AGCO CORP /DE [AGCO] Filings

10-Q 1 agco-20220331.htm 10-Q agco-20220331

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 March 31, 2022


☐			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)


Delaware		58-1960019
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
4205 River Green Parkway
Duluth,	Georgia	30096
(Address of principal executive offices)		(Zip Code)

(770) 813-9200

(Registrants 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
Common stock	AGCO	New York Stock Exchange

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.

☒

Large accelerated filer

☐

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 May 5, 2022, there were 74,543,687 shares of the registrant’s common stock, par value of $0.01 per share, outstanding.

AGCO CORPORATION AND SUBSIDIARIES

INDEX


			Page Numbers

PART I. FINANCIAL INFORMATION:

Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3

		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	4



		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021	5

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	6

	Notes to Condensed Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		42

Item 4.	Controls and Procedures		42

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings		43

Item 1A.	Risk Factors		43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 6.	Exhibits		44

SIGNATURES			45

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in millions, except share amounts)


	March 31, 2022		December 31, 2021
ASSETS
Current Assets:
Cash, cash equivalents and restricted cash	$	655.7	$	889.1
Accounts and notes receivable, net	1,108.2		991.5
Inventories, net	3,259.7		2,593.7
Other current assets	613.4		539.8
Total current assets	5,637.0		5,014.1
Property, plant and equipment, net	1,463.6		1,464.8
Right-of-use lease assets	163.9		154.1
Investments in affiliates	423.2		413.5
Deferred tax assets	186.4		169.3
Other assets	300.9		293.3
Intangible assets, net	396.8		392.2
Goodwill	1,304.7		1,280.8
Total assets	$	9,876.5	$	9,182.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	2.1	$	2.1
Short-term borrowings	93.2		90.8

Accounts payable	1,276.4		1,078.3
Accrued expenses	1,844.0		2,062.2
Other current liabilities	219.5		221.2
Total current liabilities	3,435.2		3,454.6
Long-term debt, less current portion and debt issuance costs	1,899.4		1,411.2
Operating lease liabilities	125.8		115.5
Pension and postretirement health care benefits	208.7		209.0
Deferred tax liabilities	113.6		116.9
Other noncurrent liabilities	418.9		431.1
Total liabilities	6,201.6		5,738.3
Commitments and contingencies (Note 18)

Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2022 and 2021	—		—
Common stock; $0.01 par value, 150,000,000 shares authorized, 74,542,772 and 74,441,312 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	0.7		0.7
Additional paid-in capital	2.9		3.9
Retained earnings	5,306.2		5,182.2
Accumulated other comprehensive loss	(1,635.0)		(1,770.9)
Total AGCO Corporation stockholders’ equity	3,674.8		3,415.9
Noncontrolling interests	0.1		27.9
Total stockholders’ equity	3,674.9		3,443.8
Total liabilities and stockholders’ equity	$	9,876.5	$	9,182.1

See accompanying notes to condensed consolidated financial statements.

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AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in millions, except per share data)



	Three Months Ended March 31,
	2022		2021
Net sales	$	2,685.7	$	2,378.7
Cost of goods sold	2,054.4		1,808.2
Gross profit	631.3		570.5
Selling, general and administrative expenses	271.1		260.6
Operating expenses:
Engineering expenses	100.3		96.3
Amortization of intangibles	15.3		17.5
Impairment charges	36.0		—
Restructuring expenses	3.0		1.3
Bad debt expense (credit)	1.6		(0.4)
Income from operations	204.0		195.2
Interest expense, net	0.4		3.4
Other expense, net	17.5		11.5
Income before income taxes and equity in net earnings of affiliates	186.1		180.3
Income tax provision	60.2		43.6
Income before equity in net earnings of affiliates	125.9		136.7
Equity in net earnings of affiliates	11.1		14.7
Net income	137.0		151.4
Net loss (income) attributable to noncontrolling interests	14.8		(0.6)
Net income attributable to AGCO Corporation and subsidiaries	$	151.8	$	150.8
Net income per common share attributable to AGCO Corporation and subsidiaries:
Basic	$	2.03	$	2.00
Diluted	$	2.03	$	1.99
Cash dividends declared and paid per common share	$	0.20	$	0.16
Weighted average number of common and common equivalent shares outstanding:
Basic	74.6		75.3
Diluted	74.9		75.9

See accompanying notes to condensed consolidated financial statements.

