AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide
manufacturer and distributor of agricultural equipment and
solutions, reported its results for the second quarter ended June
30, 2021. Net sales for the second quarter were approximately $2.9
billion, an increase of approximately 43.5% compared to the second
quarter of 2020. Reported net income was $3.73 per share for the
second quarter of 2021, and adjusted net income(3), which excludes
restructuring expenses and the reversal of a valuation allowance
previously established against the Company’s deferred tax assets in
the United States, was $2.88 per share. These results compare to
reported net income of $0.93 per share, and adjusted net income(3),
excluding restructuring expenses and a non-cash impairment charge,
of $1.11 per share for the second quarter of 2020. Excluding
favorable currency translation impacts of approximately 8.9%, net
sales in the second quarter of 2021 increased approximately 34.6%
compared to the second quarter of 2020.
Net sales for the first six months of 2021 were approximately
$5.3 billion, an increase of approximately 33.6% compared to the
same period in 2020. Excluding favorable currency translation
impacts of approximately 6.3%, net sales for the first six months
of 2021 increased approximately 27.3% compared to the same period
in 2020. For the first six months of 2021, reported net income was
$5.71 per share, and adjusted net income(3), excluding
restructuring expenses and the aforementioned reversal of a
valuation allowance was $4.89 per share. These results compare to
reported net income of $1.78 per share, and adjusted net income(3),
excluding restructuring expenses and a non-cash impairment charge,
of $1.97 per share for the first six months of 2020.
Highlights
- Reported regional sales results(1): Europe/Middle East (“EME”)
+45.4%, North America +32.2%, South America +55.9%,
Asia/Pacific/Africa (“APA”)+56.7%
- Constant currency regional sales results(1)(2)(3): EME +33.7%,
North America +28.9%, South America +53.1%, APA +40.3%
- Regional operating margin performance: EME 12.3%, North America
14.1%, South America 8.3%, APA 11.5%
- Raised full-year outlook for net sales and net income per
share
(1) As compared to second quarter
2020.
(2) Excludes currency translation
impact.
(3) See reconciliation of Non GAAP
measures in appendix.
“Our second quarter results were highlighted by strong margin
performance across all regions resulting in the achievement of
record earnings per share,” stated Eric Hansotia, AGCO’s Chairman,
President and Chief Executive Officer. “Focused execution and
proactive pricing actions by the AGCO team mitigated the impact of
the difficult supply chain environment, which was compounded by
escalating material cost inflation. Our second quarter sales and
production were up significantly from the second quarter of last
year when extended COVID-related shutdowns in both Europe and South
America interrupted our operations. Favorable farm economics are
supporting increases in replacement demand and market response to
our technology-focused products remains extremely positive. In
particular, strong growth in Fendt high-horsepower tractors,
Precision Planting products and our global parts business
contributed to the margin expansion. With order boards
significantly ahead of last year, we have further increased our net
sales and earnings forecast for 2021. AGCO’s focused investments in
premium technology, smart farming solutions and enhanced digital
capabilities support our farmer-first strategy to profitably grow
the business and earn high returns for its stockholders.”
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Six Months Ended June 30, 2021
Change from
Prior Year Period
Change from
Prior Year Period
North America(1)
22%
13%
South America
35%
35%
Western Europe(2)
27%
18%
(1) Excludes compact tractors.
(2) Based on Company estimates.
“Despite dry weather across parts of North and South America,
crop production is expected to be sufficient to meet increased
demand and maintain grain inventories at relatively low levels,”
stated Mr. Hansotia. “Elevated prices of agricultural commodities
are supporting healthy farm economics. These conditions are
expected to generate growth in industry demand across all major
markets in 2021.”
“Global industry retail sales of farm equipment grew in all of
AGCO’s key markets in the first half of 2021 compared to the
pandemic-impacted first half of 2020,” continued Mr. Hansotia.
