What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-03 · 213 added, 112 removed, 234 unchanged (58% of the section changed)

7 unchanged sentences

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

On September 28, 2023, the Company entered into a Sale and Contribution Agreement among AGCO, Trimble Inc.

(“Trimble”) and PTx Trimble, LLC (“PTx Trimble” or the "Joint Venture"), formerly known as Trimble Solutions, LLC, which was subsequently amended and restated on March 31, 2024.

On April 1, 2024, pursuant to the terms of an Amended and Restated Sale and Contribution Agreement among AGCO, Trimble and PTx Trimble, AGCO and Trimble completed (i) the contribution by Trimble to the Joint Venture of Trimble’s OneAg business, which is Trimble’s agricultural business, excluding certain Global Navigation Satellite System and guidance technologies, and an amount of cash, (ii) the contribution by AGCO to the Joint Venture of its interest in JCA Industries, LLC d/b/a JCA Technologies and an amount of cash, and (iii) the purchase by AGCO from Trimble of membership interests in the Joint Venture in exchange for the payment by AGCO to Trimble of $1.954 billion in cash, subject to customary working capital and other adjustments.

On April 1, 2024, pursuant to the terms of an Amended and Restated Sale and Contribution Agreement among AGCO, Trimble and PTx Trimble (the “Joint Venture”), AGCO and Trimble completed (i) the contribution by Trimble to the Joint Venture of Trimble’s OneAg business, which is Trimble’s agricultural business, excluding certain Global Navigation Satellite System and guidance technologies, and $8.1 million of cash, (ii) the contribution by AGCO to the Joint Venture of its interest in JCA Industries, LLC d/b/a JCA Technologies and $46.0 million of cash, and (iii) the purchase by AGCO from Trimble of membership interests in the Joint Venture in exchange for the payment by AGCO to Trimble of $1.954 billion in cash, subject to customary working capital and other adjustments.

Immediately following the closing and as a result of the transaction, AGCO directly and indirectly owns an 85% interest in the Joint Venture and Trimble owns a 15% interest in the Joint Venture.

AGCO will consolidate PTx Trimble within its consolidated financial statements.

AGCO began consolidating PTx Trimble within its consolidated financial statements on April 1, 2024.

We believe PTx Trimble creates a global-leading mixed-fleet precision agriculture platform.

We will be the exclusive provider of Trimble’s comprehensive technology offering, supporting the future development and distribution of next-generation agriculture technologies.

Trimble offers a wide variety of user-friendly technologies compatible across brands, equipment models and farm types.

Its hardware, software and cloud-based applications span all aspects of the crop cycle, from land preparation to planting and seeding to harvest.

We are the exclusive provider of Trimble’s comprehensive technology offering, supporting the future development and distribution of next-generation agriculture technologies, allowing us to offer a wide variety of user-friendly technologies compatible across brands, equipment models and farm types.

The acquired hardware, software and cloud-based applications span all aspects of the crop cycle, from land preparation to planting and seeding to harvest.

Refer to Note 2 of our Condensed Consolidated Financial Statements for further information.

On July 25, 2024, the Company entered into a Stock and Asset Purchase Agreement to sell the majority of its Grain & Protein (“G&P”) business, which includes the GSI®, Automated Production® (AP), Cumberland®, Cimbria® and Tecno® brands for a purchase price of $700.0 million, subject to customary working capital and other adjustments.

The divestiture of the G&P business aligns with AGCO's strategic transformation and allows for AGCO to better streamline and focus on its portfolio of agricultural machinery and precision ag technology products.

As of June 30, 2024, the business met the criteria to be classified as held for sale.

The Company recognizes assets and liabilities held for sale at the lower of carrying value or fair market value less costs to sell.

The Company determined the intended sale of the G&P business does not represent a strategic shift that will have a major effect on the consolidated results of operations, and therefore results of this business were not classified as discontinued operations.

The closing of the transaction is subject to customary conditions, including compliance with antitrust and similar laws.

The transaction is expected to be completed in the second half of 2024.

Refer to Note 3 of our Condensed Consolidated Financial Statements for further information.

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

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The following tables sets forth the percentage relationship to net sales of certain items included in our Condensed Consolidated Statements of Operations:

Three Months Ended March 31,

Three Months Ended June 30,

$ % of Net Sales (1)

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Amortization of intangibles 31.7 1.0 14.1 0.4

Impairment charges 5.1 0.2 — —

Restructuring expenses 30.2 0.9 6.1 0.2

Loss on business held for sale

494.6 15.2 — —

Income (loss) from operations

(241.7) (7.4) 496.4 13.0

Interest expense, net 29.9 0.9 5.8 0.2

Other expense, net 65.3 2.0 78.0 2.0

Income (loss) before income taxes and equity in net earnings of affiliates

(336.9) (10.4) 412.6 10.8

Income tax provision 41.6 1.3 111.0 2.9

Income (loss) before equity in net earnings of affiliates

(378.5) (11.7) 301.6 7.9

Equity in net earnings of affiliates 9.6 0.3 17.6 0.5

Net income (loss)

(368.9) (11.4) 319.2 8.4

Net loss attributable to noncontrolling interests

Net income (loss) attributable to AGCO Corporation and subsidiaries

$ (367.1) (11.3) % $ 319.2 8.4 %

___________________________________

(1) Rounding may impact summation of amounts.

