Market Overview

AGCO Reports Improved Second Quarter Results

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AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment, reported net sales of
approximately $2.5 billion for the second quarter of 2018, an increase
of approximately 17.2% compared to the second quarter of 2017. Reported
net income was $1.14 per share for the second quarter of 2018, and
adjusted net income, excluding restructuring expenses and costs
associated with an early retirement of debt, was $1.32 per share. These
results compare to a reported net income of $1.14 per share and adjusted
net income, excluding restructuring expenses, of $1.15 per share for the
second quarter of 2017. Excluding favorable currency translation impacts
of approximately 3.3%, net sales in the second quarter of 2018 increased
approximately 13.9% compared to the second quarter of 2017.

Net sales for the first six months of 2018 were approximately $4.5
billion, an increase of approximately 19.8% compared to the same period
in 2017. Excluding favorable currency translation impacts of
approximately 5.9%, net sales for the first six months of 2018 increased
approximately 13.9% compared to the same period in 2017. For the first
six months of 2018, reported net income was $1.44 per share, and
adjusted net income, excluding restructuring expenses and costs
associated with an early retirement of debt, was $1.68 per share. These
results compare to reported net income of $1.02 per share and adjusted
net income, excluding restructuring expenses and a non-cash expense
related to waived stock compensation, of $1.13 per share for the first
six months of 2017.

Second Quarter Highlights

  • Reported regional sales results(1): North America
    +25.4%, Europe/Middle East ("EME") +21.7%, South America (12.8)%,
    Asia/Pacific/Africa ("APA") +4.4%
  • Constant currency regional sales results(1)(2):
    North America +24.7%, EME +14.2%, South America +1.3%, APA (0.7)%
  • Regional operating margin performance: North America 6.3%, EME 13.5%,
    South America (7.6)%, APA 2.7%
  • Share repurchase program reduced outstanding shares by 0.5 million
    during the first six months of 2018
(1) As compared to second quarter 2017
(2) Excludes currency translation impact. See reconciliation in appendix.

"AGCO delivered solid sales and earnings growth in the second quarter,"
stated Martin Richenhagen, Chairman, President and Chief Executive
Officer. "Healthy industry conditions in Western Europe and improved
market demand in North America supported sales and margin improvement in
those regions offsetting weak results in South America. Our sales
performance and customer response to AGCO's new product line-up confirms
our additional investments in product development are paying off. We
continue to focus on innovative products like our new Rogator C-series
high performance sprayers and our expanding line-up of platform designed
tractors that deliver productivity on the farm and expand our market
position."

Market Update

Industry Unit Retail Sales

Six months ended June 30, 2018  

Tractors
Change from
Prior
Year Period

 

Combines
Change from
Prior
Year Period

 
North America(1) 3% 15%
South America (7)% ~Flat
Western Europe(2) 1% 14%
 

(1)Excludes compact tractors.
(2)Based
on Company estimates.

 

"Global crop conditions were mixed through the first half of 2018,"
continued Mr. Richenhagen. "Crop production estimates in the U.S. have
recovered following a cold wet spring, and forecasts are now calling for
another solid harvest. The lack of spring rain across much of Eastern
Europe and parts of Western Europe is negatively impacting crop
development. A dry weather pattern across Argentina and southern Brazil
has resulted in decreased 2018 crop production expectations. Global
industry sales of farm equipment in the first half of 2018 were also
mixed across AGCO's key markets, with future demand dependent on factors
such as crop conditions, commodity price development and government
trade and farm support policy. North American industry retail sales were
up in the first six months of 2018 compared to the same period in 2017
as row crop farmers are beginning to replace their equipment 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 increased slightly in the first
half of 2018, following a year of improved profitability by the arable
farming segment as well as healthy economics for dairy producers.
Industry sales growth in the United Kingdom and Italy was partially
offset by declines in France. For the full year of 2018, industry demand
in Western Europe is expected to be relatively flat compared to 2017.
Industry retail sales in South America decreased during the first six
months of 2018. Industry demand in Brazil softened in advance of
improvements in the government financing program, which started on July
1. In addition, industry sales declined in Argentina in response to a
weak first harvest. Industry demand in South America is expected to
improve in the second half of the year and 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 due to the impact of lower crop
production on farm income. 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)

