Second Quarter Net Income per Share of $1.77 on Sales of $2.8
Billion
DULUTH, Ga.--(BUSINESS WIRE)--Jul. 29, 2014--
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment, reported net sales of
approximately $2.8 billion for the second quarter of 2014, a decrease of
approximately 9.8% compared to net sales of approximately $3.0 billion
for the second quarter of 2013. Net income for the second quarter of
2014 was $1.77 per share. This result compares to net income of $2.15
per share for the second quarter of 2013. Excluding favorable currency
translation impacts of approximately 0.3%, net sales in the second
quarter of 2014 decreased approximately 10.1% compared to the second
quarter of 2013.
Net sales for the first six months of 2014 were approximately $5.1
billion, a decrease of approximately 6.7% compared to the same period in
2013. Excluding the unfavorable impact of currency translation of
approximately 0.7%, net sales for the first six months of 2014 decreased
approximately 6.0% compared to the same period in 2013. For the first
six months of 2014, net income was $2.79 per share. This result compares
to net income of $3.34 per share for the first six months of 2013.
Second Quarter Highlights
-
Regional sales results(1): North America -12.2%,
Europe/Africa/ Middle East (“EAME”) -8.6%, South America -10.7%,
Asia/Pacific (“APAC”) -13.3%
-
Regional operating margin performance: EAME 12.4%, North America
13.9%, South America 6.8%, APAC -3.2%
-
Full year earnings per share guidance reduced to approximately $5.00
-
Share repurchase program reduces outstanding shares by 4.2 million
during 1H 2014
(1)Excludes currency translation impact. See
reconciliation of Non-GAAP measures in appendix.
"In the second quarter, AGCO faced more challenging market conditions
which resulted in a sales decline of about 10%," stated Martin
Richenhagen, AGCO’s Chairman, President and Chief Executive Officer.
"Falling commodity prices negatively impacted farmer sentiment, and
demand for agricultural equipment softened across end markets in North
America and Europe while remaining weak in South America. Despite the
difficult operating environment, our increased emphasis on new products
with advanced technologies has been well received by our customers, and
our retail market performance continues to be positive. AGCO experienced
weakening order trends throughout the second quarter, and in response,
the Company took aggressive actions to cut production, manage inventory
levels, reduce operating expenses and generate cash flow. We will
maintain these priorities during the third and fourth quarters.”
Market Update
Industry Unit Retail Sales
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Tractors
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Combines
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Change from
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Change from
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Six months ended June 30, 2014
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Prior Year Period
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Prior Year Period
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North America(1)
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(2)%
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(15)%
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South America
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(18)%
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(25)%
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Western Europe
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(6)%
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(4)%
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(1) Excludes compact tractors.
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“The outlook for crop production has improved dramatically during the
second quarter,” stated Mr. Richenhagen. "Warm dry weather across the
U.S. allowed farmers to complete their planting and be in position for
attractive yields. Favorable growing conditions in most of Western
Europe are resulting in forecasts for improved 2014 harvests. The
potential for near record crops in North and South America as well as
Europe is producing higher estimates for end of year grain inventories
and is driving down soft commodity prices. With prospects for lower farm
income impacting farmer sentiment, we are experiencing softer industry
equipment demand in all major markets. Industry demand in North America
has weakened with declines in sales of high-horsepower tractors,
combines and sprayers, partially offset by growth in the
lower-horsepower categories due to improved conditions in the region's
dairy and livestock sectors. Retail sales of farm equipment remains
mixed across Western Europe, with weakness in demand from the arable
farming sector. Industry sales have remained soft in France and weakened
in Germany while modest recovery was experienced in the United Kingdom.
Delays with government financing programs and weak demand from sugar
producers negatively impacted industry sales in Brazil. Our long-term
view remains optimistic as the growing population, increasing emerging
market protein consumption and biofuels use are expected to positively
support grain demand and healthy growth in our industry."
