Alamo Group Inc.

11/04/2026 | Press release | Distributed by Public on 11/04/2026 15:40

Quarterly Report for Quarter Ending SEPTEMBER 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following tables set forth, for the periods indicated, certain financial data:
As a
Percent of Net Sales
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2026 2025 2026 2025
Vegetation Management 42.3 % 41.2 % 41.3 % 41.9 %
Industrial Equipment 57.7 % 58.8 % 58.7 % 58.1 %
Total sales, net
100.0 % 100.0 % 100.0 % 100.0 %
Cost Trends and Profit Margin, as
Percentages of Net Sales
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2026 2025 2026 2025
Gross profit 18.9 % 24.2 % 23.0 % 25.4 %
Income from operations 0.9 % 8.9 % 7.2 % 10.5 %
Income before income taxes 1.2 % 8.3 % 6.7 % 9.6 %
Net income 0.5 % 6.0 % 4.9 % 7.2 %
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.
Business Overview
Alamo Group is a leader in the manufacture and sale of high-quality, purpose-built industrial and vegetation management equipment. We serve end-markets such as infrastructure building and maintenance, industrial construction, public works, land maintenance, agriculture and tree care. Our products are sold to independent equipment dealers and directly to contractors and municipalities. Product categories include vocational products (vacuum trucks, street sweepers, roadside safety equipment, excavators, and snow removal equipment) and light machinery (tractor mounted mowing equipment, land maintenance and recycling equipment) as well as related after-market parts and services. The Company operates two divisions: the Industrial Equipment Division and the Vegetation Management Division. Founded in 1969, the Company has approximately 3,800 employees and operates 27 manufacturing facilities in the United States, Canada, Europe, Brazil and Australia. The corporate offices of Alamo Group Inc. are located in Seguin, Texas.
Recent Developments
Beginning in 2025, 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, sold the New Berlin, WI facility, repurposed one facility to support other brands, and completed initial setups for portions of the production lines. As we continue our optimization efforts, 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.
During the third quarter of 2026, we continued to evaluate our portfolio of businesses and took actions to streamline our operations and focus resources on our core businesses. We completed the sales of our Conver and
Brooms businesses, initiated a process to sell another business, and initiated wind-down activities related to our Dixie Chopper®, Boxer® and other businesses.
In connection with these activities, we recognized approximately $33.3 million of net charges during the third quarter of 2026, almost entirely within our Vegetation Management Division. 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 impact of these activities on our results of operations is discussed further below in Results of Operations.
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 leading United Kingdom manufacturer of roadway maintenance trucks and equipment that 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, and was funded through the Company's revolving credit facility. Following the acquisition, Econ became part of the Company's Industrial Equipment Division. For additional information regarding the acquisition, see Note 14 to the Consolidated Financial Statements included in this quarterly report on Form 10-Q.
Results of Operations
Three Months Ended September 30, 2026 vs. Three Months Ended September 30, 2025
Net sales for the third quarter of 2026 were $403.1 million, a decrease of $16.9 million or 4% compared to $420.0 million for the third quarter of 2025. The decrease is due to lower net sales in our Industrial Equipment Division due to softer end markets and the timing of certain orders throughout the year as well as the impact of divestiture activity in our Vegetation Management Division, partially offset by contributions from our acquisition of Petersen Industries and modest underlying growth in the Vegetation Management Division. Currency fluctuations impacted results unfavorably by 0.2%.
Net sales in the Industrial Equipment Division were $232.8 million in the third quarter of 2026 compared to $247.0 million for the same period in 2025, a decrease of $14.2 million or 6%. The decrease was primarily attributable to lower sales in our snow removal, sweeper and excavator businesses partially offset by contributions from our acquisition of Petersen Industries. Excluding Petersen Industries, net sales decreased approximately 13%.
Net sales in the Vegetation Management Division decreased by $2.7 million or 2% to $170.4 million for the third quarter of 2026 compared to $173.1 million during the same period in 2025. The decrease was primarily due to a $7.3 million unfavorable impact related to discounts and rebates associated with divestiture activity in the quarter. Excluding this impact, net sales increased approximately $4.6 million, or 3%, primarily reflecting higher volumes and favorable pricing as well as improved throughput. Our agricultural and tree care businesses improved comparatively while we experienced continued softness in the municipal mowing market.
Gross profit for the third quarter of 2026 was $76.1 million (19% of net sales) compared to $101.7 million (24% of net sales) during the same period in 2025, a decrease of $25.6 million. Comparatively lower net sales in the Industrial Equipment Division, coupled with divestiture-related charges of $7.3 million against revenue as described above and another $15.5 million against cost of sales (See Note 3) as well as elevated material and freight costs, led to the pronounced decrease in gross profit. Gross margin declined by approximately 530 basis points mainly as a result of the aforementioned charges in the quarter. Despite the divestiture-related charges, margin reflected better operating performance in the Vegetation Management Division, along with favorable pricing, procurement savings and a greater contribution from parts and service. These benefits were partially offset by material and freight inflation and lower volume in the Industrial Equipment Division.
