AGCO Corp (AGCO) 2012 Q4 法說會逐字稿

Good afternoon. My name is Kimberly and I will be your conference operator today. At this time, I would like to welcome everyone to the AGCO Corporation's 2012 Fourth-Quarter Earnings Release and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

(Operator Instructions)

I would now like to turn the call over to Greg Peterson, Head of Investor Relations.

Thanks, Kimberly, and good afternoon. Welcome to those of you joining us on the call and over the Internet for AGCO's fourth-quarter 2012 earnings conference call. We'd like to apologize for our technical difficulties this morning and any inconvenience that our delay may have caused you. We will refer to a slide presentation, which is posted on the website. The non-GAAP measures used in the slide presentation are reconciled to GAAP measures in the last section of the presentation. We'll make forward-looking statements, including demand for our products and economic and other factors that drive that demand, product development plans and timing of those plans, acquisitions, expansion, and modernization plans and our expectations with respect to the costs and benefits of those plans and timing of those benefits, and our future revenue, earnings, and other financial metrics.

We wish to caution you that these statements are predictions, that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2011. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. A replay of this call will be available on our corporate website. On the call with me this afternoon are Martin Richenhagen, our Chairman, President, and Chief Executive Officer, and Andy Beck, our Senior Vice President and Chief Financial Officer.

With that, Martin, please go ahead.

Thank you, Greg, and good afternoon to everyone. 2012 was a very good year for the global farm industry, despite unfavorable weather conditions in many of the world's important ag markets. In most cases, farmers made healthy levels of income and commodity prices remain at attractive levels. AGCO took advantage of these positive conditions and delivered a year of strong sales and earnings growth in 2012 compared to 2011. Slide 3 summarizes our results for the fourth quarter and full year of 2012. Organic sales grew over 12% for the full year and adjusted earnings per share increased to $5.25; a record for AGCO. We also made significant upgrades to our product offerings and improvements to our manufacturing facilities.

We continue to make solid progress with margins in both North and South America. For the full year of 2012, South American margins improved about 100 basis points and North American margins reached 10%. In the fourth quarter, we achieved sales growth across all of our regions compared to the same period in 2011 on a constant currency basis. Adjusted earnings per share for the fourth quarter was $0.99. As expected, these results declined from the fourth quarter of 2011 as we managed the ramp-up of production at Fendt, had lower Fendt sales and experienced additional start-up costs associated with the new Fendt assembly facility. AGCO's forecast for tractor and combine production volumes for 2012 are illustrated on slide 4. Fourth-quarter 2012 production was down about 1% compared to the fourth quarter of 2011.

Lower levels of production in North America and Europe were partially offset by increased activity in our South American factories. As you know, the Fendt production schedule in Germany was more heavily weighted towards the first half of the year to compensate for lower production during the fourth quarter as we brought the new assembly facility online. From October, deferred rates have now returned to more normal levels. We also expect to see improving production efficiency and cost through the first half of 2013. AGCO's order [boards] at the end of December 2012 were approximately flat in North America, down in Europe, and up significantly in South America compared to the end of 2011. We expect production volumes for the full year of 2013 to be about flat versus 2012. Slide 5 details industry unit volumes by region for the full year of 2012.

In North America, industry sales grew across all categories of tractors. The strongest growth came from the high horsepower segment, due to the healthy income levels of row crop farmers. The combine market was relatively flat compared to the elevated levels in the full-year of 2011. Industry unit retail sales of tractors in Western Europe were down slightly for the full year of 2012. Growth in the key markets of France and Germany was offset by declines in Southern Europe, due to dry weather and credit constraints and declined in Scandinavian Finland due to wet weather and a late harvest.

South American industry [leader] tractor volumes increased modestly during 2012 compared to 2011. Improved demand in the second half of the year in Brazil overcame a slow first half. Favorable exchange rates improved [better] and attractive soft commodity prices have energized the market in South America.

I will now turn the call over to Andy Beck, who will provide you more information on our fourth-quarter results.

Thank you, Martin, and good afternoon. AGCO's regional net sales performance for the fourth quarter and full year 2012 is outlined on slide 6. Currency translation had a negative impact of about 4% on AGCO's consolidated net sales and acquisitions added approximately 4% to the sales in the fourth quarter 2012 compared to the same period in 2011. The Europe/Africa/Middle East segment reported a net sales increase of approximately 4%, excluding the impact of currency translation during the fourth quarter 2012 compared to the fourth quarter of 2011. The negative impact of Fendt's lower production, especially on a German sales, was offset by growth in France and Russia. North American sales increased approximately 8%, excluding currency translation impacts, during the fourth quarter of 2012 compared to the same period of 2011. The GSI acquisition accounted for most of the increase.

