- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ------
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
- ------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ----------------------
Commission file number 0-19898
-------
-----------------
AGCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1960019
(State of incorporation) (I.R.S. Employer Identification No.)
4830 River Green Parkway
Duluth, Georgia 30136
(Address of principal executive
offices including zip code)
Registrant's telephone number, including area code: (770) 813-9200
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common stock par value $.01 per share: 57,237,156 shares outstanding as of
September 30, 1996.
- --------------------------------------------------------------------------------
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Numbers
----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - September 30, 1996 and December 31, 1995 . . . . . . . . . . . 3
Condensed Consolidated Statements
of Income for the Three Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements
of Income for the Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements
of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
CONSOLIDATED EQUIPMENT OPERATIONS
-------------------------------- --------------------------------
September 30, December 31, September 30, December 31,
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . $ 28,331 $ 27,858 $ 26,759 $ 20,023
Accounts and notes receivable, net of
allowances . . . . . . . . . . . . . . . . . . 805,218 785,801 805,218 785,801
Receivables from unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . 4,527 4,029 7,307 4,029
Credit receivables, net . . . . . . . . . . . . . 210,409 185,401 - -
Inventories, net . . . . . . . . . . . . . . . . 481,603 360,969 481,603 360,969
Other current assets . . . . . . . . . . . . . . 60,894 60,442 57,560 56,950
--------------- --------------- --------------- ---------------
Total current assets . . . . . . . . . . . . . . 1,590,982 1,424,500 1,378,447 1,227,772
Noncurrent credit receivables, net . . . . . . . . . 430,534 397,177 - -
Property, plant and equipment, net . . . . . . . . . 247,564 146,521 247,257 146,172
Investments in unconsolidated
subsidiary and affiliates . . . . . . . . . . . . 48,629 45,963 117,033 105,913
Other assets . . . . . . . . . . . . . . . . . . . . 56,506 44,510 56,506 44,510
Intangible assets, net . . . . . . . . . . . . . . . 218,727 104,244 218,727 104,244
--------------- --------------- --------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . $2,592,942 $2,162,915 $2,017,970 $1,628,611
=============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . $ 455,702 $ 361,376 $ - $ -
Accounts payable. . . . . . . . . . . . . . . . . 284,899 325,701 281,443 319,711
Payables to unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . 16,248 4,837 16,248 9,523
Accrued expenses . . . . . . . . . . . . . . . . 266,363 233,848 254,905 223,839
Other current liabilities . . . . . . . . . . . . 11,928 13,217 11,928 13,217
--------------- --------------- --------------- ---------------
Total current liabilities . . . . . . . . . . 1,035,140 938,979 564,524 566,290
--------------- --------------- --------------- ---------------
Long-term debt . . . . . . . . . . . . . . . . . . . 778,753 531,336 684,253 378,336
Convertible subordinated debentures . . . . . . . . - 37,558 - 37,558
Postretirement health care benefits. . . . . . . . . 24,229 23,561 24,229 23,561
Other noncurrent liabilities . . . . . . . . . . . . 38,910 42,553 29,054 33,938
--------------- --------------- --------------- ---------------
Total liabilities . . . . . . . . . . . . . . 1,877,032 1,573,987 1,302,060 1,039,683
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares
authorized, 57,237,156 and 50,557,040 shares issued
and outstanding at September 30, 1996 and
December 31, 1995, respectively . . . . . . . . . 572 506 572 506
Additional paid-in capital . . . . . . . . . . . 360,057 307,189 360,057 307,189
Retained earnings . . . . . . . . . . . . . . . . 372,006 287,706 372,006 287,706
Unearned compensation . . . . . . . . . . . . . . (24,301) (22,587) (24,301) (22,587)
Additional minimum pension liability. . . . . . . (2,619) (2,619) (2,619) (2,619)
Cumulative translation adjustment . . . . . . . . 10,195 18,733 10,195 18,733
--------------- --------------- --------------- ---------------
Total stockholders' equity . . . . . . . . . . . 715,910 588,928 715,910 588,928
--------------- --------------- --------------- ---------------
Total liabilities and stockholders' equity . . . $2,592,942 $2,162,915 $2,017,970 $1,628,611
=============== =============== =============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
FINANCE COMPANY
--------------------------------
September 30, December 31,
1996 1995
--------------- ---------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . $ 1,572 $ 7,835
Accounts and notes receivable, net of
allowances . . . . . . . . . . . . . . . . . . - -
Receivables from unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . - 4,686
Credit receivables, net . . . . . . . . . . . . . 210,409 185,401
Inventories, net . . . . . . . . . . . . . . . . - -
Other current assets . . . . . . . . . . . . . . 3,334 3,492
--------------- ---------------
Total current assets . . . . . . . . . . . . . . 215,315 201,414
Noncurrent credit receivables, net . . . . . . . . . 430,534 397,177
Property, plant and equipment, net . . . . . . . . . 307 349
Investments in unconsolidated
subsidiary and affiliates . . . . . . . . . . . . - -
Other assets . . . . . . . . . . . . . . . . . . . . - -
Intangible assets, net . . . . . . . . . . . . . . . - -
--------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . $646,156 $598,940
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . $455,702 $361,376
Accounts payable. . . . . . . . . . . . . . . . . 3,456 5,990
Payables to unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . 2,780 -
Accrued expenses . . . . . . . . . . . . . . . . 11,458 10,009
Other current liabilities . . . . . . . . . . . . - -
--------------- ---------------
Total current liabilities . . . . . . . . . . 473,396 377,375
--------------- ---------------
Long-term debt . . . . . . . . . . . . . . . . . . . 94,500 153,000
Convertible subordinated debentures . . . . . . . . - -
Postretirement health care benefits. . . . . . . . . - -
Other noncurrent liabilities . . . . . . . . . . . . 9,856 8,615
--------------- ---------------
Total liabilities . . . . . . . . . . . . . . 577,752 538,990
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares
authorized, 57,237,156 and 50,557,040 shares
issued and outstanding at September 30, 1996 and
December 31, 1995, respectively . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . 48,834 48,834
Retained earnings . . . . . . . . . . . . . . . . 19,629 11,150
Unearned compensation . . . . . . . . . . . . . . - -
Additional minimum pension liability. . . . . . . - -
Cumulative translation adjustment . . . . . . . . (60) (35)
--------------- ---------------
Total stockholders' equity . . . . . . . . . . . 68,404 59,950
--------------- ---------------
Total liabilities and stockholders' equity . . . $646,156 $598,940
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
CONSOLIDATED EQUIPMENT OPERATIONS
--------------------------------- --------------------------------
Three Months Ended Three Months Ended
September 30, September 30,
--------------------------------- --------------------------------
1996 1995 1996 1995
--------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $588,859 $484,228 $588,859 $484,228
Finance income . . . . . . . . . . . . . . . . . . . 17,646 14,411 - -
-------------- -------------- ------------ ----------------
606,505 498,639 588,859 484,228
-------------- -------------- ------------ ----------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . 465,319 371,435 465,319 371,435
Selling, general and administrative expenses . . . . 59,454 47,615 56,222 44,204
Engineering expenses . . . . . . . . . . . . . . . . 7,089 7,041 7,089 7,041
