AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide
manufacturer and distributor of agricultural equipment and
solutions, reported its results for the second quarter ended June
30, 2022. Net sales for the second quarter were approximately $2.9
billion, an increase of approximately 2.3% compared to the second
quarter of 2021. Excluding unfavorable currency translation impacts
of approximately 7.5%, net sales in the second quarter of 2022
increased approximately 9.8% compared to the second quarter of
2021. Reported net income was $2.37 per share for the second
quarter of 2022, and adjusted net income(3), which excludes
restructuring expenses, was $2.38 per share. These results compare
to reported net income of $3.73 per share and adjusted net income,
which excludes restructuring expenses and the reversal of a
valuation allowance previously established against the Company’s
deferred tax assets in the United States, of $2.88 per share for
the second quarter of 2021.
Net sales for the first six months of 2022 were approximately
$5.6 billion, an increase of approximately 7.1% compared to the
same period in 2021. Excluding unfavorable currency translation
impacts of approximately 6.4%, net sales for the first six months
of 2022 increased approximately 13.5% compared to the same period
in 2021. For the first six months of 2022, reported net income was
$4.40 per share, and adjusted net income(3), excluding impairment
charges, restructuring expenses and other related items, was $4.77
per share. These results compare to reported net income of $5.71
per share, and adjusted net income, excluding restructuring
expenses and the aforementioned reversal of a valuation allowance
of $4.89 per share, for the first six months of 2021.
Second Quarter Highlights
- Reported regional sales results(1): Europe/Middle East (“EME”)
(10.3)%, North America +0.7%, South America +86.6%,
Asia/Pacific/Africa (“APA”) (5.5)%
- Constant currency regional sales results(1)(2)(3): EME +3.2%,
North America +1.4%, South America +77.2%, APA +1.7%
- Regional operating margin performance: EME 11.0%, North America
6.9%, South America 16.5%, APA 14.1%
- Fully operational within approximately two weeks of May 2022
cyberattack
- Q2 production, sales and net income were negatively
impacted
- Paid a variable special dividend of $4.50 per share as compared
to $4.00 in 2021
- Maintained full-year outlook for adjusted earnings per
share
(1)
As compared to second quarter 2021.
(2)
Excludes currency translation impact.
(3)
See reconciliation of Non-GAAP measures in
appendix.
“AGCO delivered solid results in the second quarter by remaining
focused on our farmer-first strategy, while effectively managing
the challenges associated with the cyberattack, currency headwinds
and ongoing supply chain constraints,” stated Eric Hansotia, AGCO’s
Chairman, President and Chief Executive Officer. “Our results
reflect substantial price increases to combat rising material
costs, higher logistics expenses, and other manufacturing
inefficiencies. Farm fundamentals remain favorable and are
supporting healthy order boards that remain ahead of last year’s
level. Our farmer-first approach and expanding precision ag
portfolio are contributing to strong end-market demand and robust
growth in our margin-rich businesses.”
Mr. Hansotia continued, “Our team’s ability to execute and adapt
to the challenging environment along with the robust market
conditions gives us confidence in delivering our 2022 outlook,
which includes record sales, margin expansion and record earnings.
These results reinforce our plan to continue investing in our smart
farming solutions and enhanced digital capabilities to support
further growth and margin expansion.”
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Six Months Ended June 30, 2022
Change from
Prior Year Period
Change from
Prior Year Period
North America(1)
(7)%
(8)%
South America
7%
(5)%
Western Europe(2)
(10)%
(16)%
(1) Excludes compact tractors.
(2) Based on Company estimates.
“Healthy grain production is forecasted for the major
agricultural production regions. Although crop prices have declined
from record levels earlier in 2022, they remain supportive and are
helping farmers offset inflationary pressures from higher fuel,
fertilizer and other input costs. Farm income estimates remain
elevated and are expected to extend the strong end-market demand,”
stated Mr. Hansotia.
Global industry production and retail sales were down modestly
in the first 6 months of 2022 compared to last year's elevated
levels due primarily to supply chain limitations. Industry retail
sales in North America were down approximately 7% in the first half
of 2022 compared to last year. The decline was driven by weaker
sales in smaller tractors partially offset by improved sales of
high horsepower tractors which increased approximately 6% in the
first half of 2022 compared to the same period in 2021.
Western European industry retail tractors decreased
approximately 10% in the first six months of 2022 compared to
strong levels in the first half of 2021. Farmer sentiment has been
negatively impacted by the conflict in Ukraine, as well as input
cost inflation, but forecasts for healthy farm income in Western
Europe are expected to support improved retail demand for equipment
in the second half of 2022.
In South America, industry retail sales increased during the
first six months of 2022 in both Brazil and Argentina compared to
2021 levels. Healthy crop production levels and favorable margins
for the farmer are supporting investments to replace an aged
fleet.
