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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19898
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AGCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1960019
(State of incorporation) (I.R.S. Employer Identification No.)
4830 River Green Parkway
Duluth, Georgia 30136
(Address of principal executive
offices including zip code)
Registrant's telephone number, including area code: (770) 813-9200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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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: 62,475,636 shares outstanding as of
March 31, 1997.
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<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 - March 31, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements
of Income for the Three Months
Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements
of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------------- ------------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 25,629 $ 41,707
Accounts and notes receivable, net of allowances . . . . . 996,991 856,985
Receivables from unconsolidated subsidiary and affiliates. 10,085 12,486
Inventories, net . . . . . . . . . . . . . . . . . . . . . 620,933 473,844
Other current assets . . . . . . . . . . . . . . . . . . . 75,988 81,440
----------------- ------------------
Total current assets . . . . . . . . . . . . . . . . . . 1,729,626 1,466,462
Property, plant and equipment, net . . . . . . . . . . . . . 319,873 292,437
Investments in unconsolidated subsidiary and affiliates . . . 77,794 80,501
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . 72,771 71,488
Intangible assets, net. . . . . . . . . . . . . . . . . . . . 397,156 205,643
----------------- ------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 2,597,220 $ 2,116,531
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 340,021 $ 361,512
Payables to unconsolidated subsidiary and affiliates . . . 23,204 14,567
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 334,389 316,958
Other current liabilities. . . . . . . . . . . . . . . . . 23,900 22,951
----------------- ------------------
Total current liabilities . . . . . . . . . . . . . . . . 721,514 715,988
----------------- ------------------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . 893,183 567,055
Postretirement health care benefits . . . . . . . . . . . . . 24,658 24,445
Other noncurrent liabilities. . . . . . . . . . . . . . . . . 46,369 34,378
----------------- ------------------
Total liabilities . . . . . . . . . . . . . . . . . . . . 1,685,724 1,341,866
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000
shares authorized, 62,475,636 and 57,260,151
shares issued and outstanding at March 31, 1997
and December 31, 1996, respectively . . . . . . . . . . . 624 573
Additional paid-in capital . . . . . . . . . . . . . . . . 501,465 360,119
Retained earnings. . . . . . . . . . . . . . . . . . . . . 436,576 411,422
Unearned compensation . . . . . . . . . . . . . . . . . . (15,906) (17,779)
Cumulative translation adjustment. . . . . . . . . . . . . (11,263) 20,330
----------------- ------------------
Total stockholders' equity. . . . . . . . . . . . . . . . 911,496 774,665
----------------- ------------------
Total liabilities and stockholders' equity. . . . . . . . $ 2,597,220 $ 2,116,531
================= ==================
</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>
Three Months Ended March 31,
-------------------------------------------
1997 1996
------------------- -------------------
<S> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 704,329 $ 453,884
------------------- -------------------
Costs and Expenses:
Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . 569,980 360,144
Selling, general and administrative expenses. . . . . . . . . . . . 61,898 46,246
Engineering expenses . . . . . . . . . . . . . . . . . . . . . . . 13,253 6,979
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . 13,147 5,964
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . 4,572 2,443
Nonrecurring expenses . . . . . . . . . . . . . . . . . . . . . . . 2,625 5,923
------------------- -------------------
665,475 427,699
------------------- -------------------
Income before income taxes, equity in net earnings of
unconsolidated subsidiary and affiliates and
extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . . 38,854 26,185
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . 13,634 9,033
------------------- -------------------
Income before equity in net earnings of unconsolidated
subsidiary and affiliates and extraordinary loss. . . . . . . . . . 25,220 17,152
Equity in net earnings of unconsolidated subsidiary
and affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,587 3,443
------------------- -------------------
Income before extraordinary loss . . . . . . . . . . . . . . . . . . . . 27,807 20,595
Extraordinary loss, net of taxes . . . . . . . . . . . . . . . . . . . . (2,080) (3,503)
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,727 $ 17,092
=================== ===================
Net income per common share:
Primary:
Income before extraordinary loss. . . . . . . . . . . . . . . . . $ 0.47 $ 0.40
Extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . (0.03) (0.07)
------------------- -------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.33
=================== ===================
Fully diluted:
Income before extraordinary loss. . . . . . . . . . . . . . . . . $ 0.47 $ 0.37
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . (0.03) (0.06)
------------------- -------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.31
=================== ===================
Weighted average number of common and common equivalent shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,994 51,292
=================== ===================
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,995 57,071
=================== ===================
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 CASH FLOWS
(unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,727 $ 17,092
----------------- -----------------
Adjustments to reconcile net income to net cash used for operating
activities:
Extraordinary loss, net of taxes . . . . . . . . . . . . . . . . . 2,080 3,503
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 12,355 6,060
Equity in net earnings of unconsolidated subsidiary and affiliates,
net of cash received . . . . . . . . . . . . . . . . . . . . . (2,587) (3,443)
Deferred income tax provision . . . . . . . . . . . . . . . . . . 4,083 3,840
Amortization of intangibles . . . . . . . . . . . . . . . . . . . 3,088 1,003
Amortization of unearned compensation . . . . . . . . . . . . . . 1,873 3,165
Changes in operating assets and liabilities, net of effects from
purchase of businesses:
Accounts and notes receivable, net.. . . . . . . . . . . . . . (79,236) 16,302
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . (90,486) (70,970)
Other current and noncurrent assets. . . . . . . . . . . . . . 2,253 (345)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . (8,517) (23,121)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . (45,829) (12,662)
Other current and noncurrent liabilities . . . . . . . . . . . 5,716 1,540
----------------- -----------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . (195,207) (75,128)
----------------- -----------------
Net cash used for operating activities. . . . . . . . . . . . (169,480) (58,036)
----------------- -----------------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired . . . . . . . . . . . (283,843) (6,180)
Purchase of property, plant and equipment . . . . . . . . . . . . . (7,587) (5,439)
----------------- -----------------
Net cash used for investing activities . . . . . . . . . . . (291,430) (11,619)
----------------- -----------------
Cash flows from financing activities:
Proceeds from long-term debt, net . . . . . . . . . . . . . . . . . 310,832 84,199
Payment of debt issuance costs. . . . . . . . . . . . . . . . . . . (3,488) (9,851)
Proceeds from issuance of common stock . . . . . . . . . . . . . . 141,397 458
Dividends paid on common stock. . . . . . . . . . . . . . . . . . . (573) (506)
----------------- -----------------
Net cash provided by financing activities . . . . . . . . . . 448,168 74,300
----------------- -----------------
Effect of exchange rate changes on cash and cash equivalents . . . . . . (3,336) (73)
(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . (16,078) 4,572
Cash and cash equivalents, beginning of period. . . . . . . . . . . . . . 41,707 20,023
----------------- -----------------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . . . $ 25,629 $ 24,595
================= =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<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, 1996.
Interim results of operations are not necessarily indicative of results to be
expected for the fiscal year.
Effective November 1, 1996, the Company sold a 51% interest in
Agricredit Acceptance Company ("Agricredit"), the Company's retail finance
subsidiary in North America. Accordingly, the Company's condensed consolidated
financial statements as of March 31, 1997 and December 31, 1996 and for the
three months ended March 31, 1997 and 1996 reflect Agricredit on the equity
method of accounting for the periods presented.
2. ACQUISITIONS AND DISPOSITIONS
Effective January 1, 1997, the Company acquired the operations of Xaver
Fendt GmbH & Co. KG ("Fendt") for approximately $283.5 million plus
approximately $38.0 million of assumed working capital debt (the "Fendt
Acquisition"). The Fendt Acquisition was financed by borrowings under the
Company's January 1997 Credit Facility (Note 4). The transaction consisted of
the purchase of the outstanding stock of Fendt and its interests in other
subsidiaries. Fendt's primary business is the manufacture and distribution of
tractors through a network of independent agricultural cooperatives, dealers and
distributors in Germany and throughout Europe and Australia.
3. CHARGES FOR NONRECURRING EXPENSES
The results of operations included a charge for nonrecurring expenses
of $2.6 million, or $0.03 per common share on a fully diluted basis, for the
three months ended March 31, 1997. This nonrecurring charge related to $1.4
million for the restructuring of the Company's European operations, acquired in
the acquisition of Massey Ferguson (the "Massey Acquisition") in June 1994, and
$1.2 million for the integration of the operations of Deutz Argentina S.A.
("Deutz Argentina") and Fendt, which were acquired in December 1996 and January
1997, respectively. The nonrecurring charge consisted primarily of employee
related costs.
6
<PAGE>
The results of operations included a charge for nonrecurring expenses
of $5.9 million, or $0.07 per common share on a fully diluted basis, for the
three months ended March 31, 1996, related to further restructuring of the
Company's European operations acquired in the Massey Acquisition in June 1994.
4. LONG-TERM DEBT
Long-term debt consisted of the following at March 31, 1997 and
December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------------- --------------------
<S> <C> <C>
Revolving credit facility - Equipment Operations . . . . . . $619,982 $317,439
Senior subordinated notes . . . . . . . . . . . . . . . . . 247,993 247,957
Other long-term debt . . . . . . . . . . . . . . . . . . . . 25,208 1,659
------------------- --------------------
$893,183 $567,055
=================== ====================
</TABLE>
On January 14, 1997, the Company replaced its $650.0 million unsecured
credit facility (the "March 1996 Credit Facility") with a new credit facility
(the "January 1997 Credit Facility"), which allowed for borrowings of up to $1.2
billion. In March 1997, the lending commitment for the January 1997 Credit
Facility was reduced by $141.2 million which represented the proceeds to the
Company, net of underwriting discounts, from the Company's common stock offering
(Note 5). Lending commitments under the January 1997 Credit Facility reduce from
the current commitment of $1.1 billion as of March 31, 1997 to $1.0 billion on
January 1, 1998. In addition, borrowings under the January 1997 Credit Facility
may not exceed the sum of 90% of eligible accounts receivable and 60% of
eligible inventory. As of March 31, 1997, approximately $620.0 million was
outstanding under the January 1997 Credit Facility and available borrowings were
approximately $434.1 million.
5. COMMON STOCK OFFERING
In March 1997, the Company completed a public offering of 5.2 million
shares of its common stock (the "Offering"). The net proceeds to the Company
from the Offering were approximately $140.8 million, after deduction of
underwriting discounts and commissions and estimated expenses. The Company used
the proceeds from the Offering to reduce a portion of the borrowings outstanding
under the January 1997 Credit Facility.
6. EXTRAORDINARY LOSS
During the first quarter of 1997, as part of the refinancing of the
March 1996 Credit Facility with the January 1997 Credit Facility, the Company
recorded an extraordinary loss of $2.1 million, net of taxes of $1.4 million,
for the write-off of unamortized debt costs related to the March 1996 Credit
Facility. During the first quarter of 1996, as part of the refinancing of the
Company's $550.0 million secured revolving credit facility (the "June 1994
Credit Facility") with the March 1996 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 June 1994 Credit Facility.
7
<PAGE>
7. NET INCOME PER COMMON SHARE
Primary net income per common share is computed by dividing net income
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 the elimination of interest expense, net of taxes,
related to the Company's 6 1/2% convertible subordinated debentures which were
converted into common stock in June 1996.
8. INVENTORIES
Inventories consist primarily of farm tractors, combines, implements,
hay and forage equipment and service parts and are valued at the lower of cost
or market. Cost is determined on a first-in, first-out basis. Market is net
realizable value for finished goods and repair and replacement parts. For work
in process, production parts and raw materials, market is replacement cost.