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AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited and in millions)


	Three Months Ended March 31,
	2022		2021
Net income	$	137.0	$	151.4
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation adjustments	138.3		(47.3)
Defined benefit pension plans, net of tax	1.7		35.1
Deferred gains and losses on derivatives, net of tax	(3.3)		4.7
Other comprehensive income (loss), net of reclassification adjustments	136.7		(7.5)
Comprehensive income	273.7		143.9
Comprehensive loss (income) attributable to noncontrolling interests	14.0		(0.2)
Comprehensive income attributable to AGCO Corporation and subsidiaries	$	287.7	$	143.7

See accompanying notes to condensed consolidated financial statements.

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AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in millions)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	137.0	$	151.4
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	54.7		54.8
Amortization of intangibles	15.3		17.5
Stock compensation expense	7.0		6.8
Impairment charges	36.0		—
Equity in net earnings of affiliates, net of cash received	(11.1)		(14.7)
Deferred income tax (benefit) provision	(5.0)		4.1
Other	(8.8)		1.9
Changes in operating assets and liabilities:
Accounts and notes receivable, net	(113.3)		(232.3)
Inventories, net	(595.2)		(466.1)
Other current and noncurrent assets	(48.7)		(45.8)
Accounts payable	193.4		296.7
Accrued expenses	(219.5)		(175.7)
Other current and noncurrent liabilities	(18.3)		86.1
Total adjustments	(713.5)		(466.7)
Net cash used in operating activities	(576.5)		(315.3)
Cash flows from investing activities:
Purchases of property, plant and equipment	(66.3)		(63.5)
Proceeds from sale of property, plant and equipment	0.3		0.1
Investments in unconsolidated affiliates	(0.1)		(0.1)
Purchase of businesses, net, and net of cash acquired	(61.9)		(0.8)

Other	—		(2.5)
Net cash used in investing activities	(128.0)		(66.8)
Cash flows from financing activities:
Proceeds from indebtedness	980.7		195.3
Repayments of indebtedness	(459.1)		(416.8)

Payment of dividends to stockholders	(14.9)		(12.0)
Payment of minimum tax withholdings on stock compensation	(16.0)		(26.5)

Distributions to noncontrolling interest	(11.6)		—

Net cash provided by (used in) financing activities	479.1		(260.0)
Effects of exchange rate changes on cash, cash equivalents and restricted cash	(8.0)		(23.3)
Decrease in cash, cash equivalents and restricted cash	(233.4)		(665.4)
Cash, cash equivalents and restricted cash, beginning of period	889.1		1,119.1
Cash, cash equivalents and restricted cash, end of period	$	655.7	$	453.7

See accompanying notes to condensed consolidated financial statements.

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AGCO CORPORATION AND SUBSIDIARIES

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, 2021. Results for interim periods are not necessarily indicative of the results for the year. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company cannot predict the future impact of the COVID-19 pandemic on its business, including any related impacts on the global economic and political environments, market demand for its products, supply chain disruptions, possible workforce unavailability, exchange rates, commodity prices and availability of financing, and their impact to the Company’s net sales, production volumes, costs and overall financial conditions.

New Accounting Pronouncements to be Adopted

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected versus incurred credit losses for financial assets. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which delays the effective date of ASU 2016-13 for smaller reporting companies and other non-SEC reporting entities. This applies to the Company’s equity method finance joint ventures, which are now required to adopt ASU 2016-13 for annual periods beginning after December 15, 2022 and interim periods within those annual periods. The standard, and its subsequent modification, likely will impact the results of operations and financial condition of the Company’s finance joint ventures. Therefore, adoption of the standard by the Company’s finance joint ventures likely will impact the Company’s “Investments in affiliates” and “Equity in net earnings of affiliates.” The Company’s finance joint ventures currently are evaluating the impact of ASU 2016-13 to their results of operations and financial condition.

