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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 June 29, 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 August 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 six months ended June 29, 1996 and July 1,
1995 3
Interim Condensed Consolidated Balance Sheets -
June 29, 1996 and December 30, 1995 4
Interim Condensed Consolidated Statements of Cash Flows -
Six months ended June 29, 1996 and July 1, 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. Submission of Matters to a Vote of Security Holders 10
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 Six
Months Months
Ended Ended
June July June July
29, 1, 29, 1,
1996 1995 1996 1995
Sales, net . . . . . . . . . . $50,72 $45,30 $95,77 $79,75
. . . . . . . . . . . . . . . . 7 3 3 1
. . . . . . . . . . .
Cost of sales . . . . . . . . 36,288 32,847 71,117 59,003
. . . . . . . . . . . . . . . .
. . . . . . . . . . .
Gross margin . . . . . . . . . 14,439 12,456 24,656 20,748
. . . . . . . . . . . . . . . .
. . . . . . . . .
Operating expenses:
General and administrative 2,584 2,280 4,723 3,950
. . . . . . . . . . . . . . . .
. . . . .
Marketing . . . . . . . . 3,446 2,928 6,581 5,158
. . . . . . . . . . . . . . . .
. . . . . . . . . .
Engineering . . . . . . . 789 692 1,653 1,361
. . . . . . . . . . . . . . . .
. . . . . . . . . .
Operating expenses before 6,819 5,900 12,957 10,469
amortization . . . . . . . . .
. . . .
Intangible amortization 376 359 600 529
expense. . . . . . . . . . . .
. . . . . . . .
Income from operations . . . . 7,244 6,197 11,099 9,750
. . . . . . . . . . . . . . . .
. . . . . .
Other income (expense):
Net interest . . . . . . . (578) (845) (1,093 (1,350
. . . . . . . . . . . . . . . . ) )
. . . . . . . . . . .
Other . . . . . . . . . . . 168 317 461 654
. . . . . . . . . . . . . . . .
. . . . . . . . . . .
Income before income taxes . . 6,834 5,669 10,467 9,054
. . . . . . . . . . . . . . . .
. . . .
Provision for income taxes . . 2,600 2,115 3,907 3,392
. . . . . . . . . . . . . . . .
. . . . . .
Net income . . . . . . . . . . $4,234 $3,554 $6,560 $5,662
. . . . . . . . . . . . . . . .
. . . . . . . . . .
Net income per common share . $0.44 $0.46 $0.68 $0.74
. . . . . . . . . . . . . . . .
. . . .
Weighted average common shares 9,699 7,682 9,680 7,667
and equivalents . . . . .
See accompanying notes.
3
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Balance
Sheets
(in thousands, except share amounts)
(Unaudited)
June Decemb
29, er 30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents. . . . $ 4,007 $ 1,839
. . . . . . . . . . . . . . . . . . .
. . .
Marketable securities. . . . . . 428 769
. . . . . . . . . . . . . . . . . . .
. . . . . . .
Accounts receivable. . . . . . . 50,782 45,509
. . . . . . . . . . . . . . . . . . .
. . . . . . .
Inventories. . . . . . . . . . . 62,929 58,624
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Deferred income taxes. . . . . . 1,707 1,782
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Prepaid expenses. . . . . . . . 3,017 844
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Total current assets . 122,87 109,36
. . . . . . . . . . . . . . . . . . . 0 7
. . . . . . . . . . .
Property, plant and equipment. . . . . 46,506 46,158
. . . . . . . . . . . . . . . . . . .
. . .
Less: Accumulated depreciation . (23,67 (22,62
. . . . . . . . . . . . . . . . . . . 1) 0)
. . . .
22,835 23,538
Receivables from officers and 700 700
employees. . . . . . . . . . . . . . .
. . . .
Goodwill . . . . . . . . . . . . . . . 13,022 13,150
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . 5,289 4,816
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Total assets . . . . . $ 164,71 $ 151,57
. . . . . . . . . . . . . . . . . . . 6 1
. . . . . . . . . . . . .
LIABILITIES AND STOCKHOLDERS ' EQUITY
Current liabilities:
Trade accounts payable. . . . . $ 15,813 $ 13,143
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Income taxes payable. . . . . . 4,507 1,570
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Accrued liabilities. . . . . . . 6,546 6,045
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Current portion of capital lease 353 344
obligations. . . . . . . . . . . . . .
Current maturities of long-term 1,124 946
debt. . . . . . . . . . . . . . . . .
. . . . .
Total current 28,343 22,048
liabilities. . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Capital lease obligations, net of 6,970 7,243
current portion . . . . . . . . . . .
. . . . . .
Long-term debt. . . . . . . . . . . . 414 1,466
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Bank revolving credit facility. . . . 32,600 28,600
. . . . . . . . . . . . . . . . . . .
. . . . .
Deferred income taxes and minority 1,336 1,509
interest . . . . . . . . . . . . . . .
. . . .
Total liabilities. . . 69,663 60,866
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Stockholders' equity:
Common stock, $.10 par value,
20,000,000 shares
authorized; 9,589,851 and
9,576,913 issued and
outstanding at June 29, 1996
and December 30, 1995,
respectively . . . . . . . . 959 958
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Additional paid-in- capital . . 49,499 49,278
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Unrealized holding gain on 206 379
securities. . . . . . . . . . . . . .
. . . . . . . .
Retained earnings. . . . . . . . 44,786 40,142
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Translation adjustment . . . . . (397) (52)
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Total stockholders' 95,053 90,705
equity . . . . . . . . . . . . . . . .
. . . . . . . . . .
Total liabilities and $ 164,71 $ 151,57
stockholders' equity . . . . . . . . . 6 1
. . . . .
See accompanying notes.
4
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements
of Cash Flows
(in thousands)
(Unaudited)
Six
Months
Ended
June July
29, 1,
1996 1995
Operating Activities
Net income . . . . . . . . . . . . . . . $ 6,560 $ 5,662
. . . . . . . . . . . . . . . . . . . . .
. . . . . . .
Adjustments to reconcile net income to
net cash
provided (used) by operating
activities:
Allowance for doubtful accounts . 151 74
. . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . 2,225 2,127
. . . . . . . . . . . . . . . . . . . . .
. . .
Provision for deferred income (53) 166
tax benefit . . . . . . . . . . . . . . .
. . . .
Realized gain on marketable (370) (337)
securities . . . . . . . . . . . . . . .
. . . .
(Gain)/loss on sale of equipment (98) (9)
. . . . . . . . . . . . . . . . . . . . .
. . . . . . .
Changes in operating assets and
liabilities,
net of effect of
acquisitions:
Accounts receivable . . . . . (5,597 (9,871
. . . . . . . . . . . . . . . . . . . . . ) )
. . . . . .
Inventories . . . . . . . . . (4,458 (1,807
. . . . . . . . . . . . . . . . . . . . . ) )
. . . . . . . . .
Prepaid expenses and other (3,038 (2,602
assets . . . . . . . . . . . . . . . . . ) )
. . . .
Trade accounts payable and 3,312 291
accrued liabilities . . . . . . . . . . .
Income taxes payable . . . . 2,922 896
. . . . . . . . . . . . . . . . . . . . .
. . . . .
Net cash provided (used) by operating 1,556 (5,410
activities . . . . . . . . . . . . . . . )
Investing Activities
Acquisitions, net of cash acquired. . . . (4,973
. . . . . . . . . . . . . . . . . . . . . - )
. . . . .
Purchase of property, plant and equipment (1,326 (1,078
. . . . . . . . . . . . . . . . . . ) )
Proceeds from sale of property, plant and 134 76
equipment . . . . . . . . . . .
Equity method investment. . . . . . . . (1,980
. . . . . . . . . . . . . . . . . . . . . - )
. . . . .
Proceeds from sale of marketable 445 361
securities . . . . . . . . . . . . . . .
. . . .
Net cash provided (used) by investing (747) (7,594
activities . . . . . . . . . . . . . . . )
. . . . . . . . .
Financing Activities
Net change in bank revolving credit 4,000 13,134
facility . . . . . . . . . . . . . . . .
. . .
