AGCO CORP /DE 10-Q

ITEM 1. FINANCIAL STATEMENTS AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in millions, except share amounts) September 30, 2021 December 31, 2020 ASSETS Current Assets: Cash, cash equivalents and restricted cash $ 537.0 $ 1,119.1 Accounts and notes receivable, net 1,056.6 856.0 Inventories, net 2,738.3 1,974.4 Other current assets 476.0 418.9 Total current assets 4,807.9 4,368.4 Property, plant and equipment, net 1,460.9 1,508.5 Right-of-use lease assets 152.2 165.1 Investment in affiliates 480.4 442.7 Deferred tax assets 129.1 77.6 Other assets 215.8 179.8 Intangible assets, net 406.3 455.6 Goodwill 1,289.3 1,306.5 Total assets $ 8,941.9 $ 8,504.2 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of long-term debt $ 224.8 $ 325.9 Short-term borrowings 77.8 33.8 Accounts payable 1,092.4 855.1 Accrued expenses 1,944.2 1,916.7 Other current liabilities 210.0 231.3 Total current liabilities 3,549.2 3,362.8 Long-term debt, less current portion and debt issuance costs 1,319.1 1,256.7 Operating lease liabilities 113.1 125.9 Pension and postretirement health care benefits 216.7 253.4 Deferred tax liabilities 112.9 112.4 Other noncurrent liabilities 434.5 375.0 Total liabilities 5,745.5 5,486.2 Commitments and contingencies (Note 19) Stockholders’ Equity: AGCO Corporation stockholders’ equity: Preferred stock; $ 0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2021 and 2020 — — Common stock; $ 0.01 par value, 150,000,000 shares authorized, 74,834,173 and 74,962,231 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively 0.7 0.8 Additional paid-in capital 3.6 30.9 Retained earnings 4,969.0 4,759.1 Accumulated other comprehensive loss ( 1,804.5 ) ( 1,810.8 ) Total AGCO Corporation stockholders’ equity 3,168.8 2,980.0 Noncontrolling interests 27.6 38.0 Total stockholders’ equity 3,196.4 3,018.0 Total liabilities and stockholders’ equity $ 8,941.9 $ 8,504.2 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions, except per share data) Three Months Ended September 30, 2021 2020 Net sales $ 2,725.1 $ 2,497.5 Cost of goods sold 2,098.4 1,918.8 Gross profit 626.7 578.7 Selling, general and administrative expenses 266.1 251.3 Operating expenses: Engineering expenses 92.8 82.0 Amortization of intangibles 14.1 14.8 Restructuring expenses 1.4 0.8 Bad debt expense 0.4 5.8 Income from operations 251.9 224.0 Interest expense, net 1.2 3.6 Other expense, net 14.1 15.3 Income before income taxes and equity in net earnings of affiliates 236.6 205.1 Income tax provision 70.1 57.2 Income before equity in net earnings of affiliates 166.5 147.9 Equity in net earnings of affiliates 15.9 10.2 Net income 182.4 158.1 Net income attributable to noncontrolling interests ( 1.1 ) ( 0.8 ) Net income attributable to AGCO Corporation and subsidiaries $ 181.3 $ 157.3 Net income per common share attributable to AGCO Corporation and subsidiaries: Basic $ 2.41 $ 2.10 Diluted $ 2.40 $ 2.09 Cash dividends declared and paid per common share $ 0.20 $ 0.16 Weighted average number of common and common equivalent shares outstanding: Basic 75.2 74.9 Diluted 75.6 75.4 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in millions, except per share data) Nine Months Ended September 30, 2021 2020 Net sales $ 7,983.1 $ 6,432.6 Cost of goods sold 6,093.5 4,970.7 Gross profit 1,889.6 1,461.9 Selling, general and administrative expenses 803.0 718.4 Operating expenses: Engineering expenses 296.3 242.7 Amortization of intangibles 45.8 44.7 Goodwill impairment charge — 20.0 Restructuring expenses 7.4 5.4 Bad debt (credit) expense ( 0.3 ) 9.0 Income from operations 737.4 421.7 Interest expense, net 6.8 13.1 Other expense, net 40.2 37.8 Income before income taxes and equity in net earnings of affiliates 690.4 370.8 Income tax provision 121.4 117.9 Income before equity in net earnings of affiliates 569.0 252.9 Equity in net earnings of affiliates 49.2 31.5 Net income 618.2 284.4 Net (income) loss attributable to noncontrolling interests ( 3.3 ) 7.3 Net income attributable to AGCO Corporation and subsidiaries $ 614.9 $ 291.7 Net income per common share attributable to AGCO Corporation and subsidiaries: Basic $ 8.16 $ 3.89 Diluted $ 8.11 $ 3.86 Cash dividends declared and paid per common share $ 4.53 $ 0.48 Weighted average number of common and common equivalent shares outstanding: Basic 75.3 75.0 Diluted 75.8 75.5 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited and in millions) Three Months Ended September 30, 2021 2020 Net income $ 182.4 $ 158.1 Other comprehensive loss, net of reclassification adjustments: Foreign currency translation adjustments ( 65.4 ) ( 30.3 ) Defined benefit pension plans, net of tax 2.6 3.4 Deferred gains and losses on derivatives, net of tax ( 3.4 ) ( 1.1 ) Other comprehensive loss, net of reclassification adjustments ( 66.2 ) ( 28.0 ) Comprehensive income 116.2 130.1 Comprehensive (income) loss attributable to noncontrolling interests ( 1.1 ) 1.4 Comprehensive income attributable to AGCO Corporation and subsidiaries $ 115.1 $ 131.5 Nine Months Ended September 30, 2021 2020 Net income $ 618.2 $ 284.4 Other comprehensive income (loss), net of reclassification adjustments: Foreign currency translation adjustments ( 31.9 ) ( 275.4 ) Defined benefit pension plans, net of tax 31.7 10.3 Deferred gains and losses on derivatives, net of tax 6.9 3.9 Other comprehensive income (loss), net of reclassification adjustments 6.7 ( 261.2 ) Comprehensive income 624.9 23.2 Comprehensive (income) loss attributable to noncontrolling interests ( 3.7 ) 12.7 Comprehensive income attributable to AGCO Corporation and subsidiaries $ 621.2 $ 35.9 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents AGCO CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in millions) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net income $ 618.2 $ 284.4 Adjustments to reconcile net income to net provided by operating activities: Depreciation 164.2 154.9 Amortization of intangibles 45.8 44.7 Stock compensation expense 21.1 26.8 Goodwill impairment charge — 20.0 Equity in net earnings of affiliates, net of cash received ( 48.6 ) ( 30.9 ) Deferred income tax (benefit) provision ( 67.3 ) 2.4 Other 12.2 19.2 Changes in operating assets and liabilities: Accounts and notes receivable, net ( 247.4 ) ( 264.7 ) Inventories, net ( 868.5 ) ( 53.4 ) Other current and noncurrent assets ( 131.3 ) ( 39.5 ) Accounts payable 300.4 ( 55.6 ) Accrued expenses 102.0 22.9 Other current and noncurrent liabilities 140.7 92.9 Total adjustments ( 576.7 ) ( 60.3 ) Net cash provided by operating activities 41.5 224.1 Cash flows from investing activities: Purchases of property, plant and equipment ( 198.7 ) ( 183.1 ) Proceeds from sale of property, plant and equipment 3.9 0.9 Investments in unconsolidated affiliates ( 1.2 ) ( 4.7 ) (Purchase) sale of businesses, net, and net of cash acquired ( 16.8 ) ( 2.8 ) Other ( 2.4 ) — Net cash used in investing activities ( 215.2 ) ( 189.7 ) Cash flows from financing activities: Proceeds from indebtedness 1,463.5 1,195.6 Repayments of indebtedness ( 1,384.9 ) ( 1,027.7 ) Purchases and retirement of common stock ( 75.0 ) ( 55.0 ) Payment of dividends to stockholders ( 343.6 ) ( 36.0 ) Payment of minimum tax withholdings on stock compensation ( 34.1 ) ( 16.2 ) Payment of debt issuance costs — ( 1.4 ) Distributions to noncontrolling interest ( 3.5 ) 0.2 Net cash (used in) provided by financing activities ( 377.6 ) 59.5 Effects of exchange rate changes on cash, cash equivalents and restricted cash ( 30.8 ) ( 15.7 ) (Decrease) increase in cash, cash equivalents and restricted cash ( 582.1 ) 78.2 Cash, cash equivalents and restricted cash, beginning of period 1,119.1 432.8 Cash, cash equivalents and restricted cash, end of period $ 537.0 $ 511.0 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents AGCO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The condensed consolidated financial statements of AGCO Corporation and its subsidiaries (the “Company” or “AGCO”) included herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, comprehensive income (loss) and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Results for interim periods are not necessarily indicative of the results for the year. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company cannot predict the future impact of the COVID-19 pandemic on its business, including any related impacts on the global economic and political environments, market demand for its products, supply chain disruptions, possible workforce unavailability, exchange rate and commodity prices and availability of financing, and their impact to the Company’s net sales, production volumes, costs and overall financial conditions. Recently Adopted Accounting Pronouncements During the nine months ended September 30, 2021, the Company adopted the following pronouncements, which did not have a material impact to the Company’s results of operations, financial condition and cash flows. • ASU 2019-12 – “Simplifying the Accounting for Income Taxes” was adopted as of January 1, 2021. • ASU 2021-01 – “Reference Rate Reform: Scope” was adopted as of January 1, 2021. New Accounting Pronouncements to be Adopted In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments”, which requires measurement and recognition of expected versus incurred credit losses for financial assets. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which delays the effective date of ASU 2016-13 for smaller reporting companies and other non-SEC reporting entities. This applies to the Company’s equity method finance joint ventures, 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 likely will impact the Company’s “Investment in affiliates” and “Equity in net earnings of affiliates.” The Company’s finance joint ventures currently are evaluating the impact of ASU 2016-13 to their results of operations and financial condition. 8 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 2. ACQUISITIONS On August 13, 2021, the Company acquired Headsight, LLC (“Headsight”) for approximately $ 16.8 million. Headsight is headquartered in Bremen, Indiana and manufactures header height sensors used in corn and grain harvesting operations. The Company allocated the purchase price to the assets acquired and liabilities assumed based on estimates of their fair values as of the acquisition date. The acquired net assets primarily consisted of accounts receivable, inventories, lease right-of-use assets and liabilities, accounts payable and accrued expenses, property, plant and equipment, and customer relationship, technology and trademark identifiable intangible assets. The Company recorded approximately $ 4.8 million of customer relationship, technology and trademark identifiable intangible assets and approximately $ 8.9 million of goodwill associated with the acquisition. The results of operations of Headsight have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s North America geographical reportable segment. Proforma financial information related to the acquisition of Headsight was not material to the Company’s result of operations. The acquired identifiable intangible assets of Headsight as of the date of the acquisition are summarized in the following table (in millions): Intangible Asset Amount Weighted-Average Useful Life Customer relationships $ 3.2 7 years Technology 0.9 10 years Trademarks 0.7 7 years $ 4.8 On September 10, 2021, the Company acquired Farm Robotics and Automation S.L. (“Faromatics”) for approximately € 4.6 million (or approximately $ 5.5 million) net of approximately € 0.1 million (or approximately $ 0.1 million) of cash and € 0.8 million (or approximately $ 0.9 million) of escrowed cash which could be payable by the Company with in 18 months of the acquisition date. Faromatics is headquartered in Barcelona, Spain, and is the creator of ChickenBoy ® , the world's first ceiling-suspended robot that monitors broiler chickens and helps farmers increase animal welfare and farm productivity. The Company allocated the purchase price to the assets acquired and liabilities assumed based on estimates of their fair values as of the acquisition date. The acquired net assets primarily consisted of inventories, other assets, lease right-of-use assets and liabilities, accounts payable and accrued expenses, property, plant and equipment, and technology identifiable intangible assets. The Company recorded approximately € 1.5 million (or approximately $ 1.7 million) of technology and approximately € 4.8 million (or approximately $ 5.7 million) of goodwill associated with the acquisition. The results of operations of Faromatics have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s North America and Europe/Middle East geographical reportable segments. Proforma financial information related to the acquisition of Faromatics was not material to the Company’s result of operations. The acquired identifiable intangible assets of Faromatics as of the date of the acquisition are summarized in the following table (in millions): Intangible Asset Amount Weighted-Average Useful Life Technology $ 1.7 15 years 9 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 3. RESTRUCTURING EXPENSES In recent years, the Company has announced and initiated several actions to rationalize employee headcount in various manufacturing facilities and administrative offices located in the U.S., Europe, South America, Africa and China in order to reduce costs. Restructuring expenses activity during the three and nine months ended September 30, 2021 is summarized as follows (in millions): Gain on Sale of Joint Venture Employee Severance Facility Closure Costs Other Related Closure Costs Total Balance as of December 31, 2020 $ — $ 11.1 $ 3.9 $ 1.8 $ 16.8 First quarter 2021 provision — 1.3 — — 1.3 First quarter 2021 cash activity — ( 2.3 ) ( 3.9 ) — ( 6.2 ) Foreign currency translation — ( 0.1 ) — ( 0.2 ) ( 0.3 ) Balance as of March 31, 2021 $ — $ 10.0 $ — $ 1.6 $ 11.6 Second quarter 2021 provision — 3.9 — 1.5 5.4 Second quarter 2021 provision reversal — ( 0.7 ) — — ( 0.7 ) Second quarter 2021 cash activity — ( 1.9 ) — ( 0.7 ) ( 2.6 ) Foreign currency translation — — — 0.2 0.2 Balance as of June 30, 2021 $ — $ 11.3 $ — $ 2.6 $ 13.9 Third quarter 2021 provision — 5.1 — — 5.1 Third quarter 2021 provision reversal ( 2.5 ) ( 1.2 ) — — ( 3.7 ) Third quarter 2021 cash activity 2.5 ( 3.0 ) — ( 1.4 ) ( 1.9 ) Foreign currency translation — ( 0.2 ) — ( 0.1 ) ( 0.3 ) Balance as of September 30, 2021 $ — $ 12.0 $ — $ 1.1 $ 13.1 In addition, during the three months ended December 31, 2019, the Company exited and sold it’s 50 % interest in its USC, LLC joint venture to its joint venture partner. The Company recorded a loss of approximately $ 2.1 million associated with the sale, reflected at the time within “Restructuring expenses” in the Company’s Consolidated Statements of Operations. As a result of the final payments received from the former joint venture partner related to the sale during the three months ended September 30, 2021, the Company recorded a gain of approximately $ 2.5 million, also reflected within “Restructuring expenses” in the Company’s Condensed Consolidated Statements of Operations. 4. STOCK COMPENSATION PLANS The Company recorded stock compensation expense as follows for the three and nine months ended September 30, 2021 and 2020 (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Cost of goods sold $ 0.2 $ 0.5 $ 0.8 $ 0.9 Selling, general and administrative expenses 5.8 13.7 20.5 26.3 Total stock compensation expense $ 6.0 $ 14.2 $ 21.3 $ 27.2 Stock Incentive Plan Under the Company’s Long-Term Incentive Plan (the “Plan”), up to 10,000,000 shares of AGCO common stock may be issued. As of September 30, 2021, of the 10,000,000 shares reserved for issuance under the Plan, 3,860,676 shares were available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed below. The Plan allows the Company, under the direction of the Board of Directors’ Talent and Compensation Committee, to 10 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) make grants of performance shares, stock appreciation rights, restricted stock units and restricted stock awards to employees, officers and non-employee directors of the Company. Long-Term Incentive Plan and Related Performance Awards The weighted average grant-date fair value of performance awards granted under the Plan during the nine months ended September 30, 2021 and 2020 was $ 123.33 and $ 70.84 , respectively. During the nine months ended September 30, 2021, the Company granted 281,310 performance awards related to varying performance periods. The awards granted assume the maximum target levels of performance are achieved. The compensation expense associated with all awards granted under the Plan is amortized ratably over the vesting or performance period based on the Company’s projected assessment of the level of performance that will be achieved. The 2021 grant of performance award shares is subject to a total shareholder return modifier. Performance award transactions during the nine months ended September 30, 2021 are presented as if the Company were to achieve its maximum levels of performance and assume the 2021 performance awards subject to the total shareholder return modifier are achieved at target levels under the plan awards, and were as follows: Shares awarded but not earned at January 1 582,952 Shares awarded 281,310 Shares forfeited ( 12,238 ) Shares vested ( 142 ) Shares awarded but not earned at September 30 851,882 As of September 30, 2021, the total compensation cost related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was approximately $ 27.4 million, and the weighted average period over which it is expected to be recognized is approximately two years . The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance. Restricted Stock Unit Awards The weighted average grant-date fair value of the restricted stock units ("RSUs") granted under the Plan during the nine months ended September 30, 2021 and 2020 was $ 113.91 and $ 70.83 , respectively. During the nine months ended September 30, 2021, the Company granted 92,848 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 has a three-year cliff vesting requirement subject to adjustment based on a total shareholders return metric relative to the Company's defined peer group. The compensation expense associated with these awards is being amortized ratably over the requisite service period for the awards that are expected to vest. RSU transactions during the nine months ended September 30, 2021 assume the 2020 RSUs subject to the total shareholder return modifier are achieved at target levels, and were as follows: RSUs awarded but not vested at January 1 143,287 RSUs awarded 92,848 RSUs forfeited ( 2,226 ) RSUs vested ( 63,397 ) RSUs awarded but not vested at September 30 170,512 As of September 30, 2021, the total compensation cost related to the unvested RSUs not yet recognized was approximately $ 10.7 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years. 