Company Quick10K Filing
AGCO
Price76.18 EPS3
Shares77 P/E27
MCap5,873 P/FCF-73
Net Debt1,051 EBIT370
TEV6,924 TEV/EBIT19
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-02-27
10-Q 2012-09-30 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-05-05 Earnings, Exhibits
8-K 2020-04-30 Officers, Shareholder Vote, Exhibits
8-K 2020-04-09 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-02-06 Earnings, Exhibits
8-K 2019-10-29 Earnings, Exhibits
8-K 2019-09-25 Officers, Exhibits
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-04-25 Officers, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2019-04-24 Enter Agreement, Exhibits
8-K 2019-02-05 Earnings, Exhibits
8-K 2019-01-22 Other Events, Exhibits
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-10-26 Officers
8-K 2018-07-31 Earnings, Exhibits
8-K 2018-07-25 Officers
8-K 2018-05-15 Officers
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-04-26 Shareholder Vote
8-K 2018-02-06 Earnings, Exhibits

AGCO 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 agcoex311.htm
EX-31.2 agcoex312.htm
EX-32.1 agcoex321.htm

AGCO Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
3.12.51.81.20.5-0.12012201420172020
Rev, G Profit, Net Income
0.70.40.2-0.1-0.3-0.62012201420172020
Ops, Inv, Fin

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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, 2020
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)
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 4, 2020, there were 74,867,768 shares of the registrant’s common stock, par value of $0.01 per share, outstanding.
 



AGCO CORPORATION AND SUBSIDIARIES
INDEX
 
 
 
Page
Numbers
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
Item 6.
 
 
 



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, 2020
 
December 31, 2019
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
386.7

 
$
432.8

Accounts and notes receivable, net
825.0

 
800.5

Inventories, net
2,187.5

 
2,078.7

Other current assets
410.8

 
417.1

Total current assets
3,810.0

 
3,729.1

Property, plant and equipment, net
1,350.5

 
1,416.3

Right-of-use lease assets
178.7

 
187.3

Investment in affiliates
372.9

 
380.2

Deferred tax assets
66.5

 
93.8

Other assets
184.4

 
153.0

Intangible assets, net
481.8

 
501.7

Goodwill
1,260.9

 
1,298.3

Total assets
$
7,705.7

 
$
7,759.7

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
 
 
 
Current portion of long-term debt
$
1.9

 
$
2.9

Short-term borrowings
166.2

 
150.5

Accounts payable
821.9

 
914.8

Accrued expenses
1,394.7

 
1,654.2

Other current liabilities
177.4

 
162.1

Total current liabilities
2,562.1

 
2,884.5

Long-term debt, less current portion and debt issuance costs
1,669.5

 
1,191.8

Operating lease liabilities
140.6

 
148.6

Pension and postretirement health care benefits
226.0

 
232.1

Deferred tax liabilities
102.9

 
107.0

Other noncurrent liabilities
314.0

 
288.7

Total liabilities
5,015.1

 
4,852.7

Commitments and contingencies (Note 17)


 


Stockholders’ Equity:
 
 
 
AGCO Corporation stockholders’ equity:
 
 
 
Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2020 and 2019

 

Common stock; $0.01 par value, 150,000,000 shares authorized, 74,862,100 and 75,471,562 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
0.8

 
0.8

Additional paid-in capital

 
4.7

Retained earnings
4,432.7

 
4,443.5

Accumulated other comprehensive loss
(1,791.4
)
 
(1,595.2
)
Total AGCO Corporation stockholders’ equity
2,642.1

 
2,853.8

Noncontrolling interests
48.5

 
53.2

Total stockholders’ equity
2,690.6

 
2,907.0

Total liabilities and stockholders’ equity
$
7,705.7

 
$
7,759.7

See accompanying notes to condensed consolidated financial statements.

