- Record first quarter net sales of $3.3 billion, up 24%
year-over-year
- Record first quarter operating margin of 11.6%
- Raises full year sales, operating margin and earnings per share
outlook
- Announced $5.00 per share special variable dividend and raised
quarterly dividend 21%
AGCO, Your Agriculture Company (NYSE: AGCO), a global leader in
the design, manufacture and distribution of agricultural machinery
and precision ag technology, reported its results for the first
quarter ended March 31, 2023. Net sales for the first quarter were
approximately $3.3 billion, an increase of approximately 24.1%
compared to the first quarter of 2022. Excluding unfavorable
foreign currency translation of approximately 5.4%, net sales in
the quarter increased approximately 29.6% compared to the first
quarter of 2022. Reported net income was $3.10 per share for the
first quarter of 2023, and adjusted net income(1), which excludes
restructuring expenses and a Brazilian income tax amnesty program
payment, was $3.51 per share. These results compare to reported net
income of $2.03 per share and adjusted net income(1), which
excludes impairment charges, restructuring expenses and other
related items, of $2.39 per share for the first quarter of
2022.
“With continued execution of our strategy, AGCO delivered robust
sales growth and margin expansion in the first quarter as healthy
farm economics continued to support elevated global demand,” stated
Eric Hansotia, AGCO’s Chairman, President and Chief Executive
Officer. “Our solid operational performance, continued pricing
actions and a stabilizing supply chain all contributed to the
excellent first quarter results. The success of our farmer-first
strategy, focused on growing our precision ag business, globalizing
a full-line of our Fendt branded products and expanding our parts
and service business, is generating strong growth in these
margin-rich businesses. AGCO’s order board remains extended,
increasing our confidence in the success of our products and the
strength of large ag demand.”
“In addition, AGCO recently published its 2022 Sustainability
Report which highlights the significant progress we’ve made on
environmental, social and governance issues as we strive to deliver
farmer-focused solutions to sustainably feed our world,” continued
Mr. Hansotia. “We are delivering on sustainability commitments,
from industry-leading innovation to improve sustainability outcomes
for farmers, to decarbonizing our products and operations, to
offering our talented, diverse employees a safer, more engaging
workplace. I am proud of the progress we’re making, which includes
achieving our Scope 1 and 2 targets three years ahead of schedule
by reducing the emissions intensity of our manufacturing
operations.”
First Quarter Highlights
- Reported regional sales results(2): Europe/Middle East (“EME”)
+21.4%, North America +31.7%, South America +41.4%,
Asia/Pacific/Africa (“APA”) (9.9)%
- Constant currency regional sales results(1)(2)(3): EME +30.3%,
North America +32.4%, South America +42.2%, APA (3.6)%
- Regional operating margin performance: EME 14.1%, North America
11.1%, South America 19.8%, APA 8.9%
- Declared a variable special dividend of $5.00 per share and
increased quarterly dividend by 21% to $0.29 per share, both
payable in June
- 2022 Sustainability Report published in the first quarter
documenting significant progress on Scope 1 and 2 targets (the
Sustainability Report can be accessed via AGCO’s website at
www.agcocorp.com in the “Sustainability” section located under “Our
Commitment”)
(1)
See reconciliation of Non-GAAP measures in
appendix.
(2)
As compared to first quarter 2022.
(3)
Excludes currency translation impact.
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Three Months Ended March 31, 2023
Change from
Prior Year Period
Change from
Prior Year Period
North America(1)
(3
)%
117
%
South America
(3
)%
18
%
Western Europe(2)
(3
)%
60
%
(1)
Excludes compact tractors.
(2)
Based on Company estimates.
“The outlook for healthy farm income in 2023 across the major
agricultural production regions along with extended fleet age and
elevated used equipment pricing is driving strong demand for larger
agricultural equipment,” stated Mr. Hansotia. “While down from last
year’s record levels, commodity prices remain elevated and are
being supported by tight grain inventories. Farmer input costs have
also moderated from last year. Easing supply chain constraints are
enabling industry production to keep pace with the strong
demand.”
Global industry production and retail tractor sales were down
modestly in the first three months of 2023 compared to last year's
elevated levels with lower sales of smaller equipment offsetting
increased sales of larger equipment. Industry retail sales for
tractors in North America were down approximately 3% in the first
three months of 2023 compared to last year. The decline was driven
by weaker sales in smaller tractors partially offset by improved
sales of high horsepower tractors, which increased approximately
12% in the first three months of 2023 compared to the same period
in 2022. North America Industry retail tractor demand for 2023 is
expected to be relatively flat compared to 2022. Industry retail
sales for combines in North America increased significantly in the
first three months of 2023 compared to 2022 due to supply chain
constraints experienced in 2022.
In Western Europe, industry retail tractor sales decreased
approximately 3% in the first three months of 2023 compared to
strong levels in the same period of 2022. Farmer sentiment in the
region continues to be negatively impacted by the conflict in
Ukraine and input cost inflation. Forecasts for healthy farm income
in Western Europe are expected to support relatively flat retail
demand for equipment in 2023. Industry retail sales for combines in
Western Europe increased significantly in the first three months of
2023 compared to 2022 due to supply chain constraints experienced
in 2022.
South American industry tractor retail sales decreased during
the first three months of 2023 compared to 2022 levels in both
Brazil and Argentina. Our market share increased favorably in all
markets in South America during the three months ended March 31,
2023 as compared to the prior period. Healthy farm income,
supportive exchange rates and continued expansion in planted
acreage in Brazil are driving increased investments in high tech
farm equipment and resulting in an outlook of relatively flat
demand for the South American tractor industry in 2023 compared to
strong levels last year.
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended March 31,
2023
2022
% change from 2022
% change from 2022 due to
currency translation(1)
% change excluding currency
translation
North America
$
923.1
$
701.0
31.7
%
(0.7
)%
32.4
%
South America
503.8
356.4
41.4
%
(0.8
)%
42.2
%
Europe/Middle East
1,703.8
1,403.1
21.4
%
(8.8
)%
30.3
%
Asia/Pacific/Africa
202.8
225.2
(9.9
)%
(6.3
)%
(3.6
)%
Total
$
3,333.5
$
2,685.7
24.1
%
(5.4
)%
29.6
%
(1)
See Footnotes for additional
disclosures.
North America
Net sales in the North American region grew 32.4% in the first
three months of 2023 compared to the same period of 2022, excluding
the negative impact of currency translation. The growth resulted
primarily from increased sales of high horsepower tractors,
application equipment and combines along with the positive effects
of pricing to mitigate inflationary cost pressures. Income from
operations for the first quarter of 2023 was approximately $47.3
million higher and operating margins expanded over 320 basis points
compared to the same period in 2022. Operating income benefited
from higher sales and production, positive net pricing and
favorable mix.
South America
South American net sales increased 42.2% in the first three
months of 2023 compared to the same period of 2022, excluding the
impact of unfavorable currency translation. Strong sales growth in
Brazil was partially offset by lower sales in Argentina. Increased
sales of high horsepower, higher margin tractors, as well as
increased sales of combines and application equipment and favorable
pricing impacts drove most of the increase. Income from operations
in the first three months of 2023 increased by approximately $53.4
million compared to the same period in 2022, and operating margins
reached approximately 19.8%. The improved South America results
reflect the benefit of higher sales and production and a favorable
sales mix.
Europe/Middle East
Europe/Middle East net sales increased 30.3% in the first three
months of 2023 compared to the same period in 2022, excluding
unfavorable currency translation. The improvement was driven by
increased sales of high-horsepower tractors, utility tractors and
Fuse precision ag products along with favorable pricing actions.
Strong growth in Turkey, Germany and the United Kingdom accounted
for most of the increase. Income from operations improved
approximately $77.1 million and operating margins expanded 250
basis points in the first three months of 2023, compared to the
same period in 2022. The improvement was the result of higher sales
and production.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa decreased 3.6%, excluding the
negative impact of currency translation, in the first three months
of 2023 compared to the same period in 2022. Delayed shipments from
European factories resulted in lower sales in most of the markets
partially offset by sales growth in Australia and China. Income
from operations declined by approximately $15.9 million in the
first three months of 2023 compared to the same period in 2022 due
primarily to lower sales and production.
Outlook
AGCO’s net sales for 2023 are expected to be approximately $14.5
billion, reflecting improved sales volumes and pricing. Gross and
operating margins are projected to improve from 2022 levels,
reflecting the impact of higher sales and production volumes as
well as pricing. These improvements are expected to fund increases
in engineering and other technology investments to support AGCO’s
precision agriculture and digital initiatives. Based on these
assumptions, 2023 earnings per share are targeted at approximately
$14.40.