Interest expense, net . . . . . . . . . . . . . . . 20,209 16,311 10,571 8,029
Other expense (income), net . . . . . . . . . . . . 4,336 2,221 4,337 2,221
Nonrecurring expenses . . . . . . . . . . . . . . . 6,161 855 6,161 855
-------------- -------------- ------------ ----------------
562,568 445,478 549,699 433,785
-------------- -------------- ------------ ----------------
Income before income taxes and equity in net earnings
of unconsolidated subsidiary and affiliates. . . . . 43,937 53,161 39,160 50,443
Provision for income taxes . . . . . . . . . . . . . . . 14,866 18,547 13,305 17,488
-------------- -------------- ------------ ----------------
Income before equity in net earnings of unconsoli-
dated subsidiary and affiliates. . . . . . . . . . . 29,071 34,614 25,855 32,955
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . . . 2,228 1,581 5,444 3,240
-------------- -------------- ------------ ----------------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 31,299 $ 36,195 $ 31,299 $ 36,195
============== ============== ============ ================
Net income per common share:
Primary $ 0.54 $ 0.77
============== ==============
Fully diluted $ 0.54 $ 0.65
============== ==============
Weighted average number of common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 57,572 47,086
============== ==============
Fully diluted . . . . . . . . . . . . . . . . . . . 57,598 56,944
============== ==============
Dividends declared per common share . . . . . . . . . . $ 0.01 $ 0.01
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
FINANCE COMPANY
---------------------------------
Three Months Ended
September 30,
---------------------------------
1996 1995
--------------- --------------
<S> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ - $ -
Finance income . . . . . . . . . . . . . . . . . . . 17,646 14,411
--------------- --------------
17,646 14,411
--------------- --------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . - -
Selling, general and administrative expenses . . . . 3,232 3,411
Engineering expenses . . . . . . . . . . . . . . . . - -
Interest expense, net . . . . . . . . . . . . . . . 9,638 8,282
Other expense (income), net . . . . . . . . . . . . (1) -
Nonrecurring expenses . . . . . . . . . . . . . . . - -
--------------- --------------
12,869 11,693
--------------- --------------
Income before income taxes and equity in net earnings
of unconsolidated subsidiary and affiliates. . . . . 4,777 2,718
Provision for income taxes . . . . . . . . . . . . . . . 1,561 1,059
--------------- --------------
Income before equity in net earnings of unconsolidated
subsidiary and affiliates . . . . . . . . . . . . . 3,216 1,659
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . . . - -
--------------- --------------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 3,216 $ 1,659
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
CONSOLIDATED EQUIPMENT OPERATIONS
--------------------------------- --------------------------------
Nine Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- --------------------------------
1996 1995 1996 1995
--------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ 1,627,424 $1,486,358 $ 1,627,424 $1,486,358
Finance income . . . . . . . . . . . . . . . . . . . 51,404 40,218 - -
--------------- -------------- ------------- --------------
1,678,828 1,526,576 1,627,424 1,486,358
--------------- -------------- ------------- --------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . 1,294,350 1,162,920 1,294,350 1,162,920
Selling, general and administrative expenses . . . . 161,000 146,463 151,114 135,616
Engineering expenses . . . . . . . . . . . . . . . . 20,805 18,592 20,805 18,592
Interest expense, net . . . . . . . . . . . . . . . 51,677 48,054 23,718 25,220
Other expense (income), net . . . . . . . . . . . . 8,003 5,289 8,005 5,351
Nonrecurring expenses . . . . . . . . . . . . . . . 12,878 4,607 12,878 4,607
--------------- -------------- ------------- ---------------
1,548,713 1,385,925 1,510,870 1,352,306
--------------- -------------- ------------- ---------------
Income before income taxes, equity in net earnings
of unconsolidated subsidiary and affiliates
and extraordinary loss . . . . . . . . . . . . . . . 130,115 140,651 116,554 134,052
Provision for income taxes . . . . . . . . . . . . . . . 45,570 48,848 40,488 46,275
--------------- -------------- ------------- ----------------
Income before equity in net earnings of unconsoli-
dated subsidiary and affiliates and
extraordinary loss . . . . . . . . . . . . . . . . . 84,545 91,803 76,066 87,777
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . . . 4,857 3,664 13,336 7,690
--------------- -------------- ------------- ----------------
Income before extraordinary loss . . . . . . . . . . . . 89,402 95,467 89,402 95,467
Extraordinary loss, net of taxes . . . . . . . . . . . . (3,503) - (3,503) -
--------------- -------------- ------------- ----------------
Net income . . . . . . . . . . . . . . . . . . . . . . . 85,899 95,467 85,899 95,467
Preferred stock dividends. . . . . . . . . . . . . . . . - 2,012 - 2,012
--------------- -------------- ------------- ----------------
Net income available for common stockholders . . . . . . $ 85,899 $ 93,455 $ 85,899 $ 93,455
=============== ============== ============= ================
Net income per common share:
Primary:
Income before extraordinary loss. . . . . . . . . $ 1.64 $ 2.06
Extraordinary loss . . . . . . . . . . . . . . . (0.06) -
--------------- --------------
Net income . . . . . . . . . . . . . . . . . . . $ 1.58 $ 2.06
=============== ==============
Fully diluted:
Income before extraordinary loss . . . . . . . . $ 1.57 $ 1.71
Extraordinary loss. . . . . . . . . . . . . . . . (0.06) -
--------------- --------------
Net income . . . . . . . . . . . . . . . . . . . $ 1.51 $ 1.71
=============== ==============
Weighted average number of common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 54,374 45,354
=============== ==============
Fully diluted . . . . . . . . . . . . . . . . . . . 57,341 56,440
=============== ==============
Dividends declared per common share . . . . . . . . . . $ 0.03 $ 0.03
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
FINANCE COMPANY
---------------------------------
Nine Months Ended
September 30,
---------------------------------
1996 1995
--------------- --------------
<S> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ - $ -
Finance income . . . . . . . . . . . . . . . . . . . 51,404 40,218
-------------- --------------
51,404 40,218
-------------- --------------
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . - -
Selling, general and administrative expenses . . . . 9,886 10,847
Engineering expenses . . . . . . . . . . . . . . . . - -
Interest expense, net . . . . . . . . . . . . . . . 27,959 22,834
Other expense (income), net . . . . . . . . . . . . (2) (62)
Nonrecurring expenses . . . . . . . . . . . . . . . - -
-------------- --------------
37,843 33,619
-------------- --------------
Income before income taxes, equity in net earnings
of unconsolidated subsidiary and affiliates
and extraordinary loss . . . . . . . . . . . . . . . 13,561 6,599
Provision for income taxes . . . . . . . . . . . . . . . 5,082 2,573
-------------- --------------
Income before equity in net earnings of unconsoli-
dated subsidiary and affiliates and
extraordinary loss . . . . . . . . . . . . . . . . . 8,479 4,026
Equity in net earnings of unconsolidated subsidiary
and affiliates . . . . . . . . . . . . . . . . . - -
-------------- --------------
Income before extraordinary loss . . . . . . . . . . . . 8,479 4,026
Extraordinary loss, net of taxes . . . . . . . . . . . . - - -
-------------- --------------
Net income . . . . . . . . . . . . . . . . . . . . . . . 8,479 4,026
Preferred stock dividends. . . . . . . . . . . . . . . . - -
-------------- --------------
Net income available for common stockholders . . . . . . $ 8,479 $ 4,026
============== ==============
</TABLE>
See acompanying notes to condensed consolidated financial statements.
