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8-K - 8-K - ALAMO GROUP INCa8kq22015.htm

 
For:
Alamo Group Inc.
 
 
                                                                             
 
Contact:
Robert H. George
 
 
Vice President
 
 
830-372-9621
For Immediate Release
 
 
 
 
Financial Relations Board
 
 
Marilynn Meek
 
 
212-827-3773

ALAMO GROUP ANNOUNCES
2015 SECOND QUARTER RESULTS
SEGUIN, Texas, August 5, 2015 -- Alamo Group Inc. (NYSE: ALG) today reported results for the second quarter ended June 30, 2015.
Highlights for the Quarter
Record net sales for the quarter of $215.7 million
Net income for the quarter grew 6% to $9.7 million
Improvement in gross margins
Weak agricultural market and strong U.S. dollar continue to impact results
Currency translation negatively impacted net sales by $9.8 million
Record net sales for first six months of $423.5 million
Record backlog of $162.3 million
Net sales for the second quarter of 2015 were a record $215.7 million compared with net sales of $207.8 million for the previous year, an increase of 4%. Net income for the quarter was $9.7 million, or $0.84 per diluted share, compared to net income of $9.2 million, or $0.75 per share in 2014. This is an increase in net income of 6%; however, earnings per share were up 12% as a result of the share repurchase completed by the Company in the third quarter of 2014. The second quarter results include the net effect of the acquisition of the units of Specialized Industries which was completed in May 2014, and to a lesser extent, the effects of the acquisition of Herder in Brazil, which occurred in March 2015. The net effect of these acquisitions added $16.0 million to sales in the second quarter. Negatively impacting the quarter’s sales was a $9.8 million currency translation effect. A summary outlining the effects of the acquisitions and currency translation for the second quarter and first six months of 2015 is included as an attachment to this report.

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ALAMO GROUP ANNOUNCES RECORD 2015 SECOND QUARTER RESULTS



For the first six months of 2015, net sales were a record $423.5 million compared to $380.4 million in the previous year, an increase of 11%. Net income for the first half of 2015 was $17.1 million, or $1.49 per diluted share, versus net income of $16.4 million, or $1.34 per diluted share, in 2014. This represents an increase in net income of 4% and an increase in earnings per share of 11%. Excluding the net effect of the acquisitions referenced previously, plus adjusting for the acquisition of Fieldquip in Australia and Kellands in the U.K., both of which were completed at the beginning of the second quarter of 2014, net sales for the first half of 2015 were $341.1 million(1). As with the quarter, the six month sales were negatively impacted $18.0 million by currency translations.

Sales by Division
Alamo Group’s Industrial Division net sales in the second quarter of 2015 were $118.5 million, an increase of 12% compared with net sales of $105.5 million during the same period of 2014. Excluding the net effects from the acquisition of the units of Specialized, net sales for the quarter were $103.3 million(1). While the majority of the sales in the Division are to governmental entities used in infrastructure maintenance, some sales are to other types of end users such as construction, oilfield, petrochem, mining and other industries. The decrease for the quarter was mainly related to softness in these other markets as the governmental markets showed more strength. For the first six months of 2015, net sales in the Division were $235.4 million versus $183.2 million in 2014, an increase of 29%. Adjusted for acquisitions, net sales for the first six months of 2015 were $176.0 million(1).

The Company’s Agricultural Division reported net sales of $53.0 million in the second quarter of 2015, a decrease of 1% compared with net sales of $53.6 million in the previous year. This decrease reflects the continuing weakness of the overall agricultural market which is expected to remain soft for the balance of the year, though the Division’s results are holding up much better than the overall agricultural market. For the first six months of 2015, net sales of the Division were $101.4 million, compared with 2014 net sales of $104.4 million, a decrease of 3%.


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ALAMO GROUP ANNOUNCES RECORD 2015 SECOND QUARTER RESULTS



Alamo’s European Division net sales in the second quarter of 2015 were $44.2 million versus $48.6 million in the prior year, a decrease of 9%. This decrease was related to currency changes as, for the quarter, net sales were up 6% in local currency. For the first six months of 2015, net sales were $86.7 million compared with $92.7 million in the previous year, a decrease of 7%. Again, this decrease was related to the strong U.S. dollar as net sales in local currency were up 8% for the first six months of 2015.

Ron Robinson, Alamo Group’s President and CEO, commented, “While we did not have as much growth in the second quarter as we had hoped, all in all we felt it was a good quarter given the circumstances that included weak agricultural conditions, the strong U.S. dollar, the negative effect on margins from the inventory step up related to the acquisition of the Specialized units and weaker demand in non-governmental applications for our Industrial equipment. Despite all this, sales were still up due to acquisitions, and held up well excluding acquisitions and all the headwinds referenced above. More significantly, margins were up, even with the step up in inventory costs, mainly due to our ongoing focus on cost control and further aided by improved sales of spare and wear parts. As a result, we were able to take a 4% improvement in net sales and generate a 6% improvement in net earnings. The second quarter should be the last one in which margins are significantly impacted by the inventory step up as only about $0.2 million is left to be realized out of the more than $5 million originally added to the inventory valuation at the time of the acquisition of the units of Specialized in May 2014.