“While dependent on supply chain performance, we continue to
expect strong demand in the second half to support full year 2022
industry retail sales that are expected to be above 2021 levels in
North and South America and approximately flat in Western Europe,”
continued Mr. Hansotia.
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended June 30,
2022
2021
% change from 2021
% change from 2021 due to
currency translation(1)
% change excluding currency
translation
North America
$
739.9
$
734.7
0.7%
(0.7)%
1.4%
South America
519.2
278.3
86.6%
9.3%
77.2%
Europe/Middle East
1,467.6
1,635.2
(10.3)%
(13.5)%
3.2%
Asia/Pacific/Africa
218.5
231.1
(5.5)%
(7.1)%
1.7%
Total
$
2,945.2
$
2,879.3
2.3%
(7.5)%
9.8%
Six Months Ended June 30,
2022
2021
% change from 2021
% change from 2021 due to
currency translation(1)
% change excluding currency
translation
North America
$
1,440.9
$
1,345.8
7.1%
(0.5)%
7.6%
South America
875.6
518.8
68.8%
8.0%
60.8%
Europe/Middle East
2,870.7
2,962.4
(3.1)%
(11.6)%
8.5%
Asia/Pacific/Africa
443.7
431.0
2.9%
(6.0)%
9.0%
Total
$
5,630.9
$
5,258.0
7.1%
(6.4)%
13.5%
(1) See Footnotes for additional
disclosures.
North America
AGCO’s North American net sales grew 7.6% in the first six
months of 2022 compared to the same period of 2021, excluding the
negative impact of currency translation. The increase resulted from
the effects of pricing to mitigate inflationary cost pressures,
along with increased sales of tractors. Income from operations for
the first six months of 2022 decreased approximately $73.1 million
compared to the same period in 2021. First half 2022 operating
income was negatively impacted by a weaker sales mix, material and
logistics cost inflation, higher production costs and increased
operating expenses, including the effects of the recent
cyberattack.
South America
Net sales in the South American region increased 60.8% in the
first six months of 2022 compared to the same period of 2021,
excluding the impact of favorable currency translation. Sales grew
strongly across all markets, driven by robust industry demand and
favorable pricing impacts. Income from operations in the first six
months of 2022 increased by approximately $92.3 million compared to
the same period in 2021 and operating margins reached approximately
15.0%. The improved South America results reflect the benefit of
higher sales and production, a favorable sales mix, and pricing
that offset material cost inflation.
Europe/Middle East
Europe/Middle East net sales increased 8.5% in the first six
months of 2022 compared to the same period in 2021, excluding
unfavorable currency translation. The improvement was driven by
higher sales of tractors and replacement parts along with favorable
pricing actions. Sales growth in France and Scandinavia was
partially offset by significantly lower sales in Russia and the
Ukraine. Income from operations decreased approximately $22.3
million in the first six months of 2022, compared to the same
period in 2021. The decline was the result of foreign currency
translation, weaker sales mix, higher production costs as well as
increased operating expenses, which were magnified by the recent
cyberattack.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa increased 9.0%, excluding the
negative impact of currency translation, in the first six months of
2022 compared to the same period in 2021. Higher sales in
Australia, Japan and Africa were partially offset by lower sales in
China. Income from operations improved by approximately $17.1
million in the first six months of 2022 and operating margins
expanded by approximately 3.5% compared to the same period in 2021
due to higher sales and a richer sales mix.
Outlook
The ability of the Company’s supply chain to deliver parts and
components on schedule is currently difficult to predict. The
following outlook is based on AGCO’s current estimates of component
deliveries. AGCO’s results will be impacted if the actual supply
chain delivery performance differs from these estimates.
- Net sales for 2022 of $12.4 billion to $12.6 billion
- Gross and operating margins are projected to improve from 2021
levels, reflecting the impact of higher sales and production
volumes as well as favorable pricing to offset material and labor
cost inflation
- Increased investments in engineering and other technology
investments to support AGCO’s precision ag and digital
initiatives
- Full year adjusted earnings per share of $11.70 to $11.90
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Thursday, July 28, 2022.
The Company will refer to slides on its conference call. Interested
persons can access the conference call and slide presentation via
AGCO’s website at www.agcocorp.com in the “Events” section on the
“Company/Investors” page of our website. A replay of the conference
call will be available approximately two hours after the conclusion
of the conference call for twelve months following the call. A copy
of this press release will be available on AGCO’s website for at
least twelve months following the call.
* * * * *
Safe Harbor Statement
Statements that are not historical facts, including the
projections of earnings per share, production levels, sales,
industry demand, market conditions, commodity prices, currency
translation, farm income levels, margin levels, strategy,
investments in product and technology development, new product
introductions, restructuring and other cost reduction initiatives,
production volumes, tax rates and general economic conditions, are
forward-looking and subject to risks that could cause actual
results to differ materially from those suggested by the
statements. The following are among the factors that could cause
actual results to differ materially from the results discussed in
or implied by the forward-looking statements.
