Date: Fri, 21 Nov 1997 00:46:07 GMT Server: Apache/1.2.0 Last-Modified: Wed, 06 Aug 1997 14:01:20 GMT ETag: "2e1b9-36d4-33e883b0" Content-Length: 14036 Accept-Ranges: bytes Connection: close Content-Type: text/html
FOR IMMEDIATE RELEASE
For additional information contact:
Judith Czelusniak
Vice President, Corporate Relations
(770) 813-6044
or
Lisa Pritchard
Director of Corporate Finance
(770) 813-6082
ATLANTA, GA -- July 23 -- AGCO Corporation (NYSE:AG) today reported record sales and earnings for the second quarter ended June 30, 1997. The Company reported net sales of $871.9 million and net earnings of $48.7 million, $.77 per share for the second quarter. Sales increased 49% over 1996 primarily a result of businesses acquired in the latter part of 1996, and in January 1997.
Earnings on Comparable Basis--AGCO’s second quarter 1997 results included nonrecurring expenses of $5.2 million, $.05 per share compared to $.8 million, $.01 per share in 1996. For comparative purposes, excluding the nonrecurring charge recorded in both years, net earnings were $52.1 million, $.83 per share, for the second quarter of 1997, compared to $38.0 million, $.67 per share for the same period in 1996.
Year-To-Date Results--Net sales and net earnings for the six months ended June 30, 1997, were $1.6 billion and $74.5 million, $1.22 per share, respectively, compared to net sales and net earnings for the same period in 1996 of $1.0 billion and $54.6 million, $.96 per share, respectively. Excluding charges for nonrecurring expenses and an extraordinary after-tax charge for the write-off of unamortized debt costs related to the refinancing of the Company’s revolving credit facility in both periods, net earnings were $81.6 million, $1.34 per share for the six months ended June 30, 1997, compared to $62.5 million, $1.10 per share, for the same period in 1996.
Operating Results--AGCO’s 1997 second quarter results include the results of three acquisitions which were not included in the 1996 second quarter. In late June, 1996, AGCO acquired the agricultural equipment operations of Iochpe-Maxion in Brazil. AGCO further expanded its leading market position in South America by acquiring Deutz-Argentina in December of 1996. Most recently, in January of this year, AGCO acquired Xaver Fendt GmbH & Co. KG, (“Fendt”), the leading German tractor manufacturer and distributor. Including these acquisitions, the Company reported net sales of $871.9 million for the second quarter, a 49% increase over 1996. Sales were negatively impacted by approximately $35.0 million as a result of the translation effect of the strengthening dollar against most European currencies.
Excluding nonrecurring charges, AGCO’s operating margin improved to 10.8% in 1997 compared to 10.3% in the second quarter of 1996. Included in the second quarter operating expenses were $5.1 million, $.05 per share, of amortization expense relating to the Company’s Long-Term Incentive Plan compared to $6.0 million, $.07 per share in the prior year. Robert J. Ratliff, AGCO’s Chairman stated, “AGCO is extremely proud of its operating margin improvements especially considering that we experienced some negative impact on margins resulting from currency movement since last year. We are already seeing the benefits of cost savings initiatives in our newly acquired businesses as well as from our Phase II restructuring plan in Europe at both the gross margin and operating expense levels.”
Regional Results
North America--Overall retail dollar sales of AGCO equipment increased 13% during the first six months compared to the prior year primarily due to strong sales of combines, hay tools and implements.
“AGCO’s combine sales have been strong all year reflecting improved features on our GLEANER combines as well as increased dealer development activity,” Mr. Ratliff stated. “Improvement in the cattle and dairy markets has boosted sales in hay and forage equipment. Tractor sales compared to last year have been impacted by the change in timing of our Massey Ferguson volume bonus plan from January to December. Also affecting the year-to-year comparison were inventory management programs designed in preparation for the introduction of new Massey Ferguson mid-range tractors which will be delivered to dealers this month.”
Western Europe--Industry conditions in Western Europe declined with industry retail unit sales of tractors in 1997 approximately 2% below 1996 levels. Retail unit sales of AGCO tractors in Western Europe for 1997 have decreased approximately 1%, including Fendt unit sales in both periods.
“The decline in industry volume in Western Europe continues to be in line with our forecast,” said Mr. Ratliff. “In fact, during the second quarter, industry volumes only declined 1% compared to almost 3% in the first quarter. As in North America, AGCO’s retail volume in Western Europe has been impacted by the anticipation of the launch of new Massey Ferguson mid-range tractors. Sales of Fendt tractors continue to exceed our expectations, especially in Germany where units sold increased 12% over last year.”
South America--Industry retail sales of tractors in South America were mixed with Brazil showing a strong recovery over last year and Argentina experiencing some weakness. Industry unit sales of tractors in Brazil were up 37% over a very weak 1996 and AGCO sales increased 33%. Industry sales in Argentina increased 2% compared to 1996 and AGCO increased in line with the industry.
“Brazil’s market has shown great improvement, boosted by a strong harvest and favorable financing terms,” Mr. Ratliff stated. “AGCO has maintained its leadership position in Brazil although some competitors are discounting prices to gain share. We have maintained our pricing structure to preserve margin instead of focusing on market share in this environment.”
Rest of the World Markets--Outside North America, Western Europe, and South America, AGCO’s net sales were up approximately 28% over 1996. “AGCO’s net sales have increased in all of these markets and have been especially strong in Eastern Europe,” Mr. Ratliff said. “Results in our East Asia/Pacific markets have been mixed with strength in Japan, Korea and Indonesia as a result of improved economic conditions. AGCO’s sales in Australia have been adversely impacted by drought conditions and high feed costs in the dairy markets.”
Transition of Acquired Businesses
AGCO continues to focus on cost reduction opportunities in its acquired businesses including plant rationalization, global purchasing and engineering, and consolidation of parts distribution, sales, and administrative functions. In the second quarter, AGCO recorded $5.2 million of nonrecurring expenses related to the implementation of transition plans. The Company has recorded a total of approximately $7.8 million in nonrecurring charges to date in 1997. AGCO expects to record a total of approximately $15.0 million in nonrecurring expenses during 1997 and early 1998 related to these initiatives.
“Transition of our newly acquired businesses is going along in accordance with our plan,” Mr. Ratliff stated. “We have been very successful in reducing product costs through the renegotiation of sourcing arrangements as well as the reduction of overheads and expect that we will achieve our cost savings goals by early 1998.”
Finance Company Results
AGCO’s retail finance operations contributed $2.8 million to net earnings for the second quarter of 1997, compared to $3.7 million in 1996. The reduction compared to 1996 results from the sale of 51% of Agricredit Acceptance Company to a subsidiary of Rabobank in November 1996. “Our retail finance joint ventures continue to exceed our expectations,” said Mr. Ratliff. “We continue to expect strong contributions from these operations as we aggressively expand finance offerings to our customers through the strategic alliance with Rabobank in North America, the UK, France and Germany.”
Worldwide Agricultural Outlook Remains Positive
Economic growth in developing countries will continue to drive the demand for agricultural products. “As both population and income increase in these markets, the major exporting countries will need to respond with increased agricultural production,” said Mr. Ratliff. “Additionally, developing countries will continue to develop and invest in agricultural mechanization to provide for their own needs.”
The North American farmer is well-positioned for continuing near-term growth. Commodity prices have been somewhat volatile recently; however, because of strong crop yields and direct payments under the current farm legislation, farmers continue to enjoy strong financial positions. The increase in demand around the world will benefit the North American farmer, a major exporter in most agricultural commodities.
Significant worldwide demand has also benefited the European agricultural industry, which is the producer of 10% of the world’s grain. “Governmental regulation has also influenced a wave of farm consolidation benefiting the financial position of the remaining European farmers,” said Mr. Ratliff. “As in North America, we expect farm consolidation to lead to a reduction in the total number of units sold but a shift to higher horsepower, and thus, more expensive equipment. This shift will benefit AGCO as we have a significant position in the Western European high horsepower segment.”
South America is one of the major worldwide producers of agricultural products, with Brazil as the world’s second-largest soybean producer and Argentina as one of the world’s leading exporters of wheat. As the economic conditions in these markets improve, agricultural production will become more efficient and more competitive in world markets. “Recent domestic agricultural policy reforms, such as the reduction or elimination of export taxes on agricultural products and import taxes on farm production needs, have contributed to more efficient production in some of the MERCOSUR countries,” said Mr. Ratliff. “Sales of farm equipment will likely benefit from more positive agricultural policies and reduced limits on trading.”
Outside of North America, Europe, and South America, population growth and government reforms in many countries continue to fuel demand for agricultural products. AGCO is maximizing its efforts to provide equipment to these markets.
New Product Introductions
This week, in Kansas City, AGCO is introducing several new products and product improvements to be offered to customers worldwide. The new Massey Ferguson Series 4200 mid-range tractors will have eight models ranging from 55 to 99 horsepower. The new models will offer larger cabs with exceptional comfort and visibility and increased hydraulic and lifting capacities. AGCO is also introducing its Independence produced GLEANER Conventional Combines which will allow our dealers to sell the GLEANER product to farmers who prefer conventional technology.
“We are extremely excited about our new products as 1997 is AGCO’s most active year in terms of significant product introductions,” said Mr. Ratliff. “Our product development efforts in designing and producing these new products have been tremendous. The addition of Fendt only enhances our commitment to provide leading-edge technology to customers around the world.”
Dividends Declared
The Company also announced that its Board of Directors approved a quarterly dividend on the Company’s common stock of $.01 per share. The dividend is payable September 2, 1997, to holders of record August 15, 1997.
AGCO Corporation, headquartered in Duluth, Georgia, is a global manufacturer and distributor of agricultural equipment and related replacement parts. AGCO products are distributed in 140 countries. AGCO offers a full product line including tractors, combines, hay tools, forage equipment and implements through more than 7,500 independent dealers and distributors around the world. AGCO’s products are distributed under the brand names AGCO®Allis, Massey Ferguson®, Hesston®, White, GLEANER®, White-New®Idea, AGCOSTAR®, SAME, Black Machine, Landini, Tye®, Farmhand®, Glencoe®, Deutz (South America), IDEAL, Western Combine, PMI, and Fendt. AGCO also provides retail financing worldwide through its Agricredit joint venture in North America and through its Massey Ferguson Finance joint ventures in the UK, France and Germany. In 1996 AGCO had sales of $2.3 billion.
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Safe Harbor Statement
Statements which are not historical facts, including statements about revenue growth and cost reduction in 1997 and the statements under the “Worldwide Agricultural Outlook” heading are forward looking and are subject to risks which could cause actual results to differ materially. The Company bases its outlook on key operating, economic and agricultural data which are subject to change including: 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, production disruptions and changes in environmental, international trade and other laws which impact the way in which it conducts its business.
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