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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19898
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AGCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1960019
(State of incorporation) (I.R.S. Employer Identification No.)
4830 River Green Parkway
Duluth, Georgia 30136
(Address of principal executive
offices including zip code)
Registrant's telephone number, including area code: (770) 813-9200
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common stock par value $.01 per share: 57,125,955 shares outstanding as of
June 30, 1996.
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AGCO CORPORATION AND SUBSIDIARIES
INDEX
Page
Numbers
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - June 30, 1996 and December 31, 1995 . . . . . . . . . . . 3
Condensed Consolidated Statements
of Income for the Three Months
Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements
of Income for the Six Months
Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements
of Cash Flows for the Six Months
Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2
Part I. Financial Information
Item 1. Financial Statements
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
CONSOLIDATED EQUIPMENT OPERATIONS
-------------------------------- --------------------------------
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
ASSETS (Unaudited) (Unaudited)
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . $ 31,913 $ 27,858 $ 29,013 $ 20,023
Accounts and notes receivable, net of
allowances . . . . . . . . . . . . . . . . . . 836,901 785,801 836,901 785,801
Receivables from unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . 4,227 4,029 6,098 4,029
Credit receivables, net . . . . . . . . . . . . . 207,699 185,401 - -
Inventories, net . . . . . . . . . . . . . . . . 485,460 360,969 485,460 360,969
Other current assets . . . . . . . . . . . . . . 73,435 60,442 69,967 56,950
--------------- --------------- --------------- ---------------
Total current assets . . . . . . . . . . . . . . 1,639,635 1,424,500 1,427,439 1,227,772
Noncurrent credit receivables, net . . . . . . . . . 415,392 397,177 - -
Property, plant and equipment, net . . . . . . . . . 243,732 146,521 243,407 146,172
Investments in unconsolidated
subsidiary and affiliates . . . . . . . . . . . . 47,677 45,963 112,886 105,913
Other assets . . . . . . . . . . . . . . . . . . . . 52,710 44,510 52,710 44,510
Intangible assets, net . . . . . . . . . . . . . . . 208,870 104,244 208,870 104,244
--------------- --------------- --------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . $2,608,016 $2,162,915 $2,045,312 $1,628,611
=============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . $ 399,860 $ 361,376 $ - $ -
Accounts payable. . . . . . . . . . . . . . . . . 342,367 325,701 339,039 319,711
Payables to unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . 25,550 4,837 25,550 9,523
Accrued expenses . . . . . . . . . . . . . . . . 253,788 233,848 242,779 223,839
Other current liabilities . . . . . . . . . . . . 11,781 13,217 11,781 13,217
--------------- --------------- --------------- ---------------
Total current liabilities . . . . . . . . . . 1,033,346 938,979 619,149 566,290
--------------- --------------- --------------- ---------------
Long-term debt . . . . . . . . . . . . . . . . . . . 827,434 531,336 688,434 378,336
Convertible subordinated debentures . . . . . . . . - 37,558 - 37,558
Postretirement health care benefits. . . . . . . . . 24,021 23,561 24,021 23,561
Other noncurrent liabilities . . . . . . . . . . . . 43,149 42,553 33,642 33,938
--------------- --------------- --------------- ---------------
Total liabilities . . . . . . . . . . . . . . 1,927,950 1,573,987 1,365,246 1,039,683
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares
authorized, 57,125,955 and 50,557,040 shares issued
and outstanding at June 30, 1996 and
December 31, 1995, respectively . . . . . . . . . 572 506 572 506
Additional paid-in capital . . . . . . . . . . . 359,831 307,189 359,831 307,189
Retained earnings . . . . . . . . . . . . . . . . 341,279 287,706 341,279 287,706
Unearned compensation . . . . . . . . . . . . . . (28,850) (22,587) (28,850) (22,587)
Additional minimum pension liability. . . . . . . (2,619) (2,619) (2,619) (2,619)
Cumulative translation adjustment . . . . . . . . 9,853 18,733 9,853 18,733
--------------- --------------- --------------- ---------------
Total stockholders' equity . . . . . . . . . . . 680,066 588,928 680,066 588,928
--------------- --------------- --------------- ---------------
Total liabilities and stockholders' equity . . . $2,608,016 $2,162,915 $2,045,312 $1,628,611
=============== =============== =============== ===============
See accompanying notes to condensed consolidated financial statements.
3
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
FINANCE COMPANY
--------------------------------
June 30, December 31,
1996 1995
--------------- ---------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . $ 2,900 $ 7,835
Accounts and notes receivable, net of
allowances . . . . . . . . . . . . . . . . . . - -
Receivables from unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . - 4,686
Credit receivables, net . . . . . . . . . . . . . 207,699 185,401
Inventories, net . . . . . . . . . . . . . . . . - -
Other current assets . . . . . . . . . . . . . . 3,468 3,492
--------------- ---------------
Total current assets . . . . . . . . . . . . . . 214,067 201,414
Noncurrent credit receivables, net . . . . . . . . . 415,392 397,177
Property, plant and equipment, net . . . . . . . . . 325 349
Investments in unconsolidated
subsidiary and affiliates . . . . . . . . . . . . - -
Other assets . . . . . . . . . . . . . . . . . . . . - -
Intangible assets, net . . . . . . . . . . . . . . . - -
--------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . $629,784 $598,940
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . $399,860 $361,376
Accounts payable. . . . . . . . . . . . . . . . . 3,328 5,990
Payables to unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . 1,871 -
Accrued expenses . . . . . . . . . . . . . . . . 11,009 10,009
Other current liabilities . . . . . . . . . . . . - -
--------------- ---------------
Total current liabilities . . . . . . . . . . 416,068 377,375
--------------- ---------------
Long-term debt . . . . . . . . . . . . . . . . . . . 139,000 153,000
Convertible subordinated debentures . . . . . . . . - -
Postretirement health care benefits. . . . . . . . . - -
Other noncurrent liabilities . . . . . . . . . . . . 9,507 8,615
--------------- ---------------
Total liabilities . . . . . . . . . . . . . . 564,575 538,990
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares
authorized, 57,125,955 and 50,557,040 shares
issued and outstanding at June 30, 1996 and
December 31, 1995, respectively . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . 48,834 48,834
Retained earnings . . . . . . . . . . . . . . . . 16,413 11,150
Unearned compensation . . . . . . . . . . . . . . - -
Additional minimum pension liability. . . . . . . - -
Cumulative translation adjustment . . . . . . . . (39) (35)
--------------- ---------------
Total stockholders' equity . . . . . . . . . . . 65,209 59,950
--------------- ---------------
Total liabilities and stockholders' equity . . . $629,784 $598,940
=============== ===============
See accompanying notes to condensed consolidated financial statements.
