What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-03 compared with 2023-11-08 · 247 added, 236 removed, 99 unchanged (83% of the section changed)

1 unchanged sentence

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

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

We record sales when we sell equipment and replacement parts to our independent dealers, distributors and other customers.

To the extent possible, 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 manufacturing operations and to minimize our investment in inventories.

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

As a result, our net sales historically have been the lowest in the first quarter and have increased in subsequent quarters.

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

("Trimble") to form a joint venture (i) to which Trimble will contribute its agricultural business (other than certain Global Navigation Satellite System and guidance technologies) and AGCO will contribute JCA Technologies, and (ii) AGCO will acquire an 85% interest in the joint venture for cash consideration of $2.0 billion.

We believe the joint venture will create a global-leading mixed-fleet precision agriculture platform.

Sales of our equipment are affected by, among other things, changes in farm income, farm land values and debt levels, financing costs, acreage planted, crop yields, weather conditions, the demand for agricultural commodities, commodity and protein prices, agricultural product demand and general economic conditions and government policies and subsidies.

We sell our equipment, precision agriculture technology and replacement parts to our independent dealers, distributors and other customers.

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.

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

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

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.

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.

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.

1 unchanged sentence

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

We expect the transaction to close during the first half of 2024.

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

The COVID-19 pandemic and other economic and geopolitical factors, including inflation and the conflict in Ukraine, continue to create volatility in the global economy, including the potential for energy shortages, employment disruptions, supply chain constraints and delays in deliveries, as well as logistics interruptions.

These factors, along with fluctuating industrial demand, can have an adverse effect on production levels, particularly as a result of delays in the receipts of parts and components.

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

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

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

RESULTS OF OPERATIONS

For the three months ended September 30, 2023, we generated net income of approximately $280.6 million, or $3.74 per share, compared to approximately $237.9 million or $3.18 per share, for the same period in 2022.

For the nine months ended September 30, 2023, we generated net income of approximately $832.4 million, or $11.10 per share, compared to approximately $567.4 million, or $7.58 per share, for the same period in 2022.

Net sales during the three months ended September 30, 2023 were approximately $3,455.5 million, which were approximately 10.7% higher than the same period in 2022.

The increase was primarily due to favorable pricing and increased sales of high horsepower tractors, combines and application equipment as well as favorable currency impacts in our North America, South America and Europe/Middle East ("EME") regions.

These increases were partially offset by lower sales and unfavorable currency impacts in our Asia/Pacific/Africa ("APA") region.

Net sales during the nine months ended September 30, 2023 were approximately $10,611.7 million, which were approximately 21.2% higher than the same periods in 2022.

The increase was primarily due to favorable pricing and increased sales of high horsepower tractors, combines, hay tools and application equipment in our North America, South America and EME regions.

These increases were partially offset by lower sales and unfavorable currency impacts in our APA region.

Income from operations for the three months ended September 30, 2023 was approximately $423.6 million compared to approximately $332.1 million for the same period in 2022.

The increase was primarily the result of positive net pricing and favorable sales mix.

These increases were partially offset by material cost inflation, increased selling, general and administrative expenses and engineering expenses compared to the same period in 2022.

Financial Highlights

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,

$ % of Net Sales (1)

Net sales $ 2,928.7 100.0 % $ 3,333.5 100.0 %

Cost of goods sold 2,158.9 73.7 2,478.6 74.4

Gross profit 769.8 26.3 854.9 25.6

Selling, general and administrative expenses 350.4 12.0 331.8 10.0

Engineering expenses 130.9 4.5 119.6 3.6

Amortization of intangibles 13.9 0.5 14.8 0.4

Restructuring expenses 1.0 — 1.4 —

Income from operations 273.6 9.3 387.3 11.6

Interest expense, net 1.9 0.1 0.5 —

Other expense, net 50.8 1.7 50.4 1.5

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

Income tax provision 69.1 2.4 120.2 3.6

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

Equity in net earnings of affiliates 16.2 0.6 16.4 0.5

Net income 168.0 5.7 232.6 7.0

Net loss attributable to noncontrolling interests

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

___________________________________

(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.

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

Income from operations for the nine months ended September 30, 2023 was approximately $1,307.3 million compared to approximately $799.6 million for the same period in 2022.

The increase was primarily the result of positive net pricing, higher net sales and production volumes, along with a favorable sales mix.

These increases were partially offset by material cost inflation, increased selling, general and administrative expenses and engineering expenses compared to the same period in 2022.

Regionally, income from operations in our EME region increased for the three months ended September 30, 2023 compared to the same period in 2022 due to positive net pricing and a favorable sales mix.

Income from operations in our EME region increased for the nine months ended September 30, 2023 compared to the same period in 2022 as a result of positive net pricing, higher sales and production along with a favorable sales mix.

In our North American region, income from operations increased for the three months ended September 30, 2023 compared to the same period in 2022 due to positive net pricing and a favorable sales mix, including significant growth in Fendt products, compared to the same period in 2022.

Income from operations in our North America region increased for the nine months ended September 30, 2023 compared to the same period in 2022 as a result of positive net pricing, higher sales and production and a favorable sales mix.

In our South American region, income from operations increased in both the three and nine months ended September 30, 2023 compared to the same periods in 2022 due to the benefit of net pricing and higher net sales as well as a favorable sales mix.

In our APA region, income from operations decreased for both the three and nine months ended September 30, 2023 compared to the same periods in 2022, primarily due to lower sales, a weaker sales mix and higher logistics costs.

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.

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.

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.

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

STATEMENTS OF OPERATIONS

Net sales for the three months ended September 30, 2023 were approximately $3,455.5 million compared to approximately $3,121.6 million for the same period in 2022.

Net sales for the nine months ended September 30, 2023 were approximately $10,611.7 million compared to approximately $8,752.5 million for the same period in 2022.

The following tables set forth, for the three and nine months ended September 30, 2023, the impacts to net sales of currency translation by geographical segment (in millions, except percentages):

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

Results of Operations - Segment Information

The Company has four operating segments that are also its reportable segments, which consist of the Europe/Middle East ("EME"), North America, South America and Asia/Pacific/Africa ("APA") regions.

The Company’s reportable segments are geography based and distribute a full range of agricultural machinery and precision agriculture technology.

The Company evaluates segment performance primarily based on income from operations.

Sales for each segment are based on the location of the third-party customer.

The Company’s selling, general and administrative expenses and engineering expenses are charged to each segment based on the region and division where the expenses are incurred.

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

2024 2023 $ % $ %

4 unchanged sentences

$ 2,928.7 $ 3,333.5 $ (404.8) (12.1) % $ 33.7 1.0 %

Nine Months Ended

September 30, Change Change Due to Currency Translation

2023 2022 $ % $ %

Europe/Middle East $ 5,281.5 $ 4,260.8 $ 1,020.7 24.0 % $ (60.0) (1.4) %

Three Months Ended

Net Sales $1,729.0 $ 1,703.8 $ 25.2

Income from Operations 282.9 239.4 43.5

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.

North America

South America 1,822.2 1,446.8 375.4 25.9 % 36.0 2.5 %

Asia/Pacific/Africa 647.0 693.5 (46.5) (6.7) % (30.3) (4.4) %

$ 10,611.7 $ 8,752.5 $ 1,859.2 21.2 % $ (58.9) (0.7) %

Regionally, net sales in our EME region were higher during the three and nine months ended September 30, 2023 compared to the same periods in 2022 primarily due to higher net sales of high horsepower tractors, utility tractors and parts as well as positive pricing impacts.

Net sales in North America increased during the three and nine months ended September 30, 2023 compared to the same periods in 2022 primarily due to higher net sales of high horsepower tractors and application equipment as well as positive pricing impacts to offset inflationary cost pressures.

Net sales in South America increased during the three and nine months ended September 30, 2023 compared to the same periods in 2022, primarily as a result of higher net sales of high horsepower tractors and planters, as well as favorable pricing impacts.

The increase in net sales was primarily driven by both Brazil and Argentina in the three months ended September 30, 2023 and by Brazil in the nine months ended September 30, 2023.

In our APA region, net sales decreased during the three months ended September 30, 2023 compared to the same period in 2022, due to lower net sales resulting from declines in Japan, Australia and China and negative impacts of foreign currency translation.

Net sales decreased in the nine months ended September 30, 2023 compared to the same period in 2022 as a result of lower net sales in Japan, mostly offset by higher sales in Australia and China, and negative impacts of foreign currency translation.

We estimate our worldwide average price increase was approximately 9.9% and 11.9%, respectively, during the three and nine months ended September 30, 2023 compared to the same prior-year periods.

Consolidated net sales of tractors and combines, which together comprised approximately 63.2% and 62.9%, respectively, of our net sales for the three and nine months ended September 30, 2023, increased approximately 14.2% and 27.0% compared to the same periods in 2022.

Unit sales of tractors and combines decreased approximately 11.3% and increased approximately 0.9%, respectively, for the three and nine months ended September 30, 2023 compared to the same periods in 2022.

The decrease in unit sales for the three months ended September 30, 2023 related to a reduction in sales of compact tractors which more than offset increased sales of high horsepower tractors and combines.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.

