- Record third quarter net sales of $3.5 billion
- Third quarter operating margin of 12.3%; year-to-date operating
margin over 12%
- Raises full-year operating margin and earnings per share
outlook
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 third
quarter ended September 30, 2023. Net sales for the third quarter
were approximately $3.5 billion, an increase of 10.7% compared to
the third quarter of 2022. Excluding favorable foreign currency
translation of 3.5%, net sales in the quarter increased 7.2%
compared to the third quarter of 2022. Reported net income was
$3.74 per share for the third quarter of 2023, and adjusted net
income(1), which excludes restructuring expenses,
transaction-related costs and costs related to a completed
divestiture, was $3.97 per share. These results compare to reported
net income of $3.18 per share and adjusted net income(1), which
excluded restructuring expenses, of $3.18 per share for the third
quarter of 2022.
“Robust demand for our technology-rich products, driven by
healthy crop production, favorable farm economics and an improving
supply chain, generated record third quarter results,” stated Eric
Hansotia, AGCO’s Chairman, President and Chief Executive Officer.
“The continued 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 and helping position AGCO for another record year.”
“Furthering our Farmer-First mindset, we recently announced the
planned acquisition of Trimble’s ag assets and technologies through
the formation of a joint venture with Trimble. We believe that this
transaction, when combined with our existing solutions, will
strengthen our precision ag leadership position and create a global
leader in mixed-fleet precision ag. This transaction should
significantly enhance AGCO’s technology stack with disruptive
technologies that cover every aspect of the crop cycle, which
ultimately helps us better serve farmers no matter what brand they
use and accelerates AGCO’s strategic transformation,” Hansotia
added.
Third Quarter Highlights
- Reported regional sales results(2): Europe/Middle East (“EME”)
+14.2%, North America +3.4%, South America +26.0%,
Asia/Pacific/Africa (“APA”) (16.9)%
- Constant currency regional sales results(1)(2)(3): EME +9.3%,
North America +3.0%, South America +18.5%, APA (15.3)%
- Regional operating margin performance: EME 12.6%, North America
14.9%, South America 20.8%, APA 9.2%
(1) See reconciliation of non-GAAP
measures in appendix.
(2) As compared to third quarter 2022.
(3) Excludes currency translation
impact.
Net sales for the first nine months of 2023 were approximately
$10.6 billion, an increase of 21.2% compared to the same period in
2022. Excluding unfavorable currency translation impacts of 0.7%,
net sales for the first nine months of 2023 increased 21.9%
compared to the same period in 2022. For the first nine months of
2023, reported net income was $11.10 per share, and adjusted net
income(1), which excludes restructuring expenses,
transaction-related costs, costs related to a completed divestiture
and an estimated cost of participation in a Brazilian income tax
amnesty program, was $11.77 per share. These results compare to
reported net income of $7.58 per share, and adjusted net income,
excluding restructuring expenses, impairment charges and other
related items, of $7.95 per share, for the first nine months of
2022.
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Nine Months Ended September 30, 2023
Change from
Prior Year Period
Change from
Prior Year Period
North America(4)
(2)%
23%
South America
(8)%
(20)%
Western Europe(5)
(2)%
30%
(4) Excludes compact tractors.
(5) Based on Company estimates.
“Increased crop production in the Northern hemisphere and strong
yields in Brazil are driving higher grain inventories and weighing
on commodity prices,” stated Hansotia. “While still at supportive
levels, the lower commodity prices and a fleet age that is now
trending younger are causing farmers to become more selective about
their equipment and technology investments.”
Global industry production and retail tractor sales were down
modestly in the first nine months of 2023 compared to last year's
elevated levels with lower sales of smaller equipment more than
offsetting increased sales of larger equipment. Industry retail
sales for tractors in North America were down approximately 2% in
the first nine 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 10% in the first nine months of 2023 compared to the
same period in 2022. North America industry retail tractor demand
for 2023 is expected to be down modestly compared to 2022. Industry
retail sales for combines in North America increased significantly
in the first nine months of 2023 compared to 2022 due mainly to
improving supply chains.
