DULUTH, Ga.--(BUSINESS WIRE)-- 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
| (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.
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
Source: AGCO