AGCO Reports Fourth Quarter Results; Adjusted Earnings Per Share Increases 40% to $0.56 For the Quarter and 51% to $1.87 For the Full Year Before New Accounting Rule.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 $0.52 per share for the fourth quarter of 2004. 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. (income) expenses, was also $0.52 per share for the fourth quarter of 2004. These results compare to reported net income per share of $0.39 per share and adjusted net income per share of $0.40 per share for the fourth quarter of 2003. 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 fourth quarter of 2004 were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.5 billion, an increase of 48% over 2003. For the full year, reported net income per share was $1.71 per share in 2004 compared to $0.98 per share in 2003. Adjusted net income per share was $1.75 per share for the full year of 2004 versus $1.24 per share for the full year of 2003. Net sales for the full year of 2004 increased 51% over 2003 to approximately $5.3 billion. Net income per share for the quarter and full year of 2004 were impacted by the fourth quarter implementation of EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation Issue No. 04-08 related to the treatment of contingently con·tin·gent adj. 1. Liable to occur but not with certainty; possible: "All salaries are reckoned on contingent as well as on actual services" Ralph Waldo Emerson. convertible debt in the calculation of diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per share. The implementation of this accounting pronouncement required AGCO to include approximately 9.0 million additional shares of common stock that may be issued upon conversion of AGCO's 1.75% convertible senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes. Adjusted net income per share calculated under the previous method, which would have excluded the shares associated with the convertible notes, would have been $0.56 per share for the fourth quarter and $1.87 per share for the full year of 2004. Net income per share for 2003 was not impacted by the adoption of the accounting rule. "We are pleased with the improvements achieved in 2004," stated Martin Richenhagen, AGCO's President and Chief Executive Officer. "In particular, sales growth and cost reduction were keys to our higher profitability. Stronger markets in North and 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. contributed to achieving 14% sales growth, excluding currency and acquisitions in 2004. Higher production volumes and improved supply chain performance led to productivity gains. In addition, we demonstrated strong free cash flow of $187.5 million in 2004 which contributed to an improved balance sheet and a net debt to capital ratio of 37% at the end of 2004." "In 2005, we expect to take further actions to better position AGCO for the future," said Mr. Richenhagen. "We plan to leverage our improved level of profitability by increasing our investments in product development and cost reduction projects which are expected to improve our competitive position and productivity in future years. In addition, we are focusing on improving our distribution and customer support network in all of our markets. We believe that these initiatives will enable AGCO to further leverage its brand and technology strengths." Fourth Quarter and Full Year Results For the fourth quarter of 2004, AGCO reported net sales of $1,534.1 million and net income of $50.7 million, or $0.52 per share. Adjusted net income, excluding restructuring and other infrequent expenses, was $50.6 million, or $0.52 per share. For the fourth quarter of 2003, AGCO reported net sales of $1,035.1 million and net income of $29.8 million, or $0.39 per share. Adjusted net income, excluding restructuring and other infrequent (income) expenses, in the fourth quarter of 2003 was $30.4 million, or $0.40 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 December December: see month. 31, 2004 and 2003:
2004
------------------------------------------
(in millions, except per share data)
Operating Net Earnings
Income Income(1) Per Share(1)(2)
-------------- ------------- -------------
As adjusted $ 88.3 $ 50.6 $ 0.52 (4)
Restructuring and other
infrequent (income)
expenses (3) (1.0) (0.1) --
-------------- ------------- -------------
As reported $ 89.3 $ 50.7 $ 0.52
============== ============= =============
2003
------------------------------------------
(in millions, except per share data)
Operating Net Earnings
Income Income(1) Per Share(1)(2)
-------------- ------------- -------------
As adjusted $ 63.7 $ 30.4 $ 0.40
Restructuring and other
infrequent (income)
expenses (3) (0.2) 0.6 0.01
-------------- ------------- -------------
As reported $ 63.9 $ 29.8 $ 0.39
============== ============= =============
(1) Net income and earnings per share amounts are after tax.
(2) Earnings per share amounts include the impact of the
contingently convertible senior subordinated notes.
(3) The restructuring and other infrequent (income) expenses recorded
in the fourth quarter of 2004 relate primarily to the reversal of
$4.1 million ($2.9 million after-tax) of a previously established
provision related to the Company's pension scheme in the U.K.,
offset by $3.2 million of charges ($2.8 million after-tax)
associated with the rationalization of the Company's Randers,
Denmark combine manufacturing operations and its Finnish tractor
manufacturing operations. The Company did not record a tax benefit
associated with the charges relating to the Randers
rationalization. See Note 3 to the condensed consolidated
financial statements for further explanation.
(4) Excluding the impact of the contingently convertible notes to the
calculation of diluted net income per share, weighted average
shares outstanding would decrease by approximately 9.0 million
shares from 99.7 million shares to 90.7 million shares, resulting
in adjusted earnings per share of $0.56 per share.
For the full year of 2004, AGCO reported net sales of $5,273.3 million and net income of $158.8 million, or $1.71 per share. Adjusted net income, excluding restructuring and other infrequent expenses, was $162.4 million, or $1.75 per share. For the full year of 2003, AGCO reported net sales of $3,495.3 million and net income of $74.4 million, or $0.98 per share. Adjusted net income, excluding restructuring and other infrequent expenses, for the full year of 2003, was $94.2 million, or $1.24 per share. The following is a reconciliation of adjusted operating income, net income and earnings per share to reported operating income, net income and earnings per share for the full years ended December 31, 2004 and 2003:
2004
------------------------------------------
(in millions, except per share data)
Operating Net Earnings
Income Income(1) Per Share(1)(2)
-------------- ------------- -------------
As adjusted $ 323.6 $ 162.4 $ 1.75 (4)
Restructuring and other
infrequent expenses(3) 0.1 3.6 0.04
-------------- ------------- -------------
As reported $ 323.5 $ 158.8 $ 1.71
============== ============= =============
2003
---------------------------------------------
(in millions, except per share data)
Operating Net Earnings
Income Income(1) Per Share(1)(2)
-------------- ------------- -------------
As adjusted $ 211.9 $ 94.2 $ 1.24
Restructuring and other
infrequent expenses(3) 27.6 19.8 0.26
-------------- ------------- -------------
As reported $ 184.3 $ 74.4 $ 0.98
============== ============= =============
(1) Net income and earnings per share amounts are after tax.