Three Months Ended

Net Sales $ 729.6 $ 923.1 $ (193.5)

Income from Operations 42.4 102.1 (59.7)

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.

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

The following tables set forth, for the periods indicated, the percentage of net sales of certain items in our Condensed Consolidated Statements of Operations (in millions, except percentages):

Three Months Ended September 30,

Gross profit $ 934.0 27.0 % $ 738.9 23.7 %

Selling, general and administrative expenses 353.6 10.2 % 287.5 9.2 %

Engineering expenses 139.6 4.0 % 104.7 3.4 %

Amortization of intangibles 14.4 0.4 % 14.7 0.5 %

Restructuring expenses 0.8 — % 1.0 — %

Bad debt expense 2.0 0.1 % (1.1) — %

South America

Three Months Ended

Net Sales $ 303.4 $ 503.8 $ (200.4)

Income from Operations 16.2 99.5 (83.3)

Nine Months Ended September 30,

Gross profit $ 2,794.6 26.3 % $ 2,060.7 23.5 %

Selling, general and administrative expenses 1,033.2 9.7 % 861.1 9.8 %

Engineering expenses 398.0 3.8 % 312.1 3.6 %

Amortization of intangibles 43.3 0.4 % 45.4 0.5 %

Impairment charges — — % 36.0 0.4 %

Restructuring expenses 8.3 0.1 % 4.4 0.1 %

Bad debt expense 4.5 — % 2.1 — %

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.

Three Months Ended

Net Sales $ 166.7 $ 202.8 $ (36.1)

Income from Operations 8.0 18.1 (10.1)

Gross profit as a percentage of net sales increased for the three and nine months ended September 30, 2023 compared to the same periods in 2022.

These increases were primarily as a result of favorable pricing and a favorable sales mix that more than offset inflationary material and freight cost increases.

Global production hours decreased approximately 2.1% and increased approximately 8.0%, respectively, in the three and nine months ended September 30, 2023 compared to the same periods in 2022.

The decrease in global production hours in the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was a result of higher production hours that were incurred in the three months ended September 30, 2022 to recover from the cyber attack in the second quarter of 2022.

The increase in global production hours in the nine months ended September 30, 2023 was primarily due to robust market demand as well as easing of supply chain and logistics disruptions experienced in 2022.

Some of our production facilities continue to face supply chain and logistics disruptions that have impacted our ability to produce and ship units, which also has contributed to labor inefficiencies and resulted in higher than anticipated raw material and work in process inventory levels.

We also are continuing to experience material, labor and freight cost inflation.

These factors may continue, which could impact production and inventory levels and net sales and margins in future periods.

We recorded approximately $0.4 million and $1.4 million of stock compensation expense within cost of goods sold during the three and nine months ended September 30, 2023, respectively, compared to approximately $0.4 million and $1.0 million for the comparable periods in 2022, respectively.

See below and refer to Note 4 to our Condensed Consolidated Financial Statements for additional information on stock compensation expense.

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

Selling, general and administrative expenses (“SG&A expenses”) as a percentage of net sales were higher for the three months ended September 30, 2023 compared to the same period in 2022 primarily due to higher variable compensation expense and Trimble-related transaction related costs.

SG&A expenses as a percentage of net sales were relatively flat for the nine months ended September 30, 2023 compared to the same period in 2022 as a result of higher variable compensation expense and Trimble-related transaction related costs offset by higher net sales.

We recorded approximately $9.8 million and $36.1 million of stock compensation expense within SG&A expenses during the three and nine months ended September 30, 2023, compared to approximately $7.4 million and $24.4 million during the same periods in 2022.

Refer to Note 4 to our Condensed Consolidated Financial Statements for additional information on stock compensation expense.

Restructuring expenses of approximately $0.8 million and $8.3 million, respectively, were recorded during the three and nine months ended September 30, 2023, primarily related to severance and other related costs associated with the rationalization of certain South American, North American, European, Africa and Asian manufacturing operations.

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

“Interest expense, net” was approximately $5.5 million and $11.8 million, respectively, for the three and nine months ended September 30, 2023 compared to approximately $2.3 million and $8.6 million, respectively, for the comparable periods in 2022.

See “Liquidity and Capital Resources” for further information.

“Other expense, net” was approximately $84.2 million and $212.6 million, respectively, for the three and nine months ended September 30, 2023 compared to approximately $33.1 million and $72.3 million, respectively, for the comparable periods in 2022.

The increase in “Other expense, net” reflects an increase in foreign exchange losses related to the devaluation of the Turkish lira and Argentina peso during the three and nine months ended September 30, 2023 as compared to the same periods in 2022.

