AGCO CORPORATION
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Dated May 2, 2007
of
AGCO CORPORATION
A Delaware Corporation
IRS Employer Identification No. 58-1960019
SEC File Number 1-12930
4205 River Green Parkway
Duluth, Georgia 30096
(770) 813-9200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On May 2, 2007, AGCO Corporation issued a press release reporting its financial results for the
first quarter ended March 31, 2007. A copy of the press release is attached hereto as Exhibit
99.1.
In the press release, AGCO uses non-GAAP financial measures. For purposes of SEC Regulation G, a
non-GAAP financial measure is a numerical measure of a registrants historical or future
performance, financial position or cash flows that excludes amounts, or is subject to adjustments
that have the effect of excluding amounts, that are included in the most directly comparable
measure calculated and presented in accordance with GAAP in the statement of income, balance sheet
or statement of cash flows of the issuer; or includes amounts, or is subject to adjustments that
have the effect of including amounts, that are excluded from the most directly comparable measure
so calculated and presented. Non-GAAP financial measures should not be considered as alternatives
to operating income, net income and earnings per share as computed under GAAP for the applicable
period. AGCO considers operating income, net income and earnings per share to be the most
comparable GAAP financial measures, and AGCO has included, as a part of the press release, a
reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial
measure.
AGCO uses income from operations, net income, and earnings per share amounts that have been
adjusted to exclude restructuring and other infrequent expenses. Restructuring and other
infrequent expenses occur regularly in AGCOs business, but vary in size and frequency. AGCO
believes that the adjusted amounts provide investors useful information because the expenses that
are excluded relate to events that resulted in a significant impact during the quarter, but will
recur only in varied amounts and with unpredictable frequency. Management also uses these amounts
to compare performance to budget.
Lastly, AGCOs management frequently refers to the Companys net debt which reduces total debt by
outstanding cash. Management uses this measurement as a means of describing the Companys
financial structure and financial strength.
The information in this Form 8-K and the Exhibits shall not be deemed filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated
by reference in any filing of AGCO under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibit
99.1 Press Release of AGCO Corporation, issued May 2, 2007.
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 hereunto duly authorized.
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AGCO Corporation
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By: |
/s/ Andrew H. Beck |
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Andrew H. Beck |
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Dated: May 2, 2007 |
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Senior Vice President and Chief
Financial Officer |
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Exhibit Index
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Exhibit No. |
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Description |
99.1
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Press Release of AGCO Corporation, issued May 2, 2007 |
EX-99.1 PRESS RELEASE ISSUED MAY 2, 2007
Exhibit 99.1
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AGCO Corporation
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NEWS RELEASE |
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www.agcocorp.com |
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For Immediate Release
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CONTACT: |
Wednesday, May 2, 2007
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Greg Peterson |
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Director of Investor Relations |
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770-232-8229 |
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greg.peterson@agcocorp.com |
AGCO REPORTS FIRST QUARTER RESULTS
Improving South American Market Drives Growth in Sales and Earnings
DULUTH, GA May 2 AGCO Corporation (NYSE:AG), a worldwide manufacturer and distributor of
agricultural equipment, reported net income of $0.26 per share for the first quarter of 2007. For
the first quarter of 2006, AGCO reported net income of $0.19 per share. Net sales for the first
quarter of 2007 were $1.3 billion, an increase of approximately 14% compared to the same period in
2006.
Strong performance from our South American operations contributed to our results in the first
quarter, stated Martin Richenhagen, Chairman, President and Chief Executive Officer. The
improving conditions in the Brazilian agricultural machinery market fueled sales growth of
approximately 34% in our South American business. The additional sales volume allowed us to
leverage the improvements we have made in our cost structure in South America, resulting in
double-digit operating margins for the region. We saw sales growth in both our Massey Ferguson and
Valtra brands, which when combined, have a leading market position in Brazil. The strength of our
full product lines and our superior dealer networks has us well positioned in this important
region. In addition, our first quarter earnings benefited from lower net interest costs resulting
from our improved net debt position.
The quarter also was marked by the initial production in Europe of the new Fendt 900 series
high horsepower tractors, Mr. Richenhagen continued. This launch reinforces Fendts role as a
pioneer in agricultural engineering and superior design. As previously discussed, our controlled
roll-out of the new high horsepower tractor model impacted our sales mix in the first quarter of
2007 and resulted in lower margins in our Europe/Africa/Middle East segment. Strong performance by
our Massey Ferguson and Valtra brands in Europe partially offset the weaker sales mix and supplier
constraints experienced at Fendt. The 900 series is being well received by our customers, and we
expect strong sales and improved margins in our European business for the remainder of 2007.