AGCO's fourth-quarter net sales in South America grew about 30% from comparable 2011 levels excluding currency translation impacts. Higher sales in Brazil due to healthy farm fundamentals and attractive government financing plans accounted for most of the increase. Net sales in our Asia Pacific segment increased approximately 28% in the fourth quarter of 2012 compared to 2011, excluding the impact of currency translation and the benefit of acquisitions. Sales growth in Australia and China produced most of the organic increase. Parts sales were $295 million for the fourth quarter of 2012; an increase of approximately 4% compared to the same period in 2011, excluding the impact of currency.

Slide 7 details AGCO's sales and margin performance. Adjusted operating margins were down about 240 basis points in the fourth quarter of 2012 compared to the fourth quarter of 2011. Gross margins were negatively impacted by costs associated with the startup and low production at the Fendt facility in the fourth quarter of 2012. The decline in gross margins was partially offset by positive net pricing. Operating margins were also negatively impacted by market development expenses. In Europe/Africa/Middle East, operating margins were down about 400 basis points for the fourth quarter of 2012 compared to the same period in 2011, due to lower production volumes, a weaker mix of products, and the impact of the Fendt factory startup cost. North American operating margins exceeded 8% in the fourth quarter of 2012 and exceeded 10% for the full year compared to the same period in 2011, including the benefit of GSI. Core margins were up significantly due to higher sales and favorable sales mix and cost control initiatives. In the South American region, operating margins improved to 10% in the fourth quarter of 2012; up approximately 180 basis points compared to the fourth quarter of 2011.

Favorable exchange impacts, cost reduction benefits, and higher sales volumes produced the increase. Excluded from our adjusted results is a non-cash intangible asset impairment charge of approximate $22.4 million related to the Company's Chinese harvesting business, as mentioned in our earnings release. The development of our harvesting business in China will likely take longer than originally estimated. We are optimistic that the Chinese farm equipment market remains a significant opportunity for AGCO.

In the second half of 2012, we started to feel the impacts of the US drought on our grain storage and protein production businesses in North America. Slide 8 details GSI sales by region and by product for the full year 2012. Despite the unfavorable second half conditions, GSI sales grew by about 3% in 2012 compared to pro forma 2011 sales. Strong growth in Asia was partially offset by a decline in North America. GSI contributed approximately $0.38 of earnings per share during the full-year of 2012 and was diluted by about 12% in the fourth quarter.

Slide 9 looks at our depreciation and capital expenditure trends. We increased the investment in some of our plant productivity projects and new products during 2012 to support our growth and margin ambitions. Looking ahead to 2013, we expect to further increase our CapEx as we continue to work to meet Tier 4 emissions requirements, refresh and expand our product line, upgrade our system capabilities, improve our factory productivity, and establish assembly capabilities in China.

Slide 10 addresses AGCO's free cash flow, which represents cash provided by operating activities less capital expenditures. As a result of this strong free cash flow AGCO has generated over the last few years, our balance sheet and liquidity position at the end of 2012 remained strong. In 2013, we plan to continue investing for growth and profitability improvement and additional investments in our plants and new products. After covering increased spending on these strategic investments, we are targeting another year of solid free cash flow for 2013. At the end of December 2012, our North America dealer [month] supply on a trailing 12-month basis was approximately five months for tractors, three months for combines, and seven months for hay equipment. Other working capital details are as follows -- losses on sales receivables associated with receivable financing facilities, which is included in other expense net, was approximate $5.4 million during the fourth quarter of 2012 compared to $6.4 million in the same period of 2011.

Shifting focus to AGCO's financial management, slide 11 shows how our net debt to total capital remains at very conservative levels, even after adding the debt associated with the GSI acquisition completed late in 2011. In 2012, we reduced our debt by approximately $200 million and, going forward, we look to maintain our conservative balance sheet and investment grade rating as we begin to return cash to shareholders.

With a healthy balance sheet and improved US cash flow generation capacity, AGCO took the first step in returning cash to shareholders during July when our Board of Directors approved a share repurchase program. Under this program, the Company repurchased $18 million of its common stock during 2012. The primary purpose of the new program is to limit dilution resulting from our equity incentive plans. We took the next step last month when we announced the initiation of a $0.10 quarterly dividend, which will be paid in March of this year for the first time.

