AGCO (AGCO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information, including financial statements and management's analysis Item 1. Financial Statements (unaudited) This section presents AGCO Corporation's unaudited condensed consolidated financial statements, offering a comprehensive overview of its financial position and performance Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets show the company's financial position as of June 30, 2025, and December 31, 2024, indicating an increase in total assets and stockholders' equity over the six-month period Balance Sheet Highlights | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :--------------------------- | :----------------------- | :-------------------------- | | Total Assets | $12,309.8 | $11,190.6 | | Total Liabilities | $7,837.0 | $7,147.7 | | Total Stockholders' Equity | $4,168.5 | $3,742.8 | Condensed Consolidated Statements of Operations (Three Months) For the three months ended June 30, 2025, the company reported a significant turnaround to net income, despite a decrease in net sales, primarily due to the absence of a large loss on sale of business recorded in the prior year Statements of Operations (Three Months) | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net Sales | $2,635.0 | $3,246.6 | | Gross Profit | $658.6 | $837.5 | | Income (loss) from operations | $164.0 | $(241.7) | | Net income (loss) attributable to AGCO Corp | $314.8 | $(367.1) | | Diluted EPS | $4.22 | $(4.92) | Condensed Consolidated Statements of Operations (Six Months) For the six months ended June 30, 2025, the company achieved net income, a substantial improvement from a net loss in the prior year, despite a notable decrease in net sales, largely influenced by the absence of the prior year's loss on sale of business Statements of Operations (Six Months) | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net Sales | $4,685.5 | $6,175.3 | | Gross Profit | $1,179.2 | $1,607.3 | | Income from operations | $213.4 | $31.9 | | Net income (loss) attributable to AGCO Corp | $325.3 | $(199.1) | | Diluted EPS | $4.36 | $(2.67) | Condensed Consolidated Statements of Comprehensive Income (Loss) The Condensed Consolidated Statements of Comprehensive Income (Loss) show a significant improvement in comprehensive income for the three and six months ended June 30, 2025, primarily driven by positive foreign currency translation adjustments Comprehensive Income (Loss) Summary | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :-------------------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Comprehensive income (loss) attributable to AGCO Corp | $371.6 | $(502.3) | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :-------------------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Comprehensive income (loss) attributable to AGCO Corp | $463.4 | $(377.7) | | Foreign currency translation adjustments | $140.4 | $(188.1) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company generated positive cash flow from operating activities and significantly reduced cash used in investing activities compared to the prior year, contributing to an increase in cash and cash equivalents Cash Flow Summary | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net cash provided by (used in) operating activities | $153.5 | $(134.5) | | Net cash used in investing activities | $(108.1) | $(2,094.2) | | Net cash provided by financing activities | $98.1 | $2,335.4 | | Cash, cash equivalents and restricted cash, end of period | $783.9 | $677.3 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, significant transactions like acquisitions and divestitures, debt, equity, and segment information Note 1. BASIS OF PRESENTATION This note outlines the basis for preparing the unaudited condensed consolidated financial statements in accordance with U.S. GAAP and SEC regulations, highlighting the impact of highly inflationary economies in Turkey and Argentina on financial reporting and the prospective adoption of new accounting pronouncements - The Turkish economy was determined to be highly inflationary in 2022, leading to the United States dollar being the functional currency for the Company's subsidiary there. Net sales for the Turkish subsidiary were approximately $150.4 million for the six months ended June 30, 2025[24] - Argentina's economy was determined to be highly inflationary in 2018, with a significant devaluation of the Argentine peso in December 2023. Net sales for the Argentine subsidiary were approximately $93.0 million for the six months ended June 30, 2025[25] - New accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation), will impact disclosures but not the Company's financial condition or results of operations, with adoption planned for December 31, 2025, and after December 15, 2026, respectively[26][28] Note 2. ACQUISITIONS On April 1, 2024, AGCO completed the acquisition of Trimble's OneAg business and formed the PTx Trimble joint venture, acquiring an 85% interest for $1,910.0 million, which resulted in the consolidation of PTx Trimble and the recognition of significant goodwill and intangible assets - AGCO and Trimble completed the formation of the PTx Trimble Joint Venture on April 1, 2024, with AGCO acquiring an 85% interest[29] Acquisition Details | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Total