AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide
manufacturer and distributor of agricultural equipment and
solutions, reported net sales of approximately $3.2 billion for the
fourth quarter of 2021, an increase of approximately 16.1% compared
to the fourth quarter of 2020. Reported net income was $3.75 per
share for the fourth quarter of 2021, and adjusted net income(3),
which excludes restructuring expenses and the reversal of a
valuation allowance previously established against the Company’s
deferred tax assets in Brazil, was $3.08 per share. These results
compare to reported net income of $1.78 per share and adjusted net
income(3), which excludes restructuring expenses and a gain on sale
of an investment, of $1.54 per share for the fourth quarter of
2020. Excluding unfavorable currency translation impacts of
approximately 3.2%, net sales in the fourth quarter of 2021
increased approximately 19.3% compared to the fourth quarter of
2020.
Net sales for the full year of 2021 were approximately $11.1
billion, which is an increase of approximately 21.7% compared to
2020. Excluding favorable currency translation impacts of
approximately 2.2%, net sales for the full year of 2021 increased
approximately 19.6% compared to 2020. For the full year of 2021,
reported net income was $11.85 per share, and adjusted net
income(3), excluding restructuring expenses and the reversal of a
valuation allowance previously established against the Company’s
deferred tax assets in the United States and Brazil, was $10.38 per
share. These results compare to reported net income of $5.65 per
share and adjusted net income(3), which excludes a non-cash
impairment charge, restructuring expenses and a gain on sale of an
investment, of $5.61 per share for 2020.
Fourth Quarter Highlights
- Reported fourth quarter regional sales results(1):
Europe/Middle East (“EME”) +4.3%, North America +39.1%, South
America +51.6%, Asia/Pacific/Africa (“APA”) +15.0%
- Constant currency fourth quarter regional sales
results(1)(2)(3): EME +8.7%, North America +38.8%, South America
+56.2%, APA +15.4%
- Fourth quarter regional operating margin performance: EME
12.1%, North America 3.5%, South America 12.0%, APA 13.6%
- Full-year operating margins and adjusted operating margins(3)
improved to 9.0% and 9.1% respectively, in 2021 compared to 6.6%
and 7.0% in 2020
- Generated approximately $683 million in cash flow from
operations and approximately $413 million in free cash flow(3) in
2021
- Full-year earnings forecast for 2022 of approximately $11.50
per share
(1)
As compared to fourth quarter 2020.
(2)
Excludes currency translation impact.
(3)
See reconciliation of Non-GAAP measures in
appendix.
“AGCO delivered record results in 2021 highlighted by
significantly higher sales and margins compared to 2020,” stated
Eric Hansotia, AGCO’s Chairman, President and Chief Executive
Officer. “Our performance was fueled by improved global industry
demand and focused execution by the AGCO team, who exceeded sales
targets despite considerable supply chain challenges. Adjusted
operating margins reached 9.1% of net sales due to the benefits of
sales growth and pricing that helped to offset substantial
inflationary cost pressures. Our smart technology product lines are
in strong demand and are driving productivity improvements for our
customers and growth opportunities for AGCO. Looking forward to
2022, we expect supply chain pressures to persist, presenting
challenges throughout the year. Our teams are working tirelessly
with our suppliers to mitigate the impact of these issues to serve
our customers as well as to deliver another strong year of
performance. We are forecasting sales growth and margin expansion
in 2022 as industry demand trends positively and our farmer-first
strategy gains traction.”
Market Update
Industry Unit Retail
Sales
Tractors
Combines
Year ended December 31, 2021
Change from Prior Year
Change from Prior Year
North America(1)
14%
24%
South America
22%
20%
Western Europe(2)
16%
3%
(1) Excludes compact tractors.
(2) Based on Company estimates.
“Elevated soft commodity prices are supporting improved farm
income in 2021 despite significantly higher farm input costs,”
stated Mr. Hansotia. “These favorable farm fundamentals are
resulting in robust demand for agricultural equipment as farmers
look to upgrade their fleets.”