3


AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in millions, except per share data)
 
Three Months Ended March 31,
 
2020
 
2019
Net sales
$
1,928.3

 
$
1,995.8

Cost of goods sold
1,477.8

 
1,539.1

Gross profit
450.5

 
456.7

Selling, general and administrative expenses
247.6

 
262.2

Operating expenses:
 
 
 
Engineering expenses
84.9

 
84.5

Amortization of intangibles
15.0

 
15.3

Bad debt expense
1.8

 
0.6

Restructuring expenses
0.8

 
1.7

Income from operations
100.4

 
92.4

Interest expense, net
3.4

 
3.5

Other expense, net
12.5

 
14.6

Income before income taxes and equity in net earnings of affiliates
84.5

 
74.3

Income tax provision
29.4

 
19.4

Income before equity in net earnings of affiliates
55.1

 
54.9

Equity in net earnings of affiliates
11.2

 
10.8

Net income
66.3

 
65.7

Net income attributable to noncontrolling interests
(1.6
)
 
(0.6
)
Net income attributable to AGCO Corporation and subsidiaries
$
64.7

 
$
65.1

Net income per common share attributable to AGCO Corporation and subsidiaries:
 
 
 
Basic
$
0.86

 
$
0.85

Diluted
$
0.85

 
$
0.84

Cash dividends declared and paid per common share
$
0.16

 
$
0.15

Weighted average number of common and common equivalent shares outstanding:
 
 
 
Basic
75.3

 
76.6

Diluted
75.9

 
77.5

See accompanying notes to condensed consolidated financial statements.

4


AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(unaudited and in millions)
 
Three Months Ended March 31,
 
2020
 
2019
Net income
$
66.3

 
$
65.7

Other comprehensive (loss) income, net of reclassification adjustments:
 
 
 
Foreign currency translation adjustments
(214.8
)
 
12.2

Defined benefit pension plans, net of tax
3.5

 
3.0

Deferred gains and losses on derivatives, net of tax
9.4

 
(4.1
)
Other comprehensive (loss) income, net of reclassification adjustments
(201.9
)
 
11.1

Comprehensive (loss) income
(135.6
)
 
76.8

Comprehensive loss (income) attributable to noncontrolling interests
4.1

 
(2.1
)
Comprehensive (loss) income attributable to AGCO Corporation and subsidiaries
$
(131.5
)
 
$
74.7

See accompanying notes to condensed consolidated financial statements.
 
 
 
 


5


AGCO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
66.3

 
$
65.7

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation
51.6

 
53.0

Amortization of intangibles
15.0

 
15.3

Stock compensation expense
2.6

 
12.5

Equity in net earnings of affiliates, net of cash received
(11.2
)
 
(10.1
)
Deferred income tax provision (benefit)
3.8

 
(8.6
)
Other
4.1

 
0.8

Changes in operating assets and liabilities:
 
 
 
Accounts and notes receivable, net
(109.6
)
 
(65.7
)
Inventories, net
(252.1
)
 
(418.6
)
Other current and noncurrent assets
(65.4
)
 
(4.9
)
Accounts payable
(32.7
)
 
127.5

Accrued expenses
(206.7
)
 
(107.7
)
Other current and noncurrent liabilities
99.0

 
10.9

Total adjustments
(501.6
)
 
(395.6
)
Net cash used in operating activities
(435.3
)
 
(329.9
)
Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(60.6
)
 
(60.9
)
Proceeds from sale of property, plant and equipment
0.4

 

Investments in unconsolidated affiliates
(2.5
)
 

Net cash used in investing activities
(62.7
)
 
(60.9
)
Cash flows from financing activities:
 
 
 
Proceeds from indebtedness
710.1

 
1,139.8

Repayments of indebtedness
(150.3
)
 
(716.7
)
Purchases and retirement of common stock
(55.0
)
 
(30.0
)
Payment of dividends to stockholders
(12.1
)
 
(11.5
)
Payment of minimum tax withholdings on stock compensation
(16.0
)
 
(23.0
)
Payment of debt issuance costs

 
(0.5
)
Investment by noncontrolling interests

 
0.6

Net cash provided by financing activities
476.7

 
358.7

Effects of exchange rate changes on cash, cash equivalents and restricted cash
(24.8
)
 
(1.2
)
Decrease in cash, cash equivalents and restricted cash
(46.1
)
 
(33.3
)
Cash, cash equivalents and restricted cash, beginning of period
432.8

 
326.1

Cash, cash equivalents and restricted cash, end of period
$
386.7

 
$
292.8

See accompanying notes to condensed consolidated financial statements.

6


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, 2019. Results for interim periods are not necessarily indicative of the results for the year.