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

Six Months Ended June 30,

$ % of Net Sales (1)

Net sales $ 6,175.3 100.0 % $ 7,156.2 100.0 %

Cost of goods sold 4,568.0 74.0 5,295.6 74.0

Gross profit 1,607.3 26.0 1,860.6 26.0

Selling, general and administrative expenses 730.2 11.8 682.1 9.5

Engineering expenses 268.7 4.4 258.4 3.6

Amortization of intangibles 45.6 0.7 28.9 0.4

Impairment charges 5.1 0.1 — —

Restructuring expenses 31.2 0.5 7.5 0.1

Loss on business held for sale

494.6 8.0 — —

Income from operations 31.9 0.5 883.7 12.3

1 unchanged sentence

Other expense, net 116.1 1.9 128.4 1.8

Income before income taxes and equity in net earnings of affiliates 220.9 7.5 336.4 10.1

Income (loss) before income taxes and equity in net earnings of affiliates

(116.0) (1.9) 749.0 10.5

Income tax provision 110.7 1.8 231.2 3.2

Income before equity in net earnings of affiliates 151.8 5.2 216.2 6.5

Income (loss) before equity in net earnings of affiliates

(226.7) (3.7) 517.8 7.2

Equity in net earnings of affiliates 25.8 0.4 34.0 0.5

Net income 168.0 5.7 232.6 7.0

Net income (loss)

(200.9) (3.3) 551.8 7.7

Net loss attributable to noncontrolling interests

Net income attributable to AGCO Corporation and subsidiaries $ 168.0 5.7 % $ 232.6 7.0 %

Net income (loss) attributable to AGCO Corporation and subsidiaries

$ (199.1) (3.2) % $ 551.8 7.7 %

___________________________________

(1) Rounding may impact summation of amounts.

Net income attributable to AGCO Corporation and subsidiaries for the three months ended March 31, 2024, was $168.0 million, or $2.25 per diluted share, compared to $232.6 million or $3.10 per diluted share, for the three months ended March 31, 2023.

Net sales during the three months ended March 31, 2024 were approximately $2,928.7 million, or 12.1% lower than the three months ended March 31, 2023, primarily due to lower sales volumes resulting from softer industry sales reflecting lower end market demand, partially offset by positive pricing.

Income from operations was $273.6 million for the three months ended March 31, 2024 compared to $387.3 million in the three months ended March 31, 2023.

The decrease in income from operations during 2024 was primarily the result of lower sales and production volumes as well as higher selling, general and administrative expenses ("SG&A expenses").

We estimate that worldwide average price increases were approximately 1.1% and 11.7% for the three months ended March 31, 2024 and 2023, respectively.

Consolidated net sales of tractors and combines, which comprised approximately 63.9% of our net sales for the three months ended March 31, 2024, decreased approximately 9.4% compared to the same period in 2023.

Unit sales of tractors and combines decreased approximately 17.6% during the three months ended March 31, 2024 compared to the same period in 2023.

The primary driver of the decrease in unit sales was lower sales of compact and mid-range tractors and combines.

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

Net income (loss) attributable to AGCO Corporation and subsidiaries for the three months ended June 30, 2024, was $(367.1) million, or $(4.92) per diluted share, compared to $319.2 million or $4.26 per diluted share, for the three months ended June 30, 2023.

Net income (loss) attributable to AGCO Corporation and subsidiaries for the six months ended June 30, 2024, was $(199.1) million, or $(2.67) per diluted share, compared to $551.8 million or $7.36 per diluted share, for the six months ended June 30, 2023.

Net sales during the three months ended June 30, 2024 were approximately $3,246.6 million, or 15.1% lower than the three months ended June 30, 2023, primarily due to lower sales volumes resulting from softer industry sales reflecting lower end market demand and unfavorable currency impacts.

Income (loss) from operations was $(241.7) million for the three months ended June 30, 2024 compared to $496.4 million in the three months ended June 30, 2023.

The decrease in income from operations during 2024 was primarily the result of lower sales and production volumes, the recognition of the estimated loss on the G&P business held for sale as well as restructuring expenses associated with the Company's Program and higher selling, general and administrative expenses ("SG&A expenses"), primarily related to transaction costs related to the close of the PTx Trimble joint venture transaction and the announced G&P divestiture transaction.

Net sales during the six months ended June 30, 2024 were approximately $6,175.3 million, or 13.7% lower than the six months ended June 30, 2023, primarily due to lower sales volumes resulting from softer industry sales reflecting lower end market demand.

Income from operations was $31.9 million for the six months ended June 30, 2024 compared to $883.7 million in the six months ended June 30, 2023.

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

Overall, global production hours decreased approximately 16.2% during the three months ended March 31, 2024 compared to the same period in 2023 reflecting lower end market demand.

the close of the PTx Trimble joint venture transaction and the announced G&P divestiture transaction and higher compensation costs.

We estimate that worldwide average price increases (decreases) were approximately (1.9)% and 14.1% for the three months ended June 30, 2024 and 2023, respectively, and (0.6)% and 13.0% for the six months ended June 30, 2024 and 2023, respectively.

Consolidated net sales of tractors and combines, which comprised approximately 61.6% and 62.7% of our net sales for the three and six months ended June 30, 2024, decreased approximately 17.6% and 13.8% compared to the same periods in 2023.

Unit sales of tractors and combines decreased approximately 22.3% and 21.1% during the three and six months ended June 30, 2024 compared to the same periods in 2023.

The primary driver of the decrease in unit sales was lower sales of compact and mid-range tractors and combines.

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

Overall, global production hours decreased approximately 23.3% and 19.8% during the three and six months ended June 30, 2024 compared to the same period in 2023, reflecting our response to lower end market demand.

Results of Operations

Gross profit as a percentage of net sales increased during the three months ended March 31, 2024 compared to the same period in 2023, primarily due to positive net pricing impacts.

SG&A expenses as a percentage of net sales were higher during the three months ended March 31, 2024 compared to the same period in 2023.

The absolute level of SG&A expenses increased during the three months ended March 31, 2024 primarily due to higher compensation costs and PTx Trimble joint venture transaction-related costs.

We recorded stock compensation expense of $8.0 million and $13.5 million during the three months ended March 31, 2024 and 2023, respectively, within SG&A expenses.

Engineering expenses as a percentage of net sales, were higher during the three months ended March 31, 2024 compared to the same period in 2023, primarily driven by an increase in product innovation and other technology investments.

We recorded restructuring expenses of $1.0 million and $1.4 million during the three months ended March 31, 2024 and 2023, respectively.

The restructuring expenses primarily related to severance and other related costs associated with the rationalization of certain manufacturing facilities and administrative offices .

Interest expense, net was $1.9 million for the three months ended March 31, 2024 compared to $0.5 million for the three months ended March 31, 2023.

The increase related primarily to an increase in interest expense resulting from the amortization of bridge facility commitment fees related to the PTx Trimble joint venture transaction and increased debt levels partially offset by higher interest income for the three months ended March 31, 2024 as compared to the same period in 2023.

Gross profit as a percentage of net sales decreased during the three months ended June 30, 2024 compared to the same period in 2023, primarily due to lower production volumes and unfavorable net pricing impacts.

Gross profit as a percentage of net sales were consistent during the six months ended June 30, 2024 compared to the same period in 2023.

SG&A expenses as a percentage of net sales were higher during the three and six months ended June 30, 2024 compared to the same periods in 2023.

The absolute level of SG&A expenses increased during the three and six months ended June 30, 2024 primarily due to PTx Trimble joint venture transaction-related costs, higher compensation costs and transaction costs related to the announced divestiture of the Company's G&P business.

These increases were partially offset by decreases in stock compensation expense.

We recorded $7.4 million and $15.4 million of stock compensation expense within SG&A expenses during the three and six months ended June 30, 2024, respectively, compared to $12.8 million and $26.3 million during the same periods in 2023.

Engineering expenses as a percentage of net sales were higher during the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily driven by increased engineering expenses related to the PTx Trimble joint venture.

We recorded impairment charges of $5.1 million during the three and six months ended June 30, 2024 related

to the impairment of certain amortizing intangible assets and an investment in affiliate.

There were no impairment charges recorded during the three and six months ended June 30, 2023.

We recorded restructuring expenses of $30.2 million and $31.2 million during the three and six months ended June 30, 2024, respectively, compared to $6.1 million and $7.5 million, respectively, during the same periods in 2023.

On June 24, 2024, the Company announced a restructuring program (the “Program”) in response to increased weakening demand in the agriculture industry.

The initial phase of the Program is focused on further reducing structural costs, streamlining the Company’s workforce and enhancing global efficiencies related to changing the Company’s operating model for certain corporate and back-office functions and better leveraging technology and global centers of excellence.

The Company estimates that it will incur charges for one-time termination benefits of approximately $150.0 million to $200.0 million in connection with this phase of the Program, primarily consisting of cash charges related to severance payments, employees benefits and related costs.

The Company expects the majority of these cash charges will be incurred in 2024 and the first half of 2025.

Once fully implemented, the Company expects this phase of the Program to yield annual run-rate benefits and cost savings of approximately $100.0 million to $125.0 million.

The restructuring expenses recorded during the three and six months ended June 30, 2024 primarily related to severance and other related costs associated with the Company's Program and rationalization of certain manufacturing facilities and administrative offices.

Refer to Note 10 to our Condensed Consolidated Financial Statements for further information.

We recorded a loss on business held for sale of $494.6 million during the three and six months ended June 30, 2024.

There was no loss recorded during the three and six months ended June 30, 2023.

On July 25, 2024, the Company announced it had entered into a definitive agreement to sell its G&P business, and as of June 30, 2024, the Company determined that the G&P business met the criteria to be classified as held for sale.

Upon the Company's classification as held for sale, the Company

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

recognized a loss on business held for sale of $494.6 million, which represents the estimated loss on the business held for sale.

Refer to Note 3 to our Condensed Consolidated Financial Statements for further information.

Interest expense, net was $29.9 million and $31.8 million for the three and six months ended June 30, 2024, respectively, compared to $5.8 million and $6.3 million for the comparable periods in 2023.

The increase related primarily to an increase in interest expense resulting from the amortization of bridge facility commitment fees and increased debt levels related to financing the PTx Trimble joint venture transaction partially offset by higher interest income for the three and six months ended June 30, 2024 as compared to the same periods in 2023.

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

Other expense, net was $50.8 million for the three months ended March 31, 2024 compared to $50.4 million for the three months ended March 31, 2023.

The increase was primarily driven by foreign currency exchanges losses which were approximately $23.0 million and $18.4 million for the three months ended March 31, 2024 and 2023, respectively, partially offset by the final insurance recovery of $5.0 million recorded in the three months ended March 31, 2024 related to the 2022 cyber incident.

Losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil and included in "Other expense, net," were approximately $27.9 million and $28.5 million for the three months ended March 31, 2024 and 2023, respectively.

We recorded an income tax provision of $69.1 million for the three months ended March 31, 2024 compared to $120.2 million for the three months ended March 31, 2023.

