AGCO CORP /DE - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarter ended September 30, 2003

AGCO CORPORATION

A Delaware Corporation
IRS Employer Identification No. 58-1960019
SEC File Number 1-12930

4205 River Green Parkway
Duluth, GA 30096
(770) 813-9200

AGCO Corporation (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.

AGCO Corporation is an accelerated filer (as defined in Rule 12b-2 of the Act).

As of October 31, 2003, AGCO Corporation had 75,400,055 shares of common stock outstanding.

AGCO CORPORATION AND SUBSIDIARIES

INDEX


			Page Numbers
PART I. FINANCIAL INFORMATION:

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002		2

		Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2003 and 2002		3

		Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2003 and 2002		4

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002		5

		Notes to Condensed Consolidated Financial Statements		6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		28

	Item 4.	Controls and Procedures		29

PART II. OTHER INFORMATION:

	Item 1.	Legal Proceedings		30

	Item 6.	Exhibits and Reports on Form 8-K		30

SIGNATURES				31

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions, except share data)


			September 30,			December 31,
			2003			2002

ASSETS
Current Assets:
	Cash and cash equivalents		$	27.2		$	34.3
	Accounts and notes receivable, net			522.8			497.4
	Inventories, net			908.8			708.6
	Other current assets			213.9			171.9

		Total current assets		1,672.7			1,412.2
Property, plant and equipment, net				396.4			343.7
Investment in affiliates				92.2			78.5
Other assets				136.8			120.0
Intangible assets, net				410.8			394.6

		Total assets	$	2,708.9		$	2,349.0

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable		$	332.5		$	312.0
	Accrued expenses			450.3			445.2
	Other current liabilities			39.4			27.8

		Total current liabilities		822.2			785.0
Long-term debt				786.9			636.9
Pensions and postretirement health care benefits				154.5			131.9
Other noncurrent liabilities				98.7			77.6

		Total liabilities		1,862.3			1,631.4

Stockholders’ Equity:
	Common stock; $0.01 par value, 150,000,000 shares authorized, 75,392,555 and 75,197,285 shares issued and outstanding at September 30, 2003 and December 31, 2002, respectively			0.8			0.8
	Additional paid-in capital			590.1			587.6
	Retained earnings			605.2			560.6
	Unearned compensation			(0.5	)		(0.7	)
	Accumulated other comprehensive loss			(349.0	)		(430.7	)

		Total stockholders’ equity		846.6			717.6

		Total liabilities and stockholders’ equity	$	2,708.9		$	2,349.0

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 September 30,

		2003		2002

Net sales		$	800.3	$	689.2
Cost of goods sold			657.8		564.2

	Gross profit		142.5		125.0

Selling, general and administrative expenses			82.6		70.8
Engineering expenses			18.0		15.4
Restricted stock compensation expense			0.3		0.7
Restructuring and other infrequent expenses			1.6		9.7
Amortization of intangibles			0.5		0.3

	Income from operations		39.5		28.1

Interest expense, net			15.6		13.7
Other expense, net			4.6		4.7

Income before income taxes and equity in net earnings of affiliates			19.3		9.7
Income tax provision			8.1		3.1

Income before equity in net earnings of affiliates			11.2		6.6
Equity in net earnings of affiliates			5.3		3.1

Net income		$	16.5	$	9.7


Net income per common share:
	Basic	$	0.22	$	0.13

	Diluted	$	0.22	$	0.13


Weighted average number of common and common equivalent shares outstanding:
	Basic		75.2		74.4

	Diluted		75.7		75.2

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)


		Nine Months Ended September 30,

		2003		2002

Net sales		$	2,460.2	$	2,082.8
Cost of goods sold			2,019.7		1,697.8

	Gross profit		440.5		385.0

Selling, general and administrative expenses			239.6		206.2
Engineering expenses			51.3		41.4
Restricted stock compensation expense			0.5		28.5
Restructuring and other infrequent expenses			27.8		33.3
Amortization of intangibles			1.3		1.0

	Income from operations		120.0		74.6

Interest expense, net			45.7		42.2
Other expense, net			19.2		13.9

Income before income taxes, equity in net earnings of affiliates and cumulative effect of a change in accounting principle			55.1		18.5
Income tax provision			24.9		6.3

Income before equity in net earnings of affiliates and cumulative effect of a change in accounting principle			30.2		12.2
Equity in net earnings of affiliates			14.4		9.5

Income before cumulative effect of a change in accounting principle			44.6		21.7
Cumulative effect of a change in accounting principle, net of taxes			—		(24.1	)

Net income (loss)		$	44.6	$	(2.4	)

Net income (loss) per common share:

Basic:
	Income before cumulative effect of a change in accounting principle	$	0.59	$	0.29
	Cumulative effect of a change in accounting principle, net of taxes		—		(0.32	)

	Net income (loss)	$	0.59	$	(0.03	)


Diluted:
	Income before cumulative effect of a change in accounting principle	$	0.59	$	0.29
	Cumulative effect of a change in accounting principle, net of taxes		—		(0.32	)

	Net income (loss)	$	0.59	$	(0.03	)


Weighted average number of common and common equivalent shares outstanding:
	Basic		75.1		73.8

	Diluted		75.6		74.7

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)


					Nine Months Ended September 30,

					2003			2002

Cash flows from operating activities:
	Net income (loss)				$	44.6		$	(2.4	)

	Adjustments to reconcile net income (loss) to net cash used in operating activities:
		Cumulative effect of a change in accounting principle, net of taxes				—			24.1
		Depreciation and amortization				46.3			39.5
		Amortization of intangibles				1.3			1.0
		Restricted stock compensation				0.3			15.4
		Equity in net earnings of affiliates, net of cash received				(6.8	)		(2.7	)
		Deferred income tax benefit				(3.5	)		(15.7	)
		(Recoveries)/loss on write-down of property, plant and equipment				(0.3	)		11.6
		Changes in operating assets and liabilities, net of effect from purchase of businesses:
			Accounts and notes receivable, net			13.2			(4.0	)
			Inventories, net			(118.6	)		(165.6	)
			Other current and noncurrent assets			(33.1	)		(4.9	)
			Accounts payable			(49.3	)		4.1
			Accrued expenses			(39.6	)		39.9
			Other current and noncurrent liabilities			12.9			(15.1	)

				Total adjustments		(177.2	)		(72.4	)

				Net cash used in operating activities		(132.6	)		(74.8	)

Cash flows from investing activities:
		Purchase of property, plant and equipment				(48.0	)		(32.3	)
		Proceeds from sales of property, plant and equipment				9.4			13.8
		Sale/purchase of businesses, net of cash acquired				1.0			(12.7	)
		Investment in unconsolidated affiliates				—			(1.1	)

				Net cash used in investing activities		(37.6	)		(32.3	)

Cash flows from financing activities:
		Proceeds from long-term debt, net				161.4			82.2
		Proceeds from issuance of common stock				2.4			5.6
		Payment of debt and common stock issuance costs				(2.9	)		(0.1	)

				Net cash provided by financing activities		160.9			87.7

Effect of exchange rate changes on cash and cash equivalents						2.2			(1.6	)

Decrease in cash and cash equivalents						(7.1	)		(21.0	)
Cash and cash equivalents, beginning of period						34.3			28.9

Cash and cash equivalents, end of period					$	27.2		$	7.9

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 with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Certain reclassifications of previously reported financial information were made to conform to the current presentation. Results for interim periods are not necessarily indicative of the results for the year.

2. RESTRUCTURING AND OTHER INFREQUENT EXPENSES

In March 2003, the Company announced the closure of the Challenger track tractor facility located in DeKalb, Illinois and the relocation of production to its facility in Jackson, Minnesota. Production at the DeKalb facility ceased in May 2003 and was relocated and resumed in the Minnesota facility in June 2003. In connection with the restructuring plan, the Company recorded approximately $1.9 million of restructuring and other infrequent expenses during the nine months ended September 30, 2003. The components of the restructuring expenses are summarized in the following table:


					Facility
					Relocation
			Employee		and		Facility
	Employee		Retention		Transition		Closure
	Severance		Payments		Costs		Costs		Total

First quarter 2003 provision	$	0.2	$	0.1	$	—	$	—	$	0.3
First quarter 2003 cash activity		—		—		—		—		—

Balances as of March 31, 2003		0.2		0.1		—		—		0.3

Second quarter 2003 provision		0.3		0.1