What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-23 compared with 2022-02-24 · 48 added, 111 removed, 1152 unchanged (12% of the section changed)

10 unchanged sentences

Other Information

(a) On February 24, 2022, the Company entered into a change in control agreement with Michael A.

The Company entered into similar change in control of agreements with its other executive officers on March 6, 2020.

The agreement with Mr.

Haberman is entered into in connection with Mr.

Haberman's recent appointment as the Executive Vice-President of the Company's Industrial Equipment Division.

The intent of this agreement is to provide the executive with financial security in the event of a change in control to facilitate a transaction which may benefit shareholders but result in job loss to the executive.

Haberman is entitled to receive, upon termination of employment within six months preceding or twenty-four months after a change in control of the Company (unless such termination is because of death, disability, for cause, or by the officer other than for "good reason," as defined in the change in control agreement), (a) a lump sum severance payment equal to (i) the executive officers annual base salary in effect immediately prior to the change in control or the date of the executive's termination (whichever is greater) plus (ii) an amount equal to the executive’s target bonus opportunity for the calendar year in which the change in control or the date of the executive's termination occurs (whichever is greater) multiplied by a benefit factor which has been set at a factor of "2" for Mr.

Haberman (the "Severance Factor");

(b) acceleration of vesting of all time-based equity awards including restricted stock awards (RSAs) and stock options that vest ratably over time;

and (c) reimbursement of health care insurance costs for a period of eighteen (18) months following the executive's termination of employment, if COBRA is elected by the executive under the Company's group health plan.

The events that trigger a change-in-control under the agreement include (i) the acquisition of 50% or more of our outstanding common stock by certain persons, (ii) certain changes in the membership of the Board of Directors of the Company, (iii) certain mergers or consolidations, and (iv) a sale or transfer of all or substantially all of the Company’s assets.

The receipt of any and all severance payments pursuant the change in control agreement is expressly conditioned on the executive's execution (and non-revocation) of a release of claims agreement.

The summary is qualified in its entirety by the form of change of control agreement attached hereto as exhibit 10.24 and incorporated herein by reference.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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The Board of Directors has also adopted Corporate Governance guidelines and a Code of Business Conduct and Ethics for all employees, including the Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and those individuals performing similar functions.

The Committee Charters, Code of Business Conduct and Ethics, and Corporate Governance Guidelines may be found on the Company’s website (www.alamo-group.com) under the “Our Commitment” tab and are also available in printed form at no charge by sending a request to the Corporate Secretary, Alamo Group Inc., 1627 E.

The Committee Charters, Code of Business Conduct and Ethics, and Corporate Governance Guidelines may be found on the Company’s website (www.alamo-group.com) under the “Corporate Governance” tab at https://www.alamo-group.com/our-company/corporate-governance/ and are also available in printed form at no charge by sending a request to the Corporate Secretary, Alamo Group Inc., 1627 E.

Walnut Street, Seguin, Texas 78155, which is the principal executive office of the Company.

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3.3 — By-Laws of Alamo Group Inc.

as amended Filed as Exhibit 3.1 to Form 8-K, March 30, 2020

as amended Filed as Exhibit 3.1 to Form 8-K, December 12, 202 2

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

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*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

*10.4 — 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

*10.4 — 2005 Incentive Stock Option Plan, adopted by the Board of Directors on May 4, 2005 Filed as Appendix E to Schedule 14A, March 29, 2005

*10.6 — 2009 Equity Incentive Plan, adopted by the Board of Directors on May 7, 2009 Filed as Exhibit 10.1 to Form 8-K, May 13, 2009

10.7 — Second Amended and Restated Credit Agreement, dated as of October 24, 2019, by and among Alamo Group Inc., Bank of America, N.A.

as administrative agent, Wells Fargo Bank, National Association, and BBVA USA as co-syndication agents, and the other lenders party thereto.

10.5 — Third Amended and Restated Credit Agreement, dated as of October 28, 2022, by and among Alamo Group Inc., Bank of America, N.A.

as administrative agent, Wells Fargo Bank, N.A., and PNC Bank, N.A.

as co-syndication agents, TD Bank, N.A.

as documentation agent, and the other lenders party thereto.

Filed as Exhibit 10.1 to Form 8-K, October 31, 2022

2 unchanged sentences

*10.7 — Form of Restricted Stock Award Agreement under the 2009 Equity Incentive Plan Filed as Exhibit 10.2 to Form 8-K, May 13, 2009

*10.10 — Form of Restricted Stock Unit Award Agreement under the 2009 Equity Incentive Plan Filed as Exhibit 10.3 to Form 8-K, May 13, 2009

*10.11 — Form of Nonqualified Stock Option Agreement under the 2009 Equity Incentive Plan Filed as Exhibit 10.4 to Form 8-K, May 13, 2009

*10.12 — Form of Nonqualified Stock Option Agreement under the First Amended and Restated 1999 Nonqualified Stock Option Plan Filed as Exhibit 10.5 to Form 8-K, May 13, 2009

*10.13 — Form of Stock Option Agreement under the 2005 Stock Option Plan Filed as Exhibit 10.6 to Form 8-K, May 13, 2009

10.14 — Investor Rights Agreement, dated October 22, 2009, between Alamo Group Inc.

and Bush Hog, LLC Filed as Exhibit 10.25 to Form 10-K, March 12, 2012

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

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and Michael A.

Haberman Filed Herewith

18.1 — Lifo Preferability Letter Filed as Exhibit 1 8 .1 to Form 10-Q, November 3 , 2021

Haberman Filed as Exhibit 10.2 4 to Form 10-K, February 2 4 , 20 2 2

21.1 — Subsidiaries of the Registrant Filed Herewith

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/s/ RODERICK R.

Chairman of the Board & Director

Independent Board Chair & Director

/s/ JEFFERY A.

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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 29 principal manufacturing plants located in seven countries.

Within these locations, the Company has 28 principal manufacturing plants located in six countries.

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

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Total liabilities and stockholders’ equity $ 1,308,508 $ 1,205,742

* Years ended December 31, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Note 1 to the Consolidated Financial Statements.

See accompanying notes.

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Diluted 11,934 11,896 11,845

* Years ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Note 1 to the Consolidated Financial Statements.

See accompanying notes.

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Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax (expense) benefit of $( 344 ), $ 810 , and zero

Foreign currency translation adjustment, net of tax (expense) benefit of $ 1,069 , $( 344 ), and $ 810

( 23,032 ) ( 15,800 ) 8,862

Unrealized income (loss) on derivative instruments, net of tax (expense) benefit of $( 1,405 ), $ 1,842 , and zero , respectively

Unrealized income (loss) on derivative instruments, net of tax (expense) benefit of $( 497 ), $( 1,405 ), and $ 1,842 , respectively

2,047 5,298 ( 7,484 )

3 unchanged sentences

Comprehensive income $ 82,650 $ 71,581 $ 58,316

* Years ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Note 1 to the Consolidated Financial Statements.

See accompanying notes.

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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 transactions 64 6 ( 287 ) — — — ( 281 )

Repurchased shares — — — — — — —

Dividends paid ($ 0.56 per share)

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Balance at December 31, 2022 11,831 $ 1,191 $ 129,820 $ ( 4,566 ) $ 727,183 $ ( 68,268 ) $ 785,360

* Years ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Note 1 to the Consolidated Financial Statements.

See accompanying notes.

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Principal payments on long-term debt and capital leases ( 15,031 ) ( 15,093 ) ( 18,867 )

Proceeds from issuance of long-term debt — — 300,002

Debt issuance cost — — ( 2,875 )

Dividends paid ( 8,549 ) ( 6,627 ) ( 6,124 )

Proceeds from exercise of stock options 803 1,676 1,459

Treasury stock repurchased — — ( 4,140 )

Common stock repurchased ( 768 ) ( 1,957 ) ( 710 )

Net cash used in financing activities ( 23,001 ) ( 164,242 ) 349,223

Net cash provided (used) in financing activities 24,455 ( 23,001 ) ( 164,242 )

Effect of exchange rate changes on cash ( 2,346 ) ( 1,308 ) 1,964

5 unchanged sentences

Income taxes $ 35,102 $ 32,865 $ 17,140

* Years ended December 31, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Note 1 to the Consolidated Financial Statements.

See accompanying notes.

11 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

At the beginning of the fourth quarter of 2021, the Company began reporting operating results on the basis of two new segments, the Vegetation Management Division and the Industrial Equipment Division.

Prior to the fourth quarter of 2021, the Company had been reporting its operating results on the basis of two segments, the Industrial and Agricultural Divisions.

The realignment into these two new segments will allow the Company to capture synergies in areas such as cross-branding, distribution and product development.

The prior period segment information has been retrospectively adjusted to reflect the current segment presentation in Note 18 to the Consolidated Financial Statements.

Use of Estimates

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Inventories are stated at the lower of cost or net realizable value.

Effective July 1, 2021, the Company changed its method of accounting for its U.S.

inventories currently accounted for under the LIFO method to the FIFO method.

inventories that utilized the LIFO cost method represented 41 % of the Company's total inventory as of December 31, 2020 prior to this change in method.

The Company believes the FIFO method is preferable because it:

(i) more accurately matches cost of sales with the related revenues as the FIFO method more accurately resembles the physical flow of inventory and;

(ii) conforms all of the Company’s consolidated inventory to a single method of accounting.

The Company also notes that the revised policy improves comparability with many of the Company's peers.

The Company applied this change retrospectively to all periods presented.

There was an immaterial impact to the Company’s Consolidated Income Statement and Consolidated Statement of Cash Flows for the twelve

months ended December 31, 2021, 2020 and 2019.

The following financial statement line items in the Company's Consolidated Balance Sheet as of December 31, 2020 was adjusted as follows:

Consolidated Balance Sheets December 31, 2020

(in thousands)

As Originally Reported Effect of Change As Adjusted

Inventories, net

$ 229,971 $ 12,530 $ 242,501

Deferred income taxes (liability)

19,642 3,170 22,812

Retained earnings 550,826 9,360 560,186

Property, Plant and Equipment

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Factors considered include macroeconomic, industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the reporting unit.

qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

Alternatively, we may also bypass the qualitative assessment and go ahead and perform step 1 to determine if the carrying amount exceeds the reporting unit’s fair value.

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The Company tests its indefinite-lived intangible assets for impairment on an annual basis at year-end, or more frequently if an event occurs or circumstances change that indicate that the fair value of an indefinite-lived intangible asset could be below its carrying amount.

The impairment test consists of comparing the fair value of the indefinite-lived intangible asset, determined using the relief from royalty method, with its carrying amount.

The impairment test consists of comparing the fair value of the indefinite-lived intangible asset,

determined using the relief from royalty method, with its carrying amount.

An impairment loss would be recognized for the carrying amount in excess of its fair value.

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ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted on 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 also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

This guidance became effective for us on January 1, 2021.

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

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting”.

This Topic provides accounting relief for the transition away from LIBOR and certain other reference rates.

The amendments for this update are effective through December 31, 2022.

The Company is evaluating the impact the adoption of this standard will have on our financial statements.

In September 2022, the FASB issues ASU No.

2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations”.

The amendments in this Update are effective for are effective for fiscal years beginning after December 15, 202 and require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.

To achieve this objective, the Company will disclose qualitative and quantitative information about its supplier finance programs.

BUSINESS COMBINATIONS

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Translation adjustment 132 1,036 1,168

Goodwill acquired 110,215 4,544 114,759

Balance at December 31, 2019 $ 126,894 $ 71,128 $ 198,022

Translation adjustment 132 1,036 1,168

Goodwill adjustment ( 2,045 ) ( 2,013 ) ( 4,058 )

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Balance at December 31, 2021 $ 132,963 $ 69,443 $ 202,406

Translation adjustment ( 1,882 ) ( 1,147 ) ( 3,029 )

Goodwill adjustment ( 3,519 ) — ( 3,519 )

Balance at December 31, 2022 $ 127,562 $ 68,296 $ 195,858

INTANGIBLE ASSETS

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Operating lease cost 5,783 5,571

Short-term lease cost 1,033 818

Variable lease cost 348 410

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Total long-term debt $ 286,943 $ 254,522

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 $ 650.0 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.

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.

The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on sale of properties and limitations on liens and capital expenditures.

On October 28, 2022, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Third Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with Bank of America, N.A., as Administrative Agent.

The 2022 Credit Agreement provides Borrower with the ability to request loans and other financial obligations in an aggregate amount of up to $ 655.0 million.

Under the 2022 Credit Agreement, the Company has borrowed $ 255.0 million pursuant to a Term Facility, while up to $ 400.0 million is available to the Company pursuant to a Revolver Facility which terminates in 5 years.

The Term Facility requires the Company to make equal quarterly principal payments of $ 3,750,000 over the term of the loan, with the final payment of any outstanding principal amount, plus interest, due at the end of the five year term.

Borrowings under the 2022 Credit Agreement bear interest, at the Company’s option, at a Term Secured Overnight Financing Rate (“SOFR”) or a Base Rate (each as defined in the 2022 Credit Agreement), plus, in each case, an applicable margin.

The applicable margin ranges from 1.25 % to 2.50 % for Term SOFR borrowings and from .25 % to 1.50 % for Base Rate borrowings with the margin percentage based upon the Company's consolidated leverage ratio.

The Company must also pay a commitment fee to the lenders ranging between 0.15 % to 0.30 % on any unused portion of the $ 400,000,000 Revolver Facility.

The 2022 Credit Agreement requires the Company to maintain two financial covenants, namely, a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio.

The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on the sale of properties and limitations on liens and capital expenditures.

The Agreement also contains other customary covenants, representations and events of defaults.

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

The expiration date of the 2022 Credit Agreement, including the Term Facility and the Revolver Facility, is October 28, 2027.

As of December 31, 2022, $ 301.9 million was outstanding under the Credit Agreement.

7 unchanged sentences

$ 15.0 million in 2026;

$ 241.9 in 2027;

and zero thereafter.

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A reconciliation of the income tax at the Company’s U.S.

statutory federal income tax rate to the provision for income taxes follows:

statutory federal income tax rate to the provision for income tax follows:

(in thousands) 2022 2021 2020

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The components of the Company’s deferred income tax assets and liabilities were as follows.

Certain prior year deferred tax component amounts have been reclassified to conform to the current year presentation.

(in thousands) 2022 2021

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Lease liability 4,738 4,221

State net operating loss 157 148

Capitalized R&D costs 4,230 —

Other 1,635 1,415

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As of December 31, 2022, 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 $ 11.8 million with an unlimited carry-forward period, and $ 0.8 million with a carry-forward expiring in 2035.

These foreign jurisdictions’ net operating loss carry-forwards are approximately $ 10.1 million with an unlimited carry-forward period.

The Company also has U.S.

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16,500 8.16 $ 156.38 3,300 $ 156.38

$ 156.38 - $ 234.57

18,000 9.16 $ 156.38 — $ —

Total 84,647 43,412

30 unchanged sentences

There were no options granted in 2020 , 2021 or 2022.

Stock option expense was zero , zero and $ 0.01 million for years ending 2021, 2020, and 2019, respectively.

Stock option expense was zero for years ending 2022, 2021, and 2020, respectively.

As of December 31, 2022, there was zero unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

10 unchanged sentences

*Weighted Averages

Restricted stock awards granted in 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 and 2021 vest over a three year period.

Restricted stock awards vest over a three year period.

The weighted-average remaining contractual life in years for 2022, 2021 and 2020 was 1.41 , 1.61 and 1.95 , respectively.

1 unchanged sentence

As of December 31, 2022, there was $ 7.0 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.

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

Performance Stock Units

62 unchanged sentences

Furthermore, equity investments are diversified across U.S.

stocks, as well as growth, value, and small and large capitalization.

stocks, as well as growth, value, and small and large

capitalization.

Other assets such as real estate, private equity, and hedge funds are used judiciously to enhance long-term returns while improving portfolio diversification.

41 unchanged sentences

Mid Cap $ 637 $ 637 $ — $ —

Large Cap 3,233 3,233 — —

International 940 940 — —

Common/Collective Trusts:

Wells Fargo Liability Driven Solution 3,106 — 3,106 —

Wells Fargo Liability Driven Solution CIT I 7,782 — 7,782 —

Wells Fargo Liability Driven Solution CIT II 7,026 7,026

Wells Fargo BlackRock International Equity 616 — 616 —

Wells Fargo Core Bond 1,552 — 1,552 —

Wells Fargo/Causeway International Value 586 — 586 —

52 unchanged sentences

Benefits paid ( 313 ) ( 167 )

Plan amendments — 454

Benefit obligation at December 31, $ 9,552 $ 11,326

7 unchanged sentences

Amortization of net (gain)/loss 440 318

Recognition of settlement — 188

Net periodic benefit cost $ 1,422 $ 1,305

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*Other includes rental sales, extended warranty sales and service sales as it is considered immaterial.

The Company’s sales are principally within the United States, United Kingdom, France, Canada and Australia.

The Company sells its products primarily through a network of independent dealers and distributors to governmental end-users, related independent contractors, as well as to the agricultural and commercial turf markets.

Effective for the fourth quarter of 2021, the Company began reporting its operating results on the basis of the following segments, Vegetation Management Division and Industrial Equipment Division.

2 unchanged sentences

The Industrial Equipment Division includes the Company’s vocational truck business and other industrial operations such as excavators, vacuum trucks, street sweepers, and snow removal equipment.

The Company's prior period segment information has been retrospectively adjusted to reflect the current segment presentation.

The Company has included a summary of the financial information by reporting segment.

20 unchanged sentences

Twelve Months Ended December 31,

(in thousands) Foreign Currency Translation Adjustment Defined Benefit Plans Items Gaines (Losses) on Cash Flow Hedges Total Foreign Currency Translation Adjustment Defined Benefit Plans Items Gaines (Losses) on Cash Flow Hedges Total

(in thousands) Foreign Currency Translation Adjustment Defined Benefit Plans Items Gains (Losses) on Cash Flow Hedges Total Foreign Currency Translation Adjustment Defined Benefit Plans Items Gains (Losses) on Cash Flow Hedges Total

Balance as of beginning of period $ ( 42,397 ) $ ( 5,017 ) $ ( 1,576 ) $ ( 48,990 ) $ ( 26,597 ) $ ( 6,855 ) $ ( 6,874 ) $ ( 40,326 )

44 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