ALG - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen. Welcome to the Alamo Group Third Quarter 2018 Earnings Conference Call.

During today's presentation all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for question. [Operator Instructions]. recorded November being XXXX. is conference today, X, Thursday, This conference now to I to today's call would like turn over Mr. Edward Rizzuti. Please go ahead, sir.

Edward Rizzuti

now, press Thank copy By you all have you. received of the release. should a

call, a on However, if one, contact list. the and send company's at us make and one which will call There The like will one XXX-XXXX, will of be we a accessed to distribution please the and for copy a hour (XXX) (XXX) the you be and can anyone the run X XXX-XXXX, receive week. would sure replay missing is replay after dialing release passcode begin you by with XXXXXXX. are

available call the webcast on is www.alamo-group.com, company's the and being XX will for days. at Additionally, be website a replay

Ron Corporate Financial Richard Officer; make Management Malone, and today line Executive Chief the your for and Dan and some Chief up remarks, me then with questions. Treasurer Executive Controller. On President, President, we'll Robinson, President open Vice and the will line opening Vice are Wehrle, Officer;

call today, management of our numbers Reconciliations release. to remarks. to the the non-GAAP in certain reference results included their GAAP these in applicable earnings non-GAAP attachments numbers may are During

like the to Before Ron, forward-looking a to call about turning few comments over make I'd statements.

making Safe be statements Harbor will Litigation forward-looking made Act the are XXXX. of We provisions today Securities pursuant to that Reform of Private

demand, and in date. update known in and competition, market actual issues, cause obligation ahead. would factors listed SEC now from to uncertainties, go from materially and to does cause The risks Ron. information speaks of are involve herein, company's introduce like issues, the those which unknown to contained to future results. not this please as reports. currency-related seasonality, undertake only Risk time Ron, to I company Factors periods time any the results the results statements differ company's could other Forward-looking geopolitical which which Among actual weather, forecasted may the following: differ materially

Ron Robinson

CFO, Ed. our us you, with to following formal third provide results forward review to want on XXXX. your then of a for remarks, will the and will I begin And all you financial joining thank then few results comments our questions. the call our more for our of taking quarter we Thank we Malone, Dan look today. a of

So Dan, please go ahead.

Dan Malone

Ron. you, Thank

our In Our retroactive year-end results were XXXX third helped company quarter million XXXX our set $X for the the cover which results of earnings. achieved sales and corporate effects records without provision the both adjustment. sales the by quarter, of were were to again performance. quarter driver again industrial Very the and adjustment division XXXX of significantly the tax Act. record Tax and said results earnings main That third with benefit Reform the our tax strong

market million XX.X% In by plant of the third prior by over Industrial year offset more dynamics negatively of results sales third weak division delays $XXX.X UK XXXX French shipments businesses. While our from affected Europe, than higher our the Overall, good quarter were costs. beat input agricultural in results and with vacuum truck otherwise X.X% of sales the acquisitions. increase prior-year acquisitions. about of represented sales million sales third up were the growth X.X% third Division organic sales. by Year-to-date, without XXXX and $XXX.X without X% quarter XX.X% quarter effective quarter

yields, million acquisitions. $XX.X division quarter. the sales Year-to-date, the compared Division prior without XXXX unfavorable up European recovery the this disputes division year XX.X% sales essentially third effect, the a with Excluding were million, Year-to-date quarter. favorable organically. Division were to of sales quarter flat year, currency X.X% X.X% X.X% trade year third Weather, $XX.X this Agricultural were benefit sales down delayed lower acquisitions. without organic sales third Without or up currency sales the the about than were X.X%, of of were of were Year-to-date, prior of sales but acquisitions, prior increased third XX.X% third X% slightly X.X% effect the growth quarter year down general from this market. U.S. prior over division's agricultural crop without quarter net and this of quarter in and were currency translation. have third XXXX division's this up local X.X% grew translation also to division XXXX. sales effect

delayed sales from vacuum European by our impacted negatively truck facility. shipments were French Our

to timing receipts the deliveries delayed much due While much suppliers. was finished components of of it of customers, this miss to was product of also from

prior $XX.X the year million X.X% third grew quarter by gross of Third quarter. over margin XXXX

gross of XX.X% XX% Year-to-date was of sales Our to compared of year margin XXXX third the period. sales XX.X% net net the sales prior for gross margin in net to was quarter quarter. XX% which prior compares year

