Full Year Sales and Earnings Per Share Hit Record Levels
DULUTH, Ga.--(BUSINESS WIRE)--Feb. 9, 2009--
AGCO, Your Agriculture Company (NYSE:AG), a worldwide manufacturer and
distributor of agricultural equipment, reported fourth quarter net sales
of approximately $2.2 billion and record net income of $1.08 per share
for the fourth quarter of 2008. Adjusted net income, which excludes
restructuring and other infrequent expenses (income), was also $1.08 per
share for the fourth quarter of 2008. These results compare to reported
and adjusted net income of $0.82 per share for the fourth quarter of
2007. Net sales for the fourth quarter of 2008 were flat compared to
2007. Excluding unfavorable currency translation impacts of
approximately $274.9 million, net sales in the fourth quarter of 2008
increased approximately 12.0% compared to the same period in 2007.
For the full year of 2008, reported and adjusted net income were $4.09
per share compared to reported net income of $2.55 per share and
adjusted net income of $2.52 per share in 2007. Net sales for the full
year of 2008 increased approximately 23.4% to $8.4 billion from $6.8
billion in 2007. Excluding favorable currency translation impacts of
approximately $247.9 million, full year 2008 net sales increased
approximately 19.8% compared to 2007.
“We finished the year on a strong note, posting record earnings for both
the fourth quarter and full year,” stated Martin Richenhagen, AGCO’s
Chairman, President and Chief Executive Officer. “Strong industry retail
sales and improved operating margins produced higher operating income in
the fourth quarter of 2008 compared to the same period last year. Our
North American segment showed significant improvement, reporting
positive operating income for both the fourth quarter and full year.
Strong sales in the row crop segment and increased profitability in our
sprayer business contributed to improved performance in North America.”
“Our positive view of long-term global grain demand has not changed
despite the current financial crisis,” Mr. Richenhagen continued. “While
farm fundamentals remain positive, the farm equipment industry is not
immune to the global economic downturn. Tighter financial and credit
conditions are expected to negatively impact demand, particularly in
markets such as Eastern Europe, Russia and South America. We believe
that our strong financial position will allow us to continue to focus
our attention on operational improvements and our long-term initiatives.
In addition, AGCO Finance, our joint venture with Rabobank, continues to
be ready to support our customers’ current and future retail financing
needs.”
Fourth Quarter and Year-to-Date Results
Net sales were $2,157.2 million for the fourth quarter of 2008, compared
to $2,171.1 million for the fourth quarter of 2007. For the full year of
2008, net sales were $8,424.6 million, an increase of approximately
23.4% as compared to $6,828.1 million in net sales for the full year of
2007. Strong demand from the professional farming sector produced sales
growth in the fourth quarter of 2008 in North America of approximately
17.1% compared to the fourth quarter of 2007, excluding unfavorable
currency translation impacts of approximately $30.0 million. Net sales
in the fourth quarter of 2008 in the Europe/Africa/Middle East (EAME)
region increased approximately 9.2% when compared to the fourth quarter
of 2007, excluding unfavorable currency translation impacts of
approximately $154.1 million, with strong growth achieved particularly
in France and Central Europe. Continued favorable industry demand in
Brazil during the fourth quarter of 2008 drove a net sales increase of
approximately 18.5% in the South American region, excluding unfavorable
currency translation impacts of approximately $79.4 million, compared to
the same period in 2007. Net sales in AGCO’s Asia/Pacific region
decreased approximately 4.4% during the fourth quarter of 2008 compared
to the same period in 2007, excluding unfavorable currency translation
impacts of approximately $11.4 million, due primarily to product
availability.
Income from operations for the fourth quarter of 2008 increased
approximately $11.8 million compared to the same period in 2007.
Improved mix, price increases and cost control initiatives were
partially offset by increased material costs during the quarter. For the
full year of 2008, income from operations increased approximately $170.2
million compared to 2007. The improvement resulted from the increase in
sales volumes and higher operating margins. Unit production of tractors
and combines for the fourth quarter and full year of 2008 was
approximately 15% and 18%, respectively, above comparable 2007 levels.
AGCO’s EAME region reported a decline of approximately $1.7 million in
income from operations for the fourth quarter of 2008 compared to the
same period in 2007. Unfavorable currency translation impacts offset
both growth in key markets as well as stable operating margins. For the
full year of 2008, income from operations increased approximately $119.1
million compared to 2007 due to higher sales volumes, favorable currency
translation impacts and improved margins.
AGCO’s South American region reported an increase in income from
operations of approximately $1.9 million in the fourth quarter of 2008
compared to the same period in 2007. Sales growth in Brazil and improved
margins were substantially offset by the unfavorable impact of currency
translation. For the full year of 2008, income from operations for the
South American region increased approximately $32.9 million compared to
2007. Operating income in the South American region benefited in the
full year of 2008 from higher sales volumes and favorable currency
translation impacts.
Results in AGCO’s North American region benefited from strong industry
demand for large farm equipment, a strengthening distribution network
and operating efficiencies. In the fourth quarter of 2008, income from
operations grew approximately $21.1 million compared to the same period
in 2007. Income from operations improved by approximately $44.3 million
for the full year of 2008 compared to the same period in 2007.
Income from operations in the Asia/Pacific region decreased
approximately $5.0 million in the fourth quarter of 2008 compared to the
same period in 2007, due to a decrease in sales. For the full year of
2008, income from operations increased approximately $8.4 million
compared to the same period in 2007, driven by growth in the Australian
and New Zealand markets.
Regional Market Results
North America– Industry unit retail sales of tractors for the
full year of 2008 decreased approximately 7% over the comparable prior
year period. Industry unit retail sales of tractors over 100 horsepower
increased compared to the prior year, while industry unit retail sales
of tractors under 100 horsepower declined compared to the prior year.
Industry unit retail sales of combines for the full year of 2008
increased approximately 22% from 2007. AGCO’s unit retail sales of
tractors were down in the full year of 2008 due to decreases in tractor
sales under 100 horsepower, partially offset by strong unit retail sales
growth of tractors over 100 horsepower. AGCO’s unit sales of combines
for the full year of 2008 were higher compared to 2007. In the fourth
quarter of 2008, industry unit retail sales of tractors were down
approximately 13% and industry unit retail sales of combines grew
approximately 14% compared to the same period in 2007.
Europe – Industry unit retail sales of tractors for the full year
of 2008 increased approximately 7% compared to the prior year period.
Retail demand improved in France, Germany, Central and Eastern Europe
and Russia, and declined in Spain, Finland and Scandinavia. AGCO’s unit
retail sales of tractors for the full year of 2008 were higher when
compared to the prior year. Industry unit retail sales of tractors for
the fourth quarter of 2008 increased approximately 1% compared to the
fourth quarter of 2007.
South America – Industry unit retail sales of tractors increased
approximately 30% and industry unit retail sales of combines increased
approximately 50% for the full year of 2008 compared to the prior year.
AGCO’s South American unit retail sales of tractors and combines also
increased in the full year of 2008 compared to 2007. In the fourth
quarter of 2008, industry unit retail sales of tractors grew
approximately 16% and industry unit retail sales of combines declined
approximately 6% compared to the same period in 2007.
Rest of World Markets – Outside of North America, Europe and
South America, AGCO’s net sales for the full year of 2008 increased
approximately 10.3% compared to 2007, primarily due to higher sales in
Australia and New Zealand.
“In 2008, we saw good harvests and high levels of farm income in most of
the world’s major agricultural markets,” stated Mr. Richenhagen.
“Industry demand was very strong due to these healthy fundamentals. As
we look ahead into 2009, there is significant uncertainty regarding
market demand due to volatile commodity prices, tightness in the credit
markets and weaker farmer sentiment resulting from global economic
conditions. We remain optimistic about our long-term opportunities in
the agriculture industry and their positive impact on our business.”
Outlook
The outlook for the 2009 farm equipment industry reflects significant
uncertainty and softening demand in all major farm equipment markets.
After a record 2008, we expect 2009 South American industry volumes to
be down significantly due to dry weather conditions and the impact of
the tightened credit environment on planted acreage and crop production.
European industry volumes are expected to decline moderately in 2009,
with stronger declines in the credit challenged markets of Central and
Eastern Europe and Russia. In North America, we expect 2009 industry
volumes to decline moderately, with lower demand for small tractors
reflecting the weakness in the general economy and residential
construction. Demand from the professional farming sector in North
America is expected to moderate in the second half of the year.
Reflecting the weaker industry outlook, AGCO’s 2009 net sales are
projected to be $7.5 billion to $7.8 billion, including unfavorable
currency translation impacts of approximately $800 million to $900
million. AGCO’s earnings are expected to be impacted by lower sales and
production volumes and by increased engineering expenses for new product
development and Tier 4 emission requirements. For the full year of 2009,
AGCO’s earnings per share is expected to range from $3.00 to $3.25. In
the first quarter of 2009, earnings per share is expected to be
significantly lower than reported for the first quarter of 2008
primarily for the reasons discussed above.
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Monday, February 9, 2009. 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
on the “Investors/Calendar of Events” page. 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, net sales, market conditions, availability of
financing, production volumes, product mix, industry demand, general
economic conditions, strategic initiatives, currency translation impacts
and material cost increases, are forward-looking and subject to risks
which could cause actual results to differ materially from those
suggested by the statements. These forward-looking statements involve a
number of risks and uncertainties. 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. Further
information concerning these and other factors is included in AGCO’s
filings with the Securities and Exchange Commission, including its Form
10-Q for the quarter ended September 30, 2008. AGCO disclaims any
obligation to update any 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 and changes in the availability of
credit for our retail customers, will adversely affect us.
-
The recent poor performance of the general economy may result in a
decline in demand for our products. However, we are unable to predict
with accuracy the amount or duration of this decline, and our
forward-looking statements reflect merely our best estimates at the
current time.
-
A majority of our sales and manufacturing takes place outside of 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.
-
A large portion of the retail sales of our products are financed by
AGCO Finance, our retail finance joint venture with Rabobank. Its
ability to finance retail sales is dependent upon funding provided by
Rabobank. Any difficulty on Rabobank’s part to provide that funding,
or any business decision by Rabobank as the controlling member of the
joint venture not to fund the business or particular aspects of it
(for example, a particular country or region), would adversely impact
sales if AGCO Finance was then forced to find other sources of
financing (which may be difficult to obtain) or if our customers would
be required to utilize other retail financing providers.
-
Both AGCO and AGCO Finance have substantial accounts 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 recently have experienced substantial and sustained volatility with
respect to currency exchange rate changes, which can adversely affect
our reported results of operations and the competitiveness of our
products.
-
We are subject to extensive environmental laws and regulations, and
our compliance with, or our failure to comply with, existing or future
laws and regulations could delay production of our products or
otherwise adversely affect our business.
-
We have significant pension obligations with respect to our employees
and declines in the market value of the securities used to fund these
obligations results in increased pension expense in future periods.
-
We are subject to fluctuations in raw material prices and
availability, which may cause delays in the production of our products
or otherwise adversely affect our manufacturing costs.
-
The agricultural equipment industry is highly seasonal, and seasonal
fluctuations significantly impact our results of operations and cash
flows.
-
Our success depends on the introduction of new products, which require
substantial expenditures and may not be well received in the market
place.
-
We depend on suppliers for components and parts 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 our products.
-
We face significant competition and, if we are unable to compete
successfully against other agricultural equipment manufacturers, we
would lose customers and our revenues and profitability would decline.
-
In connection with our outstanding indebtedness, we are subject to
certain restrictive covenants and payment obligations that may
adversely affect our ability to operate and expand our business.
About AGCO
AGCO, Your Agriculture Company (NYSE: AG) was founded in 1990 and offers
a full product line of tractors, combines, hay tools, sprayers, forage,
tillage equipment, implements and related replacement parts. AGCO
agricultural products are sold under the core brands of Challenger®,
Fendt®, Massey Ferguson® and Valtra®, and are distributed globally
through more than 3,000 independent dealers and distributors, in more
than 140 countries worldwide. AGCO provides retail financing through
AGCO Finance. AGCO is headquartered in Duluth, Georgia, USA. In 2008,
AGCO had net sales of $8.4 billion.
Please visit our website at www.agcocorp.com.
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(unaudited and in millions)
|
|
|
|
|
|
|
|
December 31,
2008
|
|
December 31,
2007
|
ASSETS
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
512.2
|
|
|
$
|
582.4
|
Restricted cash
|
|
|
33.8
|
|
|
|
—
|
Accounts and notes receivable, net
|
|
|
815.6
|
|
|
|
766.4
|
Inventories, net
|
|
|
1,389.9
|
|
|
|
1,134.2
|
Deferred tax assets
|
|
|
56.6
|
|
|
|
52.7
|
Other current assets
|
|
|
197.1
|
|
|
|
186.0
|
Total current assets
|
|
|
3,005.2
|
|
|
|
2,721.7
|
Property, plant and equipment, net
|
|
|
811.1
|
|
|
|
753.0
|
Investment in affiliates
|
|
|
275.1
|
|
|
|
284.6
|
Deferred tax assets
|
|
|
29.9
|
|
|
|
89.1
|
Other assets
|
|
|
69.6
|
|
|
|
67.9
|
Intangible assets, net
|
|
|
176.9
|
|
|
|
205.7
|
Goodwill
|
|
|
587.0
|
|
|
|
665.6
|
Total assets
|
|
$
|
4,954.8
|
|
|
$
|
4,787.6
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
0.1
|
|
|
$
|
0.2
|
Convertible senior subordinated notes
|
|
|
—
|
|
|
|
402.5
|
Accounts payable
|
|
|
1,027.1
|
|
|
|
827.1
|
Accrued expenses
|
|
|
799.8
|
|
|
|
773.2
|
Other current liabilities
|
|
|
151.5
|
|
|
|
80.3
|
Total current liabilities
|
|
|
1,978.5
|
|
|
|
2,083.3
|
Long-term debt, less current portion
|
|
|
682.0
|
|
|
|
294.1
|
Pensions and postretirement health care benefits
|
|
|
173.6
|
|
|
|
150.3
|
Deferred tax liabilities
|
|
|
108.1
|
|
|
|
163.6
|
Other noncurrent liabilities
|
|
|
55.6
|
|
|
|
53.3
|
Total liabilities
|
|
|
2,997.8
|
|
|
|
2,744.6
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
Common stock
|
|
|
0.9
|
|
|
|
0.9
|
Additional paid-in capital
|
|
|
973.2
|
|
|
|
942.7
|
Retained earnings
|
|
|
1,419.3
|
|
|
|
1,020.4
|
Accumulated other comprehensive (loss) income
|
|
|
(436.4
|
)
|
|
|
79.0
|
Total stockholders’ equity
|
|
|
1,957.0
|
|
|
|
2,043.0
|
Total liabilities and stockholders’ equity
|
|
$
|
4,954.8
|
|
|
$
|
4,787.6
|
|
|
|
|
|
|
|
|
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 December 31,
|
|
|
2008
|
|
2007
|
|
|
|
|
|
Net sales
|
|
$
|
2,157.2
|
|
|
$
|
2,171.1
|
|
Cost of goods sold
|
|
|
1,781.0
|
|
|
|
1,804.1
|
|
Gross profit
|
|
|
376.2
|
|
|
|
367.0
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
185.8
|
|
|
|
187.5
|
|
Engineering expenses
|
|
|
46.3
|
|
|
|
46.6
|
|
Restructuring and other infrequent income
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
Amortization of intangibles
|
|
|
4.2
|
|
|
|
4.8
|
|
|
|
|
|
|
Income from operations
|
|
|
140.0
|
|
|
|
128.2
|
|
|
|
|
|
|
Interest expense, net
|
|
|
6.4
|
|
|
|
6.5
|
|
Other expense, net
|
|
|
1.6
|
|
|
|
14.8
|
|
|
|
|
|
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
132.0
|
|
|
|
106.9
|
|
|
|
|
|
|
Income tax provision
|
|
|
36.6
|
|
|
|
35.8
|
|
|
|
|
|
|
Income before equity in net earnings of affiliates
|
|
|
95.4
|
|
|
|
71.1
|
|
|
|
|
|
|
Equity in net earnings of affiliates
|
|
|
6.6
|
|
|
|
10.0
|
|
|
|
|
|
|
Net income
|
|
$
|
102.0
|
|
|
$
|
81.1
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.11
|
|
|
$
|
0.89
|
|
Diluted
|
|
$
|
1.08
|
|
|
$
|
0.82
|
|
|
|
|
|
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
Basic
|
|
|
91.7
|
|
|
|
91.6
|
|
Diluted
|
|
|
94.2
|
|
|
|
99.2
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2008
|
|
2007
|
|
|
|
|
|
Net sales
|
|
$
|
8,424.6
|
|
$
|
6,828.1
|
|
Cost of goods sold
|
|
|
6,924.9
|
|
|
5,637.1
|
|
Gross profit
|
|
|
1,499.7
|
|
|
1,191.0
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
720.9
|
|
|
625.7
|
|
Engineering expenses
|
|
|
194.5
|
|
|
154.9
|
|
Restructuring and other infrequent expenses (income)
|
|
|
0.2
|
|
|
(2.3
|
)
|
Amortization of intangibles
|
|
|
19.1
|
|
|
17.9
|
|
|
|
|
|
|
Income from operations
|
|
|
565.0
|
|
|
394.8
|
|
|
|
|
|
|
Interest expense, net
|
|
|
19.1
|
|
|
24.1
|
|
Other expense, net
|
|
|
20.1
|
|
|
43.4
|
|
|
|
|
|
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
525.8
|
|
|
327.3
|
|
|
|
|
|
|
Income tax provision
|
|
|
164.6
|
|
|
111.4
|
|
|
|
|
|
|
Income before equity in net earnings of affiliates
|
|
|
361.2
|
|
|
215.9
|
|
|
|
|
|
|
Equity in net earnings of affiliates
|
|
|
38.8
|
|
|
30.4
|
|
|
|
|
|
|
Net income
|
|
$
|
400.0
|
|
$
|
246.3
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
4.36
|
|
$
|
2.69
|
|
Diluted
|
|
$
|
4.09
|
|
$
|
2.55
|
|
|
|
|
|
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
Basic
|
|
|
91.7
|
|
|
91.5
|
|
Diluted
|
|
|
97.7
|
|
|
96.6
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited and in millions)
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2008
|
|
2007
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
400.0
|
|
|
$
|
246.3
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation
|
|
|
127.4
|
|
|
|
115.6
|
|
Deferred debt issuance cost amortization
|
|
|
3.2
|
|
|
|
4.7
|
|
Amortization of intangibles
|
|
|
19.1
|
|
|
|
17.9
|
|
Stock compensation
|
|
|
33.3
|
|
|
|
25.7
|
|
Equity in net earnings of affiliates, net of cash received
|
|
|
(11.0
|
)
|
|
|
(3.5
|
)
|
Deferred income tax provision
|
|
|
7.3
|
|
|
|
2.5
|
|
Gain on sales of property, plant and equipment
|
|
|
(0.2
|
)
|
|
|
(2.9
|
)
|
Changes in operating assets and liabilities, net of effects from
purchase of business:
|
|
|
|
|
Accounts and notes receivable, net
|
|
|
(208.4
|
)
|
|
|
(3.0
|
)
|
Inventories, net
|
|
|
(374.2
|
)
|
|
|
10.7
|
|
Other current and noncurrent assets
|
|
|
(75.6
|
)
|
|
|
(41.4
|
)
|
Accounts payable
|
|
|
284.4
|
|
|
|
54.1
|
|
Accrued expenses
|
|
|
127.4
|
|
|
|
86.4
|
|
Other current and noncurrent liabilities
|
|
|
(41.4
|
)
|
|
|
(8.8
|
)
|
Total adjustments
|
|
|
(108.7
|
)
|
|
|
258.0
|
|
Net cash provided by operating activities
|
|
|
291.3
|
|
|
|
504.3
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(251.3
|
)
|
|
|
(141.4
|
)
|
Purchase of business, net of cash acquired
|
|
|
—
|
|
|
|
(17.8
|
)
|
Proceeds from sales of property, plant and equipment
|
|
|
4.9
|
|
|
|
6.0
|
|
Investments in unconsolidated affiliates
|
|
|
(0.6
|
)
|
|
|
(68.0
|
)
|
Restricted cash and other
|
|
|
(32.5
|
)
|
|
|
(2.7
|
)
|
Net cash used in investing activities
|
|
|
(279.5
|
)
|
|
|
(223.9
|
)
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from (repayments of) debt obligations, net
|
|
|
38.4
|
|
|
|
(120.7
|
)
|
Proceeds from issuance of common stock
|
|
|
0.3
|
|
|
|
8.2
|
|
Payment of minimum tax withholdings on stock compensation
|
|
|
(3.2
|
)
|
|
|
—
|
|
Payment of debt issuance costs
|
|
|
(1.4
|
)
|
|
|
(0.3
|
)
|
Net cash provided by (used in) financing activities
|
|
|
34.1
|
|
|
|
(112.8
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(116.1
|
)
|
|
|
13.7
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(70.2
|
)
|
|
|
181.3
|
|
Cash and cash equivalents, beginning of period
|
|
|
582.4
|
|
|
|
401.1
|
|
Cash and cash equivalents, end of period
|
|
$
|
512.2
|
|
|
$
|
582.4
|
|
|
|
|
|
|
|
|
|
|
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
|
|
During the three months and year ended December 31, 2008, the
Company recorded approximately $11.5 million and $33.5 million,
respectively, of stock compensation expense in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 123R
(Revised 2004), “Share-Based Payment” (“SFAS No. 123R”). During the
three months and year ended December 31, 2007, the Company recorded
approximately $15.4 million and $26.0 million, respectively, of
stock compensation expense in accordance with SFAS No. 123R. The
stock compensation expense was recorded as follows:
|
|
|
Three Months Ended
December 31,
|
|
Years Ended
December 31,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Cost of goods sold
|
|
$
|
0.8
|
|
$
|
0.6
|
|
$
|
1.5
|
|
$
|
1.0
|
Selling, general and administrative expenses
|
|
|
10.7
|
|
|
14.8
|
|
|
32.0
|
|
|
25.0
|
Total stock compensation expense
|
|
$
|
11.5
|
|
$
|
15.4
|
|
$
|
33.5
|
|
$
|
26.0
|
2. INDEBTEDNESS
Indebtedness at December 31, 2008 and December 31, 2007 consisted of the
following:
|
|
December 31,
2008
|
|
December 31,
2007
|
6⅞% Senior subordinated notes due 2014
|
|
$
|
279.4
|
|
|
$
|
291.8
|
|
1¾% Convertible senior subordinated notes due 2033
|
|
|
201.3
|
|
|
|
201.3
|
|
1¼% Convertible senior subordinated notes due 2036
|
|
|
201.3
|
|
|
|
201.3
|
|
Other long-term debt
|
|
|
0.1
|
|
|
|
2.5
|
|
|
|
|
682.1
|
|
|
|
696.9
|
|
Less: Current portion of long-term debt
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
1¾% Convertible senior subordinated notes due 2033
|
|
|
—
|
|
|
|
(201.3
|
)
|
1¼% Convertible senior subordinated notes due 2036
|
|
|
—
|
|
|
|
(201.3
|
)
|
Total indebtedness, less current portion
|
|
$
|
682.0
|
|
|
$
|
294.1
|
|
Holders of the Company’s 1¾% convertible senior subordinated notes due
2033 and 1¼% convertible senior subordinated notes due 2036 may convert
the notes if, during any fiscal quarter, the closing sales price of the
Company’s common stock exceeds 120% of the conversion price of $22.36
per share for the 1¾% convertible senior subordinated notes and $40.73
per share for the 1¼% convertible senior subordinated notes for at least
20 trading days in the 30 consecutive trading days ending on the last
trading day of the preceding fiscal quarter. As of December 31, 2008,
the closing sales price of the Company’s common stock did not exceed
120% of the conversion price of both notes for at least 20 trading days
in the 30 consecutive trading days ending December 31, 2008, and,
therefore, the Company classified both notes as long-term debt. As of
December 31, 2007, the closing sales price of the Company’s common stock
had exceeded 120% of the conversion price of both notes for at least 20
trading days in the 30 consecutive trading days ending December 31,
2007, and, therefore, the Company classified both notes as current
liabilities. Future classification of the notes between current and
long-term debt is dependent on the closing sales price of the Company’s
common stock during future quarters.
3. INVENTORIES
Inventories are valued at the lower of cost or market using the
first-in, first-out method. Market is current replacement cost (by
purchase or by reproduction dependent on the type of inventory). In
cases where market exceeds net realizable value (i.e., estimated selling
price less reasonably predictable costs of completion and disposal),
inventories are stated at net realizable value. Market is not considered
to be less than net realizable value reduced by an allowance for an
approximately normal profit margin.
Inventories at December 31, 2008 and December 31, 2007 were as follows:
|
|
December 31,
2008
|
|
December 31,
2007
|
Finished goods
|
|
$
|
484.9
|
|
$
|
391.7
|
Repair and replacement parts
|
|
|
396.1
|
|
|
361.1
|
Work in process
|
|
|
130.5
|
|
|
88.3
|
Raw materials
|
|
|
378.4
|
|
|
293.1
|
Inventories, net
|
|
$
|
1,389.9
|
|
$
|
1,134.2
|
4. ACCOUNTS RECEIVABLE SECURITIZATION
The Company sells wholesale accounts receivable on a revolving basis to
commercial paper conduits either on a direct basis or through a
wholly-owned special purpose U.S. subsidiary under its United States and
Canadian securitization facilities and through a qualifying special
purpose entity in the U.K. under its European securitization facility.
Outstanding funding under these facilities totaled approximately $483.2
million at December 31, 2008 and $446.3 million at December 31, 2007.
The funded balance has the effect of reducing accounts receivable and
short-term liabilities by the same amount. Losses on sales of
receivables primarily from securitization facilities included in other
expense, net were $5.7 million and $10.6 million for the three months
ended December 31, 2008 and 2007, respectively, and $27.3 million and
$36.1 million for the years ended December 31, 2008 and 2007,
respectively.
The Company has an agreement to permit transferring, on an ongoing
basis, the majority of its wholesale interest-bearing receivables in
North America to AGCO Finance LLC and AGCO Finance Canada, Ltd., its
United States and Canadian retail finance joint ventures. The Company
has a 49% ownership interest in these joint ventures. The transfer of
the receivables is without recourse to the Company, and the Company
continues to service the receivables. As of December 31, 2008, the
balance of interest-bearing receivables transferred to AGCO Finance LLC
and AGCO Finance Canada, Ltd. under this agreement was approximately
$59.0 million compared to approximately $73.3 million as of December 31,
2007.
5. EARNINGS PER SHARE
The Company’s convertible senior subordinated notes provide 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 are converted in connection
with certain change of control transactions. Dilution of weighted shares
outstanding will depend on the Company’s stock price for the excess
conversion value using the treasury stock method. A reconciliation of
net income and weighted average common shares outstanding for purposes
of calculating basic and diluted earnings per share for the three months
and years ended December 31, 2008 and 2007 is as follows:
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
102.0
|
|
$
|
81.1
|
|
$
|
400.0
|
|
$
|
246.3
|
Weighted average number of common shares outstanding
|
|
|
91.7
|
|
|
91.6
|
|
|
91.7
|
|
|
91.5
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
1.11
|
|
$
|
0.89
|
|
$
|
4.36
|
|
$
|
2.69
|
|
|
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
Net income for purposes of computing diluted net income per share
|
|
$
|
102.0
|
|
$
|
81.1
|
|
$
|
400.0
|
|
$
|
246.3
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
91.7
|
|
|
91.6
|
|
|
91.7
|
|
|
91.5
|
Dilutive stock options, performance
share awards and restricted stock awards
|
|
|
1.0
|
|
|
0.3
|
|
|
0.4
|
|
|
0.3
|
Weighted average assumed conversion of contingently convertible
senior subordinated notes
|
|
|
1.5
|
|
|
7.3
|
|
|
5.6
|
|
|
4.8
|
Weighted average number of common and common equivalent shares
outstanding for purposes of computing diluted earnings per share
|
|
|
94.2
|
|
|
99.2
|
|
|
97.7
|
|
|
96.6
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
1.08
|
|
$
|
0.82
|
|
$
|
4.09
|
|
$
|
2.55
|
6. SEGMENT REPORTING
The Company has four reportable segments: North America; South America;
Europe/Africa/Middle East; and Asia/Pacific. Each regional segment
distributes a full range of agricultural equipment and related
replacement parts. The Company evaluates segment performance primarily
based on income from operations. Sales for each regional 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 months and years ended December 31, 2008
and 2007 are as follows:
Three Months Ended
December 31,
|
|
North
America
|
|
South
America
|
|
Europe/Africa/
Middle East
|
|
Asia/
Pacific
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
520.5
|
|
|
$
|
327.4
|
|
$
|
1,266.3
|
|
$
|
43.0
|
|
$
|
2,157.2
|
Income from operations
|
|
|
18.2
|
|
|
|
22.3
|
|
|
133.5
|
|
|
2.5
|
|
|
176.5
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
470.2
|
|
|
$
|
343.4
|
|
$
|
1,300.6
|
|
$
|
56.9
|
|
$
|
2,171.1
|
(Loss) income from operations
|
|
|
(2.9
|
)
|
|
|
20.4
|
|
|
135.2
|
|
|
7.5
|
|
|
160.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
North
America
|
|
South
America
|
|
Europe/Africa/
Middle East
|
|
Asia/
Pacific
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,794.3
|
|
|
$
|
1,496.5
|
|
$
|
4,905.4
|
|
$
|
228.4
|
|
$
|
8,424.6
|
Income from operations
|
|
|
8.6
|
|
|
|
134.2
|
|
|
517.1
|
|
|
28.3
|
|
|
688.2
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,488.1
|
|
|
$
|
1,090.6
|
|
$
|
4,067.1
|
|
$
|
182.3
|
|
$
|
6,828.1
|
(Loss) income from operations
|
|
|
(35.7
|
)
|
|
|
101.3
|
|
|
398.0
|
|
|
19.9
|
|
|
483.5
|
A reconciliation from the segment information to the consolidated
balances for income from operations is set forth below:
|
|
Three Months Ended
December 31,
|
|
Years Ended
December 31,
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
Segment income from operations
|
|
$
|
176.5
|
|
|
$
|
160.2
|
|
|
$
|
688.2
|
|
|
$
|
483.5
|
|
Corporate expenses
|
|
|
(21.7
|
)
|
|
|
(12.5
|
)
|
|
|
(71.9
|
)
|
|
|
(48.1
|
)
|
Stock compensation expense
|
|
|
(10.7
|
)
|
|
|
(14.8
|
)
|
|
|
(32.0
|
)
|
|
|
(25.0
|
)
|
Restructuring and other infrequent income (expenses)
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
(0.2
|
)
|
|
|
2.3
|
|
Amortization of intangibles
|
|
|
(4.2
|
)
|
|
|
(4.8
|
)
|
|
|
(19.1
|
)
|
|
|
(17.9
|
)
|
Consolidated income from operations
|
|
$
|
140.0
|
|
|
$
|
128.2
|
|
|
$
|
565.0
|
|
|
$
|
394.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations, net
income and earnings per share, all of which exclude amounts that differ
from the most directly comparable measure calculated in accordance with
U.S. generally accepted accounting principles (“GAAP”). A reconciliation
of each of these financial measures to the most directly comparable GAAP
measure is included below.
The following is a reconciliation of adjusted income from operations,
net income and earnings per share to reported income from operations,
net income and earnings per share for the three months ended December
31, 2008 and 2007:
|
|
Three Months Ended December 31,
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From
Operations
|
|
Net
Income(1)
|
|
Earnings
Per
Share(1)
|
|
Income
From
Operations
|
|
Net
Income(1)
|
|
Earnings
Per Share(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
139.9
|
|
|
$
|
102.0
|
|
$
|
1.08
|
|
$
|
128.1
|
|
|
$
|
81.0
|
|
|
$
|
0.82
|
Restructuring and other infrequent income(2) |
|
|
(0.1
|
)
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
140.0
|
|
|
$
|
102.0
|
|
$
|
1.08
|
|
$
|
128.2
|
|
|
$
|
81.1
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net income and earnings per share amounts are after
tax.
|
(2) The restructuring and other infrequent income
recorded in the fourth quarter of 2008 related to reversal of excess
accrued severance and employee relocation costs associated with the
Company’s rationalization of certain parts, sales and marketing and
administration functions in Germany. The restructuring and other
infrequent income recorded in the fourth quarter of 2007 related to
the gain on the sale of buildings, land and improvements associated
with the Company’s Randers, Denmark facility. This gain was
partially offset by charges primarily related to severance and
employee relocation costs associated with the Company’s
rationalization of its Valtra sales office located in France.
|
The following is a reconciliation of adjusted income from operations,
net income and earnings per share to reported income from operations,
net income and earnings per share for the years ended December 31, 2008
and 2007:
|
|
Years Ended December 31,
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From
Operations
|
|
Net
Income(1)
|
|
Earnings
Per
Share(1)
|
|
Income
From
Operations
|
|
Net
Income(1)
|
|
Earnings
Per Share(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted
|
|
$
|
565.2
|
|
$
|
400.2
|
|
$
|
4.09
|
|
$
|
392.5
|
|
|
$
|
243.7
|
|
|
$
|
2.52
|
|
Restructuring and other infrequent expenses (income)(2) |
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
(2.3
|
)
|
|
|
(2.6
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
565.0
|
|
$
|
400.0
|
|
$
|
4.09
|
|
$
|
394.8
|
|
|
$
|
246.3
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net income and earnings per share amounts are after
tax.
|
(2) The restructuring and other infrequent expenses
recorded in 2008 related primarily to severance and employee
relocation costs associated with the Company’s rationalization of
its Valtra sales office located in France. The restructuring and
other infrequent income recorded in 2007 related to the gain on
the sale of buildings, land and improvements associated with the
Company’s Randers, Denmark facility. This gain was partially
offset by charges primarily related to severance and employee
relocation costs associated with the Company’s rationalization of
its Valtra sales office located in France as well as the Company’s
rationalization of certain parts, sales and marketing and
administration functions in Germany.
|
Source: AGCO Corporation
AGCO
Greg Peterson, 770-232-8229
Director of Investor Relations
greg.peterson@agcocorp.com