ALAMO GROUP INC (Form: 10-K, Received: 03/12/2012 16:27:52)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K



[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended December 31, 2011
[X]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-21220

ALAMO GROUP INC.

(Exact name of registrant as specified in its charter)



DELAWARE	74-1621248
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

1627 East Walnut, Seguin, Texas 78155

(Address of principal executive offices, including zip code)

830-379-1480

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act :



Title of each class	Name of each exchange
Common Stock, par value	on which registered
$.10 per share	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.Yes [X] No [ ]

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10‑K. [ ]

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer [ ]	Accelerated filer	[X]
Non-accelerated filer [ ]	Smaller reporting company	[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of the voting stock (which consists solely of shares of common stock) held by non-affiliates of the registrant as of June 30, 2011 (based upon the last reported sale price of $ 23.70 per share) was approximately $204,647,462 on such date.

The number of shares of the registrant’s common stock, par value $.10 per share, outstanding as of

February 28, 2012 was 11,917,379 shares.

Documents incorporated by reference: Portions of the registrant’s proxy statement relating to the 2012 Annual Meeting of Stockholders to be held on May 3, 2012 , have been incorporated by reference herein in response to Part III.

ALAMO GROUP INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-K

TABLE OF CONTENTS



	PART I	Page
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	Mine Safety Disclosures	21
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 8.	Financial Statements and Supplementary Data	34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34
Item 9A.	Controls and Procedures	34
Item 9B.	Other Information	34
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	34
Item 11.	Executive Compensation	35
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
Item 13.	Certain Relationships, Related Transactions, and Director Independence	35
Item 14.	Principal Accountant Fees and Services	36
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	36
	Index to Consolidated Financial Statements

PART I

Item 1. Business

Unless the context otherwise requires, the terms “the Company,” “we,” “our” and “us” refer to Alamo Group Inc. and its subsidiaries on a consolidated basis.

General

The Company is a global leader in the design and manufacture of high quality agricultural equipment and infrastructure maintenance equipment for governmental and industrial use. The Company’s products include tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, snow removal equipment, pothole patchers, zero turn radius mowers, agricultural implements and related aftermarket parts and services. The Company emphasizes high quality, cost-effective products for its customers and strives to develop and market innovative products while constantly monitoring and seeking to contain its manufacturing and overhead costs. The Company has a long-standing strategy of supplementing its internal growth through acquisitions of businesses or product lines that currently complement, command, or have the potential to achieve a meaningful share of their niche markets. The Company has approximately 2,500 employees and operates a total of eighteen plants in North America, Europe and Australia. The Company sells its products primarily through a network of independent dealers and distributors to governmental end-users, related independent contractors, as well as to the agricultural and commercial turf markets. The Company operates primarily in the United States, England, France, Canada and Australia.

The predecessor corporation to Alamo Group Inc. was incorporated in the State of Texas in 1969, as a successor to a business that began selling mowing equipment in 1955, and Alamo Group Inc. was reincorporated in the State of Delaware in 1987.

History

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

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

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

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

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

wear parts.

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

In 2000, the Company purchased the product line and associated assets of Twose of Tiverton Ltd. (“Twose”) in the U.K. and incorporated its production into the existing facilities at McConnel and Bomford while maintaining its own sales force and dealer distribution network. Twose was a small regional manufacturer of power arm flail mowers and parts, as well as harrows and rollers, which strengthened the Company’s market leadership position in the U.K.

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

In 2001, the Company acquired all of the assets of SMC Corporation (“SMC”). SMC manufactures front-end loaders and backhoes principally for Original Equipment Manufacturer (“OEM”) customers and its own SMC brand. This acquisition expanded the product range of our agricultural division by branding a line of loaders for Rhino .

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

In 2002, the Company purchased substantially all of the assets of Faucheux Industries S.A. (“Faucheux”) , a leading French manufacturer of front-end loaders and attachments. The Company acquired Faucheux out of administration, a form of bankruptcy in France. This acquisition broadened the range of our agricultural implements offered in the French market.

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

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

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

In 2006, the Company acquired 100% of the ownership interests in Nite-Hawk Sweepers LLC (“Nite-Hawk”) , a manufacturer of truck mounted sweeping equipment primarily for the contract sweeping market, which expanded its presence in that market and complements our Schwarze sweeper line.

In 2007, the Company purchased Henke Manufacturing Corporation (“Henke”) , a manufacturer of specialty snow removal attachments. Henke ’s products are mounted on both heavy industrial equipment and medium to heavy-duty trucks. The primary end-users are governmental agencies, related contractors and other industrial users.

In 2008, the Company acquired Rivard Developpement S.A.S. (“Rivard”) , a leading French manufacturer of vacuum trucks, high pressure cleaning systems and trenchers. The acquisition broadened the Company’s product offering to its customers in Europe and other markets we serve.

On October 22, 2009, the Company acquired substantially all the assets of Bush Hog, LLC. (“Bush Hog”) , a leading agricultural equipment manufacturer of rotary cutters, finishing mowers, zero turn radius mowers (“ZTRs”), front-end loaders, backhoes, landscape equipment and a variety of other implements. This acquisition, combined with the Company’s existing range of agricultural mowers, created one of the largest manufacturers of agricultural mowers in the world.

On October 18, 2011, the Company acquired substantially all of the assets and assumed certain specified liabilities of Tenco Group, Inc. ( "Tenco" ) and its subsidiaries. Tenco is a Canadian based manufacturer of snow removal equipment including snow blades, blowers, dump bodies, spreaders and/associated parts and service. Tenco has operations in Quebec as well as New York and Vermont. The equipment is sold primarily through dealers to governmental end-users as well as contractors.

Marketing and Marketing Strategy

The Company believes that within the U.S. it is a leading supplier to governmental markets, a leading supplier in the U.S. agricultural market, and one of the largest suppliers in the European market for its key niche product offerings. The Company’s products are sold through the Company’s various marketing organizations and extensive worldwide dealer and distributor networks under the Alamo Industrial ® , Terrain King ® , Tiger™, Gradall ® , VacAll™, Schwarze ® , Nite-Hawk™, Henke ® , Tenco ®, Bush Hog ® , Rhino ® , Earthmaster ® , M&W ® , SMC™, Herschel™ , Valu-Bilt ® , Fuerst ® , Schulte ® , McConnel ® , Bomford ® , Spearhead™, Twose™, SMA ® , Forges Gorce™, Faucheux™, Rousseau™ and Rivard ® trademarks as well as other trademarks and trade names.

Products and Distribution Channels

North American Industrial Division

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

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

Schwarze equipment includes air, mechanical broom, and regenerative air sweepers, pothole patchers and replacement parts. Schwarze sells its products primarily to governmental agencies and independent contractors, either directly or through its independent dealer network. A portion of Schwarze’s sales includes chassis which are not manufactured by Schwarze . The Company believes that Schwarze complements Alamo Industrial because the dealer and/or end-user for both products in many cases are the same .

Gradall produces a range of models based on high-pressure hydraulic telescoping booms which are sold through dealers primarily to governmental agencies, contractors and to a lesser extent the mining industry, steel mills and other specialty applications in the U.S. and other countries. Many of these products are designed for excavation, grading, shaping and similar tasks involved in land clearing, road building or maintenance. These products are available mounted on various types of undercarriages: wheels for full-speed highway travel, wheels for on/off road use, and crawlers.

VacAll produces catch basin cleaners and roadway debris vacuum systems. These units are powerful and versatile with uses including, but not limited to, removal of wet and dry debris, spill elimination, and cleaning of sludge beds. VacAll also offers a line of sewer cleaners. VacAll products are primarily sold through dealers to

industrial and commercial contractors as well as governmental agencies. A portion of VacAll’s sales includes chassis which are not manufactured by the Company.

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

Henke designs and manufactures snow plows and heavy-duty snow removal equipment, hitches and attachments for trucks, loaders and graders sold primarily through independent truck and industrial dealers. Henke’s primary end-users are governmental agencies, related contractors and other industrial users.

Tenco designs and manufactures a heavy duty line of snow removal equipment including snow plows, snow blowers, dump bodies and spreaders. Products are primarily sold through independent dealers. End-users are governmental agencies, contractors and other industrial users.

North American Agricultural Division

Bush Hog, Rhino and M&W equipment is generally sold to farmers and ranchers to clear brush, maintain pastures and unused farmland, shred crops and till fields and for haymaking. It is also sold to other customers, such as mowing contractors and construction contractors, for non-agricultural purposes. Bush Hog and Rhino equipment consists principally of a comprehensive line of tractor-powered equipment, including rotary cutters, finishing mowers, flail mowers, disc mowers, ZTR ride-on mowers, front-end loaders, backhoes, rotary tillers, posthole diggers, scraper blades and replacement parts. This equipment is primarily sold through farm equipment dealers, as well as original equipment manufacturers (“OEMs”) and other distributors.

SMC equipment includes a broad line of front-end loaders and backhoes that fit many tractors on the market today. The products are sold to OEMs and as Bush Hog and Rhino branded equipment.

Herschel/Valu-Bilt aftermarket replacement parts are sold for many types of farm equipment and tractors and certain types of mowing and construction equipment. Herschel products include a wide range of cutting parts, plain and hard-faced replacement tillage tools, disc blades and fertilizer application components. Herschel replacement tools and parts are sold throughout the United States, Canada and Mexico to five major customer groups: farm equipment dealers; fleet stores; wholesale distributors; OEMs; and construction equipment dealers. Valu-Bilt complements the Herschel product lines while also expanding the Company’s offering of aftermarket agricultural parts and added catalog and internet sales direct to end-users.

Schulte equipment includes heavy-duty mechanical rotary mowers, snow blowers, rock removal equipment and related replacement parts. Schulte serves both the agricultural and governmental markets primarily in Canada and the U.S. Schulte also sells some of the Company’s other product lines in their markets and some of its products through independent distributors throughout the world.

European Division

McConnel equipment principally includes a broad line of hydraulic, boom-mounted hedge and grass cutters, as well as other tractor attachments and implements such as hydraulic backhoes, cultivators, subsoilers, buckets and other digger implements and related replacement parts. McConnel equipment is sold primarily in the U.K., Ireland and France and in other parts of Europe and, to a lesser extent, throughout the world through independent dealers and distributors.

Bomford equipment includes hydraulic, boom-mounted hedge and hedgerow cutters, industrial grass mowers, agricultural seedbed preparation cultivators and related replacement parts. Bomford equipment is sold to governmental agencies, contractors and agricultural end-users in the U.K., Ireland and France and, to a lesser extent, other countries in Europe, North America, Australia and the Far East. Bomford’s sales network is similar to that of McConnel in the U.K. Rhino sells some of Bomford’s product line in the U.S.

SMA equipment includes hydraulic, boom-mounted hedge and hedgerow cutters and related replacement parts. SMA’s principal customers are French local authorities. SMA’s product offerings include certain quick-attach boom mowers manufactured by the Company in the U.K. to expand its presence in agricultural dealerships. During the

third quarter of 2010, the Company closed and sold its SMA facility located in Orleans, France and production was relocated to the Rousseau manufacturing facility near Lyon, France. Forges Gorce manufactures flail blades which are sold to some of the Company’s subsidiaries as well as to other customers.

Twose equipment includes light-duty power arm mowers, agricultural implements and related replacement parts. Twose products are manufactured at the Company’s U.K. facilities. These products are sold through Twose’s dealer distribution network in the U.K. and through Faucheux’s and other independent distributors internationally.

The addition of Spearhead expanded the Company’s product lines, particularly rotary cutters, and market coverage in Europe and increased utilization of our existing U.K. manufacturing facilities.

Faucheux equipment includes front-end loaders, backhoes, attachments and related parts. Historically, the majority of Faucheux sales have been in France, but the Company has expanded market coverage to other countries.

Rousseau sells hydraulic and mechanical boom mowers, primarily in France, through its own sales force and dealer distribution network to mainly agricultural and governmental markets. These products have also been introduced into other markets outside of France.

Rivard manufactures vacuum trucks, high pressure cleaning systems and trenchers. Rivard’s equipment is primarily sold in France and certain other markets, mainly in Europe and North Africa, to governmental entities and related contractors. It also complements our product offerings in North America.

Replacement Parts

In addition to the sales of Herschel/Valu-Buil t replacement parts, the Company derives a significant portion of its revenues from sales of replacement parts for each of its wholegoods lines. Replacement parts represented approximately 24% , 26% and 26% of the Company’s total sales for the years ended December 31, 2011 , 2010 , and 2009 respectively. The percentage decrease in 2011 was mainly from a change in sales mix between wholegoods and parts. Proprietary replacement parts generally are more profitable and less cyclical than wholegoods.

While the Company believes that the end-users of its products evaluate their purchases on the basis of price, reputation and product quality, such purchases are also based on a dealer’s service, support of and loyalty to the dealer based on previous purchase experiences, as well as other factors such as product and replacement part availability.

Product Development

The Company’s ability to provide innovative responses to customer needs, to develop and manufacture new products, and to enhance existing product lines is important to its success. The Company continually conducts research and development activities in an effort to improve existing products and develop new products. As of December 31, 2011 , the Company employed 135 people in its various engineering departments, 61 of whom are degreed engineers and the balance of whom are support staff. Amounts expended on research and development activities were approximately $ 6,017,000 in 2011 , $ 5,774,000 in 2010 and $ 4,762,000 in 2009 . As a percentage of sales, research and development was approximately 1.0% in 2011 and 1.1% in 2010 and 2009 , and is expected to continue at similar levels in 2012 .

Seasonality

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

Competition

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

Unfilled Orders

As of December 31, 2011 , the Company had unfilled customer orders of $ 119,923,000 compared to $ 97,616,000 at December 31, 2010 . The 23% increase was primarily due to the positive impact of improved agricultural market conditions on Bush Hog and Rhino backlogs. The Company continues to be affected by soft market conditions and reduced government spending in parts of its Industrial and European divisions due to the downturn in the global economy. Management expects that substantially all of the Company’s backlog as of December 31, 2011 will be shipped during fiscal year 2012 . The amount of unfilled orders at a particular time is affected by a number of factors, including manufacturing and shipping schedules which, in most instances, are dependent on the Company’s seasonal sales programs and the requirements of its customers. Certain of the Company’s orders are subject to cancellation at any time before shipment; therefore, a comparison of unfilled orders from period to period is not necessarily meaningful and may not be indicative of future actual shipments. No single customer is responsible for 10% or more of the aggregate revenue of the Company.

Sources of Supply

The principal raw materials used by the Company include steel, other metal components and hydraulic tubing. During 2011 , the raw materials needed by the Company were available from a variety of sources in adequate quantities and at prevailing market prices. No one supplier is responsible for supplying more than 10% of the principal raw materials used by the Company.

While the Company manufactures many of the parts for its products, a significant percentage of parts, including most drivelines, gearboxes, industrial engines, and hydraulic components, are purchased from outside suppliers which manufacture to the Company’s specifications. In addition, the Company, through its subsidiaries, purchases tractors and truck chassis as a number of the Company’s products are mounted and shipped with a tractor or truck chassis. Tractors and truck chassis are generally available, but some delays in receiving tractors or truck chassis can occur throughout the year. The Company sources its purchased goods from international and domestic suppliers. No single supplier is responsible for supplying more than 10% of the purchased goods used by the Company.

Patents and Trademarks

The Company owns various U.S. and international patents. While the Company considers its patents to be advantageous to its business, it is not dependent on any single patent or group of patents. The Company amortized approximately $79,000 in patents and trademarks relating to the industrial segment. In 2010, the Company wrote off $224,000 in older patents which the Company believes no longer provide a competitive advantage. The net book value of trademarks was $ 5,500,000 as of December 31, 2011 and 2010 .

Products manufactured by the Company are advertised and sold under numerous trademarks. Alamo Industrial ® , Terrain King ® , Gradall ® , VacAll™, Henke ® , Bush Hog ® , Rhino ® , Earthmaster ® , McConnel ® , Bomford ® , SMA ® , Schwarze ® , Nite-Hawk™, Tenco ® , Tiger™, Schulte ® , Forges Gorce™, Twose™, Faucheux™, Herschel™,Valu-Bilt ® , Rivard ® , Rousseau™ and Spearhead™ trademarks are the primary marks for the Company’s products. The Company also owns other trademarks which it uses to a lesser extent, such as M&W ® , SMC™, Fuerst ® , Triumph ® , Mott ® , Turner ® , and Dandl ® . Management believes that the Company’s trademarks are well known in its markets and are valuable and that their value is increasing with the development of its business.

The Company actively protects its trademarks against infringement and believes it has applied for or registered its trademarks in the appropriate jurisdictions.

Environmental and Other Governmental Regulations

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

The Company knows that its Indianola, Iowa property is contaminated with chromium which most likely resulted from chrome plating operations which were discontinued before the Company purchased the property. Chlorinated volatile organic compounds have also been detected in water samples on the property, though the source is unknown at this time. The Company voluntarily worked with an environmental consultant and the state of Iowa with respect to these issues and believes it completed its remediation program in June 2006. The work was accomplished within the Company’s environmental liability reserve balance. We requested a “no further action” classification from the state. We received a conditional “no further action” letter in January of 2009. When we demonstrate stable or improving conditions below residential standards for a certain period of time by monitoring existing wells, an unconditional “no further action” letter will be requested.

On December 31, 2011 , the Company had an environmental reserve in the amount of $ 1,185,000 related to the acquisition of Gradall’s facility in New Philadelphia, Ohio. The reserve of $ 1,185,000 , is for potential ground water contamination/remediation that was identified before the acquisition and believed to have been generated by a third party company located near the Gradall facility.

The Company knows that Bush Hog ’s main manufacturing property in Selma, Alabama was contaminated with chlorinated volatile organic compounds which most likely resulted from painting and cleaning operations during the 1960s and 1970s. The contaminated areas were primarily in the location of underground storage tanks and underneath the former waste storage area. Under the Asset Purchase Agreement, Bush Hog ’s prior owner agreed to and has removed the underground storage tanks at its cost and has remediated the identified contamination in accordance with the regulations of the Alabama Department of Environmental Management. An environmental consulting firm was retained by the prior owner and administered the cleanup and will monitor the site on an ongoing basis until the remediation program is complete and approved by the applicable authorities.

Certain other assets of the Company contain asbestos that may have to be remediated over time. The Company believes that any subsequent change in the liability associated with the asbestos removal will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

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

Employees

As of December 31, 2011 , the Company employed approximately 2,500 employees. In the U.S. the Company has collective bargaining agreements at the Gradall facility which cover 184 employees and will expire in March 9, 2014 and at the Tenco facility covering 61 employees which will expire on December 13, 2015. The SMC facility has a collective bargaining agreement covering it's employees, however, due to the Company announcing its plan to close the facility, this agreement will expire during the second quarter of 2012. The Company’s European operations, McConnel, Bomford , SMA , Forges Gorce, Faucheux, Rousseau and Rivard, also have various

collective bargaining agreements covering 863 employees. The Company considers its employee relations to be satisfactory.

Financial Information about Segments

See Note 15 of the accompanying consolidated financial statements.

International Operations and Geographic Information

See Note 16 of the accompanying consolidated financial statements.

Available Information

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

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

The Company also makes available free of charge on its website its most recent annual report on Form 10-K, its quarterly reports on Form 10-Q for the current fiscal year, its most recent proxy statement and its most recent annual report to stockholders, although in some cases these documents are not available on our site as soon as they are available on the SEC’s site. You will need to have on your computer the Adobe Acrobat Reader ^® software to view the documents, which are in PDF format. In addition, the Company posts on its website its Charters for its Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee, as well as its Corporate Governance Policies and its Code of Conduct and Ethics for its directors, officers and employees. You can obtain a written copy of these documents, excluding exhibits, at no cost, by sending your request to the Corporate Secretary, Alamo Group Inc., 1627 E. Walnut Street, Seguin, Texas 78155, which is the principal corporate office of the Company. The telephone number is (830) 379-1480 ext. 1670. The information on the Company’s website is not incorporated by reference into this report.

Forward-Looking Information

Part I of this Annual Report on Form 10‑K and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II of this Annual Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, forward-looking statements may be made 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 us or on our behalf, the words "expect," “will,” “estimate,” “believe,” “intend,” “could,” “should,” “anticipate,” “project,” “forecast,” “plan,” “may” and similar expressions generally identify forward-looking statements made by us or on our behalf. Forward-looking statements involve risks and uncertainties. These uncertainties include factors that affect all businesses operating in a global market, as well as matters specific to the Company and the markets we serve. Certain particular risks and uncertainties that continually face us include the following:


•	budget constraints and revenue shortfalls which could affect the purchases of our type of equipment by governmental customers and related contractors in both domestic and international markets;


•	market acceptance of new and existing products;


•	our ability to maintain good relations with our employees;


•	our ability to hire and retain quality employees;


•	changes in the prices of agricultural commodities, which could affect our customers’ income levels; and


•	impairment in the carrying value of goodwill.

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


•	impact of tighter credit markets on the Company, its dealers and end-users;


•	changes in business and political conditions and the economy in general in both domestic and international markets;


•	increase in unfunded pension plan liability due to financial market deterioration;


•	price and availability of critical raw materials, particularly steel and steel products;


•	increased competition;


•	our ability to develop and manufacture new and existing products profitably;


•	adverse weather conditions such as droughts, floods, snowstorms, etc., which can affect the buying patterns of our customers and related contractors;


•	increased costs of complying with new regulations;


•	the potential effects on the buying habits of our customers due to animal disease outbreaks;


•	adverse market conditions and credit constraints which could affect our customers and end-users, such as cutbacks on dealer stocking levels;


•	changes in market demand;


•	financial market changes including changes in interest rates and fluctuations in foreign exchange rates;


•	the inability of our suppliers, customers, creditors, public utility providers and financial service organizations to deliver or provide their products or services to us;


•	abnormal seasonal factors in our industry;


•	unforeseen litigation;


•	changes in domestic and foreign governmental policies and laws, including increased levels of government regulation and changes in agricultural policies;


•	government actions, including budget levels, regulations and legislation, relating to the environment, commerce, infrastructure spending, health and safety;


•	risk of governmental defaults and resulting impact on the global economy and particularly financial institutions; and


•	amount of farm subsidies and farm payments.