Other expense, net was $65.3 million and $116.1 million for the three and six months ended June 30, 2024, respectively, compared to $78.0 million and $128.4 million for the comparable periods in 2023.

The decrease was primarily driven by decreases in foreign currency exchanges losses which were approximately $26.7 million and $49.6 million, respectively, for the three and six months ended June 30, 2024, compared to $41.9 million and $60.2 million, respectively, for the comparable periods in 2023.

During the six months ended June 30, 2024, the Company recorded the final insurance recovery of $5.0 million related to the 2022 cyber incident.

Losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil and included in “ Other expense, net, ” were approximately $35.9 million and $63.8 million, respectively, for the three and six months ended June 30, 2024, compared to $30.3 million and $58.8 million, respectively, for the comparable periods in 2023.

We recorded an income tax provision of $41.6 million and $110.7 million for the three and six months ended June 30, 2024 compared to $111.0 million and $231.2 million for the three and six months ended June 30, 2023.

Our effective tax rate varies from period to period due to the mix of taxable income and losses in the various tax jurisdictions in which we operate.

In 2023, we recorded approximately $26.4 million associated with our enrollment in a Brazilian tax amnesty program that is more fully described in Note 13 of our Condensed Consolidated Financial Statements.

Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $16.2 million for the three months ended March 31, 2024 compared to $16.4 million for the three months ended March 31, 2023.

The Company had no net loss attributable to noncontrolling interests recorded for the three months ended March 31, 2024 and 2023.

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

Based on a favorable tax ruling in Brazil regarding the taxability of certain state value added tax incentive benefits, the Company recorded a $31.7 million reduction in the provision for income taxes during the three months ended June 30, 2024.

During the six months ended June 30, 2023, we recorded approximately $26.4 million associated with our enrollment in a Brazilian tax amnesty program that is more fully described in Note 14 of our Condensed Consolidated Financial Statements.

Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $9.6 million and $25.8 million for the three and six months ended June 30, 2024 compared to $17.6 million and $34.0 million for the three and six months ended June 30, 2023.

The Company recorded a net loss attributable to noncontrolling interests of $1.8 million during the three and six months ended June 30, 2024.

The net loss primarily relates to the noncontrolling interests of the PTx Trimble joint venture held by Trimble, which owns a 15% interest in the joint venture.

The Company had no net loss attributable to noncontrolling interests recorded for the three and six months ended June 30, 2023.

Results of Operations - Segment Information

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

The following table sets forth, for the three months ended March 31, 2024, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

Three Months Ended March 31, Change Change Due to Currency Translation

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

The following table sets forth, for the three and six months ended June 30, 2024, the impact to net sales of currency translation by geographical segment (in millions, except percentages):

Three Months Ended June 30, Change Change Due to Currency Translation

2024 2023 $ % $ %

4 unchanged sentences

$ 3,246.6 $ 3,822.7 $ (576.1) (15.1) % $ (33.8) (0.9) %

Six Months Ended

Change Change Due to Currency Translation

2024 2023 $ % $ %

Europe/Middle East $ 3,631.9 $ 3,694.6 $ (62.7) (1.7) % $ 9.2 0.2 %

North America 1,567.4 1,919.9 (352.5) (18.4) % 1.5 0.1 %

South America 652.3 1,102.4 (450.1) (40.8) % (3.8) (0.3) %

Asia/Pacific/Africa 323.7 439.3 (115.6) (26.3) % (7.0) (1.6) %

$ 6,175.3 $ 7,156.2 $ (980.9) (13.7) % $ (0.1) — %

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2024 2023 $ 2024 2023 $

Net Sales $ 1,902.9 $ 1,990.8 $ (87.9) $ 3,631.9 $ 3,694.6 $ (62.7)

Income from Operations 288.5 295.2 (6.7) 571.4 534.6 36.8

Net sales in EME increased in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to favorable foreign currency translation and positive pricing impacts partially offset by declines in sales of grain and protein products.

Income from operations increased by $43.5 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven primarily by positive net pricing and favorable product mix related to high-horsepower tractors, partially offset by higher SG&A expenses primarily related to higher compensation costs.

Net sales in EME decreased in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to sales volumes declines, most significantly in compact and mid-range tractors, and hay tools, and unfavorable foreign currency translation, partially offset by increased sales of Fendt high-horsepower tractors and a favorable impact from the PTx Trimble joint venture transaction.

Income from operations decreased by $6.7 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Income from operations remained relatively consistent due to the favorable product mix related to high-horsepower tractors.

Net sales in EME decreased in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to sales volumes declines, most significantly in compact and mid-range tractors, and combines, and lower sales of grain and protein products, partially offset by increased sales of Fendt high-horsepower tractors.

Income from operations increased by $36.8 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, driven primarily by favorable product mix related to high-horsepower tractors.

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

North America

Three Months Ended

Six Months Ended

Net Sales $ 837.8 $ 996.8 $ (159.0) $ 1,567.4 $ 1,919.9 $ (352.5)

Income from Operations 76.7 136.9 (60.2) 119.1 239.0 (119.9)

Net sales in North America decreased in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to sales volume declines, most significantly in compact and mid-range tractors, hay tools, and combines, and lower sales of grain and protein products, partially offset by positive pricing impacts.

Income from operations decreased by $59.7 million compared to the three months ended March 31, 2023 as a result of lower sales and production volumes, higher warranty costs and higher SG&A expenses primarily related to higher compensation costs.