“Our Industrial Division continues to lead the way for Alamo, with sales benefiting from the acquisition of the units of Specialized Industries. This helped the six months results more than the quarter since these units were part of Alamo for nearly half the second quarter of 2014. There was some softness in the Division in the quarter as sales to non-governmental end users were off. This segment is a small part of the Division’s overall sales, but had been growing nicely during recent years. This softness affected sales more than earnings as the Division benefited by ongoing improvements in operating efficiencies.



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PAGE 4
ALAMO GROUP ANNOUNCES RECORD 2015 SECOND QUARTER RESULTS



“Alamo’s Agricultural Division also performed well during the quarter. While sales were down 1%, this significantly outperformed the overall agricultural market in general in which most companies are experiencing double-digit declines. In this sector, the Division continues to benefit from the broad applicability of its products across all types of farms and ranches.

“Even our European Division exhibited favorable growth in local currency which is outpacing the soft overall economic conditions there, though it was not enough to overcome the effects of the major movements in exchange rates which turned our 6% sales growth in local currency into a 9% decrease in U.S. dollars.

“Most importantly, as we look ahead, the Company in total ended the quarter with a record backlog of over $162 million. This healthy level is above both last quarter and the same period last year, even with the negative effects of the strong dollar. This, plus our margin improvement and continued stability in our various sectors, gives us confidence in the outlook for the balance of the year. While we feel headwinds such as the weak agricultural market and the strong U.S. dollar will continue to impact our results, we believe Alamo is well positioned for long term growth as we have demonstrated during the last decade or more.”

Earnings Conference Call
Alamo Group will host a conference call to discuss the second quarter results on Thursday, August 6, 2015 at 4:00 p.m. Eastern (3:00 p.m. Central, 2:00 p.m. Mountain and 1:00 p.m. Pacific). Hosting the call will be members of senior management.

Individuals wishing to participate in the conference call should dial 877-876-9177 (domestic) or 785-424-1666 (internationally). For interested individuals unable to join the call, a replay will be available until Thursday, August 13, 2015 by dialing 888-203-1112 (domestic) or 719-457-0820 (internationally), passcode 7072359.

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ALAMO GROUP ANNOUNCES RECORD 2015 SECOND QUARTER RESULTS



The live broadcast of Alamo Group Inc.’s quarterly conference call will be available online at the Company's website, www.alamo-group.com (under “Investor Relations/Events & Presentations”) on Thursday, August 6, 2015, beginning at 4:00 p.m. ET. The online replay will follow shortly after the call ends and will be archived on the Company’s website for 60 days.

About Alamo Group
Alamo Group is a leader in the design, manufacture, distribution and service of high quality equipment for infrastructure maintenance, agriculture and other applications. Our products include truck and tractor mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements and related after-market parts and services. The Company, founded in 1969, has approximately 3,100 employees and operates 25 plants in North America, Europe, Australia and Brazil as of June 30, 2015. The corporate offices of Alamo Group Inc. are located in Seguin, Texas and the headquarters for the Company’s European operations are located in Salford Priors, England.

Forward Looking Statements
This release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company’s actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: market demand, competition, weather, seasonality, currency-related issues, and other risk factors listed from time to time in the Company’s SEC reports. The Company does not undertake any obligation to update the information contained herein, which speaks only as of this date.

(Tables Follow)
###

(1) In this earnings release, Alamo Group reports net sales excluding the impact of the acquisitions which is a non-GAAP financial measure. The Company considers this information useful to investors to allow better comparability of period-to-period operating performance. Attachments 1, 2 and 3 to this earnings release contains a revenue reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure

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Alamo Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited) 
 
June 30,
2015
June 30,
2014
ASSETS
 
 

 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
34,522

 
 
$
37,359

 
Accounts receivable, net
 
194,942

 
 
201,930

 
Inventories
 
175,440

 
 
182,148

 
Other current assets
 
12,548

 
 
14,702

 
Total current assets
 
417,452

 
 
436,139

 
 
 
 
 
 
 
 
Rental equipment, net
 
44,437

 
 
29,160

 
 
 
 
 
 
 
 
Property, plant and equipment
 
69,391

 
 
75,328

 
 
 
 
 
 
 
 
Goodwill
 
77,389

 
 
73,594

 
Intangible assets
 
55,010

 
 
63,161

 
Other non-current assets
 
1,558

 
 
4,780

 
 
 
 
 
 
 
 
Total assets
 
$
665,237

 
 
$
682,162

 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 

 
Current liabilities:
 
 
 
 
 

 
Trade accounts payable
 
$
60,806

 
 
$
65,905

 
Income taxes payable
 
338

 
 
1,369

 
Accrued liabilities
 
36,060

 
 
45,228

 
Current maturities of long-term debt and capital lease obligations
 
528

 
 
1,241

 
Other current liabilities
 
322

 
 
884

 
Total current liabilities
 
98,054

 
 
114,627

 
 
 
 
 
 
 
 
Long-term debt, net of current maturities
 
203,014

 
 
188,006

 
Deferred pension liability
 
4,788

 
 
1,720

 
Other long-term liabilities
 
5,940

 
 
3,756

 
Deferred income taxes
 
5,544

 
 
4,080

 
 
 
 
 
 
 
 
Total stockholders’ equity
 
347,897

 
 
369,973

 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
665,237

 
 
$
682,162

 
                                                                       





Alamo Group Inc. and Subsidiaries 
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
 
Second Quarter Ended
 
Six Months Ended
 
6/30/2015
 
6/30/2014
 
6/30/2015
 
6/30/2014
 
 
 
 
 
 
 
 
Industrial
$
118,521

 
$
105,476

 
$
235,433

 
$
183,187

Agricultural
52,981

 
53,635

 
101,438

 
104,443

European
44,232

 
48,640

 
86,661

 
92,731

Total net sales
215,734

 
207,751

 
423,532

 
380,361

 
 
 
 
 
 
 
 
Cost of sales
165,069

 
160,465

 
327,330

 
294,945

Gross margin
50,665

 
47,286

 
96,202

 
85,416

 
23.5
%
 
22.8
%
 
22.7
%
 
22.5
%
 
 
 
 
 
 
 
 
Operating expenses
34,230

 
32,490

 
67,639

 
59,989

Income from operations
16,435

 
14,796

 
28,563

 
25,427

 
7.6
%
 
7.1
%
 
6.7
%
 
6.7
%
 
 
 
 
 
 
 
 
Interest expense
(1,848
)
 
(1,044
)
 
(3,471
)
 
(1,283
)
Interest income
41

 
35

 
93

 
96

Other income (expense)
488

 
153

 
1,348

 
627

 
 
 
 
 
 
 
 
Income before income taxes
15,116

 
13,940

 
26,533

 
24,867

Provision for income taxes
5,406

 
4,745

 
9,464

 
8,434

 
 
 
 
 
 
 
 
Net Income
$
9,710

 
$
9,195

 
$
17,069

 
$
16,433

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.86

 
$
0.76

 
$
1.51

 
$
1.36

 
 
 
 
 
 
 
 
Diluted
$
0.84

 
$
0.75

 
$
1.49

 
$
1.34

 
 
 
 
 
 
 
 
Average common shares:
 
 
 
 
 
 
 
Basic
11,352

 
12,097

 
11,316

 
12,090

 
 
 
 
 
 
 
 
Diluted
11,498

 
12,276

 
11,467

 
12,273

 
 
 
 
 
 
 
 



Alamo Group Inc.
Non-GAAP Financial Measures Reconciliation

From time to time, Alamo Group Inc. may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. For these purposes, “GAAP” refers to generally accepted accounting principles in the United States. The Securities and Exchange Commission (SEC) defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude or include amounts from the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures disclosed by Alamo Group are provided as additional information to investors in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.

In this earnings release, Alamo Group reports each of net sales, operating income and net income excluding the impact of acquisitions which are non-GAAP financial measures. The Company considers this information useful to investors to allow better comparability of period-to-period operating performance. Attachment 1 to this earnings release contains a revenue reconciliation of these non-GAAP financial measures to the comparable GAAP financial measure. Attachment 2 discloses Adjusted Operating Income, Adjusted Net Income, Adjusted Diluted EPS each adjusted to exclude the impact of inventory step up charge and transaction costs connected to the acquisitions and additional stock expense related to the accelerated vesting options to retirement eligible recipients, all of which are non-GAAP financial measures. The Company believes that providing Operating Income and Net Income exclusive of these adjustments, is useful to investors to allow better comparability of period-to-period operating preference. Attachment 2 sets forth a reconciliation of each such non-GAAP financial measure to its most directly comparable GAAP measure.



Attachment 1


Alamo Group Inc.
Non-GAAP Financial Reconciliation
(in thousands)
(Unaudited) 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net Sales (consolidated) - GAAP
 
$
215,734

 
$
207,751

 
$
423,532

 
$
380,361

   (less: net sales attributable to acquisitions)
 
(34,948
)
 
(18,976
)
 
(82,453
)
 
(18,976
)
Net Sales less acquisitions (consolidated) - non-GAAP
 
$
180,786

 
$
188,775

 
$
341,079

 
$
361,385

 
 
 
 
 
 
 
 
 
Net Sales (Industrial Division) - GAAP
 
$
118,521

 
$
105,476

 
$
235,433

 
$
183,187

   (less: net sales attributable to acquisition)
 
(34,173
)
 
(18,976
)
 
(78,425
)
 
(18,976
)
Net Sales less acquisitions (N.A. Industrial Division) - non-GAAP
 
$
84,348

 
$
86,500

 
$
157,008

 
$
164,211

 
 
 
 
 
 
 
 
 
Net Sales (Agricultural Division) - GAAP
 
$
52,981

 
$
53,635

 
$
101,438

 
$
104,443

   (less: net sales attributable to acquisitions)
 
(775
)
 

 
(1,574
)
 

Net Sales less acquisitions (N.A. Agricultural Division) - non-GAAP
 
$
52,206

 
$
53,635

 
$
99,864

 
$
104,443

 
 
 
 
 
 
 
 
 
Net Sales (European Division) - GAAP
 
$
44,232

 
$
48,640

 
$
86,661

 
$
92,731

   (less: net sales attributable to acquisition)
 

 

 
(2,454
)
 

Net Sales less acquisitions (European Division) - non-GAAP
 
$
44,232

 
$
48,640

 
$
84,207

 
$
92,731

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (consolidated) - GAAP
 
$
16,435

 
$
14,796

 
$
28,563

 
$
25,427

   (less: operating income attributable to acquisitions)
 
(1,687
)
 
(2,553
)
 
(5,814
)
 
(2,553
)
Operating Income less acquisitions (consolidated) - non-GAAP
 
$
14,748

 
$
12,243

 
$
22,749

 
$
22,874

 
 
 
 
 
 
 
 
 
Net Income (consolidated) - GAAP
 
$
9,710

 
$
9,195

 
$
17,069

 
$
16,433

   (less: net income attributable to acquisitions)
 
(214
)
 
(1,601
)
 
(2,127
)
 
(1,601
)
Net Income less acquisitions (consolidated) - non-GAAP
 
$
9,496

 
$
7,594

 
$
14,942

 
$
14,832




Attachment 2


Alamo Group Inc.
Non-GAAP Financial Reconciliation
(in thousands, except per share numbers)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Operating Income - GAAP
 
$
16,435

 
$
14,796

 
$
28,563

 
$
25,427

       (add: inventory step charge)
 
775

 

 
2,530

 

       (add: expenses relating to system conversion)
 
394

 

 
671

 

             Adjusted Operating Income - non-GAAP
 
$
17,604

 
$
14,796

 
$
31,764

 
$
25,427

 
 
 
 
 
 
 
 
 
Net Income - GAAP
 
$
9,710

 
$
9,195

 
$
17,069

 
$
16,433

       Adjustments (after tax):
 
 
 
 
 
 
 
 
       (add: inventory step charge)
 
498

 

 
1,628

 

       (add: expenses relating to system conversion)
 
253

 

 
431

 

             Adjusted Net Income - non-GAAP
 
$
10,461

 
$
9,195

 
$
19,128

 
$
16,433

 
 
 
 
 
 
 
 
 
Diluted EPS - GAAP
 
$
0.84

 
$
0.75

 
$
1.49

 
$
1.34

       (add: inventory step charge)
 
0.04

 

 
0.14

 

       (add: expenses relating to system conversion)
 
0.02

 

 
0.04

 

Adjusted Diluted EPS - non-GAAP
 
$
0.90

 
$
0.75

 
$
1.67

 
$
1.34




Attachment 3


Alamo Group Inc.
Non-GAAP Financial Reconciliation
(in thousands)
(Unaudited)

 
Three Months Ended 
 June 30,
 
 
 
Change due to currency translation
 
2015
 
2014
 
% change from 2014
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Industrial
$
118,521

 
$
105,476

 
12.4
 %
 
$
(1,782
)
 
(1.7
)%
Agricultural
52,981

 
53,635

 
(1.2
)%
 
(783
)
 
(1.5
)%
European
44,232

 
48,640

 
(9.1
)%
 
(7,200
)
 
(14.8
)%
 
$
215,734

 
$
207,751

 
3.8
 %
 
$
(9,765
)
 
(4.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended 
 June 30,
 
 
 
Change due to currency translation
 
2015
 
2014
 
% change from 2014
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Industrial
$
235,433

 
$
183,187

 
28.5
 %
 
$
(2,954
)
 
(1.6
)%
Agricultural
101,438

 
104,443

 
(2.9
)%
 
(1,336
)
 
(1.3
)%
European
86,661

 
92,731

 
(6.5
)%
 
(13,704
)
 
(14.8
)%
 
$
423,532

 
$
380,361

 
11.4
 %
 
$
(17,994
)
 
(4.7
)%