Company Quick10K Filing
Alamo Group
Price117.76 EPS6
Shares12 P/E20
MCap1,391 P/FCF31
Net Debt90 EBIT93
TEV1,481 TEV/EBIT16
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-02-26
10-Q 2020-09-30 Filed 2020-10-28
10-Q 2020-06-30 Filed 2020-07-30
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-07-31
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-10-31
10-Q 2017-06-30 Filed 2017-08-02
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-03-07
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-04
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-06
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-11
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-05
10-Q 2013-03-31 Filed 2013-05-03
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-07
10-K 2011-12-31 Filed 2012-03-12
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-15
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-15
8-K 2020-12-10 Officers, Exhibits
8-K 2020-10-28
8-K 2020-07-29
8-K 2020-05-11
8-K 2020-05-06
8-K 2020-04-07
8-K 2020-03-30
8-K 2020-03-26
8-K 2020-03-19
8-K 2020-03-10
8-K 2020-02-27
8-K 2019-12-13
8-K 2019-11-04
8-K 2019-10-30
8-K 2019-10-29
8-K 2019-09-11
8-K 2019-09-11
8-K 2019-07-31
8-K 2019-05-02
8-K 2019-05-02
8-K 2019-05-01
8-K 2019-03-06
8-K 2019-02-28
8-K 2018-10-31
8-K 2018-08-01
8-K 2018-05-03
8-K 2018-05-03
8-K 2018-04-06
8-K 2018-03-12
8-K 2018-03-01

ALG 10K Annual Report

Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships, Related Transactions and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Summary
EX-10.22 a2021formofperformanceshar.htm
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EX-32.2 a202010kex322.htm
EX-32.3 a202010kex323.htm

Alamo Group Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
0.90.70.50.40.20.02012201420172020
Assets, Equity
0.30.20.20.10.10.02012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 2020
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)
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
New York Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  NONE
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ 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
 
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 ☒ 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 ☒ No ☐

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 Accelerated filer                        
Non-accelerated filer    Smaller reporting company        
Emerging Growth Company
 
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, 2020 (based upon the last reported sale price of $102.64 per share) was approximately $1,004,602,446 on such date.
 
The number of shares of the registrant’s common stock, par value $.10 per share, outstanding as of February 19, 2021 was 11,896,421 shares.




DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s proxy statement relating to the 2021 Annual Meeting of Stockholders 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.
 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 and manufacture of high quality agricultural equipment and infrastructure maintenance equipment for governmental and industrial use. The Company’s products include 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. 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 3,990 employees and operates a total of 27 plants in North America, South America, Europe, and Australia. The Company sells its products primarily through a network of independent dealers and distributors to governmental end-users, related independent contractors, as well as to the agricultural and commercial turf markets. The primary markets for our products are North America, 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 is part of the agricultural 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 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 equipment sold by the Company.

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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. 

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. Twose consolidated its 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 under the RhinoAg brand.

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 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 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.
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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.

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 agricultural mowers, created one of the largest manufacturers of agricultural 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 Europe and allowed the Company to enter into the self-propelled sprayer market. The Kellands operations were consolidated into the Company's Salford Priors facility and its products are sold under the McConnel brand name.

In 2014, the Company acquired Fieldquip Australia PTY LTD ("Fieldquip"), a manufacturer of rotary cutters as well as a distributor of various agricultural products. This acquisition allowed the Company to broaden its presence in both the manufacturing and distribution of agricultural 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 Ltda. ("Santa Izabel"). Santa Izabel designs, manufactures and markets a variety of agricultural implements and 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. This acquisition complemented our existing range of snow removal products with RPM's
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range of heavy duty snow removal equipment, including their line of mechanical snow blowers. In 2020, RPM's operations were consolidated into the Company's nearby Tenco facility and the former RPM facility in Drummondville was sold.

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.

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.

Impact of COVID-19

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") outbreak a global pandemic. COVID-19 continues to spread throughout the U.S. and the rest of the world and has negatively impacted portions of the global economy, disrupted global supply chains, and created volatility in financial markets. COVID-19 caused government authorities around the world to implement stringent measures to attempt to help control the spread of the virus, including business shutdowns and curtailments, travel restrictions, prohibitions on group events and gatherings, quarantines, "shelter-in-place" and "stay-at-home" orders, curfews, social distancing, and other measures. The adverse global economic impact of this pandemic negatively and materially impacted our business, customers, and suppliers and caused many challenges for our business and manufacturing operations during 2020. The Company continues to experience negative impacts of COVID-19 on our markets and operations as well as ongoing business uncertainty. The full extent to which COVID-19 will adversely impact the Company’s business depends on future developments, potential new virus strains or variations, and the effectiveness of actions globally to contain or limit the spread of the virus, including the impact of vaccines. 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®, Herder®, Conver®, Roberine®, Votex®, Schwarze®, NiteHawk®, ODB, Henke®, Tenco®, Wausau®, Everest®, H.P. Fairfield, R.P.M. Tech, Morbark®, Rayco®,Denis Cimaf®, Boxer®, Bush Hog®, Rhino®, Earthmaster®, RhinoAg®, Dixie Chopper®, Herschel®, Valu-Bilt, CT Farm & Country, Schulte®, Fieldquip®, Santa Izabel, McConnel®, Bomford®, Spearhead, Twose, SMA®, Forges Gorce, Faucheux, Rousseau® and trademarks (some with related designs) as well as other trademarks and trade names.


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Products and Distribution Channels

At the beginning of the fourth quarter of 2019, the Company began reporting operating results on the basis of two segments: the Industrial Division and the Agricultural Division. Prior to the fourth quarter of 2019, the Company had been reporting its operating results on the basis of three segments which included the Company's European Division. The Company's European Division was a mixture of industrial and agricultural products similar to those within our other two segments. We believe that by combining similar products under two reporting segments, each operating globally, we will achieve better alignment of our products along functional lines, which will allow the Company to operate more efficiently.

Industrial Division

Gradall produces a range of excavators based on high-pressure hydraulic telescoping booms which are 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.

Super Products produces truck-mounted vacuum trucks, 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 provides 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.

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.

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.
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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. H.P. Fairfield also provides truck up-fitting services as part of its business.
Schwarze equipment includes truck-mounted air vacuum, mechanical broom, and regenerative air sweepers, pothole patchers and replacement parts. Schwarze 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 truck chassis which are not manufactured by Schwarze.

ODB manufactures and sells leaf collection equipment and replacement brooms for street sweepers, both of which are sold to municipalities, contractors and commercial landscape markets in North America.

Nite-Hawk manufactures parking lot sweepers with unique and innovative hydraulic designs. By eliminating the auxiliary engine, Nite-Hawk sweepers have proven to be fuel-efficient, environmentally conscious, and cost-effective to operate. Nite-Hawk focuses mainly on and sells direct to parking lot contractors. A portion of Nite-Hawk’s sales includes truck chassis which are not manufactured by Nite-Hawk.

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 - 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.

Dutch Power produces a variety of landscape and vegetation maintenance equipment and attachments under several brand names including Herder, Conver, Roberine, and Votex. Dutch Power primarily sells to contractors who perform infrastructure maintenance for governmental agencies and private landowners.

Agricultural Division

Bush Hog, Rhino and Earthmaster 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.
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.

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.

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
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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 Agricultural 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.
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.

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.

Herder and Santa Izabel give the Company a presence in the Brazilian agricultural market. Herder manufactures and distributes flail and rotary mowers and various other agricultural equipment, direct and through dealers. Its products are used in a wide variety of agricultural and governmental markets. Santa Izabel designs, manufactures and markets a variety of agricultural implements, including sugar cane trailers sold throughout Brazil.

Herschel/Valu-Bilt aftermarket replacement parts are sold for many types of farm equipment 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.
Fieldquip broadens the Company's presence in Australia. The company sells 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, 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.

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 21%, 19% and 19% of the Company’s total sales for the years ended December 31, 2020, 2019 and 2018, respectively. Replacement 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, 2020, the Company employed 261 people in its various engineering departments, 174 of whom are degreed engineers and the balance of whom are support staff. Amounts expended on research and development activities were approximately $12.4 million in 2020, $12.0 million in 2019 and $10.4 million in 2018. As a percentage of sales, research and development was approximately 1.1% in 2020, 1.1% in 2019 and 1.0% in 2018, and is expected to continue at similar levels in 2021.

Seasonality

The Company’s unit sales are fairly constant quarter to quarter. However, replacement parts 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, 2020, the Company had unfilled customer orders of $354.1 million compared to $261.0 million at December 31, 2019. Management expects that substantially all of the Company’s unfilled orders as of December 31, 2020 will be shipped during fiscal year 2021. 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. It 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 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 2020, 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
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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 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 Trade Names
 
The Company owns various U.S. and international patents, trademarks and 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, trademark, trade name or group of patents, trademarks, or trade names. The net book value of patents, trademarks and trade names was $89.2 million and $94.0 million as of December 31, 2020 and 2019, respectively.

Environmental and Other Governmental Regulations

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.
 
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.

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. The Company believes it is currently in material compliance with all such applicable laws and regulations.

Human Capital Resources and Management

We recognize that the success of our Company is dependent upon the talents and dedication of our employees, and we are committed to investing in their success. We focus on attracting, developing and retaining a team of highly talented and motivated employees. We conduct regular assessments of our pay and benefit practices to help ensure that staff members are compensated fairly and competitively. We also devote significant resources to staff training and development, including tuition assistance for career-enhancing academic and professional programs. The Company provides competitive compensation and benefits. In addition to salaries, our compensation programs, which vary by country and region, can include annual bonuses, stock-based compensation awards, company-sponsored retirement savings plans with employee matching opportunities (or similar local retirement benefit), healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, employee assistance programs, and tuition assistance.

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 facilities 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. 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, serious injury rates, and near misses from each Alamo Group company, and conducts root cause analysis with corrective action 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
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quarterly basis. Regular safety meetings are also held at our facilities on an ongoing basis. With the onset of the COVID-19 pandemic in early 2020, we immediately responded by prioritizing the safety and well-being of our employees, and all of our facilities quickly adapted to the COVID-19 environment by implementing various health and safety measures including COVID-19 case tracking and quarantining where and when necessary, daily temperature checks, mandating face coverings (except where hazardous), regular facility sanitization, widely distributing hand-sanitizer, reconfiguration of workstations to allow for appropriate distancing, expanding the use of internal video meetings and installation of related technology, and implementing remote work policies, among other things.

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, and retain 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 our business units 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 employee retention with below industry average annual turnover rates.

Employee engagement and development is another important focus for the Company. We believe in empowering our employees to develop new ideas, create new products, processes, or services, or solve significant organizational or industry problems through continuous improvement and innovation. We continuously offer employees relevant training and learning opportunities for advancement and growth.

We also 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, and that employees feel empowered to contribute fully to the Company's ongoing success.


As of December 31, 2020, we employed approximately 3,990 employees. In North America, the Company has collective bargaining agreements at its Gradall facility which covers 173 employees and will expire on April 11, 2021, and its Tenco facility in Canada which covered 113 employees which expired on December 31, 2020. The Company is currently in negotiations for a new collective bargaining agreement for the Tenco facility. R.P.M. in Canada has an agreement covering 4 employees and expires in February 1, 2025. Everest has a collective bargaining agreement covering 70 employees which will expire on November 30, 2023. The Company’s European locations, McConnel, Bomford, Spearhead, AMS-UK, SMA Faucheux, Forges Gorce, Rousseau and Rivard, have various collective bargaining agreements covering 816 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”). 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 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 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
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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. 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 assets;
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 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;
repercussions resulting from the U.K.'s exit from the European Union;
increases in input costs 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 governmental regulations which affect corporations including related fines and penalties (such as the European General Data Protection Regulation (GDPR) and the California Consumer Privacy Act);
the potential effects on the buying habits of our customers due to animal disease 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 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;
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
 
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 2021 annual meeting of directors or until their successor is duly appointed and qualified.
NameAgePosition
Ronald A. Robinson*
68President and Chief Executive Officer
Dan E. Malone60Executive Vice President and Chief Financial Officer
Jeffery A. Leonard61Executive Vice President, Alamo Group Inc. and Executive Vice President Alamo Group (USA) Inc., Industrial Division
Richard H. Raborn55Executive Vice President, Alamo Group Inc. and Executive Vice President Alamo Group (USA) Inc., Agricultural Division
Richard J. Wehrle64Vice President, Controller and Treasurer
Edward T. Rizzuti51Vice President, General Counsel and Secretary
Janet S. Pollock62Vice President, Human Resources
Lori L. Sullivan51Vice President, Internal Audit
*On December 10, 2020, Mr. Robinson notified the Company's Board of his intention to retire as President and Chief Executive Officer by mid-year 2021 and upon the appointment of his successor

Ronald A. Robinson was appointed President, Chief Executive Officer and a director of the Company on July 7, 1999. Mr. Robinson had previously been President of Svedala Industries, Inc., the U.S. subsidiary of Svedala Industries AB of Malmo, Sweden, a leading manufacturer of equipment and systems for the worldwide construction, mineral processing and materials handling industries. Mr. Robinson joined Svedala in 1992 when it acquired Denver Equipment Company of which he was Chairman and Chief Executive Officer.

Dan E. Malone was appointed Executive Vice President, Chief Financial Officer on January 15, 2007. 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.

Jeffery A. Leonard joined Alamo Group in September 2011 as Executive Vice President of Alamo Group Inc. and Executive Vice President of Alamo Group (USA) Inc., in charge 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.

Richard H. Raborn was appointed Executive Vice President of Alamo Group Inc. effective April 6, 2015. Mr. Raborn is also Executive Vice President of Alamo Group (USA) Inc. and is in charge of the Agricultural Division. 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.

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.

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Janet S. Pollock was appointed Vice President, Human Resources of Alamo Group Inc. effective May 3, 2018. Ms. Pollock joined Alamo Group in 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.

Lori L. Sullivan was appointed Vice President, Internal Audit of Alamo Group Inc. effective May 2, 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 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 July of 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
 
A sustained market slowdown due to the impacts from the 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 and these challenging market conditions could continue for an extended period of time. There is still much uncertainty as to when our markets will fully recover. If any or all of our major markets were to endure a sustained slowdown or recession due to the impacts of the COVID-19 pandemic, other public health crises, epidemics or pandemics or otherwise decline, it could have a material adverse effect on our results of operations, financial condition and cash flows. In addition, the impact of COVID-19 on macroeconomic conditions may negatively affect the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, and interest rates. 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.

Our manufacturing and supply chain capabilities may be materially and adversely impacted as a result of the ongoing COVID-19 pandemic which could materially and adversely affect our results of operations, financial condition and cash flows.

The COVID-19 pandemic triggered a significant downturn in our markets globally, which continued to unfavorably impact market conditions throughout 2020 and these challenging market conditions could continue for an extended period of time. We have experienced ongoing operational interruptions as a result of the pandemic, including the temporary suspension or reduced capacity of operations due to health concerns and government imposed restrictions, which had an adverse effect on the productivity and profitability of such manufacturing facilities, and in turn had an adverse effect on our business and financial results in 2020. We have also experienced various ongoing supply chain disruptions as a result of the pandemic. Despite the partial recovery of our markets in the second half of 2020, the ongoing spread of the virus prior to widespread vaccination presents several risks to our business. The duration of production and supply chain disruptions, and related financial impacts that result from the pandemic, cannot be estimated at this time. Should the reduced manufacturing and distribution capacities continue for an extended period of time or worsen, the impacts on our production and supply chain could have a material adverse effect on our results of operations, financial condition and cash flows.

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:
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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;
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 U.K.'s exit 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 new or modified trading arrangements between the U.K. and other countries. Any of these developments 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.
 
Significant changes in trade policy and related trade wars could have a material adverse impact on our results of operations.

The U.S. continues to make potentially significant changes in 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.

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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. 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 2020 we experienced delays in obtaining certain important components from our suppliers 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 has conducted for the last three years an analysis for estimating the fair value of the Company's business enterprise. We have utilized the discounted cash flow 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, 2020, goodwill was $195.1 million, which represents 18% of total assets.

The Company recognized no goodwill impairment in 2020, 2019 or 2018. During the 2020 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, 2020 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 15% decline in fair value, it could impact our results of operations as well as our net worth.

We are significantly dependent on information 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, as a result of the COVID-19 pandemic and resulting government actions to restrict movement, a number of our salaried employees are working remotely at various times. This remote working environment may pose a heightened risk for security
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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 subjected to attacks by hackers or breached due to employee malfeasance, employee errors, or other disruptions. Cybersecurity 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, 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. Sensitive information is also stored by our vendors and on the platforms and networks of third-party providers. Cyber-attacks on the Company, our vendors, or our third-party providers could result in inappropriate access to our intellectual property, Company data, or personally identifiable information of our global 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 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.

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 €20.0 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 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 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.

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
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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.

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;
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
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
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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 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 able to realize the potential or strategic benefits of the acquisitions we complete, and the businesses we have acquired, or may acquire in the future, may not perform as expected.

Acquisitions 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. 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;
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.

The agricultural industry and the infrastructure maintenance industry are seasonal, 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
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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.

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.

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 emission regulations. For instance, the EPA has adopted increasingly stringent engine emission regulations, including Tier 4 emission requirements applicable to diesel engines in specified horsepower ranges that are used in some of our products. Requirements have expanded to additional horsepower categories and, accordingly, apply to more of the products we sell. Our 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 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.
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Changes in environmental laws or new laws relating to climate change and/or the emission of greenhouse gases ("GHG") 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 in 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 on our overall business.
 
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, 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 on November 30, 2020, the Intercontinental Exchange’s Benchmark Administration (“IBA”) announced consultation on the possible extension of the publication of USD LIBOR for key tenors through June 30,
23


2023, to allow certain legacy LIBOR-indexed contracts to mature without disruption, there is no certainty as to the outcome of such consultation. 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.
 
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 2020 ranged from $75.21 to $143.15 per share, and during 2019 from $75.12 to $129.74 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, 2020, 11,884,321 shares of our common stock were issued and outstanding, and there were outstanding options and restricted stock awards totaling an additional 194,963 shares of our common stock. We also have additional shares available for grant under our 2015 Incentive Stock Option Plan and our 2019 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 January 4, 2021, the Board of Directors of the Company increased its quarterly dividend from $0.13 per share to $0.14 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 credit 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 stockholder actions by written consent. Our Certificate of Incorporation and Bylaws 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 stockholder for a period of three years from the date such person acquired such status unless certain board or stockholder 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, 2020, five investors - BlackRock, Inc., Henry Crown and Company, Dimensional Fund Advisors LP, Victory Capital Management Inc., and The Vanguard Group - beneficially owned approximately 43% 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.

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Item 2. Properties
      As of December 31, 2020, the Company utilized 27 principal manufacturing plants with 15 located in the United States, 8 in Europe, 3 in Canada, and 1 in Brazil. The facilities are listed below:
Facility
Square
Footage
 
Principal Types of Products
Manufactured And Assembled
Winn, Michigan*1,100,000 Owned
Tree chippers, Grinders, Brush Cutters, Debarkers, Utility Loaders for Morbark and Boxer
Selma, Alabama*769,000 Owned
Mechanical Rotary Mowers, Finishing Mowers, Zero Turn Radius Mowers, Backhoes, Front-End Loaders for Bush Hog
New Philadelphia, Ohio*430,000 Owned
Telescopic Excavators for Gradall and Vacuum Trucks for VacAll
Wooster, Ohio*400,000 Leased
Stump Cutters, Aerial Trimmers, Mulchers, Crawler Trucks for Rayco and Denis Cimaf
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
Enschede, The Netherlands*238,000 Owned
Rotary, Flail and Commercial Mowers for Dutch Power
Seguin, Texas*230,000 Owned
Hydraulic and Mechanical Rotary and Flail Mowers, Sickle-Bar Mowers, and Boom-Mounted Equipment for Alamo Industrial
Indianola, Iowa*200,000 Owned
Distribution and Manufacturing of Aftermarket Farm Equipment Replacement and Wear Parts for Herschel/Valu-Bilt
Richmond, Virginia*197,000 Leased
Leaf Collection Equipment and Replacement Brooms for Street Sweepers for ODB
Neuville, France*195,000 Owned
Hydraulic and Mechanical Boom-Mounted Hedge and Grass Cutters for Rousseau and SMA
Mukwonago, Wisconsin* 171,000 OwnedTruck-Mounted Vacuum Trucks for Super Products
Ludlow, England*160,000 Owned
Hydraulic Boom-Mounted Hedge and Grass Cutters and other Equipment for McConnel and Twose
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*138,000 Owned
Agriculture Mowing Equipment and other Attachments for Santa Izabel
Huntsville, Alabama*135,000 Owned
Air and Mechanical Sweeping Equipment for Schwarze
New Berlin, Wisconsin*120,000 Owned
Municipal Snow Removal and Ice Control Equipment for Wausau
Middelburg, The Netherlands*110,000 Owned
Boom Mowers and Stump Grinders for Dutch Power
Englefeld, Saskatchewan, Canada*105,000 Owned
Mechanical Rotary Mowers, Snow Blowers, and Rock Removal Equipment for Schulte
St. Valerien, Quebec, Canada*100,000 Owned
Snow and Ice Removal Equipment for Tenco
Daumeray, France*100,000 Owned
Vacuum Trucks, High Pressure Cleaning Systems and Trenchers for Rivard
Leavenworth, Kansas*72,000 Owned
Snow Plows and Heavy-Duty Snow Removal Equipment for Henke
Sioux Falls, South Dakota*66,000 Owned
Hydraulic and Mechanical Mowing Equipment for Tiger
Giessen, The Netherlands*44,000 Owned
Aquatic Harvesting Boats and Remote Control Mowing Equipment for Dutch Power
Kent, Washington*43,000 Owned
Truck-Mounted Sweeping Equipment for the contractor market branded NiteHawk
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
Peschadoires, France*22,000 Owned
Replacement Parts for Blades, Knives and Shackles for Forges Gorce
Oakey, Australia18,000 Leased
Agriculture Mowing Equipment and other Attachments for Fieldquip
Matao, Brazil12,000 
Owned
Agriculture Mowing Equipment and other Attachments for Herder
Installation & Rental Facilities, Warehouses & Sales309,000 Leased / OwnedServices Parts Distribution, Installation Facilities and Sales and After Market Office
Offices, Seguin, Texas21,000 OwnedCorporate Office
Total6,016,000 86%
     * Principal manufacturing plants
Approximately 86% of the manufacturing, warehouse and office space is owned. The Company considers each of these facilities to be well maintained, in good operating condition and adequate for its present level of operations.
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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.

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.

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 19, 2021, there were 11,896,421 shares of common stock outstanding, held by approximately 83 holders of record, but the total number of beneficial owners of the Company’s common stock exceeds this number. On February 19, 2021, the closing price of the common stock on the New York Stock Exchange was $155.92 per share.

On January 4, 2021, the Board of Directors of the Company declared a quarterly dividend of $0.14 per share which was paid on January 29, 2021 to holders of record as of January 19, 2021. 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.
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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, 2020, 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-20201231_g1.jpg

*$100 invested on 12/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2021 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 2021 Russell Investment Group. All rights reserved.

 12/1512/1612/1712/1812/1912/20
Alamo Group Inc.100.00146.97218.99150.69245.89271.48
S&P SmallCap 600
100.00126.56143.30131.15161.03179.20
Russell 2000
100.00121.31139.08123.76155.35186.36


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Purchase of Equity Securities

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. Selected Financial Data
 
The following selected financial data is derived from the consolidated financial statements 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, including in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."
 
Fiscal Year Ended December 31, (1)
 
(in thousands, except per share amounts)
20202019201820172016
Operations:    
Net sales$1,163,466 $1,119,138 $1,008,822 $912,380 $844,748 
Income before income taxes78,137 84,335 94,531 82,367 62,189 
Net income56,630 62,906 73,486 44,315 40,045 
Percent of sales4.9 %5.6 %7.3 %4.9 %4.7 %
Earnings per share    
Basic4.81 5.36 6.30 3.84 3.50 
Diluted4.78 5.33 6.25 3.79 3.46 
Dividends per share0.52 0.48 0.44 0.40 0.36 
Average common shares    
Basic11,782 11,729 11,660 11,549 11,434 
Diluted11,845 11,800 11,761 11,682 11,565 
Financial Position:    
Total assets$1,109,329 $1,212,763 $721,633 $639,671 $552,776 
Short-term debt and current maturities15,066 18,840 119 82 73 
Long-term debt, excluding current maturities270,320 425,141 85,179 60,000 70,017 
Stockholders’ equity$625,643 $569,757 $507,371 $449,108 $387,717 
 (1)   Includes the results of operations of companies acquired from the closing dates of acquisitions.
 
 
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Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Outlook
 
This report 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 13.

In 2020, the COVID-19 pandemic triggered a worldwide recession that caused a significant downturn in our markets globally and negatively affected our expected results. These unfavorable market conditions continued throughout much of 2020 and could continue for an extended period of time. In an effort to contain the spread of COVID-19, maintain the health and safety of our employees, meet reduced demand from our customers, and in accordance with governmental requirements, we closed or partially shut down certain office and manufacturing facilities around the world at different times in early 2020. Although most of our facilities re-opened in the second quarter of 2020, some operated at reduced capacities depending on fluctuations in customer demand and measures taken at our facilities to protect employees which included quarantining of personnel as needed.

Despite some of our markets showing signs of recovery in the second half of 2020, the ongoing spread of the virus presents several risks to our business, especially for the first half of 2021. In the fourth quarter of 2020 we experienced some operational and supply chain disruptions caused by the pandemic. We continue to experience varying levels of disruption, particularly in our supply chain, and it is hard to predict the extent to which these disruptions may continue. COVID-19 vaccines are currently being administered around the world with the hope that the majority of the population will have access to the vaccine by the second half of 2021. If vaccine effectiveness is consistent with current government and health organization estimates, we believe the vaccine will mitigate the spread of the virus and allow a return to more normal operations in the second half of the year. However, we recognize that case surges or new strains of the virus or other unanticipated events could lead to new restrictions or lockdowns, which may limit our operational capabilities and/or lead to a renewed softening of customer demand. All of this is dependent on future developments relating to the pandemic, which are highly uncertain and unpredictable at this time. In addition, certain input costs, most notably steel, have recently increased, while international trade disputes, shipping delays, a changing political landscape in the U.S., and a continuing tight labor market are also of concern. Given the current level of business uncertainty, we remain cautious in terms of our outlook for the year. Despite the challenges faced in 2020, we will continue our focus on ongoing operational improvement initiatives and, as we did in 2020, will monitor capital expenditures in 2021 in line with depreciation levels of the last several years. 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 or tax policy; Brexit integration impacts; increased levels of government regulation; weakness in the agricultural sector; acquisition integration issues; budget constraints or revenue shortfalls in governmental entities; and other risks and uncertainties as described in “Risk Factors.”

2020 Performance

In 2020, the Company's net sales increased by 4.0%, but net income decreased by 10.0% compared to 2019. The increase in net sales was due to the acquisitions of Morbark and Dutch Power in 2019 which was offset by market declines due to COVID-19. The decrease in net income was attributable to the COVID-19 pandemic which began to materially affect our operations in March 2020 and continued to negatively impact the Company's overall financial performance during the year.

The Company's Industrial Division experienced a 5.6% increase in sales for 2020 compared to 2019 due to the acquisitions of Morbark and Dutch Power. Without factoring in contributions from Morbark and Dutch Power, sales across all legacy Industrial product groups (with the exception of vegetation control, which was up) were down in 2020 compared to 2019, mostly attributable to the adverse impacts of the COVID-19 pandemic which included temporary plant closures in the U.S., France, and Canada during the second quarter of 2020, as well as other operational disruptions across the Industrial Division and softness in customer demand which occurred over the course of the year. The Division's new orders showed signs of improvement, though not evenly across product lines. Some areas, such as forestry, increased above historical average while others, such as excavators and vacuum trucks continued to be soft.

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The Company's Agricultural Division sales were up less than 1% in 2020 compared to 2019 but were negatively affected by the COVID-19 pandemic, and to a lesser extent ongoing global trade tensions, which began to hurt Agricultural sales as well as operations in late March of this year. During the second quarter of 2020 however, North American sales and profitability in the Agricultural Division showed some improvement and continued to show signs of recovery for the remainder of 2020. Likewise, soft market conditions in the Agricultural Division's operations in the U.K. and France during the first half of 2020 as well as experiencing temporary plant closures and operational disruptions during the months of March and April due to COVID-19, also showed signs of improvement during the second half of 2020.

Consolidated income from operations was $93.2 million in 2020, which included $4.8 million of non-cash inventory step-up expense related to the Morbark acquisition and redundancy costs in the amount of $2.7 million related to the Company's plan to close the Dutch Power facility located in Enschede, in The Netherlands. Without these one-time charges, consolidated income from operations was $100.7 million, an increase of 6.4% when compared to 2019, mainly the result of contributions to operating income from the Morbark and Dutch Power acquisitions. The Company's backlog increased 35.6% to $354.1 million at the end of 2020 versus the backlog of $261.0 million at the end of 2019. The increase in the Company's backlog was primarily attributable to improved market conditions in the second half of 2020, specifically in the Agricultural Division, offset by adverse effects from the COVID-19 pandemic, which has hurt the Company's overall sales and profitability.


The 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,
Net sales (data in thousands):202020192018
Industrial$811,161 $768,454 $638,198 
Agricultural352,305 350,684 370,624 
   Total net sales$1,163,466 $1,119,138 $1,008,822 
Cost and profit margins, as percentages of net sales:   
Cost of sales74.9 %75.6 %74.6 %
Gross profit25.1 %24.4 %25.4 %
Selling, general, administrative, and amortization expenses17.1 %16.0 %15.4 %
Income from operations8.0 %8.5 %10.0 %
Income before income taxes6.7 %7.5 %9.4 %
Net income4.9 %5.6 %7.3 %
                                                                                           
Results of Operations
 
Fiscal 2020 compared to Fiscal 2019
 
The Company’s net sales in the fiscal year ended December 31, 2020 (“2020”) were $1,163.5 million, an increase of $44.4 million or 4.0% compared to $1,119.1 million for the fiscal year ended December 31, 2019 (“2019”). The increase was attributable to the acquisitions of Morbark and Dutch Power, which year over year contributed net sales of $160.5 million. Negatively affecting sales in 2020, was the outbreak of the COVID-19 pandemic which began to affect the Company's operations late in the first quarter of 2020.

Net Industrial sales were $811.2 million in 2020 compared to $768.5 million in 2019, an increase of $42.7 million or 5.6%, coming from the acquisitions of Dutch Power and Morbark mentioned above, which were offset by the impacts from the COVID-19 pandemic that began to materially affect the Division late in the first quarter of 2020. This included temporary plant closures in the U.S., France and Canada along with other operational disruptions throughout our global markets resulting from health concerns and
31


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

Net Agricultural sales were $352.3 million in 2020 compared to $350.7 million in 2019, representing an increase of $1.6 million or 0.5%. Despite the COVID-19 pandemic, agricultural market conditions began to improve during the second quarter of 2020 as demand for our products continued to outpace last year. Sales in this Division's North American operations did reasonably well and benefited from the contributions of Dixie Chopper but the ongoing pandemic affected supply chain and logistics across the entire Division as well as sales and operations, particularly in our U.K. and French Agricultural businesses, as they experienced temporary plant closures and soft markets.

Gross profit for 2020 was $292.1 million (25.1% of net sales) compared to $273.2 million (24.4% of net sales) in 2019, an increase of $18.9 million. The increase in gross profit mainly came from the acquisitions of Dutch Power and Morbark. Gross margin percentage improved year over year primarily due to a favorable mix of parts sales and pricing actions which more than offset the negative impact of higher steel prices and lower factory utilization. Also, negatively affecting the gross margin and gross margin percentage during the first nine months of 2020 were $4.8 million of charges on sales of inventory that had been previously stepped-up related to the Morbark acquisition.

Selling, general and administrative expenses (“SG&A”) were $184.2 million (15.8% of net sales) in 2020 compared to $172.9 million (15.5% of net sales) in 2019, an increase of $11.3 million. Morbark and Dutch 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 COVID-19 pandemic. 2019 included $1.9 million of acquisition expenses related to the Morbark and Dutch Power. Amortization expense in 2020 was $14.7 million compared to $5.7 million in 2019, an increase of $9.0 million. The increased amortization expense in 2020 was primarily from the acquisitions of Morbark and Dutch Power.
 
Interest expense for 2020 was $15.8 million compared to $10.7 million in 2019, an increase of $5.1 million or 47.4%. The increase in interest expense in 2020 came from increased borrowings due to the Morbark acquisition in 2019 offset by a decrease in interest rates.

Other income (expense), net was expense of $0.6 million during 2020 compared to expense of $0.8 million in 2019. The expense in 2020 and the expense in 2019 were primarily the result of changes in exchange rates.

Provision for income taxes was $21.5 million (27.5% of income before income taxes) for 2020 compared to $21.4 million (25.4% of income before income taxes) in 2019. The increase in the tax rate for 2020 was due to the reversal of a FIN 48 benefit recognized in 2019 partially offset by the benefit of the final GILTI regulations issued in July of 2020.

Net income for 2020 was $56.6 million compared to $62.9 million in 2019, due to the factors described above.

Fiscal 2019 compared to Fiscal 2018
 
The Company’s net sales in the fiscal year ended December 31, 2019 (“2019”) were $1,119.1 million, an increase of $110.3 million or 10.9% compared to $1,008.8 million for the fiscal year ended December 31, 2018 (“2018”). The increase in net sales was mainly due to the acquisition of Dutch Power, which contributed $36.4 million in net sales and the Morbark acquisition, which added $35.1 million in net sales. Also contributing to the increase in sales for 2019 was relatively strong demand for our products in the Company's Industrial Division. These positive net sales impacts more than offset lower sales in our Agricultural Division due to weak market conditions as well as unfavorable currency translation effects in our European operations.

Net Industrial sales were $768.5 million in 2019 compared to $638.2 million in 2018, an increase of $130.3 million or 20.4%, primarily resulting from the acquisitions of Dutch Power and Morbark which together accounted for $71.5 million of the increase in net sales. Also contributing to the increase were higher sales of vacuum trucks, sweepers, excavators and snow equipment. To a lesser extent, negatively affecting sales in this division were lower mowing equipment sales.

Net Agricultural sales were $350.7 million in 2019 compared to $370.6 million in 2018, representing a decrease of $19.9 million or 5.4%. Negatively affecting sales in the Agricultural Division were weak market conditions and lower farm incomes, which have been impacted by lower commodity prices as well as on
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going trade disputes. A first quarter 2019 shutdown in this Division's largest manufacturing facility to install an upgrade to its paint system in addition to heavy rains and flooding throughout the mid-west part of the U.S. during the second quarter of 2019 also negatively hampered sales. Also negatively affecting sales were weak agricultural conditions in the U.K. during the second half of 2019.

Gross profit for 2019 was $273.2 million (24.4% of net sales) compared to $256.1 million (25.4% of net sales) in 2018, an increase of $17.1 million. The increase in gross profit for 2019 came from the acquisitions of Dutch Power and Morbark and higher equipment sales in the Company's Industrial Division. Negatively affecting the gross margin and margin percentage for 2019 as compared to 2018 were the step-up inventory charge of $3.3 million at Morbark due to the acquisition, the effects of lower production in our Agricultural Division and unfavorable product mix, partially offset by lower material costs and improvements in the Rivard vacuum truck business.

Selling, general and administrative expenses (“SG&A”) were $172.9 million (15.5% of net sales) in 2019 compared to $151.5 million (15.0% of net sales) in 2018, an increase of $21.4 million. To a large extent, the increase in SG&A was a result of the acquisitions of Dutch Power and Morbark which accounted for $12.5 million of the increase. Also contributing to the higher SG&A costs were increased spending in research and development projects, higher commissions and other selling expenses as well as acquisition expenses, in the amount of $1.9 million. Amortization expense in 2019 was $5.7 million compared to $3.5 million in 2018, an increase of $2.2 million. The increased amortization expense in 2019 was primarily from the acquisitions of Dutch Power and Morbark.
 
Interest expense for 2019 was $10.7 million compared to $5.5 million in 2018, an increase of $5.2 million or 95.6%. The increase in interest expense in 2019 came from increased borrowings due to the Dutch Power and Morbark acquisitions.

Other income (expense), net was expense of $0.8 million during 2019 compared to expense of $1.5 million in 2018. The expense in 2019 and the expense in 2018 were primarily the result of changes in exchange rates.

Provision for income taxes was $21.4 million (25.4% of income before income taxes) for 2019 compared to $21.0 million (22.3% of income before income taxes) in 2018. The lower effective tax rate in 2018 as compared to 2019 was a result of the Company recording a net benefit to income taxes of $3.3 million in 2018 relating to the adjustment in the provisional amounts recorded in the fourth quarter of 2017 upon enactment of Tax Cuts and Jobs Act ("TCJA"), as more fully described in Note 14 of the Notes to the Consolidated Financial Statements. This factor reduced the Company's effective income tax rate for 2018 to 22.3%.

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

Liquidity and Capital Resources
 
In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to conduct the Company’s business, including inventory purchases and capital expenditures. The Company’s accounts receivable, inventory and accounts payable levels, particularly in its Agricultural Division, build in the first quarter and early spring and, to a lesser extent, in the fourth quarter in anticipation of the spring and fall selling seasons. Accounts receivable historically build in the first and fourth quarters of each year as a result of pre-season sales and year-round sales programs. These sales, primarily in the Agricultural Division, help balance the Company’s production during the first and fourth quarters.
 
As of December 31, 2020, the Company had working capital of $345.7 million, which represents a decrease of $62.3 million from working capital of $408.0 million as of December 31, 2019. The decrease in working capital was primarily due to reductions of accounts receivable and inventory levels which created excess cash used to reduce debt levels. This was done in response to the COVID-19 pandemic.
 
Capital expenditures were $17.9 million for 2020, compared to $31.3 million for 2019. The decrease was related to the COVID-19 pandemic. In the first quarter of 2020, we began to limit new capital expenditures; however, any previously approved projects and related spending carried over. The Company will fund any future expenditure from operating cash flows or through our revolving credit facility, described below.

Net cash provided by operating activities was $184.3 million for 2020, compared to $88.8 million for 2019. The increase of cash from operating activities came primarily from working capital due to reductions in accounts
33


receivable and inventory levels as well as a decreased in the Company's investment in rental equipment in the Industrial Division.
 
Net cash used in investing activities was $14.2 million for 2020, compared to $429.9 million for 2019. The decrease in cash used in investing activities was primarily due to repayment of debt related to the acquisitions in 2019 of Morbark, Dutch Power and to a lesser extent Dixie Chopper.

Net cash used by financing activities was $164.2 million for 2020, compared to $349.2 million of net cash provided for 2019. The majority of the net cash provided by financing activities in 2019 was due to borrowings to finance the acquisitions of Morbark, Dutch Power, and to a lesser extent Dixie Chopper.

The Company had $44.7 million in cash and cash equivalents held by its foreign subsidiaries as of December 31, 2020. The majority of these funds are at our European and Canadian facilities. The Company will continue to repatriate European and Canadian cash and cash equivalents in excess of amounts needed to fund operating and investing 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.

On October 24, 2019, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Second Amended and Restated Credit Agreement (the Credit Agreement) with Bank of America, N.A., as Administrative Agent. The Credit Agreement provides the Company with the ability to request loans and other financial obligations in an aggregate amount of up to $650.0 million and, subject to certain conditions, the Company has the option to request an increase in aggregate commitments of up to an additional $200.0 million. Pursuant to the Credit Agreement, the Company has borrowed $300.0 million pursuant to a Term Facility repayable with interest quarterly at a percentage of the initial principal amount of the Term Facility of 5.0% per year with the remaining principal due in 5 years. Up to $350.0 million is available under the Credit Agreement pursuant to a Revolver Facility which terminates in 5 years. The Agreement requires the Company to maintain two financial covenants, a maximum leverage ratio and a minimum asset coverage ratio. The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on sale of properties and limitations on liens and capital expenditures. The Agreement also contains other customary covenants, representations and events of defaults. The expiration date of the Term Facility and the Revolver Facility is October 24, 2024. As of December 31, 2020, $285.2 million was outstanding under the Credit Agreement, $280.2 million on the Term Facility and $5.0 million on the Revolver Facility. On December 31, 2020, $2.2 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 $176.7 million in available borrowings. The Company is in compliance with the covenants under the Agreement.

Management believes the Agreement 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 could 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.

New Accounting Pronouncements

As discussed in Note 2 of Notes to Consolidated Financial Statements, certain new financial accounting pronouncements became effective January 1, 2020, or will become effective in the future. The effect on our financial statements upon adoption of these pronouncements is discussed in the above- referenced note.

Off-Balance Sheet Arrangements

There are currently no off-balance sheet arrangements that have or are currently likely to have a current or future material effect on our financial condition.
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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, 2020:
 Payment due by period
(in thousands) Less than1-33-5More than
Contractual ObligationsTotal1 YearYearsYears5 Years
Long-term debt obligations$285,233 $15,000 $30,000 $240,233 $— 
Capital lease obligations153 66 55 32 — 
Interest obligations21 11 — 
Operating lease obligations15,555 4,072 5,152 2,709 3,622 
Purchase obligations158,880 158,880 — — — 
    Total$459,842 $178,024 $35,218 $242,978 $3,622 
 
Definitions:
A.Long-term debt obligation means a principal payment obligation under long-term borrowings.
B.Capital lease obligation means a principal payment obligation under a lease classified as a capital lease.
C.Interest obligation represents interest due on long-term debt and capital lease obligations. Interest on long-term debt assumes all floating rates of interest remain the same as those in effect at December 31, 2020.
D.Operating lease obligation means a payment obligation under a lease classified as an operating lease.
E.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.
 
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 policies 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

We account for the acquisition of a business in accordance with the accounting standards codification guidance for business combinations, whereby the total consideration transferred is allocated to the assets acquired and liabilities assumed, including amounts attributable to intangible assets based on their respective estimated fair values as of the date of acquisition. Goodwill represents the excess of consideration transferred over the estimated fair value of the net assets acquired in a business combination.

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Assigning estimated fair values to the assets acquired and liabilities assumed requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of intangibles assets that are separately identifiable from goodwill, inventory step-up, and property, plant, and equipment and are based on available historical information, future expectations, and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, the useful life of the acquired assets and other factors. Such significant estimates, judgments, inputs, and assumptions include, when applicable, the selection of an appropriate valuation method depending on the nature of the respective asset, such as the income approach, the market or sales comparison approach, or the cost approach; 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 appropriate given the nature of the respective asset; assigning the appropriate contributory asset charge where needed; determining an appropriate useful life and 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.

In determining the estimated fair value of intangible assets that are separately identifiable from goodwill, we typically utilize the income 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 patents, we may utilize the cost approach depending on the nature of the respective intangible asset and the recency of the development or procurement of such technology. In determining the estimated fair value of acquired inventory, we typically utilize the cost approach for raw materials and the sales comparison approach for finished goods, work in process and component parts. In determining the estimated fair value of acquired property, plant, and equipment, we typically utilize the sales comparison approach or the cost approach depending on the nature of the respective asset and the recency of the construction or procurement of such asset.

We may 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 asset, 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 impact the carrying value of goodwill will affect any measurement of goodwill impairment taken during the measurement period, if applicable.

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, the U.K., France, 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.


 
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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, 2020, 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 $8.2 million. Comparatively, on December 31, 2019, 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 $8.6 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 2020 was a gain of $8.9 million. On December 31, 2020, the British pound closed at 0.7318 relative to the U.S. dollar, and the Euro closed at 0.8187 relative to the U.S. dollar. By comparison, on December 31, 2019, the British pound closed at 0.7541 relative to the U.S. dollar, and the Euro closed at 0.8917 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 2020 average interest rate under these borrowings, the Company’s 2020 interest expense would have changed by approximately $8.6 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 49 through 84 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, 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, 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 45 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 48 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, 2020 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 27, 2020, the Board of Directors (the "Board") of the Company adopted forms of restricted stock award agreements, restricted stock unit agreements, and performance share unit agreements under the Company’s 2019 Equity Incentive Plan (the “Plan”), which was approved by stockholders at the Company’s 2019 annual meeting of stockholders. The form of restricted stock award agreement, restricted stock unit agreement and form of performance share unit agreement are attached to this Annual Report on Form 10-K as exhibit 10.23, 10.24 and 10.25, respectively, and the terms thereof are incorporated herein by reference.



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 2021 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."  See also the information under the caption “Information About Our Executive Officers” in Part I of this Report.


38


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 2021 Annual Meeting of Stockholders which appear therein under the captions "Executive Compensation," “The Compensation Committee,” “Compensation Discussion and Analysis,” "Compensation Committee Report” and “Director Compensation during 2020.”

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 2021 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 not approved by the Stockholders.
 
The numbers in the table are as of December 31, 2020, the last day of Alamo Group Inc.’s 2020 fiscal year.
 
 ABC
 
 
 
                
 
 
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   
2005 Incentive Stock Option Plan36,170$41.73
2009 Equity Incentive Plan50,480$95.55
2015 Incentive Stock Option Plan64,750$83.59314,750
2019 Equity Incentive Plan43,563$111.94455,549
Plans not approved by stockholders
       Total                     
194,963770,299

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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 2021 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, 2020.

Information regarding director independence is set forth under the caption “Information Concerning Directors” in the Company’s definitive proxy statement for the 2021 Annual Meeting of Stockholders, and such information is incorporated by reference herein.

Item 14. Principal Accountant Fees and Services

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 2021 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.
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
3.2Certificate of Amendment of Certificate of Incorporation of Alamo Group Inc.
3.3By-Laws of Alamo Group Inc. as amended 
3.4By-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. 
*10.3401(k) Restoration Plan for Highly Compensated Employees, adopted on December 9, 1997 
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*10.4First Amended and Restated 1999 Non-Qualified Stock Option Plan, adopted by the Board of Directors on February 13, 2001 
*10.52005 Incentive Stock Option Plan, adopted by the Board of Directors on May 4, 2005 
*10.62009 Equity Incentive Plan, adopted by the Board of Directors on May 7, 2009 
10.7Second Amended and Restated Credit Agreement, dated as of October 24, 2019, by and among Alamo Group Inc., Bank of America, N.A. as administrative agent, Wells Fargo Bank, National Association, and BBVA USA as co-syndication agents, and the other lenders party thereto.
10.8Securities Purchase Agreement, dated as of September 11, 2019, by and among Alamo Acquisition Corporation, a Delaware corporation, Alamo Group Inc., a Delaware corporation, Stellex Capital Partners, LP, a Delaware limited partnership, and in its capacity as the initial representative of the other Sellers and Morbark Holdings Group, LLC, a Delaware limited liability company.
10.9First Amendment to Securities Purchase Agreement, dated as of October 22, 2019, by and among Alamo Acquisition Corporation, a Delaware corporation, Alamo Group Inc., a Delaware corporation, Stellex Capital Partners, LP, a Delaware limited partnership, and in its capacity as the initial representative of the other Sellers pursuant to Section 10.6 of the Securities Purchase Agreement.
*10.10Form of Restricted Stock Award Agreement under the 2009 Equity Incentive Plan 
*10.11Form of Restricted Stock Unit Award Agreement under the 2009 Equity Incentive Plan 
*10.12Form of Nonqualified Stock Option Agreement under the 2009 Equity Incentive Plan 
*10.13Form of Nonqualified Stock Option Agreement under the First Amended and Restated 1999 Nonqualified Stock Option Plan 
 
*10.14Form of Stock Option Agreement under the 2005 Stock Option Plan 
10.15Investor Rights Agreement, dated October 22, 2009, between Alamo Group Inc. and Bush Hog, LLC 
*10.16Supplemental Executive Retirement Plan 
*10.17Amended and Restated Executive Incentive Plan
*10.182015 Incentive Stock Option Plan, adopted by the Board of Directors on May 7, 2015 
*10.19Alamo Group Inc. 2019 Equity Incentive Plan
*10.20Form of Restricted Stock Award Agreement under the Alamo Group Inc. 2019 Equity Incentive Plan
*10.21Form of Restricted Stock Unit Agreement under the Alamo Group Inc. 2019 Equity Incentive Plan
*10.22Form of Performance Share Unit Agreement under the Alamo Group Inc. 2019 Equity Incentive Plan
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10.23Executive Change in Control Agreement
21.1Subsidiaries of the Registrant