What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-02-25 compared with 2021-03-01 · 208 added, 249 removed, 318 unchanged (59% of the section changed)

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Performance Graph

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

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

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

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

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100.00 121.73 114.31 139.46 159.96 199.16

Custom Peer Group Index 100.00 142.46 206.15 175.30 227.23 304.62

The total return assumes that dividends were reinvested and is based on a $100 investment on December 31, 2016.

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

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

Issuer Purchases of Equity Securities

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

Selected Financial Data

The following tables present our selected consolidated financial data.

The data set forth below should be read together with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our historical Consolidated Financial Statements and the related notes.

The Consolidated Financial Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 and the reports thereon are included in Item 8, “Financial Statements and Supplementary Data.” The historical financial data may not be indicative of our future performance.

Years Ended December 31,

The table below sets forth information with respect to purchases of our common stock made by or on behalf of us during the three months ended December 31, 2021:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (2)

October 1, 2021 through

October 31, 2021

— $ — — $ 170.0

(in millions, except per share data)

Operating Data:

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

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

Income from operations 599.7 348.1 489.0 404.4 287.0

Net income 419.8 122.8 283.7 189.3 160.2

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

Net income attributable to AGCO Corporation and subsidiaries $ 427.1 $ 125.2 $ 285.5 $ 186.4 $ 160.1

Net income per common share — diluted $ 5.65 $ 1.63 $ 3.58 $ 2.32 $ 1.96

Cash dividends declared and paid per common share $ 0.63 $ 0.63 $ 0.60 $ 0.56 $ 0.52

Weighted average shares outstanding — diluted 75.6 77.0 79.7 80.2 81.7

As of December 31,

November 1, 2021 through

November 30, 2021 (1)

393,733 $ 121.91 393,733 $ 110.0

(in millions, except number of employees)

Balance Sheet Data:

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

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

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

December 1, 2021 through

December 31, 2021 — $ — — $ 110.0

Total 393,733 $ 121.91 393,733 $ 110.0

___________________________________

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

Number of employees 21,426 20,961 21,232 20,462 19,795

(1) In November 2021, we entered into an ASR agreement with a third-party financial institution to repurchase $60.0 million of our common stock.

The ASR agreement resulted in the initial delivery of 393,733 shares of our common stock, representing approximately 80% of the shares expected to be repurchased in connection with the transaction.

In January 2022, the remaining 113,824 shares under the ASR agreement were delivered.

The average price paid per share related to the ASR agreement reflected in the table above was derived using the fair market value of the shares on the date the initial 393,733 shares were delivered.

The amount that may yet be purchased under our share repurchase programs, as presented in the above table, was reduced by the entire $60.0 million payment related to the ASR agreement.

Refer to Note 9 to our Condensed Consolidated Financial Statements for a further discussion of this matter.

(2) The remaining authorized amount to be repurchased is $110.0 million, which has no expiration date.

The information required by Item 301 and Item 302 of Regulation S-K has been omitted as we have elected to adopt the changes to Item 301 and Item 302 of Regulation S-K contained in SEC Release No.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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

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

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

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

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

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

All of our production facilities are currently operational.

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

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

The COVID-19 pandemic and other economic factors continue to create volatility in the global economy, initially through government-mandated facility closures, higher absentee rates, and reduced production at both our factories and the factories that supply us with parts and components;

and, more recently, through supply chain disruptions.

In addition, we have had to incur various costs related to preventing the spread of COVID-19, including changes to our factories and other facilities and those related to enabling remote work.

We expect COVID-19 to continue to impact our business, although the manner and extent to which it impacts us will depend on future developments, including the duration of the pandemic, the timing, distribution and impact of vaccinations, and possible mutations of the virus that are more contagious or resistant to current vaccines.

Measures taken by governments around the world, as well as businesses, including us, and the general public in order to limit the spread of COVID-19 will impact our business as well.

These factors, along with increasing industrial demand, could negatively affect production levels, particularly caused by delays in the receipts of parts and components.

Supply chain issues of particular concern include a wide range of parts and components with a portion arising from the global semiconductor shortage.

We may continue to face supplier bottlenecks and delays in all regions as well as challenges with freight logistics, and we continue to work to mitigate the impact of these issues in order to meet increased end-market demand.

Financial Highlights

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A large majority of our sales are to independent dealers and distributors that sell our products to end users.

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

To the extent practicable, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal

demands on our manufacturing operations and to minimize our investment in inventories.

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

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Net income 8.1 4.6 1.4

Net loss attributable to noncontrolling interests 0.1 — —

Net (income) loss attributable to noncontrolling interests — 0.1 —

Net income attributable to AGCO Corporation and subsidiaries 8.1 % 4.7 % 1.4 %

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Net income attributable to AGCO Corporation and subsidiaries for 2021 was $897.0 million, or $11.85 per diluted share, compared to $427.1 million, or $5.65 per diluted share, for 2020.

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

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

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

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

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

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

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

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

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

Net sales for 2021 were approximately $11,138.3 million, or 21.7% higher than 2020, primarily due to improved market demand.

Regionally, net sales were higher in all regions during 2021 compared to 2020.

Net sales were negatively impacted by extended COVID-related production shutdowns in both Europe and South America during the first half of 2020.

Income from operations was approximately $1,001.4 million in 2021 compared to approximately $599.7 million in 2020.

The increase in income from operations during 2021 was primarily the result of higher net sales and production volumes and improved margins, which benefited from positive pricing impacts and a favorable sales mix that offset substantial inflationary material and freight cost pressures along with higher manufacturing costs.

Net income per diluted share was favorably impacted by the reversal of valuation allowances previously established against our deferred tax assets in both the United States and Brazil during 2021.

In addition, our 2020 income from operations included approximately $20.0 million of a non-cash goodwill impairment charge during the second quarter of 2020 related to a tillage and seeding equipment joint venture in which we formerly owned a 50% interest in our North American (“NA”) region.

Regionally, income from operations in our Europe/Middle East (“EME”) region increased by approximately $170.1 million in 2021 compared to 2020, driven primarily by higher net sales and increased production volumes as well as positive pricing realization, which offset higher material costs and engineering expenses.

In our North American region, income from operations improved by approximately $44.4 million compared to the prior year.

Higher net sales and production levels, a

richer product mix and favorable pricing impacts contributed to the improvement in the region and helped to offset material cost inflation.

In South America, income from operations increased approximately $102.9 million in 2021 compared to 2020.

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

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

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

The increase reflects increased net sales and production volumes, a better sales mix and favorable price realization, offsetting increasing material costs.

Income from operations in our Asia/Pacific/African (“APA”) region increased approximately $51.8 million in 2021 compared to 2020, primarily due to higher net sales and an improved product mix.

Industry Market Conditions

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

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

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

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

Elevated agricultural commodity prices continue to support favorable farm economics resulting in farmers upgrading and replacing aging fleets.

These improved conditions generated industry growth across all the major equipment markets during 2021.

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

In North America, industry unit retail sales of utility and high horsepower tractors increased approximately 14% in 2021 compared to 2020.

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

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

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

COVID-19 aid package for U.S.

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

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

Industry unit retail sales of combines increased approximately 24% in 2021 compared to 2020.

Retail sales growth was strongest for high horsepower tractors in 2021 as compared to 2020 where an extended fleet age and favorable commodity prices stimulated demand.

In Western Europe, industry unit retail sales of tractors for 2021 increased approximately 16% compared to 2020.

Industry unit retail sales of combines for 2021 increased approximately 3% compared to 2020.

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

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

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

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

Industry sales increased across all major markets compared to 2020.

Higher wheat, dairy and livestock prices, combined with improved levels of crop production, generated positive farm economics and farmer sentiment.

In South America, industry unit retail sales of tractors for 2021 increased approximately 22% compared to 2020.

Industry unit retail sales of combines for 2021 increased approximately 20% compared to 2020.

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

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

The improved demand was primarily in the large markets of Brazil and Argentina, as well as in smaller South American markets.

Healthy crop production as well as favorable exchange rates supported positive economic conditions for farmers who continue to replace aged equipment.

Results of Operations

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

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

Net sales for 2021 were $11,138.3 million compared to $9,149.7 million for 2020, primarily as a result of improved market demand.

The following table sets forth, for the year ended December 31, 2021, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

Change Change due to Currency Translation

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$ 11,138.3 $ 9,149.7 $ 1,988.6 21.7 % $ 199.7 2.2 %

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

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

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

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

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

Regionally, net sales in North America increased in 2021 compared to 2020, with growth in sales of tractors and Precision Planting equipment.

In the EME region, net sales were higher during 2021 compared to 2020, primarily due to increased sales in all major markets, with the largest increases contributed by growth in tractors, combines and replacement parts.

Net sales increased in South America in 2021 compared to 2020, primarily due to higher net sales of tractors, combines, planting equipment, parts as well as grain and protein equipment.

In the APA region, net sales increased in 2021 compared to 2020, primarily due to net sales increases in China and Australia, as well as recovery in Africa.

We estimate that worldwide average price increases were approximately 6.6% and 1.6% in 2021 and 2020, respectively.

Consolidated net sales of tractors and combines, which comprised approximately 61.1% of our net sales in 2021, increased approximately 23.0% in 2021 compared to 2020.