First Quarter Results
Net sales for the first quarter of 2007 increased approximately 14% to $1,332.6 million
compared to $1,169.8 million for the first quarter of 2006. For the first quarter of 2007, AGCO
reported net income of $24.5 million, or $0.26 per share. For the first quarter of 2006, AGCO
reported net income of $17.3 million, or $0.19 per share. Adjusted net income, excluding
restructuring and other infrequent expenses, was $17.4 million, or $0.19 per share, for the
first quarter of 2006.
AGCOs net sales, excluding the impact of currency translation of $75.6 million, increased
approximately 7.5% in the first quarter of 2007 compared to the same period in 2006. Net sales
increased in all four of AGCOs geographical segments, with the strongest sales increase in South
America where improved market conditions in Brazil led to higher sales. European sales increased
due to strong growth in Scandinavia, Finland and the United Kingdom, partially offset by weaker
sales in Germany. In North America, net sales increased slightly in 2007 compared to 2006
consistent with the moderate increase in industry demand. Sales were slightly higher in AGCOs
Asia/Pacific region despite soft market conditions.
For the first quarter of 2007, income from operations increased approximately $1.7 million
compared to 2006 resulting from the increase in net sales. First quarter gross margins were below
2006 due to brand and product mix. Unit production of tractors and combines for the first quarter
of 2007 was approximately 5% above 2006 levels.
In AGCOs Europe/Africa/Middle East region, income from operations decreased approximately
$4.2 million in the first quarter of 2007 compared to 2006 due to a weaker sales mix and lower
operating margins caused by the phasing of the new Fendt 900 series production, as well as supplier
constraints in Germany that limited sales in the first quarter. Growth from the Massey Ferguson
and Valtra brands contributed to a 5% increase in net sales, excluding currency impact, and helped
to partially offset the operating income decline.
Income from operations in AGCOs South America region increased approximately $8.5 million for
the first quarter of 2007 compared to 2006. Industry demand in South America was above 2006
levels, resulting in an increase in AGCOs net sales in South America, excluding currency impact,
of approximately 30% for the first quarter of 2007. Operating margins increased approximately 2.5%
in the first quarter of 2007 compared to the first quarter of 2006. Higher sales volumes combined
with ongoing process improvements and cost reduction initiatives provided favorable operating
leverage.
In North America, income from operations decreased approximately $1.9 million in the first
quarter of 2007 compared to 2006. Income from operations in the first quarter of 2007 was lower
primarily due to negative currency impacts on products sourced from Brazil and Europe, partially
offset by sales growth.
Income from operations in the Asia/Pacific region decreased approximately $0.6 million in the
first quarter of 2007 compared to 2006. The reduction in operating income was primarily due to a
weaker sales mix in Australia, where the severe drought has resulted in lower sales of combines and
high horsepower tractors.
Regional Market Results
North America Industry unit retail sales of tractors for the first quarter of 2007
increased approximately 1% over the comparable prior year period resulting from an increase in the
utility tractor segment largely offset by decreases in the compact and high horsepower tractor
segments. Industry unit retail sales of combines for the first quarter of 2007 increased
approximately 13%
from the prior year period. AGCOs unit retail sales of tractors were lower and combines
were higher in the first quarter of 2007 compared to 2006.
Europe Industry unit retail sales of tractors for the first quarter of 2007 increased
approximately 3% compared to the prior year period. Retail demand improved in most of the major
markets of Europe, but declined in Italy and Spain. AGCOs unit retail sales for the first
quarter of 2007 were higher when compared to the prior year period.
South America Industry unit retail sales of tractors increased approximately 25% and
industry unit retail sales of combines increased approximately 30% for the first quarter of 2007
compared to the prior year period. Unit retail sales of tractors and combines in the major market
of Brazil increased approximately 31% and 57%, respectively, during the first quarter of 2007
compared to 2006. AGCOs South American unit retail sales of tractors and combines also increased
in the first quarter of 2007 compared to 2006.
Rest of World Markets Outside of North America, Europe and South America, AGCOs net sales
for the first quarter of 2007 were approximately 28% higher than 2006 due to higher sales in Africa
and Asia.
