AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide
manufacturer and distributor of agricultural equipment, reported
net sales of approximately $2.5 billion for the fourth quarter of
2017, an increase of approximately 20.7% compared to net sales of
approximately $2.1 billion for the fourth quarter of 2016. Reported
net income was $0.55 per share and adjusted net income, which
excludes restructuring expenses and a tax charge related to U.S.
tax reform, was $1.10 per share for the fourth quarter of 2017.
These results compare to reported net income of $0.77 per share and
adjusted net income, which excludes restructuring expenses, of
$0.84 per share for the fourth quarter of 2016. Excluding favorable
currency translation impacts of approximately 5.9%, net sales in
the fourth quarter of 2017 increased approximately 14.8% compared
to the fourth quarter of 2016.
Net sales for the full year of 2017 were approximately $8.3
billion, an increase of approximately 12.1% compared to 2016.
Excluding the favorable impact of currency translation of
approximately 1.6%, net sales for the full year of 2017 increased
approximately 10.5% compared to 2016. For the full year of 2017,
reported net income was $2.32 per share and adjusted net income,
which excludes restructuring expenses, a non-cash expense related
to waived stock compensation and a tax charge related to U.S. tax
reform, was $3.02 per share. These results compare to reported net
income of $1.96 per share and adjusted net income, which excludes
restructuring expenses and a non-cash deferred income tax
adjustment, of $2.47 per share for the full year of 2016.
Highlights
- Reported fourth quarter regional sales
results(1): Europe/Middle East (“EME”) +25.9%, North America
+18.9%, South America +2.5%, Asia/Pacific/Africa (“APA”)
+23.0%
- Constant currency fourth quarter
regional sales results(1)(2)(3): EME +16.6%, North America
+17.4%, South America +3.2%, APA +16.8%
- Generated $578 million in cash flow
from operations and $374 million in free cash flow(3) in
2017
- Quarterly dividend increased to $0.15
per share effective first quarter 2018
- Full-year earnings forecast for 2018
remains at approximately $3.50 per share
(1)
As compared to fourth quarter 2016
(2)
Excludes currency translation impact.
(3)
See reconciliation of Non-GAAP measures in
appendix.
“Stabilizing market demand and solid operational execution
allowed AGCO to meet its financial targets for 2017 and deliver
improved results compared to 2016,” stated Martin Richenhagen,
AGCO’s Chairman, President and Chief Executive Officer. “Over the
past few years, we worked diligently on cost reduction strategies
targeted at purchasing actions, factory productivity as well as new
product development, which now positions us well to seek new
opportunities for growth. Looking forward to 2018, we are
forecasting further earnings improvement as industry conditions
trend positively from the lower end of the agricultural equipment
cycle in key markets. In addition to cost management, we will
continue to make long-term investments to raise the efficiency of
our factories, improve our service levels and strengthen our
product offerings.”
Market Update
Industry Unit Retail Sales
Tractors
Combines
Change from Change from
Year ended December 31, 2017
Prior Year Period
Prior Year Period
North America(1) Flat 10% South America 13% 13% Western Europe(2)
4% (6)%
(1)
Excludes compact tractors.
(2)
Based on Company estimates.
“The 2017 global harvest is the fourth consecutive year of near
record production,” continued Mr. Richenhagen. “With these robust
harvests, crop production has outpaced demand, thereby keeping crop
prices and farm income at relatively low levels. Global industry
farm equipment demand started to recover following three years of
strong declines. In North America, the farm equipment fleet has
begun to age, and industry retail sales were mixed throughout 2017.
Tractor and combine demand was higher compared to last year, while
sales in other row crop equipment remained weak. Overall, we
project industry tractor sales to be relatively flat in 2018
compared to 2017, with some modest improvements in combines and hay
equipment. Industry retail sales in Western Europe improved in
2017, but remained below historic levels. Growth was strongest in
Germany, Italy and the United Kingdom. Recovery in the dairy sector
provided support to retail sales and helped improve overall
confidence in the region. While farm income remains under pressure
due to low commodity prices, 2018 farm income is expected to
improve modestly driven primarily by better dairy economics and
higher 2017 wheat production. Based on these assumptions, we expect
farmer sentiment to remain positive and 2018 demand to be
relatively flat compared to 2017 levels. Industry retail sales in
South America increased during 2017 as demand in Brazil grew
strongly from depressed first-half levels experienced last year.