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

Unit sales of tractors and combines increased approximately 16.7% during 2021 compared to 2020.

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

The following table sets forth, for the years ended December 31, 2021 and 2020, the percentage relationship to net sales of certain items included in our Consolidated Statements of Operations (in millions, except percentages):

Net Sales $ % of

Net Sales (1)

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Amortization of intangibles 61.1 0.5 % 59.5 0.7 %

Impairment charges 20.0 0.2 % 176.6 2.0 %

Impairment charge — — % 20.0 0.2 %

Restructuring expenses 15.3 0.1 % 19.7 0.2 %

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(1) Rounding may impact summation of amounts.

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

Production hours decreased across all regions during 2020.

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

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

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

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

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

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

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

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

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

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

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

Gross profit as a percentage of net sales increased during 2021 compared to 2020 primarily due to the benefit of higher net sales and production levels, as well as positive pricing, which was partially offset by the impact of material cost inflation.

Production hours increased across all regions during 2021.

Overall, global production hours increased approximately 25% on a global basis during 2021 compared to 2020, primarily as a result of stronger market demand during 2021.

Our production facilities continue to face supply chain and logistics disruptions as well as material and freight cost inflation.

These disruptions impact our ability to produce and ship units, as well as contribute to labor inefficiencies, and result in carrying higher than anticipated raw material and work in process inventory levels.

We expect these conditions to continue, which may impact production levels and net sales and margins in future periods.

Selling, general and administrative expenses (“SG&A expenses”) and engineering expenses, as a percentage of net sales, were lower during 2021 compared to 2020, primarily driven by the increases in net sales.

The absolute level of SG&A expenses increased during 2021 following prior year actions to lower expenses while operations were suspended, such as reduced field sales and marketing activities and lower travel expenses.

We recorded stock compensation expense of approximately $26.6 million and $36.8 million during 2021 and 2020, respectively, within SG&A expenses, as is more fully explained in Notes 1 and 10 of our Consolidated Financial Statements.

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

The impairment charge was recorded as “Impairment charges” within our Consolidated Statements of Operations, with an offsetting benefit of approximately $10.0 million included within “Net loss attributable to noncontrolling interests.”

We recorded restructuring expenses of approximately $15.3 million and $19.7 million during 2021 and 2020, respectively.

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

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

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

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

The restructuring expenses primarily related to severance and other related costs associated with the rationalization of employee headcount at various manufacturing facilities and administrative offices located in the United States, Europe and South America during 2021 and 2020, as well as the rationalization of our grain storage and protein production systems operations.

See Note 3 of our Consolidated Financial Statements.

Interest expense, net was $6.7 million for 2021 compared to $15.0 million for 2020 resulting primarily from higher interest income in 2021 as compared to 2020.

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

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

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

During 2020, TAFE repurchased a portion of its common stock from us resulting in a gain of approximately $32.5 million recorded within “Other expense, net.” See Note 14 of our Consolidated Financial Statements for additional information.

In addition, losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil, were approximately $24.5 million and $24.1 million in 2021 and 2020, respectively.

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

We recorded an income tax provision of $108.4 million in 2021 compared to $187.7 million in 2020.

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

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

At December 31, 2021 and 2020, we had gross deferred tax assets of $291.8 million and $360.9 million, respectively, including $69.5 million and $62.9 million, respectively, related to net operating loss carryforwards.

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

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

At December 31, 2021, we had total valuation allowances as an offset to our gross deferred tax assets of approximately $47.4 million.

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

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

This valuation allowance included allowances against deferred tax assets (including net operating loss carryforwards) in the U.S.

and certain foreign jurisdictions.

As of December 31, 2021, our income tax provision included the benefit of reversals of approximately $67.8 million and $55.6 million related to valuation allowances previously established against the Company’s net deferred tax assets in the United States and Brazil, respectively.

Improvements in income in the United States and Brazil during 2020 and 2021, along with updated future projected income levels, supported the reversal of both of the valuation allowances.

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

This valuation allowance included allowances against deferred tax assets (including net operating loss carryforwards) in the United States and certain foreign jurisdictions.

Realization of the net deferred tax assets as of December 31, 2021 will depend on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities.

We believe it is more likely than not that the remaining net deferred tax assets will be realized.

Refer to Note 5 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information.

We believe it is more likely than not that the remaining net deferred tax assets should be able to be realized.

Refer to Note 6 of our Consolidated Financial Statements for further information.

Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $65.6 million in 2021 compared to $45.5 million in 2020, primarily due to higher net earnings from our AGCO Finance joint ventures.