Our outlook for 2013 for our regional markets is captured on slide 13 and has not changed since we first communicated it to you during our analyst meeting in December. We are anticipating relatively flat demand on a global basis. In North America, the strong financial position of row crop farmers and the expectation of farm income above historical averages should support healthy demand from the professional farming sector. Strong farm fundamentals are expected to continue in Brazil in 2013 and clarity around government financing programs are expected to stimulate growth between 5% and 10% compared to the levels of 2012. We are expecting a mixed demand pattern in Western Europe with weakness in Northern Europe due to the lingering impacts of a wet fall and continued softness in Southern Europe due to tight credit and dry weather. Solid demand across some of the larger European markets is expected to offset most of the decline in Northern and Southern Europe. We are currently forecasting 2013 demand in Western Europe to be flat to down 5% compared to 2012.

Slide 14 highlights assumptions underlying our 2013 outlook. Our forecast assumes price increases ranging from 2.5% to 3% on a consolidated basis and we expect the impact of currency to be approximately neutral. In 2013, expenditures on new product development and Tier 4 emissions requirements will cause an increase in engineering expense by approximately 10% to 15% or about $40 million. We also look for new products and our productivity and purchasing initiatives to drive improved gross margins for next year. For 2013, our SG&A expense will include expenses associated with site and manufacturing startups and market support costs amounting to about $10 million for our Chinese operations.

We mentioned, at our analyst meeting in December, that the recognition of certain US deferred tax assets was under review. We did make a change in the fourth quarter of 2012, which resulted in a write-up of our deferred tax assets due to improved profitability of our North America business. Subsequent to the write-up, our effective tax rate will increase in 2013. However, our US cash taxes will remain lower through at least 2013. We are now forecasting an effective tax rate of between 32% and 34% for 2013.

Slide 15 lists our view of selected 2013 financial goals. We are expecting 2013 sales in the range of $10.2 billion to $10.4 billion. We expect it to continue to improve gross and operating margins from 2012 levels, including significant investments in product development, market development, and start-up costs associated with our manufacturing projects. We expect increased capital expenditures to be in the $400 million to $425 million range and free cash flow in the $125 million to $150 million range after funding the expected increase in capital expenditures and higher inventory levels associated with Tier 4 product transition.

Slide 16 lists our updated view for 2013 earnings per share. The only change from our December analyst meeting is the negative impact of the new higher effective tax rate, which we are currently estimating at about $0.40 per share. We are now forecasting earnings per share in the range from $5.10 to $5.35 per share. In 2013, we expect more normal seasonality for our production and our sales. As a result, our forecast assumes first-quarter and second-quarter sales will be approximately flat with the same periods in 2012 and we are projecting first-quarter earnings per share of approximately $0.85 per share.

With that, Operator, we are ready to open the call for questions.

(Operator Instructions)

Stephen Volkmann, Jefferies.

I wanted to just dig into GSI a little bit, if it's all right. What type of sales are we baked in to the full year $10.2 billion to $10.4 billion range for the whole Company?

Sales are looking to be relatively flat for the year 2013 compared to 2012.

All right, that's actually a little better than I would have expected. Is the mix going to be more non-US?

Yes. We do expect that North America sales will be down and be offset with growth in the international markets; particularly in South America and Asia. We also expect, seasonality-wise, to be a little lighter in the first half of the year because that's when North America was still running on a normal range and then the drought effects hit us in the second half. So we still expect to start out a little slower on our GSI sales in 2013, especially in the first quarter.

Okay. And does the mix shift out of North America have any implications for the margin in that business?

No, not materially.

Okay. Great. Thanks for your help.

Andy Kaplowitz, Barclays.

It's Alan standing in for Andy today. Nice quarter.

I wanted to touch on your comment on the 1Q guidance. On flat sales, what is driving the unusually weaker 1Q EPS relative to 1Q in the prior year?

Alan, if you recall 2011, we accelerated production at our Fendt facility ahead of opening the new assembly facility. So we had unusually high volumes in Europe and especially at our Fendt plant. As a result, our sales and our margins were, from a seasonality standpoint, unusually high. That allowed us, then, to transition into the new facility in the back -- in the fourth quarter, essentially -- with that earlier production having been under our belt. It's really a function of the heavy Fendt production in the first quarter last year.