11 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Stock-Settled Appreciation Rights The compensation expense associated with the stock-settled appreciation rights (“SSARs”) is amortized ratably over the requisite service period for the awards that are expected to vest. The Company estimates the fair value of the grants using the Black-Scholes option pricing model. SSAR transactions during the nine months ended September 30, 2021 were as follows: SSARs outstanding at January 1 403,150 SSARs granted — SSARs exercised ( 192,011 ) SSARs canceled or forfeited ( 904 ) SSARs outstanding at September 30 210,235 The Company did not grant any SSARs during the nine months ended September 30, 2021, and does not currently anticipate granting any SSARs in the future. As of September 30, 2021, the total compensation cost related to the unvested SSARs not yet recognized was approximately $ 1.1 million, and the weighted average period over which it is expected to be recognized is approximately two years . Director Restricted Stock Grants The Plan provides for annual restricted stock grants of the Company’s common stock to all non-employee directors. The 2021 grant was made on April 22, 2021 and equated to 9,117 shares of common stock, of which 7,899 shares of common stock were issued after shares were withheld for taxes. The Company recorded stock compensation expense of approximately $ 1.4 million during the nine months ended September 30, 2021 associated with these grants. 5. GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill during the nine months ended September 30, 2021 are summarized as follows (in millions): North America South America Europe/Middle East Asia/Pacific/Africa Consolidated Balance as of December 31, 2020 $ 593.4 $ 87.5 $ 501.3 $ 124.3 $ 1,306.5 Acquisitions 13.0 — 1.6 — 14.6 Foreign currency translation — ( 3.9 ) ( 24.1 ) ( 3.8 ) ( 31.8 ) Balance as of September 30, 2021 $ 606.4 $ 83.6 $ 478.8 $ 120.5 $ 1,289.3 Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of October 1 each fiscal year. 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 was a 50 %-owned tillage and seeding joint venture. As a result, the entire goodwill balance of this reporting unit was impaired, and during the three months ended June 30, 2020, the Company recorded a non-cash impairment charge of approximately $ 20.0 million as "Impairment charges" within the Company's Condensed Consolidated Statements of Operations, with an offsetting benefit of approximately $ 10.0 million included within "Net loss attributable to noncontrolling interests." During the three months ended June 30, 2021, the Company sold its 50 % interest in the joint venture. 12 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2021 are summarized as follows (in millions): Gross carrying amounts: Trademarks and Tradenames Customer Relationships Patents and Technology Land Use Rights Total Balance as of December 31, 2020 $ 206.0 $ 585.4 $ 158.0 $ 9.1 $ 958.5 Acquisitions 0.7 3.2 2.6 — 6.5 Sale of business ( 1.3 ) ( 4.4 ) ( 17.1 ) — ( 22.8 ) Foreign currency translation ( 4.1 ) ( 8.3 ) ( 4.6 ) 0.1 ( 16.9 ) Balance as of September 30, 2021 $ 201.3 $ 575.9 $ 138.9 $ 9.2 $ 925.3 Accumulated amortization: Trademarks and Tradenames Customer Relationships Patents and Technology Land Use Rights Total Balance as of December 31, 2020 $ 95.4 $ 390.3 $ 103.2 $ 3.4 $ 592.3 Amortization expense 7.5 28.0 10.2 0.1 45.8 Sale of business ( 1.3 ) ( 4.4 ) ( 15.2 ) — ( 20.9 ) Foreign currency translation ( 1.3 ) ( 6.0 ) ( 3.6 ) 0.1 ( 10.8 ) Balance as of September 30, 2021 $ 100.3 $ 407.9 $ 94.6 $ 3.6 $ 606.4 Indefinite-lived intangible assets: Trademarks and Tradenames Balance as of December 31, 2020 $ 89.4 Foreign currency translation ( 2.0 ) Balance as of September 30, 2021 $ 87.4 The Company currently amortizes certain acquired intangible assets, primarily on a straight-line basis, over their estimated useful lives, which range from five to 50 years. 13 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 6. INDEBTEDNESS Long-term debt consisted of the following at September 30, 2021 and December 31, 2020 (in millions): September 30, 2021 December 31, 2020 Senior term loan due 2022 $ 173.8 $ 184.0 Credit facility, expires 2023 395.0 277.9 1.002 % Senior term loan due 2025 289.7 306.7 Senior term loans due between 2021 and 2028 677.8 806.0 Other long-term debt 9.0 10.5 Debt issuance costs ( 1.4 ) ( 2.5 ) 1,543.9 1,582.6 Senior term loans due 2021, net of debt issuance costs ( 222.5 ) ( 323.6 ) Current portion of other long-term debt ( 2.3 ) ( 2.3 ) Total long-term indebtedness, less current portion $ 1,319.1 $ 1,256.7 0.800 % Senior Notes Due 2028 On October 6, 2021, the Company issued € 600.0 million (or approximately $ 692.5 million) of senior notes at an issue price of 99.993 %. The notes mature on October 6, 2028, and interest is payable annually, in arrears, at 0.800 %. The senior notes contain covenants restricting, among other things, the incurrence of certain secured indebtedness. The senior notes are subject to both optional and mandatory redemption in certain events. During October 2021, the Company used the proceeds received from the senior notes to repay its € 150.0 million (or approximately $ 173.4 million as of October 8, 2021) senior term loan due 2022, $ 370.0 million related to its multi-currency revolving credit facility, and two of its 2016 senior term loans due October 2021 with an aggregate amount outstanding of € 192.0 million (or approximately $ 223.8 million as of October 19, 2021). In August 2021, prior to the issuance of the senior notes, the Company repaid two of its 2018 senior term loans due August 2021 with an aggregate amount of € 72.0 million (or approximately $ 85.5 million as of August 1, 2021). The Company intends to use an additional aggregate amount of € 73.5 million (or approximately $ 85.2 million as of September 30, 2021) of the proceeds from the issuance of the senior notes and existing cash to repay one of its 2016 senior term loans due October 2023 and one of its 2018 senior term loans due August 2023. Senior Term Loan Due 2022 In October 2018, the Company entered into a term loan agreement with Coöperatieve Rabobank U.A (“Rabobank”) in the amount of € 150.0 million (or approximately $ 173.8 million as of September 30, 2021). Interest was payable on the term loan quarterly in arrears at an annual rate equal to the Euro Interbank Offered Rate (“EURIBOR”) plus a margin ranging from 0.875 % to 1.875 % based on the Company’s credit rating. As mentioned previously, during October 2021, the Company repaid its senior term loan of € 150.0 million (or approximately $ 173.4 million as of October 8, 2021) with the proceeds from its 0.800 % senior notes due 2028. 14 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Credit Facility In October 2018, the Company entered into a multi-currency revolving credit facility of $ 800.0 million. The credit facility expires on October 17, 2023. Interest accrues on amounts outstanding under the credit facility, at the Company’s option, at either (1) LIBOR plus a margin ranging from 0.875 % to 1.875 % based on the Company’s credit rating, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5 %, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0 %, plus a margin ranging from 0.0 % to 0.875 % based on the Company’s credit rating. As of September 30, 2021 the Company had $ 395.0 million outstanding borrowings under the revolving credit facility and had the ability to borrow approximately $ 405.0 million under the revolving credit facility. As of December 31, 2020 the Company had no outstanding borrowings under the revolving credit facility and had the ability to borrow approximately $ 800.0 million under the facility. As mentioned previously, on October 15, 2021, the Company repaid $ 370.0 million of its multicurrency revolving credit facility as a result of the issuance of its 0.800 % senior notes due 2028. On April 9, 2020, the Company entered into an amendment to its credit facility to include incremental term loans (“2020 term loans”) that allow the Company to borrow aggregate principal amounts of € 235.0 million and $ 267.5 million (or an aggregate of approximately $ 539.8 million as of September 30, 2021). 