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

Executive Officers of the Company

Certain information is set forth below concerning the executive officers of the Company, each of whom has been elected to serve until the 2012 annual meeting of directors or until his successor is duly elected and qualified.



Name	Age	Position
Ronald A. Robinson	59	President and Chief Executive Officer
Dan E. Malone	51	Executive Vice President and Chief Financial Officer
Robert H. George	65	Vice President, Secretary and Treasurer
Richard J. Wehrle	55	Vice President and Controller
Donald C. Duncan	60	Vice President and General Counsel
Geoffery Davies	64	Vice President, Alamo Group Inc. and Managing Director, Alamo Group (EUR) Ltd.
Richard D. Pummell	65	Vice President, Alamo Group Inc. and Executive Vice President Alamo Group (USA) Inc., Agricultural Division

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

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

Robert H. George joined the Company in May 1987 as Vice President and Secretary/Treasurer and has served the Company in various executive capacities since that time. Prior to joining the Company, Mr. George was Senior Vice President of Frost National Bank from 1978 to 1987.

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

Donald C. Duncan has been General Counsel of the Company since January 2002 and was elected Vice President in February 2003. Prior to joining the Company, Mr. Duncan was counsel for various publicly held companies in Houston, Texas and most recently was Associate General Counsel for EGL, Inc. from 2000 to 2001 and Senior Counsel for Weatherford International Inc. from 1997 to 1999.

Geoffery Davies, OBE and PhD, has been Managing Director of Alamo Group (EUR) Ltd. since December 1993 and was elected Vice President of the Company in February 2003. From 1988 to 1993, Dr. Davies served McConnel Ltd., a U.K. company acquired by Alamo Group in 1991, in various capacities including serving as its Marketing Director from February 1992 until December 1993.

Richard D. Pummell was elected Vice President of Alamo Group Inc. in November 2009. Mr. Pummell joined the Company in 2005 as Executive Vice President of Alamo Group (USA) Inc. and is in charge of the Agricultural division. Prior to joining the Company, Mr. Pummell was Vice President for Global Supply and General Manager of Metso Minerals.

Item 1A. Risk Factors

You should carefully consider each of the risks described below, together with all of the other information contained in this Annual Report on Form 10-K, before making an investment decision with respect to the Company’s securities. If any of the following risks develop into actual events, the Company’s business, financial

condition or results from operations could be materially and adversely affected and you could lose all or part of your investment.

Risks related to our business

Deterioration of industry conditions could harm our business, results of operations and financial condition.

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


•	weakness in worldwide economy;


•	the price and availability of raw materials, purchased components and energy;


•	budget constraints and revenue shortfalls for our governmental customers;


•	changes in domestic and foreign governmental policies and laws, including increased levels of governmental regulation;


•	the levels of interest rates;


•	the value of the U.S. dollar relative to the foreign currencies in countries where we sell our products but don’t have a manufacturing presence;


•	impact of tighter credit markets on the Company, its dealers and end-users;


•	impairment in the carrying value of goodwill; and


•	increase in unfunded pension plan liability due to financial market deterioration.

In addition, our business is susceptible to a number of factors that specifically affect agricultural customer spending patterns, including the following:


•	animal disease outbreaks, epidemics and crop pests;


•	weather conditions, such as droughts, floods and snowstorms;


•	changes in farm incomes;


•	cattle and agricultural commodity prices;


•	changes in governmental agricultural policies worldwide;


•	the level of worldwide farm output and demand for farm products; and


•	limits on agricultural imports.

A downturn in general economic conditions and outlook in the United States and around the world could adversely affect our net sales and earnings.

The strength and profitability of our business depends on the overall demand for our products and upon economic conditions and outlook, including but not limited to economic growth rates; consumer spending levels; financing availability, pricing and terms for our dealers and end-users; employment rates; interest rates; inflation; consumer confidence and general economic and political conditions and expectations in the United States and the other economies in which we conduct business. Slow or negative growth rates, inflationary pressures, higher commodity costs and energy prices, reduced credit availability or unfavorable credit terms for our dealers and end-user customers, increased unemployment rates, and continued recessionary economic conditions and outlook could cause consumers to continue to reduce spending, which may cause them to delay or forego purchases of our products and could have an adverse effect on our net sales and earnings.

We depend on governmental sales and a decrease in such sales could adversely affect our business, results of operations and financial condition.

A substantial portion of our revenues is derived from sales to federal, state and local governmental entities both in the U.S. and in other countries in which we sell our products. These sales depend primarily on the levels of budgeted and appropriated expenditures for highway, airport, roadside and parks maintenance by various governmental entities and are affected by changes in local and national economic conditions.

Our dependence on, and the price and availability of, raw materials as well as purchased components may adversely affect our business, results of operations and financial condition.

We are subject to fluctuations in market prices for raw materials such as steel and energy. Additionally, although most of the raw materials and purchase components we use are commercially available from a number of sources, we could experience disruptions in the availability of such materials. If we are unable to purchase materials we require or are unable to pass on price increases to our customers or otherwise reduce our cost of goods sold, our business, results of operations and financial condition may be adversely affected. In addition, higher energy costs may negatively affect spending by farmers, including their purchases of our products.

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

The Company estimates the fair value of its reporting units using a discounted cash flow analysis. This analysis requires the Company to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The cash flows are estimated over a significant future period of time, which makes those estimates and assumptions subject to an even higher degree of uncertainty. The Company also utilizes market valuation models and other financial ratios, which require the Company to make certain assumptions and estimates regarding the applicability of those models to its assets and businesses. As of December 31, 2011 , goodwill was $ 31,751,000 , which represents 8% of total assets.

The Company recognized goodwill impairment at two of its French operations, SMA and Rousseau , in the Company's European division of $1,898,000 in 2011 and no goodwill impairment in 2010. During the 2011 impairment analysis review, it was noted that even though the Schwarze, Rivard and Faucheux reporting units' fair value was above carrying value it was not materially different. On December 31, 2011 , there was approximately $6.8 million, $11.6 million and $0.6 million of goodwill related to the Schwarze, Rivard and Faucheux reporting units respectively. These reporting units would be most likely affected by changes in the Company’s assumptions and estimates. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, such as changes in the reporting unit’s future growth rates, discount rates, etc.

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

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

We operate and source internationally, which exposes us to the political, economic and other risks of doing business abroad.

We have operations in a number of countries outside of the United States. Our international operations are subject to the risks normally associated with conducting business in foreign countries, including but not limited to the following:


•	limitations on ownership and on repatriation of earnings;


•	import and export restrictions, tariffs and quotas;


•	additional expenses relating to the difficulties and costs of staffing and managing international operations;


•	labor disputes and uncertain political and economic environments and the impact of foreign business cycles;


•	changes in laws or policies;


•	delays in obtaining or the inability to obtain necessary governmental permits;


•	potentially adverse consequences resulting from the applicability of foreign tax laws;


•	cultural differences;


•	increased expenses due to inflation;


•	weak economic conditions in foreign markets where our subsidiaries distribute their products;


•	changes in currency exchange rates;


•	disruptions in transportation and port authorities; and


•	new regulations involving international freight shipments

Our international operations may also be adversely affected by laws and policies of the United States and the other countries in which we operate affecting foreign trade, investment and taxation.

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

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

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

We may be unable to complete or integrate existing or future acquisitions effectively, and businesses we have acquired, or may acquire in the future, may not perform as expected.

We may not be successful in integrating acquired businesses into our existing operations and achieving projected synergies. We could face many risks in integrating acquired businesses, including but not limited to the following:


•	we may incur substantial costs, delays or other operational or financial challenges in integrating acquired businesses, including integrating each company's accounting, information technology, human resource and other administrative systems to permit effective management;


•	we may be unable to achieve expected cost reductions, to take advantage of cross-selling opportunities, or to eliminate redundant operations, facilities and systems;


•	we may need to implement or improve controls, procedures and policies appropriate for a public company;


•	acquisitions may divert our management’s attention from the operation of our businesses;


•	we may not be able to retain key personnel of acquired businesses;


•	there may be cultural challenges associated with integrating management and employees from the acquired businesses into our organization; and


•	we may encounter unanticipated events, circumstances or legal liabilities.

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

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

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

In general, agricultural and governmental end-users typically purchase new equipment during the first and second calendar quarters. Other products such as street sweepers, excavators, snow blowers, front-end loaders and pothole patchers have different seasonal patterns, as do replacement parts in general. In attempting to achieve efficient utilization of manpower and facilities throughout the year, we estimate seasonal demand months in

advance and manufacturing capacity is scheduled in anticipation of such demand. We utilize a rolling twelve-month sales forecast provided by our marketing divisions and order backlog in order to develop a production plan for our manufacturing facilities. Additionally, many of our marketing departments attempt to equalize demand for their products throughout the calendar year by offering seasonal sales programs which may provide additional incentives, including discounts and extended payment terms, on equipment that is ordered during off-season periods. Because we spread our production and wholesale shipments throughout the year to take into account the factors described above, sales in any given period may not reflect the timing of dealer orders and retail demand.

Weather conditions and general economic conditions may affect the timing of purchases and actual industry conditions might differ from our forecasts. Consequently, sudden or significant declines in industry demand could adversely affect our working capital or results of operations.

If we do not retain key personnel and attract and retain other highly skilled employees, our business may suffer.

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

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

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

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

On December 31, 2011 , the Company had an environmental reserve in the amount of $ 1,185,000 related to the

acquisition of Gradall’s facility in New Philadelphia, Ohio. The reserve of $ 1,185,000 , is for potential ground water contamination/remediation that was identified before the acquisition and believed to have been generated by a third party company located near the Gradall facility.

If we are unable to comply with the terms of our credit arrangements, especially the financial covenants, our credit arrangements could be terminated.

We cannot assure you that we will be able to comply with all of the terms of our credit arrangements, especially the financial covenants. Our ability to comply with such terms depends on the success of our business and our operating results. Various risks, uncertainties, and events beyond our control could affect our ability to comply with the terms of our credit arrangements. If we were out of compliance with any covenant required by our credit arrangements following any applicable cure periods, the banks could terminate their commitments unless we could negotiate a covenant waiver. The banks could condition such waiver on amendments to the terms of our credit arrangements that may be unfavorable to us including, the interest rate we currently pay on outstanding debt under our credit arrangements could increase, which could adversely affect our operating results.

Fluctuations in currency exchange rates may adversely affect our financial results.

Our earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly in European countries, Canada and Australia, as a result of the sale of our products in international markets. While we do hedge against such fluctuations to an extent (primarily in the U.K. market), we cannot assure you that we will be able to effectively manage these risks. Significant long-term fluctuations in relative currency values, such as a devaluation of the Euro against the U.S. dollar, could have an adverse effect on our future results of operations or financial condition.

Risks related to investing in our common stock

Because the price of our common stock may fluctuate significantly and its trading volume has generally been low, it may be difficult for you to resell our common stock when desired or at attractive prices.

The trading price of our common stock has and may continue to fluctuate. The closing prices of our common stock on the New York Stock Exchange during 2011 ranged from $ 29.14 to $ 20.11 per share, and during 2010 from $ 27.82 to $ 17.02 per share. Our stock price may fluctuate in response to the risk factors set forth herein and to a number of events and factors, such as quarterly variations in operating and financial results, litigation, changes in financial estimates and recommendations by securities analysts, the operating and stock performance of other companies that investors may deem comparable to us, news reports relating to us or trends in our industry or

general economic conditions. Furthermore, the trading volume of our common stock has generally been low, which may increase the volatility of the market price for our stock. The stock price volatility and low trading volume may make it difficult for you to resell your shares of our common stock when desired or at attractive prices.

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

We may issue shares of our previously authorized and unissued securities which will result in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue 20,000,000 shares of common stock. On December 31, 2011 , 11,914,229 shares of our common stock were issued and outstanding, and there were outstanding options and restricted stock awards totalling an additional 490,280 shares of our common stock. We also have additional shares available for grant under our 2005 Incentive Stock Option Plan and our 2009 Equity Incentive Plan. Additional stock option or other compensation plans or amendments to existing plans for employees and directors may be adopted. Issuance of these shares of common stock may dilute the ownership interests of our then existing stockholders. We may also issue additional shares of our common stock in connection with the hiring of personnel, future acquisitions, such as the 1,700,000 shares issued as consideration for the acquisition of Bush Hog in 2009, future private placements of our securities for capital raising purposes or for other business purposes. This would further dilute the interests of our existing stockholders.

Future sales, or the possibility of future sales, of a substantial amount of our common stock may depress the price of the shares of our common stock.

Future sales, or the availability for sale in the public market, of substantial amounts of our common stock could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities. If we or our existing stockholders sell substantial amounts of our common stock in the public market, or if there is a perception that these sales may occur, the market price of our common stock could decline.

There is no assurance that we will continue declaring dividends or have the available cash to make dividend payments.

Although we have paid a cash dividend of $0.06 per share in each quarter since the third quarter of 1999, there can be no assurance that we will continue to declare dividends or that funds will continue to be available for this purpose in the future. The declaration and payment of dividends are restricted by the terms of our amended and restated revolving credit agreement and are subject to the discretion of our Board of Directors, are not cumulative, and will depend upon our profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by our Board of Directors.

Provisions of our corporate documents may have anti-takeover effects that could prevent a change in control.

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

Certain stockholders own a significant amount of our common stock, and their interests may conflict with those of our other stockholders.

As of December 31, 2011 , Capital Southwest Corporation, and its subsidiary Capital Southwest Venture Corporation, beneficially owned approximately 24% of our outstanding common stock and three other investors, Duroc LLC, Dimensional Fund Advisors LP and Third Avenue Management LLC beneficially own approximately 29% of our outstanding common stock. As a result, either Capital Southwest or the other major stockholders

combined could be able to significantly influence the direction of the Company, the election of our Board of Directors and the outcome of any other matter requiring stockholder approval, including mergers, consolidations and the sale of all or substantially all of our assets, and together with other beneficially owned investors, to prevent or cause a change in control of the Company. Also, pursuant to c ontractual obligations, each of Capital Southwest Venture Corporation, Capital Southwest Corporation and Duroc LLC are entitled to certain rights with respect to the registration of the common stock owned by them under the Securities Act. The interests of Capital Southwest and other major stockholders may conflict with the interests of our other stockholders.

Item 1B. Unresolved Staff Comments

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

Item 2. Properties

As of December 31, 2011 , the Company utilized nine principal manufacturing plants located in the United States, six in Europe, two in Canada, and one in Australia. The facilities are listed below:



Facility	Square Footage		Principal Types of Products Manufactured And Assembled
Selma, Alabama	767,700	Owned	Mechanical Rotary mowers, finishing mowers, zero turn radius mowers, backhoes, front-end loaders for Bush Hog
New Philadelphia, Ohio	430,000	Owned	Telescopic Excavators for Gradall and Vacuum Trucks for VacAll
Gibson City, Illinois	275,000	Owned	Mechanical Mowers, Blades, Post Hole Diggers, Deep Tillage Equipment, Front-end Loaders and Backhoes and other implements for, Rhino, Bush Hog and OEM's
Seguin, Texas	230,000	Owned	Hydraulic and Mechanical Rotary and Flail Mowers, Sickle-Bar Mowers, and Boom-Mounted Equipment for Alamo Industrial
Indianola, Iowa	200,000	Owned	Distribution and Manufacturing of Aftermarket Farm Equipment Replacement and Wear Parts for Herschel/Valu-Bilt
Neuville, France	195,000	Leased	Hydraulic and Mechanical Boom-Mounted Hedge and Grass Cutters for Rousseau and SMA
Ludlow, England	160,000	Owned	Hydraulic Boom-Mounted Hedge and Grass Cutters and other Equipment for McConnel and Twose
Chartres, France	136,000	Owned	Front-end Loaders, Backhoes and Attachments for Faucheux and McConnel
Huntsville, Alabama	136,000	Owned	Air and Mechanical Sweeping Equipment for Schwarze
Salford Priors, England	106,000	Owned	Tractor-Mounted Power Arm Flails and other Equipment for Bomford and Twose and Spearhead
St. Valerien, Quebec, Canada	100,000	Owned	Snow and Ice Removal Equipment for Tenco
Daumeray, France	100,000	Leased	Vacuum trucks, high pressure cleaning systems and trenchers for Rivard
Leavenworth, Kansas	70,000	Owned	Snow Plows and Heavy-duty Snow Removal Equipment for Henke
Sioux Falls, South Dakota	66,000	Owned	Hydraulic and Mechanical Mowing Equipment for Tiger
Englefeld, Saskatchewan, Canada	64,000	Owned	Mechanical Rotary Mowers, Snow Blowers, and Rock Removal Equipment for Schulte
Kent, Washington	42,800	Leased	Truck Mounted Sweeping Equipment for the contractor market branded Nite-Hawk
Peschadoires, France	22,000	Owned	Replacement Parts for Blades, Knives and Shackles for Forges Gorce
Ipswich, Australia	15,000	Leased	Air and Mechanical Sweeping Equipment for Schwarze
Installation Facilities, Warehouses & Sales	100,000	Owned / Leased	Services Parts Distribution, Installation Facilities and Sales Office
Offices, Seguin, Texas	10,400	Owned	Corporate Office
Total	3,225,900

Approximately 95% of the manufacturing, warehouse and office space is owned. During the fourth quarter of 2011, the Company announced its plans to close the SMC manufacturing facility located in Sioux Falls, South Dakota and consolidate the operations into the Company's Gibson City, Illinois facility. The Company is reviewing its options for the sale of the SMC plant and anticipates a gain on the sale of the facility when it occurs. The Company considers each of its facilities to be well maintained, in good operating condition and adequate for its present level of operations. The company has various warehouse locations in North America totaling 28,000 sq. ft. that are for sale or lease.

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Not applicable.

PART II

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

The Company’s common stock trades on the New York Stock Exchange under the symbol: ALG. On February 28, 2012 , there were 11,917,379 shares of common stock outstanding, held by approximately 93 holders of record, but the total number of beneficial owners of the Company’s common stock exceeds this number. On February 28, 2012 , the closing price of the common stock on the New York Stock Exchange was $27.27 per share.

The following table sets forth, for the period indicated, on a per share basis, the range of high and low sales prices for the Company’s common stock as quoted by the New York Stock Exchange. These price quotations reflect inter-dealer prices, without adjustment for retail markups, markdowns or commissions, and may not necessarily represent actual transactions.



2011				2010
			Cash				Cash
	Sales Price		Dividends		Sales Price		Dividends
Quarter Ended	High	Low	Declared	Quarter Ended	High	Low	Declared
March 31, 2011	$29.27	$25.32	.06	March 31, 2010	$20.36	16.62	.06
June 30, 2011	28.87	21.09	.06	June 30, 2010	27.00	19.58	.06
September 30, 2011	25.05	20.35	.06	September 30, 2010	25.41	18.68	.06
December 31, 2011	29.20	19.71	.06	December 31, 2010	28.19	21.55	.06

On January 4, 2012, the Board of Directors of the Company declared a quarterly dividend of $.06 per share which was paid on February 1, 2012, to holders of record as of January 18, 2012. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends as they depend on future earnings, capital requirements and financial condition. In addition, the payment of dividends is subject to restrictions under the Company’s bank revolving credit agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in Item 7 of Part II of this Annual Report on Form 10‑K for a further description of the bank revolving credit agreement.

The Company was authorized by its Board of Directors in 1997 to repurchase up to 1,000,000 shares of the Company’s common stock to be funded through working capital and credit facility borrowings. There were no shares repurchased in 2010 or in 2011 . The authorization to repurchase up to 1,000,000 shares remains available, less 42,600 shares previously purchased.

Information relating to compensation plans under which equity securities of the Company are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K.

Stock Price Performance Graph

The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act except to the extent that Alamo Group Inc. specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

The following graph and table set forth the cumulative total return to the Company's stockholders of our Common Stock during a five-year period ended December 31, 2011 , as well as the performance of an overall stock market index (the S&P 500 Index) and the Company's selected peer group index (the Russell 2000 Index).

The Company believes a representative industry peer group of companies with a similar business segment profile does not exist. The SEC has indicated that companies may use a base other than industry or line of business for determining its peer group index, such as an index of companies with similar market capitalization.

Accordingly, the Company has selected the Russell 2000 Index, a widely used small market capitalization index, to use as a representative peer group.



	12/06	12/07	12/08	12/09	12/10	12/11
Alamo Group Inc.	100.00	78.00	65.19	76.20	124.99	122.17
S&P 500	100.00	105.49	66.46	84.05	96.71	98.75
Russell 2000	100.00	98.43	65.18	82.89	105.14	100.75

Item 6. Selected Financial Data

The following selected financial data is derived from the consolidated financial statements of Alamo Group Inc. and its subsidiaries. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.



