Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
AGCO is a global leader in agricultural machinery and precision agriculture technologies. Driven by a Farmer-First strategy, AGCO delivers value through its differentiated leading brands, Fendt ™ , Massey Ferguson ™ , PTx ™ and Valtra ™ . AGCO’s high-performance equipment and smart farming solutions, including brand-agnostic retrofit technologies and autonomous offerings, empower farmers to drive productivity while sustainably feeding the world. We distribute most of our products through approximately 2,800 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.” In 2024, we fundamentally shifted our portfolio through the PTx Trimble joint venture and the divestiture of the majority of our Grain & Protein (“G&P”) business.
Our operations are subject to the cyclical and seasonal nature of the agricultural industry. 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, tariffs and subsidies. We sell our equipment, precision agriculture technology and replacement parts to our independent dealers, distributors and other customers. A large majority of our sales are to independent dealers and distributors that sell our products to end users. To the extent practicable, we attempt to sell products to our dealers and distributors on a level basis throughout the year to reduce the effect of seasonal demands on our manufacturing operations and to minimize our investment in inventories. However, retail sales by dealers to farmers are highly seasonal and are a function of the timing of the planting and harvesting seasons. In certain markets, particularly in North America, there is often a time lag, which varies based on the timing and level of retail demand, between our sale of the equipment to the dealer and the dealer’s sale to a retail customer.
The recent announcements of significant trade policy and tariff actions by the U.S. government, including but not limited to tariffs on imported steel and aluminum products, tariffs on certain imports from China, tariffs on certain imports from Canada and Mexico, announced trade deal between the United States and European Union of baseline tariffs on certain imports from the European Union, and baseline tariffs on most imports from most other countries, continue to create significant uncertainty and potential risks for our business. These announcements in some cases were followed by delays and changes in implementation, and the ultimate tariff structures are unclear at the current time. Depending on the countries affected, increases in tariffs have raised the costs of inputs used in manufacturing our products, which in turn has impacted our cost of goods sold. Additionally, higher tariffs may lead to increased after-tariff sales prices for the products we sell. The impacts of the tariffs may be partially mitigated as a majority of our sales and manufacturing takes place outside the United States. While we are actively exploring opportunities to mitigate these increased costs, there can be no guarantee that we will be able to fully offset the impact of these tariffs. Furthermore, the imposition of retaliatory tariffs from other countries on our exported products could negatively affect our sales and marketplace access in those countries. Moreover, the uncertainty of the enforceability of the tariffs, any changes to such tariffs and any future trade policy changes has impacted, and is expected to continue to impact, our sales.
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Financial Highlights
The following table sets forth the percentage relationship to net sales of certain items included in our Consolidated Statements of Operations (in millions, except percentages):
Years Ended December 31,
% of Net Sales (1)
% of Net Sales (1)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Engineering expenses
Amortization of intangibles
Impairment charges
Restructuring and business optimization expenses
Loss on sale of business
Income (loss) from operations
Interest expense, net
Other expense (income), net
Income (loss) before income taxes and equity in net earnings of affiliates
Income tax provision (benefit)
Income (loss) before equity in net earnings of affiliates
Equity in net earnings of affiliates
Net income (loss)
Net loss attributable to noncontrolling interests
Net income (loss) attributable to AGCO Corporation
(1) Rounding may impact summation of amounts.
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2025 Compared to 2024
Net income (loss) attributable to AGCO Corporation for 2025 was $726.5 million, or $9.75 per diluted share, compared to $(424.8) million, or $(5.69) per diluted share, for 2024.
Net sales for 2025 were $10,082.0 million, or 13.5% lower than 2024, primarily due to lower sales volumes resulting from softer industry sales reflecting lower end market demand and the divestiture of the majority of the Company's G&P business on November 1, 2024, partially offset by favorable currency impacts. Income (loss) from operations was $595.7 million in 2025 compared to $(122.1) million in 2024. During 2024, we recorded a loss on sale of business of $507.3 million related to the sale of the majority of the Company's G&P business and impairment charges of $369.5 million primarily related to the impairment of goodwill. Additionally, the increase in income from operations during 2025 was the result of decreases in restructuring and business optimization expenses and selling, general and administrative expenses (“SG&A expenses”) primarily related to lower compensation costs and transaction costs, partially offset by lower sales and production volumes reflecting weak industry conditions.
We estimate that worldwide average price increases (decreases) were approximately 1.1% and (0.9)% in 2025 and 2024, respectively. Consolidated net sales of tractors and combines, which comprised approximately 68.8% of our net sales in 2025, decreased approximately 6.4% in 2025 compared to 2024. Unit sales of tractors and combines decreased approximately 5.6% during 2025 compared to 2024. The primary driver of the decrease in unit sales was due to changes in end market demand. The difference between the unit sales change and the change in net sales was primarily the result of sales mix changes and foreign currency translation.
Overall, global production hours, excluding hours related to the Company's G&P business which was divested on November 1, 2024, decreased approximately 12.1% during 2025 compared to 2024, reflecting our response to lower end market demand.
Results of Operations
Gross profit as a percentage of net sales increased during 2025 compared to 2024, primarily due to lower manufacturing costs.
Selling, general and administrative expenses (“SG&A expenses”) as a percentage of net sales, were higher during 2025 compared to 2024 as net sales decreased at a faster rate than SG&A expenses. The absolute level of SG&A expenses decreased during 2025 primarily due to lower compensation costs and lower transaction costs related to the divestiture of the majority of the Company's G&P business and the PTx Trimble joint venture transaction. We recorded stock compensation expense of $27.7 million and $17.9 million during 2025 and 2024, respectively, within SG&A expenses, as is more fully explained in Note 15 of our Consolidated Financial Statements.