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, May 2nd. The
Company will refer to slides on its conference call. Interested
persons can access the conference call and slide presentation via
AGCO’s website at www.agcocorp.com in
the “Events” section on the “Company/Investors” page of our
website. A replay of the conference call will be available
approximately two hours after the conclusion of the conference call
for twelve months following the call. A copy of this press release
will be available on AGCO’s website for at least twelve months
following the call.
* * * * *
Safe Harbor Statement
Statements that are not historical facts, including the
projections of earnings per share, production levels, sales,
industry demand, market conditions, commodity prices, currency
translation, farm income levels, margin levels, strategy,
investments in product and technology development, new product
introductions, restructuring and other cost reduction initiatives,
production volumes, tax rates and general economic conditions, are
forward-looking and subject to risks that could cause actual
results to differ materially from those suggested by the
statements. The following are among the factors that could cause
actual results to differ materially from the results discussed in
or implied by the forward-looking statements.
- COVID-19 has negatively impacted our business, initially
through closures, higher absentee rates, and reduced production at
both our plants and the plants that supply us with parts and
components, transitioning to supply chain disruptions, including
the inability of some of our suppliers to meet demand and logistics
and transportation-related companies to deliver products in a
timely manner. In addition, we have had to incur various costs
related to preventing the spread of COVID-19, including changes to
our factories and other facilities and those related to enabling
remote work. While the impact of COVID-19 has diminished over time,
mutations of the virus that are more contagious or resistant to
current vaccines could evolve, resulting in impacts similar to
those we saw previously.
- We cannot predict or control the impact of the conflict in
Ukraine on our business. Already it has resulted in reduced sales
in Ukraine as farmers have experienced economic distress,
difficulties in harvesting and delivering their products, as well
as general uncertainty. There is a potential for natural gas
shortages, as well as shortages in other energy sources, throughout
Europe, which could negatively impact our production in Europe both
directly and through interrupting the supply of parts and
components that we use. It is unclear how long these conditions
will continue, or whether they will worsen, and what the ultimate
impact on our performance will be. In addition, AGCO sells products
in, and purchases parts and components from, other regions where
there could be hostilities. Any hostilities likely would adversely
impact our performance.
- 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. As a
result, we are exposed to risks related to foreign laws, taxes and
tariffs, trade restrictions, economic conditions, labor supply and
relations, political conditions and governmental policies. These
risks may delay or reduce our realization of value from our
international operations. Among these risks are the uncertain
consequences of Brexit, the conflict in Ukraine, Russian sanctions
and tariffs imposed on exports to and imports from China.
- Most retail sales of the products that we manufacture are
financed, either by our joint ventures with Rabobank or by a bank
or other private lender. Our joint ventures with Rabobank, which
are controlled by Rabobank and are dependent upon Rabobank for
financing as well, finance approximately 50% of the retail sales of
our tractors and combines in the markets where the joint ventures
operate. Any difficulty by Rabobank to continue to provide that
financing, or any business decision by Rabobank as the controlling
member not to fund the business or particular aspects of it (for
example, a particular country or region), would require the joint
ventures to find other sources of financing (which may be difficult
to obtain), or us to find another source of retail financing for
our customers, or our customers would be required to utilize other
retail financing providers. As a result of the recent economic
downturn, financing for capital equipment purchases generally has
become more difficult in certain regions and in some cases, can be
expensive to obtain. To the extent that financing is not available
or available only at unattractive prices, our sales would be
negatively impacted. In addition, Rabobank also is the lead lender
in our revolving credit facility and term loans and for many years
has been an important financing partner for us. Any interruption or
other challenges in that relationship would require us to obtain
alternative financing, which could be difficult.
- Both AGCO and our finance joint ventures have substantial
accounts receivable from dealers and end customers, and we would be
adversely impacted if the collectability of these receivables was
less than optimal; this collectability is dependent upon the
financial strength of the farm industry, which in turn is dependent
upon the general economy and commodity prices, as well as several
of the other factors listed in this section.
- We have experienced substantial and sustained volatility with
respect to currency exchange rate and interest rate changes, which
can adversely affect our reported results of operations and the
competitiveness of our products.
- Our success depends on the introduction of new products,
particularly engines that comply with emission requirements and
sustainable smart farming technology, which require substantial
expenditures; there is no certainty that we can develop the
necessary technology or that the technology that we develop will be
attractive to farmers or available at competitive prices.