South American industry tractor retail sales decreased 8% during
the first nine months of 2023 compared to 2022 levels. Retail
demand in Brazil was negatively affected by the depletion of the
government subsidized loan program prior to its June 30th fiscal
year end. Healthy farm income, supportive exchange rates and
continued expansion in planted acreage in Brazil are driving
increased investments in high-tech farm equipment. Weaker smaller
equipment demand due to financing delays is being partially offset
by strong demand for large equipment resulting in an outlook of
modestly lower demand for the South American tractor industry in
2023 compared to strong levels last year.
In Western Europe, industry retail tractor sales decreased
approximately 2% in the first nine months of 2023 compared to
strong levels in the same period of 2022. Lower commodity prices
and political uncertainty are making farmers more cautious.
Significant declines in Italy and Spain were mostly offset by
higher industry sales in Germany, the United Kingdom and France.
Farmer sentiment in the region continues to be negatively affected
by the conflict in Ukraine, and input cost inflation and full year
retail tractor demand is expected to decline modestly compared to
2022. Industry retail sales for combines in Western Europe
increased significantly in the first nine months of 2023 compared
to 2022 due to supply chain constraints experienced in 2022.
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended September 30,
2023
2022
% change from 2022
% change from 2022 due to
currency translation(6)
% change excluding currency
translation
North America
$
941.1
$
910.5
3.4
%
0.4
%
3.0
%
South America
719.8
571.2
26.0
%
7.5
%
18.5
%
Europe/Middle East
1,586.9
1,390.1
14.2
%
4.9
%
9.3
%
Asia/Pacific/Africa
207.7
249.8
(16.9
)%
(1.6
)%
(15.3
)%
Total
$
3,455.5
$
3,121.6
10.7
%
3.5
%
7.2
%
Nine Months Ended September 30,
2023
2022
% change from 2022
% change from 2022 due to
currency translation(6)
% change excluding currency
translation
North America
$
2,861.0
$
2,351.4
21.7
%
(0.2
)%
21.9
%
South America
1,822.2
1,446.8
25.9
%
2.5
%
23.4
%
Europe/Middle East
5,281.5
4,260.8
24.0
%
(1.4
)%
25.4
%
Asia/Pacific/Africa
647.0
693.5
(6.7
)%
(4.4
)%
(2.3
)%
Total
$
10,611.7
$
8,752.5
21.2
%
(0.7
)%
21.9
%
(6) See Footnotes for additional
disclosures.
North America
Net sales in the North American region increased 21.9% in the
first nine 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 nine months of 2023
was approximately $160.6 million higher with operating margins
expanding nearly 400 basis points compared to the same period in
2022. Operating income benefited from higher sales and production,
positive net pricing and a favorable sales mix.
South America
South American net sales grew 23.4% in the first nine months of
2023 compared to the same period of 2022, excluding the impact of
favorable currency translation. Strong sales growth in Brazil drove
most of the increase. Increased sales of high horsepower, higher
margin tractors, as well as elevated sales of Momentum planters and
favorable pricing drove most of the increase. Income from
operations in the first nine months of 2023 grew by approximately
$131.6 million compared to the same period in 2022, and operating
margins were 20.3%. The improved South America results reflect the
benefit of higher sales and production as well as a favorable sales
mix.
Europe/Middle East
Europe/Middle East net sales increased 25.4% in the first nine
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
parts along with favorable pricing. Strong growth in Turkey,
Germany and France accounted for most of the increase. Income from
operations improved $268.3 million and operating margins expanded
300 basis points in the first nine months of 2023, compared to the
same period in 2022 as a result of higher sales and production.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa decreased (2.3)%, excluding the
negative impact of currency translation, in the first nine months
of 2023 compared to the same period in 2022. Lower sales in Japan
were mostly offset by higher sales in Australia and China. Income
from operations declined by approximately $39.5 million in the
first nine months of 2023 compared to the same period in 2022 due
primarily to lower sales, a weaker mix of sales and higher
logistics costs.
Outlook
AGCO’s net sales for 2023 are expected to be approximately $14.7
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 and a favorable sales mix. 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 reported earnings per
share are targeted at approximately $15.08 and adjusted earnings
per share at approximately $15.75(1).
AGCO will host a conference call with respect to this earnings
announcement at 10 a.m. Eastern Time on Tuesday, October 31. 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 the website. A replay of the conference
call will be available approximately two hours after the conclusion
of the conference call for 12 months following the call. A copy of
this press release will be available on AGCO’s website for at least
12 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.
- 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.
- We recently announced the proposed acquisition of the ag assets
and technologies of Trimble through the formation of a joint
venture of which we will own 85%. This is a substantial acquisition
for us, and it will require us to incur substantial indebtedness.
All acquisitions involve risk, and there is no certainty that this
acquisition will close, that we will be able to obtain the desired
financing, that our increased leverage will not adversely impact
our remaining business, or that the acquired business will operate
as expected following closing. Each of these items, as well as
similar acquisition-related items, would adversely impact our
performance.
- 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 and tariffs imposed on exports to and
imports from China.
- 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.
- 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.
- Any increase in COVID-19, or other future pandemics, could
negatively impact our business through reduced sales, facilities
closures, higher absentee rates, and reduced production at both our
plants and the plants that supply us with parts and components. In
addition, logistical and transportation-related issues and similar
problems may also arise.
- 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 X, formerly known as Twitter: @AGCOCorp. For financial
news on X, 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)
September 30, 2023
December 31, 2022
ASSETS
Current Assets:
Cash, cash equivalents and restricted
cash
$
680.7
$
789.5
Accounts and notes receivable, net
1,643.9
1,221.3
Inventories, net
3,726.0
3,189.7
Other current assets
624.5
538.8
Total current assets
6,675.1
5,739.3
Property, plant and equipment, net
1,750.4
1,591.2
Right-of-use lease assets
167.3
163.9
Investments in affiliates
512.2
436.9
Deferred tax assets
299.6
228.5
Other assets
315.2
268.7
Intangible assets, net
322.8
364.4
Goodwill
1,308.5
1,310.8
Total assets
$
11,351.1
$
10,103.7
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
79.9
$
187.1
Short-term borrowings
25.9
8.9
Accounts payable
1,308.4
1,385.3
Accrued expenses
2,507.3
2,271.3
Other current liabilities
197.6
235.4
Total current liabilities
4,119.1
4,088.0
Long-term debt, less current portion and
debt issuance costs
1,919.7
1,264.8
Operating lease liabilities
128.2
125.4
Pension and postretirement health care
benefits
159.4
158.0
Deferred tax liabilities
112.5
112.0
Other noncurrent liabilities
556.6
472.9
Total liabilities
6,995.5
6,221.1
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.7
0.7
Additional paid-in capital
46.0
30.2
Retained earnings
6,045.7
5,654.6
Accumulated other comprehensive loss
(1,736.9
)
(1,803.1
)
Total AGCO Corporation stockholders’
equity
4,355.5
3,882.4
Noncontrolling interests
0.1
0.2
Total stockholders’ equity
4,355.6
3,882.6
Total liabilities and stockholders’
equity
$
11,351.1
$
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 September
30,
2023
2022
Net sales
$
3,455.5
$
3,121.6
Cost of goods sold
2,521.5
2,382.7
Gross profit
934.0
738.9
Selling, general and administrative
expenses
353.6
287.5
Engineering expenses
139.6
104.7
Amortization of intangibles
14.4
14.7
Restructuring expenses
0.8
1.0
Bad debt expense
2.0
(1.1
)
Income from operations
423.6
332.1
Interest expense, net
5.5
2.3
Other expense, net
84.2
33.1
Income before income taxes and equity in
net earnings of affiliates
333.9
296.7
Income tax provision
