What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-26 · 88 added, 99 removed, 111 unchanged (63% of the section changed)

3 unchanged sentences

Actual results in future periods may differ materially from those expressed or implied because of a number of risks and uncertainties which are discussed below and in the Forward-Looking Information section beginning on page 14.

In 2020, the COVID-19 pandemic triggered a worldwide recession that caused a significant downturn in our markets globally and negatively affected our expected results.

These unfavorable market conditions continued throughout much of 2020 and could continue for an extended period of time.

In an effort to contain the spread of COVID-19, maintain the health and safety of our employees, meet reduced demand from our customers, and in accordance with governmental requirements, we closed or partially shut down certain office and manufacturing facilities around the world at different times in early 2020.

Although most of our facilities re-opened in the second quarter of 2020, some operated at reduced capacities depending on fluctuations in customer demand and measures taken at our facilities to protect employees which included quarantining of personnel as needed.

Despite some of our markets showing signs of recovery in the second half of 2020, the ongoing spread of the virus presents several risks to our business, especially for the first half of 2021.

In the fourth quarter of 2020 we experienced some operational and supply chain disruptions caused by the pandemic.

We continue to experience varying levels of disruption, particularly in our supply chain, and it is hard to predict the extent to which these disruptions may continue.

COVID-19 vaccines are currently being administered around the world with the hope that the majority of the population will have access to the vaccine by the second half of 2021.

If vaccine effectiveness is consistent with current government and health organization estimates, we believe the vaccine will mitigate the spread of the virus and allow a return to more normal operations in the second half of the year.

However, we recognize that case surges or new strains of the virus or other unanticipated events could lead to new restrictions or lockdowns, which may limit our operational capabilities and/or lead to a renewed softening of customer demand.

All of this is dependent on future developments relating to the pandemic, which are highly uncertain and unpredictable at this time.

In addition, certain i nput costs, most notably steel, have recently increased, while international trade disputes, shipping delays, a changing political landscape in the U.S., and a continuing tight labor market are also of concern.

Given the current level of business uncertainty, we remain cautious in terms of our outlook for the year.

Despite the challenges faced in 2020, we will continue our focus on ongoing operational improvement initiatives and, as we did in 2020, will monitor capital expenditures in 2021 in line with depreciation levels of the last several years.

While we experienced strong demand in our markets and across our full range of products in 2021, we were confronted with the direct and indirect consequences of the COVID-19 pandemic which remained ongoing throughout the year.

At various times during the year, employee sickness and quarantining requirements created operational disruptions at several of our manufacturing facilities, leading to delayed shipments of our products, plant inefficiencies, and higher labor costs.

We were also negatively impacted by significant input cost inflation, supply chain disruptions, and labor shortages, all of which continued throughout the year.

We believe these negative forces will persist, at least for the first half of 2022.

Our record backlog level at the end of 2021 provides us with some confidence and visibility for 2022, but we remain concerned about the ongoing negative effects of the pandemic.

During the first few weeks of 2022, we experienced an increase in employee absences due to illness and quarantining, and we continue to struggle with inflationary pressures, supply chain issues and labor shortages.

We are hopeful that these negative influences will moderate during the course of the year, but it is hard to determine the extent to which these issues will continue with the information we currently have available to us.

The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.

Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, the contagiousness and severity of Coronavirus variants, including Delta and Omicron, and the resumption of widespread economic activity.

Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.

Of course, we may also be negatively affected by several other unanticipated factors, such as a weakness in the overall economy;

1 unchanged sentence

further changes in trade or tax policy;

Brexit integration impacts;

increased levels of government regulation;

weakness in the agricultural sector;

weakness in the end-markets we serve;

acquisition integration issues;

2 unchanged sentences

2021 Performance

In 2020, the Company's net sales increased by 4.0%, but net income decreased by 10.0% compared to 2019.

The increase in net sales was due to the acquisitions of Morbark and Dutch Power in 2019 which was offset by market declines due to COVID-19.

The decrease in net income was attributable to the COVID-19 pandemic which began to materially affect our operations in March 2020 and continued to negatively impact the Company's overall financial performance during the year.

The Company's Industrial Division experienced a 5.6% increase in sales for 2020 compared to 2019 due to the acquisitions of Morbark and Dutch Power .

Without factoring in contributions from Morbark and Dutch Power , sales across all legacy Industrial product groups (with the exception of vegetation control, which was up) were down in 2020 compared to 2019, mostly attributable to the adverse impacts of the COVID-19 pandemic which included temporary plant closures in the U.S., France, and Canada during the second quarter of 2020, as well as other operational disruptions across the Industrial Division and softness in customer demand which occurred over the course of the year.

The Division's new orders showed signs of improvement, though not evenly across product lines.

Some areas, such as forestry, increased above historical average while others, such as excavators and vacuum trucks continued to be soft.

The Company's Agricultural Division sales were up less than 1% in 2020 compared to 2019 but were negatively affected by the COVID-19 pandemic, and to a lesser extent ongoing global trade tensions, which began to hurt Agricultural sales as well as operations in late March of this year.

During the second quarter of 2020 however, North American sales and profitability in the Agricultural Division showed some improvement and continued to show signs of recovery for the remainder of 2020.

Likewise, soft market conditions in the Agricultural Division's operations in the U.K.

and France during the first half of 2020 as well as experiencing temporary plant closures and operational disruptions during the months of March and April due to COVID-19, also showed signs of improvement during the second half of 2020.

Consolidated income from operations was $93.2 million in 2020, which included $4.8 million of non-cash inventory step-up expense related to the Morbark acquisition and redundancy costs in the amount of $2.7 million related to the Company's plan to close the Dutch Power facility located in Enschede, in The Netherlands.

Without these one-time charges, consolidated income from operations was $100.7 million, an increase of 6.4% when compared to 2019, mainly the result of contributions to operating income from the Morbark and Dutch Power acquisitions.

In 2021, the Company's net sales increased by 14.7% and net income increased by 38.8% compared to 2020.

The increase in both net sales and net income was primarily due to a strong recovery in customer demand for our products compared to the prior year where demand for our products was materially impacted as a result of the onset of the COVID-19 pandemic.

Partially offsetting the increases in net sales and net income in 2021 were the ongoing negative effects associated with the pandemic, including supply chain disruptions, labor shortages, inflationary pressures, and logistics issues.

The Company's Vegetation Management Division experienced a 24.1% increase in sales for the full year of 2021 compared to a full year of 2020.

The increase in sales was primarily attributable to improved sales of forestry and tree care products and agricultural mowing products, along with solid contributions from the U.K., Europe, Brazil and Australia operations.

The Division's new orders and backlog improved in all product lines, though cases of COVID-19 in certain facilities caused some operational disruptions during the first half of 2021.

Negatively impacting this Division were higher input costs and supply chain disruptions which affected manufacturing efficiencies.

Notwithstanding these challenges, the Division's income from operations for the full year of 2021 recorded a 69.2% improvement compared to the full year of 2020.

The Company's Industrial Equipment Division sales were up 2.5% for the full year of 2021 compared to a full year of 2020.

The increase in sales was led by excavation/vacuum trucks and sweeper/debris collection offset by soft demand for our Snow Removal product line.

The Division's income from operations for the full year of 2021 was down 21.0% compared to the full year of 2020.

Negatively affecting this Division's sales and income for operations were the effects of the ongoing COVID-19 pandemic which included higher input costs, supply chain disruptions and labor shortages and related affected manufacturing efficiencies.

While the Industrial Division experienced ongoing strong market conditions for most of its product categories, the supply chain and inflation cost impacts on this division were more significant than those experienced by our Vegetation Management Division in 2021.

In addition, sales of snow removal products were lower in 2021 as compared to 2020 and the snow product group had both higher warranty costs with more significant impacts from steel price increases that could not be passed on to their government customers.

New orders and backlog improved in all product groups for the full year 2021.

Consolidated income from operations was $116.9 million for the full year of 2021, which included a $1.1 million charge for acceleration of stock grants for our former CEO, compared to $94.8 million, which included $4.8 million of an inventory step-up expense related to the Morbark acquisition.

The Company's backlog increased 126.2% to $800.8 million at the end of 2021 versus the backlog of $354.1 million at the end of 2020.

The increase in the Company's backlog was primarily attributable to improved market conditions in the second half of 2020, specifically in the Agricultural Division, offset by adverse effects from the COVID-19 pandemic, which has hurt the Company's overall sales and profitability.

The increase in the Company's backlog was primarily attributable to improved market conditions and an increase in customer demand for our products in both Divisions as outlined above.

The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included elsewhere in this Annual Report on Form 10-K.

3 unchanged sentences

2021 2020 2019

Industrial $ 811,161 $ 768,454 $ 638,198

Agricultural 352,305 350,684 370,624

Vegetation Management $ 812,676 $ 654,630 $ 502,194

Industrial Equipment 521,547 508,836 616,944

Total net sales $ 1,334,223 $ 1,163,466 $ 1,119,138

9 unchanged sentences

The Company’s net sales in the fiscal year ended December 31, 2021 (“2021”) were $1,334.2 million, an increase of $170.7 million or 14.7% compared to $1,163.5 million for the fiscal year ended December 31, 2020 (“2020”).

The increase in sales was attributable to the continued strong recovery in customer demand for our products in both the Vegetation Management and the Industrial Equipment Divisions.

Negatively affecting sales in 2020 was the onset of the COVID-19 pandemic which materially impacted global demand for the Company's products and overall Company financial performance.

Net Vegetation Management sales were $812.7 million in 2021 compared to $654.6 million in 2020, an increase of $158.1 million or 24.1%, coming from improved sales in the forestry/tree care and agricultural mowing units along with solid contributions from the U.K., Europe, Brazil and Australia operations.

this Division were negatively impacted by operational and supply chain disruptions and logistics issues due to the pandemic.

Net Industrial Equipment sales were $521.5 million in 2021 compared to $508.8 million in 2020, representing an increase of $12.7 million or 2.5%.

The increase primarily resulted from higher customer demand for excavation/vacuum truck products and to a lesser extent the sweeper/debris collection products, offset by softer demand for snow removal equipment.

Negatively affecting this Division were delays in truck chassis deliveries due to ongoing computer chip shortages as well as other supply chain constraints and operational disruptions due to the pandemic.

Gross profit for 2021 was $334.5 million (25.1% of net sales) compared to $293.7 million (25.2% of net sales) in 2020, an increase of $40.8 million.

The increase in gross profit was primarily attributable to higher sales volume in 2021 as well as pricing increases that were implemented over the course of the year.

This was offset by inflationary pressures, mainly from steel, along with higher costs relating to delivery of component parts, such as airfreighting charges to meet customer deliveries, which also had a negative effect on gross margin percentage for the full year of 2021.

Negatively affecting the gross margin and gross margin percentage during for the full year of 2020 was a $4.8 million charge on sales of inventory that had been previously stepped-up related to the Morbark acquisition.

Selling, general and administrative expenses (“SG&A”) were $202.9 million (15.2% of net sales) in 2021 compared to $184.2 million (15.8% of net sales) in 2020, an increase of $18.7 million.

The full year of 2021 included higher administrative and marketing expenses as the Company returned to pre-pandemic expense levels.

Amortization expense in 2021 was $14.6 million compared to $14.7 million in 2020, a decrease of $0.1 million.

Interest expense for 2021 was $10.5 million compared to $15.8 million in 2020, a decrease of $5.3 million or 33.5%.

The decrease in interest expense in 2021 primarily came from a decrease in interest rates, and to a lesser extent, reduced borrowing levels.

Other income (expense), net was income of $1.9 million during 2021 compared to expense of $0.6 million in 2020.

The income in 2021 was primarily from changes in exchange rates and the sale of a facility in the Netherlands and the expense in 2020 was primarily the result of changes in exchange rates offset by the gain on the sale of two properties, one in the U.S.

and one in Canada.

Provision for income taxes was $29.3 million (26.7% of income before income taxes) for 2021 compared to $22.0 million (27.5% of income before income taxes) in 2020.

Net income for 2021 was $80.2 million compared to $57.8 million in 2020, with the increase in 2021 net income resulting from the factors described above.

Fiscal 2020 compared to Fiscal 2019

The Company’s net sales in the fiscal year ended December 31, 2020 (“2020”) were $1,163.5 million, an increase of $44.4 million or 4.0% compared to $1,119.1 million for the fiscal year ended December 31, 2019 (“2019”).

The increase was attributable to the acquisitions of Morbark and Dutch Power, which year over year contributed net sales of $160.5 million.

Negatively affecting sales in 2020, was the outbreak of the COVID-19 pandemic which began to affect the Company's operations late in the first quarter of 2020.

Net Industrial sales were $811.2 million in 2020 compared to $768.5 million in 2019, an increase of $42.7 million or 5.6%, coming from the acquisitions of Dutch Power and Morbark mentioned above, which were offset by the impacts from the COVID-19 pandemic that began to materially affect the Division late in the first quarter of 2020.

This included temporary plant closures in the U.S., France and Canada along with other operational disruptions throughout our global markets resulting from health concerns and

governmental directives, reduced governmental spending, and customer delivery restrictions, among other things.

Net Agricultural sales were $352.3 million in 2020 compared to $350.7 million in 2019, representing an increase of $1.6 million or 0.5%.

Despite the COVID-19 pandemic, agricultural market conditions began to improve during the second quarter of 2020 as demand for our products continued to outpace last year.

Sales in this Division's North American operations did reasonably well and benefited from the contributions of Dixie Chopper but the ongoing pandemic affected supply chain and logistics across the entire Division as well as sales and operations, particularly in our U.K.

and French Agricultural businesses, as they experienced temporary plant closures and soft markets.

Negatively affecting sales in 2020, was the onset of the COVID-19 pandemic which began to negatively affect the Company's operations and customer demand late in the first quarter of 2020.

Net Vegetation Management sales were $654.6 million in 2020 compared to $502.2 million in 2019, an increase of $152.4 million or 30.4%, mainly coming from the acquisitions of Dutch Power and Morbark mentioned above and improved sales of agricultural mowing as demand for those products in 2020 outpaced demand in 2019.

This was offset by the impacts from the COVID-19 pandemic that began to materially affect the Division late in the first quarter of 2020.

This included temporary plant closures in the U.S., France and Canada along with other operational disruptions throughout our global markets resulting from health concerns and governmental directives, reduced governmental spending, lower customer demand, and customer delivery restrictions, among other things.

Net Industrial Machinery sales were $508.8 million in 2020 compared to $616.9 million in 2019, representing a decrease of $108.1 million or 17.5%.

The COVID-19 pandemic materially impacted all product lines in this Division, which resulted in significantly lower sales during 2020.

This Division also had

several operational disruptions throughout 2020 including temporary plant closures and delays in customer deliveries.

Gross profit for 2020 was $293.7 million (25.2% of net sales) compared to $273.5 million (24.4% of net sales) in 2019, an increase of $20.2 million.

1 unchanged sentence

Gross margin percentage improved year over year primarily due to a favorable mix of parts sales and pricing actions which more than offset the negative impact of higher steel prices and lower factory utilization.

Also, negatively affecting the gross margin and gross margin percentage during the first nine months of 2020 were $4.8 million of charges on sales of inventory that had been previously stepped-up related to the Morbark acquisition.

Also negatively affecting the gross margin and gross margin percentage of 2020 were $4.8 million of charges on sales of inventory that had been previously stepped-up related to the Morbark acquisition.

Selling, general and administrative expenses (“SG&A”) were $184.2 million (15.8% of net sales) in 2020 compared to $172.9 million (15.5% of net sales) in 2019, an increase of $11.3 million.

2 unchanged sentences

Amortization expense in 2020 was $14.7 million compared to $5.7 million in 2019, an increase of $9.0 million.

The increased amortization expense in 2020 was primarily from the acquisitions of Morbark and Dutch Power.

The increased amortization expense in 2020 was primarily due to the acquisitions of Morbark and Dutch Power.

Interest expense for 2020 was $15.8 million compared to $10.7 million in 2019, an increase of $5.1 million or 47.4%.

The increase in interest expense in 2020 came from increased borrowings due to the Morbark acquisition in 2019 offset by a decrease in interest rates.

The increase in interest expense in 2020 was the result of increased borrowings due to the Morbark acquisition in 2019 offset by a decrease in interest rates.

Other income (expense), net was expense of $0.6 million during 2020 compared to expense of $0.8 million in 2019.

3 unchanged sentences

Net income for 2020 was $57.8 million compared to $63.1 million in 2019, due to the factors described above.

Fiscal 2019 compared to Fiscal 2018

The Company’s net sales in the fiscal year ended December 31, 2019 (“2019”) were $1,119.1 million, an increase of $110.3 million or 10.9% compared to $1,008.8 million for the fiscal year ended December 31, 2018 (“2018”).

The increase in net sales was mainly due to the acquisition of Dutch Power, which contributed $36.4 million in net sales and the Morbark acquisition, which added $35.1 million in net sales.

Also contributing to the increase in sales for 2019 was relatively strong demand for our products in the Company's Industrial Division.

These positive net sales impacts more than offset lower sales in our Agricultural Division due to weak market conditions as well as unfavorable currency translation effects in our European operations.

Net Industrial sales were $768.5 million in 2019 compared to $638.2 million in 2018, an increase of $130.3 million or 20.4%, primarily resulting from the acquisitions of Dutch Power and Morbark which together accounted for $71.5 million of the increase in net sales.

Also contributing to the increase were higher sales of vacuum trucks, sweepers, excavators and snow equipment.

To a lesser extent, negatively affecting sales in this division were lower mowing equipment sales.

Net Agricultural sales were $350.7 million in 2019 compared to $370.6 million in 2018, representing a decrease of $19.9 million or 5.4%.

Negatively affecting sales in the Agricultural Division were weak market conditions and lower farm incomes, which have been impacted by lower commodity prices as well as on

going trade disputes.

A first quarter 2019 shutdown in this Division's largest manufacturing facility to install an upgrade to its paint system in addition to heavy rains and flooding throughout the mid-west part of the U.S.

during the second quarter of 2019 also negatively hampered sales.

Also negatively affecting sales were weak agricultural conditions in the U.K.

during the second half of 2019.

Gross profit for 2019 was $273.2 million (24.4% of net sales) compared to $256.1 million (25.4% of net sales) in 2018, an increase of $17.1 million.

The increase in gross profit for 2019 came from the acquisitions of Dutch Power and Morbark and higher equipment sales in the Company's Industrial Division.

Negatively affecting the gross margin and margin percentage for 2019 as compared to 2018 were the step-up inventory charge of $3.3 million at Morbark due to the acquisition, the effects of lower production in our Agricultural Division and unfavorable product mix, partially offset by lower material costs and improvements in the Rivard vacuum truck business.

Selling, general and administrative expenses (“SG&A”) were $172.9 million (15.5% of net sales) in 2019 compared to $151.5 million (15.0% of net sales) in 2018, an increase of $21.4 million.

To a large extent, the increase in SG&A was a result of the acquisitions of Dutch Power and Morbark which accounted for $12.5 million of the increase.

Also contributing to the higher SG&A costs were increased spending in research and development projects, higher commissions and other selling expenses as well as acquisition expenses, in the amount of $1.9 million.

Amortization expense in 2019 was $5.7 million compared to $3.5 million in 2018, an increase of $2.2 million.

The increased amortization expense in 2019 was primarily from the acquisitions of Dutch Power and Morbark.

Interest expense for 2019 was $10.7 million compared to $5.5 million in 2018, an increase of $5.2 million or 95.6%.

The increase in interest expense in 2019 came from increased borrowings due to the Dutch Power and Morbark acquisitions.

Other income (expense), net was expense of $0.8 million during 2019 compared to expense of $1.5 million in 2018.

The expense in 2019 and the expense in 2018 were primarily the result of changes in exchange rates.

Provision for income taxes was $21.4 million (25.4% of income before income taxes) for 2019 compared to $21.0 million (22.3% of income before income taxes) in 2018.

The lower effective tax rate in 2018 as compared to 2019 was a result of the Company recording a net benefit to income taxes of $3.3 million in 2018 relating to the adjustment in the provisional amounts recorded in the fourth quarter of 2017 upon enactment of Tax Cuts and Jobs Act ("TCJA"), as more fully described in Note 14 of the Notes to the Consolidated Financial Statements.

This factor reduced the Company's effective income tax rate for 2018 to 22.3%.

Net income for 2019 was $62.9 million compared to $73.5 million in 2018, due to the factors described above.

Liquidity and Capital Resources

In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to conduct the Company’s business, including inventory purchases and capital expenditures.

The Company’s accounts receivable, inventory and accounts payable levels, particularly in its Agricultural 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.

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 Agricultural Division, help balance the Company’s production during the first and fourth quarters.

As of December 31, 2020, the Company had working capital of $345.7 million, which represents a decrease of $62.3 million from working capital of $408.0 million as of December 31, 2019.

The decrease in working capital was primarily due to reductions of accounts receivable and inventory levels which created excess cash used to reduce debt levels.

This was done in response to the COVID-19 pandemic.

These sales, primarily in the Vegetation Management Division, help balance the Company’s production during the first and fourth quarters.

As of December 31, 2021, the Company had working capital of $419.6 million, which represents a increase of $61.4 million from working capital of $358.2 million as of December 31, 2020.

The increase in working capital was primarily due to sales growth and increased demand for our products as well as increased inventory to support Company's higher backlog levels along with increased work in process due to supply chain constraints.

Capital expenditures were $25.3 million for 2021, compared to $17.9 million for 2020.

The decrease was related to the COVID-19 pandemic.

In the first quarter of 2020, we began to limit new capital expenditures;

however, any previously approved projects and related spending carried over.

The increase was related to the Company returning to a more normalized level of capital expenditures as the Company limited new capital expenditures in 2020 in response to the COVID-19 pandemic.

The Company will fund any future expenditure from operating cash flows or through our revolving credit facility, described below.

Also contributing to the increase in capital expenditures in 2021 was approximately $2.2 million of capital projects intended to advance the Company's ongoing sustainability efforts.

These capital projects included LED lighting upgrades at several of our facilities, the installation of a solar power system at one of our facilities and the replacement of less efficient capital equipment.

Net cash provided by operating activities was $49.7 million for 2021, compared to $184.3 million for 2020.

The increase of cash from operating activities came primarily from working capital due to reductions in accounts

receivable and inventory levels as well as a decreased in the Company's investment in rental equipment in the Industrial Division .

The decrease of cash from operating activities came primarily from volume related increases in working capital due to higher accounts receivable and inventory levels from sales growth.

In 2021 we experienced strong demand for our products coupled with supply chain disruptions and material cost inflation which led to higher inventory levels.

2020, as a result of the COVID-19 pandemic, we focused on reductions in accounts receivable and inventory levels which led to a significant reduction in our debt levels.

Net cash used in investing activities was $33.4 million for 2021, compared to $14.2 million for 2020.

The decrease in cash used in investing activities was primarily due to repayment of debt related to the acquisitions in 2019 of Morbark , Dutch Power and to a lesser extent Dixie Chopper .

Net cash used by financing activities was $164.2 million for 2020, compared to $349.2 million of net cash provided for 2019.

The majority of the net cash provided by financing activities in 2019 was due to borrowings to finance the acquisitions of Morbark , Dutch Power , and to a lesser extent Dixie Chopper .

The increase in cash used in investing activities was primarily due to the acquisition of Timberwolf, and increased purchases of Property, plant and equipment partially offset by proceeds from the sale of an facility in the Netherlands.

Net cash used by financing activities was $23.0 million for 2021, compared to $164.2 million for 2020.

The majority of the net cash used by financing activities in 2020 was primarily due to the pay down of debt related to the 2019 acquisitions of Morbark and Dutch Power .

The Company had $37.2 million in cash and cash equivalents held by its foreign subsidiaries as of December 31, 2021.

4 unchanged sentences

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.

Up to $350.0 million is available under the Credit Agreement pursuant to a Revolver Facility which terminates in 2024.

Outstanding loans under the revolving credit facility bear interest at a variable rate generally based on LIBOR or an alternative variable rate based on the highest of the Bank of America prime rate, the federal funds rate or a rate generally based on LIBOR, in each case depending on the leverage ratio.

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

7 unchanged sentences

However, future challenges affecting the banking industry and credit markets in general could potentially cause changes to credit availability, which creates a level of uncertainty.

The Company believes that inflation generally has not had a material impact on its operations or liquidity.

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 2021, the Company was impacted by inflationary pressures that significantly increased the price of steel as well as the price of many other purchased components.

These inflationary pressures are ongoing.

New Accounting Pronouncements

1 unchanged sentence

The effect on our financial statements upon adoption of these pronouncements is discussed in the above-referenced note.

Off-Balance Sheet Arrangements

There are currently no off-balance sheet arrangements that have or are currently likely to have a current or future material effect on our financial condition.

Contractual and Other Obligations

4 unchanged sentences

Long-term debt obligations $ 269,498 $ 15,000 $ 254,498 $ — $ —

Capital lease obligations 153 66 55 32 —

Finance and operating lease obligations 18,259 4,981 6,492 3,696 3,090

Interest obligations 12 4 8 — —

Operating lease obligations 15,555 4,072 5,152 2,709 3,622

Purchase obligations 338,017 338,017 — — —

1 unchanged sentence

Long-term debt obligation means a principal payment obligation under long-term borrowings.

Capital lease obligation means a principal payment obligation under a lease classified as a capital lease.

Interest obligation represents interest due on long-term debt and capital lease obligations.

Interest on long-term debt assumes all floating rates of interest remain the same as those in effect at December 31, 2020.

Finance lease obligation means a principal payment obligation under a lease classified as a finance lease.

Operating lease obligation means a payment obligation under a lease classified as an operating lease.

Interest obligation means interest due on long-term debt and capital lease obligations.

Interest on long-term debt assumes all floating rates of interest remain the same as those in effect at December 31, 2021.

Purchase obligation means an agreement to purchase goods or services that is enforceable and legally binding on the registrant that specifies all significant terms, including:

10 unchanged sentences

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 policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Management believes the following critical accounting policy reflect 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.

2 unchanged sentences

Goodwill represents the excess of consideration transferred over the estimated fair value of the net assets acquired in a business combination.

Assigning estimated fair values to the assets acquired and liabilities assumed requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of intangibles assets that are separately identifiable from goodwill, inventory step-up, and property, plant, and equipment and are based on available historical information, future expectations, and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, the useful life of the acquired assets and other factors.

Assigning estimated fair values to the assets acquired and liabilities assumed requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of intangible assets that are separately identifiable from goodwill, inventory step-up, and property, plant, and equipment, and are based on available historical information, future expectations, and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, the useful life of the acquired assets and other factors.

Such significant estimates, judgments, inputs, and assumptions include, when applicable, the selection of an appropriate valuation method depending on the nature of the respective asset, such as the income approach, the market or sales comparison approach, or the cost approach;

13 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 7. Management’s Discussion and Analysis