Engineering expenses as a percentage of net sales, were higher during 2025 compared to 2024 as net sales decreased at a faster rate than engineering expenses. The absolute level of engineering expenses remained relatively consistent during 2025.
During 2025, we recorded impairment charges of $10.0 million, primarily related to the impairment of certain other assets. During 2024, we recorded impairment charges of $369.5 million, primarily related to the impairment of goodwill related to the Company’s PTx Trimble North America reporting unit, certain other assets and an investment in affiliate.
We recorded restructuring and business optimization expenses of $82.2 million and $172.7 million during 2025 and 2024, respectively. On June 24, 2024, the Company announced a restructuring program (the “Program”) in response to increased weakening demand in the agriculture industry. The Company estimated that it would incur charges for one-time termination benefits of approximately $150.0 million to $200.0 million in connection with the initial phase of the Program, primarily consisting of cash charges related to severance payments, employees benefits and related costs. The Company incurred a substantial portion of the charges by the end of fiscal year 2025. The restructuring expenses recorded during 2025 and 2024 primarily related to severance, business optimization and other related costs associated with the Company's Program. Refer to Note 13 of our Consolidated Financial Statements for further information.
We recorded a loss on sale of business of $10.8 million during 2025 related to the finalization of the preliminary working capital and other adjustments related to the sale of the majority of the Company's G&P business, partially offset by a gain related to an immaterial divestiture. During 2024, we recorded a loss on sale of business of $507.3 million related to the sale of the majority of the Company's G&P business. Refer to Note 3 of our Consolidated Financial Statements for further information.
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Interest expense, net was $66.4 million for 2025 compared to $93.0 million for 2024, resulting primarily from a decrease in interest expense resulting from the Company's repayment of the Term Loan Facility on November 1, 2024, partially offset by lower interest income. Refer to “Liquidity and Capital Resources” for further information on our available funding.
Other expense (income), net was $(72.7) million in 2025 compared to $218.5 million in 2024. During 2025, the Company recorded a gain of $251.9 million on the sale of an investment in affiliate related to the sale of the Company’s ownership interest in Tractors and Farm Equipment Limited (“TAFE”) within “Other expense (income), net.” Refer to Note 18 of the Consolidated Financial Statements for further information. In 2024, the Company terminated its U.S. qualified defined benefit plan and the settlement resulted in the recognition of approximately $18.5 million within “Other expense (income), net” representing the amounts previously recognized in “Accumulated other comprehensive loss.” Foreign currency exchange losses were approximately $81.9 million for 2025, compared to $85.1 million for 2024. 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 (income), net,” were approximately $90.3 million and $118.2 million, in 2025 and 2024, respectively. During 2024, the Company recorded the final business interruption insurance recovery related to the 2022 cyber attack of $5.0 million.
We recorded an income tax provision (benefit) of $(77.4) million in 2025 compared to $98.4 million in 2024. 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 income tax provision as of December 31, 2025 includes a net federal tax benefit of $179.8 million related to a legal entity reorganization, which excludes approximately $82.0 million of additional benefits related to a change in the Company's permanent reinvestment assertion and state tax benefits associated with the reorganization. Based on a favorable tax ruling in Brazil regarding the taxability of certain state value added tax incentive benefits, the Company recorded a $29.6 million reduction in the provision for income taxes during the year ended December 31, 2024.
Equity in net earnings of affiliates, which is primarily comprised of income from our AGCO Finance joint ventures, was $39.6 million in 2025 compared to $46.4 million in 2024. Refer to Note 10 of the Consolidated Financial Statements for further information.
Net loss attributable to noncontrolling interests was $7.5 million in 2025 compared to $60.8 million in 2024. The net loss primarily relates to the noncontrolling interests of the PTx Trimble joint venture held by Trimble, which owns a 15% interest in the joint venture.
Results of Operations - Segment Information
The Company has four operating segments which are also its reportable segments which consist of the Europe/Middle East (“EME”), North America, South America and Asia/Pacific/Africa (“APA”) regions. The Company’s reportable segments are geography based and distribute a full range of agricultural machinery and precision agriculture technology. The Company evaluates segment performance primarily based on income from operations. Sales for each segment are based on the location of the third-party customer. The Company’s selling, general and administrative expenses and engineering expenses are charged to each segment based on the region and division where the expenses are incurred. As a result, the components of income (loss) from operations for one segment may not be comparable to another segment.
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The following table sets forth, for the year ended December 31, 2025, the impact to net sales of currency translation by geographical segment (in millions, except percentages):
Years Ended
December 31,
Change
Change Due to Currency Translation
EME
North America
South America
APA
Total Segments
Other (1)
(1) “Other” represents the results for the year ended December 31, 2024 for the majority of the Company’s G&P business which was divested on November 1, 2024. The results of the G&P business through the date of the divestiture were previously included within our North America, South America, Europe/Middle East and Asia/Pacific/Africa segments, respectively.
EME
Years Ended
December 31,
Change
Net sales
Income from operations
Net sales in EME increased in 2025 compared to 2024, primarily due to favorable foreign currency translation, partially offset by sales volume declines, most significantly in high-horsepower tractors and combines. Income from operations increased by $45.5 million in 2025 compared to 2024 as a result of positive net pricing, partially offset by lower sales and production volumes and higher warranty costs.
