AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide
manufacturer and distributor of agricultural equipment, reported
net sales of approximately $2.0 billion for the second quarter of
2016, a decrease of approximately 3.6% compared to net sales of
approximately $2.1 billion for the second quarter of 2015. Reported
net income was $0.61 per share for the second quarter of 2016 and
adjusted net income, excluding restructuring expenses and a
non-cash deferred income tax adjustment, was $1.02 per share. These
results compare to reported net income of $1.22 per share and
adjusted net income, excluding restructuring expenses, of $1.25 per
share for the second quarter of 2015. Excluding unfavorable
currency translation impacts of approximately 2.5%, net sales in
the second quarter of 2016 decreased approximately 1.1% compared to
the second quarter of 2015. During the second quarter of 2016, AGCO
recorded a non-cash adjustment to increase the valuation allowance
on its U.S. deferred income tax assets of approximately $31.6
million, or $0.39 per share. The adjustment does not affect the
Company’s ability to utilize the deferred income tax assets with
future taxable income in the United States.
Net sales for the first six months of 2016 were approximately
$3.6 billion, a decrease of approximately 5.8% compared to the same
period in 2015. Excluding unfavorable currency translation impacts
of approximately 3.7%, net sales for the first six months of 2016
decreased approximately 2.0% compared to the same period in 2015.
For the first six months of 2016, reported net income was $0.70 per
share and adjusted net income, excluding restructuring expenses and
a non-cash deferred income tax adjustment, was $1.12 per share.
These results compare to reported net income of $1.55 per share and
adjusted net income, excluding restructuring expenses, of $1.67 per
share for the first six months of 2015.
Second Quarter Highlights
- Regional sales results(1): North
America (10.2)%, Europe/Africa/Middle East (“EAME”) +4.6%, South
America (14.3)%, Asia/Pacific (“APAC”) +25.9%
- Regional operating margin performance:
EAME 12.1%, North America 4.7%, South America 0.0%, APAC 2.0%
- Full-year adjusted earnings per share
guidance remains at $2.30
- Share repurchase program reduced
outstanding shares by 1.4 million during the second quarter and 2.8
million during the first six months of 2016
(1)As compared to second quarter 2015, excludes currency
translation impact. See reconciliation in appendix.
“Challenging market conditions shaped AGCO’s second quarter as
our industry continued to operate at a low point in the
agricultural equipment cycle,” stated Martin Richenhagen, AGCO’s
Chairman, President and Chief Executive Officer. “In the midst of a
weaker industry environment, we continued to deliver quality
products and service to our customers, while aggressively managing
our expenses and working capital. Our second quarter results were
highlighted by solid margin performance, especially in our EAME and
APAC regions, where operating margins improved during the second
quarter compared to the same period in 2015. We are also managing
for the long-term during this weak demand period by increasing the
level of investment in product development in order to provide
industry leading products and service levels for our customers. We
have a full slate of new product introductions planned for the
second half of 2016, ranging from the most powerful,
technology-rich tractor on a conventional frame to highly efficient
low and medium horsepower tractors. These new products are aimed at
improving our competitive position in the global marketplace and
increasing our margins in the years ahead."
Market Update
Industry Unit Retail Sales
Six months ended June 30, 2016
Tractors
Change from
Prior Year Period
Combines
Change from
Prior Year Period
North America(1)
(10)% (19)% South America (30)% (15)% Western Europe (1)% (9)%
(1)Excludes compact tractors.
“After a brief weather-related run up in the second quarter,
commodity prices have fallen below last year’s levels,” continued
Mr. Richenhagen. “Crops in the United States have emerged early and
are in excellent condition through July. The USDA is estimating
grain inventories will grow during 2016, further pressuring
commodity prices. Against this challenging backdrop, industry
demand remains weak across all the major markets. Industry retail
sales in North America declined in the first half of 2016, with a
significant drop in the large producer segment. Sales of
high-horsepower tractors, combines, sprayers and grain storage and
handling equipment all declined significantly. Higher industry
sales of small tractors, due to more normal conditions in the
livestock sector and general economy, have provided a partial
offset to the decline in large agricultural equipment. In Western
Europe, first half industry sales declined more modestly. Margins
for dairy producers remained weak and lower commodity prices kept
market demand soft in the row crop segment. Industry sales declines
were most pronounced in the United Kingdom and Germany. The
declines were partially offset by growth in France stimulated by
tax incentives for equipment purchases, which have been extended
through the end of 2016. Reduced industry sales in South America
were the result of lower demand in Brazil due to political and
economic uncertainty that continues to impact farmer confidence.