Regional Results
AGCO Regional Net Sales (in millions)
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% change from
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2013 due to
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% change
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currency
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Three Months Ended June 30,
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2014
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2013
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from 2013
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translation(1)
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North America
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$
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686.2
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$
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788.9
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(13.0)%
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(0.8)%
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South America
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440.2
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540.0
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(18.5)%
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(7.8)%
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Europe/Africa/Middle East
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1,521.9
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1,599.0
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(4.8)%
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3.8%
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Asia/Pacific
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102.0
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120.3
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(15.2)%
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(1.9)%
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Total
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$
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2,750.3
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$
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3,048.2
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(9.8)%
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0.3%
|
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% change from
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|
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2013 due to
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% change
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currency
|
Six Months Ended June 30,
|
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2014
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|
|
2013
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from 2013
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translation(1)
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North America
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$
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1,333.7
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$
|
1,413.1
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(5.6)%
|
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(1.1)%
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South America
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|
|
793.8
|
|
|
|
1,005.7
|
|
|
|
(21.1)%
|
|
|
(11.0)%
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Europe/Africa/Middle East
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2,757.8
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|
2,792.2
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(1.2)%
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3.3%
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Asia/Pacific
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|
|
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198.4
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240.3
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(17.4)%
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(2.5)%
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Total
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$
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5,083.7
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$
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5,451.3
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(6.7)%
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(0.7)%
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(1) See Footnotes for additional disclosures
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North America
AGCO’s North American sales declined 4.5% in the first half of 2014
compared to the first half of 2013, excluding the impact of unfavorable
currency translation. The most significant decreases were in
high-horsepower tractors and implements with growth in small tractor
sales partially offsetting the declines. Lower sales, a weaker sales mix
and lower production volumes contributed to a decline in income from
operations of $42.7 million for the first six months of 2014 compared to
the same period in 2013.
South America
South American net sales decreased 10.1% in the first six months of 2014
compared to the first six months of 2013, excluding the negative impact
of currency translation. Lower sales in Brazil produced most of the
decrease. Income from operations decreased $50.2 million for the first
half of 2014 compared to the same period in 2013 due to lower sales and
production volumes as well as increased expenditures on engineering.
EAME
Net sales, excluding favorable currency translation impacts, decreased
4.5% in AGCO’s EAME region in the first half of 2014 compared to the
same period in 2013 due to softer market conditions. Sales declines in
France, Germany and Austria were partially offset by growth in Africa
and Turkey. EAME operating income increased $4.4 million in the first
six months of 2014 compared to the same period in 2013. Improved factory
productivity and the benefit of cost reduction initiatives were
partially offset by the negative impact of lower sales and production
levels.
Asia/Pacific
Excluding the negative impact of currency translation, net sales in the
Asia/Pacific region declined 14.9% in the first six months of 2014
compared to the same period of 2013. Income from operations in the
Asia/Pacific region declined $9.3 million in the first half of 2014,
compared to the same period in 2013, due to lower sales and increased
market development costs in China.
Outlook
Global industry demand is softening compared to 2013 and declines are
anticipated across all major global agricultural markets, particularly
in the professional producer segment. AGCO is targeting earnings per
share of approximately $5.00 for the full year of 2014. Net sales are
expected to range from $10.1 billion to $10.3 billion. The negative
impact of lower sales and production volumes on gross margins, increased
engineering expenditures to meet Tier 4 final emission requirements and
market development expenses are expected to be partially offset by
improved productivity and cost reduction initiatives.
“We are balancing near-term cost reductions with continued investment in
longer-term growth initiatives,” continued Mr. Richenhagen. "We remain
positioned to focus on operational improvements and additional
investment in new products. The short-term cost reduction actions and
production cuts should see us through the current market softness, while
our strategic investments should position us for profitable growth as
market conditions improve.”
* * * * *
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, July 29, 2014. The
Company will refer to slides on its conference call. Interested persons
can access the conference call and slide presentation via AGCO’s website
at www.agcocorp.com
in the “Events” section on the “Company/Investors” page of our website.
A replay of the conference call will be available approximately two
hours after the conclusion of the conference call for twelve months
following the call. A copy of this press release will be available on
AGCO’s website for at least twelve months following the call.
* * * * *
Safe Harbor Statement
Statements that are not historical facts, including the projections of
earnings per share, sales, industry demand, market conditions, grain
inventories, crop production, commodity prices, margin improvements,
investments in product development, operational and financial
initiatives, production volumes, gross margins, market development and
performance, engineering expenses, and general economic conditions, are
forward-looking and subject to risks that could cause actual results to
differ materially from those suggested by the statements. The following
are among the factors that could cause actual results to differ
materially from the results discussed in or implied by the
forward-looking statements.
-
Our financial results depend entirely upon the agricultural industry,
and factors that adversely affect the agricultural industry generally,
including declines in the general economy, increases in farm input
costs, lower commodity prices, lower farm income and changes in the
availability of credit for our retail customers, will adversely affect
us.
-
A majority of our sales and manufacturing take place outside the
United States, and, as a result, we are exposed to risks related to
foreign laws, taxes, economic conditions, labor supply and relations,
political conditions and governmental policies. These risks may delay
or reduce our realization of value from our international operations.
