AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide
manufacturer and distributor of agricultural equipment and
solutions, reported net sales of approximately $2.7 billion for the
fourth quarter of 2020, an increase of approximately 8.1% compared
to the fourth quarter of 2019. Reported net income was $1.78 per
share for the fourth quarter of 2020, and adjusted net income(3),
which excludes restructuring expenses and a gain on sale of an
investment, was $1.54 per share. These results compare to reported
net loss of $1.17 per share and adjusted net income, which excludes
non-cash impairment charges, restructuring expenses and a tax gain,
of $0.94 per share for the fourth quarter of 2019. Excluding
favorable currency translation impacts of approximately 1.4%, net
sales in the fourth quarter of 2020 increased approximately 6.7%
compared to the fourth quarter of 2019.
Net sales for the full year of 2020 were approximately $9.1
billion, which is an increase of approximately 1.2% compared to
2019. Excluding unfavorable currency translation impacts of
approximately 1.8%, net sales for the full year of 2020 increased
approximately 3.0% compared to 2019. For the full year of 2020,
reported net income was $5.65 per share, and adjusted net
income(3), which excludes non-cash impairment charges,
restructuring expenses and a gain on sale of an investment, was
$5.61 per share. These results compare to reported net income of
$1.63 per share and adjusted net income, which excludes non-cash
impairment charges, restructuring expenses and certain tax charges
and gains, of $4.44 per share for 2019.
Fourth Quarter Highlights
- Reported fourth quarter regional sales results(1):
Europe/Middle East (“EME”) 13.7%, North America (10.2)%, South
America 21.1%, Asia/Pacific/Africa (“APA”) 2.1%
- Constant currency fourth quarter regional sales
results(1)(2)(3): EME 7.7%, North America (10.3)%, South America
52.7%, APA (3.8)%
- Fourth quarter regional operating margin performance: EME
11.9%, North America 2.0%, South America 5.9%, APA 10.6%
- Full-year adjusted operating margins(3) improved to 7.0% in
2020 compared to 5.9% in 2019
- Generated approximately $896.5 million in cash flow from
operations and approximately $626.6 million in free cash flow(3) in
2020
- Full-year earnings forecast for 2021 in a range from $7.00 to
$7.25 per share
(1)As compared to fourth quarter 2019. (2)Excludes currency
translation impact. (3)See reconciliation of Non-GAAP measures in
appendix.
“The AGCO team delivered strong operational results leveraging
improving markets to produce sales and earnings growth in the
fourth quarter,” stated Eric Hansotia, AGCO’s Chairman, President
and Chief Executive Officer. “Our focused execution allowed us to
overcome supply chain difficulties and maintain production levels,
while reducing company and dealer inventories, which contributed to
significant cash flow generation. I would like to thank all our
employees for their extraordinary efforts to support our dealers
and customers under challenging conditions. Our improved results
allowed us to maintain our investments in premium technology,
sustainable smart farming solutions and enhanced digital
capabilities. AGCO’s exceptional product line continues to be
well-received by our customers as evidenced by a strong year-end
order board. Looking forward to 2021, we are forecasting sales and
earnings growth as industry conditions trend positively and we
position AGCO for future success.”
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Year ended December 31, 2020
Change from Prior Year Period
Change from Prior Year Period
North America(1)
10%
—%
South America
12%
20%
Western Europe(2)
(1)%
1%
(1) Excludes compact tractors.
(2) Based on Company estimates.
“Increased grain consumption, driven by economic recovery and
higher export demand, helped to offset a solid year of global crop
production leaving year-end grain inventories lower than
anticipated,” stated Mr. Hansotia. “Reduced grain stocks supported
a rally in soft commodity prices, lifted farmer sentiment and
supported higher demand for agricultural equipment during the
fourth quarter.”