More supportive government policies in Argentina have contributed
to higher sales in that market. Looking past the current operating
environment, our long-term view remains optimistic, with expanding
demand for grain supporting farm economics and healthy growth in
our industry.”
Regional Results
AGCO Regional Net Sales (in
millions)
Three Months Ended June 30, 2016
2015
% change
from 2015
% change from
2015 due to
currency translation(1)
North America $ 498.9 $ 563.1 (11.4)% (1.2)% South America 203.4
280.3 (27.4)% (13.1)% Europe/Africa/Middle East 1,185.3 1,137.0
4.2% (0.4)% Asia/Pacific 108.0 88.9 21.5% (4.4)%
Total $ 1,995.6 $ 2,069.3 (3.6)% (2.5)%
Six
Months Ended June 30, 2016 2015
% change
from 2015
% change from
2015 due to
currency translation(1)
North America $ 907.3 $ 1,035.6 (12.4)% (1.6)% South America 347.6
529.3 (34.3)% (16.8)% Europe/Africa/Middle East 2,109.4 2,045.1
3.1% (1.3)% Asia/Pacific 190.6 161.9 17.7% (5.3)%
Total $ 3,554.9 $ 3,771.9 (5.8)% (3.7)%
(1)
See appendix for additional disclosures
North America
Net sales in AGCO’s North America region decreased 10.8% in the
first six months of 2016 compared to the same period of 2015,
excluding the negative impact of currency translation. Dealer
inventory reduction efforts and softer industry demand,
particularly from the row crop sector, contributed to lower sales.
Sales declines were most significant in high margin high horsepower
tractors, sprayers and grain storage and handling equipment. Lower
sales and production volumes, along with a weaker sales mix,
contributed to a reduction in income from operations of
approximately $52.6 million for the first six months of 2016
compared to the same period in 2015.
South America
South American net sales decreased 17.5% in the first six months
of 2016 compared to the first six months of 2015, excluding the
impact of unfavorable currency translation. Significant sales
declines in Brazil were partially offset by growth in Argentina.
Income from operations decreased approximately $27.9 million for
the first six months of 2016 compared to the same period in 2015
due to lower sales and production volumes, the negative impact of
currency translation and a weaker mix of sales.
Europe/Africa/Middle East
AGCO’s EAME net sales increased 4.4% in the first six months of
2016 compared to the same period in 2015, excluding unfavorable
currency translation impacts. Higher sales in France, Scandinavia
and Finland were partially offset by sales declines in Germany and
Africa. Income from operations decreased approximately $1.5 million
for the first six months of 2016, compared to the same period in
2015, due to a weaker sales mix and higher engineering
expenses.
Asia/Pacific
Net sales in AGCO’s Asia/Pacific region, excluding the negative
impact of currency translation, increased 23.0% in the first six
months of 2016 compared to the same period in 2015 due primarily to
increased sales in China. Income from operations improved
approximately $22.2 million in the first six months of 2016,
compared to the same period in 2015, due to higher sales and
production levels in China.
Outlook
Weak global demand for agricultural equipment is expected to
negatively impact AGCO’s sales and earnings in 2016. AGCO’s net
sales for 2016 are expected to reach $7.2 billion. Gross and
operating margins are expected to be below 2015 levels due to the
negative impact of lower sales and production volumes along with a
weaker sales mix. Benefits from the Company’s cost reduction
initiatives are expected to partially offset the volume-related
impacts. Based on these assumptions, 2016 reported earnings per
share are targeted at approximately $1.85 and adjusted earnings per
share, excluding restructuring expenses and the non-cash deferred
income tax adjustment, are targeted at approximately $2.30.