Selling, general and administrative expenses ("SG&A") were $67.6 million (17% of net sales) during the third quarter of 2026 compared to $59.9 million (14% of net sales) during the same period of 2025, an increase of $7.7 million attributable primarily to costs associated with dispositions of approximately $9.0 million as well as the impact from our recent acquisition of Petersen Industries (See Note 3 and Note 2, respectively). Amortization expense in
the third quarter of 2026 was $5.1 million compared to $4.2 million in the same period in 2025, an increase due to the acquisition of Petersen Industries.
Interest expense was $3.9 million for the third quarter of 2026 compared to $3.9 million during the same period in 2025 due to increased weighted-average outstanding debt related to the Petersen Industries acquisition, offset by lower interest rates comparatively, and lower supplier financing related interest expense.
Other net income (expense) was $3.6 million of income in the third quarter of 2026 compared to $0.2 million of expense during the same period in 2025, primarily due to gains incurred from the sale of facilities, partly offset by costs associated with divestitures.
Provision for income taxes was $2.6 million (56% of Income before income taxes) in the third quarter of 2026 compared to $9.6 million (27% of Income before income taxes) during the same period in 2025. The marked increase in the effective tax rate in the third quarter of 2026 was due to the substantially lower pretax income as well as the impact of certain unfavorable, discrete items stemming from certain assets that were deemed held for sale and marked down to fair value as part of the Company's divestiture-related actions in the quarter (see Note 3).
The Company's net income after tax was $2.0 million for the third quarter of 2026 compared to $25.4 million for the third quarter of 2025, reflecting the factors discussed above, including the notable impact of divestiture-related charges that occurred in the quarter.
Nine Months Ended September 30, 2026 vs. Nine Months Ended September 30, 2025
Net sales for the first nine months of 2026 were $1,271.0 million, an increase of $40.9 million or 3% compared to $1,230.1 million for the first nine months of 2025. The increase in net sales was driven primarily by the acquisitions of Ring-O-Matic and Petersen Industries in the Industrial Equipment Division, along with improvement in agricultural and tree care markets within the Vegetation Management Division.
Net sales in the Industrial Equipment Division were $746.1 million during the first nine months of 2026 compared to $714.8 million for the same period in 2025, an increase of $31.3 million or 4%. The increase in net sales was mainly due to the acquisitions of Ring-O-Matic and Petersen Industries, partly offset by a decline in our snow and sweepers businesses.
Net sales in the Vegetation Management Division increased during the first nine months by $9.6 million or 2% to $524.9 million for 2026 compared to $515.3 million during the same period in 2025. The increase was due to improvements in the agricultural and tree care businesses, partially offset by weakness in municipal mowing and impacts from disposition-related charges incurred in our third fiscal quarter.
Gross profit for the first nine months of 2026 was $291.8 million (23% of net sales) compared to $312.8 million (25% of net sales) during the same period in 2025, a decrease of $21.0 million. The decrease in gross profit was mainly attributable to disposition related charges of $7.3 million against revenue and another $15.5 million against cost of sales (See Note 3) as described above in our commentary on the three months ended September 30, 2026. Gross margin declined approximately 250 basis points primarily due to these divestiture related charges which impacted our Vegetation Management Division, particularly our agriculture business. Excluding these charges, gross margins were lower in our agriculture and tree care businesses, partially offset by improved margins in our municipal mowing business. Gross margins in our Industrial Equipment Division also decreased modestly compared to the prior-year period. Favorable pricing actions and procurement savings were unable to fully offset inflation impacts on input costs and lower volumes at certain facilities. That said, we continued to see improving margins at the consolidated facilities, although performance has not yet returned to normalized levels.
SG&A expenses were $185.5 million (15% of net sales) during the first nine months of 2026 compared to $171.4 million (14% of net sales) during the same period of 2025, an increase of $14.1 million attributable primarily to recent acquisitions (See Note 2), as well as divestiture-activity and restructuring-related costs. Amortization expense in the first nine months of 2026 was $15.0 million compared to $12.3 million in the same period in 2025, an increase stemming from recent acquisitions.
Interest expense was $13.3 million for the first nine months of 2026 compared to $10.8 million during the same period in 2025, an increase of $2.5 million following the acquisition of Petersen Industries in January 2026 which led to greater average outstanding debt balances comparatively.
Other income (expense), net was $3.1 million of income during the first nine months of 2026 compared to $4.1 million of expense in the first nine months of 2025. Other income (expense), net in 2026 was primarily associated with gains incurred from the sale of facilities and comparatively lower foreign currency transaction losses partly offset by disposition-related costs. Other income (expense), net in 2025 was impacted by unfavorable foreign currency transaction losses.
Provision for income taxes was $23.1 million (27% of Income before income taxes) during the first nine months of 2026 compared to $29.9 million (25% of Income before income taxes) during the same period in 2025. The increase in the effective tax rate was primarily due to the effect of several unfavorable rate items, including the impact from certain assets that were deemed held for sale and marked down to fair value (see Note 3).
The Company's net income after tax was $62.2 million for the first nine months of 2026 compared to $88.3 million for the first nine months of 2025, reflecting the factors discussed above, including the notable impact of disposition related charges that occurred in the third fiscal quarter.
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 September 30, 2026, the Company had working capital, defined as current assets less current liabilities, of $751.6 million, a decrease of $28.1 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 (see Note 2), partly offset by increases in accounts receivable and inventory.
Capital expenditures were $16.1 million for the first nine months of 2026, compared to $25.4 million during the first nine months of 2025. The Company expects a capital expenditure level of approximately $22.0 million to $27.0 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 $161.0 million during the first nine months of 2026 compared to $41.9 million during the first nine months of 2025.
Net cash provided by financing activities was $2.6 million during the first nine months of 2026, compared to net cash used in financing activities of $23.6 million during the nine month period ended September 30, 2025. Higher net cash provided by financing activities for the first nine months of 2026 relates to additional borrowings on bank revolving credit facilities to partially fund the Petersen Industries acquisition.
The Company had $154.8 million in cash and cash equivalents held by its foreign subsidiaries as of September 30, 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 and will monitor exchange rates to determine the appropriate timing of such repatriation given the prevailing relative value of the U.S. dollar. Generally, repatriated funds will be used to reduce debt levels, and to fund working capital, capital investments, and acquisitions company-wide.
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 the five-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 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 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. On 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. The Company is in compliance with the covenants under the Agreement as of September 30, 2026.
Subsequent to September 30, 2026, the Company used borrowings under its revolving credit facility to fund the acquisition of Econ Engineering Group Limited. See Note 14, "Subsequent Events," to the Condensed Consolidated Financial Statements for additional information regarding the acquisition. Following the acquisition, management believes that the Company's remaining liquidity, together with cash flows from operations, remains sufficient to meet its anticipated operating and capital requirements.
We believe our financial position remains robust, supported by a strong balance sheet and healthy cash flows 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
The company does not have any off-balance sheet arrangements or any interest in entities commonly referred to as variable interest entities, which include special purpose entities and other structured finance entities, except as otherwise disclosed. See the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed on March 2, 2026 for further details.
Forward-Looking Information
Part I of this Quarterly Report on Form 10-Q and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 2 of this Quarterly 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. Generally, forward-looking statements are not based on historical facts but instead represent the Company's and its management's belief regarding future events.
Statements that are not historical are forward-looking. When used by us or on our behalf, the words "expect,"
"will," "estimate," "believe," "intend," "would," "could," "predict," "should," "anticipate," "continue," "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 hire suitable employees for our business and maintain good relations with employees;
•our ability to develop and manufacture new and existing products profitably;
•the inability of our suppliers, creditors, public utility providers and financial and other service organizations to deliver or provide their products or services to us;
•legal actions and litigation;
•impairment in the carrying value of goodwill;
•our ability to successfully integrate acquisitions and operate acquired businesses or assets;
•our ability to achieve anticipated cost savings and synergies associated with restructuring some of our business operations;
•current and changing tax laws in the U.S. and internationally;
•our ability to hire and retain quality skilled employees; and
•changes in the prices of agricultural commodities, which could affect our customers' income levels.
In addition, we are subject to risks and uncertainties facing the industry in general, including the following:
•changes in business and political conditions and the economy in general in both domestic and international markets;
•uncertainty due to future direction of federal fiscal policy following national elections may slow the growth in governmental market revenue;
•the price and availability of energy and critical raw materials, particularly steel and steel products;
•increased competition;
•increases in input costs on items we use in the manufacturing of our products;
•adverse weather conditions such as droughts, floods, snowstorms, etc., which can affect the buying patterns of our customers and end-users;
•increased costs of complying with governmental regulations which affect corporations including related fines and penalties (such as the European General Data Protection Regulation (GDPR) and the California Consumer Privacy Act);
•an increase in unfunded pension plan liability due to financial market deterioration;
•the potential effects on the buying habits of our customers due to animal disease outbreaks and other epidemics;
•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;
•climate related incidents and other sustainability risks, global pandemics, acts of war or aggression and terrorist activities or military actions;
•cyber security risks including the potential loss of proprietary data or data security breaches and related fines, penalties and other liabilities;
•financial market changes including changes in interest rates and fluctuations in foreign exchange rates;
•abnormal seasonal factors in our industry;
•changes in domestic and foreign governmental policies and laws, including increased levels of government regulation and changes in agricultural policies, including the amount of farm subsidies and farm payments as well as changes in trade policy that may have an adverse impact on our business;
•changes to global trade policies, tariffs, trade sanctions, and investment restrictions;
•government actions, including but not limited to budget levels, and changes in laws, regulations and legislation, relating to tax, environment, commerce, infrastructure spending, health and safety; and
•risk of governmental defaults and resulting impact on the global economy and particularly financial institutions.
The Company wishes to caution readers not to place undue reliance on any forward-looking statements 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, 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. Any forward-looking statements made by or on behalf of the Company speak only to the date they are made and we do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the forward-looking statements were made.
Alamo Group Inc. published this content on November 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 04, 2026 at 22:26 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]