-
Most retail sales of the products that we manufacture are financed,
either by our joint ventures with Rabobank or by a bank or other
private lender. Our joint ventures with Rabobank, which are controlled
by Rabobank and are dependent upon Rabobank for financing as well,
finance approximately 50% of the retail sales of our tractors and
combines in the markets where the joint ventures operate. Any
difficulty by Rabobank to continue to provide that financing, or any
business decision by Rabobank as the controlling member not to fund
the business or particular aspects of it (for example, a particular
country or region), would require the joint ventures to find other
sources of financing (which may be difficult to obtain), or us to find
another source of retail financing for our customers, or our customers
would be required to utilize other retail financing providers. As a
result of the recent economic downturn, financing for capital
equipment purchases generally has become more difficult in certain
regions and in some cases, was expensive to obtain. To the extent that
financing is not available or available only at unattractive prices,
our sales would be negatively impacted.
-
Both AGCO and our retail finance joint ventures have substantial
account receivables from dealers and end customers, and we would be
adversely impacted if the collectability of these receivables was not
consistent with historical experience; this collectability is
dependent upon the financial strength of the farm industry, which in
turn is dependent upon the general economy and commodity prices, as
well as several of the other factors listed in this section.
-
We have experienced substantial and sustained volatility with respect
to currency exchange rate and interest rate changes, including
uncertainty associated with the Euro, which can adversely affect our
reported results of operations and the competitiveness of our products.
-
Our success depends on the introduction of new products, particularly
engines that comply with emission requirements, which requires
substantial expenditures.
-
Our production levels and capacity constraints at our facilities,
including those resulting from plant expansions and systems upgrades
at our manufacturing facilities, could adversely affect our results.
-
Our expansion plans in emerging markets, including establishing a
greater manufacturing and marketing presence and growing our use of
component suppliers, could entail significant risks.
-
We depend on suppliers for components, parts and raw materials for our
products, and any failure by our suppliers to provide products as
needed, or by us to promptly address supplier issues, will adversely
impact our ability to timely and efficiently manufacture and sell
products. We also are subject to raw material price fluctuations,
which can adversely affect our manufacturing costs.
-
We face significant competition, and if we are unable to compete
successfully against other agricultural equipment manufacturers, we
would lose customers and our net sales and profitability would decline.
-
We have a substantial amount of indebtedness, and, as result, we are
subject to certain restrictive covenants and payment obligations that
may adversely affect our ability to operate and expand our business.
Further information concerning these and other factors is included in
AGCO’s filings with the Securities and Exchange Commission, including
its Form 10-K for the year ended December 31, 2013 and subsequent Form
10-Qs. AGCO disclaims any obligation to update any forward-looking
statements except as required by law.
* * * * *
About AGCO
AGCO, Your Agriculture Company, (NYSE: AGCO), is a global leader focused
on the design, manufacture and distribution of agricultural machinery.
AGCO supports more productive farming through a full line of tractors,
combines, hay tools, sprayers, forage equipment, tillage, implements,
grain storage and protein production systems, as well as related
replacement parts. AGCO products are sold through five core machinery
brands, Challenger®, Fendt®, Massey Ferguson®, Valtra® and GSI®, and are
distributed globally through 3,100 independent dealers and distributors
in more than 140 countries worldwide. Retail financing is available
through AGCO Finance for qualified purchasers. Founded in 1990, AGCO is
headquartered in Duluth, Georgia, USA. In 2013, AGCO had net sales of
$10.8 billion. For more information, see http://www.agcocorp.com.
# # # # #
Please visit our website at www.agcocorp.com.