“Full year global industry retail sales of farm equipment in
2021 were higher across AGCO’s key markets, with fourth quarter
industry retail sales higher than the prior year despite a strong
finish to 2020,” continued Mr. Hansotia. “North American full-year
industry retail tractor sales were up significantly across all
horsepower categories compared to the previous year. Sales of high
horsepower tractors and combines showed the most strength as an
extended fleet age and favorable commodity prices stimulated
demand. These conditions are expected to continue, resulting in
higher forecasted North American industry sales in 2022. In Western
Europe, industry retail tractor sales increased approximately 16%
for the full year of 2021 compared to 2020. Healthy income levels
for arable farmers as well as dairy and livestock producers
supported increased equipment demand in 2021. Market demand
improved across all the major Western European markets with the
strongest growth in Italy, Finland and the United Kingdom. We
expect 2022 industry demand in Western Europe to be flat to
modestly higher compared to the improved levels in 2021. South
American industry retail tractor sales increased 22% during 2021,
with robust recovery in Brazil and Argentina as well as the smaller
South America markets. Increased crop production and favorable
margins are supporting farm profitability. We expect farm economics
to remain supportive in South America resulting in increased 2022
industry sales compared to 2021. Longer term, we remain optimistic
that elevated grain demand driven by population growth and
increased protein consumption will support favorable industry
conditions.”
Regional Results
AGCO Regional Net Sales (in millions)
Three Months Ended December 31,
2021
2020
% change from 2020
% change from 2020 due to
currency translation(1)
% change excluding currency
translation
North America
$
674.7
$
485.1
39.1%
0.3%
38.8%
South America
405.6
267.5
51.6%
(4.6)%
56.2%
EME
1,796.9
1,722.7
4.3%
(4.4)%
8.7%
APA
278.0
241.8
15.0%
(0.4)%
15.4%
Total
$
3,155.2
$
2,717.1
16.1%
(3.2)%
19.3%
Year Ended December 31,
2021
2020
% change from 2020
% change from 2020 due to
currency translation(1)
% change excluding currency
translation
North America
$
2,659.2
$
2,175.0
22.3%
1.5%
20.8%
South America
1,307.7
873.8
49.7%
(4.6)%
54.3%
EME
6,221.7
5,366.9
15.9%
2.9%
13.0%
APA
949.7
734.0
29.4%
7.1%
22.3%
Total
$
11,138.3
$
9,149.7
21.7%
2.2%
19.6%
(1) See Footnotes for additional
disclosures.
North America
Net sales in the North American region increased 20.8% for the
full year of 2021 compared to 2020, excluding the positive impact
of currency translation. Increased sales of high horsepower and
mid-range tractors as well as Precision Planting products
represented the largest increases. Income from operations for the
full year of 2021 increased approximately $44.4 million compared to
2020. The improvement was the result of higher sales and
production, a richer mix of products and favorable price
realization, all which offset higher material costs.
South America
AGCO’s South American net sales increased 54.3% for the full
year of 2021 compared to 2020, excluding the impact of unfavorable
currency translation. Sales increased significantly across all the
South American markets with growth achieved in tractors, combines
and planting equipment as well as replacement parts. Income from
operations for the full year of 2021 increased by approximately
$102.9 million compared to 2020 and operating margins exceeded 10%.
The improved South America results reflect the benefit of higher
sales and production, favorable pricing, and a better sales mix,
partially offset by higher materials costs.
Europe/Middle East
Net sales in AGCO’s Europe/Middle East region increased 13.0%
for the full year of 2021 compared to 2020, excluding favorable
currency translation impacts. Increased sales of tractors, combines
and replacement parts contributed to growth across all of Europe.
Income from operations increased approximately $170.1 million for
the full year of 2021 compared to 2020, due to higher net sales and
production volumes as well as price realization which offset higher
material costs and engineering expenses.
Asia/Pacific/Africa
Asia/Pacific/Africa net sales increased 22.3%, excluding the
positive impact of currency translation, during the full year of
2021 compared to 2020. Higher sales in Africa, Australia and China
produced the majority of the increase. Income from operations
improved by approximately $51.8 million for the full year of 2021
compared to 2020 due to higher sales and an improved product
mix.
Outlook
The health, safety and well-being of all AGCO employees, dealers
and farmer customers continue to be AGCO’s top priority. The
ability of the Company’s supply chain to deliver parts and
components on schedule is currently difficult to predict. The
following outlook is based on AGCO’s current estimates of component
deliveries. AGCO’s results will be impacted if the actual supply
chain delivery performance differs from these estimates.
AGCO’s net sales for 2022 are expected to be approximately $12.3
billion, reflecting improved sales volumes and pricing partially
offset by negative foreign currency translation. Gross and
operating margins are projected to improve from 2021 levels,
reflecting the impact of higher sales and production volumes as
well as pricing to offset cost inflation. 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, 2022 earnings per share
are targeted at approximately $11.50.
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, February 8th.
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.
- COVID-19 has negatively impacted our business, initially
through closures, higher absentee rates, and reduced production at
both our plants and the plants that supply us with parts and
components, and more recently through supply chain challenges,
including the inability of some of our suppliers to meet demand and
logistics and transportation-related companies to deliver products
in a timely manner. In addition, we have had to incur various costs
related to preventing the spread of COVID-19, including changes to
our factories and other facilities and those related to enabling
remote work. We expect COVID-19 to continue to impact our business,
although the manner and extent to which it impacts us will depend
on future developments, including the duration of the pandemic, the
timing, distribution and impact of vaccinations, and possible
mutations of the virus that are more contagious or resistant to
current vaccines. Measures taken by governments around the world,
as well as businesses, including us, and the general public in
order to limit the spread of COVID-19 will impact our business as
well. These measures have included travel bans and restrictions,
quarantines, shelter in place orders, curfews, business and
government office closures, increased border controls or closures,
port closures and transportation restrictions. The impacts of
COVID-19 and such measures could include decreases in demand for
our products, factory closures, increased absentee rates, reduced
production, incurrence of additional costs due to the adherence to
cleaning requirements and social distancing guidelines and
increased costs of labor, parts and components and shipping,
incurrence of impairment charges, slower collections and larger
write-offs of accounts receivable, among other changes.
- 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
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 cyber attack, we
could be subject to significant claims, penalties and damages.
- Attacks through ransomware and other cyber attacks are rapidly
increasing. While we have implemented the safeguards that we
believe are reasonable, we always will be subject to the risk that
one of these attacks is successful and disrupts or damages our
business.
- We depend on suppliers for components, parts and raw materials
for our products, and any failure by our suppliers to provide
products as needed, or by us to promptly address supplier issues,
will adversely impact our ability to timely and efficiently
manufacture and sell products. Recently suppliers of several key
parts and components have not been able to meet our demand and we
have had to decrease our production. It is unclear when the supply
chain issues will be restored or what the ultimate impact on
production, and consequently sales, will be.
- Although as a general proposition our business has not
experienced significant inflation in many years, beginning in the
second half of 2021 we 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 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,
2020 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 $11.1 billion in 2021. 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, 2021
December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents
$
889.1
$
1,119.1
Accounts and notes receivable, net
991.5
856.0
Inventories, net
2,593.7
1,974.4
Other current assets
539.8
418.9
Total current assets
5,014.1
4,368.4
Property, plant and equipment, net
1,464.8
1,508.5
Right-of-use lease assets
154.1
165.1
Investment in affiliates
413.5
442.7
Deferred tax assets
169.3
77.6
Other assets
293.3
179.8
Intangible assets, net
392.2
455.6
Goodwill
1,280.8
1,306.5
Total assets
$
9,182.1
$
8,504.2
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Current portion of long-term debt
$
2.1
$
325.9
Short term borrowings
90.8
33.8
Accounts payable
1,078.3
855.1
Accrued expenses
2,062.2
1,916.7
Other current liabilities
221.2
231.3
Total current liabilities
3,454.6
3,362.8
Long-term debt, less current portion and
debt issuance costs
1,411.2
1,256.7
Operating lease liabilities
115.5
125.9
Pensions and postretirement health care
benefits
209.0
253.4
Deferred tax liabilities
116.9
112.4
Other noncurrent liabilities
431.1
375.0
Total liabilities
5,738.3
5,486.2
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Common stock
0.7
0.8
Additional paid-in capital
3.9
30.9
Retained earnings
5,182.2
4,759.1
Accumulated other comprehensive loss
(1,770.9
)
(1,810.8
)
Total AGCO Corporation stockholders’
equity
3,415.9
2,980.0
Noncontrolling interests
27.9
38.0
Total stockholders’ equity
3,443.8
3,018.0
Total liabilities and stockholders’
equity
$
9,182.1
$
8,504.2
See accompanying notes to
condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions,
except per share data)
Three Months Ended December
31,
2021
2020
Net sales
$
3,155.2
$
2,717.1
Cost of goods sold
2,472.5
2,121.5
Gross profit
682.7
595.6
Selling, general and administrative
expenses
285.2
283.1
Engineering expenses
109.5
99.9
Amortization of intangibles
15.3
14.8
Restructuring expenses
7.9
14.3
Bad debt expense
0.8
5.5
Income from operations
264.0
178.0
Interest (income) expense, net
(0.1
)
1.9
Other expense (income), net
10.2
(15.1
)
Income before income taxes and equity in
net earnings of affiliates
253.9
191.2
Income tax (benefit) provision
(13.0
)
69.8
Income before equity in net earnings of
affiliates
266.9
121.4
Equity in net earnings of affiliates
16.4
14.0
Net income
283.3
135.4
Net income attributable to noncontrolling
interests
(1.2
)
$
—
Net income attributable to AGCO
Corporation and subsidiaries
$
282.1
$
135.4
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
3.77
$
1.81
Diluted
$
3.75
$
1.78
Cash dividends declared and paid per
common share
$
0.20
$
0.16
Weighted average number of common and
common equivalent shares outstanding:
Basic
74.7
74.9
Diluted
75.3
75.9
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)
Years Ended December 31,
2021
2020
Net sales
$
11,138.3
$
9,149.7
Cost of goods sold
8,566.0
7,092.2
Gross profit
2,572.3
2,057.5
Selling, general and administrative
expenses
1,088.2
1,001.5
Engineering expenses
405.8
342.6
Amortization of intangibles
61.1
59.5
Impairment charge
—
20.0
Restructuring expenses
15.3
19.7
Bad debt expense
0.5
14.5
Income from operations
1,001.4
599.7
Interest expense, net
6.7
15.0
Other expense, net
50.4
22.7
Income before income taxes and equity in
net earnings of affiliates
944.3
562.0
Income tax provision
108.4
187.7
Income before equity in net earnings of
affiliates
835.9
374.3
Equity in net earnings of affiliates
65.6
45.5
Net income
901.5
419.8
Net (income) loss attributable to
noncontrolling interests
(4.5
)
7.3
Net income attributable to AGCO
Corporation and subsidiaries
$
897.0
$
427.1
Net income per common share attributable
to AGCO Corporation and subsidiaries:
Basic
$
11.93
$
5.69
Diluted
$
11.85
$
5.65
Cash dividends declared and paid per
common share
$
4.74
$
0.63
Weighted average number of common and
common equivalent shares outstanding:
Basic
75.2
75.0
Diluted
75.7
75.6
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,
2021
2020
Cash flows from operating activities:
Net income
$
901.5
$
419.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
220.7
212.5
Impairment charge
—
20.0
Amortization of intangibles
61.1
59.5
Stock compensation expense
27.4
37.6
Equity in net earnings of affiliates, net
of cash received
20.8
(43.7
)
Deferred income tax (benefit)
provision
(117.9
)
3.4
Other
20.5
(7.4
)
Changes in operating assets and
liabilities:
Accounts and notes receivable, net
(207.7
)
(90.5
)
Inventories, net
(762.6
)
119.7
Other current and noncurrent assets
(268.0
)
(49.8
)
Accounts payable
292.2
(59.1
)
Accrued expenses
241.2
185.3
Other current and noncurrent
liabilities
253.7
89.2
Total adjustments
(218.6
)
476.7
Net cash provided by operating
activities
682.9
896.5
Cash flows from investing activities:
Purchases of property, plant and
equipment
(269.8
)
(269.9
)
Proceeds from sale of property, plant and
equipment
6.3
1.9
Purchase of businesses, net of cash
acquired
(22.6
)
(2.8
)
(Investments in) sale of unconsolidated
affiliates, net
(9.6
)
29.1
Other
(15.4
)
—
Net cash used in investing activities
(311.1
)
(241.7
)
Cash flows from financing activities:
(Repayments of) proceeds from
indebtedness, net
(3.8
)
150.0
Purchases and retirement of common
stock
(135.0
)
(55.0
)
Payment of dividends to stockholders
(358.5
)
(48.0
)
Payment of minimum tax withholdings on
stock compensation
(34.9
)
(19.8
)
Payment of debt issuance costs
(3.8
)
(1.4
)
Distributions to noncontrolling interests,
net
(3.5
)
(3.1
)
Net cash (used in) provided by financing
activities
(539.5
)
22.7
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(62.3
)
8.8
(Decrease) increase in cash, cash
equivalents and restricted cash
(230.0
)
686.3
Cash, cash equivalents and restricted
cash, beginning of year
1,119.1
432.8
Cash, cash equivalents and restricted
cash, end of year
$
889.1
$
1,119.1
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,
2021
2020
2021
2020
Cost of goods sold
$
0.2
$
0.2
$
1.0
$
1.1
Selling, general and administrative
expenses
6.1
10.5
26.6
36.8
Total stock compensation expense
$
6.3
$
10.7
$
27.6
$
37.9
2. RESTRUCTURING EXPENSES
From 2014 through 2021, 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 fluctuating global market demand. The Company
also previously rationalized its grain and protein business during
2019 and 2020. The Company had approximately $16.8 million of
severance and related costs accrued as of December 31, 2020. During
the year ended December 31, 2021, the Company recorded an
additional $15.3 million of severance and related costs associated
with these rationalizations. The $15.3 million of expenses recorded
during the year end December 31, 2021 included a $0.2 million
write-down of property, plant and equipment. The restructuring
expenses recorded during 2021 related to the termination of
approximately 150 employees. During 2021, the Company paid
approximately $16.6 million of severance and other related costs.
The remaining $14.7 million of accrued severance, facility closure
and other related costs as of December 31, 2021, inclusive of
approximately $0.6 million of negative foreign currency translation
impacts, are expected to be primarily paid during 2022.
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
results of our goodwill and long-lived assets impairment analyses
conducted as of October 1, 2021 indicated that no indicators of
impairment existed and no reduction in the carrying amount of
goodwill and long-lived assets was required.
The COVID-19 pandemic has adversely impacted the global economy
as a whole. Based on macroeconomic conditions during 2020, 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 charge” within the
Company’s Condensed Consolidated Statements of Operations, with an
offsetting benefit of approximately $10.0 million included within
“Net (income) 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.
4. INDEBTEDNESS
Long-term debt at December 31, 2021 and 2020 consisted of the
following (in millions):
December 31, 2021
December 31, 2020
Senior term loan due 2022
$
—
$
184.0
Credit facility, expires 2023
—
277.9
1.002% Senior term loan due 2025
283.7
306.7
Senior term loans due between 2023 and
2028
445.9
806.0
0.800% Senior Notes Due 2028
680.8
—
Other long-term debt
7.7
10.5
Debt issuance costs
(4.8
)
(2.5
)
1,413.3
1,582.6
Less:
Senior term loans due 2021, net of debt
issuance costs
—
(323.6
)
Current portion of other long-term
debt
(2.1
)
(2.3
)
Total long-term indebtedness, less current
portion
$
1,411.2
$
1,256.7
As of December 31, 2021 and 2020, the Company had short-term
borrowings due within one year of approximately $90.8 million and
$33.8 million, respectively.
On October 6, 2021, the Company issued €600.0 million (or
approximately $680.8 million) of senior notes at an issue price of
99.993%. The notes mature on October 6, 2028, and interest is
payable annually, in arrears, at 0.800%. The senior notes contain
covenants restricting, among other things, the incurrence of
certain secured indebtedness. The senior notes are subject to both
optional and mandatory redemption in certain events.
During October 2021, the Company used the proceeds received from
the senior notes to repay its €150.0 million (or approximately
$173.4 million as of October 8, 2021) senior term loan due 2022,
$370.0 million related to its multi-currency revolving credit
facility, and two of its 2016 senior term loans due October 2021
with an aggregate amount outstanding of €192.0 million (or
approximately $223.8 million as of October 19, 2021). In August
2021, prior to the issuance of the senior notes, the Company repaid
two of its 2018 senior term loans due August 2021 with an aggregate
amount of €72.0 million (or approximately $85.5 million as of
August 1, 2021). On February 1, 2022, the Company repaid €72.5
million (or approximately $81.7 million) of one of its 2018 senior
term loans due August 2023 with existing cash on hand.
5. INVENTORIES
Inventories at December 31, 2021 and 2020 were as follows (in
millions):
December 31, 2021
December 31, 2020
Finished goods
$
718.2
$
641.3
Repair and replacement parts
697.8
652.3
Work in process
282.8
175.1
Raw materials
894.9
505.7
Inventories, net
$
2,593.7
$
1,974.4
6. ACCOUNTS RECEIVABLE SALES AGREEMENTS
The Company has accounts receivable sales agreements that permit
the sale, on an ongoing basis, of a majority of its wholesale
receivables in North America, Europe and Brazil to its U.S.,
Canadian, European and Brazilian finance joint ventures. As of
December 31, 2021 and 2020, the cash received from receivables sold
under the U.S., Canadian, European and Brazilian accounts
receivable sales agreements was approximately $1.3 billion and $1.5
billion, respectively.
In addition, the Company sells certain trade receivables under
factoring arrangements to other financial institutions around the
world. As of December 31, 2021 and 2020, the cash received from
these arrangements was approximately $215.4 million and $199.9
million, 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 $7.4 million and $24.5
million, respectively, during the three months and year ended
December 31, 2021. Losses on sales of receivables associated with
the accounts receivable financing facilities discussed above,
reflected within “Other expense, net” in the Company’s Condensed
Consolidated Statements of Operations, were approximately $5.6
million and $24.1 million, respectively, during the three months
and year ended December 31, 2020.
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, 2021 and 2020, these finance
joint ventures had approximately $82.1 million and $85.2 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 months and years ended December 31, 2021 and 2020 is as
follows (in millions, except per share data):
Three Months Ended December
31,
Years Ended December 31,
2021
2020
2021
2020
Basic net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
282.1
$
135.4
$
897.0
$
427.1
Weighted average number of common shares
outstanding
74.7
74.9
75.2
75.0
Basic net income per share attributable to
AGCO Corporation and subsidiaries
$
3.77
$
1.81
$
11.93
$
5.69
Diluted net income per share:
Net income attributable to AGCO
Corporation and subsidiaries
$
282.1
$
135.4
$
897.0
$
427.1
Weighted average number of common shares
outstanding
74.7
74.9
75.2
75.0
Dilutive stock-settled appreciation
rights, performance share awards and restricted stock units
0.6
1.0
0.5
0.6
Weighted average number of common shares
and common share equivalents outstanding for purposes of computing
diluted net income per share
75.3
75.9
75.7
75.6
Diluted net income per share attributable
to AGCO Corporation and subsidiaries
$
3.75
$
1.78
$
11.85
$
5.65
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, 2021 and
2020 are as follows (in millions):
Three Months Ended December 31,
North America
South America
Europe/ Middle East
Asia/ Pacific/Africa
Consolidated
2021
Net sales
$
674.7
$
405.6
$
1,796.9
$
278.0
$
3,155.2
Income from operations
23.7
48.5
217.3
37.7
327.2
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
Years Ended December 31,
North America
South America
Europe/ Middle East
Asia/ Pacific/Africa
Consolidated
2021
Net sales
$
2,659.2
$
1,307.7
$
6,221.7
$
949.7
$
11,138.3
Income from operations
238.1
132.2
755.4
113.9
1,239.6
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
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,
2021
2020
2021
2020
Segment income from operations
$
327.2
$
255.8
$
1,239.6
$
870.4
Corporate expenses
(33.9
)
(38.2
)
(135.2
)
(134.7
)
Amortization of intangibles
(15.3
)
(14.8
)
(61.1
)
(59.5
)
Stock compensation expense
(6.1
)
(10.5
)
(26.6
)
(36.8
)
Restructuring expenses
(7.9
)
(14.3
)
(15.3
)
(19.7
)
Impairment charges
—
—
—
(20.0
)
Consolidated income from operations
$
264.0
$
178.0
$
1,001.4
$
599.7
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, 2021 and 2020 (in millions,
except per share data):
Three Months Ended December
31,
2021
2020
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)
Income From Operations(2)
Net Income(1)
Net Income Per Share(1)
As reported
$
264.0
$
282.1
$
3.75
$
178.0
$
135.4
$
1.78
Restructuring expenses(3)
7.9
5.5
0.07
14.3
14.2
0.19
Gain on sale of investment in
affiliate(4)
—
—
—
—
(32.5
)
(0.43
)
Deferred income tax adjustment(5)
$
—
(55.6
)
(0.74
)
—
—
—
As adjusted
$
272.0
$
232.0
$
3.08
$
192.2
$
117.1
$
1.54
(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, 2021 and 2020 related primarily
to severance and other related costs associated with the Company’s
rationalization of certain U.S., European and South American
manufacturing operations and various administrative offices,
including costs associated with the Company’s rationalization of
its grain and protein business.
(4)
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.
(5)
During the three months ended December 31,
2021, the Company’s income tax provision includes the benefit of a
reversal of approximately $55.6 million related to a valuation
allowance previously established against the Company’s net deferred
tax assets in Brazil. Significant improvements in income from
operations in Brazil during 2021, as well as updated operating
income forecasts for future years, supported the reversal of the
valuation allowance during the three months ended December 31,
2021.
Years Ended December 31,
2021
2020
Income From Operations
Net Income(1)
Net Income Per Share(1)
Income From Operations
Net Income(1)(2)
Net Income Per Share(1)
As reported
$
1,001.4
$
897.0
$
11.85
$
599.7
$
427.1
$
5.65
Goodwill impairment charge(3)
—
—
—
20.0
10.0
0.13
Restructuring expenses(4)
15.3
11.8
0.16
19.7
19.5
0.26
Gain on sale of investment in
affiliate(5)
—
—
—
—
(32.5
)
(0.43
)
Deferred income tax adjustment(6)
—
(123.4
)
(1.63
)
—
—
—
As adjusted
$
1,016.7
$
785.4
$
10.38
$
639.4
$
424.2
$
5.61
(1)
Net income and net income per share
amounts are after tax.
(2)
Rounding may impact summation of
amounts.
(3)
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. See Note 3 for further information.
(4)
The restructuring expenses recorded during
the year ended December 31, 2021 and 2020 related primarily to
severance and other related costs associated with the Company’s
rationalization of certain U.S., European and South American
manufacturing operations and various administrative offices,
including costs associated with the Company’s rationalization of
its grain and protein business.
(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 year ended December 31, 2021,
the Company’s income tax provision includes the benefit of the
reversal of approximately $67.8 million and $55.6 million,
respectively, related to valuation allowances previously
established against the Company’s net deferred tax assets in the
United States and Brazil, respectively. Significant improvements in
income from operations in the United States and Brazil during 2020,
as well as during 2021 and future years, supported the reversal of
the valuation allowances.
The following is a reconciliation of net cash provided by
operating activities to free cash flow for the years ended December
31, 2021 and 2020 (in millions):
December 31, 2021
December 31, 2020
Net cash provided by operating
activities
$
682.9
$
896.5
Less: capital expenditures
(269.8
)
(269.9
)
Free cash flow
$
413.1
$
626.6
The following tables set forth, for the three months and year
ended December 31, 2021 and 2020, 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
2021
2020
% change from 2020
$
%
North America
$
674.7
$
485.1
39.1
%
$
1.5
0.3
%
South America
405.6
267.5
51.6
%
(12.3
)
(4.6
)%
Europe/Middle East
1,796.9
1,722.7
4.3
%
(75.6
)
(4.4
)%
Asia/Pacific/Africa
278.0
241.8
15.0
%
(0.9
)
(0.4
)%
$
3,155.2
$
2,717.1
16.1
%
$
(87.3
)
(3.2
)%
Years Ended December 31,
Change due to currency
translation
2021
2020
% change from 2020
$
%
North America
$
2,659.2
$
2,175.0
22.3
%
$
32.4
1.5
%
South America
1,307.7
873.8
49.7
%
(40.5
)
(4.6
)%
Europe/Middle East
6,221.7
5,366.9
15.9
%
155.7
2.9
%
Asia/Pacific/Africa
949.7
734.0
29.4
%
52.1
7.1
%
$
11,138.3
$
9,149.7
21.7
%
$
199.7
2.2
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220207005880/en/
Greg Peterson Vice President, Investor Relations 770-232-8229
greg.peterson@agcocorp.com
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