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 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. On February 16, 2021, the Company repaid the 2020 term loans of € 117.5 million and $ 133.8 million (or an aggregate of approximately $ 276.0 million as of February 16, 2021). As of September 30, 2021, the Company had the ability to borrow € 117.5 million and $ 133.7 million (or an aggregate of approximately $ 269.8 million) of the 2020 term loans. As described above, the Company’s credit facility allows it to select from among various interest rate options. Due to the phase-out of LIBOR, LIBOR-based rates no longer will be available for borrowings denominated in U.S. dollars after December 31, 2022, and for loans denominated in other currencies after December 31, 2021. The interest rates reflected in the Company’s credit facility were designed to accommodate the discontinuation of LIBOR-based rates and a shift to the “Secured Overnight Financing Rate” or a base rate, and, as such, the Company does not believe that moving to other rates will have a materially adverse effect on the Company’s results of operations or financial position. In addition, the credit facility agreement also provides for an expedited amendment process once a replacement for LIBOR is established, which the Company may elect to utilize to add additional interest-rate alternatives. 1.002 % Senior Term Loan Due 2025 On January 25, 2019, the Company borrowed € 250.0 million (or approximately $ 289.7 million as of September 30, 2021) from the European Investment Bank. The loan matures on January 24, 2025. The Company is permitted to prepay the term loan before its maturity date. Interest is payable on the term loan at 1.002 % per annum, payable semi-annually in arrears. Senior Term Loans Due Between 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, the Company repaid an aggregate amount of € 56.0 million (or approximately $ 61.1 million) upon maturity of two term loan agreements in October 2019. Additionally, as mentioned previously, the Company repaid € 192.0 million (or approximately $ 223.8 million as of October 19, 2021) upon maturity of two 2016 senior term loans in October 2021. In August 2021, prior to the issuance of the senior notes due 2028, the 15 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Company repaid two of its 2018 senior term loans upon maturity with an aggregate amount of € 72.0 million (or approximately $ 85.5 million as of August 1, 2021). In aggregate, as of September 30, 2021, the Company had indebtedness of € 585.0 million (or approximately $ 677.8 million as of September 30, 2021) through a group of ten remaining related term loan agreements. As of October 31, 2021, as a result of further repayments discussed previously, the Company had indebtedness of € 393.0 million (or approximately $ 456.7 million) through a group of eight remaining term loan agreements. The provisions of the term loan agreements are substantially identical, with the exception of interest rate terms and maturities. As of September 30, 2021, for the term loans with a fixed interest rate, interest is payable in arrears on an annual basis, with interest rates ranging from 0.90 % to 2.26 % and maturity dates between October 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 0.90 % to 1.25 % and maturity dates between October 2021 and August 2025. Short-Term Borrowings As of September 30, 2021 and December 31, 2020, the Company had short-term borrowings due within one year of approximately $ 77.8 million and $ 33.8 million, respectively. Standby Letters of Credit and Similar Instruments The Company has arrangements with various banks to issue standby letters of credit or similar instruments, which guarantee the Company’s obligations for the purchase or sale of certain inventories and for potential claims exposure for insurance coverage. At September 30, 2021 and December 31, 2020, outstanding letters of credit totaled approximately $ 14.6 million and $ 14.4 million, respectively. 7. RECOVERABLE INDIRECT TAXES The Company’s Brazilian operations incur value added taxes (“VAT”) on certain purchases of raw materials, components and services. These taxes are accumulated as tax credits and create assets that are reduced by the VAT collected from the Company’s sales in the Brazilian market. The Company regularly assesses the recoverability of these tax credits, and 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 $ 122.2 million and $ 91.2 million, respectively, of VAT tax credits, net of reserves, as of September 30, 2021 and December 31, 2020. 8. INVENTORIES Inventories at September 30, 2021 and December 31, 2020 were as follows (in millions): September 30, 2021 December 31, 2020 Finished goods $ 760.8 $ 641.3 Repair and replacement parts 697.1 652.3 Work in process 413.4 175.1 Raw materials 867.0 505.7 Inventories, net $ 2,738.3 $ 1,974.4 16 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 9. PRODUCT WARRANTY The warranty reserve activity for the three and nine months ended September 30, 2021 and 2020, including deferred revenue associated with the Company's extended warranties that have been sold, was as follows (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Balance at beginning of period $ 579.3 $ 409.0 $ 521.8 $ 392.8 Acquisition — 0.2 — 0.2 Accruals for warranties issued during the period 72.7 73.2 242.8 187.1 Settlements made (in cash or in kind) during the period ( 69.3 ) ( 56.5 ) ( 172.0 ) ( 144.1 ) Foreign currency translation ( 14.0 ) 12.5 ( 23.9 ) 2.4 Balance at September 30 $ 568.7 $ 438.4 $ 568.7 $ 438.4 The Company’s agricultural equipment products generally are warranted against defects in material and workmanship for a period of one to four years . The Company accrues for future warranty costs at the time of sale based on historical warranty experience. Approximately $ 473.5 million, $ 431.6 million and $ 356.4 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively. Approximately $ 95.2 million, $ 90.2 million and $ 82.0 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021, December 31, 2020, and September 30, 2020, respectively. The Company recognizes recoveries of the costs associated with warranties it provides when the collection is probable. When specifics of the recovery have been agreed upon with the Company’s suppliers through confirmation of liability for the recovery, the Company records the recovery within “Accounts and notes receivable, net.” Estimates of the amount of warranty claim recoveries to be received from the Company’s suppliers based upon contractual supplier arrangements are recorded within “Other current assets.” 10. NET INCOME PER COMMON SHARE Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted net income per common share assumes the exercise of outstanding SSARs and the vesting of performance share awards and RSUs using the treasury stock method when the effects of such assumptions are dilutive. 17 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) A reconciliation of net income attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share for the three and nine months ended September 30, 2021 and 2020 is as follows (in millions, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Basic net income per share: Net income attributable to AGCO Corporation and subsidiaries $ 181.3 $ 157.3 $ 614.9 $ 291.7 Weighted average number of common shares outstanding 75.2 74.9 75.3 75.0 Basic net income per share attributable to AGCO Corporation and subsidiaries $ 2.41 $ 2.10 $ 8.16 $ 3.89 Diluted net income per share: Net income attributable to AGCO Corporation and subsidiaries $ 181.3 $ 157.3 $ 614.9 $ 291.7 Weighted average number of common shares outstanding 75.2 74.9 75.3 75.0 Dilutive SSARs, performance share awards and RSUs 0.4 0.5 0.5 0.5 Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share 75.6 75.4 75.8 75.5 Diluted net income per share attributable to AGCO Corporation and subsidiaries $ 2.40 $ 2.09 $ 8.11 $ 3.86 There were no SSARs outstanding for the three and nine months ended September 30, 2021 that had an antidilutive impact. SSARs to purchase approximately 0.5 million and 0.7 million shares of the Company's common stock for the three and nine months ended September 30, 2020, respectively, were outstanding but not included in the calculation of weighted average common and common equivalent shares outstanding because they had an antidilutive impact. 11. INCOME TAXES At September 30, 2021 and December 31, 2020, the Company had approximately $ 253.1 million and $ 227.9 million, respectively, of gross unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. Gross unrecognized income tax benefits as of September 30, 2021 and December 31, 2020 exclude certain indirect favorable effects that relate to other tax jurisdictions of approximately $ 62.1 million and $ 64.1 million, respectively. In addition, the gross unrecognized income tax benefits as of September 30, 2021 exclude certain deposits made in a foreign jurisdiction of approximately $ 6.8 million associated with an ongoing audit. At September 30, 2021 and December 31, 2020, the Company had approximately $ 50.8 million and $ 57.1 million, respectively, of accrued or deferred taxes related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions that it expects to settle or pay in the next 12 months, reflected in “Other current liabilities” in the Company’s Condensed Consolidated Balance Sheets. At September 30, 2021 and December 31, 2020, the Company had approximately $ 201.5 million and $ 163.8 million, respectively, of accrued taxes and approximately $ 0.8 million and $ 7.0 million, respectively, of deferred taxes related to uncertain tax positions that it expects to settle or pay beyond 12 months, reflected in “Other noncurrent liabilities” and “Deferred tax liabilities,” respectively, in the Company’s Condensed Consolidated Balance Sheets. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At September 30, 2021 and December 31, 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of approximately $ 41.7 million and $ 39.4 million, respectively. Generally, tax years 2015 through 2020 remain open to examination by taxing authorities in the United States and certain other foreign tax jurisdictions. The Company and its subsidiaries are routinely examined by tax authorities in the United States and in various state, local and foreign jurisdictions. As of September 30, 2021, a number of income tax examinations in foreign jurisdictions are ongoing. The Company’s income tax provision as of September 30, 2021 includes the benefit of a reversal of approximately $ 67.8 million related to a valuation allowance previously established against the Company’s net deferred tax assets in the United States that the Company recorded as of June 30, 2021. Improvements in income in the United States during 2020 and year-to-date 2021, along with updated future projected income levels, supported the reversal of the valuation allowance. The Company maintains a valuation allowance to fully reserve against its net deferred tax assets Brazil and certain other foreign jurisdictions. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company regularly assesses the likelihood that its deferred tax assets will be 18 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) recovered from estimated future taxable income and available tax planning strategies and has determined that all adjustments to the valuation allowances have been appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that the Company will realize its remaining net deferred tax assets, net of the valuation allowance, in future years. 12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Derivative Transactions Designated as Hedging Instruments Cash Flow Hedges Foreign Currency Contracts The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates. The changes in the fair values of these cash flow hedges are recorded in accumulated other comprehensive loss and are subsequently reclassified into “Cost of goods sold” during the period the sales and purchases are recognized. These amounts offset the effect of the changes in foreign currency rates on the related sale and purchase transactions. During 2021 and 2020, the Company designated certain foreign currency contracts as cash flow hedges of expected future sales and purchases. The total notional value of derivatives that were designated as cash flow hedges was approximately $ 293.0 million and $ 395.8 million as of September 30, 2021 and December 31, 2020, respectively. Steel Commodity Contracts During 2021 and 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 $ 11.9 million and $ 14.7 million as of September 30, 2021 and December 31, 2020, respectively. 19 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) The following tables summarize the after-tax impact that changes in the fair value of derivatives designated as cash flow hedges had on accumulated other comprehensive loss and net income during the three and nine months ended September 30, 2021 and 2020 (in millions): Recognized in Net Income Three Months Ended September 30, Gain (Loss) Recognized in Accumulated Other Comprehensive Loss Classification of Gain (Loss) Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of the Line Item in the Condensed Consolidated Statements of Operations Containing Hedge Gains (Losses) 2021 Foreign currency contracts (1) $ 1.8 Cost of goods sold $ ( 1.3 ) $ 2,098.4 Commodity contracts (2) ( 0.2 ) Cost of goods sold 6.3 $ 2,098.4 Total $ 1.6 $ 5.0 2020 Foreign currency contracts $ ( 0.1 ) Cost of goods sold $ 1.0 $ 1,918.8 Recognized in Net Income Nine Months Ended September 30, Gain (Loss) Recognized in Accumulated Other Comprehensive Loss Classification of Gain (Loss) Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of the Line Item in the Condensed Consolidated Statements of Operations Containing Hedge Gains (Losses) 2021 Foreign currency contracts (1) $ ( 5.8 ) Cost of goods sold $ ( 7.4 ) $ 6,093.5 Commodity contracts (2) $ 13.5 Cost of goods sold 8.2 $ 6,093.5 Total $ 7.7 $ 0.8 2020 Foreign currency contracts $ 8.1 Cost of goods sold $ 4.2 $ 4,970.7 (1) The outstanding contracts as of September 30, 2021 range in maturity through December 2021. (2) The outstanding contracts as of September 30, 2021 range in maturity through July 2022. The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the three months ended September 30, 2021 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated derivative net gains as of June 30, 2021 $ 11.6 $ 3.8 $ 7.8 Net changes in fair value of derivatives 1.9 0.3 1.6 Net gains reclassified from accumulated other comprehensive loss into income ( 7.0 ) ( 2.0 ) ( 5.0 ) Accumulated derivative net gains as of September 30, 2021 $ 6.5 $ 2.1 $ 4.4 20 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the nine months ended September 30, 2021 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated derivative net losses as of December 31, 2020 $ ( 3.0 ) $ ( 0.5 ) $ ( 2.5 ) Net changes in fair value of derivatives 11.5 3.8 7.7 Net gains reclassified from accumulated other comprehensive loss into income ( 2.0 ) ( 1.2 ) ( 0.8 ) Accumulated derivative net gains as of September 30, 2021 $ 6.5 $ 2.1 $ 4.4 A s of September 30, 2021, approximately $ 0.7 million of derivative net losses and approximately $ 5.5 million of derivatives net gains, before taxes, remain in accumulated other comprehensive loss held by the Company related to foreign currency contracts and commodity contracts, respectively, as the inventory associated with the losses and gains had not yet been sold. Net Investment Hedges The Company uses non-derivative and derivative instruments to hedge a portion of its net investment in foreign operations against adverse movements in exchange rates. For instruments that are designated as hedges of net investments in foreign operations, changes in the fair value of the derivative instruments are recorded in foreign currency translation adjustments, a component of accumulated other comprehensive loss, to offset changes in the value of the net investments being hedged. When the net investment in foreign operations is sold or substantially liquidates, the amounts recorded in accumulated other comprehensive loss are reclassified to earnings. To the extent foreign currency denominated debt is de-designated from a net investment hedge relationship, changes in the value of the foreign currency denominated debt are recorded in earnings through the maturity date. In January 2018, the Company entered into a cross currency swap contract as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. The cross currency swap expired on January 19, 2021. At maturity of the cross currency swap contract, the Company delivered the notional amount of approximately € 245.7 million (or approximately $ 297.1 million as of January 19, 2021) and received $ 300.0 million from the counterparties, resulting in a gain of approximately $ 2.9 million that was recognized in accumulated other comprehensive loss. The Company received quarterly interest payments from the counterparties based on a fixed interest rate until the maturity of the cross currency swap. On January 29, 2021, the Company entered into a new cross currency swap contract as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. The cross currency swap has an expiration date of January 29, 2028. At maturity of the cross currency swap contract, the Company will deliver the notional amount of approximately € 247.9 million (or approximately $ 287.3 million as of September 30, 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 the 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. The following table summarizes the notional values of the instrument designated as a net investment hedge (in millions): Notional Amount as of September 30, 2021 December 31, 2020 Cross currency swap contract $ 300.0 $ 300.0 21 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) The following table summarizes the after-tax impact of changes in the fair value of the instrument designated as a net investment hedge during the three and nine months ended September 30, 2021 and 2020 (in millions): Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Three Months Ended Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Cross currency swap contract $ 5.8 $ ( 13.3 ) $ 5.5 $ ( 11.8 ) Foreign currency denominated debt — — — 1.7 Derivative Transactions Not Designated as Hedging Instruments During 2021 and 2020, 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 September 30, 2021 and December 31, 2020, the Company had outstanding foreign currency contracts with a notional amount of approximately $ 3,390.6 million and $ 3,326.6 million, respectively. The following table summarizes the impact that changes in the fair value of derivatives not designated as hedging instruments had on net income (in millions): Loss Recognized in Net Income for the Three Months Ended Gain Recognized in Net Income for the Nine Months Ended Classification of Gain (Loss) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Foreign currency contracts Other expense, net $ ( 1.7 ) $ ( 7.0 ) $ 27.6 $ 16.1 The table below sets forth the fair value of derivative instruments as of September 30, 2021 (in millions): Asset Derivatives as of September 30, 2021 Liability Derivatives as of September 30, 2021 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivative instruments designated as hedging instruments: Foreign currency contracts Other current assets $ 1.9 Other current liabilities $ 2.6 Commodity contracts Other current assets 2.9 Other current liabilities 0.6 Cross currency swap contract Other noncurrent assets 7.0 Other noncurrent liabilities — Derivative instruments not designated as hedging instruments: Foreign currency contracts Other current assets 13.2 Other current liabilities 9.3 Total derivative instruments $ 25.0 $ 12.5 22 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 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 assets — 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 23 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 13. CHANGES IN STOCKHOLDERS’ EQUITY The following tables set forth changes in stockholders’ equity attributed to AGCO Corporation and its subsidiaries and to noncontrolling interests for the three and nine months ended September 30, 2021 (in millions): Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity Balance, June 30, 2021 $ 0.8 $ 11.7 $ 4,864.1 $ ( 1,738.3 ) $ 26.5 $ 3,164.8 Stock compensation — 5.9 — — — 5.9 SSARs exercised — ( 0.5 ) — — — ( 0.5 ) Comprehensive income: Net income — — 181.3 — 1.1 182.4 Other comprehensive loss, net of reclassification adjustments: Foreign currency translation adjustments — — — ( 65.4 ) — ( 65.4 ) Defined benefit pension plans, net of tax — — — 2.6 — 2.6 Deferred gains and losses on derivatives, net of tax — — — ( 3.4 ) — ( 3.4 ) Payment of dividends to stockholders — — ( 15.0 ) — — ( 15.0 ) Purchases and retirement of common stock ( 0.1 ) ( 13.5 ) ( 61.4 ) — — ( 75.0 ) Balance, September 30, 2021 $ 0.7 $ 3.6 $ 4,969.0 $ ( 1,804.5 ) $ 27.6 $ 3,196.4 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity Balance, December 31, 2020 $ 0.8 $ 30.9 $ 4,759.1 $ ( 1,810.8 ) $ 38.0 $ 3,018.0 Stock compensation — 21.1 — — — 21.1 Issuance of stock awards — ( 29.5 ) — — — ( 29.5 ) SSARs exercised — ( 5.4 ) — — — ( 5.4 ) Comprehensive income: Net income — — 614.9 — 3.3 618.2 Other comprehensive income, net of reclassification adjustments: Foreign currency translation adjustments — — — ( 32.3 ) 0.4 ( 31.9 ) Defined benefit pension plans, net of tax — — — 31.7 — 31.7 Deferred gains and losses on derivatives, net of tax — — — 6.9 — 6.9 Payment of dividends to stockholders — — ( 343.6 ) — — ( 343.6 ) Purchases and retirement of common stock ( 0.1 ) ( 13.5 ) ( 61.4 ) — — ( 75.0 ) Distributions to noncontrolling interest — — — — ( 3.5 ) ( 3.5 ) Change in noncontrolling interest — — — — ( 10.6 ) ( 10.6 ) Balance, September 30, 2021 $ 0.7 $ 3.6 $ 4,969.0 $ ( 1,804.5 ) $ 27.6 $ 3,196.4 24 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) The following tables set forth changes in stockholders’ equity attributed to AGCO Corporation and its subsidiaries and to noncontrolling interests for the three and nine months ended September 30, 2020 (in millions): Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity Balance, June 30, 2020 $ 0.8 $ 10.1 $ 4,490.4 $ ( 1,825.2 ) $ 41.4 $ 2,717.5 Stock compensation — 14.1 — — — 14.1 Comprehensive income: Net income — — 157.3 — 0.8 158.1 Other comprehensive loss, net of reclassification adjustments: Foreign currency translation adjustments — — — ( 28.1 ) ( 2.2 ) ( 30.3 ) Defined benefit pension plans, net of tax — — — 3.4 — 3.4 Deferred gains and losses on derivatives, net of tax — — — ( 1.1 ) — ( 1.1 ) Payment of dividends to stockholders — — ( 12.0 ) — — ( 12.0 ) Changes in noncontrolling interests — — — — 0.2 0.2 Balance, September 30, 2020 $ 0.8 $ 24.2 $ 4,635.7 $ ( 1,851.0 ) $ 40.2 $ 2,849.9 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity Balance, December 31, 2019 $ 0.8 $ 4.7 $ 4,443.5 $ ( 1,595.2 ) $ 53.2 $ 2,907.0 Stock compensation — 30.2 ( 3.4 ) — — 26.8 Issuance of stock awards — ( 7.3 ) ( 8.4 ) — — ( 15.7 ) SSARs exercised — — ( 0.1 ) — — ( 0.1 ) Comprehensive loss: Net income (loss) — — 291.7 — ( 7.3 ) 284.4 Other comprehensive loss, net of reclassification adjustments: Foreign currency translation adjustments — — — ( 270.0 ) ( 5.4 ) ( 275.4 ) Defined benefit pension plans, net of tax — — — 10.3 — 10.3 Deferred gains and losses on derivatives, net of tax — — — 3.9 — 3.9 Payment of dividends to stockholders — — ( 36.0 ) — — ( 36.0 ) Purchases and retirement of common stock — ( 3.4 ) ( 51.6 ) — — ( 55.0 ) Change in noncontrolling interest — — — — ( 0.3 ) ( 0.3 ) Balance, September 30, 2020 $ 0.8 $ 24.2 $ 4,635.7 $ ( 1,851.0 ) $ 40.2 $ 2,849.9 25 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Total comprehensive income (loss) attributable to noncontrolling interests for the three and nine months ended September 30, 2021 and 2020 was as follows (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income (loss) $ 1.1 $ 0.8 $ 3.3 $ ( 7.3 ) Other comprehensive income (loss): Foreign currency translation adjustments — ( 2.2 ) 0.4 ( 5.4 ) Total comprehensive income (loss) $ 1.1 $ ( 1.4 ) $ 3.7 $ ( 12.7 ) 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 nine months ended September 30, 2021 (in millions): Defined Benefit Pension Plans Deferred Net (Losses) Gains on Derivatives Cumulative Translation Adjustment Total Accumulated other comprehensive loss, December 31, 2020 $ ( 313.3 ) $ ( 2.5 ) $ ( 1,495.0 ) $ ( 1,810.8 ) Other comprehensive income (loss) before reclassifications 23.2 7.7 ( 32.3 ) ( 1.4 ) Net losses (gains) reclassified from accumulated other comprehensive loss 8.5 ( 0.8 ) — 7.7 Other comprehensive income (loss), net of reclassification adjustments 31.7 6.9 ( 32.3 ) 6.3 Accumulated other comprehensive loss, September 30, 2021 $ ( 281.6 ) $ 4.4 $ ( 1,527.3 ) $ ( 1,804.5 ) The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the three months ended September 30, 2021 and 2020 (in millions): Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item within the Condensed Consolidated Statements of Operations Details about Accumulated Other Comprehensive Loss Components Three Months Ended September 30, 2021 (1) Three Months Ended September 30, 2020 (1) Derivatives: Net losses (gains) on foreign currency contracts $ 1.5 $ ( 1.2 ) Cost of goods sold Net gains on commodity contracts $ ( 8.5 ) $ — Cost of goods sold Reclassification before tax ( 7.0 ) ( 1.2 ) 2.0 0.2 Income tax benefit (provision) Reclassification net of tax $ ( 5.0 ) $ ( 1.0 ) Defined benefit pension plans: Amortization of net actuarial losses $ 3.4 $ 3.5 Other expense, net (2) Amortization of prior service cost 0.1 0.5 Other expense, net (2) Reclassification before tax 3.5 4.0 ( 0.9 ) ( 0.6 ) Income tax provision Reclassification net of tax $ 2.6 $ 3.4 Net (gains) losses reclassified from accumulated other comprehensive loss $ ( 2.4 ) $ 2.4 (1) (Gains) losses included within the Condensed Consolidated Statements of Operations for the three months ended September 30, 2021 and 2020, respectively. (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost. See Note 15 for additional information on the Company’s defined benefit pension plans. 26 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the nine months ended September 30, 2021 and 2020 (in millions): Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item within the Condensed Consolidated Statements of Operations Details about Accumulated Other Comprehensive Loss Components Nine Months Ended September 30, 2021 (1) Nine Months Ended September 30, 2020 (1) Derivatives: Net losses (gains) on foreign currency contracts $ 8.4 $ ( 4.4 ) Cost of goods sold Net gains on commodity contracts ( 10.4 ) — Cost of goods sold Reclassification before tax ( 2.0 ) ( 4.4 ) 1.2 0.2 Income tax provision Reclassification net of tax $ ( 0.8 ) $ ( 4.2 ) Defined benefit pension plans: Amortization of net actuarial losses $ 10.8 $ 10.2 Other expense, net (2) Amortization of prior service cost 0.7 1.7 Other expense, net (2) Reclassification before tax 11.5 11.9 ( 3.0 ) ( 1.6 ) Income tax provision Reclassification net of tax (3) $ 8.5 $ 10.3 Net losses reclassified from accumulated other comprehensive loss $ 7.7 $ 6.1 (1) Losses included within the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021 and 2020, respectively. (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost. See Note 15 for additional information on the Company’s defined benefit pension plans. (3) During the nine months ended September 30, 2021, the Company amended its ENPP. The amendment resulted in a net gain of approximately $ 23.2 million, after tax, recognized in "Accumulated other comprehensive loss" in the Company's Condensed Balance Sheets. See Note 15 for additional information regarding the Company's defined benefit pension plans. Share Repurchase Program In August 2021, the Company entered into an ASR agreement with a financial institution to repurchase an aggregate of $ 75.0 million of shares of its common stock. The Company received 558,471 shares to date in this transaction. All shares received under the ASR agreements were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained earnings” within the Company’s Condensed Consolidated Balance Sheets. As of September 30, 2021, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $ 170.0 million, which has no expiration date. In November 2021, the Company entered into an ASR agreement with a financial institution to repurchase an aggregate of $ 60.0 million shares of its common stock. The Company received 393,733 shares to date in this transaction. The specific number of shares the Company will ultimately repurchase will be determined at the completion of the term of the ASR based on the daily volume-weighted average share price of the Company’s common stock less an agreed upon discount. Upon settlement of the ASR, the Company may be entitled to receive additional shares of common stock or, under certain circumstances, be required to remit a settlement amount. The Company expects that additional shares will be received by the Company upon final settlement of its current ASR agreement, which expires during the first quarter of 2022. All shares received under the ASR agreement discussed above were retired upon receipt and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained earnings” within the Company’s Condensed Consolidated Balance Sheets. 