AGCO will be hosting a conference call with respect to this
earnings announcement at 10:00 a.m. Eastern Time on Thursday,
August 4, 2016. 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, sales, industry demand, market
conditions, commodity prices, currency translation, farm income
levels, margin levels, 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.
- Our financial results depend entirely
upon the agricultural industry, and factors that adversely affect
the agricultural industry generally, including declines in the
general economy, 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 take place outside the United States, and, as a
result, we are exposed to risks related to foreign laws, taxes,
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.
- 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 account receivables from dealers and end
customers, and we would be adversely impacted if the collectability
of these receivables was not consistent with historical experience;
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, including uncertainty associated with the
Euro, 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, which requires substantial expenditures.
- Our production levels and capacity
constraints at our facilities, including those resulting from plant
expansions and systems upgrades at our manufacturing facilities,
could adversely affect our results.
- 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.
- 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. We also are
subject to raw material price fluctuations, which can adversely
affect our manufacturing costs.
- 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 profitability would decline.
- We have a substantial amount of
indebtedness, and, as result, we are subject to certain restrictive
covenants and payment obligations that may adversely affect our
ability to operate and expand our business.
- On June 23, 2016, the U.K. held a
referendum in which voters approved an exit from the E.U., commonly
referred to as “Brexit.” As a result of the referendum, it is
expected that the British government will begin negotiating the
terms of the U.K.’s future relationship with the E.U. Although it
is unknown what those terms will be, it is possible that there will
be greater restrictions on imports and exports between the U.K. and
E.U. countries, increased regulatory complexities, and increased
currency volatility, any of which could adversely affect our
operations and financial results.
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, 2015 and subsequent Form 10-Qs. 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 supports
more productive farming through its full line of equipment and
related services. AGCO products are sold through five core brands,
Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®, supported
by Fuse® precision technologies and farm optimization services, and
are distributed globally through a combination of approximately
3,000 independent dealers and distributors in more than 140
countries. Founded in 1990, AGCO is headquartered
in Duluth, GA, USA. In 2015, AGCO had net sales of $7.5
billion. 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, 2016 December 31, 2015
ASSETS Current
Assets: Cash and cash equivalents $ 324.7 $ 426.7 Accounts and
notes receivable, net 946.0 836.8 Inventories, net 1,764.1 1,423.4
Other current assets 271.4 211.4 Total current assets
3,306.2 2,898.3 Property, plant and equipment, net 1,355.1 1,347.1
Investment in affiliates 424.7 392.9 Deferred tax assets 87.8 100.7
Other assets 145.2 136.5 Intangible assets, net 520.8 507.7
Goodwill 1,176.1 1,114.5 Total assets $ 7,015.9
$ 6,497.7
LIABILITIES AND STOCKHOLDERS’
EQUITY Current Liabilities: Current portion of long-term debt $
93.7 $ 89.0 Senior term loan — 217.2 Accounts payable 741.1 625.6
Accrued expenses 1,125.7 1,106.9 Other current liabilities 185.6
146.7 Total current liabilities 2,146.1 2,185.4
Long-term debt, less current portion and debt issuance costs
1,378.7 925.2 Pensions and postretirement health care benefits
218.1 233.9 Deferred tax liabilities 93.9 86.4 Other noncurrent
liabilities 196.3 183.5 Total liabilities 4,033.1
3,614.4 Stockholders’ Equity: AGCO Corporation
stockholders’ equity: Common stock 0.8 0.8 Additional paid-in
capital 191.5 301.7 Retained earnings 4,032.5 3,996.0 Accumulated
other comprehensive loss (1,301.1 ) (1,460.2 ) Total AGCO
Corporation stockholders’ equity 2,923.7 2,838.3 Noncontrolling
interests 59.1 45.0 Total stockholders’ equity
2,982.8 2,883.3 Total liabilities and stockholders’
equity $ 7,015.9 $ 6,497.7
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, 2016 2015
Net sales $ 1,995.6 $ 2,069.3 Cost of goods sold 1,568.6
1,619.7 Gross profit 427.0 449.6 Selling, general and
administrative expenses 217.8 213.1 Engineering expenses 77.1 71.7
Restructuring expenses 2.1 4.0 Amortization of intangibles 11.4
10.9 Income from operations 118.6 149.9 Interest expense,
net 11.9 11.3 Other expense, net 16.0 9.5 Income before
income taxes and equity in net earnings of affiliates 90.7 129.1
Income tax provision 54.8 37.9 Income before equity in net
earnings of affiliates 35.9 91.2 Equity in net earnings of
affiliates 13.5 14.4 Net income 49.4 105.6 Net loss
attributable to noncontrolling interests 0.9 1.5 Net income
attributable to AGCO Corporation and subsidiaries $ 50.3 $
107.1 Net income per common share attributable to AGCO Corporation
and subsidiaries: Basic $ 0.61 $ 1.22 Diluted $ 0.61
$ 1.22 Cash dividends declared and paid per common share $ 0.13
$ 0.12 Weighted average number of common and common
equivalent shares outstanding: Basic 82.0 87.6 Diluted 82.1
87.7
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, 2016 2015 Net
sales $ 3,554.9 $ 3,771.9 Cost of goods sold 2,813.2 2,974.4
Gross profit 741.7 797.5 Selling, general and administrative
expenses 429.0 424.3 Engineering expenses 148.3 140.5 Restructuring
expenses 4.0 14.6 Amortization of intangibles 22.4 21.4
Income from operations 138.0 196.7 Interest expense, net 22.4 21.5
Other expense, net 27.3 19.3 Income before income taxes and
equity in net earnings of affiliates 88.3 155.9 Income tax
provision 54.4 48.5 Income before equity in net earnings of
affiliates 33.9 107.4 Equity in net earnings of affiliates 25.7
28.1 Net income 59.6 135.5 Net (income) loss attributable to
noncontrolling interests (1.5 ) 1.7 Net income attributable to AGCO
Corporation and subsidiaries $ 58.1 $ 137.2 Net income per
common share attributable to AGCO Corporation and subsidiaries:
Basic $ 0.70 $ 1.55 Diluted $ 0.70 $ 1.55 Cash
dividends declared and paid per common share $ 0.26 $ 0.24
Weighted average number of common and common equivalent shares
outstanding: Basic 82.5 88.2 Diluted 82.6 88.3
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, 2016 2015
Cash flows from operating activities: Net income $ 59.6 $
135.5
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation 111.9 108.2 Deferred debt issuance cost amortization
0.7 1.2 Amortization of intangibles 22.4 21.4 Stock compensation
expense 11.4 7.1 Proceeds from termination of hedging instrument
7.3 — Equity in net earnings of affiliates, net of cash received
(9.1 ) (22.9 ) Deferred income tax provision 14.6 (3.0 ) Other (0.3
) (0.2 )
Changes in operating assets and
liabilities, net of effects from purchase of businesses:
Accounts and notes receivable, net (61.1 ) (147.4 ) Inventories,
net (263.3 ) (170.9 ) Other current and noncurrent assets (34.3 )
(33.1 ) Accounts payable 80.6 149.5 Accrued expenses 0.3 (17.4 )
Other current and noncurrent liabilities (5.3 ) — Total
adjustments (124.2 ) (107.5 ) Net cash (used in) provided by
operating activities (64.6 ) 28.0 Cash flows from investing
activities: Purchases of property, plant and equipment (72.0 )
(101.3 ) Proceeds from sale of property, plant and equipment 0.9
0.8 Purchase of businesses, net of cash acquired (38.8 ) (18.6 )
Investment in consolidated affiliates, net of cash acquired (11.8 )
— Investment in unconsolidated affiliates — (5.2 ) Restricted cash
0.4 — Net cash used in investing activities (121.3 )
(124.3 ) Cash flows from financing activities: Proceeds from debt
obligations, net 214.1 432.9 Purchases and retirement of common
