AGCO Reports First Quarter Results
Record First Quarter Sales Produce Earnings per Share of $1.19
DULUTH, Ga.--(BUSINESS WIRE)-- AGCO, Your Agriculture Company (NYS: AGCO) , a worldwide manufacturer and distributor of agricultural equipment, reported net sales of approximately $2.4 billion for the first quarter of 2013, an increase of approximately 5.7% compared to net sales of $2.3 billion for the first quarter of 2012. Net income for the first quarter of 2013 was $1.19 per share. These results compare to net income of $1.21 per share for the first quarter of 2012. Excluding unfavorable currency translation impacts of approximately 2.7%, net sales in the first quarter of 2013 increased approximately 8.4% compared to the first quarter of 2012.
First Quarter Highlights
Strong revenue growth in South America and Asia/Pacific. Regional sales results(1):
South America +26%; Asia/Pacific("APAC") +31%; North America +10%; Europe/Africa/ Middle East ("EAME") -1%
Regional operating margin performance: North America 11.6%, South America 10.4%, EAME 8.4%, APAC 4.6%
Full year EPS guidance increased to $5.50 to $5.70
(1)Excludes currency translation impact.See reconciliation of Non-GAAP measures in appendix.
"AGCO delivered healthy sales growth in the first quarter and exceeded its first quarter operating margin targets," stated Martin Richenhagen, Chairman, President and Chief Executive Officer. "We benefited from strong market demand in North and South America as well as from our margin improvement initiatives focused on purchasing actions and factory productivity. In addition, production rates at our new Fendt assembly facility in Germany increased to normal levels during the first quarter. As expected, sales mix and Fendt productivity negatively impacted EAME's first quarter operating margins; however, we remain on track to deliver significant EAME margin improvement for the full year of 2013."
Industry Unit Retail Sales
Quarter ended March 31, 2013
Prior Year Period
Prior Year Period
"Attractive farm economics are in place across the developed farm equipment markets," stated Mr. Richenhagen. "Industry demand in North America continues at high levels, driven by strong farm income in 2012. Winter precipitation throughout much of the U.S. has alleviated some of the impact of last year's drought, and farmer planting intentions are near record levels. Crop prices have declined but remain at healthy levels. A cold wet spring across much of Europe is negatively impacting industry demand offsetting the benefit of elevated crop prices. Industry sales were softest in the United Kingdom, Finland and Southern Europe while demand remained at high levels in the key Western European markets of Germany and France. Market demand was strongest in Brazil as a better harvest, attractive government financing programs and favorable grain prices are supporting farm equipment industry sales. Looking longer-term, the trends that have increased demand for grains and lowered global grain inventories are expected to intensify, supporting healthy long-term fundamentals for the agricultural industry."
Three Months Ended March 31,
% change from
2012 due to
(1) See Footnotes for additional disclosure
AGCO's North American sales grew 10.3% in the first quarter of 2013 compared to 2012, excluding the impact of unfavorable currency translation. Elevated levels of farm income in 2012 continued to support industry demand in the first quarter of 2013 from the professional farming sector and produced strong growth for AGCO. The most significant increases were in high horsepower tractors, implements and combines. Higher sales and margin improvement initiatives contributed to growth in income from operations of $21.9 million for the first quarter of 2013 compared to 2012.
South American net sales improved 26.4% in the first quarter of 2013 compared to the first quarter of 2012, excluding the negative impact of currency translation. Higher sales in Brazil produced most of the increase. Brazilian farmers benefited from more favorable weather in the first quarter compared to the drought conditions that existed in early 2012. AGCO's profitability in South America improved during the first quarter of 2013, with operating margins rising to 10.4% compared to 5.8% in the same period of 2012. Income from operations increased $24.4 million for the first quarter of 2013 compared to 2012 due to higher sales and the benefit of cost reduction initiatives.
Net sales were approximately flat in AGCO's EAME region in the first quarter of 2013 compared to the first quarter of 2012 despite softer market conditions. Sales growth in France and Germany was offset by declines in the other European markets. EAME operating income declined by $36.1 million in the first quarter of 2013 compared to the same period in 2012. AGCO's results were negatively impacted by a weaker sales mix, increased engineering expenses and transition costs associated with the new Fendt tractor assembly facility.
Excluding the negative impact of currency translation, net sales in the Asia/Pacific region were 30.8% higher in the first quarter of 2013 compared to the first quarter of 2012. Growth in Australia, New Zealand and China produced most of the increase. Income from operations in the Asia/Pacific region improved $4.6 million in the first quarter of 2013, compared to the same period in 2012, due to higher sales partially offset by increased market development costs in China.
Global industry demand is expected to be relatively flat in 2013 compared to 2012. Growth is projected in South America; North America is expected to remain stable; modest declines are anticipated for Western Europe. AGCO is targeting earnings per share in a range from $5.50 to $5.70 for the full year of 2013. Net sales are expected to range from $10.5 billion to $10.7 billion. Gross margin improvement is expected to be partially offset by increased engineering expenditures to meet Tier 4 final emission requirements and market development expenses.
"Industry fundamentals remain solid, and we have increased our 2013 sales and earnings outlook," continued Mr. Richenhagen. "We will maintain our focus on improving profitability throughout 2013, while also increasing our investments to support our longer term objectives. These investments include construction of a low horsepower production facility in China and our important investments in new product development and market expansion. We are also forecasting another year of solid cash generation after funding our growth investments."
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AGCO will be hosting a conference call with respect to this earnings announcement at 10:00 a.m. Eastern Time on Tuesday, April 30, 2013. 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 in the "Events" section on the "Company/Investors" page of our website. 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.
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Safe Harbor Statement
Statements that are not historical facts, including the projections of earnings per share, sales, market conditions, farm incomes, share repurchase plans, initiation of dividend payments, cost reduction initiatives, commodity prices, pricing benefits, effects of tax accounting, margin improvements, currency translation, investments in production facilities and product development, expanding markets, industry demand, productivity and market share improvements, general economic conditions and engineering efforts, are forward-looking and subject to risks that could cause actual results to differ materially from those suggested by the statements. 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.
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 take place outside 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 retail sales of the products that we manufacture are financed, either by our joint ventures with Rabobank or by a bank or other private lender. During 2013, our joint ventures with Rabobank, which are controlled by Rabobank and 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 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. As a result of the recent economic downturn, financing for capital equipment purchases generally has become more difficult in certain regions and in some cases, was expensive to obtain. To the extent that financing is not available or available only at unattractive prices, our sales would be negatively impacted.
Both AGCO and our retail finance joint ventures have substantial account 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 have experienced substantial and sustained volatility with respect to currency exchange rate and interest rate changes, including uncertainty associated with the Euro, which can adversely affect our reported results of operations and the competitiveness of our products.
All acquisitions involve risks relating to retention of key employees and customers and fulfilling projections prepared by or at the direction of prior ownership. In addition, we may encounter difficulties in integrating recent and future acquisitions into our business and may not fully achieve, or achieve within a reasonable time frame, expected strategic objectives and other expected benefits of the acquisition.
Our success depends on the introduction of new products, particularly engines that comply with emission requirements, which requires substantial expenditures.
Our production levels and capacity constraints at our facilities, including those resulting from plant expansions and systems upgrades at our manufacturing facilities, could adversely affect our results.
Our expansion plans in emerging markets, including establishing a greater manufacturing and marketing presence and growing our use of component suppliers, could entail significant risks.
We depend on suppliers for components, parts and raw materials 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 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.
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, 2012. AGCO disclaims any obligation to update any forward-looking statements except as required by law.
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AGCO, Your Agriculture Company, (NYS: AGCO) , is a global leader focused on the design, manufacture and distribution of agricultural machinery. AGCO supports more productive farming through a full line of tractors, combines, hay tools, sprayers, forage equipment, tillage, implements, grain storage and protein production systems, as well as related replacement parts. AGCO products are sold through five core machinery brands, Challenger®, Fendt®, Massey Ferguson®, Valtra® and GSI®, and are distributed globally through 3,150 independent dealers and distributors in more than 140 countries worldwide. Retail financing is available through AGCO Finance for qualified purchasers. Founded in 1990, AGCO is headquartered in Duluth, Georgia, USA. In 2012, AGCO had net sales of $10.0 billion. http://www.agcocorp.com
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AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
Cash and cash equivalents
Accounts and notes receivable, net
Deferred tax assets
Other current assets
Total current assets
Property, plant and equipment, net
Investment in affiliates
Deferred tax assets
Intangible assets, net
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt
Convertible senior subordinated notes
Other current liabilities
Total current liabilities
Long-term debt, less current portion
Pensions and postretirement health care benefits
Deferred tax liabilities
Other noncurrent liabilities
AGCO Corporation stockholders' equity:
Additional paid-in capital
Accumulated other comprehensive loss
Total AGCO Corporation stockholders' equity
Total stockholders' equity
Total liabilities, temporary equity and stockholders' equity
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 March 31,
Cost of goods sold
Selling, general and administrative expenses
Amortization of intangibles
Income from operations
Interest expense, net
Other expense, net
Income before income taxes and equity in net earnings of affiliates
Income tax provision
Income before equity in net earnings of affiliates
Equity in net earnings of affiliates
Net loss (income) attributable to noncontrolling interests
Net income attributable to AGCO Corporation and subsidiaries
Net income per common share attributable to AGCO Corporation and subsidiaries:
Cash dividends declared and paid per common share