What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-08 · 373 added, 223 removed, 614 unchanged (49% of the section changed)

3 unchanged sentences

(unaudited and in millions, except share amounts)

March 31, 2020

June 30, 2020

December 31, 2019

30 unchanged sentences

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

$0.01 par value, 150,000,000 shares authorized, 74,895,942 and 75,471,562 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

9 unchanged sentences

(unaudited and in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Cost of goods sold

3 unchanged sentences

Amortization of intangibles

Goodwill impairment charge

Restructuring expenses

Bad debt expense

Income from operations

Interest expense, net

Other expense, net

Income before income taxes and equity in net earnings of affiliates

Income tax provision

Income before equity in net earnings of affiliates

Equity in net earnings of affiliates

Net loss attributable to noncontrolling interests

Net income attributable to AGCO Corporation and subsidiaries

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

Cash dividends declared and paid per common share

Weighted average number of common and common equivalent shares outstanding:

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in millions, except per share data)

Six Months Ended June 30,

Cost of goods sold

Selling, general and administrative expenses

Operating expenses:

Engineering expenses

Amortization of intangibles

Goodwill impairment charge

Restructuring expenses

Bad debt expense

Income from operations

5 unchanged sentences

Equity in net earnings of affiliates

Net income attributable to noncontrolling interests

Net loss (income) attributable to noncontrolling interests

Net income attributable to AGCO Corporation and subsidiaries

6 unchanged sentences

(unaudited and in millions)

Three Months Ended March 31,

Three Months Ended June 30,

Other comprehensive (loss) income, net of reclassification adjustments:

3 unchanged sentences

Other comprehensive (loss) income, net of reclassification adjustments

Comprehensive income

Comprehensive loss (income) attributable to noncontrolling interests

Comprehensive income attributable to AGCO Corporation and subsidiaries

Six Months Ended June 30,

Other comprehensive (loss) income, net of reclassification adjustments:

Foreign currency translation adjustments

Defined benefit pension plans, net of tax

Deferred gains and losses on derivatives, net of tax

Other comprehensive (loss) income, net of reclassification adjustments

Comprehensive (loss) income

5 unchanged sentences

(unaudited and in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

2 unchanged sentences

Stock compensation expense

Goodwill impairment charge

Equity in net earnings of affiliates, net of cash received

Deferred income tax provision (benefit)

Deferred income tax provision

Changes in operating assets and liabilities:

34 unchanged sentences

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 cannot predict the ongoing impact of the coronavirus (“COVID-19”) pandemic due to increased volatility in global economic and political environments, uncertain market demand for its products, supply chain disruptions, possible workforce unavailability, 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 available funding.

The Company may be required to record significant impairment charges in the future with respect to 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

The Company is closely monitoring the collection of accounts receivable, as well as the operating results of its finance joint ventures around the world.

If economic conditions around the world continue to deteriorate, the Company and its finance joint ventures may not collect accounts receivable at expected levels, 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 also is closely assessing its compliance with debt covenants, the recognition of any future 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 as well as the realization of deferred tax assets in light of the COVID-19 pandemic.

Recently Adopted 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.

ASU 2020-04 generally will no longer be available to apply after December 31, 2022.

Interest on U.S.

24 unchanged sentences

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.

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 currently are evaluating the impact of ASU 2016-13 to their results of operations and financial condition.

RESTRUCTURING EXPENSES

2 unchanged sentences

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):

During the six months ended June 30, 2020 , the Company recorded severance and related costs associated with further rationalizations in connection with the termination of approximately 300 employees.

Restructuring expenses activity during the three and six months ended June 30, 2020 is summarized as follows (in millions):

Write-down of Property, Plant and Equipment

Employee Severance

6 unchanged sentences

Balance as of March 31, 2020

Second quarter 2020 provision

Non-cash expense

Second quarter 2020 cash activity

Foreign currency translation

Balance as of June 30, 2020

Notes to Condensed Consolidated Financial Statements - Continued

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,

The Company recorded stock compensation expense as follows for the three and six months ended June 30, 2020 and 2019 (in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Cost of goods sold

1 unchanged sentence

Total stock compensation expense

Notes to Condensed Consolidated Financial Statements - Continued

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.

As of June 30, 2020 , of the 10,000,000 shares reserved for issuance under the Plan, approximately 3,237,655 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 weighted average grant-date fair value of performance awards granted under the Plan during the six months ended June 30, 2020 and 2019 was $ 70.84 and $ 61.01 , respectively.

During the six months ended June 30, 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:

Performance award transactions during the six months ended June 30, 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

2 unchanged sentences

Shares earned

Shares awarded but not earned at March 31

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 .

Shares awarded but not earned at June 30

As of June 30, 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 $ 25.8 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.

During the six months ended June 30, 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:

The weighted average grant-date fair value of the RSUs granted under the Plan during the six months ended June 30, 2020 and 2019 was $ 70.83 and $ 61.01 , respectively.