stock (120.0 ) (125.0 ) Payment of dividends to stockholders (21.6
) (21.3 ) Payment of minimum tax withholdings on stock compensation
(1.8 ) (6.0 ) Payment of debt issuance costs (0.5 ) (0.7 ) Net cash
provided by financing activities 70.2 279.9 Effects
of exchange rate changes on cash and cash equivalents 13.7
(49.1 ) (Decrease) increase in cash and cash equivalents (102.0 )
134.5 Cash and cash equivalents, beginning of period 426.7
363.7 Cash and cash equivalents, end of period $ 324.7
$ 498.2
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:
Three Months Ended June 30, Six Months Ended June 30, 2016
2015 2016 2015 Cost of goods sold $ 0.5 $ 0.3 $ 0.9 $
0.5 Selling, general and administrative expenses 5.7 4.7
10.8 6.9 Total stock compensation expense $ 6.2
$ 5.0 $ 11.7 $ 7.4
2. RESTRUCTURING EXPENSES
During 2014 and 2015, the Company announced and initiated
several actions to rationalize employee headcount at various
manufacturing facilities and administrative offices located in
Europe, China, South America and the United States. The aggregate
headcount reduction of approximately 2,100 employees during 2014
and 2015 was initiated in order to reduce costs in response to
softening global market demand and reduced production volumes.
During 2014 and 2015, the Company expensed and paid an aggregate of
$68.7 million and $48.5 million, respectively, associated with
these rationalizations, of which a majority related to severance
and other related costs. The Company had approximately $16.9
million of severance and related costs accrued as of
December 31, 2015. During the six months ended June 30,
2016, the Company recorded an additional $4.0 million of severance
and related costs associated with further rationalizations in the
United States, South America and Europe, associated with the
termination of approximately 300 employees, and paid approximately
$6.6 million of severance and associated costs. The remaining $14.6
million of accrued severance and other related costs as of
June 30, 2016, inclusive of approximately $0.3 million of
positive foreign currency translation impacts, are expected to be
paid primarily during 2016.
3. INDEBTEDNESS
Indebtedness at June 30, 2016 and
December 31, 2015 consisted of the following:
June 30, 2016 December 31, 2015 1.056% Senior term loan due
2020 $ 221.7 $ 217.2 Credit facility, expires 2020 455.9 338.9
Senior term loan due 2021 332.6 — 5⅞% Senior notes due 2021 307.3
297.4 4½% Senior term loan due 2016 — 217.2 Other long-term debt
158.7 164.3 Debt issuance costs (3.8 ) (3.6 ) 1,472.4 1,231.4 Less:
Current portion of other long-term debt (93.7 ) (89.0 ) 4½% Senior
term loan due 2016 — (217.2 ) Total indebtedness, less
current portion $ 1,378.7 $ 925.2
4. INVENTORIES
Inventories at June 30, 2016 and
December 31, 2015 were as follows:
June 30, 2016 December 31, 2015 Finished goods $ 759.7 $
523.1 Repair and replacement parts 560.2 515.4 Work in process
118.9 97.5 Raw materials 325.3 287.4 Inventories, net $
1,764.1 $ 1,423.4
5. ACCOUNTS RECEIVABLE SALES AGREEMENTS
At June 30, 2016 and December 31, 2015, the Company
had accounts receivable sales agreements that permit the sale, on
an ongoing basis, of a majority of its wholesale receivables in
North America and Europe to its 49% owned U.S., Canadian and
European finance joint ventures. The Company also had an accounts
receivable sales agreement that permits the sale, on an ongoing
basis, of a portion of its wholesale receivables in Brazil to its
Brazilian finance joint venture. As of June 30, 2016 and
December 31, 2015, the cash received from receivables sold
under the U.S., Canadian, European and Brazilian accounts
receivable sales agreements was approximately $1.3 billion and $1.1
billion, 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 $4.7 million and $9.5
million during the three and six months ended June 30, 2016,
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 $4.4 million and $9.4
million during the three and six months ended June 30, 2015,
respectively.
The Company’s finance joint ventures in Brazil and Australia
also provide wholesale financing directly to the Company’s dealers.
As of June 30, 2016 and December 31, 2015, these finance
joint ventures had approximately $20.7 million and $17.7 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.
6. 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, 2016 and 2015 is as
follows:
Three Months Ended June 30, Six Months
Ended June 30, 2016 2015 2016 2015
Basic net income per share: Net income attributable to AGCO
Corporation and subsidiaries $ 50.3 $ 107.1 $ 58.1
$ 137.2 Weighted average number of common shares outstanding
82.0 87.6 82.5 88.2 Basic net income per share
attributable to AGCO Corporation and subsidiaries $ 0.61 $
1.22 $ 0.70 $ 1.55 Diluted net income per share: Net
income attributable to AGCO Corporation and subsidiaries $ 50.3
$ 107.1 $ 58.1 $ 137.2 Weighted average number
of common shares outstanding 82.0 87.6 82.5 88.2 Dilutive
stock-settled appreciation rights, performance share awards and
restricted stock units 0.1 0.1 0.1 0.1
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net
income per share 82.1 87.7 82.6 88.3 Diluted
net income per share attributable to AGCO Corporation and
subsidiaries $ 0.61 $ 1.22 $ 0.70 $ 1.55
Share Repurchase Program
During the six months ended June 30, 2016, the Company
entered into accelerated share repurchase (“ASR”) agreements with a
financial institution to repurchase an aggregate of $120.0 million
of shares of the Company’s common stock. The Company received
approximately 2,349,735 shares during the six months ended
June 30, 2016 related to the ASRs. All shares received under
the ASRs were retired upon receipt, and the excess of the purchase
price over par value per share was recorded to “Additional paid-in
capital” within the Company’s Condensed Consolidated Balance
Sheets.
Of the $1,050.0 million in approved share repurchase programs,
the remaining amount authorized to be repurchased is approximately
$123.9 million.
7. 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
(loss) 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
charged to each segment based on the region and division where the
expenses are incurred. As a result, the components of income (loss)
from operations for one segment may not be comparable to another
segment. Segment results for the three and six months ended
June 30, 2016 and 2015 are as follows:
Three Months Ended June 30, North
America
South
America
Europe/Africa/
Middle East
Asia/
Pacific
Consolidated
2016 Net sales $ 498.9 $ 203.4 $ 1,185.3 $ 108.0 $
1,995.6 Income from operations 23.6 — 143.3 2.2 169.1
2015 Net sales $ 563.1 $ 280.3 $ 1,137.0 $ 88.9 $ 2,069.3
Income (loss) from operations 58.0 15.2 134.6 (10.9 ) 196.9 Six
Months Ended June 30, North
America
South
America
Europe/Africa/
Middle East
Asia/
Pacific
Consolidated
2016 Net sales $ 907.3 $ 347.6 $ 2,109.4 $ 190.6 $
3,554.9 Income (loss) from operations 22.9 0.4 213.6 (0.7 ) 236.2
2015 Net sales $ 1,035.6 $ 529.3 $ 2,045.1 $ 161.9 $
3,771.9 Income (loss) from operations 75.5 28.3 215.1 (22.9 ) 296.0
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth
below:
Three Months Ended June 30, Six Months
Ended June 30, 2016 2015 2016 2015
Segment income from operations $ 169.1 $ 196.9 $ 236.2 $ 296.0
Corporate expenses (31.3 ) (27.4 ) (61.0 ) (56.4 ) Stock
compensation expense (5.7 ) (4.7 ) (10.8 ) (6.9 ) Restructuring
expenses (2.1 ) (4.0 ) (4.0 ) (14.6 ) Amortization of intangibles
(11.4 ) (10.9 ) (22.4 ) (21.4 ) Consolidated income from operations
$ 118.6 $ 149.9 $ 138.0 $ 196.7
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
AND
CURRENCY TRANSLATION IMPACTS TO NET
SALES
This earnings release discloses adjusted income from operations,
adjusted net income and adjusted earnings per share, 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 adjusted income from
operations, net income and earnings per share to reported income
from operations, net income and earnings per share for the three
and six months ended June 30, 2016 and 2015 (in millions,
except per share data):
Three Months Ended June 30, 2016 2015
Income From Operations Net Income (1)
Earnings Per Share (1) Income From Operations Net
Income (1) Earnings Per Share (1) As adjusted $ 120.7
$ 83.6 $ 1.02 $ 153.9 $ 110.0 $ 1.25 Restructuring expenses (2) 2.1
1.7 0.02 4.0 2.9 0.03 Deferred income tax adjustment (3) —
31.6 0.39 — — — As reported $ 118.6
$ 50.3 $ 0.61 $ 149.9 $ 107.1 $
1.22
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring expenses recorded during the three months
ended June 30, 2016 related primarily to severance costs
associated with the Company’s rationalization of certain European,
South American and U.S. manufacturing operations and various
administrative offices. The restructuring expenses recorded during
the three months ended June 30, 2015 related primarily to
severance costs associated with the Company’s rationalization of
certain European and South American manufacturing operations.