“North American industry retail sales of low horsepower tractors
improved compared to last year, while demand for high horsepower
tractors showed considerable strength. An extended fleet age and
favorable commodity prices contributed to industry retail sales
growth of North American large agricultural equipment of
approximately 24% in the first six months of 2021. Industry retail
sales in Western Europe increased approximately 27% in the first
half of 2021. COVID-related shutdowns across Europe significantly
reduced both industry production and demand in the first half of
2020. Favorable farm economics for arable farmers, as well as dairy
and livestock producers in Western Europe, are supporting increased
equipment demand in 2021. Industry demand also improved in Brazil
and the smaller export markets in South America compared to
pandemic-impacted demand in 2020. Healthy commodity prices and
favorable exchange rates are supporting farm profitability in South
America, resulting in significantly higher industry sales compared
to 2020. In addition to our current industry outlook, our long-term
view remains optimistic, with expanding demand for grain and new
technologies providing significant opportunities for farmers.”
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended June 30,
2021
2020
% change
from 2020
% change from
2020 due to
currency
translation(1)
% change
excluding
currency
translation
North America
$
734.7
$
555.8
32.2%
3.3%
28.9%
South America
278.3
178.5
55.9%
2.9%
53.1%
Europe/Middle East
1,635.2
1,125.0
45.4%
11.7%
33.7%
Asia/Pacific/Africa
231.1
147.5
56.7%
16.4%
40.3%
Total
$
2,879.3
$
2,006.8
43.5%
8.9%
34.6%
Six Months Ended June 30,
2021
2020
% change
from 2020
% change from
2020 due to
currency
translation(1)
% change
excluding
currency
translation
North America
$
1,345.8
$
1,107.7
21.5%
2.1%
19.3%
South America
518.8
332.4
56.1%
(11.2)%
67.3%
Europe/Middle East
2,962.4
2,238.3
32.4%
9.7%
22.6%
Asia/Pacific/Africa
431.0
256.7
67.9%
16.7%
51.2%
Total
$
5,258.0
$
3,935.1
33.6%
6.3%
27.3%
(1) See Footnotes for additional
disclosures.
North America
Net sales in the North American region increased 19.3% in the
first six months of 2021 compared to the same period of 2020,
excluding the positive impact of currency translation. Increased
sales of tractors, parts, grain and protein equipment and Precision
Planting products generated most of the increase. Income from
operations for the first six months of 2021 rose approximately
$53.0 million compared to the same period in 2020 and operating
margins reached 13.3%. Higher sales and production, a richer mix of
products and the benefit of favorable pricing contributed to the
improvement, and helped to offset higher material costs.
South America
AGCO’s South American net sales increased 67.3% in the first six
months of 2021 compared to the COVID-impacted first half of 2020,
excluding the impact of unfavorable currency translation. Sales
grew across key markets, driven by improved industry conditions and
pricing impacts. Income from operations in the first six months of
2021 increased by approximately $42.6 million compared to the same
period in 2020. The improved South America results reflect the
benefit of higher sales and production, in addition to a favorable
sales mix with improved pricing offsetting material cost
inflation.
Europe/Middle East
AGCO’s Europe/Middle East net sales increased 22.6% in the first
six months of 2021 compared to the same period in 2020, excluding
favorable currency translation impacts. 2020 sales were negatively
impacted by extended plant shutdowns during the first half of 2020.
Sales growth was achieved in all major markets with high horsepower
tractors and parts representing the largest increases. Income from
operations increased approximately $152.5 million in the first six
months of 2021, compared to the same period in 2020, due to higher
net sales and production volumes.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa increased 51.2%, excluding the
positive impact of currency translation, in the first six months of
2021 compared to the same period in 2020. Higher sales in China,
Africa as well as Australia produced most of the increase. Income
from operations improved by approximately $34.9 million in the
first six months of 2021 compared to the same period in 2020.
Outlook
The health, safety and well-being of all AGCO employees, dealers
and farmer customers continue to be AGCO’s top priority during the
COVID-19 pandemic. The following outlook does not contemplate any
further sales or production disruptions caused by the pandemic.
Net sales for the full year of 2021 are expected to range from
$11.3 billion to $11.5 billion reflecting improved sales volumes,
positive pricing and favorable foreign currency translation. Higher
sales and production volumes, as well as cost reduction
initiatives, are projected to produce improved gross and operating
margins. The improved profitability is expected to fund increases
in engineering and other technology investments to advance AGCO’s
precision agriculture and digital initiatives. Supported by these
assumptions, 2021 earnings per share are targeted at approximately
$9.50.
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Thursday, July 29, 2021.
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, 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.
