_________________________________________________________________
_________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 30, 1997
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)
(830) 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 October 31, 1997, 9,579,514 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 30, 1997 and
September 28, 1996 3
Interim Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 4
Interim Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1997 and September 28,
1996 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
SIGNATURES 11
2
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Nine
Months Ended Months Ended
Sept. Sept. Sept. Sept.
30, 28, 30, 28,
1997 1996 1997 1996
------- ------- ------- -------
Net sales $ 52,220 $ 46,835 $162,296 $142,608
Cost of sales 36,596 32,669 117,367 103,786
------- ------- ------- -------
Gross profit 15,624 14,166 44,929 38,822
Selling, general and
administrative expense 7,900 7,232 22,966 20,789
------- ------- ------- -------
Income from operations 7,724 6,934 21,963 18,033
Interest expense (571) (601) (1,756) (2,006)
Interest income 152 126 374 438
Other income(net) 331 72 276 533
------- ------- ------- -------
Income before income taxes 7,636 6,531 20,857 16,998
Provision for income taxes 2,726 2,346 7,479 6,253
------- ------- ------- -------
Net income $ 4,910 $ 4,185 $ 13,378 $ 10,745
======= ======= ======= =======
Net income per common share $ 0.50 $ 0.43 $ 1.38 $ 1.11
======= ======= ======= =======
Weighted average common
shares and equivalents 9,709 9,643 9,668 9,667
See accompanying notes.
3
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
September 30, December 31,
1997 1996
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 898 $ 2,228
Accounts receivable 46,724 43,925
Inventories 61,802 60,171
Deferred income taxes 2,206 2,206
Prepaid expenses and other 2,154 1,327
-------- ---------
Total current assets 113,784 109,857
Property,plant and equipment 50,464 48,932
Less: Accumulated depreciation (28,420) (26,546)
-------- ---------
22,044 22,386
Goodwill 12,817 14,237
Other assets 7,508 7,382
-------- ---------
Total assets $ 156,153 $ 153,862
======== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ 11,140 $ 11,066
Income taxes payable 2,342 930
Accrued liabilities 8,072 6,725
Current maturities of long-term debt 705 1,031
-------- ---------
Total current liabilities 22,259 19,752
Long-term debt,net of current
maturities 26,993 35,299
Deferred income taxes 1,574 1,561
Stockholders' equity:
Common stock, $.10 par value,
20,000,000 shares authorized;
9,604,714 and 9,589,851 issued
at September 30, 1997 and
December 31, 1996, respectively 960 959
Additional paid-in capital 49,702 49,592
Treasury Stock, at cost; 25,200
shares at September 30, 1997 (489) --
Retained earnings 55,570 45,071
Translation adjustment (416) 1,628
-------- --------
Total stockholders' equity 105,327 97,250
-------- --------
Total liabilities and
stockholders' equity $ 156,153 $ 153,862
======== ========
See accompanying notes.
4
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
September 30, September 28,
1997 1996
------------- -------------
Operating Activities
Net income $ 13,378 $ 10,745
Adjustment to reconcile net
income to net cash provided
(used) by operating activities:
Provision for doubtful accounts 542 204
Depreciation 2,763 2,537
Amortization 1,049 1,023
Provision for deferred
income tax benefit -- (48)
Realized gain on
marketable securities (70) (370)
Gain on sale of equipment (125) (122)
Changes in operating assets and
liabilities:
Accounts receivable (4,213) 1,857
Inventories (2,530) (6,083)
Prepaid expenses and
other assets (1,489) (2,078)
Trade accounts payable
and accrued liabilities 2,145 3,319
Income taxes payable 1,536 942
--------- ---------
Net cash provided by operating
activities 12,986 11,926
Investing Activities
Purchase of property, plant and
equipment (3,333) (2,185)
Proceeds from sale of property,
plant and equipment 189 198
Proceeds from sale of marketable
securities 150 445
--------- ---------
Net cash (used) by investing
activities (2,994) (1,542)
Financing Activities
Net change in bank revolving
credit facility (7,500) (3,700)
Principal payments on long-term
debt and capital leases (462) (1,139)
Dividends paid (2,878) (2,875)
Proceeds from sale of
common stock 201 225
Cost of common stock repurchased (489) --
--------- ---------
Net cash provided (used) by
financing activities (11,128) (7,489)
Effect of exchange rate changes
changes on cash (194) (5)
--------- ---------
Net change in cash and cash
equivalents (1,330) 2,890
Cash and cash equivalents at
beginning of the period 2,228 1,839
--------- ---------
Cash and cash equivalents at
end of the period $ 898 $ 4,729
========= =========
Cash paid during the period for:
Interest $ 1,682 $ 2,129
Income taxes 3,190 3,993
See accompanying notes.
5
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements - (Unaudited)
September 30, 1997
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 pursuant to 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 31, 1997. 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, 1996.
2 Accounts Receivable
Accounts Receivable is shown less allowance for doubtful accounts
of $1,673,000 and $1,521,000 at September 30, 1997 and December
31, 1996, respectively.
3. Inventories
Inventories valued at LIFO cost represented 81% and 80% of total
inventory at September 30, 1997 and December 31, 1996,
respectively. The excess of current costs over LIFO valued
inventories was $3,221,000 at each of September 30, 1997 and
December 31, 1996. Inventory obsolescence reserves were
$4,165,000 at September 30, 1997 and $4,110,000 at December 31,
1996. Net inventories consist of the following (in thousands):
September 30, December 31,
1997 1996
------------- ------------
Finished goods $ 52,044 $ 53,748
Work in process 4,567 2,858
Raw materials 5,191 3,565
------------- ------------
$ 61,802 $ 60,171
============= ============
An actual valuation of existing 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 30, 1997 - (Continued)
4. Common Stock and Dividends
Dividends declared and paid on a per share basis were as follows:
Three Nine
Months Ended Month Ended
September September September September
30, 28, 30, 28,
1997 1996 1997 1996
------ ------ ------ ------
Dividends declared $ 0.10 $ 0.10 $ 0.30 $ 0.30
Dividends paid $ 0.10 $ 0.10 $ 0.30 $ 0.30
5. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings
per share and to restate all prior periods. The impact of
Statement 128 on the calculation of the Company's earnings per
share for these quarters is not expected to be material.
6. New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income" and Statement
No. 131, "Disclosures About Segments Of An Enterprise And Related
Information", both of which will be effective for fiscal years
beginning after December 15, 1997. The Corporation will adopt
Statements No. 130 and No. 131 as of January 1, 1998. The impact
of adopting these statements is not expected to be material on
the Company's financial position or results of operations.
7. Contingent Matters
The Company is subject to various unresolved legal matters which
arise in the ordinary course of its business. The most
prevalent of such causes of action relate to product liability
claims which are generally covered by insurance. While amounts
claimed may be substantial and the ultimate liability with
respect to such claims 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.
The Company has been named Defendant in a suit by the former
owner of Rhino International which includes aggregate claims
totaling $8 million. The Company believes it has meritorious
defenses to the suit and will vigorously defend against the
pending claims and the Company is prosecuting appropriate
counterclaims. While the ultimate outcome of this matter cannot
be determined at this time, the Company believes this matter will
not have a material adverse effect on the Company's consolidated
financial position.
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 Nine
Months Ended Months Ended
Sales Data In Thousands September September September September
30, 28, 30, 28,
1997 1996 1997 1996
--------- --------- --------- ---------
American
Agricultural $ 25,494 $ 21,771 $ 79,722 $ 66,139
Industrial 15,406 12,486 44,790 40,018
European 11,320 12,578 37,784 36,451
--------- --------- --------- ---------
Total sales,net $ 52,220 $ 46,835 $162,296 $142,608
Three Nine
Months Ended Months Ended
Cost Trends and September September September September
Profit Margins, as 30, 28, 30, 28,
Percentages of Net Sales 1997 1996 1997 1996
--------- --------- --------- ---------
Gross margin 29.9 % 30.2 % 27.7 % 27.2 %
Income from operations 14.8 % 14.8 % 13.5 % 12.6 %
Income before income taxes 14.6 % 13.9 % 12.9 % 11.9 %
Net income 9.4 % 8.9 % 8.2 % 7.5 %
Results of Operations
Three Months Ended September 30, 1997 Compared to Three Months
Ended September 28, 1996
Net sales increased $5,385,000, up 11.5% over 1996's second
quarter. Third quarter results benefited from the return of more
normalized domestic weather and operating conditions.
Accordingly, Alamo's American agricultural and industrial markets
achieved results more in-line with the Company's traditional
levels of profitability as both its wholegoods and replacement
parts sales increased. The period's results were also favorably
impacted by the continued integration of the Company's 1995
acquisitions. Sales in Alamo's European operations decreased
10.0% due to soft market conditions and currency related issues.
Expense increases were in line with Company growth.
Nine Months Ended June 30, 1997 Compared to Nine Months Ended
June 29, 1996
Net sales increased $19,688,000, up 13.8%. Nine-month results,
like the second quarter, were benefited throughout the period by
a return to more normalized domestic weather conditions and
improved performance, by the Company, particularly from the 1995
acquisitions. Order rates improved in the current nine-month
period, up 21% over 1996, but some softening in European markets
was noted late in the second quarter which resulted, in part,
from currency related issues.
Liquidity and Capital Resources
Cash provided by operations for the nine-month period ended
September 30, 1997, was $12,986,000 with the net income cash
flows for the period partially offset by a net increase in
working capital accounts related primarily to both sales growth
and seasonal effects.
8
Alamo Group Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
As of September 30, 1997, $22,393,000 was utilized under the
Company's bank revolving credit facility, of which $2,393,000 was
for standby letters of credit and $20,000,000 was borrowed. On
June 23, 1997 the credit facility was increased to $45,000,000.
The Company's borrowings are seasonal in nature with the greatest
utilization generally occurring in the first quarter and early
spring.
During the second quarter of 1997 the Company announced that its
Board of Directors had authorized the repurchase of up to
1,000,000 shares of its common stock. Any such purchases will be
funded through working capital or borrowing under the credit
facility. To date, the Company has repurchased 25,200 shares of
its common stock.
The bank credit facility and the Company's ability to internally
generate funds from operations are expected to be sufficient to
meet the Company's cash requirements in the near future.
_________________________________________________________________
This report may be deemed to contain forward-looking statements
which 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, and other risk
factors listed from time to time in the Company's SEC reports.
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 which are generally covered by
insurance. 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:
(11.1) Statement Re: Computation of Per Share Earnings
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
None
10
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)
/ Jim A. Smith /
__________________________________
Jim A. Smith
Executive Vice President and CFO
(Principal Accounting and Financial Officer)
11
Alamo Group Inc. and Subsidiaries
Exhibit (11.1) - Statement Re: Computation of Per Share Earnings
Three Nine
Months Ended Months Ended
Sept. Sept. Sept. Sept.
30, 28, 30, 28,
1997 1996 1997 1996
------ ------ ------ ------
(000's omitted, except per share data)
Primary
Average shares outstanding 9,580 9,590 9,565 9,577
Net effect of dilutive
stock options and warrants --
based on the treasury stock
method using average
market price 129 53 103 90
------ ------ ------ ------
Total 9,709 9,643 9,668 9,667
====== ====== ====== ======
Net Income $ 4,910 $ 4,185 $ 13,378 $ 10,745
====== ====== ====== ======
Per share amount $ 0.50 $ 0.43 $ 1.38 $ 1.11
====== ====== ====== ======
Fully Diluted
Average shares outstanding 9,580 9,565
Net effect of dilutive stock
options and warrants --
based on the treasury stock
method using the year-end
market price, if higher
than average market price 148 161
------ ------ ------ ------
Total 9,728 9,726
------ ------ ------ ------
Net Income $ 4,910 $ 13,378
------ ------ ------ ------
Per share amount $ 0.50 (1) $ 1.37 (1)
====== ====== ====== ======
(1) Not applicable as price at end of the period
was lower than the average for the period.