3
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
CONSOLIDATED EQUIPMENT OPERATIONS
--------------------------------- --------------------------------
Three Months Ended Three Months Ended
June 30, June 30,
--------------------------------- --------------------------------
1996 1995 1996 1995
--------------- -------------- ------------ -----------------
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $584,681 $558,594 $584,681 $558,594
Finance income . . . . . . . . . . . . . . . . . . . 16,950 13,124 - -
-------------- -------------- ------------ ----------------
601,631 571,718 584,681 558,594
-------------- -------------- ------------ ----------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . 468,887 441,150 468,887 441,150
Selling, general and administrative expenses . . . . 52,107 51,255 48,646 47,299
Engineering expenses . . . . . . . . . . . . . . . . 6,737 6,432 6,737 6,432
Interest expense, net . . . . . . . . . . . . . . . 16,416 16,428 7,183 8,845
Other expense (income), net . . . . . . . . . . . . 1,201 2,501 1,225 2,510
Nonrecurring expenses . . . . . . . . . . . . . . . 794 1,740 794 1,740
-------------- -------------- ------------ ----------------
546,142 519,506 533,472 507,976
-------------- -------------- ------------ ----------------
Income before income taxes and equity in net earnings
of unconsolidated subsidiary and affiliates. . . . . 55,489 52,212 51,209 50,618
Provision for income taxes . . . . . . . . . . . . . . . 19,837 17,900 18,150 17,278
-------------- -------------- ------------ ----------------
Income before equity in net earnings of unconsoli-
dated subsidiary and affiliates. . . . . . . . . . . 35,652 34,312 33,059 33,340
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . . . 1,856 1,576 4,449 2,548
-------------- -------------- ------------ ----------------
Net income . . . . . . . . . . . . . . . . . . . . . . . 37,508 35,888 37,508 35,888
Preferred stock dividends. . . . . . . . . . . . . . . . - 799 - 799
-------------- -------------- ------------ ----------------
Net income available for common stockholders . . . . . . $ 37,508 $ 35,089 $37,508 $35,089
============== ============== ============ ================
Net income per common share:
Primary $ 0.69 $ 0.78
============== ==============
Fully diluted $ 0.66 $ 0.64
============== ==============
Weighted average number of common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 54,222 44,896
============== ==============
Fully diluted . . . . . . . . . . . . . . . . . . . 57,384 56,178
============== ==============
Dividends declared per common share . . . . . . . . . . $ 0.01 $ 0.01
============== ==============
See accompanying notes to condensed consolidated financial statements.
4
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
FINANCE COMPANY
---------------------------------
Three Months Ended
June 30,
---------------------------------
1996 1995
--------------- --------------
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ - $ -
Finance income . . . . . . . . . . . . . . . . . . . 16,950 13,124
--------------- --------------
16,950 13,124
--------------- --------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . - -
Selling, general and administrative expenses . . . . 3,461 3,956
Engineering expenses . . . . . . . . . . . . . . . . - -
Interest expense, net . . . . . . . . . . . . . . . 9,233 7,583
Other expense (income), net . . . . . . . . . . . . (24) (9)
Nonrecurring expenses . . . . . . . . . . . . . . . - -
--------------- --------------
12,670 11,530
--------------- --------------
Income before income taxes and equity in net earnings
of unconsolidated subsidiary and affiliates. . . . . 4,280 1,594
Provision for income taxes . . . . . . . . . . . . . . . 1,687 622
--------------- --------------
Income before equity in net earnings of unconsolidated
subsidiary and affiliates . . . . . . . . . . . . . 2,593 972
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . . . - -
--------------- --------------
Net income . . . . . . . . . . . . . . . . . . . . . . . 2,593 972
Preferred stock dividends. . . . . . . . . . . . . . . . - -
--------------- --------------
Net income available for common stockholders . . . . . . $ 2,593 $ 972
=============== ==============
See accompanying notes to condensed consolidated financial statements.
4
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
CONSOLIDATED EQUIPMENT OPERATIONS
--------------------------------- --------------------------------
Six Months Ended Six Months Ended
June 30, June 30,
--------------------------------- --------------------------------
1996 1995 1996 1995
--------------- -------------- ------------ -----------------
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $1,038,565 $1,002,130 $1,038,565 $1,002,130
Finance income . . . . . . . . . . . . . . . . . . . 33,758 25,807 - -
--------------- -------------- ------------- --------------
1,072,323 1,027,937 1,038,565 1,002,130
--------------- -------------- ------------- --------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . 829,031 791,488 829,031 791,488
Selling, general and administrative expenses . . . . 101,546 98,845 94,892 91,409
Engineering expenses . . . . . . . . . . . . . . . . 13,716 11,551 13,716 11,551
Interest expense, net . . . . . . . . . . . . . . . 31,468 31,743 13,147 17,191
Other expense (income), net . . . . . . . . . . . . 3,667 3,068 3,668 3,130
Nonrecurring expenses . . . . . . . . . . . . . . . 6,717 3,752 6,717 3,752
--------------- -------------- ------------- ---------------
986,145 940,447 961,171 918,521
--------------- -------------- ------------- ---------------
Income before income taxes, equity in net earnings
of unconsolidated subsidiary and affiliates
and extraordinary loss . . . . . . . . . . . . . . . 86,178 87,490 77,394 83,609
Provision for income taxes . . . . . . . . . . . . . . . 30,704 30,301 27,183 28,787
--------------- -------------- ------------- ----------------
Income before equity in net earnings of unconsoli-
dated subsidiary and affiliates and
extraordinary loss . . . . . . . . . . . . . . . . . 55,474 57,189 50,211 54,822
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . . . 2,629 2,083 7,892 4,450
--------------- -------------- ------------- ----------------
Income before extraordinary loss . . . . . . . . . . . . 58,103 59,272 58,103 59,272
Extraordinary loss, net of taxes . . . . . . . . . . . . (3,503) - (3,503) -
--------------- -------------- ------------- ----------------
Net income . . . . . . . . . . . . . . . . . . . . . . . 54,600 59,272 54,600 59,272
Preferred stock dividends. . . . . . . . . . . . . . . . - 2,012 - 2,012
--------------- -------------- ------------- ----------------
Net income available for common stockholders . . . . . . $ 54,600 $ 57,260 $ 54,600 $ 57,260
=============== ============== ============= ================
Net income per common share:
Primary:
Income before extraordinary loss. . . . . . . . . $ 1.10 $ 1.29
Extraordinary loss . . . . . . . . . . . . . . . (0.07) -
--------------- --------------
Net income . . . . . . . . . . . . . . . . . . . $ 1.03 $ 1.29
=============== ==============
Fully diluted:
Income before extraordinary loss . . . . . . . . $ 1.02 $ 1.06
Extraordinary loss. . . . . . . . . . . . . . . . (0.06) -
--------------- --------------
Net income . . . . . . . . . . . . . . . . . . . $ 0.96 $ 1.06
=============== ==============
Weighted average number of common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 52,757 44,474
=============== ==============
Fully diluted . . . . . . . . . . . . . . . . . . . 57,237 56,080
=============== ==============
Dividends declared per common share . . . . . . . . . . $ 0.02 $ 0.02
=============== ==============
See accompanying notes to condensed consolidated financial statements.
5
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
FINANCE COMPANY
---------------------------------
Six Months Ended
June 30,
---------------------------------
1996 1995
--------------- --------------
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ - $ -
Finance income . . . . . . . . . . . . . . . . . . . 33,758 25,807
-------------- --------------
33,758 25,807
-------------- --------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . - -
Selling, general and administrative expenses . . . . 6,654 7,436
Engineering expenses . . . . . . . . . . . . . . . . - -
Interest expense, net . . . . . . . . . . . . . . . 18,321 14,552
Other expense (income), net . . . . . . . . . . . . (1) (62)
Nonrecurring expenses . . . . . . . . . . . . . . . - -
-------------- --------------
24,974 21,926
-------------- --------------
Income before income taxes, equity in net earnings
of unconsolidated subsidiary and affiliates
and extraordinary loss . . . . . . . . . . . . . . . 8,784 3,881
Provision for income taxes . . . . . . . . . . . . . . . 3,521 1,514
-------------- --------------
Income before equity in net earnings of unconsoli-
dated subsidiary and affiliates and
extraordinary loss . . . . . . . . . . . . . . . . . 5,263 2,367
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . - -
-------------- --------------
Income before extraordinary loss . . . . . . . . . . . . 5,263 2,367
Extraordinary loss, net of taxes . . . . . . . . . . . . - - -
-------------- --------------
Net income . . . . . . . . . . . . . . . . . . . . . . . 5,263 2,367
Preferred stock dividends. . . . . . . . . . . . . . . . - -
-------------- --------------
Net income available for common stockholders . . . . . . $ 5,263 $ 2,367
============== ==============
See acompanying notes to condensed consolidated financial statements.
5
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
CONSOLIDATED EQUIPMENT OPERATIONS
----------------------------------- ------------------------------
Six Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------
1996 1995 1996 1995
--------------- ------------------ -------------- -------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $54,600 $59,272 $54,600 $59,272
--------------- ------------------ -------------- -------------
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Extraordinary loss, net of taxes . . . . . . . . 3,503 - 3,503 -
Depreciation and amortization. . . . . . . . . . 12,698 11,995 12,633 11,943
Equity in net earnings of unconsolidated
subsidiary and affiliates,
net of cash received . . . . . . . . . . . . (2,629) (2,083) (7,892) (4,450)
Deferred income tax provision (benefit). . . . . 8,714 17,086 8,931 18,056
Amortization of intangibles. . . . . . . . . . . 2,018 1,861 2,018 1,861
Amortization of unearned compensation . . . . . 7,432 1,354 7,432 1,354
Provision for losses on credit receivables . . . 2,003 2,903 - -
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Accounts and notes receivable, net. . . . . . (38,126) (132,299) (39,997) (124,514)
Inventories, net. . . . . . . . . . . . . . . (87,946) (82,370) (87,946) (82,370)
Other current and noncurrent assets . . . . . (6,801) 1,515 (7,023) 1,406
Accounts payable . . . . . . . . . . . . . . 28,340 33,029 26,316 34,448
Accrued expenses. . . . . . . . . . . . . . . 14,766 4,148 13,770 4,055
Other current and noncurrent liabilities. . . 4,065 (11,590) 3,173 (11,711)
--------------- ------------------ -------------- -------------
Total adjustments . . . . . . . . . . . . . . (51,963) (154,451) (65,082) (149,922)
--------------- ------------------ -------------- -------------
Net cash provided by (used for) operating
activities . . . . . . . . . . . . . . . . . 2,637 (95,179) (10,482) (90,650)
--------------- ------------------ -------------- -------------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired . . . (6,417) (23,123) (6,417) (23,123)
Purchase of property, plant and equipment . . . . . (15,493) (13,372) (15,471) (13,288)
Credit receivables originated . . . . . . . . . . . (198,302) (153,262) - -
Principal collected on credit receivables . . . . . 155,786 117,654 - -
Investments in unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . . . - (1,708) - (1,708)
--------------- ------------------ -------------- -------------
Net cash used for investing activities . . . (64,426) (73,811) (21,888) (38,119)
--------------- ------------------ -------------- -------------
Cash flows from financing activities:
Proceeds on long-term debt, net . . . . . . . . . 76,352 171,528 51,868 139,997
Payment of debt issuance costs . . . . . . . . . . (10,590) - (10,590) -
Proceeds from issuance of common stock . . . . . . 1,454 224 1,454 224
Dividends paid on common stock. . . . . . . . . . . (1,027) (436) (1,027) (436)
Dividends paid on preferred stock . . . . . . . . . - (2,420) - (2,420)
(Payments) proceeds on short-term borrowings from
unconsolidated subsidiary and affiliates, net. . . - - - (5,333)
--------------- ------------------ -------------- -------------
Net cash provided by financing activities . . 66,189 168,896 41,705 132,032
--------------- ------------------ -------------- -------------
Effect of exchange rate changes on cash and cash (345) 1,044 (345) 1,044
equivalents . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents . . . . 4,055 950 8,990 4,307
Cash and cash equivalents, beginning of period . . . . . 27,858 25,826 20,023 21,844
--------------- ------------------ -------------- -------------
Cash and cash equivalents, end of period . . . . . . . . $31,913 $26,776 $29,013 $26,151
=============== ================== ============== =============
See accompanying notes to condensed consolidated financial statements.
6
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
FINANCE COMPANY
-----------------------------------
Six Months Ended
June 30,
-----------------------------------
1996 1995
--------------- ------------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 5,263 $ 2,367
--------------- ------------------
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Extraordinary loss, net of taxes . . . . . . . . - -
Depreciation and amortization. . . . . . . . . . 65 52
Equity in net earnings of unconsolidated
subsidiary and affiliates,
net of cash received . . . . . . . . . . . . . - -
Deferred income tax provision (benefit). . . . . (217) (970)
Amortization of intangibles. . . . . . . . . . . - -
Amortization of unearned compensation . . . . . - -
Provision for losses on credit receivables . . . 2,003 2,903
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Accounts and notes receivable, net. . . . . . - -
Inventories, net. . . . . . . . . . . . . . . - -
Other current and noncurrent assets . . . . . 222 109
Accounts payable . . . . . . . . . . . . . . 3,895 (9,204)
Accrued expenses. . . . . . . . . . . . . . . 996 93
Other current and noncurrent liabilities. . . 892 121
--------------- ------------------
Total adjustments . . . . . . . . . . . . . . 7,856 (6,896)
--------------- ------------------
Net cash provided by(used for)operating
activities . . . . . . . . . . . . . . . . . 13,119 (4,529)
--------------- ------------------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired . . . - -
Purchase of property, plant and equipment . . . . . (22) (84)
Credit receivables originated . . . . . . . . . . . (198,302) (153,262)
Principal collected on credit receivables . . . . . 155,786 117,654
Investments in unconsolidated subsidiary and
affiliates. . . . . . . . . . . . . . . . . . . . . - -
--------------- ------------------
Net cash used for investing activities . . . (42,538) (35,692)
--------------- ------------------
Cash flows from financing activities:
Proceeds on long-term debt, net . . . . . . . . . . 24,484 31,531
Payment of debt issuance costs . . . . . . . . . . - -
Proceeds from issuance of common stock . . . . . . - -
Dividends paid on common stock. . . . . . . . . . . - -
Dividends paid on preferred stock . . . . . . . . . - -
(Payments) proceeds on short-term borrowings from
unconsolidated subsidiary and affiliates, net . . . - 5,333
--------------- ------------------
Net cash provided by financing activities . . 24,484 36,864
--------------- ------------------
Effect of exchange rate changes on cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . - -
Increase (decrease) in cash and cash equivalents . . . . (4,935) (3,357)
Cash and cash equivalents, beginning of period . . . . . 7,835 3,982
--------------- ------------------
Cash and cash equivalents, end of period . . . . . . . . $ 2,900 $ 625
=============== ==================
See accompanying notes to condensed consolidated financial statements.
6
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of AGCO Corporation and
subsidiaries (the "Company" or "AGCO") included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, which are of a normal
recurring nature, to present fairly the Company's financial position, results of
operations and cash flows at the dates and for the periods presented. These
condensed consolidated financial statements should be read in conjunction with
the Company's audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Interim results of operations are not necessarily indicative of results to be
expected for the fiscal year.
The accompanying condensed consolidated financial statements include,
on a separate, supplemental basis, the Company's Equipment Operations and its
Finance Company. "Equipment Operations" reflect the consolidation of all
operations of the Company and its subsidiaries with the exception of Agricredit
Acceptance Company ("Agricredit"), a wholly-owned finance subsidiary, which is
included using the equity method of accounting. The results of operations of
Agricredit are included under the caption "Finance Company." All significant
intercompany transactions, including activity within and between the Equipment
Operations and Finance Company, have been eliminated to arrive at the
"Consolidated" financial statements. Certain prior period amounts have been
reclassified to conform with the current period presentation.
2. ACQUISITIONS
Effective June 28, 1996, the Company acquired certain assets and
liabilities of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Agricultural Equipment Business") for
consideration consisting of approximately $260.0 million (the "Maxion
Acquisition"). The Maxion Acquisition was financed primarily by borrowings under
the Company's $650.0 million revolving credit facility and was funded on July 1,
1996. The acquired assets and assumed liabilities consist primarily of accounts
receivable, inventories, property, plant and equipment (including two
manufacturing facilities), accounts payable and accrued liabilities. Prior to
the acquisition, the Maxion Agricultural Equipment Business was AGCO's Massey
Ferguson licensee in Brazil, manufacturing and distributing agricultural
tractors under the Massey Ferguson brand name, industrial loader-backhoes under
the Massey Ferguson and Maxion brand names and combines under the Massey
Ferguson and IDEAL brand names.
7
The following unaudited pro forma data summarizes the results of
operations for the six months ended June 30, 1996 and 1995 as if the Maxion
Acquisition, and the related financings, had occurred at the beginning of 1995.
The unaudited pro forma information has been prepared for comparative purposes
only and does not purport to represent what the results of operations of the
Company would actually have been had the transaction occurred on the dates
indicated or what the results of operations may be in any future period.
Six Months Six Months
Ended June 30, 1996 Ended June 30,1995
-------------------- ------------------
(in thousands, except per share data)
Net sales and finance income . . . . . $1,165,458 $1,243,013
Net income (1). . . . . . . . . . . . 14,276 40,819
Net income per common
share - fully diluted (1) . . 0.26 0.73
(1) For the six months ended June 30, 1996, amount excludes extraordinary
loss, net of taxes of $3,503.
3. CHARGES FOR NONRECURRING EXPENSES
The results of operations included a charge for nonrecurring expenses
of $0.8 million, or $0.01 per common share on a fully diluted basis, for the
three months ended June 30, 1996 and $6.7 million, or $0.08 per common share on
a fully diluted basis, for the six months ended June 30, 1996 related to the
further restructuring of the International Operations which was acquired in the
Massey Acquisition in June 1994.
The nonrecurring charge included costs associated with the
centralization of certain parts warehousing, administrative, sales and marketing
functions. The $6.7 million nonrecurring charge recorded through June 30, 1996
included $5.1 million for employee related costs consisting primarily of
severance costs and $1.6 million for other nonrecurring costs. Included in the
$5.1 million of employee related costs was $0.8 million of payroll costs
incurred through June 30, 1996 for personnel that have been terminated or will
be terminated in future periods. Of the total $6.7 million charge, $3.8 million
had been incurred at June 30, 1996. The remaining accrual of $2.9 million
consists of employee severance costs which relate to the planned reduction of 86
employees, of which 37 employees had been terminated at June 30, 1996.
The results of operations for the three and six months ended June 30,
1995 included a charge for nonrecurring expenses of $1.7 million, or $0.02 per
common share on a fully diluted basis, and $3.8 million, or $0.04 per common
share on a fully diluted basis, respectively, which was a portion of the
Company's $19.5 million charge recorded through December 31, 1995 primarily
related to the initial integration and restructuring of the International
Operations. The nonrecurring charge for the six months ended June 30, 1995
included $2.7 million for employee severance and $1.1 million for certain data
processing expenses. All of the costs associated with the $19.5 million charge
recorded through December 31, 1995 have been incurred.
8
4. LONG-TERM DEBT
Long-term debt consisted of the following at June 30, 1996 and
December 31, 1995 (in thousands):
June 30, December 31,
1996 1995
------------------- -------------------
Revolving credit facility - Equipment Operations . . . $ 180,548 $378,336
Revolving credit facility - Finance Company . . . . . . 538,860 514,376
Senior subordinated notes . . . . . . . . . . . . . . . 247,886 - -
Payable to Iochpe-Maxion S.A. . . . . . . . . . . . . . 260,000 - -
------------------- -------------------
$1,227,294 $892,712
=================== ===================
Effective June 28, 1996, the Maxion Acquisition was completed (see Note
2 - Acquisitions). The purchase price of $260.0 million was funded through
borrowings under the Company's $650.0 million revolving credit facility on July
1, 1996. Accordingly, the payable to the seller, Iochpe-Maxion S.A., that
existed at June 30, 1996 is reflected in Long-Term Debt in the Consolidated
Balance Sheet at June 30, 1996.
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount.
The Notes are unsecured obligations of the Company and are redeemable at the
option of the Company, in whole or in part, at any time on or after March 15,
2001 initially at 104.25% of their principal amount, plus accrued interest,
declining ratably to 100% of their principal amount plus accrued interest, on or
after March 15, 2003. The Notes include certain covenants, including covenants
restricting the incurrence of indebtedness and the making of certain restrictive
payments, including dividends. The net proceeds from the sale of the Notes were
used to repay outstanding indebtedness under the Company's $550.0 million
secured revolving credit facility.
In March 1996, the Company replaced its $550.0 million secured
revolving credit facility (the "Old Credit Facility") with a five-year $650.0
million unsecured credit facility (the "New Credit Facility"). Aggregate
borrowings outstanding under the New Credit Facility are subject to a borrowing
base limitation and may not at any time exceed the sum of 90% of eligible
accounts receivable and 60% of eligible inventory. Interest will accrue on
borrowings outstanding under the New Credit Facility primarily at LIBOR plus an
applicable margin, as defined. The New Credit Facility contains certain
covenants, including covenants restricting the incurrence of indebtedness and
the making of certain restrictive payments, including dividends. In addition,
the Company must maintain certain financial covenants including, among others, a
debt to capitalization ratio, an interest coverage ratio and a ratio of debt to
cash flow, as defined. On July 1, 1996, the Maxion Acquisition was funded
through $260.0 million of additional borrowings under the New Credit Facility.
As of June 30, 1996, including the borrowings for the Maxion Acquisition,
approximately $440.5 was outstanding under the New Credit Facility and available
borrowings were approximately $199.9 million.
9
5. EXTRAORDINARY LOSS
During the first quarter of 1996, as part of the refinancing of the Old
Credit Facility with the New Credit Facility, the Company recorded an
extraordinary loss of $3.5 million, net of taxes of $2.2 million, for the
write-off of unamortized debt costs related to the Old Credit Facility.
6. CONVERTIBLE SUBORDINATED DEBENTURES
In June 1995, the Company exchanged all of its outstanding 2,674,534
depositary shares (the "Exchange"), each representing 1/10 of a share of $16.25
Cumulative Convertible Exchangeable Preferred Stock (the "Preferred Stock"),
into $66.8 million of its 6.5% Convertible Subordinated Debentures due 2008 (the
"Convertible Subordinated Debentures"). The effect of this transaction resulted
in a reduction to stockholders' equity and an increase to liabilities in the
amount of $66.8 million. The Convertible Subordinated Debentures were
convertible at any time at the option of the holder into shares of the Company's
common stock at a conversion rate of 157.85 shares of common stock for each
$1,000 principal amount of the debentures. In addition, on or after June 1,
1996, the Convertible Subordinated Debentures were redeemable at the option of
the Company initially at an amount equivalent to $1,045.50 per $1,000 principal
amount of the debentures and thereafter at prices declining to an amount
equivalent to the face amount of the debentures on or after June 1, 2003, plus
all accrued and unpaid interest.
In April 1996, the Company announced its election, effective June 1,
1996, to redeem all of its outstanding Convertible Subordinated Debentures.
Prior to the execution of the redemption, all of the outstanding Convertible
Subordinated Debentures were converted into common stock. Since December 31,
1995, $37.6 million of outstanding Convertible Subordinated Debentures were
converted into approximately 5,920,000 shares of the Company's common stock.
7. NET INCOME PER COMMON SHARE
Primary net income per common share is computed by dividing net income
available for common stockholders (net income less preferred stock dividend
requirements) by the weighted average number of common and common equivalent
shares outstanding during each period. Common equivalent shares include shares
issuable upon the assumed exercise of outstanding stock options. Fully diluted
net income per common share assumes (i) conversion of the Convertible
Subordinated Debentures into common stock after the Exchange and the elimination
of interest expense related to the Convertible Subordinated Debentures, net of
applicable income taxes and (ii) the conversion of the Preferred Stock into
common stock and the elimination of the preferred stock dividend requirements
prior to the Exchange.
10
8. INVENTORIES
Inventories consist primarily of farm tractors, combines, implements,
hay and forage equipment and service parts and are valued at the lower of cost
or market. Cost is determined on a first-in, first-out basis. Market is net
realizable value for finished goods and repair and replacement parts. For work
in process, production parts and raw materials, market is replacement cost.
Inventory balances at June 30, 1996 and December 31, 1995 were as
follows (in thousands):
June 30, December 31,
1996 1995
--------------- --------------
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . $192,896 $121,034
Repair and replacement parts . . . . . . . . . . . . . . . . . 225,028 196,863
Work in process, production parts and raw materials . . . . . 113,395 84,505
--------------- --------------
Gross inventories 531,319 402,402
Allowance for surplus and obsolete inventories (45,859) (41,433)
--------------- --------------
Inventories, net $485,460 $360,969
=============== ==============
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's operations are subject to the cyclical nature of the
agricultural industry. Sales of the Company's equipment have been affected by
changes in net cash farm income, farm land values, weather conditions, the
demand for agricultural commodities and general economic conditions. The
Company's operations are expected to be subject to such conditions in the
future. Sales are recorded by the Company when equipment and replacement parts
are shipped by the Company to its independent dealers. To the extent possible,
the Company attempts to ship products on a level basis throughout the year to
reduce the effect of seasonal demands on its manufacturing operations and to
minimize its investment in inventory. Retail sales by dealers to farmers
("settlements") are highly seasonal and are a function of the timing of the
planting and harvesting seasons. As a result, the Company's net sales and
operating results have historically been the lowest in the first quarter and
have increased in subsequent quarters.
Effective June 28, 1996, the Company acquired certain assets and
liabilities of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Acquisition"). As a result of the Maxion
Acquisition, the Company expanded its product offerings and the geographic scope
of its distribution network to include Brazil. See Note 2 of the Notes to the
Condensed Consolidated Financial Statements for further discussion.
RESULTS OF OPERATIONS
NET INCOME
The Company recorded net income for the three months ended June 30,
1996 of $37.5 million compared to $35.9 million for the three months ended June
30, 1995. Net income per common share on a fully diluted basis was $0.66 for the
second quarter of 1996 compared to $0.64 for the same period in 1995. Net income
for the six months ended June 30, 1996 was $54.6 million compared to $59.3
million for the same period in 1995. Net income per common share on a fully
diluted basis was $0.96 and $1.06 for the six months ended June 30, 1996 and
1995, respectively. Net income for the three and six months ended June 30, 1996
included nonrecurring expenses of $0.8 million, or $0.01 per share on a fully
diluted basis, and $6.7 million, or $0.08 per share on a fully diluted basis,
respectively, related to the further restructuring of the Company's
International Operations. In addition, net income for the six months ended June
30, 1996 included an extraordinary after-tax charge of $3.5 million, or $0.06
per share on a fully diluted basis, for the write-off of unamortized debt costs
related to the refinancing of the revolving credit facility for the Company's
Equipment Operations (see "Liquidity and Capital Resources"). Net income for the
three and six months ended June 30, 1995 included nonrecurring expenses of $1.7
million, or $0.02 per share on a fully diluted basis, and $3.8 million, or $0.04
per share on a fully diluted basis, related to the Massey Acquisition (see
"Charges for Nonrecurring Expenses"). Excluding nonrecurring expenses and the
extraordinary after-tax charge, the improved results in 1996 reflected sales
growth in existing product lines and improved operating efficiencies.
12
RETAIL SALES
Conditions in the United States and Canadian agricultural equipment
markets continue to be favorable in 1996 compared to 1995. Industry unit retail
sales of tractors for the six months ended June 30, 1996 increased 6.9% over the
same period in 1995, while unit retail sales of combines and hay and forage
equipment decreased 4.1% and 1.7%, respectively, compared to the prior year. The
Company believes the increase in retail sales of tractors was primarily due to
favorable economic conditions relating to high net cash farm incomes, strong
commodity prices and increased export demand. The decrease in industry combine
retail sales was partly due to dry weather conditions in the South and
Southwest United States. Industry retail sales of hay and forage equipment were
below the prior year primarily due to a softness in the cattle market resulting
from low commodity prices.
Company unit settlements of tractors and combines in the United States
and Canada increased significantly for the six months ended June 30, 1996
compared to 1995. The increase in tractor settlements was attributable to the
favorable industry conditions as well as the impact of the Company's expanded
dealer network, which resulted primarily from dealers entering into crossover
contracts whereby an existing dealer carrying one of the Company's brands
contracts to sell an additional AGCO brand. In addition, the Company continues
to benefit from the successful acceptance of improved tractor product offerings,
including the new Massey Ferguson high horsepower tractors which were introduced
in the middle of 1995. Company unit settlements of combines were higher than the
prior year and were favorable compared to the decrease in industry retail sales
primarily due to increased sales to contract harvesters. Company unit
settlements of hay and forage equipment were below the prior year and slightly
below the industry decrease primarily due to the Company choosing not to match
the aggressive retail financing programs of its major competitors during the
first quarter of 1996.