				Fiscal Year Ended December 31, (1)
(in thousands, except per share amounts)	2011			2010			2009			2008			2007
Operations:
Net sales	$	603,593		$	538,548		$	454,825		$	557,135		$	504,386
Income before income taxes	47,257			29,032			31,106			17,226			18,035
Net income	32,070			21,117			18,633			10,999			12,365
Percent of sales	5.3		%	3.9		%	4.1		%	2.0		%	2.5		%
Earnings per share
Basic	2.71			1.79			1.80			1.12			1.26
Diluted	2.68			1.79			1.80			1.11			1.24
Dividends per share	0.24			0.24			0.24			0.24			0.24
Average common shares
Basic	11,848			11,782			10,330			9,847			9,781
Diluted	11,966			11,893			10,363			9,950			9,953
Financial Position:
Total assets	$	380,935		$	370,983		$	379,957		$	386,132		$	350,630
Short-term debt and current maturities	1,190			2,319			5,453			4,186			3,368
Long-term debt, excluding current maturities	8,621			23,106			44,336			99,884			78,527
Stockholders’ equity	$	276,658		$	253,260		$	236,919		$	184,312		$	198,698

(1) Includes the results of operations of companies acquired from the effective dates of acquisitions.

Item 7. Management’s Discussion and Analysis of Financial Condition

And Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included elsewhere in this Annual Report on Form 10-K.

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



	Fiscal Year Ended December 31,
Net sales (data in thousands):	2011			2010			2009

North American
Industrial	$	229,594		$	196,783		$	177,593
Agricultural	203,993			181,349			95,188
European	170,006			160,416			182,044
Total net sales	$	603,593		$	538,548		$	454,825

Cost and profit margins, as percentages of net sales:

Cost of sales	77.6		%	78.3		%	79.2		%
Gross profit	22.4		%	21.7		%	20.8		%
Selling, general and administrative expenses	15.3		%	16.0		%	16.7		%
Income from operations	8.0		%	5.7		%	7.6		%
Income before income taxes	7.8		%	5.4		%	6.8		%
Net income	5.3		%	3.9		%	4.1		%

Results of Operations

Fiscal 2011 compared to Fiscal 2010

The Company’s net sales in the fiscal year ended December 31, 2011 (“ 2011 ”) were $ 603,593,000 , an increase of $ 65,045,000 or 12.1% compared to $ 538,548,000 for the fiscal year ended December 31, 2010 (“ 2010 ”). The increase was from improved unit sales in the North American Agricultural and Industrial segments along with higher sales of replacement parts world wide. The Company's sales for 2011 were also augmented by the acquisition of Tenco .

North American Industrial sales (net) were $ 229,594,000 in 2011 compared to $ 196,783,000 in 2010 , an increase of $ 32,811,000 or 16.7% . The increase was mainly due to improved sales of the excavator, sweeper and mowing equipment products. While governmental spending continued to be affected by budget shortfalls, the Division experienced solid growth. The acquisition of Tenco on October 18, 2011 added $6,950,000 in sales.

North American Agricultural sales (net) were $ 203,993,000 in 2011 compared to $ 181,349,000 in 2010 , representing an increase of $ 22,644,000 or 12.5% . The increase was from improved global agricultural market conditions and increased shipments of 2010 pre-season orders. Favorable commodity prices and higher farm income helped support higher sales for both Bush Hog and Rhino products.

European sales (net) increased $ 9,590,000 or 6.0% to $ 170,006,000 in 2011 compared to $ 160,416,000 in 2010 . This increase was mainly from favorable exchange rates compared to 2010. Sales were impacted by weak economic conditions and budget constraints in governmental spending throughout the European economy.

Gross margins for 2011 were $ 135,085,000 ( 22.4% of net sales) compared to $ 116,914,000 ( 21.7% of net

sales) in 2010 , an increase of $ 18,171,000 . The increase was from improved sales in all of the Company's segments and reflected higher margins as well as improved margin percentages. Gross margins percentages also improved over last year as a result of continued improvements from efficiency initiatives which helped lower manufacturing costs.

Selling, general and administrative expenses (“SG&A”) were $ 92,347,000 ( 15.3% of net sales) in 2011 compared to $ 86,041,000 ( 16.0% of net sales) in 2010 . The increase of $ 6,306,000 in SG&A in 2011 was mainly from higher sales commissions on increased sales, $596,000 in legal fees from the acquisition of Tenco , and $475,000 in expense relating to the supplemental retirement plan that was adopted on January 3, 2011. Tenco operations added $873,000 in SG&A expenses for 2011.

The Company recorded a $7,745,000 gain on bargain purchase gain during the fourth quarter of 2011 relating to the acquisition of Tenco . The purchase price consideration was approximately $5,933,000 plus the assumption of certain specified liabilities and other considerations.

Goodwill impairment for 2011 was a non-cash charge of $1,898,000 compared to none in 2010. In 2011, the Company wrote off all of the goodwill pertaining to two of its French companies, SMA and Rousseau in its European Division after performing its required impairment test review.

Interest expense for 2011 was $ 2,422,000 compared to $ 3,664,000 in 2010 , a $ 1,242,000 or a 33.9% decrease. The decrease came from lower interest rates in 2011 compared to 2010 despite higher borrowing due to increased working capital requirements.

Other income net, was $ 848,000 during 2011 compared to income of $ 290,000 in 2010 . The gains in both 2011 and 2010 are entirely from changes in exchange rates.

Provision for Income Taxes was $ 15,187,000 ( 32.1% of income before income taxes) for 2011 compared to $ 7,915,000 ( 27.3% of income before income taxes) in 2010 . Included in the 2010 tax provision is an $898,000 tax credit related to prior years’ research and development expenses.

Net Income for 2011 was $ 32,070,000 compared to $ 21,117,000 in 2010 due to the factors described above.

Fiscal 2010 compared to Fiscal 2009

The Company's net sales in the fiscal year ended December 31, 2010 (“2010”) were $538,548,000, an increase of $83,723,000 or 18.4% compared to $454,825,000 for the fiscal year ended December 31, 2009 (“2009”). The increase was primarily due to the inclusion of a full year of the results of Bush Hog which was acquired in October 2009.

North American Industrial sales (net) were $196,783,000 in 2010 compared to $177,593,000 in 2009, an increase of $19,190,000 or 10.8%. The increase resulted from higher sales of replacement parts and, to a lesser extent, a slight improvement in sales of excavator, vacuum truck, sweeper and mowing equipment products. Governmental entities continue to be affected by budget constraints and revenue shortfalls. Compared to 2009, sales to state agencies remained steadier than those to cities and counties.

North American Agricultural sales (net) were $181,349,000 in 2010 compared to $95,188,000 in 2009, representing an increase of $86,161,000 or 90.5%. The increase was primarily due to the acquisition of Bush Hog, which contributed $78,030,000 of the increase. The agricultural market was soft during the first six months of 2010 due to the weakness in the overall economy, leading to dealer reluctance to stock farm equipment. During the third quarter of 2010, market conditions reflected some improvement due to increases in commodity prices and growth in farm income.

European sales (net) decreased $21,628,000 or 11.9% to $160,416,000 in 2010 compared to $182,044,000 in 2009. This decrease was mainly due to soft market conditions caused by the slowdown in the European economy. Specifically, our U.K. units held up better than our French operations, which were responsible for the majority of the decrease. The agricultural market in Europe showed more improvement in 2010 than the governmental market. The European sales in 2010 had a lagging effect from what we saw in the Company's North American markets.

Gross margins for 2010 were $116,914,000 (21.7% of net sales) compared to $94,561,000 (20.8% of net sales) in 2009, an increase of $22,353,000. The majority of the increase was due to the acquisition of Bush Hog , which accounts for $20,271,000 of the increase. Increases in the Company's replacement part business supported higher margins as well as improved margin percentages. Margin percentages also improved over 2009 as a result of ongoing cost savings initiatives which helped lower manufacturing costs.

Selling, general and administrative expenses (“SG&A”) were $86,041,000 (16.0% of net sales) in 2010 compared to $76,100,000 (16.7% of net sales) in 2009. The increase of $9,941,000 in SG&A in 2010 was due to the acquisition of Bush Hog which added a net increase of $11,799,000. Without Bush Hog expenses in 2010 and 2009 along with acquisition costs related to Bush Hog in 2009, SG&A expenses were relatively flat year over year.

The Company recorded a $27,689,000 bargain purchase gain during the fourth quarter of 2009 which has since been adjusted to $30,177,000 as a result of retrospective adjustments to the fair value of assets acquired and liabilities assumed since the date of acquisition. The purchase price consideration was 1,700,000 unregistered shares of Alamo Group stock at a closing price of $16.09 per share plus the assumption of certain liabilities and other considerations.

There was no goodwill impairment for 2010 compared to non-cash $14,104,000 impairment in 2009. In 2009, the Company wrote off the goodwill at Gradall/VacAll and just over 75% of the goodwill at Nite-Hawk in its Industrial Division after performing its required impairment test.

Interest expense for 2010 was $3,664,000 compared to $4,766,000 in 2009, a $1,102,000 or a 23.1% decrease. The decrease was due to reduced borrowings in 2010 compared to 2009. The 2010 interest expense includes $375,000 in amortization of bank fees from the amendment to the Company's revolving credit agreement in November 2009. In 2009, the Company amortized $63,000 in bank fees relating to the same amendment.

Other income net, was $290,000 during 2010 compared to income of $625,000 in 2009. The gains in both 2010 and 2009 are entirely from changes in exchange rates.

Provision for Income Taxes was $7,915,000 (27.3% of income before income taxes) for 2010 compared to $12,473,000 (40.1% of income before income taxes) in 2009. Included in the 2010 tax provision is an $898,000 tax credit related to prior years' research and development expenses. The increase in the effective tax rate for 2009 was from increased state taxes in the United States and from the non-deductible tax write-off of goodwill in the Industrial Division.

Net Income for 2010 was $21,117,000 compared to $18,633,000 in 2009 due to the factors described above.

Liquidity and Capital Resources

In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to conduct the Company’s business, including inventory purchases and capital expenditures. The Company’s inventory and accounts payable levels, particularly in its North American Agricultural Division, build in the first quarter and early spring and, to a lesser extent, in the fourth quarter in anticipation of the spring and fall selling seasons. Accounts receivable historically build in the first and fourth quarters of each year as a result of pre-season sales. These sales help balance the Company’s production during the first and fourth quarters. Some of the Company’s recent acquisitions which are not involved in vegetation maintenance have helped to soften this seasonality pattern.

As of December 31, 2011 , the Company had working capital of $ 200,430,000 , which represents an increase of $ 14,559,000 from working capital of $ 185,871,000 as of December 31, 2010 . The increase in working capital was primarily from higher accounts receivable and inventory in the Company’s North American operations and to a lessor extent from the acquisition of Tenco .

Capital expenditures were $ 6,369,000 for 2011 , compared to $ 4,980,000 for 2010 . For 2012 , capital expenditures are expected to be higher compared to 2011 levels. The Company expects to fund capital expenditures from operating cash flows or through its revolving credit facility, described below.

During the fourth quarter of 2011, the Company announced its plans to close the SMC manufacturing facility located in Sioux Falls, South Dakota and consolidate the operations into the Company's Gibson City, Illinois facility. The closure resulted in a pre-tax charge of $867,000 in redundancy costs. The Company is reviewing its options for the sale of the SMC plant and anticipates a gain on the sale of the facility when it occurs.

Net cash provided by operating activities was $ 10,915,000 for 2011 , compared to $ 41,877,000 for 2010 . The decrease of cash from operating activities resulted primarily from increased inventory levels specifically in the Company’s North American operations due to higher working capital requirements.

Net cash used by financing activities was $ 19,071,000 for 2011 , compared to net cash used of $ 26,013,000 for 2010 . The decrease in financing activities in 2011 was from repayments of amounts borrowed from our bank credit facility due to cash provided by operating activities.

On March 28, 2011, the Company entered into the Eighth Amendment of Amended and Restated Revolving Credit Agreement (the “Eighth Credit Agreement Amendment”), by and among the Company, the lenders party thereto and Bank of America, N.A. as administrative agent. The Eighth Credit Agreement Amendment amends certain provisions of the Company’s existing credit facility to, among other things, (i) release the previously pledged security interest in certain assets of the Company and its specified subsidiaries which secured any indebtedness under the existing credit facility, (ii) extend the termination date of the Company’s credit facility to March 28, 2016, (iii) reduce the aggregate commitments to $100,000,000, (iv) provide the Company the option to request an increase in aggregate commitments under the existing credit facility of up to $50,000,000, subject to the conditions set forth therein (v) lower the applicable leverage ratio, subject to certain exceptions and conditions, (vi) modify the limitation on capital expenditure, (vii) modify the limitation on other indebtedness and (viii) decrease the applicable interest margin for specified advances.

As of December 31, 2011 , there was $ 7,000,000 borrowed under the revolving credit facility. On December 31, 2011 , $ 1,095,000 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 approximately $ 92,000,000 in available borrowings.

On May 13, 2008, Alamo Group Europe Limited expanded its overdraft facility with Lloyd’s TSB Bank plc from £1.0 million to £ 5.5 million . The facility was renewed effective October 29, 2011 and any outstanding balance would bear interest at Lloyd’s Base Rate plus 1.4% per annum. The facility is unsecured but guaranteed by the U.K. subsidiaries of Alamo Group Europe Limited. As of December 31, 2011 , there were no outstanding balances in British pounds borrowed against the U.K. overdraft facility.

There are additional lines of credit: for the Company’s French operations in the amount of 6,200,000 Euros, which includes the Rivard credit facilities; for our Canadian operation in the amount of 3,500,000 Canadian dollars; and for our Australian operation in the amount of 800,000 Australian dollars. As of December 31, 2011 , 181,000 Euros were borrowed against the French line of credit; no Canadian dollars were outstanding on the Canadian line of credit; and 350,000 Australian dollars were outstanding under its facility. The Canadian and Australian revolving credit facilities are guaranteed by the Company.

As of December 31, 2011 , the Company is in compliance with the terms and conditions of its credit facilities.

Management believes the bank credit facilities 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, the challenges affecting the banking industry and credit markets in general can potentially cause changes to credit availability which creates a level of uncertainty.

Inflation

The Company believes that inflation generally has not had a material impact on its operations or liquidity. The Company is exposed to the risk that the price of energy, steel and other purchased components may increase and the Company may not be able to increase the price of its products correspondingly. If this occurs, the Company’s results of operations would be adversely impacted.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued a new accounting standard update, which amends the fair value measurement guidance and includes some enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information required for Level 3 measurements based on unobservable inputs. The standard is effective for fiscal years beginning after December 15, 2011. We will adopt this standard in the first quarter of 2012 and we do not expect the adoption will have a material impact on our financial statements and disclosures.

In June 2011, the FASB issued a new accounting standard, which eliminates the current option to report other comprehensive income and its components in the statement of stockholders' equity. Instead, an entity will be required to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. The standard is effective for fiscal years beginning after December 15, 2011. We will adopt this standard in the first quarter of 2012.

In September 2011, the FASB issued a revised accounting standard, which is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assessment to determine whether further impairment testing is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We have elected to adopt this guidance for the year ended December 31, 2011 and the guidance did not have a material impact on our financial statements.

Off-Balance Sheet Arrangements

The Company does not have any obligation, under any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, that has or is reasonably likely to have a material effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual and Other Obligations

The following table shows the Company’s approximate obligations and commitments to make future payments under contractual obligations as of December 31, 2011 :



	Payment due by period
(in thousands)			Less than		1-3		3-5		More than
Contractual Obligations	Total		1 Year		Years		Years		5 Years

Long-term debt obligations	$	2,165	$	933	$	446	$	475	$	311
Capital lease obligations	646		257		381		8		—
Interest obligations	1,392		334		550		498		10
Operating lease obligations	3,077		1,268		1,440		369		—
Purchase obligations	80,918		80,918		—		—		—
Total	$	88,198	$	83,710	$	2,817	$	1,350	$	321

Definitions:


(A)	Long-term debt obligation means a principal payment obligation under long-term borrowings.


(B)	Capital lease obligation means a principal payment obligation under a lease classified as a capital lease.


(C)	Interest obligation represents interest due on long-term debt and capital lease obligations. Interest on long-term debt assumes all floating rates of interest remain the same as those in effect at December 31, 2011 and include the effect of the Company’s interest rate derivative arrangements on future cash payments for the remaining period of those derivatives.


(D)	Operating lease obligation means a payment obligation under a lease classified as an operating lease.


(E)	Purchase obligation means an agreement to purchase goods or services that is enforceable and legally binding on the registrant that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions.

Critical Accounting Estimates

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

Critical Accounting Policies

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements. For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Allowance for Doubtful Accounts

The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, the Company records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debt based on historical experience of bad debts as a percent of revenues for each business unit, adjusted for relative improvements or deteriorations in the aging and changes in current economic conditions.

The Company evaluates all receivables that are over 60 days old and will reserve specifically on a 90-day basis. The Company has a secured interest on most of its wholegoods that each customer purchases. This allows the Company, in times of a difficult economy when the customer is unable to pay or has filed for bankruptcy (usually Chapter 11), to repossess the customer’s inventory. This also allows Alamo Group to maintain only a reserve over its cost, which usually represents the margin on the original sales price.

The allowance for doubtful accounts balance was $ 3,215,000 on December 31, 2011 , and $ 2,852,000 on December 31, 2010 . The increase was mainly from the Company’s Industrial and European operations.

Sales Discounts

On December 31, 2011 , the Company had $ 14,567,000 in reserves for sales discounts compared to $ 11,903,000 on December 31, 2010 on product shipped to our customers under various promotional programs. The increase was due primarily to increased sales volume of the Company’s agricultural products during the pre-season, which runs during the third and fourth quarters of each year with orders shipped through the second quarter of 2012. The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time.

The Company bases its reserves on historical data relating to discounts taken by the customer under each program. Historically, between 85% and 95% of the Company’s customers who qualify for each program actually take the discount that is available.

Inventories – Obsolete and Slow Moving

The Company had a reserve of $ 7,630,000 on December 31, 2011 and $ 7,506,000 on December 31, 2010 to cover obsolete and slow moving inventory. The increase in the reserve was mainly from the Company’s U.S. operations. The obsolete and slow moving inventory policy states that the reserve is to be calculated as follows: 1) no inventory usage over a three-year period is deemed obsolete and reserved at 100 percent; and 2) slow moving inventory with little usage requires a 100 percent reserve on items that have a quantity greater than a three-year supply. There are exceptions to the obsolete and slow moving classifications if approved by an officer of the Company, based on specific identification of an item or items that are deemed to be either included or excluded from this classification. In cases where there is no historical data, management makes a judgment based on a specific review of the inventory in question to determine what reserves, if any, are appropriate. New products or parts are generally excluded from the reserve policy until a three-year history has been established.

The reserve is reviewed and, if necessary, adjustments are made on a quarterly basis. The Company relies on historical information when available to support its reserve. The Company does not adjust the reserve balance until the inventory is liquidated.

Warranty

The Company’s warranty policy is generally to provide its customers warranty for up to one year on all wholegood units and 90 days on parts though some components can have warranty for longer terms.

Warranty reserve, as a percentage of sales, is generally calculated by looking at the current twelve months’ expenses and prorating that amount based on twelve months’ sales with a ninety-day to six-month lag period. The Company’s historical experience is that an end-user takes approximately 90 days to six months from the receipt of the unit to file a warranty claim. A warranty reserve is established for each different marketing group. Reserve balances are evaluated on a quarterly basis and adjustments made when required.

The current liability warranty reserve balance was $ 5,313,000 on December 31, 2011 and $ 5,554,000 on December 31, 2010 . The decrease was mainly from the Company’s Agricultural Division.

Goodwill

We test goodwill for impairment annually, at the reporting unit level, and whenever events or circumstances make it likely that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell all or a portion of a reporting unit. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Goodwill is reviewed for impairment utilizing a qualitative assessment or a two-step process. We have an option to make a qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that an impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit's goodwill, the difference is recognized as an impairment loss.

The Company recognized goodwill impairment at two of its French operations, SMA and Rousseau , in the Company's European division of $1,898,000 in 2011 and no goodwill impairment in 2010. During the 2011 impairment analysis review, it was noted that even though the Schwarze, Rivard and Faucheux reporting unit’s fair value was above carrying value it was not materially different. On December 31, 2011 , there was approximately $6.8 million, $11.6 million and $0.6 million of goodwill related to the Schwarze, Rivard and Faucheux reporting units respectively. These reporting units would be most likely affected by changes in the Company’s assumptions and estimates. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, such as changes in the reporting unit’s future growth rates, discount rates, etc.

Management believes that the estimated valuations it arrived at are reasonable and consistent with what other marketplace participants would use in valuing the Company's components. However, management cannot give any assurance that these market values will not change in the future. For example, if discount rates demanded by the market increase, this could lead to reduced valuations under the income approach. If the Company's projections are not achieved in the future, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. If the market price of the Company's stock decreases, this could cause the Company to reassess the reasonableness of the implied control premium, which might cause management to assume a higher discount rate under the income approach which could lead to reduced valuations. If future similar transactions exhibit lower multiples than those observed in the past, this could lead to reduced valuations under the similar transactions approach. And finally, if there is a general decline in the stock market and particularly in those companies selected as comparable to the Company's components, this could lead to reduced valuations under the public company market multiple approach. The Company's annual impairment test is performed during the fourth quarter of each fiscal year. Given the current market conditions and continued economic uncertainty, the fair value of the Company's components could deteriorate which could result in the need to record impairment charges in future periods. The Company also monitors potential triggering events including changes in the business climate in which it operates, attrition of key personnel, volatility in the capital markets, the Company's market capitalization compared to its book value, the Company's recent operating performance, and the Company's financial projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in future impairment charges. In particular, since the Schwarze , Rivard and Faucheux , reporting unit's carrying value is not materially different from fair value, any changes to the Company's assumptions could lead to an indicated impairment in step one, requiring the Company to proceed to step two and potentially record an impairment charge. See Note 6 to the Consolidated Financial Statements for more information regarding goodwill.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to various financial market risks. Market risk is the potential loss arising from adverse changes in market prices and rates. The Company does not enter into derivative or other

financial instruments for trading or speculative purposes.

Foreign Currency Risk

International Sales

A portion of the Company’s operations consists of manufacturing and sales activities in international jurisdictions. The Company primarily manufactures its products in the United States, the U.K., France, Canada and Australia. The Company sells its products primarily within the markets where the products are produced, but certain of the Company’s sales from its U.K. operations are denominated in other European 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 over 90% of its future net foreign currency cash receipts over a period of six months. As of December 31, 2011 , the Company had $ 3,460,000 outstanding in forward exchange contracts related to accounts receivable. A 15% fluctuation in exchange rates for these currencies would change the fair value by approximately $ 519,000 . 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.

On December 31, 2011 , the fair value of these agreements was in an unfavorable position; therefore, the derivative financial instruments were recorded as a gain of $ 102,000 , which has been recognized in other income (expense), net.

Exposure to Exchange Rates

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly in European countries, Canada and Australia, as a result of the sale of its products in international markets. Foreign currency forward contracts in the U.K. are used to hedge against the earnings effects of such fluctuations. On December 31, 2011 , the result of a uniform 10% strengthening in the value of the U.S. dollar relative to the currencies in which the Company’s sales are denominated would result in a decrease in gross profit of $ 4,816,000 . Comparatively, on December 31, 2010 , the result of a uniform 10% strengthening in the value of the dollar relative to the currencies in which the Company’s sales are denominated would have resulted in a decrease in gross profit of approximately $ 4,435,000 . This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting sales, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. The translation adjustment during 2011 was a loss of $ 2,879,000 . On December 31, 2011 , the British pound closed at 0.6434 relative to the U.S. dollar, and the Euro closed at 0.7716 relative to the U.S. dollar. By comparison, on December 31, 2010 , the British pound closed at 0.6411 relative to the U.S. dollar, and the Euro closed at 0.7479 relative to the U.S. dollar. No assurance can be given as to future valuation of the British pound or Euro or how further movements in those or other currencies could affect future earnings or the financial position of the Company.

Interest Rate Risk

The majority of the Company’s long-term debt bears interest at variable rates. Accordingly, the Company’s net income is affected by changes in interest rates. Assuming the current level of borrowings at variable rates and a two hundred basis point change in the 2011 average interest rate under these borrowings, the Company’s 2011 interest expense would have changed by approximately $ 140,000 . In the event of an adverse change in interest rates, management could take actions to mitigate its exposure. Further, this analysis does not consider the effects of the

change in the level of overall economic activity that could exist in such an environment. However, the challenges affecting the banking industry and credit markets in general can potentially cause changes to credit availability which creates a level of uncertainty.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data described in Item 15 of this report and included on pages 44 through 78 of this report are incorporated herein by reference.

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

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures . An evaluation was carried out, under the supervision and with the participation of Alamo’s management, including our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer (Principal Financial Officer), and Vice President and Corporate Controller (Principal Accounting Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1933). Based upon the evaluation, the President & Chief Executive Officer, Executive Vice President & Chief Financial Officer (Principal Financial Officer), and Vice President & Corporate Controller (Principal Accounting Officer) concluded that the Company’s disclosure controls and procedures were effective at the end of the period covered by this report.

Management’s Annual Report on Internal Control Over Financial Reporting . Management’s report on the Company’s internal control over financial reporting is included on page 40 of this Annual Report on Form 10-K and incorporated by reference herein. The Company’s independent public accounting firm has audited and issued a report on the Company’s internal control over financial reporting which is included on page 41 of this Annual Report on Form 10-K and incorporated by reference herein.

Changes in Internal Controls over Financial Reporting. There have not been any changes in Alamo’s internal control over financial reporting (as such term is defined by paragraph (d) of Rule 13-a-15) under the Securities Exchange Act during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, Alamo’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

There is incorporated in this Item 10, by reference, that portion of the Company’s definitive proxy statement for the 2012 Annual Meeting of Stockholders, which appears therein under the captions “Proposal 1 - Election of Directors,” “Nominees for Election to the Board of Directors,” “Information Concerning Directors,” “Meetings and Committees of the Board,” “The Audit Committee,” and “The Nominating/Corporate Governance Committee,” and “Section 16(a) Beneficial Ownership Reporting Compliance.” See also the information under the caption “Executive Officers of the Company” in Part I of this Report.

The Board of Directors has delegated certain responsibilities to three Committees of the Board. The Committees are the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee. The Board of Directors has also adopted Corporate Governance guidelines and a Code of Conduct and Ethics for all employees, including the Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and those individuals performing similar functions.

The Committee Charters, Code of Conduct and Ethics, and Corporate Governance Guidelines may be found on the Company’s website ( www.alamo-group.com ) under the “Our Commitment” tab and are also available without charge in print by sending a request to the Corporate Secretary, Alamo Group Inc., 1627 E. Walnut Street, Seguin,

Texas, 78155, which is the principal executive office of the Company. The telephone number is 830-379-1480. The Company will post any amendments to the Code of Conduct and Ethics, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, on the Company’s website.

Item 11. Executive Compensation

There is incorporated in this Item 11, by reference, that portion of the Company’s definitive proxy statement for the 2012 Annual Meeting of Stockholders which appears under the caption “Executive Compensation,” “The Compensation Committee,” “Compensation Discussion and Analysis,” Compensation Committee Report” and “Director Compensation during 2011 .”

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

There is incorporated in this Item 12, by reference, that portion of the Company’s definitive proxy statement for the 2012 Annual Meeting of Stockholders which appears under the caption “Beneficial Ownership of Common Stock.”

Information on Alamo Group Inc.’s Equity Compensation Plans

The following table provides information on the shares that are available under the Company’s stock compensation plans and, in the case of plans where stock options may be granted, the number of shares of common stock issuable upon exercise of those stock options. The Company currently does not have an Equity Compensation Plan not approved by the Stockholders.

The numbers in the table are as of December 31, 2011 , the last day of Alamo Group Inc.’s 2011 fiscal year.



	A	B	C
Equity Compensation Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of Securities that remain available for future issuance under equity compensation plans (excluding securities reflected in column A)
Plans approved by stockholders
Amended and Restated 1994 Incentive Stock Option Plan	49,380	$13.72	—
First Amended and Restated 1999 Non-Qualified Stock Option Plan	67,800	$16.74	—
2005 Incentive Stock Option Plan	328,100	$20.11	162,500
2009 Equity Incentive Plan	45,000	$21.45	320,500
Total	490,280		483,000

Item 13. Certain Relationships, Related Transactions and Director Independence

Information regarding certain relationships and related transactions is set forth under the caption “Certain Relationships and Related Transactions” in the Company’s definitive proxy statement for the 2011 Annual Meeting of Stockholders and such information is incorporated by reference herein. There were no such reportable

relationships or related party transactions in the fiscal year ended December 31, 2011 . In 1999, the Company approved a supplemental retirement benefit for Donald J. Douglass which is paid on a quarterly basis over a period of fourteen and one-half years that began in the year 2000. The remaining balances on December 31, 2011 and 2010 were $ 184,000 and $ 248,000 , respectively, and are included in the Accrued liabilities and Other long-term liabilities sections of the Company’s balance sheets.

Information regarding director independence is set forth under the caption “Information Concerning Directors” in the Company’s definitive proxy statement for the 2012 Annual Meeting of Stockholders and such information is incorporated by reference herein.

Item 14. Principal Accountant Fees and Services

Information regarding principal accountant fees and services is set forth under the caption “Proposal 2 – Ratification of Appointment of Independent Auditors” in the Company’s definitive proxy statement for the 2012 Annual Meeting of Stockholders and such information is incorporated by reference herein.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements



		Page

	Report of Management on Internal Control Over Financial Reporting	41
	Reports of Independent Registered Public Accounting Firm (KPMG LLP)	42
	Consolidated Balance Sheets	44
	Consolidated Statements of Income	45
	Consolidated Statements of Stockholders’ Equity	46
	Consolidated Statements of Cash Flows	47
	Notes to Consolidated Financial Statements	48

Financial Statement Schedules

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

Exhibits

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

INDEX TO EXHIBITS



		Incorporated by Reference
		From the Following
Exhibits	Exhibit Title	Documents



2.1	—	Asset Purchase Agreement, dated February 3, 2006, between Alamo Group Inc. and JLG Industries Inc.	Filed as Exhibit 2.1 to Form 8-K, February 8, 2006
2.2	—	Asset Purchase Agreement, dated September 4, 2009, between Alamo Group Inc. and Bush Hog, LLC	Filed as Exhibit 2.1 to Form 8-K, September 10, 2009, as amended by Form 8-K/A, November 9, 2009
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	—	By-Laws of Alamo Group Inc. as amended	Filed as Exhibit 3.2 to Form 10K, March 10, 2009
10.1	—	Loan Agreement, dated April 30, 1969, between Douglass Industries, Inc. and Capital Southwest Corporation	Filed as Exhibit 10.6 to Form S-1, February 5, 1993
10.2	—	First Amendment to Loan Agreement, dated February 12, 1970, between Engler Manufacturing Corporation (formerly known as Douglass Industries, Inc.) and Capital Southwest Corporation	Filed as Exhibit 10.7 to Form S-1, February 5, 1993
10.3	—	Second Amendment to Loan Agreement, dated December 21, 1972, between Terrain King Corporation (formerly known as Engler Manufacturing Corporation and Douglass Industries, Inc.) and Capital Southwest Corporation	Filed as Exhibit 10.8 to Form S-1, February 5, 1993
10.4	—	Note and Warrant Purchase Agreement, dated October 15, 1971, among Terrain King Corporation and CSC Capital Corporation, First Dallas Capital Corporation and possibly an additional purchaser or purchasers	Filed as Exhibit 10.9 to Form S-1, February 5, 1993
10.5	—	Warrant Agreement, dated November 25, 1991, between Alamo Group Inc. and Capital Southwest Corporation	Filed as Exhibit 10.11 to Form S-1, February 5, 1993
10.6	—	Form of indemnification agreements with Directors of Alamo Group Inc.	Filed as Exhibit 10.1 to Form 10-Q, May 15, 1997
10.7	—	Form of indemnification agreements with certain executive officers of Alamo Group Inc.	Filed as Exhibit 10.2 to Form 10-Q, May 15, 1997
*10.8	—	Incentive Compensation Plan, adopted on December 9, 1997	Filed as Exhibit 10.14 to Form 10-K, March 31, 1998
*10.9	—	401(k) Restoration Plan for Highly Compensated Employees, adopted on December 9, 1997	Filed as Exhibit 10.15 to Form 10-K, March 31, 1998
*10.10	—	Amended and Restated 1994 Incentive Stock Option Plan adopted by the Board of Directors on July 7, 1999	Filed as Exhibit B to Schedule 14A, July 30, 1999
*10.11	—	First Amended and Restated 1999 Non-Qualified Stock Option Plan, adopted by the Board of Directors on February 13, 2001	Filed as Exhibit B to Schedule 14A, May 3, 2001
*10.12	—	2005 Incentive Stock Option Plan, adopted by the Board of Directors on May 4, 2005	Filed as Appendix E to Schedule 14A, May 4, 2005
*10.13	—	2009 Equity Incentive Plan, adopted by the Board of Directors on May 7, 2009	Filed as Exhibit 10.1 to Form 8-K, May 13, 2009
10.14	—	Amended and Restated Revolving Credit Agreement among Alamo Group Inc., the Guarantors, and Bank of America, N.A., Chase Manhattan Bank, and Guaranty Bank dated February 3, 2006	Filed as Exhibit 10.3 to Form 8-K, February 8, 2006
10.15	—	Fourth Amendment of the Amended and Restated Revolving Credit Agreement, dated March 30, 2006, between the Company and Bank of America, N.A., JPMorgan Chase Bank and Guaranty Bank	Filed as Exhibit 10.1 to Form 8-K, April 5, 2006



10.16	—	Fifth Amendment of the Amended and Restated Revolving Credit Agreement, dated May 7, 2007, between the Company and Bank of America, N.A., JPMorgan Chase Bank, Guaranty Bank and Rabobank	Filed as Exhibit 10.13 to Form 10 Q, May 7, 2007
10.17	—	Sixth Amendment of and Waiver under Amended and Restated Revolving Credit Agreement, dated October 14, 2008, between the Company and Bank of America, N.A., JPMorgan Chase Bank, Guaranty Bank and Rabobank	Filed as Exhibit 10.12 to Form 10K, March 10, 2009
10.18	—	Seventh Amendment of the Amended and Restated Revolving Credit Agreement, dated November 5, 2009, between the Company and Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, and Rabobank	Filed as Exhibit 10.1 to Form 10 Q, November 9, 2009
10.19		Eighth Amendment of the Amended and Restated Revolving Credit Agreement, dated March 28, 2011, between the Company and Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, and Rabobank	Filed as Exhibit 10.1 to Form 8K, March 28, 2011
*10.20	—	Form of Restricted Stock Award Agreement under the 2009 Equity Incentive Plan	Filed as Exhibit 10.2 to Form 8-K, May 13, 2009
*10.21	—	Form of Restricted Stock Unit Award Agreement under the 2009 Equity Incentive Plan	Filed as Exhibit 10.3 to Form 8-K, May 13, 2009
*10.22	—	Form of Nonqualified Stock Option Agreement under the 2009 Equity Incentive Plan	Filed as Exhibit 10.4 to Form 8-K, May 13, 2009
*10.23	—	Form of Nonqualified Stock Option Agreement under the First Amended and Restated 1999 Nonqualified Stock Option Plan	Filed as Exhibit 10.5 to Form 8-K, May 13, 2009
*10.24	—	Form of Stock Option Agreement under the 2005 Stock Option Plan	Filed as Exhibit 10.6 to Form 8-K, May 13, 2009
10.25		Investor Rights Agreement, dated October 22, 2009, between Alamo Group Inc. and Bush Hog, LLC	Filed Herewith
*10.26		Supplemental Executive Retirement Plan	Filed as Exhibit 10.1 to Form 8K, January 18, 2011
*10.27		Amended Incentive Compensation Plan	Filed as Exhibit 10.1 to Form 8K, March 11, 2011
21.1	—	Subsidiaries of the Registrant	Filed Herewith
23.1	—	Consent of KPMG LLP	Filed Herewith
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 Richard J. Wehrle under Section 906 of the Sarbanes-Oxley Act of 2002	Filed Herewith
101.INS	—	XBRL Instance Document	Filed Herewith
101.SCH	—	XBRL Taxonomy Extension Schema Document	Filed Herewith
101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document	Filed Herewith



101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document	Filed Herewith
101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document	Filed Herewith
101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document	Filed Herewith

________________________________________________________________________________________________________________________

*Compensatory Plan

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		ALAMO GROUP INC.
Date:	March 12, 2012
		/s/ Ronald A. Robinson
		Ronald A. Robinson
		President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on 12 th day of March, 2012.



Signature		Title

/s/ JAMES B. SKAGGS James B. Skaggs		Chairman of the Board & Director

/s/ RONALD A. ROBINSON Ronald A. Robinson		President, Chief Executive Officer & Director (Principal Executive Officer)

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

/s/ RICHARD J. WEHRLE Richard J. Wehrle		Vice President & Corporate Controller (Principal Accounting Officer)

/s/ HELEN W. CORNELL Helen W. Cornell		Director

/s/ JERRY E. GOLDRESS Jerry E. Goldress		Director

/s/ DAVID W. GRZELAK David W. Grzelak		Director

/s/ GARY L. MARTIN Gary L. Martin		Director

/s/ RODERICK R. BATY Roderick R. Baty		Director

Report of Management on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 using the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management concludes that, as of December 31, 2011 , the Company’s internal controls over financial reporting were effective based on the framework in Internal Control – Integrated Framework.

Tenco, Inc. ("Tenco") was acquired by Alamo Group Inc. in October 2011. The scope of management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Tenco which is included in the consolidated financial statements of Alamo Group Inc. and constituted $20.3 million of assets and $7.0 million of sales for the year ended December 31, 2011.

KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of internal control over financial reporting, which is included herein.



Date:	March 12, 2012	/s/ Ronald A. Robinson
		President & Chief Executive Officer

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

		/s/ Richard J. Wehrle
		Vice President & Corporate Controller
		Principal Accounting Officer

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders Alamo Group Inc:

We have audited Alamo Group Inc.’s internal control over financial reporting as of December 31, 2011 , based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Alamo Group Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Alamo Group Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011 , based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Alamo Group Inc. acquired Tenco, Inc. ( " Tenco " ) during 2011, and management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Tenco wh ich is included in the 2011 consolidated financial statements of Alamo Group Inc. and constituted $20.3 million of assets and $7.0 million of sales for the year ended December 31, 2011 . Our audit of internal control over financial reporting of Alamo Group Inc. also excluded an evaluation of the internal control over financial reporting of Tenco .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Alamo Group Inc. and subsidiaries as of December 31, 2011 and 2010 , and the related consolidated statements of income, stockholders’ equity, and cash flows for the three-years ended December 31, 2011 , and our report dated March 12, 2012 expressed an unqualified opinion on those consolidated financial statements.



		/s/KPMG LLP
San Antonio, Texas
March 12, 2012

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders Alamo Group Inc:

We have audited the accompanying consolidated balance sheets of Alamo Group Inc. and subsidiaries as of December 31, 2011 and 2010 , and the related consolidated statements of income, stockholders’ equity, and cash flows for the three-years ended December 31, 2011 . These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alamo Group Inc. and subsidiaries as of December 31, 2011 and 2010 , and the results of their operations and their cash flows for the three-years ended December 31, 2011 , in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Alamo Group Inc.’s internal control over financial reporting as of December 31, 2011 , based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 12, 2012 , expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.



		/s/KPMG LLP
San Antonio, Texas
March 12, 2012

Alamo Group Inc. and Subsidiaries

Consolidated Balance Sheets



	December 31,
(in thousands, except per share amounts)	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	10,288		$	30,243
Accounts receivable, net	143,934			127,388
Inventories	114,305			99,304
Deferred income taxes	3,502			3,813
Prepaid expenses	3,157			3,864
Income tax receivable	937			448
Total current assets	276,123			265,060

Property, plant and equipment	147,576			139,674
Less: Accumulated depreciation	(86,034		)	(78,490		)
	61,542			61,184

Goodwill	31,751			34,073
Intangible assets	5,500			5,500
Deferred income taxes	4,921			4,311
Other assets	1,098			855
Total assets	$	380,935		$	370,983

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	40,782		$	45,152
Income taxes payable	2,362			1,567
Accrued liabilities	30,716			29,813
Current maturities of long-term debt and capital lease obligations	1,190			2,319
Deferred income taxes	643			338
Total current liabilities	75,693			79,189

Long-term debt and capital lease obligation, net of current maturities	8,621			23,106
Accrued pension liabilities	10,792			7,151
Other long-term liabilities	4,319			2,109
Deferred income taxes	4,852			6,168
Stockholders’ equity:
Common stock, $.10 par value, 20,000,000 shares authorized;11,902,729 and 11,872,479 issued at December 31, 2011 and December 31, 2010, respectively	1,190			1,187
Additional paid-in capital	85,704			84,377
Treasury stock, at cost: 42,600 shares at December 31, 2011 and December 31, 2010	(426		)	(426		)
Retained earnings	195,814			166,589
Accumulated other comprehensive income (loss)	(5,624		)	1,533
Total stockholders’ equity	276,658			253,260
Total liabilities and stockholders’ equity	$	380,935		$	370,983

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Consolidated Statements of Income



	Year Ended December 31,
(in thousands, except per share amounts)	2011			2010			2009
Net sales:
North American
Industrial	$	229,594		$	196,783		$	177,593
Agricultural	203,993			181,349			95,188
European	170,006			160,416			182,044
Total net sales	603,593			538,548			454,825
Cost of sales	468,508			421,634			360,264
Gross profit	135,085			116,914			94,561

Selling, general and administrative expenses	92,347			86,041			76,100
Gain on bargain purchase	(7,745		)	—			(30,177		)
Goodwill impairment	1,898			—			14,104
Income from operations	48,585			30,873			34,534

Interest expense	(2,422		)	(3,664		)	(4,766		)
Interest income	246			1,533			713
Other income (expense), net	848			290			625
Income before income taxes	47,257			29,032			31,106

Provision for income taxes	15,187			7,915			12,473
Net income	$	32,070		$	21,117		$	18,633

Net income per common share:
Basic	$	2.71		$	1.79		$	1.80
Diluted	$	2.68		$	1.78		$	1.80
Average common shares:
Basic	11,848			11,782			10,330
Diluted	11,966			11,893			10,363

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity



	Common Stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income			Total Stock- holders’ Equity
(in thousands)	Shares	Amount
Balance at December 31, 2008	9,922	$	996	$	55,683	$	(426	)	$	132,064		$	(4,005	)	$	184,312
Net income	—	—		—		—			18,633			—			18,633
Translation adjustment	—	—		—		—			—			6,595			6,595
Unrealized derivative gain, net of taxes	—	—		—		—			—			816			816
Net actuarial gain arising during period net of taxes	—	—		—		—			—			1,741			1,741
Total comprehensive income	—	—		—		—			—			—			27,785
Tax effect of non-qualified stock options	—	—		122		—			—			—			122
Stock-based compensation	—	—		543		—			—			—			543
Issuance of stock for acquisition	1,700	170		25,268		—			—			—			25,438
Exercise of stock options	125	13		1,105		—			—			—			1,118
Dividends paid ($.24 per share)	—	—		—		—			(2,399		)	—			(2,399		)
Balance at December 31, 2009	11,747	$	1,179	$	82,721	$	(426	)	$	148,298		$	5,147		$	236,919
Net income	—	—		—		—			21,117			—			21,117
Translation adjustment	—	—		—		—			—			(3,659		)	(3,659		)
Unrealized derivative gain, net of taxes	—	—		—		—			—			573			573
Net actuarial (loss) arising during period net of taxes	—	—		—		—			—			(528		)	(528		)
Total comprehensive income	—	—		—		—			—			—			17,503
Stock-based compensation	—	—		674		—			—			—			674
Exercise of stock options	83	8		982		—			—			—			990
Dividends paid ($.24 per share)	—	—		—		—			(2,826		)	—			(2,826		)
Balance at December 31, 2010	11,830	$	1,187	$	84,377	$	(426	)	$	166,589		$	1,533		$	253,260
Net income	—	—		—		—			32,070			—			32,070
Translation adjustment	—	—		—		—			—			(2,879		)	(2,879		)
Unrealized derivative gain, net of taxes	—	—		—		—			—			234			234
Net actuarial (loss) arising during period net of taxes	—	—		—		—			—			(4,512		)	$	(4,512	)
Total comprehensive income	—	—		—		—			—			—			24,913
Tax effect of non-qualified stock options	—	—		63		—			—			—			63
Stock-based compensation	—	—		986		—			—			—			986
Exercise of stock options	30	3		278		—			—			—			281
Dividends paid ($.24 per share)	—	—		—		—			(2,845		)	—			(2,845		)
Balance at December 31, 2011	11,860	$	1,190	$	85,704	$	(426	)	$	195,814		$	(5,624	)	$	276,658

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows



	Year Ended December 31,
(in thousands)	2011			2010			2009
Operating Activities
Net income	$	32,070		$	21,117		$	18,633
Adjustments to reconcile net income to cash provided by operating activities:
Provision for doubtful accounts	992			1,112			546
Depreciation	10,418			10,558			8,706
Amortization of intangibles	—			342			79
Amortization of debt issuance	188			375			63
Gain on bargain purchase	(7,745		)	—			(30,177		)
Goodwill impairment charge	1,898			—			14,104
Stock-based compensation	986			674			543
Excess tax benefits from stock-based payment arrangements	(63		)	—			(122		)
Provision for deferred income tax expense (benefit)	850			(6,384		)	8,896
Gain on sale of equipment	(263		)	(833		)	(59		)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	(15,152		)	(16,615		)	40,285
Inventories	(8,673		)	24,603			32,432
Prepaid expenses and other	(73		)	(1,061		)	3,177
Trade accounts payable and accrued liabilities	(4,178		)	9,133			(25,408		)
Income taxes payable	400			(268		)	2,423
Other assets and liabilities, net	(740		)	(876		)	(2,035		)
Net cash provided by operating activities	10,915			41,877			72,086

Investing Activities
Acquisitions, net of cash acquired	(5,933		)	—			—
Purchase of property, plant and equipment	(6,369		)	(4,980		)	(3,453		)
Proceeds from sale of property, plant and equipment	440			2,014			922
Net cash used in investing activities	(11,862		)	(2,966		)	(2,531		)

Financing Activities
Net change in bank revolving credit facility	(14,000		)	(20,000		)	(54,000		)
Principal payments on long-term debt and capital leases	(2,570		)	(4,545		)	(2,255		)
Proceeds from issuance of long-term debt	—			368			1,387
Debt issuance cost	—			—			(938		)
Dividends paid	(2,845		)	(2,826		)	(2,399		)
Proceeds from sale of common stock	281			990			1,118
Excess tax benefits from stock-based payment arrangements	63			—			122
Net cash provided by (used in) financing activities	(19,071		)	(26,013		)	(56,965		)

Effect of exchange rate changes on cash	63			(429		)	652
Net change in cash and cash equivalents	(19,955		)	12,469			13,242
Cash and cash equivalents at beginning of the year	30,243			17,774			4,532
Cash and cash equivalents at end of the year	$	10,288		$	30,243		$	17,774


Cash paid during the year for:
Interest	$	2,295		$	3,597		$	5,179
Income taxes	15,247			12,999			5,181

See accompanying notes.

Alamo Group Inc.

Notes to Consolidated Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES

Description of the Business and Segments

The Company manufactures, distributes and services high quality tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, excavators, vacuum trucks, snow removal equipment, pothole patchers, zero turn radius mowers, agricultural implements and related aftermarket parts and services.

The Company manages its business in three principal reporting segments: North American Agricultural, North American Industrial and European, which are discussed in Notes 15 and 16.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Alamo Group Inc. and its subsidiaries (the “Company” or “Alamo Group”), all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain reclassifications have been made to prior year balances in order to conform to the current year’s presentation. The accompanying statement of income reflects the correction of a misclassification of freight revenue for the periods. Freight billed to customers was previously recorded as a reduction of cost of sales and has been reclassified to increase sales and cost of sales in accordance with ASC 605-45-45-20. The reclassification of revenue and cost of sales for the years ended December 31, 2011 , 2010 and 2009 resulted in an increase of approximately $15.6 million, $14.0 million and $8.3 million, respectively, with no impact on reported net income.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Judgments related to asset impairment and certain reserves are particularly subject to change. Actual results could differ from those estimates.

Foreign Currency

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the end of the year. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive income within the statement of stockholders’ equity.

The Company enters into foreign currency forward contracts to hedge its exposure to certain foreign currency transactions. The Company does not hold or issue financial instruments for trading purposes. Changes in the market value of the foreign currency instruments are recognized in the financial statements upon settlement of the hedged transaction. On December 31, 2011 , the Company had $ 3,460,000 in outstanding forward exchange contracts related to sales. The unrealized gain of the December 31, 2011 contracts that the Company expects to incur during the first quarter of 2012 is approximately $ 63,000 , net of taxes. Foreign currency transaction gains or losses are included in Other income (expense), net. For 2011 , 2010 and 2009 , such transactions netted gains of $ 816,000 , $ 265,000 , and $ 625,000 , respectively.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The credit risk is limited because of the large numbers and types of customers and their

geographic dispersion.

Inventories

Inventories of U.S. operating subsidiaries are stated at the lower of cost (last-in, first-out method) (“LIFO”) or market, and the Company’s international subsidiaries’ inventories are stated at the lower of cost (first-in, first-out) (“FIFO”) or market.

Property, Plant and Equipment

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

Goodwill

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Goodwill is reviewed for impairment utilizing a qualitative assessment or a two-step process. We have an option to make a qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that an impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit's goodwill, the difference is recognized as an impairment loss.

The Company recognized goodwill impairment at two of its French operations, SMA and Rousseau, in the Company's European division of $1,898,000 in 2011 and no goodwill impairment in 2010. During the 2011 impairment analysis review, it was noted that even though the Schwarze, Rivard and Faucheux reporting unit’s fair value was above carrying value it was not materially different. On December 31, 2011 , there was approximately $6.8 million, $11.6million and $0.6 million of goodwill related to the Schwarze, Rivard and Faucheux reporting units respectively. These reporting units would be most likely affected by changes in the Company’s assumptions and estimates. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, such as changes in the reporting unit’s future growth rates, discount rates, etc.

public company market multiple approach. The Company's annual impairment test is performed during the fourth quarter of each fiscal year. Given the current market conditions and continued economic uncertainty, the fair value of the Company's components could deteriorate which could result in the need to record impairment charges in future periods. The Company also monitors potential triggering events including changes in the business climate in which it operates, attrition of key personnel, volatility in the capital markets, the Company's market capitalization compared to its book value, the Company's recent operating performance, and the Company's financial projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in future impairment charges. In particular, since the Schwarze, Rivard and Faucheux, reporting unit's carrying value is not materially different from fair value, any changes to the Company's assumptions could lead to an indicated impairment in step one, requiring the Company to proceed to step two and potentially record an impairment charge.

See Note 6 to the Consolidated Financial Statements for more information regarding goodwill.

Intangible Assets

The Company’s definite-lived intangible assets consist of trade names. The net book value of the trademarks was $ 5,500,000 as of December 31, 2011 and 2010 . During the fourth quarter of 2010, the Company wrote off $224,000 in older patents which the Company believes no longer provide a competitive advantage.

Intangible assets with indefinite useful lives not subject to amortization consist of the Gradall trade name valued at $3,600,000 and the Bush Hog trade name valued at $1,900,000 on December 31, 2011 .

The Company tests its indefinite-lived intangible assets for impairment on an annual basis at year-end, or more frequently if an event occurs or circumstances change that indicate that the fair value of an indefinite-lived intangible asset could be below its carrying amount. The impairment test consists of comparing the fair value of the indefinite-lived intangible asset, determined using the relief from royalty method, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value.

Identifiable intangible assets are recorded at estimated cost. Definite-lived intangible assets are amortized over their estimated useful lives.

Pensions

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 were frozen with respect to both future benefit accruals and future new entrants.

The Gradall Company Hourly Employees’ Pension Plan covers approximately 330 former employees and 150 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 Gradall Company Employees’ Retirement Plan covers approximately 235 former employees and 94 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 Company recognizes the funded status of the defined benefit pension plans as a liability in its statement of financial position and recognizes any changes in that funded status in the year in which the changes occur through other comprehensive income.

Related Party Transactions

There were no reportable relationships or related party transactions for the years ended December 31, 2011 and 2010 . During 1999, the Company approved a supplemental retirement benefit for Donald J. Douglass which is paid on a quarterly basis over a period of fourteen and one-half years that began in the year 2000. The balance on December 31, 2011 and 2010 was $ 184,000 and $ 248,000 , respectively, and is included in the Accrued liabilities

and Other long-term liabilities sections of the Company’s consolidated balance sheet.

Revenue Recognition

The Company recognizes revenue when each of the following four criteria are met: 1) a contract or sales arrangement exists; 2) products have been shipped per agreed terms and title has been transferred or services have been rendered; 3) the prices of the products or services are fixed or determinable; and 4) collectability is reasonably assured. Pre-season sales orders are solicited in the fall in advance of the dealer’s sales season in the spring and summer. Pre-season sales orders are shipped beginning in the fall and continuing through the spring and represent an opportunity for the Company’s factories to level their production/shipping volumes through the winter months. These pre-season shipments carry descending discounts in conjunction with delayed payment terms of up to six months from the dealer’s requested delivery date. Revenue from sales is recorded net of a provision for discounts that are anticipated to be earned and deducted at time of payment by the customer. These approximated discounts represent an average of historical amounts taken and are adjusted as program terms are changed. The reserves for discounts are reviewed and adjusted quarterly. From time to time, revenue is recognized under a bill and hold arrangement. Revenue recognized under bill and hold arrangements for 2011, 2010, and 2009 was immaterial.

Accounting for Internal Use Software

The Company capitalizes certain costs associated with the development and installation of internal use software. Internal use software costs are expensed or capitalized depending on whether they are incurred in the preliminary project stage, application development stage or the post-implementation stage. Amounts capitalized are amortized over the estimated useful lives of the software.

The book value of capitalized software net of depreciation is approximately $ 1,320,000 and $ 1,779,000 on December 31, 2011 and December 31, 2010 , respectively. Software depreciation expense was $ 822,000 , $ 749,000 and $ 721,000 in 2011 , 2010 and 2009 , respectively. Internal use software is amortized for financial reporting purposes using the straight-line method over the estimated life of two to seven years.

Shipping and Handling Costs

The Company’s policy is to include shipping and handling costs in costs of goods sold.

Advertising

We charge advertising costs to expense as incurred. Advertising and marketing expense related to operations for fiscal years 2011 , 2010 and 2009 was approximately $ 6,441,000 , $ 5,135,000 and $ 4,378,000 , respectively. Advertising and marketing expenses are included in Selling, General and Administrative expenses (“SG&A”).

Research and Development

Product development and engineering costs charged to SG&A amounted to $ 6,017,000 , $ 5,774,000 , and $ 4,762,000 for the years ended December 31, 2011 , 2010 and 2009 , respectively.

Legal Costs

The Company’s policy is to accrue for legal costs expected to be incurred in connection with loss contingencies.

Federal Income Taxes

Deferred tax assets and liabilities are determined based on differences between the financial reporting basis and tax basis of assets and liabilities and are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences.

We do not provide for a U.S. income tax liability on undistributed earnings of our foreign subsidiaries. The earnings of non-U.S. subsidiaries, which reflect full provision for non-U.S. income taxes, are currently indefinitely reinvested in non-U.S. operations.

Business Combinations

Effective January 1, 2009, we adopted the new provisions of ASC Topic 805, “Business Combinations,” which address the recognition and measurement of (i) identifiable assets acquired or liabilities assumed, and any non-controlling interest in the acquiree, and (ii) goodwill acquired or gain from a bargain purchase. In addition, acquisition-related costs are accounted for as expenses in the period in which the costs are incurred and the services are received. These provisions were applied to the acquisition of certain assets and liabilities of Bush Hog LLC in the fourth quarter of 2009 and Tenco in the fourth quarter of 2011, which is discussed in Note 20.

Stock-Based Compensation

We are using the modified-prospective transition method; however, for unvested equity awards outstanding we continue to amortize those awards using the minimum value method. Measurement and recognition of compensation expense for all share-based payment awards made to employees and directors is recognized based on estimated fair values. We use the Black-Scholes pricing model to determine the fair value of the stock options on the grant dates for stock awards made and we amortize the fair value of share-based payments on a straight-line basis over the requisite service periods of the award, which is generally the vesting period.

The Black-Scholes valuation model requires us to make assumptions and judgments about the variables used in the calculation. These variables and assumptions include the fair value of our common stock, expected term, the expected volatility, the risk-free interest rate, expected dividends, and the estimated rate of forfeitures of unvested stock options.

The Company calculated the fair value for options using a Black-Scholes option-pricing model with the following weighted-average assumptions for 2011 , 2010 , and 2009 :



	December 31,
	2011		2010		2009

Risk-free interest rate	2.64	%	3.04	%	2.67	%
Dividend yield	1.2	%	1.2	%	1.2	%
Volatility factors	46.7	%	44.3	%	42.8	%
Weighted-average expected life	8.0 years		8.0 years		7.5 years

Fair Value Measurements and Disclosures

In January 2010, the provisions of ASC Topic 820 were modified to require additional disclosures, including transfers in and out of Level 1 and 2 fair value measurements and the gross basis presentation of the reconciliation of Level 3 fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for disclosures related to Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 (including interim periods). Early adoption was permitted. We have adopted all of these provisions of ASC Topic 820 effective December 31, 2009. Since only disclosures are affected by these requirements, the adoption of these provisions did not affect our financial position or results of operations.

2. EARNINGS PER SHARE

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



(in thousands, except per share amounts)	2011		2010		2009

Net income	$	32,070	$	21,117	$	18,633

Average common shares:
Basic (weighted-average outstanding shares)	11,848		11,782		10,330
Dilutive potential common shares from stock options	118		111		33
Diluted (weighted-average outstanding shares)	11,966		11,893		10,363

Basic earnings per share	$	2.71	$	1.79	$	1.80

Diluted earnings per share	$	2.68	$	1.78	$	1.80

Stock options totaling 78,337 shares in 2011 , 133,700 shares in 2010 , and 304,533 shares in 2009 were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive.

3. VALUATION AND QUALIFYING ACCOUNTS

Valuation and qualifying accounts included the following:



(in thousands)	Balance Beginning of Year		Net Charged to Costs and Expenses		Translations, Reclassifications and Acquisitions			Net Write-Offs or Discounts Taken			Balance End of Year
2011
Allowance for doubtful accounts	$	2,852	$	992	$	(65	)	$	(564	)	$	3,215
Reserve for sales discounts	11,903		62,935		9			(60,280		)	14,567
Reserve for inventory obsolescence	7,506		3,403		(123		)	(3,156		)	7,630
Reserve for warranty	5,554		6,070		248			(6,559		)	5,313
2010
Allowance for doubtful accounts	$	2,548	$	1,112	$	(81	)	$	(727	)	$	2,852
Reserve for sales discounts	3,803		51,813		(2		)	(43,711		)	11,903
Reserve for inventory obsolescence	9,060		2,811		(230		)	(4,135		)	7,506
Reserve for warranty	5,972		7,225		(173		)	(7,470		)	5,554
2009
Allowance for doubtful accounts	$	2,430	$	546	$	114		$	(543	)	$	2,548
Reserve for sales discounts	6,849		25,514		5			(28,565		)	3,803
Reserve for inventory obsolescence	8,978		1,515		163			(1,596		)	9,060
Reserve for warranty	4,764		6,609		1,250			(6,651		)	5,972

Allowance for Doubtful Accounts

The Company evaluates all receivables that are over 60 days old and will reserve specifically on a 90-day basis. The Company has a secured or insured interest on most of its wholegoods that each customer purchases. This allows the Company, in times of a difficult economy when the customer is unable to pay or has filed for bankruptcy (usually Chapter 11), to repossess the customer’s inventory. This also allows Alamo Group to maintain only a reserve over its cost, which usually represents the margin on the original sales price.

Sales Discounts

On December 31, 2011 , the Company had $ 14,567,000 in reserves for sales discounts compared to $ 11,903,000 on December 31, 2010 on product shipped to our customers under various promotional programs. The increase was due primarily to higher sales activity of the Company’s agricultural products during the pre-season, which runs from September to December of each year with orders shipped through the first quarter of 2011. The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time.

The Company bases its reserves on historical data relating to discounts taken by the customer under each

program. Historically, between 85% and 95% of the Company’s customers who qualify for each program actually take the discount that is available.

Inventories – Obsolete and Slow Moving

Warranty

The current liability warranty reserve balance was $ 5,313,000 on December 31, 2011 and $ 5,554,000 on December 31, 2010 . The decrease was mainly from the Company’s Agricultural Division.

4. INVENTORIES

Inventories valued at LIFO represented 61% and 63% of total inventory for the years ended December 31, 2011 and 2010 , respectively. The excess of current costs over LIFO-valued inventories was $ 9,459,000 and $ 7,654,000 on December 31, 2011 and December 31, 2010 , respectively. (The $ 1,805,000 increase in LIFO reserve during 2011 came from increases in inventory levels within U.S. operations. The impact of the application of the LIFO method on the Statement of Income for the years ended December 31, 2011 , was a decrease to cost of sales of $ 1,805,000 , and a decrease in 2010 of $ 1,452,000 and a decrease in 2009 of $3,685,000.) Inventories consisted of the following on a cost basis, net of reserves:



	December 31,
(in thousands)	2011		2010
Finished goods and parts	$	90,226	$	80,102
Work in process	10,570		9,857
Raw materials	13,509		9,345
	$	114,305	$	99,304

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:



	December 31,
(in thousands)	2011			2010			Useful Lives
Land	$	8,897		$	8,656
Buildings and improvements	59,068			55,237			10-20 yrs.
Machinery and equipment	58,795			55,438			3-15 yrs.
Office furniture and equipment	5,882			5,769			3-7 yrs.
Computer software	10,368			10,111			2-7 yrs.
Transportation equipment	4,566			4,463			3 yrs.
	147,576			139,674
Accumulated depreciation	(86,034		)	(78,490		)
	$	61,542		$	61,184

Property, plant and equipment on December 31, 2011 and December 31, 2010 include $ 16,772,000 and $ 16,955,000 , respectively, for items listed above that are held under capital leases. Accumulated depreciation relating to the capital leases on December 31, 2011 and 2010 was $ 8,003,000 and $ 7,428,000 , respectively. Amortization related to the capital lease is included in depreciation expense.

6. GOODWILL

The changes in the carrying amount of goodwill for the twelve months ended December 31, 2009 , 2010 and 2011 are as follows:



(in thousands)
Balance at December 31, 2008	$	48,107
Translation adjustment	1,204
Goodwill impairment	(14,104		)
Balance at December 31, 2009	$	35,207
Translation adjustment	(1,134		)
Balance at December 31, 2010	$	34,073
Translation adjustment	(424		)
Goodwill impairment	(1,898		)
Balance at December 31, 2011	$	31,751

7. ACCRUED LIABILITIES

Accrued liabilities consist of the following balances:



	December 31,
(in thousands)	2011		2010
Salaries, wages and bonuses	$	13,956	$	12,605
Warranty	5,313		5,554
State taxes	4,473		5,323
Retirement	1,789		2,210
Other	5,185		4,121
	$	30,716	$	29,813

8. LONG-TERM DEBT

The components of long-term debt are as follows:



	December 31,
(in thousands)	2011		2010
Bank revolving credit facility	$	7,000	$	21,000
Capital lease obligations	646		1,763
Other notes payable	2,165		2,662
Total debt	9,811		25,425
Less current maturities	1,190		2,319
Total long-term debt	$	8,621	$	23,106

On November 6, 2009, the Company entered into the Seventh Amendment of the Amended and Restated Revolving Credit Agreement with Bank of America, N.A., Wells Fargo Bank, N.A., BBVA Compass Bank, and Rabobank, as its lenders. The revolving credit line remained at $125.0 million. Prior to the execution of this Amendment, BBVA Compass Bank acquired certain assets of Guaranty Bank which included this credit facility, and JPMorgan Chase Bank assigned its interest to Well Fargo Bank, N.A. The purpose of the amendment was to add Bush Hog as a member of the Obligated Group and pledge a first priority security interest in certain U.S. assets (accounts receivable, inventory, equipment, trademarks and trade names) of the Borrower and each member of the Obligated Group. The Lenders agreed to increase the operating leverage ratio during the next three quarters and to add a new EBIT to Interest Expense covenant in exchange for a commitment fee and an increase in the Applicable Interest Margin over LIBOR or Prime Rate advances.

borrowings.

