UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2018~~MARCH 31, 2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE

TRANSITION PERIOD FROM ____ TO ____

Commission file number 0-21220

ALAMO GROUP INC.

(Exact name of registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of

incorporation or organization)

74-1621248

(I.R.S. Employer

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 on which registered

Common Stock, par value

ALG

New York Stock Exchange

$.10 per share

~~INDICATE BY CHECK MARK WHETHER THE REGISTRANT~~

Indicate by check mark whether the registrant (1) ~~HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION~~has filed all reports required to be filed by Section 13 ORor 15(d) ~~OF SECURITIES EXCHANGE ACT OF~~of the Securities Exchange Act of 1934 ~~DURING THE PRECEDING~~during the preceding 12 ~~MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS)~~months (or for such shorter period that the registrant was required to file such reports), ~~AND~~and (2) ~~HAS BEEN SUBJECT TO SUCH FILING REQUIREMENT FOR THE PAST~~has been subject to such filing requirements for the past 90 ~~DAYS.~~

~~YES~~days. Yes ☒ NONo ☐

~~INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS SUBMITTED ELECTRONICALLY EVERY INTERACTIVE DATA FILE REQUIRED TO BE SUBMITTED PURSUANT TO RULE~~Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ~~OF REGULATION~~of Regulation S-T (§232.405 ~~OF THIS CHAPTER) DURING THE PRECEDING~~of this chapter) during the preceding 12 ~~MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO SUBMIT SUCH FILES)~~months (or for such shorter period that the registrant was required to submit such files). ~~YES~~Yes ☒ NONo ☐

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER, A SMALLER REPORTING COMPANY, OR AN EMERGING GROWTH COMPANY. SEE THE DEFINITIONS OF “LARGE ACCELERATED FILER,Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” ~~“ACCELERATED FILER,~~“accelerated filer,” ~~“SMALLER REPORTING COMPANY,~~“smaller reporting company,” ~~AND “EMERGING GROWTH COMPANY” IN RULE~~and “emerging growth company” in Rule 12b-2 ~~OF THE EXCHANGE ACT.~~of the Exchange Act.


~~LARGE ACCELERATED FILER~~Large accelerated filer ☒			~~ACCELERATED FILER~~Accelerated filer ¨
~~NON-ACCELERATED FILER~~Non-accelerated filer ¨			~~SMALLER REPORTING COMPANY~~Smaller reporting company ¨
			~~EMERGING GROWTH 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 13a OF THE EXCHANGE ACT.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 IS A SHELL COMPANY (AS DEFINED IN RULE~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 ~~OF THE EXCHANGE ACT)~~of the Exchange Act). ~~YES~~Yes ☐ NONo ☒

~~AT OCTOBER~~At April 26, ~~2018, 11,735,274 SHARES OF COMMON STOCK,~~2019, 11,751,974 shares of common stock, $.10 ~~PAR VALUE, OF THE REGISTRANT WERE OUTSTANDING.~~par value, of the registrant were outstanding.

Alamo Group Inc. and Subsidiaries

INDEX

PART I.

FINANCIAL INFORMATION

PAGE

Item 1.

Interim Condensed Consolidated Financial Statements (Unaudited)

Interim Condensed Consolidated Balance Sheets

~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~ 2018

Interim Condensed Consolidated Statements of Income

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~

Interim Condensed Consolidated Statements of Comprehensive Income

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~

Interim Condensed Consolidated Statement of Stockholders' Equity

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018

Interim Condensed Consolidated Statements of Cash Flows

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~

Notes to Interim Condensed Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risks

2321

Item 4.

Controls and Procedures

2423

PART II.

OTHER INFORMATION

2423

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

~~None~~Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

~~None~~Defaults Upon Senior Securities

Item 4.

~~None~~Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

SIGNATURES

2625

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share amounts)	(in thousands, except share amounts)	September 30, 2018					December 31, 2017				(in thousands, except share amounts)	March 31, 2019		December 31, 2018
ASSETS	ASSETS							ASSETS
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents		$	48,880	$	25,373		Cash and cash equivalents	$	39,023		$	34,043
Accounts receivable, net	Accounts receivable, net		227,828		205,767			Accounts receivable, net	269,785			228,098
Inventories, net	Inventories, net		184,018		155,568			Inventories, net	211,355			176,630

Prepaid expenses			6,122		5,336
Prepaid expenses and other current assets								Prepaid expenses and other current assets	6,906			5,327
Income tax receivable	Income tax receivable		4,460		483			Income tax receivable	4,918			8,745
Total current assets	Total current assets		471,308		392,527			Total current assets	531,987			452,843

Rental equipment, net	Rental equipment, net		40,461		28,493			Rental equipment, net	49,342			43,978

Property, plant and equipment	Property, plant and equipment		214,175		202,293			Property, plant and equipment	236,692			219,135
Less: Accumulated depreciation	Less: Accumulated depreciation		(130,606)		(125,629)			Less: Accumulated depreciation	(134,955)			(131,905)
			83,569		76,664
Total property, plant and equipment, net								Total property, plant and equipment, net	101,737			87,230

Goodwill	Goodwill		83,716		84,761			Goodwill	88,821			83,243
Intangible assets, net	Intangible assets, net		49,763		52,872			Intangible assets, net	63,568			48,857
Deferred income taxes	Deferred income taxes		1,553		992			Deferred income taxes	1,893			1,783
Other assets			4,403		3,362
Other non-current assets								Other non-current assets	14,905			3,699

Total assets	Total assets		$	734,773	$	639,671		Total assets	$	852,253		$	721,633

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:							Current liabilities:
Trade accounts payable	Trade accounts payable		$	71,944	$	55,825		Trade accounts payable	$	70,251		$	54,083
Income taxes payable	Income taxes payable		—		5,002			Income taxes payable	2,019			2,865
Accrued liabilities	Accrued liabilities		38,297		40,454			Accrued liabilities	42,490			43,785
Current maturities of long-term debt and capital lease obligations			189		82
Current maturities of long-term debt and finance lease obligations								Current maturities of long-term debt and finance lease obligations	134			119

Total current liabilities	Total current liabilities		110,430		101,363			Total current liabilities	114,894			100,852

Long-term debt and capital lease obligations, net of current maturities			101,000		60,000
Long-term debt and finance lease obligations, net of current maturities								Long-term debt and finance lease obligations, net of current maturities	180,234			85,179
Long-term tax liability	Long-term tax liability		7,347		12,316			Long-term tax liability	6,378			6,120
Deferred pension liability	Deferred pension liability		706		1,225			Deferred pension liability	1,832			1,944
Other long-term liabilities	Other long-term liabilities		7,474		7,291			Other long-term liabilities	13,127			8,436
Deferred income taxes	Deferred income taxes		10,924		8,368			Deferred income taxes	14,304			11,731

Stockholders’ equity:	Stockholders’ equity:							Stockholders’ equity:
Common stock, $.10 par value, 20,000,000 shares authorized; 11,660,933 and 11,577,048 outstanding at September 30, 2018 and December 31, 2017, respectively			1,166		1,158
Common stock, $.10 par value, 20,000,000 shares authorized; 11,673,838 and 11,662,688 outstanding at March 31, 2019 and December 31, 2018, respectively								Common stock, $.10 par value, 20,000,000 shares authorized; 11,673,838 and 11,662,688 outstanding at March 31, 2019 and December 31, 2018, respectively	1,167			1,166
Additional paid-in-capital	Additional paid-in-capital		107,737		103,864			Additional paid-in-capital	109,285			108,422
Treasury stock, at cost; 42,600 shares at September 30, 2018 and December 31, 2017			(426)		(426)
Treasury stock, at cost; 57,600 and 42,600 shares at March 31, 2019 and December 31, 2018, respectively								Treasury stock, at cost; 57,600 and 42,600 shares at March 31, 2019 and December 31, 2018, respectively	(1,916)			(426)
Retained earnings	Retained earnings		427,737		374,678			Retained earnings	456,889			443,040
Accumulated other comprehensive loss	Accumulated other comprehensive loss		(39,322)		(30,166)			Accumulated other comprehensive loss	(43,941)			(44,831)
Total stockholders’ equity	Total stockholders’ equity		496,892		449,108			Total stockholders’ equity	521,484			507,371

Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity		$	734,773	$	639,671		Total liabilities and stockholders’ equity	$	852,253		$	721,633

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Income

(Unaudited)


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2018		2017		2018		2017		(in thousands, except per share amounts)	2019		2018

Net sales:	Net sales:									Net sales:
Industrial	Industrial	$	156,721	$	132,388	$	438,919	$	375,546	Industrial	$	158,425	$	132,167
Agricultural	Agricultural	61,464		64,923		179,182		170,921		Agricultural	53,173		58,647
European	European	39,387		43,144		134,683		122,653		European	50,336		47,273
Total net sales	Total net sales	257,572		240,455		752,784		669,120		Total net sales	261,934		238,087
Cost of sales	Cost of sales	190,800		175,516		559,301		495,338		Cost of sales	198,626		177,830
Gross profit	Gross profit	66,772		64,939		193,483		173,782		Gross profit	63,308		60,257

Selling, general and administrative expenses	Selling, general and administrative expenses	38,523		37,178		117,087		105,463		Selling, general and administrative expenses	40,702		38,896
Income from operations	Income from operations	28,249		27,761		76,396		68,319		Income from operations	22,606		21,361

Interest expense	Interest expense	(1,399)		(1,414)		(4,233)		(4,241)		Interest expense	(1,450)		(1,337)
Interest income	Interest income	100		100		309		257		Interest income	173		100
Other income (expense)		(265)		(1,561)		(491)		(2,734)
Other expense, net										Other expense, net	(389)		(134)
Income before income taxes	Income before income taxes	26,685		24,886		71,981		61,601		Income before income taxes	20,940		19,990
Provision for income taxes	Provision for income taxes	3,142		8,294		15,084		20,526		Provision for income taxes	5,687		5,407
Net Income	Net Income	$	23,543	$	16,592	$	56,897	$	41,075	Net Income	$	15,253	$	14,583

Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	2.01	$	1.43	$	4.88	$	3.56	Basic	$	1.30	$	1.26
Diluted	Diluted	$	2.00	$	1.42	$	4.84	$	3.52	Diluted	$	1.30	$	1.24
Average common shares:	Average common shares:									Average common shares:
Basic	Basic	11,689		11,586		11,649		11,535		Basic	11,698		11,606
Diluted	Diluted	11,777		11,708		11,758		11,666		Diluted	11,777		11,739

Dividends declared	Dividends declared	$	0.11	$	0.10	$	0.33	$	0.30	Dividends declared	$	0.12	$	0.11

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2018 2017 2018 2017
Net Income $ 23,543 $ 16,592 $ 56,897 $ 41,075
Other comprehensive income:
Foreign currency translation adjustments (924) 7,452 (9,657) 17,596
Net gain on pension and other postretirement benefits 211 218 634 652
Other comprehensive income (loss) before income tax expense (713) 7,670 (9,023) 18,248
Income tax expense related to items of other comprehensive loss (44) (80) (133) (239)
Other comprehensive income (loss) (757) 7,590 (9,156) 18,009
Comprehensive Income $ 22,786 $ 24,182 $ 47,741 $ 59,084


	Three Months Ended March 31,
(in thousands)	2019		2018
Net income	$	15,253	$	14,583
Other comprehensive income:
Foreign currency translation adjustments	720		3,117
Net gain on pension and other post-retirement benefits	215		195
Other comprehensive income before income tax expense	935		3,312
Income tax expense related to items of other comprehensive income	(45)		(69)
Other comprehensive income	890		3,243
Comprehensive income	$	16,143	$	17,826

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


		Common Stock					Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss			Total Stock- holders’ Equity			Common Stock						Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss	Total Stock- holders’ Equity
(in thousands)	(in thousands)	Shares	Amount															Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stock- holders’ Equity
Balance at December 31, 2017		11,534	$	1,158	$	103,864									$	(426)	$									374,678	$	(30,166)	$	449,108
Balance at December 31, 2018																Balance at December 31, 2018	11,620		$	1,166	$	108,422	$	(426)	$	443,040	$	(44,831)	$	507,371
Net income	Net income	—							56,897		—		56,897			Net income	—								15,253		—		15,253

Translation adjustment	Translation adjustment	—									(9,657)					Translation adjustment	—										720

Net actuarial gain arising during period, net of taxes	Net actuarial gain arising during period, net of taxes	—									501					Net actuarial gain arising during period, net of taxes	—										170

Stock-based compensation	Stock-based compensation	—			1,810		—						1,810			Stock-based compensation	—				627		—						627
Common stock repurchase																Common stock repurchase	(15)		—				(1,490)		—				(1,490)
Exercise of stock options	Exercise of stock options	84	8		2,063		—						2,071			Exercise of stock options	11		1		236		—						237

Dividends paid ($0.33 per share)		—							(3,838)		—		(3,838)
Balance at September 30, 2018		11,618	$	1,166	$	107,737	$	(426)	$	427,737	$	(39,322)	$	496,892
Dividends paid ($0.12 per share)																Dividends paid ($0.12 per share)	—								(1,404)		—		(1,404)
Balance at March 31, 2019																Balance at March 31, 2019	11,616		$	1,167	$	109,285	$	(1,916)	$	456,889	$	(43,941)	$	521,484


	Common Stock					Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stock- holders’ Equity
(in thousands)	Shares	Amount
Balance at December 31, 2017	11,534	$	1,158	$	103,864	$	(426)	$	374,678	$	(30,166)	$	449,108
Net income	—	—		—		—		14,583		—		14,583

Translation adjustment	—	—		—		—		—		3,117		3,117

Net actuarial gain arising during period, net of taxes	—	—		��		—		—		126		126

Stock-based compensation	—	—		458		—		—		—		458

Exercise of stock options	9	—		266		—		—		—		266


Dividends paid ($0.11 per share)	—	—		—		—		(1,276)		—		(1,276)
Balance at March 31, 2018	11,543	$	1,158	$	104,588	$	(426)	$	387,985	$	(26,923)	$	466,382

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands)	(in thousands)	2018		2017		(in thousands)	2019		2018
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	56,897	$	41,075	Net income	$	15,253	$	14,583
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Adjustment to reconcile net income to net cash used in operating activities:						Adjustment to reconcile net income to net cash used in operating activities:
Provision for doubtful accounts	Provision for doubtful accounts	(132)		(2)		Provision for doubtful accounts	(24)		(94)
Depreciation - Property, plant and equipment	Depreciation - Property, plant and equipment	9,388		8,631		Depreciation - Property, plant and equipment	3,338		3,135
Depreciation - Rental equipment	Depreciation - Rental equipment	4,790		4,253		Depreciation - Rental equipment	2,088		1,405
Amortization of intangibles	Amortization of intangibles	2,630		2,445		Amortization of intangibles	855		881
Amortization of debt issuance costs	Amortization of debt issuance costs	166		166		Amortization of debt issuance costs	55		55
Stock-based compensation expense	Stock-based compensation expense	1,810		1,254		Stock-based compensation expense	627		458

Deferred income tax expense (benefit)		1,160		(74)
Provision for deferred income tax expense						Provision for deferred income tax expense	1,865		930
Gain on sale of property, plant and equipment	Gain on sale of property, plant and equipment	(298)		(312)		Gain on sale of property, plant and equipment	(180)		(17)
Changes in operating assets and liabilities:
Changes in operating assets and liabilities, net of acquisitions:						Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	(24,916)		(20,330)		Accounts receivable	(34,936)		(27,998)
Inventories	Inventories	(31,521)		(4,075)		Inventories	(17,098)		(12,291)
Rental equipment	Rental equipment	(16,758)		(4,327)		Rental equipment	(7,453)		(5,663)
Prepaid expenses and other assets	Prepaid expenses and other assets	(1,887)		2,828		Prepaid expenses and other assets	(1,472)		(1,765)
Trade accounts payable and accrued liabilities	Trade accounts payable and accrued liabilities	15,797		10,811		Trade accounts payable and accrued liabilities	1,563		(1,483)
Income taxes payable	Income taxes payable	(8,887)		(665)		Income taxes payable	2,925		(386)
Long-term tax liability		(4,969)		—
Long-term tax payable						Long-term tax payable	258		—
Other assets and long-term liabilities	Other assets and long-term liabilities	317		204		Other assets and long-term liabilities	(25)		104
Net cash provided by operating activities		3,587		41,882
Net cash used in operating activities						Net cash used in operating activities	(32,361)		(28,146)

Investing Activities	Investing Activities					Investing Activities
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	—		(38,523)		Acquisitions, net of cash acquired	(50,477)		—
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(18,781)		(9,686)		Purchase of property, plant and equipment	(5,284)		(7,645)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	1,037		555		Proceeds from sale of property, plant and equipment	472		97

Net cash used in investing activities	Net cash used in investing activities	(17,744)		(47,654)		Net cash used in investing activities	(55,289)		(7,548)

Financing Activities	Financing Activities					Financing Activities
Borrowings on bank revolving credit facility	Borrowings on bank revolving credit facility	126,000		126,000		Borrowings on bank revolving credit facility	103,000		90,000
Repayments on bank revolving credit facility	Repayments on bank revolving credit facility	(85,000)		(70,000)		Repayments on bank revolving credit facility	(8,000)		(3,000)
Principal payments on long-term debt and capital leases		(82)		(17)
Principal payments on finance leases						Principal payments on finance leases	(37)		—

Dividends paid	Dividends paid	(3,838)		(3,455)		Dividends paid	(1,404)		(1,276)
Proceeds from sale of common stock		2,507		2,059
Proceeds from exercise of stock options						Proceeds from exercise of stock options	237		266

Redemptions of common stock to satisfy withholding taxes related to stock-based compensation		(436)		(166)
Cost of common stock repurchased						Cost of common stock repurchased	(1,490)		—
Net cash provided by financing activities	Net cash provided by financing activities	39,151		54,421		Net cash provided by financing activities	92,306		85,990

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(1,487)		3,626		Effect of exchange rate changes on cash and cash equivalents	324		181
Net change in cash and cash equivalents	Net change in cash and cash equivalents	23,507		52,275		Net change in cash and cash equivalents	4,980		50,477
Cash and cash equivalents at beginning of the period		25,373		16,793
Cash and cash equivalents at beginning of the year						Cash and cash equivalents at beginning of the year	34,043		25,373
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	48,880	$	69,068	Cash and cash equivalents at end of the period	$	39,023	$	75,850

Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	3,889	$	5,073	Interest	$	1,061	$	1,123
Income taxes	Income taxes	26,568		20,699		Income taxes	2,814		5,066

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Notes to Interim Condensed Consolidated Financial Statements - (Unaudited)

~~September 30, 2018~~March 31, 2019

1. Basis of Financial Statement Presentation

General

The accompanying unaudited interim condensed consolidated financial statements of Alamo Group Inc. and its subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018.~~2019. The balance sheet at December 31, ~~2017~~2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2017~~2018 (the ~~"2017~~"2018 10-K").

~~Reclassifications~~

~~Certain amounts reported for the three and nine months ended September 30, 2017 have been reclassified in order to conform to the 2018 presentation.~~

Accounting Pronouncements Adopted on January 1, ~~2018~~

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

In March 2017, the FASB issued ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715),” which requires employers to report the service cost component of net periodic pension cost and net periodic postretirement benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost (non-service cost components) to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. This ASU is to be applied retrospectively for income statement items and prospectively for any capitalized benefit costs. The adoption of this ASU effective January 1, 2018 did not affect our financial position or results of operations. Accordingly, for the three months ended September 30, 2018 and 2017, we reclassified the non-service cost components out of selling, general and administrative expenses of $62,000 and $150,000 respectively, and into other income (expense), net. For the nine months ended September 30, 2018 and 2017 we reclassified the non-service cost components out of selling, general and administrative expenses of $187,000 and $450,000 respectively, and into other income (expense), net.

~~Accounting Pronouncements Not Yet Adopted~~2019

In February 2016, the FASB issued ASU No. 2016-02, ~~“Leases.”~~“Leases (Topic 842)." This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Similar to current guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in

the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. ~~Entities may elect the modified retrospective method of adoption or a cumulative transition adjustment on the effective date.~~ The guidance ~~will become~~became effective for us on January 1, ~~2019~~2019. As a lessee, this standard primarily impacted our accounting for long-term real estate and equipment leases, for which we ~~have not yet elected~~recognized right-of-use assets of $7,747,000 and a ~~transition method. We are evaluating the impacts that adoption~~corresponding lease liability of ~~the ASU is expected to have~~$7,868,000 on our consolidated ~~financial statements and related disclosures. We anticipate~~balance sheet. As a lessee, this standard ~~will~~primarily impacted our accounting for long-term real estate and equipment leases, for which we recognized a right-of-use asset and a corresponding lease liability on our consolidated balance sheet.

We adopted these provisions on January 1, 2019 using the optional transition method that permits us to apply the new disclosure requirements in 2019 and continue to present comparative period information as required under FASB ASC Topic 840, "Leases." We did not have a ~~material impact on~~cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. We elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to not account for lease and non-lease components separately for most of our ~~financial position by increasing our assets~~asset classes and ~~liabilities by equal amounts through~~to exclude leases with an initial term of 12 months or less from the ~~recognition of~~ right-of-use assets and ~~lease liabilities for our operating leases. However, we do not expect adoption to have a material~~liabilities. Adoption of the standards had no impact on ~~our~~ results of operations or liquidity. Additionally, we are evaluating the effect of the ASU on our internal control over financial reporting or other potential changes in business practices and processes including contract review and approval procedures.

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

~~In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff~~

Accounting Bulletin No. 118,” which amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Reform. This guidance clarifies the application of Topic 740 in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting under ASC Topic 740 for certain income tax effects of Tax Reform for the reporting period in which the Tax Reform was enacted. We are currently evaluating the effects of Tax Reform, and in the absence of clarifying guidance in the application of certain provisions of Tax Reform, we used reasonable estimates to determine our provisional tax amounts and are awaiting guidance for those items for which a reasonable estimate cannot be made.Pronouncements Not Yet Adopted

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

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

2. Accounting Policies

~~Revenue Recognition~~Leases

The following policy resulted from our adoption of the provisions of ASC Topic ~~606, “Revenue from Contracts with Customers,~~842, “Leases,” effective January 1, ~~2018,~~2019, as described above in “Accounting Pronouncements Adopted on January 1, ~~2018.~~2019.”

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

We have elected to not account for the lease and non-lease components separately for most of our asset classes with the exception of real-estate. We have also elected to exclude all lease agreements with an initial term of 12 months or less from product sales under contracts with customers. The Company presents three reportable operating segments within its financial statements; Industrial, Agricultural and European. Contract terms and performance obligations within each contractual agreement are generally consistent for all three divisions with small differences that do not have a significant impact on the ~~revenue~~lease recognition ~~considerations under Topic 606. Revenues are recognized when we satisfy our performance obligation to transfer~~requirements.

product to our customers, which typically occurs at a point in time upon shipment or delivery of the product, and for an amount that reflects the transaction price that is allocated to the performance obligation. Our contracts with customers state the final terms of sale, including the description, quantity and price for goods sold. In the normal course of business, we generally do not accept product returns.

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

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

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

3. Business Combinations

~~Santa Izabel Agro Industria Ltda.~~

On ~~June 6, 2017,~~March 4, 2019, the Company ~~completed~~acquired 100 percent of the ~~acquisition~~issued and outstanding equity interests of ~~Santa Izabel Agro Industria Ltda.~~Dutch Power Company B.V. ("~~Santa Izabel"~~Dutch Power"). ~~Santa Izabel~~Dutch Power designs, manufactures and ~~markets~~sells a variety of ~~agricultural implements~~landscape and ~~trailers sold throughout Brazil.~~vegetation management machines primarily in Europe. The primary reason for the ~~Santa Izabel~~Dutch Power acquisition was to ~~broaden~~enhance the Company's ~~presence~~platform for growth by increasing both the Company's product portfolio and capabilities in the ~~manufacturing and distribution of agricultural machinery in Brazil.~~European market. The acquisition price was approximately ~~$10 million.~~

~~Old Dominion Brush Company~~

~~On June 26, 2017, the Company completed the acquisition of Old Dominion Brush Company, Inc. ("Old Dominion"). Old Dominion manufactures~~$53 million and sells replacement brooms for street sweepers and leaf vacuum equipment. The acquisition price was approximately $18 million. The primary reason for the Old Dominion acquisition was to increase the Company's presence in the sweeper market and broaden our product offerings.

~~R.P.M. Tech Inc.~~

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

~~Consolidated Acquisitions~~has not yet been finalized.

The Company has included the operating results of ~~Old Dominion, Santa Izabel, and R.P.M.~~Dutch Power in its consolidated financial statements since ~~their acquisitions.~~the acquisition. Certain estimated values are not yet finalized and are subject to change. The ~~total purchase price has been allocated to assets acquired~~Company will finalize the amounts once the necessary information is obtained and ~~liabilities assumed, including deferred taxes, based on their fair values as of~~ the ~~completion of the acquisitions.~~analysis is complete. The following ~~represents~~are the ~~final~~estimated fair value of the assets acquired and liabilities assumed ~~for all acquisitions~~ as of the acquisition ~~dates~~date (in thousands):


Cash	$	~~2,547~~87
Accounts receivable	~~7,111~~6,278
Inventory	~~15,387~~17,498
Prepaid ~~expenses~~and other assets	~~134~~3,564
Property, plant &and equipment	~~5,902~~12,828
Intangible assets	~~5,855~~
~~Other assets~~	~~1,057~~
~~Other liabilities assumed~~	~~(5,635)~~15,787

~~Net assets~~Other liabilities assumed	$	~~32,358~~ (9,082)

~~Goodwill~~	~~8,741~~ Net assets assumed
~~Acquisition Price~~	$	~~41,099~~46,960

Goodwill	5,651
Acquisition Price	$	52,611

4. Accounts Receivable

Accounts receivable is shown net of sales discounts and the allowance for doubtful accounts.

At ~~September 30, 2018~~March 31, 2019 the Company had ~~$17,091,000~~$20,741,000 in reserves for sales discounts compared to ~~$15,652,000~~$18,123,000 at December 31, ~~2017~~2018 related to products shipped to our customers under various promotional programs. The increase was primarily due to additional discounts reserved related to increased sales of the Company's agricultural products sold during the first ~~nine~~three months of ~~2018.~~2019.

5. Inventories

Inventories valued at LIFO cost represented ~~60%~~54% and ~~62%~~60% of total inventory at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The excess of current cost over LIFO valued inventories was approximately ~~$7,919,000~~$10,646,000 at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. An actual valuation of inventory under the LIFO method is made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO must be based, to some extent, on management's estimates at each quarter end. Net inventories consist of the following:


(in thousands)	(in thousands)	September 30, 2018					December 31, 2017				(in thousands)	March 31, 2019		December 31, 2018

Finished goods	Finished goods		$	154,555	$	133,161		Finished goods	$	178,413		$	149,298
Work in process	Work in process		14,345		10,243			Work in process	17,675			12,732
Raw materials	Raw materials		15,118		12,164			Raw materials	15,267			14,600
Total inventory			$	184,018	$	155,568
Inventories, net								Inventories, net	$	211,355		$	176,630

Inventory obsolescence reserves were ~~$7,106,000~~$7,162,000 at ~~September 30, 2018~~March 31, 2019 and ~~$6,932,000~~$7,194,000 at December 31, ~~2017.~~2018.