Industry conditions in Western Europe continue to be favorable with
retail sales of tractors increasing approximately 11.1% for the six months ended
June 30, 1996 compared to the prior year primarily due to improved economic
conditions and strong export demand for commodities. Retail sales of Massey
Ferguson tractors significantly outperformed the industry compared to 1995 with
the most significant increases in the United Kingdom, France, Spain and
Scandinavia due to the Company's focus on dealer development and the continued
success of the new Massey Ferguson high horsepower tractors. Outside North
America and Western Europe, industry retail sales of tractors also showed gains
in many markets where the Company competes due to a general improvement in
economic conditions. Retail sales of Massey Ferguson tractors significantly
increased compared to 1995 with strong market share gains in most markets,
particularly in the Middle East, Africa and Australia primarily due to improved
economic conditions and the Company's strong distribution channels in these
markets.
REVENUES
Total revenues for the three months ended June 30, 1996 were $601.6
million, representing an increase of $29.9 million or 5.2% over total revenues
of $571.7 million for the same period in 1995. Total revenues for the six months
ended June 30, 1996 increased 4.3% to $1,072.3 million compared to $1,027.9
million for 1995. The increases for both periods were primarily attributable to
increased net sales in the International Operations of $30.5 million and $60.0
million for the three and six months ended June 30, 1996, respectively, compared
to the prior year. The increases primarily related to continued strength in the
13
agricultural industry and the strong retail sales of the new Massey Ferguson
high horsepower tractors. This increase for the International Operations was
partially offset by decreases in net sales of $4.4 million and $23.6 million for
the three and six months ended June 30, 1996, respectively, compared to the
prior year related to the Company's North American Operations. The decrease for
the second quarter of 1996 was primarily due to decreased sales of replacement
parts which the Company believes were negatively impacted by weather conditions
in certain regions which affected the winter wheat harvest or delayed planting.
The decrease for the six months ended June 30, 1996 was primarily due to the
timing of delivery of certain tractors sourced from certain European suppliers.
Total revenues also increased from the prior periods due to increases in finance
income of $3.8 million and $8.0 million for the three and six months ended June
30, 1996, respectively, associated with the operations of Agricredit. The
increase in finance income was primarily due to the growth in Agricredit's
credit receivable portfolio as a result of Agricredit's increased penetration
into the Company's dealer network.
COSTS AND EXPENSES
Cost of goods sold of the Company's Equipment Operations for the three
months ended June 30, 1996 was $468.9 million (80.2% of net sales) compared to
$441.2 million (79.0% of net sales) for the same period in 1995. For the first
six months of 1996, cost of goods sold was $829.0 million (79.8% of net sales)
compared to $791.5 million (79.0% of net sales). Gross profit, defined as net
sales less cost of goods sold, was $115.8 million (19.8% of net sales) for the
three months ended June 30, 1996 as compared to $117.4 million (21.0% of net
sales) for the same period of the prior year. Gross profit for the first six
months of 1996 was $209.5 million (20.2% of net sales) as compared to $210.6
million (21.0% of net sales) for the same period of the prior year. Gross
margins were negatively impacted for both periods by a change in the mix of
products sold, particularly due to a reduction in high margin North American
parts sales and due to a shift in sales from higher margin utility tractors
(under 100 horsepower) to high horsepower tractors (over 100 horsepower).
Selling, general and administrative expenses for the three months ended
June 30, 1996 were $52.1 million (8.7% of total revenues) compared to $51.3
million (9.0% of total revenues) for the same period last year. For the first
six months of 1996, selling, general and administrative expenses were $101.5
million (9.5% of total revenues) compared to $98.8 million (9.6% of total
revenues) for the same period in 1995. The decrease in selling, general and
administrative expenses as a percentage of total revenues was primarily due to
the successful cost reduction efforts in the Company's International Operations.
These cost reductions were offset to some extent by an increase in the
amortization of stock-based compensation expense of $4.6 million and $7.9
million over the prior year for the three and six months ended June 30, 1996,
respectively, related to the Company's long-term incentive plan which is tied to
stock price appreciation. In addition, the Company had lower operating expenses
as a percentage of total revenues related to Agricredit. Excluding Agricredit
and the amortization related to the long-term incentive plan, the Company's
Equipment Operations had selling, general and administrative expenses of $42.7
million (7.3% of net sales) and $45.9 million (8.2% of net sales) for the three
months ended June 30, 1996 and 1995, respectively. For the first six months of
1996 and 1995, the Company's Equipment Operations had selling, general and
administrative expenses of $84.5 million (8.1% of net sales) and $89.0 million
(8.9% of net sales), respectively. The decrease as a percentage of net sales was
primarily due to the successful cost reduction efforts in the Company's
International Operations.
14
Engineering expenses for the Company's Equipment Operations were $6.7
million (1.2% of net sales) for the three months ended June 30, 1996 compared to
$6.4 million (1.2% of net sales) for the same period in 1995. Engineering
expenses for the six months ended June 30, 1996 were $13.7 million (1.3% of net
sales) and $11.6 million (1.2% of net sales) for the same period in the prior
year. The increase as a percentage of net sales for the six months ended June
30, 1996 compared to the prior year was primarily due to the timing of
engineering expenses related to the development of a new Massey Ferguson utility
tractor line.
Interest expense, net was $16.4 million for the three months ended June
30, 1996 and was $16.4 million for the same period in the prior year. Interest
expense, net for the six months ended June 30, 1996 was $31.5 million compared
to $31.7 million for the same period in 1995. For both periods, the Company had
lower interest expense, net compared to 1995 in its Equipment Operations
resulting from lower interest rates and lower average borrowings in addition to
higher interest income related to dealer accounts receivable. This decrease in
interest expense, net was partially offset by increased interest expense, net
relating to Agricredit due to the additional borrowings associated with the
increase in the credit receivable portfolio.
Other expense, net was $1.2 million for the three months ended June 30,
1996 compared to $2.5 million for the same period in 1995. Other expense, net
was $3.7 million for the six months ended June 30, 1996 compared to $3.1 million
for the same period in 1995. The decrease in other expense, net for the three
months ended June 30, 1996 was primarily due to foreign exchange gains in 1996
compared to foreign exchange losses in 1995 in the International Operations. The
increase in other expense, net for the six months ended June 30, 1996 was
primarily due to foreign exchange losses in the International Operations for the
first quarter of 1996.
Nonrecurring expenses were $0.8 million and $6.7 million for the three
and six months ended June 30, 1996, respectively. Nonrecurring expenses were
$1.7 million and $3.8 million for the three and six months ended June 30, 1995,
respectively. The nonrecurring charge recorded in 1996 related to the further
restructuring of the International Operations which was acquired in the Massey
Acquisition in June 1994. The nonrecurring charge recorded in 1995 primarily
related to costs associated with the initial integration and restructuring of
the International Operations. See "Charges for Nonrecurring Expenses" for
further discussion.
The Company recorded income tax provisions of $19.8 million and $17.9
million for the three months ended June 30, 1996 and 1995, respectively. For the
six months ended June 30, 1996 and 1995, the Company recorded income tax
provisions of $30.7 million and $30.3 million, respectively. For both periods,
the Company paid income taxes at rates below statutory rates due to the
utilization of net operating loss carryforwards. Due to the availability of net
operating loss carryforwards acquired in the Massey Acquisition, the Company
expects to continue paying taxes at effective rates substantially below
statutory rates in the near future.
Equity in net earnings of unconsolidated affiliates was $1.9 million
and $1.6 million for the three months ended June 30, 1996 and 1995,
respectively. Equity in net earnings of unconsolidated affiliates was $2.6
million and $2.1 million for the six months ended June 30, 1996 and 1995,
respectively. The increase in equity in net earnings of unconsolidated
affiliates related to the Company's pro-rata share in net earnings of certain
equity investments in the International Operations.
15
FINANCE COMPANY OPERATIONS
Agricredit, the Company's wholly owned finance subsidiary, recorded net
income of $2.6 million and $1.0 million for the three months ended June 30, 1996
and 1995, respectively. Agricredit recorded net income of $5.3 million and $2.4
million for the six months ended June 30, 1996 and 1995, respectively. Retail
acceptances were approximately $180.6 million for the six months ended June 30,
1996 and $140.9 million for the same period in the prior year. The increase was
primarily the result of the strong retail demand for the Company's products
during the first six months of 1996, Agricredit's penetration into the Company's
dealer network and its continued growth in the Canadian market.
On July 16, 1996, the Company announced the proposed formation of a
joint venture with a subsidiary of Cooperatieve Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland" ("Rabobank") as its partner in Agricredit (the "Agricredit
Joint Venture"). Under the Agricredit Joint Venture, Rabobank will have a 51%
interest in Agricredit and the Company will retain a 49% interest in the finance
company. The Agricredit Joint Venture will continue the current business of
Agricredit and seek to build a broader asset-based finance business. The Company
has similar joint venture arrangements with Rabobank and its affiliates with
respect to its retail finance companies located in the United Kingdom, France
and Germany. The Agricredit Joint Venture is subject to regulatory approvals and
is expected to close during the fourth quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing requirements for its Equipment Operations are
subject to variations due to seasonal changes in inventory and dealer receivable
levels. In March 1996, the Company replaced its $550.0 million secured revolving
credit facility (the "Old Credit Facility") with a five-year $650.0 million
unsecured revolving credit facility (the "New Credit Facility") (see Note 4 of
the Notes to the Condensed Consolidated Financial Statements). The New Credit
Facility is the Company's primary source of financing for its Equipment
Operations and provides increased borrowing capacity over the Old Credit
Facility. Borrowings under the New Credit Facility may not exceed the sum of 90%
of eligible accounts receivable and 60% of eligible inventory. As receivables
and inventories fluctuate, borrowings under the New Credit Facility fluctuate as
well. On July 1, 1996, the Maxion Acquisition was funded through $260.0 million
of additional borrowings under the New Credit Facility. As of June 30, 1996,
including the borrowings for the Maxion Acquisition, approximately $440.5
million was outstanding under the New Credit Facility and available borrowings
were approximately $199.9 million.
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount
(see Note 4 of the Notes to the Condensed Consolidated Financial Statements).
The net proceeds from the sale of the Notes were used to repay outstanding
indebtedness under the Old Credit Facility. The sale of the Notes provided the
Company with subordinated capital and replaced a portion of its floating rate
debt with longer term fixed rate debt.
The Company's finance subsidiary, Agricredit, obtains funds from a
$545.0 million revolving credit agreement (the "Agricredit Revolving Credit
Agreement") to finance its credit receivable portfolio. Borrowings under the
Agricredit Revolving Credit Agreement are based on the amount and quality of
outstanding credit receivables and are generally issued for terms with
maturities matching anticipated credit receivable liquidations. As the credit
16
receivable portfolio fluctuates, borrowings under the Agricredit Revolving
Credit Agreement fluctuate as well. As of June 30, 1996, approximately $538.9
million was outstanding under the Agricredit Revolving Credit Agreement. In July
1996, the terms of the Agricredit Revolving Credit Facility were amended and
restated to increase Agricredit's borrowing capacity from $545.0 million to
$630.0 million. Including the July 1996 amendment, the available borrowings as
of June 30,1996 under the Agricredit Revolving Credit Agreement were
approximately $85.1 million. Funding of new borrowings under the Agricredit
Revolving Credit Agreement expires on June 30, 1997. Upon completion of the
proposed Agricredit Joint Venture, the Agricredit Revolving Credit Agreement is
planned to be replaced through a funding commitment from Rabobank.
In April 1996, the Company announced its election, effective June 1,
1996, to redeem all of its outstanding 6.5% Convertible Subordinated Debentures
due 2008 (the "Convertible Subordinated Debentures") (see Note 6 of the Notes to
the Condensed Consolidated Financial Statements). Prior to the execution of the
redemption, all of the outstanding Convertible Subordinated Debentures were
converted into common stock. Since December 31, 1995, $37.6 million of
outstanding Convertible Subordinated Debentures were converted into
approximately 5,920,000 shares of the Company's common stock.
The Company's working capital requirements for its Equipment Operations
are somewhat seasonal, with investments in working capital typically building in
the first and second quarters and then reducing in the third and fourth
quarters. As of June 30, 1996, the Company's Equipment Operations had $808.3
million of working capital, an increase of $146.8 million over working capital
of $661.5 million as of December 31, 1995. The increase in working capital was
primarily due to normal seasonal requirements, particularly in receivables and
inventories.
Cash flow provided by operating activities was $2.6 million for the six
months ended June 30, 1996 as compared to cash flow used for operating
activities of $95.2 million for the same period last year. The decrease in cash
flow used for operating activities was primarily due to a smaller increase in
accounts receivable at June 30, 1996 compared to June 30, 1995. The lower
increase in accounts receivable was due to the reduction of unusually high
accounts receivable levels in the International Operations at December 31, 1995
which resulted from significantly higher sales in late 1995 than in late 1994
and due to the strong retail sales during the first six months of 1996 compared
to 1995 which resulted in a lower seasonal build-up of dealer inventories in
North America.
Capital expenditures for the first six months of 1996 were $15.5
million compared to $13.4 million for the same period in 1995. The Company
currently anticipates that additional capital expenditures for the remainder of
1996 will range from approximately $24.5 million to $34.5 million and will
primarily be used to support the development and enhancement of new and existing
products.
Agricredit's credit receivable originations exceeded credit receivable
payments by $42.5 million for the six months ended June 30, 1996. The increase
in Agricredit's credit receivable portfolio will result in increased finance
income in future periods. The credit receivable originations were financed
through additional borrowings under the Agricredit Revolving Credit Agreement.
17
In June 1996, the Company's board of directors declared a common stock
dividend of $0.01 per share for the second quarter of 1996. The declaration and
payment of future dividends will be at the sole discretion of the board of
directors and will depend upon the Company's results of operations, financial
condition, cash requirements, future prospects, limitations imposed by the
Company's credit facilities and other factors deemed relevant by the Company's
board of directors.