Net sales in North America decreased in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to sales volume declines, most significantly in mid-range and high-horsepower tractors, partially offset by a favorable impact from the PTx Trimble joint venture transaction.

Net sales in North America were also negatively impacted by the announced exit of two dealers in the three months ended June 30, 2024.

Income from operations decreased by $60.2 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 as a result of lower sales and production volumes and higher warranty costs.

These decreases were partially offset by margin improvements related to grain and protein products.

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

Net sales in North America decreased in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to sales volume declines, most significantly in mid-range and high-horsepower tractors and hay tools.

Income from operations decreased by $119.9 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023 as a result of lower sales and production volumes and higher warranty costs.

These decreases were partially offset by margin improvements related to grain and protein products.

South America

Three Months Ended

Change Six Months Ended

2024 2023 $ 2024 2023 $

Net Sales $ 348.9 $ 598.6 $ (249.7) $ 652.3 $ 1,102.4 $ (450.1)

Income from Operations 12.6 121.4 (108.8) 28.8 220.9 (192.1)

Net sales decreased in South America in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, as a result of sales volume declines, most significantly in tractors and combines, and lower sales of grain and protein products, partially offset by favorable foreign currency translation.

Income from operations decreased $83.3 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, as a result of lower sales and production volumes, partially offset by lower SG&A expenses resulting from a benefit recorded from the sale of a dealership in the first quarter of 2024 which was previously terminated in the fourth quarter of 2023.

Net sales decreased in South America in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, as a result of sales volume declines, most significantly in tractors and combines, and unfavorable foreign currency translation.

Income from operations decreased $108.8 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, as a result of lower sales and production volumes and negative pricing impacts.

Net sales decreased in South America in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, as a result of sales volume declines, most significantly in tractors and combines.

Income from operations decreased $192.1 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, as a result of lower sales and production volumes and negative pricing impacts, partially offset by lower SG&A expenses resulting from a benefit recorded from the sale of a dealership in the first quarter of 2024 which was previously terminated in the fourth quarter of 2023.

Three Months Ended

Change Six Months Ended

2024 2023 $ 2024 2023 $

Net Sales $ 157.0 $ 236.5 $ (79.5) $ 323.7 $ 439.3 $ (115.6)

Income from Operations 12.4 20.9 (8.5) 20.4 39.0 (18.6)

Net sales decreased in APA in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to lower sales volumes of high horse power and mid-range tractors, lower sales of grain and protein products and unfavorable foreign currency translation.

These decreases were partially offset by positive pricing impacts.

Income from operations decreased $10.1 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to lower sales and production volumes.

Net sales decreased in APA in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to lower sales volumes of high horse power tractors and lower sales of grain and protein products.

Income from operations decreased $8.5 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to lower sales and production volumes.

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

Net sales decreased in APA in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to lower sales volumes of high horse power tractors and hay tools, lower sales of grain and protein products and unfavorable foreign currency translation.

Income from operations decreased $18.6 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to lower sales and production volumes.

LIQUIDITY AND CAPITAL RESOURCES

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We believe that the following facilities listed below, together with available cash and internally generated funds, and assuming customary renewals and replacements, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future (in millions):

March 31, 2024 (1)

June 30, 2024 (1)

Credit facility, expires 2027 $ 760.0

Term Loan Facility borrowings 500.0

5.450% Senior notes due 2027

5.800% Senior notes due 2034

0.800% Senior notes due 2028

1.002% EIB Senior term loan due 2025

2 unchanged sentences

Senior term loans due between 2025 and 2028 156.8

0.800% Senior notes due 2028 647.2

5.450% Senior notes due 2027

5.800% Senior notes due 2034

Term Loan Facility borrowings

Other long-term debt 1.0

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The Company has a credit facility providing for a $1.25 billion multi-currency unsecured revolving credit facility (“Credit Facility”) that matures on December 19, 2027.

As of March 31, 2024, the Company had $580.0 million in outstanding borrowings under the revolving credit facility and had the ability to borrow $670.0 million.

In addition, the Company has an uncommitted revolving credit facility that allows the Company to borrow up to €100.0 million (or approximately $107.9 million as of March 31, 2024).

As of June 30, 2024, the Company had $760.0 million in outstanding borrowings under the revolving credit facility and had the ability to borrow $489.9 million.

In addition, the Company has an uncommitted revolving credit facility that allows the Company to borrow up to €100.0 million (or approximately $107.0 million as of June 30, 2024).

The credit facility expires on December 31, 2026.

As of March 31, 2024, the Company had no outstanding borrowings under the revolving credit facility.

As of June 30, 2024, the Company had no outstanding borrowings under the revolving credit facility.

On September 29, 2023, the Company entered into a multi-currency Finance Contract with the EIB permitting the Company to borrow up to €250.0 million, to fund up to 50% of certain investments in research, development and innovation primarily in Germany, France and Finland during the period from 2023 through 2026.

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The loan matures on October 26, 2029.

As of March 31, 2024, there was €250.0 million (approximately $269.7 million) outstanding under the EIB Senior Term Loan due 2029.

As of June 30, 2024, there was €250.0 million (approximately $267.5 million) outstanding under the EIB Senior Term Loan due 2029.

On January 25, 2024, the Company entered into an additional multi-currency Finance Contract with the EIB permitting the Company to borrow up to €170.0 million, for which the proceeds will be used in a similar manner as described for the EIB Senior Term Loan due 2029 above.

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The loan matures on February 15, 2030.

As of March 31, 2024, there was €170.0 million (approximately $183.4 million) outstanding under the EIB Senior Term Loan due 2030.

As of June 30, 2024, there was €170.0 million (approximately $181.9 million) outstanding under the EIB Senior Term Loan due 2030.

On March 21, 2024, the Company issued (i) $400.0 million aggregate principal amount of the 2027 Notes and (ii) $700.0 million aggregate principal amount of the 2034 Notes.

The Notes are unsecured and unsubordinated indebtedness of the Company and are guaranteed on a senior unsecured basis, jointly and severally, by certain direct and indirect subsidiaries of the Company.

As of March 31, 2024, the Company had $400.0 million and $700.0 million outstanding under the 2027 Notes and 2034 Notes, respectively.

As of June 30, 2024, the Company had $400.0 million and $700.0 million outstanding under the 2027 Notes and 2034 Notes, respectively.

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

In December 2023 and March 2024, the Company amended the Credit Facility to allow for incremental borrowings in the form of the Term Loan Facility in an aggregate principal amount of $500.0 million.

The Company drew down the facility on March 28, 2024.

The Company drew down the Term Loan Facility on March 28, 2024.

Borrowings under the Term Loan Facility bear interest at the same rate and margin as the Credit Facility.

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

The Term Loan Facility matures on December 19, 2027.

As of March 31, 2024, the Company had $500.0 million outstanding under the Term Loan Facility.

As of June 30, 2024, the Company had $500.0 million outstanding under the Term Loan Facility.

On September 28, 2023, the Company entered into a bridge facility commitment letter with Morgan Stanley pursuant to which Morgan Stanley committed to provide, subject to the terms and conditions set forth therein, a $2.0 billion senior unsecured 364-day bridge facility.

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The Company financed the joint venture transaction through a combination of the Senior Notes due 2027 and 2034, the Term Loan Facility and the remainder through other borrowings and cash on hand.

The Company had redeemable noncontrolling interests of $504.7 million as of June 30, 2024 resulting from the PTx Trimble joint venture transaction, which may require the use of cash in certain instances, beginning in 2027.

Refer to Note 2 of our Condensed Consolidated Financial Statements for further information.

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

On July 25, 2024, the Company announced it had entered into a definitive agreement to sell the majority of its Grain & Protein business.

The Company expects to receive proceeds of approximately $700.0 million from the sale, subject to customary working capital and other adjustments.

The transaction is expected to be completed in the second half of 2024.

The Company intends to use the net proceeds from the transaction consistent with its stated capital allocation priorities, including debt repayment, disciplined investment in technology and organic growth initiatives, and return of capital to shareholders.

The Company is in compliance with the financial covenants contained in these facilities and expects to continue to maintain such compliance.

Should we ever encounter difficulties, our historical relationship with our lenders has been strong, and we anticipate their continued long-term support of our business.

Refer to Note 9 to the Condensed Consolidated Financial Statements for additional information regarding our current facilities, including the financial covenants contained in each debt instrument.

Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness and stockholders’ equity, was 43.9% and 23.0% at March 31, 2024 and December 31, 2023, respectively.

Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness, excluding short-term borrowings due within one year, and stockholders’ equity, was 48.8% and 23.0% at June 30, 2024 and December 31, 2023, respectively.

The increase largely reflects the indebtedness incurred to pay the purchase price attendant to the PTx Trimble joint venture transaction.

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The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the obligor group and is not intended to present the financial position or results of operations of the obligor group in accordance with generally accepted accounting principles as such principles are in effect in the United States.

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

Balance Sheet Information

(in millions) As of March 31, 2024

(in millions) As of June 30,

2024 As of December 31, 2023

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____________________________________

(a) Includes amounts due from non-guarantor subsidiaries of $6,388.0 million and $3,391.1 million as of March 31, 2024 and December 31, 2023, respectively.

(b) Includes amounts due from non-guarantor subsidiaries of $773.9 million and $404.1 million as of March 31, 2024 and December 31, 2023, respectively.

(c) Includes amounts due to non-guarantor subsidiaries of $6,358.4 million and $3,813.4 million as of March 31, 2024 and December 31, 2023, respectively.

(d) Includes amounts due to non-guarantor subsidiaries of $1,805.7 million and $1,193.3 million as of March 31, 2024 and December 31, 2023, respectively.

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

(a) Includes amounts due from non-guarantor subsidiaries of $2,529.1 million and $3,391.1 million as of June 30, 2024 and December 31, 2023, respectively.

(b) Includes amounts due from non-guarantor subsidiaries of $785.3 million and $404.1 million as of June 30, 2024 and December 31, 2023, respectively.

(c) Includes amounts due to non-guarantor subsidiaries of $2,438.5 million and $3,813.4 million as of June 30, 2024 and December 31, 2023, respectively.

(d) Includes amounts due to non-guarantor subsidiaries of $1,796.4 million and $1,193.3 million as of June 30, 2024 and December 31, 2023, respectively.

Statement of Operations Information

(in millions) Three months ended March 31, 2024

(in millions) Six months ended June 30, 2024

Income from Operations 433.8

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Balance Sheet Information

(in millions) As of March 31, 2024

(in millions) As of June 30,

2024 As of December 31, 2023

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____________________________________

(a) Includes amounts due from non-guarantor subsidiaries of $5,783.7 million and $2,760.2 million as of March 31, 2024 and December 31, 2023, respectively.

(b) Includes amounts due from non-guarantor subsidiaries of $757.8 million and $379.0 million as of March 31, 2024 and December 31, 2023, respectively.

