Sales and Earnings per Share Set Records for Fourth Quarter and Full Year
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and distributor of agricultural equipment, reported net sales of $2.5 billion for the fourth quarter of 2011, an increase of 16.1% compared to net sales of $2.2 billion for the fourth quarter of 2010. Reported and adjusted net income for the fourth quarter of 2011 were $2.90 per share and $1.44 per share, respectively. Adjusted net income excludes a tax gain and transaction expenses associated with the acquisition of GSI Holdings Corp. (“GSI”). These results compare to reported net income of $0.87 per share and adjusted net income, excluding restructuring and other infrequent items, of $0.88 per share for the fourth quarter of 2010. Excluding unfavorable currency translation impacts of 2.1%, net sales in the fourth quarter of 2011 increased 18.3% compared to the same period in 2010.
Net sales for the full year of 2011 were approximately $8.8 billion, an increase of approximately 27.2% compared to the full year of 2010. For the full year of 2011, reported net income was $5.95 per share and adjusted net income, excluding restructuring and other infrequent income and the one-time GSI acquisition items discussed above, was $4.48 per share. These results compare to reported net income of $2.29 per share and adjusted net income, excluding restructuring and other infrequent expenses, of $2.32 per share for the full year of 2010. Excluding the favorable impact of currency translation of 5.0%, net sales for the full year of 2011 increased 22.2% compared to 2010.
“We finished 2011 on a strong note, setting sales and earnings records for both the fourth quarter and full year,” stated Martin Richenhagen, Chairman, President and Chief Executive Officer. “Attractive farm economics supported robust global demand for agricultural equipment and produced sales growth for AGCO of over 27% for 2011 compared to the full year of 2010. During 2011, AGCO made significant investments in new products and in building our business in developing markets. Our sales growth and cost reduction initiatives funded these strategic investments while delivering margin expansion. AGCO’s adjusted operating margin reached 7.0% for 2011, an increase of over 220 basis points compared to 2010. In addition, AGCO generated significant cash flow in 2011 supporting our growth-oriented strategic initiatives in 2012.”
“As we move into 2012, we remain optimistic about AGCO’s ability to take advantage of the positive long-term demand drivers for our industry. Organic growth, margin improvement, and cash flow generation will continue to be our primary focus. AGCO’s cost reduction initiatives are aimed at lowering material and labor costs through purchasing actions and factory productivity. We will continue to invest in new products including upgraded harvesting, high horsepower tractor and sprayer offerings and to devote significant resources to enhance our presence in the CIS region, China and Africa. Our plans in 2012 also include investing in our production facilities to enable our growth and improve our productivity.”
AGCO completed the acquisition of GSI on November 30, 2011 for $932.2 million, net of cash acquired. GSI is a leading global manufacturer of grain storage and protein production systems. The transaction was financed through $300 million of 5.875% senior notes and a new credit facility. AGCO’s fourth quarter reported results include a tax gain for a reversal of a valuation allowance against AGCO’s net deferred tax assets associated with the acquisition accounting for GSI of approximately $149.3 million as well as one-time acquisition expenses. The tax gain and acquisition expenses were excluded from the Company’s adjusted results.
AGCO’s fourth quarter sales increase was the result of increased volumes as well as acquisition and currency impacts. On a segment reporting basis, market recovery in 2011 across Western Europe resulted in AGCO’s Europe/Africa/Middle East (EAME) region reporting a sales increase of 15.0% compared to the fourth quarter of 2010, excluding unfavorable currency translation impacts. Growth in the professional farming segment and the benefit of new product introductions produced sales improvement in the North American region of 30.1% in the fourth quarter of 2011 compared to the fourth quarter of 2010, excluding unfavorable currency translation impacts. Sales in AGCO’s South American region were up 8.0% in the fourth quarter of 2011 compared to the fourth quarter of 2010, excluding unfavorable currency translation impacts.
Income from operations during the fourth quarter of 2011 increased over 30% compared to the fourth quarter of 2010 due to higher sales and improved gross margins. Higher gross margins resulted from increased production levels in Europe and North America as well as pricing benefits, partially offset by higher material costs. Investments in new product development and tier 4 emission compliance resulted in increased engineering expenses in the fourth quarter of 2011 compared to the same period last year. Income from operations for the full year of 2011 increased approximately $286.1 million compared to the same period in 2010 also due to an increase in sales and margin improvement.
Record farm income in 2011 supported strong industry retail sales of tractors and combines in North America. Industry unit retail sales of tractors were up modestly, while industry retail sales of combines were down about 4% for the full year of 2011 compared to high levels in 2010. Improvement in the dairy and livestock sector contributed to higher industry unit retail sales of mid-range tractors and hay equipment, both of which increased compared to 2010 levels. The high level of profitability for row crop farmers also produced growth in industry sales of high horsepower tractors and sprayers.