75.3
74.2
Income before equity in net earnings of
affiliates
258.6
222.5
Equity in net earnings of affiliates
21.9
15.4
Net income
280.5
237.9
Net loss attributable to noncontrolling
interests
0.1
—
Net income attributable to AGCO
Corporation and subsidiaries
$
280.6
$
237.9
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
3.75
$
3.19
Diluted
$
3.74
$
3.18
Cash dividends declared and paid per
common share
$
0.29
$
0.24
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 OPERATIONS (unaudited and in millions,
except per share data)
Nine Months Ended September
30,
2023
2022
Net sales
$
10,611.7
$
8,752.5
Cost of goods sold
7,817.1
6,691.8
Gross profit
2,794.6
2,060.7
Selling, general and administrative
expenses
1,033.2
861.1
Engineering expenses
398.0
312.1
Amortization of intangibles
43.3
45.4
Impairment charges
—
36.0
Restructuring expenses
8.3
4.4
Bad debt expense
4.5
2.1
Income from operations
1,307.3
799.6
Interest expense, net
11.8
8.6
Other expense, net
212.6
72.3
Income before income taxes and equity in
net earnings of affiliates
1,082.9
718.7
Income tax provision
306.5
205.9
Income before equity in net earnings of
affiliates
776.4
512.8
Equity in net earnings of affiliates
55.9
39.7
Net income
832.3
552.5
Net loss attributable to noncontrolling
interests
0.1
14.9
Net income attributable to AGCO
Corporation and subsidiaries
$
832.4
$
567.4
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
11.11
$
7.60
Diluted
$
11.10
$
7.58
Cash dividends declared and paid per
common share
$
5.81
$
5.16
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)
Nine Months Ended September
30,
2023
2022
Cash flows from operating activities:
Net income
$
832.3
$
552.5
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation
168.9
157.1
Amortization of intangibles
43.3
45.4
Stock compensation expense
37.5
25.4
Impairment charges
—
36.0
Equity in net earnings of affiliates, net
of cash received
(53.0
)
(39.1
)
Deferred income tax (benefit)
provision
(55.2
)
5.7
Other
17.1
2.3
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(481.6
)
(302.2
)
Inventories, net
(542.9
)
(951.7
)
Other current and noncurrent assets
(140.6
)
(74.9
)
Accounts payable
(56.1
)
199.1
Accrued expenses
251.8
22.5
Other current and noncurrent
liabilities
181.2
26.8
Total adjustments
(629.6
)
(847.6
)
Net cash provided by (used in) operating
activities
202.7
(295.1
)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(357.7
)
(270.5
)
Proceeds from sale of property, plant and
equipment
5.2
2.5
Investments in unconsolidated
affiliates
(21.3
)
(1.6
)
Purchase of businesses, net of cash
acquired
(0.9
)
(111.3
)
Other
(4.0
)
—
Net cash used in investing activities
(378.7
)
(380.9
)
Cash flows from financing activities:
Proceeds from indebtedness, net
577.0
887.7
Payment of dividends to stockholders
(435.8
)
(386.4
)
Payment of minimum tax withholdings on
stock compensation
(20.5
)
(20.0
)
Distributions to noncontrolling
interest
—
(11.5
)
Payment of debt issuance costs
(9.5
)
(0.2
)
Net cash provided by financing
activities
111.2
469.6
Effects of exchange rate changes on cash,
cash equivalents and restricted cash
(44.0
)
(75.7
)
Decrease in cash, cash equivalents and
restricted cash
(108.8
)
(282.1
)
Cash, cash equivalents and restricted
cash, beginning of period
789.5
889.1
Cash, cash equivalents and restricted
cash, end of period
$
680.7
$
607.0
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Cost of goods sold
$
0.4
$
0.4
$
1.4
$
1.0
Selling, general and administrative
expenses
9.8
7.4
36.1
24.4
Total stock compensation expense
$
10.2
$
7.8
$
37.5
$
25.4
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, accrued severance and other costs related to such
rationalizations was approximately $6.8 million. During the three
and nine months ended September 30, 2023, the Company recorded an
additional $0.8 million and $8.3 million, respectively, of
severance and other related costs associated with these
rationalizations and paid approximately $4.8 million and $7.5
million, respectively, of severance costs. The remaining $6.5
million of accrued severance and other related costs as of
September 30, 2023, inclusive of approximately $1.1 million of
negative foreign currency translation impacts, are expected to be
paid primarily during the next 12 months.
