

MANUFACTURING

The Company's manufacturing process includes machining, fabricating,
welding, assembling and painting. Off-road machines and related equipment are
manufactured in the Company's facilities in Jackson, Minnesota. The spraying
equipment produced by the Company's AgTec Division is manufactured in a plant
located in Niles, Michigan. The Lor*Al product line is manufactured in Benson,
Minnesota. The Company's Ag-Chem Europe B.V. subsidiary manufactures sludge and
agricultural equipment in Grubbenvorst, Holland.

JOINT VENTURES

REDBALL, LLC. Formed in October 1999, Redball, LLC is Ag-Chem's joint
venture with C.A.P., Inc. Redball, LLC manufactures and sells an innovative line
of sprayers throughout the United States, South America, Australia and other
parts of the world. Although Redball is well known in cotton growing states,
Redball, LLC also manufactures products for use in corn and soybeans. Redball,
LLC was formed as the result of the contribution of $1 million in cash from
Ag-Chem and $1 million in equity from C.A.P., Inc. As a result of their
respective contributions, each party to the joint venture shares equally in the
pre-tax profits generated by sales of Redball products. At its option, Ag-Chem
has the right, between October 1, 2004 and December 31, 2004, to acquire the
other share of the joint venture for $5 million.

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AG-CHEM/NEW HOLLAND, LLC. Formed in 1999, Ag-Chem manufactures a
version of the RoGator 554, which is sold at its cost to the JV for resale
through New Holland North America, Inc. ("NHNA") to NHNA's network of dealers.
For their respective contributions, each party to the joint venture shares
equally in the pre-tax profits generated by the sale of the RoGator 554 product.
Either party has the option to acquire the other's stake in the joint venture
through a negotiated process or to compel the company to be dissolved and
liquidated on agreed-upon terms.

RESEARCH AND DEVELOPMENT

As of September 30, 2000, the Company employed a staff of employees and
contractors in research and development who are responsible for developing new
products and improvements or enhancements to existing products. Research and
development expenditures were $10.8 million in fiscal 2000, $9.4 million in
fiscal 1999 and $11.9 million in fiscal 1998. Such expenditures constituted 3.7
percent, 3.2 percent and 3.4 percent of the Company's fiscal 2000, 1999, and
1998 net sales, respectively. The Company believes its ongoing commitment to new
products and improvements and upgrades of existing products provide the Company
with a major competitive advantage and technological leadership.

PATENTS AND TRADEMARKS

The Company holds a number of patents that cover certain aspects of its
products. The Company believes that several of its patents, particularly
relating to site-specific agriculture, are significant to the Company's
business. The Company's patents generally have terms that expire twenty years
from the effective patent application filing dates, although patent terms can
differ, based on particular jurisdiction and filing date. No assurance can be
given that, if applied for by the Company, any patents will be issued or that
the patents currently held or new patents, if issued, will be valid or will
provide any significant competitive protection for the Company.

Ag-Chem has obtained federal trademark registration of the Ag-Chem logo
and the "SOILECTION(R)" trademark. In addition, the Company uses and claims
rights to and has obtained federal registration of a number of trademarks used
to identify the Company's products. The Company's prior use of an unregistered
name or trademark may entitle it an exclusive right to such usage in connection
with the sale of that Company's products in a particular market area. However,
registration of a trademark with the U.S. Patent and Trademark Office provides
such right throughout the United States and creates a presumption that the
trademark is valid. There can be no assurance that any trademark application, if
filed by the Company, will result in the receipt of a registration for the
trademark. There can also be no assurance that the Company's use of their
tradename or trademark will not infringe upon the rights of others, or that they
will be free from future challenge by others as prior use or as otherwise being
unprotectable.

REGULATIONS

The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges of processed or other types of waste water and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. These laws and regulations are constantly changing and it is
impossible to predict with accuracy the effect they may have on the Company in
the future.

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In 1990, certain provisions of the Clean Air Act Amendments were
adopted by Congress which require the Environmental Protection Agency (the
"EPA") to study emission from off-road engines and equipment, including the
majority of the equipment manufactured by the Company. In June 1994, the EPA
promulgated emission standards for new non-road, non-spark-ignition engines. The
EPA began implementing such regulations on January 1, 1996 for some models and
January 1, 1997 for other models. These regulations apply to equipment
manufactured on or after the January 1, 1996 and 1997 implementation dates,
respectively. The Company is currently in compliance with such regulations.

In July 1994, the EPA promulgated regulations allowing the State of
California to implement regulations concerning emissions from off-road engines
and equipment, as long as such regulations meet or exceed federal standards. The
Company is not aware of any other promulgated or proposed regulations at the
present, and cannot predict the impact, if any, of future regulations on the
operations of the Company.

The Company is subject to various federal, state, and local laws
affecting its business as well as a variety of regulations relating to matters
such as working conditions and product safety.

The Company's European shipments are subject to the rules and
regulations of the European Economic Community (the "EEC") as well as those of
the individual countries. These rules and regulations apply to self-propelled
agricultural working machines traveling on public roads. Also required by the
"EEC" is a certification that addresses operator safety and working conditions.

EMPLOYEES

The Company employs 1,432 full-time employees, of whom 845 were engaged
in manufacturing & engineering, 355 in service and parts distribution, 122 in
sales, and 110 in administration. The Company is not subject to any collective
bargaining agreement and believes that its employee relations are good.

SUBSEQUENT EVENTS

On November 20, 2000, the Company announced it has agreed to be
acquired by AGCO Corporation. AGCO, headquartered in Duluth, GA, is a leading
worldwide designer, manufacturer and distributor of agricultural equipment.
Subject to customary regulatory and Ag-Chem shareholder approval, the
transaction will merge the Company with a wholly owned subsidiary of AGCO. The
Company's shareholders will receive $25.80 per share consisting of no more than
$12.90 in AGCO stock and the remainder in cash.

ITEM 2. PROPERTIES

The principal properties of the Company are as follows:

LOCATION DESCRIPTION OF PROPERTY
-------- -----------------------
Minnetonka, Minnesota Corporate Office
Jackson, Minnesota Manufacturing
Jackson, Minnesota Parts/Service Support
Jackson, Minnesota Training Center

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Benson, Minnesota Manufacturing
Benson, Minnesota Parts/Service Support
Grubbenvorst, Holland Manufacturing

The Company owns executive offices in the Brenwood Office Park located
in Minnetonka, Minnesota. The Company's executive offices occupy approximately
43,300 of the total 176,000 square feet of available space. Leasing operations
related to space not occupied by the Company in the Brenwood Office Park is not
deemed material to the Company's operations. The Company owns the properties in
Jackson, Minnesota and Grubbenvorst, Holland, and leases the others. The
manufacturing facility in Benson, Minnesota is presently operating at
approximately 50% capacity, and the Jackson, Minnesota manufacturing facility is
operating at approximately 60% capacity. The Company considers each of its
facilities to be in good condition.

The Company also has 17 parts and service centers, of which it owns 13,
leases 2, and operates 2 on a consignment basis (i.e. the Company contracts with
a third party to service Ag-Chem customers).

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

The Company submitted no matters to a vote of security holders during
the fourth quarter of the fiscal year ended September 30, 2000.

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<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common stock of the Company (ticker symbol "AGCH") currently trades
on The Nasdaq Stock Market (National Market System). The following table sets
forth, for the periods indicated, the high and low closing prices for the
Company's Common Stock for each quarter within the last two fiscal years as
reported by Nasdaq. These quotations reflect inter-dealer prices without retail
markup, markdown or commissions and may not represent actual transactions.

---------------------
| CLOSING PRICES |
---------------------
LOW HIGH
FISCAL YEAR ENDED SEPTEMBER 30, 1999 ----- ------
First quarter................................. $9.50 $13.00
Second quarter................................ $10.00 $16.75
Third quarter................................. $9.75 $12.19
Fourth quarter................................ $8.50 $10.75
FISCAL YEAR ENDED SEPTEMBER 30, 2000
First quarter ................................ $9.25 $14.50
Second quarter................................ $7.63 $10.88
Third quarter................................. $5.25 $8.78
Fourth quarter................................ $6.75 $12.75

As of November 17, 2000, there were 334 shareholders of record and
approximately 1700 shareholders in street name.

The Company has never paid cash dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its operations and
does not anticipate payment of cash dividends in the foreseeable future.

11
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data has been derived from the
Company's consolidated financial statements. The data should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere herein and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------
| FOR THE FISCAL YEARS ENDED SEPTEMBER 30, |
--------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 298,841 $ 292,679 $ 322,122 $ 318,212 $ 280,152
Cost of sales 232,405 214,688 234,959 232,565 200,378
Selling, general and administrative
expenses 66,534 70,259 74,003 69,034 61,239
Operating income (loss) (98) 7,732 13,160 16,613 18,535
Other income 3,293 2,994 3,384 3,186 3,248
Interest expense 5,417 5,713 6,246 6,229 5,935
Earnings (loss) before income taxes (2,222) 5,013 10,298 13,570 15,848
Income tax (benefit) expense (800) 1,625 3,450 6,000 6,100
Net earnings (loss) (1,422) 3,388 6,848 7,570 9,748
Earnings (loss) per share (0.15) 0.35 0.71 0.78 1.01

Weighted average common shares outstanding 9,583 9,616 9,660 9,683 9,672

CONSOLIDATED BALANCE SHEET DATA:(1)

<CAPTION>
------------------------------------------------------------------
| AS OF SEPTEMBER 30, |
------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Working capital $ 52,818 $ 66,302 $ 76,174 $ 53,497 $ 47,873
Property, plant and equipment, net 38,570 42,470 45,813 46,260 42,697
Total assets 155,699 189,929 188,194 187,999 185,559
Long-term debt, less current installments . 23,854 44,299 59,903 45,368 43,334
Stockholders' equity 71,698 73,223 70,420 63,887 57,343
Average number of employees 1,448 1,536 1,720 1,637 1,534
Return on beginning equity (2) (1.9%) 4.8% 10.7% 13.2% 21.7%
</TABLE>
------------------------------------------------
(1) Dollars and shares in thousands, except per share amounts.

12
<PAGE>

(2) Return on beginning equity is calculated as net earnings for the period
divided by the equity balance at the end of the prior year.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Dollars in thousands)

SUMMARY

The following table presents the percent of net sales for each item in
the Consolidated Statements of Operations:

----------------------------------
| Fiscal years ended September 30, |
----------------------------------
2000 1999 1998
----- ----- -----
Net sales............................. 100.0 100.0 100.0
Cost of sales......................... 77.8 73.4 72.9
----- ----- -----
Gross profit.......................... 22.2 26.6 27.1

Selling, general and administrative
expenses.............................. 22.3 24.0 23.0
----- ----- -----
Operating income (loss)............... (0.1) 2.6 4.1

OTHER INCOME (EXPENSE):
Other income.......................... 1.1 1.0 1.0
Interest expense...................... (1.8) (2.0) (1.9)
----- ----- -----
Earnings (loss) before income taxes... (0.8) 1.6 3.2

Income tax (benefit) expense.......... (0.3) 0.6 1.1
----- ----- -----
Net (loss) earnings................... (0.5) 1.0 2.1
===== ===== =====

------------------------------------------------

RESULTS OF OPERATIONS - FISCAL 2000 COMPARED TO FISCAL 1999

NET SALES

FISCAL FISCAL %
2000 1999 CHANGE CHANGE
---- ---- ------ ------
$298,841 $292,679 $6,162 2.1%

The increase in net sales was primarily the result of increases in
post-emergence equipment unit shipments, which was largely due to the success of
the Company's new 1254 RoGator. This increase was partially offset by a decrease
in unit shipments of pre-emergence equipment. The agricultural economy has
continued to suffer as a result of low commodity prices, which has lowered
demand for equipment. Additionally, the farm supply industry is experiencing
consolidation with a resulting

13
<PAGE>

decrease in demand for equipment in the short-term. The Company is uncertain
about impact of these factors on future sales. The changes and factors described
above are quantified as follows:

o Post-emergence equipment net sales increased $17,367 or 22.6%
during fiscal 2000 as compared to fiscal 1999. As a result,
sales of post-emergence equipment represented 31.5% of net
sales in fiscal 2000 compared to 26.2% in fiscal 1999

o Pre-emergence equipment net sales decreased $14,172, or 12.8%
during fiscal 2000 compared to fiscal 1999. As a result, sales
of pre-emergence equipment represented 32.4% of net sales in
fiscal 2000 compared to 37.9% in fiscal 1999.

o Sales of other product lines increased $2,967, primarily
because of increases in the sales of previously owned
equipment.

