What changed in this filing

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Item 9A. Controls and Procedures

2021-02-26 compared with 2020-02-28 · 147 added, 243 removed, 1182 unchanged (25% of the section changed)

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3.2 — Certificate of Amendment of Certificate of Incorporation of Alamo Group Inc.

Filed as Exhibit 3.

1 to Form 8-K, May 10, 2016

Filed as Exhibit 3.1 to Form 8-K, May 10, 2016

3.3 — By-Laws of Alamo Group Inc.

as amended Filed as Exhibit 3.2 to Form 8-K, May 10, 2016

4.1 — Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 Filed Herewith

3.4 — By-Laws of Alamo Group Inc.

as amended Filed as Exhibit 3.

1 to Form 8-K, Ma rch 30 , 20 20

4.1 — Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 Filed as Exhibit 4.1 to Form 10-K, February 28 , 2020

10.1 — Form of indemnification agreements with Directors of Alamo Group Inc.

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Filed as Exhibit 10.2 to Form 10-Q, May 15, 1997

*10.3 — Incentive Compensation Plan, adopted on December 9, 1997 Filed as Exhibit 10.14 to Form 10-K, March 31, 1998

*10.3 — 401(k) Restoration Plan for Highly Compensated Employees, adopted on December 9, 1997 Filed as Exhibit 10.15 to Form 10-K, March 31, 1998

*10.5 — Amended and Restated 1994 Incentive Stock Option Plan adopted by the Board of Directors on July 7, 1999 Filed as Exhibit B to Schedule 14A, July 30, 1999

*10.4 — First Amended and Restated 1999 Non-Qualified Stock Option Plan, adopted by the Board of Directors on February 13, 2001 Filed as Exhibit B to Schedule 14A, March 30, 2001

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*10.16 — Supplemental Executive Retirement Plan Filed as Exhibit 10.1 to Form 8-K, January 18, 2011

*10.19 — Executive Incentive Plan Filed as Appendix A to Schedule 14A, March 28, 2013

*10.17 — Amended and Restated Executive Incentive Plan Filed as Exhibit 10.26 to Form 10-K, March 1, 2018

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*10.20 Form of Restricted Stock Award Agreement under the Alamo Group Inc.

2019 Equity Incentive Plan Filed Herewith

2019 Equity Incentive Plan Filed as Exhibit 10.23 to Form 10-K, February 28, 2020

*10.21 Form of Restricted Stock Unit Agreement under the Alamo Group Inc.

2019 Equity Incentive Plan Filed Herewith

2019 Equity Incentive Plan Filed as Exhibit 10.24 to Form 10-K, February 28, 2020

*10.22 Form of Performance Share Unit Agreement under the Alamo Group Inc.

2019 Equity Incentive Plan Filed Herewith

10.23 Executive Change in Control Agreement Filed as Exhibit 10.1 to Form 8-K, March 10, 2020

21.1 — Subsidiaries of the Registrant Filed Herewith

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101.DEF — XBRL Taxonomy Extension Definition Linkbase Document Filed Herewith

104 — Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Filed Herewith

________________________________________________________________________________________________________________________

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Based on this assessment, the Company’s management concludes that, as of December 31, 2020, the Company’s internal controls over financial reporting were effective based on these criteria.

The Company acquired Dutch Power B.V.

(Dutch Power) and Morbark, LLC.

(Morbark) during 2019, and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2019, Dutch Power’s and Morbark's internal control over financial reporting associated with combined total assets of $452 million and combined total net sales of $71 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019.

KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of internal control over financial reporting, which is included herein.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the sufficiency of evidence over Inventory

As discussed in Notes 1 and 6 to the consolidated financial statements, the value of inventory was $267.7 million as of December 31, 2019.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of evidence over the existence of inventory

As discussed in Note 6 to the consolidated financial statements, the value of inventory was $230 million as of December 31, 2020.

To facilitate the global delivery of goods to customers, the Company operates across North America, South America, Europe and Australia.

Within these locations, the Company has 30 principal manufacturing facilities located in seven countries.

Within these locations, the Company has 27 principal manufacturing plants located in seven countries.

We identified the assessment of the sufficiency of evidence over the existence of inventory as a critical audit matter.

Inventory is located in dozens of locations across the world.

The geographical dispersion of inventory

required especially subjective auditor judgment in determining the sufficiency of audit evidence obtained over the existence of inventory.

This included determining the Company facilities at which procedures were performed and the supervision and review of procedures performed at those facilities.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s inventory process, including controls related to the physical inspection of inventories at each facility.

We analyzed facilities with inventory to determine where we would perform procedures.

We performed independent test counts and compared to the Company’s records to evaluate the inventory at those specific facilities.

We inspected the results of counts performed for inaccuracies.

We investigated inventory transactions that were made by the Company subsequent to the financial statement date for proper recording.

In addition, we assessed the overall sufficiency of audit evidence obtained over the existence of inventory.

Assessment of the initial fair value measurement of the intangible assets acquired through the business combination of Dutch Power Company B.V.

As discussed in Note 3 to the consolidated financial statements, the fair value of intangible assets related to trade names and trademarks, developed technology, and customer relationships acquired in the Dutch Power B.V.

(Dutch Power) business combination was $14.1 million as of the acquisition date.

The Company allocates the purchase price to assets acquired based on the fair value at the time of the acquisition.

We identified the assessment of the initial fair value measurement of the trade names and trademarks, developed technology, and customer relationships related to the acquisition of Dutch Power as a critical audit matter.

Evaluating the assumptions used to determine the fair value involved a high degree of auditor judgment.

The forecasted revenue, royalty rate, and the discount rate assumptions used to calculate the fair value of the intangible assets were challenging to test due to the sensitivity of the fair value determination to changes in these assumptions.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s business combination process, including controls over the development of the relevant assumptions as listed above.

We evaluated the Company’s forecasted revenues for Dutch Power by comparing them to historical revenues of Dutch Power and to the Company’s and industry’s historical revenue growth rates.

We compared the Company’s historical revenue forecasts from acquired businesses to actual results to assess the Company’s ability to accurately forecast.

We performed sensitivity analyses over the forecasted revenue, royalty rate and discount rate assumptions to assess their impact on the Company’s determination of the fair value.

In addition, we involved a valuation professional with specialized skill and knowledge, who assisted in:

• evaluating the Company’s royalty rates and discount rates by comparing each to a range of rates that were independently developed using publicly available market data for comparable entities;

• developing an estimate of the intangible assets’ fair value using the Company’s cash flow forecast and an independently developed discount rate, and compared the results of our estimate of fair value to the Company’s fair value estimate.

Assessment of the initial fair value measurement of the intangible assets acquired through the business combination of Morbark, LLC

The Company allocates the purchase price to assets acquired based on the fair value at the time of the acquisition.

Evaluating the assumptions used to determine the fair value involved a high degree of auditor judgment.

The customer attrition rate, forecasted revenue, royalty rate, and the discount rate assumptions

used to calculate the fair value of the intangible assets were challenging to test due to the sensitivity of the fair value determination to changes in these assumptions.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s business combination process, including controls over the development of the relevant assumptions as listed above.

We evaluated the Company’s forecasted revenues for Morbark by comparing them to historical revenues of Morbark and to the Company’s and industry’s historical revenue growth rates.

We compared the Company’s historical revenue forecasts from acquired businesses to actual results to assess the Company’s ability to accurately forecast.

We evaluated the Company’s customer attrition rates by comparing them to historical customer data.

We performed sensitivity analyses over the customer attrition rate, forecasted revenue, royalty rate and discount rate assumptions to assess their impact on the Company’s determination of the fair value.

In addition, we involved a valuation professional with specialized skill and knowledge, who assisted in:

• evaluating the Company’s royalty rates and discount rates by comparing each to a range of rates that were independently developed using publicly available market data for comparable entities;

The geographical dispersion of inventory required especially subjective auditor judgment in determining the sufficiency of audit evidence obtained over the existence of inventory.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed over the existence of inventory including determining where we would perform procedures.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s inventory process at certain manufacturing plants.

This included controls related to the physical inspection of inventories at certain plants.

We performed independent test counts for a sample of items and compared them to the Company’s records to evaluate the inventory at those specific plants.

We selected a sample of inventory transactions that were made by the Company near the Company’s fiscal year-end and evaluated the accounting period in which they were recorded.

We evaluated the sufficiency of audit evidence obtained by assessing the results of the procedures performed.

We have served as the Company’s auditor since 2009.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and related notes (collectively, the consolidated financial statements), and our report dated February 28, 2020 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Dutch Power Company B.V.

and Morbark, LLC during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, Dutch Power Company B.V.’s and Morbark, LLC’s internal control over financial reporting associated with total assets of $452 million and total net sales of $71 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Dutch Power Company B.V.

and Morbark, LLC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Treasury stock, at cost;

82,600 and 42,600 shares at December 31, 2019 and December 31, 2018, respectively

82,600 shares at December 31, 2020 and December 31, 2019

( 4,566 ) ( 4,566 )

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Foreign currency translation adjustment 8,862 3,363 ( 13,347 )

Unrealized gains on derivative instruments 610 — —

Net (loss) gain on pension and other post-retirement benefits ( 683 ) ( 1,667 ) 987

Other comprehensive income (loss) before income tax benefit (expense) 3,290 ( 15,014 ) 17,953

Income tax benefit (expense) related to items of other comprehensive income (loss) 703 349 ( 363 )

Unrealized (loss) gains on derivative instruments ( 9,326 ) 610 —

Net loss on pension and other post-retirement benefits ( 1,096 ) ( 683 ) ( 1,667 )

Other comprehensive (loss) income before income tax (expense) benefit ( 1,560 ) 3,290 ( 15,014 )

Income tax benefit related to items of other comprehensive income (loss) 2,072 703 349

Other comprehensive income (loss) $ 512 $ 3,993 $ ( 14,665 )

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Stock-based compensation transactions 86 8 2,108 — — — 2,116

Other 11 ( 11 ) — —

Dividends paid ($ 0.44 per share)

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Other comprehensive income — — — — 62,906 3,993 66,899

— — — — 73,486 ( 14,665 ) 58,821

Stock-based compensation expense — — 3,269 — — — 3,269

Stock-based compensation transactions 90 9 1,975 — — — 1,984

Repurchased shares ( 40 ) — — ( 4,140 ) — — ( 4,140 )

Dividends paid ($ 0.48 per share)

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Stock-based compensation transactions 57 6 743 — — — 749

Repurchased shares ( 40 ) — — ( 4,140 ) — — ( 4,140 )

Dividends paid ($ 0.52 per share)

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Stock-based compensation expense 4,119 3,269 2,450

Provision for deferred income tax expense 3,316 2,052 1,328

Provision for deferred income tax (benefit) expense ( 1,301 ) 3,316 2,052

Gain on sale of property, plant and equipment ( 1,094 ) ( 912 ) ( 361 )

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Common stock repurchased ( 710 ) ( 589 ) ( 436 )

Net cash provided (used in) in financing activities 349,223 22,208 ( 12,400 )

Net cash (used in) provided by financing activities ( 164,242 ) 349,223 22,208

Effect of exchange rate changes on cash 1,964 172 ( 1,090 )

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Actual results could differ from those estimates.

estimates related to fair value for purposes of assessing goodwill, long-lived assets and intangible assets for impairment;

estimates related to income taxes;

and estimates related to contingencies.

Such estimates include, but are not limited to, allowance for doubtful accounts, reserve for sales discounts, estimated realizable value on obsolete and slow-moving inventory, warranty reserve, estimates related to pension accounting, estimates related to fair value for purposes of assessing goodwill, long-lived assets and intangible assets for impairment, estimates related to income taxes, and estimates related to contingencies.

Foreign Currency

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In accounting for these leases, the cost of the equipment purchased or manufactured by the Company is recorded as an asset, and is depreciated over its estimated useful life.

Accumulated depreciation relating to the rental equipment was $ 14,587,000 and $ 11,145,000 on December 31, 2019 and December 31, 2018, respectively.

Accumulated depreciation relating to the rental equipment was $ 18.0 million and $ 14.6 million on December 31, 2020 and December 31, 2019, respectively.

Shipping and Handling Costs

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We charge advertising costs to expense as incurred.

Advertising and marketing expense related to operations for fiscal years 2019, 2018, and 2017 was approximately $ 12,177,000 , $ 11,773,000 and $ 9,566,000 , respectively.

Advertising and marketing expense related to operations for fiscal years 2020, 2019, and 2018 was approximately $ 10.1 million, $ 12.2 million and $ 11.8 million, respectively.

Advertising and marketing expenses are included in Selling, General and Administrative expenses (“SG&A”).

Research and Development

Product development and engineering costs charged to SG&A amounted to $ 11,984,000 , $ 10,429,000 , and $ 9,849,000 for the years ended December 31, 2019, 2018, and 2017, respectively.

Product development and engineering costs charged to SG&A amounted to $ 12.4 million, $ 12.0 million, and $ 10.4 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Commitments and Contingencies

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We have elected to treat the global intangible low-taxed income (GILTI) tax as a period expense.

We previously considered substantially all of the earnings in our foreign subsidiaries to be permanently reinvested and, accordingly, recorded no deferred income taxes on such earnings.

As a result of the fundamental changes to the taxation of multinational corporations as a result of TCJA, we no longer intend to permanently reinvest all of the historical undistributed earnings of our foreign subsidiaries.

We will distribute earnings from our European subsidiaries, while maintaining our permanent reinvestment for our other foreign subsidiaries.

GAAP requires recognition of a deferred tax liability in the reporting period in which its intent to no longer permanently reinvest its historical undistributed foreign earnings is made.

There will generally be no U.S.

federal taxes imposed on such future distributions of European foreign earnings.

Stock-Based Compensation

The Company has granted options to purchase its common stock to certain employees and directors of the Company and its affiliates under various stock option plans at no less than the fair market value of the underlying stock on the date of grant.

The Company has granted options to purchase its common stock, restricted stock awards,restricted stock units, and performance stock units to certain employees and directors of the Company and its affiliates under various stock option plans at no less than the fair market value of the underlying stock on the date of grant.

These options are granted for a term not exceeding ten years and are forfeited in the event that the employee or director terminates his or her employment or relationship with the Company or one of its affiliates other than by retirement or death.

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Accounting Pronouncements Adopted on January 1, 2020

In February 2016, the FASB issued ASU No.

2016-02, “Leases (Topic 842)".

This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term.

For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities.

Similar to current guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows.

The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP.

In August 2018, the FASB issued Accounting Statement Update (ASU) No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosure requirements on fair value measurements.

Among other things, the amendments added disclosures for changes in unrealized gains and losses on Level 3 fair value measurements and required additional disclosures on unobservable inputs associated with Level 3 assets.

The guidance became effective for us on January 1, 2020.

As a lessee, this standard primarily impacted our accounting for long-term real estate and equipment leases, for which we recognized right-of-use assets of $ 7,747,000 and a corresponding lease liability of $ 7,868,000 on our consolidated balance sheet.

We adopted these provisions on January 1, 2019 using the optional transition method that permits us to apply the new disclosure requirements in 2019 and continue to present comparative period information as required under FASB ASC Topic 840, "Leases".

We did not have a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption.

We elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to not account for lease and non-lease components separately for most of our asset classes and to exclude leases with an initial term of 12 months or less from the right-of-use assets and liabilities.

Adoption of the standards had no impact on results of operations or liquidity.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income", to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA").

Upon adoption of the ASU, entities will be required to disclose a description of the accounting policy for releasing income tax effects from accumulated other comprehensive income.

The standard is required to be adopted for periods beginning after December 15, 2018, with early adoption available for any set of financial statements that have yet to be issued or made available for issuance including retrospectively for any period in which the effect of the change is the U.S.

corporate income tax rate in the TCJA is recognized.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses,” to improve information on credit losses for financial instruments.

The ASU replaces the previous incurred loss impairment methodology with a methodology that reflects expected credit losses.

This guidance became effective for us on January 1, 2020.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued Accounting Statement Update (ASU) No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosures requirements on fair value measurements.

Among other things, the amendments add disclosures for changes in unrealized gains and losses on Level 3 fair value measurements and requires additional disclosures on unobservable inputs associated with Level 3 assets.

The guidance will become effective for us on January 1, 2020.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued Accounting Statement Update (ASU) No.

2018-14, “Compensation, Defined Benefit Plans", which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The update removes certain disclosures that are no longer considered cost beneficial and adds disclosure requirements identified as relevant.

The guidance will become effective for us on January 1, 2021 with early adoption permitted for any financial statements that have not been issued.

The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses,” to improve information on credit losses for financial instruments.

The ASU replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses.

The ASU is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption is permitted beginning in fiscal years beginning after December 15, 2018.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

We have elected to adopt this accounting guidance as of January 1, 2021.

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes” to simplify the accounting for income taxes.

The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to

the general principles in Topic 740.

The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The guidance will become effective for us on January 1, 2021 with early adoption permitted for any financial statements that have not been issued.

The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.

We have elected to adopt this accounting guidance as of January 1, 2021.

BUSINESS COMBINATIONS

Dutch Power Company B.V.

On March 4, 2019, the Company acquired 100 % of the issued and outstanding equity interests of Dutch Power Company B.V.

(" Dutch Power ").

Dutch Power designs, manufactures and sells a variety of landscape and vegetation management machines primarily in Europe.

The primary reason for the Dutch Power acquisition was to enhance the Company's platform for growth by increasing both the Company's product portfolio and capabilities in the European market.

The acquisition price was approximately $ 53,000,000 .

The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed, including estimated deferred taxes.

Certain estimated values are not yet finalized and are subject to change.

The Company will finalize the amounts once the necessary information is obtained and the analysis is complete.

This allocation resulted in goodwill of $ 12,097,000 , all of which has been assigned to the Company's Industrial reporting segment, with no ne of the goodwill being tax deductible.

In the period between the date of acquisition and December 31, 2019, Dutch Power generated approximately $ 36,400,000 of net sales and $ 100,000 of net income.

The Company has included the operating results of Dutch Power in its consolidated financial statements since the date of acquisition.

The following table reflects the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Accounts receivable 6,278

Inventory 17,731

Prepaid and other assets 1,451

Property, plant and equipment 13,439

Intangible assets 14,095

Deferred tax liability ( 4,265 )

Other liabilities assumed ( 8,302 )

Net assets assumed $ 40,514

Goodwill 12,097

Acquisition Price $ 52,611

Morbark, LLC.

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These products are marketed under the Morbark, Rayco, Denis Cimaf and Boxer Equipment brand names.

The total consideration for the purchase was approximately $ 354,000,000 on a debt free basis and subject to certain post-closing adjustments.

In connection with this acquisition, Alamo Group expanded its credit facility from $ 250,000,000 to $ 650,000,000 to accommodate this event and the ongoing needs of the combined entities.

The new credit facility has a five -year duration and consists of a $ 300,000,000 term loan and a $ 350,000,000 revolving line of credit.

The Company financed the Morbark acquisition through $ 355,000,000 of new borrowings under the amended credit facility.

The total consideration for the purchase was approximately $ 354.0 million on a debt free basis and subject to certain post-closing adjustments.

The primary reason for the acquisition is to expand and complement our range of vegetation maintenance equipment in an adjacent market along with accelerating Morbark's international growth using the Company's existing presence in Europe, Brazil and Australia.

This allocation resulted in goodwill of $ 102,662,000 , all of which has been assigned to the Company's Industrial reporting segment.

$ 73,963,000 of goodwill is tax deductible, the remaining balance is not.

The acquisition was accounted for in accordance with ASC Topic 805 Business Combinations ("ASC Topic 805").

The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed, including deferred taxes, based on their estimated fair values as of October 24, 2019.

Certain estimated values are not yet finalized and are subject to change.

The Company will finalize the amounts once the necessary information is obtained and the analysis is complete.

In the period between the date of acquisition and December 31, 2019, Morbark generated approximately $ 35,100,000 of net sales and $ 1,500,000 of net loss.

The total purchase price has been allocated to assets acquired and liabilities assumed, including deferred taxes, as of October 24, 2019.

The Company completed its review of the valuation of the purchase price allocation for Morbark during the fourth quarter of 2020.

The Company found that no additional changes were necessary and that the values disclosed in the Company's 2020 third quarter 10-Q were final.

The valuation of Morbark resulted in goodwill of $ 98.6 million, all of which has been assigned to the Company's Industrial reporting segment, $ 93.0 million of goodwill is tax deductible, the remaining balance is not.

In the period between the date of acquisition and December 31, 2019, Morbark generated approximately $ 35.1 million of net sales and $ 1.5 million of net loss.

The Company has included the operating results of Morbark in its consolidated financial statements since the date of acquisition.

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Total Consideration $ 354,311

The following table presents the unaudited pro forma combined results of operations of the Company and the acquired business units of Morbark as if the acquisition had occurred on January 1, 2018 for the years ended December 31, 2018 and December 31, 2019.

This includes certain pro forma adjustments including:

(i) recognition of the costs related to the step-up in fair value of the Morbark inventory, (ii) amortization of acquired intangible assets, (iii) the impact of certain fair value adjustments such as depreciation on the acquired property, plant and equipment, and (iv) interest expense for historical long-term debt of Morbark that was repaid and interest expense on additional borrowings by the Company to fund the acquisition.

The unaudited pro forma statement of income of the Company is as follows:

(In thousands, except per share amounts) 2019 2018

Net sales $ 1,329,901 $ 1,214,285

Net income $ 69,417 $ 56,697

Diluted earnings per share $ 5.88 $ 4.82

The unaudited pro forma financial information is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the acquisition been completed as of the beginning of the periods presented, and should not be taken as being representative of the future consolidated results of operations of the Company.

Dutch Power Company B.V.

On March 4, 2019, the Company acquired 100 % of the issued and outstanding equity interests of Dutch Power Company B.V.

(" Dutch Power ").

Dutch Power designs, manufactures and sells a variety of landscape and vegetation management machines primarily in Europe.

The primary reason for the Dutch Power acquisition was to enhance the Company's platform for growth by increasing both the Company's product portfolio and capabilities in the European market.

The acquisition price was approximately $ 53.0 million.

The Company completed its review of the valuation of the purchase price allocation for Dutch Power during the first quarter of 2020.

The Company found that no additional changes were necessary and that the values disclosed in the 2019 10-K were final.

EARNINGS PER SHARE

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Sales Discounts

On December 31, 2019, the Company had $ 16,883,000 in reserves for sales discounts compared to $ 18,123,000 on December 31, 2018 on product shipped to our customers under various promotional programs.

On December 31, 2020, the Company had $ 13.5 million in reserves for sales discounts compared to $ 16.9 million on December 31, 2019 on product shipped to our customers under various promotional programs.

The most common programs provide a discount when the customer pays within a specified period of time.

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Inventories – Obsolete and Slow Moving

The Company had a reserve of $ 8,233,000 on December 31, 2019 and $ 7,194,000 on December 31, 2018 to cover obsolete and slow moving inventory.

The Company had a reserve of $ 12.0 million on December 31, 2020 and $ 8.2 million on December 31, 2019 to cover obsolete and slow moving inventory.

The increase in the reserve was primarily attributable to the Company's Industrial Division.

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A warranty reserve is established for each different marketing group.

The current liability warranty reserve balance was $ 10,249,000 on December 31, 2019 and $ 4,992,000 on December 31, 2018 and is included in Note 11 .

The current liability warranty reserve balance was $ 9.1 million on December 31, 2020 and $ 10.2 million on December 31, 2019 and is included in Note 11 .

Inventories valued at LIFO represented 41 % and 42 % of total inventory for the years ended December 31, 2020 and 2019, respectively.

The excess of current costs (market value) over LIFO-valued inventories was $ 10,910,000 and $ 10,646,000 on December 31, 2019 and December 31, 2018, respectively.

The excess of current costs (market value) over LIFO-valued inventories was $ 12.5 million and $ 10.9 million on December 31, 2020 and December 31, 2019, respectively.

Inventories consisted of the following on a cost basis, net of reserves for obsolescence and LIFO:

22 unchanged sentences

Translation adjustment ( 916 ) ( 1,460 ) ( 2,376 )

Goodwill acquired 4,846 2,895 7,741

Balance at December 31, 2017 $ 69,504 $ 15,257 $ 84,761

Translation adjustment ( 916 ) ( 1,460 ) ( 2,376 )

Goodwill adjustment 84 774 858

3 unchanged sentences

Balance at December 31, 2019 $ 183,307 $ 14,715 $ 198,022

Translation adjustment 2,089 ( 921 ) 1,168

Goodwill adjustment ( 4,058 ) — ( 4,058 )

Balance at December 31, 2020 $ 181,338 $ 13,794 $ 195,132

DEFINITE- AND INDEFINITE-LIVED INTANGIBLE ASSETS

The following is a summary of both the Company's definite and indefinite-lived intangible assets net of the accumulated amortization:

(in thousands) Estimated Useful Lives December 31,

2019 December 31, 2018

(in thousands) Estimated Useful Lives December 31, 2020 December 31, 2019

Trade names and trademarks 15 - 25 years

3 unchanged sentences

Patents and developed technologies 3 - 12 years

28,764 28,485

Favorable leasehold interests 7 years

4 unchanged sentences

Total Intangible Assets $ 193,172 $ 206,272

The Company's net carrying value at December 31, 2019 of intangible assets with definite useful lives consists of trade names and trademarks at $ 61,588,000 , customer and dealer relationships at $ 108,023,000 , patents and drawings at $ 26,961,000 , and favorable leasehold interests at $ 4,200,000 .

As of December 31, 2019, the related accumulated amortization balance for the definite-lived assets were $ 5,634,000 for trade names and trademarks, $ 13,485,000 for customer and dealer relationships, $ 1,524,000 for patents and drawings, and zero for favorable leasehold interests.

The Company estimates amortization expense to be $ 14,500,000 for each of the next five years.

Indefinite-lived trade names and trademarks consisted of the Gradall trade name with a carrying value of $ 3,600,000 and the Bush Hog trade name with a carrying value of $ 1,900,000 .

The Company's net carrying value at December 31, 2020 of intangible assets with definite useful lives consists of trade names and trademarks at $ 59.4 million, customer and dealer relationships at $ 100.5 million, patents and drawings at $ 24.3 million, and favorable leasehold interests at $ 3.5 million.

As of December 31, 2020, the related accumulated amortization balance for the definite-lived assets were $ 8.4 million for trade names and trademarks, $ 21.9 million for customer and dealer relationships, $ 4.5 million for patents and drawings, and $ 0.7 million for favorable leasehold interests.

The Company estimates amortization expense to be $ 14.5 million for each of the next five years.

Indefinite-lived trade names and trademarks consisted of the Gradall trade name with a carrying value of $ 3.6 million and the Bush Hog trade name with a carrying value of $ 1.9 million.

The Company leases office space and equipment under various operating and capital leases, which generally are expected to be renewed or replaced by other leases.

14 unchanged sentences

(in thousands)

Finance Leases

2021 $ 4,072 $ 69

2 unchanged sentences

2024 1,465 17

2025 1,244 16

Thereafter 3,622 —

2 unchanged sentences

Total lease liabilities $ 14,245 $ 153

A s of December 31, 2018, prior to the adoption of ASU 2016-02, the approximate future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year were:

As of December 31, 2019, future minimum lease payments under these non-cancelable leases are:

December 31, 2019

(in thousands)

Capital Leases

2020 $ 4,305 $ 97

1 unchanged sentence

2022 2,051 45

2023 1,459 22

Thereafter 2,587 14

2 unchanged sentences

Total lease liabilities $ 12,961 $ 264

Rental expense for operating leases was $ 5,515,000 for 2019, $ 5,087,000 for 2018, and $ 4,788,000 for 2017.

Rental expense for operating leases was $ 6.1 million for 2020, $ 5.5 million for 2019, and $ 5.1 million for 2018.

Future Lease Commencements

As of December 31, 2019, we have additional operating leases, that have not yet commenced in the amount of $ 116,000 .

As of December 31, 2020, we have additional operating leases, that have not yet commenced in the amount of $ 0.9 million.

These operating leases will commence in fiscal year 2021.

1 unchanged sentence

Operating Leases

(in thousands) December 31, 2019

(in thousands) 2020 2019

Other non-current assets

$ 14,144 $ 12,858

Accrued liabilities 3,680 3,972

2 unchanged sentences

Finance Leases

(in thousands) December 31, 2019

(in thousands) 2020 2019

Property, plant and equipment, gross $ 331 $ 524

5 unchanged sentences

Weighted Average Remaining Lease Term

Operating leases 5.10 years

Finance leases 3.47 years

Operating leases 5.83 years 5.10 years

Finance leases 2.62 years 3.47 years

Weighted Average Discount Rate

51 unchanged sentences

On October 24, 2019, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Second Amended and Restated Credit Agreement (the Credit Agreement ) with Bank of America, N.A., as Administrative Agent.

The Credit Agreement provides the Company with the ability to request loans and other financial obligations in an aggregate amount of up to $ 650,000,000 and, subject to certain conditions, the Company has the option to request an increase in aggregate commitments of up to an additional $ 200,000,000 .

Pursuant to the Credit Agreement, the Company has borrowed $ 300,000,000 pursuant to a Term Facility repayable with interest quarterly at a percentage of the initial principal amount of the Term Facility of 5.0 % per year with the remaining principal due in 5 years.

Up to $ 350,000,000 is available under the Credit Agreement pursuant to a Revolver Facility which terminates in 5 years.

The Credit Agreement provides the Company with the ability to request loans and other financial obligations in an aggregate amount of up to $ 650.0 million and, subject to certain conditions, the Company has the option to request an increase in aggregate commitments of up to an additional $ 200.0 million.

Pursuant to the Credit Agreement, the Company has borrowed $ 300.0 million pursuant to a Term Facility repayable with interest quarterly at a percentage of the initial principal amount of the Term Facility of 5.0 % per year with the remaining principal due in 5 years.

Up to $ 350.0 million is available under the Credit Agreement pursuant to a Revolver Facility which terminates in 5 years.

The Agreement requires the Company to maintain two financial covenants, a maximum leverage ratio and a minimum asset coverage ratio.

2 unchanged sentences

The expiration date of the Term Facility and the Revolver Facility is October 24, 2024.

As of December 31, 2019, $ 443,717,000 was outstanding under the Credit Agreement.

Of the total outstanding, $ 298,717,000 was on the Term Facility at a rate of 4.19 % and $ 145,000,000 was on the Revolver Facility at a weighted average rate of 4.32 %.

On December 31, 2019, $ 3,025,000 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 $ 201,975,000 in available borrowings.

The Company is in compliance with the covenants under the Agreement.

As of December 31, 2020, $ 285.2 million was outstanding under the Credit Agreement.

Of the total outstanding, $ 280.2 million was on the Term Facility at a rate of 1.90 % and $ 5.0 million was on the Revolver Facility at a rate of 4.00 %.

On December 31, 2020, $ 2.2 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 $ 176.7 million in available borrowings.

The Company is in compliance with the covenants under the Credit Agreement.

The aggregate maturities of long-term debt, as of December 31, 2020, are as follows:

$ 18,840,000 in 2020;

$ 15,078,000 in 2021;

$ 15,043,000 in 2022;

$ 15,021,000 in 2023;

and $ 379,985,000 in 2024;

and $ 14,000 thereafter.

$ 15.1 million in 2021;

$ 15.0 million in 2022;

$ 15.0 million in 2023;

$ 240.2 million in 2024;

and $ 0.02 million in 2025;

and zero thereafter.

Income Statement Components

16 unchanged sentences

Total income taxes $ 21,507 $ 21,429 $ 21,045

The difference between income tax expense (benefit) for financial statement purposes and the amount of income tax expense computed by applying the domestic statutory income tax rate of 21% in 2019 and 2018 and 35% in 2017 to income before income taxes consists of the following:

The difference between income tax expense (benefit) for financial statement purposes and the amount of income tax expense computed by applying the domestic statutory income tax rate of 21% to income before income taxes consists of the following:

(in thousands) 2020 2019 2018

6 unchanged sentences

state taxes 2,450 3,125 3,917

Domestic production deduction — — ( 1,039 )

Foreign tax expense 704 — —

R&D credit ( 415 ) ( 699 ) ( 531 )

GILTI 50 872 673

Previously unrecognized tax benefit ( 1,504 ) — —

Previously unrecognized tax (benefit)/expense 2,219 ( 1,504 ) —

Other, net ( 515 ) 835 219

3 unchanged sentences

Transition tax on deemed repatriation — — ( 4,531 )

Other — — 466

Impact of tax reform $ — $ — $ ( 3,331 )

29 unchanged sentences

As of December 31, 2020, the Company had foreign deferred tax assets consisting of foreign net operating losses and other tax benefits available to reduce future taxable income in a foreign jurisdiction.

These foreign jurisdictions’ net operating loss carry-forwards are approximately $ 10,519,000 with an unlimited carry-forward period, and $ 5,363,000 with a carry-forward expiring in 2036.

These foreign jurisdictions’ net operating loss carry-forwards are approximately $ 11.1 million with an unlimited carry-forward period, and $ 0.9 million with a carry-forward expiring in 2035.

The Company also has U.S.

state net operating loss carry-forwards in the amount of $ 4,602,000 which will expire between 2020 and 2030.

state net operating loss carry-forwards in the amount of $ 3.6 million which will expire between 2021 and 2030.

We have recorded a valuation allowance as of December 31, 2020 and 2019 due to uncertainties related to our ability to utilize some of the deferred income tax assets, primarily consisting of international operating losses and foreign tax credits generated by the transition tax, before they expire.

The valuation allowance is based on estimates of taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable.

During 2019, the valuation allowance increased $ 460,000 related to operating losses generated by foreign affiliates.

Related to the utilization of net operating loss carry forwards utilized to offset current year earnings, there is not a sufficient history of earnings to fully release the valuation allowances at this time.

Unrecognized Tax Benefits

Unrecognized tax benefits in the amount of $ 262,000 and $ 236,000 for 2019 and 2018, respectively, are included in other non-current liabilities on the balance sheet.

Unrecognized tax benefits in the amount of $ 0.3 million and $ 0.3 million for 2020 and 2019, respectively, are included in other non-current liabilities on the balance sheet.

The unrecognized tax benefits, if recognized, would favorably impact our effective tax rate in a future period.

1 unchanged sentence

Unrecognized Tax Benefits

(in thousands) 2020 2019

Balance as of beginning of year $ 262 $ 236

9 unchanged sentences

The Company’s open tax years for its foreign income tax returns are for the tax years ended 2013 through 2020.

The Company previously considered substantially all of the earnings in our foreign subsidiaries to be permanently reinvested and, accordingly, recorded no deferred income taxes on such earnings.

The Company is currently under audit with the state of Michigan.

As a result of the fundamental changes to the taxation of multinational corporations created by TCJA, we no longer intend to permanently reinvest all of the historical undistributed earnings of our foreign affiliates.

1 unchanged sentence

There will generally be no U.S.

corporate taxes imposed on such future distributions of foreign earnings or foreign withholding and other local taxes.

For the amounts we continue to assert permanent reinvestment, if the amounts were distributed, the company would be subject to approximately $ 3,965,000 in withholding taxes.

corporate taxes imposed on such future distributions of the earnings or withholding and other local taxes.

For the amounts we continue to assert permanent reinvestment, if the amounts were distributed, the company would be subject to approximately $ 4.2 million in withholding taxes.

On January 4, 2021, the Board of Directors of the Company declared a quarterly dividend of $ 0.14 per share which was paid on January 29, 2021 to holders of record as of January 19, 2021.

The Company also has a share repurchase program under which the Company is authorized to repurchase, in the aggregate, up to $ 30.0 million of its outstanding common stock.

During 2019, the Company purchased 40,000 shares.

During 2020, the Company purchased zero shares.

STOCK OPTIONS

30 unchanged sentences

The weighted-average grant-date fair values of options granted during 2020, 2019, and 2018 were $ 38.33 , $ 39.85 and $ 38.77 , respectively.

Stock option expense was $ 451,000 , $ 482,000 and $ 597,000 for years ending 2019, 2018, and 2017, respectively.

As of December 31, 2019, there was $ 755,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

Stock option expense was $ 0.5 million, $ 0.5 million and $ 0.5 million for years ending 2020, 2019, and 2018, respectively.

As of December 31, 2020, there was $ 0.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

That cost is expected to be recognized over a period of five years .

3 unchanged sentences

Options available for grant at end of year 455,549 499,640 146,075

In 2019, options available are from the 2019 Equity Incentive Plan.

(1) In 2020 and 2019, options available are from the 2019 Equity Incentive Plan.

(2) In 2018, options available are from the 2009 Equity Incentive Plan.

We also maintain other incentive option plans that have expired, under which previously granted awards remain outstanding.

17 unchanged sentences

3,000 3.36 $ 53.51 3,000 $ 53.51

$ 49.44 - $ 83.99

4,000 4.37 $ 53.51 4,000 $ 53.51

Total 3,000 3,000

1 unchanged sentence

There were no options granted in 2018 , 2019 or 2020.

Stock option expense was $ 8,000 , $ 22,000 and $ 22,000 for years ending 2019, 2018, and 2017, respectively.

Stock option expense was zero , $ 0.01 million and $ 0.02 million for years ending 2020, 2019, and 2018, respectively.

As of December 31, 2020, there was zero unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

That cost is expected to be recognized over a period of five years .

During 2019, 2018, and 2017, 34,900 , 26,800 , and 45,400 non-qualified options were exercised, respectively, $ 1,480,000 , $ 1,115,000 , and $ 1,032,000 of cash receipts were received, respectively.

During 2020, 2019, and 2018, 2,300 , 34,900 , and 26,800 non-qualified options were exercised, respectively, $ 0.1 million, $ 1.5 million, and $ 1.1 million of cash receipts were received, respectively.

Restricted Stock Awards/Units

8 unchanged sentences

*Weighted Averages

Restricted stock awards vest 25 % after one year following the award date and for an additional 25 % of total awarded shares each succeeding year until fully vested.

The weighted-average remaining contractual life in years

for 2019, 2018, and 2017 was 2.48 , 2.53 and 2.69 , respectively.

Compensation expense was $ 2,810,000 , $ 1,946,000 and $ 1,250,000 for years ending 2019, 2018, and 2017, respectively.

As of December 31, 2019, there was $ 5,775,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

That cost is expected to be recognized over a period of four years .

Restricted stock awards granted in 2018 and 2019 vest 25 % after one year following the award date and for an additional 25 % of total awarded shares each succeeding year until fully vested.

Restricted stock awards granted in 2020 vest over a three year period.

The weighted-average remaining contractual life in years for 2020, 2019, and 2018 was 1.95 , 2.48 and 2.53 , respectively.

Compensation expense was $ 3.7 million, $ 2.8 million and $ 1.9 million for years ending 2020, 2019, and 2018, respectively.

As of December 31, 2020, there was $ 6.2 million of total

unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

The cost for awards granted prior to 2020 is expected to be recognized over a period of four years .

In 2020, the Board of Directors modified the vesting period for new RSA's granted to three years to be inline with grants of future performance stock units.

Performance Stock Units

In 2020, the Company's Board of Directors approved a change to our long-term incentive compensation plan to implement a new performance-based equity grants in the form of a Performance Stock Unit ("PSU") award.

PSU award vesting and payout amounts are tied to the Company's achievement of certain targeted financial metrics relating to a three-year performance period with the goal of more closely aligning executive compensation with long-term Company performance.

The 2020 target long-term incentive compensation mix established for the Company's Section 16 filers consists of RSA's and PSU's each representing fifty percent ( 50 %) of the total long-term incentive compensation target value.

PSU awards represent a right to receive a certain number of shares of the Company’s common stock at the end of the three-year performance period if certain financial or other performance targets/metrics have been met.

RETIREMENT BENEFIT PLANS

6 unchanged sentences

An amendment ceasing all future benefit accruals was effective April 6, 1997.

On April 6, 2016, the Company notified all participants in the Gradall Company Hourly Employees’ Pension Plan of our decision to terminate the plan.

Participants in the plan did not lose any benefits but were given a choice between obtaining certain continued annuity benefits that match the benefits offered under the plan or receiving an immediate one-time lump sum payment in total settlement of benefits.

The Company made a final contribution of $ 622,000 and met all legal requirements to effectuate a proper termination of the plan before December 31, 2016.

The Company expensed $ 2,889,000 related to accumulative pension actuarial losses relating to the closure of the Gradall Hourly Employees' Savings and Investment Plan that had been previously deferred in Other comprehensive income and deferred taxes.

The following table sets forth the change in plan assets, change in projected benefit obligation, rate assumptions and components of net periodic benefit cost as of December 31 with respect to the plan.

19 unchanged sentences

The Company measures the funded status of a plan as of the date of the year-end consolidated balance sheet.

The underfunded status of the plan of $ 1,844,000 and $ 1,944,000 as of December 31, 2019 and 2018, respectively, is recognized in the accompanying consolidated balance sheets as long-term accrued pension liability because plan assets are less than the value of benefit obligations expected to be paid.

The underfunded status of the plan of $ 1.7 million and $ 1.8 million as of December 31, 2020 and 2019, respectively, is recognized in the accompanying consolidated balance sheets as long-term accrued pension liability because plan assets are less than the value of benefit obligations expected to be paid.

The accumulated benefit obligation for our pension plan represents the actuarial present value of benefits based on employee service and compensation as of a certain date and does not include an assumption about future compensation levels.

10 unchanged sentences

The Company employs a building block approach in determining the expected long-term rate of return on plan assets.

Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run.

Historical markets are studied and long-term historical relationships between equities and fixed income are

preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run.

Current market factors such as inflation and interest rates are evaluated before long-term market assumptions are determined.

10 unchanged sentences

Net periodic benefit cost $ ( 251 ) $ 91

The Company estimates that $ 508,000 of unrecognized actuarial expense will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit costs during 2020.

The Company estimates that $ 0.5 million of unrecognized actuarial expense will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit costs during 2021.

The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk.

8 unchanged sentences

Our current asset allocations are consistent with our targeted allocations.

The pension plans' weighted-average asset allocation as a percentage of plan assets at December 31 are as follows:

The pension plans' weighted-average asset allocation as a percentage of plan assets at December 31 is as follows:

Asset Allocation as a Percentage of the Plan

17 unchanged sentences

Wells Fargo Core Bond 1,552 — 1,552 —

Wells Fargo/Causeway International 864 — 864 —

Wells Fargo/Causeway International Value 923 — 923 —

Wells Fargo BlackRock Large Cap Growth Index Fund 1,268 — 1,268 —

7 unchanged sentences

Wells Fargo/T.

Rowe Price Equity Income 590 — 590 —

Rowe Price Equity Income Managed CIT 643 — 643 —

Wells Fargo Voya Large Cap Growth CIT F 639 — 639 —

12 unchanged sentences

Wells Fargo Core Bond 1,413 — 1,413 —

Wells Fargo/Causeway International 766 — 766 —

Wells Fargo/Causeway International Value 864 — 864 —

Wells Fargo BlackRock Large Cap Growth Index Fund 1,153 — 1,153 —

6 unchanged sentences

Rowe Price Large-Cap Growth Managed CIT 602 — 602 —

Rowe Price Equity Income 515 — 515 —

Wells Fargo/T.

Rowe Price Equity Income Managed CIT 590 — 590 —

Wells Fargo Voya Large Cap Growth CIT F 605 — 605 —

50 unchanged sentences

Amortization of prior service cost 317 318

Amortization of net (gain)/loss 158 —

Recognition of settlement 188 —

Net periodic benefit cost $ 1,204 $ 856

The Company estimates that $ 475,000 of unrecognized actuarial expense will be amortized from accumulated other comprehensive income into net periodic benefit costs during 2020.

The Company estimates that $ 0.7 million of unrecognized actuarial expense will be amortized from accumulated other comprehensive income into net periodic benefit costs during 2021.

In determining the projected benefit obligation and the net pension cost, we used the following significant weighted-average assumptions:

14 unchanged sentences

The Company has two defined contribution plans, The Gradall Salaried Employees’ Savings and Investment Plan (“Salary Plan”) and The International Association of Machinist and Aerospace Workers Retirement Plan (“IAM Plan”).

The Company contributed $ 557,000 , $ 418,000 , and $ 408,000 to the IAM Plan for the plan years ended December 31, 2019, 2018 and 2017, respectively.

The Company contributed $ 0.4 million, $ 0.6 million, and $ 0.4 million to the IAM Plan for the plan years ended December 31, 2020, 2019 and 2018, respectively.

The Company converted the Salary Plan into its 401(k) retirement and savings plan and put the Hourly Plan into a separate 401(k) retirement and savings plan.

1 unchanged sentence

Company matching contributions are based on a percentage of employee contributions.

Company contributions to the plan during 2019, 2018 and 2017 were $ 2,806,000 , $ 2,340,000 , and $ 1,942,000 , respectively.

Company contributions to the plan during 2020, 2019 and 2018 were $ 3.5 million, $ 2.8 million, and $ 2.3 million, respectively.

Three of the Company’s international subsidiaries also participate in a defined contribution and savings plan covering eligible employees.

The Company’s international subsidiaries contribute between 0 % and 10 % of the participant’s salary up to a specific limit.

Total contributions made to the above plans were $ 861,000 , $ 850,000 , and $ 716,000 for the years ended December 31, 2019, 2018 and 2017, respectively.

Total contributions made to the above plans were $ 0.9 million, $ 0.9 million, and $ 0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

REVENUE AND SEGMENT REPORTING

32 unchanged sentences

INTERNATIONAL OPERATIONS AND GEOGRAPHIC INFORMATION

Following is selected financial information on the Company’s international operations, which include Europe, Canada and Australia:

Following is selected financial information on the Company’s international operations, which include the United Kingdom, France, Netherlands, Canada, Brazil, Australia, and China:

International Operations Financial Information

14 unchanged sentences

Netherlands 23,946 23,462 3,983

China 16,384 9,479 2,071

Germany 9,328 7,825 1,600

39 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures