UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q




x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~quarter~~quarterly period ended ~~September 30, 2017~~March 31, 2020



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to _________

Commission File Number: ~~001-33767~~001-12930

AGCO CORPORATION

(Exact name of Registrant as specified in its charter)



Delaware		58-1960019
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
4205 River Green Parkway
Duluth,	Georgia	30096
(Address of principal executive offices)		(Zip Code)

(770) 813-9200

(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act
Title of Class	Trading Symbol	Name of exchange on which registered
Common stock	AGCO	New York Stock Exchange

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x☒Yeso No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

x☒Yeso No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



x☒	Large accelerated filer	o☐	Accelerated filer	o☐	Non-accelerated filer	o☐	Smaller reporting company	o☐	Emerging growth company
~~(Do not check if a smaller reporting company)~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐ Yes x☒ No

As of ~~November 3, 2017,~~May 4, 2020, there ~~are 79,549,358~~were 74,867,768 shares of the registrant’s common stock, par value of $0.01 per share, outstanding.

AGCO CORPORATION AND SUBSIDIARIES

INDEX



			Page Numbers

PART I. FINANCIAL INFORMATION:

Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019	3

		Condensed Consolidated Statements of Operations for the Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	4

		Condensed Consolidated Statements of ~~Operations~~Comprehensive (Loss) Income for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	5

		Condensed Consolidated Statements of ~~Comprehensive Income~~Cash Flows for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	6

			Notes to Condensed Consolidated Financial Statements ~~of Cash Flows for the Nine Months Ended September 30, 2017 and 2016~~	7

	~~Notes to Condensed Consolidated Financial Statements~~		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3430

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		4238

Item 4.	Controls and Procedures		4238

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings		4339

Item 1A.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40

Item 6.	Exhibits		4341

SIGNATURES			4442


PART I.	FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in millions, except share amounts)


	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	312.7		$	429.7		$	386.7		$	432.8
Accounts and notes receivable, net	1,047.4			890.4			825.0			800.5
Inventories, net	2,065.2			1,514.8			2,187.5			2,078.7
Other current assets	413.9			330.8			410.8			417.1
Total current assets	3,839.2			3,165.7			3,810.0			3,729.1
Property, plant and equipment, net	1,439.6			1,361.3			1,350.5			1,416.3
Right-of-use lease assets							178.7			187.3
Investment in affiliates	465.5			414.9			372.9			380.2
Deferred tax assets	98.7			99.7			66.5			93.8
Other assets	163.3			143.1			184.4			153.0
Intangible assets, net	653.4			607.3			481.8			501.7
Goodwill	1,514.7			1,376.4			1,260.9			1,298.3
Total assets	$	8,174.4		$	7,168.4		$	7,705.7		$	7,759.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	107.9		$	85.4		$	1.9		$	2.9
Short-term borrowings							166.2			150.5
Accounts payable	869.4			722.6			821.9			914.8
Accrued expenses	1,311.4			1,160.8			1,394.7			1,654.2
Other current liabilities	259.1			176.1			177.4			162.1
Total current liabilities	2,547.8			2,144.9			2,562.1			2,884.5
Long-term debt, less current portion and debt issuance costs	1,950.3			1,610.0			1,669.5			1,191.8
Pensions and postretirement health care benefits	264.2			270.0
Operating lease liabilities							140.6			148.6
Pension and postretirement health care benefits							226.0			232.1
Deferred tax liabilities	122.5			112.4			102.9			107.0
Other noncurrent liabilities	196.6			193.9			314.0			288.7
Total liabilities	5,081.4			4,331.2			5,015.1			4,852.7
Commitments and contingencies (Note 17)
Stockholders’ Equity:
AGCO Corporation stockholders’ equity:
Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2017 and 2016	—			—
Common stock; $0.01 par value, 150,000,000 shares authorized, 79,549,113 and 79,465,393 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	0.8			0.8
Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2020 and 2019							—			—
Common stock; $0.01 par value, 150,000,000 shares authorized, 74,862,100 and 75,471,562 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively							0.8			0.8
Additional paid-in capital	129.8			103.3			—			4.7
Retained earnings	4,220.6			4,113.6			4,432.7			4,443.5
Accumulated other comprehensive loss	(1,323.0		)	(1,441.6		)	(1,791.4		)	(1,595.2		)
Total AGCO Corporation stockholders’ equity	3,028.2			2,776.1			2,642.1			2,853.8
Noncontrolling interests	64.8			61.1			48.5			53.2
Total stockholders’ equity	3,093.0			2,837.2			2,690.6			2,907.0
Total liabilities and stockholders’ equity	$	8,174.4		$	7,168.4		$	7,705.7		$	7,759.7

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in millions, except per share data)

Three Months Ended September 30,
2017 2016
Net sales $ 1,986.3
$ 1,761.6
Cost of goods sold 1,557.7
1,408.1
Gross profit 428.6
353.5
Selling, general and administrative expenses 234.3
214.1
Engineering expenses 80.0
66.0
Restructuring expenses 3.0
1.5
Amortization of intangibles 14.3
12.9
Income from operations 97.0
59.0
Interest expense, net 11.6
12.1
Other expense (income), net 18.4
(0.2 )
Income before income taxes and equity in net earnings of affiliates 67.0
47.1
Income tax provision 16.9
19.5
Income before equity in net earnings of affiliates 50.1
27.6
Equity in net earnings of affiliates 10.7
11.8
Net income 60.8
39.4
Net (income) loss attributable to noncontrolling interests (0.1 ) 0.6
Net income attributable to AGCO Corporation and subsidiaries $ 60.7
$ 40.0
Net income per common share attributable to AGCO Corporation and subsidiaries:

Basic $ 0.76
$ 0.50
Diluted $ 0.76
$ 0.50
Cash dividends declared and paid per common share $ 0.14
$ 0.13
Weighted average number of common and common equivalent shares outstanding:

Basic 79.5
80.7
Diluted 80.2
80.8



	Three Months Ended March 31,
	2020			2019
Net sales	$	1,928.3		$	1,995.8
Cost of goods sold	1,477.8			1,539.1
Gross profit	450.5			456.7
Selling, general and administrative expenses	247.6			262.2
Operating expenses:
Engineering expenses	84.9			84.5
Amortization of intangibles	15.0			15.3
Bad debt expense	1.8			0.6
Restructuring expenses	0.8			1.7
Income from operations	100.4			92.4
Interest expense, net	3.4			3.5
Other expense, net	12.5			14.6
Income before income taxes and equity in net earnings of affiliates	84.5			74.3
Income tax provision	29.4			19.4
Income before equity in net earnings of affiliates	55.1			54.9
Equity in net earnings of affiliates	11.2			10.8
Net income	66.3			65.7
Net income attributable to noncontrolling interests	(1.6		)	(0.6		)
Net income attributable to AGCO Corporation and subsidiaries	$	64.7		$	65.1
Net income per common share attributable to AGCO Corporation and subsidiaries:
Basic	$	0.86		$	0.85
Diluted	$	0.85		$	0.84
Cash dividends declared and paid per common share	$	0.16		$	0.15
Weighted average number of common and common equivalent shares outstanding:
Basic	75.3			76.6
Diluted	75.9			77.5

See accompanying notes to condensed consolidated financial statements.

~~AGCO CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(unaudited and in millions, except per share data)~~

Nine Months Ended September 30,
2017 2016
Net sales $ 5,779.1
$ 5,316.5
Cost of goods sold 4,544.8
4,221.3
Gross profit 1,234.3
1,095.2
Selling, general and administrative expenses 693.6
643.1
Engineering expenses 229.7
214.3
Restructuring expenses 8.5
5.5
Amortization of intangibles 41.5
35.3
Income from operations 261.0
197.0
Interest expense, net 33.6
34.5
Other expense, net 49.1
27.1
Income before income taxes and equity in net earnings of affiliates 178.3
135.4
Income tax provision 64.9
73.9
Income before equity in net earnings of affiliates 113.4
61.5
Equity in net earnings of affiliates 30.8
37.5
Net income 144.2
99.0
Net income attributable to noncontrolling interests (2.1 ) (0.9 )
Net income attributable to AGCO Corporation and subsidiaries $ 142.1
$ 98.1
Net income per common share attributable to AGCO Corporation and subsidiaries:

Basic $ 1.79
$ 1.20
Diluted $ 1.77
$ 1.20
Cash dividends declared and paid per common share $ 0.42
$ 0.39
Weighted average number of common and common equivalent shares outstanding:

Basic 79.5
81.9
Diluted 80.1
82.0

~~See accompanying notes to condensed consolidated financial statements.~~

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited and in millions)

Three Months Ended September 30,
2017 2016
Net income $ 60.8
$ 39.4
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation adjustments 64.5
(12.5 )
Defined benefit pension plans, net of tax 3.1
2.4
Unrealized (loss) gain on derivatives, net of tax (1.8 ) 1.7
Other comprehensive income (loss), net of reclassification adjustments 65.8
(8.4 )
Comprehensive income 126.6
31.0
Comprehensive (income) loss attributable to noncontrolling interests (0.6 ) 0.3
Comprehensive income attributable to AGCO Corporation and subsidiaries $ 126.0
$ 31.3

Nine Months Ended September 30,
2017 2016
Net income $ 144.2
$ 99.0
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments 106.5
149.1
Defined benefit pension plans, net of tax 8.9
7.5
Unrealized gain (loss) on derivatives, net of tax 4.3
(5.1 )
Other comprehensive income, net of reclassification adjustments 119.7
151.5
Comprehensive income 263.9
250.5
Comprehensive income attributable to noncontrolling interests (3.2 ) (2.0 )
Comprehensive income attributable to AGCO Corporation and subsidiaries $ 260.7
$ 248.5



	Three Months Ended March 31,
	2020			2019
Net income	$	66.3		$	65.7
Other comprehensive (loss) income, net of reclassification adjustments:
Foreign currency translation adjustments	(214.8		)	12.2
Defined benefit pension plans, net of tax	3.5			3.0
Deferred gains and losses on derivatives, net of tax	9.4			(4.1		)
Other comprehensive (loss) income, net of reclassification adjustments	(201.9		)	11.1
Comprehensive (loss) income	(135.6		)	76.8
Comprehensive loss (income) attributable to noncontrolling interests	4.1			(2.1		)
Comprehensive (loss) income attributable to AGCO Corporation and subsidiaries	$	(131.5	)	$	74.7

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in millions)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income	$	144.2		$	99.0		$	66.3		$	65.7
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	165.2			167.0			51.6			53.0
Deferred debt issuance cost amortization	0.5			0.8
Amortization of intangibles	41.5			35.3			15.0			15.3
Stock compensation expense	31.3			19.3			2.6			12.5
Proceeds from termination of hedging instrument	—			7.3
Equity in net earnings of affiliates, net of cash received	(15.4		)	(13.3		)	(11.2		)	(10.1		)
Deferred income tax provision	0.7			13.6
Deferred income tax provision (benefit)							3.8			(8.6		)
Other	1.8			(0.1		)	4.1			0.8
Changes in operating assets and liabilities, net of effects from purchase of businesses:
Changes in operating assets and liabilities:
Accounts and notes receivable, net	(81.2		)	(132.2		)	(109.6		)	(65.7		)
Inventories, net	(424.9		)	(251.3		)	(252.1		)	(418.6		)
Other current and noncurrent assets	(92.4		)	(57.2		)	(65.4		)	(4.9		)
Accounts payable	100.0			(11.0		)	(32.7		)	127.5
Accrued expenses	67.9			(4.8		)	(206.7		)	(107.7		)
Other current and noncurrent liabilities	31.6			0.2			99.0			10.9
Total adjustments	(173.4		)	(226.4		)	(501.6		)	(395.6		)
Net cash used in operating activities	(29.2		)	(127.4		)	(435.3		)	(329.9		)
Cash flows from investing activities:
Purchases of property, plant and equipment	(139.4		)	(132.8		)	(60.6		)	(60.9		)
Proceeds from sale of property, plant and equipment	3.3			1.3			0.4			—
Purchase of businesses, net of cash acquired	(188.4		)	(383.6		)
Investment in consolidated affiliates, net of cash acquired	—			(11.8		)
Investments in unconsolidated affiliates	(0.8		)	(1.7		)	(2.5		)	—
Restricted cash	—			0.4
Net cash used in investing activities	(325.3		)	(528.2		)	(62.7		)	(60.9		)
Cash flows from financing activities:
Proceeds from debt obligations	2,752.9			2,235.2
Repayments of debt obligations	(2,502.5		)	(1,518.9		)
Proceeds from indebtedness							710.1			1,139.8
Repayments of indebtedness							(150.3		)	(716.7		)
Purchases and retirement of common stock	—			(170.0		)	(55.0		)	(30.0		)
Payment of dividends to stockholders	(33.4		)	(32.1		)	(12.1		)	(11.5		)
Payment of minimum tax withholdings on stock compensation	(6.7		)	(1.9		)	(16.0		)	(23.0		)
Investments by noncontrolling interest	0.5			—
Payment of debt issuance costs	—			(0.5		)	—			(0.5		)
Investment by noncontrolling interests							—			0.6
Net cash provided by financing activities	210.8			511.8			476.7			358.7
Effects of exchange rate changes on cash and cash equivalents	26.7			14.9
Decrease in cash and cash equivalents	(117.0		)	(128.9		)
Cash and cash equivalents, beginning of period	429.7			426.7
Cash and cash equivalents, end of period	$	312.7		$	297.8
Effects of exchange rate changes on cash, cash equivalents and restricted cash							(24.8		)	(1.2		)
Decrease in cash, cash equivalents and restricted cash							(46.1		)	(33.3		)
Cash, cash equivalents and restricted cash, beginning of period							432.8			326.1
Cash, cash equivalents and restricted cash, end of period							$	386.7		$	292.8

See accompanying notes to condensed consolidated financial statements.

AGCO CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements of AGCO Corporation and its subsidiaries (the “Company” or “AGCO”) included herein have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange ~~Commission (“SEC”).~~Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, comprehensive income (loss) and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2019. Results for interim periods are not necessarily indicative of the results for the year.

~~Recent Accounting Pronouncements~~

~~In August 2017,~~Additionally, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), “Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”), which aligns an entity’s risk management activities and financial reporting for hedge relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments include 1) the ability to apply hedge accounting for risk components in hedging relationships involving nonfinancial risk and interest rate risk, 2) new alternatives for measuring the hedged item for fair value hedges of interest rate risk, 3) elimination of the requirement to separately measure and report hedge ineffectiveness, 4) requirement to present the earnings effect of the hedging instrument in the same income statement line in which the earnings effect of the hedged item is reported and 5) less stringent requirements for effectiveness testing, hedge documentation and applying the critical terms match method. ASU 2017-07 is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods using a prospective approach. Early adoption is permitted for any interim or annual period. The amendments should be applied to existing hedging relationships on the date of adoption. The Company is ~~currently evaluating~~uncertain of the impact of ~~adopting this standard on~~the coronavirus (“COVID-19”) pandemic due to increased volatility in global economic and political environments, market demand for its products, supply chain disruptions, workforce availability, exchange rate and commodity price volatility and availability of financing, and their impact to the Company’s net sales, production volumes, costs and overall financial condition and liquidity. The Company may be required to record significant impairment charges in the future with respect to certain noncurrent assets such as goodwill and other intangible assets and equity method investments, whose fair values may be negatively affected by the COVID-19 pandemic. The Company also may be required to write-down obsolete inventory due to decreased customer demand and sales orders. Additionally, the Company is closely monitoring the collection of accounts receivable, as well as the operating results of it finance joint ventures around the world. If economic conditions around the world continue to deteriorate, the Company may not be able to sufficiently collect accounts receivable, and the operating results of its finance joint ventures may be negatively impacted, thus negatively impacting the Company’s results of operations and financial ~~condition~~condition. The Company is also closely assessing its compliance with debt covenants, the recognition of any future applicable insurance recoveries, cash flow hedging forecasts as compared to actual transactions, the fair value of pension assets, accounting for incentive and ~~cash flows, but~~stock compensation accruals, revenue recognition and discount reserve setting and the ~~Company has elected not to adopt~~realization of deferred tax assets in light of the ~~standard for the year ended December 31, 2017.~~COVID-19 pandemic.

Recent Accounting Pronouncements

In March ~~2017,~~2020, the FASB issued ASU ~~2017-07, “Improving~~2020-04, “Facilitation of the ~~Presentation~~Effects of ~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”~~Reference Rate Reform on Financial Reporting” (“ASU ~~2017-07”~~2020-04”), which ~~requires~~provides temporary accounting relief for contract modifications to ease the ~~service cost component~~financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to a new alternative reference rate. ASU 2020-04 can be applied as of ~~net periodic pension~~the beginning of the interim period that includes March 12, 2020 or any date thereafter. ASU 2020-04 will generally no longer be available to apply after December 31, 2022. Interest on U.S. dollar borrowings under the Company's credit facility and ~~postretirement benefit cost be included in~~its April 2020 amendment is calculated based upon LIBOR. In the same line item as other compensation costs arising from services rendered by employees. The other components of net periodic pension and postretirement benefit cost are required to be classified outside the subtotal of income from operations. Of the components of net periodic pension and postretirement benefit cost, only the service cost componentevent that LIBOR is no longer published, interest will be ~~eligible~~calculated upon a base rate. The credit facility and its April 2020 amendment provide for ~~asset capitalization. ASU 2017-07~~an expedited amendment process once a replacement for LIBOR is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, using a retrospective approach for the presentation of the service cost component and other components of net periodic pension and postretirement benefit cost in the statement of operations; and a prospective approach for the capitalization of the service cost component of net periodic pension and postretirement benefit cost in assets. Early adoption is permitted for any interim or annual period. ASU 2017-07 allows a practical expedient for applying the retrospective presentation requirements.established (see Note 5). The Company ~~is currently evaluating the impact of adopting~~adopted this standard ~~on the Company’s results~~as of ~~operations, financial condition and cash flows, but the Company has elected~~March 31, 2020. The adoption did not ~~to early adopt the standard for the year ended December 31, 2017.~~

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which eliminates Step 2 from the goodwill impairment test. Under the standard, an entity should perform its goodwill impairment test by comparing the fair value ofhave a reporting unit with its carrying amount, resulting in an impairment charge that is the amount by which the carrying amount exceeds the reporting unit’s fair value. The impairment charge, however, should not exceed the total amount of goodwill allocatedmaterial impact to a reporting unit. The impairment assessment under ASU 2017-04 applies to all reporting units, including those with a zero or negative carrying amount. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods using a prospective approach. Early adoption is permitted for any interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on the Company’s results of operations, financial condition and cash flows.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

In November 2016, the FASB issued ASU 2016-18, “Restricted Cash” (“ASU 2016-18”). which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, and interim period within those annual periods using a retrospective approach. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of adopting this standard on the Company’s cash flows, but does not expect the standard to have a material impact.

In October 2016, the FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”), which requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the standard eliminates the exception to the recognition of current and deferred income taxes for an intra-entity asset transfer other than for inventory until the asset has been sold to an outside party. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods using a modified retrospective approach. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of adopting this standard on the Company’s results of operations, financial condition and cash flows, but the Company has elected not to early adopt the standard for the year ended December 31, 2017.