- The Company is uncertain of the impact of the COVID-19 pandemic
due to increased volatility in global economic and political
environments, market demand for its products, supply chain
disruptions, workforce availability, exchange rate and commodity
price volatility and availability of financing, and their impact to
the Company’s net sales, production volumes, costs and overall
financial condition and liquidity. The Company may be required to
record significant impairment charges in the future with respect to
certain noncurrent assets such as goodwill and other intangible
assets and equity method investments, whose fair values may be
negatively affected by the COVID-19 pandemic. The Company also may
be required to write-down obsolete inventory due to decreased
customer demand and sales orders. Additionally, the Company is
closely monitoring the collection of accounts receivable, as well
as the operating results of it finance joint ventures around the
world. If economic conditions around the world continue to
deteriorate, the Company may not be able to sufficiently collect
accounts receivable, and the operating results of its finance joint
ventures may be negatively impacted, thus negatively impacting the
Company’s results of operations and financial condition. The
Company is also closely assessing its compliance with debt
covenants, cash flow hedging forecasts as compared to actual
transactions, the fair value of pension assets, accounting for
incentive and stock compensation accruals, revenue recognition and
discount reserve setting and the realization of deferred tax assets
in light of the COVID-19 pandemic.
- Our financial results depend entirely upon the agricultural
industry, and factors that adversely affect the agricultural
industry generally, including declines in the general economy,
adverse weather, tariffs, increases in farm input costs, lower
commodity prices, lower farm income and changes in the availability
of credit for our retail customers, will adversely affect us.
- A majority of our sales and manufacturing takes place outside
the United States, and many of our sales involve products that are
manufactured in one country and sold in a different country, and as
a result, we are exposed to risks related to foreign laws, taxes
and tariffs, trade restrictions, economic conditions, labor supply
and relations, political conditions and governmental policies.
These risks may delay or reduce our realization of value from our
international operations. Among these risks are the uncertain
consequences of Brexit, Russian sanctions, and tariffs imposed on
exports to and imports from China.
- Most retail sales of the products that we manufacture are
financed, either by our joint ventures with Rabobank or by a bank
or other private lender. Our joint ventures with Rabobank, which
are controlled by Rabobank and are dependent upon Rabobank for
financing as well, finance over 50% of the retail sales of our
tractors and combines in the markets where the joint ventures
operate. Any difficulty by Rabobank to continue to provide that
financing, or any business decision by Rabobank as the controlling
member not to fund the business or particular aspects of it (for
example, a particular country or region), would require the joint
ventures to find other sources of financing (which may be difficult
to obtain), or us to find another source of retail financing for
our customers, or our customers would be required to utilize other
retail financing providers. As a result of the recent economic
downturn, financing for capital equipment purchases generally has
become more difficult in certain regions and in some cases, can be
expensive to obtain. To the extent that financing is not available
or available only at unattractive prices, our sales would be
negatively impacted.
- Both AGCO and our finance joint ventures have substantial
accounts receivable from dealers and end customers, and we would be
adversely impacted if the collectability of these receivables was
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, 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 requires 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 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.
- Our business increasingly is subject to regulations relating to
privacy and data protection, and if we violate any of those
regulations, we could incur significant losses and liability.
- Attacks through ransomeware and other cyber attacks are rapidly
increasing. While we have implemented the safeguards that we
believe are reasonable in the face of these attacks, we always will
be subject to the risk that one of these attacks is successful and
disrupts or damages our business.
- 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. It remains unclear, how, if at all,
the recent outbreak of the coronavirus will impact the agricultural
industry, our suppliers or our global operations.
- We 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,
2020. 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® and
Valtra®, supported by Fuse® smart farming solutions. Founded in
1990 and headquartered in Duluth, Georgia, USA, AGCO had net sales
of over $9.1 billion in 2020. 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, 2021
December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents
$
500.2
$
1,119.1
Accounts and notes receivable, net
1,099.0
856.0
Inventories, net
2,667.0
1,974.4
Other current assets
462.0
418.9
Total current assets
4,728.2
4,368.4
Property, plant and equipment, net
1,474.6
1,508.5
Right-of-use lease assets
156.9
165.1
Investment in affiliates
475.4
442.7
Deferred tax assets
118.8
77.6
Other assets
197.6
179.8
Intangible assets, net
417.5
455.6
Goodwill
1,294.3
1,306.5
Total assets
$
8,863.3
$
8,504.2
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
315.7
$
325.9
Short-term borrowings
55.8
33.8
Accounts payable
1,141.2
855.1
Accrued expenses
1,882.6
1,916.7
Other current liabilities
224.0
231.3
Total current liabilities
3,619.3
3,362.8
Long-term debt, less current portion and
debt issuance costs
1,206.4
1,256.7
Operating lease liabilities
117.7
125.9
Pension and postretirement health care
benefits
219.8
253.4
Deferred tax liabilities
115.0
112.4
Other noncurrent liabilities
420.3
375.0
Total liabilities
5,698.5
5,486.2
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.8
0.8
Additional paid-in capital
11.7
30.9
Retained earnings
4,864.1
4,759.1
Accumulated other comprehensive loss
(1,738.3)
(1,810.8)
Total AGCO Corporation stockholders’
equity
3,138.3
2,980.0
Noncontrolling interests
26.5
38.0
Total stockholders’ equity
3,164.8
3,018.0
Total liabilities and stockholders’
equity
$
8,863.3
$
8,504.2
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,
2021
2020
Net sales
$
2,879.3
$
2,006.8
Cost of goods sold
2,186.9
1,574.1
Gross profit
692.4
432.7
Selling, general and administrative
expenses
276.3
219.5
Engineering expenses
107.2
75.8
Amortization of intangibles
14.2
14.9
Goodwill impairment charge
—
20.0
Restructuring expenses
4.7
3.8
Bad debt (credit) expense
(0.3)
1.4
Income from operations
290.3
97.3
Interest expense, net
2.2
6.1
Other expense, net
14.6
10.0
Income before income taxes and equity in
net earnings of affiliates
273.5
81.2
Income tax provision
7.7
31.3
Income before equity in net earnings of
affiliates
265.8
49.9
Equity in net earnings of affiliates
18.6
10.1
Net income
284.4
60.0
Net (income) loss attributable to
noncontrolling interests
(1.6)
9.7
Net income attributable to AGCO
Corporation and subsidiaries
$
282.8
$
69.7
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
3.74
$
0.93
Diluted
$
3.73
$
0.93
Cash dividends declared and paid per
common share
$
4.17
$
0.16
Weighted average number of common and
common equivalent shares outstanding:
Basic
75.5
74.9
Diluted
75.9
75.2
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,
2021
2020
Net sales
$
5,258.0
$
3,935.1
Cost of goods sold
3,995.1
3,051.9
Gross profit
1,262.9
883.2
Selling, general and administrative
expenses
536.9
467.1
Engineering expenses
203.5
160.7
Amortization of intangibles
31.7
29.9
Goodwill impairment charge
—
20.0
Bad debt (credit) expense
(0.7)
3.2
Restructuring expenses
6.0
4.6
Income from operations
485.5
197.7
Interest expense, net
5.6
9.5
Other expense, net
26.1
22.5
Income before income taxes and equity in
net earnings of affiliates
453.8
165.7
Income tax provision
51.3
60.7
Income before equity in net earnings of
affiliates
402.5
105.0
Equity in net earnings of affiliates
33.3
21.3
Net income
435.8
126.3
Net (income) loss attributable to
noncontrolling interests
(2.2)
8.1
Net income attributable to AGCO
Corporation and subsidiaries
$
433.6
$
134.4
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
5.75
$
1.79
Diluted
$
5.71
$
1.78
Cash dividends declared and paid per
common share
$
4.33
$
0.32
Weighted average number of common and
common equivalent shares outstanding:
Basic
75.4
75.1
Diluted
75.9
75.6
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,
2021
2020
Cash flows from operating activities:
Net income
$
435.8
$
126.3
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation
109.9
102.3
Amortization of intangibles
31.7
29.9
Stock compensation expense
15.2
12.7
Goodwill impairment charge
—
20.0
Equity in net earnings of affiliates, net
of cash received
(32.6)
(20.7)
Deferred income tax (benefit)