Notes to Condensed Consolidated Financial Statements - Continued

RSU transactions during the six months ended June 30, 2020 were as follows:

RSUs awarded but not vested at January 1

RSUs forfeited

RSUs awarded but not vested at March 31

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 .

Notes to Condensed Consolidated Financial Statements - Continued

RSUs awarded but not vested at June 30

As of June 30, 2020 , the total compensation cost related to the unvested RSUs not yet recognized was approximately $ 12.2 million , and the weighted average period over which it is expected to be recognized is approximately one and one-half years .

Stock-Settled Appreciation Rights

1 unchanged sentence

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:

SSAR transactions during the six months ended June 30, 2020 were as follows:

SSARs outstanding at January 1

2 unchanged sentences

SSARs canceled or forfeited

SSARs outstanding at March 31

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 .

SSARs outstanding at June 30

As of June 30, 2020 , the total compensation cost related to the unvested SSARs not yet recognized was approximately $ 4.8 million , and the weighted average period over which it is expected to be recognized is approximately two and one-half years .

Director Restricted Stock Grants

1 unchanged sentence

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.

The Company recorded stock compensation expense of approximately $ 1.4 million during the six months ended June 30, 2020 associated with these grants.

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):

Changes in the carrying amount of goodwill during the six months ended June 30, 2020 are summarized as follows (in millions):

North America

3 unchanged sentences

Balance as of December 31, 2019

Impairment charge

Foreign currency translation

Balance as of March 31, 2020

Balance as of June 30, 2020

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist.

1 unchanged sentence

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):

Based on current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of March 31, 2020 and June 30, 2020 .

As of June 30, 2020 , the Company concluded there were indicators of impairment during the three months ended June 30, 2020 related to one of its smaller reporting units, which is a 50 % -owned tillage and seeding joint venture.

The Company consolidates the reporting unit as it was determined to be the primary beneficiary of the joint venture.

Deteriorating market conditions for the products the joint venture

Notes to Condensed Consolidated Financial Statements - Continued

sells have been negatively impacted by the COVID-19 pandemic in the second quarter, greater than initially expected.

As a result, recently updated strategic reviews with revised forecasts indicated an impairment of the entire goodwill balance of this reporting unit was necessary as of June 30, 2020 .

During the three months ended June 30, 2020 , an impairment charge of approximately $ 20.0 million was recorded as "Goodwill impairment charge" within the Company's Condensed Consolidated Statements of Operations, with an offsetting benefit of approximately $ 10.0 million included within "Net loss attributable to noncontrolling interests."

Changes in the carrying amount of acquired intangible assets during the six months ended June 30, 2020 are summarized as follows (in millions):

Gross carrying amounts:

5 unchanged sentences

Foreign currency translation

Balance as of March 31, 2020

Notes to Condensed Consolidated Financial Statements - Continued

Balance as of June 30, 2020

Accumulated amortization:

6 unchanged sentences

Foreign currency translation

Balance as of March 31, 2020

Balance as of June 30, 2020

Indefinite-lived intangible assets:

2 unchanged sentences

Foreign currency translation

Balance as of March 31, 2020

Balance as of June 30, 2020

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.

Long-term debt consisted of the following at March 31, 2020 and December 31, 2019 (in millions):

March 31, 2020

Long-term debt consisted of the following at June 30, 2020 and December 31, 2019 (in millions):

June 30, 2020

December 31, 2019

9 unchanged sentences

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 ).

(“Rabobank”) in the amount of € 150.0 million (or approximately $ 168.1 million as of June 30, 2020 ).

Notes to Condensed Consolidated Financial Statements - Continued

The Company is permitted to prepay the term loan before its maturity date of October 28, 2022.

5 unchanged sentences

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.

Notes to Condensed Consolidated Financial Statements - Continued

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).

As of June 30, 2020 , the Company had approximately $ 196.1 million of outstanding borrowings under the revolving credit facility and the ability to borrow approximately $ 603.9 million under the revolving credit facility.

As of December 31, 2019 , the Company had no outstanding borrowings under the revolving credit facility and the ability to borrow approximately $ 800.0 million under the revolving credit facility.

Amounts can be drawn incrementally at any time prior to maturity, but must be drawn down proportionately.

6 unchanged sentences

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.

On April 15, 2020, the Company borrowed € 117.5 million and $ 133.8 million (or an aggregate of approximately $ 265.5 million as of June 30, 2020 ) 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.

There were no other borrowings on the 2020 term loans subsequent to the initial borrowings in April during the three months ended June 30, 2020.

As of June 30, 2020 , the Company had the ability to borrow approximately $ 265.4 million of 2020 term loans.

Interest on U.S.

4 unchanged sentences

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 € 250.0 million (or approximately $ 280.3 million as of June 30, 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.