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AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(unaudited and in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
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|
December 31, 2013
|
ASSETS
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Current Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
323.3
|
|
|
|
|
$
|
1,047.2
|
|
Accounts and notes receivable, net
|
|
|
|
1,233.4
|
|
|
|
|
940.6
|
|
Inventories, net
|
|
|
|
2,437.9
|
|
|
|
|
2,016.1
|
|
Deferred tax assets
|
|
|
|
219.3
|
|
|
|
|
241.2
|
|
Other current assets
|
|
|
|
319.7
|
|
|
|
|
272.0
|
|
Total current assets
|
|
|
|
4,533.6
|
|
|
|
|
4,517.1
|
|
Property, plant and equipment, net
|
|
|
|
1,603.5
|
|
|
|
|
1,602.3
|
|
Investment in affiliates
|
|
|
|
448.2
|
|
|
|
|
416.1
|
|
Deferred tax assets
|
|
|
|
23.6
|
|
|
|
|
24.4
|
|
Other assets
|
|
|
|
128.2
|
|
|
|
|
134.6
|
|
Intangible assets, net
|
|
|
|
541.6
|
|
|
|
|
565.6
|
|
Goodwill
|
|
|
|
1,190.6
|
|
|
|
|
1,178.7
|
|
Total assets
|
|
|
|
$
|
8,469.3
|
|
|
|
|
$
|
8,438.8
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
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|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
$
|
94.4
|
|
|
|
|
$
|
110.5
|
|
Convertible senior subordinated notes
|
|
|
|
151.5
|
|
|
|
|
201.2
|
|
Accounts payable
|
|
|
|
948.7
|
|
|
|
|
960.3
|
|
Accrued expenses
|
|
|
|
1,375.1
|
|
|
|
|
1,389.2
|
|
Other current liabilities
|
|
|
|
221.0
|
|
|
|
|
150.8
|
|
Total current liabilities
|
|
|
|
2,790.7
|
|
|
|
|
2,812.0
|
|
Long-term debt, less current portion
|
|
|
|
979.2
|
|
|
|
|
938.5
|
|
Pensions and postretirement health care benefits
|
|
|
|
234.3
|
|
|
|
|
246.4
|
|
Deferred tax liabilities
|
|
|
|
241.8
|
|
|
|
|
251.2
|
|
Other noncurrent liabilities
|
|
|
|
160.9
|
|
|
|
|
145.9
|
|
Total liabilities
|
|
|
|
4,406.9
|
|
|
|
|
4,394.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
AGCO Corporation stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
0.9
|
|
|
|
|
1.0
|
|
Additional paid-in capital
|
|
|
|
823.0
|
|
|
|
|
1,117.9
|
|
Retained earnings
|
|
|
|
3,649.2
|
|
|
|
|
3,402.0
|
|
Accumulated other comprehensive loss
|
|
|
|
(445.3
|
)
|
|
|
|
(510.7
|
)
|
Total AGCO Corporation stockholders’ equity
|
|
|
|
4,027.8
|
|
|
|
|
4,010.2
|
|
Noncontrolling interests
|
|
|
|
34.6
|
|
|
|
|
34.6
|
|
Total stockholders’ equity
|
|
|
|
4,062.4
|
|
|
|
|
4,044.8
|
|
Total liabilities and stockholders’ equity
|
|
|
|
$
|
8,469.3
|
|
|
|
|
$
|
8,438.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
|
|
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2014
|
|
|
|
2013
|
Net sales
|
|
|
|
$
|
2,750.3
|
|
|
|
|
$
|
3,048.2
|
Cost of goods sold
|
|
|
|
2,118.8
|
|
|
|
|
2,337.9
|
Gross profit
|
|
|
|
631.5
|
|
|
|
|
710.3
|
Selling, general and administrative expenses
|
|
|
|
262.3
|
|
|
|
|
279.7
|
Engineering expenses
|
|
|
|
92.5
|
|
|
|
|
91.4
|
Amortization of intangibles
|
|
|
|
10.0
|
|
|
|
|
12.1
|
Income from operations
|
|
|
|
266.7
|
|
|
|
|
327.1
|
Interest expense, net
|
|
|
|
15.7
|
|
|
|
|
13.5
|
Other expense, net
|
|
|
|
12.9
|
|
|
|
|
10.2
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
|
238.1
|
|
|
|
|
303.4
|
Income tax provision
|
|
|
|
83.2
|
|
|
|
|
104.4
|
Income before equity in net earnings of affiliates
|
|
|
|
154.9
|
|
|
|
|
199.0
|
Equity in net earnings of affiliates
|
|
|
|
11.1
|
|
|
|
|
14.1
|
Net income
|
|
|
|
166.0
|
|
|
|
|
213.1
|
Net loss attributable to noncontrolling interests
|
|
|
|
2.2
|
|
|
|
|
0.6
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
|
$
|
168.2
|
|
|
|
|
$
|
213.7
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
1.79
|
|
|
|
|
$
|
2.20
|
Diluted
|
|
|
|
$
|
1.77
|
|
|
|
|
$
|
2.15
|
Cash dividends declared and paid per common share
|
|
|
|
$
|
0.11
|
|
|
|
|
$
|
0.10
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
93.9
|
|
|
|
97.3
|
Diluted
|
|
|
|
95.1
|
|
|
|
99.3
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
|
|
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2014
