DULUTH, Ga.--(BUSINESS WIRE)--Aug. 4, 2016--
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment, reported net sales of
approximately $2.0 billion for the second quarter of 2016, a decrease of
approximately 3.6% compared to net sales of approximately $2.1 billion
for the second quarter of 2015. Reported net income was $0.61 per share
for the second quarter of 2016 and adjusted net income, excluding
restructuring expenses and a non-cash deferred income tax adjustment,
was $1.02 per share. These results compare to reported net income of
$1.22 per share and adjusted net income, excluding restructuring
expenses, of $1.25 per share for the second quarter of 2015. Excluding
unfavorable currency translation impacts of approximately 2.5%, net
sales in the second quarter of 2016 decreased approximately 1.1%
compared to the second quarter of 2015. During the second quarter of
2016, AGCO recorded a non-cash adjustment to increase the valuation
allowance on its U.S. deferred income tax assets of approximately $31.6
million, or $0.39 per share. The adjustment does not affect the
Company’s ability to utilize the deferred income tax assets with future
taxable income in the United States.
Net sales for the first six months of 2016 were approximately $3.6
billion, a decrease of approximately 5.8% compared to the same period in
2015. Excluding unfavorable currency translation impacts of
approximately 3.7%, net sales for the first six months of 2016 decreased
approximately 2.0% compared to the same period in 2015. For the first
six months of 2016, reported net income was $0.70 per share and adjusted
net income, excluding restructuring expenses and a non-cash deferred
income tax adjustment, was $1.12 per share. These results compare to
reported net income of $1.55 per share and adjusted net income,
excluding restructuring expenses, of $1.67 per share for the first six
months of 2015.
Second Quarter Highlights
-
Regional sales results(1): North America (10.2)%,
Europe/Africa/Middle East (“EAME”) +4.6%, South America (14.3)%,
Asia/Pacific (“APAC”) +25.9%
-
Regional operating margin performance: EAME 12.1%, North America 4.7%,
South America 0.0%, APAC 2.0%
-
Full-year adjusted earnings per share guidance remains at $2.30
-
Share repurchase program reduced outstanding shares by 1.4 million
during the second quarter and 2.8 million during the first six months
of 2016
(1)As compared to second quarter 2015, excludes currency
translation impact. See reconciliation in appendix.
“Challenging market conditions shaped AGCO’s second quarter as our
industry continued to operate at a low point in the agricultural
equipment cycle,” stated Martin Richenhagen, AGCO’s Chairman, President
and Chief Executive Officer. “In the midst of a weaker industry
environment, we continued to deliver quality products and service to our
customers, while aggressively managing our expenses and working capital.
Our second quarter results were highlighted by solid margin performance,
especially in our EAME and APAC regions, where operating margins
improved during the second quarter compared to the same period in 2015.
We are also managing for the long-term during this weak demand period by
increasing the level of investment in product development in order to
provide industry leading products and service levels for our customers.
We have a full slate of new product introductions planned for the second
half of 2016, ranging from the most powerful, technology-rich tractor on
a conventional frame to highly efficient low and medium horsepower
tractors. These new products are aimed at improving our competitive
position in the global marketplace and increasing our margins in the
years ahead."
Market Update
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Industry Unit Retail Sales
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Six months ended June 30, 2016
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Tractors
Change from
Prior Year Period
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Combines
Change from
Prior Year Period
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North America(1)
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(10)%
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(19)%
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South America
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(30)%
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(15)%
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Western Europe
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(1)%
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(9)%
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(1)Excludes compact tractors.
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“After a brief weather-related run up in the second quarter, commodity
prices have fallen below last year’s levels,” continued Mr. Richenhagen.
“Crops in the United States have emerged early and are in excellent
condition through July. The USDA is estimating grain inventories will
grow during 2016, further pressuring commodity prices. Against this
challenging backdrop, industry demand remains weak across all the major
markets. Industry retail sales in North America declined in the first
half of 2016, with a significant drop in the large producer segment.
Sales of high-horsepower tractors, combines, sprayers and grain storage
and handling equipment all declined significantly. Higher industry sales
of small tractors, due to more normal conditions in the livestock sector
and general economy, have provided a partial offset to the decline in
large agricultural equipment. In Western Europe, first half industry
sales declined more modestly. Margins for dairy producers remained weak
and lower commodity prices kept market demand soft in the row crop
segment. Industry sales declines were most pronounced in the United
Kingdom and Germany. The declines were partially offset by growth in
France stimulated by tax incentives for equipment purchases, which have
been extended through the end of 2016. Reduced industry sales in South
America were the result of lower demand in Brazil due to political and
economic uncertainty that continues to impact farmer confidence. More
supportive government policies in Argentina have contributed to higher
sales in that market. Looking past the current operating environment,
our long-term view remains optimistic, with expanding demand for grain
supporting farm economics and healthy growth in our industry.”
