AGCO, Your Agriculture Company (NYSE: AGCO), a worldwide manufacturer and distributor of agricultural equipment and solutions, reported net sales of approximately $2.7 billion for the fourth quarter of 2020, an increase of approximately 8.1% compared to the fourth quarter of 2019. Reported net income was $1.78 per share for the fourth quarter of 2020, and adjusted net income (3) , which excludes restructuring expenses and a gain on sale of an investment, was $1.54 per share. These results compare to reported net loss of $1.17 per share and adjusted net income, which excludes non-cash impairment charges, restructuring expenses and a tax gain, of $0.94 per share for the fourth quarter of 2019. Excluding favorable currency translation impacts of approximately 1.4%, net sales in the fourth quarter of 2020 increased approximately 6.7% compared to the fourth quarter of 2019.

Net sales for the full year of 2020 were approximately $9.1 billion, which is an increase of approximately 1.2% compared to 2019. Excluding unfavorable currency translation impacts of approximately 1.8%, net sales for the full year of 2020 increased approximately 3.0% compared to 2019. For the full year of 2020, reported net income was $5.65 per share, and adjusted net income (3) , which excludes non-cash impairment charges, restructuring expenses and a gain on sale of an investment, was $5.61 per share. These results compare to reported net income of $1.63 per share and adjusted net income, which excludes non-cash impairment charges, restructuring expenses and certain tax charges and gains, of $4.44 per share for 2019.

Fourth Quarter Highlights

(1) As compared to fourth quarter 2019.
(2) Excludes currency translation impact.
(3) See reconciliation of Non-GAAP measures in appendix.

“The AGCO team delivered strong operational results leveraging improving markets to produce sales and earnings growth in the fourth quarter,” stated Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer. “Our focused execution allowed us to overcome supply chain difficulties and maintain production levels, while reducing company and dealer inventories, which contributed to significant cash flow generation. I would like to thank all our employees for their extraordinary efforts to support our dealers and customers under challenging conditions. Our improved results allowed us to maintain our investments in premium technology, sustainable smart farming solutions and enhanced digital capabilities. AGCO’s exceptional product line continues to be well-received by our customers as evidenced by a strong year-end order board. Looking forward to 2021, we are forecasting sales and earnings growth as industry conditions trend positively and we position AGCO for future success.”

Market Update

 

 

Industry Unit Retail Sales

 

 

Tractors

 

Combines

Year ended December 31, 2020

 

Change from
Prior Year Period

 

Change from
Prior Year Period

North America (1)

 

10%

 

—%

South America

 

12%

 

20%

Western Europe (2)

 

(1)%

 

1%

         

(1) Excludes compact tractors.

(2) Based on Company estimates.

       

“Increased grain consumption, driven by economic recovery and higher export demand, helped to offset a solid year of global crop production leaving year-end grain inventories lower than anticipated,” stated Mr. Hansotia. “Reduced grain stocks supported a rally in soft commodity prices, lifted farmer sentiment and supported higher demand for agricultural equipment during the fourth quarter.”

“Full year global industry retail sales of farm equipment in 2020 were mixed across AGCO’s key markets with fourth quarter industry retail sales significantly higher than the prior year across the major regions,” continued Mr. Hansotia. “Industry retail tractor sales in North America increased during the full year of 2020 compared to 2019. Strong growth in the sales of lower horsepower tractors drove most of the increase. The fleet age for large equipment in North America remains extended and stronger replacement demand was evident in the fourth quarter. Higher commodity prices and improved farmer sentiment are also expected to drive higher North American industry sales in 2021. In Western Europe, industry demand improved in the fourth quarter, but remained down for the full year of 2020 compared to 2019. Market demand was weakest in the United Kingdom and Scandinavia, and was partially offset by growth in Germany, which benefited from tax incentives during 2020. We expect 2021 industry demand in Western Europe to be flat to modestly higher from 2020 levels. South America industry retail tractor sales increased during 2020, with robust recovery in Brazil and Argentina partially offset by weaker demand in the smaller South America markets. Healthy crop production and favorable exchange rates in Brazil and Argentina are supporting farm profitability. We expect farm economics to remain supportive in 2021 in South America with replacement demand resulting in higher industry sales compared to 2020. Our long-term global view remains positive. Increasing demand for commodities, driven by the growing world population, rising emerging market protein consumption and biofuel use, are expected to support healthy conditions in our industry.”

Regional Results

AGCO Regional Net Sales (in millions)

Three Months Ended December 31,

 

2020

 

2019

 

% change
from 2019

 

% change from
2019 due to
currency
translation (1)

 

% change
excluding
currency
translation

North America

 

$

485.1

 

 

$

540.5

 

 

(10.2)%

 

0.1%

 

(10.3)%

South America

 

267.5

 

 

220.9

 

 

21.1%

 

(31.6)%

 

52.7%

EME

 

1,722.7

 

 

1,515.3

 

 

13.7%

 

5.9%

 

7.7%

APA

 

241.8

 

 

236.9

 

 

2.1%

 

5.9%

 

(3.8)%

Total

 

$

2,717.1

 

 

$

2,513.6

 

 

8.1%

 

1.4%

 

6.7%

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

2020

 

2019

 

% change
from 2019

 

% change from
2019 due to
currency
translation (1)

 

% change
excluding
currency
translation

North America

 

$

2,175.0

 

 

$

2,191.8

 

 

(0.8)%

 

(0.5)%

 

(0.2)%

South America

 

873.8

 

 

802.2

 

 

8.9%

 

(27.6)%

 

36.6%

EME

 

5,366.9

 

 

5,328.8

 

 

0.7%

 

1.1%

 

(0.4)%

APA

 

734.0

 

 

718.6

 

 

2.1%

 

1.2%

 

0.9%

Total

 

$

9,149.7

 

 

$

9,041.4

 

 

1.2%

 

(1.8)%

 

3.0%

(1) See Footnotes for additional disclosures.

 

 

 

 

 

 

 

 

 

 

North America

Net sales in the North American region were flat for the full year of 2020 compared to 2019, excluding the negative impact of currency translation. Increased sales of Precision Planting equipment, high horsepower tractors and parts were offset by lower sales of grain and protein production equipment as well as sprayers. Income from operations for the full year of 2020 improved approximately $72.1 million compared to 2019. The benefit of a richer sales mix and cost control initiatives contributed to operating margin improvement.

South America

AGCO’s South American net sales increased 36.6% for the full year of 2020 compared to 2019, excluding the impact of unfavorable currency translation. Increased sales in Brazil and Argentina were responsible for the growth. Income from operations for the full year of 2020 was improved compared to 2019 by approximately $68.7 million. The improved South America results reflect the benefit of higher sales and production, a richer sales mix, as well as cost reduction initiatives, partially offset by negative currency impacts.

Europe/Middle East

AGCO’s Europe/Middle East net sales were flat for the full year of 2020 compared to 2019, excluding favorable currency translation impacts. Sales improved significantly in the second half of the year compared to 2019, offsetting a weak second quarter which was impacted by COVID-19-related production interruptions. Declines in France, Scandinavia and Central Europe were mostly offset by growth in Germany and Eastern Europe. Income from operations decreased approximately $52.9 million for the full year of 2020 compared to 2019, due to lower net sales and production volumes as well as higher warranty costs.

Asia/Pacific/Africa

Asia/Pacific/Africa net sales increased 0.9%, excluding the positive impact of currency translation, during the full year of 2020 compared to 2019. Higher sales in China and Australia were mostly offset by lower sales in Africa and the smaller Asian markets. Income from operations improved approximately $18.7 million for the full year of 2020 compared to 2019, due to higher sales and a richer product mix.

Outlook

The health, safety and well-being of all AGCO employees, dealers and farmer customers continues to be AGCO’s top priority during the COVID-19 pandemic. The following outlook does not contemplate any further sales or production disruptions caused by the pandemic.

AGCO’s net sales for 2021 are expected to range from $10.2 billion to $10.4 billion, reflecting improved sales volumes, pricing and positive foreign currency translation. Gross and operating margins are projected to improve from 2020 levels, reflecting the impact of higher sales and production volumes as well as margin improvement initiatives. These improvements are planned to fund increases in engineering and other technology investments to support AGCO’s precision agriculture and digital initiatives. Based on these assumptions, 2021 earnings per share is targeted in a range from $7.00 to $7.25.

* * * * *

AGCO will host a conference call with respect to this earnings announcement at 10:00 a.m. Eastern Time on Thursday, February 4 th . 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, 2019 and subsequent Form 10-Qs. AGCO disclaims any obligation to update any forward-looking statements except as required by law.

* * * * *

About AGCO

AGCO (NYSE: AGCO) is a global leader in the design, manufacture and distribution of agricultural solutions and delivers high-tech solutions for farmers feeding the world through its full line of equipment and related services. AGCO products are sold through five core brands, Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®, supported by Fuse® smart farming solutions. Founded in 1990 and headquartered in Duluth, Georgia, USA, AGCO had net sales of $9.1 billion in 2020. For more information, visit http://www.AGCOcorp.com . For company news, information and events, please follow us on Twitter: @AGCOCorp. For financial news on Twitter, please follow the hashtag #AGCOIR.

# # # # #

Please visit our website at www.agcocorp.com

 

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in millions)

       

 

December 31, 2020

 

December 31, 2019

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

1,119.1

 

 

$

432.8

 

Accounts and notes receivable, net

856.0

 

 

800.5

 

Inventories, net

1,974.4

 

 

2,078.7

 

Other current assets

418.9

 

 

417.1

 

Total current assets

4,368.4

 

 

3,729.1

 

Property, plant and equipment, net

1,508.5

 

 

1,416.3

 

Right-of-use lease assets

165.1

 

 

187.3

 

Investment in affiliates

442.7

 

 

380.2

 

Deferred tax assets

77.6

 

 

93.8

 

Other assets

179.8

 

 

153.0

 

Intangible assets, net

455.6

 

 

501.7

 

Goodwill

1,306.5

 

 

1,298.3

 

Total assets

$

8,504.2

 

 

$

7,759.7

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current Liabilities:

 

 

 

Current portion of long-term debt

$

325.9

 

 

$

2.9

 

Short-term borrowings

33.8

 

 

150.5

 

Accounts payable

855.1

 

 

914.8

 

Accrued expenses

1,916.7

 

 

1,654.2

 

Other current liabilities

231.3

 

 

162.1

 

Total current liabilities

3,362.8

 

 

2,884.5

 

Long-term debt, less current portion and debt issuance costs

1,256.7

 

 

1,191.8

 

Operating lease liabilities

125.9

 

 

148.6

 

Pension and postretirement health care benefits

253.4

 

 

232.1

 

Deferred tax liabilities

112.4

 

 

107.0

 

Other noncurrent liabilities

375.0

 

 

288.7

 

Total liabilities

5,486.2

 

 

4,852.7

 

 

 

 

 

Stockholders’ Equity:

 

 

 

AGCO Corporation stockholders’ equity:

 

 

 

Common stock

0.8

 

 

0.8

 

Additional paid-in capital

30.9

 

 

4.7

 

Retained earnings

4,759.1

 

 

4,443.5

 

Accumulated other comprehensive loss

(1,810.8)

 

 

(1,595.2)

 

Total AGCO Corporation stockholders’ equity

2,980.0

 

 

2,853.8

 

Noncontrolling interests

38.0

 

 

53.2

 

Total stockholders’ equity

3,018.0

 

 

2,907.0

 

Total liabilities and stockholders’ equity

$

8,504.2

 

 

$

7,759.7

 

See accompanying notes to condensed consolidated financial statements.

 

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in millions, except per share data)

       

 

Three Months Ended December 31,

 

2020

 

2019

Net sales

$

2,717.1

 

 

$

2,513.6

 

Cost of goods sold

2,121.5

 

 

2,000.1

 

Gross profit

595.6

 

 

513.5

 

Selling, general and administrative expenses

283.1

 

 

272.4

 

Engineering expenses

99.9

 

 

89.1

 

Amortization of intangibles

14.8

 

 

15.5

 

Impairment charges

 

 

176.6

 

Restructuring expenses

14.3

 

 

6.0

 

Bad debt expense

5.5

 

 

3.7

 

Income (loss) from operations

178.0

 

 

(49.8)

 

Interest expense, net

1.9

 

 

4.0

 

Other (income) expense, net

(15.1)

 

 

20.1

 

Income (loss) before income taxes and equity in net earnings of affiliates

191.2

 

 

(73.9)

 

Income tax provision

69.8

 

 

25.0

 

Income (loss) before equity in net earnings of affiliates

121.4

 

 

(98.9)

 

Equity in net earnings of affiliates

14.0

 

 

9.3

 

Net income (loss)

135.4

 

 

(89.6)

 

Net loss attributable to noncontrolling interests

 

 

1.3

 

Net income (loss) attributable to AGCO Corporation and subsidiaries

$

135.4

 

 

$

(88.3)

 

Net income (loss) per common share attributable to AGCO Corporation and subsidiaries:

 

 

 

 

Basic

$

1.81

 

 

$

(1.17)

 

Diluted

$

1.78

 

 

$

(1.17)

 

Cash dividends declared and paid per common share

$

0.16

 

 

$

0.16

 

Weighted average number of common and common equivalent shares outstanding:

 

 

 

 

 

Basic

74.9

 

 

75.6

 

Diluted

75.9

 

 

75.6

 

See accompanying notes to condensed consolidated financial statements.

 

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in millions, except per share data)

   

 

Years Ended December 31,

 

2020

 

2019

Net sales

$

9,149.7

 

 

$

9,041.4

 

Cost of goods sold

7,092.2

 

 

7,057.1

 

Gross profit

2,057.5

 

 

1,984.3

 

Selling, general and administrative expenses

1,001.5

 

 

1,040.3

 

Engineering expenses

342.6

 

 

343.4

 

Amortization of intangibles

59.5

 

 

61.1

 

Impairment charges

20.0

 

 

176.6

 

Restructuring expenses

19.7

 

 

9.0

 

Bad debt expense

14.5

 

 

5.8

 

Income from operations

599.7

 

 

348.1

 

Interest expense, net

15.0

 

 

19.9

 

Other expense, net

22.7

 

 

67.1

 

Income before income taxes and equity in net earnings of affiliates

562.0

 

 

261.1

 

Income tax provision

187.7

 

 

180.8

 

Income before equity in net earnings of affiliates

374.3

 

 

80.3

 

Equity in net earnings of affiliates

45.5

 

 

42.5

 

Net income

419.8

 

 

122.8

 

Net loss attributable to noncontrolling interests

7.3

 

 

2.4

 

Net income attributable to AGCO Corporation and subsidiaries

$

427.1

 

 

$

125.2

 

Net income per common share attributable to AGCO Corporation and subsidiaries:

 

 

 

Basic

$

5.69

 

 

$

1.64

 

Diluted

$

5.65

 

 

$

1.63

 

Cash dividends declared and paid per common share

$

0.63

 

 

$

0.63

 

Weighted average number of common and common equivalent shares outstanding:

 

 

 

Basic

75.0

 

 

76.2

 

Diluted

75.6

 

 

77.0

 

See accompanying notes to condensed consolidated financial statements.

 

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in millions)

   

 

Years Ended December 31,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income

$

419.8

 

 

$

122.8

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation

212.5

 

 

210.9

 

Impairment charges

20.0

 

 

176.6

 

Amortization of intangibles

59.5

 

 

61.1

 

Stock compensation expense

37.6

 

 

41.3

 

Equity in net earnings of affiliates, net of cash received

(43.7)

 

 

 

Deferred income tax provision

3.4

 

 

15.1

 

Other

(7.4)

 

 

6.9

 

Changes in operating assets and liabilities:

 

 

 

Accounts and notes receivable, net

(90.5)

 

 

63.8

 

Inventories, net

119.7

 

 

(216.3)

 

Other current and noncurrent assets

(49.8)

 

 

(14.4)

 

Accounts payable

(59.1)

 

 

35.7

 

Accrued expenses

185.3

 

 

114.5

 

Other current and noncurrent liabilities

89.2

 

 

77.9

 

Total adjustments

476.7

 

 

573.1

 

Net cash provided by operating activities

896.5

 

 

695.9

 

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(269.9)

 

 

(273.4)

 

Proceeds from sale of property, plant and equipment

1.9

 

 

4.9

 

Purchase of businesses, net of cash acquired

(2.8)

 

 

 

Sale of (investments in) unconsolidated affiliates, net

29.1

 

 

(3.1)

 

Net cash used in investing activities

(241.7)

 

 

(271.6)

 

Cash flows from financing activities:

 

 

 

Proceeds from (repayments of) indebtedness, net

150.0

 

 

(108.4)

 

Purchases and retirement of common stock

(55.0)

 

 

(130.0)

 

Payment of dividends to stockholders

(48.0)

 

 

(48.0)

 

Payment of minimum tax withholdings on stock compensation

(19.8)

 

 

(28.1)

 

Payment of debt issuance costs

(1.4)

 

 

(0.5)

 

(Distributions to) investments by noncontrolling interests, net

(3.1)

 

 

1.6

 

Net cash provided by (used in) financing activities

22.7

 

 

(313.4)

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

8.8

 

 

(4.2)

 

Increase in cash, cash equivalents and restricted cash

686.3

 

 

106.7

 

Cash, cash equivalents and restricted cash, beginning of year

432.8

 

 

326.1

 

Cash, cash equivalents and restricted cash, end of year

$

1,119.1

 

 

$

432.8

 

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share amounts, per share data and employees)

1. STOCK COMPENSATION EXPENSE

The Company recorded stock compensation expense as follows (in millions):

 

Three Months Ended December 31,

 

Years Ended December 31,

 

2020

 

2019

 

2020

 

2019

Cost of goods sold

$

0.2

 

 

$

0.4

 

 

$

1.1

 

 

$

1.7

 

Selling, general and administrative expenses

10.5

 

 

8.0

 

 

36.8

 

 

40.0

 

Total stock compensation expense

$

10.7

 

 

$

8.4

 

 

$

37.9

 

 

$

41.7

 

2. RESTRUCTURING EXPENSES

From 2014 through 2020, the Company announced and initiated several actions to rationalize employee headcount at various manufacturing facilities and administrative offices located in the U.S., Europe, South America, Africa and China in order to reduce costs in response to softening global market demand and lower production volumes. The aggregate headcount reduction was approximately 4,160 employees for the years 2014 to 2019. The Company had approximately $4.8 million of severance and related costs accrued as of December 31, 2019. During the year ended December 31, 2020, the Company recorded an additional $19.7 million of severance and related costs associated with these rationalizations, as well as the rationalizations of its grain and protein business that was initiated during the fourth quarter of 2019 and continued throughout 2020. The restructuring expenses recorded during 2020 related to the termination of an additional 350 employees. During 2020, the Company paid approximately $5.1 million of severance and other related costs. The $19.7 million of expenses recorded during the year end December 31, 2020 included a $2.5 million write-down of property, plant and equipment. The remaining $16.8 million of accrued severance, facility closure and other related costs as of December 31, 2020, inclusive of approximately $0.1 million of negative foreign currency translation impacts, are expected to be primarily paid during 2021.

3. GOODWILL AND OTHER INTANGIBLES IMPAIRMENT CHARGES

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of October 1 each fiscal year. The COVID-19 pandemic has adversely impacted the global economy as a whole. Based on current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of March 31, 2020, June 30, 2020 and September 30, 2020. As of June 30, 2020, the Company concluded there were indicators of impairment during the three months ended June 30, 2020 related to one of its smaller reporting units, which is a 50%-owned tillage and seeding joint venture. As a result, an impairment of the entire goodwill balance of this reporting unit was deemed necessary as of June 30, 2020. During the three months ended June 30, 2020, a non-cash impairment charge of approximately $20.0 million was recorded as “Impairment charges” within the Company’s Condensed Consolidated Statements of Operations, with an offsetting benefit of approximately $10.0 million included within “Net loss attributable to noncontrolling interests.” The quantitative goodwill impairment analysis was performed in accordance with the provisions of Accounting Standards Codification (“ASC”) 350, “Intangibles - Goodwill and Other” and Accounting Standards Update (“ASU”) 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). No other indications of impairments existed during 2020 related to any of the Company’s other reporting units, including as a result of the Company’s annual impairment analysis as of October 1, 2020.

During the three months ended December 31, 2019, the Company recorded a non-cash impairment charge of approximately $173.6 million within “Impairment charges” in the Company’s Condensed Consolidated Statements of Operations related to goodwill associated with its grain storage and protein production system operations (“grain and protein business”) in Europe/Middle East. As part of the Company’s annual impairment evaluation of goodwill, the Company concluded that it was more likely than not that the fair value of the reporting unit was less than its carrying amount. This was primarily as a result of a review of current and recently projected market conditions and operating results of the business. The quantitative goodwill impairment analysis was performed in accordance with the provisions of ASC 350 and ASU 2017-04.

During the three months ended December 31, 2019, the Company also recorded a non-cash impairment charge of approximately $3.0 million within “Impairment charges” in the Company’s Condensed Consolidated Statements of Operations. The impairment charge related to certain long-lived intangible assets associated with the grain and protein business within Europe/Middle East and North America, due to the discontinuation of a certain brand name and related products and customers in accordance with ASC 360, “Impairment and Disposal of Long-Lived Assets.”

4. INDEBTEDNESS

Long-term debt at December 31, 2020 and 2019 consisted of the following (in millions):

 

December 31, 2020

 

December 31, 2019

Senior term loan due 2022

$

184.0

 

 

$

168.1

 

Credit facility, expires 2023

277.9

 

 

 

1.002% Senior term loan due 2025

306.7

 

 

280.2

 

Senior term loans due between 2021 and 2028

806.0

 

 

736.2

 

Other long-term debt

10.5

 

 

12.5

 

Debt issuance costs

(2.5)

 

 

(2.3)

 

 

1,582.6

 

 

1,194.7

 

Less:

 

 

 

Senior term loans due 2021, net of debt issuance costs

(323.6)

 

 

 

Current portion of other long-term debt

(2.3)

 

 

(2.9)

 

Total long-term indebtedness, less current portion

$

1,256.7

 

 

$

1,191.8

 

As of December 31, 2020 and 2019, the Company had short-term borrowings due within one year of approximately $33.8 million and $150.5 million, respectively.

On April 9, 2020, the Company entered into an amendment to its $800.0 million multi-currency revolving credit facility to include incremental term loans (“2020 term loans”) that allow the Company to borrow an aggregate principal amount of €235.0 million and $267.5 million, respectively (or an aggregate of approximately $555.8 million as of December 31, 2020). Amounts can be drawn incrementally at any time prior to maturity, but must be drawn down proportionately. Amounts drawn must be in a minimum principal amount of $100.0 million and integral multiples of $50.0 million in excess thereof. Once amounts have been repaid, those amounts are not permitted to be re-drawn. The maturity date of the 2020 term loans is April 8, 2022. On April 15, 2020, the Company borrowed €117.5 million and $133.8 million, respectively, (or an aggregate of approximately $277.9 million as of December 31, 2020) of 2020 term loans. The Company simultaneously repaid €100.0 million (or approximately $108.7 million) of its revolving credit facility from the borrowings received. There were no other borrowings on the 2020 term loans subsequent to the initial borrowings in April 2020.

5. INVENTORIES

Inventories at December 31, 2020 and 2019 were as follows (in millions):

 

December 31, 2020

 

December 31, 2019

Finished goods

$

641.3

 

 

$

780.1

 

Repair and replacement parts

652.3

 

 

611.5

 

Work in process

175.1

 

 

213.4

 

Raw materials

505.7

 

 

473.7

 

Inventories, net

$

1,974.4

 

 

$

2,078.7

 

6. ACCOUNTS RECEIVABLE SALES AGREEMENTS

The Company had accounts receivable sales agreements that permit the sale, on an ongoing basis, of a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. As of December 31, 2020 and 2019, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $1.5 billion and $1.6 billion, respectively.

Losses on sales of receivables associated with the accounts receivable financing facilities discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $5.6 million and $24.1 million, respectively, during the three months and year ended December 31, 2020. Losses on sales of receivables associated with the accounts receivable financing facilities discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $12.1 million and $42.4 million, respectively, during the three months and year ended December 31, 2019.

The Company’s finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to the Company’s dealers. As of December 31, 2020 and 2019, these finance joint ventures had approximately $85.2 million and $104.3 million, respectively, of outstanding accounts receivable associated with these arrangements. In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world.

7. NET INCOME PER SHARE

A reconciliation of net income (loss) attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income (loss) per share for the three months and years ended December 31, 2020 and 2019 is as follows (in millions, except per share data):

 

Three Months Ended December 31,

 

Years Ended December 31,

 

2020

 

2019

 

2020

 

2019

Basic net income (loss) per share:

 

 

 

 

 

 

 

Net income (loss) attributable to AGCO Corporation and subsidiaries

$

135.4

 

 

$

(88.3)

 

 

$

427.1

 

 

$

125.2

 

Weighted average number of common shares outstanding

74.9

 

 

75.6

 

 

75.0

 

 

76.2

 

Basic net income (loss) per share attributable to AGCO Corporation and subsidiaries

$

1.81

 

 

$

(1.17)

 

 

$

5.69

 

 

$

1.64

 

Diluted net income (loss) per share:

 

 

 

 

 

 

 

Net income (loss) attributable to AGCO Corporation and subsidiaries

$

135.4

 

 

$

(88.3)

 

 

$

427.1

 

 

$

125.2

 

Weighted average number of common shares outstanding

74.9

 

 

75.6

 

 

75.0

 

 

76.2

 

Dilutive stock-settled appreciation rights, performance share awards and restricted stock units

1.0

 

 

 

 

0.6

 

 

0.8

 

Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share

75.9

 

 

75.6

 

 

75.6

 

 

77.0

 

Diluted net income (loss) per share attributable to AGCO Corporation and subsidiaries

$

1.78

 

 

$

(1.17)

 

 

$

5.65

 

 

$

1.63

 

The weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net loss per share above do not include the impact of dilutive stock-settled appreciation rights, performance share awards and restricted stock units for the three months ended December 31, 2019 as the impact would have been antidilutive. The number of shares excluded from the weighted average number of common shares and common share equivalents outstanding was approximately 1.1 million shares for the three months ended December 31, 2019.

8. SEGMENT REPORTING

The Company’s four reportable segments distribute a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each segment are based on the location of the third-party customer. The Company’s selling, general and administrative expenses and engineering expenses are charged to each segment based on the region and division where the expenses are incurred. As a result, the components of income from operations for one segment may not be comparable to another segment. Segment results for the three months and years ended December 31, 2020 and 2019 are as follows (in millions):

Three Months Ended December 31,

 

North
America

 

South
America

 

Europe/
Middle East

 

Asia/
Pacific/Africa

 

Consolidated

2020

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

485.1

 

 

$

267.5

 

 

$

1,722.7

 

 

$

241.8

 

 

$

2,717.1

 

Income from operations

 

9.8

 

 

15.9

 

 

204.5

 

 

25.6

 

 

255.8

 

2019

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

540.5

 

 

$

220.9

 

 

$

1,515.3

 

 

$

236.9

 

 

$

2,513.6

 

Income (loss) from operations

 

7.1

 

 

(18.2)

 

 

179.7

 

 

21.5

 

 

190.1

 

Years Ended December 31,

 

North
America

 

South
America

 

Europe/
Middle East

 

Asia/
Pacific/Africa

 

Consolidated

2020

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,175.0

 

 

$

873.8

 

 

$

5,366.9

 

 

$

734.0

 

 

$

9,149.7

 

Income from operations

 

193.7

 

 

29.3

 

 

585.3

 

 

62.1

 

 

870.4

 

2019

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,191.8

 

 

$

802.2

 

 

$

5,328.8

 

 

$

718.6

 

 

$

9,041.4

 

Income (loss) from operations

 

121.6

 

 

(39.4)

 

 

638.2

 

 

43.4

 

 

763.8

 

A reconciliation from the segment information to the consolidated balances for income from operations is set forth below (in millions):

 

Three Months Ended December 31,

 

Years Ended December 31,

 

2020

 

2019

 

2020

 

2019

Segment income from operations

$

255.8

 

 

$

190.1

 

 

$

870.4

 

 

$

763.8

 

Corporate expenses

(38.2)

 

 

(33.8)

 

 

(134.7)

 

 

(129.0)

 

Amortization of intangibles

(14.8)

 

 

(15.5)

 

 

(59.5)

 

 

(61.1)

 

Stock compensation expense

(10.5)

 

 

(8.0)

 

 

(36.8)

 

 

(40.0)

 

Impairment charges

 

 

(176.6)

 

 

(20.0)

 

 

(176.6)

 

Restructuring expenses

(14.3)

 

 

(6.0)

 

 

(19.7)

 

 

(9.0)

 

Consolidated income (loss) from operations

$

178.0

 

 

$

(49.8)

 

 

$

599.7

 

 

$

348.1

 

RECONCILIATION OF NON-GAAP MEASURES

This earnings release discloses adjusted income from operations, adjusted net income, adjusted net income per share, free cash flow and net sales on a constant currency basis, each of which exclude amounts that are typically included in the most directly comparable measure calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). A reconciliation of each of those measures to the most directly comparable GAAP measure is included below.

The following is a reconciliation of reported income from operations, net income and net income per share to adjusted income from operations, net income and net income per share for the three months and years ended December 31, 2020 and 2019 (in millions, except per share data):

 

Three Months Ended December 31,

 

2020

 

2019

 

Income From
Operations (2)

 

Net
Income (1)

 

Net Income
Per Share (1)

 

Income From
Operations

 

Net
Income (1)(2)

 

Net Income
Per Share (1)

As reported

$

178.0

 

 

$

135.4

 

 

$

1.78

 

 

$

(49.8)

 

 

$

(88.3)

 

 

$

(1.17)

 

Restructuring expenses (3)

14.3

 

 

14.2

 

 

0.19

 

 

6.0

 

 

5.8

 

 

0.08

 

Impairment charges (4)

 

 

 

 

 

 

176.6

 

 

176.6

 

 

2.33

 

Gain on sale of investment in affiliate (5)

 

 

(32.5)

 

 

(0.43)

 

 

 

 

 

 

 

Swiss tax reform (6)

 

 

 

 

 

 

 

 

(21.8)

 

 

(0.29)

 

Weighted average share impact (7)

 

 

 

 

 

 

 

 

 

 

(0.01)

 

As adjusted

$

192.2

 

 

$

117.1

 

 

$

1.54

 

 

$

132.8

 

 

$

72.2

 

 

$

0.94

 

(1)

 

Net income and net income per share amounts are after tax.

(2)

 

Rounding may impact summation of amounts.

(3)

 

The restructuring expenses recorded during the three months ended December 31, 2020 and 2019 related primarily to severance and other related costs associated with the Company’s rationalization of certain U.S., European and South American manufacturing operations and various administrative offices, including costs associated with the Company’s rationalization of its grain and protein business.

(4)

 

During the three months ended December 31, 2019, the Company recorded impairment charges of approximately $176.6 million related primarily to its Europe/Middle East grain and protein business. See Note 3 for further information.

(5)

 

The Company has a minority interest in Tractors and Farm Equipment Limited (“TAFE”). During the three months ended December 31, 2020, TAFE repurchased a portion of its common stock from the Company resulting in a gain of approximately $32.5 million.

(6)

 

During the three months ended December 31, 2019, the Company recognized a one-time income tax gain associated with the finalization of Swiss federal tax reform.

(7)

 

The weighted average share impact represents the impact of including dilutive common stock equivalents (as described in Note 7 above) in the “As adjusted” earnings per share calculation.

 

Years Ended December 31,

 

2020

 

2019

 

Income From
Operations

 

Net
Income (1)(2)

 

Net Income
Per Share (1)

 

Income From
Operations

 

Net
Income (1)(2)

 

Net Income
Per Share (1)(2)

As reported

$

599.7

 

 

$

427.1

 

 

$

5.65

 

 

$

348.1

 

 

$

125.2

 

 

$

1.63

 

Restructuring expenses (3)

19.7

 

 

19.5

 

 

0.26

 

 

9.0

 

 

8.3

 

 

0.11

 

Impairment charges (4)

20.0

 

 

10.0

 

 

0.13

 

 

176.6

 

 

176.6

 

 

2.29

 

Gain on sale of investment in affiliate (5)

 

 

(32.5)

 

 

(0.43)

 

 

 

 

 

 

 

Deferred income tax adjustment (6)

 

 

 

 

 

 

 

 

53.7

 

 

0.70

 

Swiss tax reform (7)

 

 

 

 

 

 

 

 

(21.8)

 

 

(0.28)

 

As adjusted

$

639.4

 

 

$

424.2

 

 

$

5.61

 

 

$

533.7

 

 

$

341.9

 

 

$

4.44

 

(1)

 

Net income and net income per share amounts are after tax.

(2)

 

Rounding may impact summation of amounts.

(3)

 

The restructuring expenses recorded during the year ended December 31, 2020 and 2019 related primarily to severance and other related costs associated with the Company’s rationalization of certain U.S., European and South American manufacturing operations and various administrative offices, including costs associated with the Company’s rationalization of its grain and protein business.

(4)

 

During the year ended December 31, 2020, the Company recorded a goodwill impairment charge of approximately $20.0 million related to a joint venture in which it owns a 50% interest. During the year ended December 31, 2019, the Company recorded impairment charges of approximately $176.6 million related primarily to its European/Middle East grain and protein business. See Note 3 for further information.

(5)

 

The Company has a minority interest in TAFE. During the three months ended December 31, 2020, TAFE repurchased a portion of its common stock from the Company resulting in a gain of approximately $32.5 million.

(6)

 

During the three months ended September 30, 2019, the Company recorded a non-cash adjustment to establish a valuation allowance against its Brazilian net deferred income tax assets.

(7)

 

During the three months ended December 31, 2019, the Company recognized a one-time income tax gain associated with the finalization of Swiss federal tax reform.

The following is a reconciliation of net cash provided by operating activities to free cash flow for the years ended December 31, 2020 and 2019 (in millions):

 

December 31, 2020

 

December 31, 2019

Net cash provided by operating activities

$

896.5

 

 

$

695.9

 

Less: capital expenditures

(269.9)

 

 

(273.4)

 

Free cash flow

$

626.6

 

 

$

422.5

 

The following tables set forth, for the three months and year ended December 31, 2020 and 2019, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

 

Three Months Ended December 31,

 

Change due to currency translation

 

2020

 

2019

 

% change from
2019

 

$

 

%

North America

$

485.1

 

 

$

540.5

 

 

(10.2)

%

 

$

0.3

 

 

0.1

%

South America

267.5

 

 

220.9

 

 

21.1

%

 

(69.8)

 

 

(31.6)

%

Europe/Middle East

1,722.7

 

 

1,515.3

 

 

13.7

%

 

90.0

 

 

5.9

%

Asia/Pacific/Africa

241.8

 

 

236.9

 

 

2.1

%

 

13.9

 

 

5.9

%

 

$

2,717.1

 

 

$

2,513.6

 

 

8.1

%

 

$

34.4

 

 

1.4

%

 

Years Ended December 31,

 

Change due to currency translation

 

2020

 

2019

 

% change from.
2019

 

$

 

%

North America

$

2,175.0

 

 

$

2,191.8

 

 

(0.8)

%

 

$

(11.6)

 

 

(0.5)

%

South America

873.8

 

 

802.2

 

 

8.9

%

 

(221.8)

 

 

(27.6)

%

Europe/Middle East

5,366.9

 

 

5,328.8

 

 

0.7

%

 

58.5

 

 

1.1

%

Asia/Pacific/Africa

734.0

 

 

718.6

 

 

2.1

%

 

8.8

 

 

1.2

%

 

$

9,149.7

 

 

$

9,041.4

 

 

1.2

%

 

$

(166.1)

 

 

(1.8)

%

 

Greg Peterson
Vice President, Investor Relations
770-232-8229
greg.peterson@agcocorp.com