ALAMO GROUP INC

Previous wording

For the first nine months of 2024, the Company's net sales decreased by 2% and net income decreased by 16% compared to the same period in 2023. The decrease in net sales was primarily driven by weakened product demand in the Vegetation Management Division. Additionally, the sale of Herschel Parts on August 16, 2024 had a negative impact to year-on-year sales, albeit immaterial on a year-to-date basis. 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 associated separation costs to reduce division capacity. Additionally, nonrecurring costs associated with the labor strike at Gradall Industries negatively impacted the Industrial Equipment Division in the second quarter of 2024.

Current wording

For the first three months of 2025, the Company's net sales decreased by 8%, and net income decreased by 1% compared to the same period in 2024. The decrease in net sales was driven by weakness in the markets served by our Vegetation Management Division. Additionally, the sale of Herschel Parts on August 16, 2024 had a negative impact to year-on-year sales, albeit immaterial on total Company basis. These challenges were offset by strong sales growth in the Industrial Equipment Division. The decline in net income was due to lower sales in the Vegetation Management Division.

Previous wording

The Company's Vegetation Management Division experienced an 18% decrease in sales for the first nine months of 2024 compared to the first nine months of 2023 that was driven by steep decline in the forestry, tree care and agricultural mowing markets. The Division's backlog has declined 52% compared to the same period in 2023, primarily driven by softness in incoming forestry and agricultural mowing orders. As a result, the Division's income from operations for the first nine months of 2024 declined 51% versus the same period in 2023. The Company is executing cost savings initiatives aimed to adjust to the market conditions and improve operational efficiency.

Current wording

Net Sales in the Vegetation Management Division decreased 27% for the first three months of 2025 compared to the strong first three months of 2024. The steep decline in the forestry, tree care and agricultural mowing markets that we experienced in 2024 affected first quarter sales. The Division's backlog has declined 30% compared to the same period in 2024 but improved by 1.3% compared to the fourth quarter in 2024. As a result, the Division's income from operations for the first three months of 2025 declined 39% versus the same period in 2024. To adjust to the market conditions and improve operational efficiency, the Company completed cost savings initiatives in the second half of 2024. As a result, operating margin in the first three months of 2024 was 8.1% compared to 4.0% in the fourth quarter in 2024.

Previous wording

The Company's Industrial Equipment Division sales increased in the first nine months of 2024 by 22% as compared to the first nine months of 2023. Industrial Equipment sales were strong in all product lines with excavators, vacuum trucks, sweepers & safety, and snow removal contributing to year over year growth. The Division's income from operations for the first nine months of 2024 was up 58% versus the same period in 2023, due to the increased demand combined with a significant improvement in supply chain performance and truck chassis availability.

Current wording

Net Sales in the Industrial Equipment Division increased in the first three months of 2025 by 12% compared to the first three months of 2024, driven by growth in excavators, vacuum trucks, and snow removal. The Division’s backlog has declined by 8% compared to the same period in 2024 but improved by 7% compared to the fourth quarter of 2024. The Division's income from operations for the first three months of 2025 was up 23% versus the same period in 2024, due to the increased demand combined with operational improvements across all groups in this Division.

Previous wording

Consolidated income from operations was $130.4 million in the first nine months of 2024 compared to $153.2 million in the first nine months of 2023, a decrease of 15%. The Company's backlog of $728.8 million at the end of the first nine months of 2024 is down 18% versus a backlog of $890.9 million at the end of the first nine months of 2023.

Current wording

Consolidated income from operations was $44.5 million in the first three months of 2025 compared to $47.0 million in the first three months of 2024, a decrease of 5%. The Company's backlog of $702.7 million at the end of the first three months of 2025 is down 15% versus a backlog of $831.3 million at the end of the first three months of 2024.

Previous wording

While the supply chain performance has broadly improved, we continue to experience shortages of certain components that could 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, savings related to cost saving actions being diminished by declining revenue, 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 wars in Ukraine and the Middle East, 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

The Company may be negatively affected by several 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, 2024 (the "2024 Form 10-K").

Previous wording

Net sales for the third quarter of 2024 were $401.3 million, a decrease of $18.3 million or 4% compared to $419.6 million for the third quarter of 2023. Net sales during the third quarter of 2024 declined due to weaker market demand in forestry, tree care, and agricultural mowing partially offset by continued strong demand for Industrial Equipment.

Current wording

Net sales for the first quarter of 2025 were $391.0 million, a decrease of $34.6 million or 8% compared to $425.6 million for the first quarter of 2024. Net sales during the first quarter of 2025 declined due to weaker market demand in forestry, tree care, and agricultural mowing, partially offset by continued strong demand for Industrial Equipment.

Previous wording

Net Vegetation Management sales decreased by $56.8 million or 23% to $190.1 million for the third quarter of 2024 compared to $246.9 million during the same period in 2023. The decrease was due to sustained weakness in forestry, tree care, and agricultural mowing markets. The sale of Herschel Parts on August 16, 2024 was immaterial to the year over year sales decrease.

Current wording

Net Vegetation Management sales decreased by $59.8 million or 27% to $163.9 million for the first quarter of 2025 compared to $223.7 million during the same period in 2024. The decrease was due to sustained weakness in forestry, tree care, and agricultural mowing markets. The sale of Herschel Parts on August 16, 2024, contributed slightly to the year-over-year decrease but was immaterial to the overall results.

Previous wording

Net Industrial Equipment sales were $211.2 million in the third quarter of 2024 compared to $172.7 million for the same period in 2023, an increase of $38.5 million or 22%. The increase was due to solid results in all product lines, particularly sweepers & safety, vacuum trucks, and snow contributing the most to year over year growth.

Current wording

Net Industrial Equipment sales were $227.1 million in the first quarter of 2025 compared to $201.8 million for the same period in 2024, an increase of $25.3 million or 12%. The increase was due to solid demand in most product lines, particularly vacuum trucks and snow contributing the most to year-over-year growth.

Previous wording

Gross profit for the third quarter of 2024 was $100.9 million (25% of net sales) compared to $114.1 million (27% of net sales) during the same period in 2023, a decrease of $13.2 million. The decrease in gross profit during the third quarter of 2024 compared to the third quarter of 2023 was primarily attributable to the decline in Vegetation Management market demand. Profitability in the quarter also decreased due to production inefficiencies, under- absorption, and the impact of continued separation costs to reduce capacity in Vegetation Management. Cost savings actions taken in the second quarter 2024 were offset by continued revenue decline.

Current wording

Gross profit for the first quarter of 2025 was $102.8 million (26% of net sales) compared to $111.6 million (26% of net sales) during the same period in 2024, a decrease of $8.8 million. The decrease in gross profit during the first quarter of 2025 compared to the first quarter of 2024 was driven by lower sales in the Vegetation Management

Previous wording

Selling, general and administrative expenses (“SG&A”) were $56.7 million (14% of net sales) during the third quarter of 2024 compared to $60.6 million (14% of net sales) during the same period of 2023, a decrease of $3.9 million. The decrease in SG&A expense in the third quarter of 2024 compared to the third quarter of 2023 is attributable to labor cost savings actions taken in Vegetation Management partially offset by additional cost from the Royal Truck acquisition. Labor cost inflation has been more than offset by cost savings actions. Amortization expense in the third quarter of 2024 was $4.1 million compared to $3.8 million in the same period in 2023, an increase due to the Royal Truck acquisition.

Current wording

Selling, general and administrative expenses (“SG&A”) were $54.3 million (14% of net sales) during the first quarter of 2025 compared to $60.6 million (14% of net sales) during the same period of 2024, a decrease of $6.3 million. The decrease in SG&A expense in the first quarter of 2025 compared to the first quarter of 2024 is attributable to labor cost savings actions taken in Vegetation Management. Amortization expense in the first quarter of 2025 was $4.0 million compared to $4.1 million in the same period in 2024.

Previous wording

Interest expense was $17.1 million for the first nine months of 2024 compared to $19.5 million during the same period in 2023, a decrease of $2.4 million. The decrease in interest expense in the first nine months of 2024 was mainly due to debt reduction.

Current wording

Interest expense was $3.2 million for the first quarter of 2025 compared to $6.1 million during the same period in 2024. The decrease in interest expense in the first quarter of 2025 was due to debt reduction.

Previous wording

Other income (expense), net was less than $0.1 million of expense for the third quarter of 2024 compared to $0.1 million of income during the same period in 2023. The decline was primarily a result of unfavorable currency exchange rates in the third quarter of 2024 nearly offset by the gain on sale of Herschel Parts.

Current wording

Other income (expense), net was $0.7 million of expense for the first quarter of 2025 compared to $0.1 million of income during the same period in 2024. The decline was primarily a result of unfavorable currency exchange rates.

Previous wording

Provision for income taxes was $8.3 million (23% of income before income tax) in the third quarter of 2024 compared to $8.6 million (20% of income before income tax) during the same period in 2023. The increase in tax rate for the third quarter of 2024 was largely a result of a return to provision adjustment driven by higher research and development and foreign tax credits recognized in the same period in 2023.

Current wording

Provision for income taxes was $10.0 million (24% of income before income tax) in the first quarter of 2025 compared to $9.7 million (23% of income before income tax) during the same period in 2024. The increase in tax rate for the first quarter of 2025 was largely due to the release of a valuation allowance in first quarter of 2024, which provided a benefit in that quarter.

Previous wording

The Company’s net income after tax was $27.4 million or $2.28 per share on a diluted basis for the third quarter of 2024 compared to $34.9 million or $2.91 per share on a diluted basis for the third quarter of 2023. The decrease of $7.5 million resulted from the factors described above.

Current wording

The Company’s net income after tax was $31.8 million or $2.64 per share on a diluted basis for the first quarter of 2025 compared to $32.1 million or $2.67 per share on a diluted basis for the first quarter of 2024.

Previous wording

As of September 30, 2024, the Company had working capital of $667.6 million which represents an increase of $77.6 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.

Current wording

As of March 31, 2025, the Company had working capital of $699.5 million which represents an increase of $32.3 million from working capital of $667.2 million at December 31, 2024. The increase in working capital was due to an increase in accounts receivable and inventory, partially offset by increase in accounts payable.

Previous wording

Capital expenditures were $19.0 million for the first nine months of 2024, compared to $27.1 million during the first nine 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.

Current wording

Capital expenditures were $6.0 million for the first three months of 2025, compared to $6.7 million during the first three months of 2024. The Company expects a capital expenditure level of approximately $30.0 million to $35.0 million for the full year of 2025. 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 $16.1 million during the first nine months of 2024 compared to $24.0 million during the first nine months of 2023.

Current wording

Net cash used for investing activities was $5.9 million during the first three months of 2025 compared to $5.9 million during the first three months of 2024.

Previous wording

Net cash used in financing activities was $25.4 million and net cash provided by financing activities was $14.3 million during the nine month periods ended September 30, 2024 and September 30, 2023, respectively. Lower net cash provided by financing activities for the first nine months of 2024 relates to increased repayments on the Company's credit facility.

Current wording

Net cash used in financing activities was $8.6 million and net cash provided by financing activities was $77.8 million during the three month periods ended March 31, 2025 and March 31, 2024, respectively. Lower net cash provided by financing activities for the first three months of 2025 relates to no borrowings from the revolver during the three months ended March 31, 2025, while paying down long-term debt and a quarterly dividend.

Previous wording

The Company had $130.8 million in cash and cash equivalents held by its foreign subsidiaries as of September 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.

Current wording

The Company had $145.5 million in cash and cash equivalents held by its foreign subsidiaries as of March 31, 2025. The majority of these funds are at our European and Canadian facilities. The Company will repatriate European and Canadian cash and cash equivalents as needed to fund operating and investing activities, 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 be used to reduce debt levels, and 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 September 30, 2024, $225.0 million was outstanding under the 2022 Credit Agreement, $225.0 million on the Term Facility and zero on the Revolver Facility. On September 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 $397.4 million in available borrowings. The Company is in compliance with the covenants under the Agreement as of September 30, 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 March 31, 2025, $217.5 million was outstanding under the 2022 Credit Agreement, $217.5 million on the Term Facility and zero on the Revolver Facility. On March 31, 2025, $2.8 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 $397.2 million in available borrowings. The Company is in compliance with the covenants under the Agreement as of March 31, 2025.

Previous wording

As of September 30, 2024, we believe our financial position remains robust, supported by a strong balance sheet and healthy cash flow from operations. Our available liquidity, comprised of cash and cash equivalents, along with access to undrawn credit facilities, ensures that we are well equipped to meet our operating needs and explore strategic initiatives that could enhance shareholder value. We continuously evaluate our capital allocation strategy, including implementing a share repurchase program if it aligns with our strategic priorities and is deemed to be in the best interest of our shareholders. We believe that repurchasing our shares would be a prudent use of capital, provided appropriate market conditions.

Current wording

As of March 31, 2025, we believe our financial position remains robust, supported by a strong balance sheet and healthy cash flow from operations. Our available liquidity, comprised of cash and cash equivalents, along with access to undrawn credit facilities, ensures that we are well equipped to meet our operating needs and explore strategic initiatives that could enhance shareholder value. We continuously evaluate our capital allocation strategy, including potentially repurchasing shares under the share repurchase program adopted by the Company and approved by the Board of Directors as announced on October 31, 2024 if it aligns with our strategic priorities and is deemed to be in the best interest of our shareholders. We believe that repurchasing our shares would be a prudent use of capital, provided appropriate market conditions exist.

Previous wording

•government actions, including but not limited to budget levels, and changes in tax laws, regulations and legislation, relating to the environment, commerce, infrastructure spending, health and safety; and

Current wording

•government actions, including but not limited to budget levels, and changes in laws, regulations and legislation, relating to tax, environment, commerce, infrastructure spending, health and safety; and

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 increased stockholders’ equity by $13.8 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 increased stockholders’ equity by $10.8 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 $10.0 million for the nine month period ended September 30, 2024. A stronger U.S. dollar would unfavorably impact gross profit while a weaker U.S. dollar would provide a favorable impact to gross profit. 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 $3.3 million for the three month period ended March 31, 2025. A stronger U.S. dollar would unfavorably impact gross profit while a weaker U.S. dollar would provide a favorable impact to gross profit. 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 third quarter 2024 average interest rate under these borrowings, the Company’s interest expense would have changed by approximately $1.1 million. To protect the Company's long-term debt from fluctuations in interest rates, the Company may enter into interest rate swaps to mitigate exposure. However, 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 first quarter 2025 average interest rate under these borrowings, the Company’s interest expense would have changed by approximately $1.1 million. To protect the Company's long-term debt from fluctuations in interest rates, the Company may enter into interest rate swaps to mitigate exposure. However, 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.