Our actions were pricing cost. to have by squeezed third quarter percentage input the cost which unfavorable timing implemented margins of in increases relative to offset higher an these been

but by sales part to from unfavorable equipment initiatives of constrained productivity an Third to quarter also purchasing gross mix margin continue improvements. and benefit was aftermarket

and acquisitions. factors year over constraining operating a well already quarter growth Third to gross R.P.M. operating shipments X.X% quarter, the margins $XX.X offset is by from our partially prior acquisition, the Year-to-date, vacuum as and XX.X% year due higher the X.X% third prior income Division was without Industrial than of French income mentioned truck XXXX primarily grew in shortfall as million plant. organic sales up

operating to quarter XX.X% compared XX.X% in sales the Third was quarter. income operating net Year-to-date, same XXXX of year XX.X% the net prior XX% prior period. net of to of income for was compared year sales sales

effective by due were adjustment to of the which one-time XXXX tax provision also was previously quarter helped a earnings and the most XXXX prior year per Third mentioned. to net income rate, share lower income tax and significantly

effective current quarter, compared and in rate our prior in tax the XX% year-to-date in adjustment, third one-time the XX% the quarter for third compared Excluding XX% the prior to the year-to-date XX% period. year was to

income the quarter XXXX share. one-time the in of will compared $X.XX for tax third year with $XX.X excluding at best this million or million rate or be Net the third income that $XX.X XXXX share diluted adjustment estimate line full-year Our the diluted quarter results. was prior $X per net per year-to-date point is to effective current

to Excluding the to third diluted share was per $XX.X tax net and X.X% year-to-date now full-year share. of over $X.XX the both per prior positively up trend nine net million quarter over of million share income income month XX% EBITDA EBITDA are million period. and Nine income million continues one-time XXXX adjusted or Adjusted period. over up EBITDA. to month compared prior year third XXXX adjusted $XXX.X diluted the XX up was per XXXX $XX.X diluted quarter was XX.X% months Trailing $X.XX or compared XX% net adjustment, earnings year-to-date and up prior and is over the year $XX.X

lead period, vacuum quarter, and month by order investment million have operating compares high provided totaled growth working to For net cash year which the period. capital rental operating truck caused utilization million net $XX.X supplier Like prior $X.X the longer XXXX activities to high increase backlog in times last cash in nine our the and requirements have fleet. our increased us rates provided

is $XX.X of assets, due for prior is our ended targeted Primarily same We capacities, capital in we the as and to from month cash spending with million $XX.X for year period to compared product million make additional million efficiencies. in year $X.X investment third Capital production also of debt which $XX.X the investments capital, net period. of the third the to end of down of the operating these working increased rental lines, capital the million quarter quarter. prior nine level and improvements fleet

about ended backlog third order quarter prior and $XXX.X rising the year million Our $XX more the million quarter higher third quarter. XX% than than during the at

the Third order new quarter announced Division summary, also and increase. reflects of In growth surged continued were the we third results ahead record in of continued of Agricultural Division. both prior the bookings quarter new new strong earnings while an rates bookings XXXX order our and quarter over without Without saw tax benefit with XXXX Industrial organic about one-time X%. third about our highlighted year grew strong adjustment, order order acquisitions, by the Division September in Industrial X.X% sales quarter. This results by in our price

tax in levels year-to-date a EBITDA effective in continued record tax and our one-time a income XX%, about adjustment, prior to the order trailing of build growth million months Excluding decrease $XX XX rate and quarter. our backlogs year-to-date the during

back Ron. Now, to I'd call the over turn to like

Ron Robinson

Dan. thank Hi, you,

certainly I think increases recently pleased I'll we're that quite this the some well. on cases our above with results were compounded add some in and But cost quarter quarter comments. further given covers average during quarter. enacted challenges included challenges tariffs. there a that Generally, by third particularly components purchase satisfied record These few

only France will story. was as had operations certainly each cost where they backlog to record is which pleasing. lower one issues. healthy conditions mainly they plants our by bookings to of a we quarter from the us These the benefited came Division sweepers. very shipments performed continuing a we dampening the was into our the but operating and results increased end the operationally. products combined -- even even by those and excellent also our a dampened from but in at with and quick. the this by primarily also which this, help We with lower Excuse performance both equipment, was record internal results of increases earnings had Division even anticipated quarter, earnings the quarter, well including I discussed, major our so we tariff and trucks, quarter Industrial are European and our sector achieved weakened going that's going excavators, into pleased market farm the had in in to certainly came, me vacuum we the from due in the certainly and strong effect sales our well experienced all units in very half tariffs, sales strong number quarter strong Industrial sales mean contributor really fourth our period, street being at led the bottom-line And results the think big a were the good with of we're the incomes affected during have And that experienced milling backlog third than our Yet despite the agricultural all stronger pace. I the

order even were were for we components the with would and on items it be docks on tariffs. months hit some orders even they hit but were hadn't to they think the here. already had on the ocean applied but You They new

were However, efforts efficiencies a to within we well measures, surcharges to ensure our control cost good included and earnings. increases as These and of initiatives but measures of price variety plants. and number operating absorb through also increasing these a costs proactive able have we're proactive still

results but results year's two Our below divisions helped Industrial still Division the actually in reasonable previous were weakness other our offset produce which both levels. the

are Our XXXX. going farm results year. the improving softer be Agricultural economics. farm among was Still Earlier not thinking. pace this prices now anticipated impacted weakening investment we the incomes their by created on the year but good sector some agricultural than There this to fundamentals have at third Commodity down at were it farmers quarter but are even uncertainty in in were market Division we market tariffs obvious and last and felt an were our in production. is overabundance of of Ag is

year-to-date execute well just bit little but we overcome XXXX sector to enough of not Although ahead this to we continue demand. remain softer a and in

some were in the internal different we off were There missed waiting the we I we even issues and our some quarter little were where market of from waiting caught where certainly Our cases components little either story. own weakness. our some bit on customers a to on own on operations pick was European up, shorthanded. waiting delayed expected in there But were and vendors deliveries production think a -- them

one had address to our experienced press understaffed France. taken in right improvement the we feel is the skilled UK should issues reward of our And did release have commented we we're I we European felt quarter problems well there certain that in we operation operations several pleased we filling locations think our corrective operations labor Europe many these challenge fourth a have now. general we're and this plus in but in the certainly effects very actions show actually at openings our of And in demand XXXX fourth I our a that we as backlog range ongoing the in the a and in in of focused are in which focused of and again of markets level that variety product a think not of our which broad achieved third to of is nice products. with heavily on a contribute diversity types just efforts on over we improved results generate a the think serve. or products one of testament production business equipment we that but core maintenance Alamo's used stable will is to quarter structure for quarter. market We really which

a result, record generate quarter and a can here quarter results. number a we with As still like have third challenges of the

So able and been we've to that's not do the first time, that.

cannot operate. quarter team changing also overstate business and conditions the perform to operational our development. we've quickly changing benefit to to be important has these we outlook proud and There reacting third for rapidly our of to achieved who in issues I the in of how had strong the our ongoing remainder model account and results environment just of not the by I'm are in So our some the this backlog, that but into of which likely management should the changing reaction in to Alamo's results the a these taking market quick conditions with resolved We well face with to looks feel structure, are short-term. continue promising. XXXX core focus, not we been added

some some these or into trade of unresolved For resolution U.S. or would Brexit tariffs conditions in to the still international its like like Europe whether sure we in whatever. see issues

please for might Some the positioned feel And is I'd you Alamo we and ahead. a stability about Operator, is is way, have. questions good But support. you open outlook and for that, where to conditions benefit. go thank our your in with we what external now like floor either any always

Operator

At you. we'd for like you. Instructions]. time, to the open Thank questions. floor this Thank [Operator

will question Co. & first Joe with be from Mondello Sidoti Our

Joe Mondello

little a most challenging maybe following you you've curious, the earlier they implementation get or starting that had what I was just and tariffs year. the this So that on just given couple with XQ headwind worse. anticipate anticipate saw to of came the a I'm you question on bit and sounds do as do in in I'm price XQ XQ everything you and the surcharges it the curious, done really like else, subside quickly will

Just tell segment the saw Industrial and relative to you both XQ? of guess over sort XQ and me in XQ how you that Agricultural out I plays what the think in

Ron Robinson

probably talks be I Yes, certainly I little the of affected the in they more know there bit next they it the being maybe added. come, And fourth still softer like year. I probably even affected we do a a say say was won't when quarter we'll fourth it quarter will tariffs in mean totally bit on But better come third than quarter, depending mitigate quick. I early little mitigating is by

So a I also fourth feel XX think the last up a I And we're seeing has little gone bit. But, dollar the lot a the quarter softening yes, the quarter, in strengthened the with little tariffs months. steel currency. mean okay little think Chinese it's I about mean first about I mean feel versus a also I softening fourth I it's the better I quarter. steel

currency. tariffs of a sort being the by of little some bit offset So are

don't all necessarily of see So maybe in next the modestly but I it in first fourth even so the getting that, worse more but quarter quarter you better take year.