|
|
|
|
2013
|
Net sales
|
|
|
|
$
|
5,083.7
|
|
|
|
|
$
|
5,451.3
|
Cost of goods sold
|
|
|
|
3,937.3
|
|
|
|
|
4,207.9
|
Gross profit
|
|
|
|
1,146.4
|
|
|
|
|
1,243.4
|
Selling, general and administrative expenses
|
|
|
|
529.3
|
|
|
|
|
535.4
|
Engineering expenses
|
|
|
|
174.7
|
|
|
|
|
179.4
|
Amortization of intangibles
|
|
|
|
20.0
|
|
|
|
|
24.1
|
Income from operations
|
|
|
|
422.4
|
|
|
|
|
504.5
|
Interest expense, net
|
|
|
|
29.6
|
|
|
|
|
26.1
|
Other expense, net
|
|
|
|
24.1
|
|
|
|
|
13.9
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
|
368.7
|
|
|
|
|
464.5
|
Income tax provision
|
|
|
|
129.6
|
|
|
|
|
157.3
|
Income before equity in net earnings of affiliates
|
|
|
|
239.1
|
|
|
|
|
307.2
|
Equity in net earnings of affiliates
|
|
|
|
26.1
|
|
|
|
|
23.0
|
Net income
|
|
|
|
265.2
|
|
|
|
|
330.2
|
Net loss attributable to noncontrolling interests
|
|
|
|
2.6
|
|
|
|
|
1.5
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
|
$
|
267.8
|
|
|
|
|
$
|
331.7
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
2.83
|
|
|
|
|
$
|
3.41
|
Diluted
|
|
|
|
$
|
2.79
|
|
|
|
|
$
|
3.34
|
Cash dividends declared and paid per common share
|
|
|
|
$
|
0.22
|
|
|
|
|
$
|
0.20
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
94.6
|
|
|
|
|
97.2
|
Diluted
|
|
|
|
95.9
|
|
|
|
|
99.2
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
|
|
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited and in millions)
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
265.2
|
|
|
|
|
$
|
330.2
|
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
119.3
|
|
|
|
|
101.4
|
|
Deferred debt issuance cost amortization
|
|
|
1.8
|
|
|
|
|
1.8
|
|
Amortization of intangibles
|
|
|
20.0
|
|
|
|
|
24.1
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
|
4.6
|
|
Stock compensation
|
|
|
11.8
|
|
|
|
|
28.1
|
|
Equity in net earnings of affiliates, net of cash received
|
|
|
(19.6
|
)
|
|
|
|
(12.2
|
)
|
Deferred income tax provision
|
|
|
8.6
|
|
|
|
|
27.7
|
|
Other
|
|
|
2.1
|
|
|
|
|
0.1
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
|
(271.4
|
)
|
|
|
|
(389.8
|
)
|
Inventories, net
|
|
|
(418.1
|
)
|
|
|
|
(404.7
|
)
|
Other current and noncurrent assets
|
|
|
(37.2
|
)
|
|
|
|
2.9
|
|
Accounts payable
|
|
|
12.6
|
|
|
|
|
214.9
|
|
Accrued expenses
|
|
|
8.6
|
|
|
|
|
107.4
|
|
Other current and noncurrent liabilities
|
|
|
42.1
|
|
|
|
|
28.5
|
|
Total adjustments
|
|
|
(519.4
|
)
|
|
|
|
(265.2
|
)
|
Net cash (used in) provided by operating activities
|
|
|
(254.2
|
)
|
|
|
|
65.0
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(155.5
|
)
|
|
|
|
(174.2
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
1.5
|
|
|
|
|
2.2
|
|
Purchase of businesses
|
|
|
(0.1
|
)
|
|
|
|
(0.1
|
)
|
Net cash used in investing activities
|
|
|
(154.1
|
)
|
|
|
|
(172.1
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Purchases and retirement of common stock
|
|
|
(290.0
|
)
|
|
|
|
(1.0
|
)
|
Proceeds from debt obligations, net
|
|
|
51.9
|
|
|
|
|
91.7
|
|
Repurchase or conversion of convertible senior subordinated notes
|
|
|
(49.7
|
)
|
|
|
|
—
|
|
Payment of dividends to stockholders
|
|
|
(20.6
|
)
|
|
|
|
(19.4
|
)
|
Payment of minimum tax withholdings on stock compensation
|
|
|
(11.9
|
)
|
|
|
|
(15.9
|
)
|
Distribution to noncontrolling interests, net
|
|
|
(2.0
|
)
|
|
|
|
(2.1
|
)
|
Payment of debt issuance costs
|
|
|
(1.3
|
)
|
|
|
|
—
|
|
Net cash (used in) provided by financing activities
|
|
|
(323.6
|
)
|
|
|
|
53.3
|
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
8.0
|
|
|
|
|
(46.9
|
)
|
Decrease in cash and cash equivalents
|
|
|
(723.9
|
)
|
|
|
|
(100.7
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
1,047.2
|
|
|
|
|
781.3
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
323.3
|
|
|
|
|
$
|
680.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
|
|
AGCO CORPORATION AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(unaudited, in millions, except per share data)
|
1. STOCK COMPENSATION EXPENSE
The Company recorded stock compensation expense as follows:
