AGCO (AGCO) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's financial analysis ITEM 1. FINANCIAL STATEMENTS This section presents AGCO Corporation's unaudited condensed consolidated financial statements and detailed notes for the specified periods Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Balance Sheet Summary (September 30, 2024 vs. December 31, 2023) | Metric | Sep 30, 2024 (Millions $) | Dec 31, 2023 (Millions $) | Change (Millions $) | % Change | | :-------------------------------- | :------------------------ | :------------------------ | :------------------ | :------- | | Assets: | | | | | | Total current assets | 6,538.9 | 6,340.8 | 198.1 | 3.1% | | Property, plant and equipment, net | 1,880.6 | 1,920.9 | (40.3) | (2.1%) | | Goodwill | 2,358.4 | 1,333.4 | 1,025.0 | 76.9% | | Total assets | 13,506.8 | 11,421.2 | 2,085.6 | 18.3% | | Liabilities & Equity: | | | | | | Total current liabilities | 4,280.1 | 4,343.6 | (63.5) | (1.5%) | | Long-term debt, less current portion | 3,610.0 | 1,377.2 | 2,232.8 | 162.1% | | Total liabilities | 9,020.5 | 6,764.4 | 2,256.1 | 33.3% | | Total stockholders' equity | 4,148.8 | 4,656.8 | (508.0) | (10.9%) | | Total liabilities, redeemable noncontrolling interests and stockholders' equity | 13,506.8 | 11,421.2 | 2,085.6 | 18.3% | - Goodwill increased significantly by $1,025.0 million, primarily due to the PTx Trimble joint venture acquisition[7][8][29] - Long-term debt, less current portion, increased by $2,232.8 million, reflecting financing for the PTx Trimble acquisition[8][59][199] Condensed Consolidated Statements of Operations (Three Months) This section details the company's financial performance over the three months ended September 30 Three Months Ended September 30 (2024 vs. 2023) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | Change (Millions $) | % Change | | :------------------------------------------ | :------------------------ | :------------------------ | :------------------ | :------- | | Net sales | 2,599.3 | 3,455.5 | (856.2) | (24.8%) | | Gross profit | 603.1 | 934.0 | (330.9) | (35.4%) | | Income from operations | 114.8 | 423.6 | (308.8) | (72.9%) | | Net income attributable to AGCO Corporation and subsidiaries | 30.0 | 280.6 | (250.6) | (89.3%) | | Basic EPS | 0.40 | 3.75 | (3.35) | (89.3%) | | Diluted EPS | 0.40 | 3.74 | (3.34) | (89.3%) | - Net sales decreased by 24.8% due to lower sales volumes from softer end market demand and unfavorable currency impacts[11][161] - Income from operations decreased by 72.9% due to lower sales and production volumes reflecting weak industry conditions[11][161] - Gross profit as a percentage of net sales decreased from 27.0% to 23.2% primarily due to lower production volumes and unfavorable net pricing impacts[11][157][165] Condensed Consolidated Statements of Operations (Nine Months) This section details the company's financial performance over the nine months ended September 30 Nine Months Ended September 30 (2024 vs. 2023) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | Change (Millions $) | % Change | | :------------------------------------------ | :------------------------ | :------------------------ | :------------------ | :------- | | Net sales | 8,774.6 | 10,611.7 | (1,837.1) | (17.3%) | | Gross profit | 2,210.4 | 2,794.6 | (584.2) | (20.9%) | | Income from operations | 146.7 | 1,307.3 | (1,160.6) | (88.8%) | | Net income (loss) attributable to AGCO Corporation and subsidiaries | (169.1) | 832.4 | (1,001.5) | (120.3%) | | Basic EPS | (2.27) | 11.11 | (13.38) | (120.4%) | | Diluted EPS | (2.27) | 11.10 | (13.37) | (120.4%) | - Net sales decreased by 17.3% due to lower sales volumes from softer end market demand and unfavorable currency impacts[14][162] - Income from operations decreased by 88.8% primarily due to lower sales and production volumes, a $497.8 million loss on business held for sale, increased restructuring and business optimization expenses, and higher selling, general and administrative expenses[14][162] - The company reported a net loss of $169.1 million, a significant decline from a net income of $832.4 million in the prior year[14][160] Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's comprehensive income or loss, including other comprehensive income items Comprehensive Income (Loss) (Three Months Ended Sep 30) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | Change (Millions $) | | :---------------------------------------------------- | :------------------------ | :------------------------ | :------------------ | | Net income | 28.9 | 280.5 | (251.6) | | Other comprehensive income (loss) | 84.6 | (52.1) | 136.7 | | Comprehensive income attributable to AGCO Corporation and subsidiaries | 113.5 | 228.5 | (115.0) | Comprehensive Income (Loss) (Nine Months Ended Sep 30) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | Change (Millions $) | | :---------------------------------------------------- | :------------------------ | :------------------------ | :------------------ | | Net income (loss) | (172.0) | 832.3 | (1,004.3) | | Other comprehensive income (loss) | (95.0) | 66.2 | (161.2) | | Comprehensive income (loss) attributable to AGCO Corporation and subsidiaries | (264.2) | 898.6 | (1,162.8) | - Foreign currency translation adjustments shifted from a loss of $54.5 million in 2023 to a gain of $81.0 million for the three months ended September 30, 2024[16] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Cash Flows (Nine Months Ended Sep 30) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | Change (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | :------------------ | | Net cash provided by (used in) operating activities | (108.0) | 202.7 | (310.7) | | Net cash used in investing activities | (2,181.5) | (378.7) | (1,802.8) | | Net cash provided by financing activities | 2,351.3 | 111.2 | 2,240.1 | | Increase (decrease) in cash, cash equivalents and restricted cash | 47.1 | (108.8) | 155.9 | | Cash, cash equivalents and restricted cash, end of period | 642.6 | 680.7 | (38.1) | - Operating activities shifted from providing $202.7 million in cash in 2023 to using $108.0 million in 2024, primarily due to a decrease in net income[19][213] - Investing activities used significantly more cash ($2,181.5 million vs. $378.7 million), mainly due to the $1,902.2 million purchase of businesses (PTx Trimble acquisition)[19] - Financing activities provided substantially more cash ($2,351.3 million vs. $111.2 million), driven by proceeds from indebtedness to fund the PTx Trimble acquisition[19] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. BASIS OF PRESENTATION This section outlines the accounting principles and policies used in preparing the financial statements - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules[22] - Turkey and Argentina are identified as highly inflationary economies, requiring the U.S. dollar as the functional currency for subsidiaries in those regions, with remeasurement adjustments reported in 'Other expense, net'[23][24] - The Company is evaluating new accounting pronouncements (ASU 2023-07 on Segment Reporting and ASU 2023-09 on Income Tax Disclosures) for their potential effect on financial statement disclosures[25][26][27] 2. ACQUISITIONS This section details significant business acquisitions, including the PTx Trimble joint venture - On April 1, 2024, AGCO acquired an 85% interest in PTx Trimble, a joint venture with Trimble Inc., for $1,954.0 million in cash, aiming to create a global-leading mixed-fleet precision agriculture platform[28][154] Preliminary Purchase Consideration for PTx Trimble (as of April 1, 2024) | Category | Amount (Millions $) | | :------------------------------------------ | :------------------ | | Total cash consideration for OneAg | 1,954.0 | | Estimated working capital and other adjustments | (45.6) | | Equity transaction associated with JCA noncontrolling interest | 3.1 | | Total purchase consideration | 1,911.5 | Preliminary Fair Values of Assets Acquired and Liabilities Assumed (as of April 1, 2024) | Category | Amount (Millions $) | | :-------------------------- | :------------------ | | Total assets acquired | 2,286.3 | | Total liabilities assumed | 42.6 | | Redeemable noncontrolling interests | 332.2 | | Net assets acquired | 1,911.5 | Acquired Identifiable Intangible Assets of OneAg (as of acquisition date) | Asset Type | Fair Value (Millions $) | Useful Life | | :----------------------- | :---------------------- | :---------------- | | Developed Technology | 359.3 | 7-15 years | | Customer Relationships | 39.9 | 20 years | | Tradename | 6.1 | 5 years | | Favorable contracts | 44.8 | 2-7 years | | Total | 450.1 | | - Goodwill of $1,731.3 million was recorded, representing expected future economic benefits from product sales, operating efficiencies, and sales channel synergies[29][33] - PTx Trimble's net sales and net loss attributable to AGCO Corporation and subsidiaries consolidated since the acquisition date were $122.1 million and $21.3 million, respectively[38] 3. BUSINESS HELD FOR SALE This section describes the assets and liabilities of the Grain & Protein business classified as held for sale - On July 25, 2024, AGCO entered into an agreement to sell the majority of its Grain & Protein (G&P) business for $700.0 million, which closed on November 1, 2024. This divestiture aligns with AGCO's strategic transformation[39][40][155] - The Company recognized a loss on business held for sale of $497.8 million for the nine months ended September 30, 2024, representing the estimated loss on the business, including $71.6 million of cumulative translation adjustment losses[40][170] Major Categories of Assets and Liabilities Classified as Held for Sale (as of September 30, 2024) | Category | Amount (Millions $) | | :------------------------------------------ | :------------------ | | Total current assets held for sale | 417.0 | | Total assets held for sale | 876.0 | | Total current liabilities held for sale | 259.6 | | Total liabilities held for sale | 286.5 | | Disposal group, net | 589.5 | 4. ACCOUNTS RECEIVABLE SALES AGREEMENTS This section explains the company's off-balance sheet accounts receivable sales agreements - AGCO sells a majority of its wholesale receivables in North America, Europe, and Brazil to its finance joint ventures, accounted for as off-balance sheet transactions[42][44][209] - Outstanding receivables sold under these agreements were approximately $2.2 billion as of September 30, 2024, a decrease from $2.5 billion at December 31, 2023[42][209] - Losses on sales of receivables were $28.4 million for the three months and $92.2 million for the nine months ended September 30, 2024, compared to $40.5 million and $99.3 million for the comparable periods in 2023[46][173] 5. GOODWILL AND OTHER INTANGIBLE ASSETS This section details changes in goodwill and other intangible assets, including acquisition-related impacts Goodwill Carrying Amount Changes (Nine Months Ended Sep 30, 2024) | Metric | Amount (Millions $) | | :-------------------------------- | :------------------ | | Balance as of Dec 31, 2023 | 1,333.4 | | Acquisitions (PTx Trimble) | 1,740.0 | | Reclassified to held for sale (G&P) | (715.8) | | Foreign currency translation | 0.8 | | Balance as of Sep 30, 2024 | 2,358.4 | Acquired Intangible Assets Gross Carrying Amounts (Nine Months Ended Sep 30, 2024) | Metric | Trademarks & Trade Names (Millions $) | Customer Relationships (Millions $) | Patents & Technology (Millions $) | Other (Millions $) | Total (Millions $) | | :-------------------------------- | :------------------------------------ | :---------------------------------- | :-------------------------------- | :----------------- | :----------------- | | Gross carrying amounts, Dec 31, 2023 | 194.3 | 580.7 | 148.2 | 6.3 | 929.5 | | Acquisitions | 6.1 | 39.9 | 359.3 | 44.8 | 450.1 | | Reclassified to held for sale | (124.6) | (420.6) | (60.0) | — | (605.2) | | Foreign currency translation | (0.4) | (3.6) | (2.2) | 0.1 | (6.1) | | Gross carrying amounts, Sep 30, 2024 | 75.4 | 196.4 | 445.3 | 51.2 | 768.3 | - Amortization expense for acquired intangibles was $54.4 million for the nine months ended September 30, 2024[51] 6. INVENTORIES This section provides a breakdown of the company's inventory balances and related reserves Inventories, Net (excluding held for sale) (Sep 30, 2024 vs. Dec 31, 2023) | Category | Sep 30, 2024 (Millions $) | Dec 31, 2023 (Millions $) | | :-------------------------- | :------------------------ | :------------------------ | | Finished goods | 1,604.6 | 1,460.7 | | Repair and replacement parts | 813.5 | 823.1 | | Work in process | 260.3 | 255.2 | | Raw materials | 764.8 | 901.7 | | Inventories, net | 3,443.2 | 3,440.7 | - The reserve for surplus and obsolete inventories increased to $285.9 million at September 30, 2024, from $238.9 million at December 31, 2023[54] 7. PRODUCT WARRANTY This section outlines the company's product warranty accruals and related activity Warranty Reserve Activity (Nine Months Ended Sep 30, 2024 vs. 2023) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | | Balance at beginning of period | 800.8 | 640.0 | | Accruals for warranties issued | 292.7 | 321.4 | | Settlements made and deferred revenue recognized | (291.8) | (222.7) | | Balance at September 30 | 792.8 | 735.2 | - Warranty reserves are primarily included in 'Accrued expenses' ($645.2 million) and 'Other noncurrent liabilities' ($147.6 million) as of September 30, 2024[55] 8. SUPPLIER FINANCE PROGRAMS This section describes the company's supplier finance arrangements and outstanding amounts - AGCO has supplier financing arrangements allowing suppliers to receive early payments from banks/intermediaries, with AGCO paying the face amount on the due date[58][212] - Amounts outstanding unpaid to banks or intermediaries totaled $77.7 million at September 30, 2024, down from $82.7 million at December 31, 2023, and are reflected in 'Accounts payable'[58][212] 9. INDEBTEDNESS This section details the company's long-term debt, credit facilities, and financing activities Long-term Debt (Sep 30, 2024 vs. Dec 31, 2023) | Debt Instrument | Sep 30, 2024 (Millions $) | Dec 31, 2023 (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | | Credit facility, expires 2027 | 790.0 | — | | Term Loan Facility borrowings | 500.0 | — | | 5.450% Senior notes due 2027 | 400.0 | — | | 5.800% Senior notes due 2034 | 700.0 | — | | 0.800% Senior notes due 2028 | 670.2 | 664.0 | | 1.002% EIB Senior term loan due 2025 | 279.3 | 276.7 | | EIB Senior term loan due 2029 | 279.3 | 276.7 | | EIB Senior term loan due 2030 | 189.9 | — | | Senior term loans due between 2025 and 2028 | 163.7 | 162.1 | | Other long-term debt | 1.1 | 3.1 | | Debt issuance costs | (12.8) | (3.1) | | Total long-term indebtedness | 3,610.0 | 1,377.2 | - The Company issued $400.0 million of 5.450% Senior Notes due 2027 and $700.0 million of 5.800% Senior Notes due 2034 on March 21, 2024, to finance the PTx Trimble acquisition[64][195] - The $500.0 million Term Loan Facility and $150.0 million outstanding under the Credit Facility were repaid on November 1, 2024, using proceeds from the sale of the G&P business[62][200] - The debt to capitalization ratio increased to 48.8% at September 30, 2024, from 23.0% at December 31, 2023, primarily due to indebtedness incurred for the PTx Trimble joint venture transaction[202] 10. RESTRUCTURING AND BUSINESS OPTIMIZATION EXPENSES This section covers expenses related to the company's restructuring and business optimization programs - On June 24, 2024, AGCO announced a restructuring program to reduce structural costs, streamline the workforce, and enhance global efficiencies in response to weakening demand in the agriculture industry[75][169] - The Company estimates one-time termination benefits of $150.0 million to $200.0 million, primarily cash charges for severance, with the majority expected in 2024 and the first half of 2025[75][169] - Restructuring and business optimization expenses were $41.7 million for the nine months ended September 30, 2024, compared to $8.3 million in the same period of 2023[14][169] 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES This section describes the company's use of derivative instruments for hedging market risks - AGCO uses cash flow hedges (foreign currency and steel commodity contracts) to minimize cash flow variability, with a total notional value of $234.7 million for foreign currency contracts at September 30, 2024[79][80] - A gain of $8.2 million from a treasury rate lock for the 2034 Notes was recognized in accumulated other comprehensive loss and will be reclassified to interest expense over the debt's maturity[81] - The Company uses non-derivative and derivative instruments, including a cross currency swap contract (notional amount of $277.0 million at Sep 30, 2024), to hedge net investments in foreign operations[88][89][91] Fair Value of Derivative Instruments (as of September 30, 2024) | Category | Asset Fair Value (Millions $) | Liability Fair Value (Millions $) | | :------------------------------------------ | :---------------------------- | :---------------------------- | | Designated as hedging instruments | 23.4 | 4.6 | | Not designated as hedging instruments | 2.4 | 5.9 | | Total derivative instruments | 25.8 | 10.5 | 12. STOCKHOLDERS' EQUITY This section presents changes in the company's stockholders' equity, including dividends and capital adjustments Total AGCO Corporation Stockholders' Equity (Sep 30, 2024 vs. Dec 31, 2023) | Metric | Sep 30, 2024 (Millions $) | Dec 31, 2023 (Millions $) | Change (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | :------------------ | | Common stock | 0.7 | 0.7 | 0.0 | | Additional paid-in capital | 12.4 | 4.1 | 8.3 | | Retained earnings | 5,938.9 | 6,360.0 | (421.1) | | Accumulated other comprehensive loss | (1,803.2) | (1,708.1) | (95.1) | | Total AGCO Corporation stockholders' equity | 4,148.8 | 4,656.7 | (507.9) | - The Company paid a special variable dividend of $2.50 per common share in Q2 2024 and declared a regular quarterly dividend of $0.29 per common share for Q4 2024[110][216] - Cash dividends declared and paid per common share for the nine months ended September 30, 2024, were $3.37, compared to $5.81 in 2023[14][110][216] - No direct share repurchases or accelerated share repurchase agreements were entered into during the three and nine months ended September 30, 2024[108][216] 13. NET INCOME (LOSS) PER COMMON SHARE This section details the basic and diluted net income or loss per common share for the periods Net Income (Loss) Per Common Share (Three Months Ended Sep 30) | Metric | Sep 30, 2024 | Sep 30, 2023 | | :------------------------------------------ | :----------- | :----------- | | Basic EPS | $0.40 | $3.75 | | Diluted EPS | $0.40 | $3.74 | Net Income (Loss) Per Common Share (Nine Months Ended Sep 30) | Metric | Sep 30, 2024 | Sep 30, 2023 | | :------------------------------------------ | :----------- | :----------- | | Basic EPS | $(2.27) | $11.11 | | Diluted EPS | $(2.27) | $11.10 | 14. INCOME TAXES This section provides information on the company's income tax provisions and unrecognized tax benefits - Gross unrecognized income tax benefits were $398.5 million at September 30, 2024, compared to $351.2 million at December 31, 2023[114] - A favorable tax ruling in Brazil resulted in a $31.7 million reduction in the provision for income taxes during the nine months ended September 30, 2024[118][174] - Accrued interest and penalties related to unrecognized tax benefits totaled $32.8 million at September 30, 2024[115] 15. PENSION AND POSTRETIREMENT BENEFIT PLANS This section outlines the company's pension and postretirement benefit plan costs and contributions Net Periodic Pension Cost (Nine Months Ended Sep 30) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | | Service cost | 6.2 | 7.2 | | Interest cost | 20.9 | 22.0 | | Expected return on plan assets | (23.1) | (22.1) | | Amortization of net actuarial losses | 6.7 | 6.4 | | Amortization of prior service cost | 1.1 | 1.0 | | Net periodic pension cost | 11.8 | 14.5 | Net Periodic Postretirement Benefit Cost (Nine Months Ended Sep 30) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | | Service cost | 0.1 | — | | Interest cost | 1.2 | 1.0 | | Amortization of prior service cost | 0.1 | 0.1 | | Net periodic postretirement benefit cost | 1.4 | 1.1 | - Contributions to defined pension benefit plans for the nine months ended September 30, 2024, were approximately $22.0 million, with estimated minimum contributions for 2024 aggregating to $25.4 million[122] 16. FAIR VALUE OF FINANCIAL INSTRUMENTS This section presents the fair value measurements of the company's financial instruments - The Company categorizes its assets and liabilities into a three-level fair value hierarchy based on the observability of inputs used in valuation techniques[124] Fair Value of Derivative Instruments (as of September 30, 2024) | Category | Level 1 (Millions $) | Level 2 (Millions $) | Level 3 (Millions $) | Total (Millions $) | | :-------------------------- | :------------------- | :------------------- | :------------------- | :----------------- | | Derivative assets | — | 25.8 | — | 25.8 | | Derivative liabilities | — | 10.5 | — | 10.5 | Estimated Fair Value of Senior Notes (as of September 30, 2024) | Debt Instrument | Carrying Value (Millions $) | Estimated Fair Value (Millions $) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | 0.800% Senior notes due 2028 | 670.2 | 608.2 | | 5.450% Senior notes due 2027 | 400.0 | 408.2 | | 5.800% Senior notes due 2034 | 700.0 | 732.1 | 17. COMMITMENTS AND CONTINGENCIES This section details the company's lease commitments, guarantees, and legal contingencies Lease Payments (Operating Leases with >1 year remaining term, as of September 30, 2024) | Year | Operating Leases (Millions $) | Finance Leases (Millions $) | | :-------------------------- | :---------------------------- | :-------------------------- | | 2024 | 15.3 | 0.2 | | 2025 | 55.5 | 0.7 | | 2026 | 44.4 | 0.5 | | 2027 | 29.0 | 0.5 | | 2028 | 21.5 | 0.3 | | Thereafter | 50.1 | 5.8 | | Total lease payments | 215.8 | 8.0 | - Outstanding guarantees to AGCO Capital (Argentine finance joint venture) totaled approximately $60.5 million[128][217] - Accrued guarantees of residual values to U.S. and Canadian finance joint ventures were approximately $13.0 million, with a maximum potential future payment of $193.1 million[128][217] - An ongoing patent infringement lawsuit with Deere & Company regarding Precision Planting is awaiting oral arguments on appeal, with AGCO having an indemnity right from the previous owner[130][218] 18. REVENUE This section provides disaggregated revenue information by product, geography, and contract liabilities - Contract liabilities relate to unrecognized revenues from extended warranty, maintenance, grain storage, protein production systems, and precision agriculture technology services[132] Contract Liabilities Balance (Nine Months Ended Sep 30, 2024 vs. 2023) | Metric | Sep 30, 2024 (Millions $) | Sep 30, 2023 (Millions $) | | :------------------------------------------ | :------------------------ | :------------------------ | | Balance at beginning of period | 310.7 | 239.0 | | Advance consideration received | 156.4 | 164.2 | | Revenue recognized during the period | (133.4) | (117.5) | | Balance at September 30 | 346.6 | 284.6 | - Estimated future revenues from remaining performance obligations are $47.3 million for the remainder of 2024, and $117.4 million in 2025, primarily from extended warranty contracts[136] Disaggregated Net Sales by Geographical Market (Three Months Ended Sep 30, 2024) | Region | Net Sales (Millions $) | | :-------------------------- | :--------------------- | | North America | 736.1 | | South America | 381.6 | | Europe/Middle East | 1,298.2 | | Asia/Pacific/Africa | 183.4 | | Consolidated Total | 2,599.3 | Disaggregated Net Sales by Major Products (Nine Months Ended Sep 30, 2024) | Product | Net Sales (Millions $) | | :------------------------------------------ | :--------------------- | | Tractors | 5,064.6 | | Replacement parts | 1,410.0 | | Grain storage and protein production systems | 756.8 | | Combines, application equipment and other machinery | 1,543.2 | | Consolidated Total | 8,774.6 | 19. SEGMENT REPORTING This section presents financial data for the company's reportable operating segments - The Company operates in four reportable segments: North America, South America, Europe/Middle East (EME), and Asia/Pacific/Africa (APA), with performance evaluated primarily based on income from operations[146][177] Segment Net Sales and Income from Operations (Three Months Ended Sep 30, 2024 vs. 2023) | Segment | Net Sales 2024 (Millions $) | Net Sales 2023 (Millions $) | Income from Operations 2024 (Millions $) | Income from Operations 2023 (Millions $) | | :------------------ | :-------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | North America | 736.1 | 941.1 | 52.7 | 139.8 | | South America | 381.6 | 719.8 | 45.1 | 149.8 | | Europe/Middle East | 1,298.2 | 1,586.9 | 83.0 | 199.3 | | Asia/Pacific/Africa | 183.4 | 207.7 | 7.0 | 19.2 | | Total Segments | 2,599.3 | 3,455.5 | 187.8 | 508.1 | Segment Net Sales and Income from Operations (Nine Months Ended Sep 30, 2024 vs. 2023) | Segment | Net Sales 2024 (Millions $) | Net Sales 2023 (Millions $) | Income from Operations 2024 (Millions $) | Income from Operations 2023 (Millions $) | | :------------------ | :-------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | North America | 2,303.5 | 2,861.0 | 171.8 | 378.8 | | South America | 1,033.9 | 1,822.2 | 73.9 | 370.7 | | Europe/Middle East | 4,930.1 | 5,281.5 | 654.4 | 733.9 | | Asia/Pacific/Africa | 507.1 | 647.0 | 27.4 | 58.2 | | Total Segments | 8,774.6 | 10,611.7 | 927.5 | 1,541.6 | Reconciliation of Segment Income to Consolidated Income (Nine Months Ended Sep 30, 2024) | Item | Amount (Millions $) | | :------------------------------------------ | :------------------ | | Segment income from operations | 927.5 | | Impairment charges | (5.3) | | Loss on business held for sale | (497.8) | | Corporate expenses | (161.2) | | Amortization of intangibles | (54.4) | | Stock compensation expense | (20.4) | | Restructuring and business optimization expenses | (41.7) | | Consolidated income from operations | 146.7 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's discussion and analysis of financial condition and results of operations GENERAL This section provides an overview of AGCO's operations, industry context, and recent strategic transactions - AGCO's operations are subject to the cyclical and seasonal nature of the agricultural industry, influenced by factors such as farm income, financing costs, weather conditions, and commodity prices[153] - On April 1, 2024, AGCO completed the acquisition of an 85% interest in PTx Trimble, a joint venture aimed at creating a global-leading mixed-fleet precision agriculture platform[154] - On July 25, 2024, AGCO entered into an agreement to sell the majority of its Grain & Protein (G&P) business for $700.0 million, which closed on November 1, 2024, aligning with AGCO's strategic transformation[155] RESULTS OF OPERATIONS This section discusses the company's financial performance, including sales, profit, and expense trends - Net income attributable to AGCO Corporation and subsidiaries for the three months ended September 30, 2024, was $30.0 million ($0.40 diluted EPS), a significant decrease from $280.6 million ($3.74 diluted EPS) in the prior year[160] - Net sales decreased by 24.8% for the three months and 17.3% for the nine months ended September 30, 2024, primarily due to lower sales volumes from softer end market demand and unfavorable currency impacts[161][162] - Income from operations decreased significantly, driven by lower sales and production volumes, a $497.8 million loss on the G&P business held for sale, increased restructuring expenses, and higher SG&A expenses[161][162][170] - Gross profit as a percentage of net sales decreased for both periods due to lower production volumes and unfavorable net pricing impacts[165] - Interest expense, net, increased significantly to $33.9 million (three months) and $65.7 million (nine months) in 2024, primarily due to increased debt levels related to financing the PTx Trimble joint venture transaction[171] - A favorable tax ruling in Brazil resulted in a $31.7 million reduction in the income tax provision during the nine months ended September 30, 2024[174] LIQUIDITY AND CAPITAL RESOURCES This section analyzes the company's cash flows, debt, and ability to meet its financial obligations Available Borrowings and Facilities (as of September 30, 2024) | Facility | Amount (Millions $) | | :------------------------------------------ | :------------------ | | Credit facility, expires 2027 | 790.0 | | Term Loan Facility borrowings | 500.0 | | 5.450% Senior notes due 2027 | 400.0 | | 5.800% Senior notes due 2034 | 700.0 | | 0.800% Senior notes due 2028 | 670.2 | | 1.002% EIB Senior term loan due 2025 | 279.3 | | EIB Senior term loan due 2029 | 279.3 | | EIB Senior term loan due 2030 | 189.9 | | Senior term loans due between 2025 and 2028 | 163.7 | | Other long-term debt | 1.1 | - On November 1, 2024, the Company repaid the $500.0 million Term Loan Facility and $150.0 million Credit Facility utilizing proceeds from the sale of the G&P business[200] - The debt to capitalization ratio increased to 48.8% at September 30, 2024, from 23.0% at December 31, 2023, primarily due to indebtedness incurred for the PTx Trimble joint venture transaction[202] - Cash flows used in operating activities were $108.0 million for the first nine months of 2024, a decrease from $202.7 million provided in the same period of 2023, primarily due to a decrease in net income[213] COMMITMENTS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES This section details the company's various commitments, off-balance sheet arrangements, and potential liabilities - Outstanding guarantees to AGCO Capital (Argentine finance joint venture) totaled approximately $60.5 million[217] - Accrued guarantees of residual values to U.S. and Canadian finance joint ventures were approximately $13.0 million, with a maximum potential future payment of $193.1 million[217] - The Company is involved in an ongoing patent infringement lawsuit with Deere & Company regarding Precision Planting, with an indemnity right from the previous owner[218] OUTLOOK This section provides the company's forward-looking expectations regarding industry demand and financial performance - Global industry demand for farm equipment has declined in 2024 compared to 2023 due to lower farm income[222] - AGCO's net sales are expected to decrease in 2024 due to lower sales volumes, and operating margins are expected to decrease from 2023 levels[222] - The outlook is based on current assumptions regarding demand, currency stability, pricing, and market share gains, with potential adverse impacts from incorrect assumptions or supply chain issues[223] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section highlights the key accounting policies and estimates requiring significant management judgment - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts of assets, liabilities, revenues, and expenses[224] - Key estimates include discount and sales incentive allowances, deferred income taxes, pensions, goodwill, other intangible and long-lived assets, and recoverable indirect taxes[224] FORWARD-LOOKING STATEMENTS This section cautions about risks and uncertainties that may cause actual results to differ from expectations - Forward-looking statements involve risks and uncertainties, and actual results may differ materially from expectations[225][226] - Adverse changes in factors such as general economic conditions, credit availability, demand for agricultural products, raw material costs, government policies, and supply chain disruptions could impact results[226][227][228] - The Company's substantial indebtedness subjects it to restrictive covenants and payment obligations that may affect its ability to operate and expand[229] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section refers to the Company's Annual Report on Form 10-K for detailed disclosures on market risks - There has been no material change in the Company's exposure to market risks as of the third quarter of 2024[231] - For quantitative and qualitative disclosures about market risks, refer to Item 7A of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023[231] ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of the Company's disclosure controls and procedures and internal controls - The Company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024[232] - The internal controls over financial reporting of the PTx Trimble joint venture were excluded from management's assessment due to its recent acquisition on April 1, 2024, in accordance with SEC Staff's general guidance[234] - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting during the three months ended September 30, 2024[235] PART II. OTHER INFORMATION This section presents additional information not covered in the financial statements, including legal, risk, and exhibit details ITEM 1. LEGAL PROCEEDINGS This section refers to the notes to financial statements for details on legal claims and actions - Legal claims and actions incidental to the Company's business are more fully discussed in Note 17 to the Condensed Consolidated Financial Statements[237] ITEM 1A. RISK FACTORS This section supplements the risk factors disclosed in the Company's Annual Report on Form 10-K - The information supplements the risks and uncertainties disclosed under 'Risk Factors' in Item 1A of Part I of the Annual Report on Form 10-K for the year ended December 31, 2023[238] - Actions of activist stockholders could divert management's attention, disrupt operations, interfere with strategic plans, and negatively impact the Company's stock price and ability to attract and retain qualified personnel[239][240] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section states no purchases of the Company's common stock during the three months ended September 30, 2024 - There were no purchases of the Company's common stock made by or on behalf of the Company during the three months ended September 30, 2024[241] ITEM 5. OTHER INFORMATION This section confirms no directors or officers adopted or terminated Rule 10b5-1 trading arrangements - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2024[242] ITEM 6. EXHIBITS This section lists the exhibits filed with the Quarterly Report on Form 10-Q - The Quarterly Report includes unaudited financial information formatted in Inline XBRL, covering Condensed Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Cash Flows, and Notes to Condensed Consolidated Financial Statements[244] - Key exhibits include the Purchase Agreement for the G&P business, the 2006 Long-Term Incentive Plan, Subsidiary Guarantors, and certifications from the CEO and CFO[245] SIGNATURES This section contains the official signatures for the report - The report was signed on November 7, 2024, by Damon Audia, Senior Vice President and Chief Financial Officer, and Indira Agarwal, Vice President, Chief Accounting Officer[247]