Joe Mondello

on the difference some quarter any quarter the some in there the on volume Agriculture. probably Agriculture segments see of any is the of some and segment and going margin related challenges in know Industrial commentary between margin? in And dynamics versus two leverage weighed the but did related I in different to tariffs terms in that to itself those

Ron Robinson

fourth nice, quarter always as strong, -- general. a of soft fourth to much the a is at did is relative down. quarter quarter incomes said say is in year, us quarter Ag, difference. last I much to relative see But say healthy Ag a a bookings the their pace. still, is bit I is two. don't how for backlog we relative say Ag bit last soft, between difference soft mean are like still quarter I said I would market their farm I Like I Industrial continue

think we're that but us commented bump Dan weigh So of price that's still had of shape backlogs we're by in anticipation a end in or the of though good feel to our But quarter, dealers market okay some we very reasonably the Industrial is at pretty to soft like farmers of on Like going but so the in that. we're it's a at buying a bookings increases, it's and in driven going pace. not Ag. was effects even little continuing I nice

lot of in of I think don't either one And a see them. relatively so difference I

Joe Mondello

And steel was that time tariffs is July in XXX component the tariffs think or more the period? tariffs I Chinese more implemented the XXX

Dan Malone

is Dan. this Joe, Yes,

I that It last mainly but tariffs. demand remained softened initially months supply the high pricing steel gradually. just has then XXX was and the steel saw over think but of that run-up the several in we because has

-- So steel the Ag in good and deferring really did then a particularly we segment. our job of cost increases

divisions. So bit that of the some in that's but increases impact saw the you There cost in second affected components the between think more in steel. third little quarter Ag those still certain XXX And really pretty that's absorbing why we are well is both are two. but there. affected they're the margin round the of began a tariff, compression biggest I those just in distributed

Joe Mondello

amount -- was must of asking I the I must quarter because you assume I I I actually was period that have weren't tariffs in price/cost last inventories, you May a were have guess call time before in April, just think -- second the positive we conference steel increase quarter that on Yes, a Okay. you think net mentioned at the good saw

Ron Robinson

Up to second quarter.

Dan Malone

got it Up -- was. to mid-year We

Joe Mondello

Right, okay.

Dan Malone

deferring get so increase, ahead a orders in of - of price the of timing we that mentioned of of lot orders is the price the surge then job that some pricing, the out delays surge in good of timing to increases. did those We And the a increase.

did are squeezed third we So we a the -- in bit quarter. get little

Joe Mondello

Okay.

on track like so now. Sounds you're

Dan Malone

feel Yes, like -- we

Joe Mondello

issue a little lot I good. little know issue but of your operations, I has since area of little a you've where down wondering guess any to I We with a segment constraints it's in ask chain but just just as French chain a wanted there sounds color the strong. backlog big in bit part well, you that’s really of look delay in I'm maybe don't the also Okay, the European backlog of the think weakness. about supply And like temporary past - a supply of should I constraints, and sort wait that bog been sounds never know be UK that do is see so was going there? risk that what's see. your did France the on. your if would large a because occurred how operation more certainly of issues timing a some little continue issues? on probably this It

Ron Robinson

I more think our But better shape and think in some we [indiscernible] than issues resolved. say our Yes, in control, I are quarter. of so -- are the third is like all at not under is they that I we were

And record operation a off It has, but still strong. our like And most so high. it we where the - not the had as very I has UK Rivard as fortunately their almost of say mean in the but it's backlog we a recovered better said I be do certainly bit I will feel also off like you good quarter not all well. little where is little may issues maybe I strong. that backlog but fourth very backlog it's

will, will but a soft better. of do better French it better They I year. [indiscernible] the all still I fourth well, I in operations performed the they even think I first of the our do quarter They won't so recover think but of and bit backlog lot our backlog good. [indiscernible] our we'll in it, after is the a UK I operation in think and because little softness say think operation places franchise

Joe Mondello

been to your tariffs markets going Ag crop demand some European any has as Ag in Because have What’s know Okay. been division been prices there. these implemented. in Europe? And the shifts as haven't on due I your weak as U.S. change with there demand the in

Ron Robinson

up our little are run-up than what being prices. North holding as think just see it's the they the European Steel even in And up quite half they're not you better not tariffs, implied did America. affected steel a Ag America. North also then up of same bit demand operations prices but by were in in not I obviously, the they

So us which weakening currency in yes but hurts where translation is the competitively us helps dollar from a against it the the of certainly earnings both euro little and the British U.K.

much. yes, has as Ag So you’re right. hurt quite not

cost like but by being in not in we I think North America we’re are and soft as a impacted -- there's as softness little not North Europe America. is cost

I European we today. yes, stable the issues the the stable more cost think a little order not more general stable, do, to ought own U.S. better. strong situation we Ag more in just So and it's is little our we so But as still as like is is do economy, get a that say think economy maybe situation in is I’d than

Joe Mondello

third little weaker Okay. I it's basis And It’s business, sales, about stuff. to ask and so than few side I last year that's know as actually ago a a the quarter year-over-year. the considerably down quarters compared and for was XXX weaker things a points that’s maybe of been type down margin of wanted equipment percent the parts to higher

comp last to tough So a is sort relative it of just year.

your or recovery what's do on on there? any any you there? of Sort thoughts that going what's anticipate thinking And in

Ron Robinson

weather we right had often new and Yes, quite won't parts of into as had going like I Ag as so mowing a was that fourth There in soft. were already. snow much and were drought is Texas in there stuff I in and and nicely. now, parts removal conditions now big we market was soft of I of few we quarter and too was some mean seeing bit I'm the sort some say -- type a year hoped. lately. Texas are it a because better a season Texas up I for rain those almost snow there adverse actually us it's think were the Texas was robust conditions saying just soft picked picked but markets have mean up lot, certainly little a not now

yes, ever which like is but year on quarter But I much happy. nobody's of off dramatic. quarter. nothing have are better in the think so will fourth showing there some mean the year I And improvement still not right, in quite I some pockets parts those think you’re were So specific parts softness the margins than little. are off yes probably -- they last in the which are good of be but third for as a were price

Joe Mondello

And thoughts XQ ask that? to XQ Just remind terms or then of more XQ? mentioned is biggest is which the shortfalls sort about, of if wanted snow you it on snow quarter and I in me so where your Okay. revenue pre-season

Ron Robinson

fourth home fourth have coming, when but quarter building the we shipments it’s quarter. the it More new third quarter, so heaviest so goods of is the fourth into

Joe Mondello

we a end big at And last year that I snow how know pretty tracking? the is of year. very saw

that equipment that snow in does maybe re-buying got? of translate to some So we

Ron Robinson

now. decent I at going we've also equipment be mean is a quarter snow to got think up fourth pace right I Yes, and is it

the snow I in and so to whole sales shipments our And the we actually see get will good the season. season, product year. how the are how much fourth think during quarter be But be in now on last the during compared up should season we'll are good relatively well dependent that

Joe Mondello

been your of cyclical estimated in sort trends equipment flash don’t any Okay. of component within range I I revenue. sales more that And at lastly XX% industrial change total know you've that, that business? of about your seeing

Ron Robinson

saying so that's are best yes. our equipment our you or No, there, I sales? don't sales I division total industrial What of know, business, of XX% mean

Joe Mondello

I'm equipment cyclical to industries. sorry meant that more I the sold is

say So dollar, mean when -- I in I

Ron Robinson

our sorry, that a non-governmental rebounded truck very of has being piece a we there. capacity not I'm I is mean our vacuum industrial It's have anything small to increase where this you're is, part of sales business constrained nicely. a only but that's right. division, our if want business on little our we're

We up time. both are doing having to build same trying the even and at further rental difficulty our we're fleet

nicely. hiccup is I very So mean where it to we That that totally totaled XXXX. in that rebounded saw -- has sort was up almost that's before of

Joe Mondello

Okay.

sounds it like. any it so of signs like slowing sounds no And

Ron Robinson

No, think just very But seems yes, mean decent the sector and to And little. maybe be yes, what's be which softening our a it to about continuing a no. is seems signs the general if at reasonably that I pace economy good. It worry I business at decent even in only overall it's is nicely. going is going I a pace

Operator

in Thank further I'm questions the this Instructions]. queue no you. [Operator at showing time.

Ron Robinson

quarter the call forward you. you. help to on good a Have you fourth appreciate first of thank year. after and day, well, Okay, look speaking We support. the with you And again we our thank for thank joining your today. And us

Operator

you. gentlemen, Ladies today's and this Thank teleconference. concludes

disconnect. You now may

Edward Rizzuti	VP, General Counsel & Secretary
Ron Robinson	President & CEO
Dan Malone	EVP & CFO
Richard Wehrle	VP, Treasurer & Corporate Controller
Joe Mondello	Sidoti & Co.

Alamo (ALG) 1 Nov 182018 Q3 Earnings call transcript