Regional Results
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AGCO Regional Net Sales (in millions)
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Three Months Ended June 30,
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2016
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2015
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% change
from 2015
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% change from
2015 due to
currency translation(1)
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North America
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$
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498.9
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$
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563.1
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(11.4)%
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(1.2)%
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South America
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203.4
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280.3
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(27.4)%
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(13.1)%
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Europe/Africa/Middle East
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1,185.3
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1,137.0
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4.2%
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(0.4)%
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Asia/Pacific
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108.0
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88.9
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21.5%
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(4.4)%
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Total
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$
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1,995.6
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$
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2,069.3
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(3.6)%
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(2.5)%
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Six Months Ended June 30,
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2016
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2015
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% change
from 2015
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% change from
2015 due to
currency translation(1)
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North America
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$
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907.3
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$
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1,035.6
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(12.4)%
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(1.6)%
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South America
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347.6
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529.3
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(34.3)%
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(16.8)%
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Europe/Africa/Middle East
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2,109.4
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2,045.1
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3.1%
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(1.3)%
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Asia/Pacific
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190.6
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161.9
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17.7%
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(5.3)%
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Total
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$
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3,554.9
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$
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3,771.9
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(5.8)%
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(3.7)%
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(1) See appendix for additional disclosures
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North America
Net sales in AGCO’s North America region decreased 10.8% in the first
six months of 2016 compared to the same period of 2015, excluding the
negative impact of currency translation. Dealer inventory reduction
efforts and softer industry demand, particularly from the row crop
sector, contributed to lower sales. Sales declines were most significant
in high margin high horsepower tractors, sprayers and grain storage and
handling equipment. Lower sales and production volumes, along with a
weaker sales mix, contributed to a reduction in income from operations
of approximately $52.6 million for the first six months of 2016 compared
to the same period in 2015.
South America
South American net sales decreased 17.5% in the first six months of 2016
compared to the first six months of 2015, excluding the impact of
unfavorable currency translation. Significant sales declines in Brazil
were partially offset by growth in Argentina. Income from operations
decreased approximately $27.9 million for the first six months of 2016
compared to the same period in 2015 due to lower sales and production
volumes, the negative impact of currency translation and a weaker mix of
sales.
Europe/Africa/Middle East
AGCO’s EAME net sales increased 4.4% in the first six months of 2016
compared to the same period in 2015, excluding unfavorable currency
translation impacts. Higher sales in France, Scandinavia and Finland
were partially offset by sales declines in Germany and Africa. Income
from operations decreased approximately $1.5 million for the first six
months of 2016, compared to the same period in 2015, due to a weaker
sales mix and higher engineering expenses.
Asia/Pacific
Net sales in AGCO’s Asia/Pacific region, excluding the negative impact
of currency translation, increased 23.0% in the first six months of 2016
compared to the same period in 2015 due primarily to increased sales in
China. Income from operations improved approximately $22.2 million in
the first six months of 2016, compared to the same period in 2015, due
to higher sales and production levels in China.
Outlook
Weak global demand for agricultural equipment is expected to negatively
impact AGCO’s sales and earnings in 2016. AGCO’s net sales for 2016 are
expected to reach $7.2 billion. Gross and operating margins are expected
to be below 2015 levels due to the negative impact of lower sales and
production volumes along with a weaker sales mix. Benefits from the
Company’s cost reduction initiatives are expected to partially offset
the volume-related impacts. Based on these assumptions, 2016 reported
earnings per share are targeted at approximately $1.85 and adjusted
earnings per share, excluding restructuring expenses and the non-cash
deferred income tax adjustment, are targeted at approximately $2.30.
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Thursday, August 4, 2016. 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.
-
Our financial results depend entirely upon the agricultural industry,
and factors that adversely affect the agricultural industry generally,
including declines in the general economy, 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.
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A majority of our sales and manufacturing take place outside the
United States, and, as a result, we are exposed to risks related to
foreign laws, taxes, 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.
-
Most retail sales of the products that we manufacture are financed,
either by our joint ventures with Rabobank or by a bank or other
private lender. Our joint ventures with Rabobank, which are controlled
by Rabobank and are dependent upon Rabobank for financing as well,
finance approximately 50% of the retail sales of our tractors and
combines in the markets where the joint ventures operate. Any
difficulty by Rabobank to continue to provide that financing, or any
business decision by Rabobank as the controlling member not to fund
the business or particular aspects of it (for example, a particular
country or region), would require the joint ventures to find other
sources of financing (which may be difficult to obtain), or us to find
another source of retail financing for our customers, or our customers
would be required to utilize other retail financing providers. As a
result of the recent economic downturn, financing for capital
equipment purchases generally has become more difficult in certain
regions and in some cases, can be expensive to obtain. To the extent
that financing is not available or available only at unattractive
prices, our sales would be negatively impacted.
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Both AGCO and our finance joint ventures have substantial account
receivables from dealers and end customers, and we would be adversely
impacted if the collectability of these receivables was not consistent
with historical experience; this collectability is dependent upon the
financial strength of the farm industry, which in turn is dependent
upon the general economy and commodity prices, as well as several of
the other factors listed in this section.
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We have experienced substantial and sustained volatility with respect
to currency exchange rate and interest rate changes, including
uncertainty associated with the Euro, 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, which requires
substantial expenditures.
-
Our production levels and capacity constraints at our facilities,
including those resulting from plant expansions and systems upgrades
at our manufacturing facilities, could adversely affect our results.
-
Our expansion plans in emerging markets, including establishing a
greater manufacturing and marketing presence and growing our use of
component suppliers, could entail significant risks.
-
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. We also are subject to raw material price fluctuations,
which can adversely affect our manufacturing costs.
-
We face significant competition, and if we are unable to compete
successfully against other agricultural equipment manufacturers, we
would lose customers and our net sales and profitability would decline.
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We have a substantial amount of indebtedness, and, as result, we are
subject to certain restrictive covenants and payment obligations that
may adversely affect our ability to operate and expand our business.
-
On June 23, 2016, the U.K. held a referendum in which voters approved
an exit from the E.U., commonly referred to as “Brexit.” As a result
of the referendum, it is expected that the British government will
begin negotiating the terms of the U.K.’s future relationship with the
E.U. Although it is unknown what those terms will be, it is possible
that there will be greater restrictions on imports and exports between
the U.K. and E.U. countries, increased regulatory complexities, and
increased currency volatility, any of which could adversely affect our
operations and financial results.
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, 2015 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 supports more productive
farming 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® precision technologies
and farm optimization services, and are distributed globally through a
combination of approximately 3,000 independent dealers and distributors
in more than 140 countries. Founded in 1990, AGCO is headquartered
in Duluth, GA, USA. In 2015, AGCO had net sales of $7.5 billion. 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
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AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions)
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June 30, 2016
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December 31, 2015
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ASSETS
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Current Assets:
|
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Cash and cash equivalents
|
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|
$
|
324.7
|
|
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|
$
|
426.7
|
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Accounts and notes receivable, net
|
|
|
946.0
|
|
|
|
836.8
|
|
Inventories, net
|
|
|
1,764.1
|
|
|
|
1,423.4
|
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Other current assets
|
|
|
271.4
|
|
|
|
211.4
|
|
Total current assets
|
|
|
3,306.2
|
|
|
|
2,898.3
|
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Property, plant and equipment, net
|
|
|
1,355.1
|
|
|
|
1,347.1
|
|
Investment in affiliates
|
|
|
424.7
|
|
|
|
392.9
|
|
Deferred tax assets
|
|
|
87.8
|
|
|
|
100.7
|
|
Other assets
|
|
|
145.2
|
|
|
|
136.5
|
|
Intangible assets, net
|
|
|
520.8
|
|
|
|
507.7
|
|
Goodwill
|
|
|
1,176.1
|
|
|
|
1,114.5
|
|
Total assets
|
|
|
$
|
7,015.9
|
|
|
|
$
|
6,497.7
|
|
|
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
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|
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Current Liabilities:
|
|
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|
|
|
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Current portion of long-term debt
|
|
|
$
|
93.7
|
|
|
|
$
|
89.0
|
|
Senior term loan
|
|
|
—
|
|
|
|
217.2
|
|
Accounts payable
|
|
|
741.1
|
|
|
|
625.6
|
|
Accrued expenses
|
|
|
1,125.7
|
|
|
|
1,106.9
|
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Other current liabilities
|
|
|
185.6
|
|
|
|
146.7
|
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Total current liabilities
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|
|
2,146.1
|
|
|
|
2,185.4
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Long-term debt, less current portion and debt issuance costs
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|
|
1,378.7
|
|
|
|
925.2
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Pensions and postretirement health care benefits
|
|
|
218.1
|
|
|
|
233.9
|
|
Deferred tax liabilities
|
|
|
93.9
|
|
|
|
86.4
|
|
Other noncurrent liabilities
|
|
|
196.3
|
|
|
|
183.5
|
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Total liabilities
|
|
|
4,033.1
|
|
|
|
3,614.4
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Stockholders’ Equity:
|
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AGCO Corporation stockholders’ equity:
|
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Common stock
|
|
|
0.8
|
|
|
|
0.8
|
|
Additional paid-in capital
|
|
|
191.5
|
|
|
|
301.7
|
|
Retained earnings
|
|
|
4,032.5
|
|
|
|
3,996.0
|
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Accumulated other comprehensive loss
|
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|
(1,301.1
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)
|
|
|
(1,460.2
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)
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Total AGCO Corporation stockholders’ equity
|
|
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2,923.7
|
|
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|
2,838.3
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Noncontrolling interests
|
|
|
59.1
|
|
|
|
45.0
|
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Total stockholders’ equity
|
|
|
2,982.8
|
|
|
|
2,883.3
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Total liabilities and stockholders’ equity
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$
|
7,015.9
|
|
|
|
$
|
6,497.7
|
|
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 June 30,
|
|
|
|
2016
|
|
|
2015
|
Net sales
|
|
|
$
|
1,995.6
|
|
|
|
$
|
2,069.3
|
Cost of goods sold
|
|
|
1,568.6
|
|
|
|
1,619.7
|
Gross profit
|
|
|
427.0
|
|
|
|
449.6
|
Selling, general and administrative expenses
|
|
|
217.8
|
|
|
|
213.1
|
Engineering expenses
|
|
|
77.1
|
|
|
|
71.7
|
Restructuring expenses
|
|
|
2.1
|
|
|
|
4.0
|
Amortization of intangibles
|
|
|
11.4
|
|
|
|
10.9
|
Income from operations
|
|
|
118.6
|
|
|
|
149.9
|
Interest expense, net
|
|
|
11.9
|
|
|
|
11.3
|
Other expense, net
|
|
|
16.0
|
|
|
|
9.5
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
90.7
|
|
|
|
129.1
|
Income tax provision
|
|
|
54.8
|
|
|
|
37.9
|
Income before equity in net earnings of affiliates
|
|
|
35.9
|
|
|
|
91.2
|
Equity in net earnings of affiliates
|
|
|
13.5
|
|
|
|
14.4
|
Net income
|
|
|
49.4
|
|
|
|
105.6
|
Net loss attributable to noncontrolling interests
|
|
|
0.9
|
|
|
|
1.5
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
$
|
50.3
|
|
|
|
$
|
107.1
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.61
|
|
|
|
$
|
1.22
|
Diluted
|
|
|
$
|
0.61
|
|
|
|
$
|
1.22
|
Cash dividends declared and paid per common share
|
|
|
$
|
0.13
|
|
|
|
$
|
0.12
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
82.0
|
|
|
|
87.6
|
Diluted
|
|
|
82.1
|
|
|
|
87.7
|
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)
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
Net sales
|
|
|
$
|
3,554.9
|
|
|
|
$
|
3,771.9
|
Cost of goods sold
|
|
|
2,813.2
|
|
|
|
2,974.4
|
Gross profit
|
|
|
741.7
|
|
|
|
797.5
|
Selling, general and administrative expenses
|
|
|
429.0
|
|
|
|
424.3
|
Engineering expenses
|
|
|
148.3
|
|
|
|
140.5
|
Restructuring expenses
|
|
|
4.0
|
|
|
|
14.6
|
Amortization of intangibles
|
|
|
22.4
|
|
|
|
21.4
|
Income from operations
|
|
|
138.0
|
|
|
|
196.7
|
Interest expense, net
|
|
|
22.4
|
|
|
|
21.5
|
Other expense, net
|
|
|
27.3
|
|
|
|
19.3
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
88.3
|
|
|
|
155.9
|
Income tax provision
|
|
|
54.4
|
|
|
|
48.5
|
Income before equity in net earnings of affiliates
|
|
|
33.9
|
|
|
|
107.4
|
Equity in net earnings of affiliates
|
|
|
25.7
|
|
|
|
28.1
|
Net income
|
|
|
59.6
|
|
|
|
135.5
|
Net (income) loss attributable to noncontrolling interests
|
|
|
(1.5
|
)
|
|
|
1.7
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
$
|
58.1
|
|
|
|
$
|
137.2
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.70
|
|
|
|
$
|
1.55
|
Diluted
|
|
|
$
|
0.70
|
|
|
|
$
|
1.55
|
Cash dividends declared and paid per common share
|
|
|
$
|
0.26
|
|
|
|
$
|
0.24
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
82.5
|
|
|
|
88.2
|
Diluted
|
|
|
82.6
|
|
|
|
88.3
|
See accompanying notes to condensed consolidated financial statements.
AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income
|
|
|
$
|
59.6
|
|
|
|
$
|
135.5
|
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
|
111.9
|
|
|
|
108.2
|
|
Deferred debt issuance cost amortization
|
|
|
0.7
|
|
|
|
1.2
|
|
Amortization of intangibles
|
|
|
22.4
|
|
|
|
21.4
|
|
Stock compensation expense
|
|
|
11.4
|
|
|
|
7.1
|
|
Proceeds from termination of hedging instrument
|
|
|
7.3
|
|
|
|
—
|
|
Equity in net earnings of affiliates, net of cash received
|
|
|
(9.1
|
)
|
|
|
(22.9
|
)
|
Deferred income tax provision
|
|
|
14.6
|
|
|
|
(3.0
|
)
|
Other
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
Changes in operating assets and liabilities, net of effects from
purchase of businesses:
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
|
(61.1
|
)
|
|
|
(147.4
|
)
|
Inventories, net
|
|
|
(263.3
|
)
|
|
|
(170.9
|
)
|
Other current and noncurrent assets
|
|
|
(34.3
|
)
|
|
|
(33.1
|
)
|
Accounts payable
|
|
|
80.6
|
|
|
|
149.5
|
|
Accrued expenses
|
|
|
0.3
|
|
|
|
(17.4
|
)
|
Other current and noncurrent liabilities
|
|
|
(5.3
|
)
|
|
|
—
|
|
Total adjustments
|
|
|
(124.2
|
)
|
|
|
(107.5
|
)
|
Net cash (used in) provided by operating activities
|
|
|
(64.6
|
)
|
|
|
28.0
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(72.0
|
)
|
|
|
(101.3
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
0.9
|
|
|
|
0.8
|
|
Purchase of businesses, net of cash acquired
|
|
|
(38.8
|
)
|
|
|
(18.6
|
)
|
Investment in consolidated affiliates, net of cash acquired
|
|
|
(11.8
|
)
|
|
|
—
|
|
Investment in unconsolidated affiliates
|
|
|
—
|
|
|
|
(5.2
|
)
|
Restricted cash
|
|
|
0.4
|
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(121.3
|
)
|
|
|
(124.3
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from debt obligations, net
|
|
|
214.1
|
|
|
|
432.9
|
|
Purchases and retirement of common stock
|
|
|
(120.0
|
)
|
|
|
(125.0
|
)
|
Payment of dividends to stockholders
|
|
|
(21.6
|
)
|
|
|
(21.3
|
)
|
Payment of minimum tax withholdings on stock compensation
|
|
|
(1.8
|
)
|
|
|
(6.0
|
)
|
Payment of debt issuance costs
|
|
|
(0.5
|
)
|
|
|
(0.7
|
)
|
Net cash provided by financing activities
|
|
|
70.2
|
|
|
|
279.9
|
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
13.7
|
|
|
|
(49.1
|
)
|
(Decrease) increase in cash and cash equivalents
|
|
|
(102.0
|
)
|
|
|
134.5
|
|
Cash and cash equivalents, beginning of period
|
|
|
426.7
|
|
|
|
363.7
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
324.7
|
|
|
|
$
|
498.2
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
2016
|
|
2015
|
Cost of goods sold
|
|
|
|
$
|
0.5
|
|
|
$
|
0.3
|
|
|
|
|
|
$
|
0.9
|
|
|
$
|
0.5
|
Selling, general and administrative expenses
|
|
|
|
5.7
|
|
|
4.7
|
|
|
|
|
|
10.8
|
|
|
6.9
|
Total stock compensation expense
|
|
|
|
$
|
6.2
|
|
|
$
|
5.0
|
|
|
|
|
|
$
|
11.7
|
|
|
$
|
7.4
|
2. RESTRUCTURING EXPENSES
During 2014 and 2015, the Company announced and initiated several
actions to rationalize employee headcount at various manufacturing
facilities and administrative offices located in Europe, China, South
America and the United States. The aggregate headcount reduction of
approximately 2,100 employees during 2014 and 2015 was initiated in
order to reduce costs in response to softening global market demand and
reduced production volumes. During 2014 and 2015, the Company expensed
and paid an aggregate of $68.7 million and $48.5 million, respectively,
associated with these rationalizations, of which a majority related to
severance and other related costs. The Company had approximately $16.9
million of severance and related costs accrued as of December 31, 2015.
During the six months ended June 30, 2016, the Company recorded an
additional $4.0 million of severance and related costs associated with
further rationalizations in the United States, South America and Europe,
associated with the termination of approximately 300 employees, and paid
approximately $6.6 million of severance and associated costs. The
remaining $14.6 million of accrued severance and other related costs as
of June 30, 2016, inclusive of approximately $0.3 million of positive
foreign currency translation impacts, are expected to be paid primarily
during 2016.
3. INDEBTEDNESS
|
|
|
|
|
|
|
Indebtedness at June 30, 2016 and December 31, 2015 consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
December 31, 2015
|
1.056% Senior term loan due 2020
|
|
|
$
|
221.7
|
|
|
|
$
|
217.2
|
|
Credit facility, expires 2020
|
|
|
455.9
|
|
|
|
338.9
|
|
Senior term loan due 2021
|
|
|
332.6
|
|
|
|
—
|
|
5⅞% Senior notes due 2021
|
|
|
307.3
|
|
|
|
297.4
|
|
4½% Senior term loan due 2016
|
|
|
—
|
|
|
|
217.2
|
|
Other long-term debt
|
|
|
158.7
|
|
|
|
164.3
|
|
Debt issuance costs
|
|
|
(3.8
|
)
|
|
|
(3.6
|
)
|
|
|
|
1,472.4
|
|
|
|
1,231.4
|
|
Less: Current portion of other long-term debt
|
|
|
(93.7
|
)
|
|
|
(89.0
|
)
|
4½% Senior term loan due 2016
|
|
|
—
|
|
|
|
(217.2
|
)
|
Total indebtedness, less current portion
|
|
|
$
|
1,378.7
|
|
|
|
$
|
925.2
|
|
4. INVENTORIES
|
|
|
|
|
|
|
Inventories at June 30, 2016 and December 31, 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
December 31, 2015
|
Finished goods
|
|
|
$
|
759.7
|
|
|
|
$
|
523.1
|
Repair and replacement parts
|
|
|
560.2
|
|
|
|
515.4
|
Work in process
|
|
|
118.9
|
|
|
|
97.5
|
Raw materials
|
|
|
325.3
|
|
|
|
287.4
|
Inventories, net
|
|
|
$
|
1,764.1
|
|
|
|
$
|
1,423.4
|
5. ACCOUNTS RECEIVABLE SALES AGREEMENTS
At June 30, 2016 and December 31, 2015, 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 and Europe
to its 49% owned U.S., Canadian and European finance joint ventures. The
Company also had an accounts receivable sales agreement that permits the
sale, on an ongoing basis, of a portion of its wholesale receivables in
Brazil to its Brazilian finance joint venture. As of June 30, 2016 and
December 31, 2015, the cash received from receivables sold under the
U.S., Canadian, European and Brazilian accounts receivable sales
agreements was approximately $1.3 billion and $1.1 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 $4.7 million and $9.5 million during the three and
six months ended June 30, 2016, 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 $4.4
million and $9.4 million during the three and six months ended June 30,
2015, respectively.
The Company’s finance joint ventures in Brazil and Australia also
provide wholesale financing directly to the Company’s dealers. As of
June 30, 2016 and December 31, 2015, these finance joint ventures had
approximately $20.7 million and $17.7 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.
6. NET INCOME PER SHARE
A reconciliation of net income attributable to AGCO Corporation and
subsidiaries and weighted average common shares outstanding for purposes
of calculating basic and diluted net income per share for the three and
six months ended June 30, 2016 and 2015 is as follows:
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
$
|
50.3
|
|
|
|
$
|
107.1
|
|
|
|
$
|
58.1
|
|
|
|
$
|
137.2
|
Weighted average number of common shares outstanding
|
|
|
82.0
|
|
|
|
87.6
|
|
|
|
82.5
|
|
|
|
88.2
|
Basic net income per share attributable to AGCO Corporation and
subsidiaries
|
|
|
$
|
0.61
|
|
|
|
$
|
1.22
|
|
|
|
$
|
0.70
|
|
|
|
$
|
1.55
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
$
|
50.3
|
|
|
|
$
|
107.1
|
|
|
|
$
|
58.1
|
|
|
|
$
|
137.2
|
Weighted average number of common shares outstanding
|
|
|
82.0
|
|
|
|
87.6
|
|
|
|
82.5
|
|
|
|
88.2
|
Dilutive stock-settled appreciation rights, performance share awards
and restricted stock units
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net income
per share
|
|
|
82.1
|
|
|
|
87.7
|
|
|
|
82.6
|
|
|
|
88.3
|
Diluted net income per share attributable to AGCO Corporation and
subsidiaries
|
|
|
$
|
0.61
|
|
|
|
$
|
1.22
|
|
|
|
$
|
0.70
|
|
|
|
$
|
1.55
|
Share Repurchase Program
During the six months ended June 30, 2016, the Company entered into
accelerated share repurchase (“ASR”) agreements with a financial
institution to repurchase an aggregate of $120.0 million of shares of
the Company’s common stock. The Company received approximately 2,349,735
shares during the six months ended June 30, 2016 related to the ASRs.
All shares received under the ASRs were retired upon receipt, and the
excess of the purchase price over par value per share was recorded to
“Additional paid-in capital” within the Company’s Condensed Consolidated
Balance Sheets.
Of the $1,050.0 million in approved share repurchase programs, the
remaining amount authorized to be repurchased is approximately $123.9
million.
7. 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 (loss) 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 (loss) from operations for one segment may not
be comparable to another segment. Segment results for the three and six
months ended June 30, 2016 and 2015 are as follows:
Three Months Ended June 30,
|
|
|
North
America
|
|
|
South
America
|
|
|
Europe/Africa/
Middle East
|
|
|
Asia/
Pacific
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
498.9
|
|
|
|
$
|
203.4
|
|
|
|
$
|
1,185.3
|
|
|
|
$
|
108.0
|
|
|
|
$
|
1,995.6
|
Income from operations
|
|
|
23.6
|
|
|
|
—
|
|
|
|
143.3
|
|
|
|
2.2
|
|
|
|
169.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
563.1
|
|
|
|
$
|
280.3
|
|
|
|
$
|
1,137.0
|
|
|
|
$
|
88.9
|
|
|
|
$
|
2,069.3
|
Income (loss) from operations
|
|
|
58.0
|
|
|
|
15.2
|
|
|
|
134.6
|
|
|
|
(10.9
|
)
|
|
|
196.9
|
Six Months Ended June 30,
|
|
|
North
America
|
|
|
South
America
|
|
|
Europe/Africa/
Middle East
|
|
|
Asia/
Pacific
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
907.3
|
|
|
|
$
|
347.6
|
|
|
|
$
|
2,109.4
|
|
|
|
$
|
190.6
|
|
|
|
$
|
3,554.9
|
Income (loss) from operations
|
|
|
22.9
|
|
|
|
0.4
|
|
|
|
213.6
|
|
|
|
(0.7
|
)
|
|
|
236.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
1,035.6
|
|
|
|
$
|
529.3
|
|
|
|
$
|
2,045.1
|
|
|
|
$
|
161.9
|
|
|
|
$
|
3,771.9
|
Income (loss) from operations
|
|
|
75.5
|
|
|
|
28.3
|
|
|
|
215.1
|
|
|
|
(22.9
|
)
|
|
|
296.0
|
A reconciliation from the segment information to the consolidated
balances for income from operations is set forth below:
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Segment income from operations
|
|
|
$
|
169.1
|
|
|
|
$
|
196.9
|
|
|
|
$
|
236.2
|
|
|
|
$
|
296.0
|
|
Corporate expenses
|
|
|
(31.3
|
)
|
|
|
(27.4
|
)
|
|
|
(61.0
|
)
|
|
|
(56.4
|
)
|
Stock compensation expense
|
|
|
(5.7
|
)
|
|
|
(4.7
|
)
|
|
|
(10.8
|
)
|
|
|
(6.9
|
)
|
Restructuring expenses
|
|
|
(2.1
|
)
|
|
|
(4.0
|
)
|
|
|
(4.0
|
)
|
|
|
(14.6
|
)
|
Amortization of intangibles
|
|
|
(11.4
|
)
|
|
|
(10.9
|
)
|
|
|
(22.4
|
)
|
|
|
(21.4
|
)
|
Consolidated income from operations
|
|
|
$
|
118.6
|
|
|
|
$
|
149.9
|
|
|
|
$
|
138.0
|
|
|
|
$
|
196.7
|
|
RECONCILIATION OF CERTAIN NON-GAAP MEASURES AND
CURRENCY TRANSLATION IMPACTS TO NET SALES
This earnings release discloses adjusted income from operations,
adjusted net income and adjusted earnings per share, 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 adjusted income from operations,
net income and earnings per share to reported income from operations,
net income and earnings per share for the three and six months ended
June 30, 2016 and 2015 (in millions, except per share data):
|
|
|
Three Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Income From Operations
|
|
|
Net Income (1) |
|
|
Earnings Per Share (1) |
|
|
Income From Operations
|
|
|
Net Income (1) |
|
|
Earnings Per Share (1) |
As adjusted
|
|
|
$
|
120.7
|
|
|
|
$
|
83.6
|
|
|
|
$
|
1.02
|
|
|
|
$
|
153.9
|
|
|
|
$
|
110.0
|
|
|
|
$
|
1.25
|
Restructuring expenses (2) |
|
|
2.1
|
|
|
|
1.7
|
|
|
|
0.02
|
|
|
|
4.0
|
|
|
|
2.9
|
|
|
|
0.03
|
Deferred income tax adjustment (3) |
|
|
—
|
|
|
|
31.6
|
|
|
|
0.39
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
As reported
|
|
|
$
|
118.6
|
|
|
|
$
|
50.3
|
|
|
|
$
|
0.61
|
|
|
|
$
|
149.9
|
|
|
|
$
|
107.1
|
|
|
|
$
|
1.22
|
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring expenses recorded during the three
months ended June 30, 2016 related primarily to severance costs
associated with the Company’s rationalization of certain European, South
American and U.S. manufacturing operations and various administrative
offices. The restructuring expenses recorded during the three months
ended June 30, 2015 related primarily to severance costs associated with
the Company’s rationalization of certain European and South American
manufacturing operations.
(3) During the second quarter of 2016, the Company
recorded a non-cash adjustment to increase the valuation allowance on
the U.S. deferred income tax assets of approximately $31.6 million.
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Income From Operations
|
|
|
Net Income (1) |
|
|
Earnings Per Share (1) |
|
|
Income From Operations
|
|
|
Net Income (1) |
|
|
Earnings Per Share (1) |
As adjusted
|
|
|
$
|
142.0
|
|
|
|
$
|
92.6
|
|
|
|
$
|
1.12
|
|
|
|
$
|
211.3
|
|
|
|
$
|
147.9
|
|
|
|
$
|
1.67
|
Restructuring expenses (2) |
|
|
4.0
|
|
|
|
2.9
|
|
|
|
0.04
|
|
|
|
14.6
|
|
|
|
10.7
|
|
|
|
0.12
|
Deferred income tax adjustment (3) |
|
|
—
|
|
|
|
31.6
|
|
|
|
0.38
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
As reported
|
|
|
$
|
138.0
|
|
|
|
$
|
58.1
|
|
|
|
$
|
0.70
|
|
|
|
$
|
196.7
|
|
|
|
$
|
137.2
|
|
|
|
$
|
1.55
|
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring expenses recorded during the six months
ended June 30, 2016 related primarily to severance costs associated with
the Company’s rationalization of certain European, South American and
U.S. manufacturing operations and various administrative offices. The
restructuring expenses recorded during the six months ended June 30,
2015 related primarily to severance costs associated with the Company’s
rationalization of certain European and South American manufacturing
operations as well as various administrative offices located in Europe
and the United States.
(3) During the second quarter of 2016, the Company recorded a
non-cash adjustment to increase the valuation allowance on the U.S.
deferred income tax assets of approximately $31.6 million.
The following is a reconciliation of adjusted targeted earnings per
share to targeted earnings per share for the year ended December 31,
2016:
|
|
|
Earnings Per Share (1) |
As adjusted targeted
|
|
|
$
|
2.30
|
Restructuring expenses
|
|
|
|
0.06
|
Deferred income tax adjustment
|
|
|
|
0.39
|
As targeted
|
|
|
$
|
1.85
|
(1) Earnings per share amount is after tax.
This earnings release discloses the percentage change in regional net
sales due to the impact of currency translation. The following table
sets forth, for the three and six months ended June 30, 2016, the impact
to net sales of currency translation by geographical segment (in
millions, except percentages):
|
|
|
Three Months Ended June 30,
|
|
|
|
Change due to currency
translation
|
|
|
|
2016
|
|
|
2015
|
|
|
% change
from 2015
|
|
|
$
|
|
|
%
|
North America
|
|
|
$
|
498.9
|
|
|
|
$
|
563.1
|
|
|
|
(11.4
|
)%
|
|
|
$
|
(7.0
|
)
|
|
|
(1.2
|
)%
|
South America
|
|
|
203.4
|
|
|
|
280.3
|
|
|
|
(27.4
|
)%
|
|
|
(36.8
|
)
|
|
|
(13.1
|
)%
|
Europe/Africa/Middle East
|
|
|
1,185.3
|
|
|
|
1,137.0
|
|
|
|
4.2
|
%
|
|
|
(4.0
|
)
|
|
|
(0.4
|
)%
|
Asia/Pacific
|
|
|
108.0
|
|
|
|
88.9
|
|
|
|
21.5
|
%
|
|
|
(3.9
|
)
|
|
|
(4.4
|
)%
|
|
|
|
$
|
1,995.6
|
|
|
|
$
|
2,069.3
|
|
|
|
(3.6
|
)%
|
|
|
$
|
(51.7
|
)
|
|
|
(2.5
|
)%
|
|
|
|
Six Months Ended June 30,
|
|
|
|
Change due to currency
translation
|
|
|
|
2016
|
|
|
2015
|
|
|
% change
from 2015
|
|
|
$
|
|
|
%
|
North America
|
|
|
$
|
907.3
|
|
|
|
$
|
1,035.6
|
|
|
|
(12.4
|
)%
|
|
|
$
|
(16.1
|
)
|
|
|
(1.6
|
)%
|
South America
|
|
|
347.6
|
|
|
|
529.3
|
|
|
|
(34.3
|
)%
|
|
|
(88.8
|
)
|
|
|
(16.8
|
)%
|
Europe/Africa/Middle East
|
|
|
2,109.4
|
|
|
|
2,045.1
|
|
|
|
3.1
|
%
|
|
|
(26.5
|
)
|
|
|
(1.3
|
)%
|
Asia/Pacific
|
|
|
190.6
|
|
|
|
161.9
|
|
|
|
17.7
|
%
|
|
|
(8.5
|
)
|
|
|
(5.3
|
)%
|
|
|
|
$
|
3,554.9
|
|
|
|
$
|
3,771.9
|
|
|
|
(5.8
|
)%
|
|
|
$
|
(139.9
|
)
|
|
|
(3.7
|
)%
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160804005714/en/
Source: AGCO
AGCO
Greg Peterson, 770-232-8229
Director of Investor Relations
greg.peterson@agcocorp.com