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 $40.5 million and $99.3 million, respectively, for the three and nine months ended September 30, 2023 compared to approximately $20.4 million and $38.5 million, respectively, for the comparable periods in 2022.

The increase in losses for the three and nine months ended September 30, 2023 was primarily a result of higher sales of accounts receivable and higher interest rates as compared to 2022.

For both the three and nine months ended September 30, 2023, the increases in "Other expense, net" were partially offset by business interruption insurance recoveries of $10 million related to the cyber attack in the second quarter of 2022.

We recorded an income tax provision of approximately $75.3 million and $306.5 million, respectively, for the three and nine months ended September 30, 2023 compared to approximately $74.2 million and $205.9 million, respectively, for the comparable periods in 2022.

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.

We maintain a valuation allowance to reserve against our net deferred tax assets in certain foreign jurisdictions.

In addition, we recorded approximately $26.4 million within our income tax provision during the nine months ended September 30, 2023 associated with our enrollment in a Brazilian tax amnesty program as is more fully described in Note 12 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 approximately $21.9 million and $55.9 million, respectively, the three and nine months ended September 30, 2023 compared to approximately $15.4 million and $39.7 million, respectively, for the comparable periods in 2022 primarily due to higher earnings in our finance joint ventures.

A write-down of our investment in our Russian finance joint venture of approximately $4.8 million was recorded during the three months ended March 31, 2022.

The Russian finance joint venture was sold during the three months ended December 31, 2022.

Refer to “Finance Joint Ventures” for further information regarding our finance joint ventures and their results of operations.

Net loss attributable to noncontrolling interests was $0.1 million and $0.1 million, respectively, during the three and nine months ended September 30, 2023 compared to approximately $0.0 million and $14.9 million, respectively, in the same periods in 2022.

The loss during the nine month period ended September 30, 2022 related to our Russia joint venture.

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.

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

We previously invested in two joint ventures that operated in Russia primarily for the manufacture and distribution of equipment and parts.

Beginning in 2018, our Russian joint venture partner became subject to sanctions by the United States.

Subsequent to the commencement of these sanctions, we previously had time-limited general licenses from the Office of Foreign Assets Control (“OFAC”) of the U.S.

Department of Treasury that permitted us to continue our participation, which expired on May 25, 2022.

Following that expiration, we “blocked” our interest in our Russian manufacturing joint venture through a process acceptable to OFAC, which had the effect of suspending our role in that joint venture.

During the three months ended March 31, 2022, we assessed the fair value of our gross assets related to the joint ventures for potential impairments and recorded asset impairment charges of approximately $36.0 million.

During the three months ended December 31, 2022, we sold our interest in the Russian distribution joint venture.

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

AGCO FINANCE JOINT VENTURES

Our AGCO Finance joint ventures provide both retail financing and wholesale financing to our dealers in the United States, Canada, Europe, Brazil, Argentina and Australia.

The joint ventures are owned by AGCO and by a wholly-owned subsidiary of Rabobank.

The majority of the assets of the finance joint ventures consist of finance receivables.

The majority of the liabilities consist of notes payable and accrued interest.

Under the various joint venture agreements, Rabobank or its affiliates provide financing to the finance joint ventures, primarily through lines of credit.

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

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

See “Commitments, Off-Balance Sheet Arrangements and Contingencies” and Note 19 of our Condensed Consolidated Financial Statements for additional information.

As of September 30, 2023, our investment in the finance joint ventures, which is included in “Investment in affiliates” on our Condensed Consolidated Balance Sheets, was approximately $463.8 million compared to $390.2 million as of December 31, 2022.

The total finance portfolio in our finance joint ventures was approximately $12.8 billion and $11.8 billion as of September 30, 2023 and December 31, 2022, respectively.

The total finance portfolio as of September 30, 2023 included approximately $10.1 billion of retail receivables and $2.7 billion of wholesale receivables from our dealers.

The total finance portfolio as of December 31, 2022 included approximately $9.5 billion of retail receivables and $2.3 billion of wholesale receivables from our dealers.

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 the nine months ended September 30, 2023, we made an investment in our Brazilian finance joint venture of approximately $24.6 million.

There were no dividends paid from our finance joint ventures during 2023.

For the nine months ended September 30, 2023, our share in the earnings of the finance joint ventures, included in “Equity in net earnings of affiliates” within our Condensed Consolidated Statements of Operations, was approximately $53.3 million compared to approximately $40.4 million for the same period in 2022.

In addition, during the nine months ended September 30, 2022 we recorded a write-down of our investment in our Russian finance joint venture of approximately $4.8 million, reflected within “Equity in net earnings of affiliates” in our Condensed Consolidated Statements of Operations.

