AGCO
Annual Report 2019

Plain-text annual report

A G C O 2 0 1 9 A N N U A L R E P O R T WH AT DOES IT TA K E TO FE E D A C H A NGING WORLD? SMART SOLUTIONS FOR SUSTAINABLE AGRICULTURE 2019 Annual Report Chairman’s Letter and 2019 Highlights Notice of Annual Meeting Proxy Statement for the Annual Meeting of Stockholders Annual Report on Form 10-K C WHAT DOES IT TAKE TO FEED A CHANGING WORLD? Our business has always been about solving practical farming challenges. As a provider of intelligent, transformative, farmer-centric solutions, we are primed to meet the needs and demands of our ever- changing world. All across the agricultural value chain, we collaborate with forward-thinking producers who share our vital purpose: to help feed the world with smart solutions for sustainable agriculture. For a truly interactive experience online, visit our annual report: A R 2019.AGCOCORP.COM D MARTIN H. RICHENHAGEN Chairman, President and Chief Executive Officer CH A IR M A N’S MES S AGE DEAR FELLOW SHAREHOLDERS, CUSTOMERS, DEALERS AND EMPLOYEES: Modern agriculture continues to evolve. Enhanced with promising technology, farming is becoming more innovative, more precise, and more productive. Watch the Chairman’s video AR2019.AGCOCORP.COM At AGCO, our farm-centric mindset is focused on delivering smart, efficient, and sustainable agricultural equipment. Through our digital solutions, we strive to ensure our customers’ operations are optimized, coordinated, and connected throughout all stages of the crop cycle. Improvements start with field preparation, then planting, and continue all the way through harvesting, grain storage and handling, as well as animal protein production. 2 0 19 P E R F O R M A N C E Our farmer-first approach delivered strong results in 2019. Despite difficult market conditions driven by low commodity prices, unfavorable growing conditions, and a lingering trade dispute, our results showed promising improvements in a number of key areas. Our achievements are the direct result of the relentless effort of our over 20,000 employees and our dealer partners. We did it by focusing on our customers, striving for excellence, and acting with integrity. We strengthened our position in key global markets through the successful launch of new products and a strong focus on customer service. In the midst of challenging industry conditions, AGCO produced solid financial results while making important investments to position us for future success. AGCO reported 2019 net sales of approximately $9.0 billion, a decrease of approximately 3.3% compared to 2018. Reported net income per share was $1.63 and adjusted net income per share was $4.44,* an increase of approximately 14% from the previous year. We generated approximately $423 million in free cash flow* after funding significant investments in new products and other long-term profitability improvement initiatives. Our free cash flow largely was used to support share repurchases and dividend payments in 2019. 1 D E L I V E R I N G C U S T O M E R VA L U E By focusing on delivering smart, efficient and sustainable agricultural equipment, we believe that we can grow profitably and improve our return on invested capital through margin expansion. Our strategic initiatives have two major themes: delivering greater value for our customers and improving operating efficiency. Delivering customer value comes from our smart-farming solutions, including Fendt globalization, moving towards a full-line offering in all markets, and expanding our high-margin parts business. Dealer development in both AGCO’s established markets and emerging regions also will contribute to our growth. We are equally engaged in becoming more efficient. We’ve done a lot of work over the years to make ourselves a leaner company through investments in factory automation as well as improved systems and processes throughout the company. A key ongoing initiative addresses product complexity reduction and platform consolidation, which supports efficient engineering and increased purchasing scale. D E S I G N I N G S U S TA I N A B L E A G R I C U LT U R E S O L U T I O N S AGCO is focusing our product development efforts on making agriculture more efficient, more profitable, and, at the same time, more sustainable. Our goal is to contribute to healthy and affordable nutrition for all people, while caring for our environment. Helping farmers grow crops more efficiently with lower inputs and higher yields is core to our purpose. Around the globe, we design smart solutions for real-world production challenges. As standards of living rise worldwide, driving demand for animal protein, so do concerns about animal welfare. AGCO is engineering solutions to help producers care for their animals while also improving efficiency and profitability. AGCO’s innovations include technology that makes it easier to maintain a healthy and comfortable environment, equipment that ensures proper nutrition, and tools to address bio-security concerns. Our smart protein solutions of the future will use sensors to monitor behavior, activities and physical characteristics, so the producer can make better decisions based on their animals’ individual needs. E X PA N D I N G O U R C A PA B I L I T I E S We are continuing to invest in AGCO’s digital capabilities so that we can deliver more power to our customers. Last year, I introduced you to AGCO’s Digital Customer Experience initiative. Once complete, it will deliver customer and dealer portals that provide engaging experiences for our customers and enhanced analytic capabilities for dealers and for AGCO. The online tool will enable our customers to configure, price and quote both new FINANCIAL HIGHLIGHTS (In millions, except for share amounts) Net Sales* Adjusted Operating Income* Adjusted Earnings per Share* Free Cash Flow* $8,307 $9,352 $9,041 2017 2018 2019 $420 2017 $501 2018 $534 2019 $3.02 $3.89 $4.44 $374 $393 $423 2017 2018 2019 2017 2018 2019 2 AGCO is focusing our product development efforts on making agriculture more efficient, more profitable, and, at the same time, more sustainable. equipment and parts and to interact with us seamlessly. Our customer relationship management tools will allow our dealers to identify which customers are the best fit for our solutions and help direct targeted marketing efforts towards those customers. I also want to mention the role the Fendt brand has in our smart machine effort. Fendt always has had a well-deserved reputation as the premier tractor brand, and we have the awards to prove it. Over the last few years we’ve been working on a two-dimensional growth effort to make Fendt a full-line global brand. The first dimension is expanding the Fendt portfolio to cover the entire crop cycle, providing a full-line of solutions to our customers. We’ve added hay equipment, sprayers, and harvesters, each of which we believe matches Fendt’s long-standing reputation. This expansion significantly increases Fendt’s growth opportunity in its core market of Europe. The second dimension is taking the Fendt products to the rest of the world. We’ve redesigned the Fendt tractor range with the flexibility to adjust to the differing farming practices across the globe, while continuing to be a perfect fit for the European market. We are very excited about Fendt’s future! I N V E S T I N G I N O U R P E O P L E A N D O U R C O M M U N I T I E S I’d like to close this message with some thoughts on our most important asset: our people. AGCO is investing in attracting and retaining the best people in the business. At the heart of our employee development efforts is a diversity and inclusion initiative we call TRAIT. This initiative embraces AGCO’s core values of Transparency, Respect, Accountability, Integrity, and Team Spirit and is focused on enabling regional diversity and inclusive strategies. The TRAIT program promotes a collaborative culture that supports business success and individual fulfillment. We are also investing in our communities. Last year, we established the AGCO Agriculture Foundation (AAF), a private foundation committed to food security and sustainable agricultural development. One of AAF’s first projects was the AGCO Agribusiness Qualification Program at Strathmore * See reconciliations of non-GAAP measures on page 4. AGCO’s digital solutions optimize, coordinate and connect our customers’ operations throughout all stages of the crop cycle. University Business School in Nairobi, Kenya. I am pleased to tell you that on December 5, 2019, the first class of 20 students graduated from the inaugural two-year program. The students rotated between working commercial farms, agricultural machinery manufacturers and dealers, and more traditional campus settings in Kenya, Zambia, South Africa, and the United States, to obtain a wide variety of experiential and classroom-learning opportunities. Helping to build the agribusiness talent pool in Africa is a key part of AGCO’s commitment to corporate social responsibility and sustainability to assist in the achievement of food security on the continent. As I reflect on the past year, I’m proud of our progress and impact. And I’m even more optimistic about our opportunities ahead. I would like to thank our customers, employees, dealers and shareholders for their support and commitment. We are well-positioned to leverage our considerable strengths and take advantage of the favorable long-term industry fundamentals in order to create meaningful shareholder value. Thank you for your confidence in AGCO. We look forward to rewarding you for your continued support in the years ahead. Sincerely, MARTIN RICHENHAGEN Chairman, President and Chief Executive Officer 3 RECONCILIATION OF NON-GAAP MEASURES (In millions, except per share amounts) Years Ended December 31, 2019 Income from Operations Net Income(1),(2) Net Income per Share(1),(2) Income from Operations 2018 Net Income(1) Net Income per Share(1) Income from Operations 2017 Net Income(1) Net Income per Share(1),(2) As reported $ 348.1 $ 125.2 $ 1.63 $ 489.0 $ 285.5 $ 3.58 $ 404.4 $ 186.4 $ 2.32 Impairment charges Restructuring expenses Swiss tax reform Non-cash expense related to waived stock compensation Extinguishment of debt Deferred income tax adjustment Tax (benefit) provision associated with U.S. tax reform 176.6 9.0 — — — — — 176.6 8.3 (21.8) — — 2.29 0.11 (0.28) — — 53.7 0.70 — — — 12.0 — — — — — — 8.7 — — 24.5 — — 0.11 — — 0.31 — (8.5) (0.11) — 11.2 — 4.8 — — — — 8.8 — 4.8 — — — 0.11 — 0.06 — — 42.0 0.52 As adjusted $ 533.7 $ 341.9 $ 4.44 $ 501.0 $ 310.2 $ 3.89 $ 420.4 $ 242.0 $ 3.02 (1) Net income and net income per share amounts are after tax. (2) Rounding may impact summation of amounts. 2019 2018 2017 Net cash provided by operating activities Less: Capital expenditures $ 695.9 $ 595.9 $ 577.6 (273.4) (203.3) (203.9) Free cash flow $ 422.5 $ 392.6 $ 373.7 FORWARD-LOOKING STATEMENTS This annual report includes forward-looking statements, including the statements in the Chairman’s Message and other statements in this report regarding market demand, strategic initiatives, commitments and their effects, and general economic conditions. These statements are subject to risks that could cause actual results to differ materially from those suggested by the statements, including: Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally, including declines in the general economy, adverse weather, increases in farm input costs, and lower commodity prices, will adversely affect us. We face significant competition, and if we are unable to compete successfully against other agricultural equipment manufacturers, we would lose our customers and our net sales would decline. Our success depends on the introduction of new products, which requires substantial expenditures and may not be well received in the marketplace. Most of our sales depend on the retail customers obtaining financing, and any disruption in their ability to obtain financing, whether due to economic downturns or otherwise, will result in the sale of fewer products by us. A majority of the retail sales of our products is financed by our retail finance joint ventures with Rabobank, and any interruption or decrease on Rabobank’s part in funding the venture would adversely impact net sales. We depend on suppliers for raw materials, components, and parts for our products, and any failure by our suppliers to provide products as needed, whether due to the coronavirus or otherwise, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products. A majority of our sales and manufacturing take place outside the United States, and many of our sales involve products that are manufactured in one country and sold in a different country, and, as a result, we are exposed to risks related to foreign laws, taxes and tariffs, trade restrictions, economic conditions, labor supply and relations, political conditions and governmental policies. These risks may delay or reduce our realization of value from our international operations. Among these risks are the uncertain consequences of Brexit, Russian sanctions and tariffs imposed on exports to and imports from China. Volatility with respect to currency exchange rates and interest rates can adversely affect our reported results of operations and the competitiveness of our products. We are subject to extensive environmental laws and regulations, and our compliance with, or our failure to comply with, existing or future laws and regulations could delay production of our products or otherwise adversely affect our business. We are subject to raw material price fluctuations, which can adversely affect our manufacturing costs. We disclaim any obligation to update forward- looking statements except as required by law. 4 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS Time and Date: 9:00 a.m., Eastern Time, on Thursday, April 30, 2020 Place: AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096 Items of Business: 1. To elect ten directors to the Board of Directors for terms expiring at the Annual Meeting in 2021; 2. To consider a non-binding advisory resolution to approve the compensation of the Company’s named executive officers; 3. To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2020; and 4. To transact any other business that may properly be brought before the meeting. Record Date: Only stockholders of record as of the close of business on March 20, 2020 are entitled to notice of and to vote at the Annual Meeting or any postponement or adjournment thereof. Attendance at the Annual Meeting is limited to stockholders of record at the close of business on March 20, 2020, and to any invitees of the Company. Inspection of List of Stockholders of Record: A list of stockholders as of the close of business on March 20, 2020 will be available for examination by any stockholder at the Annual Meeting itself as well as for a period of ten days prior to the Annual Meeting at our offices at the above address during normal business hours. We urge you to mark and execute your proxy card and return it promptly in the enclosed envelope or vote by telephone or electronically. In the event you are able to attend the meeting, you may revoke your proxy and vote your shares in person. We intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our annual meeting website at www.envisionreports.com/AGCO for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting. Atlanta, Georgia March 30, 2020 By Order of the Board of Directors ROGER N. BATKIN Corporate Secretary   This summary highlights information contained elsewhere in this proxy statement. Since this summary does not contain all of that information, you are encouraged to read the entire proxy statement before voting. SUMMARY Annual Meeting of Stockholders • Time and Date: 9:00 a.m., Eastern Time, on Thursday, April 30, 2020 • Place: AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096 • Record Date: March 20, 2020 • Voting: Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. Voting Recommendations Proposal Election of Directors Advisory vote on executive compensation Ratification of the selection of KPMG LLP Board Vote Recommendation FOR EACH NOMINEE FOR FOR Director Nominees The following table provides summary information about each nominee. Directors are elected annually. AGCO has majority voting in uncontested elections of directors, such as this election. In the event that a nominee does not receive the affirmative vote of a majority of the votes cast in person or by proxy, he or she is required to tender his or her resignation. Name Roy V. Armes Michael C. Arnold Sondra L. Barbour Director Since 2013 2013 2019 Age 67 63 57 P. George Benson 73 2004 Suzanne P. Clark 52 2017 Wolfgang Deml 74 1999 George E. Minnich 70 2008 Martin H. Richenhagen 67 Gerald L. Shaheen 75 2004 2005 Mallika Srinivasan 60 2011 Brief Biography Former Executive Chairman, President and CEO, Cooper Tire and Rubber Company Former President and CEO, Ryerson Inc. Former Executive Vice President, Lockheed Martin Corporation Professor of Decision Sciences and Former President, College of Charleston President of the U.S. Chamber of Commerce Former President and CEO, BayWa Corporation (Germany) Former Senior VP and CFO, ITT Corporation Chairman, President and CEO, AGCO Lead Director of AGCO, Former Group President, Caterpillar Inc. Chairman and Managing Director, Tractors and Farm Equipment Limited (India) Committee Membership Independent X EC AC CC FC GC SP X X X X X X X X X X X X X X X X C X X X X C X C X X C X C X X X X EC Executive Committee FC Finance Committee AC Audit Committee CC Compensation Committee GC Governance Committee SP Succession Planning Committee C Chair Executive Compensation Advisory Vote We are asking stockholders to approve on an advisory basis our named executive officer compensation. The Company’s compensation philosophy and program design is intended to pay for performance, support the Company’s business strategy and align executives’ interests with those of stockholders and employees. A significant portion of the Company’s executive compensation opportunity is related to factors that directly and indirectly influence stockholder value, including stock performance, earnings per share, operating margin, free cash flow and return on invested capital. The Company believes that as an executive’s responsibilities increase, so should the portion of his or her total pay comprised of annual incentive cash bonuses and long-term incentive compensation, which supports and reinforces the Company’s pay for performance philosophy. For more information on the Company’s executive compensation programs, please see “Proposal Number 2 — Non-Binding Advisory Resolution to Approve the Compensation of the Company’s NEOs” and “Compensation Discussion and Analysis” in this proxy statement. Independent Registered Public Accounting Firm As a matter of good corporate governance, we are asking our stockholders to ratify the selection of KPMG LLP as our independent registered public accounting firm for 2020. The Company’s Audit Committee considers a number of factors when selecting a firm, including the qualifications, staffing considerations, and the independence and quality controls of the firms considered. The Audit Committee has appointed KPMG LLP as the Company’s independent registered public accounting firm for 2020. KPMG LLP served as the Company’s independent registered public accounting firm for 2019 and is considered to be well-qualified. Set forth below is summary information with respect to KPMG LLP’s fees for services provided in 2019 and 2018. Type of Fees Audit Fees Audit-Related Fees Tax Fees Other Fees Total 2019 2018 (in thousands) 7,302 $ 7,328 59 188 31 42 — 32 7,580 $ 7,402 $ $ NEW BLEED PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS P R O X Y S T A T E M E N T F O R T H E A N N U A L M E E T I N G O F S T O C K H O L D E R S   TABLE OF CONTENTS INFORMATION REGARDING THE ANNUAL MEETING................................................................................... PROPOSAL NUMBER 1 ELECTION OF DIRECTORS......................................................................................... BOARD OF DIRECTORS AND CORPORATE GOVERNANCE .......................................................................... PROPOSAL NUMBER 2 NON-BINDING ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NEOS................................................................................................... PROPOSAL NUMBER 3 RATIFICATION OF COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020 ............................................................................................................................. OTHER BUSINESS................................................................................................................................................... PRINCIPAL HOLDERS OF COMMON STOCK..................................................................................................... EXECUTIVE COMPENSATION.............................................................................................................................. COMPENSATION DISCUSSION AND ANALYSIS............................................................................................... SUMMARY OF 2019 COMPENSATION................................................................................................................. 2019 SUMMARY COMPENSATION TABLE ......................................................................................................... 2019 GRANTS OF PLAN-BASED AWARDS.......................................................................................................... OUTSTANDING EQUITY AWARDS AT YEAR-END 2019................................................................................... SSAR EXERCISES AND STOCK VESTED IN 2019.............................................................................................. PENSION BENEFITS ............................................................................................................................................... 2019 PENSION BENEFITS TABLE......................................................................................................................... OTHER POTENTIAL POST-EMPLOYMENT PAYMENTS .................................................................................. 2019 CEO PAY RATIO .............................................................................................................................................. COMPENSATION COMMITTEE REPORT ............................................................................................................ AUDIT COMMITTEE REPORT............................................................................................................................... CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS........................................................... ANNUAL REPORT TO STOCKHOLDERS ............................................................................................................ ANNUAL REPORT ON FORM 10-K....................................................................................................................... INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.......................................................................... STOCKHOLDERS’ PROPOSALS............................................................................................................................ PAGE 1 3 6 13 15 15 16 18 20 32 33 36 37 38 39 41 42 45 46 46 47 48 48 48 49   AGCO CORPORATION PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS April 30, 2020 INFORMATION REGARDING THE ANNUAL MEETING INFORMATION REGARDING PROXIES This proxy solicitation is made by the Board of Directors (the “Board”) of AGCO Corporation (“AGCO”, “we”, us”, or the “Company”), which has its principal executive offices at 4205 River Green Parkway, Duluth, Georgia 30096. By signing and returning the enclosed proxy card, you authorize the persons named as proxies on the proxy card to represent you at the meeting and vote your shares. If you attend the meeting, you may vote by ballot. If you are not present at the meeting, your shares can be voted only when represented by a proxy either pursuant to the enclosed proxy card or otherwise. You may also vote over the telephone or electronically via the internet as described on the proxy card provided to you. You may indicate a vote on the enclosed proxy card in connection with any of the listed proposals, and your shares will be voted accordingly. If you indicate a preference to abstain from voting, no vote will be cast. You may revoke your proxy card before balloting begins by notifying the Corporate Secretary in writing at 4205 River Green Parkway, Duluth, Georgia 30096. In addition, you may revoke your proxy card before it is voted by signing and duly delivering a proxy card bearing a later date or by attending the meeting and voting in person. If you return a signed proxy card that does not indicate your voting preferences, the persons named as proxies on the proxy card will vote your shares (i) in favor of all of the ten director nominees described below; (ii) in favor of the non-binding advisory resolution to approve the compensation of the Company’s Named Executive Officers (“NEOs”); (iii) in favor of ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2020; and (iv) in their best judgment with respect to any other business brought before the Annual Meeting. The enclosed proxy card is solicited by the Board, and the cost of solicitation of proxy cards will be borne by the Company. The Company may retain an outside firm to aid in the solicitation of proxy cards, the cost of which the Company expects would not exceed $25,000. Proxy solicitation also may be made personally or by telephone by officers or employees of the Company, without added compensation. The Company will reimburse brokers, custodians and nominees for their customary expenses in forwarding proxy material to beneficial owners. This proxy statement and the enclosed proxy card are first being sent to stockholders on or about March 30, 2020. The Company’s 2019 Annual Report on Form 10-K is also enclosed and should be read in conjunction with the matters set forth herein. INFORMATION REGARDING VOTING Only stockholders of record as of the close of business on March 20, 2020, are entitled to notice of and to vote at the Annual Meeting. On March 20, 2020, the Company had outstanding 75,054,096 shares of common stock, each of which is entitled to one Meeting will be not applicable to the matters being proposed. For directions to the offices of the Company where the Annual held, you may contact our corporate office at (770) 813-9200. Quorum Requirement A quorum of the Company’s stockholders is necessary to hold a valid meeting. The Company’s By-Laws provide that a quorum is present if a majority of the outstanding shares of common stock of the Company entitled to vote at the meeting are present in person or represented by proxy. Votes cast by proxy or in person at the Annual Meeting will be tabulated by the inspector of elections appointed for the meeting, who will also determine whether a quorum is present for the transaction of business. Abstentions and “broker non-votes” will be treated as shares that are present and entitled to vote for purposes of determining whether a quorum is present. A broker non-vote occurs on an item when a broker or other nominee is not permitted to vote on that item without instruction from the beneficial owner of the shares and no instruction is given. Vote Necessary for the Election of Directors Directors are elected by a majority of the votes cast in person or by proxy at the Annual Meeting. See “Proposal Number 1 — Election of Directors” in this proxy statement for a more detailed description of the majority voting procedures in our By-Laws. Under the New York Stock Exchange (“NYSE”) rules, if your broker holds your shares in its name, your broker is not permitted to vote your shares with respect to the election of directors if your broker does not receive voting instructions from you. Abstentions and broker non-votes will not affect the election outcome. Vote Necessary to Adopt the Non-Binding Advisory Resolution to Approve the Compensation of the Company’s NEOs Adoption of the non-binding advisory resolution to approve the compensation of the Company’s NEOs requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting. Because the stockholder vote on this proposal is advisory only, it will not be binding on the Company or the Board. However, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation as the Compensation Committee deems appropriate. Under the NYSE rules, if your broker holds your shares in its name, your broker is not permitted to vote your shares with respect to the non-binding advisory resolution to approve the compensation of the Company’s NEOs if your broker does not receive voting instructions from you. Abstentions and broker non-votes will not affect the vote on this proposal. Vote Necessary to Ratify the Appointment of Independent Registered Public Accounting Firm Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2020 requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting. Under the NYSE rules, if your broker holds your shares in its name, your broker is permitted to vote your shares with respect to the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2020 even if your broker does not receive voting instructions from you. Abstentions and broker non-votes will not affect the vote on this proposal. Other Matters With respect to any other matter that may properly come before the Annual Meeting for stockholder consideration, a matter generally will be approved by the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting unless the question is one upon which a different vote is required by express provision of the laws of Delaware, federal law, the Company’s Certificate of Incorporation or the Company’s By-Laws or, to the extent permitted by the laws of Delaware, the Board has expressly provided that some other vote shall be required, in which case such express provisions shall govern. Important Notice Regarding the Availability of Proxy Materials As required by rules adopted by the United Stated Securities and Exchange Commission (“SEC”), the Company is making this proxy statement and its annual report available to stockholders electronically via the Internet. The proxy statement and annual report to stockholders are available at www.agcocorp.com. The proxy statement is available under the heading “SEC Filings” in our website’s “Investors” section located under “Company,” and the annual report to stockholders is available under the heading “Annual Reports” in our “Investors” section. We intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our annual meeting website at www.envisionreports.com/AGCO for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting. 2 PROPOSAL NUMBER 1 ELECTION OF DIRECTORS The Company’s By-Laws provide for a majority voting standard for the election of directors in uncontested elections. If an incumbent director does not receive the requisite majority vote, he or she would continue as a “carry over” director, but is required to tender his or her resignation. In that event, the Governance Committee will determine whether to accept the director’s resignation and will submit its recommendation to the Board. In deciding whether to accept a director’s resignation, the Board and our Governance Committee may consider any factors that they deem relevant. Our By-Laws also provide that the director whose resignation is under consideration will abstain from the deliberation process with respect to his or her resignation. In the event that a stockholder proposes a nominee to stand for election with nominees selected by the Board, and the stockholder does not withdraw the nomination prior to the tenth day preceding our mailing the notice of the stockholders meeting (i.e., a “contested election”), then our By-Laws provide that directors will be elected by a plurality vote. For this year’s Annual Meeting, the Governance Committee has recommended, and the Board has nominated, the ten individuals named below to serve as directors until the Annual Meeting in 2021 or until their successors have been duly elected and qualified. The following is a brief description of the business experience, qualifications and skills of each of the ten nominees for directorship: Roy V. Armes, age 67, has been a director of the Company since October 2013. • Former Executive Chairman, President and CEO of Cooper Tire and Rubber Company from 2007 to 2016 • Various executive positions with Whirlpool Corporation from 1975 to 2006 including Senior Vice President, Project Management Office; Corporate Vice President and General Director, Whirlpool Mexico; Corporate Vice President, Global Procurement Operations; President/Managing Director, Whirlpool Greater China, Inc. Hong Kong; Vice President, Manufacturing Technology, Whirlpool Asia (Singapore); and Vice President, Manufacturing & Technology, Refrigeration Products, Whirlpool Europe (Comerio, Italy) • Former member of the Board of Directors of The Manitowoc Company, Inc. Director Qualifications and Skills: Mr. Armes brings extensive leadership experience with manufacturing companies and will provide an important perspective and contribution to the Board. The addition of his global manufacturing experience to the collective knowledge of our Board better positions AGCO for the opportunities facing our industry. Michael C. Arnold, age 63, has been a director of the Company since October 2013. • • Former President and Chief Executive Officer of Ryerson Inc. Former member of the Board of Directors of Gardner Denver, Inc. • Various senior management positions with The Timken Company from 1979 to 2010 including Executive Vice President; President, Bearings and Power Transmission Group; President, Industrial Group; Vice President, Bearings and Business Process Advancement; Director, Bearings and Business Process Advancement; Director, Manufacturing and Technology, Europe, Africa and West Asia (Europe) Director Qualifications and Skills: Mr. Arnold brings extensive leadership experience with manufacturing companies and will provide an important perspective and contribution to the Board. The addition of his global manufacturing experience to the collective knowledge of our Board better positions AGCO for the opportunities facing our industry. Sondra L. Barbour, age 57, has been a director of the Company since April 2019. • • Former Executive Vice President, Leidos Holdings, Inc. from August 2016 to January 2017 Former Executive Vice President, Information Systems & Global Solutions, Lockheed Martin Corporation from April 2013 to August 2016 • Various leadership positions at Lockheed Martin Corporation from 1986 to 2013, including Chief Information Officer, Vice President of Corporate Internal Audit, Business Area Chief Information Officer and Vice President of Operations • Member of the Board of Directors and Audit Committee of Perspecta Inc. • Former member of the Board of Directors of 3M Company • Member of the Fox School of Business Management Information Systems Advisory Board • Named one of Fortune magazine’s “50 Most Powerful Women in Business” 3 Director Qualifications and Skills: Ms. Barbour brings extensive leadership experience in business operations and knowledge regarding information technology, financial, internal controls and audit matters to the Board. This knowledge, along with her experience serving on boards of directors, provides an important perspective to the Board. P. George Benson, Ph.D, age 73, has been a director of the Company since December 2004. • • • Professor of Decision Sciences at College of Charleston in Charleston, South Carolina from 2014 to present Former President of College of Charleston in Charleston, South Carolina from 2007 to 2014 Former Member of the Board of Directors and Chairman of the Corporate Governance Committee of Crawford & Company (Atlanta, Georgia) • Lead Director, Chairman of the Corporate Governance Committee and member of the Audit Committee for Primerica, Inc. • • • • Judge for the Malcolm Baldrige National Quality Award from 1997 to 2000, was Chairman of the Board of Overseers for the Baldrige Award from 2004 to 2007 and is currently a member of the Board of Directors for the Foundation for the Baldrige Award Former Dean of the Terry College of Business at the University of Georgia from 1998 to 2007 Former Dean of the Rutgers Business School at Rutgers University from 1993 to 1998 Former Faculty member of the Carlson School of Management at the University of Minnesota from 1977 to 1993, where he served as Director of the Operations Management Center from 1992 to 1993 and head of the Decision Sciences Area from 1983 to 1988 Director Qualifications and Skills: Mr. Benson has significant academic expertise in business, in particular with strategic planning and organizational management systems, that adds a valuable perspective to the Board, especially in the area of improving the delivery of products and services. His ties to the community provide the Board with regional representation and a critical link to the academic and research sectors. Suzanne P. Clark, age 52, has been a director of the Company since April 2017. • • President of the U.S. Chamber of Commerce Former Senior Executive Vice President and former Chief Operating Officer of the U.S. Chamber of Commerce • Member of the Board of Directors and Audit Committee of TransUnion • Led a prominent financial information boutique - Potomac Research Group (PRG) • Formerly with the Atlantic Media Company as President of the National Journal Group, a premier provider of information, news and analysis for Washington’s policy and political communities • Member of the Board of So Others Might Eat, a Washington, D.C. support system for the homeless • Former President of International Women’s Forum (Washington Chapter), a global group of leading women in business, law, government, technology and the arts • Named one of Washingtonian Magazine’s “100 Most Powerful Women in Washington” Director Qualifications and Skills: Ms. Clark brings extensive leadership experience, entrepreneurial spirit, and a wealth of political and regulatory knowledge which will provide an important perspective and contribution to the Board. Wolfgang Deml, age 74, has been a director of the Company since February 1999. • Former President and Chief Executive Officer of BayWa Corporation, a trading and services company located in Munich, Germany, from 1991 until his retirement in 2008 • Non-Executive Chairman of the Board of Directors and Audit Committee of Hauck & Aufhäuser Privatbankiers AG Director Qualifications and Skills: Mr. Deml adds extensive experience to the Board given his service as the Chief Executive Officer of an international corporation within our industry. His tenure on our Board provides consistent leadership, and he serves as an ongoing source for industry-specific knowledge, especially in Europe, which is our largest market. 4 George E. Minnich, age 70, has been a director of the Company since January 2008. • • Former Senior Vice President and Chief Financial Officer of ITT Corporation from 2005 to 2007 Several senior finance positions at United Technologies Corporation, including Vice President and Chief Financial Officer of Otis Elevator from 2001 to 2005 and Vice President and Chief Financial Officer of Carrier Corporation from 1996 to 2001 • Various positions within Price Waterhouse (now PricewaterhouseCoopers LLP) from 1971 to 1993, serving as an audit partner from 1984 to 1993 • Member of the Boards of Directors and Audit Committees of Belden Inc. and Kaman Corporation and the Chairman of the Audit Committee for Belden Inc. Director Qualifications and Skills: Mr. Minnich, through his background as a former Audit Partner of Price Waterhouse and Chief Financial Officer of a publicly-traded company, provides the Board with substantial financial expertise. He also brings to the Board a familiarity with the challenges facing large, international manufacturing companies. Martin H. Richenhagen, age 67, has been Chairman of the Board of Directors since August 2006 and has served as President and Chief Executive Officer of the Company since July 2004. • Member of the Board of Directors, Chairman of Audit and member of the Officers & Directors Compensation Committee for PPG Industries, Inc. • Member of the Board of Directors, Compensation and Governance & Nominating Committees for Linde PLC. Mr. Richenhagen also served as a director of Praxair, Inc. from 2015 until the business combination of Praxair, Inc. and Linde AG. • Member of the Board of Directors for American Institute for Contemporary German Studies • Member of the Board of Directors for Metro Atlanta Chamber of Commerce • • • • • • Former Member of President’s Advisory Council on Doing Business in Africa for the United States Department of Commerce Former Chairman of the German American Chambers of Commerce of the United States Former Chairman of the Board and Lifetime Honorary Director of the Association of Equipment Manufacturers (AEM) Former Executive Vice President of Forbo International SA, a flooring material business based in Switzerland, from 2003 to 2004 Former Group President of Claas KGaA mbH, a global farm equipment manufacturer and distributor, from 1998 to 2002 Former Senior Executive Vice President for Schindler Deutschland Holdings GmbH, a worldwide manufacturer and distributor of elevators and escalators, from 1995 to 1998 Director Qualifications and Skills: In addition to his fourteen years of experience as the Company’s Chief Executive Officer, Mr. Richenhagen brings to the Board substantial experience in the agricultural equipment industry. His business and leadership acumen as both a former Executive Vice President and current Chief Executive Officer provides the Board with an informed resource for a wide range of disciplines, from sales and marketing to broad business strategies. Gerald L. Shaheen, age 75, has been a director of the Company since October 2005. • Member of the Board of Trustees and Audit Committee of the Colonial Williamsburg Foundation • Chairman of the Advisory Board of the Illinois Neurological Institute • Board member, Audit Committee Chairman and past Chairman of the U.S. Chamber of Commerce • Numerous marketing and general management positions for Caterpillar Inc., both in the United States and Europe, including Group President from 1998 until his retirement in January 2008 • • Former Chairman of the Board of Trustees of Bradley University Former member of Board of Directors of the Ford Motor Company Director Qualifications and Skills: Mr. Shaheen’s background in management of a global heavy equipment manufacturer brings to the Board particular knowledge of the Company’s industry, as well as a necessary perspective of the 5 challenges facing large, publicly-traded companies. His work with the U.S. Chamber of Commerce also provides the Board with a wealth of knowledge related to international commerce and trade issues. Mallika Srinivasan, age 60, has been a director of the Company since July 2011. • Chairman and Managing Director of Tractors and Farm Equipment Limited, the second largest agricultural tractor manufacturer in India, since December 2019 and previously Chairman and Chief Executive Officer since 2011 • Various positions at Tractors and Farm Equipment Limited since 1981, including Director (1994 to 2011), Vice President (1991 to 1994) and General Manager – Planning & Coordination (1986 to 1991) • Chairman and member of the Board of Directors of Tata Steel Limited (India) • Former member of the Board of Directors of Tata Global Beverages Limited (India) • Member of the Board of Medical Research Foundation • Member of the Global Board of the U.S. Chamber of Commerce’s U.S. India Business Council • • Former President of the Tractor Manufacturers Association of India, the Madras Management Association and the Madras Chamber of Commerce & Industry Former member of the Board of Governors of the Indian Institute of Technology, Madras and the Indian Institute of Management, Tiruchirappalli Director Qualifications and Skills: Ms. Srinivasan’s expertise in strategy, extensive leadership experience in the farm equipment industry and knowledge of operations in India and other developing markets provide an important perspective and contribution to the Board. The Board recommends a vote “FOR” the nominees set forth above. Director Independence BOARD OF DIRECTORS AND CORPORATE GOVERNANCE In accordance with the rules of the NYSE, the Board has adopted categorical standards to assist it in making determinations of its directors’ independence. The Board has determined that in order to be considered independent, a director must not: • • • • • • be an employee of the Company or have an “immediate family member,” as that term is defined in the General Commentary to Section 303A.02(b) of the NYSE rules, who is an executive officer of the Company at any time during the preceding three years; receive or have an immediate family member who receives or solely own any business that receives during any twelve-month period within the preceding three years direct compensation from the Company or any subsidiary or other affiliate in excess of $120,000, other than for director and committee fees and pension or other forms of deferred compensation for prior service to the Company or, solely in the case of an immediate family member, compensation for services to the Company as a non-executive employee; be a current partner or current employee of a firm that is the internal or external auditor of the Company or any subsidiary or other affiliate, or have an immediate family member that is a current partner or current employee of such a firm who personally works on an audit of the Company or any subsidiary or other affiliate; have been or have an immediate family member who was at any time during the preceding three years a partner or employee of such an auditing firm who personally worked on an audit of the Company or any subsidiary or other affiliate within that time; be employed or have an immediate family member that is employed either currently or at any time within the preceding three years as an executive officer of another company in which any present executive officers of the Company or any subsidiary or other affiliate serve or served at the same time on the other company’s Compensation Committee; or be a current employee or have an immediate family member that is a current executive officer of a company that has made payments to or received payments from the Company or any subsidiary or other affiliate for property or services in an amount which, in any of the preceding three years of such other company, exceeds (or in the current year of such other company is likely to exceed) the greater of $1.0 million or two percent of the other company’s consolidated gross revenues for that respective year. 6 In addition, in order to be independent for purposes of serving on the Audit Committee, a director may not: • • accept any consulting, advisory or other compensatory fee from the Company or any subsidiary; or be an “affiliated person,” as that term is used in Section 10A(m)(3)(B)(ii) of the Securities Exchange Act of 1934 (the “Exchange Act”), of the Company or any of its subsidiaries. Finally, in order to be independent for purposes of serving on the Compensation Committee, a director may not: • • be a current or former employee or former officer of the Company or an affiliate or receive any compensation from the Company other than for services as a director; receive remuneration from the Company or an affiliate, either directly or indirectly, in any capacity other than as a “director,” as that term is defined in Section 162(m) of the Internal Revenue Code (“IRC”); or • have an interest in a transaction required under SEC rules to be described in the Company’s proxy statement. These standards are consistent with the standards set forth in the NYSE rules, the IRC and the Exchange Act. In applying these standards, the Company takes into account the interpretations of, and the other guidance available from, the NYSE. In affirmatively determining the independence of any director who will serve on the Compensation Committee, the Board of Directors considers all factors specifically relevant to determining whether such director has a relationship to the Company which is material to that director’s ability to be independent from management in connection with the duties of the Compensation Committee member, including the independence factors set forth in the NYSE rules. Based upon the foregoing standards, the Board has determined that all of its directors are independent in accordance with these standards except for Mr. Richenhagen and Ms. Srinivasan, and that none of the independent directors has any material relationship with the Company, other than as a director or stockholder of the Company. The Company and Tractors and Farm Equipment Limited (“TAFE”) are parties to a Letter Agreement, dated April 24, 2019, that replaces the previous Letter Agreement, dated August 29, 2014 (the “Letter Agreement”), regarding the current and future accumulation by TAFE of shares of the Company’s common stock and certain governance matters, including the Company’s nomination of a director candidate selected by TAFE. TAFE’s proposed director candidate for 2020 is Ms. Srinivasan, TAFE’s Chairman and Managing Director, and Ms. Srinivasan has been nominated for election by the Company’s Board of Directors. See “Certain Relationships and Related Party Transactions” below for additional information. 7 Committees of the Board of Directors The Board has delegated certain functions to six standing committees: an Executive Committee, an Audit Committee, a Compensation Committee, a Finance Committee, a Governance Committee and a Succession Planning Committee. Each of the committees has a written charter. The Board has determined that each member of the Audit, Compensation and Governance Committees is an independent director under the applicable rules of the IRC, NYSE and SEC with respect to such committees. The following is a summary of the principal responsibilities and other information regarding each of the committees: Committee Executive Committee Audit Committee Compensation Committee Finance Committee Governance Committee Principal Responsibilities • Is authorized, between meetings of the Board, to take such actions in the management of the business and affairs of the Company which, in the opinion of the Executive Committee, should not be postponed until the next scheduled meeting of the Board, except as limited by the General Corporation Law of the State of Delaware, the rules of the NYSE, the Company’s Certificate of Incorporation or By-Laws or other applicable laws or regulations. • Assists the Board in its oversight of the integrity of the Company’s consolidated financial statements, the Company’s compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence and the performance of the Company’s internal audit function and independent registered public accounting firm. • Reviews the Company’s internal accounting and financial controls, considers other matters relating to the financial reporting process and safeguards of the Company’s assets and produces an annual report of the Audit Committee for inclusion in the Company’s proxy statement. • The Board has determined that Mr. Minnich is an “audit committee financial expert,” as that term is defined under regulations of the SEC. • The report of the Audit Committee for 2019 is set forth under the caption “Audit Committee Report.” • Management periodically meets with the Company’s Audit Committee and reviews risks and relevant strategies. • Is charged with executing the Board’s overall responsibility for matters related to Chief Executive Officer and other executive compensation, including assisting the Board in administering the Company’s compensation programs and producing an annual report of the Compensation Committee on executive compensation for inclusion in the Company’s proxy statement. • Has retained Willis Towers Watson to advise on current trends and best practices in compensation. • The report of the Compensation Committee for 2019 is set forth under the caption “Compensation Committee Report.” • Assists the Board in the oversight of the financial management of the Company including: the capital structure of the Company; the Company’s global financing strategies, objectives and plans; the Company’s credit profile and ratings; capital expenditure and investment programs of the Company; the Company’s interests in finance joint ventures; and the Company’s annual budget process and review. • Assists the Board in fulfilling its responsibilities to stockholders by: identifying and screening individuals qualified to become directors of the Company, consistent with independence, diversity and other criteria approved by the Board, and recommending candidates to the Board for all directorships and for service on the committees of the Board; developing and recommending to the Board a set of corporate governance principles and guidelines applicable to the Company; and overseeing the evaluation of the Board. Succession Planning Committee • Assists the Board with respect to selecting, developing, evaluating and retaining the Chief Executive Officer, executive officers and key talent; and • Manages the succession planning process in the event the current Chief Executive Officer cannot continue in the role. 8 Committee Composition and Meetings The following table shows the current membership of each committee and the number of meetings held by each committee during 2019. The Company will determine the composition and chair positions of the respective committees for 2020 following the Annual Meeting. Director Roy V. Armes Michael C. Arnold(1) Sondra L. Barbour P. George Benson Suzanne P. Clark(2) Wolfgang Deml George E. Minnich Martin H. Richenhagen Gerald L. Shaheen(3) Mallika Srinivasan Hendrikus Visser(4) Total meetings in 2019 Executive Audit Compensation Finance Governance X X X Chair X 13 X X X Chair X X - X X X X Chair 7 X X X Chair 4 X Chair X X 6 Succession Planning X X Chair X X X 2 (1) Mr. Arnold will serve as the Chair of the Finance Committee effective April 30, 2020. (2) Ms. Clark will serve as the Chair of the Compensation Committee effective April 30, 2020. (3) Mr. Shaheen will no longer serve as the Chair or as a member of the Compensation Committee effective April 30, 2020. (4) Mr. Visser will not stand for re-election as of April 30, 2020. During 2019, the Board held eight meetings and each director attended at least 75% of the aggregate number of meetings of the Board and respective committees on which he or she served while a member thereof. Identification and Evaluation of Director Nominees With respect to the Governance Committee’s evaluation of nominee candidates, including those recommended by stockholders, the committee has no formal requirements or minimum standards for the individuals that are nominated. Rather, the committee considers each candidate on his or her own merits. However, in evaluating candidates, there are a number of factors that the committee generally views as relevant and is likely to consider to ensure the entire Board, collectively, embraces a wide variety of characteristics, including: • • • • career experience, particularly experience that is germane to the Company’s business, such as with agricultural products and services, legal, human resources, finance and marketing experience; experience serving on other boards of directors or in the senior management of companies that have faced issues generally of the level of sophistication that the Company faces; contribution to diversity of the Board; integrity and reputation; • whether the candidate has the characteristics of an independent director; • • • academic credentials; other obligations and time commitments and the ability to attend meetings in person; and current membership on the Company’s Board — our Board values continuity (but not entrenchment). The Governance Committee does not assign a particular weight to these individual factors. Similarly, the committee does not expect to see all (or even more than a few) of these factors in any individual candidate. Rather, the committee looks for a mix of factors that, when considered along with the experience and credentials of the other candidates and existing directors, will provide stockholders with a diverse and experienced Board. The committee strives to recommend candidates who each bring a unique perspective to the Board in order to contribute to the collective diversity of the Board. Although the Company has not adopted a specific diversity policy, the Board believes that a diversity of experience, gender, race, ethnicity and age contributes to effective governance over the affairs of the Company for the benefit of its stockholders. With respect to the identification of nominee candidates, the committee has not developed a single, formalized process. Instead, its members and 9 the Company’s senior management generally recommend candidates whom they are aware of personally or by reputation or may utilize outside consultants to assist in the process. The Governance Committee welcomes recommendations for nominations from the Company’s stockholders and evaluates stockholder nominees in the same manner that it evaluates a candidate recommended by other means. In order to make a recommendation, the committee requires that a stockholder send the committee: • a resume for the candidate detailing the candidate’s work experience and academic credentials; • written confirmation from the candidate that he or she (i) would like to be considered as a candidate and would serve if nominated and elected, (ii) consents to the disclosure of his or her name, (iii) has read the Company’s Global Code of Conduct (the “Code”) and that during the prior three years has not engaged in any conduct that, had he or she been a director, would have violated the Code or required a waiver, (iv) is, or is not, “independent” as that term is defined in the committee’s charter, and (v) has no plans to change or influence the control of the Company; • • • the name of the recommending stockholder as it appears in the Company’s books, the number of shares of common stock that are owned by the stockholder and written confirmation that the stockholder consents to the disclosure of his or her name. (If the recommending person is not a stockholder of record, he or she should provide proof of share ownership); personal and professional references for the candidate, including contact information; and any other information relating to the candidate required to be disclosed in solicitations of proxies for election of directors or as otherwise required, in each case, pursuant to Regulation 14A of the Exchange Act. The foregoing information should be sent to the Governance Committee, c/o Corporate Secretary, AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096, who will forward it to the chairperson of the committee. The advance notice provisions of the Company’s By-Laws provide that for a proposal to be properly brought before a meeting by a stockholder, such stockholder must disclose certain information and give the Company timely notice of such proposal in written form meeting the requirements of the Company’s By-Laws no later than 60 days and no earlier than 90 days prior to the anniversary date of the immediately preceding Annual Meeting of stockholders. The committee does not necessarily respond directly to a submitting stockholder regarding recommendations. Board Leadership Structure Mr. Richenhagen, who is also the Chief Executive Officer of the Company, serves as Chairman of the Board, and Mr. Shaheen serves as Lead Director of the Board. The Company holds executive sessions of its non-management directors at each regular meeting of its Board. The Lead Director presides over executive sessions and at all meetings of the Board in the absence of the Chairman, provides input to the Chairman on setting Board agendas, generally approves information sent to the Board (including meeting schedules to assure sufficient discussion time for all agenda items), ensures that he is available for consultation and direct communication at the request of major stockholders, leads the performance evaluation process of the Chief Executive Officer and has the authority to call meetings of the independent directors. The Board reviews the Company’s board leadership structure annually. As part of this process, the Board considered the structures used by peer companies, alternative structures and the effectiveness of the Company’s current structure. The Board believes that having the Chief Executive Officer serve as Chairman is important because it best reflects the Board’s intent that the Chief Executive Officer function as the Company’s overall leader, while the Lead Director provides independent leadership to the directors and serves as an intermediary between the independent directors and the Chairman. The resulting structure sends a message to our employees, customers and stockholders that we believe in having strong, unifying leadership at the highest levels of management. At the same time, having a Lead Director with a well-defined role provides an appropriate level of independent oversight and an effective channel for communications when needed. The Board of Directors has approved the waiver of the mandatory retirement age of 75 for Mr. Shaheen by one year. He will continue to serve as Lead Director until April 22, 2021. Risk Oversight The Company’s management maintains a risk assessment process that identifies the risks that face the Company that management considers the most significant. The risk assessment process also considers appropriate strategies to mitigate those risks. Management periodically meets with the Company’s Audit Committee and reviews such risks and relevant strategies. 10 Corporate Governance Principles, Committee Charters and Global Code of Conduct The Company provides various corporate governance and other information on its website. This information, which is also available in printed form to any stockholder of the Company upon request to the Corporate Secretary, includes the following: • • our corporate governance principles and charters for the Audit, Compensation, Executive, Finance, Governance and Succession Planning Committees of the Board, which are available under the headings “Governance Principles” and “Charters of the Committees of the Board,” respectively, in the “Corporate Governance” section of our website located under “Investors;” and the Company’s Global Code of Conduct, which is available under the heading “Global Code of Conduct” in the “Corporate Governance” section of our website located under “Investors.” In addition, in the event of any waivers of the Global Code of Conduct with respect to certain executive officers, those waivers will be available in the “Corporate Governance” section of our website. Compensation Committee Interlocks and Insider Participation During 2019, Messrs. Armes, Minnich and Shaheen (Chairman) and Mses. Barbour and Clark served as members of the Compensation Committee. No member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries during 2019. None of the Company’s executive officers serve on the board of directors of any company of which any director of the Company serves as executive officer. Director Compensation The following table provides information concerning the compensation of the members of the Board for the most recently completed year. As reflected in the table, each non-employee director received an annual base retainer of $120,000 plus $150,000 in restricted shares of the Company’s common stock for Board service. Committee chairmen received an additional annual retainer of $15,000 (or $25,000 for the chairman of the Audit Committee and $20,000 for the chairman of the Compensation Committee). Mr. Shaheen, who was the Lead Director in 2019, also received an additional annual $30,000 Lead Director’s fee. Each non-employee director received an additional annual retainer of $6,000 if they served on three or more board committees. The Company does not have any consulting arrangements with any of its directors. Name Roy V. Armes Michael C. Arnold Sondra L. Barbour P. George Benson Suzanne P. Clark Wolfgang Deml George E. Minnich Gerald L. Shaheen Mallika Srinivasan Hendrikus Visser Total 2019 DIRECTOR COMPENSATION Fees Earned or Paid in Cash ($) Stock Awards(1) ($) All Other Compensation(2) ($) Total ($) 120,000 121,125 82,088 135,000 120,000 135,000 151,000 176,000 120,000 141,000 1,301,213 150,000 150,000 — 150,000 150,000 150,000 150,000 150,000 150,000 150,000 1,350,000 — 655 — 1,302 — 4,216 809 — — 5,997 12,979 270,000 271,780 82,088 286,302 270,000 289,216 301,809 326,000 270,000 296,997 2,664,192 (1) The Long-Term Incentive Plan provides for annual restricted stock grants of the Company’s common stock to all non-employee directors. For 2019, each non-employee director was granted $150,000 in restricted stock. All restricted stock grants are restricted as to transferability for a period of one year following the award. In the event a director departs from the Board, the non-transferability period expires immediately. The 2019 annual grant occurred on April 25, 2019. The total grant on April 25, 2019 was 19,386 shares, or 2,154 shares per director. The amounts above reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation-Stock Compensation” (“ASC 718”). After shares were withheld for income tax purposes, each director held the following shares as of December 31, 2019 related to this grant: Mr. Armes — 2,154 shares; Mr. Arnold — 1,615 shares; Mr. Benson — 1,292 shares; Ms. Clark — 1,507 shares; Mr. Deml — 1,292 shares; Mr. Minnich — 1,292 shares; Mr. Shaheen — 1,292 shares; Ms. Srinivasan — 2,154 shares; and Mr. Visser — 1,507 shares. (2) Relates to travel expenses incurred by spouses to accompany board members to a business-related event. 11 Director Attendance at the Annual Meeting The Board has adopted a policy that all directors on the Board are expected to attend Annual Meetings of the Company’s stockholders. All of the directors on the Board, except for Messrs. Armes and Visser, attended the Company’s previous Annual Meeting held in April 2019. Stockholder Communication with the Board of Directors The Company encourages stockholders and other interested persons to communicate with members of the Board. Any person who wishes to communicate with a particular director or the Board as a whole, including the Lead Director or any other independent director, may write to those directors in care of Corporate Secretary, AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096. The correspondence should indicate the writer’s interest in the Company and clearly specify whether it is intended to be forwarded to the entire Board or to one or more particular directors. The Corporate Secretary will forward all correspondence satisfying these criteria. 12 PROPOSAL NUMBER 2 NON-BINDING ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NEOS The Board is submitting a “say-on-pay” proposal for stockholder consideration. While the vote on executive compensation is non-binding and solely advisory in nature, the Board and the Compensation Committee will review the voting results and seek to determine the causes of any negative voting result to better understand any issues and concerns that our stockholders may have. We intend to hold annual say-on-pay votes. Stockholders who want to communicate with the Board or management regarding compensation-related matters should refer to “Stockholder Communication with the Board of Directors” in this proxy statement for additional information. The Board recommends that stockholders vote to approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers (“NEOs”), as described in this proxy statement. Compensation Philosophy and Program Design The Company’s compensation philosophy and program design is intended to support the Company’s business strategy and align executives’ interests with those of stockholders and employees (i.e., pay for performance). A significant portion of the Company’s executive compensation opportunity is related to factors that directly and indirectly influence stockholder value. The Company believes that as an executive’s responsibilities increase, so should the proportion of his or her total pay comprised of annual incentive cash bonuses and long-term incentive (“LTI”) compensation, which supports and reinforces the Company’s pay for performance philosophy. Best Practices in Executive Compensation The Compensation Committee regularly reviews best practices related to executive compensation to ensure alignment with the Company’s compensation philosophy, business strategy and stockholder focus. The Company’s executive compensation programs consist of the following, several features of which were added in response to stockholder feedback: • A formal compensation philosophy approved by the Compensation Committee that targets executive’s total compensation levels (including NEOs) at the median (or 50th percentile) of the market and provides opportunity for upside compensation levels for excellent performance; • A well-defined peer group of similar and reasonably-sized industrial and manufacturing comparators to benchmark NEO and other officer compensation; • An annual incentive compensation plan (“IC Plan”) that includes a minimum net income threshold that must be met before a payout is earned, a maximum payout level of 200% of target, and multiple performance measures that drive stockholder value and improvement in operational results, which mitigate too heavy of a focus on any one performance measure in particular; • A balanced long-term incentive plan (“LTI Plan”) consisting of a performance share plan, which comprises approximately 60% of an NEO’s target LTI award, restricted stock units (“RSUs”), which comprises approximately 20% of an NEO’s target LTI award, and a grant of stock-settled stock appreciation rights, which comprises approximately 20% of an NEO’s target LTI award. Each LTI vehicle contains a strong performance or retention orientation and aligns closely with stockholder interests; • Beginning in 2020, a performance-based adjustment of RSU awards; • Beginning with 2018, awards under the LTI Plan, a so-called “double trigger” equity vesting in the event of change of control; • A clawback policy, which allows the Company to take remedial action against an executive if the Board determines that an executive’s misconduct contributed to the Company having to restate its financial statements; • Stock ownership requirements that encourage executives to own a specified level of stock, which emphasizes the alignment of their interests with those of stockholders; • Modest perquisites for executives (including NEOs); • A plan design that mitigates the possibility of excessive risk that could harm long-term stockholder value; • For new executive employment agreements beginning in 2017, no gross-ups for excise taxes on severance payments due to a change of control; and • A conservative approach to share usage associated with our stock compensation plans. 13 When the Compensation Committee diverges from these practices - one variance is described below - it does so only after careful consideration and input from its compensation consultant. Ultimately, the Compensation Committee has and will continue to take action to structure the Company’s executive compensation practices in a manner that is consistent with its compensation philosophy, business strategy and stockholder focus. Company Performance The agricultural equipment industry is cyclical, with sales largely dependent on the health of the overall farm economy, which is influenced by commodity prices and farm income. Industry demand, which was projected to improve modestly in 2019, was lower than 2018. However, as a result of cost containment and other margin improvement programs implemented by management, our adjusted operating margins improved in 2019 compared to 2018. This result compares favorably to the decline in operating margins experienced by some of our key competitors. We also generated substantial cash flow from operations in excess of our target in 2019. Compensation actions taken for NEOs in 2019 include: • Modest merit increases of base compensation, other than in connection with promotions; • IC Plan payouts for corporate goal achievement at 130% of target; • LTI Plan payouts at 200% of target for the 2017-2019 three-year performance cycle (which targets were set during an industry low point); and • Modification of performance metrics to focus on margin improvement. Over the past several years, the Company engaged in discussions with stockholders regarding the Company’s compensation philosophy and programs, and it received comments and feedback on a number of matters. As part of these outreach efforts, we held in-person or telephonic meetings with stockholders representing a significant portion of the Company’s outstanding shares. Overall, the feedback was positive. Based upon that feedback, the Compensation Committee has made various changes. For example, beginning in 2020, the adjustment of RSU awards will be based on our achievement of operating margin improvement relative to an agricultural equipment and industrial company peer group in order to improve pay-for-performance alignment by putting a portion of the RSU award at risk. The “Compensation Discussion and Analysis” section of this proxy statement and the accompanying tables and narrative provide a comprehensive review of the Company’s NEO compensation objectives, programs and rationale. We urge you to read this disclosure before voting on this proposal. We are asking our stockholders to indicate their support for the Company’s NEO compensation as described in this proxy statement. This proposal gives our stockholders the opportunity to express their views on the Company’s NEO compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s NEOs and the philosophy, policies and practices thereof described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting: “RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2019 Summary Compensation Table and the other related tables and accompanying narrative set forth in this Proxy Statement.” The Board recommends a vote “FOR” the non-binding advisory resolution to approve the compensation of the Company’s NEOs. 14 PROPOSAL NUMBER 3 RATIFICATION OF COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020 The Company’s independent registered public accounting firm is appointed annually by the Audit Committee. The Audit Committee examines a number of factors when selecting a firm, including the qualifications, staffing considerations, and the independence and quality controls of the firms considered. The Audit Committee has appointed KPMG LLP as the Company’s independent registered public accounting firm for 2020. KPMG LLP served as the Company’s independent registered public accounting firm for 2019 and is considered to be well-qualified. In view of the difficulty and expense involved in changing independent registered public accounting firms on short notice, should the stockholders not ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2020 under this proposal, it is contemplated that the appointment of KPMG LLP for 2020 will be permitted to stand unless the Board finds other compelling reasons for making a change. Disapproval by the stockholders will be considered a recommendation that the Board select another independent registered public accounting firm for the following year. A representative of KPMG LLP is expected to be present at the Annual Meeting and will be given the opportunity to make a statement, if they desire, and to respond to appropriate questions. The Board recommends a vote “FOR” the ratification of the Company’s independent registered public accounting firm for 2020. OTHER BUSINESS The Board does not know of any matters to be presented for action at the Annual Meeting other than the election of directors, the non-binding advisory resolution to approve the compensation of the Company’s NEOs, and the ratification of the Company’s independent registered public accounting firm for 2020. If any other business should properly come before the Annual Meeting, the persons named in the accompanying proxy card intend to vote thereon in accordance with their best judgment. 15 PRINCIPAL HOLDERS OF COMMON STOCK The following table sets forth certain information as of March 20, 2020 regarding persons or groups known to the Company who are, or may be deemed to be, the beneficial owner of more than five percent of the Company’s common stock. This information is based upon SEC filings by the individual and entities listed below, and the percentage given is based on 75,054,096 shares outstanding. Name and Address of Beneficial Owner Mallika Srinivasan Old No. 35, New No. 77, Nungambakkam High Road Chennai 600 034, India Tractor and Farm Equipment Limited Old No. 35, New No. 77, Nungambakkam High Road Chennai 600 034, India BlackRock, Inc. 55 East 52nd Street New York, NY 10022 The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 Shares of Common Stock 12,167,373 (1) Percent of Class 16.2% 12,150,152 16.2% 6,226,657 (2) 8.3% 5,905,651 (3) 7.9% (1) Includes shares held individually (17,221 shares) and through TAFE and TAFE Motors and Tractors Limited (12,150,152 shares). Based upon SEC filings made by Ms. Srinivasan. (2) BlackRock, Inc. has sole voting power with respect to 5,842,380 of its shares and sole dispositive power with respect to all 6,226,657 of its shares. (3) The Vanguard Group has sole voting power with respect to 32,182 of its shares, shared voting power with respect to 9,544 of its shares, sole dispositive power with respect to 5,872,145 of its shares and shared dispositive power with respect to 33,506 of its shares. 16 The following table sets forth information regarding beneficial ownership of the Company’s common stock by the Company’s directors, the director nominees, the Chief Executive Officer of the Company, the Chief Financial Officer of the Company, the other NEOs and all executive officers and directors as a group, all as of March 20, 2020. Except as otherwise indicated, each such individual has sole voting and investment power with respect to the shares set forth in the table. Name of Beneficial Owner Roy V. Armes Michael C. Arnold Sondra L. Barbour P. George Benson Suzanne P. Clark Wolfgang Deml George E. Minnich Gerald L. Shaheen Mallika Srinivasan(2) Hendrikus Visser Andrew H. Beck Eric P. Hansotia Martin H. Richenhagen (3) Rob Smith Hans-Bernd Veltmaat All executive officers and directors as a group (24 persons) * Less than one percent Shares of Common Stock(1) Shares That May be Acquired Within 60 Days Percent of Class 11,754 11,814 — 16,569 2,846 23,689 19,160 17,380 12,167,373 24,236 112,779 31,566 527,398 90,796 78,757 13,352,791 — — — — — — — — — — — — — — — — * * * * * * * * 16.2% * * * * * * 17.8% (1) Includes the following number of restricted shares of the Company’s common stock as a result of restricted stock grants under the Company’s incentive plans by the following individuals: Mr. Armes — 2,154; Mr. Arnold — 1,615; Mr. Benson — 1,292; Ms. Clark — 1,507; Mr.Deml — 1,292; Mr. Minnich — 1,292; Mr. Shaheen — 1,292; Ms. Srinivasan — 2,154; Mr. Visser — 1,507; All directors as a group — 14,105. (2) Includes shares held individually (17,221 shares) and through TAFE and TAFE Motors and Tractors Limited (12,150,152 shares). Ms. Srinivasan is the Chairman and Managing Director of TAFE and the Company owns a 23.75% interest in TAFE. (3) Mr. Smith resigned from the Company effective January 31, 2020. Mr Smith s beneficial ownership of the Company s common stock is as of August 12, 2019, the date of his most recent Form 4 filing. , , 17 The following table sets forth information as of March 20, 2020, with respect to each person who is an executive of the EXECUTIVE COMPENSATION Company. Name Martin H. Richenhagen Bradley C. Arnold Roger N. Batkin Andrew H. Beck Stefan Caspari Gary L. Collar Robert B. Crain Torsten R.W. Dehner Helmut R. Endres Luis F.S. Felli Eric P. Hansotia Lucinda B. Smith Rob Smith Josip T. Tomasevic Hans-Bernd Veltmaat Age 67 50 51 56 42 63 60 53 64 54 51 53 54 52 65 Chairman of the Board, President and Chief Executive Officer Senior Vice President — Global Crop Cycle and Fuse Connected Services Positions Senior Vice President — General Counsel and Corporate Secretary Senior Vice President — Chief Financial Officer Senior Vice President and General Manager, Grain and Protein Senior Vice President and General Manager, Asia/Pacific/Africa Senior Vice President and General Manager, North America Senior Vice President and General Manager, Europe/Middle East Senior Vice President — Engineering Senior Vice President and General Manager, South America Senior Vice President — Chief Operating Officer Senior Vice President — Global Business Services Former Senior Vice President and General Manager, Europe/Middle East Senior Vice President — Chief Procurement Officer Senior Vice President — Chief Supply Chain Officer Bradley C. Arnold has been Senior Vice President — Global Crop Cycle and Fuse Connected Services since January 2020. Mr. Arnold was Vice President, Global Crop Cycle and Fuse from January 2019 to December 2019, General Manager of Precision Planting LLC from 2014 to 2019, Commercial Services Director from 2012 to 2014 and Director of International Business Development from 2009 to 2012. Prior to joining Precision Planting LLC, Mr. Arnold held various leadership positions at Caterpillar Inc. Roger N. Batkin has been Senior Vice President — General Counsel and Corporate Secretary since January 2018. From 2013 to 2017, Mr. Batkin was Vice President, General Counsel and Corporate Secretary. Mr. Batkin was Vice President, Legal Services and Chief Compliance Officer for Europe/Africa/Middle East and Asia/Pacific from 2010 to 2013. Mr. Batkin was also Director of the Company’s U.K. Operations between 2009 and 2013. Prior to joining the Company, Mr. Batkin was an attorney with an international law firm. Andrew H. Beck has been Senior Vice President — Chief Financial Officer since June 2002. Mr. Beck was Vice President, Chief Accounting Officer from January 2002 to June 2002, Vice President and Controller from 2000 to 2002, Corporate Controller from 1996 to 2000, Assistant Treasurer from 1995 to 1996 and Controller, International Operations from 1994 to 1995. Stefan Caspari has been Senior Vice President and General Manager, Grain and Protein since January 2020. Mr. Caspari was Vice President and General Manager, Grain and Protein from April 2019 to December 2019, Vice President, Fuse Connected Services and Technology from 2017 to April 2019, Vice President, Global Strategy and Integration from 2015 to 2017 and Director, Strategy and Integration for Europe/Middle East from 2014 to 2016. Prior to joining the Company, Mr. Caspari held several leadership positions at Zurich Insurance Group Ltd. and Arthur D. Little consulting firm. Gary L. Collar has been Senior Vice President and General Manager, Asia/Pacific/Africa since January 2017. Mr. Collar was Senior Vice President and General Manager, Asia/Pacific from 2012 to 2016. Mr. Collar was Senior Vice President and General Manager, Europe/Africa/Middle East and Australia/New Zealand from 2009 until 2011 and Senior Vice President and General Manager Europe/Africa/Middle East and Asia/Pacific from 2004 to 2008. Mr. Collar was Vice President, Worldwide Market Development for the Challenger Division from 2002 until 2004. Between 1994 and 2002, Mr. Collar held various senior executive positions with ZF Friedrichshaven A.G., including Vice President Business Development, North America, from 2001 until 2002, and President and Chief Executive Officer of ZF-Unisia Autoparts, Inc., from 1994 until 2001. In addition, Mr. Collar is a member of the Board of Directors for Hillenbrand, Inc., a publicly traded company in the United States that designs, develops and manufactures engineered industrial equipment and funeral service products. Robert B. Crain has been Senior Vice President and General Manager, North America since January 2020. Mr. Crain was Senior Vice President and General Manager, Americas from 2015 to December 2019, and Senior Vice President and General Manager, North America from 2006 to 2014. Mr. Crain held several positions within CNH Global N.V. and its predecessors, 18 including Vice President of New Holland’s North America Agricultural Business, from 2004 to 2005, Vice President of CNH Marketing North America Agricultural business, from 2003 to 2004 and Vice President and General Manager of Worldwide Operations for the Crop Harvesting Division of CNH Global N.V. from 1999 to 2002. Mr. Crain is also an officer of the Association of Equipment Manufacturers. Torsten R.W. Dehner has been Senior Vice President and General Manager, Europe/Middle East since January 2020. Mr. Dehner was Vice President, Global Parts and Europe/Middle East Parts and Services from 2018 to December 2019, Vice President, Purchasing and Materials, Europe/Middle East - Commodity Director Powertrain & Perifery from 2015 to 2018, and Vice President, Purchasing and Materials, Europe/Middle East from 2010 to 2015. Prior to joining the Company, Mr. Dehner held a number of leadership positions at Behr GmbH & Co. KG. Helmut R. Endres has been Senior Vice President — Engineering since December 2011. Between 2006 and 2010, Mr. Endres was Chief Technological Officer and Vice President, Engineering, International Trucks and Engines for Navistar International Corporation. Between 1995 and 2006, Mr. Endres worked at Volkswagen (including the Audi division) in various roles, including Executive Director, Group Powertrain and Director, Gasoline Engines. He was a member of the Audi Executive Board’s product Strategy Committee and Chairman of the Volkswagen Group Powertrain Strategy Committee. Between 1982 and 1995, Mr. Endres was with FEV, Inc. in Germany serving in various gasoline and diesel engine engineering roles, including head of the European Business Unit, and leading the Combustion Technologies Divisions. Luis F.S. Felli has been Senior Vice President and General Manager, South America since January 2020. Mr. Felli joined the Company in 2018 as President, AGCO, South America. Prior to joining AGCO, Mr. Felli held several leadership positions including General Director of Unipar Indupa S.A.I.C. from February 2017 to November 2017, Commercial Operations Director for Eldorado Brasil Celulose S.A. from 2013 to 2017, Operations Vice President for Atvos Agroindustrial Investimentos S.A. from 2008 to 2013, and Executive Vice President for Braskem S.A. from 2006 to 2008. Mr. Felli began his career at FMC Corporation. Eric P. Hansotia has been Senior Vice President — Chief Operating Office since January 2019. He served as Senior Vice President, Global Crop Cycle and Fuse Connected Services, from 2015 to January 2019 and as Senior Vice President, Global Harvesting and Advanced Technology Solutions, from 2013 to 2015. Prior to joining AGCO, Mr. Hansotia held several positions within John Deere including Senior Vice President, Global Harvesting, from 2012 to 2013 and Vice President, Global Crop Care based in Mannheim, Germany from 2009 to 2012. Prior positions with John Deere include: from 2005 to 2009 — General Manager, Harvester Works; from 2004 to 2005 — Vice President, Global Forestry; and from 1993 to 2004 — various roles at John Deere. Lucinda B. Smith has been Senior Vice President — Global Business Services since March 2013. She is responsible for the functional management of all Human Resources and Information Technology organizations worldwide as well as for AGCO’s Shared Services Center in Budapest, Hungary. Ms. Smith was Senior Vice President — Human Resources from 2009 to 2013; Vice President, Global Talent Management & Rewards from May 2008 to December 2008; and Director of Organizational Development and Compensation from 2006 to 2008. From 2005 to 2006, Ms. Smith was Global Director of Human Resources for AJC International, Inc. Ms. Smith also held various domestic and global human resource management positions at Lend Lease Corporation, Cendian Corporation and Georgia-Pacific Corporation. Rob Smith was Senior Vice President and General Manager, Europe/Middle East from 2017 to January 2020. Mr. Smith was Senior Vice President and General Manager, Europe/Africa/Middle East from 2013 to 2016. Mr. Smith was the Vice President & General Manager of the global Engine Components Division for TRW Automotive from 2007 to 2013. He served as the Chairman of the Supervisory Board of TRW Automotive GmbH from 2009 to 2013. Prior to joining TRW, Mr. Smith served as Vice President of the Global Automotive Division at Tyco Electronics from 2005 to 2006, and Vice President & General Manager of Bombardier Transportation’s Aftermarket Parts and Material Repair and Overhaul business from 2002 to 2005. From 1993 to 2001, he served in various operations and supply chain roles in the global automotive industry with LucasVarity PLC, Lucas Industries PLC and BMW. Mr. Smith is a member of the Board of Directors and Chairman of the Technology Committee of FLSmidth & Co A/S in Copenhagen, Denmark. Josip T. Tomasevic has been Senior Vice President — Chief Procurement Officer since January 2019. From 2011 to 2018, Mr. Tomasevic was Vice President — Global Purchasing Materials. Prior to joining the Company, Mr. Tomasevic was Head of Corporate Purchasing at Claas KGaA mbH. Hans-Bernd Veltmaat has been Senior Vice President — Chief Supply Chain Officer since January 2012. Mr. Veltmaat serves on the Industry Executive Advisory Board for the Executive MBA in Supply Chain Management Program at the Swiss Federal Institute of Technology Zurich. Mr. Veltmaat was Senior Vice President — Manufacturing & Quality from 2008 to 2011. Mr. Veltmaat was Group Executive Vice President of Recycling Plants at Alba AG from 2007 to 2008. From 1996 to 2007, Mr. Veltmaat held various positions with Claas KGaA mbH in Germany, including Group Executive Vice President, a member of the Claas Group Executive Board and Chief Executive Officer of Claas Fertigungstechnik GmbH. 19 Introduction COMPENSATION DISCUSSION AND ANALYSIS The design and implementation of our compensation programs are intended to emphasize a strong pay-for-performance alignment, provide appropriate rewards and incentives to our NEOs at a reasonable cost to the Company and, at the same time, to do so in a manner consistent with the views expressed by our stockholders. We believe that our current programs, and the actions taken over the last several years, are consistent with this intent. Highlights include: • A continuation of compensation that is highly weighted - on average, approximately 75% - to variable or “at risk” compensation; • Targeting compensation at the median (50th percentile) of our peer group; • A continued focus on aligning incentives with corporate strategy; and • Extensive stockholder outreach and changes reflective of that process, including: Beginning in 2018, the implementation of “double trigger” vesting in connection with future equity awards; Elimination of excise tax gross-ups from future employment agreements; and Commencing in 2020, the addition of an adjustment to restricted stock unit (“RSU”) awards based upon operating margin improvement relative to an agricultural equipment and industrial company peer group and the addition of three-year cliff vesting (rather than annual vesting). Establishing appropriate executive compensation, particularly incentive compensation, is challenging due to the cyclical nature of the agricultural equipment industry. Our objective has been to provide targets that are achievable within the expected industry conditions during the performance period. We believe this approach maximizes our performance at all points in the cycle and, critically, supports retention of executives. We aim to establish performance targets for a fiscal year near the financial outlook communicated to investors at the start of that fiscal year. Over the past several years, agricultural equipment industry sales have stabilized and this has impacted our incentive compensation plan goal-setting process. The goals established reflect year-over-year increases, incorporating applicable rigor and stretch in incentive goal setting to ensure goals are aligned with current competitive market conditions. Below we describe our compensation philosophy, the compensation programs provided to our NEOs and the decision-making process followed in setting compensation for our NEOs during 2019. This discussion should be read in conjunction with the tables and related narratives that follow. Our NEOs for these purposes are: • Andrew H. Beck, Senior Vice President — Chief Financial Officer • Eric P. Hansotia, Senior Vice President — Chief Operating Officer • Martin H. Richenhagen, Chairman of the Board, President and Chief Executive Officer • Rob Smith, Former Senior Vice President and General Manager, Europe/Middle East • Hans-Bernd Veltmaat, Senior Vice President — Chief Supply Chain Officer At the 2019 Annual Meeting, our stockholders expressed disapproval of our executive compensation programs through their non-binding advisory vote, in which only 33% of shares voted in favor of our executive compensation policies and practices. Based upon our stockholder outreach and the recommendations of the major proxy advisory firms, we believe that this low level of support largely is responsive to the one-time retention award in 2018 for Mr. Richenhagen. During each of the last several years, we engaged in an outreach program with stockholders to discuss our compensation philosophy and programs and to receive comments and feedback on a number of matters. We value and seriously consider feedback from our stockholders. Our Compensation Committee Chairman participated in a number of stockholder meetings to answer questions and to provide his perspective on our compensation plans. Many important topics were discussed, including target-setting and maintaining a competitive pay structure during the industry down cycles. As part of these outreach efforts, we held in-person or telephonic meetings with stockholders representing a significant portion of our outstanding shares. The majority of stockholder feedback was positive and provided support for our overall compensation policy and decisions. We did make several changes to our compensation policies based on stockholder feedback, such as eliminating from future employment agreements the gross-up for excise taxes on severance payments due to a change in control, adopting a “double trigger” equity vesting in connection with future equity awards, modifying our peer group to better align with our current revenue size and, beginning in 2020, the adjustment of RSU awards based on our achievement of operating margin improvement relative to an agricultural equipment and industrial company peer group in order to improve pay-for-performance alignment by putting a portion of the RSU award at-risk. 20 Consistent with our commitment to executive compensation best practices, some of which are discussed in Proposal Number 2 above, the following executive compensation practices are in place: • The financial performance objectives in our annual and long-term incentive plans are reviewed and approved annually by the Compensation Committee; • Our annual and long-term incentive plans consist of multiple performance objectives, mitigating focus on any one objective in particular; • The vesting period for our NEOs’ stock-settled stock appreciation rights is 48 months, and the periods for performance shares and RSUs generally are 36 months; • Our NEOs (and directors) are subject to stock ownership requirements; • Compensation levels for our executives (including NEOs) generally are targeted at median levels of market competitiveness; • Our compensation programs support a conservative approach to share usage associated with our stock compensation plans; • The design of our compensation programs attempts to mitigate the possibility of excessive risk-taking that could harm the long-term value of AGCO; • For new executive employment agreements beginning in 2017, there is no gross-up for excise taxes on severance payments due to a change in control; • We adopted double-trigger equity vesting in the case of a change-in-control for equity awards made in 2018 and subsequent periods; and • We have a clawback provision in place that can require the return of any bonus or incentive compensation. Compensation Philosophy and Governance It is AGCO’s practice to compensate executive officers through a combination of cash and equity compensation, retirement programs and other benefits. Our primary objectives are to provide compensation programs that: • Are aligned with median market levels and competitive with companies of similar revenue size and complexity; • Align with stockholder interests; • Reward performance; • Attract and retain quality management; • Encourage executive stock ownership; • Mitigate excessive risk-taking; and • Are substantially consistent among our locations worldwide. AGCO’s compensation philosophy is reviewed regularly and most recently was updated and approved by the Compensation Committee in July 2019. The philosophy is intended to articulate our principles and strategy for total compensation and specific pay program elements. It is closely aligned with our business strategy and reflects performance attributes and, as such, ties executives’ interests to those of our stockholders and other employees. 21 We implement this compensation philosophy through five primary elements of compensation: Component Base Salary Annual Management Incentive Plan (“IC Plan”) Philosophy • Establishes the foundation of total compensation and supports attraction and retention of qualified staff • Facilitates alignment of management with corporate objectives to achieve outstanding performance and meet specific AGCO financial goals Strategy/Competitive Positioning • Generally targeted at median levels of other industrial companies of similar revenue and complexity • Target award opportunities competitive with median levels of other industrial companies of similar size and complexity, with minimum and maximum award opportunities ranging from 50% to 200% of target, respectively Long-Term Incentives (“LTI Plan”) • Engages management in achieving longer- term performance goals and making decisions in the best interests of stockholders • Target award opportunities competitive with median levels of other industrial companies of similar size and complexity Retirement Benefits • Supports the attraction and retention of key executives • Competitive with general market practices; consists of 401(k) and non-qualified benefits • For executives who became eligible to participate in the non-qualified benefits prior to August 1, 2015, these benefits consist of the Executive Nonqualified Pension Plan (“ENPP”), which for vesting requires executives to remain employed with the Company until attaining at least age 50 with ten years of service (five years of which must include participation in the ENPP) • For executives promoted or hired after August 1, 2015, those benefits consist of a nonqualified defined contribution plan Perquisites • Supports the attraction and retention of key • Minimal use, as appropriate executives As discussed elsewhere, on occasion, we have concluded that varying or additional awards were appropriate in light of special circumstances. We believe that as an executive’s responsibilities increase, so should the proportion of his or her total pay comprised of annual incentive cash bonuses and long-term incentive compensation. As illustrated below, on average over 75% of our NEO compensation was variable or “at risk” and tied to AGCO’s performance with the greatest portion associated with long-term incentives: When establishing compensation and performance criteria, goals are set that we believe reflect key areas of performance supporting our long-term success. We consider factors such as our current performance compared to industry peers, desired levels of performance improvement, and industry trends and conditions when determining performance expectations within our compensation plans. 22 Compensation Consultant Independence The Compensation Committee approves all compensation for executive officers, including the structure and design of the compensation programs. The Compensation Committee is responsible for retaining compensation consultants and determining the terms and conditions of their engagement, including fees. Since 2005, the Compensation Committee has engaged Willis Towers Watson, a globally recognized advisory, brokering and solutions company, to advise the Compensation Committee (and at times management) with respect to our compensation programs and to perform various related studies and projects, including market analysis and compensation program design. A Willis Towers Watson representative reports directly to the Compensation Committee as its compensation advisor. The Compensation Committee annually reviews the role of its compensation advisor and believes that the advisor is fully independent for purposes of providing on-going recommendations regarding executive compensation. In addition, and in conjunction with the SEC requirements that public companies formally review advisor independence, the Compensation Committee concluded that the compensation advisor is independent and provides candid, direct and objective advice to the Compensation Committee. To ensure independence: • The Compensation Committee directly hired and has the authority to terminate the compensation advisor; • The compensation advisor reports directly to the Compensation Committee and the chairperson; • The compensation advisor meets regularly and as needed with the Compensation Committee in executive sessions that are not attended by any of our officers; • The compensation advisor and the team at Willis Towers Watson have direct access to all members of the Compensation Committee during and between meetings; • No regular member of the Willis Towers Watson executive compensation team owns any stock of AGCO, other than possibly investments in mutual funds or other funds that are managed without the member’s input; and • The executive compensation advisor and team at Willis Towers Watson do not have any personal or business relationships with any member of the Compensation Committee or executive officer of AGCO. Willis Towers Watson provides the Compensation Committee with an annual update on its services and related fees. The Compensation Committee determines whether Willis Towers Watson’s services are performed objectively and free from the influence of management. With the full knowledge of the Compensation Committee, AGCO has retained a distinct and separate unit of Willis Towers Watson for other services, including broad-based employee retirement and benefit services, and specific projects within multiple countries for various Company subsidiaries, consisting primarily of actuarial services for our defined benefit plans and pension administration services. The Compensation Committee also closely examines the safeguards and steps Willis Towers Watson takes to ensure that its executive compensation consulting services are objective. For example: • Willis Towers Watson has separated its executive compensation consulting services into a single, segregated business unit within Willis Towers Watson; • Willis Towers Watson associates are subject to a comprehensive Code of Conduct and Ethics, which addresses issues including conflicts of interest and associates’ ownership and trading of client company stock, among other areas; • The compensation advisor receives no direct incentives based on other services Willis Towers Watson provides to AGCO; • The compensation advisor is not the Willis Towers Watson client relationship manager for AGCO; and • Neither the compensation advisor nor any member of the advisor’s team participates in any activities related to the services provided to AGCO by other Willis Towers Watson business units. For these reasons, the Compensation Committee does not believe that Willis Towers Watson’s services for AGCO’s employee retirement and benefit plans, or its specific projects, compromise its compensation advisor’s ability to provide the Compensation Committee with perspective and advice that is independent and objective. The total amount of fees for consulting services provided to the Compensation Committee in 2019 by its compensation advisor was approximately $300,000. The total amount of fees paid by AGCO to Willis Towers Watson in 2019 for all other services, excluding Compensation Committee services, was approximately $1,300,000. These other services are mainly related to actuarial services for our defined benefit plans and pension administration services and health and group benefits consulting. 23 Competitive Analyses We perform competitive market analyses with respect to cash compensation, long-term equity incentives and executive retirement programs. These analyses are conducted periodically and include a comparison to nationally recognized compensation surveys, as well as a comparison to a peer group of other industrial companies. These competitive analyses provide us with information regarding ranges and median compensation levels, as well as the types of compensation practices followed at other companies. The analyses are used to review, monitor and establish appropriate and competitive compensation guidelines, determine the appropriate mix of compensation programs and establish the specific compensation levels for our executives. The Compensation Committee performed an external market review in 2019 that examined the competitiveness of the Company’s NEOs’ total compensation. The analysis reviewed the dollar value of the compensation, as well as the mix of compensation between base salary, annual cash incentive bonus and LTI pay. The Compensation Committee’s goal is to provide base salary, target total cash compensation (e.g., base salary plus target bonus opportunity) and target total direct compensation (e.g., target total cash plus target LTI opportunity) for each NEO that is competitive with the market median, and the competitive market rate is based on published survey data for companies of similar revenue size and information from peer proxy statements, where applicable. The Compensation Committee uses the external market review to help it make informed decisions regarding NEO compensation. For the Chief Executive Officer, the Compensation Committee recognizes the critical nature of this role, his higher level of responsibility within the Company and his more pervasive influence over our performance and, therefore, provides market competitive levels of compensation that differ from levels of compensation paid to other NEOs, based on median market information and benchmarking. It is our philosophy to compensate Senior Vice Presidents (“SVPs”) relative to their particular function, scope and industry comparator. The Compensation Committee, in recognition of the collaborative efforts of the General Managers operating not only their respective businesses, but also our worldwide business, sets the compensation of all General Managers at similar levels. In Mr. Beck’s case, the Compensation Committee’s view is that the Chief Financial Officer should not be paid significantly more than the General Managers, which is consistent with our compensation philosophy and reinforced by the internal grouping of the Company’s executives. However, in recognition that external market data for Mr. Beck’s position is higher than external market data for the General Managers, he received a slightly larger LTI award in 2019. In the case of Mr. Veltmaat, the pay positioning of his role is targeted to approximate the upper end of the grade range due to the criticality of his role within the organization. As part of its regular process, the Compensation Committee reviewed our peer group in July 2019 to ensure that the included companies are appropriate comparators for determining whether total compensation for NEOs aligns with market. Industrial and other equipment manufacturers approximately one-half to two times AGCO’s revenue size are primarily considered by the Compensation Committee. No changes were made to the peer group. The Compensation Committee believes that the companies in the current peer group reflect AGCO’s size and align with our business and the markets in which we serve and operate as well as recruit talent. The composition of the current peer group (17 companies) is shown below: • BorgWarner Inc. • Cummins, Inc. • Dover Corporation • Flowserve Corporation • Illinois Tool Works Inc. • Masco Corporation • Rockwell Automation, Inc. • Navistar International Corporation • Stanley Black & Decker • Oshkosh Corporation • PACCAR Inc. • Terex Corporation • Trinity Industries, Inc. • Parker Hannifin Corporation • Textron Inc. • Ingersoll-Rand Company Limited • Pentair plc The Compensation Committee will continue to regularly review the composition of the peer group and make updates as needed. 24 Base Salary In April 2019, the Compensation Committee provided market-aligned base salary increases to our NEOs. No base salary increase was provided to Mr. Richenhagen, our Chief Executive Officer. His base salary remained at $1,385,942. Base salary increases for Messrs. Beck, Hansotia, Smith and Veltmaat ranged from 3% to 10%. Annual Cash Incentive Bonuses Incentive compensation is based on AGCO’s performance, as well as the contribution of executive officers through the leadership of their respective regional or functional areas. For 2019, incentive compensation awards for all NEO’s and senior vice presidents were based 100% on corporate goals for global alignment purposes. Incentive compensation opportunities are expressed as a percentage of the executive officer’s base salary. The annual award opportunities for the NEOs in 2019, all of which relate to corporate goals, are shown in the chart below: Name Mr. Beck Mr. Hansotia Mr. Richenhagen Mr. Smith Mr. Veltmaat Opportunity as a Percentage of Base Salary Minimum Award 50% 50% 70% 50% 45% Target Award Maximum Award 100% 100% 140% 100% 90% 200% 200% 280% 200% 180% In connection with the IC Plan, the Compensation Committee establishes three levels of performance (goals or objectives) at minimum, target and maximum levels, and final payout is based upon performance relative to these targets. The corporate objectives are set at the beginning of each year and approved by the Compensation Committee based upon a budget approved by the Finance Committee. However, unless a threshold adjusted earnings per share (“EPS”) goal is reached, no awards are paid regardless of performance relative to the other target goals. For the year ended December 31, 2019, the corporate objectives were based on targets for operating margin as a percentage of net sales and free cash flow. The calculation of these measures and corporate weightings are as follows: • Operating Margin as a Percentage of Net Sales: The percentage calculated when income from operations is divided by net sales (70% weight). This measure also excludes restructuring expenses and certain other approved items. • Free Cash Flow: Operating cash flow minus capital expenditures (30% weight). For 2019, targets for each of the measures for a 100% payout and AGCO’s performance are summarized below: Measure(1) Adjusted Operating Margin as a Percentage of Net Sales Free Cash Flow Weight Bonus Objective Performance 70% 30% 6.0% $270.0 6.0% $422.5 Percent Achieved 100% 156% Earned Award 100.0% 200.0% (1) Dollar amounts stated in millions; performance amounts reflect adjustments made in accordance with the awards. From 2018 to 2019, adjusted operating margin as a percentage of net sales increased from 5.4% to 6.0%. In establishing performance goals each year, the Compensation Committee sets goals that are calibrated to company performance expectations, incorporating rigor and stretch in these goals in order to drive outstanding performance. Industry demand was projected to improve modestly in 2019 compared to 2018, and we set our 2019 target performance goals consistent with our forecast for 2019, which also projected improved performance. The agricultural equipment industry is cyclical, with sales largely dependent on the health of the overall farm economy, which is influenced by commodity prices and farm income. Industry demand in 2019 ultimately was lower than 2018. Although industry demand decreased, cost containment and other margin improvement programs implemented by management positively impacted our operating margins in 2019 compared to 2018. The Compensation Committee believes that this reflects strong performance by the Company relative to our key competitors, who experienced declines in their operating margins during 2019. For 2019, the Compensation Committee determined that we performed at target with respect to our adjusted operating margin as a percentage of net sales and above target with respect to free cash flow. As a result, the corporate portion of bonuses paid to NEOs reflects, overall, approximately 130% of the established target. All SVPs are measured on corporate goals. For 2020, the Compensation Committee approved the continued use of operating margin as a percentage of net sales and free cash flow as the performance measures. The weighting of the operating margin metric reflects the importance the Company 25 has placed on margin improvement as a key to increasing Company performance and shareholder value. This approach is consistent with the feedback that we received from stockholders. The IC Plan also provides for payment of a pro rata portion of the participant’s bonus upon a change of control, as well as additional bonus payments to certain participants terminated without cause within two years of a change of control. This is further explained in “Severance Benefits and Change of Control.” Long-term Incentives We provide performance- and retention-based equity opportunities to the NEOs. LTI represents a significant component of total compensation and weighs heavily in the overall pay mix for executives. The overarching principles of the LTI Plan are: • LTI is performance-based and intended to engage executives in achieving longer-term goals and to make decisions in the best interests of stockholders; • Target award opportunities are generally competitive with median levels of other companies of similar size, industry and complexity; • Realizable gains with respect to each award are intended to vary with Company performance and stock price growth; and • Performance goals are aligned with stockholder interests and support the long-term success of AGCO. While awards under the LTI Plan generally are made annually, from time to time, the Compensation Committee may also utilize special incentives to support strategic initiatives and to strengthen retention of management. The following table summarizes the mix, performance measurements and general terms for each form of equity awarded to our NEOs for 2019 under our LTI Plan: LTI Mix Description Performance Measurements Vesting Period Restrictions / Expiration Competitive Positioning Performance Share Plan (“PSP”) 60% • Performance shares that are earned on the basis of AGCO’s performance versus pre-established goals for a three-year cycle • 50% Operating Margin • 50% Return on Invested Capital (“ROIC”) • The percentage level achievement is determined annually, with the ultimate award earned based upon the results over the three- year cycle • Vest in full at the end of the three-year cycle • Number of shares earned depends on performance • Converted to AGCO common stock upon vesting • Target award levels set at median level of market competitiveness Stock-Settled Stock Appreciation Rights (“SSARs”) 20% • SSARs provide the right to receive share appreciation over the grant price, payable in whole shares of AGCO common stock • Stock price appreciation Restricted Stock Units (“RSUs”) 20% • RSUs are full share equivalents, payable at the end of the vesting period • Stock price appreciation, as the total value of RSUs is influenced by stock price • Vest in equal installments • Vest in equal installments over four years over three years • Expire seven years from • N/A the grant date • Median level of market • Median level of market competitiveness competitiveness In January 2019, the Compensation Committee approved long-term incentive awards for 2019 eligible plan participants. Long-term incentive awards for the NEOs in 2019 are summarized in the table below under the caption “2019 Grants of Plan-Based Awards.” 26 In part based upon input during our stockholder outreach and given the desire to improve the pay-for-performance alignment of RSUs, beginning with awards in 2020, the number of RSUs received under each award will be further adjusted within a range of -25% to +25% based upon the change in our operating margin relative to the changes in operating margins at an 11-company agricultural equipment and industrial company peer group. In addition, rather than vesting ratable over a three-year cycle, RSUs now will cliff vest at the end of the three-year cycle to facilitate an emphasis on longer-term operating margin performance relative to peers. For grants under the PSP, operating margin as a percentage of net sales and average ROIC were chosen as performance measures because they are meaningful measures of our performance and have a strong correlation to generating stockholder value over the long-term. The Compensation Committee established three levels of performance for each measure: threshold, representing the minimum level of performance that warrants a payout; target, representing a level of performance where median target compensation levels are appropriate; and outstanding, representing a maximum realistic performance level where increased compensation levels are appropriate. The operating margin as a percentage of net sales and average ROIC goals are linked within a performance award matrix which is used to determine the number of shares earned in various combinations of performance. The award opportunity levels are expressed as multiples of the executive’s “target” award opportunity. The matrix of award opportunities is illustrated below: Operating Margin as a percentage of Net Sales ROIC Outstanding Target Threshold Below Threshold Below Threshold 100.0% 50.0% 16.5% —% Threshold 116.5% 66.6% 33.3% 16.5% Target 150.0% 100.0% 66.6% 50.0% Outstanding 200.0% 150.0% 116.5% 100.0% If the actual performance of the goal falls in between the established goals for threshold, target and outstanding performance, the associated payout factor will be calculated using a straight-line interpolation between the two goals. Unless the Compensation Committee determines otherwise, the Compensation Committee excludes restructuring and certain other items from the calculation of operating margin as a percentage of net sales and ROIC in order to ensure the calculations are equitable and appropriate decisions and actions are not discouraged by their projected impact on the awards. For the awards granted in 2017 under the PSP, the Compensation Committee determined that, based on the Company’s performance for the applicable three-year PSP performance cycle (2017-2019), we achieved above “target” on both the cumulative EPS and ROIC goals, which were the measures at the time of the awards, thus producing a payout as shown in the chart below. The information provided below includes adjustments made by the Compensation Committee in accordance with the LTI Plan for certain items. Measure(1) EPS ROIC Year 2017 2018 2019 2017 2018 2019 Target $2.50 $2.75 $3.03 5.5% 6.1% 6.7% Actual $3.02 $3.89 $4.44 5.9% 7.1% 7.7% Earned Award 200% 200% 200% 200% 200% 200% 200% 200% 200% 200% 2017 Average 2018 Average 2019 Average Cumulative (1) Performance amounts reflect adjustments made in accordance with the awards. The average yearly performance for the 2017-2019 three-year PSP performance cycle was 200% for each of the three years. The goals were established during a low point in the global agricultural market, but we substantially outperformed the 27 Company’s “outstanding” level performance goals for EPS and ROIC as a result of significant net sales growth and margin expansion driven by market recovery, new product introductions and cost reduction initiatives. The target award and actual number of shares received by the NEOs for the three-year performance cycle covering 2017-2019 are shown below: Name Mr. Beck Mr. Hansotia Mr. Richenhagen Mr. Smith Mr. Veltmaat Three-Year Performance Cycle (2017-2019) Target Award 12,300 shares 4,600 shares 69,500 shares 9,900 shares 9,900 shares Actual Award 24,600 shares 9,200 shares 139,000 shares 19,800 shares 19,800 shares In 2019, the Compensation Committee established award opportunities for executives covering a new three-year PSP performance cycle (2019-2021), as well as a new grant of SSARs and RSUs. The Compensation Committee’s strategy is to regularly evaluate the size of award levels by taking into consideration market practices, the industry’s cyclicality and other appropriate factors. Targets covering the 2019-2021 performance cycle were established for operating margin as a percentage of sales, rather than the previously utilized earnings per share, and ROIC. This shift reflects the desire to reinforce the importance of margin improvement, which is consistent with stockholder feedback, but at the same time retains an appropriate link to earnings. The targets for operating margin as a percentage of net sales and ROIC are formed by current and projected industry conditions. The goals are challenging and reflective of stretch performance expectations. The applicable threshold and outstanding levels of performance achievement are defined for each measure and incorporate shareholder expectations and a strong pay-for-performance focus. Target percentage level achievement on the new three-year PSP performance cycle (2019-2021) is based upon averaging the amounts earned during each year in the three-year performance cycle rather than on a cumulative basis during the entire performance cycle. We consider the target goals for PSP awards for uncompleted cycles to be confidential. The Compensation Committee believes it is important to establish incentive goals that incorporate stretch performance expectations and reward for exceeding defined performance and results. The Compensation Committee approves all grants of stock-based compensation to the Chief Executive Officer and all other executive officers. The Chief Executive Officer, with the assistance of the Senior Vice President — Global Business Services, assists the Compensation Committee with recommendations for award levels for all other executive officers based on external competitive analyses. Our policy is that SSARs are awarded with exercise prices at or above the fair market value of the Company’s common stock on the date of the grant. Retention Awards In 2018, Mr. Richenhagen was granted a one-time, time-based award to encourage him to delay his retirement and, in the interim, to oversee an orderly succession process, the integration of recent acquisitions, the launch of new products and the execution of near-term strategic milestones. In the aggregate, he received 137,000 restricted stock units that vest in one installment on December 31, 2020. Vesting of the restricted stock units generally is subject to Mr. Richenhagen’s continued employment on the date of vesting, except under certain circumstances such as a change in control of the Company. In 2019, Mr. Smith was granted a one-time, time-based award to encourage him to remain with the Company following the Company’s promotion of Mr. Hansotia to Chief Operating Officer. In the aggregate, he received 35,837 restricted stock units that vested 25% at the end of December 31, 2019, and were to vest 25% on December 31, 2020 and 50% on December 31, 2021. Mr. Smith resigned from the Company effective January 31, 2020, and as a result only received 25% of the restricted stock units. As part of its stockholder outreach process, the Compensation Committee noted the feedback with respect to retention awards, which it will consider in the future should the situation again arise. Clawback of Incentive Compensation We have a Compensation Adjustment and Recovery Policy. Pursuant to the policy, if the Board learns of any misconduct by an officer of AGCO or one of its subsidiaries that contributed to our having to restate our published financial statements, it shall take, or direct to take, such action as it deems reasonably necessary to remedy the misconduct, prevent its recurrence and, if appropriate, based on all relevant facts and circumstances, take remedial action against the individual in violation of the 28 policy. In determining whether remedial action is appropriate, the Board shall take into account such factors as it deems relevant, including whether the misconduct reflected negligence, recklessness or intentional wrongdoing. Remedial action may include dismissal and initiating legal action against the officer. In addition, the Board will, to the full extent permitted by governing law, in all appropriate cases, direct us to seek reimbursement of any bonus or incentive compensation awarded to an officer, or effect the cancellation of unvested, restricted or deferred equity awards previously granted to an officer, if: (i) the amount of the bonus or incentive compensation was calculated based upon the achievement of financial results that were subsequently reduced as part of a restatement; (ii) the officer engaged in intentional wrongdoing that contributed to the restatement; and (iii) the amount of the award would have been lower had the financial results been properly reported. In determining what action to take or to require to take, the Board may consider, among other things, penalties or punishments imposed by third parties, such as law enforcement agencies, regulators or other authorities, the impact upon us in any related proceeding or investigation of taking remedial action against an officer, and the cost and likely outcome of taking remedial action. The Board’s power to determine the appropriate remedial action is in addition to, and not in replacement of, remedies imposed by such authorities. Without by implication limiting the foregoing, following a restatement of the Company’s financial statements, we also shall be entitled to recover any compensation received by the Chief Executive Officer and Chief Financial Officer that is required to be recovered by Section 304 of the Sarbanes-Oxley Act of 2002. The policy further specifies that the authority vested in the Board under the policy may be exercised by any committee thereof. In addition, this policy will be evaluated after the SEC issues final rules implementing the clawback provisions set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Share Ownership and Retention Requirements Share ownership by directors and executive officers emphasizes the alignment of their interests with those of stockholders. The Company’s stock ownership program requires (i) non-employee directors to own common stock, or other equity equivalents, equal in value to four times the value of the annual retainer, (ii) the Chief Executive Officer to own common stock, or other equity equivalents, equal in value to five times annual salary, and (iii) all other executive officers to own common stock, or other equity equivalents, equal in value to three times their respective annual salaries. Once the minimum ownership level is achieved, an individual will remain qualified if he or she continues to hold at least the number of shares that is initially required regardless of the change in market value of the underlying stock. Any person becoming a director or executive officer has four-years from his or her election to comply with the stock ownership requirements. Our directors and executive officers all currently meet these requirements. Hedging and Pledging Policy We have a Hedging and Pledging Policy. Board members and officers are prohibited from, directly or indirectly, (i) pledging a significant number of the Company’s equity securities, or (ii) hedging with respect to any of the Company’s equity securities. For these purposes, (a) “pledging” includes the intentional creation of any form of pledge, security interest, deposit, lien or other hypothecation, including the holding of shares in a margin account, that entitles a third-party to foreclose against, or otherwise sell, any equity securities, whether with or without notice, consent, default or otherwise, but does not include either the involuntary imposition of liens, such as tax liens or liens arising from legal proceedings, or customary purchase and sale agreements, such as Rule 10b5-1 plans, and (b) “significant” means the lesser of 1% of the Company’s outstanding equity securities and 50% of the equity securities of the Company owned by the board member or officer. Also for these purposes, “hedging” includes any instrument or transaction, including put options and forward-sale contracts, through which the board member or officer offsets or reduces exposure to the risk of price fluctuations in a corresponding equity security. “Equity securities” include common stock, voting preferred stock and options and other securities exercisable for, or convertible into, settled in, or measured by reference to, any other equity security determined on an as-exercised and as- converted basis. The equity securities attributable to a board member or officer for these purposes shall include equity securities attributable to the board member or officer under either Section 13 or Section 16 of the Exchange Act. In addition, equity securities that are pledged shall not be counted toward board member and officer ownership requirements. Compensation Risk Assessment The Compensation Committee regularly reviews compensation plans and practices to ensure they are appropriately structured and aligned with business objectives, and not designed to encourage executives to take unwarranted risks. Specifically, the overall design of the compensation philosophy and plans mitigate risks because: (i) the financial performance objectives of the short and long-term incentive plans are reviewed and approved annually by the Board; (ii) the plans consist of multiple performance objectives, thus lessening the focus on any one in particular; (iii) short and long-term incentive payouts are capped for all participants; and (iv) the Company has in place a clawback provision that can require the return of bonus and other incentive compensation. 29 Tax Considerations Section 162(m) of the IRC generally limits to $1 million the U.S. federal tax deductibility of compensation paid in one year to any employee. Through the end of 2017, performance-based compensation was not subject to this limit on deductibility, provided that such compensation met certain requirements, including stockholder approval of material terms of compensation. The Company generally designed its compensation to meet the requirements for the exception to Section 162(m). Effective for 2018 and subsequent years, Section 162(m) was amended to eliminate the exception for performance-based compensation. As a result, all compensation in excess of $1 million, regardless of how structured, no longer is deductible. The Company did not modify its compensation programs in response to the amendment, but may do so in the future. Retirement Benefits We believe that offering competitive retirement benefits is important to attract and retain top executives. Our U.S.-based executives participate in a non-qualified executive defined benefit plan in addition to a traditional defined contribution 401(k) plan. For the Company’s 401(k) plan, we generally contributed approximately $12,600 to each eligible executive’s 401(k) account during 2019, which was the maximum contribution match allowable under the Company’s 401(k) plan. For executives, who generally became eligible to participate prior to August 1, 2015, we maintain an Executive Nonqualified Pension Plan (“ENPP”), which is designed to provide competitive retirement benefits that will attract and retain our executives. The ENPP provides eligible executive officers with retirement income for a period of 15 years - for the remainder of their lives if they retire from the Company after age 65 - based on a percentage of the average of their highest three non-consecutive years of base salary and bonus during their final 10 years of employment (referred to as their “three-year average compensation”), reduced by the executive officer’s social security benefits and 401(k) employer-matching contributions, as if the executive had made the maximum contribution. The benefit paid to the executive officers is 3% of their three-year average compensation multiplied by credited years of service, with a maximum annual benefit of 60% of their three- year average compensation. Benefits under the ENPP vest if the participant has attained age 50 and has at least ten years of service (including five years as a participant in the ENPP), but are not payable until the participant reaches age 65. For executives promoted or hired after August 1, 2015, those benefits consist of a nonqualified defined contribution plan. Severance Benefits and Change of Control Reasonable severance benefits are necessary to attract top executives. The levels of severance benefits provided to executives are designed to take into account the difficulty executives may experience with seeking comparable employment. Employment agreements with the executives provide severance benefits when the termination is without “cause” or for termination with “good reason.” The severance benefit depends on whether the termination involved a change of control. For terminations without “cause” or for “good reason” that do not involve a change of control, the severance benefit allows for the executives to receive his or her base salary for a period of up to two years and a pro rata portion of the bonus to which the executive would have been entitled for the year of termination had the executive remained employed for the entire year. Specifically for the NEOs, Messrs. Hansotia, Smith and Veltmaat may receive their respective base salaries and bonus amounts for one year upon termination. Mr. Beck may receive his base salary and bonus amount for two years upon termination. Mr. Richenhagen will not receive cash severance because his employment agreement stipulates that no cash severance is paid when he reaches the age of 65. A terminated executive also is entitled to receive any vested benefits under the ENPP payable beginning at age 65. We also believe it is important to provide certain additional benefits upon a change of control in order to protect the executive’s retirement benefits and potential income that would be earned associated with our equity incentive plans. In addition, it is our belief that the interests of stockholders will be best served if the interests of our senior management are in alignment. By providing certain change of control benefits, we believe executives will not be reluctant to consider potential change of control transactions that may be in the best interests of stockholders. The Board has approved post-employment compensation to NEOs for terminations that occur within two years of a change of control. In such case, the executive would receive a lump-sum payment equal to (i) two times his or her base salary in effect at the time of termination, (ii) a pro-rata portion of his or her bonus or other incentive compensation earned for the year of termination and (iii) a bonus equal to two times the three year average of his or her awards received during the prior two completed years and the current year’s trend (except that for Mr. Richenhagen, the lump sum payment would equal (i) three times his base salary in effect at the time of termination, (ii) a pro-rata portion of his bonus earned for the year of termination and (iii) a bonus equal to three times the three year average of Mr. Richenhagen’s awards received during the prior two completed years and the current year’s trend), and the executive would also be entitled to receive specific retirement benefits and the acceleration of vesting of outstanding equity awards. For awards under our equity incentive plan prior to 2018, the plan allows for all unearned awards to become fully vested and exercisable, and all performance goals applicable to an award will be deemed automatically satisfied with respect to the greater of the target level of compensation expected to be attained pursuant to such award or the level of performance dictated 30 by the trend of the Company’s actual performance, so that all of such compensation shall be immediately vested and payable. Effective with equity awards in 2018, the “single trigger” provision, which stated that shares will vest upon a change in control, was replaced with a “double-trigger” provision that states that vesting is contingent on a change in control and either termination of employment or failure of the acquiring company to assume outstanding equity grants or provide participants with the value equal to that of the unvested equity grants. All benefits under the ENPP that have been earned based on years of service also become vested upon a change of control. Executives with employment agreements prior to 2017 are entitled to receive a gross-up for excise taxes due on any of the change of control payments described above, other than ordinary income taxes associated with payouts from a change of control. Based upon discussions with stockholders, we have eliminated the gross-up for excise taxes on severance payments due to a change in control for any executive receiving an initial employment agreement in 2017 and beyond. For purposes of these benefits, a “change of control” occurs, in general, when either (i) one or more persons acquire common stock of the Company that, together with other stock owned by the acquirers, amounts to more than 50% of the total fair market value or total voting power of the stock, (ii) one or more persons acquire during a 12-month period stock of the Company that amounts to 30% or more of the total voting power of the stock, (iii) a majority of the members of our Board of Directors are replaced in any 12-month period by directors who are not endorsed by a majority of the directors then in office, or (iv) with some exceptions, one or more persons acquire assets from the Company that have a total fair market value equal to or greater than 40% of the aggregate fair market value of all of our assets. Perquisites and Other Benefits We believe that cash and incentive compensation should be the primary focus of compensation and that perquisites should be modest. Perquisites are periodically reviewed for executives to ensure conformity with this policy. The primary perquisites available to executives are the use of a leased automobile and the reimbursement of dues associated with a social or athletic club. We do not allow executive officers the use of our leased aircraft for personal use. Supplemental life and disability insurance is also provided for executives. The life insurance generally provides for a death benefit of six times the executive officer’s base salary. For executives on international assignments, additional expatriate benefits are designed to compensate the employee for differences in costs of living and taxation between the executive’s home country and host country. In addition, financial assistance is provided to the assignee for expenses such as relocation, children’s education, tax preparation and home leave travel. Executives also participate in our other benefit plans on the same general terms as other employees. These plans may include medical, dental and disability insurance coverage. Post-Employment Compensation Each of the NEOs is covered by an employment agreement. These agreements provide post-employment compensation and benefits in the event of certain types of termination of employment, including death, disability, involuntary termination without cause, or termination for good reason by the executive. For further detail on the post-employment compensation and benefits each NEO is entitled to in the event of certain types of termination, please refer to the tables below under the caption “Other Potential Post-Employment Payments.” Summary Overall, we believe our executive compensation programs accomplish the objectives for which they have been designed and are in concert with the compensation philosophy. We believe the competitive compensation that is provided to our executives is reasonable based on competitive market practices and has enabled us to attract and retain a strong management team generating strong results in a challenging industry environment. We further believe that our short-term and long-term incentive programs appropriately reward our executives for their achievement of performance goals and that these programs sufficiently align the interests of the executives with those of the stockholders. 31 SUMMARY OF 2019 COMPENSATION The following table provides information concerning the compensation of the NEOs for the Company’s three most recently completed years ended December 31, 2017, 2018 and 2019. In the column “Salary,” we disclose the amount of base salary paid to the NEO during the year. In the columns “Stock Awards” and “SSAR Awards,” we disclose the award of stock, SSARs or RSUs measured in dollars and calculated in accordance with ASC 718. For SSARs, the ASC 718 aggregate grant date fair value per share is based on certain assumptions that the Company explains in Note 10 to our Consolidated Financial Statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2019. For awards of stock, the ASC 718 aggregate grant date fair value per share is equal to the closing price of our common stock on the date of grant. The amounts disclosed as the aggregate grant date fair value of the stock awards granted under the PSP are computed at the probable outcome of the performance conditions, or “target” level. The actual amounts that will be earned are dependent upon the achievement of pre-established performance goals. Please also refer to the table below under the caption “2019 Grants of Plan-Based Awards.” In the column “Non-Equity Incentive Plan Compensation,” we disclose amounts earned under our IC Plan. The amounts included with respect to any particular year are dependent on whether the achievement of the relevant performance measure was satisfied during the year. In the column “Change in Pension Value and Non-Qualified Earnings,” we disclose the aggregate change in the actuarial present value of the NEO’s accumulated benefit under all defined benefit and actuarial benefit plans (including supplemental plans) in 2019. In the column “All Other Compensation,” we disclose the sum of the dollar value of all perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000. The Company currently has employment agreements with Messrs. Beck, Hansotia, Richenhagen, Smith and Veltmaat. The employment contracts provide for current base salaries at the following annualized rates per annum: Mr. Beck — $660,539; Mr. Hansotia — $727,100; Mr. Richenhagen — $1,385,942; Mr. Smith — $692,147; and Mr. Veltmaat — $616,177. Messrs. Beck, Hansotia, Richenhagen, Smith and Veltmaat’s employment contracts continue in effect until terminated in accordance with their terms. Actual amounts paid in the year vary slightly due to timing of pay periods. In addition to the specified base salary, the employment contracts provide that each executive officer shall be entitled to participate in benefit plans and other arrangements generally available to senior executive officers of the Company. 32 2019 SUMMARY COMPENSATION TABLE Salary ($) Bonus ($) Stock Awards(1) ($) SSAR Awards(2) ($) — 1,019,082 968,755 — — 1,030,093 379,018 — — 365,996 188,760 172,592 206,388 70,928 64,400 — 1,054,619 210,924 Non-Equity Incentive Plan Compensation(3) ($) 954,901 872,714 852,448 535,566 511,451 923,747 Change in Pension Value and Non- Qualified Earnings(4) ($) 1,046,532 312,013 2,073,667 267,350 263,406 667,792 All Other Compensation(5) ($) 51,759 42,304 42,098 56,773 Total ($) 3,830,784 2,995,103 4,860,423 1,766,135 51,280 1,746,253 47,840 3,615,497 93,116 14,724,596 90,231 20,648,619 — 5,747,717 1,063,920 3,157,257 3,317,011 — 13,437,972 985,320 2,682,220 2,077,025 — 5,855,740 1,179,360 2,522,415 4,226,060 118,215 15,287,732 — — 820,237 767,836 — 3,014,199 151,008 137,816 165,564 — — — 820,237 151,008 767,836 137,816 827,784 165,564 874,271 753,478 884,929 880,340 746,056 715,678 203,755 130,322 211,124 950,747 754,663 1,540,452 112,843 2,741,715 86,875 97,449 2,477,546 5,043,327 52,843 3,438,800 60,952 3,062,621 49,895 3,911,063 Name and Principle Position Andrew H. Beck, Senior Vice President — Chief Financial Officer Eric P. Hansotia, Senior Chief Vice President — Operating Officer Martin H. Richenhagen, Chairman, President and Chief Executive Officer Rob Smith, Former Senior Vice and General Manager, Europe/Middle East President Hans-Bernd Veltmaat, Senior Vice President — Chief Supply Chain Officer Year 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 (1) Stock Awards for 2017 569,750 626,725 655,729 456,500 489,720 710,575 1,345,575 1,375,851 1,385,942 579,601 601,219 670,062 583,625 595,298 611,690 In 2017, awards were granted under a three-year performance cycle under the PSP where the awards earned are based on the average of each year in the three-year performance cycle and RSUs that vest in equal installments over three years from the date of grant. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718 in relation to the 2017 three-year performance cycle at the probable outcome of the performance conditions, or “target” level, at the date of grant, as well as the grant date fair value of RSUs. The actual amounts that were earned under the 2017-2019 three-year performance cycle differ as previously disclosed, and were dependent upon the achievement of pre-established performance goals. The value of the awards on the date of grant at the actual achieved level of performance, which is the maximum level of performance conditions, under the 2017-2019 three-year performance cycle for the PSP, is as follows: Mr. Beck — $1,521,018; Mr. Hansotia — $568,836; Mr. Richenhagen — $8,594,370; Mr. Smith — $1,224,234; and Mr. Veltmaat — $1,224,234. The following were the value of the RSUs on the date of grant: Mr. Beck — $258,573; Mr. Hansotia — $94,600; Mr. Richenhagen — $1,450,532; Mr. Smith — $208,120; and Mr. Veltmaat —$208,120. Stock Awards for 2018 In 2018, awards were granted under a three-year performance cycle under the PSP where the awards earned are based on the average of each year in the three-year performance cycle and RSUs that vest in equal installments over three years from the date of grant. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718 in relation to the 2018 three-year performance cycle at the probable outcome of the performance conditions, or “target” level, at the date of grant, as well as the grant date fair value of RSUs. The actual amounts that will be earned under the 2018-2020 three-year performance cycle differ as disclosed above, and are dependent upon the achievement of pre-established performance goals. Assuming the maximum level of performance conditions under the 2018-2020 three-year performance cycle for the PSP, the following would be the value of the award on the date of grant: Mr. Beck — $1,442,280; Mr. Hansotia — $542,640; Mr. Richenhagen — $8,211,000; Mr. Smith — $1,142,400; and Mr. Veltmaat — $1,142,400. The pre-established performance goals for the first and second year of the three-year performance cycle under the PSP were achieved but are not yet vested. The following were the value of the RSUs on the date of grant: Mr. Beck — $247,615; Mr. Hansotia — $94,676; Mr. Richenhagen — $9,332,472, including a one-time, time-based award discussed below; Mr. Smith — $196,636; and Mr. Veltmaat —$196,636. In 2018, Mr. Richenhagen was granted a one-time, time-based award to encourage him to delay his retirement and, in the interim, to oversee an orderly succession process, the integration of recent acquisitions, the launch of new products and the execution of near-term strategic milestones. In the aggregate, he received 137,000 restricted stock units that vest in one 33 installment on December 31, 2020. Vesting of the restricted stock units generally are subject to Mr. Richenhagen’s continued employment on the date of vesting, except under certain circumstances such as a change in control of the Company. Stock Awards for 2019 In 2019, awards were granted under a three-year performance cycle under the PSP where the awards earned are based on the average of each year in the three-year performance cycle and RSUs that vest in equal installments over three years from the date of grant. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718 in relation to the 2019 three-year performance cycle at the probable outcome of the performance conditions, or “target” level, at the date of grant, as well as the grant date fair value of RSUs. The actual amounts that will be earned under the 2019-2021 three-year performance cycle differ as disclosed above, and are dependent upon the achievement of pre-established performance goals. Assuming the maximum level of performance conditions under the 2019-2021 three-year performance cycle for the PSP, the following would be the value of the award on the date of grant: Mr. Beck — $1,537,452; Mr. Hansotia — $1,574,058; Mr. Richenhagen — $8,724,430; Mr. Smith — $1,232,402; and Mr. Veltmaat — $1,232,402. The pre-established performance goals for the first year of the three-year performance cycle under the PSP were achieved but are not yet vested. The following were the value of the RSUs on the date of grant: Mr. Beck — $261,367; Mr. Hansotia — $267,590; Mr. Richenhagen — $1,493,525; Mr. Smith — $2,397,998, including a one-time, time-based award discussed below; and Mr. Veltmaat —$211,583. In 2019, Mr. Smith was granted a one-time, time-based award to encourage him to remain with the Company following the Company’s promotion of Mr. Hansotia to Chief Operating Officer. In the aggregate, he received 35,837 restricted stock units that vested 25% at the end of December 31, 2019, and were to vest 25% on December 31, 2020 and 50% on December 31, 2021. Mr. Smith resigned from the Company effective January 31, 2020, and as a result only received 25% of the restricted stock units. (2) SSARs were awarded on January 24, 2017, January 23, 2018 and January 22, 2019. The SSARs vest over four years from the date of grant, or 25% per year. The amounts above reflect the aggregate grant date fair value computed in accordance with ASC 718. (3) Non-Equity Incentive Plan Compensation for 2017. All annual incentive awards for 2017 were performance-based. These payments were earned in 2017 and paid in January or February 2018 under the IC Plan. Non-Equity Incentive Plan Compensation for 2018. All annual incentive awards for 2018 were performance-based. These payments were earned in 2018 and paid in February 2019 under the IC Plan. Non-Equity Incentive Plan Compensation for 2019. All annual incentive awards for 2019 were performance-based. These payments were earned in 2019 and paid in February 2020 under the IC Plan. (4) The change in each officer’s pension value is the change in the Company’s obligation to provide pension benefits (at a future retirement date) from the beginning of the year to the end of the year. The obligation shown in the “2019 Pension Benefits Table” presented below is the value today of a benefit that will be paid at the officer’s normal retirement age, based on the benefit formula and his or her current salary and service. The values shown in the Summary Compensation Table represent the change in the pension obligation since the prior year. Change in pension values during the year may be due to various sources such as: • Service accruals: The benefits payable from the pension plans increase as participants earn additional years of service. Therefore, as each executive officer earns an additional year of service during the year, the benefit payable at retirement increases. Each of the NEOs who participate in a pension plan earned an additional year of benefit service during 2019 except for Mr. Beck who has already earned the maximum benefit service allowed under the plan. • Compensation increases/decreases since prior year: The benefits payable from the pension plans are related to salary. As executive officers’ salaries increase (decrease), then the expected benefits payable from the pension plans will increase (decrease) as well. • Aging: The amounts shown above are changes in the present values of retirement benefits that will be paid in the future. As the officers approach retirement, the present value of the liability increases due to the fact that the executive officer is one year closer to retirement than he was at the prior measurement date. • Changes in assumptions: The amounts shown above are changes in the present values of retirement benefits that will be paid in the future. The discount rate used to determine the present value is updated each year based on current economic conditions. This assumption does not impact the actual benefits paid to participants. The discount rate decreased from 2018 to 2019, which resulted in a significant increase in the present value of the officers’ benefits. 34 The change in pension value is subject to many external variables discussed above, such as discount rates, that are not related to Company performance. • Plan amendments: The Company periodically amends the retirement programs in order to remain competitive locally and/or align with our global benefits strategy. There were no such amendments during 2019. The pension benefits and assumptions used to calculate these values are described in more detail under the caption “Pension Benefits.” (5) The amount shown as “All Other Compensation” includes the following perquisites and personal benefits for the year ended December 31, 2019: Name Andrew H. Beck Eric P. Hansotia Martin H. Richenhagen Rob Smith Hans-Bernd Veltmaat Club Membership ($) Defined Contribution Match ($) Life Insurance(a) ($) Car Lease and Maintenance(b) ($) 9,400 13,125 7,824 — 7,974 12,600 12,600 12,600 — 12,600 5,883 3,956 46,911 — 11,486 13,478 17,712 39,647 25,288 17,835 Other(c) ($) 737 447 11,233 72,161 — Total ($) 42,098 47,840 118,215 97,449 49,895 (a) These amounts represent the value of the benefit to the executive officer for life insurance policies funded by the Company. (b) These amounts represent car lease payments made by the Company for cars used by executives and/or their family members, as well as payments for related gas and maintenance costs. (c) The amount for Mr. Beck includes commercial airfare related to attendance by Mr. Beck’s wife at a business-related event — $737. The amount for Mr. Hansotia includes commercial airfare related to attendance by Mr. Hansotia’s wife at a business-related event — $447. The amount for Mr. Richenhagen includes estate planning fees — $6,069 and commercial airfare related to attendance by Mr. Richenhagen’s wife at a business-related event — $5,164. Mr. Richenhagen’s wife accompanied Mr. Richenhagen when the Company’s corporate aircraft was used for attendance at corporate functions at no incremental cost. The amount for Mr. Smith includes housing allowance — $48,302, tax preparation fees — $18,101 and commercial airfare related to attendance by a guest of Mr. Smith at business-related events — $5,758. Mr. Veltmaat’s wife accompanied Mr. Veltmaat when the Company’s corporate aircraft was used for attendance at a corporate function at no incremental cost. 35 2019 GRANTS OF PLAN-BASED AWARDS In this table, we provide information concerning each grant of an award made to an NEO in the most recently completed year. This includes the awards under the Company’s IC Plan, as well as PSP awards, RSUs and SSARs under the LTI Plan, each of which is discussed in greater detail under the caption “Compensation Discussion and Analysis.” The “Threshold,” “Target” and “Maximum” columns reflect the range of estimated payouts under the IC Plan and the range of number of shares to be awarded under the PSP. In the fourth-to-last column, we report the number of shares of common stock underlying RSUs granted in the year. In the third- and second-to-last columns, we report the number of shares of common stock underlying SSARs granted in the year and corresponding per share exercise price. In all cases, the exercise price was equal to the closing market price of the Company’s common stock on the date of grant. In the last column, we report the aggregate ASC 718 grant date fair value of all stock and SSAR awards made in 2019. Stock awards include the annual PSP award and the RSU award. Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) Estimated Future Payouts Under Equity Incentive Plan Awards(2) Name Andrew H. Beck Award Type IC Plan Grant Date Threshold ($) Target ($) Maximum ($) 327,865 655,729 1,311,458 PSP 1/22/19 RSU 1/22/19 SSAR 1/22/19 Eric P. Hansotia IC Plan 355,288 710,575 1,421,150 PSP 1/22/19 RSU 1/22/19 SSAR 1/22/19 Martin H. Richenhagen IC Plan 970,160 1,940,319 3,880,638 PSP 1/22/19 RSU 1/22/19 SSAR 1/22/19 Rob Smith IC Plan 335,031 670,062 1,340,124 PSP 1/22/19 RSU 1/22/19 SSAR 1/22/19 Hans-Bernd Veltmaat IC Plan 275,261 550,521 1,101,042 PSP 1/22/19 RSU 1/22/19 SSAR 1/22/19 Threshold (# of shares) Target (# of shares) Maximum (# of shares) 4,200 12,600 25,200 4,300 12,900 25,800 23,833 71,500 143,000 3,367 10,100 20,200 3,367 10,100 20,200 All Other Stock Awards: Number of Shares of Stock or Units (#) 4,284 4,386 24,480 39,305 3,468 Underlying SSARs Compensation (#) Exercise Price of SSAR Awards ($/sh) Grant Date Fair Value of Stock and SSAR Awards ($) 768,726 261,367 18,200 62.85 206,388 787,029 267,590 18,600 62.85 210,924 4,362,215 1,493,525 104,000 62.85 1,179,360 616,201 2,397,998 14,600 62.85 165,564 616,201 211,583 14,600 62.85 165,564 (1) Amounts included in the table above represent the potential payout levels related to corporate objectives for the fiscal year 2019 under the Company’s IC Plan. The payment for these awards already have been determined and were paid on February 14, 2020 and February 25, 2020 to the NEOs. Refer to Note 3 of the 2019 Summary Compensation Table. (2) The amounts shown represent the number of shares the executive would receive if the “Threshold,” “Target” and “Maximum” levels of performance are reached. 36 OUTSTANDING EQUITY AWARDS AT YEAR-END 2019 The following table provides information concerning unexercised SSARs and stock (including RSUs) that has not been earned or vested for each NEO outstanding as of the end of the Company’s most recently completed year. Each outstanding award is represented by a separate row that indicates the number of securities underlying the award. For SSAR awards, the table discloses the exercise price and the expiration date. For stock awards, the table provides the total number of shares of stock that have not vested (or have not been earned) and the aggregate market value of shares of stock that have not vested (or have not been earned). SSAR Awards Stock Awards Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5) (#) — — — Equity Incentive Plan Awards: Value Realized on Vesting(6) ($) — — — 3,366 8,400 187,385 648,900 — — — 1,266 8,600 — — — — — 70,478 664,350 — — 19,166 1,066,971 47,666 3,682,276 — — 2,666 6,734 — — — — — 148,416 520,202 — — — 2,666 6,734 148,416 520,202 Name Andrew H. Beck Eric P. Hansotia Martin H. Richenhagen Rob Smith Hans-Bernd Veltmaat 17,800 12,225 8,250 3,350 — 6,700 4,575 3,100 1,250 — — — 19,125 — — — 2,675 — 7,100 9,750 6,600 2,675 — Number of Securities Underlying Unexercised SSARs Exercisable (#) Number of Securities Underlying Unexercised SSARs Unexercisable(1) (#) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned SSARs (#) SSAR Exercise Price ($) SSAR Expiration Date Number of Shares or Units of Stock That Have Not Vested(2)(3) (#) — — 1,394 15,780 10,332 — — 510 5,952 10,578 — Market Value of Shares or Units of Stock That Have Not Vested(4) ($) — — 99,573 878,473 798,147 — — 36,429 331,348 817,151 — — 43.88 1/21/2022 — 46.58 1/26/2023 — 63.47 1/24/2024 — 73.14 1/23/2025 — 62.85 1/22/2026 — 43.88 1/21/2022 — 46.58 1/26/2023 — 63.47 1/24/2024 — 73.14 1/23/2025 — 62.85 1/22/2026 — 46.58 1/26/2023 — 4,075 8,250 10,050 18,200 — 1,525 3,100 3,750 18,600 23,000 46,500 57,375 — 63.47 1/24/2024 7,820 558,583 — 73.14 1/23/2025 226,588 12,614,154 104,000 — 62.85 1/22/2026 58,801 4,542,300 3,250 6,600 8,025 14,600 — 3,250 6,600 8,025 14,600 — 46.58 1/26/2023 — 63.47 1/24/2024 — 73.14 1/23/2025 — 1,122 12,504 — 80,144 696,098 — 62.85 1/22/2026 35,193 2,718,662 — 43.88 1/21/2022 — 46.58 1/26/2023 — 63.47 1/24/2024 — 73.14 1/23/2025 — 62.85 1/22/2026 — — 1,122 12,504 8,315 — — 80,144 696,098 642,337 37 (1) SSAR awards vest ratably, or 25% annually, over four years beginning from the date of grant, which was January 26, 2016 for the 2016 grants, January 24, 2017 for the 2017 grants, January 23, 2018 for the 2018 grants and January 22, 2019 for the 2019 grants. (2) RSU awards vest in equal installments over three years beginning from the date of grant, which was January 24, 2017 for the 2017 grants, January 23, 2018 for the 2018 grants and January 22, 2019 for the 2019 grants. (3) The pre-established performance goals of certain one-year performance cycles under the PSP were achieved; however, the award is subject to a further vesting period. The number of shares are at the actual level of performance achieved. (4) The market value of RSU awards that have not vested is based on the closing price of the Company’s common stock on December 31, 2019, December 31, 2018 and December 31, 2017, which was $77.25, $55.67 and $71.43, respectively. The market value of the awards earned under the three one-year performance cycles under the PSP are based on the closing price of the Company’s common stock on December 31, 2019 and December 31, 2018, which was $77.25 and $55.67, respectively. (5) The amounts shown represent the number of shares awarded but unearned under the PSP in January 2018 and January 2019, respectively. The actual amounts that will be earned under the PSP are dependent upon the achievement of pre-established performance goals during the respective performance cycles. (6) Based on the closing price of the Company’s common stock on December 31, 2019 and December 31, 2018, which was $77.25 and $55.67, respectively. SSAR EXERCISES AND STOCK VESTED IN 2019 The following table provides information concerning exercises of SSARs and similar instruments, and vesting of stock awards including restricted stock and similar instruments, during the most recently completed year for each of the NEOs. The table reports the number of securities acquired upon exercise of SSARs; the aggregate dollar value realized upon exercise of SSARs; the number of shares of stock that have vested; and the aggregate dollar value realized upon vesting. Name Andrew H. Beck Eric P. Hansotia Martin H. Richenhagen Rob Smith Hans-Bernd Veltmaat SSAR Awards Stock Awards Number of Shares Acquired on Exercise(1) (#) Value Realized on Exercise(2) ($) Number of Shares Acquired on Vesting (#) Value Realized on Vesting(3) ($) 7,949 4,665 78,564 6,198 2,698 581,831 372,130 5,783,010 453,314 174,513 28,850 10,832 162,630 32,159 23,200 1,912,238 717,845 10,780,562 2,136,086 1,537,804 (1) The number of shares acquired on exercise of SSARs is computed by dividing the value realized on exercise by the market price of the underlying securities at exercise. The number of shares acquired upon exercise is inclusive of the following shares withheld for income tax purposes: Mr. Beck — 3,607 shares, Mr. Hansotia — 1,837 shares, Mr. Richenhagen — 35,435 shares, Mr. Smith — 351 shares and Mr. Veltmaat — 1,218 shares. (2) The dollar amount realized upon exercise is computed by multiplying the number of shares times the difference between the market price of the underlying securities at exercise and the exercise price of the SSARs. (3) Shares withheld for income tax purposes related to stock vested were as follows: Mr. Beck — 13,011 shares, Mr. Hansotia — 2,787 shares, Mr. Richenhagen — 73,348 shares, Mr. Smith — 15,572 shares and Mr. Veltmaat — 7,445 shares. 38 PENSION BENEFITS The “2019 Pension Benefits Table” provides further details regarding the executive officers’ defined benefit retirement plan benefits. Because the pension amounts shown in the “2019 Summary Compensation Table” and the “2019 Pension Benefits Table” are projections of future retirement benefits, numerous assumptions must be applied. In general, the assumptions should be the same as those used to calculate the pension liabilities in accordance with ASC Topic 715, “Compensation – Retirement Benefits,” on the measurement date, although the SEC specifies certain exceptions, as noted in the table below. Executive Nonqualified Pension Plan The ENPP provides the Company’s eligible executives with retirement income for a period of 15 years based on a percentage of their final average compensation, including base salary and annual incentive bonus, reduced by the executive’s social security benefits and savings plan benefits attributable to employer matching contributions. In addition, executives who remain with AGCO until age 65 will have their benefits continue as a lifetime annuity after the 15-year certain period ends (i.e., at age 80). The key provisions of the ENPP are as follows: Monthly Benefit. Senior executives with a vested benefit will be eligible to receive the following retirement benefits each month for 15 years beginning on their normal retirement date (age 65): 3% of final average monthly compensation times years of service up to 20 years, reduced by each of (i) the senior executive’s U.S. social security benefit or similar government retirement program to which the senior executive is eligible, (ii) the benefits payable from the AGCO Savings Plan (payable as a life annuity) attributable to the Company’s matching contributions and earnings thereon (at the maximum level), and (iii) the benefits payable from any retirement plan sponsored by the Company in any foreign country attributable to the Company’s contributions. Final Average Monthly Compensation. The final average monthly compensation is the average of the three years of base salary and annual incentive payments under the IC Plan paid to the executive during the three years in which such sum was the highest from among the ten years prior to his or her death, termination or retirement. Vesting. Participants become vested after meeting all three of the following requirements: (i) turn age 50; (ii) completing ten years of service with the Company; and (iii) achieving five years of participation in the ENPP. An executive must remain with the Company until age 65 with at least ten years of service (five years must include tenure as an executive officer) to vest in the life annuity portion of this benefit that begins at age 80. Alternatively, all participants will become vested in the plan in the event of a change of control. Early Retirement Benefits. Participants may not receive retirement benefits prior to normal retirement age. Swiss Life Collective “BVG” Foundation The Swiss Life Collective “BVG” Foundation (“BVG”) operates a pension fund in Switzerland, for which Mr. Smith is a participant. The BVG ensures the plan meets at least the mandated requirements for minimum pension benefits. This plan is a cash balance formula, with contributions made both by the Company and Mr. Smith. Mr. Smith’s total account balance represents contributions and interest made by the Company, as well as from his prior employers. The amounts shown in the tables throughout this proxy reflect the portion of account balance attributable to contributions made while employed by the Company. The key provisions of the BVG plan are as follows: Retirement benefit. Upon retirement, participants will receive the value of their cash balance account. They may elect to receive their benefit as a lump sum or as an annuity. The cash balance account grows each year with pay credits (payable by the employee and the employer) and interest. 39 Pay credits. Each year, a participant’s cash balance account is credited with the following percentage of pensionable pay (varies by age): Age 25 - 34 35 - 44 45 - 54 55 - 65 Credit as a percentage of pay (paid by the Company) 5.5% 7.5% 11.5% 13.5% Credit (standard level) as a percentage of pay (paid by employee) 2.5% 3.5% 4.5% 5.5% Pensionable pay. Payable at the annual rate of base pay. Normal Retirement Age. Age 65 for males; age 64 for females (as in accordance with Swiss law). Early Retirement Benefits. Participants may elect to retire from the age of 58. Annuity benefits are converted using reduced actuarial equivalence conversion factors. Swiss Life Additional Capital Plan Effective January 1, 2012, the BVG also operates an enhanced pension fund for executives in Switzerland, for which Mr. Smith is a participant. This plan is a cash balance formula, with contributions made only by the Company, and contributions are made retroactive to date of hire. The key provisions of the additional capital plan are as follows: Retirement benefit. Upon retirement, participants will receive benefits equal to that of their cash balance account. The cash balance account grows each year with pay credits (payable by the employee and the employer) and interest. Pay credits. Each year, a participant’s cash balance account is credited with the following percentage of pensionable pay (varies by age): Age 35 - 44 45 - 54 55 - 65 Credit as a percentage of pay (paid by the Company) 11.0% 16.0% 19.0% Credit as a percentage of pay (paid by employee) 0.0% 0.0% 0.0% Pensionable pay. Bonus pay only. Normal Retirement Age. Age 65 for males; age 64 for females (as in accordance with Swiss law). Early Retirement Benefits. Participants may elect to retire from the age of 58. Vesting. 100% vested. 40 2019 PENSION BENEFITS TABLE Name Plan Name Andrew H. Beck Eric P. Hansotia Martin H. Richenhagen Rob Smith Hans-Bernd Veltmaat AGCO Executive Nonqualified Pension Plan AGCO Executive Nonqualified Pension Plan AGCO Executive Nonqualified Pension Plan Swiss Life Collective “BVG” Foundation AGCO Executive Nonqualified Pension Plan Number of Years of Credited Service (#) 20.00 6.50 15.75 6.33 11.50 Present Value of Accumulated Benefit(1) ($) 8,736,934 1,317,079 27,994,749 1,061,743 6,634,188 Payments During Last Year ($) — — — — — (1) Based on plan provisions in effect as of December 31, 2019. The executive officers participate in pension plans that will provide a monthly annuity benefit upon retirement. The values shown in this column are the estimated lump sum value today of the monthly benefits they will receive in the future (based on their current salary and service, as well as the assumptions and methods prescribed by the SEC). These values are not the monthly or annual benefits that they would receive. Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual earnings and the assumptions used to determine the present value, such as the discount rate. For 2019, the discount rate assumption used to determine the actuarial present value of accumulated pension benefits was lower than in 2018. The Company cautions that the values reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column in the Summary Compensation Table, as well as the amounts above in the Present Value of Accumulated Benefit column, are theoretical as those amounts are calculated pursuant to SEC requirements and are based on assumptions used in preparing the Company’s audited financial statements for the applicable fiscal years. The Company’s retirement plans utilize a different method of calculating actuarial present value for the purpose of determining a lump sum payment, if any. The change in pension value from year to year as reported in the table is subject to market volatility and may not represent the value that a NEO will actually accrue or receive under the Company’s retirement plans during any given year. 41 OTHER POTENTIAL POST-EMPLOYMENT PAYMENTS Each NEO’s employment agreement with the Company includes provisions for post-employment compensation related to certain employment termination events. Pursuant to the LTI Plan, all outstanding equity awards prior to 2018 become fully vested and exercisable upon a change of control. Beginning in 2018, all equity awards became subject to a “double trigger” whereby accelerated vesting is contingent on a change in control and either termination of employment or failure of the acquiring company to assume outstanding equity grants or provide participants with the value equal to that of the unvested equity grants. The LTI Plan does not provide for accelerated vesting of equity under other employment termination events. The table below and its accompanying footnotes provides specific detail on the post-employment compensation each NEO is entitled to in the event of certain employment termination events assuming termination on the last day of the prior year (December 31, 2019). 42 Executive / Termination Scenario(1) Andrew H. Beck Change in Control(2)(3)(4)(5) Voluntary Termination Without Good Reason (6) Retirement Death(7) Disability(8) Involuntary With Cause Involuntary Without Cause or Good Reason Resignation(9) Eric P. Hansotia Change in Control(2)(3)(4)(5) Voluntary Termination Without Good Reason Retirement(6) Death(7) Disability(8) Involuntary With Cause Involuntary Without Cause or Good Reason Resignation(9) Martin H. Richenhagen Change in Control(2)(3)(4)(5) Voluntary Termination Without Good Reason Retirement(6) Death(7) Disability(8) Involuntary With Cause Involuntary Without Cause, Good Reason, Resignation or Company’s Non-Renewal of Employment Agreement(9) Rob Smith Change in Control(2)(3)(4)(5) Voluntary Termination Without Good Reason Retirement Death(7) Disability(8) Involuntary With Cause Involuntary Without Cause or Good Reason Resignation(9) Hans-Bernd Veltmaat Change in Control(2)(3)(4)(5) Voluntary Termination Without Good Reason Retirement(6) Death(7) Disability(8) Involuntary With Cause Involuntary Without Cause or Good Reason Resignation(9) Severance Bonus Accelerated Vesting of Equity Benefits Retirement Benefits Death Benefit Disability Benefit 280G Tax Gross- Up Estimated Total $ $ $ $ $ $ $ $ $ $ $ $ $ $ 3,107,787 $ 852,448 $ 4,121,352 $ 117,078 $ 8,708,978 (10) $ — $ — $ — $ 16,907,643 — $ — $ — $ — $ 165,135 $ 852,448 $ — $ — $ 852,448 $ — $ 1,321,078 $ 852,448 $ — $ — $ — $ — $ — $ — $ — $ 789,486 (10) $ — $ — $ — $ — $ — $ — $ 789,486 — $ — $ — — $ 789,486 (10) $3,963,234 $ — $ — $ 5,770,303 — $ 789,486 (10) $ — $ 916,200 $ — $ 2,558,134 — $ 789,486 (10) $ — $ — $ — $ 789,486 — $ 789,486 (10) $ — $ — $ — $ 2,963,012 2,768,043 $ 923,747 $ 2,841,343 $ 108,832 $ 1,267,800 (11) $ — $ — $ — $ 7,909,765 — $ — $ — $ — $ 181,775 $ 923,747 $ — $ — $ 923,747 $ — $ 727,100 $ 923,747 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — — — — — — $ $ — $ — $ — $ — $ — $ — $ — — $4,362,600 $ — $ — $ 5,468,122 $ $ $ — $ 749,400 $ — $ 1,673,147 — $ — $ — $ — — $ — $ — $ 1,650,847 $ 12,519,718 $ 2,522,415 $ 33,993,496 $ 659,132 $ 29,271,280 (12) $ — $ — $ — $ 78,966,041 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ — $ — $ — $ — $ 346,486 $ 2,522,415 $ — $ 2,522,415 $ — $ — $ — $ — $ — $ — $ — $ — $ 1,921,705 (12) $ — $ 1,921,705 (12) $ — $ — $ — $ — $ 1,921,705 — $ — $ 1,921,705 — $ 1,921,705 (12) $8,662,988 $ — $ — $ 13,453,594 — $ 1,921,705 (12) $ — $5,271,600 $ 9,715,720 — $ 1,921,705 (12) $ — $ — $ — $ 1,921,705 — $ 2,522,415 $ — $ — $ 1,921,705 (12) $ — $ — $ — $ 4,444,120 3,032,876 $ 871,079 $ 6,058,189 $ 22,492 $ 907,478 (13) $ — $ — $ — $ 10,892,114 — $ — $ — $ — $ 170,874 $ 871,079 $ — $ — $ 871,079 $ — $ 683,495 $ 871,079 $ — $ — $ — $ — $ — $ — $ — $ 907,478 (13) $ — $ — $ — $ 2,019,853 (13) $ — $ 415,289 (13) $ — $ 907,478 (13) $ — $ — $ — $ — $ — $ — $ — $ 907,478 — $ — $ — — $ — $ 3,061,806 — $ — $ 1,286,368 — $ — $ 907,478 — $ 907,478 (13) $ — $ — $ — $ 2,462,052 2,793,736 $ 715,678 $ 3,289,781 $ 120,182 $ 6,905,785 (14) $ — $ — $ — $ 13,825,162 — $ — $ — $ — $ 154,044 $ 715,678 $ — $ — $ 715,678 $ — $ 616,177 $ 715,678 $ — $ — $ — $ — $ — $ — $ — $ 434,117 (14) $ — $ — $ — $ — $ — $ — $ 434,117 — $ — $ — — $ 434,117 (14) $3,697,062 $ — $ — $ 5,000,901 — $ 434,117 (14) $ — $ 841,800 $ — $ 1,991,595 — $ 434,117 (14) $ — $ — $ — $ 434,117 — $ 434,117 (14) $ — $ — $ — $ 1,765,972 (1) All termination scenarios assume termination occurs on December 31, 2019, and a stock price of $77.25, which was the closing price of the Company’s common stock on the last trading day of the Company’s year ended December 31, 2019. (2) Upon termination within two years following a change of control, the following provisions apply to each of the NEOs: • Mr. Richenhagen receives a lump sum payment equal to (i) three times his base salary in effect at the time of termination, (ii) a pro-rata portion of his bonus or other incentive compensation earned for the year of termination and (iii) a bonus equal to three times the three-year average of Mr. Richenhagen’s awards received during the prior two completed years and the current year’s trend. He continues to receive life insurance and health benefits during a three-year period and disability benefits during a two-year period. 43 • Messrs. Beck, Hansotia, Smith and Veltmaat receive a lump sum payment equal to (i) two times base salary in effect at the time of termination, (ii) a pro-rata portion of bonus or other incentive compensation earned for the year of termination and (iii) a bonus equal to two times the three-year average of the NEO’s awards received during the prior two completed years and the current year’s trend. Each of the NEOs continues to receive life insurance, disability and healthcare benefits during a two-year period. • Messrs. Beck, Hansotia, Richenhagen and Veltmaat will receive their ENPP retirement benefit payable as a lump sum. This lump sum is calculated in a similar fashion as values disclosed in the Pension Benefits Table, except it is determined based on the plan’s actuarial equivalence definition rather than the SEC prescribed assumptions. There is no enhancement to their pension benefit amount in the event of a change in control other than immediate vesting of the benefit. (3) All outstanding equity awards prior to 2018 held by the NEOs at the time of a change of control become non-cancelable, fully vested and exercisable, and all performance goals associated with any awards are deemed satisfied with respect to the greater of target performance or the level dictated by the trend of the Company’s performance to date, so that all compensation is immediately vested and payable. (4) In the case of a change of control, the retirement benefits are payable as a lump sum six months after termination of employment or, if such termination occurs more than twenty-four months after the change in control, in accordance with the terms of the ENPP. The difference between the “Retirement Benefits” values shown in the table above from the ENPP and the value shown in the “2019 Pension Benefits Table” is due to the fact that the interest and mortality assumptions prescribed by the plan in the event of a change of control are different from the assumptions used in the actuarial valuation. There is no enhancement to the benefit amount under a change of control other than immediate vesting of the benefit. (5) The change-in-control calculation has factored into it a value for the executive’s covenant not to compete. (6) As of December 31, 2019, Mr. Richenhagen is eligible for retirement benefits. Messrs. Beck and Veltmaat are vested in their ENPP benefit, but are not eligible to commence their benefits. Mr. Hansotia is not vested in his ENPP benefit. (7) Upon death, the following provisions apply to each of the NEOs: • The estate receives the executive’s base salary in effect at the time of death for a period of three months. The estate is also entitled to all sums payable to the executive through the end of the month in which death occurs, including the pro-rata portion of his bonus earned at this time. The “Death Benefit” amount represents the value of the insurance proceeds payable upon death. (8) Upon disability, the following provisions apply to each of the NEOs: • Each of the NEOs receives all sums otherwise payable to them by the Company through the date of disability, including the pro-rata portion of the bonus earned. The “Disability Benefit” amount represents the annual value of the insurance proceeds payable to the executive on a monthly basis upon disability. (9) Unless such termination occurs within two years following a change of control, if employment is terminated without cause or if the executive voluntarily resigns with good reason, the following provisions apply to each of the NEOs: • • • For Mr. Richenhagen, he does not receive cash severance because he is over age 65. His employment agreement stipulates that no cash severance is paid when he reaches the age of 65. Mr. Richenhagen does receives a pro-rata portion of his bonus earned for the year of termination, which is payable at the time incentive compensation is generally payable by the Company. For Mr. Beck, he receives his base salary in effect at the time of termination for a two-year severance period, paid at the same intervals as if he had remained employed with the Company. He also receives a pro-rata portion of his bonus earned for the year of termination, which is payable at the time incentive compensation is generally payable by the Company. For Messrs. Hansotia, Smith and Veltmaat, each of the NEOs receive their base salary in effect at the time of termination for a one-year severance period, paid at the same intervals as if they had remained employed with the Company. Each NEO also receives a pro-rata portion of their bonus earned for the year of termination, which is payable at the time incentive compensation is generally payable by the Company. (10) Mr. Beck is currently vested in his ENPP retirement benefit. In the event of Mr. Beck’s termination due to a change of control, he will receive a $8,708,978 lump sum payment. In the event of his termination due to any other cause, he will receive a $789,486 annual annuity for 15 years beginning at age 65. The present value of this annuity (plus the value of the life annuity beginning at age 80 if he were to remain employed by the Company until age 65) equals the benefit disclosed in the Pension Benefits Table, based on the assumptions and methods defined by the SEC. In other words, there is no enhancement that would be added to his pension benefit if he had been terminated on December 31, 2019. 44 (11) Mr. Hansotia is not currently vested in his ENPP retirement benefit. In the event of Mr. Hansotia’s termination due to a change of control, he will receive a $1,267,800 lump sum payment. In the event of his termination due to any other cause on December 31, 2019, he would not receive an ENPP retirement benefit. (12) Mr. Richenhagen is currently vested in his ENPP retirement benefit. In the event of Mr. Richenhagen’s termination due to a change of control, he will receive a $29,271,280 lump sum payment. In the event of Mr. Richenhagen’s termination due to any other cause, he will receive $1,921,705 annually as a 15-year certain and life annuity beginning at termination. The present value of this annuity plus the value of the life annuity beginning 15 years later equals the benefit disclosed in the Pension Benefits Table, based on the assumptions and methods defined by the SEC. In other words, there is no enhancement that would be added to his pension benefit if he had been terminated on December 31, 2019. (13) In the event of Mr. Smith’s termination due to a change of control, he will receive a $907,478 lump sum payment from his retirement plan. In the event of his termination due to death, he will receive a $2,019,853 lump sum payment. In the event of his termination due to disability, he will receive a $415,289 annual annuity until age 65. In the event of his termination due to any other cause, he will receive a lump sum payment of $907,478, which corresponds to his vested benefits as per December 31, 2019. (14) Mr. Veltmaat is currently vested in his ENPP retirement benefit. In the event of Mr. Veltmaat’s termination due to a change of control, he will receive a $6,905,785 lump sum payment. In the event of his termination due to any other cause, he will receive a $434,117 annual annuity for 15 years beginning at age 65. The present value of this annuity (plus the value of the life annuity beginning at age 80 if he were to remain employed by the Company until age 65) equals the benefits disclosed in the Pension Benefits Table, based on the assumptions and methods defined by the SEC. In other words, there is no enhancement that would be added to his pension benefit if he had been terminated on December 31, 2019. Mr. Richenhagen’s employment agreement provides certain restrictive covenants that continue for a period of two years after termination of employment, including a non-competition covenant, a non-solicitation of customers covenant and a non-recruitment of employees covenant. If Mr. Richenhagen breaches his post-employment obligations under these covenants, the Company may terminate the severance period and discontinue any further payments or benefits to Mr. Richenhagen. 2019 CEO PAY RATIO Our analysis began by determining that we had approximately 21,625 employees as of a November 30, 2019 determination date. Although permitted by the SEC, we did not use the 5% de Minimis rule to exclude or eliminate any employee group. Based on our consistently applied compensation measure of actual total cash compensation, we identified the median employee. The median employee’s total 2019 compensation, as determined in a manner consistent with our Summary Compensation Table, was $48,463. Based on this methodology, we estimate the ratio of CEO pay to median employee pay is 315:1. In 2018, the CEO pay to median employee pay ratio was 427:1, which reflected a one-time stock retention award to the CEO. Without this one-time award, the ratio of CEO pay to median employee pay would have been 262:1. 45 THE FOLLOWING REPORTS OF THE COMPENSATION COMMITTEE AND THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE INCORPORATED BY REFERENCE IN ANY PREVIOUS OR FUTURE DOCUMENTS FILED BY THE COMPANY WITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY EXPRESSLY INCORPORATES SAID REPORTS BY REFERENCE IN ANY SUCH DOCUMENT. COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the SEC. The Company has engaged Willis Towers Watson to advise management and the Compensation Committee with respect to our compensation programs and to perform various related studies and projects. The aggregate fees billed by Willis Towers Watson for consulting services rendered to the Compensation Committee for 2019 in recommending the amount or form of executive and director compensation were approximately $300,000. The total amount of fees paid by the Company to Willis Towers Watson in 2019 for all other services, excluding Compensation Committee services, was approximately $1,300,000. These other services primarily related to actuarial services in respect of our defined benefit plans, general employee compensation consulting services, benefit plan design services and pension administration services. The Compensation Committee recommended and approved the provision of these additional services to the Company by Willis Towers Watson. The foregoing report is submitted by the Compensation Committee of the Board. Gerald L. Shaheen, Chairman Roy V. Armes Sondra L. Barbour Suzanne P. Clark George E. Minnich To the Board of Directors: AUDIT COMMITTEE REPORT The Audit Committee consists of the following members of the Board: Michael C. Arnold, Sondra L. Barbour, P. George Benson, George E. Minnich (Chairman) and Hendrikus Visser. Each of the members is “independent” as defined by the NYSE and SEC. Management is responsible for the Company’s internal controls, financial reporting process and compliance with the laws and regulations and ethical business standards. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and an audit of the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and to issue reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and to report its findings to the Board. The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm, nor can the Audit Committee certify that the independent registered public accounting firm is “independent” under applicable rules. The Audit Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors and the experience of the Audit Committee’s members in business, financial and accounting matters. We have reviewed and discussed with management the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019 and management’s assessment of the effectiveness of the Company’s internal control over financial reporting and KPMG LLP’s audit of the Company’s internal control over financial reporting as of December 31, 2019. We have discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (United States) and the U.S. Securities and Exchange Commission. We have received and reviewed the written disclosures and the letter from KPMG LLP required by NYSE listing standards and the applicable requirements of the Public Company Accounting Oversight Board (United States) regarding the independent registered public accounting firm’s communications with the audit committee and have discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence. 46 We also have considered whether the professional services provided by KPMG LLP, not related to the audit of the consolidated financial statements and internal control over financial reporting referred to above or to the reviews of the interim consolidated financial statements included in the Company’s Forms 10-Q for the quarters ended March 31, 2019, June 30, 2019, and September 30, 2019, is compatible with maintaining KPMG LLP’s independence. Based on the reviews and discussions referred to above, we recommended to the Board that the consolidated financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The foregoing report has been furnished by the Audit Committee of the Board. George E. Minnich, Chairman Michael C. Arnold Sondra L. Barbour P. George Benson Hendrikus Visser Audit Fees The aggregate fees billed by KPMG LLP for professional services rendered for the audit of the Company’s annual consolidated financial statements for 2019 and 2018, the audit of the Company’s internal control over financial reporting for 2019 and 2018, subsidiary statutory audits and the reviews of the financial statements included in the Company’s SEC filings on Form 10-K, Form 10-Q and Form 8-K during such years were approximately $7,302,000 and $7,328,000, respectively. Audit-Related Fees The aggregate fees billed by KPMG LLP for professional services rendered for 2019 and 2018 for audit-related fees were approximately $59,000 and $42,000, respectively. The amounts for 2019 and 2018 primarily represent fees for audits of employee benefit plans and required auditor certifications for various matters required in certain foreign jurisdictions. Tax Fees The aggregate fees billed by KPMG LLP for professional services rendered for 2019 for tax services were approximately $188,000. KPMG LLP did not provide any professional tax services during 2018. Financial and Operational Information Systems Design and Implementation Fees KPMG LLP did not provide any information technology services related to financial and operational information systems design and implementation to the Company or its subsidiaries for 2019 or 2018. All Other Fees of KPMG LLP The aggregate of all other fees billed by KPMG LLP for 2019 and 2018 was $31,000 and $32,000, respectively, all of which relate to advisory services in connection with the Company’s global procurement reorganization that were rendered by a firm that KPMG LLP acquired in 2012. A representative of KPMG LLP is expected to be present at the Annual Meeting with the opportunity to make a statement and will be available to respond to appropriate questions. All of KPMG’s services and fees for services, whether audit or non-audit, are preapproved by the Audit Committee. In some instances services and fees initially are preapproved by the Chairman of the Audit Committee and then re-approved subsequently by the Audit Committee. All services performed by KPMG LLP for 2019 were approved by the Chairman of the Audit Committee or the Audit Committee. The Audit Committee has appointed KPMG LLP as the Company’s independent registered public accounting firm for 2020, subject to stockholder ratification. KPMG LLP has served as the Company’s independent registered public accounting firm since 2002. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS The Company has a written related party transaction policy pursuant to which a majority of the independent directors of an appropriate committee must approve transactions that exceed $120,000 in amount in which any director, executive officer, significant stockholder or certain other persons has or have a material interest. During 2019, the Company paid approximately $4.4 million to PPG Industries, Inc. for painting materials used in the Company’s manufacturing processes. Mr. Richenhagen, who is the Company’s Chairman, President and Chief Executive Officer, is currently a member of the board of directors, is the Chairman of the Audit Committee and serves as a member of the Officers & Directors compensation committee of PPG Industries, Inc. In addition, the Company paid approximately 47 $6.2 million during the year ended December 31, 2019 to Linde PLC (the parent company of Praxair, Inc.) for propane, gas and welding and laser consumables used in the Company’s manufacturing processes. Mr. Richenhagen served as a member of the board of directors of Praxair, Inc. from 2015 until the business combination of Praxair, Inc. and Linde AG, and is currently a member of the board of directors and serves on the Compensation and Governance & Nominating committees of Linde PLC, the holding company for the combined business. Mr. Richenhagen’s stepson is the Company’s Senior Vice-President, Grain and Protein and his daughter is the Company’s Director, Corporate Social Responsibility. Their combined annual salaries, bonuses and all other compensation was $687,740 and combined grants of stock awards was $73,822 during 2019. The stock awards reflect the aggregate grant date fair value computed in accordance with ASC 718 and the stock awards are based on the “target” level of performance at the date of grant. Ms. Srinivasan, who is currently a member of the Company’s Board of Directors, is the Chairman and Managing Director of TAFE, in which the Company holds a 23.75% interest. Through TAFE and TAFE Motors and Tractors Limited, Ms. Srinivasan is the beneficial owner of 12,150,152 shares of the Company’s common stock, not including shares of the Company’s common stock received by Ms. Srinivasan for service as a director. The Company received dividends of approximately $2.0 million from TAFE during 2019. TAFE manufactures and sells Massey Ferguson branded equipment primarily in India and also supplies tractors and components to AGCO for sale in other markets. During 2019, the Company purchased approximately $92.7 million of tractors and components from TAFE and sold approximately $1.5 million of parts to TAFE. The Company and TAFE are parties to a Letter Agreement regarding the current and future accumulation by TAFE of shares of our common stock and certain governance matters. The Letter Agreement expires on April 24, 2024. Pursuant to the Letter Agreement, TAFE has agreed not to (i) purchase in excess of 12,150,152 shares of our common stock, subject to certain adjustments; (ii) subject to its rights to make a non-public offer to acquire all or a part of the Company (or propose another transaction that would result in a change of control of the Company), form or act as part of a group with respect to the ownership or voting of our common stock or to otherwise grant a third-party a proxy or other voting rights with respect to our common stock owned by TAFE or its affiliates (other than to or at the request of the Company), provided that TAFE and its affiliates are expressly permitted to act as a group; or (iii) publicly announce its intention to commence, or commence, an offer to acquire all or part of our common stock. Pursuant to the Letter Agreement, the Company has agreed to: (i) nominate a candidate proposed by TAFE for election to our Board of Directors at each annual meeting, as long as the collective beneficial ownership by TAFE and its affiliates is 5% or more of the then outstanding common stock of the Company, subject to certain adjustments and restrictions; and (ii) provide customary assistance to TAFE in selling its shares, including filing a registration statement with the SEC, if TAFE determines to dispose of any shares of our common stock in a public distribution. The foregoing description of the Letter Agreement is qualified in its entirety by reference to the Letter Agreement, a copy of which was included as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 25, 2019. ANNUAL REPORT TO STOCKHOLDERS The Company’s 2019 Annual Report to its stockholders and Annual Report on Form 10-K for the year ended December 31, 2019, including consolidated financial statements and schedule thereto, but excluding other exhibits, is being furnished with this proxy statement to stockholders of record as of March 20, 2020. ANNUAL REPORT ON FORM 10-K We will provide without charge a copy of our Annual Report filed on Form 10-K for the year ended December 31, 2019, including the consolidated financial statements and schedule thereto, on the written request of the beneficial owner of any shares of our common stock on March 20, 2020. The written request should be directed to: Corporate Secretary, AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM A representative of KPMG LLP, our independent registered public accounting firm for 2019, is expected to attend the Annual Meeting and will have the opportunity to make a statement if he or she desires to do so. The representative also will be available to respond to appropriate questions from stockholders. The Audit Committee has appointed KPMG LLP as our independent registered public accounting firm for 2020, subject to stockholder ratification. 48 STOCKHOLDERS’ PROPOSALS Any stockholder of the Company who wishes to present a proposal at the 2021 Annual Meeting of stockholders of the Company, and who wishes to have such proposal included in the Company’s proxy statement and form of proxy for that meeting, must deliver a copy of such proposal to the Company at its principal executive offices at 4205 River Green Parkway, Duluth, Georgia 30096, Attention: Corporate Secretary, no later than November 30, 2020; however, if next year’s Annual Meeting of stockholders is held on a date more than 30 days before or after the corresponding date of the 2020 Annual Meeting, any stockholder who wishes to have a proposal included in our proxy statement for that meeting must deliver a copy of the proposal to the Company at a reasonable time before the proxy solicitation is made. We reserve the right to decline to include in our proxy statement any stockholder’s proposal which does not comply with the advance notice provisions of our By-Laws or the rules of the SEC for inclusion therein. Any stockholder of the Company who wishes to present a proposal at the 2021 Annual Meeting of stockholders of the Company, but not have such proposal included in our proxy statement and form of proxy for that meeting, must deliver a copy of such proposal to the Company at its principal executive offices at 4205 River Green Parkway, Duluth, Georgia 30096, Attention: Corporate Secretary no later than March 1, 2021 and otherwise in accordance with the advance notice provisions of our By-Laws or the persons appointed as proxies may exercise their discretionary voting authority if the proposal is considered at the meeting. The advance notice provisions of our By-Laws provide that for a proposal to be properly brought before a meeting by a stockholder, such stockholder must disclose certain information and must have given the Company notice of such proposal in written form meeting the requirements of our By-Laws no later than 60 days and no earlier than 90 days prior to the anniversary date of the immediately preceding Annual Meeting of stockholders. 49   NEW BLEED A N N U A L R E P O R T O N F O R M 1 0 - K ANNUAL REPORT ON FORM 10-K (cid:3) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR 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: 001-12930 AGCO CORPORATION (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 4205 River Green Parkway Duluth, Georgia (Address of principal executive offices) 58-1960019 (I.R.S. Employer Identification No.) 30096 (Zip Code) (770) 813-9200 (Registrants telephone number, including area code) Title of Class Common stock Securities registered pursuant to Section 12(b) of the Act: Trading Symbol AGCO Name of exchange on which registered New York Stock Exchange Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the 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. Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes 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): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth 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. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of AGCO Corporation’s Common Stock (based upon the closing sales price quoted on the New York Stock Exchange) held by non-affiliates as of June 30, 2019 was approximately $4.9 billion. For this purpose, directors and officers and the entities that they control have been assumed to be affiliates. As of February 24, 2020, 75,465,353 shares of AGCO Corporation’s Common Stock were outstanding. Portions of AGCO Corporation's Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. Documents Incorporated by Reference Item 1. Business PART I AGCO Corporation (“AGCO,” “we,” “us” or the “Company”) was incorporated in Delaware in 1991. executive offices are located at 4205 River Green Parkway, Duluth, Georgia 30096, and our telephone number is Our (770) 813-9200. Unless otherwise indicated, all references in this Form 10-K to the Company include our subsidiaries. General We are a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. We sell a full range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. Our products are widely recognized in the agricultural equipment industry and are marketed under a number of well-known brands, including Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®. We distribute most of our products through approximately 3,275 independent dealers and distributors in approximately 140 countries. We also provide retail and wholesale financing through our finance joint ventures with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., which we refer to as “Rabobank.” Products The following table sets forth a description of the Company’s products and their percentage of net sales: Product Product Description • High horsepower tractors (100 to 650 horsepower); typically used on large acreage farms, primarily for row crop production, soil cultivation, planting, land leveling, seeding and commercial hay operations. Tractors • Utility tractors (40 to 130 horsepower); typically used on small- and medium-sized farms and in specialty agricultural industries, including dairy, livestock, orchards and vineyards • Compact tractors (under 40 horsepower); typically used on small farms and specialty agricultural industries, as well as for landscaping, equestrian and residential uses Percentage of Net Sales 2019(1) 57% 2018(1) 57% 2017 57% Replacement Parts Grain Storage and Protein Production Systems Hay Tools and Forage Equipment, Implements & Other Equipment • Replacement parts for all of the products we sell, including products no longer in production. 15% 14% 16% Most of our products can be economically maintained with parts and service for a period of ten to 20 years. Our parts inventories are maintained and distributed through a network of master and regional warehouses throughout North America, South America, Europe, Africa, China and Australia in order to provide timely response to customer demand for replacement parts • Grain storage bins and related drying and handling equipment systems; seed-processing systems; 11% 12% 13% swine and poultry feed storage and delivery, ventilation and watering systems; and egg production systems and broiler production equipment • Round and rectangular balers, loader wagons, self-propelled windrowers, forage harvesters, disc 10% 10% 7% mowers, spreaders, rakes, tedders, and mower conditioners; used for the harvesting and packaging of vegetative feeds used in the cattle, dairy, horse and renewable fuel industries • Implements, including disc harrows, which cut through crop residue, leveling seed beds and mixing chemicals with the soils; heavy tillage, which break up soil and mix crop residue into topsoil, with or without prior discing; field cultivators, which prepare a smooth seed bed and destroy weeds; and drills, which are primarily used for small grain seeding • Planters and other planting equipment; used to plant seeds and apply fertilizer in the field, typically used for row crops, including planting technologies that cover the areas of monitoring and measurement, liquid control and delivery, meter accuracy and seed delivery • Other equipment, including loaders; used for a variety of tasks, including lifting and transporting hay crops Combines • Combines, sold with a variety of threshing technologies and complemented by a variety of crop- harvesting heads; typically used in harvesting grain crops such as corn, wheat, soybeans and rice Application Equipment • Self-propelled, three- and four-wheeled vehicles and related equipment; for use in the application of liquid and dry fertilizers and crop protection chemicals both prior to planting crops (“pre- emergence”) and after crops emerge from the ground (“post-emergence”) 3% 3% 3% 3% 4% 3% ____________________________________ (1) The summation of these individual percentages does not total due to rounding. 1 Smart Farming Technologies We offer smart solutions to the farmer to optimize farming performance while improving ease of use. Our strategy is based upon an open approach to data management leveraging existing solutions offered by partnering with industry leaders while integrating AGCO products and innovation. These smart farming technologies are based on connectivity, automation and digitalization and include satellite-based steering, field data collection, product self-adjustment, yield-mapping and telemetry-based fleet management systems. Our Fuse® and other smart-farming technologies support our products, brands and the aftermarket with a comprehensive and customizable suite of solutions, enabling farmers to make individual, data based decisions in order to reduce costs and maximize efficiency, yields and profitability of their farms. A significant number of these technologies are developed by third parties and are integrated into our products. We believe that these products and related devices are highly valued by professional farmers globally and are integral to the current and future growth of our equipment sales and revenues. Marketing and Distribution We distribute products primarily through a network of independent dealers and distributors. Our dealers are responsible for retail sales of equipment to end users and after-sales service and support. Our distributors may sell our products through networks of dealers supported by the distributors, and our distributors also may directly market our products and provide customer service support. Our sales are not dependent on any specific dealer, distributor or group of dealers. In some countries, we utilize associates and licensees to provide a distribution channel for our products and a source of low-cost production for certain Massey Ferguson and Valtra products. Associates are entities in which we have an ownership interest, most notably in India. Licensees are entities in which we have no ownership interest. An associate or licensee generally has the exclusive right to produce and sell Massey Ferguson or Valtra equipment in its licensed territory under these tradenames, but may not sell these products outside the licensed territory. We generally license certain technology to these associates and licensees, and we may sell them certain components used in local manufacturing operations. Geographical Region Europe .................................................................................................. North America...................................................................................... South America...................................................................................... Rest of World (2).................................................................................... ____________________________________ (1) The summation of these individual percentages does not total due to rounding. (2) Consists of approximately 60 countries in Africa, the Middle East, Australia and Asia. Dealer Support and Supervision Independent Dealers and Distributors 2019 770 1,875 250 380 2019 Percent of Net Sales 2018(1) 57% 58% 2017 53% 24% 9% 9% 23% 10% 9% 23% 13% 11% We believe that one of the most important criteria affecting a farmer’s decision to purchase a particular brand of equipment is the quality of the dealer who sells and services the equipment. We support our dealers in order to improve the quality of our dealer network. We monitor each dealer’s performance and profitability and establish programs that focus on continuous dealer improvement. Our dealers generally have sales territories for which they are responsible. We believe that our ability to offer our dealers a full product line of agricultural equipment and related replacement parts, as well as our ongoing dealer training and support programs focusing on business and inventory management, sales, marketing, warranty and servicing matters and products, helps ensure the vitality and increase the competitiveness of our dealer network. We also maintain dealer advisory groups to obtain dealer feedback on our operations. We provide our dealers with volume sales incentives, demonstration programs and other advertising support to assist sales. We design our sales programs, including retail financing incentives, and our policies for maintaining parts and service availability with extensive product warranties to enhance our dealers’ competitive position. 2 Manufacturing and Suppliers Manufacturing and Assembly We manufacture and assemble our products in 45 locations worldwide, including four locations where we operate joint ventures. Our locations are intended to optimize capacity, technology or local costs. Furthermore, we continue to balance our manufacturing resources with externally-sourced machinery, components and/or replacement parts to enable us to better control costs, inventory levels and our supply of components. We believe that our manufacturing facilities are sufficient to meet our needs for the foreseeable future. Refer to Item 2, “Properties,” where a listing of our principal manufacturing locations is presented. Our AGCO Power engines division produces diesel engines, gears and generating sets. The diesel engines are manufactured for use in a portion of our tractors, combines and sprayers, and also are sold to third parties. AGCO Power specializes in the manufacturing of off-road engines in the 75 to 600 horsepower range. Third-Party Suppliers We externally source some of our machinery, components and replacement parts from third-party suppliers. Our production strategy is intended to optimize our research and development and capital investment requirements and to allow us greater flexibility to respond to changes in market conditions. We purchase some fully-manufactured tractors from Tractors and Farm Equipment Limited (“TAFE”), Carraro S.p.A. and Iseki & Company, Limited. We also purchase other tractors, implements and hay and forage equipment from various third-party suppliers. Refer to Note 14 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further discussion of our relationship with TAFE. In addition to the purchase of machinery, third-party suppliers supply us with significant components used in our manufacturing operations. We select third-party suppliers that we believe are low cost, high quality and possess the most appropriate technology. We also assist in the development of these products or component parts based upon our own design requirements. Our past experience with outside suppliers generally has been favorable. Seasonality Generally, retail sales by dealers to farmers are highly seasonal and largely are a function of the timing of the planting and harvesting seasons. To the extent possible, we attempt to ship products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal retail demands on our manufacturing operations and to minimize our investment in inventory. Our financing requirements are subject to variations due to seasonal changes in working capital levels, which typically increase in the first half of the year and then decrease in the second half of the year. The fourth quarter is also typically a period for higher retail sales because of our customers’ year-end tax planning considerations, the increase in the availability of funds from completed harvests and the timing of dealer incentives. Competition The agricultural industry is highly competitive. We compete with several large national and international full-line suppliers, as well as numerous short-line and specialty manufacturers with differing manufacturing and marketing methods. Our two principal competitors on a worldwide basis are Deere & Company and CNH Industrial N.V. We have regional competitors around the world that have significant market share in a single country or a group of countries. We believe several key factors influence a buyer’s choice of farm equipment, including the strength and quality of a company’s dealers, the quality and pricing of products, dealer or brand loyalty, product availability, terms of financing and customer service. See “Marketing and Distribution” for additional information. Engineering and Research We make significant expenditures for engineering and applied research to improve the quality and performance of our products, to develop new products and to comply with government safety and engine emissions regulations. 3 Wholesale Financing Primarily in the United States and Canada, we engage in the standard industry practice of providing dealers with floor plan payment terms for their inventories of farm equipment for extended periods, generally through our AGCO Finance joint ventures. The terms of our wholesale finance agreements with our dealers vary by region and product line, with fixed payment schedules on all sales, generally ranging from one to 12 months. In the United States and Canada, dealers typically are not required to make an initial down payment, and our terms allow for an interest-free period generally ranging from one to 12 months, depending on the product. Amounts due from sales to dealers in the United States and Canada are immediately due upon a retail sale of the underlying equipment by the dealer, with the exception of sales of grain storage and protein production systems, as discussed further below. If not previously paid by the dealer, installment payments generally are required beginning after the interest-free period with the remaining outstanding equipment balance generally due within 12 months after shipment. In limited circumstances, we provide sales terms, and in some cases, interest-free periods that are longer than 12 months for certain products. These typically are specified programs, predominantly in the United States and Canada, where interest is charged after a period of up to 24 months, depending on various factors including dealers' sales volumes during the preceding year. We also provide financing to dealers on used equipment accepted in trade. We generally obtain a security interest in the new and used equipment we finance. Typically, sales terms outside the United States and Canada are of a shorter duration, generally ranging from 30 to 180 days. In many cases, we retain a security interest in the equipment sold on extended terms. In certain international markets, our sales are generally backed by letters of credit or credit insurance. Sales of grain storage and protein production systems both in the United States and in other countries generally are payable within 30 days of shipment. In certain countries, sales of such systems for which the Company is responsible for construction or installation may be contingent upon customer acceptance. Payment terms vary by market and product, with fixed payment schedules on all sales. We have accounts receivable sales agreements that permit transferring, on an ongoing basis, a majority of our wholesale receivables in North America, Europe and Brazil to our AGCO Finance joint ventures in the United States, Canada, Europe and Brazil. Upon transfer, the wholesale receivables maintain standard payment terms, including required regular principal payments on amounts outstanding and interest charges at market rates. Qualified dealers may obtain additional financing through our U.S., Canadian, European and Brazilian finance joint ventures at the joint ventures’ discretion. In addition, our AGCO Finance joint ventures may provide wholesale financing directly to dealers in Europe, Brazil and Australia. Retail Financing Our AGCO Finance joint ventures offer financing to most of the end users of our products. Besides contributing to our overall profitability, the AGCO Finance joint ventures enhance our sales efforts by tailoring retail finance programs to prevailing market conditions. Our finance joint ventures are located in the United States, Canada, Europe, Brazil, Argentina and Australia and are owned by AGCO and by a wholly-owned subsidiary of Rabobank. Refer to “Finance Joint Ventures” within Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for further information. In addition, Rabobank is the primary lender with respect to our credit facility and our senior term loan, as are more fully described in “Liquidity and Capital Resources” within Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical relationship with Rabobank has been strong, and we anticipate its continued long-term support of our business. Intellectual Property We own and have licenses to the rights under a number of domestic and foreign patents, trademarks, trade names and brand names relating to our products and businesses. We defend our patent, trademark and trade and brand name rights primarily by monitoring competitors’ machines and industry publications and conducting other investigative work. We consider our intellectual property rights, including our right to use our trade and brand names, important in the operation of our businesses. However, we do not believe we are dependent on any single patent, trademark, trade name, brand name or group of patents or trademarks, trade names or brand names. We intend to maintain the separate strengths and identities of our core brand names and product lines. 4 Environmental Matters and Regulation We are subject to environmental laws and regulations concerning emissions to the air, discharges of processed or other types of wastewater, and the generation, handling, storage, transportation, treatment and disposal of waste materials. These laws and regulations are constantly changing, and the effects that they may have on us in the future are impossible to accurately predict. It is our policy to comply with all applicable environmental, health and safety laws and regulations. We believe that any expense or liability we may incur in connection with noncompliance with laws or regulations or the cleanup of any of our properties will not have a materially adverse effect on us. The engines manufactured by our AGCO Power engine division, which specializes in the manufacturing of non-road engines in the 75 to 600 horsepower range, currently comply with emissions standards and related requirements set by European, Brazilian and U.S. regulatory authorities, including both the United States Environmental Protection Agency and various state authorities. We expect to meet future emissions requirements through the introduction of new technology to our engines and exhaust after-treatment systems, as necessary. In some markets, such as the United States, we must obtain governmental environmental approvals in order to import our products, and these approvals can be difficult or time-consuming to obtain or may not be obtainable at all. For example, our AGCO Power engine division and our engine suppliers are subject to air quality standards, and production at our facilities could be impaired if AGCO Power and these suppliers are unable to timely respond to any changes in environmental laws and regulations affecting engine emissions, including the emissions of greenhouse gases (“GHG”). Compliance with environmental and safety regulations has added, and will continue to add, to the cost of our products and increase the capital-intensive nature of our business. Climate change, as a result of emissions of GHG, is a significant topic of discussion and may generate U.S. and other regulatory responses. It is impracticable to predict with any certainty the impact on our business of climate change or the regulatory responses to it, although we recognize that they could be significant. The most direct impacts are likely to be an increase in energy costs, which would increase our operating costs (through increased utility and transportation costs) and an increase in the costs of the products we purchase from others. In addition, increased energy costs for our customers could impact demand for our equipment. It is too soon for us to predict with any certainty the ultimate impact of additional regulation, either directionally or quantitatively, on our overall business, results of operations or financial condition. Regulation and Government Policy Domestic and foreign political developments and government regulations and policies directly affect the agricultural industry and indirectly affect the agricultural equipment business in the United States and abroad. The application, modification or adoption of laws, regulations or policies could have an adverse effect on our business. We have manufacturing facilities or other physical presence in approximately 33 countries and sell our products in approximately 140 countries. This subjects us to a range of trade, product, foreign exchange, employment, tax and other laws and regulations, in addition to the environmental regulations discussed previously, in a significant number of jurisdictions. Many jurisdictions and a variety of laws regulate the contractual relationships with our dealers. These laws impose substantive standards on the relationships between us and our dealers, including events of default, grounds for termination, non-renewal of dealer contracts and equipment repurchase requirements. Such laws could adversely affect our ability to terminate our dealers. In addition, each of the jurisdictions within which we operate or sell products has an important interest in the success of its agricultural industry and the consistency of the availability of reasonably priced food sources. These interests result in active political involvement in the agricultural industry, which, in turn, can impact our business in a variety of ways. Corporate Social Responsibility For AGCO, corporate social responsibility is a core business imperative that underlies our strategy to build a more valuable enterprise through long-term economic, social and environmental sustainability in support of our key stakeholders and AGCO communities. This aligns with our vision to provide high-tech solutions for farmers feeding the world. To achieve that vision, we seek opportunities in every aspect of the AGCO agricultural value chain to address many of today’s most significant challenges, including food security, farmer livelihood and resource efficiency. We see efficiency as key to sustainable agriculture and achieving the United Nations Sustainable Development Goals related to minimizing the environmental impact of farming and ending hunger. Our products and processes address significant long-term issues, including (1) the reduction of fuel (carbon) usage and related emissions in connection with the engines contained in the equipment that we manufacture, (2) the minimization of other inputs used by farmers, e.g., seeds, fertilizer, pesticide, and water, through smart farming technology and equipment, 5 (3) improved crop storage and animal welfare, and (4) the reduction in our consumption of natural resources in the production of the equipment that we manufacture. For example, for U.S. equipment, our engines now are Tier 4 compliant and, in Europe, they now are Stage V compliant; in both cases representing meaningful reductions in fuel usage and greenhouse gases in our two largest markets. In addition, our sprayer equipment is equipped with variable rate technology, nozzle controls and positioning systems that allow farmers to precisely apply nutrients and chemicals which result in overall reduced chemical and fertilizer usage. Our efforts include the AGCO Future Farm and training center in Zambia, which teaches farmers how to farm more sustainably, with focused efficiency, while preserving soil health and reducing post-harvest loss. Additionally, our AGCO Agriculture Foundation, initiated by AGCO in 2018, is a private foundation with the vision to prevent and relief hunger. foundation initiates impactful programs that support food security, foster sustainable agricultural development and build The needed agricultural infrastructure in marginalized farming communities. We launched the AGCO Agriculture Foundation to focus our philanthropy on building needed agricultural infrastructure to help feed the world sustainably and equitably. Employees As of December 31, 2019, we employed approximately 21,000 employees, including approximately 4,650 employees in the United States and Canada. A majority of our employees at our manufacturing facilities, both domestic and international, are represented by collective bargaining agreements and union contracts with terms that expire on varying dates. We currently do not expect any significant difficulties in renewing these agreements. Available Information Our Internet address is www.agcocorp.com. We make the following reports filed by us available, free of charge, on our website under the heading “SEC Filings” in our website’s “Investors” section: • • • • • annual reports on Form 10-K; quarterly reports on Form 10-Q; current reports on Form 8-K; proxy statements for the annual meetings of stockholders; and reports on Form SD. These reports are made available on our website as soon as practicable after they are filed with the Securities and Exchange Commission (“SEC”). The SEC also maintains a website (www.sec.gov) that contains our reports and other information filed with the SEC. We also provide corporate governance and other information on our website. This information includes: • • charters for the standing committees of our board of directors, which are available under the heading “Charters of the Committees of the Board” in the “Governance, Committees, & Charters” section of the “Corporate Governance” section of our website located under “Investors,” and our Global Code of Conduct, which is available under the heading “Global Code of Conduct” in the “Corporate Governance” section of our website located under “Investors.” In addition, in the event of any waivers of our Global Code of Conduct, those waivers will be available under the heading “Corporate Governance” of our website. None of these materials, including the other materials available on our website, is incorporated by reference into this Form 10-K unless expressly provided. 6 Item 1A. Risk Factors We make forward-looking statements in this report, in other materials we file with the SEC, on our website, or otherwise release to the public. In addition, our senior management makes forward-looking statements orally to analysts, investors, the media and others. Statements, including the statements contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” concerning our future operations, prospects, strategies, products, manufacturing facilities, legal proceedings, financial condition, financial performance (including growth and earnings) and demand for our products and services, and other statements of our plans, beliefs or expectations, net sales, industry conditions, currency translation impacts, market demand, farm incomes, weather conditions, commodity prices, general economic conditions, availability of financing, working capital, capital expenditures, debt service requirements, margins, production volumes, cost reduction initiatives, investments in product development, compliance with financial covenants, support from lenders, recovery of amounts under guarantee, uncertain income tax provisions, funding of our pension and postretirement benefit plans, or realization of net deferred tax assets, are forward-looking statements. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These factors include, among others, those set forth below and in the other documents that we file with the SEC. There also are other factors that we may not describe, generally because we currently do not perceive them to be material, or likely to become material, that could cause actual results to differ materially from our expectations. These risks could impact our business in a number of ways, including by negatively impacting our future results of operations, cash flows and financial condition. For simplicity, below we collectively refer to these impacts as our “performance.” We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Our financial results depend entirely upon the agricultural industry, and factors that adversely affect the agricultural industry generally, including declines in the general economy, increases in farm input costs, weather conditions and lower commodity prices, will adversely affect us. Our success depends entirely on the vitality of the agricultural industry. Historically, the agricultural industry has been cyclical and subject to a variety of economic and other factors. Sales of agricultural equipment, in turn, also are cyclical and generally reflect the economic health of the agricultural industry. The economic health of the agricultural industry is affected by numerous factors, including farm income, farm input costs, land values and debt levels, all of which are influenced by levels of commodity prices, acreage planted, crop yields, agricultural product demand (including crops used as renewable energy sources), government policies and government subsidies. The economic health also is influenced by general economic conditions, interest rate and exchange rate levels, and the availability of financing for retail customers, including financing subsidies to farmers, which can be significant in countries such as Brazil. Trends in the agricultural industry, such as farm consolidations, may affect the agricultural equipment market. In addition, weather conditions, such as floods, heat waves or droughts, and pervasive livestock or crop diseases affect farmers’ buying decisions. Downturns in the agricultural industry due to these or other factors, which could vary by market, can result in decreases in demand for agricultural equipment, which would adversely affect our performance. Moreover, the unpredictable nature of many of these factors and the resulting volatility in demand make it difficult for us to accurately predict sales and optimize production. This, in turn, can result in higher costs, including inventory carrying costs and underutilized manufacturing capacity. During previous downturns in the agricultural industry, we experienced significant and prolonged declines in our performance, and we expect our business to remain subject to similar market fluctuations in the future. The agricultural equipment industry is highly seasonal, and seasonal fluctuations significantly impact our performance. The agricultural equipment business is highly seasonal, which causes our quarterly results and our cash flow to fluctuate during the year. Farmers generally purchase agricultural equipment in the Spring and Fall in conjunction with the major planting and harvesting seasons. In addition, the fourth quarter typically is a significant period for retail sales because of year-end tax planning considerations, the increase in availability of funds from completed harvests, and the timing of dealer incentives. Our net sales and income from operations historically have been the lowest in the first quarter and have increased in subsequent quarters as dealers anticipate increased retail sales in subsequent quarters. 7 Most of our sales depend on the availability of financing to retail customers, and any disruption in their ability to obtain financing, whether due to economic downturns or otherwise, will result in the sale of fewer products by us. In addition, the collectability of receivables that are created from our sales, as well as from such retail financing, is critical to our business. Most retail sales of our products are financed, either by our AGCO Finance joint ventures or by a bank or other private lender. The AGCO Finance joint ventures, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance approximately 40% to 50% of the retail sales of our tractors and combines in the markets where the joint ventures operate. Any difficulty by Rabobank in continuing to provide that financing, or any business decision by Rabobank as the controlling member not to fund the business or particular aspects of it (for example, a particular country or region), would require the joint ventures to find other sources of financing (which may be difficult to obtain) or would require us to find other sources of retail financing for our dealers and their retail customers, or our dealers and their retail customers would be required to utilize other retail financing providers. In an economic downturn, we expect that financing for capital equipment purchases generally would become more difficult or more expensive to obtain. To the extent that financing is not available, or available only at unattractive prices, our sales would be negatively impacted. Both AGCO and our AGCO Finance joint ventures have substantial accounts receivable from dealers and retail customers, and we both are adversely impacted when the collectability of these receivables is not consistent with historical experience. This collectability is dependent on the financial strength of the agricultural industry, which in turn is dependent upon the factors discussed elsewhere in this “Risk Factors” section. In addition, the AGCO Finance joint ventures may project estimated credit losses that exceed expectations and adversely affect their financial condition and results of operations. The finance joint ventures lease equipment as well and also may experience residual value losses that exceed expectations caused by lower pricing for used equipment and higher than expected returns at lease maturity. To the extent that defaults and losses are higher than expected, our equity in the net earnings of the finance joint ventures would be less, or there could be losses, which could materially impact our performance. Our success depends on the introduction of new products, which requires substantial expenditures. Our long-term results depend upon our ability to introduce and market new products successfully. The success of our new products will depend on a number of factors, including: • • • • innovation; customer acceptance; the efficiency of our suppliers in providing component parts and of our manufacturing facilities in producing final products; and the performance and quality of our products relative to those of our competitors. As both we and our competitors continuously introduce new products or refine versions of existing products, we cannot predict the level of market acceptance or the amount of market share our new products will achieve. We have experienced delays in the introduction of new products in the past, and we may experience delays in the future. Any delays or other problems with our new product launches will adversely affect our performance. In addition, introducing new products can result in decreases in revenues from our existing products. Consistent with our strategy of offering new products and product refinements, we expect to make substantial investments in product development and refinement. We may need more funding for product development and refinement than is readily available, which could adversely affect our business. Our expansion plans in emerging markets entail significant risks. Our long-term strategy includes establishing a greater manufacturing and supply-chain and/or marketing presence in emerging markets such as India, China and Africa. As we progress with these efforts, it will involve a significant investment of capital and other resources and entail various risks. These include risks attendant to obtaining necessary governmental approvals and the construction of facilities in a timely manner and within cost estimates, the establishment of supply channels, the commencement of efficient manufacturing operations, and, ultimately, the acceptance of the products by retail customers. While we expect the expansion to be successful, should we encounter difficulties involving these or similar factors, it may not be as successful as we anticipate. 8 We face significant competition, and, if we are unable to compete successfully against other agricultural equipment manufacturers, we will lose dealers and their retail customers and our net sales and profitability will decline. The agricultural equipment business is highly competitive, particularly in our major markets. Our two key competitors, Deere & Company and CNH Industrial N.V., are substantially larger than we are and have greater financial and other resources. In addition, in some markets, we compete with smaller regional competitors with significant market share in a single country or group of countries. Our competitors may substantially increase the resources devoted to the development and marketing, including discounting, of products that compete with our products, which would necessitate our making similar expenditures. In addition, competitive pressures in the agricultural equipment business may affect the market prices of new and used equipment, which, in turn, may adversely affect our performance. We maintain an independent dealer and distribution network in the markets where we sell products. The financial and operational capabilities of our dealers and distributors are critical to our ability to compete in these markets. In addition, we compete with other manufacturers of agricultural equipment for dealers. If we are unable to compete successfully against other agricultural equipment manufacturers, we could lose dealers and their retail customers and performance may decline. Rationalization or restructuring of manufacturing facilities, and plant expansions and system upgrades at our manufacturing facilities, may cause production capacity constraints and inventory fluctuations. The rationalization of our manufacturing facilities has at times resulted in, and similar rationalizations or restructurings in the future may result in, temporary constraints upon our ability to produce the quantity of products necessary to fill orders and thereby complete sales in a timely manner. In addition, system upgrades at our manufacturing facilities that impact ordering, production scheduling, manufacturing and other related processes are complex, and could impact or delay production. A prolonged delay in our ability to fill orders on a timely basis could affect customer demand for our products and increase the size of our product inventories, causing future reductions in our manufacturing schedules and adversely affecting our performance. Moreover, our continuous development and production of new products often involve the retooling of existing manufacturing facilities. This retooling may limit our production capacity at certain times in the future, which could adversely affect our performance. In addition, the expansion and reconfiguration of existing manufacturing facilities, as well as the start-up of new manufacturing operations in emerging markets, such as China and Russia, could increase the risk of production delays, as well as require significant investments. Our business will be adversely impacted if the coronavirus outbreak spreads widely or otherwise impacts our manufacturing and supply chain or demand for our products The extent that the coronavirus outbreak will spread widely and its impact on our results will depend on future developments, which are highly uncertain and unpredictable. We have factories and suppliers in China and Italy, where the early outbreaks have been significant and where production of our products could be directly impacted by actions taken to contain the virus. The virus could spread to areas in other countries where we have other factories and suppliers. In response to intensifying efforts to contain the spread of this coronavirus, we have limited travel by our employees and stopped travel by our employees to certain countries. In addition, our factories are dependent upon parts and components manufactured by others, and to the extent that our suppliers are impacted by the virus it likely will reduce the availability, or result in delays, of parts and components to us, which in turn could interrupt our ability to produce and sell completed products. Recently there have been circumstances of freight channels being interrupted and increases in the freight prices, which also could impact our business. While we do not anticipate a significant impact upon demand for our products, in the event that the virus spreads widely, or there are negative impacts to economic conditions and resulting farmer confidence, there could be a reduction in market demand or delays in sales. We depend on suppliers for components, parts and raw materials for our products, and any failure by our suppliers to provide products as needed, or by us to promptly address supplier issues, will adversely impact our ability to timely and efficiently manufacture and sell products. We also are subject to raw material price fluctuations, which can adversely affect our manufacturing costs. Our products include components and parts manufactured by others. As a result, our ability to timely and efficiently manufacture existing products, to introduce new products and to shift manufacturing of products from one facility to another depends on the quality of these components and parts and the timeliness of their delivery to our facilities. At any particular time, we depend on numerous suppliers, and the failure by one or more of our suppliers to perform as needed will result in fewer products being manufactured, shipped and sold. If the quality of the components or parts provided by our suppliers is less than required and we do not recognize that failure prior to the shipment of our products, we will incur higher warranty costs. The timely supply of component parts for our products also depends on our ability to manage our relationships with suppliers, 9 to identify and replace suppliers that fail to meet our schedules or quality standards, and to monitor the flow of components and accurately project our needs. The shift from our existing suppliers to new suppliers, including suppliers in emerging markets, also may impact the quality and efficiency of our manufacturing capabilities, as well as warranty costs. Changes in the availability and prices of certain raw materials, components and parts could result in production disruptions or increased costs and lower profits on the sale of our products. Changes in the availability and price of these raw materials, components and parts, which have fluctuated significantly in the past and are more likely to fluctuate during times of economic volatility, as well as regulatory instability or change in tariffs, can significantly increase the costs of production. This, in turn, could have a material negative effect on performance, particularly if, due to pricing considerations or other factors, we are unable to recover the increased costs through pricing from our dealers. A majority of our sales and manufacturing take place outside the United States, and, as a result, we are exposed to risks related to foreign laws, taxes, economic conditions, labor supply and relations, political conditions and governmental policies as well as U.S. laws governing who we sell to and how we conduct business. These risks may delay or reduce our realization of value from our international operations. A majority of our sales are derived from sales outside the United States. The foreign countries in which our sales are the greatest are Germany, France, Brazil, the United Kingdom, Finland and Canada. We have significant manufacturing operations in France, Germany, Brazil, Italy and Finland, and we have established manufacturing operations in emerging markets, such as China. Many of our sales involve products that are manufactured in one country and sold in a different country, and, therefore, our performance can be adversely affected by adverse changes, in either the country of origin or the country of destination, in the factors discussed elsewhere in this "Risk Factors" section, particularly the factors that impact the delivered cost of our products. Our business practices in these foreign countries generally must comply with U.S. law, including limitations on where and to whom we may sell products and the Foreign Corrupt Practices Act (“FCPA”). We have a compliance program in place designed to reduce the likelihood of potential violations of these laws, but it is difficult to identify and prevent violations. Significant violations could subject us to fines and other penalties as well as increased compliance costs. Some of our international operations also are, or might become, subject to various risks that are not present in domestic operations, including restrictions on dividends and the repatriation of funds. Foreign developing markets may present special risks, such as unavailability of financing, inflation, slow economic growth, price controls and difficulties in complying with U.S. regulations. Domestic and foreign political developments and government regulations and policies directly affect the international agricultural industry, which affects the demand for agricultural equipment. If demand for agricultural equipment declines, our performance will be adversely affected. The application, modification or adoption of laws, regulations, trade agreements or policies adversely affecting the agricultural industry, including the imposition of import and export duties and quotas, expropriation and potentially burdensome taxation, could have an adverse effect on our business. Trade restrictions, including potential withdrawal from or modification of existing trade agreements, negotiation of new trade agreements, and imposition of new (and retaliatory) tariffs against certain countries or covering certain products, could limit our ability to capitalize on current and future growth opportunities in the international markets in which we operate and impair our ability to expand our business by offering new technologies, products and services. These changes also can impact the cost of the products we manufacture, including the cost of steel. These trade restrictions and changes in, or uncertainty surrounding, global trade policy may affect our competitive position. The health of the agricultural industry and the ability of our international dealers and retail customers to operate their businesses, in general, are affected by domestic and foreign government programs that provide economic support to farmers. As a result, farm income levels and the ability of farmers to obtain advantageous financing and other protections would be reduced to the extent that any such programs are curtailed or eliminated. Any such reductions likely would result in a decrease in demand for agricultural equipment. For example, a decrease or elimination of current price protections for commodities or of subsidy payments for farmers in the European Union, the United States, Brazil or elsewhere in South America would negatively impact the operations of farmers in those regions, and, as a result, our sales may decline if these farmers delay, reduce or cancel purchases of our products. In emerging markets, some of these (and other) risks can be greater than they might be elsewhere. In addition, in some cases, the financing provided by the AGCO Finance joint ventures or by others is supported by a government subsidy or guarantee. The programs under which those subsidies and guarantees are provided generally are of limited duration and subject to renewal and contain various caps and other limitations. In some markets, for example Brazil, this support is quite significant. In the event the governments that provide this support elect not to renew these programs, and were financing not available on reasonable terms, whether through our joint ventures or otherwise, our performance would be negatively impacted. 10 As a result of the multinational nature of our business and the acquisitions that we have made over time, our corporate and tax structures are complex, with a significant portion of our operations being held through foreign holding companies. As a result, it can be inefficient, from a tax perspective, for us to repatriate or otherwise transfer funds, and we may be subject to taxation from multiple tax jurisdictions. In addition, we must comply with a greater level of tax-related regulation and reviews by multiple governmental units than would companies with a more simplified structure. Our foreign and U.S. operations also routinely sell products to, and license technology to other operations of ours. The pricing of these intra-company transactions is subject to regulation and review as well. While we make every effort to comply with all applicable tax laws, audits and other reviews by governmental units could result in our being required to pay additional taxes, interest and penalties. Brexit and political uncertainty in the United Kingdom and the European Union could disrupt our operations and adversely affect our performance. We have significant operations in the United Kingdom. The United Kingdom withdrew from the European Union on January 31, 2020 and is now in a period of transition which currently is stated to continue until the end of 2020. The transitional period maintains all existing trading arrangements. The current rules on trade, travel, and business for the United Kingdom and the European Union will continue to apply through the transitional period during which time the United Kingdom and the European Union will negotiate future trading arrangements. Uncertainty related to the withdrawal of the United Kingdom from the European Union, and the outcome of the negotiations related to future trade and other arrangements, may reduce demand for our products and services and may increase the costs and difficulty of doing business in the United Kingdom and the European Union. Brexit also may result in significant changes in the British regulatory environment, which likely would increase our compliance costs. We may find it more difficult to conduct business in the United Kingdom and the European Union, as Brexit may result in increased regulatory complexity and increased restrictions on the movement of capital, goods and personnel. Depending on the outcome of negotiations between the United Kingdom and the European Union regarding the terms of Brexit, we may decide to relocate or otherwise alter certain of our European or United Kingdom operations to respond to the new business, legal, regulatory, tax and trade environments. Brexit may adversely affect our relationships with our dealers and their retail customers, suppliers and employees and our performance could be adversely affected. We can experience substantial and sustained volatility with respect to currency exchange rates and interest rates, which can adversely affect our reported results of operations and the competitiveness of our products. We conduct operations in a variety of currencies. Our production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. We also are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we denominate sales and to risks associated with translating the financial statements of our foreign subsidiaries from local currencies into United States dollars. Similarly, changes in interest rates affect us by increasing or decreasing borrowing costs and finance income. Our most significant transactional foreign currency exposures are the Euro, the Brazilian real and the Canadian dollar in relation to the United States dollar, and the Euro in relation to the British pound. Where naturally offsetting currency positions do not occur, we attempt to manage these risks by economically hedging some, but not necessarily all, of our exposures through the use of foreign currency forward exchange or option contracts. As with all hedging instruments, there are risks associated with the use of foreign currency forward exchange or option contracts, interest rate swap agreements and other risk management contracts. While the use of such hedging instruments provides us with protection for a finite period of time from certain fluctuations in currency exchange and interest rates, when we hedge we forego part or all the benefits that might result from favorable fluctuations in currency exchange and interest rates. In addition, any default by the counterparties to these transactions could adversely affect us. Despite our use of economic hedging transactions, currency exchange rate or interest rate fluctuations may adversely affect our performance. In July 2017, the Financial Conduct Authority in the UK, the governing body responsible for regulating the London Interbank Offered Rate (“LIBOR”), announced that it no longer will compel or persuade financial institutions and panel banks to make LIBOR submissions after 2021. This decision is expected to result in the end of the use of LIBOR as a reference rate for commercial loans and other indebtedness. We have both LIBOR-denominated and EURIBOR-denominated indebtedness or derivative instruments. The transition to alternatives to LIBOR could be modestly disruptive to the credit markets, and while we do not believe that the impact would be material to us, we do not have insight into what the impacts might be. In the event that LIBOR is no longer published, interest on our credit facility will be calculated based upon a base rate, as defined in the facility agreement. Our credit facility also provides for an expedited amendment process once a replacement for LIBOR is established. 11 We are subject to extensive environmental laws and regulations, including increasingly stringent engine emissions standards, and our compliance with, or our failure to comply with, existing or future laws and regulations could delay production of our products or otherwise adversely affect our business. We are subject to increasingly stringent environmental laws and regulations in the countries in which we operate. These regulations govern, among other things, emissions into the air, discharges into water, the use, handling and disposal of hazardous substances, waste disposal and the prevention and remediation of soil and groundwater contamination. Our costs of complying with these or any other current or future environmental regulations may be significant. For example, several countries have adopted more stringent environmental regulations regarding emissions into the air, and it is possible that new emissions-related legislation or regulations will be adopted in connection with concerns regarding GHG. The regulation of GHG emissions from certain stationary or mobile sources could result in additional costs to us in the form of taxes or emission allowances, facilities improvements and energy costs, which would increase our operating costs through higher utility and transportation expenses and costs of materials. Increased input costs, such as fuel and fertilizer, and compliance-related costs also could impact retail customer operations and demand for our equipment. Because the impact of any future GHG legislative, regulatory or product standard requirements on our global businesses and products is dependent on the timing and design of mandates or standards, we are unable to predict its potential impact at this time. In addition, we may be subject to liability in connection with properties and businesses that we no longer own or operate. We may be adversely impacted by costs, liabilities or claims with respect to our operations under existing laws or those that may be adopted in the future that could apply to both future and prior conduct. If we fail to comply with existing or future laws and regulations, we may be subject to governmental or judicial fines or sanctions, or we may not be able to sell our products and, therefore, our performance could be adversely affected. In addition, the products that we manufacture or sell, particularly engines, are subject to increasingly stringent environmental regulations, including those that limit GHG emissions. As a result, on an ongoing basis we incur significant engineering expenses and capital expenditures to modify our products to comply with these regulations. Further, we may experience production delays if we or our suppliers are unable to design and manufacture components for our products that comply with environmental standards. For instance, as we are required to meet more stringent engine emission reduction standards that are applicable to engines we manufacture or incorporate into our products, we expect to meet these requirements through the introduction of new technology to our products, engines and exhaust after-treatment systems, as necessary. Failure to meet applicable requirements could materially affect our business and results of operations. We are subject to SEC disclosure obligations relating to “conflict minerals” (columbite-tantalite, cassiterite (tin), wolframite (tungsten) and gold) that are sourced from the Democratic Republic of Congo or adjacent countries. Complying with these requirements has and will require us to incur additional costs, including the costs to determine the sources of any conflict minerals used in our products and to modify our processes or products, if required. As a result, we may choose to modify the sourcing, supply and pricing of materials in our products. In addition, we may face reputational and regulatory risks if the information that we receive from our suppliers is inaccurate or inadequate, or our process for obtaining that information does not fulfill the SEC’s requirements. We have a formal policy with respect to the use of conflict minerals in our products that is intended to minimize, if not eliminate, conflict minerals sourced from the covered countries to the extent that we are unable to document that they have been obtained from conflict-free sources. Our labor force is heavily unionized, and our obligations under collective bargaining agreements and labor laws subject us to the risks of work interruption or stoppage and could cause our costs to be higher. Most of our employees, most notably at our manufacturing facilities, are subject to collective bargaining agreements and union contracts with terms that expire on varying dates. Several of our collective bargaining agreements and union contracts are of limited duration and, therefore, must be re-negotiated frequently. As a result, we are at greater risk of work interruptions or stoppages than non-unionized companies, and any work interruption or stoppage could significantly impact the volume of products we have available for sale. In addition, collective bargaining agreements, union contracts and labor laws may impair our ability to streamline existing manufacturing facilities, restructure our business or otherwise reduce our labor costs because of limitations on personnel and salary changes and similar restrictions. 12 We have significant pension and retiree healthcare obligations with respect to our employees, and our cash flow available for other purposes may be adversely affected in the event that payments became due under any pension plans that are unfunded or underfunded. Declines in the market value of the securities used to fund these obligations will result in increased pension expense in future periods. A portion of our active and retired employees participate in defined benefit pension and retiree healthcare plans under which we are obligated to provide prescribed levels of benefits regardless of the value of the underlying assets, if any, of the applicable plans. To the extent that our obligations are unfunded or underfunded, we will have to use cash flow from operations and other sources to fulfill our obligations either as they become due or over some shorter funding period. In addition, since the assets that we already have provided to fund these obligations are invested in debt instruments and other securities, the value of these assets varies due to market factors. Historically, these fluctuations have been significant and sometimes adverse, and there can be no assurances that they will not be significant or adverse in the future. Similarly the amount of our obligations varies depending upon mortality assumptions, discount rates, salary growth, retirement rates and ages, inflation, changes in health care costs and similar factors. We also are subject to laws and regulations governing the administration of our plans in certain countries, and the specific provisions, benefit formulas and related interpretations of such laws, regulations and provisions can be complex. Failure to properly administer the provisions of our plans and comply with applicable laws and regulations could have an adverse impact to our results of operations. As of December 31, 2019, we had substantial unfunded or underfunded obligations related to our pension and other postretirement health care benefits. See the notes to our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for more information regarding our unfunded or underfunded obligations. Our business routinely is subject to claims and legal actions, some of which could be material. We routinely are a party to claims and legal actions incidental to our business. These include claims for personal injuries by users of farm equipment, disputes with distributors, vendors and others with respect to commercial matters, and disputes with taxing and other governmental authorities regarding the conduct of our business. While these matters generally are not material, it is entirely possible that a matter will arise that is material to our business. In addition, we use a broad range of technology in our products. We developed some of this technology, we license some of this technology from others, and some of the technology is embedded in the components and parts that we purchase from suppliers. From time-to-time, third parties make claims that the technology that we use violates their patent rights. While to date none of these claims have been significant, we cannot provide any assurances that there will not be significant claims in the future or that currently existing claims will not prove to be more significant than anticipated. We have a substantial amount of indebtedness, and, as a result, we are subject to certain restrictive covenants and payment obligations that may adversely affect our ability to operate and expand our business. Our credit facility and certain other debt agreements have various financial and other covenants that require us to maintain certain total debt to EBITDA and interest coverage ratios. In addition, the credit facility and certain other debt agreements contain other restrictive covenants, such as ones that limit the incurrence of indebtedness and the making of certain payments, including dividends, and are subject to acceleration in the event of default. If we fail to comply with these covenants and are unable to obtain a waiver or amendment, an event of default would result. If any event of default were to occur, our lenders could, among other things, declare outstanding amounts due and payable, and our cash may become restricted. In addition, an event of default or declaration of acceleration under our credit facility or certain other debt agreements also could result in an event of default under our other financing agreements. Our substantial indebtedness could have other important adverse consequences such as: • • • • • requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, which would reduce the availability of our cash flow to fund future working capital, capital expenditures, acquisitions and other general corporate purposes; increasing our vulnerability to general adverse economic and industry conditions; limiting our flexibility in planning for, or reacting to, changes in our business and the agricultural industry; restricting us from being able to introduce new products or pursuing business opportunities; placing us at a competitive disadvantage compared to our competitors that may have less indebtedness; and 13 • limiting, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds, repurchase shares, pay cash dividends or engage in or enter into certain transactions. Our business increasingly is subject to regulations relating to privacy and data protection, and if we violate any of those regulations we could be subject to significant claims, penalties and damages. Increasingly, the United States, the European Union, Brazil and other governmental entities are imposing regulations designed to protect the collection, maintenance and transfer of personal information. For example, the European Union adopted the General Data Protection Regulation (the “GDPR”) that imposed stringent data protection requirements and greater penalties for non-compliance beginning in May 2018. The GDPR also protects a broader set of personal information than traditionally has been protected in the United States and provides for a right of “erasure.” Other regulations govern the collection and transfer of financial data and data security generally. These regulations generally impose penalties in the event of violations. While we attempt to comply with all applicable cybersecurity regulations, their implementation is complex, and, if we are not successful, we may be subject to penalties and claims for damages from regulators and the impacted parties. Cybersecurity breaches and other disruptions to our information technology infrastructure could interfere with our operations and could compromise confidential information, exposing us to liability that could cause our business and reputation to suffer. We rely upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including supply chain, manufacturing, distribution, invoicing and collection of payments from dealers or other purchasers of our equipment. We also use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, we collect and store sensitive data, including intellectual property and proprietary business information, in data centers and on information technology networks. The secure operation of these information technology networks and the processing and maintenance of this information is critical to our business operations and strategy. Despite security measures and business continuity plans, our information technology networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attacks by cyber criminals or breaches due to employee error or malfeasance or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures, terrorist acts or, natural disasters or other catastrophic events. The occurrence of any of these events could compromise our networks, and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, and could disrupt our operations and damage our reputation, which could adversely affect our performance. In addition, as security threats continue to evolve and increase in frequency and sophistication, we may need to invest additional resources to protect the security of our systems. We may encounter difficulties in integrating businesses we acquire and may not fully achieve, or achieve within a reasonable time frame, expected strategic objectives and other expected benefits of the acquisitions. From time-to-time we seek to expand through acquisitions of other businesses. We expect to realize strategic and other benefits as a result of our acquisitions, including, among other things, the opportunity to extend our reach in the agricultural industry and provide our dealers and their retail customers with an even wider range of products and services. However, it is impossible to predict with certainty whether, or to what extent, these benefits will be realized or whether we will be able to integrate acquired businesses in a timely and effective manner. For example: • • • the costs of integrating acquired businesses and their operations may be higher than we expect and may require significant attention from our management; the businesses we acquire may have undisclosed liabilities, such as environmental liabilities or liabilities for violations of laws, such as the FCPA, that we did not expect; and our ability to successfully carry out our growth strategies for acquired businesses will be affected by, among other things, our ability to maintain and enhance our relationships with their existing customers, our ability to provide additional product distribution opportunities to them through our existing distribution channels, changes in the spending patterns and preferences of customers and potential customers, fluctuating economic and competitive conditions and our ability to retain their key personnel. 14 Our ability to address these issues will determine the extent to which we are able to successfully integrate, develop and grow acquired businesses and to realize the expected benefits of these transactions. Our failure to do so could have a material adverse effect on our performance following the transactions. Changes to United States tax, tariff, trade and import/export regulations may have a negative effect on global economic conditions, financial markets and our business. There have been ongoing discussions and significant changes to United States trade policies, treaties, tariffs and taxes. Although the levels change from period to period, we generally have substantial imports into the United States of products and components that are either produced in our foreign locations or are purchased from foreign suppliers, and also have substantial exports of products and components that we manufacture in the United States. The impact of any changes to current trade, tariff or tax policies relating to imports and exports of goods is dependent on factors such as the treatment of exports as a credit to imports, and the introduction of any tariffs or taxes relating to imports from specific countries. The most significant changes have been the imposition of tariffs by the United States on imports from China and the imposition by China of tariffs on imports from the United States. These trade restrictions include tariffs on the import of agricultural commodities into China, which are critical to our customers. Policies impacting exchange rates and commodity prices or limiting the export of commodities could have a material adverse impact on the international flow of agricultural and other commodities that may result in a corresponding negative impact on the demand for agricultural equipment across the world. Our sales could be negatively impacted by such policies because farm income strongly influences sales of such equipment globally. In the past, we have had moderate amounts of imports into the U.S. from China. To date, the impact of U.S. import tariffs on China sourced equipment has not been material to us because we have been able to redirect production and employ sourcing alternatives for products previously imported into the U.S. from our China manufacturing facility. In addition, we do not export significant amounts from the United States into China. It is unclear what other changes might be considered or implemented and what response to any such changes may be by the governments of other countries. Any changes that increase the cost of international trade or otherwise impact the global economy, including through the increase in domestic prices for raw materials, could have a material adverse effect on our performance. For example, the United States, Canada and Mexico have renegotiated the North America Free Trade Agreement, and the impacts of the changes brought about by the new agreement, named the United States, Mexico, Canada Agreement (the “USMCA”), are not currently known. We continue to monitor closely the status and implementation of the USMCA. 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 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. Our most recent preliminary assessment indicated that impairment, if any, would not be material. Item 1B. Unresolved Staff Comments Not applicable. 15 Item 2. Properties Our principal manufacturing locations and/or properties as of January 31, 2020, were as follows: Location United States: Description of Property Leased (Sq. Ft.) Owned (Sq. Ft.) Assumption, Illinois .......................................... Manufacturing/Sales and Administrative Office Batavia, Illinois ................................................. Parts Distribution Duluth, Georgia................................................. Corporate Headquarters Hesston, Kansas ................................................ Manufacturing Jackson, Minnesota ........................................... Manufacturing International: Beauvais, France(1) ................................................. Manufacturing Breganze, Italy .................................................. Manufacturing Ennery, France................................................... Parts Distribution Linnavuori, Finland........................................... Manufacturing Hohenmölsen, Germany.................................... Manufacturing Marktoberdorf, Germany .................................. Manufacturing Wolfenbüttel, Germany..................................... Manufacturing Stockerau, Austria ............................................. Manufacturing Biatorbagy, Hungary ......................................... Manufacturing Thisted, Denmark.............................................. Manufacturing Suolahti, Finland ............................................... Manufacturing/Parts Distribution Canoas, Brazil ................................................... Regional Headquarters/Manufacturing Mogi das Cruzes, Brazil.................................... Manufacturing Santa Rosa, Brazil ............................................. Manufacturing Changzhou, China ............................................. Manufacturing _______________________________________ (1) Includes our joint venture, GIMA, in which we own a 50% interest. 310,200 159,000 6,300 51,400 14,300 11,800 839,600 245,400 231,600 287,300 133,200 97,500 12,900 186,800 933,900 1,469,100 986,400 2,231,300 1,562,000 360,300 396,300 437,000 1,504,600 546,700 160,700 295,300 561,400 1,120,000 737,400 508,900 767,000 We consider each of our facilities to be in good condition and adequate for its present use. We believe that we have sufficient capacity to meet our current and anticipated manufacturing requirements. 16 Item 3. Legal Proceedings In August 2008, as part of a routine audit, 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. The amount of the tax disallowance through December 31, 2019, not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $32.6 million). The amount ultimately in dispute will be significantly greater because of interest and penalties. We have been advised by our legal and tax advisors that our position with respect to the deductions is allowable under the tax laws of Brazil. We are contesting the disallowance and believe 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. We are a party to various other legal claims and actions incidental to our business. We believe that none of these claims or actions, either individually or in the aggregate, is material to our business or financial statements as a whole, including our results of operations and financial condition. Item 4. Mine Safety Disclosures Not Applicable. 17 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange and trades under the symbol AGCO. As of the close of business on February 24, 2020, the closing stock price was $67.51, and there were 349 stockholders of record (this number does not include stockholders who hold their stock through brokers, banks and other nominees). Performance Graph The following presentation is a line graph of our cumulative total shareholder return on our common stock on an indexed basis as compared to the cumulative total return of the S&P Mid-Cap 400 Index and a self-constructed peer group (“Peer Group”) for the five years ended December 31, 2019. Our total returns in the graph are not necessarily indicative of future performance. COMPARISON OF CUMULATIVE TOTAL RETURN $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2014 AGCO Corpora�on S&P MidCap 400 Index Custom Peer Group 2015 2016 2017 2018 2019 AGCO Corporation..................................................... S&P Midcap 400 Index............................................... Peer Group Index........................................................ Cumulative Total Return for the Years Ended December 31, 2014 2015 2016 2017 2018 2019 $ 100.00 $ 101.39 $ 130.61 $ 162.62 $ 127.97 $ 179.20 100.00 100.00 97.82 77.51 118.11 110.42 137.30 159.78 122.08 135.87 154.07 176.12 The total return assumes that dividends were reinvested and is based on a $100 investment on December 31, 2014. The Peer Group Index is a self-constructed peer group of companies that includes: Caterpillar Inc., CNH Industrial NV, Cummins Inc., Deere & Company, Eaton Corporation Plc., Ingersoll-Rand Plc., Navistar International Corporation, PACCAR Inc., Parker-Hannifin Corporation and Terex Corporation. 18 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 December 31, 2019: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(3) 84,570 308,880 72,291 465,741 $ $ $ $ 71.39 78.70 78.70 74.87 84,570 308,880 72,291 465,741 $ $ $ $ 47.1 17.1 300.0 300.0 Period October 1, 2019 through October 31, 2019(1) ........................... November 1, 2019 through November 30, 2019(2) ....................... December 1, 2019 through December 31, 2019(2)........................ Total ..................................................... ____________________________________ (1) In August 2019, we entered into an ASR agreement with a third-party financial institution to repurchase $30.0 million of shares of our common stock. The ASR agreement resulted in the initial delivery of our common stock, representing approximately 80% of the shares that was expected to be repurchased in connection with the transaction. In October 2019, the remaining shares were delivered. As reflected in the table above, the average price paid per share for the ASR agreement was the volume-weighted average stock price of our common stock over the term of the ASR agreement. Refer to Note 9 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for a further discussion of this matter. In November 2019, we entered into an ASR agreement with a third-party financial institution to repurchase $30.0 million of shares of our common stock. Refer to Note 9 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for a further discussion of this matter. (2) (3) The remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $300.0 million, which has no expiration date. 19 Item 6. Selected Financial Data The following tables present our selected consolidated financial data. The data set forth below should be read together with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our historical Consolidated Financial Statements and the related notes. The Consolidated Financial Statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 and the reports thereon are included in Item 8, “Financial Statements and Supplementary Data.” The historical financial data may not be indicative of our future performance. Operating Data: Net sales ....................................................................... Gross profit................................................................... Income from operations ............................................... Net income ................................................................... Net loss (income) attributable to noncontrolling interests ................................................................. Net income attributable to AGCO Corporation and subsidiaries............................................................ Net income per common share — diluted.................... Cash dividends declared and paid per common share.. Weighted average shares outstanding — diluted ......... $ $ $ Years Ended December 31, 2019 2018 2017 2016 2015 (in millions, except per share data) $ 9,041.4 $ 9,352.0 $ 8,306.5 $ 7,410.5 $ 7,467.3 1,984.3 1,996.7 1,765.3 1,515.5 1,560.6 348.1 122.8 2.4 125.2 1.63 0.63 77.0 489.0 283.7 404.4 189.3 287.0 160.2 358.6 264.0 1.8 (2.9) (0.1) 2.4 $ $ $ $ $ $ 285.5 3.58 0.60 79.7 $ $ $ 186.4 2.32 0.56 80.2 $ $ $ 160.1 1.96 0.52 81.7 266.4 3.06 0.48 87.1 As of December 31, 2019 2018 2017 2016 2015 (in millions, except number of employees) Balance Sheet Data: Cash and cash equivalents............................................ Total assets ................................................................... Total long-term debt, excluding current portion and debt issuance costs ................................................ Stockholders’ equity..................................................... Other Data: Number of employees .................................................. $ 432.8 $ 326.1 $ 367.7 $ 429.7 $ 426.7 7,759.7 7,626.4 7,971.7 7,168.4 6,497.7 1,191.8 2,907.0 1,275.3 2,993.5 1,618.1 3,095.3 1,610.0 2,837.2 925.2 2,883.3 20,961 21,232 20,462 19,795 19,588 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations We are a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. We sell a full range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. Our products are widely recognized in the agricultural equipment industry and are marketed under a number of well-known brand names, including: Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®. We distribute most of our products through a combination of approximately 3,275 dealers and distributors as well as associates and licensees. In addition, we provide retail financing through our finance joint ventures with Rabobank. Financial Highlights We sell our equipment and replacement parts to our independent dealers, distributors and other customers. A large majority of our sales are to independent dealers and distributors that sell our products to end users. To the extent practicable, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal demands on our manufacturing operations and to minimize our investment in inventories. However, retail sales by dealers to farmers are highly seasonal and are linked to the planting and harvesting seasons. In certain markets, particularly in North America, there is often a time lag, which varies based on the timing and level of retail demand, between our sale of the equipment to the dealer and the dealer’s sale to a retail customer. The following table sets forth, for the periods indicated, the percentage relationship to net sales of certain items included in our Consolidated Statements of Operations: Net sales .................................................................................................................................. Cost of goods sold................................................................................................................... Gross profit ............................................................................................................................. Selling, general and administrative expenses ....................................................................... Engineering expenses ........................................................................................................... Impairment charges .............................................................................................................. Amortization of intangibles .................................................................................................. Restructuring expenses ......................................................................................................... Bad debt expense .................................................................................................................. Income from operations .......................................................................................................... Interest expense, net.............................................................................................................. Other expense, net ................................................................................................................ Income before income taxes and equity in net earnings of affiliates...................................... Income tax provision ............................................................................................................ Income before equity in net earnings of affiliates................................................................... Equity in net earnings of affiliates........................................................................................ Net income .............................................................................................................................. Net loss (income) attributable to noncontrolling interests ...................................................... Net income attributable to AGCO Corporation and subsidiaries............................................ ___________________________________ (1) Rounding may impact summation of amounts. Years Ended December 31, 2017(1) 2018(1) 2019(1) 100.0% 100.0% 100.0% 78.1 21.9 11.5 3.8 2.0 0.7 0.1 0.1 3.9 0.2 0.7 2.9 2.0 0.9 0.5 1.4 — 78.6 21.4 11.4 3.8 — 0.7 0.1 0.1 5.3 0.6 0.8 3.9 1.2 2.7 0.4 3.0 — 78.7 21.3 11.6 3.9 — 0.7 0.1 0.1 4.9 0.5 0.9 3.4 1.6 1.8 0.5 2.3 — 1.4% 3.1% 2.2% 21 2019 Compared to 2018 Net income attributable to AGCO Corporation and subsidiaries for 2019 was $125.2 million, or $1.63 per diluted share, compared to $285.5 million, or $3.58 per diluted share for 2018. Net sales for 2019 were approximately $9,041.4 million, or 3.3% lower than 2018, primarily due to decreased sales volumes in our South American and Asia/Pacific/African (“APA”) regions and the negative impact of currency translation. Income from operations was $348.1 million in 2019 compared to $489.0 million in 2018. The decrease in income from operations during 2019 was primarily the result of non-cash goodwill and other intangible asset impairment charges recorded during the fourth quarter of 2019 related to our grain storage and protein production systems operations in our Europe/Middle East (“EME”) region. Excluding the impact of $176.6 million of non-cash impairment charges, income from operations during 2019 increased compared to 2018 due to improved gross profit margins, which largely offset the adverse impact of foreign currency translation. Regionally, income from operations in EME increased by approximately $37.1 million in 2019 compared to 2018, driven primarily by the benefit of higher sales and margin improvement resulting from the impacts of pricing, better factory productivity and a favorable sales mix. In our North American region, income from operations improved by approximately $18.5 million. Increased net sales levels and the benefit of favorable pricing impacts and expense control initiatives contributed to the improvement in the region. In South America, operating losses increased approximately $29.3 million in 2019 compared to 2018. The losses reflect low levels of industry demand and company production, as well as unfavorable cost impacts of newer product technology into our Brazilian factories. Income from operations in our APA region decreased approximately $6.2 million in 2019 compared to 2018, primarily due to lower net sales and production volumes. Industry Market Conditions Farm economics remain challenged across the major crop-producing regions, and low commodity prices and international trade tensions continue to weigh on farmer sentiment, resulting in decreased global equipment demand during 2019. In North America, industry unit retail sales of utility and high horsepower tractors for 2019 decreased slightly compared to 2018. Industry unit retail sales of combines for 2019 decreased approximately 6% compared to 2018. A difficult growing season, as well as the uncertainty regarding the outcome of trade negotiations related to agricultural products and delayed market facilitation aid payments in the U.S., all contributed to weak demand in the large farm sector during 2019. In Western Europe, industry unit retail sales of tractors for 2019 declined approximately 2% compared to 2018. Industry unit retail sales of combines for 2019 decreased approximately 18% compared to 2018. Industry demand trended progressively lower throughout 2019 due to the impact of lower wheat and milk prices as well as higher input costs for dairy producers. During 2019, industry sales declines experienced in Italy, the United Kingdom and Germany were partially offset by industry sales growth in France and Finland. In South America, industry unit retail sales of tractors for 2019 dropped approximately 16% compared to 2018. Industry unit retail sales of combines for 2019 decreased approximately 5% compared to 2018. Despite improved grain production in Brazil and Argentina, industry demand was negatively impacted by interruptions in the government subsidized finance program in Brazil and weak economic conditions in Argentina. Results of Operations Net sales for 2019 were $9,041.4 million compared to $9,352.0 million for 2018, primarily as a result of sales declines in our South American and APA regions, partially offset by sales growth in our North American and EME regions, on a constant currency basis. The following table sets forth, for the year ended December 31, 2019, the impact to net sales of currency translation by geographical segment (in millions, except percentages): 2019 2018 North America .................................................. $ 2,191.8 South America.................................................. 802.2 EME ................................................................. APA .................................................................. 5,328.8 718.6 $ 2,180.1 $ 959.0 5,385.1 827.8 $ 9,041.4 $ 9,352.0 $ 22 Change Change due to Currency Translation $ 11.7 (156.8) (56.3) (109.2) (310.6) % 0.5 % $ (16.4)% (1.0)% (13.2)% (3.3)% $ $ (8.5) (49.9) (295.0) (35.8) (389.2) % (0.4)% (5.2)% (5.5)% (4.3)% (4.2)% Regionally, net sales in North America increased during 2019 compared to 2018, with sales growth driven by a growth in net sales of low horsepower tractors, combines and parts, largely offset by a reduction in sales of protein production equipment and utility tractors. In the EME region, net sales, excluding the negative impact of foreign currency translation, increased during 2019 compared to 2018, primarily due to net sales growth in France, Germany and Italy, partially offset by declines in the United Kingdom and Eastern Europe. Net sales decreased in South America in 2019 compared to 2018, primarily due to weaker industry conditions resulting in sales declines in Brazil and other South American markets as well as the negative impact of foreign currency translation. In the APA region, net sales decreased in 2019 compared to 2018, primarily due to lower sales in China, Southeast Asia and Africa. We estimate that worldwide average price increases were approximately 1.9% and 1.4% in 2019 and 2018, respectively. Consolidated net sales of tractors and combines, which comprised approximately 61% of our net sales in 2019, decreased approximately 3.7% in 2019 compared to 2018. Unit sales of tractors and combines decreased approximately 9.5% during 2019 compared to 2018. The unit sales decrease and the decrease in net sales can differ due to foreign currency translation, pricing and sales mix changes. The following table sets forth, for the years ended December 31, 2019 and 2018, the percentage relationship to net sales of certain items included in our Consolidated Statements of Operations (in millions, except percentages): 2019 2018 % of Net Sales(1) $ $ % of Net Sales Gross profit.......................................................................................................... $ 1,984.3 1,040.3 Selling, general and administrative expenses ................................................... Engineering expenses........................................................................................ Impairment charges........................................................................................... Amortization of intangibles .............................................................................. Restructuring expenses ..................................................................................... Bad debt expense .............................................................................................. Income from operations....................................................................................... $ 343.4 176.6 61.1 9.0 5.8 21.9% $ 1,996.7 11.5% 1,069.4 3.8% 2.0% 0.7% 0.1% 0.1% 355.2 — 64.7 12.0 6.4 21.4% 11.4% 3.8% —% 0.7% 0.1% 0.1% 5.3% 348.1 3.9% $ 489.0 ____________________________________ (1) Rounding may impact summation of amounts. Gross profit as a percentage of net sales increased during 2019 compared to 2018, primarily due to the benefit of pricing in excess of material cost increases, partially offset by the cost impact of lower production levels. Production hours decreased in both North America and South America, while production hours increased in Europe during 2019. Overall, production hours decreased approximately 2% on a global basis during 2019 compared to 2018. We recorded stock compensation expense of approximately $1.7 million and $2.3 million during 2019 and 2018, respectively, within cost of goods sold, as is more fully explained in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.” Selling, general and administrative expenses (“SG&A expenses”) and engineering expenses, as a percentage of net sales, were relatively flat during 2019 compared to 2018. We recorded stock compensation expense of approximately $40.0 million and $44.3 million during 2019 and 2018, respectively, within SG&A expenses, as is more fully explained in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.” We recorded restructuring expenses of approximately $9.0 million and $12.0 million during 2019 and 2018, respectively. The restructuring expenses primarily related to severance and related costs associated with the rationalization of employee headcount at various manufacturing facilities and administrative offices located in Europe, South America, China, Africa and the United States during 2019, as well as the rationalization of our grain storage and protein production systems operations initiated in the fourth quarter of 2019. In addition, we recorded a loss of approximately $2.1 million within "Restructuring expenses" associated with the sale of our 50% interest in our USC, LLC joint venture. See Note 3 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information. During the three months ended December 31, 2019, we recorded non-cash goodwill and other intangible asset impairment charges of approximately $173.6 million associated with our grain storage and protein production systems operations in Europe/Middle East, as well as the impairment of long-lived intangible assets of approximately $3.0 million associated with brand and product rationalization within our grain storage and protein production systems operations in 23 North America. These impairment charges are more fully described in “Critical Accounting Estimates - Goodwill, Other Intangible Assets and Long-Lived Assets” and Note 1 to our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.” Interest expense, net was $19.9 million for 2019 compared to $53.8 million for 2018. The decline was primarily the result of debt extinguishment costs incurred in 2018 associated with debt refinancings completed during 2018 that included the replacement of higher interest-bearing debt with lower interest-bearing debt. During 2018, we repurchased approximately $300.0 million of our outstanding 57/8% senior notes. The repurchase resulted in a loss on extinguishment of debt of approximately $24.5 million, including associated fees, offset by approximately $4.7 million of accelerated amortization of a deferred gain related to a terminated interest rate swap instrument associated with the senior notes. In addition, we repaid our outstanding term loan under our former revolving credit and term loan facility. We recorded approximately $0.7 million associated with the write-off of deferred debt issuance costs and a loss of approximately $3.9 million from a terminated interest rate swap instrument related to the term loan. Other expense, net was $67.1 million in 2019 compared to $74.9 million in 2018. Losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil, were approximately $42.4 million and $36.0 million in 2019 and 2018, respectively. Other expense, net for 2018 also included higher foreign exchanges losses, primarily associated with the significant devaluation of the Argentine peso. We recorded an income tax provision of $180.8 million in 2019 compared to $110.9 million in 2018. Our tax provision and effective tax rate are impacted by the differing tax rates of the various tax jurisdictions in which we operate, permanent differences for items treated differently for financial accounting and income tax purposes and for losses in jurisdictions where no income tax benefit is recorded. At December 31, 2019 and 2018, we had gross deferred tax assets of $396.0 million and $350.2 million, respectively, including $72.0 million and $74.5 million, respectively, related to net operating loss carryforwards. During 2019, we recognized a one-time income tax gain of approximately $21.8 million associated with the changing of Swiss federal and cantonal tax rates, as well as recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of our Swiss subsidiary's assets. During 2019, we also recorded a non-cash adjustment to establish a valuation allowance against our Brazilian net deferred income tax assets of approximately $53.7 million. At December 31, 2019, we had total valuation allowances as an offset to our gross deferred tax assets of approximately $169.1 million. This valuation allowance included allowances primarily against net operating loss carryforwards in Brazil, China, Hungary, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes primarily in the U.S. and Brazil. At December 31, 2018, we had total valuation allowances as an offset to the gross deferred tax assets of approximately $83.9 million, primarily related to net operating loss carryforwards in Brazil, China, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes in the U.S. Realization of the net deferred tax assets as of December 31, 2019 will depend on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities. We believe it is more likely than not that the remaining net deferred tax assets will be realized. Refer to Note 6 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information. Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $42.5 million in 2019 compared to $34.3 million in 2018, primarily due to higher net earnings from our AGCO Finance joint ventures. See “Finance Joint Ventures” for further information regarding our finance joint ventures and their results of operations and Note 5 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information. 2018 Compared to 2017 A comparison of the results of operations for 2018 versus that of 2017 was included in our Annual Report on Form 10-K for the year ended December 31, 2018. 24 Quarterly Results The following table presents unaudited interim operating results. We believe that the following information includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our results of operations for the periods presented. 2019: Net sales............................................................................... $ Gross profit.......................................................................... Income (loss) from operations............................................. Net income (loss)................................................................. Net (income) loss attributable to noncontrolling interests .. Net income (loss) attributable to AGCO Corporation and subsidiaries ................................................................... Net income (loss) per common share attributable to AGCO Corporation and subsidiaries — diluted .......... 2018: Net sales............................................................................... $ Gross profit.......................................................................... Income from operations....................................................... Net income........................................................................... Net (income) loss attributable to noncontrolling interests .. Net income attributable to AGCO Corporation and subsidiaries ................................................................. Net income per common share attributable to AGCO Corporation and subsidiaries — diluted ..................... AGCO Finance Joint Ventures Three Months Ended March 31 June 30 September 30 December 31 (in millions, except per share data) 1,995.8 $ 2,422.6 $ 2,109.4 $ 2,513.6 456.7 92.4 65.7 (0.6) 65.1 0.84 563.9 199.6 140.4 0.4 140.8 1.82 450.2 105.9 6.3 1.3 7.6 0.10 513.5 (49.8) (89.6) 1.3 (88.3) (1.17) 2,007.5 $ 2,537.6 $ 2,214.7 $ 2,592.2 428.0 50.5 25.0 (0.7) 24.3 0.30 556.3 168.1 90.4 1.0 91.4 1.14 473.7 111.3 70.7 0.4 71.1 0.89 538.7 159.1 97.6 1.1 98.7 1.26 Our AGCO Finance joint ventures provide both retail financing and wholesale financing to our dealers in the United States, Canada, Europe, Brazil, Argentina and Australia. The joint ventures are owned by AGCO and by a wholly-owned subsidiary of Rabobank. The majority of the assets of the finance joint ventures consist of finance receivables. The majority of the liabilities consist of notes payable and accrued interest. Under the various joint venture agreements, Rabobank or its affiliates provide financing to the finance joint ventures, primarily through lines of credit. We do not guarantee the debt obligations of the joint ventures. As of December 31, 2019, our capital investment in the finance joint ventures, which is included in “Investment in affiliates” on our Consolidated Balance Sheets, was approximately $339.0 million compared to $358.7 million as of December 31, 2018. The total finance portfolio in our finance joint ventures was approximately $9.6 billion and $8.8 billion as of December 31, 2019 and 2018, respectively. The total finance portfolio as of December 31, 2019 and 2018 included approximately $7.7 billion and $7.2 billion, respectively, of retail receivables and $1.9 billion and $1.6 billion, respectively, of wholesale receivables from AGCO 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 2019 and 2018, we did not make additional investments in our finance joint ventures. During 2019 and 2018, we received dividends of approximately $40.5 million and $29.4 million, respectively, from certain of our finance joint ventures. Our share in the earnings of the finance joint ventures, included in “Equity in net earnings of affiliates” within our Consolidated Statements of Operations, was $41.5 million and $34.7 million for the years ended December 31, 2019 and 2018, respectively, with the increase in earnings primarily due to higher income in our European, Brazilian and U.S. finance joint ventures during 2019 as compared to 2018. 25 Outlook 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. Our net sales are expected to increase in 2020 compared to 2019, resulting from relatively flat net sales volumes and positive pricing impacts. Gross and operating margins are expected to improve from 2019 levels, reflecting the positive impact of pricing and cost control initiatives. This assumes that the coronavirus outbreak does not significantly impact our business. See, “Risk Factors.” 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 and accounts receivable sales agreement facilities. We believe that the following facilities, 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): 1.002% Senior term loan due 2025(1) ........................................................................................................... $ Senior term loan due 2022(1) ........................................................................................................................ Credit facility, expires 2023 ......................................................................................................................... Senior term loans due between 2021 and 2028(1)......................................................................................... Other long-term debt .................................................................................................................................... ____________________________________ (1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $2.3 million. 280.2 168.1 — 736.2 12.5 December 31, 2019 Interest on U.S. dollar borrowings under our credit facility 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 also provides for an expedited amendment process once a replacement for LIBOR is established. 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 $280.2 million as of December 31, 2019) of funding was received on January 25, 2019 with a maturity date of January 24, 2025. We have the ability 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. We had an additional term loan with the EIB in the amount of €200.0 million that was entered into in December 2014 and had a maturity date of January 15, 2020. We repaid this €200.0 million (or approximately $220.0 million) term loan in December 2019. In October 2018, we entered into a term loan agreement with Rabobank in the amount of €150.0 million (or approximately $168.1 million as of December 31, 2019). We have the ability 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. 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 26 December 31, 2019, we have indebtedness of approximately €657.0 million (or approximately $736.2 million) under a total group of twelve term loan agreements with remaining maturities ranging from August 2021 to August 2028. We are in compliance with the financial covenants contained in these facilities and expect to continue to maintain such compliance. Should we ever encounter difficulties, our historical relationship with our lenders has been strong and we anticipate their continued long-term support of our business. Refer to Note 7 to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our current facilities, including the financial covenants contained in each debt instrument. 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 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 December 31, 2019 and 2018, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $1.6 billion and $1.4 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 also are without recourse to us. As of December 31, 2019 and 2018, these finance joint ventures had approximately $104.3 million and $82.5 million, respectively, of outstanding accounts receivable associated with these arrangements. These arrangements are accounted for as off-balance sheet transactions. In addition, we sell certain trade receivables under factoring arrangements to other financial institutions around the world. These arrangements also are 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 30.4% at December 31, 2019 compared to 32.8% at December 31, 2018. Cash Flows Cash flows provided by operating activities were $695.9 million during 2019 compared to $595.9 million during 2018 and $577.6 million during 2017. The increase during 2019 was primarily due to a source of cash in operating assets and liabilities in 2019 compared to a use of cash in 2018. In addition, we received an increased amount of dividends from our finance joint ventures in 2019 as compared to 2018. 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 $844.6 million in working capital at December 31, 2019, as compared with $770.7 million at December 31, 2018. Accounts receivable and inventories, combined, at December 31, 2019 were $90.2 million higher than at December 31, 2018. Inventories as of December 31, 2019 included stock related to the transition of production to products meeting new emissions standards in Europe. Weaker market conditions in many key markets contributed to lower net sales and resulting higher finished goods inventories as compared to 2018. Share Repurchase Program During 2019 and 2018, we repurchased 1,794,256 and 3,120,184 shares of our common stock, respectively, for approximately $130.0 million and $184.3 million, respectively, either through Accelerated Share Repurchase (“ASR”) agreements with financial institutions or through open market transactions. All shares received were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and "Retained Earnings" within our Consolidated Balance Sheets. In February 2020, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $25.0 million of shares of our common stock. We received approximately 297,000 shares to date in this transaction. Upon settlement of the ASR, we may be entitled to receive additional shares of common stock or, under certain circumstances, be required to remit a settlement amount. We expect that the additional shares will be received by us upon final settlement of our current ASR agreement, which expires during the second quarter of 2020. 27 Contractual Obligations The future payments required under our significant contractual obligations, excluding foreign currency option and forward contracts, as of December 31, 2019 are as follows (in millions): Total Payments Due By Period 2021 to 2022 2023 to 2024 2020 2025 and Beyond Indebtedness(1).............................................................. $ Interest payments related to indebtedness(2) ................ Capital lease obligations .............................................. Operating lease obligations.......................................... Unconditional purchase obligations............................. Other short-term and long-term obligations(3) ............. Total contractual cash obligations................................ $ 1,270.9 $ 76.8 $ 468.3 $ 280.8 $ 57.4 18.9 223.0 127.7 296.0 1,993.9 $ 13.9 4.8 48.3 102.1 91.7 337.6 $ 24.0 3.9 72.3 25.4 105.8 699.7 $ 13.8 1.5 40.8 0.2 50.9 388.0 $ 445.0 5.7 8.7 61.6 — 47.6 568.6 Amount of Commitment Expiration Per Period 2021 to 2022 2023 to 2024 2020 2025 and Beyond Total Standby letters of credit and similar instruments......... $ Guarantees.................................................................... Total commercial commitments and letters of credit... $ 14.8 66.6 81.4 $ $ 14.8 44.7 59.5 $ $ — $ 13.0 13.0 $ — $ 8.4 8.4 $ — 0.5 0.5 _______________________________________ (1) (2) Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements. Debt may be Indebtedness amounts reflect the principal amount of our senior term loan, senior notes and credit facility. repaid sooner or later than such minimum maturity periods. (3) Other short-term and long-term obligations include estimates of future minimum contribution requirements under our U.S. and non-U.S. defined benefit pension and postretirement plans. These estimates are based on current legislation in the countries we operate within and are subject to change. Other short-term and long-term obligations also include income tax liabilities related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions. Commitments and Off-Balance Sheet Arrangements Guarantees We maintain a remarketing agreement with our finance joint venture in the United States, whereby we are obligated to repurchase up to $6.0 million of repossessed equipment each calendar year. We believe any losses that might be incurred on the resale of this equipment will not materially impact our financial position or results of operations, due to the fact that the repurchase obligation would be equivalent to the fair value of the underlying equipment. At December 31, 2019, we guaranteed indebtedness owed to third parties of approximately $47.6 million, primarily related to dealer and end-user financing of equipment. Such guarantees generally obligate us to repay outstanding finance obligations owed to financial institutions if dealers or end users default on such loans through 2025. Losses under such guarantees historically have been insignificant. In addition, we 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 offset a substantial portion of the amounts paid. We also have obligations to guarantee indebtedness owed to certain of our 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. We believe the credit risk associated with all of these guarantees is not material to our financial position or results of operations. In addition, at December 31, 2019, we had accrued approximately $18.9 million of outstanding guarantees of minimum residual values that may be owed to our finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users. The maximum potential amount of future payments under the guarantee is approximately $26.7 million. 28 Other At December 31, 2019, we had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $3,133.0 million. The outstanding contracts as of December 31, 2019 range in maturity through December 2020. As discussed in “Liquidity and Capital Resources,” we sell a majority of our wholesale accounts receivable in North America, Europe and Brazil to our U.S., Canadian, European and Brazilian finance joint ventures. We also sell certain accounts receivable under factoring arrangements to financial institutions around the world. We have determined that these facilities should be accounted for as off-balance sheet transactions. Contingencies We are party to various claims and lawsuits arising in the normal course of business. We closely monitor these claims and lawsuits and frequently consult with our legal counsel to determine whether they may, when resolved, have a material adverse effect on our financial position or results of operations and accrue and/or disclose loss contingencies as appropriate. See Note 12 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” and Item 3, “Legal Proceedings,” for further information. Related Parties In the ordinary course of business, the Company engages in transactions with related parties. See Note 14 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for information regarding related party transactions and their impact to our consolidated results of operations and financial position. Foreign Currency Risk Management We have significant manufacturing locations in the United States, France, Germany, Finland, Italy, China and Brazil, and we purchase a portion of our tractors, combines and components from third-party foreign suppliers, primarily in various European countries and in Japan. We also sell products in approximately 140 countries throughout the world. The majority of our net sales outside the United States are denominated in the currency of the customer location, with the exception of sales in Middle East, Africa, Asia and parts of South America, where net sales are primarily denominated in British pounds, Euros, or the United States dollar. We manage our transactional foreign currency 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, we hedge certain, but not all, of our exposures through the use of foreign currency contracts. Our translation exposure resulting from translating the financial statements of foreign subsidiaries into United States dollars may be partially hedged from time to time. When practical, this translation impact is reduced by financing local operations with local borrowings. Our hedging policy prohibits use of foreign currency contracts for speculative trading purposes. The total notional value of our foreign currency instruments was $3,133.0 million and $1,462.8 million as of December 31, 2019 and 2018, respectively, inclusive of both those instruments that are designated and qualified for hedge accounting and non-designated derivative instruments. We enter into 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, and we enter into foreign currency contracts to economically hedge receivables and payables on our balance sheets that are denominated in foreign currencies other than the functional currency. In addition, we use derivative and non-derivative instruments to hedge a portion of our net investment in foreign operations against adverse movements in exchange rates. See Note 11 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information about our hedging transactions and derivative instruments. Assuming a 10% change relative to the currency of the hedge contracts, the fair value of the foreign currency instruments could be negatively impacted by approximately $22.3 million as of December 31, 2019. Due to the fact that these instruments are primarily entered into for hedging purposes, the gains or losses on the contracts would largely be offset by losses and gains on the underlying firm commitment or forecasted transaction. 29 Interest Rate Risk Our interest expense is, in part, sensitive to the general level of interest rates. We manage our exposure to interest rate risk through our mix of floating rate and fixed rate debt. From time to time, we enter into interest rate swap agreements to manage our exposure to interest rate fluctuations. See Notes 7 and 11 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information about our interest rate swap agreements. Based on our floating rate debt and our accounts receivable sales facilities outstanding at December 31, 2019, a 10% increase in interest rates, would have increased, collectively, “Interest expense, net” and “Other expense, net” for the year ended December 31, 2019 by approximately $5.6 million. Recent Accounting Pronouncements See Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position. Critical Accounting Estimates We prepare our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles. In the preparation of these financial statements, we make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant accounting policies followed in the preparation of the financial statements are detailed in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.” We believe that our application of the policies discussed below involves significant levels of judgment, estimates and complexity. Due to the levels of judgment, complexity and period of time over which many of these items are resolved, actual results could differ from those estimated at the time of preparation of the financial statements. Adjustments to these estimates would impact our financial position and future results of operations. Discount and Sales Incentive Allowances We provide various volume bonus and sales incentive programs with respect to our products. These sales incentive programs include reductions in invoice prices, reductions in retail financing rates, dealer commissions and dealer incentive allowances. In most cases, incentive programs are established and communicated to our dealers on a quarterly basis. The incentives are paid either at the time of the cash settlement of the receivable (which is generally at the time of retail sale), at the time of retail financing, at the time of warranty registration, or at a subsequent time based on dealer purchase volumes. The incentive programs are product line specific and generally do not vary by dealer. The cost of sales incentives associated with dealer commissions and dealer incentive allowances is estimated based upon the terms of the programs and historical experience, is based on a percentage of the sales price, and estimates for sales incentives are made and recorded at the time of sale for expected incentive programs using the expected value method. These estimates are reassessed each reporting period and are revised in the event of subsequent modifications to incentive programs, as they are communicated to dealers. The related provisions and accruals are made on a product or product-line basis and are monitored for adequacy and revised at least quarterly in the event of subsequent modifications to the programs. Interest rate subsidy payments, which are a reduction in retail financing rates, are recorded in the same manner as dealer commissions and dealer incentive allowances. Volume discounts are estimated and recognized based on historical experience, and related reserves are monitored and adjusted based on actual dealer purchase volumes and the dealers’ progress towards achieving specified cumulative target levels. Estimates of these incentives are based on the terms of the programs and historical experience. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that we do not receive a distinct good or service in exchange for the consideration provided. In the United States and Canada, reserves for incentive programs related to accounts receivable not sold to our U.S. and Canadian finance joint ventures are recorded as “accounts receivable allowances” within our Consolidated Balance Sheets due to the fact that the incentives are paid through a reduction of future cash settlement of the receivable. Globally, reserves for incentive programs that will be paid in cash or credit memos, as is the case with most of our volume discount programs, as well as sales incentives associated with accounts receivable sold to our finance joint ventures, are recorded within “Accrued expenses” within our Consolidated Balance Sheets. At December 31, 2019, we had recorded an allowance for discounts and sales incentives of approximately $606.1 million that will be paid either through a reduction of future cash settlements of receivables and through credit memos 30 to our dealers or through reductions in retail financing rates paid to our finance joint ventures. If we were to allow an additional 1% of sales incentives and discounts at the time of retail sale for those sales subject to such discount programs, our reserve would increase by approximately $21.0 million as of December 31, 2019. Conversely, if we were to decrease our sales incentives and discounts by 1% at the time of retail sale, our reserve would decrease by approximately $21.0 million as of December 31, 2019. Deferred Income Taxes and Uncertain Income Tax Positions We recorded an income tax provision of $180.8 million in 2019 compared to $110.9 million in 2018 and $133.6 million in 2017. Our tax provision and effective tax rate are impacted by the differing tax rates of the various tax jurisdictions in which we operate, permanent differences for items treated differently for financial accounting and income tax purposes, and for losses in jurisdictions where no income tax benefit is recorded. During the third quarter of 2019, we recorded a non-cash adjustment to establish a valuation allowance against our Brazilian net deferred income tax assets of approximately $53.7 million. In addition, we maintain a valuation allowance to fully reserve against our net deferred tax assets in the United States 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. 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 was appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. We future years. believe it is more likely than not that we will realize our remaining net deferred tax assets, net of the valuation allowance, in Swiss tax reform was enacted during 2019 and eliminates certain preferential tax items as well as implements new tax rates at both the federal and cantonal levels. During the three months ended December 31, 2019, the Company recognized a one-time income tax gain of approximately $21.8 million associated with the changing of Swiss federal and cantonal tax rates as well as recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of our Swiss subsidiary's assets. On December 22, 2017, the Tax Cuts and Jobs Act (“the 2017 Tax Act”) was enacted in the United States. During the three months ended December 31, 2017, we recorded a tax provision of approximately $42.0 million in accordance with Staff Accounting Bulletin No. 118, which provided SEC Staff guidance for the application of Accounting Standards Codification (“ASC”) 740 “Income Taxes,” in the reporting period in which the 2017 Tax Act was enacted. The $42.0 million tax provision included a provisional income tax charge related to a one-time transition tax associated with the mandatory deemed repatriation of unremitted foreign earnings. The tax provision also included a provisional income tax charge associated with the income tax consequences related to the expected future repatriation of certain underlying foreign earnings, as historically, we have considered them to be permanently reinvested. The remaining balance of the tax provision primarily related to the remeasurement of certain net deferred tax assets using the lower enacted U.S. Corporate tax rate (from 35% to 21%), as well as other miscellaneous related impacts. During the three months ended December 31, 2018, we finalized our calculations related to the 2017 Tax Act and recorded an income tax benefit of approximately $8.4 million. At December 31, 2019 and 2018, we had gross deferred tax assets of $396.0 million and $350.2 million, respectively, including $72.0 million and $74.5 million, respectively, related to net operating loss carryforwards. At December 31, 2019 and 2018, we had total valuation allowances as an offset to our gross deferred tax assets of $169.1 million and $83.9 million, respectively, which included allowances primarily against net operating loss carryforwards in Brazil, China, Hungary, the United Kingdom and the Netherlands, as well as allowances against our net deferred taxes primarily in the U.S. and Brazil, as previously discussed. Realization of the remaining deferred tax assets as of December 31, 2019 will depend on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities. We believe it is more likely than not that the remaining net deferred tax assets will be realized. We recognize income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. As of December 31, 2019 and 2018, we had approximately $210.7 million and $166.1 million, respectively, of gross unrecognized tax benefits, all of which would impact our effective tax rate if recognized. As of December 31, 2019 and 2018, we had approximately $51.0 million and $58.5 million, respectively, of current accrued taxes related to uncertain income tax positions connected with ongoing tax audits in various jurisdictions that we expect to settle or pay in the next 12 months. We recognize interest and penalties related to uncertain income tax positions in income tax expense. As of December 31, 2019 and 2018, had accrued interest and penalties related to unrecognized tax benefits of approximately $28.4 million and $27.2 million, we respectively. See Note 6 of our Consolidated Financial Statements for further discussion of our uncertain income tax positions. 31 Pensions We sponsor defined benefit pension plans covering certain employees, principally in the United Kingdom, the United States, Germany, Switzerland, Finland, France, Norway and Argentina. Our primary plans cover certain employees in the United States and the United Kingdom. In the United States, we sponsor a funded, qualified defined benefit pension plan for our salaried employees, as well as a separate funded qualified defined benefit pension plan for our hourly employees. Both plans are closed to new entrants and frozen, and we fund at least the minimum contributions required under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code to both plans. In addition, we maintain an unfunded, nonqualified defined benefit pension plan for certain senior executives, which is our Executive Nonqualified Pension Plan (“ENPP”). The ENPP is also closed to new entrants. In the United Kingdom, we sponsor a funded defined benefit pension plan that provides an annuity benefit based on participants’ final average earnings and service. Participation in this plan is limited to certain older, longer service employees and existing retirees. This plan is closed to new participants. See Note 8 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding costs and assumptions for employee retirement benefits. Nature of Estimates Required. The measurement date for all of our benefit plans is December 31. The measurement of our pension obligations, costs and liabilities is dependent on a variety of assumptions provided by management and used by our actuaries. These assumptions include estimates of the present value of projected future pension payments to all plan participants, taking into consideration the likelihood of potential future events such as salary increases and demographic experience. These assumptions may have an effect on the amount and timing of future contributions. Assumptions and Approach Used. The assumptions used in developing the required estimates include, but are not limited to, the following key factors: • Discount rates • Salary growth • Retirement rates and ages • Inflation • Expected return on plan assets • Mortality rates For the years ended December 31, 2019, 2018 and 2017, we used a globally consistent methodology to set the discount rate in the countries where our largest benefit obligations exist. In the United States, the United Kingdom and the Euro Zone, we constructed a hypothetical bond portfolio of high-quality corporate bonds and then applied the cash flows of our benefit plans to those bond yields to derive a discount rate. The bond portfolio and plan-specific cash flows vary by country, but the methodology in which the portfolio is constructed is consistent. In the United States, the bond portfolio is large enough to result in taking a “settlement approach” to derive the discount rate, in which high-quality corporate bonds are assumed to be purchased and the resulting coupon payments and maturities are used to satisfy our U.S. pension plans’ projected benefit payments. In the United Kingdom and the Euro Zone, the discount rate is derived using a “yield curve approach,” in which an individual spot rate, or zero coupon bond yield, for each future annual period is developed to discount each future benefit payment and, thereby, determine the present value of all future payments. The Company uses a spot yield curve to determine the discount rate applicable in the United Kingdom to measure the U.K. pension plan’s service cost and interest cost. Under the settlement and yield curve approaches, the discount rate is set to equal the single discount rate that produces the same present value of all future payments. The other key assumptions and methods were set as follows: • Our inflation assumption is based on an evaluation of external market indicators. • The salary growth assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation. • The expected return on plan asset assumptions reflects asset allocations, investment strategy, historical experience and the views of investment managers, and reflects a projection of the expected arithmetic returns over ten years. • Determination of retirement rates and ages as well as termination rates, based on actual plan experience, actuarial standards of practice and the manner in which our defined benefit plans are being administered. 32 • The mortality rates for the U.K. defined benefit pension plan was updated in 2019 to reflect the latest expected improvements in the life expectancy of the plan participants. The mortality rates for the U.S. defined benefit pension plans were updated in 2019 to reflect the Society of Actuaries’ most recent findings on the topic of mortality. • The fair value of assets used to determine the expected return on assets does not reflect any delayed recognition of asset gains and losses. The effects of actual results differing from our assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense in such periods. Our U.S. and U.K. defined benefit pension plans, including our ENPP, comprised approximately 86% of our consolidated projected benefit obligation as of December 31, 2019. If the discount rate used to determine the 2019 projected benefit obligation for our U.S. qualified defined benefit pension plans and our ENPP was decreased by 25 basis points, our projected benefit obligation would have increased by approximately $4.8 million at December 31, 2019, and our 2020 pension expense would increase by approximately $0.5 million. If the discount rate used to determine the 2019 projected benefit obligation for our U.S. qualified defined benefit pension plans and our ENPP was increased by 25 basis points, our projected benefit obligation would have decreased by approximately $4.5 million at December 31, 2019, and our 2020 pension expense would decrease by approximately $0.5 million. If the discount rate used to determine the projected benefit obligation for our U.K. defined benefit pension plan was decreased by 25 basis points, our projected benefit obligation would have increased by approximately $25.3 million at December 31, 2019, and our 2020 pension expense would increase by approximately $0.2 million. If the discount rate used to determine the projected benefit obligation for our U.K. defined benefit pension plan was increased by 25 basis points, our projected benefit obligation would have decreased by approximately $23.1 million at December 31, 2019, and our 2020 pension expense would decrease by approximately $0.3 million. In addition, if the expected long-term rate of return on plan assets related to our U.K. defined benefit pension plan was increased or decreased by 25 basis points, our 2020 pension expense would decrease or increase by approximately $1.6 million each, respectively. The impact to our U.S. defined benefit pension plans for a 25-basis-point change in our expected long-term rate of return would decrease or increase our 2020 pension expense by approximately $0.1 million, respectively. unrecognized net actuarial losses will be impacted in future periods by actual asset returns, discount rate changes, currency Unrecognized actuarial net losses related to our defined benefit pension plans and ENPP were $362.2 million as of December 31, 2019 compared to $356.7 million as of December 31, 2018. The increase in unrecognized net actuarial losses between years primarily resulted from lower discount rates at December 31, 2019 compared to December 31, 2018. The exchange rate fluctuations, actual demographic experience and certain other factors. For some of our defined benefit pension plans, these losses, to the extent they exceed 10% of the greater of the plan’s liabilities or the fair value of assets (“the gain/loss corridor”), will be amortized on a straight-line basis over the periods discussed as follows. For our U.S. salaried, U.S. hourly and U.K. defined benefit pension plans, the population covered is predominantly inactive participants, and losses related to those plans, to the extent they exceed the gain/loss corridor, will be amortized over the average remaining lives of those participants while covered by the respective plan. For our ENPP, the population is predominantly active participants, and losses related to the plan will be amortized over the average future working lifetime of the active participants expected to receive benefits. As of December 31, 2019, the average amortization periods were as follows: Average amortization period of losses related to defined benefit pension plans........ 7 years 15 years 19 years ENPP U.S. Plans U.K. Plan Unrecognized prior service cost related to our defined benefit pension plans was $22.5 million as of December 31, 2019 compared to $19.5 million as of December 31, 2018. The increase in the unrecognized prior service cost between years is due primarily to a plan amendment related to our ENPP. As of December 31, 2019, our unfunded or underfunded obligations related to our defined benefit pension plans and ENPP were approximately $206.3 million, primarily related to our defined benefit pension plans in Europe and the United States. In 2019, we contributed approximately $30.6 million towards those obligations, and we expect to fund approximately $33.6 million in 2020. Future funding is dependent upon compliance with local laws and regulations and changes to those laws and regulations in the future, as well as the generation of operating cash flows in the future. We currently have an agreement in place with the trustees of the U.K. defined benefit plan that obligates us to fund approximately £15.3 million per year (or approximately $20.2 million) towards that obligation through December 2021. The funding arrangement is based upon the current funded status and could change in the future as discount rates, local laws and regulations, and other factors change. 33 See Note 8 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for more information regarding the investment strategy and concentration of risk. Goodwill, Other Intangible Assets and Long-Lived Assets We test goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. We combine and aggregate two or more components of an operating segment as a single reporting unit if the components have similar economic characteristics. Our reportable segments are not our reporting units. Goodwill is evaluated for impairment annually as of October 1 using a qualitative assessment or a quantitative one-step assessment. If we elect to perform a qualitative assessment and determine the fair value of our reporting units more likely than not exceeds their carrying value of net assets, no further evaluation is necessary. For reporting units where we perform a one-step quantitative assessment, we compare the fair value of each reporting unit to its respective carrying value of net assets, including goodwill. If the fair value of the reporting unit exceeds its carrying value of net assets, the goodwill is not considered impaired. If the carrying value of net assets is higher than the fair value of the reporting unit, the impairment charge is the amount by which the carrying value exceeds the reporting unit’s fair value. We utilize a combination of valuation techniques, including a discounted cash flow approach and a market multiple approach, when making quantitative goodwill assessments. We review our long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If we determine that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on many factors, including current operating results, expected market trends and competitive influences. We also evaluate the amortization periods assigned to our intangible assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell. We make various assumptions, including assumptions regarding future cash flows, market multiples, growth rates and discount rates, in our assessments of the impairment of goodwill, other indefinite-lived intangible assets and long-lived assets. The assumptions about future cash flows and growth rates are based on the current and long-term business plans of the reporting unit or related to the long-lived assets. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the reporting unit or long-lived assets. These assumptions require significant judgments on our part, and the conclusions that we reach could vary significantly based upon these judgments. Our goodwill impairment analysis conducted as of October 1, 2019 indicated that the carrying value of the net assets of our grain storage and protein production systems business in Europe/Middle East was in excess of the fair value of the reporting unit, and therefore, we recorded a non-cash impairment charge of approximately $173.6 million within “Impairment charges” in our Consolidated Statements of Operations. In response to weakening market conditions and resulting operating results, new management was put in place over the grain storage and protein productions systems business, tasked with conducting a full strategic review of the business, including that of the Europe/Middle East reporting unit. That full strategic review was completed in the fourth quarter of 2019, along with revised forecasts to include updated market conditions and strategic operating decisions. This impairment charge was a substantial portion of the reporting unit's goodwill balance as of October 1, 2019. During the three months ended December 31, 2019, we also recorded a non-cash impairment charge of approximately $3.0 million within “Impairment charges” in our Consolidated Statements of Operations. The impairment charge related to certain long-lived intangible assets associated with our grain storage and protein production systems operations within North America due to the discontinuation of a certain brand name and related products and customers. Finally, our goodwill impairment analysis conducted as of October 1, 2019 also indicated that the fair value in excess of the carrying value of one of our smaller reporting units was less than 10%, due to deteriorating market conditions for the products it sells. If market conditions and our overall results do not improve, we may incur an impairment charge related to this reporting unit in the future under the one-step process described above. The goodwill associated with this reporting unit as of December 31, 2019 was approximately $20.0 million. 34 The results of our goodwill and long-lived assets impairment analyses conducted as of October 1, 2018 and 2017 indicated that no reduction in the carrying amount of goodwill and long-lived assets was required. Numerous facts and circumstances are considered when evaluating the carrying amount of our goodwill. The fair value of a reporting unit is impacted by the reporting unit’s expected financial performance, which is dependent upon the agricultural industry and other factors that could adversely affect the agricultural industry, including but not limited to, declines in the general economy, increases in farm input costs, weather conditions, lower commodity prices and changes in the availability of credit. The estimated fair value of the individual reporting units is assessed for reasonableness by reviewing a variety of indicators evaluated over a reasonable period of time. As of December 31, 2019, we had approximately $1,298.3 million of goodwill, after the goodwill impairment charge we recorded during the three months ended December 31, 2019. While our annual impairment testing in 2019 supported the carrying amount of this goodwill, we may be required to re-evaluate the carrying amount in future periods, thus utilizing different assumptions that reflect the then current market conditions and expectations, and, therefore, we could conclude that an impairment has occurred. Recoverable Indirect Taxes Our 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 our sales in the Brazilian market. We 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 our ongoing operations. We believe that these tax credits, net of established reserves are realizable. Our assessment of realization of these tax assets involves significant judgments on our part, and the conclusions that we reach could vary significantly based upon these judgments. We recorded approximately $142.3 million and $156.0 million, respectively, of VAT tax credits, net of reserves, as of December 31, 2019 and 2018. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Quantitative and Qualitative Disclosures about Market Risk information required by this Item set forth under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Foreign Currency Risk Management” and “Interest Rate Risk” under Item 7 of this Form 10-K are incorporated herein by reference. 35 Item 8. Financial Statements and Supplementary Data The following Consolidated Financial Statements of AGCO and its subsidiaries for each of the years in the three-year period ended December 31, 2019 are included in this Item: Report of Independent Registered Public Accounting Firm ............................................................................................ Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017.................................. Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017.. Consolidated Balance Sheets as of December 31, 2019 and 2018................................................................................... Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017.................. Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 ................................ Notes to Consolidated Financial Statements.................................................................................................................... The information under the heading “Quarterly Results” of Item 7 of this Form 10-K is incorporated herein by reference. Page 37 40 41 42 43 44 45 36 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors AGCO Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of AGCO Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule II — Valuation and Qualifying Accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Changes in Accounting Principles As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue recognition in 2018 due to the adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers. As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification 842, Leases. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 37 Assessment of the reserve and allowance for volume discounts and sales incentive programs in certain geographic regions As discussed in Note 1 to the consolidated financial statements, the Company provides various volume discount and sales incentive programs with respect to its products. Sales incentive programs include reductions in invoice prices, reduction in retail financial rates, dealer commissions and dealer incentive allowances. Volume discounts and sales incentives are recorded at the time of sale as a reduction of revenue using the expected value method. As of December 31, 2019, the Company had accrued volume discounts and sales incentives of approximately $580.4 million and an allowance for sales incentive discounts of approximately $25.7 million. We identified the assessment of the reserve and allowance for volume discounts and sales incentive programs in certain geographic regions as a critical audit matter. Auditor judgment was required to evaluate certain assumptions which had a higher degree of measurement uncertainty. Key assumptions included estimated incentive rates, which were the estimated rates at which programs were applied to eligible products, and estimated achievement by dealers of specified cumulative target levels. The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s reserve and allowance for volume discounts and sales incentive process, including controls related to the development of the key assumptions. For certain volume discounts and sales incentive programs, we compared the program details to dealer communications and the key assumptions to historical results for similar programs. We assessed the Company’s historical ability to estimate key assumptions by comparing the prior year estimated amounts to actual discounts and sales incentives realized by the customers. We evaluated the Company’s key assumptions by comparing them to actual results, including results of transactions occurring after year-end. Assessment of gross unrecognized income tax benefits in certain jurisdictions As discussed in Note 6 to the consolidated financial statements, the Company has recorded a liability for gross unrecognized income tax benefits of approximately $210.7 million as of December 31, 2019. The Company recognizes income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. We identified the assessment of gross unrecognized income tax benefits in certain jurisdictions as a critical audit matter. Complex auditor judgment and specialized skills were required in evaluating the Company’s interpretation and application of tax law and the estimate of the amount of tax benefits expected to be realized. The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s gross unrecognized income tax benefit process. This included controls related to the Company’s consideration of information that could affect the recognition or measurement of income tax benefits from uncertain tax positions and the interpretation and application of tax laws. We involved tax professionals with specialized skills and knowledge, who assisted in: • • • inspecting correspondence and assessments from the taxing authorities; evaluating the Company’s interpretation and application of tax laws; and performing an independent assessment of the Company’s tax positions and comparing the results to the Company’s assessment. Assessment of goodwill impairment for the grain storage and protein production systems Europe/Middle East reporting unit As discussed in Note 1 to the consolidated financial statements, the Company evaluates goodwill for impairment as of October 1 and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. The Company performs its goodwill impairment analysis using either a qualitative or a quantitative assessment. Based on the Company’s quantitative analysis of its grain storage and protein production systems Europe/Middle East reporting unit, the Company determined that the carrying value of the reporting unit exceeded its fair value. As a result, the Company recorded the excess as a goodwill impairment charge of approximately $173.6 million. We identified the assessment of goodwill impairment for the grain storage and protein production systems Europe/Middle East reporting unit as a critical audit matter because a high degree of subjective auditor judgment was required to evaluate the fair value of the reporting unit. The fair value estimation methodology used the following key 38 assumptions for which there was limited observable market information: future cash flows, market multiples, revenue growth rates and discount rate. The determined fair value, which directly impacted the goodwill impairment charge, was sensitive to changes in these key assumptions. The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s goodwill impairment process, including controls over the key assumptions. We performed sensitivity analyses over the key assumptions to assess their impact on the Company’s determination that the carrying value of the grain storage and protein production systems Europe/Middle East reporting unit exceeded its fair value. We compared the Company’s future cash flows and revenue growth rates used in the valuation model against underlying business strategies and growth plans. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to forecast. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in: • • comparing the Company’s discount rate inputs and market multiples to market data and publicly available information for comparable entities to test the selected discount rate and market multiples, and testing the estimate of fair value for the grain storage and protein production systems Europe/Middle East reporting unit using the Company’s cash flow forecast and discount rate, and comparing the results to the Company’s fair value estimate. /s/ KPMG LLP We have served as the Company’s auditor since 2002. Atlanta, Georgia February 28, 2020 39 AGCO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Net sales ...................................................................................................................... $ Cost of goods sold....................................................................................................... Gross profit................................................................................................................. Operating expenses: Selling, general and administrative expenses.......................................................... Engineering expenses .............................................................................................. Impairment charges ................................................................................................. Amortization of intangibles..................................................................................... Restructuring expenses............................................................................................ Bad debt expense..................................................................................................... Income from operations .............................................................................................. Interest expense, net ................................................................................................ Other expense, net ................................................................................................... Income before income taxes and equity in net earnings of affiliates.......................... Income tax provision ............................................................................................... Income before equity in net earnings of affiliates....................................................... Equity in net earnings of affiliates........................................................................... Net income .................................................................................................................. Net loss (income) attributable to noncontrolling interests .......................................... Net income attributable to AGCO Corporation and subsidiaries................................ $ Net income per common share attributable to AGCO Corporation and subsidiaries: Basic........................................................................................................................ $ Diluted..................................................................................................................... $ Cash dividends declared and paid per common share ................................................ $ Weighted average number of common and common equivalent shares outstanding: Basic........................................................................................................................ Diluted..................................................................................................................... Years Ended December 31, 2019 2018 2017 9,041.4 $ 9,352.0 $ 8,306.5 7,057.1 1,984.3 1,040.3 343.4 176.6 61.1 9.0 5.8 348.1 19.9 67.1 261.1 180.8 80.3 42.5 122.8 2.4 125.2 1.64 1.63 0.63 76.2 77.0 $ $ $ $ 7,355.3 1,996.7 1,069.4 355.2 — 64.7 12.0 6.4 489.0 53.8 74.9 360.3 110.9 249.4 34.3 283.7 1.8 285.5 3.62 3.58 0.60 78.8 79.7 $ $ $ $ 6,541.2 1,765.3 964.7 323.4 — 57.0 11.2 4.6 404.4 45.1 75.5 283.8 133.6 150.2 39.1 189.3 (2.9) 186.4 2.34 2.32 0.56 79.5 80.2 See accompanying notes to Consolidated Financial Statements. 40 AGCO CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) Net income .................................................................................................................. $ Other comprehensive (loss) income, net of reclassification adjustments: Defined benefit pension plans, net of taxes: Years Ended December 31, 2019 2018 2017 122.8 $ 283.7 $ 189.3 Prior service cost arising during the year ......................................................... Net loss recognized due to settlement .............................................................. Net actuarial (loss) gain arising during the year .............................................. Amortization of prior service cost included in net periodic pension cost........ Amortization of net actuarial losses included in net periodic pension cost ..... (4.7) 0.6 (23.3) 1.6 11.8 (7.0) 0.9 (4.2) 1.3 11.7 Derivative adjustments: Net changes in fair value of derivatives ........................................................... Net (gains) losses reclassified from accumulated other comprehensive loss into income ................................................................................................... Foreign currency translation adjustments.............................................................. Other comprehensive (loss) income, net of reclassification adjustments ................... Comprehensive income............................................................................................... Comprehensive (income) loss attributable to noncontrolling interests....................... Comprehensive income attributable to AGCO Corporation and subsidiaries ............ $ (2.6) (1.1) (0.1) (20.6) (37.3) 85.5 (0.1) 85.4 7.2 (206.8) (198.0) 85.7 6.0 $ 91.7 $ — 0.2 6.6 1.3 11.3 2.0 2.0 57.8 81.2 270.5 (4.1) 266.4 See accompanying notes to Consolidated Financial Statements. 41 AGCO CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except share amounts) December 31, 2019 December 31, 2018 ASSETS Current Assets: Cash and cash equivalents........................................................................................................ $ Accounts and notes receivable, net .......................................................................................... Inventories, net ......................................................................................................................... Other current assets .................................................................................................................. Total current assets .............................................................................................................. Property, plant and equipment, net ............................................................................................. Right-of-use lease assets............................................................................................................. Investment in affiliates ............................................................................................................... Deferred tax assets...................................................................................................................... Other assets................................................................................................................................. Intangible assets, net................................................................................................................... Goodwill ..................................................................................................................................... Total assets ..................................................................................................................... $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current portion of long-term debt ............................................................................................ $ Short-term borrowings ............................................................................................................. Accounts payable ..................................................................................................................... Accrued expenses ..................................................................................................................... Other current liabilities............................................................................................................. Total current liabilities......................................................................................................... Long-term debt, less current portion and debt issuance costs .................................................... Operating lease liabilities ........................................................................................................... Pensions and postretirement health care benefits ....................................................................... Deferred tax liabilities ................................................................................................................ Other noncurrent liabilities ......................................................................................................... Total liabilities ..................................................................................................................... Commitments and contingencies (Note 12) Stockholders’ Equity: AGCO Corporation stockholders’ equity: $ $ $ 432.8 800.5 2,078.7 417.1 3,729.1 1,416.3 187.3 380.2 93.8 153.0 501.7 1,298.3 7,759.7 2.9 150.5 914.8 1,654.2 162.1 2,884.5 1,191.8 148.6 232.1 107.0 288.7 4,852.7 326.1 880.3 1,908.7 422.3 3,537.4 1,373.1 — 400.0 104.9 142.4 573.1 1,495.5 7,626.4 72.6 138.0 865.9 1,522.4 167.8 2,766.7 1,275.3 — 223.2 116.3 251.4 4,632.9 Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding in 2019 and 2018............................................................................................... Common stock; $0.01 par value, 150,000,000 shares authorized, 75,471,562 and 76,536,755 shares issued and outstanding at December 31, 2019 and 2018, respectively .. Additional paid-in capital......................................................................................................... Retained earnings ..................................................................................................................... Accumulated other comprehensive loss ................................................................................... Total AGCO Corporation stockholders’ equity ................................................................... Noncontrolling interests ........................................................................................................... Total stockholders’ equity.................................................................................................... Total liabilities and stockholders’ equity........................................................................ $ — — 0.8 4.7 4,443.5 (1,595.2) 2,853.8 53.2 2,907.0 7,759.7 $ 0.8 10.2 4,477.3 (1,555.4) 2,932.9 60.6 2,993.5 7,626.4 See accompanying notes to Consolidated Financial Statements. 42 AGCO CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share amounts) Accumulated Other Comprehensive Loss Retained Earnings $ 4,113.6 186.4 (44.5) — Defined Benefit Pension Plans $ (304.5) — — — Cumulative Translation Adjustment $ (1,128.4) — — — Deferred (Losses) Gains on Derivatives (8.7) $ — — — Common Stock Shares Amount Additional Paid-in Capital Balance, December 31, 2016................................................................................ Net income........................................................................................................ Payment of dividends to shareholders .............................................................. Issuance of restricted stock............................................................................... 79,465,393 — — 12,066 $ Issuance of stock awards .................................................................................. SSARs exercised............................................................................................... Stock compensation.......................................................................................... Investment by noncontrolling interest .............................................................. Purchases and retirement of common stock ..................................................... Adjustment related to the adoption of ASU 2016-09 ....................................... Defined benefit pension plans, net of taxes: Net loss recognized due to settlement .......................................................... Net actuarial gain arising during year........................................................... Amortization of prior service cost included in net periodic pension cost .... Amortization of net actuarial losses included in net periodic pension cost.. Deferred gains and losses on derivatives, net................................................... 54,309 92,521 — — (70,464) — — — — — — Change in cumulative translation adjustment................................................... Balance, December 31, 2017................................................................................ Net income (loss).............................................................................................. — 79,553,825 — Payment of dividends to shareholders .............................................................. Issuance of restricted stock............................................................................... Issuance of stock awards .................................................................................. SSARs exercised............................................................................................... Stock compensation.......................................................................................... Investment by noncontrolling interests............................................................. Distribution to noncontrolling interest ............................................................. — 12,629 75,604 14,881 — — — Purchases and retirement of common stock ..................................................... Adjustment related to the adoption of ASU 2014-09 ....................................... Defined benefit pension plans, net of taxes: (3,120,184) — Prior service cost arising during year ........................................................... Net loss recognized due to settlement .......................................................... Net actuarial loss arising during year ........................................................... Amortization of prior service cost included in net periodic pension cost .... Amortization of net actuarial losses included in net periodic pension cost.. Deferred gains and losses on derivatives, net................................................... — — — — — — Change in cumulative translation adjustment................................................... Balance, December 31, 2018................................................................................ Net income (loss).............................................................................................. — 76,536,755 — Payment of dividends to shareholders .............................................................. Issuance of restricted stock............................................................................... Issuance of stock awards .................................................................................. SSARs exercised............................................................................................... Stock compensation.......................................................................................... Investment by noncontrolling interests............................................................. Distribution to noncontrolling interest ............................................................. — 14,105 608,444 106,514 — — — Changes in noncontrolling interest ................................................................... Purchases and retirement of common stock ..................................................... Defined benefit pension plans, net of taxes: — (1,794,256) Prior service cost arising during year ........................................................... Net loss recognized due to settlement .......................................................... Net actuarial loss arising during year ........................................................... Amortization of prior service cost included in net periodic pension cost .... Amortization of net actuarial losses included in net periodic pension cost.. Deferred gains and losses on derivatives, net................................................... Change in cumulative translation adjustment................................................... — — — — — — — $ 0.8 — — — — — — — — — — — — — — — 0.8 — — — — — — — — — — — — — — — — — 0.8 — — — — — — — — — — — — — — — — — 103.3 — — 0.8 (2.2) (4.4) 39.1 — — — — — — — — — 136.6 — — 0.8 (3.1) (0.6) 45.5 — — (169.0) — — — — — — — — 10.2 — — 1.0 (13.3) (3.1) 40.3 — — — (30.4) — — — — — — — — — — — — (1.7) — — — — — — 4,253.8 285.5 (47.1) — — — — — — (15.3) 0.4 — — — — — — — 4,477.3 125.2 (48.0) — (9.7) (1.7) — — — — (99.6) — — — — — — — — — — — — — 0.2 6.6 1.3 11.3 — — — — — — — — — — — — — (285.1) — 56.6 (1,071.8) — — — — — — — — — — (7.0) 0.9 (4.2) 1.3 11.7 — — (282.4) — — — — — — — — — — (4.7) 0.6 (23.3) 1.6 11.8 — — — — — — — — — — — — — — — — — (202.6) (1,274.4) — — — — — — — — — — — — — — — — (23.1) Balance, December 31, 2019................................................................................ 75,471,562 $ 0.8 $ 4.7 $ 4,443.5 $ (296.4) $ (1,297.5) $ See accompanying notes to Consolidated Financial Statements. 43 Accumulated Other Comprehensive Loss Noncontrolling Interests Total Stockholders’ Equity $ $ (1,441.6) — — — — — — — — — 0.2 6.6 1.3 11.3 4.0 56.6 (1,361.6) — — — — — — — — — — (7.0) 0.9 (4.2) 1.3 11.7 6.1 (202.6) (1,555.4) — — — — — — — — — — (4.7) 0.6 (23.3) 1.6 11.8 (2.7) (23.1) 61.1 2.9 — — — — — 0.5 — — — — — — — 1.2 65.7 (1.8) — — — — — 1.0 (0.1) — — — — — — — — (4.2) 60.6 (2.4) — — — — — 2.0 (0.4) (9.1) — — — — — — — 2.5 $ 2,837.2 189.3 (44.5) 0.8 (2.2) (4.4) 39.1 0.5 — (1.7) 0.2 6.6 1.3 11.3 4.0 57.8 3,095.3 283.7 (47.1) 0.8 (3.1) (0.6) 45.5 1.0 (0.1) (184.3) 0.4 (7.0) 0.9 (4.2) 1.3 11.7 6.1 (206.8) 2,993.5 122.8 (48.0) 1.0 (23.0) (4.8) 40.3 2.0 (0.4) (9.1) (130.0) (4.7) 0.6 (23.3) 1.6 11.8 (2.7) (20.6) $ (1,595.2) $ 53.2 $ 2,907.0 — — — — — — — — — — 4.0 — (4.7) — — — — — — — — — — — — — — — 6.1 — 1.4 — — — — — — — — — — — — — — — (2.7) — (1.3) AGCO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Years Ended December 31, 2018 2017 2019 Cash flows from operating activities: Net income................................................................................................................ $ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation......................................................................................................... Impairment charges.............................................................................................. Amortization of intangibles ................................................................................. Stock compensation expense ............................................................................... Equity in net earnings of affiliates, net of cash received ..................................... Deferred income tax provision (benefit).............................................................. Loss on extinguishment of debt ........................................................................... Other .................................................................................................................... Changes in operating assets and liabilities, net of effects from purchase of businesses: Accounts and notes receivable, net ................................................................. Inventories, net................................................................................................ Other current and noncurrent assets................................................................ Accounts payable ............................................................................................ Accrued expenses............................................................................................ Other current and noncurrent liabilities .......................................................... Total adjustments.......................................................................................... Net cash provided by operating activities..................................................... Cash flows from investing activities: Purchases of property, plant and equipment............................................................. Proceeds from sale of property, plant and equipment............................................... Purchase of businesses, net of cash acquired............................................................ Investments in unconsolidated affiliates................................................................... Other ......................................................................................................................... Net cash used in investing activities............................................................. Cash flows from financing activities: 122.8 $ 283.7 $ 189.3 210.9 176.6 61.1 41.3 — 15.1 — 6.9 63.8 (216.3) (14.4) 35.7 114.5 77.9 573.1 695.9 (273.4) 4.9 — (3.1) — (271.6) 225.2 — 64.7 46.3 (3.2) (14.7) 24.5 2.6 63.3 (214.3) (85.6) (24.3) 161.3 66.4 312.2 595.9 (203.3) 3.2 — (5.8) 0.4 (205.5) 222.8 — 57.0 38.2 41.2 (14.1) — 3.0 (34.7) (196.0) (36.6) 123.5 149.0 35.0 388.3 577.6 (203.9) 4.1 (293.1) (0.8) — (493.7) Proceeds from indebtedness ..................................................................................... Repayments of indebtedness..................................................................................... Purchases and retirement of common stock ............................................................. Payment of dividends to stockholders ...................................................................... Payment of minimum tax withholdings on stock compensation .............................. Payment of debt issuance costs................................................................................. Investments by noncontrolling interests, net ............................................................ Net cash used in financing activities ............................................................ Effect of exchange rate changes on cash, cash equivalents and restricted cash ......... Increase (decrease) in cash, cash equivalents and restricted cash............................... Cash, cash equivalents and restricted cash, beginning of year ................................... Cash, cash equivalents and restricted cash, end of year.............................................. $ 2,082.7 (2,191.1) (130.0) (48.0) (28.1) (0.5) 1.6 (313.4) (4.2) 106.7 326.1 432.8 $ 5,257.5 (5,433.6) (184.3) (47.1) (4.0) (2.7) 0.9 (413.3) (18.7) (41.6) 367.7 326.1 $ 3,513.9 (3,639.7) — (44.5) (6.9) — 0.5 (176.7) 30.8 (62.0) 429.7 367.7 See accompanying notes to Consolidated Financial Statements. 44 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Operations and Summary of Significant Accounting Policies Business AGCO Corporation and subsidiaries (“AGCO” or the “Company”) is a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. The Company sells a full range of agricultural equipment, including tractors, combines, hay tools, sprayers, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The Company’s products are widely recognized in the agricultural equipment industry and are marketed under a number of well-known brand names including: Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®. The Company distributes most of its products through a combination of approximately 3,275 independent dealers and distributors as well as the Company utilizes associates and licensees to provide a distribution channel for its products. In addition, the Company provides retail financing through its finance joint ventures with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., or “Rabobank.” Basis of Presentation and Consolidation The Company’s Consolidated Financial Statements represent the consolidation of all wholly-owned companies, majority-owned companies and joint ventures in which the Company has been determined to be the primary beneficiary. The Company consolidates a variable interest entity (“VIE”) if the Company determines it is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. The Company also consolidates all entities that are not considered VIEs if it is determined that the Company has a controlling voting interest to direct the activities that most significantly impact the joint venture or entity. The Company records investments in all other affiliate companies using the equity method of accounting when it has significant influence. Other investments, including those representing an ownership interest of less than 20%, are recorded at cost. All significant intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. Certain prior period amounts have been reclassified to conform to the current period presentation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimates made by management primarily relate to accounts and notes receivable, inventories, deferred income tax valuation allowances, uncertain tax positions, goodwill and other identifiable intangible assets, and certain accrued liabilities, principally relating to reserves for volume discounts and sales incentives, warranty obligations, product liability and workers’ compensation obligations, and pensions and postretirement benefits. Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries are translated into United States currency in accordance with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters.” Assets and liabilities are translated to United States dollars at period-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the period. Translation adjustments are included in “Accumulated other comprehensive loss” in stockholders’ equity within the Company’s Consolidated Balance Sheets. Gains and losses, which result from foreign currency transactions, are included in the accompanying Consolidated Statements of Operations. The Company changed the functional currency of its wholly-owned subsidiary from the Argentinian peso to the U.S. dollar effective July 1, 2018. 45 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents reported in the Consolidated Balance Sheets as of December 31, 2019, 2018 and 2017 and cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 are as follows (in millions): Cash(1) ................................................................................ $ Cash equivalents(2)............................................................. Restricted cash(3)................................................................ Total ................................................................................... $ December 31, 2019 412.3 December 31, 2018 290.5 $ December 31, 2017 317.0 $ 17.3 3.2 35.6 — 432.8 $ 326.1 $ 50.7 — 367.7 ____________________________________ (1) Consisted primarily of cash on hand and bank deposits. (2) Consisted primarily of money market deposits, certificates of deposits and overnight investments. The Company considers all investments with an original maturity of three months or less to be cash equivalents. (3) Consisted primarily of cash in escrow or held as guarantee to support specific requirements. Accounts and Notes Receivable Accounts and notes receivable arise from the sale of equipment and replacement parts to independent dealers, distributors or other customers. In the United States and Canada, amounts due from sales to dealers are immediately due upon a retail sale of the underlying equipment by the dealer with the exception of sales of grain storage and protein production systems as discussed further below. If not previously paid by the dealer in the United States and Canada, installment payments are required generally beginning after the interest-free period with the remaining outstanding equipment balance generally due within 12 months after shipment or delivery. These interest-free periods vary by product and generally range from one to 12 months. In limited circumstances, the Company provides sales terms, and in some cases, interest-free periods that are longer than 12 months for certain products. These are typically specified programs predominately in the United States and Canada, that allow for interest-free periods and due dates of up to 24 months for certain products depending on the year of the sale and the dealer or distributor’s ordering or sales volume during the preceding year. Interest generally is charged at or above prime lending rates on the outstanding receivable balances after shipment or delivery and after interest-free periods. Sales terms of some highly seasonal products provide for payment and due dates based on a specified date during the year regardless of the shipment date. Equipment sold to dealers in the United States and Canada is paid in full on average within 12 months of shipment. Sales of replacement parts generally are payable within 30 days of shipment, with terms for some larger, seasonal stock orders generally requiring payment within six months of shipment. Under normal circumstances, equipment may not be returned. In certain regions, with respect to most equipment sales, including the United States and Canada, the Company is obligated to repurchase equipment and replacement parts upon cancellation of a dealer or distributor contract. These obligations are required by national, state or provincial laws and require the Company to repurchase a dealer or distributor’s unsold inventory, including inventories for which the receivable already has been paid. Actual interest-free periods are shorter than described above because the equipment receivable from dealers or distributors in some countries, such as in the United States and Canada, is generally due immediately upon sale of the equipment to a retail customer as discussed above. Receivables can also be paid prior to terms specified in sales agreements. Under normal circumstances, interest is not forgiven and interest-free periods are not extended. In other international markets, equipment sales generally are payable in full within 30 days to 180 days of shipment or delivery. Payment terms for some highly seasonal products have a specified due date during the year regardless of the shipment or delivery date. For sales in most markets outside of the United States and Canada, the Company generally does not charge interest on outstanding receivables with its dealers and distributors. Sales of replacement parts generally are payable within 30 days to 90 days of shipment, with terms for some larger, seasonal stock orders generally payable within six months of shipment. In certain markets, there is a time lag, which varies based on the timing and level of retail demand, between the date the Company records a sale and when the dealer sells the equipment to a retail customer. Sales of grain storage and protein production systems generally are payable within 30 days of shipment. In certain countries, sales of such systems in which the Company is responsible for construction or installation may be contingent upon customer acceptance, payment terms vary by market and product, with fixed payment schedules on all sales. 46 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following summarizes by geographic region, as a percentage of our consolidated net sales, amounts with maximum interest-free periods as presented below (in millions): North Year Ended December 31, 2019 America 0 to 6 months........................................................$ 1,535.0 7 to 12 months...................................................... 645.0 13 to 24 months.................................................... 11.8 South America $ 802.2 Europe/ Middle East $ 5,317.8 Asia/ Pacific/Africa $ 718.5 Consolidated $ 8,373.5 92.6% — — 11.1 — — — 656.1 11.8 7.3% 0.1% $ 2,191.8 $ 802.2 $ 5,328.9 $ 718.5 $ 9,041.4 100.0% The Company has an agreement to permit transferring, on an ongoing basis, a majority of its wholesale interest-bearing and non-interest bearing accounts receivable in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures. Qualified dealers may obtain additional financing through the Company’s U.S., Canadian, European and Brazilian finance joint ventures at the joint ventures’ discretion. The Company provides various volume bonus and sales incentive programs with respect to its products. These sales incentive programs include reductions in invoice prices, reductions in retail financing rates, dealer commissions and dealer incentive allowances. In most cases, incentive programs are established and communicated to the Company’s dealers on a quarterly basis. The incentives are paid either at the time of the cash settlement of the receivable (which is generally at the time of retail sale), at the time of retail financing, at the time of warranty registration, or at a subsequent time based on dealer purchase volumes. The incentive programs are product-line specific and generally do not vary by dealer. The cost of sales incentives associated with dealer commissions and dealer incentive allowances is estimated based upon the terms of the programs and historical experience, is based on a percentage of the sales price, and estimates for sales incentives are made and recorded at the time of sale for expected incentive programs using the expected value method. These estimates are reassessed each reporting period and are revised in the event of subsequent modifications to incentive programs, as they are communicated to dealers. The related provisions and accruals are made on a product or product-line basis and are monitored for adequacy and revised at least quarterly in the event of subsequent modifications to the programs. Interest rate subsidy payments, which are a reduction in retail finance rates, are recorded in the same manner as dealer commissions and dealer incentive allowances. Volume discounts are estimated and recognized based on historical experience, and related reserves are monitored and adjusted based on actual dealer purchase volumes and the dealer’s progress towards achieving specified cumulative target levels. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that the Company does not receive a distinct good or service in exchange for the consideration provided. In the United States and Canada, reserves for incentive programs related to accounts receivable not sold to Company’s U.S. and Canadian finance joint ventures are recorded as “accounts receivable allowances” within the Company’s Consolidated Balance Sheets due to the fact that the incentives are paid through a reduction of future cash settlement of the receivable. Globally, reserves for incentive programs that will be paid in cash or credit memos, as is the case with most of the Company’s volume discount programs, as well as sales with incentives associated with accounts receivable sold to its finance joint ventures, are recorded within “Accrued expenses” within the Company’s Consolidated Balance Sheets. Accounts and notes receivable are shown net of allowances for sales incentive discounts available to dealers and for doubtful accounts. Cash flows related to the collection of receivables are reported within “Cash flows from operating activities” within the Company’s Consolidated Statements of Cash Flows. Accounts and notes receivable allowances at December 31, 2019 and 2018 were as follows (in millions): Sales incentive discounts ................................................................................................................ $ Doubtful accounts ........................................................................................................................... $ 2019 2018 25.7 28.8 54.5 $ $ 24.2 31.7 55.9 In the United States and Canada, sales incentives can be paid through future cash settlements of receivables and through credit memos to Company’s dealers or through reductions in retail financing rates paid to the Company’s finance joint ventures. Outside of the United States and Canada, sales incentives can be paid through cash or credit memos to the Company’s dealers or through reductions in retail financing rates paid to the Company’s finance joint ventures. The Company transfers certain accounts receivable under its accounts receivable sales agreements with its finance joint ventures (see Note 4). The Company records such transfers as sales of accounts receivable when it is considered to have surrendered control of such 47 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) receivables under the provisions of Accounting Standards Update (“ASU”) 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets.” Cash payments made to the Company’s finance joint ventures for sales incentive discounts provided to dealers related to outstanding accounts receivables sold are recorded within “Accrued expenses.” Inventories Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. At December 31, 2019 and 2018, the Company had recorded $178.6 million and $156.6 million, respectively, as an adjustment for surplus and obsolete inventories. These adjustments are reflected within “Inventories, net” within the Company’s Consolidated Balance Sheets. Inventories, net at December 31, 2019 and 2018 were as follows (in millions): Finished goods ............................................................................................................................ $ Repair and replacement parts...................................................................................................... Work in process .......................................................................................................................... Raw materials ............................................................................................................................. Inventories, net ........................................................................................................................... $ 2019 2018 780.1 $ 611.5 213.4 473.7 660.4 587.3 217.5 443.5 2,078.7 $ 1,908.7 Cash flows related to the sale of inventories are reported within “Cash flows from operating activities” within the Company’s Consolidated Statements of Cash Flows. 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 $142.3 million and $156.0 million, respectively, of VAT tax credits, net of reserves, as of December 31, 2019 and 2018. Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of ten to 40 years for buildings and improvements, three to 15 years for machinery and equipment and three to ten years for furniture and fixtures. Expenditures for maintenance and repairs are charged to expense as incurred. Property, plant and equipment, net at December 31, 2019 and 2018 consisted of the following (in millions): Land ................................................................................................................................................ $ Buildings and improvements .......................................................................................................... Machinery and equipment .............................................................................................................. Furniture and fixtures ..................................................................................................................... Gross property, plant and equipment.............................................................................................. Accumulated depreciation and amortization .................................................................................. Property, plant and equipment, net ................................................................................................. $ 142.5 808.1 2,522.0 153.4 3,626.0 (2,209.7) 1,416.3 $ $ 125.3 769.1 2,391.8 148.6 3,434.8 (2,061.7) 1,373.1 2019 2018 48 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Goodwill, Other Intangible Assets and Long-Lived Assets The Company tests goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. The Company combines and aggregates two or more components of an operating segment as a single reporting unit if the components have similar economic characteristics. The Company’s reportable segments are not its reporting units. Goodwill is evaluated annually as of October 1 for impairment using a qualitative assessment or a quantitative one- step assessment. If the Company elects to perform a qualitative assessment and determines the fair value of its reporting units more likely than not exceed the carrying value of their net assets, no further evaluation is necessary. For reporting units where the Company performs a one-step quantitative assessment, the Company compares the fair value of each reporting unit, which is determined based on a combination of a discounted cash flow valuation approach and a market multiple valuation approach, to its respective carrying value of net assets, including goodwill. If the fair value of the reporting unit exceeds its carrying value of net assets, the goodwill is not considered impaired. If the carrying value of net assets is higher than the fair value of the reporting unit, the impairment charge is the amount by which the carrying value exceeds the reporting unit’s fair value in accordance with ASU 2017-04. The Company reviews its long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If the Company determines that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on many factors, including current operating results, expected market trends and competitive influences. The Company also evaluates the amortization periods assigned to its intangible assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell. The Company’s goodwill impairment analysis conducted as of October 1, 2019 indicated that the carrying value of the net assets of the Company’s grain storage and protein production systems operations in Europe/Middle East was in excess of the fair value of the reporting unit, and therefore, the Company recorded a non-cash impairment charge of approximately $173.6 million within “Impairment charges” in the Company’s Consolidated Statements of Operations. In response to weakening market conditions and resulting operating results, new management was put in place over the grain storage and protein productions systems business, tasked with conducting a full strategic review of the business, including that of the Europe/Middle East reporting unit. That full strategic review was completed in the fourth quarter of 2019, along with revised forecasts to include updated market conditions and strategic operating decisions. During the three months ended December 31, 2019, the Company also recorded a non-cash impairment charge of approximately $3.0 million within “Impairment charges” in the Company’s Consolidated Statements of Operations. The impairment charge related to certain long-lived intangible assets associated with the Company’s grain storage and protein production systems operations within North America, due to the discontinuation of a certain brand name and related product, and customers. The results of the Company’s goodwill and long-lived assets impairment analyses conducted as of October 1, 2018 and 2017 indicated that no reduction in the carrying amount of the Company’s goodwill and long-lived assets was required. The Company’s accumulated goodwill impairment is approximately $354.1 million related to impairment charges the Company recorded during 2019, 2012 and 2006 pertaining to its grain storage and protein production systems business in Europe/Middle East, its Chinese harvesting reporting unit and its former sprayer reporting unit, respectively. The Company’s grain storage and protein production systems Europe/Middle East reporting unit operates within the Europe/Middle East geographical reportable segment. The Chinese harvesting business operates within the Asia/Pacific/Africa geographical reportable segment and the former sprayer reporting unit operates within the North American geographical reportable segment. 49 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Changes in the carrying amount of goodwill during the years ended December 31, 2019, 2018 and 2017 are summarized as follows (in millions): Balance as of December 31, 2016 .............. $ Acquisitions................................................ Foreign currency translation....................... Balance as of December 31, 2017 .............. Adjustments................................................ Foreign currency translation....................... Balance as of December 31, 2018 .............. Impairment charge...................................... Sale of a joint venture................................. Foreign currency translation....................... Balance as of December 31, 2019 .............. $ North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated 543.9 $ 138.8 $ 581.9 $ 111.8 $ 1,376.4 67.2 — 611.1 — — 611.1 — (5.1) — 606.0 $ — (2.4) 136.4 — (19.7) 116.7 — — (4.5) 112.2 $ 17.4 71.7 671.0 8.4 (29.8) 649.6 (173.6) — (12.7) 463.3 $ — 11.1 122.9 — (4.8) 118.1 — — (1.3) 116.8 $ 84.6 80.4 1,541.4 8.4 (54.3) 1,495.5 (173.6) (5.1) (18.5) 1,298.3 The Company amortizes certain acquired identifiable intangible assets primarily on a straight-line basis over their estimated useful lives, which range from five to 50 years. The acquired intangible assets have a weighted average useful life as follows: Intangible Assets Patents and technology................................................................................................................................. Customer relationships................................................................................................................................. Trademarks and trade names........................................................................................................................ Land use rights ............................................................................................................................................. Weighted-Average Useful Life 12 years 13 years 20 years 45 years For the years ended December 31, 2019, 2018 and 2017, acquired intangible asset amortization was $61.1 million, $64.7 million and $57.0 million, respectively. The Company estimates amortization of existing intangible assets will be $59.6 million in 2020, $56.8 million in 2021, $56.3 million in 2022, $53.8 million in 2023, and $52.3 million in 2024. The Company has previously determined that two of its trademarks have an indefinite useful life. The Massey Ferguson trademark has been in existence since 1952 and was formed from the merger of Massey-Harris (established in the 1890’s) and Ferguson (established in the 1930’s). The Massey Ferguson brand is currently sold in approximately 110 countries worldwide, making it one of the most widely sold tractor brands in the world. The Company also has identified the Valtra trademark as an indefinite-lived asset. The Valtra trademark has been in existence since the late 1990’s, but is a derivative of the Valmet trademark which has been in existence since 1951. The Valmet name transitioned to the Valtra name over a period of time in the marketplace. The Valtra brand is currently sold in over 75 countries around the world. Both the Massey Ferguson brand and the Valtra brand are primary product lines of the Company’s business, and the Company plans to use these trademarks for an indefinite period of time. The Company plans to continue to make investments in product development to enhance the value of these brands into the future. There are no legal, regulatory, contractual, competitive, economic or other factors that the Company is aware of or that the Company believes would limit the useful lives of the trademarks. The Massey Ferguson and Valtra trademark registrations can be renewed at a nominal cost in the countries in which the Company operates. 50 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Changes in the carrying amount of acquired intangible assets during 2019 and 2018 are summarized as follows (in millions): Trademarks and Trade Names Customer Relationships Patents and Technology Land Use Rights Total Gross carrying amounts: Balance as of December 31, 2017.............. $ Foreign currency translation ...................... Balance as of December 31, 2018.............. Sale of a joint venture ................................ Impairment charge ..................................... Foreign currency translation ...................... Balance as of December 31, 2019.............. $ 208.4 $ (5.0) 203.4 (1.3) (1.1) (1.7) 199.3 $ 600.4 (14.1) 586.3 (2.9) (0.8) (3.6) 579.0 $ $ 160.0 (4.2) 155.8 (1.9) (1.1) (1.7) 151.1 $ $ 9.1 (0.5) 8.6 — — (0.1) 8.5 $ $ 977.9 (23.8) 954.1 (6.1) (3.0) (7.1) 937.9 Trademarks and Trade Names Customer Relationships Patents and Technology Land Use Rights Total Accumulated amortization: Balance as of December 31, 2017 .............. $ Amortization expense ................................. Foreign currency translation ....................... Balance as of December 31, 2018 .............. Amortization expense ................................. Sale of a joint venture ................................. Foreign currency translation ....................... Balance as of December 31, 2019 .............. $ 61.4 13.7 (1.7) 73.4 11.0 (0.5) (0.6) 83.3 $ $ 279.7 $ 73.4 $ 3.0 $ 40.7 (9.6) 310.8 40.1 (1.2) (2.3) 347.4 $ 10.1 (2.8) 80.7 9.9 (0.7) (1.2) 88.7 0.2 (0.2) 3.0 0.1 — — $ 3.1 $ 417.5 64.7 (14.3) 467.9 61.1 (2.4) (4.1) 522.5 Trademarks and Trade Names Indefinite-lived intangible assets: Balance as of December 31, 2017 ......................................................................................................................... $ Foreign currency translation.................................................................................................................................. Balance as of December 31, 2018 ......................................................................................................................... Foreign currency translation.................................................................................................................................. Balance as of December 31, 2019 ......................................................................................................................... $ 88.6 (1.7) 86.9 (0.6) 86.3 Accrued Expenses Accrued expenses at December 31, 2019 and 2018 consisted of the following (in millions): Reserve for volume discounts and sales incentives ................................................................... $ Warranty reserves....................................................................................................................... Accrued employee compensation and benefits.......................................................................... Accrued taxes............................................................................................................................. Other .......................................................................................................................................... $ 2019 2018 580.4 331.9 290.8 170.3 280.8 1,654.2 $ $ 537.7 308.6 286.2 137.8 252.1 1,522.4 51 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Warranty Reserves The warranty reserve activity for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in millions): Balance at beginning of the year....................................................................................... $ Acquisitions ...................................................................................................................... Accruals for warranties issued during the year ................................................................. Settlements made (in cash or in kind) during the year...................................................... Foreign currency translation ............................................................................................. Balance at the end of the year ........................................................................................... $ 2019 2018 2017 360.9 $ 316.0 $ 255.6 — 234.1 (198.7) (3.5) 392.8 $ — 230.5 (174.7) (10.9) 360.9 5.1 215.9 (183.1) 22.5 $ 316.0 The Company’s agricultural equipment products generally are under warranty against defects in materials 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 $60.9 million and $52.3 million of warranty reserves are included in “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets as of December 31, 2019 and 2018, 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.” Insurance Reserves Under the Company’s insurance programs, coverage is obtained for significant liability limits as well as those risks required to be insured by law or contract. It is the policy of the Company to self-insure a portion of certain expected losses primarily related to workers’ compensation and comprehensive general liability, product and vehicle liability. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred. Revenue The Company adopted ASU 2014-09, “Revenue from Contracts with Customers,” effective January 1, 2018 using the modified retrospective approach. Revenue is recognized when the Company satisfies the performance obligation by transferring control over goods or services to a dealer, distributor or other customer. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those goods or services pursuant to a contract with the customer. A contract exists once the Company receives and accepts a purchase order under a dealer sales agreement, or once the Company enters into a contract with an end user. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. The Company generates revenue from the manufacture and distribution of agricultural equipment and replacement parts. Sales of equipment and replacement parts, which represents a majority of the Company’s net sales, are recorded by the Company at the point in time when title and control have been transferred to an independent dealer, distributor or other customer. Title generally passes to the dealer or distributor upon shipment or specified delivery, and the risk of loss upon damage, theft or destruction of the equipment is the responsibility of the dealer, distributor or designated third-party carrier. The Company believes control passes and the performance obligation is satisfied at the point of the stated shipping or delivery term with respect to such sales. As previously discussed, the amount of consideration the Company receives and the revenue recognized varies with certain sales incentives the Company offers to dealers and distributors. Estimates for sales incentives are made at the time of sale for expected incentive programs using the expected value method. These estimates are revised in the event of subsequent 52 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) modification to the incentive program. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that the Company does not receive a distinct good or service in exchange for the consideration provided. Dealers or distributors may not return equipment or replacement parts while its contract with the Company is in force, except for under established promotional and annual replacement parts return programs. At the time of sale, the Company estimates the amount of returns based on the terms of promotional and annual return programs and anticipated returns in the future. Sales and other related taxes are excluded from the transaction price. Shipping and handling costs associated with freight activities after the customer has obtained control are accounted for as fulfillment costs and are expensed and accrued at the time revenue is recognized in “Cost of goods sold” and “Selling, general and administrative expenses” in the Company’s Consolidated Statements of Operations. The Company applied the practical expedient in ASU 2014-09 to not adjust the amount of revenue to be recognized under a contract with a dealer, distributor or other customer for the time value of money when the difference between the receipt of payment and the recognition of revenue is less than one year. Although, substantially all revenue is recognized at a point in time, a relatively insignificant amount of installation revenue associated with the sale of grain storage and protein production systems is recognized on an “over time” basis as discussed below. The Company also recognizes revenue “over time” with respect to extended warranty or maintenance contracts and certain technology services. Generally, all of the contracts with customers that relate to “over time” revenue recognition have contract durations of less than 12 months. Grain Storage and Protein Production Systems Installation Revenue. In certain countries, the Company sells grain storage and protein production systems where the Company is responsible for construction and installation, and the sale is contingent upon customer acceptance. Under these conditions, the revenues are recognized over the term of the contract when the Company can objectively determine control has been transferred to the customer in accordance with agreed-upon specifications in the contract. For these contracts, the Company may be entitled to receive an advance payment, which is recognized as a contract liability for the amount in excess of the revenue recognized. The Company uses the input method using costs incurred to date relative to total estimated costs at completion to measure the progress toward satisfaction of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs include labor, material and overhead. The estimation of the progress toward completion is subject to various assumptions. As part of the estimation process, the Company reviews the length of time to complete the performance obligation, the cost of materials and labor productivity. If a significant change in one of the assumptions occurs, then the Company will recognize an adjustment under the cumulative catch-up method and the impact of the adjustment on the revenue recorded to date is recognized in the period the adjustment is identified. Extended Warranty Contracts. The Company sells separately priced extended warranty contracts, which extends coverage beyond the base warranty period. Revenue is recognized for the extended warranty contract on a straight-line basis, which the Company believes approximates the costs expected to be incurred in satisfying the obligations, over the extended warranty period. The extended warranty period ranges from one to five years. Payment is received at the inception of the extended warranty contract, which is recognized as a contract liability for the amount in excess of the revenue recognized. The revenue associated with the sale of extended warranty contracts is insignificant. Technology Services Revenue. The Company sells a combination of technology products and services. When the bundled package of technology products and services is sold, the portion of the consideration received related to the services component is recognized over time as the Company satisfies the future performance obligation. Revenue is recognized for the hardware component when control is transferred to the dealer or distributor. The revenue associated with the sale of technology services is insignificant. 53 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Stock Incentive Plans Stock compensation expense was recorded as follows (in millions). Refer to Note 10 for additional information regarding the Company’s stock incentive plans during 2019, 2018 and 2017: Years Ended December 31, 2019 2018 2017 Cost of goods sold ............................................................................................................. $ Selling, general and administrative expenses.................................................................... Total stock compensation expense .................................................................................... $ 1.7 40.0 41.7 $ $ 2.3 44.3 46.6 $ $ 2.8 35.6 38.4 Research and Development Expenses Research and development expenses are expensed as incurred and are included in engineering expenses in the Company’s Consolidated Statements of Operations. Advertising Costs The Company expenses all advertising costs as incurred. Cooperative advertising costs normally are expensed at the time the revenue is earned. Advertising expenses for the years ended December 31, 2019, 2018 and 2017 totaled approximately $42.3 million, $42.4 million and $42.0 million, respectively. Shipping and Handling Expenses All shipping and handling fees charged to customers are included as a component of net sales, and are associated with freight activities after the customer has obtained control. Shipping and handling costs are accounted for as fulfillment costs and are expensed and accrued at the time revenue is recognized within “Cost of goods sold,” with the exception of certain handling costs included in “Selling, general and administrative expenses” in the amount of $38.9 million, $37.9 million and $35.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Interest Expense, Net Interest expense, net for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in millions): Interest expense................................................................................................................. $ Interest income .................................................................................................................. $ 2019 2018 2017 28.8 (8.9) 19.9 $ $ 61.9 (8.1) 53.8 $ $ 54.5 (9.4) 45.1 During 2018, the Company repurchased its 57/8% senior notes due December 1, 2021, and as a result, recorded approximately $24.5 million in a loss on extinguishment of debt reflected in “Interest expense, net.” This was offset by approximately $4.7 million of accelerated amortization of a deferred gain related to a terminated interest rate swap agreement associated with the senior notes. Refer to Note 7 for further information. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. See Note 6 for additional information regarding the Company’s income taxes. 54 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 stock-settled stock appreciation rights (“SSARs”) and the vesting of performance share awards and restricted stock units using the treasury stock method when the effects of such assumptions are dilutive. A reconciliation of net income attributable to AGCO Corporation and subsidiaries and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share during the years ended December 31, 2019, 2018 and 2017 is as follows (in millions, except per share data): Basic net income per share: Net income attributable to AGCO Corporation and subsidiaries...................................... $ Weighted average number of common shares outstanding............................................... Basic net income per share attributable to AGCO Corporation and subsidiaries ............. $ Diluted net income per share: Net income attributable to AGCO Corporation and subsidiaries ................................... $ Weighted average number of common shares outstanding ............................................ Dilutive SSARs, performance share awards and restricted stock units.......................... Weighted average number of common shares and common share equivalents outstanding for purposes of computing diluted net income per share ........................ Diluted net income per share attributable to AGCO Corporation and subsidiaries .......... $ 2019 2018 2017 125.2 76.2 1.64 125.2 76.2 0.8 77.0 1.63 $ $ $ $ 285.5 78.8 3.62 285.5 78.8 0.9 79.7 3.58 $ $ $ $ 186.4 79.5 2.34 186.4 79.5 0.7 80.2 2.32 SSARs to purchase approximately 0.2 million shares, 0.5 million shares and 0.3 million shares of the Company’s common stock for the years ended December 31, 2019, 2018 and 2017, respectively, were outstanding but not included in the calculation of weighted average common and common equivalent shares outstanding because they had an antidilutive impact. Comprehensive Income (Loss) The Company reports comprehensive income (loss), defined as the total of net income (loss) and all other non-owner changes in equity, and the components thereof in its Consolidated Statements of Stockholders’ Equity and Consolidated Statements of Comprehensive Income (Loss). The components of other comprehensive (loss) income and the related tax effects for the years ended December 31, 2019, 2018 and 2017 are as follows (in millions): AGCO Corporation and Subsidiaries 2019 Income Taxes Before-tax Amount After-tax Amount Noncontrolling Interests 2019 After-tax Amount Defined benefit pension plans ......................................................... $ Net loss on derivatives..................................................................... Foreign currency translation adjustments........................................ Total components of other comprehensive loss............................... $ (13.4) $ (3.1) (23.1) (39.6) $ (0.6) $ 0.4 — (0.2) $ (14.0) $ (2.7) (23.1) (39.8) $ — — 2.5 2.5 55 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) AGCO Corporation and Subsidiaries Noncontrolling Interests Defined benefit pension plans ......................................................... $ Net gain on derivatives.................................................................... Foreign currency translation adjustments........................................ Total components of other comprehensive loss............................... $ 0.8 $ 7.6 (202.6) (194.2) $ Before-tax Amount 2018 Income Taxes After-tax Amount $ 2.7 $ 6.1 (202.6) (193.8) $ 1.9 (1.5) — 0.4 $ 2018 After-tax Amount — — (4.2) (4.2) AGCO Corporation and Subsidiaries Noncontrolling Interests Before-tax Amount 2017 Income Taxes After-tax Amount 2017 After-tax Amount Defined benefit pension plans ......................................................... $ Net gain on derivatives.................................................................... Foreign currency translation adjustments........................................ Total components of other comprehensive income ......................... $ 24.2 4.1 56.6 84.9 $ $ (4.8) $ (0.1) — (4.9) $ 19.4 4.0 56.6 80.0 $ $ — — 1.2 1.2 Derivatives The Company uses foreign currency contracts to hedge the foreign currency exposure of certain receivables and payables. The contracts are for periods consistent with the exposure being hedged and generally have maturities of one year or less. These contracts are classified as non-designated derivative instruments. The Company also enters into foreign currency contracts designated as cash flow hedges of expected sales. The Company’s foreign currency contracts mitigate risk due to exchange rate fluctuations because gains and losses on these contracts generally offset losses and gains on the exposure being hedged. The notional amounts of the foreign currency contracts do not represent amounts exchanged by the parties and, therefore, are not a measure of the Company’s risk. The amounts exchanged are calculated on the basis of the notional amounts and other terms of the contracts. The credit and market risks under these contracts are not considered to be significant. The Company’s interest expense is, in part, sensitive to the general level of interest rates, and the Company manages its exposure to interest rate risk through the mix of floating rate and fixed rate debt. From time to time, the Company enters into interest rate swap agreements in order to manage the Company’s exposure to interest rate fluctuations. The Company uses non-derivative and, periodically, derivative instruments to hedge a portion of the Company’s net investment in foreign operations against adverse movements in exchange rates. The Company’s hedging policy prohibits it from entering into any foreign currency contracts for speculative trading purposes. See Note 11 for additional information regarding the Company’s derivative instruments and hedging activities. Recent Accounting Pronouncements 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 of 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 allocated 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 adopted ASU 2017-04 during the fourth quarter of 2019 and applied the standard to its annual impairment test performed as of October 1, 2019. 56 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”), which superseded 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 new standard does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard and leases continue to be classified as finance or operating. The primary change under ASU 2016-02 is the requirement for entities to recognize a lease liability for payments and a right-of-use (“ROU”) asset representing the right to use the leased asset during the term of an operating lease arrangement. Lessees were 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 new standard was largely unchanged from the previous accounting standard. In addition, ASU 2016-02 expanded the disclosure requirements of lease arrangements. Upon adoption, lessees and lessors were required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-11, “Targeted Improvements,” which allowed for a new, optional transition method that provided the option to use the effective date as the date of initial application on transition. Under this option, the comparative periods continued to apply the legacy guidance in ASC 840, including the disclosure requirements, and a cumulative effect adjustment was recognized in the period of adoption rather than the earliest period presented. Under this transition option, comparative reporting was not required and the provisions of the standard was applied prospectively to leases in effect at the date of adoption. The Company adopted the new guidance effective January 1, 2019 using a modified retrospective approach and no cumulative effect adjustment was recorded upon adoption. Based on the Company’s current lease portfolio, the adoption of the standard as of January 1, 2019 resulted in the recognition on that date of ROU assets and operating lease liabilities in the amount of approximately $194.2 million and $196.4 million, respectively, in the Company’s Consolidated Balance Sheets. The adoption of the new standard did not materially impact the Company’s Consolidated Statements of Operations or Consolidated Statements of Cash Flows. ASU 2016-02 provided a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permitted the Company not to reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company elected the short-term lease exemption for all leases with a term of 12 months or less for both existing and ongoing operating leases. The Company elected the practical expedient to separate lease and non-lease components for a majority of its operating leases, other than real estate and office equipment leases. In connection with the adoption of ASU 2016-02 on January 1, 2019, the Company completed the design of new processes and internal controls, which included the implementation of a software solution and the cataloging of the Company’s existing and ongoing population of leased assets. See Note 17 for additional information and related disclosures. 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 January 1, 2020. The adoption did not have a material impact to the Company’s results of operations, financial condition and cash flows. The Company also adopted the following pronouncements in 2019, none of which had a material effect on its results of operations, financial condition and cash flows: • ASU 2018-02 - “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” • ASU 2018-13 - “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” 57 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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. 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 will likely impact the Company’s “Investment in affiliates” and “Equity in net earnings of affiliates.” The Company’s finance joint ventures are currently evaluating the impact of ASU 2016-13 to their results of operations and financial condition. 2. Acquisitions On October 2, 2017, the Company acquired the hay and forage division of the Lely Group (“Lely”) for approximately €80.2 million (or approximately $94.6 million), net of cash acquired of approximately €10.1 million (or approximately $11.9 million). The Lely acquisition, with manufacturing locations in northern Germany, has allowed the Company to expand its product offering of hay and forage equipment, including balers and loader wagons. The acquisition was financed by the Company’s credit facility (see Note 7). The fair values of the assets acquired and liabilities assumed as of the acquisition date are presented in the following table (in millions): Current assets ................................................................................................................................................. $ Property, plant and equipment........................................................................................................................ Intangible assets ............................................................................................................................................. Goodwill......................................................................................................................................................... Total assets acquired .................................................................................................................................... Current liabilities............................................................................................................................................ Long-term liabilities....................................................................................................................................... Total liabilities assumed............................................................................................................................... Net assets acquired .................................................................................................................................... $ 87.0 17.8 7.6 25.8 138.2 23.5 8.2 31.7 106.5 The acquired identifiable intangible assets of Lely as of the date of the acquisition are summarized in the following table (in millions): Intangible Assets Customer relationships................................................................................................ Technology.................................................................................................................. Trademarks.................................................................................................................. Amount Weighted-Average Useful Life $ $ 3.0 3.0 1.6 7.6 5 years 12 years 10 years 58 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The results of operations of Lely have been included in the Company’s Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Europe/Middle East geographical reportable segment. Proforma results related to the acquisition were not material. On September 1, 2017, the Company acquired Precision Planting LLC (“Precision Planting”) for approximately $198.1 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 (see Note 7). The fair values of the assets acquired and liabilities assumed as of the acquisition date are presented in the following table (in millions): Current assets ................................................................................................................................................ $ Property, plant and equipment....................................................................................................................... Intangible assets ............................................................................................................................................ Goodwill........................................................................................................................................................ Total assets acquired................................................................................................................................... Current liabilities........................................................................................................................................... Total liabilities assumed ............................................................................................................................. Net assets acquired ................................................................................................................................... $ 59.5 20.8 64.4 67.2 211.9 12.2 12.2 199.7 The acquired identifiable intangible assets of Precision Planting as of the date of the acquisition are summarized in the following table (in millions): Intangible Assets Customer relationships................................................................................................ Technology.................................................................................................................. Trademarks.................................................................................................................. Amount Weighted-Average Useful Life $ $ 21.4 25.1 17.9 64.4 14 years 10 years 20 years The results of operations of Precision Planting have been included in the Company’s 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. 59 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 3. Restructuring Expenses From 2014 through 2019, 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 to reduce costs in response to softening global market demand and lower production volumes. The aggregate headcount reduction was approximately 3,890 employees between 2014 and 2018. In addition, during the three months ended December 31, 2019, the Company initiated various restructuring activities in an effort to rationalize its grain storage and protein production system operations. The Company recorded severance and related costs associated with these rationalizations in connection with the termination of approximately 270 employee during 2019. The components of the restructuring expenses are summarized as follows (in millions): Loss on Sale of Joint Venture Write-down of Property, Plant and Equipment Employee Severance Facility Closure Costs Total Balance as of December 31, 2016 .................... $ 2017 provision .................................................. Less: Non-cash expense.................................... Cash expense .................................................... 2017 provision reversal..................................... 2017 cash activity ............................................. Foreign currency translation ............................. Balance as of December 31, 2017 .................... 2018 provision .................................................. Less: Non-cash expense.................................... Cash expense .................................................... 2018 provision reversal..................................... 2018 cash activity ............................................. Foreign currency translation ............................. Balance as of December 31, 2018 .................... 2019 provision .................................................. Less: Non-cash expense.................................... Cash expense .................................................... 2019 provision reversal..................................... 2019 cash activity ............................................. Foreign currency translation ............................. Balance as of December 31, 2019 .................... $ — $ — — — — — — — — — — — — — — 2.1 (2.1) — — — — — $ 0.2 (0.2) — — — — — 0.3 (0.3) — — — — — 1.5 (1.5) — — — — — $ — $ 14.5 12.4 — 12.4 (1.4) (16.0) 1.4 10.9 13.8 — 13.8 (2.1) (14.4) (1.1) 7.1 5.6 — 5.6 (0.7) (6.8) (0.4) 4.8 $ $ 0.8 — — — — (0.8) — — — — — — — — — 0.5 — 0.5 — (0.5) — $ — $ 15.3 12.6 (0.2) 12.4 (1.4) (16.8) 1.4 10.9 14.1 (0.3) 13.8 (2.1) (14.4) (1.1) 7.1 9.7 (3.6) 6.1 (0.7) (7.3) (0.4) 4.8 In addition, during the three months ended December 31, 2019, the Company exited and sold its 50% interest in its USC, LLC joint venture to its joint venture partner for approximately $5.1 million. The Company recorded a loss of approximately $2.1 million associated with the sale, which was reflected within “Restructuring expenses” in the Company’s Consolidated Statements of Operations. 60 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4. 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 December 31, 2019 and 2018, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $1.6 billion and $1.4 billion, respectively. Under the terms of the accounts receivable sales agreements in North America, Europe and Brazil, the Company pays an annual 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 receivables sales agreements. These fees are reflected within losses on the sales of receivables included within “Other expense, net” in the Company’s Consolidated Statements of Operations. The Company does not service the receivables after the sale occurs 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 discussed above, reflected within “Other expense, net” in the Company’s Consolidated Statements of Operations, were approximately $42.4 million, $36.0 million and $39.2 million during 2019, 2018 and 2017, respectively. 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 December 31, 2019 and 2018, these finance joint ventures had approximately $104.3 million and $82.5 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. 5. Investments in Affiliates Investments in affiliates as of December 31, 2019 and 2018 were as follows (in millions): Finance joint ventures......................................................................................................... $ Manufacturing joint ventures.............................................................................................. Other affiliates .................................................................................................................... 339.0 $ 26.8 14.4 $ 380.2 $ 358.7 26.3 15.0 400.0 2019 2018 The Company’s finance joint ventures are located in the United States, Canada, Europe, Brazil, Argentina and Australia, and provide retail financing and wholesale financing to the Company’s retail customers and dealers, respectively. See Note 14 for further information on the Company’s finance joint ventures. The Company’s manufacturing joint ventures consist of Groupement International De Mecanique Agricole SA (“GIMA”) (a joint venture with a third-party manufacturer to purchase, design and manufacture components for agricultural equipment in France) and a joint venture with a third-party manufacturer to manufacture protein production equipment in China. The other joint ventures represent investments in farm equipment manufacturers, an electronic and software system manufacturer, distributors and licensees. 61 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company’s equity in net earnings of affiliates for the years ended December 31, 2019, 2018 and 2017 were as follows (in millions): Finance joint ventures ......................................................................... $ Manufacturing and other joint ventures .............................................. $ 2019 2018 2017 41.5 1.0 42.5 $ $ 34.7 (0.4) 34.3 $ $ 39.9 (0.8) 39.1 Summarized combined financial information of the Company’s finance joint ventures as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 were as follows (in millions): Total assets.......................................................................................................................... $ Total liabilities .................................................................................................................... Partners’ equity ................................................................................................................... 7,773.2 $ 7,082.4 690.8 7,649.2 6,917.2 732.0 As of December 31, 2019 2018 For the Years Ended December 31, 2018 2019 2017 Revenues ............................................................................................. $ Costs.................................................................................................... Income before income taxes ............................................................... $ 417.6 299.9 117.7 $ $ 390.8 286.7 104.1 $ $ 366.0 243.3 122.7 The majority of the assets of the Company’s finance joint ventures represent finance receivables. The majority of the liabilities represent notes payable and accrued interest. Under the various joint venture agreements, Rabobank or its affiliates provide financing to the joint venture companies. AGCO has a 49% interest in the Company’s finance joint ventures (Note 14). At December 31, 2019 and 2018, the Company’s receivables from affiliates were approximately $15.2 million and $12.9 million, respectively. The receivables from affiliates are reflected within “Accounts and notes receivable, net” within the Company’s Consolidated Balance Sheets. The portion of the Company’s retained earnings balance that represents undistributed retained earnings of equity method investees was approximately $310.8 million and $326.9 million as of December 31, 2019 and 2018, respectively. 6. Income Taxes The sources of income before income taxes and equity in net earnings of affiliates were as follows for the years ended December 31, 2019, 2018 and 2017 (in millions): United States ................................................................................................... $ Foreign ............................................................................................................ Income before income taxes and equity in net earnings of affiliates .............. $ (53.1) $ 314.2 261.1 $ (126.0) $ 486.3 360.3 $ (141.6) 425.4 283.8 2019 2018 2017 62 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in millions): Current: United States: Federal...................................................................................................... $ State.......................................................................................................... Foreign.......................................................................................................... Deferred: United States: Federal...................................................................................................... State.......................................................................................................... Foreign.......................................................................................................... $ 2019 2018 2017 (6.5) $ 2.1 170.1 165.7 1.3 — 13.8 15.1 180.8 $ (9.1) $ 1.2 133.5 125.6 — — (14.7) (14.7) 110.9 $ 20.3 0.6 126.8 147.7 0.9 — (15.0) (14.1) 133.6 Swiss tax reform was enacted during 2019 and eliminates certain preferential tax items as well as implements new tax rates at both the federal and cantonal levels. During the three months ended December 31, 2019, the Company recognized a one-time income tax gain of approximately $21.8 million associated with the changing of Swiss federal and cantonal tax rates as well as recognition of a deferred tax asset associated with the estimated value of a tax basis step-up of the Company’s Swiss subsidiary’s assets. On December 22, 2017, The Tax Cuts and Jobs Act (“the 2017 Tax Act”) was enacted in the United States. During the three months ended December 31, 2017, the Company recorded a tax provision of approximately $42.0 million in accordance with Staff Accounting Bulletin No. 118, which provided SEC Staff guidance for the application of ASC 740 “Income Taxes,” in the reporting period in which the 2017 Tax Act was enacted. The $42.0 million tax provision included a provisional income tax charge related to a one-time transition tax associated with the mandatory deemed repatriation of unremitted foreign earnings. The tax provision also included a provisional income tax charge associated with the income tax consequences related to the expected future repatriation of certain underlying foreign earnings, as historically, the Company had considered them to be permanently reinvested. The remaining balance of the tax provision primarily related to the remeasurement of certain net deferred tax assets using the lower enacted U.S. Corporate tax rate, as well as other miscellaneous related impacts. During the three months ended December 31, 2018, the Company finalized its calculations related to the 2017 Tax Act and recorded an income tax benefit of approximately $8.4 million. A reconciliation of income taxes computed at the United States federal statutory income tax rate (21% for 2019, 21% for 2018 (from 35% to 21%), and 35% for 2017) to the provision for income taxes reflected in the Company’s Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 is as follows (in millions): Provision for income taxes at United States federal statutory rate.................... $ State and local income taxes, net of federal income tax effects ........................ Taxes on foreign income which differ from the United States statutory rate.... Tax effect of permanent differences .................................................................. Change in valuation allowance.......................................................................... Change in tax contingency reserves .................................................................. Research and development tax credits .............................................................. Impacts related to changes in tax laws .............................................................. Other .................................................................................................................. $ 63 2019 2018 2017 54.8 (2.5) 6.7 63.9 84.6 3.2 (7.1) (21.8) (1.0) 180.8 $ $ 75.7 (6.0) (0.3) 26.7 24.6 8.5 (8.5) (8.4) (1.4) 110.9 $ $ 99.3 (5.7) (57.7) 60.6 (1.4) 3.8 (5.0) 42.0 (2.3) 133.6 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The significant components of the deferred tax assets and liabilities at December 31, 2019 and 2018 were as follows (in millions): Deferred Tax Assets: 2019 2018 Net operating loss carryforwards ............................................................................................. $ Sales incentive discounts.......................................................................................................... Inventory valuation reserves .................................................................................................... Pensions and postretirement health care benefits..................................................................... Warranty and other reserves..................................................................................................... Research and development tax credits ..................................................................................... Foreign tax credits.................................................................................................................... Other......................................................................................................................................... Total gross deferred tax assets ............................................................................................... Valuation allowance ............................................................................................................... Total deferred tax assets ...................................................................................................... Deferred Tax Liabilities: Tax over book depreciation and amortization .......................................................................... Investment in affiliates ............................................................................................................. Other......................................................................................................................................... Total deferred tax liabilities................................................................................................. Net deferred tax liabilities .............................................................................................. $ Amounts recognized in Consolidated Balance Sheets: Deferred tax assets - noncurrent............................................................................................... $ Deferred tax liabilities - noncurrent ......................................................................................... $ $ 72.0 61.9 41.1 51.6 128.5 17.3 6.4 17.2 396.0 (169.1) 226.9 164.3 50.3 25.5 240.1 (13.2) $ $ 93.8 (107.0) (13.2) $ 74.5 58.8 36.3 47.6 98.6 3.1 9.7 21.6 350.2 (83.9) 266.3 214.3 42.8 20.6 277.7 (11.4) 104.9 (116.3) (11.4) As reflected in the preceding table, the Company recorded a net deferred tax liability of $13.2 million and $11.4 million as of December 31, 2019 and December 31, 2018, respectively, and had a valuation allowance against its gross deferred tax assets of approximately $169.1 million and $83.9 million as of December 31, 2019 and 2018, respectively. During the three months ended September 30, 2019, the Company recorded a non-cash deferred income tax charge of approximately $53.7 million to establish a valuation allowance against its Brazilian net deferred income tax assets. In addition, the Company maintains a valuation allowance to fully reserve its net deferred tax assets in the United States and certain 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 all adjustments to the valuation allowance were appropriate. In making this assessment, all available evidence was considered including the current economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the valuation allowance, in future years. The Company had net operating loss carryforwards of $236.4 million as of December 31, 2019, with expiration dates as follows: 2020 - $24.4 million; 2021 - $21.3 million; 2022 - $14.3 million and thereafter or unlimited - $176.4 million. The net operating loss carryforwards of $236.4 million are entirely in tax jurisdictions outside of the United States. The Company does not have any material U.S. state net operating loss carryforwards. The Company paid income taxes of $144.4 million, $101.6 million and $111.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company recognizes income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. At December 31, 2019 and 2018, the Company had $210.7 million and $166.1 million, respectively, of 64 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. At December 31, 2019 and 2018, the Company had approximately $51.0 million and $58.5 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 accrued approximately $1.8 million and $5.6 million of interest and penalties related to unrecognized tax benefits in its provision for income taxes during 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company had accrued interest and penalties related to unrecognized tax benefits of $28.4 million and $27.2 million, respectively. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits as of and during the years ended December 31, 2019 and 2018 is as follows (in millions): Gross unrecognized income tax benefits at the beginning of the year ....................................... $ Additions for tax positions of the current year ........................................................................... Additions for tax positions of prior years ................................................................................... Reductions for tax positions of prior years for: Changes in judgments .............................................................................................................. Settlements during the year ...................................................................................................... Lapses of applicable statute of limitations ............................................................................... Foreign currency translation..................................................................................................... Gross unrecognized income tax benefits at the end of the year ................................................. $ 2019 2018 166.1 $ 32.8 20.7 (4.6) (0.7) (0.8) (2.8) 210.7 $ 163.4 3.8 13.1 (1.6) (0.7) (4.4) (7.5) 166.1 The reconciliation of gross unrecognized tax benefits above for 2019 excludes certain indirect favorable effects that relate to other tax jurisdictions of approximately $44.9 million. The Company and its subsidiaries file income tax returns in the United States and in various state, local and foreign jurisdictions. The Company and its subsidiaries are routinely examined by tax authorities in these jurisdictions. As of December 31, 2019, a number of income tax examinations in foreign jurisdictions were ongoing. It is possible that certain of these ongoing examinations may be resolved within 12 months. Due to the potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized income tax benefits balance may materially change within the next 12 months. In certain foreign jurisdictions, there is either statutory expirations or our settlement expectations such that approximately $51.0 million could be concluded within the next 12 months. Although there are ongoing examinations in various federal and state jurisdictions, the 2016 through 2019 tax years generally remain subject to examination in the United States by applicable authorities. In the Company’s significant foreign jurisdictions, primarily the United Kingdom, France, Germany, Switzerland, Finland and Brazil, the 2014 through 2019 tax years generally remain subject to examination by their respective tax authorities. In Brazil, the Company is contesting disallowed deductions related to the amortization of certain goodwill amounts (see Note 12). 65 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 7. Indebtedness Long-term debt consisted of the following at December 31, 2019 and 2018 (in millions): Senior term loan due 2022(1)............................................................................................... $ Credit facility, expires 2023(1)............................................................................................. 1.002% Senior term loan due 2025..................................................................................... Senior term loans due between 2021 and 2028(1) ............................................................... 1.056% Senior term loan due 2020(1).................................................................................. Other long-term debt........................................................................................................... Debt issuance costs ............................................................................................................. Less: Current portion of other long-term debt.................................................................. Senior term loans due 2019 .................................................................................... Total indebtedness, less current portion.............................................................................. $ ____________________________________ (1) Maturity dates are reflected as of December 31, 2019. December 31, 2019 December 31, 2018 168.1 — 280.2 736.2 — 12.5 (2.3) 1,194.7 (2.9) — 1,191.8 $ $ 171.5 114.4 — 815.3 228.7 20.6 (2.6) 1,347.9 (8.8) (63.8) 1,275.3 At December 31, 2019, the aggregate scheduled maturities of long-term debt, excluding the current portion of long-term debt, are as follows (in millions): 2021.................................................................................................................................................................... $ 2022.................................................................................................................................................................... 2023.................................................................................................................................................................... 2024.................................................................................................................................................................... Thereafter ........................................................................................................................................................... 297.4 170.2 277.7 2.3 444.2 $ 1,191.8 Cash payments for interest were approximately $26.3 million, $35.2 million and $55.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. Current Indebtedness Senior Term Loan Due 2022 In October 2018, the Company entered in a term loan agreement with Rabobank in the amount of €150.0 million (or approximately $168.1 million as of December 31, 2019). The Company is permitted to prepay the term loan before its maturity date of 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 the Company’s credit rating. The Company also has to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio. Credit Facility In October 2018, the Company 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 the Company’s option, at either (1) LIBOR plus a margin ranging from 0.875% to 1.875% based on the Company’s 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 the Company’s credit rating. The credit facility contains 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. As of December 31, 2019, the Company had no outstanding borrowings under the credit facility and the ability to borrow approximately $800.0 million 66 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) under the facility. As of December 31, 2018, the Company had approximately $114.4 million of outstanding borrowings under the credit facility and the ability to borrow approximately $685.6 million under the facility. Interest on U.S. dollar borrowings under the Company's credit facility 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 also provides for an expedited amendment process once a replacement for LIBOR is established. The Company’s former revolving credit and term loan facility consisted of an $800.0 million multi-currency revolving credit facility and a €312.0 million term loan facility. The maturity date of the former credit facility was June 26, 2020. Under the former credit facility agreement, interest accrued on amounts outstanding, at the Company’s option, depending on the currency borrowed, at either (1) LIBOR or EURIBOR plus a margin ranging from 1.0% to 1.75% based on the Company’s leverage ratio, 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% based on the Company’s leverage ratio. The credit facility contained covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends, and was subject to acceleration in the event of a default. The Company also had to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage 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. In connection with the closing of new credit facility in October 2018, the Company repaid its outstanding €312.0 million (or approximately $360.8 million) term loan under the former revolving credit and term loan facility. The Company recorded approximately $0.9 million in “Interest expense, net,” associated with the write-off of deferred debt issuance costs associated with the repayment. The Company also recorded a loss of approximately $3.9 million which was recorded in “Interest expense, net” for the year ended December 31, 2018 associated with the termination of the interest rate swap instrument. 1.002% Senior Term Loan 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 $280.2 million as of December 31, 2019) of funding was received on January 25, 2019 with a maturity date of January 24, 2025. The Company is 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. The term loan contains covenants regarding, among other things, the incurrence of indebtedness and the making of certain payments, as well as commitments regarding amounts of future research and development expenses in Europe, and is subject to acceleration in the events of default. The Company also has to fulfill financial covenants with respect to a net leverage ratio and interest coverage ratio. Senior Term Loans Due Between 2021 and 2028 In October 2016, the Company borrowed an aggregate amount of €375.0 million through a group of seven related term loan agreements, and in August 2018, the Company borrowed an additional aggregate amount of €338.0 million through a group of another seven related term loan agreements. Of the 2016 term loans, an aggregate amount of €56.0 million (or approximately $61.1 million) was repaid upon maturity in October 2019. In aggregate, the Company has indebtedness of €657.0 million (or approximately $736.2 million as of December 31, 2019) through a group of twelve related term loan agreements. The provisions of the term loan agreements are substantially identical, with the exception of interest rate terms and maturities. The Company is permitted to prepay the term loans before their maturity dates. For the term loans with a fixed interest rate, interest is payable in arrears 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. The term loans contain covenants restricting, among other things, the incurrence of indebtedness and the making of certain payments, including dividends, and is subject to acceleration in the event of default. 67 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Former Indebtedness 1.056% Senior Term Loan In December 2014, the Company entered into a term loan with the EIB, which provided the Company with the ability to borrow up to €200.0 million. The €200.0 million of funding was received on January 15, 2015 and had a maturity date of January 15, 2020. The Company repaid the €200.0 million (or approximately $220.0 million) term loan in December 2019. Interest was payable on the term loan at 1.056% per annum, payable quarterly in arrears. The term loan contained covenants regarding, among other things, the incurrence of indebtedness and the making of certain payments, as well as commitments regarding amounts of future research and development expenses in Europe, and was subject to acceleration in the events of default. The Company also had to fulfill financial covenants with respect to a net leverage ratio and interest coverage ratio. Senior Term Loans Due 2021 In April 2016, the Company entered into two term loan agreements with Rabobank, in the amount of €100.0 million and €200.0 million, respectively. The provisions of the two term loans were identical in nature. In December 2017, the Company repaid its €200.0 million (or approximately $239.8 million) term loan and in October 2018, in connection with the term loan agreement due 2022 with Rabobank discussed above, the Company repaid its €100.0 million (or approximately $113.2 million) term loan. The Company had the ability to prepay the term loans before their maturity date on April 26, 2021. Interest was payable on the term loans per annum, paid quarterly in arrears, equal to the EURIBOR plus a margin ranging from 1.0% to 1.75% based on the Company’s net leverage ratio. The Company also had to fulfill financial covenants with respect to a total debt to EBITDA ratio and an interest coverage ratio. 57/8% Senior Notes The Company’s 57/8% senior notes due December 1, 2021 constituted senior unsecured indebtedness. Interest was payable on the notes semi-annually in arrears. At any time prior to September 1, 2021, the Company could 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 could 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. In May 2018, the Company completed a cash tender offer to purchase any and all of its outstanding 57/8% senior notes at a cash purchase price of $1,077.50 per $1,000.00 of senior notes. As a result of the tender offer, the Company repurchased approximately $185.9 million of principal amount of the senior notes for approximately $200.3 million, plus accrued interest. In October 2018, the Company repurchased the remaining principal amount of the senior notes of approximately $114.1 million for approximately $122.5 million, plus accrued interest. Both repurchases resulted in total losses on extinguishment of debt of approximately $24.5 million, including associated fees. As a result of the repurchase of the 57/8% senior notes, the Company recorded a cumulative amount of approximately $4.7 million of accelerated amortization of a deferred gain related to a terminated interest rate swap instrument associated with the senior notes. The losses on extinguishment as well as the accelerated amortization were reflected in “Interest expense, net,” for the year ended December 31, 2018. Short-Term Borrowings As of December 31, 2019 and 2018, the Company had short-term borrowings due within one year of approximately $150.5 million and $138.0 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 December 31, 2019 and 2018, outstanding letters of credit totaled $13.9 million and $14.1 million, respectively. 68 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8. Employee Benefit Plans The Company sponsors defined benefit pension plans covering certain employees, principally in the United Kingdom, the United States, Germany, Switzerland, Finland, France, Norway and Argentina. The Company also provides certain postretirement health care and life insurance benefits for certain employees, principally in the United States and Brazil. The Company also maintains an Executive Nonqualified Pension Plan (“ENPP”) that provides certain senior executives with retirement income for a period of 15 years or up to a lifetime annuity, if certain requirements are met. Benefits under the ENPP vest if the participant has attained age 50 and has at least ten years of service (including five years as a participant in the ENPP), but are not payable until the participant reaches age 65. The lifetime annuity benefit generally is available only to vested participants who retire on or after reaching age 65. The ENPP is an unfunded, nonqualified defined benefit pension plan. Net annual pension costs for the years ended December 31, 2019, 2018 and 2017 for the Company’s defined benefit pension plans and ENPP are set forth below (in millions): Pension benefits Service cost.............................................................................................. Interest cost.............................................................................................. Expected return on plan assets ................................................................ Amortization of net actuarial losses ........................................................ Amortization of prior service cost........................................................... Net loss recognized due to settlement ..................................................... Net annual pension cost........................................................................... $ $ 2019 2018 2017 $ 15.5 20.7 (28.1) 14.3 1.6 0.5 $ 16.6 19.9 (34.0) 13.8 1.2 0.9 24.5 $ 18.4 $ 17.1 20.6 (35.9) 13.4 1.2 0.2 16.6 The components of net periodic pension and postretirement benefits cost, other than the service cost component, are included in “Other expense, net” in the Company’s Consolidated Statements of Operations. The weighted average assumptions used to determine the net annual pension costs for the Company’s defined benefit pension plans and ENPP for the years ended December 31, 2019, 2018 and 2017 are as follows: 2019 2018 2017 All plans: Weighted average discount rate .............................................................. Weighted average expected long-term rate of return on plan assets....... Rate of increase in future compensation................................................. 2.8% 4.6% 2.5% 5.4% 2.7% 5.8% 1.8%-5.0% 1.8%-5.0% 1.5%-5.0% U.S.-based plans: Weighted average discount rate .............................................................. Weighted average expected long-term rate of return on plan assets(1).... Rate of increase in future compensation(2).............................................. 4.35% 5.5% 5.0% 3.70% 6.0% 5.0% 4.25% 6.0% 5.0% ___________________________________ (1) Applicable for U.S. funded, qualified plans. (2) Applicable for U.S. unfunded, nonqualified plan. For the Company’s Swiss cash balance plan, the interest crediting rate of 1.0% for both 2019 and 2018 was set equal to the current annual minimum rate set by the government for the mandatory portion of the account balance. Amounts above that have an interest crediting rate of 0.25%. 69 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Net annual postretirement benefit costs, and the weighted average discount rate used to determine them, for the years ended December 31, 2019, 2018 and 2017 are set forth below (in millions, except percentages): Postretirement benefits Service cost.............................................................................................. Interest cost.............................................................................................. Amortization of net actuarial losses ........................................................ Amortization of prior service cost........................................................... Net annual postretirement benefit cost .................................................... $ $ 2019 2018 2017 0.1 1.3 — 0.1 1.5 $ $ 0.1 1.4 0.1 0.2 1.8 $ $ 0.1 1.4 0.1 0.2 1.8 Weighted average discount rate............................................................... 5.2% 4.9% 5.3% 70 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables set forth reconciliations of the changes in benefit obligation, plan assets and funded status as of December 31, 2019 and 2018 (in millions): Change in benefit obligation Benefit obligation at beginning of year ..................... Service cost ................................................................ Interest cost ................................................................ Plan participants’ contributions.................................. Actuarial losses (gains) .............................................. Amendments .............................................................. Settlements................................................................. Benefits paid .............................................................. Other .......................................................................... Foreign currency exchange rate changes ................... Benefit obligation at end of year................................ Change in plan assets Fair value of plan assets at beginning of year............ Actual return on plan assets ....................................... Employer contributions.............................................. Plan participants’ contributions.................................. Benefits paid .............................................................. Settlements................................................................. Foreign currency exchange rate changes ................... Fair value of plan assets at end of year ...................... Funded status ............................................................. Unrecognized net actuarial losses (gains).................. Unrecognized prior service cost................................. Accumulated other comprehensive loss..................... Net amount recognized .............................................. Amounts recognized in Consolidated Balance Sheets: Other long-term asset................................................. Other current liabilities .............................................. Accrued expenses....................................................... Pensions and postretirement health care benefits (noncurrent)................................................................ Net amount recognized .............................................. $ $ $ $ $ $ $ Pension and ENPP Benefits 2019 2018 Postretirement Benefits 2018 2019 $ 823.1 $ 916.7 $ 25.3 $ 15.5 20.7 1.2 83.3 4.7 (0.8) (44.8) — 14.4 917.3 $ 16.6 19.9 1.2 (55.2) 8.5 (1.5) (45.9) 1.9 (39.1) 823.1 Pension and ENPP Benefits 2019 2018 30.2 0.1 1.4 — (4.2) — — (1.4) — (0.8) 25.3 0.1 1.3 — 4.5 — — (1.5) — (0.3) 29.4 $ Postretirement Benefits 2018 2019 — $ — 1.5 — (1.5) — — — $ (29.4) $ 3.9 3.0 (6.9) (29.4) $ — $ (1.6) — (27.8) (29.4) $ — — 1.4 — (1.4) — — — (25.3) (0.6) 3.1 (2.5) (25.3) — (1.5) — (23.8) (25.3) $ $ 691.8 (32.4) 36.8 1.2 (45.9) (1.5) (32.9) 617.1 $ (206.0) $ 356.7 19.5 (376.2) (206.0) $ 617.1 $ 91.2 30.6 1.2 (44.8) (0.8) 16.5 711.0 $ (206.3) $ 362.2 22.5 (384.7) (206.3) $ $ 6.2 (4.9) (3.3) $ 0.1 (3.8) (2.9) (204.3) (206.3) $ (199.4) (206.0) $ 71 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the activity in accumulated other comprehensive loss related to the Company’s ENPP and defined pension and postretirement benefit plans during the years ended December 31, 2019 and 2018 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated other comprehensive loss as of December 31, 2017 ......... Prior service cost arising during the year ................................................ Net loss recognized due to settlement ..................................................... Net actuarial loss arising during the year ................................................ Amortization of prior service cost........................................................... Amortization of net actuarial losses ........................................................ Accumulated other comprehensive loss as of December 31, 2018 ......... Prior service cost arising during the year ................................................ Net loss recognized due to settlement ..................................................... Net actuarial loss arising during the year ................................................ Amortization of prior service cost........................................................... Amortization of net actuarial losses ........................................................ Accumulated other comprehensive loss as of December 31, 2019 ......... $ $ $ (380.6) $ (8.5) 1.0 (7.0) 1.4 13.9 (379.8) $ (4.7) 0.6 (25.3) 1.7 14.3 (393.2) $ (95.5) $ (1.5) 0.1 (2.8) 0.1 2.2 (97.4) $ — — (2.0) 0.1 2.5 (96.8) $ (285.1) (7.0) 0.9 (4.2) 1.3 11.7 (282.4) (4.7) 0.6 (23.3) 1.6 11.8 (296.4) The unrecognized net actuarial losses included in accumulated other comprehensive loss related to the Company’s defined benefit pension plans and ENPP as of December 31, 2019 and 2018 are set forth below (in millions): Unrecognized net actuarial losses........................................................................................... $ 362.2 $ 356.7 2019 2018 The increase in unrecognized net actuarial losses between years primarily resulted from lower discount rates at December 31, 2019 compared to December 31, 2018. The unrecognized net actuarial losses will be impacted in future periods by actual asset returns, discount rate changes, currency exchange rate fluctuations, actual demographic experience and certain other factors. For some of the Company’s defined benefit pension plans, these losses, to the extent they exceed 10% of the greater of the plan’s liabilities or the fair value of assets (“the gain/loss corridor”), will be amortized on a straight-line basis over the periods discussed as follows. For the Company’s U.S. salaried, U.S. hourly and U.K. defined benefit pension plans, the population covered is predominantly inactive participants, and losses related to those plans, to the extent they exceed the gain/loss corridor, will be amortized over the average remaining lives of those participants while covered by the respective plan. For the Company’s ENPP, the population is predominantly active participants, and losses related to the plan will be amortized over the average future working lifetime of the active participants expected to receive benefits. As of December 31, 2019, the average amortization periods were as follows: Average amortization period of losses related to defined benefit pension plans........ 7 years 15 years 19 years ENPP U.S. Plans U.K. Plan The following table summarizes the unrecognized prior service cost related to the Company's defined benefit pension plans as of December 31, 2019 and 2018 (in millions): Unrecognized prior service cost ............................................................................................. $ 22.5 $ 19.5 2019 2018 The increase in the unrecognized prior service cost between years is due primarily to a plan amendment related to the Company's ENPP. 72 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the unrecognized net actuarial losses (gains) included in the Company's accumulated other comprehensive loss related to the Company’s U.S. and Brazilian postretirement health care benefit plans as of December 31, 2019 and 2018 (in millions): 2019 2018 Unrecognized net actuarial losses (gains)(1)............................................................................ $ ___________________________________ (1) Includes a loss of approximately $1.6 million and $0.3 million, respectively, related to the Company’s U.S. postretirement benefit plans. 3.9 $ (0.6) The increase in unrecognized net actuarial losses related to the Company’s U.S. and Brazilian postretirement benefit unrecognized net actuarial gains or losses will be impacted in future periods by discount rate changes, actual demographic plans was primarily due to lower discount rates as of December 31, 2019 as compared to December 31, 2018. The experience, actual health care inflation and certain other factors. These gains or losses, to the extent they exceed the gain/loss corridor, will be amortized on a straight-line basis over the average remaining service period of active employees expected to receive benefits, or the average remaining lives of inactive participants, covered under the postretirement benefit plans. As of December 31, 2019, the average amortization period was 12 years for the Company’s U.S. postretirement benefit plans. As of December 31, 2019 and 2018, the net prior service cost related to the Company’s U.S. and Brazilian postretirement health care benefit plans was as follows (in millions): Net prior service cost .............................................................................................................. $ 3.0 $ 3.1 2019 2018 The following table summarizes the fair value of plan assets, aggregate projected benefit obligation and accumulated benefit obligation as of December 31, 2019 and 2018 for defined benefit pension plans, ENPP and other postretirement plans with accumulated benefit obligations in excess of plan assets (in millions): All plans: Fair value of plan assets ....................................................................................................... $ Projected benefit obligation ................................................................................................. Accumulated benefit obligation ........................................................................................... U.S.-based plans and ENPP: Fair value of plan assets ....................................................................................................... $ Projected benefit obligation ................................................................................................. Accumulated benefit obligation ........................................................................................... 2019 2018 67.8 $ 309.3 275.2 38.3 $ 172.5 151.9 616.0 847.3 798.5 36.8 145.6 128.7 The amounts for 2019 disclosed above do not include the fair value of plan assets, the projected benefit obligation or the accumulated benefit obligation related to the Company's U.K. plan. The 2018 amounts disclosed above do include balances related to the Company's U.K. plan. The Company’s U.K. plan's fair value of plan assets was in excess of the plan’s accumulated benefit obligation as of December 31, 2019. 73 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company’s accumulated comprehensive loss as of December 31, 2019 and 2018 reflects a reduction in equity related to the following items (in millions): 2019 2018 All plans:(1) Reduction in equity, net of taxes of $96.3 and $97.0 at December 31, 2019 and 2018, respectively.. $ 391.6 $ 378.7 GIMA joint venture:(2) Reduction in equity, net of taxes of $0.5 and $0.4 at December 31, 2019 and 2018, respectively...... 1.6 1.1 ______________________________________ (1) Primarily related to the Company’s U.K. pension plan. (2) These amounts represented 50% of GIMA’s unrecognized net actuarial losses and unrecognized prior service cost associated with its pension plan. In addition, GIMA recognized a net actuarial loss due to settlements of approximately $0.1 million during both 2019 and 2018. The Company’s defined benefit pension obligation has been reflected based on the manner in which its defined benefit plans are being administered. The obligation and resulting liability is calculated employing both actuarial and legal assumptions. These assumptions include, but are not limited to, future inflation, the return on pension assets, discount rates, life expectancy and potential salary increases. There are also assumptions related to the manner in which individual benefit plan benefits are calculated, some of which are legal in nature and include, but are not limited to, member eligibility, years of service and the uniformity of both guaranteed minimum pension benefits and member normal retirement ages for men and women. Some of these assumptions also are subject to the outcome of certain legal cases, which are currently unknown. In the event that any of these assumptions or the administration approach are proven to be different from the Company’s current interpretations and approach, there could be material increases in the Company’s defined benefit pension obligation and the related amounts and timing of future contributions to be paid by the Company. The weighted average assumptions used to determine the benefit obligation for the Company’s defined benefit pension plans and ENPP as of December 31, 2019 and 2018 are as follows: All plans: Weighted average discount rate............................................................................................ Rate of increase in future compensation .............................................................................. 2.0% 2.8% 1.75%-5.0% 1.75%-5.0% U.S.-based plans: Weighted average discount rate............................................................................................ Rate of increase in future compensation(1) ........................................................................... 3.45% 5.0% 4.35% 5.0% 2019 2018 ____________________________________ (1) Applicable for U.S. unfunded, nonqualified plan. The weighted average discount rate used to determine the benefit obligation for the Company’s postretirement benefit plans for the years ended December 31, 2019 and 2018 was 4.5% and 5.2%, respectively. For the years ended December 31, 2019, 2018 and 2017, the Company used a globally consistent methodology to set the discount rate in the countries where its largest benefit obligations exist. In the United States, the United Kingdom and the Euro Zone, the Company constructed a hypothetical bond portfolio of high-quality corporate bonds and then applied the cash flows of the Company’s benefit plans to those bond yields to derive a discount rate. The bond portfolio and plan-specific cash flows vary by country, but the methodology in which the portfolio is constructed is consistent. In the United States, the bond portfolio is large enough to result in taking a “settlement approach” to derive the discount rate, in which high-quality corporate bonds are assumed to be purchased and the resulting coupon payments and maturities are used to satisfy the Company’s U.S. pension plans’ projected benefit payments. In the United Kingdom and the Euro Zone, the discount rate is derived using a “yield curve approach,” in which an individual spot rate, or zero coupon bond yield, for each future annual period is developed to discount each future benefit payment and, thereby, determine the present value of all future payments. The Company uses a spot yield curve to determine the discount rate applicable in the United Kingdom to measure the U.K. pension plan’s service cost and interest cost. Under the settlement and yield curve approaches, the discount rate is set to equal the single discount rate that produces the same present value of all future payments. For measuring the expected U.S. postretirement benefit obligation at December 31, 2019, the Company assumed a 6.25% health care cost trend rate for 2020 decreasing to 5.0% by 2025. For measuring the expected U.S. postretirement benefit 74 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) obligation at December 31, 2018, the Company assumed a 6.50% health care cost trend rate for 2019 decreasing to 5.0% by 2025. For measuring the Brazilian postretirement benefit plan obligation at December 31, 2019, the Company assumed a 10.55% health care cost trend rate for 2020, decreasing to 4.8% by 2031. For measuring the Brazilian postretirement benefit plan obligation at December 31, 2018, the Company assumed a 10.8% health care cost trend rate for 2019, decreasing to 5.0% by 2030. The Company currently estimates its minimum contributions and benefit payments to its U.S.-based underfunded defined benefit pension plans and unfunded ENPP for 2020 will aggregate approximately $3.6 million. The Company currently estimates its minimum contributions for underfunded plans and benefit payments for unfunded plans for 2020 to its non-U.S.-based defined benefit pension plans will aggregate approximately $30.0 million, of which approximately $20.2 million relates to its U.K. pension plan. The Company currently estimates its benefit payments for 2020 to its U.S.-based postretirement health care and life insurance benefit plans will aggregate approximately $1.6 million and its benefit payments for 2020 to its Brazilian postretirement health care benefit plans will aggregate less than $0.1 million. During 2019, approximately $45.6 million of benefit payments were made related to the Company’s defined benefit pension plans and ENPP. At December 31, 2019, the aggregate expected benefit payments for the Company’s defined benefit pension plans and ENPP are as follows (in millions): 2020...................................................................................................................................................................... $ 2021...................................................................................................................................................................... 2022...................................................................................................................................................................... 2023...................................................................................................................................................................... 2024...................................................................................................................................................................... 2025 through 2029 ............................................................................................................................................... $ 47.0 49.7 50.3 50.3 51.0 278.3 526.6 During 2019, approximately $1.5 million of benefit payments were made related to the Company’s U.S. and Brazilian postretirement benefit plans. At December 31, 2019, the aggregate expected benefit payments for the Company’s U.S. and Brazilian postretirement benefit plans are as follows (in millions): 2020...................................................................................................................................................................... $ 2021...................................................................................................................................................................... 2022...................................................................................................................................................................... 2023...................................................................................................................................................................... 2024...................................................................................................................................................................... 2025 through 2029 ............................................................................................................................................... $ 1.6 1.7 1.7 1.7 1.7 8.6 17.0 Investment Strategy and Concentration of Risk The weighted average asset allocation of the Company’s U.S. pension benefit plans as of December 31, 2019 and 2018 are as follows: Asset Category Equity securities .................................................................................................................... Fixed income securities......................................................................................................... Other investments ................................................................................................................. Total....................................................................................................................................... 2019 2018 34% 59% 7% 100% 27% 57% 16% 100% 75 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The weighted average asset allocation of the Company’s non-U.S. pension benefit plans as of December 31, 2019 and 2018 are as follows: Asset Category Equity securities .................................................................................................................... Fixed income securities......................................................................................................... Other investments ................................................................................................................. Total....................................................................................................................................... 2019 2018 39% 54% 7% 100% 39% 54% 7% 100% The Company categorizes its pension plan assets into one of three levels based on the assumptions used in valuing the asset. See Note 13 for a discussion of the fair value hierarchy as per the guidance in ASC 820, “Fair Value Measurements” (“ASC 820”). The Company’s valuation techniques are designed to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses the following valuation methodologies to measure the fair value of its pension plan assets: • Equity Securities: Equity securities are valued on the basis of the closing price per unit on each business day as reported on the applicable exchange. Equity funds are valued using the net asset value of the fund, which is based on the fair value of the underlying securities. • Fixed Income: Fixed income securities are valued using the closing prices in the active market in which the fixed income investment trades. Fixed income funds are valued using the net asset value of the fund, which is based on the fair value of the underlying securities. • Cash: These investments primarily consist of short-term investment funds which are valued using the net asset value. • Alternative Investments: These investments are reported at fair value as determined by the general partner of the alternative investment. The “market approach” valuation technique is used to value investments in these funds. The funds typically are open-end funds as they generally offer subscription and redemption options to investors. The frequency of such subscriptions or redemptions is dictated by each fund’s governing documents. The amount of liquidity provided to investors in a particular fund generally is consistent with the liquidity and risk associated with the underlying portfolio (i.e., the more liquid the investments in the portfolio, the greater the liquidity provided to investors). Liquidity of individual funds varies based on various factors and may include “gates,” “holdbacks” and “side pockets” imposed by the manager of the fund, as well as redemption fees that may also apply. Investments in these funds typically are valued utilizing the net asset valuations provided by their underlying investment managers, general partners or administrators. The funds consider subscription and redemption rights, including any restrictions on the disposition of the interest, in its determination of the fair value. • Insurance Contracts: Insurance contracts are valued using current prevailing interest rates. 76 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of the Company’s pension assets as of December 31, 2019 is as follows (in millions): Total Level 1 Level 2 Level 3 Equity securities: Global equities .......................................................... $ Non-U.S. equities ...................................................... U.K. equities ............................................................. U.S. large cap equities............................................... U.S. small cap equities .............................................. Total equity securities........................................... Fixed income: Aggregate fixed income ............................................ International fixed income ........................................ Total fixed income share(1) .................................. Alternative investments: Private equity fund .................................................... Hedge funds measured at net asset value(4)............... Total alternative investments(2)............................. Miscellaneous funds(3) ................................................. Cash and equivalents measured at net asset value(4).... 183.4 $ 116.5 $ 66.9 $ 3.8 65.2 5.9 3.4 261.7 150.1 220.0 370.1 2.3 33.3 35.6 30.8 12.8 3.8 65.2 5.9 3.4 194.8 150.1 220.0 370.1 — — — — — — — — — 66.9 — — — — — — — — Total assets ........................................................... $ 711.0 $ 564.9 $ 66.9 $ — — — — — — — — — 2.3 — 2.3 30.8 — 33.1 ______________________________________ (1) 43% of “fixed income” securities are in investment-grade corporate bonds; 18% are in government treasuries; 14% are in high-yield securities; 10% are in foreign securities; 9% are in asset-backed and mortgage-backed securities; and 6% are in other various fixed income securities. (2) 42% of “alternative investments” are in relative value funds; 24% are in long-short equity funds; 21% are in event-driven funds; 7% are distributed in hedged and non-hedged funds; and 6% are in credit funds. (3) “Miscellaneous funds” is comprised of insurance contracts in Finland, Norway and Switzerland. (4) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The following is a reconciliation of Level 3 assets as of December 31, 2019 (in millions): Beginning balance as of December 31, 2018............................................ $ Actual return on plan assets: (a) Relating to assets still held at reporting date..................................... (b) Relating to assets sold during period ................................................ Purchases, sales and /or settlements.......................................................... Foreign currency exchange rate changes .................................................. Ending balance as of December 31, 2019................................................. $ Total Alternative Investments Miscellaneous Funds 30.5 $ 2.3 $ 28.2 1.9 — 1.3 (0.6) 33.1 $ (0.1) — 0.1 — 2.3 $ 2.0 — 1.2 (0.6) 30.8 77 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of the Company’s pension assets as of December 31, 2018 is as follows (in millions): Total Level 1 Level 2 Level 3 Equity securities: Global equities .......................................................... $ Non-U.S. equities ...................................................... U.K. equities ............................................................. U.S. large cap equities............................................... U.S. small cap equities .............................................. Preferred securities.................................................... Total equity securities........................................... Fixed income: Aggregate fixed income ............................................ International fixed income ........................................ Total fixed income share(1) .................................. Alternative investments: Private equity fund .................................................... Hedge funds measured at net asset value(4)............... Total alternative investments(2)............................. Miscellaneous funds(3) ................................................. Cash and equivalents measured at net asset value(4).... 104.4 $ 104.4 $ — $ 3.0 112.4 4.5 2.4 0.2 226.9 131.5 189.3 320.8 2.3 31.8 34.1 28.2 7.1 3.0 112.4 4.5 2.4 0.2 226.9 131.5 189.3 320.8 — — — — — — — — — — — — — — — — — — Total assets ........................................................... $ 617.1 $ 547.7 $ — $ — — — — — — — — — 2.3 — 2.3 28.2 — 30.5 _______________________________________ (1) 36% of “fixed income” securities are in investment-grade corporate bonds; 27% are in government treasuries; 17% are in foreign securities; 13% are in high-yield securities; and 7% are in other various fixed income securities. (2) 44% of “alternative investments” are in relative value funds; 22% are in long-short equity funds; 22% are in event-driven funds; 7% are distributed in hedged and non-hedged funds; and 5% are in credit funds. (3) “Miscellaneous funds” is comprised of insurance contracts in Finland, Norway and Switzerland. (4) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The following is a reconciliation of Level 3 assets as of December 31, 2018 (in millions): Beginning balance as of December 31, 2017............................................ $ Actual return on plan assets: (a) Relating to assets still held at reporting date..................................... (b) Relating to assets sold during period ................................................ Purchases, sales and /or settlements.......................................................... Foreign currency exchange rate changes .................................................. Ending balance as of December 31, 2018................................................. $ Total Alternative Investments Miscellaneous Funds 27.8 $ 2.4 $ 25.4 0.8 — 3.2 (1.3) 30.5 $ (0.2) — 0.1 — 2.3 $ 1.0 — 3.1 (1.3) 28.2 All tax-qualified pension fund investments in the United States are held in the AGCO Corporation Master Pension Trust. The Company’s global pension fund strategy is to diversify investments across broad categories of equity and fixed income securities with appropriate use of alternative investment categories to minimize risk and volatility. The primary investment objective of the Company’s pension plans is to secure participant retirement benefits. As such, the key objective in the pension plans’ financial management is to promote stability and, to the extent appropriate, growth in funded status. The investment strategy for the plans’ portfolio of assets balances the requirement to generate returns with the need to control risk. The asset mix is recognized as the primary mechanism to influence the reward and risk structure of the pension fund investments in an effort to accomplish the plans’ funding objectives. The overall investment strategies and target 78 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) allocations of retirement fund investments for the Company’s U.S.-based pension plans and the non-U.S. based pension plans are as follow: Overall investment strategies(2): Assets for the near-term benefit payments ........................................................................... Assets for longer-term growth.............................................................................................. Total ................................................................................................................................... Target allocations: Equity securities ................................................................................................................... Fixed income securities........................................................................................................ Alternative investments........................................................................................................ Cash and cash equivalents.................................................................................................... Total ................................................................................................................................... U.S. Pension Plans Non-U.S. Pension Plans(1) 60.0% 40.0% 100.0% 30.0% 55.0% 10.0% 5.0% 100.0% 55.0% 45.0% 100.0% 40.0% 55.0% 5.0% —% 100.0% _______________________________________ (1) The majority of the Company’s non-U.S. pension fund investments are related to the Company’s pension plan in the United Kingdom. (2) The overall U.S. and non-U.S. pension funds invest in a broad diversification of assets types. The Company has noted that over very long periods, this mix of investments would achieve an average return on its U.S.-based pension plans of approximately 5.50%. In arriving at the choice of an expected return assumption of 5.0% for its U.S. plans for the year ended December 31, 2020, the Company has tempered this historical indicator with lower expectations for returns and changes to investments in the future as well as the administrative costs of the plans. The Company has noted that over very long periods, this mix of investments would achieve an average return on its non-U.S. based pension plans of approximately 4.75%. In arriving at the choice of an expected return assumption of 4.25% for its U.K.-based plans for the year ended December 31, 2020, the Company has tempered this historical indicator with lower expectations for returns and changes to investments in the future as well as the administrative costs of the plans. Equity securities primarily include investments in large-cap and small-cap companies located across the globe. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, agency mortgages, asset-backed securities and government securities. Alternative and other assets include investments in hedge fund of funds that follow diversified investment strategies. To date, the Company has not invested pension funds in its own stock and has no intention of doing so in the future. Within each asset class, careful consideration is given to balancing the portfolio among industry sectors, geographies, interest rate sensitivity, dependence on economic growth, currency and other factors affecting investment returns. The assets are managed by professional investment firms, who are bound by precise mandates and are measured against specific benchmarks. Among asset managers, consideration is given, among others, to balancing security concentration, issuer concentration, investment style and reliance on particular active investment strategies. The Company participates in a small number of multiemployer plans in the Netherlands and Sweden. The Company has assessed and determined that none of the multiemployer plans which it participates in are individually, or in the aggregate, significant to the Company’s Consolidated Financial Statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contributions over the remainder of the multiemployer plans’ contract periods. The Company maintains separate defined contribution plans covering certain employees, primarily in the United States, the United Kingdom and Brazil. Under the plans, the Company contributes a specified percentage of each eligible employee’s compensation. The Company contributed approximately $15.8 million for both the years ended December 31, 2019 and 2018, and approximately $15.1 million for the year ended December 31, 2017. 79 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 9. Stockholders’ Equity Common Stock At December 31, 2019, the Company had 150,000,000 authorized shares of common stock with a par value of $0.01 per share, with approximately 75,471,562 shares of common stock outstanding and approximately 3,581,614 shares reserved for issuance under the Company’s 2006 Long-Term Incentive Plan (the “Plan”) (See Note 10). Share Repurchase Program During 2019 and 2018, the Company repurchased 1,794,256 and 3,120,184 shares of its common stock, respectively, for approximately $130.0 million and $184.3 million, respectively, either through Accelerated Share Repurchase (“ASR”) agreements with financial institutions or through open market transactions. All shares received were retired upon receipt, and the excess of the purchase price over par value per share was recorded to a combination of “Additional paid-in capital” and “Retained earnings” within the Company’s Consolidated Balance Sheets. As of December 31, 2019, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $300.0 million, which has no expiration date. In February 2020, the Company entered into an ASR agreement with a financial institution to repurchase an aggregate of $25.0 million of shares of its common stock. The Company received approximately 297,000 shares to date in this transaction. Upon settlement of the ASR, the Company may be entitled to receive additional shares of common stock or, under certain circumstances, be required to remit a settlement amount. The Company expects that the additional shares will be received by the Company upon final settlement of its current ASR agreement, which expires during the second quarter of 2020. Dividends The Company’s Board of Directors has declared and the Company has paid quarterly cash dividends per common share generally beginning in the first quarter of the following years: Dividends declared and paid per common share................................................... $ 0.15 $ 0.15 $ 0.14 ____________________________________ (1) The Company's Board of Directors has declared and the Company has paid quarterly cash dividends of $0.16 per common share beginning in the second quarter of 2019, from $0.15 per common share in the first quarter of 2019. 2019(1) 2018 2017 On January 23, 2020, the Company’s Board of Directors approved a quarterly dividend of $0.16 per common share beginning in the first quarter of 2020. 80 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accumulated Other Comprehensive Loss 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 years ended December 31, 2019 and 2018 (in millions): Defined Benefit Pension Plans Cumulative Translation Adjustment Deferred Net Gains (Losses) on Derivatives Total Accumulated other comprehensive loss, December 31, 2017......................................... $ Other comprehensive loss before reclassifications ....................................... Net losses reclassified from accumulated other comprehensive loss ........................ Other comprehensive income (loss), net of reclassification adjustments ............................ Accumulated other comprehensive loss, December 31, 2018......................................... Other comprehensive loss before reclassifications ....................................... Net losses (gains) reclassified from accumulated other comprehensive loss ... Other comprehensive loss, net of reclassification adjustments ............................ Accumulated other comprehensive loss, December 31, 2019......................................... $ (285.1) $ (1,071.8) $ (4.7) $ (1,361.6) (10.3) (202.6) (1.1) (214.0) 13.0 2.7 — (202.6) (282.4) (1,274.4) (27.4) 13.4 (14.0) (23.1) — (23.1) 7.2 6.1 1.4 (2.6) (0.1) (2.7) 20.2 (193.8) (1,555.4) (53.1) 13.3 (39.8) (296.4) $ (1,297.5) $ (1.3) $ (1,595.2) 81 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table sets forth reclassification adjustments out of accumulated other comprehensive loss by component attributed to AGCO Corporation and its subsidiaries for the years ended December 31, 2019 and 2018 (in millions): Details about Accumulated Other Comprehensive Loss Components Year ended December 31, 2019(1) Year ended December 31, 2018(1) Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item within the Consolidated Statements of Operations Derivatives: Net (gains) losses on foreign currency contracts ......................................................... Net losses on interest rate swap contract....... Reclassification before tax ................................ $ Reclassification net of tax ................................. $ Defined benefit pension plans: Amortization of net actuarial losses............... Amortization of prior service cost ................. Reclassification before tax ................................ $ Reclassification net of tax ................................. $ (0.1) $ — (0.1) — (0.1) $ 14.3 $ 1.7 16.0 (2.6) 13.4 $ 2.3 Cost of goods sold 6.3 Interest expense, net 8.6 (1.4) 7.2 Income tax provision 13.9 Other expense, net(2) 1.4 Other expense, net(2) 15.3 (2.3) 13.0 Income tax provision Net losses reclassified from accumulated other comprehensive loss ........................................ $ 13.3 $ 20.2 ____________________________________ (1) (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension and postretirement benefit cost. See (Gains) losses included within the Consolidated Statements of Operations for the years ended December 31, 2019 and 2018, respectively. Note 8 to the Company’s Consolidated Financial Statements. 82 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 10. Stock Incentive Plan Under the Plan, up to 10,000,000 shares of AGCO common stock may be issued. As of December 31, 2019, approximately 3,581,614 shares remained available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed below. The 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 Company’s primary long-term incentive plan is a performance share plan that provides for awards of shares of the Company’s common stock based on achieving financial targets, such as targets for earnings per share, return on invested capital and operating margins, as determined by the Company’s Board of Directors. The stock awards under the Plan are earned over a performance period, and the number of shares earned is determined based on annual cumulative or average results for the specified period, depending on the measurement. Performance periods for the Company’s primary long-term incentive plan are consecutive and overlapping three-year cycles, and performance targets are set at the beginning of each cycle. The primary long-term incentive plan provides for participants to earn 33% to 200% of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Awards earned under the Plan are paid in shares of common stock at the end of each three-year performance period. The percentage level achievement is determined annually, with the ultimate award that is earned determined based upon the average of the three annual percentages. The compensation expense associated with these awards 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. Compensation expense recorded during 2019, 2018 and 2017 with respect to awards granted was based upon the stock price as of the grant date. The weighted average grant-date fair value of performance awards granted under the Plan during 2019, 2018 and 2017 was as follows: Years Ended December 31, 2019 2018 2017 Weighted average grant-date fair value ............................................ $ 61.01 $ 71.40 $ 61.94 During 2019, the Company granted 542,180 performance awards related to varying performance periods. The awards granted assume the maximum target levels of performance are achieved. The compensation expense associated with all awards granted under the 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. Performance award transactions during 2019 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan: Shares awarded but not earned at January 1...................................................................................................... Shares awarded.................................................................................................................................................. Shares forfeited.................................................................................................................................................. Shares earned..................................................................................................................................................... Shares awarded but not earned at December 31................................................................................................ 938,862 542,180 (45,346) (503,514) 932,182 Based on the level of performance achieved as of December 31, 2019, 492,314 shares were earned under the related performance period and 302,009 shares were issued in February 2020, net of 190,305 shares that were withheld for taxes related to the earned awards. The Plan allows for the participant to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the participant’s statutory minimum federal, state and employment taxes which would be payable at the time of grant. During 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. 83 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) As of December 31, 2019, 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, was approximately $24.0 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years. This estimate is based on the current projected levels of performance of outstanding awards. The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance. Restricted Stock Units During the year ended December 31, 2019, the Company granted 165,160 restricted stock unit (“RSU”) awards. These awards entitle the participant to receive one share of the Company’s common stock for each RSU granted and vest one-third per year over a three-year requisite service 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 Plan during the years ended December 31, 2019, 2018 and 2017 were $61.01, $63.99 and $61.99, respectively. RSU transactions during the year ended December 31, 2019 were as follows: Shares awarded but not vested at January 1 ....................................................................................................... Shares awarded................................................................................................................................................... Shares forfeited .................................................................................................................................................. Shares vested ...................................................................................................................................................... Shares awarded but not vested at December 31 ................................................................................................. 352,975 165,160 (8,424) (113,182) 396,529 As of December 31, 2019, the total compensation cost related to the unvested RSUs not yet recognized was approximately $12.6 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years. Stock-settled Appreciation Rights Certain executives and key managers are eligible to receive grants of SSARs. The SSARs provide a participant with the right to receive the aggregate appreciation in stock price over the market price of the Company’s common stock at the date of grant, payable in shares of the Company’s common stock. The participant may exercise his or her SSARs at any time after the grant is vested but no later than seven years after the date of grant. The SSARs vest ratably over a four-year period from the date of grant. SSAR awards made to certain executives and key managers under the Plan are made with the base price equal to the price of the Company’s common stock on the date of grant. The Company recorded stock compensation expense of approximately $2.4 million, $2.4 million and $3.0 million associated with SSAR awards during 2019, 2018 and 2017, respectively. The compensation expense associated with these awards is being amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option pricing model. The weighted average grant-date fair value of SSAR awards granted under the Plan and the weighted average assumptions under the Black-Scholes option model were as follows for the years ended December 31, 2019, 2018 and 2017: Weighted average grant-date fair value............................................... $ Weighted average assumptions under Black-Scholes option model: Expected life of awards (years)........................................................... Risk-free interest rate .......................................................................... Expected volatility .............................................................................. Expected dividend yield...................................................................... Years Ended December 31, 2019 2018 2017 11.34 $ 12.88 $ 11.45 3.0 2.6% 24.2% 1.0% 3.0 2.2% 23.7% 0.8% 3.0 1.5% 25.9% 0.9% 84 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) SSAR transactions during the year ended December 31, 2019 were as follows: SSARs outstanding at January 1 ........................................................................................................................ SSARs granted ................................................................................................................................................... SSARs exercised ................................................................................................................................................ SSARs canceled or forfeited .............................................................................................................................. SSARs outstanding at December 31 .................................................................................................................. SSAR price ranges per share: 1,099,592 243,600 (562,030) (21,487) 759,675 Granted............................................................................................................................................................. $ Exercised.......................................................................................................................................................... Canceled or forfeited........................................................................................................................................ 62.85 43.88 - 73.14 43.88 - 73.14 Weighted average SSAR exercise prices per share: Granted............................................................................................................................................................. $ Exercised.......................................................................................................................................................... Canceled or forfeited........................................................................................................................................ Outstanding at December 31............................................................................................................................ 62.85 50.73 62.56 61.30 At December 31, 2019, the weighted average remaining contractual life of SSARs outstanding was approximately 4.6 years. As of December 31, 2019, the total compensation cost related to unvested SSARs not yet recognized was approximately $3.9 million and the weighted-average period over which it is expected to be recognized is approximately two and one-half years. The following table sets forth the exercise price range, number of shares, weighted average exercise price, and remaining contractual lives by groups of similar price as of December 31, 2019: Range of Exercise Prices $43.88 - $55.23 $62.85 - $73.14 Number of Shares 175,825 583,850 759,675 SSARs Outstanding SSARs Exercisable Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Exercisable as of December 31, 2019 Weighted Average Exercise Price 2.6 5.1 $ $ 46.52 65.75 111,100 98,525 209,625 $ $ $ 46.45 67.09 56.15 The total fair value of SSARs vested during 2019 was approximately $3.1 million. There were 550,050 SSARs that were not vested as of December 31, 2019. The total intrinsic value of outstanding and exercisable SSARs as of December 31, 2019 was $8.1 million and $4.3 million, respectively. The total intrinsic value of SSARs exercised during 2019 was approximately $12.7 million. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs, vesting of RSU awards and vesting of performance awards under the Plan was approximately $2.7 million for the year ended December 31, 2019. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs and vesting of RSU awards and vesting of performance awards under the Plan was approximately $1.6 million for the year ended December 31, 2018. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs and vesting of RSU awards under the Plan was less than $0.1 million for the year ended December 31, 2017. The Company realized an insignificant tax benefit from the exercise of SSARs, vesting of performance awards and vesting of RSU awards in certain foreign jurisdictions during the years ended December 31, 2019, 2018 and 2017. On January 22, 2020, the Company granted 212,720 performance award shares (subject to the Company achieving future target levels of performance), 187,100 SSARs and 95,820 RSUs under the Plan. 85 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Director Restricted Stock Grants Pursuant to the Plan, all non-employee directors receive annual restricted stock grants of the Company’s common stock. All restricted stock grants made to the Company’s directors are restricted as to transferability for a period of one year. In the event a director departs from the Company’s Board of Directors, the non-transferability period expires immediately. The plan allows each director to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the statutory minimum federal, state and employment taxes that would be payable at the time of grant. The 2019 grant was made on April 25, 2019 and equated to 19,386 shares of common stock, of which 14,105 shares of common stock were issued, after shares were withheld for taxes. The Company recorded stock compensation expense of approximately $1.4 million during 2019 associated with these grants. 11. Derivative Instruments and Hedging Activities 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. 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. To protect the value of the Company’s investment in foreign operations against adverse changes in foreign currency exchange rates, the Company from time to time, may hedge a portion of the Company’s net investment in the foreign subsidiaries by using a cross currency swap. The component of the gains and losses on the Company’s net investment in the designated foreign operations driven by changes in foreign exchange rates are economically offset by movements in the fair value of the cross currency swap contracts. 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 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 categorizes its derivative assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. See Note 13 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. 86 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Derivative Transactions Designated as Hedging Instruments Cash Flow Hedges 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 2019, 2018 and 2017, 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 $332.7 million and $127.0 million as of December 31, 2019 and 2018, respectively. The following table summarizes 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 2019, 2018 and 2017 (in millions): Recognized in Net Income (Loss) Gain 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 Consolidated Statements of Operations Containing Hedge Gains (Losses) 2019 Foreign currency contracts(1)........................... $ 2018 Foreign currency contracts.............................. $ Interest rate swap contract............................... Total................................................................. $ 2017 Foreign currency contracts.............................. $ Interest rate swap contract............................... Total................................................................. $ (2.6) Cost of goods sold 0.4 Cost of goods sold (1.5) (1.1) Interest expense, net 2.7 Cost of goods sold (0.7) 2.0 Interest expense, net $ $ $ $ $ 0.1 $ 7,057.1 (2.2) $ (5.0) (7.2) $ 0.4 (2.4) (2.0) 7,355.3 53.8 6,541.2 45.1 (1) The outstanding contracts as of December 31, 2019 range in maturity through December 2020. 87 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the activity in accumulated other comprehensive loss related to the derivatives held by the Company during the years ended December 31, 2019, 2018 and 2017 (in millions): Before-Tax Amount Income Tax After-Tax Amount Accumulated derivative net losses as of December 31, 2016.................................... Net changes in fair value of derivatives..................................................................... Net losses reclassified from accumulated other comprehensive loss into income .... Accumulated derivative net losses as of December 31, 2017.................................... Net changes in fair value of derivatives..................................................................... Net losses reclassified from accumulated other comprehensive loss into income .... Accumulated derivative net gains as of December 31, 2018..................................... Net changes in fair value of derivatives..................................................................... Net gains reclassified from accumulated other comprehensive loss into income ..... Accumulated derivative net losses as of December 31, 2019.................................... $ $ (10.1) $ 1.9 2.2 (6.0) (1.0) 8.6 1.6 (3.0) (0.1) (1.5) $ (1.4) $ (0.1) 0.2 (1.3) 0.1 1.4 0.2 (0.4) — (0.2) $ (8.7) 2.0 2.0 (4.7) (1.1) 7.2 1.4 (2.6) (0.1) (1.3) 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 de-designated from a 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 $275.3 million as of December 31, 2019) 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. In January 2019 and September 2019, the Company designated €160.0 million and €30.0 million, respectively, of its multi-currency revolving credit facility with a maturity date of 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 September 2019, the Company repaid the designated amount outstanding under its multi-currency revolving credit facility and the foreign currency denominated debt was de-designated as a net investment hedge. The following table summarizes the notional values of the instrument designated as a net investment hedge (in millions): Cross currency swap contract ................................................................................. $ 300.0 $ 300.0 Notional Amount as of December 31, 2019 December 31, 2018 88 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the after-tax impact of changes in the fair value of the instrument designated as a net investment hedge (in millions): Gain (Loss) Recognized in Accumulated Other Comprehensive Loss for the Years Ended Foreign currency denominated debt .................................... $ Cross currency swap contract.............................................. December 31, 2019 December 31, 2018 December 31, 2017 (45.0) — (14.4) $ 17.7 9.3 2.5 $ Derivative Transactions Not Designated as Hedging Instruments During 2019, 2018 and 2017, 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 December 31, 2019 and 2018, the Company had outstanding foreign currency contracts with a notional amount of approximately $2,800.3 million and $1,335.8 million, respectively. The following table summarizes the impact that changes in the fair value of derivatives not designated as hedging instruments had on net income (in millions): Classification of Gain (Loss) December 31, 2019 December 31, 2018 December 31, 2017 For the Years Ended Foreign currency contracts......... Other expense, net $ 20.4 $ (1.4) $ 38.3 The table below sets forth the fair value of derivative instruments as of December 31, 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 Cross currency swap contract ................... Other noncurrent assets $ 0.6 Other current liabilities $ 27.0 Other noncurrent liabilities 1.9 — Derivative instruments not designated as hedging instruments: Foreign currency contracts........................ Other current assets 11.7 Other current liabilities Total derivative instruments ................. $ 39.3 13.1 15.0 $ 89 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The table below sets forth the fair value of derivative instruments as of December 31, 2018 (in millions): Asset Derivatives as of December 31, 2018 Liability Derivatives as of December 31, 2018 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivative instruments designated as hedging instruments: Foreign currency contracts........................ Other current assets Cross currency swap contract ................... Other noncurrent assets $ 1.9 Other current liabilities $ 17.7 Other noncurrent liabilities Derivative instruments not designated as hedging instruments: Foreign currency contracts........................ Other current assets 5.1 Other current liabilities Total derivative instruments ................. $ 24.7 $ 0.4 — 6.2 6.6 Former Interest Rate Swap 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 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 paid a fixed interest rate of 0.33% plus the applicable margin, and the counterparty to the agreement paid a floating interest rate based on the three-month EURIBOR. Changes in the fair value of the interest rate swap were recorded in accumulated other comprehensive loss and were 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 affected earnings. As a result of the Company’s new credit facility agreement entered into in October 2018 and the repayment of the €312.0 million (or approximately $360.8 million) term loan under the Company’s former revolving credit facility, as well as the change in the mix of the Company’s short-term and long-term debt, the Company terminated the interest rate swap instrument and recorded a loss of approximately $3.9 million which was recorded in “Interest expense, net” for the year ended December 31, 2018. Refer to Note 7 for further information. 90 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 12. Commitments and Contingencies The future payments required under the Company’s significant commitments, excluding indebtedness, as of December 31, 2019 are as follows (in millions): 2020 2021 2022 2023 2024 Thereafter Total Payments Due By Period Interest payments related to indebtedness(1)(2) .. $ Unconditional purchase obligations(3) .............. Other short-term and long-term obligations(4) .. 91.7 Total contractual cash obligations .................. $ 207.7 13.9 $ 102.1 13.2 20.9 67.3 $ 10.8 $ 4.5 38.5 53.8 $ 8.0 0.2 32.4 40.6 $ $ 5.8 — 18.5 24.3 $ $ 5.7 — 47.6 53.3 $ 57.4 127.7 296.0 $ 481.1 $ 101.4 $ ____________________________________ (1) Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements. Debt may be repaid sooner or later than such minimum maturity periods (unaudited). (2) Refer to Note 7 for more information on the Company's commitments with respect to indebtedness. (3) Unconditional purchase obligations exclude routine purchase orders entered into in the normal course of business. (4) Other short-term and long-term obligations include estimates of future minimum contribution requirements under the Company’s U.S. and non-U.S. defined benefit pension and postretirement plans. These estimates are based on current legislation in the countries the Company operates within and are subject to change. Other short-term and long-term obligations also include income tax liabilities related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions (unaudited). Guarantees ........................................................ $ 44.7 $ 6.1 $ 6.9 $ 5.2 $ 3.2 $ 0.5 $ 66.6 Amount of Commitment Expiration Per Period 2020 2021 2022 2023 2024 Thereafter Total 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 up to $6.0 million 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 December 31, 2019, the Company has outstanding guarantees of indebtedness owed to third parties of approximately $47.6 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 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 all of these guarantees is not material to its financial position or results of operations. In addition, at December 31, 2019, the Company had accrued approximately $18.9 million of outstanding guarantees of minimum residual values 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 guarantee is approximately $26.7 million. Other At December 31, 2019, the Company had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $3,133.0 million. The outstanding contracts as of December 31, 2019 range in maturity through December 2020 (see Note 11). 91 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 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 December 31, 2019, not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $32.6 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, is material to its business or financial statements as a whole, including its results of operations and financial condition. 13. 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 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • 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. See Note 8 for a discussion of the valuation methods used to measure the fair value of the Company’s pension plan assets. 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 the Company’s derivative instruments and hedging activities. 92 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018 are summarized below (in millions): Derivative assets .................................................................................. $ Derivative liabilities............................................................................. — $ — 39.3 $ 15.0 — $ — 39.3 15.0 As of December 31, 2019 Level 1 Level 2 Level 3 Total As of December 31, 2018 Level 1 Level 2 Level 3 Total Derivative assets .................................................................................. $ Derivative liabilities............................................................................. — $ — 24.7 $ 6.6 — $ — 24.7 6.6 Cash and cash equivalents, accounts and notes receivable, net and accounts payable are valued at their carrying amounts in the Company’s Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments. The carrying amounts of long-term debt under the Company’s senior term loan due 2022, 1.002% senior term loan due 2025 and senior term loans due between 2021 and 2028 approximate fair value based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. See Note 7 for additional information on the Company’s long-term debt. 14. Related Party Transactions Rabobank, a financial institution based in the Netherlands, is a 51% owner in the Company’s finance joint ventures, which are located in the United States, Canada, Europe, Brazil, Argentina and Australia. Rabobank is also the principal agent and participant in the Company’s revolving credit facility (see Note 7). The majority of the assets of the Company’s finance joint ventures represents finance receivables. The majority of the liabilities represents notes payable and accrued interest. Under the various joint venture agreements, Rabobank or its affiliates provide financing to the joint venture companies, primarily through lines of credit. During 2019, 2018 and 2017, the Company did not make additional investments in its finance joint ventures. During 2019 and 2018, the Company received dividends of approximately $40.5 million and $29.4 million, respectively, from certain of the Company’s finance joint ventures. The Company’s finance joint ventures provide retail financing and wholesale financing to its dealers. The terms of the financing arrangements offered to the Company’s dealers are similar to arrangements the finance joint ventures provide to unaffiliated third parties. In addition, the Company transfers, on an ongoing basis, a majority of its wholesale receivables in North America, Europe and Brazil to its U.S., Canadian, European and Brazilian finance joint ventures (see Note 4). The Company maintains a remarketing agreement with its U.S. finance joint venture and has other guarantees with its other finance joint ventures which were not material (see Note 12). In addition, as part of sales incentives provided to end users, the Company may from time to time subsidize interest rates of retail financing provided by its finance joint ventures. The cost of those programs is recognized at the time of sale to the Company’s dealers (See Note 1). Tractors and Farm Equipment Limited (“TAFE”), in which the Company holds a 23.75% interest, manufactures and sells Massey Ferguson-branded equipment primarily in India, and also supplies tractors and components to the Company for sale in other markets. Mallika Srinivasan, who is the Chairman and Chief Executive Officer of TAFE, is currently a member of the Company’s Board of Directors. As of December 31, 2019, TAFE beneficially owned 12,150,152 shares of the Company’s common stock, not including shares of the Company's common stock received by Ms. Srinivasan for service as a director. The Company and TAFE are parties to an agreement pursuant to which, among other things, TAFE has agreed not to purchase in excess of 12,150,152 shares of the Company’s common stock, subject to certain adjustments, and the Company has agreed to annually nominate a TAFE representative to its Board of Directors. During 2019, 2018 and 2017, the Company purchased approximately $92.7 million, $109.6 million and $102.0 million, respectively, of tractors and components from TAFE. During 2019, 2018 and 2017, the Company sold approximately $1.5 million, $1.8 million and $1.2 million, respectively, of parts to TAFE. The Company received dividends from TAFE of approximately $2.0 million during 2019 and $1.8 million during both 2018 and 2017. 93 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) During 2019, 2018 and 2017, the Company paid approximately $4.4 million, $3.5 million and $7.2 million, respectively, to PPG Industries, Inc. for painting materials used in the Company’s manufacturing processes. The Company’s Chairman, President and Chief Executive Officer is currently a member of the board of directors of PPG Industries, Inc. During 2019, 2018 and 2017, the Company paid approximately $6.2 million, $1.6 million and $1.5 million, respectively, to Linde PLC (the parent company of Praxair, Inc.) for propane, gas and welding, and laser consumables used in the Company’s manufacturing processes. The Company’s Chairman, President and Chief Executive Officer served as a member of the board of directors of Praxair, Inc. until the business combination of Praxair, Inc. and Linde AG, and is currently a member of the board of directors of Linde PLC, the holding company for the combined business. 15. Segment Reporting The Company’s four 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 years ended December 31, 2019, 2018 and 2017 based on the Company’s reportable segments are as follows (in millions): Years Ended December 31, 2019 Net sales............................................................ Income (loss) from operations .......................... Depreciation...................................................... Assets................................................................ Capital expenditures ......................................... 2018 Net sales............................................................ Income (loss) from operations .......................... Depreciation...................................................... Assets................................................................ Capital expenditures ......................................... 2017 Net sales............................................................ Income from operations.................................... Depreciation...................................................... Assets................................................................ Capital expenditures ......................................... North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated $ 2,191.8 $ 121.6 61.6 1,125.6 52.1 $ 2,180.1 $ 103.1 67.6 1,032.1 43.3 802.2 (39.4) 32.4 758.0 32.9 959.0 (10.1) 30.5 736.1 30.4 $ 5,328.8 $ 718.6 $ 9,041.4 638.2 102.7 2,187.7 173.5 43.4 14.2 430.2 14.9 763.8 210.9 4,501.5 273.4 $ 5,385.1 $ 827.8 $ 9,352.0 601.1 111.3 1,905.8 120.3 49.6 15.8 501.1 9.3 743.7 225.2 4,175.1 203.3 $ 1,876.7 $ 1,063.5 $ 4,614.3 $ 752.0 $ 8,306.5 66.9 61.5 1,064.1 59.1 15.4 30.5 752.1 43.0 493.3 113.0 2,074.4 92.9 48.8 17.8 499.4 8.9 624.4 222.8 4,390.0 203.9 94 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) A reconciliation from the segment information to the consolidated balances for income from operations and total assets is set forth below (in millions): Segment income from operations ....................................................... $ Corporate expenses ............................................................................. Impairment charges............................................................................. Amortization of intangibles ................................................................ Stock compensation expense .............................................................. Restructuring expenses ....................................................................... Consolidated income from operations ................................................ $ Segment assets .................................................................................... $ Cash and cash equivalents................................................................... Investments in affiliates ...................................................................... Deferred tax assets, other current and noncurrent assets .................... Intangible assets, net ........................................................................... Goodwill.............................................................................................. Consolidated total assets ..................................................................... $ 2019 2018 2017 $ $ $ 763.8 (129.0) (176.6) (61.1) (40.0) (9.0) 348.1 4,501.5 432.8 380.2 645.2 501.7 $ $ $ 743.7 (133.7) — (64.7) (44.3) (12.0) 489.0 4,175.1 326.1 400.0 656.6 573.1 1,298.3 1,495.5 7,759.7 $ 7,626.4 $ 624.4 (116.2) — (57.0) (35.6) (11.2) 404.4 4,390.0 367.7 409.0 614.6 649.0 1,541.4 7,971.7 Property, plant and equipment and amortizable intangible assets by country as of December 31, 2019 and 2018 was as follows (in millions): United States....................................................................................................................... $ Germany ............................................................................................................................. Brazil................................................................................................................................... Finland ................................................................................................................................ China................................................................................................................................... Denmark ............................................................................................................................. Italy ..................................................................................................................................... France ................................................................................................................................. Other ................................................................................................................................... $ 2019 2018 550.2 384.5 184.3 142.5 98.1 97.2 109.7 92.5 172.8 1,831.8 $ $ 593.6 371.5 187.7 130.0 109.4 108.7 115.1 75.6 167.7 1,859.3 95 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 16. 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 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 years ended December 31, 2019 and 2018 were as follows (in millions): Balance at beginning of period.......................................................................... Advance consideration received........................................................................ Revenue recognized during the period for extended warranty contracts .......... Revenue recognized during the period related to installation of grain storage and protein production systems ......................................................................... Foreign currency translation.............................................................................. Balance as of December 31, 2019 ..................................................................... $ $ ____________________________________ (1) The beginning of the period is from the date of adoption of ASU 2014-09 or January 1, 2018. Year Ended December 31, 2019 Year Ended December 31, 2018(1) 82.6 $ 76.8 147.7 (33.8) (87.4) 0.7 104.0 $ 124.9 (29.0) (100.9) (0.8) 76.8 The contract liabilities are classified as either “Other current liabilities” and "Other noncurrent liabilities" or “Accrued expenses” in the Company’s 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 December 31, 2019 are $37.7 million in 2020, $27.4 million in 2021, $16.2 million in 2022, $8.2 million in 2023 and $2.2 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. 96 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Disaggregated Revenue Net sales for the year ended December 31, 2019 disaggregated by primary geographical markets and major products consisted of the following (in millions): North America South America Europe/ Middle East Asia/ Pacific/Africa Consolidated Primary geographical markets: United States....................................... Canada ................................................ Germany ............................................. France ................................................. United Kingdom and Ireland .............. Finland and Scandinavia..................... Other Europe....................................... South America .................................... Middle East and Algeria ..................... Africa .................................................. Asia ..................................................... Australia and New Zealand ................ Mexico, Central America and Caribbean............................................ Major products: Tractors ............................................... Replacement parts............................... Grain storage and protein production systems................................................ Other machinery ................................. $ 1,799.7 $ — $ 289.7 — — — — — — — — — — — — — — — — 789.7 — — — — 102.4 12.5 — $ — 1,194.3 1,097.6 561.9 772.8 1,629.0 — 73.2 — — — — — $ — — — — — — — — 116.2 344.7 257.7 — $ $ 2,191.8 $ 802.2 $ 5,328.8 $ 718.6 $ 662.4 $ 447.7 $ 3,772.0 $ 300.6 $ 310.2 547.9 671.3 88.2 79.5 186.8 874.8 172.8 509.2 74.6 234.6 108.8 $ 2,191.8 $ 802.2 $ 5,328.8 $ 718.6 $ 1,799.7 289.7 1,194.3 1,097.6 561.9 772.8 1,629.0 789.7 73.2 116.2 344.7 257.7 114.9 9,041.4 5,182.7 1,347.8 1,034.8 1,476.1 9,041.4 97 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Net sales for the year ended December 31, 2018 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 Consolidated(1) Primary geographical markets: United States .................................... Canada .............................................. Germany ........................................... France ............................................... United Kingdom and Ireland............ Finland and Scandinavia .................. Other Europe .................................... South America.................................. Middle East and Algeria................... Africa................................................ Asia................................................... Australia and New Zealand .............. Mexico, Central America and Caribbean ......................................... Major products: Tractors............................................. Replacement parts ............................ Grain storage and protein production systems........................... Other machinery ............................... $ 1,723.6 $ — $ 329.0 — — — — — — — — — — — — — — — — 943.1 — — — — 127.5 15.9 — $ — 1,213.6 1,002.9 614.4 826.5 1,627.8 — 100.0 — — — — — $ — — — — — — — — 135.5 414.5 277.8 — $ $ 2,180.1 $ 959.0 $ 5,385.1 $ 827.8 $ 665.8 $ 599.1 $ 3,743.0 $ 353.2 $ 298.7 570.3 645.3 91.0 70.1 198.8 880.3 187.6 574.3 76.0 285.5 113.1 $ 2,180.1 $ 959.0 $ 5,385.1 $ 827.8 $ 1,723.6 329.0 1,213.6 1,002.9 614.4 826.5 1,627.8 943.1 100.0 135.5 414.5 277.8 143.4 9,352.0 5,361.1 1,346.0 1,113.5 1,531.5 9,352.0 ___________________________________ (1) Rounding may impact summation of amounts. 98 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Net sales for the year ended December 31, 2017 disaggregated by primary geographical markets and major products consisted of the following (in millions): Primary geographical markets: United States..................................... Canada .............................................. Germany ........................................... France ............................................... United Kingdom and Ireland ............ Finland and Scandinavia................... Other Europe..................................... South America .................................. Middle East and Algeria ................... Africa ................................................ Asia ................................................... Australia and New Zealand .............. Mexico, Central America and Caribbean.......................................... Major products: Tractors ............................................. Replacement parts............................. Grain storage and protein production systems ........................... Other machinery ............................... North America(1) South America Europe/ Middle East Asia/ Pacific/Africa(1) Consolidated $ 1,445.7 $ — $ — $ — $ 1,445.7 296.9 — — — — — — — — — — — — — — — — 1,039.2 — — — — 134.2 24.3 — 997.4 815.7 512.6 721.3 1,396.0 — 171.3 — — — — — — — — — — — — 138.1 366.4 247.4 — $ $ 1,876.7 $ 1,063.5 $ 4,614.3 $ 752.0 $ 624.8 $ 673.5 $ 3,149.7 $ 337.2 $ 287.0 537.2 427.7 108.4 72.9 208.7 835.3 182.9 446.4 74.3 256.6 83.9 296.9 997.4 815.7 512.6 721.3 1,396.0 1,039.2 171.3 138.1 366.4 247.4 158.5 8,306.5 4,785.2 1,305.0 1,049.6 1,166.7 8,306.5 ___________________________________ (1) Rounding may impact summation of amounts. $ 1,876.7 $ 1,063.5 $ 4,614.3 $ 752.0 $ 99 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 17. LEASES The Company leases certain land, buildings, machinery, equipment, vehicles and office and computer equipment under finance and operating leases. As previously discussed in Note 1, the Company adopted ASU 2016-02 effective January 1, 2019. Under the new standard, lessees are required to record an asset (ROU asset or finance lease asset) and a lease liability. The new standard continues to allow for two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases result in the recognition of a single lease expense on a straight-line basis over the lease term, similar to the treatment for operating leases under previous U.S. GAAP. Finance leases result in an accelerated expense also similar to previous U.S. GAAP. ASU 2016-02 also contains amended guidance regarding the identification of embedded leases in service and supply contracts, as well as the identification of lease and nonlease components of an arrangement. ROU assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent the Company’s obligation to make lease payments for the lease term. All leases greater than 12 months result in the recognition of an ROU asset and liability at the lease commencement date based on the present value of the lease payments over the lease term. The present value of the lease payments is calculated using the applicable weighted-average discount rate. The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The incremental borrowing rate is estimated using the currency denomination of the lease, the contractual lease term and the Company’s applicable borrowing rate. The Company does not recognize a ROU asset or lease liability with respect to operating leases with an initial term of 12 months or less and recognizes expense on such leases on a straight-line basis over the lease term. The Company accounts for lease components separately from nonlease components other than for real estate and office equipment. The Company evaluated its supplier agreements for the existence of leases and determined these leases comprised an insignificant portion of its supplier agreements. As such, these leases were not material to the Company’s Consolidated Balance Sheets. The Company has certain leases that include one or more options to renew, with renewal terms that can extend the lease term from six months to 10 years. The exercise of the lease renewal options is at the Company’s discretion and are included in the determination of the ROU asset and lease liability when the option is reasonably certain of being exercised. The depreciable life of ROU assets and leasehold improvements are limited by the expected lease term. The Company has certain lease agreements that include variable rental payments that are adjusted periodically for inflation based on the index rate as defined by the applicable government authority. Generally, the Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. Total lease assets and liabilities at December 31, 2019 were as follows (in millions): Lease Assets Operating ROU assets ........................................................ Right-of-use lease assets Finance lease assets ............................................................ Property, plant and equipment, net(1) Classification Total leased assets ....................................................... As of December 31, 2019 $ $ 187.3 19.1 206.4 Lease Liabilities Current: Classification As of December 31, 2019 Operating.......................................................................... Accrued expenses Finance............................................................................. Other current liabilities Noncurrent: Operating.......................................................................... Operating lease liabilities Finance............................................................................. Other noncurrent liabilities Total leased liabilities.................................................. ____________________________________ (1) Finance lease assets are recorded net of accumulated depreciation of $15.2 million as of December 31, 2019. $ $ 42.3 4.5 148.6 12.0 207.4 100 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Total lease cost for 2019 is set forth below (in millions): Operating lease cost ................................................................................. Variable lease cost .................................................................................... Short-term lease cost ................................................................................ Finance lease cost: Classification Selling, general and administrative expenses Selling, general and administrative expenses Selling, general and administrative expenses Amortization of leased assets................................................................. Depreciation expense(1) Interest on leased liabilities.................................................................... Total lease cost ......................................................................................... Interest expense, net ____________________________________ (1) Depreciation expense was included in both cost of sales and selling, general and administrative expenses. Year Ended December 31, 2019 $ $ 55.0 0.6 8.1 4.7 0.7 69.1 The total lease expense under noncancelable operating leases was approximately $72.1 million for the year ended December 31, 2018. The aggregate future minimum lease payments under noncancelable operating and finance leases with remaining terms greater than one year as of December 31, 2019 were as follows (in millions): December 31, 2019 Operating Leases(1) Finance Leases 2020 ................................................................................................................................... 2021 ................................................................................................................................... 2022 ................................................................................................................................... 2023 ................................................................................................................................... 2024 ................................................................................................................................... Thereafter .......................................................................................................................... Total lease payments.......................................................................................................... Less: imputed interest(2) .................................................................................................. Present value of leased liabilities ...................................................................................... $ $ $ 48.3 40.8 31.5 24.1 16.7 61.6 223.0 (32.1) 190.9 $ ____________________________________ (1) Operating lease payments include $11.4 million related to options to extend leases that are reasonably certain of being exercised. (2) Calculated using the implicit interest rate for each lease. 4.8 2.7 1.2 0.9 0.6 8.7 18.9 (2.4) 16.5 101 AGCO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The aggregate future minimum lease payments under noncancelable operating and finance leases with remaining terms greater than one year as of December 31, 2018 were as follows (in millions): December 31, 2018 Operating Leases(2) Finance Leases(2) 2019 ................................................................................................................................... 2020 ................................................................................................................................... 2021 ................................................................................................................................... 2022 ................................................................................................................................... 2023 ................................................................................................................................... Thereafter .......................................................................................................................... Total lease payments.......................................................................................................... Less: imputed interest(1) .................................................................................................. Present value of leased liabilities ...................................................................................... $ $ 46.7 39.5 32.6 26.0 21.7 85.5 252.0 — $ 252.0 $ ____________________________________ (1) Imputed interest for operating leases as of December 31, 2018 is not applicable as the Company adopted ASC 842 on January 1, 2019. (2) As determined under ASC 840, “Leases.” 4.5 4.4 2.2 0.9 0.6 5.0 17.6 (2.1) 15.5 The following table summarizes the weighted-average remaining lease term and weighted-average discount rate: Weighted-average remaining lease term: Operating leases.............................................................................................................................. Finance leases ................................................................................................................................. Weighted-average discount rate: Operating leases.............................................................................................................................. Finance leases ................................................................................................................................. As of December 31, 2019 14 years 7 years 4.1% 2.9% The following table summarizes the supplemental cash flow information for 2019 (in millions): Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases................................................................................... Operating cash flows from finance leases ...................................................................................... Financing cash flows from finance leases ...................................................................................... Leased assets obtained in exchange for lease obligations: Operating leases.............................................................................................................................. Finance leases ................................................................................................................................. $ $ Year Ended December 31, 2019 51.9 0.6 5.3 34.8 1.5 102 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures 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. However, our principal executive officer and principal financial officer have concluded the Company’s disclosure controls and procedures are effective at the reasonable assurance level. 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. 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 December 31, 2019, 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. Management’s Annual Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements for external purposes in accordance with generally accepted accounting principles. In assessing the effectiveness of the Company’s internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control — Integrated Framework (2013).” Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. Based on this assessment, management believes that, as of December 31, 2019, the Company’s internal control over financial reporting is effective based on the criteria referred to above. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by KPMG LLP, an independent registered public accounting firm, which also audited the Company’s Consolidated Financial Statements as of and for the year ended December 31, 2019. KPMG LLP’s report on internal control over financial reporting is set forth below. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as a result of the Company’s processes to comply with the Sarbanes-Oxley Act of 2002, enhancements to the Company’s internal control over financial reporting were implemented as management addressed and remediated deficiencies that had been identified. 103 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors AGCO Corporation: Opinion on Internal Control Over Financial Reporting We have audited AGCO Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three- year period ended December 31, 2019, and the related notes and financial statement schedule II — Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 28, 2020 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Atlanta, Georgia February 28, 2020 104 Item 9B. Other Information None. PART III The information called for by Items 10, 11, 12, 13 and 14, if any, will be contained in our Proxy Statement for the 2020 Annual Meeting of Stockholders, which we intend to file in March 2020. Item 10 Directors, Executive Officers and Corporate Governance The information with respect to directors and committees required by this Item set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders in the sections entitled Proposal Number 1 “Election of Directors” and “Board of Directors and Corporate Governance” is incorporated herein by reference. The information with respect to executive officers required by this Item set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders in the section entitled “Executive Compensation” is incorporated herein by reference. See the information under the heading “Available Information” set forth in Part I of this Form 10-K. The code of conduct referenced therein applies to our principal executive officer, principal financial officer, principal accounting officer and controller and the persons performing similar functions. Item 11. Executive Compensation The information with respect to executive compensation and its establishment required by this Item set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders in the sections entitled “Board of Directors and Corporate Governance,” “2019 CEO Pay Ratio,” “Executive Compensation” and “Compensation Committee Report” is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (a) Securities Authorized for Issuance Under Equity Compensation Plans AGCO maintains its Plan pursuant to which we may grant equity awards to eligible persons. For additional information, see Note 10, “Stock Incentive Plan,” in the Notes to Consolidated Financial Statements included in this filing. The following table gives information about equity awards under our Plan. Plan Category Equity compensation plans approved by security holders ...................................... Equity compensation plans not approved by security holders ................................. Total ............................................................. (a) (b) (c) Number of Securities to be Issued upon Exercise of Outstanding Awards Under the Plans Weighted-Average Exercise Price of Outstanding Awards Under the Plans Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) 2,088,386 $ — 2,088,386 $ 63.29 — 63.29 3,581,614 — 3,581,614 (b) Security Ownership of Certain Beneficial Owners and Management The information required by this Item set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders in the section entitled “Principal Holders of Common Stock” is incorporated herein by reference. Item 13. Certain Relationships and Related Party Transactions, and Director Independence The information required by this Item set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders in the section entitled “Certain Relationships and Related Party Transactions” is incorporated herein by reference. 105 Item 14. Principal Accounting Fees and Services The information required by this Item set forth in our 2020 Proxy Statement for the Annual Meeting of Stockholders in the sections entitled “Audit Committee Report” and “Board of Directors and Corporate Governance” is incorporated herein by reference. Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this Form 10-K: PART IV (1) The Consolidated Financial Statements, Notes to Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm for AGCO Corporation and its subsidiaries are presented under Item 8 of this Form 10-K. (2) Financial Statement Schedules: The following Consolidated Financial Statement Schedule of AGCO Corporation and its subsidiaries is included herein and follows this report. Schedule Schedule II Description Valuation and Qualifying Accounts Schedules other than that listed above have been omitted because the required information is contained in Notes to the Consolidated Financial Statements or because such schedules are not required or are not applicable. (3) The following exhibits are filed or incorporated by reference as part of this report. Each management contract or compensation plan required to be filed as an exhibit is identified by an asterisk (*). The exhibits below may not include all 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 3.1 3.2 4.1 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 Description of Exhibit Certificate of Incorporation Amended and Restated By-Laws Description of Securities 2006 Long-Term Incentive Plan* 2006 Form of Non-Qualified Stock Option Award Agreement* 2006 Form of Incentive Stock Option Award Agreement* 2006 Form of Stock Appreciation Rights Agreement* The Filings Referenced for Incorporation by Reference are AGCO Corporation June 30, 2002, Form 10-Q, Exhibit 3.1 April 26, 2019, Form 8-K, Exhibit 3.1 Filed herewith September 30, 2017, Form 10-Q, Exhibit 10.5 March 31, 2006, Form 10-Q, Exhibit 10.2 March 31, 2006, Form 10-Q, Exhibit 10.3 March 31, 2006, Form 10-Q, Exhibit 10.4 2019 Form of Stock Appreciation Rights Agreement* January 22, 2019, Form 8-K, Exhibit 10.2 2016 Form of Restricted Stock Units Agreement* January 27, 2016, Form 8-K, Exhibit 10.1 2018 Form of Restricted Stock Units Agreement* June 30, 2018, Form 10-Q, Exhibit 10.1 2019 Form of Restricted Stock Units Agreement* January 22, 2019, Form 8-K, Exhibit 10.1 2006 Form of Performance Share Award* March 31, 2006, Form 10-Q, Exhibit 10.6 2019 Form of Performance Share Agreement* January 22, 2019, Form 8-K, Exhibit 10.3 Amended and Restated Management Incentive Program* Amended and Restated Executive Nonqualified Pension Plan* June 30, 2019, Form 10-Q, Exhibit 10.3 June 30, 2019, Form 10-Q, Exhibit 10.2 Executive Nonqualified Defined Contribution Plan* December 31, 2015, Form 10-K, Exhibit 10.9 Employment and Severance Agreement with Martin Richenhagen* December 31, 2009, Form 10-K, Exhibit 10.12 106 Exhibit Number 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 21.1 23.1 24.1 31.1 31.2 32.1 Description of Exhibit Employment and Severance Agreement with Andrew H. Beck* Employment and Severance Agreement with Eric P. Hansotia* Employment and Severance Agreement with Robert B. Crain* Employment and Severance Agreement with Rob Smith* Employment and Severance Agreement with Hans- Bernd Veltmaat* The Filings Referenced for Incorporation by Reference are AGCO Corporation March 31, 2010, Form 10-Q, Exhibit 10.2 December 31, 2018, Form 10-K, Exhibit 10.16 December 31, 2017, Form 10-K, Exhibit 10.13 December 31, 2015, Form 10-K, Exhibit 10.13 December 31, 2009, Form 10-K, Exhibit 10.17 Debt Agreement dated December 18, 2014 December 31, 2014, Form 10-K, Exhibit 10.15 Credit Agreement dated as of October 17, 2018 September 30, 2018, Form 10-Q, Exhibit 10.1 Letter Agreement, dated November 5, 2015, between AGCO International GmbH and TAFE International LLC, Turkey and Tractors and Farm Equipment Limited Amended and Restated Letter Agreement, dated April 24, 2019, between AGCO Corporation and Tractors and Farm Equipment Limited Farm and Machinery Distributor Agreement, dated January 1, 2012, between AGCO International GmbH and Tractors and Farm Equipment Limited Letter Agreement, dated August 3, 2007, between AGCO Corporation and Tractors and Farm Equipment Limited Letter Agreement for Far East Markets, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited Letter Agreement for Mexico, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited Letter Agreement for Australia/New Zealand, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited Amendment to the Letter Agreement for Africa, dated July 24, 2017, between AGCO International GmbH and Tractors and Farm Equipment Limited Current Director Compensation* Subsidiaries of the Registrant Consent of KPMG LLP Powers of Attorney Certification of Martin Richenhagen Certification of Andrew H. Beck Certification of Martin Richenhagen and Andrew H. Beck September 30, 2015, Form 10-Q, Exhibit 10.1 March 31, 2019, Form 10-Q, Exhibit 10.1 September 4, 2014, Form 8-K, Exhibit 10.2 September 4, 2014, Form 8-K, Exhibit 10.3 July 27, 2017, Form 8-K, Exhibit 10.1 July 27, 2017, Form 8-K, Exhibit 10.2 July 27, 2017, Form 8-K, Exhibit 10.3 July 27, 2017, Form 8-K, Exhibit 10.4 Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith 107 Exhibit Number 101 Description of Exhibit The following audited financial information from this Annual Report on Form 10-K for the year ended December 31, 2019, are formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements. The Filings Referenced for Incorporation by Reference are AGCO Corporation Filed herewith 104 Cover Page Interactive Data File - the cover page from this Annual Report on Form 10-K for the year ended December 31, 2019 is formatted in Inline XBRL Filed herewith Item 16. Form 10-K Summary None. 108 Pursuant to the requirements of Section 13 or 15(d) 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. SIGNATURES AGCO Corporation By: /s/ MARTIN RICHENHAGEN Martin Richenhagen Chairman of the Board, President and Chief Executive Officer Dated: February 28, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated. Signature Title Chairman of the Board, President and Chief Executive Officer Date February 28, 2020 Senior Vice President and Chief Financial Officer (Principal Financial Officer) February 28, 2020 Vice President, Chief Accounting Officer (Principal Accounting Officer) February 28, 2020 /s/ MARTIN RICHENHAGEN Martin Richenhagen /s/ ANDREW H. BECK Andrew H. Beck /s/ LARA T. LONG Lara T. Long /s/ ROY V. ARMES * Roy V. Armes /s/ MICHAEL C. ARNOLD * Michael C. Arnold /s/ SONDRA L. BARBOUR * Sondra L. Barbour /s/ P. GEORGE BENSON * P. George Benson /s/ SUZANNE P. CLARK * Suzanne P. Clark /s/ WOLFGANG DEML * Wolfgang Deml /s/ GEORGE E. MINNICH * George E. Minnich /s/ GERALD L. SHAHEEN * Gerald L. Shaheen /s/ MALLIKA SRINIVASAN * Mallika Srinivasan /s/ HENDRIKUS VISSER * Hendrikus Visser *By: /s/ ANDREW H. BECK Andrew H. Beck Attorney-in-Fact 109 Director Director Director Director Director Director Director Director Director Director February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 February 28, 2020 [THIS PAGE INTENTIONALLY LEFT BLANK] AGCO CORPORATION AND SUBSIDIARIES SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS (in millions) SCHEDULE II Description Year ended December 31, 2019 Additions Balance at Beginning of Period Acquired Businesses Charged to Costs and Expenses Deductions Foreign Currency Translation Balance at End of Period Allowances for doubtful accounts .............. Year ended December 31, 2018 Allowances for doubtful accounts .............. Year ended December 31, 2017 Allowances for doubtful accounts .............. $ $ $ 31.7 38.7 33.7 $ $ $ 5.8 6.4 4.6 $ $ $ (8.3) $ (0.4) $ 28.8 (11.4) $ (2.0) $ 31.7 (3.8) $ 2.0 $ 38.7 — $ — $ 2.2 $ Additions Description Year ended December 31, 2019 Balance at Beginning of Period Charged to Costs and Expenses Reversal of Accrual Deductions Foreign Currency Translation Balance at End of Period Accruals of severance, relocation and other integration costs................................. Year ended December 31, 2018 Accruals of severance, relocation and other integration costs................................. Year ended December 31, 2017 Accruals of severance, relocation and other integration costs................................. $ $ $ 7.1 $ 6.1 $ (0.7) $ (7.3) $ (0.4) $ 4.8 10.9 $ 13.8 $ (2.1) $ (14.4) $ (1.1) $ 7.1 15.3 $ 12.4 $ (1.4) $ (16.8) $ 1.4 $ 10.9 Additions Balance at Beginning of Period Acquired Businesses Charged (Credited) to Costs and Expenses(1) Deductions Foreign Currency Translation Balance at End of Period Description Year ended December 31, 2019 Deferred tax valuation allowance ............... Year ended December 31, 2018 Deferred tax valuation allowance ............... Year ended December 31, 2017 Deferred tax valuation allowance ............... $ $ $ 83.9 81.9 116.0 $ $ $ — $ 87.1 — $ 6.3 $ $ — $ (1.9) $ 169.1 — $ (4.3) $ 83.9 — $ (38.4) $ — $ 4.3 $ 81.9 (1) Amounts (credited) charged through other comprehensive income during the years ended December 31, 2019 and 2018 were $(2.5) million and $18.3 million, respectively. II-1 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] OUR LEADERSHIP BOARD OF DIRECTORS ROY V. ARMES Former Executive Chairman, President and CEO Cooper Tire and Rubber Company P. GEORGE BENSON Professor of Decision Sciences and former President College of Charleston GEORGE E. MINNICH Former Senior Vice President and CFO ITT Corporation MALLIKA SRINIVASAN Chairman and Managing Director Tractors and Farm Equipment Limited (TAFE) MICHAEL C. ARNOLD Former President and CEO Ryerson Inc. SUZANNE P. CLARK President U.S. Chamber of Commerce MARTIN H. RICHENHAGEN Chairman, President and Chief Executive Officer HENDRIKUS VISSER Former Chairman Royal Huisman Shipyards N.V. SONDRA L. BARBOUR Former Executive Vice President Lockheed Martin Corporation WOLFGANG DEML Former President and Chief Executive Officer BayWa Corporation GERALD L. SHAHEEN Former Group President Caterpillar Inc. SENIOR MANAGEMENT BRADLEY C. ARNOLD Senior Vice President, Global Crop Cycle and Fuse Connected Services ROGER N. BATKIN Senior Vice President, General Counsel and Corporate Secretary ANDREW H. BECK Senior Vice President, Chief Financial Officer STEFAN CASPARI Senior Vice President, General Manager, Grain and Protein GARY L. COLLAR Senior Vice President, General Manager, Asia/Pacific/Africa ROBERT B. CRAIN Senior Vice President, General Manager, North America TORSTEN R.W. DEHNER Senior Vice President, General Manager, Europe/Middle East HELMUT R. ENDRES Senior Vice President, Engineering LUÍS F.S. FELLI Senior Vice President, General Manager, South America ERIC P. HANSOTIA Senior Vice President, Chief Operating Officer MARTIN H. RICHENHAGEN Chairman, President and Chief Executive Officer LUCINDA B. SMITH Senior Vice President, Global Business Services JOSIP T. TOMASEVIC Senior Vice President, Chief Procurement Officer HANS-BERND VELTMAAT Senior Vice President, Chief Supply Chain Officer SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS 4205 River Green Parkway Duluth, Georgia 30096 U.S. +1-770-813-9200 STOCK EXCHANGE AGCO Corporation common stock (trading symbol is “AGCO”) is traded on the New York Stock Exchange. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP Atlanta, Georgia U.S. TRANSFER AGENT & REGISTRAR You can contact Computershare through the following methods: Overnight Mail Delivery 462 South 4th Street, Suite 1600 Louisville, KY 40202 U.S. Regular Mail Delivery P.O. Box 505000 Louisville, KY 40233 U.S. Telephone +1-800-962-4284 FORM 10-K The Form 10-K Annual Report filed with the Securities and Exchange Commission is available in the “Investors” Section of our corporate website (www.agcocorp.com), under the heading “SEC Filings,” or upon request from the Investor Relations Department at our corporate headquarters. ANNUAL MEETING The annual meeting of the Company’s stockholders will be held at 9:00 a.m. ET on April 30, 2020, at the offices of AGCO Corporation, 4205 River Green Parkway, Duluth, Georgia 30096 U.S. © 2020 AGCO Corporation All rights reserved. Incorporated in Delaware. An Equal Opportunity Employer. AGCO,® Fendt,® GSI,® Massey Ferguson,® Valtra® and their respective logos as well as corporate and product identity used herein are trademarks of AGCO or its subsidiaries and may not be used without permission. Challenger® is a registered trademark of Caterpillar, Inc. and may not be used without permission. A G C O 2 0 1 9 A N N U A L R E P O R T 4205 River Green Parkway, Duluth, Georgia 30096 U.S. +1-770-813-9200 · www.agcocorp.com A R 2019.AGCOCORP.COM For a truly interactive experience online, visit our annual report: A 

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