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
Cost of goods sold
|
|
|
$
|
0.3
|
|
|
|
$
|
1.3
|
|
|
|
|
$
|
0.8
|
|
|
|
$
|
1.9
|
Selling, general and administrative expenses
|
|
|
5.3
|
|
|
|
18.5
|
|
|
|
|
11.2
|
|
|
|
26.4
|
Total stock compensation expense
|
|
|
$
|
5.6
|
|
|
|
$
|
19.8
|
|
|
|
|
$
|
12.0
|
|
|
|
$
|
28.3
|
2. INDEBTEDNESS
Indebtedness at June 30, 2014 and December 31, 2013 consisted of the
following:
|
|
|
June 30, 2014
|
|
|
|
December 31, 2013
|
1¼% Convertible senior subordinated notes due 2036
|
|
|
$
|
151.5
|
|
|
|
|
$
|
201.2
|
|
4½% Senior term loan due 2016
|
|
|
273.8
|
|
|
|
|
275.0
|
|
5⅞% Senior notes due 2021
|
|
|
300.0
|
|
|
|
|
300.0
|
|
Credit facility expires 2019
|
|
|
355.0
|
|
|
|
|
360.0
|
|
Other long-term debt
|
|
|
144.8
|
|
|
|
|
114.0
|
|
|
|
|
1,225.1
|
|
|
|
|
1,250.2
|
|
Less: Current portion of long-term debt
|
|
|
(94.4
|
)
|
|
|
|
(110.5
|
)
|
1¼% Convertible senior subordinated notes due 2036
|
|
|
(151.5
|
)
|
|
|
|
(201.2
|
)
|
Total indebtedness, less current portion
|
|
|
$
|
979.2
|
|
|
|
|
$
|
938.5
|
|
Holders of the Company’s 1¼% convertible senior subordinated notes had
the ability to convert the notes if, during any fiscal quarter, the
closing sales price of the Company’s common stock exceeded 120% of the
conversion price of $40.27 per share for at least 20 trading days in the
30 consecutive trading days ending on the last trading day of the
preceding fiscal quarter. In May 2014, the Company announced its
election to redeem all of its outstanding 1¼% convertible senior
subordinated notes with an effective date of June 20, 2014.
Substantially all of the holders of the notes converted their notes with
settlement dates during July 2014. Therefore, the Company classified the
notes as a current liability as of June 30, 2014. Due to the ability of
the holders of the notes to convert the notes during the three months
ending March 31, 2014, the Company also classified the notes as a
current liability as of December 31, 2013.
3. INVENTORIES
Inventories at June 30, 2014 and December 31, 2013 were as follows:
|
|
|
June 30, 2014
|
|
|
December 31, 2013
|
Finished goods
|
|
|
$
|
958.0
|
|
|
|
$
|
775.7
|
Repair and replacement parts
|
|
|
658.9
|
|
|
|
550.2
|
Work in process
|
|
|
195.6
|
|
|
|
109.0
|
Raw materials
|
|
|
625.4
|
|
|
|
581.2
|
Inventories, net
|
|
|
$
|
2,437.9
|
|
|
|
$
|
2,016.1
|
4. ACCOUNTS RECEIVABLE SALES AGREEMENTS
At June 30, 2014 and December 31, 2013, the Company had accounts
receivable sales agreements that permit the sale, on an ongoing basis,
of a majority of its wholesale receivables in North America and Europe
to its 49% owned U.S., Canadian and European retail finance joint
ventures. As of June 30, 2014 and December 31, 2013, the cash received
from receivables sold under the U.S., Canadian and European accounts
receivable sales agreements was approximately $1.4 billion and $1.3
billion, respectively.
Losses on sales of receivables associated with the accounts receivable
financing facilities discussed above, reflected within “Other expense,
net” in the Company’s Condensed Consolidated Statements of Operations,
were approximately $6.7 million and $14.2 million during the three and
six months ended June 30, 2014, respectively. Losses on sales of
receivables associated with the accounts receivable financing facilities
discussed above, reflected within “Other expense, net” in the Company’s
Condensed Consolidated Statements of Operations, were approximately $6.5
million and $12.1 million during the three and six months ended June 30,
2013, respectively.
The Company’s retail finance joint ventures in Brazil and Australia also
provide wholesale financing to the Company’s dealers. As of June 30,
2014 and December 31, 2013, these retail finance joint ventures had
approximately $66.9 million and $68.2 million, respectively, of
outstanding accounts receivable associated with these arrangements. In
addition, the Company sells certain trade receivables under factoring
arrangements to other financial institutions around the world.
