WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-21220
ALAMO GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE
74-1621248
(State of incorporation)
(I.R.S. Employer Identification Number)
1502 E. Walnut, Seguin, Texas 78155
(Address of principal executive offices)
(210) 379-1480
(Telephone number)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirement
for the past 90 days.
Yes X No ___
At November 13, 1996, 9,589,851 shares of common stock, $.10 par
value, of the Registrant were outstanding.
Alamo Group Inc. and Subsidiaries
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Interim Condensed Consolidated Financial Statements
(Unaudited)
Interim Condensed Consolidated Statements of Income -
Three months and nine months ended September 28, 1996 and
September 30, 1995 3
Interim Condensed Consolidated Balance Sheets -
September 28, 1996 and December 30, 1995 4
Interim Condensed Consolidated Statements of Cash Flows -
Nine months ended September 28, 1996 and September 30, 1995 5
Notes to Interim Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. None
Item 3. None
Item 4. None
Item 5. None
Item 6. Exhibits and Reports on Form 8-K 10-
11
SIGNATURES
12
2
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Septemb Septemb Septemb Septemb
er 28, er 20, er 28, er 30,
1996 1996 1996 1995
Sales, net . . . . . . . . . $ $ $ $
. . . . . . . . . . . . . . 46,835 43,343 142,608 123,094
. . . . . . . . . . . . . .
Cost of sales. . . . . . . . 32,669 30,434 103,786 89,437
. . . . . . . . . . . . . .
. . . . . . . . . . . . .
Gross margin . . . . . . . . 14,166 12,909 38,822 33,657
. . . . . . . . . . . . . .
. . . . . . . . . . . .
Operating expenses:
General and 2,564 2,301 7,287 6,250
administrative . . . . . . .
. . . . . . . . . . . . . .
Marketing . . . . . . . 3,496 3,026 10,077 8,186
. . . . . . . . . . . . . .
. . . . . . . . . . . . .
Engineering. . . . . . . 761 2,402 2,121
. . . . . . . . . . . . . . 749
. . . . . . . . . . . .
Operating expenses before 6,088 19,766 16,557
amortization. . . . . . . . 6,809
. . . . .
Intangible amortization 413 1,023 942
expense. . . . . . . . . . . 423
. . . . . . . .
Income from operations . . . 6,408 18,033 16,158
. . . . . . . . . . . . . . 6,934
. . . . . . . .
Other income (expense):
Net interest . . . . . . (448) (1,568) (1,798)
. . . . . . . . . . . . . . (475)
. . . . . . . . . . . . .
Other . . . . . . . . . 164 533 818
. . . . . . . . . . . . . . 72
. . . . . . . . . . . . . .
.
Income before income taxes . 6,124 16,998 15,178
. . . . . . . . . . . . . . 6,531
. . . . . . .
Provision for income taxes . 2,346 2,220 6,253 5,612
. . . . . . . . . . . . . .
. . . . . . . .
Net income . . . . . . . . . $ $ $ $
. . . . . . . . . . . . . . 4,185 3,904 10,745 9,566
. . . . . . . . . . . .
Net income per common share. $ $ $ $
. . . . . . . . . . . . . . 0.43 0.41 1.11 1.15
. . . . .
Weighted average common 9,643 9,567 9,667 8,301
shares and equivalents. . .
.
See accompanying notes.
3
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
Septembe December
r 28, 30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents . . $ $
. . . . . . . . . . . . . . . . . 4,729 1,839
. . . . . . . . . . . .
Marketable securities . . . . 395 769
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Accounts receivable . . . . . 43,358 45,509
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Inventories . . . . . . . . . 64,602 58,624
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Deferred income taxes . . . . 1,707 1,782
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Prepaid expenses . . . . . . . 1,786 844
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Total current 116,577 109,367
assets . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Property, plant and equipment. . . 47,286 46,158
. . . . . . . . . . . . . . . . .
. . . . . . . . . .
Less: Accumulated (24,481) (22,620)
depreciation. . . . . . . . . . .
. . . . . . . . . . . . . . .
22,805 23,538
Receivables from officers and 700 700
employees . . . . . . . . . . . .
. . . . . . . . .
Goodwill, net of amortization . . 12,729 13,150
. . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Other assets . . . . . . . . . . . 5,479 4,816
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Total assets . . . $ $
. . . . . . . . . . . . . . . . . 158,290 151,571
. . . . . . . . . . . . . . . . .
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Trade accounts payable . . . . $ $
. . . . . . . . . . . . . . . . . 15,956 13,143
. . . . . . . . . . . .
Income taxes payable. . . . . 2,527 1,570
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Accrued liabilities . . . . . 6,465 6,045
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Current portion of capital 362 344
lease obligations. . . . . . . . .
. . . . . . . . .
Current maturities of long- 1,107 946
term debt. . . . . . . . . . . . .
. . . . . . . . . .
Total current 26,417 22,048
liabilities. . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Capital lease obligations, net of 6,904 7,243
current portion . . . . . . . . .
. . . . . . .
Long-term debt, net of current 317 1,466
portion . . . . . . . . . . . . .
. . . . . . . . . .
Bank revolving credit facility . . 24,900 28,600
. . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Deferred income taxes and minority 1,341 1,509
interest. . . . . . . . . . . . .
. . . . . .
Total liabilities . 59,879 60,866
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Stockholders' equity:
Common stock, $.10 par value,
20,000,000 shares
authorized; 9,589,851 and
9,576,913 issued and 959 958
outstanding at September
28, 1996 and December 30, 1995,
respectively . . . . . . .
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Additional paid-in-capital . . 49,502 49,278
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Unrealized holding gain on 184 379
securities . . . . . . . . . . . .
. . . . . . . . . .
Retained earnings . . . . . . 48,013 40,142
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Translation adjustment . . . . (247) (52)
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Total stockholders' 98,411 90,705
equity . . . . . . . . . . . . . .
. . . . . . . . . . .
Total liabilities $ $
and stockholders' equity . . . . . 158,290 151,571
. . . . . . . . .
See accompanying notes.
4
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
Septembe Septembe
r 28, r 30,
1996 1995
Operating Activities
Net income $ $
10,745 9,566
Adjustments to reconcile net
income to net cash
provided (used) by operating 204 122
activities:
Allowance for doubtful
accounts
Depreciation and 3,560 3,521
amortization
Provision for deferred (48) (339)
income tax benefit
Realized gain on (370) (432)
marketable securities
(Gain)/loss on sale of (122) (36)
equipment
Changes in operating
assets and liabilities,
net of effect of 1,857 (6,045)
acquisitions:
Accounts receivable
Inventories (6,083) (1,085)
Prepaid expenses and (2,078) (4,280)
other assets
Trade accounts payable 3,319 435
and accrued liabilities
Income taxes payable 942 146
Net cash provided (used) by 11,926 1,573
operating activities
Investing Activities
Acquisitions, net of cash acquired (4,973)
-
Purchase of property, plant and (2,185) (1,762)
equipment
Proceeds from sale of property, 198 75
plant and equipment
Equity method investment (2,480)
-
Proceeds from sale of marketable 445 464
securities
Net cash provided (used) by (1,542) (8,676)
investing activities
Financing Activities
Net change in bank revolving (3,700) (480)
credit facility
Dividends paid (2,875) (2,469)
Proceeds from sale of common stock 172 33,139
Principal payments on long-term (1,139) (24,809)
debt and capital leases
Proceeds from issuance of long 317
term debt -
Cash received from stockholder for
purchase of common stock 53
-
Net cash provided (used) by (7,489) 5,698
financing activities
Effect of exchange rate changes on (5) 149
cash
Net change in cash and cash 2,890 (1,256)
equivalents
Cash and cash equivalents at 1,839 1,873
beginning of the year
Cash and cash equivalents at end $ 617
of the period 4,729
Cash paid during the period for:
Interest $ $
2,129 1,614
Income taxes 3,993 3,521
See accompanying notes.
5
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements -
(Unaudited)
September 28, 1996
1. Basis of Financial Statement Presentation
The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles 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 generally accepted
accounting principles 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 ended December, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and
Subsidiaries' annual report on Form 10-K for the year ended
December 30, 1995.
2. Acquisitions and Investments
In 1995 the Company acquired the following entities, accounted
for as purchase acquisitions: April 27, 1995, M&W Gear Co.
("M&W"); May 12, 1995, Rhino International, Inc. ("Rhino
International"); June 29, 1995, N J M Dabekausen Beheer, BV and
its subsidiaries ("Dakebausen"); December 6, 1995, Herschel
Corporation ("Herschel").
On May 24, 1995, the Company invested $1,980,000 to purchase a
49.5% equity interest in Certified Power Inc. ("CPI"), in a highly
leveraged transaction, accounted for under equity accounting
rules.
3. Accounts Receivable
Accounts Receivable is shown less allowance for doubtful accounts
of $1,380,000 and $1,357,000 September 28, 1996 and December 30,
1995, respectively.
4. Inventories
Inventories valued at LIFO cost represented 83% and 67% of total
inventory for the periods ended September 28, 1996 and December
30, 1995, respectively. The excess of current costs over LIFO
valued inventories was $2,538,000 at September 28, 1996 and
$2,618,000 at December 30, 1995. Inventory obsolescence reserves
were $4,833,000 at September 28, 1996 and $4,157,000 at December
30, 1995. Net inventories consist of the
following (in thousands):
Septembe December
r 28, 30,
1996 1995
Finished goods . . . . . . . $ $
. . . . . . . . . . . . . . 56,922 51,613
. . .
Work in process . . . . . . 3,409 3,234
. . . . . . . . . . . . . .
. . .
Raw materials. . . . . . . . 4,271 3,777
. . . . . . . . . . . . . .
. . .
$ $
64,602 58,624
An actual valuation of inventory under the LIFO method can be
made only at the end of each year based on the inventory levels
and costs at that time. Accordingly, interim LIFO must
necessarily be based on management's estimates of expected year-
end inventory levels and costs. Because these are subject to
many forces beyond management's control, interim results are
subject to the final year-end LIFO inventory valuation.
6
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements -
(Unaudited)
September 28, 1996 - (Continued)
5. Common Stock and Dividends
The Company completed a 2,000,000 share public offering of its
common stock on June 29, 1995.
Dividends declared and paid on a per share basis were as follows:
Three Months Ended Nine Months Ended
Septembe Septembe Septembe Septembe
r 28, r 30, r 28, r 30,
1996 1995 1996 1995
Dividends declared . . . . . $ $ $ $
. . . . . . . . . . . . . . 0.10 0.10 0.30 0.30
. . .
Dividends paid . . . . . . . $ $ $ $
. . . . . . . . . . . . . . 0.10 0.10 0.30 0.30
. . . .
6. Contingent Matters
The Company is subject to various unresolved legal actions which
arise in the normal course of its business, the most prevalent of
which relate to product liability. Although it is not possible
to predict with certainty the outcome of these unresolved legal
actions or the range of possible loss, the Company believes these
unresolved legal actions will not have a material affect on its
financial position or results of operations.
7
Alamo Group Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following tables set forth, for the periods indicated,
certain financial data:
Three Months Nine Months Ended
Ended
Sales Data In Thousands Sept. Sept. Sept. Sept.
28, 30, 28, 30,
1996 1995 1996 1995
American
Agricultural . . . $ $ $ $
. . . . . . . . . . . . . . 21,771 17,368 66,139 48,538
. . . . . .
Governmental . . . 12,486 13,559 40,018 41,001
. . . . . . . . . . . . . .
. . . .
European . . . . . . . 12,578 12,416 36,451 33,555
. . . . . . . . . . . . . .
. . . . . .
Total sales, net . . . . . $ $ $ $
. . . . . . . . . . . . . . 46,835 43,343 142,608 123,608
. . . . .
Three Months Nine Months Ended
Ended
Cost Trends and Profit Sept. Sept. Sept. Sept.
Margins, as Percentages of 28, 30, 28, 30,
Net Sales 1996 1995 1996 1995
Gross margin . . . . . . . 30.2 % 29.8 % 27.2 % 27.3 %
. . . . . . . . . . . . . .
. . . . .
Income from operations . . 14.8 % 14.8 % 12.6 % 13.1 %
. . . . . . . . . . . . . .
.
Income before income taxes 13.9 % 14.1 % 11.9 % 12.3 %
. . . . . . . . . . . . . .
Net income . . . . . . . . 8.9 % 9.0 % 7.5 % 7.8 %
. . . . . . . . . . . . . .
. . . . .
Results of Operations
Three Months Ended September 28, 1996 Compared to Three Months
Ended September 30, 1995
Net sales increased $3,492,000, up 8% over 1995's third quarter.
This increase, including the 25% increase in American
agricultural sales, is a result of acquisitions (see notes to
financial statements) in 1995 which increased replacement parts
sales. Replacement parts sales have strengthened with the return
of more normal domestic weather patterns. Sales growth was
partially offset by lower governmental sales due to the delay in
shipment of certain wholegoods caused by lower availability of
tractor supplies from the Company's major OEM suppliers. These
orders are expected to be completed in the fourth quarter.
Increases in the amounts of costs and expenses are also,
generally, related to the acquisitions.
Gross margin, up from 29.8% to 30.2 %, increased largely due to
production efficiency programs and price increase effects.
Nine Months Ended September 28, 1996 Compared to Nine Months
Ended September 30, 1995
Net sales increased $19,514,000, up 16%. Acquisitions in 1995
were the primary factor in increases in sales and costs.
European operations also contributed to sales growth. Nine month
results were impacted by negative impacts of harsh weather on
sales volume during the first half of the year, particularly in
agricultural markets and replacement parts. The 16% increase in
average common shares and equivalents related to the 2,000,000
share June 29, 1995, stock offering.
8
Liquidity and Capital Resources
Cash provided by operations was $11,926,000 for the nine-month
period ended September 28, 1996.
As of September 28, 1996, $26,945,000 was utilized under the
Company's $40,000,000 Amended and Restated Revolving Credit and
Term Loan Agreement (the "Facility") of which $2,045,000 was for
standby letters of credit and $24,900,000 was borrowed under the
revolving credit line. The Company's borrowings are seasonal in
nature with the greatest utilization of the Facility generally
occurring in the spring.
The Facility and the Company's ability to internally generate
funds from operations should be sufficient to meet the Company's
cash requirements in the near future.
9
Alamo Group Inc. and Subsidiaries
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
The Company is subject to various unresolved legal
actions which arise in the ordinary course of its
business. The most prevalent of such actions relate to
product liability. While amounts claimed may be
substantial and the ultimate liability with respect to
such litigation cannot be determined at this time, the
Company believes that the ultimate outcome of these
matters will not have a material adverse effect on the
Company's consolidated financial position.
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are included herein:
(11) Statement Re: Computation of Per Share
Earnings
(b) Reports on Form 8-K
None
10
Alamo Group Inc. and Subsidiaries
Exhibit (11) - Statement Re: Computation of Per Share
Earnings
Three Months Nine Months
Ended Ended
Septem Septem Septem Septem
ber ber ber ber
28, 30, 28, 30,
1996 1995 1996 1995
(000's omitted, except per
share data)
Primary
Average shares outstanding . . . . 9,590 9,467 9,577 8,195
. . . . . . . . . . . . . . . . . .
. .
Net effect of dilutive stock
options -- based
on the treasury stock method
using
average market price . . . . . 53 100 90 106
. . . . . . . . . . . . . . . . . .
. . . .
Total . . . . . . . . . . . . . . . 9,643 9,567 9,667 8,301
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Net Income . . . . . . . . . . . . $ $ $ $
. . . . . . . . . . . . . . . . . . 4,185 3,904 10,745 9,566
. . . . . .
Per share amount . . . . . . . . . $ $ $ $
. . . . . . . . . . . . . . . . . . .43 .41 1.11 1.15
. . . .
Fully Diluted
Average shares outstanding . . . . 9,467 8,194
. . . . . . . . . . . . . . . . . .
. .
Net effect of dilutive stock
options -- based
on the treasury stock method
using the
period end market price, if
higher than
average market price . . . . . 161 127
. . . . . . . . . . . . . . . . . .
. . . .
Total . . . . . . . . . . . . . . . 9,628 8,321
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Net Income . . . . . . . . . . . . $ $
. . . . . . . . . . . . . . . . . . 3,904 9,566
. . . . . .
Per share amount . . . . . . . . . $ (1) $
. . . . . . . . . . . . . . . . . . (1) .41 1.15
. . . .
(1) Not applicable as the market price at end of the period
was lower than the average for the period.
11
Alamo Group Inc. and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Alamo
Group Inc.
(Registrant)
/s/ Jim A. Smith
Jim A. Smith
Executive Vice President and
CFO
(Principal Accounting and
Financial Officer)
12