North America
Years Ended
December 31,
Change
Net sales
Income (loss) from operations
Net sales in North America decreased in 2025 compared to 2024, primarily due to sales volume declines, most significantly in high-horsepower tractors, sprayers, hay tools and combines. Income (loss) from operations decreased by $196.0 million compared to 2024 as a result of lower sales and production volumes.
South America
Years Ended
December 31,
Change
Net sales
Income from operations
Net sales decreased in South America in 2025 compared to 2024, primarily due to sales volume declines, most significantly in tractors and implements, negative pricing impacts and unfavorable foreign currency translation. Income from
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operations decreased $35.6 million in 2025 compared to 2024, as a result of lower sales and negative pricing impacts, partially offset by lower manufacturing costs.
APA
Years Ended
December 31,
Change
Net sales
Income from operations
Net sales decreased in APA in 2025 compared to 2024, primarily due to sales volume declines, most significantly in high-horsepower tractors, hay tools and sprayers. Income from operations decreased $3.4 million in 2025 compared to 2024, primarily due to lower sales and production volumes.
2024 Compared to 2023
A comparison of the results of operations for 2024 versus that of 2023 was included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Outlook
Global industry demand for farm equipment, driven by farm income, is expected to be relatively flat during 2026 in most major markets compared to 2025. Our net sales are expected to modestly increase in 2026 compared to 2025, resulting from positive pricing, favorable currency translation and sales mix. Operating margins will reflect the impact of higher net sales, positive pricing, relatively flat production volumes and continued cost controls, partially offset by tariff headwinds.
Our outlook is based on current assumptions regarding a number of factors including demand, currency stability, pricing and market share gains. If our assumptions are incorrect, or other issues arise or return, such as tariffs or a worsening of our supply chain, our results of operations will be adversely impacted. Refer to “Risk Factors” in Item 1A for further discussion.
Liquidity and Capital Resources
Our financing requirements are subject to variations due to seasonal changes in inventory and receivable levels. Internally generated funds are supplemented when necessary from external sources, primarily our credit facilities and accounts receivable sales agreement facilities. Additional information regarding our indebtedness is contained in Note 12 to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.” We believe that the facilities and borrowings 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, 2025 (1)
Credit Facility, expires 2027
5.450% Senior notes due 2027
5.800% Senior notes due 2034
0.800% Senior notes due 2028
EIB Senior term loan due 2029
EIB Senior term loan due 2030
Senior term loans due between 2025 and 2028
(1) The amounts above are gross of debt issuance costs of an aggregate amount of approximately $9.7 million.
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The Company has a credit facility providing for a $1.25 billion multi-currency unsecured revolving credit facility (“Credit Facility”) that matures on December 19, 2027. In May 2025, the Company amended the Credit Facility with respect to the net leverage ratio financial covenant requirements for the remainder of 2025 and in the event of a future material acquisition. As of December 31, 2025, the Company had no outstanding borrowings under the revolving credit facility and had the ability to borrow $1,250.0 million.
In addition, the Company has an uncommitted revolving credit facility that allows the Company to borrow up to €200.0 million (or approximately $234.6 million as of December 31, 2025). The credit facility expires on December 31, 2026. As of December 31, 2025, the Company had no outstanding borrowings under the revolving credit facility.
The Company had redeemable noncontrolling interests of $299.2 million as of December 31, 2025 resulting from the PTx Trimble joint venture transaction, which may require the use of cash in certain instances, beginning in 2027. Refer to Note 2 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information.
The Company is in compliance with the financial covenants contained in these facilities and expects to continue to maintain such compliance. Should we ever encounter difficulties, our historical relationship with our lenders has been strong, and we anticipate their continued long-term support of our business. Refer to Note 12 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our current facilities, including the financial covenants contained in each debt instrument.
Our debt to capitalization ratio, which is total indebtedness divided by the sum of total indebtedness, excluding short-term borrowings due within one year, and stockholders’ equity, was 35.8% and 40.6% at December 31, 2025 and 2024, respectively.
Supplemental Guarantor Financial Information
On March 21, 2024, the Company issued (i) $400.0 million aggregate principal amount of 5.450% Senior Notes due 2027 (the “2027 Notes”) and (ii) $700.0 million aggregate principal amount of 5.800% Senior Notes due 2034 (the “2034 Notes”, and together with the 2027 Notes, the “Notes”). The 2027 Notes and the 2034 Notes are unsecured and unsubordinated indebtedness of the Company and are guaranteed on a senior unsecured basis, jointly and severally, by AGCO International Holdings B.V., AGCO International GmbH and Massey Ferguson Corp., direct and indirect subsidiaries of the Company (collectively, the “Guarantors”). Refer to Note 12 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further discussion of these debt obligations.
The following tables present summarized financial information of AGCO Corporation, as the issuer of the 2027 Notes and the 2034 Notes, and the Guarantors on a combined basis after elimination of intercompany transactions and balances within the Guarantors and equity in the earnings from and investments in any non-guarantor subsidiary. As used herein, “obligor group” means AGCO Corporation, as the issuer of the debt securities, and the Guarantors on a combined basis. The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the obligor group and is not intended to present the financial position or results of operations of the obligor group in accordance with generally accepted accounting principles as such principles are in effect in the United States.
