AGCO CORP /DE 10-K

Item 8. Financial Statements and Supplementary Data The following Consolidated Financial Statements of AGCO and its subsidiaries for each of the years in the three-year period ended December 31, 2020 are included in this Item: Page Report of Independent Registered Public Accounting Firm 43 Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 46 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018 47 Consolidated Balance Sheets as of December 31, 2020 and 2019 48 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018 49 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 50 Notes to Consolidated Financial Statements 51 The information under the heading “Quarterly Results” of Item 7 of this Form 10-K is incorporated herein by reference. 42 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors AGCO Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of AGCO Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II — Valuation and Qualifying Accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification 842, Leases. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 43 Table of Contents Assessment of the reserve and allowance for volume discount and sales incentive programs in certain geographic regions As discussed in Note 1 to the consolidated financial statements, the Company provides various volume discount and sales incentive programs with respect to its products. As of December 31, 2020, the Company had accrued volume discounts and sales incentives of approximately $582.9 million and an allowance for sales incentive discounts of approximately $12.9 million. Sales incentive programs include reductions in invoice prices, reductions in retail financial rates, dealer commissions and dealer incentive allowances. Volume discounts and sales incentives are recorded at the time of sale as a reduction of revenue using the expected value method. We identified the assessment of the reserve and allowance for volume discount and sales incentive programs in certain geographic regions as a critical audit matter. Auditor judgment was required to evaluate certain assumptions which had a higher degree of measurement uncertainty. Significant assumptions included estimated incentive rates, which were the estimated rates at which programs were applied to eligible products, and estimated achievement by dealers of specified cumulative targeted purchase levels. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s reserve and allowance for volume discount and sales incentive process, including controls related to the development of the significant assumptions. For certain volume discount and sales incentive programs, we compared the program details to dealer communications and the significant assumptions to historical results for similar programs. We assessed the Company’s historical ability to estimate significant assumptions by comparing the prior year estimated amounts to actual discounts and sales incentives realized by the customers. We evaluated the significant assumptions by comparing them to actual results, including the results of transactions occurring after year-end. Assessment of gross unrecognized income tax benefits in certain jurisdictions As discussed in Note 5 to the consolidated financial statements, the Company has recorded a liability for gross unrecognized income tax benefits of approximately $227.9 million as of December 31, 2020. The Company recognizes income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. We identified the assessment of gross unrecognized income tax benefits in certain jurisdictions as a critical audit matter. Complex auditor judgment and specialized skills were required in evaluating the Company’s interpretation and application of tax laws and the estimate of the amount of tax benefits expected to be realized. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s gross unrecognized income tax benefit process. This included controls related to the Company’s consideration of information that could affect the recognition or measurement of income tax benefits from uncertain tax positions and the interpretation and application of tax laws. We involved tax professionals with specialized skills and knowledge, who assisted in: • inspecting correspondence and assessments from the taxing authorities • evaluating the Company’s interpretation and application of tax laws • developing an expectation of the Company’s tax positions and comparing the results to the Company’s assessment Assessment of goodwill impairment for certain reporting units As discussed in Note 1 to the consolidated financial statements, the Company evaluates goodwill for impairment annually as of October 1 and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. As of December 31, 2020, the Company has $1,306.5 million of goodwill. The Company performs its goodwill impairment analyses using either a qualitative or a quantitative assessment. The fair values of the reporting units are determined based on a combination of valuation techniques, including an income approach and guideline public company method. Based on the Company’s analysis, the Company determined that the fair values of certain reporting units were in excess of the carrying values and therefore did not record any goodwill impairment for these reporting units. 44 Table of Contents We identified the assessment of goodwill impairment for certain reporting units as a critical audit matter because a high degree of subjective auditor judgment was required to evaluate the fair value of the reporting units. The fair value model used the following significant assumptions for which there was limited observable market information: forecasted revenue growth and discount rates. The determined fair values were sensitive to changes in these significant assumptions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment process, including controls over the significant assumptions. We performed sensitivity analyses over the significant assumptions to assess their impact on the Company’s fair value determination. We compared the Company’s forecasted revenue growth used in the valuation model against underlying business strategies and growth plans. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to forecast. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in: • comparing the Company’s discount rate inputs to publicly available information for comparable entities to test the selected discount rate • recomputing the estimate of fair value for the reporting units using the Company’s significant assumptions and comparing the result to the Company’s fair value estimate /s/ KPMG LLP We have served as the Company’s auditor since 2002. Atlanta, Georgia February 26, 2021 45 Table of Contents AGCO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Years Ended December 31, 2020 2019 2018 Net sales $ 9,149.7 $ 9,041.4 $ 9,352.0 Cost of goods sold 7,092.2 7,057.1 7,355.3 Gross profit 2,057.5 1,984.3 1,996.7 Operating expenses: Selling, general and administrative expenses 1,001.5 1,040.3 1,069.4 Engineering expenses 342.6 343.4 355.2 Amortization of intangibles 59.5 61.1 64.7 Impairment charges 20.0 176.6 — Restructuring expenses 19.7 9.0 12.0 Bad debt expense 14.5 5.8 6.4 Income from operations 599.7 348.1 489.0 Interest expense, net 15.0 19.9 53.8 Other expense, net 22.7 67.1 74.9 Income before income taxes and equity in net earnings of affiliates 562.0 261.1 360.3 Income tax provision 187.7 180.8 110.9 Income before equity in net earnings of affiliates 374.3 80.3 249.4 Equity in net earnings of affiliates 45.5 42.5 34.3 Net income 419.8 122.8 283.7 Net loss attributable to noncontrolling interests 7.3 2.4 1.8 Net income attributable to AGCO Corporation and subsidiaries $ 427.1 $ 125.2 $ 285.5 Net income per common share attributable to AGCO Corporation and subsidiaries: Basic $ 5.69 $ 1.64 $ 3.62 Diluted $ 5.65 $ 1.63 $ 3.58 Cash dividends declared and paid per common share $ 0.63 $ 0.63 $ 0.60 Weighted average number of common and common equivalent shares outstanding: Basic 75.0 76.2 78.8 Diluted 75.6 77.0 79.7 See accompanying notes to Consolidated Financial Statements. 46 Table of Contents AGCO CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) Years Ended December 31, 2020 2019 2018 Net income $ 419.8 $ 122.8 $ 283.7 Other comprehensive loss, net of reclassification adjustments: Defined benefit pension plans, net of taxes: Prior service credit (cost) arising during the year 0.3 ( 4.7 ) ( 7.0 ) Net loss recognized due to settlement 0.3 0.6 0.9 Net actuarial loss arising during the year ( 32.7 ) ( 23.3 ) ( 4.2 ) Amortization of prior service cost included in net periodic pension cost 2.1 1.6 1.3 Amortization of net actuarial losses included in net periodic pension cost 13.1 11.8 11.7 Derivative adjustments: Net changes in fair value of derivatives 5.1 ( 2.6 ) ( 1.1 ) Net (gains) losses reclassified from accumulated other comprehensive loss into income ( 6.3 ) ( 0.1 ) 7.2 Foreign currency translation adjustments ( 201.8 ) ( 20.6 ) ( 206.8 ) Other comprehensive loss, net of reclassification adjustments ( 219.9 ) ( 37.3 ) ( 198.0 ) Comprehensive income 199.9 85.5 85.7 Comprehensive loss (income) attributable to noncontrolling interests 11.6 ( 0.1 ) 6.0 Comprehensive income attributable to AGCO Corporation and subsidiaries $ 211.5 $ 85.4 $ 91.7 See accompanying notes to Consolidated Financial Statements. 47 Table of Contents AGCO CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except share amounts) December 31, 2020 December 31, 2019 ASSETS Current Assets: Cash and cash equivalents $ 1,119.1 $ 432.8 Accounts and notes receivable, net 856.0 800.5 Inventories, net 1,974.4 2,078.7 Other current assets 418.9 417.1 Total current assets 4,368.4 3,729.1 Property, plant and equipment, net 1,508.5 1,416.3 Right-of-use lease assets 165.1 187.3 Investment in affiliates 442.7 380.2 Deferred tax assets 77.6 93.8 Other assets 179.8 153.0 Intangible assets, net 455.6 501.7 Goodwill 1,306.5 1,298.3 Total assets $ 8,504.2 $ 7,759.7 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of long-term debt $ 325.9 $ 2.9 Short-term borrowings 33.8 150.5 Accounts payable 855.1 914.8 Accrued expenses 1,916.7 1,654.2 Other current liabilities 231.3 162.1 Total current liabilities 3,362.8 2,884.5 Long-term debt, less current portion and debt issuance costs 1,256.7 1,191.8 Operating lease liabilities 125.9 148.6 Pensions and postretirement health care benefits 253.4 232.1 Deferred tax liabilities 112.4 107.0 Other noncurrent liabilities 375.0 288.7 Total liabilities 5,486.2 4,852.7 Commitments and contingencies (Note 11) Stockholders’ Equity: AGCO Corporation stockholders’ equity: Preferred stock; $ 0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2020 and 2019 — — Common stock; $ 0.01 par value, 150,000,000 shares authorized, 74,962,231 and 75,471,562 shares issued and outstanding at December 31, 2020 and 2019, respectively 0.8 0.8 Additional paid-in capital 30.9 4.7 Retained earnings 4,759.1 4,443.5 Accumulated other comprehensive loss ( 1,810.8 ) ( 1,595.2 ) Total AGCO Corporation stockholders’ equity 2,980.0 2,853.8 Noncontrolling interests 38.0 53.2 Total stockholders’ equity 3,018.0 2,907.0 Total liabilities and stockholders’ equity $ 8,504.2 $ 7,759.7 See accompanying notes to Consolidated Financial Statements. 48 Table of Contents AGCO CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share amounts) Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity Common Stock Defined Benefit Pension Plans Cumulative Translation Adjustment Deferred (Losses) Gains on Derivatives Accumulated Other Comprehensive Loss Shares Amount Balance, December 31, 2017 79,553,825 $ 0.8 $ 136.6 $ 4,253.8 $ ( 285.1 ) $ ( 1,071.8 ) $ ( 4.7 ) $ ( 1,361.6 ) $ 65.7 $ 3,095.3 Net income (loss) — — — 285.5 — — — — ( 1.8 ) 283.7 Payment of dividends to shareholders — — — ( 47.1 ) — — — — — ( 47.1 ) Issuance of restricted stock 12,629 — 0.8 — — — — — — 0.8 Issuance of stock awards 75,604 — ( 3.1 ) — — — — — — ( 3.1 ) SSARs exercised 14,881 — ( 0.6 ) — — — — — — ( 0.6 ) Stock compensation — — 45.5 — — — — — — 45.5 Investment by noncontrolling interest — — — — — — — — 1.0 1.0 Distribution to noncontrolling interest — — — — — — — — ( 0.1 ) ( 0.1 ) Purchases and retirement of common stock ( 3,120,184 ) — ( 169.0 ) ( 15.3 ) — — — — — ( 184.3 ) Adjustment related to the adoption of ASU 2014-09 — — — 0.4 — — — — — 0.4 Defined benefit pension plans, net of taxes: Prior service cost arising during year — — — — ( 7.0 ) — — ( 7.0 ) — ( 7.0 ) Net loss recognized due to settlement — — — — 0.9 — — 0.9 — 0.9 Net actuarial loss arising during year — — — — ( 4.2 ) — — ( 4.2 ) — ( 4.2 ) Amortization of prior service cost included in net periodic pension cost — — — — 1.3 — — 1.3 — 1.3 Amortization of net actuarial losses included in net periodic pension cost — — — — 11.7 — — 11.7 — 11.7 Deferred gains and losses on derivatives, net — — — — — — 6.1 6.1 — 6.1 Change in cumulative translation adjustment — — — — — ( 202.6 ) — ( 202.6 ) ( 4.2 ) ( 206.8 ) Balance, December 31, 2018 76,536,755 0.8 10.2 4,477.3 ( 282.4 ) ( 1,274.4 ) 1.4 ( 1,555.4 ) 60.6 2,993.5 Net income (loss) — — — 125.2 — — — — ( 2.4 ) 122.8 Payment of dividends to shareholders — — — ( 48.0 ) — — — — — ( 48.0 ) Issuance of restricted stock 14,105 — 1.0 — — — — — — 1.0 Issuance of stock awards 608,444 — ( 13.3 ) ( 9.7 ) — — — — — ( 23.0 ) SSARs exercised 106,514 — ( 3.1 ) ( 1.7 ) — — — — — ( 4.8 ) Stock compensation — — 40.3 — — — — — — 40.3 Investment by noncontrolling interests — — — — — — — — 2.0 2.0 Distribution to noncontrolling interest — — — — — — — — ( 0.4 ) ( 0.4 ) Changes in noncontrolling interest — — — — — — — — ( 9.1 ) ( 9.1 ) Purchases and retirement of common stock ( 1,794,256 ) — ( 30.4 ) ( 99.6 ) — — — — — ( 130.0 ) Defined benefit pension plans, net of taxes: Prior service cost arising during year — — — — ( 4.7 ) — — ( 4.7 ) — ( 4.7 ) Net loss recognized due to settlement — — — — 0.6 — — 0.6 — 0.6 Net actuarial loss arising during year — — — — ( 23.3 ) — — ( 23.3 ) — ( 23.3 ) Amortization of prior service cost included in net periodic pension cost — — — — 1.6 — — 1.6 — 1.6 Amortization of net actuarial losses included in net periodic pension cost — — — — 11.8 — — 11.8 — 11.8 Deferred gains and losses on derivatives, net — — — — — — ( 2.7 ) ( 2.7 ) — ( 2.7 ) Change in cumulative translation adjustment — — — — — ( 23.1 ) — ( 23.1 ) 2.5 ( 20.6 ) Balance, December 31, 2019 75,471,562 0.8 4.7 4,443.5 ( 296.4 ) ( 1,297.5 ) ( 1.3 ) ( 1,595.2 ) 53.2 2,907.0 Net income (loss) — — — 427.1 — — — — ( 7.3 ) 419.8 Payment of dividends to shareholders — — — ( 48.0 ) — — — — — ( 48.0 ) Issuance of restricted stock 19,862 — 1.1 — — — — — — 1.1 Issuance of stock awards 374,212 — ( 7.3 ) ( 8.4 ) — — — — — ( 15.7 ) SSARs exercised 66,736 — ( 4.1 ) ( 0.1 ) — — — — — ( 4.2 ) Stock compensation — — 39.9 ( 3.4 ) — — — — — 36.5 Investment by noncontrolling interests — — — — — — — — 0.2 0.2 Distribution to noncontrolling interest — — — — — — — — ( 3.3 ) ( 3.3 ) Changes in noncontrolling interest — — — — — — — — ( 0.5 ) ( 0.5 ) Purchases and retirement of common stock ( 970,141 ) — ( 3.4 ) ( 51.6 ) — — — — — ( 55.0 ) Defined benefit pension plans, net of taxes: Prior service credit arising during year — — — — 0.3 — — 0.3 — 0.3 Net loss recognized due to settlement — — — — 0.3 — — 0.3 — 0.3 Net actuarial loss arising during year — — — — ( 32.7 ) — — ( 32.7 ) — ( 32.7 ) Amortization of prior service cost included in net periodic pension cost — — — — 2.1 — — 2.1 — 2.1 Amortization of net actuarial losses included in net periodic pension cost — — — — 13.1 — — 13.1 — 13.1 Deferred gains and losses on derivatives, net — — — — — — ( 1.2 ) ( 1.2 ) — ( 1.2 ) Change in cumulative translation adjustment — — — — — ( 197.5 ) — ( 197.5 ) ( 4.3 ) ( 201.8 ) Balance, December 31, 2020 74,962,231 $ 0.8 $ 30.9 $ 4,759.1 $ ( 313.3 ) $ ( 1,495.0 ) $ ( 2.5 ) $ ( 1,810.8 ) $ 38.0 $ 3,018.0 See accompanying notes to Consolidated Financial Statements. 49 Table of Contents AGCO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Years Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net income $ 419.8 $ 122.8 $ 283.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 212.5 210.9 225.2 Impairment charges 20.0 176.6 — Amortization of intangibles 59.5 61.1 64.7 Stock compensation expense 37.6 41.3 46.3 Equity in net earnings of affiliates, net of cash received ( 43.7 ) — ( 3.2 ) Deferred income tax provision (benefit) 3.4 15.1 ( 14.7 ) Loss on extinguishment of debt — — 24.5 Other ( 7.4 ) 6.9 2.6 Changes in operating assets and liabilities, net of effects from purchase of businesses: Accounts and notes receivable, net ( 90.5 ) 63.8 63.3 Inventories, net 119.7 ( 216.3 ) ( 214.3 ) Other current and noncurrent assets ( 49.8 ) ( 14.4 ) ( 85.6 ) Accounts payable ( 59.1 ) 35.7 ( 24.3 ) Accrued expenses 185.3 114.5 161.3 Other current and noncurrent liabilities 89.2 77.9 66.4 Total adjustments 476.7 573.1 312.2 Net cash provided by operating activities 896.5 695.9 595.9 Cash flows from investing activities: Purchases of property, plant and equipment ( 269.9 ) ( 273.4 ) ( 203.3 ) Proceeds from sale of property, plant and equipment 1.9 4.9 3.2 Purchase of businesses, net of cash acquired ( 2.8 ) — — Sale of (investments in) unconsolidated affiliates, net 29.1 ( 3.1 ) ( 5.8 ) Other — — 0.4 Net cash used in investing activities ( 241.7 ) ( 271.6 ) ( 205.5 ) Cash flows from financing activities: Proceeds from indebtedness 1,195.6 2,082.7 5,257.5 Repayments of indebtedness ( 1,045.6 ) ( 2,191.1 ) ( 5,433.6 ) Purchases and retirement of common stock ( 55.0 ) ( 130.0 ) ( 184.3 ) Payment of dividends to stockholders ( 48.0 ) ( 48.0 ) ( 47.1 ) Payment of minimum tax withholdings on stock compensation ( 19.8 ) ( 28.1 ) ( 4.0 ) Payment of debt issuance costs ( 1.4 ) ( 0.5 ) ( 2.7 ) (Distributions to) investments by noncontrolling interests, net ( 3.1 ) 1.6 0.9 Net cash provided by (used in) financing activities 22.7 ( 313.4 ) ( 413.3 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 8.8 ( 4.2 ) ( 18.7 ) Increase (decrease) in cash, cash equivalents and restricted cash 686.3 106.7 ( 41.6 ) Cash, cash equivalents and restricted cash, beginning of year 432.8 326.1 367.7 Cash, cash equivalents and restricted cash, end of year $ 1,119.1 $ 432.8 $ 326.1 See accompanying notes to Consolidated Financial Statements. 50 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Operations and Summary of Significant Accounting Policies Business AGCO Corporation and subsidiaries (“AGCO” or the “Company”) is a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. The Company sells a full range of agricultural equipment, including tractors, combines, hay tools, sprayers, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The Company’s 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 ® . The Company distributes most of its products through a combination of approximately 3,250 independent dealers and distributors as well as the Company utilizes associates and licensees to provide a distribution channel for its products. In addition, the Company provides retail financing through its finance joint ventures with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., or “Rabobank.” Basis of Presentation and Consolidation The Company’s Consolidated Financial Statements represent the consolidation of all wholly-owned companies, majority-owned companies and joint ventures in which the Company has been determined to be the primary beneficiary. The Company consolidates a variable interest entity (“VIE”) if the Company determines it is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. The Company also consolidates all entities that are not considered VIEs if it is determined that the Company has a controlling voting interest to direct the activities that most significantly impact the joint venture or entity. The Company records investments in all other affiliate companies using the equity method of accounting when it has significant influence. Other investments, including those representing an ownership interest of less than 20 %, are recorded at cost. All significant intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimates made by management primarily relate to accounts and notes receivable, inventories, deferred income tax valuation allowances, uncertain tax positions, goodwill and other identifiable intangible assets, and certain accrued liabilities, principally relating to reserves for volume discounts and sales incentives, warranty obligations, product liability and workers’ compensation obligations, and pensions and postretirement benefits. The Company cannot predict the ongoing impact of the 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 and protein 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. 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. 51 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries are translated into United States currency in accordance with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters.” Assets and liabilities are translated to United States dollars at period-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the period. Translation adjustments are included in “Accumulated other comprehensive loss” in stockholders’ equity within the Company’s Consolidated Balance Sheets. Gains and losses, which result from foreign currency transactions, are included in the accompanying Consolidated Statements of Operations. The Company changed the functional currency of its wholly-owned subsidiary from the Argentinian peso to the U.S. dollar effective July 1, 2018. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents reported in the Consolidated Balance Sheets as of December 31, 2020, 2019 and 2018 and cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 are as follows (in millions): December 31, 2020 December 31, 2019 December 31, 2018 Cash (1) $ 1,022.0 $ 412.3 $ 290.5 Cash equivalents (2) 89.7 17.3 35.6 Restricted cash (3) 7.4 3.2 — Total $ 1,119.1 $ 432.8 $ 326.1 ____________________________________ (1) Consisted primarily of cash on hand and bank deposits. (2) Consisted primarily of money market deposits, certificates of deposits and overnight investments. The Company considers all investments with an original maturity of three months or less to be cash equivalents. (3) Consisted primarily of cash in escrow or held as guarantee to support specific requirements. Accounts and Notes Receivable Accounts and notes receivable arise from the sale of equipment and replacement parts to independent dealers, distributors or other customers. In the United States and Canada, amounts due from sales to dealers are immediately due upon a retail sale of the underlying equipment by the dealer with the exception of sales of grain storage and protein production systems as discussed further below. If not previously paid by the dealer in the United States and Canada, installment payments are required generally beginning after the interest-free period with the remaining outstanding equipment balance generally due within 12 months after shipment or delivery. These interest-free periods vary by product and generally range from one to 12 months. In limited circumstances, the Company provides sales terms, and in some cases, interest-free periods that are longer than 12 months for certain products. These are typically specified programs predominately in the United States and Canada, that allow for interest-free periods and due dates of up to 24 months for certain products depending on the year of the sale and the dealer or distributor’s ordering or sales volume during the preceding year. Interest generally is charged at or above prime lending rates on the outstanding receivable balances after shipment or delivery and after interest-free periods. Sales terms of some highly seasonal products provide for payment and due dates based on a specified date during the year regardless of the shipment date. Equipment sold to dealers in the United States and Canada is paid in full on average within 12 months of shipment. Sales of replacement parts generally are payable within 30 days of shipment, with terms for some larger, seasonal stock orders generally requiring payment within six months of shipment. Under normal circumstances, equipment may not be returned. In certain regions, with respect to most equipment sales, including the United States and Canada, the Company is obligated to repurchase equipment and replacement parts upon cancellation of a dealer or distributor contract. These obligations are required by national, state or provincial laws and require the Company to repurchase a dealer or distributor’s unsold inventory, including inventories for which the receivable already has been paid. Actual interest-free periods are shorter than described above because the equipment receivable from dealers or distributors in some countries, such as in the United States and Canada, is generally due immediately upon sale of the equipment to a retail customer as discussed above. Receivables can also be paid prior to terms specified in sales agreements. Under normal circumstances, interest is not forgiven and interest-free periods are not extended. In other international markets, equipment sales generally are payable in full within 30 days to 180 days of shipment or delivery. Payment terms for some highly seasonal products have a specified due date during the year regardless of the shipment or delivery date. For sales in most markets outside of the United States and Canada, the Company generally does not charge 52 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) interest on outstanding receivables with its dealers and distributors. Sales of replacement parts generally are payable within 30 days to 90 days of shipment, with terms for some larger, seasonal stock orders generally payable within six months of shipment. In certain markets, there is a time lag, which varies based on the timing and level of retail demand, between the date the Company records a sale and when the dealer sells the equipment to a retail customer. Sales of grain storage and protein production systems both in the United States and in other countries generally are payable within 30 days of shipment. In certain countries, sales of such systems for which the Company is responsible for construction or installation may be contingent upon customer acceptance. Payment terms vary by market and product, with fixed payment schedules on all sales. When sales of installation services occur, fixed payment schedules may include upfront deposits, progress payments and final payment upon customer acceptance. The following summarizes by geographic region, as a percentage of the Company’s consolidated net sales, amounts with maximum interest-free periods as presented below (in millions): Year Ended December 31, 2020 North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated 0 to 6 months $ 1,506.5 $ 873.8 $ 5,361.4 $ 734.0 $ 8,475.7 92.6 % 7 to 12 months 645.0 — 5.5 — 650.5 7.1 % 13 to 24 months 23.5 — — — 23.5 0.3 % $ 2,175.0 $ 873.8 $ 5,366.9 $ 734.0 $ 9,149.7 100.0 % The Company has an agreement to permit transferring, on an ongoing basis, a majority of its wholesale interest-bearing and non-interest bearing accounts receivable in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. Qualified dealers may obtain additional financing through the Company’s U.S., Canadian, European and Brazilian finance joint ventures at the joint ventures’ discretion. The Company provides various volume bonus and sales incentive programs with respect to its products. These sales incentive programs include reductions in invoice prices, reductions in retail financing rates, dealer commissions and dealer incentive allowances. In most cases, incentive programs are established and communicated to the Company’s dealers on a quarterly basis. The incentives are paid either at the time of the cash settlement of the receivable (which is generally at the time of retail sale), at the time of retail financing, at the time of warranty registration, or at a subsequent time based on dealer purchase volumes. The incentive programs are product-line specific and generally do not vary by dealer. The cost of sales incentives associated with dealer commissions and dealer incentive allowances is estimated based upon the terms of the programs and historical experience, is based on a percentage of the sales price, and estimates for sales incentives are made and recorded at the time of sale for expected incentive programs using the expected value method. These estimates are reassessed each reporting period and are revised in the event of subsequent modifications to incentive programs, as they are communicated to dealers. The related provisions and accruals are made on a product or product-line basis and are monitored for adequacy and revised at least quarterly in the event of subsequent modifications to the programs. Interest rate subsidy payments, which are a reduction in retail finance rates, are recorded in the same manner as dealer commissions and dealer incentive allowances. Volume discounts are estimated and recognized based on historical experience, and related reserves are monitored and adjusted based on actual dealer purchase volumes and the dealer’s progress towards achieving specified cumulative target levels. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that the Company does not receive a distinct good or service in exchange for the consideration provided. In the United States and Canada, reserves for incentive programs related to accounts receivable not sold to Company’s U.S. and Canadian finance joint ventures are recorded as “accounts receivable allowances” within the Company’s Consolidated Balance Sheets due to the fact that the incentives are paid through a reduction of future cash settlement of the receivable. Globally, reserves for incentive programs that will be paid in cash or credit memos, as is the case with most of the Company’s volume discount programs, as well as sales with incentives associated with accounts receivable sold to its finance joint ventures, are recorded within “Accrued expenses” within the Company’s Consolidated Balance Sheets. 53 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accounts and notes receivable are shown net of allowances for sales incentive discounts available to dealers and for doubtful accounts. Cash flows related to the collection of receivables are reported within “Cash flows from operating activities” within the Company’s Consolidated Statements of Cash Flows. Accounts and notes receivable allowances at December 31, 2020 and 2019 were as follows (in millions): 2020 2019 Sales incentive discounts $ 12.9 $ 25.7 Doubtful accounts 36.4 28.8 $ 49.3 $ 54.5 The Company accounts for its provision for doubtful accounts in accordance with ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”). In the United States and Canada, sales incentives can be paid through future cash settlements of receivables and through credit memos to Company’s dealers or through reductions in retail financing rates paid to the Company’s finance joint ventures. Outside of the United States and Canada, sales incentives can be paid through cash or credit memos to the Company’s dealers or through reductions in retail financing rates paid to the Company’s finance joint ventures. The Company transfers certain accounts receivable under its accounts receivable sales agreements with its finance joint ventures (see Note 3). The Company records such transfers as sales of accounts receivable when it is considered to have surrendered control of such receivables under the provisions of Accounting Standards Update (“ASU”) 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets.” Cash payments made to the Company’s finance joint ventures for sales incentive discounts provided to dealers related to outstanding accounts receivables sold are recorded within “Accrued expenses.” Inventories Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. At December 31, 2020 and 2019, the Company had recorded $ 209.2 million and $ 178.6 million, respectively, as an adjustment for surplus and obsolete inventories. These adjustments are reflected within “Inventories, net” within the Company’s Consolidated Balance Sheets. Inventories, net at December 31, 2020 and 2019 were as follows (in millions): 2020 2019 Finished goods $ 641.3 $ 780.1 Repair and replacement parts 652.3 611.5 Work in process 175.1 213.4 Raw materials 505.7 473.7 Inventories, net $ 1,974.4 $ 2,078.7 Cash flows related to the sale of inventories are reported within “Cash flows from operating activities” within the Company’s Consolidated Statements of Cash Flows. Recoverable Indirect Taxes The Company’s Brazilian operations incur value added taxes (“VAT”) on certain purchases of raw materials, components and services. These taxes are accumulated as tax credits and create assets that are reduced by the VAT collected from the Company’s sales in the Brazilian market. The Company regularly assesses the recoverability of these tax credits, and establishes reserves when necessary against them, through analyses that include, amongst others, the history of realization, the transfer of tax credits to third parties as authorized by the government, anticipated changes in the supply chain and the future expectation of tax debits from the Company’s ongoing operations. The Company believes that these tax credits, net of established reserves, are realizable. The Company had recorded approximately $ 91.2 million and $ 142.3 million, respectively, of VAT tax credits, net of reserves, as of December 31, 2020 and 2019. 54 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of ten to 40 years for buildings and improvements, three to 15 years for machinery and equipment and three to ten years for furniture and fixtures. Expenditures for maintenance and repairs are primarily charged to expense as incurred. Property, plant and equipment, net at December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Land $ 147.2 $ 142.5 Buildings and improvements 899.7 808.1 Machinery and equipment 2,772.0 2,522.0 Furniture and fixtures 168.0 153.4 Gross property, plant and equipment 3,986.9 3,626.0 Accumulated depreciation and amortization ( 2,478.4 ) ( 2,209.7 ) Property, plant and equipment, net $ 1,508.5 $ 1,416.3 Goodwill, Other Intangible Assets and Long-Lived Assets The Company tests goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. The Company combines and aggregates two or more components of an operating segment as a single reporting unit if the components have similar economic characteristics. The Company’s reportable segments are not its reporting units. Goodwill is evaluated annually as of October 1 for impairment using a qualitative assessment or a quantitative one-step assessment. If the Company elects to perform a qualitative assessment and determines the fair value of its reporting units more likely than not exceed the carrying value of their net assets, no further evaluation is necessary. For reporting units where the Company performs a one-step quantitative assessment, the Company compares the fair value of each reporting unit, which is determined based on a combination of a discounted cash flow valuation approach and a market multiple valuation approach, to its respective carrying value of net assets, including goodwill. 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, an impairment charge is recorded in the amount by which the carrying value exceeds the reporting unit’s fair value in accordance with ASU 2017-04. The Company reviews its 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. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If the Company determines that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on many factors, including current operating results, expected market trends and competitive influences. The Company also evaluates the amortization periods assigned to its intangible assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell. 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, June 30, 2020 and September 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 equipment 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 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 55 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) of June 30, 2020. During the three months ended June 30, 2020, an impairment charge of approximately $ 20.0 million was recorded as “Impairment charge” within the Company’s Consolidated Statements of Operations, with an offsetting benefit of approximately $ 10.0 million included within “Net loss attributable to noncontrolling interests.” The Company’s goodwill impairment analysis 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 the Company’s other reporting units. The Company’s goodwill impairment analysis conducted as of October 1, 2019, indicated that the carrying value of the net assets of the Company’s grain storage and protein production systems operations in Europe/Middle East was in excess of the fair value of the reporting unit, and therefore, the Company recorded a non-cash impairment charge of approximately $ 173.6 million within “Impairment charges” in the Company’s Consolidated Statements of Operations. During the three months ended December 31, 2019, the Company also recorded a non-cash impairment charge of approximately $ 3.0 million within “Impairment charge” in the Company’s Consolidated Statements of Operations. The impairment charge related to certain long-lived assets associated with the Company’s grain storage and protein production systems operations within North America, due to the discontinuation of a certain brand name and related product, and customers. The results of the Company’s goodwill and long-lived assets impairment analyses conducted as of October 1, 2018 indicated that no reduction in the carrying amount of the Company’s goodwill and long-lived assets was required. The Company’s accumulated goodwill impairment is approximately $ 374.1 million related to impairment charges the Company recorded during 2020, 2019, 2012 and 2006 pertaining to its 50 %-owned tillage and seeding equipment joint venture, its grain storage and protein production systems business in Europe/Middle East, its Chinese harvesting reporting unit and its former sprayer reporting unit, respectively. The tillage and seeding equipment joint venture operates within the North American geographical reportable segment. The Company’s grain storage and protein production systems Europe/Middle East reporting unit operates within the Europe/Middle East geographical reportable segment. The Chinese harvesting business operates within the Asia/Pacific/Africa geographical reportable segment and the former sprayer reporting unit operates within the North American geographical reportable segment. Changes in the carrying amount of goodwill during the years ended December 31, 2020, 2019 and 2018 are summarized as follows (in millions): North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated Balance as of December 31, 2017 $ 611.1 $ 136.4 $ 671.0 $ 122.9 $ 1,541.4 Adjustments — — 8.4 — 8.4 Foreign currency translation — ( 19.7 ) ( 29.8 ) ( 4.8 ) ( 54.3 ) Balance as of December 31, 2018 611.1 116.7 649.6 118.1 1,495.5 Impairment charge — — ( 173.6 ) — ( 173.6 ) Sale of a joint venture ( 5.1 ) — — — ( 5.1 ) Foreign currency translation — ( 4.5 ) ( 12.7 ) ( 1.3 ) ( 18.5 ) Balance as of December 31, 2019 606.0 112.2 463.3 116.8 1,298.3 Foreign currency translation 0.2 ( 24.7 ) 38.0 7.5 21.0 Impairment charge ( 20.0 ) — — — ( 20.0 ) Acquisition 7.2 — — — 7.2 Balance as of December 31, 2020 $ 593.4 $ 87.5 $ 501.3 $ 124.3 $ 1,306.5 On September 10, 2020, the Company acquired 151 Research, Inc., a company specializing in agricultural technology, for approximately $ 2.8 million. The Company agreed to further contingent consideration related to the acquisition, and therefore recorded a liability of approximately $ 4.4 million to reflect estimated achievement of agreed upon targets. The acquisition did not have a material impact on the Company. 56 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company amortizes certain acquired identifiable intangible assets primarily on a straight-line basis over their estimated useful lives, which range from five to 50 years. The acquired intangible assets have a weighted average useful life as follows: Intangible Assets Weighted-Average Useful Life Patents and technology 12 years Customer relationships 13 years Trademarks and trade names 20 years Land use rights 45 years For the years ended December 31, 2020, 2019 and 2018, acquired intangible asset amortization was $ 59.5 million, $ 61.1 million and $ 64.7 million, respectively. The Company estimates amortization of existing intangible assets will be $ 57.8 million in 2021, $ 57.5 million in 2022, $ 55.4 million in 2023, $ 54.0 million in 2024, and $ 49.8 million in 2025. The Company has previously determined that two of its trademarks have an indefinite useful life. The Massey Ferguson trademark has been in existence since 1952 and was formed from the merger of Massey-Harris (established in the 1890’s) and Ferguson (established in the 1930’s). The Massey Ferguson brand is currently sold in approximately 110 countries worldwide, making it one of the most widely sold tractor brands in the world. The Company also has identified the Valtra trademark as an indefinite-lived asset. The Valtra trademark has been in existence since the late 1990’s, but is a derivative of the Valmet trademark which has been in existence since 1951. The Valmet name transitioned to the Valtra name over a period of time in the marketplace. The Valtra brand is currently sold in over 70 countries around the world. Both the Massey Ferguson brand and the Valtra brand are primary product lines of the Company’s business, and the Company plans to use these trademarks for an indefinite period of time. The Company plans to continue to make investments in product development to enhance the value of these brands into the future. There are no legal, regulatory, contractual, competitive, economic or other factors that the Company is aware of or that the Company believes would limit the useful lives of the trademarks. The Massey Ferguson and Valtra trademark registrations can be renewed at a nominal cost in the countries in which the Company operates. Changes in the carrying amount of acquired intangible assets during 2020 and 2019 are summarized as follows (in millions): Trademarks and Trade Names Customer Relationships Patents and Technology Land Use Rights Total Gross carrying amounts: Balance as of December 31, 2018 $ 203.4 $ 586.3 $ 155.8 $ 8.6 $ 954.1 Sale of a joint venture ( 1.3 ) ( 2.9 ) ( 1.9 ) — ( 6.1 ) Impairment charge ( 1.1 ) ( 0.8 ) ( 1.1 ) — ( 3.0 ) Foreign currency translation ( 1.7 ) ( 3.6 ) ( 1.7 ) ( 0.1 ) ( 7.1 ) Balance as of December 31, 2019 199.3 579.0 151.1 8.5 937.9 Foreign currency translation 6.7 6.4 6.9 0.6 20.6 Balance as of December 31, 2020 $ 206.0 $ 585.4 $ 158.0 $ 9.1 $ 958.5 57 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accumulated Amortization Trademarks and Trade Names Customer Relationships Patents and Technology Land Use Rights Total Balance as of December 31, 2018 $ 73.4 $ 310.8 $ 80.7 $ 3.0 $ 467.9 Amortization expense 11.0 40.1 9.9 0.1 61.1 Sale of a joint venture ( 0.5 ) ( 1.2 ) ( 0.7 ) — ( 2.4 ) Foreign currency translation ( 0.6 ) ( 2.3 ) ( 1.2 ) — ( 4.1 ) Balance as of December 31, 2019 83.3 347.4 88.7 3.1 522.5 Amortization expense 10.1 39.9 9.4 0.1 59.5 Foreign currency translation 2.0 3.0 5.1 0.2 10.3 Balance as of December 31, 2020 $ 95.4 $ 390.3 $ 103.2 $ 3.4 $ 592.3 Indefinite-Lived Intangible Assets Trademarks and Trade Names Balance as of December 31, 2018 $ 86.9 Foreign currency translation ( 0.6 ) Balance as of December 31, 2019 86.3 Foreign currency translation 3.1 Balance as of December 31, 2020 $ 89.4 Accrued Expenses Accrued expenses at December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Reserve for volume discounts and sales incentives $ 582.9 $ 580.4 Warranty reserves 431.6 331.9 Accrued employee compensation and benefits 329.2 290.8 Accrued taxes 249.6 170.3 Other 323.4 280.8 $ 1,916.7 $ 1,654.2 Warranty Reserves The warranty reserve activity for the years ended December 31, 2020, 2019 and 2018 consisted of the following (in millions): 2020 2019 2018 Balance at beginning of the year $ 392.8 $ 360.9 $ 316.0 Acquisitions 0.2 — — Accruals for warranties issued during the year 310.2 234.1 230.5 Settlements made (in cash or in kind) during the year ( 204.3 ) ( 198.7 ) ( 174.7 ) Foreign currency translation 22.9 ( 3.5 ) ( 10.9 ) Balance at the end of the year $ 521.8 $ 392.8 $ 360.9 The Company’s agricultural equipment products generally are under warranty against defects in materials 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 $ 90.2 million and $ 60.9 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively. 58 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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.” Insurance Reserves Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected losses primarily related to workers’ compensation and comprehensive general liability, product and vehicle liability. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred. Revenue The Company accounts for revenue recognition pursuant to ASU 2014-09, “Revenue from Contracts with Customers.” Revenue is recognized when the Company satisfies the performance obligation by transferring control over goods or services to a dealer, distributor or other customer. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those goods or services pursuant to a contract with the customer. A contract exists once the Company receives and accepts a purchase order under a dealer sales agreement, or once the Company enters into a contract with an end user. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. The Company generates revenue from the manufacture and distribution of agricultural equipment and replacement parts. Sales of equipment and replacement parts, which represents a majority of the Company’s net sales, are recorded by the Company at the point in time when title and control have been transferred to an independent dealer, distributor or other customer. Title generally passes to the dealer or distributor upon shipment or specified delivery, and the risk of loss upon damage, theft or destruction of the equipment is the responsibility of the dealer, distributor or designated third-party carrier. The Company believes control passes and the performance obligation is satisfied at the point of the stated shipping or delivery term with respect to such sales. As previously discussed, the amount of consideration the Company receives and the revenue recognized varies with certain sales incentives the Company offers to dealers and distributors. Estimates for sales incentives are made at the time of sale for expected incentive programs using the expected value method. These estimates are revised in the event of subsequent modification to the incentive program. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that the Company does not receive a distinct good or service in exchange for the consideration provided. Dealers or distributors may not return equipment or replacement parts while its contract with the Company is in force, except for under established promotional and annual replacement parts return programs. At the time of sale, the Company estimates the amount of returns based on the terms of promotional and annual return programs and anticipated returns in the future. Sales and other related taxes are excluded from the transaction price. Shipping and handling costs associated with freight activities after the customer has obtained control are accounted for as fulfillment costs and are expensed and accrued at the time revenue is recognized in “Cost of goods sold” and “Selling, general and administrative expenses” in the Company’s Consolidated Statements of Operations. As afforded under the practical expedient in ASU 2014-09, the Company does not adjust the amount of revenue to be recognized under a contract with a dealer, distributor or other customer for the time value of money when the difference between the receipt of payment and the recognition of revenue is less than one year. Although, substantially all revenue is recognized at a point in time, a relatively insignificant amount of installation revenue associated with the sale of grain storage and protein production systems is recognized on an “over time” basis as discussed below. The Company also recognizes revenue “over time” with respect to extended warranty and maintenance contracts and certain precision technology services. Generally, almost all of the grain storage and protein production systems contracts with customers that relate to “over time” revenue recognition have contract durations of less than 12 months. 59 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Extended warranty, maintenance services contracts and certain precision technology services generally have contract durations of more than 12 months. Grain Storage and Protein Production Systems Installation Revenue. In certain countries, the Company sells grain storage and protein production systems where the Company is responsible for construction and installation, and the sale is contingent upon customer acceptance. Under these conditions, the revenues are recognized over the term of the contract when the Company can objectively determine control has been transferred to the customer in accordance with agreed-upon specifications in the contract. For these contracts, the Company may be entitled to receive an advance payment, which is recognized as a contract liability for the amount in excess of the revenue recognized. The Company uses the input method using costs incurred to date relative to total estimated costs at completion to measure the progress toward satisfaction of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs include labor, material and overhead. The estimation of the progress toward completion is subject to various assumptions. As part of the estimation process, the Company reviews the length of time to complete the performance obligation, the cost of materials and labor productivity. If a significant change in one of the assumptions occurs, then the Company will recognize an adjustment under the cumulative catch-up method and the impact of the adjustment on the revenue recorded to date is recognized in the period the adjustment is identified. Extended Warranty Contracts. The Company sells separately priced extended warranty contracts and maintenance contracts, which extends coverage beyond the base warranty period, or covers maintenance over a specified period. Revenue is recognized for the extended warranty contract on a straight-line basis, which the Company believes approximates the costs expected to be incurred in satisfying the obligations, over the extended warranty period. The extended warranty period ranges from one to five years . Payment is received or revenue is deferred for free contracts at the inception of the extended warranty contract or maintenance contract, which is recognized as a contract liability for the amount in excess of the revenue recognized. The revenue associated with the sale of extended warranty contracts is insignificant. Precision Technology Services Revenue. The Company sells a combination of precision technology products and services. When the bundled package of technology products and services is sold, the portion of the consideration received related to the services component is recognized over time as the Company satisfies the future performance obligation. Revenue is recognized for the hardware component when control is transferred to the dealer or distributor. Payment is received or revenue is deferred for free subscriptions at inception of the precision technology subscription period, which is recognized as a contract liability for the amount in excess of the revenue recognized. The revenue associated with the sale of precision technology services is insignificant. See Note 15 for additional information regarding the Company’s sources of revenue and associated contract liabilities and performance obligations. Stock Incentive Plans Stock compensation expense was recorded as follows (in millions). Refer to Note 9 for additional information regarding the Company’s stock incentive plans during 2020, 2019 and 2018: Years Ended December 31, 2020 2019 2018 Cost of goods sold $ 1.1 $ 1.7 $ 2.3 Selling, general and administrative expenses 36.8 40.0 44.3 Total stock compensation expense $ 37.9 $ 41.7 $ 46.6 Research and Development Expenses Research and development expenses are expensed as incurred and are included in engineering expenses in the Company’s Consolidated Statements of Operations. 60 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Advertising Costs The Company expenses all advertising costs as incurred. Cooperative advertising costs normally are expensed at the time the revenue is earned. Advertising expenses for the years ended December 31, 2020, 2019 and 2018 totaled approximately $ 45.3 million, $ 42.3 million and $ 42.4 million, respectively. Shipping and Handling Expenses All shipping and handling fees charged to customers are included as a component of net sales, and are associated with freight activities after the customer has obtained control. Shipping and handling costs are accounted for as fulfillment costs and are expensed and accrued at the time revenue is recognized within “Cost of goods sold,” with the exception of certain handling costs included in “Selling, general and administrative expenses” in the amount of $ 38.0 million, $ 38.9 million and $ 37.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. Interest Expense, Net Interest expense, net for the years ended December 31, 2020, 2019 and 2018 consisted of the following (in millions): 2020 2019 2018 Interest expense $ 24.9 $ 28.8 $ 61.9 Interest income ( 9.9 ) ( 8.9 ) ( 8.1 ) $ 15.0 $ 19.9 $ 53.8 During 2018, the Company repurchased its 5 7 / 8 % senior notes due December 1, 2021, and as a result, recorded approximately $ 24.5 million in a loss on extinguishment of debt reflected in “Interest expense, net.” This was offset by approximately $ 4.7 million of accelerated amortization of a deferred gain related to a terminated interest rate swap agreement associated with the senior notes. Refer to Note 6 for further information. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. See Note 5 for additional information regarding the Company’s income taxes. Net Income Per Common Share Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted net income per common share assumes the exercise of outstanding stock-settled stock appreciation rights (“SSARs”) and the vesting of performance share awards and restricted stock units using the treasury stock method when the effects of such assumptions are dilutive. 61 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 during the years ended December 31, 2020, 2019 and 2018 is as follows (in millions, except per share data): 2020 2019 2018 Basic net income per share: Net income attributable to AGCO Corporation and subsidiaries $ 427.1 $ 125.2 $ 285.5 Weighted average number of common shares outstanding 75.0 76.2 78.8 Basic net income per share attributable to AGCO Corporation and subsidiaries $ 5.69 $ 1.64 $ 3.62 Diluted net income per share: Net income attributable to AGCO Corporation and subsidiaries $ 427.1 $ 125.2 $ 285.5 Weighted average number of common shares outstanding 75.0 76.2 78.8 Dilutive SSARs, performance share awards and restricted stock units 0.6 0.8 0.9 Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share 75.6 77.0 79.7 Diluted net income per share attributable to AGCO Corporation and subsidiaries $ 5.65 $ 1.63 $ 3.58 SSARs to purchase approximately 0.3 million shares, 0.2 million shares and 0.5 million shares of the Company’s common stock for the years ended December 31, 2020, 2019 and 2018, respectively, were outstanding but not included in the calculation of weighted average common and common equivalent shares outstanding because they had an antidilutive impact. Comprehensive Income (Loss) The Company reports comprehensive income (loss), defined as the total of net in come (loss) and all other non-owner changes in equity, and the components thereof in its Consolidated Statements of Stockholders’ Equity and Consolidated Statements of Comprehensive Income (Loss). The components of other comprehensive (loss) income and the related tax effects for the years ended December 31, 2020, 2019 and 2018 are as follows (in millions): AGCO Corporation and Subsidiaries Noncontrolling Interests 2020 2020 Before-tax Amount Income Taxes After-tax Amount After-tax Amount Defined benefit pension plans $ ( 19.3 ) $ 2.4 $ ( 16.9 ) $ — Net loss on derivatives ( 1.5 ) 0.3 ( 1.2 ) — Foreign currency translation adjustments ( 197.5 ) — ( 197.5 ) ( 4.3 ) Total components of other comprehensive loss $ ( 218.3 ) $ 2.7 $ ( 215.6 ) $ ( 4.3 ) AGCO Corporation and Subsidiaries Noncontrolling Interests 2019 2019 Before-tax Amount Income Taxes After-tax Amount After-tax Amount Defined benefit pension plans $ ( 13.4 ) $ ( 0.6 ) $ ( 14.0 ) $ — Net loss on derivatives ( 3.1 ) 0.4 ( 2.7 ) — Foreign currency translation adjustments ( 23.1 ) — ( 23.1 ) 2.5 Total components of other comprehensive loss $ ( 39.6 ) $ ( 0.2 ) $ ( 39.8 ) $ 2.5 62 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) AGCO Corporation and Subsidiaries Noncontrolling Interests 2018 2018 Before-tax Amount Income Taxes After-tax Amount After-tax Amount Defined benefit pension plans $ 0.8 $ 1.9 $ 2.7 $ — Net gain on derivatives 7.6 ( 1.5 ) 6.1 — Foreign currency translation adjustments ( 202.6 ) — ( 202.6 ) ( 4.2 ) Total components of other comprehensive income $ ( 194.2 ) $ 0.4 $ ( 193.8 ) $ ( 4.2 ) Derivatives The Company uses foreign currency contracts to hedge the foreign currency exposure of certain receivables and payables. The contracts are for periods consistent with the exposure being hedged and generally have maturities of one year or less. These contracts are classified as non-designated derivative instruments. The Company also enters into foreign currency contracts designated as cash flow hedges of expected sales. The Company’s foreign currency contracts mitigate risk due to exchange rate fluctuations because gains and losses on these contracts generally offset losses and gains on the exposure being hedged. The notional amounts of the foreign currency contracts do not represent amounts exchanged by the parties and, therefore, are not a measure of the Company’s risk. The amounts exchanged are calculated on the basis of the notional amounts and other terms of the contracts. The credit and market risks under these contracts are not considered to be significant. The Company’s interest expense is, in part, sensitive to the general level of interest rates, and the Company manages its exposure to interest rate risk through the mix of floating rate and fixed rate debt. From time to time, the Company enters into interest rate swap agreements in order to manage the Company’s exposure to interest rate fluctuations. The Company uses non-derivative and, periodically, derivative instruments to hedge a portion of the Company’s net investment in foreign operations against adverse movements in exchange rates. The Company’s gross profit is sensitive to the cost of steel and other raw materials. From time to time, the Company enters into derivative instruments to hedge a portion of its commodity purchases against adverse movements in commodity prices. The Company’s hedging policy prohibits it from entering into any foreign currency contracts for speculative trading purposes. See Note 10 for additional information regarding the Company’s derivative instruments and hedging activities. 63 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Recent Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods as the adoption of the standard relates to the Company. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“ASU 2019-04”), which provides, among other things, targeted improvements to certain aspects of accounting for credit losses addressed by ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326), Financial Instruments - Credit Losses,” which clarifies the treatment of expected recoveries for amounts previously written-off on purchased receivables, provides transition relief for troubled debt restructurings and allows for certain disclosure simplifications of accrued interest. The effective dates for both ASU 2019-04 and ASU 2019-11 were the same as the effective dates for ASU 2016-13. The Company adopted this standard, and its subsequent modifications, as of January 1, 2020. The adoption did not have a material impact to the Company’s results of operations, financial condition and cash flows. The Company also adopted the following pronouncements, none of which had a material impact to the Company’s results of operations, financial condition and cash flows. • ASU 2020-04 – “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” was adopted in 2020. See Note 6 for additional information. • ASU 2018-15 – “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” was adopted in 2020. • ASU 2019-12 – “Simplifying the Accounting for Income Taxes” was adopted as of January 1, 2021. New Accounting Pronouncements to be Adopted As discussed above, in June 2016, the FASB issued ASU 2016-13, which requires measurement and recognition of expected versus incurred credit losses for financial assets held. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which delays the effective date of ASU 2016-13 for smaller reporting companies and other non-SEC reporting entities. This applies to the Company’s equity method finance joint ventures who are now required to adopt ASU 2016-13 for annual periods beginning after December 15, 2022 and interim periods within those annual periods. The standard, and its subsequent modification, will likely impact the results of operations and financial condition of the Company’s finance joint ventures. Therefore, adoption of the standard by the Company’s finance joint ventures will likely impact the Company’s “Investment in affiliates” and “Equity in net earnings of affiliates.” The Company’s finance joint ventures are currently evaluating the impact of ASU 2016-13 to their results of operations and financial condition. 64 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2. Restructuring Expenses The Company has announced and initiated actions over the course of several years to rationalize employee headcount at various manufacturing facilities and various administrative offices located in Europe, South America, Africa, China and the United States, as well as the rationalization of its grain storage and protein production system operations. These rationalizations were taken to reduce costs in response to softening global market demand and lower production volumes. During 2020, the Company recorded severance and related costs associated with these rationalizations in connection with the termination of approximately 350 employees. The components of the restructuring expenses are summarized as follows (in millions): Employee Severance Facility Closure Costs Write-down of Property, Plant and Equipment Other Related Closure Costs Loss on Sale of Joint Venture Total Balance as of December 31, 2017 $ 10.9 $ — $ — $ — $ — $ 10.9 2018 provision 13.8 — 0.3 — — 14.1 Less: Non-cash expense — — ( 0.3 ) — — ( 0.3 ) Cash expense 13.8 — — — — 13.8 2018 provision reversal ( 2.1 ) — — — — ( 2.1 ) 2018 cash activity ( 14.4 ) — — — — ( 14.4 ) Foreign currency translation ( 1.1 ) — — — — ( 1.1 ) Balance as of December 31, 2018 7.1 — — — — 7.1 2019 provision 5.6 0.5 1.5 — 2.1 9.7 Less: Non-cash expense — — ( 1.5 ) — ( 2.1 ) ( 3.6 ) Cash expense 5.6 0.5 — — — 6.1 2019 provision reversal ( 0.7 ) — — — — ( 0.7 ) 2019 cash activity ( 6.8 ) ( 0.5 ) — — — ( 7.3 ) Foreign currency translation ( 0.4 ) — — — — ( 0.4 ) Balance as of December 31, 2019 4.8 — — — — 4.8 2020 provision 11.3 4.5 2.5 1.8 — 20.1 Less: Non-cash expense — — ( 2.5 ) — — ( 2.5 ) Cash expense 11.3 4.5 — 1.8 — 17.6 2020 provision reversal ( 0.4 ) — — — — ( 0.4 ) 2020 cash activity ( 4.5 ) ( 0.6 ) — — — ( 5.1 ) Foreign currency translation ( 0.1 ) — — — — ( 0.1 ) Balance as of December 31, 2020 $ 11.1 $ 3.9 $ — $ 1.8 $ — $ 16.8 During the three months ended December 31, 2019, the Company exited and sold its 50 % interest in its USC, LLC joint venture to its joint venture partner for approximately $ 5.1 million. The operations of the joint venture were part of the Company's grain storage and production system operations, and the decision to sell the joint venture was as a result of the overall rationalization of the business. The Company recorded a loss of approximately $ 2.1 million associated with the sale, which was reflected within “Restructuring expenses” in the Company’s Consolidated Statements of Operations. 65 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 3. 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 December 31, 2020 and 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. The Company also pays the respective AGCO Finance entities a subsidized interest payment with respect to the accounts receivable sales agreements, calculated based upon LIBOR plus a margin on any non-interest bearing accounts receivable outstanding and sold under the accounts receivables sales agreements. These fees are reflected within losses on the sales of receivables included within “Other expense, net” in the Company’s Consolidated Statements of Operations. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. The Company reviewed its accounting for the accounts receivable sales agreements and determined that these facilities should be accounted for as off-balance sheet transactions. Losses on sales of receivables associated with the accounts receivable financing facilities discussed above, reflected within “Other expense, net” in the Company’s Consolidated Statements of Operations, were approximately $ 24.1 million, $ 42.4 million and $ 36.0 million during 2020, 2019 and 2018, respectively. The Company’s finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to the Company’s dealers. The receivables associated with these arrangements are without recourse to the Company. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. As of December 31, 2020 and 2019, these finance joint ventures had approximately $ 85.2 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. In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world. The Company reviewed the sale of such receivables and determined that these arrangements should be accounted for as off-balance sheet transactions. 4. Investments in Affiliates Investments in affiliates as of December 31, 2020 and 2019 were as follows (in millions): 2020 2019 Finance joint ventures $ 395.3 $ 339.0 Manufacturing joint ventures 31.8 26.8 Other affiliates 15.6 14.4 $ 442.7 $ 380.2 The Company's finance joint ventures provide retail financing and wholesale financing to its dealers. The majority of the assets of the Company’s finance joint ventures represent finance receivables. The majority of the liabilities represent notes payable and accrued interest. Under the various joint venture agreements, Rabobank or its affiliates provide financing to the joint venture companies. AGCO has a 49 % interest in the Company’s finance joint ventures (Note 13). The Company’s manufacturing joint ventures consist of Groupement International De Mecanique Agricole SA (“GIMA”) (a joint venture with a third-party manufacturer to purchase, design and manufacture components for agricultural equipment in France) and a joint venture with a third-party manufacturer to manufacture protein production equipment in China. The other joint ventures represent investments in farm equipment manufacturers, an electronic and software system manufacturer, distributors and licensees. 66 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company’s equity in net earnings of affiliates for the years ended December 31, 2020, 2019 and 2018 were as follows (in millions): 2020 2019 2018 Finance joint ventures $ 45.0 $ 41.5 $ 34.7 Manufacturing and other joint ventures 0.5 1.0 ( 0.4 ) $ 45.5 $ 42.5 $ 34.3 Summarized combined financial information of the Company’s finance joint ventures as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 were as follows (in millions): As of December 31, 2020 2019 Total assets $ 8,033.4 $ 7,773.7 Total liabilities 7,226.7 7,081.9 Partners’ equity 806.7 691.8 For the Years Ended December 31, 2020 2019 2018 Revenues $ 402.2 $ 417.6 $ 390.8 Costs 274.0 299.9 286.7 Income before income taxes $ 128.2 $ 117.7 $ 104.1 At December 31, 2020 and 2019, the Company’s receivables from affiliates were approximately $ 47.5 million and $ 15.2 million, respectively. The receivables from affiliates are reflected within “Accounts and notes receivable, net” within the Company’s Consolidated Balance Sheets. The portion of the Company’s retained earnings balance that represents undistributed retained earnings of equity method investees was approximately $ 375.5 million and $ 310.8 million as of December 31, 2020 and 2019, respectively. 67 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 5. Income Taxes The sources of income before income taxes and equity in net earnings of affiliates were as follows for the years ended December 31, 2020, 2019 and 2018 (in millions): 2020 2019 2018 United States $ ( 73.4 ) $ ( 53.1 ) $ ( 126.0 ) Foreign 635.4 314.2 486.3 Income before income taxes and equity in net earnings of affiliates $ 562.0 $ 261.1 $ 360.3 The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2020, 2019 and 2018 consisted of the following (in millions): 2020 2019 2018 Current: United States: Federal $ 1.0 $ ( 6.5 ) $ ( 9.1 ) State 3.1 2.1 1.2 Foreign 180.2 170.1 133.5 184.3 165.7 125.6 Deferred: United States: Federal 1.3 1.3 — State — — — Foreign 2.1 13.8 ( 14.7 ) 3.4 15.1 ( 14.7 ) $ 187.7 $ 180.8 $ 110.9 On March 27, 2020, the CARES Act (the “Act”) was enacted in the United States in response to the COVID-19 pandemic to, among other things, provide 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 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. 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, 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 the Company’s Swiss subsidiary’s assets. On December 22, 2017, The Tax Cuts and Jobs Act (“the 2017 Tax Act”) was enacted in the United States. The primary provisions of the 2017 Tax Act affecting the Company 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, the Company was 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 the Company’s provision for income taxes in 2020 or 2019. During the three months ended December 31, 2018, the Company finalized its 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. 68 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) A reconciliation of income taxes computed at the United States federal statutory income tax rate (21% for 2020, 2019, and 2018 (from 35% for 2017)) to the provision for income taxes reflected in the Company’s Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 is as follows (in millions): 2020 2019 2018 Provision for income taxes at United States federal statutory rate $ 118.0 $ 54.8 $ 75.7 State and local income taxes, net of federal income tax effects ( 3.5 ) ( 2.5 ) ( 6.0 ) Taxes on foreign income which differ from the United States statutory rate 13.9 6.7 ( 0.3 ) Tax effect of permanent differences 13.4 63.9 26.7 Change in valuation allowance 16.3 84.6 24.6 Change in tax contingency reserves 37.2 3.2 8.5 Research and development tax credits ( 9.0 ) ( 7.1 ) ( 8.5 ) Impacts related to changes in tax laws — ( 21.8 ) ( 8.4 ) Other 1.4 ( 1.0 ) ( 1.4 ) $ 187.7 $ 180.8 $ 110.9 The significant components of the deferred tax assets and liabilities at December 31, 2020 and 2019 were as follows (in millions): 2020 2019 Deferred Tax Assets: Net operating loss carryforwards $ 62.9 $ 72.0 Sales incentive discounts 50.8 61.9 Inventory valuation reserves 35.9 41.1 Pensions and postretirement health care benefits 55.8 51.6 Warranty and other reserves 126.3 128.5 Research and development tax credits 12.9 17.3 Foreign tax credits 5.9 6.4 Other 10.4 17.2 Total gross deferred tax assets 360.9 396.0 Valuation allowance ( 181.0 ) ( 169.1 ) Total deferred tax assets 179.9 226.9 Deferred Tax Liabilities: Tax over book depreciation and amortization 167.5 164.3 Investment in affiliates 33.1 50.3 Other 14.1 25.5 Total deferred tax liabilities 214.7 240.1 Net deferred tax liabilities $ ( 34.8 ) $ ( 13.2 ) Amounts recognized in Consolidated Balance Sheets: Deferred tax assets - noncurrent $ 77.6 $ 93.8 Deferred tax liabilities - noncurrent ( 112.4 ) ( 107.0 ) $ ( 34.8 ) $ ( 13.2 ) As reflected in the preceding table, the Company recorded a net deferred tax liability of $ 34.8 million and $ 13.2 million as of December 31, 2020 and December 31, 2019, respectively, and had a valuation allowance against its gross deferred tax assets of approximately $ 181.0 million and $ 169.1 million as of December 31, 2020 and 2019, respectively. 69 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) During the three months ended September 30, 2019, the Company recorded a non-cash deferred income tax charge of approximately $ 53.7 million to establish a valuation allowance against its Brazilian net deferred income tax assets. In addition, the Company maintains a valuation allowance to fully reserve its net deferred tax assets in the United States and certain foreign jurisdictions. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies and determined that all adjustments to the valuation allowance were appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the valuation allowance, in future years. The Company had net operating loss carryforwards of $ 219.7 million as of December 31, 2020, with expiration dates as follows: 2021 - $ 24.0 million; 2022 - $ 15.0 million; 2023 - $ 46.7 million and thereafter or unlimited - $ 134.0 million. The net operating loss carryforwards of $ 219.7 million are entirely in tax jurisdictions outside of the United States. The Company does not have any material U.S. state net operating loss carryforwards. The Company paid income taxes of $ 181.4 million, $ 144.4 million and $ 101.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. The Company recognizes income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. At December 31, 2020 and 2019, the Company had $ 227.9 million and $ 210.7 million, respectively, of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. At December 31, 2020 and 2019, the Company had approximately $ 57.1 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 accrued approximately $ 7.1 million and $ 1.8 million of interest and penalties related to unrecognized tax benefits in its provision for income taxes during 2020 and 2019, respectively. At December 31, 2020 and 2019, the Company had accrued interest and penalties related to unrecognized tax benefits of $ 39.4 million and $ 28.4 million, respectively. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits as of and during the years ended December 31, 2020 and 2019 is as follows (in millions): 2020 2019 Gross unrecognized income tax benefits at the beginning of the year $ 210.7 $ 166.1 Additions for tax positions of the current year 32.0 32.8 Additions for tax positions of prior years 9.4 20.7 Reductions for tax positions of prior years for: Changes in judgments 9.1 ( 4.6 ) Settlements during the year ( 52.9 ) ( 0.7 ) Lapses of applicable statute of limitations ( 0.2 ) ( 0.8 ) Foreign currency translation and other 19.8 ( 2.8 ) Gross unrecognized income tax benefits at the end of the year $ 227.9 $ 210.7 The reconciliation of gross unrecognized tax benefits above for 2020 and 2019 excludes certain indirect favorable effects that relate to other tax jurisdictions of approximately $ 64.1 million and $ 44.9 million, respectively. The change in certain indirect favorable effects between 2020 and 2019 includes approximately $ 13.1 million related to additions and reductions for tax positions of current and prior years, changes in judgments and lapses of statutes of limitations. The Company and its subsidiaries file income tax returns in the United States and in various state, local and foreign jurisdictions. The Company and its subsidiaries are routinely examined by tax authorities in these jurisdictions. As of December 31, 2020, a number of income tax examinations in foreign jurisdictions, as well as the United States, were ongoing. It is possible that certain of these ongoing examinations may be resolved within 12 months. Due to the potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized income tax benefits balance may materially change within the next 12 months. In certain 70 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) foreign jurisdictions, there is either statutory expirations or the Company’s settlement expectations such that approximately $ 57.1 million could be concluded within the next 12 months. Although there are ongoing examinations in various federal and state jurisdictions, the 2017 through 2020 tax years generally remain subject to examination in the United States by applicable authorities. In the Company’s significant foreign jurisdictions, primarily the United Kingdom, France, Germany, Switzerland, Finland and Brazil, the 2015 through 2020 tax years generally remain subject to examination by their respective tax authorities. In Brazil, the Company is contesting disallowed deductions related to amortization of certain goodwill amounts (see Note 11). 6. Indebtedness Long-term debt consisted of the following at December 31, 2020 and 2019 (in millions): December 31, 2020 December 31, 2019 Senior term loan due 2022 (1) $ 184.0 $ 168.1 Credit facility, expires 2023 (1) 277.9 — 1.002 % Senior term loan due 2025 306.7 280.2 Senior term loans due between 2021 and 2028 (1) 806.0 736.2 Other long-term debt 10.5 12.5 Debt issuance costs ( 2.5 ) ( 2.3 ) 1,582.6 1,194.7 Less: Senior term loans due 2021, net of debt issuance costs ( 323.6 ) — Current portion of other long-term debt ( 2.3 ) ( 2.9 ) Total long-term indebtedness, less current portion $ 1,256.7 $ 1,191.8 ____________________________________ (1) Maturity dates are reflected as of December 31, 2020. At December 31, 2020, the aggregate scheduled maturities of long-term debt, excluding the current portion of long-term debt, are as follows (in millions): 2022 $ 463.5 2023 304.3 2024 2.5 2025 383.8 Thereafter 102.6 $ 1,256.7 Cash payments for interest were approximately $ 23.6 million, $ 26.3 million and $ 35.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. Current Indebtedness Senior Term Loan Due 2022 In October 2018, the Company entered in a term loan agreement with Rabobank in the amount of € 150.0 million (or approximately $ 184.0 million as of December 31, 2020). The Company is permitted to prepay the term loan before its maturity date of October 28, 2022. Interest is payable on the term loan quarterly in arrears at an annual rate, equal to the EURIBOR plus a margin ranging from 0.875 % to 1.875 % based on the Company’s credit rating. The Company also has to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio. 71 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Credit Facility In October 2018, the Company entered into a multi-currency revolving credit facility of $ 800.0 million. The maturity date of the credit facility is October 17, 2023. Interest accrues on amounts outstanding under the credit facility, at the Company’s option, at either (1) LIBOR plus a margin ranging from 0.875 % to 1.875 % based on the Company’s credit rating, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5 %, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0 %, plus a margin ranging from 0.0 % to 0.875 % based on the Company’s credit rating. The credit facility contains covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends. The Company also has to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio. As of December 31, 2020 and 2019, the Company had no outstanding borrowings under the revolving credit facility and the ability to borrow approximately $ 800.0 million under the facility. 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 $ 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 the Company’s option, at either (1) LIBOR plus a margin based on the Company’s credit rating ranging from 1.125 % to 2.125 % until April 8, 2021 and ranging from 1.375 % to 2.375 % thereafter, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5 %, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0 %, plus a margin based on the Company’s credit rating ranging from 0.125 % to 1.375 % until April 8, 2021 and ranging from 0.375 % to 1.375 % thereafter. The 2020 term loans contain covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends. The Company also has to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio. On April 15, 2020, the Company borrowed € 117.5 million and $ 133.8 million (or an aggregate of approximately $ 277.9 million as of December 31, 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 2020. As of December 31, 2020, the Company had the ability to borrow approximately $ 277.9 million of 2020 term loans. Interest on U.S. dollar borrowings under the Company’s credit facility 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. The Company’s former revolving credit and term loan facility consisted of an $ 800.0 million multi-currency revolving credit facility and a € 312.0 million term loan facility. The maturity date of the former credit facility was June 26, 2020. As is more fully described in Note 10, the Company entered into an interest rate swap in 2015 to convert the term loan facility’s floating interest rate to a fixed interest rate of 0.33 % plus the applicable margin over the remaining life of the term loan facility. In connection with the closing of new credit facility in October 2018, the Company repaid its outstanding € 312.0 million (or approximately $ 360.8 million) term loan under the former revolving credit and term loan facility. The Company recorded approximately $ 0.9 million in “Interest expense, net,” associated with the write-off of deferred debt issuance costs associated with the repayment. The Company also recorded a loss of approximately $ 3.9 million which was recorded in “Interest expense, net” for the year ended December 31, 2018 associated with the termination of the interest rate swap instrument. 1.002 % Senior Term Loan 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 $ 306.7 million as of December 31, 2020) of funding was received on January 25, 2019 with a maturity date of January 24, 2025. The Company is permitted to prepay the term loan before its maturity date. Interest is payable on the term loan at 1.002 % per annum, payable semi-annually in arrears. The term loan contains covenants regarding, among other things, the incurrence of indebtedness and the making of certain payments, as well as commitments regarding amounts of future research and development expenses in 72 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Europe, and is subject to acceleration in the events of default. The Company also has to fulfill financial covenants with respect to a net leverage ratio and interest coverage ratio. Senior Term Loans Due Between 2021 and 2028 In October 2016, the Company borrowed an aggregate amount of € 375.0 million through a group of seven related term loan agreements, and in August 2018, the Company borrowed an additional aggregate amount of € 338.0 million through a group of another seven related term loan agreements. Of the 2016 term loans, an aggregate amount of € 56.0 million (or approximately $ 61.1 million) was repaid upon maturity of two term loan agreements in October 2019. In aggregate, the Company has indebtedness of € 657.0 million (or approximately $ 806.0 million as of December 31, 2020) through a group of twelve related term loan agreements. Four of the term loan agreements in the aggregate amount of € 264.0 million (or approximately $ 323.60 million net of debt issuance costs, as of December 31, 2020) will mature in August and October 2021. The provisions of the term loan agreements are substantially identical, with the exception of interest rate terms and maturities. The Company is permitted to prepay the term loans before their maturity dates. For the term loans with a fixed interest rate, interest is payable in arrears on an annual basis, with interest rates ranging from 0.70 % to 2.26 % and a maturity date between August 2021 and August 2028. For the term loans with a floating interest rate, interest is payable in arrears on a semi-annual basis, with interest rates based on the EURIBOR plus a margin ranging from 0.70 % to 1.25 % and a maturity date between August 2021 and August 2025. The term loans contain covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends, and is subject to acceleration in the event of default. Former Indebtedness 1.056 % Senior Term Loan In December 2014, the Company entered into a term loan with the EIB, which provided the Company with the ability to borrow up to € 200.0 million. The € 200.0 million of funding was received on January 15, 2015 and had a maturity date of January 15, 2020. The Company repaid the € 200.0 million (or approximately $ 220.0 million) term loan in December 2019. Senior Term Loans Due 2021 In April 2016, the Company entered into two term loan agreements with Rabobank, in the amount of € 100.0 million and € 200.0 million, respectively. The provisions of the two term loans were identical in nature. In December 2017, the Company repaid its € 200.0 million (or approximately $ 239.8 million) term loan and in October 2018, in connection with the term loan agreement due 2022 with Rabobank discussed above, the Company repaid its € 100.0 million (or approximately $ 113.2 million) term loan. 5 7 / 8 % Senior Notes The Company’s 5 7 / 8 % senior notes due December 1, 2021 constituted senior unsecured indebtedness. At any time prior to September 1, 2021, the Company could redeem the notes, in whole or in part from time to time, at its option, at a redemption price equal to the greater of (i) 100 % of the principal amount plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the redemption date at the treasury rate plus 0.5 %, plus accrued and unpaid interest, including additional interest, if any. In May 2018, the Company completed a cash tender offer to purchase any and all of its outstanding 5 7 / 8 % senior notes at a cash purchase price of $1,077.50 per $1,000.00 of senior notes. As a result of the tender offer, the Company repurchased approximately $ 185.9 million of principal amount of the senior notes for approximately $ 200.3 million, plus accrued interest. In October 2018, the Company repurchased the remaining principal amount of the senior notes of approximately $ 114.1 million for approximately $ 122.5 million, plus accrued interest. Both repurchases resulted in total losses on extinguishment of debt of approximately $ 24.5 million, including associated fees. As a result of the repurchase of the 5 7 / 8 % senior notes, the Company recorded a cumulative amount of approximately $ 4.7 million of accelerated amortization of a deferred gain related to a terminated interest rate swap instrument associated with the senior notes. The losses on extinguishment as well as the accelerated amortization were reflected in “Interest expense, net,” for the year ended December 31, 2018. 73 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Short-Term Borrowings As of December 31, 2020 and 2019, the Company had short-term borrowings due within one year of approximately $ 33.8 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 December 31, 2020 and 2019, outstanding letters of credit totaled $ 14.4 million and $ 13.9 million, respectively. 7. Employee Benefit Plans The Company sponsors defined benefit pension plans covering certain employees, principally in the United Kingdom, the United States, Germany, Switzerland, Finland, France, Norway and Argentina. The Company also provides certain postretirement health care and life insurance benefits for certain employees, principally in the United States and Brazil. The Company also maintains an Executive Nonqualified Pension Plan (“ENPP”) that provides certain senior executives with retirement income for a period of 15 years or up to a lifetime annuity, if certain requirements are met. Benefits under the ENPP vest if the participant has attained age 50 and has at least ten years of service (including five years as a participant in the ENPP), but are not payable until the participant reaches age 65 . The lifetime annuity benefit generally is available only to vested participants who retire on or after reaching age 65 . The ENPP is an unfunded, nonqualified defined benefit pension plan. Net annual pension costs for the years ended December 31, 2020, 2019 and 2018 for the Company’s defined benefit pension plans and ENPP are set forth below (in millions): Pension benefits 2020 2019 2018 Service cost $ 16.2 $ 15.5 $ 16.6 Interest cost 16.5 20.7 19.9 Expected return on plan assets ( 28.4 ) ( 28.1 ) ( 34.0 ) Amortization of net actuarial losses 15.5 14.3 13.8 Amortization of prior service cost 2.1 1.6 1.2 Net loss recognized due to settlement 0.2 0.5 0.9 Net annual pension cost $ 22.1 $ 24.5 $ 18.4 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 Consolidated Statements of Operations. 74 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The weighted average assumptions used to determine the net annual pension costs for the Company’s defined benefit pension plans and ENPP for the years ended December 31, 2020, 2019 and 2018 are as follows: 2020 2019 2018 All plans: Weighted average discount rate 2.0 % 2.8 % 2.5 % Weighted average expected long-term rate of return on plan assets 4.1 % 4.6 % 5.4 % Rate of increase in future compensation 1.8 %- 5.0 % 1.8 %- 5.0 % 1.8 %- 5.0 % U.S.-based plans: Weighted average discount rate 3.45 % 4.35 % 3.70 % Weighted average expected long-term rate of return on plan assets (1) 5.0 % 5.5 % 6.0 % Rate of increase in future compensation (2) 5.0 % 5.0 % 5.0 % ___________________________________ (1) Applicable for U.S. funded, qualified plans. (2) Applicable for U.S. unfunded, nonqualified plan. For the Company’s Swiss cash balance plan, the interest crediting rate of 1.0 % for both 2020 and 2019 was set equal to the current annual minimum rate set by the government for the mandatory portion of the account balance. Above mandatory amounts have an interest crediting rate of 0.0 % for 2020 and 0.25 % for 2019. Net annual postretirement benefit costs, and the weighted average discount rate used to determine them, for the years ended December 31, 2020, 2019 and 2018 are set forth below (in millions, except percentages): Postretirement benefits 2020 2019 2018 Service cost $ 0.1 $ 0.1 $ 0.1 Interest cost 1.2 1.3 1.4 Amortization of net actuarial losses 0.1 — 0.1 Amortization of prior service cost 0.1 0.1 0.2 Net annual postretirement benefit cost $ 1.5 $ 1.5 $ 1.8 Weighted average discount rate 4.5 % 5.2 % 4.9 % 75 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables set forth reconciliations of the changes in benefit obligation, plan assets and funded status as of December 31, 2020 and 2019 (in millions): Pension and ENPP Benefits Postretirement Benefits Change in benefit obligation 2020 2019 2020 2019 Benefit obligation at beginning of year $ 917.3 $ 823.1 $ 29.4 $ 25.3 Service cost 16.2 15.5 0.1 0.1 Interest cost 16.5 20.7 1.2 1.3 Plan participants’ contributions 1.3 1.2 — — Actuarial losses (gains) 86.8 83.3 ( 1.1 ) 4.5 Amendments ( 0.3 ) 4.7 — — Settlements ( 0.3 ) ( 0.8 ) — — Benefits paid ( 44.6 ) ( 44.8 ) ( 1.5 ) ( 1.5 ) Foreign currency exchange rate changes 40.8 14.4 ( 1.7 ) ( 0.3 ) Benefit obligation at end of year $ 1,033.7 $ 917.3 $ 26.4 $ 29.4 Pension and ENPP Benefits Postretirement Benefits Change in plan assets 2020 2019 2020 2019 Fair value of plan assets at beginning of year $ 711.0 $ 617.1 $ — $ — Actual return on plan assets 76.6 91.2 — — Employer contributions 32.4 30.6 1.5 1.5 Plan participants’ contributions 1.3 1.2 — — Benefits paid ( 44.6 ) ( 44.8 ) ( 1.5 ) ( 1.5 ) Settlements ( 0.3 ) ( 0.8 ) — — Foreign currency exchange rate changes 32.2 16.5 — — Fair value of plan assets at end of year $ 808.6 $ 711.0 $ — $ — Funded status $ ( 225.1 ) $ ( 206.3 ) $ ( 26.4 ) $ ( 29.4 ) Unrecognized net actuarial losses 385.1 362.2 2.6 3.9 Unrecognized prior service cost 20.1 22.5 2.9 3.0 Accumulated other comprehensive loss ( 405.2 ) ( 384.7 ) ( 5.5 ) ( 6.9 ) Net amount recognized $ ( 225.1 ) $ ( 206.3 ) $ ( 26.4 ) $ ( 29.4 ) Amounts recognized in Consolidated Balance Sheets: Other long-term asset $ 13.2 $ 6.2 $ — $ — Other current liabilities ( 6.7 ) ( 4.9 ) ( 1.4 ) ( 1.6 ) Accrued expenses ( 3.2 ) ( 3.3 ) — — Pensions and postretirement health care benefits (noncurrent) ( 228.4 ) ( 204.3 ) ( 25.0 ) ( 27.8 ) Net amount recognized $ ( 225.1 ) $ ( 206.3 ) $ ( 26.4 ) $ ( 29.4 ) 76 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the activity in accumulated other comprehensive loss related to the Company’s ENPP and defined pension and postretirement benefit plans during the years ended December 31, 2020 and 2019 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated other comprehensive loss as of December 31, 2018 $ ( 379.8 ) $ ( 97.4 ) $ ( 282.4 ) Prior service cost arising during the year ( 4.7 ) — ( 4.7 ) Net loss recognized due to settlement 0.6 — 0.6 Net actuarial loss arising during the year ( 25.3 ) ( 2.0 ) ( 23.3 ) Amortization of prior service cost 1.7 0.1 1.6 Amortization of net actuarial losses 14.3 2.5 11.8 Accumulated other comprehensive loss as of December 31, 2019 $ ( 393.2 ) $ ( 96.8 ) $ ( 296.4 ) Prior service cost arising during the year 0.3 — 0.3 Net loss recognized due to settlement 0.3 — 0.3 Net actuarial loss arising during the year ( 37.8 ) ( 5.1 ) ( 32.7 ) Amortization of prior service cost 2.2 0.1 2.1 Amortization of net actuarial losses 15.7 2.6 13.1 Accumulated other comprehensive loss as of December 31, 2020 $ ( 412.5 ) $ ( 99.2 ) $ ( 313.3 ) The unrecognized net actuarial losses included in accumulated other comprehensive loss related to the Company’s defined benefit pension plans and ENPP as of December 31, 2020 and 2019 are set forth below (in millions): 2020 2019 Unrecognized net actuarial losses $ 385.1 $ 362.2 The increase in unrecognized net actuarial losses between years primarily resulted from lower discount rates at December 31, 2020 compared to December 31, 2019. The unrecognized net actuarial losses will be impacted in future periods by actual asset returns, discount rate changes, currency exchange rate fluctuations, actual demographic experience and certain other factors. For some of the Company’s defined benefit pension plans, these losses, to the extent they exceed 10% of the greater of the plan’s liabilities or the fair value of assets (“the gain/loss corridor”), will be amortized on a straight-line basis over the periods discussed as follows. For the Company’s U.S. salaried, U.S. hourly and U.K. defined benefit pension plans, the population covered is predominantly inactive participants, and losses related to those plans, to the extent they exceed the gain/loss corridor, will be amortized over the average remaining lives of those participants while covered by the respective plan. For the Company’s ENPP, the population is predominantly active participants, and losses related to the plan will be amortized over the average future working lifetime of the active participants expected to receive benefits. As of December 31, 2020, the average amortization periods were as follows: ENPP U.S. Plans U.K. Plan Average amortization period of losses related to defined benefit pension plans 7 years 14 years 19 years The following table summarizes the unrecognized prior service cost related to the Company’s defined benefit pension plans as of December 31, 2020 and 2019 (in millions): 2020 2019 Unrecognized prior service cost $ 20.1 $ 22.5 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 the Company’s ENPP during 2019. 77 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the unrecognized net actuarial losses included in the Company’s accumulated other comprehensive loss related to the Company’s U.S. and Brazilian postretirement health care benefit plans as of December 31, 2020 and 2019 (in millions): 2020 2019 Unrecognized net actuarial losses (1) $ 2.6 $ 3.9 ___________________________________ (1) Includes a loss of approximately $ 1.0 million and $ 1.6 million, respectively, related to the Company’s U.S. postretirement benefit plans. The decrease in unrecognized net actuarial losses related to the Company’s U.S. and Brazilian postretirement benefit plans was primarily due to liability gain due to the experience of the plans as of December 31, 2020 as compared to December 31, 2019. The unrecognized net actuarial gains or losses will be impacted in future periods by discount rate changes, actual demographic experience, actual health care inflation and certain other factors. These gains or losses, to the extent they exceed the gain/loss corridor, will be amortized on a straight-line basis over the average remaining service period of active employees expected to receive benefits, or the average remaining lives of inactive participants, covered under the postretirement benefit plans. As of December 31, 2020, the average amortization period was 10 years for the Company’s U.S. postretirement benefit plans. As of December 31, 2020 and 2019, the net prior service cost related to the Company’s U.S. and Brazilian postretirement health care benefit plans was as follows (in millions): 2020 2019 Net prior service cost $ 2.9 $ 3.0 The following table summarizes the fair value of plan assets, aggregate projected benefit obligation and accumulated benefit obligation as of December 31, 2020 and 2019 for defined benefit pension plans, ENPP and other postretirement plans with accumulated benefit obligations in excess of plan assets (in millions): 2020 2019 All plans: Fair value of plan assets $ 41.6 $ 67.8 Projected benefit obligation 306.2 309.3 Accumulated benefit obligation 269.4 275.2 U.S.-based plans and ENPP: Fair value of plan assets $ 5.1 $ 38.3 Projected benefit obligation 157.4 172.5 Accumulated benefit obligation 135.4 151.9 The 2020 amounts disclosed above do not include balances related to the Company’s U.K. plan. The Company’s U.K. plan’s fair value of plan assets was in excess of the plan’s accumulated benefit obligation as of December 31, 2020. The amounts for 2019 disclosed above do not include the fair value of plan assets, the projected benefit obligation or the accumulated benefit obligation related to the Company’s U.K. plan. The Company’s U.K. plan’s fair value of plan assets was in excess of the plan’s accumulated benefit obligation as of December 31, 2019. 78 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company’s accumulated comprehensive loss as of December 31, 2020 and 2019 reflects a reduction in equity related to the following items (in millions): 2020 2019 All plans: (1) Reduction in equity, net of taxes of $ 98.6 and $ 96.3 at December 31, 2020 and 2019, respectively $ 410.8 $ 391.6 GIMA joint venture: (2) Reduction in equity, net of taxes of $ 0.6 and $ 0.5 at December 31, 2020 and 2019, respectively 1.7 1.6 ______________________________________ (1) Primarily related to the Company’s U.K. pension plan. (2) These amounts represented 50 % of GIMA’s unrecognized net actuarial losses and unrecognized prior service cost associated with its pension plan. In addition, GIMA recognized a net actuarial loss due to settlements of approximately $ 0.1 million for both of 2020 and 2019, respectively. The Company’s defined benefit pension obligation has been reflected based on the manner in which its defined benefit plans are being administered. The obligation and resulting liability is calculated employing both actuarial and legal assumptions. These assumptions include, but are not limited to, future inflation, the return on pension assets, discount rates, life expectancy and potential salary increases. There are also assumptions related to the manner in which individual benefit plan benefits are calculated, some of which are legal in nature and include, but are not limited to, member eligibility, years of service and the uniformity of both guaranteed minimum pension benefits and member normal retirement ages for men and women. Some of these assumptions also are subject to the outcome of certain legal cases, which are currently unknown. In the event that any of these assumptions or the administration approach are proven to be different from the Company’s current interpretations and approach, there could be material increases in the Company’s defined benefit pension obligation and the related amounts and timing of future contributions to be paid by the Company. The weighted average assumptions used to determine the benefit obligation for the Company’s defined benefit pension plans and ENPP as of December 31, 2020 and 2019 are as follows: 2020 2019 All plans: Weighted average discount rate 1.5 % 2.0 % Rate of increase in future compensation 1.50 %- 5.0 % 1.75 %- 5.0 % U.S.-based plans: Weighted average discount rate 2.75 % 3.45 % Rate of increase in future compensation (1) 5.0 % 5.0 % ____________________________________ (1) Applicable for U.S. unfunded, nonqualified plan. The weighted average discount rate used to determine the benefit obligation for the Company’s postretirement benefit plans for the years ended December 31, 2020 and 2019 was 3.8 % and 4.5 %, respectively. For the years ended December 31, 2020, 2019 and 2018, the Company used a globally consistent methodology to set the discount rate in the countries where its largest benefit obligations exist. In the United States, the United Kingdom and the Euro Zone, the Company constructed a hypothetical bond portfolio of high-quality corporate bonds and then applied the cash flows of the Company’s benefit plans to those bond yields to derive a discount rate. The bond portfolio and plan-specific cash flows vary by country, but the methodology in which the portfolio is constructed is consistent. In the United States, the bond portfolio is large enough to result in taking a “settlement approach” to derive the discount rate, in which high-quality corporate bonds are assumed to be purchased and the resulting coupon payments and maturities are used to satisfy the Company’s U.S. pension plans’ projected benefit payments. 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. pension plan’s service cost and interest cost. Under the settlement and yield curve approaches, the discount rate is set to equal the single discount rate that produces the same present value of all future payments. 79 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For measuring the expected U.S. postretirement benefit obligation at December 31, 2020, the Company assumed a 7.0 % health care cost trend rate for 2021 decreasing to 5.0 % by 2029. For measuring the expected U.S. postretirement benefit obligation at December 31, 2019, the Company assumed a 6.25 % health care cost trend rate for 2020 decreasing to 5.0 % by 2025. For measuring the Brazilian postretirement benefit plan obligation at December 31, 2020, the Company assumed a 9.96 % health care cost trend rate for 2021, decreasing to 4.28 % by 2032. For measuring the Brazilian postretirement benefit plan obligation at December 31, 2019, the Company assumed a 10.55 % health care cost trend rate for 2020, decreasing to 4.8 % by 2031. The Company currently estimates its minimum contributions and benefit payments to its U.S.-based underfunded defined benefit pension plans and unfunded ENPP for 2021 will aggregate approximately $ 4.4 million. The Company currently estimates its minimum contributions for underfunded plans and benefit payments for unfunded plans for 2021 to its non-U.S.-based defined benefit pension plans will aggregate approximately $ 31.3 million, of which approximately $ 20.9 million relates to its U.K. pension plan. The Company currently estimates its benefit payments for 2021 to its U.S.-based postretirement health care and life insurance benefit plans will aggregate approximately $ 1.5 million and its benefit payments for 2021 to its Brazilian postretirement health care benefit plans will aggregate less than $ 0.1 million. During 2020, approximately $ 44.9 million of benefit payments were made related to the Company’s defined benefit pension plans and ENPP. At December 31, 2020, the aggregate expected benefit payments for the Company’s defined benefit pension plans and ENPP are as follows (in millions): 2021 $ 50.5 2022 51.0 2023 51.9 2024 51.4 2025 52.6 2026 through 2030 283.6 $ 541.0 During 2020, approximately $ 1.5 million of benefit payments were made related to the Company’s U.S. and Brazilian postretirement benefit plans. At December 31, 2020, the aggregate expected benefit payments for the Company’s U.S. and Brazilian postretirement benefit plans are as follows (in millions): 2021 $ 1.5 2022 1.5 2023 1.6 2024 1.6 2025 1.6 2026 through 2030 7.8 $ 15.6 80 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Investment Strategy and Concentration of Risk The weighted average asset allocation of the Company’s U.S. pension benefit plans as of December 31, 2020 and 2019 are as follows: Asset Category 2020 2019 Equity securities 36 % 34 % Fixed income securities 57 % 59 % Other investments 7 % 7 % Total 100 % 100 % The weighted average asset allocation of the Company’s non-U.S. pension benefit plans as of December 31, 2020 and 2019 are as follows: Asset Category 2020 2019 Equity securities 41 % 39 % Fixed income securities 53 % 54 % Other investments 6 % 7 % Total 100 % 100 % The Company categorizes its pension plan assets into one of three levels based on the assumptions used in valuing the asset. See Note 12 for a discussion of the fair value hierarchy as per the guidance in ASC 820, “Fair Value Measurements” (“ASC 820”). The Company’s valuation techniques are designed to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses the following valuation methodologies to measure the fair value of its pension plan assets: • Equity Securities : Equity securities are valued on the basis of the closing price per unit on each business day as reported on the applicable exchange. Equity funds are valued using the net asset value of the fund, which is based on the fair value of the underlying securities. • Fixed Income : Fixed income securities are valued using the closing prices in the active market in which the fixed income investment trades. Fixed income funds are valued using the net asset value of the fund, which is based on the fair value of the underlying securities. • Cash : These investments primarily consist of short-term investment funds which are valued using the net asset value. • Alternative Investments : These investments are reported at fair value as determined by the general partner of the alternative investment. The “market approach” valuation technique is used to value investments in these funds. The funds typically are open-end funds as they generally offer subscription and redemption options to investors. The frequency of such subscriptions or redemptions is dictated by each fund’s governing documents. The amount of liquidity provided to investors in a particular fund generally is consistent with the liquidity and risk associated with the underlying portfolio (i.e., the more liquid the investments in the portfolio, the greater the liquidity provided to investors). Liquidity of individual funds varies based on various factors and may include “gates,” “holdbacks” and “side pockets” imposed by the manager of the fund, as well as redemption fees that may also apply. Investments in these funds typically are valued utilizing the net asset valuations provided by their underlying investment managers, general partners or administrators. The funds consider subscription and redemption rights, including any restrictions on the disposition of the interest, in its determination of the fair value. • Insurance Contracts : Insurance contracts are valued using current prevailing interest rates. 81 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of the Company’s pension assets as of December 31, 2020 is as follows (in millions): Total Level 1 Level 2 Level 3 Equity securities: Global equities $ 235.3 $ 156.5 $ 78.8 $ — Non-U.S. equities 4.7 4.7 — — U.K. equities 65.2 65.2 — — U.S. large cap equities 5.2 5.2 — — U.S. small cap equities 3.9 3.9 — — Total equity securities 314.3 235.5 78.8 — Fixed income: Aggregate fixed income 162.9 162.9 — — International fixed income 249.5 249.5 — — Total fixed income share (1) 412.4 412.4 — — Alternative investments: Private equity fund 2.1 — — 2.1 Hedge funds measured at net asset value (4) 38.5 — — — Total alternative investments (2) 40.6 — — 2.1 Miscellaneous funds (3) 36.6 — — 36.6 Cash and equivalents measured at net asset value (4) 4.7 — — — Total assets $ 808.6 $ 647.9 $ 78.8 $ 38.7 ______________________________________ (1) 44 % of “fixed income” securities are in investment-grade corporate bonds; 20 % are in government treasuries; 11 % are in high-yield securities; 10 % are in foreign securities; 6 % are in asset-backed and mortgage-backed securities; and 9 % are in other various fixed income securities. (2) 42 % of “alternative investments” are in relative value funds; 25 % are in long-short equity funds; 14 % are in event-driven funds; 14 % are in credit funds; and 5 % are distributed in hedged and non-hedged funds. (3) “Miscellaneous funds” is comprised of insurance contracts in Finland, Norway and Switzerland. (4) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The following is a reconciliation of Level 3 assets as of December 31, 2020 (in millions): Total Alternative Investments Miscellaneous Funds Beginning balance as of December 31, 2019 $ 33.1 $ 2.3 $ 30.8 Actual return on plan assets: (a) Relating to assets still held at reporting date 0.1 ( 0.2 ) 0.3 (b) Relating to assets sold during period — — — Purchases, sales and /or settlements 2.4 — 2.4 Foreign currency exchange rate changes 3.1 — 3.1 Ending balance as of December 31, 2020 $ 38.7 $ 2.1 $ 36.6 82 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of the Company’s pension assets as of December 31, 2019 is as follows (in millions): Total Level 1 Level 2 Level 3 Equity securities: Global equities $ 183.4 $ 116.5 $ 66.9 $ — Non-U.S. equities 3.8 3.8 — — U.K. equities 65.2 65.2 — — U.S. large cap equities 5.9 5.9 — — U.S. small cap equities 3.4 3.4 — — Total equity securities 261.7 194.8 66.9 — Fixed income: Aggregate fixed income 150.1 150.1 — — International fixed income 220.0 220.0 — — Total fixed income share (1) 370.1 370.1 — — Alternative investments: Private equity fund 2.3 — — 2.3 Hedge funds measured at net asset value (4) 33.3 — — — Total alternative investments (2) 35.6 — — 2.3 Miscellaneous funds (3) 30.8 — — 30.8 Cash and equivalents measured at net asset value (4) 12.8 — — — Total assets $ 711.0 $ 564.9 $ 66.9 $ 33.1 _______________________________________ (1) 43 % of “fixed income” securities are in investment-grade corporate bonds; 18 % are in government treasuries; 14 % are in high-yield securities; 10 % are in foreign securities; 9 % are in asset-backed and mortgage-backed securities; and 6 % are in other various fixed income securities. (2) 42 % of “alternative investments” are in relative value funds; 24 % are in long-short equity funds; 21 % are in event-driven funds; 7 % are distributed in hedged and non-hedged funds; and 6 % are in credit funds. (3) “Miscellaneous funds” is comprised of insurance contracts in Finland, Norway and Switzerland. (4) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The following is a reconciliation of Level 3 assets as of December 31, 2019 (in millions): Total Alternative Investments Miscellaneous Funds Beginning balance as of December 31, 2018 $ 30.5 $ 2.3 $ 28.2 Actual return on plan assets: (a) Relating to assets still held at reporting date 1.9 ( 0.1 ) 2.0 (b) Relating to assets sold during period — — — Purchases, sales and /or settlements 1.3 0.1 1.2 Foreign currency exchange rate changes ( 0.6 ) — ( 0.6 ) Ending balance as of December 31, 2019 $ 33.1 $ 2.3 $ 30.8 All tax-qualified pension fund investments in the United States are held in the AGCO Corporation Master Pension Trust. The Company’s global pension fund strategy is to diversify investments across broad categories of equity and fixed income securities with appropriate use of alternative investment categories to minimize risk and volatility. The primary investment objective of the Company’s pension plans is to secure participant retirement benefits. As such, the key objective in the pension plans’ financial management is to promote stability and, to the extent appropriate, growth in funded status. The investment strategy for the plans’ portfolio of assets balances the requirement to generate returns with the need to control risk. The asset mix is recognized as the primary mechanism to influence the reward and risk structure of the pension fund investments in an effort to accomplish the plans’ funding objectives. The overall investment strategies and target allocations of retirement fund investments for the Company’s U.S.-based pension plans and the non-U.S. based pension plans are as follow: 83 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) U.S. Pension Plans Non-U.S. Pension Plans (1) Overall investment strategies: (2) Assets for the near-term benefit payments 60.0 % 55.0 % Assets for longer-term growth 40.0 % 45.0 % Total 100.0 % 100.0 % Target allocations: Equity securities 30.0 % 40.0 % Fixed income securities 55.0 % 55.0 % Alternative investments 10.0 % 5.0 % Cash and cash equivalents 5.0 % — % Total 100.0 % 100.0 % _______________________________________ (1) The majority of the Company’s non-U.S. pension fund investments are related to the Company’s pension plan in the United Kingdom. (2) The overall U.S. and non-U.S. pension funds invest in a broad diversification of assets types. The Company has noted that over very long periods, this mix of investments would achieve an average return on its U.S.-based pension plans of approximately 5.5 %. In arriving at the choice of an expected return assumption of 5.0 % for its U.S. plans for the year ended December 31, 2021, the Company has tempered this historical indicator with lower expectations for returns and changes to investments in the future as well as the administrative costs of the plans. The Company has noted that over very long periods, this mix of investments would achieve an average return on its non-U.S. based pension plans of approximately 4.25 %. In arriving at the choice of an expected return assumption of 4.0 % for its U.K.-based plans for the year ended December 31, 2021, the Company has tempered this historical indicator with lower expectations for returns and changes to investments in the future as well as the administrative costs of the plans. Equity securities primarily include investments in large-cap and small-cap companies located across the globe. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, agency mortgages, asset-backed securities and government securities. Alternative and other assets include investments in hedge fund of funds that follow diversified investment strategies. To date, the Company has not invested pension funds in its own stock and has no intention of doing so in the future. Within each asset class, careful consideration is given to balancing the portfolio among industry sectors, geographies, interest rate sensitivity, dependence on economic growth, currency and other factors affecting investment returns. The assets are managed by professional investment firms, who are bound by precise mandates and are measured against specific benchmarks. Among asset managers, consideration is given, among others, to balancing security concentration, issuer concentration, investment style and reliance on particular active investment strategies. The Company participates in a small number of multiemployer plans in the Netherlands and Sweden. The Company has assessed and determined that none of the multiemployer plans which it participates in are individually, or in the aggregate, significant to the Company’s Consolidated Financial Statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contributions over the remainder of the multiemployer plans’ contract periods. The Company maintains separate defined contribution plans covering certain employees, primarily in the United States, the United Kingdom and Brazil. Under the plans, the Company contributes a specified percentage of each eligible employee’s compensation. The Company contributed approximately $ 15.4 million for the year ended December 31, 2020 and $ 15.8 million for both the years ended December 31, 2019 and 2018. 84 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8. Stockholders’ Equity Common Stock At December 31, 2020, the Company had 150,000,000 authorized shares of common stock with a par value of $ 0.01 per share, with approximately 74,962,231 shares of common stock outstanding and approximately 3,853,244 shares reserved for issuance under the Company’s 2006 Long-Term Incentive Plan (the “Plan”) (See Note 9). Share Repurchase Program During the three months ended March 31, 2020 and throughout 2019, the Company repurchased approximately 970,141 and 1,794,256 shares of its 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 the Company’s Consolidated Balance Sheets. The Company suspended share repurchases subsequent to March 31, 2020 in light of the COVID-19 pandemic and has not repurchased shares since that period. As of December 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. Dividends The Company’s Board of Directors has declared and the Company has paid quarterly cash dividends per common share generally beginning in the first quarter of the following years: 2020 (1) 2019 (1) 2018 Dividends declared and paid per common share $ 0.16 $ 0.15 $ 0.15 ____________________________________ (1) The Company’s Board of Directors declared and the Company has paid quarterly cash dividends of $ 0.16 per common share beginning in the second quarter of 2019, from $ 0.15 per common share in the first quarter of 2019. On January 21, 2021, the Company’s Board of Directors approved a quarterly dividend of $ 0.16 per common share commencing in the first quarter of 2021. 85 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accumulated Other Comprehensive Loss 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 years ended December 31, 2020 and 2019 (in millions): Defined Benefit Pension Plans Cumulative Translation Adjustment Deferred Net Gains (Losses) on Derivatives Total Accumulated other comprehensive loss, December 31, 2018 $ ( 282.4 ) $ ( 1,274.4 ) $ 1.4 $ ( 1,555.4 ) Other comprehensive loss before reclassifications ( 27.4 ) ( 23.1 ) ( 2.6 ) ( 53.1 ) Net losses (gains) reclassified from accumulated other comprehensive loss 13.4 — ( 0.1 ) 13.3 Other comprehensive loss, net of reclassification adjustments ( 14.0 ) ( 23.1 ) ( 2.7 ) ( 39.8 ) Accumulated other comprehensive loss, December 31, 2019 ( 296.4 ) ( 1,297.5 ) ( 1.3 ) ( 1,595.2 ) Other comprehensive loss (gain) before reclassifications ( 32.1 ) ( 197.5 ) 5.1 ( 224.5 ) Net losses (gains) reclassified from accumulated other comprehensive loss 15.2 — ( 6.3 ) 8.9 Other comprehensive loss, net of reclassification adjustments ( 16.9 ) ( 197.5 ) ( 1.2 ) ( 215.6 ) Accumulated other comprehensive loss, December 31, 2020 $ ( 313.3 ) $ ( 1,495.0 ) $ ( 2.5 ) $ ( 1,810.8 ) The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the years ended December 31, 2020 and 2019 (in millions): Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item within the Consolidated Statements of Operations Year ended December 31, 2020 (1) Year ended December 31, 2019 (1) Derivatives: Net gains on foreign currency contracts $ ( 6.4 ) $ ( 0.1 ) Cost of goods sold Reclassification before tax ( 6.4 ) ( 0.1 ) 0.1 — Income tax provision Reclassification net of tax $ ( 6.3 ) $ ( 0.1 ) Defined benefit pension plans: Amortization of net actuarial losses $ 15.7 $ 14.3 Other expense, net (2) Amortization of prior service cost 2.2 1.7 Other expense, net (2) Reclassification before tax 17.9 16.0 ( 2.7 ) ( 2.6 ) Income tax provision Reclassification net of tax $ 15.2 $ 13.4 Net losses reclassified from accumulated other comprehensive loss $ 8.9 $ 13.3 ____________________________________ (1) (Gains) losses included within the Consolidated Statements of Operations for the years ended December 31, 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 7 to the Company’s Consolidated Financial Statements. 86 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 9. Stock Incentive Plan Under the Plan, up to 10,000,000 shares of AGCO’s common stock may be issued. As of December 31, 2020, of the 10,000,000 shares reserved for issuance under the Plan, approximately 3,853,244 shares remained 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 Company’s primary long-term incentive plan is a performance share plan that provides for awards of shares of the Company’s common stock based on achieving financial targets, such as targets for earnings per share, return on invested capital and operating margins, as determined by the Company’s Board of Directors. The stock awards under the Plan are earned over a performance period, and the number of shares earned is determined based on annual cumulative or average results for the specified period, depending on the measurement. Performance periods for the Company’s primary long-term incentive plan are consecutive and overlapping three-year cycles, and performance targets are set at the beginning of each cycle. The primary long-term incentive plan provides for participants to earn 33 % to 200 % of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Awards earned under the Plan are paid in shares of common stock at the end of each three-year performance period. The percentage level achievement is determined annually, with the ultimate award that is earned determined based upon the average of the three annual percentages. The compensation expense associated with these awards 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 and earned. Compensation expense recorded during 2020, 2019 and 2018 with respect to awards granted was based upon the stock price as of the grant date. The weighted average grant-date fair value of performance awards granted under the Plan during 2020, 2019 and 2018 was as follows: Years Ended December 31, 2020 2019 2018 Weighted average grant-date fair value $ 70.84 $ 61.01 $ 71.40 During 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 2020 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan: Shares awarded but not earned at January 1 932,182 Shares awarded 425,440 Shares forfeited ( 221,586 ) Shares earned ( 553,084 ) Shares awarded but not earned at December 31 582,952 Based on the level of performance achieved as of December 31, 2020, 553,084 shares were earned under the related performance period and 233,668 shares were issued in February 2021, net of 149,434 shares that were withheld for taxes related to the earned awards. The Plan allows for the participant to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the participant’s statutory minimum federal, state and employment taxes which would be payable at the time of grant. I n addition, there were 169,982 shares earned as of December 31, 2020 related to certain retirees and other individuals that will be issued at the end of the relevant performance periods based on the ultimate level of performance achieved with respect to those periods. 87 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) As of December 31, 2020, the total compensatio n 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 $ 17.1 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years . This estimate is based on the current projected levels of performance of outstanding awards. The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance. Restricted Stock Units During the year ended December 31, 2020, the Company granted 95,593 restricted stock unit (“RSU”) awards. These awards entitle the participant to receive one share of the Company’s common stock for each RSU granted and vest one-third per year over a three-year requisite service period. The 2020 grant of RSU’s to certain executives was and had a three-year cliff vesting requirement. The compensation expense associated with all RSU 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 years ended December 31, 2020, 2019 and 2018 were $ 70.83 , $ 61.01 and $ 63.99 , respectively. RSU transactions during the year ended December 31, 2020 were as follows: Shares awarded but not vested at January 1 396,529 Shares awarded 95,593 Shares forfeited ( 67,914 ) Shares vested ( 280,921 ) Shares awarded but not vested at December 31 143,287 As of December 31, 2020, the total compensation cost related to the unvested RSUs not yet recognized was approximately $ 5.1 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 Certain executives and key managers were eligible to receive grants of SSARs through the year ended December 31, 2020. The SSARs provide a participant with the right to receive the aggregate appreciation in stock price over the market price of the Company’s common stock at the date of grant, payable in shares of the Company’s common stock. The participant may exercise his or her SSARs at any time after the grant is vested but no later than seven years after the date of grant. The SSARs vest ratably over a four-year period from the date of grant. SSAR awards made to certain executives and key managers under the Plan are made with the base price equal to the price of the Company’s common stock on the date of grant. The Company recorded stock compensation expense of approximately $ 1.9 million, $ 2.4 million and $ 2.4 million associated with SSAR awards during 2020, 2019 and 2018, respectively. The compensation expense associated with these awards is being amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option pricing model. The weighted average grant-date fair value of SSAR awards granted under the Plan and the weighted average assumptions under the Black-Scholes option model were as follows for the years ended December 31, 2020, 2019 and 2018: Years Ended December 31, 2020 2019 2018 Weighted average grant-date fair value $ 12.31 $ 11.34 $ 12.88 Weighted average assumptions under Black-Scholes option model: Expected life of awards (years) 3.0 3.0 3.0 Risk-free interest rate 1.5 % 2.6 % 2.2 % Expected volatility 24.1 % 24.2 % 23.7 % Expected dividend yield 0.9 % 1.0 % 0.8 % 88 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) SSAR transactions during the year ended December 31, 2020 were as follows: SSARs outstanding at January 1 759,675 SSARs granted 187,100 SSARs exercised ( 311,200 ) SSARs canceled or forfeited ( 232,425 ) SSARs outstanding at December 31 403,150 SSAR price ranges per share: Granted $ 72.74 Exercised 43.88 - 73.14 Canceled or forfeited 43.88 - 73.14 Weighted average SSAR exercise prices per share: Granted $ 72.74 Exercised 56.61 Canceled or forfeited 67.87 Outstanding at December 31 66.44 At December 31, 2020, the weighted average remaining contractual life of SSARs outstanding was approximately four years . As of December 31, 2020, the total compensation cost related to unvested SSARs not yet recognized was approximately $ 1.7 million and the weighted-average period over which it is expected to be recognized is approximately two and one-half years. The following table sets forth the exercise price range, number of shares, weighted average exercise price, and remaining contractual lives by groups of similar price as of December 31, 2020: SSARs Outstanding SSARs Exercisable Range of Exercise Prices Number of Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Exercisable as of December 31, 2020 Weighted Average Exercise Price $ 43.88 - $ 62.85 142,106 3.73 $ 60.52 68,756 $ 58.04 $ 63.47 - $ 73.14 261,044 4.21 $ 69.66 101,369 $ 67.56 403,150 170,125 $ 63.71 The total fair value of SSARs vested during 2020 was approximately $ 3.1 million. There were 233,025 SSARs that were not vested as of December 31, 2020. The total intrinsic value of outstanding and exercisable SSARs as of December 31, 2020 was $ 14.8 million and $ 6.7 million, respectively. The total intrinsic value of SSARs exercised during 2020 was approximately $ 10.2 million. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs, vesting of RSU awards and vesting of performance awards under the Plan was approximately $ 2.5 million for the year ended December 31, 2020. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs and vesting of RSU awards and vesting of performance awards under the Plan was approximately $ 2.7 million for the year ended December 31, 2019. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs and vesting of RSU awards and vesting of performance awards under the Plan was approximately $ 1.6 million for the year ended December 31, 2018. The Company realized an insignificant tax benefit from the exercise of SSARs, vesting of performance awards and vesting of RSU awards in certain foreign jurisdictions during the years ended December 31, 2020, 2019 and 2018. 89 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) On January 20, 2021, the Company granted 134,754 performance award shares (subject to the Company achieving future target levels of performance) and 89,775 RSUs under the Plan. The 2021 grant of performance award shares is subject to a total shareholder return modifier. Director Restricted Stock Grants Pursuant to the Plan, all non-employee directors receive annual restricted stock grants of the Company’s common stock. All restricted stock grants made to the Company’s directors are restricted as to transferability for a period of one year . In the event a director departs from the Company’s Board of Directors, the non-transferability period expires immediately. The plan allows each director to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the statutory minimum federal, state and employment taxes that would be payable at the time of grant. 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 2020 associated with these grants. 10. Derivative Instruments and Hedging Activities The Company attempts to manage its transactional foreign exchange exposure by hedging foreign currency cash flow forecasts and commitments arising from the anticipated settlement of receivables and payables and from future purchases and sales. Where naturally offsetting currency positions do not occur, the Company hedges certain, but not all, of its exposures through the use of foreign currency contracts. The Company’s translation exposure resulting from translating the financial statements of foreign subsidiaries into United States dollars may be partially hedged from time to time. When practical, the translation impact is reduced by financing local operations with local borrowings. The Company uses floating rate and fixed rate debt to finance its operations. The floating rate debt obligations expose the Company to variability in interest payments due to changes in the EURIBOR and LIBOR benchmark interest rates. The Company believes it is prudent to limit the variability of a portion of its interest payments, and to meet that objective, the Company periodically enters into interest rate swaps to manage the interest rate risk associated with the Company’s borrowings. The Company designates interest rate contracts used to convert the interest rate exposure on a portion of the Company’s debt portfolio from a floating rate to a fixed rate as cash flow hedges, while those contracts converting the Company’s interest rate exposure from a fixed rate to a floating rate are designated as fair value hedges. To protect the value of the Company’s investment in foreign operations against adverse changes in foreign currency exchange rates, the Company from time to time, may hedge a portion of the Company’s net investment in the foreign subsidiaries by using a cross currency swap. The component of the gains and losses on the Company’s net investment in the designated foreign operations driven by changes in foreign exchange rates are economically offset by movements in the fair value of the cross currency swap contracts. The Company is exposed to commodity risk from steel and other raw material purchases where a portion of the contractual purchase price is linked to a variable rate based on publicly available market data. From time to time, the Company enters into cash flow hedges to mitigate its exposure to variability in commodity prices. The Company’s senior management establishes the Company’s foreign currency and interest rate risk management policies. These policies are reviewed periodically by the Finance Committee of the Company’s Board of Directors. The policies allow for the use of derivative instruments to hedge exposures to movements in foreign currency and interest rates. The Company’s policies prohibit the use of derivative instruments for speculative purposes. All derivatives are recognized on the Company’s Consolidated Balance Sheets at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either (1) a cash flow hedge of a forecasted transaction, (2) a fair value hedge of a recognized liability, (3) a hedge of a net investment in a foreign operation, or (4) a non-designated derivative instrument. The Company categorizes its derivative assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. See Note 12 for a discussion of the fair value hierarchy as per the guidance in ASC 820. The Company’s valuation techniques are designed to maximize the use of observable inputs and minimize the use of unobservable inputs. 90 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Counterparty Risk The Company regularly monitors the counterparty risk and credit ratings of all the counterparties to the derivative instruments. The Company believes that its exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. If the Company perceives any risk with a counterparty, then the Company would cease to do business with that counterparty. There have been no negative impacts to the Company from any non-performance of any counterparties. Derivative Transactions Designated as Hedging Instruments Cash Flow Hedges Foreign Currency Contracts The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates. The changes in the fair values of these cash flow hedges are recorded in accumulated other comprehensive loss and are subsequently reclassified into “Cost of goods sold” during the period the sales and purchases are recognized. These amounts offset the effect of the changes in foreign currency rates on the related sale and purchase transactions. During 2020, 2019 and 2018, 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 $ 395.8 million and $ 332.7 million as of December 31, 2020 and 2019, respectively. Steel Commodity Contracts In December 2020, the Company designated certain steel commodity contracts as cash flow hedges of expected future purchases of steel. The total notional value of derivatives that were designated as cash flow hedges was approximately $ 14.7 million as of December 31, 2020. 91 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes 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 2020, 2019 and 2018 (in millions): Recognized in Net Income 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 Consolidated Statements of Operations Containing Hedge Gains (Losses) 2020 Foreign currency contracts (1) $ 4.6 Cost of goods sold $ 6.3 $ 7,092.2 Commodity contracts (2) 0.5 — Total $ 5.1 $ 6.3 2019 Foreign currency contracts $ ( 2.6 ) Cost of goods sold $ 0.1 $ 7,057.1 2018 Foreign currency contracts $ 0.4 Cost of goods sold $ ( 2.2 ) $ 7,355.3 Interest rate swap contract ( 1.5 ) Interest expense, net ( 5.0 ) 53.8 Total $ ( 1.1 ) $ ( 7.2 ) (1) The outstanding contracts as of December 31, 2020 range in maturity through December 2021. (2) The outstanding contracts as of December 31, 2020 range in maturity through May 2021. The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the years ended December 31, 2020, 2019 and 2018 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated derivative net losses as of December 31, 2017 $ ( 6.0 ) $ ( 1.3 ) $ ( 4.7 ) Net changes in fair value of derivatives ( 1.0 ) 0.1 ( 1.1 ) Net losses reclassified from accumulated other comprehensive loss into income 8.6 1.4 7.2 Accumulated derivative net gains as of December 31, 2018 $ 1.6 $ 0.2 $ 1.4 Net changes in fair value of derivatives ( 3.0 ) ( 0.4 ) ( 2.6 ) Net gains reclassified from accumulated other comprehensive loss into income ( 0.1 ) — ( 0.1 ) Accumulated derivative net losses as of December 31, 2019 $ ( 1.5 ) $ ( 0.2 ) $ ( 1.3 ) Net changes in fair value of derivatives 4.9 ( 0.2 ) 5.1 Net gains reclassified from accumulated other comprehensive loss into income ( 6.4 ) ( 0.1 ) ( 6.3 ) Accumulated derivative net losses as of December 31, 2020 $ ( 3.0 ) $ ( 0.5 ) $ ( 2.5 ) Net Investment Hedges The Company uses non-derivative and derivative instruments, to hedge a portion of its net investment in foreign operations against adverse movements in exchange rates. For instruments that are designated as hedges of net investments in foreign operations, changes in the fair value of the derivative instruments are recorded in foreign currency translation adjustments, a component of accumulated other comprehensive loss, to offset changes in the value of the net investments being hedged. When the net investment in foreign operations is sold or substantially liquidates, the amounts recorded in accumulated other comprehensive loss are reclassified to earnings. To the extent foreign currency denominated debt is de-designated from 92 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) a net investment hedge relationship, changes in the value of the foreign currency denominated debt are recorded in earnings through the maturity date. In January 2018, the Company entered into a cross currency swap contract as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. The cross currency swap expired on January 19, 2021. At maturity of the cross currency swap contract, the Company delivered the notional amount of approximately € 245.7 million (or approximately $ 297.1 million as of January 19, 2021) and received $ 300.0 million from the counterparties, resulting in a gain of approximately $ 2.9 million that was recognized in accumulated other comprehensive loss. The Company received quarterly interest payments from the counterparties based on a fixed interest rate until maturity of the cross currency swap. On January 29, 2021, the Company entered into a new cross currency swap contract as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. The cross currency swap has an expiration date of January 29, 2028. At maturity of the cross currency swap contract, the Company will deliver the notional amount of approximately € 247.9 million (or approximately $ 300.9 million as of January 29, 2021) 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 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. In January 2019 and September 2019, the Company designated € 160.0 million and € 30.0 million, respectively, 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 September 2019, 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. The following table summarizes the notional values of the instrument designated as a net investment hedge (in millions): Notional Amount as of December 31, 2020 December 31, 2019 Cross currency swap contract $ 300.0 $ 300.0 The following table summarizes the after-tax impact of changes in the fair value of the instrument designated as a net investment hedge (in millions): Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Years Ended December 31, 2020 December 31, 2019 December 31, 2018 Foreign currency denominated debt $ 1.7 $ 2.5 $ ( 14.4 ) Cross currency swap contract ( 25.5 ) 9.3 17.7 Derivative Transactions Not Designated as Hedging Instruments During 2020, 2019 and 2018, the Company entered into foreign currency contracts to economically hedge receivables and payables on the Company and its subsidiaries’ balance sheets that are denominated in foreign currencies other than the functional currency. These contracts were classified as non-designated derivative instruments. Gains and losses on such contracts are substantially offset by losses and gains on the remeasurement of the underlying asset or liability being hedged and are immediately recognized into earnings. As of December 31, 2020 and 2019, the Company had outstanding foreign currency contracts with a notional amount of approximately $ 3,326.6 million and $ 2,800.3 million, respectively. 93 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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): For the Years Ended Classification of Gain (Loss) December 31, 2020 December 31, 2019 December 31, 2018 Foreign currency contracts Other expense, net $ 3.7 $ 20.4 $ ( 1.4 ) The table below sets forth the fair value of derivative instruments as of December 31, 2020 (in millions): Asset Derivatives as of December 31, 2020 Liability Derivatives as of December 31, 2020 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivative instruments designated as hedging instruments: Foreign currency contracts Other current assets $ 1.0 Other current liabilities $ 4.5 Commodity contracts Other current assets 0.5 Other current liabilities — Cross currency swap contract Other noncurrent assets 1.5 Other noncurrent liabilities — Derivative instruments not designated as hedging instruments: Foreign currency contracts Other current assets 12.3 Other current liabilities 22.2 Total derivative instruments $ 15.3 $ 26.7 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 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivative instruments designated as hedging instruments: Foreign currency contracts Other current assets $ 0.6 Other current liabilities $ 1.9 Cross currency swap contract Other noncurrent assets 27.0 Other noncurrent liabilities — Derivative instruments not designated as hedging instruments: Foreign currency contracts Other current assets 11.7 Other current liabilities 13.1 Total derivative instruments $ 39.3 $ 15.0 Former Interest Rate Swap Contract The Company monitors the mix of short-term and long-term debt regularly. From time to time, the Company manages the risk to interest rate fluctuations through the use of derivative financial instruments. During 2015, the Company entered into an interest rate swap instrument with a notional amount of € 312.0 million and an expiration date of June 26, 2020. The swap was designated and accounted for as a cash flow hedge. Under the swap agreement, the Company paid a fixed interest rate of 0.33 % plus the applicable margin, and the counterparty to the agreement paid a floating interest rate based on the three-month EURIBOR. Changes in the fair value of the interest rate swap were recorded in accumulated other comprehensive loss and were subsequently reclassified into “Interest expense, net” as a rate adjustment in the same period in which the related interest on the Company’s floating rate term loan facility affected earnings. As a result of the Company’s credit facility agreement entered into in October 2018 and the repayment of the € 312.0 million (or approximately $ 360.8 million) term loan under the Company’s former revolving credit facility, as well as the change in the mix of the Company’s short-term and long-term debt, the Company 94 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) terminated the interest rate swap instrument and recorded a loss of approximately $ 3.9 million which was recorded in “Interest expense, net” for the year ended December 31, 2018. Refer to Note 6 for further information. 11. Commitments and Contingencies The future payments required under the Company’s significant commitments, excluding indebtedness, as of December 31, 2020 are as follows (in millions): Payments Due By Period 2021 2022 2023 2024 2025 Thereafter Total Interest payments related to indebtedness (1) $ 16.8 $ 12.5 $ 8.7 $ 6.4 $ 3.0 $ 3.2 $ 50.6 Unconditional purchase obligations (2) 106.2 9.9 0.6 0.2 — — 116.9 Other short-term and long-term obligations (3) 95.8 19.6 141.7 22.3 8.9 49.2 337.5 Total contractual cash obligations $ 218.8 $ 42.0 $ 151.0 $ 28.9 $ 11.9 $ 52.4 $ 505.0 ____________________________________ (1) 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 (unaudited). Refer to Note 6 for more information on the Company's commitments with respect to indebtedness. (2) Unconditional purchase obligations exclude routine purchase orders entered into in the normal course of business. (3) Other short-term and long-term obligations include estimates of future minimum contribution requirements under the Company’s U.S. and non-U.S. defined benefit pension and postretirement plans. These estimates are based on current legislation in the countries the Company operates 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, based on the years of statutory expiration. The uncertain income tax positions included above are gross of certain indirect favorable effects that relate to other tax jurisdictions (unaudited). See Note 5 for further information. Amount of Commitment Expiration Per Period 2021 2022 2023 2024 2025 Thereafter Total Guarantees $ 13.8 $ 12.2 $ 31.7 $ 18.4 $ 24.9 $ 2.3 $ 103.3 Off-Balance Sheet Arrangements Guarantees The Company maintains a remarketing agreement with its U.S. 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 December 31, 2020, the Company has outstanding guarantees of indebtedness owed to related and third parties of approximately $ 17.9 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. Losses under such guarantees historically have been insignificant. In addition, the Company generally would expect to be able to recover a significant portion of the amounts paid under such guarantees from the sale of the underlying financed farm equipment, as the fair value of such equipment is expected to be sufficient to offset a substantial portion of the amounts paid. The Company also has obligations to guarantee indebtedness owed to certain of its finance joint ventures if dealers or end users default on loans. Losses under such guarantees historically have been insignificant and the guarantees are not material. The Company believes the credit risk associated with these guarantees is not material. In addition, at December 31, 2020, the Company had accrued approximately $ 25.3 million of outstanding guarantees of minimum 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 guarantee is approximately $ 85.4 million. 95 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Other At December 31, 2020, the Company had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $ 3,722.4 million. The outstanding contracts as of December 31, 2020 range in maturity through December 2021. The Company 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). The Company sells a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. The Company also sells certain accounts receivable under factoring arrangements to financial institutions around the world. The Company reviewed the sale of such receivables and determined that these facilities should be accounted for as off-balance sheet transactions. Contingencies 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 December 31, 2020, not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $ 25.3 million). The amount ultimately in dispute will be significantly greater because of interest and penalties. The Company has been advised by its legal and tax advisors that its position with respect to the deductions is allowable under the tax laws of Brazil. The Company is contesting the disallowance and believes that it is not likely that the assessment, interest or penalties will be required to be paid. However, the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which could take several years. The Company is a party to various other legal claims and actions incidental to its business. The Company believes that none of these claims or actions, either individually or in the aggregate, is material to its business or financial statements as a whole, including its results of operations and financial condition. 96 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 12. Fair Value of Financial Instruments The Company categorizes its assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. Estimates of fair value for financial assets and liabilities are based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Model-derived valuations in which one or more significant inputs are unobservable. The Company categorizes its pension plan assets into one of the three levels of the fair value hierarchy. See Note 7 for a discussion of the valuation methods used to measure the fair value of the Company’s pension plan assets. The Company enters into foreign currency, commodity and interest rate swap contracts. The fair values of the Company’s derivative instruments are determined using discounted cash flow valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these discounted cash flow valuation models for derivative instruments include the applicable exchange rates, forward rates or interest rates. Such models used for option contracts also use implied volatility. See Note 10 for a discussion of the Company’s derivative instruments and hedging activities. Assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019 are summarized below (in millions): As of December 31, 2020 Level 1 Level 2 Level 3 Total Derivative assets $ — $ 15.3 $ — $ 15.3 Derivative liabilities — 26.7 — 26.7 As of December 31, 2019 Level 1 Level 2 Level 3 Total Derivative assets $ — $ 39.3 $ — $ 39.3 Derivative liabilities — 15.0 — 15.0 Cash and cash equivalents, accounts and notes receivable, net and accounts payable are valued at their carrying amounts in the Company’s Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments. The carrying amounts of long-term debt under the Company’s senior term loan due 2022, 1.002 % senior term loan due 2025 and senior term loans due between 2021 and 2028 approximate fair value based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. See Note 6 for additional information on the Company’s long-term debt. 97 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 13. Related Party Transactions Rabobank, a financial institution based in the Netherlands, is a 51 % owner in the Company’s finance joint ventures, which are located in the United States, Canada, Europe, Brazil, Argentina and Australia. Rabobank is also the principal agent and participant in the Company’s revolving credit facility (see Note 6). The majority of the assets of the Company’s finance joint ventures represents finance receivables. The majority of the liabilities represents notes payable and accrued interest. Under the various joint venture agreements, Rabobank or its affiliates provide financing to the joint venture companies, primarily through lines of credit. During 2020, the Company made a total of approximately $ 1.9 million of additional investments in its finance joint venture in the Netherlands. During 2019 and 2018, the Company did not make additional investments in its finance joint ventures. During 2020, the Company did no t receive dividends from its finance joint ventures. During 2019 and 2018, the Company received approximately $ 40.5 million and $ 29.4 million, respectively, dividends from certain of the its finance joint ventures. The Company’s finance joint ventures provide retail financing and wholesale financing to its dealers. The terms of the financing arrangements offered to the Company’s dealers are similar to arrangements the finance joint ventures provide to unaffiliated third parties. In addition, the Company transfers, on an ongoing basis, a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures (see Note 3). The Company maintains a remarketing agreement with its U.S. finance joint venture and has outstanding guarantees of minimum residual values that may be owed to its finance joint ventures in the U.S. and Canada upon the expiration of certain eligible operating leases and has guarantees with its other finance joint ventures which were not material (see Note 11). In addition, as part of sales incentives provided to end users, the Company may from time to time subsidize interest rates of retail financing provided by its finance joint ventures. The cost of those programs is recognized at the time of sale to the Company’s dealers (see Note 1). The Company has a minority equity interest in Tractors and Farm Equipment Limited (“TAFE”), which manufactures and sells Massey Ferguson-branded equipment primarily in India, and also supplies tractors and components to the Company for sale in other markets. On October 15, 2020, TAFE repurchased 461,000 shares of its common stock from the Company for approximately $ 33.9 million, resulting in an approximate remaining 20.7 % ownership interest. Mallika Srinivasan, who is the Chairman and Managing Director of TAFE, is currently a member of the Company’s Board of Directors. As of December 31, 2020, TAFE beneficially owned 12,150,152 shares of the Company’s common stock, not including shares of the Company’s common stock received by Ms. Srinivasan for service as a director. The Company and TAFE are parties to an agreement pursuant to which, among other things, TAFE has agreed not to purchase in excess of 12,150,152 shares of the Company’s common stock, subject to certain adjustments, and the Company has agreed to annually nominate a TAFE representative to its Board of Directors. During 2020, 2019 and 2018, the Company purchased approximately $ 78.9 million, $ 92.7 million and $ 109.6 million, respectively, of tractors and components from TAFE. During 2020, 2019 and 2018, the Company sold approximately $ 1.3 million, $ 1.5 million and $ 1.8 million, respectively, of parts to TAFE. The Company received dividends from TAFE of approximately $ 1.8 million, $ 2.0 million and $ 1.8 million during 2020, 2019 and 2018, respectively. During 2020, 2019 and 2018, the Company paid approximately $ 3.3 million, $ 4.4 million and $ 3.5 million, respectively, to PPG Industries, Inc. for painting materials used in the Company’s manufacturing processes. The Company’s Chairman, President and Chief Executive Officer, who retired effective on December 31, 2020, serves as a member of the board of directors of PPG Industries, Inc. During 2020, 2019 and 2018, the Company paid approximately $ 5.6 million, $ 6.2 million and $ 1.6 million, respectively, to Linde PLC (the parent company of Praxair, Inc.) for propane, gas and welding, and laser consumables used in the Company’s manufacturing processes. The Company’s Chairman, President and Chief Executive Officer, who retired effective on December 31, 2020, served as a member of the board of directors of Praxair, Inc. until the business combination of Praxair, Inc. and Linde AG, and is currently a member of the board of directors of Linde PLC, the holding company for the combined business. 98 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 14. Segment Reporting The Company’s four reportable segments distribute a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each segment are based on the location of the third-party customer. The Company’s selling, general and administrative expenses and engineering expenses are generally charged to each segment based on the region and division where the expenses are incurred. As a result, the components of income from operations for one segment may not be comparable to another segment. Segment results for the years ended December 31, 2020, 2019 and 2018 based on the Company’s reportable segments are as follows (in millions): Years Ended December 31, North America South America Europe/Middle East Asia/Pacific/Africa Consolidated 2020 Net sales $ 2,175.0 $ 873.8 $ 5,366.9 $ 734.0 $ 9,149.7 Income from operations 193.7 29.3 585.3 62.1 870.4 Depreciation 61.3 25.8 110.5 14.9 212.5 Assets 1,051.9 687.6 2,238.7 536.2 4,514.4 Capital expenditures 42.2 18.8 201.8 7.1 269.9 2019 Net sales $ 2,191.8 $ 802.2 $ 5,328.8 $ 718.6 $ 9,041.4 Income (loss) from operations 121.6 ( 39.4 ) 638.2 43.4 763.8 Depreciation 61.6 32.4 102.7 14.2 210.9 Assets 1,125.6 758.0 2,187.7 430.2 4,501.5 Capital expenditures 52.1 32.9 173.5 14.9 273.4 2018 Net sales $ 2,180.1 $ 959.0 $ 5,385.1 $ 827.8 $ 9,352.0 Income (loss) from operations 103.1 ( 10.1 ) 601.1 49.6 743.7 Depreciation 67.6 30.5 111.3 15.8 225.2 Assets 1,032.1 736.1 1,905.8 501.1 4,175.1 Capital expenditures 43.3 30.4 120.3 9.3 203.3 99 Table of Contents AGCO CORPORATION NOTES TO 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): 2020 2019 2018 Segment income from operations $ 870.4 $ 763.8 $ 743.7 Corporate expenses ( 134.7 ) ( 129.0 ) ( 133.7 ) Amortization of intangibles ( 59.5 ) ( 61.1 ) ( 64.7 ) Stock compensation expense ( 36.8 ) ( 40.0 ) ( 44.3 ) Impairment charges ( 20.0 ) ( 176.6 ) — Restructuring expenses ( 19.7 ) ( 9.0 ) ( 12.0 ) Consolidated income from operations $ 599.7 $ 348.1 $ 489.0 Segment assets $ 4,514.4 $ 4,501.5 $ 4,175.1 Cash and cash equivalents 1,119.1 432.8 326.1 Investments in affiliates 442.7 380.2 400.0 Deferred tax assets, other current and noncurrent assets 665.9 645.2 656.6 Intangible assets, net 455.6 501.7 573.1 Goodwill 1,306.5 1,298.3 1,495.5 Consolidated total assets $ 8,504.2 $ 7,759.7 $ 7,626.4 Property, plant and equipment, right-of-use lease assets and amortizable intangible assets by country as of December 31, 2020 and 2019 was as follows (in millions): 2020 2019 United States $ 541.2 $ 604.2 Germany 456.6 392.7 Finland 191.4 156.1 Brazil 150.4 199.9 France 137.6 123.4 Italy 129.0 112.3 Denmark 101.9 99.2 China 98.9 99.8 Other 232.8 231.4 $ 2,039.8 $ 2,019.0 100 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 15. Revenue Contract Liabilities Contract liabilities relate to the following: (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 consideration precedes the Company’s performance with respect to precision technology services and where the performance obligation is satisfied over time. Significant changes in the balance of contract liabilities for the years ended December 31, 2020 and 2019 were as follows (in millions): Year Ended December 31, 2020 Year Ended December 31, 2019 Balance at beginning of period $ 104.0 $ 76.8 Advance consideration received 192.7 147.7 Revenue recognized during the period for extended warranty contracts, maintenance services and technology services ( 46.6 ) ( 33.8 ) Revenue recognized during the period related to grain storage and protein production systems ( 85.6 ) ( 87.4 ) Foreign currency translation 7.5 0.7 Balance as of December 31 $ 172.0 $ 104.0 The contract liabilities are classified as either “Other current liabilities” and "Other noncurrent liabilities" or “Accrued expenses” in the Company’s 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 December 31, 2020 are $ 52.4 million in 2021, $ 46.2 million in 2022, $ 27.6 million in 2023, $ 11.9 million in 2024 and $ 3.8 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. 101 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Disaggregated Revenue Net sales for the year ended December 31, 2020 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated Primary geographical markets: United States $ 1,781.7 $ — $ — $ — $ 1,781.7 Canada 307.4 — — — 307.4 Germany — — 1,280.6 — 1,280.6 France — — 1,080.2 — 1,080.2 United Kingdom and Ireland — — 557.8 — 557.8 Finland and Scandinavia — — 698.5 — 698.5 Other Europe — — 1,613.1 — 1,613.1 South America — 865.4 — — 865.4 Middle East and Algeria — — 136.7 — 136.7 Africa — — — 58.3 58.3 Asia — — — 373.1 373.1 Australia and New Zealand — — — 302.6 302.6 Mexico, Central America and Caribbean 85.9 8.4 — — 94.3 $ 2,175.0 $ 873.8 $ 5,366.9 $ 734.0 $ 9,149.7 Major products: Tractors $ 692.0 $ 469.8 $ 3,814.3 $ 296.1 $ 5,272.2 Replacement parts 338.4 84.0 936.1 87.2 1,445.7 Grain storage and protein production systems 471.0 82.8 122.2 226.0 902.0 Combines, application equipment and other machinery 673.6 237.2 494.3 124.7 1,529.8 $ 2,175.0 $ 873.8 $ 5,366.9 $ 734.0 $ 9,149.7 102 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Net sales for the year ended December 31, 2019 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated Primary geographical markets: United States $ 1,799.7 $ — $ — $ — $ 1,799.7 Canada 289.7 — — — 289.7 Germany — — 1,194.3 — 1,194.3 France — — 1,097.6 — 1,097.6 United Kingdom and Ireland — — 561.9 — 561.9 Finland and Scandinavia — — 772.8 — 772.8 Other Europe — — 1,629.0 — 1,629.0 South America — 789.7 — — 789.7 Middle East and Algeria — — 73.2 — 73.2 Africa — — — 116.2 116.2 Asia — — — 344.7 344.7 Australia and New Zealand — — — 257.7 257.7 Mexico, Central America and Caribbean 102.4 12.5 — — 114.9 $ 2,191.8 $ 802.2 $ 5,328.8 $ 718.6 $ 9,041.4 Major products: Tractors $ 662.4 $ 447.7 $ 3,772.0 $ 300.6 $ 5,182.7 Replacement parts 310.2 88.2 874.8 74.6 1,347.8 Grain storage and protein production systems 547.9 79.5 172.8 234.6 1,034.8 Combines, application equipment and other machinery 671.3 186.8 509.2 108.8 1,476.1 $ 2,191.8 $ 802.2 $ 5,328.8 $ 718.6 $ 9,041.4 103 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Net sales for the year ended December 31, 2018 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America (1) South America Europe/ Middle East (1) Asia/ Pacific/Africa Consolidated (1) Primary geographical markets: United States $ 1,723.6 $ — $ — $ — $ 1,723.6 Canada 329.0 — — — 329.0 Germany — — 1,213.6 — 1,213.6 France — — 1,002.9 — 1,002.9 United Kingdom and Ireland — — 614.4 — 614.4 Finland and Scandinavia — — 826.5 — 826.5 Other Europe — — 1,627.8 — 1,627.8 South America — 943.1 — — 943.1 Middle East and Algeria — — 100.0 — 100.0 Africa — — — 135.5 135.5 Asia — — — 414.5 414.5 Australia and New Zealand — — — 277.8 277.8 Mexico, Central America and Caribbean 127.5 15.9 — — 143.4 $ 2,180.1 $ 959.0 $ 5,385.1 $ 827.8 $ 9,352.0 Major products: Tractors $ 665.8 $ 599.1 $ 3,743.0 $ 353.2 $ 5,361.1 Replacement parts 298.7 91.0 880.3 76.0 1,346.0 Grain storage and protein production systems 570.3 70.1 187.6 285.5 1,113.5 Combines, application equipment and other machinery 645.3 198.8 574.3 113.1 1,531.5 $ 2,180.1 $ 959.0 $ 5,385.1 $ 827.8 $ 9,352.0 ___________________________________ (1) Rounding may impact summation of amounts. 104 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 16. Leases The Company leases certain land, buildings, machinery, equipment, vehicles and office and computer equipment under finance and operating leases. The Company adopted ASU 2016-02, “Leases” effective January 1, 2019. Under the new standard, lessees are required to record an asset (ROU asset or finance lease asset) and a lease liability. The new standard continues to allow for two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases result in the recognition of a single lease expense on a straight-line basis over the lease term, similar to the treatment for operating leases under previous U.S. GAAP. Finance leases result in an accelerated expense, also similar to previous U.S. GAAP. ASU 2016-02 also contains amended guidance regarding the identification of embedded leases in service and supply contracts, as well as the identification of lease and nonlease components of an arrangement. ROU assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent the Company’s obligation to make lease payments for the lease term. All leases greater than 12 months result in the recognition of an ROU asset and liability at the lease commencement date based on the present value of the lease payments over the lease term. The present value of the lease payments is calculated using the applicable weighted-average discount rate. The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The incremental borrowing rate is estimated using the currency denomination of the lease, the contractual lease term and the Company’s applicable borrowing rate. The Company does not recognize a ROU asset or lease liability with respect to operating leases with an initial term of 12 months or less and recognizes expense on such leases on a straight-line basis over the lease term. The Company accounts for lease components separately from nonlease components other than for real estate and office equipment. The Company evaluated its supplier agreements for the existence of leases and determined these leases comprised an insignificant portion of its supplier agreements. As such, these leases were not material to the Company’s Consolidated Balance Sheets. The Company has certain leases that contain one or more options to terminate or renew that can extend the lease term up to 17 years. Options that the company is reasonably certain to exercise are included in the lease term. The depreciable life of ROU assets and leasehold improvements are limited by the expected lease term. The Company has certain lease agreements that include variable rental payments that are adjusted periodically for inflation based on the index rate as defined by the applicable government authority. Generally, the Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. Total lease assets and liabilities at December 31, 2020 and 2019 were as follows (in millions): Lease Assets Classification As of December 31, 2020 As of December 31, 2019 Operating ROU assets Right-of-use lease assets $ 165.1 $ 187.3 Finance lease assets Property, plant and equipment, net (1) 15.1 19.1 Total leased assets $ 180.2 $ 206.4 Lease Liabilities Classification As of December 31, 2020 As of December 31, 2019 Current: Operating Accrued expenses $ 43.5 $ 42.3 Finance Other current liabilities 3.0 4.5 Noncurrent: Operating Operating lease liabilities 125.9 148.6 Finance Other noncurrent liabilities 9.8 12.0 Total leased liabilities $ 182.2 $ 207.4 ____________________________________ (1) Finance lease assets are recorded net of accumulated depreciation of $ 15.6 million and $ 15.2 million as of December 31, 2020 and 2019, respectively. 105 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Total lease cost for 2020 and 2019 are set forth below (in millions): Classification Year Ended December 31, 2020 Year Ended December 31, 2019 Operating lease cost Selling, general and administrative expenses $ 54.0 $ 55.0 Variable lease cost Selling, general and administrative expenses 1.7 0.6 Short-term lease cost Selling, general and administrative expenses 11.0 8.1 Finance lease cost: Amortization of leased assets Depreciation expense (1) 3.7 4.7 Interest on leased liabilities Interest expense, net 0.6 0.7 Total lease cost $ 71.0 $ 69.1 ____________________________________ (1) Depreciation expense was included in both cost of sales and selling, general and administrative expenses. Lease payment amounts for operating and finance leases with remaining terms greater than one year as of December 31, 2020 were as follows (in millions): December 31, 2020 Operating Leases Finance Leases 2021 $ 47.6 $ 3.3 2022 37.7 1.4 2023 28.6 1.1 2024 18.9 0.8 2025 13.6 0.6 Thereafter 44.5 9.1 Total lease payments 190.9 16.3 Less: imputed interest (1) ( 21.5 ) ( 3.5 ) Present value of leased liabilities $ 169.4 $ 12.8 ____________________________________ (1) Calculated using the implicit interest rate for each lease. Lease payment amounts for operating and finance leases with remaining terms greater than one year as of December 31, 2019 were as follows (in millions): December 31, 2019 Operating Leases Finance Leases 2020 $ 48.3 $ 4.8 2021 40.8 2.7 2022 31.5 1.2 2023 24.1 0.9 2024 16.7 0.6 Thereafter 61.6 8.7 Total lease payments 223.0 18.9 Less: imputed interest (1) ( 32.1 ) ( 2.4 ) Present value of leased liabilities $ 190.9 $ 16.5 ____________________________________ (1) Calculated using the implicit interest rate for each lease. 106 Table of Contents AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the weighted-average remaining lease term and weighted-average discount rate: As of December 31, 2020 As of December 31, 2019 Weighted-average remaining lease term: Operating leases 7 years 7 years Finance leases 15 years 14 years Weighted-average discount rate: Operating leases 3.5 % 4.1 % Finance leases 2.7 % 2.9 % The following table summarizes the supplemental cash flow information for 2020 and 2019 (in millions): Year Ended December 31, 2020 Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 54.1 $ 51.9 Operating cash flows from finance leases 0.4 0.6 Financing cash flows from finance leases 3.8 5.3 Leased assets obtained in exchange for lease obligations: Operating leases $ 30.8 $ 34.8 Finance leases 0.9 1.5 107 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.