AGCO Reports Third Quarter Results
http://www.businesswire.com/news/home/20091027005695/en
Third Quarter Sales of $1.4 Billion Produce Net Income of $11 million
DULUTH, Ga.--(Business Wire)--
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment, reported net sales of approximately $1.4
billion for the third quarter of 2009, a decrease of approximately 32.7%
compared to net sales of approximately $2.1 billion for the third quarter of
2008. Reported net income per share was $0.12 for the third quarter of 2009 and
adjusted net income, which excludes restructuring and other infrequent expenses,
was $0.13 per share for the third quarter of 2009. These results compare to
reported and adjusted net income of $1.01 per share for the third quarter of
2008. Excluding unfavorable currency translation impacts of approximately 5%,
net sales in the third quarter of 2009 decreased approximately 27.7% compared to
the same period in 2008.
Net sales for the first nine months of 2009 were approximately $4.8 billion, a
decrease of approximately 23.8% compared to the same period in 2008. Excluding
the unfavorable impact of currency translation of approximately 9.9%, net sales
for the first nine months of 2009 decreased approximately 13.8% compared to the
same period in 2008. For the first nine months of 2009, reported net income was
$1.09 per share and adjusted net income, excluding restructuring and other
infrequent expenses, was $1.12 per share. These results compare to reported and
adjusted net income for the first nine months of 2008 of $2.91 per share.
"Our third quarter results were impacted by weak markets and significant
production cuts aimed at reducing our company and dealer inventories," stated
Martin Richenhagen, Chairman, President and Chief Executive Officer.
"Expectations of lower farm income in 2009 and the lingering effects of
constrained credit in some markets have negatively impacted our business. We are
facing softening end market demand in Western Europe and North America,
partially offset by stabilizing markets in South America. The priority for the
remainder of the year continues to be lowering our investment in working capital
in order to better align us with current market demand."
"Further progress was made with our inventory reduction efforts and cost
reduction initiatives during the third quarter. Company and dealer inventories
were reduced by approximately $165 million from June 30, 2009 levels by cutting
production approximately 31% in the third quarter compared to the third quarter
of 2008. We continue to make adjustments to our cost structure to match lower
sales levels by aggressively reducing our work force. Through a combination of
layoffs, temporary furloughs and the dismissal of temporary employees, we have
lowered our workforce by approximately 25% since the beginning of the year. We
are not, however, losing sight of our long-term objectives to expand and upgrade
our product offerings and improve our profitability. We are continuing to invest
in new product development, distribution enhancements and productivity
improvements in our production facilities."
AGCO`s Europe/Africa/Middle East (EAME) region reported a sales decline of
approximately 30.3% compared to the third quarter of 2008, excluding unfavorable
currency translation impacts. Demand in the third quarter of 2009 softened
significantly in France, Germany, Finland and Scandinavia, while the Russian and
Eastern European markets continue to be extremely weak. In the North American
region, sales in the third quarter declined approximately 31.9% on a constant
currency basis compared to the same period in 2008. Lower sales of tractors
under 100 horsepower and hay products tied to the dairy and cattle sectors, in
addition to dealer inventory reductions resulted in the decline in North
American sales. AGCO`s South American region reported a sales decline of
approximately 20.5% compared to the third quarter of 2008, excluding unfavorable
currency translation impacts. Dry weather and credit constraints have resulted
in weaker demand.
Lower net sales, reduced gross margins and the negative impact of currency
translation all contributed to a decline in income from operations for the third
quarter and first nine months of 2009. Gross margins declined due to lower
production volumes and a weaker product mix, partially offset by the impact of
reduced workforce levels and cost containment initiatives. The Company continued
its investment in engineering in the first nine months of 2009 at levels
slightly below the prior year. Unit production of tractors and combines for the
third quarter of 2009 was approximately 31% below comparable 2008 levels.
Market Update
Industry Unit Retail Sales
Nine Months Ended September 30, 2009 Tractors Combines
Change from Change from
Prior Year Period
Prior Year Period
North America - 22 % + 19 %
South America - 22 % - 49 %
Europe - 14 % -7 %
North America
Industry unit retail sales of high horsepower tractors were down approximately
19% and 11% in the third quarter and first nine months of 2009, respectively,
compared to strong levels in the prior year. Industry sales of tractors under
100 horsepower declined approximately 24% in the first nine months of 2009
compared to the prior year due to weakness in the landscaping, residential
construction and dairy sectors. Industry unit retail sales of combines for the
first nine months of 2009 grew by approximately 19% compared to the prior year
period.
South America
For the first nine months of 2009, industry unit retail sales of tractors
declined approximately 22% compared to the same period last year. Weak market
conditions in Argentina and Brazil have contributed to most of the decline. In
the third quarter of 2009, industry conditions improved in Brazil as new
government financing programs strengthened demand. The mix of tractor sales in
Brazil remained weighted toward smaller tractors. The Brazilian government`s
special financing plan for small farms continued to stimulate sales of lower
horsepower tractors during the third quarter of 2009.
Europe
Industry retail units declined approximately 14% in the first nine months of
2009 with weaker market conditions across Europe. During the third quarter of
2009, the slow-down in industry demand accelerated across Western Europe,
especially in the two largest markets of France and Germany. The markets of
Finland and Scandinavia also experienced significant weakness as industry retail
tractor volumes declined approximately 38% compared to the third quarter of
2008. Lower commodity prices and the expectation of reduced farm income
generated the softer demand. Industry sales in Eastern Europe and Russia
continued to experience severe declines due to ongoing credit constraints.
"The lower level of commodity prices and the recent estimates of decreased farm
income from 2008 levels are resulting in weak equipment investments across the
farm sector," stated Mr. Richenhagen. "Despite some cold, wet weather across
parts of the United States, crop production is expected to be strong around the
world. Commodity prices are down from record levels in 2008, and farmers are
deferring equipment replacement decisions. The dairy and livestock producers
have been hardest hit by the global recession, and sales in those sectors
continue to be at very low levels. Global grain inventories are expected to
increase, but remain below historical levels on a stocks-to-use basis. Longer
term, we are very optimistic about the fundamentals supporting commodity prices
and farm income."
Regional Results
AGCORegional Sales (in millions)
Net sales % change % change from
from 2008 2008 due to
currency translation
Three months ended September 30, 2009
North America $ 292.1 - 33.7 % - 1.8 %
South America 331.6 - 28.9 % - 8.4 %
Europe/Africa/Middle East 720.1 - 35.1 % - 4.7 %
Asia/Pacific 59.9 - 13.9 % - 5.2 %
Total $ 1,403.7 - 32.7 % - 5.0 %
Nine months ended September 30, 2009
North America $ 1,131.2 - 11.2 % - 3.7 %
South America 738.0 - 36.9 % - 12.9 %
Europe/Africa/Middle East 2,755.5 - 24.3 % - 11.0 %
Asia/Pacific 153.2 - 17.3 % - 13.6 %
Total $ 4,777.9 - 23.8 % - 9.9 %
North America
Net sales declined across all the major products in AGCO`s North American region
during the first nine months of 2009 compared to the same period in 2008, with
the exception of combines. In the first nine months of 2009, income from
operations increased approximately $36.6 million compared to the same period in
2008. Results benefited from new products, reduced warranty expense and cost
control initiatives, partially offset by higher levels of engineering costs.
South America
Weak market demand in Argentina and lower sales of high horsepower tractors in
Brazil led to sales declines in the South American region. Income from
operations decreased approximately $82.6 million in the first nine months of
2009 compared to the same period in 2008. Lower sales and production levels, the
unfavorable impact of currency translation and the shift in mix to lower
horsepower tractors in Brazil combined to produce lower income from operations.
Europe/Africa/Middle East
Softer market demand across Western Europe and the depressed industry conditions
in Eastern and Central Europe and Russia produced significant sales declines in
the EAME region. AGCO experienced the largest declines in France, Germany and
Scandinavia. Income from operations declined by approximately $196.7 million in
the first nine months of 2009 compared to the same period in 2008. Reduced
sales, lower production levels and unfavorable currency translation impacts all
contributed to the decline.
Asia/Pacific
Net sales in AGCO`s Asia/Pacific region declined by approximately 3.8% during
the first nine months of 2009 compared to the same period in 2008, excluding
unfavorable currency translation impacts. Weaker market conditions in Asia were
partially offset by improved sales in Australia. Income from operations in the
Asia/Pacific region decreased approximately $11.6 million in the first nine
months of 2009 compared to the same period in 2008, due to lower sales and
unfavorable currency translation impacts.
Outlook
Reduced farm income expectations and the weak global economy have dampened
worldwide industry demand for farm equipment with no improvement expected in the
fourth quarter. In North America, demand from the professional farming segment
is expected to continue to soften. Demand in Brazil has begun to stabilize,
resulting from government-supported finance incentives, but lingering impacts of
the drought continue to hurt sales in Argentina. Weakening farm economics in
Western Europe are expected to continue to reduce industry sales in key markets.
For the full year of 2009, AGCO is targeting earnings per share in a range from
$1.30 to $1.50. Net sales are expected to range from $6.4 billion to $6.6
billion, including unfavorable currency translation impacts of approximately
$500 million to $600 million. AGCO`s earnings are expected to be impacted by
lower sales and production volumes, engineering expenses for new product
development and Tier 4 emission requirements, and working capital reduction
efforts.
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, October 27, 2009. The
Company will refer to slides on its conference call. Interested persons can
access the conference call and slide presentation via AGCO`s website at
www.agcocorp.com on the "Investors/Events" page. A replay of the conference call
will be available approximately two hours after the conclusion of the conference
call for twelve months following the call. A copy of this press release will be
available on AGCO`s website for at least twelve months following the call.
Safe Harbor Statement
Statements that are not historical facts, including the projections of earnings
per share, sales, market conditions, product offerings, investment in
development and operating improvements, production volumes, industry demand,
general economic conditions, working capital, crop production, commodity
pricing, farm incomes, grain inventories and use, currency translation impacts
and engineering expense, are forward-looking and subject to risks which could
cause actual results to differ materially from those suggested by the
statements. These forward-looking statements involve a number of risks and
uncertainties. The following are among the factors that could cause actual
results to differ materially from the results discussed in or implied by the
forward-looking statements. Further information concerning these and other
factors is included in AGCO`s filings with the Securities and Exchange
Commission, including its Form 10-K for the year ended December 31, 2008. AGCO
disclaims any obligation to update any forward-looking statements except as
required by law.
* Our financial results depend entirely upon the agricultural industry, and
factors that adversely affect the agricultural industry generally, including
declines in the general economy, increases in farm input costs, lower commodity
prices, lower farm income and changes in the availability of credit for our
retail customers, will adversely affect us.
* The recent poor performance of the general economy may result in a decline in
demand for our products. However, we are unable to predict with accuracy the
amount or duration of this decline, and our forward-looking statements reflect
merely our best estimates at the current time.
* A majority of our sales and manufacturing takes place outside of the United
States, and, as a result, we are exposed to risks related to foreign laws,
taxes, economic conditions, labor supply and relations, political conditions and
governmental policies. These risks may delay or reduce our realization of value
from our international operations.
* Most of the retail sales of our products are financed either by our retail
finance joint ventures with Rabobank or by a bank or other private lender.