5
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
<TABLE>
<CAPTION>
CONSOLIDATED EQUIPMENT OPERATIONS
----------------------------------- ------------------------------
Nine Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- -----------------------------
1996 1995 1996 1995
--------------- ------------------ -------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $85,899 $95,467 $85,899 $95,467
--------------- ------------------ -------------- -------------
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Extraordinary loss, net of taxes . . . . . . . . 3,503 - 3,503 -
Depreciation and amortization. . . . . . . . . . 20,496 17,621 20,398 17,529
Equity in net earnings of unconsolidated
subsidiary and affiliates,
net of cash received . . . . . . . . . . . . (4,857) (3,664) (13,336) (7,690)
Deferred income tax provision (benefit). . . . . 14,530 29,632 14,593 31,282
Amortization of intangibles. . . . . . . . . . . 3,833 2,917 3,833 2,917
Amortization of unearned compensation . . . . . 11,981 3,995 11,981 3,995
Provision for losses on credit receivables . . . 2,931 4,005 - -
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Accounts and notes receivable, net. . . . . . 1,106 (101,534) (1,674) (98,996)
Inventories, net. . . . . . . . . . . . . . . (72,905) (71,030) (72,905) (71,030)
Other current and noncurrent assets . . . . . (10,132) (2,842) (10,326) (2,793)
Accounts payable . . . . . . . . . . . . . . (40,607) (19,386) (42,759) (17,872)
Accrued expenses. . . . . . . . . . . . . . . 26,106 4,345 24,682 3,434
Other current and noncurrent liabilities. . . 1,902 (5,641) 661 (5,972)
--------------- ------------------ -------------- -------------
Total adjustments . . . . . . . . . . . . . . (42,113) (141,582) (61,349) (145,196)
--------------- ------------------ -------------- -------------
Net cash provided by (used for) operating
activities . . . . . . . . . . . . . . . . . 43,786 (46,115) 24,550 (49,729)
--------------- ------------------ -------------- -------------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired . . . (287,426) (27,364) (287,426) (27,364)
Purchase of property, plant and equipment . . . . . (26,513) (24,471) (26,484) (24,354)
Credit receivables originated . . . . . . . . . . . (307,079) (265,552) - -
Principal collected on credit receivables . . . . . 245,783 190,505 - -
Proceeds from disposition of (investments in)
unconsolidated subsidiary and affiliates . . . . . 1,181 (1,710) 1,181 (1,710)
--------------- ------------------ -------------- -------------
Net cash used for investing activities . . . (374,054) (128,592) (312,729) (53,428)
--------------- ------------------ -------------- -------------
Cash flows from financing activities:
Proceeds on long-term debt, net . . . . . . . . . 341,744 173,057 305,918 109,300
Payment of debt issuance costs . . . . . . . . . . (10,590) - (10,590) -
Proceeds from issuance of common stock . . . . . . 1,680 850 1,680 850
Dividends (paid) received on common stock . . . . . (1,599) (670) (1,599) 1,330
Dividends paid on preferred stock . . . . . . . . . - (2,420) - (2,420)
(Payments) proceeds on short-term borrowings from
unconsolidated subsidiary and affiliates, net. . . - - - (7,249)
--------------- ------------------ -------------- -------------
Net cash provided by financing activities . . 331,235 170,817 295,409 101,811
--------------- ------------------ -------------- -------------
Effect of exchange rate changes on cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . (494) 848 (494) 848
Increase (decrease) in cash and cash equivalents . . . . 473 (3,042) 6,736 (498)
Cash and cash equivalents, beginning of period . . . . . 27,858 25,826 20,023 21,844
--------------- ------------------ -------------- -------------
Cash and cash equivalents, end of period . . . . . . . . $28,331 $22,784 $26,759 $21,346
=============== ================== ============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
<TABLE>
<CAPTION>
FINANCE COMPANY
-----------------------------------
Nine Months Ended
September 30,
-----------------------------------
1996 1995
--------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $ 8,479 $ 4,026
--------------- ------------------
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Extraordinary loss, net of taxes . . . . . . . . - -
Depreciation and amortization. . . . . . . . . . 98 92
Equity in net earnings of unconsolidated
subsidiary and affiliates,
net of cash received . . . . . . . . . . . . . - -
Deferred income tax provision (benefit). . . . . (63) (1,650)
Amortization of intangibles. . . . . . . . . . . - -
Amortization of unearned compensation . . . . . - -
Provision for losses on credit receivables . . . 2,931 4,005
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Accounts and notes receivable, net. . . . . . - -
Inventories, net. . . . . . . . . . . . . . . - -
Other current and noncurrent assets . . . . . 194 (49)
Accounts payable . . . . . . . . . . . . . . 4,932 (4,052)
Accrued expenses. . . . . . . . . . . . . . . 1,424 911
Other current and noncurrent liabilities. . . 1,241 331
--------------- ------------------
Total adjustments . . . . . . . . . . . . . . 10,757 (412)
--------------- ------------------
Net cash provided by(used for)operating
activities . . . . . . . . . . . . . . . . . 19,236 3,614
--------------- ------------------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired . . . - -
Purchase of property, plant and equipment . . . . . (29) (117)
Credit receivables originated . . . . . . . . . . . (307,079) (265,552)
Principal collected on credit receivables . . . . . 245,783 190,505
Proceeds from disposition of (investments in)
unconsolidated subsidiary and affiliates. . . . . . - -
--------------- ------------------
Net cash used for investing activities . . . (61,325) (75,164)
--------------- ------------------
Cash flows from financing activities:
Proceeds on long-term debt, net . . . . . . . . . . 35,826 63,757
Payment of debt issuance costs . . . . . . . . . . - -
Proceeds from issuance of common stock . . . . . . - -
Dividends (paid) received on common stock . . . . . - (2,000)
Dividends paid on preferred stock . . . . . . . . . - -
(Payments) proceeds on short-term borrowings from
unconsolidated subsidiary and affiliates, net . . . - 7,249
--------------- ------------------
Net cash provided by financing activities . . 35,826 69,006
--------------- ------------------
Effect of exchange rate changes on cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . - -
Increase (decrease) in cash and cash equivalents . . . . (6,263) (2,544)
Cash and cash equivalents, beginning of period . . . . . 7,835 3,982
--------------- ------------------
Cash and cash equivalents, end of period . . . . . . . . $ 1,572 $ 1,438
=============== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of AGCO Corporation and
subsidiaries (the "Company" or "AGCO") included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, which are of a normal
recurring nature, to present fairly the Company's financial position, results of
operations and cash flows at the dates and for the periods presented. These
condensed consolidated financial statements should be read in conjunction with
the Company's audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Interim results of operations are not necessarily indicative of results to be
expected for the fiscal year.
The accompanying condensed consolidated financial statements include,
on a separate, supplemental basis, the Company's Equipment Operations and its
Finance Company. "Equipment Operations" reflect the consolidation of all
operations of the Company and its subsidiaries with the exception of Agricredit
Acceptance Company ("Agricredit"), a wholly-owned finance subsidiary, which is
included using the equity method of accounting. The results of operations of
Agricredit are included under the caption "Finance Company." All significant
intercompany transactions, including activity within and between the Equipment
Operations and Finance Company, have been eliminated to arrive at the
"Consolidated" financial statements. Certain prior period amounts have been
reclassified to conform with the current period presentation.