“Full year global industry retail sales of farm equipment in
2020 were mixed across AGCO’s key markets with fourth quarter
industry retail sales significantly higher than the prior year
across the major regions,” continued Mr. Hansotia. “Industry retail
tractor sales in North America increased during the full year of
2020 compared to 2019. Strong growth in the sales of lower
horsepower tractors drove most of the increase. The fleet age for
large equipment in North America remains extended and stronger
replacement demand was evident in the fourth quarter. Higher
commodity prices and improved farmer sentiment are also expected to
drive higher North American industry sales in 2021. In Western
Europe, industry demand improved in the fourth quarter, but
remained down for the full year of 2020 compared to 2019. Market
demand was weakest in the United Kingdom and Scandinavia, and was
partially offset by growth in Germany, which benefited from tax
incentives during 2020. We expect 2021 industry demand in Western
Europe to be flat to modestly higher from 2020 levels. South
America industry retail tractor sales increased during 2020, with
robust recovery in Brazil and Argentina partially offset by weaker
demand in the smaller South America markets. Healthy crop
production and favorable exchange rates in Brazil and Argentina are
supporting farm profitability. We expect farm economics to remain
supportive in 2021 in South America with replacement demand
resulting in higher industry sales compared to 2020. Our long-term
global view remains positive. Increasing demand for commodities,
driven by the growing world population, rising emerging market
protein consumption and biofuel use, are expected to support
healthy conditions in our industry.”
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended December 31,
2020
2019
% change from 2019
% change from 2019 due to
currency translation(1)
% change excluding currency
translation
North America
$
485.1
$
540.5
(10.2)%
0.1%
(10.3)%
South America
267.5
220.9
21.1%
(31.6)%
52.7%
EME
1,722.7
1,515.3
13.7%
5.9%
7.7%
APA
241.8
236.9
2.1%
5.9%
(3.8)%
Total
$
2,717.1
$
2,513.6
8.1%
1.4%
6.7%
Year Ended December 31,
2020
2019
% change from 2019
% change from 2019 due to
currency translation(1)
% change excluding currency
translation
North America
$
2,175.0
$
2,191.8
(0.8)%
(0.5)%
(0.2)%
South America
873.8
802.2
8.9%
(27.6)%
36.6%
EME
5,366.9
5,328.8
0.7%
1.1%
(0.4)%
APA
734.0
718.6
2.1%
1.2%
0.9%
Total
$
9,149.7
$
9,041.4
1.2%
(1.8)%
3.0%
(1) See Footnotes for additional
disclosures.
North America
Net sales in the North American region were flat for the full
year of 2020 compared to 2019, excluding the negative impact of
currency translation. Increased sales of Precision Planting
equipment, high horsepower tractors and parts were offset by lower
sales of grain and protein production equipment as well as
sprayers. Income from operations for the full year of 2020 improved
approximately $72.1 million compared to 2019. The benefit of a
richer sales mix and cost control initiatives contributed to
operating margin improvement.
South America
AGCO’s South American net sales increased 36.6% for the full
year of 2020 compared to 2019, excluding the impact of unfavorable
currency translation. Increased sales in Brazil and Argentina were
responsible for the growth. Income from operations for the full
year of 2020 was improved compared to 2019 by approximately $68.7
million. The improved South America results reflect the benefit of
higher sales and production, a richer sales mix, as well as cost
reduction initiatives, partially offset by negative currency
impacts.
Europe/Middle East
AGCO’s Europe/Middle East net sales were flat for the full year
of 2020 compared to 2019, excluding favorable currency translation
impacts. Sales improved significantly in the second half of the
year compared to 2019, offsetting a weak second quarter which was
impacted by COVID-19-related production interruptions. Declines in
France, Scandinavia and Central Europe were mostly offset by growth
in Germany and Eastern Europe. Income from operations decreased
approximately $52.9 million for the full year of 2020 compared to
2019, due to lower net sales and production volumes as well as
higher warranty costs.
Asia/Pacific/Africa
Asia/Pacific/Africa net sales increased 0.9%, excluding the
positive impact of currency translation, during the full year of
2020 compared to 2019. Higher sales in China and Australia were
mostly offset by lower sales in Africa and the smaller Asian
markets. Income from operations improved approximately $18.7
million for the full year of 2020 compared to 2019, due to higher
sales and a richer product mix.
Outlook
The health, safety and well-being of all AGCO employees, dealers
and farmer customers continues 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.
AGCO’s net sales for 2021 are expected to range from $10.2
billion to $10.4 billion, reflecting improved sales volumes,
pricing and positive foreign currency translation. Gross and
operating margins are projected to improve from 2020 levels,
reflecting the impact of higher sales and production volumes as
well as margin improvement initiatives. These improvements are
planned to fund increases in engineering and other technology
investments to support AGCO’s precision agriculture and digital
initiatives. Based on these assumptions, 2021 earnings per share is
targeted in a range from $7.00 to $7.25.
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Thursday, February 4th.
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 Company is uncertain of the impact of the coronavirus
(“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, the recognition of any future
applicable insurance recoveries, 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 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. 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,
2019 and subsequent Form 10-Qs. AGCO disclaims any obligation to
update any forward-looking statements except as required by
law.
* * * * *
About AGCO
AGCO (NYSE: AGCO) is a global leader in the design, manufacture
and distribution of agricultural solutions and 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 $9.1 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)
December 31, 2020
December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents
$
1,119.1
$
432.8
Accounts and notes receivable, net
856.0
800.5
Inventories, net
1,974.4
2,078.7
Other current assets
418.9
417.1
Total current assets
4,368.4
3,729.1
Property, plant and equipment, net
1,508.5
1,416.3
Right-of-use lease assets
165.1
187.3
Investment in affiliates
442.7
380.2
Deferred tax assets
77.6
93.8
Other assets
179.8
153.0
Intangible assets, net
455.6
501.7
Goodwill
1,306.5
1,298.3
Total assets
$
8,504.2
$
7,759.7
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
325.9
$
2.9
Short-term borrowings
33.8
150.5
Accounts payable
855.1
914.8
Accrued expenses
1,916.7
1,654.2
Other current liabilities
231.3
162.1
Total current liabilities
3,362.8
2,884.5
Long-term debt, less current portion and
debt issuance costs
1,256.7
1,191.8
Operating lease liabilities
125.9
148.6
Pension and postretirement health care
benefits
253.4
232.1
Deferred tax liabilities
112.4
107.0
Other noncurrent liabilities
375.0
288.7
Total liabilities
5,486.2
4,852.7
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.8
0.8
Additional paid-in capital
30.9
4.7
Retained earnings
4,759.1
4,443.5
Accumulated other comprehensive loss
(1,810.8)
(1,595.2)
Total AGCO Corporation stockholders’
equity
2,980.0
2,853.8
Noncontrolling interests
38.0
53.2
Total stockholders’ equity
3,018.0
2,907.0
Total liabilities and stockholders’
equity
$
8,504.2
$
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 December
31,
2020
2019
Net sales
$
2,717.1
$
2,513.6
Cost of goods sold
2,121.5
2,000.1
Gross profit
595.6
513.5
Selling, general and administrative
expenses
283.1
272.4
Engineering expenses
99.9
89.1
Amortization of intangibles
14.8
15.5
Impairment charges
—
176.6
Restructuring expenses
14.3
6.0
Bad debt expense
5.5
3.7
Income (loss) from operations
178.0
(49.8)
Interest expense, net
1.9
4.0
Other (income) expense, net
(15.1)
20.1
Income (loss) before income taxes and
equity in net earnings of affiliates
191.2
(73.9)
Income tax provision
69.8
25.0
Income (loss) before equity in net
earnings of affiliates
121.4
(98.9)
Equity in net earnings of affiliates
14.0
9.3
Net income (loss)
135.4
(89.6)
Net loss attributable to noncontrolling
interests
—
1.3
Net income (loss) attributable to AGCO
Corporation and subsidiaries
$
135.4
$
(88.3)
Net income (loss) per common share
attributable to AGCO Corporation and subsidiaries:
Basic
$
1.81
$
(1.17)
Diluted
$
1.78
$
(1.17)
Cash dividends declared and paid per
common share
$
0.16
$
0.16
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.9
75.6
Diluted
75.9
75.6
See accompanying notes to condensed
consolidated financial statements.