                   
Three Months Ended June 30, 2018 2017

%
change
from
2017

% change
from 2017 due
to currency
translation(1)

% change from
2017 due to
acquisitions(1)

 
North America $ 600.5 $ 478.8 25.4% 0.7% 5.0%
South America 219.6 251.9 (12.8)% (14.1)% 2.1%
Europe/Middle East 1,545.2 1,269.5 21.7% 7.5% 3.7%
Asia/Pacific/Africa 172.3   165.0   4.4% 5.1% 1.3%
Total $ 2,537.6   $ 2,165.2   17.2% 3.3% 3.6%
 
Six Months Ended June 30, 2018 2017

%
change
from
2017

% change
from 2017 due
to currency
translation(1)

% change from
2017 due to
acquisitions(1)

North America $ 1,103.4 $ 861.4 28.1% 1.2% 10.7%
South America 401.7 474.1 (15.3)% (9.8)% 1.7%
Europe/Middle East 2,708.9 2,162.0 25.3% 11.0% 3.7%
Asia/Pacific/Africa 331.1   295.3   12.1% 7.0% 2.2%
Total $ 4,545.1   $ 3,792.8   19.8% 5.9% 4.9%

(1) See appendix for additional disclosures

 

North America

Net sales in the North American region increased 26.9% in the first six
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 $82.9 million in its seasonally strong first half.
Excluding the impact of acquisitions and currency translation, sales
grew approximately 16.2% compared to the first six months of 2017. The
largest increases were in sprayers, high horsepower tractors and hay
tools. Income from operations for the first six months of 2018 improved
approximately $37.8 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

AGCO's South American net sales decreased 5.5% in the first six months
of 2018 compared to the first six months of 2017, excluding the impact
of unfavorable currency translation. Sales declined in both Argentina
and Brazil. Income from operations dropped approximately $38.5 million
for the first six months of 2018 compared to the same period in 2017.
Lower sales and production volumes, the impact of material cost
inflation, costs associated with transitioning to new products with tier
3 emission technology, as well as the impact of the Brazilian trucking
strike on sales and production, all contributed to the decrease in
income from operations.

Europe/Middle East

Net sales in the AGCO's EME region increased 14.3% in the first six
months of 2018 compared to the same period in 2017, excluding favorable
currency translation impacts. Acquisitions benefited sales by
approximately 3.7% during the first six months compared to the same
period last year. Higher sales in Germany, the United Kingdom and France
produced most of the increase. Income from operations improved
approximately $73.8 million for the first six 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

Asia/Pacific/Africa net sales increased 5.1%, excluding the positive
impact of currency translation, in the first six months of 2018 compared
to the same period in 2017. Higher sales in Australia were partially
offset by lower sales in Asia. Acquisitions benefited sales by
approximately 2.2% during the first six months of 2018 compared to the
same period last year. Income from operations improved approximately
$1.5 million in the first six 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 sales as well as the benefits
resulting from the Company's cost reduction initiatives, partially
offset by increased engineering expenses. Based on these assumptions,
2018 earnings per share are targeted at approximately $3.46 on a
reported basis, or approximately $3.70 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, July 31, 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, 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 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 agricultural solutions and supports more productive
farming through its full line of equipment and related services. AGCO
products are sold through five core brands, Challenger®, Fendt®, GSI®,
Massey Ferguson® and Valtra®, supported by Fuse® precision technologies
and farm optimization services. Founded in 1990, AGCO is headquartered
in Duluth, GA, USA. In 2017, AGCO had net sales of approximately $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

   

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in millions)

 
June 30, 2018 December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents $ 280.6 $ 367.7
Accounts and notes receivable, net 1,047.1 1,019.4
Inventories, net 2,131.9 1,872.9
Other current assets 384.3   367.7  
Total current assets 3,843.9 3,627.7
Property, plant and equipment, net 1,392.9 1,485.3
Investment in affiliates 411.2 409.0
Deferred tax assets 110.8 112.2
Other assets 153.5 147.1
Intangible assets, net 608.1 649.0
Goodwill 1,503.7   1,541.4  
Total assets $ 8,024.1   $ 7,971.7  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 17.9 $ 24.8
Short-term borrowings 197.7 90.8
Accounts payable 898.3 917.5
Accrued expenses 1,385.5 1,407.9
Other current liabilities 201.1   209.6  
Total current liabilities 2,700.5 2,650.6
Long-term debt, less current portion and debt issuance costs 1,728.0 1,618.1
Pensions and postretirement health care benefits 230.6 247.3
Deferred tax liabilities 122.6 130.5
Other noncurrent liabilities 244.3   229.9  
Total liabilities 5,026.0   4,876.4  
 
Stockholders' Equity:
AGCO Corporation stockholders' equity:
Common stock 0.8 0.8
Additional paid-in capital 121.4 136.6
Retained earnings 4,346.1 4,253.8
Accumulated other comprehensive loss (1,533.5 ) (1,361.6 )
Total AGCO Corporation stockholders' equity 2,934.8 3,029.6
Noncontrolling interests 63.3   65.7  
Total stockholders' equity 2,998.1   3,095.3  
Total liabilities and stockholders' equity $ 8,024.1   $ 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 June 30,
2018   2017
Net sales $ 2,537.6 $ 2,165.2
Cost of goods sold 1,981.3   1,689.8  
Gross profit 556.3 475.4
Selling, general and administrative expenses 271.8 234.6
Engineering expenses 93.0 76.8
Restructuring expenses 2.7 0.4
Amortization of intangibles 18.2 13.8
Bad debt expense 2.5   1.5  
Income from operations 168.1 148.3
Interest expense, net 21.2 11.3
Other expense, net 27.2   17.6  
Income before income taxes and equity in net earnings of affiliates 119.7 119.4
Income tax provision 38.5   36.9  
Income before equity in net earnings of affiliates 81.2 82.5
Equity in net earnings of affiliates 9.2   9.1  
Net income 90.4 91.6
Net loss (income) attributable to noncontrolling interests 1.0   (0.1 )
Net income attributable to AGCO Corporation and subsidiaries $ 91.4   $ 91.5  
Net income per common share attributable to AGCO Corporation and
subsidiaries:
Basic $ 1.15   $ 1.15  
Diluted $ 1.14   $ 1.14  
Cash dividends declared and paid per common share $ 0.15   $ 0.14  
Weighted average number of common and common equivalent shares
outstanding:
Basic 79.3 79.5
Diluted 80.2 80.1
 

See accompanying notes to condensed consolidated financial
statements.

 
 

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in millions, except per share data)

 
Six Months Ended June 30,
2018   2017
Net sales $ 4,545.1 $ 3,792.8
Cost of goods sold 3,560.8   2,987.1  
Gross profit 984.3 805.7
Selling, general and administrative expenses 536.4 457.3
Engineering expenses 183.9 149.9
Restructuring expenses 8.6 5.5
Amortization of intangibles 33.9 27.2
Bad debt expense 2.9   1.8  
Income from operations 218.6 164.0
Interest expense, net 31.5 22.0
Other expense, net 38.7   30.7  
Income before income taxes and equity in net earnings of affiliates 148.4 111.3
Income tax provision 49.9   48.0  
Income before equity in net earnings of affiliates 98.5 63.3
Equity in net earnings of affiliates 16.9   20.1  
Net income 115.4 83.4
Net loss (income) attributable to noncontrolling interests 0.3   (2.0 )
Net income attributable to AGCO Corporation and subsidiaries $ 115.7   $ 81.4  
Net income per common share attributable to AGCO Corporation and
subsidiaries:
Basic $ 1.46   $ 1.02  
Diluted $ 1.44   $ 1.02  
Cash dividends declared and paid per common share $ 0.30   $ 0.28  
Weighted average number of common and common equivalent shares
outstanding:
Basic 79.4   79.5  
Diluted 80.3   80.1  
 

See accompanying notes to condensed consolidated financial
statements.

 
 

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in millions)

 
Six Months Ended June 30,
2018   2017
 
Cash flows from operating activities:
Net income $ 115.4 $ 83.4
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation 115.1 108.9
Amortization of intangibles 33.9 27.2
Stock compensation expense 22.5 22.6
Equity in net earnings of affiliates, net of cash received (13.4 ) (5.6 )
Deferred income tax (benefit) provision (14.3 ) 0.6
Other 1.3 1.8
Changes in operating assets and liabilities:
Accounts and notes receivable, net (83.0 ) (94.3 )
Inventories, net (396.3 ) (316.5 )
Other current and noncurrent assets (47.3 ) (48.4 )
Accounts payable 7.9 120.6
Accrued expenses 6.7 9.9
Other current and noncurrent liabilities 47.2   23.4  
Total adjustments (319.7 ) (149.8 )
Net cash used in operating activities (204.3 ) (66.4 )
Cash flows from investing activities:
Purchases of property, plant and equipment (89.8 ) (92.3 )
Proceeds from sale of property, plant and equipment 2.3 1.6
Investment in unconsolidated affiliates (5.8 ) (0.8 )
Other 0.4    
Net cash used in investing activities (92.9 ) (91.5 )
Cash flows from financing activities:
Proceeds from indebtedness, net 282.1 54.8
Purchases and retirement of common stock (34.3 )
Payment of dividends to stockholders (23.8 ) (22.2 )
Payment of minimum tax withholdings on stock compensation (3.5 ) (4.0 )
Investments by noncontrolling interests   0.2  
Net cash provided by financing activities 220.5   28.8  
Effects of exchange rate changes on cash and cash equivalents (10.4 ) 17.2  
Decrease in cash and cash equivalents (87.1 ) (111.9 )
Cash and cash equivalents, beginning of period 367.7   429.7  
Cash and cash equivalents, end of period $ 280.6   $ 317.8  
 

See accompanying notes to condensed consolidated financial
statements.

 

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

1. STOCK COMPENSATION EXPENSE

The Company recorded stock compensation expense as follows:

    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Cost of goods sold $ 1.1 $ 1.0 $ 1.9 $ 1.6
Selling, general and administrative expenses 12.5   9.8   20.9   21.2
Total stock compensation expense $ 13.6   $ 10.8   $ 22.8   $ 22.8
 

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
six months ended June 30, 2018, the Company recorded an additional $2.7
million and $8.6 million, respectively, of severance and related costs
associated with further rationalizations associated with the termination
of approximately 340 employees, and paid approximately $8.7 million of
severance and associated costs. The remaining $10.1 million of accrued
severance and other related costs as of June 30, 2018, inclusive of
approximately $0.7 million of negative foreign currency translation
impacts, are expected to be paid primarily during 2018.

3. INDEBTEDNESS

Long-term debt at June 30, 2018 and December 31, 2017 consisted of the
following:

  June 30, 2018   December 31, 2017
1.056% Senior term loan due 2020 $ 232.9 $ 239.8
Credit facility, expires 2020 799.9 471.2
Senior term loan due 2021 116.4 119.9

5⅞% Senior notes due 2021

115.9 305.3
Senior term loans due between 2019 and 2026 436.6 449.7
Other long-term debt 46.8 61.0
Debt issuance costs (2.6 ) (4.0 )
1,745.9 1,642.9
Less: Current portion of other long-term debt (17.9 ) (24.8 )
Total long-debt, less current portion $ 1,728.0   $ 1,618.1  
 

During the three months ended June 30, 2018, the Company completed a
voluntary cash tender offer to purchase any and all of its outstanding 57/8%
senior notes at a cash purchase price of $1,077.50 per $1,000.00 of
senior notes. The Company repurchased approximately $185.9 million of
principal amount of the senior notes for approximately $200.3 million,
plus accrued interest. The repurchase resulted in a loss on
extinguishment of debt of approximately $15.7 million, including
associated fees. The Company also recorded approximately $3.0 million of
accelerated amortization of the deferred gain related to a terminated
interest rate swap instrument associated with the senior notes. Both the
loss on extinguishment and the accelerated amortization were reflected
in "Interest expense, net," for the three months ended June 30, 2018.

As of June 30, 2018 and December 31, 2017, the Company had short-term
borrowings due within one year of approximately $197.7 million and $90.8
million, respectively, primarily in China, Brazil and Europe.

4. INVENTORIES

Inventories at June 30, 2018 and December 31, 2017 were as follows:

  June 30, 2018   December 31, 2017
Finished goods $ 781.2 $ 684.1
Repair and replacement parts 611.4 605.9
Work in process 264.1 178.7
Raw materials 475.2   404.2
Inventories, net $ 2,131.9   $ 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 June 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 $1.4 billion and $1.3 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 $9.7 million and $17.5 million, respectively, during
the three and six months ended June 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 $8.9
million and $17.2 million, respectively, during the three and six months
ended June 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 June 30, 2018 and December 31, 2017, these finance joint ventures had
approximately $48.2 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
six months ended June 30, 2018 and 2017 is as follows:

  Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
Basic net income per share:
Net income attributable to AGCO Corporation and subsidiaries $ 91.4   $ 91.5   $ 115.7   $ 81.4
Weighted average number of common shares outstanding 79.3   79.5   79.4   79.5
Basic net income per share attributable to AGCO Corporation and
subsidiaries
$ 1.15   $ 1.15   $ 1.46   $ 1.02
Diluted net income per share:
Net income attributable to AGCO Corporation and subsidiaries $ 91.4   $ 91.5   $ 115.7   $ 81.4
Weighted average number of common shares outstanding 79.3 79.5 79.4 79.5
Dilutive stock-settled appreciation rights, performance share awards
and restricted stock units
0.9   0.6   0.9   0.6
Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net income
per share
80.2   80.1   80.3   80.1
Diluted net income per share attributable to AGCO Corporation and
subsidiaries
$ 1.14   $ 1.14   $ 1.44   $ 1.02
 

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 six months ended June 30,
2018 and 2017 are as follows:

Three Months Ended June 30,    

North

America

    South

America

    Europe/

Middle East

    Asia/

Pacific/Africa

   

Consolidated

 
2018
Net sales $ 600.5 $ 219.6 $ 1,545.2 $ 172.3 $ 2,537.6
Income (loss) from operations 37.6 (16.7 ) 208.5 4.6 234.0
 
2017
Net sales $ 478.8 $ 251.9 $ 1,269.5 $ 165.0 $ 2,165.2
Income from operations 23.6 2.8 170.3 5.7 202.4
 
Six Months Ended June 30,     North

America

    South

America

    Europe/

Middle East

    Asia/

Pacific/Africa

   

Consolidated

 
2018
Net sales $ 1,103.4 $ 401.7 $ 2,708.9 $ 331.1 $ 4,545.1
Income (loss) from operations 64.4 (33.3 ) 307.5 9.3 347.9
 
2017
Net sales $ 861.4 $ 474.1 $ 2,162.0 $ 295.3 $ 3,792.8
Income from operations 26.6 5.2 233.8 7.8 273.4
 

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

  Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
Segment income from operations $ 234.0 $ 202.4 $ 347.9 $ 273.4
Corporate expenses (32.5 ) (30.1 ) (65.9 ) (55.5 )
Stock compensation expense (12.5 ) (9.8 ) (20.9 ) (21.2 )
Restructuring expenses (2.7 ) (0.4 ) (8.6 ) (5.5 )
Amortization of intangibles (18.2 ) (13.8 ) (33.9 ) (27.2 )
Consolidated income from operations $ 168.1   $ 148.3   $ 218.6   $ 164.0  
 

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 six months ended
June 30, 2018 and 2017 (in millions, except per share data):

  Three Months Ended June 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 $ 168.1 $ 91.4 $ 1.14 $ 148.3 $ 91.5 $ 1.14
Restructuring expenses(2) 2.7 2.0 0.02 0.4 0.3 0.01
Extinguishment of debt (3)   12.7   0.16      
As adjusted $ 170.8   $ 106.1   $ 1.32   $ 148.7   $ 91.8   $ 1.15
(1) Net income and net income per share amounts are after tax.
(2) The restructuring expenses recorded during the three months ended
June 30, 2018 and 2017 related primarily to severance costs
associated with the Company's rationalization of certain U.S.,
European and South American manufacturing operations and various
administrative offices.
(3) The Company repurchased approximately $185.9 million of its
outstanding 57/8% 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.
 
  Six Months Ended June 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 $ 218.6 $ 115.7 $ 1.44 $ 164.0 $ 81.4 $ 1.02
Restructuring expenses(2) 8.6 6.2 0.08 5.5 4.1 0.05
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 $ 227.2   $ 134.6   $ 1.68   $ 174.3   $ 90.3   $ 1.13
(1) Net income and net income per share amounts are after tax.
(2) The restructuring expenses recorded during the six months ended June
30, 2018 and 2017 related primarily to severance costs associated
with the Company's rationalization of certain U.S., European and
South American manufacturing operations and various administrative
offices.
(3) The Company repurchased approximately $185.9 million of its
outstanding 57/8% 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 $ 3.46
Restructuring expenses 0.08
Extinguishment of debt   0.16
As adjusted targeted(2) $ 3.70
(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
the other adjustments incurred during the six months ended June 30,
2018. Full year restructuring expenses could differ based on future
restructuring activity.
 

The following tables set forth, for the three and six months ended
June 30, 2018, the impact to net sales of currency translation and
recent acquisitions by geographical segment (in millions, except
percentages):

 

Three Months Ended
June 30,

 

Change due to currency
translation

 

Change due to
acquisitions

2018   2017  

% change
from 2017

$

 

%

$

 

%

North America $ 600.5 $ 478.8 25.4 % $ 3.4 0.7 % $ 23.8 5.0 %
South America 219.6 251.9 (12.8 )% (35.6 ) (14.1 )% 5.4 2.1 %
Europe/Middle East 1,545.2 1,269.5 21.7 % 95.1 7.5 % 46.9 3.7 %
Asia/Pacific/Africa 172.3   165.0   4.4 % 8.4   5.1 % 2.1   1.3 %
$ 2,537.6   $ 2,165.2   17.2 % $ 71.3   3.3 % $ 78.2   3.6 %
 
 

Six Months Ended
June 30,

 

Change due to currency
translation

 

Change due to
acquisitions

2018   2017  

% change
from 2017

$

 

%

$

 

%

North America $ 1,103.4 $ 861.4 28.1 % $ 10.5 1.2 % $ 92.3 10.7 %
South America 401.7 474.1 (15.3 )% (46.3 ) (9.8 )% 7.9 1.7 %
Europe/Middle East 2,708.9 2,162.0 25.3 % 238.7 11.0 % 80.9 3.7 %
Asia/Pacific/Africa 331.1   295.3   12.1 % 20.7   7.0 % 6.5   2.2 %
$ 4,545.1   $ 3,792.8   19.8 % $ 223.6   5.9 % $ 187.6   4.9 %

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