Additionally, the Company is uncertain of the impact of the coronavirus (“COVID-19”) pandemic due to increased volatility in global economic and political environments, market demand for its products, supply chain disruptions, workforce availability, exchange rate and commodity price volatility and availability of financing, and their impact to the Company’s net sales, production volumes, costs and overall financial condition and liquidity. The Company may be required to record significant impairment charges in the future with respect to certain noncurrent assets such as goodwill and other intangible assets and equity method investments, whose fair values may be negatively affected by the COVID-19 pandemic. The Company also may be required to write-down obsolete inventory due to decreased customer demand and sales orders. Additionally, the Company is closely monitoring the collection of accounts receivable, as well as the operating results of it finance joint ventures around the world. If economic conditions around the world continue to deteriorate, the Company may not be able to sufficiently collect accounts receivable, and the operating results of its finance joint ventures may be negatively impacted, thus negatively impacting the Company’s results of operations and financial condition. The Company is also closely assessing its compliance with debt covenants, the recognition of any future applicable insurance recoveries, cash flow hedging forecasts as compared to actual transactions, the fair value of pension assets, accounting for incentive and stock compensation accruals, revenue recognition and discount reserve setting and the realization of deferred tax assets in light of the COVID-19 pandemic.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides temporary accounting relief for contract modifications to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to a new alternative reference rate. ASU 2020-04 can be applied as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. ASU 2020-04 will generally no longer be available to apply after December 31, 2022. Interest on U.S. dollar borrowings under the Company's credit facility and its April 2020 amendment is calculated based upon LIBOR. In the event that LIBOR is no longer published, interest will be calculated upon a base rate. The credit facility and its April 2020 amendment provide for an expedited amendment process once a replacement for LIBOR is established (see Note 5). The Company adopted this standard as of March 31, 2020. The adoption did not have a material impact to the Company’s results of operations, financial condition and cash flows.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods as the adoption of the standard relates to the Company. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“ASU 2019-04”), which provides, among other things, targeted improvements to certain aspects of accounting for credit losses addressed by ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326), Financial Instruments - Credit Losses,” which clarifies the treatment of expected recoveries for amounts previously written-off on purchased receivables, provides transition relief for troubled debt restructurings and allows for certain disclosure simplifications of accrued interest. The effective dates for both ASU 2019-04 and ASU 2019-11 are the same as the effective dates for ASU 2016-13. The Company adopted this standard, and its subsequent modifications, as of

7

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)




January 1, 2020. The adoption did not have a material impact to the Company’s results of operations, financial condition and cash flows.

New Accounting Pronouncements to be Adopted

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies various aspects related to accounting for income taxes by removing certain exceptions for investments, intraperiod allocations and interim calculations, and adding guidance to reduce complexity in accounting for income taxes. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods using a prospective approach. Early adoption is permitted. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The standard will not have a material impact on the Company's results of operations, financial condition and cash flows.

As discussed above, in June 2016, the FASB issued ASU 2016-13, which requires measurement and recognition of expected versus incurred credit losses for financial assets held. 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 who 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, will likely 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 will likely impact the Company’s “Investment in affiliates” and “Equity in net earnings of affiliates.” The Company’s finance joint ventures are currently evaluating the impact of ASU 2016-13 to their results of operations and financial condition.

2.    RESTRUCTURING EXPENSES

From 2014 through 2020, the Company announced and initiated several actions to rationalize employee headcount at various manufacturing facilities and various administrative offices located in Europe, South America, Africa, China and the United States in order to reduce costs in response to softening global market demand and lower production volumes. The aggregate headcount reduction was approximately 4,160 employees between 2014 and 2019. In addition, during 2019, the Company initiated various restructuring activities in an effort to rationalize its grain storage and protein production system operations. During the three months ended March 31, 2020, the Company recorded severance and related costs associated with further rationalizations in connection with the termination of approximately 10 employees. Restructuring expenses activity during the three months ended March 31, 2020 is summarized as follows (in millions):
 
Employee Severance
 
Facility Closure Costs
 
Total
Balance as of December 31, 2019
$
4.8

 
$

 
$
4.8

First quarter 2020 provision
0.7

 
0.2

 
0.9

First quarter 2020 provision reversal
(0.1
)
 

 
(0.1
)
First quarter 2020 cash activity
(1.7
)
 
(0.2
)
 
(1.9
)
Foreign currency translation
(0.1
)
 

 
(0.1
)
Balance as of March 31, 2020
$
3.6

 
$


$
3.6



3.    STOCK COMPENSATION PLANS

The Company recorded stock compensation expense as follows for the three months ended March 31, 2020 and 2019 (in millions):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Cost of goods sold
 
$
0.1

 
$
0.5

Selling, general and administrative expenses
 
2.5

 
12.0

Total stock compensation expense
 
$
2.6

 
$
12.5



8

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)





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, 2020, of the 10,000,000 shares reserved for issuance under the Plan, approximately 3,229,538 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’ 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, 2020 and 2019 was $70.84 and $61.01, respectively.

During the three months ended March 31, 2020, the Company granted 425,440 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.

Performance award transactions during the three months ended March 31, 2020 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan awards:
Shares awarded but not earned at January 1
932,182

Shares awarded
425,440

Shares forfeited
(47,256
)
Shares earned

Shares awarded but not earned at March 31
1,310,366



As of March 31, 2020, 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 $30.6 million, and the weighted average period over which it is expected to be recognized is approximately two years. The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance.

Restricted Stock Unit Awards

During the three months ended March 31, 2020, the Company granted 95,593 restricted stock unit (“RSU”) awards. These awards 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, subject to adjustment in certain cases based on performance metric relative to the Company's peer group, commencing in 2020. The compensation expense associated with these awards is being amortized ratably over the requisite service period for the awards that are expected to vest. The weighted average grant-date fair value of the RSUs granted under the Plan during the three months ended March 31, 2020 and 2019 was $70.83 and $61.01, respectively. RSU transactions during the three months ended March 31, 2020 were as follows:
RSUs awarded but not vested at January 1
396,529

RSUs awarded
95,593

RSUs forfeited
(32,484
)
RSUs vested
(116,225
)
RSUs awarded but not vested at March 31
343,413



As of March 31, 2020, the total compensation cost related to the unvested RSUs not yet recognized was approximately $15.0 million, and the weighted average period over which it is expected to be recognized is approximately two years.


9

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, 2020 were as follows:
SSARs outstanding at January 1
759,675

SSARs granted
187,100

SSARs exercised
(18,600
)
SSARs canceled or forfeited
(25,061
)
SSARs outstanding at March 31
903,114



As of March 31, 2020, the total compensation cost related to the unvested SSARs not yet recognized was approximately $5.4 million, and the weighted average period over which it is expected to be recognized is approximately three 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 2020 grant was made on April 30, 2020 and equated to 25,542 shares of common stock, of which 19,862 shares of common stock were issued after shares were withheld for taxes. The Company recorded stock compensation expense of approximately $1.4 million during the three months ended June 30, 2020 associated with these grants.

4.    GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill during the three months ended March 31, 2020 are summarized as follows (in millions):
 
North America
 
South America
 
Europe/Middle East
 
Asia/Pacific/Africa
 
Consolidated
Balance as of December 31, 2019
$
606.0

 
$
112.2

 
$
463.3

 
$
116.8

 
$
1,298.3

Foreign currency translation

 
(24.8
)
 
(9.9
)
 
(2.7
)
 
(37.4
)
Balance as of March 31, 2020
$
606.0

 
$
87.4

 
$
453.4

 
$
114.1

 
$
1,260.9



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. The COVID-19 pandemic has adversely impacted the global economy as a whole. Based on current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of March 31, 2020 and concluded there were no indicators of impairment during the three months ended March 31, 2020.

Changes in the carrying amount of acquired intangible assets during the three months ended March 31, 2020 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, 2019
$
199.3

 
$
579.0

 
$
151.1

 
$
8.5

 
$
937.9

Foreign currency translation
(2.6
)
 
(11.2
)
 
(1.9
)
 
(0.1
)
 
(15.8
)
Balance as of March 31, 2020
$
196.7

 
$
567.8

 
$
149.2

 
$
8.4

 
$
922.1


10

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)




Accumulated amortization:
Trademarks and Tradenames
 
Customer Relationships
 
Patents and Technology
 
Land Use Rights
 
Total
Balance as of December 31, 2019
$
83.3

 
$
347.4

 
$
88.7

 
$
3.1

 
$
522.5

Amortization expense
2.5

 
10.1

 
2.4

 

 
15.0

Foreign currency translation
(1.1
)
 
(9.2
)
 
(1.4
)
 

 
(11.7
)
Balance as of March 31, 2020
$
84.7

 
$
348.3

 
$
89.7

 
$
3.1

 
$
525.8


Indefinite-lived intangible assets:
Trademarks and
Tradenames
Balance as of December 31, 2019
$
86.3

Foreign currency translation
(0.8
)
Balance as of March 31, 2020
$
85.5


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

5.    INDEBTEDNESS

Long-term debt consisted of the following at March 31, 2020 and December 31, 2019 (in millions):
 
March 31, 2020
 
December 31, 2019
Senior term loan due 2022
$
164.3

 
$
168.1

Credit facility, expires 2023
504.0

 

1.002% Senior term loan due 2025
273.9

 
280.2

Senior term loans due between 2021 and 2028
719.9

 
736.2

Other long-term debt
11.3

 
12.5

Debt issuance costs
(2.0
)
 
(2.3
)
 
1,671.4

 
1,194.7

Current portion of other long-term debt
(1.9
)
 
(2.9
)
Total long-term indebtedness, less current portion
$
1,669.5

 
$
1,191.8



Senior Term Loan Due 2022

In October 2018, the Company entered into a term loan agreement with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank”) in the amount of 150.0 million (or approximately $164.3 million as of March 31, 2020). The Company is permitted to prepay the term loan before its maturity date of October 28, 2022. Interest is payable on the term loan quarterly in arrears at an annual rate equal to the Euro Interbank Offered Rate (“EURIBOR”) plus a margin ranging from 0.875% to 1.875% based on the Company’s credit rating.

Credit Facility

In October 2018, the Company entered into a multi-currency revolving credit facility of $800.0 million. The maturity date of the credit facility is 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, 2020, the Company had approximately $504.0 million of outstanding borrowings under the credit facility and the ability to borrow approximately $296.0 million under the facility. As of December 31, 2019, the Company had no outstanding borrowings under the credit facility and the ability to borrow approximately $800.0 million under the facility.


11

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)




On April 9, 2020, the Company entered into an amendment to its $800.0 million multi-currency revolving credit facility to include incremental term loans (“2020 term loans”) that allow the Company to borrow an aggregate principal amount of 235.0 million and $267.5 million, respectively (or an aggregate of approximately $524.4 million as of April 9, 2020). 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 is April 8, 2022. Interest accrues on amounts outstanding under the 2020 term loans, at the Company's option, at either (1) LIBOR plus a margin based on the Company's credit rating ranging from 1.125% to 2.125% until April 8, 2021 and ranging from 1.375% to 2.375% thereafter, 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 based on the Company’s credit rating ranging from 0.125% to 1.375% until April 8, 2021 and ranging from 0.375% to 1.375% thereafter. The 2020 term loans contain 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. On April 15, 2020, the Company borrowed 117.5 million and $133.8 million (or an aggregate of approximately $261.5 million) of 2020 term loans. The Company simultaneously repaid 100.0 million (or approximately $108.7 million) of its revolving credit facility from the borrowings received.

Interest on U.S. dollar borrowings under the Company's credit facility and the 2020 term loans is calculated based upon LIBOR. In the event that LIBOR is no longer published, interest will be calculated upon a base rate. The credit facility and 2020 term loans also provides for an expedited amendment process once a replacement for LIBOR is established.

1.002% Senior Term Loan Due 2025

In December 2018, the Company entered into a term loan with the European Investment Bank ("EIB"), which provided the Company with the ability to borrow up to 250.0 million. The 250.0 million (or approximately $273.9 million as of March 31, 2020) of funding was received on January 25, 2019 with a maturity date of 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 2021 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, an aggregate amount of 56.0 million (or approximately $61.1 million) was repaid upon maturity in October 2019.