2. ACQUISITIONS
Effective June 28, 1996, the Company acquired certain assets and
liabilities of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Agricultural Equipment Business") for
consideration consisting of approximately $260.0 million (the "Maxion
Acquisition"). The Maxion Acquisition was financed primarily by borrowings under
the Company's $650.0 million revolving credit facility and was funded on July 1,
1996. The acquired assets and assumed liabilities consist primarily of accounts
receivable, inventories, property, plant and equipment (including two
manufacturing facilities), accounts payable and accrued liabilities. Prior to
the acquisition, the Maxion Agricultural Equipment Business was AGCO's Massey
Ferguson licensee in Brazil, manufacturing and distributing agricultural
tractors under the Massey Ferguson brand name, industrial loader-backhoes under
the Massey Ferguson and Maxion brand names and combines under the Massey
Ferguson and IDEAL brand names.
7
<PAGE>
The following unaudited pro forma data summarizes the results of operations for
the nine months ended September 30, 1996 and 1995 as if the Maxion Acquisition,
and the related financings, had occurred at the beginning of 1995. The unaudited
pro forma information has been prepared for comparative purposes only and does
not purport to represent what the results of operations of the Company would
actually have been had the transaction occurred on the dates indicated or what
the results of operations may be in any future period.
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended September 30, 1996 Ended September 30,1995
------------------------ -----------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales and finance income. . . . . . . . $ 1,771,963 $ 1,771,909
Net income (1). . . . . . . . . . . . . . . 44,418 54,056
Net income per common
share - fully diluted (1) . . . . 0.82 0.97
(1) For the nine months ended September 30, 1996, amount excludes
extraordinary loss, net of taxes of $3,503, or $0.06 per common
share on a fully diluted basis.
</TABLE>
3. CHARGES FOR NONRECURRING EXPENSES
The results of operations included a charge for nonrecurring expenses
of $6.2 million, or $0.07 per common share on a fully diluted basis, for the
three months ended September 30, 1996 and $12.9 million, or $0.15 per common
share on a fully diluted basis, for the nine months ended September 30, 1996.
This charge related to the further restructuring of the European operations,
which was acquired in the Massey Acquisition in June 1994 and the integration
and restructuring of the Maxion Agricultural Equipment Business, which was
acquired in June 1996 (Note 2).
The nonrecurring charge for the further restructuring of the European
operations included costs associated with the centralization of certain parts
warehousing, administrative, sales and marketing functions. The $9.2 million
nonrecurring charge recorded through September 30, 1996 included $7.1 million
for employee related costs consisting primarily of severance costs and $2.1
million for other nonrecurring costs. Included in the $7.1 million of employee
related costs was $1.0 million of payroll costs incurred through September 30,
1996 for personnel that have been terminated or will be terminated in future
periods. Of the total $9.2 million charge, $5.2 million has been incurred at
September 30, 1996. The remaining accrual of $4.0 million primarily consists of
employee severance costs which relate to the planned reduction of 86 employees,
of which 54 employees have been terminated at September 30, 1996.
The nonrecurring charge for the integration and restructuring of the
Maxion Agricultural Equipment Business included costs associated with the
rationalization of manufacturing, sales, and administrative functions. The $3.7
million recorded for the three months ended September 30, 1996 included $2.3
million for employee related costs, including severance costs, and $1.4 million
for other nonrecurring costs. Included in the $2.3 million of employee related
costs was $1.0 million of payroll costs incurred through September 30, 1996 for
personnel that have been terminated or will be terminated in future periods. Of
the total $3.7 million charge, $2.5 million has been incurred through September
30, 1996, with the remaining accrual of $1.2 million primarily related to
employee severance. The employee severance costs relate to the planned reduction
of 260 employees, of which 180 employees have been terminated at September 30,
1996.
8
<PAGE>
The results of operations for the three and nine months ended September
30, 1995 included a charge for nonrecurring expenses of $0.9 million, or $0.01
per common share on a fully diluted basis, and $4.6 million, or $0.05 per common
share on a fully diluted basis, respectively, which was a portion of the
Company's $19.5 million charge recorded through December 31, 1995 primarily
related to the initial integration and restructuring of the European operations
related to the Massey Acquisition. The nonrecurring charge for the nine months
ended September 30, 1995 included $3.0 million for employee severance and $1.6
million for certain data processing expenses. All of the costs associated with
the $19.5 million charge recorded through December 31, 1995 have been incurred.
4. LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 1996 and
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------------- ---------------------
<S> <C> <C>
Revolving credit facility - Equipment Operations. . . . . . . $ 436,332 $ 378,336
Revolving credit facility - Finance Company . . . . . . . . . 550,202 514,376
Senior subordinated notes . . . . . . . . . . . . . . . . . . 247,921 -
--------------------- ---------------------
$ 1,234,455 $ 892,712
===================== =====================
</TABLE>
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount.
The Notes are unsecured obligations of the Company and are redeemable at the
option of the Company, in whole or in part, at any time on or after March 15,
2001 initially at 104.25% of their principal amount, plus accrued interest,
declining ratably to 100% of their principal amount plus accrued interest, on or
after March 15, 2003. The Notes include certain covenants, including covenants
restricting the incurrence of indebtedness and the making of certain restrictive
payments, including dividends. The net proceeds from the sale of the Notes were
used to repay outstanding indebtedness under the Company's $550.0 million
secured revolving credit facility.
In March 1996, the Company replaced its $550.0 million secured
revolving credit facility (the "Old Credit Facility") with a five-year $650.0
million unsecured credit facility (the "New Credit Facility"). Aggregate
borrowings outstanding under the New Credit Facility are subject to a borrowing
base limitation and may not at any time exceed the sum of 90% of eligible
accounts receivable and 60% of eligible inventory. Interest will accrue on
borrowings outstanding under the New Credit Facility primarily at LIBOR plus an
applicable margin, as defined. The New Credit Facility contains certain
covenants, including covenants restricting the incurrence of indebtedness and
the making of certain restrictive payments, including dividends. In addition,
the Company must maintain certain financial covenants including, among others, a
debt to capitalization ratio, an interest coverage ratio and a ratio of debt to
cash flow, as defined. As of September 30, 1996, approximately $436.3 million
was outstanding under the New Credit Facility and available borrowings were
approximately $210.5 million.
9
<PAGE>
5. EXTRAORDINARY LOSS
During the first quarter of 1996, as part of the refinancing of the Old
Credit Facility with the New Credit Facility, the Company recorded an
extraordinary loss of $3.5 million, net of taxes of $2.2 million, for the
write-off of unamortized debt costs related to the Old Credit Facility.
6. CONVERTIBLE SUBORDINATED DEBENTURES
In June 1995, the Company exchanged all of its outstanding 2,674,534
depositary shares (the "Exchange"), each representing 1/10 of a share of $16.25
Cumulative Convertible Exchangeable Preferred Stock (the "Preferred Stock"),
into $66.8 million of its 6.5% Convertible Subordinated Debentures due 2008 (the
"Convertible Subordinated Debentures"). The effect of this transaction resulted
in a reduction to stockholders' equity and an increase to liabilities in the
amount of $66.8 million. The Convertible Subordinated Debentures were
convertible at any time at the option of the holder into shares of the Company's
common stock at a conversion rate of 157.85 shares of common stock for each
$1,000 principal amount of the debentures. In addition, on or after June 1,
1996, the Convertible Subordinated Debentures were redeemable at the option of
the Company initially at an amount equivalent to $1,045.50 per $1,000 principal
amount of the debentures and thereafter at prices declining to an amount
equivalent to the face amount of the debentures on or after June 1, 2003, plus
all accrued and unpaid interest.