AGCO CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(unaudited and in millions,
except per share data)
Years Ended December 31,
2020
2019
Net sales
$
9,149.7
$
9,041.4
Cost of goods sold
7,092.2
7,057.1
Gross profit
2,057.5
1,984.3
Selling, general and administrative
expenses
1,001.5
1,040.3
Engineering expenses
342.6
343.4
Amortization of intangibles
59.5
61.1
Impairment charges
20.0
176.6
Restructuring expenses
19.7
9.0
Bad debt expense
14.5
5.8
Income from operations
599.7
348.1
Interest expense, net
15.0
19.9
Other expense, net
22.7
67.1
Income before income taxes and equity in
net earnings of affiliates
562.0
261.1
Income tax provision
187.7
180.8
Income before equity in net earnings of
affiliates
374.3
80.3
Equity in net earnings of affiliates
45.5
42.5
Net income
419.8
122.8
Net loss attributable to noncontrolling
interests
7.3
2.4
Net income attributable to AGCO
Corporation and subsidiaries
$
427.1
$
125.2
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
5.69
$
1.64
Diluted
$
5.65
$
1.63
Cash dividends declared and paid per
common share
$
0.63
$
0.63
Weighted average number of common and
common equivalent shares outstanding:
Basic
75.0
76.2
Diluted
75.6
77.0
See accompanying notes to condensed
consolidated financial statements.
AGCO CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited and in millions)
Years Ended December 31,
2020
2019
Cash flows from operating activities:
Net income
$
419.8
$
122.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
212.5
210.9
Impairment charges
20.0
176.6
Amortization of intangibles
59.5
61.1
Stock compensation expense
37.6
41.3
Equity in net earnings of affiliates, net
of cash received
(43.7)
—
Deferred income tax provision
3.4
15.1
Other
(7.4)
6.9
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(90.5)
63.8
Inventories, net
119.7
(216.3)
Other current and noncurrent assets
(49.8)
(14.4)
Accounts payable
(59.1)
35.7
Accrued expenses
185.3
114.5
Other current and noncurrent
liabilities
89.2
77.9
Total adjustments
476.7
573.1
Net cash provided by operating
activities
896.5
695.9
Cash flows from investing activities:
Purchases of property, plant and
equipment
(269.9)
(273.4)
Proceeds from sale of property, plant and
equipment
1.9
4.9
Purchase of businesses, net of cash
acquired
(2.8)
—
Sale of (investments in) unconsolidated
affiliates, net
29.1
(3.1)
Net cash used in investing activities
(241.7)
(271.6)
Cash flows from financing activities:
Proceeds from (repayments of)
indebtedness, net
150.0
(108.4)
Purchases and retirement of common
stock
(55.0)
(130.0)
Payment of dividends to stockholders
(48.0)
(48.0)
Payment of minimum tax withholdings on
stock compensation
(19.8)
(28.1)
Payment of debt issuance costs
(1.4)
(0.5)
(Distributions to) investments by
noncontrolling interests, net
(3.1)
1.6
Net cash provided by (used in) financing
activities
22.7
(313.4)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
8.8
(4.2)
Increase in cash, cash equivalents and
restricted cash
686.3
106.7
Cash, cash equivalents and restricted
cash, beginning of year
432.8
326.1
Cash, cash equivalents and restricted
cash, end of year
$
1,119.1
$
432.8
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 December
31,
Years Ended December 31,
2020
2019
2020
2019
Cost of goods sold
$
0.2
$
0.4
$
1.1
$
1.7
Selling, general and administrative
expenses
10.5
8.0
36.8
40.0
Total stock compensation expense
$
10.7
$
8.4
$
37.9
$
41.7
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 the
U.S., Europe, South America, Africa and China in order to reduce
costs in response to softening global market demand and lower
production volumes. The aggregate headcount reduction was
approximately 4,160 employees for the years 2014 to 2019. The
Company had approximately $4.8 million of severance and related
costs accrued as of December 31, 2019. During the year ended
December 31, 2020, the Company recorded an additional $19.7 million
of severance and related costs associated with these
rationalizations, as well as the rationalizations of its grain and
protein business that was initiated during the fourth quarter of
2019 and continued throughout 2020. The restructuring expenses
recorded during 2020 related to the termination of an additional
350 employees. During 2020, the Company paid approximately $5.1
million of severance and other related costs. The $19.7 million of
expenses recorded during the year end December 31, 2020 included a
$2.5 million write-down of property, plant and equipment. The
remaining $16.8 million of accrued severance, facility closure and
other related costs as of December 31, 2020, inclusive of
approximately $0.1 million of negative foreign currency translation
impacts, are expected to be primarily paid during 2021.
3. GOODWILL AND OTHER INTANGIBLES IMPAIRMENT CHARGES
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. The
COVID-19 pandemic has adversely impacted the global economy as a
whole. Based on current macroeconomic conditions, the Company
assessed its goodwill and other intangible assets for indications
of impairment as of March 31, 2020, June 30, 2020 and September 30,
2020. 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.” The
quantitative goodwill impairment analysis was performed in
accordance with the provisions of Accounting Standards Codification
(“ASC”) 350, “Intangibles - Goodwill and Other” and Accounting
Standards Update (“ASU”) 2017-04, “Simplifying the Test for
Goodwill Impairment” (“ASU 2017-04”). No other indications of
impairments existed during 2020 related to any of the Company’s
other reporting units, including as a result of the Company’s
annual impairment analysis as of October 1, 2020.
During the three months ended December 31, 2019, the Company
recorded a non-cash impairment charge of approximately $173.6
million within “Impairment charges” in the Company’s Condensed
Consolidated Statements of Operations related to goodwill
associated with its grain storage and protein production system
operations (“grain and protein business”) in Europe/Middle East. As
part of the Company’s annual impairment evaluation of goodwill, the
Company concluded that it was more likely than not that the fair
value of the reporting unit was less than its carrying amount. This
was primarily as a result of a review of current and recently
projected market conditions and operating results of the business.
The quantitative goodwill impairment analysis was performed in
accordance with the provisions of ASC 350 and ASU 2017-04.
During the three months ended December 31, 2019, the Company
also recorded a non-cash impairment charge of approximately $3.0
million within “Impairment charges” in the Company’s Condensed
Consolidated Statements of Operations. The impairment charge
related to certain long-lived intangible assets associated with the
grain and protein business within Europe/Middle East and North
America, due to the discontinuation of a certain brand name and
related products and customers in accordance with ASC 360,
“Impairment and Disposal of Long-Lived Assets.”
4. INDEBTEDNESS
Long-term debt at December 31, 2020 and 2019 consisted of the
following (in millions):
December 31, 2020
December 31, 2019
Senior term loan due 2022
$
184.0
$
168.1
Credit facility, expires 2023
277.9
—
1.002% Senior term loan due 2025
306.7
280.2
Senior term loans due between 2021 and
2028
806.0
736.2
Other long-term debt
10.5
12.5
Debt issuance costs
(2.5)
(2.3)
1,582.6
1,194.7
Less:
Senior term loans due 2021, net of debt
issuance costs
(323.6)
—
Current portion of other long-term
debt
(2.3)
(2.9)
Total long-term indebtedness, less current
portion
$
1,256.7
$
1,191.8
As of December 31, 2020 and 2019, the Company had short-term
borrowings due within one year of approximately $33.8 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 (“2020 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
$555.8 million as of December 31, 2020). Amounts can be drawn
incrementally 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 2020 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 $277.9 million as of December 31, 2020) of 2020
term loans. The Company simultaneously repaid €100.0 million (or
approximately $108.7 million) of its revolving credit facility from
the borrowings received. There were no other borrowings on the 2020
term loans subsequent to the initial borrowings in April 2020.
5. INVENTORIES
Inventories at December 31, 2020 and 2019 were as follows (in
millions):
December 31, 2020
December 31, 2019
Finished goods
$
641.3
$
780.1
Repair and replacement parts
652.3
611.5
Work in process
175.1
213.4
Raw materials
505.7
473.7
Inventories, net
$
1,974.4
$
2,078.7
6. ACCOUNTS RECEIVABLE SALES AGREEMENTS
The Company had accounts receivable sales agreements that permit
the sale, on an ongoing basis, of a majority of its wholesale
receivables in North America, Europe and Brazil to its U.S.,
Canadian, European and Brazilian finance joint ventures. As of
December 31, 2020 and 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 $5.6 million and $24.1
million, respectively, during the three months and year ended
December 31, 2020. 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 $12.1
million and $42.4 million, respectively, during the three months
and year ended December 31, 2019.
The Company’s finance joint ventures in Europe, Brazil and
Australia also provide wholesale financing directly to the
Company’s dealers. As of December 31, 2020 and 2019, these finance
joint ventures had approximately $85.2 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.
7. NET INCOME PER SHARE
A reconciliation of net income (loss) attributable to AGCO
Corporation and subsidiaries and weighted average common shares
outstanding for purposes of calculating basic and diluted net
income (loss) per share for the three months and years ended
December 31, 2020 and 2019 is as follows (in millions, except per
share data):
Three Months Ended December
31,
Years Ended December 31,
2020
2019
2020
2019
Basic net income (loss) per share:
Net income (loss) attributable to AGCO
Corporation and subsidiaries
$
135.4
$
(88.3)
$
427.1
$
125.2
Weighted average number of common shares
outstanding
74.9
75.6
75.0
76.2
Basic net income (loss) per share
attributable to AGCO Corporation and subsidiaries
$
1.81
$
(1.17)
$
5.69
$
1.64
Diluted net income (loss) per share:
Net income (loss) attributable to AGCO
Corporation and subsidiaries
$
135.4
$
(88.3)
$
427.1
$
125.2
Weighted average number of common shares
outstanding
74.9
75.6
75.0
76.2
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
1.0
—
0.6
0.8
Weighted average number of common shares
and common share equivalents outstanding for purposes of computing
diluted net income per share
75.9
75.6
75.6
77.0
Diluted net income (loss) per share
attributable to AGCO Corporation and subsidiaries
$
1.78
$
(1.17)
$
5.65
$
1.63
The weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net loss
per share above do not include the impact of dilutive stock-settled
appreciation rights, performance share awards and restricted stock
units for the three months ended December 31, 2019 as the impact
would have been antidilutive. The number of shares excluded from
the weighted average number of common shares and common share
equivalents outstanding was approximately 1.1 million shares for
the three months ended December 31, 2019.
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 charged to
each segment based on the region and division where the expenses
are incurred. As a result, the components of income from operations
for one segment may not be comparable to another segment. Segment
results for the three months and years ended December 31, 2020 and
2019 are as follows (in millions):
Three Months Ended December 31,
North America
South America
Europe/ Middle East
Asia/ Pacific/Africa
Consolidated
2020
Net sales
$
485.1
$
267.5
$
1,722.7
$
241.8
$
2,717.1
Income from operations
9.8
15.9
204.5
25.6
255.8
2019
Net sales
$
540.5
$
220.9
$
1,515.3
$
236.9
$
2,513.6
Income (loss) from operations
7.1
(18.2)
179.7
21.5
190.1
Years Ended December 31,
North America
South America
Europe/ Middle East
Asia/ Pacific/Africa
Consolidated
2020
Net sales
$
2,175.0
$
873.8
$
5,366.9
$
734.0
$
9,149.7
Income from operations
193.7
29.3
585.3
62.1
870.4
2019
Net sales
$
2,191.8
$
802.2
$
5,328.8
$
718.6
$
9,041.4
Income (loss) from operations
121.6
(39.4)
638.2
43.4
763.8
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
Three Months Ended December
31,
Years Ended December 31,
2020
2019
2020
2019
Segment income from operations
$
255.8
$
190.1
$
870.4
$
763.8
Corporate expenses
(38.2)
(33.8)
(134.7)
(129.0)
Amortization of intangibles
(14.8)
(15.5)
(59.5)
(61.1)
Stock compensation expense
(10.5)
(8.0)
(36.8)
(40.0)
Impairment charges
—
(176.6)
(20.0)
(176.6)
Restructuring expenses
(14.3)
(6.0)
(19.7)
(9.0)
Consolidated income (loss) from
operations
$
178.0
$
(49.8)
$
599.7
$
348.1
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income, adjusted net income per share, free cash flow
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 and years ended December 31, 2020 and 2019 (in millions,
except per share data):
Three Months Ended December
31,
2020
2019
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
As reported
$
178.0
$
135.4
$
1.78
$
(49.8)
$
(88.3)
$
(1.17)
Restructuring expenses(3)
14.3
14.2
0.19
6.0
5.8
0.08
Impairment charges(4)
—
—
—
176.6
176.6
2.33
Gain on sale of investment in
affiliate(5)
—
(32.5)
(0.43)
—
—
—
Swiss tax reform(6)
—
—
—
—
(21.8)
(0.29)
Weighted average share impact(7)
—
—
—
—
—
(0.01)
As adjusted
$
192.2
$
117.1
$
1.54
$
132.8
$
72.2
$
0.94
(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 December 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,
including costs associated with the Company’s rationalization of
its grain and protein business.
