UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from _________ to _________ | |||||
Commission File Number: 001-12930
AGCO CORPORATION
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant's telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act | ||||||||
| Title of Class | Trading Symbol | Name of exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | ☐ | Accelerated filer | ☐ | Non-accelerated filer | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of November 1, 2024, there were 74,645,281 shares of the registrant’s common stock, par value of $0.01 per share, outstanding.
AGCO CORPORATION
INDEX
| Page Numbers | |||||||||||
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| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 4. | |||||||||||
| Item 1. | |||||||||||
| Item 1A. | |||||||||||
| Item 2. | |||||||||||
| Item 5. | |||||||||||
| Item 6. | |||||||||||
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AGCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions, except share amounts)
| September 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts and notes receivable, net | |||||||||||
| Inventories, net | |||||||||||
| Other current assets | |||||||||||
Current assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Right-of-use lease assets | |||||||||||
| Investments in affiliates | |||||||||||
| Deferred tax assets | |||||||||||
| Other assets | |||||||||||
| Noncurrent assets held for sale | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Borrowings due within one year | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued expenses | |||||||||||
| Other current liabilities | |||||||||||
Current liabilities held for sale | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, less current portion and debt issuance costs | |||||||||||
| Operating lease liabilities | |||||||||||
| Pension and postretirement health care benefits | |||||||||||
| Deferred tax liabilities | |||||||||||
| Other noncurrent liabilities | |||||||||||
| Noncurrent liabilities held for sale | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 17) | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Stockholders’ Equity: | |||||||||||
| AGCO Corporation stockholders’ equity: | |||||||||||
Preferred stock; $ | |||||||||||
Common stock; $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total AGCO Corporation stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities, redeemable noncontrolling interests and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
3
AGCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
| Three Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net sales | $ | $ | |||||||||
| Cost of goods sold | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | |||||||||||
Engineering expenses | |||||||||||
Amortization of intangibles | |||||||||||
| Impairment charges | |||||||||||
Restructuring and business optimization expenses | |||||||||||
Loss on business held for sale | |||||||||||
Income from operations | |||||||||||
Interest expense, net | |||||||||||
Other expense, net | |||||||||||
Income before income taxes and equity in net earnings of affiliates | |||||||||||
Income tax provision | |||||||||||
Income before equity in net earnings of affiliates | |||||||||||
Equity in net earnings of affiliates | |||||||||||
Net income | |||||||||||
| Net loss attributable to noncontrolling interests | |||||||||||
Net income attributable to AGCO Corporation and subsidiaries | $ | $ | |||||||||
Net income per common share attributable to AGCO Corporation and subsidiaries: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ | |||||||||
| Cash dividends declared and paid per common share | $ | $ | |||||||||
| Weighted average number of common and common equivalent shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted | |||||||||||
See accompanying notes to condensed consolidated financial statements.
4
AGCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net sales | $ | $ | |||||||||
| Cost of goods sold | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | |||||||||||
Engineering expenses | |||||||||||
Amortization of intangibles | |||||||||||
| Impairment charges | |||||||||||
Restructuring and business optimization expenses | |||||||||||
Loss on business held for sale | |||||||||||
| Income from operations | |||||||||||
Interest expense, net | |||||||||||
Other expense, net | |||||||||||
Income (loss) before income taxes and equity in net earnings of affiliates | ( | ||||||||||
Income tax provision | |||||||||||
Income (loss) before equity in net earnings of affiliates | ( | ||||||||||
Equity in net earnings of affiliates | |||||||||||
Net income (loss) | ( | ||||||||||
| Net loss attributable to noncontrolling interests | |||||||||||
Net income (loss) attributable to AGCO Corporation and subsidiaries | $ | ( | $ | ||||||||
Net income (loss) per common share attributable to AGCO Corporation and subsidiaries: | |||||||||||
Basic | $ | ( | $ | ||||||||
Diluted | $ | ( | $ | ||||||||
| Cash dividends declared and paid per common share | $ | $ | |||||||||
| Weighted average number of common and common equivalent shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted | |||||||||||
See accompanying notes to condensed consolidated financial statements.
5
AGCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited and in millions)
| Three Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
Net income | $ | $ | |||||||||
Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
Defined pension and postretirement benefit plans, net of tax | |||||||||||
| Deferred gains and losses on derivatives, net of tax | |||||||||||
Other comprehensive income (loss) | ( | ||||||||||
Comprehensive income | |||||||||||
Comprehensive loss attributable to noncontrolling interests | |||||||||||
Comprehensive income attributable to AGCO Corporation and subsidiaries | $ | $ | |||||||||
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
Net income (loss) | $ | ( | $ | ||||||||
Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
Defined pension and postretirement benefit plans, net of tax | |||||||||||
| Deferred gains and losses on derivatives, net of tax | ( | ||||||||||
Other comprehensive income (loss) | ( | ||||||||||
Comprehensive income (loss) | ( | ||||||||||
| Comprehensive loss attributable to noncontrolling interests | |||||||||||
Comprehensive income (loss) attributable to AGCO Corporation and subsidiaries | $ | ( | $ | ||||||||
See accompanying notes to condensed consolidated financial statements.
6
AGCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | ( | $ | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of intangibles | |||||||||||
| Stock compensation expense | |||||||||||
| Impairment charges | |||||||||||
| Loss on business held for sale | |||||||||||
| Equity in net earnings of affiliates, net of cash received | ( | ( | |||||||||
Deferred income tax benefit | ( | ( | |||||||||
| Other | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
| Accounts and notes receivable, net | ( | ( | |||||||||
| Inventories, net | ( | ( | |||||||||
| Other current and noncurrent assets | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expenses | ( | ||||||||||
| Other current and noncurrent liabilities | |||||||||||
| Total adjustments | ( | ||||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Proceeds from sale of property, plant and equipment | |||||||||||
Purchase of businesses, net of cash acquired | ( | ( | |||||||||
Investments in unconsolidated affiliates, net | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from indebtedness | |||||||||||
| Repayments of indebtedness | ( | ( | |||||||||
| Payment of dividends to stockholders | ( | ( | |||||||||
| Payment of minimum tax withholdings on stock compensation | ( | ( | |||||||||
| Payment of debt issuance costs | ( | ( | |||||||||
Investments by noncontrolling interests, net | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Effects of exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | |||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
Cash, cash equivalents and restricted cash, end of period(1) | $ | $ | |||||||||
____________________________________
(1) Includes $20.0 million of cash and cash equivalents classified as held for sale as of September 30, 2024.
See accompanying notes to condensed consolidated financial statements.
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AGCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of AGCO Corporation and its subsidiaries (the “Company” or “AGCO”) included herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, comprehensive income (loss) and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Results for interim periods are not necessarily indicative of the results for the year. Certain prior-period amounts have been reclassified in the accompanying condensed consolidated financial statements and notes thereto in order to conform to the current period presentation.
The Company has a wholly-owned subsidiary in Turkey that distributes agricultural equipment and replacement parts. On the basis of available data related to inflation indices and as a result of the devaluation of the Turkish lira relative to the United States dollar, the Turkish economy was determined to be highly inflationary during 2022. A highly inflationary economy is one where the cumulative inflation rate for the three years preceding the beginning of the reporting period, including interim reporting periods, is in excess of 100 percent. For subsidiaries operating in highly inflationary economies, the United States dollar is the functional currency. Remeasurement adjustments for financial statements in highly inflationary economies and other transactional exchange gains and losses are reported in "Other expense, net" within the Company's Condensed Consolidated Statements of Operations. For the nine months ended and as of September 30, 2024, the Company's wholly-owned subsidiary in Turkey had net sales of approximately $317.9 million and total assets of approximately 5.9 billion Turkish lira (or approximately $173.1 million). The monetary assets and liabilities denominated in the Turkish lira were approximately 4.6 billion Turkish lira (or approximately $134.0 million) and approximately 2.5 billion Turkish lira (or approximately $72.0 million), respectively, as of September 30, 2024. The monetary assets and liabilities were remeasured into United States dollar based on exchange rates as of September 30, 2024.
The Company has a wholly-owned subsidiary in Argentina that assembles and distributes agricultural equipment and replacement parts. In recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina. As a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting from certain capital market operations, usually effected to obtain United States dollars, has broadened significantly. Argentina's economy was determined to be highly inflationary during 2018. In December 2023, the central bank of Argentina adjusted the official foreign currency exchange rate for the Argentine peso, significantly devaluing the currency relative to the United States dollar. For the nine months ended and as of September 30, 2024, the Company's wholly-owned subsidiary in Argentina had net sales of approximately $167.3 million and total assets of approximately 254.7 billion pesos (or approximately $262.3 million). The monetary assets of the Company's operations in Argentina denominated in pesos at the official government rate were approximately 104.4 billion pesos (or approximately $107.5 million), inclusive of approximately 59.8 billion pesos (or approximately $61.6 million) in cash and cash equivalents, as of September 30, 2024. The monetary liabilities of the Company's operations in Argentina denominated in pesos at the official government rate were approximately 15.3 billion pesos (or approximately $15.8 million) as of September 30, 2024. The monetary assets and liabilities were remeasured into United States dollar based on exchange rates as of September 30, 2024. The Company's finance joint venture in Argentina, AGCO Capital Argentina S.A. ("AGCO Capital"), had net monetary assets denominated in pesos at the official government rate of approximately 9.0 billion pesos (or approximately $9.3 million) as of September 30, 2024. All gains and losses resulting from AGCO Capital's remeasurement of its monetary assets and liabilities are reported as part of AGCO Capital's net income, our share of which is included in “Equity in net earnings of affiliates” within our Condensed Consolidated Statements of Operations.
New Accounting Pronouncements to be Adopted
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands annual and interim disclosure requirements and requires entities to disclose its significant segment expense categories and amounts for each reportable segment. The ASU is effective for public entities for fiscal years
8
beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
2. ACQUISITIONS
On September 28, 2023, the Company entered into a Sale and Contribution Agreement among AGCO, Trimble Inc. (“Trimble”) and PTx Trimble, LLC (“PTx Trimble” or the "Joint Venture"), formerly known as Trimble Solutions, LLC, which was subsequently amended and restated on March 31, 2024. On April 1, 2024, pursuant to the terms of an Amended and Restated Sale and Contribution Agreement (the “Agreement”), AGCO and Trimble completed (i) the contribution by Trimble to the Joint Venture of Trimble’s OneAg business (“OneAg”), which is Trimble’s agricultural business, excluding certain Global Navigation Satellite System and guidance technologies, and $8.1 million of cash, (ii) the contribution by AGCO to the Joint Venture of its interest in JCA Industries, LLC d/b/a JCA Technologies and $46.0 million of cash, and (iii) the purchase by AGCO from Trimble of membership interests in the Joint Venture in exchange for the payment by AGCO to Trimble of $1,954.0 million in cash, subject to customary working capital and other adjustments. Immediately following the closing and as a result of the transaction, AGCO directly and indirectly owns an 85 % interest in the Joint Venture and Trimble owns a 15 % interest in the Joint Venture. The purchase price was funded using net proceeds from the issuance of Senior Notes due 2027 and 2034, a term loan facility and the remainder through other borrowings and cash on hand. Refer to Note 9 for further information. AGCO began consolidating PTx Trimble within its consolidated financial statements on April 1, 2024.
The Company is accounting for the Joint Venture transaction as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recorded at their acquisition date fair value. The Company preliminarily allocated the purchase price of the acquisition to identified assets acquired, liabilities assumed, and noncontrolling interests based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income, market or cost approach (or a combination thereof). Fair values of certain assets were determined based on Level 3 inputs, including estimated future cash flows, discount rates, royalty rates, growth rates and sales projections, all of which require significant management judgment and are susceptible to change. The purchase price allocation was based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. Measurement period adjustments to the previously disclosed preliminary fair values of developed technologies, tradename, favorable contracts, customer relationships and redeemable noncontrolling interests as a result of updated valuations were recorded resulting in a decrease of intangible assets of $94.9 million, redeemable noncontrolling interests of $167.2 million and goodwill of $72.0 million during the three months ended September 30, 2024. The adjustment to intangible assets resulted in a reduction of amortization expense of approximately $5.9 million being recorded during the three months ended September 30, 2024. The Company continues to evaluate the valuation of the assets acquired and liabilities assumed related to the acquisition, including inventories, developed technologies, tradename, favorable contracts, customer relationships, deferred taxes and redeemable noncontrolling interests. The final fair value of the net assets acquired may result in adjustments to these assets and liabilities, including goodwill. Any subsequent measurement period adjustments are not expected to have a material impact on the Company's results of operations. The goodwill consists of expected future economic benefits that will arise from expected future product sales, operating efficiencies and sales channel synergies that may result from the Joint Venture. The Company expects that the portion of the goodwill balance allocated to the US business will be deductible for tax purposes, and the goodwill allocated to the Joint Venture’s investments in foreign subsidiaries, primarily in Germany and France, will not be deductible for tax purposes. At this time, the assignment of goodwill to reporting units has not yet been completed.
9
| Purchase Consideration | |||||
| Total cash consideration for OneAg | $ | ||||
| Estimated working capital and other adjustments | ( | ||||
| Equity transaction associated with JCA noncontrolling interest (a) | |||||
| Total purchase consideration | $ | ||||
(a) Equity transaction associated with JCA noncontrolling interest
The transfer of the 15 % interest in AGCO's JCA business is accounted for as an equity transaction. The adjustment to additional paid-in-capital represents the excess of the fair value of the JCA business transferred over its historical carrying amount. The fair value of the JCA business was determined using a discounted cash flow model.
| As of April 1, 2024 | |||||
| Cash | $ | ||||
| Accounts receivable | |||||
| Inventories | |||||
| Other current assets | |||||
| Property, plant and equipment | |||||
| Deferred tax assets | |||||
| Right-of-use lease assets | |||||
| Other assets (non-current) | |||||
| Intangible assets | |||||
| Goodwill | |||||
| Total assets acquired | $ | ||||
| Accounts payable | $ | ||||
| Accrued expenses | |||||
| Other current liabilities | |||||
| Operating lease liabilities | |||||
| Deferred tax liabilities | |||||
| Other noncurrent liabilities | |||||
| Total liabilities assumed | $ | ||||
| Redeemable noncontrolling interests (b) | $ | ||||
| Net assets acquired | $ | ||||
(b) Redeemable noncontrolling interests
Trimble has a put option to sell its noncontrolling interests to the Company, and the Company has a call option to redeem Trimble's noncontrolling interests. The first exercisable date of both the put and call options is April 1, 2027. The put and call options prices are based on multiples of EBITDA, subject to the terms of the Agreement. We estimated the preliminary fair value of the put and call options using a Monte Carlo simulation along with a Black Scholes model assuming an exercise date of three years from the close of the transaction, the first allowable exercise date. We evaluated the put and call options for the
10
redeemable noncontrolling interests under ASC 480, Distinguishing Liabilities from Equity, and classified the redeemable noncontrolling interests as mezzanine equity based on its redemption features. The amount of the net income or loss attributable to the redeemable noncontrolling interests is recorded in “Net loss attributable to noncontrolling interests” within the Company's Condensed Consolidated Statements of Operations. To the extent the redemption value exceeds the initial fair value recorded, the Company will recognize the entire change in the redemption amount each reporting period in retained earnings.
| Fair Value | Useful Life(1) | ||||||||||
| Developed Technology | $ | ||||||||||
| Customer Relationships | |||||||||||
| Tradename | |||||||||||
| Favorable contracts | |||||||||||
| $ | |||||||||||
(1) Based on available information and certain assumptions that we believe are reasonable.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Unaudited Consolidated Pro Forma Results | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
Net income (loss) attributable to AGCO Corporation and subsidiaries | ( | ||||||||||||||||||||||
These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor are they necessarily an indication of future operating results.
The amounts of PTx Trimble's net sales and net loss attributable to AGCO Corporation and subsidiaries consolidated by the Company since the acquisition date were $122.1 million and $21.3 million, respectively.
During the nine months ended September 30, 2024, transaction-related costs of approximately $24.1 million were expensed as incurred to “Selling, general and administrative expenses” in the Company's Condensed Consolidated Statements of Operations.
3. BUSINESS HELD FOR SALE
On July 25, 2024, the Company entered into a Stock and Asset Purchase Agreement to sell the majority of its Grain & Protein (“G&P”) business, which includes the GSI®, Automated Production® (AP), Cumberland®, Cimbria® and Tecno® brands for a purchase price of $700.0 million, subject to customary working capital and other adjustments. As of June 30, 2024, the business met the criteria to be classified as held for sale. The Company recognizes assets and liabilities held for sale at the lower of carrying value or fair market value less costs to sell. The fair market value less costs to sell of the disposal group is evaluated at each reporting period to determine if it has changed, and any subsequent changes are recognized as a gain or loss with a corresponding adjustment to the carrying amount of the disposal group. The loss on business held for sale will be finalized in the fourth quarter upon the closing of the transaction based on the carrying value of the disposal group at the date of
11
sale. The Company determined the intended sale of the G&P business does not represent a strategic shift that will have a major effect on the consolidated results of operations, and therefore results of this business were not classified as discontinued operations. The results of the G&P business are included within our North America, South America, Europe/Middle East and Asia/Pacific/Africa segments. As of September 30, 2024, the Company recognized a loss on business held for sale of $497.8 million, which represents the estimated loss on the business held for sale, and is included within “Loss on business held for sale” in the Company's Condensed Consolidated Statements of Operations. The estimated loss includes $71.6 million of cumulative translation adjustment losses related to the assets expected to be divested and an estimate of costs to sell the business. On November 1, 2024, the Company completed the previously announced sale of the Company’s G&P business to A-AG Holdco Limited, an affiliate of American Industrial Partners. Additionally, on November 1, 2024, the Company repaid the $500.0 million outstanding under the Term Loan Facility and $150.0 million outstanding under the Credit Facility utilizing proceeds from the sale of the Company’s G&P business. Refer to Note 9 for further information.
| September 30, 2024 | |||||
| Current assets held for sale: | |||||
| Cash and cash equivalents | $ | ||||
| Accounts and notes receivable, net | |||||
| Inventories, net | |||||
| Other current assets | |||||
| Total current assets held for sale | |||||
| Property, plant and equipment, net | |||||
| Right-of-use lease assets | |||||
| Other assets | |||||
| Intangible assets, net | |||||
| Goodwill | |||||
| Total assets held for sale | $ | ||||
| Current liabilities held for sale: | |||||
| Accounts payable | $ | ||||
| Accrued expenses | |||||
| Other current liabilities | |||||
| Total current liabilities held for sale | |||||
| Deferred tax liabilities | |||||
| Operating lease liabilities | |||||
| Other noncurrent liabilities | |||||
| Total liabilities held for sale | $ | ||||
| Disposal group, net | $ | ||||
4. 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. The cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements that remain outstanding as of September 30, 2024 and December 31, 2023 was approximately $2.2 billion and $2.5 billion, respectively.
