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AGCO > SEC Filings for AGCO > Form 10-Q on 8-May-2013All Recent SEC Filings

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Form 10-Q for AGCO CORP /DE


8-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL
Our operations are subject to the cyclical nature of the agricultural industry. Sales of our equipment have been and are expected to continue to be affected by changes in net cash farm income, farm land values, weather conditions, demand for agricultural commodities, commodity prices and general economic conditions. We record sales when we sell equipment and replacement parts to our independent dealers, distributors or other customers. To the extent possible, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal demands on manufacturing operations and to minimize our investment in inventory. Retail sales by dealers to farmers are highly seasonal and are a function of the timing of the planting and harvesting seasons. As a result, our net sales have historically been the lowest in the first quarter and have increased in subsequent quarters.

RESULTS OF OPERATIONS
For the three months ended March 31, 2013, we generated net income of $118.0 million, or $1.19 per share, compared to net income of $120.2 million, or $1.21 per share, for the same period in 2012.

Net sales during the three months ended March 31, 2013 were $2,403.1 million, which were approximately 5.7% higher than the three months ended March 31, 2012 due to sales growth in most of our geographical segments, partially offset by the unfavorable impact of currency translation.

Income from operations for the first three months ended March 31, 2013 was $177.4 million, compared to $169.8 million for the same period in 2012. The increase in income from operations during the three months ended March 31, 2013 was a result of an increase in net sales as well as improved gross margins resulting from cost control initiatives and positive pricing impacts, partially offset by higher engineering expenses associated with new engine emission requirements and increased market development expenses.

Income from operations in our Europe/Africa/Middle East ("EAME") region decreased in the first three months of 2013 compared to the same period in 2012 primarily due to a weaker sales mix, increased engineering expenses and transition costs associated with our new German tractor assembly facility. In the South American region, income from operations increased in the first three months of 2013 compared to the same period in 2012 primarily due to higher sales volumes and the benefit of cost reduction initiatives. Income from operations in North America was higher in the first three months of 2013 compared to the same period in 2012 primarily due to higher net sales, a favorable sales mix and cost control initiatives. Income from operations in our Asia/Pacific region increased in the first three months of 2013 compared to the same period in 2012 as a result of higher net sales, which was partially offset by increased market development expenses in China.

Industry Unit Retail Sales
In North America, industry unit retail sales of tractors for the first three months of 2013 increased by approximately 13% compared to the first three months of 2012, with increases in compact, utility and high horsepower tractors. Industry unit retail sales of combines for the first three months of 2013 also increased by approximately 52% compared to the first three months of 2012. Higher levels of farm income in 2012 continued to support equipment demand in the first three months of 2013.

In Western Europe, industry unit retail sales of tractors and combines decreased approximately 5% and 22%, respectively, for the first three months of 2013 compared to the first three months of 2012. Market sales results by country remained mixed during the first three months of 2013, with weather-related declines experienced in the markets of the United Kingdom, Finland and Southern Europe offsetting market growth in France.

South American industry unit retail sales of tractors and combines in the first three months of 2013 increased approximately 23% and 49%, respectively, compared to the same period in 2012. An improved harvest due to favorable weather conditions, attractive government financing rates and favorable crop prices resulted in strong retail demand in Brazil. Retail demand also significantly improved in Argentina.


Table of Contents
Management's Discussion and Analysis of Financial Condition and Results of Operations
(continued)

STATEMENTS OF OPERATIONS
Net sales for the first three months of 2013 were $2,403.1 million compared to $2,273.7 million for the same period in 2012. Foreign currency translation negatively impacted net sales by approximately $60.9 million, or approximately 2.7%, during the first three months of 2013.

The following table sets forth, for the three months ended March 31, 2013, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

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