provision
(65.5)
2.8
Other
9.2
11.2
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(265.5)
(181.0)
Inventories, net
(721.5)
(210.6)
Other current and noncurrent assets
(73.3)
(62.3)
Accounts payable
320.5
(60.9)
Accrued expenses
(0.8)
(67.9)
Other current and noncurrent
liabilities
112.0
76.6
Total adjustments
(560.7)
(347.9)
Net cash used in operating activities
(124.9)
(221.6)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(120.6)
(117.5)
Proceeds from sale of property, plant and
equipment
2.4
0.5
Investment in unconsolidated
affiliates
(1.0)
(3.1)
( Purchase) sale of businesses, net of
cash acquired
5.4
—
Other
(2.4)
—
Net cash used in investing activities
(116.2)
(120.1)
Cash flows from financing activities:
Proceeds from indebtedness, net
4.0
427.6
Purchases and retirement of common
stock
—
(55.0)
Payment of dividends to stockholders
(328.6)
(24.0)
Payment of minimum tax withholdings on
stock compensation
(33.6)
(16.1)
Payment of debt issuance costs
—
(1.4)
Distributions to noncontrolling
interest
(3.5)
—
Net cash (used in) provided by financing
activities
(361.7)
331.1
Effects of exchange rate changes on cash,
cash equivalents and restricted cash
(16.1)
(17.8)
Decrease in cash, cash equivalents and
restricted cash
(618.9)
(28.4)
Cash, cash equivalents and restricted
cash, beginning of period
1,119.1
432.8
Cash, cash equivalents and restricted
cash, end of period
$
500.2
$
404.4
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited, in
millions, except share amounts, per share data and employees)
1. STOCK COMPENSATION EXPENSE
The Company recorded stock compensation expense as follows (in
millions):
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Cost of goods sold
$
0.3
$
0.3
$
0.6
$
0.4
Selling, general and administrative
expenses
8.2
10.1
14.7
12.6
Total stock compensation expense
$
8.5
$
10.4
$
15.3
$
13.0
2. GOODWILL IMPAIRMENT CHARGE
Goodwill is tested for impairment on an annual basis and more
often if indications of impairment exist. The Company conducts its
annual impairment analyses as of October 1 each fiscal year. As of
June 30, 2020, the Company concluded there were indicators of
impairment during the three months ended June 30, 2020 related to
one of its smaller reporting units, which is a 50%-owned tillage
and seeding joint venture. As a result, an impairment of the entire
goodwill balance of this reporting unit was deemed necessary as of
June 30, 2020. During the three months ended June 30, 2020, a
non-cash impairment charge of approximately $20.0 million was
recorded as “Impairment charges” within the Company’s Condensed
Consolidated Statements of Operations, with an offsetting benefit
of approximately $10.0 million included within “Net loss
attributable to noncontrolling interests.”
3. RESTRUCTURING EXPENSES
In recent years, the Company has 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, 2020, the Company had approximately
$16.8 million of accrued severance, facility closure and other
costs related to such rationalizations. During the three and six
months ended June 30, 2021, the Company recorded an additional $4.7
million and $6.0 million, respectively, of severance and related
costs associated with further rationalizations in connection with
the termination of approximately 70 employees, and paid
approximately $2.6 million and $8.8 million, respectively, of
severance and facility closure costs. The remaining $13.9 million
of severance, facility closure and other related costs as of June
30, 2021, inclusive of approximately $0.1 million of negative
foreign currency translation impacts, are expected to be paid
primarily during 2021.
4. INDEBTEDNESS
Long-term debt at June 30, 2021 and December 31, 2020 consisted
of the following (in millions):
June 30, 2021
December 31, 2020
Senior term loan due 2022
$
178.1
$
184.0
Credit facility, expires 2023
260.0
277.9
1.002% Senior term loan due 2025
296.8
306.7
Senior term loans due between 2021 and
2028
779.9
806.0
Other long-term debt
9.1
10.5
Debt issuance costs
(1.8)
(2.5)
1,522.1
1,582.6
Less:
Senior term loans due 2021, net of debt
issuance costs
(313.4)
(323.6)
Current portion of other long-term
debt
(2.3)
(2.3)
Total long-term indebtedness, less current
portion
$
1,206.4
$
1,256.7
As of June 30, 2021 and December 31, 2020, the Company had
short-term borrowings due within one year of approximately $55.8
million and $33.8 million, respectively.
5. INVENTORIES
Inventories at June 30, 2021 and December 31, 2020 were as
follows (in millions):
June 30, 2021
December 31, 2020
Finished goods
$
778.6
$
641.3
Repair and replacement parts
706.2
652.3
Work in process
424.3
175.1
Raw materials
757.9
505.7
Inventories, net
$
2,667.0
$
1,974.4
6. ACCOUNTS RECEIVABLE SALES AGREEMENTS
The Company has accounts receivable sales agreements that permit
the sale, on an ongoing basis, of a majority of its wholesale
receivables in North America, Europe and Brazil to its U.S.,
Canadian, European and Brazilian finance joint ventures. As of June
30, 2021 and December 31, 2020, the cash received from receivables
sold under the U.S., Canadian, European and Brazilian accounts
receivable sales agreements was approximately $1.4 billion and $1.5
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 $5.1 million and $9.7
million, respectively, during the three and six months ended June
30, 2021. 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 $4.3 million and $12.4
million, respectively, during the three and six months ended June
30, 2020.
The Company’s finance joint ventures in Europe, Brazil and
Australia also provide wholesale financing directly to the
Company’s dealers. As of June 30, 2021 and December 31, 2020, these
finance joint ventures had approximately $82.7 million and $85.2
million, respectively, of outstanding accounts receivable
associated with these arrangements. In addition, the Company sells
certain trade receivables under factoring arrangements to other
financial institutions around the world.
7. NET INCOME PER SHARE
A reconciliation of net income attributable to AGCO Corporation
and subsidiaries and weighted average common shares outstanding for
purposes of calculating basic and diluted net income per share for
the three and six months ended June 30, 2021 and 2020 is as follows
(in millions, except per share data):
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
282.8
$
69.7
$
433.6
$
134.4
Weighted average number of common shares
outstanding
75.5
74.9
75.4
75.1
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
3.74
$
0.93
$
5.75
$
1.79
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
282.8
$
69.7
$
433.6
$
134.4
Weighted average number of common shares
outstanding
75.5
74.9
75.4
75.1
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
0.4
0.3
0.5
0.5
Weighted average number of common shares
and common share equivalents outstanding for purposes of computing
diluted net income per share
75.9
75.2
75.9
75.6
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
3.73
$
0.93
$
5.71
$
1.78
8. SEGMENT REPORTING
The Company’s four reportable segments distribute a full range
of agricultural equipment and related replacement parts. The
Company evaluates segment performance primarily based on income
from operations. Sales for each segment are based on the location
of the third-party customer. The Company’s selling, general and
administrative expenses and engineering expenses are generally
charged to each segment based on the region and division where the
expenses are incurred. As a result, the components of income from
operations for one segment may not be comparable to another
segment. Segment results for the three and six months ended June
30, 2021 and 2020 are as follows (in millions):
Three Months Ended June 30,
North America
South America
Europe/Middle
East
Asia/Pacific/Africa
Consolidated
2021
Net sales
$
734.7
$
278.3
$
1,635.2
$
231.1
$
2,879.3
Income from operations
103.7
23.1
201.5
26.6
354.9
2020
Net sales
$
555.8
$
178.5
$
1,125.0
$
147.5
$
2,006.8
Income (loss) from operations
64.7
5.5
91.0
14.0
175.2
Six Months Ended June 30,
North America
South America
Europe/Middle
East
Asia/Pacific/Africa
Consolidated
2021
Net sales
$
1,345.8
$
518.8
$
2,962.4
$
431.0
$
5,258.0
Income from operations
178.6
39.3
345.8
47.6
611.3
2020
Net sales
$
1,107.7
$
332.4
$
2,238.3
$
256.7
$
3,935.1
Income (loss) from operations
125.6
(3.3)
193.3
12.7
328.3
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Segment income from operations
$
354.9
$
175.2
$
611.3
$
328.3
Corporate expenses
(37.5)
(29.1)
(73.4)
(63.5)
Amortization of intangibles
(14.2)
(14.9)
(31.7)
(29.9)
Goodwill impairment charge
—
(20.0)
—
(20.0)
Stock compensation expense
(8.2)
(10.1)
(14.7)
(12.6)
Restructuring expenses
(4.7)
(3.8)
(6.0)
(4.6)
Consolidated income from operations
$
290.3
$
97.3
$
485.5
$
197.7
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income, adjusted net income per share, and net sales
on a constant currency basis, each of which exclude amounts that
are typically included in the most directly comparable measure
calculated in accordance with U.S. generally accepted accounting
principles (“GAAP”). A reconciliation of each of those measures to
the most directly comparable GAAP measure is included below.
The following is a reconciliation of reported income from
operations, net income and net income per share to adjusted income
from operations, adjusted net income and adjusted net income per
share for the three and six months ended June 30, 2021 and 2020 (in
millions, except per share data):
Three Months Ended June 30,
2021
2020
Income From Operations
Net Income(2)
Net Income
Per
Share(1)(2)
Income From Operations(1)
Net Income(2)
Net Income Per Share(2)
As reported
$
290.3
$
282.8
$
3.73
$
97.3
$
69.7
$
0.93
Goodwill impairment charge(3)
—
—
—
20.0
10.0
0.13
Restructuring expenses(4)
4.7
3.9
0.05
3.8
3.7
0.05
Deferred income tax adjustment(5)
—
(67.8)
(0.89)
—
—
—
As adjusted
$
295.0
$
218.9
$
2.88
$
121.2
$
83.4
$
1.11
(1) Rounding may impact summation of
amounts.
(2) Net income and net income per share
amounts are after tax.
(3) During the three months ended June 30,
2020, the Company recorded a goodwill impairment charge of
approximately $20.0 million related to a joint venture in which it
owns a 50% interest. See Note 2 for further information.
(4) The restructuring expenses recorded
during the three months ended June 30, 2021 and 2020 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 three months ended June 30,
2021, the Company’s income tax provision includes the benefit of a
reversal of approximately $67.8 million related to a valuation
allowance previously established against the Company’s net deferred
tax assets in the United States. Significant improvements in income
from operations in the United States during 2020, as well as
updated operating income forecasts for the full year of 2021 and
future years supported the reversal of the valuation allowance.
Six Months Ended June 30,
2021
2020
Income From
Operations
Net
Income(2)
Net Income
Per Share(2)
Income From
Operations(1)
Net
Income(1)(2)
Net Income
Per Share(2)
As reported
$
485.5
$
433.6
$
5.71
$
197.7
$
134.4
$
1.78
Goodwill impairment charge(3)
—
—
—
20.0
10.0
0.13
Restructuring expenses(4)
6.0
5.2
0.07
4.6
4.4
0.06
Deferred income tax adjustment(5)
—
(67.8)
(0.89)
—
—
—
As adjusted
$
491.5
$
371.0
$
4.89
$
222.4
$
148.9
$
1.97
(1) Rounding may impact summation of
amounts.
(2) Net income and net income per share
amounts are after tax.
(3)During the three months ended June 30,
2020, the Company recorded a goodwill impairment charge of
approximately $20.0 million related to a joint venture in which it
owns a 50% interest. See Note 2 for further information.
(4) The restructuring expenses recorded
during the six months ended June 30, 2021 and 2020 related
primarily to severance and other related costs associated with the
Company’s rationalization of certain U.S., European and South
American manufacturing operations and various administrative
offices.
(5)During the six months ended June 30,
2021, the Company’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 2020, as well as
updated operating income forecasts for the full year of 2021 and
future years supported the reversal of the valuation allowance.
The following table sets forth, for the three and six months
ended June 30, 2021 and 2020, 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
2021
2020
% change from
2020
$
%
North America
$
734.7
$
555.8
32.2
%
$
18.1
3.3
%
South America
278.3
178.5
55.9
%
5.1
2.9
%
Europe/Middle East
1,635.2
1,125.0
45.4
%
131.5
11.7
%
Asia/Pacific/Africa
231.1
147.5
56.7
%
24.2
16.4
%
$
2,879.3
$
2,006.8
43.5
%
$
178.9
8.9
%
Six Months Ended June 30,
Change due to currency
translation
2021
2020
% change from
2020
$
%
North America
$
1,345.8
$
1,107.7
21.5
%
$
23.8
2.1
%
South America
518.8
332.4
56.1
%
(37.3)
(11.2)
%
Europe/Middle East
2,962.4
2,238.3
32.4
%
217.9
9.7
%
Asia/Pacific/Africa
431.0
256.7
67.9
%
42.9
16.7
%
$
5,258.0
$
3,935.1
33.6
%
$
247.3
6.3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005547/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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