- Our expansion plans in emerging markets, including establishing
a greater manufacturing and marketing presence and growing our use
of component suppliers, could entail significant risks.
- Our business increasingly is subject to regulations relating to
privacy and data protection, and if we violate any of those
regulations, or otherwise are the victim of a cyberattack, we could
be subject to significant claims, penalties and damages.
- Attacks through ransomware and other means are rapidly
increasing, and in May 2022 we learned that we had been subject to
a cyberattack. We continue to review and improve our safeguards to
minimize our exposure to future attacks. However, there always will
be the potential of the risk that a cyberattack will be successful
and will disrupt our business, either through shutting down our
operations, destroying data, exfiltrating data or otherwise.
- We depend on suppliers for components, parts and raw materials
for our products, and any failure by our suppliers to provide
products as needed, or by us to promptly address supplier issues,
will adversely impact our ability to timely and efficiently
manufacture and sell products. Recently suppliers of several key
parts and components have not been able to meet our demand and we
have had to decrease our production levels. In addition, the
potential of natural gas shortages in Europe, as well as predicted
overall shortages in other energy sources, could also negatively
impact our production and that of our supply chain in the future.
It is unclear when these supply chain disruptions will be restored
or what the ultimate impact on production, and consequently sales,
will be.
- We recently have experienced significant inflation in a range
of costs, including for parts and components, shipping, and energy.
While we have been able to pass along most of those costs through
increased prices, there can be no assurance that we will be able to
continue to do so. If we are not, it will adversely impact our
performance.
- We face significant competition, and if we are unable to
compete successfully against other agricultural equipment
manufacturers, we would lose customers and our net sales and
performance would decline.
- We have a substantial amount of indebtedness, and, as a result,
we are subject to certain restrictive covenants and payment
obligations that may adversely affect our ability to operate and
expand our business.
Further information concerning these and other factors is
included in AGCO’s filings with the Securities and Exchange
Commission, including its Form 10-K for the year ended December 31,
2022 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 machinery and precision ag
technology. AGCO delivers customer value through its differentiated
brand portfolio including core brands like Fendt®, GSI®, Massey
Ferguson®, Precision Planting® and Valtra®. Powered by Fuse® smart
farming solutions, AGCO’s full line of equipment and services help
farmers sustainably feed our world. Founded in 1990 and
headquartered in Duluth, Georgia, USA, AGCO had net sales of
approximately $12.7 billion in 2022. For more information, visit
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)
March 31, 2023
December 31, 2022
ASSETS
Current Assets:
Cash, cash equivalents and restricted
cash
$
558.7
$
789.5
Accounts and notes receivable, net
1,530.7
1,221.3
Inventories, net
3,642.8
3,189.7
Other current assets
596.6
538.8
Total current assets
6,328.8
5,739.3
Property, plant and equipment, net
1,668.7
1,591.2
Right-of-use lease assets
160.8
163.9
Investments in affiliates
456.5
436.9
Deferred tax assets
232.9
228.5
Other assets
287.4
268.7
Intangible assets, net
354.0
364.4
Goodwill
1,322.5
1,310.8
Total assets
$
10,811.6
$
10,103.7
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
190.6
$
187.1
Short-term borrowings
4.9
8.9
Accounts payable
1,426.6
1,385.3
Accrued expenses
2,144.3
2,271.3
Other current liabilities
217.9
235.4
Total current liabilities
3,984.3
4,088.0
Long-term debt, less current portion and
debt issuance costs
1,791.1
1,264.8
Operating lease liabilities
122.3
125.4
Pension and postretirement health care
benefits
160.1
158.0
Deferred tax liabilities
115.3
112.0
Other noncurrent liabilities
505.6
472.9
Total liabilities
6,678.7
6,221.1
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.7
0.7
Additional paid-in capital
24.7
30.2
Retained earnings
5,863.7
5,654.6
Accumulated other comprehensive loss
(1,756.4
)
(1,803.1
)
Total AGCO Corporation stockholders’
equity
4,132.7
3,882.4
Noncontrolling interests
0.2
0.2
Total stockholders’ equity
4,132.9
3,882.6
Total liabilities and stockholders’
equity
$
10,811.6
$
10,103.7
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 March 31,
2023
2022
Net sales
$
3,333.5
$
2,685.7
Cost of goods sold
2,478.6
2,054.4
Gross profit
854.9
631.3
Selling, general and administrative
expenses
330.3
271.1
Engineering expenses
119.6
100.3
Amortization of intangibles
14.8
15.3
Impairment charges
—
36.0
Restructuring expenses
1.4
3.0
Bad debt expense
1.5
1.6
Income from operations
387.3
204.0
Interest expense, net
0.5
0.4
Other expense, net
50.4
17.5
Income before income taxes and equity in
net earnings of affiliates
336.4
186.1
Income tax provision
120.2
60.2
Income before equity in net earnings of
affiliates
216.2
125.9
Equity in net earnings of affiliates
16.4
11.1
Net income
232.6
137.0
Net income attributable to noncontrolling
interests
—
14.8
Net income attributable to AGCO
Corporation and subsidiaries
$
232.6
$
151.8
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
3.11
$
2.03
Diluted
$
3.10
$
2.03
Cash dividends declared and paid per
common share
$
0.24
$
0.20
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.9
74.6
Diluted
75.0
74.9
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in
millions)
Three Months Ended March 31,
2023
2022
Cash flows from operating activities:
Net income
$
232.6
$
137.0
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation
53.6
54.7
Amortization of intangibles
14.8
15.3
Stock compensation expense
14.0
7.0
Impairment charges
—
36.0
Equity in net earnings of affiliates, net
of cash received
(16.4
)
(11.1
)
Deferred income tax benefit
(3.9
)
(5.0
)
Other
2.4
(8.8
)
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(298.1
)
(113.3
)
Inventories, net
(402.6
)
(595.2
)
Other current and noncurrent assets
(69.9
)
(48.7
)
Accounts payable
39.2
193.4
Accrued expenses
(155.9
)
(219.5
)
Other current and noncurrent
liabilities
33.1
(18.3
)
Total adjustments
(789.7
)
(713.5
)
Net cash used in operating activities
(557.1
)
(576.5
)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(125.3
)
(66.3
)
Proceeds from sale of property, plant and
equipment
0.1
0.3
Investments in unconsolidated
affiliates
(0.1
)
(0.1
)
Purchase of businesses, net of cash
acquired
(0.9
)
(61.9
)
Other
(2.6
)
—
Net cash used in investing activities
(128.8
)
(128.0
)
Cash flows from financing activities:
Proceeds from indebtedness, net
497.3
521.6
Payment of dividends to stockholders
(18.0
)
(14.9
)
Payment of minimum tax withholdings on
stock compensation
(17.7
)
(16.0
)
Distributions to noncontrolling
interest
—
(11.6
)
Net cash provided by financing
activities
461.6
479.1
Effects of exchange rate changes on cash,
cash equivalents and restricted cash
(6.5
)
(8.0
)
Decrease in cash, cash equivalents and
restricted cash
(230.8
)
(233.4
)
Cash, cash equivalents and restricted
cash, beginning of period
789.5
889.1
Cash, cash equivalents and restricted
cash, end of period
$
558.7
$
655.7
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 March 31,
2023
2022
Cost of goods sold
$
0.5
$
0.3
Selling, general and administrative
expenses
13.5
6.7
Total stock compensation expense
$
14.0
$
7.0
2. IMPAIRMENT CHARGES
As a consequence of the conflict between Russia and Ukraine,
during the three months ended March 31, 2022, the Company assessed
the fair value of its gross assets related to its joint ventures in
Russia for potential impairment and recorded certain asset
impairment charges of approximately $36.0 million, reflected as
“Impairment charges” in its Condensed Consolidated Statements of
Operations, with an offsetting benefit of approximately $12.2
million included within “Net loss (income) attributable to
noncontrolling interests.” The Company sold its interest in its
Russian distribution joint venture during the three months ended
December 31, 2022. In addition, during the three months ended March
31, 2022, the Company recorded a write-down of its investment in
its Russian finance joint venture of approximately $4.8 million,
reflected within “Equity in net earnings of affiliates” in its
Condensed Consolidated Statements of Operations. The Russian
finance joint venture was sold during the three months ended
December 31, 2022.
3. RESTRUCTURING EXPENSES
In recent years, the Company announced and initiated several
actions to rationalize employee headcount in various manufacturing
facilities and administrative offices located in the U.S., Europe,
South America, Africa and China, as well as the rationalization of
its grain and protein business, in order to reduce costs in
response to fluctuating global market demand. As of December 31,
2022, the Company had approximately $6.8 million of accrued
severance and other costs related to such rationalizations. During
the three months ended March 31, 2023, the Company recorded an
additional $1.4 million of severance costs associated with these
rationalizations and paid approximately $1.0 million of severance
costs. The remaining $7.2 million of severance and other related
costs as of March 31, 2023 are expected to be paid primarily during
2023.
4. INDEBTEDNESS
Long-term debt at March 31, 2023 and December 31, 2022 consisted
of the following (in millions):
March 31, 2023
December 31, 2022
Credit facility, expires 2027
$
706.2
$
200.0
1.002% Senior term loan due 2025
272.3
267.3
Senior term loans due between 2023 and
2028
348.0
341.6
0.800% Senior Notes Due 2028
653.5
641.5
Other long-term debt
5.2
5.1
Debt issuance costs
(3.5
)
(3.6
)
1,981.7
1,451.9
Less:
Senior term loans due 2023, net of debt
issuance costs
(188.4
)
(184.9
)
Current portion of other long-term
debt
(2.2
)
(2.2
)
Total long-term indebtedness, less current
portion
$
1,791.1
$
1,264.8
As of March 31, 2023 and December 31, 2022, the Company had
short-term borrowings due within one year of approximately $4.9
million and $8.9 million, respectively.
5. INVENTORIES
Inventories at March 31, 2023 and December 31, 2022 were as
follows (in millions):
March 31, 2023
December 31, 2022
Finished goods
$
1,248.4
$
994.9
Repair and replacement parts
789.0
750.1
Work in process
461.1
369.8
Raw materials
1,144.3
1,074.9
Inventories, net
$
3,642.8
$
3,189.7
6. ACCOUNTS RECEIVABLE SALES AGREEMENTS
The Company has accounts receivable sales agreements that permit
the sale, on an ongoing basis, of a majority of its wholesale
receivables in North America, Europe and Brazil to its U.S.,
Canadian, European and Brazilian finance joint ventures. As of
March 31, 2023 and December 31, 2022, the cash received from
receivables sold under the U.S., Canadian, European and Brazilian
accounts receivable sales agreements was approximately $1.7 billion
and $1.8 billion, respectively.
In addition, the Company sells certain trade receivables under
factoring arrangements to other financial institutions around the
world. As of March 31, 2023 and December 31, 2022, the cash
received from these arrangements was approximately $233.3 million
and $226.0 million, respectively.
Losses on sales of receivables associated with the accounts
receivable sales agreement discussed above, reflected within “Other
expense, net” in the Company’s Condensed Consolidated Statements of
Operations, were approximately $28.5 million and $7.9 million for
the three months ended March 31, 2023 and 2022, respectively.
The Company’s finance joint ventures in Europe, Brazil and
Australia also provide wholesale financing directly to the
Company’s dealers. As of March 31, 2023 and December 31, 2022,
these finance joint ventures had approximately $108.3 million and
$69.5 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.
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 months ended March 31, 2023 and 2022 is as follows (in
millions, except per share data):
Three Months Ended March 31,
2023
2022
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
232.6
$
151.8
Weighted average number of common shares
outstanding
74.9
74.6
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
3.11
$
2.03
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
232.6
$
151.8
Weighted average number of common shares
outstanding
74.9
74.6
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
0.1
0.3
Weighted average number of common shares
and common share equivalents outstanding for purposes of computing
diluted net income per share
75.0
74.9
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
3.10
$
2.03
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 months ended March 31, 2023
and 2022 are as follows (in millions):
Three Months Ended March 31,
North America
South America
Europe/Middle East
Asia/Pacific/Africa
Consolidated
2023
Net sales
$
923.1
$
503.8
$
1,703.8
$
202.8
$
3,333.5
Income from operations
102.1
99.5
239.4
18.1
459.1
2022
Net sales
$
701.0
$
356.4
$
1,403.1
$
225.2
$
2,685.7
Income from operations
54.8
46.1
162.3
34.0
297.2
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
Three Months Ended March 31,
2023
2022
Segment income from operations
$
459.1
$
297.2
Impairment charges
—
(36.0
)
Corporate expenses
(42.1
)
(32.2
)
Amortization of intangibles
(14.8
)
(15.3
)
Stock compensation expense
(13.5
)
(6.7
)
Restructuring expenses
(1.4
)
(3.0
)
Consolidated income from operations
$
387.3
$
204.0
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 months ended March 31, 2023 and 2022 (in
millions, except per share data):
Three Months Ended March 31,
2023
2022
Income From Operations(2)
Net Income(1)(2)
Net Income Per Share(1)(2)
Income From Operations(2)
Net Income(1)(2)
Net Income Per Share(1)
As reported
$
387.3
$
232.6
$
3.10
$
204.0
$
151.8
$
2.03
Restructuring expenses(3)
1.4
0.9
0.01
3.0
2.2
0.03
Brazilian tax amnesty program(4)
—
29.5
0.39
—
—
—
Impairment of Russian joint
ventures(5)
—
—
—
36.0
23.8
0.32
Gain on full acquisition of IAS joint
venture(6)
—
—
—
—
(3.4
)
(0.05
)
Write-down of investment in Russian
finance joint venture(7)
—
—
—
—
4.8
0.06
As adjusted
$
388.8
$
263.1
$
3.51
$
242.9
$
179.1
$
2.39
(1)
Net income and net income per share
amounts are after tax.
(2)
Rounding may impact summation of
amounts.
(3)
The restructuring expenses recorded during
the three months ended March 31, 2023 related primarily to
severance and other related costs associated with the Company’s
South American manufacturing operations. The restructuring expenses
recorded during the three months ended March 31, 2022 related
primarily to severance and other related costs associated with the
Company’s European manufacturing operations.
(4)
During the three months ended
March 31, 2023, the Company applied for enrollment in the
Brazilian government’s “Litigation Zero” tax amnesty program
whereby cases being disputed at the administrative court level of
review for a period of more than ten years can be considered for
amnesty. The Company recorded it’s best estimate of the ultimate
settlement under the amnesty program of approximately $29.5 million
within “Income tax provision” during the three months ended
March 31, 2023, net of associated U.S. income tax credits.
(5)
During the three months ended March 31,
2022, the Company recorded certain asset impairment charges related
to its Russian joint ventures of approximately $36.0 million,
reflected as “Impairment charges” in its Condensed Consolidated
Statements of Operations, with an offsetting benefit of
approximately $12.2 million included within “Net loss (income)
attributable to noncontrolling interests.” The Company sold its
interest in the Russian distribution joint venture during the three
months ended December 31, 2022.
(6)
During 2022, the Company acquired Appareo
Systems, LLC (“Appareo”), which included the acquisition of the
remaining 50% of its former 50% IAS joint venture with Appareo. The
Company recorded a gain associated with this remaining 50%
acquisition of approximately $3.4 million, which was reflected
within “Other expense, net” in its Condensed Consolidated
Statements of Operations.
(7)
During the three months ended March 31,
2022, the Company recorded a write-down of its investment in its
Russian finance joint venture of approximately $4.8 million,
reflected within “Equity in net earnings of affiliates” in its
Condensed Consolidated Statements of Operations. The Russian
finance joint venture was sold during the three months ended
December 31, 2022.
The following is a reconciliation of targeted net income per
share to adjusted targeted net income per share for the full year
ended December 31, 2023:
Net Income Per Share(1)
As targeted
$
14.00
Restructuring expenses
0.01
Brazilian tax amnesty program
0.39
As adjusted targeted(2)
$
14.40
(1)
Net income per share amount is after
tax.
(2)
The above reconciliation adjustments to
full year 2023 targeted net income per share are based upon
restructuring expenses and the other adjustments incurred during
the three months ended March 31, 2023. Full year expenses or
benefits could differ based on future restructuring activity as
well as other activities.
The following table sets forth, for the three months ended March
31, 2023 and 2022, the impact to net sales of currency translation
by geographical segment (in millions, except percentages):
Three Months Ended March 31,
Change due to currency
translation
2023
2022
% change from 2022
$
%
North America
$
923.1
$
701.0
31.7
%
$
(5.0
)
(0.7
) %
South America
503.8
356.4
41.4
%
(2.9
)
(0.8
) %
Europe/Middle East
1,703.8
1,403.1
21.4
%
(124.0
)
(8.8
) %
Asia/Pacific/Africa
202.8
225.2
(9.9
) %
(14.3
)
(6.3
) %
$
3,333.5
$
2,685.7
24.1
%
$
(146.2
)
(5.4
) %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230501005711/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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