ALAMO GROUP INC

Previous wording

We experienced strong demand for industrial equipment during the first three months of 2024 while demand for forestry, tree care, and agricultural mowing products has weakened as was reflected in our top line growth. Margins declined slightly due to weaker Vegetation Management Division sales that slowed our production cadence and adversely impacted production efficiency.

Current wording

We experienced strong demand for industrial equipment during the first six months of 2024 while demand for forestry, tree care, and agricultural mowing products has weakened as was reflected in our sales growth. Gross profit margins declined slightly due to weaker Vegetation Management Division sales that slowed our production cadence and adversely impacted production efficiency.

Previous wording

For the first three months of 2024, the Company's net sales increased by 3%, and net income decreased by 4% compared to the same period in 2023. The increase in net sales was primarily driven by industrial product demand, partially offset by a decline in forestry, tree care, and agricultural mowing product demand. The decrease in net income was largely driven by the decline in forestry, tree care, and agricultural mowing product demand.

Current wording

For the first six months of 2024, the Company's net sales decreased by 1%, and net income decreased by 13% compared to the same period in 2023. The decrease in net sales was primarily driven by weakened product demand in the Vegetation Management Division, and the labor strike at Gradall Industries, which had a negative effect on the Industrial Equipment Division. However, these challenges were nearly offset by strong sales growth in the Industrial Equipment Division. The decrease in net income was largely driven by the decrease in Vegetation Management product demand which impacted production efficiency, and the nonrecurring costs associated with the labor strike at Gradall Industries, which negatively impacted the Industrial Equipment Division, and restructuring costs in Vegetation Management.

Previous wording

The Company's Vegetation Management Division experienced a 13% decrease in sales for the first three months of 2024 compared to the first three months of 2023 that was driven by weaker shipments of forestry, tree care and agricultural mowing products. The Division's backlog has declined by 48% compared to the same period in 2023, primarily driven by softness in incoming orders, specifically in the forestry and North American agricultural mowing markets. As a result, the Division's income from operations for the three months of 2024 declined 41% versus the same period in 2023.

Current wording

The Company's Vegetation Management Division experienced a 16% decrease in sales for the first six months of 2024 compared to the first six months of 2023 that was driven by weaker shipments of forestry, tree care and agricultural mowing products. The Division's backlog has declined 48% compared to the same period in 2023, primarily driven by softness in incoming orders, specifically in the forestry and North American agricultural mowing markets. Vegetation Management's backlog has returned to pre-COVID levels. As a result, the Division's income from operations for the six months of 2024 declined 48% versus the same period in 2023.

Previous wording

The Company's Industrial Equipment Division sales increased in the first three months of 2024 by 30% as compared to the first three months of 2023. Industrial Equipment sales were strong in all product lines with excavators, vacuum trucks, and safety contributing the most to year on year growth. The Division's income from operations for the first three months of 2024 was up 102% versus the same period in 2023, due to the increased demand.

Current wording

The Company's Industrial Equipment Division sales increased in the first six months of 2024 by 21% as compared to the six months of 2023. Industrial Equipment sales were strong in all product lines with excavators, vacuum trucks, and safety contributing the most to year on year growth. The Division's income from operations for the first three months of 2024 was up 68% versus the same period in 2023, due to the increased demand combined with a significant improvement in supply chain performance and truck chassis availability.

Previous wording

Consolidated income from operations was $47.0 million in the first three months of 2024 compared to $49.0 million in the first three months of 2023, a decrease of 4%. The Company's backlog of $831.3 million at the end of the first three months of 2024 is down 16% versus a backlog of $994.8 million at the end of the first three months of 2023.

Current wording

Consolidated income from operations was $90.3 million in the first six months of 2024 compared to $103.4 million in the first six months of 2023, a decrease of 13%. The Company's backlog of $768.9 million at the end of the first six months of 2024 is down 14% versus a backlog of $891.2 million at the end of the first six months of 2023.

Previous wording

While the supply chain performance has broadly improved, disruptions relating to chassis frames, transmissions, and hydraulics continue to negatively impact performance. In addition, the Company may also be negatively affected by several other factors such as weakness in the overall U.S. or world-wide economy, further increases in interest rates, changes in tariff regulations and the imposition of new tariffs, ongoing trade disputes, a deterioration of our supply chain, changes in U.S. fiscal policy such as changes in the federal tax rate, significant changes in currency exchange rates, negative economic impacts resulting from geopolitical events such as the ongoing war in Ukraine, changes in trade policy, increased levels of government regulations, weakness in the agricultural sector, acquisition integration issues, budget constraints or revenue shortfalls in governmental entities, and other risks and uncertainties as described in the “Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K").

Current wording

While the supply chain performance has broadly improved, we continue to experience shortages of certain components such as transmissions and hydraulics which negatively impact performance. In addition, the Company may also be negatively affected by several other factors such as weakness in the overall U.S. or world-wide economy, further increases in interest rates, changes in tariff regulations and the imposition of new tariffs, ongoing trade disputes, a deterioration of our supply chain, changes in U.S. fiscal policy such as changes in the federal tax rate, significant changes in currency exchange rates, negative economic impacts resulting from geopolitical events such as the ongoing war in Ukraine, changes in trade policy, increased levels of government regulations, weakness in the agricultural sector, acquisition integration issues, budget constraints or revenue shortfalls in governmental entities, and other risks and uncertainties as described in the “Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K").

Previous wording

Net Industrial Equipment sales were $201.8 million in the first quarter of 2024 compared to $155.3 million for the same period in 2023, an increase of $46.5 million or 30%. The increase was due to solid results in all product lines, particularly excavators, vacuum trucks, and safety contributing the most to year on year growth.

Current wording

Net Industrial Equipment sales were $204.8 million in the second quarter of 2024 compared to $179.3 million for the same period in 2023, an increase of $25.5 million or 14%. The increase was due to solid results in all product lines, particularly safety, vacuum trucks, and snow contributing the most to year on year growth.

Previous wording

Gross profit for the first quarter of 2024 was $111.6 million (26% of net sales) compared to $112.5 million (27% of net sales) during the same period in 2023, a decrease of $0.9 million. The decrease in gross profit during the first quarter of 2024 compared to the first quarter of 2023 was primarily attributable to weaker mix between our Vegetation and Industrial Divisions. This resulted in slightly lower gross margins compared to the first quarter of 2023. Profitability in the quarter also decreased due to production inefficiencies resulting from volume decline in Vegetation Management.

Current wording

Gross profit for the second quarter of 2024 was $108.2 million (26% of net sales) compared to $118.1 million (27% of net sales) during the same period in 2023, a decrease of $9.9 million. The decrease in gross profit during the second quarter of 2024 compared to the second quarter of 2023 was primarily attributable to the decline in Vegetation Management product demand. Profitability in the quarter also decreased due to production inefficiencies, under-absorption, and the impact of restructuring costs to reduce capacity in Vegetation Management. Industrial profitability, while very solid, was impacted by the five-week strike at the Gradall operations in Ohio.

Previous wording

Selling, general and administrative expenses (“SG&A”) were $60.6 million (14% of net sales) during the first quarter of 2024 compared to $59.7 million (14% of net sales) during the same period of 2023, an increase of $0.9 million. The increase in SG&A expense in the first quarter of 2024 compared to the first quarter of 2023 was attributable to labor cost inflation. Amortization expense in the first quarter of 2024 was $4.1 million compared to $3.8 million in the same period in 2023.

Current wording

Selling, general and administrative expenses (“SG&A”) were $60.8 million (15% of net sales) during the second quarter of 2024 compared to $59.9 million (14% of net sales) during the same period of 2023, an increase of $0.9 million. The increase in SG&A expense in the second quarter of 2024 compared to the second quarter of 2023 was attributable to the Royal Truck acquisition. Labor cost inflation has been offset by cost savings actions. Amortization expense in the second quarter of 2024 was $4.1 million compared to $3.8 million in the same period in 2023.

Previous wording

Interest expense was $6.1 million for the first quarter of 2024 compared to $5.9 million during the same period in 2023. The increase in interest expense in the first quarter of 2024 was mainly due to higher interest rates compared to the first quarter of 2023.

Current wording

Interest expense was $6.1 million for the second quarter of 2024 compared to $6.8 million during the same period in 2023. The decrease in interest expense in the second quarter of 2024 was mainly due to debt reduction and slightly lower interest rates compared to the second quarter of 2023.

Previous wording

Other income (expense), net was $0.1 million of income for the first quarter of 2024 compared to $1.0 million of income during the same period in 2023. The income in the first quarter of 2023 was primarily a result from a gain of approximately $1.7 million related to a sale of a manufacturing facility, partially offset by more favorable currency exchange rates in the first quarter of 2024.

Current wording

Other income (expense), net was $0.1 million of expense for the second quarter of 2024 compared to $1.0 million of expense during the same period in 2023. The improvement was primarily a result of more favorable currency exchange rates in the second quarter of 2024.

Previous wording

Provision for income taxes was $9.7 million (23% of income before income tax) in the first quarter of 2024 compared to $11.1 million (25% of income before income tax) during the same period in 2023. The decrease in the tax rate for the first quarter of 2024 was largely a result of a favorable research and development tax settlement with the Brazilian government.

Current wording

Provision for income taxes was $9.3 million (25% of income before income tax) in the second quarter of 2024 compared to $10.5 million (22% of income before income tax) during the same period in 2023. The increase in tax rate for the second quarter of 2024 was largely a result of jurisdictional mix and a nonrecurring tax refund received in the same period in 2023.

Previous wording

The Company’s net income after tax was $32.1 million or $2.67 per share on a diluted basis for the first quarter of 2024 compared to $33.3 million or $2.79 per share on a diluted basis for the first quarter of 2023. The decrease of $1.2 million resulted from the factors described above.

Current wording

The Company’s net income after tax was $28.3 million or $2.35 per share on a diluted basis for the second quarter of 2024 compared to $36.4 million or $3.03 per share on a diluted basis for the second quarter of 2023. The decrease of $8.1 million resulted from the factors described above.

Previous wording

Net Vegetation Management sales decreased by $32.7 million or 13% to $223.7 million for the first quarter of 2024 compared to $256.4 million during the same period in 2023. The decrease was due to weaker demand for forestry, tree care, and agricultural mowing products.

Current wording

Net Vegetation Management sales decreased during the first six months by $82.5 million or 16% to $435.3 million for 2024 compared to $517.8 million during the same period in 2023. The decrease was due to weaker demand for forestry, tree care, and agricultural mowing products.

Previous wording

As of March 31, 2024, the Company had working capital of $702.2 million which represents an increase of $112.2 million from working capital of $590.0 million at December 31, 2023. The increase in working capital was primarily a result of cash and cash equivalents and volume-driven increases in accounts receivable.

Current wording

As of June 30, 2024, the Company had working capital of $699.9 million which represents an increase of $109.9 million from working capital of $590.0 million at December 31, 2023. The increase in working capital was primarily a result of cash and cash equivalents.

Previous wording

Capital expenditures were $6.7 million for the first three months of 2024, compared to $9.0 million during the first three months of 2023. The Company expects a capital expenditure level of approximately $35.0 million to $45.0 million for the full year of 2024. The Company will fund any future expenditures from operating cash flows or through our revolving credit facility, described below.

Current wording

Capital expenditures were $11.1 million for the first six months of 2024, compared to $18.2 million during the first six months of 2023. The Company expects a capital expenditure level of approximately $30.0 million to $35.0 million for the full year of 2024. The Company will fund any future expenditures from operating cash flows or through our revolving credit facility, described below.

Previous wording

Net cash used for investing activities was $5.9 million during the first three months of 2024 compared to $6.5 million during the first three months of 2023.

Current wording

Net cash used for investing activities was $10.3 million during the first six months of 2024 compared to $15.3 million during the first six months of 2023.

