Retirement Benefit Plans

Defined Benefit Plan

In connection with the February 3, 2006 purchase of all the net assets of the Gradall excavator business, Alamo Group Inc. 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 333 former employees and 125 current employees who (i) were formerly employed by the former parent of Gradall, (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 239 former employees and 83 current employees who (i) were formerly employed by the former parent of Gradall, (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 present the components of net periodic benefit cost (gains are denoted with parentheses and losses are not):



	Nine Months Ended September 30, 2014
(in thousands)	Hourly Employees’ Pension Plan				Employees’ Retirement Plan				Total
Service cost		$	6			$	3		$	9
Interest cost		315				639			954
Expected return on plan assets		(477		)		(885		)	(1,362		)
Amortization of prior service cost		—				—			—
Amortization of net (gain)/loss		54				45			99
Net periodic benefit cost		$	(102	)		$	(198	)	$	(300	)



	Nine Months Ended September 30, 2013
(in thousands)	Hourly Employees’ Pension Plan				Employees’ Retirement Plan				Total
Service cost		$	8			$	3		$	11
Interest cost		278				570			848
Expected return on plan assets		(412		)		(763		)	(1,175		)
Amortization of prior service cost		—				—			—
Amortization of net (gain)/loss		214				314			528
Net periodic benefit cost		$	88			$	124		$	212

The Company amortizes pension expense evenly over four quarters. Pension income was $100,000 for the three months ended September 30, 2014 and net pension expense for the three months ended September 30, 2013 was $71,000. Pension income for the nine months ended September 30, 2014 was $300,000 and pension expense for the nine month ending September 30, 2013 was $212,000. The Company is required to contribute $1,199,000 to the pension plans for 2014, of which $875,000 has been paid through September 30, 2014.

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 ten 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.

The net period expense for the three months ended September 30, 2014 and 2013 was $140,000 and $136,000, respectively and $420,000 and $407,000 for the nine months ended September 30, 2014 and 2013, respectively.