ALAMO GROUP INCALG
ALAMO GROUP INC Income Taxes Disclosure
INCOME TAXES
The Company adopted ASU 2023-09 prospectively for the year ended December 31, 2025. Comparative information for 2024 and 2023 remain under the previous ASC 740 disclosure requirements.
Income Tax Expense and Rate Reconciliation:
| December 31, | ||||||||||||||
| (in thousands) | 2025 | % | ||||||||||||
| Income before income taxes | $ | 139,512 | ||||||||||||
| U.S. Federal Statutory Tax Rate | 29,298 | 21.0 | % | |||||||||||
| State and Local Income Taxes, net of federal benefit (a) | 3,675 | 2.6 | % | |||||||||||
| Foreign Tax Effects | ||||||||||||||
| Canada | Statutory tax rate difference between Canada and the United States | (1,958) | (1.4) | % | ||||||||||
| State and Local Income Taxes (b) | 3,423 | 2.5 | % | |||||||||||
| Other Adjustments, Net | (236) | (0.2) | % | |||||||||||
| UK | 495 | 0.4 | % | |||||||||||
| Other foreign jurisdictions | 377 | 0.3 | % | |||||||||||
| Other Adjustments, Net | 637 | 0.4 | % | |||||||||||
| Effective Tax Rate | $ | 35,711 | 25.6 | % | ||||||||||
(a) The following are the list of states that made up the majority (greater than 50%) of the tax effect in this category: California, Illinois, Maine, Maryland, Massachusetts, New York, Pennsylvania, and Virginia
(b) The following are the list of provinces that made up the majority (greater than 50%) of the tax effect in this category: Quebec and Saskatchewan
The following table disaggregates the income taxes paid:
| December 31, | ||||||||||||||
| Jurisdiction (in thousands) | 2025 | |||||||||||||
| U.S. Federal | $ | 25,313 | ||||||||||||
| U.S. State & Local | 6,167 | |||||||||||||
| Foreign Total | 21,452 | |||||||||||||
| Countries>5%: | ||||||||||||||
| Canada | 12,455 | |||||||||||||
| UK | 3,380 | |||||||||||||
| France | 2,740 | |||||||||||||
Income Statement Components
Earnings before income taxes were as follows:
| December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Income before income taxes: | ||||||||||||||||||||
| Domestic | $ | 82,735 | $ | 66,449 | $ | 121,065 | ||||||||||||||
| Foreign | 56,777 | 83,179 | 54,055 | |||||||||||||||||
| $ | 139,512 | $ | 149,628 | $ | 175,120 | |||||||||||||||
The components of income tax expense (benefit) were as follows:
| December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Domestic | $ | 7,385 | $ | 13,080 | $ | 24,168 | ||||||||||||||
| Foreign | 14,528 | 19,968 | 11,356 | |||||||||||||||||
| State | 3,215 | 4,257 | 7,688 | |||||||||||||||||
| 25,128 | 37,305 | 43,212 | ||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Domestic | 9,953 | (1,895) | (4,451) | |||||||||||||||||
| Foreign | (505) | (1,225) | 353 | |||||||||||||||||
| State | 1,135 | (487) | (155) | |||||||||||||||||
| 10,583 | (3,607) | (4,253) | ||||||||||||||||||
| Total income taxes | $ | 35,711 | $ | 33,698 | $ | 38,959 | ||||||||||||||
A reconciliation of the income tax at the Company’s U.S. statutory federal income tax rate to the provision for income tax follows. Some prior year components have been reclassified to conform to the current year presentation.
| December 31, | |||||||||||||||||
| (in thousands) | 2024 | 2023 | |||||||||||||||
Income tax expense at statutory rates | $ | 31,422 | $ | 36,775 | |||||||||||||
| Increase (reduction) from: | |||||||||||||||||
| Jurisdictional rate differences | 4,832 | 2,766 | |||||||||||||||
| Executive compensation limitations | 1,122 | 183 | |||||||||||||||
| Valuation allowance | (2,432) | (789) | |||||||||||||||
| Stock based compensation | 209 | (24) | |||||||||||||||
| U.S. state taxes | 2,876 | 6,076 | |||||||||||||||
| Foreign tax (credit) / expense | (1,498) | (371) | |||||||||||||||
| R&D credit (net) | (3,529) | (3,618) | |||||||||||||||
| Other credits | (490) | (628) | |||||||||||||||
| GILTI | 871 | 109 | |||||||||||||||
| FDII | (187) | (731) | |||||||||||||||
| Previously unrecognized tax (benefit) / expense | 136 | 170 | |||||||||||||||
| Other (net) | 366 | (959) | |||||||||||||||
| Provision for income taxes | $ | 33,698 | $ | 38,959 | |||||||||||||
| Effective tax rate | 22.5 | % | 22.2 | % | |||||||||||||
Deferred Income Tax Assets and Liabilities
The components of the Company’s deferred income tax assets and liabilities were as follows:
| December 31, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Deferred income tax assets: | ||||||||||||||
| Inventory basis difference | $ | 6,205 | $ | 4,579 | ||||||||||
| Accounts receivable reserve | 987 | 620 | ||||||||||||
| Rental equipment and Property, plant and equipment | 13 | — | ||||||||||||
| Stock based compensation | — | 679 | ||||||||||||
| Pension liability | 3,322 | 3,010 | ||||||||||||
| Employee benefit accrual | 3,384 | 2,384 | ||||||||||||
| Product liability and warranty reserves | 2,803 | 2,598 | ||||||||||||
| Foreign net operating loss | 611 | — | ||||||||||||
| Lease liability | 4,390 | 3,662 | ||||||||||||
| Intangible assets | 146 | — | ||||||||||||
| Capitalized R&D costs | 5,854 | 13,676 | ||||||||||||
| Other | 801 | 808 | ||||||||||||
| Total deferred income tax assets | $ | 28,516 | $ | 32,016 | ||||||||||
| Less: Valuation allowance | — | — | ||||||||||||
| Net deferred income tax assets | $ | 28,516 | $ | 32,016 | ||||||||||
| Deferred income tax liabilities: | ||||||||||||||
| Inventory basis differences | $ | — | $ | (78) | ||||||||||
| Rental equipment and Property, plant and equipment | (19,017) | (14,960) | ||||||||||||
| Stock based compensation | (270) | — | ||||||||||||
| Lease asset | (4,293) | (3,545) | ||||||||||||
| Intangible assets | (23,769) | (21,962) | ||||||||||||
| Expenses not currently deductible for book purposes | (1,689) | (1,351) | ||||||||||||
| Other | (2,429) | — | ||||||||||||
| Total deferred income tax liabilities | $ | (51,467) | $ | (41,896) | ||||||||||
| Net deferred income taxes | $ | (22,951) | $ | (9,880) | ||||||||||
As of December 31, 2025, the Company had no foreign or domestic net operating loss carry-forwards.
The Company had no valuation allowances on deferred tax assets as of December 31, 2025.
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.
| Unrecognized Tax Benefits | ||||||||||||||
| December 31, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Balance as of beginning of year | $ | 626 | $ | 490 | ||||||||||
| Increases for tax positions related to the current year | — | 218 | ||||||||||||
| Decreases due to lapse of statute of limitations | (156) | (82) | ||||||||||||
| Balance as of end of year | $ | 470 | $ | 626 | ||||||||||
The Company has adopted the policy to include interest and penalty expense related to income taxes as interest and other expense, respectively. As of December 31, 2025, no interest or penalties have been accrued. With few exceptions, the Company’s open tax years for its federal and state income tax returns are for the tax years ended 2020 through 2025, and for tax years ended 2019 through 2025 for its foreign income tax returns.
The Company currently intends to permanently reinvest its earnings in certain foreign subsidiaries. No U.S. corporate income taxes or foreign withholding taxes should be imposed on future distributions of the earnings not permanently reinvested. If the amounts asserted as permanent reinvestment were distributed, the Company would be subject to approximately $6.8 million in withholding taxes.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 7, 2017 | |
| 2015 | Mar 4, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.