Inventory balances at March 31, 1997 and December 31, 1996 were as
follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------------ -------------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . $261,605 $171,105
Repair and replacement parts . . . . . . . . . . . . . . . . . . 246,099 222,601
Work in process, production parts and raw materials. 201,085 134,734
------------------ -------------------
Gross inventories . . . . . . . . . . . . . . . . . . . . . . . 708,789 528,440
Allowance for surplus and obsolete inventories . . . . . . . . . (87,856)
(54,596)
------------------ -------------------
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . $620,933 $473,844
================== ===================
</TABLE>
9. ACCOUNTING CHANGE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("SFAS 128"), "Earnings per Share" which specifies the
computation, presentation and disclosure requirements for earnings per share.
The Company will be required to adopt this new statement in the fourth quarter
of 1997 and all prior period earnings per share data will be restated to conform
with the provisions of SFAS 128. Based on a preliminary evaluation of this
statement's requirements, the Company does not expect the per share amounts
reported under SFAS 128 to be materially different than those calculated and
presented under Accounting Principles Board Opinion No. 15.
8
<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, distributors or other
customers. To the extent possible, the Company attempts to ship products to its
dealers and distributors 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 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 January 1, 1997, the Company acquired the operations of Xaver
Fendt GmbH & Co. KG ("Fendt"), a manufacturer and distributor of tractors,
primarily in Germany and throughout Europe (the "Fendt Acquisition"). The Fendt
Acquisition added a new line of tractors to the Company's product offerings and
expanded the Company's market presence in Germany and throughout Europe and
Australia. 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 March 31,
1997 of $25.7 million compared to $17.1 million for the three months ended March
31, 1996. Net income per common share on a fully diluted basis was $0.44 and
$0.31 for the three months ended March 31, 1997 and 1996, respectively. Net
income for the three months ended March 31, 1997 included nonrecurring expenses
of $2.6 million, or $0.03 per share on a fully diluted basis, related to the
restructuring of the Company's European operations, acquired in the Massey
Acquisition in June 1994, and the integration of the Deutz Argentina and Fendt
operations, acquired in December 1996 and January 1997, respectively (see
"Charges for Nonrecurring Expenses"). In addition, net income for the three
months ended March 31, 1997 included an extraordinary after-tax charge of $2.1
million, or $0.03 per share on a fully diluted basis, for the write-off of
unamortized debt costs related to the refinancing of the Company's March 1996
Credit Facility (see "Liquidity and Capital Resources"). Net income for the
three months ended March 31, 1996 included nonrecurring expenses of $5.9
million, or $0.07 per share on a fully diluted basis, related to the
restructuring of the Company's European operations (see "Charges for
Nonrecurring Expenses"). In addition, net income for the three months ended
9
<PAGE>
March 31, 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 June 1994 Credit Facility (see Note 6 of
the Notes to the Condensed Consolidated Financial Statements). The Company's
improved results for the first quarter of 1997 reflected the positive impact of
the Company's recent acquisitions.
RETAIL SALES
In the United States and Canada, industry unit retail sales of tractors
for the three months ended March 31, 1997 increased approximately 7% over the
same period in 1996, while industry unit retail sales of combines and hay and
forage equipment decreased approximately 6% and 12%, 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 high export demand. Company unit
settlements of tractors in the United States and Canada decreased for the three
months ended March 31, 1997 compared to 1996 primarily due to the change in the
timing of the year-end for the Massey Ferguson annual volume bonus program from
January to December and the strong retail sales of high horsepower tractors in
the first quarter of 1996. Company unit settlements of combines increased
significantly for the first quarter of 1997 compared to the prior year primarily
due to strong contract harvester sales and the continued success of the
Company's enhanced product offerings. Company unit settlements of hay and forage
equipment were flat compared to the prior year.
In Western Europe, industry unit retail sales of tractors decreased
approximately 3% in the first quarter of 1997 compared to the prior year
primarily due to decreases in the U.K. and France and the relatively strong
retail sales of tractors during the first quarter of 1996. Company retail sales
of tractors in Western Europe decreased in line with the industry. Outside of
North America and Western Europe, industry unit retail sales of tractors showed
mixed results with increases particularly in South America primarily due to
increasingly favorable economic and inflationary conditions in Brazil and the
lower sales volumes experienced during the first quarter of 1996 following the
suspension of Brazilian Central Bank loan programs during the first half of
1996. The Company's market share outside of North America and Western Europe
improved in 1997 compared to 1996, particularly in South America and the Far
East, reflecting the Company's strong distribution network in these markets.
