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Agco Corp. Reports Operating Results (10-Q/A)
Posted by: gurufocus (IP Logged)
Date: August 6, 2010 05:20PM

Agco Corp. (AGCO) filed Amended Quarterly Report for the period ended 2010-06-30. Agco Corp. has a market cap of $3.42 billion; its shares were traded at around $36.71 with a P/E ratio of 27.9 and P/S ratio of 0.5. Agco Corp. had an annual average earning growth of 11.6% over the past 10 years. GuruFocus rated Agco Corp. the business predictability rank of 2.5-star.

AGCO is in the portfolios of Steven Romick of FPA Crescent Fund, David Williams of Columbia Value and Restructuring Fund, Jeff Auxier of Auxier Focus Fund, First Pacific Advisors of First Pacific Advisors, LLC, First Pacific Advisors of First Pacific Advisors, LLC, Bruce Kovner of Caxton Associates, Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

For the three months ended June 30, 2010, we generated net income of $62.9 million, or $0.66 per share, compared to net income of $57.4 million, or $0.61 per share, for the same period in 2009. For the first six months of 2010, we generated net income of $73.0 million, or $0.76 per share, compared to net income of $91.1 million, or $0.98 per share, for the same period in 2009.

Income from operations during the second quarter of 2010 was $96.5 million compared to $78.1 million in the second quarter of 2009. The increase in income from operations during the second quarter of 2010 was primarily due to higher gross margins resulting from lower material costs and increased production volumes, partially offset by lower net sales and increased engineering expenditures. Income from operations was $105.9 million for the first six months of 2010 compared to $135.2 million for the same period in 2009. The decrease in income from operations during the first six months of 2010 was primarily due to net sales declines.

Net sales for the second quarter of 2010 were $1,743.0 million compared to $1,767.0 million for the same period in 2009. Net sales for the first six months of 2010 were $3,071.2 million compared to $3,299.7 million for the prior year period. Foreign currency translation positively impacted net sales by approximately $6.1 million, or 0.4%, in the second quarter of 2010 and by $138.1 million, or 4.2%, in the first six months of 2010. The following table sets forth, for the three and six months ended June 30, 2010 and 2009, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

Other expense, net was $7.3 million and $4.8 million during the second quarter and first six months of 2010, respectively, compared to $8.4 million and $14.8 million, respectively, for the same periods in 2009. Losses on sales of receivables primarily under our accounts receivable sales agreements in North America with AGCO Finance LLC and AGCO Finance Canada, Ltd. were $3.7 million and $6.3 million in the second quarter and first six months of 2010, respectively. Losses on sales of receivables primarily under our European securitization facilities and our former U.S. and Canadian securitization facilities were approximately $5.2 million and $10.2 million in the second quarter and first six months of 2009, respectively. Other expense, net also decreased in the second quarter and first six months of 2010 primarily due to foreign exchange gains compared to foreign exchange losses in the same periods in 2009.

Equity in net earnings of affiliates was $13.8 million for the second quarter of 2010 compared to $13.2 million for the comparable period in 2009. For the first six months of 2010, equity in net earnings from affiliates was approximately $25.3 million compared to $22.1 million for the same period in 2009.

Our AGCO Finance retail finance joint ventures provide retail financing and wholesale financing to our dealers in the United States, Canada, Brazil, Germany, France, the United Kingdom, Australia, Ireland, Austria and Argentina. The joint ventures are owned 49% by AGCO and 51% by a wholly owned subsidiary of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank”), a AAA rated financial institution based in the Netherlands. The majority of the assets of the retail finance joint ventures represent finance receivables. The majority of the liabilities represent notes payable and accrued interest. Under the various joint venture agreements, Rabobank or its affiliates are obligated to provide financing to the joint venture companies, primarily through lines of credit. We do not guarantee the debt obligations of the retail finance joint ventures other than a portion of the retail portfolio in Brazil that is held outside the joint venture by Rabobank Brazil, which was approximately $3.7 million as of December 31, 2009 and will gradually be eliminated over time. As of June 30, 2010, our capital investment in the retail finance joint ventures, which is included in “Investment in affiliates” on our Condensed Consolidated Balance Sheets, was approximately $260.1 million compared to $258.7 million as of December 31, 2009. The total finance portfolio in our retail finance joint ventures was approximately $6.2 billion and $6.3 billion as of June 30, 2010 and December 31, 2009, respectively. The total finance portfolio as of June 30, 2010 included approximately $5.4 billion of retail receivables and $0.8 billion of wholesale receivables from AGCO dealers. The total finance portfolio as of December 31, 2009 included approximately $5.6 billion of retail receivables and $0.7 billion of wholesale receivables from AGCO dealers. The wholesale receivables were either sold to our AGCO Finance retail finance joint ventures without recourse from our operating companies or the retail finance joint ventures provided the financing directly to the dealers. For the six months ended June 30, 2010, our share in the earnings of the retail finance joint ventures, included in “Equity in net earnings of affiliates” on our Condensed Consolidated Statements of Operations, was $20.2 million compared to $17.8 million for the same period in 2009.

Read the The complete Report



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