The Company believes that available borrowings under the New Credit
Facility, the Agricredit Revolving Credit Agreement, available cash and
internally generated funds will be sufficient to support its working capital,
capital expenditures, credit receivable originations and debt service
requirements for the foreseeable future.
The Company from time to time reviews and will continue to review
acquisition and joint venture opportunities as well as changes in the capital
markets. If the Company were to consummate a significant acquisition or elect to
take advantage of favorable opportunities in the capital markets, the Company
may supplement availability or revise the terms under its credit facilities or
complete public or private offerings of equity or debt securities.
CHARGES FOR NONRECURRING EXPENSES
The Company identified approximately $12.0 million of nonrecurring
expenses related to the further restructuring of the Company's International
Operations, acquired in June 1994 as a result of the Massey Acquisition. The
Company recorded $6.7 million of nonrecurring expenses during the first six
months of 1996 to recognize a portion of these costs. These costs are primarily
related to the centralization of certain parts warehousing, administrative,
sales and marketing functions (see Note 3 of the Notes to the Condensed
Consolidated Financial Statements). The Company expects to record the remaining
$5.3 million of nonrecurring expenses in 1996 and to complete the restructuring
by mid-1997. Savings from the further restructuring of the International
Operations are expected to result primarily from reduced selling, general and
administrative expenses primarily relating to the Company's parts warehousing,
administrative, sales and marketing functions. While the Company believes that
cost savings from its restructuring plan can be attained, there can be no
assurance that all objectives of the restructuring will be achieved.
In the first six months of 1995, the Company recorded nonrecurring
expenses of $3.8 million which was a portion of the Company's $19.5 million
charge recorded through December 31, 1995 primarily related to the initial
integration and restructuring of the International Operations. These costs
primarily related to the centralization and rationalization of the International
Operations' administrative, sales, and marketing functions. All of the costs
associated with the $19.5 million charge recorded through December 31, 1995 have
been incurred.
18
FORWARD LOOKING STATEMENTS
Certain information included in Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. Although the Company believes that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. Additionally, the Company's
financial results are sensitive to movement in interest rates and foreign
currencies, as well as general economic conditions, pricing and product actions
taken by competitors, production disruptions and changes in environmental,
international trade and other laws which impact the way in which it conducts it
business.
19
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on
April 24, 1996. The following matters were voted upon and
the results of the voting were as follows:
(1) To elect four directors to serve for the ensuing three
years or until their successors have been duly elected and
qualified. The nominees, Messrs. Mechem, Richard, Robinson
and Shumejda were elected to the Company's board of directors.
There were 39,245,885 votes for and 197,894 votes withheld for
each nominee.
(2) To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
common stock from 75,000,000 to 150,000,000. The votes of the
stockholders on this amendment to the Company's Certificate of
Incorporation were as follows: 38,247,379 in favor, 1,140,072
opposed and 56,328 abstained.
(3) To approve the Company's amended and restated Long-Term Incentive
Plan. The votes of the stockholders on this plan were as follows:
38,553,166 in favor, 435,254 opposed, 81,748 abstained and
373,611 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.0 - Statement re:Computation of Per Share Earnings.
27.0 - Financial Data Schedule
(electronic filing purposes only).
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
June 28, 1996 disclosing the acquisition of certain assets and
liabilities of the agricultural and industrial equipment
business of Iochpe-Maxion S.A.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGCO CORPORATION
----------------
Registrant
Date: August 14, 1996 Chris E. Perkins
-----------------------------------------
Vice President and Chief Financial Officer
21
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
11.0 Statement re: Computation of Per Share Earnings.
27.0 Financial Data Schedule (electronic filing
purposes only).
Exhibit 11
AGCO CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
(in thousands, except per share data)
Three Months Ended
June 30,
----------------------------------------
PRIMARY EARNINGS PER SHARE 1996 1995
------------------- -------------------
Weighted average number of common shares outstanding . . . . . . . 53,738 44,260
Shares issued upon assumed exercise of outstanding
stock options . . . . . . . . . . . . . . . . . . . . . . . . . 484 636
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 54,222 44,896
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $37,508 $35,888
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,508 35,888
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . - 799
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $37,508 $35,089
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 0.69 $ 0.78
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.69 $ 0.78
=================== ===================
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of common shares outstanding . . . . . . . 53,738 44,260
Shares issued upon assumed conversion of the Convertible
Subordinated Debentures . . . . . . . . . . . . . . . . . . . . 3,161 11,272
Shares issued upon assumed exercise of outstanding
stock options (2) . . . . . . . . . . . . . . . . . . . . . . . 485 646
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 57,384 56,178
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $37,508 $35,888
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,508 35,888
Interest expense on Convertible Subordinated Debentures, net of
applicable income taxes . . . . . . . . . . . . . . . . . . . . 156 -
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $37,664 $35,888
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 0.66 $ 0.64
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.66 $ 0.64
=================== ===================
(1) All numbers of shares in this exhibit are weighted on the basis of the
number of days the shares were outstanding or assumed to be outstanding
during each period. All share data has been restated to reflect the
two-for-one stock split, effected January 31, 1996.
(2) Based on the treasury stock method using the higher of the average or period end market price.
Exhibit II
AGCO CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
(in thousands, except per share data)
Six Months Ended
June 30,
----------------------------------------
PRIMARY EARNINGS PER SHARE 1996 1995
------------------- -------------------
Weighted average number of common shares outstanding . . . . . . . 52,248 43,870
Shares issued upon assumed exercise of outstanding
stock options . . . . . . . . . . . . . . . . . . . . . . . . . 509 604
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 52,757 44,474
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $58,103 $59,272
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . (3,503) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,600 59,272
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . - 2,012
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $54,600 $57,260
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 1.10 $ 1.29
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . (0.07) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.03 $ 1.29
=================== ===================
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of common shares outstanding . . . . . . . 52,248 43,870
Shares issued upon assumed conversion of the Convertible
Subordinated Debentures . . . . . . . . . . . . . . . . . . . . 4,470 11,536
Shares issued upon assumed exercise of outstanding
stock options (2) . . . . . . . . . . . . . . . . . . . . . . . 519 674
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 57,237 56,080
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $58,103 $59,272
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . (3,503) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,600 59,272
Interest expense on Convertible Subordinated Debentures, net of
applicable income taxes . . . . . . . . . . . . . . . . . . . . 529 -
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $55,129 $59,272
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 1.02 $ 1.06
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . (0.06) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.96 $ 1.06
=================== ===================
(1) All numbers of shares in this exhibit are weighted on the basis of the
number of days the shares were outstanding or assumed to be outstanding
during each period. All share data has been restated to reflect the
two-for-one stock split, effected January 31, 1996.
(2) Based on the treasury stock method using the higher of the average or period end market price.
5
1,000
3-MOS
DEC-31-1995
JAN-01-1996
JUN-30-1996
31,913
0
1,459,992
0
485,460
1,639,635
243,732
0
2,608,016
1,033,346
827,434
0
0
572
679,494
2,608,016
1,038,565
1,072,323
829,031
829,031
13,716
4,713
31,468
86,178
30,704
58,103
0
(3,503)
0
54,600
1.03
0.96