The Russian finance joint venture was sold during the three months ended December 31, 2022.

LIQUIDITY AND CAPITAL RESOURCES

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

Internally generated funds are supplemented when necessary from external sources, primarily our credit facilities and accounts receivable sales agreement facilities subject to the discussion below with respect to financing of the Trimble transaction.

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

September 30, 2023 (1)

Internally generated funds are supplemented when necessary from external sources, primarily our credit facilities and accounts receivable sales agreement facilities, subject to the discussion below with respect to the financing of the PTx Trimble joint venture transaction.

Additional information regarding our indebtedness is contained in Note 8 to the Condensed Consolidated Financial Statements.

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)

Credit facility, expires 2027 $ 580.0

1.002% Senior term loan due 2025 264.5

1.002% EIB Senior term loan due 2025

EIB Senior Term Loan due 2029

EIB Senior Term Loan due 2030

Senior term loans due between 2025 and 2028

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 2.9

1 unchanged sentence

(1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $13.5 million.

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

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

As of September 30, 2023, the Company had $866.6 million outstanding borrowings under the revolving credit facility and had the ability to borrow $288.4 million.

In addition, the Company has access to an uncommitted revolving credit facility that allows the Company to borrow up to €100.0 million (or approximately $105.8 million as of September 30, 2023).

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).

The credit facility expires on December 31, 2026.

As of September 30, 2023, 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 (or approximately $264.5 million as of September 30, 2023), 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.

There were no amounts outstanding under the EIB Senior Term Loan as of September 30, 2023.

Subsequent to the end of the quarter, on October 26, 2023, the Company borrowed €250.0 million (approximately $263.7 million) under the arrangement.

In connection with the planned Joint Venture with Trimble Inc., on September 28, 2023, the Company entered into a bridge facility commitment letter with Morgan Stanley pursuant to which Morgan Stanley has committed to provide, subject to the terms and conditions set forth therein, a $2.0 billion senior unsecured 364-day bridge facility.

There were no amounts outstanding under the Bridge Facility as of September 30, 2023.

Subject to market conditions, the Company intends to finance the planned Joint Venture transaction through a combination of existing liquidity, ongoing cash flow from operations and the issuance of new debt and not to utilize funding pursuant to the commitment letter.

As of March 31, 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.

On October 26, 2023, the Company borrowed €250.0 million under the arrangement.

The loan matures on October 26.

As of March 31, 2024, there was €250.0 million (approximately $269.7 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.

On February 15, 2024, the Company borrowed €170.0 million under the arrangement.

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.

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.

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.

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.

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.

The amount available under the Bridge Facility was reduced to zero by certain permanent financing transactions including the net proceeds from the issuance of the Notes, the Company's entry into the Term Loan Facility and by amounts based on the Company's cash flow.

The Company terminated the Bridge Facility on March 25, 2024.

The PTx Trimble joint venture transaction closed on April 1, 2024.

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.

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.

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.

See Note 6 to our Condensed Consolidated Financial Statements for additional information.

Refer to Note 8 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.

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

Supplemental Guarantor Financial Information

The 2027 Notes and the 2034 Notes are unsecured and unsubordinated indebtedness of the Company and are guaranteed on a senior unsecured basis, jointly and severally, by AGCO International Holdings B.V., AGCO International GmbH, Massey Ferguson Corp.

and The GSI Group, LLC, direct and indirect subsidiaries of the Company (collectively, the “Guarantors”).

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

The following tables present summarized financial information of AGCO Corporation, as the issuer of the 2027 Notes and the 2034 Notes, and the Guarantors on a combined basis after elimination of intercompany transactions and balances within the Guarantors and equity in the earnings from and investments in any non-guarantor subsidiary.

As used herein, “obligor group” means AGCO Corporation, as the issuer of the debt securities, and the Guarantors on a combined basis.

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.

Balance Sheet Information

(in millions) As of March 31, 2024

As of December 31, 2023

Current assets (a)

$ 10,853.5 $ 5,710.3

Noncurrent assets (b)

2,439.1 2,036.4

Current liabilities (c)

8,391.9 5,597.4

Noncurrent liabilities (d)

5,496.1 2,824.2

____________________________________

(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

Statement of Operations Information

(in millions) Three months ended March 31, 2024

Income from Operations 195.6

Net income 15.2

Net income attributable to obligor group 15.2

____________________________________

(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $1,528.6 million.

The following tables present summarized financial information of AGCO International GmbH, after elimination of intercompany transactions and balances within the Guarantors and equity in the earnings from and investments in any non-guarantor subsidiary.

Balance Sheet Information

(in millions) As of March 31, 2024

As of December 31, 2023

Current assets (a)

$ 7,168.1 $ 4,108.0

Noncurrent assets (b)

1,031.6 648.3

Current liabilities (c)

6,885.7 4,422.5

Noncurrent liabilities (d)

1,984.8 1,376.5

____________________________________

(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.

Statement of Operations Information

(in millions) Three months ended March 31, 2024

Income from Operations 265.5

Net income 106.4

Net income attributable to obligor group 106.4

____________________________________

(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $1,417.2 million.

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.

2 unchanged sentences

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

As of September 30, 2023 and September 30, 2022, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $2.1 billion and $1.2 billion, respectively.

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.

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

During the nine months ended September 30, 2023 and September 30, 2022, the cash received from these arrangements was approximately $218.7 million and $170.8 million, respectively.

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.

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

The receivables associated with these arrangements are also without recourse to us.

As of September 30, 2023 and December 31, 2022, these finance joint ventures had approximately $139.4 million and $69.5 million, respectively, of outstanding accounts receivable associated with these arrangements.

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 are also accounted for as off-balance sheet transactions.

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.

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

1 unchanged sentence

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 September 30, 2023 and December 31, 2022, the amount outstanding that remains unpaid to the banks or other intermediaries associated with these programs totaled $90.7 million and $121.5 million, respectively.

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.

Refer to Note 7 of our Condensed Consolidated Financial Statements for further discussion.

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

Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness and stockholders’ equity, was 31.5% and 27.3% at September 30, 2023 and December 31, 2022, respectively.

Cash flows provided by operating activities were approximately $202.7 million for the first nine months of 2023 compared to cash used in operating activities of approximately $295.1 million for the same period in 2022.

The increase in cash flows provided in operating activities during the nine months ended September 30, 2023 was primarily as a result of an increase in net income as compared to the same period in 2022.

Supply chain challenges continued to result in higher raw material and work-in-process inventory levels during the first nine months of 2023.

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.

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 $2,556.0 million in working capital at September 30, 2023 as compared to $1,651.3 million at December 31, 2022 and $2,083.6 million at September 30, 2022.

Accounts receivable and inventories, combined, as of September 30, 2023 were approximately $958.9 million and $869.3 million higher, respectively, than at December 31, 2022 and September 30, 2022.

Accounts receivable and inventories, combined, at September 30, 2023 were higher than at December 31, 2022 and September 30, 2022 primarily due to higher net sales, favorable pricing and the lingering impact of supply chain constraints experienced in the first half of 2023.

Capital expenditures for the first nine months of 2023 were approximately $357.7 million compared to $270.5 million for the same period in 2022 primarily due to capital investments made in our smart farming and precision agriculture manufacturing capacity.

We anticipate capital expenditures for the full year of 2023 will be approximately $450.0 million and will be used primarily to upgrade our system capabilities, improve our factory productivity, and to support the development and enhancement of new and existing products, including investments in smart farming, precision agriculture and digital technologies.

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.

Share Repurchase and Dividends

During the three and nine months ended September 30, 2023, we did not purchase any shares directly or enter into any accelerated share repurchase agreements.

As of September 30, 2023, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $110.0 million, which has no expiration date.

In addition, on April 27, 2023, our Board of Directors approved an increase to our quarterly dividend commencing in the second quarter of 2023 by 21% to $0.29 per common share and declared a special variable dividend of $5.00 per common share that was paid during the second quarter of 2023.

During the three months ended September 30, 2023 and September 30, 2022, the Company declared and paid cash dividends of $0.29 and $0.24 per common share, respectively.

During the nine months ended September 30, 2023 and September 30, 2022, the Company declared and paid cash dividends of $5.81 and $5.16 per common share, respectively.

On October 26, 2023, the Company approved the quarterly dividend of $0.29 per common share to be paid on December 15, 2023, to all stockholders of record as of the close of business November 15, 2023.

In November 2023, the Company entered into an ASR agreement with a financial institution to repurchase $53.0 million of shares of its common stock.

We received approximately 371,669 shares associated with this transaction as of December 31, 2023.

In January 2024, the Company received an additional 82,883 shares upon final settlement of our November 2023 ASR agreement.

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

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 September 30, 2023, we had outstanding guarantees issued to our Argentine finance joint venture, AGCO Capital, of approximately $36.6 million.

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

1 unchanged sentence

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 September 30, 2023, we had outstanding designated and non-designated foreign currency contracts with a gross notional amount of approximately $5.3 billion.

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.

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

Quantitative and Qualitative Disclosures about Market Risk-Foreign Currency Risk Management,” as well as to Notes 3, 10 and 16 of our Condensed Consolidated Financial Statements for further discussion of these matters.