Under the terms of the accounts receivable sales agreements in the U.S., Canada, Europe and Brazil, the Company pays an annual fee related to the servicing of the receivables sold. The Company also pays the respective AGCO Finance
12
entities a subsidized interest payment with respect to the accounts receivable sales agreements, calculated based upon the interest rate charged by Rabobank to its affiliate, and such affiliate then lends to the AGCO Finance entities plus an agreed-upon margin. These fees are reflected within losses on the sales of receivables included within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. The Company reviewed its accounting for the accounts receivable sales agreements and determined that receivables sold under these agreements should be accounted for as off-balance sheet transactions.
In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world. The cash received from trade receivables sold under factoring arrangements that remain outstanding as of September 30, 2024 and December 31, 2023 was approximately $205.4 million and $254.1 million, respectively. Under these arrangements, the Company is required to continue to service the sold receivables at market rates. The Company does not maintain any direct retained interest in the receivables. The Company reviewed its accounting for the accounts receivable sales agreements and determined that receivables sold under these agreements should be accounted for as off-balance sheet transactions.
Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $28.4 million and $92.2 million during the three and nine months ended September 30, 2024, respectively. Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately and $40.5 million and $99.3 million during the three and nine months ended September 30, 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 September 30, 2024 and December 31, 2023, these finance joint ventures had approximately $203.2 million and $211.3 million, respectively, of outstanding accounts receivable associated with these arrangements.
In certain foreign countries, the Company invoices its finance joint ventures directly and the finance joint ventures retain a form of title to the goods delivered to dealers until the dealer makes payment so that the finance joint ventures can recover the goods in the event of dealer or end customer default on payment. This occurs as the laws of some foreign countries do not provide for a seller’s retention of a security interest in goods in the same manner as established in the United States Uniform Commercial Code. The only right the finance joint ventures retain with respect to the title are those enabling recovery of the goods in the event of customer default on payment. The dealer or distributor may not return equipment or replacement parts to the Company while its contract with the finance joint venture is in force, and can only return the equipment to the retail finance joint venture with penalties that would generally not make it economically beneficial to do so.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
| North America | South America | Europe/Middle East | Asia/Pacific/Africa | Unallocated(1) | Consolidated | ||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Acquisitions | |||||||||||||||||||||||||||||||||||
Reclassified to held for sale(2) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Unallocated goodwill relates to the PTx Trimble joint venture transaction. Refer to Note 2 for additional information.
(2) Reclassification resulting from the Company's classification of the G&P business as held for sale, $497.8 million is included within “Loss on business held for sale” in the Company’s Condensed Consolidated Statements of Operations and $218.0 million is included within “Assets held for sale” in the Company’s Condensed Consolidated Balance Sheets. Refer to Note 3 for additional information.
Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of October 1st each year.
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| Gross carrying amounts: | Trademarks and Trade Names | Customer Relationships | Patents and Technology | Other | Total | ||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Acquisitions | |||||||||||||||||||||||||||||
Reclassified to held for sale(1) | ( | ( | ( | ( | |||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Accumulated amortization: | Trademarks and Trade Names | Customer Relationships | Patents and Technology | Other | Total | ||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Amortization expense | |||||||||||||||||||||||||||||
Reclassified to held for sale(1) | ( | ( | ( | ( | |||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Indefinite-lived intangible assets: | Trademarks and Trade Names | ||||
| Balance as of December 31, 2023 | $ | ||||
| Foreign currency translation | |||||
| Balance as of September 30, 2024 | $ | ||||
____________________________________
(1) Reclassification resulting from the Company's classification of the G&P business as held for sale. Refer to Note 3 for additional information.
The Company amortizes certain acquired identifiable intangible assets primarily on a straight-line basis over their estimated useful lives, which range from to 50 years. External-use software, net, developed by the Company and marketed externally, was approximately $0.7 million and $6.3 million as of September 30, 2024 and December 31, 2023, respectively, and classified within “Intangible assets, net.” As of September 30, 2024, $4.6 million of external-use software, net was reclassified to held for sale.
6. INVENTORIES
| September 30, 2024 | December 31, 2023 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Repair and replacement parts | |||||||||||
| Work in process | |||||||||||
| Raw materials | |||||||||||
| Inventories, net | $ | $ | |||||||||
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At September 30, 2024 and December 31, 2023, the Company had recorded $285.9 million and $238.9 million respectively, as a reserve for surplus and obsolete inventories. These reserves are reflected within "Inventories, net" within the Company's Condensed Consolidated Balance Sheets.
7. PRODUCT WARRANTY
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
Acquisitions | |||||||||||||||||||||||
Accruals for warranties issued | |||||||||||||||||||||||
Settlements made and deferred revenue recognized | ( | ( | ( | ( | |||||||||||||||||||
Reclassified to held for sale(1) | ( | ( | |||||||||||||||||||||
| Foreign currency translation | ( | ( | ( | ||||||||||||||||||||
| Balance at September 30 | $ | $ | $ | $ | |||||||||||||||||||
(1) Reclassification resulting from the Company's classification of the G&P business as held for sale. Refer to Note 3 for additional information.
The Company’s agricultural equipment products generally are warranted against defects in material and workmanship for a period of to four years . The Company accrues for future warranty costs at the time of sale based on historical warranty experience. The Company's extended warranty period for the majority of products ranges from to five years . Revenue is recognized for the extended warranty contracts on a straight-line basis, which the Company believes approximates the cost expected to be incurred in satisfying the obligations, over the extended warranty period. Approximately $645.2 million, $679.9 million and $625.6 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2024, December 31, 2023 and September 30, 2023, respectively. Approximately $147.6 million, $120.9 million and $109.6 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2024, December 31, 2023, and September 30, 2023, respectively.
The Company recognizes potential recoveries of the costs associated with warranties it provides when the collection is probable. When specifics of the recovery have been agreed upon with the Company’s suppliers through the confirmation of liability for the recovery, the Company records the recovery within “Accounts and notes receivable, net” in the Company's Condensed Consolidated Balance Sheets. Estimates of the amount of warranty claim recoveries to be received from the Company’s suppliers based upon contractual supplier arrangements are recorded within “Other current assets” in the Company's Condensed Consolidated Balance Sheets.
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8. SUPPLIER FINANCE PROGRAMS
The Company has supplier financing arrangements with certain banks or other intermediaries whereby a bank or intermediary purchases receivables held by the Company’s suppliers. Under the program, suppliers have the option to be paid by the bank or intermediary earlier than the payment due date. When the supplier receives an early payment, they receive discounted amounts, and the Company pays the bank or intermediary the face amount of the invoice on the payment due date. The Company does not reimburse suppliers for any costs incurred for participation in the program. The Company and its suppliers agree on the contractual terms, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the supplier finance programs. The suppliers’ voluntary inclusion in the supplier financing programs has no bearing on the Company’s payment terms. The Company has no economic interest in a supplier’s decision to participate in the programs, and the Company has no direct financial relationship with the banks or other intermediaries as it relates to the supplier finance programs. As of September 30, 2024, payment terms with the majority of the Company’s suppliers are generally 30 to 180 days, which correspond to the contractual terms, with rates that are based on market rates (such as SOFR) plus a credit spread. There are no assets pledged as security under the programs. As of September 30, 2024 and December 31, 2023, the amounts outstanding that remain unpaid to the banks or other intermediaries totaled $77.7 million and $82.7 million, respectively, and are reflected in “Accounts payable” in the Company’s Condensed Consolidated Balance Sheets.
9. INDEBTEDNESS
| September 30, 2024 | December 31, 2023 | ||||||||||
| Credit facility, expires 2027 | $ | $ | |||||||||
Term Loan Facility borrowings | |||||||||||
EIB Senior term loan due 2029 | |||||||||||
EIB Senior term loan due 2030 | |||||||||||
Senior term loans due between 2025 and 2028 | |||||||||||
| Other long-term debt | |||||||||||
| Debt issuance costs | ( | ( | |||||||||
Less: | |||||||||||
| Current portion of other long-term debt | ( | ( | |||||||||
| ( | |||||||||||
Senior term loans due 2025, net of debt issuance costs | ( | ||||||||||
Total long-term indebtedness | $ | $ | |||||||||
Credit Facility and Term Loan Facility
In December 2022, the Company, certain of its subsidiaries and Rabobank, and other named lenders entered into an amendment to its credit facility providing for a $1.25 billion multi-currency unsecured revolving credit facility (“Credit Facility”), which replaced the Company’s former $800.0 million multi-currency unsecured revolving credit facility. The amendment provided an additional $450.0 million in borrowing capacity. An initial borrowing under the credit facility was used to repay and retire a $240.0 million short-term multi-currency revolving credit facility with Rabobank that matured on March 31, 2023. The Credit Facility consists of a $325.0 million United States dollar tranche and a $925.0 million multi-currency tranche for loans denominated in United States dollars, Euros or other currencies to be agreed upon. The Credit Facility matures on December 19, 2027. Interest accrues on amounts outstanding for any borrowings denominated in United States dollars, at the
16
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 September 30, 2024, the Company had $790.0 million in outstanding borrowings under the revolving credit facility and had the ability to borrow $459.9 million. Subsequent to the end of the quarter, on November 1, 2024, the Company repaid $150.0 million outstanding under the Credit Facility utilizing proceeds from the sale of the Company’s G&P business.
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 Term Loan 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 September 30, 2024, the Company had $500.0 million outstanding under the Term Loan Facility. Subsequent to the end of the quarter, on November 1, 2024, the Company repaid the $500.0 million outstanding under the Term Loan Facility utilizing proceeds from the sale of the Company’s G&P business. Refer to Note 3 for further information on the sale of the Company's G&P business.
Uncommitted Credit Facility
In June 2022, the Company entered into an uncommitted revolving credit facility that allows the Company to borrow up to €100.0 million (or approximately $111.7 million as of September 30, 2024). The credit facility expires on December 31, 2026. Any loans will bear interest at the EURIBOR plus a credit spread. As of September 30, 2024 and December 31, 2023, the Company had no 100.0 111.7
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 % Senior Notes due 2034 (the “2034 Notes”, and together with the 2027 Notes, the “Notes”). The Notes are unsecured and guaranteed on a senior unsecured basis by AGCO International Holdings B.V., AGCO International GmbH, Massey Ferguson Corp. and The GSI Group, LLC, direct and indirect subsidiaries of the Company (collectively, the “Guarantors”). 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 %. The Notes contain covenants restricting among other things, the incurrence of certain secured indebtedness.
Prior to February 21, 2027, in the case of the 2027 Notes, and December 21, 2033, in the case of the 2034 Notes, the Company may redeem the 2027 Notes and/or the 2034 Notes at its option, in whole or in part, at any time and from time to time, at the applicable “make-whole” redemption price (calculated as set forth in the the Senior Note Indenture and First Supplemental Indenture and applicable series of the Notes). On or after February 21, 2027, in the case of the 2027 Notes, and December 21, 2033, in the case of the 2034 Notes, the Company may redeem the 2027 Notes or the 2034 Notes, as the case may be, in whole or in part, at any time and from time to time, at a redemption price equal to 100
On October 6, 2021, the Company issued €600.0 million (or approximately $670.2 million as of September 30, 2024) of senior notes at an issue price of 99.993 %. The notes mature on October 6, 2028, and interest is payable annually, in arrears, at 0.800 %. The notes contain covenants restricting, among other things, the incurrence of certain secured indebtedness. The senior notes are subject to both optional and mandatory redemption in certain events.
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On January 25, 2019, the Company borrowed €250.0 million (or approximately $279.3 million as of September 30, 2024) from the EIB. The loan matures on January 24, 2025. The Company is permitted to prepay the loan before its maturity date. Interest is payable on the loan at 1.002 % per annum, payable semi-annually in arrears.
EIB Senior Term Loans due 2029 and 2030
On September 29, 2023, the Company entered into a multi-currency Finance Contract with the EIB permitting the Company to borrow up to €250.0 million to fund up to 50 % of certain investments in research, development and innovation primarily in Germany, France and Finland during the period from 2023 through 2026. On October 26, 2023, the Company borrowed €250.0 million (or approximately $279.3 million as of September 30, 2024) under the arrangement. The loan matures on October 26, 2029. The loan generally can be prepaid at any time upon the election of the Company and must be prepaid upon the occurrence of certain events. Interest is payable on the term loan at 3.980 % per annum, payable semi-annually in arrears. The Company also has to fulfill financial covenants with respect to a net leverage ratio and an interest coverage ratio.
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, for which the proceeds will be used in a similar manner as described for the EIB Senior Term Loan due 2029 above. On February 15, 2024, the Company borrowed €170.0 million (or approximately $189.9 million as of September 30, 2024) under the arrangement. The loan matures on February 15, 2030. The loan generally can be prepaid at any time upon the election of the Company and must be prepaid upon the occurrence of certain events. Interest is payable on the term loan at 3.416 % per annum, payable semi-annually in arrears. The Company also has to fulfill financial covenants with respect to a net leverage ratio and an interest coverage ratio.
Senior Term Loans Due Between 2025 and 2028
In October 2016, the Company borrowed an aggregate amount of €375.0 million through a group of seven related term loan agreements, and in August 2018, the Company borrowed an additional aggregate amount of €338.0 million through a group of another seven related term loan agreements. Of the 2016 term loans, the Company repaid an aggregate amount of €322.5 million in October 2019, October 2021, April 2022 and October 2023. Of the 2018 senior term loans, the Company repaid an aggregate amount of €244.0 million in August 2021, February 2022 and August 2023.
In aggregate, as of September 30, 2024, the Company had indebtedness of €146.5 million (or approximately $163.7 million as of September 30, 2024) through a group of four remaining related term loan agreements. The provisions of the term loan agreements are substantially identical, with the exception of interest rate terms and maturities. As of September 30, 2024, for the term loans with a fixed interest rate, interest is payable in arrears on an annual basis, with interest rates ranging from 1.67 % to 2.26 % and maturity dates between August 2025 and August 2028. For the term loan with a floating interest rate, interest is payable in arrears on a semi-annual basis, with an interest rate based on the EURIBOR plus a margin of 1.10 % and a maturity date of August 2025.
Bridge Facility
On September 28, 2023, the Company entered into a bridge facility commitment letter with Morgan Stanley pursuant to which Morgan Stanley committed to provide a $2.0 billion senior unsecured 364-day bridge facility (the "Bridge Facility"). The availability under the Bridge Facility was reduced to zero by certain permanent financing transactions including the net proceeds from the issuance of the Notes, the Company's entry into the Term Loan Facility and by amounts based on the Company's cash flow, and the Company terminated the Bridge Facility on March 25, 2024.
Other Short-Term Borrowings
As of September 30, 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 $61.6 million and $12.7 million, respectively.
Standby Letters of Credit and Similar Instruments
The Company has arrangements with various banks to issue standby letters of credit or similar instruments, which guarantee the Company’s obligations for the purchase or sale of certain inventories and for potential claims exposure for
18
insurance coverage. At September 30, 2024 and December 31, 2023, outstanding letters of credit totaled approximately $14.7 million and $14.7 million, respectively.
10. RESTRUCTURING AND BUSINESS OPTIMIZATION EXPENSES
On June 24, 2024, the Company announced a restructuring program (the “Program”) in response to increased weakening demand in the agriculture industry. The initial phase of the Program is focused on further reducing structural costs, streamlining the Company’s workforce and enhancing global efficiencies related to changing the Company’s operating model for certain corporate and back-office functions and better leveraging technology and global centers of excellence. The Company estimates that it will incur charges for one-time termination benefits of approximately $150.0 million to $200.0 million in connection with this phase of the Program, primarily consisting of cash charges related to severance payments, employees benefits and related costs. The Company expects the majority of these cash charges will be incurred in 2024 and the first half of 2025.
Additionally, in recent years, the Company announced and initiated several actions to rationalize employee headcount in various manufacturing facilities and administrative offices located in the U.S., Europe, South America, Africa and Asia, in order to reduce costs in response to fluctuating global market demand.
| Balance as of December 31, 2023 | $ | |||||||
| First quarter 2024 provision | ||||||||
| First quarter 2024 cash activity | ( | |||||||
| Foreign currency translation | ( | |||||||
| Balance as of March 31, 2024 | $ | |||||||
| Second quarter 2024 provision, net of reversals | ||||||||
| Second quarter 2024 cash activity | ( | |||||||
Reclassified to held for sale(1) | ( | |||||||
| Foreign currency translation | ( | |||||||
| Balance as of June 30, 2024 | $ | |||||||
| Third quarter 2024 provision, net of reversals | ||||||||
Reclassified to held for sale(1) | ||||||||
| Third quarter 2024 cash activity | ( | |||||||
| Foreign currency translation | ||||||||
| Balance as of September 30, 2024 | $ | |||||||
(1) Reclassification resulting from the Company's classification of the G&P business as held for sale. Refer to Note 3 for additional information.
Business optimization expenses primarily related to professional services costs incurred as part of the restructuring program aimed to reduce structural costs, enhance global efficiencies by changing the Company’s operating model for certain corporate and back-office functions. During the three and nine months ended September 30, 2024, the Company recognized approximately $5.3
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11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Derivative Transactions Designated as Hedging Instruments
Cash Flow Hedges
Foreign Currency Contracts
The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates. The changes in the fair values of these cash flow hedges are recorded in accumulated other comprehensive loss and are subsequently reclassified into “Cost of goods sold” during the period the sales and purchases are recognized. These amounts offset the effect of the changes in foreign currency rates on the related sale and purchase transactions.
The Company designates certain foreign currency contracts as cash flow hedges of expected future sales and purchases. The total notional value of derivatives that were designated as cash flow hedges was approximately $234.7 million and $262.2 million as of September 30, 2024 and December 31, 2023, respectively.
Steel Commodity Contracts
The Company designates certain steel commodity contracts as cash flow hedges of expected future purchases of steel. The total notional value of derivatives that were designated as cash flow hedges was approximately $0.0 million and $2.5 million as of September 30, 2024 and December 31, 2023, respectively.
Interest Rate Risk
The Company entered into treasury rate locks in early March 2024 to fix the interest rate for the 2034 Notes issued on March 21, 2024. The derivative position settled on March 28, 2024 with a cash settlement that offset changes in the benchmark treasury rate between the execution of the treasury rate lock and the debt pricing date for the 2034 Notes. This treasury rate lock was designated as a cash flow hedge and the gain at termination of $8.2 million was recognized in accumulated other comprehensive loss. The amount recognized in accumulated other comprehensive loss is reclassified to interest expense as interest payments are made on the 2034 Notes through the maturity date.
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Recognized in Net Income (Loss) | |||||||||||||||||||||||
| Three Months Ended September 30, | Gain (Loss) Recognized in Accumulated Other Comprehensive Loss | Classification of Gain (Loss) | Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income | Total Amount of the Line Item in the Condensed Consolidated Statements of Operations Containing Hedge Gains (Losses) | |||||||||||||||||||
| 2024 | |||||||||||||||||||||||
Foreign currency contracts(1) | $ | ( | Cost of goods sold | $ | ( | $ | |||||||||||||||||
Commodity contracts(2) | Cost of goods sold | ( | $ | ||||||||||||||||||||
| Treasury rate locks | Interest expense, net | $ | |||||||||||||||||||||
| Total | $ | ( | $ | ( | |||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Foreign currency contracts | $ | ( | Cost of goods sold | $ | ( | $ | |||||||||||||||||
| Commodity contracts | ( | Cost of goods sold | $ | ||||||||||||||||||||
| Total | $ | ( | $ | ( | |||||||||||||||||||
Recognized in Net Income (Loss) | |||||||||||||||||||||||
| Nine Months Ended September 30, | Gain (Loss) Recognized in Accumulated Other Comprehensive Loss | Classification of Gain (Loss) | Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income | Total Amount of the Line Item in the Condensed Consolidated Statements of Operations Containing Hedge Gains (Losses) | |||||||||||||||||||
| 2024 | |||||||||||||||||||||||
Foreign currency contracts(1) | $ | ( | Cost of goods sold | $ | ( | $ | |||||||||||||||||
Commodity contracts(2) | ( | Cost of goods sold | ( | $ | |||||||||||||||||||
| Treasury rate locks | Interest expense, net | $ | |||||||||||||||||||||
| Total | $ | $ | ( | ||||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Foreign currency contracts | $ | ( | Cost of goods sold | $ | ( | $ | |||||||||||||||||
| Commodity contracts | Cost of goods sold | $ | |||||||||||||||||||||
| Total | $ | ( | $ | ( | |||||||||||||||||||
(1) The outstanding contracts as of September 30, 2024 range in maturity through December 2024.
(2) As of September 30, 2024, there were no outstanding contracts with future maturity dates.
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The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the three months ended September 30, 2024 (in millions):
| Before-Tax Amount | Income Tax Expense (Benefit) | After-Tax Amount | ||||||||||||||||||
Accumulated derivative net gains as of June 30, 2024 | $ | $ | $ | |||||||||||||||||
| Net changes in fair value of derivatives | ( | ( | ||||||||||||||||||
| Net losses reclassified from accumulated other comprehensive loss into income | ||||||||||||||||||||
Accumulated derivative net gains as of September 30, 2024 | $ | $ | $ | |||||||||||||||||
The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the nine months ended September 30, 2024 (in millions):
| Before-Tax Amount | Income Tax Expense (Benefit) | After-Tax Amount | ||||||||||||||||||
| Accumulated derivative net losses as of December 31, 2023 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Net changes in fair value of derivatives | ||||||||||||||||||||
| Net losses reclassified from accumulated other comprehensive loss into income | ||||||||||||||||||||
| Accumulated derivative net gains as of September 30, 2024 | $ | $ | $ | |||||||||||||||||
As of September 30, 2024, approximately $3.5 million loss of realized derivatives, before taxes, remain in accumulated other comprehensive loss related to foreign currency contracts associated with inventory that had not yet been sold.
Net Investment Hedges
The Company uses non-derivative and derivative instruments to hedge a portion of its net investment in foreign operations against adverse movements in exchange rates. For instruments that are designated as hedges of net investments in foreign operations, changes in the fair value of the derivative instruments are recorded in foreign currency translation adjustments, a component of accumulated other comprehensive loss, to offset changes in the value of the net investments being hedged. When the net investment in foreign operations is sold or substantially liquidates, the amounts recorded in accumulated other comprehensive loss are reclassified to earnings. To the extent foreign currency denominated debt is de-designated from a net investment hedge relationship, changes in the value of the foreign currency denominated debt are recorded in earnings through the maturity date.
On January 29, 2021, the Company entered into a cross currency swap contract as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. The cross currency swap has an expiration date of January 29, 2028. At maturity of the cross currency swap contract, the Company was expected to deliver the notional amount of approximately €247.9 million (or approximately $277.0 million as of September 30, 2024) and receive $300.0 million from the counterparties. The Company receives quarterly interest payments from the counterparties based on a fixed interest rate until the maturity of the cross currency swap. On November 4, 2024, the Company's existing cross currency swap contract was terminated and the Company delivered the notional amount of approximately $277.4 million and received $300.0 million from the counterparties. In addition, the Company executed new $600.0 million cross currency swap contracts comprising of $200.0 million tranche for 3 years tenor, $200 million tranche for 5 years tenor and $200.0 million tranche for 7 years tenor.
During the nine months ended September 30, 2023, the Company designated €150.0 million of its multi-currency revolving credit facility maturing December 2027 as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. This portion of the multi-currency revolving credit facility was repaid in December 2023. The Company recognized the change in fair value of the foreign currency denominated debt designated as a net investment hedge, a gain of $1.7 million and $2.7 million, net of tax, in accumulated other comprehensive loss during the three and nine months ended September 30, 2023, respectively.
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| Notional Amount as of | |||||||||||
| September 30, 2024 | December 31, 2023 | ||||||||||
| Cross currency swap contract | $ | $ | |||||||||
The following table summarizes the changes in the fair value of the cross currency swap contract designated as a net investment hedge during the three and nine months ended September 30, 2024 and 2023 (in millions):
| Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Three Months Ended | Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Nine Months Ended | ||||||||||||||||||||||||||||||||||
| Before-Tax Amount | Income Tax Expense (Benefit) | After-Tax Amount | Before-Tax Amount | Income Tax Expense (Benefit) | After-Tax Amount | ||||||||||||||||||||||||||||||
| September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| September 30, 2023 | ( | ( | ( | ||||||||||||||||||||||||||||||||
Derivative Transactions Not Designated as Hedging Instruments
The Company enters into foreign currency contracts to economically hedge a portion of its receivables and payables on the Company and its subsidiaries’ balance sheets that are denominated in foreign currencies other than the functional currency. These contracts are classified as non-designated derivative instruments. Gains and losses on such contracts are substantially offset by losses and gains on the remeasurement of the underlying asset or liability being hedged and are immediately recognized into earnings. As of September 30, 2024 and December 31, 2023, the Company had outstanding foreign currency contracts with a notional amount of approximately $2,710.6 million and $3,125.1 million, respectively.
Gain (Loss) Recognized in Net Income for the Three Months Ended | Gain (Loss) Recognized in Net Income for the Nine Months Ended | ||||||||||||||||||||||||||||
Classification of Gain (Loss) | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||||||||||||||
| Foreign currency contracts | Other expense, net | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
23
Asset Derivatives as of September 30, 2024 | Liability Derivatives as of September 30, 2024 | ||||||||||||||||||||||
| Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||||||||
| Derivative instruments designated as hedging instruments: | |||||||||||||||||||||||
| Foreign currency contracts | Other current assets | $ | Other current liabilities | $ | |||||||||||||||||||
| Cross currency swap contract | Other noncurrent assets | Other noncurrent liabilities | |||||||||||||||||||||
| Derivative instruments not designated as hedging instruments: | |||||||||||||||||||||||
Foreign currency contracts(1) | Other current assets | Other current liabilities | |||||||||||||||||||||
| Total derivative instruments | $ | $ | |||||||||||||||||||||
(1) The outstanding contracts as of September 30, 2024 range in maturity through November 2024.
The table below sets forth the fair value of derivative instruments as of December 31, 2023 (in millions):
| Asset Derivatives as of December 31, 2023 | Liability Derivatives as of December 31, 2023 | ||||||||||||||||||||||
| Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||||||||||
| Derivative instruments designated as hedging instruments: | |||||||||||||||||||||||
| Foreign currency contracts | Other current assets | $ | Other current liabilities | $ | |||||||||||||||||||
| Cross currency swap contract | Other noncurrent assets | Other noncurrent liabilities | |||||||||||||||||||||
| Derivative instruments not designated as hedging instruments: | |||||||||||||||||||||||
Foreign currency contracts(1) | Other current assets | Other current liabilities | |||||||||||||||||||||
| Total derivative instruments | $ | $ | |||||||||||||||||||||
(1) The outstanding contracts as of December 31, 2023 range in maturity through February 2024.
24
12. STOCKHOLDERS’ EQUITY
Redeemable Noncontrolling Interests | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Stock compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Issuance of stock awards | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Sale of minority interest | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Defined pension and postretirement benefit plans, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Deferred gains and losses on derivatives, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Payment of dividends to stockholders | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests measurement period adjustment (Note 2) | ( | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
25
| Redeemable Noncontrolling Interests | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Stock compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Issuance of stock awards | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| SSARs exercised | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Sale of minority interest | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||
Net loss | ( | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||
Defined pension and postretirement benefit plans, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Deferred gains and losses on derivatives, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Payment of dividends to stockholders | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Equity transaction associated with JCA noncontrolling interest (Note 2) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Initial fair value of redeemable noncontrolling interests (Note 2) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Investment by redeemable noncontrolling interest (Note 2) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
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| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
| Stock compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Issuance of stock awards | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||
| SSARs exercised | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | ( | |||||||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Defined pension and postretirement benefit plans, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
Deferred gains and losses on derivatives, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
Payment of dividends to stockholders | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
| Stock compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Issuance of stock awards | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||
| SSARs exercised | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||
| Net income | — | — | — | ( | |||||||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | |||||||||||||||||||||||||||||||
Defined pension and postretirement benefit plans, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
Deferred gains and losses on derivatives, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Payment of dividends to stockholders | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
27
Defined Pension and Postretirement Benefit Plans | Deferred Gains and Losses on Derivatives | Cumulative Translation Adjustment | Total | ||||||||||||||||||||
Accumulated other comprehensive loss, December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
| Net losses reclassified from accumulated other comprehensive loss | |||||||||||||||||||||||
Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
Accumulated other comprehensive income (loss), September 30, 2024 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item within the Condensed Consolidated Statements of Operations | |||||||||||||||||||
| Details about Accumulated Other Comprehensive Loss Components | Three Months Ended September 30, 2024(1) | Three Months Ended September 30, 2023(1) | ||||||||||||||||||
| Derivatives: | ||||||||||||||||||||
| Net losses on foreign currency contracts | $ | $ | Cost of goods sold | |||||||||||||||||
Net losses (gains) on commodity contracts | ( | Cost of goods sold | ||||||||||||||||||
Net gains on treasury rate locks | ( | Interest expense, net | ||||||||||||||||||
| Reclassification before tax | ||||||||||||||||||||
Income tax benefit | ( | ( | Income tax provision | |||||||||||||||||
| Reclassification net of tax | $ | $ | ||||||||||||||||||
Defined pension and postretirement benefit plans: | ||||||||||||||||||||
| Amortization of net actuarial losses | $ | $ | Other expense, net(2) | |||||||||||||||||
| Amortization of prior service cost | Other expense, net(2) | |||||||||||||||||||
| Reclassification before tax | ||||||||||||||||||||
Income tax benefit | ( | ( | Income tax provision | |||||||||||||||||
| Reclassification net of tax | $ | $ | ||||||||||||||||||
| Net losses reclassified from accumulated other comprehensive loss | $ | $ | ||||||||||||||||||
(1) Losses (Gains) included within the Condensed Consolidated Statements of Operations for the three months ended September 30, 2024 and 2023, respectively.
(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost. See Note 15 for additional information.
28
| Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item within the Condensed Consolidated Statements of Operations | |||||||||||||||||||
| Details about Accumulated Other Comprehensive Loss Components | Nine Months Ended September 30, 2024(1) | Nine Months Ended September 30, 2023(1) | ||||||||||||||||||
| Derivatives: | ||||||||||||||||||||
| Net losses on foreign currency contracts | $ | $ | Cost of goods sold | |||||||||||||||||
Net losses (gains) on commodity contracts | ( | Cost of goods sold | ||||||||||||||||||
Net gains on treasury rate locks | ( | Interest expense, net | ||||||||||||||||||
| Reclassification before tax | ||||||||||||||||||||
Income tax benefit | ( | ( | Income tax provision | |||||||||||||||||
| Reclassification net of tax | $ | $ | ||||||||||||||||||
Defined pension and postretirement benefit plans: | ||||||||||||||||||||
| Amortization of net actuarial losses | $ | $ | Other expense, net(2) | |||||||||||||||||
| Amortization of prior service cost | Other expense, net(2) | |||||||||||||||||||
| Reclassification before tax | ||||||||||||||||||||
Income tax benefit | ( | ( | Income tax provision | |||||||||||||||||
| Reclassification net of tax | $ | $ | ||||||||||||||||||
| Net losses reclassified from accumulated other comprehensive loss | $ | $ | ||||||||||||||||||
(1) Losses (Gains) included within the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 and 2023, respectively.
(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost. See Note 15 for additional information.
Share Repurchase Program
In November 2023, the Company entered into an accelerated share repurchase (“ASR”) agreement with a financial institution to repurchase $53.0 million of shares of its common stock. The Company received approximately 371,669 shares associated with this transaction as of December 31, 2023. In January 2024, the Company received an additional 82,883 shares upon final settlement of its November 2023 ASR agreement. All shares received under the ASR agreement were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained earnings” within the Company’s Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2024, the Company did no
As of September 30, 2024, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $57.0 million, which has no expiration date.
Dividends
On April 25, 2024, the Company's Board of Directors declared a special variable dividend of $2.50 per common share that was paid during the second quarter of 2024. During the three months ended September 30, 2024 and September 30, 2023, the Company declared and paid cash dividends of $0.29 0.29 3.37 5.81 0.29 per common share to be paid on December 16, 2024, to all stockholders of record as of the close of business on November 15, 2024.
29
13. NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during each period. Diluted net income (loss) per common share assumes the exercise of outstanding stock-settled stock appreciation rights ("SSARs") and the vesting of restricted stock unit awards ("RSUs") using the treasury stock method when there is no other circumstance other than the passage of time under which they would not be issued, and the effects of such assumptions are dilutive.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Basic net income (loss) per share: | |||||||||||||||||||||||
Net income (loss) attributable to AGCO Corporation and subsidiaries | $ | $ | $ | ( | $ | ||||||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
Basic net income (loss) per share attributable to AGCO Corporation and subsidiaries | $ | $ | $ | ( | $ | ||||||||||||||||||
Diluted net income (loss) per share: | |||||||||||||||||||||||
Net income (loss) attributable to AGCO Corporation and subsidiaries | $ | $ | $ | ( | $ | ||||||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
Dilutive SSARs and RSUs | |||||||||||||||||||||||
| Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share | |||||||||||||||||||||||
Diluted net income (loss) per share attributable to AGCO Corporation and subsidiaries | $ | $ | $ | ( | $ | ||||||||||||||||||
14. INCOME TAXES
At September 30, 2024 and December 31, 2023, the Company had approximately $398.5 million and $351.2 million, respectively, of gross unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. Gross unrecognized income tax benefits as of September 30, 2024 and December 31, 2023 exclude certain indirect favorable effects that relate to other tax jurisdictions of approximately $125.6 million and $103.9 million, respectively. In addition, the gross unrecognized income tax benefits as of September 30, 2024 and December 31, 2023 exclude certain deposits made in a foreign jurisdiction of approximately $27.1 million, net of $20.0 million refunds received, and $26.9 million, net of $19.7 million refunds received, respectively, associated with an ongoing audit.
At September 30, 2024 and December 31, 2023, the Company had approximately $11.7 million and $9.9 million, respectively, of accrued or deferred taxes related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions that it expects to settle or pay in the next 12 months, reflected in “Other current liabilities” in the Company’s Condensed Consolidated Balance Sheets. At September 30, 2024 and December 31, 2023, the Company had approximately $389.4 million and $344.2 million, respectively, of accrued taxes reflected in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At September 30, 2024 and December 31, 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $32.8 million and $27.9 million, respectively. Generally, tax years 2019 through 2023 remain open to examination by taxing authorities in the United States and certain other foreign tax jurisdictions. The Company and its subsidiaries are routinely examined by tax authorities in the United States and in various state, local and foreign jurisdictions. As of September 30, 2024, a number of income tax examinations in foreign jurisdictions are ongoing.