See “Finance Joint Ventures” for further information regarding our finance joint ventures and their results of operations and Note 4 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information.

See “Finance Joint Ventures” for further information regarding our finance joint ventures and their results of operations and Note 5 of our Consolidated Financial Statements for further information.

2020 Compared to 2019

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

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

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

See “Commitments and Off-Balance Sheet Arrangements” and Note 12 to our Consolidated Financial Statements for additional information.

As of December 31, 2021, our capital investment in the finance joint ventures, which is included in “Investment in affiliates” on our Consolidated Balance Sheets, was approximately $359.2 million compared to approximately $395.3 million as of December 31, 2020.

The total finance portfolio in our finance joint ventures was approximately $10.9 billion and $10.7 billion as of December 31, 2021 and 2020, respectively.

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

The total finance portfolio as of December 31, 2021 and 2020 included approximately $9.2 billion and $8.8 billion, respectively, of retail receivables and $1.7 billion and $1.9 billion of wholesale receivables from AGCO dealers as of December 31, 2021 and 2020, respectively.

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

During 2021, we did not make additional investments in our finance joint ventures, and we received dividends of approximately $84.4 million from certain of our finance joint ventures.

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

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

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

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

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

Our share in the earnings of the finance joint ventures, included in “Equity in net earnings of affiliates” within our Consolidated Statements of Operations, was approximately $64.4 million and $45.0 million for the years ended December 31, 2021 and 2020, respectively, with the increase in earnings primarily due to higher income in our finance joint ventures in the U.S., Canada and France during 2021 as compared to 2020.

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

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

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

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

Global industry demand for farm equipment is expected to be higher across all major markets during 2022.

Our net sales are expected to increase in 2022 compared to 2021, resulting from improved sales volumes and pricing, partially offset by negative foreign currency translation.

Gross and operating margins are expected to improve from 2021 levels, reflecting the impact of higher net sales and production volumes as well as pricing initiatives to offset material cost inflation.

Engineering expenses and other technology investments are expected to increase in 2022 compared to 2021 to support our product development plans as well as our precision agriculture and digital initiatives.

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

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

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

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

Our outlook is also based on current estimates of supplier component deliveries, and the ability of the Company's supply chain to deliver parts and components on schedule is currently difficult to predict.

If supply chain performance worsens, our results of operations will be adversely impacted.

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

Liquidity and Capital Resources

Our financing requirements are subject to variations due to seasonal changes in inventory and receivable levels.

In addition, unusual events such as the recent supply chain disruptions can result in increases in inventories and, consequentially, our financing requirements.

Internally generated funds are supplemented when necessary from external sources, primarily our credit facility and accounts receivable sales agreement facilities.

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December 31, 2021

Credit facility, expires 2023 $ 277.9

1.002% Senior term loan due 2025 (1)

Senior term loan due 2022 (1)

Senior term loans due between 2023 and 2028 (1)

0.800% Senior Notes Due 2028 (1)

Other long-term debt 7.7

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(1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $4.8 million.

On April 9, 2020, we entered into an amendment to our $800.0 million multi-currency revolving credit facility to include incremental term loans (“2020 term loans”) that allow us to borrow an aggregate principal amount of €235.0 million and $267.5 million, respectively (or an aggregate of approximately $555.8 million as of December 31, 2020).

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

Amounts drawn must be in a minimum principal amount of $100.0 million and integral multiples of $50.0 million in excess thereof.

Once amounts have been repaid, those amounts are not permitted to be re-drawn.

The maturity date of the 2020 term loans is April 8, 2022.

Interest accrues on amounts outstanding under the 2020 term loans, at our option, at either (1) LIBOR plus a margin based on our credit rating ranging from 1.125% to 2.125% until April 8, 2021 and ranging from 1.375% to 2.375% thereafter, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S.

dollars plus 1.0%, plus a margin based on our credit rating ranging from 0.125% to 1.375% until April 8, 2021 and ranging from 0.375% to 1.375% thereafter.

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

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

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

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

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

On October 6, 2021, we issued €600.0 million (or approximately $680.8 million as of December 31, 2021) 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, we used the proceeds received from the senior notes to repay our €150.0 million (or approximately $173.4 million as of October 8, 2021) senior term loan due 2022, $370.0 million related to our multi-currency revolving credit facility, and two of our 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, we repaid two of our 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).

In October 2018, we entered into a multi-currency revolving credit facility of $800.0 million.

The maturity date of the credit facility is October 17, 2023.

The credit facility matures on October 17, 2023.

Interest accrues on amounts outstanding under the credit facility, at our option, at either (1) LIBOR plus a margin ranging from 0.875% to 1.875% based on our credit rating, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S.

dollars plus 1.0%, plus a margin ranging from 0.0% to 0.875% based on our credit rating.