5. NET INCOME PER SHARE
The Company’s convertible senior subordinated notes provided for (i) the
settlement upon conversion in cash up to the principal amount of the
converted notes with any excess conversion value settled in shares of
the Company’s common stock, and (ii) the conversion rate to be increased
under certain circumstances if the notes were converted in connection
with certain change of control transactions. Dilution of weighted shares
outstanding depends on the Company’s stock price for the excess
conversion value using the treasury stock method. A reconciliation of
net income attributable to AGCO Corporation and subsidiaries and
weighted average common shares outstanding for purposes of calculating
basic and diluted net income per share for the three and six months
ended June 30, 2014 and 2013 is as follows:
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
$
|
168.2
|
|
|
|
$
|
213.7
|
|
|
|
|
$
|
267.8
|
|
|
|
$
|
331.7
|
Weighted average number of common shares outstanding
|
|
|
93.9
|
|
|
|
97.3
|
|
|
|
|
94.6
|
|
|
|
97.2
|
Basic net income per share attributable to AGCO Corporation and
subsidiaries
|
|
|
$
|
1.79
|
|
|
|
$
|
2.20
|
|
|
|
|
$
|
2.83
|
|
|
|
$
|
3.41
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
$
|
168.2
|
|
|
|
$
|
213.7
|
|
|
|
|
$
|
267.8
|
|
|
|
$
|
331.7
|
Weighted average number of common shares outstanding
|
|
|
93.9
|
|
|
|
97.3
|
|
|
|
|
94.6
|
|
|
|
97.2
|
Dilutive stock-settled appreciation rights and performance share
awards
|
|
|
0.2
|
|
|
|
0.9
|
|
|
|
|
0.3
|
|
|
|
0.9
|
Weighted average assumed conversion of contingently convertible
senior subordinated notes
|
|
|
1.0
|
|
|
|
1.1
|
|
|
|
|
1.0
|
|
|
|
1.1
|
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net income
per share
|
|
|
95.1
|
|
|
|
99.3
|
|
|
|
|
95.9
|
|
|
|
99.2
|
Diluted net income per share attributable to AGCO Corporation and
subsidiaries
|
|
|
$
|
1.77
|
|
|
|
$
|
2.15
|
|
|
|
|
$
|
2.79
|
|
|
|
$
|
3.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Repurchase Program
In July 2012, the Company’s Board of Directors approved a share
repurchase program under which the Company can repurchase up to $50.0
million of its common stock. This share repurchase program does not have
an expiration date. In December 2013, the Company’s Board of Directors
approved an additional share repurchase program under which the Company
can repurchase up to $500.0 million of its common stock through an
expiration date of June 2015.
During the six months ended June 30, 2014, the Company entered into
accelerated repurchase agreements (“ASRs”) with a financial institution
to repurchase an aggregate of $290.0 million of shares of the Company’s
common stock. The Company has received approximately 4,178,915 shares
during the six months ended June 30, 2014 related to these ASRs. All
shares received under the ASRs were retired upon receipt, and the excess
of the purchase price over par value per share was recorded to
“Additional paid-in capital” within the Company’s Condensed Consolidated
Balance Sheets. Of the $550.0 million in approved share repurchase
programs, the remaining amount authorized to be repurchased is
approximately $241.4 million.
6. SEGMENT REPORTING
The Company’s four reportable segments distribute a full range of
agricultural equipment and related replacement parts. The Company
evaluates segment performance primarily based on income from operations.
Sales for each segment are based on the location of the third-party
customer. The Company’s selling, general and administrative expenses and
engineering expenses are charged to each segment based on the region and
division where the expenses are incurred. As a result, the components of
income from operations for one segment may not be comparable to another
segment. Segment results for the three and six months ended June 30,
2014 and 2013 are as follows:
|
|
|
|
North
|
|
|
South
|
|
|
Europe/Africa/
|
|
|
Asia/
|
|
|
|
Three Months Ended June 30,
|
|
|
|
America
|
|
|
America
|
|
|
Middle East
|
|
|
Pacific
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
686.2
|
|
|
|
$
|
440.2
|
|
|
|
$
|
1,521.9
|
|
|
|
$
|
102.0
|
|
|
|
$
|
2,750.3
|
Income (loss) from operations
|
|
|
|
95.5
|
|
|
|
29.9
|
|
|
|
188.1
|
|
|
|
(3.3
|
)
|
|
|
310.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
788.9
|
|
|
|
$
|
540.0
|
|
|
|
$
|
1,599.0
|
|
|
|
$
|
120.3
|
|
|
|
$
|
3,048.2
|
Income (loss) from operations
|
|
|
|
121.6
|
|
|
|
59.7
|
|
|
|
204.9
|
|
|
|
(0.8
|
)
|
|
|
385.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
South
|
|
|
Europe/Africa/
|
|
|
Asia/
|
|
|
|
Six Months Ended June 30,
|
|
|
|
America
|
|
|
America
|
|
|
Middle East
|
|
|
Pacific
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
1,333.7
|
|
|
|
$
|
793.8
|
|
|
|
$
|
2,757.8
|
|
|
|
$
|
198.4
|
|
|
|
$
|
5,083.7
|
Income (loss) from operations
|
|
|
|
151.0
|
|
|
|
57.8
|
|
|
|
309.0
|
|
|
|
(4.6
|
)
|
|
|
513.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
1,413.1
|
|
|
|
$
|
1,005.7
|
|
|
|
$
|
2,792.2
|
|
|
|
$
|
240.3
|
|
|
|
$
|
5,451.3
|
Income from operations
|
|
|
|
193.7
|
|
|
|
108.0
|
|
|
|
304.6
|
|
|
|
4.7
|
|
|
|
611.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation from the segment information to the consolidated
balances for income from operations is set forth below:
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Segment income from operations
|
|
|
$
|
310.2
|
|
|
|
$
|
385.4
|
|
|
|
$
|
513.2
|
|
|
|
$
|
611.0
|
|
Corporate expenses
|
|
|
(28.2
|
)
|
|
|
(27.7
|
)
|
|
|
(59.6
|
)
|
|
|
(56.0
|
)
|
Stock compensation expense
|
|
|
(5.3
|
)
|
|
|
(18.5
|
)
|
|
|
(11.2
|
)
|
|
|
(26.4
|
)
|
Amortization of intangibles
|
|
|
(10.0
|
)
|
|
|
(12.1
|
)
|
|
|
(20.0
|
)
|
|
|
(24.1
|
)
|
Consolidated income from operations
|
|
|
$
|
266.7
|
|
|
|
$
|
327.1
|
|
|
|
$
|
422.4
|
|
|
|
$
|
504.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses the percentage change in regional net
sales due to the impact of currency translation. The following table
sets forth, for the three and six months ended June 30, 2014, the impact
to net sales of currency translation by geographical segment (in
millions, except percentages):
|
|
|
|
|
|
|
Change due to currency
|
|
|
|
Three Months Ended June 30,
|
|
|
|
translation
|
|
|
|
|
|
|
|
|
|
|
|
% change
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
from 2013
|
|
|
$
|
|
|
%
|
North America
|
|
|
$
|
686.2
|
|
|
|
$
|
788.9
|
|
|
|
(13.0
|
)%
|
|
|
$
|
(6.3
|
)
|
|
|
(0.8
|
)%
|
South America
|
|
|
440.2
|
|
|
|
540.0
|
|
|
|
(18.5
|
)%
|
|
|
(42.0
|
)
|
|
|
(7.8
|
)%
|
Europe/Africa/Middle East
|
|
|
1,521.9
|
|
|
|
1,599.0
|
|
|
|
(4.8
|
)%
|
|
|
59.9
|
|
|
|
3.8
|
%
|
Asia/Pacific
|
|
|
102.0
|
|
|
|
120.3
|
|
|
|
(15.2
|
)%
|
|
|
(2.3
|
)
|
|
|
(1.9
|
)%
|
|
|
|
$
|
2,750.3
|
|
|
|
$
|
3,048.2
|
|
|
|
(9.8
|
)%
|
|
|
$
|
9.3
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change due to currency
|
|
|
|
Six Months Ended June 30,
|
|
|
|
translation
|
|
|
|
|
|
|
|
|
|
% change
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
from 2013
|
|
|
$
|
|
|
%
|
North America
|
|
|
$
|
1,333.7
|
|
|
|
$
|
1,413.1
|
|
|
|
(5.6
|
)%
|
|
|
$
|
(15.8
|
)
|
|
|
(1.1
|
)%
|
South America
|
|
|
793.8
|
|
|
|
1,005.7
|
|
|
|
(21.1
|
)%
|
|
|
(110.8
|
)
|
|
|
(11.0
|
)%
|
Europe/Africa/Middle East
|
|
|
2,757.8
|
|
|
|
2,792.2
|
|
|
|
(1.2
|
)%
|
|
|
92.6
|
|
|
|
3.3
|
%
|
Asia/Pacific
|
|
|
198.4
|
|
|
|
240.3
|
|
|
|
(17.4
|
)%
|
|
|
(6.0
|
)
|
|
|
(2.5
|
)%
|
|
|
|
$
|
5,083.7
|
|
|
|
$
|
5,451.3
|
|
|
|
(6.7
|
)%
|
|
|
$
|
(40.0
|
)
|
|
|
(0.7
|
)%
|
Source: AGCO
AGCO Greg Peterson, 770-232-8229 Director of Investor Relations greg.peterson@agcocorp.com
|