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance,” which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. This guidance will be effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of the new

guidance on the Company's annual disclosures.

Additionally, the Company will adopt the following pronouncement, effective for fiscal years beginning after December 15, 2022, which is not expected to have a material impact the Company's results of operations, financial condition and cash flows.

•ASU 2021-08 – “Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

2. ACQUISITIONS

On May 2, 2022, the Company acquired JCA Industries, Inc. (“JCA”) for 63.0 million Canadian dollars (or approximately $49.2 million as of May 2, 2022). JCA is located in Winnipeg, Manitoba, Canada, and specializes in the design of electronic systems and software development to automate and control agricultural equipment. The Company is in the process of determining the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed.

On January 1, 2022, the Company acquired Appareo Systems, LLC (“Appareo”) for approximately $61.9 million, net of approximately $0.5 million of cash. As a result of the acquisition of the remaining 50% interest in IAS, the Company's previous operating joint venture with Appareo, the Company recorded a gain of approximately $3.4 million on the remeasurement of the previously held equity interest within “Other expense, net” in the Company's Condensed Consolidated Statements of Operations. The fair value of the previously held 50% interest in the joint venture as of the acquisition date was approximately $11.2 million. Appareo is headquartered in Fargo, North Dakota and offers engineering, manufacturing, and technology for end-to-end product development. The Company allocated the purchase price to the assets acquired and liabilities assumed based on preliminary estimates of their fair values as of the acquisition date. The acquired net assets primarily consisted of accounts receivable, inventories, other current and noncurrent assets, assets held for sale, lease right-of-use assets and liabilities, accounts payable, accrued expenses, other current and noncurrent liabilities, property, plant and equipment, as well as customer relationship, technology, non-competition agreements and trademark identifiable intangible assets. The Company recorded approximately $20.5 million of goodwill associated with the acquisition. The results of operations of Appareo have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s North America geographical reportable segment. Proforma financial information related to the acquisition of Appareo was not material to the Company’s results of operations.

The preliminary estimate of acquired identifiable intangible assets of Appareo as of the date of the acquisition are summarized in the following table (in millions):

Intangible Asset

Amount

Weighted-Average Useful Life

Customer relationships

9.8

12 years

Technology

6.3

9 years

Trademarks

4.9

10 years

Non-competition agreements

1.4

5 years

22.4

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

3. RESTRUCTURING EXPENSES AND IMPAIRMENT CHARGES

Restructuring Expenses

In recent years, the Company has 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 China in order to reduce costs. Restructuring expenses activity during the three months ended March 31, 2022 is summarized as follows (in millions):


	Employee Severance		Other Related Closure Costs		Total
Balance as of December 31, 2021	$	14.5	$	0.2	$	14.7
First quarter 2022 provision	3.0		—		3.0
First quarter 2022 cash activity	(3.4)		—		(3.4)
Foreign currency translation	(0.3)		0.1		(0.2)
Balance as of March 31, 2022	$	13.8	$	0.3	$	14.1

Impairment Charges

In light of the current conflict between Russia and Ukraine, during the three months ended March 31, 2022, the Company assessed the fair value of its gross assets related to the joint ventures operating in Russia for potential impairment and recorded asset impairment charges of approximately $36.0 million, reflected as “Impairment charges” in its Condensed Consolidated Statements of Operations, with an offsetting benefit of approximately $12.2 million included within “Net loss (income) attributable to noncontrolling interests.” In addition, during the three months ended March 31, 2022, the Company recorded a write-down of its investment in its Russian finance joint venture of approximately $4.8 million, reflected within “Equity in net earnings of affiliates” in its Condensed Consolidated Statements of Operations.

4. STOCK COMPENSATION PLANS

The Company recorded stock compensation expense as follows for the three months ended March 31, 2022 and 2021 (in millions):


	Three Months Ended March 31,
	2022		2021
Cost of goods sold	$	0.3	$	0.3
Selling, general and administrative expenses	6.7		6.5
Total stock compensation expense	$	7.0	$	6.8

Stock Incentive Plan

Under the Company’s Long-Term Incentive Plan (the “Plan”), up to 10,000,000 shares of AGCO common stock may be issued. As of March 31, 2022, of the 10,000,000 shares reserved for issuance under the Plan, 3,823,268 shares were available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed below. The Plan allows the Company, under the direction of the Board of Directors’ Talent and Compensation Committee, to make grants of performance shares, stock appreciation rights, restricted stock units and restricted stock awards to employees, officers and non-employee directors of the Company.

Long-Term Incentive Plan and Related Performance Awards

The weighted average grant-date fair value of performance awards granted under the Plan during the three months ended March 31, 2022 and 2021 was $124.12 and $123.26, respectively.

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

During the three months ended March 31, 2022, the Company granted 274,566 performance awards related to varying performance periods. The awards granted assume the maximum target levels of performance are achieved. The compensation expense associated with all awards granted under the Plan is amortized ratably over the vesting or performance period based on the Company’s projected assessment of the level of performance that will be achieved. The 2022 and 2021 grants of performance award shares are subject to a total shareholder return modifier.

Performance award transactions during the three months ended March 31, 2022 are presented as if the Company were to achieve its maximum levels of performance and assume the 2022 and 2021 performance awards subject to the total shareholder return modifier are achieved at target levels under the plan awards, and were as follows:


Shares awarded but not earned at January 1			514,714
Shares awarded			274,566
Shares forfeited			(8,780)
Shares vested			(2,534)
Shares awarded but not earned at March 31			777,966

As of March 31, 2022, the total compensation cost related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was approximately $46.0 million, and the weighted average period over which it is expected to be recognized is approximately two and one-half years. The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance.

Restricted Stock Unit Awards

The weighted average grant-date fair value of the restricted stock units (“RSUs”) granted under the Plan during the three months ended March 31, 2022 and 2021 was $117.08 and $113.63, respectively.

During the three months ended March 31, 2022, the Company granted 91,583 RSU awards. RSUs granted in 2022 and 2021 entitle the participant to receive one share of the Company’s common stock for each RSU granted and vest one-third per year over a three-year requisite service period. The 2020 grant of RSU’s to certain executives has a three-year cliff vesting requirement subject to adjustment based on a total shareholder return modifier relative to the Company's defined peer group. The compensation expense associated with these awards is being amortized ratably over the requisite service period for the awards that are expected to vest.

RSU transactions during the three months ended March 31, 2022 assume the 2020 RSUs subject to the total shareholder return modifier are achieved at target levels, and were as follows:


RSUs awarded but not vested at January 1			159,228
RSUs awarded			91,583
RSUs forfeited			(2,400)
RSUs vested			(65,025)
RSUs awarded but not vested at March 31			183,386

As of March 31, 2022, the total compensation cost related to the unvested RSUs not yet recognized was approximately $17.0 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years.

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Stock-Settled Appreciation Rights

The compensation expense associated with the stock-settled appreciation rights (“SSARs”) is amortized ratably over the requisite service period for the awards that are expected to vest. The Company estimates the fair value of the grants using the Black-Scholes option pricing model. SSAR transactions during the three months ended March 31, 2022 were as follows:


SSARs outstanding at January 1			194,611
SSARs granted			—
SSARs exercised			(38,051)
SSARs canceled or forfeited			—
SSARs outstanding at March 31			156,560

The Company did not grant any SSARs during the three months ended March 31, 2022, and does not currently anticipate granting any SSARs in the future. As of March 31, 2022, the total compensation cost related to the unvested SSARs not yet recognized was approximately $0.7 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years.

Director Restricted Stock Grants

The Plan provides for annual restricted stock grants of the Company’s common stock to all non-employee directors. The 2022 grant was made on April 28, 2022 and equated to 11,664 shares of common stock, of which 10,301 shares of common stock were issued after shares were withheld for taxes. The Company recorded stock compensation expense of approximately $1.5 million during the three months ended June 30, 2022 associated with these grants.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill during the three months ended March 31, 2022 are summarized as follows (in millions):


	North America		South America		Europe/Middle East		Asia/Pacific/Africa		Consolidated
Balance as of December 31, 2021	$	609.6	$	81.7	$	469.5	$	120.0	$	1,280.8
Acquisition	20.5		—		—		—		20.5

Foreign currency translation	0.1		14.1		(9.5)		(1.3)		3.4
Balance as of March 31, 2022	$	630.2	$	95.8	$	460.0	$	118.7	$	1,304.7

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 1 each fiscal year.

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Changes in the carrying amount of acquired intangible assets during the three months ended March 31, 2022 are summarized as follows (in millions):


Gross carrying amounts:	Trademarks and Tradenames		Customer Relationships		Patents and Technology		Land Use Rights		Total
Balance as of December 31, 2021	$	189.0	$	568.6	$	139.9	$	7.0	$	904.5
Acquisition	6.3		9.8		6.3		—		22.4


Foreign currency translation	(1.3)		0.9		(1.5)		0.1		(1.8)
Balance as of March 31, 2022	$	194.0	$	579.3	$	144.7	$	7.1	$	925.1


Accumulated amortization:	Trademarks and Tradenames		Customer Relationships		Patents and Technology		Land Use Rights		Total
Balance as of December 31, 2021	$	93.1	$	409.7	$	94.7	$	1.5	$	599.0
Amortization expense	3.4		9.5		2.4		—		15.3

Foreign currency translation	(0.4)		1.4		(1.2)		0.1		(0.1)
Balance as of March 31, 2022	$	96.1	$	420.6	$	95.9	$	1.6	$	614.2


Indefinite-lived intangible assets:	Trademarks and Tradenames

Balance as of December 31, 2021	$	86.7
Foreign currency translation	(0.8)
Balance as of March 31, 2022	$	85.9

The Company currently amortizes certain acquired intangible assets, primarily on a straight-line basis, over their estimated useful lives, which range from three to 50 years.

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

6. INDEBTEDNESS

Long-term debt consisted of the following at March 31, 2022 and December 31, 2021 (in millions):


	March 31, 2022		December 31, 2021

Credit facility, expires 2023	$	600.0	$	—
1.002% Senior term loan due 2025	277.3		283.7
Senior term loans due between 2023 and 2028	355.5		445.9
0.800% Senior notes due 2028	665.6		680.8
Other long-term debt	7.5		7.7
Debt issuance costs	(4.4)		(4.8)
	1,901.5		1,413.3

Current portion of other long-term debt	(2.1)		(2.1)
Total long-term indebtedness, less current portion	$	1,899.4	$	1,411.2

Short-term Credit Facility

In April 2022, the Company entered into a short-term revolving credit facility of €225.0 million with Coöperatieve Rabobank U.A., or “Rabobank.” The €225.0 million (or approximately $240.0 million) was borrowed on April 26, 2022, with a maturity date of March 31, 2023. Interest accrues on amounts outstanding under the credit facility, at the Company’s option, at either (1) the secured overnight financing rate (“SOFR”) for borrowings denominated in U.S. dollars or Euro Interbank Offered Rate (“EURIBOR”) for borrowings denominated in Euros plus a margin of 0.75%, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, or (iii) one-month adjusted term SOFR plus 1.0%, plus a margin of 0.75%. The credit facility contains covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends. The Company also has to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio.

0.800% Senior Notes Due 2028

On October 6, 2021, the Company issued €600.0 million (or approximately $665.6 million as of March 31, 2022) 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.

Credit Facility

In October 2018, the Company entered into a multi-currency revolving credit facility of $800.0 million. The credit facility expires on October 17, 2023. Interest accrues on amounts outstanding under the credit facility, at the Company’s option, at either (1) LIBOR plus a margin ranging from 0.875% to 1.875% based on the Company’s credit rating, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0%, plus a margin ranging from 0.0% to 0.875% based on the Company’s credit rating. As of March 31, 2022 the Company had $600.0 million of outstanding borrowings under the revolving credit facility and had the ability to borrow approximately $200.0 million under the revolving credit facility. During April 2022, the Company borrowed $200.0 million under its revolving credit facility. As of December 31, 2021 the Company had no outstanding borrowings under the revolving credit facility and had the ability to borrow approximately $800.0 million under the facility.

On April 9, 2020, the Company entered into an amendment to its credit facility to include incremental term loans (“2020 term loans”) that allow the Company to borrow aggregate principal amounts of €235.0 million and $267.5 million (or an aggregate of approximately $528.2 million as of March 31, 2022). Amounts can be drawn incrementally at any time prior to maturity, but must be drawn down proportionately. Amounts drawn must be in a minimum principal amount of $100.0 million and integral multiples of $50.0 million in excess thereof. Once amounts have been repaid, those amounts are not permitted to be re-drawn. The maturity date of the 2020 term loans was April 8, 2022. On April 15, 2020, the Company borrowed €117.5 million and $133.8 million of 2020 term loans. There were no other borrowings on the 2020 term loans subsequent to

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the initial borrowings in April 2020. On February 16, 2021, the Company repaid the 2020 term loans of €117.5 million and $133.8 million (or an aggregate of approximately $276.0 million as of February 16, 2021). As of March 31, 2022, the Company had the ability to borrow €117.5 million and $133.7 million (or an aggregate of approximately $264.0 million) of the 2020 term loans.

As described above, the Company’s credit facility allows it to select from among various interest rate options. Due to the phase-out of LIBOR, LIBOR-based rates no longer will be available for borrowings denominated in U.S. dollars after December 31, 2022, and already are not available for loans denominated in other currencies. The interest rates reflected in the Company’s credit facility were designed to accommodate the discontinuation of LIBOR-based rates and a shift to SOFR or a base rate, and, as such, the Company does not believe that moving to other rates will have a materially adverse effect on the Company’s results of operations or financial position. In addition, the credit facility agreement also provides for an expedited amendment process once a replacement for LIBOR is established, which the Company may elect to utilize to add additional interest-rate alternatives.

1.002% Senior Term Loan Due 2025

On January 25, 2019, the Company borrowed €250.0 million (or approximately $277.3 million as of March 31, 2022) from the European Investment Bank. The loan matures on January 24, 2025. The Company is permitted to prepay the term loan before its maturity date. Interest is payable on the term loan at 1.002% per annum, payable semi-annually in arrears.

Senior Term Loans Due Between 2023 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 €56.0 million (or approximately $61.1 million) upon maturity of two term loan agreements in October 2019. Additionally, the Company repaid €192.0 million (or approximately $223.8 million as of October 19, 2021) upon maturity of two 2016 senior term loans in October 2021. In August 2021, prior to the issuance of the senior notes due 2028, the Company repaid two of its 2018 senior term loans upon maturity with an aggregate amount of €72.0 million (or approximately $85.5 million as of August 1, 2021). On February 1, 2022, the Company repaid €72.5 million (or approximately $81.7 million) of one of its 2018 senior term loans due August 2023 with existing cash on hand.

In aggregate, as of March 31, 2022, the Company had indebtedness of €320.5 million (or approximately $355.5 million as of March 31, 2022) through a group of seven 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 March 31, 2022, for the term loans with a fixed interest rate, interest is payable in arrears on an annual basis, with interest rates ranging from 0.90% to 2.26% and maturity dates between August 2023 and August 2028. For the term loans with a floating interest rate, interest is payable in arrears on a semi-annual basis, with interest rates based on the EURIBOR plus a margin ranging from 1.10% to 1.25% and maturity dates between October 2023 and August 2025.

Short-Term Borrowings

As of March 31, 2022 and December 31, 2021, the Company had short-term borrowings due within one year of approximately $93.2 million and $90.8 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 insurance coverage. At both March 31, 2022 and December 31, 2021, outstanding letters of credit totaled approximately $14.6 million.

7. RECOVERABLE INDIRECT TAXES

The Company’s Brazilian operations incur value added taxes (“VAT”) on certain purchases of raw materials, components and services. These taxes are accumulated as tax credits and create assets that are reduced by the VAT collected from the Company’s sales in the Brazilian market. The Company regularly assesses the recoverability of these tax credits, and

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establishes reserves when necessary against them, through analyses that include, amongst others, the history of realization, the transfer of tax credits to third parties as authorized by the government, anticipated changes in the supply chain and the future expectation of tax debits from the Company’s ongoing operations. The Company believes that these tax credits, net of established reserves, are realizable. The Company had recorded approximately $142.3 million and $114.4 million, respectively, of VAT tax credits, net of reserves, as of March 31, 2022 and December 31, 2021.

8. INVENTORIES

Inventories at March 31, 2022 and December 31, 2021 were as follows (in millions):


	March 31, 2022		December 31, 2021
Finished goods	$	857.1	$	718.2
Repair and replacement parts	747.0		697.8
Work in process	593.0		282.8
Raw materials	1,062.6		894.9
Inventories, net	$	3,259.7	$	2,593.7

9. PRODUCT WARRANTY

The warranty reserve activity for the three months ended March 31, 2022 and 2021, including deferred revenue associated with the Company's extended warranties that have been sold, was as follows (in millions):


	Three Months Ended March 31,
	2022		2021
Balance at beginning of period	$	592.5	$	521.8

Accruals for warranties issued during the period	83.3		93.3
Settlements made (in cash or in kind) during the period	(57.7)		(55.3)
Foreign currency translation	(3.6)		(17.8)
Balance at March 31	$	614.5	$	542.0

The Company’s agricultural equipment products generally are warranted against defects in material and workmanship for a period of one to four years. The Company accrues for future warranty costs at the time of sale based on historical warranty experience. Approximately $519.6 million, $492.7 million and $450.0 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Approximately $94.9 million, $99.8 million and $92.0 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

The Company recognizes 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 confirmation of liability for the recovery, the Company records the recovery within “Accounts and notes receivable, net.” 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.”

10. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted net income per common share assumes the exercise of outstanding SSARs and the vesting of performance share awards and RSUs using the treasury stock method when the effects of such assumptions are dilutive.

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A reconciliation of net income attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share for the three months ended March 31, 2022 and 2021 is as follows (in millions, except per share data):


	Three Months Ended March 31,
	2022		2021
Basic net income per share:
Net income attributable to AGCO Corporation and subsidiaries	$	151.8	$	150.8
Weighted average number of common shares outstanding	74.6		75.3
Basic net income per share attributable to AGCO Corporation and subsidiaries	$	2.03	$	2.00
Diluted net income per share:
Net income attributable to AGCO Corporation and subsidiaries	$	151.8	$	150.8
Weighted average number of common shares outstanding	74.6		75.3
Dilutive SSARs, performance share awards and RSUs	0.3		0.6
Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share	74.9		75.9
Diluted net income per share attributable to AGCO Corporation and subsidiaries	$	2.03	$	1.99

There were no SSARs outstanding for the three months ended March 31, 2022 and 2021 that had an antidilutive impact.

11. INCOME TAXES

At March 31, 2022 and December 31, 2021, the Company had approximately $256.5 million and $246.4 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 March 31, 2022 and December 31, 2021 exclude certain indirect favorable effects that relate to other tax jurisdictions of approximately $61.5 million and $70.2 million, respectively. In addition, the gross unrecognized income tax benefits as of March 31, 2022 and December 31, 2021 exclude certain deposits made in a foreign jurisdiction of approximately $46.8 million and $6.7 million, respectively, associated with an ongoing audit. At March 31, 2022 and December 31, 2021, the Company had approximately $12.7 million and $40.1 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 March 31, 2022 and December 31, 2021, the Company had approximately $234.3 million and $196.7 million, respectively, of accrued taxes and approximately $9.5 million and $9.6 million, respectively, of deferred taxes related to uncertain tax positions that it expects to settle or pay beyond 12 months, reflected in “Other noncurrent liabilities” and “Deferred tax liabilities,” respectively, 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 March 31, 2022 and December 31, 2021, the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $31.7 million and $32.7 million, respectively. Generally, tax years 2016 through 2021 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 March 31, 2022, a number of income tax examinations in foreign jurisdictions are ongoing.

The Company maintains a valuation allowance to fully 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 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.

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12. 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.

During 2022 and 2021, the Company designated 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 $235.9 million as of March 31, 2022. The Company did not have any derivatives that were designated as cash flow hedges related to foreign currency contracts as of December 31, 2021.

Steel Commodity Contracts

During 2022 and 2021, the Company designated 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 $21.6 million and $31.9 million as of March 31, 2022 and December 31, 2021, respectively.

The following tables summarize the after-tax impact that changes in the fair value of derivatives designated as cash flow hedges had on accumulated other comprehensive loss and net income during the three months ended March 31, 2022 and 2021 (in millions):


			Recognized in Net Income
Three Months Ended March 31,	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)
2022
Foreign currency contracts(1)	$	(3.8)	Cost of goods sold	$	(0.1)	$	2,054.4
Commodity contracts(2)	1.4		Cost of goods sold	1.0		$	2,054.4
Total	$	(2.4)		$	0.9
2021
Foreign currency contracts	$	(6.8)	Cost of goods sold	$	(3.7)	$	1,808.2
Commodity contracts	7.8		Cost of goods sold	—		1,808.2
Total	$	1.0		$	(3.7)

(1) The outstanding contracts as of March 31, 2022 range in maturity through December 2022.

(2) The outstanding contracts as of March 31, 2022 range in maturity through August 2022.

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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 March 31, 2022 (in millions):


	Before-Tax Amount		Income Tax		After-Tax Amount
Accumulated derivative net losses as of December 31, 2021	$	(0.5)	$	(0.1)	$	(0.4)
Net changes in fair value of derivatives	(3.1)		(0.7)		(2.4)
Net gains reclassified from accumulated other comprehensive loss into income	(1.2)		(0.3)		(0.9)
Accumulated derivative net losses as of March 31, 2022	$	(4.8)	$	(1.1)	$	(3.7)

As of March 31, 2022, approximately $2.4 million of derivatives net losses, before taxes, remain in accumulated other comprehensive loss held by the Company related to commodity contracts, as the inventory associated with the losses 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.

In January 2018, 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 expired on January 19, 2021. At maturity of the cross currency swap contract, the Company delivered the notional amount of approximately €245.7 million (or approximately $297.1 million as of January 19, 2021) and received $300.0 million from the counterparties, resulting in a gain of approximately $2.9 million that was recognized in accumulated other comprehensive loss. The Company received quarterly interest payments from the counterparties based on a fixed interest rate until the maturity of the cross currency swap.

On January 29, 2021, the Company entered into a new 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 will deliver the notional amount of approximately €247.9 million (or approximately $275.0 million as of March 31, 2022) and will receive $300.0 million from the counterparties. The Company will receive quarterly interest payments from the counterparties based on a fixed interest rate until the maturity of the cross currency swap.

The following table summarizes the notional values of the instrument designated as a net investment hedge (in millions):


	Notional Amount as of
	March 31, 2022		December 31, 2021
Cross currency swap contract	$	300.0	$	300.0

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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 months ended March 31, 2022 and 2021 (in millions):


	Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Three Months Ended
	Before-Tax Amount		Income Tax		After-Tax Amount
March 31, 2022	$	4.2	$	1.1	$	3.1
March 31, 2021	(4.1)		—		(4.1)

Derivative Transactions Not Designated as Hedging Instruments

During 2022 and 2021, the Company entered into foreign currency contracts to economically hedge receivables and payables on the Company and its subsidiaries’ balance sheets that are denominated in foreign currencies other than the functional currency. These contracts were 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 March 31, 2022 and December 31, 2021, the Company had outstanding foreign currency contracts with a notional amount of approximately $3,360.9 million and $3,681.9 million, respectively.

The following table summarizes the impact that changes in the fair value of derivatives not designated as hedging instruments had on net income (in millions):


		(Loss) Gain Recognized in Net Income for the Three Months Ended
	Classification of (Loss) Gain	March 31, 2022		March 31, 2021
Foreign currency contracts	Other expense, net	$	(13.8)	$	34.4