- Net sales of $2.9 billion, down
12.1%
- Reported earnings per share of $2.25 and adjusted earnings per
share(1) of $2.32
- Closed the previously announced joint venture transaction, PTx
Trimble, on April 1
- Announced variable special dividend of $2.50 per share on April
25
DULUTH,
Ga., May 2, 2024 /PRNewswire/ -- AGCO, (NYSE:
AGCO), a global leader in the design, manufacture and distribution
of agricultural machinery and precision ag technology, reported net
sales of $2.9 billion for the first
quarter ended March 31, 2024, a decrease of 12.1% compared to
the first quarter of 2023. Reported net income was $2.25 per share for the first quarter of 2024,
and adjusted net income(1) was $2.32 per
share. These results compare to reported net income of $3.10 per share and adjusted net
income(1) of $3.51 per
share, for the first quarter of 2023. Excluding favorable foreign
currency translation of 1.0%, net sales in the first quarter of
2024 decreased 13.1% compared to the first quarter of
2023.
"AGCO demonstrated strong execution of its Farmer First-strategy
in the first quarter," said Eric
Hansotia, AGCO's Chairman, President and Chief Executive
Officer. "Our results reflect the declining global demand for the
agricultural equipment industry, and as anticipated,
correspondingly significant production cuts that still led to solid
results. The reductions were aimed at helping reduce dealer
inventories. While cost and working capital management remain a
priority to mitigate market pressures, we continue to reward
shareholders through dividends and investing in our three
margin-rich initiatives: growing our precision ag business,
globalizing a full-line of our Fendt branded products and expanding
our parts and service business."
"We successfully completed the PTx Trimble joint venture
("JV") transaction in early April, which greatly enhances our
retrofit and mixed-fleet precision ag business," continued
Hansotia. "We also launched our new leading brand, PTx, which
combines precision ag technologies from PTx Trimble and Precision
Planting, the cornerstones of AGCO's tech stack. The strategic
alignment of these brands will expedite AGCO's technology
transformation and support the future development and distribution
of next-generation ag technologies for farmers and original
equipment manufacturers around the world."
First Quarter Highlights
- Reported regional sales results(2): Europe/Middle
East ("EME") +1.5%, North
America (21.0)%, South
America (39.8)%, Asia/Pacific/Africa ("APA") (17.8)%
- Constant currency regional sales results(1)(2)(3):
EME +0.1%, North America (21.3)%,
South America (42.1)%, APA
(15.5)%
- Regional operating margin performance: EME 16.4%, North America 5.8%, South America 5.3%, APA 4.8%
(1) See
reconciliation of non-GAAP measures in appendix.
|
(2) As
compared to first quarter 2023.
|
(3) Excludes currency translation
impact.
|
Market Update
|
|
Industry Unit Retail
Sales
|
|
|
Tractors
|
|
Combines
|
Three Months Ended
March 31, 2024
|
|
Change from
Prior Year
Period
|
|
Change from
Prior Year
Period
|
North
America(4)
|
|
(9) %
|
|
(17) %
|
South
America(5)
|
|
(18) %
|
|
(40) %
|
Western
Europe(5)
|
|
(8) %
|
|
(30) %
|
|
(4)
Excludes compact tractors.
|
(5)
Based on Company estimates.
|
"Planting activities are under way in the northern hemisphere
and healthy yields would result in increases to grain inventories,"
said Hansotia. "Farm income levels are expected to further moderate
in 2024, aligning more closely to historical averages following
three prosperous years. We continue to expect increased adoption of
precision technology, but more challenging farm economics are
resulting in weaker global industry demand across most equipment
categories. In the first quarter of 2024, retail tractor industry
demand fell by an average of 10% across the three major
regions."
North American industry retail tractor sales decreased 9% during
the first three months of 2024 compared to the first three months
of 2023. Sales declines in smaller equipment were more significant
than most of the larger equipment categories. Combine unit sales
were down 17% in the first quarter. Lower projected farm income and
a refreshed fleet are expected to pressure industry demand in 2024,
resulting in weaker North American industry sales compared to
2023.
South American industry retail tractor sales decreased 18%
during the first three months of 2024 compared to the first three
months of 2023. Brazil and the
smaller South American markets showed the most weakness while
declines in Argentina were
moderate after weak industry sales in 2023. Retail demand in
Brazil was negatively affected by
funding shortfalls of the government-subsidized loan program and a
challenging first harvest in the Cerrado region. Following three
strong years, retail demand in South
America is expected to further soften in 2024 as a
result of lower commodity prices and farm income.
In Western Europe, industry
retail tractor sales decreased 8% during the first three months of
2024 compared to the first three months of 2023 with the weakest
conditions in Italy, Finland and the United Kingdom. Farmer sentiment in the region
has continued to be negatively impacted by the conflict in
Ukraine and high input cost
inflation. Industry demand is expected to soften in 2024 as lower
income levels pressure demand from arable farmers, while healthy
demand from dairy and livestock producers is expected to mitigate
some of the decline.
Regional Results
AGCO Regional Net Sales (in
millions)
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
|
% change
from 2023
|
|
% change
from 2023 due
to currency
translation(6)
|
|
% change
excluding
currency
translation
|
North
America
|
|
$
729.6
|
|
$
923.1
|
|
(21.0) %
|
|
0.3 %
|
|
(21.3) %
|
South
America
|
|
303.4
|
|
503.8
|
|
(39.8) %
|
|
2.3 %
|
|
(42.1) %
|
EME
|
|
1,729.0
|
|
1,703.8
|
|
1.5 %
|
|
1.4 %
|
|
0.1 %
|
APA
|
|
166.7
|
|
202.8
|
|
(17.8) %
|
|
(2.3) %
|
|
(15.5) %
|
Total
|
|
$ 2,928.7
|
|
$ 3,333.5
|
|
(12.1) %
|
|
1.0 %
|
|
(13.1) %
|
|
(6) See
Footnotes for additional disclosures.
|
North America
Net sales in AGCO's North American region decreased 21.3% in the
first three months of 2024 compared to the same period of 2023,
excluding the impact of favorable currency translation. Softer
industry sales and lower end market demand were partially offset by
positive pricing. The most significant sales declines occurred in
the hay equipment, mid-range tractor and combine categories. Income
from operations for the first three months of 2024 decreased
$59.7 million compared to the same
period in 2023 and operating margins were 5.8%. The decrease
resulted from lower sales and production, as well as higher
selling, general, and administrative expenses ("SG&A expenses")
and engineering expenses.
South America
South American net sales decreased 42.1% in the first three
months of 2024 compared to the same period of 2023, excluding the
impact of favorable currency translation. Softer industry sales and
under-production of retail demand drove most of the decrease. Lower
sales of tractors and combines accounted for most of the decline.
Significant sales decreases in Brazil were slightly offset by modestly higher
sales in Argentina. Income from
operations in the first three months of 2024 decreased by
$83.3 million compared to the same
period in 2023. This decrease was primarily a result of lower sales
and production volumes as well as negative pricing.
Europe/Middle East
Net sales in the Europe/Middle
East region increased 0.1% in the first three months of 2024
compared to the same period in 2023, excluding the impact of
favorable currency translation. Growth in Germany and France was offset by lower sales across nearly
all the other European markets. Positive pricing and increased
sales of high-horsepower tractors were offset by declines in the
other products. Income from operations increased $43.5 million and operating margins improved 230
basis points in the first three months of 2024, compared to the
same period in 2023. The improvement was driven by positive net
pricing, partially offset by higher SG&A expenses and
engineering expenses.
Asia/Pacific/Africa
Net sales in Asia/Pacific/Africa decreased 15.5%, excluding negative
currency translation impacts, in the first three months of 2024
compared to the same period in 2023 due to weaker end market demand
and lower production volumes. Lower sales in China and Australia drove most of the decline. Income
from operations decreased by $10.1
million in the first three months of 2024 compared to the
same period in 2023 due to lower sales volumes.
Outlook
On April 1, 2024, AGCO acquired an
85% stake in PTx Trimble, and Trimble holds a 15% stake. Going
forward, the PTx Trimble JV will be consolidated into AGCO's
financial statements.
AGCO's net sales for 2024, including the positive impact of PTx
Trimble, are expected to be approximately $13.5 billion, reflecting lower sales volumes,
adverse foreign currency translation and modest positive pricing.