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. ASU 2016-15 may be applied using a retrospective approach or a prospective approach, if impracticable to apply the amendments retrospectively. Early adoption is permitted in any interim or annual period. The Company adopted ASU 2016-15 on January 1, 2017 and the adoption did not have a material impact on its cash flows.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods as the adoption of the standard relates to the Company. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“ASU 2019-04”), which provides, among other things, targeted improvements to certain aspects of accounting for credit losses addressed by ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326), Financial Instruments - Credit Losses,” which clarifies the treatment of expected recoveries for amounts previously written-off on purchased receivables, provides transition relief for troubled debt restructurings and allows for certain disclosure simplifications of accrued interest. The effective dates for both ASU 2019-04 and ASU 2019-11 are the same as the effective dates for ASU 2016-13. The Company adopted this standard, and its subsequent modifications, as of

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

January 1, 2020. The adoption did not have a material impact to the Company’s results of operations, financial condition and cash flows.

New Accounting Pronouncements to be Adopted

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies various aspects related to accounting for income taxes by removing certain exceptions for investments, intraperiod allocations and interim calculations, and adding guidance to reduce complexity in accounting for income taxes. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods using a prospective approach. Early adoption is permitted. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The standard will not have a material impact on the Company's results of operations, financial condition and cash flows.

As discussed above, in June 2016, the FASB issued ASU 2016-13, which requires measurement and recognition of expected versus incurred credit losses for financial assets held. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which delays the effective date of ASU 2016-13 for smaller reporting companies and other non-SEC reporting entities. This applies to the Company’s equity method finance joint ventures who are now required to adopt ASU 2016-13 for annual periods beginning after December 15, 2022 and interim periods within those annual periods. ~~This~~The standard, and its subsequent modification, will likely impact the results of operations and financial condition of the Company’s finance joint ventures. Therefore, adoption of the standard by the Company’s finance joint ventures ~~and as a result,~~ will likely impact the Company’s “Investment in affiliates” and “Equity in net earnings of ~~affiliates” upon adoption.~~affiliates.” The Company’s finance joint ventures are currently evaluating the ~~standard’s~~ impact of ASU 2016-13 to their results of operations and financial condition.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, the standard clarifies the statement of cash flow presentation for certain components of share-based awards. The Company adopted ASU 2016-09 on January 1, 2017 by prospectively recognizing excess tax benefits and tax deficiencies in the Company’s Condensed Consolidated Statements of Operations as the awards vest or were settled, when applicable, and by prospectively presenting excess tax benefits as an operating activity, rather than a financing activity, in the Company’s Condensed Consolidated Statements of Cash Flows, when applicable. In addition, the Company elected to change its accounting policy to recognize actual forfeitures, rather than estimate the number of awards that are expected to vest, by adjusting stock compensation expense in the same period as the forfeitures occur. The change in accounting policy was adopted using a modified retrospective approach, with a cumulative effect adjustment to “Retained Earnings” of approximately $1.7 million as of January 1, 2017 for the difference between stock compensation expense previously recorded and the amount that would have been recorded without assuming forfeitures.

~~In February 2016, the~~FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”), which supersedes the existing lease guidance under current U.S. GAAP. ASU 2016-02 is based on the principle that entities should recognize assets and liabilities arising from leases. The standard does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Leases are classified as finance or operating. ASU 2016-02’s primary change is the requirement for entities to recognize a lease liability for payments and a right-of-use asset representing the right to use the leased asset during the term of an operating lease arrangement. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of 12 months or less. Lessors’ accounting under the standard is largely unchanged from the previous accounting standard. In addition, ASU 2016-02 expands the disclosure requirements of lease arrangements. The standard is effective for reporting periods beginning after December 15, 2018, and

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~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

interim periods within those annual periods. Early adoption is permitted. Upon adoption, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of adopting this standard on the Company’s results of operations, financial condition and cash flows, but the Company has elected not to early adopt the standard for the year ended December 31, 2017.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which provides a single, comprehensive revenue recognition model for all contracts with customers with a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers at an amount that reflects the consideration expected to be received in exchange for those goods or services. Additional disclosures also will be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in those judgments. The standard is effective for reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 31, 2016. Entities have the option to apply the new standard under a full retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initial adoption and application within the Condensed Consolidated Statement of Stockholders’ Equity. The Company plans to adopt the new standard effective January 1, 2018 under the modified retrospective approach. Under the new model, the Company will begin to recognize an asset for the value of expected replacement parts returns. The Company has substantially completed its evaluation process, including the identification of new controls and processes designed to meet the requirements of the standard, at this time the Company has not identified any material impacts to the consolidated financial statements that the Company believes will be material in the year of adoption, with the exception of new and expanded disclosures as previously mentioned.

2. ~~ACQUISITION~~

On September 1, 2017, the Company acquired Precision Planting LLC (“Precision Planting”) for approximately $188.4 million, net of cash acquired of approximately $1.6 million. Precision Planting, headquartered in Tremont, Illinois, is a leading manufacturer of high-tech planting equipment. The acquisition of Precision Planting provided the Company an opportunity to expand its precision farming technology offerings on a global basis. The acquisition was financed by the Company’s credit facility (Note 6).

~~The preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date are presented in the following table (in millions):~~

Current assets $ 52.8
Property, plant and equipment 20.7
Intangible assets 64.4
Goodwill 64.3
      Total assets acquired 202.2

Current liabilities 12.2
       Total liabilities assumed 12.2
       Net assets acquired $ 190.0

~~The acquired identifiable intangible assets of Precision Planting as of the date of the acquisition are summarized in the following table (in millions)~~:

Intangible Asset Amount Weighted-Average Useful Life
Customer relationships $ 21.4
14 years
Technology 25.1
10 years
Trademarks 17.9
20 years
$ 64.4

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~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

The results of operations of Precision Planting have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated tax deductible goodwill has been included in the Company’s North America geographical reportable segment. Proforma results related to the acquisition were not material.

3. RESTRUCTURING EXPENSES

~~Beginning in~~From 2014 through ~~2017,~~2020, the Company announced and initiated several actions to rationalize employee headcount at various manufacturing facilities and various administrative offices located in Europe, South America, Africa, China and the United States in order to reduce costs in response to softening global market demand and lower production volumes. The aggregate headcount reduction was approximately ~~2,750~~4,160 employees between 2014 and 2019. In addition, during 2019, the Company initiated various restructuring activities in ~~2014, 2015~~an effort to rationalize its grain storage and ~~2016.~~protein production system operations. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company recorded severance and related costs associated with further rationalizations in ~~Europe, South America and the United States, in~~ connection with the termination of approximately ~~440~~10 employees. ~~The components of~~Restructuring expenses activity during the ~~restructuring expenses are~~three months ended March 31, 2020 is summarized as follows (in millions):



	Employee Severance			Facility Closure Costs			Total
Balance as of December 31, 2019	$	4.8		$	—		$	4.8
First quarter 2020 provision	0.7			0.2			0.9
First quarter 2020 provision reversal	(0.1		)	—			(0.1		)
First quarter 2020 cash activity	(1.7		)	(0.2		)	(1.9		)
Foreign currency translation	(0.1		)	—			(0.1		)
Balance as of March 31, 2020	$	3.6		$	—		$	3.6

Write-down of Property, Plant
and Equipment
Employee Severance Facility Closure Costs Total
Balance as of December 31, 2016 $ —
$ 14.5
$ 0.8
$ 15.3
First quarter 2017 provision 0.2
4.9
—
5.1
Less: Non-cash expense (0.2 ) —
—
(0.2 )
Cash expense —
4.9
—
4.9
First quarter 2017 cash activity —
(5.0 ) (0.8 ) (5.8 )
Foreign currency translation —
0.2
—
0.2
Balance as of March 31, 2017 —
14.6
—
14.6
Second quarter 2017 provision —
0.4
—
0.4
Second quarter 2017 cash activity —
(2.5 ) —
(2.5 )
Foreign currency translation —
0.9
—
0.9
Balance as of June 30, 2017 $ —
$ 13.4
$ —
$ 13.4
Third quarter 2017 provision —
3.0
—
3.0
Third quarter 2017 cash activity —
(3.1 ) —
(3.1 )
Foreign currency translation —
0.2
—
0.2
Balance as of September 30, 2017 $ —
$ 13.5
$ —
$ 13.5

3. STOCK COMPENSATION PLANS

The Company recorded stock compensation expense as follows for the three months ended March 31, 2020 and 2019 (in millions):



	Three Months Ended March 31,
	2020		2019
Cost of goods sold	$	0.1	$	0.5
Selling, general and administrative expenses	2.5		12.0
Total stock compensation expense	$	2.6	$	12.5

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

~~4. STOCK COMPENSATION PLANS~~

~~The Company recorded stock compensation expense as follows for the three and nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~(in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Cost of goods sold $ 0.8
$ 0.7
$ 2.4
$ 1.6
Selling, general and administrative expenses 7.9
7.2
29.1
18.0
Total stock compensation expense $ 8.7
$ 7.9
$ 31.5
$ 19.6

Stock Incentive Plan

Under the Company’s ~~2006 Long Term~~Long-Term Incentive Plan (the ~~“2006 Plan”~~“Plan”), up to 10,000,000 shares of AGCO common stock may be issued. As of ~~September 30, 2017,~~March 31, 2020, of the 10,000,000 shares reserved for issuance under the ~~2006~~ Plan, approximately ~~3,373,067~~3,229,538 shares were available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed below. The ~~2006~~ Plan allows the Company, under the direction of the Board of Directors’ Compensation Committee, to make grants of performance shares, stock appreciation rights, restricted stock units and restricted stock awards to employees, officers and non-employee directors of the Company.

Long-Term Incentive Plan and Related Performance Awards

The weighted average grant-date fair value of performance awards granted under the ~~2006~~ Plan during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was ~~$61.94~~$70.84 and ~~$47.93~~,$61.01, respectively.

During the ~~nine~~three months ended ~~September 30, 2017~~,March 31, 2020, the Company granted ~~539,598~~425,440 performance awards related to varying performance periods. The awards granted assume the maximum target ~~level~~levels of performance ~~is achieved, as applicable.~~are achieved. The compensation expense associated with all awards granted under the ~~2006~~ Plan is amortized ratably over the vesting or performance period based on the Company’s projected assessment of the level of performance that will be ~~achieved and earned.~~ achieved.

Performance award transactions during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan awards:



Shares awarded but not earned at January 1	~~1,982,120~~932,182
Shares awarded	~~539,598~~425,440
Shares forfeited ~~or unearned~~	(~~217,498~~47,256	)
Shares earned	—
Shares awarded but not earned at ~~September 30~~March 31	~~2,304,220~~1,310,366

~~During the three months ended~~

As of March 31, ~~2017, the Company recorded approximately $4.8 million of accelerated stock compensation expense associated with a stock award declined by the Company’s Chief Executive Officer.~~

~~As of~~ ~~September 30, 2017~~,2020, the total compensation cost related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, ~~and earned,~~ was approximately ~~$42.2~~$30.6 million, and the weighted average period over which it is expected to be recognized is approximately two years. The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance.

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~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

Restricted Stock Unit Awards

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company granted ~~111,166~~95,593 restricted stock unit (“RSU”) awards. These awards entitle the participant to receive ~~one~~1 share of the Company’s common stock for each RSU granted and vest one-third per year over a three-year requisite service ~~period.~~period, subject to adjustment in certain cases based on performance metric relative to the Company's peer group, commencing in 2020. The compensation expense associated with these awards is being amortized ratably over the requisite service period for the awards that are expected to vest. The weighted average grant-date fair value of the RSUs granted under the ~~2006~~ Plan during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was ~~$61.99~~$70.83 and ~~$45.10,~~$61.01, respectively. RSU transactions during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 were as follows:



~~Shares~~RSUs awarded but not vested at January 1	~~222,730~~396,529
~~Shares~~RSUs awarded	~~111,166~~95,593
~~Shares~~RSUs forfeited	(~~7,107~~32,484	)
~~Shares~~RSUs vested	(~~88,645~~116,225	)
~~Shares~~RSUs awarded but not vested at ~~September 30~~March 31	~~238,144~~343,413

As of ~~September 30, 2017,~~March 31, 2020, the total compensation cost related to the unvested RSUs not yet recognized was approximately ~~$8.5~~$15.0 million, and the weighted average period over which it is expected to be recognized is approximately two years.

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Stock-Settled Appreciation Rights

~~Compensation~~The compensation expense associated with the stock-settled appreciation rights (“~~SSAR”~~SSARs”) ~~awards~~ is amortized ratably over the requisite service period for the awards that are expected to vest. The Company ~~estimated~~estimates the fair value of the grants using the Black-Scholes option pricing model. SSAR transactions during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 were as follows:



SSARs outstanding at January 1	759,675	~~1,458,611~~
SSARs granted	187,100	~~286,200~~
SSARs exercised		(~~645,744~~18,600	)
SSARs canceled or forfeited		(~~13,850~~25,061	)
SSARs outstanding at ~~September 30~~March 31	903,114	~~1,085,217~~

As of ~~September 30, 2017,~~March 31, 2020, the total compensation cost related to the unvested SSARs not yet recognized was approximately ~~$5.1~~$5.4 million, and the weighted average period over which it is expected to be recognized is approximately three years.

Director Restricted Stock Grants

The ~~2006~~ Plan provides for annual restricted stock grants of the Company’s common stock to all non-employee directors. The ~~2017~~2020 grant was made on April ~~27, 2017~~30, 2020 and equated to ~~14,968~~25,542 shares of common stock, of which ~~12,066~~19,862 shares of common stock were issued after shares were withheld for taxes. The Company recorded stock compensation expense of approximately ~~$1.0~~$1.4 million during the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2020 associated with ~~this grant.~~these grants.

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~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

5.4. GOODWILL AND OTHER INTANGIBLE ASSETS

~~Changes in the carrying amount of acquired intangible assets during the nine months ended~~ ~~September 30, 2017~~ ~~are summarized as follows (in millions):~~

Trademarks and
Tradenames

Customer
Relationships

Patents and
Technology
Land Use Rights Total
Gross carrying amounts:

Balance as of December 31, 2016 $ 179.2
$ 558.0
$ 122.1
$ 8.5
$ 867.8
Acquisition 17.9
21.4
25.1
—
64.4
Foreign currency translation 8.3
16.7
8.6
0.4
34.0
Balance as of September 30, 2017 $ 205.4
$ 596.1
$ 155.8
$ 8.9
$ 966.2

Trademarks and
Tradenames

Customer
Relationships

Patents and
Technology
Land Use Rights Total
Accumulated amortization:

Balance as of December 31, 2016 $ 49.7
$ 233.0
$ 59.5
$ 2.7
$ 344.9
Amortization expense 7.5
28.4
5.5
0.1
41.5
Foreign currency translation 1.0
8.2
5.1
0.1
14.4
Balance as of September 30, 2017 $ 58.2
$ 269.6
$ 70.1
$ 2.9
$ 400.8

Trademarks and
Tradenames
Indefinite-lived intangible assets:
Balance as of December 31, 2016 $ 84.4
Foreign currency translation 3.6
Balance as of September 30, 2017 $ 88.0

~~The Company currently amortizes certain acquired intangible assets, primarily on a straight-line basis, over their estimated useful lives, which range from~~ ~~five~~ to 50 ~~years.~~

Changes in the carrying amount of goodwill during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 are summarized as follows (in millions):



	North America		South America			Europe/Middle East			Asia/Pacific/Africa			Consolidated
Balance as of December 31, 2019	$	606.0	$	112.2		$	463.3		$	116.8		$	1,298.3
Foreign currency translation	—		(24.8		)	(9.9		)	(2.7		)	(37.4		)
Balance as of March 31, 2020	$	606.0	$	87.4		$	453.4		$	114.1		$	1,260.9

North
America

South
America
Europe/Middle East
Asia/
Pacific/Africa
Consolidated
Balance as of December 31, 2016 $ 543.9
$ 138.8
$ 581.9
$ 111.8
$ 1,376.4
Acquisition 64.3
—
—
—
64.3
Foreign currency translation —
3.7
61.8
8.5
74.0
Balance as of September 30, 2017 $ 608.2
$ 142.5
$ 643.7
$ 120.3
$ 1,514.7

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of October 1 each fiscal year. The COVID-19 pandemic has adversely impacted the global economy as a whole. Based on current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of March 31, 2020 and concluded there were no indicators of impairment during the three months ended March 31, 2020.

Changes in the carrying amount of acquired intangible assets during the three months ended March 31, 2020 are summarized as follows (in millions):



Gross carrying amounts:	Trademarks and Tradenames			Customer Relationships			Patents and Technology			Land Use Rights			Total
Balance as of December 31, 2019	$	199.3		$	579.0		$	151.1		$	8.5		$	937.9
Foreign currency translation	(2.6		)	(11.2		)	(1.9		)	(0.1		)	(15.8		)
Balance as of March 31, 2020	$	196.7		$	567.8		$	149.2		$	8.4		$	922.1

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Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)



Accumulated amortization:	Trademarks and Tradenames			Customer Relationships			Patents and Technology			Land Use Rights		Total
Balance as of December 31, 2019	$	83.3		$	347.4		$	88.7		$	3.1	$	522.5
Amortization expense	2.5			10.1			2.4			—		15.0
Foreign currency translation	(1.1		)	(9.2		)	(1.4		)	—		(11.7		)
Balance as of March 31, 2020	$	84.7		$	348.3		$	89.7		$	3.1	$	525.8



Indefinite-lived intangible assets:	Trademarks and Tradenames
Balance as of December 31, 2019	$	86.3
Foreign currency translation	(0.8		)
Balance as of March 31, 2020	$	85.5

The Company currently amortizes certain acquired intangible assets, primarily on a straight-line basis, over their estimated useful lives, which range from five to 50 years.

~~Indebtedness~~Long-term debt consisted of the following at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in millions):



	March 31, 2020			December 31, 2019
Senior term loan due 2022	$	164.3		$	168.1
Credit facility, expires 2023	504.0			—
1.002% Senior term loan due 2025	273.9			280.2
Senior term loans due between 2021 and 2028	719.9			736.2
Other long-term debt	11.3			12.5
Debt issuance costs	(2.0		)	(2.3		)
	1,671.4			1,194.7
Current portion of other long-term debt	(1.9		)	(2.9		)
Total long-term indebtedness, less current portion	$	1,669.5		$	1,191.8

September 30, 2017 December 31, 2016
1.056% Senior term loan due 2020 $ 235.9
$ 211.0
Credit facility, expiring 2020 587.4
329.2
Senior term loans due 2021 353.9
316.5
5⁷/8% Senior notes due 2021
305.6
306.6
Senior term loans due between 2019 and 2026 442.4
395.6
Other long-term debt 137.5
141.6
Debt issuance costs (4.5 ) (5.1 )
2,058.2
1,695.4
Less: Current portion of other long-term debt (107.9 ) (85.4 )
Total indebtedness, less current portion $ 1,950.3
$ 1,610.0

~~1.056%~~ Senior Term Loan Due 2022

In ~~December 2014,~~October 2018, the Company entered into a term loan agreement with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank”) in the ~~European Investment Bank, which provided the Company with the ability to borrow up to €200.0 million. The €200.0~~amount of €150.0 million (or approximately ~~$235.9~~$164.3 million as of ~~September 30, 2017) of funding was received on January 15, 2015 with a maturity date of January 15, 2020.~~March 31, 2020). The Company ~~has the ability~~is permitted to prepay the term loan before its maturity ~~date.~~date of October 28, 2022. Interest is payable on the term loan ~~at 1.056% per annum, payable~~ quarterly in ~~arrears.~~arrears at an annual rate equal to the Euro Interbank Offered Rate (“EURIBOR”) plus a margin ranging from 0.875% to 1.875% based on the Company’s credit rating.

~~The Company’s revolving credit and term loan facility consists of an $800.0 million~~In October 2018, the Company entered into a multi-currency revolving credit facility ~~and a €312.0 million (or approximately $368.1 million as~~ of ~~September 30, 2017) term loan facility.~~$800.0 million. The maturity date of the credit facility is ~~June 26, 2020. Under the credit facility agreement, interest~~October 17, 2023. Interest accrues on amounts outstanding under the credit facility, at the Company’s option, ~~depending on the currency borrowed,~~ at either (1) LIBOR ~~or EURIBOR~~ plus a margin ranging from ~~1.0%~~0.875% to ~~1.75%~~1.875% based on the Company’s ~~leverage ratio,~~credit rating, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0%, plus a margin ranging from 0.0% to ~~0.25%~~0.875% based on the Company’s leverage ratio. As is more fully described in Note 11, the Company entered into an interest rate swap in 2015 to convert the term loan facility’s floating interest rate to a fixed interest rate of 0.33% plus the applicable margin over the remaining life of the term loan facility.credit rating. As of ~~September 30, 2017,~~March 31, 2020, the Company had ~~$587.4~~approximately $504.0 million of outstanding borrowings under the credit facility and the ability to borrow approximately ~~$580.7~~$296.0 million under the facility. Approximately $219.3 million was outstanding under the multi-currency revolving credit facility and €312.0 million (or approximately $368.1 million) was outstanding under the term loan facility as of September 30, 2017. As of December 31, ~~2016,~~2019, the Company had no ~~amounts were~~ outstanding borrowings under the ~~Company’s multi-currency revolving~~ credit facility and ~~the Company had~~ the ability to borrow approximately $800.0 million under the facility. ~~Approximately €312.0 million (or approximately $329.2 million) was outstanding under the term loan facility as of December 31, 2016.~~

During 2015, the Company designated its €312.0 million ($368.1 million as of September 30, 2017) term loan facility as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. See Note 11 for additional information about the net investment hedge.

~~Senior Term Loans Due 2021~~

In April 2016, the Company entered into two term loan agreements with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank”), in the amount of €100.0 million and €200.0 million, respectively. The €300.0 million (or approximately $353.9 million as of September 30, 2017) of funding was received on April 26, 2016 and was partially used to repay a senior term loan with Rabobank which was due May 2, 2016. The Company received net proceeds of approximately €99.6 million (or approximately $112.2 million) after debt issuance costs. The provisions of the two term loans are identical in

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

~~nature.~~

On April 9, 2020, the Company entered into an amendment to its $800.0 million multi-currency revolving credit facility to include incremental term loans (“2020 term loans”) that allow the Company to borrow an aggregate principal amount of €235.0 million and $267.5 million, respectively (or an aggregate of approximately $524.4 million as of April 9, 2020). Amounts can be drawn incrementally at any time prior to maturity, but must be drawn down proportionately. Amounts drawn must be in a minimum principal amount of $100.0 million and integral multiples of $50.0 million in excess thereof. Once amounts have been repaid, those amounts are not permitted to be re-drawn. The maturity date of the 2020 term loans is April 8, 2022. Interest accrues on amounts outstanding under the 2020 term loans, at the Company's option, at either (1) LIBOR plus a margin based on the Company's credit rating ranging from 1.125% to 2.125% until April 8, 2021 and ranging from 1.375% to 2.375% thereafter, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0%, plus a margin based on the Company’s credit rating ranging from 0.125% to 1.375% until April 8, 2021 and ranging from 0.375% to 1.375% thereafter. The 2020 term loans contain covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends. The Company also has to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio. On April 15, 2020, the Company borrowed €117.5 million and $133.8 million(or an aggregate of approximately $261.5 million) of 2020 term loans. The Company simultaneously repaid €100.0 million (or approximately $108.7 million) of its revolving credit facility from the borrowings received.

Interest on U.S. dollar borrowings under the Company's credit facility and the 2020 term loans is calculated based upon LIBOR. In the event that LIBOR is no longer published, interest will be calculated upon a base rate. The credit facility and 2020 term loans also provides for an expedited amendment process once a replacement for LIBOR is established.

1.002% Senior Term Loan Due 2025

In December 2018, the Company entered into a term loan with the European Investment Bank ("EIB"), which provided the Company with the ability to borrow up to €250.0 million. The €250.0 million (or approximately $273.9 million as of March 31, 2020) of funding was received on January 25, 2019 with a maturity date of January 24, 2025. The Company is permitted to prepay the term ~~loans~~loan before ~~their~~its maturity ~~date on April 26, 2021.~~date. Interest is payable on the term ~~loans~~loan at 1.002% per annum, ~~equal to the EURIBOR plus a margin ranging from 1.0% to 1.75% based on the Company’s net leverage ratio. Interest is paid quarterly in arrears.~~

5 ⁷/8~~% Senior Notes~~

~~The Company’s $305.6 million of 5~~⁷/8~~% senior notes due December 1, 2021 constitute senior unsecured and unsubordinated indebtedness. Interest is~~ payable ~~on the notes~~ semi-annually in arrears. At any time prior to September 1, 2021, the Company may redeem the notes, in whole or in part from time to time, at its option, at a redemption price equal to the greater of (i) 100% of the principal amount plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption) discounted to the redemption date at the treasury rate plus 0.5%, plus accrued and unpaid interest, including additional interest, if any. Beginning September 1, 2021, the Company may redeem the notes, in whole or in part from time to time, at its option, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, including additional interest, if any. As is more fully described in Note 11, the Company entered into an interest rate swap in 2015 to convert the senior notes’ fixed interest rate to a floating interest rate over the remaining life of the senior notes. During 2016, the Company terminated the interest rate swap. As a result, the Company recorded a deferred gain of approximately $7.3 million associated with the termination, which will be amortized as a reduction to “Interest expense, net” over the remaining term of the 5⁷/8% senior notes through December 1, 2021. As of September 30, 2017, the unamortized portion of the deferred gain was approximately $5.6 million and the amortization for the three and nine months ended September 30, 2017 was approximately $0.3 million and $1.0 million, respectively.

Senior Term Loans Due Between ~~2019~~2021 and ~~2026~~2028

In October 2016, the Company borrowed an aggregate amount of €375.0 million ~~(or approximately $442.4 million as of September 30, 2017)~~ through a group of ~~seven~~7 related term loan agreements, and in August 2018, the Company borrowed an additional aggregate amount of €338.0 million through a group of another 7 related term loan agreements. ~~The Company received net proceeds~~Of the 2016 term loans, an aggregate amount of ~~approximately €373.2~~€56.0 million (or approximately ~~$409.5~~$61.1 million) was repaid upon maturity in October 2019.

In aggregate, the Company has indebtedness of €657.0 million (or approximately $719.9 million as of ~~October 19, 2016) after debt issuance costs which were used to repay borrowings made under the Company’s revolving credit facility.~~March 31, 2020) through this group of 12 related term loan agreements. The provisions of the term loan agreements are substantially identical, ~~in nature,~~ with the exception of interest rate terms and maturities. The Company ~~has the ability~~is permitted to prepay the term loans before their maturity dates. ~~Interest is payable on~~For the term loans with a fixed interest rate, interest is payable in arrears ~~either semi-annually or annually as provided below (in millions):~~ on an annual basis, with interest rates ranging from 0.70% to 2.26% and a maturity date between August 2021 and August 2028. For the term loans with a floating interest rate, interest is payable in arrears on a semi-annual basis, with interest rates based on the EURIBOR plus a margin ranging from 0.70% to 1.25% and a maturity date between August 2021 and August 2025.

Maturity Date Floating or Fixed Interest Rate Interest Rate Interest Payment Term Loan Amount
October 19, 2019 Floating EURIBOR + 0.75% Semi-Annually € 1.0
October 19, 2019 Fixed 0.75% Annually 55.0
October 19, 2021 Floating EURIBOR + 1.00% Semi-Annually 25.5
October 19, 2021 Fixed 1.00% Annually 166.5
October 19, 2023 Floating EURIBOR + 1.25% Semi-Annually 1.0
October 19, 2023 Fixed 1.33% Annually 73.5
October 19, 2026 Fixed 1.98% Annually 52.5
€ 375.0
Short-Term Borrowings

As of March 31, 2020 and December 31, 2019, the Company had short-term borrowings due within one year of approximately $166.2 million and $150.5 million, respectively.

Standby Letters of Credit and Similar Instruments

The Company has arrangements with various banks to issue standby letters of credit or similar instruments, which guarantee the Company’s obligations for the purchase or sale of certain inventories and for potential claims exposure for insurance coverage. At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, outstanding letters of credit totaled ~~$15.2~~approximately $14.4 million and ~~$17.1~~$13.9 million, respectively.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

~~7. INVENTORIES~~

6. RECOVERABLE INDIRECT TAXES

The Company’s Brazilian operations incur value added taxes (“VAT”) on certain purchases of raw materials, components and services. These taxes are accumulated as tax credits and create assets that are reduced by the VAT collected from the Company’s sales in the Brazilian market. The Company regularly assesses the recoverability of these tax credits, and establishes reserves when necessary against them, through analyses that include, amongst others, the history of realization, the transfer of tax credits to third parties as authorized by the government, anticipated changes in the supply chain and the future expectation of tax debits from the Company’s ongoing operations. The Company believes that these tax credits, net of established reserves, are realizable. The Company had recorded approximately $104.8 million and $142.3 million, respectively, of VAT tax credits, net of reserves, as of March 31, 2020 and December 31, 2019.

Inventories at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 were as follows (in millions):



	March 31, 2020		December 31, 2019
Finished goods	$	796.6	$	780.1
Repair and replacement parts	614.6		611.5
Work in process	259.7		213.4
Raw materials	516.6		473.7
Inventories, net	$	2,187.5	$	2,078.7

September 30, 2017 December 31, 2016
Finished goods $ 815.0
$ 589.3
Repair and replacement parts 599.0
532.5
Work in process 215.3
113.8
Raw materials 435.9
279.2
Inventories, net $ 2,065.2
$ 1,514.8

The warranty reserve activity for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 consisted of the following (in millions):



	Three Months Ended March 31,
	2020			2019
Balance at beginning of period	$	392.8		$	360.9
Accruals for warranties issued during the period	56.3			51.1
Settlements made (in cash or in kind) during the period	(49.4		)	(47.4		)
Foreign currency translation	(15.1		)	(3.3		)
Balance at March 31	$	384.6		$	361.3

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Balance at beginning of period $ 296.9
$ 240.6
$ 255.6
$ 230.3
Acquisitions 2.1
3.1
2.1
3.7
Accruals for warranties issued during the period 47.7
43.3
152.6
138.7
Settlements made (in cash or in kind) during the period (49.3 ) (40.1 ) (127.4 ) (128.3 )
Foreign currency translation 6.2
2.0
20.7
4.5
Balance at September 30 $ 303.6
$ 248.9
$ 303.6
$ 248.9

The Company’s agricultural equipment products generally are warranted against defects in material and workmanship for a period of one to four years. The Company accrues for future warranty costs at the time of sale based on historical warranty experience. Approximately ~~$267.4~~$322.6 million and ~~$223.1~~$331.9 million of warranty reserves are included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, respectively. Approximately ~~$36.2~~$62.0 million and ~~$32.5~~$60.9 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, respectively.

The Company recognizes recoveries of the costs associated with warranties it provides when the collection is probable. When specifics of the recovery have been agreed upon with the Company’s suppliers through confirmation of liability for the recovery, the Company records the recovery within “Accounts and notes receivable, net.” Estimates of the amount of warranty claim recoveries to be received from the Company’s suppliers based upon contractual supplier arrangements are recorded within “Other current assets.”

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

9. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted net income per common share assumes the exercise of outstanding SSARs and the vesting of performance share awards and RSUs using the treasury stock method when the effects of such assumptions are dilutive.

A reconciliation of net income attributable to AGCO Corporation and ~~its~~ subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 is as follows (in millions, except per share data):



	Three Months Ended March 31,
	2020		2019
Basic net income per share:
Net income attributable to AGCO Corporation and subsidiaries	$	64.7	$	65.1
Weighted average number of common shares outstanding	75.3		76.6
Basic net income per share attributable to AGCO Corporation and subsidiaries	$	0.86	$	0.85
Diluted net income per share:
Net income attributable to AGCO Corporation and subsidiaries	$	64.7	$	65.1
Weighted average number of common shares outstanding	75.3		76.6
Dilutive SSARs, performance share awards and RSUs	0.6		0.9
Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share	75.9		77.5
Diluted net income per share attributable to AGCO Corporation and subsidiaries	$	0.85	$	0.84

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Basic net income per share:

Net income attributable to AGCO Corporation and subsidiaries $ 60.7
$ 40.0
$ 142.1
$ 98.1
Weighted average number of common shares outstanding 79.5
80.7
79.5
81.9
Basic net income per share attributable to AGCO Corporation and subsidiaries $ 0.76
$ 0.50
$ 1.79
$ 1.20
Diluted net income per share:

Net income attributable to AGCO Corporation and subsidiaries $ 60.7
$ 40.0
$ 142.1
$ 98.1
Weighted average number of common shares outstanding 79.5
80.7
79.5
81.9
Dilutive SSARs, performance share awards and RSUs 0.7
0.1
0.6
0.1
Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share 80.2
80.8
80.1
82.0
Diluted net income per share attributable to AGCO Corporation and subsidiaries $ 0.76
$ 0.50
$ 1.77
$ 1.20

SSARs to purchase approximately ~~0.3~~0.7 million shares of the Company’s common stock for both the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020 and ~~approximately 1.5 million and 1.2 million shares of the Company’s common stock for the three and nine months ended September 30, 2016, respectively,~~2019 were outstanding but not included in the calculation of weighted average common and common equivalent shares outstanding because they had an antidilutive impact.

At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, the Company had approximately ~~$151.2~~$219.4 million and ~~$139.9~~$210.7 million, respectively, of gross unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. At ~~September 30, 2017~~Gross unrecognized income tax benefits as of March 31, 2020 and December 31, ~~2016~~,2019 include certain indirect favorable effects that relate to other tax jurisdictions of approximately $50.7 million and $44.9 million, respectively. At March 31, 2020 and December 31, 2019, the Company had approximately ~~$57.1~~$50.3 million and ~~$47.0~~$51.0 million,, respectively, of accrued or deferred taxes related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions that it expects to settle or pay in the next 12 months. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, the Company had accrued interest and penalties related to unrecognized tax benefits of ~~$20.9~~approximately $29.9 million and ~~$16.4~~$28.4 million,, respectively. Generally, tax years ~~2011~~2014 through ~~2016~~2019 remain open to examination by taxing authorities in the United States and certain other foreign tax jurisdictions.

~~During~~ The Company and its subsidiaries are routinely examined by tax authorities in the ~~second quarter~~United States and in various state, local and foreign jurisdictions. As of ~~2016, the Company recorded~~March 31, 2020, a ~~non-cash deferred~~number of income tax ~~charge of approximately $31.6 million to increase the~~examinations in foreign jurisdictions are ongoing.

The Company maintains a valuation allowance onto fully reserve against its net deferred ~~income~~ tax assets in the United States ~~for previous periods.~~and certain other foreign jurisdictions. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies and determined that ~~the adjustment~~all adjustments to the valuation ~~allowance at June 30, 2016 was~~allowances were appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. ~~As of September 30, 2017, the~~The Company believes it is more likely than not that the Company will realize its remaining net deferred tax assets, net of the valuation allowance, in future years.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

On March 27, 2020, the CARES Act (the “Act”) was enacted in the United States in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses. Tax provisions of the Act include the deferral of certain payroll taxes, relief for retaining employees and other provisions. Other governments around the world are also enacting similar measures and may enact further measures in the future. The Company is evaluating the impact of the Act and similar measures.

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company has significant manufacturing operations in the United States, France, Germany, Finland and Brazil, and it purchases a portion of its tractors, combines and components from third-party foreign suppliers, primarily in various European countries and in Japan. The Company also sells products in over 150 countries throughout the world. The Company’s most significant transactional foreign currency exposures are the Euro, Brazilian real and the Canadian dollar in relation to the United States dollar, and the Euro in relation to the British pound.

The Company attempts to manage its transactional foreign exchange exposure by hedging foreign currency cash flow forecasts and commitments arising from the anticipated settlement of receivables and payables and from future purchases and sales. Where naturally offsetting currency positions do not occur, the Company hedges certain, but not all, of its exposures through the use of foreign currency contracts. The Company’s translation exposure resulting from translating the financial statements of foreign subsidiaries into United States dollars may be partially hedged from time to time. The Company’s most significant translation exposures are the Euro, the British pound and the Brazilian real in relation to the United States dollar and the Swiss franc in relation to the Euro. When practical, the translation impact is reduced by financing local operations with local borrowings.

The Company uses floating rate and fixed rate debt to finance its operations. The floating rate debt obligations expose the Company to variability in interest payments due to changes in the EURIBOR and LIBOR benchmark interest rates. The Company believes it is prudent to limit the variability of a portion of its interest payments, and to meet that objective, the Company periodically enters into interest rate swaps to manage the interest rate risk associated with the Company’s borrowings. The Company designates interest rate contracts used to convert the interest rate exposure on a portion of the Company’s debt portfolio from a floating rate to a fixed rate as cash flow hedges, while those contracts converting the Company’s interest rate exposure from a fixed rate to a floating rate are designated as fair value hedges.

The Company’s senior management establishes the Company’s foreign currency and interest rate risk management policies. These policies are reviewed periodically by the Finance Committee of the Company’s Board of Directors. The policies allow for the use of derivative instruments to hedge exposures to movements in foreign currency and interest rates. The Company’s policies prohibit the use of derivative instruments for speculative purposes.

All derivatives are recognized on the Company’s Condensed Consolidated Balance Sheets at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either (1) a cash flow hedge of a forecasted transaction, (2) a fair value hedge of a recognized liability, (3) a hedge of a net investment in a foreign operation, or (4) a non-designated derivative instrument.

The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk management objectives and strategy for undertaking various hedge transactions. The Company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items or the net investment hedges in foreign operations. When it is determined that a derivative is no longer highly effective as a hedge, hedge accounting is discontinued on a prospective basis.

The Company categorizes its derivative assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. See Note 15 for a discussion of the fair value hierarchy as per the guidance in ASC 820. The Company’s valuation techniques are designed to maximize the use of observable inputs and minimize the use of unobservable inputs.

~~Counterparty Risk~~

The Company regularly monitors the counterparty risk and credit ratings of all the counterparties to the derivative instruments. The Company believes that its exposures are appropriately diversified across counterparties and that these counterparties are creditworthy financial institutions. If the Company perceives any risk with a counterparty, then the Company would cease to do business with that counterparty. There have been no negative impacts to the Company from any non-performance of any counterparties.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

Derivative Transactions Designated as Hedging Instruments

Foreign Currency Contracts

The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates. The changes in the fair values of these cash flow hedges are recorded in accumulated other comprehensive loss and are subsequently reclassified into “Cost of goods sold” during the period the sales and purchases are recognized. These amounts offset the effect of the changes in foreign currency rates on the related sale and purchase transactions.

During ~~2017,~~2020 and 2019, the Company designated certain foreign currency contracts as cash flow hedges of expected future sales and purchases. The total notional value of derivatives that were designated as cash flow hedges was ~~$107.4~~approximately $204.6 million and ~~$111.2~~$332.7 million as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively.

~~Interest Rate Contract~~

The Company monitors the mix of short-term and long-term debt regularly. From time to time, the Company manages the risk to interest rate fluctuations through the use of derivative financial instruments. During 2015, the Company entered into an interest rate swap instrument with a notional amount of €312.0 million (or approximately $368.1 million at September 30, 2017) and an expiration date of June 26, 2020. The swap was designated and accounted for as a cash flow hedge. Under the swap agreement, the Company pays a fixed interest rate of 0.33% plus the applicable margin, and the counterparty to the agreement pays a floating interest rate based on the three-month EURIBOR.

Changes in the fair value of the interest rate swap are recorded in accumulated other comprehensive loss and are subsequently reclassified into “Interest expense, net” as a rate adjustment in the same period in which the related interest on the Company’s floating rate term loan facility affects earnings.

The following ~~table summarizes~~tables summarize the after-tax impact that changes in the fair value of derivatives designated as cash flow hedges had on accumulated other comprehensive loss and net income during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in millions):

Recognized in Net Income
Three Months Ended September 30, Gain (Loss) Recognized in Accumulated
Other Comprehensive Loss
Classification
of Gain (Loss)

Gain (Loss) Reclassified from Accumulated
Other Comprehensive Loss into Income
2017
Foreign currency contracts⁽¹⁾
$ (0.3 ) Cost of goods sold $ 1.1
Interest rate contract (1.0 ) Interest expense, net (0.6 )
Total $ (1.3 ) $ 0.5
2016
Foreign currency contracts $ 1.5
Cost of goods sold $ 0.2
Interest rate contract (0.1 ) Interest expense, net (0.5 )
Total $ 1.4
$ (0.3 )



				Recognized in Net Income
Three Months Ended March 31,	Gain (Loss) Recognized in Accumulated Other Comprehensive Loss			Classification of Gain (Loss)	Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income			Total Amount of the Line Item in the Condensed Consolidated Statements of Operations Containing Hedge Gains (Losses)
2020
Foreign currency contracts⁽¹⁾	$	9.5		Cost of goods sold	$	0.1		$	1,477.8
2019
Foreign currency contracts	$	(4.7	)	Cost of goods sold	$	(0.6	)	$	1,539.1

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

Recognized in Net Income
Nine Months Ended September 30, Gain (Loss) Recognized in Accumulated
Other Comprehensive Loss
Classification
of Gain (Loss)

Gain (Loss) Reclassified from Accumulated
Other Comprehensive Loss into Income
2017
Foreign currency contracts⁽¹⁾
$ 2.9
Cost of goods sold $ (0.3 )
Interest rate contract (0.6 ) Interest expense, net (1.7 )
Total $ 2.3
$ (2.0 )
2016
Foreign currency contracts $ 1.2
Cost of goods sold $ 0.2
Interest rate contract (7.5 ) Interest expense, net (1.4 )
Total $ (6.3 ) $ (1.2 )

(1) The outstanding contracts as of ~~September 30, 2017~~March 31, 2020 range in maturity through December ~~2018.~~2020.

~~There was no ineffectiveness with respect to the cash flow hedges during the three and nine months ended September 30, 2017 and 2016.~~

The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (in millions):



	Before-Tax Amount			Income Tax			After-Tax Amount
Accumulated derivative net losses as of December 31, 2019	$	(1.5	)	$	(0.2	)	$	(1.3	)
Net changes in fair value of derivatives	11.7			2.2			9.5
Net gains reclassified from accumulated other comprehensive loss into income	(0.1		)	—			(0.1		)
Accumulated derivative net gains as of March 31, 2020	$	10.1		$	2.0		$	8.1

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Before-Tax
Amount

Income
Tax

After-Tax
Amount
Accumulated derivative net losses as of December 31, 2016 $ (10.1 ) $ (1.4 ) $ (8.7 )
Net changes in fair value of derivatives 2.2
(0.1 ) 2.3
Net losses reclassified from accumulated other comprehensive loss into income 2.3
0.3
2.0
Accumulated derivative net losses as of September 30, 2017 $ (5.6 ) $ (1.2 ) $ (4.4 )

~~Fair Value Hedges~~

The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that results from fluctuations in benchmark interest rates. During 2015, the Company entered into an interest rate swap instrument with a notional amount of $300.0 million and an expiration date of December 1, 2021 designated as a fair value hedge of the Company’s 5⁷/8% senior notes (Note 6). Under the interest rate swap, the Company paid a floating interest rate based on the three-month LIBOR plus a spread of 4.14% and the counterparty to the agreement paid a fixed interest rate of 5⁷/8~~%. The gains and losses related to changes in the fair value of the interest rate swap were recorded to “Interest expense, net” and offset changes in the fair value of the underlying hedged 5~~⁷/8~~% senior notes.~~

During 2016, the Company terminated the existing interest rate swap transaction and received cash proceeds of approximately $7.3 million. The resulting gain was deferred and is being amortized as a reduction to “Interest expense, net” over the remaining term of the Company’s 5⁷/8~~% senior notes through December 1, 2021. Refer to Note 6 for further information.~~

Net Investment Hedges

The Company uses non-derivative and derivative instruments to hedge a portion of its net investment in foreign operations against adverse movements in exchange rates. For instruments that are designated as hedges of net investments in foreign operations, changes in the fair value of the derivative instruments are recorded in foreign currency translation adjustments, a component of accumulated other comprehensive loss, to offset changes in the value of the net investments being hedged. When the net investment in foreign operations is sold or substantially liquidates, the amounts recorded in accumulated other comprehensive loss are reclassified to earnings. To the extent foreign currency denominated debt is ~~dedesignated~~de-designated from a

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

net investment hedge relationship, changes in the value of the foreign currency denominated debt are recorded in earnings through the maturity date.

In January 2018, the Company entered into a cross currency swap contract as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. The cross currency swap has an expiration date of January 19, 2021. At maturity of the cross currency swap contract, the Company will deliver the notional amount of approximately €245.7 million (or approximately $269.2 million as of March 31, 2020) and will receive $300.0 million from the counterparties. The Company will receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of the cross currency swap.

During ~~2015,~~the three months ended March 31, 2020, the Company designated ~~its €312.0~~€110.0 million (or approximately ~~$368.1~~$120.5 million as of ~~September 30, 2017) term loan~~March 31, 2020) of its multi-currency revolving credit facility with a maturity date of ~~June 26, 2020~~October 17, 2023 as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment.

During the three months ended March 31, 2019, the Company designated €160.0 million (or approximately $179.8 million as of March 31, 2019) of its multi-currency revolving credit facility as a hedge of its net investment in foreign operations to offset foreign currency translation gains or losses on the net investment. During September 2019, the Company repaid the designated amount outstanding under its multi-currency revolving credit facility and the foreign currency denominated debt was de-desginated as a net investment hedge.

The following table summarizes the notional values of the instrument designated as a net investment hedge (in millions):



	Notional Amount as of
	March 31, 2020		December 31, 2019
Cross currency swap contract	$	300.0	$	300.0
Foreign currency denominated debt	120.5		—

Notional Amount as of
September 30, 2017 December 31, 2016
Foreign currency denominated debt $ 368.1
$ 329.2

The following table summarizes the after-tax impact of changes in the fair value of the instrument designated as a net investment hedge during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in millions):



	Gain Recognized in Accumulated Other Comprehensive Loss for the Three Months Ended
	March 31, 2020		March 31, 2019
Cross currency swap contract	$	7.3	$	6.9
Foreign currency denominated debt	0.6		1.7

(Loss) Gain Recognized in Accumulated
Other Comprehensive Loss for the Three Months Ended

(Loss) Gain Recognized in Accumulated
Other Comprehensive Loss for the Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Foreign currency denominated debt $ (11.8 ) $ (4.8 ) $ (38.9 ) $ (8.9 )

~~There was no ineffectiveness with respect to the net investment hedge during the three and nine months ended September 30, 2017 and 2016.~~

Derivative Transactions Not Designated as Hedging Instruments

During ~~2017~~2020 and ~~2016,~~2019, the Company entered into foreign currency contracts to economically hedge receivables and payables on the Company and its subsidiaries’ balance sheets that are denominated in foreign currencies other than the functional currency. These contracts were classified as non-designated derivative instruments. Gains and losses on such contracts are substantially offset by losses and gains on the remeasurement of the underlying asset or liability being hedged and are immediately recognized into earnings. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company had outstanding foreign currency contracts with a notional amount of approximately ~~$1,391.6~~$2,678.1 million and ~~$1,550.2~~$2,800.3 million, respectively.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

The following table summarizes the impact that changes in the fair value of derivatives not designated as hedging instruments had on ~~earnings~~net income (in millions):



		Gain Recognized in Net Income for the Three Months Ended
	Classification of Gain	March 31, 2020		March 31, 2019
Foreign currency contracts	Other expense, net	$	32.1	$	8.8

For the Three Months Ended For the Nine Months Ended
Classification of Gain September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Foreign currency contracts Other expense, net $ 13.9
$ —
$ 35.8
$ 14.3

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

The table below sets forth the fair value of derivative instruments as of ~~September 30, 2017~~March 31, 2020 (in millions):

The table below sets forth the fair value of derivative instruments as of December 31, ~~2016~~2019 (in millions):



	Asset Derivatives as of December 31, 2019			Liability Derivatives as of December 31, 2019
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments designated as hedging instruments:
Foreign currency contracts	Other current assets	$	0.6	Other current liabilities	$	1.9
Cross currency swap contract	Other noncurrent assets	27.0		Other noncurrent liabilities	—
Derivative instruments not designated as hedging instruments:
Foreign currency contracts	Other current assets	11.7		Other current liabilities	13.1
Total derivative instruments		$	39.3		$	15.0

Asset Derivatives as of
December 31, 2016

Liability Derivatives as of
December 31, 2016

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value
Derivative instruments designated as hedging instruments:

Foreign currency contracts Other current assets $ 0.2
Other current liabilities $ 3.8
Interest rate contract Other noncurrent assets —
Other noncurrent liabilities 6.4
Derivative instruments not designated as hedging instruments:
Foreign currency contracts Other current assets 6.3
Other current liabilities 3.2
Total derivative instruments $ 6.5
$ 13.4

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

12. CHANGES IN STOCKHOLDERS’ EQUITY

The following ~~table sets~~tables set forth changes in stockholders’ equity attributed to AGCO Corporation and its subsidiaries and to noncontrolling interests for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and 2019 (in millions):

Common
Stock

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Noncontrolling
Interests

Total Stockholders’
Equity
Balance, December 31, 2016 $ 0.8
$ 103.3
$ 4,113.6
$ (1,441.6 ) $ 61.1
$ 2,837.2
Stock compensation —
33.0
—
—
—
33.0
Issuance of stock awards —
(2.2 ) —
—
—
(2.2 )
SSARs exercised —
(4.3 ) —
—
—
(4.3 )
Comprehensive income:
Net income —
—
142.1
—
2.1
144.2
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments —
—
—
105.4
1.1
106.5
Defined benefit pension plans, net of tax —
—
—
8.9
—
8.9
Unrealized gain on derivatives, net of tax —
—
—
4.3
—
4.3
Payment of dividends to stockholders —
—
(33.4 ) —
—
(33.4 )
Investments by noncontrolling interest —
—
—
—
0.5
0.5
Adjustment related to the adoption of ASU 2016-09 —
—
(1.7 ) —
—
(1.7 )
Balance, September 30, 2017 $ 0.8
$ 129.8
$ 4,220.6
$ (1,323.0 ) $ 64.8
$ 3,093.0



	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Stockholders’ Equity
Balance, December 31, 2019	$	0.8	$	4.7		$	4,443.5		$	(1,595.2	)	$	53.2		$	2,907.0
Stock compensation	—		5.9			(3.3		)	—			—			2.6
Issuance of stock awards	—		(7.2		)	(8.4		)	—			—			(15.6		)
SSARs exercised	—		—			(0.1		)	—			—			(0.1		)
Comprehensive loss:
Net income	—		—			64.7			—			1.6			66.3
Other comprehensive loss, net of reclassification adjustments:
Foreign currency translation adjustments	—		—			—			(209.1		)	(5.7		)	(214.8		)
Defined benefit pension plans, net of tax	—		—			—			3.5			—			3.5
Deferred gains and losses on derivatives, net of tax	—		—			—			9.4			—			9.4
Payment of dividends to stockholders	—		—			(12.1		)	—			—			(12.1		)
Purchases and retirement of common stock	—		(3.4		)	(51.6		)	—			—			(55.0		)
Change in noncontrolling interest	—		—			—			—			(0.6		)	(0.6		)
Balance, March 31, 2020	$	0.8	$	—		$	4,432.7		$	(1,791.4	)	$	48.5		$	2,690.6

~~Total comprehensive income (loss) attributable to noncontrolling interests for the three and nine months ended~~ ~~September 30, 2017~~ ~~and 2016 was as follows (in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income (loss) $ 0.1
$ (0.6 ) $ 2.1
$ 0.9
Other comprehensive income:
Foreign currency translation adjustments 0.5
0.3
1.1
1.1
Total comprehensive income (loss) $ 0.6
$ (0.3 ) $ 3.2
$ 2.0



	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests		Total Stockholders’ Equity
Balance, December 31, 2018	$	0.8	$	10.2		$	4,477.3		$	(1,555.4	)	$	60.6	$	2,993.5
Stock compensation	—		12.5			—			—			—		12.5
Issuance of stock awards	—		(13.0		)	(9.6		)	—			—		(22.6		)
SSARs exercised	—		—			(0.3		)	—			—		(0.3		)
Comprehensive income:
Net income	—		—			65.1			—			0.6		65.7
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments	—		—			—			10.7			1.5		12.2
Defined benefit pension plans, net of tax	—		—			—			3.0			—		3.0
Deferred gains and losses on derivatives, net of tax	—		—			—			(4.1		)	—		(4.1		)
Payment of dividends to stockholders	—		—			(11.5		)	—			—		(11.5		)
Purchases and retirement of common stock	—		—			(30.0		)	—			—		(30.0		)
Investment by noncontrolling interests	—		—			—			—			0.6		0.6
Balance, March 31, 2019	$	0.8	$	9.7		$	4,491.0		$	(1,545.8	)	$	63.3	$	3,019.0

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Total comprehensive (loss) income attributable to noncontrolling interests for the three months ended March 31, 2020 and 2019 was as follows (in millions):



	Three Months Ended March 31,
	2020			2019
Net income	$	1.6		$	0.6
Other comprehensive (loss) income:
Foreign currency translation adjustments	(5.7		)	1.5
Total comprehensive (loss) income	$	(4.1	)	$	2.1

The following table sets forth changes in accumulated other comprehensive loss by component, net of tax, attributed to AGCO Corporation and its subsidiaries for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (in millions):



	Defined Benefit Pension Plans			Deferred Net Gains (Losses) on Derivatives			Cumulative Translation Adjustment			Total
Accumulated other comprehensive loss, December 31, 2019	$	(296.4	)	$	(1.3	)	$	(1,297.5	)	$	(1,595.2	)
Other comprehensive income (loss) before reclassifications	—			9.5			(209.1		)	(199.6		)
Net losses (gains) reclassified from accumulated other comprehensive loss	3.5			(0.1		)	—			3.4
Other comprehensive income (loss), net of reclassification adjustments	3.5			9.4			(209.1		)	(196.2		)
Accumulated other comprehensive loss, March 31, 2020	$	(292.9	)	$	8.1		$	(1,506.6	)	$	(1,791.4	)

Defined Benefit Pension Plans Deferred Net (Losses) Gains on Derivatives Cumulative Translation Adjustment Total
Accumulated other comprehensive loss, December 31, 2016 $ (304.5 ) $ (8.7 ) $ (1,128.4 ) $ (1,441.6 )
Other comprehensive income before reclassifications —
2.3
105.4
107.7
Net losses reclassified from accumulated other comprehensive loss 8.9
2.0
—
10.9
Other comprehensive income, net of reclassification adjustments 8.9
4.3
105.4
118.6
Accumulated other comprehensive loss, September 30, 2017 $ (295.6 ) $ (4.4 ) $ (1,023.0 ) $ (1,323.0 )

The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in millions):


	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item within the Condensed Consolidated Statements of Operations	Amount Reclassified from Accumulated Other Comprehensive Loss						Affected Line Item within the Condensed Consolidated Statements of Operations
Details about Accumulated Other Comprehensive Loss Components	Three Months Ended September 30, 2017⁽¹⁾			Three Months Ended September 30, 2016⁽¹⁾				Three Months Ended March 31, 2020⁽¹⁾			Three Months Ended March 31, 2019⁽¹⁾
Derivatives:
Net gains on foreign currency contracts	$	(0.9	)	$	(0.3	)	Cost of goods sold
Net losses on interest rate contract	0.6			0.5			Interest expense, net
Net (gains) losses on foreign currency contracts								$	(0.1	)	$	0.6		Cost of goods sold
Reclassification before tax	(0.3		)	0.2				(0.1		)	0.6
	(0.2		)	0.1			Income tax (provision) benefit	—			—			Income tax provision
Reclassification net of tax	$	(0.5	)	$	0.3			$	(0.1	)	$	0.6

Defined benefit pension plans:
Amortization of net actuarial losses	$	3.2		$	2.5		⁽²⁾	$	3.5		$	3.1		Other expense, net⁽²⁾
Amortization of prior service cost	0.3			0.3			⁽²⁾	0.5			0.4			Other expense, net⁽²⁾
Reclassification before tax	3.5			2.8				4.0			3.5
	(0.4		)	(0.4		)	Income tax provision	(0.5		)	(0.5		)	Income tax provision
Reclassification net of tax	$	3.1		$	2.4			$	3.5		$	3.0

Net losses reclassified from accumulated other comprehensive loss	$	2.6		$	2.7			$	3.4		$	3.6

(1) (Gains) losses included within the Condensed Consolidated Statements of Operations for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019, respectively.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost. See Note 14 tofor additional information on the Company’s ~~Condensed Consolidated Financial Statements.~~defined benefit pension plans.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

~~The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for~~

Share Repurchase Program

During the ~~nine~~three months ended ~~September 30, 2017 and 2016 (in millions):~~

Amount Reclassified from Accumulated Other Comprehensive Loss
Affected Line Item within the Condensed Consolidated
Statements of Operations
Details about Accumulated Other Comprehensive Loss Components
Nine months ended September 30, 2017⁽¹⁾

Nine months ended September 30, 2016⁽¹⁾
Derivatives:
Net losses (gains) on foreign currency contracts $ 0.6
$ (0.3 ) Cost of goods sold
Net losses on interest rate contract 1.7
1.4
Interest expense, net
Reclassification before tax 2.3
1.1

(0.3 ) 0.1
Income tax (provision) benefit
Reclassification net of tax $ 2.0
$ 1.2

Defined benefit pension plans:
Amortization of net actuarial losses $ 9.3
$ 7.8
⁽²⁾
Amortization of prior service cost 1.0
0.9
⁽²⁾
Reclassification before tax 10.3
8.7

(1.4 ) (1.2 ) Income tax provision
Reclassification net of tax $ 8.9
$ 7.5

Net losses reclassified from accumulated other comprehensive loss $ 10.9
$ 8.7

~~(1) Losses (gains) included within~~March 31, 2020, the ~~Condensed Consolidated Statements~~Company entered into accelerated share repurchase (“ASR”) agreements with a financial institution to repurchase an aggregate of ~~Operations for~~$55.0 million of shares of its common stock. The Company received approximately 970,141 shares during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 related to the ASR agreements. The specific number of shares the Company ultimately repurchased was determined at the completion of the term of the ASR agreements based on the daily volume-weighted average share price of the Company’s common stock less an agreed upon discount. Upon settlement of the ASR agreements, the Company was entitled to receive additional shares of common stock or, under certain circumstances, was required to remit a settlement amount. All shares received under the ASR agreements were retired upon receipt, and ~~2016.~~

~~(2) These accumulated other comprehensive loss components are included in~~ the ~~computation~~excess of ~~net periodic pension~~the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and ~~postretirement benefit cost. See Note 14 to~~“Retained earnings” within the Company’s Condensed Consolidated ~~Financial Statements.~~Balance Sheets.

~~Share Repurchase Program~~

As of ~~September 30, 2017,~~March 31, 2020, the remaining amount authorized to be repurchased isunder board-approved share repurchase authorizations was approximately ~~$331.4 million. The authorization for $300.0~~$245.0 million, ~~of this amount will expire in December 2019. The remaining amount of $31.4 million authorized~~which has no expiration date.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

13. ACCOUNTS RECEIVABLE SALES AGREEMENTS

The Company has accounts receivable sales agreements that permit the sale, on an ongoing basis, of a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. As of ~~both~~ ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements ~~were~~was approximately ~~$1.1 billion.~~$1.5 billion and $1.6 billion, respectively.

Under the terms of the accounts receivable sales agreements in North America, Europe and Brazil, the Company pays an annual ~~servicing~~ fee related to the servicing of the receivables sold. The Company also pays the respective AGCO Finance entities a subsidized interest payment with respect to the accounts receivable sales agreements, calculated based upon LIBOR plus a margin on any non-interest bearing accounts receivable outstanding and sold under the accounts receivable sales agreements. These fees ~~were~~are reflected within losses on the sales of receivables included within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations. The Company does not service the receivables after the ~~sale occurs~~sales occur and does not maintain any direct retained interest in the receivables. The Company reviewed its accounting for the accounts receivable sales agreements and determined that these facilities should be accounted for as off-balance sheet transactions.

Losses on sales of receivables associated with the accounts receivable ~~financing facilities~~sales agreements discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately ~~$10.3~~$8.1 million and ~~$27.5~~$8.7 million, respectively, during the three ~~and nine~~ months ended September 30, 2017. Losses on sales of receivables associated with the accounts receivable financing facilities discussed above, reflected within “Other expense, net” in the Company’s Condensed Consolidated Statements of Operations, were approximately $4.3 millionMarch 31, 2020 and ~~$13.8 million during the three and nine months ended September 30, 2016, respectively.~~2019.

The Company’s finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to the Company’s dealers. The receivables associated with these arrangements are without recourse to the Company. The Company does not service the receivables after the sale occurs and does not maintain any direct retained interest in the receivables. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, these finance joint ventures had approximately ~~$40.2~~$85.3 million and ~~$41.5~~$104.3 million,, respectively, of outstanding accounts receivable associated with these arrangements. The Company reviewed its accounting for these arrangements and determined that these arrangements should be accounted for as off-balance sheet transactions.

In addition, the Company sells certain trade receivables under factoring arrangements to other financial institutions around the world. The Company reviewed the sale of such receivables and determined that these arrangements should be accounted for as off-balance sheet transactions.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

14. ~~EMPLOYEE~~ PENSION AND POSTRETIREMENT BENEFIT PLANS

Net periodic pension and postretirement benefit cost for the Company’s defined pension and postretirement benefit plans for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 are set forth below (in millions):



	Three Months Ended March 31,
Pension benefits	2020			2019
Service cost	$	4.0		$	3.9
Interest cost	4.1			5.3
Expected return on plan assets	(7.1		)	(7.2		)
Amortization of net actuarial losses	3.4			3.1
Amortization of prior service cost	0.5			0.4
Net periodic pension cost	$	4.9		$	5.5



	Three Months Ended March 31,
Postretirement benefits	2020		2019
Interest cost	$	0.3	$	0.4
Amortization of net actuarial losses	0.1		—
Net periodic postretirement benefit cost	$	0.4	$	0.4

Three Months Ended September 30,
Pension benefits 2017 2016
Service cost $ 4.2
$ 4.1
Interest cost 5.1
6.2
Expected return on plan assets (8.9 ) (9.8 )
Amortization of net actuarial losses 3.2
2.5
Amortization of prior service cost 0.3
0.3
Net periodic pension cost $ 3.9
$ 3.3

Three Months Ended September 30,
Postretirement benefits 2017 2016
Interest cost $ 0.4
$ 0.3
Net periodic postretirement benefit cost $ 0.4
$ 0.3

~~Net~~The components of net periodic pension and postretirement ~~benefit~~benefits cost, ~~for~~other than the service cost component, are included in “Other expense, net” in the Company’s ~~defined pension and postretirement benefit plans for the nine months ended September 30, 2017 and 2016 are set forth below (in millions):~~

Nine Months Ended September 30,
Pension benefits 2017 2016
Service cost $ 12.8
$ 12.3
Interest cost 15.3
19.0
Expected return on plan assets (26.7 ) (30.2 )
Amortization of net actuarial losses 9.3
7.8
Amortization of prior service cost 0.9
0.8
Net periodic pension cost $ 11.6
$ 9.7

Nine Months Ended September 30,
Postretirement benefits 2017 2016
Service cost $ 0.1
$ —
Interest cost 1.2
1.1
Amortization of prior service cost 0.1
0.1
Net periodic postretirement benefit cost $ 1.4
$ 1.2

~~Table of Contents~~

~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements ~~- Continued~~of Operations.

~~(unaudited)~~

The following table summarizes the activity in accumulated other comprehensive loss related to the Company’s defined pension and postretirement benefit plans during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (in millions):



	Before-Tax Amount			Income Tax			After-Tax Amount
Accumulated other comprehensive loss as of December 31, 2019	$	(393.2	)	$	(96.8	)	$	(296.4	)
Amortization of net actuarial losses	3.5			0.5			3.0
Amortization of prior service cost	0.5			—			0.5
Accumulated other comprehensive loss as of March 31, 2020	$	(389.2	)	$	(96.3	)	$	(292.9	)

Before-Tax
Amount

Income
Tax

After-Tax
Amount
Accumulated other comprehensive loss as of December 31, 2016 $ (404.8 ) $ (100.3 ) $ (304.5 )
Amortization of net actuarial losses 9.3
1.4
7.9
Amortization of prior service cost 1.0
—
1.0
Accumulated other comprehensive loss as of September 30, 2017 $ (394.5 ) $ (98.9 ) $ (295.6 )

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, approximately ~~$22.5~~$9.8 million of contributions had been made to the Company’s defined pension benefit plans. The Company currently estimates its minimum contributions for ~~2017~~2020 to its defined pension benefit plans will aggregate approximately ~~$29.1~~$32.5 million.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company made approximately ~~$1.3~~$0.3 million of contributions to its postretirement health care and life insurance benefit plans. The Company currently estimates that it will make approximately ~~$1.5~~$1.6 million of contributions to its postretirement health care and life insurance benefit plans during ~~2017.~~2020.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company categorizes its assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. Estimates of fair value for financial assets and liabilities are based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:

Level 3 - Model-derived valuations in which one or more significant inputs are unobservable.

The Company categorizes its pension plan assets into one of the three levels of the fair value hierarchy.

The Company enters into foreign currency and interest rate swap contracts. The fair values of the Company’s derivative instruments are determined using discounted cash flow valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these discounted cash flow valuation models for derivative instruments include the applicable exchange rates, forward rates or interest rates. Such models used for option contracts also use implied volatility. See Note 11 for ~~a discussion of~~additional information on the Company’s derivative instruments and hedging activities.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

Assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 are summarized below (in millions):



	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Derivative assets	$	—	$	39.3	$	—	$	39.3
Derivative liabilities	—		15.0		—		15.0

As of December 31, 2016
Level 1 Level 2 Level 3 Total
Derivative assets $ —
$ 6.5
$ —
$ 6.5
Derivative liabilities $ —
$ 13.4
$ —
$ 13.4

The carrying amounts of long-term debt under the Company’s ~~1.056%~~ senior term loan ~~credit facility,~~due 2022, 1.002% senior term ~~loans~~loan due ~~2021~~2025 and senior term loans due between ~~2019~~2021 and ~~2026 (Note 6)~~2028 approximate fair value based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. ~~At September 30, 2017 and December 31, 2016, the estimated fair value of~~See Note 5 for additional information on the Company’s 5⁷/8% senior notes (Note 6), based on their listed market values, was approximately $332.4 million and $318.5 million, respectively, compared to its carrying value of $305.6 million and $306.6 million~~, respectively.~~
long-term debt.

~~16. SEGMENT REPORTING~~

Effective January 1, 2017, the Company modified its system of reporting, resulting from changes to its internal management and organizational structure, which changed its reportable segments from North America; South America; Europe/Africa/Middle East; and Asia/Pacific to North America; South America; Europe/Middle East; and Asia/Pacific/Africa. The Asia/Pacific/Africa reportable segment includes the regions of Africa, Asia, Australia and New Zealand, and the Europe/Middle East segment no longer includes certain markets in Africa. Effective January 1, 2017, these reportable segments are reflective of how the Company’s chief operating decision maker reviews operating results for the purposes of allocating resources and assessing performance. Disclosures for both the three and nine months ended September 30, 2017 and 2016, as well as the year ended December 31, 2016, have been adjusted to reflect the change in reportable segments.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

16. SEGMENT REPORTING

The Company’s ~~four~~4 reportable segments distribute a full range of agricultural equipment and related replacement parts. The Company evaluates segment performance primarily based on income from operations. Sales for each segment are based on the location of the third-party customer. The Company’s selling, general and administrative expenses and engineering expenses are generally charged to each segment based on the region and division where the expenses are incurred. As a result, the components of income from operations for one segment may not be comparable to another segment. Segment results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 and assets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 based on the Company’s reportable segments are as follows (in millions):



Three Months Ended March 31,	North America		South America			Europe/Middle East		Asia/Pacific/Africa			Consolidated
2020
Net sales	$	551.9	$	153.9		$	1,113.3	$	109.2		$	1,928.3
Income (loss) from operations	60.9		(8.8		)	102.3		(1.3		)	153.1
Depreciation	15.6		7.4			26.0		2.6			51.6
Capital expenditures	10.1		7.1			41.7		1.7			60.6
2019
Net sales	$	496.2	$	156.1		$	1,210.6	$	132.9		$	1,995.8
Income (loss) from operations	30.6		(8.5		)	127.7		3.4			153.2
Depreciation	15.6		8.5			26.0		2.9			53.0
Capital expenditures	18.3		12.1			29.5		1.0			60.9
Assets
As of March 31, 2020	$	1,241.5	$	659.4		$	2,228.1	$	426.8		$	4,555.8
As of December 31, 2019	1,125.6		758.0			2,187.7		430.2			4,501.5

Three Months Ended September 30, North
America South
America Europe/
Middle East Asia/
Pacific/Africa Consolidated
2017

Net sales $ 483.5
$ 273.5
$ 1,017.7
$ 211.6
$ 1,986.3
Income from operations 27.2
9.0
98.9
15.4
150.5
Depreciation 15.5
8.0
26.7
6.1
56.3
Capital expenditures 12.1
10.9
22.8
1.3
47.1
2016

Net sales $ 453.0
$ 261.8
$ 883.3
$ 163.5
$ 1,761.6
Income from operations 21.1
5.9
75.8
7.1
109.9
Depreciation 14.4
6.2
29.5
5.0
55.1
Capital expenditures 11.3
26.7
22.8
—
60.8

Nine Months Ended September 30,
North
America

South
America

Europe/
Middle East

Asia/
Pacific/Africa
Consolidated
2017

Net sales $ 1,344.9
$ 747.6
$ 3,179.7
$ 506.9
$ 5,779.1
Income from operations 52.7
13.8
336.6
23.2
426.3
Depreciation 45.4
22.7
83.4
13.7
165.2
Capital expenditures 43.2
31.0
59.3
5.9
139.4
2016

Net sales $ 1,360.3
$ 609.4
$ 2,950.4
$ 396.4
$ 5,316.5
Income from operations 44.0
6.3
287.4
8.4
346.1
Depreciation 46.5
16.1
90.7
13.7
167.0
Capital expenditures 31.1
41.1
56.4
4.2
132.8
Assets
As of September 30, 2017 $ 1,083.6
$ 875.9
$ 2,093.4
$ 511.0
$ 4,563.9
As of December 31, 2016 $ 978.5
$ 739.4
$ 1,635.2
$ 426.3
$ 3,779.4

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

A reconciliation from the segment information to the consolidated balances for income from operations and total assets is set forth below (in millions):



	Three Months Ended March 31,
	2020			2019
Segment income from operations	$	153.1		$	153.2
Corporate expenses	(34.4		)	(31.8		)
Amortization of intangibles	(15.0		)	(15.3		)
Stock compensation expense	(2.5		)	(12.0		)
Restructuring expenses	(0.8		)	(1.7		)
Consolidated income from operations	$	100.4		$	92.4



	March 31, 2020		December 31, 2019
Segment assets	$	4,555.8	$	4,501.5
Cash and cash equivalents	386.7		432.8
Investments in affiliates	372.9		380.2
Deferred tax assets, other current and noncurrent assets	647.6		645.2
Intangible assets, net	481.8		501.7
Goodwill	1,260.9		1,298.3
Consolidated total assets	$	7,705.7	$	7,759.7

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Segment income from operations $ 150.5
$ 109.9
$ 426.3
$ 346.1
Corporate expenses (28.3 ) (29.3 ) (86.2 ) (90.3 )
Stock compensation expense (7.9 ) (7.2 ) (29.1 ) (18.0 )
Restructuring expenses (3.0 ) (1.5 ) (8.5 ) (5.5 )
Amortization of intangibles (14.3 ) (12.9 ) (41.5 ) (35.3 )
Consolidated income from operations $ 97.0
$ 59.0
$ 261.0
$ 197.0

September 30, 2017 December 31, 2016
Segment assets $ 4,563.9
$ 3,779.4
Cash and cash equivalents 312.7
429.7
Investments in affiliates 465.5
414.9
Deferred tax assets, other current and noncurrent assets 664.2
560.7
Intangible assets, net 653.4
607.3
Goodwill 1,514.7
1,376.4
Consolidated total assets $ 8,174.4
$ 7,168.4

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

17. COMMITMENTS AND CONTINGENCIES

Off-Balance Sheet Arrangements

Guarantees

The Company maintains a remarketing agreement with its U.S. finance joint venture, AGCO Finance LLC, whereby the Company is obligated to repurchase ~~repossessed inventory at market values. The Company has an agreement with its U.S. finance joint venture, AGCO Finance LLC, which limits the Company’s purchase obligations under this arrangement~~up to $6.0 million ~~in the aggregate per~~of repossessed equipment each calendar year. The Company believes that any losses that might be incurred on the resale of this equipment will not materially impact the Company’s financial position or results of operations, due to the fair value of the underlying equipment.

At ~~September 30, 2017,~~March 31, 2020, the Company has outstanding guarantees of indebtedness owed to third parties of approximately ~~$75.2~~$30.4 million, primarily related to dealer and end-user financing of equipment. Such guarantees generally obligate the Company to repay outstanding finance obligations owed to financial institutions if dealers or end users default on such loans through ~~2021. The Company believes the credit risk associated with these guarantees is not material to its financial position or results of operations.~~2025. Losses under such guarantees historically have been insignificant. In addition, the Company generally would expect to be able to recover a significant portion of the amounts paid under such guarantees from the sale of the underlying financed farm equipment, as the fair value of such equipment is expected to be sufficient to offset a substantial portion of the amounts paid. The Company also has obligations to guarantee indebtedness owed to certain of its finance joint ventures if dealers or end users default on loans. Losses under such guarantees historically have been insignificant and the guarantees are not material. The Company believes the credit risk associated with these guarantees is not material to its financial position or results of operations.

In addition, at March 31, 2020, the Company had accrued approximately $19.9 million of outstanding guarantees of minimum residual value that may be owed to its finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users. The maximum potential amount of future payments under the guarantees is approximately $28.5 million.

Other

At March 31, 2020, the Company had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $2,882.7 million. The outstanding contracts as of March 31, 2020 range in maturity through December 2020 (see Note 11).

The Company sells a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. The Company also sells certain accounts receivable under factoring arrangements to financial institutions around the world. The Company reviewed the sale of such receivables and determined that these facilities should be accounted for as off-balance sheet transactions.

Contingencies

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(unaudited)~~

~~Legal Claims and Other Matters~~

The Environmental Protection Agency of Victoria, Australia has issued the Company’s Australian subsidiary a notice regarding remediation of contamination of a property located in a suburb of Melbourne, Australia. The property was owned and divested by the subsidiary before the subsidiary was acquired by the Company. The Australian subsidiary has applied to the Victorian Supreme Court for judicial review seeking to quash the decision of the Environmental Protection Agency of Victoria and to suspend the remediation notice. At this time, the Company is not able to determine whether the subsidiary might have any liability or the nature and cost of any possible required remediation.

In August 2008, as part of routine audits, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of the Company’s Brazilian operations and the related transfer of certain assets to the Company’s Brazilian subsidiaries. The amount of the tax disallowance through ~~September 30, 2017,~~March 31, 2020, not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately ~~$41.5~~$25.3 million). The amount ultimately in dispute will be significantly greater because of interest and penalties. The Company has been advised by its legal and tax advisors that its position with respect to the deductions is allowable under the tax laws of Brazil. The Company is contesting the disallowance and believes that it is not likely that the assessment, interest or penalties will be required to be paid. However, the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which could take several years.

The Company is a party to various other legal claims and actions incidental to its business. The Company believes that none of these claims or actions, either individually or in the aggregate, isare material to its business or financial statements as a whole, including its results of operations and financial condition.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

18. ~~SUBSEQUENT EVENT~~ REVENUE

Contract Liabilities

Contract liabilities relate to the following: (1) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to extended warranty contracts and where the performance obligation is satisfied over time, (2) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to certain grain storage and protein production systems and where the performance obligation is satisfied over time and (3) unrecognized revenues where advance payment of consideration precedes the Company’s performance with respect to technology services and where the performance obligation is satisfied over time.

Significant changes in the balance of contract liabilities for the three months ended March 31, 2020 and 2019 were as follows (in millions):



	Three Months Ended March 31,
	2020			2019
Balance at beginning of period	$	104.0		$	76.8
Advance consideration received	33.9			25.4
Revenue recognized during the period for extended warranty contracts	(10.1		)	(6.1		)
Revenue recognized during the period related to installation of grain storage and protein production systems	(11.8		)	(11.4		)
Foreign currency translation	(4.4		)	(0.2		)
Balance at March 31	$	111.6		$	84.5

The contract liabilities are classified as either “Other current liabilities” and “Other noncurrent liabilities” or “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheets.

Remaining Performance Obligations

The estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020 are $31.0 million for the remainder of 2020, $31.6 million in 2021, $19.8 million in 2022, $9.9 million in 2023 and $3.7 million thereafter, and relate primarily to extended warranty contracts. The Company applied the practical expedient in ASU 2014-09 and has not disclosed information about remaining performance obligations that have original expected durations of 12 months or less.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Disaggregated Revenue

Net sales for the three months ended March 31, 2020 disaggregated by primary geographical markets and major products consisted of the following (in millions):



	North America		South America		Europe/Middle East⁽¹⁾		Asia/Pacific/Africa⁽¹⁾		Consolidated
Primary geographical markets:
United States	$	467.4	$	—	$	—	$	—	$	467.4
Canada	61.7		—		—		—		61.7
South America	—		151.9		—		—		151.9
Germany	—		—		300.1		—		300.1
France	—		—		214.7		—		214.7
United Kingdom and Ireland	—		—		112.5		—		112.5
Finland and Scandinavia	—		—		132.3		—		132.3
Other Europe	—		—		324.2		—		324.2
Middle East and Algeria	—		—		29.5		—		29.5
Africa	—		—		—		13.4		13.4
Asia	—		—		—		48.0		48.0
Australia and New Zealand	—		—		—		47.8		47.8
Mexico, Central America and Caribbean	22.8		2.0		—		—		24.8
	$	551.9	$	153.9	$	1,113.3	$	109.2	$	1,928.3

Major products:
Tractors	$	168.4	$	75.9	$	770.3	$	46.9	$	1,061.5
Replacement parts	72.2		20.1		200.6		17.3		310.2
Grain storage and protein production systems	96.8		21.9		27.5		29.0		175.2
Other machinery	214.5		36.0		114.8		16.1		381.4
	$	551.9	$	153.9	$	1,113.3	$	109.2	$	1,928.3

(1) Rounding may impact the summation of amounts.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Net sales for the three months ended March 31, 2019 disaggregated by primary geographical markets and major products consisted of the following (in millions):



	North America⁽¹⁾		South America⁽¹⁾		Europe/Middle East⁽¹⁾		Asia/Pacific/Africa⁽¹⁾		Consolidated⁽¹⁾
Primary geographical markets:
United States	$	412.6	$	—	$	—	$	—	$	412.6
Canada	61.2		—		—		—		61.2
South America	—		152.9		—		—		152.9
Germany	—		—		270.3		—		270.3
France	—		—		238.1		—		238.1
United Kingdom and Ireland	—		—		154.3		—		154.3
Finland and Scandinavia	—		—		169.6		—		169.6
Other Europe	—		—		364.2		—		364.2
Middle East and Algeria	—		—		14.1		—		14.1
Africa	—		—		—		20.3		20.3
Asia	—		—		—		59.2		59.2
Australia and New Zealand	—		—		—		53.4		53.4
Mexico, Central America and Caribbean	22.4		3.3		—		—		25.7
	$	496.2	$	156.1	$	1,210.6	$	132.9	$	1,995.8

Major products:
Tractors	$	140.2	$	84.3	$	829.7	$	65.0	$	1,119.2
Replacement parts	61.5		21.9		201.9		16.7		302.0
Grain storage and protein production systems	103.8		19.7		42.5		37.1		203.1
Other machinery	190.8		30.2		136.4		14.0		371.4
	$	496.2	$	156.1	$	1,210.6	$	132.9	$	1,995.8

(1) Rounding may impact the summation of amounts.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

19. LEASES

Total lease assets and liabilities as of March 31, 2020 and December 31, 2019 were as follows (in millions):



Lease Assets	Classification	As of March 31, 2020		As of December 31, 2019
Operating ROU assets	Right-of-use lease assets	$	178.7	$	187.3
Finance lease assets	Property, plant and equipment, net⁽¹⁾	18.1		19.1
Total leased assets		$	196.8	$	206.4

Lease Liabilities	Classification	As of March 31, 2020		As of December 31, 2019
Current:
Operating	Accrued expenses	$	42.7	$	42.3
Finance	Other current liabilities	4.1		4.5

Noncurrent:
Operating	Operating lease liabilities	140.6		148.6
Finance	Other noncurrent liabilities	11.4		12.0
Total leased liabilities		$	198.8	$	207.4

(1) Finance lease assets are recorded net of accumulated depreciation of $14.4 million as of March 31, 2020 and $15.2 million as of December 31, 2019.

Total lease cost for the three months ended March 31, 2020 and 2019 are set forth below (in millions):



	Classification	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease cost	Selling, general and administrative expenses	$	14.3	$	14.3
Variable lease cost	Selling, general and administrative expenses	0.4		0.1
Short-term lease cost	Selling, general and administrative expenses	1.6		2.2
Finance lease cost:
Amortization of leased assets	Depreciation expense⁽¹⁾	1.0		1.3
Interest on leased liabilities	Interest expense, net	0.1		0.1
Total lease cost		$	17.4	$	18.0

(1) Depreciation expense is a component of both cost of sales and selling, general and administrative expenses.

Table of Contents

Notes to Condensed Consolidated Financial Statements - Continued

(unaudited)

Lease payment amounts for operating and finance leases with remaining terms greater than one year as of March 31, 2020 and December 31, 2019 were as follows (in millions):



	March 31, 2020						December 31, 2019
	Operating Leases⁽¹⁾			Finance Leases			Operating Leases⁽¹⁾			Finance Leases
2020	$	36.3		$	3.6		$	48.3		$	4.8
2021	41.9			2.8			40.8			2.7
2022	32.2			1.2			31.5			1.2
2023	24.6			1.0			24.1			0.9
2024	17.0			0.6			16.7			0.6
Thereafter	57.2			8.5			61.6			8.7
Total lease payments	209.2			17.7			223.0			18.9
Less: imputed interest⁽²⁾	(25.9		)	(2.2		)	(32.1		)	(2.4		)
Present value of leased liabilities	$	183.3		$	15.5		$	190.9		$	16.5

(1) Operating lease payments include options to extend or terminate at the Company's sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised.

(2) Calculated for each lease using either the implicit interest rate or the incremental borrowing rate when the implicit interest rate is not readily available.

For leases related to real estate and office equipment, the minimum lease payments include payments for nonlease components.

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate:



	As of March 31, 2020		As of December 31, 2019
Weighted-average remaining lease term:
Operating leases	7 years		7 years
Finance leases	14 years		14 years

Weighted-average discount rate:
Operating leases	3.8	%	4.1	%
Finance leases	2.7	%	2.9	%

The following table summarizes the supplemental cash flow information for the three months ended March 31, 2020 and 2019 (in millions):



	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14.1	$	14.3
Operating cash flows from finance leases	0.1		0.1
Financing cash flows from finance leases	1.1		1.3

Leased assets obtained in exchange for lease obligations:
Operating leases	$	8.4	$	14.0
Finance leases	—		0.2

On October 2, 2017, the Company acquired certain net assets of the forage division of the Lely Group (“Lely”) for approximately €88.7 million (or approximately $104.1 million). Lely, headquartered in Maassluis, Netherlands, is a leading manufacturer of hay and forage equipment in Europe. The acquisition was financed through the Company’s credit facility (Note 6). The Company will allocate the purchase price to the assets acquired and liabilities assumed based on preliminary estimates of their fair values as of the acquisition date. The acquired net assets primarily consisted of accounts receivable, inventories, property, plant and equipment, accounts payable and accrued expenses, goodwill and certain identifiable intangible assets.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Our operations are subject to the cyclical nature of the agricultural industry. Sales of our equipment are affected by, among other things, changes in net cash farm income, farm land values, weather conditions, the demand for agricultural commodities, commodity 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.

The coronavirus (“COVID-19”) pandemic has created significant volatility in the global economy and has led to substantially reduced economic activity, employment disruptions and supply chain constraints and delays. In most areas, our business has been deemed essential, thereby allowing us to maintain operations. However, production has been severely impacted by component availability, particularly during late March and throughout April, which directly impacted net sales levels. The affected plants all resumed production in late April, and all but one of our major production facilities currently are operational. The ability to maintain full-time production remains uncertain for the foreseeable future due to potential supply chain constraints, workforce limitations, safety equipment availability and government restrictions. We are enacting cost saving measures as well as managing our cash flows and capital deployment to respond to the volatile environment.

RESULTS OF OPERATIONS

For the three months ended ~~September 30, 2017,~~March 31, 2020, we generated net income of ~~$60.7~~$64.7 million, or ~~$0.76~~$0.85 per share, compared to ~~net income of $40.0~~$65.1 million, or ~~$0.50~~$0.84 per share, for the same period in ~~2016. For the first nine months of 2017, we generated net income of $142.1 million, or $1.77 per share, compared to net income of $98.1 million, or $1.20 per share, for the same period in 2016.~~2019.

Net sales during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 were ~~$1,986.3~~$1,928.3 million, ~~and $5,779.1 million, respectively,~~ which were approximately ~~12.8% and 8.7% higher~~3.4% lower than the same ~~periods~~period in ~~2016, respectively,~~2019. This decrease was primarily ~~due to~~ the ~~benefit~~result of ~~new acquisitions and~~the negative impact of currency translation. Regionally, net sales, ~~growth~~excluding negative currency translation impacts, were higher in our North America and South America regions, but were offset by declines in net sales in our Europe/Middle East (“EME”) and Asia/Pacific/Africa (“APA”) ~~regions.~~regions due to reduced production volumes caused by the impacts of the COVID-19 pandemic.

Income from operations for the three months ended ~~September 30, 2017~~March 31, 2020 was ~~$97.0~~$100.4 million compared to ~~$59.0~~$92.4 million for the same period in ~~2016. Income from operations was $261.0 million for the nine months ended September 30, 2017 compared to $197.0 million for the same period in 2016.~~2019. The increase ~~in income from operations for the three and nine months~~ was primarily athe result of ~~higher net sales and~~ improved operating ~~margins.~~margins which benefited from a richer sales mix and cost control initiatives, partially offset by the impact of lower production volumes.

Regionally, income from operations in our EME region ~~increased in both~~decreased for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 compared to the same ~~periods~~period in ~~2016.~~2019. The ~~increase~~decrease was primarily due to ~~increased~~lower net sales and production ~~levels as well as a favorable sales mix.~~volumes. In our North American region, income from operations ~~improved~~increased for the three ~~and nine~~ months ended ~~September 30, 2017 as~~March 31, 2020 compared to the same ~~periods~~period in ~~2016.~~2019. The ~~impacts~~increase was primarily due to the benefit of increased net sales and a favorable sales mix. In our South America region, operating losses in the three months ended March 31, 2020 were relatively flat compared to the same period in 2019. These losses reflect low levels of industry demand and company production, as well as the cost impact of newer product technology localized into our Brazilian factories. In our APA region, income from ~~improved factory productivity and expense reduction efforts were partially offset by~~operations decreased for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to lower net sales and production volumes. Income from operations in our South American region also increased in both the three and nine months ended September 30, 2017 compared to the same periods in 2016. The benefits of higher net sales and production volumes were mostly offset by material cost inflation and costs associated with transitioning to new tier 3 emission technology. The operating results in our APA region improved for both the three and nine months ended September 30, 2017 compared to the same periods in 2016 primarily due to higher net sales and production levels.

Industry Market Conditions

~~Harvests over the last four consecutive years~~The COVID-19 pandemic is projected to have minimal impact on global crop production. Most farm operations, which generally have been ~~near record levels~~deemed essential, are operating at normal levels. However, the consumption of grain for food, fuel and livestock feed is being negatively impacted by the economic constraints caused by the pandemic. As a result, grain inventories are ~~satisfying growing global~~expected to increase in 2020, and soft commodity prices trended significantly lower in the first quarter. In addition, protein processing has been severely constrained, which pressures protein producers. Future demand for ~~grain. These higher grain inventories pressure~~agricultural equipment will be influenced by farm income, which is a function of commodity and protein prices, crop yields and ~~generally result in lower farm income. Industry demand for equipment in most global markets remains at historically low levels as a result of these weaker economic conditions.~~government support.

In North America, industry unit retail sales of utility and high horsepower tractors for the first ~~nine~~three months of ~~2017~~2020 decreased by approximately 3%6% compared to the ~~first nine months of 2016.~~same period in 2019. Industry unit retail sales of combines for the first ~~nine~~three months of ~~2017 increased by~~2020 decreased approximately 6%22% compared to the first ~~nine~~three months of ~~2016. Industry retail sales were significantly lower for high horsepower tractors, partially offset by higher retail sales for lower horsepower tractors.~~

In Western Europe, industry unit retail sales of tractors for the first nine months of 2017 decreased by approximately 3% compared to the first nine months of 2016. Industry unit retail sales of combines for the first nine months of 2017 decreased by approximately 9% compared to the first nine months of 2016.2019. Lower commodity prices ~~in the arable farming sector are being partially offset by improving conditions for dairy~~ and ~~livestock producers across the region. Growth in the United Kingdom, Spain and Italy was primarily offset by~~ a ~~decrease in market demand in France.~~

3430

Table of Contents

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

(continued)

cautious farmer sentiment both contributed to weak demand in the large farm sector during the first three months of 2020, compared to the same period in 2019. Retail sales of low horsepower tractors also declined in the first three months of 2020 compared to the prior year period.

In Western Europe, industry unit retail sales of tractors for the first three months of 2020 decreased approximately 4% compared to the same period in 2019. Industry unit retail sales of combines for the first three months of 2020 decreased approximately 17% compared to the first three months of 2019. During the first three months of 2020, industry sales declined across the markets of Spain and Italy, partially offset by growth in Germany compared to the same period in 2019.

In South America, industry unit retail sales of tractors for the first ~~nine~~three months of ~~2017 increased~~2020 decreased approximately ~~20%~~8% compared to the same period in ~~2016.~~2019. Industry unit retail sales of combines for the first ~~nine~~three months of ~~2017 increased by~~2020 decreased approximately ~~18%~~27% compared to the first ~~nine~~three months of ~~2016. Improved industry~~2019. Industry retail sales in Brazil aswere relatively level compared to ~~depressed levels experienced~~the prior year but declined in ~~the first nine months of 2016 as well as more supportive government policies in Argentina contributed to growth in the region.~~most other South American markets.

STATEMENTS OF OPERATIONS

Net sales for the three months ended ~~September 30, 2017~~March 31, 2020 were ~~$1,986.3~~$1,928.3 million compared to ~~$1,761.6~~$1,995.8 million for the same period in 2016. Net sales for the nine months ended September 30, 2017 were $5,779.1 million compared to $5,316.5 million for the same period in 2016. Foreign currency translation positively impacted net sales by approximately $47.6 million, or 2.7%,2019. The following tables set forth, for the three months ended ~~September 30, 2017, and negatively impacted net sales by approximately $6.1 million, or 0.1%, for~~March 31, 2020, the nine months ended September 30, 2017. Recent acquisitions positively impacted net sales by approximately $39.9 million, or 2.3%, for the three months ended September 30, 2017, and by approximately $130.6 million, or 2.5%, for the nine months ended September 30, 2017.

~~The following tables sets forth, for the three and nine months ended September 30, 2017, the impact~~impacts to net sales of currency translation by geographical segment (in millions, except percentages):



	Three Months Ended March 31,				Change					Change Due to Currency Translation
	2020		2019		$			%		$			%
North America		$551.9		$496.2	$	55.7		11.2	%	$	(2.4	)	(0.5	)%
South America	153.9		156.1		(2.2		)	(1.4	)%	(23.8		)	(15.2	)%
Europe/Middle East	1,113.3		1,210.6		(97.3		)	(8.0	)%	(39.8		)	(3.3	)%
Asia/Pacific/Africa	109.2		132.9		(23.7		)	(17.8	)%	(5.9		)	(4.4	)%
	$	1,928.3	$	1,995.8	$	(67.5	)	(3.4	)%	$	(71.9	)	(3.6	)%

Three Months Ended September 30, Change Change Due to Currency Translation Change Due to Acquisitions
2017 2016 $ % $ % $ %
North America $ 483.5
$ 453.0
$ 30.5
6.7 % $ 4.4
1.0 % $ 10.0
2.2 %
South America 273.5
261.8
11.7
4.5 % (0.9 ) (0.3 )% 0.7
0.3 %
Europe/Middle East⁽¹⁾
1,017.7
883.3
134.4
15.2 % 38.4
4.3 % 25.4
2.9 %
Asia/Pacific/Africa⁽¹⁾
211.6
163.5
48.1
29.4 % 5.7
3.5 % 3.8
2.3 %
$ 1,986.3
$ 1,761.6
$ 224.7
12.8 % $ 47.6
2.7 % $ 39.9
2.3 %

Nine Months Ended September 30, Change Change Due to Currency Translation Change Due to Acquisitions
2017 2016 $ % $ % $ %
North America $ 1,344.9
$ 1,360.3
$ (15.4 ) (1.1 )% $ (1.9 ) (0.1 )% $ 19.4
1.4 %
South America 747.6
609.4
138.2
22.7 % 43.4
7.1 % 2.5
0.4 %
Europe/Middle East⁽¹⁾
3,179.7
2,950.4
229.3
7.8 % (49.1 ) (1.7 )% 93.7
3.2 %
Asia/Pacific/Africa⁽¹⁾
506.9
396.4
110.5
27.9 % 1.5
0.4 % 15.0
3.8 %
$ 5,779.1
$ 5,316.5
$ 462.6
8.7 % $ (6.1 ) (0.1 )% $ 130.6
2.5 %

~~(1)Effective January 1, 2017, we realigned our regional structure as reflected above. See Note 16 to our condensed consolidated financial statements for further information.~~

Regionally, net sales in North America increased during the three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. The increase was primarily a result of higher net sales ~~growth~~ of ~~mid-range tractors and~~ high horsepower tractors, ~~partially offset by~~Precision Planting equipment and hay equipment. In our EME region, net sales ~~declines of sprayers and combines. Net sales in North America decreased~~were lower during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in 2016 resulting from softer industry demand and dealer inventory reduction efforts. In the EME region, net sales were higher during the three and nine months ended September 30, 2017 compared to the same periods in 2016.2019. The ~~increase~~decrease was primarily due to lost production caused by the ~~benefit~~impacts from the COVID-19 pandemic and the negative impact of ~~acquisitions and net sales growth throughout Western Europe.~~foreign currency translation. Net sales in South America, excluding the negative impact of foreign currency translation, increased during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 compared to the same ~~periods~~period in ~~2016.~~2019. Net sales ~~growth was~~increased during the ~~most significant~~first quarter of 2020, primarily in ~~Argentina.~~Brazil. In ~~the~~our APA region, net sales ~~increased~~decreased during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 compared to the same ~~periods~~period in ~~2016,~~2019, primarily driven by ~~growth~~sales declines in ~~Australia~~Africa and ~~China.~~ Asia, as well as the negative impact of foreign currency translation.

We estimate worldwide average ~~price increases~~prices were ~~approximately 1.4% and 1.2%~~relatively flat during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 compared to the same prior year ~~periods.~~period. Consolidated net sales of tractors and combines, which comprised approximately ~~58% and 60%~~57% of our net sales for the three ~~and nine months ended~~

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~~(continued)~~

~~September 30, 2017, respectively, increased approximately 13% and 9%, respectively, for the three and nine~~ months ended ~~September 30, 2017~~March 31, 2020, decreased approximately 6% compared to the same ~~periods~~period in ~~2016.~~2019. Unit sales of tractors and combines ~~increased~~decreased approximately ~~5% and 3%, respectively,~~8.7% for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 compared to the same ~~periods~~period in ~~2016.~~2019. 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.

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

(continued)

The following ~~table sets~~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 March 31,
	2020				2019
	$		% of Net Sales⁽¹⁾		$		% of Net Sales⁽¹⁾
Gross profit	$	450.5	23.4	%	$	456.7	22.9	%
Selling, general and administrative expenses	247.6		12.8	%	262.2		13.1	%
Engineering expenses	84.9		4.4	%	84.5		4.2	%
Amortization of intangibles	15.0		0.8	%	15.3		0.8	%
Bad debt expense	1.8		0.1	%	0.6		—	%
Restructuring expenses	0.8		—	%	1.7		0.1	%
Income from operations	$	100.4	5.2	%	$	92.4	4.6	%

Three Months Ended September 30,
2017 2016
$
% of
Net Sales
$
% of
Net Sales⁽¹⁾
Gross profit $ 428.6
21.6 % $ 353.5
20.1 %
Selling, general and administrative expenses 234.3
11.8 % 214.1
12.2 %
Engineering expenses 80.0
4.0 % 66.0
3.7 %
Restructuring expenses 3.0
0.2 % 1.5
0.1 %
Amortization of intangibles 14.3
0.7 % 12.9
0.7 %
Income from operations $ 97.0
4.9 % $ 59.0
3.3 %

Nine Months Ended September 30,
2017 2016
$
% of
Net Sales⁽¹⁾
$ ��
% of
Net Sales
Gross profit $ 1,234.3
21.4 % $ 1,095.2
20.6 %
Selling, general and administrative expenses 693.6
12.0 % 643.1
12.1 %
Engineering expenses 229.7
4.0 % 214.3
4.0 %
Restructuring expenses 8.5
0.1 % 5.5
0.1 %
Amortization of intangibles 41.5
0.7 % 35.3
0.7 %
Income from operations $ 261.0
4.5 % $ 197.0
3.7 %



~~(1)~~									~~Rounding may impact summation of amounts.~~

(1) Rounding may impact the summation of amounts.

Gross profit as a percentage of net sales ~~improved~~increased for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 compared to the same ~~periods~~period in ~~2016 with~~2019. Gross profit margins ~~benefiting~~increased from the benefits of increased pricing, improved material costs and product mix, offset by the impact of ~~pricing, higher~~lower production.

Global production ~~as well as material cost and labor productivity initiatives. Production~~ hours ~~increased~~declined approximately 9% in ~~both Europe~~the first quarter of 2020 compared to the first quarter of 2019. The decrease was primarily due to the suspension of production in our European and South ~~America~~American production sites in ~~response~~late March due to ~~increased demands in those regions~~component supply disruptions caused by the COVID-19 pandemic. These factory closures continued during the ~~nine months ended September 30, 2017, while~~majority of April, resulting in significantly lower production hours ~~decreased~~for the month of April 2020 compared to April 2019, with an 80% estimated reduction in our European factories and a 70% reduction in our South American factories. Preliminary sales for April 2020 were approximately 30% below sales for April 2019. We attribute this primarily to the ~~North American region.~~ closures of our European plants which remained shut down through most of April. We do not believe that this decline in April revenue is indicative of sales for the remainder of our second quarter and year, as the decline appears to have been largely production-driven and not demand-driven. However, the impacts of the COVID-19 pandemic continue to be unpredictable, and a range of factors could impact our future sales, including additional production constraints and changing industry conditions impacted by commodity prices, farmer sentiment and the other factors that we discuss below under “Risk Factors.”

We recorded approximately ~~$0.8 million and $2.4~~$0.1 million of stock compensation expense within cost of goods sold during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020, compared to approximately ~~$0.7~~$0.5 million ~~and $1.6 million, respectively,~~ for the comparable ~~periods~~period in ~~2016, as is more fully explained~~2019. See below and inrefer to Note 43 to our Condensed Consolidated Financial ~~Statements.~~Statements for additional information on stock compensation expense.

Selling, general and administrative expenses (“SG&A ~~expenses and engineering expenses combined,~~expenses”), as a percentage of net sales, ~~declined~~decreased for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 compared to the same ~~periods~~period in ~~2016 primarily~~2019 as a result of ~~increased net sales as well as expense-reduction initiatives.~~the initiation of cost containment initiatives related to the COVID-19 pandemic and lower stock compensation expense compared to the prior year. We recorded approximately ~~$7.9 million and $29.1~~$2.5 million of stock compensation expense within SG&A expenses during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 compared to ~~$7.2 million and $18.0~~$12.0 million during the same ~~periods~~period in ~~2016, respectively, as is more fully explained in~~2019. Refer to Note 43 to our Condensed Consolidated Financial ~~Statements. During~~Statements for additional information. Engineering expenses, as a percentage of net sales, increased slightly for the three months ended March 31, ~~2017, we recorded approximately $4.8 million of accelerated stock compensation expense associated with a stock award declined by our Chief Executive Officer.~~2020 compared to the same period in 2019.

The restructuring expenses of ~~$3.0 million and $8.5~~approximately $0.8 million recorded during the three ~~and nine~~ months ended ~~September 30, 2017, respectively, were~~March 31, 2020 primarily related to severance and ~~other~~ related costs associated with the rationalization of certain manufacturing operations and administrative offices located in ~~Europe, South America and~~ the United ~~States.~~States, Europe and South America. Refer to Note 32 to our Condensed Consolidated Financial Statements for ~~further~~additional information.

Interest expense, net was approximately $3.4 million for the three months ended March 31, 2020 compared to approximately $3.5 million for the comparable period in 2019. See “Liquidity and Capital Resources” for further information on our current liquidity condition.

3632

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Interest expense, net was approximately $11.6 million and $33.6 million for the three and nine months ended September 30, 2017, respectively, compared to approximately $12.1 million and $34.5 million for the comparable periods in 2016.

Other expense, net was approximately ~~$18.4~~$12.5 million for the three months ended ~~September 30, 2017, and other income, net was~~March 31, 2020 compared to approximately ~~$0.2~~$14.6 million for the ~~three months ended September 30, 2016. Other expense, net was approximately $49.1 million and $27.1 million for the nine months ended September 30, 2017 and 2016, respectively.~~comparable period in 2019. 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 ~~$10.3 million and $27.5~~$8.1 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 compared to approximately ~~$4.3 million and $13.8~~$8.7 million for the comparable ~~periods in 2016. In addition, during the three months ended September 30, 2017, other expense, net was a result of foreign exchange losses compared to foreign exchange gains in the same~~ period in ~~2016. The increase in other expense, net during the during the nine months ended September 30, 2017 as compared to the same period in 2016 was a result of higher foreign exchange losses.~~2019.

We recorded an income tax provision of approximately ~~$16.9 million and $64.9~~$29.4 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 compared to ~~$19.5~~approximately $19.4 million ~~and $73.9 million, respectively,~~ for the comparable ~~periods~~period in ~~2016.~~2019. 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 fully reserve against our net deferred tax assets in the United States and certain other foreign jurisdictions. Our effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2017 reflects~~March 31, 2020 include the impact of ~~establishing a~~ valuation ~~allowance during the three months ended June 30, 2016~~allowances against certain of our Brazilian and U.S. net deferred ~~income~~ tax assets asand, accordingly, we ~~have not been recording a~~recorded no tax benefit against ~~losses in that jurisdiction since that period.~~our Brazilian and U.S. losses.

During the three months ended June 30, 2016, we recorded a non-cash deferred tax adjustment of approximately $31.6 million to establish a valuation allowance against our U.S. net deferred income tax assets for previous periods. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We assessed the likelihood that our deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies and determined that the adjustment to the valuation allowance at June 30, 2016 was appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. As of September 30, 2017, we believe it is more likely than not that we will realize our remaining deferred tax assets, net of the valuation allowance, in future years.

Equity in net earnings of affiliates, which is primarily comprised of income from our ~~finance~~AGCO Finance joint ventures, was approximately ~~$10.7 million and $30.8~~$11.2 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 compared to approximately ~~$11.8 million and $37.5~~$10.8 million for the comparable ~~periods~~period in ~~2016. The decrease for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 was~~2019, primarily due to ~~lower~~higher net earnings from ~~certain finance~~our AGCO Finance joint ~~ventures and other affiliates.~~ventures. Refer to “Finance Joint Ventures” for further information regarding our finance joint ventures and their results of operations.

~~Table of Contents~~

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

~~(continued)~~

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~~us and by a ~~wholly owned~~wholly-owned subsidiary of ~~Rabobank, a financial institution based in the Netherlands.~~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 joint ventures, primarily through lines of credit. We do not guarantee the debt obligations of the joint ventures. As of ~~September 30, 2017~~,March 31, 2020, our capital investment in the finance joint ventures, which is included in “Investment in affiliates” on our Condensed Consolidated Balance Sheets, was approximately ~~$430.1~~$330.5 million compared to ~~$380.8~~$339.0 million as of December 31, ~~2016.~~2019. The total finance portfolio in our finance joint ventures was approximately ~~$8.6~~$9.2 billion and ~~$8.0~~$9.6 billion as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~,2019, respectively. The total finance portfolio as of ~~September 30, 2017~~March 31, 2020 included approximately ~~$7.3~~$7.5 billion of retail receivables and ~~$1.3~~$1.7 billion of wholesale receivables from ~~AGCO~~our dealers. The total finance portfolio as of December 31, ~~2016~~2019 included approximately ~~$6.7~~$7.7 billion of retail receivables and ~~$1.3~~$1.9 billion of wholesale receivables from ~~AGCO~~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 2020, we made a total of approximately $1.9 million of additional investments in our finance joint venture in the Netherlands. For the ~~nine~~three months ended ~~September 30, 2017~~,March 31, 2020, 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 ~~$30.7~~approximately $11.3 million compared to ~~$36.8~~approximately $10.1 million for the same period in ~~2016~~.2019.

LIQUIDITY AND CAPITAL RESOURCES

Our financing requirements 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 ~~facility~~facilities and accounts receivable sales agreement facilities. We believe that the following facilities, ~~discussed below,~~ together with 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, 2017
1.056% Senior term loan due 2020 $ 235.9
Credit facility, expiring 2020 587.4
Senior term loans due 2021 353.9
5⁷/8% Senior notes due 2021
305.6
Senior term loans due between 2019 and 2026 442.4
Other long-term debt 137.5
Debt issuance costs (4.5 )
$ 2,058.2



	March 31, 2020
1.002% Senior term loan due 2025	$	273.9
Senior term loan due 2022	164.3
Credit facility, expires 2023	504.0
Senior term loans due between 2021 and 2028	719.9
Other long-term debt	11.3

~~While~~On April 9, 2020, we entered into an amendment to our $800.0 million multi-currency revolving credit facility to include incremental term loans (“2020 term loans”) that allow us to borrow an aggregate principal amount of €235.0 million and $267.5 million, respectively (or an aggregate of approximately $524.4 million as of April 9, 2020). Amounts can be drawn

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

(continued)

incrementally at any time prior to maturity, but must be drawn down proportionately. Amounts drawn must be in a minimum principal amount of $100.0 million and integral multiples of $50.0 million in excess thereof. Once amounts have been repaid, those amounts are not permitted to be re-drawn. The maturity date of the 2020 term loans is April 8, 2022. Interest accrues on amounts outstanding under the 2020 term loans, at our option, at either (1) LIBOR plus a margin based on our credit rating ranging from 1.125% to 2.125% until April 8, 2021 and ranging from 1.375% to 2.375% thereafter, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0%, plus a margin based on our credit rating ranging from 0.125% to 1.375% until April 8, 2021 and ranging from 0.375% to 1.375% thereafter. On April 15, 2020, we borrowed €117.5 million and $133.8 million (or an aggregate of approximately $261.5 million) of 2020 term loans. We simultaneously repaid €100.0 million (or approximately $108.7 million) of our revolving credit facility from the borrowings received. Refer to Note 5 to the Condensed Consolidated Financial Statements for additional information regarding our current facilities.

In December 2018, we entered into a term loan agreement with the European Investment Bank (“EIB”), which provided us with the ability to borrow up to €250.0 million. The €250.0 million (or approximately $273.9 million as of March 31, 2020) of funding was received on January 25, 2019 with a maturity date of January 24, 2025. We are permitted to prepay the term loan before its maturity date. Interest is payable on the term loan at 1.002% per annum, payable semi-annually in arrears.

In October 2018, we entered into a term loan agreement with Rabobank in the amount of €150.0 million (or approximately $164.3 million as of March 31, 2020). We are permitted to prepay the term loan before its maturity date on October 28, 2022. Interest is payable on the term loan quarterly in arrears at an annual rate, equal to the EURIBOR plus a margin ranging from 0.875% to 1.875% based on our credit rating.

In October 2018, we entered into a multi-currency revolving credit facility of $800.0 million. The maturity date of the credit facility is October 17, 2023. Interest accrues on amounts outstanding under the credit facility, at our option, at either (1) LIBOR plus a margin ranging from 0.875% to 1.875% based on our credit rating, or (2) the base rate, which is equal to the higher of (i) the administrative agent’s base lending rate for the applicable currency, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR for loans denominated in U.S. dollars plus 1.0%, plus a margin ranging from 0.0% to 0.875% based on our credit rating. As of March 31, 2020, we had approximately $504.0 million of outstanding borrowings under the credit facility and the ability to borrow approximately $296.0 million under the facility.

In October 2016, we borrowed an aggregate amount of €375.0 million through a group of seven related term loan agreements. These agreements had maturities ranging from October 2019 to October 2026. In October 2019, we repaid an aggregate amount of €56.0 million (or approximately $61.1 million) of these term loans. In August 2018, we borrowed an additional aggregate amount of indebtedness of €338.0 million through a group of another seven related term loan agreements. Proceeds from the borrowings were used to repay borrowings under our former revolving credit facility. The provisions of the term loan agreements are identical in nature with the exception of interest rate terms and maturities. In aggregate, as of March 31, 2020 we have indebtedness of approximately €657.0 million (or approximately $719.9 million) under a total group of twelve term loan agreements with remaining maturities ranging from August 2021 to August 2028.

As of March 31, 2020 and December 31, 2019, we had short-term borrowings due within one year of approximately $166.2 million and $150.5 million, respectively.

Interest on U.S. dollar borrowings under our credit facility and the 2020 term loans is calculated based upon LIBOR. In the event that LIBOR is no longer published, interest will be calculated based upon a base rate. The credit facility and 2020 term loans also provide for an expedited amendment process once a replacement for LIBOR is established.

We are in compliance with the financial covenants contained in these facilities and ~~currently~~ expect to continue to maintain such ~~compliance, should~~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~~

Our total liquidity as of March 31, 2020 was approximately $682.7 million, consisting of cash of approximately $386.7 million and available borrowing capacity of approximately $296.0 million. The addition of the new term loan facility on April 9, 2020 increased our liquidity position by approximately $524.4 million. Our liquidity position is expected to ~~Note 6~~decrease during the second quarter of 2020 due to seasonal requirements and the ~~Condensed Consolidated~~impact of factory shutdowns. Our total liquidity as of April 30, 2020 was approximately $967.8 million, consisting of cash of approximately $406.0 million and available borrowing

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Management’s Discussion and Analysis of Financial ~~Statements for further information regarding~~Condition and Results of Operations

(continued)

capacity under our ~~current facilities.~~2020 term loans and revolving credit facility of approximately $561.8 million. We are confident that we have sufficient available liquidity provided the length and severity of the pandemic on our operations is not more significant than currently estimated. While we currently expect to maintain the payment of our quarterly dividend, we have suspended future share repurchases until business visibility improves.

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. The sales of all receivables are without recourse to us. We do not service the receivables after the ~~sale occurs,~~sales occur, and we do not maintain any direct retained interest in the receivables. These agreements are accounted for as off-balance sheet transactions and have the effect of reducing accounts receivable and short-term liabilities by the same amount. As of ~~both September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements ~~were~~was approximately ~~$1.1 billion.~~$1.5 billion and $1.6 billion, 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, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, these finance joint ventures had approximately ~~$40.2~~$85.3 million and ~~$41.5~~$104.3 million, respectively, of outstanding accounts receivable associated with these arrangements. These arrangements are accounted for as off-balance sheet transactions. In

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

~~(continued)~~

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.

Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness and stockholders’ equity, was 39.4% and 30.4% at March 31, 2020 and December 31, 2019, respectively.

Cash Flows

Cash flows used in operating activities were approximately ~~$29.2~~$435.3 million for the first ~~nine~~three months of ~~2017~~2020 compared to approximately ~~$127.4~~$329.9 million for the ~~first nine~~same period in 2019. Our normal seasonal requirements for working capital, as well as the impacts of factory shutdowns, production cuts and supply chain constraints resulted in negative cash flow from operations during the three months ~~of 2016.~~ ended March 31, 2020.

Our working capital requirements are seasonal, with investments in working capital typically building in the first half of the year and then reducing in the second half of the year. We had ~~$1,291.4~~$1,247.9 million in working capital at ~~September 30, 2017~~March 31, 2020 as compared to ~~$1,020.8~~$844.6 million at December 31, ~~2016~~2019 and ~~$1,271.1~~$906.6 million at ~~September 30, 2016.~~March 31, 2019. Accounts receivable and inventories, combined, at ~~September 30, 2017~~March 31, 2020 were ~~$707.4~~$133.3 million higher and ~~$275.8~~$223.6 million ~~higher~~lower than at December 31, ~~2016~~2019 and ~~September 30, 2016,~~March 31, 2019, respectively. ~~The increase in accounts~~Accounts receivable and inventories, ~~as of September 30, 2017 compared to September 30, 2016 was~~combined, at March 31, 2020 were lower than March 31, 2019 primarily due to ~~foreign exchange and acquisition impacts, as well as higher seasonal inventory requirements primarily in the South American and EME regions.~~

negative currency translation.

Capital expenditures for the first ~~nine~~three months of ~~2017~~2020 were ~~$139.4~~$60.6 million compared to ~~$132.8~~$60.9 million for the same period ~~of 2016. We anticipate that capital~~in 2019. Capital expenditures for the full year of ~~2017 will be approximately $200.0 million to $225.0 million and~~2020 will be used primarily to support the development and enhancement of new and existing products, upgrade our system capabilities and improve our factory productivity.

~~Our debt~~Share Repurchase Program

During the three months ended March 31, 2020, we entered into accelerated share repurchase (“ASR”) agreements with a financial institution to ~~capitalization ratio, which is total indebtedness divided by~~repurchase an aggregate of $55.0 million of shares of our common stock. We received approximately 970,141 shares during the ~~sum~~three months ended March 31, 2020 related to the ASR agreements. The specific number of ~~total indebtedness~~shares we ultimately repurchased was determined at the completion of the term of the ASR agreements based on the daily volume-weighted average share price of our common stock less an agreed upon discount. Upon settlement of the ASR agreements, we were entitled to receive additional shares of common stock or, under certain circumstances, were required to remit a settlement amount. All shares received under the ASR agreements were retired upon receipt, and ~~stockholders’ equity,~~the excess of the purchase price over par value per share was ~~40.0%~~recorded to a combination of “Additional paid-in capital” and ~~37.5% at September 30, 2017 and December 31, 2016, respectively.~~“Retained earnings” within our Condensed Consolidated Balance Sheets. We have suspended future share repurchases until business visibility improves.

Table of Contents

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

(continued)

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”~~off-balance sheet arrangements. At ~~September 30, 2017,~~March 31, 2020, we ~~have outstanding guarantees of~~guaranteed indebtedness owed to third parties of approximately ~~$75.2~~$30.4 million, primarily related to dealer and end-user financing of equipment. In addition, we had accrued approximately $19.9 million of outstanding guarantees of minimum residual value 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. The maximum potential amount of future payments under the guarantee is approximately $28.5 million. 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, 2017,~~March 31, 2020, we had outstanding designated and non-designated foreign currency contracts with a gross notional amount of approximately ~~$1,499.0 million.~~$2.9 billion. 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 11, 13 and 17 to our Condensed Consolidated Financial Statements, for further discussion of these matters.

Contingencies

The Environmental Protection Agency (“EPA”) of Victoria, Australia has issued our Australian subsidiary a notice to our subsidiary regarding remediation of contamination of a property located in a suburb of Melbourne, Australia. Our Australian subsidiary has applied to the Victoria Supreme court for judicial review seeking to quash the decision of the EPA of Victoria and to suspend the notice.

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 17 to our Condensed Consolidated Financial Statements for further discussion of ~~these matters.~~this matter.

OUTLOOK

~~Industry demand for farm equipment~~The COVID-19 pandemic is expected to ~~remain relatively flat in Europe, weaken in North America, but strengthen in South America,~~continue to negatively impact our sales and production levels. The factory closures during April 2020 will have a significant negative impact to our second quarter sales and earnings. In addition, a considerable amount of uncertainty exists for the ~~full year~~balance of ~~2017 compared~~2020 relating to ~~2016.~~industry demand, production constraints and other impacts of the COVID-19 pandemic. Our ~~net sales~~focus is on employee safety, serving customers and operating as effectively as possible under these challenging conditions. Refer to “Risk Factors” in ~~2017 are expected to increase compared to 2016, primarily due to~~Item 1A of Part II of this Form 10-Q for further discussion of the impact of pricing, acquisition-related sales and improved net sales volumes. Income from operations and net income are expected to be above 2016 levels due to higher net sales as well as margin improvements.COVID-19 pandemic.

~~Table of Contents~~

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

~~(continued)~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. 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 ~~reserves, goodwill~~discount and ~~intangible assets,~~sales incentive allowances, deferred income taxes ~~pension~~ and uncertain income tax positions, pensions, goodwill, other ~~postretirement benefit obligations, derivative financial instruments~~intangible and ~~contingencies.~~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. Actual results may differ from these estimates under different assumptions or conditions. A description of critical accounting policies and related judgments and estimates that affect the preparation of our Condensed Consolidated Financial Statements is set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2019.

FORWARD-LOOKING STATEMENTS

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, availability of financing, product development and enhancement, factory productivity, production and sales volumes, benefits from cost reduction initiatives, 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.

Table of Contents

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

(continued)

These forward-looking statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed in or implied by the forward-looking statements. Adverse changes in any of the following factors could cause actual results to differ materially from the forward-looking statements:

general economic and capital market conditions;

availability of credit to our retail customers;

the worldwide demand for agricultural products;

grain stock levels and the levels of new and used field inventories;

• cost of steel and other raw materials;

• energy costs;

• performance and collectability of the accounts receivable originated or owned by AGCO or AGCO Finance;

government policies and subsidies;

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

recent suspension of agricultural products into China and the impact to global agricultural equipment demand, if any;

weather conditions;

interest and foreign currency exchange rates;

pricing and product actions taken by competitors;

commodity prices, acreage planted and crop yields;

farm income, land values, debt levels and access to credit;

pervasive livestock diseases;

production disruptions;

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

~~Table of Contents~~

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

~~(continued)~~

integration of recent and future acquisitions;

our expansion plans in emerging markets;

supply constraints;

our cost reduction and control initiatives;

our research and development efforts;

dealer and distributor actions;

regulations affecting privacy and data protection; and

technological ~~difficulties; and~~difficulties.

~~political and economic uncertainty in various areas of the world.~~

Any forward-looking statement should be considered in light of such important factors. For additional factors and additional information regarding these factors, ~~please~~ see “Risk Factors” in Item 1A of Part II of this Form 10-Q and “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2019.

We have joint ventures in the Netherlands and Russia with an entity that currently is operating under a time-limited general license from the U.S. Department of the Treasury authorizing the maintenance or wind down of operations and existing contracts. In the event that the license expires without further relief being granted or without other authorization from the U.S. Department of the Treasury, we may no longer be able to continue the joint ventures’ commercial operations and we would be required to assess the fair value of certain assets related to the joint ventures for potential impairment.

Table of Contents

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

(continued)

New factors that could cause actual results to differ materially from those described above emerge from time to time, and it is not possible for us to predict all of such factors or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and we disclaim any obligation to update the information contained in such statement to reflect subsequent developments or information except as required by law.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk Management

For quantitative and qualitative disclosures about market risks, see “Quantitative and Qualitative Disclosures About Market Risks” in Item 7A of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. As of the ~~third~~first quarter of ~~2017,~~2020, there has been no material change in our exposure to market risks.


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of ~~September 30, 2017~~,March 31, 2020, have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that the Company’s disclosure controls or the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. We will conduct periodic evaluations of our internal controls to enhance, where necessary, our procedures and controls.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the three months ended ~~September 30, 2017~~March 31, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

We are a party to various other legal claims and actions incidental to our business. These items are more fully discussed in Note 17 to our Condensed Consolidated Financial Statements.


ITEM 1A.	RISK FACTORS

The following disclosure supplements and updates the discussion of certain risks and uncertainties previously disclosed in Part 1, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our business or financial results. Additional risks and uncertainties that are not presently known to us or that we currently deem immaterial may also impact our business, financial condition or financial results.

Our business will be adversely impacted if the COVID-19 pandemic spreads widely or otherwise impacts our manufacturing and supply chain or demand for our products

The COVID-19 pandemic has had, and we expect will continue to have, negative impacts on our business, and further impacts will depend on future developments, which are highly uncertain and unpredictable. The COVID-19 pandemic has created significant volatility in the global economy and has led to substantially reduced economic activity, employment disruptions, supply chain constraints and delays, and declines in consumer demand. Measures taken by governments around the world, as well as businesses, including us and the general public in order to limit the spread of COVID-19, will continue to negatively impact our business and overall financial condition, including but not limited to the following:

Our industry may experience a further decline in global market demand, thus reducing net sales of our products.

The COVID-19 pandemic is projected to have minimal impact on global crop production. Most farm operations, which generally have been deemed essential, are working to relatively normal levels. However, the consumption of grain for food, fuel (including ethanol) and livestock feed is being negatively impacted by economic constraints caused by the pandemic. As a result, grain inventories are expected to increase in 2020, and soft commodity prices are trending significantly lower. In addition, protein processing has been severely constrained, which pressure protein producers. Future market demand for agricultural equipment will be influenced by farm income, which is a function of commodity and protein prices, crop yields and government support, and the decrease in market demand because of these factors influencing the buying decisions of the farmer could negatively impact our results of operations and overall financial condition.

Deteriorating economic and political conditions, such as increased unemployment, economic slowdown or recessions, could cause further decrease in sales of our products.

We may experience adverse fluctuations in foreign currency rates, particularly an increase in the value of the U.S. dollar against key market foreign currencies, which could negatively impact our sales.

Governmental guidance, directives or regulations around the world could result in factory shutdowns and reduced production related to factory shutdowns or higher absentee rates.

Our factories are dependent upon parts and components manufactured by others, and to the extent that our suppliers are impacted by the COVID-19 pandemic, it will reduce the availability, or result in delays, of parts and supply components to us, which in turn could interrupt our ability to produce and sell completed products.

Freight channels may be disrupted due to additional safety requirements imposed by port authorities and/or capacity constraints experienced by our freight carriers.

Declines in equity markets and the valuation of assets may negatively affect our pension plan assets, and if this continues, we may incur increased pension expenses and funding requirements related to the fair value of our pension plan assets.

Although we currently believe we have sufficient liquidity to support our business, and we have not experienced a significant increase in borrowing costs, the severity and length of the COVID-19 pandemic could have significant negative impacts to our financial condition.

While we have limited travel by our employees and have taken measures to ensure the health and safety of our employees at our factories, these measures may not be sufficient to prevent adverse effects of the COVID-19 pandemic.

While we have initiated several cost-saving and capital deployment measures and strategies to monitor and manage our cash flows and operating expenses, these measures may not be sufficient to prevent adverse effects of the COVID-19 pandemic.

We may be required to record significant impairment charges with respect to certain noncurrent assets such as goodwill and other intangible assets and equity method investments, whose fair values may be negatively affected by the COVID-19 pandemic. We also may be required to write-down obsolete inventory due to decreased sales.

If economic conditions continue to deteriorate, we may experience slower collections and larger write-offs of accounts receivable. In addition, our finance joint ventures also may experience slower collections and greater write-offs of accounts receivable, which would result in reduced earnings, if not losses, for us from our investments in the retail joint ventures.

Government authorities in the U.S. and throughout the world may increase or impose new income or indirect taxes, or revise interpretations of existing tax regulations, as a means of financing the costs of stimulus and other measures taken, or that might be enacted and taken in the future, to protect populations and economies from the impact of the COVID-19 pandemic. Such actions could have a negative impact on our results of operations.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The table below sets forth information with respect to purchases of our common stock made by or on behalf of us during the three months ended March 31, 2020:



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)⁽¹⁾
January 1, 2020 through January 31, 2020	—	$	—	—	$	300.0
February 1, 2020 through February 29, 2020	297,000	$	63.15	297,000	$	275.0
March 1, 2020 through March 31, 2020	673,141	$	53.84	673,141	$	245.0
Total⁽²⁾	970,141	$	56.69	970,141	$	245.0

⁽¹⁾ The remaining authorized amount to be repurchased is $245.0 million, which has no expiration date.

⁽²⁾ Refer to Note 12 to our Condensed Consolidated Financial Statements for additional information on our share repurchase program.


ITEM 6.	EXHIBITS

(The Company is not filing, under Item 4, instruments defining the rights of holders of long-term debt where the debt does not exceed 10% of the Company’s total assets. The Company agrees to furnish copies of those instruments to the Commission upon request.)



Exhibit Number	Description of Exhibit	The filings referenced for incorporation by reference are AGCO Corporation

~~10.1~~31.1	~~Letter Agreement for Far East Markets, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited~~Certification of Martin Richenhagen	~~July 27, 2017, Form 8-K, Exhibit 10.1~~Filed herewith

~~10.2~~31.2	~~Letter Agreement for Mexico, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited~~Certification of Andrew H. Beck	~~July 27, 2017, Form 8-K, Exhibit 10.2~~Filed herewith

~~10.3~~32.1	~~Letter Agreement for Australia/New Zealand, dated July 24, 2017, between AGCO International GmbH~~Certification of Martin Richenhagen and ~~Tractors and Farm Equipment Limited~~Andrew H. Beck	~~July 27, 2017, Form 8-K, Exhibit 10.3~~Furnished herewith

~~10.4~~ 101	~~Amendment~~The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, are formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to ~~the Letter Agreement for Africa, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited~~	~~July 27, 2017, Form 8-K, Exhibit 10.4~~

~~10.5~~	~~2006 Long-Term Incentive Plan~~Condensed Consolidated Financial Statements	Filed herewith

~~31.1~~ 104	~~Certification of Martin Richenhagen~~	~~Filed herewith~~

~~31.2~~	~~Certification of Andrew H. Beck~~	~~Filed herewith~~

~~32.1~~	~~Certification of Martin Richenhagen and Andrew H. Beck~~	~~Furnished herewith~~

~~101.INS~~	Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 is formatted in Inline XBRL ~~Instance Document~~	~~Filed herewith~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema~~	~~Filed herewith~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase~~	~~Filed herewith~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase~~	~~Filed herewith~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase~~	~~Filed herewith~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase~~	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




Date:	~~November~~May 8, ~~2017~~2020	AGCO CORPORATION Registrant /s/ Andrew H. Beck
		Andrew H. Beck Senior Vice President and Chief Financial Officer (Principal Financial Officer)

		/s/ Lara T. Long
		Lara T. Long Vice President, Chief Accounting Officer (Principal Accounting Officer)

4442



	Three Months Ended September 30,
	2017			2016
Net sales	$	1,986.3		$	1,761.6
Cost of goods sold	1,557.7			1,408.1
Gross profit	428.6			353.5
Selling, general and administrative expenses	234.3			214.1
Engineering expenses	80.0			66.0
Restructuring expenses	3.0			1.5
Amortization of intangibles	14.3			12.9
Income from operations	97.0			59.0
Interest expense, net	11.6			12.1
Other expense (income), net	18.4			(0.2		)
Income before income taxes and equity in net earnings of affiliates	67.0			47.1
Income tax provision	16.9			19.5
Income before equity in net earnings of affiliates	50.1			27.6
Equity in net earnings of affiliates	10.7			11.8
Net income	60.8			39.4
Net (income) loss attributable to noncontrolling interests	(0.1		)	0.6
Net income attributable to AGCO Corporation and subsidiaries	$	60.7		$	40.0
Net income per common share attributable to AGCO Corporation and subsidiaries:
Basic	$	0.76		$	0.50
Diluted	$	0.76		$	0.50
Cash dividends declared and paid per common share	$	0.14		$	0.13
Weighted average number of common and common equivalent shares outstanding:
Basic	79.5			80.7
Diluted	80.2			80.8



Current assets	$	52.8
Property, plant and equipment	20.7
Intangible assets	64.4
Goodwill	64.3
Total assets acquired	202.2

Current liabilities	12.2
Total liabilities assumed	12.2
Net assets acquired	$	190.0



Intangible Asset	Amount		Weighted-Average Useful Life
Customer relationships	$	21.4	14	years
Technology	25.1		10	years
Trademarks	17.9		20	years
	$	64.4



	Trademarks and Tradenames		Customer Relationships		Patents and Technology		Land Use Rights		Total
Gross carrying amounts:
Balance as of December 31, 2016	$	179.2	$	558.0	$	122.1	$	8.5	$	867.8
Acquisition	17.9		21.4		25.1		—		64.4
Foreign currency translation	8.3		16.7		8.6		0.4		34.0
Balance as of September 30, 2017	$	205.4	$	596.1	$	155.8	$	8.9	$	966.2



	North America		South America		Europe/Middle East		Asia/ Pacific/Africa		Consolidated
Balance as of December 31, 2016	$	543.9	$	138.8	$	581.9	$	111.8	$	1,376.4
Acquisition	64.3		—		—		—		64.3
Foreign currency translation	—		3.7		61.8		8.5		74.0
Balance as of September 30, 2017	$	608.2	$	142.5	$	643.7	$	120.3	$	1,514.7



	September 30, 2017			December 31, 2016
1.056% Senior term loan due 2020	$	235.9		$	211.0
Credit facility, expiring 2020	587.4			329.2
Senior term loans due 2021	353.9			316.5
5⁷/8% Senior notes due 2021	305.6			306.6
Senior term loans due between 2019 and 2026	442.4			395.6
Other long-term debt	137.5			141.6
Debt issuance costs	(4.5		)	(5.1		)
	2,058.2			1,695.4
Less: Current portion of other long-term debt	(107.9		)	(85.4		)
Total indebtedness, less current portion	$	1,950.3		$	1,610.0



Maturity Date	Floating or Fixed Interest Rate	Interest Rate	Interest Payment	Term Loan Amount
October 19, 2019	Floating	EURIBOR + 0.75%	Semi-Annually	€	1.0
October 19, 2019	Fixed	0.75%	Annually	55.0
October 19, 2021	Floating	EURIBOR + 1.00%	Semi-Annually	25.5
October 19, 2021	Fixed	1.00%	Annually	166.5
October 19, 2023	Floating	EURIBOR + 1.25%	Semi-Annually	1.0
October 19, 2023	Fixed	1.33%	Annually	73.5
October 19, 2026	Fixed	1.98%	Annually	52.5
				€	375.0



	Before-Tax Amount			Income Tax			After-Tax Amount
Accumulated derivative net losses as of December 31, 2016	$	(10.1	)	$	(1.4	)	$	(8.7	)
Net changes in fair value of derivatives	2.2			(0.1		)	2.3
Net losses reclassified from accumulated other comprehensive loss into income	2.3			0.3			2.0
Accumulated derivative net losses as of September 30, 2017	$	(5.6	)	$	(1.2	)	$	(4.4	)



		For the Three Months Ended				For the Nine Months Ended
	Classification of Gain	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Foreign currency contracts	Other expense, net	$	13.9	$	—	$	35.8	$	14.3


	Asset Derivatives as of September 30, 2017			Liability Derivatives as of September 30, 2017			Asset Derivatives as of March 31, 2020			Liability Derivatives as of March 31, 2020
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments designated as hedging instruments:
Foreign currency contracts	Other current assets	$	1.4	Other current liabilities	$	1.7	Other current assets	$	10.2	Other current liabilities	$	0.1
Interest rate contract	Other noncurrent assets	—		Other noncurrent liabilities	5.3
Cross currency swap contract							Other noncurrent assets	34.3		Other noncurrent liabilities	—
Derivative instruments not designated as hedging instruments:
Foreign currency contracts	Other current assets	5.1		Other current liabilities	4.1		Other current assets	44.1		Other current liabilities	19.6
Total derivative instruments		$	6.5		$	11.1		$	88.6		$	19.7



	Asset Derivatives as of December 31, 2016			Liability Derivatives as of December 31, 2016
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments designated as hedging instruments:
Foreign currency contracts	Other current assets	$	0.2	Other current liabilities	$	3.8
Interest rate contract	Other noncurrent assets	—		Other noncurrent liabilities	6.4
Derivative instruments not designated as hedging instruments:
Foreign currency contracts	Other current assets	6.3		Other current liabilities	3.2
Total derivative instruments		$	6.5		$	13.4



	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests		Total Stockholders’ Equity
Balance, December 31, 2016	$	0.8	$	103.3		$	4,113.6		$	(1,441.6	)	$	61.1	$	2,837.2
Stock compensation	—		33.0			—			—			—		33.0
Issuance of stock awards	—		(2.2		)	—			—			—		(2.2		)
SSARs exercised	—		(4.3		)	—			—			—		(4.3		)
Comprehensive income:
Net income	—		—			142.1			—			2.1		144.2
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments	—		—			—			105.4			1.1		106.5
Defined benefit pension plans, net of tax	—		—			—			8.9			—		8.9
Unrealized gain on derivatives, net of tax	—		—			—			4.3			—		4.3
Payment of dividends to stockholders	—		—			(33.4		)	—			—		(33.4		)
Investments by noncontrolling interest	—		—			—			—			0.5		0.5
Adjustment related to the adoption of ASU 2016-09	—		—			(1.7		)	—			—		(1.7		)
Balance, September 30, 2017	$	0.8	$	129.8		$	4,220.6		$	(1,323.0	)	$	64.8	$	3,093.0



	Defined Benefit Pension Plans			Deferred Net (Losses) Gains on Derivatives			Cumulative Translation Adjustment			Total
Accumulated other comprehensive loss, December 31, 2016	$	(304.5	)	$	(8.7	)	$	(1,128.4	)	$	(1,441.6	)
Other comprehensive income before reclassifications	—			2.3			105.4			107.7
Net losses reclassified from accumulated other comprehensive loss	8.9			2.0			—			10.9
Other comprehensive income, net of reclassification adjustments	8.9			4.3			105.4			118.6
Accumulated other comprehensive loss, September 30, 2017	$	(295.6	)	$	(4.4	)	$	(1,023.0	)	$	(1,323.0	)


	As of September 30, 2017								As of March 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Derivative assets	$	—	$	6.5	$	—	$	6.5	$	—	$	88.6	$	—	$	88.6
Derivative liabilities	$	—	$	11.1	$	—	$	11.1	—		19.7		—		19.7



	As of December 31, 2016
	Level 1		Level 2		Level 3		Total
Derivative assets	$	—	$	6.5	$	—	$	6.5
Derivative liabilities	$	—	$	13.4	$	—	$	13.4