What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-01 compared with 2020-02-28 · 213 added, 164 removed, 354 unchanged (52% of the section changed)

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Performance Graph

The following presentation is a line graph of our cumulative total shareholder return on our common stock on an indexed basis as compared to the cumulative total return of the S&P Mid-Cap 400 Index and a self-constructed peer group (“Peer Group”) for the five years ended December 31, 2019.

The following presentation is a line graph of our cumulative total shareholder return on our common stock on an indexed basis as compared to the cumulative total return of the S&P Mid-Cap 400 Index, the MVIS Global Agribusiness Index and a self-constructed peer group (“Custom Peer Group Index”) for the five years ended December 31, 2020.

The MVIS Global Agribusiness Index has been added to the performance chart during 2020 to replace the Custom Peer Group Index based upon the MVIS Global Agribusiness Index's closer alignment to our business.

In the future, we will not include the Custom Peer Group Index.

Our total returns in the graph are not necessarily indicative of future performance.

Cumulative Total Return for the Years Ended December 31,

2015 2016 2017 2018 2019 2020

AGCO Corporation $ 100.00 $ 128.82 $ 160.39 $ 126.22 $ 176.74 $ 238.19

S&P Midcap 400 Index 100.00 120.74 140.35 124.80 157.49 179.00

Peer Group Index

MVIS Global Agribusiness Index

100.00 112.51 136.95 128.61 156.90 179.96

Custom Peer Group Index 100.00 142.46 206.15 175.30 227.23 304.62

The total return assumes that dividends were reinvested and is based on a $100 investment on December 31, 2015.

The Peer Group Index is a self-constructed peer group of companies that includes:

The Custom Peer Group Index is a self-constructed peer group of companies that includes:

Caterpillar Inc., CNH Industrial NV, Cummins Inc., Deere & Company, Eaton Corporation Plc., Ingersoll-Rand Plc., Navistar International Corporation, PACCAR Inc., Parker-Hannifin Corporation and Terex Corporation.

Issuer Purchases of Equity Securities

The table below sets forth information with respect to purchases of our common stock made by or on behalf of us during the three months ended December 31, 2019:

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (3)

October 1, 2019 through

October 31, 2019 (1)

November 1, 2019 through

November 30, 2019 (2)

December 1, 2019 through

December 31, 2019 (2)

____________________________________

In August 2019, we entered into an ASR agreement with a third-party financial institution to repurchase $30.0 million of shares of our common stock.

The ASR agreement resulted in the initial delivery of our common stock, representing approximately 80% of the shares that was expected to be repurchased in connection with the transaction.

In October 2019, the remaining shares were delivered.

As reflected in the table above, the average price paid per share for the ASR agreement was the volume-weighted average stock price of our common stock over the term of the ASR agreement.

Refer to Note 9 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for a further discussion of this matter.

In November 2019, we entered into an ASR agreement with a third-party financial institution to repurchase $30.0 million of shares of our common stock.

Refer to Note 9 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for a further discussion of this matter.

The remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $300.0 million, which has no expiration date.

There were no purchases of our common stock made by or on behalf of us during the three months ended December 31, 2020.

Selected Financial Data

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Years Ended December 31,

2020 2019 2018 2017 2016

(in millions, except per share data)

Operating Data:

Net sales $ 9,149.7 $ 9,041.4 $ 9,352.0 $ 8,306.5 $ 7,410.5

Gross profit 2,057.5 1,984.3 1,996.7 1,765.3 1,515.5

Income from operations 599.7 348.1 489.0 404.4 287.0

Net income 419.8 122.8 283.7 189.3 160.2

Net loss (income) attributable to noncontrolling interests 7.3 2.4 1.8 (2.9) (0.1)

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As of December 31,

2020 2019 2018 2017 2016

(in millions, except number of employees)

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Cash and cash equivalents $ 1,119.1 $ 432.8 $ 326.1 $ 367.7 $ 429.7

Total assets 8,504.2 7,759.7 7,626.4 7,971.7 7,168.4

Total long-term debt, excluding current portion and debt issuance costs

1,256.7 1,191.8 1,275.3 1,618.1 1,610.0

Stockholders’ equity 3,018.0 2,907.0 2,993.5 3,095.3 2,837.2

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Our products are widely recognized in the agricultural equipment industry and are marketed under a number of well-known brand names, including:

Challenger ® , Fendt ® , GSI ® , Massey Ferguson ® and Valtra ® .

Challenger ® , Fendt ® , GSI ® , Massey Ferguson ® and Valtra ® , supported by our Fuse ® precision agriculture solutions.

We distribute most of our products through a combination of approximately 3,250 dealers and distributors as well as associates and licensees.

In addition, we provide retail financing through our finance joint ventures with Rabobank.

In addition, we provide retail and wholesale financing through our finance joint ventures with Rabobank.

The COVID-19 pandemic created significant volatility in the global economy and led to substantially reduced economic activity, employment disruptions and supply chain constraints and delays.

In most areas, our business has been deemed essential, thereby allowing us to maintain operations.

However, production during the first half of 2020 was severely impacted by component availability, particularly during late March and throughout April, and therefore net sales levels during 2020 were directly impacted.

The affected plants, primarily in Europe and South America, all resumed production in late April.

During the third quarter of 2020, we were able to ramp up production and recover from supply chain disruptions experienced in the second quarter.

All of our production facilities are currently operational.

The ability to maintain full-time production remains uncertain for the foreseeable future due to government restrictions, potential supply chain constraints, workforce limitations and safety equipment availability.

We have enacted cost saving measures, are working closely with our suppliers to maintain stable component availability, and are continuing to manage our cash flows and capital deployment to respond to the ongoing volatile environment.

Financial Highlights

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To the extent practicable, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal demands on our manufacturing operations and to minimize our investment in inventories.

However, retail sales by dealers to farmers are highly seasonal and are linked to the planting and harvesting seasons.

However, retail sales by dealers to farmers are highly seasonal and are a function of the timing the planting and harvesting seasons.

In certain markets, particularly in North America, there is often a time lag, which varies based on the timing and level of retail demand, between our sale of the equipment to the dealer and the dealer’s sale to a retail customer.

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Years Ended December 31,

Net sales 100.0 % 100.0 % 100.0 %

Cost of goods sold 77.5 78.1 78.6

Gross profit 22.5 21.9 21.4

Selling, general and administrative expenses 10.9 11.5 11.4

Engineering expenses 3.7 3.8 3.8

Impairment charges

Amortization of intangibles 0.7 0.7 0.7

Impairment charges 0.2 2.0 —

Restructuring expenses 0.2 0.1 0.1

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Equity in net earnings of affiliates 0.5 0.5 0.4

Net loss (income) attributable to noncontrolling interests

Net income 4.6 1.4 3.0

Net loss attributable to noncontrolling interests 0.1 — —

Net income attributable to AGCO Corporation and subsidiaries 4.7 % 1.4 % 3.1 %

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Net income attributable to AGCO Corporation and subsidiaries for 2020 was $427.1 million, or $5.65 per diluted share, compared to $125.2 million, or $1.63 per diluted share for 2019.

Net sales for 2019 were approximately $9,041.4 million , or 3.3% lower than 2018 , primarily due to decreased sales volumes in our South American and Asia/Pacific/African (“APA”) regions and the negative impact of currency translation.

Net sales for 2020 were approximately $9,149.7 million, or 1.2% higher than 2019, primarily due to increased sales volumes in our South American region, partially offset by the negative impact of currency translation.

Net sales were impacted by reduced production volumes caused by component availability and other impacts of the COVID-19 pandemic in the first half of 2020, but recovered in the second half of the year resulting from more normalized production levels and improved industry demand.

Income from operations was $599.7 million in 2020 compared to $348.1 million in 2019.

The decrease in income from operations during 2019 was primarily the result of non-cash goodwill and other intangible asset impairment charges recorded during the fourth quarter of 2019 related to our grain storage and protein production systems operations in our Europe/Middle East (“EME”) region.

Excluding the impact of $176.6 million of non-cash impairment charges, income from operations during 2019 increased compared to 2018 due to improved gross profit margins, which largely offset the adverse impact of foreign currency translation.

Regionally, income from operations in EME increased by approximately $37.1 million in 2019 compared to 2018 , driven primarily by the benefit of higher sales and margin improvement resulting from the impacts of pricing, better factory productivity and a favorable sales mix.

In our North American region, income from operations improved by approximately $18.5 million .

Increased net sales levels and the benefit of favorable pricing impacts and expense control initiatives contributed to the improvement in the region.

In South America, operating losses increased approximately $29.3 million in 2019 compared to 2018 .

The losses reflect low levels of industry demand and company production, as well as unfavorable cost impacts of newer product technology into our Brazilian factories.

Income from operations in our APA region decreased approximately $6.2 million in 2019 compared to 2018 , primarily due to lower net sales and production volumes.

The increase in income from operations during 2020 was primarily the result of improved margins which benefited from positive pricing impacts, a favorable sales mix and cost control initiatives as compared to prior year.

In addition, our 2019 income from operations included approximately $176.6 million of non-cash goodwill and other intangible asset impairment charges recorded during the fourth quarter of 2019 related to our grain storage and protein production systems operations in our Europe/Middle East (“EME”) region.

Regionally, income from operations in EME decreased by approximately $52.9 million in 2020 compared to 2019, driven primarily by lower net sales (excluding positive currency translation impacts), as well as decreased production volumes and higher warranty costs.

Sales volumes increased substantially in the second half of 2020 in the EME region, partially offsetting declines experienced in the second quarter due to production disruptions in our European operations.

In our North American region, despite flat net sales levels, income from operations improved by approximately $72.1 million compared to the prior year.

A favorable sales mix and expense control measures contributed to the improvement in the region.

In South America, income from operations increased approximately $68.7 million in 2020 compared to 2019.

The increase reflects increased net sales and production volumes, a richer margin product mix and cost containment efforts, partially offset by negative currency translation impacts.

Income from operations in our Asia/Pacific/African (“APA”) region increased

approximately $18.7 million in 2020 compared to 2019, primarily due to higher net sales, a favorable sales mix and expense control efforts.

Industry Market Conditions

Farm economics remain challenged across the major crop-producing regions, and low commodity prices and international trade tensions continue to weigh on farmer sentiment, resulting in decreased global equipment demand during 2019.

In North America, industry unit retail sales of utility and high horsepower tractors for 2019 decreased slightly compared to 2018.

Industry unit retail sales of combines for 2019 decreased approximately 6% compared to 2018.

A difficult growing season, as well as the uncertainty regarding the outcome of trade negotiations related to agricultural products and delayed market facilitation aid payments in the U.S., all contributed to weak demand in the large farm sector during 2019.

In Western Europe, industry unit retail sales of tractors for 2019 declined approximately 2% compared to 2018.

Industry unit retail sales of combines for 2019 decreased approximately 18% compared to 2018.

Industry demand trended progressively lower throughout 2019 due to the impact of lower wheat and milk prices as well as higher input costs for dairy producers.

During 2019, industry sales declines experienced in Italy, the United Kingdom and Germany were partially offset by industry sales growth in France and Finland.

In South America, industry unit retail sales of tractors for 2019 dropped approximately 16% compared to 2018.

Industry unit retail sales of combines for 2019 decreased approximately 5% compared to 2018.

Despite improved grain production in Brazil and Argentina, industry demand was negatively impacted by interruptions in the government subsidized finance program in Brazil and weak economic conditions in Argentina.

During 2020, the COVID-19 pandemic had a minimal impact on global crop production.

However, the consumption of grain for food, fuel and livestock feed was negatively impacted by the economic constraints caused by the pandemic in the first half of the year.

During the second half of 2020, grain consumption started to recover, consistent with improving economic activities and increased grain exports to China, thus reducing forecasts for ending grain inventories, and raising soft commodity prices.

Consequently, global industry demand for farm equipment was mixed during 2020, but improved in the second half of the year across major markets.

Future demand for agricultural equipment will be influenced by farm income, which is a function of commodity and protein prices, crop yields and government support.

In North America, industry unit retail sales of utility and high horsepower tractors increased approximately 10% in 2020 compared to 2019.

Industry unit retail sales of combines for 2020 was flat compared to 2019.

Retail sales growth was strongest for low horsepower tractors in 2020 compared to 2019, while retail sales of high horsepower tractors improved towards the end of 2020.

The rise in commodity prices, along with the U.S.

COVID-19 aid package for U.S.

farmers and livestock producers, as well as an extended fleet age, all contributed to the improved demand.

In Western Europe, industry unit retail sales of tractors for 2020 declined modestly compared to 2019.

Industry unit retail sales of combines for 2020 increased approximately 1% compared to 2019.

During 2020, industry sales were weakest in the markets of the United Kingdom and Scandinavia, partially offset by industry sales growth in Germany compared to 2019.

Industry sales declined due largely to production constraints in the first half of 2020 caused by the COVID-19 pandemic.

In addition, the impact of dry weather on certain grain markets was mostly offset by stronger grain export demand and supportive wheat prices.

European dairy and livestock fundamentals stabilized after weakening earlier in 2020.

In South America, industry unit retail sales of tractors for 2020 increased approximately 12% compared to 2019.

Industry unit retail sales of combines for 2020 increased approximately 20% compared to 2019.

Industry retail sales increased in Brazil and Argentina compared to the prior year, partially offset by weaker demand in most other South American markets.

Robust crop production in Brazil and Argentina, as well as favorable exchange rates, supported positive economics for farmers.

Results of Operations

Net sales for 2019 were $9,041.4 million compared to $9,352.0 million for 2018 , primarily as a result of sales declines in our South American and APA regions, partially offset by sales growth in our North American and EME regions, on a constant currency basis.

The following table sets forth, for the year ended December 31, 2019 , the impact to net sales of currency translation by geographical segment (in millions, except percentages):

Change due to Currency Translation

Net sales for 2020 were $9,149.7 million compared to $9,041.4 million for 2019, primarily as a result of improved market conditions in the second half of 2020 that offset reduced production volumes caused by component availability and other impacts of the COVID-19 pandemic in the first half of 2020.

In addition, the following table sets forth, for the year ended December 31, 2020, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

Change Change due to Currency Translation

2020 2019 $ % $ %

North America $ 2,175.0 $ 2,191.8 $ (16.8) (0.8) % $ (11.6) (0.5) %

South America 873.8 802.2 71.6 8.9 % (221.8) (27.6) %

Regionally, net sales in North America increased during 2019 compared to 2018 , with sales growth driven by a growth in net sales of low horsepower tractors, combines and parts, largely offset by a reduction in sales of protein production equipment and utility tractors.

In the EME region, net sales, excluding the negative impact of foreign currency translation, increased during 2019 compared to 2018 , primarily due to net sales growth in France, Germany and Italy, partially offset by declines in the United Kingdom and Eastern Europe.

Net sales decreased in South America in 2019 compared to 2018 , primarily due to weaker industry conditions resulting in sales declines in Brazil and other South American markets as well as the negative impact of foreign currency translation.

In the APA region, net sales decreased in 2019 compared to 2018 , primarily due to lower sales in China, Southeast Asia and Africa.

EME 5,366.9 5,328.8 38.1 0.7 % 58.5 1.1 %

APA 734.0 718.6 15.4 2.1 % 8.8 1.2 %

$ 9,149.7 $ 9,041.4 $ 108.3 1.2 % $ (166.1) (1.8) %

Regionally, net sales in North America were flat in 2020 compared to 2019, with growth in sales of high horsepower tractors, replacement parts and Precision Planting equipment, offset by a reduction in sales of grain and protein equipment as well as sprayers.

In the EME region, net sales were flat during 2020 compared to 2019, primarily due to increased sales in the second half of 2020 that helped to offset the lost production and supply chain constraints caused by the impacts from the COVID-19 pandemic experienced in the first half of 2020.

Declines in net sales in France, Scandinavia and Central Europe were mostly offset by growth in Germany and Eastern Europe.

Net sales increased in South America in 2020 compared to 2019, primarily due to sales increases in Brazil and Argentina, partially offset by decreased net sales in other South American markets.

In the APA region, net sales increased in 2020 compared to 2019, primarily due to net sales increases in Australia and China, partially offset by net sales declines in Africa and smaller Asian markets.

We estimate that worldwide average price increases were approximately 1.6% and 1.9% in 2020 and 2019, respectively.

Consolidated net sales of tractors and combines, which comprised approximately 61% of our net sales in 2019 , decreased approximately 3.7% in 2019 compared to 2018 .

Consolidated net sales of tractors and combines, which comprised approximately 60.6% of our net sales in 2020, increased approximately 1.3% in 2020 compared to 2019.

Unit sales of tractors and combines decreased approximately 1.1% during 2020 compared to 2019.

The unit sales decrease and the decrease in net sales can differ due to foreign currency translation, pricing and sales mix changes.

The difference between the unit sales change and the change in net sales was primarily the result of foreign currency translation, pricing and sales mix changes.

The following table sets forth, for the years ended December 31, 2020 and 2019, the percentage relationship to net sales of certain items included in our Consolidated Statements of Operations (in millions, except percentages):

Net Sales $ % of

Net Sales (1)

Gross profit $ 2,057.5 22.5 % $ 1,984.3 21.9 %

Selling, general and administrative expenses 1,001.5 10.9 % 1,040.3 11.5 %

Engineering expenses 342.6 3.7 % 343.4 3.8 %

Impairment charges

Amortization of intangibles 59.5 0.7 % 61.1 0.7 %

Impairment charges 20.0 0.2 % 176.6 2.0 %

Restructuring expenses 19.7 0.2 % 9.0 0.1 %

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(1) Rounding may impact summation of amounts.

Gross profit as a percentage of net sales increased during 2019 compared to 2018 , primarily due to the benefit of pricing in excess of material cost increases, partially offset by the cost impact of lower production levels.

Production hours decreased in both North America and South America, while production hours increased in Europe during 2019.

Overall, production hours decreased approximately 2% on a global basis during 2019 compared to 2018 .

Gross profit as a percentage of net sales increased during 2020 compared to 2019, primarily due to the benefits of improved pricing net of material costs and a favorable sales mix, partially offset by the impact of lower production volumes.

Production hours decreased across all regions during 2020.

Overall, global production hours decreased approximately 5% on a global basis during 2020 compared to 2019 primarily due to the suspension of production in our European and South American production sites in late March and throughout April due to component supply disruptions and government-mandated closures of facilities caused by the COVID-19 pandemic.

While production hours recovered during the third quarter of 2020 from second quarter disruptions, our fourth quarter levels were flat compared to 2019 in order to facilitate dealer and company inventory reductions.

The impacts of the COVID-19 pandemic continue to be unpredictable, and a range of factors could impact our future sales, including additional production and workforce constraints, government mandates and changing industry conditions impacted by commodity and protein prices, farmer sentiment and the other factors that we discuss under “Risk Factors.”

We recorded stock compensation expense of approximately $1.1 million and $1.7 million during 2020 and 2019, respectively, within cost of goods sold, as is more fully explained in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”

Selling, general and administrative expenses (“SG&A expenses”) and engineering expenses, as a percentage of net sales, were relatively flat during 2019 compared to 2018 .

Selling, general and administrative expenses (“SG&A expenses”) and engineering expenses, as a percentage of net sales, were lower during 2020 compared to 2019.

The reduction in SG&A expenses as a percentage of net sales for 2020 was achieved through actions such as suspended merit compensation increases, reduced field sales and marketing activities and lower travel expenses.

We recorded stock compensation expense of approximately $36.8 million and $40.0 million during 2020 and 2019, respectively, within SG&A expenses, as is more fully explained in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”

During 2020, we recorded a non-cash goodwill impairment charge of approximately $20.0 million related to a tillage and seeding equipment joint venture in which we own a 50% interest.

The impairment charge was recorded as “Impairment charges” within our Consolidated Statements of Operations, with an offsetting benefit of approximately $10.0 million included

within “Net loss attributable to noncontrolling interests.” During 2019, we recorded a non-cash goodwill impairment charge of approximately $173.6 million associated with our grain storage and protein production systems operations in Europe/Middle East, as well as an impairment of long-lived intangible assets of approximately $3.0 million associated with brand and product rationalization within our grain storage and protein production systems operations in North America.

These impairment charges are more fully described in “Critical Accounting Estimates - Goodwill, Other Intangible Assets and Long-Lived Assets” and Note 1 to our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”

We recorded restructuring expenses of approximately $19.7 million and $9.0 million during 2020 and 2019, respectively.

The restructuring expenses primarily related to severance and related costs associated with the rationalization of employee headcount at various manufacturing facilities and administrative offices located in Europe, South America, China, Africa and the United States during 2019, as well as the rationalization of our grain storage and protein production systems operations initiated in the fourth quarter of 2019.

In addition, we recorded a loss of approximately $2.1 million within "Restructuring expenses" associated with the sale of our 50% interest in our USC, LLC joint venture.

The restructuring expenses primarily related to severance and related costs associated with the rationalization of employee headcount at various manufacturing facilities and administrative offices located in the United States, Europe and South America during 2020, as well as the rationalization of our grain storage and protein production systems operations.

In addition, during 2019 we recorded a loss of approximately $2.1 million within “Restructuring expenses” associated with the sale of our 50% interest in our USC, LLC joint venture.

See Note 2 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information.

During the three months ended December 31, 2019, we recorded non-cash goodwill and other intangible asset impairment charges of approximately $173.6 million associated with our grain storage and protein production systems operations in Europe/Middle East, as well as the impairment of long-lived intangible assets of approximately $3.0 million associated with brand and product rationalization within our grain storage and protein production systems operations in North

Interest expense, net was $15.0 million for 2020 compared to $19.9 million for 2019.

The decline was primarily the result of debt extinguishment costs incurred in 2018 associated with debt refinancings completed during 2018 that included the replacement of higher interest-bearing debt with lower interest-bearing debt.

During 2018, we repurchased approximately $300.0 million of our outstanding 5 7 / 8 % senior notes.

The repurchase resulted in a loss on extinguishment of debt of approximately $24.5 million, including associated fees, offset by approximately $4.7 million of accelerated amortization of a deferred gain related to a terminated interest rate swap instrument associated with the senior notes.

In addition, we repaid our outstanding term loan under our former revolving credit and term loan facility.

We recorded approximately $0.7 million associated with the write-off of deferred debt issuance costs and a loss of approximately $3.9 million from a terminated interest rate swap instrument related to the term loan.

See “Liquidity and Capital Resources” for further information on our available funding.

Other expense, net was $22.7 million in 2020 compared to $67.1 million in 2019.

Losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil, were approximately $42.4 million and $36.0 million in 2019 and 2018 , respectively.

Other expense, net for 2018 also included higher foreign exchanges losses, primarily associated with the significant devaluation of the Argentine peso.

We have a minority equity interest in Tractors and Farm Equipment Limited (“TAFE”).

During 2020, TAFE repurchased a portion of its common stock from us resulting in a gain of approximately $32.5 million recorded within “Other expense, net.” See Note 13 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information.

In addition, losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil, were approximately $24.1 million and $42.4 million in 2020 and 2019, respectively.

The decrease in losses was primarily a result of lower accounts receivable balances and reduced interest rates in 2020 as compared to 2019.

We recorded an income tax provision of $187.7 million in 2020 compared to $180.8 million in 2019.

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At December 31, 2020, we had total valuation allowances as an offset to our gross deferred tax assets of approximately $181.0 million.

This valuation allowance included allowances primarily against net operating loss carryforwards in Brazil, China, Hungary, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes primarily in the U.S.

At December 31, 2018 , we had total valuation allowances as an offset to the gross deferred tax assets of approximately $83.9 million , primarily related to net operating loss carryforwards in Brazil, China, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes in the U.S.

This valuation allowance included allowances primarily against net operating loss carryforwards in Brazil, China, Hungary and the United Kingdom, as well as allowances against our net deferred taxes primarily in the U.S.

At December 31, 2019, we had total valuation allowances as an offset to the gross deferred tax assets of approximately $169.1 million, primarily related to net operating loss carryforwards in Brazil, China, Hungary, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes in the U.S.

Realization of the net deferred tax assets as of December 31, 2020 will depend on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities.

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A comparison of the results of operations for 2019 versus that of 2018 was included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Quarterly Results

The following table presents unaudited interim operating results.

We believe that the following information includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our results of operations for the periods presented.

Three Months Ended

(in millions, except per share data)

Income (loss) from operations

Net income (loss)

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to AGCO Corporation and subsidiaries

Net income (loss) per common share attributable to AGCO Corporation and subsidiaries — diluted

Income from operations

Net (income) loss attributable to noncontrolling interests

Net income attributable to AGCO Corporation and subsidiaries

Net income per common share attributable to AGCO Corporation and subsidiaries — diluted

AGCO Finance Joint Ventures

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We do not guarantee the debt obligations of the joint ventures.

In the United States and Canada, we guarantee certain minimum residual values to those joint ventures upon expiration of certain eligible leases between the finance joint ventures and end users.

See “Commitments and Off-Balance Sheet Arrangements” and Note 11 to our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information.

As of December 31, 2020, our capital investment in the finance joint ventures, which is included in “Investment in affiliates” on our Consolidated Balance Sheets, was approximately $395.3 million compared to $339.0 million as of December 31, 2019.

The total finance portfolio in our finance joint ventures was approximately $10.7 billion and $9.6 billion as of December 31, 2020 and 2019, respectively.

The total finance portfolio as of December 31, 2019 and 2018 included approximately $7.7 billion and $7.2 billion , respectively, of retail receivables and $1.9 billion and $1.6 billion , respectively, of wholesale receivables from AGCO dealers.

The total finance portfolio as of December 31, 2020 and 2019 included approximately $8.8 billion and $7.7 billion, respectively, of retail receivables and $1.9 billion of wholesale receivables from AGCO dealers as of both December 31, 2020 and 2019.

The wholesale receivables either were sold directly to AGCO Finance without recourse from our operating companies, or AGCO Finance provided the financing directly to the dealers.

During 2019 and 2018 , we did not make additional investments in our finance joint ventures.

During 2019 and 2018 , we received dividends of approximately $40.5 million and $29.4 million , respectively, from certain of our finance joint ventures.

Our share in the earnings of the finance joint ventures, included in “Equity in net earnings of affiliates” within our Consolidated Statements of Operations, was $41.5 million and $34.7 million for the years ended December 31, 2019 and 2018 , respectively, with the increase in earnings primarily due to higher income in our European, Brazilian and U.S.

finance joint ventures during 2019 as compared to 2018 .

During 2020, we made approximately $1.9 million of additional investments in our finance joint ventures, and there were no dividends paid from our finance joint ventures.

Our finance joint ventures were restricted from paying dividends to us during 2020 as a result of COVID-19 pandemic banking regulations.

During 2019, we did not make additional investments in our finance joint ventures, and we received dividends of approximately $40.5 million from certain of our finance joint ventures.

Our share in the earnings of the finance joint ventures, included in “Equity in net earnings of affiliates” within our Consolidated Statements of Operations, was $45.0 million and $41.5 million for the years ended December 31, 2020 and 2019, respectively, with the increase in earnings primarily due to higher income in our U.S.

and Canadian finance joint ventures during 2020 as compared to 2019, partially offset by lower income in certain of our European finance joint ventures.

Our operations are subject to the cyclical nature of the agricultural industry.

Sales of our equipment are affected by, among other things, changes in net cash farm income, farm land values, weather conditions, the demand for agricultural commodities, commodity prices and general economic conditions.

Our net sales are expected to increase in 2020 compared to 2019 , resulting from relatively flat net sales volumes and positive pricing impacts.

Gross and operating margins are expected to improve from 2019 levels, reflecting the positive impact of pricing and cost control initiatives.

This assumes that the coronavirus outbreak does not significantly impact our business.

See, “Risk Factors.”

Our net sales are expected to increase in 2021 compared to 2020, resulting from improved forecasted industry demand, as well as positive pricing and foreign currency impacts.

Gross and operating margins are expected to improve from 2020 levels, reflecting increased net sales and production volumes.

Engineering expenses and other technology investments are expected to increase in 2021 compared to 2020 to support our product development plans as well as our precision agriculture and digital initiatives.

Although not contemplated in the above outlook, the COVID-19 pandemic may continue to negatively impact our operations.

Additional factory closures or other production constraints as a result of government mandates, supply chain disruptions or other factors could significantly negatively impact our net sales and earnings.

In addition, a considerable amount of uncertainty exists for 2021 relating to industry demand and other macroeconomic impacts of the COVID-19 pandemic.

Refer to “Risk Factors” for further discussion of the COVID-19 pandemic.

Liquidity and Capital Resources

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December 31, 2020

Credit facility, expires 2023 $ 277.9

1.002% Senior term loan due 2025 (1)

Senior term loan due 2022 (1)

Credit facility, expires 2023

Senior term loans due between 2021 and 2028 (1)

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(1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $2.5 million.

Interest on U.S.

dollar borrowings under our credit facility is calculated based upon LIBOR.

In the event that LIBOR is no longer published, interest will be calculated based upon a base rate.

The credit facility also provides for an expedited amendment process once a replacement for LIBOR is established.

On April 9, 2020, we entered into an amendment to our $800.0 million multi-currency revolving credit facility to include incremental term loans (“2020 term loans”) that allow us to borrow an aggregate principal amount of €235.0 million and $267.5 million, respectively (or an aggregate of approximately $555.8 million as of December 31, 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 our option, at either (1) LIBOR plus a margin based on our 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 our credit rating ranging from 0.125% to 1.375% until April 8, 2021 and ranging from 0.375% to 1.375% thereafter.

On April 15, 2020, we borrowed €117.5 million and $133.8 million (or an aggregate of approximately $277.9 million as of December 31, 2020) of 2020 term loans.

We simultaneously repaid €100.0 million (or approximately $108.7 million) of our revolving credit facility from the borrowings received.

There were no other borrowings on the 2020 term loans subsequent to the initial borrowings in April 2020.

As of December 31, 2020, we had the ability to borrow approximately $277.9 million of 2020 term loans.

Refer to Note 6 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information regarding our current facilities.

In October 2018, we 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 our option, at either (1) LIBOR plus a margin ranging from 0.875% to 1.875% based on our 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 our credit rating.

As of December 31, 2020, we had no outstanding borrowings under the revolving credit facility, and the ability to borrow was approximately $800.0 million under the revolving credit facility.

In December 2018, we entered into a term loan agreement with the European Investment Bank (“EIB”), which provided us with the ability to borrow up to €250.0 million.

The €250.0 million (or approximately $306.7 million as of December 31, 2020) of funding was received on January 25, 2019 with a maturity date of January 24, 2025.

We have the ability to prepay the term loan before its maturity date.

We are 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.

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In October 2018, we entered into a term loan agreement with Rabobank in the amount of €150.0 million (or approximately $184.0 million as of December 31, 2020).

We have the ability to prepay the term loan before its maturity date on October 28, 2022.

We are permitted to prepay the term loan before its maturity date on October 28, 2022.

Interest is payable on the term loan quarterly in arrears at an annual rate, equal to the EURIBOR plus a margin ranging from 0.875% to 1.875% based on our credit rating.

In October 2018, we 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 our option, at either (1) LIBOR plus a margin ranging from 0.875% to 1.875% based on our 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 our credit rating.

In October 2016, we borrowed an aggregate amount of €375.0 million through a group of seven related term loan agreements.

These agreements had maturities ranging from October 2019 to October 2026.

In October 2019, we repaid an aggregate amount of €56.0 million (or approximately $61.1 million ) of these term loans.

In October 2019, we repaid an aggregate amount of €56.0 million (or approximately $61.1 million) of two of these term loans.

In August 2018, we borrowed an additional aggregate amount of indebtedness of €338.0 million through a group of another seven related term loan agreements.

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The provisions of the term loan agreements are identical in nature with the exception of interest rate terms and maturities.

In aggregate, as of

December 31, 2019 , we have indebtedness of approximately €657.0 million (or approximately $736.2 million ) under a total group of twelve term loan agreements with remaining maturities ranging from August 2021 to August 2028.

In aggregate, as of December 31, 2020, we have indebtedness of approximately €657.0 million (or approximately $806.0 million as of December 31, 2020) under a total group of 12 term loan agreements with remaining maturities ranging from August 2021 to August 2028.

Four of these term loan agreements in the aggregate of €264.0 million (or approximately $323.8 million gross of debt issuance costs as of December 31, 2020) will mature in August and October 2021.

As of December 31, 2020 and 2019, we had short-term borrowings due within one year of approximately $33.8 million and $150.5 million, respectively.

Interest on U.S.

dollar borrowings under our 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 either a base rate or the secured overnight financing rate depending on cost.

The credit facility and 2020 term loans also provide for an expedited amendment process once a replacement for LIBOR is established.

We are in compliance with the financial covenants contained in these facilities and expect to continue to maintain such compliance.

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These arrangements also are accounted for as off-balance sheet transactions.

In order to efficiently manage our liquidity, we generally pay vendors in accordance with negotiated terms.

To enable vendors to obtain payment in advance of our payment due dates to them, we have established programs in certain markets with financial institutions under which the vendors have the option to be paid by the financial institutions earlier than the payment due dates.

When vendors receive early payments they receive discounted amounts and we then pay the financial institutions the face amounts of the invoices on the payment due dates.

We do not reimburse vendors for any costs they incur for participation in the programs.

Amounts owed to the financial institutions are presented as “Accounts payable” in our Consolidated Balance Sheets.

Should we not be able to negotiate extended payment terms with our vendors, or should financial institutions no longer be willing to participate in early payment programs with us, we would expect to have sufficient liquidity to timely pay our vendors without any material impact on us or our financial position.

Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness and stockholders’ equity, was 34.8% at December 31, 2020 compared to 30.4% at December 31, 2019.

Cash flows provided by operating activities were $695.9 million during 2019 compared to $595.9 million during 2018 and $577.6 million during 2017 .

The increase during 2019 was primarily due to a source of cash in operating assets and liabilities in 2019 compared to a use of cash in 2018.

In addition, we received an increased amount of dividends from our finance joint ventures in 2019 as compared to 2018.

Cash flows provided by operating activities were approximately $896.5 million during 2020 compared to approximately $695.9 million during 2019.

The increase during 2020 was primarily due to an increased source of cash derived from operating assets and liabilities in 2020 compared to 2019.

The reduction of inventory levels during 2020 resulted in a source of cash flow of approximately $119.7 million in 2020.

Our working capital requirements are seasonal, with investments in working capital typically building in the first half of the year and then reducing in the second half of the year.

We had $1,005.6 million in working capital at December 31, 2020, as compared with $844.6 million at December 31, 2019.

Accounts receivable and inventories, combined, at December 31, 2019 were $90.2 million higher than at December 31, 2018 .

Inventories as of December 31, 2019 included stock related to the transition of production to products meeting new emissions standards in Europe.

Weaker market conditions in many key markets contributed to lower net sales and resulting higher finished goods inventories as compared to 2018.

Accounts receivable and inventories, combined, at December 31, 2020 were approximately $48.8 million lower than at December 31, 2019, primarily due to inventory reduction efforts during the course of 2020.

Share Repurchase Program

During 2019 and 2018 , we repurchased 1,794,256 and 3,120,184 shares of our common stock, respectively, for approximately $130.0 million and $184.3 million , respectively, either through Accelerated Share Repurchase (“ASR”) agreements with financial institutions or through open market transactions.

During the three months ended March 31, 2020 and during 2019, we repurchased 970,141 and 1,794,256 shares of our common stock, respectively, for approximately $55.0 million and $130.0 million, respectively, either through accelerated share repurchase agreements with financial institutions or through open market transactions.

All shares received 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 our Consolidated Balance Sheets.

In February 2020, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $25.0 million of shares of our common stock.

We received approximately 297,000 shares to date in this transaction.

Upon settlement of the ASR, we may be entitled to receive additional shares of common stock or, under certain circumstances, be required to remit a settlement amount.

We expect that the additional shares will be received by us upon final settlement of our current ASR agreement, which expires during the second quarter of 2020.

We suspended share repurchases subsequent to March 31, 2020 in light of the COVID-19 pandemic and have not repurchased shares since that period.

Contractual Obligations

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Payments Due By Period

2025 and Beyond

Total 2021 2022 to 2023 2024 to 2025 2026 and Beyond

Indebtedness (1)

$ 1,614.1 $ 355.1 $ 769.3 $ 386.8 $ 102.9

Interest payments related to indebtedness (2)

50.6 16.8 21.2 9.4 3.2

Capital lease obligations 16.3 3.3 2.5 1.4 9.1

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Other short-term and long-term obligations (3)

337.5 95.8 161.3 31.2 49.2

Total contractual cash obligations $ 2,326.3 $ 624.8 $ 1,031.1 $ 461.5 $ 208.9

Amount of Commitment Expiration Per Period

2025 and Beyond

Total 2021 2022 to 2023 2024 to 2025 2026 and Beyond

Standby letters of credit and similar instruments $ 14.4 $ 14.4 $ — $ — $ —

Guarantees 103.3 13.8 43.9 43.3 2.3

Total commercial commitments and letters of credit $ 117.7 $ 28.2 $ 43.9 $ 43.3 $ 2.3

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Indebtedness amounts reflect the principal amount of our senior term loan, senior notes and credit facility.

(1) Indebtedness amounts reflect the principal amount of our senior term loan, senior notes, credit facility and certain short-term borrowings, gross of any debt issuance costs.

(2) Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements.

Debt may be repaid sooner or later than such minimum maturity periods.

Indebtedness may be repaid sooner or later than such minimum maturity periods.

(3) Other short-term and long-term obligations include estimates of future minimum contribution requirements under our U.S.

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These estimates are based on current legislation in the countries we operate within and are subject to change.

Other short-term and long-term obligations also include income tax liabilities related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions.

Other short-term and long-term obligations also include income tax liabilities related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions, based on the years of statutory expiration.

The uncertain tax positions included above are gross of certain indirect favorable effects that relate to other tax jurisdictions.

Commitments and Off-Balance Sheet Arrangements

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We believe the credit risk associated with all of these guarantees is not material to our financial position or results of operations.

In addition, at December 31, 2019 , we had accrued approximately $18.9 million of outstanding guarantees of minimum residual values that may be owed to our finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users.

In addition, at December 31, 2020, we had accrued approximately $25.3 million of outstanding guarantees of residual values that may be owed to our finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users.

The maximum potential amount of future payments under the guarantee is approximately $85.4 million.

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The outstanding contracts as of December 31, 2020 range in maturity through December 2021.

We also had outstanding designated steel commodity contracts with a gross notional amount of approximately $14.7 million that range in maturity through May 2021.

See Note 10 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information.

As discussed in “Liquidity and Capital Resources,” we sell a majority of our wholesale accounts receivable in North America, Europe and Brazil to our U.S., Canadian, European and Brazilian finance joint ventures.

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Related Parties

In the ordinary course of business, the Company engages in transactions with related parties.

In the ordinary course of business, we engage in transactions with related parties.

See Note 13 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for information regarding related party transactions and their impact to our consolidated results of operations and financial position.

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Globally, reserves for incentive programs that will be paid in cash or credit memos, as is the case with most of our volume discount programs, as well as sales incentives associated with accounts receivable sold to our finance joint ventures, are recorded within “Accrued expenses” within our Consolidated Balance Sheets.

At December 31, 2019 , we had recorded an allowance for discounts and sales incentives of approximately $606.1 million that will be paid either through a reduction of future cash settlements of receivables and through credit memos

to our dealers or through reductions in retail financing rates paid to our finance joint ventures.

At December 31, 2020, we had recorded an allowance for discounts and sales incentives of approximately $595.8 million that will be paid either through a reduction of future cash settlements of receivables and through credit memos to our dealers or through reductions in retail financing rates paid to our finance joint ventures.

If we were to allow an additional 1% of sales incentives and discounts at the time of retail sale for those sales subject to such discount programs, our reserve would increase by approximately $25.7 million as of December 31, 2020.

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Our tax provision and effective tax rate are impacted by the differing tax rates of the various tax jurisdictions in which we operate, permanent differences for items treated differently for financial accounting and income tax purposes, and for losses in jurisdictions where no income tax benefit is recorded.

During the third quarter of 2019, we recorded a non-cash adjustment to establish a valuation allowance against our Brazilian net deferred income tax assets of approximately $53.7 million.

During the three months ended September 30, 2019, we recorded a non-cash adjustment to establish a valuation allowance against our Brazilian net deferred income tax assets of approximately $53.7 million.

In addition, we maintain a valuation allowance to fully reserve against our 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.

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.

We assessed the likelihood that our deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies and determined that the adjustment to the valuation allowance was appropriate.

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We believe it is more likely than not that we will realize our remaining net deferred tax assets, net of the valuation allowance, in future years.

Swiss tax reform was enacted during 2019 and eliminates certain preferential tax items as well as implements new tax rates at both the federal and cantonal levels.

During the three months ended December 31, 2019 , the Company recognized a one-time income tax gain of approximately $21.8 million associated with the changing of Swiss federal and cantonal tax rates as well as recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of our Swiss subsidiary's assets.

Swiss tax reform was enacted during 2019 and eliminated certain preferential tax items as well as implemented new tax rates at both the federal and cantonal levels.

During the three months ended December 31, 2019, we recognized a one-time income tax gain of approximately $21.8 million associated with the changing of Swiss federal and cantonal tax rates as well as recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of our Swiss subsidiary’s assets.

On December 22, 2017, The Tax Cuts and Jobs Act (“the 2017 Tax Act”) was enacted in the United States.

During the three months ended December 31, 2017, we recorded a tax provision of approximately $42.0 million in accordance with Staff Accounting Bulletin No.

118, which provided SEC Staff guidance for the application of Accounting Standards Codification (“ASC”) 740 “Income Taxes,” in the reporting period in which the 2017 Tax Act was enacted.

The $42.0 million tax provision included a provisional income tax charge related to a one-time transition tax associated with the mandatory deemed repatriation of unremitted foreign earnings.

The tax provision also included a provisional income tax charge associated with the income tax consequences related to the expected future repatriation of certain underlying foreign earnings, as historically, we have considered them to be permanently reinvested.

The remaining balance of the tax provision primarily related to the remeasurement of certain net deferred tax assets using the lower enacted U.S.

Corporate tax rate (from 35% to 21%), as well as other miscellaneous related impacts.

During the three months ended December 31, 2018, we finalized our calculations related to the 2017 Tax Act and recorded an income tax benefit of approximately $8.4 million .

The primary provisions of the 2017 Tax Act affecting us in 2018 were a reduction to the corporate tax rate from 35% to 21% and a transition from a worldwide corporate tax system to a primarily territorial tax system.

Beginning in 2018, we were also subject to additional provisions of the 2017 Tax Act.

The main provisions include a tax on global intangible low-taxed income (“GILTI”) and a limitation on the deductibility of certain executive compensation.

The combined effect of these and other provisions did not have a material effect on our provision for income taxes in 2020 or 2019.

During the three months ended December 31, 2018, we finalized our calculations related to the 2017 Tax Act’s one-time transition tax associated with the mandatory deemed repatriation of unremitted foreign earnings, and recorded an income tax benefit of approximately $8.4 million.

At December 31, 2020 and 2019, we had gross deferred tax assets of $360.9 million and $396.0 million, respectively, including $62.9 million and $72.0 million, respectively, related to net operating loss carryforwards.

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The assumptions used in developing the required estimates include, but are not limited to, the following key factors:

• Discount rates

• Salary growth

• Expected return on plan assets

• Retirement rates and ages

• Mortality rates

• Discount rates • Inflation

• Salary growth • Expected return on plan assets

• Retirement rates and ages • Mortality rates

For the years ended December 31, 2020, 2019 and 2018, we used a globally consistent methodology to set the discount rate in the countries where our largest benefit obligations exist.

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In the United Kingdom and the Euro Zone, the discount rate is derived using a “yield curve approach,” in which an individual spot rate, or zero coupon bond yield, for each future annual period is developed to discount each future benefit payment and, thereby, determine the present value of all future payments.

The Company uses a spot yield curve to determine the discount rate applicable in the United Kingdom to measure the U.K.

We use a spot yield curve to determine the discount rate applicable in the United Kingdom to measure the U.K.

pension plan’s service cost and interest cost.

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defined benefit pension plan was increased by 25 basis points, our projected benefit obligation would have decreased by approximately $27.8 million at December 31, 2020, and our 2021 pension expense would decrease by approximately $0.2 million.

In addition, if the expected long-term rate of return on plan assets related to our U.K.

In addition, if the expected

long-term rate of return on plan assets related to our U.K.

defined benefit pension plan was increased or decreased by 25 basis points, our 2021 pension expense would decrease or increase by approximately $1.8 million each, respectively.

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As of December 31, 2020, the average amortization periods were as follows:

Average amortization period of losses related to defined benefit pension plans

Average amortization period of losses related to defined benefit pension plans 7 years 14 years 19 years

Unrecognized prior service cost related to our defined benefit pension plans was $20.1 million as of December 31, 2020 compared to $22.5 million as of December 31, 2019.

The increase in the unrecognized prior service cost between years is due primarily to a plan amendment related to our ENPP.

The decrease in the unrecognized prior service cost between years is due primarily to the amortization of unrecognized prior service cost related to prior plan amendments.

The amortization of unrecognized prior service cost during 2020 also included the initial amortization impacts of an amendment to our ENPP during 2019.

As of December 31, 2020, our unfunded or underfunded obligations related to our defined benefit pension plans and ENPP were approximately $225.1 million, primarily related to our defined benefit pension plans in Europe and the United States.

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If the fair value of the reporting unit exceeds its carrying value of net assets, the goodwill is not considered impaired.

If the carrying value of net assets is higher than the fair value of the reporting unit, the impairment charge is the amount by which the carrying value exceeds the reporting unit’s fair value.

We utilize a combination of valuation techniques, including a discounted cash flow approach and a market multiple approach, when making quantitative goodwill assessments.

If the carrying value of net assets is higher than the fair value of the reporting unit, an impairment charge is recorded in the amount by which the carrying value exceeds the reporting unit’s fair value.

We utilize a combination of valuation techniques, including an income approach, whereby the present value of future expected operating net cash flows are calculated using a discount rate;

and a guideline public company method, whereby EBITDA and revenue multiples are derived from the market prices of stocks of companies that are engaged in the same or

similar lines of business and that are actively traded on a free and open market.

Assumptions included in these approaches can positively and negatively impact the results of our assessments such as interest rates, sales and margin growth rates, tax rates, cost structures, market share, pricing, capital expenditures, working capital levels and the use of control premiums.

We review our long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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These assumptions require significant judgments on our part, and the conclusions that we reach could vary significantly based upon these judgments.

The COVID-19 pandemic has adversely impacted the global economy as a whole.

Based on current macroeconomic conditions, we assessed our goodwill and other intangible assets for indications of impairment as of March 31, 2020, June 30, 2020 and September 30, 2020.

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

We consolidate the reporting unit as we were determined to be the primary beneficiary of the joint venture.

Deteriorating market conditions for the products the joint venture sells were negatively impacted by the COVID-19 pandemic in the second quarter, greater than initially expected.

As a result, 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 our Consolidated Statements of Operations, with an offsetting benefit of approximately $10.0 million included within “Net loss attributable to noncontrolling interests.”

The results of our goodwill and long-lived assets impairment analyses conducted as of October 1, 2020 indicated that no other indicators of impairment existed and no reduction in the carrying amount of goodwill and long-lived assets was required related to our other reporting units.

Our goodwill impairment analysis conducted as of October 1, 2020 also indicated that the fair value in excess of the carrying value of our grain and protein production systems Europe/Middle East and North America reporting units was approximately 15% and approximately 19%, respectively.

In response to weakening market conditions and resulting operating results, new management was put in place over the global grain and protein systems productions systems business in 2019, and from that time, full strategic reviews and operating decisions of the business have been conducted and launched, including several restructuring initiatives aimed at lowering operating costs, improving product portfolios and enhancing customer support, which management believes will result in improved long-term operating results.

If market conditions and our overall results do not improve, we may incur an impairment charge related to this reporting units in the future under the one-step process described above.

The goodwill associated with these reporting units as of December 31, 2020 was approximately $64.0 million and $523.0 million, respectively

Our goodwill impairment analysis conducted as of October 1, 2019 indicated that the carrying value of the net assets of our grain storage and protein production systems business in Europe/Middle East was in excess of the fair value of the reporting unit, and therefore, we recorded a non-cash impairment charge of approximately $173.6 million within “Impairment charges” in our Consolidated Statements of Operations.

In response to weakening market conditions and resulting operating results, new management was put in place over the grain storage and protein productions systems business, tasked with conducting a full strategic review of the business, including that of the Europe/Middle East reporting unit.

That full strategic review was completed in the fourth quarter of 2019, along with revised forecasts to include updated market conditions and strategic operating decisions.

This impairment charge was a substantial portion of the reporting unit's goodwill balance as of October 1, 2019.

This impairment charge was a substantial portion of the reporting unit’s goodwill balance.

During the three months ended December 31, 2019, we also recorded a non-cash impairment charge of approximately $3.0 million within “Impairment charges” in our Consolidated Statements of Operations.

The impairment charge related to certain long-lived intangible assets associated with our grain storage and protein production systems operations within North America due to the discontinuation of a certain brand name and related products and customers.

Finally, our goodwill impairment analysis conducted as of October 1, 2019 also indicated that the fair value in excess of the carrying value of one of our smaller reporting units was less than 10%, due to deteriorating market conditions for the products it sells.

If market conditions and our overall results do not improve, we may incur an impairment charge related to this reporting unit in the future under the one-step process described above.

The goodwill associated with this reporting unit as of December 31, 2019 was approximately $20.0 million.

The results of our goodwill and long-lived assets impairment analyses conducted as of October 1, 2018 and 2017 indicated that no reduction in the carrying amount of goodwill and long-lived assets was required.

The results of our goodwill and long-lived assets impairment analyses conducted as of October 1, 2018 indicated that no reduction in the carrying amount of goodwill and long-lived assets was required.

Numerous facts and circumstances are considered when evaluating the carrying amount of our goodwill.

The fair value of a reporting unit is impacted by the reporting unit’s expected financial performance, which is dependent upon the agricultural industry and other factors that could adversely affect the agricultural industry, including but not limited to, declines in the general economy, increases in farm input costs, weather conditions, lower commodity prices and changes in the availability of credit.

The estimated fair value of the individual reporting units is assessed for reasonableness by reviewing a variety of indicators evaluated over a reasonable period of time.

As of December 31, 2019 , we had approximately $1,298.3 million of goodwill, after the goodwill impairment charge we recorded during the three months ended December 31, 2019 .

As of December 31, 2020, we had approximately $1,306.5 million of goodwill.

While our annual impairment testing in 2020 supported the carrying amount of this goodwill, we may be required to re-evaluate the carrying amount in future periods, thus utilizing different assumptions that reflect the then current market conditions and expectations, and, therefore, we could conclude that an impairment has occurred.

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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-K

Item 5. Market for Registrant’s Common Equity