ALAMO GROUP INC

Previous wording

We experienced strong demand for our products in the Industrial Equipment Division during the first three months of 2025, resulting in 12% organic growth compared to first quarter in 2024. Forestry, tree care, and agricultural industries remained weaker leading to 27% sales decline in the Vegetation Management Division. Gross profit margins improved slightly, driven by the cost reduction actions completed in 2024, as well as continuous operational improvements.

Current wording

We continue to experience strong demand for our products in the Industrial Equipment Division during the first six months of 2025, resulting in 15% organic growth compared to the first six months in 2024. Forestry, tree care, and agricultural industries remained weaker, leading to 21% sales decline in the Vegetation Management Division. Gross profit margins remained flat in spite of sales decline, driven by the cost reduction actions completed in 2024, as well as continuous operational improvements.

Previous 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.

Current wording

For the six months of 2025, the Company's net sales decreased by 4%, but income from operations improved 1% and net income improved 4% 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 a total Company basis. These challenges were offset by strong sales growth in the Industrial Equipment Division.

Previous 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.

Current wording

Net Sales in the Vegetation Management Division decreased 21% for the first six months of 2025 compared to the same period in 2024. The Division's backlog declined 19%, but new orders increased 14% for the first six months of 2025 compared to the first six months of 2024. The Division's income from operations for the first six months of 2025 declined 31% versus the same period in 2024. The cost savings initiatives the Company completed in the second half of 2024 did not fully offset the sales decline and operational inefficiencies related to the factory consolidations.

Previous 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.

Current wording

Net Sales in the Industrial Equipment Division increased in the first six months of 2025 by 15% compared to the first six months of 2024, driven by growth in excavators, vacuum trucks, and snow removal. The Division’s backlog has declined by 7% compared to the same period in 2024 but improved by 6% compared to the fourth quarter of 2024. The Division's income from operations for the first six months of 2025 was up 24% versus the same period in 2024, due to increased demand combined with operational improvements across all operating companies in this Division.

Previous 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.

Current wording

Consolidated income from operations was $91.5 million in the first six months of 2025 compared to $90.3 million in the first six months of 2024, an increase of 1%. The Company's backlog of $687.2 million at the end of the first six months of 2025 is down 11% versus a backlog of $768.9 million at the end of the first six months of 2024.

Previous 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.

Current wording

Net sales for the second quarter of 2025 were $419.1 million, an increase of $2.8 million or 1% compared to $416.3 million for the second quarter of 2024. Net sales during the second quarter of 2025 increased due to strong demand for Industrial Equipment, but was offset by the weaker market demand in forestry, tree care, and agricultural mowing.

Previous 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.

Current wording

Net Vegetation Management sales decreased by $33.1 million or 16% to $178.4 million for the second quarter of 2025 compared to $211.5 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 $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.

Current wording

Net Industrial Equipment sales were $240.7 million in the second quarter of 2025 compared to $204.8 million for the same period in 2024, an increase of $35.9 million or 18%. The increase was due to solid demand in most product lines, particularly vacuum trucks and snow removal contributing the most to year-over-year growth.

Previous 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.

Current wording

Selling, general and administrative expenses (“SG&A”) were $57.1 million (14% of net sales) during the second quarter of 2025 compared to $60.8 million (15% of net sales) during the same period of 2024, a decrease of $3.7 million attributable to labor cost savings actions taken in the Vegetation Management Division. Amortization expense in the second quarter of 2025 was $4.1 million compared to $4.1 million in the same period in 2024.

Previous 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.

Current wording

Interest expense was $3.7 million for the second quarter of 2025 compared to $6.1 million during the same period in 2024. The decrease in interest expense in the second quarter of 2025 was due to debt reduction.

Previous 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.

Current wording

Other income (expense), net was $3.2 million of expense for the second quarter of 2025 compared to $0.1 million of expense during the same period in 2024. The increase was primarily a result of unfavorable currency exchange rates.

Previous 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.

Current wording

Provision for income taxes was $10.3 million (25% of income before income tax) in the second quarter of 2025 compared to $9.3 million (25% of income before income tax) during the same period in 2024.

Previous 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.

Current wording

The Company’s net income after tax was $31.1 million or $2.57 per share on a diluted basis for the second quarter of 2025 compared to $28.3 million or $2.35 per share on a diluted basis for the second quarter of 2024.

Previous 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

Current wording

Gross profit for the first six months of 2025 was $211.1 million (26% of net sales) compared to $219.8 million (26% of net sales) during the same period in 2024, a decrease of $8.7 million. The decrease in gross profit was mainly attributable to lower sales volume and production inefficiencies in Vegetation Management. Profitability in the first six months of 2025 remained flat compared to the same period in 2024.

Previous wording

In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to operate the business, including inventory purchases and capital expenditures. The Company’s accounts receivable, inventory and accounts payable levels, particularly in its Vegetation Management Division, build in the first quarter and early spring and, to a lesser extent, in the fourth quarter in anticipation of the spring and fall selling seasons. Accounts receivable historically build in the first and fourth quarters of each year as a result of pre-season sales and year-round sales programs. These sales, primarily in the Vegetation Management Division, help balance the Company’s production during the first and fourth quarters.

Current wording

In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to operate the business, including inventory purchases and capital expenditures. The Company’s accounts receivable, inventory and accounts payable levels, particularly in its Vegetation Management Division, historically build in the first quarter and early spring and, to a lesser extent, in the fourth quarter in anticipation of the spring and fall selling seasons. Accounts receivable historically build in the first and fourth quarters of each year as a result of pre-season sales and year-round sales programs. These sales, primarily in the Vegetation Management Division, help balance the Company’s production during the first and fourth quarters.

Previous 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.

Current wording

As of June 30, 2025, the Company had working capital of $735.7 million which represents an increase of $68.5 million from working capital of $667.2 million at December 31, 2024. The increase in working capital was due to higher cash and cash equivalents as well as an increase in accounts receivable and inventory, partially offset by increase in accounts payable.

Previous 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.

Current wording

Capital expenditures were $13.0 million for the first six months of 2025, compared to $11.1 million during the first six 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 $5.9 million during the first three months of 2025 compared to $5.9 million during the first three months of 2024.

Current wording

Net cash used for investing activities was $29.7 million during the first six months of 2025 compared to $10.3 million during the first six months of 2024.

Previous 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.

Current wording

Net cash used in financing activities was $15.1 million and net cash provided by financing activities was $47.2 million during the six month periods ended June 30, 2025 and June 30, 2024, respectively. Lower net cash provided by financing activities for the first six months of 2025 relates to no net borrowings from the revolver during the six months ended June 30, 2025, while paying down long-term debt and a quarterly dividend.

Previous 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.

Current wording

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 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.

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, 2025, $213.8 million was outstanding under the 2022 Credit Agreement, $213.8 million on the Term Facility and zero on the Revolver Facility. On June 30, 2025, $2.7 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 $397.3 million in available borrowings. The Company is in compliance with the covenants under the Agreement as of June 30, 2025.

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 $10.8 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 $28.1 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 $3.3 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.

Current wording

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 $6.4 million for the six month period ended June 30, 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 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.

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 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.