ALAMO GROUP INC

Notes to Interim Condensed Consolidated Financial Statements - (Unaudited)

September 30, 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 the disclosures required by GAAP for full annual 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 the information and footnotes required by GAAP for complete financial statements. Certain reclassifications have been made to these condensed consolidated financial statements and accompanying footnotes to conform the presentation to the current fiscal year. 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").

Summary of Significant Accounting Policies

Please refer to Note 1, "Significant Accounting Policies" in our consolidated financial statements from our fiscal 2025 Form 10-K, as filed with the SEC on March 2, 2026, for the discussion on our significant accounting policies.

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 $163.9 million. The purchase price, which was 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 engaged valuation specialists to use the income approach to value intangibles. The Company substantially completed its review of the valuation of the purchase price allocation for Petersen during the third quarter of 2026. 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 expand existing operations to an adjacent market, truck-mounted grapple loader equipment, where the Company sees compelling opportunities.

Purchase Price Allocation

On October 31, 2025, the Company acquired certain U.K. 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 $3.6 million U.S. dollars). 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. We acquired Ring-O-Matic operations to expand to an adjacent market: trailer-mounted vacuum excavators, where the Company sees compelling 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. Divestitures

During the third quarter of 2026, the Company completed the sales of its Conver and Brooms businesses, initiated a process to sell another business resulting in held-for-sale accounting, as well as initiated wind-down and other exit activities related to certain other businesses, such as our Dixie Chopper® and Boxer® businesses.

In connection with these activities, the Company recognized approximately $33.3 million of net charges, almost entirely within its Vegetation Management segment. These charges included inventory valuation adjustments, impairment of certain intangible and other long-lived assets, losses associated with dispositions, as well as other wind-down-related costs. The net charges, before provision for income taxes, had the following impacts on our Condensed Consolidated Statements of Income:

These activities did not represent a strategic shift that had a major effect on the Company’s operations or financial results and, accordingly, did not qualify for discontinued operations presentation.

Separate from the divestitures, the Company has also incurred expenses for certain actions that were not considered divestiture-related but did give rise to similar expenditures, such as severance, professional fees, facilities consolidation costs, and facilities sale proceeds. The Company recognized $(3.1) million and $0.6 million for the three months ended, and $2.9 million and $1.9 million for the nine months ended September 30, 2026 and 2025, respectively. These amounts are included within cost of sales, selling and administrative expense, and other income (expense) in the Company’s Interim Condensed Consolidated Statements of Income.

4. Inventories

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

5. Rental Equipment

Rental equipment is shown net of accumulated depreciation of $26.0 million and $24.5 million at September 30, 2026 and December 31, 2025, respectively. The Company recognized depreciation expense of $2.8 million and $2.9 million for the three months ended September 30, 2026 and 2025, and $8.7 million and $8.7 million for the nine months ended September 30, 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 September 30, 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 require 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.

The Company hasone interest rate swap agreement outstanding as of September 30, 2026. The notional amount of the Company’s outstanding swap agreement is $140.0 million. The fair value of the Company’s derivative assets is $0.5 million as of September 30, 2026 compared to a derivative liability of $2.1 million as of December 31, 2025. In the condensed consolidated balance sheet, the fair value of the interest rate swaps is included in other long-term assets and other long-term liabilities for the periods ending September 30, 2026 and December 31, 2025, respectively.

Business Combinations and Divestitures

In connection with the divestiture activities described in Note 3, the Company recognized impairment charges related to intangible and other long-lived assets measured at fair value on a nonrecurring basis.

Additionally, we acquired certain assets and liabilities as disclosed in Note 2, "Business Combinations" at fair value according to acquisition accounting.

7. Goodwill and Intangible Assets

The following is the summary of changes to the Company's Goodwill for the nine months ended September 30, 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 $5.1 million and $4.2 million for the three months ended September 30, 2026 and 2025, respectively, and $15.0 million and $12.3 million for the nine months ended September 30, 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:

Maturities of operating lease liabilities were as follows:

Future Lease Commencements

As of September 30, 2026, there are additional operating leases, primarily for buildings, that have not yet commenced in the amount of $1.2 million. These operating leases will commence in fiscal year 2026 with lease terms of 2 to 5 years.

Supplemental balance sheet information related to leases was as follows:

Supplemental cash flow information related to leases was as follows:

9. Debt

The components of long-term debt are as follows:

On May 27, 2026, the Company, as Borrower, and each of its domestic subsidiaries as guarantors, entered into a Fourth Amended and Restated Credit Agreement (the “2026 Credit Agreement”) with Bank of America, N.A., as Administrative Agent. The 2026 Credit Agreement provides Borrower with the ability to request loans and other financial obligations in an aggregate amount of up to $602.5 million. Under the 2026 Credit Agreement, the Company has borrowed $202.5 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 2031. The Term Facility requires the Company to make equal quarterly principal payments of $1.27 million over the term of the loan, with the final payment of any outstanding principal amount, plus interest, due at the end of thefive-year term. Borrowings under the 2026 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 2026 Credit Agreement), plus, in each case, an applicable margin. The applicable margin ranges from 1.25% to 2.25% for Term SOFR borrowings and from 0.25% to 1.25% 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 0.125% to 0.30% on any unused portion of the $400.0 million Revolver Facility. The 2026 Credit Agreement requires the Company to maintaintwo 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 2026 Credit Agreement, including the Term Facility and the Revolver Facility, is May 27, 2031. As of September 30, 2026, $233.1 million was outstanding under the 2026 Credit Agreement, $200.0 million on the Term Facility and $33.1 million on the Revolver Facility. As of September 30, 2026, $3.3 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 $363.6 million in available borrowings.

10. Common Stock and Dividends

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

On October 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 October 28, 2026, to shareholders of record at the close of business on October 15, 2026. The Company also has a share repurchase program under which the Company is authorized to repurchase, in aggregate, up to $50 million of its outstanding common stock. The program has approximately $41 million remaining to repurchase shares. During 2026, the Company purchased 61,932 shares, which are held in treasury.

11. Net income per common share

The following table sets forth the reconciliation from basic to diluted weighted-average common shares and the calculations of net income per common share.

12. Revenue and Segment Information

During the third quarter of 2026, the Company recorded approximately $7.3 million as a reduction of sales within its Vegetation Management segment. This unfavorable impact related to discounts and rebates associated with divestiture activity in the quarter. The results of the Vegetation Management segment for the three months ended September 30, 2026 also included approximately $26.0 million of charges. The aforementioned charges are further described in Note 3.

Revenues from Contracts with Customers

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

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

Net sales are attributed to countries based on the location of the customer. Other includes sales from more than 50 countries.

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 ourtwo 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 September 30, 2026:

13. Accumulated Other Comprehensive Loss

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

14. Subsequent Events

On October 27, 2026, the Company, through Alamo Group Europe Limited, a wholly-owned subsidiary, acquired 100% of the equity interests in Econ Engineering Group Limited (“Econ”), a stand-alone company prior to the acquisition. Econ is a leading United Kingdom manufacturer of roadway maintenance trucks and equipment and also operates an equipment rental fleet. The acquisition expands the Company’s Industrial Equipment portfolio and strengthens its platform in the United Kingdom. The purchase price was £120.0 million, or approximately $158.7 million, subject to certain post-closing adjustments, with all consideration transferred in connection with the acquisition consisting of cash, and was funded through the Company’s revolving credit facility. Following the acquisition, Econ became part of the Company’s Industrial Equipment Division, and its results of operations will be included in the Company’s consolidated financial statements beginning on the acquisition date.

Due to the limited time between the acquisition date and the issuance of these financial statements, the Company has not made certain disclosures required for the business combination, including a preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed. As the acquisition occurred subsequent to September 30, 2026, the transaction has not been recognized in the Company’s consolidated financial statements as of and for the period ended September 30, 2026.