The Company maintains a valuation allowance to reserve against its net deferred tax assets in certain foreign jurisdictions. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax
30
assets will not be realized. The Company regularly assesses the likelihood that its deferred tax assets will be recovered from estimated future taxable income and available tax planning strategies and has determined that all adjustments to the valuation allowances have been appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that the Company will realize its remaining net deferred tax assets, net of the valuation allowance, in future years.
In recent decisions, the Brazilian courts have confirmed a favorable tax ruling regarding the taxability of certain state value added tax incentive benefits, which allowed the Company to record a $31.7 million reduction in the provision for income taxes during the nine months ended September 30, 2024.
In 2008 and 2012, as part of routine audits, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of the Company’s Brazilian operations and the related transfer of certain assets to the Company’s Brazilian subsidiaries. The amount of the tax disallowance through December 31, 2023 would have been approximately 131.5 million Brazilian reais (or approximately $27.1 million) and subject to significant interest and penalties. In the first quarter of 2023, the Brazilian government issued a “Litigation Zero” tax amnesty program, whereby cases being disputed at the administrative court level of review for a period of more than ten years could be considered for amnesty. Enrollment in the amnesty program was not considered an admission of guilt and allowed for outstanding contested cases to be settled at a significant monetary discount. The Company contested the disallowance and had been historically advised by its legal and tax advisors that its position was allowable under the tax laws of Brazil. After weighing various impacts involved with enrollment, including the avoidance of potential interest, penalties and legal costs, the Company enrolled in the program in the quarter ended March 31, 2023. The Company recorded approximately 182.6 million Brazilian reais (or approximately $34.8 million) within “Income tax provision” net of associated U.S. income tax credits of approximately $8.4 million and completed its installment payments related to its enrollment in the program during the year ended December 31, 2023.
15. PENSION AND POSTRETIREMENT BENEFIT PLANS
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| Pension benefits | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ||||||||||||||||||||||
| Amortization of net actuarial losses | ||||||||||||||||||||||||||
| Amortization of prior service cost | ||||||||||||||||||||||||||
| Net periodic pension cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| Postretirement benefits | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Amortization of prior service cost | ||||||||||||||||||||||||||
| Net periodic postretirement benefit cost | $ | $ | $ | $ | ||||||||||||||||||||||
The components of net periodic pension and postretirement benefits cost, other than the service cost component, are included in “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations.
31
During the nine months ended September 30, 2024, the Company made approximately $22.0 million of contributions to its defined pension benefit plans. The Company currently estimates its minimum contributions for 2024 to its defined pension benefit plans will aggregate to approximately $25.4 million.
During the nine months ended September 30, 2024, the Company made approximately $1.2 million of contributions to its postretirement health care and life insurance benefit plans. The Company currently estimates that it will make approximately $1.7 million of contributions to its postretirement health care and life insurance benefit plans during 2024.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company categorizes its assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. Estimates of fair value for financial assets and liabilities are based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Model-derived valuations in which one or more significant inputs are unobservable.
The Company categorizes its pension plan assets into one of the three levels of the fair value hierarchy, except for those measured using the net asset value per share (or its equivalent) practical expedient.
The Company enters into foreign currency, commodity and interest rate swap contracts. The fair values of the Company’s derivative instruments are determined using discounted cash flow valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these discounted cash flow valuation models for derivative instruments include the applicable exchange rates, forward rates or interest rates. Such models used for option contracts also use implied volatility. See Note 11 for additional information on the Company’s derivative instruments and hedging activities.
| As of September 30, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Derivative assets | $ | $ | $ | $ | |||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||
| As of December 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Derivative assets | $ | $ | $ | $ | |||||||||||||||||||
| Derivative liabilities | |||||||||||||||||||||||
The carrying amounts of long-term debt under the Company’s 1.002 % EIB senior term loan due 2025, EIB senior term loans due 2029 and 2030 and senior term loans due between 2025 and 2028 approximate fair value based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. At September 30, 2024, the estimated fair value of the Company's 0.800 % senior notes due 2028, based on listed market values, was approximately €544.5 million (or approximately $608.2 million), compared to the carrying value of €600.0 million (or approximately $670.2 million). At September 30, 2024, the estimated fair value of the Company's 5.450 % senior notes due 2027, based on listed market values, was approximately $408.2 million, compared to the carrying value of $400.0 million. At September 30, 2024, the estimated fair value of the Company's 5.800 % senior notes due 2034, based on listed market values, was approximately $732.1 million, compared to the carrying value of $700.0 million. See Note 9 for additional information on the Company’s long-term debt.
32
17. COMMITMENTS AND CONTINGENCIES
Leases
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
Operating Leases(1) | Finance Leases | Operating Leases(1) | Finance Leases | |||||||||||||||||||||||
2024 | $ | $ | $ | $ | ||||||||||||||||||||||
| 2025 | ||||||||||||||||||||||||||
| 2026 | ||||||||||||||||||||||||||
| 2027 | ||||||||||||||||||||||||||
| 2028 | ||||||||||||||||||||||||||
| Thereafter | ||||||||||||||||||||||||||
| Total lease payments | ||||||||||||||||||||||||||
Less: imputed interest(2) | ( | ( | ( | ( | ||||||||||||||||||||||
| Present value of leased liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
(1) Operating lease payments include options to extend or terminate at the Company's sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised.
(2) Calculated for each lease using either the implicit interest rate or the incremental borrowing rate when the implicit interest rate is not readily available.
Off-Balance Sheet Arrangements
Guarantees
At September 30, 2024, the Company had outstanding guarantees issued to its Argentine finance joint venture, AGCO Capital Argentina S.A. (“AGCO Capital”), of approximately $60.5 million. Such guarantees generally obligate the Company to repay outstanding finance obligations owed to AGCO Capital if end users default on such loans to the extent that, due to non-credit risk, the end users are not able, or not required, to pay their loans, or are required to pay in a different currency than the one agreed in their loan. The Company also has obligations to guarantee indebtedness owed to certain of its finance joint ventures if dealers or end users default on loans. Losses under such guarantees historically have been insignificant, and the guarantees are not material. The Company believes the credit risk associated with these guarantees is not material.
In addition, at September 30, 2024, the Company had accrued approximately $13.0 million of outstanding guarantees of residual values that may be owed to its finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users. The maximum potential amount of future payments under these guarantees is approximately $193.1 million.
Other
The Company sells a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. The Company also sells certain accounts receivable under factoring arrangements to financial institutions around the world. The Company accounts for the sale of such receivables as off-balance sheet transactions. Refer to Note 4 for discussion of the Company’s accounts receivable sales agreements.
33
Contingencies
During 2017, the Company purchased Precision Planting, which provides precision agricultural technology solutions. In 2018, Deere & Company (“Deere”) filed separate complaints in the U.S. District Court of Delaware against the Company and Precision Planting alleging that certain products of those entities infringed certain patents of Deere. The two complaints subsequently were consolidated into a single case, Case No. 1:18-cv-00827-CFC. In July 2022, the case was tried before a jury, which determined that the Company and Precision Planting had not infringed the Deere patents. Following customary post-trial procedures, the Court entered a judgment in the Company’s favor, and Deere appealed the judgment to the U.S. Court of Appeals for the Federal Circuit. The appeal is fully briefed and is awaiting oral arguments before the court. The Company has an indemnity right under the purchase agreement related to the acquisition of Precision Planting from its previous owner. Pursuant to that right, the previous owner of Precision Planting currently is responsible for the litigation costs associated with the complaint and is obligated to reimburse AGCO for some or all of the damages in the event of an adverse outcome in the litigation.
The Company is a party to various other legal claims and actions incidental to its business. The Company believes that none of these claims or actions, either individually or in the aggregate, are material to its business or financial statements as a whole, including its results of operations and financial condition.
18. REVENUE
Contract Liabilities
Contract liabilities relate to the following: (1) unrecognized revenues where payment of consideration precedes the Company’s performance with respect to extended warranty and maintenance contracts and where the performance obligation is satisfied over time, (2) unrecognized revenues where payment of consideration precedes the Company’s performance with respect to certain grain storage and protein production systems and where the performance obligation is satisfied over time and (3) unrecognized revenues where payment of consideration precedes the Company’s performance with respect to precision agriculture technology services and where the performance obligation is satisfied over time.
34
| Three Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Advance consideration received | |||||||||||
| Revenue recognized during the period for extended warranty contracts, maintenance services and technology services | ( | ( | |||||||||
| Revenue recognized during the period related to grain storage and protein production systems | ( | ( | |||||||||
Reclassified to held for sale(1) | ( | ||||||||||
| Foreign currency translation | ( | ||||||||||
| Balance at September 30 | $ | $ | |||||||||
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of period | $ | $ | |||||||||
Acquisitions | |||||||||||
| Advance consideration received | |||||||||||
| Revenue recognized during the period for extended warranty contracts, maintenance services and technology services | ( | ( | |||||||||
| Revenue recognized during the period related to grain storage and protein production systems | ( | ( | |||||||||
Reclassified to held for sale(1) | ( | ||||||||||
| Foreign currency translation | ( | ||||||||||
| Balance at September 30 | $ | $ | |||||||||
(1) Reclassification resulting from the Company's classification of the G&P business as held for sale. Refer to Note 3 for additional information.
The contract liabilities are classified as either “Accrued expenses” or “Other current liabilities” and “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2024, the Company recognized approximately $35.7 million and $106.9 million of revenue that was recorded as a contract liability at the beginning of 2024. During the three and nine months ended September 30, 2023, the Company recognized approximately $26.9 million and $96.9 million of revenue that was recorded as a contract liability at the beginning of 2023.
Remaining Performance Obligations
The estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2024 are $47.3 million for the remainder of 2024, $117.4 million in 2025, $94.0 million in 2026, $49.7 million in 2027 and $28.6 million thereafter, and relate primarily to extended warranty contracts. The Company applied the practical expedient in ASU 2014-09 and has not disclosed information about remaining performance obligations that have original expected durations of 12 months or less.
35
Disaggregated Revenue
North America(1) | South America | Europe/Middle East(1) | Asia/Pacific/Africa(1) | Consolidated | ||||||||||||||||||||||||||||
| Primary geographical markets: | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||
| Brazil | ||||||||||||||||||||||||||||||||
| Other South America | ||||||||||||||||||||||||||||||||
| Germany | ||||||||||||||||||||||||||||||||
| France | ||||||||||||||||||||||||||||||||
| United Kingdom and Ireland | ||||||||||||||||||||||||||||||||
| Finland and Scandinavia | ||||||||||||||||||||||||||||||||
| Italy | ||||||||||||||||||||||||||||||||
| Other Europe | ||||||||||||||||||||||||||||||||
| Middle East and Algeria | ||||||||||||||||||||||||||||||||
| Africa | ||||||||||||||||||||||||||||||||
| Asia | ||||||||||||||||||||||||||||||||
| Australia and New Zealand | ||||||||||||||||||||||||||||||||
| Mexico, Central America and Caribbean | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Major products: | ||||||||||||||||||||||||||||||||
| Tractors | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Replacement parts | ||||||||||||||||||||||||||||||||
| Grain storage and protein production systems | ||||||||||||||||||||||||||||||||
| Combines, application equipment and other machinery | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
(1) Rounding may impact the summation of amounts.
36
Net sales for the three months ended September 30, 2023 disaggregated by primary geographical markets and major products consisted of the following (in millions):
North America | South America | Europe/Middle East | Asia/Pacific/Africa | Consolidated | ||||||||||||||||||||||||||||
| Primary geographical markets: | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||
| Brazil | ||||||||||||||||||||||||||||||||
| Other South America | ||||||||||||||||||||||||||||||||
| Germany | ||||||||||||||||||||||||||||||||
| France | ||||||||||||||||||||||||||||||||
| United Kingdom and Ireland | ||||||||||||||||||||||||||||||||
| Finland and Scandinavia | ||||||||||||||||||||||||||||||||
| Italy | ||||||||||||||||||||||||||||||||
| Other Europe | ||||||||||||||||||||||||||||||||
| Middle East and Algeria | ||||||||||||||||||||||||||||||||
| Africa | ||||||||||||||||||||||||||||||||
| Asia | ||||||||||||||||||||||||||||||||
| Australia and New Zealand | ||||||||||||||||||||||||||||||||
| Mexico, Central America and Caribbean | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Major products: | ||||||||||||||||||||||||||||||||
| Tractors | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Replacement parts | ||||||||||||||||||||||||||||||||
| Grain storage and protein production systems | ||||||||||||||||||||||||||||||||
| Combines, application equipment and other machinery | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
37
Net sales for the nine months ended September 30, 2024 disaggregated by primary geographical markets and major products consisted of the following (in millions):
North America | South America | Europe/Middle East | Asia/Pacific/Africa | Consolidated | ||||||||||||||||||||||||||||
| Primary geographical markets: | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||
| Brazil | ||||||||||||||||||||||||||||||||
| Other South America | ||||||||||||||||||||||||||||||||
| Germany | ||||||||||||||||||||||||||||||||
| France | ||||||||||||||||||||||||||||||||
| United Kingdom and Ireland | ||||||||||||||||||||||||||||||||
| Finland and Scandinavia | ||||||||||||||||||||||||||||||||
| Italy | ||||||||||||||||||||||||||||||||
| Other Europe | ||||||||||||||||||||||||||||||||
| Middle East and Algeria | ||||||||||||||||||||||||||||||||
| Africa | ||||||||||||||||||||||||||||||||
| Asia | ||||||||||||||||||||||||||||||||
| Australia and New Zealand | ||||||||||||||||||||||||||||||||
| Mexico, Central America and Caribbean | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Major products: | ||||||||||||||||||||||||||||||||
| Tractors | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Replacement parts | ||||||||||||||||||||||||||||||||
| Grain storage and protein production systems | ||||||||||||||||||||||||||||||||
| Combines, application equipment and other machinery | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
38
Net sales for the nine months ended September 30, 2023 disaggregated by primary geographical markets and major products consisted of the following (in millions):
| North America | South America | Europe/Middle East | Asia/Pacific/Africa | Consolidated | ||||||||||||||||||||||||||||
| Primary geographical markets: | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||
| Brazil | ||||||||||||||||||||||||||||||||
| Other South America | ||||||||||||||||||||||||||||||||
| Germany | ||||||||||||||||||||||||||||||||
| France | ||||||||||||||||||||||||||||||||
| United Kingdom and Ireland | ||||||||||||||||||||||||||||||||
| Finland and Scandinavia | ||||||||||||||||||||||||||||||||
| Italy | ||||||||||||||||||||||||||||||||
| Other Europe | ||||||||||||||||||||||||||||||||
| Middle East and Algeria | ||||||||||||||||||||||||||||||||
| Africa | ||||||||||||||||||||||||||||||||
| Asia | ||||||||||||||||||||||||||||||||
| Australia and New Zealand | ||||||||||||||||||||||||||||||||
| Mexico, Central America and Caribbean | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Major products: | ||||||||||||||||||||||||||||||||
| Tractors | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Replacement parts | ||||||||||||||||||||||||||||||||
| Grain storage and protein production systems | ||||||||||||||||||||||||||||||||
| Combines, application equipment and other machinery | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
39
19. SEGMENT REPORTING
The Company has four Segment results for the three and nine months ended September 30, 2024 and 2023 and assets as of September 30, 2024 and December 31, 2023 based on the Company’s reportable segments are as follows (in millions):
| Three Months Ended September 30, | North America | South America | Europe/Middle East | Asia/Pacific/Africa | Total Segments | |||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Income from operations | ||||||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Income from operations | ||||||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | North America | South America | Europe/Middle East | Asia/Pacific/Africa | Total Segments | |||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Income from operations | ||||||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Income from operations | ||||||||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| As of September 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
40
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Segment income from operations | $ | $ | $ | $ | |||||||||||||||||||
| Impairment charges | ( | ( | |||||||||||||||||||||
Loss on business held for sale | ( | ( | |||||||||||||||||||||
| Corporate expenses | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of intangibles | ( | ( | ( | ( | |||||||||||||||||||
| Stock compensation expense | ( | ( | ( | ( | |||||||||||||||||||
Restructuring and business optimization expenses | ( | ( | ( | ( | |||||||||||||||||||
Consolidated income from operations | $ | $ | $ | $ | |||||||||||||||||||
| September 30, 2024 | December 31, 2023 | ||||||||||
| Segment assets | $ | $ | |||||||||
Cash and cash equivalents | |||||||||||
| Investments in affiliates | |||||||||||
| Deferred tax assets, other current and noncurrent assets | |||||||||||
Assets held for sale(1) | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Consolidated total assets | $ | $ | |||||||||
____________________________________
(1) Represents non-segment assets related to the Company's G&P business, which the Company has classified as held for sale since June 30, 2024. Segment assets include the G&P assets held for sale. Refer to Note 3 for additional information.
41
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Our operations are subject to the cyclical and seasonal nature of the agricultural industry. Sales of our equipment are affected by, among other things, changes in farm income, farm land values and debt levels, financing costs, acreage planted, crop yields, weather conditions, the demand for agricultural commodities, commodity and protein prices, agricultural product demand and general economic conditions and government policies and subsidies. We sell our equipment, precision agriculture technology and replacement parts to our independent dealers, distributors and other customers. A large majority of our sales are to independent dealers and distributors that sell our products to end users. To the extent practicable, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal demands on our manufacturing operations and to minimize our investment in inventories. However, retail sales by dealers to farmers are highly seasonal and are a function of the timing of the planting and harvesting seasons. In certain markets, particularly in North America, there is often a time lag, which varies based on the timing and level of retail demand, between our sale of the equipment to the dealer and the dealer’s sale to a retail customer.