Have margins in Europe troughed? Should they improve sequentially in 1Q?

Yes, we would expect the margins would be the lowest that we just experienced, and we start to build back our margins here in the first quarter, and then even more in the second quarter. The first quarter margins will still be lower than what we experienced a year ago, for the reasons that Greg discussed, with the lower amount of Fendt production and sales along with much higher engineering expenses as we are trying to get accelerated on our Tier 4 development here in the first quarter; get a lot of projects through to completion on time. So that's also affecting our margins and impacts our first quarter.

Okay. Then if I could just follow-up with a quick question on your cash flow this quarter. It was pretty good, and full-year cash flow came in substantially ahead of what you had previously guided to. What drove the delta there? Looks like you had a significant inventory reduction. And can you just talk about what regions that showed up in?

The reduction was across the regions; but particularly in Europe, we cut production and worked a lot of work and process down during the last quarter of the year. Also, once you get through your seasons, you're able to get parts inventories down as well. But really, we saw inventory reduction across all the regions and we're pretty pleased with what we ended up with. We also had our receivables down, really just because of the timing and mix of sales from compared to where we were year ago, able to get those down a little more than we had thought. That drove the improved performance on the cash flow.

Okay. Thanks, guys.

Jamie Cook, Credit Suisse.

Two questions, Martin. I think in your prepared remarks, you talked about the order board for South America being up significantly. Can you just provide a little more color on how much and the visibility that you have? Because your fourth quarter sales were good, too, and were keeping the industry, the forecast the same.

My next question -- in North America, what was the margin excluding GSI? Because again, you continue to make good progress on the core margins of that business. How much incremental opportunity do you think there is in 2013 to improve the margins in North America ex-GSI? Thanks.

Jamie, what we've seen in South America right now is that the fundamentals for the industry are pretty much back to a strong year again. Therefore, I think we can be optimistic for 2013. The order book -- where are we compared to last year?

And how much were you up?

The order book for South America is up about 50% from where we were a year ago. Keep in mind that a year ago, we were in the middle of some dry weather down there and actually the orders were unusually low. This is a large recovery from where we were at that point.

From a coverage standpoint, that's probably two to three months' worth of sales. We don't have huge order backlogs typically in South America, but that's a very healthy, good order backlog right now.

To be clear, is that just the market? Or were you able to gain share -- are you doing better than the market as well in Brazil?

I would say we're participating with the market at this point. You can also see that the margins have improved in South America, so we're focused on the balance between market share and margins, and we're very pleased with what we've been able to accomplish on the margin side.

Market share is pretty solid.

Okay. Sorry -- just again on the North America business ex- GSI -- what the profitability was in the quarter. And Martin or Andy, how much opportunity do you think there is to continue to improve that in 2013?

Jamie, I don't know if I have the quarter in front of me, but for the year it was over 8%.

Okay.

We have improved the core North American margins along with the contribution of the GSI business.

That team really did great job, so that means -- it looks like as if we are now in a very stable situation (inaudible) North America.

Okay. But do we think that there's incremental opportunity in 2013? Or is this way to think about it for next year? Is the 8% change the way to think about it?

There's incremental opportunity, I would guess, yes.

Okay, thank you.

Jerry Revich, Goldman Sachs.

Andy, can you talk about what was material cost inflation that you saw in the quarter? And what are you assuming in your 2013 guidance? You also mentioned that currency was neutral for the year. I'm wondering if you could just share with us what your assumptions are for the euro/dollar and real/dollar exchange rates? Thanks.

Okay, for the quarter, our net pricing benefit was about 100 basis points, so our price increases were close to 3% -- a little under 3% -- and offsetting the increase in materials, we netted about 1%. Obviously, that was offset by some of the inefficiencies and lower production that we discussed already. As we look into next year, our focus on margin improvement -- we expect to improve gross margins by probably 70 basis points, 80 basis points, and most of that is in the net price arena.

Andy, the currency assumptions, please, on the euro/dollar and real/dollar?

The euro is similar to where it is today, kind of in the low to mid-$1.30s; and then, the real, right at around BRL2, BRL2 to $1.

Lastly, the Fendt production -- any [ERP transition]? What was the impact on your EBIT this quarter, Greg, and how should we think about that into the first quarter? Are we back at a normal run rate in the first quarter? Or are we still working on the transition?

Yes. In the fourth quarter, Jerry, Fendt was -- from an EPS standpoint, Fendt was probably caused about a quarter's worth of damage to our EPS in the fourth quarter; and into the first quarter, we're not back yet to where we want to be. We still have some extra heads in the process that we'll work through as we get beyond the first quarter. So we'll still have, in the first quarter of 2013, more from margin standpoint, probably 50 or 60 basis points of drag in the first quarter related to Fendt.

In total Company or just (inaudible) --

That's total Company.

Okay, thank you very much.

Ann Duignan, JPMorgan.

This is Mike Shlisky filling in for Ann today.

I wanted to touch quickly on GSI, again. We've been seeing some livestock industry players culling herd sizes and getting a little squeezed on feed costs. Just want to know, now that we're at the start of 2013, what effect do you think some of the squeezing that's going on in that industry is going to be affecting demand for some of your livestock equipment in GSI? And actually, your overall livestock industry exposure?

It does not because our livestock is more in chicken, broilers, layers; and pig, not so much into beef.

Got it. Got it. Thanks. Just to follow up on that, what about some of the extensions and expansions to the tax benefits we saw on December 31? Is that going to affect, do you think, livestock players, both chicken and other animals -- their appetite for additional equipment?

We think so, but I think there's a certain uncertainty in the US market. We see more growth in the more emerging markets like China and South America.

Okay, guys. Thanks so much.

Ashish Gupta, CLSA.

I'm wondering if you could give us a little bit more color on what's driving the $125 million to $150 million of free cash flow forecast? It looks like, with the cash taxes being lower, strong net income, that it should be higher. Is there just something I'm missing in the working capital?

Yes, you're right. It's around the working capital usage that we are forecasting at this point along with the higher CapEx. Recall, we said CapEx would be $400 million to $425 million, which is $60 million, $80 million higher than this year. As we also look at the working capital, we have two impacts that I'll point out -- one is on inventory. As I mentioned in the prepared remarks, we are looking at increasing inventory in order to bridge our way to the Tier 4 final new product introductions that begin in 2014.

At the end of 2013, we will have additional engine inventory and in some cases, finished goods inventory, that allow us to transition our way to having a more orderly new product introduction in 2014. That is one of the impacts.

Secondly, on receivables, since we expect to have a little more back-end loaded sales than we did this year, we're looking for receivables to be higher than where they are this year at the end of the year. Working capital usage probably is going to be in excess of $200 million in 2013.

Great. That's very helpful, Andy. Thanks.

Just on Fendt -- I'm wondering how you're thinking about opportunity for share gains now that you're not capacity-constrained?

Fendt has a very healthy and very advanced product range. We have a very high market share in Western Europe -- mainly, Germany, France, Spain, England -- so what we think is, there will be growing demand in some of the other European markets. Many also coming from Eastern Europe; so overall I think Fendt will be in a position to leverage a new footprint very soon.

Great, thanks very much.

Robert Wertheimer, Vertical Research.

Just a quick clarification -- I think you touched on the drag of Fendt in the quarter, but I didn't understand, I think you said a quarter. Was that $0.25 of earnings impact in 4Q from identified extra bodies that are on their way out? Is that what you said?

Yes, that is. Yes.

Okay. Do you think that's the total impact? Or would there be anything else in terms of ramping?

Yes, there's also some volume-related and some mix-related in terms of our sales, so it bleeds into a couple different categories, but yes.

But the $0.25 is just extra heads you can count? Okay, beautiful. Second, I don't know --

Actually, Rob, come the $0.25 is all in, but it shows up in sales, a little bit of sales, but it's more about margins related to those sales.

Thank you for clarifying.

This may be too detailed to go to on the call, but your margins, obviously, in North America have been very impressive for a multi-quarter, multi-year period now. How much of that is driven by high horsepower versus you're seeing broad margin improvement across the product and portfolio and horsepower range?

It's both, but it's mainly, let's say -- in North America, we really worked hard on the complete reengineering process, core process, redesign. We looked in all the factories, so it's more getting the business model right and then of course, the high horsepower tractors help, but they're not the main reason.

Great. That's helpful. Thank you.

Seth Weber, RBC Capital Markets.

It's Adam Nielsen here, on for Seth.

Could you comment on what you're seeing in used equipment flow in Europe out East?

Yes. The used equipment market in Europe is still doing rather strong. Of course, where you see problems is in the very big combines, so that's more for our competitors than for us. As soon as product gets a little bit too sophisticated, the used market in Eastern Europe don't basically consume it so well. But overall, for us, it's pretty good, so the markets are pretty strong.

Great. Thanks.

Then just a quick one on volume guided flat and pricing 2.5% to 3% -- that's roughly near as your sales outlook. Can you comment a little bit on mix dynamics for the year ahead that you see? It would seem to be implied to be about neutral.

It is neutral.

Neutral. Okay.

One last one -- just a little bit of an update on Santal and some of the sugar cane harvester integration there, and cross-selling opportunities?

It works pretty well. Of course, the product need some engineering work, quality needs to improve. But overall, our dealers are very excited and we will see some growth in the coming years.

Okay. Is that a '13 or more of a '14 over time, here?

We will see some already this year, but of course in the years to come, I think the numbers will be pretty strong.

Great. Thank you.

Andy Casey, Wells Fargo Securities.

Could you guys give some puts and takes on what drove the South American margin improvement? You had good performance last quarter and again this quarter, and I'm just wondering if this quarter was more volume than anything else?

Andy, I think it's a combination of the volume, plus we've really worked hard on improving the cost of the products. We have a number of product cost improvement programs that we've been working on, where we simplify model range, try to improve the mix of the products we sell. We're now -- and I think the pricing has been a little more solid as well. And so all that put together has allowed us to get the margins up.

Okay. Then on the government incentives down there, are you seeing any skewing to any particular product type? Or is it pretty much across the board?

It's pretty much across the board and it's pretty much consistent with the good visibility also in the future.

Okay, thank you very much.

Ross Gilardi, Bank of America.

Martin, could you just talk a little bit more about Europe? Obviously, there are puts and takes and there are weather-related issues in the North, and it's complicated, but what's your overall level of conviction that Europe has sort of bottomed right now?

Actually, I agree. Europe is complicated, but on the other hand, Europe is pretty stable when you look at it overall. You have, of course, impact from climate, and that's a little bit more volatile than what we are used to here in the US. I think, yes, we certainly -- I think the market shouldn't go down a lot. But also, it didn't, so that means, when you think about markets which could recover soon, it's Italy, Spain, England, and maybe Scandinavia.

I think you mentioned that France was up. Can you talk a little bit more about France?

France is the biggest market for farm equipment in Europe. For us, it's a great market because we have a very strong distribution network. We have a factory in France, which helps, because the idea for the French farmers, there's a certain appeal to buy something made in France, maybe not for you so much. Therefore, I think this market is doing pretty well, and we have also chances to gain share there a little bit, I think, over time.

That market was up about 10% this year.

Okay. Thank you. Anything new happening with cap reform?

Nothing which would have an big impact on our business.

Okay. Then, just the last one I had -- there's been some negative press about [Yang] in China and I think you've flagged China as a source of demand growth for GSI, particularly on the poultry side. Are you seeing any slowdown for GSI products in China, particularly in poultry?

No, we do not see that.

Thanks a lot.

(Operator Instructions)

Adam Fleck, Morningstar.

Following the third quarter, you had thought you'd be increasing production slightly from a year ago this quarter, but it looks like you were actually down a bit. Was there something that changed throughout the quarter that led to this? Or was that just more in line with your thinking?

I think we were pretty close. We did adjust some of our European production. As you see, we got the inventories lower, and I think most of the change was probably around trying to adjust inventory levels more than affecting what we were seeing in the marketplace.

Okay, great. Thanks.

Your parts sales growth slowed throughout the second half of this year. I'm sure hours used was probably down. Do you see this as a potential incremental opportunity for the back half of '13, especially since they're higher margin?

You're exactly right. That's what we saw, was in the parts business; the level of activity levels in the harvest did cause us to have some softness there. It'll all depend on how this harvest goes coming up in 2013; if it's a little more normal, then there might be some opportunity there.

Okay, great. Appreciate it. Thanks a lot.

Ashish Gupta, CLSA.

Philosophically, I'm wondering if you could ever see share repurchase used beyond offsetting dilution as your North American cash flows grow?

We review that on a regular basis, but we have nothing in the pipeline right now.

Okay. Great. Thanks very much.

I will now turn the call back over to Greg Petersen for closing remarks.

Thanks, Kimberly.

I just would like to, once again, thank everyone for their participation today and encourage you to follow up with me if you have additional questions. Thanks for your interest in AGCO and we look forward to talking to you soon.

Ladies and gentlemen, this concludes today's conference. You may now disconnect.