What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-22 compared with 2023-02-23 · 83 added, 80 removed, 1120 unchanged (13% of the section changed)

1 unchanged sentence

Disclosure Controls and Procedures .

An evaluation was carried out, under the supervision and with the participation of the Company's management, including our President & Chief Executive Officer and Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934).

Based upon the evaluation, the President & Chief Executive Officer and Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) concluded that the Company’s disclosure controls and procedures were effective at the end of the period covered by this report.

An evaluation was carried out, under the supervision and with the participation of the Company's management, including our President & Chief Executive Officer, Executive Vice President & Chief Financial Officer (Principal Financial Officer), and Vice President & Chief Accounting Officer (Principal Accounting Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934).

Based upon the evaluation, the President & Chief Executive Officer and Executive Vice President & Chief Financial Officer (Principal Financial Officer), and Vice President & Chief Accounting Officer (Principal Accounting Officer), concluded that the Company’s disclosure controls and procedures were effective at the end of the period covered by this report.

Management’s Annual Report on Internal Control over Financial Reporting .

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Other Information

During the period covered by this report, none of the Company's directors or executive officers has adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

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 “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.

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/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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2005 Incentive Stock Option Plan 550 $53.51 —

2009 Equity Incentive Plan 6,300 $97.30 —

2015 Incentive Stock Option Plan 75,312 $129.19 273,558

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

10.6 — First Amendment to Securities Purchase Agreement, dated as of October 22, 2019, by and among Alamo Acquisition Corporation, a Delaware corporation, Alamo Group Inc., a Delaware corporation, Stellex Capital Partners, LP, a Delaware limited partnership, and in its capacity as the initial representative of the other Sellers pursuant to Section 10.6 of the Securities Purchase Agreement.

Filed as Exhibit 10.2 to Form 10-Q, October 31, 2019

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

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

10.16 — Amendment to Executive Change in Control Agreement Filed as Exhibit 10.1 to Form 10-Q, August 4, 2021

10.17 — Executive Change in Control Agreement by and between Alamo Group Inc.

and Michael A.

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

10.15 — Amendment to Executive Change in Control Agreement by and between Alamo Group Inc.

and Dan Malone Filed as Exhibit 10.

1 to Form 10- Q , Au gust 2 , 20 23

10.16 — Amendment to Executive Change in Control Agreement by and between Alamo Group Inc.

and Edward Rizzuti Filed as Exhibit 10.2 to Form 10- Q , August 2, 2023

10.17 — Amendment to Executive Change in Control Agreement by and between Alamo Group Inc.

and Richard Wehrle Filed as Exhibit 10.

3 to Form 10- Q , August 2, 2023

21.1 — Subsidiaries of the Registrant Filed Herewith

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Wehrle under Section 302 of the Sarbanes-Oxley Act of 2002 Filed Herewith

31.3 — Certification by Ian M.

Eckert under Section 302 of the Sarbanes-Oxley Act of 2002 Filed Herewith

32.1 — Certification by Jeffery A.

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Wehrle under Section 906 of the Sarbanes-Oxley Act of 2002 Filed Herewith

32.3 — Certification by Ian M.

Eckert under Section 906 of the Sarbanes-Oxley Act of 2002 Filed Herewith

97.0 — Recoupment Policy Filed Herewith

101.INS — XBRL Instance Document Filed Herewith

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President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the 23th day of February 2023.

Signature Title

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/s/ RICHARD J.

Executive Vice President & Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Executive Vice President & Chief Financial Officer (Principal Financial Officer)

Vice President, Corporate Controller & Chief Accounting Officer (Principal Accounting Officer)

/s/ ROBERT P.

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Executive Vice President & Chief Financial Officer (Principal Financial Officer)

Vice President, Corporate Controller & Chief Accounting Officer (Principal Accounting Officer)

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Stockholders and the Board of Directors

Alamo Group Inc.:

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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.

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.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Stockholders and the Board of Directors

Alamo Group Inc.:

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Interest income 1,485 752 1,149

Other income ( 673 ) 1,944 ( 557 )

Other income (expense) 1,761 ( 673 ) 1,944

Income before income taxes 175,120 134,310 109,498

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13,644 ( 23,032 ) ( 15,800 )

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

Unrealized (loss) income on derivative instruments, net of tax benefit (expense) of $ 282 , $( 497 ), and $( 1,405 ), respectively

( 1,231 ) 2,047 5,298

Recognition of deferred pension and other post-retirement benefits, net of tax (expense) benefit of $( 194 ), $( 356 ), and $ 230 , respectively

Recognition of deferred pension and other post-retirement benefits, net of tax expense of $( 391 ), $( 194 ), and $( 356 ), respectively

1,338 1,707 1,838

Other comprehensive (loss) income, net of tax $ ( 19,278 ) $ ( 8,664 ) $ 512

Other comprehensive income (loss), net of tax $ 13,751 $ ( 19,278 ) $ ( 8,664 )

Comprehensive income $ 149,912 $ 82,650 $ 71,581

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Stock-based compensation expense 7,424 5,561 5,987

Provision for deferred income tax (benefit) expense ( 2,337 ) ( 1,182 ) ( 855 )

Provision for deferred income tax benefit ( 4,253 ) ( 2,337 ) ( 1,182 )

Gain on sale of property, plant and equipment ( 6,621 ) ( 161 ) ( 3,779 )

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Common stock repurchased ( 1,034 ) ( 768 ) ( 1,957 )

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

Net cash (used in) provided by financing activities ( 76,881 ) 24,455 ( 23,001 )

Effect of exchange rate changes on cash 3,253 ( 2,346 ) ( 1,308 )

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Description of the Business and Segments

The Company manufactures, distributes and services high quality tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, forestry and tree maintenance equipment, snow removal equipment, leaf collection equipment, pothole patchers, zero turn radius mowers, agricultural implements and related aftermarket parts and services.

The Company manufactures, distributes and services high quality tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, truck mounted highway attenuator trucks, forestry and tree maintenance equipment, snow removal equipment, leaf collection equipment, pothole patchers, zero turn radius mowers, agricultural implements and related aftermarket parts and services.

The Company manages its business through two principal reporting segments:

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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 Not Yet Adopted

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.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-07, Improvements to Reportable Segment Disclosures (Topic 280).

This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is also permitted.

Upon adoption this ASU will likely result in incremental disclosures as required.

We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.

In December 2023, the FASB issued ASU No.

2023-09, Improvements to Income Tax Disclosures (Topic 740).

The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024.

Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.

This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

BUSINESS COMBINATIONS

On October 26, 2021, the Company acquired 100 % of the issued and outstanding equity interests of Timberwolf Limited (“ Timberwolf ”).

Timberwolf manufactures a broad range of commercial wood chippers, primarily serving markets in the U.K.

and the European Union.

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

The acquisition price was approximately $ 25.0 million.

The Company has included the operating results of Timberwolf in its consolidated financial statements since the date of acquisition, these results are considered immaterial.

On October 10, 2023, the Company acquired 100 % of the issued and outstanding equity capital of Royal Truck & Equipment, Inc.

(“Royal Truck”).

Royal Truck is a leading manufacturer of truck mounted highway attenuator trucks and other specialty trucks and equipment for the highway infrastructure and traffic control market.

The primary reason for the Royal Truck acquisition was to acquire business operations in an adjacent market, highway safety and equipment, where the Company sees compelling future opportunities.

The acquisition price was approximately $ 28 million subject to post closing adjustments.

The Company has included the operating results of

Royal Truck in its consolidated financial statements since the date of acquisition, these results are considered immaterial.

EARNINGS PER SHARE

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The Company had a reserve of $ 9.0 million on December 31, 2023 and $ 13.2 million on December 31, 2022 to cover obsolete and slow moving inventory.

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

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

The reserve for inventory obsolescence is calculated as follows:

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Translation adjustment ( 1,510 ) ( 708 ) ( 2,218 )

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

Balance at December 31, 2020 $ 124,981 $ 70,151 $ 195,132

Translation adjustment ( 1,510 ) ( 708 ) ( 2,218 )

Goodwill acquired 9,492 — 9,492

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

Translation adjustment 1,337 476 1,813

Goodwill acquired — 8,865 8,865

Balance at December 31, 2023 $ 128,899 $ 77,637 $ 206,536

INTANGIBLE ASSETS

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Favorable leasehold interests 7 years

Noncompetition agreements 5 years

Total at cost 243,536 230,772

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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.

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

As of December 31, 2023, the components of lease cost were as follows:

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Operating lease cost 6,137 5,783

Short-term lease cost 1,308 1,397

Variable lease cost 281 348

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There is a three-tier fair value hierarchy based upon the observability of inputs used in valuation techniques.

Observable inputs (highest level) reflect market data obtained from independent sources, while

unobservable inputs (lowest level) reflect internally developed market assumptions.

Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions.

In fair value, measurements are classified under the following hierarchy:

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Term debt 235,201 249,928

Capital lease obligations 24 56

Finance lease obligations 76 24

Total debt 235,277 301,952

4 unchanged sentences

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.

The Term Facility requires the Company to make equal quarterly principal payments of $ 3.75 million over the term of the loan, with the final payment of any outstanding principal amount, plus interest, due at the end of the five year term.

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

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

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

The Company must also pay a commitment fee to the lenders ranging between 0.15 % to 0.30 % on any unused portion of the $ 400.0 million Revolver Facility.

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

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As of December 31, 2023, $ 235.2 million was outstanding under the Credit Agreement.

Of the total outstanding, $ 249.9 million was on the Term Facility at a rate of 6.17 % and $ 52.0 million was on the Revolver Facility at a rate of 6.25 %.

Of the total outstanding, $ 235.2 million was on the Term Facility at a rate of 6.71 %.

On December 31, 2023, $ 2.6 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by vendors' contracts resulting in $ 397.4 million in available borrowings.

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$ 190.2 million in 2027;

$ 241.9 in 2027;

and zero thereafter.

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

Some prior year components have been reclassified to conform to the current year presentation.

(in thousands) 2023 2022 2021

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Jurisdictional rate differences 2,766 1,989 1,599

Executive compensation limitation 481 1,314 170

Executive compensation limitations 183 481 1,314

Valuation allowance ( 789 ) ( 316 ) ( 269 )

Stock based compensation ( 24 ) 122 ( 322 )

state taxes 6,076 2,632 3,724

Foreign tax expense 267 — 704

R&D credit ( 1,645 ) ( 670 ) ( 415 )

Foreign tax (credit) / expense ( 371 ) 267 —

R&D credit (net) ( 3,618 ) ( 1,585 ) ( 782 )

Other credits ( 628 ) — —

GILTI 109 500 —

FDII ( 731 ) ( 192 ) —

Previously unrecognized tax (benefit) / expense 170 51 8

4 unchanged sentences

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) 2023 2022

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As of December 31, 2023, 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 $ 10.1 million with an unlimited carry-forward period.

The Company also has U.S.

state net operating loss carry-forwards in the amount of $ 0.2 million which will expire between 2036 and 2042.

The Company's valuation allowances as of December 31, 2022 and 2021 related primarily to foreign net operating losses and foreign tax credits.

These foreign jurisdictions’ net operating loss carry-forwards are approximately $ 9.2 million, and substantially all of these foreign jurisdiction net operating losses have an unlimited carry-forward period.

The Company's valuation allowance as of December 31, 2023 related primarily to foreign net operating losses and as of December 31, 2022 related primarily to foreign net operating losses and foreign tax credits.

Unrecognized Tax Benefits

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The Company has adopted the policy to include interest and penalty expense related to income taxes as interest and other expense, respectively.

As of December 31, 2022, no interest or penalties have accrued.

As of December 31, 2023, no interest or penalties have been accrued.

With few exceptions, the Company’s open tax years for its federal and state income tax returns are for the tax years ended 2018 through 2023, and for tax years ended 2017 through 2023 for its foreign income tax returns.

2 unchanged sentences

If the amounts asserted as permanent reinvestment were distributed, the Company would be subject to approximately $ 6.4 million in withholding taxes.

On January 3, 2023, the Board of Directors of the Company declared a quarterly dividend of $ 0.22 per share which was paid on February 1, 2023 to holders of record as of January 18, 2023.

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 2022, the Company purchased zero shares.

On January 2, 2024, the Board of Directors of the Company declared a quarterly dividend of $ 0.26 per share which was paid on January 29, 2024 to holders of record as of January 16, 2024.

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

During 2023, the Company repurchased zero shares and the program terminated on December 12, 2023.

STOCK OPTIONS

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*Weighted Averages

Options outstanding and exercisable as of December 31, 2022 were as follows:

Non-Qualified Stock Options Options Outstanding Options Exercisable

Shares Remaining Contractual Life (yrs)* Exercise Price* Shares Exercise Price*

Range of Exercise Price

$ 42.70 - $ 83.99

1,000 1.36 $ 53.51 1,000 $ 53.51

Total 1,000 1,000

*Weighted Averages

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

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.

During 2022, 2021, and 2020, 1,000 , 1,000 , and 2,300 non-qualified options were exercised, respectively, $ 0.1 million, $ 0.1 million, and $ 0.1 million of cash receipts were received, respectively.

Restricted Stock Awards/Units

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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.

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Mid Cap $ 148 $ 148 $ — $ —

Large Cap 106 106 — —

International 221 221 — —

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Rowe Price Equity Income Managed CIT 106 — 106 —

Wells Fargo Voya Large Cap Growth CIT F 357 — 357 —

Cash & Short-term Investments 376 376 — —

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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’s sales are principally within the United States, United Kingdom, France, Canada, Brazil, Netherlands 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.

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

The Vegetation Management Division includes all of the operations of the former Agricultural Division plus the mowing and forestry/tree care operations that were previously part of the former Industrial Division.

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

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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