Third Quarter EPS of $0.77 on Sales of $1.7 Billion
DULUTH, Ga.--(BUSINESS WIRE)--Oct. 28, 2015--
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment, reported net sales of
approximately $1.7 billion for the third quarter of 2015, a decrease of
approximately 19.4% compared to net sales of approximately $2.2 billion
for the third quarter of 2014. Reported net income was $0.77 per share
for the third quarter of 2015. These results compare to reported net
income of $0.69 per share and adjusted net income, excluding
restructuring and other infrequent expenses, of $0.71 per share for the
third quarter of 2014. Excluding unfavorable currency translation
impacts of approximately 15.0%, net sales in the third quarter of 2015
decreased approximately 4.4% compared to the third quarter of 2014.
Net sales for the first nine months of 2015 were approximately $5.5
billion, a decrease of approximately 23.9% compared to the same period
in 2014. Excluding the unfavorable impact of currency translation of
approximately 13.5%, net sales for the first nine months of 2015
decreased approximately 10.4% compared to the same period in 2014. For
the first nine months of 2015, reported net income was $2.33 per share
and adjusted net income, excluding restructuring and other infrequent
expenses, was $2.45 per share. These results compare to reported net
income of $3.50 per share and adjusted net income, excluding
restructuring and other infrequent expenses, of $3.52 per share for the
first nine months of 2014.
Third Quarter Highlights
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Regional sales results(1): North America (3.7)%,
Europe/Africa/Middle East (“EAME”) 3.7%, South America (23.8)%,
Asia/Pacific (“APAC”) (3.8)%
-
Regional operating margin performance: EAME 7.7%, North America 8.3%,
South America 4.5%, APAC (2.2)%
-
Inventory at September 30, 2015: approximately $305 million lower than
September 30, 2014 on a constant currency basis(1)
-
EPS positively impacted by a lower effective tax rate versus third
quarter 2014 (24.9% vs 40.4%)
-
Share repurchase program reduced outstanding shares by 3.5 million
during the first nine months of 2015
-
Full-year 2015 earnings per share guidance increased to approximately
$3.20 (from approximately $3.10)
(1)Excludes currency translation impact. See
reconciliation of Non-GAAP measures in appendix.
“Our third quarter was highlighted by focused operational performance
with cost control and inventory management efforts helping to lessen the
impacts of weak global industry demand and currency pressures,” stated
Martin Richenhagen, AGCO’s Chairman, President and Chief Executive
Officer. “Our emphasis during these challenging times is on operational
execution through efforts like AGCO Production Systems and new product
introductions like our new Valtra T-series and N-series tractors. In
addition, AGCO recently launched our Fuse® Connected
Services, a suite of technology-enabled services designed to help
growers improve overall farm efficiency by reducing maintenance and
input costs, improving yields and enabling more informed business
decisions. We will continue to invest in new technologies, product
innovation and new precision agriculture service capabilities – both
within AGCO, and by partnering with leading technology companies.”
Market Update
Industry Unit Retail Sales
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Tractors
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Combines
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Change from
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Change from
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Nine months ended September 30, 2015
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Prior Year Period
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Prior Year Period
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North America(1) |
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(11)%
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(33)%
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South America
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(24)%
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(35)%
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Western Europe
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(8)%
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(11)%
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(1)Excludes compact tractors.
“With much of the strong U.S. harvest already in the grain bins, and
with healthy crop production across Europe and South America, we are
experiencing the third consecutive year of robust global harvests,”
continued Mr. Richenhagen. “Elevated crop production is pressuring grain
prices and farm income, resulting in softer demand for farm equipment.
In North America, industry sales have progressively declined through the
first nine months of the year. Weaker demand from the large farm sector
resulted in significant declines in industry retail sales of
high-horsepower tractors, combines and sprayers. More stable sales of
hay and forage equipment and small tractors, due to more normal
conditions in the livestock sector, has provided a partial offset to the
decline in large agricultural equipment. Industry retail sales in
Western Europe declined more modestly from 2014 levels. Margins for
dairy producers remained weak, and lower commodity prices kept market
demand soft from the arable farming segment. Declines were most
pronounced in the United Kingdom, Finland and Germany. Industry demand
in South America has weakened throughout 2015. The lower sales were
driven primarily by significant declines in Brazil due to weakness in
the general economy, changes to the government financing program and
softness in the sugar sector. Longer term, we are optimistic about the
fundamentals supporting commodity prices and farm income as well as
healthy growth in our industry.”
Regional Results
AGCO Regional Net Sales (in millions)
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% change from
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2014 due to
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% change
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currency
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Three Months Ended September 30,
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2015
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2014
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from 2014
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translation(1)
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North America
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$
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494.9
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$
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531.3
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(6.9)%
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(3.1)%
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South America
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231.4
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455.0
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(49.1)%
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(25.3)%
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Europe/Africa/Middle East
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894.3
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1,026.0
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(12.8)%
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(16.6)%
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Asia/Pacific
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115.8
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142.5
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(18.7)%
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(15.0)%
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Total
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$
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1,736.4
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$
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2,154.8
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(19.4)%
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(15.0)%
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% change from
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2014 due to
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% change
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currency
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Nine Months Ended September 30,
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2015
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2014
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from 2014
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translation(1)
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North America
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$
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1,530.5
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$
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1,865.0
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(17.9)%
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(2.3)%
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South America
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760.7
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1,248.8
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(39.1)%
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(21.3)%
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Europe/Africa/Middle East
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2,939.4
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3,783.8
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(22.3)%
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(16.5)%
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Asia/Pacific
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277.7
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340.9
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(18.5)%
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(12.6)%
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Total
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$
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5,508.3
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$
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7,238.5
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(23.9)%
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(13.5)%
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(1) See Footnotes for additional disclosures
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North America
Net sales in the North American region decreased 15.7% in the first nine
months of 2015 compared to the same period of 2014, excluding the
negative impact of currency translation. Inventory reduction efforts and
weaker industry demand, particularly from the row crop sector,
contributed to lower sales. Declines in sales of sprayers, combines and
implements were partially offset by modest growth in sales of protein
production products. Lower sales and production volumes and a weaker
sales mix contributed to a reduction in income from operations of
approximately $71.9 million for the first nine months of 2015 compared
to the same period in 2014.
South America
AGCO’s South American net sales decreased 17.7% in the first nine months
of 2015 compared to the first nine months of 2014, excluding the impact
of unfavorable currency translation. Sales declines in Brazil were
partially offset by sales growth in Argentina and other South American
markets. Income from operations decreased approximately $55.4 million
for the first nine months of 2015 compared to the same period in 2014
due to lower sales and production volumes, the negative impact of
currency translation, and a weaker mix of sales.
Europe/Africa/Middle East
Excluding unfavorable currency translation impacts, net sales in EAME
declined 5.8% in the first nine months of 2015 compared to the same
period in 2014. Sales declines were the largest in Germany, Scandinavia
and Russia. Income from operations decreased approximately $82.0 million
for the first nine months of 2015, compared to the same period in 2014,
due to lower sales and production volumes as well as unfavorable
currency translation impacts. These headwinds were partially offset by
the benefits of operational efficiencies, SG&A cost reduction
initiatives and new product sales.
Asia/Pacific
Net sales in AGCO’s Asia/Pacific region, excluding the negative impact
of currency translation, declined 5.9% in the first nine months of 2015
compared to the same period in 2014. Losses from operations increased
approximately $19.8 million in the first nine months of 2015, compared
to the same period in 2014, due to lower sales and increased market
development costs in China.
Outlook
Lower industry demand for farm equipment across all regions and the
unfavorable effect of foreign currency translation are expected to
continue to negatively impact AGCO’s sales and earnings for the
remainder of 2015. AGCO’s 2015 net sales are expected to range from $7.5
to $7.6 billion. Gross and operating margins are expected to be below
2014 levels due to the negative impact of lower sales and production
volumes coupled with a weaker sales mix. Benefits from the Company’s
restructuring and other cost reduction initiatives and a lower tax rate
are expected to partially offset the volume-related impacts. Based on
these assumptions, 2015 earnings per share are targeted at approximately
$3.20, excluding restructuring and other infrequent expenses.
* * * * *
AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Wednesday, October 28, 2015.
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, 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 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.
-
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, 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.
-
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.
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, 2014 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 machinery. AGCO supports more productive
farming through a full line of tractors, combines, hay tools, sprayers,
forage equipment, grain storage and protein production systems, seeding
and tillage implements and replacement parts. AGCO products are sold
through five core machinery brands, Challenger®, Fendt®, GSI®, Massey
Ferguson® and Valtra® and are distributed globally through a combination
of approximately 3,100 independent dealers and distributors in more than
140 countries. Founded in 1990, AGCO is headquartered in Duluth, GA,
USA. In 2014, AGCO had net sales of $9.7 billion. For more information,
visit http://www.AGCOcorp.com.
For company news, information and events, please follow us on Twitter:
@AGCOCorp. For financial news on Twitter, please follow the hashtag
#AGCOIR.
AGCO: 25 years of identity, centuries of history
Please visit our website at www.agcocorp.com
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AGCO CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(unaudited and in millions)
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September 30, 2015
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December 31, 2014
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$
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425.4
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$
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363.7
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Accounts and notes receivable, net
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946.7
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|
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|
963.8
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Inventories, net
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|
|
|
1,699.3
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|
|
|
|
1,750.7
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Deferred tax assets
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|
210.4
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|
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|
217.2
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Other current assets
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218.7
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232.5
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Total current assets
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3,500.5
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|
3,527.9
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Property, plant and equipment, net
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|
1,361.5
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|
|
|
|
1,530.4
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Investment in affiliates
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|
403.3
|
|
|
|
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424.1
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|
Deferred tax assets
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|
20.1
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|
|
|
|
25.8
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|
Other assets
|
|
|
|
141.8
|
|
|
|
|
141.1
|
|
Intangible assets, net
|
|
|
|
520.7
|
|
|
|
|
553.8
|
|
Goodwill
|
|
|
|
1,123.7
|
|
|
|
|
1,192.8
|
|
Total assets
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|
|
|
$
|
7,071.6
|
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|
$
|
7,395.9
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current Liabilities:
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Current portion of long-term debt
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$
|
87.4
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$
|
94.3
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Senior term loan
|
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|
|
223.4
|
|
|
|
|
—
|
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Accounts payable
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|
|
|
650.3
|
|
|
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|
670.2
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Accrued expenses
|
|
|
|
1,091.2
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|
|
|
|
1,244.1
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Other current liabilities
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|
|
|
159.9
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|
|
|
|
208.3
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|
Total current liabilities
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|
|
|
2,212.2
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|
|
|
|
2,216.9
|
|
Long-term debt, less current portion
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|
|
|
1,230.2
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|
|
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|
997.6
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|
Pensions and postretirement health care benefits
|
|
|
|
240.0
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|
|
|
|
269.0
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Deferred tax liabilities
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|
|
|
232.9
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|
|
|
|
238.8
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|
Other noncurrent liabilities
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|
|
|
182.8
|
|
|
|
|
176.7
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Total liabilities
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|
|
4,098.1
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|
|
|
|
3,899.0
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Stockholders’ Equity:
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AGCO Corporation stockholders’ equity:
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Common stock
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0.9
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0.9
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Additional paid-in capital
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399.5
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|
|
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582.5
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Retained earnings
|
|
|
|
3,944.2
|
|
|
|
|
3,771.6
|
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Accumulated other comprehensive loss
|
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(1,417.2
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)
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(906.5
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)
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Total AGCO Corporation stockholders’ equity
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2,927.4
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|
|
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|
3,448.5
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Noncontrolling interests
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|
|
|
46.1
|
|
|
|
|
48.4
|
|
Total stockholders’ equity
|
|
|
|
2,973.5
|
|
|
|
|
3,496.9
|
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Total liabilities and stockholders’ equity
|
|
|
|
$
|
7,071.6
|
|
|
|
|
$
|
7,395.9
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
See accompanying notes to condensed consolidated financial
statements.
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AGCO CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited and in millions, except per share data)
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|
|
|
|
|
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|
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|
Three Months Ended September 30,
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|
|
|
|
2015
|
|
|
|
2014
|
Net sales
|
|
|
|
$
|
1,736.4
|
|
|
|
|
$
|
2,154.8
|
Cost of goods sold
|
|
|
|
1,370.7
|
|
|
|
|
1,732.9
|
Gross profit
|
|
|
|
365.7
|
|
|
|
|
421.9
|
Selling, general and administrative expenses
|
|
|
|
205.8
|
|
|
|
|
221.7
|
Engineering expenses
|
|
|
|
70.0
|
|
|
|
|
78.2
|
Restructuring and other infrequent expenses
|
|
|
|
—
|
|
|
|
|
2.9
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Amortization of intangibles
|
|
|
|
10.8
|
|
|
|
|
10.4
|
Income from operations
|
|
|
|
79.1
|
|
|
|
|
108.7
|
Interest expense, net
|
|
|
|
10.6
|
|
|
|
|
13.9
|
Other (income) expense, net
|
|
|
|
(2.1
|
)
|
|
|
|
10.1
|
Income before income taxes and equity in net earnings of affiliates
|
|
|
|
70.6
|
|
|
|
|
84.7
|
Income tax provision
|
|
|
|
17.6
|
|
|
|
|
34.2
|
Income before equity in net earnings of affiliates
|
|
|
|
53.0
|
|
|
|
|
50.5
|
Equity in net earnings of affiliates
|
|
|
|
14.2
|
|
|
|
|
12.0
|
Net income
|
|
|
|
67.2
|
|
|
|
|
62.5
|
Net (income) loss attributable to noncontrolling interests
|
|
|
|
(0.1
|
)
|
|
|
|
2.5
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
|
|
$
|
67.1
|
|
|
|
|
$
|
65.0
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.77
|
|
|
|
|
$
|
0.70
|
Diluted
|
|
|
|
$
|
0.77
|
|
|
|
|
$
|
0.69
|
Cash dividends declared and paid per common share
|
|
|
|
$
|
0.12
|
|
|
|
|
$
|
0.11
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
86.6
|
|
|
|
93.5
|
Diluted
|
|
|
|
86.7
|
|
|
|
93.8
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2015
|
|
|
|
2014
|
Net sales
|
|
$
|
5,508.3
|
|
|
|
|
$
|
7,238.5
|
Cost of goods sold
|
|
4,345.1
|
|
|
|
|
5,670.2
|
Gross profit
|
|
1,163.2
|
|
|
|
|
1,568.3
|
Selling, general and administrative expenses
|
|
630.1
|
|
|
|
|
751.0
|
Engineering expenses
|
|
210.5
|
|
|
|
|
252.9
|
Restructuring and other infrequent expenses
|
|
14.6
|
|
|
|
|
2.9
|
Amortization of intangibles
|
|
32.2
|
|
|
|
|
30.4
|
Income from operations
|
|
275.8
|
|
|
|
|
531.1
|
Interest expense, net
|
|
32.1
|
|
|
|
|
43.5
|
Other expense, net
|
|
17.2
|
|
|
|
|
34.2
|
Income before income taxes and equity in net earnings of affiliates
|
|
226.5
|
|
|
|
|
453.4
|
Income tax provision
|
|
66.1
|
|
|
|
|
163.8
|
Income before equity in net earnings of affiliates
|
|
160.4
|
|
|
|
|
289.6
|
Equity in net earnings of affiliates
|
|
42.3
|
|
|
|
|
38.1
|
Net income
|
|
202.7
|
|
|
|
|
327.7
|
Net loss attributable to noncontrolling interests
|
|
1.6
|
|
|
|
|
5.1
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
204.3
|
|
|
|
|
$
|
332.8
|
Net income per common share attributable to AGCO Corporation and
subsidiaries:
|
|
|
|
|
|
|
Basic
|
|
$
|
2.33
|
|
|
|
|
$
|
3.53
|
Diluted
|
|
$
|
2.33
|
|
|
|
|
$
|
3.50
|
Cash dividends declared and paid per common share
|
|
$
|
0.36
|
|
|
|
|
$
|
0.33
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
Basic
|
|
87.7
|
|
|
|
|
94.2
|
Diluted
|
|
87.8
|
|
|
|
|
95.2
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
202.7
|
|
|
|
|
$
|
327.7
|
|
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
162.0
|
|
|
|
|
180.4
|
|
Deferred debt issuance cost amortization
|
|
|
1.6
|
|
|
|
|
2.2
|
|
Amortization of intangibles
|
|
|
32.2
|
|
|
|
|
30.4
|
|
Stock compensation expense
|
|
|
10.6
|
|
|
|
|
(11.0
|
)
|
Equity in net earnings of affiliates, net of cash received
|
|
|
(28.0
|
)
|
|
|
|
(28.6
|
)
|
Deferred income tax provision
|
|
|
(11.3
|
)
|
|
|
|
1.7
|
|
Other
|
|
|
(0.2
|
)
|
|
|
|
2.3
|
|
Changes in operating assets and liabilities, net of effects from
purchase of
businesses:
|
|
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
|
(76.0
|
)
|
|
|
|
(151.4
|
)
|
Inventories, net
|
|
|
(140.2
|
)
|
|
|
|
(422.7
|
)
|
Other current and noncurrent assets
|
|
|
(79.5
|
)
|
|
|
|
(0.8
|
)
|
Accounts payable
|
|
|
58.3
|
|
|
|
|
(74.7
|
)
|
Accrued expenses
|
|
|
(35.0
|
)
|
|
|
|
(96.9
|
)
|
Other current and noncurrent liabilities
|
|
|
(25.0
|
)
|
|
|
|
26.1
|
|
Total adjustments
|
|
|
(130.5
|
)
|
|
|
|
(543.0
|
)
|
Net cash provided by (used in) operating activities
|
|
|
72.2
|
|
|
|
|
(215.3
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(147.1
|
)
|
|
|
|
|
(229.3
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
1.2
|
|
|
|
|
|
2.2
|
|
Purchase of businesses, net of cash acquired
|
|
|
(25.4
|
)
|
|
|
|
|
(130.4
|
)
|
Investment in unconsolidated affiliates
|
|
|
(5.2
|
)
|
|
|
|
|
—
|
|
Restricted cash
|
|
|
(0.4
|
)
|
|
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(176.9
|
)
|
|
|
|
|
(357.5
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from debt obligations, net
|
|
|
462.3
|
|
|
|
|
450.6
|
|
Purchases and retirement of common stock
|
|
|
(187.5
|
)
|
|
|
|
(340.9
|
)
|
Payment of dividends to stockholders
|
|
|
(31.7
|
)
|
|
|
|
(30.9
|
)
|
Payment of minimum tax withholdings on stock compensation
|
|
|
(6.2
|
)
|
|
|
|
(11.9
|
)
|
Payment of debt issuance costs
|
|
|
(0.7
|
)
|
|
|
|
(1.3
|
)
|
Repurchase or conversion of convertible senior subordinated notes
|
|
|
—
|
|
|
|
|
(201.2
|
)
|
Purchase of or distribution to noncontrolling interests
|
|
|
—
|
|
|
|
|
(6.1
|
)
|
Net cash provided by (used in) financing activities
|
|
|
236.2
|
|
|
|
|
(141.7
|
)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
(69.8
|
)
|
|
|
|
(11.8
|
)
|
Increase (decrease) in cash and cash equivalents
|
|
|
61.7
|
|
|
|
|
(726.3
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
363.7
|
|
|
|
|
1,047.2
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
425.4
|
|
|
|
|
$
|
320.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (CREDIT)
The Company recorded stock compensation expense (credit) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
Cost of goods sold
|
|
|
|
$
|
0.3
|
|
|
$
|
(1.8
|
)
|
|
|
$
|
0.8
|
|
|
$
|
(1.0
|
)
|
Selling, general and administrative expenses
|
|
|
|
3.2
|
|
|
(21.0
|
)
|
|
|
10.1
|
|
|
(9.8
|
)
|
Total stock compensation expense (credit)
|
|
|
|
$
|
3.5
|
|
|
$
|
(22.8
|
)
|
|
|
$
|
10.9
|
|
|
$
|
(10.8
|
)
|
During the three months ended September 30, 2014, the Company recorded a
credit of approximately $24.1 million for the reversal of previously
recorded long-term stock compensation expense.
2. RESTRUCTURING AND OTHER INFREQUENT EXPENSES
During the second half of 2014 and the first half of 2015, the Company
announced and initiated several actions to rationalize employee
headcount at various manufacturing facilities located in Europe, China,
Brazil, Argentina and the United States, as well as various
administrative offices located in Europe, Brazil, China and the United
States. The aggregate headcount reduction of approximately 1,950
employees in 2014 and 2015 was initiated in order to reduce costs in
response to softening global market demand and reduced production
volumes. The Company recorded restructuring and other infrequent
expenses of approximately $46.4 million and $14.6 million, respectively,
during 2014 and 2015 associated with these rationalizations, primarily
related to severance and other related costs. Approximately $19.0
million of severance and other related costs were paid during 2014. In
addition, during the nine months ended September 30, 2015, the Company
paid approximately $23.2 million of severance and other related costs.
The remaining $15.9 million balance of severance and other related costs
accrued as of September 30, 2015, inclusive of approximately $0.9
million of negative foreign currency translation impacts, will be paid
primarily during 2015 and 2016.
3. INDEBTEDNESS
Indebtedness at September 30, 2015 and December 31, 2014 consisted of
the following:
|
|
|
|
September 30, 2015
|
|
|
|
December 31, 2014
|
4½% Senior term loan due 2016
|
|
|
|
$
|
223.4
|
|
|
|
|
$
|
242.0
|
|
Credit facility, expires 2020
|
|
|
|
653.1
|
|
|
|
|
404.4
|
|
1.056% Senior term loan due 2020
|
|
|
|
223.4
|
|
|
|
|
—
|
|
5⅞% Senior notes due 2021
|
|
|
|
301.6
|
|
|
|
|
300.0
|
|
Other long-term debt
|
|
|
|
139.5
|
|
|
|
|
145.5
|
|
|
|
|
|
1,541.0
|
|
|
|
|
1,091.9
|
|
Less: Current portion of long-term debt
|
|
|
|
(87.4
|
)
|
|
|
|
(94.3
|
)
|
4½% Senior term loan due 2016
|
|
|
|
(223.4
|
)
|
|
|
|
—
|
|
Total indebtedness, less current portion
|
|
|
|
$
|
1,230.2
|
|
|
|
|
$
|
997.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. INVENTORIES
Inventories at September 30, 2015 and December 31, 2014 were as follows:
|
|
|
|
|
September 30, 2015
|
|
|
|
December 31, 2014
|
Finished goods
|
|
|
|
|
$
|
671.2
|
|
|
|
|
$
|
616.6
|
Repair and replacement parts
|
|
|
|
|
531.2
|
|
|
|
|
536.4
|
Work in process
|
|
|
|
|
118.5
|
|
|
|
|
130.5
|
Raw materials
|
|
|
|
|
378.4
|
|
|
|
|
467.2
|
Inventories, net
|
|
|
|
|
$
|
1,699.3
|
|
|
|
|
$
|
1,750.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. ACCOUNTS RECEIVABLE SALES AGREEMENTS
At September 30, 2015 and December 31, 2014, 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.
During the third quarter of 2015, the Company entered into an accounts
receivable sales agreement that permits the sale, on an ongoing basis,
of its wholesale receivables in Brazil to its Brazilian finance joint
venture. As of September 30, 2015 and December 31, 2014, the cash
received from receivables sold under the U.S., Canadian, European and
Brazilian accounts receivable sales agreements was approximately $1.1
billion and $1.2 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 $4.0 million and $13.4 million during the three and
nine months ended September 30, 2015, 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 $4.8
million and $19.0 million during the three and nine months ended
September 30, 2014, respectively.
The Company’s finance joint ventures in Brazil and Australia also
provide wholesale financing to the Company’s dealers. As of
September 30, 2015 and December 31, 2014, these finance joint ventures
had approximately $19.7 million and $43.3 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.
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, 2015 and 2014 is as follows:
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
67.1
|
|
|
$
|
65.0
|
|
|
|
$
|
204.3
|
|
|
$
|
332.8
|
Weighted average number of common shares outstanding
|
|
86.6
|
|
|
93.5
|
|
|
|
87.7
|
|
|
94.2
|
Basic net income per share attributable to AGCO Corporation and
subsidiaries
|
|
$
|
0.77
|
|
|
$
|
0.70
|
|
|
|
$
|
2.33
|
|
|
$
|
3.53
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
Net income attributable to AGCO Corporation and subsidiaries
|
|
$
|
67.1
|
|
|
$
|
65.0
|
|
|
|
$
|
204.3
|
|
|
$
|
332.8
|
Weighted average number of common shares outstanding
|
|
86.6
|
|
|
93.5
|
|
|
|
87.7
|
|
|
94.2
|
Dilutive stock-settled appreciation rights, performance share awards
and restricted stock units
|
|
0.1
|
|
|
0.2
|
|
|
|
0.1
|
|
|
0.3
|
Weighted average assumed conversion of contingently convertible
senior subordinated notes
|
|
—
|
|
|
0.1
|
|
|
|
—
|
|
|
0.7
|
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net income
per share
|
|
86.7
|
|
|
93.8
|
|
|
|
87.8
|
|
|
95.2
|
Diluted net income per share attributable to AGCO Corporation and
subsidiaries
|
|
$
|
0.77
|
|
|
$
|
0.69
|
|
|
|
$
|
2.33
|
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Repurchase Program
During the nine months ended September 30, 2015, the Company entered
into accelerated share repurchase agreements (“ASRs”) with a financial
institution to repurchase an aggregate of $187.5 million of shares of
the Company’s common stock. The Company received approximately 3,488,063
shares during the nine months ended September 30, 2015 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 $344.2
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 nine
months ended September 30, 2015 and 2014 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
South
|
|
Europe/Africa/
|
|
Asia/
|
|
|
Three Months Ended September 30,
|
|
|
|
America
|
|
America
|
|
Middle East
|
|
Pacific
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
494.9
|
|
|
$
|
231.4
|
|
|
$
|
894.3
|
|
|
$
|
115.8
|
|
|
$
|
1,736.4
|
Income (loss) from operations
|
|
|
|
40.9
|
|
|
10.5
|
|
|
68.9
|
|
|
(2.5
|
)
|
|
117.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
531.3
|
|
|
$
|
455.0
|
|
|
$
|
1,026.0
|
|
|
$
|
142.5
|
|
|
$
|
2,154.8
|
Income (loss) from operations
|
|
|
|
37.3
|
|
|
36.4
|
|
|
57.0
|
|
|
(1.0
|
)
|
|
129.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
South
|
|
Europe/Africa/
|
|
Asia/
|
|
|
Nine Months Ended September 30,
|
|
|
|
America
|
|
America
|
|
Middle East
|
|
Pacific
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
1,530.5
|
|
|
$
|
760.7
|
|
|
$
|
2,939.4
|
|
|
$
|
277.7
|
|
$
|
5,508.3
|
Income (loss) from operations
|
|
|
|
116.4
|
|
|
38.8
|
|
|
284.0
|
|
|
(25.4
|
)
|
|
413.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
1,865.0
|
|
|
$
|
1,248.8
|
|
|
$
|
3,783.8
|
|
|
$
|
340.9
|
|
$
|
7,238.5
|
Income (loss) from operations
|
|
|
|
188.3
|
|
|
94.2
|
|
|
366.0
|
|
|
(5.6
|
)
|
|
642.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Segment income from operations
|
|
|
|
$
|
117.8
|
|
|
$
|
129.7
|
|
|
$
|
413.8
|
|
|
$
|
642.9
|
|
Corporate expenses
|
|
|
|
(24.7
|
)
|
|
(28.7
|
)
|
|
(81.1
|
)
|
|
(88.3
|
)
|
Stock compensation (expense) credit
|
|
|
|
(3.2
|
)
|
|
21.0
|
|
|
(10.1
|
)
|
|
9.8
|
|
Restructuring and other infrequent expenses
|
|
|
|
—
|
|
|
(2.9
|
)
|
|
(14.6
|
)
|
|
(2.9
|
)
|
Amortization of intangibles
|
|
|
|
(10.8
|
)
|
|
(10.4
|
)
|
|
(32.2
|
)
|
|
(30.4
|
)
|
Consolidated income from operations
|
|
|
|
$
|
79.1
|
|
|
$
|
108.7
|
|
|
$
|
275.8
|
|
|
$
|
531.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations, net
income and earnings per share, all of which exclude amounts that differ
from 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 months ended
September 30, 2015 and 2014 (in millions, except per share data):
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
Income
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
From
|
|
Net
|
|
Earnings Per
|
|
From
|
|
Net
|
|
Earnings Per
|
|
|
|
|
Operations
|
|
Income(1)
|
|
Share(1)
|
|
Operations
|
|
Income(1)
|
|
Share(1)
|
As adjusted
|
|
|
|
$
|
79.1
|
|
|
$
|
67.1
|
|
|
$
|
0.77
|
|
|
$
|
111.6
|
|
|
$
|
66.9
|
|
|
$
|
0.71
|
Restructuring and other infrequent expenses
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.9
|
|
|
1.9
|
|
|
0.02
|
As reported
|
|
|
|
$
|
79.1
|
|
|
$
|
67.1
|
|
|
$
|
0.77
|
|
|
$
|
108.7
|
|
|
$
|
65.0
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net income and earnings per share amounts are after
tax.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 nine months ended
September 30, 2015 and 2014 (in millions, except per share data):
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
Income
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
From
|
|
Net
|
|
Earnings Per
|
|
From
|
|
Net
|
|
Earnings Per
|
|
|
|
|
Operations
|
|
Income(1)
|
|
Share(1)
|
|
Operations
|
|
Income(1)
|
|
Share(1)
|
As adjusted
|
|
|
|
$
|
290.4
|
|
|
$
|
215.0
|
|
|
$
|
2.45
|
|
|
$
|
534.0
|
|
|
$
|
334.7
|
|
|
$
|
3.52
|
Restructuring and other infrequent expenses (2) |
|
|
|
14.6
|
|
|
10.7
|
|
|
0.12
|
|
|
2.9
|
|
|
1.9
|
|
|
0.02
|
As reported
|
|
|
|
$
|
275.8
|
|
|
$
|
204.3
|
|
|
$
|
2.33
|
|
|
$
|
531.1
|
|
|
$
|
332.8
|
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net income and earnings per share amounts are after tax.
(2) The restructuring and other infrequent expenses recorded
during the nine months ended September 30, 2015 relate 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.
The following is a reconciliation of adjusted targeted earnings per
share to targeted earnings per share for the year ended December 31,
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share (1) |
As adjusted targeted
|
|
|
|
|
|
|
$
|
3.20
|
Restructuring and other infrequent expenses
|
|
|
|
|
|
|
|
0.13 - 0.14
|
As targeted
|
|
|
|
|
|
|
$
|
3.06 - 3.07
|
|
|
|
|
|
|
|
|
|
(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 nine months ended September 30, 2015, the
impact to net sales of currency translation by geographical segment (in
millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
Change due to currency translation
|
|
|
|
|
|
|
|
|
|
|
% change
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
from 2014
|
|
|
|
$
|
|
%
|
North America
|
|
|
|
$
|
494.9
|
|
|
$
|
531.3
|
|
|
|
|
(6.9
|
)%
|
|
|
|
$
|
(16.6
|
)
|
|
(3.1
|
)%
|
South America
|
|
|
|
231.4
|
|
|
455.0
|
|
|
|
|
(49.1
|
)%
|
|
|
|
(115.3
|
)
|
|
(25.3
|
)%
|
Europe/Africa/Middle East
|
|
|
|
894.3
|
|
|
1,026.0
|
|
|
|
|
(12.8
|
)%
|
|
|
|
(169.9
|
)
|
|
(16.6
|
)%
|
Asia/Pacific
|
|
|
|
115.8
|
|
|
142.5
|
|
|
|
|
(18.7
|
)%
|
|
|
|
(21.3
|
)
|
|
(15.0
|
)%
|
|
|
|
|
$
|
1,736.4
|
|
|
$
|
2,154.8
|
|
|
|
|
(19.4
|
)%
|
|
|
|
$
|
(323.1
|
)
|
|
(15.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
Change due to currency translation
|
|
|
|
|
|
|
|
|
|
|
% change
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
from 2014
|
|
|
|
$
|
|
%
|
North America
|
|
|
|
$
|
1,530.5
|
|
|
$
|
1,865.0
|
|
|
|
|
(17.9
|
)%
|
|
|
|
$
|
(42.0
|
)
|
|
(2.3
|
)%
|
South America
|
|
|
|
760.7
|
|
|
1,248.8
|
|
|
|
|
(39.1
|
)%
|
|
|
|
(266.5
|
)
|
|
(21.3
|
)%
|
Europe/Africa/Middle East
|
|
|
|
2,939.4
|
|
|
3,783.8
|
|
|
|
|
(22.3
|
)%
|
|
|
|
(624.8
|
)
|
|
(16.5
|
)%
|
Asia/Pacific
|
|
|
|
277.7
|
|
|
340.9
|
|
|
|
|
(18.5
|
)%
|
|
|
|
(43.1
|
)
|
|
(12.6
|
)%
|
|
|
|
|
$
|
5,508.3
|
|
|
$
|
7,238.5
|
|
|
|
|
(23.9
|
)%
|
|
|
|
$
|
(976.4
|
)
|
|
(13.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This earnings release discloses the reduction in inventory on a constant
currency basis, excluding the impact of currency translation, between
September 30, 2015 and 2014. The following is a reconciliation of the
impact of currency translation on the change in inventory balances (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change due to
|
|
Change excluding
|
|
|
|
|
|
|
|
|
Change from
|
|
currency
|
|
currency
|
|
|
|
|
September 30, 2015
|
|
September 30, 2014
|
|
2014
|
|
translation
|
|
translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
|
$
|
1,699.3
|
|
|
$
|
2,315.1
|
|
|
$
|
(615.8
|
)
|
|
$
|
(310.7
|
)
|
|
$
|
(305.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20151028005749/en/
Source: AGCO
AGCO
Greg Peterson, 770-232-8229
Director of Investor Relations
greg.peterson@agcocorp.com