AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide
manufacturer and distributor of agricultural equipment and
solutions, reported its results for the first quarter ended March
31, 2020. “AGCO delivered solid results for the first quarter under
challenging conditions,” stated Martin Richenhagen, AGCO’s
Chairman, President and Chief Executive Officer. “AGCO’s current
priorities are the safety of our employees and serving the world’s
farmers as we do our part to minimize the impact of the COVID-19
pandemic on the world’s food supply. We are facing a very dynamic
environment requiring rigorous and coordinated business planning to
manage our manufacturing, supply chain and aftermarket operations,
to effectively serve our dealers and end-customers as well as to
maintain a productive workforce. In addition to restarting
factories and ramping up production, we remain focused on
maintaining parts and service support for our dealers and our
customers. It is rewarding to see our employees rise to the
challenge to find innovative solutions to keep our business running
effectively and support farmers as they continue their important
work.”
Net sales for the first quarter were approximately $1.9 billion,
a decrease of approximately 3.4% compared to the first quarter of
2019. Reported net income was $0.85 per share for the first quarter
of 2020 and adjusted net income, excluding restructuring expenses,
was $0.86 per share. These results compare to reported net income
of $0.84 per share and adjusted net income, excluding restructuring
expenses, of $0.86 per share for the first quarter of 2019.
Excluding unfavorable currency translation impacts of approximately
3.6%, net sales in the first quarter of 2020 increased
approximately 0.2% compared to the first quarter of 2019.
First Quarter Highlights
- Reported regional sales results(1): Europe/Middle East (“EME”)
(8.0)%, North America 11.2%, South America (1.4)%,
Asia/Pacific/Africa (“APA”) (17.8)%
- Constant currency regional sales results(1)(2): EME (4.7)%,
North America 11.7%, South America 13.8%, APA (13.4)%
- Regional operating margin performance: EME 9.2%, North America
11.0%, South America (5.7)%, APA (1.2)%
- New Term Loan - $520 million facility completed in April to
provide incremental liquidity
- Repurchases reduced outstanding shares by approximately 1.0
million in the first three months of 2020
- Full-year outlook withdrawn on March 23rd
(1)As compared to first quarter
2019.
(2)Excludes currency translation
impact. See reconciliation in appendix.
“Our first quarter results demonstrated strong execution as we
overcame COVID-19 related production disruptions in China and
Europe to expand operating margins compared to the first quarter of
last year,” stated Mr. Richenhagen. “Strong performance in our
North America region highlighted our results driven by improved
product availability and an increase in the retail demand of our
products. The Precision Planting business also produced
significantly improved results over the prior year in its
seasonally important first quarter. Our Europe/Middle East region
results remained solid but were impacted by production
interruptions late in March despite a strong order board. In April,
we also added over $500 million in liquidity with the completion of
a new term loan facility.”
Operations Update
In most areas, AGCO’s business has been deemed essential,
thereby allowing the company to maintain operations. However,
production has been severely impacted by component supply
availability, particularly during late March and throughout April,
which has directly impacted sales levels. The affected plants all
resumed production in late April, and all but one of AGCO’s major
production facilities are currently operational. The ability to
maintain full-time production remains uncertain for the foreseeable
future due to potential supply chain constraints, workforce
limitations, safety equipment availability and government
restrictions. To date, AGCO’s regional production was impacted as
follows:
- China production was suspended early in the first quarter; now
producing near normal levels.
- All major European factories suspended production in late March
through most of April, with production currently resumed with one
exception; Suolahti Finland facility suspended production as of
April 30 due to a supplier fire with restart date expected in June.
Summer maintenance and vacation shutdown period are planning to be
pulled forward to increase production capacity for the balance of
the year.
- Primary South American factories production suspended during
the majority of April with restart dates in late April.
- North American factory production maintained with no
interruption. Capacities are limited in some cases due to workforce
constraints.