During 2008, our joint ventures with Rabobank, which are dependent upon Rabobank
for financing as well, financed approximately 50% of the retail sales of our
tractors and combines, in the markets where the joint ventures operate. Any
difficulty by Rabobank to continue to provide that financing, or any business
decision by Rabobank as the controlling member of the joint ventures not to fund
the business or particular aspects of it (for example, a particular country or
region), would require the joint ventures to find other sources of financing
(which may be difficult to obtain), or us to find another source of retail
financing for our customers, or our customers would be required to utilize other
retail financing providers. To the extent that financing is not available or
available only at unattractive prices, our sales would be negatively impacted.
* Both AGCO and AGCO Finance have substantial accounts receivables from dealers
and end-customers, and we would be adversely impacted if the collectability of
these receivables was not consistent with historical experience; this
collectability is dependent upon the financial strength of the farm industry,
which in turn is dependent upon the general economy and commodity prices, as
well as several of the other factors listed in this section.
* We recently have experienced substantial and sustained volatility with respect
to currency exchange rate and interest rate changes, which can adversely affect
our reported results of operations and the competitiveness of our products.
* We are subject to extensive environmental laws and regulations, and our
compliance with, or our failure to comply with, existing or future laws and
regulations could delay production of our products or otherwise adversely affect
our business.
* We have significant pension obligations with respect to our employees and our
available cash flow may be adversely affected in the event that payments become
due under any pension plans that are unfunded or underfunded. Declines in the
market value of the securities used to fund these obligations result in
increased pension expense in future periods.
* The agricultural equipment industry is highly seasonal, and seasonal
fluctuations significantly impact our results of operations and cash flows.
* Our success depends on the introduction of new products, which requires
substantial expenditures.
* We depend on suppliers for raw materials, components and parts for our
products, and any failure by our suppliers to provide products as needed, or by
us to promptly address supplier issues, will adversely impact our ability to
timely and efficiently manufacture and sell our products. We also are subject to
raw material price fluctuations, which can adversely affect our manufacturing
costs.
* We face significant competition and, if we are unable to compete successfully
against other agricultural equipment manufacturers, we would lose customers and
our net sales and profitability would decline.
* We have a substantial amount of indebtedness, and as result, we are subject to
certain restrictive covenants and payment obligations that may adversely affect
our ability to operate and expand our business.
About AGCO
AGCO, Your Agriculture Company (NYSE: AGCO), was founded in 1990 and offers a
full product line of tractors, combines, hay tools, sprayers, forage, tillage
equipment, implements and related replacement parts. AGCO agricultural products
are sold under the core brands of Challenger, Fendt, Massey Ferguson and Valtra,
and are distributed globally through more than 2,800 independent dealers and
distributors, in more than 140 countries worldwide. AGCO provides retail
financing through AGCO Finance. AGCO is headquartered in Duluth, Georgia, USA.
In 2008, AGCO had net sales of $8.4 billion.
Please visit our website at www.agcocorp.com.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
September 30, December 31,
2009 2008
ASSETS
Current Assets:
Cash and cash equivalents $ 218.4 $ 512.2
Restricted cash 4.8 33.8
Accounts and notes receivable, net 785.0 815.6
Inventories, net 1,444.5 1,389.9
Deferred tax assets 44.3 56.6
Other current assets 195.7 197.1
Total current assets 2,692.7 3,005.2
Property, plant and equipment, net 933.1 811.1
Investment in affiliates 322.9 275.1
Deferred tax assets 36.6 29.9
Other assets 95.4 69.6
Intangible assets, net 172.7 176.9
Goodwill 643.5 587.0
Total assets $ 4,896.9 $ 4,954.8
