Stock Incentive Plan

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Under the Plan, up to 10,000,000 shares of AGCO’s common stock may be issued. As of December 31, 2022, of the 10,000,000 shares reserved for issuance under the Plan, approximately 3,780,349 shares remained available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed below. The Plan allows the Company, under the direction of the Board of Directors’ Compensation Committee, to make grants of performance shares, stock appreciation rights, restricted stock units and restricted stock awards to employees, officers and non-employee directors of the Company.

Long-Term Incentive Plan and Related Performance Awards

The Company’s primary long-term incentive plan is a performance share plan that provides for awards of shares of the Company’s common stock based on achieving financial targets, such as targets for return on invested capital, operating margins, return on net assets and revenue growth, as determined by the Company’s Board of Directors. Performance periods for the Company’s primary long-term incentive plan are consecutive and overlapping three-year cycles, and performance targets are set at the beginning of each cycle. The primary long-term incentive plan provides for participants to earn 16.5% to 200% of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Awards earned under the Plan are paid in shares of common stock at the end of each three-year performance period. The percentage level achievement is determined annually or over the three-year cycle in aggregate, with the ultimate award that is earned determined based upon the average of the three annual percentages. The 2022 grant of performance award shares is subject to a total shareholder return modifier. The compensation expense associated with these awards is amortized ratably over the vesting or performance period based on the Company’s projected assessment of the level of performance that will be achieved and earned.

During 2022, the Company granted 320,120 performance awards if the Company were to achieve its maximum levels of performance related to varying performance periods. Compensation expense recorded during 2022, 2021 and 2020 with respect to awards granted was based upon the fair value as of the grant date. For the 2022 and 2021 awards that included a market condition, the Company measured the fair value using a Monte Carlo simulation. The weighted average grant-date fair value of performance awards granted under the Plan during 2022, 2021 and 2020 was as follows:


	Years Ended December 31,
	2022		2021		2020
Weighted average grant-date fair value	$	119.35	$	123.33	$	70.84

Performance award transactions during 2022 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan:


	Performance awards	Weighted-Average Grant Date Fair Value
Shares awarded but not earned at January 1	514,714	$	97.72
Shares awarded	320,120	119.35
Shares forfeited	(34,324)	108.99
Shares vested or earned	(256,606)	73.96
Shares awarded but not earned at December 31	543,904	$	120.94

Based on the level of performance achieved as of December 31, 2022, 289,513 shares were earned under the related performance period, including 53,681 shares vested as of December 31, 2021 related to certain retirees and other individuals. 183,431 shares were issued in February 2023, net of 106,082 shares that were withheld for taxes related to the earned awards. The Plan allows for the participant to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the participant’s statutory minimum federal, state and employment taxes which would be payable at the time of grant. In addition, assuming the maximum target levels of performance achieved, there were 13,560 shares earned as of December 31, 2022 related to certain retirees and other individuals that will be issued at the end of the relevant performance periods based on the ultimate level of performance achieved with respect to those periods.

As of December 31, 2022, the total compensation cost related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was approximately $30.9 million, and the weighted average period over which it is expected to be recognized is approximately two years. This estimate is based on the current projected levels of performance of outstanding awards. The compensation cost not yet recognized could be higher or lower based on actual achieved levels of performance.

Restricted Stock Units

Restricted stock unit (“RSU”) awards granted under Plan do not entitle recipients to vote or receive dividends during the vesting period and will be forfeited in the event of the recipient’s termination of employment, except for certain circumstances such as retirement, death or disability. The fair value of restricted stock and restricted stock units is the closing market price per share of the Company’s stock on the grant date less the present value of the expected dividends not received during the vesting period.

The weighted average grant-date fair value of the RSUs granted under the Plan during 2022, 2021 and 2020 was as follows:


	Years Ended December 31,
	2022		2021		2020
Weighted average grant-date fair value	$	109.09	$	113.91	$	70.83

During the year ended December 31, 2022, the Company granted 133,546 RSU awards. These awards entitle the participant to receive one share of the Company’s common stock for each RSU granted and vest one-third per year over a three-year requisite service period. The 2020 grant of RSUs to certain executives has a three-year cliff vesting requirement subject to adjustment based on a margin improvement metric relative to the Company’s defined peer group. The compensation expense associated with all RSU awards is being amortized ratably over the requisite service period for the awards that are expected to vest. RSU transactions during the year ended December 31, 2022 were as follows:


	RSUs	Weighted-Average Grant Date Fair Value
Shares awarded but not vested at January 1	159,228	$	93.13
Shares awarded	133,546	109.09
Shares forfeited	(9,320)	107.53
Shares vested	(70,256)	86.71
Shares awarded but not vested at December 31	213,198	$	104.62

A majority of the 70,256 shares vested with respect to RSU awards during 2022 were issued in January 2022. 4,380 shares vested during 2022 related to certain retirees. During January 2023, 53,637 RSUs shares were issued, net of 31,458 shares that were withheld for taxes. 22,451 RSUs 2020 remain to be issued as they are subject to adjustment based on a total margin improvement metric relative to the Company’s defined peers. The Plan allows for the participant to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the participant’s statutory minimum federal, state and employment taxes which would be payable at the time of grant. As of December 31, 2022, the total compensation cost related to the unvested RSUs not yet recognized was approximately $13.0 million, and the weighted average period over which it is expected to be recognized is approximately one and one-half years.

2023 Awards

On January 30, 2023, the Company granted 140,042 performance award shares (subject to the Company achieving future target levels of performance) and 100,955 RSUs under the Plan. The 2023 grant of performance award shares is subject to a total shareholder return modifier.

Stock-settled Appreciation Rights

Certain executives and key managers were eligible to receive grants of SSARs through the year ended December 31, 2020. The Company did not grant any SSARs since the year ended December 31, 2020 and does not currently anticipate granting any SSARs in the future. The Company recorded stock compensation expense of approximately $0.5 million, $0.8 million and $1.9 million associated with SSAR awards during 2022, 2021 and 2020, respectively. The compensation expense associated with these awards is being amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option pricing model.

The total fair value of SSARs vested during 2022 was approximately $0.7 million. There were 57,300 SSARs that were not vested and 144,984 SSARs outstanding as of December 31, 2022. The total intrinsic value of outstanding and exercisable SSARs as of December 31, 2022 was $10.1 million and $6.2 million, respectively. The total intrinsic value of SSARs exercised during 2022 was approximately $2.8 million.

Excess Tax Benefit

The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs, vesting of RSU awards and vesting of performance awards under the Plan was approximately $1.9 million for the year ended December 31, 2022. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs, vesting of RSU awards and vesting of performance awards under the Plan was approximately $3.3 million for the year ended December 31, 2021. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs, vesting of RSU awards and vesting of performance awards under the Plan was approximately $2.5 million for the year

ended December 31, 2020. The Company realized an insignificant tax benefit from the exercise of SSARs, vesting of performance awards and vesting of RSU awards in certain foreign jurisdictions during the years ended December 31, 2022, 2021 and 2020.

Director Restricted Stock Grants

Pursuant to the Plan, all non-employee directors receive annual restricted stock grants of the Company’s common stock. All restricted stock grants made to the Company’s directors are restricted as to transferability for a period of one year. In the event a director departs from the Company’s Board of Directors, the non-transferability period expires immediately. The plan allows each director to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the statutory minimum federal, state and employment taxes that would be payable at the time of grant. The 2022 grant was made on April 28, 2022 and equated to 11,664 shares of common stock, of which 10,301 shares of common stock were issued, after shares were withheld for taxes. The Company recorded stock compensation expense of approximately $1.5 million during 2022 associated with these grants.