“I am very proud of the considerable effort given by the AGCO
team to secure components from our supply chain partners and to
develop protocols for safe working conditions in order to support
our customer’s requirements,” continued Mr. Richenhagen.
Market Update
Industry Unit Retail Sales
Tractors
Combines
Three Months Ended March 31, 2020
Change from Prior Year Period
Change from Prior Year Period
North America(1)
(6)%
(22)%
South America
(8)%
(27)%
Western Europe(2)
(4)%
(17)%
(1) Excludes compact
tractors.
(2) Based on Company
estimates.
The COVID-19 pandemic is projected to have minimal impact on
global crop production. Most farm operations, which generally have
been deemed essential, are working at normal levels. Soybeans and
other crops are being harvested in the Southern Hemisphere, fields
are being planted in the Northern Hemisphere and farm equipment is
being used intensively in most regions. However, the consumption of
grain for food, fuel and livestock feed is being negatively
impacted by the economic constraints caused by the pandemic. As a
result, grain inventories are expected to increase in 2020, and
soft commodity prices have trended significantly lower in the first
quarter.
North American industry retail sales decreased in the first
three months of 2020 compared to the same period in 2019. Sales of
low horsepower tractors softened, while demand for high horsepower
tractors was relatively stable. While the need to replace a
relatively aged fleet remains, lower commodity prices and a
cautious farmer sentiment are also influencing equipment demand.
The recently announced $16 billion CV-19 Aid Package by the USDA
for U.S. farmers and livestock producers could offset some of the
impact of lower commodity prices. Industry retail sales in Western
Europe decreased modestly in the first three months of 2020. Market
demand was weakest in Spain and Italy but was mitigated by growth
in Germany. Dry weather across much of Western Europe is negatively
impacting the development of the winter wheat crop, limiting
production estimates. Conversely, stronger grain export demand and
supportive wheat prices project to favorable farm economics for
Western European farmers. European dairy and livestock fundamentals
are mixed. Milk prices have come under pressure as demand is being
negatively impacted by the effects of the pandemic, while strong
pork exports are supporting pork prices. Industry retail sales in
South America decreased during the first three months of 2020, with
most of the decline in markets outside of Brazil. While the benefit
of a strong first crop in Brazil and Argentina as well as favorable
exchange rates are supporting relatively positive economics,
farmers are exhibiting a cautious approach to equipment purchases
due to the current economic and political environment. Mr.
Richenhagen added, “While the effects of the COVID-19 pandemic will
impact demand in 2020, there are promising indicators that the
agricultural equipment industry is relatively resilient. Although
our production has been reduced in some geographic areas, we
continue to aggressively support retail sales activity in our
global markets.”
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended March 31,
2020
2019
% change from 2019
% change from 2019 due to
currency translation(1)
% change excluding currency
translation
North America
$
551.9
$
496.2
11.2
%
(0.5
)%
11.7
%
South America
153.9
156.1
(1.4
)%
(15.2
)%
13.8
%
Europe/Middle East
1,113.3
1,210.6
(8.0
)%
(3.3
)%
(4.7
)%
Asia/Pacific/Africa
109.2
132.9
(17.8
)%
(4.4
)%
(13.4
)%
Total
$
1,928.3
$
1,995.8
(3.4
)%
(3.6
)%
0.2
%
(1) See appendix for additional
disclosures.
North America
AGCO’s North American net sales increased 11.7% in the first
three months of 2020 compared to the same period of 2019, excluding
the negative impact of currency translation. Increased sales of
high horsepower tractors, Precision Planting equipment and hay
equipment accounted for most of the increase. Income from
operations for the first three months of 2020 improved
approximately $30.3 million compared to the same period in 2019.
The benefit of higher sales and a richer mix of products, as well
as cost control initiatives contributed most of the increase.
South America
Net sales in the South American region increased 13.8% in the
first three months of 2020 compared to the first three months of
2019, excluding the impact of unfavorable currency translation.
Loss from operations in the first three months of 2020 was
relatively flat compared to the same period in 2019. The South
America results reflect low levels of industry demand and company
production, as well as unfavorable cost impacts associated with
newer product technology into our Brazilian factories.
Europe/Middle East
AGCO’s Europe/Middle East net sales decreased 4.7% in the first
three months of 2020 compared to the same period in 2019, excluding
unfavorable currency translation impacts. Sales declines were
driven primarily by lost production caused by the impacts from
COVID-19 crisis. Income from operations dropped approximately $25.4
million for the first three months of 2020, compared to the same
period in 2019, due to lower sales and production as well as the
costs associated with factory closures.
Asia/Pacific/Africa
Asia/Pacific/Africa net sales decreased 13.4%, excluding the
negative impact of currency translation, in the first three months
of 2020 compared to the same period in 2019. Sales were weakest in
Africa and Asia. Income from operations reduced by approximately
$4.7 million in the first three months of 2020, compared to the
same period in 2019, due to lower sales and production.
Liquidity Update
On April 9, 2020, AGCO completed a new term loan facility that
provided approximately $520 million of additional liquidity.
Including the new facility, AGCO’s total liquidity as of March 31,
2020, would have been approximately $1.2 billion consisting of cash
of approximately $387 million and available borrowing capacity of
approximately $820 million. The liquidity position is expected to
reduce during the second quarter due to seasonal requirements and
the impact of factory shutdowns. However, the Company is confident
it has sufficient available liquidity provided that the length and
severity of the pandemic on the Company’s operations are not more
significant than currently estimated. During the first quarter,
AGCO completed share repurchases of approximately $55 million.
During this period of uncertainty, the Company is closely managing
costs as well as cash expenditures and has suspended further share
repurchases. At this time, the Company expects to maintain the
payment of its quarterly dividend.
Outlook
Given the uncertainty caused by the COVID-19 pandemic, AGCO
withdrew all guidance for its 2020 results on March 23, 2020. A
considerable amount of uncertainty remains for the balance of 2020
relating to industry demand, production constraints and other
impacts of the pandemic. AGCO’s focus is on employee safety,
serving customers and operating as effectively as possible under
these challenging conditions.
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, May 5, 2020.
The Company will refer to slides on its conference call. Interested
persons can access the conference call and slide presentation via
AGCO’s website at www.agcocorp.com in
the “Events” section on the “Company/Investors” page of our
website. A replay of the conference call will be available
approximately two hours after the conclusion of the conference call
for twelve months following the call. A copy of this press release
will be available on AGCO’s website for at least twelve months
following the call.
* * * * *
Safe Harbor Statement
Statements that are not historical facts, including the
projections of earnings per share, sales, industry demand, market
conditions, commodity prices, currency translation, farm income
levels, margin levels, investments in product and technology
development, new product introductions, restructuring and other
cost reduction initiatives, production volumes, tax rates and
general economic conditions, are forward-looking and subject to
risks that could cause actual results to differ materially from
those suggested by the statements. The following are among the
factors that could cause actual results to differ materially from
the results discussed in or implied by the forward-looking
statements.
- The COVID-19 pandemic has impacted our operations around the
globe, particularly with respect to our supply chain’s ability to
meet our requirements on a timely basis and our ability to sustain
manufacturing and parts distribution operations due to workforce
availability and other restrictions. In addition, the pandemic has
negatively impacted the demand for soft commodities, dairy and
protein, which negatively impacts farm income as well as farmer
sentiment. All of these factors have negative effects on the
Company’s sales and results of operations. To the extent these
impacts continue, our results will be adversely effected.
- 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 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. 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, 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.
- 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 cyber attack, we could
incur significant losses and liability.
- 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. The recent outbreak of the
coronavirus has impacted the availability of components and parts,
particularly in Europe, which, in turn, has forced us to suspend
some manufacturing operations from time-to-time. Further
disruptions in our supply chain will impact our manufacturing
capacity and, ultimately, sales.
- 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,
2019. 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 $9.0 billion in 2019. 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)
March 31, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
386.7
$
432.8
Accounts and notes receivable, net
825.0
800.5
Inventories, net
2,187.5
2,078.7
Other current assets
410.8
417.1
Total current assets
3,810.0
3,729.1
Property, plant and equipment, net
1,350.5
1,416.3
Right-of-use lease assets
178.7
187.3
Investment in affiliates
372.9
380.2
Deferred tax assets
66.5
93.8
Other assets
184.4
153.0
Intangible assets, net
481.8
501.7
Goodwill
1,260.9
1,298.3
Total assets
$
7,705.7
$
7,759.7
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
1.9
$
2.9
Short-term borrowings
166.2
150.5
Accounts payable
821.9
914.8
Accrued expenses
1,394.7
1,654.2
Other current liabilities
177.4
162.1
Total current liabilities
2,562.1
2,884.5
Long-term debt, less current portion and
debt issuance costs
1,669.5
1,191.8
Operating lease liabilities
140.6
148.6
Pension and postretirement health care
benefits
226.0
232.1
Deferred tax liabilities
102.9
107.0
Other noncurrent liabilities
314.0
288.7
Total liabilities
5,015.1
4,852.7
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.8
0.8
Additional paid-in capital
—
4.7
Retained earnings
4,432.7
4,443.5
Accumulated other comprehensive loss
(1,791.4
)
(1,595.2
)
Total AGCO Corporation stockholders’
equity
2,642.1
2,853.8
Noncontrolling interests
48.5
53.2
Total stockholders’ equity
2,690.6
2,907.0
Total liabilities and stockholders’
equity
$
7,705.7
$
7,759.7
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,
2020
2019
Net sales
$
1,928.3
$
1,995.8
Cost of goods sold
1,477.8
1,539.1
Gross profit
450.5
456.7
Selling, general and administrative
expenses
247.6
262.2
Engineering expenses
84.9
84.5
Amortization of intangibles
15.0
15.3
Bad debt expense
1.8
0.6
Restructuring expenses
0.8
1.7
Income from operations
100.4
92.4
Interest expense, net
3.4
3.5
Other expense, net
12.5
14.6
Income before income taxes and equity in
net earnings of affiliates
84.5
74.3
Income tax provision
29.4
19.4
Income before equity in net earnings of
affiliates
55.1
54.9
Equity in net earnings of affiliates
11.2
10.8
Net income
66.3
65.7
Net income attributable to noncontrolling
interests
(1.6
)
(0.6
)
Net income attributable to AGCO
Corporation and subsidiaries
$
64.7
$
65.1
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
0.86
$
0.85
Diluted
$
0.85
$
0.84
Cash dividends declared and paid per
common share
$
0.16
$
0.15
Weighted average number of common and
common equivalent shares outstanding:
Basic
75.3
76.6
Diluted
75.9
77.5
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,
2020
2019
Cash flows from operating activities:
Net income
$
66.3
$
65.7
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation
51.6
53.0
Amortization of intangibles
15.0
15.3
Stock compensation expense
2.6
12.5
Equity in net earnings of affiliates, net
of cash received
(11.2
)
(10.1
)
Deferred income tax provision
(benefit)
3.8
(8.6
)
Other
4.1
0.8
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(109.6
)
(65.7
)
Inventories, net
(252.1
)
(418.6
)
Other current and noncurrent assets
(65.4
)
(4.9
)
Accounts payable
(32.7
)
127.5
Accrued expenses
(206.7
)
(107.7
)
Other current and noncurrent
liabilities
99.0
10.9
Total adjustments
(501.6
)
(395.6
)
Net cash used in operating activities
(435.3
)
(329.9
)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(60.6
)
(60.9
)
Proceeds from sale of property, plant and
equipment
0.4
—
Investment in unconsolidated
affiliates
(2.5
)
—
Net cash used in investing activities
(62.7
)
(60.9
)
Cash flows from financing activities:
Proceeds from indebtedness, net
559.8
423.1
Purchases and retirement of common
stock
(55.0
)
(30.0
)
Payment of dividends to stockholders
(12.1
)
(11.5
)
Payment of minimum tax withholdings on
stock compensation
(16.0
)
(23.0
)
Payment of debt issuance costs
—
(0.5
)
Investment by noncontrolling interests
—
0.6
Net cash provided by financing
activities
476.7
358.7
Effects of exchange rate changes on cash,
cash equivalents and restricted cash
(24.8
)
(1.2
)
Decrease in cash, cash equivalents and
restricted cash
(46.1
)
(33.3
)
Cash, cash equivalents and restricted
cash, beginning of period
432.8
326.1
Cash, cash equivalents and restricted
cash, end of period
$
386.7
$
292.8
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,
2020
2019
Cost of goods sold
$
0.1
$
0.5
Selling, general and administrative
expenses
2.5
12.0
Total stock compensation expense
$
2.6
$
12.5
2. RESTRUCTURING EXPENSES
From 2014 through 2020, the Company announced and initiated
several actions to rationalize employee headcount at various
manufacturing facilities and administrative offices located in
Europe, South America, Africa, China and the United States to
reduce costs in response to softening global market demand and
lower production volumes. The aggregate headcount reduction was
approximately 4,160 employees between 2014 and 2019. The Company
had approximately $4.8 million of severance and related costs
accrued as of December 31, 2019. During the three months ended
March 31, 2020, the Company recorded an additional $0.8 million of
severance and related costs associated with further
rationalizations in connection with the termination of
approximately 10 employees, and paid approximately $1.9 million of
severance and associated costs. The remaining $3.6 million of
accrued severance and other related costs as of March 31, 2020,
inclusive of approximately $0.1 million of negative foreign
currency translation impacts, are expected to be paid primarily
during 2020.
3. INDEBTEDNESS
Long-term debt at March 31, 2020 and December 31, 2019 consisted
of the following (in millions):
March 31, 2020
December 31, 2019
Senior term loan due 2022
$
164.3
$
168.1
Credit facility, expires 2023
504.0
—
1.002% Senior term loan due 2025
273.9
280.2
Senior term loans due between 2021 and
2028
719.9
736.2
Other long-term debt
11.3
12.5
Debt issuance costs
(2.0
)
(2.3
)
1,671.4
1,194.7
Less:
Current portion of other long-term
debt
(1.9
)
(2.9
)
Total long-term indebtedness, less current
portion
$
1,669.5
$
1,191.8
As of March 31, 2020 and December 31, 2019, the Company had
short-term borrowings due within one year of approximately $166.2
million and $150.5 million, respectively.
On April 9, 2020, the Company entered into an amendment to its
$800.0 million multi-currency revolving credit facility to include
incremental term loans (“incremental term loans”) that allow the
Company to borrow an aggregate principal amount of €235.0 million
and $267.5 million, respectively (or an aggregate of approximately
$524.4 million as of April 9, 2020). Amounts can be drawn on the
incremental term loans at any time prior to maturity, but must be
drawn down proportionately. Amounts drawn must be in a minimum
principal amount of $100.0 million and integral multiples of $50.0
million in excess thereof. Once amounts have been repaid, those
amounts are not permitted to be re-drawn. The maturity date of the
incremental term loans is April 8, 2022. On April 15, 2020, the
Company borrowed €117.5 million and $133.8 million, respectively,
(or an aggregate of approximately $261.5 million) of incremental
term loans. The Company simultaneously repaid €100.0 million (or
approximately $108.7 million) of its revolving credit facility from
the borrowings received.
