Second Quarter Net Income of $57.4 million on Sales of $1.8 Billion
DULUTH, Ga., July 28 /PRNewswire-FirstCall/ -- AGCO, Your Agriculture
Company (NYSE: AGCO), a worldwide manufacturer and distributor of agricultural
equipment, reported net sales of approximately $1.8 billion for the second
quarter of 2009, a decrease of approximately 25%, compared to net sales of
approximately $2.4 billion for the second quarter of 2008. Net income per
share was $0.61 for the second quarter of 2009 and adjusted net income, which
excludes restructuring and other infrequent expenses, was $0.64 per share for
the second quarter of 2009. These results compare to reported and adjusted
net income of $1.31 per share for the second quarter of 2008. Excluding
unfavorable currency translation impacts of approximately 10.8%, net sales in
the second quarter of 2009 decreased approximately 14.2% compared to the same
period in 2008.
Net sales for the first six months of 2009 were $3.4 billion, a decrease
of approximately 19.3%, compared to the same period in 2008. Excluding the
unfavorable impact of currency translation of approximately 12.4%, net sales
for the first six months of 2009 decreased approximately 6.9% compared to the
same period in 2008. For the first six months of 2009, net income was $0.98
per share and adjusted net income, excluding restructuring and other
infrequent expenses, was $1.00 per share. These results compare to reported
and adjusted net income of $1.90 per share for the first six months of 2008.
"The global recession had a major impact on farmer sentiment in the second
quarter of 2009, and with the accompanying constrained credit environment,
demand for agricultural equipment softened across the end markets in North
America, Europe and South America," stated Martin Richenhagen, AGCO's
Chairman, President and Chief Executive Officer. "We experienced weakening
order trends throughout the second quarter. In response to the decreased
order volume, the Company launched a series of operational and financial
actions aimed at cutting production, lowering inventory levels, reducing
operating expenses and generating cash flow. We will maintain these
priorities during the third and fourth quarters."
"In the second quarter, we made progress with our inventory reduction
efforts and cost reduction initiatives. By lowering production by
approximately 35% compared to the second quarter of 2008, inventories declined
by over $235 million from March 31, 2009 levels. We also took steps to adjust
our cost structure in response to lower demand and production levels. Through
a combination of layoffs, temporary furloughs, and the dismissal of temporary
employees, we lowered our workforce by approximately 17% since the beginning
of the year. Despite the progress, inventory continues to be above targeted
levels and our short-term focus will remain on lowering working capital,
reducing expenses and generating free cash flow. In addition, our long-term
optimism for our industry and our confidence in our strategy remains intact as
we continue investing in new technology, geographic expansion and productivity
improvements."
Net sales in the second quarter of 2009 showed the sharpest decline in
AGCO's South American region where sales declined 26% compared to the second
quarter of 2008, excluding unfavorable currency translation impacts. Weak
market conditions across all the South American markets drove the decline.
Sales in the Europe/Africa/Middle East (EAME) region decreased approximately
16.1% when compared to the second quarter of 2008, excluding unfavorable
currency translation impacts. A severe decline in the Russian and Eastern
European markets and softer demand in Central Europe and Scandinavia produced
most of the decrease in the EAME region. In the North American region, sales
in the second quarter declined less than 1% on a constant currency basis
compared to the same period in 2008.
Income from operations for the second quarter and first six months of 2009
decreased approximately $111.3 million and $146.9 million, respectively,
compared to the same periods in 2008. The decline resulted from a decrease in
net sales, reduced gross margins and the negative impact of currency
translation. Gross margins declined due to lower production volumes and a
weaker product mix partially offset by reduced workforce levels and cost
control initiatives. The Company maintained its investment in engineering
expense in the first six months of 2009 at levels slightly above the prior
year. Unit production of tractors and combines for the second quarter of 2009
was approximately 35% below comparable 2008 levels.
Market Update
Industry Unit Retail Sales
Tractors Combines
-------- --------
Change from Change from
Three Months Ended June 30, 2009 Prior Year Period Prior Year Period
-------------------------------- ----------------- -----------------
North America - 23% + 27%
South America - 28% - 56%
Europe - 11% + 2%
North America
Industry unit retail sales of tractors under 100 horsepower declined
approximately 25% in the second quarter compared to the prior year due to
weakness in the landscaping, residential construction and dairy sectors. High
horsepower tractors were down approximately 9% in the second quarter compared
to strong levels in the prior year. Industry unit retail sales of combines
for the second quarter of 2009 grew by 27% compared to the second quarter of
the prior year.
South America
Industry unit retail sales of tractors in Brazil decreased approximately
13% while industry unit retail sales in Argentina declined approximately 57%
during the second quarter of 2009 compared to 2008. The mix of tractor sales
in Brazil was heavily weighted toward smaller tractors as the Brazilian
government's special financing program for small farms stimulated sales of
lower horsepower tractors. Demand for high horsepower tractors in Brazil
remained well below last year's robust level.
Europe
Industry unit retail sales of tractors in Europe for the second quarter of
2009 decreased compared to the prior year period due to lower retail volumes
in all the major European markets except for France. The sharpest decline was
in the weakened dairy and livestock sectors. Industry sales were weakest in
Central and Eastern Europe, Russia, Scandinavia and Spain.
"The recent volatility in commodity prices has increased the level of
uncertainty around farm income and farmers remain conservative with their
equipment investments," stated Mr. Richenhagen. "In addition, the tight global
credit situation continues to constrain equipment sales in Eastern Europe and
Russia and, to a lesser extent, in South America. Planting is complete in the
Northern hemisphere, and crops have emerged in relatively good shape. Parts
of South America remain dry, but much of the Southern hemisphere has received
normal rainfall. With good crop production this year, global grain
inventories are expected to increase, but remain below historical levels on a
stocks-to-use basis. Longer term, world grain use is expected to increase
resulting from steady population growth, higher per capita incomes, changing
diets and increases in biofuel production. This will require additional
harvested area, increases in yields and a growing need for farm equipment. "
Regional Results
AGCO Regional Sales (in millions)
---------------------------------
% change from
% change 2008 due to
Net sales from 2008 currency translation
--------- --------- --------------------
Three months ended
June 30, 2009
-------------------
North America $445.8 -4.3% - 3.8%
South America 226.9 - 40.5% - 14.5%
Europe/Africa/Middle East 1,069.5 -28.0% - 11.9%
Asia/Pacific 53.0 -16.8% - 16.9%
----
Total $1,795.2 - 25.1% -10.8%
========
Six months ended
June 30, 2009
------------------
North America $839.1 + 0.7% - 4.6%
South America 406.4 - 42.2% - 15.9%
Europe/Africa/Middle East 2,035.4 - 19.6% - 13.7%
Asia/Pacific 93.3 - 19.4% - 18.6%
----
Total $3,374.2 - 19.3% - 12.4%
========
North America
In AGCO's North American region, stronger sales of high horsepower
tractors, balers and implements were offset by weaker sales of lower
horsepower tractors. In the second quarter of 2009, income from operations
grew approximately $25.9 million compared to the same period in 2008. Results
benefited from new products, reduced warranty expense, positive currency
impacts on imported products sold in North America and cost control
initiatives, partially offset by higher levels of engineering costs.
South America
Soft market conditions and a weaker product mix produced sales declines in
the South American region. Income from operations decreased approximately
$35.5 million in the second quarter of 2009 compared to the same period in
2008. Lower sales, significantly lower production levels, the unfavorable
impact of currency translation and a shift in sales mix to lower horsepower
tractors in Brazil produced lower income from operations compared to the
second quarter of 2008.
EAME
EAME sales declines were driven by lower sales in Eastern and Central
Europe, Russia, Scandinavia and Spain and were partially offset by increases
in Germany and France. AGCO's EAME region reported a decline of approximately
$94.4 million in income from operations for the second quarter of 2009
compared to the same period in 2008. Reduced sales, lower production levels,
unfavorable currency translation impacts and increased engineering expenses
all contributed to the decline.
Asia/Pacific
Net sales in AGCO'sAsia/Pacific region were flat during the second
quarter of 2009 compared to the same period in 2008, excluding unfavorable
currency translation impacts. Stronger sales in Australia, which has
benefited from increased rainfall, were offset by lower sales in Asia. Income
from operations in the Asia/Pacific region decreased approximately $3.9
million in the second quarter of 2009 compared to the same period in 2008, due
to lower gross margins and unfavorable currency translation impacts.