(c) Includes amounts due to non-guarantor subsidiaries of $6,064.3 million and $3,540.1 million as of March 31, 2024 and December 31, 2023, respectively.

(d) Includes amounts due to non-guarantor subsidiaries of $1,805.7 million and $1,193.3 million as of March 31, 2024 and December 31, 2023, respectively.

(a) Includes amounts due from non-guarantor subsidiaries of $1,906.6 million and $2,760.2 million as of June 30, 2024 and December 31, 2023, respectively.

(b) Includes amounts due from non-guarantor subsidiaries of $751.7 million and $379.0 million as of June 30, 2024 and December 31, 2023, respectively.

(c) Includes amounts due to non-guarantor subsidiaries of $2,120.0 million and $3,540.1 million as of June 30, 2024 and December 31, 2023, respectively.

(d) Includes amounts due to non-guarantor subsidiaries of $1,796.4 million and $1,193.3 million as of June 30, 2024 and December 31, 2023, respectively.

Statement of Operations Information

(in millions) Three months ended March 31, 2024

(in millions) Six months ended June 30, 2024

Income from Operations 533.4

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(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $2,938.1 million.

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

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

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

For the three months ended March 31, 2024 and 2023, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $2.4 billion and $1.7 billion, respectively.

The cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements that remain outstanding as of June 30, 2024 and December 31, 2023 was approximately $2.4 billion and $2.5 billion, respectively.

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

For the three months ended March 31, 2024 and 2023, the cash received from these arrangements was approximately $213.3 million and $233.3 million, respectively.

The cash received from trade receivables sold under factoring arrangements that remain outstanding as of June 30, 2024 and December 31, 2023 was approximately $221.4 million and $254.1 million, respectively.

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

As of March 31, 2024 and December 31, 2023, these finance joint ventures had approximately $218.6 million and $211.3 million, respectively, of outstanding accounts receivable associated with these arrangements.

The total finance portfolio in our finance

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

joint ventures was approximately $14.0 billion and $14.1 billion as of March 31, 2024 and December 31, 2023, respectively.

The total finance portfolio as of March 31, 2024 and December 31, 2023 included approximately $10.9 billion and $10.8 billion, respectively, of retail receivables and $3.1 billion and $3.3 billion, respectively, of wholesale receivables from AGCO dealers.

As of June 30, 2024 and December 31, 2023, these finance joint ventures had approximately $187.7 million and $211.3 million, respectively, of outstanding accounts receivable associated with these arrangements.

The total finance portfolio in our finance joint ventures was approximately $14.2 billion and $14.1 billion as of June 30, 2024 and December 31, 2023, respectively.

The total finance portfolio as of June 30, 2024 and December 31, 2023 included approximately $11.2 billion and $10.8 billion, respectively, of retail receivables and $3.0 billion and $3.3 billion, respectively, of wholesale receivables from AGCO dealers.

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

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

As of March 31, 2024 and December 31, 2023, the amount outstanding that remains unpaid to the banks or other intermediaries associated with these programs totaled $87.5 million and $82.7 million, respectively.

As of June 30, 2024 and December 31, 2023, the amount outstanding that remains unpaid to the banks or other intermediaries associated with these programs totaled $92.9 million and $82.7 million, respectively.

Refer to Note 8 of our Condensed Consolidated Financial Statements for further discussion.

Cash flows used in operating activities were approximately $370.0 million for the first three months of 2024 compared to cash used in operating activities of approximately $557.1 million for the same period in 2023.

The decrease of cash used in operating activities during the three months ended March 31, 2024 was primarily driven by changes in working capital, partially offset by a decrease in net income in the first three months of 2024 compared to the same period in 2023.

Cash flows used in operating activities were approximately $134.5 million for the first six months of 2024 compared to cash used in operating activities of approximately $365.0 million for the same period in 2023.

The decrease of cash used in operating activities during the six months ended June 30, 2024 was primarily driven by changes in working capital, partially offset by a decrease in net income in the first six months of 2024 compared to the same period in 2023.

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 approximately $4,160.9 million in working capital at March 31, 2024 as compared to $1,997.2 million at December 31, 2023.

The most significant change in working capital related to an increase in cash and cash equivalents of $1,860.3 million related to proceeds from the issuance of debt in anticipation of the close of the PTx Trimble joint venture which occurred on April 1, 2024.

Inventories as of March 31, 2024 were approximately $3,781.9 million as compared to $3,440.7 million at December 31, 2023.

Accounts and notes receivable, net, as of March 31, 2024 were approximately $63.1 million lower than at December 31, 2023 primarily due to timing of sales of accounts receivable under our factoring arrangements.

Capital expenditures for the first three months of 2024 were approximately $95.0 million compared to $125.3 million for the same period in 2023.

We had approximately $2,275.2 million in working capital at June 30, 2024 as compared to $1,997.2 million at December 31, 2023.

Inventories as of June 30, 2024 were approximately $3,499.4 million as compared to $3,440.7 million at December 31, 2023.

Accounts and notes receivable, net, as of June 30, 2024 were approximately $139.4 million lower than at December 31, 2023 primarily due to timing of sales of accounts receivable under our factoring arrangements.

Capital expenditures for the first six months of 2024 were approximately $193.0 million compared to $237.0 million for the same period in 2023.

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

Share Repurchase and Dividends

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All shares received under the ASR agreement 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.

We did not purchase any shares directly or enter into any accelerated share repurchase agreements during the three months ended March 31, 2024.

As of March 31, 2024, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $57.0 million, which has no expiration date.

During the three months ended March 31, 2024 and 2023, the Company declared and paid cash dividends of $0.29 and $0.24 per common share, respectively.

On April 25, 2024, the Company's Board of Directors declared a regular quarterly dividend of $0.29 per common share to be paid on June 14, 2024, to all stockholders of record as of the close of business on May 15, 2024.

In addition, on April 25, 2024, the Company's Board of Directors declared a special variable dividend of $2.50 per common share that will be paid on June 20, 2024, to all stockholders of record as of the close of business on May 20, 2024.

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

We did not purchase any shares directly or enter into any accelerated share repurchase agreements during the three and six months ended June 30, 2024.

As of June 30, 2024, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $57.0 million, which has no expiration date.

On April 25, 2024, the Company's Board of Directors declared a special variable dividend of $2.50 per common share that was paid during the second quarter of 2024.

During the three months ended June 30, 2024 and 2023, the Company declared and paid cash dividends of $2.79 and $5.28 per common share, respectively.

During the six months ended June 30, 2024 and 2023, the Company declared and paid cash dividends of $3.08 and $5.52 per common share, respectively.

On July 11, 2024, the Company's Board of Directors declared a regular quarterly dividend of $0.29 per common share to be paid on September 16, 2024, to all stockholders of record as of the close of business on August 15, 2024.

COMMITMENTS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES

We are party to a number of commitments and other financial arrangements, which may include off-balance sheet arrangements.

At March 31, 2024, we had outstanding guarantees issued to our Argentine finance joint venture, AGCO Capital, of approximately $43.6 million.

At June 30, 2024, we had outstanding guarantees issued to our Argentine finance joint venture, AGCO Capital, of approximately $54.1 million.

In addition, we had accrued approximately $12.6 million of outstanding guarantees of residual values that may be owed to our finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users.

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We also sell a majority of our wholesale receivables in North America, Europe and Brazil to our U.S., Canadian, European and Brazilian finance joint ventures.

At March 31, 2024, we had outstanding designated and non-designated foreign currency contracts with a gross notional amount of approximately $3,039.7 million.

At June 30, 2024, we had outstanding designated and non-designated foreign currency contracts with a gross notional amount of approximately $3,032.1 million.

Refer to “Liquidity and Capital Resources” and “Item 3.

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In July 2022, the case was tried before a jury, which determined that the Company and Precision Planting had not infringed the Deere patents.

Following customary post-trial procedures, the Court entered a judgement in the Company’s favor, and Deere appealed the judgment to the U.S.

Following customary post-trial procedures, the Court entered a judgment in the Company’s favor, and Deere appealed the judgment to the U.S.

Court of Appeals for the Federal Circuit.

5 unchanged sentences

See Note 17 of our Condensed Consolidated Financial Statements for further information.

Following the closing of the PTx Trimble joint venture on April 1, 2024, AGCO has an 85% ownership interest in PTx Trimble, and Trimble holds a 15% interest.

Going forward, the PTx Trimble joint venture will be consolidated into AGCO's consolidated financial statements.

Global industry demand for farm equipment, driven by farm income, is expected to decline during 2024 in most major markets compared to 2023.

AGCO's net sales, including PTx Trimble, are expected to moderately decrease in 2024 compared to 2023, resulting from lower sales volumes and adverse foreign currency translation, offset in part by modest positive pricing.

Operating margins, including PTx Trimble, are expected to moderately decrease from 2023 levels, reflecting the impact of lower net sales and lower production volumes, partially offset by increased cost controls and modestly lower investments in engineering and other technology efforts to support AGCO's precision agriculture and digital initiatives.

On April 1, 2024, AGCO acquired an 85% ownership interest in PTx Trimble, and Trimble holds a 15% interest.

AGCO began consolidating the PTx Trimble joint venture into its consolidated financial statements on April 1, 2024.

In addition, on July 25, 2024, AGCO announced the entry into a definitive agreement to sell its Grain & Protein business which is expected to be completed in the second half of 2024.

Global industry demand for farm equipment, driven by farm income, has declined during 2024 in most major markets compared to 2023.

AGCO's net sales, including PTx Trimble, are expected to decrease in 2024 compared to 2023, resulting from lower sales volumes and adverse foreign currency translation.

Operating margins, including PTx Trimble, are expected to decrease from 2023 levels, reflecting the impact of lower net sales and lower production volumes, partially offset by increased cost controls and modestly lower investments in engineering.

Our outlook is based on current assumptions regarding a number of factors including demand, currency stability, pricing and market share gains.

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The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.

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

ongoing basis, management evaluates estimates, including those related to discount and sales incentive allowances, deferred income taxes and uncertain income tax positions, pensions, goodwill, other intangible and long-lived assets, and recoverable indirect taxes.

On an ongoing basis, management evaluates estimates, including those related to discount and sales incentive allowances, deferred income taxes and uncertain income tax positions, pensions, goodwill, other intangible and long-lived assets, and recoverable indirect taxes.

Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

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• government policies and subsidies;

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

• uncertainty regarding changes in the international tariff regimes and product embargoes and their impact on the cost of the products that we sell;

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• integration of recent and future acquisitions, including the completed acquisition on April 1, 2024 of the Trimble ag assets and formation of the joint venture, PTx Trimble, and the ability to obtain the expected results;

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

• our ability to complete the sale of the majority of the G&P business;

• our expansion plans in emerging markets;

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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-Q

Item 2. Management’s Discussion and Analysis