AGCO Reports First Quarter Results; Strong Worldwide Sales Offset Impact of Weaker South American Market.DULUTH Duluth (dəl  th`), city (1990 pop. 85,493), seat of St. Louis co., NE Minn., at the west end of Lake Superior, at the head of lake navigation and opposite Superior, Wis.; inc. 1870. , Ga. -- AGCO AGCO Alcohol and Gaming Commission of OntarioAGCO Anderson, Greenwood, & Company AGCO After Google Check-Out Corporation (NYSE NYSE See: New York Stock Exchange :AG), a worldwide designer, manufacturer and distributor of agricultural equipment, reported net income per share of $0.23 per share for the first quarter of 2005. Adjusted net income per share, which excludes restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other infrequent in·fre·quent adj. 1. Not occurring regularly; occasional or rare: an infrequent guest. 2. expenses, was $0.24 per share for the first quarter of 2005. These results compare to reported net income per share of $0.31 per share and adjusted net income per share of $0.26 per share for the first quarter of 2004. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the first quarter of 2005 were $1.3 billion, an increase of approximately 13% over 2004. "As anticipated, our first quarter results were significantly impacted by weaker market conditions in South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. ," stated Martin Richenhagen, President and Chief Executive Officer. "We are pleased that improvements in our European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations substantially offset the lower income in South America. Our first quarter results were in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. with our expectations, and we are maintaining our full-year earnings guidance." "We are also pleased with our sales performance in the first quarter which increased 9%, excluding currency impacts," Mr Richenhagen continued. "We also increased our investment in engineering expense in the first quarter for the future development of new products and to support our cost reduction efforts. We are confident that our current actions and strategies will strengthen AGCO's worldwide market position and cost structure in the future." First Quarter Results For the first quarter of 2005, AGCO reported net sales of $1,256.9 million and net income of $21.5 million, or $0.23 per share. Adjusted net income, excluding restructuring and other infrequent expenses, was $22.4 million, or $0.24 per share. For the first quarter of 2004, AGCO reported net sales of $1,115.7 million and net income of $25.0 million, or $0.31 per share. Adjusted net income, excluding restructuring and other infrequent income, in the first quarter of 2004 was $20.4 million, or $0.26 per share. The following is a reconciliation of adjusted operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , net income and earnings per share to reported operating income, net income and earnings per share for the quarters ended March 31, 2005 and 2004:
2005 2004
--------------------------- ---------------------------
(in millions, except per share data)
Earnings Earnings
Operating Net Per Operating Net Per
Income Income(1) Share(1) Income Income(1) Share(1)
--------------------------- ---------------------------
As adjusted $54.0 $22.4 $0.24 $57.6 $20.4 $0.26
Restructuring
and other
infrequent
expenses
(income)(2) 1.0 0.9 0.01 (6.6) (4.6) (0.05)
--------------------------- ---------------------------
As reported $53.0 $21.5 $0.23 $64.2 $25.0 $0.31
=========================== ===========================
(1)Net income and earnings per share amounts are after tax.
(2)The restructuring and other infrequent expenses recorded in the
first quarter of 2005 relate primarily to the rationalization of the
Company's Randers, Denmark combine manufacturing operations and its
Finnish tractor manufacturing and parts operations. The Company did
not record a tax benefit associated with the charges relating to the
Randers rationalization. The restructuring and other infrequent
income recorded in the first quarter of 2004 primarily related to
the gain on the sale of the Company's Coventry, England facility,
which occurred in January 2004. See Note 1 to our condensed
consolidated financial statements for further explanation.
AGCO's net sales for the first quarter increased 13% primarily due to sales growth in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). and North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , as well as positive currency translation impacts. The impact of currency translation contributed approximately 4% of the sales growth for the quarter. Adjusted operating income decreased $3.6 million for the first quarter of 2005 compared to 2004. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: declined in 2005 as a result of reduced margins in South America primarily due to a significant reduction in industry demand and in North America primarily due to the impact of the weak dollar on products imported and sold in North America. In AGCO's Europe/Africa/Middle East operations, operating income improved $20.0 million in the first quarter of 2005 compared to 2004. The increase was the result of an 11% sales increase, improved margins and currency translation benefits. Operating income in AGCO's South America operations decreased by $18.6 million for the quarter. Weaker market conditions in 2005 contributed to a 13% sales decline and lower margins resulted from lower production, unfavorable sales mix sales mix See product mix. and currency impacts. In North America, operating income decreased $3.5 million in the first quarter of 2005 compared to 2004. While improved market conditions in North America contributed to a 34% sales increase, operating margins in North America were reduced due to the impact of the weak dollar on products imported from Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and
Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. . Operating income in the Asia Pacific region increased $0.6
million in the first quarter of 2005 compared to 2004, primarily
resulting from improved margins in 2005.Regional Market Results North America - Industry unit retail sales of tractors for the first quarter of 2005 increased approximately 5% over the comparable prior year period resulting from increases in all tractor tractor, in agriculture, vehicle used to pull such equipment as plows, cultivators, and mowers; to power stationary devices such as saws and winches; and to push snowplows and earth-moving implements. segments, with the largest growth in utility equipment. First quarter industry unit retail sales of combines were approximately 34% higher than the prior year. AGCO's unit retail sales of tractors and combines were also higher for the first quarter of 2005 over 2004. Western Europe - Industry unit retail sales of tractors for the first quarter of 2005 were relatively flat when compared to the comparable prior year period. Retail demand improved in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. but declined in Finland Finland, Finnish Suomi (swô`mē), officially Republic of Finland, republic (2005 est. pop. 5,223,000), 130,119 sq mi (337,009 sq km), N Europe. and France. AGCO's unit retail sales for the first quarter of 2005 were also relatively flat when compared to the comparable prior year period. South America - Industry unit retail sales of tractors for the first quarter of 2005 decreased approximately 16% over the comparable prior year period. Tractor demand declined in Brazil and Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. offset by a slight increase in other South American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of markets. Industry retail unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. of combines for the first quarter of 2005 were approximately 59% lower than the prior year, with sharp declines in both Brazil and Argentina. AGCO's South American unit retail sales of tractors and combines also declined in the first quarter of 2005 compared to 2004. Rest of World Markets - Outside of North America, Western Europe and South America, AGCO's net sales for the first quarter of 2005 were approximately 28% higher than 2004 due to higher sales in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. and Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. . "In South America, market demand has declined significantly in 2005 primarily due to drought conditions "Drought Conditions" is episode 126 of The West Wing. Plot Senator Rafferty, a new presidential candidate garnered much media attention with a ground-breaking speech about health care. in southern Brazil which impacted the recent harvest, as well as the impact of lower commodity prices and the weak dollar on farm income," Mr. Richenhagen commented. "In contrast, North America equipment demand continued to remain strong in the first quarter supported by record farm income in 2004. In Western Europe, the market was relatively stable in the first quarter of 2005. We continue to forecast full-year industry sales in North America to be at or above 2004 levels, Western Europe to be level with 2004, and South America to be significantly lower than 2004. We are also pleased to have recently received regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approval for the Valtra Valtra is a Finnish based manufacturer of tractors owned by the AGCO Corporation. Valtra traces its origin to Valmet, Bolinder, Munktell and Volvo. Bolinder-Munktell merged with Volvo in 1950 to form BM Volvo. acquisition in Brazil. Although the market conditions in South America were weaker in the first quarter of 2005, we believe our leading market position in South America will provide substantial advantages in the future to AGCO in this growing agricultural region." Outlook For the full year of 2005, AGCO expects adjusted net income per share, which excludes restructuring and infrequent expenses, to be flat to 5% higher than 2004. Sales increases outside of South America and cost reduction benefits are expected to offset lower profitability in South America resulting from continued anticipated market declines. In addition, the Company plans to fund an increase in engineering expense in 2005 for new product introductions, common product platform designs and the expansion of the Company's engine production. Reported net income per share for 2005 including all items is also expected to remain flat to 5% above 2004. Second quarter adjusted net income per share in 2005 is also expected to be relatively flat compared to 2004 second quarter adjusted earnings per share of $0.57. Reported net income per share in the second quarter of 2005 is expected to be approximately 10% above 2004 due to lower restructuring expenses anticipated in 2005. "We remain focused on generating improvements in our business to offset the expected income decline in South America and achieving another strong year of cash flow generation," stated Mr. Richenhagen. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Statements which are not historical facts, including projections of net income, earnings, market position and our cost structure, are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and subject to risks which could cause actual results to differ materially from those suggested by the statements. 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. The Company bases its outlook on key operating, economic and agricultural data which are subject to change including, but not limited to: farm cash income, worldwide demand for agricultural products, commodity prices, grain stock levels, weather, crop production, farmer debt levels, existing government programs and farm-related legislation. 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, customer acceptance of product introductions, the success of its facility rationalization rationalization, in psychology: see defense mechanism. process and other cost cutting measures, availability of governmental subsidized financing Subsidized financing Funding provided by a government or other entity that is available at a below-market interest rate. programs, production disruptions, and changes in environmental, international trade and other laws which impact the way in which it conducts its business. 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, including its Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2004. The Company disclaims any obligation to update any forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . The Company will be hosting a conference call with respect to this earnings announcement at 10:00 a.m. Eastern Time on Tuesday Tuesday: see week. , May 3, 2005. Interested persons can access the conference call via the Company's website at www.agcocorp.com. A replay of the conference call will be available approximately two hours after the conclusion of the conference call for twelve months following the call. A copy of this press release will be available on the Company's website. AGCO Corporation, headquartered in Duluth, Georgia Duluth is a city in Gwinnett County, Georgia, and a suburb of Atlanta located in the Metro Atlanta area. Unincorporated portions of northeast Fulton County and Forsyth County also have Duluth as a mailing address, though this area is technically outside city limits. , is a global manufacturer and distributor of agricultural equipment and related replacement parts. AGCO products are distributed in more than 140 countries. AGCO offers a full product line including tractors, combines, hay tools, sprayers, forage forage Vegetable food, including corn and hay, of wild or domestic animals. Harvested, processed, and stored forage is called silage. Forage should be harvested in early maturity to avoid a decrease in protein and fibre content as crops mature. , tillage equipment and implements through more than 3,900 independent dealers and distributors around the world. AGCO products are distributed under the various well-known well-known adj. 1. Widely known; familiar or famous: a well-known performer. 2. Fully known: well-known facts. brand names AGCO(R), Challenger(R), Fendt Fendt is a German manufacturer of agricultural tractors and machines. It is part of AGCO Corporation. It was founded in 1937 by Xaver Fendt and purchased by AGCO in 1997. (R), Gleaner(R), Hesston(R), Massey Ferguson Massey Ferguson Limited is a major agricultural equipment manufacturer. Originally started in Canada it became one of the country's largest industrial concerns in the 1960s. (R), New Idea(R), RoGator(R), Spra-Coupe(R), Sunflower sunflower, any plant of the genus Helianthus of the family Asteraceae (aster family), annual or perennial herbs native to the New World and common throughout the United States. (R), Terra-Gator(R), Valtra(R), and White(TM) Planters Planters is an American snack food company under Kraft Foods manufacturing, best known for its nuts and the Mr. Peanut icon that symbolizes them. Started by Italian immigrants Amedeo Obici and Mario Peruzzi in Wilkes-Barre, Pennsylvania, in 1906, it was incorporated in 1908 . AGCO provides retail financing through AGCO Finance in North America and through Agricredit in Australia, the United Kingdom, France, Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. , and Brazil. In 2004, AGCO had net sales of $5.3 billion. Please visit our website at www.agcocorp.com.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
March 31, December 31,
2005 2004
--------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 28.0 $ 325.6
Accounts and notes receivable, net 876.4 823.2
Inventories, net 1,307.6 1,069.4
Deferred tax assets 102.5 127.5
Other current assets 76.6 58.8
--------- ---------
Total current assets 2,391.1 2,404.5
Property, plant and equipment, net 566.6 593.3
Investment in affiliates 144.6 114.5
Deferred tax assets 138.3 146.1
Other assets 70.1 70.1
Intangible assets, net 228.7 238.2
Goodwill 710.9 730.6
--------- ---------
Total assets $ 4,250.3 $ 4,297.3
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 6.8 $ 6.9
Accounts payable 651.1 601.9
Accrued expenses 572.3 660.3
Other current liabilities 117.1 89.9
--------- ---------
Total current liabilities 1,347.3 1,359.0
Long-term debt, less current portion 1,132.1 1,151.7
Pensions and postretirement health care benefits 242.4 247.3
Other noncurrent liabilities 105.0 116.9
--------- ---------
Total liabilities 2,826.8 2,874.9
--------- ---------
Stockholders' Equity:
Common stock 0.9 0.9
Additional paid-in capital 893.6 893.2
Retained earnings 815.3 793.8
Unearned compensation (0.2) (0.2)
Accumulated other comprehensive loss (286.1) (265.3)
--------- ---------
Total stockholders' equity 1,423.5 1,422.4
--------- ---------
Total liabilities and stockholders' equity $ 4,250.3 $ 4,297.3
========= =========
See accompanying notes to condensed consolidated financial
statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
Three Months Ended
March 31,
-------------------
2005 2004
--------- --------
Net sales $1,256.9 $1,115.7
Cost of goods sold 1,037.4 908.0
-------- --------
Gross profit 219.5 207.7
Selling, general and administrative expenses
(includes restricted stock compensation expense
of $0.1 million and $0.3 million for the three
months ended March 31, 2005 and 2004,
respectively) 130.6 119.9
Engineering expenses 30.7 26.2
Restructuring and other infrequent expenses
(income) 1.0 (6.6)
Amortization of intangibles 4.2 4.0
-------- --------
Income from operations 53.0 64.2
Interest expense, net 17.0 22.8
Other expense, net 6.8 5.1
-------- --------
Income before income taxes and equity in net
earnings of affiliates 29.2 36.3
Income tax provision 12.3 16.2
-------- --------
Income before equity in net earnings of affiliates 16.9 20.1
Equity in net earnings of affiliates 4.6 4.9
-------- --------
Net income $ 21.5 $ 25.0
======== ========
Net income per common share:
Basic $ 0.24 $ 0.33
======== ========
Diluted $ 0.23 $ 0.31
======== ========
Weighted average number of common and common
equivalent shares outstanding:
Basic 90.3 75.3
======== ========
Diluted 99.7 84.8
======== ========
See accompanying notes to condensed consolidated financial
statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
Three Months Ended
March 31,
------------------
2005 2004
-------- --------
Cash flows from operating activities:
Net income $ 21.5 $ 25.0
------- -------
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation 22.5 20.9
Deferred debt issuance cost amortization 1.5 2.9
Amortization of intangibles 4.2 4.0
Restricted stock compensation -- 0.1
Equity in net earnings of affiliates, net of cash
received (4.6) (2.4)
Deferred income tax expense 0.2 3.0
Gain on sale of property, plant and equipment -- (7.0)
Changes in operating assets and liabilities, net
of effects from purchase of businesses:
Accounts and notes receivable, net (81.2) (26.8)
Inventories, net (258.3) (180.0)
Other current and noncurrent assets (16.0) (1.4)
Accounts payable 72.5 98.8
Accrued expenses (51.7) (36.8)
Other current and noncurrent liabilities (16.3) (22.3)
------- -------
Total adjustments (327.2) (147.0)
------- -------
Net cash used in operating activities (305.7) (122.0)
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (14.2) (13.9)
Proceeds from sales of property, plant and
equipment 6.6 34.7
Purchase of businesses, net of cash acquired -- (760.9)
Investments in unconsolidated affiliates (22.7) --
------- -------
Net cash used in investing activities (30.3) (740.1)
------- -------
Cash flows from financing activities:
Proceeds from debt obligations, net 41.9 780.7
Payment of debt issuance costs -- (16.2)
Proceeds from issuance of common stock 0.4 0.4
------- -------
Net cash provided by financing activities 42.3 764.9
------- -------
Effect of exchange rate changes on cash and cash
equivalents (3.9) 0.5
------- -------
Decrease in cash and cash equivalents (297.6) (96.7)
Cash and cash equivalents, beginning of period 325.6 147.0
------- -------
Cash and cash equivalents, end of period $ 28.0 $ 50.3
======= =======
See accompanying notes to condensed consolidated financial
statements.
AGCO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge (unaudited, in millions, except per share data) 1. RESTRUCTURING AND OTHER INFREQUENT EXPENSES During the first quarter of 2005, the Company recorded restructuring and other infrequent expenses of approximately $1.0 million. The charges include $0.6 million of costs associated with the rationalization of the Randers Randers (rä`nərs), city (1992 pop. 55,358), Århus co., N central Denmark, a seaport at the mouth of the Gudenå River in the Randers Fjord (an arm of the Kattegat). It is a commercial and industrial center and a rail junction. , Denmark Denmark (dĕn`märk), Dan. Danmark, officially Kingdom of Denmark, kingdom (2005 est. pop. 5,432,000), 16,629 sq mi (43,069 sq km), N Europe. combine manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. announced in July July: see month. 2004, consisting primarily of employee retention payments and other facility closure costs. In addition, the Company incurred and recorded approximately $0.3 million of contract termination Defense procurement: the cessation or cancellation, in whole or in part, of work under a prime contract or a subcontract thereunder for the convenience of, or at the option of, the government, or due to failure of the contractor to perform in accordance with the terms of the contract (default). costs associated with the rationalization of its Valtra European parts distribution operations and $0.1 million of severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs associated with the rationalization of certain administrative functions of its Finnish tractor manufacturing operations. During the first quarter of 2004, the Company recorded restructuring and other infrequent income of approximately $6.6 million, primarily related to a $6.9 million net gain on the sale of land, buildings and improvements associated with the rationalization of the Company's Coventry Coventry, city, England Coventry (kŏv`əntrē, kŭv`–), city (1991 pop. 318,718) and metropolitan district, central England. Coventry is an industrial center noted for its automobile production. , England England, the largest and most populous portion of the United Kingdom of Great Britain and Northern Ireland (1991 pop. 46,382,050), 50,334 sq mi (130,365 sq km). It is bounded by Wales and the Irish Sea on the west and Scotland on the north. tractor manufacturing facility. The net gain was offset by $0.3 million of restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. associated with various European and U.S. rationalization initiatives. 2. LONG-TERM DEBT Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. Long-term debt consisted of the following at March 31, 2005 and December 31, 2004 (in millions):
March 31, December 31,
2005 2004
--------- ------------
Credit facility $ 417.2 $ 424.7
1 3/4% Convertible senior subordinated notes due
2033 201.3 201.3
9 1/2% Senior notes due 2008 250.0 250.0
6 7/8% Senior subordinated notes due 2014 259.5 271.1
Other long-term debt 10.9 11.5
--------- ---------
1,138.9 1,158.6
Less: Current portion of long-term debt (6.8) (6.9)
--------- ---------
Total long-term debt, less current portion $ 1,132.1 $ 1,151.7
========= =========
3. INVENTORIES Inventories are valued at the lower of cost or market lower of cost or market A method for determining an asset's value such that either the original cost or the current replacement cost, whichever is lowest, is used for financial reporting purposes. using the first-in, first-out first-in, first-out n. A method of inventory accounting in which the oldest remaining items are assumed to have been the first sold. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods sold, a higher gross method. Market is net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. for finished goods and repair and replacement parts. For work in process, production parts and raw materials, market is replacement cost. Inventories at March 31, 2005 and December 31, 2004 were as follows (in millions):
March 31, December 31,
2005 2004
--------- ------------
Finished goods $ 652.6 $ 432.5
Repair and replacement parts 328.1 313.2
Work in process 112.6 103.6
Raw materials 214.3 220.1
-------- ---------
Inventories, net $1,307.6 $ 1,069.4
======== =========
4. ACCOUNTS RECEIVABLE accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying SECURITIZATION Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. The Company sells wholesale accounts receivable on a revolving basis to commercial paper conduits either on a direct basis or through a wholly-owned special purpose U.S. subsidiary under its United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. and European securitization facilities. Outstanding funding under these facilities totaled approximately $449.3 million at March 31, 2005 and $458.9 million at December 31, 2004. The funded balance has the effect of reducing accounts receivable and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. liabilities by the same amount. Losses on sales of receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed primarily from securitization facilities included in other expense, net were $5.0 million and $3.8 million for the three months ended March 31, 2005 and 2004, respectively. 5. EARNINGS PER SHARE During the fourth quarter of 2004, the Emerging Issues Task Force ("EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation ") reached a consensus on EITF Issue No. 04-08, "Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of ." EITF Issue No. 04-08 requires that contingently convertible debt should be included in the calculation of diluted earnings per share using the if-converted method regardless of whether a market price trigger has been met. The Company adopted the statement during the fourth quarter of 2004 and has included approximately 9.0 million additional shares of common stock that may be issued upon conversion of the Company's outstanding 1 3/4% convertible senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes in its diluted earnings per share calculation for the three months ended March 31, 2004 and 2005. In addition, diluted earnings per share is required to be restated for each period that the convertible notes were outstanding. The convertible notes were issued on March 23, 2003. As the Company is not benefiting losses in the United States for tax purposes, the interest expense associated with the convertible notes included in the diluted earnings per share calculation does not reflect a tax benefit. A reconciliation of net income and weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share for the three months ended March 31, 2005 and 2004 is as follows:
Three Months Three Months
Ending Ending
March 31, 2005 March 31, 2004
-------------- --------------
Basic net income per share:
Net income $ 21.5 $ 25.0
========= =========
Weighted average number of common
shares outstanding 90.3 75.3
--------- ---------
Basic net income per share $ 0.24 $ 0.33
========= =========
Diluted net income per share:
Net income $ 21.5 $ 25.0
After-tax interest expense on
contingently convertible senior
subordinated notes 1.2 1.1
--------- ---------
Net income for purposes of computing
diluted net income per share $ 22.7 $ 26.1
========= =========
Weighted average number of common
shares outstanding 90.3 75.3
Dilutive stock options and
restricted stock awards 0.4 0.5
Weighted average assumed conversion
of contingently convertible senior
subordinated notes 9.0 9.0
--------- ---------
Weighted average number of common
and common share equivalents
outstanding for purposes of
computing diluted earnings per
share 99.7 84.8
========= =========
Diluted net income per share $ 0.23 $ 0.31
========= =========
6. SEGMENT REPORTING segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four The Company has four reportable segments: North America; South America; Europe/Africa/Middle East; and Asia/Pacific. Each regional segment distributes a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each regional segment are based on the location of the third-party customer. The Company's selling, general and administrative expenses and engineering expenses are charged to each segment based on the region and division where the expenses are incurred. As a result, the components of operating income for one segment may not be comparable to another segment. Segment results for the three months ended March 31, 2005 and 2004 are as follows:
Three Months Ended North South Europe/Africa Asia/
March 31, America America /Middle East Pacific Consolidated
------------------- ------- ------- ------------- ------- ------------
2005
Net sales $392.8 $152.3 $666.3 $45.5 $1,256.9
Income from
operations 2.6 12.5 45.4 7.5 68.0
2004
Net sales $293.7 $174.9 $601.3 $45.8 $1,115.7
Income from
operations 6.1 31.1 25.4 6.9 69.5
A reconciliation from the segment information to the consolidated balances for income from operations is set forth below:
Three Months
Ended
March 31,
----------------
2005 2004
------- -------
Segment income from operations $ 68.0 $ 69.5
Corporate expenses (9.7) (7.6)
Restricted stock compensation expense (0.1) (0.3)
Restructuring and other infrequent (expenses) income
(1.0) 6.6
Amortization of intangibles (4.2) (4.0)
------- -------
Consolidated income from operations $ 53.0 $ 64.2
------- -------
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