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Retirement Benefit Plans | 12 Months Ended
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Dec. 31, 2023
Retirement Benefits [Abstract] |
RETIREMENT BENEFIT PLANS | RETIREMENT BENEFIT PLANS Defined Benefit Plans In connection with the February 3, 2006 purchase of all the net assets of the Gradall excavator business, the Company assumed sponsorship of two Gradall non-contributory defined benefit pension plans, both of which are frozen with respect to both future benefit accruals and future new entrants. The Gradall Company Employees’ Retirement Plan covers approximately 245 former employees and 47 current employees who (i) were formerly employed by JLG Industries, Inc., (ii) were not covered by a collective bargaining agreement and (iii) first participated in the plan before December 31, 2004. An amendment ceasing future benefit accruals for certain participants was effective December 31, 2004. A second amendment discontinued all future benefit accruals for all participants effective April 24, 2006. The Gradall Company Hourly Employees’ Pension Plan covered former employees and current employees who (i) were formerly employed by JLG Industries, Inc., (ii) were covered by a collective bargaining agreement and (iii) first participated in the plan before April 6, 1997. An amendment ceasing all future benefit accruals was effective April 6, 1997. The following table sets forth the change in plan assets, change in projected benefit obligation, rate assumptions and components of net periodic benefit cost as of December 31 with respect to the plan. The measurement dates of the assets and liabilities of the plan were December 31 of the respective years presented.
Reconciliation of Funded Status |
|  | Year Ended December 31, |
(in thousands) |  | 2023 |  | 2022 |
Change in projected benefit obligation |  |  |  |  |
Benefit obligation at beginning of year |  | $ | 17,271 |  |  | $ | 22,564 |  |
Service cost |  | 2 |  |  | 4 |  |
Interest cost |  | 848 |  |  | 604 |  |
Liability actuarial (gain) loss |  | (35) |  |  | (4,761) |  |
Benefits paid |  | (1,139) |  |  | (1,140) |  |
Benefit obligation at end of year |  | $ | 16,947 |  |  | $ | 17,271 |  |
Change in fair value of plan assets |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 18,269 |  |  | $ | 23,671 |  |
Return on plan assets |  | 1,645 |  |  | (4,262) |  |
Employer contributions |  | — |  |  | — |  |
Benefits paid |  | (1,139) |  |  | (1,140) |  |
Fair value of plan assets at end of year |  | 18,775 |  |  | 18,269 |  |
Funded status |  | $ | 1,828 |  |  | $ | 998 |  |
The Company recognizes the overfunded or underfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of defined benefit postretirement plans as an asset or liability in its consolidated balance sheet and recognizes changes in the funded status in the year in which the changes occur. The Company measures the funded status of a plan as of the date of the year-end consolidated balance sheet. The accumulated benefit obligation for our pension plan represents the actuarial present value of benefits based on employee service and compensation as of a certain date and does not include an assumption about future compensation levels. In determining the projected benefit obligation and the net pension cost, we used the following significant weighted-average assumptions:
Rates to Determine Benefit Obligation
|  |  | Year Ended December 31,
|  |  | 2023 | 2022
Discount rate |  |  | 4.90% | 5.10%
Composite rate of compensation increase |  |  | N/A | N/A
Rates to Determine Net Periodic Benefit Cost
|  |  | Year Ended December 31,
|  |  | 2023 | 2022
Discount rate |  |  | 5.10% | 2.75%
Long-term rate of return on plan assets |  |  | 6.00% | 6.00%
Composite rate of compensation increase |  |  | N/A | N/A
The Company employs a building block approach in determining the expected long-term rate of return on plan assets. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term market assumptions are determined. The long-term portfolio return is established via a building block approach with proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed to check for reasonability and appropriateness. The following table presents the components of net periodic benefit cost (gains are denoted with parentheses and losses are not):
Components of Net Periodic Benefit Cost
|  | Year Ended December 31,
(in thousands) |  | 2023 |  | 2022
Service cost |  | $ | 2 |  |  | $ | 4 |
Interest cost |  | 848 |  |  | 604 |
Expected return on plan assets |  | (1,058) |  |  | (1,384) |
Amortization of net loss |  | 1,031 |  |  | 182 |
Net periodic benefit cost |  | $ | 823 |  |  | $ | (594) |
The Company estimates that $0.8 million of unrecognized actuarial expense will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit costs during 2024. The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value, and small and large capitalization. Other assets such as real estate, private equity, and hedge funds are used judiciously to enhance long-term returns while improving portfolio diversification. Derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of the underlying investments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset/liability studies. Our current asset allocations are consistent with our targeted allocations. The pension plans' weighted-average asset allocation as a percentage of plan assets at December 31 is as follows:
Asset Allocation as a Percentage of the Plan
|  |  |  | Year Ended December 31,
|  |  |  |  | 2023 | 2022
Equity securities |  |  |  |  | 10% | 36%
Debt securities |  |  |  |  | 88% | 62%
Short-term investments |  |  |  |  | 2% | 2%
Other |  |  |  |  | —% | —%
Total |  |  |  |  | 100% | 100%
The following table presents the hierarchy levels for our postretirement benefit plan investments as of December 31 as described in Note 1 to the Consolidated Financial Statements:
(in thousands) | December 31, 2023 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3)
Mutual Funds: |  |  |  |  |  |  |  |  |  |  |
| Mid Cap |  | $ | 148 |  |  |  | $ | 148 |  |  |  | $ | — |  |  |  | $ | — |
| Large Cap |  | 106 |  |  |  | 106 |  |  |  | — |  |  |  | — |
| International |  | 221 |  |  |  | 221 |  |  |  | — |  |  |  | — |
Common/Collective Trusts: |  |  |  |  |  |  |  |  |  |  |
| Wells Fargo Liability Driven Solution CIT I |  | 11,997 |  |  |  | — |  |  |  | 11,997 |  |  |  | — |
| Wells Fargo Liability Driven Solution CIT II |  | 4,501 |  |  |  | — |  |  |  | 4,501 |  |  |  | — |
| Wells Fargo BlackRock International Equity |  | 142 |  |  |  | — |  |  |  | 142 |  |  |  | — |
| Wells Fargo/Causeway International Value |  | 134 |  |  |  | — |  |  |  | 134 |  |  |  | — |
| Wells Fargo BlackRock Large Cap Growth Index Fund |  | 214 |  |  |  | — |  |  |  | 214 |  |  |  | — |
| Wells Fargo BlackRock Large Cap Value Index Fund |  | 214 |  |  |  | — |  |  |  | 214 |  |  |  | — |
| Wells Fargo Multi-Manager Small Cap |  | 229 |  |  |  | — |  |  |  | 229 |  |  |  | — |
| Wells Fargo BlackRock Russell 2000 Index Fund |  | 76 |  |  |  | — |  |  |  | 76 |  |  |  | — |
| Wells Fargo BlackRock S&P Mid Cap Index Fund |  | 99 |  |  |  | — |  |  |  | 99 |  |  |  | — |
| Wells Fargo/MFS Value CIT F |  | 106 |  |  |  | — |  |  |  | 106 |  |  |  | — |
| Wells Fargo/T. Rowe Price Large-Cap Growth Managed CIT |  | 106 |  |  |  | — |  |  |  | 106 |  |  |  | — |
| Wells Fargo/T. Rowe Price Equity Income Managed CIT |  | 106 |  |  |  | — |  |  |  | 106 |  |  |  | — |
Cash & Short-term Investments |  | 376 |  |  |  | 376 |  |  |  | — |  |  |  | — |
| Total |  | $ | 18,775 |  |  |  | $ | 851 |  |  |  | $ | 17,924 |  |  |  | $ | — |
(in thousands) | December 31, 2022 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3)
Mutual Funds: |  |  |  |  |  |  |  |  |  |  |
| Mid Cap |  | $ | 512 |  |  |  | $ | 512 |  |  |  | $ | — |  |  |  | $ | — |
| International |  | 743 |  |  |  | 743 |  |  |  | — |  |  |  | — |
Common/Collective Trusts: |  |  |  |  |  |  |  |  |  |  |
| Wells Fargo Liability Driven Solution CIT I |  | 7,815 |  |  |  | — |  |  |  | 7,815 |  |  |  | — |
| Wells Fargo Liability Driven Solution CIT II |  | 3,550 |  |  |  |  |  |  | 3,550 |  |  |  |
| Wells Fargo BlackRock International Equity |  | 488 |  |  |  | — |  |  |  | 488 |  |  |  | — |
| Wells Fargo/Causeway International Value |  | 464 |  |  |  | — |  |  |  | 464 |  |  |  | — |
| Wells Fargo BlackRock Large Cap Growth Index Fund |  | 724 |  |  |  | — |  |  |  | 724 |  |  |  | — |
| Wells Fargo BlackRock Large Cap Value Index Fund |  | 744 |  |  |  | — |  |  |  | 744 |  |  |  | — |
| Wells Fargo Multi-Manager Small Cap |  | 785 |  |  |  | — |  |  |  | 785 |  |  |  | — |
| Wells Fargo BlackRock Russell 2000 Index Fund |  | 261 |  |  |  | — |  |  |  | 261 |  |  |  | — |
| Wells Fargo BlackRock S&P Mid Cap Index Fund |  | 320 |  |  |  | — |  |  |  | 320 |  |  |  | — |
| Wells Fargo/MFS Value CIT F |  | 359 |  |  |  | — |  |  |  | 359 |  |  |  | — |
| Wells Fargo/T. Rowe Price Large-Cap Growth Managed CIT |  | 359 |  |  |  | — |  |  |  | 359 |  |  |  | — |
| Wells Fargo/T. Rowe Price Equity Income Managed CIT |  | 356 |  |  |  | — |  |  |  | 356 |  |  |  | — |
| Wells Fargo Voya Large Cap Growth CIT F |  | 357 |  |  |  | — |  |  |  | 357 |  |  |  | — |
Cash & Short-term Investments |  | 432 |  |  |  | 432 |  |  |  | — |  |  |  | — |
| Total |  | $ | 18,269 |  |  |  | $ | 1,687 |  |  |  | $ | 16,582 |  |  |  | $ | — |
Our interests in the common collective trust investments are managed by one custodian. Consistent with our investment policy, the custodian has invested the assets across a widely diversified portfolio of U.S. and international equity and fixed income securities. Fair values of each security within the collective trust as of December 31, 2023 were obtained from the custodian and are based on quoted market prices of individual investments; however, since the fund itself does not have a quoted market price, these assets are considered Level 2. The common collective funds noted in the above table have estimated fair value using the net asset value per share of investments. Investments can be redeemed immediately at the current net asset value per share based on the fair value of the underlying assets. Redemption frequency is daily. The categories contain investments in equity securities of smaller growing companies, medium-sized U.S. companies, large value-oriented and growth-oriented companies, and foreign companies traded on international markets. Expected benefit payments are estimated using the same assumptions used in determining our benefit obligation as of December 31, 2023. The following table illustrates the estimated pension benefit payments that are projected to be paid:
Projected Future Benefit Payments
(in thousands) |  | Employees’ Retirement Plan |  |
2024 |  |  |  |  | $ | 1,264 |  |  |  |
2025 |  |  |  |  | 1,282 |  |  |  |
2026 |  |  |  |  | 1,282 |  |  |  |
2027 |  |  |  |  | 1,279 |  |  |  |
2028 |  |  |  |  | 1,262 |  |  |  |
Years 2029 through 2033 |  |  |  |  | 6,021 |  |  |  |
Supplemental Retirement Plan The Board of Directors of the Company adopted the Alamo Group Inc. Supplemental Executive Retirement Plan (the “SERP”), effective as of January 3, 2011. The SERP will benefit certain key management or other highly compensated employees of the Company and/or certain subsidiaries who are selected by the Compensation Committee and approved by the Board to participate. The SERP is intended to provide a benefit from the Company upon retirement, death or disability, or a change in control of the Company. Accordingly, the SERP obligates the Company to pay to a participant a Retirement Benefit (as defined in the SERP) upon the occurrence of certain payment events to the extent a participant has a vested right thereto. A participant’s right to his or her Retirement Benefit becomes vested in the Company’s contributions upon 10 years of Credited Service (as defined in the SERP) or a change in control of the Company. The Retirement Benefit is based on 20% of the final three-year average salary of each participant on or after his or her normal retirement age (65 years of age). In the event of the participant’s death or a change in control, the participant’s vested retirement benefit will be paid in a lump sum to the participant or his or her estate, as applicable, within 90 days after the participant’s death or a change in control, as applicable. In the event that the participant is entitled to a benefit from the SERP due to disability, retirement or other termination of employment, the benefit will be paid in monthly installments over a period of fifteen years. The Company records amounts relating to the SERP based on calculations that incorporate various actuarial and other assumptions, including discount rates, rate of compensation increases, retirement dates and life expectancy. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits. In May of 2015, the Board amended the SERP to allow the Board to modify the retirement benefit percentage either higher or lower than 20%. In May of 2016, the Board added additional highly compensated employees to the plan. As of December 31, 2023, the current retirement benefit (as defined in the plan) for the participants ranges from 10% to 20%. The change in the Projected Benefit Obligation (PBO) as of December 31, 2023 and 2022, is shown below:
Reconciliation of Benefit Obligation
|  | Year Ended December 31,
(in thousands) |  | 2023 |  | 2022
Benefit obligation at January 1, |  | $ | 9,552 |  |  | $ | 11,326 |
Service cost |  | 204 |  |  | 284 |
Interest cost |  | 470 |  |  | 278 |
Liability actuarial loss (gain) |  | 386 |  |  | (2,023) |
Benefits paid |  | (349) |  |  | (313) |
Benefit obligation at December 31, |  | $ | 10,263 |  |  | $ | 9,552 |
The components of net periodic pension expense were as follows:
Components of Net Periodic Benefit Cost
|  | Year Ended December 31,
(in thousands) |  | 2023 |  | 2022
Service cost |  | $ | 204 |  |  | $ | 284 |
Interest cost |  | 470 |  |  | 278 |
Amortization of prior service cost |  | 381 |  |  | 420 |
Amortization of net (gain)/loss |  | (2) |  |  | 440 |
Net periodic benefit cost |  | $ | 1,053 |  |  | $ | 1,422 |
The Company estimates that $0.4 million of unrecognized actuarial expense will be amortized from Accumulated other comprehensive income into net periodic benefit costs during 2024. In determining the projected benefit obligation and the net pension cost, we used the following significant weighted-average assumptions: Assumptions used to determine benefit obligations at December 31:
Rates to Determine Benefit Obligation
|  | 2023 | 2022 |
Discount rate |  | 4.80% | 5.05% |
Composite rate of compensation increase |  | 3.00% | 3.00% |
Assumptions used to determine net periodic benefit cost for the years ended December 31:
Rates to Determine Net Periodic Benefit Cost
|  | 2023 | 2022 |
Discount rate |  | 5.05% | 2.50% |
Composite rate of compensation increase |  | 3.00% | 3.00% |
Long-term rate of return on plan assets |  | N/A | N/A |
Future estimated benefits expected to be paid from the plan over the next ten years as follows:
Projected Future Benefit Payments
(in thousands) | SERP |  |  |  |
2024 | $ | 557 |  |  |  |  |
2025 | 656 |  |  |  |  |
2026 | 888 |  |  |  |  |
2027 | 890 |  |  |  |  |
2028 | 892 |  |  |  |  |
Years 2029 through 2033 | 4,448 |  |  |  |  |
Defined Contribution Plans The Company has two defined contribution plans, The Gradall Salaried Employees’ Savings and Investment Plan (“Salary Plan”) and The International Association of Machinist and Aerospace Workers Retirement Plan (“IAM Plan”). The Company contributed $0.5 million, $0.5 million, and $0.5 million to the IAM Plan for the plan years ended December 31, 2023, 2022 and 2021, respectively. The Company converted the Salary Plan into its 401(k) retirement and savings plan and put the Hourly Plan into a separate 401(k) retirement and savings plan. The Company provides a defined contribution 401(k) retirement and savings plan for eligible U.S. employees. Company matching contributions are based on a percentage of employee contributions. Company contributions to the plan during 2023, 2022 and 2021 were $4.5 million, $4.2 million, and $3.9 million, respectively. Three of the Company’s international subsidiaries also participate in a defined contribution and savings plan covering eligible employees. The Company’s international subsidiaries contribute between 0% and 10% of the participant’s salary up to a specific limit. Total contributions made to the above plans were $1.1 million, $0.9 million, and $0.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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