Strong commodity prices supported industry demand across much of the globe in the first
quarter, stated Mr. Richenhagen. In Europe, industry retail sales are benefiting from higher
farm income in 2006 and the continuing strong growth in Eastern and Central Europe. In North
America, higher commodity prices and improving farmer sentiment contributed to modest improvement
in retail demand in the first quarter. The sugar cane sector remains strong in Brazil, and a
better grain harvest has increased industry demand.
Outlook
Industry retail sales of farm equipment in 2007 in all major markets are expected to be flat
or above 2006 levels. In North America, 2007 farm income is expected to increase slightly as the
benefit of strong commodity prices is offset by higher input costs and lower government subsidies.
As a result, sales of farm equipment in 2007 are also expected to increase slightly. Improved
farm income in Brazil is expected to support an increase in industry sales this year. However,
high levels of farmer debt, especially in the mid-west region, could impact Brazilian demand for
the remainder of 2007. Industry demand in Europe is expected to be relatively flat compared to
2006 with growth in Central and Eastern Europe offsetting small declines in Western Europe.
AGCOs net sales for the full year of 2007 are expected to grow 8% to 9% compared to 2006,
driven primarily by improving market conditions in South America, continued growth in
Europe and
currency impacts. For the full year, AGCO is targeting earnings per share of approximately $1.45
with earnings improvements resulting primarily from sales growth and lower interest costs. The
earnings target continues to include investments in the form of increased engineering expenses,
plant restructurings, system initiatives, new market development, and distribution expenditures,
all of which support the Companys strategic direction. In addition, ongoing working capital
initiatives are expected to produce strong cash flow.
* * * * *
AGCO will be hosting a conference call with respect to this earnings announcement at 10:00
a.m. Eastern Time on Wednesday, May 2, 2007. The Company will refer to slides on its conference
call. Interested persons can access the conference call and slide presentation via AGCOs website
at www.agcocorp.com on the Investors/Media 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 AGCOs website for at least
twelve months following the call.
* * * * *
Safe Harbor Statement
Statements which are not historical facts, including projections of margin improvement, industry
demand, net sales, earnings per share, farm income and cash flow, 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 AGCOs filings with the Securities and Exchange Commission,
including its Form 10-K for the year ended December 31, 2006. AGCO disclaims any obligation to
update any forward-looking statements.
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Our financial results depend entirely upon the agricultural industry, and factors
that adversely affect the agricultural industry generally will adversely affect us. |
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Our success depends on the introduction of new products which require substantial
expenditures. |
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We depend on suppliers for components and parts for our products, and any failure by
our suppliers to provide products as needed, or by us to promptly address supplier
issues, will adversely impact our ability to timely and efficiently manufacture and
sell our products. |
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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. |
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These risks may delay or reduce our realization of value from our international
operations. |
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Currency exchange rate and interest rate changes can adversely affect the
profitability of our products. |
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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. |
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Our labor force is heavily unionized, and our contractual and legal obligations
under collective bargaining agreements and labor laws subject us to the risks of work
interruption or stoppage and could cause our costs to be higher. |
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We have significant pension obligations with respect to our employees. |
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We are subject to fluctuations in raw material prices and availability, which may
cause delays in the production of our products or otherwise adversely affect our
manufacturing costs. |
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The agricultural equipment industry is highly seasonal, and seasonal fluctuations
significantly impact our results of operations and cash flows. |
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We face significant competition and, if we are unable to compete successfully
against other agricultural equipment manufacturers, we would lose customers and our
revenues and profitability would decline. |
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We have a substantial amount of indebtedness, and, as a 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
Founded in
1990, AGCO Corporation (NYSE: AG) (www.agcocorp.com) is a global manufacturer of
agricultural equipment and related replacement parts. AGCO offers a full product line including
tractors, combines, hay tools, sprayers, forage, tillage equipment and implements, which are
distributed through more than 3,200 independent dealers and distributors in more than 140 countries
worldwide. AGCO products include the following well-known brands: AGCO®,
Challenger®, Fendt®, Gleaner®, Hesston®, Massey
Ferguson®, New Idea®, RoGator®, Spra-Coupe®,
Sunflower®, Terra-Gator®, Valtra®, and White Planters.
AGCO provides retail financing through AGCO Finance. The company is headquartered in Duluth,
Georgia and, in 2006, had net sales of $5.4 billion.
# # # # #
Please visit our website at www.agcocorp.com.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
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March 31, |
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December 31, |
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2007 |
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2006 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
157.4 |
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$ |
401.1 |
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Accounts and notes receivable, net |
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734.7 |
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677.1 |
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Inventories, net |
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1,227.5 |
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1,064.9 |
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Deferred tax assets |
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32.7 |
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36.8 |
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Other current assets |
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109.6 |
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129.1 |
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Total current assets |
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2,261.9 |
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2,309.0 |
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Property, plant and equipment, net |
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650.2 |
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643.9 |
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Investment in affiliates |
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196.2 |
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191.6 |
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Deferred tax assets |
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106.5 |
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105.5 |
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Other assets |
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68.1 |
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64.5 |
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Intangible assets, net |
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205.9 |
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207.9 |
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Goodwill |
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601.6 |
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592.1 |
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Total assets |
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$ |
4,090.4 |
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$ |
4,114.5 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current Liabilities: |
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Current portion of long-term debt |
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$ |
6.3 |
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$ |
6.3 |
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Convertible senior subordinated notes |
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201.3 |
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201.3 |
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Accounts payable |
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684.8 |
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706.9 |
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Accrued expenses |
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561.1 |
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629.7 |
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Other current liabilities |
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59.1 |
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79.4 |
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Total current liabilities |
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1,512.6 |
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1,623.6 |
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Long-term debt, less current portion |
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583.3 |
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577.4 |
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Pensions and postretirement health care benefits |
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268.8 |
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268.1 |
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Deferred tax liabilities |
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132.2 |
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114.9 |
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Other noncurrent liabilities |
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43.2 |
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36.9 |
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Total liabilities |
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2,540.1 |
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2,620.9 |
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Stockholders Equity: |
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Common stock |
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0.9 |
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0.9 |
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Additional paid-in capital |
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916.7 |
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908.9 |
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Retained earnings |
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798.6 |
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774.1 |
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Accumulated other comprehensive loss |
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(165.9 |
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(190.3 |
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Total stockholders equity |
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1,550.3 |
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1,493.6 |
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Total liabilities and stockholders equity |
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$ |
4,090.4 |
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$ |
4,114.5 |
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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)
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Three Months Ended March 31, |
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2007 |
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2006 |
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Net sales |
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$ |
1,332.6 |
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$ |
1,169.8 |
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Cost of goods sold |
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1,113.2 |
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963.5 |
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Gross profit |
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219.4 |
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206.3 |
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Selling, general and administrative expenses |
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137.2 |
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126.6 |
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Engineering expenses |
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32.4 |
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31.6 |
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Restructuring and other infrequent expenses |
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0.1 |
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Amortization of intangibles |
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4.2 |
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4.1 |
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Income from operations |
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45.6 |
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43.9 |
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Interest expense, net |
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6.7 |
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13.6 |
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Other expense, net |
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8.6 |
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6.5 |
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Income before income taxes and equity in net earnings of affiliates |
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30.3 |
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23.8 |
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Income tax provision |
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12.8 |
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12.6 |
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Income before equity in net earnings of affiliates |
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17.5 |
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11.2 |
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Equity in net earnings of affiliates |
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7.0 |
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6.1 |
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Net income |
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$ |
24.5 |
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$ |
17.3 |
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Net income per common share: |
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Basic |
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$ |
0.27 |
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$ |
0.19 |
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Diluted |
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$ |
0.26 |
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$ |
0.19 |
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Weighted average number of common and common equivalent shares
outstanding: |
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Basic |
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91.3 |
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90.5 |
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Diluted |
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94.8 |
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90.7 |
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See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
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Three Months Ended March 31, |
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2007 |
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2006 |
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Cash flows from operating activities: |
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Net income |
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$ |
24.5 |
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$ |
17.3 |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation |
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26.2 |
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23.2 |
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Deferred debt issuance cost amortization |
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1.1 |
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1.1 |
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Amortization of intangibles |
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4.2 |
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4.1 |
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Stock compensation |
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1.7 |
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1.3 |
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Equity in net earnings of affiliates, net of cash received |
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(3.1 |
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(3.0 |
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Deferred income tax provision |
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2.4 |
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2.2 |
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Changes in operating assets and liabilities: |
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Accounts and notes receivable, net |
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(58.8 |
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(29.5 |
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Inventories, net |
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(150.9 |
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(185.4 |
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Other current and noncurrent assets |
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17.2 |
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6.4 |
|
Accounts payable |
|
|
(29.0 |
) |
|
|
28.8 |
|
Accrued expenses |
|
|
(64.7 |
) |
|
|
(42.0 |
) |
Other current and noncurrent liabilities |
|
|
(6.8 |
) |
|
|
1.5 |
|
|
|
|
|
|
|
|
Total adjustments |
|
|
(260.5 |
) |
|
|
(191.3 |
) |
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(236.0 |
) |
|
|
(174.0 |
) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(23.7 |
) |
|
|
(23.4 |
) |
Proceeds from sales of property, plant and equipment |
|
|
0.3 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(23.4 |
) |
|
|
(22.3 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from debt obligations, net |
|
|
10.1 |
|
|
|
21.0 |
|
Proceeds from issuance of common stock |
|
|
6.0 |
|
|
|
0.4 |
|
Payment of debt issuance costs |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
15.9 |
|
|
|
21.4 |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(0.2 |
) |
|
|
6.6 |
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
|
(243.7 |
) |
|
|
(168.3 |
) |
Cash and cash equivalents, beginning of period |
|
|
401.1 |
|
|
|
220.6 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
157.4 |
|
|
$ |
52.3 |
|
|
|
|
|
|
|
|
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 first quarter of 2007 and 2006, the Company recorded approximately $1.9 million and
$1.3 million, respectively, of stock compensation expense in accordance with Statement of Financial
Accounting Standards (SFAS) No. 123R (Revised 2004), Share-Based Payment. The stock
compensation expense was recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2007 |
|
|
2006 |
|
Cost of goods sold |
|
$ |
0.1 |
|
|
$ |
|
|
Selling, general and administrative expenses |
|
|
1.8 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
Total stock compensation expense |
|
$ |
1.9 |
|
|
$ |
1.3 |
|
|
|
|
|
|
|
|
2. LONG-TERM DEBT
Long-term debt consisted of the following at March 31, 2007 and December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Credit facility |
|
$ |
114.3 |
|
|
$ |
111.4 |
|
67/8% Senior subordinated notes due 2014 |
|
|
267.1 |
|
|
|
264.0 |
|
13/4% Convertible senior subordinated notes due 2033 |
|
|
201.3 |
|
|
|
201.3 |
|
11/4% Convertible senior subordinated notes due 2036 |
|
|
201.3 |
|
|
|
201.3 |
|
Other long-term debt |
|
|
6.9 |
|
|
|
7.0 |
|
|
|
|
|
|
|
|
|
|
|
790.9 |
|
|
|
785.0 |
|
Less: Current portion of long-term debt |
|
|
(6.3 |
) |
|
|
(6.3 |
) |
13/4% Convertible senior subordinated
notes due 2033 |
|
|
(201.3 |
) |
|
|
(201.3 |
) |
|
|
|
|
|
|
|
Total long-term debt, less current portion |
|
$ |
583.3 |
|
|
$ |
577.4 |
|
|
|
|
|
|
|
|
3. INVENTORIES
Inventories are valued at the lower of cost or market using the first-in, first-out method.
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.
Inventories at March 31, 2007 and December 31, 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Finished goods |
|
$ |
568.5 |
|
|
$ |
468.7 |
|
Repair and replacement parts |
|
|
351.1 |
|
|
|
331.9 |
|
Work in process |
|
|
76.5 |
|
|
|
59.8 |
|
Raw materials |
|
|
231.4 |
|
|
|
204.5 |
|
|
|
|
|
|
|
|
Inventories, net |
|
$ |
1,227.5 |
|
|
$ |
1,064.9 |
|
|
|
|
|
|
|
|
4. ACCOUNTS RECEIVABLE SECURITIZATION
The Company sells wholesale accounts receivable on a revolving basis to commercial
paper conduits either on a direct basis or through a wholly-owned special purpose U.S. subsidiary
under its United States, Canadian and European securitization facilities. Outstanding funding
under these facilities totaled approximately $419.8 million at March 31, 2007 and $429.6 million at
December 31, 2006. 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 $6.7 million and $6.5 million for the
three months ended March 31, 2007 and 2006, respectively.
During the second quarter of 2005, the Company completed an agreement to permit transferring,
on an ongoing basis, the majority of its wholesale interest-bearing receivables in North America to
AGCO Finance LLC and AGCO Finance Canada, Ltd., its United States and Canadian retail finance joint
ventures. The Company has a 49% ownership interest in these joint ventures. The transfer of the
receivables is without recourse to the Company, and the Company will continue to service the
receivables. As of March 31, 2007, the balance of interest-bearing receivables transferred to AGCO
Finance LLC and AGCO Finance Canada, Ltd. under this agreement was approximately $116.2 million
compared to approximately $124.1 million as of December 31, 2006.
5. EARNINGS PER SHARE
The Companys $201.3 million aggregate principal amount of 13/4% convertible senior subordinated
notes and its $201.3 million aggregate principal amount of 11/4% 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 Companys common stock,
and (ii) the conversion rate to be increased under certain circumstances if the new notes are
converted in connection with certain change of control transactions. Dilution of weighted shares
outstanding will depend on the Companys stock for the excess conversion value using the treasury
stock method. A reconciliation of net income and weighted average common shares outstanding for
purposes of calculating basic and diluted earnings per share for the three months ended March 31,
2007 and 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending March 31, |
|
|
|
2007 |
|
|
2006 |
|
Basic net income per share: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
24.5 |
|
|
$ |
17.3 |
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding |
|
|
91.3 |
|
|
|
90.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.27 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share: |
|
|
|
|
|
|
|
|
Net income for purposes of
computing diluted net
income per share |
|
$ |
24.5 |
|
|
$ |
17.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding |
|
|
91.3 |
|
|
|
90.5 |
|
Dilutive stock options and
restricted stock awards |
|
|
0.3 |
|
|
|
0.2 |
|
Weighted average assumed
conversion of contingently
convertible senior
subordinated notes |
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common and common
equivalent shares
outstanding for purposes of
computing diluted earnings
per share |
|
|
94.8 |
|
|
|
90.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.26 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
6. SEGMENT REPORTING
The Company has four reportable segments: North America; South America; Europe/Africa/Middle
East; and Asia/Pacific. Each regional segment distributes a full range of agricultural equipment
and related replacement parts. The Company evaluates segment performance primarily based on income
from operations. Sales for each regional segment are based on the location of the third-party
customer. The Companys selling, general and administrative expenses and engineering expenses are
charged to each segment based on the region and division where the expenses are incurred. As a
result, the components of income from operations for one segment may not be comparable to another
segment. Segment results for the three months ended March 31, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
North |
|
South |
|
Europe/Africa/ |
|
Asia/ |
|
|
March 31, |
|
America |
|
America |
|
Middle East |
|
Pacific |
|
Consolidated |
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
326.8 |
|
|
$ |
189.3 |
|
|
$ |
780.1 |
|
|
$ |
36.4 |
|
|
$ |
1,332.6 |
|
(Loss) income from
operations |
|
|
(7.3 |
) |
|
|
19.7 |
|
|
|
47.1 |
|
|
|
3.1 |
|
|
|
62.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
320.8 |
|
|
$ |
141.2 |
|
|
$ |
675.2 |
|
|
$ |
32.6 |
|
|
$ |
1,169.8 |
|
(Loss) income from
operations |
|
|
(5.4 |
) |
|
|
11.2 |
|
|
|
51.3 |
|
|
|
3.7 |
|
|
|
60.8 |
|
A reconciliation from the segment information to the consolidated balances for income
from operations is set forth below:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2007 |
|
|
2006 |
|
Segment income from operations |
|
$ |
62.6 |
|
|
$ |
60.8 |
|
Corporate expenses |
|
|
(11.0 |
) |
|
|
(11.4 |
) |
Stock compensation expense |
|
|
(1.8 |
) |
|
|
(1.3 |
) |
Restructuring and other infrequent expenses |
|
|
|
|
|
|
(0.1 |
) |
Amortization of intangibles |
|
|
(4.2 |
) |
|
|
(4.1 |
) |
|
|
|
|
|
|
|
Consolidated income from operations |
|
$ |
45.6 |
|
|
$ |
43.9 |
|
|
|
|
|
|
|
|
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 March 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
Income |
|
|
|
|
|
|
Earnings |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
From |
|
|
Net |
|
|
Per |
|
|
From |
|
|
Net |
|
|
Earnings |
|
|
|
Operations |
|
|
Income(1) |
|
|
Share(1) |
|
|
Operations |
|
|
Income(1) |
|
|
Per Share(1) |
|
As adjusted |
|
$ |
45.6 |
|
|
$ |
24.5 |
|
|
$ |
0.26 |
|
|
$ |
44.0 |
|
|
$ |
17.4 |
|
|
$ |
0.19 |
|
Restructuring and
other infrequent
expenses(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
45.6 |
|
|
$ |
24.5 |
|
|
$ |
0.26 |
|
|
$ |
43.9 |
|
|
$ |
17.3 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net income and earnings per share amounts are after tax. |
|
(2) |
|
The restructuring and other infrequent expenses recorded in the first quarter of 2006 related primarily to severance costs
associated with the Companys rationalization of certain Valtra European sales offices located in Denmark, Norway and the United Kingdom. |