(4)
During the three months ended December 31,
2019, the Company recorded impairment charges of approximately
$176.6 million related primarily to its Europe/Middle East grain
and protein business. See Note 3 for further information.
(5)
The Company has a minority interest in
Tractors and Farm Equipment Limited (“TAFE”). During the three
months ended December 31, 2020, TAFE repurchased a portion of its
common stock from the Company resulting in a gain of approximately
$32.5 million.
(6)
During the three months ended December 31,
2019, the Company recognized a one-time income tax gain associated
with the finalization of Swiss federal tax reform.
(7)
The weighted average share impact
represents the impact of including dilutive common stock
equivalents (as described in Note 7 above) in the “As adjusted”
earnings per share calculation.
Years Ended December 31,
2020
2019
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)(2)
As reported
$
599.7
$
427.1
$
5.65
$
348.1
$
125.2
$
1.63
Restructuring expenses(3)
19.7
19.5
0.26
9.0
8.3
0.11
Impairment charges(4)
20.0
10.0
0.13
176.6
176.6
2.29
Gain on sale of investment in
affiliate(5)
—
(32.5)
(0.43)
—
—
—
Deferred income tax adjustment(6)
—
—
—
—
53.7
0.70
Swiss tax reform(7)
—
—
—
—
(21.8)
(0.28)
As adjusted
$
639.4
$
424.2
$
5.61
$
533.7
$
341.9
$
4.44
(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 year ended December 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,
including costs associated with the Company’s rationalization of
its grain and protein business.
(4)
During the year ended December 31, 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. During the year ended December 31, 2019, the Company
recorded impairment charges of approximately $176.6 million related
primarily to its European/Middle East grain and protein business.
See Note 3 for further information.
(5)
The Company has a minority interest in
TAFE. During the three months ended December 31, 2020, TAFE
repurchased a portion of its common stock from the Company
resulting in a gain of approximately $32.5 million.
(6)
During the three months ended September
30, 2019, the Company recorded a non-cash adjustment to establish a
valuation allowance against its Brazilian net deferred income tax
assets.
(7)
During the three months ended December 31,
2019, the Company recognized a one-time income tax gain associated
with the finalization of Swiss federal tax reform.
The following is a reconciliation of net cash provided by
operating activities to free cash flow for the years ended December
31, 2020 and 2019 (in millions):
December 31, 2020
December 31, 2019
Net cash provided by operating
activities
$
896.5
$
695.9
Less: capital expenditures
(269.9)
(273.4)
Free cash flow
$
626.6
$
422.5
The following tables set forth, for the three months and year
ended December 31, 2020 and 2019, the impact to net sales of
currency translation by geographical segment (in millions, except
percentages):
Three Months Ended December
31,
Change due to currency
translation
2020
2019
% change from 2019
$
%
North America
$
485.1
$
540.5
(10.2)
%
$
0.3
0.1
%
South America
267.5
220.9
21.1
%
(69.8)
(31.6)
%
Europe/Middle East
1,722.7
1,515.3
13.7
%
90.0
5.9
%
Asia/Pacific/Africa
241.8
236.9
2.1
%
13.9
5.9
%
$
2,717.1
$
2,513.6
8.1
%
$
34.4
1.4
%
Years Ended December 31,
Change due to currency
translation
2020
2019
% change from. 2019
$
%
North America
$
2,175.0
$
2,191.8
(0.8)
%
$
(11.6)
(0.5)
%
South America
873.8
802.2
8.9
%
(221.8)
(27.6)
%
Europe/Middle East
5,366.9
5,328.8
0.7
%
58.5
1.1
%
Asia/Pacific/Africa
734.0
718.6
2.1
%
8.8
1.2
%
$
9,149.7
$
9,041.4
1.2
%
$
(166.1)
(1.8)
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210204005292/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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