- Record net sales of $3.1 billion, up 14.5% year-over-year,
driven by North and South America
- North American sales up ~43% year-over-year from growth in
Fendt and Precision Planting products
- Record operating margin of 10.6%, expanded 140 basis points
through pricing and improved mix
- South American operating margin of nearly 19%
- Reaffirms full year operating margin and earnings per share
outlook
AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide
manufacturer and distributor of agricultural equipment and
solutions, reported its results for the third quarter ended
September 30, 2022. Net sales for the third quarter were
approximately $3.1 billion, an increase of approximately 14.5%
compared to the third quarter of 2021. Excluding unfavorable
foreign currency translation of approximately 11.8%, net sales in
the quarter increased approximately 26.3% compared to the third
quarter of 2021. Reported net income was $3.18 per share for the
third quarter of 2022, and adjusted net income(3), which excludes
restructuring expenses, was also $3.18 per share. These results
compare to reported net income of $2.40 per share and adjusted net
income, which excludes restructuring expenses, of $2.41 per share
for the third quarter of 2021.
“We delivered record third quarter sales and earnings driven
through the consistent execution of our farmer-first strategy,
coupled with continued robust market conditions in many of our
regions,” stated Eric Hansotia, AGCO’s Chairman, President and
Chief Executive Officer. “Our solid operational performance and
continued strong pricing overcame ongoing supply chain challenges,
inflationary pressures and significant currency headwinds. Healthy
farm fundamentals are supporting order boards that now stretch well
into 2023 in some regions. The success of our farmer-first
strategy, focused on growing our precision ag business, globalizing
a full-line of our Fendt branded products and expanding our parts
and service business, is generating strong growth in these
margin-rich businesses.”
Mr. Hansotia continued, “Global market conditions remain
positive as favorable farm economics are allowing farmers to
upgrade and replace their aging fleets. At the same time, our smart
technology product lines are in strong demand and are helping to
drive meaningful productivity improvements for our customers
through both retrofitting their current equipment and in our new
product offerings. We will continue to accelerate investments in
premium technology, smart farming solutions and enhanced digital
capabilities to support our farmer-first strategy while helping to
sustainably feed the world.”
Third Quarter Highlights
- Reported regional sales results(1): Europe/Middle East (“EME”)
(4.9)%, North America +42.6%, South America +49.0%,
Asia/Pacific/Africa (“APA”) 3.8%
- Constant currency regional sales results(1)(2)(3): EME +14.6%,
North America +43.5%, South America +49.7%, APA +14.7%
- Regional operating margin performance: EME 10.2%, North America
12.4%, South America 18.8%, APA 13.2%
(1)
As compared to third quarter 2021.
(2)
Excludes currency translation impact.
(3)
See reconciliation of Non-GAAP measures in
appendix.
Net sales for the first nine months of 2022 were approximately
$8.8 billion, an increase of approximately 9.6% compared to the
same period in 2021. Excluding unfavorable foreign currency
translation of approximately 8.2%, net sales for the first nine
months of 2022 increased approximately 17.9% compared to the same
period in 2021. For the first nine months of 2022, reported net
income was $7.58 per share, and adjusted net income(3), excluding
impairment charges, restructuring expenses and other related items,
was $7.95 per share. These results compare to reported net income
of $8.11 per share, and adjusted net income, excluding
restructuring expenses and the reversal of a valuation allowance
previously established against the Company’s deferred tax assets in
the United States, of $7.30 per share for the first nine months of
2021.
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Nine Months Ended September 30, 2022
Change from Prior Year Period
Change from Prior Year Period
North America(1)
(6)%
3%
South America
9%
(3)%
Western Europe(2)
(10)%
(9)%
(1) Excludes compact tractors.
(2) Based on Company estimates.
“Healthy farm income is projected across most of the major
agricultural production regions with elevated crop prices
offsetting higher fuel, fertilizer and other input costs,” stated
Mr. Hansotia. “Despite ongoing supply chain disruptions, favorable
farm economics are expected to generate strong demand across all
the major global markets well into 2023.”
Global industry production and retail sales were down modestly
in the first nine months of 2022 compared to last year's elevated
levels due primarily to supply chain limitations. Industry retail
sales for tractors in North America were down approximately 6% in
the first nine months 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 8% in the first nine months of 2022 compared to the
same period in 2021.
In Western Europe, industry retail tractor sales decreased
approximately 10% in the first nine months of 2022 compared to
strong levels in the same period of 2021. Farmer sentiment in the
region has been negatively impacted by the conflict in Ukraine,
looming energy concerns, and higher input cost inflation. Forecasts
for healthy farm income in Western Europe are expected to support
relatively flat retail demand for equipment in the fourth quarter
of 2022.
South American industry retail sales increased during the first
nine months of 2022 in both Brazil and Argentina compared to 2021
levels. Healthy farm income, supportive exchange rates and
continued expansion in planted acreage are driving increased
investments in high tech farm equipment.
“Disruptions in the global supply chain are continuing to limit
industry production; however, we continue to expect strong demand
in the fourth quarter to support full year 2022 industry retail
sales above 2021 levels in South America, relatively flat sales in
North America and modestly lower sales in Western Europe,”
continued Mr. Hansotia.
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended September 30,
2022
2021
% change from 2021
% change from 2021 due to
currency translation(1)
% change excluding currency
translation
North America
$
910.5
$
638.7
42.6%
(0.9)%
43.5%
South America
571.2
383.3
49.0%
(0.7)%
49.7%
Europe/Middle East
1,390.1
1,462.4
(4.9)%
(19.6)%
14.6%
Asia/Pacific/Africa
249.8
240.7
3.8%
(10.9)%
14.7%
Total
$
3,121.6
$
2,725.1
14.5%
(11.8)%
26.3%
Nine Months Ended September 30,
2022
2021
% change from 2021
% change from 2021 due to
currency translation(1)
% change excluding currency
translation
North America
$
2,351.4
$
1,984.5
18.5%
(0.6)%
19.1%
South America
1,446.8
902.1
60.4%
4.3%
56.1%
Europe/Middle East
4,260.8
4,424.8
(3.7)%
(14.3)%
10.6%
Asia/Pacific/Africa
693.5
671.7
3.2%
(7.8)%
11.0%
Total
$
8,752.5
$
7,983.1
9.6%
(8.2)%
17.9%
(1) See Footnotes for additional
disclosures.
North America
Net sales in the North American region grew 19.1% in the first
nine months of 2022 compared to the same period of 2021, excluding
the negative impact of currency translation. The increase resulted
primarily from increased sales of tractors and precision planting
equipment along with the effects of pricing to mitigate
inflationary cost pressures. Income from operations for the third
quarter of 2022 was approximately $76.9 million higher compared to
the same period in 2021, which drove an increase in income from
operations for the first nine months of 2022 by approximately $3.8
million compared to 2021. Operating income benefited from higher
sales and production, but was mostly offset by material and
logistics cost inflation, higher production costs and increased
operating expenses.
South America
South American net sales increased 56.1% in the first nine
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 nine months of
2022 increased by approximately $155.4 million compared to the same
period in 2021, and operating margins reached approximately 16.5%.
The improved South America results reflect the benefit of higher
sales and production, pricing in excess of material cost inflation
and a favorable sales mix.
Europe/Middle East
Europe/Middle East net sales increased 10.6% in the first nine
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. Strong growth in France, Turkey, Central Europe
and Scandinavia accounted for most of the increase. Income from
operations decreased approximately $72.5 million in the first nine
months of 2022, compared to the same period in 2021. The decline
was the result of foreign currency translation, a weaker sales mix
and higher production costs.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa increased 11.0%, excluding the
negative impact of currency translation, in the first nine months
of 2022 compared to the same period in 2021. Higher sales in
Australia and Africa were partially offset by lower sales in China.
Income from operations improved by approximately $21.5 million in
the first nine months of 2022 and operating margins expanded by
approximately 2.7% 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 remains 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 ranging from $12.5 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 Tuesday, November 1,
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.
- We cannot predict or control the impact of the conflict in
Ukraine on our business. Already it has resulted in reduced sales
in Ukraine as farmers have experienced economic distress,
difficulties in harvesting and delivering their products, as well
as general uncertainty. There is a potential for natural gas
shortages, as well as shortages in other energy sources, throughout
Europe, which could negatively impact our production in Europe both
directly and through interrupting the supply of parts and
components that we use. It is unclear how long these conditions
will continue, or whether they will worsen, and what the ultimate
impact on our business will be.
- 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, the conflict in Ukraine, 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 approximately 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 cyberattack, 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 continue to review and improve our safeguards
to minimize our exposure to future attacks. 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)
September 30, 2022
December 31, 2021
ASSETS
Current Assets:
Cash, cash equivalents and restricted
cash
$
607.0
$
889.1
Accounts and notes receivable, net
1,175.9
991.5
Inventories, net
3,324.7
2,593.7
Other current assets
593.9
539.8
Total current assets
5,701.5
5,014.1
Property, plant and equipment, net
1,419.4
1,464.8
Right-of-use lease assets
145.8
154.1
Investments in affiliates
416.5
413.5
Deferred tax assets
224.3
169.3
Other assets
279.5
293.3
Intangible assets, net
367.6
392.2
Goodwill
1,263.5
1,280.8
Total assets
$
9,818.1
$
9,182.1
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
99.3
$
2.1
Short-term borrowings
261.8
90.8
Accounts payable
1,171.4
1,078.3
Accrued expenses
1,896.9
2,062.2
Other current liabilities
188.5
221.2
Total current liabilities
3,617.9
3,454.6
Long-term debt, less current portion and
debt issuance costs
1,845.7
1,411.2
Operating lease liabilities
111.9
115.5
Pension and postretirement health care
benefits
199.6
209.0
Deferred tax liabilities
108.9
116.9
Other noncurrent liabilities
413.5
431.1
Total liabilities
6,297.5
5,738.3
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.7
0.7
Additional paid-in capital
21.8
3.9
Retained earnings
5,350.3
5,182.2
Accumulated other comprehensive loss
(1,852.4
)
(1,770.9
)
Total AGCO Corporation stockholders’
equity
3,520.4
3,415.9
Noncontrolling interests
0.2
27.9
Total stockholders’ equity
3,520.6
3,443.8
Total liabilities and stockholders’
equity
$
9,818.1
$
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 September
30,
2022
2021
Net sales
$
3,121.6
$
2,725.1
Cost of goods sold
2,382.7
2,098.4
Gross profit
738.9
626.7
Selling, general and administrative
expenses
287.5
266.1
Engineering expenses
104.7
92.8
Amortization of intangibles
14.7
14.1
Restructuring expenses
1.0
1.4
Bad debt (credit) expense
(1.1
)
0.4
Income from operations
332.1
251.9
Interest expense, net
2.3
1.2
Other expense, net
33.1
14.1
Income before income taxes and equity in
net earnings of affiliates
296.7
236.6
Income tax provision
74.2
70.1
Income before equity in net earnings of
affiliates
222.5
166.5
Equity in net earnings of affiliates
15.4
15.9
Net income
237.9
182.4
Net income attributable to noncontrolling
interests
—
(1.1
)
Net income attributable to AGCO
Corporation and subsidiaries
$
237.9
$
181.3
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
3.19
$
2.41
Diluted
$
3.18
$
2.40
Cash dividends declared and paid per
common share
$
0.24
$
0.20
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.6
75.2
Diluted
74.9
75.6
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)
Nine Months Ended September
30,
2022
2021
Net sales
$
8,752.5
$
7,983.1
Cost of goods sold
6,691.8
6,093.5
Gross profit
2,060.7
1,889.6
Selling, general and administrative
expenses
861.1
803.0
Engineering expenses
312.1
296.3
Amortization of intangibles
45.4
45.8
Impairment charges
36.0
—
Restructuring expenses
4.4
7.4
Bad debt expense (credit)
2.1
(0.3
)
Income from operations
799.6
737.4
Interest expense, net
8.6
6.8
Other expense, net
72.3
40.2
Income before income taxes and equity in
net earnings of affiliates
718.7
690.4
Income tax provision
205.9
121.4
Income before equity in net earnings of
affiliates
512.8
569.0
Equity in net earnings of affiliates
39.7
49.2
Net income
552.5
618.2
Net loss (income) attributable to
noncontrolling interests
14.9
(3.3
)
Net income attributable to AGCO
Corporation and subsidiaries
$
567.4
$
614.9
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
7.60
$
8.16
Diluted
$
7.58
$
8.11
Cash dividends declared and paid per
common share
$
5.16
$
4.53
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.6
75.3
Diluted
74.9
75.8
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in
millions)
Nine Months Ended September
30,
2022
2021
Cash flows from operating activities:
Net income
$
552.5
$
618.2
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation
157.1
164.2
Amortization of intangibles
45.4
45.8
Stock compensation expense
25.4
21.1
Impairment charges
36.0
—
Equity in net earnings of affiliates, net
of cash received
(39.1
)
(48.6
)
Deferred income tax provision
(benefit)
5.7
(67.3
)
Other
2.3
12.2
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(302.2
)
(247.4
)
Inventories, net
(951.7
)
(868.5
)
Other current and noncurrent assets
(74.9
)
(131.3
)
Accounts payable
199.1
300.4
Accrued expenses
22.5
102.0
Other current and noncurrent
liabilities
26.8
140.7
Total adjustments
(847.6
)
(576.7
)
Net cash (used in) provided by operating
activities
(295.1
)
41.5
Cash flows from investing activities:
Purchases of property, plant and
equipment
(270.5
)
(198.7
)
Proceeds from sale of property, plant and
equipment
2.5
3.9
Investment in unconsolidated
affiliates
(1.6
)
(1.2
)
Purchase of businesses, net of cash
acquired
(111.3
)
(16.8
)
Other
—
(2.4
)
Net cash used in investing activities
(380.9
)
(215.2
)
Cash flows from financing activities:
Proceeds from indebtedness, net
887.7
78.6
Purchases and retirement of common
stock
—
(75.0
)
Payment of dividends to stockholders
(386.4
)
(343.6
)
Payment of minimum tax withholdings on
stock compensation
(20.0
)
(34.1
)
Payment of debt issuance costs
(0.2
)
—
Distributions to noncontrolling
interest
(11.5
)
(3.5
)
Net cash provided by (used in) financing
activities
469.6
(377.6
)
Effects of exchange rate changes on cash,
cash equivalents and restricted cash
(75.7
)
(30.8
)
Decrease in cash, cash equivalents and
restricted cash
(282.1
)
(582.1
)
Cash, cash equivalents and restricted
cash, beginning of period
889.1
1,119.1
Cash, cash equivalents and restricted
cash, end of period
$
607.0
$
537.0
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Cost of goods sold
$
0.4
$
0.2
$
1.0
$
0.8
Selling, general and administrative
expenses
7.4
5.8
24.4
20.5
Total stock compensation expense
$
7.8
$
6.0
$
25.4
$
21.3
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 nine months ended September
30, 2022, the Company recorded an additional $1.0 million and $4.4
million, respectively, of severance costs associated with further
rationalizations in connection with the termination of
approximately 75 employees, and paid approximately $3.4 million and
$10.1 million, respectively, of severance costs. The remaining $7.6
million of severance and other related costs as of September 30,
2022, inclusive of approximately $1.4 million of negative foreign
currency translation impacts, are expected to be paid primarily
during 2022.
4. INDEBTEDNESS
Long-term debt at September 30, 2022 and December 31, 2021
consisted of the following (in millions):
September 30, 2022
December 31, 2021
Credit facility, expires 2023
800.0
—
1.002% Senior term loan due 2025
244.3
283.7
Senior term loans due between 2023 and
2028
312.2
445.9
0.800% Senior Notes Due 2028
586.4
680.8
Other long-term debt
5.7
7.7
Debt issuance costs
(3.6
)
(4.8
)
1,945.0
1,413.3
Less:
Current portion of other long-term
debt
(99.3
)
(2.1
)
Total long-term indebtedness, less current
portion
$
1,845.7
$
1,411.2
In April 2022, the Company entered into a short-term
multi-currency revolving credit facility of €225.0 million with
Co�peratieve Rabobank U.A., or “Rabobank.” The Company borrowed
$240.0 million in U.S. dollars (or approximately €225.0 million as
of April 26, 2022), with a maturity date of March 31, 2023, which
remained outstanding as of September 30, 2022. 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. If, on the last business day
of any quarter, the outstanding borrowings on the short-term
multi-currency revolving credit facility exceed the U.S. dollar
equivalent of €225.0 million (as of that date) by 5% or more, the
Company is required to repay the amount above such 5%
allowance.
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 $97.7 million as of September 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 September
30, 2022, the Company had no outstanding borrowings under the
revolving credit facility and had the ability to borrow €100.0
million (or approximately $97.7 million).
As of September 30, 2022 and December 31, 2021, the Company had
short-term borrowings due within one year of approximately $261.8
million and $90.8 million, respectively. The balance as of
September 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 September 30, 2022 and December 31, 2021 were as
follows (in millions):
September 30, 2022
December 31, 2021
Finished goods
$
925.6
$
718.2
Repair and replacement parts
715.0
697.8
Work in process
647.4
282.8
Raw materials
1,036.7
894.9
Inventories, net
$
3,324.7
$
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
September 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 September 30, 2022 and December 31, 2021, the cash
received from these arrangements was approximately $170.8 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 $20.4 million and
$38.5 million, respectively, during the three and nine months ended
September 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 $7.4
million and $17.1 million, respectively, during the three and nine
months ended September 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 September 30, 2022 and December 31, 2021,
these finance joint ventures had approximately $45.8 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 nine months ended September 30, 2022 and 2021 is as
follows (in millions, except per share data):
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
237.9
$
181.3
$
567.4
$
614.9
Weighted average number of common shares
outstanding
74.6
75.2
74.6
75.3
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
3.19
$
2.41
$
7.60
$
8.16
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
237.9
$
181.3
$
567.4
$
614.9
Weighted average number of common shares
outstanding
74.6
75.2
74.6
75.3
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
75.6
74.9
75.8
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
3.18
$
2.40
$
7.58
$
8.11
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 nine months ended
September 30, 2022 and 2021 are as follows (in millions):
Three Months Ended September
30,
North America
South America
Europe/ Middle East
Asia/Pacific/ Africa
Consolidated
2022
Net sales
$
910.5
$
571.2
$
1,390.1
$
249.8
$
3,121.6
Income from operations
112.7
107.5
142.1
33.0
395.3
2021
Net sales
$
638.7
$
383.3
$
1,462.4
$
240.7
$
2,725.1
Income from operations
35.8
44.4
192.3
28.6
301.1
Nine Months Ended September
30,
North America
South America
Europe/ Middle East
Asia/Pacific/ Africa
Consolidated
2022
Net sales
$
2,351.4
$
1,446.8
$
4,260.8
$
693.5
$
8,752.5
Income from operations
218.2
239.1
465.6
97.7
1,020.6
2021
Net sales
$
1,984.5
$
902.1
$
4,424.8
$
671.7
$
7,983.1
Income from operations
214.4
83.7
538.1
76.2
912.4
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Segment income from operations
$
395.3
$
301.1
$
1,020.6
$
912.4
Impairment charges
—
—
(36.0
)
—
Corporate expenses
(40.1
)
(27.9
)
(110.8
)
(101.3
)
Amortization of intangibles
(14.7
)
(14.1
)
(45.4
)
(45.8
)
Stock compensation expense
(7.4
)
(5.8
)
(24.4
)
(20.5
)
Restructuring expenses
(1.0
)
(1.4
)
(4.4
)
(7.4
)
Consolidated income from operations
$
332.1
$
251.9
$
799.6
$
737.4
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 nine months ended September 30, 2022 and
2021 (in millions, except per share data):
Three Months Ended September
30,
2022
2021
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)(2)
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
As reported
$
332.1
$
237.9
$
3.18
$
251.9
$
181.3
$
2.40
Restructuring expenses(3)
1.0
0.6
0.01
1.4
1.1
0.01
As adjusted
$
333.0
$
238.5
$
3.18
$
253.3
$
182.5
$
2.41
(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 September 30, 2022 related primarily to
severance and other related costs associated with the Company’s
South American manufacturing operations. The restructuring expenses
recorded during the three months ended September 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.
Nine Months Ended September
30,
2022
2021
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)
As reported
$
799.6
$
567.4
$
7.58
$
737.4
$
614.9
$
8.11
Impairment of Russian joint
ventures(3)
36.0
23.8
0.32
—
—
—
Restructuring expenses(4)
4.4
3.1
0.04
7.4
6.3
0.08
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
$
840.0
$
595.6
$
7.95
$
744.7
$
553.4
$
7.30
(1)
Net income and net income per share
amounts are after tax.
(2)
Rounding may impact summation of
amounts.
(3)
During the nine months ended September 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 nine months ended September 30, 2022 related primarily to
severance and other related costs associated with the Company’s
European and South American manufacturing operations. The
restructuring expenses recorded during the nine months ended
September 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 nine months ended September 30,
2022, 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 nine months ended September 30,
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.
(7)
During the nine months ended September 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 nine months ended September 30,
2021.
The following is a reconciliation of targeted net income per
share to adjusted targeted net income per share for the full year
ended December 31, 2022:
Net Income Per Share(1)
As targeted
$11.33 - $11.53
Impairment of Russian joint ventures
0.32
Restructuring expenses
0.04
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 nine months ended September 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 nine months
ended September 30, 2022 and 2021, the impact to net sales of
currency translation by geographical segment (in millions, except
percentages):
Three Months Ended September
30,
Change due to currency
translation
2022
2021
% change from 2021
$
%
North America
$
910.5
$
638.7
42.6
%
$
(5.9
)
(0.9
)%
South America
571.2
383.3
49.0
%
(2.5
)
(0.7
)%
Europe/Middle East
1,390.1
1,462.4
(4.9
)%
(286.4
)
(19.6
)%
Asia/Pacific/Africa
249.8
240.7
3.8
%
(26.2
)
(10.9
)%
$
3,121.6
$
2,725.1
14.5
%
$
(321.0
)
(11.8
)%
Nine Months Ended September
30,
Change due to currency
translation
2022
2021
% change from 2021
$
%
North America
$
2,351.4
$
1,984.5
18.5
%
$
(12.8
)
(0.6
)%
South America
1,446.8
902.1
60.4
%
38.9
4.3
%
Europe/Middle East
4,260.8
4,424.8
(3.7
)%
(630.9
)
(14.3
)%
Asia/Pacific/Africa
693.5
671.7
3.2
%
(52.2
)
(7.8
)%
$
8,752.5
$
7,983.1
9.6
%
$
(657.0
)
(8.2
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221031005830/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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