GROSS PROFIT

FISCAL FISCAL %
2000 1999 CHANGE CHANGE
---- ---- ------ ------
$66,436 $77,991 ($11,555) (14.8%)

Consolidated gross profit, as a percent of net sales was 22.2% and
26.6% for fiscal 2000 and 1999, respectively. The decrease in gross profit as a
percentage of net sales was primarily the result of changes in product mix,
reduced margins on sales of prior-year models in fiscal 2000 and an increase in
warranty expense in the fiscal year ending September 30, 2000 compared to the
prior-year period. The inventory of prior-year models was significantly reduced
in the first half of fiscal 2000. Warranty and customer service campaign expense
increased $5,486 to $9,830 in the fiscal year ending September 30, 2000 compared
to the prior-year period. The increase was largely due to the axle replacement
product improvement program announced on September 11, 2000. The company
currently estimates that it will cost between $5,300 to $8,100 to replace the
axles and related components on certain RoGator models. In addition to the
actual expense incurred in the quarter, a reserve was set up in accordance with
generally accepted accounting principles in the amount of $5,100. It is very
early in the replacement process and the reserve will be adjusted, if necessary,
in future periods as more information on the actual costs of replacement is
collected. The Company has been informed by the supplier that it will take until
approximately August 2001 to produce all the replacement axles. A settlement
with the supplier of the component has not been reached at this time.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (S,G&A)

FISCAL FISCAL %
2000 1999 CHANGE CHANGE
---- ---- ------ ------
$66,534 $70,259 ($3,725) (5.3%)

Compensation, employee benefits and employee-related expenses decreased
3.3% or $1,582. This decrease was primarily due to reduced employee headcount in
the current year resulting from the Company's continued focus on cost
reductions. All other S,G&A expenses decreased by 9.8% or $2,143. S,G&A expenses
as a percent of net sales were 22.3% and 24.0% in fiscal 2000 and 1999,
respectively.

14
<PAGE>

As a result of the above, operating (loss) income was ($98) and $7,732
in fiscal 2000 and 1999, respectively.

Other Income increased 10.0% or $299 to $3,293 in the fiscal year ended
September 30, 2000 compared to the prior fiscal year. The increase was the
result of the Company's joint ventures. These joint ventures were new in fiscal
2000 and contributed $1,143 to other income in fiscal 2000. This increase was
partially offset by a decrease in interest income and finance charges. Interest
income and finance charges decreased $499 to $583 in the fiscal year ending
September 30, 2000 compared to the prior fiscal year. This decrease resulted
from the company's effort to reduce its notes receivable from customers in the
current fiscal year, as discussed below.

The Company recorded an income tax benefit of $800 in fiscal 2000
compared to income tax expense of $1,625 in fiscal 1999. The effective tax rates
in fiscal 2000 and 1999 were 36.0% and 32.4%, respectively. The lower effective
tax rate in fiscal 1999 was primarily the result of a larger utilization of a
net operating loss carryforward by Ag-Chem Europe B.V..

Included in the results of operations discussed above are the results
of Ag-Chem Europe B.V. This subsidiary experienced a $105 or 0.5% decrease in
net sales from fiscal 1999 to 2000. Gross profit for this subsidiary decreased
$93 or 2.2% in fiscal 2000, compared to the prior year. Gross profit as a
percentage of sales decreased from 19.6% during fiscal 1999 to 19.3% in fiscal
2000. Net income for this subsidiary was $186 during fiscal 2000 compared to
$610 in the prior year. The decreases in sales and profit during fiscal 2000
compared to the prior year was related to the decrease in the relative value of
the Euro to the U.S. dollar

A single currency called the Euro was introduced in Europe on January
1, 1999. Although the Company has experienced no material impact, the increased
price transparency resulting from the use of a single currency may affect the
ability of Ag-Chem and other companies to price their products differently in
the various European markets. A possible result of this price harmonization is
lower average prices for products sold in these markets. Additionally, the
Company is in the process of replacing the financial systems used by Ag-Chem
Europe B.V. so that it will be capable of converting to the currency. The
Company has put in place such new systems in the first quarter of fiscal 2000.

LIQUIDITY AND FINANCIAL POSITION - 2000 COMPARED TO 1999

Net cash provided by operating activities increased to $40,520 in the
year ended September 30, 2000, compared to cash used in operating activities of
$3,554 in the year ended September 30, 1999. The major reason for this change
was an increase in cash provided by changes in operating assets and liabilities
to $38,773 from cash used of $13,058 in the years ended September 30, 2000 and
1999, respectively. Reductions in inventories and operating notes receivable
provided cash of $28,326 compared to using cash of $10,280 during the years
ended September 30, 2000 and 1999, respectively. Inventories decreased to
$89,319 at September 30, 2000 from $109,463 at September 30, 1999 compared to an
increase of $7,712 during the prior year. The decrease was the result of the
Company's efforts to reduce inventories by better matching its production
schedule to sales and the decision to carry less inventory. Lower inventory
levels could result in the Company not being able to meet market demand should
the agriculture economy improve. The decrease in operating notes receivable was
from the non-recourse sale of a number of its notes receivable to third parties.
The notes were sold at book value. The Company expects cash will continue to be
provided by operating activities through net

15
<PAGE>

earnings, and this cash will be used to satisfy the current portion of long-term
debt. Accounts receivable turnover has remained relatively stable in recent
periods, and has not significantly affected liquidity.

Cash used in investing activities in the year ended September 30, 2000
was $1,028 compared to $2,136 in the prior year. This decrease in cash used was
primarily the result of less investment in equipment rented to customers in the
year ended September 30, 2000 compared to the prior year. This decrease was
partially offset by increased investment in property, plant and equipment as the
Company's European subsidiary purchased the manufacturing facility it had
previously been leasing.

Cash used in financing activities was $39,547 in the year ended
September 30, 2000, compared to $5,812 of cash provided by financing activities
in the prior year. Of the cash used in financing activities, $39,290 was due to
repayments of notes payable and long-term borrowings, net of new notes payable
and long-term borrowings during the year ended September 30, 2000, compared to
$8,283 of cash provided by such activities during the year ended September 30,
1999. This increase in net repayments was primarily due to decreased working
capital requirements as compared to the prior year.

Working capital at September 30, 2000 was $52,818. As of September 30,
2000, the Company had $52,735 of unused credit line available. The Company
periodically receives prepayments from customers to secure either more favorable
pricing or a desired delivery date. If the Company did not receive customer
prepayments, it believes its line of credit would provide sufficient liquidity
to meet working capital requirements.

The terms of the Company's amended line of credit agreement include
covenants that the Company must maintain. There are a number of standard
affirmative covenants, as well as restrictive negative covenants as to
additional borrowings and requirements for the Company to maintain certain
financial ratios. These restrictive covenants include a minimum tangible net
worth of $57.5 million plus 50% of each fiscal year's net earnings, a ratio of
total liabilities to tangible net worth and an interest coverage ratio. There
are additional limitations on mergers, acquisitions, disposal of assets, and
capital expenditures. At September 30, 2000 and 1999, the weighted average
interest rate payable on this line of credit was 9.2% and 8.0%, respectively.
The increase in the weighted average interest rate in fiscal year 2000 compared
to the prior year was due to increases in the bank's prime interest rates and
the Company's financial performance as measured in the amended line of credit.

RESULTS OF OPERATIONS -1999 COMPARED TO 1998

NET SALES

FISCAL FISCAL %
1999 1998 CHANGE CHANGE
---- ---- ------ ------
$292,679 $322,122 ($29,443) (9.1%)

The decrease was primarily the result of decreases in pre-emergence and
post-emergence equipment unit shipments. The agricultural economy has continued
to suffer as a result of low commodity prices, which has decreased demand for
equipment. Additionally, the farm supply industry is experiencing consolidation
with a resulting decrease in demand for equipment in the short-term. The changes
and factors described above are quantified as follows:

16
<PAGE>

o Post-emergence equipment net sales decreased $11,736 or 13.2%
during fiscal 1999 as compared to fiscal 1998. As a result,
sales of post-emergence equipment represented 26.2% and 27.5%
of net sales in fiscal 1999 and 1998, respectively.

o Pre-emergence equipment net sales decreased $20,190, or 15.8%
during fiscal 1999 compared to fiscal 1998. As a result sales
of pre-emergence equipment represented 36.7% and 39.6% of net
sales in fiscal 1999 and 1998, respectively.

o Sales of other product lines increased $2,483, primarily as
the result of the introduction of new product lines.

GROSS PROFIT

FISCAL FISCAL %
1999 1998 CHANGE CHANGE
---- ---- ------ ------
$77,991 $87,163 ($9,172) (10.5%)

Consolidated gross profit as a percent of net sales was 26.6% and 27.1
% for the years ended September 30, 1999 and 1998, respectively. Gross profit as
a percent of net sales was reduced during the fiscal year ending September 30,
1999 due to price reductions on old-style machines and increased discounts on
the current product line. Additionally, gross profit as a percentage of net
sales was negatively impacted in the prior fiscal year by warranty expense
related to older model equipment. Warranty expense for fiscal 1999 was
significantly lower as compared to the prior fiscal year.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (S,G&A)

FISCAL FISCAL %
1999 1998 CHANGE CHANGE
---- ---- ------ ------
$70,259 $74,003 ($3,744) (5.1%)

Compensation, employee benefits and employee-related expenses decreased
5.2% or $2,688. The largest single factor contributing to this decrease was a
decrease in commission expense, which is directly related to net sales.
Moreover, during the three months ended December 31, 1998, the Company initiated
efforts to contain S,G&A expenses through employment reductions and other cost
control efforts. These efforts reduced S,G&A expense during fiscal 1999. All
other S,G&A expenses decreased by 4.6% or $1,056. S,G&A expenses as a percent of
net sales were 24.0% and 23.0% in fiscals 1999 and 1998, respectively.

As a result of the above, operating income was $7,732 and $13,160 in
the years ended September 30, 1999 and 1998, respectively.

The effective tax rates in the years ended September 30, 1999 and 1998
were 32.4% and 33.5 %, respectively. The decrease in the effective tax rate was
primarily the result of a lower effective state tax rate and net operating loss
carryforward utilization by the Company's European subsidiary.

Included in the results of operations discussed above are the results
of the Company's Dutch subsidiary. This subsidiary experienced a $3,651 or 20.7%
increase in net sales from fiscal 1998 to fiscal 1999. This increase was
primarily the result of increased pre-emergence equipment sales due to an
increase in unit shipments. The increase in units shipped was the result of
increased efforts by the Company to penetrate the European market. Gross profit
for this subsidiary increased $1,442 or 52.8%

17
<PAGE>

in fiscal 1999, compared to the prior year. Gross profit as a percentage of
sales increased from 15.5% during fiscal 1998 to 19.6% in fiscal 1999. Pretax
income for this subsidiary was $610 during fiscal 1999 compared to $136 in the
prior year. The remaining components of the subsidiary's results were materially
unchanged from the prior year and had no material effect on the consolidated
result of operations

LIQUIDITY AND FINANCIAL POSITION - 1999 COMPARED TO 1998

Net cash used in operating activities was $3,554 in fiscal 1999
compared to net cash provided by operating activities of $9,789 in fiscal 1998.
The major reason for this change was changes in operating assets and liabilities
used cash of $13,058 and $5,788 in fiscals 1999 and 1998, respectively.
Increased investments in inventories used cash of $7,712 and $1,857 in fiscals
1999 and 1998, respectively. Inventories increased to $109,463 at September 30,
1999 from $101,751 at September 30, 1998. Inventories increased in fiscal 1999
primarily because sales did not meet expectations. Accounts payable used cash of
$4,261 in fiscal 1999 compared to providing cash of $71 in fiscal 1998. Accounts
payable as of September 30, 1999 was $10,859 compared to $15,120 at September
30, 1998. The decrease in accounts payable was related to the Company's attempt
to reduce its inventory for fiscal 2000. These uses of cash were partially
offset, primarily, by reductions in the Company's account receivables due to
reduced sales in the fourth quarter of 1999 compared to the prior-year period.
Accounts receivable provided $4,577 and $229 in fiscal 1999 and 1998,
respectively.

Cash used in investing activities in fiscal 1999 was $2,136 compared to
$6,187 in the prior-year period. The decrease in cash used by investing
activities was primarily the result of a reduction of investment in property,
plant and equipment and equipment rental to customers. In fiscal 1999,
investments in property, plant and equipment were $1,759 compared to $3,969 in
the prior year. The Company reduced its investment in property, plant and
equipment in fiscal 1999 compared to 1998 as part of its cost control program
and to conserve cash flow. The Company used $592 and $2,906 for investment in
rental equipment to customers in fiscal 1999 and 1998, respectively. The Company
experienced a much greater increase in equipment rented to customers during
fiscal 1998 than it did in fiscal 1999 as its customers looked to reduce their
capital expenditures.

Cash provided by financing activities was $5,812 in fiscal 1999,
compared to $3,739 used in the prior period. The net receipts of notes payable
and long-term debt were $8,283 during fiscal 1999 compared to a net repayment of
$5,425 during fiscal 1998. This increase in net borrowings was primarily due to
increased working capital requirements.

The terms of the Company's line of credit agreement include covenants
that the Company must maintain. There are a number of standard affirmative
covenants, as well as restrictive negative covenants as to additional borrowings
and requirements for the Company to maintain certain financial ratios. These
restrictive covenants include a minimum tangible net worth of $57.5 million plus
50% of each fiscal year's net earnings, a ratio of total liabilities to tangible
net worth and an interest coverage ratio. There are additional limitations on
mergers, acquisitions, disposal of assets, and capital expenditures. At
September 30, 1999 the Company was not in compliance with the interest coverage
ratio covenant with its banks. The banks modified the debt agreement as a result
of the non-compliance with this covenant. At September 30, 1999, the weighted
average interest rate payable on this line of credit was 8.0%.

18
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), effective for the
Company on October 1, 2000, establishes new standards for recognizing certain
derivatives as either assets or liabilities, and measuring those instruments at
fair value. The Company adopted this standard on October 1, 2000 and recorded
the fair value of its interest rate swap of $145 as an asset.

In December 1999, the Securities and Exchange Commission (SEC) staff
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB 101). SAB 101 summarizes certain SEC staff views in applying
generally accepted accounting principles in the United States of America to
revenue recognition in financial statements. SAB 101 will be effective for the
Company in the fourth quarter of fiscal year 2001. Ag-Chem is currently
evaluating the impact of SAB 101 on its financial condition and results of
operations.

FORWARD-LOOKING STATEMENTS

Certain statements in this Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements can be identified by the use of words
such as "will," "intends," "expects", "should", and similar language. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance, or achievements
of the Company or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These include factors that affect all businesses, as
well as matters specific to the Company and markets it serves.

For most companies operating in a global economy, monetary and fiscal
policies implemented in the U.S. and abroad have a significant impact on
economic growth, and, accordingly, demand for their products. For example, if
the Federal Reserve Board raises interest rates in fiscal 2001, the U.S. economy
could slow and negatively impact demand for the Company's products. If low
interest rates in Europe do not stimulate that economy or if government spending
is significantly reduced, the demand for Company products in that region could
be negatively impacted.

Political factors in the U.S. and abroad also have a major impact on
global companies. The Company anticipates significant growth in international
sales. International trade and fiscal policies implemented in the U.S. this year
could impact the Company's ability to grow its business abroad. U.S. foreign
relations with certain countries and any related restrictions imposed could also
have a significant impact on foreign sales. In addition, political instability
in regions such as Eastern Europe and South America make potential economic
growth difficult to predict for those countries.

Currency fluctuations are also a significant unknown for global
companies. If the U.S. dollar continues to strengthen against foreign
currencies, the Company's ability to realize price increases on sales could be
negatively impacted.

The rate of growth for the agricultural industry and the rate of
acceptance of new technologies that SOILTEQ offers also play a significant role
in the Company's results. The Company's products are an integral component of
these activities and as they increase or decrease in the U.S. or abroad, demand
for the Company's products may be significantly impacted.

19
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

F-1
<PAGE>

CONSOLIDATED BALANCE SHEETS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

-----------------------------------------------
<TABLE>
<CAPTION>
ASSETS
--------------------
| September 30, |
--------------------
2000 1999
-------- --------
CURRENT ASSETS:
<S> <C> <C>
Accounts receivable, less allowance for doubtful accounts
of $869 and $874, respectively (note 7) $ 14,752 $ 18,922
Notes receivable, current portion, and accrued interest
receivable (notes 5 and 7) 2,741 5,296
Inventories (notes 2 and 7) 89,319 109,463
Deferred income tax benefits, net (note 10) 5,800 4,400
Prepaid expenses and other current assets 353 628
-------- --------
Total current assets 112,965 138,709
-------- --------
38,570 42,470

PROPERTY, PLANT AND EQUIPMENT, NET (NOTES 3, 4 AND 8)

OTHER ASSETS:
Notes receivable, less current maturities (note 5 and 7) 1,419 7,046
Intangible and other assets, net of accumulated amortization
of $4,333 and $4,142, respectively (note 1) 2,745 1,704
-------- --------
Total other assets 4,164 8,750
-------- --------

TOTAL ASSETS $155,699 $189,929
======== ========

===========================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3
<PAGE>

CONSOLIDATED BALANCE SHEETS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------
| September 30, |
-----------------------
2000 1999
--------- ---------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current installments of long-term debt (note 8) $ 6,178 $ 6,381
Notes payable to banks (note 7) 17,265 35,225
Accounts payable 12,036 10,859
Checks outstanding in excess of cash balances 39 138
Customer prepayments 5,380 5,183
Accrued expenses (note 6) 17,695 13,262
Deferred revenue 527 1,359
Accrued income taxes 1,027 --
--------- ---------
Total current liabilities 60,147 72,407

LONG-TERM DEBT, LESS CURRENT INSTALLMENTS (NOTE 8) 23,854 44,299
--------- ---------
Total liabilities 84,001 116,706
--------- ---------

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value: Authorized, 40,000,000 shares; issued
and outstanding, 9,579,868 shares and, 9,595,468, respectively 96 96
Additional paid-in capital 1,116 1,274
Retained earnings 70,896 72,318
Accumulated other comprehensive loss (410) (465)
--------- ---------
Total stockholders' equity 71,698 73,223
--------- ---------

COMMITMENTS AND CONTINGENCIES (NOTES 12 AND 13)
Total liabilities and stockholders' equity $ 155,699 $ 189,929
========= =========

============================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

-------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------
| YEAR ENDED SEPTEMBER 30, |
-------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 298,841 $ 292,679 $ 322,122
Cost of sales 232,405 214,688 234,959
----------- ----------- -----------
Gross profit 66,436 77,991 87,163

Selling, general and administrative expenses 66,534 70,259 74,003
----------- ----------- -----------
Operating income (loss) (98) 7,732 13,160

Other income (expense):
Other income (note 11) 3,293 2,994 3,384
Interest expense (5,417) (5,713) (6,246)
----------- ----------- -----------
Earnings (loss) before income taxes (2,222) 5,013 10,298

Income tax expense (benefit) (note 10) (800) 1,625 3,450
----------- ----------- -----------
Net earnings (loss) ($ 1,422) $ 3,388 $ 6,848
----------- ----------- -----------
Earnings (loss) per share, basic and diluted ($ 0.15) $ 0.35 $ 0.71

Weighted average common shares outstanding, basic and
diluted 9,583,200 9,616,313 9,660,152

============================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

--------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
-----------
OTHER TOTAL
----- -----
ADDITIONAL RETAINED COMPREHENSIVE STOCKHOLDERS'
COMMON STOCK ---------- -------- ------------- -------------
SHARES AMOUNT PAID-IN CAPITAL EARNINGS LOSS EQUITY
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1997 9,670,268 $ 97 $ 2,188 $ 62,082 ($ 480) $ 63,887
Comprehensive income:
Net earnings -- -- -- 6,848 -- 6,848

Other comprehensive income -- -- -- -- 137 137
----------
Comprehensive income 6,985
Purchases and retirement of
previously issued shares (30,000) (1) (451) -- -- (452)
-----------------------------------------------------------------------------------------------
Balances at September 30, 1998 9,640,268 96 1,737 68,930 (343) 70,420

Comprehensive income:

Net earnings -- -- -- 3,388 -- 3,388

Other comprehensive loss -- -- -- -- (122) (122)
----------
Comprehensive income 3,266
Purchases and retirement of
previously issued shares (44,800) -- (463) -- -- (463)
-----------------------------------------------------------------------------------------------
Balances at September 30, 1999
9,595,468 96 1,274 72,318 (465) 73,223
</TABLE>

F-6
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(CONTINUED) AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
-----------
OTHER TOTAL
----- -----
ADDITIONAL RETAINED COMPREHENSIVE STOCKHOLDERS'
COMMON STOCK ---------- -------- ------------- ------------
SHARES AMOUNT PAID-IN CAPITAL EARNINGS LOSS EQUITY
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPREHENSIVE INCOME:

NET LOSS -- -- -- (1,422) -- (1,422)

OTHER COMPREHENSIVE INCOME -- -- -- -- 55 55

COMPREHENSIVE LOSS (1,367)

PURCHASES AND RETIREMENT OF
PREVIOUSLY ISSUED SHARES (15,600) -- (158) -- -- (158)
-----------------------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2000
9,579,868 $ 96 $ 1,116 $ 70,896 ($ 410) $ 71,698
===============================================================================================

=====================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-7
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

---------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------
| SEPTEMBER 30, |
2000 1999 1998
------- ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($1,422) $3,388 $6,848

ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization 5,457 6,726 8,330
Gain on sale of equipment (203) (210) (151)
(Increase) decrease in deferred income tax benefits (1,400) (400) 550
Income in equity investment (1,143) -- --
Loss on currency fluctuations 458 -- --
Changes in operating assets and liabilities:
Accounts receivable 4,170 4,577 229
Operating notes receivable 8,182 (2,568) (1,373)
Inventories 20,144 (7,712) (1,857)
Prepaid expenses and other current assets 188 76 264
Accounts payable 1,177 (4,261) 71
Customer prepayments and deferred revenue (635) (1,405) (334)
Accrued expenses 4,433 (1,304) (2,938)
Income taxes 1,114 (461) 150
------- ------ ------
Cash provided by (used in) operating activities 40,520 (3,554) 9,789

========================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-8
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------
| SEPTEMBER 30, |
------------------------------------
2000 1999 1998
-------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Retirement of short-term investments for industrial
revenue bond $--- $ 23 $ 722
Purchase of property and equipment (4,551) (1,759) (3,969)
Decrease (increase) in rental equipment 3,848 (592) (2,906)
Proceeds from sale of equipment 256 245 132
Equity investment (1,000) (50) --
Return on equity investment 400 -- --
Increase (decrease) in other assets 19 (3) (166)
-------- --------- ---------
Cash used in investing activities (1,028) (2,136) (6,187)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in checks outstanding in excess of
cash balances (99) (2,007) 2,138
Proceeds from notes payable - banks 121,911 187,580 155,150
Repayments on notes payable - banks (140,214) (163,707) (176,483)
Proceeds from line of credit borrowings 20,444 145,000 29,750
Repayments of line of credit borrowings (41,431) (160,590) (13,842)
Purchase of common stock (158) (464) (452)
-------- --------- ---------
Cash (used in) provided by financing activities (39,547) 5,812 (3,739)

Effect of exchange on cash and cash equivalents 55 (122) 137
-------- --------- ---------
Net change in cash -- -- --

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR -- -- --
-------- --------- ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR $--- $--- $---
-------- --------- ---------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 5,852 $ 6,276 $ 6,184
Income taxes 267 2,485 2,695
</TABLE>

F-9
<PAGE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company entered into capital leases for computer equipment that
aggregated to $789 during fiscal 1998.

==========================================

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-10
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES AND NATURE OF BUSINESS

PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of Ag-Chem Equipment Co., Inc. and its subsidiaries (the Company). All material
inter-company accounts and transactions have been eliminated in consolidation.

The Company maintains a 50% ownership interest in certain affiliates.
Investments in these affiliates are accounted for under the equity method, and
accordingly, the Company's share of these affiliates' net income (loss) is
recorded as other income in the consolidated statement of operations.

NATURE OF BUSINESS
The Company manufactures and distributes off-road equipment primarily
for agricultural fertilization, the application of crop protection chemicals,
and to a lesser extent, industrial waste treatment applications and other
industrial uses. The Company has positioned itself as the leading,
state-of-the-art manufacturer of agricultural application equipment, with an
emphasis on "Site-Specific Agriculture" and other high-tech hardware and
software product offerings. The Company generates a majority of its consolidated
revenues from its line of agricultural equipment which consists of
self-propelled, three and four-wheeled vehicles and related equipment for use in
the application of liquid and dry fertilizers and crop protection chemicals both
prior to planting crops ("pre-emergence") and after crops emerge from the ground
("post-emergence"). The Company has concluded that it operates in one operating
segment.

USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

CONCENTRATION OF CREDIT RISK
The Company extends credit primarily to agricultural cooperatives and
dealers in the United States and Canada, and to international distributors. The
Company also provides financing for the sales of equipment through notes
receivable and operating leases.

INVENTORIES
Inventories, except used equipment, are stated at the lower of cost or
market. Cost is determined using the last in, first out (LIFO) method for all
inventories other than used equipment and inventories at the company's European
subsidiary. Used equipment is valued at amounts that do not exceed estimated
fair market value less costs to sell.

F-11
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation and
amortization of all property, plant and equipment is computed on straight-line
and accelerated methods over the following estimated useful lives:

--------------------------------------------------- --------
Years
--------------------------------------------------- --------
Land improvements 15-20
--------------------------------------------------- --------
Buildings and improvements 15-40
--------------------------------------------------- --------
Rental property 5-40
--------------------------------------------------- --------
Machinery and equipment 5-10
--------------------------------------------------- --------
Rental equipment 5
--------------------------------------------------- --------
Transportation equipment 3-5
--------------------------------------------------- --------
Office equipment and furniture 5-10
--------------------------------------------------- --------
Computer equipment 2-5
--------------------------------------------------- --------

INTANGIBLE AND OTHER ASSETS
Intangible and other assets, net of accumulated amortization, consist
of the following:
<TABLE>
<CAPTION>
September 30,
---------------------
2000 1999
---------------------
<S> <C> <C>
Excess of purchase price over fair market value of net assets purchased $150 $654
Non-compete agreements 32 128
Deferred financing costs 325 201
Manufacturing and marketing rights 249 456
Equity investment 1,793 50
Other 196 215
---------------------
Total intangible and other assets $2,745 $1,704
=====================
</TABLE>

Intangible and other assets are capitalized at cost and, except for
deferred financing costs, are amortized on a straight-line basis over periods
ranging from two to ten years. Deferred financing costs are being amortized over
the term of the financing using the effective-interest method.

RESEARCH AND DEVELOPMENT EXPENDITURES
The Company's research and development expenditures are expensed as
incurred and totaled $11,109, $9,391 and $10,846 for the years ended September
30, 2000, 1999, and 1998, respectively.

INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

F-12
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

FOREIGN CURRENCY TRANSLATION
For the Company's Dutch operation, the Dutch guilder is considered the
functional currency. Assets and liabilities are translated using the exchange
rates in effect at the balance sheet date. Results of operations are translated
using the average exchange rates prevailing throughout the period. Translation
effects are accumulated in the accumulated other comprehensive income (loss)
caption in stockholders' equity.

EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share are computed based upon the weighted
average number of common shares outstanding during the respective years. The
Company has no potentially dilutive common shares.

PROFIT SHARING PLAN
The Company made contributions of $414 to its profit sharing plan in
fiscal 1998.

CASH AND CASH EQUIVALENTS
The Company considers temporary cash investments with original
maturities of three months or less from the date of purchase to be cash
equivalents.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company reviews its long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net undiscounted cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds future discounted cash flows to be generated by the asset. Long-lived
assets to be disposed of are valued at the lower of the carrying amount or fair
value less costs to sell.

In December 1999, the Securities and Exchange Commission (SEC) staff
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB 101). SAB 101 summarizes certain SEC staff views in applying
accounting principles generally accepted in the United States of America to
revenue recognition in financial statements. SAB 101 will be effective for the
Company in the fourth quarter of fiscal year 2001. Ag-Chem is currently
evaluating the impact of SAB 101 on its financial condition and results of
operations.

RECLASSIFICATIONS
Certain reclassifications have been made in the fiscal 1998 and fiscal
1999 financial statements to conform to the fiscal 2000 presentation.

F-13
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

2. INVENTORIES
Inventories consist of the following:

September 30,
------------------------------------
2000 1999
------------------------------------
Finished goods $32,599 $45,033
Resale parts 26,228 25,815
Work in process and raw materials 27,626 36,330
------------------------------------
Total 86,453 107,178
Less LIFO reserve (12,210) (12,077)
------------------------------------
Total 74,243 95,101
Used equipment 15,076 14,362
------------------------------------
Total inventories $89,319 $109,463
====================================

If the first in, first out (FIFO) method utilizing current costs had
been used for inventories valued using the LIFO method, net earnings would have
been higher by $133 at September 30, 2000 and lower by $71 at September 30,
1999.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

September 30,
----------------------------------
2000 1999
----------------------------------
Land $2,136 $1,338
Land improvements 4,022 3,893
Buildings and improvements 25,653 25,423
Machinery and equipment 20,726 20,532
Rental property 5,780 4,619
Rental equipment (note 4) 8,485 12,488
Transportation equipment 1,709 1,772
Office equipment and furniture 4,323 3,892
Computer equipment 10,940 10,748
----------------------------------
83,774 84,705
Less accumulated depreciation and amortization (45,204) (42,235)
----------------------------------
Net property, plant and equipment $38,570 $42,470
==================================

4. RENTAL EQUIPMENT
The Company leases equipment to customers through operating leases, the
majority of which are cancelable at the option of the lessee. The net investment
in equipment leased to customers under operating leases is as follows:

September 30,
------------------------------------
2000 1999
------------------------------------
Rental equipment $8,485 $12,488
Less accumulated depreciation (3,427) (3,874)
------------------------------------
Net rental equipment $5,058 $8,614
====================================

F-14
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

Future minimum rentals receivable under non-cancelable operating leases
at September 30, 2000 are as follows:

Year ending September 30, Amount
--------------------------------------- -----------------
2001 $430
2002 162
2003 72
-----------------
Total $664
=================

5. NOTES RECEIVABLE

The Company provides financing to customers with notes receivable,
which bear interest between 8.0% to 13.0%. These notes are payable in
installments over 1 to 7 years and are secured primarily with the equipment sold
to the customer. Principal maturity of notes receivable are as follows:

Year ending September 30, Amount
--------------------------------------- ------------------
2001 $2,627
2002 730
2003 377
2004 183
2005 129
------------------
Total $4,046
==================

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30,
------------------------------------
2000 1999
------------------------------------
Compensation $5,523 $6,471
Warranty (note 13) 6,202 1,165
Taxes other than income 1,116 897
Insurance 1,869 1,784
Interest 818 1,253
Other 2,167 1,692
------------------------------------
Total $17,695 $13,262
====================================

7. NOTES PAYABLE TO BANKS

In May 2000, the Company amended its line of credit agreement with four
banks. The Company was required to pay a commitment fee of 0.125 to 0.375
percent of the average daily unused portion of the line of credit. The amended
agreement required the Company to maintain a tangible net worth of $57.5 million
plus 50% of each fiscal year's net earnings, certain working capital, net worth
and debt to net worth ratios as well as limits the amount of capital
expenditures, distributions, interest and indebtedness. This line of credit
contains a covenant requiring lenders to approve mergers entered into by the
Company. The line of credit will be due upon the closing of the proposed merger
if the proper approvals are not obtained. (See note 16).

F-15
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

The line of credit agreements allow aggregate borrowings up to $70
million, of which $40 million is due in June 2002 and $30 million is payable in
June 2001. As of September 30, 2000, $12,950 was outstanding compared to $30,500
in the prior year. This line of credit is secured by certain assets of the
Company, including inventory, accounts receivable and notes receivable. The
weighted average interest rate on short-term borrowings outstanding was 11.0% as
of September 30, 2000.

The Company's European subsidiary utilizes a portion of Ag-Chem's line
of credit agreement. The subsidiary also had its own line of credit with a bank.
The agreement allowed aggregate borrowings up to 2.8 million Guilders
(approximately $1,100) which expires on June 28, 2001. Borrowings under this
line of credit bear interest at the one-month LIBOR rate plus 2.75 percent and
were guaranteed by Ag-Chem Equipment Co., Inc. Borrowings outstanding under
these facilities were $4,315 and $4,725 at September 30, 2000 and 1999,
respectively.

8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
------------------
2000 1999
------- -------
<S> <C> <C>
Industrial revenue bonds with the City of Jackson, MN payable in varying annual
amounts beginning in November 1998 through 2007 with interest from
4.5% to 6.0% $ 5,085 $ 5,585
Note payable in five annual installments of $3,000 commencing in April 1997
with interest payable semiannually at 6.83% 3,000 6,000
Note payable in seven annual installments of $2,143 commencing in April 1999
with interest payable semiannually at 7.25% 10,714 12,857
Brenwood mortgage payable in 120 monthly installments of $70 commencing in
November 2000 with interest payable monthly at 8.1%, final installment of $7,308
due on October 1, 2010 9,000 --
Grubbenvorst mortgage payable in 80 quarterly installments of $25 commencing in
March 2000 with interest payable monthly at 5.4% for the first five years and will
then be renegotiated based on current rates 1,921 --
Note payable under line of credit with four banks with interest at the banks'
reference rate due June 2000 (see note 7) -- 25,000
Miscellaneous notes payable 312 1,238
------- -------
30,032 50,680
Less current installments 6,178 6,381
------- -------
$23,854 $44,299
------- -------
</TABLE>

Scheduled annual maturity of long-term debts is as follows:

Years ending September 30, Amount
-------------------------------------- ---------------------
2001 $6,178
2002 2,933
2003 2,961
2004 3,000
2005 3,048
Thereafter 11,912

F-16
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

---------------------
Total $30,032
=====================

The Brenwood mortgage payable is secured by the Company's office
buildings located in the Brenwood Office Park in Minnetonka, Minnesota.

The Grubbenvorst mortgage payable is secured by the Company's
manufacturing facilities located in Grubbenvorst, Holland. The Grubbenvorst
mortgage payable is payable in quarterly installments of 63 Dutch Guilders
commencing March 1, 2000 for 20 years.

Industrial revenue bonds are secured by a mortgage on a manufacturing
plant in Jackson, Minnesota and a security interest in equipment purchased with
bond proceeds. The industrial revenue bonds are payable in escalating yearly
installments commencing December 1, 1998 through December 1, 2007 of $480 to
$765, respectively. The bonds bear interest, which escalates from 4.5 percent
for the December 1, 1998 installment to 6.0 percent for the December 1, 2007
installment. Under the terms of the agreement, the Company is required to meet
certain debt covenants.

Some notes payable contain certain restrictive covenants as to
additional borrowings and require the Company to maintain certain financial
ratios. Certain debt arrangements contain a covenant requiring lenders to
approve mergers entered into by the Company. These debt arrangements will be due
upon the closing of the proposed merger if the proper approvals are not
obtained. (See note 16).

9. FINANCIAL INSTRUMENTS
Most of the Company's financial instruments are recorded on the balance
sheet. Quoted market prices generally are not available for all of the Company's
financial instruments. Accordingly, fair values are based on judgments regarding
current economic conditions, risk characteristics of various financial
instruments and other factors. These estimates involve uncertainties and matters
of judgment, and therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

A description of the methods and assumptions used to estimate the fair
value of each class of the Company's financial instruments is as follows:

ACCOUNTS RECEIVABLE, NET
As the average collection period for these is less than 45 days, the carrying
amount approximates fair value.

NOTES RECEIVABLE
The fair values of fixed rate notes receivable are estimated by discounting
future cash flows using current discount rates that reflect the risks associated
with similar types of loans.

NOTE PAYABLE TO BANKS
The carrying amounts approximate fair value due to the short maturity of these
instruments.

ACCOUNTS PAYABLE, CHECKS OUTSTANDING IN EXCESS OF CASH BALANCES, AND ACCRUED
EXPENSES
The carrying amounts approximate fair value due to the short maturity
of these instruments.

F-17
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

LONG-TERM DEBT
The fair value of the Company's long-term debt was estimated based on the amount
of future cash flows associated with each instrument discounted using the
current rates offered to the Company for similar debt instruments of comparable
maturity.

The carrying amount and estimated fair values of the Company's
financial instruments at September 30, 2000 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------------------- ------------------------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Accounts receivable, net $14,752 $14,752 $18,922 $18,922
Notes receivable and accrued interest
receivable 4,160 4,163 12,342 10,330
Note payable to banks 17,265 17,265 35,225 35,225
Accounts payable 12,036 12,036 10,859 10,859
Checks outstanding in
excess of cash balances 39 39 138 138
Accrued expenses 17,695 17,695 13,262 13,262
Long-term debt 30,032 30,138 50,680 51,205
</TABLE>

The Company from time to time selectively uses derivative instruments
to reduce financial risk of interest rates and foreign currency. Interest rate
swap and foreign exchange agreements are made with highly rated financial
institutions. The Company has exposure associated with derivative agreements to
the extent these agreements have positive value. The Company does not have a
significant concentration of risk with any single party.

10. INCOME TAXES
Income tax (benefit) expense consists of the following:

Federal State Total
-------------- ------------- -------------
2000
CURRENT $481 $300 $781
DEFERRED (1,347) (234) (1,581)
-------------- ------------- -------------
TOTAL ($866) $66 ($800)
============== ============= =============
1999
Current $1,850 $315 $2,165

Deferred (470) (70) (540)
-------------- ------------- -------------
Total $1,380 $245 $1,625
============== ============= =============
1998
Current $2,750 $550 $3,300
Deferred 125 25 150
-------------- ------------- -------------
Total $2,875 $575 $3,450
============== ============= =============

F-18
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

The actual tax expense (benefit) for 2000, 1999 and 1998 differs from
the "expected" tax expense for those years (computed by applying the United
States federal corporate rate of 35 percent in earnings (loss) before income
taxes) as follows:

2000 1999 1998
------- ------- -------
Expected (benefit) tax, at statutory rates ($ 778) $ 1,755 $ 3,604
State taxes, net of federal tax effect 43 160 374
Decrease in valuation allowance for
deferred tax assets (100) (443) (50)
Tax benefit of foreign sales
corporation (46) (105) (135)
Goodwill, technology rights
Amortization 140 140 140
Research credit (50) (200) (500)
Other, net (9) 318 17
------- ------- -------
Actual tax (benefit) expense ($ 800) $ 1,625 $ 3,450
======= ======= =======

The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at September 30, 2000 and 1999 are as follows:

2000 1999
------- -------
Inventory $ 2,583 $ 2,863
Accrued warranty 2,207 253
Accrued vacation 530 512
Deferred revenue 203 508
Subsidiary's net operating tax loss carryforward 226 264
Foreign subsidiary net operating loss carryforward 177 245
Intangibles 243 401
Other 534 138
------- -------
Gross deferred tax assets 6,703 5,184

Fixed assets (284) --
Research and development expenditures (78) (144)
Other (99) (98)
------- -------
Gross deferred tax liabilities (461) (242)
------- -------

Valuation allowance (442) (542)
-------
Net deferred tax asset $ 5,800 $ 4,400
======= =======

A reconciliation of the valuation allowance for deferred taxes is as follows:

2000 1999
----- ------
Valuation allowance at beginning of year $ 542 $ 985

Decrease in valuation allowance (100) (443)
----- -----
Valuation allowance at end of year $ 442 $ 542
===== =====

The valuation allowance is necessary due to uncertainty over the future
utilization of the net operating loss carryforwards of Ag-Chem Manufacturing
Co., Inc. and Ag-Chem Europe B.V., subsidiaries of the Company.

F-19
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

11. OTHER INCOME
Other income consists of the following:

Years ended September 30,
--------------------------
2000 1999 1998
------ ------ ------
Interest income and finance charges $ 583 $1,082 $1,394
Gain on sale of property, plant and equipment 203 210 151
Income from rental properties, net of expenses 855 755 778
Income from equity investment 1,143 -- --
Miscellaneous income 509 947 1,061
------ ------ ------
Total $3,293 $2,994 $3,384
====== ====== ======

12. LEASES

Rent expense under operating leases amounted to $1,426, $1,056 and $900
for offices, warehouses and equipment, and $1,647, $1,869 and $1,823 for autos
and trucks in fiscal 2000, 1999, and 1998, respectively.

The following is a schedule, by year, of future minimum rental payments
required under operating leases that have initial or remaining non-cancelable
terms in excess of one year as of September 30, 2000. Commitments for autos and
trucks have not been included since most of these leases are cancelable upon
specified notice.

Years ending September 30, Amount
--------------------------------------- ---------------------
2001 $319
2002 131
2003 105
2004 83
2005 83
Thereafter 562
---------------------
Total $1,283
=====================

Several parts and service centers are leased under agreements
classified as operating leases. Most leases can be renewed at current market
rates for additional periods.

The Company leases its Benson, Minnesota facility under a long-term
lease, which expires in September 2012 with monthly lease payments of $7. The
Company has the right to purchase the property subject to the lease at any time
during the lease term for an amount not greater than $100 plus an amount,
defined by the lease agreement, which approximates the remaining outstanding
lease balance.

13. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in several legal actions at September 30, 2000,
the ultimate settlement of which is not expected to have a material effect on
the consolidated financial condition or consolidated results of the Company.

On September 11, 2000, the Company announced an axle replacement
product improvement program. It is presently estimated that it will cost between
$5,300 to $8,100 to replace the axles and

F-20
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

related components on certain RoGator models. In addition to the actual expense
incurred in the year, a reserve was set up in accordance with accounting
principles generally accepted in the United States of America in the amount of
$5,100. It is very early in the replacement process and the reserve will be
adjusted, if necessary, in future periods as more information on the actual
costs of replacement is collected. The Company has been informed by the supplier
that it will take until approximately August 2001 to produce all the replacement
axles. A settlement with the supplier of the component has not been reached at
this time.

14. RELATED PARTY TRANSACTIONS
In fiscal 2000, 1999, and 1998, legal services in the amount of $445,
$445 and $344, respectively, were provided by a law firm in which a director and
stockholder of the Company is a partner.

15. SEGMENT INFORMATION
For fiscal 2000, 1999, and 1998 the members of a farming co-op
accounted for 14.6%, 12.6% and 13.8% of net sales, respectively. Export sales
were 9.7%, 10.9% and 11.4% of net sales in fiscal 2000, 1999, and 1998,
respectively.

The Company has a subsidiary in the Netherlands. This subsidiary had
net sales of $21,168, $21,273 and $17,622 in fiscal 2000, 1999, and 1998,
respectively. Foreign income before tax for fiscal 2000, 1999, and 1998 were
$186, $610 and $136, respectively. Foreign currency transaction losses included
in net loss for fiscal 2000 totaled $521. Foreign currency transaction gains or
losses included in net earnings for fiscal 1999 and 1998 were not significant.

16. SUBSEQUENT EVENTS
On November 20, 2000, the Company announced it has agreed to be
acquired by AGCO Corporation (AGCO). AGCO, headquartered in Duluth, GA, is a
leading worldwide designer, manufacturer and distributor of agricultural
equipment. Subject to customary regulatory and Ag-Chem shareholder approval, the
transaction will merge the Company with a wholly owned subsidiary of AGCO. The
Company's shareholders will receive $25.80 per share consisting of no more than
$12.90 in AGCO stock and the remainder in cash.

F-21
<PAGE>

AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

17. SELECTED CONSOLIDATED FINANCIAL DATA - QUARTERLY (UNAUDITED)

NET EARNINGS EARNINGS
------------ (LOSS)
NET SALES GROSS PROFIT (LOSS) PER SHARE
-------- ------------ ------ ---------
2000
----
1ST QUARTER $ 58,708 $ 14,086 ($ 2,024) ($ .21)
2ND QUARTER 118,074 28,451 6,883 .72
3RD QUARTER 65,181 14,187 (1,384) (.14)
4TH QUARTER 56,878 9,712 (4,897) (.51)
-------- -------- -------- --------
TOTAL $298,841 $ 66,436 ($ 1,422) ($ .15)
======== ======== ======== =======

1999
----
1st Quarter $ 53,529 $ 15,476 ($ 356) ($ .04)
2nd Quarter 110,995 30,906 7,505 .78
3rd Quarter 71,504 17,783 (638) (.06)
4th Quarter 56,651 13,826 (3,123) (.33)
-------- -------- -------- --------
Total $292,679 $ 77,991 $ 3,388 $ .35
======== ======== ======== =======

F-22
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no changes in or disagreements with accountants for the
Company, which require reporting under this item.

21
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information about each of the
Company's directors and executive officers:
<TABLE>
<CAPTION>
Name Age Company Position Director Since
<S> <C> <C> <C>
Alvin E. McQuinn 69 Chairman of the Board, Chief Executive 1963
Officer and Director
Donald D. Pottinger 58 President and Director 1998
John C. Retherford 49 Senior Vice President, Chief Financial 1987
Officer and Director
Mary M. Jetland 39 Senior Vice President, SOILTEQ 1994
Steve M. Koep 50 Senior Vice President, Sales and Marketing n/a
Robert L. Hoffman(1) 72 Secretary and Director 1963
G. Waddy Garrett(1)(2) 59 Director 1983
A.J. (Al) Giese(1)(2) 52 Director 1996
DeWalt J. Willard, Jr.(1)(2) 69 Director 1998

(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</TABLE>

ALVIN E. MCQUINN has served as a Director and as Chairman of the Board
since 1963. He has served as Chief Executive Officer since 1976. From 1963 to
1976, and from 1988 to July 1997, Mr. McQuinn served as the Company's President.
Mr. McQuinn serves as President, Chief Executive Officer and a Director of
Lor*Al Products, Inc., Ag-Chem Sales Co., Inc., Ag-Chem Equipment Canada, Ltd.
and Ag-Chem Equipment International Inc., as Chairman and Chief Executive
Officer of Ag-Chem Manufacturing Co., Inc., and as a Supervisory Director of
Ag-Chem Europe B.V., all of which are subsidiaries of the Company. Mr. McQuinn
is the father of Mary M. Jetland.

DONALD D. POTTINGER has served as President of the Company since July
1997. From April 1996 to June 1997, Mr. Pottinger served as the Company's Vice
President of Sales, North America. From November 1994 to March 1996, Mr.
Pottinger was President and Chief Executive Officer of Hickson Kerley, Inc., a
fertilizer company based in Phoenix, Arizona. From January 1994 to November
1994, he worked as an independent consultant with small and mid-sized
agricultural and environmental companies. From 1992 to 1994, he was President of
the Minerals and Chemical Group of the J.R. Simplot Company, a diversified
mining, manufacturing and marketing organization based in Pocatello, Idaho.

JOHN C. RETHERFORD has served as Senior Vice President and Chief
Financial Officer since March 1994, as Vice President of Finance from 1986 to
March 1994 and as a Director since 1987. Mr. Retherford is also a Director and
Vice President of Lor*Al Products, Inc., Ag-Chem Manufacturing Co., Inc.,
Ag-Chem Sales Co., Inc., Ag-Chem Equipment Canada, Ltd. and Ag-Chem Equipment
International Inc., and a Supervisory Director of Ag-Chem Europe B.V.

22
<PAGE>

MARY M. JETLAND has served as Senior Vice President SOILTEQ, a division
of Ag-Chem Equipment Co., Inc., since April 2000 and as a Director of the
Company since February 1994. Ms. Jetland served as Senior Vice President,
Advanced Technology and Manufacturing from November 1998 to April 2000, as Vice
President, Site Specific Products from July 1998 to November 1998, as Vice
President of Manufacturing from March 1995 to November 1998, and as Vice
President of Corporate Services from February 1994 to July 1998. From 1989 to
February 1994, she served as the Manager of Corporate Services of the Company.
Ms. Jetland is also President and a Director of Ag-Chem Manufacturing Co., Inc.
Ms. Jetland is the daughter of Alvin E. McQuinn.

STEVE M. KOEP has served as Senior Vice President of Sales and
Marketing of Ag-Chem Equipment Co., Inc., since August 2000. Mr. Koep served as
the Company's Vice President of Marketing from October 1998 to August 2000 and
as the Company's Manager of Marketing Services from August 1992 to October 1998.
Prior to joining the Company in 1992, Mr. Koep spent 18 years with Case
Corporation in a wide range of sales and marketing positions, serving as
Director of North American Marketing Services from 1988 to 1992.

ROBERT L. HOFFMAN has served as a Director and the Secretary of the
Company since 1963. Since 1958, Mr. Hoffman has been an attorney with, and a
shareholder of, the law firm of Larkin, Hoffman, Daly & Lindgren, Ltd., based in
Bloomington, Minnesota. He is also a Director of WAM!NET Inc., a public
reporting company based in Bloomington, Minnesota, engaged in the business of
high-speed data transportation.

G. WADDY GARRETT has served as a Director of the Company since 1983.
Since 1978, he has served as the Chief Executive Officer and Chairman of the
Board of Alliance Agronomics, Inc., a Mechanicsville, Virginia holding company
consisting of various companies engaged in manufacturing, distribution and the
custom application of fertilizer. Mr. Garrett is also a Director of Reed
Jewelers, Inc., Willard Agri-Services of Frederick, Inc., located in Frederick,
Maryland, and County Bank of Chesterfield, as well as a publicly-held commercial
printing company, Cadmus Communications Corporation, located in Richmond,
Virginia.

A.J. (AL) GIESE has been a Director of the Company since 1996. He
currently serves as Co-President of the newly-formed agronomy joint venture,
Agriliance, LLC, the largest crop inputs entity in North America which is
jointly owned by Land O'Lakes, Inc., Cenex Harvest States Cooperatives and
Farmland Industries. From March 1998 to December 2000, Mr. Giese was President
of Cenex/Land O'Lakes Agronomy Company (a predecessor to Agriliance, LLC) and
from 1980 to 1998, he served as its Vice President and Senior Vice President.
Mr. Giese is a member of the Board of Directors and serves on the Executive
Committee of The Fertilizer Institute, Washington, D.C., an industry trade
association representing approximately 90 percent of domestic fertilizer
producers, manufacturers, retailers, trading firms and equipment manufacturers.
Mr. Giese also is a member of the Board of Directors of the International
Fertilizer Development Center, Muscle Shoals, Alabama and a member of the Board
of Directors of the Potash and Phosphate Institute, located in Atlanta, Georgia.

DEWALT J. WILLARD, JR. has been a Director of the Company since
December 1998. Since 1970, Mr. Willard has been a director and executive officer
of multiple business entities, located in the Eastern part of the United States,
including Willard Agri-Service of Frederick, Inc., located in Frederick,
Maryland and Willard Agri-Service of Lynch, Inc., located in Lynch, Maryland,
which are retail fertilizer and pesticide suppliers; Willard Distribution Co.,
Inc., located in Frederick, Maryland, a wholesale fertilizer dealer; and
AgVenture LLC, an agricultural data processing company located in

23
<PAGE>

Frederick, Maryland. In addition, Mr. Willard is a director and executive
officer of five retail automobile dealerships and three commercial real estate
management firms. Mr. Willard is a director of FCNB Bank, a publicly-held
banking entity located in Frederick, Maryland, and serves on numerous other
private company, hospital, association and non-profit boards of directors.

REPORTING UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires executive officers and directors of the Company, and persons who
beneficially own more than 10 percent of the Company's outstanding shares of
Common Stock, to file initial reports of ownership and reports of changes in
ownership of securities of the Company with the Securities and Exchange
Commission ("SEC"). Officers, directors and persons owning more than 10 percent
of the Company's outstanding Common Stock are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms filed. Based solely
on a review of the copies of such reports and amendments thereto furnished to or
obtained by the Company or written representations that no other reports were
required, the Company believes that during the fiscal year ended September 30,
2000, all filing requirements applicable to its directors, officers or
beneficial owners of more than 10 percent of the Company's outstanding shares of
Common Stock were complied with.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation earned for services
rendered in all capacities to the Company during the Company's fiscal years
ended September 30, 1998, 1999 and 2000 by Alvin E. McQuinn, Chairman of the
Board and Chief Executive Officer, Donald D. Pottinger, President, John C.
Retherford, Senior Vice President and Chief Financial Officer, and Mary M.
Jetland, Senior Vice President, Advanced Technology and Manufacturing. The
Company has no other executive officers.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------------------------- ------------
Securities
Name and Other Annual Underlying
Principal Position Year Salary Bonus Compensation(1) Options(2)
------------------------------ ------- ------- ------- ------- -------
($) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
Alvin E. McQuinn 2000 350,000 0 0 n/a
Chairman of the Board and 1999 337,700 0 0 n/a
Chief Executive Officer 1998 331,000 0 0 n/a

2000 224,000 0 0 n/a
Donald D. Pottinger 1999 204,000 0 0 4,000
President 1998 200,000 0 0 n/a

John C. Retherford 2000 173,000 10,000 0 n/a
Senior Vice President 1999 153,000 0 0 4,000
and Chief Financial Officer 1998 150,000 0 0 n/a

Mary M. Jetland 2000 147,500 0 0 n/a
Senior Vice President, 1999 127,500 0 0 4,000
Advanced Technology and 1998 120,000 0 0 n/a
Manufacturing
</TABLE>

24
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Steve M. Koep(3) 2000 130,000 0 0 n/a
</TABLE>

(1) Represents profit sharing contributions made by the Company on the
executive officer's behalf.
(2) Represents the number of phantom shares granted, effective December 1,
1998, to the named executive officer pursuant to the Ag-Chem Equipment
Co., Inc. Key Employee Phantom Stock Bonus Plan.
(3) Mr. Koep became an executive officer of the Company during fiscal year
2000.

25
<PAGE>

AGGREGATE OPTION/SAR EXERCISES IN THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 AND
OPTION/SAR VALUES AT SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Shares Acquired Underlying Unexercised In-the-Money Options/SARS
on Exercise Value Realized Options at FY-End(1) at FY-End(2)
Name --------------- -------------- ---------------------- -------------------------
------------------- (#) ($) (#) ($)
<S> <C> <C> <C> <C>
Alvin E. McQuinn n/a n/a n/a n/a
Donald D. Pottinger n/a n/a 4,000 0
John C. Retherford n/a n/a 4,000 0
Mary M. Jetland n/a n/a 4,000 0
Steve M. Koep n/a n/a 3000 0
</TABLE>

(1) The Company adopted the Ag-Chem Equipment Co., Inc. 1998 Key Employee
Phantom Stock Bonus Plan (the "Plan") effective December 1, 1998. Under the
Plan, a number of employees were granted "phantom shares." Such phantom
shares do not represent shares of the Company's common stock. Instead,
phantom shares are a method of calculating potential bonus payments to such
employees. All phantom shares will be redeemed on November 30, 2001 if not
sooner called. On the redemption date, the Company is required to make a
cash payment to the employee equal to the difference between the grant price
and the price of shares on the date of redemption. If the market price on
the date of redemption is lower than the grant price, no cash payment shall
be made. If the price of the Company's common stock reaches $31 15/16, the
Company has the right to call and redeem the phantom shares at that time.
The determination whether to call such phantom shares early will be made
solely by the Compensation Committee of the Board of Directors. Under the
Plan, if a participant's employment is terminated, all rights under the Plan
are forfeited unless such termination is the result of death or permanent
total disability, in which case the participant or his/her estate will
receive a cash payment based upon the market price of the Company's common
stock on the date of death or permanent total disability.
(2) All of the phantom shares have no value given that the market price of the
Company's common stock was less than the base price of the phantom stock
grant as of September 30, 2000.

COMPENSATION OF DIRECTORS

During the fiscal year ended September 30, 2000, the Company paid each
non-employee director a fee of $3,000 per meeting of the Board of Directors and
$500 per committee meeting. In addition, the Company paid each non-employee
director an annual retainer of $6,000.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee (the "Committee") has responsibility for all
elements of compensation of Ag-Chem officers, including the executive officers
named in the Summary Compensation Table. These elements consist of base salary,
profit sharing and incentive bonus. The Committee is also responsible for
setting the profit threshold for the Company's Profit Sharing Plan. During the
fiscal year ended September 30, 2000, the Committee was comprised of three
outside directors, G. Waddy Garrett, A.J. (Al) Giese and DeWalt J. Willard, Jr.,
who were not officers or employees of Ag-Chem or its subsidiaries and who were
not eligible to participate in any of the plans or programs that the Committee
administers. The Committee makes recommendations on compensation issues which
are subject to the approval of the Board of Directors.

COMPENSATION PHILOSOPHY

The Company has a "pay for performance" philosophy for its management
employees including officers. Compensation is dependent upon the annual and
long-term financial performance of the Company, as well as long-term shareholder
return. The Committee has established programs to provide

26
<PAGE>

a total compensation package that will attract highly qualified personnel to
Ag-Chem, motivate individuals to perform at optimum levels, reward outstanding
individual performance and retain valuable employees. The Company's compensation
plans can provide significant cash incentives to the Company's management.

BASE SALARY AND INCENTIVE BONUS

Salaries of the Company's management employees are based in part on the
compensation practices of other companies. The Committee has an independent
consulting firm review the total compensation of the officers to assess the
competitiveness of the Company's compensation program. The Company compares
itself to similarly-sized manufacturing companies located in the Midwest Region
of the United States. The Company's most direct competitors for executive
personnel are not necessarily the companies that would be included in a peer
group established to compare shareholder returns. Thus, the compensation peer
group is not the same as the peer group utilized in the Comparative Stock
Performance Graph included in this Annual Report. Salaries established by the
Committee are also based on the officer's scope of responsibilities, level of
experience and individual performance. Officers have an annual incentive bonus
opportunity with awards based on overall performance of the Company. The purpose
of this incentive is to maintain a strong correlation between annual pay and
overall Company financial results.

PROFIT SHARING

The purpose of the Company's Profit Sharing Plan is to encourage
employees to work in a manner, and suggest ideas, that will increase Company
profit. Profit sharing compensation varies and is based on pre-tax profits. If
the Company obtains an acceptable profit level (the "threshold"), then the
Company pays profit sharing compensation to all eligible employees. The
Committee annually sets the profit threshold for the Company and its
subsidiaries. Any increase in the threshold is based on the net income of the
previous year.

COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The compensation of Alvin E. McQuinn, Chairman of the Board and Chief
Executive Officer, is determined by the same process used for the other officers
of the Company. The only difference is that a higher portion of Mr. McQuinn's
total compensation is variable and at risk by being tied to the Company's
performance. The compensation paid to Mr. McQuinn is also based on subjective
non-financial Company performance measures which include continued growth,
customer satisfaction, management succession and overall quality of the Company.

In the fiscal year ended September 30, 2000, Mr. McQuinn received a
base salary of $350,000, with no discretionary bonus or profit sharing
contribution. Such determination was made by the Compensation Committee and
approved by the Company's Board of Directors. The determination not to pay Mr.
McQuinn a bonus under the Chairman's Annual Performance Incentive Plan was based
on the financial performance of the Company and was made by an independent
consulting firm engaged by the Company to evaluate compensation paid to other
chief executive officers in the Company's industry and to make recommendations
regarding compensation.

27
<PAGE>

DISCUSSION OF CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1,000,000
PER YEAR

As part of its responsibilities, the Committee reviews certain measures
of performance for the Company's Chairman of the Board and Chief Executive
Officer that it believes are critical to the overall performance of the Company.
Certain measures of performance, such as succession planning and strategic
planning, are vital to the long-term performance of the Company. Section 162(m)
of the Internal Revenue Code of 1986 (the "Code") prohibits the Company from
deducting as compensation expense, amounts exceeding $1,000,000 per year for
certain officers, unless the payment of such compensation is based on
pre-established objective performance goals approved by the Company's
shareholders. A significant portion of the Chairman of the Board and Chief
Executive Officer's compensation meets the Code's requirement for deductibility.
At the Annual Meeting of Shareholders held in 1995 shareholders approved the
"Chairman's Annual Performance Incentive Plan." The Company believes that
amounts payable to the Chairman of the Board and Chief Executive Officer under
that plan are deductible. A portion of the Chairman of the Board and Chief
Executive Officer's compensation, however, will continue to be based on
critical, subjective measures that may prohibit certain compensation from being
deductible under the Code. The Committee strongly believes that its ability to
evaluate the performance of the Chairman of the Board and Chief Executive
Officer on vital subjective performance measures outweighs the Code's limitation
on such deductibility.

The foregoing Compensation Committee Report shall not be deemed
incorporated by reference by any statement incorporating by reference this
Annual Report, or any portion thereof, into any filing under the Securities Act
of 1933 or under the Securities Exchange Act of 1934 and shall not otherwise be
deemed filed under such Acts.

G. Waddy Garrett
A.J. (Al) Giese
DeWalt J. Willard, Jr.
Ag-Chem Equipment Co., Inc. Compensation Committee

COMPARATIVE STOCK PERFORMANCE

The following graph compares the cumulative total shareholder return,
assuming $100 invested on September 30, 1995, as if such amount had been
invested in each of: (i) the Company's Common Stock; (ii) the stocks comprising
the Dow Jones Industrial Sector-Heavy Machinery; and (iii) the stocks included
in the Dow Jones Industrial Average. The graph assumes the reinvestment of all
dividends (the Company has never paid a dividend). Prices of the Company's
Common Stock are based upon closing bid prices the Nasdaq National Market.

28
<PAGE>

The historical stock price performance of the Company's Common Stock
shown below is not necessarily indicative of future performance. The graph below
shall not be deemed incorporated by reference by any statement incorporating by
reference this Annual Report, or any portion thereof, into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934 and shall
not otherwise be deemed filed under such Acts.

[PLOT POINTS GRAPH]
<TABLE>
<CAPTION>
9/30/95 9/30/96 9/30/97 9/29/98 9/30/99 9/30/00
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ag-Chem Equipment Co., Inc. 100 59 62 40 32 29
----------------------------------------------------------------------------------------------------------------
Dow Jones Industrial Sector-
Heavy Machinery 100 137 188 118 158 74
----------------------------------------------------------------------------------------------------------------
Dow Jones Industrial Average 100 126 173 174 233 247
----------------------------------------------------------------------------------------------------------------
</TABLE>

29
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of the close of business on November
17, 2000, the number of shares of Common Stock beneficially owned: (i) by each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock; (ii) by each director and director-nominee
of the Company; and (iii) by all executive officers and directors of the Company
as a group. Unless otherwise indicated, each of the following persons has sole
voting and investment power with respect to the shares of Common Stock set forth
opposite their respective names.

Number of Shares Beneficially Owned
Name and Address --------------------------------------
of Beneficial Owner Shares Percent
-------------------------------------- ------------- -------------
Alvin E. McQuinn
5,644,148(1) 58.92

Donald D. Pottinger 440 *

John C. Retherford 87,600(2) *

Mary M. Jetland 51,900(3) *

Steve M. Koep 1,800(4) *

Robert L. Hoffman 5,458,498(5) 56.98

G. Waddy Garrett 22,000(6) *

A.J. (Al) Giese 3,300(7) *

DeWalt J. Willard, Jr. 10,000 *

Wellington Management Company, LLP 589,000(8) 6.10

All directors and executive 5,826,388 60.81
officers as a group (nine persons)

* Less than 1%.
(1) Includes 5,453,298 shares owned by the Alvin E. McQuinn Revocable Trust
of which Mr. McQuinn is a co-trustee and 10,000 shares held by Mr.
McQuinn as custodian for grandchildren.
(2) Includes 62,450 shares owned jointly with Mr. Retherford's spouse and
16,734 shares held of record by Mr. Retherford's minor children. Also
includes 8,416 shares owned of record by two trusts of which Mr.
Retherford is trustee, as to all of which shares Mr. Retherford
disclaims beneficial ownership.
(3) Includes 27,000 shares held of record by Ms. Jetland's spouse and 100
shares held of record by Ms. Jetland's children, as to all of which Ms.
Jetland disclaims beneficial ownership.
(4) Includes 1,800 shares held jointly with Mr. Koep's spouse.
(5) Includes 5,453,298 shares owned by the Alvin E. McQuinn Revocable Trust
of which Mr. Hoffman is a co-trustee, and 1,200 shares held by Mr.
Hoffman's spouse.
(6) Includes 6,000 shares held of record by Mr. Garrett's spouse and 800
shares held of record by Mr. Garrett's children.
(7) Includes 3,300 shares held jointly with Mr. Giese's spouse.
(8) Based on the Schedule 13G filed on February 11, 2000 by Wellington
Management Company, LLP, an investment adviser and its wholly-owned
subsidiary, Wellington Trust Company, N.A., a holding company
(collectively "Wellington"). Represents the total number of shares
owned which may be deemed beneficially held as of December 31, 1999 by
Wellington in its capacity as an investment adviser which are held of
record by clients of Wellington.

30
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Robert L. Hoffman, a member of the Company's Board of Directors and its
Secretary, is an attorney with, and a shareholder of, the law firm of Larkin,
Hoffman, Daly & Lindgren, Ltd., which currently serves as legal counsel to the
Company and served as legal counsel to the Company during the fiscal year ended
September 30, 2000.

The Company has transactions in the ordinary course of business with
unaffiliated businesses of which certain of the Company's non-employee directors
are officers and/or directors. The Company does not consider the amounts
involved in such transactions material in relation to its business and believes
that any such amounts are not material in relation to the business of such other
businesses or the interests of the non-employee directors involved.

The Company sold its products and furnished services and repairs to its
products to certain companies owned by DeWalt J. Willard, Jr., a director of the
Company. Sales to three of such companies exceeded five percent of each such
company's annual sales. Such companies, and the amount of sales to each are as
follows: Willard Agri-Service of Frederick, Inc. ($394,000), Willard
Agri-Service of Mt. Airy, Inc. ($399,000) and Willard Agri-Service of Lynch,
Inc. ($382,000). The Company believes that such sales were at prices and on
terms comparable to its sales to unrelated companies.

31
<PAGE>

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

FINANCIAL STATEMENTS

The following consolidated financial statements of Ag-Chem Equipment
Co., Inc. are included herein at the indicated page numbers:

PAGE NO.
--------
o Independent Auditors' Report F-1

o Consolidated Balance Sheets as of September 30, 2000
and 1999 F-2

o Consolidated Statements of Operations for the Fiscal
Years Ended September 30, 2000, 1999 and 1998 F-4

o Consolidated Statements of Stockholders' Equity and
Comprehensive Income (Loss) for the Fiscal Years
Ended September 30, 2000, 1999 and 1998 F-5

o Consolidated Statements of Cash Flows for the Fiscal
Years Ended September 30, 2000, 1999 and 1998 F-6

o Notes to Consolidated Financial Statements F-8

FINANCIAL STATEMENT SCHEDULES

The following financial statement schedules of Ag-Chem Equipment Co.,
Inc. and subsidiaries are included herein at the indicated page number:

PAGE NO.
--------
o Independent Auditors' Report FS-1

o Schedule II - Valuation and Qualifying Accounts FS-2

32
<PAGE>

EXHIBITS

EXHIBIT NO. TITLE
----------- -----

3 Articles of incorporation and by-laws(1)

10.1 $45,000,000 Third Amended and Restated Long Term Revolving
Credit Agreement among Ag-Chem Equipment Co., Inc., certain
subsidiaries of Ag-Chem Equipment Co., In., as Multicurrency
Subsidiary Borrowers, The Institutions From Time to Time
Hereto, as Lenders, and The First National Bank of Chicago, as
Agent(4)

10.2 $45,000,000 Short Term Revolving Credit Agreement among
Ag-Chem Equipment Co., Inc., The Institutions From Time to
Time Hereto, as Lenders, and the First National Bank of
Chicago, as Agent(4)

10.3 $30,000,000 Short Term Revolving Credit Agreement among
Ag-Chem Equipment Co., Inc., NBD Bank, as Lender and Agent,
Harris Trust & Savings Bank, as Lender, Rabobank Nederland, as
Lender, dated June 12, 1998(3)

10.4 Long Term Amended and Restated Revolving Credit Notes(2)

10.5 Short Term Revolving Credit Notes(2)

10.6 Guaranty (Long Term) of Lor*Al Products, Inc.(2)

10.7 Guaranty (Long Term) of Ag-Chem Sales Co., Inc(2)

10.8 Guaranty (Long Term) of Ag-Chem Equipment Co., International
Corp.(2)

10.9 Guaranty (Long Term) of Ag-Chem Equipment Canada Ltd.(2)

10.10 Guaranty (Long Term) of Ag-Chem Manufacturing Co., Inc.
(formerly Soil Teq, Inc.)(2)

10.11 Guaranty (Long Term) of Ag-Chem Europe, B.V. (formerly
Kurstjens Terra-Gator, B.V.)(2)

10.12 Guaranty (Short Term) of Lor*Al Products, Inc.(2)

10.13 Guaranty (Short Term) of Ag-Chem Sales Co., Inc(2)

10.14 Guaranty (Short Term) of Ag-Chem Equipment Co., International
Corp.(2)

10.15 Guaranty (Short Term) of Ag-Chem Equipment Canada Ltd.(2)

10.16 Guaranty (Short Term) of Ag-Chem Manufacturing Co., Inc.
(formerly Soil Teq, Inc.)(2)

10.17 Guaranty (Short Term) of Ag-Chem Europe, B.V. (formerly
Kurstjens Terra-Gator, B.V.)(2)

10.18 Waiver and Amendment No. 1 To Third Amended and Restated Long
Term Revolving Credit Agreement and Short Term Revolving
Credit Agreement among Ag-Chem Equipment Co., Inc., The
Institutions, From Time to Time Hereto, as Lenders, and the
First National Bank of Chicago as Agent(5)

10.19 Waiver and Amendment No. 2 To Third Amended and Restated Long
Term Revolving Credit Agreement and Short Term Revolving
Credit Agreement among Ag-Chem Equipment Co., Inc., The
Institutions, From Time to Time Hereto, as Lenders, and the
Agent dated as of May 15, 2000(6)

10.20 Collateral Sharing Agreement dated as of May 15, 2000(6)

33
<PAGE>

10.21 Security Agreement between Ag-Chem Equipment Co., Inc. and
Bank One, NA dated as of May 15, 2000(6)

10.22 Guarantor Security Agreement between Ag-Chem Sales Co., Inc.
and Bank One, NA dated as of May 15, 2000(6)

10.23 Guarantor Security Agreement between Lor*al Products, Inc. and
Bank One, NA dated as of May 15, 2000(6)

10.24 Guarantor Security Agreement between Ag-Chem Manufacturing
Co., Inc. and Bank One, NA dated as of May 15, 2000(6)

10.25 Guarantor Security Agreement between Ag-Chem Equipment Canada,
Ltd. and Bank One, NA dated as of May 15, 2000(6)

10.26 Mass Mutual Waiver dated as of May 15, 2000(6)

10.27 Prudential Waiver dated as of May 15, 2000(6)

10.28 Agreement and Plan of Merger by and among AGCO Corporation,
AGRI Acquisition Corp. and Ag-Chem Equipment Co., Inc., dated
as of November 20, 2000.(7)

10.29 Voting Agreement dated as of November 20, 2000 among AGCO
Corporation, The Alvin E. McQuinn Revocable Trust and Alvin E.
McQuinn.(7)

10.30 Mortgage Note between Ag-Chem Equipment Co., Inc. and Allstate
Life Insurance Company(8)

10.31 Mortgage, Assignment of Leases, Rents and Contracts, Security
Agreement and Fixture Filing Between Ag-Chem Equipment Co.,
Inc. as Mortgagor, and Allstate Life Insurance Company as
Mortgagee(8)

10.32 Assignment of Leases and Rents between Ag-Chem Equipment Co.,
Inc. and Allstate Life Insurance Company(8)

10.33 Recourse Indemnity Agreement between Ag-Chem Equipment Co.,
Inc. and Allstate Life Insurance Company(8)

10.34 Environmental Indemnity Agreement between Ag-Chem Equipment
Co., Inc. and Allstate Life Insurance Company(8)

10.35 Security Agreement between Ag-Chem Equipment Co., Inc. and
Allstate Life Insurance Company(8)

10.36 Amendment No. 3 to Third Amended and Restated Long Term
Revolving Credit Agreement among Ag-Chem Equipment Co., Inc.,
The Institutions, From Time to Time Hereto, as Lenders, and
the First National Bank of Chicago as Agent(8)

10.37 Member Control Agreement of Redball, LLC between Ag-Chem
Equipment Co., Inc. and C.A.P., Inc.(8)

10.38 Contribution Agreement by and among Redball, LLC, C.A.P., Inc.
and Steven Claussen and Robert Claussen(8)

10.39 Side Agreement between Ag-Chem Equipment Co., Inc. and
Redball, LLC (8)

10.41 Lease-Business Premises between Claussen Properties, Inc. and
Redball, LLC(8)

34
<PAGE>

10.42 Contribution Agreement by and between Redball, LLC, and
Ag-Chem Equipment Co., Inc.(8)

11.1 Statement of Computation of Earnings per Share(8)

21 Subsidiaries of the Company(8)

23 Independent Auditors' Consent(8)

------------------------------

(1) Incorporated by reference to the Company's September 30, 1994 Form 10/A.
(2) Incorporated by reference to the Company's June 30, 1997 Form 10Q.
(3) Incorporated by reference to the Company's June 30, 1998 Form 10Q.
(4) Incorporated by reference to the Company's June 30, 1999 Form 10Q.
(5) Incorporated by reference to the Company's September 30, 1999 Form 10K.
(6) Incorporated by reference to the Company's March 31, 2000 Form 10Q.
(7) Incorporated by reference to the Company's November 20, 2000 Form 8K.
(8) Filed herewith.

REPORTS ON FORMS 8-K

The Company did not file any reports on Form 8-K during the fourth
quarter of the fiscal year ending as of September 30, 2000.

35
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

AG-CHEM EQUIPMENT CO., INC.

BY: /s/ Alvin E. McQuinn
--------------------
December 14, 2000 Alvin E. McQuinn

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints Alvin E. McQuinn and/or John C. Retherford as thy true and lawful
attorney-in-fact and agent with the full power of substitution for
aforementioned persons in name, place, and stead, in any and all capacities, to
sign any or all amendments to this Annual Report on Form 10-K, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities & Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and duty requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their substitute or substitutes, can lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Alvin E. McQuinn Chairman of the Board, Chief Executive Officer December 14, 2000
-------------------------- (Principal Executive Officer) and Director
Alvin E. McQuinn

/s/ Don Pottinger President and Director December 14, 2000
--------------------------
Don Pottinger

/s/ John C. Retherford Senior Vice President, Chief Financial Officer December 14, 2000
-------------------------- (Principal Financial and Accounting Officer), and Director
John C. Retherford

/s/ Robert L. Hoffman Secretary and Director December 14, 2000
--------------------------
Robert L. Hoffman

/s/ G. Waddy Garrett Director December 14, 2000
--------------------------
G. Waddy Garrett

/s/ Mary M. Jetland Senior Vice President, SOILTEQ December 14, 2000
-------------------------- and Director
Mary M. Jetland

/s/ A.J. (Al) Giese Director December 14, 2000
--------------------------
A.J. (Al) Giese

/s/ Dewalt J. Willard, Jr. Director December 14, 2000
--------------------------
Dewalt J. Willard, Jr.
</TABLE>

36
<PAGE>

INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL
STATEMENT SCHEDULE

The Board of Directors and Stockholders
Ag-Chem Equipment Co., Inc.

Under date of November 9, 2000, except as to note 16 which is as of November 20,
2000, we reported on the consolidated balance sheets of Ag-Chem Equipment Co.,
Inc. and subsidiaries as of September 30, 2000 and 1999 and the related
consolidated statements of operations, stockholders' equity and comprehensive
income (loss), and cash flows for each of the years in the three-year period
ended September 30, 2000, as contained in the annual report on Form 10-K for the
fiscal year 2000. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

KPMG LLP

Minneapolis, Minnesota
November 9, 2000

FS-2
<PAGE>

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)

-----------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING OF COSTS AND FROM AT END OF
DESCRIPTION PERIOD EXPENSES RESERVES PERIOD
----------- ------------ ---------- ---------- ---------

ALLOWANCES FOR POSSIBLE LOSSES
ON ACCOUNTS RECEIVABLE:
<S> <C> <C> <C> <C>
Year-end September 30, 2000 $874 $486 ($491)(a) $869
Year-end September 30, 1999 $730 $404 ($260)(a) $874
Year-end September 30, 1998 $576 $300 ($146)(a) $730

ALLOWANCES FOR POSSIBLE LOSSES
ON ACCRUED WARRANTY:
Year-end September 30, 2000 $1,165 $8,497 ($3,460)(b) $6,202
Year-end September 30, 1999 $1,537 $3,327 ($3,699)(b) $1,165
Year-end September 30, 1998 $1,385 $4,530 ($4,378)(b) $1,537

--------------------------------------

(a) Bad debt write-offs

(b) Actual warranty claims
</TABLE>

FS-3