Alamo Group ALG Form 10-Q filing Q1 FY2026

PART I. FINANCIAL INFORMATION PAGE

Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)

Interim Condensed Consolidated Statements of Income 3

Three Months Ended March 31, 2026 and March 31, 2025

Interim Condensed Consolidated Statements of Comprehensive Income 4

Three Months Ended March 31, 2026 and March 31, 2025

Interim Condensed Consolidated Balance Sheets 5

March 31, 2026 and December 31, 2025

Interim Condensed Consolidated Statements of Stockholders' Equity 6

Three Months Ended March 31, 2026 and March 31, 2025

Interim Condensed Consolidated Statements of Cash Flows 7

Three Months Ended March 31, 2026 and March 31, 2025

Notes to Interim Condensed Consolidated Financial Statements 8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15

Item 3. Quantitative and Qualitative Disclosures About Market Risks 20

Item 4. Controls and Procedures 21

PART II. OTHER INFORMATION 21

Item 1. Legal Proceedings

For a description of legal proceedings, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2025 (the "2025 10-K").

Item 1A. Risk Factors

There have not been any material changes from the risk factors previously disclosed in the 2025 Form 10-K for the year ended December 31, 2025.

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

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

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

Overview

This report contains forward-looking statements that are based on Alamo Group’s current expectations. Actual results in future periods may differ materially from those expressed or implied because of a number of risks and uncertainties which are discussed below and in the Forward-Looking Information section. Unless the context otherwise requires, the terms "the Company", "we", "our" and "us" means Alamo Group Inc.

For the first three months of 2026, the Company's net sales increased by 7%, while income from operations decreased by 5% and net income decreased by 8% compared to the same period in 2025.

The increase in net sales was primarily driven by acquisitions in the Industrial Equipment Division and modest improvements in agricultural markets served by the Vegetation Management Division. The Company's backlog at March 31, 2026, totaled $603.0 million, a 14% decrease from $702.7 million at the same period the prior-year.

Consolidated income from operations for the first three months of 2026 was $42.2 million, down 5% from $44.5 million in the same period 2025. The decline in consolidated income from operations was due to inefficiencies in the Vegetation Management Division, partially offset by strength in the Industrial Equipment Division.

Net Sales in the Industrial Equipment Division increased by 6% (down 1% organically) for the first three months of 2026 compared to the same period in 2025. The Division’s backlog declined by 21% as lead times improved and demand normalized following elevated order levels in prior periods. New orders decreased approximately 11% year over year. Income from operations rose 2% versus the prior-year period, reflecting higher sales and continued operational improvements across this Division.

Net Sales in the Vegetation Management Division increased 7% for the first three months of 2026 compared to the same period in 2025. The Division's backlog increased 5% and new orders increased 5% year over year. Income from operations decreased 21% versus the prior year period primarily due to operational inefficiencies associated with factory consolidation, partially offset by the reduction in operating expenses.

As part of our ongoing efforts to optimize operations in both of our Divisions, we have relocated applicable product families, sold the Gibson City, IL facility, repurposed one facility to support other brands, and completed initial setups for portions of the production lines. In the first quarter of 2026, we have also listed our facility in New Berlin, WI as an asset held for sale. As we continue our optimization efforts throughout the rest of the year, we expect temporary production inefficiencies, duplicate costs, and shipment-timing effects that may pressure revenue and gross margin, along with potentially one-time expenses related to relocation and facility exit. Following completion, we expect improved capacity utilization, service levels and structural cost reductions. The anticipated timing, costs and benefits are forward-looking and subject to the risks and uncertainties described under “Forward- Looking Information.”

Results of Operations

Three Months Ended March 31, 2026 vs. Three Months Ended March 31, 2025

Net sales for the first quarter of 2026 were $417.1 million, an increase of $26.1 million or 7% compared to $391.0 million for the first quarter of 2025. Net sales during the first quarter of 2026 increased due to contributions from recent acquisitions in the Industrial Equipment Division, modest improvement in agricultural markets within the Vegetation Management Division, and FX. Our price/volume analysis indicate 2% of the 7% growth was due to currency movement.

Net sales in the Industrial Equipment Division were $241.7 million in the first quarter of 2026 compared to $227.1 million for the same period in 2025, an increase of $14.6 million or 6%. The increase was due to the addition of Ring-O-Matic and Petersen Industries. Organic net sales in the first quarter of 2026 declined 1% compared to the first quarter in 2025. Currency movement impacted sales favorably by 1%.

Net sales in the Vegetation Management Division increased by $11.5 million or 7% to $175.4 million for the first quarter of 2026 compared to $163.9 million during the same period in 2025. The increase was due to modest improvements in tree care and agricultural mowing markets which offset weakness in the municipal mowing markets, and FX. Currency movement was 4% of the 7% growth.

Gross profit for the first quarter of 2026 was $104.8 million (25% of net sales) compared to $102.8 million (26% of net sales) during the same period in 2025, an increase of $2.0 million. Higher net sales in the Industrial Equipment Division supported the increase in gross profit, however overall gross margin declined due to operational inefficiencies in the Vegetation Management Division.

Selling, general and administrative expenses (“SG&A”) were $57.8 million (14% of net sales) during the first quarter of 2026 compared to $54.3 million (14% of net sales) during the same period of 2025, an increase of $3.5 million attributable mainly to the new acquisitions. Amortization expense in the first quarter of 2026 was $4.9 million compared to $4.0 million in the same period in 2025, an increase due to addition of the Ring-o-Matic and Petersen Industries acquisitions.

Interest expense was $4.6 million for the first quarter of 2026 compared to $3.2 million during the same period in 2025 due to increased debt related to the Petersen Industries acquisition.

Other net income (expense) was $0.03 million of income in the first quarter of 2026 compared to $0.7 million of expense during the same period in 2025.

Provision for income taxes was $9.9 million (25% of income before income tax) in the first quarter of 2026 compared to $10.0 million (24% of income before income tax) during the same period in 2025. The increase in the tax rate for the first quarter of 2026 was largely due to a lower expected R&D credit for 2026.

The Company’s net income after tax was $29.2 million or $2.41 per share on a diluted basis for the first quarter of 2026 compared to $31.8 million or $2.64 per share on a diluted basis for the first quarter of 2025.

Liquidity and Capital Resources

In addition to normal operating expenses, the Company has ongoing cash requirements which are necessary to operate the business, including inventory purchases and capital expenditures. The Company’s accounts receivable, inventory and accounts payable levels, particularly in its Vegetation Management Division, historically 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 and year-round sales programs. These sales, primarily in the Vegetation Management Division, help balance the Company’s production during the first and fourth quarters.

As of March 31, 2026, the Company had working capital of $755.7 million, a decrease of $24.0 million from working capital of $779.7 million at December 31, 2025. The decrease was primarily due to the use of cash and cash equivalents to partially fund the Petersen Industries acquisition, partly offset by revenue-driven increase in accounts receivable and inventory.

Capital expenditures were $4.5 million for the first three months of 2026, compared to $6.0 million during the first three months of 2025. The Company expects a capital expenditure level of approximately $28.0 million to $33.0 million for the full year of 2026. The Company will fund any future expenditures from operating cash flows or through our revolving credit facility, described below

Net cash used for investing activities was $169.8 million during the first three months of 2026 compared to $5.9 million during the first three months of 2025.

Net cash provided by financing activities was $80.2 million in the three month period ended March 31, 2026, compared to financing activities of $8.6 million during the three month period ended March 31, 2025. Higher net cash provided by financing activities for the first three months of 2026 relates to additional borrowings on bank revolving credit facilities to partially fund the Petersen Industries acquisition.

The Company had $146.7 million in cash and cash equivalents held by its foreign subsidiaries as of March 31, 2026. The majority of these funds are at our European and Canadian facilities. The Company will repatriate European and Canadian cash and cash equivalents as needed to fund operating and investing activities, and will monitor exchange rates to determine the appropriate timing of such repatriation given the current relative value of the U.S. dollar. Repatriated funds will be used to reduce debt levels, and to fund working capital, capital investments, and acquisitions company-wide.

On October 28, 2022, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Third Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with Bank of America, N.A., as Administrative Agent. The 2022 Credit Agreement provides Borrower with the ability to request loans and other financial obligations in an aggregate amount of up to $655.0 million. Under the 2022 Credit Agreement, the Company has borrowed $255.0 million pursuant to a Term Facility, while up to $400.0 million is available to the Company pursuant to a Revolver Facility which terminates in 2027. The Term Facility requires the Company to make equal quarterly principal payments of $3.75 million over the term of the loan, with the final payment of any outstanding principal amount, plus interest, due at the end of the five year term. Borrowings under the 2022 Credit Agreement bear interest, at the Company’s option, at a Term Secured Overnight Financing Rate (“SOFR”) or a Base Rate (each as defined in the 2022 Credit Agreement), plus, in each case, an applicable margin. The applicable margin ranges from 1.25% to 2.50% for Term SOFR borrowings and from .25% to 1.50% for Base Rate borrowings with the margin percentage based upon the Company's consolidated leverage ratio. The Company must also pay a commitment fee to the lenders ranging between 0.15% to 0.30% on any unused portion of the $400.0 million Revolver Facility. The 2022 Credit Agreement requires the Company to maintain two financial covenants, namely, a

maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. The Agreement also contains various covenants relating to limitations on indebtedness, limitations on investments and acquisitions, limitations on the sale of properties and limitations on liens and capital expenditures. The Agreement also contains other customary covenants, representations and events of defaults. The expiration date of the 2022 Credit Agreement, including the Term Facility and the Revolver Facility, is October 28, 2027. As of March 31, 2026, $290.9 million was outstanding under the 2022 Credit Agreement, $202.5 million on the Term Facility and $88.4 million on the Revolver Facility. On March 31, 2026, $3.2 million 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 $308.4 million in available borrowings. The Company is in compliance with the covenants under the Agreement as of March 31, 2026.

Management believes the 2022 Credit Agreement along with the Company’s ability to internally generate funds from operations should be sufficient to allow the Company to meet its cash requirements for the foreseeable future. However, future challenges affecting the banking industry and credit markets in general could potentially cause changes to credit availability, which creates a level of uncertainty.

As of March 31, 2026, we believe our financial position remains robust, supported by a strong balance sheet and healthy cash flow from operations. Our available liquidity, comprised of cash and cash equivalents, along with access to undrawn credit facilities, ensures that we are well equipped to meet our operating needs and explore strategic initiatives that could enhance shareholder value. We continuously evaluate our capital allocation strategy, including potentially repurchasing shares under the share repurchase program adopted by the Company and approved by the Board of Directors as announced on October 31, 2024 if it aligns with our strategic priorities and is deemed to be in the best interest of our shareholders. We believe that repurchasing our shares would be a prudent use of capital, provided appropriate market conditions exist.

Critical Accounting Estimates

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

Critical Accounting Policies

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes that of the Company's significant accounting policies, which are set forth in Note 1 of the Notes to Consolidated Financial Statements in the 2025 Form 10-K, the policies relating to the business combinations involve a higher degree of judgment and complexity. There have been no material changes to the nature of estimates, assumptions and levels of subjectivity and judgment related to critical accounting estimates disclosed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2025 Form 10-K.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risks

The Company is exposed to various market risks. Market risks are the potential losses arising from adverse changes in market prices and rates. The Company does not enter into derivative or other financial instruments for trading or speculative purposes.

Foreign Currency Risk

International Sales

A portion of the Company’s operations consists of manufacturing and sales activities in international jurisdictions. The Company primarily manufactures its products in the U.S., U.K., France, Canada, Brazil, and the Netherlands. The Company sells its products primarily in the functional currency within the markets where the products are produced, but certain sales from the Company's U.K. and Canadian operations are denominated in other foreign currencies. As a result, the Company’s financials, specifically the value of its foreign assets, could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the other markets in which the subsidiaries of the Company distribute their products.

Exposure to Exchange Rates

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the balance sheet date. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive income within the statement of stockholders’ equity. The total foreign currency translation adjustment for the current quarter decreased stockholders’ equity by $3.8 million.

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately in Europe and Canada, as a result of the sales of its products in international markets. Forward currency contracts are used to hedge against the earnings effects of such fluctuations. The result of a uniform 10% strengthening or 10% decrease in the value of the dollar relative to the currencies in which the Company’s sales are denominated would result in a change in gross profit of $3.3 million for the three month period ended March 31, 2026. A stronger U.S. dollar would unfavorably impact gross profit while a weaker U.S. dollar would provide a favorable impact to gross profit. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which include a changed dollar value of the resulting sales, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.

Interest Rate Risk

The Company’s long-term debt bears interest at variable rates. Accordingly, the Company’s net income is affected by changes in interest rates. Assuming the current level of borrowings at variable rates and a two percentage point change for the first quarter 2026 average interest rate under these borrowings, the Company’s interest expense would have changed by approximately $1.5 million. To protect the Company's long-term debt from fluctuations in interest rates, the Company may enter into interest rate swaps to mitigate exposure. However, this analysis assumes no such actions. Further this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of Alamo’s management, including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer (Principal Financial Officer) of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon the evaluation, the President and Chief Executive Officer and Executive Vice President and Chief Financial Officer (Principal Financial Officer) concluded that the Company’s design and operation of these disclosure controls and procedures were effective at the end of the period covered by this report.

Changes in internal control over financial reporting

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

PART II. OTHER INFORMATION

Item 5. Other Information

(a) Reports on Form 8-K

None.

(b) Other Information

None.

(c) During the period covered by this report, none of the Company’s directors or executive officers has adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5–1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

Item 6. Exhibits

SIGNATURES 23

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts) Three Months Ended March 31, 2026 Three Months Ended March 31, 2025

| Net sales: | | |

Vegetation Management $175,420 $163,890 Industrial Equipment 241,729 227,060 Total net sales 417,149 390,950 Cost of sales 312,344 288,109 Gross profit 104,805 102,841 Selling, general and administrative expenses 57,767 54,330 Amortization expense 4,879 4,049 Income from operations 42,159 44,462 Interest expense (4,624) (3,194) Interest income 1,481 1,238 Other income (expense), net 32 (663) Income before income taxes 39,048 41,843 Provision for income taxes 9,864 10,043 Net Income $29,184 $31,800 | Net income per common share: | | | Basic $2.42 $2.65 Diluted $2.41 $2.64 | Average common shares: | | | Basic 12,051 11,990 Diluted 12,103 12,048 Dividends declared $0.34 $0.30

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands) Three Months Ended March 31, 2026 Three Months Ended March 31, 2025

Net income $29,184 $31,800 | Other comprehensive income (loss), net of tax: | | | Foreign currency translation adjustments, net of tax benefit and (expense) of $493 and $(541) (3,805) 10,821 Recognition of deferred pension and other post-retirement benefits, net of tax expense of $(54) and $(59) 289 200 Unrealized income (loss) on derivative instruments, net of tax (expense) and benefit of $(442) and $428 1,183 (1,463) Other comprehensive (loss) income, net of tax (2,333) 9,558 Comprehensive income $26,851 $41,358

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share amounts) March 31, 2026 December 31, 2025

| ASSETS | | | | Current assets: | | |

Cash and cash equivalents $195,234 $309,659 Accounts receivable, net 334,956 276,866 Inventories, net 425,538 383,252 Prepaid expenses and other current assets 15,820 11,629 Income tax receivable 12,023 16,687 Total current assets 983,571 998,093 Rental equipment, net 60,273 61,102 Property, plant and equipment 386,659 392,029 Less: Accumulated depreciation (223,852) (226,052) Total property, plant and equipment, net 162,807 165,977 Goodwill 266,610 214,611 Intangible assets, net 225,691 144,932 Deferred income taxes 1,264 1,264 Other non-current assets 27,228 20,637 Total assets $1,727,444 $1,606,616 | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | Current liabilities: | | | Trade accounts payable $141,662 $125,130 Income taxes payable 2,704 2,332 Accrued liabilities 68,466 75,905 Current maturities of long-term debt and finance lease obligations 15,000 15,000 Total current liabilities 227,832 218,367 Long-term debt and finance lease obligations, net of current maturities 275,467 190,748 Long-term tax liability 470 470 Other long-term liabilities 24,964 24,113 Deferred income taxes 25,787 24,215 Total liabilities 554,520 457,913 | Stockholders’ equity: | | | Common stock, $0.10 par value, 20,000,000 shares authorized; 12,101,934 and 12,073,713 outstanding at March 31, 2026 and December 31, 2025, respectively 1,210 1,207 Additional paid-in-capital 156,887 155,427 Treasury stock, at cost; 82,600 shares at March 31, 2026 and December 31, 2025, respectively (4,566) (4,566) Retained earnings 1,070,824 1,045,733 Accumulated other comprehensive loss (51,431) (49,098) Total stockholders’ equity 1,172,924 1,148,703 Total liabilities and stockholders’ equity $1,727,444 $1,606,616

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

For three months ended March 31, 2026

See accompanying notes.

For three months ended March 31, 2025

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes.

Alamo Group Inc. and Subsidiaries

Notes to Interim Condensed Consolidated Financial Statements - (Unaudited)

March 31, 2026

1. Basis of Financial Statement Presentation

General

The accompanying unaudited interim condensed consolidated financial statements of Alamo Group Inc. and its subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The balance sheet at December 31, 2025 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2025 (the "2025 10-K").

Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40). The ASU requires disaggregated Income Statement Expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is also permitted. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

2. Business Combinations

On January 26, 2026, the Company acquired 100% of the outstanding membership interest in Petersen Industries, LLC (“Petersen”) for approximately $166.5 million. The purchase price, which is subject to customary post-closing adjustments, was financed with a combination of cash on hand and availability under the Company's credit facility. The Company has engaged valuation specialists to use the income approach to value intangibles. However, the valuation estimates used are still preliminary. Petersen is a manufacturer and market leader in providing high-quality and innovative truck-mounted grapple loader equipment to end-customers for the handling of bulky waste collection. The purpose of the acquisition was to acquire business operations in an adjacent market, truck-mounted grapple loader equipment, where the Company sees compelling future opportunities.

On October 31, 2025, the Company acquired certain UK assets of GreenMech Ltd. (GreenMech), and 100% of the issued and outstanding equity capital of GreenMech subsidiaries in France and Germany. GreenMech is a manufacturer of woodchippers and tree care equipment. The acquisition price was approximately £2.6 million (about USD $3.6 million). The Company completed its review of the valuation of the purchase price allocation for

GreenMech during the fourth quarter of 2025. The Company has included the operating results of GreenMech in its consolidated financial statements since the date of acquisition; these results are considered immaterial.

On June 30, 2025, the Company acquired 100% of the issued and outstanding equity capital of Ring-O-Matic, LLC. (“Ring-O-Matic”). Ring-O-Matic is a leading manufacturer of trailer-mounted and truck-mounted vacuum excavators and excavation systems. The primary reason for the Ring-O-Matic acquisition was to acquire business operations in an adjacent market, trailer-mounted vacuum excavators, where the Company sees compelling future opportunities. The acquisition price was approximately $17.5 million. The Company completed its review of the valuation of the purchase price allocation for Ring-O-Matic during the fourth quarter of 2025. The Company has included the operating results of Ring-O-Matic in its consolidated financial statements since the date of acquisition; these results are considered immaterial.

3. Accounts Receivable

Accounts receivable is shown net of sales discounts and the allowance for credit losses.

At March 31, 2026 the Company had $12.7 million in reserves for sales discounts compared to $10.7 million at December 31, 2025 related to products shipped to our customers under various promotional programs.

4. Inventories

Inventories are stated at the lower of cost or net realizable value. Net inventories consist of the following:

Inventory obsolescence reserves were $18.8 million at March 31, 2026 and $19.8 million at December 31, 2025.

5. Rental Equipment

Rental equipment is shown net of accumulated depreciation of $24.3 million and $24.5 million at March 31, 2026 and December 31, 2025, respectively. The Company recognized depreciation expense of $3.0 million and $2.9 million for the three months ended March 31, 2026 and 2025, respectively.

6. Fair Value Measurements

The carrying values of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate their fair value because of the short-term nature of these items. The carrying value of our debt approximates the fair value as of March 31, 2026 and December 31, 2025. This conclusion was made based on Level 2 inputs. Fair values determined by Level 2 utilize inputs that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Derivative Instruments and Hedging Activities

The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging, which requires derivative instruments to be reported on the condensed consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company is exposed to market risk such as changes in foreign currencies and interest rates. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company may periodically utilize derivative instruments such as foreign currency or interest rate swaps in the normal course of business to partially offset exposure. The related gains and losses are reported as a component of accumulated other comprehensive loss ("AOCL") in the condensed consolidated balance sheets.

7. Goodwill and Intangible Assets

The following is the summary of changes to the Company's Goodwill for the three months ended March 31, 2026:

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

The Company recognized amortization expense of $4.9 million and $4.0 million for the three months ended March 31, 2026 and 2025, respectively.

8. Leases

The Company leases office space and equipment under various operating and finance leases, which generally are expected to be renewed or replaced by other leases. The finance leases currently held are considered immaterial. The components of lease cost were as follows:

Components of Lease Cost

Maturities of operating lease liabilities were as follows:

Future Lease Commencements

As of March 31, 2026, there are additional operating leases, primarily for buildings, that have not yet commenced in the amount of $5.1 million. These operating leases will commence in fiscal year 2026 with lease terms of 7 years.

Supplemental balance sheet information related to leases was as follows:

Operating Leases

Supplemental cash flow information related to leases was as follows:

9. Debt

The components of long-term debt are as follows:

As of March 31, 2026, $3.2 million 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 $308.4 million in available borrowings.

10. Common Stock and Dividends

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

On April 1, 2026, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.34 per share, which was paid on April 29, 2026, to shareholders of record at the close of business on April 15, 2026.

11. Earnings Per Share

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

12. Revenue and Segment Information

Revenues from Contracts with Customers

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

Revenue by Product Type

Other includes rental sales, extended warranty sales and service sales as they are considered immaterial.

Revenue by Geographical Location

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

Segment Information

The Company’s Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM is responsible for evaluating the performance of the Company’s operating segments. This evaluation of operating segments supports the allocation of resources, both financial and human, to optimize income from operations as the measure of segment profit and loss.

Our reportable segments are our two Divisions: Vegetation Management and Industrial Equipment.

The CODM focuses heavily on operating performance and reviews mainly non-GAAP measures, such as bookings and backlog, absorption, and headcount. The CODM does not utilize asset metrics to evaluate the segment performance. The GAAP measures used are:

• Division Net Sales
• Division Cost of Sales
• Division Operating Expenses
• Division Income from Operations

The following includes a summary of the unaudited financial information by reporting segment at March 31, 2026:

Three Months Ended March 31, 2026

Three Months Ended March 31, 2025

13. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component, net of tax, were as follows: