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What changed in AGCO CORP /DE's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AGCO CORP /DE's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+376 added−461 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in AGCO CORP /DE's 2023 10-K

376 paragraphs added · 461 removed · 238 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+28 added−103 removed30 unchanged
Biggest changeOur 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 13 % 15 % 16 % Grain Storage and Protein Production Systems • Grain storage bins and related drying and handling equipment systems; seed-processing systems; swine and poultry feed storage and delivery, ventilation and watering systems; egg production systems, and broiler production equipment 9 % 10 % 10 % Hay Tools and Forage Equipment, Planters, Implements & Other Equipment • Round and rectangular balers, loader wagons, self-propelled windrowers, forage harvesters, disc 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 12 % 12 % 11 % • Planters and other planting equipment (including retrofit 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 • 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 • 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 5 % 4 % 3 % 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 % ____________________________________ (1) The summation of these individual percentages does not total due to rounding. 1 Table of Contents Precision Agriculture We offer solutions to farmers to optimize farming performance, while improving ease of use.
Biggest changeSee Note 2 of our Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," for further information. 1 Table of Contents Products The following table sets forth a description of the Company’s more significant products and their percentage of net sales: Percentage of Net Sales (1) Product Product Description 2023 2022 2021 Tractors • High horsepower tractors (140 to 650 horsepower); typically used on large acreage farms, primarily for row crop production, soil cultivation, planting, land leveling, seeding and commercial hay operations 61 % 59 % 57 % • 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 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 4 % 5 % 4 % Hay Tools and Forage Equipment, Planters, Implements & Other Equipment • Round and rectangular balers, loader wagons, self-propelled windrowers, forage harvesters, disc 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 12 % 12 % 12 % • Planters and other planting equipment (including retrofit 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 • 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 • Other equipment, including loaders; used for a variety of tasks, including lifting and transporting hay crops 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 % Replacement Parts • Replacement parts for all of the products we sell, including products no longer in production.
These products ultimately result in improved yields or reduced waste as well as increased profitability for farmers to help to enable sustainable farming. In addition, our precision agriculture solutions are based on connectivity, automation and digitalization and include satellite-based steering, field data collection, product self-adjustment and yield-mapping.
These products ultimately result in improved yields or reduced waste as well as increased profitability for farmers to help enable sustainable farming. In addition, our precision agriculture solutions are based on connectivity, automation and digitalization and include satellite-based steering, field data collection, product self-adjustment and yield-mapping.
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.
In addition, each of the jurisdictions in 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.
While fluctuations may occur within our workforce from time to time, we track and attempt to manage our attrition rates, while also ensuring that key positions critical to our performance our appropriately staffed. We also analyze employee departure data so that we can continually improve upon the employee experience.
While fluctuations may occur within our workforce from time to time, we track and attempt to manage our attrition rates, while also ensuring that key positions critical to our performance are appropriately staffed. We also analyze employee departure data so that we can continually improve upon the employee experience.
None of these materials, including the other materials available on our website, is incorporated by reference into this Form 10-K unless expressly provided. 14 Table of Contents
None of these materials, including the other materials available on our website, is incorporated by reference into this Form 10-K unless expressly provided. 10 Table of Contents
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 also purchase other tractors, implements and hay and forage equipment from various third-party suppliers. Refer to Note 18 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.
Our compensation programs, practices, and policies reflect our commitment to reward short- and long-term performance that aligns with, and drives stockholder value. Total direct compensation is generally positioned within a competitive range of the market median, with differentiation based on tenure, skills, proficiency, and performance to attract and retain key talent.
Our compensation programs, practices, and policies reflect our commitment to reward short and long-term performance that aligns with and drives shareholder value. Total direct compensation is generally positioned within a competitive range of the market median, with differentiation based on tenure, skills, proficiency and performance to attract and retain key talent.
Market Conditions Demand for agricultural equipment is cyclical, influenced by, among other things, farm input costs, farm income, farm land values and debt levels, acreage planted, crop yields, weather conditions, the demand for agricultural commodities, commodity and protein prices, agricultural product demand and general economic conditions, and government policies and subsidies.
Market Conditions Demand for agricultural equipment is cyclical, influenced by, among other things, farm income, farm land values and debt levels, financing costs, acreage planted, crop yields, weather conditions, the demand for agricultural commodities, commodity and protein prices, agricultural product demand and general economic conditions and government policies and subsidies.
In addition, our AGCO Finance joint ventures may provide wholesale financing directly to dealers in Europe, Brazil and Australia. We also sell certain trade receivables under factoring arrangements to other third-party financial institutions around the world, and we account for the sale of such receivables as off-balance sheet transactions.
In addition, our AGCO Finance joint ventures may provide wholesale financing directly to dealers in Europe, Brazil and Australia. 5 Table of Contents We also sell certain trade receivables under factoring arrangements to other third-party financial institutions around the world, and we account for the sale of such receivables as off-balance sheet transactions.
We are deeply committed to identifying and developing the next generation of top-tier leadership with a special focus on diverse and technologically innovative talent. We conduct annual in-depth talent and succession reviews with our senior leadership team that focus on accelerating talent development, strengthening succession pipelines, and advancing diversity representation for our most critical roles.
We are deeply committed to identifying and developing the next generation of top-tier leadership with a special focus on diverse and technologically innovative talent. We now conduct quarterly in-depth talent and succession reviews with our senior leadership team that focus on accelerating talent development, strengthening succession pipelines and advancing diversity representation for our most critical roles.
This information includes: 13 Table of Contents • 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.
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.
The engines manufactured by our AGCO Power division, which specializes in the manufacturing of non-road engines in the 75 to 500 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.
The engines manufactured by our AGCO Power division, which specializes in manufacturing off-road engines in the 75 to 500 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 select third-party suppliers that we believe are low cost and 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.
We select third-party suppliers that we believe are low cost and high quality and possess the most appropriate technology. 4 Table of Contents We also assist in the development of these products or component parts based upon our own design requirements.
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.
This subjects us to a range of trade, product, foreign exchange, employment, tax, environmental 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 6 Table of Contents contractual relationships with our dealers.
Compliance training includes education in AGCO’s culture and values and compliance with our global Code of Conduct, which, in turn, includes compliance with anti-bribery/corruption laws and policies, compliance with data privacy and cybersecurity protocols, 11 Table of Contents conflicts of interest, discrimination and workplace harassment policies and sexual harassment policies.
Compliance training includes education in AGCO’s culture and values and compliance with our global Code of Conduct, which, in turn, includes compliance with anti-bribery/corruption laws and policies, compliance with data privacy and cybersecurity protocols, conflicts of interest, discrimination and workplace harassment and sexual harassment policies.
Through our AGCO Agriculture Foundation, as well as our brand and regional engagement activities, we support a variety of non-profit organizations and local community-based groups. Available Information Our Internet address is www.agcocorp.com .
Through our AGCO Agriculture Foundation, as well as our brand and regional engagement activities, we support a variety of non-profit organizations and local community-based groups. 9 Table of Contents Available Information Our Internet address is www.agcocorp.com .
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 4 Table of Contents financing through our U.S., Canadian, European and Brazilian finance joint ventures at the joint ventures’ discretion.
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.
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. 3 Table of Contents We purchase some fully-manufactured tractors from Tractors and Farm Equipment Limited (“TAFE”), Carraro S.p.A. and Iseki & Company, Limited.
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.
Most of our products can be economically maintained with parts and service for a period of ten to 20 years.
Most of our products can be economically maintained with parts and service for a period of 10 to 20 years.
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.
In addition, Rabobank is the primary lender with respect to our credit facility, our senior term loan and the loans related to the planned Trimble Ag joint venture, 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.
Some examples of key programs and initiatives that we are focused on to enable us to attract, retain and develop our diverse workforce are described below: Talent To facilitate talent attraction and retention, we strive to make AGCO an inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits and health and wellness programs, and by platforms that build connections between our employees and their communities.
Some examples of key programs and initiatives that we are focused on to enable us to attract, retain and develop our diverse workforce are described below. 7 Table of Contents Talent To facilitate talent attraction, engagement and retention, we strive to make AGCO an inclusive and safe workplace, with opportunities for our employees to find success in their current roles as well as grow and develop in their careers, supported by strong compensation, benefits and health and wellness programs, and by platforms that build connections between our employees and their communities.
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.
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.
For example, our AGCO Power division and our engine suppliers are subject to air quality standards, and production at our facilities and sales of our products 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”).
Production at our facilities and sales of our products could be impaired if AGCO Power and our other engine suppliers are unable to timely respond to any changes in environmental laws and regulations affecting engine emissions, including the emissions of greenhouse gases (“GHG”).
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.
Engineering, Research and Innovation We make significant expenditures for engineering and applied research to improve the quality and performance of our products, to develop new products and technologies which enhance agriculture and integrate sustainability and to comply with government safety and engine emissions regulations.
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.
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 generally obtain a security interest in the new and used equipment we finance.
Through ongoing talent development, comprehensive compensation and benefits, and a focus on health, safety and employee well-being, we strive to help our employees in all aspects of their lives so they can do their best work.
We are committed to fostering a diverse and inclusive workplace that attracts and retains exceptional talent. Through ongoing talent development, comprehensive compensation and benefits, and a focus on health, safety and employee well being, we strive to help our employees in all aspects of their lives so they can do their best work.
See “Marketing and Distribution” for additional information. 2 Table of Contents Marketing and Distribution Dealers and Distributors 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.
Marketing and Distribution Dealers and Distributors 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.
We believe that our ability to offer our dealers a full product line of agricultural equipment and related replacement parts, as well as our digital tools to support the dealer’s sales, marketing, warranty and servicing efforts, helps ensure the vitality and increase the competitiveness of our dealer network.
We believe that our ability to offer our dealers a full product line of agricultural machines and precision agriculture technology, as well as our digital tools to support the dealer’s sales, marketing, warranty and servicing efforts, helps ensure the vitality and increases the competitiveness of our dealer network.
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.
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. Our net sales and income from operations historically have been the lowest in the first quarter and have increased in subsequent quarters.
Through our DE&I initiatives, we encourage employees to become involved in their communities, contributing time and talent for the improvement of the communities in which they live and work.
Through our DE&I initiatives, we encourage employees to become involved in their communities, contributing time and talent for the improvement of the communities in which they live and work. During 2023, we administered our third global employee experience and engagement survey.
In certain countries, sales of such systems for which we are 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. When we are responsible for installation services, fixed payment schedules may include upfront deposits, progress payments and final payment upon customer acceptance.
Payment terms vary by market and product, with fixed payment schedules on all sales. When we are responsible for installation services, fixed payment schedules may include upfront deposits, progress payments and final payment upon customer acceptance.
We continue to strive to offer a variety of working arrangements, including flexible schedules, telecommuting and job sharing, to help employees manage work and life balance. We are committed to providing total rewards that are market-competitive and performance-based, driving innovation and operational excellence.
Rewards We periodically review surveys of market rates for jobs to ensure our compensation practices are competitive. We continue to strive to offer a variety of working arrangements, including flexible schedules to help employees manage work and life balance. We are committed to providing total rewards that are market-competitive and performance-based, driving innovation and operational excellence.
Indicators that are measured with goal metrics that aid in closing gaps across our global operations. Leading indicators are measured using proactive prevention programs that are designed to reduce the overall risks by implementing risk assessments, ergonomic assessments and incident investigation to include detailed root cause corrective action analysis, near-miss corrective actions, and behavioral-based safety programs.
Leading indicators are measured using proactive prevention programs that are designed to reduce overall risks by implementing risk assessments, ergonomic assessments and incident investigations to include detailed root cause corrective action analysis, near-miss corrective actions, and behavioral-based safety programs.
Employees are further guided by our global Code of Conduct, which builds on the foundation of our embedded core values: Integrity, Trust, Respect, Team Spirit and Accountability. We also maintain a global anonymous reporting mechanism for the receipt, retention and treatment of complaints or concerns regarding accounting or other possible violations of our global Code of Conduct.
Employees are further guided by our global Code of Conduct. We also maintain a global anonymous reporting mechanism for the receipt, retention and treatment of complaints or concerns regarding accounting or other possible violations of our global Code of Conduct.
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.
Sales terms outside the United States and Canada are typically 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 often backed by letters of credit or credit insurance.
Item 1. Business AGCO Corporation was incorporated in Delaware in 1991. Unless otherwise indicated, all references in this Form 10-K to “AGCO,” “we,” “us” or the “Company” include AGCO Corporation and its subsidiaries. General We are a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world.
Item 1. Business AGCO Corporation was incorporated in Delaware in 1991. Unless otherwise indicated, all references in this Form 10-K to “AGCO,” “we,” “us” or the “Company” include AGCO Corporation and its subsidiaries. General We are a global leader in the design, manufacture and distribution of agricultural machinery and precision agriculture technology.
Net sales for 2022 were approximately $12,651.4 million, or 13.6% higher than 2021, primarily due to improved market demand and favorable pricing impacts. Income from operations was $1,265.4 million in 2022 compared to $1,001.4 million in 2021.
Net sales for 2023 were $14,412.4 million, or 13.9% higher than 2022, primarily due to favorable pricing impacts, improved product mix and favorable currency impacts. Income from operations was $1,700.4 million in 2023 compared to $1,265.4 million in 2022.
The lagging indicators are measured by each of our facilities and demonstrate the current state regarding injury rates such as total case incident rate (“TCIR”). We reported a global TCIR of 2.18 in 2022, which is a 15% decrease compared to 2021.
The lagging indicators are measured by each of our facilities and demonstrate the current state regarding injury rates such as total case incident rate (“TCIR”). This is the third year in a row we achieved double digit improvement in our global TCIR rate.
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.
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 have been nationally recognized in the United States as a female-friendly employer of choice. We are committed to increasing the percentage of female representation in our full time management-level employee group and our overall global employee base, as well as to further initiatives for compensation equity, employee engagement, development and inclusion.
We are committed to increasing the percentage of female representation in our full time management-level employee group and our overall global employee base, as well as to further initiatives for compensation equity, employee engagement, development and inclusion. We believe that embedding inclusion and equity into our everyday business practices enhances innovation and delivers better business results.
However, we do not believe we are dependent on any single patent or group of patents, although several of our trade and brand names are internationally recognized and are vital to our operations. We intend to maintain the separate strengths and identities of our core brand names and product lines.
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 or group of patents, although several of our trade and brand names are internationally recognized and are important to our operations.
In addition to salaries, our compensation programs include annual incentive bonuses, stock awards, and participation in various retirement savings plans, dependent upon the position and level of employee, and the countries in which we operate.
In addition to salaries, our compensation programs include annual short-term and long-term incentive programs and participation in various retirement savings plans, dependent upon the position and level of employee and the countries in which we operate. We also invest in talent development initiatives to support the ongoing career development of all employees, including learning management and leadership programs.
Independent Dealers and Distributors Percent of Net Sales (1) Geographical Region 2022 2022 2021 2020 Europe 695 49 % 54 % 57 % North America 1,735 25 % 24 % 24 % South America 265 17 % 12 % 9 % Rest of World (2) 405 9 % 10 % 10 % ____________________________________ (1) The summation of these individual percentages may not total due to rounding.
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 products. 3 Table of Contents Independent Dealers and Distributors Percent of Net Sales (1) Geographical Region 2023 2023 2022 2021 Europe 690 49 % 49 % 54 % North America 1,795 26 % 25 % 24 % South America 220 16 % 17 % 12 % Rest of World (2) 395 9 % 9 % 10 % ____________________________________ (1) The summation of these individual percentages may not total due to rounding.
Over the past year, our employees have completed online, self-directed instructor-led courses across a broad range of categories – leadership, inclusion and diversity, professional skills, technical competencies and compliance.
Our employees engage in learning and development targeted to their current roles and future career aspirations. This includes completing online, self-directed and instructor-led courses across a broad range of categories – leadership, inclusion and diversity, professional skills, technical competencies and compliance.
In certain international markets, our sales often are 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.
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 we are responsible for construction or installation may be contingent upon customer acceptance.
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.
We believe that these products and related devices are highly valued by farmers globally and are integral to the current and future growth of our equipment sales and revenues. The planned Trimble Ag joint venture will complement and enhance AGCO’s existing precision agriculture portfolio to deliver even more industry leading solutions across the crop cycle.
We strive to foster safe, inclusive and respectful workplaces wherever we do business, including prohibiting human trafficking, slavery, child labor or any other form of forced or involuntary labor. Our commitment to human rights also includes improving agricultural prosperity and supporting marginalized farmers and vulnerable populations in developing countries where our activities contribute to addressing adverse human rights impacts.
Our commitment to human rights also includes improving agricultural prosperity and supporting marginalized farmers and vulnerable populations in developing countries where our activities contribute to addressing adverse human rights impacts.
During 2022, our employee turnover rate related to voluntary terminations was approximately 9.5% as compared to 7.7% in 2021. Unions, Collective Bargaining Agreements and Work Councils Of our worldwide employees, approximately 5,700 are located in the United States and Canada.
Unions, Collective Bargaining Agreements and Work Councils Of our worldwide employees, approximately 5,800 are located in the United States.
We also provide our employees with employee resource groups (“ERG’s”), such as AGCO’s Global Women’s Network and AGCO’s Black Employee Network, to help foster a diverse and inclusive workplace as well as provide for the growth and development of underrepresented groups. We plan to expand our employee resource groups in the future, with executive sponsorship for each ERG.
We established employee resource groups (“ERGs”), such as AGCO’s Global Women’s Network and AGCO’s Black Employee Network, to help foster a diverse and inclusive workplace as well as support the growth and development of underrepresented groups. To support the global expansion of our ERGs, we have established a new framework to accelerate growth and organizational impact.
Furthermore, we have a performance management process that includes annual goal setting, mid-year reviews and annual performance appraisals. Both employees and managers play an active part in our performance management process, promoting a culture of accountability that fosters employee development. Rewards We regularly review surveys of market rates for jobs to ensure our compensation practices are competitive.
Furthermore, we have a performance management process that includes annual goal setting and annual performance appraisals. Both employees and managers play an active part in our performance management process, promoting a culture of accountability that fosters employee development. During 2023, our employee turnover rate related to voluntary terminations was approximately 7.5% as compared to 9.5% in 2022.
Our commitment to diversity and inclusion starts at the top with a highly skilled and diverse board. Three of our ten board members are women. Women represent approximately 14% of our full-time executive positions at the senior vice president and vice president levels, and approximately 17% of our overall full-time management-level employees.
Women represent approximately 13% of our full-time executive positions at the senior vice president and vice president levels, and approximately 19% of our overall full-time management-level employees.
Our past experience with outside suppliers generally has been favorable, although in 2021 and 2022 we experienced supply chain disruptions for several key components such as the global semiconductor shortage. 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.
Our past experience with outside suppliers generally has been favorable, although from 2020 to 2022 we experienced supply chain disruptions for several key components, such as semiconductors. These supply chain disruptions eased over the course of 2023.
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.
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. We have a minority interest in the joint ventures and they are owned by AGCO and a wholly-owned subsidiary of Rabobank. The majority of the assets of the finance joint ventures consist of finance receivables.
Through our global DE&I initiatives, employees take part in robust training, such as creating an inclusive environment and cultural training.
Building upon our cultural beliefs, our employees value learning opportunities that increase awareness and understanding of the diverse cultures that exist within our workforce and throughout the countries in which we operate. Through our global DE&I initiatives, employees take part in robust training, including creating an inclusive environment and cultural training.
Human Capital We have approximately 25,600 employees worldwide, who are guided by our Company’s clear purpose – Farmer-focused solutions to sustainably feed our world. We are committed to fostering a diverse and inclusive workplace that attracts and retains exceptional talent.
Throughout our value chain, we attempt to deliver sustainable product solutions, optimize our transportation and logistics networks and engage supply chain partners to help drive environmental progress. Human Capital We have approximately 27,900 employees worldwide, who are guided by our Company’s clear purpose – Farmer-focused solutions to sustainably feed our world.
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 have regional competitors around the world that have significant market share in a single country or a group of countries. Additionally, the industry is attracting technology-focused companies and start-up ventures as technology increasingly impacts all aspects of the crop cycle.
Human Rights Policy We are committed to respecting human rights in all aspects of our global operations under our global Human Rights Policy. We believe that we have a responsibility to ensure that human rights are understood and observed in every region in which we operate.
We believe that we have a responsibility to ensure that human rights are understood and observed in every region in which we operate. We strive to foster safe, inclusive and respectful workplaces wherever we do business, including prohibiting human trafficking, slavery, child labor or any other form of forced or involuntary labor.
We will continue to focus on the leading indicators in 2023 with a major emphasis on risk reduction by completing projects using tools such as risk/ergonomic assessments and behavioral-based safety programs. All sites worldwide have established objectives and targets outlined in a three-year glide path to aid in achieving a target regarding TCIR equal to 1.50 or less by 2025.
We will be targeting improvement actions at our sites based on the inputs we receive from internal and vendor surveys that will drive further feedback. All sites worldwide have established objectives and targets to aid in achieving a target TCIR equal to 1.50 or less by 2025 .
See “Financial Highlights” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for additional information. 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.
The increase in income from operations in 2023 was primarily the result of positive net pricing and favorable product mix, partially offset by higher selling, general, and administrative expenses and engineering expenses. See “Financial Highlights” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for additional information. Competition The agricultural industry is highly competitive.
During 2022, we administered a global employee engagement and experience survey for all of our employees to seek feedback on the employee experience. 79% of our workforce participated in the survey with a 69% level of favorable engagement with respect to our core employment engagement index metrics. We intend to repeat the survey on an annual basis.
The survey is an opportunity for all employees across our offices and shop floor locations worldwide to provide feedback on what we are doing well and where we can improve. 84% of our workforce participated in the survey, with a favorable engagement result of approximately 71%, which aligns with our core employee engagement index metric.
Our global safety initiative includes the intention to add 80 AGCO sites into the program during 2023, up from 53 sites in 2022, ensuring that we are capturing and regularly reporting safety statistics to ensure a complete understanding of our global safety performance.
We reported a global TCIR of 1.86 in 2023, which is an approximate 15% decrease compared to 2022. In 2023, we focused on a global safety initiative to collect data from all sites, which added 80 additional AGCO sites into the program during 2023, up from 53 sites in 2022.
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 32 countries and sell our products in approximately 140 countries.
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. Regulation and Government Policy We have manufacturing facilities or other physical presence in approximately 31 countries and sell our products primarily through independent dealers and distributors in approximately 140 countries.
As previously discussed, our health and safety program focuses on risk reduction and safety management systems that promote preventative measures.
Health, Wellness and Safety We are committed to the health, safety and wellness of our employees, striving to work safe, every day in every way. Our health and safety program focuses on risk reduction and safety management systems that promote preventative measures. We have implemented many leading and lagging indicators for enabling employee health and safety.
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We distribute most of our products through approximately 3,100 independent dealers and distributors in approximately 140 countries.
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We distribute most of our products through approximately 3,100 independent dealers and distributors in approximately 140 countries. We also provide retail and wholesale financing through our finance joint ventures with Coöperatieve Rabobank U.A., which, together with its affiliates, we refer to as “Rabobank.” On September 28, 2023, the Company entered into a Sale and Contribution Agreement with Trimble Inc.
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We also provide retail and wholesale financing through our finance joint ventures with Coöperatieve Rabobank U.A., which, together with its affiliates, we refer to as “Rabobank.” Products The following table sets forth a description of the Company’s more significant products and their percentage of net sales: Percentage of Net Sales Product Product Description 2022 (1) 2021 (1) 2020 Tractors • High horsepower tractors (140 to 650 horsepower); typically used on large acreage farms, primarily for row crop production, soil cultivation, planting, land leveling, seeding and commercial hay operations 59 % 57 % 57 % • 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 Replacement Parts • Replacement parts for all of the products we sell, including products no longer in production.
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("Trimble") to form a joint venture ("Trimble Ag joint venture") (i) to which Trimble will contribute its agricultural business (other than certain Global Navigation Satellite System and guidance technologies) and AGCO will contribute JCA Technologies, and (ii) AGCO will acquire an 85% interest in the joint venture for cash consideration of $2.0 billion.
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The COVID-19 pandemic, the conflict in Ukraine and other economic factors continue to create volatility in the global economy, including employment disruptions, supply chain constraints and logistics interruptions. Elevated agricultural commodity prices have supported favorable farm economics resulting in farmers upgrading and replacing aging fleets. Supply chain constraints negatively affected industry production during 2022.
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We believe the joint venture will create a global-leading mixed-fleet precision ag platform. We will be the exclusive provider of Trimble’s comprehensive technology offering, supporting the future development and distribution of next-generation agriculture technologies. Trimble offers a wide variety of user-friendly technologies compatible across brands, equipment models and farm types.
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Future demand for agricultural equipment will be influenced by the factors noted above.
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Its hardware, software and cloud-based applications span all aspects of the crop cycle, from land preparation to planting and seeding to harvest. We expect the transaction to close during the first half of 2024. The closing is subject to customary conditions, including compliance with antitrust and similar laws.
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Despite global supply chain and logistics disruptions, farmer economics are healthy and continue to bolster market demand. 2022 Compared to 2021 Financial Highlights Net income attributable to AGCO Corporation and subsidiaries for 2022 was $889.6 million, or $11.87 per diluted share, compared to $897.0 million, or $11.85 per diluted share for 2021.
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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 13 % 13 % 15 % Grain Storage and Protein Production Systems • Grain storage bins and related drying and handling equipment systems; seed-processing systems; swine and poultry feed storage and delivery, ventilation and watering systems; egg production systems, and broiler production equipment 7 % 9 % 10 % ____________________________________ (1) The summation of these individual percentages may not total due to rounding.
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The increase in income from operations in 2022 was primarily the result of higher net sales and production volumes along with significant pricing to offset inflationary cost increases. Income from operations was also impacted by impairment charges recorded during the first quarter of 2022 related to our joint ventures in Russia of approximately $36.0 million.
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Precision Agriculture We offer solutions to farmers to optimize performance, while improving ease of use. These solutions are reflected in the table above.
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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 products.
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The Trimble Ag joint venture will allow us to have over 500,000 connectable machines. By 2 Table of Contents combining these two precision agriculture portfolios, we will be positioned to drive outsized growth and better provide next-generation technologies to even more farmers around the world.
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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. 5 Table of Contents Cybersecurity We have a cybersecurity incident response plan in place that provides a documented framework for handling high severity security incidents and includes facilitated coordination across multiple functions of the Company.
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Geopolitical factors, including inflation and regional conflicts, continue to create volatility in the global economy, including the potential for energy shortages, employment disruptions, supply chain constraints and delays in deliveries, as well as logistics interruptions. Farmer input costs have moderated from levels experienced during 2022, and easing supply chain constraints in 2023 enabled industry production to meet market demand.
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We invest in threat intelligence and are active participants in industry and government forums to strive to improve our overall capabilities with respect to cybersecurity. We routinely perform reviews of threat intelligence and vulnerability management capabilities, while performing simulations and drills at both technical and management levels.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIt 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.
Biggest changeAny changes that increase 18 Table of Contents 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. Further, the Pacific Rim region is an important producer of parts and components that are critical to our products, particularly semiconductor chips.
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.
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, by the factors discussed elsewhere in this “Risk Factors” section, particularly the factors that impact the delivered cost of our products.
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 • 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 substantial indebtedness could have other important adverse consequences such as: • requiring us to dedicate a substantial portion of our cash flows 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 • 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.
Overall collectability depends upon the financial strength of the agricultural industry, which in turn depends upon the factors discussed elsewhere in this “Risk Factors” section. 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.
Overall collectability depends upon the financial strength of the agricultural industry, which in turn depends upon the factors discussed elsewhere in this “Risk Factors” section. Certain 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 financing is not available, or available only at unattractive prices, it would negatively impact our performance. Both AGCO and our AGCO Finance joint ventures have substantial accounts receivable from dealers and retail customers, and we both are adversely impacted when collectability is less than optimal.
To the extent that financing is not available, or available only at unattractive prices, it would negatively impact our performance. Both AGCO and our AGCO Finance joint ventures have substantial accounts receivable from dealers and retail customers and are adversely impacted when collectability is less than optimal.
Item 1A. Risk Factors We make forward-looking statements in this report, in other materials we file with the SEC, on our website, in press releases, and in materials that we otherwise share with the public. In addition, our senior management makes forward-looking statements orally to investors, analysts, the media and others.
Item 1A. Risk Factors We make forward-looking statements in this report, in other materials we file with the SEC, on our website, in press releases and in materials that we otherwise share with the public. In addition, our senior management makes forward-looking statements to investors, analysts, the media and others.
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.
Our ability to address these issues will determine the extent to which we are able to successfully integrate, develop and grow acquired businesses and technologies to realize the expected benefits of these transactions. Our failure to do so could have a material adverse effect on our performance.
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. • our ability to successfully carry out our growth strategies for acquired businesses often will be affected by, among other things, our ability to maintain and enhance our relationships with their existing customers, our ability to 20 Table of Contents provide additional product distribution opportunities to the acquired businesses 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; and • our approach and strategies with respect to the development and introduction of new precision technology solutions to improve the profitability and sustainability for our farmer customers, including technologies we obtain through acquisitions, investments and joint ventures, may not provide the desired results for our customers.
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; • our ability to successfully carry out our growth strategies for acquired businesses often 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 the acquired businesses 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; and • our approach and strategies with respect to the development and introduction of new precision technology solutions to improve the profitability and sustainability for our farmer customers, including technologies we obtain through acquisitions, investments and joint ventures, may not provide the desired results for our customers.
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. During 2022, we experienced significant supply chain interruptions, including delays in timely deliveries of components.
As a result, our ability to timely and efficiently manufacture current 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. During 2022, we experienced significant supply chain interruptions, including delays in timely deliveries of components.
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 government financing subsidies to farmers, which can be significant in countries such as Brazil, as discussed elsewhere in this “Risk Factors” section.
The economic health of the agricultural industry also is influenced by general economic conditions, interest rate and exchange rate levels, and the availability of financing for retail customers, including government financing subsidies to farmers, which can be significant in countries such as Brazil, as discussed elsewhere in this “Risk Factors” section.
In emerging markets, some of these (and other) risks can be greater than they might be elsewhere. In addition, the financing provided by the AGCO Finance joint ventures or by others is supported by a government subsidy or guarantee in some markets, including financing rate subsidies.
In emerging markets, some of these (and other) risks can be greater than they might be elsewhere. In addition, the financing provided by the AGCO Finance joint ventures or by others in certain jurisdictions is supported by a government subsidy or guarantee in some markets, including financing rate subsidies.
In addition, AGCO sells products in, and purchase parts and components from, other regions where there could be hostilities. Should hostilities arise, we would expect our sales to decline and for our parts and component deliveries to be interrupted, which would adversely impact our performance.
In addition, AGCO sells products in, and purchases parts and components from, other regions where there could be hostilities. Should hostilities arise, we would expect our sales to decline and for our parts and component deliveries to be interrupted, which would adversely impact our performance.
Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could significantly increase our effective tax rate and ultimately reduce our cash flows from operating activities and otherwise have a material adverse effect on our financial condition. In 2022, the U.S.
Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could significantly increase our effective tax rate and ultimately reduce our cash flows from operating activities and otherwise have a material adverse effect on our financial condition.
It is unclear what impact the hostilities in Ukraine going forward will have on our net sales or assets, although we assume that our net sales will decline in the Ukraine, possibly significantly. We assess the fair value of our assets in Ukraine for potential impairment on a periodic basis as warranted.
It is unclear what impact the hostilities in Ukraine going forward will have on our net sales or assets, although we assume that our net sales may continue to decline in the Ukraine, possibly significantly. We assess the fair value of our assets in Ukraine for potential impairment on a periodic basis as warranted.
While we do not believe that the ultimate consequences of the attack were material to our performance, over the course of 2022 the occurrence of any of similar or other events in the future could compromise our networks, and the information stored there could be accessed, publicly disclosed, lost or stolen.
While we do not believe that the ultimate consequences of the attack were material to our performance, the occurrence of any similar or other events in the future could compromise our networks, and the information stored there could be accessed, publicly disclosed, lost or stolen.
For example, a decrease or elimination of current price 17 Table of Contents protections for commodities or of subsidy payments or financing rate subsidies for farmers in the European Union, the United States or elsewhere 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.
For example, a decrease or elimination of current price protections for commodities or of subsidy payments or financing rate subsidies for farmers in the European Union, the United States, Brazil or elsewhere 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.
The impact of any changes to current trade, tariff 22 Table of Contents 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 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.
Financial Risks We can experience substantial and sustained volatility with respect to currency exchange rates and interest rates, which can adversely affect our performance and the competitiveness of our products. We conduct operations in a variety of currencies.
Financial Risks We can experience substantial and sustained volatility with respect to currency exchange rates and interest rates, which can adversely affect our performance and the competitiveness of our products. 16 Table of Contents We conduct operations in a variety of currencies.
These uncertainties and implications could materially adversely impact the financial markets in Europe and globally, as well as our customers, suppliers and lenders. Inflation can impact our costs and sales. During 2022, we experienced significant inflation in a range of costs, including for parts and components, transportation, logistics, and energy.
These uncertainties and implications could materially adversely impact the financial markets in Europe and globally, as well as our customers, suppliers and lenders and ultimately our performance. Inflation can impact our costs and sales. During 2022 and 2023, we experienced significant inflation in a range of costs, including for parts and components, labor, transportation, logistics, and energy.
The AGCO Finance joint ventures, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance approximately 50% of the retail sales of our tractors and combines in the markets where the joint ventures 16 Table of Contents operate.
The AGCO Finance joint ventures, which are controlled by Rabobank and are dependent upon Rabobank for financing as well, finance approximately 50% of the retail sales of our tractors and combines in the markets where the joint ventures operate.
If we are unable to compete successfully against other agricultural equipment manufacturers, we could lose dealers and their retail customers and performance may decline. 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.
If we are unable to compete successfully against other agricultural equipment manufacturers, we could lose dealers and their retail customers and performance may decline. Our expansion plans in emerging markets entail significant risks. 13 Table of Contents Our long-term strategy includes establishing a greater manufacturing and supply-chain and/or marketing presence in emerging markets such as India and Africa.
These changes, particularly increases in the cost of steel, also can impact the cost of the products we manufacture. Trade restrictions and changes in, or uncertainty surrounding, global trade policy also could affect our competitive position.
These changes, particularly increases in the 12 Table of Contents cost of steel, also can impact the cost of the products we manufacture. Trade restrictions and changes in, or uncertainty surrounding, global trade policy also could affect our competitive position.
There could be a risk that other countries may leave the European Union, leaving uncertainty regarding debt burden of certain Eurozone countries and their ability to meet future financial obligations, as well as uncertainty over the long-term stability of the Euro as a single common currency.
There also is a risk that other countries may leave the European Union, leaving uncertainty regarding debt burden of certain Eurozone countries and their ability to meet future financial obligations, as well as uncertainty over the long-term stability of the Euro as a single common currency.
We may need more funding for product development and refinement than is readily available, which could adversely affect our business. If we are unable to deliver precision agriculture and high-tech solutions to our customers, it could materially adversely affect our performance.
We may need more funding for product development and refinement than is readily available, which could adversely affect our performance. If we are unable to deliver precision agriculture and high-tech solutions to our customers, it could materially adversely affect our performance. Increasingly our customers are implementing precision farming solutions.
The COVID-19 impacts, in addition to related or unrelated application, modification or adoption of laws, regulations, trade agreements or policies, can adversely affect the agricultural industry, including the imposition of import and export duties and quotas, expropriation and potentially burdensome taxation, and could have an adverse effect on our performance.
Future pandemics, in addition to related or unrelated application, modification or adoption of laws, regulations, trade agreements or policies, can adversely affect the agricultural industry, including the imposition of import and export duties and quotas, expropriation and potentially burdensome taxation, and could have an adverse effect on our performance.
Among the risks that we face are (i) increased governmental regulation of both our manufacturing operations and the equipment that we produce, (ii) the possibility that we will not become as resource-efficient in our operations as we need to, both as a result of our own actions (or inactions) and those of our suppliers, (iii) that we will not be able to develop new and improved products that help our farmer customers address climate-related changes and opportunities and that keep our products competitive with the products of others, (iv) that climate change will reduce demand for our products, (v) the impacts on our physical facilities, including from increased severe weather condition risks, and (vi) the cost of complying with the SEC’s proposed climate change disclosure rules if implemented as proposed.
Among the risks that we face are (i) increased governmental regulation of both our manufacturing operations and the equipment that we produce, (ii) the possibility that we will not become as resource-efficient in our operations as we need to, both as a result of our own actions (or inactions) and those of our suppliers, (iii) that we will not be able to develop new and improved products that help our farmer customers address climate-related changes and opportunities and that keep our products competitive with the products of others, (iv) that climate change will reduce demand for our products, and (v) the impacts on our physical facilities, including from increased severe weather condition risks.
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.
Any delays or other problems with our new product launches, such as high warranty costs, 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.
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. 18 Table of Contents Brexit and political uncertainty in the United Kingdom and the European Union could disrupt our operations and adversely affect our performance.
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 and could adversely impact our performance. Brexit and political uncertainty in the United Kingdom and the European Union could disrupt our operations and adversely affect our performance.
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.
However, it is impossible 15 Table of Contents 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, in recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina. As a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting implicitly from certain capital market operations, usually effected to obtain U.S. dollars, has broadened significantly.
In recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina. As a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting implicitly from certain capital market operations, usually effected to obtain United States dollars, has broadened significantly.
As of December 31, 2022, we had approximately 40 employees in Ukraine, and in 2022 and 2021, we had net sales of approximately $76 million and $86 million, respectively. As of December 31, 2022 and 2021, we had less than $15 million in assets in Ukraine.
As of December 31, 2023, we had approximately 40 employees in Ukraine, and in 2023 and 2022, we had net sales of approximately $85 million and $76 million, respectively. As of December 31, 2023 and 2022, we had less than $15 million in assets in Ukraine.
The economic health of the agricultural industry is affected by numerous factors, including farm income, farm input costs, farm land values and debt levels, all of which are influenced by levels of commodity and protein prices, acreage planted, crop yields, agricultural product demand (including crops used as renewable energy sources), government policies and government subsidies.
The economic health of the agricultural industry is affected by numerous factors, including farm income, farm land values and debt levels and financing costs, all of which are influenced by levels of commodity and protein prices, acreage planted, crop yields, agricultural product demand, farm input costs, government policies and government subsidies.
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 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.
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, it could adversely affect our performance.
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, it could adversely affect our performance. We are subject to disclosure obligations with respect to conflict materials.
In addition, as security threats continue to evolve and increase in frequency and sophistication, we increasingly are needing to invest additional resources to protect the security of our systems and likely will need to invest even more in the future.
In addition, as security threats continue to evolve and increase in frequency and sophistication, we increasingly are needing to invest additional resources to protect the security of our systems and likely will need to invest even more in the future. Item 1B. Unresolved Staff Comments None.
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.
While we make every effort to comply with all applicable tax laws, audits and other reviews by governmental entities for non-compliance could result in our companies being required to pay additional taxes, interest and penalties.
Our precision technology products include both hardware and software components that relate to guidance, telemetry, automation, autonomy and connectivity solutions. We have to be able to successfully acquire and develop and introduce new solutions that improve profitability and result in sustainable farming techniques in order to remain competitive.
In order to remain competitive, we have been able to successfully acquire or develop and introduce new solutions that improve profitability and sustainable farming techniques. Our precision technology products include both hardware and software components that relate to guidance, 14 Table of Contents telemetry, automation, autonomy and connectivity solutions.
Domestic and foreign political developments and government regulations and policies directly affect the international agricultural industry, which affects the demand for agricultural equipment. Declines in demand for agricultural equipment adversely affect our performance. As discussed previously in “Risks Related to the COVID -19 Pandemic,” the pandemic has caused a global recession and increased economic and demand uncertainty.
Domestic and foreign political developments and government regulations and policies directly affect the international agricultural industry, which affects the demand for agricultural equipment. Declines in demand for agricultural equipment adversely affect our performance. The COVID-19 pandemic caused a global recession and increased economic and demand uncertainty.
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.
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.
This, in turn, could affect our credit ratings and borrowing costs. Market, Economic and Geopolitical Risks 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, unfavorable weather conditions and lower commodity and protein prices, adversely affect our performance.
Market, Economic and Geopolitical Risks 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, unfavorable weather conditions and lower commodity and protein prices, adversely affect our performance. Our success depends entirely on the vitality of the agricultural industry.
Such investments may not produce attractive solutions for our customers. 19 Table of Contents We also may have to depend on third parties to supply certain hardware or software components or data services in our precision technology products. Our dealers ability to support such solutions also may impact our customers, acceptance and demand of such products.
We also may have to depend on third parties to supply certain hardware or software components or data services in our precision technology products. Our dealers' ability to support such solutions also may impact our customers, acceptance and demand of such products.
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.
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. Our ability to recruit, develop, train and retain qualified and skilled employees could impact our ability to execute strategies.
We have significant operations in the United Kingdom and the European Union. The United Kingdom withdrew from the European Union, in a process known as “Brexit,” effective December 31, 2020.
A majority of our operations are in the United Kingdom and the European Union. The United Kingdom withdrew from the European Union, in a process known as “Brexit,” effective December 31, 2020.
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.
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.
Data Security, Privacy and Cybersecurity Risks 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.
Failure to do so could impair our ability to execute our business strategies and could ultimately impact our performance. Data Security, Privacy and Cybersecurity Risks 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.
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.
While supply chain disruptions eased in 2023, there can be no assurance that there will not be future disruptions. 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.
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.
Our net sales and income from operations historically have been the lowest in the first quarter and have increased in subsequent quarters. 11 Table of Contents 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.
For a discussion of some of the actions that we have taken, see Item 1, “Business”, above. 23 Table of Contents 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 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.
While we have been able to pass along these costs through increased prices, there can be no assurance that we will be able to continue to do so. If we are not, it will impact our performance. Manufacturing and Operations Our success depends on the introduction of new products, which requires substantial expenditures.
While inflation has eased over 2023 and we have been able to pass along these higher costs through increased prices, there can be no assurance that we will be able to continue to do so. If we are not, it will adversely impact our performance.
The primary provisions of the Acts are effective during 2023 and forward. The Company is evaluating the impact these acts could have on the Company’s future tax provision and the effective tax rate, as well as any other impacts on the Company’s financial position and results of operations.
The European Union effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. The Company is evaluating the impact this directive could have on the Company’s future tax provision and the effective tax rate, as well as any other impacts on the Company’s financial position and results of operations.
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.
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. 20 Table of Contents Human Capital Risks 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.
Any failure by us to satisfy their assessments could impact the desirability of an investment in AGCO and the share price of our common stock.
Any failure by us to satisfy their assessments could impact the desirability of an investment in AGCO, our access to capital could be restricted and the share price of our common stock could be impacted. For a discussion of some of the actions that we have taken, see Item 1, “Business”, above.
Our ability to recruit, develop, train and retain qualified and skilled employees could impact our ability to execute strategies. 24 Table of Contents Our success is dependent, in part, on our ability to recruit, develop, train and retain qualified employees with the relevant education, background and experience.
Our success is dependent, in part, on our ability to recruit, develop, train and retain qualified employees with the relevant education, background and experience. Equally we must be able to retain such skilled employees through our efforts to develop, train, compensate and engage them.
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.
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.
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. 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.
We have a substantial amount of indebtedness and will incur more as part of the planned Trimble Ag joint venture, 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.
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. As previously announced, in connection with the planned Trimble Ag joint venture, we expect to incur a substantial amount of additional indebtedness.
Our long-term results depend upon our ability to introduce and market new products successfully.
Product Development, Manufacturing and Operations 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.
We continue to review and improve our safeguards to minimize our exposure to future attacks. We do not believe the cost of remediation to the impacted systems will be material. To date, the cost of those efforts has not been consequential. We have cyber insurance coverage, and we recently have filed a claim associated with the attack.
We have invested heavily in maturing our information technology and cybersecurity operations and continue to review and improve our safeguards to minimize our exposure to future attacks. The cost of remediation to the impacted systems has not been material. We maintain a cyber liability insurance 21 Table of Contents program, although the coverage may not be sufficient in some circumstances.
However, we may not be able to address these risks effectively and efficiently, which would impact our performance. In addition, investors increasingly are assessing their investments and investment opportunities based upon how businesses are addressing climate change.
However, we may not be able to address these risks effectively and efficiently, which would impact our performance. In addition, we are increasingly subject to requirements for disclosure regarding our GHG emissions as well as those of our upstream vendors and downstream customers.
Removed
Risks Related to the COVID-19 Pandemic Our business has been materially impacted by COVID-19, and the impacts are likely to continue for as long as COVID-19 continues to impact our supply chain, labor force and demand for our products.
Added
While to date the consequences to the Company from Brexit have not been significant, the implementation of Brexit is not complete and over the longer term, changes in the regulatory environment, particularly changes that restrict the movement of capital, goods and personnel that result in increases in compliance obligations, could adversely impact our performance.
Removed
COVID-19 has negatively impacted our business, initially through closures, higher absentee rates, and reduced production at both our plants and the plants that supply us with parts and components, transitioning to supply chain disruptions, including the inability of some of our suppliers to meet demand and logistics and transportation-related companies to deliver products in a timely manner.
Added
These investments include the recently announced planned acquisition of the agriculture assets and technologies of Trimble through the formation of a joint venture of which we will own 85% further discussed in the Trimble Ag joint venture transaction risk factor below. Such investments may not produce attractive solutions for our customers.
Removed
In addition, we have had to incur various costs related to preventing the spread of COVID-19, including changes to our factories and other facilities and those related to enabling remote work.
Added
From time-to-time we seek to expand through acquisitions of other businesses, including, our planned acquisition of the agricultural assets and technologies of Trimble through the formation of a joint venture of which we will own 85%, which is further discussed in the Trimble Ag joint venture transaction risk factor below.
Removed
We expect COVID-19 to continue to impact our business, although the manner and extent to which it impacts us will depend on future developments, including the duration of the pandemic, the timing, distribution and impact of vaccinations, and possible mutations of the virus that are more contagious or resistant to current vaccines.
Added
We may not be able to complete the Trimble Ag joint venture transaction or successfully integrate the joint venture into our business, which could adversely affect our business or results of operations.
Removed
Measures taken by governments around the world, as well as businesses, including us, and the general public in order to limit the spread of COVID-19 will impact our business as well. These measures have included travel bans and restrictions, quarantines, shelter-in-place orders, curfews, business and government office closures, increased border controls and closures, port closures and transportation restrictions.
Added
We recently announced the planned acquisition of the agriculture assets and technologies of Trimble through the formation of the Trimble Ag joint venture, of which we will own 85%.
Removed
The impacts of COVID-19 and these measures could include, but are not limited to, the following: • Overall demand for our products could decline.
Added
Closing the transaction is dependent upon obtaining required regulatory approvals (primarily competition and antitrust approvals), obtaining the necessary financing, and fulfilling other closing conditions, all of which, at least in part, are not within our control.
Removed
While most farm-related operations have been deemed “essential” throughout the pandemic and are working to relatively normal levels, the consumption of grain for food, fuel (including ethanol) and livestock feed was negatively impacted initially during the first half of 2020 and could be impacted again.
Added
The Sale and Contribution Agreement ("the Agreement") entitles Trimble and AGCO to terminate the Agreement under certain circumstances, including the failure of the closing to occur nine months following the date of entry into the Agreement (followed by two three-month extensions in the event that the delay is the result of the failure to obtain certain antitrust approvals).
Removed
As discussed below, generally decreased demand for agricultural products negatively impacts demand for our products as well. • To the extents that factory closures, increased absentee rates, or reduced production, whether on our part or the part of our suppliers, or the failure of our suppliers to meet demand or of shipping companies to timely deliver products, reduces our production of completed products, our sales will be less than they otherwise would have been.
Added
Under certain circumstances, we could be obligated to pay Trimble a termination fee of $94 million.
Removed
In addition, decreases in sales have and can result in increased inventory and related costs. Supply chain issues of particular concern include a wide range of parts and components that we use, particularly semiconductors.
Added
In addition, acquisitions and joint venture transactions involve many risks, including the difficulty of determining the appropriate valuation, which is based upon a number of factors, including projections provided by the seller, which may not prove accurate, the challenges attendant to integrating the operations, technologies, services and products of the acquired lines of businesses, reactions by customers to the transaction, particularly the rate at which Trimble’s largest OEM customer reduces purchases of Trimble equipment, and the rate of replacement by the joint venture of those sales, personnel turnover, and the diversion of management's attention from other business matters.
Removed
We may continue to face supplier bottlenecks and delays in all regions, as well as continued challenges with freight logistics, and we continue to work to mitigate the impact of these issues in order to meet end-market demand. 15 Table of Contents • We could incur additional costs due to the adherence to cleaning requirements and social distancing guidelines and increased costs of labor, parts and components and shipping. • We severely limited travel by our employees in 2020 and 2021, and to the extent that these limitations return, it could impact our ability to efficiently manage our business and effectively market our products, including our ability to participate in trade shows. • Declines in the general economy as a result of COVID-19 could negatively affect the value our pension plan assets, and, if this occurs, it likely will result in increased pension expenses and funding requirements. • Declines in performance as a result of COVID-19 could require us to record significant impairment charges with respect to certain noncurrent assets (such as goodwill and other intangible assets) and equity method investments.
Added
In addition, we may be unable to achieve anticipated benefits from the transaction in the time frame that we anticipate, or at all. All of these risks, as well as the others that typically accompany a large transaction, could adversely affect our business or results of operations .
Removed
We also may be required to write-down inventory that is deemed obsolete due to decreased sales and rising costs that we may not be able to pass on to our customers. • Should farm economies decline, we could experience slower collections and larger write-offs of accounts receivable.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFt.) United States: Assumption, Illinois Manufacturing/Sales and Administrative Office — 933,900 Batavia, Illinois Parts Distribution 522,900 — Duluth, Georgia Corporate Headquarters 158,900 — Hesston, Kansas Manufacturing 6,300 1,469,100 Jackson, Minnesota Manufacturing 31,400 1,006,400 International: Beauvais, France (1) Manufacturing — 2,231,300 Breganze, Italy Manufacturing 11,800 1,562,000 Ennery, France Parts Distribution 931,100 360,300 Linnavuori, Finland Manufacturing 15,900 471,900 Hohenmölsen, Germany Manufacturing — 437,100 Marktoberdorf, Germany Manufacturing 263,100 1,552,600 Wolfenbüttel, Germany Manufacturing — 546,700 Stockerau, Austria Manufacturing 37,200 160,700 Thisted, Denmark Manufacturing 92,400 295,300 Suolahti, Finland Manufacturing/Parts Distribution 51,600 785,100 Canoas, Brazil Regional Headquarters/Manufacturing 23,000 1,138,700 Mogi das Cruzes, Brazil Manufacturing — 793,400 Santa Rosa, Brazil Manufacturing — 540,600 Changzhou, China Manufacturing 76,800 767,000 _______________________________________ (1) Includes our joint venture, GIMA, in which we own a 50% interest.
Biggest changeProperties Our principal manufacturing locations and/or properties as of January 31, 2024 were as follows: Location Description of Property United States: Assumption, Illinois Manufacturing/Sales and Administrative Office Batavia, Illinois Parts Distribution Duluth, Georgia Corporate Headquarters Hesston, Kansas Manufacturing Jackson, Minnesota Manufacturing Morton, Illinois 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 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.
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. 26 Table of Contents
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. 23 Table of Contents
Removed
Item 2. Properties Our principal manufacturing locations and/or properties as of January 31, 2023, were as follows: Location Description of Property Leased (Sq. Ft.) Owned (Sq.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−5 removed2 unchanged
Biggest changeIn July 2022, the case was tried before a jury, which determined that we and Precision Planting had not infringed the Deere patents. The case currently is subject to customary post-trial procedures, including the right of the parties to appeal. We have an indemnity right under the purchase agreement related to the acquisition of Precision Planting from its previous owner.
Biggest changeThe two complaints subsequently were consolidated into a single case, Case No. 1:18-cv-00827-CFC. In July 2022, the case was tried before a jury, which determined that the Company and Precision Planting had not infringed the Deere patents. Following customary post-trial procedures, the Court entered a judgement in the Company’s favor, and Deere appealed the judgment to the U.S.
During 2017, we purchased Precision Planting, which provides precision agricultural technology solutions. In 2018, Deere & Company (“Deere”) filed separate complaints in the U.S. District Court of Delaware against us and Precision Planting alleging that certain products of those entities infringed certain patents of Deere. The two complaints subsequently were consolidated into a single case, Case No. 1:18-cv-00827-CFC.
Item 3. Legal Proceedings During 2017, the Company purchased Precision Planting, which provides precision agricultural technology solutions. In 2018, Deere & Company (“Deere”) filed separate complaints in the U.S. District Court of Delaware against the Company and Precision Planting alleging that certain products of those entities infringed certain patents of Deere.
Removed
Item 3. Legal Proceedings In 2008 and 2012, as part of routine audits, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of our Brazilian operations and the related transfer of certain assets to our Brazilian subsidiaries.
Added
Court of Appeals for the Federal Circuit. The appeal is fully briefed and is awaiting oral arguments before the court. The Company has an indemnity right under the purchase agreement related to the acquisition of Precision Planting from its previous owner.
Removed
The amount of the tax disallowance through December 31, 2022, not including interest and penalties, was approximately 131.5 million Brazilian reais (or approximately $24.9 million). The amount ultimately in dispute will be significantly greater because of interest and penalties that will continue to increase as time progresses.
Removed
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.
Removed
However, the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which could take several years. On January 12, 2023, the Brazilian government issued a “Litigation Zero” tax amnesty program, whereby cases being disputed at the administrative court level of review for a period of more than ten years can be considered for amnesty.
Removed
If companies choose to enroll in the amnesty program, it would not be considered an admission of guilt with respect to outstanding cases. We are considering whether or not to apply to enroll in the program by March 2023. The ultimate outcome of our consideration with respect to our participation in the amnesty program cannot currently be determined.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 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.
Biggest changeItem 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. We have a history of paying quarterly cash dividends.
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, the MVIS Global Agribusiness Index for the five years ended December 31, 2022.
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, the MVIS Global Agribusiness Index for the five years ended December 31, 2023.
As of the close of business on February 23, 2023, the closing stock price was $141.76, and there were 429 stockholders of record (this number does not include stockholders who hold their stock through brokers, banks and other nominees).
As of the close of business on February 20, 2024, the closing stock price was $106.47, and there were 448 stockholders of record (this number does not include stockholders who hold their stock through brokers, banks and other nominees).
Removed
Cumulative Total Return for the Years Ended December 31, 2017 2018 2019 2020 2021 2022 AGCO Corporation $ 100.00 $ 78.70 $ 110.20 $ 148.51 $ 172.46 $ 215.50 S&P Midcap 400 Index 100.00 88.92 112.21 127.54 159.12 138.34 MVIS Global Agribusiness Index 100.00 93.01 114.56 131.40 163.61 151.11 The total return assumes that dividends were reinvested and is based on a $100 investment on December 31, 2017. 28 Table of Contents Issuer Purchases of Equity Securities There were no purchases of our common stock made by or on our behalf during the three months ended December 31, 2022.
Added
On April 27, 2023, the Company's Board of Directors approved an increase to its quarterly dividend commencing in the second quarter of 2023 by 21% to $0.29 per common share and declared a special variable dividend of $5.00 per common share that was paid during the second quarter of 2023.
Added
While we currently expect a cash dividend to be paid in the future, future dividend payments will depend on our earnings, capital requirements, financial condition, and other factors considered relevant by the Company's Board of Directors.
Added
Cumulative Total Return for the Years Ended December 31, 2018 2019 2020 2021 2022 2023 AGCO Corporation $ 100.00 $ 140.03 $ 188.71 $ 219.15 $ 273.84 $ 252.25 S&P Midcap 400 Index 100.00 126.20 143.44 178.95 155.58 181.15 MVIS Global Agribusiness Index 100.00 121.99 139.93 174.22 160.91 146.98 The total return assumes that dividends were reinvested and is based on a $100 investment on December 31, 2018. 25 Table of Contents 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, 2023: Period 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) (2) October 1, 2023 through October 31, 2023 — $ — — $ 110.0 November 1, 2023 through November 30, 2023 (1) 371,669 $ 114.08 371,669 $ 57.0 December 1, 2023 through December 31, 2023 — $ — — $ 57.0 Total 371,669 $ 114.08 371,669 $ 57.0 ___________________________________ (1) In November 2023, we entered into an ASR agreement with a third-party financial institution to repurchase $53.0 million of our common stock.
Added
The ASR agreement resulted in the initial delivery of 371,669 shares of our common stock, representing approximately 80% of the shares to be purchased in connection with the transaction. In January 2024, the remaining 82,883 shares under the ASR agreement were delivered.
Added
The average price paid per share related to the ASR agreement reflected in the table above was derived using the fair market value of the shares on the date the initial 371,669 shares were delivered.
Added
The amount that may yet be purchased under our share repurchase programs, as presented in the above table, was reduced by the entire $53.0 million payment related to the ASR agreement. Refer to Note 16 of our Consolidated Financial Statements contained in Item 8, "Financial Statements and Supplementary Data," for further discussion of this matter.
Added
(2) The remaining authorized amount to be repurchased is $57.0 million, which has no expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn 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. 30 Table of Contents Financial Highlights 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: Years Ended December 31, 2022 (1) 2021 (1) 2020 (1) Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 76.3 76.9 77.5 Gross profit 23.7 23.1 22.5 Selling, general and administrative expenses 9.4 9.8 10.9 Engineering expenses 3.5 3.6 3.7 Amortization of intangibles 0.5 0.5 0.7 Impairment charges 0.3 — 0.2 Restructuring expenses — 0.1 0.2 Bad debt expense — — 0.2 Income from operations 10.0 9.0 6.6 Interest expense, net 0.1 0.1 0.2 Other expense, net 1.1 0.5 0.2 Income before income taxes and equity in net earnings of affiliates 8.8 8.5 6.1 Income tax provision 2.3 1.0 2.1 Income before equity in net earnings of affiliates 6.4 7.5 4.1 Equity in net earnings of affiliates 0.5 0.6 0.5 Net income 6.9 8.1 4.6 Net (income) loss attributable to noncontrolling interests 0.1 — 0.1 Net income attributable to AGCO Corporation and subsidiaries 7.0 % 8.1 % 4.7 % ___________________________________ (1) Rounding may impact summation of amounts. 2022 Compared to 2021 Net income attributable to AGCO Corporation and subsidiaries for 2022 was $889.6 million, or $11.87 per diluted share, compared to $897.0 million, or $11.85 per diluted share, for 2021.
Biggest changeIn 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. 27 Table of Contents Financial Highlights The following table sets forth the percentage relationship to net sales of certain items included in our Consolidated Statements of Operations: Years Ended December 31, 2023 2022 $ % of Net Sales (1) $ % of Net Sales (1) Net sales $ 14,412.4 100.0 % $ 12,651.4 100.0 % Cost of goods sold 10,635.0 73.8 9,650.1 76.3 Gross profit 3,777.4 26.2 3,001.3 23.7 Selling, general and administrative expenses 1,454.5 10.1 1,189.5 9.4 Engineering expenses 548.8 3.8 444.2 3.5 Amortization of intangibles 57.7 0.4 60.1 0.5 Impairment charges 4.1 — 36.0 0.3 Restructuring expenses 11.9 0.1 6.1 — Income from operations 1,700.4 11.8 1,265.4 10.0 Interest expense, net 4.6 — 13.0 0.1 Other expense, net 362.3 2.5 145.2 1.1 Income before income taxes and equity in net earnings of affiliates 1,333.5 9.3 1,107.2 8.8 Income tax provision 230.4 1.6 296.6 2.3 Income before equity in net earnings of affiliates 1,103.1 7.7 810.6 6.4 Equity in net earnings of affiliates 68.2 0.5 64.1 0.5 Net income 1,171.3 8.1 874.7 6.9 Net loss attributable to noncontrolling interests 0.1 — 14.9 0.1 Net income attributable to AGCO Corporation and subsidiaries $ 1,171.4 8.1 % $ 889.6 7.0 % ___________________________________ (1) Rounding may impact summation of amounts. 2023 Compared to 2022 Net income attributable to AGCO Corporation and subsidiaries for 2023 was $1,171.4 million, or $15.63 per diluted share, compared to $889.6 million, or $11.87 per diluted share, for 2022.
However, retail sales by dealers to farmers are highly seasonal and are a function of the timing the planting and harvesting seasons.
However, retail sales by dealers to farmers are highly seasonal and are a function of the timing of the planting and harvesting seasons.
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. • The mortality rates for the U.K. defined benefit pension plan were updated during 2022 to reflect the latest expected improvements in the life expectancy of the plan participants.
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. • The mortality rates for the U.K. defined benefit pension plan were updated during 2023 to reflect the latest expected improvements in the life expectancy of the plan participants.
The ENPP also is closed to new entrants, and, during 2021, we amended the ENPP to freeze future salary benefit accruals as of December 31, 2024 and to eliminate a lifetime annuity feature for participants reaching age 65 subsequent to December 31, 2022.
The ENPP also is closed to new entrants, and, during 2021, we amended the ENPP to freeze future benefit accruals as of December 31, 2024 and to eliminate a lifetime annuity feature for participants reaching age 65 subsequent to December 31, 2022.
The assumptions used in developing the required estimates include, but are not limited to, the following key factors: • Discount rates • Inflation • Salary growth • Expected return on plan assets • Retirement rates and ages • Mortality rates For the years ended December 31, 2022 and 2021, we used a globally consistent methodology to set the discount rate in the countries where our largest benefit obligations exist.
The assumptions used in developing the required estimates include, but are not limited to, the following key factors: • Discount rates • Inflation • Salary growth • Expected return on plan assets • Retirement rates and ages • Mortality rates For the years ended December 31, 2023 and 2022, we used a globally consistent methodology to set the discount rate in the countries where our largest benefit obligations exist.
The mortality rates for the U.S. defined benefit pension plans were unchanged from 2021, which reflected 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 mortality rates for the U.S. defined benefit pension plans were unchanged from 2022, which reflected 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.
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, 2022, the average amortization periods were as follows: ENPP U.S. Plans U.K.
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, 2023, the average amortization periods were as follows: ENPP U.S. Plans U.K.
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. See Note 8 of our Consolidated Financial Statements for more information regarding the investment strategy and concentration of risk.
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. See Note 20 of our Consolidated Financial Statements for more information regarding the investment strategy and concentration of risk.
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 for further information about our hedging transactions and derivative instruments.
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 14 of our Consolidated Financial Statements for further information about our hedging transactions and derivative instruments.
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.
For reporting units where we perform a 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.
We also are subject to the risk of the imposition of limitations by governments on international transfers of funds. For example, in recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina.
We also are subject to the risk of the imposition of limitations by governments on international transfers of funds. In recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina.
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, losses in jurisdictions where no income tax benefit is recorded and provisions for unrecognized income tax benefits related to uncertain tax positions.
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, losses in jurisdictions where no income tax benefit is recorded and provisions for unrecognized income tax 37 Table of Contents benefits related to uncertain tax positions.
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.
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 long-lived assets to determine whether events or changes in circumstances warrant revised estimates of useful lives.
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.
We sell a full range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, replacement parts and grain storage and protein production systems.
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.
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.
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 84% of our consolidated projected benefit obligation as of December 31, 2022.
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 83% of our consolidated projected benefit obligation as of December 31, 2023.
These valuation allowances are held against deferred tax assets (including net operating loss carryforwards) in the U.S and certain foreign jurisdictions. Realization of the remaining deferred tax assets as of December 31, 2022 depends on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities.
These valuation allowances are held against deferred tax assets (including net operating loss carryforwards and certain other tax attributes) in the U.S and certain foreign jurisdictions. Realization of the remaining deferred tax assets as of December 31, 2023 depends on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities.
Should we not be able to negotiate extended payment terms with our vendors, or should financial institutions no longer 37 Table of Contents be willing to participate in early payment programs with us, we would expect to have sufficient liquidity to timely pay our vendors without any material impact on us or our financial position.
Should we not be able to negotiate extended payment terms with our vendors, or should financial institutions no longer be willing to participate in early payment programs with us, we would expect to have sufficient liquidity to timely pay our vendors without any material impact on us or our financial position.
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 $28.5 million as of December 31, 2022.
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 $41.5 million as of December 31, 2023.
Other short-term and long-term obligations – As of December 31, 2022, we had approximately $10.4 million of income tax liabilities related to uncertain income tax provisions connected with ongoing income tax audits in various jurisdictions that we expects to pay or settle within the next 12 months.
Other short-term and long-term obligations – As of December 31, 2023, we had approximately $9.9 million of income tax liabilities related to uncertain income tax provisions connected with ongoing income tax audits in various jurisdictions that we expects to pay or settle within the next 12 months.
As of December 31, 2022 and 2021, we had approximately $10.4 million and $40.1 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.
As of December 31, 2023 and 2022, we had approximately $9.9 million and $10.4 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.
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 $18.5 million as of December 31, 2022.
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 $26.5 million as of December 31, 2023.
The decrease in unrecognized net actuarial losses between years primarily resulted from higher discount rates at December 31, 2022 compared to December 31, 2021. 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.
The increase in unrecognized net actuarial losses between years primarily resulted from lower discount rates at December 31, 2023 compared to December 31, 2022. 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.
At December 31, 2022, we had recorded an allowance for discounts and sales incentives of approximately $638.4 million that will be paid either through a reduction of future cash settlements of receivables and through credit memos to our dealers or through reductions in retail financing rates paid to our finance joint ventures.
At December 31, 2023, we had recorded an allowance for discounts and sales incentives of approximately $1,008.3 million that will be paid either through a reduction of future cash settlements of receivables and through credit memos to our dealers or through reductions in retail financing rates paid to our finance joint ventures.
At December 31, 2022 and 2021, the Company had approximately $274.1 million and $196.7 million, respectively, of accrued taxes reflected in “Other noncurrent liabilities”, and approximately $2.8 million of deferred tax assets and $9.6 million of deferred tax liabilities, respectively, related to uncertain tax positions that it expects to settle or pay beyond 12 months, reflected in “Deferred tax assets” and “Deferred tax liabilities,” respectively, in the Company’s Consolidated Balance Sheets.
At December 31, 2023 and 2022, the Company had approximately $344.2 million and $274.1 million, respectively, of accrued taxes reflected in “Other noncurrent liabilities”, and approximately $2.9 million and $2.8 million of deferred tax assets, respectively, related to uncertain tax positions that it expects to settle or pay beyond 12 months, reflected in “Deferred tax assets” in the Company’s Consolidated Balance Sheets.
The effects of a 25 basis point change in certain actuarial 43 Table of Contents assumptions on the 2023 net annual pension and ENPP costs and related benefit obligations as of December 31, 2022 would be as follows: Year-end Benefit Obligation 2023 Net Annual Pension Cost 25 basis point increase 25 basis point decrease 25 basis point increase 25 basis point decrease Discount rate: U.S. qualified defined benefit pension plans and ENPP $ (2.5) $ 2.6 $ 0.1 $ (0.1) U.K. defined benefit pension plans (10.5) 11.1 (0.2) 0.2 2023 Net Annual Pension Cost 25 basis point increase 25 basis point decrease Long-term rate of return on plan assets: U.S. qualified defined benefit pension plans and ENPP $ (0.1) $ 0.1 U.K. defined benefit pension plans (1.2) 1.2 Unrecognized actuarial net losses related to our defined benefit pension plans and ENPP were $270.0 million as of December 31, 2022 compared to $291.7 million as of December 31, 2021.
The effects of a 25 basis point change in certain actuarial 39 Table of Contents assumptions on the 2023 net annual pension and ENPP costs and related benefit obligations as of December 31, 2023 would be as follows: Year-end Benefit Obligation 2024 Net Annual Pension Cost 25 basis point increase 25 basis point decrease 25 basis point increase 25 basis point decrease Discount rate: U.S. qualified defined benefit pension plans and ENPP $ (2.6) $ 2.7 $ 0.1 $ (0.1) U.K. defined benefit pension plans (11.9) 12.4 (0.3) 0.2 2024 Net Annual Pension Cost 25 basis point increase 25 basis point decrease Long-term rate of return on plan assets: U.S. qualified defined benefit pension plans and ENPP $ (0.1) $ 0.1 U.K. defined benefit pension plans (1.2) 1.2 Unrecognized actuarial net losses related to our defined benefit pension plans and ENPP were $280.2 million as of December 31, 2023 compared to $270.0 million as of December 31, 2022.
As of December 31, 2022 and 2021, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements for the years then ended was approximately $1.8 billion and $1.3 billion, respectively. In addition, we sell certain trade receivables under factoring arrangements to other financial institutions around the world.
For the years ended December 31, 2023 and 2022, the cash received from receivables sold under the U.S., Canadian, European and Brazilian accounts receivable sales agreements was approximately $2.5 billion and $1.8 billion, respectively. In addition, we sell certain trade receivables under factoring arrangements to other financial institutions around the world.
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.
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 22 of our Consolidated Financial Statements for further information.
We utilize a combination of valuation techniques, including an income approach, whereby the present value of future expected operating net cash flows are calculated using a discount rate; and a guideline public company method, whereby EBITDA and revenue multiples are derived from the market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market.
We use a discounted cash flow model (income approach) whereby the present value of future expected operating net cash flows are calculated using a discount rate; and a guideline public company method (market approach), whereby EBITDA and/or revenue multiples are derived from the market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market.
We recognize interest and penalties related to uncertain income tax positions in income tax expense. As of December 31, 2022 and 2021, we had accrued interest and penalties related to unrecognized tax benefits of approximately $25.8 million and $32.7 million, respectively. See Note 6 of our Consolidated Financial Statements for further discussion of our uncertain income tax positions.
We recognize interest and penalties related to uncertain income tax positions in income tax expense. As of December 31, 2023 and 2022, we had accrued interest and penalties related to unrecognized tax benefits of approximately $27.9 million and $25.8 million, respectively. See Note 19 of our Consolidated Financial Statements for further discussion of our uncertain income tax positions.
Share Repurchase Program and Dividends We did not purchase any shares directly or enter into any accelerated share repurchase agreements during 2022. As of December 31, 2022, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $110.0 million, which has no expiration date.
We did not purchase any shares directly or enter into any 33 Table of Contents accelerated share repurchase agreements during 2022. As of December 31, 2023, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $57.0 million, which has no expiration date.
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.
Goodwill is evaluated for impairment using a qualitative assessment or a quantitative 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.
As of December 31, 2022 and 2021, we had approximately $281.7 million and $246.4 million, respectively, of gross unrecognized tax benefits, all of which would impact our effective tax rate if recognized.
As of December 31, 2023 and 2022, we had approximately $351.2 million and $281.7 million, respectively, of gross unrecognized tax benefits, all of which would impact our effective tax rate if recognized.
See Note 12 of our Consolidated Financial Statements for further information. 39 Table of Contents Related Parties In the ordinary course of business, we engage in transactions with related parties. See Note 14 of our Consolidated Financial Statements for information regarding related party transactions and their impact to our consolidated results of operations and financial position.
Related Party Transactions In the ordinary course of business, we engage in transactions with related parties. See Note 18 of our Consolidated Financial Statements for information regarding related party transactions and their impact to our consolidated results of operations and financial position.
Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness and stockholders’ equity, was 27.3% at December 31, 2022 compared to 29.7% at December 31, 2021. Cash Flows Cash flows provided by operating activities were approximately $838.2 million during 2022 compared to approximately $660.2 million during 2021.
Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness and stockholders’ equity, was 23.0% at December 31, 2023 compared to 27.3% at December 31, 2022. Cash Flows Cash flows provided by operating activities were approximately $1,103.1 million during 2023 compared to approximately $838.2 million during 2022.
On January 19, 2022, we received additional 113,824 shares upon final settlement of our November 2021 ASR agreement. All shares received under the ASR agreements 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 our Consolidated Balance Sheets.
In January 2024, we received an additional 82,883 shares upon final settlement of our November 2023 ASR agreement. All shares received under the ASR agreements 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 our Consolidated Balance Sheets.
Additionally, we had approximately $36.3 million of estimated future minimum contribution requirements under our U.S. and non-U.S. defined benefit pension and postretirement plans due during the year ended December 31, 2023. Refer to Notes 6 and 8 of the Consolidated Financial Statements for additional information regarding our uncertain tax positions and pension and postretirement plans, respectively.
Additionally, we had approximately $16.7 million of estimated future minimum contribution requirements under our U.S. and non-U.S. defined benefit pension and postretirement plans due during the year ending December 31, 2024. Refer to Notes 19 and 20 of the Consolidated Financial Statements for additional information regarding our uncertain tax positions and pension and postretirement plans, respectively.
We currently have an agreement in place with the trustees of the U.K. defined benefit plan that obligates us to fund approximately £16.0 million per year (or approximately $19.4 million) towards that obligation through December 2023.
We currently have an agreement in place with the trustees of the U.K. defined benefit plan that obligates us to fund approximately £10.9 million per year (or approximately $13.9 million) towards that obligation through December 2024.
This plan is closed to new participants. 42 Table of Contents See Note 8 of our Consolidated Financial Statements 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.
See Note 20 of our Consolidated Financial Statements for additional information regarding costs and assumptions for employee retirement benefits. 38 Table of Contents Nature of Estimates Required. The measurement date for all of our benefit plans is December 31.
Contractual Obligations and Cash Requirements Our material cash requirements include the following contractual and other obligations: Indebtedness – As of December 31, 2022, we had approximately $194.5 million of payments due as of the year ended December 31, 2023, related to indebtedness and certain short-term obligations, in addition to approximately $35.4 million of interest payments associated with indebtedness we expect to pay during 2023.
Contractual Obligations and Cash Requirements Our material cash requirements include the following contractual and other obligations: Indebtedness – As of December 31, 2023, we had approximately $14.1 million of payments due within the year ending December 31, 2024, related to indebtedness and certain short-term obligations, in addition to approximately $56.1 million of interest payments associated with indebtedness we expect to pay during 2024.
We also had outstanding designated steel commodity contracts with a gross notional amount of approximately $0.9 million that range in maturity through April 2023. See Note 11 of our Consolidated Financial Statements for additional information.
We also had outstanding designated steel commodity contracts with a gross notional amount of approximately $2.5 million that range in maturity through June 2024. See Note 14 of our Consolidated Financial Statements for additional information.
In addition, at December 31, 2022, we had accrued approximately $18.6 million of outstanding guarantees of residual values that may be owed to our finance joint ventures in the United States and Canada due upon expiration of certain eligible operating leases between the finance joint ventures and end users.
In addition, at December 31, 2023, the Company accrued approximately $13.8 million of outstanding guarantees of residual values that may be owed to its finance joint ventures in the United States and Canada upon expiration of certain eligible operating leases between the finance joint ventures and end users.
While our annual impairment testing in 2022 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.
While our annual impairment testing in 2023 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. 41 Table of Contents We are currently conducting a strategic review of our G&P business.
We distribute most of our products through a combination of approximately 3,100 dealers and distributors as well as associates and licensees. In addition, we provide retail and wholesale financing through our finance joint ventures with Rabobank.
We distribute most of our products through a combination of approximately 3,100 dealers and distributors as well as associates and licensees. In addition, we provide retail and wholesale financing through our finance joint ventures with Rabobank. We sell our equipment, precision agriculture technology and replacement parts to our independent dealers, distributors and other customers.
Plan Average amortization period of losses related to defined benefit pension plans 7 years 14 years 19 years Unrecognized prior service cost related to our defined benefit pension plans was $32.5 million as of December 31, 2022 compared to $7.1 million as of December 31, 2021.
Plan Average amortization period of losses related to defined benefit pension plans 6 years 13 years 18 years Unrecognized prior service cost related to our defined benefit pension plans was $31.4 million as of December 31, 2023 compared to $32.5 million as of December 31, 2022.
In addition, on April 28, 2022, our Board of Directors approved an increase to our quarterly dividend commencing in the second quarter of 2022 by 20% to $0.24 per common share and declared a special variable dividend of $4.50 per common share that was paid during the second quarter of 2022.
In addition, on April 27, 2023, our Board of Directors approved an increase to our quarterly dividend commencing in the second quarter of 2023 by 21% to $0.29 per common share and declared a special variable dividend of $5.00 per common share that was paid during the second quarter of 2023.
If the carrying value of net assets is higher than the fair value of the reporting unit, an impairment charge is recorded in the amount by which the carrying value exceeds the reporting unit’s fair value.
If the carrying value of net assets is higher than the fair value of the reporting unit, an impairment charge is recorded in the amount by which the carrying value exceeds the reporting unit’s fair value. For the quantitative impairment assessment, we utilize a combination of valuation techniques.
The total notional value of our foreign currency instruments was $4,318.8 million and $3,981.9 million as of December 31, 2022 and 2021, respectively, inclusive of both those instruments that are designated and qualified for hedge accounting and non-designated derivative instruments.
The total notional value of our foreign currency instruments was $3,687.3 million and $4,318.8 million, including $300.0 million and $300.0 million related to net investment hedges, as of December 31, 2023 and 2022, respectively, inclusive of both those instruments that are designated and qualified for hedge accounting and non-designated derivative instruments.
We also 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.
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. The Company believes the credit risk associated with these guarantees is not material.
The maximum potential amount of future payments under the guarantee is approximately $191.3 million. Other At December 31, 2022, we had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $4,318.8 million. The outstanding contracts as of December 31, 2022 range in maturity through March 2023.
The maximum potential amount of future payments under the guarantees is approximately $182.1 million. Other At December 31, 2023, we had outstanding designated and non-designated foreign exchange contracts with a gross notional amount of approximately $3,387.3 million. The outstanding contracts as of December 31, 2023 range in maturity 34 Table of Contents through December 2024.
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. Interest Rate Risk Our interest expense is, in part, sensitive to the general level of interest rates.
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.
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.
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 11 and 14 of our Consolidated Financial Statements for additional information.
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.
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.
See Notes 7 and 11 of our Consolidated Financial Statements for additional information. 40 Table of Contents Based on our floating rate debt and our accounts receivable sales facilities outstanding at December 31, 2022, a 10% increase in interest rates, would have increased, collectively, “Interest expense, net” and “Other expense, net” for the year ended December 31, 2022 by approximately $7.3 million.
Based on our floating rate debt and our accounts receivable sales facilities outstanding at December 31, 2023, a 10% increase in interest rates, would have increased, collectively, “Interest expense, net” and “Other expense, net” for the year ended December 31, 2023, by approximately $13.7 million. 36 Table of Contents Recent Accounting Pronouncements See Note 1 of our Consolidated Financial Statements for information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.
As of December 31, 2022 and 2020, the cash received from these arrangements for the years then ended was approximately $226.0 million and $215.4 million, respectively. Our finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to our dealers. The receivables associated with these arrangements also are without recourse to us.
For the years ended December 31, 2023 and 2022, the cash received from these arrangements was approximately $254.1 million and $226.0 million, respectively. Our finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to our dealers.
The restructuring expenses primarily related to severance and other related costs associated with the rationalization of certain U.S., China, South American and European manufacturing operations. See Note 3 of our Consolidated Financial Statements.
The restructuring expenses primarily related to severance and other related costs associated with the rationalization of certain South American, North American, European, African and Asian manufacturing facilities and administrative offices . See Note 12 of our Consolidated Financial Statements.
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.
As discussed above, 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.
Refer to “Risk Factors” for further discussion of the COVID-19 pandemic, supply chain and logistic disruptions and other factors. 35 Table of Contents Liquidity and Capital Resources Our financing requirements are subject to variations due to seasonal changes in inventory and receivable levels.
Refer to “Risk Factors” in Item 1A for further discussion. 31 Table of Contents Liquidity and Capital Resources Our financing requirements are subject to variations due to seasonal changes in inventory and receivable levels.
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): December 31, 2022 Credit facility, expires 2027 $ 200.0 1.002% Senior term loan due 2025 (1) 267.3 Senior term loans due between 2023 and 2028 (1) 341.6 0.800% Senior Notes Due 2028 (1) 641.5 Other long-term debt 5.1 ____________________________________ (1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $3.6 million.
Additional information regarding our indebtedness is contained in Note 11 to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data." We believe that the following facilities listed below, together with available cash and internally generated funds, and assuming customary renewals and replacements, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future (in millions): December 31, 2023 (1) Credit facility, expires 2027 $ — 1.002% EIB Senior term loan due 2025 276.7 EIB Senior Term Loan due 2029 276.7 Senior term loans due between 2025 and 2028 162.1 0.800% Senior Notes Due 2028 664.0 Other long-term debt 3.1 ____________________________________ (1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $3.1 million.
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 and protein prices and changes in the availability of credit.
Future cash flows and growth rates are 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 and protein prices and changes in the availability of credit.
In 2022, we contributed approximately $34.1 million towards those obligations, and we expect to fund approximately $34.6 million in 2023. 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.
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 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 st using a qualitative assessment or a quantitative one-step assessment.
A reporting unit is an operating segment or one level below an operating 40 Table of Contents 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.
As a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting implicitly from certain capital market operations, usually effected to obtain U.S. dollars, has broadened significantly.
As 35 Table of Contents a consequence of these limitations, the spread between the official government exchange rate and the exchange rates resulting implicitly from certain capital market operations, usually effected to obtain United States dollars, had broadened significantly. Argentina's economy was determined to be highly inflationary during 2018.
The net monetary assets of our operations in Argentina denominated in pesos at the official government rate were approximately 4.1 billion (or approximately $23.0 million) as of December 31, 2022, inclusive of approximately 6.8 billion pesos (or approximately $38.1 million) in cash and cash equivalents.
The monetary assets of the Company's operations in Argentina denominated in pesos at the official government rate were approximately 68.3 billion pesos (or approximately $82.0 million), inclusive of approximately 27.7 billion pesos (or approximately $33.3 million) in cash and cash equivalents, as of December 31, 2023.
In addition, during the year ended December 31, 2022, we recorded a write-down of our investment in our Russian finance joint venture of approximately $4.8 million, reflected within “Equity in net earnings of affiliates” in our Consolidated Statements of Operations. The Russian finance joint venture was sold during the three months ended December 31, 2022.
During the first quarter of 2022, we recorded a write-down of our investment in our Russian finance joint venture of approximately $4.8 million. The Russian finance joint venture was sold during the three months ended December 31, 2022. Refer to Note 9 of our Consolidated Financial Statements for further information.
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”).
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.
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.
These taxes are accumulated as tax credits and create assets that are reduced by the VAT collected from our sales in the Brazilian market.
The difference between the unit sales change and the change in net sales was primarily the result of foreign currency translation, pricing and sales mix changes.
The difference between the unit sales change and the change in net sales was primarily the result of pricing, foreign currency translation and sales mix changes. Overall, global production hours increased approximately 3.6% during 2023 compared to 2022.
The finance joint venture in Argentina has net monetary assets denominated in pesos at the official government rate of approximately 4.1 billion (or approximately $22.9 million) as of December 31, 2022, of which a majority is cash and cash equivalents. Future impairments and charges are possible in connection with these exposures.
The Company's finance joint venture in Argentina, AGCO Capital has net monetary assets denominated in pesos at the official government rate of approximately 11.0 billion (or approximately $13.2 million) as of December 31, 2023, of which a majority is cash and cash equivalents.
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 and protein prices and general economic conditions.
Sales of our equipment are affected by, among other things, changes in farm income, farm land values and debt levels, financing costs, acreage planted, crop yields, weather conditions, the demand for agricultural commodities, commodity and protein prices, agricultural product demand and general economic conditions and government policies and subsidies.
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.
Refer to Note 11 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.
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 $71.1 million and $24.5 million in 2022 and 2021, respectively. The increase in losses was primarily the result of higher interest rates in 2022 as compared to 2021.
The December 2023 impact of the devaluation and remeasurement of net monetary assets was approximately $79.9 million. Losses on sales of receivables, primarily related to our accounts receivable sales agreements with our finance joint ventures in North America, Europe and Brazil and included in "Other expense, net," were approximately $148.4 million and $71.1 million in 2023 and 2022, respectively.
These assumptions require significant judgments on our part, and the conclusions that we reach could vary significantly based upon these judgments.
Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the reporting unit. These assumptions require significant judgments on our part, and the conclusions that we reach could vary significantly based on these judgments.
Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $64.1 million in 2022 compared to $65.6 million in 2021. The decrease was primarily due to a write-down of our investment in our Russian finance joint venture of approximately $4.8 million recorded during the first quarter of 2022.
Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $68.2 million in 2023 compared to $64.1 million in 2022. The increase was primarily due to higher earnings in our finance joint ventures.
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 $28.5 million as of December 31, 2022. 41 Table of Contents Deferred Income Taxes and Uncertain Income Tax Positions We recorded an income tax provision of approximately $296.6 million in 2022 compared to $108.4 million in 2021 and $187.7 million in 2020.
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 $41.5 million as of December 31, 2023.
Global industry demand for farm equipment, driven by continued strong commodity prices and healthy farm economics, is expected to be flat to moderately higher during 2023 in most major markets. Our net sales are expected to increase in 2023 compared to 2022, resulting from improved sales volumes and pricing, partially offset by negative foreign currency translation.
Global industry demand for farm equipment, driven by farm income, is expected to be modestly lower during 2024 in most major markets compared to 2023. Our net sales are expected to moderately decrease in 2024 compared to 2023, resulting from lower sales volumes, offset in part by modest positive pricing.
Capital and operating lease obligations – As of December 31, 2022, we had approximately $0.8 million and $47.8 million of payments due during the year ended December 31, 2023, related to capital and operating lease obligations, respectively.
Finance and operating lease obligations – As of December 31, 2023, we had approximately $0.7 million and $52.8 million of payments due during the year ending December 31, 2024, related to finance and operating lease obligations, respectively. Refer to Note 23 of the Consolidated Financial Statements for additional information regarding our lease obligations.
The total finance portfolio as of December 31, 2022 and 2021 included approximately $9.5 billion and $9.2 billion, respectively, of retail receivables and $2.3 billion and $1.7 billion of wholesale receivables from AGCO dealers as of December 31, 2022 and 2021, respectively.
The total finance portfolio as of December 31, 2023 and 2022 included approximately $10.8 billion and $9.5 billion, respectively, of retail receivables and $3.3 billion and $2.3 billion of wholesale receivables from AGCO dealers as of December 31, 2023 and 2022, respectively. In order to efficiently manage our liquidity, we generally pay vendors in accordance with negotiated terms.
We recorded approximately $94.6 million and $114.4 million, respectively, of VAT tax credits, net of reserves, as of December 31, 2022 and 2021.
We recorded approximately $139.2 million and $143.9 million, of VAT tax credits, net of reserves of approximately $45.7 million and $49.3 million, respectively, as of December 31, 2023 and 2022.
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.
The assumptions about future cash flows and growth rates are based on the current and long-term business plans of the reporting unit and country specific agricultural industry and economic growth projections.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeQuantitative 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. 46 Table of Contents
Biggest changeQuantitative 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. 42 Table of Contents

Other AGCO 10-K year-over-year comparisons