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

Contingencies

As part of routine audits, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of our Brazilian operations and the related transfer of certain assets to our Brazilian subsidiaries.

Refer to Note 12 of our Condensed Consolidated Financial Statements for further discussion of this matter.

During 2017, we purchased Precision Planting, which provides precision agricultural technology solutions.

During 2017, the Company purchased Precision Planting, which provides precision agricultural technology solutions.

In 2018, Deere & Company (“Deere”) filed separate complaints in the U.S.

District Court of Delaware against us and Precision Planting alleging that certain products of those entities infringed certain patents of Deere.

The two complaints subsequently were consolidated into a single case.

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

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

District Court of Delaware against the Company and Precision Planting alleging that certain products of those entities infringed certain patents of Deere.

The two complaints subsequently were consolidated into a single case, Case No.

1:18-cv-00827-CFC.

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.

Court of Appeals for the Federal Circuit.

The parties currently are briefing of the appeal.

We have an indemnity right under the purchase agreement related to the acquisition of Precision Planting from its previous owner.

Pursuant to that right, the previous owner of Precision Planting currently is responsible for the litigation costs associated with the complaint and is obligated to reimburse us for some or all of the damages in the event of an adverse outcome in the litigation.

Refer to Note 19 of our Condensed Consolidated Financial Statements or further discussion of this matter.

Our net sales are expected to increase in 2023 compared to 2022, resulting from improved pricing, higher sales of high horsepower tractors and combines and increased production volumes.

Gross and operating margins are expected to improve from 2022 levels, reflecting the impact of improved pricing, higher sales of high horsepower tractors and combines, increased production volumes and expected improvements in factory productivity.

We expect these items to more than offset material cost inflation, increased selling, general, and administrative expenses as well as engineering expenses and other technology investments which are expected to increase during 2023 compared to 2022 to support our product development plans as well as our precision agriculture and digital initiatives.

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

The appeal is fully briefed and is awaiting oral arguments before the court.

The Company has an indemnity right under the purchase agreement related to the acquisition of Precision Planting from its previous owner.

Pursuant to that right, the previous owner of Precision Planting currently is responsible for the litigation costs associated with the complaint and is obligated to reimburse AGCO for some or all of the damages in the event of an adverse outcome in the litigation.

We are party to various claims and lawsuits arising in the normal course of business.

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 16 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.

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

If our assumptions are incorrect, or other issues arise or return, such as a worsening of our supply chain, our results of operations will be adversely impacted.

Refer to “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion of the COVID-19 pandemic.

Refer to “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

2 unchanged sentences

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.

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’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.

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

3 unchanged sentences

Certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q are forward-looking, including certain statements set forth under the headings “Liquidity and Capital Resources” and “Outlook.” Forward-looking statements reflect assumptions, expectations, projections, intentions or beliefs about future events.

These statements, which may relate to such matters as earnings, net sales, margins, industry demand, market conditions, commodity prices, farm incomes, foreign currency translation, general economic outlook, dividends, share repurchases, availability of financing, product development and enhancement, factory productivity, production and sales volumes, benefits from cost reduction initiatives, material costs, pricing impacts, tax rates, compliance with loan covenants, capital expenditures, working capital and debt service requirements and the impacts of the COVID-19 pandemic are “forward-looking statements” within the meaning of the federal securities laws.

These statements do not relate strictly to

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

historical or current facts, and you can identify certain of these statements, but not necessarily all, by the use of the words “anticipate,” “assumed,” “indicate,” “estimate,” “believe,” “predict,” “forecast,” “rely,” “expect,” “continue,” “grow” and other words of similar meaning.

These statements, which may relate to such matters as earnings, net sales, margins, industry conditions, market demand, commodity prices, farm incomes, weather conditions, foreign currency translation impacts, general economic outlook, dividends, share repurchases, availability of financing, product development and enhancement, factory productivity, production and sales volumes, benefits from cost reduction initiatives, material costs, pricing impacts, tax rates, compliance with loan covenants, capital expenditures and working capital and debt service requirements are “forward-looking statements” within the meaning of the federal securities laws.

These statements do not relate strictly to historical or current facts, and you can identify certain of these statements, but not necessarily all, by the use of the words “anticipate,” “assumed,” “indicate,” “estimate,” “believe,” “predict,” “forecast,” “rely,” “expect,” “continue,” “grow” and other words of similar meaning.

Although we believe that the expectations and assumptions reflected in these statements are reasonable in view of the information currently available to us, there can be no assurance that these expectations will prove to be correct.