On May 13, 2008, Alamo Group Europe Limited expanded its annual overdraft facility with Lloyd’s TSB Bank plc from £1.0 million to £ 5.5 million . The facility was renewed on October 29, 2011 and outstandings currently bear interest at Lloyd’s Base Rate plus 1.4% per annum. The facility is unsecured but guaranteed by the U.K. subsidiaries of Alamo Group Europe Limited. As of December 31, 2011 , there were no outstanding balances in British pounds borrowed against the U.K. overdraft facility.

There are additional annual lines of credit: for the Company’s French operations in the amount of 6,200,000 Euros, which includes the Rivard credit facilities; for our Canadian operation in the amount of 3,500,000 Canadian dollars; and for our Australian operation in the amount of 800,000 Australian dollars. As of December 31, 2011 , 181,000 Euros were borrowed against the French line of credit; no Canadian dollars were outstanding on the Canadian line of credit; and 350,000 Australian dollars were outstanding under its facility. The Canadian and Australian revolving credit facilities are guaranteed by the Company. The Company’s borrowing levels for working capital are seasonal with the greatest utilization generally occurring in the first quarter and early spring.

As of December 31, 2011 , the Company is in compliance with the terms and conditions of its credit facilities.

The aggregate maturities of long-term debt, as of December 31, 2011 , are as follows: $ 1,190,000 in 2012 ; $ 492,000 in 2013 ; $ 335,000 in 2014 ; $ 242,000 in 2015 ; $ 7,241,000 in 2016 ; and $ 311,000 thereafter.

The fair value of the Company’s debt is based on secondary market indicators. Since the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral, amortization schedule and liquidity. The carrying amount approximates fair value.

9. DERIVATIVES AND HEDGING

Most of the Company’s outstanding debt is advanced from a revolving credit facility that accrues interest at a contractual margin over current market interest rates. The Company’s financing costs associated with this credit facility can materially change with market increases and decreases of short-term borrowing rates, specifically London Interbank Offered Rate (“LIBOR”). During the second quarter of 2007, the Company entered into two interest rate swap agreements with JPMorgan that hedge future cash flows related to its outstanding debt obligations. One swap had a three-year term and fixed the LIBOR base rate at 4.910% covering $ 20 million of this debt, which expired on March 31, 2010. The other had a four-year term and fixed the LIBOR base rate at 4.935% covering an additional $ 20 million of these variable rate borrowings and expired on March 31, 2011. At December 31, 2011 there was zero liability related to the expired interest rate swaps.

10. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. There is a three-tier fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In Fair value measurements are classified under the following hierarchy:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

Level 3 – Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable

When available, the Company uses quoted market prices to determine fair value, and the Company classifies such measurements within Level 1. In some cases where market prices are not available, the Company makes use of observable market-based inputs to calculate fair value, in which case the measurements are classified with Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that

use, where possible, current market-based parameters such as interest rates, yield curves, currency rates, etc. These measurements are classified within Level 3.

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

11. INCOME TAXES

The jurisdictional components of income before taxes consist of the following:



	December 31,
(in thousands)	2011		2010		2009
Income before income taxes:
Domestic	$	28,118	$	15,639	$	13,381
Foreign	19,139		13,393		17,725
	$	47,257	$	29,032	$	31,106

The components of income tax expense (benefit) consist of the following:



	December 31,
(in thousands)	2011		2010			2009
Current:
Domestic	$	7,774	$	8,995		$	(1,059	)
Foreign	5,424		3,851			5,017
State	1,139		1,453			(381		)
	14,337		14,299			3,577
Deferred:
Domestic	397		(5,308		)	8,017
Foreign	331		(284		)	(641		)
State	122		(792		)	1,520
	850		(6,384		)	8,896
Total income taxes	$	15,187	$	7,915		$	12,473

The difference between income tax expense (benefit) for financial statement purposes and the amount of income tax expense computed by applying the domestic statutory income tax rate of 34% to income loss before income taxes consist of the following:



	December 31,
(in thousands)	2011			2010			2009
Domestic statutory rate at 34%	$	16,067		$	9,871		$	10,576
Increase (reduction) from:
Jurisdictional rate differences	(1,273		)	(986		)	(581		)
Goodwill impairment	633			—			2,686
Valuation allowance	—			—			(793		)
Stock based compensation	161			135			138
U.S. state taxes	740			436			746
Domestic Production Deduction	(796		)	(744		)	(50		)
R&E Credit Reserve	(252		)	(1,068		)	—
Other, net	(93		)	271			(249		)
Provision for income taxes	$	15,187		$	7,915		$	12,473
Effective tax rate	32		%	27		%	40		%

Deferred income taxes arise from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The components of the Company’s deferred income tax assets and liabilities consist of the following:



	December 31,
(in thousands)	2011			2010
Deferred income tax assets:
Inventory basis difference	$	1,464		$	1,219
Accounts receivable reserve	320			665
Stock based compensation	518			325
Pension liability	3,839			2,717
Employee benefit accrual	382			347
Environmental reserve	450			568
Product liability and warranty reserves	797			1,035
Derivative liability	—			88
Expenses not deductible for tax purposes	—			547
Foreign net operating loss	374			613
State net operating loss	279			—

Total deferred income tax assets	$	8,423		$	8,124

Deferred income tax liabilities:
Inventory basis differences	$	(246	)	$	—
Depreciation	(3,924		)	(5,444		)
Intangible assets	(710		)	(435		)
Deferred revenue	(218		)	(289		)
Expenses not deductible for tax purposes	(397		)	(338		)

Total deferred income tax liabilities	$	(5,495	)	$	(6,506	)

Net deferred income tax assets	$	2,928		$	1,618

As of December 31, 2011 , the Company had foreign deferred tax assets consisting of foreign net operating losses and other tax benefits available to reduce future taxable income in a foreign jurisdiction. These foreign jurisdictions' net operating loss carryforwards are in the approximate amount of $4.9 million with an unlimited carryforward period. The Company also has U.S. state net operating loss carryforwards in the approximate amount of $5.6 million which expire from 2014 to 2028.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on the expectation of future taxable income and that the deductible temporary differences will offset existing taxable temporary differences, the Company believes it is more likely than not that it will realize the benefits of these deductible differences.

Deferred income taxes have not been provided on the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and the respective tax bases of the Company’s foreign subsidiaries, based on the determination that such differences are essentially permanent in duration in that the earnings of the subsidiaries are expected to be indefinitely reinvested in foreign operations. As of December 31, 2011 , the cumulative undistributed earnings of these subsidiaries approximated $ 115,625,000 . If these earnings were not considered indefinitely reinvested, deferred income taxes would have been recorded after the consideration of foreign tax credits. At this time, it is not practicable to estimate the amount of additional income taxes that might be payable on those earnings, if distributed.

The Company adopted the provisions of FASB ASC Section 740-10-25 (formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”) on January 1, 2007. During the 3rd quarter of 2010, the Company completed a research and development credit study (R&D study) related to prior year tax returns. The R&D study

resulted in tax credits of approximately $1,1000,000. The Company has recorded an unrecognized tax benefit in the amount of $193,000 as of December 31, 2010. In 2011, the Company recorded an additional R&D tax credit of $252,000 for federal and $164,000 for state, and recorded an additional unrecognized tax benefit of approximately $42,000 that if recognized would affect our annual effective tax rate. We do not expect our unrecognized tax benefits to change significantly over the next 12 months.



	December 31,
(in thousands)	2011		2010
Balance as of beginning of year	$	193,000	$	—
Addition for tax positions related to the current year	42,000		193,000
Reductions for tax positions related to prior years	—		—
Balance as of end of year	$	235,000	$	193,000

The Company adopted the policy to include interest and penalty expense related to income taxes as interest and other expense, respectively. As of December 31, 2011 , no interest or penalties has been or is required to be accrued. The Company’s open tax years for its federal and state income tax returns are for the tax years ended 2006 through 2011 .

12. COMMON STOCK

The Company was authorized by its Board of Directors in 1997 to repurchase up to 1,000,000 shares of the Company’s common stock to be funded through working capital and credit facility borrowings. No shares were repurchased in 2010 or 2011 . The authorization to repurchase up to 1,000,000 shares remains available less 42,600 shares, previously purchased.

Subsequent to December 31, 2011 , the Company declared and paid a dividend of $.06 per share.

13. STOCK OPTIONS

Incentive Options

On April 28, 1994, the stockholders approved the 1994 Incentive Stock Option Plan (“1994 ISO Plan”) for key employees. Each option becomes vested and exercisable for up to 20% of the total optioned shares each year after grant. Under the terms of this plan, the exercise price of the shares subject to each option granted would not be less than the fair market value of the common stock at the date the option is granted.

There are 58,030 shares outstanding under this option plan. No further option grants can be made under this plan.

On May 3, 2005, the stockholders of the Company approved the 2005 Incentive Stock Option Plan (“2005 ISO Plan”) and the Company reserved 500,000 shares of common stock for options to be issued under the 2005 ISO Plan . During the years ended December 31, 2011 , 2010 and 2009 , options to purchase 35,000 shares, 19,000 shares and 99,000 shares, respectively, were granted under this plan. Each option becomes vested and exercisable for up to 20% of the total optioned shares one year following the grant of the option and for an additional 20% of the total optioned shares after each succeeding year until the option is fully exercisable at the end of the fifth year.

Following is a summary of activity in the Incentive Stock Option Plans for the periods indicated:



	2011				2010				2009
	Shares		Exercise Price*		Shares		Exercise Price*		Shares		Exercise Price*
Options outstanding at beginning of year	360,130		$	18.29	345,480		$	18.73	253,980		$	20.44
Granted	35,000		26.45		19,000		24.69		99,000		11.45
Exercised	(15,650	)	12.03		(4,350	)	12.98		—		—
Cancelled	(2,000	)	24.69		—		—		(7,500	)	20.04
Options outstanding at end of year	377,480		19.27		360,130		18.29		345,480		18.73
Options exercisable at end of year	243,180		$	19.32	209,530		$	18.86	156,780		$	18.74
Options available for grant at end of year	162,500				195,500				214,500

*Weighted Averages

Options outstanding and exercisable at December 31, 2011 were as follows:



Qualified Stock Options	Options Outstanding				Options Exercisable
	Shares	Remaining Contractual Life (yrs)*	Exercise Price*		Shares	Exercise Price*
Range of Exercise Price
$11.45 - $17.85	137,480	5.93	$	12.27	78,980	$	12.87
$19.79 - $26.45	240,000	6.35	$	23.29	164,200	$	22.42
Total	377,480				243,180

*Weighted Averages

The weighted-average grant-date fair values of options granted during 2011 , 2010 , and 2009 were $ 12.50 , $ 11.40 and $ 5.08 , respectively. As of December 31, 2011 , there was $ 816,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a period of five years.

Non-qualified Options

On May 7, 2009, the stockholders of the Company approved the 2009 Equity Incentive Plan and the Company reserved 400,000 shares of common stock for this plan. Options become vested and exercisable for up to 20% of the total optioned shares one year following the grant of the option and for an additional 20% of the total optioned shares after each succeeding year until the option is fully exercisable at the end of the fifth year.

Following is a summary of activity in the Non-Qualified Stock Option Plans for the periods indicated:



	2011				2010				2009
	Shares		Exercise Price*		Shares		Exercise Price*		Shares		Exercise Price*
Options outstanding at beginning of year	102,400		$	15.62	186,000		$	14.57	226,000		$	12.62
Granted	30,000		26.45		—		—		85,000		11.45
Exercised	(14,600	)	11.45		(78,600	)	12.52		(125,000	)	8.94
Cancelled	(5,000	)	25.18		(5,000	)	25.18		—		—
Options outstanding at end of year	112,800		18.62		102,400		15.62		186,000		14.57
Options exercisable at end of year	37,400		$	19.57	30,300		$	20.79	79,000		$	15.17
Options available for grant at end of year	320,500				364,000				367,000

*Weighted Averages

Options outstanding and exercisable as of December 31, 2011 were as follows:



Non-Qualified Stock Options	Options Outstanding				Options Exercisable
	Shares	Remaining Contractual Life(yrs)*	Exercise Price*		Shares	Exercise Price*
Range of Exercise Price
$11.45 - $12.10	54,300	8.00	$	11.45	12,900	$	11.45
$13.96 - $19.79	6,000	4.00	19.79		6,000	19.79
$25.02 - $26.45	52,500	8.24	$	25.90	18,500	$	25.16
Total	112,800				37,400

*Weighted Averages

The weighted-average grant-date fair values of options granted during 2011 and 2009 were $ 12.50 and $5.08, respectively. No options were granted in 2010. There were 30,000 options granted in 2011 . As of December 31, 2011 , there was $ 478,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a period of five years.

During 2011 , 2010 and 2009 , 14,600 , 78,600 , and 125,000 non-qualified options, respectively, were exercised, $ 167,000 , $ 984,000 , and $ 1,117,000 of cash receipts were received, respectively, and tax deductions of $ 178,000 , $ 796,000 , and $ 289,000 were realized, respectively, for the tax deductions from option exercises.

Restricted Stock Units

Following is a summary of activity in the Restricted Stock Units for the periods indicated:



	Shares		Price		Weighted-average remaining contractual term (in years)
Options outstanding at beginning of year	9,000		$	15.86
Granted	13,500		26.08		—
Vested	(2,750	)	15.06		—
Forfeited or Cancelled	—		—		—
Options outstanding at end of year	19,750		$	22.96	3.48

Restricted stock units vest 25% after one year following the award date and for an additional 25% of total awarded shares each succeeding year until fully vested. As of December 31, 2011 , there was $ 240,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a period of four years.

14. 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 235 former employees and 94 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 following tables set 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 these plans. The measurement dates of the assets and liabilities of both plans were December 31 of the respective years presented.



	Year Ended December 31, 2011
(in thousands)	Hourly Employees’ Pension Plan			Employees’ Retirement Plan			Total
Change in projected benefit obligation
Benefit obligation at beginning of year	$	9,511		$	16,427		$	25,938
Service cost	8			4			12
Interest cost	469			858			1,327
Liability actuarial (gain)/loss	1,098			2,650			3,748
Benefits paid	(632		)	(701		)	(1,333		)
Benefit obligation at end of year	10,454			19,238			29,692
Change in fair value of plan assets
Fair value of plan assets at beginning of year	6,303			12,485			18,788
Return on plan assets	(73		)	(65		)	(138		)
Employer contributions	1,065			519			1,584
Benefits paid	(632		)	(702		)	(1,334		)
Fair value of plan assets at end of year	6,663			12,237			18,900
Underfunded status – December 31, 2011	$	(3,791	)	$	(7,001	)	$	(10,792	)
Accumulated benefit obligation – December 31, 2011	$	10,454		$	19,238		$	29,692



	Year Ended December 31, 2010
(in thousands)	Hourly Employees’ Pension Plan			Employees’ Retirement Plan			Total
Change in projected benefit obligation
Benefit obligation at beginning of year	$	9,067		$	15,056		$	24,123
Service cost	6			3			9
Interest cost	498			864			1,362
Liability actuarial (gain)/loss	578			1,119			1,697
Benefits paid	(638		)	(615		)	(1,253		)
Benefit obligation at end of year	9,511			16,427			25,938
Change in fair value of plan assets
Fair value of plan assets at beginning of year	5,560			10,922			16,482
Return on plan assets	678			1,319			1,997
Employer contributions	702			859			1,561
Benefits paid	(638		)	(615		)	(1,253		)
Fair value of plan assets at end of year	6,302			12,485			18,787
Underfunded status – December 31, 2010	$	(3,209	)	$	(3,942	)	$	(7,151	)
Accumulated benefit obligation – December 31, 2010	$	9,511		$	16,427		$	25,938

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 statement of financial position and recognized 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 its year-end statement of financial position.

The underfunded status of the plan of $10,792,000 and $7,151,000 as of December 31, 2011 and 2010 , respectively, is recognized in the accompanying consolidated balance sheets as long-term accrued pension liability because plan assets are less than the value of benefit obligations expected to be paid.

The accumulated benefit obligation for our pension plans 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:

Assumptions used to determine benefit obligations at December 31:



	Hourly Employees’ Pension Plan		Employees’ Retirement Plan
	2011	2010	2011	2010
Discount rate	4.06%	5.12%	4.18%	5.30%
Composite rate of compensation increase	N/A	N/A	N/A	N/A

Assumptions used to determine net periodic benefit cost for the years ended December 31:



	Hourly Employees’ Pension Plan		Employees’ Retirement Plan
	2011	2010	2011	2010
Discount rate	5.12%	5.67%	5.30%	5.83%
Long-term rate of return on plan assets	7.75%	7.75%	7.75%	7.75%
Composite rate of compensation increase	N/A	N/A	N/A	N/A

The Company employs a building block approach in determining the expected long-term rate on 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 tables present the components of net periodic benefit cost (gains are denoted with parentheses and losses are not):



	Year Ended December 31, 2011
(in thousands)	Hourly Employees’ Pension Plan			Employees’ Retirement Plan			Total
Service cost	$	8		$	4		$	12
Interest cost	469			858			1,327
Expected return on plan assets	(514		)	(963		)	(1,477		)
Amortization of prior service cost	—			—			—
Amortization of net (gain)/loss	117			77			194
Net periodic benefit cost	$	80		$	(24	)	$	56



	Year Ended December 31, 2010
(in thousands)	Hourly Employees’ Pension Plan			Employees’ Retirement Plan			Total
Service cost	$	6		$	3		$	9
Interest cost	499			864			1,363
Expected return on plan assets	(431		)	(850		)	(1,281		)
Amortization of prior service cost	—			—			—
Amortization of net (gain)/loss	96			33			129
Net periodic benefit cost	$	170		$	50		$	220

The Company estimates that $ 659,000 of unrecognized actuarial expense will be amortized from accumulated other comprehensive income into net periodic benefit costs during 2012 .

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 capitalizations. 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.

The pension plans' weighted-average asset allocations as a percentage of plan assets at December 31 are as follows:



	Hourly Employees’ Pension Plan		Employees’ Retirement Plan
	2011	2010	2011	2010
Equity securities	56%	47%	56%	47%
Debt securities	38%	45%	38%	45%
Short-term investments	1%	3%	1%	3%
Other	5%	5%	5%	5%
Total	100%	100%	100%	100%

As of December 31, 2011 , we used the following valuation techniques to measure fair value for assets. There were no changes to these methodologies during 2011 : Level 1 - Assets were valued using the closing price reported in the active market in which the individual security was traded. Level 2 - Assets were valued using quoted prices in markets that are not active, broker dealer quotations, net asset value of shares held by the plans, and other methods by which all significant input were observable at the measurement date. Level 3 - Assets were valued using valuation reports from the respective institutions at the measurement date. The following table presents the hierarchy levels for our postretirement benefit plan investments as of December 31, :



(in thousands)	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mutual Funds:
Small Cap	$	1,321	$	1,321	$	—	$—
Mid Cap	1,238		1,238
Large Cap	7,130		7,130
International	1,835		1,835

Common/Collective:
Liability Driven Solution	2,614		—		2,614		—
Wells Fargo International Equity Index Fund	906				906
Wells Fargo Large Cap Growth Index Fund	1,085				1,085
Wells Fargo Large Cap Value Index Fund	1,108				1,108
Wells Fargo Russell 2000 Index Fund	656				656
Wells Fargo S&P Mid Cap Index Fund	734				734

Cash & Short-term Investments	265		265
Total	$	18,892	$	11,789	$	7,103	$—



(in thousands)	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Mutual Funds:
Small Cap	$	1,418	$	1,418	$	—	$	—
Mid Cap	1,737		1,737
Large Cap	6,567		6,567

Common/Collective:
Liability Driven Solution	4,266		—		4,266		—
Wells Fargo International Equity Index Fund	703				703
Wells Fargo Large Cap Growth Index Fund	1,273				1,273
Wells Fargo Large Cap Value Index Fund	1,223				1,223
Wells Fargo Russell 2000 Index Fund	466				466
Wells Fargo S&P Mid Cap Index Fund	483				483

Cash & Short-term Investments	652		652
Total	$	18,788	$	10,374	$	8,414	$	—

Our interests in the common collective trust investments are managed by one custodian. Consistent with our investment strategy, 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, 2011 were obtained from the custodian and are based on quoted market prices of individual investments; however, since the fund itself does not have immediate liquidity or 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, 2011 . The following table illustrates the estimated pension benefit payments which reflect expected future service, as appropriate, that are projected to be paid:



(in thousands)	Hourly Employees’ Pension Plan		Employees’ Retirement Plan		Total
2012	$	662	$	769	$	1,431
2013	656		803		1,459
2014	654		873		1,527
2015	646		900		1,546
2016	648		945		1,593
Years 2017 through 2021	$	3,246	$	5,589	$	8,835

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 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 expectancies. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits.

In connection with the initiation of the SERP, the Company recorded an unfunded long-term liability of $1,964,301 , a deferred tax asset of $746,000 and $1,218,301 in accumulated other comprehensive income. The $1,964,301 represents prior service cost which will be amortized over the average remaining service periods of the employees. The prior service cost is included as a component of net periodic pension cost. The prior service cost expected to be amortized for the year ended December 31, 2011 is $263,665 .

The change in the Projected Benefit Obligation (BPO) as of December 31, 2011 is shown below in thousands:



Benefit obligation at January 1, 2011	$	—
Service cost	108
Interest cost	103
Liability actuarial (gain)/loss	409
Plan Amendments	1,964
Benefit obligation at December 31, 2011	$	2,584

The components of net periodic pension expense were as follows in thousands:



	2011
Service Cost	$	108
Interest Cost	103
Amortization of Prior Service Cost	264
Net Periodic Benefit Cost	$	475

The Net Periodic Pension Expense is based on the following assumptions: 4.04% discount rate; 3% rate of compensation increases and a 7.45 year amortization period for 2011.

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



2012	$	10
2013	42
2014	43
2015	50
2016	98
Years 2017 through 2021	$	1,069

Defined Contribution Plans

The Company has three defined contribution plans, The Gradall Salaried Employees’ Savings and Investment Plan (“Salary Plan”), The Gradall Hourly Employees’ Savings and Investment Plan (“Hourly Plan”) and The International Association of Machinist and Aerospace Retirement Plan (“IAM Plan”). The Company contributed $ 356,000 and $ 269,000 to the IAM Plan for the plan years ended December 31, 2011 and 2010 , 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 2011 , 2010 and 2009 were $ 992,000 , $ 481,000 , and $ 1,330,000 , respectively. A U.S. subsidiary of the Company had an Hourly Employee Pension Plan of Trust covering collective bargaining which was terminated on December 31, 2006. As of January 1, 2006 the employees were added to the existing 401(k) retirement and salary plan.

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 3% and 10% of the participant’s salary up to a specific limit. Total contributions made to the above plan were $ 676,000 , $ 607,000 , and $ 537,000 for the year ended December 31, 2011 , 2010 and 2009 , respectively.

15. SEGMENT REPORTING

The Company reports three business segments: North American Industrial, North American Agricultural and European. The Company’s sales are principally within the United States, United Kingdom, France, Canada and Australia. The Company sells its products primarily through a network of independent dealers and distributors to governmental end-users, related independent contractors, as well as to the agricultural and commercial turf markets.

The Company has included a summary of the financial information by reporting segment. The following table presents the revenues, income from operations (loss), goodwill and total identifiable assets by reporting segment for the years ended December 31, 2011 , 2010 and 2009 :



	December 31,
(in thousands)	2011		2010		2009
Net Revenue
North American Industrial	$	229,594	$	196,783	$	177,593
North American Agricultural	203,993		181,349		95,188
European	170,006		160,416		182,044
Consolidated	$	603,593	$	538,548	$	454,825
Income from Operations
North American Industrial	$	23,782	$	8,513	$	(12,426	)
North American Agricultural	16,640		10,073		31,206
European	8,163		12,287		15,754
Consolidated	$	48,585	$	30,873	$	34,534
Goodwill
North American Industrial	$	13,316	$	13,316	$	13,128
North American Agricultural	—		—		—
European	18,435		20,757		22,079
Consolidated	$	31,751	$	34,073	$	35,207
Total Identifiable Assets
North American Industrial	$	144,016	$	120,293	$	126,553
North American Agricultural	121,337		116,575		124,165
European	115,582		134,115		129,239
Consolidated	$	380,935	$	370,983	$	379,957

16. INTERNATIONAL OPERATIONS AND GEOGRAPHIC INFORMATION

Following is selected financial information on the Company’s international operations which include Europe, Canada and Australia:



	December 31,
(in thousands)	2011		2010		2009
Net sales	$	216,201	$	193,182	$	206,880
Income from operations	18,481		13,476		17,776
Income before income taxes	19,170		13,429		17,740
Identifiable assets	$	154,465	$	160,966	$	153,968

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



	December 31,
(in thousands)	2011		2010		2009
Geographic net sales:
United States	$	381,390	$	336,261	$	240,319
United Kingdom	39,967		36,685		38,332
France	101,124		93,130		115,395
Canada	26,029		15,325		17,756
Australia	14,171		11,765		11,400
Other	40,912		45,382		31,623
Total net sales	$	603,593	$	538,548	$	454,825
Geographic location of long-lived assets:
United States	$	52,263	$	55,448	$	59,094
United Kingdom	13,511		13,757		14,483
France	26,746		29,165		33,588
Canada	11,708		6,776		6,542
Australia	158		84		265
Total long-lived assets	$	104,386	$	105,230	$	113,972

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

17. COMPREHENSIVE INCOME (LOSS)

For 2011 , 2010 and 2009 the Company’s Comprehensive Income was $ 24,913,000 , $ 17,503,000 , and $ 27,785,000 , respectively.

The components of Accumulated Other Comprehensive Income (Loss) are as follows:



	December 31,
(in thousands)	2011			2010			2009
Foreign currency translation adjustments	$	1,610		$	4,489		$	8,148
Derivatives net of taxes	63			(171		)	(744		)
Actuarial (loss) gain on defined benefit pension plan, net of taxes	(7,297		)	(2,785		)	(2,257		)
Accumulated other comprehensive income (loss)	$	(5,624	)	$	1,533		$	5,147

18. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space and equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. The Company has certain capitalized leases consisting principally of leases of buildings. As of December 31, 2011 , future minimum lease payments under these non-cancelable leases and the present value of the net minimum lease payments for the capitalized leases are:



(in thousands)	Operating Leases		Capitalized Leases
2012	$	1,268	$	293
2013	839		291
2014	601		111
2015	296		9
2016	73		—
Thereafter	—		—
Total minimum lease payments	$	3,077	$	704
Less amount representing interest			58
Present value of net minimum lease payments			$	646
Less current portion			257
Long-term portion			$	389

Rental expense for operating leases was $ 1,879,000 for 2011 , $ 1,632,000 for 2010 , and $ 1,693,000 for 2009 .

Purchase obligations of $ 80,918,000 represent an estimate of goods and services to be purchased under outstanding purchase orders not reflected on the Company’s balance sheet. New purchase obligations should be received and paid for during the current fiscal year.

Other

contamination/remediation that was identified before the acquisition and believed to have been generated by a third party company located near the Gradall facility.

19. QUARTERLY FINANCIAL DATA (Unaudited)

Summarized quarterly financial data for 2011 and 2010 is presented below. Seasonal influences affect the Company’s sales and profits, with peak business occurring in May through August.

(in thousands, except per share amounts)



	2011								2010
	First		Second		Third		Fourth		First		Second		Third		Fourth
Sales	$	140,715	$	160,824	$	155,057	$	146,997	$	131,153	$	138,069	$	136,673	$	132,653
Gross profit	31,901		37,391		37,223		28,569		28,135		28,681		32,390		27,708
Net income	5,667		8,914		10,056		7,433		3,993		4,870		8,150		4,104
Earnings per share
Diluted	$	0.47	$	0.74	$	0.84	$	0.62	$	0.34	$	0.41	$	0.68	$	0.34
Average shares
Diluted	11,980		11,966		11,947		11,973		11,833		11,882		11,906		11,952
Dividends per share	.06		.06		.06		.06		.06		.06		.06		.06
Market price of common stock
High	$	29.27	$	28.87	$	25.05	$	29.20	$	20.36	$	27.00	$	25.41	$	28.19
Low	$	25.32	$	21.09	$	20.35	$	19.71	$	16.62	$	19.58	$	18.68	$	21.55

The sum of quarterly earnings per share may not equal total year earnings per share due to rounding of earnings per share amounts, and differences in weighted-average shares and equivalent shares outstanding for each of the periods presented.

The third quarter 2010 results include a tax credit of $0.9 million relating to prior years research and development expenses. The fourth quarter 2011 results include the following items: (1) a pretax charge of $1.9 million related to goodwill impairment (2) a $7.7 million gain on bargain purchase relating to Tenco and (3) restructuring cost of $0.9 million relating to a plant closure.

20. ACQUISITIONS AND INVESTMENTS

Tenco

On October 18, 2011 (“Closing Date”), the Company acquired the majority of the assets and assumed certain liabilities of Tenco Group Inc . ( "Tenco" ) located in St. Valerien, Quebec, Canada. The purchase price was approximately $5.9 million and included substantially all of the ongoing business of Tenco, including the Tenco brand name and all related product names and trademarks (the "Acquisition").

The Acquisition was accounted for in accordance with ASC Topic 805, Business Combinations (“ASC Topic 805”). Accordingly, the total purchase price was allocated on a provisional basis to assets acquired and net liabilities assumed in connection with the Acquisition based on their estimated fair values as of the completion of the Acquisition. These allocations reflected various provisional estimates that were available at the time and are subject to change during the purchase price allocation period as valuations are finalized.

The fair value of the net assets acquired was approximately $13.6 million, which exceeds the preliminary estimated purchase price of approximately $5.9 million. Accordingly, the Company recognized the excess of the fair value of the net assets over the purchase price of approximately $7.7 million as a gain on bargain purchase. The gain on bargain purchase of approximately $7.7 million was shown separately within income from operations in the Consolidated Statements of Income. The Company continues to evaluate the purchase price allocation including the opening fair value of inventory, accounts receivable, property plant and equipment, accrued liabilities and deferred taxes which may require the Company to adjust the recorded amount.

The Company believes that it was able to acquire the assets of Tenco for less than the fair value because of (i) Tenco's Canadian operations had been operating under Receivership Orders from the Quebec Superior Court since July 25, 2011 and (ii) Tenco had no additional working capital to pay their vendors timely and could not operate the business in order to service their customers in the ordinary course of business. Tenco was an unprofitable venture, and the seller approached the Company in an effort to sell Tenco. With Tenco in receivership, the only options, in our opinion, available were to sell the business below market value or shut Tenco down and sell off the business in pieces which, we believe, would have been more costly and time consuming. As a result, the Company was able to agree on a favorable purchase price.

The primary reason for the Tenco acquisition was to provide the opportunity to expand the Company's presence in the snow removal equipment business in North America, particularly Canada and North East U.S. This acquisition complemented and broadened our range of products in this sector.

The following table summarizes the provisional amount recognized for assets acquired and liabilities assumed as of the Closing Date. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company's judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations. Certain estimated values are not yet finalized and are subject to change. The Company will finalize the amounts recognized as information necessary to complete the analysis is obtained. The Company expects to finalize these amounts as soon as possible but no later than one year from the acquisition date. The following are estimated fair value of assets acquired and liabilities assumed as of the Acquisition date (in thousands):



(in thousands)	Initial Valuation

Accounts receivable	$	3,182
Inventory	7,375
Prepaid expenses	277
Property, plant & equipment	5,277
Other Liabilities	(2,433		)
Net Assets acquired	13,678
Less: Purchase Price	5,933
Gain on Bargain purchase	$	7,745

Under 805-10, acquisition related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. The Company incurred $0.6 million of acquisition related costs in 2011. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro-forma results would not be materially different from reported results.

In the period between the Closing Date and December 31, 2011, Tenco generated approximately $7.0 million of net revenue and $0.2 million net income. The Company has included the operating results of Tenco in its consolidated financial statements since the Closing Date.

Bush Hog

On October 22, 2009 (“Closing Date”), the Company acquired the majority of the assets and assumed certain liabilities of Bush Hog located in Selma, Alabama. The purchase included substantially all of the ongoing business of Bush Hog, including the Bush Hog brand name and all related product names and trademarks (the “Acquisition”). The purchase price consideration was 1.7 million unregistered shares, with certain registration rights, of Alamo Group common stock which represented approximately 14.5% of the outstanding stock of Alamo Group. Because the restricted stock was issued in an unregistered private transaction, resale of the shares is restricted and the shares may be resold only if registered or sold in a transaction exempt from the registration requirements of the Securities Act, including pursuant to Rule 144 under the Securities Act. Under Rule 144, the restricted stock was subject to, among other things, an initial 6-month holding period before any of the shares could be sold in the public market. Accordingly, the fair value of the 1.7 million shares was based on the public market price of Alamo common stock less a discount for lack of marketability associated with the 6-month holding period. We utilized an Asian put option model to measure the discount for lack of marketability. An Asian put option is an option that entitles the holder to a payoff based on the average price of an underlying asset, over a predetermined period. The closing price of our common stock on October 22, 2009 was $16.09 per share.

The fair value of the net assets acquired was approximately $53.1 million, which exceeded the preliminary estimated purchase price of $25.4 million. Accordingly, the Company recognized the excess of the fair value of the net assets over the purchase price of approximately $27.7 million as a gain on bargain purchase. The Company evaluated the purchase price allocation during 2010, including the opening fair value of inventory, accounts receivable, property, plant & equipment, accrued liabilities and deferred taxes, which required the Company to adjust the recorded gain by $2.5 million to a total final gain on bargain purchase of $30.2 million.

Exhibit 10.25

INVESTOR RIGHTS AGREEMENT

THIS INVESTOR RIGHTS AGREEMENT (this " Agreement "), dated as of October 22, 2009, is entered into by and between ALAMO GROUP INC., a Delaware corporation (the " Company ") , and BUSH HOG, LLC, a Delaware limited liability company ( "Investor" ).

W I T N E S S E T H :

WHEREAS , pursuant to the terms of an Asset Purchase Agreement (as amended, modified or supplemented, the " Purchase Agreement ") dated as of September 4, 2009 by and among Alamo Acquisition, Inc., a Delaware corporation, the Company, Investor and CC Industries, Inc., a Delaware corporation, the Company has issued to Investor 1,700,000 shares of Common Stock (the "Securities" ).

WHEREAS , it is a condition precedent to Investor's willingness to consummate the transactions contemplated by the Purchase Agreement that the Company shall have entered into this Agreement.

NOW, THEREFORE , as an inducement to the Investor to consummate the transactions contemplated by the Purchase Agreement, and in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the Company hereby covenants and agrees with the Investor, and with each subsequent holder of Shares (as such term is defined herein), as follows:

Section 1. Definitions . As used herein, the following terms shall have the following respective meanings:

"Commission" shall mean the Securities and Exchange Commission, or any other Federal agency at the time administering the Securities Act.

"Common Stock" shall mean, collectively, the Common Stock, $.10 par value per share, of the Company, and any class or series of common stock of the Company authorized after the date hereof, or any other class or series of stock resulting from successive changes or reclassifications of any class or series of common stock of the Company.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

" Expiration Date " shall mean the date three (3) years following the date hereof.

“Material Transaction” means any material transaction in which the Company proposes to engage or is engaged, including a purchase or sale of assets or securities, financing, merger, consolidation or any other transaction that would require disclosure pursuant to the Securities Act or Exchange Act, and with respect to which the Company's Board of Directors has reasonably determined in good faith that compliance with this Agreement would require the Company to disclose material, non-public information prior to such time as it would otherwise be required to be disclosed.

"Registrable Stock" shall mean any capital stock or other securities issued or issuable with respect to the Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, conversion, consolidation or other reorganization.

"Registration Expenses " shall mean the expenses so described in Section 5 hereof.

"Securities Act" shall mean the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

"Selling Expenses " shall mean the expenses so described in Section 5 hereof.

" Shares " shall mean the Securities and the Registrable Stock.

Exhibit 10.25

Section 2. Required Registration.

(a) At any time beginning two years following the date hereof, Investor and its successors and permitted assigns (the "Requesting Holders" ) may, by written notice, request that the Company register under the Securities Act all or any portion of the Shares held by the Requesting Holders for sale in the manner specified in such notice; provided , however , that the Company shall not be obligated to register Shares pursuant to such request: subject to Section 3(a) below, during the period beginning 30 days prior to the filing, and ending on a date 90 days following, the effective date, of a registration statement filed by the Company relating to an underwritten offering only of the Company's capital stock (other than a registration statement for the Company's capital stock which does not give rise to incidental registration rights pursuant to Section 3(a) below) provided that the Company is actively employing in good faith its best efforts to cause such registration statement to become effective. Notwithstanding anything to the contrary contained herein, (y) the Company shall be obligated to register Shares pursuant to a request made under this Section 2 on one occasion only, provided , however , that (i) such obligation shall be deemed satisfied only when a registration statement covering all Shares specified in notices received as aforesaid, for sale in accordance with the method of disposition specified by the Requesting Holders, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto; (ii) if the Company provides a certificate of its President stating that a Material Transaction exists at the time of the request, no such registration statement need be filed until the earlier of the lapse of 60 days from the issuance of such certificate or the date on which such Material Transaction no longer exists ( provided , however , that the Company may not exercise its right under this clause (ii) more than once in any 12-month period); and (iii) if the Investor determines, acting in good faith, to withdraw (prior to the effective date of the registration statement relating to a request) a proposed registration due to marketing or regulatory reasons (a "Withdrawn Demand"), then such withdrawn registration shall not count as a request for purposes of this Section 2(a) , and (z) no request may be made under this Section 2 within 180 days after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which a Requesting Holder shall have been entitled to join pursuant to Section 3 hereof and in which there shall have been effectively registered all Shares as to which registration shall have been so requested. The Company shall have no obligation to effect a registration under this Section 2(a) unless the aggregate offering price of the securities requested to be sold pursuant to such registration is, in the good faith judgment of the Company, expected to be equal to or greater than $10,000,000.

(b) Promptly following receipt of any notice under this Section 2 , the Company shall file and use its reasonable best efforts to have declared effective a registration statement under the Securities Act for the public sale, in accordance with the method of disposition specified in such notice from the Requesting Holders, of the number of Shares specified in such notice. If such method of disposition shall be an underwritten public offering, the Requesting Holders may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed.

(c) The Company shall be entitled to include in any registration statement referred to in this Section 2 for which the method of distribution is an underwritten public offering, for sale in accordance with the method of disposition specified by the Requesting Holders, shares of Common Stock to be sold by the Company for its own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Shares to be sold. Except as set forth in this Section 2 , no securities shall be included in any registration statement referred to in this Section 2 without the prior written consent of the Requesting Holders. Except with respect to registration statements on Form S-4 or Form S-8, the Company will not file with the Commission any other registration statement with respect to its Common Stock, whether for its own account or that of other stockholders, from the date of receipt of a notice from Requesting Holders pursuant to this Section 2 until the completion of the period of distribution of the registration contemplated thereby.

Section 3. Incidental Registration If the Company at any time (other than pursuant to Section 2 hereof) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for a similarly limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation or in connection with any similar transaction), each such time it will give prompt written notice to the holders of Shares of its intention to do so. Upon the written request of any such holder of Shares, given within 20 days after the date of any such notice, to register any of its Shares (which request shall state the intended method of disposition thereof), the Company will cause the Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other

Exhibit 10.25

disposition by the holders (in accordance with its written request) of such Shares so registered. The Company may withdraw any such registration statement before it becomes effective or postpone the offering of securities contemplated by such registration statement without any obligation to the holders of any Shares. In the event that any registration pursuant to this Section 3 shall be, in whole or in part, an underwritten public offering of Common Stock, any request by a holder pursuant to this Section 3 to register Shares shall specify that either (i) such Shares are to be included in the underwriting on the same terms and conditions as the shares of Common Stock otherwise being sold through underwriters under such registration or (ii) such Shares are to be sold in the open market without any underwriting, on terms and conditions comparable to those normally applicable to offerings of common stock in reasonably similar circumstances. The number of shares of Common Stock, including, without limitation Shares, to be included in such an underwriting may be reduced (pro rata among the holders of shares participating in such registration) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein. Notwithstanding anything to the contrary contained in this Section 3 , in the event that there is an underwritten offering of securities of the Company pursuant to a registration statement covering Shares and a selling holder of Shares does not elect to sell his, her or its Shares to the underwriters of the Company's securities in connection with such offering, such holder shall refrain from selling such Shares not registered pursuant to this Section 3 during the period of distribution of the Company's securities by such underwriters and the period in which the underwriting syndicate participates in the after market; provided , however , that, such holder shall, in any event, be entitled to sell its Shares commencing on the 120th day after the effective date of such registration statement.

Section 4. Registration Procedures . If and whenever the Company is required by the provisions of Section 2 or 3 hereof to effect the registration of any Shares under the Securities Act, the Company will, as expeditiously as reasonably possible:

(a) prepare and file with the Commission a registration statement (which, in the case of an underwritten public offering pursuant to Section 2 hereof, shall be on Form S-1 or other form of general applicability satisfactory to the managing underwriter selected as therein provided) with respect to such securities and use its reasonable best efforts to cause such registration statement to become and remain effective (provided that before filing a registration statement or any amendments or supplements thereto, the Company will furnish to the counsel selected by the holders of a majority of the Shares covered by such registration statement copies of all such documents and include any reasonable comments of such counsel in such document) for the period of the distribution contemplated thereby (determined as hereinafter provided);

(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in Section 4(a) above and as to comply with the provisions of the Securities Act with respect to the disposition of all Shares covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement for such period;

(c) furnish to each seller and to each underwriter such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus and any amendment or supplement thereto) and such other documents as such persons may reasonably request in order to facilitate the public sale or other disposition of the Shares covered by such registration statement;

(d) use its reasonable best efforts to register or qualify the Shares covered by such registration statement under the securities or blue sky laws of such jurisdictions as the sellers of Shares or, in the case of an underwritten public offering, the managing underwriter shall reasonably request and do any and all other acts and things which are reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Shares owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection or (ii) consent to general service of process (i.e., service of process which is not limited solely to securities law violations) in any such jurisdiction);

(e) immediately notify each seller under such registration statement and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and, at the request of any seller, the

Exhibit 10.25

Company will promptly prepare a supplement or amendment to such registration statement so that, as thereafter delivered to the purchasers of such Shares, such registration statement will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

(f) furnish, at the request of any seller, on the date that Shares are delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, (A) stating that such registration statement has become effective under the Securities Act, (B) stating that, to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (C) stating that the registration statement and the related prospectus, and each amendment or supplement thereof, comply as to form in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder (except that such counsel need not express any opinion as to financial statements contained therein), (D) containing a 10b-5 opinion in customary form and (E) to such other effects as may reasonably be requested by counsel for the underwriters or by such seller or its counsel, and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to such seller, (A) stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to the registration in respect of which such letter is being given as such underwriters or such seller may reasonably request, and (B) containing "cold comfort" language covering such matters of the type customarily covered by "cold comfort" letters as the holders of a majority in nominal value of the Shares being sold reasonably request;

(g) make reasonably available for inspection, on two (2) business days prior notice, by each seller, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees, public accountants, attorneys and financial advisors to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(h) use its reasonable best efforts to cause all such Shares to be listed on a recognized U.S. stock exchange or traded on a U.S. inter-dealer quotation system and, if similar securities issued by the Company are already so listed, on each securities exchange or inter-dealer quotation system on which similar securities issued by the Company are then listed or traded;

(i) provide a transfer agent and registrar for all such Shares not later than the printing of any preliminary prospectus;

(j) use reasonable efforts to assist any underwriter or seller participating in such registration or offering in its marketing efforts with prospective investors by causing the Company's officers, directors and employees to participate in marketing efforts, including "roadshow" presentations in various major national and international centers, in connection with any offering;

(k) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission or any other applicable regulatory authority, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(l) permit any holder, which holder, in its reasonable judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration statement and to require the insertion therein of material furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included and which material has been approved by the Company, such approval not to be unreasonably withheld or delayed;

(m) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related offering document or suspending the

Exhibit 10.25

qualification of any Shares included in such registration statement or offering document for sale in any jurisdiction, the Company will use its best efforts promptly to obtain the withdrawal of such order;

(n) use its reasonable best efforts to cause such Shares covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Shares; and

(o) take all such other actions as the holders of a majority in nominal value of Shares being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Shares.

For purposes of Sections 4(a) and (b) above and of Section 2(c) hereof, the period of distribution of Shares in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Shares in any other registration shall be deemed to extend until the earlier of the sale of all Shares covered thereby or nine months after the effective date thereof.

In connection with each registration hereunder, the selling holders of Shares will furnish to the Company such information with respect to themselves and the proposed distribution by them as shall be necessary in order to assure compliance with Federal and applicable state securities laws.

In connection with each registration pursuant to Sections 2 and 3 hereof covering an underwritten public offering, the Company agrees to enter into such customary agreements (including underwriting agreements) as the managing underwriter selected in the manner herein provided may request in such form and containing such provisions as are customary in the securities business for such an arrangement between major underwriters and companies of the Company's size and investment stature, provided that such agreement shall not contain any such provision applicable to the Company which is inconsistent with the provisions hereof.

The Company agrees not to effect any public sale or distribution of its capital stock or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any registration statement (except as part of such underwritten registration pursuant to the terms hereof or pursuant to registrations on Forms S-4 or S-8 or any successor forms), unless the underwriters managing such public offering otherwise agree.

Any holder of Shares, and their permitted transferees, receiving any written notice from the Company regarding the Company's plans to file a registration statement shall treat such notice confidentially and shall not disclose such information to any person other than as necessary to exercise its rights under this Agreement.

Section 5. Expenses . All expenses incurred by the Company in complying with Sections 2 and 3 hereof, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities and blue sky laws, fees and expenses in connection with any listing of the Shares on a securities exchange or inter-dealer quotation system, printing expenses, fees and disbursements of counsel and independent public accountants for the Company and the fees and disbursements of the underwriters, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs of insurance and fees and expenses of one counsel for the sellers of Shares, but excluding any Selling Expenses (as defined below), are herein called "Registration Expenses . " All underwriting discounts and selling commissions applicable to the sale of Shares are herein called " Selling Expenses ." The Company will pay all Registration Expenses in connection with each registration statement filed pursuant to Section 2 or 3 hereof; provided that, in the case of any registration pursuant to Section 2 hereof, the Investor shall be responsible for reimbursing the Company for 50% of all Registration Expenses incurred by the Company in connection with such registration; provided, further, however, that, in the case of a Withdrawn Demand, the Investor shall be responsible for reimbursing the Company for all Registration Expenses incurred by the Company in connection with such Withdrawn Demand. All Selling Expenses incurred in connection with any sale of Shares shall be borne by the holder of such Shares pro rata on the basis of the number of Shares so registered on their behalf, or by such persons other than the Company (except to the extent the Company shall be a seller) as they may agree.

Section 6. Indemnification . In the event of a registration of any of the Shares under the Securities Act pursuant to Section 2 or 3 hereof, the Company will indemnify and hold harmless each seller of such Shares thereunder and each underwriter of such Shares thereunder and their respective officers, directors and employees and each other person, if any, who controls such seller or underwriter within the meaning of the Securities

Exhibit 10.25

Act, against any and all losses, claims, damages, expenses or liabilities, joint or several, to which such person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Shares was registered under the Securities Act pursuant to Section 2 or 3 , any preliminary prospectus or final prospectus contained therein, any amendment or supplement thereof, any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Shares, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or any application, filing or other material filed, registered, distributed or otherwise furnished by the Company or with the consent of the Company in connection with the securities laws of any state or political subdivision thereof, including any blue sky application, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such person in writing specifically for use in such registration statement or prospectus.

In the event of a registration of any of the Shares under the Securities Act pursuant to Section 2 or 3 hereof, each seller of such Shares thereunder, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, and each other holder of Shares, against all losses, claims, damages, expenses or liabilities, to which the Company or such officer or director or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Shares were registered under the Securities Act pursuant to Section 2 or 3 , any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus; provided , further , however , that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not to exceed the proceeds received by such seller from the sale of Shares covered by such registration statement.

Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party under this Section 6 . In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided , however , that, if the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the other party or parties thereto or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the other party or parties thereto, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.

Notwithstanding the foregoing, any indemnified party shall have the right to retain its own counsel in

Exhibit 10.25

any such action, but the fees and disbursements of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party shall have failed to retain counsel for the indemnified party as aforesaid, (ii) the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the other party or parties thereto or that the interests of the indemnified party conflict with the interests of the other party or parties thereto, or (iii) the indemnifying party and such indemnified party shall have mutually agreed to the retention of such counsel. It is understood that the indemnifying party shall not, in connection with any action or related actions in the same jurisdiction, be liable for the fees and disbursements of more than one separate law firm qualified in such jurisdiction to act as counsel for the indemnified party. The indemnifying party shall not (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any proceeding effected without its written consent (which consent shall not be unreasonably withheld), but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. If the indemnification provided for in the first two paragraphs of this Section 6 is unavailable to or insufficient to hold harmless an indemnified party under such paragraphs in respect of any losses, claims, damages or liabilities or actions referred to therein, then each indemnifying party shall in lieu of indemnifying such indemnified party con-tribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or actions in such proportion as appropriate to reflect the relative fault of the Company, on the one hand, and the sellers of such Shares, on the other, in connection with the statement or omissions which resulted in such losses, claims, damages, liabilities or actions, as well as any other relevant equitable considerations including, without limitation, the failure to give any notice under the second paragraph of this Section 6 . The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the sellers of such Shares, on the other hand, and to the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company and the sellers of Shares agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro-rata allocation (even if all of the sellers of Shares were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this and the immediately preceding paragraph, the sellers of such Shares shall not be required to contribute any amount in excess of the amount, if any, by which the total price at which the Common Stock sold by each of them was offered to the public exceeds the amount of any damages which they would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. The indemnification of underwriters provided for in this Section 6 shall be on such other terms and conditions as are at the time customary and reasonably required by such underwriters and the indemnification of the sellers of Shares in such underwriting shall, at the sellers' request, be modified to conform to such terms and conditions.

The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and will survive the transfer of securities.

Section 7. Changes in Common Stock . If, and as often as, there are any changes in the Common Stock by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof, as may be required, so that the rights and privileges granted by this Agreement shall continue with respect to the Shares as so changed.

Section 8. Rule 144 Reporting . The Company agrees with Investor as follows:

Exhibit 10.25

(a) The Company shall make and keep current public information available as those terms are understood and defined in Rule 144 under the Securities Act, at all times after it has become subject to the Exchange Act.

(b) The Company shall file with the Commission in a timely manner all reports and other documents as the Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act, and the rules and regulations promulgated thereunder at any time after the Company has become subject to such reporting requirements of the Exchange Act.

(c) The Company shall furnish to each holder of Securities forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after 90 days following the effective date of the first registration statement of the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents so filed as such holder may reason-ably request to avail itself of any rule or regulation of the Commission allowing a holder of Securities to sell any such securities without registration.

Section 9. Appointment of Investor Director. The Company agrees with the Investor as follows:

(a) From and after the date hereof until the Expiration Date, the Investor may nominate one director (an " Investor Director ") to be elected to the Board of Directors of the Company (the " Board "). Any such nominee for Investor Director shall be subject to (a) the reasonable approval of the Board's Nominating and Corporate Governance Committee (the " Governance Committee ") (such approval not to be unreasonably withheld, conditioned or delayed), and (b) satisfaction of all legal and governance requirements regarding service as a director of the Company; provided, that the Company shall at the reasonable request of the Investor, so long as such request is not inconsistent with applicable law or stock exchange requirements, amend or modify any such requirements so as not to in any way impede the right of the Investor to nominate a director. The Company from time to time shall take all actions necessary or reasonably required such that the number of members on the Board shall, if necessary, be increased such that there are sufficient seats on the Board for the Investor Director to serve on the Board, effective as of the date hereof (or, if later, then the date that the Investor determines to appoint such Investor Director). Each Investor Director appointed pursuant to this Section 9 shall continue to hold office until such Investor Director's term expires, subject, however, to prior death, resignation, retirement, disqualification or termination of term of office as provided in Section 9(c) .

(b) Prior to the Expiration Date, at each meeting of the Company's stockholders at which the election of an Investor Director is to be considered, the Company shall, subject to the provisions of Section 9(a) and Section 9(c) , nominate the Investor Director designated by the Investor for election to the Board by the holders of voting capital stock and solicit proxies from the Company's stockholders in favor of the election of Investor Directors. Subject to the provisions of Section 9(a) and Section 9(c) , the Company shall use all reasonable best efforts to cause the Investor Director to be elected to the Board (including voting all unrestricted proxies in favor of the election of such Investor Director and including recommending approval of such Investor Director's appointment to the Board) and shall not take any action which would diminish the prospects of such Investor Director of being elected to the Board.

(c) The right of the Investor to designate the Investor Director pursuant to Section 9(a) and Section 9(b) shall terminate on the Expiration Date. If the right of the Investor to nominate an Investor Director terminates pursuant to the immediately preceding sentence, then any Investor Director shall promptly submit his or her resignation as a member of the Board and each applicable committee thereof with immediate effect.

(d) Any elected Investor Director may resign from the Board at any time by giving written notice to the Board. Any such resignation shall be effective without acceptance when the notice is given to the Board, unless a later effective time is specified in the notice.

(e) So long as the Investor retains the right to designate an Investor Director, the Company shall use all reasonable best efforts to remove such Investor Director only if so directed in writing by the Investor.

(f) In the event of a vacancy on the Board resulting from the death, disqualification, resignation, retirement or termination of term of office of an Investor Director nominated by the Investor, the Company shall use all reasonable best efforts to fill such vacancy with a representative designated by the Investor as provided hereunder, to serve until the next annual or special meeting of the stockholders (and at such meeting, such representative, or

Exhibit 10.25

another representative designated by the Investor, will be elected to the Board in the manner set forth in Section 9(b) ).

(g) The Investor Director or the Board Observer (as defined below), if any, shall be entitled to reimbursement of reasonable expenses incurred in such capacities, but shall not otherwise be entitled to any compensation from the Company in such capacities as Investor Director or Board Observer.

(h) Until the Expiration Date, if the Investor shall not have elected to appoint an Investor Director pursuant to Section 9(a) , the Investor shall have the right to appoint a non-voting observer (the " Board Observer ") to attend all meetings of the Board as an observer. The Board Observer shall not attend executive sessions or committee meetings without the consent of the majority of the members of the Board or committee members; provided that the Board Observer shall be entitled to attend all meetings of the Audit Committee. The Board Observer shall be entitled to notice of all meetings of the Board and the Audit Committee in the manner that notice is provided to members of the Board or the Audit Committee, as applicable, shall be entitled to receive all materials provided to members of the Board and the Audit Committee, shall be entitled to attend (whether in person, by telephone, or otherwise), subject to the restriction set forth in the immediately preceding sentence, all meetings of the Board and the Audit Committee as a non-voting observer. Notwithstanding anything herein to the contrary, if, in the reasonable judgment of counsel to the Company, acting in good faith, the receipt of information by the Board Observer or the attendance by the Board Observer at any portion of a Board meeting would result in a waiver of the attorney-client privilege of the Company with respect to a particular matter, then the Board Observer will take such reasonable action, including recusing himself or herself from such portion of such meeting, as may be necessary in the judgment of counsel to the Company to protect the Company's attorney-client privilege.

Section 10. Representations and Warranties of the Company . The Company represents and warrants to Investor as follows (which representations and warranties shall survive the execution and delivery of this Agreement):

(a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation or By-laws of the Company, or any provision of any indenture, agreement or other instrument to which it or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company or any of its subsidiaries.

(b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

Section 11. Miscellaneous .

(a) The obligations and rights under Sections 2 , 3 and 8 shall terminate as to a holder of Shares when such Investor is (other than with respect to any representative of Investor serving on the Board) permitted to sell all Shares then held by it within a three (3) month period pursuant to Rule 144 under the Securities Act.

(b) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, the registration rights conferred herein on the holders of Shares shall inure to the benefit of any and all subsequent holders from time to time of the Shares.

(c) All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier (with receipt confirmed), courier service or personal delivery:

Exhibit 10.25



If to the Company::	Alamo Group Inc. 1627 E. Walnut Seguin, Texas 78155 Attention: R.A. Robinson Facsimile No. (830) 372-9683
With a copy (which shall not constitute notice) to:	Oppenheimer, Blend, Harrison & Tate, Inc. 711 Navarro, Sixth Floor San Antonio, Texas 78205 Attention: J. David Oppenheimer Facsimile No. (210) 224-7540
If to Investor:	Bush Hog, LLC c/o CC Industries, Inc. 222 N. LaSalle St., Suite 1000 Chicago, Illinois 60601 Attention: David M. Rubin Facsimile No. 312/899-5038
With a copy (which shall not constitute notice) to:	Gould & Ratner LLP 222 N. LaSalle St., Suite 800 Chicago, Illinois 60601 Attention: Brian B. Gilbert Facsimile No. 312/236-3241

or to such other address or addresses as shall have been furnished in writing to the other parties hereto. Each party hereto agrees, at all times, to provide the Company with an address for notices hereunder.

All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; if mailed, five business days after being deposited in the mail, postage prepaid; or if telecopied, when receipt is acknowledged.

(d) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE.

(e) (I) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE OR OF THE UNITED STATES OF AMERICA SITTING IN DELAWARE AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 11(c) , SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.

(II) - THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE COMPANY (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY INVESTOR HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH INVESTOR WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (Y) ACKNOWLEDGES THAT THE INVESTORS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

Exhibit 10.25

(f) This Agreement constitutes the entire agreement among the undersigned with respect to the subject matter contained herein and supersedes any and all prior agreements or understanding, oral or written, among any or all of the undersigned related to such subject matter.

(g) Except as otherwise provided herein, neither this Agreement nor any provision hereof shall be modified, changed, discharged or terminated (collectively, " Modifications ") except (a) by an instrument in writing signed by the party against whom the enforcement of any Modification is sought or (b) by the written consent of (i) the holders of a majority of the Shares. Anything contained herein to the contrary notwithstanding, no Modification of this Section 11(g) shall be effective without the written consent of all the parties hereto.

(h) Telefacsimile transmissions of any executed original document and/or retransmission of any executed telefacsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm telefacsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(i) The Company (on the one hand) and the Investors (on the other hand) agree that any amendment to the Federal securities laws (and regulations promulgated thereunder (and related registration forms), and related state securities laws shall not affect the substantive registration requirements (and other obligations of the Company) set forth in this Agreement; and, following any such amendment, the Company shall continue to be required to cause the registration of Shares (and pay all Registration Expenses and provide indemnification) under the Federal securities laws, as amended, in a manner consistent to carry out the intent and purposes of (and on terms as similar as practicable as the terms set forth in) this Agreement.

(j) If any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions of this Agreement. The parties hereto further agree to replace such invalid, illegal or unenforceable provision of this Agreement with a valid, legal and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid, illegal or unenforceable provision.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Exhibit 10.25

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.



	ALAMO GROUP INC. By: /s/ Ronald A. Robinson Name: Ronald A. Robinson Title: President & CEO
	BUSH HOG, LLC By: /s/ David M. Rubin Name: David M. Rubin Title: Vice President

Exhibit 21.1

SUBSIDIARIES OF ALAMO GROUP INC.



	Name		Jurisdiction of Incorporation
	Alamo Group (USA) Inc. (1)		Delaware
	Alamo Group (Europe) Limited (1)		United Kingdom
	Alamo Group (Canada) Inc. (1)		New Brunswick
	Gradall Industries, Inc. (2)		Delaware
	NP Real Estate Inc. (2)		Ohio
	Bush Hog, Inc. (2)		Delaware
	Henke Manufacturing Corporation (2)		Kansas
	Alamo Group (TX) Inc. (2)		Delaware
	Alamo Group Services Inc.(2)		Delaware
	Alamo Group Management Inc. (2)		Texas
	Tenco Industries Inc. (2)		Delaware
	Alamo Sales Corp. (2)		Delaware
	Alamo Group (IL) Inc. (2)		Delaware
	Tiger Corporation (2)		Nevada
	Terrain King Corporation (2)		Nevada
	Schwarze Industries, Inc. (2)		Alabama
	Schwarze Industries Australia PTY Ltd. (3)		Australia
	Schulte (USA) Inc. (2)		Florida
	Alamo Group (SMC) Inc. (2)		Nevada
	Nite-Hawk Sweepers, LLC (2)		Washington
	ALG (HK) Limited (2)		Hong Kong
	Alamo Group (IA) Inc. (2)		Nevada
	Alamo Group (FR) SAS (4)		France
	Alamo Manufacturing Services (UK) Limited (4)		United Kingdom
	McConnel Ltd. (4)		United Kingdom
	Twose of Tiverton Ltd. (5)		United Kingdom
	Spearhead Machinery Ltd. (5)		United Kingdom
	Bomford & Evershed Ltd. (5)		United Kingdom
	Bomford Turner Ltd. (5)		United Kingdom
	Turner International (ENG) Ltd. (5)		United Kingdom
	SMA SAS (6)		France
	SCI La Saussaie (6)		France
	Forges Gorce SAS(8)		France
	Faucheux SAS (6)		France
	Rousseau SAS (6)		France
	Rivard SAS (6)		France
	Schulte Industries Ltd. (7)		New Brunswick
	Tenco Inc. (7)		New Brunswick
	ALG (Beijing) Trading Co. Ltd. (9)		Hong Kong

_____________________

(1) 100% owned by Alamo Group Inc.

(2) 100% owned by Alamo Group (USA) Inc.

(3) 100% owned by Schwarze Industries, Inc.

(4) 100% owned by Alamo Group (Europe) Limited

(5) 100% owned by Alamo Manufacturing Services (UK) Limited

(6) 100% owned by Alamo Group (FR) SAS

(7) 100% owned by Alamo Group (Canada) Inc.

(8) 100% owned by SMA SAS

(9) 100% owned by ALG (HK) Limited

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors Alamo Group Inc.

We consent to the incorporation by reference in the registration statements Nos. 333-174755, 333-88454, and 333-143216 on Form S-8 of Alamo Group Inc. of our reports dated March 12, 2012, with respect to the consolidated balance sheets of Alamo Group Inc. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, stockholders' equity, and cash flows for the three- years ended December 31, 2011, and the effectiveness of internal control over financial reporting as of December 31, 2011, which reports appear in the December 31, 2011 annual report on Form 10-K of Alamo Group Inc.



	/s/KPMG LLP
San Antonio, Texas
March 12, 2012

Exhibit 31.1

I, Ronald A. Robinson, certify that:


1.	I have reviewed this annual report on Form 10-K of Alamo Group Inc;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



March 12, 2012	/s/Ronald A. Robinson
	Ronald A. Robinson President & Chief Executive Officer

Exhibit 31.2

I, Dan E. Malone, certify that:


1.	I have reviewed this annual report on Form 10-K of Alamo Group Inc;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



March 12, 2012	/s/Dan E. Malone
	Dan E. Malone Executive Vice President & Chief Financial Officer

Exhibit 31.3

I, Richard J. Wehrle, certify that:


1.	I have reviewed this annual report on Form 10-K of Alamo Group Inc;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



March 12, 2012	/s/Richard J. Wehrle
	Richard J. Wehrle Vice President & Corporate Controller

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Alamo Group Inc. (the “Company”) on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald A. Robinson, President & Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



March 12, 2012	/s/Ronald A. Robinson
	Ronald A. Robinson President & Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Alamo Group Inc. (the “Company”) on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dan E. Malone, Executive Vice President & Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



March 12, 2012	/s/Dan E. Malone
	Dan E. Malone Executive Vice President & Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.3

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Alamo Group Inc. (the “Company”) on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard J. Wehrle, Vice President & Corporate Controller of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



March 12, 2012	/s/Richard J. Wehrle
	Richard J. Wehrle Vice President & Corporate Controller
	(Principal Accounting Officer)