ALAMO GROUP INC

Previous wording

In 2024, the Company's net sales decreased by 4% and net income decreased by 15% compared to 2023. The decrease in net sales was primarily driven by weak forestry, tree care, and agricultural mowing markets, leading to lower demand in the Vegetation Management Division. Additionally, the sale of Herschel Parts on August 16, 2024, had a negative impact on year-over-year sales, though it was immaterial on a full-year basis. These challenges were nearly offset by strong sales growth in the Industrial Equipment Division.

Current wording

In 2025, the Company's net sales decreased by 2% and net income decreased by 10% compared to 2024. The decrease in net sales was primarily driven by the ongoing lower demand in tree care and recycling markets and operational challenges in the Vegetation Management Division related to consolidation of certain operations. Additionally, the sale of Herschel Parts on August 16, 2024, had an unfavorable impact on year-over-year sales, though immaterial for total Company results for the year. These challenges were only partially offset by strong sales growth in the Industrial Equipment Division.

Previous wording

The Company's Industrial Equipment Division reported a 19% increase in net sales for the full year of 2024 compared to 2023. Sales growth was strong in all product lines, with excavators, vacuum trucks, sweepers & safety, and snow removal contributing to year-over-year growth. Income from operations for 2024 rose 43% versus 2023, driven by increased demand, greater operational efficiencies, and an improvement in supply chain performance and truck chassis availability.

Current wording

The Company's Industrial Equipment Division reported a 13% increase in net sales for the full year of 2025 compared to 2024. Sales growth was strong in all product lines, led by excavators, vacuum trucks and snow, followed by sweepers & safety. Income from operations for 2025 rose 19% versus 2024, driven by increased demand, greater operational efficiencies, and an improvement in supply chain performance.

Previous wording

Net income for 2023 was $136.2 million compared to $101.9 million in 2022, with the increase in 2023 net income resulting from the factors described above.

Current wording

Net income for 2025 was $103.8 million compared to $115.9 million in 2024, with the decrease in 2025 net income resulting from the factors described above.

Previous wording

Gross profit for 2024 was $412.5 million (25.3% of net sales) compared to $453.6 million (26.8% of net sales) in 2023, a decrease of $41.1 million. The decrease in gross profit was primarily attributable to the decline in Vegetation Management market demand, resulting in production inefficiencies, and the impact of costs to reduce capacity and separation expenses as the Division adjusted to market conditions. In addition, profitability was also impacted by the five-week strike at Gradall in Ohio, which negatively affected the Industrial Equipment Division.

Current wording

Gross profit for 2024 was $412.5 million (25.3% of net sales) compared to $453.6 million (26.8% of net sales) in 2023, a decrease of $41.1 million. The decrease in gross profit was primarily attributable to the decline in Vegetation Management market demand, production inefficiencies, and the impact of costs to reduce capacity and separation expenses as the Division adjusted to market conditions. In addition, profitability was also impacted by the five-week strike at Gradall in Ohio, which negatively affected the Industrial Equipment Division.

Previous wording

As of December 31, 2024, the Company had working capital of $667.2 million, which represents an increase of $77.2 million from working capital of $590.0 million as of December 31, 2023. The increase in working capital was primarily a result of higher cash and cash equivalents.

Current wording

As of December 31, 2025, the Company had working capital of $779.7 million, which represents an increase of $112.5 million from working capital of $667.2 million as of December 31, 2024. The increase in working capital was primarily a result of higher cash and cash equivalents.

Previous wording

Capital expenditures were $25.0 million for 2024, compared to $37.7 million for 2023. The Company will fund any future expenditures from operating cash flows or through our revolving credit facility, described below.

Current wording

Capital expenditures were $30.6 million for 2025, compared to $25.0 million for 2024. The Company will fund any future expenditures from operating cash flows or through our revolving credit facility, described below.

Previous wording

Net cash provided by operating activities was $209.8 million for 2024, compared to $131.2 million for 2023. The increase of cash from operating activities is primarily the result of improved receivables and inventory compared to 2023.

Current wording

Net cash provided by operating activities was $177.5 million for 2025, compared to $209.8 million for 2024. The decrease of cash from operating activities is a result of lower net income as well as higher inventory, which was partially offset by lower accounts receivable and improved accounts payable.

Previous wording

Net cash used in investing activities was $22.2 million for 2024, compared to $52.6 million for 2023. The decrease in investing activities was in part driven by the acquisition of Royal Truck in 2023. Net cash used by financing activities was $32.0 million for 2024, compared to net cash used of $76.9 million for 2023. This reduction in cash used by financing activities is due to repayment of revolving credit.

Current wording

Net cash used in investing activities was $46.2 million for 2025, compared to $22.2 million for 2024. The increase in investing activities was in part driven by the acquisition of Ring-O-Matic in 2025. Net cash used by financing activities was $30.8 million for 2025, compared to net cash used of $32.0 million for 2024. This reduction in cash used by financing activities is due to payment of contingent consideration in 2024 offset by higher dividend payments in 2025.

Previous wording

The Company had $147.2 million in cash and cash equivalents held by its foreign subsidiaries as of December 31, 2024. The majority of these funds are held 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, but will need to monitor exchange rates to determine the appropriate timing of such repatriation given the current relative strength 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 $174.5 million in cash and cash equivalents held by its foreign subsidiaries as of December 31, 2025. The majority of these funds are held 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, but will need to monitor exchange rates to determine the appropriate timing of such repatriation given the current relative strength 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

As of December 31, 2024, $220.5 million was outstanding under the Credit Agreement, $220.5 million on the Term Facility and zero on the Revolver Facility. On December 31, 2024, $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.

Current wording

As of December 31, 2025, $205.7 million was outstanding under the Credit Agreement, $205.7 million on the Term Facility and zero on the Revolver Facility. On December 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'

Previous wording

The Company is exposed to the risk that the price of energy, steel and other purchased components may increase and the Company may not be able to increase the price of its products correspondingly. If this occurs, the Company’s results of operations would be adversely impacted. In 2024, while inflation moderated compared to prior years, the cost of commodities, components, parts, and accessories remained elevated relative to historical levels. Throughout 2024, we continued to implement strategic pricing actions and operational efficiency measures to help offset these sustained cost pressures. While the rate of inflation decreased during 2024, prices for many key inputs remained higher than pre-pandemic levels. Looking ahead to 2025, we expect the cost environment to remain challenging, though with less volatility than in recent years. We anticipate modest increases in the average cost of commodities, components, parts, and accessories compared to 2024 levels. However, cost inflation continues to be an ongoing challenge that could have a material impact on the Company's business and financial results, particularly if there are unexpected shifts in political policy changes (including the imposition of tariffs), global economic environment or supply chain dynamics.

Current wording

The Company is exposed to the risk that the price of energy, steel and other purchased components may increase and the Company may not be able to increase the price of its products correspondingly. If this occurs, the Company’s results of operations would be adversely impacted. In 2025, the cost of commodities, components, parts, and accessories somewhat normalized relative to historical levels. Throughout 2025, we continued to implement strategic pricing actions and operational efficiency measures to help offset tariffs and other supply chain cost pressures. Looking ahead to 2026, we expect the cost environment to return to more historically normal levels than we have seen in recent years. We anticipate modest increases in the average cost of commodities, components, parts, and accessories compared to 2025 levels. However, cost inflation continues to be an ongoing challenge that could have a material impact on the Company's business and financial results, particularly if there are unexpected shifts in political policy changes (including the continued imposition of tariffs), global economic environment or supply chain dynamics.

Previous wording

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policy reflects its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements. For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Current wording

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes there are currently no critical accounting policies.