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Agco Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 7, 2010 09:16AM
Agco Corp. (AGCO) filed Quarterly Report for the period ended 2010-03-31. Agco Corp. has a market cap of $3.07 billion; its shares were traded at around $33.17 with a P/E ratio of 25.5 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 David Williams of Columbia Value and Restructuring Fund, Steven Romick of FPA Crescent Fund, First Pacific Advisors of First Pacific Advisors, LLC, George Soros of Soros Fund Management LLC, Kenneth Fisher of Fisher Asset Management, LLC.
Highlight of Business Operations:
For the three months ended March 31, 2010, we generated net income of $10.1 million, or $0.10 per share, compared to net income of $33.7 million, or $0.36 per share, for the same period in 2009.
Other income, net was $2.5 million during the first quarter of 2010 compared to other expense, net of $6.4 million for the same period 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 $2.7 million in the first quarter of 2010. Losses on sales of receivables primarily under our European securitization facilities and our former U.S. and Canadian securitization facilities were approximately $5.0 million for the first quarter of 2009. Other income, net also increased in the first quarter of 2010 primarily due to foreign exchange gains compared to foreign exchange losses in the same period in 2009.
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 March 31, 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 $260.6 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 March 31, 2010 and December 31, 2009, respectively. The total finance portfolio as of March 31, 2010 included approximately $5.5 billion of retail receivables and $0.7 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 AGCO Finance without recourse from our operating companies or AGCO Finance provided the financing directly to the dealers. For the three months ended March 31, 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 $9.4 million compared to $6.7 million for the same period in 2009.
Our accounts receivable sales agreements permit the sale, on an ongoing basis, of substantially all of our wholesale interest-bearing and non-interest bearing receivables in North America to AGCO Finance LLC and AGCO Finance Canada, Ltd., our U.S. and Canadian retail finance joint ventures. We have a 49% ownership in these joint ventures. The accounts receivable sales agreements provide for funding up to $600.0 million of U.S. accounts receivable and up to C$250.0 million (or approximately $246.2 million as of March 31, 2010) of Canadian accounts receivable. The sale of the receivables is without recourse to us. We do not service the receivables after the sale occurs and we do not maintain any direct retained interest in the receivables. These agreements are accounted for as off-balance sheet transactions and have the effect of reducing accounts receivable and short-term liabilities by the same amount. As of March 31, 2010, net cash received from receivables sold under the U.S. and Canadian accounts receivable sales agreements with AGCO Finance LLC and AGCO Finance Canada, Ltd. was approximately $420.7 million.
Our working capital requirements are seasonal, with investments in working capital typically building in the first half of the year and then reducing in the second half of the year. We had $1,075.3 million in working capital at March 31, 2010, as compared with $1,079.6 million at December 31, 2009 and $1,067.6 million at March 31, 2009. Accounts receivable and inventories, combined, at March 31, 2010 were $299.1 million higher than at December 31, 2009 and $152.5 lower than at March 31, 2009. The increase in accounts receivable and inventories at March 31, 2010 compared to December 31, 2009 was as a result of our adoption of ASU 2009-16 and ASU 2009- 17 discussed above, which increased our accounts receivable balance by approximately $137.5 million, and also as a result of seasonal dealer and company inventory requirements.
Capital expenditures for the first quarter of 2010 were $24.1 million compared to $46.9 million for the first quarter of 2009. We anticipate that capital expenditures for the full year of 2010 will range from approximately $225.0 million to $250.0 million and will primarily be used to support our manufacturing operations, focused on improving productivity, as well as to support the development and enhancement of new and existing products, primarily as it relates to our efforts to meet new emission requirements.
Stocks Discussed: AGCO,