As mentioned previously, on October 15, 2021, we repaid $370.0 million of our multicurrency revolving credit facility as a result of the issuance of our 0.800% senior notes due 2028.

As of December 31, 2021, we had no outstanding borrowings under the revolving credit facility, and the ability to borrow was approximately $800.0 million under the revolving credit facility.

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

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

We are permitted to prepay the term loan before its maturity date.

On April 15, 2020, we borrowed €117.5 million and $133.8 million under a term loan facility that had been added to our multi-currency revolving credit facility.

While outstanding, the loans bore interest at one-month LIBOR plus a margin of 1.625%.

We repaid the two loans on February 16, 2021 (for an aggregate amount of approximately $276.0 million as of that date).

Refer to Note 7 of our Consolidated Financial Statements for further information regarding our current facilities.

As described above, our credit facility allows us 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 our credit facility were designed to accommodate the discontinuation of LIBOR-based rates and a shift to the “Secured Overnight Financing Rate” (“SOFR”) or a base rate, and, as such, we do not believe that moving to the other rates will have a materially adverse effect on our 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 we may elect to utilize to add additional interest-rate alternatives.

On January 25, 2019, we borrowed €250.0 million (or approximately $283.7 million as of December 31, 2021) from the European Investment Bank.

The loan matures on January 24, 2025.

Interest is payable on the term loan at 1.002% per annum, payable semi-annually in arrears.

We had an additional term loan with the EIB in the amount of €200.0 million that was entered into in December 2014 and had a maturity date of January 15, 2020.

We repaid this €200.0 million (or approximately $220.0 million) term loan in December 2019.

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

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

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

In October 2018, we entered into a term loan agreement with Rabobank in the amount of €150.0 million.

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

As mentioned previously, during October 2021, we repaid this term loan of approximately $173.4 million as of October 8, 2021 with the proceeds from our 0.800% senior notes due 2028.

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

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

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

Of the 2016 term loans, we repaid an aggregate amount of €56.0 million (or approximately $61.1 million) of two of these term loans in October 2019.

Additionally, as mentioned previously, we 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 2018, we borrowed an additional aggregate amount of indebtedness of €338.0 million through a group of another seven related term loan agreements.

Proceeds from the borrowings were used to repay borrowings under our former revolving credit facility.

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

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

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

In August 2021, prior to the issuance of the senior notes due 2028, we repaid two of our 2018 senior term loans upon maturity with an aggregate amount of €72.0 million (or approximately $85.5 million as of August 1, 2021).

On February 1, 2022, we repaid an additional amount of €72.5 million (or approximately $81.7 million) of one of our 2018 senior term loans due August 2023 with existing cash on hand.

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

In aggregate, as of December 31, 2021, we had indebtedness of approximately €393.0 million (or approximately $445.9 million as of December 31, 2021) under a total group of eight remaining term loan agreements.

As of February 1, 2022, as a result of a further repayment discussed previously, we had indebtedness of €320.5 million (or approximately $361.0 million) through a group of seven remaining term loan agreements.

As of December 31, 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 August 2023 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 August 2023 and August 2025.

As of December 31, 2021 and 2020, we had short-term borrowings due within one year of approximately $90.8 million and $33.8 million, respectively.

Interest on U.S.

dollar borrowings under our credit facility and the 2020 term loans is calculated based upon LIBOR.

In the event that LIBOR is no longer published, interest will be calculated upon either a base rate or the secured overnight financing rate depending on cost.

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

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

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These agreements are accounted for as off-balance sheet transactions and have the effect of reducing accounts receivable and short-term liabilities by the same amount.

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

As of December 31, 2021 and 2020, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements for the years then ended was approximately $1.3 billion and $1.5 billion, respectively.

In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world.

As of December 31, 2021 and 2020, the cash received from these arrangements for the years then ended was approximately $215.4 million and $199.9 million, respectively.

Our finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to our dealers.

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

In addition, we sell certain trade receivables under factoring arrangements to other financial institutions around the world.

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

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

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Cash flows provided by operating activities were approximately $660.2 million during 2021 compared to approximately $896.5 million during 2020.

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

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

The decrease during 2021 was primarily due to an increase in inventories, partially offset by increases in net income and accounts payable as compared to 2020.

Supply chain disruptions resulted in higher raw material and work-in-process inventory levels during 2021 as compared to the prior year.

Free cash flow, which is defined as “Net cash provided by operating activities” less “Purchases of property, plant and equipment”, was approximately $390.4 million during 2021, as compared to approximately $626.6 million during 2020.

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

We had $1,559.5 million in working capital at December 31, 2021, as compared with $1,005.6 million at December 31, 2020.

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

Accounts receivable and inventories, combined, at December 31, 2021 were approximately $754.8 million higher than at December 31, 2020, primarily due to higher net sales and production levels, as well as the significant impact of supply chain constraints during 2021.

Share Repurchase Program

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

All shares received were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained Earnings” within our Consolidated Balance Sheets.

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

Contractual Obligations

The future payments required under our significant contractual obligations, excluding foreign currency option and forward contracts, as of December 31, 2020 are as follows (in millions):

Payments Due By Period

Total 2021 2022 to 2023 2024 to 2025 2026 and Beyond

Indebtedness (1)

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

Interest payments related to indebtedness (2)

50.6 16.8 21.2 9.4 3.2

Capital lease obligations 16.3 3.3 2.5 1.4 9.1

Operating lease obligations 190.9 47.6 66.3 32.5 44.5

Unconditional purchase obligations 116.9 106.2 10.5 0.2 —

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

337.5 95.8 161.3 31.2 49.2

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

Amount of Commitment Expiration Per Period

Total 2021 2022 to 2023 2024 to 2025 2026 and Beyond

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

Guarantees 103.3 13.8 43.9 43.3 2.3

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

_______________________________________

In August and November 2021, we entered into two accelerated share repurchase (“ASR”) agreements with financial institutions to repurchase an aggregate of $135.0 million of shares of our common stock.

We received approximately 952,204 shares in these transactions as of December 31, 2021.

On January 19, 2022, we received additional 113,824 shares upon final settlement of our November 2021 ASR agreement.

In February and March 2020, we entered into two ASR agreements with financial institutions to repurchase an aggregate of $55.0 million of shares of our common stock.

We received approximately 970,141 shares in these transactions as of December 31, 2020.

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 our Consolidated Balance Sheets.

Contractual Obligations and Cash Requirements

Our material cash requirements include the following contractual and other obligations:

Indebtedness – As of December 31, 2021, we had approximately $44.4 million of payments due during the year ended December 31, 2022, related to indebtedness and certain short-term obligations, in addition to approximately $15.1 million of interest payments associated with indebtedness we expect to pay during 2022.

Interest payments generally do not vary materially year to year.

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

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

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

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

defined benefit pension and postretirement plans.

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

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

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

Refer to Note 7 of the Consolidated Financial Statements for additional information regarding our indebtedness.

Capital and operating lease obligations – As of December 31, 2021, we had approximately $4.0 million and $45.7 million of payments due during the year ended December 31, 2022, related to capital and operating lease obligations, respectively.

Refer to Note 17 of the Consolidated Financial Statements for additional information regarding our lease obligations.

Unconditional purchase obligations – As of December 31, 2021, we had approximately $131.1 million of outstanding purchase obligations payable during the year ended December 31, 2022.

These obligations generally do not vary materially year to year.

Other short-term and long-term obligations – As of December 31, 2021, we had approximately $40.1 million of income tax liabilities related to uncertain income tax provisions connected with ongoing income tax audits in various jurisdictions due during the year ended December 31, 2022.

Additionally, we had approximately $37.8 million of estimated future minimum contribution requirements under our U.S.

defined benefit pension and postretirement plans due during the year ended December 31, 2022.

Refer to Notes 6 and 8 of the Consolidated Financial Statements for additional information regarding our uncertain tax positions and pension and postretirement plans, respectively.

These obligations comprise a majority of our other short-term and long-term obligations.

Commitments and Off-Balance Sheet Arrangements

We maintain a remarketing agreement with our finance joint venture in the United States, whereby we are obligated to repurchase up to $6.0 million of repossessed equipment each calendar year.

We believe any losses that might be incurred on the resale of this equipment will not materially impact our financial position or results of operations, due to the fact that the repurchase obligation would be equivalent to the fair value of the underlying equipment.

We believe any losses that might be incurred on the resale of this equipment will not materially impact our financial position or results of operations, due to the fact that the repurchase obligations would be equivalent to the fair value of the underlying equipment.

At December 31, 2021, we guaranteed indebtedness owed to third parties of approximately $25.2 million, primarily related to dealer and end-user financing of equipment.

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In addition, we 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 offset a substantial portion of the amounts paid.

We also have obligations to guarantee indebtedness owed to certain of our finance joint ventures if dealers or end users default on loans.

We also guarantee indebtedness owed to certain of our 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.

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At December 31, 2021, we had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $3,681.9 million.

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

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

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

The outstanding contracts as of December 31, 2021 range in maturity through October 2022.

We also had outstanding designated steel commodity contracts with a gross notional amount of approximately $31.9 million that range in maturity through July 2022.

See Note 11 of our Consolidated Financial Statements for additional information.

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

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We closely monitor these claims and lawsuits and frequently consult with our legal counsel to determine whether they may, when resolved, have a material adverse effect on our financial position or results of operations and accrue and/or disclose loss contingencies as appropriate.

See Note 11 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and Item 3, “Legal Proceedings,” for further information.

See Note 12 of our Consolidated Financial Statements for further information.

Related Parties

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

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

See Note 14 of our Consolidated Financial Statements for information regarding related party transactions and their impact to our consolidated results of operations and financial position.

Foreign Currency Risk Management

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In addition, we use derivative and non-derivative instruments to hedge a portion of our net investment in foreign operations against adverse movements in exchange rates.

See Note 10 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information about our hedging transactions and derivative instruments.

See Note 11 of our Consolidated Financial Statements for further information about our hedging transactions and derivative instruments.

Assuming a 10% change relative to the currency of the hedge contracts, the fair value of the foreign currency instruments could be negatively impacted by approximately $52.6 million as of December 31, 2021.

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From time to time, we enter into interest rate swap agreements to manage our exposure to interest rate fluctuations.

See Notes 6 and 10 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information about our interest rate swap agreements.

See Notes 7 and 11 of our Consolidated Financial Statements for additional information.

Based on our floating rate debt and our accounts receivable sales facilities outstanding at December 31, 2021, a 10% increase in interest rates, would have increased, collectively, “Interest expense, net” and “Other expense, net” for the year ended December 31, 2021 by approximately $2.1 million.

Recent Accounting Pronouncements

See Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.

See Note 1 of our Consolidated Financial Statements for information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.

Critical Accounting Estimates

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We recorded an income tax provision of $108.4 million in 2021 compared to $187.7 million in 2020 and $180.8 million in 2019.

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

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

In addition, we maintain a valuation allowance to fully reserve against our net deferred tax assets in the United States and certain other foreign jurisdictions.

A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax

assets will not be realized.

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

In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies.

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

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

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

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

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

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

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

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

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

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

Improvements in income in the United States and Brazil during 2020 and 2021, along

with updated future projected income levels, supported the reversal of both of the valuation allowances.

In addition, we maintain a valuation allowance to reserve a portion of our net deferred tax assets in the United States and certain foreign jurisdictions.

A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets may not be realized.

We assessed the likelihood that our deferred tax assets should be recovered from estimated future taxable income and the current economic climate, as well as available tax planning strategies and determined that the adjustment to the valuation allowance was appropriate.

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

At December 31, 2020 and 2019, we had total valuation allowances as an offset to our gross deferred tax assets of $181.0 million and $169.1 million, respectively, which included allowances primarily against net operating loss carryforwards in Brazil, China, Hungary, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes primarily in the U.S.

and Brazil, as previously discussed.

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

We believe it is more likely than not that the remaining net deferred tax assets will be realized.

At December 31, 2021 and 2020, we had total valuation allowances as an offset to our gross deferred tax assets of $47.4 million and $181.0 million, respectively.

These valuation allowances are held against deferred tax assets (including net operating loss carryforwards) in the United States and certain foreign jurisdictions.

Realization of the remaining deferred tax assets as of December 31, 2021 depends on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities.

We believe it is more likely than not that the remaining net deferred tax assets should be able to be realized.

We recognize income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions.

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In addition, we maintain an unfunded, nonqualified defined benefit pension plan for certain senior executives, which is our Executive Nonqualified Pension Plan (“ENPP”).

The ENPP is also closed to new entrants.

The ENPP also is closed to new entrants, and, during 2021, we amended the ENPP to freeze future salary benefit accruals as of December 31, 2024 and to eliminate a lifetime annuity feature for participants reaching age 65 subsequent to December 31, 2022.

In the United Kingdom, we sponsor a funded defined benefit pension plan that provides an annuity benefit based on participants’ final average earnings and service.

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• The mortality rates for the U.K.

defined benefit pension plan was updated in 2020 to reflect the latest expected improvements in the life expectancy of the plan participants.

defined benefit pension plan was updated during 2021 to reflect the latest expected improvements in the life expectancy of the plan participants.

The mortality rates for the U.S.

defined benefit pension plans were updated in 2020 to reflect the Society of Actuaries’ most recent findings on the topic of mortality.

defined benefit pension plans were also updated during 2021 to reflect the Society of Actuaries’ most recent findings on the topic of mortality.

• The fair value of assets used to determine the expected return on assets does not reflect any delayed recognition of asset gains and losses.

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defined benefit pension plans, including our ENPP, comprised approximately 85% of our consolidated projected benefit obligation as of December 31, 2021.

If the discount rate used to determine the 2020 projected benefit obligation for our U.S.

qualified defined benefit pension plans and our ENPP was decreased by 25 basis points, our projected benefit obligation would have increased by approximately $5.6 million at December 31, 2020, and our 2021 pension expense would increase by approximately $0.6 million.

If the discount rate used to determine the 2020 projected benefit obligation for our U.S.

qualified defined benefit pension plans and our ENPP was increased by 25 basis points, our projected benefit obligation would have decreased by approximately $5.3 million at December 31, 2020, and our 2021 pension expense would decrease by approximately $0.5 million.

If the discount rate used to determine the projected benefit obligation for our U.K.

defined benefit pension plan was decreased by 25 basis points, our projected benefit obligation would have increased by approximately $29.3 million at December 31, 2020, and our 2021 pension expense would increase by approximately $0.1 million.

If the discount rate used to determine the projected benefit obligation for our U.K.

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

In addition, if the expected

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

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

The impact to our U.S.

defined benefit pension plans for a 25-basis-point change in our expected long-term rate of return would decrease or increase our 2021 pension expense by approximately $0.1 million, respectively.

The effects of a 25 basis point change in certain actuarial assumptions on the 2022 net annual pension and ENPP costs and related benefit obligations as of December 31, 2021 would be as follows:

Year-end Benefit Obligation 2022 Net Annual Pension Cost

25 basis point increase 25 basis point decrease 25 basis point increase 25 basis point decrease

Discount rate:

qualified defined benefit pension plans and ENPP

$ (3.6) $ 3.8 $ (0.2) $ 0.2

defined benefit pension plans

(22.2) 23.7 (0.2) 0.2

2022 Net Annual Pension Cost

25 basis point increase 25 basis point decrease

Long-term rate of return on plan assets:

qualified defined benefit pension plans and ENPP

$ (0.1) $ 0.1

defined benefit pension plans

Unrecognized actuarial net losses related to our defined benefit pension plans and ENPP were $291.7 million as of December 31, 2021 compared to $385.1 million as of December 31, 2020.

The increase in unrecognized net actuarial losses between years primarily resulted from lower discount rates at December 31, 2020 compared to December 31, 2019.

The decrease in unrecognized net actuarial losses between years primarily resulted from higher discount rates at December 31, 2021 compared to December 31, 2020, as well as a result of the amendment to our ENPP as previously discussed.

The unrecognized net actuarial losses will be impacted in future periods by actual asset returns, discount rate changes, currency exchange rate fluctuations, actual demographic experience and certain other factors.

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Unrecognized prior service cost related to our defined benefit pension plans was $7.1 million as of December 31, 2021 compared to $20.1 million as of December 31, 2020.

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

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

The decrease in the unrecognized prior service cost between years is due primarily to the amortization of unrecognized prior service cost related to prior plan amendments, as well as the amendment in 2021 previously discussed related to our ENPP.

The 2021 amendment resulted in both a curtailment gain and a net prior service credit.

As of December 31, 2021, our unfunded or underfunded obligations related to our defined benefit pension plans and ENPP were approximately $89.2 million, primarily related to our defined benefit pension plans in Europe and the United States.

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The funding arrangement is based upon the current funded status and could change in the future as discount rates, local laws and regulations, and other factors change.

See Note 7 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for more information regarding the investment strategy and concentration of risk.

See Note 8 of our Consolidated Financial Statements for more information regarding the investment strategy and concentration of risk.

Goodwill, Other Intangible Assets and Long-Lived Assets

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

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

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

and a guideline public company method, whereby EBITDA and revenue multiples are derived from the market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market.

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

reporting units, a 10 percent decrease in the estimated fair value would have had no effect on the carrying value of goodwill as of our annual measurement date on October 1, 2021.

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

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

The results of our goodwill and long-lived assets impairment analyses conducted as of October 1, 2021 indicated that no indicators of impairment existed and no reduction in the carrying amount of goodwill and long-lived assets was required.

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

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

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

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

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

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

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

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

Deteriorating market conditions for the products the joint venture sold were negatively impacted by the COVID-19 pandemic in the second quarter of 2020, greater than initially expected.

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

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

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

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

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

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

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

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

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

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

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

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As of December 31, 2021, we had approximately $1,280.8 million of goodwill.

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

While our annual impairment testing in 2021 supported the carrying amount of this goodwill, we may be required to re-evaluate the carrying amount in future periods,

thus utilizing different assumptions that reflect the then current market conditions and expectations, and, therefore, we could conclude that an impairment has occurred.

Recoverable Indirect Taxes

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity