DULUTH, Ga.--(BUSINESS WIRE)--Oct. 30, 2018--
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment and solutions, reported net sales
of approximately $2.2 billion for the third quarter of 2018, an increase
of approximately 11.5% compared to the third quarter of 2017. Reported
net income was $0.89 per share for the third quarter of 2018, and
adjusted net income, excluding restructuring expenses, was $0.91 per
share. These results compare to a reported net income of $0.76 per share
and adjusted net income, excluding restructuring expenses, of $0.79 per
share for the third quarter of 2017. Excluding unfavorable currency
translation impacts of approximately 5.9%, net sales in the third
quarter of 2018 increased approximately 17.4% compared to the third
quarter of 2017.
Net sales for the first nine months of 2018 were approximately $6.8
billion, an increase of approximately 17.0% compared to the same period
in 2017. Excluding favorable currency translation impacts of
approximately 1.8%, net sales for the first nine months of 2018
increased approximately 15.1% compared to the same period in 2017. For
the first nine months of 2018, reported net income was $2.33 per share,
and adjusted net income, excluding restructuring expenses and costs
associated with an early retirement of debt, was $2.58 per share. These
results compare to reported net income of $1.77 per share and adjusted
net income, excluding restructuring expenses and a non-cash expense
related to waived stock compensation, of $1.91 per share for the first
nine months of 2017.
Third Quarter Highlights
-
Reported regional sales results(1): North America
+12.8%, Europe/Middle East (“EME”) +14.4%, South America +2.8%,
Asia/Pacific/Africa (“APA”) +5.7%
-
Constant currency regional sales results(1)(2):
North America +13.8%, EME +16.5%, South America +33.1%, APA +9.9%
-
Regional operating margin performance: North America 6.0%, EME 9.3%,
South America 4.5%, APA 7.9%
-
Share repurchase program reduced outstanding shares by approximately
1.2 million during the first nine months of 2018
(1) As compared to third quarter 2017
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(2) Excludes currency translation impact. See
reconciliation in appendix.
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“AGCO’s solid operational performance across our regional business units
and constructive market developments are driving sales and earnings
growth,” stated Martin Richenhagen, AGCO’s Chairman, President and Chief
Executive Officer. “We delivered sales and operating income improvement
across all regions, with the strongest growth in North and South
America. Price increases and focused cost control efforts helped to
offset most of the trade-related material cost inflation. Equally
important, we have delivered operationally while making significant
progress on our long-term strategic growth drivers. Our new product
launches are resonating with customers, resulting in strong demand
across our targeted end-markets.”
Market Update
Industry Unit Retail Sales
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Nine months ended September 30, 2018
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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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3%
|
|
13%
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South America
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(1)%
|
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7%
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Western Europe(2) |
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1%
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17%
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(1) Excludes compact tractors.
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(2) Based on Company estimates.
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“Global crop production for 2018 is expected to be up modestly from
healthy levels in 2017,” continued Mr. Richenhagen. “Robust harvests in
North America are being offset by lower output in the European Union,
Argentina and Australia due to dry conditions in those areas. However,
increased grain consumption this year is expected to result in lower
year-end grain inventories. Global industry sales of farm equipment in
the first nine months of 2018 were mixed across AGCO’s key markets, with
future demand dependent on factors such as commodity price development
as well as government trade and farm support policy. North American
industry retail sales increased in the first nine months of 2018
compared to the same period in 2017 as replacement demand from row crop
farmers is stimulating equipment sales after years of weaker demand.
Overall, we project industry retail tractor sales to increase modestly
in 2018 with improved retail sales in the row crop segment and flat
retail sales of small tractors compared to last year. Industry retail
sales in Western Europe were up modestly in the first nine months of
2018, with improved economics for the dairy segment the primary
catalyst. However, industry sales slowed in the third quarter as the
impact of the hot, dry summer and the resulting weak wheat harvest
negatively impacted demand. Industry sales growth in the United Kingdom,
Scandinavia and Italy was partially offset by declines in Germany and
France. For the full year of 2018, industry demand in Western Europe is
expected to be approximately flat compared to 2017. Industry retail
sales in South America decreased during the first nine months of 2018.
Weak industry demand in Brazil in the first half of 2018 improved in the
third quarter after more positive terms for the government financing
program were announced. Industry sales declined in Argentina in response
to a weak first harvest and the decline of the Peso. Industry demand in
South America is expected to be relatively flat for the full year
compared to 2017. Higher retail sales in Brazil are expected to be
offset by lower sales in Argentina. Our long-term view remains very
optimistic for demand in the agricultural equipment industry. We expect
elevated grain demand driven by population growth and increased protein
consumption to result in favorable income levels for farmers.”
Regional Results
AGCO Regional Net Sales (in millions)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Three Months Ended September 30,
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2018
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2017
|
|
% change from 2017
|
|
% change from 2017 due to currency translation(1)
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|
% change from 2017 due to acquisitions(1)
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|
|
|
|
|
|
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|
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North America
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$
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545.5
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|
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$
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483.5
|
|
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12.8%
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(1.0)%
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3.2%
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South America
|
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281.1
|
|
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273.5
|
|
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2.8%
|
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(30.3)%
|
|
1.7%
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Europe/Middle East
|
|
1,164.5
|
|
|
1,017.7
|
|
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14.4%
|
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(2.1)%
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|
2.3%
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Asia/Pacific/Africa
|
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223.6
|
|
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211.6
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5.7%
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(4.3)%
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|
2.9%
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Total
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$
|
2,214.7
|
|
|
$
|
1,986.3
|
|
|
11.5%
|
|
(5.9)%
|
|
2.5%
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
% change from 2017
|
|
% change from 2017 due to currency translation(1)
|
|
% change from 2017 due to acquisitions(1)
|
North America
|
|
$
|
1,648.9
|
|
|
$
|
1,344.9
|
|
|
22.6%
|
|
0.4%
|
|
8.0%
|
South America
|
|
682.8
|
|
|
747.6
|
|
|
(8.7)%
|
|
(17.3)%
|
|
1.7%
|
Europe/Middle East
|
|
3,873.4
|
|
|
3,179.7
|
|
|
21.8%
|
|
6.8%
|
|
3.3%
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Asia/Pacific/Africa
|
|
554.7
|
|
|
506.9
|
|
|
9.4%
|
|
2.3%
|
|
2.5%
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Total
|
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$
|
6,759.8
|
|
|
$
|
5,779.1
|
|
|
17.0%
|
|
1.8%
|
|
4.1%
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(1) See appendix for additional disclosures
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North America
AGCO’s North American net sales increased 22.2% in the first nine months
of 2018 compared to the same period of 2017, excluding the positive
impact of currency translation. Precision Planting, which was acquired
in the fourth quarter of 2017, contributed sales of approximately $97.2
million in the first nine months of 2018. Excluding the impact of
acquisitions and currency translation, sales grew approximately 14.2%
compared to the first nine months of 2017. The largest increases were in
sprayers, high horsepower tractors and hay tools. Income from operations
for the first nine months of 2018 improved approximately $42.5 million
compared to the same period in 2017. The benefit of the Precision
Planting acquisition and higher sales and production volumes contributed
to the increase.
South America
Net sales in the South American region increased 8.6% in the first nine
months of 2018 compared to the first nine months of 2017, excluding the
impact of unfavorable currency translation. Sales growth in Brazil was
partially offset by declines in Argentina. Income from operations
increased in the third quarter, but dropped approximately $35.2 million
for the first nine months of 2018 compared to the same period in 2017.
The impacts of material cost inflation and costs associated with
transitioning to new products with tier 3 emission technology
contributed to the decrease in income from operations.
Europe/Middle East
Europe/Middle East net sales increased 15.0% in the first nine months of
2018 compared to the same period in 2017, excluding favorable currency
translation impacts. Acquisitions benefited sales by approximately 3.3%
during the first nine months compared to the same period last year.
Sales growth was strongest in Germany, the United Kingdom and France.
Income from operations improved approximately $85.4 million for the
first nine months of 2018, compared to the same period in 2017, due to
the benefit of higher sales and margin improvement partially offset by
higher engineering costs.
Asia/Pacific/Africa
Net sales in AGCO’s Asia/Pacific/Africa region increased 7.1%, excluding
the positive impact of currency translation, in the first nine months of
2018 compared to the same period in 2017. Higher sales in Australia
produced most of the increase. Acquisitions benefited sales by
approximately 2.5% during the first nine months of 2018 compared to the
same period last year. Income from operations improved approximately
$3.7 million in the first nine months of 2018, compared to the same
period in 2017, due to higher sales and production levels.
Outlook
AGCO’s net sales for 2018 are expected to reach $9.3 billion, reflecting
improved sales volumes, positive pricing as well as acquisition and
foreign exchange impacts. Gross and operating margins are expected to
improve from 2017 levels due to higher net sales as well as the benefits
resulting from the Company’s cost reduction initiatives, partially
offset by increased engineering expenses and higher material costs.
Based on these assumptions, 2018 earnings per share are targeted at
approximately $3.35 on a reported basis, or approximately $3.75 on an
adjusted basis, which excludes restructuring expenses and costs
associated with debt retirement.
* * * * *
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Tuesday, October 30, 2018.
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.
-
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 40% to 50% of the retail sales of our tractors and combines in
the markets where the joint ventures operate. Any difficulty by
Rabobank to continue to provide that financing, or any business
decision by Rabobank as the controlling member not to fund the
business or particular aspects of it (for example, a particular
country or region), would require the joint ventures to find other
sources of financing (which may be difficult to obtain), or us to find
another source of retail financing for our customers, or our customers
would be required to utilize other retail financing providers. As a
result of the recent economic downturn, financing for capital
equipment purchases generally has become more difficult in certain
regions and in some cases, can be expensive to obtain. To the extent
that financing is not available or available only at unattractive
prices, our sales would be negatively impacted.
-
Both AGCO and our finance joint ventures have substantial 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.
-
We have experienced substantial and sustained volatility with respect
to currency exchange rate and interest rate changes, which can
adversely affect our reported results of operations and the
competitiveness of our products.
-
Our success depends on the introduction of new products, particularly
engines that comply with emission requirements, 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.
-
Our business increasingly is subject to regulations relating to
privacy and data protection, and if we violate any of those
regulations or otherwise are the victim of a cyber attack, we could
incur significant losses and liability.
-
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.
-
We have a substantial amount of indebtedness, and, as a result, we are
subject to certain restrictive covenants and payment obligations that
may adversely affect our ability to operate and expand our business.
Further information concerning these and other factors is included in
AGCO’s filings with the Securities and Exchange Commission, including
its Form 10-K for the year ended December 31, 2017. 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 agriculture equipment and solutions that 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. Founded in 1990, AGCO is
headquartered in Duluth, GA, USA. In 2017, AGCO had net sales of $8.3
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)
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
ASSETS
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
292.7
|
|
|
$
|
367.7
|
|
Accounts and notes receivable, net
|
|
992.7
|
|
|
1,019.4
|
|
Inventories, net
|
|
2,101.8
|
|
|
1,872.9
|
|
Other current assets
|
|
401.8
|
|
|
367.7
|
|
Total current assets
|
|
3,789.0
|
|
|
3,627.7
|
|
Property, plant and equipment, net
|
|
1,367.8
|
|
|
1,485.3
|
|
Investment in affiliates
|
|
419.2
|
|
|
409.0
|
|
Deferred tax assets
|
|
108.7
|
|
|
112.2
|
|
Other assets
|
|
147.2
|
|
|
147.1
|
|
Intangible assets, net
|
|
590.8
|
|
|
649.0
|
|
Goodwill
|
|
1,494.4
|
|
|
1,541.4
|
|
Total assets
|
|
$
|
7,917.1
|
|
|
$
|
7,971.7
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
5.5
|
|
|
$
|
24.8
|
|
Short-term borrowings
|
|
181.3
|
|
|
90.8
|
|
Accounts payable
|
|
855.3
|
|
|
917.5
|
|
Accrued expenses
|
|
1,425.5
|
|
|
1,407.9
|
|
Other current liabilities
|
|
191.5
|
|
|
209.6
|
|
Total current liabilities
|
|
2,659.1
|
|
|
2,650.6
|
|
Long-term debt, less current portion and debt issuance costs
|
|
1,699.3
|
|
|
1,618.1
|
|
Pensions and postretirement health care benefits
|
|
223.7
|
|
|
247.3
|
|
Deferred tax liabilities
|
|
121.0
|
|
|
130.5
|
|
Other noncurrent liabilities
|
|
245.1
|
|
|
229.9
|
|
Total liabilities
|
|
4,948.2
|
|
|
4,876.4
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
AGCO Corporation stockholders’ equity:
|
|
|
|
|
Common stock
|
|
0.8
|
|
|
0.8
|
|
Additional paid-in capital
|
|
81.8
|
|
|
136.6
|
|
Retained earnings
|
|
4,405.4
|
|
|
4,253.8
|
|
Accumulated other comprehensive loss
|
|
(1,581.9
|
)
|
|
(1,361.6
|
)
|
Total AGCO Corporation stockholders’ equity
|
|
2,906.1
|
|
|
3,029.6
|
|
Noncontrolling interests
|
|
62.8
|
|
|
65.7
|
|
Total stockholders’ equity
|
|
2,968.9
|
|
|
3,095.3
|
|
Total liabilities and stockholders’ equity
|
|
$
|
7,917.1
|
|
|
$
|
7,971.7
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in millions, except per share data)
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
2018
|
|
2017
|
Net sales
|
|
$
|
2,214.7
|
|
|
$
|
1,986.3
|
|
Cost of goods sold
|
|
1,741.0
|
|
|
1,557.7
|
|
Gross profit
|
|
473.7
|
|
|
428.6
|
|
Selling, general and administrative expenses
|
|
260.5
|
|
|
233.2
|
|
Engineering expenses
|
|
83.3
|
|
|
80.1
|
|
Restructuring expenses
|
|
1.5
|
|
|
3.0
|
|
Amortization of intangibles
|
|
15.3
|
|
|
14.3
|
|
Bad debt expense
|
|
1.8
|
|
|
0.9
|
|
Income from operations
|
|
111.3
|
|
|
97.1
|
|
Interest expense, net
|
|
7.0
|
|
|
11.6
|
|
Other expense, net
|
|
19.1
|
|
|
18.5
|
|
Income before income taxes and equity in net earnings of affiliates
|
|
85.2
|
|
|
67.0
|
|
Income tax provision
|
|
23.9
|
|
|
16.9
|
|
Income before equity in net earnings of affiliates
|
|
61.3
|
|
|
50.1
|
|
Equity in net earnings of affiliates
|
|
9.4
|
|
|
10.7
|
|
Net income
|
|
70.7
|
|
|
60.8
|
|
Net loss (income) attributable to noncontrolling interests
|
|
0.4
|
|
|
(0.1
|
)
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
71.1
|
|
|
$
|
60.7
|
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
Basic
|
|
$
|
0.90
|
|
|
$
|
0.76
|
|
Diluted
|
|
$
|
0.89
|
|
|
$
|
0.76
|
|
Cash dividends declared and paid per common share
|
|
$
|
0.15
|
|
|
$
|
0.14
|
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
Basic
|
|
78.7
|
|
79.5
|
Diluted
|
|
79.7
|
|
80.2
|
|
|
|
|
|
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)
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
Net sales
|
|
$
|
6,759.8
|
|
|
$
|
5,779.1
|
|
Cost of goods sold
|
|
5,301.8
|
|
|
4,544.8
|
|
Gross profit
|
|
1,458.0
|
|
|
1,234.3
|
|
Selling, general and administrative expenses
|
|
796.9
|
|
|
690.5
|
|
Engineering expenses
|
|
267.2
|
|
|
230.0
|
|
Restructuring expenses
|
|
10.1
|
|
|
8.5
|
|
Amortization of intangibles
|
|
49.2
|
|
|
41.5
|
|
Bad debt expense
|
|
4.7
|
|
|
2.7
|
|
Income from operations
|
|
329.9
|
|
|
261.1
|
|
Interest expense, net
|
|
38.5
|
|
|
33.6
|
|
Other expense, net
|
|
57.8
|
|
|
49.2
|
|
Income before income taxes and equity in net earnings of affiliates
|
|
233.6
|
|
|
178.3
|
|
Income tax provision
|
|
73.8
|
|
|
64.9
|
|
Income before equity in net earnings of affiliates
|
|
159.8
|
|
|
113.4
|
|
Equity in net earnings of affiliates
|
|
26.3
|
|
|
30.8
|
|
Net income
|
|
186.1
|
|
|
144.2
|
|
Net loss (income) attributable to noncontrolling interests
|
|
0.7
|
|
|
(2.1
|
)
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
186.8
|
|
|
$
|
142.1
|
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
Basic
|
|
$
|
2.36
|
|
|
$
|
1.79
|
|
Diluted
|
|
$
|
2.33
|
|
|
$
|
1.77
|
|
Cash dividends declared and paid per common share
|
|
$
|
0.45
|
|
|
$
|
0.42
|
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
Basic
|
|
79.2
|
|
|
79.5
|
|
Diluted
|
|
80.1
|
|
|
80.1
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
AGCO CORPORATION AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited and in millions)
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
186.1
|
|
|
$
|
144.2
|
|
Adjustments to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
Depreciation
|
|
170.1
|
|
|
165.2
|
|
Amortization of intangibles
|
|
49.2
|
|
|
41.5
|
|
Stock compensation expense
|
|
33.0
|
|
|
31.3
|
|
Equity in net earnings of affiliates, net of cash received
|
|
(21.8
|
)
|
|
(15.4
|
)
|
Deferred income tax (benefit) provision
|
|
(17.7
|
)
|
|
0.7
|
|
Other
|
|
(1.4
|
)
|
|
2.3
|
|
Changes in operating assets and liabilities, net of effects from
purchase of businesses:
|
|
|
|
|
Accounts and notes receivable, net
|
|
(59.8
|
)
|
|
(81.2
|
)
|
Inventories, net
|
|
(398.0
|
)
|
|
(424.9
|
)
|
Other current and noncurrent assets
|
|
(67.3
|
)
|
|
(92.4
|
)
|
Accounts payable
|
|
(18.4
|
)
|
|
100.0
|
|
Accrued expenses
|
|
55.9
|
|
|
67.9
|
|
Other current and noncurrent liabilities
|
|
71.2
|
|
|
31.6
|
|
Total adjustments
|
|
(205.0
|
)
|
|
(173.4
|
)
|
Net cash used in operating activities
|
|
(18.9
|
)
|
|
(29.2
|
)
|
Cash flows from investing activities:
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(138.5
|
)
|
|
(139.4
|
)
|
Proceeds from sale of property, plant and equipment
|
|
2.6
|
|
|
3.3
|
|
Investment in unconsolidated affiliates
|
|
(5.8
|
)
|
|
(0.8
|
)
|
Purchase of businesses, net of cash acquired
|
|
—
|
|
|
(188.4
|
)
|
Other
|
|
0.4
|
|
|
—
|
|
Net cash used in investing activities
|
|
(141.3
|
)
|
|
(325.3
|
)
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from indebtedness, net
|
|
231.3
|
|
|
250.4
|
|
Purchases and retirement of common stock
|
|
(84.3
|
)
|
|
—
|
|
Payment of dividends to stockholders
|
|
(35.6
|
)
|
|
(33.4
|
)
|
Payment of minimum tax withholdings on stock compensation
|
|
(3.7
|
)
|
|
(6.7
|
)
|
Payment of debt issuance costs
|
|
(1.6
|
)
|
|
—
|
|
Investment by or distribution to noncontrolling interests, net
|
|
0.8
|
|
|
0.5
|
|
Net cash provided by financing activities
|
|
106.9
|
|
|
210.8
|
|
Effects of exchange rate changes on cash and cash equivalents
|
|
(21.7
|
)
|
|
26.7
|
|
Decrease in cash and cash equivalents
|
|
(75.0
|
)
|
|
(117.0
|
)
|
Cash and cash equivalents, beginning of period
|
|
367.7
|
|
|
429.7
|
|
Cash and cash equivalents, end of period
|
|
$
|
292.7
|
|
|
$
|
312.7
|
|
|
|
|
|
|
|
|
|
|
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 September 30,
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cost of goods sold
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
|
$
|
2.7
|
|
|
$
|
2.4
|
Selling, general and administrative expenses
|
|
9.7
|
|
|
7.9
|
|
|
30.6
|
|
|
29.1
|
Total stock compensation expense
|
|
$
|
10.5
|
|
|
$
|
8.7
|
|
|
$
|
33.3
|
|
|
$
|
31.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. RESTRUCTURING EXPENSES
From 2014 through 2018, the Company announced and initiated several
actions to rationalize employee headcount at various manufacturing
facilities and administrative offices located in Europe, South America,
China and the United States in order to reduce costs in response to
softening global market demand and lower production volumes. The
aggregate headcount reduction was approximately 3,370 employees between
2014 and 2017. The Company had approximately $10.9 million of severance
and related costs accrued as of December 31, 2017. During the three and
nine months ended September 30, 2018, the Company recorded an additional
$1.5 million and $10.1 million, respectively, of severance and related
costs associated with further rationalizations associated with the
termination of approximately 460 employees, and paid approximately $10.4
million of severance and associated costs. The $10.1 million of costs
incurred during the nine months ended September 30, 2018 included a $0.3
million write-down of property, plant and equipment. The remaining $9.2
million of accrued severance and other related costs as of September 30,
2018, inclusive of approximately $1.1 million of negative foreign
currency translation impacts, are expected to be paid primarily during
2018.
3. INDEBTEDNESS
Long-term debt at September 30, 2018 and December 31, 2017 consisted of
the following:
|
|
September 30, 2018
|
|
December 31, 2017
|
1.056% Senior term loan due 2020
|
|
$
|
231.6
|
|
|
$
|
239.8
|
|
Credit facility, expires 2020
|
|
390.3
|
|
|
471.2
|
|
Senior term loan due 2021
|
|
115.8
|
|
|
119.9
|
|
5⅞% Senior notes due 2021
|
|
115.8
|
|
|
305.3
|
|
Senior term loans due between 2019 and 2028
|
|
825.7
|
|
|
449.7
|
|
Other long-term debt
|
|
29.4
|
|
|
61.0
|
|
Debt issuance costs
|
|
(3.8
|
)
|
|
(4.0
|
)
|
|
|
1,704.8
|
|
|
1,642.9
|
|
Less: Current portion of other long-term debt
|
|
(5.5
|
)
|
|
(24.8
|
)
|
Total long-debt, less current portion
|
|
$
|
1,699.3
|
|
|
$
|
1,618.1
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018 and December 31, 2017, the Company had
short-term borrowings due within one year of approximately $181.3
million and $90.8 million, respectively.
4. INVENTORIES
Inventories at September 30, 2018 and December 31, 2017 were as follows:
|
|
September 30, 2018
|
|
December 31, 2017
|
Finished goods
|
|
$
|
773.4
|
|
|
$
|
684.1
|
Repair and replacement parts
|
|
601.2
|
|
|
605.9
|
Work in process
|
|
250.9
|
|
|
178.7
|
Raw materials
|
|
476.3
|
|
|
404.2
|
Inventories, net
|
|
$
|
2,101.8
|
|
|
$
|
1,872.9
|
|
|
|
|
|
|
|
|
5. 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 both September 30, 2018 and
December 31, 2017, the cash received from receivables sold under the
U.S., Canadian, European and Brazilian accounts receivable sales
agreements was approximately $1.3 billion.
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 $6.7 million and $24.2 million, respectively, during
the three and nine months ended September 30, 2018. 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
$10.3 million and $27.5 million, respectively, during the three and nine
months ended September 30, 2017.
The Company’s finance joint ventures in Europe, Brazil and Australia
also provide wholesale financing directly to the Company’s dealers. As
of September 30, 2018 and December 31, 2017, these finance joint
ventures had approximately $50.1 million and $41.6 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
nine months ended September 30, 2018 and 2017 is as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
71.1
|
|
|
$
|
60.7
|
|
|
$
|
186.8
|
|
|
$
|
142.1
|
Weighted average number of common shares outstanding
|
|
78.7
|
|
|
79.5
|
|
|
79.2
|
|
|
79.5
|
Basic net income per share attributable to AGCO Corporation and
subsidiaries
|
|
$
|
0.90
|
|
|
$
|
0.76
|
|
|
$
|
2.36
|
|
|
$
|
1.79
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
71.1
|
|
|
$
|
60.7
|
|
|
$
|
186.8
|
|
|
$
|
142.1
|
Weighted average number of common shares outstanding
|
|
78.7
|
|
|
79.5
|
|
|
79.2
|
|
|
79.5
|
Dilutive stock-settled appreciation rights, performance share awards
and restricted stock units
|
|
1.0
|
|
|
0.7
|
|
|
0.9
|
|
|
0.6
|
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net income
per share
|
|
79.7
|
|
|
80.2
|
|
|
80.1
|
|
|
80.1
|
Diluted net income per share attributable to AGCO Corporation and
subsidiaries
|
|
$
|
0.89
|
|
|
$
|
0.76
|
|
|
$
|
2.33
|
|
|
$
|
1.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 and nine months ended
September 30, 2018 and 2017 are as follows:
Three Months Ended September 30,
|
|
North
America
|
|
South
America
|
|
Europe/
Middle East
|
|
Asia/
Pacific/Africa
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
545.5
|
|
|
$
|
281.1
|
|
|
$
|
1,164.5
|
|
|
$
|
223.6
|
|
|
$
|
2,214.7
|
Income from operations
|
|
32.5
|
|
|
12.6
|
|
|
108.6
|
|
|
17.6
|
|
|
171.3
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
483.5
|
|
|
$
|
273.5
|
|
|
$
|
1,017.7
|
|
|
$
|
211.6
|
|
|
$
|
1,986.3
|
Income from operations
|
|
27.8
|
|
|
9.3
|
|
|
96.9
|
|
|
15.4
|
|
|
149.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
North
America
|
|
South
America
|
|
Europe/
Middle East
|
|
Asia/
Pacific/Africa
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,648.9
|
|
|
$
|
682.8
|
|
|
$
|
3,873.4
|
|
|
$
|
554.7
|
|
|
$
|
6,759.8
|
Income (loss) from operations
|
|
96.9
|
|
|
(20.7
|
)
|
|
416.1
|
|
|
26.9
|
|
|
519.2
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,344.9
|
|
|
$
|
747.6
|
|
|
$
|
3,179.7
|
|
|
$
|
506.9
|
|
|
$
|
5,779.1
|
Income from operations
|
|
54.4
|
|
|
14.5
|
|
|
330.7
|
|
|
23.2
|
|
|
422.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation from the segment information to the consolidated
balances for income from operations is set forth below:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Segment income from operations
|
|
$
|
171.3
|
|
|
$
|
149.4
|
|
|
$
|
519.2
|
|
|
$
|
422.8
|
|
Corporate expenses
|
|
(33.5
|
)
|
|
(27.1
|
)
|
|
(99.4
|
)
|
|
(82.6
|
)
|
Stock compensation expense
|
|
(9.7
|
)
|
|
(7.9
|
)
|
|
(30.6
|
)
|
|
(29.1
|
)
|
Restructuring expenses
|
|
(1.5
|
)
|
|
(3.0
|
)
|
|
(10.1
|
)
|
|
(8.5
|
)
|
Amortization of intangibles
|
|
(15.3
|
)
|
|
(14.3
|
)
|
|
(49.2
|
)
|
|
(41.5
|
)
|
Consolidated income from operations
|
|
$
|
111.3
|
|
|
$
|
97.1
|
|
|
$
|
329.9
|
|
|
$
|
261.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted net income and adjusted net income 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 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 and nine months ended
September 30, 2018 and 2017 (in millions, except per share data):
|
|
Three Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
|
Income From Operations
|
|
Net Income(1) |
|
Net Income Per Share(1)(3)
|
|
Income From Operations
|
|
Net Income(1) |
|
Net Income Per Share(1)
|
As reported
|
|
$
|
111.3
|
|
|
$
|
71.1
|
|
|
$
|
0.89
|
|
|
$
|
97.1
|
|
|
$
|
60.7
|
|
|
$
|
0.76
|
Restructuring expenses(2) |
|
1.5
|
|
|
1.1
|
|
|
0.01
|
|
|
3.0
|
|
|
2.3
|
|
|
0.03
|
As adjusted
|
|
$
|
112.8
|
|
|
$
|
72.2
|
|
|
$
|
0.91
|
|
|
$
|
100.1
|
|
|
$
|
63.0
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Net income and net income per share amounts are after tax.
|
(2) |
The restructuring expenses recorded during the three months ended
September 30, 2018 and 2017 related primarily to severance costs
associated with the Company’s rationalization of certain U.S.,
European, Chinese and South American manufacturing operations and
various administrative offices.
|
(3) |
Rounding may impact summation of amounts.
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
|
Income From Operations
|
|
Net Income(1) |
|
Net Income Per Share(1)
|
|
Income From Operations
|
|
Net Income(1) |
|
Net Income Per Share(1)
|
As reported
|
|
$
|
329.9
|
|
|
$
|
186.8
|
|
|
$
|
2.33
|
|
|
$
|
261.1
|
|
|
$
|
142.1
|
|
|
$
|
1.77
|
Restructuring expenses(2) |
|
10.1
|
|
|
7.3
|
|
|
0.09
|
|
|
8.5
|
|
|
6.4
|
|
|
0.08
|
Extinguishment of debt(3) |
|
—
|
|
|
12.7
|
|
|
0.16
|
|
|
—
|
|
|
—
|
|
|
—
|
Non-cash expense related to waived stock compensation(4) |
|
—
|
|
|
—
|
|
|
—
|
|
|
4.8
|
|
|
4.8
|
|
|
0.06
|
As adjusted
|
|
$
|
340.0
|
|
|
$
|
206.8
|
|
|
$
|
2.58
|
|
|
$
|
274.4
|
|
|
$
|
153.3
|
|
|
$
|
1.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Net income and net income per share amounts are after tax.
|
(2) |
The restructuring expenses recorded during the nine months ended
September 30, 2018 and 2017 related primarily to severance costs
associated with the Company’s rationalization of certain U.S.,
European, Chinese and South American manufacturing operations and
various administrative offices.
|
(3) |
The Company repurchased approximately $185.9 million of its
outstanding 5 7/8% senior notes during the three months ended June
30, 2018. The repurchase resulted in a loss on extinguishment of
debt of approximately $15.7 million, including associated fees,
offset by approximately $3.0 million of accelerated amortization
of the deferred gain related to a terminated interest rate swap
instrument associated with the senior notes.
|
(4) |
The Company recorded approximately $4.8 million of accelerated stock
compensation expense during the three months ended March 31, 2017
associated with a waived award declined by the Company’s CEO.
|
|
|
The following is a reconciliation of targeted net income per share to
adjusted targeted net income per share for the year ended December 31,
2018:
|
|
Net Income Per Share(1) |
As targeted
|
|
$
|
3.35
|
Restructuring expenses
|
|
|
0.09
|
Extinguishment of debt
|
|
|
0.31
|
As adjusted targeted(2) |
|
$
|
3.75
|
|
|
|
|
(1) |
Net income per share amount is after tax.
|
(2) |
The above reconciliation reflects adjustments to full year 2018
targeted net income per share based upon restructuring expenses
and other adjustments incurred during the nine months ended
September 30, 2018. Full year restructuring expenses could differ
based on future restructuring activity. Full year extinguishment
of debt includes the extinguishment of the remaining outstanding 5
7/8% senior notes, as well as further debt refinancing actions
during the fourth quarter of 2018.
|
|
|
The following tables set forth, for the three and nine months ended
September 30, 2018, the impact to net sales of currency translation and
recent acquisitions by geographical segment (in millions, except
percentages):
|
|
Three Months Ended September 30,
|
|
|
Change due to currency translation
|
|
Change due to acquisitions
|
|
|
2018
|
|
2017
|
|
% change from 2017
|
|
$
|
|
%
|
|
$
|
|
%
|
North America
|
|
$
|
545.5
|
|
|
$
|
483.5
|
|
|
12.8
|
%
|
|
$
|
(4.9
|
)
|
|
(1.0
|
)%
|
|
$
|
15.4
|
|
|
3.2
|
%
|
South America
|
|
281.1
|
|
|
273.5
|
|
|
2.8
|
%
|
|
(83.0
|
)
|
|
(30.3
|
)%
|
|
4.7
|
|
|
1.7
|
%
|
Europe/Middle East
|
|
1,164.5
|
|
|
1,017.7
|
|
|
14.4
|
%
|
|
(21.1
|
)
|
|
(2.1
|
)%
|
|
23.2
|
|
|
2.3
|
%
|
Asia/Pacific/Africa
|
|
223.6
|
|
|
211.6
|
|
|
5.7
|
%
|
|
(9.0
|
)
|
|
(4.3
|
)%
|
|
6.1
|
|
|
2.9
|
%
|
|
|
$
|
2,214.7
|
|
|
$
|
1,986.3
|
|
|
11.5
|
%
|
|
$
|
(118.0
|
)
|
|
(5.9
|
)%
|
|
$
|
49.4
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change due to currency translation
|
|
Change due to acquisitions
|
|
|
2018
|
|
2017
|
|
% change from 2017
|
|
$
|
|
%
|
|
$
|
|
%
|
North America
|
|
$
|
1,648.9
|
|
|
$
|
1,344.9
|
|
|
22.6
|
%
|
|
$
|
5.6
|
|
|
0.4
|
%
|
|
$
|
107.7
|
|
|
8.0
|
%
|
South America
|
|
682.8
|
|
|
747.6
|
|
|
(8.7
|
)%
|
|
(129.3
|
)
|
|
(17.3
|
)%
|
|
12.6
|
|
|
1.7
|
%
|
Europe/Middle East
|
|
3,873.4
|
|
|
3,179.7
|
|
|
21.8
|
%
|
|
217.6
|
|
|
6.8
|
%
|
|
104.1
|
|
|
3.3
|
%
|
Asia/Pacific/Africa
|
|
554.7
|
|
|
506.9
|
|
|
9.4
|
%
|
|
11.7
|
|
|
2.3
|
%
|
|
12.6
|
|
|
2.5
|
%
|
|
|
$
|
6,759.8
|
|
|
$
|
5,779.1
|
|
|
17.0
|
%
|
|
$
|
105.6
|
|
|
1.8
|
%
|
|
$
|
237.0
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20181030005509/en/
Source: AGCO
AGCO Greg Peterson, 770-232-8229 Vice President, Investor
Relations greg.peterson@agcocorp.com
|