27 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 14. 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 September 30, 2021 and December 31, 2020, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $ 1.3 billion and $ 1.5 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 receivable sales agreements. Following the phase out of LIBOR-denominated rates, the Company expects this funding to be based upon the interest rate charged by Rabobank to its affiliate, which, in turn, such affiliate then lends to the AGCO Finance entities plus an agreed-upon margin. These fees are reflected within losses on the sales of receivables included within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations. The Company does not service the receivables after the sales occur and does not maintain any direct retained interest in the receivables. The Company accounts for the receivable sales agreements as off-balance sheet transactions. Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $ 7.4 million and $ 17.1 million, respectively, during the three and nine months ended September 30, 2021. Losses on sales of receivables associated with the accounts receivable sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $ 6.1 million and $ 18.5 million, respectively, during the three and nine ended September 30, 2020. 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 September 30, 2021 and December 31, 2020, these finance joint ventures had approximately $ 67.0 million and $ 85.2 million, respectively, of outstanding accounts receivable associated with these arrangements. The Company accounts for these arrangements 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 accounts for the sale of such receivables as off-balance sheet transactions. 28 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 15. PENSION AND POSTRETIREMENT BENEFIT PLANS Net periodic pension and postretirement benefit cost for the Company’s defined pension and postretirement benefit plans for the three and nine months ended September 30, 2021 and 2020 are set forth below (in millions): Three Months Ended September 30, Nine Months Ended September 30, Pension benefits 2021 2020 2021 2020 Service cost $ 3.7 $ 4.0 $ 11.5 $ 12.0 Interest cost 3.3 4.1 9.7 12.3 Expected return on plan assets ( 8.0 ) ( 7.1 ) ( 23.7 ) ( 21.2 ) Amortization of net actuarial losses 3.3 3.4 10.7 10.0 Amortization of prior service cost — 0.5 0.6 1.6 Curtailment (1) — — ( 1.2 ) $ — Net periodic pension cost $ 2.3 $ 4.9 $ 7.6 $ 14.7 (1) During the nine months ended September 30, 2021, the Company amended its Executive Nonqualified Pension Plan (“ENPP”) to freeze the plan as of December 31, 2024 to future salary benefit accruals, and to eliminate a life-time annuity feature for participants reaching age 65 subsequent to December 31, 2022. This amendment resulted in a curtailment gain related to the ENPP's net prior service credit. Three Months Ended September 30, Nine Months Ended September 30, Postretirement benefits 2021 2020 2021 2020 Service cost $ — $ — $ 0.1 $ — Interest cost 0.2 0.3 0.6 0.9 Amortization of net actuarial losses 0.1 0.1 0.1 0.2 Amortization of prior service cost 0.1 — 0.1 0.1 Net periodic postretirement benefit cost $ 0.4 $ 0.4 $ 0.9 $ 1.2 The components of net periodic pension and postretirement benefits cost, other than the service cost component, are included in “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations. The following table summarizes the activity in accumulated other comprehensive loss related to the Company’s defined pension and postretirement benefit plans during the nine months ended September 30, 2021 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated other comprehensive loss as of December 31, 2020 $ ( 412.5 ) $ ( 99.2 ) $ ( 313.3 ) Amortization of net actuarial losses 10.8 2.7 8.1 Amortization of prior service cost 0.7 0.3 0.4 Plan amendment (1) 31.2 8.0 23.2 Accumulated other comprehensive loss as of September 30, 2021 $ ( 369.8 ) $ ( 88.2 ) $ ( 281.6 ) (1) During the nine months ended September 30, 2021, the Company amended its ENPP. The amendment resulted in a remeasurement gain of approximately $ 10.5 million as well as the impacts of approximately $ 12.2 million due to the elimination a life-time annuity feature and approximately $ 9.7 million due to the freezing of future salary benefits, partially offset by a curtailment gain of approximately $ 1.2 million. The after-tax impact of the aggregate of these items was approximately $ 23.2 million. During the nine months ended September 30, 2021, the Company made approximately $ 28.3 million of contributions to its defined pension benefit plans. The Company currently estimates its minimum contributions for 2021 to its defined pension benefit plans will aggregate approximately $ 36.6 million. During the nine months ended September 30, 2021, the Company made approximately $ 1.0 million of contributions to its postretirement health care and life insurance benefit plans. The Company currently estimates that it will make approximately $ 1.5 million of contributions to its postretirement health care and life insurance benefit plans during 2021. 29 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 16. 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. 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 12 for additional information on the Company’s derivative instruments and hedging activities. Assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 are summarized below (in millions): As of September 30, 2021 Level 1 Level 2 Level 3 Total Derivative assets $ — $ 25.0 $ — $ 25.0 Derivative liabilities — 12.5 — 12.5 As of December 31, 2020 Level 1 Level 2 Level 3 Total Derivative assets $ — $ 15.3 $ — $ 15.3 Derivative liabilities — 26.7 — 26.7 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. 17. RELATED PARTIES 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. 30 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 18. 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 three and nine months ended September 30, 2021 and 2020 and assets as of September 30, 2021 and December 31, 2020 based on the Company’s reportable segments are as follows (in millions): Three Months Ended September 30, North America South America Europe/Middle East Asia/Pacific/Africa Consolidated 2021 Net sales $ 638.7 $ 383.3 $ 1,462.4 $ 240.7 $ 2,725.1 Income from operations 35.8 44.4 192.3 28.6 301.1 Depreciation 14.8 6.7 28.6 4.2 54.3 Capital expenditures 10.5 8.9 55.6 3.1 78.1 2020 Net sales $ 582.2 $ 273.9 $ 1,405.9 $ 235.5 $ 2,497.5 Income from operations 58.3 16.7 187.5 23.8 286.3 Depreciation 15.4 6.1 26.6 4.5 52.6 Capital expenditures 9.2 2.9 52.8 0.7 65.6 Nine Months Ended September 30, North America South America Europe/Middle East Asia/Pacific/Africa Consolidated 2021 Net sales $ 1,984.5 $ 902.1 $ 4,424.8 $ 671.7 $ 7,983.1 Income from operations 214.4 83.7 538.1 76.2 912.4 Depreciation 45.6 20.0 86.6 12.0 164.2 Capital expenditures 31.6 20.5 139.4 7.2 198.7 2020 Net sales $ 1,689.9 $ 606.3 $ 3,644.2 $ 492.2 $ 6,432.6 Income from operations 183.9 13.4 380.8 36.5 614.6 Depreciation 46.2 19.6 79.0 10.1 154.9 Capital expenditures 27.5 13.3 137.3 5.0 183.1 Assets As of September 30, 2021 $ 1,321.6 $ 854.4 $ 2,605.6 $ 633.1 $ 5,414.7 As of December 31, 2020 1,051.9 687.6 2,238.7 536.2 4,514.4 31 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) A reconciliation from the segment information to the consolidated balances for income from operations and total assets is set forth below (in millions): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Segment income from operations $ 301.1 $ 286.3 $ 912.4 $ 614.6 Corporate expenses ( 27.9 ) ( 33.0 ) ( 101.3 ) ( 96.5 ) Amortization of intangibles ( 14.1 ) ( 14.8 ) ( 45.8 ) ( 44.7 ) Goodwill impairment charge — — — ( 20.0 ) Stock compensation expense ( 5.8 ) ( 13.7 ) ( 20.5 ) ( 26.3 ) Restructuring expenses ( 1.4 ) ( 0.8 ) ( 7.4 ) ( 5.4 ) Consolidated income from operations $ 251.9 $ 224.0 $ 737.4 $ 421.7 September 30, 2021 December 31, 2020 Segment assets $ 5,414.7 $ 4,514.4 Cash, cash equivalents and restricted cash 537.0 1,119.1 Investments