(3) During the second quarter of 2016, the Company recorded a
non-cash adjustment to increase the valuation allowance on the U.S.
deferred income tax assets of approximately $31.6 million.
Six Months Ended June 30, 2016 2015
Income From Operations Net Income (1)
Earnings Per Share (1) Income From Operations Net
Income (1) Earnings Per Share (1) As adjusted $ 142.0
$ 92.6 $ 1.12 $ 211.3 $ 147.9 $ 1.67 Restructuring expenses (2) 4.0
2.9 0.04 14.6 10.7 0.12 Deferred income tax adjustment (3) —
31.6 0.38 — — — As reported $ 138.0
$ 58.1 $ 0.70 $ 196.7 $ 137.2 $
1.55
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring expenses recorded during the six months
ended June 30, 2016 related primarily to severance costs
associated with the Company’s rationalization of certain European,
South American and U.S. manufacturing operations and various
administrative offices. The restructuring expenses recorded during
the six months ended June 30, 2015 related primarily to
severance costs associated with the Company’s rationalization of
certain European and South American manufacturing operations as
well as various administrative offices located in Europe and the
United States.
(3) During the second quarter of 2016, the Company recorded a
non-cash adjustment to increase the valuation allowance on the U.S.
deferred income tax assets of approximately $31.6 million.
The following is a reconciliation of adjusted targeted earnings
per share to targeted earnings per share for the year ended
December 31, 2016:
Earnings Per Share (1) As adjusted targeted $ 2.30
Restructuring expenses 0.06 Deferred income tax adjustment
0.39 As targeted $ 1.85
(1) Earnings per share amount is after tax.
This earnings release discloses the percentage change in
regional net sales due to the impact of currency translation. The
following table sets forth, for the three and six months ended
June 30, 2016, 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
2016 2015
% change
from 2015
$
%
North America $ 498.9 $ 563.1 (11.4 )% $ (7.0 ) (1.2 )% South
America 203.4 280.3 (27.4 )% (36.8 ) (13.1 )% Europe/Africa/Middle
East 1,185.3 1,137.0 4.2 % (4.0 ) (0.4 )% Asia/Pacific 108.0
88.9 21.5 % (3.9 ) (4.4 )% $ 1,995.6 $ 2,069.3
(3.6 )% $ (51.7 ) (2.5 )% Six Months Ended June 30,
Change due to currency
translation
2016 2015
% change
from 2015
$
%
North America $ 907.3 $ 1,035.6 (12.4 )% $ (16.1 ) (1.6 )% South
America 347.6 529.3 (34.3 )% (88.8 ) (16.8 )% Europe/Africa/Middle
East 2,109.4 2,045.1 3.1 % (26.5 ) (1.3 )% Asia/Pacific 190.6
161.9 17.7 % (8.5 ) (5.3 )% $ 3,554.9 $
3,771.9 (5.8 )% $ (139.9 ) (3.7 )%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160804005714/en/
AGCOGreg Peterson, 770-232-8229Director of Investor
Relationsgreg.peterson@agcocorp.com
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