Previous wording

Net cash provided by financing activities was $77.8 million and $66.8 million during the three month periods ended March 31, 2024 and March 31, 2023, respectively. Higher net cash provided by financing activities for the first three months of 2024 relates to increased net borrowings on the Company's credit facility.

Current wording

Net cash provided by financing activities was $47.2 million and $40.5 million during the six month periods ended June 30, 2024 and June 30, 2023, respectively. Higher net cash provided by financing activities for the first six months of 2024 relates to increased net borrowings on the Company's credit facility.

Previous wording

The Company had $116.0 million in cash and cash equivalents held by its foreign subsidiaries as of March 31, 2024. The majority of these funds are at our European and Canadian facilities. The Company will continue to repatriate European and Canadian cash and cash equivalents in excess of amounts needed to fund operating and investing activities in these locations, and will monitor exchange rates to determine the appropriate timing of such repatriation given the current relative value of the U.S. dollar. Repatriated funds will initially be used to reduce funded debt levels under the Company's current credit facility and subsequently used to fund working capital, capital investments and acquisitions company-wide.

Current wording

The Company had $112.2 million in cash and cash equivalents held by its foreign subsidiaries as of June 30, 2024. The majority of these funds are at our European and Canadian facilities. The Company will continue to repatriate European and Canadian cash and cash equivalents in excess of amounts needed to fund operating and investing activities in these locations, and will monitor exchange rates to determine the appropriate timing of such repatriation given the current relative value of the U.S. dollar. Repatriated funds will initially be used to reduce funded debt levels under the Company's current credit facility and subsequently used to fund working capital, capital investments and acquisitions company-wide.

Previous wording

On October 28, 2022, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Third Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with Bank of America, N.A., as Administrative Agent. The 2022 Credit Agreement provides Borrower with the ability to request loans and other financial obligations in an aggregate amount of up to $655.0 million. Under the 2022 Credit Agreement, the Company has borrowed $255.0 million pursuant to a Term Facility, while up to $400.0 million is available to the Company pursuant to a Revolver Facility which terminates in 2027. The Term Facility requires the Company to make equal quarterly principal payments of $3.75 million over the term of the loan, with the final payment of any outstanding principal amount, plus interest, due at the end of the five year term. Borrowings under the 2022 Credit Agreement bear interest, at the Company’s option, at a Term Secured Overnight Financing Rate (“SOFR”) or a Base Rate (each as defined in the 2022 Credit Agreement), plus, in each case, an applicable margin. The applicable margin ranges from 1.25% to 2.50% for Term SOFR borrowings and from .25% to 1.50% for Base Rate borrowings with the margin percentage based upon the Company's consolidated leverage ratio. The Company must also pay a commitment fee to the lenders ranging between 0.15% to 0.30% on any unused portion of the $400.0 million Revolver Facility. The 2022 Credit Agreement requires the Company to maintain two financial covenants, namely, a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on the sale of properties and limitations on liens and capital expenditures. The Agreement also contains other customary covenants, representations and events of defaults. The expiration date of the 2022 Credit Agreement, including the Term Facility and the Revolver Facility, is October 28, 2027. As of March 31, 2024, $322.5 million was outstanding under the 2022 Credit Agreement, $232.5 million on the Term Facility and $90.0 million on the Revolver Facility. On March 31, 2024, $2.6 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by vendors' contracts resulting in $307.4 million in available borrowings. The Company is in compliance with the covenants under the Agreement as of March 31, 2024.

Current wording

On October 28, 2022, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Third Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with Bank of America, N.A., as Administrative Agent. The 2022 Credit Agreement provides Borrower with the ability to request loans and other financial obligations in an aggregate amount of up to $655.0 million. Under the 2022 Credit Agreement, the Company has borrowed $255.0 million pursuant to a Term Facility, while up to $400.0 million is available to the Company pursuant to a Revolver Facility which terminates in 2027. The Term Facility requires the Company to make equal quarterly principal payments of $3.75 million over the term of the loan, with the final payment of any outstanding principal amount, plus interest, due at the end of the five year term. Borrowings under the 2022 Credit Agreement bear interest, at the Company’s option, at a Term Secured Overnight Financing Rate (“SOFR”) or a Base Rate (each as defined in the 2022 Credit Agreement), plus, in each case, an applicable margin. The applicable margin ranges from 1.25% to 2.50% for Term SOFR borrowings and from .25% to 1.50% for Base Rate borrowings with the margin percentage based upon the Company's consolidated leverage ratio. The Company must also pay a commitment fee to the lenders ranging between 0.15% to 0.30% on any unused portion of the $400.0 million Revolver Facility. The 2022 Credit Agreement requires the Company to maintain two financial covenants, namely, a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on the sale of properties and limitations on liens and capital expenditures. The Agreement also contains other customary covenants, representations and events of defaults. The expiration date of the 2022 Credit Agreement, including the Term Facility and the Revolver Facility, is October 28, 2027. As of June 30, 2024, $294.5 million was outstanding under the 2022 Credit Agreement, $228.8 million on the Term Facility and $65.8 million on the Revolver Facility. On June 30, 2024, $2.6 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by vendors' contracts resulting in $331.7 million in available borrowings. The Company is in compliance with the covenants under the Agreement as of June 30, 2024.

Previous wording

Management believes the 2022 Credit Agreement along with the Company’s ability to internally generate funds from operations should be sufficient to allow the Company to meet its cash requirements for the foreseeable future.

Current wording

Management believes the 2022 Credit Agreement along with the Company’s ability to internally generate funds from operations should be sufficient to allow the Company to meet its cash requirements for the foreseeable future. However, future challenges affecting the banking industry and credit markets in general could potentially cause changes to credit availability, which creates a level of uncertainty.

Previous wording

Part I of this Quarterly Report on Form 10-Q and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 2 of this Quarterly Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, forward-looking statements may be made orally or in press releases, conferences, reports or otherwise, in the future by or on behalf of the Company.

Current wording

Part I of this Quarterly Report on Form 10-Q and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 2 of this Quarterly Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, forward-looking statements may be made orally or in press releases, conferences, reports or otherwise, in the future by or on behalf of the Company. Generally, forward-looking statements are not based on historical facts but instead represent the Company's and its management's belief regarding future events.

Previous wording

Statements that are not historical are forward-looking. When used by or on behalf of the Company, the words “estimate,” "anticipate," "expect," “believe,” “intend”, "will", "would", "should", "could" and similar expressions generally identify forward-looking statements made by or on behalf of the Company.

Current wording

Statements that are not historical are forward-looking. When used by us or on our behalf, the words "expect,"

Previous wording

Forward-looking statements involve risks and uncertainties. These uncertainties include factors that affect all businesses operating in a global market, as well as matters specific to the Company and the markets it serves. Particular risks and uncertainties facing the Company include changes in market conditions and a potential weakening of the markets we serve; supply chain disruptions; labor constraints; changes in tariff regulations and the imposition of new tariffs; a strong U.S. dollar; increased competition; negative economic impacts resulting from geopolitical events such as the war in Ukraine or trade wars; new or unanticipated effects of the COVID-19 pandemic; decreases in the prices of agricultural commodities, which could affect our customers' income levels; increases in input costs; our inability to increase profit margins through continuing production efficiencies and cost reductions; acquisition integration issues; budget constraints or income shortfalls which could affect the purchases of our type of equipment by governmental customers; credit availability for both the Company and its customers, adverse weather conditions such as droughts, floods, snowstorms, etc. which can affect buying patterns of the Company’s customers and related contractors; the price and availability of raw materials and product components; energy cost; increased cost of governmental regulations which effect corporations including related fines and penalties (such as the European General Data Protection Regulation and the California Consumer Privacy Act); the potential effects on the buying habits of our customers due to animal disease outbreaks and other epidemics; the

Current wording

Forward-looking statements involve risks and uncertainties. These uncertainties include factors that affect all

Previous wording

Company’s ability to develop and manufacture new and existing products profitably; market acceptance of new and existing products; the Company’s ability to maintain good relations with its employees; the Company's ability to successfully complete acquisitions and operate acquired businesses or assets; the ability to hire and retain quality skilled employees; cyber security risks affecting information technology or data security breaches; and the possible effects of events beyond our control, such as political unrest, acts of terror, natural disasters and pandemics, on the Company or its customers, suppliers and the economy in general.

Current wording

•market acceptance of new and existing products;

Previous wording

In addition, the Company is subject to risks and uncertainties facing the industry in general, including changes in business and political conditions and the economy in general in both domestic and international markets; weather conditions affecting demand; slower growth in the Company’s markets; financial market changes including increases in interest rates and fluctuations in foreign exchange rates; actions of competitors; the inability of the Company’s suppliers, customers, creditors, public utility providers and financial service organizations to deliver or provide their products or services to the Company; seasonal factors in the Company’s industry; litigation; government actions including budget levels, regulations and legislation, primarily relating to the environment, commerce, infrastructure spending, health and safety; and availability of materials.

Current wording

•the inability of our suppliers, creditors, public utility providers and financial and other service organizations to deliver or provide their products or services to us;

Previous wording

The Company wishes to caution readers not to place undue reliance on any forward-looking statements and to recognize that the statements are not predictions of actual future results. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, as well as others not now anticipated. The foregoing statements are not exclusive and further information concerning the Company and its businesses, including factors that could potentially materially affect the Company’s financial results, may emerge from time to time. It is not possible for management to predict all risk factors or to assess the impact of such risk factors on the Company’s businesses.

Current wording

described above, as well as others not now anticipated. The foregoing statements are not exclusive and further information concerning us and our businesses, including factors that could potentially materially affect our financial results, may emerge from time to time. It is not possible for management to predict all risk factors or to assess the impact of such risk factors on the Company’s businesses. Any forward-looking statements made by or on behalf of the Company speak only to the date they are made and we do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the forward-looking statements were made.

Previous wording

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the balance sheet date. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive income within the statement of stockholders’ equity. The total foreign currency translation adjustment for the current quarter decreased stockholders’ equity by $7.3 million.

Current wording

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the balance sheet date. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive income within the statement of stockholders’ equity. The total foreign currency translation adjustment for the current quarter decreased stockholders’ equity by $5.5 million.

Previous wording

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately in Europe and Canada, as a result of the sales of its products in international markets. Forward currency contracts are used to hedge against the earnings effects of such fluctuations. The result of a uniform 10% strengthening or 10% decrease in the value of the dollar relative to the currencies in which the Company’s sales are denominated would result in a change in gross profit of $3.6 million for the three month period ended March 31, 2024. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which include a changed dollar value of the resulting sales, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.

Current wording

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately in Europe and Canada, as a result of the sales of its products in international markets. Forward currency contracts are used to hedge against the earnings effects of such fluctuations. The result of a uniform 10% strengthening or 10% decrease in the value of the dollar relative to the currencies in which the Company’s sales are denominated would result in a change in gross profit of $7.0 million for the six month period ended June 30, 2024. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which include a changed dollar value of the resulting sales, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.

Previous wording

The Company’s long-term debt bears interest at variable rates. Accordingly, the Company’s net income is affected by changes in interest rates. Assuming the current level of borrowings at variable rates and a two percentage point change for the first quarter 2024 average interest rate under these borrowings, the Company’s interest expense would have changed by approximately $1.6 million. In the event of an adverse change in interest rates, management could take actions to mitigate its exposure. However, due to the uncertainty of the actions that would be taken and their possible effects this analysis assumes no such actions. Further this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

Current wording

The Company’s long-term debt bears interest at variable rates. Accordingly, the Company’s net income is affected by changes in interest rates. Assuming the current level of borrowings at variable rates and a two percentage point change for the second quarter 2024 average interest rate under these borrowings, the Company’s interest expense would have changed by approximately $1.5 million. In the event of an adverse change in interest rates, management could take actions to mitigate its exposure. However, due to the uncertainty of the actions that would be taken and their possible effects this analysis assumes no such actions. Further this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.