2 unchanged sentences

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.

Of the 2016 term loans, an aggregate amount of € 56.0 million (or approximately $ 61.1 million ) was repaid upon maturity of two term loan agreements in October 2019.

Notes to Condensed Consolidated Financial Statements - Continued

In aggregate, the Company has indebtedness of € 657.0 million (or approximately $ 736.5 million as of June 30, 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.

3 unchanged sentences

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.

As of June 30, 2020 and December 31, 2019 , the Company had short-term borrowings due within one year of approximately $ 102.6 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.

Notes to Condensed Consolidated Financial Statements - Continued

At June 30, 2020 and December 31, 2019 , outstanding letters of credit totaled approximately $ 14.4 million and $ 13.9 million , respectively.

RECOVERABLE INDIRECT TAXES

3 unchanged sentences

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 .

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

March 31, 2020

The Company had recorded approximately $ 99.1 million and $ 142.3 million , respectively, of VAT tax credits, net of reserves, as of June 30, 2020 and December 31, 2019 .

Inventories at June 30, 2020 and December 31, 2019 were as follows (in millions):

June 30, 2020

December 31, 2019

5 unchanged sentences

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,

The warranty reserve activity for the three and six months ended June 30, 2020 and 2019 consisted of the following (in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Balance at beginning of period

2 unchanged sentences

Foreign currency translation

Balance at March 31

Balance at June 30

Notes to Condensed Consolidated Financial Statements - Continued

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.

Approximately $ 334.3 million and $ 331.9 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 , respectively.

Approximately $ 74.7 million and $ 60.9 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of June 30, 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.”

Notes to Condensed Consolidated Financial Statements - Continued

NET INCOME PER COMMON SHARE

1 unchanged sentence

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,

A reconciliation of net income attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share for the three and six months ended June 30, 2020 and 2019 is as follows (in millions, except per share data):

Three Months Ended June 30,

Six Months Ended June 30,

Basic net income per share:

8 unchanged sentences

Diluted net income per share attributable to AGCO Corporation and subsidiaries

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.

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.

SSARs to purchase approximately 0.7 million shares of the Company’s common stock for both three and six months ended June 30, 2020 , and approximately 0.4 million and 0.6 million shares of the Company's common stock for the three and six months ended June 30, 2019 , respectively, were outstanding but not included in the calculation of weighted average common and common equivalent shares outstanding because they had an antidilutive impact.

Notes to Condensed Consolidated Financial Statements - Continued

At June 30, 2020 and December 31, 2019 , the Company had approximately $ 229.4 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 June 30, 2020 and December 31, 2019 include certain indirect favorable effects that relate to other tax jurisdictions of approximately $ 50.9 million and $ 44.9 million , respectively.

At June 30, 2020 and December 31, 2019 , the Company had approximately $ 53.4 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.

At June 30, 2020 and December 31, 2019 , the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $ 33.8 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.

As of June 30, 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.

3 unchanged sentences

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.

Notes to Condensed Consolidated Financial Statements - Continued

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.

Other governments around the world have also enacted similar measures and may enact further measures in the future.

To date, the Act and other similar worldwide measures have not had a material impact to the Company’s results of operations or financial condition.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

6 unchanged sentences

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):

The total notional value of derivatives that were designated as cash flow hedges was approximately $ 125.3 million and $ 332.7 million as of June 30, 2020 and December 31, 2019 , respectively.

Notes to Condensed Consolidated Financial Statements - Continued

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 and six months ended June 30, 2020 and 2019 (in millions):

Recognized in Net Income

Three Months Ended March 31,

Three Months Ended June 30,

Gain (Loss) Recognized in Accumulated

8 unchanged sentences

Cost of goods sold

(1) The outstanding contracts as of March 31, 2020 range in maturity through December 2020 .

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, 2020 (in millions):

Recognized in Net Income

Six Months Ended June 30,

Gain (Loss) Recognized in Accumulated

Other Comprehensive Loss

Classification of Gain (Loss)

Gain (Loss) Reclassified from Accumulated

Other Comprehensive Loss into Income

Total Amount of the Line Item in the Condensed Consolidated Statements of Operations Containing Hedge Gains (Losses)

Foreign currency contracts (1)

Cost of goods sold

Foreign currency contracts

Cost of goods sold

(1) The outstanding contracts as of June 30, 2020 range in maturity through December 2020 .

The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the six months ended June 30, 2020 (in millions):

Before-Tax Amount

3 unchanged sentences

Net gains reclassified from accumulated other comprehensive loss into income

Accumulated derivative net gains as of March 31, 2020

Notes to Condensed Consolidated Financial Statements - Continued

Accumulated derivative net gains as of June 30, 2020

Net Investment Hedges

3 unchanged sentences

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.

Notes to Condensed Consolidated Financial Statements - Continued

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 has an expiration date of January 19, 2021.

At maturity of the cross currency swap contract, the Company will deliver the notional amount of approximately € 245.7 million (or approximately $ 269.2 million as of March 31, 2020 ) and will receive $ 300.0 million from the counterparties.

At maturity of the cross currency swap contract, the Company will deliver the notional amount of approximately € 245.7 million (or approximately $ 275.4 million as of June 30, 2020 ) 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 maturity of the cross currency swap.

During the three months ended March 31, 2020 , the Company designated € 110.0 million (or approximately $ 120.5 million as of March 31, 2020 ) of its multi-currency revolving credit facility with a maturity date of October 17, 2023 as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment.

During the three months ended March 31, 2019, the Company designated € 160.0 million (or approximately $ 179.8 million as of March 31, 2019) of its multi-currency revolving credit facility as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment.

During September 2019, the Company repaid the designated amount outstanding under its multi-currency revolving credit facility and the foreign currency denominated debt was de-desginated as a net investment hedge.

During the three months ended March 31, 2020, the Company designated € 110.0 million of its multi-currency revolving credit facility with a maturity date of October 17, 2023 as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment.

In May 2020, the Company repaid the designated amount outstanding under its multi-currency revolving credit facility and the foreign currency denominated debt was de-designated as a net investment hedge.

During the six months ended June 30, 2019 , the Company designated € 160.0 million (or approximately $ 182.1 million as of June 30, 2019 ) of its multi-currency revolving credit facility as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment.

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

Notional Amount as of

March 31, 2020

June 30, 2020

December 31, 2019

Cross currency swap contract

Foreign currency denominated debt

The following table summarizes the after-tax impact of changes in the fair value of the instrument designated as a net investment hedge during the three months ended March 31, 2020 and 2019 (in millions):

Gain Recognized in Accumulated

The following table summarizes the after-tax impact of changes in the fair value of the instrument designated as a net investment hedge during the three and six months ended June 30, 2020 and 2019 (in millions):

Gain (Loss) Recognized in Accumulated

Other Comprehensive Loss for the Three Months Ended

March 31, 2020

March 31, 2019

Gain Recognized in Accumulated

Other Comprehensive Loss for the Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Cross currency swap contract

4 unchanged sentences

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, 2020 and December 31, 2019 , the Company had outstanding foreign currency contracts with a notional amount of approximately $ 2,678.1 million and $ 2,800.3 million , respectively.

Notes to Condensed Consolidated Financial Statements - Continued

As of June 30, 2020 and December 31, 2019 , the Company had outstanding foreign currency contracts with a notional amount of approximately $ 2,552.4 million and $ 2,800.3 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):

Gain Recognized in Net Income for the Three Months Ended

Classification of Gain

March 31, 2020

March 31, 2019

Loss Recognized in Net Income for the Three Months Ended

Gain Recognized in Net Income for the Six Months Ended

Classification of Gain (Loss)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Foreign currency contracts

Other expense, net

The table below sets forth the fair value of derivative instruments as of March 31, 2020 (in millions):

Asset Derivatives as of March 31, 2020

Liability Derivatives as of March 31, 2020

Notes to Condensed Consolidated Financial Statements - Continued

The table below sets forth the fair value of derivative instruments as of June 30, 2020 (in millions):

Asset Derivatives as of

June 30, 2020

Liability Derivatives as of

June 30, 2020

Balance Sheet Location

13 unchanged sentences

The table below sets forth the fair value of derivative instruments as of December 31, 2019 (in millions):

Asset Derivatives as of December 31, 2019

Liability Derivatives as of December 31, 2019

Asset Derivatives as of

December 31, 2019

Liability Derivatives as of

December 31, 2019

Balance Sheet Location

14 unchanged sentences

CHANGES IN STOCKHOLDERS’ EQUITY

The following tables set forth changes in stockholders’ equity attributed to AGCO Corporation and its subsidiaries and to noncontrolling interests for the three months ended March 31, 2020 and 2019 (in millions):

The following tables set forth changes in stockholders’ equity attributed to AGCO Corporation and its subsidiaries and to noncontrolling interests for the three and six months ended June 30, 2020 (in millions):

Paid-in Capital

3 unchanged sentences

Total Stockholders’

Balance, March 31, 2020

Stock compensation

Issuance of stock awards

Comprehensive income:

Net income (loss)

Other comprehensive loss, net of reclassification adjustments:

Foreign currency translation adjustments

Defined benefit pension plans, net of tax

Deferred gains and losses on derivatives, net of tax

Payment of dividends to stockholders

Change in noncontrolling interest

Balance, June 30, 2020

Paid-in Capital

Accumulated Other

Comprehensive Loss

Noncontrolling

Total Stockholders’

Balance, December 31, 2019

3 unchanged sentences

Comprehensive loss:

Net income (loss)

Other comprehensive loss, net of reclassification adjustments:

5 unchanged sentences

Change in noncontrolling interest

Balance, June 30, 2020

Notes to Condensed Consolidated Financial Statements - Continued

Paid-in Capital

Accumulated Other

Comprehensive Loss

Noncontrolling

Total Stockholders’

Balance, March 31, 2019

Stock compensation

Issuance of stock awards

SSARs exercised

Comprehensive income:

Net income (loss)

Other comprehensive income, net of reclassification adjustments:

Foreign currency translation adjustments

Defined benefit pension plans, net of tax

Deferred gains and losses on derivatives, net of tax

Payment of dividends to stockholders

Purchases and retirement of common stock

Investment by noncontrolling interests

Balance, June 30, 2019

Paid-in Capital

15 unchanged sentences

Investment by noncontrolling interests

Balance, March 31, 2019

Balance, June 30, 2019

Notes to Condensed Consolidated Financial Statements - Continued

Total comprehensive (loss) income attributable to noncontrolling interests for the three months ended March 31, 2020 and 2019 was as follows (in millions):

Three Months Ended March 31,

Total comprehensive (loss) income attributable to noncontrolling interests for the three and six months ended June 30, 2020 and 2019 was as follows (in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

Other comprehensive (loss) income:

1 unchanged sentence

Total comprehensive (loss) income

The following table sets forth changes in accumulated other comprehensive loss by component, net of tax, attributed to AGCO Corporation and its subsidiaries for the three months ended March 31, 2020 (in millions):

The following table sets forth changes in accumulated other comprehensive loss by component, net of tax, attributed to AGCO Corporation and its subsidiaries for the six months ended June 30, 2020 (in millions):

Defined Benefit Pension Plans

5 unchanged sentences

Other comprehensive income (loss), net of reclassification adjustments

Accumulated other comprehensive loss, March 31, 2020

The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the three months ended March 31, 2020 and 2019 (in millions):

Accumulated other comprehensive loss, June 30, 2020

Amount Reclassified from Accumulated Other Comprehensive Loss

2 unchanged sentences

Details about Accumulated Other Comprehensive Loss Components

Three Months Ended March 31, 2020 (1)

Three Months Ended March 31, 2019 (1)

Three Months Ended June 30, 2020 (1)

Three Months Ended June 30, 2019 (1)

Net (gains) losses on foreign currency contracts

12 unchanged sentences

Net losses reclassified from accumulated other comprehensive loss

(1) (Gains) losses included within the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 , respectively.

(1) (Gains) losses included within the Condensed Consolidated Statements of Operations for the three months ended June 30, 2020 and 2019 , respectively.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements - Continued

The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the six months ended June 30, 2020 and 2019 (in millions):

Amount Reclassified from Accumulated Other Comprehensive Loss

Affected Line Item within the Condensed Consolidated

Statements of Operations

Details about Accumulated Other Comprehensive Loss Components

Six Months Ended June 30, 2020 (1)

Six Months Ended June 30, 2019 (1)

Net (gains) losses on foreign currency contracts

Cost of goods sold

Reclassification before tax

Income tax provision

Reclassification net of tax

Defined benefit pension plans:

Amortization of net actuarial losses

Other expense, net (2)

Amortization of prior service cost

Other expense, net (2)

Reclassification before tax

Income tax provision

Reclassification net of tax

Net losses reclassified from accumulated other comprehensive loss

(1) (Gains) losses included within the Condensed Consolidated Statements of Operations for the six months ended June 30, 2020 and 2019 , respectively.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost.

See Note 14 for additional information on the Company’s defined benefit pension plans.

Share Repurchase Program

During the three months ended March 31, 2020 , the Company entered into accelerated share repurchase (“ASR”) agreements with a financial institution to repurchase an aggregate of $ 55.0 million of shares of its common stock.

During the three months ended June 30, 2020 , the Company did not purchase any shares directly or enter into any accelerated share repurchase (“ASR”) agreements as a result of its suspension of share repurchases until business visibility improves.

During the three months ended March 31, 2020, the Company entered into ASR agreements with a financial institution to repurchase an aggregate of $ 55.0 million of shares of its common stock.

The Company received approximately 970,141 shares during the three months ended March 31, 2020 related to the ASR agreements.

2 unchanged sentences

All shares received under the ASR agreements were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained earnings” within the Company’s Condensed Consolidated Balance Sheets.

As of March 31, 2020 , the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $ 245.0 million , which has no expiration date .

As of June 30, 2020 , the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $ 245.0 million , which has no expiration date .

Notes to Condensed Consolidated Financial Statements - Continued

ACCOUNTS RECEIVABLE SALES AGREEMENTS

The Company has accounts receivable sales agreements that permit the sale, on an ongoing basis, of a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures.