12 unchanged sentences

• interest and foreign currency exchange rates;

• limitations on ability to repatriate funds;

• inflation, including in individual countries that have been designated as highly inflationary;

• pricing and product actions taken by competitors;

4 unchanged sentences

• production levels and capacity constraints at our facilities, including those resulting from plant expansions and systems upgrades;

• integration of recent and future acquisitions, including the recently announced acquisition of the Trimble ag assets, and the ability to obtain the expected results;

• 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 expansion plans in emerging markets;

9 unchanged sentences

We depend on suppliers for components, parts and raw materials for our products, and any failure by our suppliers to provide products as needed, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products.

Recently suppliers of several key parts and components have not been able to meet our demand and we have had to decrease our production levels.

In addition, the potential of future natural gas shortages in Europe, as well as predicted overall shortages in other energy sources, could also negatively impact our production and that of our supply chain in the future.

While we have largely have recovered from supply chain disruptions there can be no assurance that there will not be future disruptions.

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

International relations in the Pacific Rim remain in a state of flux, with, for instance, changes over the last few years in the international tariff regimes between the United States and China in response to various political issues and heightened uncertainty regarding China-Taiwan relations.

This region is an important producer of parts and components that are critical to our products, particularly semiconductor chips.

Should events in that region or between governments in that region and the countries in which we manufacture products deteriorate, it could significantly adversely impact the availability of parts and components to us, and, correspondingly, our ability to produce products at targeted levels.

We have a wholly-owned subsidiary in Turkey that distributes agricultural equipment and replacement parts.

The Turkish economy is highly inflationary.

For the nine months ended and as of September 30, 2023, our wholly-owned subsidiary in Turkey had net sales of approximately $292.9 million and total assets of approximately 3.5 billion Turkish lira (or approximately $126.5 million).

The monetary assets and liabilities denominated in the Turkish lira were approximately 3.0 billion Turkish lira (or approximately $109.4 million) and approximately 2.3 billion Turkish lira (or approximately $85.4 million), respectively, as of September 30, 2023.

The monetary assets and liabilities were remeasured into U.S.

dollar based on exchange rates as of September 30, 2023.

We are subject to the risk of the imposition of limitations by governments on international transfers of funds.

In recent years, the Argentine government has substantially limited the ability of companies to transfer funds out

of Argentina.

As a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting implicitly from certain capital market operations, usually effected to obtain U.S.

dollars, has broadened

significantly.

We have a wholly-owned subsidiary in Argentina that assembles and distributes agricultural equipment and replacement parts within Argentina.

We determined that the Argentina economy was highly inflationary during the third quarter of 2018.

For the nine months ended and as of September 30, 2023, our wholly-owned subsidiary in Argentina had net sales of approximately $164.6 million and total assets of approximately 82.8 billion pesos (or approximately $240.0 million).

The monetary assets of our operations in Argentina denominated in pesos at the official government rate were approximately 25.6 billion pesos (or approximately $74.4 million), inclusive of approximately 14.1 billion pesos (or approximately $41.0 million) in cash and cash equivalents, as of September 30, 2023.

The monetary liabilities of our operations in Argentina denominated in pesos at the official government rate were approximately 9.0 billion pesos (or approximately $26.2 million) as of September 30, 2023.

The monetary assets and liabilities were remeasured into U.S.

dollar based on exchange rates as of September 30, 2023.

The Company's finance joint venture in Argentina, AGCO Capital Argentina S.A.

("AGCO Capital") has net monetary assets denominated in pesos at the official government rate of approximately 7.1 billion (or approximately $20.5 million) as of September 30, 2023, of which a majority is cash and cash equivalents.

Future impairments and charges are possible in connection with these exposures.

In May 2022, we discovered that we had been subject to a sophisticated cyberattack.

The attack resulted in the

temporary closure of most of our production sites and parts operations.

A majority of the affected locations resumed operations

within approximately two weeks after the attack was discovered.

There was some data exfiltration as a result of the attack, and a portion of the exfiltrated data subsequently was released publicly.

We do not have significant retail operations, and we do not believe that the exfiltrated data included privacy protected consumer data or that the exfiltration was consequential.

We have invested heavily in maturing our information technology and cybersecurity operations and continue to review and improve our safeguards to minimize our exposure to future attacks.

We do not believe the cost of remediation to the impacted systems will be material.

To date, the cost of those efforts has not been consequential.

We maintain cyber insurance coverage for business interruption.

There can be no assurance that there will not be future disruptions.

We have a substantial amount of indebtedness, and, as a result, we are subject to certain restrictive covenants and payment obligations that may adversely affect our ability to operate and expand our business.

4 unchanged sentences

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