On April 1, 2024, pursuant to the terms of an Amended and Restated Sale and Contribution Agreement among AGCO, Trimble and PTx Trimble (the “Joint Venture”), AGCO and Trimble completed (i) the contribution by Trimble to the Joint Venture of Trimble’s OneAg business, which is Trimble’s agricultural business, excluding certain Global Navigation Satellite System and guidance technologies, and $8.1 million of cash, (ii) the contribution by AGCO to the Joint Venture of its interest in JCA Industries, LLC d/b/a JCA Technologies and $46.0 million of cash, and (iii) the purchase by AGCO from Trimble of membership interests in the Joint Venture in exchange for the payment by AGCO to Trimble of $1.954 billion in cash, subject to customary working capital and other adjustments. Immediately following the closing and as a result of the transaction, AGCO directly and indirectly owns an 85% interest in the Joint Venture and Trimble owns a 15% interest in the Joint Venture. AGCO began consolidating PTx Trimble within its consolidated financial statements on April 1, 2024. We believe PTx Trimble creates a global-leading mixed-fleet precision agriculture platform. We are the exclusive provider of Trimble’s comprehensive technology offering, supporting the future development and distribution of next-generation agriculture technologies, allowing us to offer a wide variety of user-friendly technologies compatible across brands, equipment models and farm types. The acquired hardware, software and cloud-based applications span all aspects of the crop cycle, from land preparation to planting and seeding to harvest. Refer to Note 2 of our Condensed Consolidated Financial Statements for further information.
On July 25, 2024, the Company entered into a Stock and Asset Purchase Agreement to sell the majority of its Grain & Protein (“G&P”) business, which includes the GSI®, Automated Production® (AP), Cumberland®, Cimbria® and Tecno® brands for a purchase price of $700.0 million, subject to customary working capital and other adjustments. The divestiture of the G&P business aligns with AGCO's strategic transformation and allows for AGCO to better streamline and focus on its portfolio of agricultural machinery and precision ag technology products. As of June 30, 2024, the business met the criteria to be classified as held for sale. The Company recognizes assets and liabilities held for sale at the lower of carrying value or fair market value less costs to sell. The fair market value less costs to sell of the disposal group is evaluated at each reporting period to determine if it has changed, and any subsequent changes are recognized as a gain or loss with a corresponding adjustment to the carrying amount of the disposal group. The loss on business held for sale will be finalized in the fourth quarter upon the closing of the transaction based on the carrying value of the disposal group at the date of sale. The Company determined the intended sale of the G&P business does not represent a strategic shift that will have a major effect on the consolidated results of operations, and therefore results of this business were not classified as discontinued operations. On November 1, 2024, the Company completed the previously announced sale of the Company’s G&P business to A-AG Holdco Limited, an affiliate of American Industrial Partners. Refer to Note 3 of our Condensed Consolidated Financial Statements for further information.
42
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
RESULTS OF OPERATIONS
Financial Highlights
The following tables sets forth the percentage relationship to net sales of certain items included in our Condensed Consolidated Statements of Operations:
___________________________________
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| $ | % of Net Sales(1) | $ | % of Net Sales(1) | ||||||||||||||||||||
| Net sales | $ | 2,599.3 | 100.0 | % | $ | 3,455.5 | 100.0 | % | |||||||||||||||
| Cost of goods sold | 1,996.2 | 76.8 | 2,521.5 | 73.0 | |||||||||||||||||||
| Gross profit | 603.1 | 23.2 | 934.0 | 27.0 | |||||||||||||||||||
| Selling, general and administrative expenses | 344.3 | 13.2 | 355.6 | 10.3 | |||||||||||||||||||
| Engineering expenses | 121.3 | 4.7 | 139.6 | 4.0 | |||||||||||||||||||
| Amortization of intangibles | 8.8 | 0.3 | 14.4 | 0.4 | |||||||||||||||||||
| Impairment charges | 0.2 | — | — | — | |||||||||||||||||||
Restructuring and business optimization expenses | 10.5 | 0.4 | 0.8 | — | |||||||||||||||||||
Loss on business held for sale | 3.2 | 0.1 | — | — | |||||||||||||||||||
Income from operations | 114.8 | 4.4 | 423.6 | 12.3 | |||||||||||||||||||
| Interest expense, net | 33.9 | 1.3 | 5.5 | 0.2 | |||||||||||||||||||
| Other expense, net | 52.3 | 2.0 | 84.2 | 2.4 | |||||||||||||||||||
Income before income taxes and equity in net earnings of affiliates | 28.6 | 1.1 | 333.9 | 9.7 | |||||||||||||||||||
| Income tax provision | 11.9 | 0.5 | 75.3 | 2.2 | |||||||||||||||||||
Income before equity in net earnings of affiliates | 16.7 | 0.6 | 258.6 | 7.5 | |||||||||||||||||||
| Equity in net earnings of affiliates | 12.2 | 0.5 | 21.9 | 0.6 | |||||||||||||||||||
Net income | 28.9 | 1.1 | 280.5 | 8.1 | |||||||||||||||||||
Net loss attributable to noncontrolling interests | 1.1 | — | 0.1 | — | |||||||||||||||||||
Net income attributable to AGCO Corporation and subsidiaries | $ | 30.0 | 1.2 | % | $ | 280.6 | 8.1 | % | |||||||||||||||
(1) Rounding may impact summation of amounts.
43
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| $ | % of Net Sales(1) | $ | % of Net Sales(1) | ||||||||||||||||||||
| Net sales | $ | 8,774.6 | 100.0 | % | $ | 10,611.7 | 100.0 | % | |||||||||||||||
| Cost of goods sold | 6,564.2 | 74.8 | 7,817.1 | 73.7 | |||||||||||||||||||
| Gross profit | 2,210.4 | 25.2 | 2,794.6 | 26.3 | |||||||||||||||||||
| Selling, general and administrative expenses | 1,074.5 | 12.2 | 1,037.7 | 9.8 | |||||||||||||||||||
| Engineering expenses | 390.0 | 4.4 | 398.0 | 3.8 | |||||||||||||||||||
| Amortization of intangibles | 54.4 | 0.6 | 43.3 | 0.4 | |||||||||||||||||||
| Impairment charges | 5.3 | 0.1 | — | — | |||||||||||||||||||
Restructuring and business optimization expenses | 41.7 | 0.5 | 8.3 | 0.1 | |||||||||||||||||||
Loss on business held for sale | 497.8 | 5.7 | — | — | |||||||||||||||||||
| Income from operations | 146.7 | 1.7 | 1,307.3 | 12.3 | |||||||||||||||||||
| Interest expense, net | 65.7 | 0.7 | 11.8 | 0.1 | |||||||||||||||||||
| Other expense, net | 168.4 | 1.9 | 212.6 | 2.0 | |||||||||||||||||||
Income (loss) before income taxes and equity in net earnings of affiliates | (87.4) | (1.0) | 1,082.9 | 10.2 | |||||||||||||||||||
| Income tax provision | 122.6 | 1.4 | 306.5 | 2.9 | |||||||||||||||||||
Income (loss) before equity in net earnings of affiliates | (210.0) | (2.4) | 776.4 | 7.3 | |||||||||||||||||||
| Equity in net earnings of affiliates | 38.0 | 0.4 | 55.9 | 0.5 | |||||||||||||||||||
Net income (loss) | (172.0) | (2.0) | 832.3 | 7.8 | |||||||||||||||||||
Net loss attributable to noncontrolling interests | 2.9 | — | 0.1 | — | |||||||||||||||||||
Net income (loss) attributable to AGCO Corporation and subsidiaries | $ | (169.1) | (1.9) | % | $ | 832.4 | 7.8 | % | |||||||||||||||
(1) Rounding may impact summation of amounts.
Net income attributable to AGCO Corporation and subsidiaries for the three months ended September 30, 2024, was $30.0 million, or $0.40 per diluted share, compared to $280.6 million or $3.74 per diluted share, for the three months ended September 30, 2023. Net income (loss) attributable to AGCO Corporation and subsidiaries for the nine months ended September 30, 2024, was $(169.1) million, or $(2.27) per diluted share, compared to $832.4 million or $11.10 per diluted share, for the nine months ended September 30, 2023.
Net sales during the three months ended September 30, 2024 were approximately $2,599.3 million, or 24.8% lower than the three months ended September 30, 2023, primarily due to lower sales volumes resulting from softer industry sales reflecting lower end market demand and unfavorable currency impacts. Income from operations was $114.8 million for the three months ended September 30, 2024 compared to $423.6 million in the three months ended September 30, 2023. The decrease in income from operations during 2024 was primarily the result of lower sales and production volumes reflecting weak industry conditions.
Net sales during the nine months ended September 30, 2024 were approximately $8,774.6 million, or 17.3% lower than the nine months ended September 30, 2023, primarily due to lower sales volumes resulting from softer industry sales reflecting lower end market demand and unfavorable currency impacts. Income from operations was $146.7 million for the nine months ended September 30, 2024 compared to $1,307.3 million in the nine months ended September 30, 2023. The decrease in income from operations during 2024 was primarily the result of lower sales and production volumes, the recognition of the estimated loss on the G&P business held for sale as well as restructuring and business optimization expenses and higher selling, general and administrative expenses ("SG&A expenses"), primarily related to transaction costs related to the close of the PTx Trimble joint venture transaction and the G&P divestiture transaction and higher compensation costs.
44
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
We estimate that worldwide average price increases (decreases) were approximately (1.2)% and 9.9% for the three months ended September 30, 2024 and 2023, respectively, and (0.8)% and 11.9% for the nine months ended September 30, 2024 and 2023, respectively. Consolidated net sales of tractors and combines, which comprised approximately 57.6% and 61.2% of our net sales for the three and nine months ended September 30, 2024, decreased approximately 31.5% and 19.6% compared to the same periods in 2023. Unit sales of tractors and combines decreased approximately 29.4% and 23.5% during the three and nine months ended September 30, 2024 compared to the same periods in 2023. The primary driver of the decrease in unit sales was lower sales of compact and mid-range tractors and combines. The difference between the unit sales change and the change in net sales was primarily the result of sales mix changes and foreign currency translation.
Overall, global production hours decreased approximately 34.8% and 24.4% during the three and nine months ended September 30, 2024 compared to the same periods in 2023, reflecting our response to lower end market demand.
Results of Operations
Gross profit as a percentage of net sales decreased during the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to lower production volumes and unfavorable net pricing impacts.
SG&A expenses as a percentage of net sales were higher during the three and nine months ended September 30, 2024 compared to the same periods in 2023. The absolute level of SG&A expenses were largely consistent during the three months ended September 30, 2024. The absolute level of SG&A expenses increased during the nine months ended September 30, 2024 primarily due to PTx Trimble joint venture transaction-related costs and transaction costs related to the divestiture of the Company's G&P business. These increases were partially offset by decreases in stock compensation expense. We recorded $5.0 million and $20.4 million of stock compensation expense within SG&A expenses during the three and nine months ended September 30, 2024, respectively, compared to $9.8 million and $36.1 million during the same periods in 2023.
Engineering expenses as a percentage of net sales were higher during the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily driven by increased engineering expenses related to the PTx Trimble joint venture.
We recorded impairment charges of $0.2 million and $5.3 million during the three and nine months ended September 30, 2024, respectively, related to the impairment of certain amortizing intangible assets and an investment in affiliate. There were no impairment charges recorded during the three and nine months ended September 30, 2023.
We recorded restructuring and business optimization expenses of $10.5 million and $41.7 million during the three and nine months ended September 30, 2024, respectively, compared to $0.8 million and $8.3 million, respectively, during the same periods in 2023. On June 24, 2024, the Company announced a restructuring program (the “Program”) in response to increased weakening demand in the agriculture industry. The initial phase of the Program is focused on further reducing structural costs, streamlining the Company’s workforce and enhancing global efficiencies related to changing the Company’s operating model for certain corporate and back-office functions and better leveraging technology and global centers of excellence. The Company estimates that it will incur charges for one-time termination benefits of approximately $150.0 million to $200.0 million in connection with this phase of the Program, primarily consisting of cash charges related to severance payments, employees benefits and related costs. The Company expects the majority of these cash charges will be incurred in 2024 and the first half of 2025. Once fully implemented, the Company expects this phase of the Program to yield annual run-rate benefits and cost savings of approximately $100.0 million to $125.0 million. The restructuring expenses recorded during the three and nine months ended September 30, 2024 primarily related to severance, business optimization and other related costs associated with the Company's Program and rationalization of certain manufacturing facilities and administrative offices. Refer to Note 10 to our Condensed Consolidated Financial Statements for further information.
We recorded a loss on business held for sale of $3.2 million and $497.8 million during the three and nine months ended September 30, 2024, respectively. There was no loss recorded during the three and nine months ended September 30, 2023. On July 25, 2024, the Company announced it had entered into a definitive agreement to sell its G&P business, and as of June 30, 2024, the Company determined that the G&P business met the criteria to be classified as held for sale. As of September 30, 2024, the Company recognized a loss on business held for sale of $497.8 million, which represents the estimated loss on the business held for sale. Refer to Note 3 to our Condensed Consolidated Financial Statements for further information.
Interest expense, net was $33.9 million and $65.7 million for the three and nine months ended September 30, 2024, respectively, compared to $5.5 million and $11.8 million for the comparable periods in 2023. The increase related primarily to
45
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
an increase in interest expense resulting from the amortization of bridge facility commitment fees and increased debt levels related to financing the PTx Trimble joint venture transaction partially offset by higher interest income for the three and nine months ended September 30, 2024 as compared to the same periods in 2023. See “Liquidity and Capital Resources” for further information on our available funding.
Other expense, net was $52.3 million and $168.4 million for the three and nine months ended September 30, 2024, respectively, compared to $84.2 million and $212.6 million for the comparable periods in 2023. The decreases were primarily driven by decreases in foreign currency exchanges losses which were approximately $24.7 million and $74.3 million, respectively, for the three and nine months ended September 30, 2024, compared to $43.8 million and $104.1 million, respectively, for the comparable periods in 2023. During the nine months ended September 30, 2024, the Company recorded the final insurance recovery of $5.0 million related to the 2022 cyber incident. Losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil and included in “Other expense, net,” were approximately $28.4 million and $92.2 million, respectively, for the three and nine months ended September 30, 2024, compared to $40.5 million and $99.3 million, respectively, for the comparable periods in 2023.
We recorded an income tax provision of $11.9 million and $122.6 million for the three and nine months ended September 30, 2024 compared to $75.3 million and $306.5 million for the three and nine months ended September 30, 2023. Our effective tax rate varies from period to period due to the mix of taxable income and losses in the various tax jurisdictions in which we operate. Based on a favorable tax ruling in Brazil regarding the taxability of certain state value added tax incentive benefits, the Company recorded a $31.7 million reduction in the provision for income taxes during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, we recorded approximately $26.4 million associated with our enrollment in a Brazilian tax amnesty program that is more fully described in Note 14 of our Condensed Consolidated Financial Statements.
Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $12.2 million and $38.0 million for the three and nine months ended September 30, 2024 compared to $21.9 million and $55.9 million for the three and nine months ended September 30, 2023.
The Company recorded a net loss attributable to noncontrolling interests of $1.1 million and $2.9 million during the three and nine months ended September 30, 2024, respectively. The net loss primarily relates to the noncontrolling interests of the PTx Trimble joint venture held by Trimble, which owns a 15% interest in the joint venture. The Company recorded a net loss attributable to noncontrolling interests of $0.1 million and $0.1 million during the three and nine months ended September 30, 2023, respectively.
Results of Operations - Segment Information
The Company has four operating segments that are also its reportable segments, which consist of the Europe/Middle East (“EME”), North America, South America and Asia/Pacific/Africa (“APA”) 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 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.
46
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
The following table sets forth, for the three and nine months ended September 30, 2024, the impact to net sales of currency translation by geographical segment (in millions, except percentages):
| Three Months Ended September 30, | Change | Change Due to Currency Translation | |||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Europe/Middle East | $ | 1,298.2 | $ | 1,586.9 | $ | (288.7) | (18.2) | % | $ | 17.8 | 1.1 | % | |||||||||||||||||||||||
| North America | 736.1 | 941.1 | (205.0) | (21.8) | % | (5.1) | (0.5) | % | |||||||||||||||||||||||||||
| South America | 381.6 | 719.8 | (338.2) | (47.0) | % | (37.5) | (5.2) | % | |||||||||||||||||||||||||||
| Asia/Pacific/Africa | 183.4 | 207.7 | (24.3) | (11.7) | % | 3.6 | 1.7 | % | |||||||||||||||||||||||||||
| $ | 2,599.3 | $ | 3,455.5 | $ | (856.2) | (24.8) | % | $ | (21.2) | (0.6) | % | ||||||||||||||||||||||||
| Nine Months Ended September 30, | Change | Change Due to Currency Translation | |||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Europe/Middle East | $ | 4,930.1 | $ | 5,281.5 | $ | (351.4) | (6.7) | % | $ | 27.0 | 0.5 | % | |||||||||||||||||||||||
| North America | 2,303.5 | 2,861.0 | (557.5) | (19.5) | % | (3.6) | (0.1) | % | |||||||||||||||||||||||||||
| South America | 1,033.9 | 1,822.2 | (788.3) | (43.3) | % | (41.3) | (2.3) | % | |||||||||||||||||||||||||||
| Asia/Pacific/Africa | 507.1 | 647.0 | (139.9) | (21.6) | % | (3.4) | (0.5) | % | |||||||||||||||||||||||||||
| $ | 8,774.6 | $ | 10,611.7 | $ | (1,837.1) | (17.3) | % | $ | (21.3) | (0.2) | % | ||||||||||||||||||||||||
EME
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | 2024 | 2023 | $ | ||||||||||||||||||||||||||||||
| Net Sales | $ | 1,298.2 | $ | 1,586.9 | $ | (288.7) | $ | 4,930.1 | $ | 5,281.5 | $ | (351.4) | |||||||||||||||||||||||
| Income from Operations | 83.0 | 199.3 | (116.3) | 654.4 | 733.9 | (79.5) | |||||||||||||||||||||||||||||
Net sales in EME decreased in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to sales volume declines, most significantly in mid-range tractors, high-horsepower tractors and hay tools, partially offset by favorable foreign currency translation and a favorable impact from the PTx Trimble joint venture transaction. Income from operations decreased by $116.3 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 as a result of lower sales and production volumes, increased discounting and higher warranty costs.
Net sales in EME decreased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to sales volume declines, most significantly in mid-range tractors and hay tools, and lower sales of grain and protein products, partially offset by favorable foreign currency translation. Income from operations decreased by $79.5 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as a result of lower sales and production volumes.
47
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
North America
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | 2024 | 2023 | $ | ||||||||||||||||||||||||||||||
| Net Sales | $ | 736.1 | $ | 941.1 | $ | (205.0) | $ | 2,303.5 | $ | 2,861.0 | $ | (557.5) | |||||||||||||||||||||||
| Income from Operations | 52.7 | 139.8 | (87.1) | 171.8 | 378.8 | (207.0) | |||||||||||||||||||||||||||||
Net sales in North America decreased in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to sales volume declines, most significantly in mid-range and high-horsepower tractors and hay tools. Income from operations decreased by $87.1 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 as a result of lower sales and production volumes and higher warranty costs. These decreases were partially offset by margin improvements related to grain and protein products.
Net sales in North America decreased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to sales volume declines, most significantly in mid-range and high-horsepower tractors and hay tools. Income from operations decreased by $207.0 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 as a result of lower sales and production volumes and higher warranty costs. These decreases were partially offset by margin improvements related to grain and protein products.
South America
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | 2024 | 2023 | $ | ||||||||||||||||||||||||||||||
| Net Sales | $ | 381.6 | $ | 719.8 | $ | (338.2) | $ | 1,033.9 | $ | 1,822.2 | $ | (788.3) | |||||||||||||||||||||||
| Income from Operations | 45.1 | 149.8 | (104.7) | 73.9 | 370.7 | (296.8) | |||||||||||||||||||||||||||||
Net sales decreased in South America in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as a result of sales volume declines, most significantly in tractors, combines and implements, and unfavorable foreign currency translation. Income from operations decreased $104.7 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as a result of lower sales and production volumes and negative pricing impacts, partially offset by a one-time benefit from the tax reduction of tax on payments from imported goods and services in Argentina.
Net sales decreased in South America in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as a result of sales volume declines, most significantly in tractors and combines and unfavorable foreign currency translation. Income from operations decreased $296.8 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as a result of lower sales and production volumes and negative pricing impacts, partially offset by lower SG&A expenses resulting from a benefit recorded from the sale of a dealership in the first quarter of 2024 which was previously terminated in the fourth quarter of 2023.
APA
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | 2024 | 2023 | $ | ||||||||||||||||||||||||||||||
| Net Sales | $ | 183.4 | $ | 207.7 | $ | (24.3) | $ | 507.1 | $ | 647.0 | $ | (139.9) | |||||||||||||||||||||||
| Income from Operations | 7.0 | 19.2 | (12.2) | 27.4 | 58.2 | (30.8) | |||||||||||||||||||||||||||||
Net sales decreased in APA in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to lower sales volumes of high horse power tractors and lower sales of grain and protein products. Income from operations decreased $12.2 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to lower sales and production volumes.
48
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Net sales decreased in APA in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to lower sales volumes of high horse power tractors and hay tools and lower sales of grain and protein products. Income from operations decreased $30.8 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to lower sales and production volumes.
LIQUIDITY AND CAPITAL RESOURCES
Our financing requirements generally are subject to variations due to seasonal changes in inventory and receivable levels. Internally generated funds are supplemented when necessary from external sources, primarily our credit facilities and accounts receivable sales agreement facilities, subject to the discussion below with respect to the financing of the PTx Trimble joint venture transaction. Additional information regarding our indebtedness is contained in Note 9 to the Condensed Consolidated Financial Statements. We believe that the following borrowings and facilities listed below, together with available cash and internally generated funds, and assuming customary renewals and replacements, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future (in millions):
September 30, 2024(1) | |||||
| Credit facility, expires 2027 | $ | 790.0 | |||
| Term Loan Facility borrowings | 500.0 | ||||
5.450% Senior notes due 2027 | 400.0 | ||||
5.800% Senior notes due 2034 | 700.0 | ||||
0.800% Senior notes due 2028 | 670.2 | ||||
1.002% EIB Senior term loan due 2025 | 279.3 | ||||
| EIB Senior term loan due 2029 | 279.3 | ||||
| EIB Senior term loan due 2030 | 189.9 | ||||
| Senior term loans due between 2025 and 2028 | 163.7 | ||||
| Other long-term debt | 1.1 | ||||
____________________________________
(1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $12.8 million.
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. As of September 30, 2024, the Company had $790.0 million in outstanding borrowings under the revolving credit facility and had the ability to borrow $459.9 million. Subsequent to the end of the quarter, on November 1, 2024, the Company repaid $150.0 million outstanding under the Credit Facility utilizing proceeds from the sale of the Company’s G&P business discussed further below.
In addition, the Company has an uncommitted revolving credit facility that allows the Company to borrow up to €100.0 million (or approximately $111.7 million as of September 30, 2024). The credit facility expires on December 31, 2026. As of September 30, 2024, the Company had no outstanding borrowings under the revolving credit facility.
On September 29, 2023, the Company entered into a multi-currency Finance Contract with the EIB permitting the Company to borrow up to €250.0 million, to fund up to 50% of certain investments in research, development and innovation primarily in Germany, France and Finland during the period from 2023 through 2026. On October 26, 2023, the Company borrowed €250.0 million under the arrangement. The loan matures on October 26, 2029. As of September 30, 2024, there was €250.0 million (approximately $279.3 million) outstanding under the EIB Senior Term Loan due 2029.
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, for which the proceeds will be used in a similar manner as described for the EIB Senior Term Loan due 2029 above. On February 15, 2024, the Company borrowed €170.0 million under the arrangement. The loan matures on February 15, 2030. As of September 30, 2024, there was €170.0 million (approximately $189.9 million) outstanding under the EIB Senior Term Loan due 2030.
On March 21, 2024, the Company issued (i) $400.0 million aggregate principal amount of the 2027 Notes and (ii) $700.0 million aggregate principal amount of the 2034 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
49
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Company. As of September 30, 2024, the Company had $400.0 million and $700.0 million outstanding under the 2027 Notes and 2034 Notes, respectively.
In December 2023 and March 2024, the Company amended the Credit Facility to allow for incremental borrowings in the form of the Term Loan Facility in an aggregate principal amount of $500.0 million. The Company drew down the Term Loan 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 September 30, 2024, the Company had $500.0 million outstanding under the Term Loan Facility. Subsequent to the end of the quarter, on November 1, 2024, the Company repaid the $500.0 million outstanding under the Term Loan Facility utilizing proceeds from the sale of the Company’s G&P business discussed further below.
On September 28, 2023, the Company entered into a bridge facility commitment letter with Morgan Stanley pursuant to which Morgan Stanley committed to provide, subject to the terms and conditions set forth therein, a $2.0 billion senior unsecured 364-day bridge facility. The amount available under the Bridge Facility was reduced to zero by certain permanent financing transactions including the net proceeds from the issuance of the Notes, the Company's entry into the Term Loan Facility and by amounts based on the Company's cash flow. The Company terminated the Bridge Facility on March 25, 2024.
The PTx Trimble joint venture 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. The Company had redeemable noncontrolling interests of $337.5 million as of September 30, 2024 resulting from the PTx Trimble joint venture transaction, which may require the use of cash in certain instances, beginning in 2027. Refer to Note 2 of our Condensed Consolidated Financial Statements for further information.
On November 1, 2024, the Company completed the previously announced sale of the Company’s G&P business to A-AG Holdco Limited, an affiliate of American Industrial Partners. The Company received proceeds of approximately $700.0 million from the sale, subject to customary working capital and other adjustments. The Company repaid the $500.0 million outstanding under the Term Loan Facility and $150.0 million outstanding under the Credit Facility utilizing proceeds from the sale.
The Company is in compliance with the financial covenants contained in these facilities and expects to continue to maintain such compliance. Should we ever encounter difficulties, our historical relationship with our lenders has been strong, and we anticipate their continued long-term support of our business. Refer to Note 9 to the Condensed Consolidated Financial Statements for additional information regarding our current facilities, including the financial covenants contained in each debt instrument.
Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness, excluding short-term borrowings due within one year, and stockholders’ equity, was 48.8% and 23.0% at September 30, 2024 and December 31, 2023, respectively. The increase largely reflects the indebtedness incurred to pay the purchase price attendant to the PTx Trimble joint venture transaction.
Supplemental Guarantor Financial Information
The 2027 Notes and the 2034 Notes are unsecured and unsubordinated indebtedness of the Company and are guaranteed on a senior unsecured basis, jointly and severally, by AGCO International Holdings B.V., AGCO International GmbH, Massey Ferguson Corp. and The GSI Group, LLC, direct and indirect subsidiaries of the Company (collectively, the “Guarantors”). Refer to Note 9 of our Condensed Consolidated Financial Statements for further discussion of these debt obligations.
The following tables present summarized financial information of AGCO Corporation, as the issuer of the 2027 Notes and the 2034 Notes, and the Guarantors on a combined basis after elimination of intercompany transactions and balances within the Guarantors and equity in the earnings from and investments in any non-guarantor subsidiary. As used herein, “obligor group” means AGCO Corporation, as the issuer of the debt securities, and the Guarantors on a combined basis. The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the obligor group and is not intended to present the financial position or results of operations of the obligor group in accordance with generally accepted accounting principles as such principles are in effect in the United States.
50
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Balance Sheet Information
| (in millions) | As of September 30, 2024 | As of December 31, 2023 | |||||||||
Current assets(a) | $ | 4,830.5 | $ | 5,710.3 | |||||||
Noncurrent assets(b) | 2,569.5 | 2,036.4 | |||||||||
Current liabilities(c) | 3,921.4 | 5,597.4 | |||||||||
Noncurrent liabilities(d) | 5,763.2 | 2,824.2 | |||||||||
(a) Includes amounts due from non-guarantor subsidiaries of $2,309.9 million and $3,391.1 million as of September 30, 2024 and December 31, 2023, respectively.
(b) Includes amounts due from non-guarantor subsidiaries of $819.5 million and $404.1 million as of September 30, 2024 and December 31, 2023, respectively.
(c) Includes amounts due to non-guarantor subsidiaries of $1,836.7 million and $3,813.4 million as of September 30, 2024 and December 31, 2023, respectively.
(d) Includes amounts due to non-guarantor subsidiaries of $1,871.3 million and $1,193.3 million as of September 30, 2024 and December 31, 2023, respectively.
Statement of Operations Information
| (in millions) | Nine Months Ended September 30, | ||||
Revenues(a) | $ | 6,694.6 | |||
| Income from Operations | 490.1 | ||||
| Net income | (44.6) | ||||
| Net income attributable to obligor group | (44.6) | ||||
(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $4,190.7 million.
The following tables present summarized financial information of AGCO International GmbH, after elimination of intercompany transactions and balances within the Guarantors and equity in the earnings from and investments in any non-guarantor subsidiary.
Balance Sheet Information
| (in millions) | As of September 30, 2024 | As of December 31, 2023 | |||||||||
Current assets(a) | $ | 3,438.7 | $ | 4,108.0 | |||||||
Noncurrent assets(b) | 1,078.4 | 648.3 | |||||||||
Current liabilities(c) | 2,641.8 | 4,422.5 | |||||||||
Noncurrent liabilities(d) | 1,950.0 | 1,376.5 | |||||||||
(a) Includes amounts due from non-guarantor subsidiaries of $2,013.1 million and $2,760.2 million as of September 30, 2024 and December 31, 2023, respectively.
(b) Includes amounts due from non-guarantor subsidiaries of $784.7 million and $379.0 million as of September 30, 2024 and December 31, 2023, respectively.
(c) Includes amounts due to non-guarantor subsidiaries of $1,769.8 million and $3,540.1 million as of September 30, 2024 and December 31, 2023, respectively.
(d) Includes amounts due to non-guarantor subsidiaries of $1,834.2 million and $1,193.3 million as of September 30, 2024 and December 31, 2023, respectively.
51
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Statement of Operations Information
| (in millions) | Nine Months Ended September 30, 2024 | ||||
Revenues(a) | $ | 4,721.6 | |||
| Income from Operations | 616.0 | ||||
| Net income | 158.0 | ||||
| Net income attributable to obligor group | 158.0 | ||||
(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $3,851.3 million.
Our accounts receivable sales agreements in North America, Europe and Brazil permit the sale, on an ongoing basis, of a majority of our receivables to our U.S., Canadian, European and Brazilian finance joint ventures. The sales of all receivables are without recourse to us. We do not service the receivables after the sales occur, and we do not maintain any direct retained interest in the receivables. These agreements are accounted for as off-balance sheet transactions. The cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements that remain outstanding as of September 30, 2024 and December 31, 2023 was approximately $2.2 billion and $2.5 billion, respectively.
In addition, we sell certain trade receivables under factoring arrangements to other financial institutions around the world. The cash received from trade receivables sold under factoring arrangements that remain outstanding as of September 30, 2024 and December 31, 2023 was approximately $205.4 million and $254.1 million, respectively.
Our finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to our dealers. As of September 30, 2024 and December 31, 2023, these finance joint ventures had approximately $203.2 million and $211.3 million, respectively, of outstanding accounts receivable associated with these arrangements. The total finance portfolio in our finance joint ventures was approximately $14.6 billion and $14.1 billion as of September 30, 2024 and December 31, 2023, respectively. The total finance portfolio as of September 30, 2024 and December 31, 2023 included approximately $11.8 billion and $10.8 billion, respectively, of retail receivables and $2.8 billion and $3.3 billion, respectively, of wholesale receivables from AGCO dealers.
In order to efficiently manage our liquidity, we generally pay vendors in accordance with negotiated terms. To enable vendors to obtain payment in advance of our payment due dates to them, we have established programs in certain markets with financial institutions under which the vendors have the option to be paid by the financial institutions earlier than the payment due dates. Should we not be able to negotiate extended payment terms with our vendors, or should financial institutions no longer be willing to participate in early payment programs with us, we would expect to have sufficient liquidity to timely pay our vendors without any material impact on us or our financial position. As of September 30, 2024 and December 31, 2023, the amount outstanding that remains unpaid to the banks or other intermediaries associated with these programs totaled $77.7 million and $82.7 million, respectively. Refer to Note 8 of our Condensed Consolidated Financial Statements for further discussion.
Cash Flows
Cash flows used in operating activities were approximately $108.0 million for the first nine months of 2024 compared to cash provided by operating activities of approximately $202.7 million for the same period in 2023. The increase of cash used in operating activities during the nine months ended September 30, 2024 was primarily driven by a decrease in net income in the first nine months of 2024 compared to the same period in 2023.
Our working capital requirements are seasonal, with investments in working capital typically building in the first half of the year and then reducing in the second half of the year. We had approximately $2,258.8 million in working capital at September 30, 2024 as compared to $1,997.2 million at December 31, 2023. Inventories as of September 30, 2024 were approximately $3,443.2 million as compared to $3,440.7 million at December 31, 2023. Accounts and notes receivable, net, as of September 30, 2024 were approximately $156.9 million lower than at December 31, 2023 primarily due to timing of sales of accounts receivable under our factoring arrangements. Accounts payable and Accrued expenses as of September 30, 2024 were approximately $246.2 million and $395.0 million lower than at December 31, 2023, respectively.
52
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Capital expenditures for the first nine months of 2024 were approximately $279.3 million compared to $357.7 million for the same period in 2023.
Share Repurchase and Dividends
In November 2023, the Company entered into an ASR agreement with a financial institution to repurchase $53.0 million of shares of its common stock. We received approximately 371,669 shares associated with this transaction as of December 31, 2023. In January 2024, the Company received an additional 82,883 shares upon final settlement of our November 2023 ASR agreement. All shares received under the ASR agreement were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained earnings” within the Company’s Condensed Consolidated Balance Sheets. We did not purchase any shares directly or enter into any accelerated share repurchase agreements during the three and nine months ended September 30, 2024. As of September 30, 2024, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $57.0 million, which has no expiration date. On April 25, 2024, the Company's Board of Directors declared a special variable dividend of $2.50 per common share that was paid during the second quarter of 2024. During the three months ended September 30, 2024 and 2023, the Company declared and paid cash dividends of $0.29 and $0.29 per common share, respectively. During the nine months ended September 30, 2024 and 2023, the Company declared and paid cash dividends of $3.37 and $5.81 per common share, respectively. On October 24, 2024, the Company's Board of Directors declared a regular quarterly dividend of $0.29 per common share to be paid on December 16, 2024, to all stockholders of record as of the close of business on November 15, 2024.
COMMITMENTS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES
We are party to a number of commitments and other financial arrangements, which may include off-balance sheet arrangements. At September 30, 2024, we had outstanding guarantees issued to our Argentine finance joint venture, AGCO Capital, of approximately $60.5 million. In addition, we had accrued approximately $13.0 million of outstanding guarantees of residual values that may be owed to our finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users. The maximum potential amount of future payments under the guarantee is approximately $193.1 million. We also sell a majority of our wholesale receivables in North America, Europe and Brazil to our U.S., Canadian, European and Brazilian finance joint ventures. Refer to “Liquidity and Capital Resources” as well as to Notes 4 and 17 of our Condensed Consolidated Financial Statements for further discussion of these matters.
Contingencies
During 2017, the Company purchased Precision Planting, which provides precision agricultural technology solutions. In 2018, Deere & Company (“Deere”) filed separate complaints in the U.S. District Court of Delaware against the Company and Precision Planting alleging that certain products of those entities infringed certain patents of Deere. The two complaints subsequently were consolidated into a single case, Case No. 1:18-cv-00827-CFC. In July 2022, the case was tried before a jury, which determined that the Company and Precision Planting had not infringed the Deere patents. Following customary post-trial procedures, the Court entered a judgment in the Company’s favor, and Deere appealed the judgment to the U.S. Court of Appeals for the Federal Circuit. The appeal is fully briefed and is awaiting oral arguments before the court. The Company has an indemnity right under the purchase agreement related to the acquisition of Precision Planting from its previous owner. Pursuant to that right, the previous owner of Precision Planting currently is responsible for the litigation costs associated with the complaint and is obligated to reimburse AGCO for some or all of the damages in the event of an adverse outcome in the litigation.
We are party to various claims and lawsuits arising in the normal course of business. We closely monitor these claims and lawsuits and frequently consult with our legal counsel to determine whether they may, when resolved, have a material adverse effect on our financial position or results of operations and accrue and/or disclose loss contingencies as appropriate. See Note 17 of our Condensed Consolidated Financial Statements for further information.
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OUTLOOK
On April 1, 2024, AGCO acquired an 85% stake in PTx Trimble, and Trimble holds a 15% stake. AGCO began consolidating the PTx Trimble joint venture into its consolidated financial statements on April 1, 2024. On November 1, 2024, AGCO closed the previously announced divestiture of the Grain & Protein business.
Global industry demand for farm equipment, driven by farm income, has declined during 2024 in most major markets compared to 2023. AGCO's net sales are expected to decrease in 2024 compared to 2023, resulting from lower sales volumes. Operating margins are expected to decrease from 2023 levels, reflecting the impact of lower net sales, lower production volumes, partially offset by increased cost controls and modestly lower investments in engineering.
Our outlook is based on current assumptions regarding a number of factors including demand, currency stability, pricing and market share gains. If our assumptions are incorrect, or other issues arise or return, such as a worsening of our supply chain, our results of operations will be adversely impacted. Refer to “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates estimates, including those related to discount and sales incentive allowances, deferred income taxes and uncertain income tax positions, pensions, goodwill, other intangible and long-lived assets, and recoverable indirect taxes. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of critical accounting policies and related judgments and estimates that affect the preparation of our Condensed Consolidated Financial Statements is set forth in our Annual Report on Form 10-K for the year ended December 31, 2023.
FORWARD-LOOKING STATEMENTS
Certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q are forward-looking, including certain statements set forth under the headings “Liquidity and Capital Resources” and “Outlook.” Forward-looking statements reflect assumptions, expectations, projections, intentions or beliefs about future events. These statements, which may relate to such matters as earnings, net sales, margins, industry conditions, market demand, commodity prices, farm incomes, weather conditions, foreign currency translation impacts, general economic outlook, dividends, share repurchases, availability of financing, product development and enhancement, factory productivity, production and sales volumes, benefits from cost reduction initiatives, material costs, pricing impacts, tax rates, compliance with loan covenants, capital expenditures and working capital and debt service requirements are “forward-looking statements” within the meaning of the federal securities laws. These statements do not relate strictly to historical or current facts, and you can identify certain of these statements, but not necessarily all, by the use of the words “anticipate,” “assumed,” “indicate,” “estimate,” “believe,” “predict,” “forecast,” “rely,” “expect,” “continue,” “grow” and other words of similar meaning. Although we believe that the expectations and assumptions reflected in these statements are reasonable in view of the information currently available to us, there can be no assurance that these expectations will prove to be correct.
These forward-looking statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed in or implied by the forward-looking statements. Adverse changes in any of the following factors could cause actual results to differ materially from the forward-looking statements:
• general economic and capital market conditions;
• availability of credit to our retail customers;
• the worldwide demand for agricultural products;
• grain stock levels and the levels of new and used field inventories;
54
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
• cost of steel and other raw materials;
• energy costs;
• performance and collectability of the accounts receivable originated or owned by AGCO or our finance joint ventures;
• government policies and subsidies;
• uncertainty regarding changes in the international tariff regimes and product embargoes and their impact on the cost of the products that we sell;
• weather conditions;
• interest and foreign currency exchange rates;
• limitations on ability to repatriate funds;
• inflation, including in individual countries that have been designated as highly inflationary;
• pricing and product actions taken by competitors;
• commodity prices, acreage planted and crop yields;
• farm income, land values, debt levels and access to credit;
• pervasive livestock diseases;
• production disruptions, including due to component and raw material availability;
• production levels and capacity constraints at our facilities, including those resulting from plant expansions and systems upgrades;
• integration of recent and future acquisitions, including the completed acquisition on April 1, 2024 of the Trimble ag assets and formation of the joint venture, PTx Trimble, and the ability to obtain the expected results;
• our expansion plans in emerging markets;
• supply constraints, including energy shortages;
• our cost reduction and control initiatives;
• our research and development efforts;
• dealer and distributor actions;
• regulations affecting privacy and data protection;
• technological difficulties;
• the impact of the COVID-19, or other future pandemics, on product demand and production;
• the occurrence of future cyberattacks, including ransomware attacks; and
• the conflict in Ukraine.
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. In addition, the potential of future 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. There can be no assurance that there will not be future disruptions.
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.
Any forward-looking statement should be considered in light of such important factors. For additional factors and additional information regarding these factors, see “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023.
New factors that could cause actual results to differ materially from those described above emerge from time to time, and it is not possible for us to predict all of such factors or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and we disclaim any obligation to update the information contained in such statement to reflect subsequent developments or information except as required by law.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk Management
For quantitative and qualitative disclosures about market risks, see “Quantitative and Qualitative Disclosures About Market Risks” in Item 7A of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023. As of the third quarter of 2024, there has been no material change in our exposure to market risks.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2024, have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that the Company’s disclosure controls or the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. We will conduct periodic evaluations of our internal controls to enhance, where necessary, our procedures and controls.
Changes in Internal Control Over Financial Reporting
The Company closed the PTx Trimble joint venture transaction on April 1, 2024 and has included the operating results and assets and liabilities of the PTx Trimble joint venture in our condensed consolidated financial statements as of June 30, 2024 and September 30, 2024. The scope of management’s assessment of the effectiveness of the Company’s disclosure controls and procedures did not include the internal controls over financial reporting of the PTx Trimble joint venture. This exclusion is in accordance with the SEC Staff’s general guidance that an assessment of a recently acquired business may be omitted from the scope of management’s assessment for one year following the acquisition.
There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the three months ended September 30, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to various other legal claims and actions incidental to our business. These items are more fully discussed in Note 17 to our Condensed Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
The following information supplements our risks and uncertainties disclosed under "Risk Factors" in Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2023. The risks and uncertainties described in our risk factors have the potential to materially affect our business, results of operations, financial condition and cash flows. These risks are not exclusive and additional risks to which we are subject include the factors mentioned under “Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.
We are, and in the past have been, subject to the actions of activist stockholders, which could divert management’s attention and negatively impact our business.
The Company values constructive input from investors and regularly engages in dialogue with its shareholders regarding strategy and performance. The Company’s Board of Directors and management team are committed to acting in the best interests of all the Company’s shareholders. Stockholders may, from time to time, engage in proxy solicitations or advance stockholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management. Responding to some of these actions can be costly and time-consuming, may disrupt the Company’s operations and divert the attention of the Board of Directors, management and the Company’s employees. Such activities could interfere with the Company’s ability to execute its strategic plan. Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or senior management team arising from a proxy contest could lead to the perception of a change in the direction of our business or instability which may affect the market price and volatility of the Company’s common stock, result in the loss of potential business opportunities, make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners, any of which could adversely affect our business and operating results. We may choose to initiate, or may become subject to, litigation as a result of a proxy contest or matters arising from a proxy contest, which would serve as a further distraction to our board of directors and management and would require us to incur significant additional costs. In addition, actions such as those described above could cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
There were no purchases of our common stock made by or on behalf of us during the three months ended September 30, 2024.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted terminated
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ITEM 6. EXHIBITS
(Each management contract or compensation plan required to be filed as an exhibit is identified by an asterisk (*). The Company is not filing, under Item 4, instruments defining the rights of holders of long-term debt where the debt does not exceed 10% of the Company’s total assets. The Company agrees to furnish copies of those instruments to the Commission upon request.)
| Exhibit Number | Description of Exhibit | The filings referenced for incorporation by reference are AGCO Corporation | ||||||||||||
| July 25, 2024, Form 8-K, Exhibit 2.1 | ||||||||||||||
| Filed herewith | ||||||||||||||
| Filed herewith | ||||||||||||||
| Filed herewith | ||||||||||||||
| Filed herewith | ||||||||||||||
| Furnished herewith | ||||||||||||||
| 101 | The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, are formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements | Filed herewith | ||||||||||||
| 104 | Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 is formatted in Inline XBRL | Filed herewith | ||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AGCO Corporation | |||||||||||
| Date: | November 7, 2024 | By: | /s/ Damon Audia | ||||||||
| Damon Audia Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
| /s/ Indira Agarwal | |||||||||||
| Indira Agarwal Vice President, Chief Accounting Officer (Principal Accounting Officer) | |||||||||||
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Exhibit 10.1
AGCO CORPORATION
2006 LONG-TERM INCENTIVE PLAN
As amended through October 24, 2024.
The AGCO Corporation 2006 Long-Term Incentive Plan has been established by AGCO Corporation to (a) attract and retain persons eligible to participate in the Plan; (b) motivate Participants, by means of appropriate incentives, to achieve long-range goals; (c) provide incentive compensation opportunities that are competitive with those of other similar companies; and (d) further identify Participants’ interests with those of the Company’s other shareholders through compensation that is based on the Company’s common stock; and thereby promote the long-term financial interest of the Company and the Subsidiaries, including the growth in value of the Company’s equity and enhancement of long-term shareholder return.
ARTICLE I
GENERAL
1.1. Participation. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Individuals (including transferees of Eligible Individuals to the extent the transfer is permitted by the Plan and the applicable Award Agreement), those persons who will be granted one or more Awards under the Plan, and thereby become Participants in the Plan. In the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant.
1.2. Operation, Administration, and Definitions. The operation and administration of the Plan, including the Awards made under the Plan, shall be subject to the provisions of Section 6 (relating to operation and administration). Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Article II of the Plan).
ARTICLE II
DEFINED TERMS
In addition to the other definitions contained herein, the following definitions shall apply:
2.1. Award. The term “Award” means any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, Restricted Stock, Restricted Stock Units and Performance Share Awards.
2.2. Award Agreement. The term “Award Agreement” is defined in Section 5.2.
2.3. Board. The term “Board” means the Board of Directors of the Company.
2.4. Change in Control. The term “Change in Control” shall mean a change in the ownership of the Company, change in the effective control of the Company or change in ownership of a substantial portion of the Company’s assets, as described in Section 409A of the Code, including each of the following:
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(a) A change in the ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, possess more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company (not including where any one person, or more than one person acting as a group, who is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, acquires additional stock).
(b) A change in the effective control of the Company is presumed (which presumption may be rebutted by the Committee) to occur on the date that: any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company, or a majority of the members of the Board is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election of such new directors.
(c) A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total fair market value equal to or more than forty percent (40%) of the total fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions unless the assets are transferred to (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly by the Company, (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all of the outstanding stock of the Company, or (iv) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a person, or more than one person acting as a group, that owns directly or indirectly, fifty percent (50%) or more of the total value or voting power of all of the outstanding stock of the Company.
2.5. Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.
2.6. Committee. The term “Committee” is defined in Section 8.1.
2.7. Company. The term “Company” means AGCO Corporation, a Delaware corporation.
2.8. Effective Date. The term “Effective Date” means April 21, 2011.
2.9. Eligible Individual. The term “Eligible Individual” means any employee of the Company or a Subsidiary and any board member, consultant or other person providing services to the Company or a Subsidiary. An Award may be granted to an individual, in
2 | ||
connection with hiring, retention or otherwise, prior to the date the employee first performs services for the Company or the Subsidiaries, provided that such Awards shall not become effective prior to the date the individual first performs such services. However, only employees of the Company or any Subsidiary shall be considered Eligible Individuals with respect to Incentive Stock Options.
2.10. Exchange Act. The term “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.11. Exercise Price. The term “Exercise Price” is defined in Section 3.1.
2.12. Fair Market Value. The term “Fair Market Value” means, for any particular date:
(a) for any period during which the Stock shall be listed for trading on a national securities exchange, the closing price per share of stock on such exchange, or
(b) for any period during which the Stock shall not be listed for trading on a national securities exchange, but when prices for the Stock shall be reported by Nasdaq, the closing bid price as reported by the Nasdaq, or
(c) in the event neither Section 2.12 (a) or (b) above shall be applicable, the market price per share of Stock as determined in good faith by the Committee using a reasonable valuation method based on the facts and circumstances on the valuation date; provided, however, that the use of a value per share of stock previously calculated shall not be reasonable if, as of the date of grant, such valuation fails to reflect information available after the date of valuation that may materially affect the value of the Company or if the valuation per share of stock was calculated on a date more than twelve (12) months prior to the date of grant.
If Fair Market Value is to be determined as of a day when the securities markets are not open, the Fair Market Value on that day shall be the Fair Market Value on the preceding day when the markets were open. The provisions of this Section 2.12 shall be interpreted in accordance with Section 409A of the Code and the regulations issued thereunder and applicable accounting principles.
2.13. Incentive Stock Option. The term “Incentive Stock Option” means an Option that is intended to satisfy the requirements applicable to an “incentive stock option” described in section 422(b) of the Code.
2.14. Non-Qualified Option. The term “Non-Qualified Option” means an Option that is not intended to be an “incentive stock option” as that term is described in section 422(b) of the Code.
2.15. Option. The term “Option” means either an Incentive Stock Option or a Non- Qualified Option and the grant of an Option entitles the Participant to purchase shares of Stock at an Exercise Price established by the Committee.
2.16. Participant. The term “Participant” means those Eligible Individuals who are granted one or more Awards under the Plan.
3 | ||
2.17. Performance Measures. The term “Performance Measures” means the measurable performance objectives, if any, established by the Committee for a Performance Period that are to be achieved with respect to an Award granted to a Participant under the Plan. Performance Measures may be described in terms of Company-wide objectives or in terms of objectives that are related to performance of the division, Subsidiary, department or function within the Company or a Subsidiary in which the Participant receiving the Award is employed or on which the Participant’s efforts have the most influence. The achievement of the Performance Measures established by the Committee for any Performance Period will be determined without regard to the effect on such Performance Measures of any acquisition or disposition by the Company of a trade or business, or of substantially all of the assets of a trade or business, during the Performance Period and without regard to any change in, or interpretation of, accounting standards by the Financial Accounting Standards Board (or any successor entity) or any other authority that establishes or interprets accounting principles applicable to the Company or its Subsidiaries. The Performance Measures established by the Committee for any Performance Period under the Plan will consist of one or more of the following:
(1) revenue and/or growth in revenue in relation to target objectives;
(2) productivity and/or improvement in productivity;
(3) improvement in or attainment of expense levels;
(4) operating income and/or growth in operating income in relation to target objectives;
(5) margins and/or growth in margins (gross, operating or otherwise) in relation to target objectives;
(6) net income and/or growth in net income in relation to target objectives;
(7) earnings per share and/or growth in earnings per share in relation to target objectives;
(8) total stockholder return (measured as the total of the appreciation of and dividends declared on common stock) in relation to target objectives;
(9) return on invested capital in relation to target objectives;
(10) return on stockholder equity in relation to target objectives;
(11) return on assets in relation to target objectives;
(12) return on common book equity in relation to target objectives;
(13) operating cash flow and/or growth in operating cash flow in relation to target objectives;
4 | ||
(14) cash available in relation to target objectives;
(15) customer satisfaction and/or improvement in customer satisfaction;
(16) quality and related metrics; and
(17) achievement of milestones on special projects.
If the Committee determines that, as a result of a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which the Company conducts its business, or any other events or circumstances, the Performance Measures are no longer suitable, the Committee may in its discretion modify such Performance Measures or the related minimum acceptable level of achievement, in whole or in part, with respect to a period as the Committee deems appropriate and equitable, except where such action would result in the loss of the otherwise available exemption of the Award under Section 162(m) of the Code, if applicable. In such case, the Committee will not make any modification of the Performance Measures or minimum acceptable level of achievement.
2.18. Performance Period. The term “Performance Period” means, with respect to an Award, a period of not less than one year within which the Performance Measures relating to such Award are to be measured. Notwithstanding the foregoing, up to 250,000 Performance Shares (less any shares referenced in the second sentence of Section 6.2) may have Performance Periods that are less than one year. The Performance Period will be established by the Committee at the time the Award is granted.
2.19. Performance Share. The term “Performance Share” means an Award that is a grant of a right to receive shares of Stock that is contingent on the achievement of performance or other objectives during a specified period.
2.20. Plan. The Term “Plan” means the 2006 AGCO Corporation Long-Term
Incentive Plan as amended and/or restated from time to time.
2.21. Restricted Stock. The term “Restricted Stock” means an Award that is a grant of shares of Stock with such shares of Stock subject to a risk of forfeiture or other restrictions or conditions that will lapse over a specified period or upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Committee.
2.22. Restricted Stock Unit. The term “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article IV-A under which no shares of Stock are actually awarded to the Participant on the date of grant.
2.23. SAR. The term “SAR” means a stock appreciation right and the grant of a SAR
entitles the Participant to receive, in cash or Stock (as determined in accordance with subsection 3.4), value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of shares of Stock at the time of exercise; over (b) an Exercise Price established by the Committee.
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2.24. Subsidiaries. The term “Subsidiary” means any corporation during any period in which it is a “subsidiary corporation” (as that term is defined in Code Section 424(f)) with respect to the Company.
2.25. Stock. The term “Stock” means shares of common stock of the Company, par value $.01 per share.
2.26. Ten Percent Shareholder. The term “Ten Percent Shareholder” means an individual shareholder of the Company owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any parent or Subsidiary. For purposes of the preceding sentence, the rules of Section 424 of the Code shall apply in determining stock ownership.
ARTICLE III
OPTIONS AND SARS
3.1. Exercise Price. The “Exercise Price” of each Option and SAR granted under this Article 3 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; except that the Exercise Price shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant (110% of the Fair Market Value on such date in the event of an Incentive Stock Option granted to a Participant who is a Ten Percent Shareholder).
3.2. Exercise. An Option and a SAR shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. Notwithstanding the foregoing, no Incentive Stock Options may be exercisable more than ten (10) years after the date of grant (five (5) years after the date of grant in the event of Incentive Stock Options granted to a Participant who is a Ten Percent Shareholder).
3.3. Payment of Option Exercise Price. The payment of the Exercise Price of an
Option granted under this Article 3 shall be subject to the following:
(a) Subject to the following provisions of this Section 3.3, the full Exercise Price for shares of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in Section 3.3(c), payment may be made as soon as practicable after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering, by either actual delivery of shares or by attestation, shares of Stock acceptable to the Committee, and valued at Fair Market Value as of the day of exercise, or in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an Option by irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any minimum tax withholding resulting from such exercise.
3.4. Settlement of Award. Shares of Stock delivered pursuant to the exercise of an Option or SAR shall be subject to such conditions, restrictions and contingencies as the
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Committee may establish in the applicable Award Agreement. Settlement of SARs may be made in shares of Stock (valued at their Fair Market Value at the time of exercise), in cash, or in a combination thereof, as determined in the discretion of the Committee. The Committee, in its discretion, may impose such conditions, restrictions and contingencies with respect to shares of Stock acquired pursuant to the exercise of an Option or a SAR as the Committee determines to be desirable.
3.5. Incentive Stock Option Limits. To the extent the aggregate Fair Market Value of Stock with respect to which Incentive Stock Options (whether granted under this Plan or any other plan of the Company or any parent or Subsidiary of the Company) are first exercisable by any Participant during any calendar year exceeds $100,000, such Options, to the extent of the excess, shall be treated as Non-Qualified Options.
3.6. Repricing Prohibited. The Committee shall not reprice any outstanding option or SAR, directly or indirectly, without the approval of the stockholders of the Company, provided that nothing herein shall prevent the Committee from taking any action provided for in Section 6.2(d).
ARTICLE IV-A
RESTRICTED STOCK UNITS
4.1. Restricted Stock Units. A Restricted Stock Unit shall entitle the Participant to receive, at a specified future date or time, one share of Stock with respect to each Restricted Stock Unit that becomes payable under the terms and conditions of the Award or, in the Committee’s sole discretion at the time thereof, an amount in cash equal to the then Fair Market Value of such share of Stock. At the time of the grant, the Committee must determine the number of Restricted Stock Units subject to an award of Restricted Stock Units and (i) the period over which such Restricted Stock Unit shall vest and become payable and in what proportions or (ii) the Performance Period and the Performance Goals applicable to the determination of the ultimate settlement of the Restricted Stock Unit.
4.2. Settlement. Settlement with respect to Restricted Stock Units may be made by the Company in shares of Stock, or in cash, as provided in the applicable Award Agreement or Award program or, in the absence of such provision, as the Committee may determine in its sole discretion.
4.3. Conditions to Settlement. Each Restricted Stock Unit granted under the Plan shall be settled at the end of the vesting period or Performance Period or upon the occurrence of an event, and in such number of shares or amount, as the Committee shall specify in the applicable Award Agreement or Award program.
ARTICLE IV- B
PERFORMANCE SHARE AWARDS
At the time a Performance Share Award is granted, the Committee may designate whether such Performance Share Award being granted to the Participant is intended to be “performance- based compensation” as that term is used in section 162(m) of the Code. Any such Performance Share Awards designated as intended to be “performance-based compensation” shall be conditioned on the achievement of one or more Performance Measures, over a specified Performance Period. Prior to payment of such Performance Shares,
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the Committee must certify in writing that the Performance Measures and other material terms of the Award were in fact satisfied.
For Performance Share Awards intended to be “performance-based compensation,” the grant of the Awards and the establishment of the Performance Measures shall be made during the period required under Section 162(m) of the Code.
ARTICLE V
TERMS AND CONDITIONS OF ALL AWARDS
5.1. Awards. The number of shares of Stock as to which an Award may be granted will be determined by the Committee in its sole discretion, subject to the provisions of Section
6.2(a) as to the total number of shares available for grants under the Plan and subject to the limits on Awards in the following sentence. On such date as required by Section 162(m) of the Code and the regulations thereunder for compensation to be treated as qualified performance- based compensation, the maximum number of shares of Stock with respect to which Options, SARs, Restricted Stock, Restricted Stock Units or Performance Shares may be granted during any calendar year period to any Participant may not exceed 500,000. If, after grant, an Award is cancelled, the cancelled Award shall continue to be counted against the maximum number of shares for which Awards may be granted to Participant as described in this Section 5.1.
5.2. Award Agreements. Each Award will either be evidenced by an “Award Agreement” in such form and containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, Performance Goals that must be achieved as a condition to vesting or payment of the Award, or be made subject to the terms of an Award program, containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, Performance Goals that must be achieved as a condition to vesting or payment of the Award. Each Award Agreement or Award program is subject to the terms of the Plan and any provisions contained in the Award Agreement or Award program that is inconsistent with the Plan are null and void.
5.3. Grant Date. The date an Award is granted will be the date on which the Committee has approved the terms and conditions of the Award and has determined the recipient of the Award and the number of shares covered by the Award, and has taken all such other actions necessary to complete the grant of the Award.
5.4. Post-termination Obligations. The terms of an Award may provide that the Award will be forfeited and that the Participant will be obligated to turn over to the Company the proceeds of an Award in the event that the Participant violates any post-termination obligations that the Participant has to the Company or any Subsidiary including, without limitation, any obligation not to compete with the Company or any Subsidiary (regardless of whether such obligation is enforceable under applicable law), not to solicit employees, customers or clients of the Company or any Subsidiary, to maintain the confidentiality of information belonging to the Company or any Subsidiary, or not to disparage the Company or any Subsidiary or any of their affiliates.
5.5. Clawback Policy. Each Award will be subject to any “clawback” policy of the Company in effect on the date that the Award is granted and any other “clawback” policy that the Company thereafter is required by law to adopt.
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ARTICLE VI
OPERATION AND ADMINISTRATION
6.1. Effective Date. The Plan, as amended and restated, became effective as of the Effective Date subject to approval by the shareholders of the Company. Awards granted prior to the Effective Date shall be governed by the terms of the Plan in effect on the date of grant except as expressly provided otherwise. The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that, to the extent required by the Code, no Incentive Stock Option may be granted under the Plan on or after January 1, 2021.
6.2. Shares Subject to Plan. The shares of Stock for which Awards may be granted under the Plan shall be subject to the following:
(a) Subject to the following provisions of this subsection 6.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be 10,000,000 (which shall include shares issued before and after the Effective Date).
(b) For purposes of calculating the total number of shares of Stock available under this Plan for grants of Awards, (i) the grant of an Award of Options, Restricted Stock, Restricted Stock Units, SARs or a Performance Share Award shall be deemed to be equal to the maximum number of shares of Stock which may be issued under the Award, (ii) subject to the provisions of this Section 6.2 there shall again be available for Awards under this Plan all of the following: (A) shares of Stock represented by Awards which have been cancelled, forfeited, surrendered or terminated or which expire unexercised and (B) the excess portion of variable Awards, such as SARs, Restricted Stock Units and Performance Share Awards, which become fixed at less than their maximum limitations.
(c) If the Exercise Price of any stock option granted under the Plan or any prior equity incentive plan of the Company is satisfied by tendering shares of Stock to the Company (by either actual delivery or by attestation), only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock for delivery under the Plan.
(d) Subject to Article VII, in the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Committee shall adjust Awards to preserve the benefits or potential benefits of the Awards. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan and the applicable limits under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the Exercise Price of outstanding Options and SARs; and (iv) any other adjustments that the Committee determines to be equitable; provided, however that any adjustments to the number of shares subject to an Award and the Exercise Price to be paid therefor, shall be proportionately adjusted to reflect such transaction and only such transaction
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on a pro rata basis such that the aggregate Exercise Price of such Awards, if any, is not less than the aggregate Exercise Price before such transaction. The foregoing adjustment and the manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion and to the extent not prohibited under Section 409A of the Code and the regulations thereunder. Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to an Award.
6.3. General Restrictions. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provisions of the Plan, the Company shall have no liability to deliver any shares of Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non- certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
(c) For Restricted Stock Awards granted to Eligible Individuals other than non-employee members of the Board, the time period for vesting, subject to Article VII and other provisions relating to the termination of employment, shall not be less than three years. Notwithstanding the foregoing, up to 250,000 of such Restricted Shares (less any shares referenced in the second sentence of Section 2.18) may vest in less than three years.
6.4. Tax Withholding. All Awards under the Plan are subject to withholding or payment of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Participant or through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan.
6.5. Section 409A of the Code. Notwithstanding anything to the contrary contained herein, Awards granted under this Plan are not intended to be treated as deferred compensation within the meaning of Section 409A of the Code. Towards that end, the Plan will be administered and construed by the Committee in a manner to fulfill such intent. Notwithstanding the foregoing, none of the Company, its Subsidiaries or the Committee shall be liable to any Participant if any Award fails to be exempt from, or to be in compliance with, Section 409A of the Code.
6.6. Use of Shares. Subject to the overall limitation on the number of shares of Stock that may be delivered under the Plan, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other
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compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.
6.7. Dividends and Dividend Equivalents. An Award other than an Option or SAR Award may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is earned, vested, or acquired), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in shares of Stock, may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including the reinvestment of such credited amounts in Stock equivalents.
6.8. Payments. Awards may be settled through cash payments, the delivery of shares of Stock, or combination thereof, as the Committee shall determine provided that, in the case of Restricted Stock Awards, Restricted Stock Units and Performance Share Awards, such Participant’s taxable year during which the Award is no longer subject to a substantial risk of forfeiture or (ii) the last day of the Company’s taxable year during which the Award is no longer subject to a substantial risk of forfeiture. Any Award settlement, including payments thereof or delivery of Stock, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. Each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee.
6.9. Transferability. Except as otherwise provided by the Committee, Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution.
6.10. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
6.11. Action by Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company.
6.12. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
6.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in their sole
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discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment or service, and selection as a Participant will not give any participating employee or service provider the right to be retained in the employ or service of the Company or any Subsidiary, nor any right to claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights and issuance of Stock to such individual.
6.14. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
6.15. Governing Law. This Plan and all Awards granted hereunder shall be governed by the laws of the State of Delaware, except to the extent federal law applies.
ARTICLE VII
CHANGE IN CONTROL
Subject to the provisions of Section 6.2(d) (relating to the adjustment of shares), and except as otherwise provided in the Plan or the Award Agreement reflecting the applicable Award, upon the occurrence of a Change in Control: (a) all outstanding Options shall become fully exercisable; (b) all outstanding SARs shall become fully exercisable; and (c) all Restricted Stock, Restricted Stock Units and Performance Shares shall become fully vested.
Notwithstanding any provision of any Award Agreement, in the event of or in anticipation of a Change in Control, the Committee in its discretion may (a) declare that some or all outstanding Options and/or SARs previously granted under the Plan, whether or not then exercisable or vested, shall terminate as of a date before or on the Change in Control without any payment to the holder thereof (other than repayment of the purchase price, if any, paid for such Awards), provided that the Committee gives prior written notice to the Participants of such termination and gives such Participants the right to exercise the outstanding Options or SARs for at least seven (7) days before such date to the extent then exercisable (or to the extent such Options or SARs would have been exercisable as of the Change in Control); (b) terminate before or on the Change in Control some or all outstanding Awards previously granted under the Plan, whether or not then exercisable, vested or earned and payable, in consideration of payment to the holder thereof, (i) with respect to each share of Stock for which the Option or SAR is then exercisable (or for which the Option or SAR would have been exercisable as of the Change in Control), of the excess, if any, of the Fair Market Value on such date of the Stock subject to such portion of the Option or SAR over the exercise or base price (provided that outstanding Options or SARs that are not then exercisable and that would not become exercisable on the Change in Control, and Options or SARs with respect to which the Fair Market Value of the Stock subject to the Options or SARs does not exceed the exercise or base price, shall be cancelled without any payment therefor), (ii) with respect to
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Restricted Stock Awards that are not then nonforfeitable and transferable (but that would have become nonforfeitable and transferable as of the Change in Control) in exchange for the payment equal to the difference between the then Fair Market Value of the shares of Stock subject to the Restricted Stock Award less the unpaid purchase price, if any, for such shares or (iii) with respect to Restricted Stock Units or Performance Shares that are not then vested, earned and payable (but that would have become vested, earned and payable as of the Change in Control) in exchange for a payment equal to the amount which would have been payable under such Restricted Stock Units or Performance Share Awards; (c) terminate before or on the Change in Control some or all outstanding Restricted Stock Units or Performance Share Awards previously granted under the Plan that are not then vested, earned and payable (and that would not have become vested, earned and payable as of the Change in Control) without any payment to the holder thereof or (d) take such other action as the Committee determines to be reasonable under the circumstances to permit the Participant to realize the value of the Award (which value for purposes of Awards that are not then exercisable, vested or payable and that would not become exercisable, vested or payable as of the Change in Control, and Options or SARs with respect to which the Fair Market Value of the Stock subject to the Options or SARs does not exceed the exercise or base price, shall be deemed to be zero). The payments described above may be made in any manner the Committee determines, including in cash, stock or other property (whether or not part of the consideration of the Change in Control). The Committee may take the actions described above with respect to Awards that are not then exercisable whether or not the Participant will receive any payment therefor. The Committee in its discretion may take any of the actions described in this Article VII contingent on consummation of the Change in Control and with respect to some or all outstanding Awards, whether or not then exercisable, vested or payable or on an Award-by-Award basis, which actions need not be uniform with respect to all outstanding Awards. However, the Awards shall not be terminated to the extent that written provision is made for their continuance, assumption or substitution by the Company or a successor employer or its parent or subsidiary in connection with the Change in Control.
ARTICLE VIII
COMMITTEE
8.1. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Article 8. So long as the Board has a Compensation Committee, the Compensation Committee shall constitute the committee unless expressly determined otherwise by the Board. In the event that the Board does not have a Compensation Committee or the Board expressly determines that the Compensation Committee shall not be the Committee, the members of the Committee shall be selected by the Board and the Committee shall be comprised of two or more members of the Board who satisfy the independence requirements of Section 162(m) of the Code as well as any other applicable stock exchange or Exchange Act independence requirements. If the Committee does not exist, or for any other reason determined by the Board, the members of the Board deemed to meet such independence standards by the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.
8.2. Powers of Committee. The Committee’s administration of the Plan shall be subject to the following:
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(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Article IX) to cancel or suspend Awards.
(b) The Committee may, without amending the Plan, provide for different terms and conditions for the Awards granted to Participants who are foreign nationals or employed outside the United States in order to accommodate differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters, and may make such awards pursuant to sub-plans and other appropriate means.
(c) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any Award Agreement made pursuant to the Plan,and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(d) Any interpretations of the Plan by the Committee and any decisions made by it under the Plan are final and binding on all persons.
(e) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and by- laws of the Company and applicable state corporate law.
8.3. Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time.
8.4. Information to be Furnished to Committee. The Company and Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and Subsidiaries as to an employee’s or Participant’s employment, service, termination of employment or service, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined by the Committee to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
ARTICLE IX
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), materially adversely affect the rights of any Participant or beneficiary under any Award
14 | ||
granted under the Plan prior to the date such amendment is adopted by the Board; provided that adjustments pursuant to Section 6.2(d) and amendments to allow the Plan and the Awards issued thereunder to comply with the provisions of Section 409A of the Code and the regulations and other applicable law thereunder or to be exempt from Section 409A of the Code shall not be subject to the foregoing limitations of this Article IX.
Notwithstanding the foregoing, no amendment that (i) materially increases the benefits accruing to participants under the Plan, or (ii) materially expands the definition of Eligible Employee shall be effective until such amendment has been approved by stockholders of the Company.
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Exhibit 22.1
List of Subsidiary Guarantors
As of September 30, 2024, the 5.450% Senior Notes due 2027 and the 5.800% Senior Notes due 2034 issued by AGCO Corporation are guaranteed by the following direct and indirect subsidiaries of AGCO Corporation:
| Name of Subsidiary | State or Other Jurisdiction of Incorporation or Organization | |||||||
| AGCO International Holdings B.V. | The Netherlands | |||||||
| AGCO International GmbH | Switzerland | |||||||
| Massey Ferguson Corp. | Delaware | |||||||
| The GSI Group, LLC | Delaware | |||||||
Exhibit 31.1
Certification Pursuant to § 302 of the Sarbanes-Oxley Act of 2002
I, Eric P. Hansotia, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of AGCO Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: | November 7, 2024 | |||||||
| /s/ Eric P. Hansotia | ||||||||
| Eric P. Hansotia | ||||||||
| Chairman of the Board, President and Chief Executive Officer | ||||||||
Exhibit 31.2
Certification Pursuant to § 302 of the Sarbanes-Oxley Act of 2002
I, Damon Audia, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of AGCO Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: | November 7, 2024 | |||||||
| /s/ Damon Audia | ||||||||
| Damon Audia | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATION
The undersigned, as the Chairman of the Board, President and Chief Executive Officer and as the Senior Vice President and Chief Financial Officer of AGCO Corporation, respectively, certify that, to the best of their knowledge and belief, the Quarterly Report on Form 10-Q for the period ended September 30, 2024, which accompanies this certification fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of AGCO Corporation at the dates and for the periods indicated. The foregoing certifications are made pursuant to 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and shall not be relied upon for any other purpose.
| /s/ Eric P. Hansotia | ||||||||
| Eric P. Hansotia | ||||||||
| Chairman of the Board, President and Chief Executive Officer | ||||||||
| November 7, 2024 | ||||||||
| /s/ Damon Audia | ||||||||
| Damon Audia | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||
| November 7, 2024 | ||||||||
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to AGCO Corporation and will be retained by AGCO Corporation and furnished to the Securities and Exchange Commission or its staff upon request.