4. INVENTORIES
Inventories at March 31, 2020 and December 31, 2019 were as
follows (in millions):
March 31, 2020
December 31, 2019
Finished goods
$
796.6
$
780.1
Repair and replacement parts
614.6
611.5
Work in process
259.7
213.4
Raw materials
516.6
473.7
Inventories, net
$
2,187.5
$
2,078.7
5. 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, 2020 and December 31, 2019, the cash received from
receivables sold under the U.S., Canadian, European and Brazilian
accounts receivable sales agreements was approximately $1.5 billion
and $1.6 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 $8.1 million and $8.7
million, respectively, during the three months ended March 31, 2020
and 2019.
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, 2020 and December 31, 2019,
these finance joint ventures had approximately $85.3 million and
$104.3 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 ended March 31, 2020 and 2019 is as follows (in
millions, except per share data):
Three Months Ended March 31,
2020
2019
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
64.7
$
65.1
Weighted average number of common shares
outstanding
75.3
76.6
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
0.86
$
0.85
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
64.7
$
65.1
Weighted average number of common shares
outstanding
75.3
76.6
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
0.6
0.9
Weighted average number of common shares
and common share equivalents outstanding for purposes of computing
diluted net income per share
75.9
77.5
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
0.85
$
0.84
7. SEGMENT REPORTING
The Company’s four reportable segments distribute a full range
of agricultural equipment and related replacement parts. The
Company evaluates segment performance primarily based on income
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, 2020
and 2019 are as follows (in millions):
Three Months Ended March 31,
North
America
South
America
Europe/
Middle East
Asia/
Pacific/Africa
Consolidated
2020
Net sales
$
551.9
$
153.9
$
1,113.3
$
109.2
$
1,928.3
Income (loss) from operations
60.9
(8.8
)
102.3
(1.3
)
153.1
2019
Net sales
$
496.2
$
156.1
$
1,210.6
$
132.9
$
1,995.8
Income (loss) from operations
30.6
(8.5
)
127.7
3.4
153.2
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,
2020
2019
Segment income from operations
$
153.1
$
153.2
Corporate expenses
(34.4
)
(31.8
)
Amortization of intangibles
(15.0
)
(15.3
)
Stock compensation expense
(2.5
)
(12.0
)
Restructuring expenses
(0.8
)
(1.7
)
Consolidated income from operations
$
100.4
$
92.4
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income, adjusted net income per share and net sales on
a constant currency basis, each of which exclude amounts that are
typically included in the most directly comparable measure
calculated in accordance with U.S. generally accepted accounting
principles (“GAAP”). A reconciliation of each of those measures to
the most directly comparable GAAP measure is included below.
The following is a reconciliation of reported income from
operations, net income and net income per share to adjusted income
from operations, net income and net income per share for the three
months ended March 31, 2020 and 2019 (in millions, except per share
data):
Three Months Ended March 31,
2020
2019
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
Income From Operations
Net Income(1)
Net Income Per Share(1)
As reported
$
100.4
$
64.7
$
0.85
$
92.4
$
65.1
$
0.84
Restructuring expenses(3)
0.8
0.7
0.01
1.7
1.4
0.02
As adjusted
$
101.2
$
65.5
$
0.86
$
94.1
$
66.5
$
0.86
(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, 2020 and 2019
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.
The following table sets forth, for the three months ended March
31, 2020 and 2019, 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
2020
2019
% change from 2019
$
%
North America
$
551.9
$
496.2
11.2
%
$
(2.4
)
(0.5
)%
South America
153.9
156.1
(1.4
)%
(23.8
)
(15.2
)%
Europe/Middle East
1,113.3
1,210.6
(8.0
)%
(39.8
)
(3.3
)%
Asia/Pacific/Africa
109.2
132.9
(17.8
)%
(5.9
)
(4.4
)%
$
1,928.3
$
1,995.8
(3.4
)%
$
(71.9
)
(3.6
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200505005161/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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