The agricultural equipment maker
) announced that it would redeem all outstanding Convertible Senior
Subordinated Notes due 2036, which were issued on December 4, 2006,
at a coupon rate of 1.25%. The aggregate principal amount of the
notes is $201.2 million.
A notice of redemption is being sent by the Trustee, Union Bank
N.A., to all registered holders of the notes. The company declared
that the option will be effective June 20, 2014.
The redemption price of the Notes would be equal to 100% of the
aggregate principal amount of the Notes along with accrued but
unpaid interest prior to the Redemption Date. During 2013, holders
of this convertible senior subordinated notes converted less than
$0.1 million of the principal amount.
Based in Duluth, GA, AGCO is a global leader on the design,
manufacture and distribution of agricultural machinery. It supports
productive farming through a wide range of tractors, combines, hay
tools, sprayers, forage equipment, tillage, implements, grain
storage and protein production systems as well as other related
Last month, AGCO reported earnings of $1.03 per share, declining
13% year over year. However, the figure surpassed the Zacks
Consensus Estimate of 79 cents per share. Revenues also decreased
2.9% year over year to $2.33 billion and fell short of the Zacks
Consensus Estimate of $2.55 billion.
At quarter-end, the company had cash and cash equivalents of $193.9
million. The company had $1.13 billion long-term debt on its
balance sheet as of Mar 31, 2014. Currently, the company's
debt-to-total capitalization ratio is only 22.6%.The redemption of
debt will lower the leverage and interest burden of the company
The company remains committed to its plans of expanding to the
Commonwealth of Independent States (CIS), China and Africa. AGCO
also entered into a 50-50 joint venture (JV) with Russian Machines
to manufacture and distribute agricultural equipment and
replacement parts in Russia.
Additionally, the company's effort to enhance shareholder value was
evident when a 10% hike in the quarterly payout was announced in
Jan 2014. AGCO also increased its share repurchase program to $500
million, which is likely to be complete over the next 18 months.
However, AGCO reiterated its full-year 2014 earnings per share
guidance of $6.00, which reflects a 0.2% year-over-year dip. AGCO
is projecting net sales in the range of $10.8 billion to $11.0
billion for 2014, relatively flat as compared with 2013. The
guidance includes the impact of softer market conditions.
The company also cautioned against a fall in commodity prices in
2014 as compared with 2013, which might lead to reduced farm income
and softer industry demand across the developed agricultural
equipment markets. Furthermore, the absence of an extension of
current depreciation tax benefits beyond 2013 (in the U.S.) and
potential FINAME borrowing cost increases (in Brazil) could
pressure AGCO's earnings.
Currently, AGCO has a Zacks Rank #3 (Hold). Some better-ranked
stocks in the same sector include
AO Smith Corp.
Columbus McKinnon Corp.
). All these carry a Zacks Rank #2 (Buy).
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