In April 1996, the Company announced its election, effective June 1,
1996, to redeem all of its outstanding Convertible Subordinated Debentures.
Prior to the execution of the redemption, all of the outstanding Convertible
Subordinated Debentures were converted into common stock. Since December 31,
1995, $37.6 million of outstanding Convertible Subordinated Debentures were
converted into approximately 5,920,000 shares of the Company's common stock.
7. NET INCOME PER COMMON SHARE
Primary net income per common share is computed by dividing net income
available for common stockholders (net income less preferred stock dividend
requirements) by the weighted average number of common and common equivalent
shares outstanding during each period. Common equivalent shares include shares
issuable upon the assumed exercise of outstanding stock options. Fully diluted
net income per common share assumes (i) conversion of the Convertible
Subordinated Debentures into common stock after the Exchange and the elimination
of interest expense related to the Convertible Subordinated Debentures, net of
applicable income taxes and (ii) the conversion of the Preferred Stock into
common stock and the elimination of the preferred stock dividend requirements
prior to the Exchange.
8. INVENTORIES
Inventories consist primarily of farm tractors, combines, implements,
hay and forage equipment and service parts and are valued at the lower of cost
or market. Cost is determined on a first-in, first-out basis. Market is net
realizable value for finished goods and repair and replacement parts. For work
in process, production parts and raw materials, market is replacement cost.
10
<PAGE>
Inventory balances at September 30, 1996 and December 31, 1995 were as
follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------------------ ------------------------
<S> <C> <C>
Finished goods................................................... $ 193,162 $ 121,034
Repair and replacement parts..................................... 219,237 196,863
Work in process, production parts and raw materials.............. 116,680 84,505
------------------------ ------------------------
Gross inventories................................................ 529,079 402,402
Allowance for surplus and obsolete inventories................... (47,476) (41,433)
------------------------ ------------------------
Inventories, net................................................. $ 481,603 $ 360,969
======================== ========================
</TABLE>
9. SUBSEQUENT EVENT
Effective November 1, 1996, the Company entered into an agreement with
De Lage Landen International, B.V., a wholly owned subsidiary of Cooperatieve
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" (together, "Rabobank") to
be its joint venture partner in Agricredit, the Company's retail finance
subsidiary in North America (the "Agricredit Joint Venture"). As a result of the
agreement, the Company sold a 51% interest in Agricredit to Rabobank. The
Company received total consideration of approximately $44.3 million in the
transaction. Under the Agricredit Joint Venture, Rabobank will have a 51%
interest in Agricredit and the Company will retain a 49% interest in the finance
company. Substantially all of the net assets of Agricredit were transferred to
the Agricredit Joint Venture. The Agricredit Joint Venture will continue the
current business of Agricredit and seek to build a broader asset-based finance
business.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's operations are subject to the cyclical nature of the
agricultural industry. Sales of the Company's equipment have been affected by
changes in net cash farm income, farm land values, weather conditions, the
demand for agricultural commodities and general economic conditions. The
Company's operations are expected to be subject to such conditions in the
future. Sales are recorded by the Company when equipment and replacement parts
are shipped by the Company to its independent dealers. To the extent possible,
the Company attempts to ship products on a level basis throughout the year to
reduce the effect of seasonal demands on its manufacturing operations and to
minimize its investment in inventory. Retail sales by dealers to farmers
("settlements") are highly seasonal and are a function of the timing of the
planting and harvesting seasons. As a result, the Company's net sales and
operating results have historically been the lowest in the first quarter and
have increased in subsequent quarters.
Effective June 28, 1996, the Company acquired certain assets and
liabilities of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Acquisition"). As a result of the Maxion
Acquisition, the Company expanded its product offerings and the geographic scope
of its distribution network to include Brazil. See Note 2 of the Notes to the
Condensed Consolidated Financial Statements for further discussion.
RESULTS OF OPERATIONS
NET INCOME
The Company recorded net income for the three months ended September 30,
1996 of $31.3 million compared to $36.2 million for the three months ended
September 30, 1995. Net income per common share on a fully diluted basis was
$0.54 and $0.65 for the three months ended September 30, 1996 and 1995,
respectively. Net income for the nine months ended September 30, 1996 was $85.9
million compared to $95.5 million for the same period in 1995. Net income per
common share on a fully diluted basis was $1.51 and $1.71 for the nine months
ended September 30, 1996 and 1995, respectively. Net income for the three and
nine months ended September 30, 1996 included nonrecurring expenses of $6.2
million, or $0.07 per share on a fully diluted basis, and $12.9 million, or
$0.15 per share on a fully diluted basis, respectively, related to the further
restructuring of the Company's European operations, which was acquired in the
Massey Acquisition in June 1994, and the integration and restructuring of the
Maxion Agricultural Equipment Business, which was acquired in June 1996 (see
"Charges for Nonrecurring Expenses"). In addition, net income for the nine
months ended September 30, 1996 included an extraordinary after-tax charge of
$3.5 million, or $0.06 per share on a fully diluted basis, for the write-off of
unamortized debt costs related to the refinancing of the revolving credit
facility for the Company's Equipment Operations (see "Liquidity and Capital
Resources"). Net income for the three and nine months ended September 30, 1995
included nonrecurring expenses of $0.9 million, or $0.01 per share on a fully
diluted basis, and $4.6 million, or $0.05 per share on a fully diluted basis,
respectively, related to the Massey Acquisition (see "Charges for Nonrecurring
Expenses"). The Company's results were negatively impacted by losses in the
newly acquired Brazilian operations as a result of the poor industry conditions
currently experienced in the region. Excluding nonrecurring expenses, the
extraordinary after-tax charge and the impact of the Brazilian
12
<PAGE>
operations, the Company's results were slightly improved over 1995, primarily
the result of sales growth in existing markets.
RETAIL SALES
Conditions in the United States and Canadian agricultural equipment
markets continue to be favorable in 1996 compared to 1995. Industry unit retail
sales of tractors for the nine months ended September 30, 1996 increased 6.4%
over the same period in 1995, while unit retail sales of combines and hay and
forage equipment decreased 1.6% and 3.8%, respectively, compared to the prior
year. The Company believes general market conditions continue to be positive due
to favorable economic conditions relating to high net cash farm incomes, strong
commodity prices and increased export demand. The industry combine retail sales
were partly impacted by dry weather conditions in the South and Southwest United
States and a late planting season resulting in a late harvest in the Midwest.
Industry retail sales of hay and forage equipment were below the prior year
primarily due to a softness in the cattle market resulting from low commodity
prices.
Company unit settlements of tractors in the United States and Canada
increased in line with the industry for the nine months ended September 30, 1996
compared to 1995. The increase in tractor settlements was attributable to the
favorable industry conditions as well as the impact of the Company's expanded
dealer network, which resulted primarily from dealers entering into crossover
contracts whereby an existing dealer carrying one of the Company's brands
contracts to sell an additional AGCO brand. In addition, the Company continues
to benefit from the successful acceptance of improved tractor product offerings,
including the new Massey Ferguson high horsepower tractors which were introduced
in the middle of 1995. Company unit settlements of combines increased
significantly compared to the prior year due to increased sales to contract
harvesters. Company unit settlements of hay and forage equipment were below the
prior year and slightly below the industry decrease primarily due to the
unfavorable industry conditions and the Company choosing not to match the
aggressive retail financing programs of its major competitors during the first
quarter of 1996.
Industry conditions in Western Europe continue to be favorable with
retail sales of tractors increasing approximately 8.8% for the nine months ended
September 30, 1996 compared to the prior year primarily due to higher net cash
farm incomes, improved economic conditions, increased export demand and strong
commodity prices. Retail sales of Massey Ferguson tractors continue to
outperform the industry compared to 1995 with the most significant increases in
France, Spain and Scandinavia due to the Company's focus on dealer development.
Outside North America and Western Europe, industry retail sales of tractors also
showed gains in many markets where the Company competes due to a general
improvement in economic conditions. Retail sales of Massey Ferguson tractors
increased compared to 1995 particularly in the Middle East, Africa and Australia
primarily due to the Company's strong distribution channels in these markets.
Industry conditions in Brazil remain depressed in 1996 relative to historic
volumes following the suspension and subsequent reinstatement of Brazilian
Central Bank loan programs.
13
<PAGE>
REVENUES
Total revenues for the three months ended September 30, 1996 were
$606.5 million, representing an increase of $107.9 million or 21.6% over total
revenues of $498.6 million for the same period in 1995. Total revenues for the
nine months ended September 30, 1996 increased 10.0% to $1,678.8 million
compared to $1,526.6 million for 1995. A significant portion of the increase is
the result of the Company's sales of $48.1 million in Brazil for the three
months ended September 30, 1996 resulting from the Maxion Acquisition. Excluding
sales in Brazil, the Company achieved net sales increases in its international
operations of $25.2 million and $85.2 million for the three and nine months
ended September 30, 1996, respectively, compared to the prior year. The
increases for both periods primarily related to increased sales of tractors due
to the Company's favorable retail sales performance and increased sales of
non-tractor products resulting from the Company's efforts to expand non-tractor
sales in international markets. The Company also experienced increased net sales
of $31.4 million and $7.7 million for the three and nine months ended September
30, 1996, respectively, compared to the prior year in its North American
operations primarily due to the Company's strong retail sales in 1996. Total
revenues also increased from the prior periods due to increases in finance
income of $3.2 million and $11.2 million for the three and nine months ended
September 30, 1996, respectively, associated with the operations of Agricredit.
The increase in finance income was primarily due to the growth in Agricredit's
credit receivable portfolio as a result of Agricredit's continued penetration
into the Company's North American dealer network.
COSTS AND EXPENSES
Cost of goods sold of the Company's Equipment Operations for the three
months ended September 30, 1996 was $465.3 million (79.0% of net sales) compared
to $371.4 million (76.7% of net sales) for the same period in 1995. For the
first nine months of 1996, cost of goods sold was $1,294.4 million (79.5% of net
sales) compared to $1,162.9 million (78.2% of net sales). Gross profit, defined
as net sales less cost of goods sold, was $123.5 million (21.0% of net sales)
for the three months ended September 30, 1996 as compared to $112.8 million
(23.3% of net sales) for the same period of the prior year. Gross profit for the
first nine months of 1996 was $333.1 million (20.5% of net sales) as compared to
$323.4 million (21.8% of net sales) for the same period of the prior year. Gross
margins were negatively impacted for both periods by the following: (1) lower
margins related to its Brazilian operations acquired in the Maxion Acquisition
and (2) a change in the mix of products sold, particularly due to a reduction in
high margin North American parts sales, a shift in North American sales from
higher margin utility tractors (under 100 horsepower) to high horsepower
tractors (over 100 horsepower) and increased sales of combines in Europe, which
have lower margins.
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $59.5 million (9.8% of total revenues) compared to $47.6
million (9.5% of total revenues) for the same period last year. For the first
nine months of 1996, selling, general and administrative expenses were $161.0
million (9.6% of total revenues) compared to $146.5 million (9.6% of total
revenues) for the same period in 1995. The increase in selling, general and
administrative expenses for both the three and nine months ended September 30,
1996 was primarily due to an increase in sales volume and an increase in the
amortization of stock-based compensation expense of $3.2 million and $11.2
million, respectively, over the prior year related to the Company's long-term
incentive plan which is tied to stock price appreciation. Excluding
14
<PAGE>
Agricredit and the amortization expense related to the long-term incentive plan,
the Company's Equipment Operations had selling, general and administrative
expenses of $49.9 million (8.5% of net sales) and $41.1 million (8.5% of net
sales) for the three months ended September 30, 1996 and 1995, respectively. For
the first nine months of 1996 and 1995, the Company's Equipment Operations,
excluding Agricredit and the amortization expense related to the long-term
incentive plan, had selling, general and administrative expenses of $134.4
million (8.3% of net sales) and $130.0 million (8.7% of net sales),
respectively. The decrease as a percentage of net sales for the nine months
ended September 30, 1996 was primarily due to the successful cost reduction
efforts in the Company's European operations.
Engineering expenses for the Company's Equipment Operations were $7.1
million (1.2% of net sales) for the three months ended September 30, 1996
compared to $7.0 million (1.5% of net sales) for the same period in 1995.
Engineering expenses for the nine months ended September 30, 1996 were $20.8
million (1.3% of net sales) and $18.6 million (1.3% of net sales) for the same
period in the prior year. The decrease as a percentage of net sales for the
three months ended September 30, 1996 compared to the prior year was primarily
due to the timing of engineering expenses related to the development of a new
Massey Ferguson utility tractor line.
Interest expense, net was $20.2 million for the three months ended
September 30, 1996 compared to $16.3 million for the same period in the prior
year. Interest expense, net for the nine months ended September 30, 1996 was
$51.7 million compared to $48.1 million for the same period in 1995. For the
three months ended September 30, 1996, the Company had higher interest expense,
net compared to 1995 in its Equipment Operations resulting from additional
borrowings related to the Maxion Acquisition and increased interest expense, net
relating to Agricredit due to the additional borrowings associated with the
increase in the credit receivable portfolio. For the nine months ended September
30, 1996, the Company also had higher interest expense, net relating to
Agricredit which was slightly offset by lower interest expense, net in its
Equipment Operations compared to 1995 resulting from increased interest income
related to dealer accounts receivable.
Other expense, net was $4.3 million for the three months ended
September 30, 1996 compared to $2.2 million for the same period in 1995. Other
expense, net was $8.0 million for the nine months ended September 30, 1996
compared to $5.3 million for the same period in 1995. The increase in other
expense, net for both periods was primarily due to foreign exchange losses in
1996 compared to foreign exchange gains in 1995 related to the sale of the
Company's products internationally and increased amortization of intangibles
related to the Maxion Acquisition.
Nonrecurring expenses were $6.2 million and $12.9 million for the three
and nine months ended September 30, 1996, respectively. Nonrecurring expenses
were $0.9 million and $4.6 million for the three and nine months ended September
30, 1995, respectively. The nonrecurring charge recorded in 1996 related to the
further restructuring of the European operations which was acquired in the
Massey Acquisition in June 1994 and the integration and restructuring of the
Brazilian operations which was acquired in the Maxion Acquisition in June 1996.
The nonrecurring charge recorded in 1995 primarily related to costs associated
with the initial integration and restructuring of the European operations. See
"Charges for Nonrecurring Expenses" for further discussion.
15
<PAGE>
The Company recorded income tax provisions of $14.9 million and $18.5
million for the three months ended September 30, 1996 and 1995, respectively.
For the nine months ended September 30, 1996 and 1995, the Company recorded
income tax provisions of $45.6 million and $48.8 million, respectively. For both
periods, the Company paid income taxes at rates below statutory rates due to the
utilization of net operating loss carryforwards. Due to the availability of net
operating loss carryforwards acquired in the Massey Acquisition, the Company
expects to continue paying taxes at effective rates substantially below
statutory rates in the near future.
Equity in net earnings of unconsolidated affiliates was $2.2 million
and $1.6 million for the three months ended September 30, 1996 and 1995,
respectively. Equity in net earnings of unconsolidated affiliates was $4.9
million and $3.7 million for the nine months ended September 30, 1996 and 1995,
respectively. The increase in equity in net earnings of unconsolidated
affiliates related to the Company's pro-rata share in net earnings of certain
equity investments in the European operations.
FINANCE COMPANY OPERATIONS
Agricredit, the Company's wholly owned finance subsidiary, recorded net
income of $3.2 million and $1.7 million for the three months ended September 30,
1996 and 1995, respectively. Agricredit recorded net income of $8.5 million and
$4.0 million for the nine months ended September 30, 1996 and 1995,
respectively. Retail acceptances were approximately $281.8 million for the nine
months ended September 30, 1996 and $242.4 million for the same period in the
prior year. The increase was primarily the result of the strong retail demand
for the Company's products during the nine months ended September 30, 1996 and
Agricredit's continued penetration in the Company's North American dealer
network.
Effective November 1, 1996, the Company formed a strategic alliance with a
subsidiary of Cooperatieve Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland"
("Rabobank") as its joint venture partner in Agricredit (the "Agricredit Joint
Venture"). Under the Agricredit Joint Venture, Rabobank has a 51% interest in
Agricredit and the Company retains a 49% interest in the finance company. The
Company received proceeds of approximately $44.3 million in the transaction. The
Agricredit Joint Venture will continue the current business of Agricredit and
seek to build a broader asset-based finance business. The Company's benefits
from the transaction also include deleveraging the consolidated balance sheet by
approximately $550.0 million and the redeployment of approximately $44.3 million
of capital. The Company has similar joint venture arrangements with Rabobank and
its affiliates with respect to its retail finance companies located in the
United Kingdom, France and Germany.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing requirements for its Equipment Operations are
subject to variations due to seasonal changes in inventory and dealer receivable
levels. In March 1996, the Company replaced its $550.0 million secured revolving
credit facility (the "Old Credit Facility") with a five-year $650.0 million
unsecured revolving credit facility (the "New Credit Facility") (see Note 4 of
the Notes to the Condensed Consolidated Financial Statements). The New Credit
Facility is the Company's primary source of financing for its Equipment
Operations and provides increased borrowing capacity over the Old Credit
Facility. Borrowings under the New Credit Facility may not exceed the sum of 90%
of eligible accounts receivable and 60% of eligible inventory. As receivables
and inventories fluctuate, borrowings under the New Credit Facility fluctuate as
well. As of September 30, 1996, approximately $436.3 million was outstanding
under the New Credit Facility and available borrowings
16
<PAGE>
were approximately $210.5 million.
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount
(see Note 4 of the Notes to the Condensed Consolidated Financial Statements).
The net proceeds from the sale of the Notes were used to repay outstanding
indebtedness under the Old Credit Facility. The sale of the Notes provided the
Company with subordinated capital and replaced a portion of its floating rate
debt with longer term fixed rate debt.
The Company's finance subsidiary, Agricredit, obtains funds from a
$630.0 million revolving credit agreement (the "Agricredit Revolving Credit
Agreement") to finance its credit receivable portfolio. Borrowings under the
Agricredit Revolving Credit Agreement are based on the amount and quality of
outstanding credit receivables and are generally issued for terms with
maturities matching anticipated credit receivable liquidations. As the credit
receivable portfolio fluctuates, borrowings under the Agricredit Revolving
Credit Agreement fluctuate as well. As of September 30, 1996, approximately
$550.2 million was outstanding under the Agricredit Revolving Credit Agreement
and available borrowings were approximately $73.5 million. Effective November 1,
1996, as a result of the Agricredit Joint Venture, the Agricredit Revolving
Credit Agreement was replaced with a new credit agreement with Rabobank.
In April 1996, the Company announced its election, effective June 1,
1996, to redeem all of its outstanding 6.5% Convertible Subordinated Debentures
due 2008 (the "Convertible Subordinated Debentures") (see Note 6 of the Notes to
the Condensed Consolidated Financial Statements). Prior to the execution of the
redemption, all of the outstanding Convertible Subordinated Debentures were
converted into common stock. Since December 31, 1995, $37.6 million of
outstanding Convertible Subordinated Debentures were converted into
approximately 5,920,000 shares of the Company's common stock.
The Company's working capital requirements for its Equipment Operations
are seasonal, with investments in working capital typically building in the
first and second quarters and then reducing in the third and fourth quarters. As
of September 30, 1996, the Company's Equipment Operations had $813.9 million of
working capital, an increase of $152.4 million over working capital of $661.5
million as of December 31, 1995. The increase in working capital was primarily
due to working capital acquired in the Maxion Acquisition and normal seasonal
requirements, particularly in receivables and inventories.
Cash flow provided by operating activities was $43.8 million for the
nine months ended September 30, 1996 as compared to cash flow used for operating
activities of $46.1 million for the same period last year. The increase in cash
flow provided by operating activities was primarily due to the collection of
receivables in 1996 related to unusually high accounts receivable levels in the
European operations at December 31, 1995 which resulted from significantly
higher sales in late 1995 than in late 1994 and due to the strong retail sales
in North America during the first nine months of 1996 which resulted in a lower
seasonal increase of dealer inventories compared to 1995.
17
<PAGE>
Capital expenditures for the first nine months of 1996 were $26.5
million compared to $24.5 million for the same period in 1995. The
Company anticipates that additional capital expenditures for the remainder
of 1996 will range from approximately $20.0 million to $25.0 million and
will primarily be used to support the development and enhancement of new and
existing products.
Agricredit's credit receivable originations exceeded credit receivable
payments by $61.3 million for the nine months ended September 30, 1996. The
increase in Agricredit's credit receivable portfolio will result in increased
finance income in future periods. The credit receivable originations were
financed through additional borrowings under the Agricredit Revolving Credit
Agreement.
In October 1996, the Company's board of directors declared a common
stock dividend of $0.01 per share for the third quarter of 1996. The declaration
and payment of future dividends will be at the sole discretion of the board of
directors and will depend upon the Company's results of operations, financial
condition, cash requirements, future prospects, limitations imposed by the
Company's credit facilities and other factors deemed relevant by the Company's
board of directors.
The Company believes that available borrowings under the New Credit
Facility, available cash and internally generated funds will be sufficient to
support its working capital, capital expenditures and debt service requirements
for the foreseeable future.
The Company from time to time reviews and will continue to review
acquisition and joint venture opportunities as well as changes in the capital
markets. If the Company were to consummate a significant acquisition or elect to
take advantage of favorable opportunities in the capital markets, the Company
may supplement availability or revise the terms under its credit facilities or
complete public or private offerings of equity or debt securities.
CHARGES FOR NONRECURRING EXPENSES
The Company identified approximately $12.0 million of nonrecurring
expenses related to the further restructuring of the Company's European
operations, acquired in June 1994 as a result of the Massey Acquisition. The
Company recorded $9.2 million of nonrecurring expenses during the first nine
months of 1996 to recognize a portion of these costs. These costs are primarily
related to the centralization of certain parts warehousing, administrative,
sales and marketing functions (see Note 3 of the Notes to the Condensed
Consolidated Financial Statements). The Company expects to record the remaining
$2.8 million of nonrecurring expenses in 1996 and to complete the restructuring
by mid-1997. Savings from the further restructuring of the European operations
are expected to result primarily from reduced selling, general and
administrative expenses primarily relating to the Company's parts warehousing,
administrative, sales and marketing functions.
The Company identified $5.0 million to $6.0 million of nonrecurring
expenses related to the integration and restructuring of the Company's Brazilian
operations, acquired in June 1996 as a result of the Maxion Acquisition. The
Company recorded $3.7 million of nonrecurring expenses during the third quarter
of 1996 to recognize a portion of these costs. These costs are primarily related
to the rationalization of manufacturing, sales and administrative functions
designed to
18
<PAGE>
resize the operations to current sales and production volumes (see Note 3 of the
Notes to the Condensed Consolidated Financial Statements). Savings from the
integration and restructuring of the Brazilian operations are expected to result
primarily in reduced selling, general and administrative expenses and product
cost reductions. The Company expects to record the remaining $1.8 million of
nonrecurring expenses in 1996 and 1997 and to complete the integration by 1997.
While the Company believes that cost savings from its restructuring plan can be
attained, there can be no assurance that all objectives of the restructuring
will be achieved.
In the first nine months of 1995, the Company recorded nonrecurring
expenses of $4.6 million which was a portion of the Company's $19.5 million
charge recorded through December 31, 1995 primarily related to the initial
integration and restructuring of the European operations. These costs primarily
related to the centralization and rationalization of the European operations'
administrative, sales, and marketing functions. All of the costs associated with
the $19.5 million charge recorded through December 31, 1995 have been incurred.
FORWARD LOOKING STATEMENTS
Certain information included in Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. Although the Company believes that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. Additionally, the Company's
financial results are sensitive to movement in interest rates and foreign
currencies, as well as general economic conditions, pricing and product actions
taken by competitors, production disruptions and changes in environmental,
international trade and other laws which impact the way in which it conducts it
business.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.0 - Statement re: Computation of Per Share Earnings.
27.0 - Financial Data Schedule (electronic filing purposes
only).
(b) Reports on Form 8-K
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGCO CORPORATION
Registrant
Date: November 14, 1996 Chris E. Perkins
-------------------------- ----------------
Chris E. Perkins
Vice President and Chief Financial Officer
21
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------- ------------------------------------------ ------------
11.0 Statement re: Computation of Per Share Earnings.
27.0 Financial Data Schedule (electronic filing
purposes only).
Exhibit 11
AGCO CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------------
PRIMARY EARNINGS PER SHARE 1996 1995
------------------- -------------------
<S> <C> <C>
Weighted average number of common shares outstanding . . . . . . . 57,208 46,406
Shares issued upon assumed exercise of outstanding
stock options . . . . . . . . . . . . . . . . . . . . . . . . . 364 680
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 57,572 47,086
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $31,299 $36,195
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,299 36,195
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $31,299 $36,195
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 0.54 $ 0.77
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.77
=================== ===================
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of common shares outstanding . . . . . . . 57,208 46,406
Shares issued upon assumed conversion of the Convertible
Subordinated Debentures . . . . . . . . . . . . . . . . . . . . - 9,856
Shares issued upon assumed exercise of outstanding
stock options (2) . . . . . . . . . . . . . . . . . . . . . . . 390 682
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 57,598 56,944
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $31,299 $36,195
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,299 36,195
Interest expense on Convertible Subordinated Debentures, net of
applicable income taxes . . . . . . . . . . . . . . . . . . . . - 636
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $31,299 $36,831
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 0.54 $ 0.65
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . - -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.65
=================== ===================
(1) All numbers of shares in this exhibit are weighted on the basis of the
number of days the shares were outstanding or assumed to be outstanding
during each period. All share data has been restated to reflect the
two-for-one stock split, effected January 31, 1996.
(2) Based on the treasury stock method using the higher of the average or
period end market price.
<PAGE>
Exhibit II
AGCO CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
(in thousands, except per share data)
<CAPTION>
Nine Months Ended
Septmeber 30,
----------------------------------------
PRIMARY EARNINGS PER SHARE 1996 1995
------------------- -------------------
<S> <C> <C>
Weighted average number of common shares outstanding . . . . . . . 53,913 44,726
Shares issued upon assumed exercise of outstanding
stock options . . . . . . . . . . . . . . . . . . . . . . . . . 461 628
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 54,374 45,354
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $89,402 $95,467
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . (3,503) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,899 95,467
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . - 2,012
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $85,899 $93,455
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 1.64 $ 2.06
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . (0.06) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.58 $ 2.06
=================== ===================
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of common shares outstanding . . . . . . . 53,913 44,726
Shares issued upon assumed conversion of the Convertible
Subordinated Debentures . . . . . . . . . . . . . . . . . . . . 2,969 10,974
Shares issued upon assumed exercise of outstanding
stock options (2) . . . . . . . . . . . . . . . . . . . . . . . 459 740
------------------- -------------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . 57,341 56,440
=================== ===================
Income before extraordinary loss . . . . . . . . . . . . . . . . . $89,402 $95,467
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . (3,503) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,899 95,467
Interest expense on Convertible Subordinated Debentures, net of
applicable income taxes . . . . . . . . . . . . . . . . . . . . 529 811
------------------- -------------------
Net income available for common stockholders . . . . . . . . . . . $86,428 $96,278
=================== ===================
Net income per common share:
Income before extraordinary loss . . . . . . . . . . . . . . $ 1.57 $ 1.71
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . (0.06) -
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.51 $ 1.71
=================== ===================
(1) All numbers of shares in this exhibit are weighted on the basis of the
number of days the shares were outstanding or assumed to be outstanding
during each period. All share data has been restated to reflect the
two-for-one stock split, effected January 31, 1996.
(2) Based on the treasury stock method using the higher of the average or
period end market price.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 28,331
<SECURITIES> 0
<RECEIVABLES> 1,446,161
<ALLOWANCES> 0
<INVENTORY> 481,603
<CURRENT-ASSETS> 1,590,982
<PP&E> 247,564
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,592,942
<CURRENT-LIABILITIES> 1,035,140
<BONDS> 778,753
0
0
<COMMON> 572
<OTHER-SE> 715,338
<TOTAL-LIABILITY-AND-EQUITY> 2,592,942
<SALES> 1,627,424
<TOTAL-REVENUES> 1,678,828
<CGS> 1,294,350
<TOTAL-COSTS> 1,294,350
<OTHER-EXPENSES> 20,805
<LOSS-PROVISION> 6,972
<INTEREST-EXPENSE> 51,677
<INCOME-PRETAX> 130,115
<INCOME-TAX> 45,570
<INCOME-CONTINUING> 89,402
<DISCONTINUED> 0
<EXTRAORDINARY> (3,503)
<CHANGES> 0
<NET-INCOME> 85,899
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.51
</TABLE>