(2) Earnings per share amounts include the impact of the contingently
convertible senior subordinated notes.
(3) The restructuring and other infrequent expenses recorded during
2004 relate primarily to $11.5 million pre-tax ($11.5 million
after-tax) of charges associated with the rationalization of the
Randers, Denmark combine manufacturing operations announced in
July 2004 and $1.9 million of charges ($1.4 million after-tax)
associated with various rationalization initiatives in Europe and
the U.S., offset by gains on the sale of property, plant and
equipment and restructuring reserve reversals totaling $9.2
million on a pre-tax basis ($6.4 million after-tax) related to the
Coventry, England facility closure and a reversal of $4.1 million
($2.9 million after-tax) of a previously established provision
related to the Company's pension scheme in the U.K. The Company
did not record a tax benefit associated with the charges relating
to the Randers rationalization. See Note 3 to the condensed
consolidated financial statements for further explanation.
(4) Excluding the impact of the contingently convertible debt to the
calculation of diluted net income per share, weighted average
shares outstanding would decrease by approximately 9.0 million
shares from 95.6 million shares to 86.6 million shares, resulting
in adjusted earnings per share of $1.87 per share.
Other non-GAAP measures referred to in this release are discussed in Note 11 to the 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 . AGCO's net sales increased 48% for the fourth quarter and 51% for the full year of 2004 primarily due to the acquisition of 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. in January January: see month. 2004, sales growth in each of the Company's geographical segments and positive currency translation impacts. Valtra represented approximately 27% of the growth for the quarter and approximately 29% of the growth for the full year with net sales of approximately $282.1 million in the fourth quarter and $1,007.5 million for the full year of 2004. In addition, the consolidation of the GIMA transmission joint venture and the impact of currency translation contributed approximately 6% of the growth for the quarter and approximately 8% for the full year. The balance of the sales growth was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to stronger end markets, particularly in 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. and South America, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. response to new products and distribution, and improved product availability. Adjusted operating income increased $24.6 million for the fourth quarter and $111.7 million for the full year of 2004 compared to 2003. Increased operating income was achieved through the contribution of Valtra, higher sales volumes and improved operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . Offsetting these positive factors was the impact of the weak U.S. dollar, higher steel costs and additional non-cash amortization of purchased intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. related to the Valtra acquisition. Reported operating income in 2004 also increased compared to 2003 due to lower restructuring and other infrequent expenses in 2004. In AGCO's 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). Africa Middle East operations, operating
income improved $37.1 million for the fourth quarter and $73.2 million
for the full year. The increase in 2004 reflects the contribution of
Valtra, higher sales volume, productivity gains and currency translation
benefits. Improved productivity and supply chain performance in the
Beauvais Beauvais (bōvā`), town (1990 pop. 56,278), capital of Oise dept., N France. Tractors, ceramic tiles, textiles, and musical instruments are among its many manufactures. , France plant contributed to better product availability and
higher margins. Operating income in AGCO's South America operations
increased by $1.7 million for the quarter and $65.4 million for the full
year. For the fourth quarter, the operating income contribution from
Valtra was offset by lower margins due to higher input and operating
costs operating costs npl → gastos mpl operacionales and lower production volume. For the full year, operating income
in South America was significantly higher in 2004 resulting from
stronger end markets, production efficiencies and price realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out.[Handout by Mr. David Gillibrand]. . In North America, operating income decreased $4.4 million for the fourth quarter and $7.0 million for the full year. Although higher sales volumes were achieved from improved market conditions in North America, these benefits were offset by reduced margins due to the impact of the weak dollar on products imported from Europe 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. as well as higher steel costs. Operating income in the Asia Pacific region increased $0.1 million for the fourth quarter and $9.7 million for the full year primarily resulting from the operating income contribution from Valtra, improved product availability, improved market conditions and currency translation benefits. Regional Market Results North America - Industry unit retail sales of tractors for the full year of 2004 increased approximately 12% 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 high-horsepower equipment. Industry unit retail sales of combines were approximately 41% higher than the prior year. AGCO's unit retail sales of tractors and combines were also higher for the full year of 2004 over 2003. 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). - Industry unit retail sales of tractors for the full year of 2004 increased approximately 2% over the comparable prior year period. Retail demand improved in France and 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 the higher horsepower horsepower, unit of power in the English system of units. It is equal to 33,000 foot-pounds per minute or 550 foot-pounds per second or approximately 746 watts. sector in 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). . Including the impact of Valtra sales in both periods, AGCO's unit retail sales for the full year of 2004 also increased when compared to the prior year period. South America - Industry unit retail sales of tractors for the full year of 2004 increased approximately 8% over the prior year period. Tractor demand declined slightly in Brazil but was offset by significant increases in 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. and 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 full year of 2004 were approximately 8% higher than the prior year, with increases in both Brazil and Argentina. Including the impact of Valtra sales in both periods, AGCO's South American unit retail sales of tractors and combines also increased in the full year of 2004 compared to 2003. Rest of World Markets - Outside of North America, Western Europe and South America, AGCO's net sales for the full year of 2004, excluding Valtra, were approximately 14% higher than 2003 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. , Asia, 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. and the Middle East. "AGCO performed well in all major markets in 2004," stated Mr. Richenhagen. "In North America, equipment demand improved significantly over prior years as farmers enjoyed record harvests, strong commodity prices and tax incentives. In South America, the market in 2004 remained strong, driven by high farm income. However, we saw some softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. in demand in the fourth quarter resulting from the effects of lower commodity prices and the weak dollar. In Western Europe, the end markets demonstrated mixed results but were relatively flat, as a whole, despite improved harvest (tool, networking) Harvest - A highly scalable, customisable system for discovering resources on the Internet. Version: 1.3. http://tardis.ed.ac.uk/harvest/. and yields in 2004." "In 2005, we anticipate industry retail sales conditions to be mixed," continued Mr. Richenhagen. "In North America, despite a decline in commodity prices, we expect the end markets to remain at or above current levels as farmers benefit from high farm income generated in 2004. In Western Europe, industry demand is expected to be relatively flat as the benefit of a stronger harvest in 2004 is likely to be offset by lower commodity prices and the impact of the strong Euro. In South America, we expect demand to soften, particularly in the combine market and in Brazil. Lower commodity prices, increasing input costs and the weak dollar are expected to impact the soybean soybean, soya bean, or soy pea, leguminous plant (Glycine max, G. soja, or Soja max) of the family Leguminosae (pulse family), native to tropical and warm temperate regions of Asia, where it has been sector and delay further farm expansion. As a result, we expect industry demand in 2005 in South America to have meaningful declines from their strong levels of 2004." Outlook In 2005, AGCO's net sales are expected to grow approximately 5% resulting from currency translation, price realization and increased retail sales in most regions. In addition, the Company expects to benefit from improved productivity and other cost reduction initiatives. These benefits are expected to be partially used to fund a 20% increase in engineering expense in 2005 in order to accelerate new product introductions, common product platform designs and the expansion of the Company's engine production. In addition, anticipated market declines in AGCO's profitable South America operations are expected to negatively impact 2005 results. As a result, adjusted net income per share for 2005, which excludes restructuring and other infrequent expenses, is expected to remain flat to 5% higher than 2004. Reported net income per share for 2005 including all items is also expected to remain flat to 5% above 2004. First quarter adjusted net income per share in 2005 is expected to range from $0.20 to $0.25 per share. Reported net income per share in the first quarter of 2005 is expected to be $0.18 to $0.23 per share. The weighted average shares outstanding used to calculate earnings per share will be approximately 20% and 5% higher than 2004 for the first quarter and full year of 2005, respectively, to reflect additional common shares issued in March 2004. "We believe that 2005 will be another successful year for AGCO," stated Mr. Richenhagen. "We are focused on offsetting the impact of the decline in the South America in addition to taking important actions which will allow AGCO to continue to improve its operations in future years." 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 future sales, earnings, market conditions and our business plans are forward looking 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 31, 2003. 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. , February February: see month. 22, 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 designer, 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), TerraGator(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, 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)
December 31, December 31,
2004 2003
--------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 325.6 $ 147.0
Accounts and notes receivable, net 823.2 553.6
Inventories, net 1,069.4 803.6
Other current assets 186.3 180.3
--------------- -------------
Total current assets 2,404.5 1,684.5
Property, plant and equipment, net 593.3 434.2
Investment in affiliates 114.5 91.6
Deferred tax assets 146.1 138.8
Other assets 70.1 72.5
Intangible assets, net 238.2 86.1
Goodwill 730.6 331.7
--------------- -------------
Total assets $ 4,297.3 $ 2,839.4
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 6.9 $ 2.2
Accounts payable 601.9 393.2
Accrued expenses 660.3 490.2
Other current liabilities 89.9 43.5
--------------- -------------
Total current liabilities 1,359.0 929.1
Long-term debt, less current portion 1,151.7 711.1
Pensions and postretirement health care
benefits 247.3 201.9
Other noncurrent liabilities 116.9 91.2
--------------- -------------
Total liabilities 2,874.9 1,933.3
--------------- -------------
Stockholders' Equity:
Common stock 0.9 0.8
Additional paid-in capital 893.2 590.3
Retained earnings 793.8 635.0
Unearned compensation (0.2) (0.5)
Accumulated other comprehensive loss (265.3) (319.5)
--------------- -------------
Total stockholders' equity 1,422.4 906.1
--------------- -------------
Total liabilities and stockholders'
equity $ 4,297.3 $ 2,839.4
=============== =============
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
December 31,
-------------------
2004 2003
--------- ---------
Net sales $1,534.1 $1,035.1
Cost of goods sold 1,269.3 859.2
--------- ---------
Gross profit 264.8 175.9
Selling, general and administrative expenses
(includes restricted stock compensation expense
of $0.1 million and $0.1 million for the three
months ended December 31, 2004 and 2003,
respectively) 146.1 91.7
Engineering expenses 26.3 20.1
Restructuring and other infrequent income (1.0) (0.2)
Amortization of intangibles 4.1 0.4
--------- ---------
Income from operations 89.3 63.9
Interest expense, net 15.2 14.3
Other expense, net 6.6 6.4
--------- ---------
Income before income taxes and equity in net
earnings of affiliates 67.5 43.2
Income tax provision 22.6 16.4
--------- ---------
Income before equity in net earnings of affiliates 44.9 26.8
Equity in net earnings of affiliates 5.8 3.0
--------- ---------
Net income $ 50.7 $ 29.8
========= =========
Net income per common share:
Basic $ 0.56 $ 0.40
========= =========
Diluted $ 0.52 $ 0.39
========= =========
Weighted average number of common and common
equivalent shares outstanding:
Basic 90.3 75.3
========= =========
Diluted 99.7 76.5
========= =========
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)
Year Ended December 31,
-----------------------
2004 2003
----------- -----------
Net sales $ 5,273.3 $ 3,495.3
Cost of goods sold 4,320.4 2,878.9
----------- -----------
Gross profit 952.9 616.4
Selling, general and administrative expenses
(includes restricted stock compensation
expense of $0.5 million and $0.6 million for
the years ended December 31, 2004 and 2003,
respectively) 509.8 331.4
Engineering expenses 103.7 71.4
Restructuring and other infrequent expenses 0.1 27.6
Amortization of intangibles 15.8 1.7
----------- -----------
Income from operations 323.5 184.3
Interest expense, net 77.0 60.0
Other expense, net 22.1 26.0
----------- -----------
Income before income taxes and equity in net
earnings of affiliates 224.4 98.3
Income tax provision 86.2 41.3
----------- -----------
Income before equity in net earnings of
affiliates 138.2 57.0
Equity in net earnings of affiliates 20.6 17.4
----------- -----------
Net income $ 158.8 $ 74.4
=========== ===========
Net income per common share:
Basic $ 1.84 $ 0.99
=========== ===========
Diluted $ 1.71 $ 0.98
=========== ===========
Weighted average number of common and common
equivalent shares outstanding:
Basic 86.2 75.2
=========== ===========
Diluted 95.6 75.8
=========== ===========
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
Year Ended
December 31,
----------------
2004 2003
-------- -------
Cash flows from operating activities:
Net income $ 158.8 $ 74.4
-------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 84.3 58.8
Deferred debt issuance cost amortization 13.2 5.4
Amortization of intangibles 15.8 1.7
Restricted stock compensation 0.3 0.5
Equity in net earnings of affiliates, net of cash
received (6.1) (0.8)
Deferred income tax expense/(benefit) 14.5 (12.3)
Gain on sale of property, plant and equipment (8.7) --
Write-down of property, plant and equipment 9.5 1.6
Changes in operating assets and liabilities, net
of effects from purchase of businesses:
Accounts and notes receivable, net (39.9) 11.5
Inventories, net (65.1) 13.8
Other current and noncurrent assets (10.5) (20.4)
Accounts payable 53.2 (16.5)
Accrued expenses 38.5 (50.9)
Other current and noncurrent liabilities 8.1 21.2
-------- -------
Total adjustments 107.1 13.6
-------- -------
Net cash provided by operating activities 265.9 88.0
-------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (78.4) (78.7)
Proceeds from sales of property, plant and
equipment 46.0 14.9
(Purchase)/sale of businesses, net of cash
acquired (765.7) 1.5
Proceeds from sale of unconsolidated affiliates 1.0 4.5
-------- -------
Net cash used in investing activities (797.1) (57.8)
-------- -------
Cash flows from financing activities:
Proceeds from debt obligations, net 413.6 84.3
Payment of debt issuance costs (21.0) (9.8)
Proceeds from issuance of common stock 302.9 2.5
-------- -------
Net cash provided by financing activities 695.5 77.0
-------- -------
Effect of exchange rate changes on cash and cash
equivalents 14.3 5.5
-------- -------
Increase in cash and cash equivalents 178.6 112.7
Cash and cash equivalents, beginning of period 147.0 34.3
-------- -------
Cash and cash equivalents, end of period $ 325.6 $147.0
======== =======
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited, in millions, except per share data) 1. BASIS OF PRESENTATION The condensed consolidated financial statements of AGCO Corporation and subsidiaries (the "Company" or "AGCO") included herein have been prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with 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. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. 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 there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 and our Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. dated June June: see month. 2, 2004. Certain reclassifications of previously reported financial information were made to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current presentation. 2. ACQUISITIONS On January 5, 2004, the Company acquired the Valtra tractor and diesel engine operations of Kone Corporation, a Finnish company, for EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 606.1 million, net of approximately EUR19.8 million cash acquired (approximately $760 million, net). Valtra is a global tractor and off-road off-road adj. Existing, taking place, or designed for use off paved or public roads or in rugged terrain: off-road sports such as snowmobiling. engine manufacturer in the Nordic region of Europe and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . The acquisition of Valtra provides the Company with the opportunity to expand its business in significant global markets by utilizing Valtra's technology and productivity leadership in the agricultural equipment market. The acquired assets and liabilities consist primarily of inventories, 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 , property, plant and equipment, technology, tradenames, trademarks, customer relationships and patents. The results of operations for the Valtra acquisition have been included in the Company's Condensed Consolidated Financial Statements from the date of acquisition. The Valtra acquisition was accounted for in accordance with SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 141, "Business Combinations," and accordingly, the Company has allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of the acquisition date. The Company recorded approximately $358.4 million of goodwill and approximately $156.9 million of other identifiable intangible assets such as tradenames, trademarks, technology and related patents, and customer relationship intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. as part of the purchase price allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as . The Company completed the initial funding of the cash purchase price of Valtra through the issuance of $201.3 million principal amount of convertible senior subordinated notes in December 2003, funds borrowed under the Company's new revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. and term loan facilities which were entered into January 5, 2004, and $100.0 million borrowed under an interim bridge facility that also closed on January 5, 2004 (Note 5). 3. RESTRUCTURING AND OTHER INFREQUENT EXPENSES The restructuring and other infrequent expenses recorded during 2004 relate primarily to an $8.2 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. ($8.2 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) of property, plant and equipment 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, $3.3 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 and facility closure costs ($3.3 million after-tax) associated with the Randers rationalization, a $1.4 million charge ($1.0 million after-tax) associated with the rationalization of certain administrative functions within the Company's Finnish tractor manufacturing facility as well as $0.5 million of charges ($0.4 million after-tax) associated with various rationalization initiatives in Europe and the U.S. These charges were offset by gains on the sale 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. facility and related machinery and equipment of $8.3 million on a pre-tax basis ($5.8 million after-tax), $0.9 million ($0.6 million after-tax) of restructuring reserve reversals related to the Coventry closure and a reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of $4.1 million ($2.9 million after-tax) of the previously established provision related to litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. involving the Company's U.K. pension plan. The Company did not record a tax benefit associated with the charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Randers rationalization. The following provides additional detail related to these activities. During the fourth quarter of 2004, the Company initiated the restructuring of certain administrative functions within its Finnish tractor manufacturing operations, resulting in the termination of approximately 58 employees. The Company recorded severance costs of approximately $1.4 million associated with this rationalization. As of December 31, 2004, 16 of the 58 employees had been terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: . The $1.4 million of severance payments accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. at December 31, 2004 will be paid during 2005. On July 2, 2004, the Company announced and initiated a plan related to the restructuring of its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. combine manufacturing operations located in Randers, Denmark, to include the elimination of the facility's component manufacturing operations, as well as the rationalization of the combine model range to be assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. in Randers. The components of the restructuring expenses are summarized in the following table:
Write-down
of
Property, Employee Facility
Plant and Employee Retention Closure
Equipment Severance Payments Costs Total
---------- --------- ---------- -------- ------
2004 provision $ 8.2 $ 1.1 $ 2.1 $ 0.1 $11.5
Less: Non-cash
expense 8.2 -- -- -- 8.2
---------- --------- ---------- -------- ------
Cash expense -- 1.1 2.1 0.1 3.3
2004 cash activity -- (0.2) (0.4) -- (0.6)
Foreign currency
translation -- -- 0.1 -- 0.1
---------- --------- ---------- -------- ------
Balances as of
December 31, 2004 $ -- $ 0.9 $ 1.8 $ 0.1 $ 2.8
========== ========= ========== ======== ======
The write-down of certain property, plant and equipment within the component manufacturing operation represents the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of real estate and machinery and equipment resulting from the restructuring, as the rationalization will eliminate a majority of the square footage utilized in the facility. The impairment charge was based upon the estimated fair value of the assets compared to their carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. . The estimated fair value of the equipment was determined based on current conditions in the market. The land, buildings, machinery, equipment and tooling will be disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of or marketed for sale after the facility's component manufacturing production ceases in the first quarter of 2005. The severance costs relate to the termination of 298 employees. As of December 31, 2004, 240 of the 298 employees had been terminated. The employee retention payments relate to incentives paid to Randers employees who will remain employed until certain future termination dates termination date, n See expiration date. and are accrued over the term of the retention period. The facility closure costs include certain noncancelable operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. terminations and other facility exit costs. Total cash restructuring costs associated with the plan are expected to be approximately $4.0 million to $5.0 million. The Company has also recorded a write-down of approximately $3.7 million of inventory, reflected in costs of goods sold, during 2004, related to inventory that was identified as obsolete OBSOLETE. This term is applied to those laws which have lost their efficacy, without being repealed, 2. A positive statute, unrepealed, can never be repealed by non-user alone. 4 Yeates, Rep. 181; Id. 215; 1 Browne's Rep. Appx. 28; 13 Serg. & Rawle, 447. as a result of the rationalization. The $2.8 million of restructuring costs accrued at December 31, 2004 are expected to be incurred during 2005. During 2002, the Company announced and initiated a restructuring plan related to the closure of its tractor manufacturing facility in Coventry, England and the relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of existing production at Coventry to the Company's Beauvais, France and Canoas Ca·no·as A city of southern Brazil, a suburb of Pôrto Alegre. Population: 326,000. , Brazil manufacturing facilities. The components of the restructuring expenses are summarized in the following table:
Write-down
of
Property, Employee Facility
Plant and Employee Retention Closure
Equipment Severance Payments Costs Total
---------- --------- ---------- -------- ------
2002 provision $ 11.2 $ 8.3 $ 18.3 $ 2.4 $40.2
Less: Non-
cash expense 11.2 -- -- -- 11.2
---------- --------- ---------- -------- ------
Cash expense -- 8.3 18.3 2.4 29.0
2002 cash activity -- (0.1) (0.3) (0.3) (0.7)
---------- --------- ---------- -------- ------
Balances as of
December 31, 2002 -- 8.2 18.0 2.1 28.3
---------- --------- ---------- -------- ------
2003 provision -- -- 10.2 1.8 12.0
2003 cash activity -- (8.9) (26.7) (2.5) (38.1)
Foreign currency
translation -- 1.2 0.5 0.2 1.9
---------- --------- ---------- -------- ------
Balances as of
December 31, 2003 -- 0.5 2.0 1.6 4.1
---------- --------- ---------- -------- ------
2004 provision
reversal -- -- (0.4) (0.5) (0.9)
2004 cash activity -- (0.5) (1.4) (0.8) (2.7)
Foreign currency
translation -- -- 0.1 0.1 0.2
---------- --------- ---------- -------- ------
Balances as of
December 31, 2004 $ -- $ -- $ 0.3 $ 0.4 $ 0.7
========== ========= ========== ======== ======
The write-down of property, plant and equipment represents the impairment of machinery and equipment resulting from the facility closure and was based on the estimated fair value of the assets compared to their carrying value. The estimated fair value of the equipment was determined based on current conditions in the market at the time the decision was made to close the facility. The Company determined through discussions with third party real estate advisors that the land and buildings were not impaired See assistive technology. . During the fourth quarter of 2003, the Company sold machinery and equipment at auction and, as a result of those sales, recognized a net gain of approximately $2.0 million. This gain was reflected in "Restructuring and other infrequent expenses" in the Company's Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Operations for the year ended December 31, 2003. On January 30, 2004, the Company sold the land, buildings and improvements of the Coventry facility for approximately $41.0 million, and as a result of that sale, recognized a net gain, after selling costs, of approximately $6.9 million. This gain was reflected in "Restructuring and other infrequent expenses" in the Company's Consolidated Statements of Operations for the year ended December 31, 2004. The Company will lease part of the facility back from the buyers for a period of three years, with the ability to exit the lease within two years from the date of the sale. The Company received approximately $34.4 million of the sale proceeds on January 30, 2004 and the remaining $6.6 million on January 28, 2005. In addition, the Company completed the auctions of the remaining machinery and equipment, as well as finalized See finalization. the sale of the facility (and associated selling costs) during the second quarter of 2004, and recorded an additional $1.4 million in net gains related to such actions. The net gains were reflected in "Restructuring and other infrequent expenses" in the Company's Consolidated Statements of Operations. The severance costs relate to the termination of 1,049 employees. As of December 31, 2004, 1,024 employees have been terminated. The employee retention payments relate to incentives paid to Coventry employees who remain employed until certain future termination dates and are accrued over the term of the retention period. The facility closure costs include certain noncancelable operating lease terminations and other facility exit costs. During 2004, the Company reversed approximately $0.9 million of provisions related to the restructuring that had been previously established. The reversals were necessary to adequately reflect more accurate estimates of remaining obligations related to retention payments, lease termination payouts and other exit costs, as some employees have been redeployed or have been terminated earlier than estimated, and as some supplier and rental contracts have been finalized and terminated earlier than anticipated. The $0.7 million of restructuring costs accrued at December 31, 2004 are expected to be incurred during 2005. In October October: see month. 2002, the Company applied to the High Court in London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. , England, for clarification Clarification The removal of small amounts of fine, particulate solids from liquids. The purpose is almost invariably to improve the quality of the liquid, and the removed solids often are discarded. of a provision in its U.K. pension plan that governs the value of pension payments payable to an employee who is over 50 years old and who retires from service in certain circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or prior to his normal retirement date. The primary matter before the High Court was whether pension payments to such employees, including those who take early retirement and those terminated due to the closure of the Company's Coventry facility, should be reduced to compensate for the fact that the pension payments begin prior to a normal retirement age of 65. In December 2002, the High Court ruled against the Company's position that reduced pension payments are payable in the context of early retirements or terminations. The Company appealed the High Court's ruling, and in July 2003, the Court of Appeal ruled that employees terminated as a result of the closure of the Coventry facility do not qualify for full pensions, thereby reversing the earlier High Court ruling for this aspect of the case, but ruled that other employees might qualify. The representatives of the beneficiaries of the pension plan sought the right to appeal to the House of Lords House of Lords: see Parliament. , and on March 26, 2004, the House of Lords denied their request. As a result of the High Court's ruling in that case, certain employees who took early retirement in prior years under voluntary retirement arrangements would be entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to additional payments, and therefore the Company recorded a charge in the second quarter of 2003, included in "Restructuring and other infrequent expenses," of approximately GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 7.5 million ($12.4 million) to reflect its estimate of the additional pension liability associated with previous early retirement programs. Subsequently, as full details of the Court of Appeal judgment were published, the Company received more detailed legal advice regarding the specific circumstances in which the past voluntary retirements would be subject to the Court's ruling. Based on this advice, the Company completed a detailed review of past terminations during the fourth quarter of 2004, and concluded that the number of former employees who are considered to be eligible to receive enhanced pensions under the Court's ruling was lower than the Company's initial estimate. The Company therefore recorded a reversal of the established provision of approximately GBP2.5 million ($4.1 million) during the fourth quarter of 2004, which was included in "Restructuring and other infrequent expenses" in the Company's Consolidated Statements of Operations. During 2002 and 2003, the Company initiated several rationalization plans and recorded restructuring and other infrequent expenses in total of approximately $4.6 million. The expenses primarily related to severance costs and certain lease termination and other exit costs associated with the rationalization of the Company's European engineering and marketing personnel, certain components of the Company's German manufacturing facilities located in Kempten Kempten (kĕmp`tən), city (1994 pop. 61,700), Bavaria, S central Germany, on the Iller River, in the Allgäu. It is the center of a dairying region and is widely known for its cheeses. and Marktoberdorf Marktoberdorf is the capital of the Bavarian district of Ostallgäu in the Regierungsbezirk of Swabia. Marktoberdorf is near Kempten, Füssen, known for the castle Neuschwanstein, Bad Wörishofen, and Schongau. , Germany, as well as a European combine engineering rationalization that was initiated during 2003. During the year ended 2004, the Company recorded $0.2 million of restructuring and other infrequent expenses associated with these European rationalization initiatives, as well as $0.3 million of charges related to the closure and consolidation of Valtra's U.S. and 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. sales offices into the Company's existing U.S. and Canadian sales organizations and a loss on the sale of the DeKalb, Illinois DeKalb is a city in DeKalb County, Illinois, United States. The population was 39,018 at the 2000 census. The city's name (as well as the name of DeKalb County, IL where it is located) is pronounced "dee-KALB" (di-kalb') (IPA]/di:'kaelb/) (the L sound is present), not as "dee-KABB" facility. Of the $5.1 million of total costs, approximately $4.0 million relate to severance costs associated with the termination of approximately 215 employees in total. At December 31, 2004, a total of approximately $4.5 million of expenses had been incurred and paid. The remaining accrued balance of $0.6 million as of December 31, 2004 is expected to be incurred during 2005. 4. GOODWILL AND OTHER INTANGIBLE ASSETS The Company's acquired intangible assets are as follows:
December 31, 2004 December 31, 2003
---------------------- -----------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amounts Amortization Amounts Amortization
-------- ------------- --------- -------------
Amortized intangible
assets:
Trademarks and
tradenames $ 32.9 $ (3.7) $ 31.8 $ (2.5)
Customer
relationships 81.7 (9.4) 3.5 (1.0)
Patents and
technology 51.4 (7.8) 1.1 (0.2)
-------- ------------- --------- -------------
Total $ 166.0 $ (20.9) $ 36.4 $ (3.7)
======== ============= ========= =============
Unamortized intangible
assets:
Trademarks $ 93.1 $ 53.4
======== =========
Changes in the carrying amount of goodwill during the year ended December 31, 2004 are summarized as follows:
North South Europe/Africa/
America America Middle East Consolidated
------- ------- -------------- ------------
Balance as of
December 31, 2003 $165.5 $ 42.3 $ 123.9 $ 331.7
Acquisition -- 68.8 289.6 358.4
Foreign currency
translation -- 9.7 30.8 40.5
------- ------- -------------- ------------
Balance as of December 31,
2004 $165.5 $120.8 $ 444.3 $ 730.6
======= ======= ============== ============
5. 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 December 31, 2004 and December 31, 2003:
December 31, December 31,
2004 2003
------------ ------------
Credit facility $ 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 271.1 --
8 1/2% Senior subordinated notes due 2006 -- 249.3
Other long-term debt 11.5 12.7
------------ ------------
1,158.6 713.3
Less: Current portion of long-term debt (6.9) (2.2)
------------ ------------
Total long-term debt, less current portion $ 1,151.7 $ 711.1
============ ============
The Company's credit facility provides for a $300.0 million multi-currency revolving credit facility, a $300.0 million U.S. dollar denominated term loan and a EUR120.0 million (or approximately $162.7 million) Euro denominated term loan. The revolving credit facility will mature in March 2008. The maturity date of the revolving credit facility may be extended to December 2008 if the Company's existing 9 1/2% senior notes due 2008 are refinanced on terms specified by the lenders prior to such date. Both term loans will amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. at the rate of one percent per annum Per annum Yearly. until the maturity date. The maturity date for the term loans is March 2008. The maturity date of the term loans may be extended to June 2009 if the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. senior notes are refinanced on terms specified by the lenders prior to such date. The revolving credit and term facilities are secured by a majority of the Company's U.S., Canadian, Finnish and U.K. based assets and a pledge A Bailment or delivery of Personal Property to a creditor as security for a debt or for the performance of an act. Sometimes called bailment, pledges are a form of security to assure that a person will repay a debt or perform an act under contract. of a portion of the stock of the Company's domestic and material foreign subsidiaries. Interest accrues on amounts outstanding under the facility, at the Company's option, at either (1) LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus a margin ranging between 1.50% and 2.25% based upon the Company's senior debt ratio or (2) the higher of the administrative agent's base lending rate or one-half of one percent over the federal funds rate Federal Funds Rate The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. plus a margin ranging between 0.25% and 1.0% based on the Company's senior debt ratio. The facility contains covenants restricting re·strict tr.v. re·strict·ed, re·strict·ing, re·stricts To keep or confine within limits. See Synonyms at limit. [Latin restringere, restrict- : re-, , among other things, the incurrence In`cur´rence n. 1. The act of incurring, bringing on, or subjecting one's self to (something troublesome or burdensome); as, the incurrence of guilt, debt, responsibility, etc. s> Noun 1. of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. and the making of certain payments, including dividends. The Company must also fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. financial covenants including, among others, a total debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ratio, a senior debt to EBITDA ratio and a fixed charge coverage ratio, as defined in the facility. The Company borrowed $100.0 million under an interim bridge loan facility on January 5, 2004. On April 7, 2004, the bridge loan facility was repaid with proceeds from a common stock offering as described in Note 6. On April 23, 2004, the Company completed its offering of EUR200.0 million of 6 7/8% senior subordinated notes due 2014, and received proceeds of approximately $234 million, after offering related fees and expenses. On May 24, 2004, the Company used the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the offering and available cash to redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. its $250.0 million principal amount of 8 1/2% senior subordinated notes. The 6 7/8% senior subordinated notes are unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. obligations and are subordinated in right of payment to the Company's 9 1/2% senior notes, and any existing or future senior indebtedness. Interest is payable on the notes at 6 7/8% per annum, payable semi-annually on April 15 and October 15 of each year, beginning October 15, 2004. Beginning April 15, 2009, the Company may redeem the notes, in whole or in part, initially at 103.438% of their principal amount, plus accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. , declining to 100% of their principal amount, plus accrued interest, at any time on or after April 15, 2012. In addition, before April 15, 2009, the Company may redeem the notes, in whole or in part, at a redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. equal to 100% of the principal amount, plus accrued interest plus a make-whole premium. Before April 15, 2007, the Company may also redeem up to 35% of the notes at 106.875% of their principal amount using the proceeds from sales of certain kinds of capital stock. The notes include certain covenants restricting the incurrence of indebtedness and the making of certain restrictive payments, including dividends. 6. COMMON STOCK OFFERING On April 7, 2004, the Company sold 14,720,000 shares of its common stock in an underwritten public offering, and received net proceeds of approximately $300.1 million. The Company used the net proceeds to repay the $100.0 million interim bridge loan facility, to repay borrowings under its credit facility and to pay offering related fees and expenses. 7. 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 December 31, 2004 and December 31, 2003 were as follows:
December 31, December 31,
2004 2003
------------- -------------
Finished goods $ 432.5 $ 285.3
Repair and replacement parts 313.2 270.2
Work in process 103.6 80.7
Raw materials 220.1 167.4
------------- -------------
Inventories, net $ 1,069.4 $ 803.6
============= =============
8. ACCOUNTS RECEIVABLE 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. At December 31, 2004, the Company had accounts receivable securitization facilities in the United States, Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and Europe totaling approximately $499.1 million. During the second quarter 2004, the Company amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. certain provisions of its United States and Canada receivable securitization facilities including the expansion of the facilities by an additional $30.0 million and $10.0 million, respectively, and to eliminate the ratings triggers in the facilities. At December 31, 2004, these additional amounts had not been utilized. Under the securitization facilities, wholesale accounts receivable are sold on a revolving basis to commercial paper conduits either on a direct basis or through a wholly-owned special purpose U.S. subsidiary. Outstanding funding under these facilities totaled approximately $458.9 million at December 31, 2004 and $448.4 million at December 31, 2003. 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 $4.3 million and $3.8 million for the three months ended December 31, 2004 and 2003, respectively, and were $15.6 million and $14.6 million for the year ended December 31, 2004 and 2003, respectively. 9. EARNINGS PER SHARE During the fourth quarter of 2004, the Emerging Issues Task Force ("EITF") 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 (1) A mechanism that initiates an action when an event occurs such as reaching a certain time or date or upon receiving some type of input. A trigger generally causes a program routine to be executed. 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 1.75% convertible senior subordinated notes in its diluted earnings per share calculation for both the quarter and year ended December 31, 2004. In addition, diluted earnings per share is required to be restated for each period that the convertible debt was outstanding. AGCO's convertible senior subordinated notes were issued on December 23, 2003. As the Company is not benefiting losses in the United States for tax purposes, the interest expense associated with the convertible senior subordinated 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 is as follows:
2004 2003
--------------- --------------
Quarter Year Quarter Year
Ending Ending Ending Ending
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
-------- -------- -------- --------
Basic net income per share:
Net income $ 50.7 $158.8 $ 29.8 $ 74.4
======== ======= ======= =======
Weighted average number of
common shares outstanding 90.3 86.2 75.3 75.2
-------- ------- ------- -------
Basic net income per share $ 0.56 $ 1.84 $ 0.40 $ 0.99
======== ======= ======= =======
Diluted net income per share:
Net income $ 50.7 $158.8 $ 29.8 $ 74.4
After-tax interest expense on
contingently convertible
senior subordinated notes 1.1 4.6 0.1 0.1
-------- ------- ------- -------
Net income for purposes of
computing diluted net income
per share $ 51.8 $163.4 $ 29.9 $ 74.5
======== ======= ======= =======
Weighted average number of
common shares outstanding 90.3 86.2 75.3 75.2
Dilutive stock options and
restricted stock awards 0.4 0.4 0.4 0.4
Weighted average assumed
conversion of contingently
convertible senior
subordinated notes 9.0 9.0 0.8 0.2
-------- ------- ------- -------
Weighted average number of
common and common share
equivalents outstanding for
purposes of computing diluted
earnings per share 99.7 95.6 76.5 75.8
======== ======= ======= =======
Diluted net income per share $ 0.52 $ 1.71 $ 0.39 $ 0.98
======== ======= ======= =======
10. 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. During the first quarter of 2004, the Company modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. its segment reporting from five reportable segments to four reportable segments. The Company no longer considers the Sprayers division a reportable segment under the requirements of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," due to organizational changes and changes in the distribution and servicing of certain Sprayer products which became effective January 1, 2004. Therefore, the results for 2003 have been reclassified to conform to the current presentation. All intercompany transactions Intercompany transaction Transaction carried out between two units of the same corporation. 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 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 and year ended December 31, 2004 and 2003 are as follows: Three Months Ended North South Europe/Africa Asia/ December 31, America America /Middle East Pacific Consolidated ------------------- ------- ------- ------------- ------- ------------ 2004 Net sales $398.5 $194.5 $889.4 $51.7 $1,534.1 Income from operations 2.9 23.0 70.7 8.5 105.1 2003 Net sales $337.8 $125.7 $520.8 $50.8 $1,035.1 Income from operations 7.3 21.3 33.6 8.4 70.6 Year Ended North South Europe/Africa Asia/ December 31, America America /Middle East Pacific Consolidated ----------------- --------- ------- ------------- ------- ------------ 2004 Net sales $1,412.5 $796.8 $2,873.0 $191.0 $5,273.3 Income from operations 32.6 126.6 186.8 32.9 378.9 2003 Net sales $1,176.2 $416.3 $1,758.8 $144.0 $3,495.3 Income from operations 39.6 61.2 113.6 23.2 237.6 A reconciliation from the segment information to the consolidated balances for income from operations is set forth below:
Three Months
Ended Year Ended
December 31, December 31,
-------------- ---------------
2004 2003 2004 2003
------- ------ ------- -------
Segment income from operations $105.1 $70.6 $378.9 $237.6
Corporate expenses (12.6) (6.4) (39.0) (23.4)
Restricted stock compensation expense (0.1) (0.1) (0.5) (0.6)
Restructuring and other infrequent
income (expenses) 1.0 0.2 (0.1) (27.6)
Amortization of intangibles (4.1) (0.4) (15.8) (1.7)
------- ------ ------- -------
Consolidated income from operations $ 89.3 $63.9 $323.5 $184.3
======= ====== ====== ======
11. RECONCILIATION OF NON-GAAP FINANCIAL MEASURE This earnings release discloses free cash flow as well as operating income, net income and earnings per share excluding restructuring and other infrequent expenses, all of which exclude amounts that differ from the most directly comparable measure calculated in accordance with generally accepted accounting principles in the United States ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release in the "Fourth Quarter and Full Year Results" summary or in the notes to the earnings release. The Company believes that these financial measures are useful to investors because either they exclude transactions of an unusual nature, or are recognized by investors as commonly used financial measures. The Company uses this information in monitoring and evaluating the on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" performance of its operations. The following is a reconciliation of free cash flow to net cash provided by operating activities:
2004
-------
Net cash provided by operating activities $265.9
Less:
Capital expenditures 78.4
-------
Free cash flow $187.5
=======
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion