prepare a well-written titled "Would You Advise a Friend to Invest in This Company?" based on your research and analysis of this company's financial information. You should identify at least 5-7 significant points that justify your conclusion. Support your points with a comprehensive explanation incorporating sound reasoning.
Refer financial statement of The Alamo Group for a response (attached)
500 words APA format and citaations
ALAMO GROUP INC. ANNUAL REPORT
2021ALAMO GROUP INC. WWW.ALAMO-GROUP.COM
In thousands, except per share data 2021 2020 2019 2018
Net Sales $1,334,223 $1,163,466 $1,119,138 $1,008,822
Gross Margin $334,514 $293,730 $273,491 $258,842
Operating Expenses $217,576 $198,945 $178,579 $155,027
Income From Operations $116,938 $94,785 $94,912 $103,815
Net Income $80,245 $57,804 $63,103 $75,606
Earnings Per Share (Diluted) $6.75 $4.88 $5.35 $6.43
Depreciation & Amortization $45,146 $44,474 $30,260 $23,335
Capital Expenditures $25,263 $17,874 $31,337 $26,587
Dividends Paid $6,627 $6,124 $5,626 $5,124
Working Capital $419,604 $358,245 $418,864 $362,637
Cash Flow From Operations(1) $124,377 $104,261 $100,799 $97,866
Long-Term Debt(2) $254,522 $270,320 $425,141 $85,179
Shareholder Equity $705,663 $635,003 $577,943 $515,360
Average Shares Outstanding(3) 11,896 11,845 11,800 11,761
Book Value Per Share $59.32 $53.61 $48.98 $43.82
(1) Excludes Changes in Working Capital (2) Excludes Current Portion (3) On a Diluted Basis
18 19 20 21 18 19 20 21 18 19 20 21
NET SALES NET INCOME SHAREHOLDER EQUITY IN MILLIONS IN MILLIONS IN MILLIONS
The past year was a very dynamic one for Alamo Group in many respects. We entered 2021 optimistic that the Coronavirus pandemic would end soon, but unfortunately this did not prove to be the case as the pandemic continued to impact our operations both directly and indirectly throughout the year. The Company faced a number of pandemic related headwinds including significant cost inflation, supply chain shortages, logistics disruptions, higher shipping costs, and skilled labor shortages to name a few. Paradoxically, our markets remained strong throughout the year and demand for the Company’s products set records in nearly every category and geographic region. We are pleased to report that against this backdrop, in 2021 the Company reported the highest net sales, net income, earnings per share, and order backlog in its history.
We are also pleased to report that Alamo Group ended 2021 with a healthy balance sheet. As a result of the combined effects of the strong market demand and supply chain shortages mentioned above, inventories increased by slightly over $78 million (49%) during the year. This was driven by a combination of material cost inflation and higher work-in-process inventories caused by supply chain shortages that delayed shipments in many areas of our business. In spite of this, we reduced long term debt under our revolving credit facility by nearly $16 million during the year. We remain well positioned to exploit strategic opportunities that may arise in 2022.
The solid financial performance we reported for 2021 was the direct result of the exceptional hard work, flexibility, ingenuity and innovation demonstrated by our employees around the world. We are extremely proud of the way our teams rose to meet the many challenges encountered during the year and delivered results that set records in many respects. We want to take this opportunity to acknowledge, and thank our employees for this extraordinary display of dedication to our company.
This past year was also one marked by corporate renewal for Alamo Group. After 22 years of exemplary leadership as the Company’s President and CEO, Ron Robinson retired but continues to contribute to the Company as a member of the Board of Directors. In June, Jeff Leonard succeeded Ron as President and Chief Executive Officer after successfully leading the Company’s Industrial Division for the previous ten years. Because of the care our Board has dedicated to succession planning over the past several years, Alamo Group was able to choose from several well-prepared internal CEO candidates and a smooth transition was achieved.
Following the leadership transition, the Company conducted a review of its strategy in the second half of the year. This process resulted in the realignment of the Company’s two operating divisions, now called Vegetation Management and Industrial Equipment, aiming to achieve greater market synergies and accelerate organic growth. The Vegetation Management Division is responsible for the Company’s portfolio of brands and products that treat, maintain or harvest organic materials including its agricultural products, mowing equipment (governmental, roadside and waterway) as well as its complete forestry, recycling and tree care offering. The Industrial Equipment Division is responsible for the Company’s portfolio of brands and products for road and highway maintenance including its excavators, vacuum trucks, street sweepers, debris collectors and snow removal equipment. As we continued to refine our operating model in 2021, we discontinued manufacturing operations at facilities at Enschede in The Netherlands and at Barre, Vermont in the United States and transferred these production activities to other Alamo Group manufacturing locations.
On the M&A front, 2021 was an active year for corporate transactions, although valuations remained challenging due to the abundance of liquidity in capital markets and the extraordinary level of dry powder held by private equity firms. While we maintained our traditionally conservative approach to deal valuations, the Company was able to complete the acquisition of Timberwolf Limited in the United Kingdom, a small but important first step at expanding our presence in the forestry and tree care segment in Europe.
To accelerate progress with our ESG initiatives, the Company appointed Dan Malone as its first Chief Sustainability Officer. Previously, Dan served fifteen years as Alamo Group’s Chief Financial Officer. To facilitate improvement of our environmental performance, “Green Teams” were formed at every Company operating facility to focus on increasing energy efficiency and reducing waste. Our progress on the environmental front this year has been gratifying. Following Dan’s appointment as CSO, Richard Wehrle, was named Chief Financial Officer after serving twenty years as Corporate Controller. These further leadership changes again demonstrate the strength and effectiveness of the Company’s succession planning processes.
LETTER TO OUR SHAREHOLDERS
EARNINGS PER SHARE EBITDA* DILUTED IN MILLIONS
18 19 20 21
18 19 20 21
Late in the year, we expanded the Board of Directors to nine members and Ms. Nina Grooms Lee joined the Company as its newest independent director. Ms. Grooms Lee brings to the Board substantial experience in technology matters generally, and very relevant, current experience with autonomous vehicle fleet operations in the municipal environment. Notably, the Company’s executive team will benefit from the skills and experience of the most diverse Board of Directors in Alamo Group’s history.
As we enter 2022, we are encouraged by the continued strength of the Company’s markets, good momentum and exceptional order backlog. We expect the supply chain will remain challenging for at least the first half of the year. Based on recent discussions with our key suppliers, we are hopeful that we will begin to see supply chain performance improve in the second half. While material cost inflation, skilled labor shortages and rising labor costs certainly remain of concern, we are confident that the Company will be able to overcome these challenges as we did in 2021.
Finally, we wish to express our gratitude to our shareholders for your ongoing support and confidence in Alamo Group during 2021. We remain optimistic about the Company’s short and long term outlook.
Roderick R. Baty Jeffery A. Leonard Chairman of the Board President and CEO
Certain statements included herein constitute forward-looking statements. Such statements are subject to various risks and uncertainties which may cause the Company’s actual results in future periods to differ materially from those anticipated in any forward-looking statements. Among those factors which could cause actual results to differ materially are the following: overall market demand, impacts from the COVID-19 pandemic including significant supply chain disruptions, reductions in customer demand, sales and profitability declines, operational disruptions, full or partial facility closures, and other similar impacts, inflation, competition, geopolitical risks, weather, seasonality, currency-related issues, and other risk factors listed from time to time in the reports of the Company filed with the Securities and Exchange Commission, including the Company’s Form 10-K for 2021 attached hereto.
* EBITDA is a non-GAAP financial measure, defined for this purpose as income from operations plus depreciation and amortization.
ALAMO GROUP CORPORATE PROFILE
Alamo Group is a leader in the design, manufacture, distribution and service of high quality equipment for infrastructure
maintenance, agriculture and other applications. Our products include truck—and tractor—mounted mowing and other
vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial
equipment, agricultural implements, forestry equipment and related after-market parts and services. The Company,
founded in 1969, has approximately 4,200 employees and operates 29 plants in North America, Europe, Australia and Brazil
as of December 31, 2021. The corporate offices of Alamo Group Inc. are located in Seguin, Texas.
Vegetation Management Division
Our Vegetation Management Division produces a wide range of equipment for the maintenance, management and recycling of organic materials. The Division’s products include a wide array of mowing equipment from rotary cutters to boom-mounted flail mowers as well forestry and tree-care equipment such as tree chippers, stump grinders, mulchers, and brush cutters.
Industrial Equipment Division
Our Industrial Equipment Division produces a wide range of equipment for infrastructure maintenance on and around highways, airports, industrial properties, parks and recreational facilities, commercial landscapes and other specialty use areas. The Division’s products include excavators, vacuum trucks, street sweepers, debris collectors and snow removal equipment.
SALES BY DIVISION IN MILLIONS
18 19 20 21
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, 2021
☐ 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)
(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 class Trading symbol(s) Name of each exchange
Common Stock, par value $.10 per share
ALG on 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, 2021 (based upon the last reported sale price of $152.68 per share) was approximately $1,511,728,346 on such date.
The number of shares of the registrant’s common stock, par value $.10 per share, outstanding as of February 18, 2022 was 11,934,602 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement relating to the 2022 Annual Meeting of Stockholders have been incorporated by reference herein in response to Part III.
ALAMO GROUP INC. AND CONSOLIDATED SUBSIDIARIES
TABLE OF CONTENTS
PART I Page Item 1. Business 3 Item 1A. Risk Factors 17 Item 1B. Unresolved Staff Comments 27 Item 2. Properties 28 Item 3. Legal Proceedings 29 Item 4. Mine Safety Disclosures 29 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities 29
Item 6. Reserved 31 Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations 31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 37 Item 8. Financial Statements and Supplementary Data 38 Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 38
Item 9A. Controls and Procedures 38 Item 9B. Other Information 39 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 39 PART III Item 10. Directors, Executive Officers and Corporate Governance 39 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 40
Item 13. Certain Relationships, Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services 41 PART IV Item 15. Exhibits and Financial Statement Schedules 41 Index to Consolidated Financial Statements 41 Item 16. Summary 41
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.
The Company is a leader in the design, manufacture and servicing of high quality vegetation management and
infrastructure maintenance equipment for governmental, industrial and agricultural use. The Company’s products include tractor mounted and self-propelled mowers, zero-turn mowers, agricultural implements, tree and branch chippers, forestry/wood recycling equipment, street and parking lot sweepers, leaf and debris collection equipment, pothole patchers, vacuum trucks, hydro-excavation equipment, telescopic boom excavators, and snow removal equipment. The Company emphasizes high quality, cost-effective products for its customers and strives to develop and market innovative products while constantly monitoring and seeking to contain its manufacturing and overhead costs. The Company has a long-standing strategy of supplementing its internal growth through acquisitions of businesses or product lines that currently complement, command, or have the potential to achieve a meaningful share of their niche markets.
The Company has approximately 4,200 employees and operates a total of 29 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.
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 vegetation management marketing group.
In 1991, the Company began its international expansion with the acquisition of McConnel Ltd. (“McConnel”), a United Kingdom (“U.K.”) manufacturer of vegetation maintenance equipment, principally hydraulic boom-mounted hedge and grass cutters and related parts. Bomford-Turner Ltd. (“Bomford”), also a U.K. company, was acquired in 1993. Bomford is a manufacturer of heavy-duty, tractor-mounted grass and hedge mowing equipment. McConnel and Bomford sell their products to dealers and distributors through their respective sales forces.
In 1994, the Company acquired Signalisation Moderne Autoroutiere S.A. (“SMA”) located in Orleans, France. SMA manufactures and sells principally a line of heavy-duty, tractor-mounted grass and hedge mowing-equipment and associated replacement parts primarily to departments of the French government. This acquisition, along with the acquisitions of Forges Gorce ("Forges Gorce"), a flail blade manufacturer in France, in 1996 and Rousseau Holdings S.A. (“Rousseau”), a leading French manufacturer of hedge and verge mowers, in 2004, when combined with McConnel and Bomford, has made the Company one of the largest manufacturers in the European market for the kind of vegetation management equipment sold by the Company.
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 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 Bomford’s 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 Equipment Division product offering sold to governmental buyers and related contractors for maintenance along right-of-ways.
In 2006, the Company purchased the vacuum truck and sweeper lines of Clean Earth Environmental Group, LLC and Clean Earth Kentucky, LLC (collectively referred to as “VacAll”). This included the product lines, inventory and certain other assets that relate to this business. The production of the vacuum truck and sweeper lines were moved to the Gradall facility in New Philadelphia, Ohio.
In 2006, the Company acquired 100% of the ownership interests in Nite-Hawk Sweepers LLC (“Nite-Hawk”), a manufacturer of truck mounted sweeping equipment primarily for the contract sweeping market, which expanded our presence in that market and complements our Schwarze sweeper line.
In 2007, the Company purchased Henke Manufacturing Corporation (“Henke”), a manufacturer of specialty snow removal attachments. Henke’s products are mounted on both heavy industrial equipment and medium to heavy-duty trucks. The primary end-users are governmental agencies, related contractors and other industrial users.
In 2008, the Company acquired Rivard Developpement S.A.S. (“Rivard”), a leading French manufacturer of vacuum trucks, high pressure cleaning systems and trenchers. The acquisition broadened the Company’s product offering to our customers in Europe and other markets we serve.
In 2009, the Company acquired substantially all the assets of Bush Hog, LLC (“Bush Hog”), a leading 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 rotary mowers, created one of the largest manufacturers of rotary 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 lifestyle products. This acquisition allowed the Company to broaden its presence in both the manufacturing and distribution of vegetation management machinery in Australia.
In 2014, the Company acquired all of the operating units of Specialized Industries LP. The purchase included the businesses of Super Products LLC ("Super Products"), Wausau-Everest LP ("Wausau" & "Everest") and Howard P. Fairfield LLC ("H.P. Fairfield") as well as several related entities ("Specialized"), including all brand names and related product names and trademarks. The primary reason for the Specialized acquisition was to broaden the Company's existing equipment lines. This acquisition increased our product offering and enhanced our market position both in vacuum trucks and snow removal equipment primarily in North America.
In 2015, the Company acquired Herder Implementos e Maquinas Agricolas Ltda. ("Herder"). Herder is a manufacturer of flail mowers 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 C
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