UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
[ ]FOR THE FISCAL YEAR ENDED DECEMBER 31, 20182021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-21220

ALAMO GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE Delaware74-1621248
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
 1627 East Walnut, Seguin, Texas 78155
(Address of principal executive offices, including zip code)
 
830-379-1480
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange
Common Stock, par value
$.10 per share
ALGon which registered
$.10 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  NONENone
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [  ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and an "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X]Accelerated filer                        [ ]
Non-accelerated filer   [  ]Smaller reporting company        [  ] 
Emerging Growth Companygrowth company[  ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]
The aggregate market value of the voting stock (which consists solely of shares of common stock) held by non-affiliates of the registrant as of June 29, 2018 (based upon the last reported sale price of $90.36 per share) was approximately $870,475,741 on such date.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting stock (which consists solely of shares of common stock) held by non-affiliates of the registrant as of June 30, 2021 (based upon the last reported sale price of $152.68 per share) was approximately $1,511,728,346 on such date.
The number of shares of the registrant’s common stock, par value $.10 per share, outstanding as of February 22, 201918, 2022 was 11,739,07411,934,602 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: 



Portions of the registrant’s proxy statement relating to the 20192022 Annual Meeting of Stockholders to be held on May 2, 2019 have been incorporated by reference herein in response to Part III. 



ALAMO GROUP INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-K
TABLE OF CONTENTS
                                                                                                                                                 
 PART IPage
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 PART II 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
 PART III 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 PART IV 
Item 15.
 Index to Consolidated Financial Statements
Item 16.

2


PART I
Item 1. Business

Unless the context otherwise requires, the terms “the Company,”  “we,” “our” and “us” refer to Alamo Group Inc. and its subsidiaries on a consolidated basis.
 
General
 
The Company is a leader in the design, manufacture and manufactureservicing of high quality agricultural equipmentvegetation management and infrastructure maintenance equipment for governmental, industrial and industrialagricultural use. The Company’s products include tractor-mounted mowingtractor mounted and other vegetation maintenanceself-propelled mowers, zero-turn mowers, agricultural implements, tree and branch chippers, forestry/wood recycling equipment, street and parking lot sweepers, excavators, vacuum trucks, snow removal equipment, leaf and debris collection equipment, pothole patchers, zero turn radius mowers, agricultural implementsvacuum trucks, hydro-excavation equipment, telescopic boom excavators, and related aftermarket parts. snow removal equipment. The Company emphasizes high quality, cost-effective products for its customers and strives to develop and market innovative products while constantly monitoring and seeking to contain its manufacturing and overhead costs. The Company has a long-standing strategy of supplementing its internal growth through acquisitions of businesses or product lines that currently complement, command, or have the potential to achieve a meaningful share of their niche markets.

The Company has approximately 3,4704,200 employees and operates a total of twenty-five29 plants in North America, South America, Europe, Australia and Brazil.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. The primary markets for our products are North America, Europe, South America, Europe and Australia.
  
The predecessor corporation to Alamo Group Inc. was incorporated in the State of Texas in 1969, as a successor to a business that began selling mowing equipment in 1955, and Alamo Group Inc. was reincorporated in the State of Delaware in 1987.

History

Since its founding in 1969, the Company has focused on satisfying customer needs through geographic market expansion, product development and refinement, and selected acquisitions. The Company’s first products were based on rotary cutting technology. Through acquisitions, the Company added flail cutting technology in 1983 and sickle-bar cutting technology in 1984. The Company added to its presence in the industrial and governmental vegetation markets with the acquisition of Tiger Corporation (“Tiger”) in late 1994.

The Company entered the agricultural mowing markets in 1986 with the acquisition of Rhino Products Inc. (“Rhino”), a leading manufacturer in this field. With this acquisition, the Company embarked on a strategy to increase the Rhino dealer distribution network during a period of industry contraction. The addition of M&W Gear Company (“M&W”) in early 1995 allowed the Company to enter into the manufacturing and distribution of tillage equipment, which complements the Rhino distribution network. M&W has been integrated intois part of the agriculturalvegetation management marketing group.

In 1991, the Company began its international expansion with the acquisition of McConnel Ltd. (“McConnel”), a United Kingdom (“U.K.”) manufacturer of vegetation maintenance equipment, principally hydraulic boom-mounted hedge and grass cutters and related parts. Bomford-Turner Ltd. (“Bomford”), also a U.K. company, was acquired in 1993. Bomford is a manufacturer of heavy-duty, tractor-mounted grass and hedge mowing equipment. McConnel and Bomford sell their products to dealers and distributors through their respective sales forces.

In 1994, the Company acquired Signalisation Moderne Autoroutiere S.A. (“SMA”) located in Orleans, France. SMA manufactures and sells principally a line of heavy-duty, tractor-mounted grass and hedge mowing equipmentmowing-equipment and associated replacement parts primarily to departments of the French government. This acquisition, along with the acquisitions of Forges Gorce ("Forges Gorce"), a flail blade manufacturer in France, in 1996 and Rousseau Holdings S.A. (“Rousseau”), a leading French manufacturer of hedge and verge mowers, in 2004, when combined with McConnel and Bomford, has made the Company one of the largest manufacturers in the European market for the kind of vegetation management equipment sold by the Company.

3


In 1995, the Company expanded its business in the agricultural market with the acquisition of Herschel Corporation (“Herschel”), a manufacturer and distributor of aftermarket farm equipment replacement and wear parts. 

3


In 2000, the Company acquired Schwarze Industries, Inc. (“Schwarze”). Schwarze is a manufacturer of a broad range of street sweeping equipment which is sold to governmental agencies and contractors. The Company believes the Schwarze sweeper products fit the Company’s strategy of identifying product offerings with brand recognition in the industrial markets the Company serves. In 2004, the Company purchased the pothole patcher product line from Wildcat Manufacturing, Inc. The product line was merged into the Schwarze operation and is complementary to its current product offerings.

In 2000, the Company purchased the product line and associated assets of Twose of Tiverton Ltd. (“Twose”) a small regional manufacturer of power arm flail mowers and parts, as well as harrows and rollers, in the U.K. TheyTwose consolidated theirits operations into the existing facilities at McConnel and Bomford.and its brand name has been merged into the McConnel product line.

In 2000, the Company acquired Schulte Industries Ltd. and its related entities (“Schulte”). Schulte is a Canadian manufacturer of mechanical rotary mowers, snow blowers, and rock removal equipment. Schulte strengthened the Company’s Canadian presence in both marketing and manufacturing. It also expanded the Company’s range of large, heavy-duty rotary mowers.

In 2001, the Company acquired all of the assets of SMC Corporation (“SMC”). SMC manufactures front-end loaders and backhoes principally for Original Equipment Manufacturer (“OEM”) customers and its own SMC brand. This acquisition expanded the product range of our agricultural division and has since been consolidated into the Company's Gibson City, Illinois location.

In 2002, the Company purchased inventory, fixed assets and certain other assets of Valu-Bilt Tractor Parts (“Valu-Bilt”), a subsidiary of Quality Stores, Inc., located in Des Moines, Iowa. Valu-Bilt is a distributor of new, used and rebuilt tractor parts and other agricultural spare and wear parts sold directly to customers through its catalog and the internet and on a wholesale basis to dealers. Subsequent to the purchase, the operations of Valu-Bilt in Des Moines, Iowa, were consolidated into the Company’s Herschel facility in Indianola, Iowa.

In 2005, the Company, through its European subsidiary Alamo Group (EUR) Ltd., acquired 100% of the issued and outstanding stock of Spearhead Machinery Limited (“Spearhead”) and subsequently merged its manufacturing operations into Bomfords facility. Spearhead manufactures a range of tractor-mounted vegetation maintenance equipment, including reach mowers, flail mowers and rotary cutters. This acquisition extended our product lines and market coverage in Europe.

In early 2006, the Company purchased substantially all of the assets of the Gradall excavator business (“Gradall”) of JLG Industries, Inc., including their manufacturing plant in New Philadelphia, Ohio. Gradall is a leading manufacturer of both wheeled and crawler telescopic excavators in North America. This acquisition enhanced our Industrial Equipment Division product offering sold to governmental buyers and related contractors for maintenance along right-of-ways.

In 2006, the Company purchased the vacuum truck and sweeper lines of Clean Earth Environmental Group, LLC and Clean Earth Kentucky, LLC (collectively referred to as “VacAll”). This included the product lines, inventory and certain other assets that relate to this business. The production of the vacuum truck and sweeper lines were moved to the Gradall facility in New Philadelphia, Ohio.

In 2006, the Company acquired 100% of the ownership interests in Nite-Hawk Sweepers LLC (“Nite-Hawk”), a manufacturer of truck mounted sweeping equipment primarily for the contract sweeping market, which expanded our presence in that market and complements our Schwarze sweeper line.             
 
In 2007, the Company purchased Henke Manufacturing Corporation (“Henke”), a manufacturer of specialty snow removal attachments. Henke’s products are mounted on both heavy industrial equipment and medium to heavy-duty trucks. The primary end-users are governmental agencies, related contractors and other industrial users.
In 2008, the Company acquired Rivard Developpement S.A.S. (“Rivard”), a leading French manufacturer of vacuum trucks, high pressure cleaning systems and trenchers. The acquisition broadened the Company’s product offering to our customers in Europe and other markets we serve.

4


In 2009, the Company acquired substantially all the assets of Bush Hog, LLC (“Bush Hog”), a leading agricultural equipment manufacturer of rotary cutters, finishing mowers, zero turn radius mowers, front-end loaders, backhoes, landscape equipment and a variety of other implements. This acquisition, combined with the Company’s existing range of agriculturalrotary mowers, created one of the largest manufacturers of agriculturalrotary mowers in the world.

In 2011, the Company acquired substantially all of the assets and assumed certain specified liabilities of Tenco Group, Inc. ("Tenco") and its subsidiaries. Tenco is a Canadian-based manufacturer of snow removal equipment including snow blades, blowers, dump bodies, spreaders and associated parts and service. Tenco has operations in Quebec as well as New York and Vermont. The equipment is sold primarily through dealers to governmental end-users as well as snow removal contractors.

In 2013, the Company acquired substantially all of the assets and assumed certain specified liabilities of Superior Equipment Australia PTY LTD ("Superior"). Superior is a small Australian-based manufacturer of agricultural mowing equipment and other attachments, parts, and services. The equipment is sold through dealers primarily to agricultural end-users with some sold to governmental entities in Australia. The Superior operations have been consolidated with the Company's Fieldquip location.

In 2014, the Company acquired Kellands Agricultural Ltd. and its subsidiary Multidrive Tractors Ltd. ("Kellands"). Kellands is a U.K.-based manufacturer of self-propelled sprayers and a range of multi-purpose load-carrying tractor vehicles. This acquisition enhanced our manufacture and distribution of our agricultural machinery in our European operationsEurope and allowed the Company to enter into the self-propelled sprayer market. The Kellands operations have beenwere consolidated into the Company's Salford Priorsfacility and its products are sold under the McConnelfacility.  brand name.

In 2014, the Company acquired Fieldquip Australia PTY LTD ("Fieldquip"), a manufacturer of rotary cutters as well as a distributor of various agriculturallifestyle products. This acquisition allowed the Company to broaden its presence in both the manufacturing and distribution of agriculturalvegetation management machinery in Australia.

In 2014, the Company acquired all of the operating units of Specialized Industries LP.  The purchase included the businesses of Super Products LLC ("Super Products"), Wausau-Everest LP ("Wausau" & "Everest") and Howard P. Fairfield LLC ("H.P. Fairfield") as well as several related entities ("Specialized"), including all brand names and related product names and trademarks. The primary reason for the Specialized acquisition was to broaden the Company's existing equipment lines. This acquisition increased our product offering and enhanced our market position both in vacuum trucks and snow removal equipment primarily in North America.

In 2015, the Company acquired Herder Implementos e Maquinas Agricolas Ltda. ("Herder"). Herder is a manufacturer of flail mowers and other agricultural implements which are sold direct and through dealers to a wide variety of agricultural markets as well as the roadside maintenance market. This acquisition allowed the Company to establish a presence in Brazil, one of the largest agricultural markets in the world. The Herder manufacturing operations have been consolidated into our Santa Izabel facility.

In 2017, the Company acquired 100% of the outstanding shares of Santa Izabel Agro Industria.Industria Ltda. ("Santa Izabel"). Santa Izabel designs, manufactures and markets a variety of agricultural implements and sugar cane trailers sold throughout Brazil. This acquisition, along with our existing Herder operation in Brazil, augmented our product portfolio and improved our manufacturing capabilities in one of the world's largest agricultural markets.

In 2017, the Company acquired substantially all of the assets and assumed certain specified liabilities of Old Dominion Brush Company, Inc. ("ODB"). ODB manufactures leaf collection equipment as well as replacement brooms for street sweepers, both of which are sold to municipalities, contractors and commercial landscape markets in North America. ODB is based in Richmond, Virginia. This acquisition provided new and complementary products to our existing range of infrastructure maintenance equipment and parts.

In 2017, the Company acquired R.P.M. Tech Inc. ("RPM"), a manufacturer of heavy duty snow removal equipment and associated parts. RPM primarily sells to governmental agencies, related contractors, airports and other industrial users. RPM's operations are in Drummondville, Quebec and will work in close proximity to the Company's nearby Tenco operations. This acquisition complementscomplemented our existing range of snow removal products with RPM's range of heavy duty snow removal equipment, including their line of mechanical snow blowers. The Company plans to moveIn 2020, RPM'soperations were consolidated into itsthe Company's nearby Tenco facility during 2019. and the former RPM facility in Drummondville was sold.

5


In 2019, the Company acquired 100% of the outstanding capital shares of Dutch Power B.V. ("Dutch Power") in the Netherlands. Dutch Power designs and manufactures a variety of landscape and vegetation management machines and attachments. This acquisition expanded our existing platform and increased our capabilities in the European market. Dutch Power changed its legal name to Alamo Group The Netherlands in 2021.

In 2019, the Company acquired substantially all of the assets of the Dixie Chopper ("Dixie Chopper") business. Dixie Chopper manufactures a wide range of commercial and high end residential Zero Turn ("ZT") mowers. This acquisition provided a new channel and increased the Company's exposure in the outdoor power equipment market. Dixie Chopper was relocated into the Company's RhinoAg facility in Gibson City, Illinois.

In 2019, the Company acquired 100% of the outstanding capital shares of Morbark, LLC ("Morbark") which included its subsidiaries Rayco Manufacturing LLC ("Rayco") and Denis Cimaf Inc. ("Denis Cimaf"). Morbark is a leading manufacturer of equipment and aftermarket parts for forestry, tree care, biomass, land management and recycling markets. This acquisition expanded the Company's product line and complemented its range of vegetation maintenance equipment in an adjacent market. Morbark is based in Winn, Michigan with subsidiary locations in Wooster, Ohio and Roxton Falls, Quebec. At the end of 2020, the Denis Cimaf manufacturing operations based in Roxton Falls were consolidated into the Rayco facility in Wooster, Ohio.

In 2021, the Company acquired 100% of the outstanding capital shares of Timberwolf Limited ("Timberwolf") in the U.K. Timberwolf is a leading manufacturer of a broad range of commercial wood chippers primarily serving markets in the U.K. and the European Union. This acquisition complements the Company's existing range of tree care products and strengthens the Company's presence in the U.K. and European forestry and tree care markets.

Impact of COVID-19

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19" or "the pandemic") outbreak a global pandemic. COVID-19 has had a material negative impact on public health and the global economy. While direct impacts from the transmission of the disease have caused significant disruptions to our business, these impacts appear to be moderating at the present time. However, the indirect effects of the pandemic, including, among other things, supply chain disruptions, input cost inflation, labor shortages and logistics challenges, all of which materially impacted our business and financial results in 2021, continue to adversely impact our business and we expect these will continue to impact us at least through the first half of 2022.The longer term impacts of COVID-19 on our business remain uncertain and will depend on certain future developments, including the duration of the pandemic; any adverse impact due to variants of the virus; its impact on market demand for our products; its impact on our employees, customers, and suppliers; the range of government mandated restrictions and other measures; and the success of the deployment of approved COVID-19 vaccines and therapeutic drugs and their effectiveness and rate of adoption. Additional information regarding the impact of COVID-19 on our business can be found under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K, and risks related to COVID-19 can be found under Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.

Sales and Marketing Strategy
 
The Company believes that within the U.S. it is a leading supplier to governmental markets, a leading supplier in the U.S. agricultural market, and one of the largest suppliers in the European market for its key niche product offerings. The Company’s products are sold through the Company’s various marketing organizations and extensive worldwide dealer and distributor networks under the Gradall®, VacAll®, Super Products®, Rivard®, Alamo Industrial®, Terrain King®, Tiger®, GradallHerder®, Conver®, Roberine®, Votex®, Schwarze®, NiteHawk®, ODB, Henke®, Tenco®, VacAllWausau®, Schwarze®, NiteHawk®, Henke®, Tenco®, Super ProductsEverest®, Wausau-Everest, H.P. Fairfield, ODB, R.P.M. Tech, Morbark®, Rayco®,Denis Cimaf®, Boxer®, Bush Hog®, Rhino®, Earthmaster®, RhinoAg®, M&W®, Dixie Chopper®, Herschel®, Valu-Bilt®, CT Farm & Country, Schulte®, Superior®, Fieldquip®, Herder®, Santa Izabel, McConnel®, Bomford®, Spearhead, Twose, Kellands®, SMA®, Forges Gorce, Faucheux, Rousseau® , Timberwolf® , and RivardWolftrack® trademarks (some with related designs) as well as other trademarks and trade names.


6


Products and Distribution Channels

At the beginning of the fourth quarter of 2021, the Company began reporting operating results on the basis of two new segments, namely, 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 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, including the Company's recently acquired Morbark and Dutch Power business units. 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. We believe the realignment of our two divisions provides greater potential to capture synergies in cross-branding, distribution, product development, supply chain management and logistics. The two divisions are also more balanced in scale and scope giving the Company two strong platforms for ongoing development through a mix of organic growth and
acquisitions.

Vegetation Management Division

Bush Hog andRhino equipment is generally sold to farmers, ranchers and other end-users to clear brush, mow grass, maintain pastures and unused farmland, shred crops, till fields, and for haymaking and other applications. Bush Hog and Rhino equipment consists principally of a comprehensive line of tractor-powered equipment, including rotary mowers, finishing mowers, flail mowers, disc mowers, front-end loaders, backhoes, rotary tillers, posthole diggers, scraper blades and replacement parts. The equipment also includes a range of self-propelled zero turn radius mowers.

Dixie Chopper produces a wide range of commercial and high end residential zero turn ("ZT") mowers. It sells its products through its independent dealers in the outdoor power equipment channel throughout the U.S.
Schulte equipment includes heavy-duty mechanical rotary mowers, snow blowers, rock removal equipment and related replacement parts. Schulte serves both the agricultural and governmental markets primarily in Canada and the U.S. It also sells some of the Company’s other product lines in its markets and some of its products through independent distributors throughout the world.

McConnel equipment principally includes a broad line of hydraulic, boom-mounted hedge and grass cutters, remote control mowers as well as other tractor attachments and implements such as cultivators, subsoilers and other implements and related replacement parts. McConnel equipment is sold primarily in the U.K., Ireland and France and in other parts of Europe and, to a lesser extent, throughout the world, through independent dealers and distributors. McConnel also sells a range of self-propelled sprayers and a variety of multi-drive load-carrying vehicles. These products are sold through its existing dealer network as well as various marketing groups within the European region of the Vegetation Management Division.
Bomford equipment includes hydraulic boom-mounted hedge and hedgerow cutters, industrial grass mowers, agricultural seedbed preparation cultivators and related replacement parts. Bomford equipment is sold to governmental agencies, contractors and agricultural end-users in the U.K., Ireland and France and, to a lesser extent, other countries in Europe, North America, Australia and Asia. Bomford’s sales network is similar to that of McConnel in the U.K.

Spearhead manufactures a range of tractor-mounted vegetation maintenance equipment, including reach mowers, flail mowers and rotary cutters. These products are manufactured in the Company's Salford Priors facility.
Fieldquip broadens the Company's presence in Australia. The company sells a variety of vegetation maintenance equipment, specifically rotary mowers and tractor attachments. Fieldquip sells to customers ranging from large agricultural and commercial operators to small farm hobbyist and residential users, as well as agricultural dealers who serve owners and operators in the turf, golf, park and airport industries and growers with orchards, vineyards and plantations in Australia and the South Pacific.
Rousseau sells hydraulic and mechanical boom mowers, primarily in France, through its own sales force and dealer distribution network mainly to agricultural and governmental markets. These products have also been introduced into other markets outside of France. These products are manufactured at our facility near Lyon, France.

7


SMA equipment includes hydraulic boom-mounted hedge and hedgerow cutters and related replacement parts. SMA’s principal customers are French local authorities. SMA’s product offerings include certain quick-attach boom mowers manufactured by the Company in the U.K. to expand its presence in agricultural dealerships. The Company consolidated its SMA operations located in Orleans, France, and production was relocated to its manufacturing facility near Lyon, France.

Forges Gorce manufactures cutting blades which are sold to some of the Company’s subsidiaries as well as to other third party customers and distributors.

Morbark manufactures a broad range of tree chippers, stump grinders, mulchers, brush cutters, flails and debarkers sold under the Morbark, Rayco, Denis Cimaf and Boxer brand names. Its products are sold to industrial and commercial contractors mainly through a network of independent dealers and distributors and, to a lesser extent, direct sales to end-users.

Timberwolf produces a variety of commercial tree care and forestry equipment and attachments under several brand names including Timberwolf and Wolftrack. Timberwolf sells its products primarily to commercial customers through a comprehensive network of dealers.

Alamo Industrial equipment is principally sold through independent dealers to governmental end-users, related independent contractors and, to a lesser extent, utility and other dealers serving infrastructure maintenance operators and other applications in the U.S. and other countries. Governmental agencies and contractors that perform services for such agencies purchase primarily hydraulically-powered, tractor-mountedtractor - and off-road chassis mounted mowers, including boom-mounted mowers, other types of cutters and replacement parts for heavy-duty, intensive use applications, including maintenance around highway, airport, recreational and other public areas. A portion of Alamo Industrial’s sales includes tractors, which are not manufactured by Alamo Industrial.

Tiger equipment includes heavy duty, tractor- and truck-mounted mowing and vegetation maintenance equipment and replacement parts. Tiger sells to state, county and local governmental entities and related contractors, primarily through a network of independent dealers. Tiger’s dealer distribution network is independent of Alamo Industrial’s dealer distribution network. A portion of Tiger’s sales includes tractors, which are not manufactured by Tiger.

SchwarzeAlamo Group The Netherlands produces a variety of landscape and vegetation maintenance equipment includes truck-mounted air vacuum, mechanical broom, and regenerative air sweepers, pothole patchersattachments under several brand names including Herder, Conver, Roberine, and replacement parts. SchwarzeVotex. Alamo Group The Netherlands primarily sells its products primarily to contractors who perform infrastructure maintenance for governmental agencies and independent contractors, either directly or through its independent dealer network. A portion of Schwarze’s sales includes truck chassis which are not manufactured by Schwarze.private landowners.

ODBHerder and Santa Izabel give the Company a presence in the Brazilian agricultural market. Herder manufactures and sells leaf collectiondistributes flail and rotary mowers and various other agricultural equipment, direct and replacement brooms for street sweepers, boththrough dealers. Its products are used in a wide variety of which areagricultural and governmental markets. Santa Izabel designs, manufactures and markets a variety of agricultural implements, including sugar cane trailers sold to municipalities, contractors and commercial landscape markets in North America.throughout Brazil.

Nite-HawkHerschel aftermarket replacement parts are sold for many types of farm equipment and tractors and certain types of mowing and construction equipment. Herschel manufactures parking lot sweepers with uniqueproducts include a wide range of cutting parts, plain and innovative hydraulic designs. By eliminatinghard-faced replacement tillage tools, disc blades and fertilizer application components. Herschel replacement tools and parts are sold throughout the auxiliary engine,United States, Canada and Mexico to five major customer groups: farm equipment dealers; fleet stores; wholesale distributors; OEMs; and construction equipment dealers. Nite-HawkValu-Bilt sweepers have proven to be fuel-efficient, environmentally conscious,complements the Herschel product lines while also expanding the Company’s offering of aftermarket agricultural parts and cost-effective to operate. Nite-Hawk focuses mainly onadded catalog and sellsinternet sales direct to parking lot contractors. A portion of end-users.
Nite-Hawk’s
sales includes truck chassis which are not manufactured by
Nite-Hawk
8

.
Industrial Equipment Division

Gradall produces a range of excavators based on high-pressure hydraulic telescoping booms which are primarily sold through dealers primarily to governmental agencies and related contractors, and to a lesser extent the mining industry, steel mills and other specialty applications in the U.S. and other countries. Many of these products are designed for excavation, grading, shaping and similar tasks involved in land clearing, road building or maintenance. These products are available mounted on various types of undercarriages: wheels for full-speed highway travel, wheels for on/off road use, and crawlers. A portion of Gradall’s sales includes truck chassis which are not manufactured by Gradall.

VacAll produces catch basin cleaners and roadway debris vacuum systems. These units are powerful and versatile with uses including, but not limited to, removal of wet and dry debris, spill elimination, and cleaning of sludge beds. VacAll also offers a line of sewer cleaners. Its products are primarily sold through dealers to industrial and commercial contractors as well as governmental agencies. A portion of VacAll’s sales includes truck chassis which are not manufactured by the Company.

6


Super Products produces truck-mounted vacuum trucks,machines, combination sewer cleaners and hydro excavators. Its products are sold to municipalities, utilities and contractors through a nationwide distributor network. Super Products also operates a network of rental stores that provideprovides short and long-term rental contracts for its products. Rental customers are primarily contractors serving the petrochemical, petroleum production and refining industries. A portion of the sales of Super Products includes truck chassis which are not manufactured by the Company.
Rivard manufactures vacuum trucks, high pressure cleaning systems and trenchers. Rivard’s equipment is sold primarily in France and certain other markets, mainly in Europe, the Middle East and North Africa, and to governmental entities and related contractors. This business also complements our product offerings in North America. The majority of Rivard's customers provide their own truck chassis.

Tenco and RPM both design and manufacture a heavy-duty line of snow removal equipment, including truck-mounted snow plows, snow blowers, dump bodies and spreaders. Their products are primarily sold through independent dealers. End-users are governmental agencies, contractors, airports and other industrial users.

Wausau designs and manufactures a comprehensive range of snow removal and ice control products. Products include snowplows, snow blowers, snow throwers, brooms, deicers, brine sprayers and other related accessories and parts. Wausau sells its products through its established dealer network to both governmental and non-governmental end-users and sells directly to airports and fixed-base operators.
Everest designs and manufactures a range of snow removal and ice control products including snowplows, wing systems, spreader bodies, and other related accessories and parts. Everest also manufactures custom-engineered underground construction forms for tunnels.
Henke designs and manufactures snow plows and heavy duty snow removal equipment, hitches and attachments for trucks, loaders and graders sold primarily through independent truck and industrial equipment dealers. Henke’s primary end-users are governmental agencies, related contractors and other industrial users.
Tenco and RPM both design and manufacture a heavy-duty line of snow removal equipment, including truck-mounted snow plows, snow blowers, dump bodies and spreaders. Their products are primarily sold through independent dealers. End-users are governmental agencies, contractors, airports and other industrial users.

H.P. Fairfield is a full-service distributor of public works and runway maintenance products, parts and service, whose sales and service outlets are located in the northeastern part of the U.S. H.P. Fairfield’s offerings include custom municipal snow and ice removal equipment, a range of salt spreaders and truck bodies, street sweepers, a line of industrial rotary, flail and boom mowers, solid waste and recycling equipment, water and sewer maintenance equipment, municipal tractors and attachments, and asphalt maintenance patchers, some of which are sourced from other Alamo Group companies. Certain of the products distributed and sold by H.P. Fairfield include Alamo Group products. H.P. Fairfield also provides truck up-fitting services as part of its business.
Agricultural Division

Bush Hog,Rhino and EarthmasterSchwarze equipment is generally sold to farmers, ranchersincludes truck-mounted air vacuum, mechanical broom, and other end-users to clear brush, mow grass, maintain pastures and unused farmland, shred crops, till fields, and for haymaking and other applications. Bush Hog and Rhino equipment consists principally of a comprehensive line of tractor-powered equipment, including rotary mowers, finishing mowers, flail mowers, disc mowers, front-end loaders, backhoes, rotary tillers, posthole diggers, scraper bladesregenerative air sweepers, pothole patchers and replacement parts. The equipment alsoSchwarze sells its products primarily to governmental agencies and independent contractors, either directly or through its independent dealer network. A portion of Schwarze’s sales includes a range of self-propelled zero turn radius mowers.truck chassis which are not manufactured by Schwarze.

Herschel/Valu-BiltODB aftermarketmanufactures and sells leaf collection equipment and replacement partsbrooms for street sweepers, both of which are sold for many types of farm equipmentto municipalities, contractors and tractors and certain types of mowing and construction equipment. Herschel products include a wide range of cutting parts, plain and hard-faced replacement tillage tools, disc blades and fertilizer application components. Herschel replacement tools and parts are sold throughout the United States, Canada and Mexico to five major customer groups: farm equipment dealers; fleet stores; wholesale distributors; OEMs; and construction equipment dealers. Valu-Bilt complements the Herschel product lines while also expanding the Company’s offering of aftermarket agricultural parts and added catalog and internet sales direct to end-users.
Schulte equipment includes heavy-duty mechanical rotary mowers, snow blowers, rock removal equipment and related replacement parts. Schulte serves both the agricultural and governmentalcommercial landscape markets primarily in Canada and the U.S. It also sells some of the Company’s other product lines in their markets and some of its products through independent distributors throughout the world.North America.

Fieldquip and Superior together broaden the Company's presence in Australia. Both companies sell a variety of agricultural equipment, specifically rotary mowers and tractor attachments. Fieldquip sells to customers ranging from large agricultural and commercial operators to small farm hobbyist and residential users. Superior's customers are generally agricultural dealers who service owners and operators in the turf, golf, park and airport industries and growers with orchards, vineyards and plantations in Australia and the South Pacific.

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Herder and Santa Izabel give the Company a presence in the Brazilian agricultural market. With our recent acquisition of Santa Izabel, we have strengthened our market position in Brazil which allows us to further pursue organic growth and additional acquisitions. HerderNite-Hawk manufactures parking lot sweepers with unique and distributes flail mowers and various other agricultural equipment, direct and through dealers. Its products are used in a wide variety of agricultural and governmental markets.innovative hydraulic designs. By eliminating the auxiliary engine, Santa IzabelNite-Hawk designs, manufacturessweepers have proven to be fuel-efficient, environmentally conscious, and markets a varietycost-effective to operate. Nite-Hawk focuses mainly on and sells direct to parking lot contractors. A portion of agricultural implements, including trailers sold throughout Brazil.Nite-Hawk’s sales includes truck chassis which are not manufactured by Nite-Hawk.

European Division
McConnel equipment principally includes a broad line of hydraulic, boom-mounted hedge and grass cutters, remote control mowers as well as other tractor attachments and implements such as cultivators, subsoilers  and other implements and related replacement parts. McConnel equipment is sold primarily in the U.K., Ireland and France and in other parts of Europe and, to a lesser extent, throughout the world, through independent dealers and distributors.
Bomford equipment includes hydraulic, boom-mounted hedge and hedgerow cutters, industrial grass mowers, agricultural seedbed preparation cultivators and related replacement parts. Bomford equipment is sold to governmental agencies, contractors and agricultural end-users in the U.K., Ireland and France and, to a lesser extent, other countries in Europe, North America, Australia and Asia. Bomford’s sales network is similar to that of McConnel in the U.K.Replacement Parts

Spearhead manufactures a range of tractor-mounted vegetation maintenance equipment, including reach mowers, flail mowers and rotary cutters. These products are manufactured in the Company's Bomford facility.
Kellands equipment which are being re-branded and sold as McConnel, includes a range of self-propelled sprayers and a variety of multi-drive load-carrying vehicles. These products are sold through an existing dealer network as well as various marketing groups within the European Division.
SMA equipment includes hydraulic, boom-mounted hedge and hedgerow cutters and related replacement parts. SMA’s principal customers are French local authorities. SMA’s product offerings include certain quick-attach boom mowers manufactured by the Company in the U.K. to expand its presence in agricultural dealerships. The Company consolidated its SMA operations located in Orleans, France, and production was relocated to its manufacturing facility near Lyon, France.

Forges Gorce manufactures cutting blades which are sold to some of the Company’s subsidiaries as well as to other customers.
Rousseau sells hydraulic and mechanical boom mowers, primarily in France, through its own sales force and dealer distribution network mainly to agricultural and governmental markets. These products have also been introduced into other markets outside of France.
Rivard manufactures vacuum trucks, high pressure cleaning systems and trenchers. Rivard’s equipment is sold primarily in France and certain other markets, mainly in Europe, the Middle East and North Africa, and to governmental entities and related contractors. It also complements our product offerings in North America. The majority of Rivard's customers provide their own truck chassis.
Replacement Parts
The Company derives a significant portion of its revenues from sales of replacement parts for each of its wholegoods lines. Replacement parts represented approximately 19%20%, 20%21% and 20%19% of the Company’s total sales for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively. Proprietary replacementReplacement parts generally are more profitable and less cyclical than wholegoods.


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Product Development

The Company’s ability to provide innovative responses to customer needs, to develop and manufacture new products, and to enhance existing product lines is important to its success. The Company continually conducts research and development activities in an effort to improve existing products and develop new products. As of December 31, 2018,2021, the Company employed 185268 people in its various engineering departments, 117164 of whom are degreed engineers and the balance of whom are support staff. Amounts expended on research and development activities were approximately $10,429,000$11.7 million in 2018, $9,849,0002021, $12.4 million in 20172020 and $8,847,000$12.0 million in 2016.2019. As a percentage of sales, research and& development was approximately 1.0%0.9% in 2018,2021, 1.1% in 20172020 and 1.0%1.1% in 2016,2019, and is expected to continue at similar levels in 2019.2022.

Seasonality

The Company’s unit sales are fairly constant quarter to quarter. However, replacement partspart sales are generally higher in the second and third quarters of the year, because a substantial number of the Company’s products are used for maintenance activities such as vegetation maintenance, highway right-of-way maintenance, construction, and street and parking lot sweeping. Usage of this equipment is typically lower in harsh weather. The Company utilizes an annual twelve-month sales forecast provided by the Company’s marketing departments which is updated quarterly in order to develop a production plan for its manufacturing facilities. In addition, many of the Company’s marketing departments attempt to equalize demand for products throughout the calendar year by offering seasonal sales programs which may provide additional incentives, including discounts and extended payment terms.

Competition

The Company’s products are sold in highly competitive markets throughout the world. The principal competitive factors are price, quality, availability, service and reputation. The Company competes with several large national and international companies that offer a broad range of equipment and replacement parts, as well as with numerous small, privately-held manufacturers and suppliers of a limited number of products, mainly on a regional basis. Some of the Company’s competitors are significantly larger than the Company and have substantially greater financial and other resources at their disposal. The Company believes that it is able to compete successfully in its markets by effectively managing its manufacturing costs, offering high quality products, developing and designing innovative products and, to some extent, avoiding direct competition with significantly larger potential competitors. There can be no assurance that the Company’s competitors will not substantially increase the resources devoted to the development and marketing of products competitive with the Company’s products or that new competitors with greater resources will not enter the Company’s markets.

Unfilled Orders

As of December 31, 2018,2021, the Company had unfilled customer orders of $240,260,000$800.8 million compared to $218,158,000$354.1 million at December 31, 2017.2020. Management expects that substantially all of the Company’s unfilled orders as of December 31, 20182021 will be shipped during fiscal year 2019.2022. The amount of unfilled orders at a particular time is affected by a number of factors, including manufacturing and shipping schedules which, in most instances, are dependent on the Company’s seasonal sales programs and the requirements of its customers. CertainIt is possible that unanticipated effects of the COVID-19 pandemic, including supply chain disruptions or customer issues, could continue to cause delays in delivery or an inability to complete unfilled customer orders. The Company’s orders are subject to cancellation at any time before shipment; therefore, a comparison of unfilled orders from period to period
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is not necessarily meaningful and may not be indicative of future actual shipments. No single customer or group of customers is responsible for 10% or more of the aggregate revenue of the Company or of a segment of the Company.

Sources of Supply

The principal raw materials used by the Company include steel, other metal components, hydraulic hoses, paint and tires. During 2018,2021, the raw materials needed by the Company were available from a variety of sources in adequate quantities and at prevailing market prices.
 
While the Company manufactures many of the parts for its products, a significant percentage of parts, including most drivelines, gearboxes, industrial engines, and hydraulic components, are purchased from outside suppliers which manufacture to the Company’s specifications. In addition, the Company, through its subsidiaries, purchases tractors and truck chassis as a number of the Company’s products are mounted and shipped with a tractor or truck chassis. Tractors and truck chassis are generally available, but some delays in receiving tractors or truck chassis
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can occur throughout the year. The Company sources its purchased goods from international and domestic suppliers. No one supplier is responsible for supplying more than 10% of the principal raw materials or purchased goods used by the Company.
 
Patents, Trademarks and TrademarksTrade Names
 
The Company owns various U.S. and international patents, trademarks and trademarks.trade names. While the Company considers its patents, trademarks and trade names to be advantageous to its business, it is not dependent on any single patent, or trademark, trade name or group of patents, and trademarks.trademarks, or trade names. The net book value of patents, trademarks and trademarkstrade names was $26,523,000$84.8 million and $29,215,000$89.2 million as of December 31, 20182021 and 2017,2020, respectively.

Environmental and Other Governmental Regulations

Like other manufacturers, the Company is subject to a broad range of federal, state, local and foreign laws, rules and requirements,regulations including those concerningrelating to climate change; emissions to air, emissions,including Tier 4 or similar engine emission regulations; discharges into waterways,to water; restrictions placed on water usage and water availability; product and associated packaging; use of certain chemicals; restricted substances, including "conflict minerals" disclosure rules; import and export compliance, including country of origin certification requirements; worker and product user health and safety; energy efficiency; product life-cycles; outdoor noise laws; and the generation, use, handling, labeling, collection, management, storage, transportation, treatment, and disposal of hazardous substances, wastes, and other regulated materials.

The U.S. Environmental Protection Agency ("EPA"), the California Air Resources Board ("CARB"), and similar regulators in other U.S. states and foreign jurisdictions in which we sell our products have emission requirements setting maximum emission standards for certain equipment. In addition to the the EPA's implementation of Tier 4 emission requirements applicable to diesel engines, China, the European Union ("EU") and and the United Kingdom also have adopted similar regulations, and similar emission regulations are also being considered in other markets in which we sell our products. CARB continues to propose and discuss implementation of zero emissions equipment regulations that will likely create increasingly stringent requirements on exhaust and other emissions from some of the products we manufacture.

The U.S. federal government, several U.S. states, and certain international markets where we sell our products, including the EU and some EU member countries have introduced product life-cycle laws, rules, or regulations, which are intended to reduce waste materials, as well asand environmental and human health impact, and require manufacturers to label, collect, dispose, and recycle certain products, including some of our products, at the remediationend of contaminationtheir useful life. These include, among other laws and regulations: (i) the Registration, Evaluation, Authorization and Restriction of Chemicals directive or similar substance level laws, rules, or regulations that require notification of use of certain chemicals, or ban or restrict the use of certain chemicals; (ii) California Proposition 65 and other product substance restriction laws, some of which require certain labeling of products; (iii) energy efficiency laws, rules, or regulations, which are intended to reduce the use and inefficiencies associated with releasesenergy and natural resource consumption and require specified efficiency ratings and capabilities for certain products; (iv) conflict minerals laws, such as those contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules
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promulgated by the U.S. Securities and Exchange Commission ("SEC"), which require specific procedures for the determination and disclosure of hazardous substances at the Company’s facilitiesuse of certain minerals, known as "conflict minerals," which are mined from the Democratic Republic of the Congo and off-site disposal locations, workplace safetyadjoining countries; and equal employment opportunities. These(v) supply chain transparency laws and regulations are constantly changing,addressing modern slavery and it is impossible to predict with accuracy the effect that changes to such laws and regulations may have on the Company in the future. Like other industrial concerns, the Company’s manufacturing operations entail the risk of noncompliance, and there can be no assurance that the Company will not incur material costs or other liabilities as a result thereof.
Certain assets of the Company contain asbestos that may have to be remediated over time. The Company believes that any subsequent change in the liability associated with the asbestos removal will not have a material adverse effect on the Company’s consolidated financial position or results of operations.human trafficking.

The Company is also subject to various other federal, state, and local laws affecting its business, as well as a variety of regulations relating to such matters as working conditions, equal employment opportunities, and product safety. Asafety, including National Highway Traffic Safety Administration reporting. In addition, a variety of state laws regulate the Company’s contractual relationships with its dealers, some of which impose restrictive standards on the relationship between the Company and its dealers, including events of default, grounds for termination, non-renewal of dealer contracts, and equipment repurchase requirements. The Company believes it is currently in material compliance with all such applicable laws and regulations.

EmployeesWe believe we have maintained compliance with existing laws, rules and regulations applicable to our business and will continue to do so. While we believe there will be some additional costs to our business as a result of the increasing level of regulation applicable to our business activities, we do not believe that the costs associated with our compliance efforts will have a material impact on our financial results.

Human Capital Resources and Management

We recognize that the success of our Company is dependent upon the talents and dedication of our people, and we are committed to investing in their success. Our Vice-President of Corporate Human Resources is responsible for developing and executing our human resources strategy together with our President and Chief Executive Officer and the other members of the Company's management team. Our Chief Executive Officer and Vice-President of Human Resources regularly update our Board of Directors regarding the status of our human resources activities. Among the key elements of our human resources strategy are the following:

Focus on Health and Safety: Employee health and safety is of paramount importance to us. We believe it is our responsibility to maintain a safe and healthy workplace in each of our locations and to make continuous improvements in this area. We do this by embedding safety into every level of the organization as one of our core values. Our approach is proactive and preventative. Regular safety meetings are held at our plants on an ongoing basis. Every location offers frequent safety training programs to all employees and leverages safety committees who conduct safety audits to identify and remove potential issues. We ensure that safety performance is tracked, aggregated, and reviewed on an ongoing basis. Our corporate technical affairs and safety team collects data on recordable injury rates, severe injury rates, and near misses from each Alamo Group operating company, and conducts root cause analysis with corrective action plans to prevent future occurrences. This data is reviewed monthly by the executive leadership team and shared with the Company's Board of Directors on a quarterly basis. With the onset of the COVID-19 pandemic, we implemented, and continue to adhere to, certain rigorous and meaningful safety measures recommended by the U.S. Centers for Disease Control and Prevention, World Health Organization, and federal, state, local, and foreign authorities that we determined were in the best interest of our employees, customers, and suppliers. This led to the adoption of various measures including COVID-19 case tracking and quarantining where and when necessary, mandating face coverings when required by local rules and regulations (except where hazardous), regular sanitization, reconfiguration of workstations to allow for appropriate distancing, expanding the use of internal video meetings and installation of related technology, minimizing travel, and implementing remote work assignments, amongst other actions.

Employee Engagement and Talent Development: We focus on attracting, developing, and retaining a team of highly talented and motivated employees. Our key talent philosophy is to develop talent from within, so they are “ready now” when career opportunities arise, and when we recruit externally to select candidates with future stretch potential. We provide all employees a wide range of professional development experiences, both formal and informal, at all stages in their careers. Our formal offerings include tuition reimbursement, a diverse curriculum of learning programs, leadership development experiences, vocational and trade skills training, and external partnerships across the globe. The Company's focus on supervisor and manager development and a culture of promoting a diverse, inclusive, and respectful workplace supports our ability to attract, engage, retain, and motivate industry-leading talent to meet our customer’s needs and sustain the Company’s growth. Formal welder training, apprenticeships, and local partnerships with vocational training programs, junior colleges, and high schools ensure that our operating companies continue to attract and grow their critical manufacturing skills. The Company’s emphasis on our core competencies, including Leading People and Leading Change, continues to favorably impact our succession planning and employee retention with below industry average annual turnover rates. In January of 2022, we implemented The Alamo Group Learning & Development Academy, a new talent development program which focuses on building and strengthening the leadership capabilities of our management teams and also offers technical skills training for our production floor employees. Many programs are available on-demand to
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manufacturing supervisors, which offers development opportunities to those with direct oversight of the people building our products. Training is easily accessible both to employees who work on-site as well as those who work in remote and hybrid environments. Virtual, in-person and on-campus programs are offered to encourage cross-location and cross-functional networking and sharing of ideas that foster and support our culture of continuous improvement.

Commitment to Diversity and Inclusion: We recognize, value, and respect the individual differences of our employees and believe that a diverse set of backgrounds, experiences, and perspectives is crucial to our ability to continue to innovate, collaborate, and meet the needs of our global workforce and customers. Accordingly, we are committed to encouraging and fostering an inclusive culture where diversity and individual differences are accepted, respected, and valued so that employees feel empowered to contribute fully to the Company's ongoing success. To promote diversity and inclusion in the workplace, we dedicate people and resources to promote an inclusive environment through policies and training. We also promote our career opportunities to a wide network of organizations and job boards that can help us source diverse candidate pools. We actively volunteer and engage in local community projects and contribute donations to charitable organizations. We build strategies and implement tactics that will attract and maintain a diverse workforce, positively impacting the communities and markets in which our employees live and work. Initiatives include but are not limited to increased diversity and inclusion training that increases awareness and reinforces respect in the workplace, as well as building partnerships with organizations like Women in Manufacturing and The National Diversity Council.

Compensation and Benefits: We conduct regular assessments of our pay and benefit practices to help ensure that our people are compensated fairly and competitively. We also devote significant resources to management and employee training and development, including tuition assistance for career-enhancing academic and professional programs. In addition to salaries, our compensation programs, which vary by country and region, can include annual bonuses, profit sharing, stock-based compensation awards, company-sponsored retirement savings plans with employee matching opportunities (or similar local retirement benefits), healthcare and insurance benefits, dependent care and flexible savings accounts, paid time off such as vacation and holidays, sick pay, disability pay and family leave, flexible work schedules, wellness and employee assistance programs for mental health, self-improvement, legal and financial services, service anniversary awards, tuition assistance and dependent college scholarships, and discounts on products and services.

Labor Agreements: As of December 31, 2018, the Company2021, we employed approximately 3,4704,200 employees. In North America,the U.S. the Company has a collective bargaining agreementsagreement at the its Gradall facility plant which cover 205covers 174 employees and will expire on April 11, 2021,14, 2024. In Canada the Tenco facility in Canada covering 107 bargaining agreement covers 109 employees will expireand expires on December 31, 2020,2025; RPM has an agreement covering 4 employees which expires on February 1, 2025; and at the three R.P.M. facilities in CanadaEverest has a collective bargaining agreement covering 2270 employees all of which will expire on SeptemberNovember 30, 2019. The2023. In the Company’s European operations,locations, McConnel,all employees are covered by the European Works Council agreements. McConnel, Bomford,, Spearhead, AMS-UK, SMA, Faucheux,, Forges Gorce,Rousseau, Rivard, and Rivard,Alamo Group The Netherlands have various collective bargaining agreements covering 924approximately 969 employees. The Company considers its employee relations to be satisfactory.


Available Information

The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements, and other information that issuers (including the Company) file electronically with the SEC. The SEC’s website is www.sec.gov.

The Company’s website is www.alamo-group.com. The Company makes available free of charge through its website, via a link to the SEC’s website at www.sec.gov, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company also makes
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available through its website, via a link to the SEC’s website, statements of beneficial ownership of the Company’s equity securities filed by its directors, officers, 10% or greater shareholders, and others required to file under Section 16 of the Exchange Act.

The Company also makes available free of charge on its website its most recent annual report on Form 10-K, its quarterly reports on Form 10-Q for the current fiscal year, its most recent proxy statement and its most recent annual report to stockholders, although in some cases these documents are not available on our site as soon as
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they are available on the SEC’s site. You will need to have on your computer the Adobe Acrobat Reader® software to view the documents, which are in PDF format. In addition, the Company posts on its website its Charters for its Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee, as well as its Corporate Governance Policies and its Code of Conduct and Ethics for its directors, officers and employees. You can obtain a written copy of these documents, excluding exhibits, at no cost, by sending your request to the Corporate Secretary, Alamo Group Inc., 1627 E. Walnut Street, Seguin, Texas 78155, which is the principal corporate office of the Company. The telephone number is (830) 379-1480.830-379-1480. The information on the Company’s website is not incorporated by reference into this report.

Forward-Looking Information

Part I of this Annual Report on Form 10-K and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II of this Annual Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, forward-looking statements may be made in other documents filed or furnished with the SEC, or by management orally or in press releases, conferences, reports or otherwise to analysts, investors, representatives of the media and others, in the future by or on behalf of the Company. Generally, forward-looking statements are not based on historical facts but instead represent the Company's and its management's beliefs regarding future events.

Statements that are not historical are forward-looking. When used by us or on our behalf, the words "expect," “will,” “estimate,” “believe,” “intend,” "would," “could,” "predict," “should,” “anticipate,” "continue," “project,” “forecast,” “plan,” “may” and similar expressions generally identify forward-looking statements made by us or on our behalf. Forward-looking statements involve risks and uncertainties. These uncertainties include factors that affect all businesses operating in a global market, as well as matters specific to the Company and the markets we serve. Certain particular risks and uncertainties that continually face us include the following:

budget constraints and revenue shortfalls which could affect the purchases of our type of equipment by governmental customers and related contractors in both domestic and international markets;
market acceptance of new and existing products;
our ability to maintain good relations with our employees;
our ability to develop and manufacture new and existing products profitably;
the inability of our suppliers, creditors, public utility providers and financial and other service organizations to deliver or provide their products or services to us;
legal actions and litigation;
adverse impacts on our supply chain and other parts of our business resulting from the sudden unrestrained outbreak of human disease including those caused by the coronavirus;
impairment in the carrying value of goodwill;
our ability to successfully integrate acquisitions and operate acquired businesses or assetsassets;
current and changing tax laws in the U.S. and internationally;
our ability to hire and retain quality skilled employees; and
changes in the prices of agricultural commodities, which could affect our customers’ income
levels.

In addition, we are subject to risks and uncertainties facing the industry in general, including the following:

negative impacts on our business and financial results attributable to the ongoing COVID-19 pandemic which may include a softening of customer demand, operational and supply chain disruptions, input cost inflation, labor shortages, or other negative unanticipated effects;
changes in business and political conditions and the economy in general in both domestic and international markets;
an increase in unfunded pension plan liability due to financial market deterioration;
price and availability of energy and critical raw materials, particularly steel and steel products;
increased competition;
repercussionsrepercussions resulting from the pendingU.K.'s exit by the U.K. from the European Union;
increaseincreases in input costscosts on items we use in the manufacturing of our products;
adverse weather conditions such as droughts, floods, snowstorms, etc., which can affect the buying patterns of our customers and end-users;
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increased costs of complying with newgovernmental regulations which affect corporations including compliance withrelated fines and penalties (such as the European General Data Protection Regulation (GDPR) and similar data protection laws imposed by the State of California and other U.S. states, including any related potential fines and penalties;Consumer Privacy Act);
the potential effects on the buying habits of our customers due to animal disease outbreaks;outbreaks and other epidemics;
adverse market conditions and credit constraints which could affect our customers and end-users, such as cutbacks on dealer stocking levels;
changes in market demand;
cyber security risks including the potential loss of proprietary data or data security breaches and related fines, penalties and other liabilities;
financial market changes including changes in interest rates and fluctuations in foreign exchange rates;
abnormal seasonal factors in our industry;
changes in domestic and foreign governmental policies and laws, including increased levels of government regulation and changes in agricultural policies, including the amount of farm subsidies and farm payments;payments as well as changes in trade policy that may have an adverse impact on our business;
government actions, including but not limited to budget levels, change in tax laws, regulations and legislation, relating to the environment, commerce, infrastructure spending, health and safety; and
risk of governmental defaults and resulting impact on the global economy and particularly financial institutions.

We wish to caution readers not to place undue reliance on any forward-looking statement and to recognize that the statements are not predictions of actual future results. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above and under “Risk Factors,” as well as others not now anticipated. The foregoing statements are not exclusive and further information concerning us and our businesses, including factors that could potentially materially affect our financial results, may emerge from time to time. It is not possible for management to predict all risk factors or to assess the impact of such risk factors on the Company’s businesses. Any forward-looking statements made by or on behalf of the Company speak only to the date they are made and we do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the forward-looking statements were made.

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Information About our Executive Officers of the Company
 
Certain information is set forth below concerning the executive officers of the Company (the "Executives"), each of whom has been appointed to serve until the 20192022 annual meeting of directors or until histheir successor is duly appointed and qualified.
NameAgePosition
RonaldJeffery A. Robinson Leonard6662President and Chief Executive Officer
Dan E. Malone Richard J. Wehrle5865Executive Vice President and Chief Financial Officer
Richard J. Wehrle 62Vice President, Controller and Treasurer
Edward T. Rizzuti4952Executive Vice President, General Counsel and Secretary
Dan E. Malone61Executive Vice President, Chief Sustainability Officer
Richard H. Raborn56Executive Vice President, Alamo Vegetation Management Division
Michael A. Haberman63Executive Vice President, Alamo Industrial Equipment Division
Janet S. Pollock6063Vice President, Human Resources
Geoffrey DaviesLori L. Sullivan7152Executive Vice President, Alamo Group Inc. and Managing Director, Alamo Group (EUR) Ltd., European DivisionInternal Audit
Richard H. Raborn53Executive Vice President, Alamo Group Inc. and Executive Vice President Alamo Group (USA) Inc., Agricultural Division
Jeffery A. Leonard59Executive Vice President, Alamo Group Inc. and Executive Vice President Alamo Group (USA) Inc., Industrial Division

RonaldJeffery A. RobinsonLeonard was appointed President and Chief Executive Officer andof the Company in May of 2021. Mr. Leonard was also appointed as a director of the Company on July 7, 1999.in June of 2021. Mr. Robinson had previously beenLeonard joined the Company in 2011, and served as Executive Vice President of Svedalathe Company's former Industrial Division from 2011 to 2021. Mr. Leonard previously was Senior Vice President of Metso Minerals Industries Inc., the U.S. subsidiarya supplier of Svedala Industries AB of Malmo, Sweden, a leading manufacturer of equipmenttechnology and systemsservices for the worldwidemining, construction, mineral processingpower generation, automation, recycling, and materials handlingpulp and paper industries. Mr. Robinson joined Svedala in 1992 when it acquired Denver Equipment Company of which he was Chairman and Chief Executive Officer.

12Richard J. Wehrle was appointed Executive Vice-President and Chief Financial Officer of the Company in July of 2021. Prior to that, Mr. Wehrle served as Vice President, Controller and Treasurer of the Company from May 2001 to July 2021. He assumed Treasury responsibilities in May of 2018. Previously, Mr. Wehrle served in various accounting management capacities within the Company from 1988 to 2001.


Edward T. Rizzuti was appointed Vice President, General Counsel of Alamo Group Inc. in July of 2015, assumed the Secretary role in May of 2018 and was promoted to Executive Vice-President in November of 2021. Prior to joining the Company, from 2010 to 2015, Mr. Rizzuti served as Vice President, General Counsel and Secretary for Erickson Incorporated, a publicly traded aircraft manufacturing and operating company based in Portland, Oregon.

Dan E. Malone was appointed Executive Vice President, Chief Sustainability Officer in July of 2021. Mr. Malone joined the Company in 2007 and served as Executive Vice President, Chief Financial Officer on January 15, 2007.from 2007 to 2021. Prior to joining the Company, Mr. Malone held the position of Executive Vice President, Chief Financial Officer & Corporate Secretary at Igloo Products Corporation, a manufacturer of insulated consumer goods, from 2002 to January 2007. Mr. Malone was Vice President and Chief Financial Officer of The York Group, Inc. from 2000 to 2002, and held various financial positions from 1987 to 2000 with Cooper Industries, Inc. and its various subsidiaries.

  Richard J. Wehrle has been Vice President, Controller and Treasurer of the Company since May 2001. He assumed Treasury responsibilities in May of 2018. Prior to his appointment, Mr. Wehrle served in various accounting management capacities within the Company since 1988.

Edward T. Rizzuti was appointed Vice President, General Counsel of Alamo Group Inc. effective July 15, 2015 and assumed the Secretary role in May of 2018. Prior to joining the Company, Mr. Rizzuti previously served from 2010 to 2015 as Vice President, General Counsel and Secretary for Erickson Incorporated, a publicly traded aircraft manufacturing and operating company based in Portland, Oregon.

Janet S. Pollock was appointed Vice President, Human Resources of Alamo Group Inc. effective May 3, 2018. Ms. Pollock joined Alamo Group June of 2013 as Vice President of Human Resources for U.S. Operations. Prior to joining the Company, Ms. Pollock was previously Vice President of Human Resources with CPS Energy in San Antonio, Texas and Vice President of Strategic Initiatives for Coca-Cola Enterprises, Inc.

Geoffrey Davies, OBE and PhD, has been Managing Director of Alamo Group (EUR) Ltd. since December 1993 and was appointed Vice President of the Company in February 2003. From 1988 to 1993, Dr. Davies served McConnel Ltd., a U.K. company acquired by Alamo Group in 1991, in various capacities including serving as its Marketing Director from February 1992 until December 1993.
Richard H. Raborn was appointed Executive Vice President the Company's Vegetation Management Division in July of Alamo Group Inc. effective April 6, 2015.2021. Mr. Raborn is alsojoined the Company in 2015 and served as Executive Vice President of Alamo Group (USA) Inc. and is in chargeVice-President of the Company's former Agricultural Division.Division from 2015 to 2021. Prior to joining the Company, Mr. Raborn was Vice President and General Manager of the Powertrain Metal Division for Illinois Tool Works (ITW) from 2009 to 2015. ITW is one of the world's leading diversified manufacturers of specialized industrial equipment, consumables and related service business.

Jeffery
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Michael A. LeonardHaberman was appointed Executive Vice-President of the Company's Industrial Equipment Division in July of 2021. Prior to his role as Executive Vice-President, Mr. Haberman served as the Company's Excavation/Vacuum Truck group Vice-President from January 2020 to July 2021. Previously, Mr. Haberman served as President of the Company's Gradall Industries company from February of 2006 until January of 2020.

Janet S. Pollock was appointed Vice President, Human Resources of Alamo Group Inc. in May of 2018. Ms. Pollock joined Alamo Group in September 2011June of 2013 as Executive Vice President of Human Resources for U.S. Operations. Prior to joining the Company, Ms. Pollock was Vice President of Human Resources with CPS Energy in San Antonio, Texas and Vice President of Strategic Initiatives for Coca-Cola Enterprises, Inc.

Lori L. Sullivan was appointed Vice President, Internal Audit of Alamo Group Inc. and Executivein May of 2019. Prior to this appointment, Ms. Sullivan was Vice President of Internal Audit for U.S. Operations and Director of Internal Audit for Alamo Group (USA) Inc., Ms. Sullivan has held audit positions within various industries including research and development, public utilities, and public accounting prior to joining Alamo Group in chargeJuly of the Industrial Division. Mr. Leonard previously was Senior Vice President of Metso Minerals Industries Inc., a supplier of technology and services for mining, construction, power generation, automation, recycling, and pulp and paper industries.2011.

Item 1A. Risk Factors

You should carefully consider each of the risks described below, together with all of the other information contained in this Annual Report on Form 10-K, before making an investment decision with respect to the Company’s securities. If any of the following risks develop into actual events, the Company’s business, financial condition or results from operations could be materially and adversely affected and you could lose all or part of your investment.

Risks related to our business
 
The ongoing COVID-19 pandemic could have a material and adverse effect on our results of operations, financial condition and cash flows.

The COVID-19 pandemic caused a significant downturn in our markets globally. While our markets appear to have recovered in 2021, the sustainability of the recovery remains unclear. Challenging market conditions could continue for an extended period of time given the uncertainty that new COVID-19 variants could cause governments around the world to implement stringent or restrictive measures to help control the spread of the virus, including quarantines, "shelter in place" or "stay home" orders, travel restrictions, and other measures. The COVID-19 pandemic could negatively impact our operations, financial condition and cash flows in numerous ways, including but not limited to the following:

macroeconomic conditions may negatively affect the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, and interest rates;
we may be prevented from operating our manufacturing facilities and other worksites;
we may experience interruptions including temporary suspensions or reduced capacity of operations due to health concerns and government imposed restrictions;
we may experience ongoing supply chain disruptions, including those caused by industry capacity constraints, mismatch of supply and demand, material availability, logistics delays, and delays in resumption of operations by one or more suppliers;
we may be subject to legal claims related to alleged exposure to COVID-19 on Company premises; and
we may experience labor shortages or disruptions due to illnesses or unwillingness of employees to return to work.

The longer the pandemic continues, the more likely the foregoing risks will be realized. The ultimate duration and severity of the COVID-19 pandemic cannot be accurately forecasted at this time. Nor can the disruption to our business, customers and supply chain due to the pandemic be accurately forecasted at this time. Even after the COVID-19 pandemic has subsided, we may continue to experience material adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. Moreover, the effects of the COVID-19 pandemic will heighten the other risks described throughout this section.

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Deterioration of industry conditions could harm our business, results of operations and financial condition.
 
Our business depends to a large extent upon the prospects for the mowing, infrastructure maintenance and agricultural markets in general. Future prospects of the industry depend largely on factors outside of our control. Any of those factors could adversely impact demand for our products, which could adversely impact our business, results of operations and financial condition. These factors include the following:

weakness in the worldwide economy;
the price and availability of raw materials, purchased components and energy;
budget constraints and revenue shortfalls for our governmental customers;
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changes in domestic and foreign governmental policies and laws, including increased levels of governmental regulation and associated liabilities;
the levels of interest rates;
the value of the U.S. dollar relative to the foreign currencies in countries where we sell our products but don’t have a manufacturing presence;
impact of tighter credit markets on the Company, its dealers and end-users;
impairment in the carrying value of goodwill; and
increase in unfunded pension plan liability due to financial market deterioration.
In addition, our business is susceptible to a number of factors that specifically affect agricultural customer spending patterns, including the following:

animal disease outbreaks, epidemics and crop pests;
weather conditions, such as droughts, floods and snowstorms;
changes in farm incomes;
cattle and agricultural commodity prices;
changes in governmental agricultural policies worldwide;
the level of worldwide farm output and demand for farm products; and
limits on agricultural imports/exports.

Some or all of the above factors may be negatively impacted or magnified by the ongoing COVID-19 pandemic.

A downturn in general economic conditions and outlook in the United States and around the world could adversely affect our net sales and earnings.
 
The strength and profitability of our business depends on the overall demand for our products and upon economic conditions and outlook, including but not limited to economic growth rates; consumer spending levels; financing availability, pricing and terms for our dealers and end-users; employment rates; interest rates; inflation; consumer confidence and general economic and political conditions and expectations in the United States and the other economies in which we conduct business. Slow or negative growth rates, inflationary/deflationary pressures, higher commodity costs and energy prices, reduced credit availability or unfavorable credit terms for our dealers and end-user customers, increased unemployment rates, and recessionary economic conditions and outlook could cause consumers to reduce spending, which may cause them to delay or forgo purchases of our products and could have an adverse effect on our net sales and earnings. In addition, the ongoing effects of the COVID-19 pandemic may continue to adversely affect global economic activity which could negatively impact our revenues.

The pendingU.K.'s exit by the U.K. from the European Union (“Brexit”) and the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the U.K., the European Union and elsewhere. Our business in Europe may suffer from shipment delays, supply chain disruptions, tariffs or other effects that could negatively impact our business. The economic conditions and outlook could be further adversely affected by the uncertainty concerning the timing and terms of the exit and new or modified trading arrangements between the U.K. and other countries. Any of these developments or the perception that any of these developments are likely to occur, could negatively affect economic growth or business activity in the U.K., the European Union and elsewhere, and could materially and adversely affect our business and results of operations.
 
Changes in U.S. tax legislation could have a material adverse impact on our results of operations.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act ("TCJA") that instituted fundamental changes to the U.S. Internal Revenue Code of 1986, as amended ("the Code"). We reflected an overall income tax liability for the year ended December 31, 2017 with respect to TCJA as a result of remeasuring our U.S. deferred tax assets and liabilities using the 21% rate and recognizing a one-time transition tax charge on the deemed repatriation of previously undistributed accumulated earnings and profits of our international subsidiaries.  Due to the significant and complex changes to the Code from the TCJA, the SEC issued Staff Accounting Bulletin No. 118, "Income Tax Accounting Implications of the Tax Cuts and Jobs Act," (SAB 118).  SAB 118 provides measurement period for up to one year for adjustments to be made to account for the effects of the TCJA.  The Company reflected the income tax effects of those aspects of TCJA for which the accounting was complete.  To the extent the Company’s accounting for certain income tax effects of TCJA was incomplete but the Company was able to determine a reasonable estimate, the Company recorded a provisional estimate in the financial statements.  For those items where a reasonable estimate could not be made, a provisional amount was not recorded and the Company continued to apply the provisions of the tax laws that were in effect immediately before the enactment of TCJA.

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During 2018, we revised our initial provisional amount recorded for the transitional tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and the impact of the federal tax rate change on the value of our deferred tax assets and liabilities. For further information, see Note 13 to the consolidated financial statements. In addition to the changes described above, TCJA imposes a U.S. tax on Global Intangible Low Taxed Income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder.  The computation of GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment.

Significant changes in trade policy and related trade wars could have a material adverse impact on our results of operations.

The current administrationU.S. continues to make potentially significant changes in U.S.its trade policy and has taken certain actions that have adversely impacted U.S. trade and relationships with China and other trading partners, including imposing tariffs on certain goods imported into the U.S. Any continued actions or further changes in U.S. trade policy could trigger additional retaliatory actions by affected countries, resulting in "trade wars." Trade wars may lead to reduced economic activity, increased costs, reduced demand and changes in purchasing behaviors for some or all of our products, or other potentially adverse economic outcomes. These or other consequences from any trade wars could have a material adverse impact on our sales volumes, prices and our consolidated financial results.

We depend on governmental sales, and a decrease in such sales could adversely affect our business, results of operations and financial condition.
 
A substantial portion of our revenues is derived from sales to federal, state, provincial and local governmental entities and related contractors, both in the U.S. and in other countries in which we sell our products. These sales depend primarily on the levels of budgeted and appropriated expenditures for highway, airport, roadside and parks maintenance by various governmental entities and are affected by changes in local and national economic conditions. Federal, state, provincial and local government budgets have been and will likely continue to be negatively affected by the COVID-19 pandemic and this could have a material negative impact on our business and financial condition.
 
Our dependence on, and the price and availability of, raw materials as well as purchased components may adversely affect our business, results of operations and financial condition.

We are subject to fluctuations in market prices for raw materials such as steel and energy. For example, in 2021 the price of raw materials like steel and other components we require in our manufacturing process increased materially due to inflationary pressures. In addition, although most of the raw materials and purchased components we use are commercially available from a number of sources, we could experience disruptions in the availability of such materials. If we are unable to purchase materials we require or are unable to pass on price increases to our customers or otherwise reduce our cost of goods sold, our business, results of operations and financial condition may be adversely affected. In addition, higher energy costs could negatively affect spending by farmers, including their purchases of our products. In 2021 we experienced delays in obtaining certain important components from our suppliers largely due to operational disruptions resulting from the COVID-19 pandemic. We may experience delays, shortages, price increases or other supply chain disruptions as a result of the ongoing COVID-19 pandemic which could have a material adverse effect on our business and financial results.

Impairment in the carrying value of goodwill could negatively impact our consolidated results of operations and net worth.

The Company estimateshas conducted for the last three years an analysis for estimating the fair value of its reporting units using athe Company's business enterprise. We have utilized the discounted cash flow analysis.income approach and market approach for which we chose to heavily weigh more on the discounted cash flow approach. This analysis requires the Company to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The cash flows are estimated over a significant future period of time, which makes those estimates and assumptions subject to an even higher degree of uncertainty. The Company also utilizes market valuation models and other financial ratios, which require the Company to make certain assumptions and estimates regarding the applicability of those models to its assets and businesses. As of December 31, 2018,2021, goodwill was $83,243,000,$202.4 million, which represents 12%17% of total assets.

The Company recognized no goodwill impairment in 2018, 20172021, 2020 or 2016.2019. During the 20182021 impairment analysis review, we performed a sensitivity analysis for goodwill impairment with respect to each of our reporting units and determined that a hypothetical 15% decline in the fair value of each reporting unit as of October 1, 20182021 would not result in an impairment of goodwill for any of the reporting units. If we were to have a significant goodwill impairment caused by a greater than a 15% decline in fair value, it could impact our results of operations as well as our net worth.

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We are significantly dependent on information technology.technology and our business may suffer from disruptions associated with information technology, cyber-attacks or other catastrophic losses affecting our IT infrastructure.

We rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information, to manage a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements. We also depend on our information technology infrastructure for digital marketing activities and for electronic communications among our locations, personnel, customers, and suppliers. These information technology systems (some of which are provided and maintained by third parties) may be susceptible to damage, disruptions, or shutdowns due to hardware failures, computer viruses, hacker attacks, telecommunication failures, user errors, catastrophic events or other factors. In addition, a number of our salaried employees are working remotely at various times. This remote working environment may pose a heightened risk for security breaches or other disruptions of our information technology systems. If our information technology systems suffer severe damage, disruption or shutdown, and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience business disruptions, transaction errors, processing inefficiencies, and the loss of customers and sales, causing our product sales, financial condition, and operating results to be adversely affected and the reporting of our financial results to be delayed.

In addition, in the ordinary course of our business, we collect and store sensitive data, including our intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information or other sensitive information of our customers and employees. The secure use, processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite the information security measures we have taken, our information technology and infrastructure may be vulnerablesubjected to attacks by hackers or breached due to employee error, malfeasance, employee errors, or other disruptions. Any such breach could compromise ourCybersecurity threats and sophisticated computer crime pose a potential risk to the security of the Company’s information technology systems, networks, and services, as well as the confidentiality and integrity of the Company’s data and intellectual property. Cyber-attacks, unauthorized access or security breaches, and other cyber incidents could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial-of-service attacks, and other similar attacks. These threats are constantly evolving, which increases the difficulty of defending against them or implementing adequate preventive measures. Sensitive information is also stored there could be accessed, publicly disclosed, lostby our vendors and on the platforms and networks of third-party providers. Cyber-attacks on the Company, our vendors, or stolen. Any such access, disclosure or other loss of informationour third-party providers could result in legal claimsinappropriate access to our intellectual property, Company data, or proceedings, liability under laws that protect the privacy of personalpersonally identifiable information regulatory fines and penalties, disruption of our operationsglobal workforce, suppliers, or customers. Potential consequences of a successful cyber-attack or other cybersecurity breach or incident include remediation costs, legal costs, increased cybersecurity protection costs, lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack, litigation and the services we provide to customers,legal risks including governmental or regulatory enforcement actions, increased insurance premiums, reputational damage that adversely affects customer or investor confidence, and damage to the Company’s competitiveness, stock price, and long-term shareholder value.

While we have taken steps to address these risks by implementing enhanced security technologies, internal controls, and business continuity plans, these measures may not be adequate. We cannot assure that the steps we have taken will be sufficient to protect our reputation,systems, information or other property. Our systems and information may be vulnerable to theft, loss, damage and interruption from a lossnumber of confidence in our productspotential threats and services, which could adversely affect our business and operating results.events.

Changes in the regulatory environment regarding privacy and data protection regulations could have a material adverse impact on our results of operations.

The EU has recently adopted a comprehensive overhaul of its data protection regime in the form of the General Data Protection Regulation (“GDPR”), which came into effect in May of 2018. GDPR extends the scope of the existing EU data protection law to foreign companies processing personal data of EU residents. The regulation imposes a strict data protection compliance regime with severe penalties of 4% of worldwide turnover or €20€20.0 million, whichever is greater, and includes new rights such as the right of erasure of personal data. Although the GDPR applies across the EU, as has been the case under the current data protection regime, EU Member States have some national derogations and local data protection authorities (“DPAs”) will still have the ability to interpret the GDPR, which has the potential to create inconsistencies on a country-by-country basis. In addition, certain U.S. states including the State of California, have enacted privacy and data protection laws. For example, the State of California enacted the California Consumer Privacy Act ("CCPA") which became effective in 2020. Implementation of, and compliance
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with, the GDPR, CCPA and other similar laws could increase our cost of doing business and/or force us to change our business practices in a manner adverse to our business. In addition, violations of the GDPR, CCPA and other laws may result in significant fines, penalties and damage to our brand and business which could, individually or in the aggregate, materially harm our business and reputation. Privacy legislation, enforcement and policy activity in this area continues to rapidly expand. Compliance costs and costs related with implementing privacy-related and data protection measures could be significant. Further, noncompliance could expose us to significant monetary penalties, damage to our reputation, and even possible criminal sanctions. Even our inadvertent failure to comply with privacy-related or data protection laws and regulations could have a material adverse impact on our results of operations.

We operate in a highly competitive industry, and some of our competitors and potential competitors have greater resources than we do.

Our products are sold in highly competitive markets throughout the world. We compete with several large national and international companies that offer a broad range of equipment and replacement parts that compete with our products, as well as with numerous small, privately-held manufacturers and suppliers of a limited number of products mainly on a regional basis. Some of our competitors are significantly larger than we are and have substantially greater financial and other resources at their disposal. We believe that we are able to compete successfully in our markets by, to some extent, avoiding direct competition with significantly larger potential competitors. There can be no assurance that our competitors will not substantially increase the resources devoted to the development and marketing of products competitive with our products or that new competitors with greater resources will not enter our markets. Any failure to effectively compete could have an adverse effect on our business, results of operations and financial condition.

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Failure to develop new products or keep pace with technological developments may have a material adverse impact on our results of operations.

Our industry is affected by future technological developments. The introduction of new products or processes with innovative technologies could render our existing products or processes obsolete or unmarketable. Our success depends, to some extent, upon our ability to develop, market and sell cost-effective new products and applications that keep pace with technological developments in the markets we serve. We may not be successful in identifying, developing and marketing new products and applications or we may experience difficulties that could delay or prevent the successful development, introduction and marketing of such new products and applications, which could have a material adverse impact on our business and results of operations.

We operate and source internationally, which exposes us to the political, economic and other risks of doing business abroad.
 
We have operations in a number of countries outside of the United States and we source raw materials and components globally. Our international operations are subject to the risks normally associated with conducting business in foreign countries, including but not limited to the following:

limitations on ownership and on repatriation of earnings;
import and export restrictions, tariffs and quotas;
potentially adverse effects including negative economic conditions resulting from war or the threat of war, including the ongoing conflict occurring in the Ukraine;
additional expenses relating to the difficulties and costs of staffing and managing international operations;
labor disputes and uncertain political and economic environments and the impact of foreign business cycles;
changes in laws or policies;
changes in any international trade agreements, such as any changes in European Union membership;
delays in obtaining or the inability to obtain necessary governmental permits;
potentially adverse consequences resulting from the applicability of foreign tax laws;
cultural differences;
increased expenses due to inflation;
weak economic conditions in foreign markets where our subsidiaries distribute their products;
changes in currency exchange rates;
disruptions in transportation and port authorities; and
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regulations involving international freight shipments.

Operating in the international marketplace exposes us to a number of risks, including the need to comply with U.S. and foreign laws and regulations applicable to our foreign operations, including anti-corruption laws such as the Foreign Corrupt Practices Act and the U.K. Bribery Act, United States export control laws, and data privacy laws such as the recently enacted European GDPR. The costs of compliance with these various laws, regulations and policies can be significant and penalties for noncompliance could significantly and adversely impact our business. Our international operations may also be adversely affected by laws and policies affecting foreign trade, investment, taxation, and our ability to effectively source components and raw materials internationally. For example, any significant changes in U.S. trade policy, including the introduction of any new or expanded tariffs, could increase the cost of critical materials and supplies that we source internationally or negatively impact international sales of our products, which would have an adverse effect on our net sales and earnings.

 In addition, political developments and governmental regulations and policies in the countries in which we operate directly affect the demand for our products. For example, decreases or delays in farm subsidies to our agricultural customers, or changes in environmental policies aimed at limiting mowing activities, could adversely affect our business, results of operations and financial condition.

Our acquisition strategy may not be successful, which may adversely affect our business, results of operations and financial condition.

We intend to grow internally and through the acquisition of businesses and assets that will complement our current businesses. To date, a material portion of our growth has come through acquisitions. We cannot be certain that we will be able to identify attractive acquisition targets, obtain financing for acquisitions on satisfactory terms or successfully acquire identified targets. Competition for acquisition opportunities may also increase our costs of
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making acquisitions or prevent us from making certain acquisitions. These and other acquisition-related factors may adversely impact our business, results of operations and financial condition.

We may not be unableable to realize the potential or strategic benefits of the acquisitions we complete, or integrate existing or future acquisitions effectively, and the businesses we have acquired, or may acquire in the future, may not perform as expected.

WeAcquisitions are an important part of our growth strategy and we have completed a number of acquisitions over the past several years. In 2019, we completed three acquisitions, namely Dutch Power, Dixie Chopper, and Morbark, and in 2021 we acquired Timberwolf. Acquisitions can be difficult, time-consuming, and pose a number of risks, including:

potential negative impact on our earnings per share as a result of acquisition costs and related financing costs, among other things;
the assumption of liabilities that are unknown to us at the time of closing;
failure of acquired products to achieve projected sales;
potential downward pressure on operating margins due to lower operating margins of acquired businesses, increased headcount costs and other expenses associated with adding and supporting new products;
disruption of ongoing business operations, including diversion of management’s attention and uncertainty for employees and customers, particularly during the post-acquisition integration process; and
potential negative impact on our relationships with customers, distributors and vendors.

If we do not manage these risks, the acquisitions that we complete may have an adverse effect on our business, our results of operations or financial condition. In addition, we may not be successful in integrating acquired businesses into our existing operations and achieving projected synergies. We could face many risks in integrating acquired businesses, including but not limited to the following:

we may incur substantial costs, delays or other operational or financial challenges in integrating acquired businesses, including integrating each company's accounting, information technology, human resource and other administrative systems to facilitate effective management;
we may be unable to achieve expected cost reductions, to take advantage of cross-selling opportunities, or to eliminate redundant operations, facilities and systems;
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We may encounter problems in integrating the acquired products with our existing and/or new products;
we may need to implement or improve controls, procedures and policies appropriate for a public company which could take a significant amount of time and expense;
acquisitions may divert our management’s attention from the operation of our existing businesses;
we may not be able to retain key personnel of acquired businesses;
there may be cultural challenges associated with integrating management and employees from the acquired businesses into our organization; and
we may encounter unanticipated events, circumstances and legal risk and associated liabilities.

Our integration of acquired businesses requires significant efforts from the management of each entity, including coordinating existing business plans and research and development efforts. Integrating operations may distract management’s attention from the day-to-day operation of the combined companies. Ultimately, our attempts to integrate the operations, technology and personnel of acquired businesses may not be successful. If we are unable to successfully integrate acquired businesses, our future results may be negatively impacted.

In addition, we may be adversely affected if businesses that we have acquired, or that we acquire in the future, do not perform as expected. An acquired business could perform below our expectations for a number of reasons, including legislative or regulatory changes that affect the areas in which the acquired business specializes, the loss of customers and dealers, general economic factors that directly affect the acquired business, and the cultural incompatibility of its management team. Any or all of these reasons could adversely affect our business, results of operation and financial condition.

The agricultural industry and the infrastructure maintenance industry are seasonal, and are affected by the weather, and seasonal fluctuations may cause our results of operations and working capital to fluctuate from quarter to quarter.

In general, agricultural and governmental end-users typically purchase new equipment during the first and second calendar quarters. Other products such as street sweepers, excavators, snow removal equipment, front-end loaders and pothole patchers have different seasonal patterns, as do replacement parts in general. In attempting to achieve efficient utilization of manpower and facilities throughout the year, we estimate seasonal demand months in advance and manufacturing capacity is scheduled in anticipation of such demand. We utilize an annual plan with updated quarterly sales forecasts provided by our marketing divisions and order backlog in order to develop a production plan for our manufacturing facilities. In addition, many of our marketing departments attempt to equalize demand for their products throughout the calendar year by offering seasonal sales programs which may provide additional incentives, including discounts and extended payment terms, on equipment that is ordered during off-season periods. Because we spread our production and wholesale shipments throughout the year to take into account the factors described above, sales in any given period may not reflect the timing of dealer orders and retail demand.

Weather conditions and general economic conditions may affect the timing of purchases and actual industry conditions might differ from our forecasts. In addition to seasonal factors, the agricultural industry is cyclical in nature with sales largely dependent on the state of the farm economy and, in particular, agriculture commodity prices and farm income. Consequently, sudden or significant declines in industry demand could adversely affect our working capital or results of operations.

Extreme weather conditions may impact demand for some of our products and impact our business, results of operations and financial condition.

Extreme weather conditions such as droughts or flooding may adversely affect sales of some of our products including our mowing equipment and other agricultural equipment and related parts. Milder winter conditions with lower snowfall accumulations can have an adverse impact on sales of our snow removal equipment and related parts business in the key markets we serve. In the event unfavorable weather conditions are worsened as a result of global climate change, our business may be adversely affected to a more significant extent.

Our business and operations are subject to risks related to climate change.

The long-term effects of global climate change present both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable. These changes could affect the availability and cost of products, commodities and energy, which may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require. In addition, many of our operations and facilities around the world are in locations that may be impacted by the physical risks of climate change, and we face the risk of losses incurred as a result of physical damage to our facilities, loss or spoilage of inventory and business interruption caused by such events. We also use natural gas, diesel fuel, gasoline and electricity in our operations, all of which could face increased regulation as a result of climate change or other environmental concerns. New legal and regulatory requirements have been, and may continue to be, implemented to address the concern over climate change in an effort to reduce or mitigate the effects of it, and such regulatory requirements dealing with the environmental aspects of the products
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we manufacture could result in significant expenditures in designing and manufacturing new forms of equipment that satisfy such requirements. We cannot currently predict the specific terms of any new climate change legislation or regulation, but any such new legislation or regulation may have a material adverse impact on our business, results of operations, or financial condition.
If we do not retain key personnel and attract and retain other highly skilled employees, our business may suffer.

Our continued success will depend on, among other things, the efforts and skills of our executive officers, including our president and chief executive officer, and our ability to attract and retain additional highly qualified managerial, technical, manufacturing, and sales and marketing personnel. We do not maintain “key man” life insurance for any of our employees, and all of our senior management are employed at will. We cannot assure you that we will be able to attract and hire suitable replacements for any of our key employees. We believe the loss of a key executive officer or other key employee could have an adverse effect on our business, results of operations, and financial condition.

We may not be ableSkilled labor shortages or our ability to realize the potential or strategic benefits of the acquisitions we complete, or we may not be able to successfully address problems encountered in connection with acquisitions.retain qualified employees could adversely affect our operations.

AcquisitionsIn 2021, we experienced labor constraints that negatively impacted our business. Shortages of skilled labor, such as welders and machine operators, are an important part ofongoing and could negatively affect our growth strategy. We have completed a number of acquisitions over the past several years. We expectproduction capabilities or lead to consider opportunities and make additional acquisitions in the future, but we may not find suitable acquisition targets or be able to consummate desired acquisitions due to among other things, unfavorable credit markets or other risks,production inefficiencies, which could harmmaterially impact our operatingfinancial results. Acquisitions can be difficult, time-consuming, and pose a number of risks, including:

potential negative impact on our earnings per share;
failure of acquired products to achieve projected sales;
problems in integrating the acquired products with our products;
potential downward pressure on operating margins due to lower operating margins of acquired businesses,
increased headcount costs and other expenses associated with adding and supporting new products;
difficulties in retaining and integrating key employees;
Our failure to realize expected synergiesattract or cost savings;
disruption of ongoing business operations, including diversion of management’s attention and uncertainty forretain qualified employees and customers, particularly during the post-acquisition integration process;
potential negative impact on our relationships with customers, distributors and vendors; and
the assumption of liabilities that are unknown to us at the time of closing.

If we do not manage these risks, the acquisitions that we complete maycould also have an adverse effect on our business, our results of operations, orand financial condition.

Increasingly stringent engine emission regulations could impact our ability to sell certain of our products into the market and appropriately price certain of our products, which could negatively affect our competitive position and financial results.

The products we manufacture or sell, particularly engines, are subject to increasingly stringent environmental emissionsemission regulations. For instance, the EPA has adopted increasingly stringent engine emissionsemission regulations, including Tier 4 emission requirements applicable to diesel engines in specified horsepower ranges that are used in some of our products. As of January 1, 2012, such requirementsRequirements have expanded to additional horsepower categories and, accordingly, apply to more of the products we sell. While we have developed and implemented plans to achieve full and timely compliance with these requirements, ourOur ability to meet the Tier 4 requirements is subject to many variables, some of which are beyond our direct control. If we fail to meet the Tier 4 requirements and any other EPA emission standards that are currently in place or that may be introduced in the future, our ability to sell our products into the market may be limited, which could have a material adverse effect on our competitive position and financial results.

We are subject on an ongoing basis to the risk of product liability claims and other litigation arising in the ordinary course of business.

Like other manufacturers, we are subject to various claims, including product liability claims, arising in the ordinary course of business, and we are a party to various legal proceedings that constitute routine litigation incidental to our business. We may be exposed to product liability claims in the event that the use of our products results, or is alleged to result, in bodily injury, property damage, or both. We cannot assure you that we will not
19


experience any material product liability losses in the future or that we will not incur significant costs to defend the Company against such claims. While we currently have product liability insurance, we cannot assure you that our product liability insurance coverage will be adequate for any liabilities that may ultimately be incurred or that it will continue to be available on terms acceptable to us. A successful claim brought against us in excess of available insurance coverage or a requirement to participate in a product recall may have a materially adverse effect on our business.

We are subject to environmental, health and safety and employment laws and regulations and related compliance expenditures and liabilities.

Like other manufacturers, the Company is subject to a broad range of federal, state, local and foreign laws and requirements, including those concerning air emissions, discharges into waterways, and the generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and offsite disposal locations, workplace safety and equal employment opportunities. These laws and regulations are constantly changing, and it is impossible to predict with accuracy the effect that changes to such laws and regulations may have on the Company in the future. Like other industrial concerns, the Company’s manufacturing operations entail the risk of noncompliance, and there can be no assurance that the Company will not incur material costs or other liabilities as a result thereof.

Certain propertiesChanges in environmental laws or new laws relating to the emission of greenhouse gases ("GHG") or the emission of other gases may cause us to make additional investment in new product designs or could increase our environmental compliance expenditures. The regulation of GHG emissions could result in other additional costs to the Company contain asbestos thatin the form of tax or emissions allowances, facility improvement costs, and higher input costs. Increased input costs and other costs associated with GHG emissions regulation and related compliance may also negatively impact customer demand. Because the timing and extent of GHG emission regulations or climate change regulations are unknown at this time, we are unable to predict the impact this may have to be remediated over time and it could be additional expense to the Company.on our overall business.
24


 
The Company is subject to various other federal, state, and local laws affecting its business, as well as a variety of regulations relating to such matters as working conditions, equal employment opportunities, and product safety. A variety of state laws regulate the Company’s contractual relationships with its dealers, some of which impose restrictive standards on the relationship between the Company and its dealers, including events of default, grounds for termination, non-renewal of dealer contracts, and equipment repurchase requirements.

We are subject on an ongoing basis to the risk of product liability claims and other litigation arising in the ordinary course of business.

Like other manufacturers, we are subject to various claims, including product liability claims, arising in the ordinary course of business, and we are a party to various legal proceedings that constitute routine litigation incidental to our business. We may be exposed to product liability claims in the event that the use of our products results, or is alleged to result, in bodily injury, property damage, or both. We cannot assure you that we will not experience any material product liability losses in the future or that we will not incur significant costs to defend the Company against such claims. We cannot assure you that our product liability insurance coverage will be adequate for any liabilities that may ultimately be incurred or that it will continue to be available on terms acceptable to us. A successful claim brought against us in excess of available insurance coverage or a requirement to participate in a product recall may have a materially adverse effect on our business.

If we are unable to comply with the terms of our credit arrangements, especially the financial covenants, our credit arrangements could be terminated.
 
We cannot assure you that we will be able to comply with all of the terms of our credit arrangements, especially the financial covenants. Our ability to comply with such terms depends on the success of our business and our operating results. Various risks, uncertainties, and events beyond our control could affect our ability to comply with the terms of our credit arrangements. If we were out of compliance with any covenant required by our credit arrangements following any applicable cure periods, the banks could terminate their commitments unless we could negotiate a covenant waiver. The banks could condition such waiver on amendments to the terms of our credit arrangements that may be unfavorable to us, including a potential increase to the interest rate we currently pay on outstanding debt under our credit arrangements, could increase, which could adversely affect our operating results.
 
Fluctuations in currency exchange rates may adversely affect our financial results.
 
Our earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly in European countries, Canada and Australia, as a result of the sale of our products in international markets. While we do enter into foreign exchange contracts to protect against such fluctuations to an extent (primarily in the U.K. market), we cannot assure you that we will be able to effectively manage these risks. Significant long-term fluctuations in relative currency values, such as a devaluation of the Euro against the U.S. dollar, could have an adverse effect on our future results of operations or financial condition.

Changes concerning the availability of the London Interbank Offered Rate ("LIBOR") may have a negative impact on our business.

Current interest rates on borrowings under our credit facility are variable and include the use of the London Interbank Offered Rate (“LIBOR”). In 2017, the U.K. Financial Conduct Authority announced that it intends to phase out LIBOR by the end of 2021. In addition, other regulators have suggested reforming or replacing other benchmark rates. Although the publication of certain USD LIBOR for key tenors have been extended through June 30, 2023, to allow certain legacy LIBOR-indexed contracts to mature without disruption, there is no certainty as to the outcome of such extension. The discontinuation, reform, or replacement of LIBOR, including with the Secured Overnight Financing Rate identified by the Alternative Reference Rate Committee as the alternative reference rate for US dollar LIBOR, or any other benchmark rates, may result in fluctuating interest rates that may have a negative impact on our interest expense and our profitability.
2025


Risks related to investing in our common stock
 
Because the price of our common stock may fluctuate significantly, it may be difficult for you to resell our common stock when desired or at attractive prices.
 
The trading price of our common stock has and may continue to fluctuate. The closing prices of our common stock on the New York Stock Exchange during 20182021 ranged from $120.13$136.01 to $73.92$164.81 per share, and during 20172020 from $119.29$75.21 to $72.22$143.15 per share. Our stock price may fluctuate in response to the risk factors set forth herein and to a number of events and factors, such as quarterly variations in operating and financial results, litigation, changes in financial estimates and recommendations by securities analysts, the operating and stock performance of other companies that investors may deem comparable to us, news reports relating to us or trends in our industry or general economic conditions. The stock price volatility and trading volume may make it difficult for you to resell your shares of our common stock when desired or at attractive prices.

You may experience dilution of your ownership interests due to the future issuance of additional shares of our common stock.

We may issue shares of our previously authorized and unissued securities, which will result in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue 20,000,000 shares of common stock. On December 31, 2018, 11,736,9242021, 11,927,452 shares of our common stock were issued and outstanding, and there were outstanding options and restricted stock awards totaling an additional 256,006170,226 shares of our common stock. We also have additional shares available for grant under our 2015 Incentive Stock Option Plan and our 20092019 Equity Incentive Plan. Additional stock option or other compensation plans or amendments to existing plans for employees and directors may be adopted. Issuance of these shares of common stock may dilute the ownership interests of our then existing stockholders. We may also issue additional shares of our common stock in connection with the hiring of personnel, future acquisitions, such as the 1,700,000 shares issued as consideration for the acquisition of Bush Hog in 2009, future private placements of our securities for capital raising purposes, or for other business purposes. This would further dilute the interests of our existing stockholders.
 
There is no assurance that we will continue declaring dividends or have the available cash to make dividend payments.
 
On December 19, 2018,January 3, 2022, the Board of Directors of the Company increased its quarterly dividend from $.11$0.14 per share to $.12$0.18 per share. Although we have paid a cash dividend in each quarter since becoming a public company in 1993, there can be no assurance that we will continue to declare dividends or that funds will continue to be available for this purpose in the future. The declaration and payment of dividends are restricted by the terms of our amended and restated revolving credit agreement,facility, are subject to the discretion of our Board of Directors, are not cumulative, and will depend upon our profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by our Board of Directors.

Provisions of our corporate documents may have anti-takeover effects that could prevent a change in control.
 
Provisions of our charter, bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions include prohibiting stockholders from calling stockholder meetings and prohibiting shareholderstockholder actions by written consent. Our Certificate of Incorporation and By-lawsBylaws state that any amendment to certain provisions, including those provisions regarding limitations on action by written consent discussed above, be approved by the holders of at least two-thirds of our common stock. We are also afforded the protections of Section 203 of the Delaware General Corporation Law, which would prevent us from engaging in a business combination with a person who becomes a 15% or greater shareholderstockholder for a period of three years from the date such person acquired such status unless certain board or shareholderstockholder approvals were obtained.

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Future sales, or the possibility of future sales, of a substantial amount of our common stock may depress the price of the shares of our common stock.
 
Future sales, or the availability for sale in the public market, of substantial amounts of our common stock could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities. If we or our existing stockholders sell substantial amounts of our common stock in the public market, or if there is a perception that these sales may occur, the market price of our common stock could decline.
 
Certain stockholders own a significant amount of our common stock, and their interests may conflict with those of our other stockholders.
 
As of December 31, 2018, four2021, six investors - BlackRock, Inc., Henry Crown and Company, Dimensional Fund Advisors LP, andT. Rowe Price Associates, Inc., Victory Capital Management Inc., and The Vanguard Group - beneficially owned approximately 43%49% of our outstanding common stock. As a result, the major stockholders combined could be able to significantly influence the direction of the Company, the election of our Board of Directors, and the outcome of any other matter requiring stockholder approval, including mergers, consolidations and the sale of all or substantially all of our assets, and together with other beneficially owned investors, to prevent or cause a change in control of the Company. Also, pursuant to contractual obligations, affiliates of Henry Crown and Company were entitled to certain rights with respect to the registration of the common stock owned by them under the Securities Act. Pursuant to such registration rights, on March 12, 2012, we filed a registration statement related to the common stock owned by such entities and such registration statement was declared effective by the SEC. The interests of the major stockholders may conflict with the interests of our other stockholders.

Item 1B. Unresolved Staff Comments 

The Company has no unresolved staff comments to report pursuant to Item 1B.

27
22


Item 2. Properties
     As of December 31, 2018,2021, the Company utilized fourteentwenty-nine principal manufacturing plants with sixteen located in the United States, fiveeight in Europe, fourthree in Canada, one in AustraliaBrazil, and one in Brazil.Australia. The facilities are listed below:
Facility
Facility
Square
Footage
  
Principal Types of Products
Manufactured And Assembled
Facility
Square
Footage
 
Principal Types of Products
Manufactured And Assembled
Winn, Michigan*Winn, Michigan*1,100,000 Owned
Tree chippers, Grinders, Brush Cutters, Debarkers, Utility Loaders for Morbark and Boxer
Selma, Alabama*Selma, Alabama*769,000 Owned 
Mechanical Rotary Mowers, Finishing Mowers, Zero Turn Radius Mowers, Backhoes, Front-End Loaders for Bush Hog
Selma, Alabama*769,000 Owned
Mechanical Rotary Mowers, Finishing Mowers, Zero Turn Radius Mowers, Backhoes, Front-End Loaders for Bush Hog
New Philadelphia, Ohio*New Philadelphia, Ohio*430,000 Owned 
Telescopic Excavators for Gradall and Vacuum Trucks for VacAll
New Philadelphia, Ohio*430,000 Owned
Telescopic Excavators for Gradall and Vacuum Trucks for VacAll
Wooster, Ohio*Wooster, Ohio*400,000 Leased
Stump Cutters, Aerial Trimmers, Mulchers, Crawler Trucks for Rayco and Denis Cimaf
Gibson City, Illinois*Gibson City, Illinois*275,000 Owned 
Mechanical Mowers, Blades, Post Hole Diggers, Deep Tillage Equipment, front-end loaders, backhoes, and other implements for Rhino, Bush Hog and OEM's
Gibson City, Illinois*275,000 Owned
Mechanical Mowers, Blades, Post Hole Diggers, Deep Tillage Equipment, front-end loaders, backhoes, and other implements for Rhino, Bush Hog and OEMs
Seguin, Texas*Seguin, Texas*230,000 Owned 
Hydraulic and Mechanical Rotary and Flail Mowers, Sickle-Bar Mowers, and Boom-Mounted Equipment for Alamo Industrial
Seguin, Texas*230,000 Owned
Hydraulic and Mechanical Rotary and Flail Mowers, Sickle-Bar Mowers, and Boom-Mounted Equipment for Alamo Industrial
Indianola, Iowa*Indianola, Iowa*200,000 Owned 
Distribution and Manufacturing of Aftermarket Farm Equipment Replacement and Wear Parts for Herschel/Valu-Bilt
Indianola, Iowa*200,000 Owned
Distribution and Manufacturing of Aftermarket Farm Equipment Replacement and Wear Parts for Herschel/Valu-Bilt
Richmond, Virginia*Richmond, Virginia*197,000 Leased
Leaf Collection Equipment and Replacement Brooms for Street Sweepers for ODB
Richmond, Virginia*197,000 Leased
Leaf Collection Equipment and Replacement Brooms for Street Sweepers for ODB
Neuville, France*Neuville, France*195,000 Owned
Hydraulic and Mechanical Boom-Mounted Hedge and Grass Cutters for Rousseau and SMA
Neuville, France*195,000 Owned
Hydraulic and Mechanical Boom-Mounted Hedge and Grass Cutters for Rousseau and SMA
Mukwonago, Wisconsin*Mukwonago, Wisconsin*171,000 Owned
Truck-Mounted Vacuum Trucks for Super Products
Ludlow, England*Ludlow, England*160,000 Owned 
Hydraulic Boom-Mounted Hedge and Grass Cutters and other Equipment for McConnel and Twose
Ludlow, England*160,000 Owned
Hydraulic Boom-Mounted Hedge and Grass Cutters and other Equipment for McConnel and Twose
Salford Priors, England*Salford Priors, England*157,000 Owned 
Tractor-Mounted Power Arm Flails and other Equipment for Bomford and Twose and Spearhead
Salford Priors, England*157,000 Owned
Tractor-Mounted Power Arm Flails and other Equipment for Bomford and Twose and Spearhead
Sao Joao da Boa Vista, Brazil*Sao Joao da Boa Vista, Brazil*138,000 Owned
Agriculture Mowing Equipment and other Attachments for Santa Izabel
Sao Joao da Boa Vista, Brazil*138,000 Owned
Agriculture Mowing Equipment and other Attachments for Santa Izabel
Chartres, France136,000 Owned Property held for sale
Huntsville, Alabama*Huntsville, Alabama*135,000 Owned 
Air and Mechanical Sweeping Equipment for Schwarze
Huntsville, Alabama*135,000 Owned
Air and Mechanical Sweeping Equipment for Schwarze
New Berlin, Wisconsin*New Berlin, Wisconsin*120,000 Owned
Municipal Snow Removal and Ice Control Equipment for Wausau
New Berlin, Wisconsin*120,000 Owned
Municipal Snow Removal and Ice Control Equipment for Wausau
Middelburg, the Netherlands*Middelburg, the Netherlands*110,000 Owned
Boom Mowers and Stump Grinders for Dutch Power
Englefeld, Saskatchewan, Canada*Englefeld, Saskatchewan, Canada*105,000 Owned
Mechanical Rotary Mowers, Snow Blowers, and Rock Removal Equipment for Schulte
Englefeld, Saskatchewan, Canada*105,000 Owned
Mechanical Rotary Mowers, Snow Blowers, and Rock Removal Equipment for Schulte
St. Valerien, Quebec, Canada*St. Valerien, Quebec, Canada*100,000 Owned 
Snow and Ice Removal Equipment for Tenco
St. Valerien, Quebec, Canada*100,000 Owned
Snow and Ice Removal Equipment for Tenco
Daumeray, France*Daumeray, France*100,000 Owned 
Vacuum Trucks, High Pressure Cleaning Systems and Trenchers for Rivard
Daumeray, France*100,000 Owned
Vacuum Trucks, High Pressure Cleaning Systems and Trenchers for Rivard
Leavenworth, Kansas*Leavenworth, Kansas*72,000 Owned 
Snow Plows and Heavy-Duty Snow Removal Equipment for Henke
Leavenworth, Kansas*72,000 Owned
Snow Plows and Heavy-Duty Snow Removal Equipment for Henke
Giessen, the Netherlands*Giessen, the Netherlands*70,000 Owned
Aquatic Harvesting Boats and Remote Control Mowing Equipment for Alamo Group The Netherlands
Sioux Falls, South Dakota*Sioux Falls, South Dakota*66,000 Owned 
Hydraulic and Mechanical Mowing Equipment for Tiger
Sioux Falls, South Dakota*66,000 Owned
Hydraulic and Mechanical Mowing Equipment for Tiger
New Berlin, Wisconsin*55,000 Owned
Truck-Mounted Vacuum Trucks for Super Products
Hopkinton, New Hampshire55,000 Owned
Distributor of Public Works and Runway Maintenance Products for H.P. Fairfield
Skowhegan, Maine47,000 Owned
Distributor of Public Works and Runway Maintenance Products for H.P. Fairfield
Brookfield, Wisconsin*46,000 Leased
Truck-Mounted Vacuum Trucks for Super Products
Hopkinton, New Hampshire*Hopkinton, New Hampshire*55,000 Owned
Distributor of Public Works and Runway Maintenance Products for H.P. Fairfield
Skowhegan, Maine*Skowhegan, Maine*47,000 Owned
Distributor of Public Works and Runway Maintenance Products for H.P. Fairfield
Kent, Washington*Kent, Washington*42,800 Owned
Truck-Mounted Sweeping Equipment for the contractor market branded NiteHawk
Kent, Washington*43,000 Owned
Truck-Mounted Sweeping Equipment for the contractor market branded NiteHawk
Ayer's Cliff, Quebec, Canada*Ayer's Cliff, Quebec, Canada*41,000 Owned
Municipal Snow Removal and Ice Control Equipment for Everest
Ayer's Cliff, Quebec, Canada*41,000 Owned
Municipal Snow Removal and Ice Control Equipment for Everest
Fond du Lac, Wisconsin*38,000 Owned
Municipal Snow Removal and Ice Control Equipment for Wausau
Suffolk, England*Suffolk, England*35,000 Leased
Commercial wood chippers and other forestry equipment for Timberwolf
Peschadoires, France*Peschadoires, France*22,000 Owned 
Replacement Parts for Blades, Knives and Shackles for Forges Gorce
Peschadoires, France*22,000 Owned
Replacement Parts for Blades, Knives and Shackles for Forges Gorce
Oakey, Australia*Oakey, Australia*18,000 Leased
Agriculture Mowing Equipment and other Attachments for Fieldquip and Superior
Oakey, Australia*18,000 Leased
Agriculture Mowing Equipment and other Attachments for Fieldquip
Drummondville, Quebec, Canada*17,000 Owned
Heavy-Duty Snow Removal Equipment for RPM
Matao, BrazilMatao, Brazil12,000 Owned
Agriculture Mowing Equipment and other Attachments for Herder
Matao, Brazil12,000 Owned
Agriculture Mowing Equipment and other Attachments for Herder
Installation & Rental Facilities, Warehouses & SalesInstallation & Rental Facilities, Warehouses & Sales277,000 LeasedServices Parts Distribution, Installation Facilities and Sales Office Installation & Rental Facilities, Warehouses & Sales585,000 Leased / OwnedServices Parts Distribution, Installation Facilities and Sales and After Market Office
Offices, Seguin, Texas Offices, Seguin, Texas 21,000 Owned Corporate Office Offices, Seguin, Texas21,000 OwnedCorporate Office
TotalTotal4,221,855 0.8726 Total6,179,000 80%
     * Principal manufacturing plants
28


Approximately 87%80% of the manufacturing, warehouse and office space is owned.  In 2018, the Company purchased the properties at the NiteHawk facility location in Kent, Washington, the Santa Izabel facility in Sao Joao da Boa Vista, Brazil and a new facility for HP Fairfield in Hopkinton, New Hampshire. The Company considers each of these facilities to be well maintained, in good operating condition and adequate for its present level of operations. Our Chartres, France location which was listed for sale, was sold in February of 2021. In the fourth quarter of 2020, the Company announced the future closure of Dutch Power's facility in Enschede, The Netherlands. The facility was subsequently sold in April of 2021.
23


Item 3. Legal Proceedings

The Company is subject to various legal actions which have arisen in the ordinary course of its business. The most prevalent of such actions relate to product liability, which is generally covered by insurance after various self-insured retention amounts. While amounts claimed might be substantial and the ultimate liability with respect to such litigation cannot be determined at this time, the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations; however, the ultimate resolution cannot be determined at this time.Like other manufacturers, the Company is subject to a broad range of federal, state, local and foreign laws and requirements, including those concerning air emissions, discharges into waterways, and the generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and off-site disposal locations, workplace safety and equal employment opportunities. These laws and regulations are constantly changing, and it is impossible to predict with accuracy the effect that changes to such laws and regulations may have on the Company in the future. Like other industrial concerns, the Company’s manufacturing operations entail the risk of noncompliance, and there can be no assurance that the Company will not incur material costs or other liabilities as a result thereof.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock trades on the New York Stock Exchange under the symbol: ALG. On February 22, 2019,18, 2022, there were 11,739,07411,934,602 shares of common stock outstanding, held by approximately 8984 holders of record, but the total number of beneficial owners of the Company’s common stock exceeds this number. On February 22, 2019,18, 2022, the closing price of the common stock on the New York Stock Exchange was $94.72$136.62 per share.

The following table sets forth, for the period indicated, on a per share basis, the range of high and low sales prices for the Company’s common stock as quoted by the New York Stock Exchange. These price quotations reflect inter-dealer prices, without adjustment for retail markups, markdowns or commissions, and may not necessarily represent actual transactions.
20182017
    Cash      Cash
  Sales Price Dividends  Sales Price Dividends
Quarter Ended High Low DeclaredQuarter Ended High Low Declared
March 31, 2018$120.22 $103.38 $.11 March 31, 2017$79.50 $71.20 $.10 
June 30, 2018118.93 88.60 .11 June 30, 201792.67 71.72 .10 
September 30, 2018102.29 88.13 .11 September 30, 2017107.69 86.80 .10 
December 31, 201893.45 72.85 .11 December 31, 2017119.50 104.87 .10 

On December 19, 2018,January 3, 2022, the Board of Directors of the Company declared a quarterly dividend of $.12$0.18 per share which was paid on January 29, 2019February 1, 2022 to holders of record as of January 17, 2019.18, 2022. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends as they depend on future earnings, capital requirements and financial condition. In addition, the payment of dividends is subject to restrictions under the Company’s bank revolving credit agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in Item 7 of Part II of this Annual Report on Form 10-K for a further description of the bank revolving credit agreement.
 
Information relating to compensation plans under which equity securities of the Company are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K.
2429


Stock Price Performance Graph

The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Alamo Group Inc. specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
  
The following graph and table set forth the cumulative total return to the Company's stockholders of our Common Stock during a five-year period ended December 31, 2018,2021, as well as the performance of an overall stock market index (the S&P SmallCap 600 Index) and the Company's selected peer group index (the Russell 2000 Index).
 
The Company believes a representative industry peer group of companies with a similar business segment profile does not exist. The SEC has indicated that companies may use a base other than industry or line of business for determining its peer group index, such as an index of companies with similar market capitalization. Accordingly, the Company has selected the Russell 2000 Index, a widely used small market capitalization index, to use as a representative peer group.


alg-20181231_g1.jpgalg-20211231_g1.jpg

*$100 invested on 12/31/1316 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 20192022 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 20192022 Russell Investment Group. All rights reserved.

12/1312/1412/1512/1612/1712/18 12/1612/1712/1812/1912/2012/21
Alamo Group Inc. Alamo Group Inc. 100.00 80.27 86.87 127.68 190.25 130.91 Alamo Group Inc.100.00149.01102.53167.31184.72197.82
S&P SmallCap 600S&P SmallCap 600100.00 105.76 103.67 131.20 148.56 135.96 S&P SmallCap 600100.00113.23103.63127.24141.60179.58
Russell 2000Russell 2000100.00 104.89 100.26 121.63 139.44 124.09 Russell 2000100.00114.65102.02128.06153.62176.39




2530


Item 6. Selected Financial Data
The following selected financial data is derived from the consolidated financial statementsPurchase of Alamo Group Inc. and its subsidiaries. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.Equity Securities
  
Fiscal Year Ended December 31, (1)
 
(in thousands, except per share amounts)
20182017201620152014
Operations:         
Net sales $1,008,822 $912,380 $844,748 $879,577 $839,055 
Income before income taxes 94,531 82,367 62,189 66,867 60,605 
Net income 73,486 44,315 40,045 43,209 41,151 
Percent of sales 7.3 %4.9 %4.7 %4.9 %4.9 %
Earnings per share       
Basic 6.30 3.84 3.50 3.81 3.47 
Diluted 6.25 3.79 3.46 3.76 3.42 
Dividends per share 0.44 0.40 0.36 0.32 0.28 
Average common shares       
Basic 11,660 11,549 11,434 11,349 11,875 
Diluted 11,761 11,682 11,565 11,482 12,039 
Financial Position:       
Total assets $721,633 $639,671 $552,776 $603,503 $632,886 
Short-term debt and current maturities 119 82 73 77 551 
Long-term debt, excluding current maturities 85,179 60,000 70,017 144,006 190,024 
Stockholders’ equity $507,371 $449,108 $387,717 $360,469 $337,670 
(1)   Includes the results of operations of companies acquired from the closing dates of acquisitions.
26


Due to the COVID-19 pandemic, in April of 2020, the Company announced that it had temporarily suspended its share repurchase program for the year.

Item 6. Reserved

Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Outlook
 
This reportreport contains forward-looking statements that are based on Alamo Group’s current expectations. 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 11.14.

 In 2018, several factors helped drive positive resultsWhile we experienced strong demand in our business including, among other things,markets and across our full range of products in 2021, we were confronted with the full year benefitdirect and indirect consequences of the acquisitionsCOVID-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 completed in 2017, improved demand in governmental and someremain concerned about the ongoing negative effects of the non-governmental marketspandemic. During the first few weeks of 2022, we serve, increased salesexperienced an increase in employee absences due to illness and rentals of vacuum truck equipment, modest strengthening in the UKquarantining, and European agricultural markets, continuous improvement in our operational efficiencieswe continue to struggle with inflationary pressures, supply chain issues and from the recently enacted Tax Cuts and Jobs Act ("TCJA") which reformed U.S. tax legislation. These positive factors more than offset thelabor shortages. We are hopeful that these negative impacts on our business resulting from soft market conditions in U.S. agricultural sales, increased raw material and input costs and changes in trade policy by the U.S. and some of its trading partners. While the Company believes that some of the negative effects experienced in 2018 are showing signs of moderating in 2019, we remain cautious in terms of our outlook since market conditions and input costs can and do change regularly, while trade policy remains an area of uncertainty.  As a result of improving market conditions, especially in our Industrial Division, our backlog substantially increasedinfluences will moderate during the course of 2018 and, as of December 31, 2018, was in excess of $240 million, an increase of 10% over December 31, 2017.  While this level of backlogthe year, but it is encouraging, it also challenges our capacitieshard to efficiently produce products necessarydetermine the extent to fulfillwhich these higher order levels.  Consequently,issues will continue with the information we currently have continued our focus on ongoing operational improvement initiatives and, as we did in 2018, we will increase capital expenditures in 2019 above the average capital expenditure levelsavailable to us. The extent of the past several years.  In addition,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 will continueare unable to focuspredict with any confidence the likely impact of the COVID-19 pandemic on employee retention efforts and related programs.  Weour future operations. Of course, we may also be negatively affected by several other unanticipated factors, such as a weakness in the overall economy; significant changes in currency exchange rates; further changes in trade policy,or tax policy; increased levels of government regulations;regulation; weakness in the agricultural sector;end-markets we serve; acquisition integration issues; budget constraints or revenue shortfalls in governmental entities; and other risks and uncertainties as described in “Risk Factors.”

2021 Performance

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.
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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 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.
The following tables set forth, for the periods indicated, certain financial data:
Fiscal Year Ended December 31,  Fiscal Year Ended December 31,
Net sales (data in thousands):Net sales (data in thousands):201820172016Net sales (data in thousands):202120202019
Industrial$598,930 $522,706 $484,088 
Agricultural235,069 227,389 205,834 
European 174,823 162,285 154,826 
Vegetation ManagementVegetation Management$812,676 $654,630 $502,194 
Industrial EquipmentIndustrial Equipment521,547 508,836 616,944 
Total net salesTotal net sales$1,008,822 $912,380 $844,748  Total net sales$1,334,223 $1,163,466 $1,119,138 
Cost and profit margins, as percentages of net sales: Cost and profit margins, as percentages of net sales:       Cost and profit margins, as percentages of net sales:   
Cost of sales Cost of sales 74.6 %74.3 %75.7 %Cost of sales74.9 %74.8 %75.6 %
Gross profit Gross profit 25.4 %25.7 %24.3 %Gross profit25.1 %25.2 %24.4 %
Selling, general and administrative expenses 15.4 %16.0 %16.3 %
Selling, general, administrative, and amortization expensesSelling, general, administrative, and amortization expenses16.3 %17.1 %16.0 %
Income from operations Income from operations 10.0 %9.7 %8.0 %Income from operations8.8 %8.1 %8.5 %
Income before income taxes Income before income taxes 9.4 %9.0 %7.4 %Income before income taxes8.2 %6.9 %7.6 %
Net income Net income 7.3 %4.9 %4.7 %Net income6.0 %5.0 %5.6 %
                                                                                           
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Results of Operations
 
Fiscal 20182021 compared to Fiscal 2017 2020
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. Sales in
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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, 20182020 (“2018”2020”) were $1,008,822,000,$1,163.5 million, an increase of $96,442,000$44.4 million or 10.6%4.0% compared to $912,380,000$1,119.1 million for the fiscal year ended December 31, 20172019 (“2017”2019”). The increase was mainly attributable to the increased demand for our products in the Company's Industrial and European Divisions. Our recent acquisitions of Santa Izabel, ODBMorbark and RPMDutch Power, added $39,396,000which year over year contributed net sales of $160.5 million. Negatively affecting sales in 2020, was the onset of the COVID-19 pandemic which began to negatively affect the increaseCompany's operations and customer demand late in net sales. Also contributing to the increase in sales for 2018 were favorable currency translation effects primarily on our European sales.first quarter of 2020.

Net IndustrialVegetation Management sales were $598,930,000$654.6 million in 20182020 compared to $522,706,000$502.2 million in 2017,2019, an increase of $76,224,000$152.4 million or 14.6%. The increase primarily came30.4%, mainly coming from higher sales of vacuum trucks, mowing equipment, sweepers, excavators and snow equipment. Also contributing to the increase were the acquisitions of ODBDutch Power and RPMMorbark which together added $29,174,000mentioned above and improved sales of agricultural mowing as demand for those products in net sales. 

Net Agricultural sales were $235,069,0002020 outpaced demand in 2018 compared to $227,389,000 in 2017, representing an increase of $7,680,000 or 3.4%. The increase2019. This was a result of the acquisition of Santa Izabel which accounted for $10,222,000 in net sales. Negatively affecting this Division were soft market conditions which resulted from lower farm incomes and commodity prices andoffset by the impacts from the COVID-19 pandemic that began to materially affect the Division late in the first quarter of new2020. This included temporary plant closures in the U.S., France and retaliatory tariffs.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 EuropeanIndustrial Machinery sales increased $12,538,000 or 7.7% to $174,823,000were $508.8 million in 20182020 compared to $162,285,000$616.9 million in 2017.2019, representing a decrease of $108.1 million or 17.5%. The increase was primarily due to improvedCOVID-19 pandemic materially impacted all product lines in this Division, which resulted in significantly lower sales during 2020. This Division also had
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several operational disruptions throughout 2020 including temporary plant closures and delays in both the U.K. and French agricultural markets. Also contributing to sales in 2018 were the effects of currency translation rates.customer deliveries.

Gross profit for 20182020 was $256,115,000 (25.4%$293.7 million (25.2% of net sales) compared to $234,693,000 (25.7%$273.5 million (24.4% of net sales) in 2017,2019, an increase of $21,422,000.$20.2 million. The increase in gross profit for 2018mainly came from higher equipment sales in the Company's Industrial and European Divisions and, to a lesser extent, the acquisitions of Santa Izabel, ODBDutch Power and RPMMorbark. . NegativelyGross 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 margin percentage for 2018 were higher steel, freight and other input costs (including tariff impacts) which more than offset productivity improvements, pricing actions, and purchasing initiatives.  To a lesser extent, gross margin percentage was also impacted byof 2020 were $4.8 million of charges on sales of inventory that had been previously stepped-up related to the mix of higher wholegoods, tractor and chassis sales compared to modest higher margin part sales.Morbark acquisition.

Selling, general and administrative expenses (“SG&A”) were $155,027,000 (15.4%$184.2 million (15.8% of net sales) in 20182020 compared to $145,955,000 (16.0%$172.9 million (15.5% of net sales) in 2017,2019, an increase of $9,072,000. The increase in SG&A was primarily the result of the acquisitions of$11.3 million. Santa Izabel, ODBMorbark and RPMDutch Power accounted for $23.6 million of net additional SG&A expense in 2020 offset by $12.3 million in expense savings related to the amountCOVID-19 pandemic. 2019 included $1.9 million of $5,120,000acquisition expenses related to the Morbark and Dutch Power. Amortization expense in 2020 was $14.7 million compared to a lesser extent higher commissions$5.7 million in 2019, an increase of $9.0 million. The increased amortization expense in 2020 was primarily due to the acquisitions of Morbark and other selling expenses and higher spending on research and development projects.Dutch Power.
 
Interest expense for 20182020 was $5,493,000$15.8 million compared to $4,839,000$10.7 million in 2017,2019, an increase of $654,000$5.1 million or 13.5%47.4%. The increase in interest expense in 2018 came from higher debt levels from2020 was the result of increased demandsborrowings due to the Morbark acquisition in working capital and an increase2019 offset by a decrease in interest rates during 2018.rates.

Other income (expense), net was expense of $1,474,000$0.6 million during 20182020 compared to expense of $1,868,000$0.8 million in 2017.2019. The expense in 20182020 and the expense in 2017 were primarily the result of changes in exchange rates.

Provision for income taxes was $21,045,000 (22.3% of income before income taxes) for 2018 compared to $38,052,000 (46.2% of income before income taxes) in 2017. The decrease in both income taxes and the effective tax rate was due to the recent enactment of the TCJA that lowered the U.S. statutory income tax rate from 35% in 2017 to 21% in 2018. In addition, the Company recorded during 2018, a net benefit to income taxes of $3,334,000 relating to the adjustment in the provisional amounts recorded in the fourth quarter of 2017 upon enactment of TCJA, as more fully described in Note 13 of the Notes to the Consolidated Financial Statements. The combination of these two factors reduced the Company's effective income tax rate for 2018 to 22.3%.

Net income for 2018 was $73,486,000 compared to $44,315,000 in 2017, due to the factors described above.

Fiscal 2017 compared to Fiscal 2016 
The Company’s net sales in the fiscal year ended December 31, 2017 (“2017”) were $912,380,000, an increase of $67,632,000 or 8.0% compared to $844,748,000 for the fiscal year ended December 31, 2016 (“2016”). The
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increase was mainly attributable to the increased demand for our products in all three of the Company's Divisions. Also contributing to the increase in sales were the acquisitions of Santa Izabel, ODB and RPM in the amount of $25,488,000.

Net Industrial sales were $522,706,000 in 2017 compared to $484,088,000 in 2016, an increase of $38,618,000 or 8.0%. The increase primarily came from higher sales of mowing equipment, sweepers, excavators and vacuum trucks. Also contributing to the increase were the acquisitions of ODB and RPM which together added $19,759,000. These increases were offset by lower sales of snow removal products due to mild weather conditions during the early part of 2017.

Net Agricultural sales were $227,389,000 in 2017 compared to $205,834,000 in 2016, representing an increase of $21,555,000 or 10.5%. The increase resulted from higher demand for our products despite some continued softness in the overall agricultural market. Also contributing to the increase was the acquisition of Santa Izabel in the amount of $5,729,000.

Net European sales increased $7,459,000 or 4.8% to $162,285,000 in 2017 compared to $154,826,000 in 2016. The increase was primarily due to improved sales in the U.K. and French agricultural markets as well as increased sales from Rivard vacuum trucks. Negatively affecting European sales in 2017 were currency translation rates.
Gross profit for 2017 was $234,693,000 (25.7% of net sales) compared to $205,099,000 (24.3% of net sales) in 2016, an increase of $29,594,000. The increase in gross profit for 2017 came from higher equipment and part sales in all three of the Company's divisions and, to a lesser extent, the acquisitions of Santa Izabel, ODB and RPM. The increased higher margin percentage for 2017 came from productivity improvements, pricing actions, and purchasing initiatives.
Selling, general and administrative expenses (“SG&A”) were $145,955,000 (16.0% of net sales) in 2017 compared to $137,479,000 (16.3% of net sales) in 2016, an increase of $8,476,000. The increase in SG&A was primarily the result of the acquisitions of SantaIzabel, ODB and RPM in the amount of $4,491,000 and to a lesser extent higher commissions and other selling expenses due to increased sales as well as transactional costs relating to the acquisitions.
Interest expense for 2017 was $4,839,000 compared to $5,914,000 in 2016, a decrease of $1,075,000 or 18.2%.The decrease in expense in 2017 came from lower debt levels despite a marginal increase in interest rates during 2017.

Other income (expense), net was expense of $1,868,000 during 2017 compared to income of $269,000 in 2016. The expense in 2017 and the income in 20162019 were primarily the result of changes in exchange rates.

Provision for income taxes was $38,052,000 (46.2%$22.0 million (27.5% of income before income taxes) for 20172020 compared to $22,144,000 (35.6%$21.5 million (25.4% of income before income taxes) in 2016.2019. The increasesincrease in both income taxes and the effective tax rate were primarilyfor 2020 was due to the reversal of a $10,236,000 tax expenseFIN 48 benefit recognized in 2017 resulting from2019 partially offset by the implementationbenefit of the provisions under the TCJA signed into law on December 22, 2017. The effective rate for 2017, excluding the impactfinal GILTI regulations issued in July of the $10,236,000 expense related to TCJA, was 33.8%.

See Note 13 of the consolidated financial statements for additional information about the TCJA and $10,236,000 expense recorded by the Company.2020.

Net income for 20172020 was $44,315,000$57.8 million compared to $40,045,000$63.1 million in 2016,2019, 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 AgriculturalVegetation 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 roundyear-round sales programs. These sales, primarily in the AgriculturalVegetation Management Division, help balance the Company’s production during the first and fourth quarters.
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As of December 31, 2018,2021, the Company had working capital of $351,991,000,$419.6 million, which represents ana increase of $60,827,000$61.4 million from working capital of $291,164,000$358.2 million as of December 31, 2017.2020. The increase in working capital was primarily due to sales growth and increased demand for our products which is reflected in theas well as increased inventory to support Company's higher backlog levels along with increased work in both the Industrial and European Divisions as well as higher inventory levels from longer lead-times for purchased components.process due to supply chain constraints.
 
Capital expenditures were $26,587,000$25.3 million for 2018,2021, compared to $13,490,000$17.9 million for 2017 which included2020. The increase was related to the purchaseCompany returning to a more normalized level of capital expenditures as the land and buildings atCompany limited new capital expenditures in 2020 in response to the Company's NiteHawk and Santa Izabel facilities in the amount of $7,794,000.COVID-19 pandemic. The Company will continue to have higher capital expenditures in order to increase production capacity, support improvement in operational efficiencies, invest in technology as well as acquiring new manufacturing locations or purchasing currently leased facilities. We will fund any future capital expendituresexpenditure from operating cash flows or through itsour 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 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. In
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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 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.

In conjunction with our implementationNet cash used by financing activities was $23.0 million for 2021, compared to $164.2 million for 2020. The majority of the provisions of TCJA, and as more fully describednet cash used by financing activities in Note 132020 was primarily due to the consolidated financial statements, we recorded a liability in 2017 forpay down of debt related to the estimated U.S. federal tax due on the deemed repatriation2019 acquisitions of the accumulated earningsMorbark and profits of our international subsidiaries not previously distributed. We will pay this liability over the eight-year period permitted by the TCJA provisions. Dutch Power.

The deemed repatriation of these accumulated earnings and profits are no longer subject to any U.S. federal income tax consequences associated with the repatriation of the Company's $23,209,000Company had $37.2 million in cash and cash equivalents held by its foreign subsidiaries as of December 31, 2018; however, a portion would be subject to foreign withholding tax.2021. The majority of these funds are at our FrenchEuropean and Canadian facilities. As a result of the fundamental changes to the taxation of multinational corporations created by TCJA, we no longer intend to permanently reinvest all of the historical undistributed earnings of our European foreign affiliates. While theThe Company intends to use some of these funds for working capital and capital expenditures outside the U.S., recent changes in the U.S. tax laws have substantially mitigated the cost of repatriation. Consequently, the Company now intendswill continue to repatriate foreignEuropean and Canadian cash and cash equivalents in excess of amounts needed to fund foreign operating and investing activities.activities, but will need to monitor exchange rates to determine the appropriate timing of such repatriation given the current relative strength of the U.S. dollar. Repatriated funds will initially be used to reduce funded debt levels under the Company's current credit facility and subsequently used to fund working capital, capital investments and acquisitions company-wide.
Net cash provided by operating activities was $12,910,000 for 2018, compared to $70,804,000 for 2017. The decrease of cash from operating activities came primarily from volume related increases in working capital due to higher inventory levels and increased investment in rental equipment in the Industrial Division and increased inventory levels in the European Division due to sales growth.
Net cash used in investing activities was $25,358,000 for 2018, compared to $51,276,000 for 2017. The decrease in cash used in investing activities was primarily due to the acquisitions of Santa Izabel, ODB and RPM in 2017. 

Net cash provided by financing activities was $22,208,000 for 2018, compared to net cash usedOn October 24, 2019, the Company, as Borrower, and each of $12,400,000 for 2017. The increase in cash used in financing activities was due to the increase in working capital in 2018 from sales growth in the Industrial Division and toits domestic subsidiaries as guarantors, entered into a lessor extent from the European Division. Also contributing to the increase in 2018 was higher purchases of property, plant and equipment.
The Company maintains an unsecured revolving credit facility with certain lenders under itsSecond Amended and Restated Revolving Credit Agreement ("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 commitments from lenders under this Agreement are $250,000,000amount 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 $50,000,000.$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 2024. 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 usthe Company to maintain varioustwo financial covenants, including a minimum earnings before interest and tax to interest expense ratio, 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. The Agreement also contains other customary covenants, representations and events of defaults. Effective December 20, 2016, the Company amended its revolving credit facility to extend the termination date, reduce LIBOR interest margin and to modify certain financial and other covenants in order to meet the ongoing needs of the Company's business and to allow for greater flexibility in relation to future acquisitions. The expiration date of the revolving credit facilityTerm Facility and the Revolver Facility is December 20, 2021.October 24, 2024. As of December 31, 2018, $85,000,0002021, $269.5 million was outstanding under the Agreement.Credit Agreement, $265.5 millionon the Term Facility and$4.0 million on the Revolver Facility. On December 31, 2018, $1,388,0002021, $2.4 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of
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business as required by vendors' contracts resulting in $163,612,000$255.0 million in available borrowings. As of December 31, 2018, theThe Company wasis in compliance with the terms and conditions ofcovenants under the Agreement.

Management believes the revolving credit facilityAgreement and the Company’s ability to internally generate funds from operations should be sufficient to meet the Company’s cash requirements for the foreseeable future. However, future challenges affecting the banking industry and credit markets in general cancould potentially cause changes to credit availability, which creates a level of uncertainty.

Inflation
 
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 Adopted on January 1, 2018

In May 2014, theAs discussed in Note 2 of Notes to Consolidated Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605. “Revenue Recognition,” and most industry-specific guidance. EffectiveStatements, certain new financial accounting pronouncements became effective January 1, 2018 the Company adopted the provisions of Topic 606 using the modified retrospective method of adoption. There was no impact to our financial position2021, or results of operations as of and for the nine months ended September 30, 2018 as a result of adopting Topic 606. Therefore, there was no cumulative-effect adjustment to retained earnings as of January 1, 2018 for the impact of the adoption of Topic 606. See “Revenue Recognition” below for our accounting policy affected by our adoption of Topic 606.

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, “Leases.” This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Similar to current guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. The guidance will become effective for us on January 1, 2019.  As a lessee, this standard will primarily impact our accounting for long-term real estate and office equipment leases, for which we will recognize a right-of-use asset and a corresponding lease liabilityin the future. The effect on our consolidated balance sheet. We will apply this guidance prospectively, beginning January 1, 2019 and currently estimate the impact on our balance sheet to be approximately $8 million. We are nearing completion of our process to implement a lease accounting system for our leases, including the conversion of our existing lease data to the new system and implementing relevant internal controls and procedures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” to improve information on credit losses for financial instruments. The ASU replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses.  The ASU is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted beginning in fiscal years beginning after December 18, 2018. The Company does not expect thestatements upon adoption of this ASU to have a material impact on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). Upon adoption of the ASU, entities will be required to disclose a description of the accounting policy for releasing income tax effects from accumulated other comprehensive income. The standardthese pronouncements is required to be adopted for periods beginning after December 15, 2018, with early adoption available for any set of financial statements that have yet to be issued or made available for issuance including retrospectively for any period in which the effect of the change is the U.S. corporate income tax ratediscussed in the TCJA is recognized. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.above-referenced note.

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In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,” which amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Reform. This guidance clarifies the application of Topic 740 in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting under ASC Topic 740 for certain income tax effects of Tax Reform for the reporting period in which the Tax Reform was enacted. During 2018, we revised our initial provisional amount recorded for the transitional tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and the impact of the federal tax rate change on the value of our deferred tax assets and liabilities. For further information, see Note 13 to the consolidated financial statements.

In August 2018, the FASB issued Accounting Statement Update (ASU) No. 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosures requirements on fair value measurements. Among other things, the amendments add disclosures for changes in unrealized gains and losses on Level 3 fair value measurements and requires additional disclosures on unobservable inputs associated with Level 3 assets. The guidance will become effective for us on January 1, 2020. The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.

In August 2018, the FASB issued Accounting Statement Update (ASU) No. 2018-14, “Compensation, Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The update removes certain disclosures that are no longer considered cost beneficial and adds disclosure requirements identified as relevant. The guidance will become effective for us on January 1, 2021 with early adoption permitted for any financial statements that have not been issued. The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.

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

The following table shows the Company’s approximate obligations and commitments to make future payments under contractual obligations as of December 31, 2018:2021:
Payment due by period  Payment due by period
(in thousands) (in thousands)   Less than 1-3 3-5 More than (in thousands) Less than1-33-5More than
Contractual Obligations Contractual Obligations Total 1 Year Years Years 5 Years Contractual ObligationsTotal1 YearYearsYears5 Years
Long-term debt obligations Long-term debt obligations $85,000 $— $85,000 $— $— Long-term debt obligations$269,498 $15,000 $254,498 $— $— 
Capital lease obligations 298 119 158 21 — 
Finance and operating lease obligationsFinance and operating lease obligations18,259 4,981 6,492 3,696 3,090 
Interest obligations Interest obligations 10,124 3,414 6,710 — — Interest obligations12 — — 
Operating lease obligations 8,312 3,310 3,761 1162 79 
Purchase obligations Purchase obligations 146,995 146,995 — — — Purchase obligations338,017 338,017 — — — 
Total Total$250,729 $153,838 $95,629 $1,183 $79  Total$625,786 $358,002 $260,998 $3,696 $3,090 
 
Definitions:
A.Long-term debt obligation means a principal payment obligation under long-term borrowings.
B.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.
C.Interest obligation representsmeans 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, 2018.
C.Operating lease obligation means a payment obligation under a lease classified as an operating lease.2021.
D.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: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions.
 
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Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
Critical Accounting Policies

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 policiespolicy 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.

Business Combinations

Business acquisitions are accountedWe account for by the acquisition method of accounting. Under this method,a business in accordance with the purchase priceaccounting standards codification guidance for business combinations, whereby the total consideration transferred is allocated to the assets acquired and the liabilities assumed, including amounts attributable to intangible assets based on thetheir respective estimated fair value at the timevalues as of the date of acquisition. AnyGoodwill represents the excess purchase priceof consideration transferred over the estimated fair value of identifiablethe net assets acquired and liabilities assumed is recorded as goodwill. We believe thein a business combination.

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Assigning estimated fair values assigned 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 assumptions; however, thesebut 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 may be incompleteinclude, 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 inaccurate,sales comparison approach, or the cost approach; estimating future cash flows based on projected revenues and/or margins that we expect to generate subsequent to an acquisition; applying an appropriate discount rate to estimate the present value of those projected cash flows we expect to generate subsequent to an acquisition; selecting an appropriate royalty rate or estimating a customer attrition or technological obsolescence factor where necessary and unanticipated eventsappropriate given the nature of the respective asset; assigning the appropriate contributory asset charge where needed; determining an appropriate useful life and circumstances may occur.the related depreciation or amortization method for the respective asset; and assessing the accuracy and completeness of other historical financial metrics of the acquiree used as standalone inputs or as the basis for determining estimated projected inputs such as margins, customer attrition, and costs to hold and sell product.

Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment, and economic obsolescence. In making other assumptions on valuation and useful lives, we considered the unique nature of the acquisition and we utilized a third-party valuation firm to assist us in the valuation of the acquired intangibles and the resulting allocation of purchase price for the acquisition.

Sales Discounts
On December 31, 2018, the Company had $18,123,000 in reserves for sales discounts compared to $15,652,000 on December 31, 2017 on product shipped to our customers under various promotional programs. The most common programs provide a discount when the customer pays within a specified period of time. 

The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time. The cost of these discounts is estimated based on historical experience and known changes in promotional programs and is reported as a reduction to sales when the product sale is recognized. The reserve is adjusted if discounts paid differ from those estimated. Historically, those adjustments have not been material.
Goodwill Impairment

Goodwill represents the excess of the purchase price of acquired businesses overdetermining the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested at least annually for impairment at the reporting unit level. Definite-lived intangible assets that are also tested for impairment atseparately identifiable from goodwill, we typically utilize the reporting unit level whenever eventsincome approach, which discounts the projected future cash flows using an appropriate discount rate that reflects the risks associated with the projected cash flows. However, in certain instances, particularly in relation to developed technology or circumstances make it likely that an impairmentpatents, we may have occurred. Reporting units are operating segmentsutilize the cost approach depending on the nature of the respective intangible asset and the recency of the development or componentsprocurement of operating segments for which discrete financial information is available.

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Goodwill is reviewed for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and determinesuch technology. In determining the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the quantitative goodwill impairment test, we compare theestimated fair value of each reporting unit, whichacquired inventory, we primarily determine using an incometypically utilize the cost approach based onfor raw materials and the present value of discounted cash flows, tosales comparison approach for finished goods, work in process and component parts. In determining the respective carrying value, which includes goodwill. If theestimated fair value of acquired property, plant, and equipment, we typically utilize the reporting unit exceeds its carrying value,sales comparison approach or the goodwill is not considered impaired. Ifcost approach depending on the carrying value is higher thannature of the fair value,respective asset and the difference would be recognized as an impairment loss.recency of the construction or procurement of such asset.

We typically measuremay refine the estimated fair values of assets acquired and liabilities assumed, if necessary, over a period not to exceed one year from the date of acquisition by taking into consideration new information that, if known at the date of acquisition, would have affected the estimated fair values ascribed to the assets acquired and liabilities assumed. The judgments made in determining the estimated fair value assigned to assets acquired and liabilities assumed, as well as the estimated useful life and depreciation or amortization method of each reporting unit using a discounted cash flow analysis (income approach) based on assumptionsasset, can materially impact the net earnings of the periods subsequent to an acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. During the measurement period, any purchase price allocation changes that market participants would apply. Becauseimpact the business is assumed to continue in perpetuity,carrying value of goodwill will affect any measurement of goodwill impairment taken during the discounted cash flows include a terminal value. Cash flows to perpetuity are forecast based on projected revenue growth and our planned business strategies in future periods. Examples of planned strategies would include a plant or line expansion at an existing facility; a reduction of working capital at a specific location; and price increases or cost reductions within a reporting unit. The discount rate is based on a reporting unit’s targeted weighted-average cost of capital, which is not necessarily the same as our weighted-average cost of capital.measurement period, if applicable.

We perform our annual test for goodwill impairment in the fourth quarter of each fiscal year. In 2018 a qualitative test was performed and the Company determined there was no goodwill impairment related to any of our reporting units. During 2017 and 2016, we determined that none of the goodwill associated with our reporting units were impaired in any of those years which was based on the quantitative testing. These reporting units would be most likely affected by changes in the Company’s assumptions and estimates. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, such as changes in the reporting unit’s future growth rates, discount rates, etc.

These assumptions and projections underlying the fair value estimates are subject to change and are impacted by our ability to achieve our forecasts and by economic conditions that may impact future results and result in projections not being attained. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on our results of operations. Each year we re-evaluate the assumptions used to reflect changes in the business environment.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 
The Company is exposed to various financial market risks. Market risk is the potential loss arising from adverse changes in market prices and rates. The Company does not enter into derivative or other financial instruments for trading or speculative purposes.
 
Foreign Currency Risk
 
International Sales

A portion of the Company’s operations consists of manufacturing and sales activities in international jurisdictions. The Company manufactures its products primarily in the United States,U.S., the U.K., France, the Netherlands, Canada, Brazil and Australia. The Company sells its products primarily within the markets where the products are produced, but certain of the Company’s sales from its U.K. and Canadian operations are denominated in other currencies. As a result, the Company’s financials, specifically the value of its foreign assets, could be affected by factors such as changes in foreign currency exchange rates in the U.K. and Canada or weak economic conditions in the other markets in which the subsidiaries of the Company distribute their products.

To mitigate the short-term effect of changes in currency exchange rates on the Company’s functional currency-based sales, the Company’s U.K. and Canadian subsidiaries regularly enter into foreign exchange contracts for over 90% of their future net foreign currency cash receipts over a period of six months. As of December 31, 2018, the Company had a notional amount of $539,000 in outstanding forward exchange contracts related to accounts receivable. A 15% fluctuation in exchange rates for these currencies would change the fair value by approximately $81,000. However, since these contracts offset foreign currency denominated transactions, any change in the fair value of the contracts should be offset by changes in the underlying value of the transaction.
 
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Exposure to Exchange Rates

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly in European countries and Canada and, to a lesser extent, Australia and Brazil, as a result of the sale of its products in international markets. Foreign currency forward exchange contracts in the U.K. are used to offset the earnings effects of such fluctuations. On December 31, 2018,2021, the result of a uniform 10% strengthening in the value of the U.S. dollar relative to the currencies in which the Company’s sales are denominated would have been a decrease in gross profit of $7,360,000.$8.9 million. Comparatively, on December 31, 2017,2020, the result of a uniform 10% strengthening in the value of the dollar relative to the currencies in which the Company’s sales are denominated would have been a decrease in gross profit of approximately $6,564,000.$8.2 million. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting sales, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. The translation adjustment during 20182021 was a loss of $13,347,000.$15.8 million. On December 31, 2018,2021, the British pound closed at 0.78380.7392 relative to the U.S. dollar, and the Euro closed at 0.87180.8793 relative to the U.S. dollar. By comparison, on December 31, 2017,2020, the British pound closed at 0.74000.7318 relative to the U.S. dollar, and the Euro closed at 0.83310.8187 relative to the U.S. dollar. No assurance can be given as to future valuation of the British pound or Euro or how further movements in those or other currencies could affect future earnings or the financial position of the Company.
 
Interest Rate Risk

The majority of the Company’s long-term debt bears interest at variable rates. Accordingly, the Company’s net income is affected by changes in interest rates. Assuming the average level of borrowings at variable rates and a two hundred basis point change in the 20182021 average interest rate under these borrowings, the Company’s 20182021 interest expense would have changed by approximately $2,363,000.$6.6 million. In the event of an adverse change in interest rates, management could take actions to mitigate its exposure. Further, this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. However, challenges affecting the banking industry and credit markets in general can potentially cause changes to credit availability and cost of borrowing, which creates a level of uncertainty.
 
Item 8. Financial Statements and Supplementary Data
 
The financial statements and supplementary data described in Item 15 of this report and included on pages 4649 through 7881 of this report are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures. An evaluation was carried out, under the supervision and with the participation of the Company's management, including our President and& Chief Executive Officer and Executive Vice President and& Chief Financial Officer (Principal Financial Officer), and Vice President and Corporate Controller (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 & Corporate Controller (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. Management’s report on the Company’s internal control over financial reporting is included on page 4345 of this Annual Report on Form 10-K and incorporated by reference herein. The Company’s independent registered public accounting firm has audited and issued a report on the Company’s internal control over financial reporting which is included on page 4548 of this Annual Report on Form 10-K and incorporated by reference herein.

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The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP, an independent registered public accounting firm, and the firm’s report on this matter is included in Item 8 of this annual report on Form 10-K.
Changes in Internal Controls over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined by paragraph (d) of Rule 13a-15 under the Securities Exchange Act) during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
 
Item 9B. Other Information

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



Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

PART III
 
Item 10. Directors, Executive Officers and Corporate Governance
 
There are incorporated in this Item 10, by reference, those portions of the Company’s definitive proxy statement for the 20192022 Annual Meeting of Stockholders which appear therein under the captions “Proposal 1 -  Election of Directors,” “Nominees for Election to the Board of Directors,” “Information Concerning Directors,” “Meetings and Committees of the Board,” “The Audit Committee,” and “The Nominating/Corporate Governance Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance.”Committee."  See also the information under the caption “Executive Officers of the Company”“Information About Our Executive Officers” in Part I of this Report.


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The Board of Directors has delegated certain responsibilities to three Committees of the Board. The Committees are the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee. 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. Walnut Street, Seguin, Texas 78155, which is the principal executive office of the Company. The telephone number is (830) 379-1480. The Company will post any amendments to the Code of Conduct and Ethics, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, on the Company’s website.

Item 11. Executive Compensation

There are incorporated in this Item 11, by reference, those portions of the Company’s definitive proxy statement for the 20192022 Annual Meeting of Stockholders which appear therein under the captions “Executive"Executive Compensation," “The Compensation Committee,” “Compensation Discussion and Analysis,” "Compensation Committee Report” and “Director Compensation during 2018.2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

There is incorporated in this Item 12, by reference, that portion of the Company’s definitive proxy statement for the 20192022 Annual Meeting of Stockholders which appears under the caption “Beneficial Ownership of our Common Stock.”

Information on Alamo Group Inc.’s Equity Compensation Plans
 
The following table provides information on the shares that are available under the Company’s stock compensation plans and, in the case of plans where stock options may be granted, the number of shares of common stock issuable upon exercise of those stock options. The Company currently does not have an Equity Compensation Plan that is not approved by the Stockholders.
 
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The numbers in the table are as of December 31, 2018,2021, the last day of Alamo Group Inc.’s 20182021 fiscal year.
 
ABC
Equity Compensation
Plan Category
Equity Compensation
Plan Category
 
 
 
Number of Securities to be issued upon
exercise of outstanding
options, warrants and rights
 
 
 
Weighted-average exercise
price of outstanding
options, warrants and
rights
 
Number of Securities
that remain
available for future
issuance
 under equity
compensation plans
(excluding securities
reflected in column A) 
Equity Compensation
Plan Category
 
 
 
Number of Securities to be issued upon
exercise of outstanding
options, warrants and rights
 
 
 
Weighted-average exercise
price of outstanding
options, warrants and
rights
Number of Securities
that remain
available for future
issuance
 under equity
compensation plans
(excluding securities
reflected in column A) 
Plans approved by stockholders Plans approved by stockholders       Plans approved by stockholders   
First Amended and Restated 1999 Non-Qualified Stock Option Plan 8,000 $11.45 — 
2005 Incentive Stock Option Plan 2005 Incentive Stock Option Plan 84,470 $39.03 — 2005 Incentive Stock Option Plan19,050$43.05
2009 Equity Incentive Plan 2009 Equity Incentive Plan 107,836 $72.26 146,075 2009 Equity Incentive Plan18,225$96.21
2015 Incentive Stock Option Plan2015 Incentive Stock Option Plan55,700 $66.08 336,450 2015 Incentive Stock Option Plan68,560$104.63297,850
2019 Equity Incentive Plan2019 Equity Incentive Plan64,391$136.59423,969
Plans not approved by stockholdersPlans not approved by stockholders— — — Plans not approved by stockholders
Total
Total
256,006 482,525 
Total
170,226721,819

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Item 13. Certain Relationships, Related Transactions and Director Independence

Information regarding certain relationships and related transactions is set forth under the caption “Certain Relationships and Related Transactions” in the Company’s definitive proxy statement for the 20192022 Annual Meeting of Stockholders, and such information is incorporated by reference herein. There were no such reportable relationships or related party transactions in the fiscal year ended December 31, 2018.2021.

Information regarding director independence is set forth under the caption “Information Concerning Directors” in the Company’s definitive proxy statement for the 20192022 Annual Meeting of Stockholders, and such information is incorporated by reference herein.

Item 14. Principal Accountant Fees and Services

Our independent registered public accounting firm is KPMG LLP, San Antonio, TX, Auditor Firm ID: 185.

Information regarding principal accountant fees and services is set forth under the caption “Proposal 3 – Ratification of Appointment of Independent Auditors” in the Company’s definitive proxy statement for the 20192022 Annual Meeting of Stockholders, and such information is incorporated by reference herein.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements
  Page
   
 
 
 
 
 
 
 
 
Financial Statement Schedules

All schedules for which a provision is made in the applicable accounting regulation of the Securities and Exchange Commission are omitted because they are not required or because the required information is included in the consolidated financial statements or notes thereto.
 
Item 16. Summary

None.

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Exhibits

Exhibits – The following exhibits are incorporated by reference to the filing indicated or are included following the index to Exhibits.

INDEX TO EXHIBITS
 
    Incorporated by Reference
    From the Following
Exhibits Exhibit Title Documents
3.1Certificate of Incorporation, as amended, of Alamo Group Inc. Filed as Exhibit 3.1 to Form S-1, February 5, 1993
3.2By-LawsCertificate of Amendment of Certificate of Incorporation of Alamo Group Inc. as amended 
3.3By-Laws of Alamo Group Inc. as amended
4.1Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
10.1Form of indemnification agreements with Directors of Alamo Group Inc. 
10.2Form of indemnification agreements with certain executive officers of Alamo Group Inc. 
*10.3Incentive Compensation Plan, adopted on December 9, 1997 
*10.4— 401(k) Restoration Plan for Highly Compensated Employees, adopted on December 9, 1997 
*10.510.4Amended and Restated 1994 Incentive Stock Option Plan adopted by the Board of Directors on July 7, 1999 
*10.6— First Amended and Restated 1999 Non-Qualified Stock Option Plan, adopted by the Board of Directors on February 13, 2001 
*10.710.52005 Incentive Stock Option Plan, adopted by the Board of Directors on May 4, 2005 
*10.810.62009 Equity Incentive Plan, adopted by the Board of Directors on May 7, 2009 
10.910.7Second Amended and Restated Revolving Credit Agreement, dated August 25, 2004, between the Companyas of October 24, 2019, by and among Alamo Group Inc., Bank of America, N.A., JPMorgan Chase as administrative agent, Wells Fargo Bank, National Association, and Guaranty BankBBVA USA as co-syndication agents, and the other lenders party thereto.
10.110.8ThirdFirst 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 Amended and Restated Revolving Creditother Sellers pursuant to Section 10.6 of the Securities Purchase Agreement.
*10.9Form of Restricted Stock Award Agreement dated February 3, 2006 betweenunder the Company and Bank2009 Equity Incentive Plan
*10.10Form of America, N.A., Chase Manhattan Bank, and Guaranty BankRestricted Stock Unit Award Agreement under the 2009 Equity Incentive Plan 
*10.11Fourth AmendmentForm of Nonqualified Stock Option Agreement under the Amended and Restated Revolving Credit Agreement, dated March 30, 2006, between the Company and Bank of America, N.A., JPMorgan Chase Bank and Guaranty Bank 2009 Equity Incentive Plan 
*10.12Fifth AmendmentForm of Nonqualified Stock Option Agreement under the First Amended and Restated Revolving Credit Agreement, dated May 7, 2007, between the Company and Bank of America, N.A., JPMorgan Chase Bank, Guaranty Bank and Rabobank 1999 Nonqualified Stock Option Plan 
10.13— Sixth Amendment of and Waiver under Amended and Restated Revolving Credit Agreement, dated October 14, 2008, between the Company and Bank of America, N.A., JPMorgan Chase Bank, Guaranty Bank and Rabobank 
3942


10.14*10.13Seventh Amendment of the Amended and Restated Revolving Credit Agreement, dated November 6, 2009, between the Company and Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, and Rabobank
10.15— Eighth Amendment of the Amended and Restated Revolving Credit Agreement, dated March 28, 2011, between the Company and Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, and Rabobank 
10.16Ninth Amendment of the Amended and Restated Revolving Credit Agreement, dated May 12, 2014, between the Company and Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, Rabobank, and Amegy Bank.
10.17Tenth Amendment of the Amended and Restated Revolving Credit Agreement, dated December 20, 2016, between the Company and Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, Rabobank, and Amegy Bank.

*10.18— Form of Restricted Stock Award Agreement under the 2009 Equity Incentive Plan 
*10.19— Form of Restricted Stock Unit Award Agreement under the 2009 Equity Incentive Plan 
*10.20— Form of Nonqualified Stock Option Agreement under the 2009 Equity Incentive Plan 
*10.21— Form of Nonqualified Stock Option Agreement under the First Amended and Restated 1999 Nonqualified Stock Option Plan 
*10.22— Form of Stock Option Agreement under the 2005 Stock Option Plan 
10.2310.14Investor Rights Agreement, dated October 22, 2009, between Alamo Group Inc. and Bush Hog, LLC 
*10.2410.15Supplemental Executive Retirement Plan 
*10.25Executive Incentive Plan
*10.2610.16Amended and Restated Executive Incentive Plan
*10.2710.172015 Incentive Stock Option Plan, adopted by the Board of Directors on May 7, 2015 
*10.18Alamo Group Inc. 2019 Equity Incentive Plan
*10.19Form of Restricted Stock Award Agreement under the Alamo Group Inc. 2019 Equity Incentive Plan
*10.20Form of Restricted Stock Unit Agreement under the Alamo Group Inc. 2019 Equity Incentive Plan
*10.21Form of Performance Share Unit Agreement under the Alamo Group Inc. 2019 Equity Incentive Plan
10.22Form of Executive Change in Control Agreement
10.23Amendment to Executive Change in Control Agreement
10.24Executive Change in Control Agreement by and between Alamo Group Inc. and Michael A. Haberman
18.1Lifo Preferability Letter
21.1Subsidiaries of the Registrant 
23.1Consent of KPMG LLP 
31.1Certification by RonaldJeffery A. RobinsonLeonard under Section 302 of the Sarbanes-Oxley Act of 2002 
31.2Certification by Dan E. Malone under Section 302 of the Sarbanes-Oxley Act of 2002 
31.3— Certification by Richard J. Wehrle under Section 302 of the Sarbanes-Oxley Act of 2002 
32.1Certification by RonaldJeffery A. RobinsonLeonard under Section 906 of the Sarbanes-Oxley Act of 2002 
32.2Certification by Dan E. Malone under Section 906 of the  Sarbanes-Oxley Act of 2002 
32.3— Certification by Richard J. Wehrle under Section 906 of the  Sarbanes-Oxley Act of 2002 
101.INSXBRL Instance Document Filed Herewith
101.SCHXBRL Taxonomy Extension Schema Document Filed Herewith
40


101.CALXBRL Taxonomy Extension Calculation Linkbase Document Filed Herewith
101.LABXBRL Taxonomy Extension Label Linkbase Document Filed Herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase Document Filed Herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase Document Filed Herewith
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)Filed Herewith

*Compensatory Plan
43
41


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 ALAMO GROUP INC.
Date: March 1, 2019February 24, 2022 
 /s/ RonaldJeffery A. Robinson Leonard
 RonaldJeffery A. Robinson Leonard
 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 1st24th day of March, 2019.February, 2022.
Signature Title 
    
/s/RONALDRODERICK R. BATY
Roderick R. Baty
Chairman of the Board & Director
/s/JEFFERY A. ROBINSONLEONARD
RonaldJeffery A. RobinsonLeonard
 President & Chief Executive Officer & Interim Chairman of the Board (Principal
(Principal
Executive Officer)
/s/DAN E. MALONE
Dan E. Malone
Executive Vice President & Chief Financial Officer (Principal Financial Officer)  
    
/s/RICHARD J. WEHRLE
Richard J. Wehrle
 
Executive Vice President Controller & Treasurer
(Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
 
    
/s/RODERICK R. BATY
Roderick R. Baty
Director
/s/ROBERT P. BAUER
Robert P. Bauer
 Director
/s/ERIC P. ETCHART
Eric P. Etchart
 Director 
/s/NINA C. GROOMS DAVID W. GRZELAK
David W. GrzelakNina C. Grooms
 Director 
   
/s/TRACY C. JOKINEN
Tracy C. Jokinen
 Director 
/s/RICHARD W. PAROD
Richard W. Parod
 Director
/s/RONALD A. ROBINSON
Ronald A. Robinson
Director
/s/LORIE L. TEKORIUS
Lorie L. Tekorius
Director


4244


Report of Management on Internal Control over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. Generally Accepted Accounting Principles.
 
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 20182021 using the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s management concludes that, as of December 31, 2018,2021, the Company’s internal controls over financial reporting were effective based on these criteria.

KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of internal control over financial reporting, which is included herein.
  
Date:March 1, 2019February 24, 2022
/s/RonaldJeffery A. RobinsonLeonard
RonaldJeffery A. RobinsonLeonard
 President, Chief Executive Officer & Director (Principal Executive Officer)
  
 /s/Dan E. MaloneRichard J. Wehrle
Dan E. MaloneRichard J. Wehrle
 Executive Vice President & Chief Financial Officer (Principal Financial Officer)
/s/Richard J. Wehrle
Richard J. Wehrle
Vice President, Controller & Treasurer (Principal Accounting Officer)
 
























4345



Report of Independent Registered Public Accounting Firm


To the Stockholders and Board of Directors
Alamo Group Inc.:

Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Alamo Group, Inc. and subsidiaries (the Company) as of December 31, 20182021 and 2017,2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018,2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2019February 24, 2022 expressedan unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of evidence over the existence of inventory
As discussed in Note 6 to the consolidated financial statements, the value of inventory was $320.9 million as of December 31, 2021. 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.

We identified the assessment of the sufficiency of evidence over the existence of inventory as a critical audit matter. The geographical dispersion of inventory required especially subjective auditor judgment in determining the sufficiency of audit evidence obtained over the existence of inventory.
46


The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the existence of inventory including determining where we would perform procedures. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s inventory process at certain manufacturing plants. This included controls related to the physical inspection of inventories at certain plants. We performed independent test counts for a sample of items and compared them to the Company’s records to evaluate the inventory at those specific plants. We selected a sample of inventory transactions that were made by the Company near the Company’s fiscal year-end and evaluated the accounting period in which they were recorded. We evaluated the sufficiency of audit evidence obtained by assessing the results of the procedures performed.

 /s/KPMG LLP
We have served as the Company’s auditor since 2009.
San Antonio, Texas
March 1, 2019February 24, 2022 


















4447


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Alamo Group Inc.:

Opinion on Internal Control Over Financial Reporting
We have audited Alamo Group, Inc. and subsidiriessubsidiaries' (the Company) internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20182021 and 2017,2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2019February 24, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 /s/KPMG LLP
San Antonio, Texas
March 1, 2019February 24, 2022 

48
45


Alamo Group Inc. and Subsidiaries
Consolidated Balance Sheets
Year Ended December 31, Year Ended December 31,
(in thousands, except per share amounts)
(in thousands, except per share amounts)
2018 2017
(in thousands, except per share amounts)
20212020
ASSETS ASSETS     ASSETS  
Current assets: Current assets:     Current assets:  
Cash and cash equivalents Cash and cash equivalents $34,043 $25,373 Cash and cash equivalents$42,115 $50,195 
Accounts receivable, net Accounts receivable, net 228,098 205,767 Accounts receivable, net237,970 209,276 
Inventories, netInventories, net176,630 155,568 Inventories, net320,917 242,501 
Prepaid expenses 5,327 5,336 
Prepaid expenses and other current assetsPrepaid expenses and other current assets9,500 7,382 
Income tax receivable Income tax receivable 8,745 483 Income tax receivable 1,666 6,186 
Total current assets Total current assets 452,843 392,527 Total current assets612,168 515,540 
Rental equipment, netRental equipment, net43,978 28,493 Rental equipment, net32,514 42,266 
Property, plant and equipment Property, plant and equipment 219,135 202,293 Property, plant and equipment321,863 312,362 
Less: Accumulated depreciation Less: Accumulated depreciation (131,905)(125,629)Less: Accumulated depreciation(169,372)(156,928)
87,230 76,664 
Total property, plant and equipment, netTotal property, plant and equipment, net152,491 155,434 
Goodwill Goodwill 83,243 84,761 Goodwill202,406 195,132 
Intangible assets, netIntangible assets, net48,857 52,872 Intangible assets, net183,466 193,172 
Deferred income taxes Deferred income taxes 1,783 992 Deferred income taxes1,110 1,203 
Other assets 3,699 3,362 
Other non-current assetsOther non-current assets21,587 19,112 
Total assets Total assets $721,633 $639,671 Total assets$1,205,742 $1,121,859 
LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES AND STOCKHOLDERS’ EQUITY     LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities: Current liabilities:     Current liabilities:  
Trade accounts payable Trade accounts payable $54,083 $55,825 Trade accounts payable$101,396 $75,317 
Income taxes payable Income taxes payable 2,865 5,002 Income taxes payable2,613 2,278 
Accrued liabilities Accrued liabilities 43,785 40,454 Accrued liabilities73,523 64,634 
Current maturities of long-term debt and capital lease obligations 119 82 
Current maturities of long-term debt and finance lease obligationsCurrent maturities of long-term debt and finance lease obligations15,032 15,066 
Total current liabilities Total current liabilities 100,852 101,363 Total current liabilities192,564 157,295 
Long-term debt and capital lease obligation, net of current maturities 85,179 60,000 
Long-term debt and finance lease obligations, net of current maturitiesLong-term debt and finance lease obligations, net of current maturities254,522 270,320 
Long-term tax liabilityLong-term tax liability6,120 12,316 Long-term tax liability4,416 3,954 
Accrued pension liabilities 1,944 1,225 
Other long-term liabilities Other long-term liabilities 8,436 7,291 Other long-term liabilities27,119 32,475 
Deferred income taxesDeferred income taxes11,731 8,368 Deferred income taxes21,458 22,812 
Stockholders’ equity: Stockholders’ equity:     Stockholders’ equity:  
Common stock, $.10 par value, 20,000,000 shares authorized; 11,662,688 and 11,577,048 outstanding at December 31, 2018 and December 31, 2017, respectively 1,166 1,158 
Common stock, $.10 par value, 20,000,000 shares authorized; 11,874,178 and 11,809,926 outstanding at December 31, 2021 and December 31, 2020, respectivelyCommon stock, $.10 par value, 20,000,000 shares authorized; 11,874,178 and 11,809,926 outstanding at December 31, 2021 and December 31, 2020, respectively1,187 1,181 
Additional paid-in capital Additional paid-in capital 108,422 103,864 Additional paid-in capital124,228 118,528 
Treasury stock, at cost; 42,600 shares at December 31, 2018 and December 31, 2017 (426)(426)
Treasury stock, at cost; 82,600 shares at December 31, 2021 and December 31, 2020Treasury stock, at cost; 82,600 shares at December 31, 2021 and December 31, 2020(4,566)(4,566)
Retained earnings Retained earnings 443,040 374,678 Retained earnings633,804 560,186 
Accumulated other comprehensive lossAccumulated other comprehensive loss(44,831)(30,166)Accumulated other comprehensive loss(48,990)(40,326)
Total stockholders’ equity Total stockholders’ equity 507,371 449,108 Total stockholders’ equity705,663 635,003 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$721,633 $639,671 Total liabilities and stockholders’ equity$1,205,742 $1,121,859 
*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.


49





46


Alamo Group Inc. and Subsidiaries
Consolidated Statements of Income

Year Ended December 31, Year Ended December 31,
(in thousands, except per share amounts)
(in thousands, except per share amounts)
201820172016
(in thousands, except per share amounts)
202120202019
Net sales: Net sales:       Net sales:   
Industrial $598,930 $522,706 $484,088 
Agricultural235,069 227,389 205,834 
European 174,823 162,285 154,826 
Vegetation ManagementVegetation Management$812,676 $654,630 $502,194 
Industrial EquipmentIndustrial Equipment521,547 508,836 616,944 
Total net salesTotal net sales1,008,822 912,380 844,748 Total net sales1,334,223 1,163,466 1,119,138 
Cost of sales Cost of sales 752,707 677,687 639,649 Cost of sales999,709 869,736 845,647 
Gross profit Gross profit 256,115 234,693 205,099 Gross profit334,514 293,730 273,491 
Selling, general and administrative expenses Selling, general and administrative expenses 155,027 145,955 137,479 Selling, general and administrative expenses202,939 184,199 172,921 
Amortization expenseAmortization expense14,637 14,746 5,658 
Income from operations Income from operations 101,088 88,738 67,620 Income from operations116,938 94,785 94,912 
Interest expense Interest expense (5,493)(4,839)(5,914)Interest expense(10,533)(15,837)(10,747)
Interest income Interest income 410 336 214 Interest income1,149 1,366 1,229 
Other incomeOther income(1,474)(1,868)269 Other income1,944 (557)(795)
Income before income taxes Income before income taxes 94,531 82,367 62,189 Income before income taxes109,498 79,757 84,599 
Provision for income taxes Provision for income taxes 21,045 38,052 22,144 Provision for income taxes29,253 21,953 21,496 
Net income Net income $73,486 $44,315 $40,045 Net income$80,245 $57,804 $63,103 
Net income per common share: Net income per common share:       Net income per common share:   
Basic Basic $6.30 $3.84 $3.50 Basic$6.78 $4.91 $5.38 
Diluted Diluted $6.25 $3.79 $3.46 Diluted$6.75 $4.88 $5.35 
Average common shares: Average common shares: Average common shares:
Basic Basic 11,660 11,549 11,434 Basic11,837 11,782 11,729 
Diluted Diluted 11,761 11,682 11,565 Diluted11,896 11,845 11,800 
*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.
50
47


Alamo Group Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income

Year Ended December 31,Year Ended December 31,
(in thousands, except per share amounts) 201820172016
(in thousands)(in thousands)202120202019
Net incomeNet income$80,245 $57,804 $63,103 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax (expense) benefit of $(344), $810, and zero(15,800)8,862 3,363 
Net income$73,486 $44,315 $40,045 
Other comprehensive (loss) income:
Foreign currency translation adjustment(13,347)16,966 (13,156)
Unrealized income (loss) on derivative instruments, net of tax (expense) benefit of $(1,405), $1,842, and zero, respectively5,298 (7,484)610 
Net (loss) gain on pension and other post-retirement benefits(1,667)987 2,369 Recognition of deferred pension and other post-retirement benefits, net of tax (expense) benefit of $(356), $230, and $703, respectively1,838 (866)20 
Other comprehensive (loss) income before income tax benefit (expense)(15,014)17,953 (10,787)
Income tax benefit (expense) related to items of other comprehensive (loss) income349 (363)(890)
Other comprehensive (loss) income$(14,665)$17,590 $(11,677)Other comprehensive (loss) income, net of tax$(8,664)$512 $3,993 
Comprehensive incomeComprehensive income$58,821 $61,905 $28,368 Comprehensive income$71,581 $58,316 $67,096 
*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.

4851


Alamo Group Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
 
  Common Stock 
Additional
Paid-in Capital
Treasury Stock Retained Earnings 
Accumulated
Other
Comprehensive Income
Total Stock-
holders’ Equity
(in thousands) Shares Amount 
Balance at December 31, 201511,350 $1,139 $96,778 $(426)$299,057 $(36,079)$360,469 
Net income — — — — 40,045 — 40,045 
Translation adjustment — — — — — (13,156)(13,156)
Net actuarial loss arising during period net of taxes— — — — — 1,479 1,479 
Tax effect of exercised non-qualified stock options— — 230 — — — 230 
Stock-based compensation — — 1,414 — — — 1,414 
Exercise of stock options 70 1,362 — — — 1,369 
Repurchased shares— — (19)— — — (19)
Dividends paid ($0.36 per share)— — — — (4,114)— (4,114)
Balance at December 31, 201611,420 $1,146 $99,765 $(426)$334,988 $(47,756)$387,717 
Net income — — — — 44,315 — 44,315 
Translation adjustment — — — — — 16,966 16,966 
Net actuarial gain arising during period net of taxes— — — — — 624 624 
Stock-based compensation — — 1,869 — — — 1,869 
Exercise of stock options 114 12 2,385 — — — 2,397 
Repurchased shares— — (166)— — — (166)
Other— — 11 — (11)— — 
Dividends paid ($0.40 per share) — — — — (4,614)— (4,614)
Balance at December 31, 201711,534 $1,158 $103,864 $(426)$374,678 $(30,166)$449,108 
Net income— — — — 73,486 — 73,486 
Translation adjustment— — — — — (13,347)(13,347)
Net actuarial gain arising during period net of taxes— — — — — (1,318)(1,318)
Stock-based compensation— — 2,450 — — — 2,450 
Exercise of stock options86 2,544 — — — 2,552 
Repurchased shares— — (436)— — — (436)
Dividends paid ($0.44 per share) — — — — (5,124)— (5,124)
Balance at December 31, 201811,620 $1,166 $108,422 $(426)$443,040 $(44,831)$507,371 
 Common Stock
Additional
Paid-in Capital
Treasury StockRetained Earnings
Accumulated
Other
Comprehensive Income
Total Stock-
holders’ Equity
(in thousands)SharesAmount
Balance at December 31, 201811,620 $1,166 $108,422 $(426)$451,029 $(44,831)$515,360 
Other comprehensive income— — — — 63,103 3,993 67,096 
Stock-based compensation expense— — 3,269 — — — 3,269 
Stock-based compensation transactions90 1,975 — — — 1,984 
Repurchased shares(40)— (4,140)— — (4,140)
Dividends paid ($0.48 per share)— — — — (5,626)— (5,626)
Balance at December 31, 201911,670 $1,175 $113,666 $(4,566)$508,506 $(40,838)$577,943 
Other comprehensive income— — — — 57,804 512 58,316 
Stock-based compensation expense— — 4,119 — — — 4,119 
Stock-based compensation transactions57 743 — — — 749 
Repurchased shares— — — — — — — 
Dividends paid ($0.52 per share)— — — — (6,124)— (6,124)
Balance at December 31, 202011,727 $1,181 $118,528 $(4,566)$560,186 $(40,326)$635,003 
Other comprehensive income— — — — 80,245 (8,664)71,581 
Stock-based compensation expense— — 5,987 — — — 5,987 
Stock-based compensation transactions64 (287)— — — (281)
Dividends paid ($0.56 per share)— — — — (6,627)— (6,627)
Balance at December 31, 202111,791 $1,187 $124,228 $(4,566)$633,804 $(48,990)$705,663 
*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.
52
49


Alamo Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended December 31,  Year Ended December 31,
(in thousands) (in thousands) 201820172016(in thousands)202120202019
Operating Activities Operating Activities       Operating Activities   
Net income Net income $73,486 $44,315 $40,045 Net income$80,245 $57,804 $63,103 
Adjustments to reconcile net income to cash provided by
operating activities:
Adjustments to reconcile net income to cash provided by
operating activities:
      Adjustments to reconcile net income to cash provided by operating activities:   
Provision for doubtful accounts Provision for doubtful accounts 71 187 482 Provision for doubtful accounts506 860 575 
Depreciation - PP&EDepreciation - PP&E12,884 11,616 11,267 Depreciation - PP&E21,229 19,264 14,934 
Depreciation - RentalDepreciation - Rental6,725 5,531 6,429 Depreciation - Rental8,613 9,830 9,373 
Amortization of intangibles Amortization of intangibles 3,505 3,317 3,104 Amortization of intangibles14,637 14,746 5,658 
Amortization of debt issuance Amortization of debt issuance 221 203 213 Amortization of debt issuance667 634 295 
Stock-based compensation expenseStock-based compensation expense2,450 1,869 1,414 Stock-based compensation expense5,987 4,119 3,269 
Provision for deferred income tax expense2,052 1,328 2,620 
Provision for deferred income tax (benefit) expenseProvision for deferred income tax (benefit) expense(1,182)(855)3,383 
Gain on sale of property, plant and equipmentGain on sale of property, plant and equipment(361)(341)(345)Gain on sale of property, plant and equipment(3,779)(1,094)(912)
Changes in operating assets and liabilities, net of acquisitions: Changes in operating assets and liabilities, net of acquisitions:       Changes in operating assets and liabilities, net of acquisitions:   
Accounts receivable
Accounts receivable
(27,029)(23,134)3,876 
Accounts receivable
(27,571)28,064 11,447 
Inventories Inventories (25,991)142 12,340 Inventories(78,463)38,275 393 
Rental equipmentRental equipment(22,424)(3,054)315 Rental equipment1,138 4,542 (20,729)
Prepaid expenses and other Prepaid expenses and other (583)2,845 (5,634)Prepaid expenses and other(6,994)6,373 (4,633)
Trade accounts payable and accrued liabilities Trade accounts payable and accrued liabilities 4,130 11,688 (5,382)Trade accounts payable and accrued liabilities32,532 (3,783)6,397 
Income taxes payable Income taxes payable (10,332)2,357 2,908 Income taxes payable4,648 6,601 (4,861)
Long term tax payableLong term tax payable(6,196)12,478 — Long term tax payable462 (3,478)(1,082)
Other assets and liabilities, net Other assets and liabilities, net 302 (543)2,132 Other assets and liabilities, net(3,008)2,431 2,203 
Net cash provided by operating activities Net cash provided by operating activities 12,910 70,804 75,784 Net cash provided by operating activities49,667 184,333 88,813 
Investing Activities Investing Activities       Investing Activities   
Acquisitions, net of cash acquired Acquisitions, net of cash acquired — (38,553)(188)Acquisitions, net of cash acquired(17,798)— (400,784)
Purchase of property, plant and equipment Purchase of property, plant and equipment (26,587)(13,490)(9,711)Purchase of property, plant and equipment(25,263)(17,874)(31,337)
Proceeds from sale of property, plant and equipment Proceeds from sale of property, plant and equipment 1,341 767 1,293 Proceeds from sale of property, plant and equipment9,667 3,703 2,277 
Purchase of patentsPurchase of patents(112)— (50)Purchase of patents(44)— (96)
Net cash used in investing activities Net cash used in investing activities (25,358)(51,276)(8,656)Net cash used in investing activities(33,438)(14,171)(429,940)
Financing Activities Financing Activities     Financing Activities  
Borrowings on bank revolving credit facilityBorrowings on bank revolving credit facility159,000 143,000 79,000 Borrowings on bank revolving credit facility188,000 115,000 217,000 
Repayment on bank revolving credit facilityRepayment on bank revolving credit facility(134,000)(153,000)(153,000)Repayment on bank revolving credit facility(189,000)(255,000)(157,000)
Principal payments on long-term debt and capital leases Principal payments on long-term debt and capital leases 216 (17)(38)Principal payments on long-term debt and capital leases(15,093)(18,867)(122)
Proceeds from issuance of long-term debt Proceeds from issuance of long-term debt — — 48 Proceeds from issuance of long-term debt— — 300,002 
Debt issuance cost Debt issuance cost — — (593)Debt issuance cost— — (2,875)
Dividends paid Dividends paid (5,124)(4,614)(4,114)Dividends paid(6,627)(6,124)(5,626)
Proceeds from exercise of stock optionsProceeds from exercise of stock options2,552 2,397 1,369 Proceeds from exercise of stock options1,676 1,459 2,573 
Treasury stock repurchasedTreasury stock repurchased— — (4,140)
Common stock repurchasedCommon stock repurchased(436)(166)(19)Common stock repurchased(1,957)(710)(589)
Net cash provided in financing activities22,208 (12,400)(77,347)
Net cash used in financing activitiesNet cash used in financing activities(23,001)(164,242)349,223 
Effect of exchange rate changes on cash Effect of exchange rate changes on cash (1,090)1,452 90 Effect of exchange rate changes on cash(1,308)1,964 172 
Net change in cash and cash equivalents Net change in cash and cash equivalents 8,670 8,580 (10,129)Net change in cash and cash equivalents(8,080)7,884 8,268 
Cash and cash equivalents at beginning of the year Cash and cash equivalents at beginning of the year 25,373 16,793 26,922 Cash and cash equivalents at beginning of the year50,195 42,311 34,043 
Cash and cash equivalents at end of the year Cash and cash equivalents at end of the year $34,043 $25,373 $16,793 Cash and cash equivalents at end of the year$42,115 $50,195 $42,311 
Cash paid during the year for: Cash paid during the year for:       Cash paid during the year for:   
Interest Interest $5,199 $5,217 $5,796 Interest$10,248 $17,049 $9,455 
Income taxes Income taxes $30,295 $23,175 $16,637 Income taxes$32,865 $17,140 $23,099 
*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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Alamo Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 
1. SIGNIFICANT ACCOUNTING POLICIES

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 manages its business through three2 principal reporting segments: Vegetation Management and Industrial Agricultural and European,Equipment, which are discussed in Note 1718.

Basis of Presentation and Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Alamo Group Inc. and its subsidiaries (the “Company” or “Alamo Group”), all of which are wholly owned. 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 2 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 2 segments, the Industrial and Agricultural Divisions. The realignment into these 2 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

 The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenues, and expenses reported in the financial statements and accompanying notes. Judgments related to asset impairment and certain reserves are particularly subject to change. Actual results could differ from those estimates. Such estimates include, but are not limited to, allowance for doubtful accounts, reserve for sales discounts, estimated realizable value on obsolete and slow-moving inventory, warranty reserve, estimates related to pension accounting;accounting, estimates related to fair value for purposes of assessing goodwill, long-lived assets and intangible assets for impairment;impairment, estimates related to income taxes;taxes, and estimates related to contingencies.

Foreign Currency

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the end of the year. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulatedAccumulated other comprehensive income (loss).
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. As of December 31, 20182021 and December 31, 2017,2020, there was no restricted cash.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The credit risk is limited because of the large numbers and types of customers and their geographic dispersion.
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Inventories
Inventory Valuation

Inventories of U.S. operating subsidiaries are stated at the lower of cost (last-in, first-out method) (“LIFO”) or market, andnet 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. Total U.S. 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 international subsidiaries’ inventories are stated atconsolidated inventory to a single method of accounting. The Company also notes that the lowerrevised policy improves comparability with many of cost (first-in, first-out) (“FIFO”) or market. Inventory costs include those costs directly attributable to products, including raw materials, labor and overhead.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
51months 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 SheetsDecember 31, 2020
(in thousands)As Originally ReportedEffect of ChangeAs Adjusted
Inventories, net$229,971 $12,530 $242,501 
Deferred income taxes (liability)19,642 3,170 22,812 
Retained earnings550,826 9,360 560,186 

Property, Plant and Equipment

Property, plant, and equipment are stated on the basis of cost. Major renewals and betterments are charged to the property accounts, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed to the current period. Depreciation is provided at amounts calculated to amortize the cost of the assets over their estimated useful economic lives using the straight-line method.

Impairment of Long-Lived Assets
Long-lived assets, such as property, plant and equipment, rental equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares non-discounted cash flows expected to be generated by that asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on a non-discounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is instead tested for impairment at least annually, or whenever events or circumstances change between the annual impairment tests that make it likely that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell all or a portion of a reporting unit. The Company performs its annual test for goodwill impairment related to its reporting units on October 1 of each fiscal year. Impairment testing for goodwill is done at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available, and segment management regularly reviews the operating results of that component.

We perform a qualitative assessment for all of our reporting units to determine whether it is more likely than not that an impairment exists. Factors considered include macroeconomic, industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the reporting unit. If the
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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. If the fair value of the reporting unit is lower than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds the fair value. However, the loss recognized cannot exceed the carrying amount of goodwill. We typically use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those we believe a hypothetical marketplace participant would use.

See Note 8 to the Consolidated Financial Statements for more information regarding goodwill.
 
 Intangible Assets    

The Company has intangible assets with both definite and indefinite useful lives. The definite-lived assets are trade names and trademarks, customer and dealer relationships, and patents and drawings that are subject to amortization with useful lives ranging from 3 years to 25 years. Impairment of definite-lived assets is discussed as part of the Impairment of Long-Lived Assets paragraph above.
The indefinite-lived assets not subject to amortization consist of trade names. 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. An impairment loss would be recognized for the carrying amount in excess of its fair value.

See Note 9 to the Consolidated Financial Statements for more information regarding intangible assets.

Leases
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We determine if an arrangement is a lease at inception. Operating leases are included in other non-current assets, accrued liabilities, and other long-term liabilities on our consolidated balance sheets. Finance leases are included in property, plant and equipment, accrued liabilities, and other long-term liabilities on our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have elected to not account for the lease and non-lease components separately for most of our asset classes with the exception of real-estate. We have also elected to exclude all lease agreements with an initial term of 12 months or less from the lease recognition requirements as allowed by ASC.

SeeNote 10 to the Consolidated Financial Statements for more information regarding leases.

Pensions

The Company records annual amounts relating to its pension and post-retirement plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases, turnover rates and health care cost trend rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulatedAccumulated other comprehensive income (loss) and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

The net periodic costs are recognized as employees render the services necessary to earn the
post-retirement benefits.
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Revenue Recognition

The following policy resulted from our adoption of the provisions of ASC Topic 606, “Revenue from Contracts with Customers,” effective January 1, 2018, as described above in “Accounting Pronouncements Adopted on January 1, 2018.”

The majority of the Company's revenue is recognized from product sales under contracts with customers. The Company presents three2 reportable operating segments within its financial statements;statements: Vegetation Management and Industrial Agricultural and European.Equipment. Contract terms and performance obligations within each contractual agreement are generally consistent for all threeboth divisions, with small differences that do not have a significant impact on the revenue recognition considerations under Topic 606. Revenues are recognized when we satisfy our performance obligation to transfer product to our customers, which typically occurs at a point in time upon shipment or delivery of the product, and for an amount that reflects the transaction price that is allocated to the performance obligation. Our contracts with customers state the final terms of sale, including the description, quantity and price for goods sold. In the normal course of business, we generally do not accept product returns.

The transaction price is the consideration that we expect to be entitled to in exchange for our products. Some of our contracts contain variable consideration in the form of sales incentives to our customers, such as discounts and rebates. For contracts that include variable consideration, we estimate the factors that determine the variable consideration in order to establish the transaction price.

We have elected that any taxes collected from customers and remitted to government authorities (i.e., sales tax, use tax, etc.) are excluded from the measurement of the transaction price and therefore are excluded from net sales in the consolidated statements of operations.

There are instances where we provide shipping services in relation to the goods sold to our customers. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are included in cost of goods sold. We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service.
 
Rental Equipment

The Company enters into operating lease agreements with customers related to the rental of certain equipment. In accounting for these leases, the cost of the equipment purchased or manufactured by the Company is recorded as an asset, and is depreciated over its estimated useful life. Accumulated depreciation relating to the rental equipment was $11,145,000$20.1 million and $9,413,000$18.0 million on December 31, 20182021 and December 31, 2017,2020, respectively.
 
Shipping and Handling Costs
 
The Company’s policy is to include shipping and handling costs in costs of goods sold.
 
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Advertising

We charge advertising costs to expense as incurred. Advertising and marketing expense related to operations for fiscal years 2018, 2017,2021, 2020, and 20162019 was approximately $11,773,000, $9,566,000$10.2 million, $10.1 million and $7,742,000,$12.2 million, respectively. Advertising and marketing expenses are included in Selling, General and Administrative expenses (“SG&A”).

Research and Development

Product development and engineering costs charged to SG&A amounted to $10,429,000, $9,849,000,$11.7 million, $12.4 million, and $8,847,000$12.0 million for the years ended December 31, 2018, 2017,2021, 2020, and 2016,2019, respectively.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. The Company's policy is to accrue for legal costs expected to be incurred in connection with loss contingencies.
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Income Taxes

Deferred tax assets and liabilities are determined based on differences between the financial reporting basis and tax basis of assets and liabilities, and are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, available tax carry backscarrybacks and tax planning strategies in making this assessment other than those which we have reserved. We have elected to treat the global intangible low-taxed income (GILTI) tax as a period expense.

We previously considered substantially all of the earnings in our foreign subsidiaries to be permanently reinvested and, accordingly, recorded no deferred income taxes on such earnings. As a result of the fundamental changes to the taxation of multinational corporations as a result of TCJA, we no longer intend to permanently reinvest all of the historical undistributed earnings of our foreign subsidiaries. We will distribute earnings from our European subsidiaries, while maintaining our permanent reinvestment for our other foreign subsidiaries. GAAP requires recognition of a deferred tax liability in the reporting period in which its intent to no longer permanently reinvest its historical undistributed foreign earnings is made. There will generally be no U.S. federal taxes imposed on such future distributions of European foreign earnings.
Stock-Based Compensation
 
The Company has granted options to purchase its common stock, restricted stock awards, restricted stock units, and performance stock units to certain employees and directors of the Company and its affiliates under various stock option plans at no less than the fair market value of the underlying stock on the date of grant.  These options are granted for a term not exceeding ten years and are forfeited in the event that the employee or director terminates his or her employment or relationship with the Company or one of its affiliates other than by retirement or death.  These options generally vest over five years.  All option plans contain anti-dilutive provisions that permit an adjustment of the number of shares of the Company’s common stock represented by each option for any change in capitalization. Excess tax benefits or awards that are recognized in equity related to stock option exercises are reflected as cash flows from financing activities in the statement of cash flows.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation method with the following assumptions noted:

1.The risk-free rate is based on the U.S. Treasury rate over the expected life of the option at the time of the grant.
2.The dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of the grant.
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3.The expected volatility factors are based on the historical movement of the Company’s common stock price over the expected life of the option.
4.The expected life is the average length of time in which officers, other employees, and non-employee directors are expected to exercise their options, and which are primarily based on historical experience.
  
The Company calculated the fair value for options with the following weighted-average assumptions for 2018, 2017,2021, 2020, and 2016:2019:
Fair Value Calculation Assumptions for Stock Compensation Fair Value Calculation Assumptions for Stock Compensation Fair Value Calculation Assumptions for Stock Compensation
December 31,  December 31,
201820172016 202120202019
Risk-free interest rate Risk-free interest rate 2.94 %2.23 %1.54 %Risk-free interest rate1.25 %1.22 %2.43 %
Dividend yield Dividend yield 0.5 %0.5 %0.6 %Dividend yield0.4 %0.5 %0.5 %
Volatility factors Volatility factors 34.5 %37.6 %48.5 %Volatility factors33.9 %30.0 %31.2 %
Weighted-average expected life Weighted-average expected life 8.0 years8.0 years8.0 yearsWeighted-average expected life8.0 years8.0 years8.0 years

Earnings per Common Share (“EPS”)

Basic EPS is computed using the weighted-average number of common shares outstanding during the year. The treasury stock method is used to compute diluted EPS which gives effect to the potential dilution of earnings that could have occurred if additional shares were issued for awards granted under the Company’s incentive stock option plans. The treasury stock method assumes that proceeds obtained upon exercise of awards granted under the incentive stock option plans are used to purchase outstanding common stock at the average market price during the period.

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2. ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted on January 1, 20182021

In May 2014,December 2019, the Financial Accounting Standards Board ("FASB")FASB issued Accounting Standards Update (ASU)ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes2019-12, “Income Taxes” to simplify the revenue recognition requirementsaccounting for income taxes. The amendments in Accounting Standards Codification ("ASC")this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 605. “Revenue Recognition,”740. The amendments also improve consistent application of and most industry-specificsimplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. EffectiveThis guidance became effective for us on January 1, 2018 the Company adopted the provisions of Topic 606 using the modified retrospective method of adoption. There was no impact to our financial position or results of operations as of and for the year ending December 31, 2018 as a result of adopting Topic 606. Therefore, there was no cumulative-effect adjustment to retained earnings as of January 1, 2018 for the impact of the2021. The adoption of Topic 606. See “Revenue Recognition” below for our accounting policy affected by our adoption of Topic 606.this ASU did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In February 2016,March 2020, the FASB issued ASU No. 2016-02, “Leases.”2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying assetTopic provides accounting relief for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assetstransition away from LIBOR and lease liabilities. Similar to current guidance, thecertain other reference rates. The amendments for this update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. The guidance will becomeare effective for us on January 1, 2019. As a lessee, this standard will primarily impact our accounting for long-term real estate and office equipment leases, for which we will recognize a right-of-use asset and a corresponding lease liability on our consolidated balance sheet. We will apply this guidance prospectively, beginning January 1, 2019 and currently estimate the impact on our balance sheet to be approximately $8 million. We are nearing completion of our process to implement a lease accounting system for our leases, including the conversion of our existing lease data to the new system and implementing relevant internal controls and procedures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” to improve information on credit losses for financial instruments. The ASU replaces the current incurred loss impairment
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methodology with a methodology that reflects expected credit losses.  The ASU is effective for the Company for fiscal years beginning afterthrough December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted beginning in fiscal years beginning after December 18, 2018.31, 2022. The Company does not expectis evaluating the impact the adoption of this ASU to have a material impact on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). Upon adoption of the ASU, entitiesstandard will be required to disclose a description of the accounting policy for releasing income tax effects from accumulated other comprehensive income. The standard is required to be adopted for periods beginning after December 15, 2018, with early adoption available for any set of financial statements that have yet to be issued or made available for issuance including retrospectively for any period in which the effect of the change is the U.S. corporate income tax rate in the TCJA is recognized. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,” which amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Reform. This guidance clarifies the application of Topic 740 in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting under ASC Topic 740 for certain income tax effects of Tax Reform for the reporting period in which the Tax Reform was enacted. During 2018, we revised our initial provisional amount recorded for the transitional tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and the impact of the federal tax rate change on the value of our deferred tax assets and liabilities. For further information, see Note 13 to the consolidated financial statements.

In August 2018, the FASB issued Accounting Statement Update (ASU) No. 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosures requirements on fair value measurements. Among other things, the amendments add disclosures for changes in unrealized gains and losses on Level 3 fair value measurements and requires additional disclosures on unobservable inputs associated with Level 3 assets. The guidance will become effective for us on January 1, 2020. The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.

In August 2018, the FASB issued Accounting Statement Update (ASU) No. 2018-14, “Compensation, Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The update removes certain disclosures that are no longer considered cost beneficial and adds disclosure requirements identified as relevant. The guidance will become effective for us on January 1, 2021 with early adoption permitted for any financial statements that have not been issued. The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.statements.

3. BUSINESS COMBINATIONS

Santa Izabel Agro Industria Ltda.

On June 6, 2017,October 26, 2021, the Company completedacquired 100% of the acquisitionissued and outstanding equity interests of Santa Izabel Agro Industria Ltda. ("Santa Izabel"Timberwolf Limited (“Timberwolf). Santa Izabel designs,Timberwolf manufactures a broad range of commercial wood chippers, primarily serving markets in the U.K. and markets a variety of agricultural implements and trailers sold throughout Brazil.the European Union. The primary reason for the Santa IzabelTimberwolf acquisition was to broadenenhance the Company's presenceforestry and tree care platform for growth by increasing both the Company's product portfolio and capabilities in the manufacturing and distribution of agricultural machinery in Brazil.European market. The acquisition price was approximately $10$25.0 million.

Old Dominion Brush Company

On June 26, 2017, the Company completed the acquisition of Old Dominion Brush Company, Inc. ("Old Dominion"). Old Dominion manufactures and sells replacement brooms for street sweepers and leaf vacuum equipment. The primary reason for the Old Dominion acquisition was to increase the Company's presence in the sweeper market and broaden our product offerings. The acquisition price was approximately $18 million.
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R.P.M. Tech Inc.

On August 8, 2017, the Company completed the acquisition of R.P.M. Tech Inc. ("R.P.M."). R.P.M. manufactures and sells heavy duty snow removal equipment. The primary reason for the R.P.M acquisition was to strengthen the Company's offering in industrial snowblowers. The acquisition price was approximately $13 million.

Consolidated Acquisitions

The Company has included the operating results of Old Dominion, Santa Izabel, and R.P.M.Timberwolf in its consolidated financial statements since their acquisitions. The total purchase price has been allocated to assets acquired and liabilities assumed, including deferred taxes, based on their fair values asthe date of the completion of the acquisitions. The following represents the final fair value of the assets acquired and liabilities assumed for all acquisitions as of the acquisition, dates (in thousands):
these results are considered immaterial.
Cash$2,547 
Accounts receivable7,111 
Inventory15,387 
Prepaid expenses134 
Property, plant & equipment5,902 
Intangible assets5,855 
Other assets1,057 
Other liabilities assumed(5,635)
Net assets assumed$32,358 
Goodwill8,741 
Acquisition Price$41,099 

4. EARNINGS PER SHARE
 
The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net income per common share. Net income for basic and diluted calculations does not differ.
(in thousands, except per share amounts) (in thousands, except per share amounts) 201820172016(in thousands, except per share amounts)202120202019
Net income Net income $73,486 $44,315 $40,045 Net income$80,245 $57,804 $63,103 
Average common shares: Average common shares:       Average common shares:   
Basic (weighted-average outstanding shares) Basic (weighted-average outstanding shares) 11,660 11,549 11,434 Basic (weighted-average outstanding shares)11,837 11,782 11,729 
Dilutive potential common shares from stock options Dilutive potential common shares from stock options 101 133 131 Dilutive potential common shares from stock options59 63 71 
Diluted (weighted-average outstanding shares)
Diluted (weighted-average outstanding shares)
11,761 11,682 11,565 
Diluted (weighted-average outstanding shares)
11,896 11,845 11,800 
Basic earnings per share Basic earnings per share $6.30 $3.84 $3.50 Basic earnings per share$6.78 $4.91 $5.38 
Diluted earnings per share Diluted earnings per share $6.25 $3.79 $3.46 Diluted earnings per share$6.75 $4.88 $5.35 
 
Stock options totaling 4,85015,586 shares in 2018, 1,5652021, 9,864 shares in 2017,2020, and 21,4914,244 shares in 20162019 were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive.
                       
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5. VALUATION AND QUALIFYING ACCOUNTS
Valuation and qualifying accounts included the following:
(in thousands)
(in thousands)
Balance
Beginning of
Year
Net
Charged to
Costs and
Expenses
 Translations,
Reclassifications
and Acquisitions
 Net Write-Offs or
Discounts Taken
Balance
End of
Year
(in thousands)
Balance
Beginning of
Year
Net
Charged to
Costs and
Expenses
 Translations,
Reclassifications
and Acquisitions
 Net Write-Offs or
Discounts Taken
Balance
End of
Year
2018          
20212021     
Reserve for sales discounts Reserve for sales discounts $15,652 $91,082 $(48)$(88,563)$18,123 Reserve for sales discounts$13,549 $116,114 $(688)$(116,408)$12,567 
Reserve for inventory obsolescence Reserve for inventory obsolescence 6,932 3,773 (116)(3,395)7,194 Reserve for inventory obsolescence12,027 6,531 (146)(5,504)12,908 
Reserve for warranty Reserve for warranty 5,335 5,815 (144)(6,014)4,992 Reserve for warranty9,096 10,727 (132)(9,738)9,953 
2017          
20202020     
Reserve for sales discounts Reserve for sales discounts $13,488 $82,724 $166 $(80,726)$15,652 Reserve for sales discounts$16,883 $93,398 $15 $(96,747)$13,549 
Reserve for inventory obsolescence Reserve for inventory obsolescence 7,262 3,007 886 (4,223)6,932 Reserve for inventory obsolescence8,233 4,609 1,471 (2,286)12,027 
Reserve for warranty Reserve for warranty 5,262 7,224 567 (7,718)5,335 Reserve for warranty10,249 8,466 247 (9,866)9,096 
2016          
20192019     
Reserve for sales discounts Reserve for sales discounts $15,094 $77,126 $(109)$(78,623)$13,488 Reserve for sales discounts$18,123 $91,962 $39 $(93,241)$16,883 
Reserve for inventory obsolescence Reserve for inventory obsolescence 9,675 2,041 295 (4,749)7,262 Reserve for inventory obsolescence7,194 5,711 6,467 (11,139)8,233 
Reserve for warranty Reserve for warranty 5,566 7,867 (49)(8,122)5,262 Reserve for warranty4,992 8,273 4,343 (7,359)10,249 
 
Sales Discounts
 
On December 31, 2018,2021, the Company had $18,123,000$12.6 million in reserves for sales discounts compared to $15,652,000$13.5 million on December 31, 20172020 on product shipped to our customers under various promotional programs. The most common programs provide a discount when the customer pays within a specified period of time.

The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time. The cost of these discounts is estimated based on historical experience and known changes in promotional programs and is reported as a reduction to sales when the product sale is recognized. The reserve is adjusted if discounts paid differ from those estimated. Historically, those adjustments have not been material.
 
Inventories – ObsoleteReserve for Inventory Obsolescence
We value inventories at the lower of the cost of inventory or net realizable value. As needed, we record an inventory valuation adjustment for excess, slow moving, and Slow Movingobsolete inventory that is equal to the excess of the cost of the inventory over the estimated net realizable value. The inventory valuation adjustment to net realizable value establishes a new cost basis of the inventory that cannot be subsequently reversed. Such inventory valuation adjustments for excess, obsolete, and slow moving inventory are not reduced or removed until the product is sold or disposed of.

The Company had a reserve of $7,194,000$12.9 million on December 31, 20182021 and $6,932,000$12.0 million on December 31, 20172020 to cover obsolete and slow moving inventory. The increase in the reserve was primarily attributable to the Company's Industrial Equipment Division. The obsolete and slow movingreserve for inventory reserveobsolescence is calculated as follows: 1) no inventory usage over a three-year period is deemed obsolete and reserved at 100%; and 2) slow moving inventory with little usage requires a 100% reserve on items that have a quantity greater than a three-year supply. There are exceptions to the obsolete and slow moving classifications if approved by an officer of the Company, based on specific identification of an item or items that are deemed to be either included or excluded from this classification. In cases where there is no historical data, management makes a judgment based on a specific review of the inventory in question to determine what reserves, if any, are appropriate. New products or parts are generally excluded from the reserve until a three-year history has been established.
 
Warranty
 
The Company’s warranty policy is generally to provide its customers warranty for up to one year on all wholegood units and 90 days on parts, though some components can have warranty for longer terms.
 
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Warranty reserve, as a percentage of sales, is generally calculated by looking at the current twelve months’ expenses and prorating that amount based on twelve months’ sales with a 90 daythree to six-monthsix month lag period. The Company’s historical experience is that an end-user takes approximately 90 daysthree to six months from the receipt of the unit to file a warranty claim. A warranty reserve is established for each different marketing group.
 
The current liability warranty reserve balance was $4,992,000$10.0 million on December 31, 20182021 and $5,335,000$9.1 million on December 31, 20172020 and is included in Note 1011.
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6. INVENTORIES
 
Inventories valued at LIFO represented 60% and 62% of total inventory for the years ended December 31, 2018 and 2017, respectively. The excess of current costs (market value) over LIFO-valued inventories was $10,646,000 and $7,919,000 on December 31, 2018 and December 31, 2017, respectively. Inventories consisted of the following on a cost basis, net of reserves for obsolescence and LIFO:following:
December 31,  December 31,
(in thousands) (in thousands) 20182017(in thousands)20212020
Finished goods and parts Finished goods and parts $149,298 $133,161 Finished goods and parts$277,760 $208,656 
Work in process Work in process 12,732 10,243 Work in process24,895 21,225 
Raw materials Raw materials 14,600 12,164 Raw materials18,262 12,620 
Inventory, netInventory, net$176,630 $155,568 Inventory, net$320,917 $242,501 
 
7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:
December 31,    December 31, 
(in thousands)
(in thousands)
20182017
Useful
Lives
(in thousands)
20212020
Useful
Lives
Land Land $11,970 $9,920   Land$12,838 $14,908  
Buildings and improvements Buildings and improvements 90,065 82,412 5-20 yrs.Buildings and improvements145,086 149,048 5-20 yrs.
Machinery and equipment Machinery and equipment 88,806 83,445 3-10 yrs.Machinery and equipment129,901 116,825 3-10 yrs.
Office furniture and equipment Office furniture and equipment 10,290 8,153 3-7 yrs.Office furniture and equipment13,291 11,743 3-7 yrs.
Computer software Computer software 11,410 12,500 3-7 yrs.Computer software12,384 12,276 3-7 yrs.
Transportation equipment Transportation equipment 6,594 5,863 3 yrs.Transportation equipment8,363 7,562 3 yrs.
Property, plant and equipment, at costProperty, plant and equipment, at cost219,135 202,293   Property, plant and equipment, at cost321,863 312,362  
Accumulated depreciation Accumulated depreciation (131,905)(125,629)  Accumulated depreciation(169,372)(156,928) 
Property, plant and equipment, netProperty, plant and equipment, net$87,230 $76,664   Property, plant and equipment, net$152,491 $155,434  
       
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8. GOODWILL
 
The changes in the carrying amount of goodwill for the twelve monthsyear ended December 31, 2016, 2017,2019, 2020, and 20182021 are as follows:
IndustrialAgriculturalEuropeanConsolidatedVegetation ManagementIndustrial EquipmentConsolidated
(in thousands) (in thousands)   (in thousands) 
Balance at December 31, 2015$56,293 $2,984 $16,232 $75,509 
Translation adjustment 154 505 (1,343)(684)
Balance at December 31, 2016$56,447 $3,489 $14,889 $74,825 
Balance at December 31, 2018Balance at December 31, 2018$16,751 $66,492 $83,243 
Translation adjustment Translation adjustment 389 (27)1,833 2,195 Translation adjustment(72)92 20 
Goodwill acquiredGoodwill acquired4,846 2,895 — 7,741 Goodwill acquired110,215 4,544 114,759 
Balance at December 31, 2017$61,682 $6,357 $16,722 $84,761 
Balance at December 31, 2019Balance at December 31, 2019$126,894 $71,128 $198,022 
Translation adjustment Translation adjustment (659)(901)(816)(2,376)Translation adjustment132 1,036 1,168 
Goodwill adjustmentGoodwill adjustment84 774 — 858 Goodwill adjustment(2,045)(2,013)(4,058)
Balance at December 31, 2018$61,107 $6,230 $15,906 $83,243 
Balance at December 31, 2020Balance at December 31, 2020$124,981 $70,151 $195,132 
Translation adjustmentTranslation adjustment(1,510)(708)(2,218)
Goodwill acquiredGoodwill acquired9,492 — 9,492 
Balance at December 31, 2021Balance at December 31, 2021$132,963 $69,443 $202,406 

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9. DEFINITE- AND INDEFINITE-LIVED INTANGIBLE ASSETS

The following is a summary of both the Company's definite- and indefinite-lived intangible assets net of the accumulated amortization:
(in thousands)(in thousands)Estimated Useful LivesDecember 31,
2018
December 31, 2017(in thousands)Estimated Useful LivesDecember 31, 2021December 31, 2020
Definite:Definite:Definite:
Trade names and trademarksTrade names and trademarks25 years$23,938 $25,574  Trade names and trademarks15-25 years$68,321 $67,770 
Customer and dealer relationshipsCustomer and dealer relationships10-14 years32,260 31,356  Customer and dealer relationships8-15 years126,104 122,470 
Patents and drawings3-12 years2,061 1,982 
Patents and developed technologies Patents and developed technologies3-12 years29,338 28,764 
Favorable leasehold interests Favorable leasehold interests7 years4,200 4,200 
Total at costTotal at cost58,259 58,912  Total at cost227,963 223,204 
Less accumulated amortizationLess accumulated amortization(14,902)(11,540) Less accumulated amortization(49,997)(35,532)
Total netTotal net43,357 47,372  Total net177,966 187,672 
Indefinite:Indefinite:Indefinite:
Trade names and trademarksTrade names and trademarks5,500 5,500  Trade names and trademarks5,500 5,500 
Total Intangible AssetsTotal Intangible Assets$48,857 $52,872  Total Intangible Assets$183,466 $193,172 

The Company's net carrying value at December 31, 20182021 of intangible assets with definite useful lives consists of trade names and trademarks at $19,721,000,$57.2 million, customer and dealer relationships at $22,334,000, and$95.8 million, patents and drawings at $1,302,000.$22.1 million, and favorable leasehold interests at $2.9 million. As of December 31, 2018,2021, the related accumulated amortization balance for the definite- liveddefinite-lived assets were $4,217,000$11.1 million for trade names and trademarks, $9,926,000$30.4 million for customer and dealer relationships, and $759,000$7.2 million for patents and drawings.drawings, and $1.3 million for favorable leasehold interests. The Company estimates amortization expense to be $3,500,000$14.5 million for each of the next five years.

Indefinite-lived trade names and trademarks consisted of the Gradall trade name with a carrying value of $3,600,000$3.6 million and the Bush Hog trade name with a carrying value of $1,900,000. $1.9 million.

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10. LEASES

Leases
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. As of December 31, 2021, the components of lease cost were as follows:

Components of Lease Cost
Twelve Months Ended December 31,
(in thousands)20212020
Finance lease cost:
Amortization of right-of-use assets$67 $89 
Interest on lease liabilities
Operating lease cost5,571 4,824 
Short-term lease cost1,033 818 
Variable lease cost410 487 
Total lease cost$7,084 $6,225 


As of December 31, 2021, future minimum lease payments under these non-cancelable leases are:
Future Minimum Lease Payments
  
(in thousands)
Operating
Leases
2022$4,949 
20233,793 
20242,683 
20252,036 
20261,652 
Thereafter3,090 
Total minimum lease payments$18,203 
Less imputed interest(1,311)
Total lease liabilities$16,892 
Rental expense for operating leases was $7.0 million for 2021, $6.1 million for 2020, and $5.5 million for 2019.
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Future Lease Commencements

As of December 31, 2021, we have additional operating leases that have not yet commenced in the amount of $4.2 million. These operating leases will commence in fiscal year 2022.
Supplemental balance sheet information related to leases was as follows:
Operating Leases
December 31,
(in thousands)20212020
Other non-current assets
$16,744 $14,144 
Accrued liabilities4,655 3,680 
Other long-term liabilities12,237 10,565 
Total operating lease liabilities$16,892 $14,245 
Weighted average remaining lease term5.14 years5.83 years
Weighted average discount rate2.83 %3.04 %

Supplemental cash flow information related to leases was as follows:
Twelve Months Ended December 31,
(in thousands)20212020
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases5,013 4,487 



10.11. ACCRUED LIABILITIES

Accrued liabilities consist of the following balances:
December 31,  December 31,
(in thousands) (in thousands) 20182017(in thousands)20212020
Salaries, wages and bonuses Salaries, wages and bonuses $22,598 $25,100 Salaries, wages and bonuses$37,462 $31,658 
Lease liabilityLease liability4,655 3,680 
Taxes Taxes 6,621 3,463 Taxes1,902 5,907 
Warranty Warranty 4,992 5,335 Warranty9,953 9,096 
Retirement Provision 2,646 2,792 
Customer Deposits 2,520 200 
Retirement provisionRetirement provision2,967 3,252 
Customer depositsCustomer deposits6,383 1,385 
Other Other 4,408 3,564 Other10,201 9,656 
Accrued Liabilities$43,785 $40,454 
Accrued liabilitiesAccrued liabilities$73,523 $64,634 

11.12. FAIR VALUE OF FINANCIAL INSTRUMENTS

U.S. GAAP requires or permits certain assets or liabilities to be measured at fair value on a recurring or nonnon- recurring basis in our balance sheets. U.S. GAAP also requires the disclosure of the fair values of financial instruments when onan option to elect fair value accounting has been provided but such election has not been made. A debt obligation is an example of such a financial instrument.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. 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
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unobservable inputs (lowest level) reflect internally developed market assumptions. In fair value, measurements are classified under the following hierarchy:
 
Level 1 – Quoted prices for identical assets or liabilities in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
Level 3 – Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

When measuring fair value, the Company maximizes use of observable inputs and minimizes the use of unobservable inputs.

Fair value measurements are classified to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

The carrying values of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value because of the short-term nature of these items. The carrying value of our debt approximates the fair value as of December 31, 20182021 and 2017,2020, as the floating rates on our outstanding balances approximate current market rates. This conclusion was made based on Level 2 inputs. Other than the investments held by the retirement benefit plans, as described in Note 16 to the Consolidated Financial Statements, the Company does not have any other significant financial assets or liabilities measured at fair value on a recurring basis.

The carrying value of our debt approximates the fair value as of December 31, 2018 and 2017, as our borrowings bear interest based upon short-term floating market interest rates. The fair value measurement for these liabilities is categorized as Level 2 in the fair value hierarchy. Fair values determined by Level 2 utilize inputs that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Other than the investments held by the retirement benefit plans, as described in Note 17 to the Consolidated Financial Statements, the Company does not have any other significant financial assets or liabilities measured at fair value on a recurring basis.
 
Fair value measurements are also used in connection withThe Company has no recurring or nonrecurring valuations performed in connection with impairment assessments and acquisition accounting. In completing the analysis of the fair values of certain assets acquired as part of business acquisitions, discounted cash flow models were used, which were principally based upon internal assumptions. In valuing certain of the acquired intangible assets, we used an excess earnings methodology, which is a form of a discounted cash flow analysis.

All of our nonrecurring valuations use significant unobservable inputs and thereforethat fall under Level 3 of the fair value hierarchy.hierarchy as of December 31, 2021 and 2020.

12.13. LONG-TERM DEBT

The components of long-term debt are as follows:
December 31,  December 31,
(in thousands) (in thousands) 20182017(in thousands)20212020
Bank revolving credit facility Bank revolving credit facility $85,000 $60,000 Bank revolving credit facility$4,000 $5,000 
Term debtTerm debt265,498 280,233 
Capital lease obligations Capital lease obligations 298 — Capital lease obligations56 153 
Other notes payable — 82 
Total debt Total debt 85,298 60,082 Total debt269,554 285,386 
Less current maturities Less current maturities 119 82 Less current maturities15,032 15,066 
Total long-term debt Total long-term debt $85,179 $60,000 Total long-term debt$254,522 $270,320 
 
TheOn October 24, 2019, the Company, maintains an unsecured revolving credit facility with certain lenders underas Borrower, and each of its domestic subsidiaries as guarantors, entered into a Second Amended and Restated Revolving Credit Agreement ("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 commitments from lenders under this Agreement are $250,000,000amount 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 $50,000,000.$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 usthe Company to maintain various
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2 financial covenants including a minimum earnings before interest and tax to interest expense ratio,- 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. The Agreement also contains other customary covenants, representations and events of defaults. The
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expiration date of the revolving credit facilityTerm Facility and the Revolver Facility is December 20, 2021.October 24, 2024. As of December 31, 2018, $85,000,0002021, $269.5 million was outstanding under the Credit Agreement. Of the total outstanding, $265.5 million was on the Term Facility at a rate of 1.60% and $4.0 million was on the Revolver Facility at a rate of 3.75%. On December 31, 2018, $1,388,0002021, $2.4 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 $163,612,000$255.0 million in available borrowings. The Company is in compliance with the covenants under the Credit Agreement.
 
The aggregate maturities of long-term debt, as of December 31, 2018,2021, are as follows: $119,000$15.0 million in 2019; $94,0002022; $15.0 million in 2020; $85,064,0002023; $239.5 million in 2021; $21,0002024; $0.01 million in 20222025; and zero thereafter. 

13.14. INCOME TAXES

Tax Reform
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act ("TCJA") that instituted fundamental changes to the U.S. Internal Revenue Code of 1986, as amended ("the Code").

We reflected an overall income tax liability of $10.2 million for the year ended December 31, 2017 with respect to TCJA as a result of remeasuring our U.S. deferred tax assets and liabilities using the 21% rate and recognizing a one-time transition tax charge on the deemed repatriation of previously undistributed accumulated earnings and profits of our international subsidiaries. Due to the significant and complex changes to the Code from the TCJA, the SEC issued Staff Accounting Bulletin No. 118, "Income Tax Accounting Implications of the Tax Cuts and Jobs Act," (SAB 118). SAB 118 provides measurement period for up to one year for adjustments to be made to account for the effects of the TCJA. The Company reflected the income tax effects of those aspects of TCJA for which the accounting was complete. To the extent the Company’s accounting for certain income tax effects of TCJA was incomplete but the Company was able to determine a reasonable estimate, the Company recorded a provisional estimate in the financial statements. For those items where a reasonable estimate could not be made, a provisional amount was not recorded and the Company continued to apply the provisions of the tax laws that were in effect immediately before the enactment of TCJA.

During 2018, we revised our initial provisional amount recorded for the transitional tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and the impact of the federal tax rate change on the value of our deferred tax assets and liabilities. The transition tax liability on the deemed repatriation decreased $4.2 million, primarily as a result of additional analysis performed over our historical foreign earnings and foreign source income which provided increased ability to credit foreign taxes associated with the deemed repatriation. In addition, adjustments to deferred assets and liabilities recorded upon the filing of our 2017 federal income tax return resulted in a $1.2 million expense from the rate change. 

Income Statement Components

The jurisdictional components ofEarnings before income before taxes consist of the following:were as follows:
December 31,  December 31,
(in thousands) (in thousands) 201820172016(in thousands)202120202019
Income before income taxes: Income before income taxes:       Income before income taxes:   
Domestic Domestic $66,858 $61,329 $44,446 Domestic$74,070 $50,977 $54,830 
Foreign Foreign 27,673 21,038 17,743 Foreign35,428 28,780 29,769 
$94,531 $82,367 $62,189  $109,498 $79,757 $84,599 
 
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The components of income tax expense (benefit) consistwere as follows:
 December 31,
(in thousands)202120202019
Current:   
Domestic$16,846 $10,823 $6,403 
Foreign8,646 8,759 8,419 
State4,943 3,226 3,291 
 30,435 22,808 18,113 
Deferred:      
Domestic(679)1,238 3,906 
Foreign(274)(1,199)(280)
State(229)(894)(243)
 (1,182)(855)3,383 
Total income taxes$29,253 $21,953 $21,496 
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A reconciliation of the following:
  December 31, 
(in thousands) 201820172016
Current:       
Domestic $6,771 $26,713 $11,958 
Foreign 7,391 6,222 5,491 
State 4,831 3,789 2,075 
  18,993 36,724 19,524 
Deferred:          
Domestic 2,542 1,711 1,580 
Foreign (390)(155)934 
State (100)(228)106 
  2,052 1,328 2,620 
Total income taxes $21,045 $38,052 $22,144 
The difference between income tax expense (benefit) for financial statement purposes andat the amount of income tax expense computed by applying the domesticCompany’s U.S. statutory federal income tax rate of 21% in 2018 and 35% in 2017 and 2016 to income beforethe provision for income taxes consists of the following:follows: 
 December 31,
(in thousands)202120202019
Income tax expense at statutory rates$22,995 $16,749 $17,765 
Increase (reduction) from:   
Jurisdictional rate differences1,599 1,034 988 
Executive compensation limitation1,314 170 715 
Stock based compensation(322)(366)(358)
U.S. state taxes3,724 2,556 3,137 
Foreign tax expense— 704 — 
R&D credit(670)(415)(699)
GILTI— 50 872 
Previously unrecognized tax (benefit)/expense2,219 (1,504)
Other, net605 (748)580 
Provision for income taxes$29,253 $21,953 $21,496 
Effective tax rate27 %28 %25 %
 
  December 31, 
(in thousands) 201820172016
Income tax expense at statutory rates$19,851 $28,828 $21,766 
Increase (reduction) from:       
Jurisdictional rate differences 719 (1,863)(1,936)
Valuation allowance (267)308 1,731 
Stock based compensation (205)(778)275 
U.S. state taxes 3,917 2,463 1,295 
Domestic production deduction— (1,039)(618)
R&D credit(531)(500)(329)
GILTI673 — — 
Other, net 219 397 (40)
Provision for income taxes before tax reform$24,376 $27,816 $22,144 
Effective tax rate before effects of tax reform 26 %34 %36 %
Tax Reform:
Rate change of deferreds1,200 (3,334)— 
Transition tax on deemed repatriation(4,531)13,104 — 
Other— 466 — 
Impact of tax reform$(3,331)$10,236 $— 
Provision for income tax$21,045 $38,052 $22,144 
Effective tax rate22 %46 %36 %
6367


Deferred Income Tax Assets and Liabilities

Deferred income taxes arise from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The components of the Company’s deferred income tax assets and liabilities consist of the following:were as follows:
December 31,  December 31,
(in thousands) (in thousands) 20182017(in thousands)20212020
Deferred income tax assets: Deferred income tax assets:     Deferred income tax assets:  
Inventory basis difference Inventory basis difference $1,825 $571  Inventory basis difference$892 $519 
Accounts receivable reserve Accounts receivable reserve 251 310  Accounts receivable reserve240 255 
Rental equipment and Property, plant and equipmentRental equipment and Property, plant and equipment56  Rental equipment and Property, plant and equipment201 144 
Stock based compensation Stock based compensation 672 549  Stock based compensation688 606 
Pension liability Pension liability 3,204 2,859  Pension liability3,116 3,655 
Employee benefit accrual Employee benefit accrual 1,911 2,193  Employee benefit accrual2,747 1,585 
Product liability and warranty reserves Product liability and warranty reserves 1,294 1,211  Product liability and warranty reserves2,155 2,242 
Foreign net operating loss Foreign net operating loss 4,164 4,266  Foreign net operating loss3,764 3,566 
Lease liability Lease liability3,858 3,376 
State net operating loss State net operating loss 148 286  State net operating loss157 148 
Foreign tax credit— 4,106 
OtherOther(156)216  Other1,016 1,891 
Total deferred income tax assetsTotal deferred income tax assets$13,369 $16,571  Total deferred income tax assets$18,834 $17,987 
Less: Valuation allowanceLess: Valuation allowance(3,696)(8,519) Less: Valuation allowance(4,129)(3,641)
Net deferred income tax assetsNet deferred income tax assets$9,673 $8,052  Net deferred income tax assets$14,705 $14,346 
      
Deferred income tax liabilities: Deferred income tax liabilities:     Deferred income tax liabilities:  
Inventory basis differences Inventory basis differences$(165)$(287)
Rental equipment and Property, plant and equipmentRental equipment and Property, plant and equipment(9,928)(7,477) Rental equipment and Property, plant and equipment(13,844)(14,818)
Lease asset Lease asset(3,794)(3,351)
Intangible assets Intangible assets (8,944)(7,064) Intangible assets(16,197)(16,496)
Expenses not currently deductible for book purposesExpenses not currently deductible for book purposes(749)(887) Expenses not currently deductible for book purposes(1,053)(1,003)
Total deferred income tax liabilitiesTotal deferred income tax liabilities$(19,621)$(15,428) Total deferred income tax liabilities$(35,053)$(35,955)
Net deferred income taxesNet deferred income taxes$(9,948)$(7,376) Net deferred income taxes$(20,348)$(21,609)
 
As of December 31, 2018,2021, 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 $9,499,000$11.8 million with an unlimited carry-forward period, and $5,100,000$0.8 million with a carry-forward expiring in 2035. The Company also has U.S. state net operating loss carry-forwards in the amount of $4,602,000$3.6 million which will expire between 20192022 and 2029.2030.

We have recorded aThe Company's valuation allowanceallowances as of December 31, 20182021 and 2017 due2020 related primarily to uncertainties related to our ability to utilize some of the deferred income tax assets, primarily consisting of internationalforeign net operating losses and foreign tax credits generated by the transition tax, before they expire. The valuation allowance is based on estimates of taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. During 2018, the valuation allowance decreased $4.8 million, primarily due to $4.1 million of foreign tax credits that the company was able to utilize to offset foreign source income and reduce the one-time transition tax.credits.

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Unrecognized Tax Benefits

Unrecognized tax benefits inA reconciliation of the beginning and ending amount of $236,000 and $234,000 for 2018 and 2017, respectively, are included in other non-current liabilities on the balance sheet. The unrecognized tax benefits if recognized, would favorably impact our effective tax rate in a future period. We dois as follows. The Company does not expect ourthe unrecognized tax benefits disclosed above to change significantly over the next 12 months.
 
Unrecognized Tax Benefits 
  December 31, 
20182017
Balance as of beginning of year $234,000 $235,000 
Additions for tax positions related to the current year63,000 62,000 
Additions for tax positions related to prior years— — 
Reduction due to lapse of statute of limitations(61,000)(63,000)
Balance as of end of year $236,000 $234,000 
68


Unrecognized Tax Benefits
 December 31,
(in thousands)20212020
Balance as of beginning of year$262 $262 
Increases for tax positions related to the current year82 88 
Decreases due to lapse of statute of limitations(74)(88)
Balance as of end of year$270 $262 

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, 2018,2021, no interest or penalties has beenhave accrued. TheWith few exceptions, the Company’s open tax years for its federal and state income tax returns are for the tax years ended 20132018 through 2018. The Company’s open2021, and for tax years ended 2014 through 2021 for its foreign income tax returns are for the tax years ended 2011 through 2018. The Company is currently under audit for tax years 2014 and 2015 for the State of New York and for tax year 2011 and 2016 for certain subsidiaries in Canada.returns.

The Company previously considered substantially allcurrently intends to permanently reinvest its earnings in certain foreign subsidiaries. No U.S. corporate income taxes or foreign withholding taxes should be imposed on future distributions of the earnings in our foreign subsidiaries to benot permanently reinvested and, accordingly, recorded no deferred income taxes on such earnings. As a result of the fundamental changes to the taxation of multinational corporations created by TCJA, we no longer intend to permanently reinvest all of the historical undistributed earnings of our foreign affiliates. We will distribute earnings from our European subsidiaries, while maintaining our permanent reinvestment for our other foreign subsidiaries. There will generally be no U.S. corporate taxes imposed on such future distributions of foreign earnings or foreign withholding and other local taxes. Forreinvested. If the amounts we continue to assertasserted as permanent reinvestment if the amounts were distributed, the companyCompany would be subject to approximately $3,326,000$4.5 million in withholding taxes.

14.15. COMMON STOCK

On December 19, 2018,January 3, 2022, the Board of Directors of the Company declared a quarterly dividend of $.12$0.18 per share which was paid on January 29, 2019February 1, 2022 to holders of record as of January 17, 2019.18, 2022. The Company also announcedhas a share repurchase program under which the Company is authorized to repurchase, in the aggregate, up to $30$30.0 million of its outstanding common stock. During 2021, the Company purchased zero shares.
 
15.16. STOCK OPTIONS
 
Incentive Stock Option Plan
 
On May 7, 2015, the stockholders of the Company approved the 2015 Incentive Stock Option Plan (“2015 ISO Plan”) and the Company reserved 400,000 shares of common stock for options to be issued under the 2015 ISO Plan. Each option becomes vested and exercisable for up to 20% of the total optioned shares one year following the grant of the option and for an additional 20% of the total optioned shares after each succeeding year until the option is fully exercisable at the end of the fifth year.

We also maintain other incentive option plans that have expired, under which previously granted awards remain outstanding. No additional grants may be awarded under these plans.



65


Following is a summary of activity in the Incentive Stock Option Plans for the periods indicated:
 
2018 2017 2016  202120202019
Shares 
  Exercise
   Price*
Shares 
  Exercise
   Price*
Shares 
  Exercise
   Price*
Shares
  Exercise
   Price*
Shares
  Exercise
   Price*
Shares
  Exercise
   Price*
Options outstanding at beginning of year Options outstanding at beginning of year 172,875 $43.91 220,820 $37.39 254,195 $34.64 Options outstanding at beginning of year100,920 $68.58 119,720 $57.65 140,170 $49.78 
Granted Granted 9,500 92.50 10,750 83.99 21,000 54.87 Granted18,900 156.38 13,950 114.53 12,150 105.56 
Exercised Exercised (41,205)34.89 (54,945)24.83 (43,775)26.59 Exercised(30,210)53.68 (31,300)45.94 (28,100)38.93 
CanceledCanceled(1,000)54.49 (3,750)54.57 (10,600)50.68 Canceled(2,000)130.92 (1,450)96.97 (4,500)58.57 
Options outstanding at end of year Options outstanding at end of year 140,170 49.78 172,875 43.91 220,820 37.39 Options outstanding at end of year87,610 91.24 100,920 68.58 119,720 57.65 
Options exercisable at end of year Options exercisable at end of year 96,320 $41.56 111,875 $36.44 136,220 $29.66 Options exercisable at end of year49,360 $61.21 67,700 $52.60 85,070 $47.10 
Options available for grant at end of yearOptions available for grant at end of year336,450   344,950   353,450   Options available for grant at end of year297,850  314,750  327,250  
*Weighted Averages
 
69


Options outstanding and exercisable at December 31, 20182021 were as follows:
 
Qualified Stock Options Options Outstanding Options Exercisable 
  
 Shares
Remaining Contractual Life (yrs)*Exercise Price*SharesExercise     Price*
Range of Exercise Price           
$11.45 - $24.69 6,000 0.53$13.66 6,000 $13.66 
$26.45 - $42.70 54,520 3.58$35.83 54,520 $35.83 
$49.44 - $83.99 70,150 6.56$57.92 35,800 $54.96 
$92.50 - $92.50 9,500 9.36$92.50 — $— 
Total 140,170     96,320   
Qualified Stock OptionsOptions OutstandingOptions Exercisable
 
 Shares
Remaining Contractual Life (yrs)*Exercise Price*SharesExercise     Price*
Range of Exercise Price     
$32.76 - $52.5116,100 1.49$40.88 16,100 $40.88 
$53.51 - $80.2719,800 3.35$54.20 19,800 $54.20 
$83.99 - $125.9933,710 7.08$102.27 13,460 $95.85 
$156.38 - $234.5718,000 9.16$156.38 — $— 
Total87,610   49,360  
*Weighted Averages
 
The weighted-average grant-date fair values of options granted during 2018, 2017,2021, 2020, and 20162019 were $38.77, $36.00$59.01, $38.33 and $27.48,$39.85, respectively. Stock option expense was $482,000, $597,000$0.6 million, $0.5 million and $787,000$0.5 million for years ending 2018, 2017,2021, 2020, and 2016,2019, respectively. As of December 31, 2018,2021, there was $816,000$1.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a period of five years.

Equity Incentive Plan
 
UnderOn May 2, 2019, the Company's 2009stockholders of the Company approved the 2019 Equity Incentive Plan and the Company reserved 400,000500,000 shares of common stock for issuance of equity awards including the issuance of non-qualified options tofor the purchase of shares of our common stock which may be granted to Company officers and non-employee directors. Options become vested and exercisable for up to 20% of the total optioned shares one year following the grant of the option and for an additional 20% of the total optioned shares after each succeeding year until the option is fully exercisable at the end of the fifth year.
 2018 2017 2016 
Options available for grant at end of year146,075 176,294 207,608 
 202120202019
Options available for grant at end of year423,969455,549499,640

We also maintain other incentive option plans that have expired, under which previously granted awards remain outstanding. No additional grants may be awarded under these plans.

66


Non-Qualified Options

Following is a summary of activity in the Non-Qualified Stock Option Plans for the periods indicated:
 
2018 2017 2016  202120202019
Shares Exercise Price*Shares Exercise Price*Shares Exercise Price* SharesExercise Price*SharesExercise Price*SharesExercise Price*
Options outstanding at beginning of year Options outstanding at beginning of year 67,000 $42.43 112,400 $34.48 127,300 $32.05 Options outstanding at beginning of year3,000 $53.51 5,300 $46.87 40,200 $42.99 
Granted Granted — — — — — — Granted— — — — — — 
Exercised Exercised (26,800)41.61 (45,400)22.73 (14,900)13.73 Exercised(1,000)53.51 (2,300)38.22 (34,900)42.40 
CanceledCanceled— — — — — — Canceled— — — — — — 
Options outstanding at end of year Options outstanding at end of year 40,200 42.99 67,000 42.43 112,400 34.48 Options outstanding at end of year2,000 53.51 3,000 53.51 5,300 46.87 
Options exercisable at end of year Options exercisable at end of year 34,400 $41.21 50,400 $39.86 85,000 $29.61 Options exercisable at end of year2,000 $53.51 3,000 $53.51 5,300 $46.87 
*Weighted Averages
 
70


Options outstanding and exercisable as of December 31, 20182021 were as follows:
Non-Qualified Stock Options Non-Qualified Stock Options Options Outstanding Options Exercisable Non-Qualified Stock OptionsOptions OutstandingOptions Exercisable
Shares   Remaining Contractual Life (yrs)*Exercise Price*SharesExercise Price* Shares   Remaining Contractual Life (yrs)*Exercise Price*SharesExercise Price*
Range of Exercise Price Range of Exercise Price           Range of Exercise Price     
$11.45 - $24.69 8,000 0.36$11.45 8,000 $11.45 
$26.45 - $42.70 3,200 2.3626.45 3,200 26.45 
$49.44 - $83.99 29,000 5.37$53.51 23,200 $53.51 
$53.51 - $80.27 $53.51 - $80.272,000 2.36$53.51 2,000 $53.51 
Total Total 40,200     34,400   Total2,000   2,000  
*Weighted Averages

There were no options granted in 20162019, 20172020 or 2018.2021. Stock option expense was $22,000, $22,000zero, zero and $27,000$0.01 million for years ending 2018, 2017,2021, 2020, and 2016,2019, respectively. As of December 31, 2018,2021, there was $8,000 of totalzero unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a period of five years.

During 2018, 2017,2021, 2020, and 2016, 26,800, 45,400,2019, 1,000, 2,300, and 14,90034,900 non-qualified options were exercised, respectively, $1,115,000, $1,032,000,$0.1 million, $0.1 million, and $205,000$1.5 million of cash receipts were received, respectively, and tax deductions of zero, zero, and $657,000 were realized, respectively, for the tax deductions from option exercises.respectively.

Restricted Stock Awards/Units
 
Following is a summary of activity in the Restricted Stock Awards ("RSA")/Units for the periods indicated:
  
2018 2017 2016  202120202019
Shares Grant-Date Fair Value*Shares Grant-Date Fair Value*Shares Grant-Date Fair Value* SharesGrant-Date Fair Value*SharesGrant-Date Fair Value*SharesGrant-Date Fair Value*
Options outstanding at beginning of year 63,052 $70.08 45,621 $54.58 32,616 $53.31 
Awards outstanding at beginning of yearAwards outstanding at beginning of year91,043 $104.77 78,705 $94.34 75,636 $81.39 
Granted Granted 35,300 92.50 33,620 84.34 27,440 55.17 Granted35,224 157.00 44,307 111.95 36,060 105.69 
Exercised Exercised (22,266)66.91 (16,189)56.03 (11,909)52.67 Exercised(45,651)101.36 (31,594)88.90 (32,466)69.94 
CanceledCanceled(450)83.99 — — (2,526)53.57 Canceled— — (375)100.34 (525)99.96 
Options outstanding at end of year 75,636 81.39 63,052 70.08 45,621 54.58 
Awards outstanding at end of yearAwards outstanding at end of year80,616 129.53 91,043 104.77 78,705 94.34 
*Weighted Averages

67


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. The weighted-average remaining contractual life in years for 2018, 2017,2021, 2020 and 20162019 was 2.53, 2.691.61, 1.95 and 2.89,2.48, respectively. Compensation expense was $1,946,000, $1,250,000$5.4 million, $3.7 million and $600,000$2.8 million for years ending 2018, 2017,2021, 2020, and 2016,2019, respectively. As of December 31, 2018,2021, there was $4,825,000$6.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. ThatThe cost for awards granted prior to 2020 is expected to be recognized over a period of four years. In 2020, the Board of Directors modified the vesting period for new RSA's granted to three years to be inline with grants of future performance stock units.

Performance Stock Units

In 2020, the Company's Board of Directors approved a change to our long-term incentive compensation plan to implement new performance-based equity grants in the form of a Performance Stock Unit ("PSU") award. PSU award vesting and payout amounts are tied to the Company's achievement of certain targeted financial metrics relating to a three-year performance period with the goal of more closely aligning executive compensation with long-term Company performance.

The 2020 target long-term incentive compensation mix established for the Company's Section 16 filers consists of RSAs and PSUs each representing fifty percent (50%) of the total long-term incentive compensation target value.PSU awards represent a right to receive a certain number of shares of the Company’s common stock at the end of the three-year performance period if certain financial or other performance targets/metrics have been met. 
16.
71


17. RETIREMENT BENEFIT PLANS

Defined Benefit Plans
 
In connection with the February 3, 2006 purchase of all the net assets of the Gradall excavator business, the Company assumed sponsorship of two2 Gradall non-contributory defined benefit pension plans, both of which are frozen with respect to both future benefit accruals and future new entrants.
 
The Gradall Company Employees’ Retirement Plan covers approximately 252248 former employees and 6755 current employees who (i) were formerly employed by JLG Industries, Inc., (ii) were not covered by a collective bargaining agreement and (iii) first participated in the plan before December 31, 2004. An amendment ceasing future benefit accruals for certain participants was effective December 31, 2004. A second amendment discontinued all future benefit accruals for all participants effective April 24, 2006.

The Gradall Company Hourly Employees’ Pension Plan covered former employees and current employees who (i) were formerly employed by JLG Industries, Inc., (ii) were covered by a collective bargaining agreement and (iii) first participated in the plan before April 6, 1997. An amendment ceasing all future benefit accruals was effective April 6, 1997.

On April 6, 2016, the Company notified all participants in the Gradall Company Hourly Employees’ Pension Plan of our decision to terminate the plan.  Participants in the plan did not lose any benefits but were given a choice between obtaining certain continued annuity benefits that match the benefits offered under the plan or receiving an immediate one-time lump sum payment in total settlement of benefits.  The Company made a final contribution of $622,000 and met all legal requirements to effectuate a proper termination of the plan before December 31, 2016. The Company expensed $2,889,000 related to accumulative pension actuarial losses relating to the closure of the Gradall Hourly Employees' Savings and Investment Plan that had been previously deferred in Other comprehensive income and deferred taxes.

68


 The following table sets forth the change in plan assets, change in projected benefit obligation, rate assumptions and components of net periodic benefit cost as of December 31 with respect to the plan. The measurement dates of the assets and liabilities of the plan were December 31 of the respective years presented.
 
Reconciliation of Funded Status Reconciliation of Funded Status Reconciliation of Funded Status
Year Ended December 31, Year Ended December 31,
(in thousands) (in thousands) 20182017 (in thousands) 20212020
Change in projected benefit obligation Change in projected benefit obligation     Change in projected benefit obligation   
Benefit obligation at beginning of year Benefit obligation at beginning of year $21,552 $20,787 Benefit obligation at beginning of year$24,100 $22,449 
Service cost Service cost Service cost
Interest cost Interest cost 757 831 Interest cost553 689 
Liability actuarial (gain) lossLiability actuarial (gain) loss(1,270)866 Liability actuarial (gain) loss(994)2,025 
Benefits paid Benefits paid (993)(936)Benefits paid(1,100)(1,067)
Benefit obligation at end of year Benefit obligation at end of year 20,050 21,552 Benefit obligation at end of year$22,564 $24,100 
Change in fair value of plan assets Change in fair value of plan assets     Change in fair value of plan assets   
Fair value of plan assets at beginning of year Fair value of plan assets at beginning of year 20,327 17,858 Fair value of plan assets at beginning of year$22,370 $20,605 
Return on plan assets Return on plan assets (1,228)2,505 Return on plan assets2,401 2,832 
Employer contributions Employer contributions — 900 Employer contributions— — 
Benefits paid Benefits paid (993)(936)Benefits paid(1,100)(1,067)
Fair value of plan assets at end of year Fair value of plan assets at end of year 18,106 20,327 Fair value of plan assets at end of year23,671 22,370 
Funded statusFunded status(1,944)$(1,225)Funded status$1,107 $(1,730)
 
The Company recognizes the overfunded or underfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of defined benefit postretirement plans as an asset or liability in its consolidated balance sheet and recognizes changes in the funded status in the year in which the changes occur. The Company measures the funded status of a plan as of the date of the year-end consolidated balance sheet.
The underfunded status of the plan of $1,944,000 and $1,225,000 as of December 31, 2018 and 2017, respectively, is recognized in the accompanying consolidated balance sheets as long-term accrued pension liability because plan assets are less than the value of benefit obligations expected to be paid.
The accumulated benefit obligation for our pension plan represents the actuarial present value of benefits based on employee service and compensation as of a certain date and does not include an assumption about future compensation levels.
 
In determining the projected benefit obligation and the net pension cost, we used the following significant weighted-average assumptions:
 
Rates to Determine Benefit Obligation 
  Year Ended December 31,
  20182017
Discount rate 4.20%  3.60%  
Composite rate of compensation increase N/A N/A 

6972


Rates to Determine Net Periodic Benefit Cost
Rates to Determine Benefit ObligationRates to Determine Benefit Obligation
Year Ended December 31, Year Ended December 31,
20182017 20212020
Discount rate Discount rate 3.60%  4.10%  Discount rate2.75%2.35%
Long-term rate of return on plan assets 7.25%  7.25%  
Composite rate of compensation increase Composite rate of compensation increase N/A Composite rate of compensation increaseN/A

Rates to Determine Net Periodic Benefit Cost
 Year Ended December 31,
 20212020
Discount rate2.35%3.15%
Long-term rate of return on plan assets7.25%7.25%
Composite rate of compensation increaseN/AN/A
  
The Company employs a building block approach in determining the expected long-term rate of return on plan assets. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term market assumptions are determined. The long-term portfolio return is established via a building block approach with proper consideration of diversification and re-balancing.rebalancing. Peer data and historical returns are reviewed to check for reasonability and appropriateness.

The following table presents the components of net periodic benefit cost (gains are denoted with parentheses and losses are not):
Components of Net Periodic Benefit Cost Components of Net Periodic Benefit Cost Components of Net Periodic Benefit Cost
Year Ended December 31, Year Ended December 31,
(in thousands)
(in thousands)
2018 2017 
(in thousands)
20212020
Service cost Service cost $$Service cost$$
Interest cost Interest cost 757 831 Interest cost553 689 
Expected return on plan assets Expected return on plan assets (1,454)(1,275)Expected return on plan assets(1,581)(1,452)
Amortization of net lossAmortization of net loss346 433 Amortization of net loss542 508 
Net periodic benefit cost Net periodic benefit cost $(347)$(7)Net periodic benefit cost$(481)$(251)

 The Company estimates that $542,000$0.2 million of unrecognized actuarial expense will be amortized from accumulatedAccumulated other comprehensive income (loss) into net periodic benefit costs during 2019.2022.
 
The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. 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. Derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of the underlying investments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset/liability studies. Our current asset allocations are consistent with our targeted allocations.
 
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The pension plans' weighted-average asset allocation as a percentage of plan assets at December 31 areis as follows:
 
Asset Allocation as a Percentage of the Plan 
  Year Ended December 31,
  20182017
Equity securities 55%  55%  
Debt securities 38%  38%  
Short-term investments 2%  2%  
Other 5%  5%  
Total 100%  100%  
70


Asset Allocation as a Percentage of the Plan
 Year Ended December 31,
 20212020
Equity securities36%56%
Debt securities62%38%
Short-term investments2%2%
Other—%4%
Total100%100%
  
The following table presents the hierarchy levels for our postretirement benefit plan investments as of December 31 as described in Note 1 to the Consolidated Financial Statements:
 




(in thousands)




(in thousands)
December 31, 2018
Quoted
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)




(in thousands)
December 31, 2021
Quoted
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Mutual Funds:Mutual Funds:        Mutual Funds:    
Mid Cap$1,176 $1,176 $— $— Mid Cap$637 $637 $— $— 
Large Cap2,618 2,618 — — 
International2,051 2,051 — — International940 940 — — 
Common/Collective Trusts:Common/Collective Trusts:Common/Collective Trusts:
Wells Fargo Liability Driven Solution 2,532 — 2,532 — Wells Fargo Liability Driven Solution CIT I7,782 — 7,782 — 
Wells Fargo BlackRock International Equity 765 — 765 — Wells Fargo Liability Driven Solution CIT II7,026 — 7,026 — 
Wells Fargo Core Bond 1,266 — 1,266 — Wells Fargo BlackRock International Equity616 — 616 — 
Wells Fargo/Causeway International 766 — 766 — 
Wells Fargo BlackRock Large Cap Growth Index Fund 1,026 — 1,026 — Wells Fargo/Causeway International Value586 — 586 — 
Wells Fargo BlackRock Large Cap Value Index Fund 1,025 — 1,025 — Wells Fargo BlackRock Large Cap Growth Index Fund950 — 950 — 
Wells Fargo Multi-Manager Small Cap 1,246 — 1,246 — Wells Fargo BlackRock Large Cap Value Index Fund968 — 968 — 
Wells Fargo BlackRock Russell 2000 Index Fund 573 — 573 — Wells Fargo Multi-Manager Small Cap1,015 — 1,015 — 
Wells Fargo BlackRock S&P Mid Cap Index Fund 641 — 641 — Wells Fargo BlackRock Russell 2000 Index Fund332 — 332 — 
Wells Fargo/MFS Value CIT F 516 — 516 — Wells Fargo BlackRock S&P Mid Cap Index Fund419 — 419 — 
Wells Fargo/T. Rowe Price Large-Cap Growth Managed CIT 516 — 516 — Wells Fargo/MFS Value CIT F469 — 469 — 
Wells Fargo/T. Rowe Price Equity Income 515 — 515 — Wells Fargo/T. Rowe Price Large-Cap Growth Managed CIT465 — 465 — 
Wells Fargo Voya Large Cap Growth CIT F 516 — 516 — Wells Fargo/T. Rowe Price Equity Income Managed CIT487 — 487 — 
Wells Fargo Voya Large Cap Growth CIT F482 — 482 — 
Cash & Short-term InvestmentsCash & Short-term Investments358 358 — — Cash & Short-term Investments497 497 — — 
Total $18,106 $6,203 $11,903 $— Total$23,671 $2,074 $21,597 $— 
            
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(in thousands)




(in thousands)
December 31, 2017
Quoted
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
 
Significant
Unobservable
Inputs
(Level 3)




(in thousands)
December 31, 2020
Quoted
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
 
Significant
Unobservable
Inputs
(Level 3)
Mutual Funds:Mutual Funds:        Mutual Funds:    
Mid Cap$1,321 $1,321 $— $— Mid Cap$1,450 $1,450 $— $— 
Large Cap2,930 2,930 — — Large Cap3,233 3,233 — — 
International2,300 2,300 — — International2,660 2,660 — — 
Common/Collective Trusts:Common/Collective Trusts:Common/Collective Trusts:
Wells Fargo Liability Driven Solution 2,845 — 2,845 — Wells Fargo Liability Driven Solution3,106 — 3,106 — 
Wells Fargo BlackRock International Equity 859 — 859 — Wells Fargo BlackRock International Equity959 — 959 — 
Wells Fargo Core Bond 1,416 — 1,416 — Wells Fargo Core Bond1,552 — 1,552 — 
Wells Fargo/Causeway International 861 — 861 — Wells Fargo/Causeway International Value923 — 923 — 
Wells Fargo BlackRock Large Cap Growth Index Fund 1,146 — 1,146 — Wells Fargo BlackRock Large Cap Growth Index Fund1,268 — 1,268 — 
Wells Fargo BlackRock Large Cap Value Index Fund 1,146 — 1,146 — Wells Fargo BlackRock Large Cap Value Index Fund1,240 — 1,240 — 
Wells Fargo Multi-Manager Small Cap 1,387 — 1,387 — Wells Fargo Multi-Manager Small Cap1,544 — 1,544 — 
Wells Fargo BlackRock Russell 2000 Index Fund 636 — 636 — Wells Fargo BlackRock Russell 2000 Index Fund702 — 702 — 
Wells Fargo BlackRock S&P Mid Cap Index Fund 715 — 715 — Wells Fargo BlackRock S&P Mid Cap Index Fund781 — 781 — 
Wells Fargo/MFS Value CIT F 578 — 578 — Wells Fargo/MFS Value CIT F627 — 627 — 
Wells Fargo/T. Rowe Price Large-Cap Growth Managed CIT 577 — 577 — Wells Fargo/T. Rowe Price Large-Cap Growth Managed CIT639 — 639 — 
T. Rowe Price Equity Income 577 — 577 — Wells Fargo/T. Rowe Price Equity Income Managed CIT643 — 643 — 
Wells Fargo Voya Large Cap Growth CIT F 577 — 577 — Wells Fargo Voya Large Cap Growth CIT F639 — 639 — 
Cash & Short-term InvestmentsCash & Short-term Investments456 456 — — Cash & Short-term Investments404 404 — — 
Total $20,327 $7,007 $13,320 $— Total$22,370 $7,747 $14,623 $— 
              
Our interests in the common collective trust investments are managed by one custodian. Consistent with our investment policy, the custodian has invested the assets across a widely diversified portfolio of U.S. and international equity and fixed income securities. Fair values of each security within the collective trust as of December 31, 20182021 were obtained from the custodian and are based on quoted market prices of individual investments; however, since the fund itself does not have a quoted market price, these assets are considered Level 2.

The common collective funds noted in the above table have estimated fair value using the net asset value per share of investments. Investments can be redeemed immediately at the current net asset value per share based on the fair value of the underlying assets. Redemption frequency is daily. The categories contain investments in equity securities of smaller growing companies, medium-sized U.S. companies, large value-oriented and growth-oriented companies, and foreign companies traded on international markets.
 
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Expected benefit payments are estimated using the same assumptions used in determining our benefit obligation as of December 31, 2018.2021. The following table illustrates the estimated pension benefit payments that are projected to be paid:
 
Projected Future Benefit Payments Projected Future Benefit Payments Projected Future Benefit Payments
(in thousands)
(in thousands)
Employees’
Retirement Plan
(in thousands)
Employees’
Retirement Plan
2019 $1,151 
2020 1,170 
2021 1,233 
2022 2022 1,269 2022$1,269 
2023 2023 1,283 20231,288 
Years 2024 through 2028 6,417 
202420241,301 
202520251,310 
202620261,306 
Years 2027 through 2031Years 2027 through 20316,287 

Supplemental Retirement Plan
 
The Board of Directors of the Company adopted the Alamo Group Inc. Supplemental Executive Retirement Plan (the “SERP”), effective as of January 3, 2011. The SERP will benefit certain key management or other highly compensated employees of the Company and/or certain subsidiaries who are selected by the Compensation Committee and approved by the Board to participate.
  
The SERP is intended to provide a benefit from the Company upon retirement, death or disability, or a change in control of the Company. Accordingly, the SERP obligates the Company to pay to a participant a Retirement Benefit (as defined in the SERP) upon the occurrence of certain payment events to the extent a participant has a vested right thereto. A participant’s right to his or her Retirement Benefit becomes vested in the Company’s contributions upon 10 years of Credited Service (as defined in the SERP) or a change in control of the Company.  The Retirement Benefit is based on 20% of the final three-year average salary of each participant on or after his or her normal retirement age (65 years of age).  In the event of the participant’s death or a change in control, the participant’s vested retirement benefit will be paid in a lump sum to the participant or his or her estate, as applicable, within 90 days after the participant’s death or a change in control, as applicable. In the event that the participant is entitled to a benefit from the SERP due to disability, retirement or other termination of employment, the benefit will be paid in monthly installments over a period of fifteen years.
 
The Company records amounts relating to the SERP based on calculations that incorporate various actuarial and other assumptions, including discount rates, rate of compensation increases, retirement dates and life expectancy. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits.

In May of 2015, the Board amended the SERP to allow the Board to modify the retirement benefit percentage either higher or lower than 20%. In May of 2016, the Board added additional highly compensated employees to the plan. As of December 31, 2018,2021, the current retirement benefit (as defined in the plan) for the participants ranges from 10% to 20%.
 
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The change in the Projected Benefit Obligation (PBO) as of December 31, 20182021 and 2017,2020, is shown below:
 
Reconciliation of Benefit Obligation Reconciliation of Benefit Obligation Reconciliation of Benefit Obligation
Year Ended December 31, Year Ended December 31,
(in thousands)(in thousands)20182017(in thousands)20212020
Benefit obligation at January 1,Benefit obligation at January 1,$5,945 $5,387 Benefit obligation at January 1,$10,160 $9,022 
Service cost Service cost 249 198 Service cost369 305 
Interest cost Interest cost 248 204 Interest cost205 236 
Liability actuarial loss (gain)Liability actuarial loss (gain)(328)247 Liability actuarial loss (gain)759 1,168 
Benefits paidBenefits paid(98)(91)Benefits paid(167)(1,025)
Plan amendmentsPlan amendments1,430 — Plan amendments— 454 
Benefit obligation at December 31,Benefit obligation at December 31,$7,446 $5,945 Benefit obligation at December 31,$11,326 $10,160 

The components of net periodic pension expense were as follows:
 
Components of Net Periodic Benefit Cost Components of Net Periodic Benefit Cost Components of Net Periodic Benefit Cost
Year Ended December 31,Year Ended December 31,
(in thousands)(in thousands)20182017(in thousands)20212020
Service costService cost$249 $198 Service cost$369 $305 
Interest costInterest cost248 204 Interest cost205 236 
Amortization of prior service costAmortization of prior service cost501 406 Amortization of prior service cost413 317 
Amortization of net (gain)/lossAmortization of net (gain)/loss318 158 
Recognition of settlementRecognition of settlement— 188 
Net periodic benefit costNet periodic benefit cost$998 $808 Net periodic benefit cost$1,305 $1,204 
 
The Company estimates that $317,000$0.9 million of unrecognized actuarial expense will be amortized from accumulatedAccumulated other comprehensive income into net periodic benefit costs during 2019.2022.

In determining the projected benefit obligation and the net pension cost, we used the following significant weighted-average assumptions:
 
Assumptions used to determine benefit obligations at December 31:
 
Rates to Determine Benefit Obligation Rates to Determine Benefit Obligation Rates to Determine Benefit Obligation
20182017 20212020
Discount rate Discount rate 4.10%  3.45%  Discount rate2.50%2.05%
Composite rate of compensation increase Composite rate of compensation increase 3.00%  3.00%  Composite rate of compensation increase3.00%
 
Assumptions used to determine net periodic benefit cost for the years ended December 31:
 
Rates to Determine Net Periodic Benefit Cost Rates to Determine Net Periodic Benefit Cost Rates to Determine Net Periodic Benefit Cost
20182017 20212020
Discount rate Discount rate 3.45%  3.85%  Discount rate2.05%2.95%
Composite rate of compensation increaseComposite rate of compensation increase3.00%  3.00%  Composite rate of compensation increase3.00%
Long-term rate of return on plan assets Long-term rate of return on plan assets N/A  N/A  Long-term rate of return on plan assetsN/A

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Future estimated benefits expected to be paid from the plan over the next ten years as follows:

Projected Future Benefit Payments Projected Future Benefit Payments Projected Future Benefit Payments
(in thousands)(in thousands)SERP (in thousands)SERP
2019$375 
2020397 
2021405 
20222022499 2022$456 
20232023504 2023489 
Years 2024 through 20283,255 
20242024530 
20252025606 
20262026828 
Years 2027 through 2031Years 2027 through 20314,105 

Defined Contribution Plans
 
The Company has two2 defined contribution plans, The Gradall Salaried Employees’ Savings and Investment Plan (“Salary Plan”) and The International Association of Machinist and Aerospace Workers Retirement Plan (“IAM Plan”). The Company contributed $418,000, $408,000,$0.5 million, $0.4 million, and $435,000$0.6 million to the IAM Plan for the plan years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively. The Company converted the Salary Plan into its 401(k) retirement and savings plan and put the Hourly Plan into a separate 401(k) retirement and savings plan.
 
The Company provides a defined contribution 401(k) retirement and savings plan for eligible U.S. employees. Company matching contributions are based on a percentage of employee contributions. Company contributions to the plan during 2018, 20172021, 2020 and 20162019 were $2,340,000, $1,942,000,$3.9 million, $3.5 million, and $1,900,000,$2.8 million, respectively.
 
 ThreeNaN of the Company’s international subsidiaries also participate in a defined contribution and savings plan covering eligible employees. The Company’s international subsidiaries contribute between 0% and 10% of the participant’s salary up to a specific limit. Total contributions made to the above plans were $850,000, $716,000,$0.9 million, $0.9 million, and $735,000$0.9 million for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
 
17.18. REVENUE AND SEGMENT REPORTING
 
Disaggregation of revenue is presented in the tables below by product type. Management has determined that this level of disaggregation would be beneficial to users of the financial statements.

Revenue by Product Type Revenue by Product Type Revenue by Product Type
December 31, December 31,
(in thousands) (in thousands) 20182017 2016 (in thousands)202120202019
Net Sales Net Sales Net Sales
Wholegoods Wholegoods $802,403 $714,862 $663,331 Wholegoods$1,024,158 $885,254 $875,805 
Parts Parts 186,979 182,412 167,411 Parts262,432 247,126 207,766 
Other Other 19,440 15,106 14,006 Other47,633 31,086 35,567 
Consolidated Consolidated $1,008,822 $912,380 $844,748 Consolidated$1,334,223 $1,163,466 $1,119,138 
 
Other includes rental sales, extended warranty sales and service sales as it is considered immaterial.

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 2 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's prior period segment information has been retrospectively adjusted to reflect the current segment presentation.
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The Company has included a summary of the financial information by reporting segment. The following table presents the revenuesrevenue and income from operations by reporting segment for the years ended December 31, 2018, 2017,2021, 2020, and 2016:2019:
 
  December 31, 
(in thousands) 201820172016
Net Revenue       
Industrial$598,930 $522,706 $484,088 
Agricultural235,069 227,389 205,834 
European 174,823 162,285 154,826 
Consolidated $1,008,822 $912,380 $844,748 
Income from Operations       
Industrial$64,213 $51,914 $35,984 
Agricultural22,649 24,059 20,720 
European 14,226 12,765 10,916 
Consolidated $101,088 $88,738 $67,620 
 December 31,
(in thousands)202120202019
Net Revenue   
Vegetation Management$812,676 $654,630 $502,194 
Industrial Equipment521,547 508,836 616,944 
Consolidated$1,334,223 $1,163,466 $1,119,138 
Income from Operations   
Vegetation Management$78,917 $46,651 $34,035 
Industrial Equipment38,021 48,134 60,877 
Consolidated$116,938 $94,785 $94,912 
The following table presents the goodwill and total identifiable assets by reporting segment for the years ended December 31, 20182021 and 2017:2020:
 
December 31,
(in thousands)20182017
Goodwill
Industrial$61,107 $61,682 
Agricultural6,230 6,357 
European15,906 16,722 
Consolidated$83,243 $84,761 
Identifiable Assets
Industrial$421,539 $369,271 
Agricultural162,548 141,023 
European137,546 129,377 
Consolidated$721,633 $639,671 
December 31,
(in thousands)20212020
Goodwill
Vegetation Management$132,963 $124,981 
Industrial Equipment69,443 70,151 
Consolidated$202,406 $195,132 
Identifiable Assets
Vegetation Management$789,838 $707,398 
Industrial Equipment415,904 414,461 
Consolidated$1,205,742 $1,121,859 


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19.  ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, net of tax, were as follows:

Twelve Months Ended December 31,
20212020
(in thousands)Foreign Currency Translation AdjustmentDefined Benefit Plans ItemsGaines (Losses) on Cash Flow HedgesTotalForeign Currency Translation AdjustmentDefined Benefit Plans ItemsGaines (Losses) on Cash Flow HedgesTotal
Balance as of beginning of period$(26,597)$(6,855)$(6,874)$(40,326)$(35,459)$(5,989)$610 $(40,838)
Other comprehensive income (loss) before reclassifications(15,800)— 7,984 (7,816)8,862 — (5,789)3,073 
Amounts reclassified from accumulated other comprehensive loss— 1,838 (2,686)(848)— (866)(1,695)(2,561)
Other comprehensive income (loss)(15,800)1,838 5,298 (8,664)8,862 (866)(7,484)512 
Balance as of end of period$(42,397)$(5,017)$(1,576)$(48,990)$(26,597)$(6,855)$(6,874)$(40,326)


18.20. INTERNATIONAL OPERATIONS AND GEOGRAPHIC INFORMATION
 
Following is selected financial information on the Company’s international operations, which include Europe,the United Kingdom, France, Netherlands, Canada, Brazil, and Australia:
International Operations Financial Information International Operations Financial Information International Operations Financial Information
December 31,  December 31,
(in thousands) (in thousands) 201820172016(in thousands)202120202019
Net sales Net sales $297,246 $254,144 $232,291 Net sales$363,339 $312,462 $357,602 
Income from operations Income from operations 28,301 23,110 18,544 Income from operations34,561 31,166 32,518 
Income before income taxes Income before income taxes 29,254 22,476 18,720 Income before income taxes37,051 30,674 31,975 
Identifiable assets Identifiable assets 244,888 227,758 167,990 Identifiable assets352,187 304,536 333,392 

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Following is other selected geographic financial information on the Company’s operations:

Geographic Financial Information Geographic Financial Information Geographic Financial Information
December 31, December 31,
(in thousands) (in thousands) 201820172016(in thousands)202120202019
Geographic net sales:
Geographic net sales:
Geographic net sales:
United States United States $726,582 $663,600 $615,028 United States$953,024 $862,430 $774,854 
United Kingdom 51,043 44,416 45,184 
France France 90,956 86,443 79,070 France92,052 81,259 99,145 
Canada Canada 62,077 52,332 48,357 Canada83,392 65,313 72,950 
United KingdomUnited Kingdom57,386 47,757 52,098 
BrazilBrazil31,365 16,592 17,919 
NetherlandsNetherlands27,964 23,946 23,462 
GermanyGermany8,977 9,328 7,825 
Australia Australia 9,055 12,778 13,580 Australia20,980 10,999 7,550 
Brazil 16,829 9,321 2,665 
Other Other 52,280 43,490 40,864 Other59,083 45,842 63,335 
Total net sales Total net sales $1,008,822 $912,380 $844,748 Total net sales$1,334,223 $1,163,466 $1,119,138 
Geographic location of long-lived assets:
Geographic location of long-lived assets:
    
Geographic location of long-lived assets:
  
United States United States $191,958 $171,048 $166,707 United States$461,341 $480,940 $515,189 
NetherlandsNetherlands32,262 39,063 37,930 
CanadaCanada32,132 33,573 32,606 
United Kingdom United Kingdom 19,270 18,948 16,254 United Kingdom36,569 18,843 19,840 
France France 18,650 19,324 16,772 France19,781 21,033 19,513 
Canada 21,647 24,302 19,435 
BrazilBrazil10,408 11,123 15,096 
Australia Australia 815 917 1,401 Australia790 964 1,021 
Brazil15,701 11,558 3,621 
Total long-lived assets Total long-lived assets $268,041 $246,097 $224,190 Total long-lived assets$593,283 $605,539 $641,195 
     
Net sales are attributed to countries based on the location of customers.
 
19.21. COMMITMENTS AND CONTINGENCIES

Leases
The Company leases office spaceis subject to various unresolved legal actions that arise in the ordinary course of its business. The most significant of such actions relates to product liability, which is generally covered by insurance after various self-insured retention amounts. While amounts claimed might be substantial and equipment under various operating and capital leases, which generally are expectedthe liability with respect to such litigation cannot be reneweddetermined at this time, the Company believes that the outcome of these matters will not have a material adverse effect on the Company’s consolidated financial position or replaced by other leases.  Asresults of December 31, 2018, future minimum lease payments under these non-cancelable leases are:
Future Minimum Lease Payments 
  
(in thousands)
Operating
Leases
Capitalized
Leases
2019$3,310 $119 
20202,453 94 
20211,308 64 
2022743 21 
2023419 — 
Thereafter 79 — 
Total minimum lease payments $8,312 $298 
Rental expense for operating leases was $5,087,000 for 2018, $4,788,000 for 2017, and $4,060,000 for 2016.operations; however, the ultimate resolution cannot be determined at this time.

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Other Commitments

LikeAlso, like other manufacturers, the Company is subject to a broad range of federal, state, local and foreign laws and requirements, including those concerning air emissions, discharges into waterways, and the generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and off-site disposal locations, workplace safety and equal employment opportunities. These laws and regulations are constantly changing, and it is impossible to predict with accuracy the effect that changes to such laws and regulations may have on the Company in the future. Like other industrial concerns, the Company’s manufacturing operations entail the risk of noncompliance, and there can be no assurance that the Company will not incur material costs or other liabilities as a result thereof.

20. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 2018 and 2017 are presented below. Seasonal influences affect the Company’s sales and profits, with heavier business occurring in May through August.
(in thousands, except per share amounts)
  20182017
  First Second Third FourthFirst Second Third 
Fourth(1)
Sales $238,087 $257,125 $257,572 $256,038 $215,389 $213,276 $240,455 $243,260 
Gross profit 60,257 66,454 66,772 62,632 54,164 54,679 64,939 60,911 
Net income 14,583 18,771 23,543 16,589 12,167 12,316 16,592 3,240 
Earnings per share                 
Diluted $1.24 $1.60 $2.00 $1.41 $1.05 $1.05 $1.42 $0.27 
Average shares                 
Diluted 11,739 11,759 11,777 11,768 11,620 11,671 11,708 11,727 
Dividends per share $0.11 $0.11 $0.11 $0.11 $0.10 $0.10 $0.10 $0.10 
Market price of
    common stock
                
High $120.22 $118.93 $102.29 $93.45 $79.50 $92.67 $107.69 $119.50 
Low $103.38 $88.60 $88.13 $72.85 $71.20 $71.72 $86.80 $104.87 
(1) The Net income for the fourth quarter of 2017 includes a one-time charge of $10.1 million relating to the U.S. tax reform act. 
The sum of quarterly earnings per share may not equal total year earnings per share due to rounding of earnings per share amounts, and differences in weighted-average shares and equivalent shares outstanding for each of the periods presented.

21. SUBSEQUENT EVENTS
On February 21, 2019, the Company announced that it entered into an agreement to acquire 100% of the outstanding capital shares of Dutch Power Company B.V. (“Dutch Power”), a privately held equipment manufacturer based in the Netherlands. Dutch Power designs, manufactures and sells a variety of landscape and vegetation management machines and attachments under several different brand names including Herder, Conver, Roberine, Votex and Precision Makers. The acquisition is expected to close in the first quarter of 2019.
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