- COVID-19 has negatively impacted our business, initially
through closures, higher absentee rates, and reduced production at
both our plants and the plants that supply us with parts and
components, and more recently through supply chain challenges,
including the inability of some of our suppliers to meet demand and
logistics and transportation-related companies to deliver products
in a timely manner. In addition, we have had to incur various costs
related to preventing the spread of COVID-19, including changes to
our factories and other facilities and those related to enabling
remote work. We expect COVID-19 to continue to impact our business,
although the manner and extent to which it impacts us will depend
on future developments, including the duration of the pandemic, the
timing, distribution and impact of vaccinations, and possible
mutations of the virus that are more contagious or resistant to
current vaccines. Measures taken by governments around the world,
as well as businesses, including us, and the general public in
order to limit the spread of COVID-19 will impact our business as
well. These measures have included travel bans and restrictions,
quarantines, shelter in place orders, curfews, business and
government office closures, increased border controls or closures,
port closures and transportation restrictions. The impacts of
COVID-19 and such measures could include decreases in demand for
our products, factory closures, increased absentee rates, reduced
production, incurrence of additional costs due to the adherence to
cleaning requirements and social distancing guidelines and
increased costs of labor, parts and components and shipping,
incurrence of impairment charges, slower collections and larger
write-offs of accounts receivable, among other changes.
- Our financial results depend entirely upon the agricultural
industry, and factors that adversely affect the agricultural
industry generally, including declines in the general economy,
adverse weather, tariffs, increases in farm input costs, lower
commodity prices, lower farm income and changes in the availability
of credit for our retail customers, will adversely affect us.
- A majority of our sales and manufacturing takes place outside
the United States, and, many of our sales involve products that are
manufactured in one country and sold in a different country, and as
a result, we are exposed to risks related to foreign laws, taxes
and tariffs, trade restrictions, economic conditions, labor supply
and relations, political conditions and governmental policies.
These risks may delay or reduce our realization of value from our
international operations. Among these risks are the uncertain
consequences of Brexit, Russian sanctions and tariffs imposed on
exports to and imports from China.
- Most retail sales of the products that we manufacture are
financed, either by our joint ventures with Rabobank or by a bank
or other private lender. Our joint ventures with Rabobank, which
are controlled by Rabobank and are dependent upon Rabobank for
financing as well, finance over 50% of the retail sales of our
tractors and combines in the markets where the joint ventures
operate. Any difficulty by Rabobank to continue to provide that
financing, or any business decision by Rabobank as the controlling
member not to fund the business or particular aspects of it (for
example, a particular country or region), would require the joint
ventures to find other sources of financing (which may be difficult
to obtain), or us to find another source of retail financing for
our customers, or our customers would be required to utilize other
retail financing providers. As a result of the recent economic
downturn, financing for capital equipment purchases generally has
become more difficult in certain regions and in some cases, can be
expensive to obtain. To the extent that financing is not available
or available only at unattractive prices, our sales would be
negatively impacted.
- Both AGCO and our finance joint ventures have substantial
accounts receivable from dealers and end customers, and we would be
adversely impacted if the collectability of these receivables was
less than optimal; this collectability is dependent upon the
financial strength of the farm industry, which in turn is dependent
upon the general economy and commodity prices, as well as several
of the other factors listed in this section.
- We have experienced substantial and sustained volatility with
respect to currency exchange rate and interest rate changes, which
can adversely affect our reported results of operations and the
competitiveness of our products.
- Our success depends on the introduction of new products,
particularly engines that comply with emission requirements and
sustainable smart farming technology, which require substantial
expenditures; there is no certainty that we can develop the
necessary technology or that the technology that we develop will be
attractive to farmers or available at competitive prices.
- Our expansion plans in emerging markets, including establishing
a greater manufacturing and marketing presence and growing our use
of component suppliers, could entail significant risks.
- Our business increasingly is subject to regulations relating to
privacy and data protection, and if we violate any of those
regulations, or otherwise are the victim of a cyber-attack, we
could be subject to significant claims, penalties and damages.
- Attacks through ransomware and other means are rapidly
increasing, and in May 2022 we learned that we had been the victim
of a cyberattack. We have recently reexamined our safeguards as a
result of the cyberattack, and continue to implement and bolster
such safeguards that we believe are reasonable. However, there
always will be the potential of the risk that a cyberattack will be
successful and will disrupt our business, either through shutting
down our operations, destroying data, exfiltrating data or
otherwise.
- We depend on suppliers for components, parts and raw materials
for our products, and any failure by our suppliers to provide
products as needed, or by us to promptly address supplier issues,
will adversely impact our ability to timely and efficiently
manufacture and sell products. Recently suppliers of several key
parts and components have not been able to meet our demand and we
have had to decrease our production levels. In addition, the
potential of natural gas shortages in Europe, as well as predicted
overall shortages in other energy sources, could also negatively
impact our production and that of our supply chain in the future.
It is unclear when these supply chain disruptions will be restored
or what the ultimate impact on production, and consequently sales,
will be.
- Although as a general proposition our business has not
experienced significant inflation in many years, beginning in the
second half of 2021 we experienced significant inflation in a range
of costs, including for parts and components, shipping, and energy.
While we have been able to pass along most of those costs through
increased prices, there can be no assurance that we will be able to
continue to do so. If we are not, it will adversely impact our
performance.
- We face significant competition, and if we are unable to
compete successfully against other agricultural equipment
manufacturers, we would lose customers and our net sales and
performance would decline.
- We have a substantial amount of indebtedness, and, as a result,
we are subject to certain restrictive covenants and payment
obligations that may adversely affect our ability to operate and
expand our business.
Further information concerning these and other factors is
included in AGCO’s filings with the Securities and Exchange
Commission, including its Form 10-K for the year ended December 31,
2021. AGCO disclaims any obligation to update any forward-looking
statements except as required by law.
* * * * *
About AGCO
AGCO (NYSE: AGCO) is a global leader in the design, manufacture
and distribution of agricultural solutions and delivers high-tech
solutions for farmers feeding the world through its full line of
equipment and related services. AGCO products are sold through five
core brands, Challenger®, Fendt®, GSI®, Massey Ferguson®, Precision
Planting® and Valtra®, supported by Fuse® smart farming solutions.
Founded in 1990 and headquartered in Duluth, Georgia, USA, AGCO had
net sales of approximately $11.1 billion in 2021. For more
information, visit http://www.agcocorp.com. For company news,
information and events, please follow us on Twitter: @AGCOCorp. For
financial news on Twitter, please follow the hashtag #AGCOIR.
# # # # #
Please visit our website at
www.agcocorp.com
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited and in millions)
June 30, 2022
December 31, 2021
ASSETS
Current Assets:
Cash, cash equivalents and restricted
cash
$
580.6
$
889.1
Accounts and notes receivable, net
1,149.3
991.5
Inventories, net
3,382.3
2,593.7
Other current assets
592.1
539.8
Total current assets
5,704.3
5,014.1
Property, plant and equipment, net
1,405.6
1,464.8
Right-of-use lease assets
153.4
154.1
Investments in affiliates
417.0
413.5
Deferred tax assets
203.8
169.3
Other assets
317.8
293.3
Intangible assets, net
388.8
392.2
Goodwill
1,298.2
1,280.8
Total assets
$
9,888.9
$
9,182.1
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
2.0
$
2.1
Short-term borrowings
320.8
90.8
Accounts payable
1,204.1
1,078.3
Accrued expenses
1,915.0
2,062.2
Other current liabilities
188.6
221.2
Total current liabilities
3,630.5
3,454.6
Long-term debt, less current portion and
debt issuance costs
2,018.0
1,411.2
Operating lease liabilities
119.8
115.5
Pension and postretirement health care
benefits
203.6
209.0
Deferred tax liabilities
114.2
116.9
Other noncurrent liabilities
419.5
431.1
Total liabilities
6,505.6
5,738.3
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.7
0.7
Additional paid-in capital
13.3
3.9
Retained earnings
5,130.3
5,182.2
Accumulated other comprehensive loss
(1,761.1
)
(1,770.9
)
Total AGCO Corporation stockholders’
equity
3,383.2
3,415.9
Noncontrolling interests
0.1
27.9
Total stockholders’ equity
3,383.3
3,443.8
Total liabilities and stockholders’
equity
$
9,888.9
$
9,182.1
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions,
except per share data)
Three Months Ended June 30,
2022
2021
Net sales
$
2,945.2
$
2,879.3
Cost of goods sold
2,254.7
2,186.9
Gross profit
690.5
692.4
Selling, general and administrative
expenses
302.5
276.3
Engineering expenses
107.1
107.2
Amortization of intangibles
15.4
14.2
Restructuring expenses
0.4
4.7
Bad debt expense (credit)
1.6
(0.3
)
Income from operations
263.5
290.3
Interest expense, net
5.9
2.2
Other expense, net
21.7
14.6
Income before income taxes and equity in
net earnings of affiliates
235.9
273.5
Income tax provision
71.5
7.7
Income before equity in net earnings of
affiliates
164.4
265.8
Equity in net earnings of affiliates
13.2
18.6
Net income
177.6
284.4
Net loss (income) attributable to
noncontrolling interests
0.1
(1.6
)
Net income attributable to AGCO
Corporation and subsidiaries
$
177.7
$
282.8
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
2.38
$
3.74
Diluted
$
2.37
$
3.73
Cash dividends declared and paid per
common share
$
4.72
$
4.17
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.6
75.5
Diluted
74.9
75.9
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions,
except per share data)
Six Months Ended June 30,
2022
2021
Net sales
$
5,630.9
$
5,258.0
Cost of goods sold
4,309.1
3,995.1
Gross profit
1,321.8
1,262.9
Selling, general and administrative
expenses
573.6
536.9
Engineering expenses
207.4
203.5
Amortization of intangibles
30.7
31.7
Impairment charges
36.0
—
Restructuring expenses
3.4
6.0
Bad debt expense (credit)
3.2
(0.7
)
Income from operations
467.5
485.5
Interest expense, net
6.3
5.6
Other expense, net
39.2
26.1
Income before income taxes and equity in
net earnings of affiliates
422.0
453.8
Income tax provision
131.7
51.3
Income before equity in net earnings of
affiliates
290.3
402.5
Equity in net earnings of affiliates
24.3
33.3
Net income
314.6
435.8
Net loss (income) attributable to
noncontrolling interests
14.9
(2.2
)
Net income attributable to AGCO
Corporation and subsidiaries
$
329.5
$
433.6
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
4.41
$
5.75
Diluted
$
4.40
$
5.71
Cash dividends declared and paid per
common share
$
4.92
$
4.33
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.6
75.4
Diluted
74.9
75.9
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in
millions)
Six Months Ended June 30,
2022
2021
Cash flows from operating activities:
Net income
$
314.6
$
435.8
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation
106.5
109.9
Amortization of intangibles
30.7
31.7
Stock compensation expense
17.6
15.2
Impairment charges
36.0
—
Equity in net earnings of affiliates, net
of cash received
(23.7
)
(32.6
)
Deferred income tax benefit
(0.6
)
(65.5
)
Other
2.7
9.2
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(219.5
)
(265.5
)
Inventories, net
(888.1
)
(721.5
)
Other current and noncurrent assets
(91.9
)
(73.3
)
Accounts payable
191.1
320.5
Accrued expenses
(46.2
)
(0.8
)
Other current and noncurrent
liabilities
4.6
112.0
Total adjustments
(880.8
)
(560.7
)
Net cash used in operating activities
(566.2
)
(124.9
)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(139.2
)
(120.6
)
Proceeds from sale of property, plant and
equipment
2.1
2.4
Investment in unconsolidated
affiliates
(1.5
)
(1.0
)
(Purchase) sale of businesses, net of cash
acquired
(111.3
)
5.4
Other
—
(2.4
)
Net cash used in investing activities
(249.9
)
(116.2
)
Cash flows from financing activities:
Proceeds from indebtedness, net
947.2
4.0
Payment of dividends to stockholders
(368.5
)
(328.6
)
Payment of minimum tax withholdings on
stock compensation
(20.8
)
(33.6
)
Payment of debt issuance costs
(0.2
)
—
Distributions to noncontrolling
interest
(11.6
)
(3.5
)
Net cash provided by (used in) financing
activities
546.1
(361.7
)
Effects of exchange rate changes on cash,
cash equivalents and restricted cash
(38.5
)
(16.1
)
Decrease in cash, cash equivalents and
restricted cash
(308.5
)
(618.9
)
Cash, cash equivalents and restricted
cash, beginning of period
889.1
1,119.1
Cash, cash equivalents and restricted
cash, end of period
$
580.6
$
500.2
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited, in
millions, except share amounts, per share data and employees)
1. STOCK COMPENSATION EXPENSE
The Company recorded stock compensation expense as follows (in
millions):
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Cost of goods sold
$
0.3
$
0.3
$
0.6
$
0.6
Selling, general and administrative
expenses
10.3
8.2
17.0
14.7
Total stock compensation expense
$
10.6
$
8.5
$
17.6
$
15.3
2. IMPAIRMENT CHARGES
As a consequence of the current conflict between Russia and
Ukraine, during the three months ended March 31, 2022, the Company
assessed the fair value of its gross assets related to its joint
ventures in Russia for potential impairment and recorded certain
asset impairment charges of approximately $36.0 million, reflected
as “Impairment charges” in its Condensed Consolidated Statements of
Operations, with an offsetting benefit of approximately $12.2
million included within “Net loss (income) attributable to
noncontrolling interests.” In addition, during the three months
ended March 31, 2022, the Company recorded a write-down of its
investment in its Russian finance joint venture of approximately
$4.8 million, reflected within “Equity in net earnings of
affiliates” in its Condensed Consolidated Statements of
Operations.
3. RESTRUCTURING EXPENSES
In recent years, the Company announced and initiated several
actions to rationalize employee headcount in various manufacturing
facilities and administrative offices located in the U.S., Europe,
South America, Africa and China in order to reduce costs in
response to fluctuating global market demand. The Company also
previously rationalized its grain and protein business during 2019
and 2020. As of December 31, 2021, the Company had approximately
$14.7 million of accrued severance and other costs related to such
rationalizations. During the three and six months ended June 30,
2022, the Company recorded an additional $0.4 million and $3.4
million, respectively, of severance costs associated with further
rationalizations in connection with the termination of
approximately 75 employees, and paid approximately $3.3 million and
$6.7 million, respectively, of severance costs. The remaining $10.6
million of severance and other related costs as of June 30, 2022,
inclusive of approximately $0.8 million of negative foreign
currency translation impacts, are expected to be paid primarily
during 2022.
4. INDEBTEDNESS
Long-term debt at June 30, 2022 and December 31, 2021 consisted
of the following (in millions):
June 30, 2022
December 31, 2021
Credit facility, expires 2023
800.0
—
1.002% Senior term loan due 2025
260.4
283.7
Senior term loans due between 2023 and
2028
332.7
445.9
0.800% Senior Notes Due 2028
624.8
680.8
Other long-term debt
6.1
7.7
Debt issuance costs
(4.0
)
(4.8
)
2,020.0
1,413.3
Less:
Current portion of other long-term
debt
(2.0
)
(2.1
)
Total long-term indebtedness, less current
portion
$
2,018.0
$
1,411.2
In April 2022, the Company entered into a short-term revolving
credit facility of €225.0 million with Co�peratieve Rabobank U.A.,
or “Rabobank.” The €225.0 million (or approximately $240.0 million)
was borrowed on April 26, 2022, with a maturity date of March 31,
2023. Interest accrues on amounts outstanding under the credit
facility, at the Company’s option, at either (1) the secured
overnight financing rate (“SOFR”) for borrowings denominated in
U.S. dollars or Euro Interbank Offered Rate (“EURIBOR”) for
borrowings denominated in Euros plus a margin of 0.75%, or (2) the
base rate, which is equal to the higher of (i) the administrative
agent’s base lending rate for the applicable currency, (ii) the
federal funds rate plus 0.5%, or (iii) one-month adjusted term SOFR
plus 1.0%, plus a margin of 0.75%. The credit facility contains
covenants restricting, among other things, the incurrence of
indebtedness and the making of certain payments, including
dividends. The Company also has to fulfill financial covenants with
respect to a total debt to EBITDA ratio and an interest coverage
ratio.
In June 2022, the Company entered into an uncommitted revolving
credit facility that allows the Company to borrow up to €100.0
million (or approximately $104.1 million as of June 30, 2022) with
Unicredit Bank. The credit facility expires on December 31, 2026.
Borrowing requests are required for each borrowing and, the Company
must state the amount and interest period at which time the Company
is quoted a rate for the entire period. The amount of each
requested drawdown must be at least €1.0 million. As of June 30,
2022, the Company had no outstanding borrowings under the revolving
credit facility and had the ability to borrow €100.0 million (or
approximately $104.1 million).
As of June 30, 2022 and December 31, 2021, the Company had
short-term borrowings due within one year of approximately $320.8
million and $90.8 million, respectively. The balance as of June 30,
2022 related to short-term borrowings includes the short-term
revolving credit facility discussed previously of approximately
$240.0 million.
5. INVENTORIES
Inventories at June 30, 2022 and December 31, 2021 were as
follows (in millions):
June 30, 2022
December 31, 2021
Finished goods
$
951.9
$
718.2
Repair and replacement parts
737.6
697.8
Work in process
625.6
282.8
Raw materials
1,067.2
894.9
Inventories, net
$
3,382.3
$
2,593.7
6. ACCOUNTS RECEIVABLE SALES AGREEMENTS
The Company has accounts receivable sales agreements that permit
the sale, on an ongoing basis, of a majority of its wholesale
receivables in North America, Europe and Brazil to its U.S.,
Canadian, European and Brazilian finance joint ventures. As of June
30, 2022 and December 31, 2021, the cash received from receivables
sold under the U.S., Canadian, European and Brazilian accounts
receivable sales agreements was approximately $1.2 billion and $1.3
billion, respectively.
In addition, the Company sells certain trade receivables under
factoring arrangements to other financial institutions around the
world. As of June 30, 2022 and December 31, 2021, the cash received
from these arrangements was approximately $174.9 million and $215.4
million, respectively.
Losses on sales of receivables associated with the accounts
receivable financing facilities discussed above, reflected within
“Other expense, net” in the Company’s Condensed Consolidated
Statements of Operations, were approximately $10.2 million and
$18.1 million, respectively, during the three and six months ended
June 30, 2022. Losses on sales of receivables associated with the
accounts receivable financing facilities discussed above, reflected
within “Other expense, net” in the Company’s Condensed Consolidated
Statements of Operations, were approximately $5.1 million and $9.7
million, respectively, during the three and six months ended June
30, 2021.
The Company’s finance joint ventures in Europe, Brazil and
Australia also provide wholesale financing directly to the
Company’s dealers. As of June 30, 2022 and December 31, 2021, these
finance joint ventures had approximately $50.7 million and $42.6
million, respectively, of outstanding accounts receivable
associated with these arrangements. In addition, the Company sells
certain trade receivables under factoring arrangements to other
financial institutions around the world.
7. NET INCOME PER SHARE
A reconciliation of net income attributable to AGCO Corporation
and subsidiaries and weighted average common shares outstanding for
purposes of calculating basic and diluted net income per share for
the three and six months ended June 30, 2022 and 2021 is as follows
(in millions, except per share data):
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
177.7
$
282.8
$
329.5
$
433.6
Weighted average number of common shares
outstanding
74.6
75.5
74.6
75.4
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
2.38
$
3.74
$
4.41
$
5.75
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
177.7
$
282.8
$
329.5
$
433.6
Weighted average number of common shares
outstanding
74.6
75.5
74.6
75.4
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
0.3
0.4
0.3
0.5
Weighted average number of common shares
and common share equivalents outstanding for purposes of computing
diluted net income per share
74.9
75.9
74.9
75.9
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
2.37
$
3.73
$
4.40
$
5.71
8. SEGMENT REPORTING
The Company’s four reportable segments distribute a full range
of agricultural equipment and related replacement parts. The
Company evaluates segment performance primarily based on income
from operations. Sales for each segment are based on the location
of the third-party customer. The Company’s selling, general and
administrative expenses and engineering expenses are generally
charged to each segment based on the region and division where the
expenses are incurred. As a result, the components of income from
operations for one segment may not be comparable to another
segment. Segment results for the three and six months ended June
30, 2022 and 2021 are as follows (in millions):
Three Months Ended June 30,
North America
South America
Europe/Middle East
Asia/Pacific/ Africa
Consolidated
2022
Net sales
$
739.9
$
519.2
$
1,467.6
$
218.5
$
2,945.2
Income from operations
50.7
85.5
161.2
30.7
328.1
2021
Net sales
$
734.7
$
278.3
$
1,635.2
$
231.1
$
2,879.3
Income from operations
103.7
23.1
201.5
26.6
354.9
Six Months Ended June 30,
North America
South America
Europe/Middle East
Asia/Pacific/ Africa
Consolidated
2022
Net sales
$
1,440.9
$
875.6
$
2,870.7
$
443.7
$
5,630.9
Income from operations
105.5
131.6
323.5
64.7
625.3
2021
Net sales
$
1,345.8
$
518.8
$
2,962.4
$
431.0
$
5,258.0
Income from operations
178.6
39.3
345.8
47.6
611.3
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Segment income from operations
$
328.1
$
354.9
$
625.3
$
611.3
Impairment charges
—
—
(36.0
)
—
Corporate expenses
(38.5
)
(37.5
)
(70.7
)
(73.4
)
Amortization of intangibles
(15.4
)
(14.2
)
(30.7
)
(31.7
)
Stock compensation expense
(10.3
)
(8.2
)
(17.0
)
(14.7
)
Restructuring expenses
(0.4
)
(4.7
)
(3.4
)
(6.0
)
Consolidated income from operations
$
263.5
$
290.3
$
467.5
$
485.5
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income, adjusted net income per share, and net sales
on a constant currency basis, each of which exclude amounts that
are typically included in the most directly comparable measure
calculated in accordance with U.S. generally accepted accounting
principles (“GAAP”). A reconciliation of each of those measures to
the most directly comparable GAAP measure is included below.
The following is a reconciliation of reported income from
operations, net income and net income per share to adjusted income
from operations, adjusted net income and adjusted net income per
share for the three and six months ended June 30, 2022 and 2021 (in
millions, except per share data):
Three Months Ended June 30,
2022
2021
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)
Income From Operations
Net Income(1)
Net Income Per Share(1)(2)
As reported
$
263.5
$
177.7
$
2.37
$
290.3
$
282.8
$
3.73
Restructuring expenses(3)
0.4
0.4
0.01
4.7
3.9
0.05
Deferred income tax adjustment(4)
—
—
—
—
(67.8
)
(0.89
)
As adjusted
$
264.0
$
178.1
$
2.38
$
295.0
$
218.9
$
2.88
(1)
Net income and net income per share
amounts are after tax.
(2)
Rounding may impact summation of
amounts.
(3)
The restructuring expenses recorded during
the three months ended June 30, 2022 related primarily to severance
and other related costs associated with the Company’s
rationalization of certain European manufacturing operations. The
restructuring expenses recorded during the three months ended June
30, 2021 related primarily to severance and other related costs
associated with the Company’s rationalization of certain U.S.,
European and South American manufacturing operations and various
administrative offices.
(4)
During the three months ended June 30,
2021, the Company’s income tax provision includes the benefit of a
reversal of approximately $67.8 million related to a valuation
allowance previously established against the Company’s net deferred
tax assets in the United States. Significant improvements in income
from operations in the United States during 2021, as well as
updated forecasts for future years, supported the reversal of the
valuation allowance during the three months ended June 30,
2021.
Six Months Ended June 30,
2022
2021
Income From Operations(2)
Net Income(1)(2)
Net Income Per Share(1)(2)
Income From Operations(2)
Net Income(1)(2)
Net Income Per Share(1)
As reported
$
467.5
$
329.5
$
4.40
$
485.5
$
433.6
$
5.71
Impairment of Russian joint
ventures(3)
36.0
23.8
0.32
—
—
—
Restructuring expenses(4)
3.4
2.5
0.03
6.0
5.2
0.07
Gain on full acquisition of IAS joint
venture(5)
—
(3.4
)
(0.05
)
—
—
—
Write-down of investment in Russian
finance joint venture(6)
—
4.8
0.06
—
—
—
Deferred income tax adjustment(7)
—
—
—
—
(67.8
)
(0.89
)
As adjusted
$
507.0
$
357.1
$
4.77
$
491.5
$
371.0
$
4.89
(1)
Net income and net income per share
amounts are after tax.
(2)
Rounding may impact summation of
amounts.
(3)
During the six months ended June 30, 2022,
the Company recorded certain asset impairment charges related to
its Russian joint ventures of approximately $36.0 million,
reflected as “Impairment charges” in its Condensed Consolidated
Statements of Operations, with an offsetting benefit of
approximately $12.2 million included within “Net loss (income)
attributable to noncontrolling interests.”
(4)
The restructuring expenses recorded during
the six months ended June 30, 2022 related primarily to severance
and other related costs associated with the Company’s
rationalization of certain European manufacturing operations. The
restructuring expenses recorded during the six months ended June
30, 2021 related primarily to severance and other related costs
associated with the Company’s rationalization of certain U.S.,
European and South American manufacturing operations and various
administrative offices.
(5)
During the six months ended June 30, 2021,
the Company acquired Appareo Systems, LLC (“Appareo”), which
included the acquisition of the remaining 50% of its former 50% IAS
joint venture with Appareo. The Company recorded a gain associated
with this remaining 50% acquisition of approximately $3.4 million,
which was reflected within “Other expense, net” in its Condensed
Consolidated Statements of Operations.
(6)
During the six months ended June 30, 2021,
the Company recorded a write-down of its investment in its Russian
finance joint venture of approximately $4.8 million, reflected
within “Equity in net earnings of affiliates” in its Condensed
Consolidated Statements of Operations.
(7)
During the six months ended June 30, 2021,
the Company’s income tax provision includes the benefit of a
reversal of approximately $67.8 million related to a valuation
allowance previously established against the Company’s net deferred
tax assets in the United States. Significant improvements in income
from operations in the United States during 2021, as well as
updated forecasts for future years, supported the reversal of the
valuation allowance during the three months ended June 30,
2021.
The following is a reconciliation of targeted net income per
share to adjusted targeted net income per share for the six months
ended June 30, 2022:
Net Income Per Share(1)
As targeted
$11.34 - $11.54
Impairment of Russian joint ventures
0.32
Restructuring expenses
0.03
Gain on full acquisition of IAS joint
venture
(0.05
)
Write-down of investment in Russian
finance joint venture
0.06
As adjusted targeted(2)
$11.70 - $11.90
(1)
Net income per share amount is after
tax.
(2)
The above reconciliation adjustments to
full year 2022 targeted net income per share are based upon
restructuring expenses and the other adjustments incurred during
the six months ended June 30, 2022. Full year expenses or benefits
could differ based on future restructuring activity as well as
other activities.
The following table sets forth, for the three and six months
ended June 30, 2022 and 2021, the impact to net sales of currency
translation by geographical segment (in millions, except
percentages):
Three Months Ended June 30,
Change due to currency
translation
2022
2021
% change from 2021
$
%
North America
$
739.9
$
734.7
0.7
%
$
(5.3
)
(0.7
)%
South America
519.2
278.3
86.6
%
26.0
9.3
%
Europe/Middle East
1,467.6
1,635.2
(10.3
)%
(220.7
)
(13.5
)%
Asia/Pacific/Africa
218.5
231.1
(5.5
)%
(16.5
)
(7.1
)%
$
2,945.2
$
2,879.3
2.3
%
$
(216.5
)
(7.5
)%
Six Months Ended June 30,
Change due to currency
translation
2022
2021
% change from 2021
$
%
North America
$
1,440.9
$
1,345.8
7.1
%
$
(6.9
)
(0.5
)%
South America
875.6
518.8
68.8
%
41.4
8.0
%
Europe/Middle East
2,870.7
2,962.4
(3.1
)%
(344.5
)
(11.6
)%
Asia/Pacific/Africa
443.7
431.0
2.9
%
(26.0
)
(6.0
)%
$
5,630.9
$
5,258.0
7.1
%
$
(336.0
)
(6.4
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220727006108/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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