Purchase Consideration | $1,910.0 | | Goodwill Recognized | $1,592.2 | | Acquired Intangible Assets (Total) | $624.6 | | Redeemable Noncontrolling Interests | $355.1 | - The acquired identifiable intangible assets include Developed Technology ($526.0 million), Customer Relationships ($47.3 million), Tradename ($6.5 million), and Favorable contracts ($44.8 million)[38] Note 3. BUSINESS DIVESTITURE The Company completed the sale of the majority of its Grain & Protein (G&P) business on November 1, 2024, for $700.0 million, recognizing a total loss on sale of $507.3 million, with an additional $12.3 million loss recorded in May 2025 due to final working capital adjustments - The Company completed the sale of the majority of its Grain & Protein (G&P) business on November 1, 2024[40] Divestiture Details | Metric | Amount (Millions) | | :-------------------- | :---------------- | | Purchase Price | $700.0 | | Net Proceeds Received | $630.7 | | Loss on Sale of Business | $507.3 (initial) + $12.3 (additional) = $519.6 | | Total Assets Divested | $839.2 | | Total Liabilities Divested | $267.5 | Note 4. ACCOUNTS RECEIVABLE SALES AGREEMENTS The Company uses off-balance sheet accounts receivable sales agreements and factoring arrangements to sell a majority of its wholesale receivables in North America, Europe, and Brazil to finance joint ventures and other financial institutions, incurring associated fees and losses Accounts Receivable Sales Data | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :------------------------------------------------ | :----------------------- | :-------------------------- | | Cash from receivables sold (outstanding) | ~$2,000.0 | ~$2,300.0 | | Cash from trade receivables sold (factoring, outstanding) | ~$254.2 | ~$220.5 | | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :------------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Losses on sales of receivables | ~$19.8 | ~$35.9 | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Losses on sales of receivables | ~$38.7 | ~$63.8 | Note 5. GOODWILL AND OTHER INTANGIBLE ASSETS This note details the changes in the carrying amount of goodwill and acquired intangible assets, including the impact of foreign currency translation and impairment charges, for the six months ended June 30, 2025 Goodwill and Intangible Assets | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :-------------------------- | | Consolidated Goodwill Balance | $1,898.7 | $1,820.4 | | Gross Carrying Amounts of Acquired Intangible Assets | $938.2 | $909.8 | - Goodwill increased by $78.3 million due to foreign currency translation during the six months ended June 30, 2025[51] - The Company recorded an impairment charge of $2.2 million for acquired intangible assets and amortization expense of $31.0 million during the six months ended June 30, 2025[53] Note 6. INVENTORIES This note provides a breakdown of the Company's inventories, net, as of June 30, 2025, and December 31, 2024, along with the reserve for surplus and obsolete inventories Inventory Breakdown | Inventory Category | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :----------------- | :----------------------- | :-------------------------- | | Finished goods | $1,295.4 | $1,187.9 | | Repair and replacement parts | $831.1 | $754.6 | | Work in process | $262.0 | $170.0 | | Raw materials | $707.9 | $618.8 | | Inventories, net | $3,096.4 | $2,731.3 | | Reserve for surplus and obsolete inventories | $279.8 | $251.1 | Note 7. PRODUCT WARRANTY This note details the activity in the Company's product warranty reserve, including accruals, settlements, and the impact of foreign currency translation, for the three and six months ended June 30, 2025 and 2024 Product Warranty Reserve Activity | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :-------------------------------- | :-------------------------------------- | :-------------------------------------- | | Balance at beginning of period | $743.0 | $800.8 | | Accruals for warranties issued | $180.1 | $185.9 | | Settlements made and deferred revenue recognized | $(196.1) | $(175.6) | | Foreign currency translation | $74.0 | $(29.0) | | Balance at June 30 | $801.0 | $774.6 | - The Company accrues for future warranty costs at the time of sale based on historical experience, with agricultural equipment products generally warranted for one to four years and extended warranties ranging from three to five years[55] Note 8. SUPPLIER FINANCE PROGRAMS The Company participates in supplier financing arrangements where banks or intermediaries pay suppliers early at a discount, with the Company paying the full invoice amount on the due date, without direct financial interest in the supplier's decision to participate Supplier Finance Program Details | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :------------------------------------------------ | :----------------------- | :-------------------------- | | Amounts outstanding unpaid to banks/intermediaries | $40.1 | $50.6 | - Payment terms with the majority of the Company's suppliers range from 30 to 180 days[57] Note 9. INDEBTEDNESS This note details the Company's long-term debt, including its Credit Facility, Senior Notes, and EIB Senior term loans, and highlights the repayment of the EIB Senior term loan due 2025 Long-Term Indebtedness | Debt Instrument | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :------------------------------------------ | :----------------------- | :-------------------------- | | Credit Facility, expires 2027 | $375.0 | — | | 5.450% Senior notes due 2027 | $400.0 | $400.0 | | 5.800% Senior notes due 2034 | $700.0 | $700.0 | | 0.800% Senior notes due 2028 | $703.0 | $622.7 | | 1.002% EIB Senior term loan due 2025 | — | $259.5 | | EIB Senior term loan due 2029 | $292.9 | $259.5 | | EIB Senior term loan due 2030 | $199.2 | $176.4 | | Senior term loans due between 2025 and 2028 | $171.6 | $152.0 | | Total long-term indebtedness | $2,756.9 | $2,233.3 | - The Company repaid the €250.0 million (approximately $262.3 million) EIB Senior term loan due 2025 upon maturity on January 24, 2025[62] - As of June 30, 2025, the Company had $375.0 million in outstanding borrowings under its $1.25 billion Credit Facility and had the ability to borrow an additional $875.0 million[60] Note 10. RESTRUCTURING AND BUSINESS OPTIMIZATION EXPENSES The Company initiated a restructuring program in June 2024 to reduce structural costs and enhance global efficiencies, with estimated one-time termination benefits of $150.0 million to $200.0 million, primarily incurred in 2024 and continuing into 2025 - A restructuring program was announced on June 24, 2024, in response to weakening demand in the agriculture industry, focusing on reducing structural costs and streamlining the workforce[65] - Estimated one-time termination benefits for this program are approximately $150.0 million to $200.0 million, primarily cash charges for severance and employee benefits[65] Restructuring and Optimization Expenses | Expense Category | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Restructuring expenses | $28.6 | $31.2 | | Business optimization expenses | $26.9 | N/A | Note 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES This note details the Company's use of derivative instruments for hedging foreign currency, interest rate, and net investment risks, including cash flow hedges, net investment hedges, and non-designated foreign currency contracts Derivative Instruments and Hedging Activity | Derivative Type | Notional Value as of June 30, 2025 (Millions) | Notional Value as of December 31, 2024 (Millions) | | :------------------------------------ | :------------------------------------------ | :-------------------------------------------- | | Cash Flow Hedges (Foreign Currency) | ~$256.5 | ~$356.7 | | Net Investment Hedges (Cross Currency Swap) | $600.0 | $600.0 | | Non-Designated (Foreign Currency) | ~$2,238.7 | ~$3,231.2 | - The Company entered into new $600.0 million cross currency swap contracts on November 4, 2024, to hedge its net investment in foreign operations[80] Derivative Instruments and Hedging Activity | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Gain (Loss) from non-designated foreign currency contracts | $43.9 | $(41.8) | Note 12. STOCKHOLDERS' EQUITY This note details changes in redeemable noncontrolling interests and stockholders' equity, including stock compensation, issuance of stock awards, comprehensive income (loss) components, dividend payments, and share repurchase program activities Stockholders' Equity and Dividends | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------------- | :----------------------- | :-------------------------- | | Total Stockholders' Equity | $4,168.5 | $3,742.8 | | Redeemable Noncontrolling Interests | $304.3 | $300.1 | Stockholders' Equity and Dividends | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cash dividends declared and paid per common share | $0.29 | $2.79 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cash dividends declared and paid per common share | $0.58 | $3.08 | - On July 9, 2025, the Company's Board of Directors authorized a new share repurchase program for up to $1.0 billion of common stock, with no expiration date[97] Note 13. NET INCOME (LOSS) PER COMMON SHARE This note provides the reconciliation of net income (loss) attributable to AGCO Corporation and weighted average common shares outstanding for calculating basic and diluted net income (loss) per share, showing a positive shift in EPS for 2025 compared to a loss in 2024 Net Income (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Basic net income (loss) per share | $4.22 | $(4.92) | | Diluted net income (loss) per share | $4.22 | $(4.92) | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Basic net income (loss) per share | $4.36 | $(2.67) | | Diluted net income (loss) per share | $4.36 | $(2.67) | Note 14. INCOME TAXES This note presents the income tax provision (benefit) and effective tax rates, highlighting a significant net tax benefit in 2025 due to a legal entity reorganization and a prior-year benefit from a Brazilian tax ruling Income Tax Provision (Benefit) | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Income tax provision (benefit) | $(205.5) | $41.6 | | Effective tax rate | (211.2)% | (12.3)% | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Income tax provision (benefit) | $(203.5) | $110.7 | | Effective tax rate | (212.2)% | (95.4)% | - The income tax provision for the three and six months ended June 30, 2025, included a net tax benefit of $255.2 million related to a legal entity reorganization[104] - In the prior year, a $31.7 million reduction in the income tax provision was recorded due to a favorable tax ruling in Brazil regarding state value-added tax incentive benefits[104] Note 15. PENSION AND POSTRETIREMENT BENEFIT PLANS This note outlines the net periodic pension and postretirement benefit costs for the three and six months ended June 30, 2025 and 2024, and provides estimates for minimum contributions for 2025 Pension and Postretirement Benefit Costs | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net periodic pension cost | $9.4 | $7.8 | | Net periodic postretirement benefit cost | $0.8 | $1.0 | - The Company estimates minimum contributions for 2025 to be approximately $14.9 million for defined pension benefit plans and $1.7 million for postretirement health care and life insurance benefit plans[109][110] Note 16. FAIR VALUE OF FINANCIAL INSTRUMENTS This note categorizes the Company's financial assets and liabilities into fair value hierarchy levels, primarily Level 2 for derivative instruments, and provides estimated fair values for certain long-term debt instruments Fair Value of Financial Instruments | Instrument Type | June 30, 2025 Fair Value (Millions) | | :------------------------------------ | :---------------------------------- | | Derivative assets | $11.9 | | Derivative liabilities | $47.7 | | 0.800% Senior notes due 2028 | ~$656.4 (carrying value $703.0) | | 5.450% Senior notes due 2027 | ~$405.6 (carrying value $400.0) | | 5.800% Senior notes due 2034 | ~$711.6 (carrying value $700.0) | - The fair values of the Company's derivative instruments are determined using discounted cash flow valuation models, with significant inputs classified as Level 2[112] Note 17. COMMITMENTS AND CONTINGENCIES This note details the Company's lease payment commitments, off-balance sheet arrangements including guarantees to its Argentine finance joint venture and for residual values in the U.S. and Canada, and ongoing legal claims Lease Payment Commitments and Guarantees | Lease Type | Total Lease Payments (Millions) | | :----------- | :------------------------------ | | Operating Leases | $213.8 | | Finance Leases | $7.9 | - The Company had outstanding guarantees of approximately $67.4 million to its Argentine finance joint venture, AGCO Capital Argentina S.A., as of June 30, 2025[116] - Outstanding guarantees of residual values in the United States and Canada totaled approximately $13.5 million accrued, with a maximum potential future payment of approximately $216.9 million as of June 30, 2025[117] Note 18. REVENUE This note provides detailed information on contract liabilities, remaining performance obligations, and disaggregated net sales by primary geographical markets and major products for the three and six months ended June 30, 2025 and 2024 Contract Liabilities and Net Sales by Product | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :------------------------------------ | :----------------------- | :-------------------------- | | Contract Liabilities | $377.7 | $341.5 | - Estimated revenues from remaining performance obligations are $81.7 million for the remainder of 2025, $134.1 million in 2026, $88.3 million in 2027, $43.2 million in 2028, and $21.8 million thereafter, primarily related to extended warranty contracts[126] Contract Liabilities and Net Sales by Product | Major Product (6 Months Ended June 30, 2025) | Net Sales (Millions) | | :------------------------------------------- | :------------------- | | Tractors | $2,952.3 | | Replacement parts | $935.0 | | Combines, application equipment and other machinery | $797.1 | Note 19. SEGMENT REPORTING This note presents financial results for the Company's 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 Segment Performance | Segment (3 Months Ended June 30, 2025) | Net Sales (Millions) | Income (loss) from operations (Millions) | | :------------------------------------- | :------------------- | :--------------------------------------- | | North America | $420.9 | $(22.1) | | South America | $303.4 | $23.8 | | Europe/Middle East | $1,774.9 | $261.3 | | Asia/Pacific/Africa | $135.8 | $9.4 | | Total Segments | $2,635.0 | $272.4 | Segment Performance | Segment (6 Months Ended June 30, 2025) | Net Sales (Millions) | Income (loss) from operations (Millions) | | :------------------------------------- | :------------------- | :--------------------------------------- | | North America | $816.5 | $(41.9) | | South America | $533.3 | $25.9 | | Europe/Middle East | $3,105.4 | $415.7 | | Asia/Pacific/Africa | $230.3 | $6.7 | | Total Segments | $4,685.5 | $406.4 | Segment Performance | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------- | :----------------------- | :-------------------------- | | Total Segment Assets | $6,472.8 | $6,013.9 | Note 20. RELATED PARTY TRANSACTIONS This note details several agreements entered into with Tractors and Farm Equipment Limited (TAFE) on June 30, 2025, including settlement of disputes, TAFE's repurchase of AGCO's remaining shareholdings for $260 million, and an Intellectual Property Agreement transferring Massey Ferguson brand ownership in India, Nepal, and Bhutan to TAFE - TAFE will repurchase AGCO's remaining shareholdings in TAFE for an aggregate amount of $260 million[141][145] - The Arbitrations Settlement Agreement and India Litigation Settlement Agreement resolve claims arising from the termination of commercial and brand agreements between AGCO and TAFE[142] - The Intellectual Property Agreement transfers ownership of the Massey Ferguson brand in India, Nepal, and Bhutan to TAFE, with AGCO retaining certain protective rights[143] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, analyzing key financial metrics, segment performance, liquidity, capital resources, and future outlook, while also discussing critical accounting policies and forward-looking statements GENERAL This section discusses the cyclical and seasonal nature of the agricultural industry, factors influencing equipment sales, and the significant uncertainties and potential risks posed by U.S. government trade policies and tariffs on the Company's business - Sales of equipment are affected by factors such as farm income, land values, debt levels, financing costs, acreage planted, crop yields, weather, demand for agricultural commodities, commodity and protein prices, and government policies, tariffs, and subsidies[148] - Significant trade policy and tariff actions by the U.S. government are creating uncertainty and potential risks, including increased costs for raw materials and components, and potential retaliatory tariffs negatively affecting sales and market access[149] RESULTS OF OPERATIONS This section provides an overview of the Company's financial performance, highlighting a significant improvement in net income for the three and six months ended June 30, 2025, compared to the prior year, despite lower net sales, primarily due to the absence of the substantial loss on sale of business from 2024 Financial Highlights The financial highlights show a significant increase in net income attributable to AGCO Corporation for both the three and six months ended June 30, 2025, compared to net losses in the prior year, despite a decrease in net sales, largely due to the absence of the prior year's loss on sale of business Financial Performance Highlights | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net Sales | $2,635.0 | $3,246.6 | | Net income (loss) attributable to AGCO Corp | $314.8 | $(367.1) | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net Sales | $4,685.5 | $6,175.3 | | Net income (loss) attributable to AGCO Corp | $325.3 | $(199.1) | - The increase in income from operations in 2025 was primarily due to decreases in engineering, restructuring, business optimization, and selling, general and administrative expenses, partially offset by lower sales and production volumes and higher warranty costs. The prior year included a $494.6 million loss on sale of the G&P business[153][154][156] Results of Operations - Segment Information This section analyzes the net sales and income from operations across the Company's four geographical segments, revealing overall sales volume declines due to softer market demand, with varying impacts on profitability across regions, partially mitigated by favorable currency translation in some areas - Consolidated net sales of tractors and combines decreased by approximately 10.3% for the three months and 19.9% for the six months ended June 30, 2025, compared to the same periods in 2024[157] - Global production hours (excluding the divested G&P business) decreased by approximately 15.6% and 24.4% during the three and six months ended June 30, 2025, respectively, reflecting lower end market demand[158] - Gross profit as a percentage of net sales decreased in 2025 compared to 2024, primarily due to lower production volumes[159] EME Net sales and income from operations in Europe/Middle East (EME) decreased for both the three and six months ended June 30, 2025, primarily due to sales volume declines in high-horsepower tractors and combines, and higher warranty costs, partially offset by favorable foreign currency translation EME Segment Performance | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :----------------------- | :---------------------------------------- | :---------------------------------------- | | Net sales | $1,774.9 | $1,869.5 | | Income from operations | $261.3 | $295.6 | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :----------------------- | :-------------------------------------- | :-------------------------------------- | | Net sales | $3,105.4 | $3,576.4 | | Income from operations | $415.7 | $590.7 | North America North America experienced significant declines in net sales and a shift to an operating loss for both the three and six months ended June 30, 2025, primarily driven by sales volume declines in high-horsepower tractors, sprayers, and hay tools North America Segment Performance | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :---------------------------- | :---------------------------------------- | :---------------------------------------- | | Net sales | $420.9 | $627.2 | | Income (loss) from operations | $(22.1) | $36.2 | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :---------------------------- | :-------------------------------------- | :-------------------------------------- | | Net sales | $816.5 | $1,228.3 | | Income (loss) from operations | $(41.9) | $64.6 | South America South America reported decreased net sales but increased income from operations for both the three and six months ended June 30, 2025, primarily due to an improved product mix and lower manufacturing costs, despite sales declines in tractors, sprayers, and implements South America Segment Performance | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :----------------------- | :---------------------------------------- | :---------------------------------------- | | Net sales | $303.4 | $315.9 | | Income from operations | $23.8 | $6.4 | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :----------------------- | :-------------------------------------- | :-------------------------------------- | | Net sales | $533.3 | $588.9 | | Income from operations | $25.9 | $18.4 | APA Net sales and income from operations in Asia/Pacific/Africa (APA) decreased for both the three and six months ended June 30, 2025, primarily due to sales volume declines in hay tools, sprayers, and high-horsepower tractors APA Segment Performance | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :----------------------- | :---------------------------------------- | :---------------------------------------- | | Net sales | $135.8 | $143.5 | | Income from operations | $9.4 | $10.4 | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :----------------------- | :-------------------------------------- | :-------------------------------------- | | Net sales | $230.3 | $291.1 | | Income from operations | $6.7 | $19.5 | LIQUIDITY AND CAPITAL RESOURCES This section outlines the Company's financing strategy, including its credit facilities, senior notes, and accounts receivable sales agreements, emphasizing its compliance with financial covenants and sufficient liquidity to support working capital, capital expenditures, and debt service requirements Long-Term Indebtedness | Debt Instrument | June 30, 2025 (Millions) | | :------------------------------------------ | :----------------------- | | Credit facility, expires 2027 | $375.0 | | 5.450% Senior notes due 2027 | $400.0 | | 5.800% Senior notes due 2034 | $700.0 | | 0.800% Senior notes due 2028 | $703.0 | | EIB Senior term loan due 2029 | $292.9 | | EIB Senior term loan due 2030 | $199.2 | | Senior term loans due between 2025 and 2028 | $171.6 | - The Company has a $1.25 billion multi-currency unsecured revolving credit facility, with $375.0 million outstanding and $875.0 million available as of June 30, 2025. The facility was amended in May 2025 regarding net leverage ratio financial covenant requirements[184] Key Financial Data | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Debt to capitalization ratio | 40.4% | 40.6% | Supplemental Guarantor Financial Information This section provides summarized financial information for AGCO Corporation (as the issuer) and its Guarantors on a combined basis, after eliminating intercompany transactions, in accordance with SEC Regulation S-X Guarantor Financial Information | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------- | :----------------------- | :-------------------------- | | Current assets | $4,982.7 | $4,143.4 | | Noncurrent assets | $1,540.9 | $1,910.6 | | Current liabilities | $3,896.8 | $3,802.8 | | Noncurrent liabilities | $4,626.5 | $4,214.5 | Guarantor Financial Information | Metric | Six Months Ended June 30, 2025 (Millions) | | :-------------------- | :-------------------------------------- | | Revenues | $3,403.4 | | Income from Operations | $154.7 | | Net income | $195.4 | Cash Flows Cash flows provided by operating activities significantly improved for the first six months of 2025, driven by favorable changes in working capital, particularly a decrease in inventories and accounts and notes receivable, while capital expenditures decreased Cash Flow and Working Capital | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | | :------------------------------------------ | :-------------------------------------- | :-------------------------------------- | | Net cash provided by (used in) operating activities | $153.5 | $(134.5) | | Capital expenditures | $90.4 | $193.0 | Cash Flow and Working Capital | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------- | :----------------------- | :-------------------------- | | Working capital | $1,824.8 | $1,312.0 | | Inventories | $3,096.4 | $2,731.3 | Share Repurchase and Dividends The Company did not repurchase shares during the three and six months ended June 30, 2025, but its Board of Directors authorized a new $1.0 billion share repurchase program in July 2025, while also declaring regular quarterly dividends - No shares were purchased directly or through accelerated share repurchase agreements during the three and six months ended June 30, 2025[203] - On July 9, 2025, the Company's Board of Directors authorized a new share repurchase program for up to $1.0 billion of common stock, with no expiration date[203] Share Repurchase and Dividend Data | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cash dividends declared and paid per common share | $0.29 | $2.79 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cash dividends declared and paid per common share | $0.58 | $3.08 | COMMITMENTS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES This section reiterates the Company's commitments and off-balance sheet arrangements, including guarantees to finance joint ventures and accounts receivable sales, and notes ongoing legal claims that are not considered material - Outstanding guarantees to AGCO Capital (Argentine finance joint venture) totaled approximately $67.4 million as of June 30, 2025[204] - Guarantees of residual values to finance joint ventures in the U.S. and Canada had a maximum potential future payment of approximately $216.9 million as of June 30, 2025[204] Commitments and Off-Balance Sheet Arrangements | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :------------------------------------ | :----------------------- | :-------------------------- | | Total finance portfolio in finance joint ventures | $15,000.0 | $14,500.0 | OUTLOOK The Company anticipates a moderate decrease in global industry demand for farm equipment and its net sales in 2025, with operating margins expected to reflect lower sales and production volumes, partially offset by increased cost controls and flat engineering expenses - Global industry demand for farm equipment is expected to be moderately lower in 2025 compared to 2024[207] - Net sales are expected to moderately decrease in 2025 due to lower sales volumes, partially offset by pricing, favorable currency translation, and sales mix[207] - Operating margins will be impacted by lower net sales and production volumes, but partially offset by increased cost controls and flat engineering expenses[207] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section states that the Company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments, which are regularly evaluated, related to various financial areas - Management regularly evaluates estimates related to discount and sales incentive allowances, deferred income taxes, uncertain income tax positions, pensions, goodwill, and other intangible and long-lived assets[209] FORWARD-LOOKING STATEMENTS This section provides a cautionary statement regarding forward-looking statements, outlining various risks and uncertainties that could cause actual results to differ materially from projections, including economic conditions, market demand, tariffs, and supply chain issues - Forward-looking statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed or implied[212] - Adverse changes in factors such as general economic conditions, credit availability, worldwide demand for agricultural products, tariffs, weather, interest and foreign currency exchange rates, inflation, and production disruptions could impact results[212][213][214] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to the Company's Annual Report on Form 10-K for detailed quantitative and qualitative disclosures about market risks, noting that there have been no material changes in its exposure to market risks as of the second quarter of 2025 - No material changes in the Company's exposure to market risks as of the second quarter of 2025[218] Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, and reported no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[219] - There were no changes in internal control over financial reporting during the three months ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[221] PART II. OTHER INFORMATION This section provides other essential information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section refers to Note 17 of the Condensed Consolidated Financial Statements for details on various legal claims and actions incidental to the Company's business, none of which are considered material individually or in the aggregate - The Company is a party to various legal claims and actions incidental to its business, which are not considered material to its business or financial statements as a whole[223] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K, and additional risks are outlined in the "Forward-Looking Statements" section of this Quarterly Report - No material changes to 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, 2024[224] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no purchases of the Company's common stock made by or on behalf of the Company during the three months ended June 30, 2025 - No purchases of common stock were made by or on behalf of the Company during the three months ended June 30, 2025[225] Item 5. Other Information This section states that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - 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 June 30, 2025[226] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various amendments to agreements, settlement agreements, an intellectual property agreement, a buyback agreement, and a cooperation agreement related to Tractors and Farm Equipment Limited (TAFE), as well as certifications - Exhibits include Amendment No. 4 to the Amended and Restated Letter Agreement with TAFE, Arbitrations Settlement Agreement, India Litigation Settlement Agreement, Intellectual Property Agreement, Buyback Agreement, and Cooperation Agreement with TAFE[228] - The Third Amendment to the 2022 Credit Agreement is filed as Exhibit 10.9[228] - Certifications of the Chief Executive Officer and Chief Financial Officer are filed as Exhibits 31.1, 31.2, and 32.1[228] SIGNATURES This section contains the signatures of the Company's Senior Vice President and Chief Financial Officer, and Vice President, Chief Accounting Officer, certifying the filing of the report - The report was signed by Damon Audia, Senior Vice President and Chief Financial Officer, and Indira Agarwal, Vice President, Chief Accounting Officer, on July 31, 2025[231]