Outlook
The unstable global economy has created significant uncertainty about
market conditions, and worldwide industry demand for farm equipment is
expected to soften for the remainder of 2009. In North America, the market is
expected to decline with the largest reduction in low and medium horsepower
tractors. In South America, dry weather conditions and a reduction in planted
acreage and crop production are expected to produce significantly lower
industry volumes. Lower farm income in Europe is expected to drive reduced
industry sales in 2009, with the weakest markets being Central and Eastern
Europe and Russia.
For the full year of 2009, AGCO is targeting earnings per share in a range
from $2.00 to $2.25. Net sales are expected to range from $6.5 billion to
$6.8 billion, including unfavorable currency translation impacts of
approximately $750 million to $850 million. AGCO's earnings are expected to
be impacted by lower sales and production volumes and by engineering expenses
for new product development and Tier 4 emission requirements. The impacts
from production cuts and working capital reduction will continue to dampen
results in the second half of the year.
* * * * *
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, July 28, 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/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, sales, operating expenses, market conditions, inventory
levels, production volumes, industry demand, general economic conditions,
working capital, cash flow and other strategic initiatives, weather
conditions, grain inventories and use, currency translation impacts and
engineering expense, 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-K for the year ended December 31, 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.
-- Most of the retail sales of our products are financed either by our
retail finance joint ventures with Rabobank or by a bank or other
private lender. During 2008, our joint ventures with Rabobank, which
are dependent upon Rabobank for financing as well, financed
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 of the joint ventures
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. To the extent that financing is not available or available
at unattractive prices, our sales would be negatively impacted.
-- 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 and interest 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 our available cash flow may be adversely affected in the event
that payments become due under any pension plans that are unfunded or
underfunded. Declines in the market value of the securities used to
fund these obligations result in increased pension expense in future
periods.
-- 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.
-- We depend on suppliers for raw materials, 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 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.
* * * * *
About AGCO
AGCO, Your Agriculture Company (NYSE: AGCO), 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 2,800
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)
June 30, December 31,
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $190.2 $512.2
Restricted cash 7.3 33.8
Accounts and notes receivable, net 916.7 815.6
Inventories, net 1,443.0 1,389.9
Deferred tax assets 40.5 56.6
Other current assets 185.5 197.1
----- -----
Total current assets 2,783.2 3,005.2
Property, plant and equipment, net 878.9 811.1
Investment in affiliates 306.6 275.1
Deferred tax assets 44.1 29.9
Other assets 91.5 69.6
Intangible assets, net 172.0 176.9
Goodwill 610.1 587.0
----- -----
Total assets $4,886.4 $4,954.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $0.1 $0.1
Convertible senior subordinated notes 189.1 -
Accounts payable 670.3 1,027.1
Accrued expenses 781.2 799.8
Other current liabilities 94.6 151.5
---- -----
Total current liabilities 1,735.3 1,978.5
Long-term debt, less current portion 444.6 625.0
Pensions and postretirement health care benefits 177.1 173.6
Deferred tax liabilities 105.6 108.1
Other noncurrent liabilities 74.0 49.6
---- ----
Total liabilities 2,536.6 2,934.8
------- -------
Stockholders' Equity:
AGCO Corporation stockholders' equity:
Common stock 0.9 0.9
Additional paid-in capital 1,070.5 1,067.4
Retained earnings 1,473.2 1,382.1
Accumulated other comprehensive loss (202.3) (436.1)
------ ------
Total AGCO Corporation stockholders' equity 2,342.3 2,014.3
------- -------
Noncontrolling interests 7.5 5.7
--- ---
Total stockholders' equity 2,349.8 2,020.0
------- -------
Total liabilities and stockholders' equity $4,886.4 $4,954.8
======== ========
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,
---------------------------
2009 2008
---- ----
Net sales $1,795.2 $2,395.4
Cost of goods sold 1,503.7 1,967.2
------- -------
Gross profit 291.5 428.2
Selling, general and administrative
expenses 154.2 181.0
Engineering expenses 52.1 53.0
Restructuring and other infrequent expenses 2.8 0.1
Amortization of intangibles 4.6 5.0
--- ---
Income from operations 77.8 189.1
Interest expense, net 11.7 9.0
Other expense, net 8.3 9.6
--- ---
Income before income taxes and equity in
net earnings of affiliates 57.8 170.5
Income tax provision 14.4 55.5
---- ----
Income before equity in net earnings of
affiliates 43.4 115.0
Equity in net earnings of affiliates 13.6 14.6
---- ----
Net income 57.0 129.6
Net loss attributable to noncontrolling
interests 0.4 -
--- ---
Net income attributable to AGCO Corporation
and subsidiaries $57.4 $129.6
===== ======
Net income per common share attributable to
AGCO Corporation and subsidiaries:
Basic $0.62 $1.41
===== =====
Diluted $0.61 $1.31
===== =====
Weighted average number of common and
common equivalent shares outstanding:
Basic 92.3 91.7
==== ====
Diluted 93.8 99.1
==== ====
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,
-------------------------
2009 2008
---- ----
Net sales $3,374.2 $4,182.0
Cost of goods sold 2,810.4 3,438.6
------- -------
Gross profit 563.8 743.4
Selling, general and administrative
expenses 315.8 351.6
Engineering expenses 100.1 98.4
Restructuring and other infrequent expenses 2.8 0.2
Amortization of intangibles 8.7 9.9
--- ---
Income from operations 136.4 283.3
Interest expense, net 23.4 17.6
Other expense, net 14.8 15.6
---- ----
Income before income taxes and equity in
net earnings of affiliates 98.2 250.1
Income tax provision 28.8 85.3
---- ----
Income before equity in net earnings of
affiliates 69.4 164.8
Equity in net earnings of affiliates 21.9 23.6
---- ----
Net income 91.3 188.4
Net income attributable to noncontrolling
interests (0.2) -
---- ----
Net income attributable to AGCO Corporation
and subsidiaries $91.1 $188.4
===== ======
Net income per common share attributable to
AGCO Corporation and subsidiaries:
Basic $0.99 $2.05
===== =====
Diluted $0.98 $1.90
===== =====
Weighted average number of common and
common equivalent shares outstanding:
Basic 92.1 91.7
==== ====
Diluted 92.9 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,
-------------------------
2009 2008
---- ----
Cash flows from operating activities:
Net income attributable to AGCO
Corporation and subsidiaries $91.1 $188.4
----- ------
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation 58.2 63.5
Deferred debt issuance cost
amortization 1.4 1.8
Amortization of intangibles 8.7 9.9
Amortization of debt discount 7.5 7.0
Stock compensation 8.4 15.0
Equity in net earnings of affiliates,
net of cash received (14.2) (15.8)
Deferred income tax provision (7.2) 17.2
Gain on sale of property, plant and
equipment (0.2) (0.1)
Changes in operating assets and
liabilities:
Accounts and notes receivable, net (40.6) (9.2)
Inventories, net 2.2 (320.4)
Other current and noncurrent assets (0.4) (39.7)
Accounts payable (344.6) 85.9
Accrued expenses (28.1) 69.3
Other current and noncurrent
liabilities (9.7) (11.5)
---- -----
Total adjustments (358.6) (127.1)
------ ------
Net cash (used in) provided by
operating activities (267.5) 61.3
------ ----
Cash flows from investing activities:
Purchases of property, plant and
equipment (101.5) (99.7)
Proceeds from sale of property, plant
and equipment 1.4 1.8
Investments in unconsolidated
affiliates (0.2) (0.4)
Restricted cash and other 29.0 -
---- ----
Net cash used in investing activities (71.3) (98.3)
----- -----
Cash flows from financing activities:
(Repayment of) proceeds from debt
obligations, net (19.4) 1.6
Proceeds from issuance of common stock - 0.2
Payment of minimum tax withholdings on
stock compensation (5.2) (3.1)
Payment of debt issuance costs - (1.3)
Investments by noncontrolling interests 1.3 -
--- ----
Net cash used in financing activities (23.3) (2.6)
----- ----
Effect of exchange rate changes on cash
and cash equivalents 40.1 15.7
---- ----
Decrease in cash and cash equivalents (322.0) (23.9)
Cash and cash equivalents, beginning of period 512.2 582.4
----- -----
Cash and cash equivalents, end of period $190.2 $558.5
====== ======
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 six months ended June 30, 2009, the Company
recorded approximately $2.3 million and $8.7 million, respectively, of stock
compensation expense. During the three months and six months ended June 30,
2008, the Company recorded approximately $8.6 million and $15.2 million,
respectively, of stock compensation expense. The stock compensation expense
was recorded as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Cost of goods sold $- $0.2 $0.5 $0.4
Selling, general and
administrative expenses 2.3 8.4 8.2 14.8
--- --- --- ----
Total stock compensation
expense $2.3 $8.6 $8.7 $15.2
==== ==== ==== =====
2. RESTRUCTURING AND OTHER INFREQUENT EXPENSES
During the second quarter of 2009, the Company recorded restructuring and
other infrequent expenses of approximately $2.8 million. These charges
primarily related to severance costs associated with the Company's
rationalization of its operations in the United States, United Kingdom and
Finland.
During the second quarter of 2008, the Company recorded and incurred
employee relocation costs of approximately $0.1 million associated with the
closure of one of its German sales offices initiated in 2006.
3. INDEBTEDNESS
Indebtedness at June 30, 2009 and December 31, 2008 consisted of the
following:
June 30, December 31,
2009 2008
---- ----
6 7/8% Senior subordinated notes due 2014 $280.7 $279.4
1 3/4% Convertible senior subordinated
notes due 2033 189.1 185.3
1 1/4% Convertible senior subordinated
notes due 2036 163.9 160.3
Other long-term debt 0.1 0.1
--- ---
633.8 625.1
Less: Current portion of long-term debt (0.1) (0.1)
1 3/4% Convertible senior
subordinated notes due 2033 (189.1) -
====== ======
Total indebtedness, less current
portion $444.6 $625.0
====== ======
Holders of the Company's 1 3/4% convertible senior subordinated notes due
2033 and 1 1/4% 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
1 3/4% convertible senior subordinated notes and $40.73 per share for the 1
1/4% 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 June 30, 2009, the closing sales price of the Company's
common stock had exceeded 120% of the conversion price of the 1 3/4%
convertible senior subordinated notes for at least 20 trading days in the 30
consecutive trading days ending June 30, 2009, and, therefore, the Company
classified the notes as a current liability. Future classification of both
notes between current and long-term debt is dependent on the closing sales
price of the Company's common stock during future quarters. The Company
believes it is unlikely the holders of the notes would convert the notes under
the provisions of the indenture agreement, thereby requiring the Company to
repay the principal portion in cash. In the event the notes were converted,
the Company believes it could repay the notes with available cash on hand,
funds from the Company's $300.0 million multi-currency revolving credit
facility, or a combination of these sources.
4. INVENTORIES
Inventories at June 30, 2009 and December 31, 2008 were as follows:
June 30, December 31,
2009 2008
---- ----
Finished goods $650.9 $484.9
Repair and replacement parts 385.4 396.1
Work in process 116.7 130.5
Raw materials 290.0 378.4
----- -----
Inventories, net $1,443.0 $1,389.9
======== ========
5. 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 United States subsidiary under its United States and Canadian
securitization facilities and through a qualifying special purpose entity in
the United Kingdom under its European securitization facility. Outstanding
funding under these facilities totaled approximately $482.2 million at June
30, 2009 and $483.2 million at December 31, 2008. 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 $5.2 million and $8.3 million
for the three months ended June 30, 2009 and 2008, respectively, and $10.2
million and $14.5 million for the six months ended June 30, 2009 and 2008,
respectively.
6. 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 attributable to AGCO Corporation
and subsidiaries and weighted average common shares outstanding for purposes
of calculating basic and diluted earnings per share for the three and six
months ended June 30, 2009 and 2008 is as follows:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2009 2008 2009 2008
---- ---- ---- ----
Basic net income
per share:
Net income
attributable to
AGCO Corporation
and subsidiaries $57.4 $129.6 $91.1 $188.4
===== ====== ===== ======
Weighted average
number of common
shares outstanding 92.3 91.7 92.1 91.7
---- ---- ---- ----
Basic net income
per share
attributable to
AGCO Corporation
and subsidiaries $0.62 $1.41 $0.99 $2.05
===== ===== ===== =====
Diluted net income
per share:
Net income
attributable to
AGCO Corporation
and subsidiaries
for purposes of
computing diluted
net income per
share $57.4 $129.6 $91.1 $188.4
===== ====== ===== ======
Weighted average
number of common
shares outstanding 92.3 91.7 92.1 91.7
Dilutive stock
options, performance
share awards and
restricted stock
awards 0.2 0.2 0.2 0.2
Weighted average
assumed conversion of
contingently convertible
senior subordinated
notes 1.3 7.2 0.6 7.3
--- --- --- ---
Weighted average
number of common
and common equivalent
shares outstanding
for purposes of
computing diluted
earnings per share 93.8 99.1 92.9 99.2
==== ==== ==== ====
Diluted net income
per share attributable
to AGCO Corporation
and subsidiaries $0.61 $1.31 $0.98 $1.90
===== ===== ===== =====
7. 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 and six months ended June 30,
2009 and 2008 are as follows:
Three Months Ended North South Europe/Africa/ Asia/
June 30, America America Middle East Pacific Consolidated
-------- ------- ------- ----------- ------- ------------
2009
Net sales $445.8 $226.9 $1,069.5 $53.0 $1,795.2
Income from
operations 24.6 1.0 81.0 4.0 110.6
2008
Net sales $465.7 $381.1 $1,484.8 $63.8 $2,395.4
(Loss) income from
operations (1.3) 36.5 175.4 7.9 218.5
North South Europe/Africa/ Asia/
Six Months Ended America America Middle East Pacific Consolidated
June 30, ------- ------- ----------- ------- ------------
--------
2009
Net sales $839.1 $406.4 $2,035.4 $93.3 $3,374.2
Income from
operations 29.8 6.4 158.7 6.4 201.3
2008
Net sales $833.4 $702.5 $2,530.3 $115.8 $4,182.0
(Loss) income from
operations (14.3) 70.9 272.8 13.7 343.1
A reconciliation from the segment information to the consolidated balances
for income from operations is set forth below:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Segment income from operations $110.6 $218.5 $201.3 $343.1
Corporate expenses (23.1) (15.9) (45.2) (34.9)
Stock compensation expense (2.3) (8.4) (8.2) (14.8)
Restructuring and other
infrequent expenses (2.8) (0.1) (2.8) (0.2)
Amortization of intangibles (4.6) (5.0) (8.7) (9.9)
---- ---- ---- ----
Consolidated income from
operations $77.8 $189.1 $136.4 $283.3
===== ====== ====== ======
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 June 30, 2009 and 2008 (in
millions, except per share data):
Three months ended June 30,
------------------------------------------------------------
2009 2008
------------------------------ -----------------------------
Income Earnings Income Earnings
From Net Per From Net Per
Operations Income(1) Share(1) Operations Income(1) Share(1)
---------- --------- -------- ---------- --------- --------
As adjusted $80.6 $59.6 $0.64 $189.2 $129.6 $1.31
Restructuring
and other
infrequent
expenses(2) 2.8 2.2 0.02 0.1 - -
--- --- ---- --- --- ---
As reported $77.8 $57.4 $0.61 $189.1 $129.6 $1.31
===== ===== ===== ====== ====== =====
(1) Net income and earnings per share amounts are after tax (rounding
may impact the summation of certain line items).
(2) The restructuring and other infrequent expenses recorded during the
second quarter of 2009 related primarily to severance costs associated
with the Company's rationalization of its operations in the United
States, United Kingdom and Finland. The restructuring and other
infrequent expenses recorded during the second quarter of 2008 related
to employee relocation costs associated with the closure of one of the
Company's German sales offices initiated in 2006.
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 six months ended June 30, 2009 and 2008 (in
millions, except per share data):
Six months ended June 30,
------------------------------------------------------------
2009 2008
------------------------------ -----------------------------
Income Earnings Income Earnings
From Net Per From Net Per
Operations Income(1) Share(1) Operations Income(1) Share(1)
---------- --------- -------- ---------- --------- --------
As adjusted $139.2 $93.3 $1.00 $283.5 $188.5 $1.90
Restructuring
and other
infrequent
expenses(2) 2.8 2.2 0.02 0.2 0.1 -
--- --- ---- --- --- ---
As reported $136.4 $91.1 $0.98 $283.3 $188.4 $1.90
====== ===== ===== ====== ====== =====
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring and other infrequent expenses recorded during the
first six months of 2009 related primarily to severance costs associated
with the Company's rationalization of its operations in the United
States, United Kingdom and Finland. The restructuring and other
infrequent expenses recorded during the first six months of 2008 related
primarily 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
CONTACT:
Greg Peterson
Director of Investor Relations of AGCO
+1-770-232-8229
greg.peterson@agcocorp.com
Web Site: http://www.agcocorp.com
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