Dividends paid . . . . . . . . . . . . . (1,916 (1,512
. . . . . . . . . . . . . . . . . . . . . ) )
. . . . . . .
Proceeds from sale of common stock . . . 172 225
. . . . . . . . . . . . . . . . . . . . . -
Principal payments on long-term debt (940) (773)
and capital leases . . . . . . .
Proceeds from issuance of long term debt. 318
. . . . . . . . . . . . . . . . . . . . -
Cash received from stockholder for
purchase of common stock . . . . . 51
. . . . . . . . . . . . . . . . . . . . . -
. . . . . .
Net cash provided (used) by financing 1,367 11,392
activities . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash (8) 78
. . . . . . . . . . . . . . . . . . . . .
.
Net change in cash and cash equivalents 2,168 (1,534
. . . . . . . . . . . . . . . . . . . . . )
Cash and cash equivalents at beginning of 1,839 1,873
the year . . . . . . . . . . . . .
Cash and cash equivalents at end of the $ 4,007 $ 339
period . . . . . . . . . . . . . . . . .
Cash paid during the period for:
Interest . . . . . . . . . . . . $ 1,125 $ 1,453
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Income taxes . . . . . . . . . . 2,375 1,881
. . . . . . . . . . . . . . . . . . . . . -
. . . . . . .
See accompanying notes.
5
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements -
(Unaudited)
June 29, 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 $1,521,000 and $1,357,000 at June 29, 1996 and December 30,
1995, respectively.
4. Inventories
Inventories valued at LIFO cost represented 83% and 67% of total
inventory for the periods ended June 29, 1996 and December 30,
1995, respectively. The excess of current costs over LIFO valued
inventories was $2,538,000 at June 29, 1996 and $2,618,000 at
December 30, 1995. Inventory obsolescence reserves were
$4,742,000 at June 29, 1996 and $4,157,000 at December 30, 1995.
Net inventories consist of the following (in thousands):
June 29, December
30,
1996 1995
Finished goods . . . . . . . $ 52,774 $ 51,613
. . . . . . . . . . . . . .
. . .
Work in process . . . . . . 5,487 3,234
. . . . . . . . . . . . . .
. . .
Raw materials. . . . . . . . 4,668 3,777
. . . . . . . . . . . . . .
. . .
$ 62,929 $ 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)
June 29, 1996 - (Continued)
5. Common Stock and Dividends
The Company completed a public offering of common stock on June
29, 1995 for 2,000,000 shares.
Dividends declared and paid on a per share basis were as follows:
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
Dividends declared . . . . . $ 0.10 $ 0.10 $ 0.20 $ 0.20
. . . . . . . . . . . . . .
. . .
Dividends paid . . . . . . . $ 0.10 $ 0.10 $ 0.20 $ 0.20
. . . . . . . . . . . . . .
. . . .
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 Six Months Ended
Ended
Sales Data In Thousands June July 1, June July 1,
29, 29,
1996 1995 1996 1995
American
Agricultural . . . $ $ $ $
. . . . . . . . . . . . . . 21,751 18,435 44,368 31,170
. . . . . .
Governmental . . . 16,311 15,343 27,532 27,442
. . . . . . . . . . . . . .
. . . .
European . . . . . . . 12,665 11,525 23,873 21,139
. . . . . . . . . . . . . .
. . . . . .
Total sales, net . . . . . $ $ $ $
. . . . . . . . . . . . . . 50,727 45,303 95,773 79,751
. . . . .
Three Months Six Months Ended
Ended
Cost Trends and Profit June July 1, June July 1,
Margins, as Percentages of 29, 29,
Net Sales 1996 1995 1996 1995
Gross margin . . . . . . . 28.5 % 27.5 % 25.7 % 26.0 %
. . . . . . . . . . . . . .
. . . . .
Income from operations . . 14.3 % 13.7 % 11.6 % 12.2 %
. . . . . . . . . . . . . .
.
Income before income taxes 13.5 % 12.5 % 10.9 % 11.4 %
. . . . . . . . . . . . . .
Net income . . . . . . . . 8.3 % 7.8 % 6.8 % 7.1 %
. . . . . . . . . . . . . .
. . . . .
Results of Operations
Second Quarter Ended June 29, 1996 Compared to Second Quarter
Ended July 1, 1995
Net sales increased $5,424,000, up 12% over 1995's second
quarter. This increase is a result of acquisitions (see notes to
financial statements) in 1995 and European sales volume
increases, partially offset by decreases in sales volume in
American operations, particularly in agricultural markets and
replacement parts. The acquisitions primarily affected American
agricultural sales. The sales volume decreases in American
operations were due primarily to harsh weather conditions.
Increases in the amounts of costs and expenses are also,
generally, related to the acquisitions.
Gross margin, up from 27.5% to 28.5 %, increased due to
production efficiency programs and price increase effects.
Partially offsetting these positive effects were the margin
effects of sales volume reductions, particularly in replacement
parts, and lower than expected performance from recently acquired
companies. The 26% increase in average common shares and
equivalents related to the 2,000,000 share June 29, 1995 stock
offering.
Six Months Ended June 29, 1996 Compared to Six Months Ended July
1, 1995
Net sales increased $16,022,000, up 20%. Acquisitions in 1995
were the primary factor in increases in sales and costs.
European operations also contributed to sales growth. Six month
results, like the second quarter, were impacted by negative
impacts of harsh weather on sales volume, particularly in
agricultural markets and replacement parts. Overall, margins and
cost ratios were little changed with second quarter improvements
generally having offset modest first quarter declines. The first
quarter results reflected a 1.7% benefit to the income tax rate
related to the calculation of state income taxes.
8
Liquidity and Capital Resources
Cash provided by operations was $1,5556,000 for the six-month
period ended June 29, 1996, with the net income cash flows for
the period substantially offset by net increases in working
capital accounts related primarily to seasonal effect.
As of June 29, 1996, $34,104,000 was utilized under the Company's
$40,000,000 Amended and Restated Revolving Credit and Term Loan
Agreement (the "Facility") of which $1,504,000 was for standby
letters of credit and $32,600,000 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 4.Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on
April 30, 1996, with the following results of elections
and approvals
Votes Cast
__________________________________________
Against/
Abstentions/
For Withheld Non-
Votes
a.The following Directors were elected
to serve until the next Annual
Meeting of Stockholders.
Donald J. Douglass 8,316,698 25,103 N/A
Oran F. Logan 8,316,648 25,153 N/A
Joseph C. Graf 8,314,398 27,403 N/A
O.S. Simpson, Jr. 8,315,898 25,903 N/A
William R. Thomas 8,185,798 156,003 N/A
David Morris 8,316,198 25,603 N/A
James B. Skaggs 8,316,198 25,603 N/A
b.Ernst & Young was approved as
the Company's auditors for the
1996 fiscal year. 8,238,970 265
102,566
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 Six Months
Ended Ended
June July June July
29, 1, 29, 1,
1996 1995 1996 1995
(000's omitted, except per
share data)
Primary
Average shares outstanding . . . . 9,590 7,563 9,577 7,559
. . . . . . . . . . . . . . . . . .
. .
Net effect of dilutive stock
options -- based
on the treasury stock method
using
average market price . . . . . 109 119 103 108
. . . . . . . . . . . . . . . . . .
. . . .
Total . . . . . . . . . . . . . . . 9,699 7,682 9,680 7,667
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Net Income . . . . . . . . . . . . $ $ $ $
. . . . . . . . . . . . . . . . . . 4,234 3,554 6,560 5,662
. . . . . .
Per share amount . . . . . . . . . $ $ $ $
. . . . . . . . . . . . . . . . . . .44 .46 .68 .74
. . . .
Fully Diluted
Average shares outstanding . . . . 9,577
. . . . . . . . . . . . . . . . . .
. .
Net effect of dilutive stock
options -- based
on the treasury stock method
using the
period end market price, if
higher than
average market price . . . . . 112
. . . . . . . . . . . . . . . . . .
. . . .
Total . . . . . . . . . . . . . . . 9,689
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Net Income . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . . . 6,560
. . . . . .
Per share amount . . . . . . . . . (1) (1) $ (1)
. . . . . . . . . . . . . . . . . . .68
. . . .
(1) Not applicable as 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)
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