REVENUES
Net sales for the three months ended March 31, 1997 were $704.3
million, representing an increase of $250.4 million, or 55.0%, over net sales of
$453.8 million for the same period in 1996. Net sales increased $139.5 million,
or 65%, in Western Europe for the first three months of 1997, compared to the
same period in 1996 resulting from the Fendt Acquisition, which was acquired
effective January 1, 1997. Additionally, net sales in South America increased
$72.0 million for the first quarter of 1997, primarily related to the impact of
acquired operations in Brazil and Argentina, which were acquired in June 1996
and December 1996, respectively. In the remaining international markets, net
sales increased $21.9 million, or 32%, over the first three months of 1996,
primarily related to increased sales in Africa, Eastern Europe and the
10
<PAGE>
Far East markets. The Company also achieved increases in net sales in its North
American operations of $17.0 million, or 10.1%, for the first three months of
1997 compared to the same period in the prior year, primarily related to
increased sales of combines and the timing of shipments of certain European
sourced tractors compared to 1996.
COSTS AND EXPENSES
Cost of goods sold for the three months ended March 31, 1997 was $570.0
million (80.9% of net sales) compared to $360.1 million (79.3% of net sales) for
the same period in 1996. Gross profit, defined as net sales less cost of goods
sold, was $134.3 million (19.1% of net sales) for the three months ended March
31, 1997 compared to $93.7 million (20.7% of net sales) for the same period
in the prior year. The gross margins for the first quarter of 1997 were
negatively impacted by the following: (1) lower margins related to the South
American operations primarily resulting from low production volumes in Brazil,
(2) lower margins related to the newly acquired Fendt operations and (3) an
unfavorable impact of foreign exchange related to the Company's products
manufactured in the U.K. resulting from the recent strength of the British
pound.
Selling, general and administrative expenses for the three months ended
March 31, 1997 were $61.9 million (8.8% of net sales) compared to $46.2 million
(10.2% of net sales) for the same period in 1996. The decrease in selling,
general and administrative expenses as a percentage of net sales compared to the
prior year was primarily due to cost reduction initiatives in the Company's
European operations, lower operating expense ratios related to newly acquired
operations and a decrease in the amortization of stock-based compensation
expense of $1.8 million compared to the prior year.
Engineering expenses were $13.3 million (1.9% of net sales) for the
three months ended March 31, 1997 compared to $7.0 million (1.5% of net sales)
for the same period in 1996. The increase as a percentage of net sales compared
to the prior year was primarily due to additional engineering expenses related
to the newly acquired Fendt operations.
Interest expense, net was $13.1 million for the three months ended
March 31, 1997 compared to $6.0 million for the same period in the prior year.
The Company had higher interest expense, net in the first quarter of 1997
compared to 1996 resulting from additional borrowings related to the
acquisitions of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Agricultural Equipment Business"), Deutz
Argentina and Fendt.
Other expense, net was $4.6 million for the three months ended March
31, 1997 compared to $2.4 million for the same period in 1996. The increase in
other expense, net compared to the prior year was primarily due to increased
amortization of intangibles related to the acquisitions of the Maxion Industrial
Equipment Business, Deutz Argentina and Fendt.
Nonrecurring expenses were $2.6 million and $5.9 million for the three
months ended March 31, 1997 and 1996, respectively. The nonrecurring charge
recorded in 1997 related to the further restructuring of the Company's European
operations, acquired in the Massey Acquisition in June 1994, and the integration
of the Deutz Argentina and Fendt operations, acquired in December 1996 and
11
<PAGE>
January 1997, respectively. The nonrecurring charge recorded in 1996 primarily
related to costs associated with the restructuring of the Company's European
operations. See "Charges for Nonrecurring Expenses" for further discussion.
The Company recorded a net income tax provision of $13.6 million and
$9.0 million for the three months ended March 31, 1997 and 1996, respectively.
For both periods, the Company's income tax provision approximated statutory
rates, although actual income tax payments remained at rates below statutory
rates resulting from the utilization of net operating loss carryforwards
acquired in the Massey Acquisition.
Equity in net earnings of unconsolidated affiliates was $2.6 million
and $3.4 million for the three months ended March 31, 1997 and 1996,
respectively. The decrease in 1997 compared to the prior year relates to a
decrease in net income recognized related to Agricredit. As a result of the
Company selling a 51% joint venture interest in Agricredit in November 1996, the
Company recognized only 49% of the net income of the North American retail
finance company during the three months ended March 31, 1997 compared to 100%
for the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing requirements are subject to variations due to
seasonal changes in inventory and dealer receivable levels. Internally generated
funds are supplemented when necessary from external sources, primarily the
Company's revolving credit facility. In January 1997, the Company replaced the
$650.0 million March 1996 Credit Facility with the new $1.2 billion January 1997
Credit Facility (see Note 4 of the Notes to the Condensed Consolidated Financial
Statements). The January 1997 Credit Facility is the Company's primary source of
financing and provides increased borrowing capacity over the March 1996 Credit
Facility. In March 1997, the lending commitment for the January 1997 Credit
Facility was reduced by $141.2 million wich represented the proceeds to the
Company, net of underwriting discounts, from the Company's common stock offering
(see Note 5 of the Notes to the Condensed Consolidated Financial Statements).
Lending commitments under the January 1997 Credit Facility reduce from the
current commitment of $1.1 billion as of March 31, 1997 to $1.0 billion on
January 1, 1998. In addition, borrowings under the January 1997 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 January 1997 Credit Facility fluctuate as well. As of March 31, 1997,
approximately $620.0 million was outstanding under the January 1997 Credit
Facility and available borrowings were approximately $434.1 million.
In March 1997, the Company completed a public offering of 5.2 million
shares of its common stock (the "Offering"). The net proceeds to the Company
from the Offering were approximately $140.8 million, after deduction of
underwriting discounts and commissions and estimated expenses. The Company used
the proceeds from the Offering to reduce a portion of the borrowings outstanding
under the January 1997 Credit Facility.
The Company's working capital requirements are seasonal, with
investments in working capital typically building in the first half of the year
and then reducing in the second half of the year. As of March 31, 1997, the
Company had $1,008.1 million of working capital, an increase of $257.6 million
over working capital of $750.5 million as of December 31, 1996. The increase in
working capital was primarily due to working capital acquired in the Fendt
Acquisition and normal seasonal requirements, particularly in receivables and
inventories.
12
<PAGE>
Cash flow used for operating activities was $169.5 million and $58.0
million for the three months ended March 31, 1997 and 1996, respectively. The
increase in cash flow used for operating activities in 1997 compared to the
prior year was primarily due to increases in receivables and inventories and
decreases in accrued expenses. Additionally, for the three months ended March
31, 1996, cash flow from operations was favorably impacted by the collection of
unusually high levels of international accounts receivable at December 31, 1995
which were collected in 1996.
Capital expenditures for the three months ended March 31, 1997 were
$7.6 million compared to $5.4 million for the same period in 1996. The Company
anticipates that additional capital expenditures for the remainder of 1997 will
range from approximately $65.0 million to $75.0 million and will primarily be
used to support the development and enhancement of new and existing products.
In April 1997, the Company's Board of Directors declared a dividend of
$0.01 per share of common stock for the second quarter of 1997. 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 January 1997
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 recorded $1.4 million of nonrecurring expenses during the
first quarter of 1997 related to the further restructuring of the Company's
European operations, acquired in June 1994 as a result of the Massey
Acquisition. These costs primarily related to the centralization of certain
administrative functions (see Note 3 of the Notes to the Condensed Consolidated
Financial Statements). Savings from the further restructuring of the Company's
European operations are expected to result primarily from reduced general and
administrative expenses.
The Company recorded $1.2 million of nonrecurring expenses during the
first quarter of 1997 related to the integration of the Company's Deutz
Argentina and Fendt operations, acquired in December 1996 and January 1997,
respectively. These costs primarily related to the rationalization of
manufacturing and administrative functions in the Company's South American
operations and Fendt operations in Europe (see Note 3 of the Notes to the
13
<PAGE>
Condensed Consolidated Financial Statements). Savings from the integration of
the South American and Fendt operations are expected to result primarily in
reduced cost of goods sold and selling, general and administrative expenses.
The Company expects to record total nonrecurring expenses of
approximately $15.0 million in 1997 related to the Company's restructuring and
integration plans. While the Company believes that cost savings from its
restructuring and integration plans can be attained, there can be no assurance
that all objectives will be achieved.
In the first quarter of 1996, the Company recorded nonrecurring
expenses of $5.9 million related to the restructuring of the Company's European
operations. These costs primarily related to the centralization and
rationalization of the Company's European operations' administrative, sales, and
marketing functions.
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 its
business.
14
<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
The Company filed a Current Report on form 8-K dated February
28, 1997 disclosing AGCO Corporation's Management's Discussion
and Analysis of Financial Condition and Results of Operations
for the years ended December 31, 1996, 1995 and 1994 and its
Consolidated Financial Statements as of December 31, 1996 and
1995 and for the years ended December 31, 1996, 1995 and 1994.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
AGCO CORPORATION
Registrant
Date: May 15, 1997 Chris E. Perkins
--------------------
Chris E. Perkins
Vice President and Chief Financial Officer
16
<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).
17
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
March 31,
---------------------------
PRIMARY EARNINGS PER SHARE 1997 1996
------------ ------------
<S> <C> <C>
Weighted average number of common shares outstanding . . . . . . . . . . . . . . 58,605 50,757
Shares issued upon assumed exercise of outstanding
stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 535
------------ ------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . 58,994 51,292
============ ============
Income before extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . $ 27,807 $ 20,595
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,080) (3,503)
------------ ------------
Net income available for common stockholders . . . . . . . . . . . . . . . . . . $ 25,727 $ 17,092
============ ============
Net income per common share:
Income before extraordinary loss. . . . . . . . . . . . . . . . . . . . . . $ 0.47 $ 0.40
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.03) (0.07)
------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.33
============ ============
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of common shares outstanding . . . . . . . . . . . . . . 58,605 50,757
Shares issued upon assumed conversion of the convertible
subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5,778
Shares issued upon assumed exercise of outstanding
stock options (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 536
------------ ------------
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . 58,995 57,071
============ ============
Income before extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . $ 27,807 $ 20,595
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,080) (3,503)
------------ ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,727 17,092
Interest expense on convertible subordinated debentures, net of
applicable income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 398
------------ ------------
Net income available for common stockholders . . . . . . . . . . . . . . . . . . $ 25,727 $ 17,490
============ ============
Net income per common share:
Income before extraordinary loss. . . . . . . . . . . . . . . . . . . . . . $ 0.47 $ 0.37
Extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.03) (0.06)
------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.31
============ ============
(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.
(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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 25,629
<SECURITIES> 0
<RECEIVABLES> 996,991
<ALLOWANCES> 0
<INVENTORY> 620,933
<CURRENT-ASSETS> 1,729,626
<PP&E> 319,873
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,597,220
<CURRENT-LIABILITIES> 721,514
<BONDS> 893,183
0
0
<COMMON> 624
<OTHER-SE> 910,872
<TOTAL-LIABILITY-AND-EQUITY> 2,597,220
<SALES> 704,329
<TOTAL-REVENUES> 704,329
<CGS> 569,980
<TOTAL-COSTS> 569,980
<OTHER-EXPENSES> 13,253
<LOSS-PROVISION> 1,317
<INTEREST-EXPENSE> 13,147
<INCOME-PRETAX> 38,854
<INCOME-TAX> 13,634
<INCOME-CONTINUING> 27,807
<DISCONTINUED> 0
<EXTRAORDINARY> (2,080)
<CHANGES> 0
<NET-INCOME> 25,727
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