As of March 31, 2020 and December 31, 2019 , the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $ 1.5 billion and $ 1.6 billion , respectively.

As of June 30, 2020 and December 31, 2019 , the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $ 1.5 billion and $ 1.6 billion , respectively.

Under the terms of the accounts receivable sales agreements in North America, Europe and Brazil, the Company pays an annual fee related to the servicing of the receivables sold.

3 unchanged sentences

The Company reviewed its accounting for the accounts receivable sales agreements and determined that these facilities should be accounted for as off-balance sheet transactions.

Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $ 8.1 million and $ 8.7 million , respectively, during the three months ended March 31, 2020 and 2019 .

Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $ 4.3 million and $ 12.4 million , respectively, during the three and six months ended June 30, 2020 .

Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $ 11.0 million and $ 19.7 million , respectively, during the three and six months ended June 30, 2019 .

The Company’s finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to the Company’s dealers.

1 unchanged sentence

The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables.

As of March 31, 2020 and December 31, 2019 , these finance joint ventures had approximately $ 85.3 million and $ 104.3 million , respectively, of outstanding accounts receivable associated with these arrangements.

As of June 30, 2020 and December 31, 2019 , these finance joint ventures had approximately $ 77.3 million and $ 104.3 million , respectively, of outstanding accounts receivable associated with these arrangements.

The Company reviewed its accounting for these arrangements and determined that these arrangements should be accounted for as off-balance sheet transactions.

3 unchanged sentences

PENSION AND POSTRETIREMENT BENEFIT PLANS

Net periodic pension and postretirement benefit cost for the Company’s defined pension and postretirement benefit plans for the three months ended March 31, 2020 and 2019 are set forth below (in millions):

Three Months Ended March 31,

Net periodic pension and postretirement benefit cost for the Company’s defined pension and postretirement benefit plans for the three and six months ended June 30, 2020 and 2019 are set forth below (in millions):

Three Months Ended June 30,

Six Months Ended June 30,

Pension benefits

4 unchanged sentences

Net periodic pension cost

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Postretirement benefits

1 unchanged sentence

Amortization of net actuarial losses

Amortization of prior service cost

Net periodic postretirement benefit cost

The components of net periodic pension and postretirement benefits cost, other than the service cost component, are included in “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations.

The following table summarizes the activity in accumulated other comprehensive loss related to the Company’s defined pension and postretirement benefit plans during the three months ended March 31, 2020 (in millions):

The following table summarizes the activity in accumulated other comprehensive loss related to the Company’s defined pension and postretirement benefit plans during the six months ended June 30, 2020 (in millions):

Before-Tax Amount

3 unchanged sentences

Amortization of prior service cost

Accumulated other comprehensive loss as of March 31, 2020

During the three months ended March 31, 2020 , approximately $ 9.8 million of contributions had been made to the Company’s defined pension benefit plans.

Accumulated other comprehensive loss as of June 30, 2020

During the six months ended June 30, 2020 , the Company made approximately $ 17.1 million of contributions to its defined pension benefit plans.

The Company currently estimates its minimum contributions for 2020 to its defined pension benefit plans will aggregate approximately $ 32.2 million .

During the three months ended March 31, 2020 , the Company made approximately $ 0.3 million of contributions to its postretirement health care and life insurance benefit plans.

During the six months ended June 30, 2020 , the Company made approximately $ 0.7 million of contributions to its postretirement health care and life insurance benefit plans.

The Company currently estimates that it will make approximately $ 1.6 million of contributions to its postretirement health care and life insurance benefit plans during 2020 .

17 unchanged sentences

See Note 11 for additional information on the Company’s derivative instruments and hedging activities.

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 are summarized below (in millions):

As of March 31, 2020

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 are summarized below (in millions):

As of June 30, 2020

Derivative assets

12 unchanged sentences

As a result, the components of income from operations for one segment may not be comparable to another segment.

Segment results for the three months ended March 31, 2020 and 2019 and assets as of March 31, 2020 and December 31, 2019 based on the Company’s reportable segments are as follows (in millions):

Three Months Ended March 31,

Segment results for the three and six months ended June 30, 2020 and 2019 and assets as of June 30, 2020 and December 31, 2019 based on the Company’s reportable segments are as follows (in millions):

Three Months Ended June 30,

North America

2 unchanged sentences

Asia/Pacific/Africa

Income from operations

Capital expenditures

Income (loss) from operations

Capital expenditures

Six Months Ended June 30,

North America

South America

Europe/Middle East

Asia/Pacific/Africa

Income (loss) from operations

Capital expenditures

As of March 31, 2020

Income (loss) from operations

Capital expenditures

As of June 30, 2020

As of December 31, 2019

Notes to Condensed Consolidated Financial Statements - Continued

A reconciliation from the segment information to the consolidated balances for income from operations and total assets is set forth below (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Segment income from operations

1 unchanged sentence

Amortization of intangibles

Goodwill impairment charge

Stock compensation expense

1 unchanged sentence

Consolidated income from operations

March 31, 2020

June 30, 2020

December 31, 2019

5 unchanged sentences

Consolidated total assets

Notes to Condensed Consolidated Financial Statements - Continued

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

finance joint venture, AGCO Finance LLC, whereby the Company is obligated to repurchase up to $ 6.0 million of repossessed equipment each calendar year.

The Company believes that any losses that might be incurred on the resale of this equipment will not materially impact the Company’s financial position or results of operations, due to the fair value of the underlying equipment.

At March 31, 2020 , the Company has outstanding guarantees of indebtedness owed to third parties of approximately $ 30.4 million , primarily related to dealer and end-user financing of equipment.

The Company believes that any losses that it might incur on the resale of this equipment will not be material, due to the fair value of the underlying equipment.

At June 30, 2020 , the Company has outstanding guarantees of indebtedness owed to third parties of approximately $ 25.4 million , primarily related to dealer and end-user financing of equipment.

Such guarantees generally obligate the Company to repay outstanding finance obligations owed to financial institutions if dealers or end users default on such loans through 2026.

3 unchanged sentences

Losses under such guarantees historically have been insignificant, and the guarantees are not material.

The Company believes the credit risk associated with these guarantees is not material to its financial position or results of operations.

In addition, at March 31, 2020 , the Company had accrued approximately $ 19.9 million of outstanding guarantees of minimum residual value that may be owed to its finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users.

The Company believes the credit risk associated with these guarantees is not material.

In addition, at June 30, 2020 , the Company had accrued approximately $ 21.5 million of outstanding guarantees of residual values that may be owed to its finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users.

The maximum potential amount of future payments under the guarantees is approximately $ 56.3 million .

At March 31, 2020 , the Company had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $ 2,882.7 million .

The outstanding contracts as of March 31, 2020 range in maturity through December 2020 (see Note 11 ).

Notes to Condensed Consolidated Financial Statements - Continued

Lease payment amounts for operating and finance leases with remaining terms greater than one year as of June 30, 2020 and December 31, 2019 were as follows (in millions):

June 30, 2020

December 31, 2019

Operating Leases (1)

Finance Leases

Operating Leases (1)

Finance Leases

Total lease payments

imputed interest (2)

Present value of leased liabilities

(1) Operating lease payments include options to extend or terminate at the Company's sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised.

(2) Calculated for each lease using either the implicit interest rate or the incremental borrowing rate when the implicit interest rate is not readily available.

At June 30, 2020 , the Company had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $ 2,677.7 million .

The outstanding contracts as of June 30, 2020 range in maturity through December 2020 (see Note 11 ).

The Company sells a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures.

3 unchanged sentences

In August 2008, as part of routine audits, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of the Company’s Brazilian operations and the related transfer of certain assets to the Company’s Brazilian subsidiaries.

The amount of the tax disallowance through March 31, 2020 , not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $ 25.3 million ).

The amount of the tax disallowance through June 30, 2020 , not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $ 24.0 million ).

The amount ultimately in dispute will be significantly greater because of interest and penalties.

7 unchanged sentences

Contract liabilities relate to the following:

(1) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to extended warranty contracts and where the performance obligation is satisfied over time, (2) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to certain grain storage and protein production systems and where the performance obligation is satisfied over time and (3) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to technology services and where the performance obligation is satisfied over time.

Significant changes in the balance of contract liabilities for the three months ended March 31, 2020 and 2019 were as follows (in millions):

Three Months Ended March 31,

(1) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to extended warranty and maintenance contracts and where the performance obligation is satisfied over time, (2) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to certain grain storage and protein production systems and where the performance obligation is satisfied over time and (3) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to technology services and where the performance obligation is satisfied over time.

Significant changes in the balance of contract liabilities for the three and six months ended June 30, 2020 and 2019 were as follows (in millions):

Three Months Ended June 30,

Balance at beginning of period

Advance consideration received

Revenue recognized during the period for extended warranty contracts

Revenue recognized during the period related to installation of grain storage and protein production systems

Revenue recognized during the period for extended warranty contracts, maintenance services and technology services

Revenue recognized during the period related to grain storage and protein production systems

Foreign currency translation

Balance at March 31

The contract liabilities are classified as either “Other current liabilities” and “Other noncurrent liabilities” or “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets.

Balance at June 30

Six Months Ended June 30,

Balance at beginning of period

Advance consideration received

Revenue recognized during the period for extended warranty contracts, maintenance services and technology services

Revenue recognized during the period related to grain storage and protein production systems

Foreign currency translation

Balance at June 30

The contract liabilities are classified as either “Accrued expenses” or “Other current liabilities” and “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets.

Remaining Performance Obligations

The estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020 are $ 31.0 million for the remainder of 2020 , $ 31.6 million in 2021 , $ 19.8 million in 2022 , $ 9.9 million in 2023 and $ 3.7 million thereafter, and relate primarily to extended warranty contracts.

The estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2020 are $ 24.8 million for the remainder of 2020 , $ 35.9 million in 2021 , $ 24.1 million in 2022 , $ 12.3 million in 2023 and $ 5.8 million thereafter, and relate primarily to extended warranty contracts.

The Company applied the practical expedient in ASU 2014-09 and has not disclosed information about remaining performance obligations that have original expected durations of 12 months or less.

1 unchanged sentence

Disaggregated Revenue

Net sales for the three months ended March 31, 2020 disaggregated by primary geographical markets and major products consisted of the following (in millions):

Net sales for the three months ended June 30, 2020 disaggregated by primary geographical markets and major products consisted of the following (in millions):

North America

2 unchanged sentences

Asia/Pacific/Africa

Consolidated (1)

Primary geographical markets:

9 unchanged sentences

Grain storage and protein production systems

Other machinery

Combines, application equipment and other machinery

(1) Rounding may impact the summation of amounts.

Notes to Condensed Consolidated Financial Statements - Continued

Net sales for the three months ended March 31, 2019 disaggregated by primary geographical markets and major products consisted of the following (in millions):

Net sales for the three months ended June 30, 2019 disaggregated by primary geographical markets and major products consisted of the following (in millions):

North America (1)

14 unchanged sentences

Grain storage and protein production systems

Other machinery

Combines, application equipment and other machinery

(1) Rounding may impact the summation of amounts.

Notes to Condensed Consolidated Financial Statements - Continued

Total lease assets and liabilities as of March 31, 2020 and December 31, 2019 were as follows (in millions):

Classification

As of March 31, 2020

As of December 31, 2019

Operating ROU assets

Right-of-use lease assets

Finance lease assets

Property, plant and equipment, net (1)

Total leased assets

Lease Liabilities

Classification

As of March 31, 2020

As of December 31, 2019

Accrued expenses

Other current liabilities

Operating lease liabilities

Other noncurrent liabilities

Total leased liabilities

(1) Finance lease assets are recorded net of accumulated depreciation of $ 14.4 million as of March 31, 2020 and $ 15.2 million as of December 31, 2019 .

Total lease cost for the three months ended March 31, 2020 and 2019 are set forth below (in millions):

Classification

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Operating lease cost

Selling, general and administrative expenses

Variable lease cost

Selling, general and administrative expenses

Short-term lease cost

Selling, general and administrative expenses

Finance lease cost:

Amortization of leased assets

Depreciation expense (1)

Interest on leased liabilities

Interest expense, net

Total lease cost

(1) Depreciation expense is a component of both cost of sales and selling, general and administrative expenses.

Net sales for the six months ended June 30, 2020 disaggregated by primary geographical markets and major products consisted of the following (in millions):

North America

South America

Europe/Middle East (1)

Asia/Pacific/Africa (1)

Primary geographical markets:

United States

South America

United Kingdom and Ireland

Finland and Scandinavia

Middle East and Algeria

Australia and New Zealand

Mexico, Central America and Caribbean

Major products:

Replacement parts

Grain storage and protein production systems

Other machinery

(1) Rounding may impact the summation of amounts.

Notes to Condensed Consolidated Financial Statements - Continued

L ease payment amounts for operating and finance leases with remaining terms greater than one year as of March 31, 2020 and December 31, 2019 were as follows (in millions):

March 31, 2020

December 31, 2019

Operating Leases (1)

Finance Leases

Operating Leases (1)

Finance Leases

Total lease payments

imputed interest (2)

Present value of leased liabilities

(2) Calculated for each lease using either the implicit interest rate or the incremental borrowing rate when the implicit interest rate is not readily available.

For leases related to real estate and office equipment, the minimum lease payments include payments for nonlease components.

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate:

As of March 31, 2020

As of December 31, 2019

Weighted-average remaining lease term:

Operating leases

Finance leases

Weighted-average discount rate:

Operating leases

Finance leases

The following table summarizes the supplemental cash flow information for the three months ended March 31, 2020 and 2019 (in millions):

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Leased assets obtained in exchange for lease obligations:

Operating leases

Finance leases

Net sales for the six months ended June 30, 2019 disaggregated by primary geographical markets and major products consisted of the following (in millions):

North America (1)

South America

Europe/Middle East

Asia/Pacific/Africa (1)

Consolidated (1)

Primary geographical markets:

United States

South America

United Kingdom and Ireland

Finland and Scandinavia

Middle East and Algeria

Australia and New Zealand

Mexico, Central America and Caribbean

Major products:

Replacement parts

Grain storage and protein production systems

Other machinery

(1) Rounding may impact the summation of amounts.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements