What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-02 compared with 2025-02-27 · 54 added, 53 removed, 107 unchanged (50% of the section changed)

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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 .

We experienced strong demand for industrial equipment products in 2024 while demand for forestry, tree care, and agricultural mowing products weakened.

Gross profit margins declined slightly due to weaker Vegetation Management Division sales that slowed our production cadence and adversely impacted production efficiency.

Market conditions are mixed;

governmental and industrial product demand is robust while vegetation product demand has been hampered mainly by higher interest rates and elevated channel inventories.

We continued to experienced strong demand for industrial equipment products in 2025, while demand for vegetation products was mixed.

Agricultural, tree care and recycling markets remained weak.

Operating margins declined as strong performance in the Industrial Equipment Division only partially offset lower margins in the Vegetation Management Division.

Market conditions continue to be mixed.

Demand for governmental and industrial products is healthy and vegetation product demand remains weak by soft commodity pricing, elevated interest rates, and reduced housing construction activity.

2025 Performance

In 2025, the Company's net sales decreased by 2% and net income decreased by 10% compared to 2024.

The decrease in net sales was primarily driven by weak forestry, tree care, and agricultural mowing markets, leading to lower demand in the Vegetation Management Division.

Additionally, the sale of Herschel Parts on August 16, 2024, had a negative impact on year-over-year sales, though it was immaterial on a full-year basis.

These challenges were nearly offset by strong sales growth in the Industrial Equipment Division.

The decline in net income was due to lower product demand in the Vegetation Management Division, which affected production efficiency, along with associated separation costs incurred to reduce division capacity.

In the Industrial Equipment Division, nonrecurring costs related to the five-week labor strike at Gradall Industries negatively impacted second-quarter results.

The Company reached a new five-year collective bargaining agreement at its Gradall plant in May 2024.

The Company's Vegetation Management Division experienced a 20% decrease in net sales for the full year of 2024 compared to 2023 due to a steep decline in forestry, tree care and agricultural mowing markets.

The Division’s backlog has declined 47% year-over-year and is now at pre-Covid levels.

Income from operations for 2024 decreased by 54% compared to 2023, reflecting market downturn and costs associated with separation and reduction of capacity.

The Company continues to implement cost-saving initiatives and enhance operational efficiency, with the goal of improving operating margins.

The decrease in net sales was primarily driven by the ongoing lower demand in tree care and recycling markets and operational challenges in the Vegetation Management Division related to consolidation of certain operations.

Additionally, the sale of Herschel Parts on August 16, 2024, had an unfavorable impact on year-over-year sales, though immaterial for total Company results for the year.

These challenges were only partially offset by strong sales growth in the Industrial Equipment Division.

Net income was impacted by the CEO transition costs, acquisition and integration expenses, and ongoing restructuring efforts.

Additional pressure on net income resulted from market-driven revenue declines and production inefficiencies in the Vegetation Management Division.

Strong demand and solid margins in the Industrial Equipment Division only partially offset these challenges.

The Company's Vegetation Management Division experienced a 17% decrease in net sales and a 59% decline in income from operations for the full year of 2025 compared to 2024.

While continued market weakness and operational challenges led to lower revenue, the Division’s backlog increased 6% reflecting potential market stabilization.

The Company continues to implement cost-saving initiatives and enhancement of operational efficiencies in an effort to improve operating margins.

The Company's Industrial Equipment Division reported a 13% increase in net sales for the full year of 2025 compared to 2024.

Sales growth was strong in all product lines, with excavators, vacuum trucks, sweepers & safety, and snow removal contributing to year-over-year growth.

Income from operations for 2024 rose 43% versus 2023, driven by increased demand, greater operational efficiencies, and an improvement in supply chain performance and truck chassis availability.

Consolidated income from operations was $165 million for the full year of 2024 compared to $198 million for the full year of 2023, a decrease of 17%.

The Company's backlog decreased 22% to $669 million at the end of 2024 versus the backlog of $860 million at the end of 2023.

Sales growth was strong in all product lines, led by excavators, vacuum trucks and snow, followed by sweepers & safety.

Income from operations for 2025 rose 19% versus 2024, driven by increased demand, greater operational efficiencies, and an improvement in supply chain performance.

Consolidated income from operations was $152 million for the full year of 2025 compared to $165 million for the full year of 2024, a decrease of 8%, impacted by CEO transition costs, acquisition and integration expenses, and ongoing restructuring efforts.

As part of our ongoing efforts to optimize operations in both of our Divisions, we have relocated applicable product families, sold the Gibson City, IL facility, repurposed one facility to support other brands, and completed initial set-ups for portions of the production lines.

Over the next approximately one to two quarters, we plan to finish the remaining line installations and increase production.

During this transition, we expect temporary production inefficiencies, duplicate costs, and shipment-timing effects that may pressure revenue and gross margin, along with potentially one-time expenses related to relocation and facility exit.

Following completion, we expect improved capacity utilization, service levels and structural cost reductions.

The anticipated timing, costs and benefits are forward-looking and subject to the risks and uncertainties described under “Forward- Looking Information.”

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.

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The Company’s net sales in the fiscal year ended December 31, 2025 (“2025”) were $1,603.7 million, a decrease of $24.8 million or 1.5% compared to $1,628.5 million for the fiscal year ended December 31, 2024 (“2024”).

The decrease in sales was attributable to continued weaknesses in tree care and recycling markets and operational challenges related to consolidating certain operations, partially offset by sustained strong demand for industrial equipment.

Vegetation Management net sales were $654.1 million in 2025 compared to $785.2 million in 2024, a decrease of $131.1 million or 16.7%.

The decline was attributable to sustained weakness in the tree care and recycling markets as well as operational challenges in consolidating certain operations.

The sale of Herschel Parts on August 16, 2024 also impacted results compared to 2024, though it was immaterial to the year-over-year sales decrease.

Industrial Equipment net sales were $949.7 million in 2025 compared to $843.3 million in 2024, representing an increase of $106.4 million or 12.6%.

The increase was driven by the strong ongoing demand across the division in excavators, vacuum trucks, sweepers, and snow removal equipment.

Gross profit for 2025 was $397.8 million (24.8% of net sales) compared to $412.5 million (25.3% of net sales) in 2024, a decrease of $14.7 million.

The decrease in gross profit was driven by lower revenue and production inefficiencies in the Vegetation Management Division, partially offset by the healthy demand in Industrial Equipment Division.

Selling, general and administrative expenses (“SG&A”) were $229.7 million (14.3% of net sales) in 2025 compared to $231.5 million (14.2% of net sales) in 2024, a decrease of $1.8 million attributable to labor cost savings actions taken in Vegetation Management, offsetting the additional costs related to the CEO succession, and acquisition and integration expenses.

Amortization expense in 2025 was $16.5 million compared to $16.2 million in 2024, an increase of $0.3 million due to the acquisition of Ring-O-Matic.

Interest expense for 2025 was $14.9 million compared to $20.5 million in 2024, a decrease of $5.6 million or 27.6% primarily related to debt reduction.

Interest income for 2025 was $5.6 million compared to $2.6 million in 2024, an increase of $3.0 million or 111.2%, related to higher cash on hand.

Other income (expense), was a net expense of $2.8 million during 2025 compared to income of $2.7 million in 2024.

The expense increase was primarily driven by foreign exchange transaction losses, offset by gains related to the sale of former Rhino Ag facility in Gibson City, IL.

Provision for income taxes was $35.7 million (25.6% of income before income taxes) for 2025 compared to $33.7 million (22.5% of income before income taxes) in 2024.

The tax rate was impacted by stock compensation related to the CEO transition, lower R&D credit, and a large release of a valuation allowance in 2024.

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

Fiscal 2024 compared to Fiscal 2023

The Company’s net sales in the fiscal year ended December 31, 2024 (“2024”) were $1,628.5 million, a decrease of $61.2 million or 3.6% compared to $1,689.7 million for the fiscal year ended December 31, 2023 (“2023”).

The decrease in sales was attributable to weaker market demand in forestry, tree care, and agricultural mowing markets, partially offset by continued strong demand for industrial equipment.

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Gross profit for 2024 was $412.5 million (25.3% of net sales) compared to $453.6 million (26.8% of net sales) in 2023, a decrease of $41.1 million.

The decrease in gross profit was primarily attributable to the decline in Vegetation Management market demand, resulting in production inefficiencies, and the impact of costs to reduce capacity and separation expenses as the Division adjusted to market conditions.

The decrease in gross profit was primarily attributable to the decline in Vegetation Management market demand, production inefficiencies, and the impact of costs to reduce capacity and separation expenses as the Division adjusted to market conditions.

In addition, profitability was also impacted by the five-week strike at Gradall in Ohio, which negatively affected the Industrial Equipment Division.

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Net income for 2024 was $115.9 million compared to $136.2 million in 2023, with the decrease in 2024 net income resulting from the factors described above.

Fiscal 2023 compared to Fiscal 2022

The Company’s net sales in the fiscal year ended December 31, 2023 (“2023”) were $1,689.7 million, an increase of $176.1 million or 11.6% compared to $1,513.6 million for the fiscal year ended December 31, 2022 (“2022”).

The increase in sales was attributable to continued strong customer demand for our products in both the Vegetation Management and Industrial Equipment Divisions, improved pricing, and higher throughput due to gradually improving supply chain conditions.

Supply chain disruptions and a shortage of skilled labor negatively impacted net sales, especially in the first half of the year earlier.

Net Vegetation Management sales were $979.0 million in 2023 compared to $937.1 million in 2022, an increase of $41.9 million or 4.5%, coming from a strong performance in European agricultural and governmental mowing, forestry and tree care, and North American governmental mowing equipment.

Skilled labor shortages and certain supplier issues constrained this division during 2023.

Net Industrial Equipment sales were $710.6 million in 2023 compared to $576.6 million in 2022, representing an increase of $134.0 million or 23.3%.

The increase was a result of strong performance in all product lines including excavator and vacuum trucks, sweepers and debris collection, and snow removal equipment further supported by the acquisition of Royal Truck.

This division was negatively impacted by a shortage of skilled labor and disruptions in parts of its supply chain, predominantly causing delays in receiving truck chassis.

Gross profit for 2023 was $453.6 million (26.8% of net sales) compared to $376.5 million (24.9% of net sales) in 2022, an increase of $77.1 million.

The increase in gross profit was mainly attributable to higher sales volume and better operational performance during 2023 compared to 2022 as well as improved pricing which led to higher profitability as a percentage of sales in 2023 compared to 2022, though these results were partially offset by the negative impacts of supply chain disruptions and material inflation previously mentioned.

Selling, general and administrative expenses (“SG&A”) were $240.2 million (14.2% of net sales) in 2023 compared to $212.6 million (14.0% of net sales) in 2022, an increase of $27.6 million.

The increase in SG&A expenses in 2023 was largely attributable to higher marketing expenses related to trade shows, sales promotions and commissions and to a lesser extent, sales volume-driven administration expense.

Amortization expense in 2023 was $15.5 million compared to $15.3 million in 2022, an increase of $0.2 million.

Interest expense for 2023 was $26.1 million compared to $14.4 million in 2022, an increase of $11.7 million or 81.7%.

The increase in interest expense in 2023 primarily came from higher interest rates compared to 2022.

Other income (expense), net was income of $1.8 million during 2023 compared to expense of $0.7 million in 2022.

The increase in 2023 was primarily the result of a gain on fixed assets relating to the sale of a manufacturing facility located in Kent, Washington partially offset by loss on currency exchange.

The expense in 2022 was primarily the result of an excise tax audit and to a lesser extent, changes in exchange rates.

Provision for income taxes was $39.0 million (22.2% of income before income taxes) for 2023 compared to $32.4 million (24.1% of income before income taxes) in 2022.

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

Liquidity and Capital Resources

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Net cash provided by operating activities was $177.5 million for 2025, compared to $209.8 million for 2024.

The increase of cash from operating activities is primarily the result of improved receivables and inventory compared to 2023.

The decrease of cash from operating activities is a result of lower net income as well as higher inventory, which was partially offset by lower accounts receivable and improved accounts payable.

Net cash used in investing activities was $46.2 million for 2025, compared to $22.2 million for 2024.

The decrease in investing activities was in part driven by the acquisition of Royal Truck in 2023.

The increase in investing activities was in part driven by the acquisition of Ring-O-Matic in 2025.

Net cash used by financing activities was $30.8 million for 2025, compared to net cash used of $32.0 million for 2024.

This reduction in cash used by financing activities is due to repayment of revolving credit.

This reduction in cash used by financing activities is due to payment of contingent consideration in 2024 offset by higher dividend payments in 2025.

The Company had $174.5 million in cash and cash equivalents held by its foreign subsidiaries as of December 31, 2025.

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

On December 31, 2024, $2.7 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by vendors' contracts resulting in $397.3 million in available borrowings.

On December 31, 2025, $2.8 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by vendors'

contracts resulting in $397.2 million in available borrowings.

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

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If this occurs, the Company’s results of operations would be adversely impacted.

In 2024, while inflation moderated compared to prior years, the cost of commodities, components, parts, and accessories remained elevated relative to historical levels.

Throughout 2024, we continued to implement strategic pricing actions and operational efficiency measures to help offset these sustained cost pressures.

While the rate of inflation decreased during 2024, prices for many key inputs remained higher than pre-pandemic levels.

Looking ahead to 2025, we expect the cost environment to remain challenging, though with less volatility than in recent years.

In 2025, the cost of commodities, components, parts, and accessories somewhat normalized relative to historical levels.

Throughout 2025, we continued to implement strategic pricing actions and operational efficiency measures to help offset tariffs and other supply chain cost pressures.

Looking ahead to 2026, we expect the cost environment to return to more historically normal levels than we have seen in recent years.

We anticipate modest increases in the average cost of commodities, components, parts, and accessories compared to 2025 levels.

However, cost inflation continues to be an ongoing challenge that could have a material impact on the Company's business and financial results, particularly if there are unexpected shifts in political policy changes (including the imposition of tariffs), global economic environment or supply chain dynamics.

However, cost inflation continues to be an ongoing challenge that could have a material impact on the Company's business and financial results, particularly if there are unexpected shifts in political policy changes (including the continued imposition of tariffs), global economic environment or supply chain dynamics.

New Accounting Pronouncements

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.

Management believes the following critical accounting policy reflects its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Management believes there are currently no critical accounting policies.

Business Combinations

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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 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.

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;

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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 7. Management’s Discussion and Analysis