Balance Sheet Information
(in millions)
As of December 31, 2025
Current assets (a)
Noncurrent assets (b)
Current liabilities (c)
Noncurrent liabilities (d)
(a) Includes amounts due from non-guarantor subsidiaries of $2,628.9 million as of December 31, 2025.
(b) Includes amounts due from non-guarantor subsidiaries of $108.2 million as of December 31, 2025.
(c) Includes amounts due to non-guarantor subsidiaries of $2,557.6 million as of December 31, 2025.
(d) Includes amounts due to non-guarantor subsidiaries of $1,556.0 million as of December 31, 2025.
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Statement of Operations Information
(in millions)
Year Ended December 31, 2025
Revenues (a)
Income from operations
Net income
Net income attributable to obligor group
(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $5,044.5 million.
The following tables present summarized financial information of AGCO International GmbH, after elimination of intercompany transactions and balances within the Guarantors and equity in the earnings from and investments in any non-guarantor subsidiary.
Balance Sheet Information
(in millions)
As of December 31, 2025
Current assets (a)
Noncurrent assets (b)
Current liabilities (c)
Noncurrent liabilities (d)
(a) Includes amounts due from non-guarantor subsidiaries of $2,329.1 million as of December 31, 2025.
(b) Includes amounts due from non-guarantor subsidiaries of $102.6 million as of December 31, 2025.
(c) Includes amounts due to non-guarantor subsidiaries of $2,368.1 million as of December 31, 2025.
(d) Includes amounts due to non-guarantor subsidiaries of $1,556.0 million as of December 31, 2025.
Statement of Operations Information
(in millions)
Year Ended December 31, 2025
Revenues (a)
Income from operations
Net income
Net income attributable to obligor group
(a) Includes intercompany revenues generated from non-guarantor subsidiaries of $4,752.1 million.
Our accounts receivable sales agreements in North America, Europe and Brazil permit the sale, on an ongoing basis, of a majority of our receivables to our U.S., Canadian, European and Brazilian finance joint ventures. The sales of all receivables are without recourse to us. We do not service the receivables after the sales occur, and we do not maintain any direct retained interest in the receivables. These agreements are accounted for as off-balance sheet transactions. The cash received from receivables sold under these accounts receivable sales agreements that remains outstanding as of December 31, 2025 and 2024 was approximately $2.1 billion and $2.3 billion, respectively.
In addition, we sell certain trade receivables under factoring arrangements to other financial institutions around the world. The cash received from trade receivables sold under factoring arrangements that remain outstanding as of December 31, 2025 and 2024 was approximately $270.5 million and $220.5 million, respectively.
In order to efficiently manage our liquidity, we generally pay vendors in accordance with negotiated terms. To enable vendors to obtain payment in advance of our payment due dates to them, we have established programs in certain markets with financial institutions under which the vendors have the option to be paid by the financial institutions earlier than the payment due dates. Should we not be able to negotiate extended payment terms with our vendors, or should financial institutions no
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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. As of December 31, 2025 and 2024, the amount outstanding that remains unpaid to the banks or other intermediaries associated with these programs totaled approximately $31.7 million and $50.6 million, respectively. Refer to Note 1 1 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further discussion.
Cash Flows
Cash flows provided by operating activities were approximately $988.1 million during 2025 compared to approximately $689.9 million during 2024. The increase during 2025 compared to 2024 was driven by changes in working capital.
Our working capital requirements are seasonal, with investments in working capital typically building in the first half of the year and then reducing in the second half of the year. We had approximately $1,467.0 million in working capital at December 31, 2025, as compared with $1,312.0 million at December 31, 2024. Inventories as of December 31, 2025 were approximately $2,709.3 million as compared to $2,731.3 million as of December 31, 2024. Accounts and notes receivable, net at December 31, 2025 were approximately $188.0 million lower than at December 31, 2024, primarily due to timing of sales of accounts receivable under our factoring arrangements. Accounts payable and Accrued expenses as of December 31, 2025 were approximately $207.1 million higher than at December 31, 2024.
Capital expenditures for 2025 were approximately $247.9 million compared to $393.3 million for the same period in 2024.
Share Repurchase Program and Dividends
On July 9, 2025, the Company's Board of Directors authorized a new share repurchase program authorizing the Company to repurchase up to $1.0 billion of the Company's common stock, which has no expiration date. In November 2025, the Company entered into accelerated share repurchase (“ASR”) agreements with two financial institutions to repurchase an aggregate of $250.0 million of shares of its common stock. The Company received approximately 1,997,204 shares associated with these transactions as of December 31, 2025. In February 2026, the Company received an additional 333,755 shares upon final settlement of its November 2025 ASR agreements. In November 2024, the Company entered into an ASR agreement with a financial institution to repurchase $22.0 million of shares of its common stock. The Company received approximately 228,969 shares associated with the completion of this transaction as of December 31, 2024. In November 2023, the Company entered into an ASR agreement with a financial institution to repurchase $53.0 million of shares of its common stock. The Company received approximately 371,669 shares associated with this transaction as of December 31, 2023. In January 2024, the Company received an additional 82,883 shares upon final settlement of its 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 our Consolidated Balance Sheets. As of December 31, 2025, the remaining amount authorized to be repurchased under board-approved share repurchase authorizations was approximately $785.0 million, which has no expiration date. During the years ended December 31, 2025 and 2024, the Company declared and paid cash dividends of $1.16 and $3.66 per common share, respectively. The Company paid a special variable dividend of $2.50 per common share that was paid during the second quarter of 2024. On January 15, 2026, the Company's Board of Directors declared a regular quarterly dividend of $0.29 per common share to be paid on March 16, 2026, to all stockholders of record as of the close of business on February 13, 2026.
Contractual Obligations and Cash Requirements
Our material cash requirements include the following contractual and other obligations:
Indebtedness – As of December 31, 2025, we had approximately $117.7 million of principal payments due within the year ending December 31, 2026 related to indebtedness and certain short-term obligations. In addition, future interest payments of approximately $116.6 million are payable within the next twelve months . Indebtedness amounts reflect the principal amount of our EIB senior term loans, senior notes, credit facility and certain short-term borrowings, gross of any debt issuance costs. Our projected amount of interest payments includes assumptions regarding the future fluctuations in interest rates, as well as borrowings under our revolving credit facility and other variable debt instruments. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt. Refer to the discussion above and Note 12 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our indebtedness.
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Finance and operating lease obligations – As of December 31, 2025, we had approximately $0.6 million and $55.5 million of payments due during the year ending December 31, 2026, related to finance and operating lease obligations, respectively. Refer to Note 23 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our lease obligations.
Unconditional purchase obligations – As of December 31, 2025, we had approximately $161.6 million of outstanding purchase obligations payable during the year ending December 31, 2026. The Company's unconditional purchase obligations are primarily payable within 12 months.
Uncertain tax positions – As of December 31, 2025, we had approximately $3.8 million of income tax liabilities related to uncertain income tax provisions connected with ongoing income tax audits in various jurisdictions that we expect to pay or settle within the next 12 months. These liabilities and related income tax audits are subject to statutory expiration. Refer to Note 19 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our uncertain tax positions.
Pensions - It is our objective to contribute to the pension plans to ensure adequate funds are available in the plans to make benefit payments to plan participants and beneficiaries when required. We currently expect that we will contribute approximately $2.4 million under our non-U.S. defined benefit pension and postretirement plans during the year ending December 31, 2026. The timing and amounts of future contributions are dependent upon the funding status of the plans, which is expected to vary as a result of changes in interest rates, returns on underlying assets, and other factors. Refer to Note 20 of the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our pension and postretirement plans.
These obligations comprise a majority of our other short-term and long-term obligations.
Commitments and Off-Balance Sheet Arrangements
Guarantees
At December 31, 2025, the Company had outstanding guarantees issued to its Argentine finance joint venture, AGCO Capital Argentina S.A. (“AGCO Capital”) of approximately $82.6 million. Such guarantees generally obligate the Company to repay outstanding finance obligations owed to AGCO Capital if end users default on such loans to the extent that, due to non-credit risk, the end users are not able, or not required, to pay their loans, or are required to pay in a different currency than the one agreed in their loan. 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.
In addition, at December 31, 2025, the Company accrued approximately $11.6 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. The maximum potential amount of future payments under the guarantees is approximately $224.1 million.
Other
We sell certain accounts receivable under factoring arrangements to our finance joint ventures and to financial institutions around the world. We account for the sale of such receivables as off-balance sheet transactions. Our finance joint ventures in Europe, Brazil and Australia also provide wholesale financing directly to our dealers. As of December 31, 2025 and 2024, these finance joint ventures had approximately $107.5 million and $139.2 million, respectively, of outstanding accounts receivable associated with these arrangements. The total finance portfolio in our finance joint ventures was approximately $15.1 billion and $14.5 billion as of December 31, 2025 and 2024, respectively. The total finance portfolio as of December 31, 2025 and 2024 included approximately $12.7 billion and $11.3 billion, respectively, of retail receivables and $2.4 billion and $3.2 billion, respectively, of wholesale receivables from AGCO dealers.
Contingencies
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. The 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,
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which determined that the Company and Precision Planting had not infringed the Deere patents. Following customary post-trial procedures, the Court entered a judgment in the Company’s favor, and Deere appealed the judgment to the U.S. Court of Appeals for the Federal Circuit. On January 24, 2025, the Court ruled in favor of the Company and Precision Planting. Deere did not file for a writ of certiorari from the U.S. Supreme Court within the required time period, and, as a result, the District Court judgment is final.
We are party to various claims and lawsuits arising in the normal course of business. We closely monitor these claims and lawsuits and frequently consult with our legal counsel to determine whether they may, when resolved, have a material adverse effect on our financial position or results of operations and accrue and/or disclose loss contingencies as appropriate. Refer to Note 22 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information.
Related Party Transactions
In the ordinary course of business, we engage in transactions with related parties. Refer to Note 18 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for information regarding related party transactions and their impact to our consolidated results of operations and financial position.
Foreign Currency Risk Management
We have significant manufacturing locations in the United States, France, Germany, Finland, Italy, China and Brazil, and we purchase a portion of our tractors, other machinery and components from third-party foreign suppliers, primarily in various European countries and in Japan. We also sell products in approximately 140 countries throughout the world. The majority of our net sales outside the United States are denominated in the currency of the customer location, with the exception of sales in the Middle East, Africa, Asia and parts of South America, where net sales are primarily denominated in British pounds, Euros or the United States dollar.
The Company has a wholly-owned subsidiary in Turkey that distributes agricultural equipment and replacement parts. On the basis of available data related to inflation indices and as a result of the devaluation of the Turkish lira relative to the United States dollar, the Turkish economy was determined to be highly inflationary during 2022. A highly inflationary economy is one where the cumulative inflation rate for the three years preceding the beginning of the reporting period, including interim reporting periods, is in excess of 100 percent. For subsidiaries operating in highly inflationary economies, the United States dollar is the functional currency. Remeasurement adjustments for financial statements in highly inflationary economies and other transactional exchange gains and losses are reported in “Other expense (income), net” within our Consolidated Statements of Operations. For the year ended and as of December 31, 2025, the Company's wholly-owned subsidiary in Turkey had net sales of approximately $262.9 million and total assets of approximately 6.0 billion Turkish lira (or approximately $139.6 million). The monetary assets and liabilities denominated in the Turkish lira were approximately 4.9 billion Turkish lira (or approximately $114.5 million) and approximately 2.7 billion Turkish lira (or approximately $62.6 million), respectively, as of December 31, 2025. The monetary assets and liabilities were remeasured into United States dollars based on exchange rates as of December 31, 2025.
We also are subject to the risk of the imposition of limitations by governments on international transfers of funds. The Company has a wholly-owned subsidiary in Argentina that assembles and distributes agricultural equipment and replacement parts. In recent years, the Argentine government has substantially limited the ability of companies to transfer funds out of Argentina. Argentina's economy was determined to be highly inflationary during 2018. In December 2023, the central bank of Argentina adjusted the official foreign currency exchange rate for the Argentine peso, significantly devaluing the currency relative to the United States dollar. The December 2023 impact of the devaluation and remeasurement of net monetary assets was approximately $79.9 million. For the year ended and as of December 31, 2025, the Company's wholly-owned subsidiary in Argentina had net sales of approximately $188.4 million and total assets of approximately 313.3 billion pesos (or approximately $216.2 million). The monetary assets of the Company's operations in Argentina denominated in pesos at the official government rate were approximately 85.0 billion pesos (or approximately $58.7 million), inclusive of approximately 16.5 billion pesos (or approximately $11.4 million) in cash and cash equivalents, as of December 31, 2025. The monetary liabilities of the Company's operations in Argentina denominated in pesos at the official government rate were approximately 63.4 billion pesos (or approximately $43.8 million) as of December 31, 2025. The monetary assets and liabilities were remeasured into United States dollars based on exchange rates as of December 31, 2025. The Company's finance joint venture in Argentina, AGCO Capital, has net monetary assets denominated in pesos at the official government rate of approximately 4.3 billion pesos (or approximately $3.0 million) as of December 31, 2025. All and resulting from AGCO Capital's remeasurement of its monetary asset and liabilities are reported in “Equity in net earnings of affiliates” within the Company's
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Consolidated Statements of Operations. If limitations on transfer of funds remain, we may be subject to future losses on the net monetary assets described above.
We manage our transactional foreign currency exposure by hedging foreign currency cash flow forecasts and commitments arising from the anticipated settlement of receivables and payables and from future purchases and sales. Where naturally offsetting currency positions do not occur, we hedge certain, but not all, of our exposures through the use of foreign currency contracts. Our translation exposure resulting from translating the financial statements of foreign subsidiaries into United States dollars may be partially hedged from time to time. When practical, this translation impact is reduced by financing local operations with local borrowings. Our hedging policy prohibits use of foreign currency contracts for speculative trading purposes.
The total notional value of our foreign currency instruments was $3,676.5 million and $4,187.9 million, including $600.0 million and $600.0 million related to net investment hedges, as of December 31, 2025 and 2024, respectively, inclusive of both those instruments that are designated and qualified for hedge accounting and non-designated derivative instruments. We enter into cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates, and we enter into foreign currency contracts to economically hedge receivables and payables on our balance sheets that are denominated in foreign currencies other than the functional currency. In addition, we use derivative and non-derivative instruments to hedge a portion of our net investment in foreign operations against adverse movements in exchange rates. Refer to Note 14 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for further information about our hedging transactions and derivative instruments.
Assuming a 10% change relative to the currency of the hedge contracts, the fair value of the foreign currency instruments could be negatively impacted by approximately $25.6 million as of December 31, 2025. 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. The gains and losses on the Company’s net investment in the designated foreign operations driven by changes in foreign exchange rates would largely be offset by movements in the fair value of the cross currency swap contracts or foreign currency denominated debt.
Interest Rate Risk
Our interest expense is, in part, sensitive to the general level of interest rates. We manage our exposure to interest rate risk through our mix of floating rate and fixed rate debt. From time to time, we enter into interest rate swap agreements to manage our exposure to interest rate fluctuations. Refer to Note 12 and Note 14 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information.
Based on our floating rate debt and our accounts receivable sales facilities outstanding at December 31, 2025, a 10% increase in interest rates would have increased collectively, “Interest expense, net” and “Other expense (income), net” for the year ended December 31, 2025, by approximately $7.8 million.
Recent Accounting Pronouncements
Refer to Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.
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Critical Accounting Estimates
We prepare our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles. In the preparation of these financial statements, we make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant accounting policies followed in the preparation of the financial statements are detailed in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.” We believe that our application of the policies discussed below involves significant levels of judgment, estimates and complexity.
Due to the levels of judgment, complexity and period of time over which many of these items are resolved, actual results could differ from those estimated at the time of preparation of the financial statements. Adjustments to these estimates would impact our financial position and future results of operations.
Discount and Sales Incentive Allowances
We provide various volume bonus and sales incentive programs with respect to our products. These sales incentive programs include reductions in invoice prices, reductions in retail financing rates, dealer commissions and dealer incentive allowances. In most cases, incentive programs are established and communicated to our dealers on a quarterly basis. The incentives are paid either at the time of the cash settlement of the receivable (which is generally at the time of retail sale), at the time of retail financing, at the time of warranty registration, or at a subsequent time based on dealer purchase volumes. The incentive programs are product line specific and generally do not vary by dealer. The cost of sales incentives associated with dealer commissions and dealer incentive allowances is estimated based upon the terms of the programs and historical experience, is based on a percentage of the sales price, and estimates for sales incentives are made and recorded at the time of sale for expected incentive programs using the expected value method. These estimates are reassessed each reporting period and are revised in the event of subsequent modifications to incentive programs, as they are communicated to dealers. The related provisions and accruals are made on a product or product-line basis and are monitored for adequacy and revised at least quarterly in the event of subsequent modifications to the programs. Interest rate subsidy payments, which are a reduction in retail financing rates, are recorded in the same manner as dealer commissions and dealer incentive allowances. Volume discounts are estimated and recognized based on historical experience, and related reserves are monitored and adjusted based on actual dealer purchase volumes and the dealers’ towards specified cumulative target levels. Estimates of these incentives are based on the terms of the programs and historical experience. All incentive programs are recorded and presented as a reduction of revenue, due to the fact that we do not receive a distinct or service in exchange for the consideration provided. In the United States and Canada, reserves for incentive programs related to accounts receivable not sold to our U.S. and Canadian finance joint ventures are recorded as “Accounts receivable allowances” within our Consolidated Balance Sheets due to the fact that the incentives are paid through a reduction of future cash settlement of the receivable. Globally, reserves for incentive programs that will be paid in cash or credit memos, as is the case with most of our volume discount programs, as well as sales incentives associated with accounts receivable sold to our finance joint ventures, are recorded within “Accrued expenses” within our Consolidated Balance Sheets.
At December 31, 2025 and 2024, we had recorded an allowance for discounts and sales incentives of approximately $951.8 million and $1,018.8 million, respectively, 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. 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 $33.1 million as of December 31, 2025. 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 $33.1 million as of December 31, 2025.
Deferred Income Taxes and Uncertain Income Tax Positions
We recorded an income tax provision (benefit) of $(77.4) million in 2025 compared to $98.4 million in 2024 and $230.4 million in 2023. 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. The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate. Future changes in applicable laws, projected levels of taxable income, and tax planning could change the effective tax rate and tax balances recorded by us. In addition, tax authorities periodically review income tax returns filed by us and can raise issues regarding our filing positions, timing and amount of income or deductions, and the allocation of income among the jurisdictions in which we
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operate. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. We believe that we have adequately provided for any reasonably foreseeable resolution of these matters.
At December 31, 2025 and 2024, we had gross deferred tax assets of $962.0 million and $651.5 million, respectively, including $112.2 million and $30.3 million, respectively, related to net operating loss carryforwards. We maintain a valuation allowance to reserve a portion of our net deferred tax assets in the U.S. and certain foreign jurisdictions. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets may not be realized. At December 31, 2025 and 2024, we had total valuation allowances as an offset to our gross deferred tax assets of $179.5 million and $147.2 million, respectively. 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, 2025 depends on generating sufficient taxable income in future periods, net of reversing deferred tax liabilities. We believe it is more likely than not that the remaining net deferred tax assets should be able to be realized.
We recognize income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. As of December 31, 2025 and 2024, we had approximately $469.9 million and $387.4 million, respectively, of gross unrecognized tax benefits, all of which would impact our effective tax rate if recognized. As of December 31, 2025 and 2024, we had approximately $3.8 million and $9.3 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. At December 31, 2025 and 2024, the Company had approximately $465.8 million and $378.4 million, respectively, of accrued taxes reflected in “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets. We recognize interest and penalties related to uncertain income tax positions in income tax expense. As of December 31, 2025 and 2024, we had accrued interest and penalties related to unrecognized tax benefits of approximately $34.7 million and $30.9 million, respectively. Refer to Note 19 of our Consolidated Financial Statements for further discussion of our uncertain income tax positions.
Pensions
We sponsor qualified defined benefit pension plans covering certain employees, principally in the United Kingdom, Germany, Switzerland, Finland, France, Norway and Argentina.
In the United States, we maintain an unfunded, nonqualified defined benefit pension plan for certain senior executives, which is our Executive Nonqualified Pension Plan (“ENPP”). The ENPP is closed to new entrants and, as of December 31, 2024, future benefit accruals were frozen.
The Company merged its U.S. qualified defined benefit pension plans for hourly and salaried employees into one plan (the “Plan”) on December 31, 2023 and finalized the termination of the Plan in 2024. In connection with the termination process, the Company offered a lump sum benefit payout option to Plan participants, and the remaining assets of the Plan were used to purchase a group annuity contract that transferred the remaining plan liabilities to an insurance carrier. The termination process was finalized by December 31, 2024 and the settlement resulted in the recognition of approximately $18.5 million within “Other expense (income), net” within the Company's Consolidated Statements of Operations.
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.
Refer to Note 20 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. The measurement of our pension obligations, costs and liabilities is dependent on a variety of assumptions provided by management and used by our actuaries. These assumptions include estimates of the present value of projected future pension payments to all plan participants, taking into consideration the likelihood of potential future events such as salary increases and demographic experience. These assumptions may have an effect on the amount and timing of future contributions.
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Assumptions and Approach Used. 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, 2025 and 2024, we used a globally consistent methodology to set the discount rate in the countries where our largest benefit obligations exist. In the United States, the United Kingdom and the Euro Zone, we constructed a hypothetical bond portfolio of high-quality corporate bonds and then applied the cash flows of our benefit plans to those bond yields to derive a discount rate. The bond portfolio and plan-specific cash flows vary by country, but the methodology in which the portfolio is constructed is consistent.
The other key assumptions and methods were set as follows:
• The 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 2024 to reflect the latest expected improvements in the life expectancy of the plan participants. The mortality rates for the U.S. ENPP 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 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. ENPP and U.K. defined benefit pension plans comprise approximately 83.1% of our consolidated projected benefit obligation as of December 31, 2025. The effects of a 25 basis point change in certain actuarial assumptions on the 2025 net annual pension and ENPP costs and related benefit obligations as of December 31, 2025 would be as follows:
Year-end Benefit Obligation
2025 Net Annual Pension Cost
25 basis point increase
25 basis point decrease
25 basis point increase
25 basis point decrease
Discount rate:
U.S. ENPP
U.K. defined benefit pension plans
2025 Net Annual Pension Cost
25 basis point increase
25 basis point decrease
Long-term rate of return on plan assets:
U.S. ENPP (1)
U.K. defined benefit pension plans
(1) The U.S. ENPP is an unfunded plan.
Unrecognized actuarial net losses related to our defined benefit pension plans and ENPP were $260.4 million as of December 31, 2025 compared to $256.7 million as of December 31, 2024. The increase in unrecognized net actuarial losses between years is primarily due to the termination of the U.S. qualified defined benefit plan in the prior year, as well as the total
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net impact of the changes in the assumptions, specifically the decrease in the discount rate. The unrecognized net actuarial losses will be impacted in future periods by actual asset returns, discount rate changes, currency exchange rate fluctuations, actual demographic experience and certain other factors. For some of our defined benefit pension plans, these losses, to the extent they exceed 10% of the greater of the plan’s liabilities or the fair value of assets (“the gain/loss corridor”), will be amortized on a straight-line basis over the periods discussed as follows. For our U.K. defined benefit pension plan, the population covered is predominantly inactive participants, and losses related to those plans, to the extent they exceed the gain/loss corridor, will be amortized over the average remaining lives of those participants while covered by the respective plan. For our ENPP, the population is predominantly active participants, and losses related to the plan will be amortized over the average future working lifetime of the active participants expected to receive benefits. As of December 31, 2025, the average amortization periods were as follows:
ENPP
U.K. Plan
Average amortization period of losses related to defined benefit pension plans
6.5 years
16.3 years
Unrecognized prior service cost related to our defined benefit pension plans was $28.3 million as of December 31, 2025 compared to $29.8 million as of December 31, 2024.
As of December 31, 2025, our unfunded or underfunded obligations related to our defined benefit pension plans and ENPP were approximately $61.9 million, primarily related to our defined benefit pension plans in Europe. In 2025, we contributed approximately $14.8 million towards those obligations, and we expect to fund approximately $14.8 million in 2026. 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.
Refer to Note 20 of our Consolidated Financial Statements for more information regarding the investment strategy and concentration of risk.
Goodwill, Other Intangible Assets and Long-Lived Assets
Goodwill
We have significant goodwill on our balance sheet related to historical acquisitions and the PTx Trimble joint venture transaction in 2024, which we accounted for using the acquisition method of accounting. We test goodwill for impairment, at the reporting unit level, annually as of October 1 st or more frequently when events or circumstances indicate that the fair value of a reporting unit is more likely than not less than its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. We combine and aggregate two or more components of an operating segment as a single reporting unit if the components have similar economic characteristics. Our reportable segments are not our reporting units. The goodwill arising from the PTx Trimble joint venture has been assigned to four new reporting units within our North America, South America, Europe/Middle East and Asia/Pacific/Africa operating segments.
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. 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. 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 may utilize one or a combination of valuation techniques. 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 make various assumptions, including assumptions regarding future cash flows, growth rates, discount rates, and market multiples in our assessment of the impairment of goodwill. 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. 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
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farm input costs, weather conditions, lower commodity prices and changes in the availability of credit. 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.
The annual impairment tests completed as of October 1, 2025 indicated the fair value of each of the Company's reporting units was substantially above its respective carrying value except for the PTx North America reporting unit, which is part of the North America operating segment. The results of the impairment test indicated the fair value in excess of the carrying value of our PTx North America reporting unit was approximately 16%. We estimated the fair value of the PTx North America reporting unit using a combination of an income and market approach. The most critical assumptions used in the calculation of the fair value of the reporting unit were the forecasted revenue growth and the discount rate used in the discounted cash flow model as well as the selection of peer companies and respective revenue multiples used in the guideline public company method. If we had changed the discount rate assumption used to estimate the fair value of our PTx North America reporting unit as of the annual impairment test under the income approach, in isolation, it would have resulted in a change in the fair value in excess of the carrying value of this reporting unit. An increase in the discount rate of 1.0 percent would have decreased the headroom to approximately 3% while a decrease in the discount rate of 1.0 percent would have increased the headroom to approximately 32%.
As of December 31, 2025, we had approximately $1,898.8 million of goodwill. While our annual impairment testing in 2025 supports 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.
Long-lived assets
We review our long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If we determine that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on many factors, including current operating results, expected market trends and competitive influences. We also evaluate the amortization or depreciation periods assigned to our long-lived assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell.