Industry sales in Brazil slowed in the second half of 2017,
however, as ongoing macroeconomic weakness continued to hurt farmer
confidence. Industry demand in Argentina remained robust as more
supportive government policies continued to stimulate growth. Our
South American industry forecast for 2018 assumes industry sales
are flat to modestly up compared to 2017. Our long-term global view
remains positive. Increasing demand for commodities, driven by the
growing world population, rising emerging market protein
consumption and biofuel use, are expected to support elevated farm
income and healthy conditions in our industry.”
Regional Results
AGCO Regional Net Sales (in
millions)
Three Months Ended December 31, 2017 2016
%changefrom2016
% changefrom 2016 dueto
currencytranslation(1)
% change from2016 due
toacquisitions(1)
North America $ 531.8 $ 447.4 18.9% 1.5% 4.3% South America 315.9
308.1 2.5% (0.7)% 0.5% EME 1,434.6 1,139.3 25.9% 9.4% 1.5% APA
245.1 199.2 23.0% 6.2% 4.6% Total $ 2,527.4 $ 2,094.0 20.7% 5.9%
2.2%
Year Ended December 31, 2017 2016
%changefrom2016
% changefrom 2016 dueto
currencytranslation(1)
% change from2016 due
toacquisitions(1)
North America $ 1,876.7 $ 1,807.7 3.8% 0.3% 2.1% South America
1,063.5 917.5 15.9% 4.5% 0.4% EME 4,614.3 4,089.7 12.8% 1.4% 2.7%
APA 752.0 595.6 26.3% 2.3% 4.0% Total $ 8,306.5 $ 7,410.5 12.1%
1.6% 2.4%
(1) See Footnotes for additional
disclosures
(2) Effective January 1, 2017,
AGCO realigned its regional structure as reflected in the table
above. A schedule showing restated segment results for 2016 is
available on AGCO’s website at www.agcocorp.com on
the “Company/Investors” page.
North America
North American net sales increased approximately 3.6% in the
full year of 2017 compared to 2016, excluding the positive impact
of currency translation. Acquisitions benefited sales by
approximately 2% in 2017. Mixed industry demand and dealer
inventory reduction efforts pressured sales volumes. Sales growth
in tractors, driven by new product introductions, were mostly
offset by sales declines in hay tools, sprayers and grain storage
equipment. Income from operations increased approximately $25.6
million for the full year of 2017 compared to 2016 due to the
benefit of higher sales and margin improvement.
South America
Net sales in the South American region improved approximately
11.4%, excluding favorable currency translation impacts, in the
full year of 2017 compared to 2016. The improvement was primarily
driven by significantly higher sales in Argentina and modest growth
in Brazil. Income from operations decreased approximately $5.4
million for the full year of 2017 compared to 2016 due to the
negative impact of material cost inflation and higher costs related
to the localization of emissions compliant products.
Europe/Middle East
AGCO’s EME net sales increased approximately 11.4% in the full
year of 2017 compared to 2016, excluding favorable currency
translation. Acquisitions benefited sales by approximately 3%
during 2017 compared to the full year of 2016. Most of the sales
growth was achieved in the key markets of the United Kingdom,
Germany and Italy. Income from operations increased approximately
$90.6 million for the full year of 2017 compared to 2016 due to
higher sales and improved margins resulting from new product
introductions and increased production.
Asia/Pacific/Africa
Net sales in AGCO’s Asia/Pacific/Africa region, excluding the
positive impact of currency translation, increased approximately
23.9% in the full year of 2017 compared to the same period in 2016.
Sales growth was driven primarily by China and Australia.
Acquisitions benefited sales by approximately 4% during the full
year of 2017 compared to the same period last year. Income from
operations improved approximately $29.1 million in 2017 compared to
the full year of 2016 due to higher sales and production
levels.
U.S. Tax Reform
The income tax provision during the fourth quarter of 2017
includes a one-time charge of approximately $42.0 million resulting
from the enactment of U.S. tax reform legislation on December 22,
2017. The charge includes an estimate of approximately $14.3
million related to the transition tax associated with the mandatory
deemed repatriation of foreign earnings.
Outlook
Relatively stable industry demand is anticipated across all
regions in 2018. AGCO’s net sales for 2018 are expected to reach
approximately $9.1 billion reflecting improved sales volumes,
positive pricing as well as acquisition and foreign currency
translation impacts. Gross and operating margins are expected to
improve from 2017 levels, reflecting the positive impact of pricing
and cost reduction efforts partially offset by increased
engineering expenses. Based on these assumptions, 2018 earnings per
share is targeted to be approximately $3.50.
* * * * *
AGCO will be hosting a conference call with respect to this
earnings announcement at 10:00 a.m. Eastern Time on Tuesday,
February 6, 2018. The Company will refer to slides on its
conference call. The conference call and slide presentation can be
accessed on 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, world population, biofuel use and protein consumption,
currency translation, farm income levels, margin levels, industry
inventory levels, investments in product and technology
development, cost reduction initiatives, production volumes, 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, 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.
- 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 40% 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 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, 2016 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 over 3,000
independent dealers and distributors in approximately 150
countries. Founded in 1990, AGCO is headquartered
in Duluth, GA, USA. In 2017, AGCO had net sales of $8.3
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)
December 31, 2017 December 31, 2016
ASSETS Current
Assets: Cash and cash equivalents $ 367.7 $ 429.7 Accounts and
notes receivable, net 1,019.4 890.4 Inventories, net 1,872.9
1,514.8 Other current assets 367.7 330.8 Total
current assets 3,627.7 3,165.7 Property, plant and equipment, net
1,485.3 1,361.3 Investment in affiliates 409.0 414.9 Deferred tax
assets 112.2 99.7 Other assets 147.1 143.1 Intangible assets, net
649.0 607.3 Goodwill 1,541.4 1,376.4 Total assets $
7,971.7 $ 7,168.4
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of
long-term debt $ 95.4 $ 85.4 Accounts payable 917.5 722.6 Accrued
expenses 1,407.9 1,160.8 Other current liabilities 229.8
176.1 Total current liabilities 2,650.6 2,144.9 Long-term
debt, less current portion and debt issuance costs 1,618.1 1,610.0
Pensions and postretirement health care benefits 247.3 270.0
Deferred tax liabilities 130.5 112.4 Other noncurrent liabilities
229.9 193.9 Total liabilities 4,876.4 4,331.2
Stockholders’ Equity: AGCO Corporation stockholders’
equity: Common stock 0.8 0.8 Additional paid-in capital 136.6 103.3
Retained earnings 4,253.8 4,113.6 Accumulated other comprehensive
loss (1,361.6 ) (1,441.6 ) Total AGCO Corporation stockholders’
equity 3,029.6 2,776.1 Noncontrolling interests 65.7 61.1
Total stockholders’ equity 3,095.3 2,837.2
Total liabilities and stockholders’ equity $ 7,971.7 $
7,168.4
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 December 31, 2017 2016 Net
sales $ 2,527.4 $ 2,094.0 Cost of goods sold 1,996.4 1,673.7
Gross profit 531.0 420.3 Selling, general and administrative
expenses 277.1 224.8 Engineering expenses 93.4 81.8 Restructuring
expenses 2.7 6.4 Amortization of intangibles 15.5 15.9
Income from operations 142.3 91.4 Interest expense, net 11.5 17.6
Other expense, net 25.3 4.3 Income before income taxes and
equity in net earnings of affiliates 105.5 69.5 Income tax
provision 68.7 18.3 Income before equity in net earnings of
affiliates 36.8 51.2 Equity in net earnings of affiliates 8.3
10.0 Net income 45.1 61.2 Net (income) loss attributable to
noncontrolling interests (0.8 ) 0.8 Net income attributable to AGCO
Corporation and subsidiaries $ 44.3 $ 62.0 Net income per
common share attributable to AGCO Corporation and subsidiaries:
Basic $ 0.56 $ 0.78 Diluted $ 0.55 $ 0.77 Cash
dividends declared and paid per common share $ 0.14 $ 0.13
Weighted average number of common and common equivalent shares
outstanding: Basic 79.6 79.9 Diluted 80.5 80.8
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)
Years Ended December 31, 2017 2016 Net sales $
8,306.5 $ 7,410.5 Cost of goods sold 6,541.2 5,895.0
Gross profit 1,765.3 1,515.5 Selling, general and administrative
expenses 970.7 867.9 Engineering expenses 323.1 296.1 Restructuring
expenses 11.2 11.9 Amortization of intangibles 57.0 51.2
Income from operations 403.3 288.4 Interest expense, net
45.1 52.1 Other expense, net 74.4 31.4 Income before
income taxes and equity in net earnings of affiliates 283.8 204.9
Income tax provision 133.6 92.2 Income before equity
in net earnings of affiliates 150.2 112.7 Equity in net earnings of
affiliates 39.1 47.5 Net income 189.3 160.2 Net
income attributable to noncontrolling interests (2.9 ) (0.1 ) Net
income attributable to AGCO Corporation and subsidiaries $ 186.4
$ 160.1 Net income per common share attributable to
AGCO Corporation and subsidiaries: Basic $ 2.34 $ 1.97
Diluted $ 2.32 $ 1.96 Cash dividends declared
and paid per common share $ 0.56 $ 0.52 Weighted
average number of common and common equivalent shares outstanding:
Basic 79.5 81.4 Diluted 80.2 81.7
See accompanying notes to condensed
consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited and in millions)
Years Ended December 31, 2017 2016 Cash
flows from operating activities: Net income $ 189.3 $ 160.2
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 222.8 223.4 Deferred debt
issuance cost amortization 0.7 1.0 Amortization of intangibles 57.0
51.2 Stock compensation expense 38.2 18.1 Proceeds from termination
of hedging instrument — 7.3 Equity in net earnings of affiliates,
net of cash received 41.2 (1.4 ) Deferred income tax (benefit)
provision (14.1 ) 2.1 Other 2.3 1.3 Changes in operating assets and
liabilities, net of effects from purchase of businesses: Accounts
and notes receivable, net (34.7 ) (4.5 ) Inventories, net (196.0 )
(33.1 ) Other current and noncurrent assets (36.6 ) (98.7 )
Accounts payable 123.5 62.8 Accrued expenses 149.0 47.0 Other
current and noncurrent liabilities 35.0 (67.2 ) Total
adjustments 388.3 209.3 Net cash provided by
operating activities 577.6 369.5 Cash flows from
investing activities: Purchases of property, plant and equipment
(203.9 ) (201.0 ) Proceeds from sale of property, plant and
equipment 4.1 2.4 Purchase of businesses, net of cash acquired
(293.1 ) (383.8 ) Investment in consolidated affiliates, net of
cash acquired — (11.8 ) Investments in unconsolidated affiliates
(0.8 ) (4.5 ) Restricted cash and other — 0.4 Net
cash used in investing activities (493.7 ) (598.3 ) Cash flows from
financing activities: (Payments) proceeds from debt obligations,
net (125.8 ) 495.5 Purchases and retirement of common stock —
(212.5 ) Payment of dividends to stockholders (44.5 ) (42.5 )
Payment of minimum tax withholdings on stock compensation (6.9 )
(2.0 ) Payment of debt issuance costs — (2.5 ) Investments by
noncontrolling interest 0.5 0.4 Net cash (used in)
provided by financing activities (176.7 ) 236.4 Effects of
exchange rate changes on cash and cash equivalents 30.8 (4.6
) (Decrease) increase in cash and cash equivalents (62.0 ) 3.0 Cash
and cash equivalents, beginning of year 429.7 426.7
Cash and cash equivalents, end of year $ 367.7 $ 429.7
See accompanying notes to condensed
consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIESNOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(unaudited, in millions,
except share amounts, per share data and employees)
1. STOCK COMPENSATION EXPENSE (CREDIT)
The Company recorded stock compensation expense (credit) as
follows:
Three Months Ended
December 31, Years Ended December 31, 2017
2016 2017 2016 Cost of goods sold $ 0.4 $ (0.1
) $ 2.8 $ 1.5 Selling, general and administrative expenses 6.5
(1.1 ) 35.6 16.9 Total stock compensation expense
(credit) $ 6.9 $ (1.2 ) $ 38.4 $ 18.4
The Company recorded approximately $4.8 million of accelerated
stock compensation expense during the three months ended March 31,
2017 associated with a waived stock award declined by the Company’s
Chief Executive Officer.
2. RESTRUCTURING EXPENSES
From 2014 through 2017, the Company announced and initiated
several actions to rationalize employee headcount at various
manufacturing facilities and administrative offices located in
Europe, South America, China and the United States in order to
reduce costs in response to softening global market demand and
lower production volumes. The aggregate headcount reduction was
approximately 2,750 employees in 2014, 2015 and 2016. The Company
had approximately $15.3 million of severance and related costs
accrued as of December 31, 2016. During the year ended
December 31, 2017, the Company recorded an additional $11.2
million of severance and related costs associated with further
rationalizations associated with the termination of approximately
620 employees, and paid approximately $16.8 million of severance
and related costs. The remaining $10.9 million of accrued severance
and other related costs as of December 31, 2017, inclusive of
approximately $1.4 million of positive foreign currency translation
impacts, are expected to be paid primarily during 2018.
3. INDEBTEDNESS
Indebtedness at December 31, 2017 and 2016 consisted of the
following:
December 31, 2017
December 31, 2016 1.056% Senior term loan due 2020 $ 239.8 $ 211.0
Credit facility, expires 2020 471.2 329.2 Senior term loans due
2021 119.9 316.5 5 7/8% Senior notes due 2021 305.3 306.6 Senior
term loans due between 2019 and 2026 449.7 395.6 Other long-term
debt 131.6 141.6 Debt issuance costs (4.0 ) (5.1 ) 1,713.5 1,695.4
Less: Current portion of other long-term debt (95.4 ) (85.4 ) Total
indebtedness, less current portion $ 1,618.1 $ 1,610.0
4. INVENTORIES
Inventories at December 31, 2017 and 2016 were as
follows:
December 31, 2017
December 31, 2016 Finished goods $ 684.1 $ 589.3 Repair and
replacement parts 605.9 532.5 Work in process 178.7 113.8 Raw
materials 404.2 279.2 Inventories, net $ 1,872.9 $
1,514.8
5. ACCOUNTS RECEIVABLE SALES AGREEMENTS
At December 31, 2017 and 2016, 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,
Europe and Brazil to its U.S., Canadian, European and Brazilian
finance joint ventures. As of December 31, 2017 and 2016, 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 Consolidated Statements of
Operations, were approximately $11.7 million and $39.2 million
during the three months and year ended December 31, 2017,
respectively. Losses on sales of receivables associated with the
accounts receivable financing facilities discussed above, reflected
within “Other expense, net” in the Company’s Consolidated
Statements of Operations, were approximately $5.7 million and $19.5
million during the three months and year ended December 31,
2016, respectively.
The Company’s finance joint ventures in Europe, Brazil and
Australia also provide wholesale financing to the Company’s
dealers. As of December 31, 2017 and 2016, these finance joint
ventures had approximately $41.6 million and $41.5 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 months and years ended December 31, 2017 and 2016 is
as follows:
Three Months EndedDecember 31,
Years EndedDecember 31,
2017 2016 2017 2016 Basic
net income per share: Net income attributable to AGCO Corporation
and subsidiaries $ 44.3 $ 62.0 $ 186.4 $ 160.1
Weighted average number of common shares outstanding 79.6
79.9 79.5 81.4 Basic net income per share
attributable to AGCO Corporation and subsidiaries $ 0.56 $
0.78 $ 2.34 $ 1.97 Diluted net income per share: Net
income attributable to AGCO Corporation and subsidiaries $ 44.3
$ 62.0 $ 186.4 $ 160.1 Weighted average number
of common shares outstanding 79.6 79.9 79.5 81.4 Dilutive
stock-settled appreciation rights, performance share awards and
restricted stock units 0.9 0.9 0.7 0.3
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net
income per share 80.5 80.8 80.2 81.7 Diluted
net income per share attributable to AGCO Corporation and
subsidiaries $ 0.55 $ 0.77 $ 2.32 $ 1.96
7. SEGMENT REPORTING
Effective January 1, 2017, the Company modified its system of
reporting, resulting from changes to its internal management and
organizational structure, which changed its reportable segments
from North America; South America; Europe/Africa/Middle East; and
Asia/Pacific to North America; South America; Europe/Middle East;
and Asia/Pacific/Africa. The Asia/Pacific/Africa reportable segment
includes the regions of Africa, Asia, Australia and New Zealand,
and the Europe/Africa/Middle East segment no longer includes
certain markets in Africa. Effective January 1, 2017, these
reportable segments are reflective of how the Company’s chief
operating decision maker reviews operating results for the purposes
of allocating resources and assessing performance.
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 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 months and years ended December 31, 2017
and 2016 are as follows:
Three Months Ended December 31, North
America
South
America
Europe/
Middle East
Asia/
Pacific/Africa
Consolidated
2017 Net sales $ 531.8 $ 315.9 $ 1,434.6 $ 245.1 $
2,527.4 Income from operations 12.0 0.7 163.4 25.6 201.7
2016 Net sales $ 447.4 $ 308.1 $ 1,139.3 $ 199.2 $ 2,094.0
(Loss) income from operations (4.9 ) 13.6 122.0 11.3 142.0
Years Ended December 31, North
America
South
America
Europe/Middle East Asia/Pacific/Africa
Consolidated
2017 Net sales $ 1,876.7 $ 1,063.5 $ 4,614.3 $ 752.0
$ 8,306.5 Income from operations 64.7 14.5 500.0 48.8 628.0
2016 Net sales $ 1,807.7 $ 917.5 $ 4,089.7 $ 595.6 $ 7,410.5
Income from operations 39.1 19.9 409.4 19.7 488.1
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth
below:
Three Months Ended December 31, Years
Ended December 31, 2017 2016 2017
2016 Segment income from operations $ 201.7 $ 142.0 $ 628.0
$ 488.1 Corporate expenses (34.7 ) (29.4 ) (120.9 ) (119.7 ) Stock
compensation (expense) credit (6.5 ) 1.1 (35.6 ) (16.9 )
Restructuring expenses (2.7 ) (6.4 ) (11.2 ) (11.9 ) Amortization
of intangibles (15.5 ) (15.9 ) (57.0 ) (51.2 ) Consolidated income
from operations $ 142.3 $ 91.4 $ 403.3 $ 288.4
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income, adjusted net income per share, net sales on a
constant currency basis and free cash flow, each of which excludes
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, net income and net income per share for the three
months and years ended December 31, 2017 and 2016 (in
millions, except per share data):
Three Months Ended December 31, 2017
2016
Income FromOperations
Net Income (1)
Net IncomePer Share (1)
Income FromOperations
Net Income (1)
Net IncomePer Share (1)
As reported $ 142.3 $ 44.3 $ 0.55 $ 91.4 $ 62.0 $ 0.77
Restructuring expenses (2) 2.7 2.4 0.03 6.4 5.6 0.07 U.S. tax
reform(3) — 42.0 0.52 — — — As
adjusted $ 145.0 $ 88.7 $ 1.10 $ 97.8 $
67.6 $ 0.84 (1) Net income and net income per
share amounts are after tax. (2) The restructuring expenses
recorded during the three months ended December 31, 2017 and 2016
related primarily to severance costs associated with the Company’s
rationalization of certain U.S., European, South American and
Chinese manufacturing operations and various administrative
offices. (3) During the three months ended December 31, 2017, the
Company recorded a one-time charge of approximately $42.0 million
resulting from the enactment of U.S. tax reform legislation on
December 22, 2017. The charge includes an estimate of approximately
$14.3 million related to the transition tax associated with the
mandatory deemed repatriation of foreign earnings, with the
remainder primarily related to the remeasurement of certain net
deferred tax assets using the lower U.S. corporate tax rate, as
well as other tax impacts associated with unremitted foreign
earnings. The one-time charge related to the enacted tax reform
legislation is based on the Company’s current estimates. The final
impact of the tax reform legislation may differ materially due to
factors such as further refinement of the Company’s calculations,
changes in interpretations and assumptions that the Company and its
advisors have made, additional guidance that may be issued in the
future by the U.S. government, and actions that the Company may
take as a result of the legislation. Years
Ended December 31, 2017 2016
Income FromOperations
Net Income (1)
Net IncomePer Share (1)(2)
Income FromOperations
Net Income (1)
Net IncomePer Share (1)
As reported $ 403.3 $ 186.4 $ 2.32 $ 288.4 $ 160.1 $ 1.96
Restructuring expenses (3) 11.2 8.8 0.11 11.9 9.9 0.12 Non-cash
expense related to waived stock compensation (4) 4.8 4.8 0.06 — — —
Deferred income tax adjustment (5) — — — — 31.6 0.39 U.S. tax
reform(6) — 42.0 0.52 — — — As
adjusted $ 419.3 $ 242.0 $ 3.02 $ 300.3
$ 201.6 $ 2.47 (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
years ended December 31, 2017 and 2016 related primarily to
severance costs associated with the Company’s rationalization of
certain U.S., European, South American and Chinese manufacturing
operations and various administrative offices. (4) The Company
recorded accelerated stock compensation expense associated with a
waived award declined by the Company’s CEO of approximately $4.8
million during the three months ended March 31, 2017. (5) 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 during the three months ended June 30, 2016. (6)
During the year ended December 31, 2017, the Company recorded a
one-time charge of approximately $42.0 million resulting from the
enactment of U.S. tax reform legislation on December 22, 2017, as
previously described.
The following table sets forth, for the three months and year
ended December 31, 2017, the impact to net sales of currency
translation and recent acquisitions by geographical segment (in
millions, except percentages):
Three Months EndedDecember 31,
Change due to currencytranslation
Change due toacquisitions
2017 2016
% changefrom 2016
$
%
$
%
North America $ 531.8 $ 447.4 18.9 % $ 6.6 1.5 % $ 19.4 4.3 % South
America 315.9 308.1 2.5 % (2.1 )
(0.7)
%
1.6 0.5 % Europe/Middle East 1,434.6 1,139.3 25.9 % 106.7 9.4 %
16.9 1.5 % Asia/Pacific/Africa 245.1 199.2 23.0 %
12.4 6.2 % 9.1 4.6 % $ 2,527.4 $ 2,094.0
20.7 % $ 123.6 5.9 % $ 47.0 2.2 %
Years EndedDecember 31,
Change due to currencytranslation
Change due toacquisitions
2017 2016
% changefrom 2016
$
%
$
%
North America $ 1,876.7 $ 1,807.7 3.8 % $ 4.7 0.3 % $ 38.8 2.1 %
South America 1,063.5 917.5 15.9 % 41.3 4.5 % 4.1 0.4 %
Europe/Middle East 4,614.3 4,089.7 12.8 % 57.6 1.4 % 110.6 2.7 %
Asia/Pacific/Africa 752.0 595.6 26.3 % 13.9
2.3 % 24.1 4.0 % $ 8,306.5 $ 7,410.5 12.1 % $
117.5 1.6 % $ 177.6 2.4 %
The following is a reconciliation of net cash provided by
operating activities to free cash flow for the years ended
December 31, 2017 and 2016 (in millions):
2017 2016 Net cash
provided by operating activities $ 577.6 $ 369.5 Less: Capital
expenditures (203.9 ) (201.0 ) Free cash flow $ 373.7 $
168.5
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180206005730/en/
AGCOGreg Peterson, 770-232-8229Vice President, Investor
Relationsgreg.peterson@agcocorp.com
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