4. INDEBTEDNESS
Long-term debt at September 30, 2023 and December 31, 2022
consisted of the following (in millions):
September 30, 2023
December 31, 2022
Credit facility, expires 2027
$
866.6
$
200.0
1.002% Senior term loan due 2025
264.5
267.3
Senior term loans due between 2023 and
2028
232.8
341.6
0.800% Senior Notes Due 2028
634.9
641.5
Other long-term debt
3.9
5.1
Debt issuance costs
(3.1
)
(3.6
)
1,999.6
1,451.9
Less:
Senior term loans due 2023, net of debt
issuance costs
(77.7
)
(184.9
)
Current portion of other long-term
debt
(2.2
)
(2.2
)
Total long-term indebtedness, less current
portion
$
1,919.7
$
1,264.8
As of September 30, 2023 and December 31, 2022, the Company had
short-term borrowings due within one year of approximately $25.9
million and $8.9 million, respectively.
5. INVENTORIES
Inventories at September 30, 2023 and December 31, 2022 were as
follows (in millions):
September 30, 2023
December 31, 2022
Finished goods
$
1,464.0
$
994.9
Repair and replacement parts
807.9
750.1
Work in process
432.6
369.8
Raw materials
1,021.5
1,074.9
Inventories, net
$
3,726.0
$
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. During the
nine months ended September 30, 2023 and September 30, 2022, the
cash received from receivables sold under the U.S., Canadian,
European and Brazilian accounts receivable sales agreements was
approximately $2.1 billion and $1.2 billion, respectively.
In addition, the Company sells certain trade receivables under
factoring arrangements to other financial institutions around the
world. During the nine months ended September 30, 2023 and
September 30, 2022, the cash received from these arrangements was
approximately $218.7 million and $170.8 million, respectively.
Losses on sales of receivables associated with the accounts
receivable sales agreements discussed above, reflected within
“Other expense, net” in the Company’s Condensed Consolidated
Statements of Operations, were approximately $40.5 million and
$99.3 million during the three and nine months ended September 30,
2023, 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 $20.4
million and $38.5 million, respectively, during the three and nine
ended September 30, 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 September 30, 2023 and December 31, 2022,
these finance joint ventures had approximately $139.4 million and
$69.5 million, respectively, of outstanding accounts receivable
associated with these arrangements.
7. NET INCOME PER SHARE
A reconciliation of net income attributable to AGCO Corporation
and subsidiaries and weighted average common shares outstanding for
purposes of calculating basic and diluted net income per share for
the three and nine months ended September 30, 2023 and 2022 is as
follows (in millions, except per share data):
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
280.6
$
237.9
$
832.4
$
567.4
Weighted average number of common shares
outstanding
74.9
74.6
74.9
74.6
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
3.75
$
3.19
$
11.11
$
7.60
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
280.6
$
237.9
$
832.4
$
567.4
Weighted average number of common shares
outstanding
74.9
74.6
74.9
74.6
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
0.1
0.3
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
75.0
74.9
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
3.74
$
3.18
$
11.10
$
7.58
8. SEGMENT REPORTING
The Company’s four reportable segments distribute a full range
of agricultural equipment and related replacement parts. The
Company evaluates segment performance primarily based on income
from operations. Sales for each segment are based on the location
of the third-party customer. The Company’s selling, general and
administrative expenses and engineering expenses are generally
charged to each segment based on the region and division where the
expenses are incurred. As a result, the components of income from
operations for one segment may not be comparable to another
segment. Segment results for the three and nine months ended
September 30, 2023 and 2022 are as follows (in millions):
Three Months Ended September 30,
North America
South America
Europe/Middle East
Asia/Pacific/Africa
Total Segments
2023
Net sales
$
941.1
$
719.8
$
1,586.9
$
207.7
$
3,455.5
Income from operations
139.8
149.8
199.3
19.2
508.1
2022
Net sales
$
910.5
$
571.2
$
1,390.1
$
249.8
$
3,121.6
Income from operations
112.7
107.5
142.1
33.0
395.3
Nine Months Ended September 30,
North America
South America
Europe/Middle East
Asia/Pacific/Africa
Total Segments
2023
Net sales
$
2,861.0
$
1,822.2
$
5,281.5
$
647.0
$
10,611.7
Income from operations
378.8
370.7
733.9
58.2
1,541.6
2022
Net sales
$
2,351.4
$
1,446.8
$
4,260.8
$
693.5
$
8,752.5
Income from operations
218.2
239.1
465.6
97.7
1,020.6
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Segment income from operations
$
508.1
$
395.3
$
1,541.6
$
1,020.6
Impairment charges
—
—
—
(36.0
)
Corporate expenses
(59.5
)
(40.1
)
(146.6
)
(110.8
)
Amortization of intangibles
(14.4
)
(14.7
)
(43.3
)
(45.4
)
Stock compensation expense
(9.8
)
(7.4
)
(36.1
)
(24.4
)
Restructuring expenses
(0.8
)
(1.0
)
(8.3
)
(4.4
)
Consolidated income from operations
$
423.6
$
332.1
$
1,307.3
$
799.6
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income, adjusted net income per share, and net sales
on a constant currency basis, each of which exclude amounts that
are typically included in the most directly comparable measure
calculated in accordance with U.S. generally accepted accounting
principles (“GAAP”). A reconciliation of each of those measures to
the most directly comparable GAAP measure is included below.
The following is a reconciliation of reported income from
operations, net income and net income per share to adjusted income
from operations, adjusted net income and adjusted net income per
share for the three and nine months ended September 30, 2023 and
2022 (in millions, except per share data):
Three Months Ended September
30,
2023
2022
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)(2)
As reported
$
423.6
$
280.6
$
3.74
$
332.1
$
237.9
$
3.18
Restructuring expenses(3)
0.8
0.6
0.01
1.0
0.6
0.01
Transaction-related costs(4)
11.5
8.5
0.11
—
—
—
Divestiture-related foreign currency
translation release(5)
—
8.2
0.11
—
—
—
As adjusted
$
435.8
$
297.9
$
3.97
$
333.0
$
238.5
$
3.18
(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 September 30, 2023 related primarily to
severance and other related costs associated with the Company’s
North American and Asian manufacturing operations. The
restructuring expenses recorded during the three months ended
September 30, 2022 related primarily to severance and other related
costs associated with the Company’s South American manufacturing
operations.
(4)
The transaction related costs recorded
during the three months ended September 30, 2023 related to the
Company’s planned acquisition of Trimble’s agriculture business
through the formation of a joint venture with Trimble Inc.
(5)
During the three months ended September
30, 2023, the Company divested its interest in its Germany finance
joint venture. Foreign currency translation impacts since inception
of the Germany finance joint venture previously recognized within
“Accumulated other comprehensive loss” were recorded within “Other
expense, net” on the Company’s Condensed Consolidated Statements of
Operations.
Nine Months Ended September
30,
2023
2022
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)(2)
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
As reported
$
1,307.3
$
832.4
$
11.10
$
799.6
$
567.4
$
7.58
Impairment of Russian joint
ventures(3)
—
—
—
36.0
23.8
0.32
Restructuring expenses(4)
8.3
6.8
0.09
4.4
3.1
0.04
Brazilian tax amnesty program(5)
—
26.4
0.35
—
—
—
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
Transaction-related costs(8)
11.5
8.5
0.11
—
—
—
Divestiture-related foreign currency
translation release(9)
—
8.2
0.11
—
—
—
As adjusted
$
1,327.0
$
882.3
$
11.77
$
840.0
$
595.6
$
7.95
(1)
Net income and net income per share
amounts are after tax.
(2)
Rounding may impact summation of
amounts.
(3)
During the nine months ended September 30,
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.”
(4)
The restructuring expenses recorded during
the nine months ended September 30, 2023 related primarily to
severance and other related costs associated with the Company’s
South American, North American, European, Africa and Asian
manufacturing operations. The restructuring expenses recorded
during the nine months ended September 30, 2022 related primarily
to severance and other related costs associated with the Company’s
U.S., European and South American manufacturing operations and
various administrative offices.
(5)
During the nine months ended September 30,
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 its best estimate of the ultimate settlement under
the amnesty program of approximately $26.4 million within “Income
tax provision” during the nine months ended September 30, 2023, net
of associated U.S. income tax credits.
(6)
During the nine months ended September 30,
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 nine months ended September 30,
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.
(8)
The transaction related costs recorded
during the nine months ended September 30, 2023 related to the
Company’s planned acquisition of Trimble’s agriculture business
through the formation of a joint venture with Trimble Inc.
(9)
During the nine months ended September 30,
2023, the Company divested its interest in its Germany finance
joint venture. Foreign currency translation impacts since inception
of the Germany finance joint venture previously recognized within
“Accumulated other comprehensive loss” were recorded within “Other
expense, net” on the Company’s Condensed Consolidated Statements of
Operations.
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)(3)
As targeted
$
15.08
Restructuring expenses
0.09
Brazilian tax amnesty program
0.35
Transaction-related costs
0.11
Divestiture-related foreign currency
translation release
0.11
As adjusted targeted(2)
$
15.75
(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 nine months ended September 30, 2023. Full year expenses or
benefits could differ based on future restructuring activity as
well as other activities.
(3)
Rounding may impact summation of
amounts.
The following table sets forth, for the three and nine months
ended September 30, 2023 and 2022, the impact to net sales of
currency translation by geographical segment (in millions, except
percentages):
Three Months Ended September
30,
Change due to currency
translation
2023
2022
% change from 2022
$
%
North America
$
941.1
$
910.5
3.4
%
$
3.2
0.4
%
South America
719.8
571.2
26.0
%
42.7
7.5
%
Europe/Middle East
1,586.9
1,390.1
14.2
%
68.1
4.9
%
Asia/Pacific/Africa
207.7
249.8
(16.9
)%
(4.0
)
(1.6
)%
$
3,455.5
$
3,121.6
10.7
%
$
110.0
3.5
%
Nine Months Ended September
30,
Change due to currency
translation
2023
2022
% change from 2022
$
%
North America
$
2,861.0
$
2,351.4
21.7
%
$
(4.6
)
(0.2
)%
South America
1,822.2
1,446.8
25.9
%
36.0
2.5
%
Europe/Middle East
5,281.5
4,260.8
24.0
%
(60.0
)
(1.4
)%
Asia/Pacific/Africa
647.0
693.5
(6.7
)%
(30.3
)
(4.4
)%
$
10,611.7
$
8,752.5
21.2
%
$
(58.9
)
(0.7
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030268905/en/
INVESTOR CONTACT: Greg Peterson VP, Investor Relations
770-232-8229 greg.peterson@agcocorp.com
MEDIA CONTACT: Rachel Potts VP, Chief Communications
Officer 678-654-7719 rachel.potts@agcocorp.com
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