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6. Rental Equipment

Rental equipment is shown net of accumulated depreciation of ~~$11,247,000~~$12,463,000 and ~~$9,413,000~~$11,145,000 at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The Company recognized depreciation expense of ~~$1,808,000~~$2,088,000 and ~~$1,449,000~~$1,405,000 for the three months ended ~~September 30,~~March 31, 2019 and March 31, 2018, ~~and September 30, 2017, respectively and $4,790,000 and $4,253,000 for the nine months ended September 30, 2018 and September 30, 2017,~~ respectively.

7. Fair Value Measurements

The carrying values of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate their fair value because of the short-term nature of these items. The carrying value of our debt approximates the fair value as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, as the floating rates on our outstanding balances approximate current market rates. This conclusion was made based on Level 2 inputs.

8. Goodwill and Definite and Indefinite-lived Intangible Assets

The following is the summary of changes to the Company's Goodwill for the ~~nine~~three months ended ~~September 30, 2018:~~March 31, 2019:

Industrial Agricultural European Consolidated
(in thousands)
Balance at December 31, 2017 $ 61,682 $ 6,357 $ 16,722 $ 84,761
Translation adjustment (220) (1,122) (561) (1,903)
Goodwill adjustment 84 774 — 858
Balance at September 30, 2018 $ 61,546 $ 6,009 $ 16,161 $ 83,716


	Industrial					Agricultural			European		Consolidated
(in thousands)
Balance at December 31, 2018		$	61,107	$	6,230		$	15,906	$	83,243
Translation adjustment		170		(53)			(190)		(73)
Goodwill acquired		—		—			5,651		5,651
Balance at March 31, 2019		$	61,277	$	6,177		$	21,367	$	88,821

The following is a summary of the Company's definite and indefinite-lived intangible assets net of the accumulated amortization:


(in thousands)	(in thousands)	Estimated Useful Lives	September 30, 2018					December 31, 2017			(in thousands)	Estimated Useful Lives	March 31, 2019			December 31, 2018
Definite:	Definite:							Definite:
Trade names and trademarks	Trade names and trademarks	25 years		$	23,966	$	24,276	Trade names and trademarks	25 years	$	32,940			$	23,938
Customer and dealer relationships	Customer and dealer relationships	10-14 years		32,435		32,654		Customer and dealer relationships	10-14 years	34,354				32,260
Patents and drawings	Patents and drawings	3-12 years		1,971		1,982		Patents and drawings	3-12 years	6,562				2,061
Total at cost	Total at cost			58,372		58,912		Total at cost		73,856				58,259
Less accumulated amortization	Less accumulated amortization			(14,109)		(11,540)		Less accumulated amortization		(15,788)				(14,902)
Total net	Total net			44,263		47,372		Total net		58,068				43,357
Indefinite:	Indefinite:							Indefinite:
Trade names and trademarks	Trade names and trademarks			5,500		5,500		Trade names and trademarks		5,500				5,500
Total Intangible Assets	Total Intangible Assets			$	49,763	$	52,872	Total Intangible Assets		$	63,568			$	48,857

The Company recognized amortization expense of ~~$874,000~~$855,000 and ~~$891,000~~$881,000 for the three months ending ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, ~~and $2,630,000 and $2,445,000 for the nine months ended September 30, 2018 and 2017, respectively.~~.

As of ~~September 30, 2018,~~March 31, 2019, the Company had ~~$49,763,000~~$63,568,000 of intangible assets, which represents 7% of total assets.

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9. Debt

The components of long-term debt are as follows:


(in thousands)	(in thousands)	September 30, 2018					December 31, 2017				(in thousands)	March 31, 2019		December 31, 2018
Current Maturities:	Current Maturities:							Current Maturities:
Finance lease obligations								Finance lease obligations	$	134		$	119

Other notes payable			$	189	$	82
			189		82				134			119
Long-term debt:	Long-term debt:							Long-term debt:
Bank revolving credit facility	Bank revolving credit facility		101,000		60,000			Bank revolving credit facility	180,000			85,000

Finance lease obligations								Finance lease obligations	234			179

			101,000		60,000				180,234			85,179
Total debt	Total debt		$	101,189	$	60,082		Total debt	$	180,368		$	85,298

As of ~~September 30, 2018, $1,325,000~~March 31, 2019, $3,188,000 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 ~~$147,675,000~~$66,812,000 in available borrowings.

10. Common Stock and Dividends

Dividends declared and paid on a per share basis were as follows:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2018		2017		2018		2017			2019		2018

Dividends declared	Dividends declared	$	0.11	$	0.10	$	0.33	$	0.30	Dividends declared	$	0.12	$	0.11
Dividends paid	Dividends paid	$	0.11	$	0.10	$	0.33	$	0.30	Dividends paid	$	0.12	$	0.11

On ~~October 1, 2018,~~April 2, 2019, the Company announced that its Board of Directors had declared a quarterly cash dividend of ~~$0.11~~$0.12 per share, which was paid on ~~October 26, 2018,~~April 29, 2019, to shareholders of record at the close of business on ~~October 15, 2018.~~April 16, 2019.

11. Earnings Per Share

The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net income per common share. Net income for basic and diluted calculations do not differ.


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(In thousands, except per share)	(In thousands, except per share)	2018		2017		2018		2017		(In thousands, except per share)	2019		2018
Net Income	Net Income	$	23,543	$	16,592	$	56,897	$	41,075	Net Income	$	15,253	$	14,583
Average Common Shares:	Average Common Shares:									Average Common Shares:
Basic (weighted-average outstanding shares)	Basic (weighted-average outstanding shares)	11,689		11,586		11,649		11,535		Basic (weighted-average outstanding shares)	11,698		11,606
Dilutive potential common shares from stock options	Dilutive potential common shares from stock options	88		122		109		131		Dilutive potential common shares from stock options	79		133
Diluted (weighted-average outstanding shares)	Diluted (weighted-average outstanding shares)	11,777		11,708		11,758		11,666		Diluted (weighted-average outstanding shares)	11,777		11,739

Basic earnings per share	Basic earnings per share	$	2.01	$	1.43	$	4.88	$	3.56	Basic earnings per share	$	1.30	$	1.26
Diluted earnings per share	Diluted earnings per share	$	2.00	$	1.42	$	4.84	$	3.52	Diluted earnings per share	$	1.30	$	1.24

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12. ~~Income Taxes~~

~~Tax Reform~~

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

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

During the three months ended September 30, 2018, we revised our initial provisional amount recorded for the transitional tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and the impact of the federal tax rate change on the value of our deferred tax assets and liabilities. The transition tax liability on the deemed repatriation decreased $4.2 million, primarily as a result of additional analysis performed over our historical foreign earnings and foreign source income which provided increased ability to credit foreign taxes associated with the deemed repatriation. In addition, the impact of rate the change on deferred increased by $1.2 million due to adjustments resulting from the filing of our 2017 federal income tax return. We continue to gather additional information regarding the state impacts of repatriation and will finalize our calculation of the tax effects of the TCJA in the fourth quarter of 2018.

In addition to the changes described above, TCJA imposes a U.S. tax on Global Intangible Low Taxed Income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is still subject to interpretation and additional clarifying guidance is expected, but is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. We are still assessing impacts GILTI may have.

~~13.~~ Revenue and Segment Information

Revenues from Contracts with Customers

Disaggregation of revenue is presented in the tables below by product type and by geographical location. Management has determined that this level of disaggregation would be beneficial to users of the financial statements.


Revenue by Product Type	Revenue by Product Type															Revenue by Product Type
		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands)	(in thousands)	2018		2017		2018		2017		(in thousands)	2019		2018

Net Sales	Net Sales									Net Sales
Wholegoods	Wholegoods	$	204,349	$	187,696	$	604,073	$	528,807	Wholegoods	$	207,771	$	187,929
Parts	Parts	47,911		48,302		135,153		128,927		Parts	48,255		46,433
Other	Other	5,312		4,457		13,558		11,386		Other	5,908		3,725
Consolidated	Consolidated	$	257,572	$	240,455	$	752,784	$	669,120	Consolidated	$	261,934	$	238,087

Other includes rental sales, extended warranty sales and service sales as it is considered immaterial.


Revenue by Geographical Location	Revenue by Geographical Location															Revenue by Geographical Location
		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands)	(in thousands)	2018		2017		2018		2017		(in thousands)	2019		2018

Net Sales	Net Sales									Net Sales
United States	United States	$	188,037	$	174,807	$	536,505	$	486,513	United States	$	185,313	$	165,177
United Kingdom		15,141		13,319		41,003		35,745
France	France	17,048		21,660		66,321		62,563		France	25,935		24,927
Canada	Canada	15,167		13,064		44,819		35,242		Canada	13,944		14,234
United Kingdom										United Kingdom	13,798		13,443
Brazil										Brazil	4,273		5,460
Netherlands										Netherlands	2,674		1,289
Australia	Australia	2,023		2,203		7,550		10,093		Australia	2,496		2,382
Brazil		3,050		4,058		13,368		6,579
Chile										Chile	2,195		1,120
Other	Other	17,106		11,344		43,218		32,385		Other	11,306		10,055
Consolidated	Consolidated	$	257,572	$	240,455	$	752,784	$	669,120	Consolidated	$	261,934	$	238,087

Net sales are attributed to countries based on the location of the customer.

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Segment Information

The following includes a summary of the unaudited financial information by reporting segment at ~~September 30, 2018:~~March 31, 2019:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands)	(in thousands)	2018		2017		2018		2017		(in thousands)	2019		2018
Net Sales	Net Sales									Net Sales
Industrial	Industrial	$	156,721	$	132,388	$	438,919	$	375,546	Industrial	$	158,425	$	132,167
Agricultural	Agricultural	61,464		64,923		179,182		170,921		Agricultural	53,173		58,647
European	European	39,387		43,144		134,683		122,653		European	50,336		47,273
Consolidated	Consolidated	$	257,572	$	240,455	$	752,784	$	669,120	Consolidated	$	261,934	$	238,087

Income from Operations	Income from Operations									Income from Operations
Industrial	Industrial	$	18,351	$	14,941	$	46,316	$	38,563	Industrial	$	16,472	$	11,800
Agricultural	Agricultural	6,608		8,598		18,047		19,315		Agricultural	2,172		5,253
European	European	3,290		4,222		12,033		10,441		European	3,962		4,308
Consolidated	Consolidated	$	28,249	$	27,761	$	76,396	$	68,319	Consolidated	$	22,606	$	21,361


(in thousands)	(in thousands)	September 30, 2018		December 31, 2017		(in thousands)	March 31, 2019		December 31, 2018
Goodwill	Goodwill					Goodwill
Industrial	Industrial	$	61,546	$	61,682	Industrial	$	61,277	$	61,107
Agricultural	Agricultural	6,009		6,357		Agricultural	6,177		6,230
European	European	16,161		16,722		European	21,367		15,906
Consolidated	Consolidated	$	83,716	$	84,761	Consolidated	$	88,821	$	83,243

Total Identifiable Assets	Total Identifiable Assets					Total Identifiable Assets
Industrial	Industrial	$	419,444	$	369,271	Industrial	$	451,549	$	421,539
Agricultural	Agricultural	167,851		141,023		Agricultural	184,495		162,548
European	European	147,478		129,377		European	216,209		137,546
Consolidated	Consolidated	$	734,773	$	639,671	Consolidated	$	852,253	$	721,633

~~14.~~13. Contingent Matters

The Company is subject to various legal actions which have arisen in the ordinary course of its business. The most prevalent of such actions relate to product liability, which is generally covered by insurance after various self-insured retention amounts. While amounts claimed might be substantial and the ultimate liability with respect to such litigation cannot be determined at this time, the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations; however, the ultimate resolution cannot be determined at this time.

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

1614

14. Leases

The Company leases office space and equipment under various operating and finance leases, which generally are expected to be renewed or replaced by other leases. As of March 31, 2019, the components of lease cost were as follows:


Components of Lease Cost
	Three Months Ended March 31,
(in thousands)	2019
Finance lease cost:
Amortization of right-of-use assets	$	31
Interest on lease liabilities	2
Operating lease cost	1,024
Short-term lease cost	52
Variable lease cost	105

Total lease cost	$	1,214

Rent expense for March 31, 2018 was immaterial.

Maturities of lease liabilities were as follows:


Future Minimum Lease Payments
	March 31, 2019						December 31, 2018
(in thousands)	Operating Leases		Finance Leases		Operating Leases		Capital Leases
2019	$	3,494	$	144	$	3,310	$	125
2020	2,408		101		2,453		97
2021	1,221		74		1,308		62
2022	758		31		743		24
2023	361		17		419		1
Thereafter	29		26		79		—
Total minimum lease payments	$	8,271	$	393	$	8,312	$	309
Less imputed interest	(385)		(25)		—		(11)
Total lease liabilities	$	7,886	$	368	$	8,312	$	298

As of March 31, 2019, we have an additional operating lease, primarily for a building that has not yet commenced of $627,000. This operating lease will commence in fiscal year 2019 with a lease term of 5 years.

Supplemental balance sheet information related to leases was as follows:


Operating Leases
	Three Months Ended March 31,
(in thousands)	2019
Other non-current assets	$	7,777

Accrued liabilities	3,300
Other long-term liabilities	4,586
Total operating lease liabilities	$	7,886

Finance Leases
	Three Months Ended March 31,
(in thousands)	2019
Property, plant and equipment, gross	$	627
Accumulated Depreciation	(270)
Property, plant and equipment, net	$	357

Current maturities of long-term debt and finance lease obligations				$	134
Long-term debt and finance lease obligations, net of current maturities				234
Total finance lease liabilities	$	368

Weighted Average Remaining Lease Term
Operating leases	2.86 years
Finance leases	3.73 years
Weighted Average Discount Rate
Operating leases	3.18		%
Finance leases	3.31		%

Supplemental Cash Flow information related to leases was as follows:


	Three Months Ended March 31,
(in thousands)	2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	3
Operating cash flows from operating leases	982
Financing cash flows from finance leases	37

15. Retirement Benefit Plans

Defined Benefit Plan

The Company amortizes annual pension income or expense evenly over four quarters. Pension expense was $23,000 and pension income was $87,000 ~~and $2,000~~ for the three months ended ~~September 30,~~March 31, 2019 and March 31, 2018, ~~and September 30, 2017,~~ respectively. ~~Pension income for the nine months ended September 30, 2018 was $260,000 and pension income for the nine months ended September 30, 2017 was $5,000.~~ The Company is not required to contribute to the pension plans for the ~~2018~~2019 plan year but may do so.

Supplemental Retirement Plan

In May of 2015, the Board amended the SERP to allow the Board to modify the retirement benefit percentage either higher or lower than 20%. In May of 2016, the Board added additional key management to the plan. As of ~~September 30, 2018,~~March 31, 2019, the current retirement benefit (as defined in the plan) for the participants ranges from 10% to 20%.

The net period expense for the three months ended ~~September 30,~~March 31, 2019 and 2018 was $214,000 and ~~2017 was $250,000 and, $202,000 respectively, and $749,000 and $606,000 for the nine months ended September 30, 2018 and 2017,~~$212,000 respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following tables set forth, for the periods indicated, certain financial data:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
As a Percent of Net Sales	As a Percent of Net Sales	2018		2017		2018		2017		As a Percent of Net Sales	2019		2018

Industrial	Industrial	60.8	%	55.1	%	58.3	%	56.1	%	Industrial	60.5	%	55.5	%
Agricultural	Agricultural	23.9	%	27.0	%	23.8	%	25.6	%	Agricultural	20.3	%	24.6	%
European	European	15.3	%	17.9	%	17.9	%	18.3	%	European	19.2	%	19.9	%
Total sales, net	Total sales, net	100.0	%	100.0	%	100.0	%	100.0	%	Total sales, net	100.0	%	100.0	%


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
Cost Trends and Profit Margin, as Percentages of Net Sales	Cost Trends and Profit Margin, as Percentages of Net Sales	2018		2017		2018		2017		Cost Trends and Profit Margin, as Percentages of Net Sales	2019		2018

Gross profit	Gross profit	25.9	%	27.0	%	25.7	%	26.0	%	Gross profit	24.2	%	25.3	%
Income from operations	Income from operations	11.0	%	11.5	%	10.1	%	10.2	%	Income from operations	8.6	%	9.0	%
Income before income taxes	Income before income taxes	10.4	%	10.3	%	9.6	%	9.2	%	Income before income taxes	8.0	%	8.4	%
Net income	Net income	9.1	%	6.9	%	7.6	%	6.1	%	Net income	5.8	%	6.1	%

Overview

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. Unless the context otherwise requires, the terms the "Company", "we", "our" and "us" means Alamo Group Inc.

For the first ~~nine~~three months of ~~2018,~~2019, the Company's net income increased by approximately ~~38.5%~~4.6% when compared to the same period in ~~2017.~~2018. This increase was the result of improved sales growth in the Company's Industrial Division and, ~~European Divisions, the acquisitions of Santa Izabel and Old Dominion completed in June of 2017~~

~~and~~to a lesser extent, the acquisition of ~~R.P.M., which was~~Dutch Power Company B.V. ("Dutch Power") completed in ~~August~~early March of ~~2017 and ongoing operational improvements. Also contributing to~~2019. Negatively affecting the ~~increase in net income for 2018,~~Company's performance during the first quarter of 2019 was the ~~TCJA,~~continued soft market conditions in the agricultural market, which ~~lowered the Company's U.S. effective tax rate to 21% for~~impacted our North American agricultural sales. Also, while higher material costs hurt profitability during the first ~~nine~~three months of ~~2018 compared 35% for~~2019, pricing actions and lower steel costs began to ease the ~~same period in 2017 and a $3.0 million net tax benefit relating to an adjustment to~~negative impact on our margins toward the ~~provisional tax reform expense recorded in~~end of the ~~fourth quarter of 2017.~~first quarter.

The Company's Industrial Division experienced a ~~16.9%~~19.9% increase in sales for the first ~~nine~~three months of ~~2018 which includes $28.0 million~~2019 compared to the same period in ~~net sales from Old Dominion and R.P.M.~~2018. Sales ~~of vacuum trucks, excavators, mowers, snow removal products and sweeping equipment~~across all Industrial product groups outperformed during the first ~~nine~~three months of ~~2018~~2019 compared to the first ~~nine~~three months of ~~2017.~~2018. Agricultural sales were updown in the first ~~nine~~three months of ~~2018~~2019 by ~~4.8%~~9.3% compared to the first ~~nine~~three months of ~~2017~~2018 as a result of ~~stable~~weak demand for our products ~~despite~~due to soft agricultural market ~~conditions. Sales from~~conditions and declining farm incomes. Also negatively impacting results was a shutdown of the ~~Santa Izabel business contributed $9.7 million~~Division's largest manufacturing facility for several days to ~~our Agricultural Division for the first nine months of 2018 compared~~install an upgrade to ~~$.6 million for the first nine months of 2017.~~its paint system. European sales for the first ~~nine~~three months of ~~2018~~2019 were up in U.S. dollars by ~~9.8%~~6.5% compared to the same period in ~~2017 primarily as a result~~2018 mainly due to the acquisition of ~~increased demand for products~~Dutch Power. Excluding Dutch Power, sales in ~~this Division.~~local currency were up during the first quarter of

2019 compared to the same time in 2018, but were negatively affected by changes due to currency translation. Consolidated income from operations was ~~$76.4~~$22.6 million in the first ~~nine~~three months of ~~2018~~2019 compared to ~~$68.3~~$21.4 million for the first ~~nine~~three months of ~~2017.~~2018. The Company's backlog ~~was $251.2~~increased 8.4% to $257.8 million at the end of the ~~third~~first quarter of ~~2018, which is an increase of 38.8%~~2019 versus the backlog of ~~$181.0~~$237.8 million at the end of the ~~third~~first quarter of ~~2017.~~2018. The increase in the Company's backlog was ~~primarily~~ attributable to greater demand for our products, specifically in the Company's Industrial Division and from the acquisition of Dutch Power partially offset by lower new orders in the Company's Agricultural and European Divisions.

The Company is cautiously optimistic about its outlook for the remainder of ~~2018,~~2019, but we continue to face several ongoing challenges. ~~We have~~The Company has seen increases in raw material, freight, tariff surcharges and other input costs including labor, at rates above those experienced in recent years ~~and we expect that~~though some of these inflationary pressures ~~will persist~~appear to be easing in the near term. Stronger overall demand ~~has led~~continues to create longer lead times for certain key components of our products, such as truck chassis. ~~We have been~~The Company also continue to be impacted by a ~~tightening~~tight labor market and difficulties in hiring and retaining skilled workers. Additional tariffs, future changes in tariff regulations and ongoing trade disputes could further impact ~~our~~the business by increasing the cost of items ~~we use~~used in the manufacturing of our products and by softening sales of our products to certain of our customers who may be impacted directly or indirectly by increasing tariffs and other negative effects resulting from trade disputes. In response to our strong backlog position, we have increased personnel and outsourcing to address short term demand and in the long term we are increasing our capital expenditure levels to continue production efficiency gains while expanding our production capacity. WeThe Company may also be negatively affected by several other unanticipated factors such as a weakness in the overall economy; significant changes in currency exchange rates; negative economic impacts resulting from geopolitical events, ~~a tightening labor market,~~ changes in trade policy, increased levels of government regulations; 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 section of ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (the ~~"2017~~"2018 Form 10-K").”

Results of Operations

Three Months Ended ~~September 30, 2018~~March 31, 2019 vs. Three Months Ended ~~September 30, 2017~~March 31, 2018

Net sales for the ~~third~~first quarter of ~~2018~~2019 were ~~$257,572,000~~$261,934,000, an increase of ~~$17,117,000~~$23,847,000 or ~~7.1%~~10.0% compared to ~~$240,455,000~~$238,087,000 for the ~~third~~first quarter of ~~2017.~~2018. The increase in sales was mainly attributable to strong demand for our products in the Company's Industrial Division as well as ~~$8,211,000~~$3,613,000 of net sales from the acquisition of ~~R.P.M.~~Dutch Power.

Net Industrial sales increased by ~~$24,333,000~~$26,258,000 or ~~18.4%~~19.9% to ~~$156,721,000~~$158,425,000 for the ~~third~~first quarter of ~~2018~~2019 compared to ~~$132,388,000~~$132,167,000 during the same period in ~~2017.~~2018. The increase was ~~primarily~~ attributable to increased sales ~~of vacuum truck, mowing, excavator, snow removal and sweeping equipment. Also,~~across all product groups within the ~~acquisition of R.P.M. added $8,211,000 of net sales during the quarter.~~Division.

Net Agricultural sales were ~~$61,464,000~~$53,173,000 in the ~~third~~first quarter of ~~2018~~2019 compared to ~~$64,923,000~~$58,647,000 for the same period in ~~2017~~2018, a decrease of ~~$3,459,000~~$5,474,000 or ~~5.3%~~9.3%. The decrease was primarily the result of weak market conditions which limited sales growth in both equipment and replacement parts and lower farm incomes which have been negatively impacted by ~~high~~lower crop ~~yields~~prices as well as ~~tariffs on specific commodities such as soybeans.~~tariffs. A shutdown in the Division's largest manufacturing facility to install an upgrade to its paint system also negatively impacted sales in this quarter.

Net European sales for the ~~third~~first quarter of ~~2018~~2019 were ~~$39,387,000 a decrease~~$50,336,000, an increase of ~~$3,757,000~~$3,063,000 or ~~8.7%~~6.5% compared to ~~$43,144,000~~$47,273,000 during the ~~third~~first quarter of ~~2017.~~2018. The ~~decrease~~increase was primarily driven by ~~missed shipments at~~ the ~~Company's Rivard facility~~acquisition of Dutch Power which added $3,613,000 of net sales during the quarter. Excluding Dutch Power, sales were down $550,000, a decrease of 1.2%. Excluding Dutch Power, sales in local currency were up during the first quarter of 2019 compared to the same time in 2018, but were negatively affected by changes due to ~~the timing of some customer order deliveries and certain. Delays of critical inventory components from certain suppliers also contributed to this shortfall.~~ currency translation.

Gross profit for the ~~third~~first quarter of ~~2018~~2019 was ~~$66,772,000 (25.9%~~$63,308,000 (24.2% of net sales) compared to ~~$64,939,000 (27.0%~~$60,257,000 (25.3% of net sales) during the same period in ~~2017,~~2018, an increase of ~~$1,833,000.~~$3,051,000. The increase in gross profit during the ~~third~~first quarter of ~~2018~~2019 was primarily due to improved sales in the Company's Industrial Division and to a lesser extent the acquisition of ~~R.P.M.~~Dutch Power, which more than offset the profit decline in the Agricultural and European Divisions. Negatively affecting both gross profit and gross margin percentage for the quarter were higher commodity costs,

specifically raw materials such as ~~steel. This more than offset gains in productivity improvements, pricing actions,~~steel, lower sales volume and, ~~purchasing initiatives.~~as mentioned above, the shutdown at the Agricultural Division's largest manufacturing facility.

Selling, general and administrative expenses (“SG&A”) were ~~$38,523,000 (15.0%~~$40,702,000 (15.5% of net sales) during the ~~third~~first quarter of ~~2018~~2019 compared to ~~$37,178,000 (15.5%~~$38,896,000 (16.3% of net sales) during the same period of ~~2017,~~2018, an increase of ~~$1,345,000.~~$1,806,000. The increase primarily came from higher ~~commissions and other~~ selling expenses due to increased sales and increased spending on research and development projects. Also, the acquisition of Dutch Power added $611,000 in SG&A expenses during the first quarter of 2019.

Interest expense was ~~$1,399,000~~$1,450,000 for the ~~third~~first quarter of ~~2018~~2019 compared to ~~$1,414,000~~$1,337,000 during the same period in ~~2017, a decrease~~2018, an increase of ~~$15,000.~~$113,000.

Other ~~income (expense), net~~expense was ~~$(265,000) of expense~~$389,000 for the ~~third~~first quarter of ~~2018~~2019 compared to ~~$(1,561,000) of expense~~$134,000 during the same period in ~~2017.~~2018. The expenses in ~~2018~~2019 and ~~2017~~2018 were primarily the result of changes in currency exchange rates.

Provision for income taxes ~~after the impacts of TCJA,~~ was ~~$3,142,000 (11.8%~~$5,687,000 (27.2% of income before income tax) in the ~~third~~first quarter of ~~2018~~2019 compared to ~~$8,294,000 (33.3%~~$5,407,000 (27.0% of income before income tax) during the same period in ~~2017.~~2018. The ~~decrease in the effective tax rate~~increase was due to ~~the recent enactment of the TCJA that lowered the U.S. statutory~~higher pre-tax income ~~tax rate from 35% to 21% for 2018. In addition~~ during the ~~third quarter~~first three months of 2018, the Company recorded a net benefit to income taxes of $2,995,000 relating to the adjustment in the provisional amounts recorded in the fourth quarter of 2017 upon enactment of TCJA, as more fully described in Note 12 of the Interim Condensed Consolidated Financial Statements. The combination of these two factors reduced the Company's effective income tax rate for the third quarter of 2018 to 11.8%.2019.

The Company’s net income after tax was ~~$23,543,000~~$15,253,000 or $2.00 per share on a diluted basis for the third quarter of 2018 compared to $16,592,000 or $1.42 per share on a diluted basis for the third quarter of 2017. The increase of $6,951,000 resulted from the factors described above.

~~Nine Months Ended September 30, 2018 vs. Nine Months Ended September 30, 2017~~

Net sales for the first nine months of 2018 were $752,784,000, an increase of $83,664,000 or 12.5% compared to $669,120,000 for the first nine months of 2017. The increase was primarily attributable to increased demand for our products in the Company's Industrial and European Divisions. Our recent acquisitions of Santa Izabel, Old Dominion and R.P.M. also added to the increase in net sales in the amount of $37,062,000. Further contributing to the increase in sales were favorable currency translation effects primarily on our European sales during the first nine months of 2018.

Net Industrial sales increased during the first nine months by $63,373,000 or 16.9% to $438,919,000 for 2018 compared to $375,546,000 during the same period in 2017. Most of the increase came from higher sales of vacuum trucks, mowers, excavators and snow removal equipment. The acquisitions of Old Dominion and R.P.M. together added $28,041,000 in net sales during the the first nine months of 2018.

Net Agricultural sales were $179,182,000 during the first nine months of 2018 compared to $170,921,000 for the same period in 2017, an increase of $8,261,000 or 4.8%. The increase in sales for the first nine months of 2018 compared to the first nine months of 2017 was a result of the acquisition of Santa Izabel which accounted for $9,021,000 in net sales.

~~Net European sales for the first nine months of 2018 were $134,683,000, an increase of $12,030,000 or 9.8% compared to $122,653,000 during the same period of 2017. The increase in 2018 was due to~~

~~improved sales in both the U.K. and French agricultural markets as well as Rivard vacuum trucks. Also contributing to sales in 2018 were the effects of currency translation rates.~~

Gross profit for the first nine months of 2018 was $193,483,000 (25.7% of net sales) compared to $173,782,000 (26.0% of net sales) during the same period in 2017, an increase of $19,701,000. The increase in gross profit for the first nine months of 2018 came from higher equipment sales in the Company's Industrial and European Divisions and, to a lesser extent, the acquisitions of Santa Izabel, Old Dominion and R.P.M. Negatively affecting both gross margin and margin percentage for the first nine months of 2018 were higher steel, freight and other input costs which more than offset gains in productivity improvements, pricing actions, and purchasing initiatives.

SG&A expenses were $117,087,000 (15.6% of net sales) during the first nine months of 2018 compared to $105,463,000 (15.8% of net sales) during the same period of 2017, an increase of $11,624,000. The increase primarily came from our recently acquired Santa Izabel, Old Dominion and R.P.M. businesses in the net amount of $5,446,000 and to a lesser extent, commissions, other selling expenses and higher spending on research and development projects.

~~Interest expense was $4,233,000 for the first nine months of 2018 compared to $4,241,000 during the same period in 2017, a decrease of $8,000.~~

Other income (expense), net was $(491,000) of expense during the first nine months of 2018 compared to $(2,734,000) of expense in the first nine months of 2017. The expenses in 2018 and 2017 were primarily the result of changes in exchange rates.

Provision for income taxes, after the impacts of TCJA, was $15,084,000 (21.0% of income before income taxes) in the first nine months of 2018 compared to $20,526,000 (33.3% of income before income taxes) during the same period in 2017. The decrease in both income taxes and the effective tax rate was due to the recent enactment of the TCJA that lowered the U.S. statutory income tax rate from 35% to 21% for 2018. In addition, the Company recorded during the third quarter of 2018, a net benefit to income taxes of $2,995,000 relating to the adjustment in the provisional amounts recorded in the fourth quarter of 2017 upon enactment of TCJA, as more fully described in Note 12 of the Interim Condensed Consolidated Financial Statements. The combination of these two factors reduced the Company's effective income tax rate for the first nine months of 2018 to 21.0%.

~~The Company's net income after tax was $56,897,000 or $4.84~~$1.30 per share on a diluted basis for the first ~~nine months~~quarter of ~~2018~~2019 compared to ~~$41,075,000~~$14,583,000 or ~~$3.52~~$1.24 per share on a diluted basis for the first ~~nine months~~quarter of ~~2017.~~2018. The increase of ~~$15,822,000~~$670,000 resulted from the factors described above.

Liquidity and Capital Resources

In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to operate the Company’s business, including inventory purchases and capital expenditures. The Company’s inventory and accounts payable levels typically build in the first half of the year and 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 fall preseason sales programs and out of season sales, particularly in our Agricultural Division. Preseason sales, primarily in the Agricultural Division, help level the Company’s production during the off season.

As of ~~September 30, 2018,~~March 31, 2019, the Company had working capital of ~~$360,878,000~~$417,093,000 which represents an increase of ~~$69,714,000~~$65,102,000 from working capital of ~~$291,164,000~~$351,991,000 at December 31, ~~2017.~~2018. The increase in working capital was primarily due to seasonality and increased demand for our products reflected in the Company's higher sales and backlog.

Capital expenditures were ~~$18,781,000~~$5,284,000 for the first ~~nine~~three months of ~~2018,~~2019, compared to ~~$9,686,000~~$7,645,000 during the first ~~nine~~three months of ~~2017. The~~2018. While first quarter capital expenditures were lower in 2019 as compared to the same period in 2018, the Company expects higher capital expenditures in ~~2018~~2019 in order to increase production capacity, support ~~improvement~~improvements in operational efficiencies, invest in technology ~~as well as possibly acquiring~~and for the previously announced construction of a new manufacturing ~~locations or purchasing currently leased facilities. We~~facility for its Super Products vacuum truck operation in Wisconsin. The Company will fund future expenditures from operating cash flows or through our revolving credit facility, described below.

Net cash provided by financing activities was ~~$39,151,000~~$92,306,000 and ~~$54,421,000~~$85,990,000 during the ~~nine~~three month periods ended ~~September 30,~~March 31, 2019 and March 31, 2018, ~~and September 30, 2017,~~ respectively. The majority of the ~~decrease~~increase in net cash

provided by financing activities in ~~2018~~2019 as compared to the prior year, was mainly due to ~~repayment~~borrowings to finance the acquisition of ~~debt and a decrease in borrowings under our bank credit facility as a result of repatriating excess funds from our European operations.~~Dutch Power offset by the repurchase activity related to the Company's common stock.

The Company had ~~$46,178,000~~$36,023,000 in cash and cash equivalents held by its foreign subsidiaries as of ~~September 30, 2018.~~March 31, 2019. The majority of these funds are at our European and Canadian facilities. As a result of the fundamental changes to the taxation of multinational corporations created by ~~TCJA,~~Tax Cuts and Jobs Act, we no longer intend to reinvest all of the undistributed earnings of our foreign affiliates. While the Company intends to use some of these funds for working capital and capital expenditures outside the U.S., recent changes in the U.S. tax laws have substantially mitigated the cost of repatriation. During the second quarter of 2018, the Company repatriated excess

cash from its European operations of approximately $24,000,000. The Company will continue to repatriate foreign cash and cash equivalents in excess of amounts needed to fund foreign operating and investing activities. 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.

The Company maintains an unsecured revolving credit facility with certain lenders under its Amended and Restated Revolving Credit Agreement ("the Agreement"). The aggregate commitments from lenders under the Agreement is $250,000,000 and, subject to certain conditions and bank approval, the Company has the option to request an increase in aggregate commitments of up to an additional $50,000,000. The Agreement requires the Company to maintain various financial covenants including a minimum earnings before interest and tax to interest expense ratio, a maximum leverage ratio and a minimum asset coverage ratio. The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on sale of properties and limitations on liens and capital expenditures. The Agreement also contains other customary covenants, representations and events of defaults. Effective December 20, 2016, the Company amended its revolving credit facility to extend the termination date, reduce LIBOR interest margin and to modify certain financial and other covenants in order to meet the ongoing needs of the Company's business and to allow for greater flexibility in relation to future acquisitions. The expiration date of the revolving credit facility is December 20, 2021. As of ~~September 30, 2018, $101,000,000~~March 31, 2019, $180,000,000 was outstanding under the Agreement. On ~~September 30, 2018, $1,325,000~~March 31, 2019, $3,188,000 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 ~~$147,675,000~~$66,812,000 in available borrowings. As of ~~September 30, 2018,~~March 31, 2019, the Company was 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.

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 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 that of the Company's significant accounting policies, which are set forth in Note 1 of the Notes to Consolidated Financial Statements in the ~~2017~~2018 Form 10-K, the policies relating to the business combinations, allowance for doubtful accounts, sales discounts, inventories-obsolete and slow moving, warranty, and goodwill and other intangible assets involved a higher degree of judgment and complexity. There have been no material changes to the nature of estimates,

assumptions and levels of subjectivity and judgment related to critical accounting estimates disclosed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the ~~2017~~2018 Form 10-K.

The enactment of the TCJA on December 22, 2017 made broad and complex changes to the U.S. tax code, including a new tax law that may subject the Company to a tax on global intangible low-taxed income (“GILTI”) beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. We are still assessing impacts GILTI may have.

As of September 30, 2018, the Company revised our initial provisional amount for the federal tax impact on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries and the impact of the federal tax rate change on the value of our deferred tax assets and liabilities. The federal tax expense on the deemed repatriation decreased $4,231,000 and impact of rate change on deferred taxes increased by $1,236,000. The Company continues to gather additional information regarding the state impacts of repatriation and will finalize the calculation of the tax effects of the TCJA in the fourth quarter of 2018.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are likely to have a current or future material effect on our financial condition.

Forward-Looking Information

Part I of this Quarterly Report on Form 10-Q and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 2 of this Quarterly 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 orally or in press releases, conferences, reports or otherwise, in the future by or on behalf of the Company.

Statements that are not historical are forward-looking. When used by or on behalf of the Company, the words “estimate,” "anticipate," "expect," “believe,” “intend”, "will", "would", "should", "could" and similar expressions generally identify forward-looking statements made by or on behalf of the Company.

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 it serves. Particular risks and uncertainties facing the Company include changes in market conditions; ongoing weakness in the agricultural sector; changes in tariff regulations and the imposition of new tariffs; a strong U.S. dollar; increased competition; trade wars or other negative economic impacts resulting from geopolitical events; decreases in the prices of agricultural commodities, which could affect our customers' income levels; increase in input costs; our inability to increase profit margins through continuing production efficiencies and cost reductions; repercussions from the pending exit by the U.K. from the European Union (EU); acquisition integration issues; budget constraints or income shortfalls which could affect the purchases of our type of equipment by governmental customers; credit availability for both the Company and its customers, adverse weather conditions such as droughts, floods, snowstorms, etc. which can affect buying patterns of the Company’s customers and related contractors; the price and availability of critical raw materials, particularly steel and steel products; energy cost; increased cost of new governmental regulations which effect corporations including related fines and penalties (such as the new European General Data Protection Regulation); the potential effects on the buying habits of our customers due to animal disease outbreaks and other epidemics; the Company’s ability to develop and manufacture new and existing products profitably; market acceptance of new and existing products; the Company’s ability to maintain good relations with its employees; the Company's ability to successfully complete acquisitions and operate acquired businesses or assets; the ability to hire and retain quality skilled employees; and cyber security risks affecting information technology or data security breaches.

In addition, the Company is subject to risks and uncertainties facing the industry in general, including changes in business and political conditions and the economy in general in both domestic and international markets; weather conditions affecting demand; slower growth in the Company’s markets; financial market changes including increases in interest rates and fluctuations in foreign exchange rates; actions of competitors; the inability of the

Company’s suppliers, customers, creditors, public utility providers and financial service organizations to deliver or provide their products or services to the Company; seasonal factors in the Company’s industry; litigation; government actions including budget levels, regulations and legislation, primarily relating to the environment, commerce, infrastructure spending, health and safety; and availability of materials.

The Company wishes to caution readers not to place undue reliance on any forward-looking statements 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, as well as others not now anticipated. The foregoing statements are not exclusive and further information concerning the Company and its businesses, including factors that could potentially materially affect the Company’s 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

The Company is exposed to various market risks. Market risks are the potential losses 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 primarily manufactures its products in the U.S., U.K., France, Canada, Brazil, Australia and ~~Australia.~~the Netherlands. The Company sells its products primarily in the functional currency within the markets where the products are produced, but certain sales from the Company's U.K. and Canadian operations are denominated in other foreign 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 or weak economic conditions in the other markets in which the subsidiaries of the Company distribute their products.

To mitigate the short-term effect of changes in currency exchange rates on the Company’s functional currency-based sales, the Company’s U.K. subsidiaries regularly enter into foreign exchange forward contracts to hedge approximately 90% of its future net foreign currency collections over a period of six months. As of ~~September 30, 2018,~~March 31, 2019, the Company had ~~$994,000~~$1,369,000 outstanding in forward exchange contracts related to accounts receivable. A 15% fluctuation in exchange rates for these currencies would change the fair value of these contracts by approximately ~~$149,000.~~$205,000. However, since these contracts hedge foreign currency denominated transactions, any change in the fair value of the contracts should be offset by changes in the underlying value of the transaction being hedged.

In March 2019, the Company entered into fixed-to-fixed cross-currency swaps and designated these swaps to hedge a portion of its net investment in a euro functional currency denominated subsidiary against foreign currency fluctuations. These contracts involve the exchange of fixed U.S. dollars with fixed euro interest payments periodically over the life of the contracts and an exchange of the notional amounts at maturity. The fixed-to-fixed cross-currency swaps include €40 million ($45 million) maturing December 2021.

Exposure to Exchange Rates

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the balance sheet date. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive income within the statement of stockholders’ equity. The total foreign currency translation adjustment for the current quarter ~~decreased~~increased stockholders’ equity by ~~$924,000.~~$720,000.

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately in Europe and Canada, as a result of the sales of its products in international markets. Forward currency contracts are used to hedge against the earnings effects of such fluctuations. The result of a uniform 10% strengthening or 10% decrease in the value of the dollar relative to the currencies in which the Company’s sales are denominated would result in a change in gross profit of ~~$5,586,000~~$1,923,000 for the ~~nine~~three month period ending ~~September 30, 2018.~~March 31, 2019. 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 include 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.

Interest Rate Risk

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 current level of borrowings at variable rates and a two percentage point change for the ~~third~~first quarter ~~2018~~2019 average interest rate under these borrowings, the Company’s interest expense would have changed by approximately ~~$505,000.~~$900,000. In the event of an adverse change in interest rates, management could take actions to mitigate its exposure. However, due to the uncertainty of the actions that would be taken and their possible effects this analysis assumes no such actions. 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.

Item 4. Controls and Procedures

Disclosure Controls and Procedures.

An evaluation was carried out under the supervision and with the participation of Alamo’s management, including our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer (Principal Financial Officer) and ~~Vice-President~~Vice President, Controller and ~~Corporate Controller,~~Treasurer, (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 and Chief Executive Officer, Executive Vice President and Chief Financial Officer (Principal Financial Officer) and ~~Vice-President, Corporate~~Vice President, Controller and Treasurer, (Principal Accounting Officer) concluded that the Company’s design and operation of these disclosure controls and procedures were effective at the end of the period covered by this report.

Changes in internal control over financial reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. - Legal Proceedings

For a description of legal proceedings, see Note 1413 Contingent Matters to our interim condensed consolidated financial statements.

Item 1A. - Risk Factors

The Trump Administration continues to make potentially significant changes in U.S. 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 changes in U.S. trade policy could trigger, and certain actions already taken have triggered, 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.

~~Other than as set forth under this Item 1A, there~~There have not been any material changes from the risk factors previously disclosed in the ~~2017~~2018 Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 2. - ~~None~~Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides a summary of the Company's repurchase activity for its common stock during the three months ended March 31, 2019:

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ^(a)
January 2019	—	—		—	—
February 2019	—	—		—	—
March 2019	15,000	$	99.34	15,000	$	28,510,398
(a) On December 13, 2018, the Board authorized a stock repurchase program of up to $30.0 million of the Company's common stock. The program shall have a term of five (5) years, terminating on December 12, 2023.

Item 3. - ~~None~~Defaults Upon Senior Securities

None.

Item 4. - ~~None~~Mine Safety Disclosures

Not Applicable

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Item 5. - Other Information

(a) Reports on Form 8-K

~~None~~None.

(b) Other Information

~~None~~None.

Item 6. - Exhibits

(a) Exhibits

~~31.1~~ Exhibits

Exhibit Title

Incorporated by Reference From the Following Documents

3.1

—

Certificate of Incorporation, as amended, of Alamo Group Inc.

Filed as Exhibit 3.1 to Form S-1, February 5, 1993

3.2

—

Certificate of Amendment of Certificate of Incorporation of Alamo Group

Filed as Exhibit 3.1 to Form 8-K, May 10, 2016

3.3

—

By-Laws of Alamo Group Inc. as amended

Filed as Exhibit 3.2 to Form 8-K, May 10, 2016

31.1

—

Certification by Ronald A. Robinson under Section 302 of the Sarbanes-Oxley Act of 2002

Filed Herewith

31.2

—

Certification by Dan E. Malone under Section 302 of the Sarbanes-Oxley Act of 2002

Filed Herewith

31.3

—

Certification by Richard J. Wehrle under Section 302 of the Sarbanes-Oxley Act of 2002

Filed Herewith

32.1

—

Certification by Ronald A. Robinson under Section 906 of the Sarbanes-Oxley Act of 2002

Filed Herewith

32.2

—

Certification by Dan E. Malone under Section 906 of the Sarbanes-Oxley Act of 2002

Filed Herewith

32.3

—

Certification by ~~Richar~~dRichard J. Wehrle under Section 906 of the Sarbanes-Oxley Act of 2002

Filed Herewith

101.INS

—

XBRL Instance Document - the instance document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document

Filed Herewith

101.SCH

—

XBRL Taxonomy Extension Schema Document

Filed Herewith

101.CAL

—

XBRL Taxonomy Extension Calculation Linkbase Document

Filed Herewith

101.DEF

—

XBRL Taxonomy Extension Definition Linkbase Document

Filed Herewith

101.LAB

—

XBRL Taxonomy Extension Label Linkbase Document

Filed Herewith

101.PRE

—

XBRL Taxonomy Extension Presentation Linkbase Document

Filed Herewith

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Alamo Group Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


~~October 31, 2018~~May 1, 2019			Alamo Group Inc.
			(Registrant)

			/s/ Ronald A. Robinson
			Ronald A. Robinson
			President & Chief Executive Officer


			/s/ Dan E. Malone
			Dan E. Malone
			Executive Vice President & Chief Financial Officer
			(Principal Financial Officer)


			/s/ Richard J. Wehrle
			Richard J. Wehrle
			Vice President, Controller & ~~Corporate Controller~~Treasurer
			(Principal Accounting Officer)

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