in affiliates 480.4 442.7 Deferred tax assets, other current and noncurrent assets 814.2 665.9 Intangible assets, net 406.3 455.6 Goodwill 1,289.3 1,306.5 Consolidated total assets $ 8,941.9 $ 8,504.2 32 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 19. COMMITMENTS AND CONTINGENCIES 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 it might incur on the resale of this equipment will not be material, due to the fair value of the underlying equipment. At September 30, 2021, the Company has outstanding guarantees of indebtedness owed to related and third parties of approximately $ 23.2 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 September 30, 2021, the Company had accrued approximately $ 24.3 million of outstanding guarantees of residual values that may be owed to its finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users. The maximum potential amount of future payments under these guarantees is approximately $ 142.1 million. Leases Lease payment amounts for operating and finance leases with remaining terms greater than one year as of September 30, 2021 and December 31, 2020 were as follows (in millions): September 30, 2021 December 31, 2020 Operating Leases (1) Finance Leases Operating Leases (1) Finance Leases 2021 $ 12.4 $ 0.7 $ 47.6 $ 3.3 2022 43.7 1.4 37.7 1.4 2023 34.4 1.2 28.6 1.1 2024 23.2 0.9 18.9 0.8 2025 16.4 0.6 13.6 0.6 Thereafter 42.5 8.7 44.5 9.1 Total lease payments 172.6 13.5 190.9 16.3 Less: imputed interest (2) ( 16.6 ) ( 3.0 ) ( 21.5 ) ( 3.5 ) Present value of leased liabilities $ 156.0 $ 10.5 $ 169.4 $ 12.8 (1) Operating lease payments include options to extend or terminate at the Company's sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised. (2) Calculated for each lease using either the implicit interest rate or the incremental borrowing rate when the implicit interest rate is not readily available. Other At September 30, 2021, the Company had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $ 3,683.6 million. The outstanding contracts as of September 30, 2021 range in maturity through December 2021. The Company also had outstanding designated steel commodity contracts with a gross notional amount of approximately $ 11.9 million that range in maturity through July 2022. 33 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) 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 accounts for the sale of such receivables 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 September 30, 2021, not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $ 24.2 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, are material to its business or financial statements as a whole, including its results of operations and financial condition. 20. 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 of consideration precedes the Company’s performance with respect to technology services and where the performance obligation is satisfied over time. Significant changes in the balance of contract liabilities for the three and nine months ended September 30, 2021 and 2020 were as follows (in millions): Three Months Ended September 30, 2021 2020 Balance at beginning of period $ 201.2 $ 118.7 Advance consideration received 54.7 57.6 Revenue recognized during the period for extended warranty contracts, maintenance services and technology services ( 18.8 ) ( 11.5 ) Revenue recognized during the period related to grain storage and protein production systems ( 24.2 ) ( 24.6 ) Foreign currency translation ( 3.5 ) 4.7 Balance at September 30 $ 209.4 $ 144.9 34 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Nine Months Ended September 30, 2021 2020 Balance at beginning of period $ 172.0 $ 104.0 Advance consideration received 170.8 127.2 Revenue recognized during the period for extended warranty contracts, maintenance services and technology services ( 45.1 ) ( 33.6 ) Revenue recognized during the period related to grain storage and protein production systems ( 84.0 ) ( 53.6 ) Foreign currency translation ( 4.3 ) 0.9 Balance at September 30 $ 209.4 $ 144.9 The contract liabilities are classified as either “Accrued expenses” or “Other current liabilities” and “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2021, we recognized approximately $ 18.7 million and $ 61.9 million, respectively, of revenue that was recorded as a contract liability at the beginning of 2021. During the three and nine months ended September 30, 2020, we recognized approximately $ 10.5 million and $ 36.3 million, respectively, of revenue that was recorded as a contract liability at the beginning of 2020. 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 September 30, 2021 are $ 17.1 million for the remainder of 2021, $ 66.7 million in 2022, $ 51.9 million in 2023, $ 27.1 million in 2024 and $ 18.0 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. 35 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Disaggregated Revenue Net sales for the three months ended September 30, 2021 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America South America (1) Europe/Middle East Asia/Pacific/Africa (1) Consolidated Primary geographical markets: United States $ 506.6 $ — $ — $ — $ 506.6 Canada 101.6 — — — 101.6 South America — 379.8 — — 379.8 Germany — — 294.3 — 294.3 France — — 258.1 — 258.1 United Kingdom and Ireland — — 155.5 — 155.5 Finland and Scandinavia — — 196.3 — 196.3 Other Europe — — 508.2 — 508.2 Middle East and Algeria — — 50.0 — 50.0 Africa — — — 37.6 37.6 Asia — — — 99.9 99.9 Australia and New Zealand — — — 103.2 103.2 Mexico, Central America and Caribbean 30.5 3.5 — — 34.0 $ 638.7 $ 383.3 $ 1,462.4 $ 240.7 $ 2,725.1 Major products: Tractors $ 227.5 $ 202.8 $ 1,016.8 $ 105.7 $ 1,552.8 Replacement parts 98.0 37.2 279.9 28.1 443.2 Grain storage and protein production systems 154.0 42.3 45.7 48.0 290.0 Combines, application equipment and other machinery 159.2 100.9 120.0 59.0 439.1 $ 638.7 $ 383.3 $ 1,462.4 $ 240.7 $ 2,725.1 (1) Rounding may impact the summation of amounts. 36 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Net sales for the three months ended September 30, 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 $ 463.9 $ — $ — $ — $ 463.9 Canada 98.2 — — — 98.2 South America — 271.6 — — 271.6 Germany — — 387.0 — 387.0 France — — 261.8 — 261.8 United Kingdom and Ireland — — 131.3 — 131.3 Finland and Scandinavia — — 189.3 — 189.3 Other Europe — — 397.5 — 397.5 Middle East and Algeria — — 39.0 — 39.0 Africa — — — 15.8 15.8 Asia — — — 109.9 109.9 Australia and New Zealand — — — 109.8 109.8 Mexico, Central America and Caribbean 20.1 2.3 — — 22.4 $ 582.2 $ 273.9 $ 1,405.9 $ 235.5 $ 2,497.5 Major products: Tractors $ 198.4 $ 154.3 $ 1,033.5 $ 82.5 $ 1,468.7 Replacement parts 94.8 22.8 249.6 23.6 390.8 Grain storage and protein production systems 152.0 16.7 29.3 67.3 265.3 Combines, application equipment and other machinery 137.0 80.1 93.5 62.1 372.7 $ 582.2 $ 273.9 $ 1,405.9 $ 235.5 $ 2,497.5 37 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Net sales for the nine months ended September 30, 2021 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America South America (1) Europe/Middle East Asia/Pacific/Africa (1) Consolidated Primary geographical markets: United States $ 1,576.2 $ — $ — $ — $ 1,576.2 Canada 332.0 — — — 332.0 South America — 894.4 — — 894.4 Germany — — 988.2 — 988.2 France — — 768.4 — 768.4 United Kingdom and Ireland — — 450.9 — 450.9 Finland and Scandinavia — — 574.9 — 574.9 Other Europe — — 1,490.5 — 1,490.5 Middle East and Algeria — — 151.9 — 151.9 Africa — — — 99.5 99.5 Asia — — — 318.8 318.8 Australia and New Zealand — — — 253.4 253.4 Mexico, Central America and Caribbean 76.3 7.7 — — 84.0 $ 1,984.5 $ 902.1 $ 4,424.8 $ 671.7 $ 7,983.1 Major products: Tractors $ 661.0 $ 440.2 $ 2,967.3 $ 295.8 $ 4,364.3 Replacement parts 305.5 99.7 839.2 77.0 1,321.4 Grain storage and protein production systems 418.4 96.0 131.6 173.7 819.7 Combines, application equipment and other machinery 599.6 266.1 486.7 125.3 1,477.7 $ 1,984.5 $ 902.1 $ 4,424.8 $ 671.7 $ 7,983.1 (1) Rounding may impact the summation of amounts. 38 Table of Contents Notes to Condensed Consolidated Financial Statements - Continued (unaudited) Net sales for the nine months ended September 30, 2020 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America South America Europe/Middle East (1) Asia/Pacific/Africa (1) Consolidated Primary geographical markets: United States $ 1,373.6 $ — $ — $ — $ 1,373.6 Canada 252.4 — — — 252.4 South America — 600.8 — — 600.8 Germany — — 981.4 — 981.4 France — — 697.5 — 697.5 United Kingdom and Ireland — — 354.9 — 354.9 Finland and Scandinavia — — 466.2 — 466.2 Other Europe — — 1,047.1 — 1,047.1 Middle East and Algeria — — 97.1 — 97.1 Africa — — — 31.8 31.8 Asia — — — 243.8 243.8 Australia and New Zealand — — — 216.6 216.6 Mexico, Central America and Caribbean 63.9 5.5 — — 69.4 $ 1,689.9 $ 606.3 $ 3,644.2 $ 492.2 $ 6,432.6 Major products: Tractors $ 515.4 $ 331.2 $ 2,486.0 $ 189.9 $ 3,522.5 Replacement parts 272.8 59.6 707.6 60.2 1,100.2 Grain storage and protein production systems 391.6 55.5 90.1 144.7 681.9 Combines, application equipment and other machinery 510.1 160.0 360.4 97.5 1,128.0 $ 1,689.9 $ 606.3 $ 3,644.2 $ 492.2 $ 6,432.6 (1) Rounding may impact the summation of amounts. 39 Table of Contents