In aggregate, the Company has indebtedness of 657.0 million (or approximately $719.9 million as of March 31, 2020) through this group of twelve related term loan agreements. The provisions of the term loan agreements are substantially identical, with the exception of interest rate terms and maturities. The Company is permitted to prepay the term loans before their maturity dates. For the term loans with a fixed interest rate, interest is payable in arrears on an annual basis, with interest rates ranging from 0.70% to 2.26% and a maturity date between August 2021 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 0.70% to 1.25% and a maturity date between August 2021 and August 2025.

Short-Term Borrowings

As of March 31, 2020 and December 31, 2019, the Company had short-term borrowings due within one year of approximately $166.2 million and $150.5 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 March 31, 2020 and December 31, 2019, outstanding letters of credit totaled approximately $14.4 million and $13.9 million, respectively.


12

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)




6.    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 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 $104.8 million and $142.3 million, respectively, of VAT tax credits, net of reserves, as of March 31, 2020 and December 31, 2019.

7.    INVENTORIES

Inventories at March 31, 2020 and December 31, 2019 were as follows (in millions):
 
March 31, 2020
 
December 31, 2019
Finished goods
$
796.6

 
$
780.1

Repair and replacement parts
614.6

 
611.5

Work in process
259.7

 
213.4

Raw materials
516.6

 
473.7

Inventories, net
$
2,187.5

 
$
2,078.7



8.    PRODUCT WARRANTY

The warranty reserve activity for the three months ended March 31, 2020 and 2019 consisted of the following (in millions):
 
Three Months Ended March 31,
 
2020
 
2019
Balance at beginning of period
$
392.8

 
$
360.9

Accruals for warranties issued during the period
56.3

 
51.1

Settlements made (in cash or in kind) during the period
(49.4
)
 
(47.4
)
Foreign currency translation
(15.1
)
 
(3.3
)
Balance at March 31
$
384.6

 
$
361.3



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 $322.6 million and $331.9 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively. Approximately $62.0 million and $60.9 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, 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.”


13

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)




9.    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.

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, 2020 and 2019 is as follows (in millions, except per share data):
 
Three Months Ended March 31,
 
2020
 
2019
Basic net income per share:
 
 
 
Net income attributable to AGCO Corporation and subsidiaries
$
64.7

 
$
65.1

Weighted average number of common shares outstanding
75.3

 
76.6

Basic net income per share attributable to AGCO Corporation and subsidiaries
$
0.86

 
$
0.85

Diluted net income per share:
 

 
 

Net income attributable to AGCO Corporation and subsidiaries
$
64.7

 
$
65.1

Weighted average number of common shares outstanding
75.3

 
76.6

Dilutive SSARs, performance share awards and RSUs
0.6

 
0.9

Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share
75.9

 
77.5

Diluted net income per share attributable to AGCO Corporation and subsidiaries
$
0.85

 
$
0.84



SSARs to purchase approximately 0.7 million shares of the Company’s common stock for both the three months ended March 31, 2020 and 2019 were outstanding but not included in the calculation of weighted average common and common equivalent shares outstanding because they had an antidilutive impact.

10.    INCOME TAXES

At March 31, 2020 and December 31, 2019, the Company had approximately $219.4 million and $210.7 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, 2020 and December 31, 2019 include certain indirect favorable effects that relate to other tax jurisdictions of approximately $50.7 million and $44.9 million, respectively. At March 31, 2020 and December 31, 2019, the Company had approximately $50.3 million and $51.0 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. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At March 31, 2020 and December 31, 2019, the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $29.9 million and $28.4 million, respectively. Generally, tax years 2014 through 2019 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, 2020, 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 the United States and certain other 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 assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies and determined that all adjustments to the valuation allowances were 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.


14

Notes to Condensed Consolidated Financial Statements - Continued
(unaudited)




On March 27, 2020, the CARES Act (the “Act”) was enacted in the United States in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses. Tax provisions of the Act include the deferral of certain payroll taxes, relief for retaining employees and other provisions. Other governments around the world are also enacting similar measures and may enact further measures in the future. The Company is evaluating the impact of the Act and similar measures.  

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.

During 2020 and 2019, 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 $204.6 million and $332.7 million as of March 31, 2020 and December 31, 2019, 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, 2020 and 2019 (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)
2020
 
 
 
 
 
 
 
Foreign currency contracts(1)