GENERAL
Our operations are subject to the cyclical nature of the agricultural industry. Sales of our equipment are affected by, among other things, changes in net cash farm income, farm land values, weather conditions, the 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 and 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 inventories. However, retail sales by dealers to farmers are highly seasonal and largely are a function of the timing of the planting and harvesting seasons. As a result, our net sales historically have been the lowest in the first quarter and have increased in subsequent quarters.
The coronavirus ("COVID-19") pandemic has created significant volatility in the global economy and has led to substantially reduced economic activity, employment disruptions and supply chain constraints and delays. In most areas, our business has been deemed essential, thereby allowing us to maintain operations. However, production has been severely impacted by component availability, particularly during late March and throughout April, which directly impacted net sales levels. The affected plants all resumed production in late April, and all but one of our major production facilities currently are operational. The ability to maintain full-time production remains uncertain for the foreseeable future due to potential supply chain constraints, workforce limitations, safety equipment availability and government restrictions. We are enacting cost saving measures as well as managing our cash flows and capital deployment to respond to the volatile environment.
RESULTS OF OPERATIONS
For the three months ended
Net sales during the three months ended
Income from operations for the three months ended
Regionally, income from operations in our EME region decreased for the three
months ended
Industry Market Conditions The COVID-19 pandemic is projected to have minimal impact on global crop production. Most farm operations, which generally have been deemed essential, are operating at normal levels. However, the consumption of grain for food, fuel and livestock feed is being negatively impacted by the economic constraints caused by the pandemic. As a result, grain inventories are expected to increase in 2020, and soft commodity prices trended significantly lower in the first quarter. In addition, protein processing has been severely constrained, which pressures protein producers. Future demand for agricultural equipment will be influenced by farm income, which is a function of commodity and protein prices, crop yields and government support.
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Table of Contents Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
cautious farmer sentiment both contributed to weak demand in the large farm sector during the first three months of 2020, compared to the same period in 2019. Retail sales of low horsepower tractors also declined in the first three months of 2020 compared to the prior year period.
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