Adjusted operating margins are projected to be approximately 11.3%,
reflecting the benefits of consolidating PTx Trimble as well as the
impacts of lower sales, lower production volumes, increased cost
controls and modestly lower investments in engineering and other
technology efforts to support AGCO's precision agriculture and
digital initiatives. Based on these assumptions, 2024 adjusted
earnings per share are targeted at approximately $12.00.
* * * * *
AGCO will host a conference call with respect to this earnings
announcement at 10 a.m. Eastern Time on
Thursday, May 2. 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 the
website. A replay of the conference call will be available
approximately two hours after the conclusion of the conference call
for 12 months following the call. A copy of this press release will
be available on AGCO's website for at least 12 months following the
call.
* * * * *
Safe Harbor Statement
Statements that are not historical facts, including the
projections of earnings per share, production levels, sales,
industry demand, market conditions, commodity prices, currency
translation, farm income levels, margin levels, strategy,
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,
adverse weather, tariffs, 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.
- We maintain an independent dealer and distribution network in
the markets where we sell products. The financial and operational
capabilities of our dealers and distributors are critical to our
ability to compete in these markets. Higher inventory levels at our
dealers and high utilization of dealer credit limits could
negatively impact future sales and adversely impact our
performance.
- On April 1, 2024, we completed
the acquisition of the ag assets and technologies of Trimble
through the formation of a joint venture, PTx Trimble, of which we
own 85%. Financing the PTx Trimble transaction significantly
increased our indebtedness and interest expense. We also have made
various assumptions relating to the acquisition that may not prove
to be correct and we may fail to realize all of the anticipated
benefits of the acquisition. All acquisitions involve risk, and
there is no certainty that the acquired business will operate as
expected. Each of these items, as well as similar
acquisition-related items, would adversely impact our
performance.
- A majority of our sales and manufacturing takes place outside
the United States, and many of our
sales involve products that are manufactured in one country and
sold in a different country. As a result, we are exposed to risks
related to foreign laws, taxes and tariffs, trade restrictions,
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.
Among these risks are the uncertain consequences of Brexit and
tariffs imposed on exports to and imports from China.
- We cannot predict or control the impact of the conflict in
Ukraine on our business. Already
it has resulted in reduced sales in Ukraine as farmers have experienced economic
distress, difficulties in harvesting and delivering their products,
as well as general uncertainty. There is a potential for natural
gas shortages, as well as shortages in other energy sources,
throughout Europe, which could
negatively impact our production in Europe both directly and through interrupting
the supply of parts and components that we use. It is unclear how
long these conditions will continue, or whether they will worsen,
and what the ultimate impact on our performance will be. In
addition, AGCO sells products in, and purchases parts and
components from, other regions where there could be hostilities.
Any hostilities likely would adversely impact our performance.
- 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. In addition, Rabobank also is the lead lender
in our revolving credit facility and term loans and for many years
has been an important financing partner for us. Any interruption or
other challenges in that relationship would require us to obtain
alternative financing, which could be difficult.
- Both AGCO and our finance joint ventures have substantial
accounts receivable from dealers and end customers, and we would be
adversely impacted if the collectability of these receivables was
less than optimal; 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 and
sustainable smart farming technology, which require substantial
expenditures; there is no certainty that we can develop the
necessary technology or that the technology that we develop will be
attractive to farmers or available at competitive prices.
- 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 cyberattack, we could
be subject to significant claims, penalties and damages.
- Cybersecurity breaches including ransomware attacks and other
means are rapidly increasing. We continue to review and improve our
safeguards to minimize our exposure to future attacks. However,
there always will be the potential of the risk that a cyberattack
will be successful and will disrupt our business, either through
shutting down our operations, destroying data, exfiltrating data or
otherwise.
- 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. Recently suppliers of several key
parts and components have not been able to meet our demand and we
have had to decrease our production levels. In addition, the
potential of natural gas shortages in Europe, as well as predicted overall shortages
in other energy sources, could also negatively impact our
production and that of our supply chain in the future. It is
unclear when these supply chain disruptions will be restored or
what the ultimate impact on production, and consequently sales,
will be.
- Any resurgence of COVID-19, or other future pandemics, could
negatively impact our business through reduced sales, facilities
closures, higher absentee rates, and reduced production at both our
plants and the plants that supply us with parts and components. In
addition, logistical and transportation-related issues and similar
problems may also arise.
- We recently have experienced significant inflation in a range
of costs, including for parts and components, shipping, and energy.
While we have been able to pass along most of those costs through
increased prices, there can be no assurance that we will be able to
continue to do so. If we are not, it will adversely impact our
performance.
- 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
performance would decline.
- We have a substantial amount of indebtedness (and have incurred
additional indebtedness as part of the PTx Trimble joint venture
transaction), and, as a result, we are subject to certain
restrictive covenants and payment obligations, as well as increased
leverage generally, 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, 2023 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 and precision ag
technology. AGCO delivers value to farmers and OEM customers
through its differentiated brand portfolio including core brands
like Fendt®, GSI®, Massey Ferguson®, PTx and Valtra®. AGCO's full
line of equipment, smart farming solutions and services helps
farmers sustainably feed our world. Founded in 1990 and
headquartered in Duluth, Georgia,
USA, AGCO had net sales of approximately $14.4 billion in 2023. For more
information, visit www.AGCOcorp.com. For company news, information,
and events, please follow us on X: @AGCOCorp. For financial news on
X, please follow the hashtag #AGCOIR.
Please visit our website at www.agcocorp.com
AGCO
CORPORATION
CONDENSED CONSOLIDATED
BALANCE SHEETS
(unaudited and in
millions)
|
|
|
March 31,
2024
|
|
December 31,
2023
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
2,455.8
|
|
$
595.5
|
Accounts and notes
receivable, net
|
1,542.2
|
|
1,605.3
|
Inventories,
net
|
3,781.9
|
|
3,440.7
|
Other current
assets
|
594.2
|
|
699.3
|
Total current
assets
|
8,374.1
|
|
6,340.8
|
Property, plant and
equipment, net
|
1,886.7
|
|
1,920.9
|
Right-of-use lease
assets
|
175.0
|
|
176.2
|
Investments in
affiliates
|
520.5
|
|
512.7
|
Deferred tax
assets
|
489.8
|
|
481.6
|
Other assets
|
396.4
|
|
346.8
|
Intangible assets,
net
|
291.6
|
|
308.8
|
Goodwill
|
1,325.8
|
|
1,333.4
|
Total
assets
|
$
13,459.9
|
|
$
11,421.2
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Borrowings due within
one year
|
$
300.4
|
|
$
15.0
|
Accounts
payable
|
1,238.0
|
|
1,207.3
|
Accrued
expenses
|
2,489.2
|
|
2,903.8
|
Other current
liabilities
|
185.6
|
|
217.5
|
Total current
liabilities
|
4,213.2
|
|
4,343.6
|
Long-term debt, less
current portion and debt issuance costs
|
3,425.7
|
|
1,377.2
|
Operating lease
liabilities
|
133.0
|
|
134.4
|
Pension and
postretirement health care benefits
|
167.9
|
|
170.5
|
Deferred tax
liabilities
|
119.5
|
|
122.6
|
Other noncurrent
liabilities
|
645.4
|
|
616.1
|
Total
liabilities
|
8,704.7
|
|
6,764.4
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
AGCO Corporation
stockholders' equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common
stock
|
0.7
|
|
0.7
|
Additional paid-in
capital
|
—
|
|
4.1
|
Retained
earnings
|
6,505.9
|
|
6,360.0
|
Accumulated other
comprehensive loss
|
(1,751.5)
|
|
(1,708.1)
|
Total AGCO Corporation
stockholders' equity
|
4,755.1
|
|
4,656.7
|
Noncontrolling
interests
|
0.1
|
|
0.1
|
Total stockholders'
equity
|
4,755.2
|
|
4,656.8
|
Total liabilities and
stockholders' equity
|
$
13,459.9
|
|
$
11,421.2
|
|
See accompanying notes
to condensed consolidated financial statements.
|
AGCO
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited and in
millions, except per share data)
|
|
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
Net sales
|
$
2,928.7
|
|
$
3,333.5
|
Cost of goods
sold
|
2,158.9
|
|
2,478.6
|
Gross profit
|
769.8
|
|
854.9
|
Selling, general and
administrative expenses
|
350.4
|
|
331.8
|
Engineering
expenses
|
130.9
|
|
119.6
|
Amortization of
intangibles
|
13.9
|
|
14.8
|
Restructuring
expenses
|
1.0
|
|
1.4
|
Income from
operations
|
273.6
|
|
387.3
|
Interest expense,
net
|
1.9
|
|
0.5
|
Other expense,
net
|
50.8
|
|
50.4
|
Income before income
taxes and equity in net earnings of affiliates
|
220.9
|
|
336.4
|
Income tax
provision
|
69.1
|
|
120.2
|
Income before equity in
net earnings of affiliates
|
151.8
|
|
216.2
|
Equity in net earnings
of affiliates
|
16.2
|
|
16.4
|
Net income
|
168.0
|
|
232.6
|
Net loss attributable
to noncontrolling interests
|
—
|
|
—
|
Net income attributable
to AGCO Corporation and subsidiaries
|
$
168.0
|
|
$
232.6
|
Net income per common
share attributable to AGCO Corporation and subsidiaries:
|
|
|
|
Basic
|
$
2.25
|
|
$
3.11
|
Diluted
|
$
2.25
|
|
$
3.10
|
Cash dividends declared
and paid per common share
|
$
0.29
|
|
$
0.24
|
Weighted average number
of common and common equivalent shares outstanding:
|
|
|
|
Basic
|
74.6
|
|
74.9
|
Diluted
|
74.7
|
|
75.0
|
|
See accompanying notes
to condensed consolidated financial statements.
|
AGCO
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited and in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
168.0
|
|
$
232.6
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
Depreciation
|
63.3
|
|
53.6
|
Amortization of
intangibles
|
13.9
|
|
14.8
|
Stock compensation
expense
|
8.4
|
|
14.0
|
Equity in net earnings
of affiliates, net of cash received
|
(16.2)
|
|
(16.4)
|
Deferred income tax
benefit
|
(7.3)
|
|
(3.9)
|
Other
|
17.7
|
|
2.4
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts and notes
receivable, net
|
24.1
|
|
(298.1)
|
Inventories,
net
|
(420.1)
|
|
(402.6)
|
Other current and
noncurrent assets
|
16.8
|
|
(69.9)
|
Accounts
payable
|
74.2
|
|
39.2
|
Accrued
expenses
|
(358.2)
|
|
(155.9)
|
Other current and
noncurrent liabilities
|
45.4
|
|
33.1
|
Total
adjustments
|
(538.0)
|
|
(789.7)
|
Net cash used in
operating activities
|
(370.0)
|
|
(557.1)
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property,
plant and equipment
|
(95.0)
|
|
(125.3)
|
Proceeds from sale of
property, plant and equipment
|
0.2
|
|
0.1
|
Purchase of
businesses, net of cash acquired
|
—
|
|
(0.9)
|
Investments in
unconsolidated affiliates, net
|
—
|
|
(0.1)
|
Other
|
—
|
|
(2.6)
|
Net cash used in
investing activities
|
(94.8)
|
|
(128.8)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
indebtedness
|
2,380.6
|
|
501.7
|
Repayments of
indebtedness
|
(0.4)
|
|
(4.4)
|
Payment of dividends to
stockholders
|
(21.6)
|
|
(18.0)
|
Payment of minimum tax
withholdings on stock compensation
|
(9.7)
|
|
(17.7)
|
Payment of debt
issuance costs
|
(11.9)
|
|
—
|
Net cash provided by
financing activities
|
2,337.0
|
|
461.6
|
Effects of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(11.9)
|
|
(6.5)
|
Increase (decrease) in
cash, cash equivalents and restricted cash
|
1,860.3
|
|
(230.8)
|
Cash, cash equivalents
and restricted cash, beginning of period
|
595.5
|
|
789.5
|
Cash, cash equivalents
and restricted cash, end of period
|
$
2,455.8
|
|
$
558.7
|
|
See accompanying notes
to condensed consolidated financial statements.
|
AGCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share amounts, per share data)
1. 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. For the three months ended
March 31, 2024 and March 31, 2023, the cash received from
receivables sold under the U.S., Canadian, European and Brazilian
accounts receivable sales agreements was approximately $2.4 billion and $1.7
billion, respectively.
In addition, the Company sells certain trade receivables under
factoring arrangements to other financial institutions around the
world. During the three months ended March
31, 2024 and March 31, 2023,
the cash received from these arrangements was approximately
$213.3 million and $233.3 million, respectively.
Losses on sales of receivables associated with the accounts
receivable financing facilities discussed above, reflected within
"Other expense, net" in the Company's Condensed Consolidated
Statements of Operations, were approximately $27.9 million and $28.5
million during the three months ended March 31, 2024 and 2023, respectively.
The Company's finance joint ventures in Europe, Brazil and Australia also provide wholesale financing
directly to the Company's dealers. As of March 31, 2024 and December 31, 2023, these finance joint ventures
had approximately $218.6 million and
$211.3 million, respectively, of
outstanding accounts receivable associated with these
arrangements.
2. INVENTORIES
Inventories, net at March 31, 2024
and December 31, 2023 were as follows
(in millions):
|
March 31,
2024
|
|
December 31,
2023
|
Finished
goods
|
$
1,608.6
|
|
$
1,460.7
|
Repair and replacement
parts
|
831.9
|
|
823.1
|
Work in
process
|
379.8
|
|
255.2
|
Raw
materials
|
961.6
|
|
901.7
|
Inventories,
net
|
$
3,781.9
|
|
$
3,440.7
|
3. INDEBTEDNESS
Long-term debt consisted of the following at March 31, 2024 and December 31, 2023 (in millions):
|
March 31,
2024
|
|
December 31,
2023
|
Credit facility,
expires 2027
|
$
580.0
|
|
$
—
|
1.002% EIB Senior term
loan due 2025
|
269.7
|
|
276.7
|
EIB Senior Term Loan
due 2029
|
269.7
|
|
276.7
|
EIB Senior Term Loan
due 2030
|
183.4
|
|
—
|
Senior term loans due
between 2025 and 2028
|
158.0
|
|
162.1
|
0.800% Senior notes due
2028
|
647.2
|
|
664.0
|
5.450% Senior notes due
2027
|
400.0
|
|
—
|
5.800% Senior notes due
2034
|
700.0
|
|
—
|
Term Loan Facility
borrowings
|
500.0
|
|
—
|
Other long-term
debt
|
2.9
|
|
3.1
|
Debt issuance
costs
|
(13.5)
|
|
(3.1)
|
|
3,697.4
|
|
1,379.5
|
Less:
|
|
|
|
Current portion of
other long-term debt
|
(2.0)
|
|
(2.3)
|
1.002% EIB Senior term
loan due 2025
|
(269.7)
|
|
—
|
Total long-term
indebtedness
|
$
3,425.7
|
|
$
1,377.2
|
As of March 31, 2024 and
December 31, 2023, the Company had
short-term borrowings due within one year excluding the current
portion of long-term debt, of approximately $28.7 million and $12.7
million, respectively.
European Investment Bank ("EIB") Senior Term Loan due
2030
On January 25, 2024, the Company
entered into an additional multi-currency Finance Contract with the
EIB permitting the Company to borrow up to €170.0 million. On
February 15, 2024, the Company
borrowed €170.0 million (or approximately $183.4 million as of March
31, 2024) under the arrangement. The loan matures on
February 15, 2030. Interest is
payable on the term loan at 3.416% per annum, payable semi-annually
in arrears.
5.450% Senior Notes due 2027 and 5.800%
Senior Notes due 2034
On March 21, 2024, the Company
issued (i) $400.0 million aggregate
principal amount of 5.450% Senior Notes due 2027 (the "2027 Notes")
and (ii) $700.0 million aggregate
principal amount of 5.800% Notes due 2034 (the "2034 Notes", and
together with the 2027 Notes, the "Notes"). The Notes are unsecured
and unsubordinated indebtedness of the Company and are guaranteed
on a senior unsecured basis, jointly and severally, by certain
direct and indirect subsidiaries of the Company. The 2027 Notes
mature on March 21, 2027, and
interest is payable semi-annually, in arrears, at 5.450%. The 2034
Notes mature on March 21, 2034, and
interest is payable semi-annually, in arrears, at 5.800%.
Credit Facility and Term Loan Facility
The Company has a credit facility providing for a $1.25 billion multi-currency unsecured revolving
credit facility ("Credit Facility") that matures on December 19, 2027. Interest accrues on amounts
outstanding for any borrowings denominated in United States dollars, at the Company's
option, at either (1) the Secured Overnight Financing Rate ("SOFR")
plus 0.1% plus a margin ranging from 0.875% to 1.875% based on the
Company's credit rating, or (2) the base rate, which is the highest
of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus
0.5%, and (iii) Term SOFR for a one-month tenor plus 1.0%, plus a
margin ranging from 0.000% to 0.875% based on the Company's credit
rating. Interest accrues on amounts outstanding for any borrowings
denominated in Euros at the Euro Interbank Offered Rate ("EURIBOR")
plus a margin ranging from 0.875% to 1.875% based on the Company's
credit rating. As of March 31, 2024,
the Company had $580.0 million in
outstanding borrowings under the revolving credit facility.
In December 2023, the Company
amended the Credit Facility to allow for incremental borrowings in
the form of a delayed draw term loan facility in an aggregate
principal amount of $250.0 million.
In March 2024, the Company further
amended the Credit Facility to increase this amount by $250.0 million, for an aggregate amount of
$500.0 million ("Term Loan
Facility"). The Company drew down the facility on March 28, 2024. Borrowings under the Term Loan
Facility bear interest at the same rate and margin as the Credit
Facility. The Term Loan Facility matures on December 19, 2027. As of March 31, 2024, the Company had $500.0 million outstanding under the Term Loan
Facility.
The increase in indebtedness for the three months ended
March 31, 2024 compared to the same
period in 2023 related to the PTx Trimble joint venture
transaction. The transaction closed on April
1, 2024. The Company financed the joint venture transaction
through a combination of the Senior Notes due 2027 and 2034, the
Term Loan Facility and the remainder through other borrowings and
cash on hand.
4. SEGMENT REPORTING
The Company has four operating segments that are also its
reportable segments, which consist of the North America, South
America, Europe/Middle
East and Asia/Pacific/Africa regions. The Company's reportable
segments are geography based and distribute a full range of
agricultural machinery and precision agriculture technology. 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 generally
charged to each segment based on the region and division where the
expenses are incurred. As a result, the components of income from
operations for one segment may not be comparable to another
segment. Segment results for the three months ended March 31, 2024 and 2023 are as follows (in
millions):
Three Months Ended
March 31,
|
|
North
America
|
|
South
America
|
|
Europe/
Middle East
|
|
Asia/Pacific/
Africa
|
|
Total
Segments
|
2024
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
729.6
|
|
$
303.4
|
|
$
1,729.0
|
|
$
166.7
|
|
$
2,928.7
|
Income from
operations
|
|
42.4
|
|
16.2
|
|
282.9
|
|
8.0
|
|
349.5
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
923.1
|
|
$
503.8
|
|
$
1,703.8
|
|
$
202.8
|
|
$
3,333.5
|
Income from
operations
|
|
102.1
|
|
99.5
|
|
239.4
|
|
18.1
|
|
459.1
|
A reconciliation from the segment information to the
consolidated balances for income from operations is set forth below
(in millions):
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
Segment income from
operations
|
$
349.5
|
|
$
459.1
|
Corporate
expenses
|
(53.0)
|
|
(42.1)
|
Amortization of
intangibles
|
(13.9)
|
|
(14.8)
|
Stock compensation
expense
|
(8.0)
|
|
(13.5)
|
Restructuring
expenses
|
(1.0)
|
|
(1.4)
|
Consolidated income
from operations
|
$
273.6
|
|
$
387.3
|
RECONCILIATION OF NON-GAAP MEASURES
This earnings release discloses adjusted income from operations,
adjusted operating margin, adjusted net income, adjusted net income
per share and net sales on a constant currency basis, each of which
exclude amounts that are typically included in the most directly
comparable measure calculated in accordance with U.S. generally
accepted accounting principles ("GAAP"). A reconciliation of each
of those measures to the most directly comparable GAAP measure is
included below.
The following is a reconciliation of reported income from
operations, net income and net income per share to adjusted income
from operations, adjusted net income and adjusted net income per
share for the three months ended March 31,
2024 and 2023 (in millions, except per share data):
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
|
Income From
Operations
|
|
Net
Income(1)
|
|
Net Income
Per Share(1)
|
|
Income From
Operations(2)
|
|
Net
Income(1)(2)
|
|
Net Income
Per Share(1)(2)
|
As reported
|
$
273.6
|
|
$
168.0
|
|
$
2.25
|
|
$
387.3
|
|
$
232.6
|
|
$
3.10
|
Restructuring
expenses(3)
|
1.0
|
|
0.7
|
|
0.01
|
|
1.4
|
|
0.9
|
|
0.01
|
Transaction-related
costs(4)
|
6.2
|
|
4.6
|
|
0.06
|
|
—
|
|
—
|
|
—
|
Brazilian tax amnesty
program(5)
|
—
|
|
—
|
|
—
|
|
—
|
|
29.5
|
|
0.39
|
As adjusted
|
$
280.8
|
|
$
173.3
|
|
$
2.32
|
|
$
388.8
|
|
$
263.1
|
|
$
3.51
|
|
|
(1)
|
Net income and net
income per share amounts are after tax.
|
(2)
|
Rounding may impact
summation of amounts.
|
(3)
|
The restructuring
expenses recorded during the three months ended March 31, 2024 and
March 31, 2023 related primarily to severance and other related
costs associated with the Company's rationalization of certain
manufacturing facilities and administrative offices.
|
(4)
|
The transaction related
costs recorded during the three months ended March 31, 2024 related
to the Company's acquisition of Trimble Inc.'s agriculture business
through the formation of the PTx Trimble joint venture.
|
(5)
|
During the three months
ended March 31, 2023, the Company applied for enrollment in the
Brazilian government's "Litigation Zero" tax amnesty program
whereby cases being disputed at the administrative court level of
review for a period of more than ten years can be considered for
amnesty. The Company recorded its best estimate of the ultimate
settlement under the amnesty program of approximately $29.5 million
within "Income tax provision" during the three months ended March
31, 2023, net of associated U.S. income tax credits.
|
The following is a reconciliation of adjusted operating margin
for the three months ended March 31,
2024 and March 31, 2023 (in
millions):
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
Net sales
|
$
2,928.7
|
|
$
3,333.5
|
|
|
|
|
Income from
operations
|
273.6
|
|
387.3
|
Adjusted income from
operations(1)
|
$
280.8
|
|
$
388.8
|
Operating
margin(2)
|
9.3 %
|
|
11.6 %
|
Adjusted operating
margin(2)
|
9.6 %
|
|
11.7 %
|
|
|
(1)
|
Refer to the previous
table for the reconciliation of income from operations to adjusted
income from operations.
|
(2)
|
Operating margin is
defined as the ratio of income from operations divided by net
sales. Adjusted operating margin is defined as the ratio of
adjusted income from operations divided by net sales.
|
Adjusted targeted operating margin and earnings per share
excludes restructuring expenses, transaction-related costs and
amortization of acquired PTx Trimble intangible assets.
The following table sets forth, for the three months ended
March 31, 2024 and 2023, the impact
to net sales of currency translation by geographical segment (in
millions, except percentages):
|
Three Months Ended
March 31,
|
|
Change due to currency
translation
|
|
2024
|
|
2023
|
|
% change
from 2023
|
|
$
|
|
%
|
North
America
|
$
729.6
|
|
$
923.1
|
|
(21.0) %
|
|
$
3.1
|
|
0.3 %
|
South
America
|
303.4
|
|
503.8
|
|
(39.8) %
|
|
11.4
|
|
2.3 %
|
Europe/Middle
East
|
1,729.0
|
|
1,703.8
|
|
1.5 %
|
|
23.8
|
|
1.4 %
|
Asia/Pacific/Africa
|
166.7
|
|
202.8
|
|
(17.8) %
|
|
(4.6)
|
|
(2.3) %
|
|
$
2,928.7
|
|
$
3,333.5
|
|
(12.1) %
|
|
$
33.7
|
|
1.0 %
|
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SOURCE AGCO Corporation