LIABILITIES AND STOCKHOLDERS` EQUITY
Current Liabilities:
Current portion of long-term debt $ - $ 0.1
Convertible senior subordinated notes 191.1 -
Accounts payable 618.1 1,027.1
Accrued expenses 752.8 799.8
Other current liabilities 59.7 151.5
Total current liabilities 1,621.7 1,978.5
Long-term debt, less current portion 458.5 625.0
Pensions and postretirement health care benefits 173.9 173.6
Deferred tax liabilities 106.7 108.1
Other noncurrent liabilities 77.9 49.6
Total liabilities 2,438.7 2,934.8
Temporary Equity:
Equity component of redeemable convertible senior subordinated notes 10.2 -
Stockholders` Equity:
AGCO Corporation stockholders` equity:
Common stock 0.9 0.9
Additional paid-in capital 1,063.3 1,067.4
Retained earnings 1,484.3 1,382.1
Accumulated other comprehensive loss (107.5 ) (436.1 )
Total AGCO Corporation stockholders` equity 2,441.0 2,014.3
Noncontrolling interests 7.0 5.7
Total stockholders' equity 2,448.0 2,020.0
Total liabilities, temporary equity and stockholders` equity $ 4,896.9 $ 4,954.8
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
Three Months Ended September 30,
2009 2008
Net sales $ 1,403.7 $ 2,085.4
Cost of goods sold 1,162.3 1,705.3
Gross profit 241.4 380.1
Selling, general and administrative expenses 155.5 183.5
Engineering expenses 46.3 49.8
Restructuring and other infrequent expenses 1.0 0.1
Amortization of intangibles 4.6 5.0
Income from operations 34.0 141.7
Interest expense, net 10.5 5.7
Other expense, net 5.7 2.9
Income before income taxes and equity in net earnings of affiliates 17.8 133.1
Income tax provision 14.8 42.7
Income before equity in net earnings of affiliates 3.0 90.4
Equity in net earnings of affiliates 7.0 8.6
Net income 10.0 99.0
Net loss attributable to noncontrolling interests 1.1 -
Net income attributable to AGCO Corporation and subsidiaries $ 11.1 $ 99.0
Net income per common share attributable to AGCO Corporation and subsidiaries:
Basic $ 0.12 $ 1.08
Diluted $ 0.12 $ 1.01
Weighted average number of common and common equivalent shares outstanding:
Basic 92.3 91.7
Diluted 94.8 98.3
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
Nine Months Ended September 30,
2009 2008
Net sales $ 4,777.9 $ 6,267.4
Cost of goods sold 3,972.7 5,143.9
Gross profit 805.2 1,123.5
Selling, general and administrative expenses 471.3 535.1
Engineering expenses 146.4 148.2
Restructuring and other infrequent expenses 3.8 0.3
Amortization of intangibles 13.3 14.9
Income from operations 170.4 425.0
Interest expense, net 33.9 23.3
Other expense, net 20.5 18.5
Income before income taxes and equity in net earnings of affiliates 116.0 383.2
Income tax provision 43.6 128.0
Income before equity in net earnings of affiliates 72.4 255.2
Equity in net earnings of affiliates 28.9 32.2
Net income 101.3 287.4
Net loss attributable to noncontrolling interests 0.9 -
Net income attributable to AGCO Corporation and subsidiaries $ 102.2 $ 287.4
Net income per common share attributable to AGCO Corporation and subsidiaries:
Basic $ 1.11 $ 3.13
Diluted $ 1.09 $ 2.91
Weighted average number of common and common equivalent shares outstanding:
Basic 92.2 91.7
Diluted 93.5 98.9
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
Nine Months Ended September 30,
2009 2008
Cash flows from operating activities:
Net income attributable to AGCO Corporation and subsidiaries $ 102.2 $ 287.4
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Depreciation 91.0 95.0
Deferred debt issuance cost amortization 2.1 2.5
Amortization of intangibles 13.3 14.9
Amortization of debt discount 11.3 10.6
Stock compensation 11.3 21.8
Equity in net earnings of affiliates, net of cash received (14.5 ) (18.8 )
Deferred income tax provision (7.9 ) 2.8
Gain on sale of property, plant and equipment (0.3 ) (0.2 )
Changes in operating assets and liabilities:
Accounts and notes receivable, net 71.4 (72.0 )
Inventories, net 55.2 (391.4 )
Other current and noncurrent assets 16.3 (56.0 )
Accounts payable (413.6 ) 50.8
Accrued expenses (83.5 ) 113.6
Other current and noncurrent liabilities (16.5 ) (13.1 )
Total adjustments (264.4 ) (239.5 )
Net cash (used in) provided by operating activities (162.2 ) 47.9
Cash flows from investing activities:
Purchases of property, plant and equipment (149.4 ) (155.5 )
Proceeds from sale of property, plant and equipment 1.8 3.0
Investments in unconsolidated affiliates (1.1 ) (0.4 )
Restricted cash and other 32.2 -
Net cash used in investing activities (116.5 ) (152.9 )
Cash flows from financing activities:
(Repayment of) proceeds from debt obligations, net (55.5 ) 12.7
Proceeds from issuance of common stock - 0.3
Payment of minimum tax withholdings on stock compensation (5.2 ) (3.2 )
Payment of debt issuance costs - (1.3 )
Investments by noncontrolling interests 1.3 -
Net cash (used in) provided by financing activities (59.4 ) 8.5
Effect of exchange rate changes on cash and cash equivalents 44.3 (36.1 )
Decrease in cash and cash equivalents (293.8 ) (132.6 )
Cash and cash equivalents, beginning of period 512.2 582.4
Cash and cash equivalents, end of period $ 218.4 $ 449.8
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except per share data)
1. STOCK COMPENSATION EXPENSE
The Company recorded stock compensation expense as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Cost of goods sold $ 0.1 $ 0.3 $ 0.6 $ 0.7
Selling, general and administrative expenses 2.8 6.5 11.0 21.3
Total stock compensation expense $ 2.9 $ 6.8 $ 11.6 $ 22.0
2.RESTRUCTURING AND OTHER INFREQUENT EXPENSES
During the third quarter of 2009, the Company recorded restructuring and other
infrequent expenses of approximately $1.0 million. These charges primarily
related to severance and other related costs associated with the Company's
rationalization of its operations in the United States, the United Kingdom and
Finland. The Company recorded restructuring and other infrequent expenses of
approximately $2.8 million associated with these rationalizations during the
second quarter of 2009. The rationalizations will result in the termination of
approximately 332 employees. Approximately $2.8 million of severance and other
related costs had been paid as of September 30, 2009, and 257 of the employees
had been terminated. The remaining $1.0 million of severance and other related
costs accrued as of September 30, 2009 are expected to be paid during 2009 and
early 2010.
3. INDEBTEDNESS
Indebtedness at September 30, 2009 and December 31, 2008 consisted of the following:
September 30, December 31,
2009 2008
6⅞% Senior subordinated notes due 2014 $ 292.7 $ 279.4
1¾% Convertible senior subordinated notes due 2033 191.1 185.3
1¼% Convertible senior subordinated notes due 2036 165.7 160.3
Other long-term debt 0.1 0.1
649.6 625.1
Less: Current portion of long-term debt - (0.1 )
1¾% Convertible senior subordinated notes due 2033 (191.1 ) -
Total indebtedness, less current portion $ 458.5 $ 625.0
Holders of the Company`s 1¾% convertible senior subordinated notes due 2033 and
1¼% convertible senior subordinated notes due 2036 may convert the notes if,
during any fiscal quarter, the closing sales price of the Company`s common stock
exceeds 120% of the conversion price of $22.36 per share for the 1¾% convertible
senior subordinated notes and $40.73 per share for the 1¼% convertible senior
subordinated notes for at least 20 trading days in the 30 consecutive trading
days ending on the last trading day of the preceding fiscal quarter. As of
September 30, 2009, the closing sales price of the Company`s common stock had
exceeded 120% of the conversion price of the 1¾% convertible senior subordinated
notes for at least 20 trading days in the 30 consecutive trading days ending
September 30, 2009, and, therefore, the Company classified the notes as a
current liability. In accordance with Accounting Standards Update No. 2009-04,
"Accounting for Redeemable Equity Instruments," the Company also classified the
equity component of the 1¾% convertible senior subordinated notes as "temporary
equity." The amount classified as "temporary equity" was measured as the excess
of (a) the amount of cash that would be required to be paid upon conversion over
(b) the current carrying amount of the liability-classified component. Future
classification of both notes between current and long-term debt and
classification of the equity component of both notes as "temporary equity" is
dependent on the closing sales price of the Company`s common stock during future
quarters. The Company believes it is unlikely the holders of the notes would
convert the notes under the provisions of the indenture agreement, thereby
requiring the Company to repay the principal portion in cash. In the event the
notes were converted, the Company believes it could repay the notes with
available cash on hand, funds from the Company`s $300.0 million multi-currency
revolving credit facility, or a combination of these sources.
4. INVENTORIES
Inventories at September 30, 2009 and December 31, 2008 were as follows:
September 30, December 31,
2009 2008
Finished goods $ 641.2 $ 484.9
Repair and replacement parts 394.2 396.1
Work in process 127.8 130.5
Raw materials 281.3 378.4
Inventories, net $ 1,444.5 $ 1,389.9
5.ACCOUNTS RECEIVABLE SECURITIZATION
The Company sells wholesale accounts receivable on a revolving basis to
commercial paper conduits either on a direct basis or through a wholly-owned
special purpose United States subsidiary under its United States and Canadian
securitization facilities and through a qualifying special purpose entity in the
United Kingdom under its European securitization facility. Outstanding funding
under these facilities totaled approximately $491.0 million at September 30,
2009 and $483.2 million at December 31, 2008. The funded balance has the effect
of reducing accounts receivable and short-term liabilities by the same amount.
Losses on sales of receivables primarily from securitization facilities included
in other expense, net were $1.5 million and $7.2 million for the three months
ended September 30, 2009 and 2008, respectively, and $11.7 million and $21.6
million for the nine months ended September 30, 2009 and 2008, respectively.
6. EARNINGS PER SHARE
The Company`s convertible senior subordinated notes provide for (i) the settlement upon conversion in cash up to the principal amount of the converted notes with any excess conversion value settled in shares of the Company`s common stock, and (ii) the conversion rate to be increased under certain circumstances if the notes are converted in connection with certain change of control transactions. Dilution of weighted shares outstanding will depend on the Company`s stock price for the excess conversion value
using the treasury stock method. A reconciliation of net income attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the three and nine months ended September 30, 2009 and 2008 is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Basic net income per share:
Net income attributable to AGCO $ 11.1 $ 99.0 $ 102.2 $ 287.4
Corporation and subsidiaries
Weighted average number of common shares outstanding 92.3 91.7 92.2 91.7
Basic net income per share attributable to AGCO Corporation and subsidiaries $ 0.12 $ 1.08 $ 1.11 $ 3.13
Diluted net income per share:
Net income attributable to AGCO $ 11.1 $ 99.0 $ 102.2 $ 287.4
Corporation and subsidiaries for
purposes of computing diluted net income per share
Weighted average number of common shares outstanding 92.3 91.7 92.2 91.7
Dilutive stock options, performance share awards and restricted stock awards 0.2 0.2 0.1 0.2
Weighted average assumed conversion of contingently convertible senior subordinated notes 2.3 6.4 1.2 7.0
Weighted average number of common and common equivalent shares outstanding for purposes of computing diluted earnings per share 94.8 98.3 93.5 98.9
Diluted net income per share attributable to AGCO Corporation and subsidiaries $ 0.12 $ 1.01 $ 1.09 $ 2.91
7. SEGMENT REPORTING
The Company has four reportable segments: North America; South America; Europe/Africa/Middle East; and Asia/Pacific. Each regional segment distributes a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each regional segment are based on the location of the third-party customer. The Company`s selling, general and administrative expenses and engineering expenses are charged to each segment based
on the region and division where the expenses are incurred. As a result, the components of income from operations for one segment may not be comparable to another segment. Segment results for the three and nine months ended September 30, 2009 and 2008 are as follows:
Three Months Ended North South Europe/Africa/ Asia/ Consolidated
September 30, America America Middle East Pacific
2009
Net sales $ 292.1 $ 331.6 $ 720.1 $ 59.9 $ 1,403.7
(Loss) income from operations (2.8 ) 22.9 28.2 7.8 56.1
2008
Net sales $ 440.4 $ 466.6 $ 1,108.8 $ 69.6 $ 2,085.4
Income from operations 4.7 41.0 110.8 12.1 168.6
Nine Months Ended North South Europe/Africa/ Asia/ Consolidated
September 30, America America Middle East Pacific
2009
Net sales $ 1,131.2 $ 738.0 $ 2,755.5 $ 153.2 $ 4,777.9
Income from operations 27.0 29.3 186.9 14.2 257.4
2008
Net sales $ 1,273.8 $ 1,169.1 $ 3,639.1 $ 185.4 $ 6,267.4
(Loss) income from operations (9.6 ) 111.9 383.6 25.8 511.7
A reconciliation from the segment information to the consolidated balances for income from operations is set forth below:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Segment income from operations $ 56.1 $ 168.6 $ 257.4 $ 511.7
Corporate expenses (13.7 ) (15.3 ) (58.9 ) (50.2 )
Stock compensation expense (2.8 ) (6.5 ) (11.0 ) (21.3 )
Restructuring and other infrequent expenses (1.0 ) (0.1 ) (3.8 ) (0.3 )
Amortization of intangibles (4.6 ) (5.0 ) (13.3 ) (14.9 )
Consolidated income from operations $ 34.0 $ 141.7 $ 170.4 $ 425.0
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 September 30, 2009 and 2008 (in
millions, except per share data):
Three months ended September 30,
2009 2008
Income Net Earnings Income Net Earnings
From Income(1) Per From Income(1)
Per
Operations Share(1) Operations Share(1)
As adjusted $ 35.0 $ 12.0 $ 0.13 $ 141.8 $ 99.1 $ 1.01
Restructuring and other infrequent expenses(2) 1.0 0.9 0.01 0.1 0.1 -
As reported $ 34.0 $ 11.1 $ 0.12 $ 141.7 $ 99.0 $ 1.01
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring and other infrequent expenses recorded during the third quarter of 2009 related primarily to severance costs associated with the Company`s rationalization of its operations in the United States, the United Kingdom and Finland. The restructuring and other infrequent expenses recorded during the third quarter of 2008 related primarily to severance and employee relocation costs associated with the Company`s rationalization of its Valtra sales office located in France.
The following is a reconciliation of adjusted income from operations, net income
and earnings per share to reported income from operations, net income and
earnings per share for the nine months ended September 30, 2009 and 2008 (in
millions, except per share data):
Nine months ended September 30,
2009 2008
Income Net Earnings Income Net Earnings
From Income(1) Per From Income(1)
Per
Operations Share(1) Operations Share(1)
As adjusted $ 174.2 $ 105.3 $ 1.12 $ 425.3 $ 287.6 $ 2.91
Restructuring and other infrequent expenses(2) 3.8 3.1 0.03 0.3 0.2 -
As reported $ 170.4 $ 102.2 $ 1.09 $ 425.0 $ 287.4 $ 2.91
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring and other infrequent expenses recorded during the first nine months of 2009 related primarily to severance costs associated with the Company`s rationalization of its operations in the United States, the United Kingdom and Finland. The restructuring and other infrequent expenses recorded during the first nine months of 2008 related primarily to severance and employee relocation costs associated with the Company`s rationalization of its Valtra sales office located in France as well as
the Company`s rationalization of certain parts, sales and marketing and administration functions in Germany.
AGCO
Greg Peterson, 770-232-8229
Director of Investor Relations
greg.peterson@agcocorp.com
Copyright Business Wire 2009
