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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
(AMENDMENT NO. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 1-12930
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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.)
4205 RIVER GREEN PARKWAY
DULUTH, GEORGIA 30096
(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: 59,587,761 shares outstanding as
of March 31, 2000.
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AGCO CORPORATION AND SUBSIDIARIES
INDEX
Page
Numbers
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - March 31, 2000 and
December 31, 1999........................................................................... 3
Condensed Consolidated Statements
of Operations for the Three Months
Ended March 31, 2000 and 1999............................................................... 4
Condensed Consolidated Statements
of Cash Flows for the Three Months
Ended March 31, 2000 and 1999............................................................... 5
Notes to Condensed Consolidated
Financial Statements........................................................................ 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................................... 11
Item 3. Quantitative and Qualitative Disclosures
about Market Risk........................................................................... 17
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K............................................................ 18
SIGNATURES ............................................................................................................ 19
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Part I. Financial Information
Item 1. Financial Statements
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents ............................................. $ 10.4 $ 19.6
Accounts and notes receivable, net .................................... 598.3 758.2
Inventories, net ...................................................... 596.9 561.1
Other current assets .................................................. 82.9 77.2
---------- ----------
Total current assets ............................................... 1,288.5 1,416.1
Property, plant and equipment, net .......................................... 299.2 310.8
Investment in affiliates .................................................... 96.7 93.6
Other assets ................................................................ 152.7 140.1
Intangible assets, net ...................................................... 306.2 312.6
---------- ----------
Total assets ....................................................... $ 2,143.3 $ 2,273.2
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ...................................................... $ 258.1 $ 244.2
Accrued expenses ...................................................... 389.4 408.2
Other current liabilities ............................................. 37.2 29.8
---------- ----------
Total current liabilities .......................................... 684.7 682.2
Long-term debt .............................................................. 587.1 691.7
Postretirement health care benefits ......................................... 25.7 25.4
Other noncurrent liabilities ................................................ 43.8 44.8
---------- ----------
Total liabilities .................................................. 1,341.3 1,444.1
---------- ----------
Stockholders' Equity:
Common stock: $0.01 per value, 150,000,000 shares authorized,
59,587,761 and 59,579,559 shares issued and outstanding
at March 31, 2000 and December 31, 1999, respectively .............. 0.6 0.6
Additional paid-in capital ............................................ 427.7 427.7
Retained earnings ..................................................... 610.6 621.9
Unearned compensation ................................................. (3.6) (5.1)
Accumulated other comprehensive income ................................ (233.3) (216.0)
---------- ----------
Total stockholders' equity ......................................... 802.0 829.1
---------- ----------
Total liabilities and stockholders' equity ......................... $ 2,143.3 $ 2,273.2
========== ==========
See accompanying notes to condensed consolidated financial statements.
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AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
-------- --------
Net sales ................................................................... $ 529.8 $ 561.6
Cost of goods sold .......................................................... 452.7 482.6
-------- --------
Gross profit ........................................................... 77.1 79.0
Selling, general and administrative expenses ................................ 58.4 57.9
Engineering expenses ........................................................ 10.5 11.8
Restructuring and other infrequent expenses ................................. 1.9 --
Amortization of intangibles ................................................. 3.8 3.7
-------- --------
2.5 5.6
Income from operations
Interest and financing expense, net ......................................... 20.5 16.5
Other expense, net .......................................................... 3.7 4.8
-------- --------
Loss before income taxes and equity in net earnings
of affiliates ........................................................... (21.7) (15.7)
Income tax benefit .......................................................... (8.7) (5.8)
-------- --------
Loss before equity in net earnings of affiliates ............................ (13.0) (9.9)
Equity in net earnings of affiliates ........................................ 2.3 2.7
-------- --------
Net loss .................................................................... $ (10.7) $ (7.2)
======== ========
Net loss per common share:
Basic .................................................................. $ (0.18) $ (0.12)
======== ========
Diluted ................................................................ $ (0.18) $ (0.12)
======== ========
Weighted average number of common and common equivalent shares outstanding:
Basic .................................................................. 58.9 58.5
======== ========
Diluted ................................................................ 58.9 58.5
======== ========
Dividends declared per common share ......................................... $ 0.01 $ 0.01
======== ========
See accompanying notes to condensed consolidated financial statements.
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AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN MILLIONS)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
-------- --------
Cash flows from operating activities:
Net loss .............................................................. $ (10.7) $ (7.2)
-------- --------
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Depreciation and amortization ..................................... 13.7 14.5
Amortization of intangibles ....................................... 3.8 3.7
Amortization of unearned compensation ............................. 1.5 1.8
Equity in net earnings of affiliates,
net of cash received ........................................... (2.3) (2.7)
Deferred income tax benefit ....................................... (14.8) (2.7)
Changes in operating assets and liabilities, net of effects
from purchase/sale of businesses:
Accounts and notes receivable, net ............................. 142.2 (22.6)
Inventories, net ............................................... (46.5) (42.2)
Other current and noncurrent assets ............................ (7.1) (20.0)
Accounts payable ............................................... 20.4 (8.8)
Accrued expenses ............................................... (16.0) (43.2)
Other current and noncurrent liabilities ....................... 8.0 (9.1)
-------- --------
Total adjustments ............................................ 102.9 (131.3)
-------- --------
Net cash provided by (used for) operating activities ......... 92.2 (138.5)
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment ......................... (7.5) (6.9)
Investment in unconsolidated affiliates ........................... (1.2) --
-------- --------
Net cash used for investing activities ....................... (8.7) (6.9)
-------- --------
Cash flows from financing activities:
Proceeds from (repayments of) long-term debt, net ................. (93.4) 153.4
Dividends paid on common stock .................................... (0.6) (0.6)
-------- --------
Net cash provided by (used for) financing activities ......... (94.0) 152.8
-------- --------
Effect of exchange rate changes on cash and cash equivalents ...... 1.3 (2.3)
-------- --------
Increase (decrease) in cash and cash equivalents .................. (9.2) 5.1
Cash and cash equivalents, beginning of period .................... 19.6 15.9
-------- --------
Cash and cash equivalents, end of period .......................... $ 10.4 $ 21.0
======== ========
See accompanying notes to condensed consolidated financial statements.
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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, necessary 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, 1999.
Interim results of operations are not necessarily indicative of results to be
expected for the fiscal year.
2. RESTRUCTURING AND OTHER INFREQUENT EXPENSES
In the fourth quarter of 1999, the Company announced its plan to close
its Coldwater, Ohio; Lockney, Texas; and Noetinger, Argentina manufacturing
facilities. The majority of production in these facilities will be relocated to
existing Company facilities or outsourced to third parties. The Coldwater, Ohio
facility was permanently closed in 1999 and the Lockney, Texas and Noetinger,
Argentina are planned to close in 2000. In the fourth quarter of 1999, the
Company recorded restructuring and other infrequent expenses of $24.5 million
related to employee severance and other costs associated with the closure of
these facilities. In the first quarter of 2000, the Company recorded additional
restructuring and other infrequent expenses of $1.9 million related to employee
severance, facility closure costs and other production transition costs. The
components of the expenses are summarized in the following table (in millions):
1999 2000
Restructuring Restructuring
and other and other Reserve
infrequent infrequent Expenses Balance at
Expenses Expenses Incurred March 31, 2000
------------- ------------- -------- --------------
Employee severance ......................................... $ 1.9 $ 0.6 $ 1.1 $ 1.4
Facility closure costs ..................................... 7.7 0.7 3.0 5.4
Write-down of property plant
and equipment ........................................... 14.9 -- 14.9 --
Production transition costs ................................ -- 0.6 0.6 --
-------- -------- -------- --------
$ 24.5 $ 1.9 $ 19.6 $ 6.8
======== ======== ======== ========
The severance costs relate to the termination of approximately 680
employees in the Coldwater, Ohio; Lockney, Texas; and Noetinger, Argentina
facilities of which approximately 540 employees had been terminated as of March
31, 2000. The facility closure costs include
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employee costs and other exit costs to be incurred after operations cease in
addition to noncancelable operating lease obligations. The production transition
costs include costs to integrate production into other existing AGCO facilities.
3. LONG-TERM DEBT
Long-term debt consisted of the following at March 31, 2000 and
December 31, 1999 (in millions):
March 31, December 31,
2000 1999
---------- ------------
Revolving credit facility ............................................ $ 330.5 $ 431.4
Senior subordinated notes ............................................ 248.5 248.5
Other long-term debt ................................................. 8.1 11.8
---------- ----------
$ 587.1 $ 691.7
========== ==========
In January 2000, the Company entered into a $250 million asset backed
securitization facility whereby certain U.S. wholesale accounts receivable are
sold through a wholly-owned special purpose subsidiary to a third party (the
"Securitization Facility"). Funding under the Securitization Facility is
provided on a revolving basis and is dependent upon the level of U.S. dealer
wholesale receivables eligible to be sold under the facility. The Company
initially funded $200 million under the Securitization Facility which was used
to reduce outstanding borrowings under the Company's revolving credit facility.
The $1.0 billion lending commitment under the revolving credit facility was
permanently reduced by the $200 million initial proceeds received from the
Securitization Facility and will be further reduced by any additional funding
received under the Securitization Facility. In conjunction with the closing of
the securitization transaction, the Company recorded an initial one-time loss in
the first quarter of 2000 on the sale of the receivables of approximately $8
million, or $0.08 per share. The initial loss, included as a component of
interest and financing expense, net, represents the difference between the
current and future value of the receivables sold, related transaction expenses
and the write-off of certain unamortized debt issuance costs due to the
reduction in the lending commitment of the revolving credit facility.
The Company's revolving credit facility allows for borrowings up to
$800 million. As of March 31, 2000, $330.5 million was outstanding under the
revolving credit facility and available borrowings were $469.5 million, subject
to receivable and inventory borrowing base requirements.
The components of interest and financing expense, net are as follows:
March 31, March 31,
2000 1999
--------- ---------
Interest expense, net ........................................... $ 10.5 $ 16.5
Loss on sale of accounts receivable ............................. 10.0 --
------- -------
$ 20.5 $ 16.5
======= =======
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The loss on sale of accounts receivable of $10.0 million includes a
one-time loss of $8.0 million recorded in conjunction with the closing and
initial funding of the Securitization Facility as discussed above and $2.0
million related to subsequent sales of receivables provided on an ongoing
revolving basis under the Securitization Facility.
4. NET INCOME PER COMMON SHARE
The computation, presentation and disclosure requirements for earnings
per share are presented in accordance with Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share." Basic earnings per common
share is computed by dividing net income by the weighted average number of
common shares outstanding during each period. Diluted earnings per common share
assumes exercise of outstanding stock options and vesting of restricted stock
when the effects of such assumptions are dilutive.
A reconciliation of net loss and the weighted average number of common
shares outstanding used to calculate basic and diluted net loss per common share
for the three months ended March 31, 2000 and 1999 is as follows (in millions,
except per share data):
Three Months Ended
March 31
---------------------------
2000 1999
-------- --------
BASIC EARNINGS PER SHARE
Weighted average number of common shares outstanding ........................ 58.9 58.5
======== ========
Net loss .................................................................... $ (10.7) $ (7.2)
======== ========
Net loss per common share ................................................... $ (0.18) $ (0.12)
======== ========
DILUTED EARNINGS PER SHARE
Weighted average number of common shares outstanding ........................ 58.9 58.5
Assumed vesting of restricted stock ......................................... -- --
Assumed exercise of outstanding stock options ............................... -- --
-------- --------
Weighted average number of common and common equivalent
shares outstanding ...................................................... 58.9 58.5
======== ========
Net loss .................................................................... $ (10.7) $ (7.2)
======== ========
Net loss per common share ................................................... $ (0.18) $ (0.12)
======== ========
5. INVENTORIES
Inventories are valued at the lower of cost or market using the
first-in, first-out method. Market is net realizable value for finished goods
and repair and replacement parts. For work in process, production parts and raw
materials, market is replacement cost.
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Inventory balances at March 31, 2000 and December 31, 1999 were as
follows (in millions):
March 31, March 31,
2000 1999
--------- ---------
Finished goods ....................................................... $ 277.4 $ 248.4
Repair and replacement parts ......................................... 234.2 229.3
Work in process, production parts and raw materials .................. 153.8 154.6
-------- --------
Gross inventories ............................................. 665.4 632.3
Allowance for surplus and obsolete inventories ....................... (68.5) (71.2)
-------- --------
Inventories, net .............................................. $ 596.9 $ 561.1
======== ========
6. COMPREHENSIVE INCOME
The Company follows the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," which requires companies to
disclose components of comprehensive income, defined as the total of net income
and all other nonowner changes in equity. Total comprehensive income (loss) for
the three months ended March 31, 2000 and 1999 was as follows (in millions):
Three Months Ended
March 31
----------------------------
2000 1999
-------- ---------
Net loss ............................................................. $ (10.7) $ (7.2)
Other comprehensive income (loss):
Foreign currency translation adjustments ........................ (17.3) (108.3)
-------- ---------
Total comprehensive income (loss) .................................... $ (28.0) $ (115.5)
======== =========
7. SEGMENT REPORTING
The Company has four geographic reportable segments: North America;
South America; Europe/Africa/Middle East; and Asia/Pacific. Each segment
distributes a full range of agricultural equipment and related replacement
parts. The Company evaluates segment performance primarily based on income from
operations. Sales for each segment are based on the location of the third-party
customer. All intercompany transactions between the segments have been
eliminated. The Company's selling, general and administrative expenses and
engineering expenses are charged to each segment based on the region where the
expenses are incurred. As a result, the components of operating income for one
segment may not be comparable to another segment. Segment results for the three
months ended March 31, 2000 and 1999 are as follows (in millions):
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North South Europe/Africa/
Americ America Middle East Asia/Pacific Consolidated
-------- ------- -------------- ------------ ------------
2000
Net sales $ 138.7 $ 47.2 $ 318.4 $ 25.5 $ 529.8
Income (loss) from operations (10.7) (1.2) 18.0 3.7 9.8
1999
Net sales $ 141.1 $ 49.3 $ 350.6 $ 20.6 $ 561.6
Income (loss) from operations (7.2) (1.5) 18.4 2.1 11.8
A reconciliation from the segment information to the consolidated
balances for income from operations is set forth below (in millions):
Three Months Ended
March 31
-------------------------
2000 1999
------- -------
Segment income from operations ....................................... $ 9.8 $ 11.8
Restricted stock compensation expense ................................ (1.6) (2.5)
Restructuring and other infrequent expenses .......................... (1.9) --
Amortization of intangibles .......................................... (3.8) (3.7)
======= =======
Consolidated income from operations .................................. $ 2.5 $ 5.6
======= =======
8. SUBSEQUENT EVENTS
In May 2000, the Company entered into an agreement with CNH Global N.V.
("CNH") to purchase its 50% share in Hay and Forage Industries ("HFI"). This
agreement, which is subject to regulatory approval, will terminate a joint
venture agreement in which CNH and AGCO each owned 50% interests in HFI, thereby
providing AGCO with sole ownership of the facility. HFI develops and
manufactures hay and forage equipment and implements which AGCO sells under
various brand names.
In May 2000, the Company announced its plans to close its combine
manufacturing facility in Independence, Missouri and relocate production to HFI.
The closing of the facility is expected to be completed by the end of 2000. The
Company expects to record restructuring and other infrequent expenses of
approximately $20 million in 2000 related to the Independence facility closure.
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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 and are
expected to continue to be affected by changes in net cash farm income, farm
land values, weather conditions, the demand for agricultural commodities,
commodity prices and general economic conditions. The Company records sales when
the Company ships equipment and replacement parts 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 have historically been
the lowest in the first quarter and have increased in subsequent quarters.
RESULTS OF OPERATIONS
The Company recorded a net loss for the quarter ended March 31, 2000 of
$10.7 million compared to a net loss of $7.2 million for the same period in
1999. Net loss per common share on a diluted basis was $0.18 and $0.12 for the
first quarter of 2000 and 1999, respectively. The net loss for the first quarter
of 2000 included restructuring and other infrequent expenses ("restructuring
expenses") of $1.9 million, or $0.02 per share, associated with the closure of
certain manufacturing facilities announced in 1999 and an $8.0 million loss, or
$0.08 per share, associated with the completion of an asset backed
securitization facility in January 2000 (see Liquidity and Capital Resources).
Excluding restructuring expenses and the loss on the securitization facility,
the Company's results in the quarter improved compared to the prior year.
RETAIL SALES
Global demand for agricultural equipment in the first quarter of 2000
continued to show signs of weakness exhibited during 1999 in most major markets.
The industry decline was primarily due to the continued effects of high global
commodity stocks and lower export demand for farm commodities, which resulted in
lower commodity prices and reduced demand for new equipment purchases.
In the United States and Canada, industry unit retail sales of tractors
and combines for the first three months of 2000 increased approximately 1% and
decreased approximately 32%, respectively, compared to the same period in 1999.
The decline in industry retail tractor sales were significant in the high
horsepower and utility tractor segments but were offset by strong increases in
the under 40 horsepower segment. When compared to the same period in 1999,
Company unit retail sales of tractors in the United States and Canada decreased,
and Company unit retail sales of combines increased.
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In Western Europe, industry unit retail sales of tractors declined
approximately 9% for the first three months of 2000 as compared to the prior
year. Decreases in industry unit retail sales were experienced in most
significant Western European markets except for a modest increase in the UK.
Company unit retail sales results for the first quarter of 2000 also declined
compared to the same period in 1999. However, the Company's retail sales for the
first quarter of 2000 improved relative to the industry due to continued
favorable acceptance of the Company's new Massey Ferguson high horsepower
tractor line as well as new Fendt product introductions in the utility and high
horsepower tractor lines, all of which were introduced during 1999.
Industry unit retail sales of tractors in South America for the first
three months of 2000 decreased approximately 20% compared to the same period in
1999. In the major market of Brazil, industry retail sales declined
approximately 13% due to a change in the Brazilian government retail financing
program, which was not fully implemented until after the first quarter of 2000
and resulted in a delay of purchases by retail customers. In addition, the
remaining South American markets decreased approximately 42% due to low
commodity prices, economic uncertainty and tightening credit. Company unit
retail sales of tractors in South America decreased slightly less than the
industry.
In other international markets, decreases in the Middle Eastern and
Australian markets were partially offset by increases in certain other regions
particularly in Asia/Pacific. Company unit retail sales of tractors were largely
in line with industry changes.
STATEMENTS OF OPERATIONS
Net sales for the first quarter of 2000 were $529.8 million compared to
$561.6 million for the same period in 1999. Net sales were negatively impacted
by approximately $32.7 million from the currency translation effect of the
strengthening U.S. dollar in relation to the Euro. Excluding the impact of
currency translation, net sales for the first quarter of 2000 were in line with
the prior year.
Regionally, net sales in North America decreased $2.4 million, or 1.7%
for the first quarter of 2000, compared to the same period in the prior year,
primarily due to continued unfavorable market conditions. In the
Europe/Africa/Middle East region, net sales decreased $32.2 million, or 9.2% for
the first quarter of 2000 compared to 1999, primarily due to the negative impact
of foreign currency translation due to the strengthening of the U.S. dollar in
relation to the Euro. Net sales in South America decreased approximately $2.1
million, or 4.3% for the first quarter of 2000 compared to 1999, primarily due
to unfavorable industry conditions. In the Asia/Pacific region, net sales
increased approximately $4.9 million, or 23.8% for the first quarter of 2000
compared to 1999, primarily due to improvements in market conditions.
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Gross profit was $77.1 million (14.6% of net sales) for the first
quarter of 2000 compared to $79.0 million (14.1% of net sales) for the same
period in the prior year. Gross margins improved for the quarter, primarily due
to cost reduction initiatives and facility rationalization benefits offset by
slightly lower production.
Selling, general and administrative expenses ("SG&A expenses") for the
first quarter of 2000 were $58.4 million (11.0% of net sales) compared to $57.9
million (10.3% of net sales) for the same period in the prior year. The increase
as a percentage of net sales was due to lower sales volume in the first quarter
of 2000. Engineering expenses for the first quarter of 2000 were $10.5 million
(2.0% of net sales), compared to $11.8 million (2.1% of net sales) for the same
period in the prior year.
The Company recorded restructuring expenses of $1.9 million for the
first quarter of 2000 related to the closing of the Company's Coldwater, Ohio
and Lockney, Texas manufacturing facilities announced in 1999. These
restructuring expenses related to employee severance, facility closure costs and
production transition costs. The Company recorded restructuring expenses of
$24.5 million in the fourth quarter of 1999 related to the facility closures.
Income from operations was $2.5 million (.5% of net sales) for the
three months ended March 31, 2000, as compared to $5.6 million (1.0% of net
sales) for the same period in 1999. Excluding restructuring expenses, income
from operations in 2000 was $4.4 million (.8% of net sales). Operating income,
as a percentage of net sales, was lower primarily because of higher SG&A
expenses relative to net sales compared to 1999.
Interest and financing expense, net was $20.5 million for the three
months ended March 31, 2000 compared to $16.5 million for the same period in
1999. The increase in interest and financing expense, net was primarily the
result of the initial one-time $8.0 million loss associated with the asset
backed securitization transaction completed during the first quarter of 2000
(see Liquidity and Capital Resources), offset to some extent by lower interest
expense due to lower average borrowings as compared to the first quarter of
1999.
The Company recorded an income tax benefit of $8.7 million for the
three months ended March 31, 2000, compared to an income tax benefit of $5.8
million for the same period in 1999. The Company's effective tax rate for the
first quarter increased to 40% from 37% recorded in the same period in 1999.
This increase is attributable to a change in the mix of income to jurisdictions
with higher tax rates.
Equity in earnings of affiliates was $2.3 million for the three months
ended March 31, 2000, compared to $2.7 million for the same period in 1999. The
reduction in earnings was due to lower net income in the Company's engine joint
venture in Argentina and in its retail finance joint ventures.
In May 2000, the Company entered into an agreement with CNH Global N.V. ("CNH")
to purchase its 50% share in Hay and Forage Industries ("HFI"). This agreement,
which is subject
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to regulatory approval, will terminate a joint venture agreement in which CNH
and AGCO each owned 50% interests in HFI, thereby providing AGCO with sole
ownership of the facility. HFI develops and manufactures hay and forage
equipment and implements which AGCO sells under various brand names.
RESTRUCTURING AND OTHER INFREQUENT EXPENSES
In the fourth quarter of 1999, the Company announced its plan to close
its Coldwater, Ohio; Lockney, Texas; and Noetinger, Argentina manufacturing
facilities. The closure of the two facilities in the United States is consistent
with the Company's efforts to continue to resize its operations to current
industry demand which has declined significantly since the middle of 1998. The
Noetinger, Argentina closure is consistent with the Company's strategy to
consolidate production in South America. The Company closed the Coldwater
facility in 1999 and expects to close the Lockney and Noetinger facilities in
2000. The rationalization of the Company's production facilities is expected to
generate cost savings of $10 million to $15 million from the elimination of
production overhead costs beginning in the year 2000.
In connection with the closures, the Company recorded restructuring and
other infrequent expenses, representing unusual or infrequent expenses, of $24.5
million in 1999 and $1.9 million in the first quarter of 2000. The components of
the expenses are summarized in the following table (in millions).
1999 2000
Restructuring Restructuring
and other and other Balance
infrequent infrequent Expenses at March 31,
Expenses Expenses Incurred 2000
------------- ------------- -------- ------------
Employee severance .......................... $ 1.9 $ 0.6 $ 1.1 $ 1.4
Facility closure costs ...................... 7.7 0.7 3.0 5.4
Write-down of property, plant
and equipment ............................ 14.9 -- 14.9 --
Production transition costs ................. -- 0.6 0.6 --
------- ------ ------- ------
$ 24.5 $ 1.9 $ 19.6 $ 6.8
======= ====== ======= ======
The employee severance costs relate to the termination of approximately
580 production employees and 100 production staff employees of which
approximately 540 employees have been terminated as of March 31, 2000. The
million of facility closure costs include employee and other exit costs to be
incurred after operations cease in addition to noncancelable operating lease
obligations. The write-down of property, plant and equipment consisted of $7.0
million related to machinery and equipment and $7.9 million for buildings and
improvements and was based on the estimated fair value of the assets compared to
their carrying value. The production transition costs include costs to integrate
production into other existing AGCO facilities. The remaining costs accrued at
March 31 are expected to be paid in year 2000 and 2001. The Company also expects
to incur an additional $6.0 million of restructuring and other infrequent
expenses in 2000 and 2001 related to these closures.
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In May 2000, the Company announced its plans to close its combine
manufacturing facility in Independence, Missouri and relocate production to HFI.
The closing of the facility is expected to be completed by the end of 2000. The
closure of the Independence facility is consistent with the Company's efforts to
rationalize production in response to lower industry demand and is expected to
generate annual cost savings of approximately $10 million. The Company expects
to record restructuring and other infrequent expenses of approximately $20
million in 2000 related to the Independence facility closure.
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. The current lending commitment under the
Company's revolving credit facility is $800 million with borrowings limited to
the sum of 90% of eligible accounts receivable and 60% of eligible inventory. As
of March 31, 2000, approximately $330.5 million was outstanding under the
Company's revolving credit facility and available borrowings were approximately
$469.5 million, subject to receivable and inventory borrowing base requirements.
In January 2000, the Company entered into a $250 million asset backed
securitization facility whereby certain U.S. wholesale accounts receivables are
sold through a wholly-owned special purpose subsidiary to a third party (the
"Securitization Facility"). The Company initially funded $200 million under the
Securitization Facility, which was used to reduce outstanding borrowings under
the revolving credit facility. The Company's lending commitment under the
revolving credit facility was permanently reduced to $800 million, representing
a decrease of the $200 million initial proceeds received from the
securitization, and will be further reduced by any additional funding received
from the Securitization Facility. In conjunction with the closing of the
securitization transaction, the Company recorded an initial one-time $8.0
million loss in the first quarter of 2000. The initial loss represents the
difference between the current and future value of the receivables sold, related
transaction expenses and the write-off of certain unamortized debt issuance
costs due to the reduction in the lending commitment of the revolving 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. The Company had $603.8 million
of working capital at March 31, 2000, a decrease of $130.1 million from working
capital of $733.9 million at December 31, 1999. The decrease in working capital
was primarily due to lower accounts receivables primarily related to the $200
million sale of accounts receivable through the Securitization Facility.
Cash flow provided by operating activities was $92.2 million for the
three months ended March 31, 2000 compared to a use of cash of $138.5 million
for the same period during 1999. The increase in cash flow provided by operating
activities was primarily due to a reduction in the Company's accounts receivable
levels due to the $200 million sale of accounts receivable through the
Securitization Facility.
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Capital expenditures for the three months ended March 31, 2000 were
$7.5 million compared to $6.9 million for the same period in 1999. The Company
anticipates that additional capital expenditures for the remainder of 2000 will
range from approximately $45 million to $55 million and will primarily be used
to support the development and enhancement of new and existing products as well
as facility and equipment improvements.
The Company's debt to capitalization ratio (total long-term debt
divided by the sum of total long-term debt and stockholders' equity) was 42.3%
at March 31, 2000 compared to 45.5% at December 31, 1999. The decrease is
attributable to a reduction of indebtedness of $104.6 million from December 31,
1999 due to the reduction in outstanding borrowings from proceeds from the
Securitization Facility, offset to some extent by the negative cumulative
translation adjustment to equity of $17.3 million, primarily related to the
weakening of the Euro in relation to the U.S. dollar.
In April 2000, the Company's Board of Directors declared a dividend of
$0.01 per share of common stock for the second quarter of 2000. 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 Company's
revolving 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.
FORWARD LOOKING STATEMENTS
Certain statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this report are
forward looking, including certain statements set forth under the "Results of
Operations" and "Liquidity and Capital Resources" headings. Forward looking
statements include the Company's expectations with respect to future commodity
prices, export demand for commodities, farm income, demand for agricultural
equipment, production levels, the impact of cost reduction initiatives,
operating margins, overall profitability and the availability of capital.
Although the Company believes that the statements it has made are based on
reasonable assumptions, they are based on current information and beliefs and,
accordingly, the Company can give no assurance that its statements will be
achieved. In addition, these statements are subject to factors that could cause
actual results to differ materially from those suggested by the forward looking
statements. These
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factors include, but are not limited to, general economic and capital market
conditions, the demand for agricultural products, world grain stocks, crop
production, commodity prices, farm income, farm land values, government farm
programs and legislation, the levels of new and used field inventories, weather
conditions, interest and foreign currency exchanges rates, the conversion to the
Euro, pricing and product actions taken by competitors, customer access to
credit, production disruptions, supply and capacity constraints, Company cost
reduction and control initiatives, Company research and development efforts,
labor relations, dealer and distributor actions, technological difficulties,
changes in environmental, international trade and other laws, and political and
economic uncertainty in various areas of the world. Further information
concerning factors that could significantly affect the Company's results is
included in the Company's filings with the Securities and Exchange Commission.
The Company disclaims any responsibility to update any forward looking
statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN CURRENCY RISK MANAGEMENT
The Company has significant manufacturing operations in the United
States, the United Kingdom, France, Germany, Denmark and Brazil, and it
purchases a portion of its tractors, combines and components from third party
foreign suppliers, primarily in various European countries and in Japan. The
Company also sells products in over 140 countries throughout the world. The
majority of the Company's revenue outside the United States is denominated in
the currency of the customer location with the exception of sales in the Middle
East, Africa and Asia which is primarily denominated in British pounds, Euros or
U.S. dollars. The Company's most significant transactional foreign currency
exposures are the British pound in relation to the Euro and the British pound,
the Euro and the Canadian dollar in relation to the U.S. dollar. Fluctuations in
the value of foreign currencies create exposures which can adversely affect the
Company's results of operations.
The Company attempts to manage its transactional foreign exchange
exposure by hedging identifiable foreign currency cash flow commitments arising
from receivables, payables, and committed purchases and sales. Where naturally
offsetting currency positions do not occur, the Company hedges certain of its
exposures through the use of foreign currency forward contracts. The Company's
hedging policy prohibits foreign currency forward contracts for speculative
trading purposes. The Company's translation exposure resulting from translating
the financial statements of foreign subsidiaries into U.S. dollars is not
hedged. The Company's most significant translation exposures are the British
pound, the Euro and the Brazilian real in relation to the U.S. dollar. When
practical, this translation impact is reduced by financing local operations with
local borrowings.
INTEREST RATE RISK
The Company manages interest rate risk through the use of fixed rate
debt and interest rate swap contracts. The Company has fixed rate debt from its
$250 million 8.5% Senior Subordinated Notes due 2006. In addition, the Company
uses its interest rate swap contract to further minimize the effect of potential
interest rate increases on floating rate debt in a rising interest rate
environment. The Company's floating rate debt is primarily the revolving credit
facility, which is tied to changes in U.S. and European libor rates.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Schedule - March 31, 2000 (electronic
filing purposes only).
(b) Reports on Form 8-K
None
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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: March 29, 2001 /s/ Donald R. Millard
-----------------------------------------
Donald R. Millard
Senior Vice President and Chief
Financial Officer
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EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
------- --------------------------------------------------- ------------
Financial Data Schedule - March 31, 2000
27.1* (electronic filing purposes only).
--
* previously filed
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