SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-21220
ALAMO GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE
74-1621248
(State or other jurisdiction of
(I.R.S. Employer Identification Number)
incorporation or organization)
1502 E. Walnut, Seguin, Texas 78155
(Address of principal executive offices)
Registrant's telephone number, including area code: (210) 379-
1480
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .10 Par Value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
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 No ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock (which consists
solely of shares of Common Stock) held by non-affiliates of the
Registrant as of February 28, 1997 (based upon the last reported
sale price of $15.375 per share) was approximately $79,560,797 on
such date.
The number of shares of the issuer's Common Stock, par value
$.10 per share, outstanding as of February 28, 1997, was
9,589,851 shares.
Documents Incorporated by reference: Portions of the
Registrant's Proxy Statement relating to the year ended December
31, 1996 and the 1996 Annual Meeting of Stockholders to be held
on April 29, 1997, have been incorporated by reference herein
(Part III).
ALAMO GROUP INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1. Business
.................................................................
.................................................................
.... 3
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders
7
Item 4a. Executive Officers of the Company 7
PART II
Item 5. Market for Registrant's Common Stock And Related
Stockholder Matters 8
Item 6.
Selected Financial Data 9
Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 8.
Financial Statements 12
Item 9.
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 12
PART III
Item 10.
Directors and Executive Officers 12
Item 11.
Executive Compensation 12
Item 12.
Security Ownership of Certain Beneficial Owners and Management 12
Item 13.
Certain Relationships and Related Transactions 12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ...................................... 13
Index to Consolidated Financial Statements
..................................................................
................................ F-1
PART I
Item 1. Business
General
Alamo Group Inc. and its subsidiaries ("Alamo Group", "Alamo",
or the "Company") is a leading manufacturer of high quality,
tractor-mounted mowing and other vegetation maintenance equipment
and replacement parts for industrial and agricultural end-users.
The Company believes it is one of the only vegetation maintenance
equipment manufacturers offering a comprehensive product line
that employs the three primary heavy-duty cutting technologies:
rotary, flail and sickle-bar. The Company's history of developing
innovative products, its reputation for quality and service and
its broad geographic market coverage, principally in North
America and Europe, have enabled the Company to establish
leadership positions in the niche markets it serves.
History
The predecessor corporation to the Company was incorporated in
Texas in 1969 as successor to a business that began selling
mowing equipment in 1955. The Company was reincorporated in
Delaware in November, 1987.
Since its founding in 1969, the Company has focused on
satisfying customer needs through geographic market expansion,
product development and refinement, and selected acquisitions.
The Company's first products were based on the rotary cutting
technology. Through acquisitions, the Company added the flail
cutting technology in 1983 and the sickle-bar technology in 1984.
The Company added to its presence in industrial and governmental
markets with the acquisition of Tiger registered trademark at
the end of 1994.
A major thrust into agricultural mowing markets was begun in
1986 with the acquisition of Rhino registered trademark, a
leading manufacturer in this field. With this acquisition, the
Company embarked on an aggressive strategy to increase the Rhino
dealer network during a period of industry contraction.
Distribution network expansion remains a primary focus of the
Company's marketing plans for agricultural and industrial uses.
Another strategic move was made in 1995 with the acquisition of
Herschel registered trademark, a leading manufacturer and
distributor of high wear, high turnover farm equipment
replacement parts. Further, the Company has concentrated on
developing new products which meet the needs of its niche market
customers and on adapting its existing products to serve other
applications.
In 1991, the Company began its international expansion with the
acquisition of McConnel registered trademark, a United Kingdom
manufacturer of vegetation maintenance equipment, principally
hydraulic boom-mounted hedge and grass cutters and related parts.
Later moves have been to add Bomford registered trademark in the
U.K. and SMA registered trademark in France.
Other key acquisitions have expanded the Company's geographic
coverage and product offerings. Alamo's development has been
enhanced by some twenty acquisitions over its history.
The Company's initial public offering was in 1993, and in 1995
the Company completed an additional equity offering. Proceeds
were used to pay off debt relating to acquisitions as well as to
position the Company for further development through internal
growth and acquisitions. Alamo Group's stock was listed on the
New York Stock Exchange in 1995.
In 1996, Alamo expanded its internal manufacturing capabilities
through two small business purchases, a flail blade manufacturer
in France and a rotary blade manufacturing production line of a
U.S. manufacturer (to be completed in 1997). 1994 through 1996
acquisitions are further detailed in Notes to Consolidated
Financial Statements.
The Company emphasizes high quality, cost efficient products
for its customers and strives to develop and market innovative
products while constantly monitoring and containing its
manufacturing and overhead costs. The Company has a long-
standing policy of supplementing its internal growth through
acquisitions of
businesses or product lines that currently command, or have the
potential to achieve, a leading share of their niche markets.
The Company has successfully utilized its expertise in design,
procurement, manufacturing and marketing to increase the
profitability of its acquired businesses.
Marketing and Marketing Strategy
The Company's products are sold through the Company's eight
marketing organizations under the Alamo Industrial, Rhino, M&W,
McConnel, Bomford, SMA, Tiger, Herschel-Adams and Rhino
International trademarks.
Alamo Industrial equipment is principally sold to governmental
end-users and, to a lesser extent, to the agricultural market and
commercial turf market. Domestic governmental agencies and
contractors that perform services for such agencies purchase
primarily hydraulically-powered, tractor-mounted mowers,
including boom-mounted mowers, and replacement parts for heavy-
duty, intensive use applications, including the maintenance of
highway, airport, recreational and other public areas. Municipal
park agencies, golf courses and landscape maintenance contractors
purchase certain Alamo Industrial mowers that deliver a fine
manicured cut.
Rhino and M&W equipment is generally sold to farmers and
ranchers to clear brush, maintain pastures and unused farmland,
shred crops, and for hay-making activities. It is also sold to
other customers, such as mowing contractors and construction
contractors, for non-agricultural purposes. Rhino equipment
consists principally of a comprehensive line of tractor-mounted
equipment, including rotary cutters, finishing mowers, flail
mowers and disc mowers. Rhino also sells post hole diggers,
scraper blades and replacement parts for all Rhino equipment.
Farm equipment dealers play the primary role in the sales of
Rhino equipment. The McConnel acquisition gave the Company an
established presence in the European agricultural equipment
industry and also facilitates the international marketing and
sale of the Company's Rhino product line through McConnel's
existing network of agricultural tractor dealers in the U.K.
McConnel equipment principally includes a line of hydraulic,
boom-mounted hedge and grass cutters, as well as other tractor
attachments and implements such as hydraulic backhoes,
cultivators, subsoilers, buckets and other digger implements and
replacement parts. McConnel also sells turf maintenance
equipment to the golf course and leisure markets. McConnel
equipment is sold primarily in the U.K. and France, and to a
lesser extent in other parts of Europe and Australia. McConnel
primarily focuses on the agricultural and commercial end-user.
McConnel products are sold in the U.K. through a network of
agricultural tractor dealers.
Bomford equipment includes hydraulic, boom-mounted hedge and
hedgerow cutters, industrial grass mowers, agricultural seed bed
preparation cultivators, and replacement parts. Bomford
equipment is sold to governmental agencies, contractors and
agricultural end-users in the U.K., France, Germany, Scandinavia,
and to a lesser extent in North America, Australia and the Far
East. Bomford's sales network is very similar to that of
McConnel in the U.K.
SMA equipment includes hydraulic, boom-mounted hedge and
hedgerow cutters and associated replacement parts. SMA's
principal customers are the French local authorities. SMA's
product offerings were expanded in 1994 to include certain quick-
attach boom mowers manufactured by the Company in the U.K. to
expand its presence in agricultural dealerships.
Tiger equipment includes heavy-duty, tractor-mounted mowing and
growth maintenance equipment and replacement parts. A portion of
Tiger sales includes tractors, which are not manufactured by
Tiger. Tiger sells to state, county and local governmental
entities through a network of dealers. In most cases, the larger
dealers principal product line is Tiger equipment. Tiger's
dealership network is independent of Alamo's dealership network.
Herschel-Adams replacement parts are sold for all types of
tillage equipment as well as certain types of mowing and
construction equipment. Herschel-Adams products include a full
range of cutting parts, tractor parts, chromium carbide treated
hard-faced and plain replacement tillage tools, disc blades, and
fertilizer application components. Herschel-Adams replacement
tools are sold throughout the United States, Canada
and Mexico to five major customer groups: farm equipment
dealers, fleet distributors (which generally act as a buyer for a
number of farm supply stores), wholesale distributors, original
equipment manufacturers and construction equipment dealers.
Rhino International equipment includes economical, Chinese
manufactured tractors and service parts. Rhino International
has a separate dealer network.
In addition to the sales of Herschel-Adams replacement
parts, the Company derives a significant portion of its revenues
from sales of replacement parts for each of its whole goods
lines. Replacement parts represented approximately 35% of the
Company's total sales for the year ended December 31, 1996.
Replacement parts are more profitable and generally less cyclical
than whole goods equipment.
While the Company believes that the end-user of its products
evaluates the purchase of such
products on the basis of product quality, such purchases are also
based on a dealer's service and
support, and loyalty to the dealer based on previous purchases.
Demand for products tends to be strongest in the spring and
summer growing seasons. The Company provides incentives for off-
season purchases, including cash discounts, as a way to even out
seasonal variations in its manufacturing cycles. Under incentive
programs, there is no right of return.
Product Development
The Company believes its ability to quickly provide innovative
responses to customer needs, to continue to develop and
manufacture new products, and to enhance existing product lines
is critical to its success. The Company continually conducts
research and development activities in an effort to improve
existing products and develop new products. The Company
currently employs 64 people in its engineering department, 29 of
whom are professionals and the balance of whom are support staff.
Amounts expended on research and development activities
aggregated approximately $1,747,000 in 1996, $1,434,000 in 1995,
and $1,354,000 in 1994.
Seasonality
The vegetation maintenance equipment industry in general tends
to follow the seasonal buying patterns of its major customers
with peak sales occurring in May through August. Agricultural
end-users generally purchase equipment in the early spring for
the beginning of the mowing season. Governmental end-users
typically wait to purchase new equipment until the first and
second calendar quarters. The timing of these purchases,
however, may be affected by weather conditions and general
economic conditions. In order to achieve efficient utilization
of manpower and facilities throughout the year, the Company must
estimate seasonal demand months in advance, and equipment must be
manufactured in anticipation of such demand. The Company
utilizes a rolling monthly sales forecast from the Company's
marketing divisions in order to develop a master production plan
for its manufacturing facilities. Additionally, the Company
attempts to equalize demand for its products throughout the
calendar year by offering pre-season sales programs which provide
additional discounts on equipment that is ordered during off-
season periods.
Competition
The Company's products are sold in markets where the principal
competitive factors are price,
quality, service and reputation. The Company competes with
several large national and international companies that offer a
broad range of agricultural equipment and replacement parts, as
well as numerous small, privately-held manufacturers and
suppliers of a limited number of equipment products. However, the
Company has fewer competitors in the wide-swath and boom-mounted
mowing equipment and within the governmental niche. Some of the
Company's competitors are significantly larger than the Company
and have substantially greater financial and other resources at
their disposal. The Company believes that it is able to compete
successfully in its markets by containing its manufacturing
costs, offering high quality products, developing and designing
innovative products and, to some extent, by avoiding direct
competition with significantly larger
competitors. There can be no assurance that such competitors will
not substantially increase the resources devoted to the
development and marketing of products competitive with those of
the Company. The Company believes that within the U.S. it is the
largest supplier within governmental markets for its kind of
equipment, the third largest supplier in the U. S. agricultural
market for such equipment, and one of the two largest suppliers
in the European market for such equipment.
Unfilled Orders
As of December 31, 1996, the Company had unfilled customer
orders of $31.6 million compared to $27.0 million at the end of
1995. Management expects that substantially all of the
Company's backlog as of December 31, 1996, will be shipped during
fiscal year 1997. The amount of unfilled orders at a particular
time is affected by a number of factors, including the scheduling
of manufacturing and shipping of the product, which in most
instances is dependent on the Company's pre-season sales program
and the needs of the customer. Certain of the Company's orders
are generally subject to cancellation anytime before shipment,
therefore, a comparison of unfilled orders from period to period
is not necessarily meaningful and may not be indicative of
eventual actual shipments.
Sources of Supply
The principal raw materials used by the Company include steel
and purchased components. During 1996, the raw materials needed
by the Company were available from a variety of sources in
adequate quantities and at prevailing market prices. A number of
the Company's units are mounted on and shipped with a tractor.
Tractors are generally available, but some delays have been
experienced. No one supplier is responsible for supplying more
than 10% of the principal raw materials used by the Company.
While the Company manufactures many of the parts for its
products, a significant percentage of parts, including most drive
lines, gear boxes and hydraulic pumps and motors, are purchased
from outside suppliers which manufacture to the Company's
specifications.
Approximately 11% of the aggregate dollar amount of parts
purchased by the Company's U.S. operations are imported.
Patents and Trademarks
The Company owns numerous U.S. and foreign patents. While the
Company considers its patents to be advantageous to its business,
it is not dependent on any single patent or group of patents.
Products manufactured by the Company are advertised and sold
under numerous trademarks. The Alamo Industrial registered
trademark, Rhino registered trademark, M&W registered trademark,
McConnel registered trademark, Bomford registered trademark, SMA
registered trademark, Tiger registered trademark, Herschel-Adams
registered trademark, and Rhino International registered
trademark trademarks are the primary marks for the Company's
products. The Company also owns other trademarks which it uses
to a lesser extent such as Terrain King registered trademark,
Triumph registered trademark, Mott registered trademark, Turner
registered trademark, Fuerst registered trademark, and Dandl
registered trademark. Management believes that the Company's
trademarks are well known in its markets, are valuable and that
their value is increasing with the development of its business,
but that the business is not dependent on such trademarks. The
Company, however, vigorously protects its trademarks against
infringement. The Company has registered its trademarks in the
appropriate jurisdictions.
Environmental and Other Governmental Regulations
The Company is subject to numerous environmental laws and
regulations concerning air emissions, discharges into waterways
and the generation, handling, storage, transportation, treatment
and disposal of waste materials. These laws and regulations are
constantly changing and it is impossible to predict with accuracy
the effect they may have on the Company in the future. Like
other industrial concerns, the Company's manufacturing operations
entail the risk of future noncompliance, and there can be no
assurance that material costs or liabilities will not be incurred
by the Company as a result thereof. It is the Company's policy
to comply with all applicable environmental, health and safety
laws and regulations, and the Company believes it is currently in
material compliance with all such applicable laws and
regulations.
The Company is subject to various federal, state and local laws
affecting its business, as well as a variety of regulations
relating to such matters as working conditions, equal employment
opportunities and product safety. A variety of state laws
regulate the Company's contractual relationships with its
dealers, some of which impose substantive standards on the
relationship between the Company and its dealers, including
events of default, grounds for termination, non-renewal of dealer
contracts and equipment repurchase requirements. The Company
believes it is currently in material compliance with all such
applicable laws and regulations.
Employees
As of December 31, 1996, the Company employed 1,344 full-time
employees. A subsidiary has a collective bargaining agreement
which covers approximately 70 employees. The company considers
its employee relations to be satisfactory.
Foreign Operations
See Note 13 of the accompanying consolidated financial
statements.
Item 2. Properties
At December 31, 1996, the Company utilized eight principal
manufacturing plants located in seven U.S. states and four in
Europe. In addition, there were four principal warehouse
facilities located in the United States. About 87 percent sign
of the manufacturing and office space is in owned facilities, the
balance being leased. In total the Company operates in
approximately 1,430,000 square feet of manufacturing and office
space and 77,500 square feet of warehouse space. The Company
considers each of its facilities to be well maintained, in good
operating condition and adequate for its present level of
operations.
Item 3. 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 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the
Company during the fourth quarter of the fiscal year ended
December 31, 1996.
Item 4a. Executive Officers of the Company
Certain information is set forth below concerning the executive
officers of the Company, each of whom has been selected to serve
until the 1997 annual meeting of directors or until his successor
is duly elected and qualified.
Name Age Position
Donald J. 65 Chairman of the Board and Chief
Douglass Executive Officer
Oran F. Logan 53 President, Chief Operating
Officer and a Director
Jim A. Smith 58 Executive Vice President, Chief
Financial Officer
Robert H. 50 Vice President, Secretary and
George Treasurer
Donald J. Douglass founded the Company in 1969 and has served
as Chairman of the Board and Chief Executive Officer of the
Company since 1969.
Oran F. Logan has been President and Chief Operating Officer of
the Company since 1984. Prior thereto, Mr. Logan served as Vice
President of the Company from 1972 to 1980. Mr. Logan was an
Executive Vice President and General Manager from 1981 to 1984.
Mr. Logan has been a Director of the Company since October, 1984.
Jim A. Smith joined the Company in April, 1996. Prior to
joining the Company, Mr. Smith served as Chief Financial Officer
and a Director of Tracor, Inc., a NYSE listed Company, from 1966
to 1987 (employed in 1966 as Controller). From 1987 to 1996 he
served as financial advisor and held seats on Boards of Directors
for public companies National Instruments Corp., Mobley
Environmental Services, Inc., and Electrosource, Inc., and for
several privately held companies.
Robert H. George joined the Company in 1987 as Vice President
and Secretary and has served the Company in various executive
capacities since then. Prior to joining the Company, Mr. George
was Senior Vice President of Frost National Bank from 1978 to
1987.
PART II
Item 5. Market for Registrant's Common Stock And Related
Stockholder Matters
The Company's common stock trades on The New York Stock
Exchange under the symbol: ALG. On February 28, 1997, there were
9,589,851 shares of common stock outstanding, held by
approximately 1,950 holders of record. On February 28, 1997,
the last reported sales price of the common stock on The New York
Stock Exchange was $15.375 per share.
The following table sets forth for the period indicated, on a
per share basis, the range of high and
low sales prices for the Company's common stock as quoted by
NASDAQ and The New York Stock Exchange. The Company used NASDAQ
prices for the first and second quarters of 1995. In July, 1995,
the Company became listed on The New York Stock Exchange. These
price quotations reflect inter-dealer prices, without adjustment
for retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
High and low stock prices for the last two fiscal years were:
1996 1995
Sales Cash Sales Cash
Price Price
Divid Divid
ends ends
Quarter High Low Decla Quarter High Low Decla
Ended red Ended red
March 30, $18- $15- $.10 April 1, $17- $15- $.10
1996 1/2 7/8 1995 3/4 3/4
June 29, 19- 17- .10 July 1, 19- 17- .10
1996 7/8 1/2 1995 1/2 1/4
September 18 13- .10 September 18- 17- .10
28, 1996 3/4 30, 1995 3/8 1/4
December 17- 14- .10 December 18- 16- .10
31, 1996 1/2 5/8 30, 1995 1/8 1/8
On January 6, 1997, the Board of Directors of the Company
declared a quarterly dividend of $.10 per share. The Company
expects to continue its policy of paying regular cash dividends,
although there is no assurance as to future dividends as they
depend on future earnings, capital requirements and financial
condition. In addition, the payment of dividends is subject to
restrictions under the Company's bank revolving credit agreement.
Although on occasion the Company paid special dividends prior to
its initial public offering, there is no current intention to pay
special dividends in the future.
Item 6. Selected Financial Data
The following selected financial data are derived from the
consolidated financial statements of Alamo Group Inc. and
Subsidiaries. The data should be read in conjunction with the
consolidated financial statements, related notes, and other
financial information included herein.
Fiscal Year Ended(1)
Decembe Decembe Decembe January January
r 31, r 30, r 31, 1, 2,
1996 1995(2) 1994(2) 1994(2) 1993
Operations:
Net sales $ $163,85 $119,64 $88,519 $78,096
...................... 183,595 2 3
......................
..
Income before income 13,722 17,779 14,255 12,225 9,974
taxes
.................
Net income 8,762 11,615 9,166 7,785 6,305
......................
.....................
Percent of sales 4.8% 7.1% 7.7% 8.8% 8.1%
......................
............
Earnings per share 0.91 1.34 1.20 1.08 1.07
......................
.........
Dividends per share 0.40 0.40 0.36 0.32 0.50
(3)
......................
..
Average common shares 9,664 8,643 7,623 7,203 5,918
& equivalents
Financial Position:
Total assets $153,86 $151,57 $99,160 $75,091 $45,872
...................... 2 1
....................
Short-term debt and 1,031 1,290 8,441 13,990 9,301
current maturities .
Long-term debt,
excluding current 35,299 37,309 24,513 8,920 9,202
maturities
......................
.....................
Stockholders' equity 97,250 90,705 50,166 41,710 20,264
......................
.......
_____
(1) All references to 1995, 1994, 1993 and 1992 herein are to the
fiscal years ended December 30, 1995 (52 week period), December
31, 1994 (52 week period). January 1, 1994 (52 week period), and
January 2, 1993 (53 week period), respectively. Until 1996, the
Company's fiscal years comprised 52 or 53 week periods ending on
the Saturday closest to December 31. For 1996, the Company has
moved to a calendar year basis. There are no material
differences in the results presented that result from this
change.
(2) Includes the results of operations of companies acquired in
the respective year from the effective dates of acquisitions.
(3) Includes special annual dividend of $0.22 per share paid by
the Company in 1992 prior to its initial public offering.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes
thereto included elsewhere in this Annual Report on Form 10-K.
General
During the fiscal year ended December 31, 1996, the Company had
12 percent sign growth in sales, but a decline in profitability.
Earnings per share were diluted by a 12 percent sign increase in
average common shares and equivalents outstanding. Sales gains
were attributable to the additional sales from acquisitions made
in 1995 and from European operations; ongoing domestic
operations sales declined.
Contributing significantly to the decline in 1996 profitability
were charges and expenses, mainly related to inventory and
accounts receivable, as well as litigation costs, incurred in the
entities acquired by Alamo during 1995. These items total $3.2
million. Further, in the final two months of 1996, the strength
of the British Pound against the French Franc caused currency
transaction losses in the U.K. operations French Franc business.
Approximately 35 percent sign of the Company's 1996 sales were
attributable to replacement parts compared to 28 percent sign in
1995. This increase was a direct result of the acquisition of
Herschel registered trademark near the end of 1995. Herschel is
substantially a distributor of replacement parts. The Herschel
lines augment the Company's substantial replacement parts
business which supplies such items to dealers and end users of
the Company's whole goods. The replacement parts business is
generally less cyclical and more profitable than whole goods
business.
The following table sets forth, for the periods indicated,
certain financial data as percentages of net sales:
Fiscal Year Ended
December December December
31, 1996 30, 1995 31, 1994
Income Statement Data:
Net sales
American
Agricultural 46.8% 41.9% 40.8%
................................
.....................
Industrial 27.3
................................ 31.8 29.0
.........................
European 25.9
................................ 26.3 30.2
............................
Total net sales 100.0%
................................ 100.0% 100.0%
........................
Gross 26.4% 27.8%
profit.......................... 24.6%
................................
...
Selling, general and
administrative expenses 16.2 14.8 15.2
.........
Income from operations
................................ 8.4 11.5 12.7
.........
Interest expense
................................ (1.4) (1.6) (1.5)
.....................
Interest income
................................ 0.3 0.3 0.3
......................
Other income (net)
................................ 0.2 0.7 0.4
.................
Income before income
taxes 7.5 10.9 11.9
................................
...
Provision for income
taxes 2.7 3.8 4.2
................................
.....
Net Income
................................ 4.8% 7.1% 7.7%
............................
Results of Operations
1996 Fiscal Year Ended December 31, 1996 Compared to 1995 Fiscal
Year Ended December 30, 1995.
Net Sales. 1996 sales of $183,595,000, in addition to being
affected by sales additions from the acquisitions made during the
year 1995, were adversely impacted by severe weather conditions
in the U.S. during the first half of 1996, which shortened or
diminished growing seasons, thereby reducing, particularly,
replacement parts sales. American agriculture sales of whole
goods were also reduced by some softness in agriculture
economics, particularly in ranching due to weak cattle prices.
Further, in the second half of the year, shipments were deferred
by tractor supply delays (certain of the Company's products ship
with or are attached to a tractor) and by late year end order
patterns. European operation sales increased 10 percent sign,
attritutable to expanded distribution throughout the markets
served.
Also impacting costs and profitability were slower than
expected integration and improvements in the 1995 acquisitions
and at one acquired company, disruptions to operations from
flooding and litigation with the former owner.
Gross Profit and Selling, General, and Administrative
Expense. The gross profit percentage decrease from 1995, and the
operating costs percentage increase are driven by the factors
described above, along with some margin impact from sales mix,
caused largely by replacement parts sales declines due to
weather, and fixed cost impacts, given the sales deferrals.
Price increases during the year have generally offset general
cost increases.
Interest Expense, Interest Income, Other Income(net), and
Income Taxes. The net impact of proceeds from the 1995 common
stock offering, 1995 acquisition expenditures, and working
capital needs produced average borrowings during 1996 modestly
below 1995 levels, thereby reducing interest expense accordingly.
Other income (net) declined in 1996 due largely to charges in
1996 for currency transaction impacts. Income taxes as a percent
of pre-tax income has increased largely due to a non-recurring
1995 tax refund.
1995 Fiscal Year Ended December 30, 1995 Compared to 1994 Fiscal
Year Ended December 31, 1994.
Net Sales. The Company's net sales in 1995 increased
$44,209,000 or 37.0 percent sign over 1994. Increased net sales
were primarily attributable to 1995 acquisitions, to an increase
in European sales, and to a lesser extent, to an increase in
sales of the Company's American agricultural and industrial
products. American agricultural sales were strengthened through
additions to field sales personnel, and expansion of dealership
networks, and were somewhat adversely affected by lower cattle
prices. American industrial sales increased, aided by less
constrained governmental budgets and increased bidding activity.
European sales increased, as a result of increased market share
in the U.K. and improved marketing efforts in France.
Gross Profit. The gross profit percentage decrease resulted
largely from the acquired companies having historically higher
percentage cost of goods sold than the company as a whole. The
reduction in parts sales as a percentage of total sales also
contributed to the increased percentage of cost of goods.
European margins improved as a result of increased prices and
improved manufacturing efficiencies.
Selling, General and Administrative Expense. Operating
expenses in 1995 increased almost entirely to the incremental
operating costs associated with the acquisitions.
Interest Expense, Interest Income, Other Income (net),
and Income Taxes. Interest expense increased primarily due to the
additional debt incurred by the Company in connection with the
acquisitions during 1995. Other income in 1995 was due primarily
to realized gains on an investment in a marketable security and
equity accounting income. Other income in 1994 was due primarily
to realized gains on an investment in a marketable security. The
Company's effective tax rate decreased due to a non-recurring
refund of taxes in Europe.
Liquidity and Capital Resources
1996 operating activities generated $9.6 million in
cash flow allowing the Company to reduce debt by $3.4 million and
return $3.8 million to shareholders through dividends. 1995's
cash flow and changes in balance sheet accounts were
significantly impacted by 1995 acquisitions.
Future investments in working capital are expected to be
required to fund sales growth, geographic expansion and new
products. Further, future acquisitions could cause additional
capital needs. The Company's cash flow, strong financial
position, and existing and available credit opportunities should
be adequate for the Company's needs in the near and longer term.
Capital resources for 1995 acquisitions were provided by
combinations of increased debt and proceeds from the 1995 equity
offering. The flail mower blade production operation in France,
acquired in 1996, and the purchase of the domestic rotary blade
production capability, to be completed in 1997, are relatively
small and are being funded from available resources and seller
financing.
Long-term debt as a percent of total capital at December 31,
1996 was 27 percent sign compared to 29 percent sign at year end
1995.
As of December 31, 1996, Alamo had a $40,000,000
contractually committed, unsecured, long-term bank revolving
credit facility under which the Company can borrow and repay
until December 31, 1998, with interest at various rate options
based upon Prime or Eurodollar rates, with such rates either
floating on a daily basis or fixed for periods up to 180 days.
All or part of outstanding balances under the revolver may be
converted to term loans due December 2001. Proceeds may be used
for general corporate purposes or acquisitions. The loan
agreement contains certain financial covenants, customary in
credit facilities of this nature, including minimum financial
ratio requirements and limitations on dividends, indebtedness,
liens, and investments. The Company is in compliance with all
covenants at December 31, 1996. At December 31, 1996,
$27,500,000 was drawn on the revolver at various interest
options, with an average effective rate of 6.4 percent sign. At
December 31, 1996, $2,245,000 of the revolver capacity was
committed to irrevocable standby letters of credit issued in the
ordinary course of business as required by certain vendor
contracts.
Capital expenditures during 1996, 1995, and 1994 were,
respectively, $2,868,000, $2,401,000 and $2,927,000. 1997
capital expenditures are expected to be approximately $4.5
million, and will be funded from operating cash flow. Because
of seasonality in the Company's business, borrowings are heaviest
in December to March.
Inflation
The Company believes that inflation generally has not had a
material impact on its operations or liquidity to date.
Item 8. Financial Statements
For the financial statements and supplementary data required
by this Item 8, see the Index to
Consolidated Financial Statements.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure
None.
PART III
Item 10. Directors and Executive Officers
There is incorporated herein, by reference, that portion of the
Company's definitive proxy statement for the 1997 Annual Meeting
of Stockholders which appears therein under the captions "Item 1:
Election of Directors", "Information Concerning Directors", and
"Section 16(a) Beneficial Ownership Reporting Compliance". See
also the information in Item 4a. of Part I of this Report.
Item 11. Executive Compensation
There is incorporated in this Item 11, by reference, that
portion of the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders which appears under the caption
"Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
There is incorporated in this Item 12, by reference, that
portion of the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders which appears under the caption
"Beneficial Owners of Common Stock".
Item 13. Certain Relationships and Related Transactions
There is incorporated in this Item 13, by reference, that
portion of the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders which appears under the captions
"Certain Relationships and Related Transactions" and
"Compensation Committee Interlocks and Insider Participation."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)1. Financial Statements
The following consolidated financial statements of the
Company are included following the Index to Consolidated
Financial Statements on page F-1 of this Report.
Page
Report of Ernst ampersand Young LLP, Independent Auditors
........................................ F-2
Consolidated Statements of Income
.................................................................
... F-3
Consolidated Balance Sheets
.................................................................
............. F-4
Consolidated Statements of Stockholders' Equity
............................................... F-5
Consolidated Statements of Cash Flows
.............................................................
F-6
Notes to Consolidated Financial Statements
........................................................ F-7
(a)2. Financial Statements Schedules
All schedules have been omitted because they are not
applicable, not required under the instructions, or the
information requested is set forth in the consolidated financial
statements or related notes thereto.
(a)3. Exhibits
The following Exhibits are incorporated by reference to the
filing indicated or are included following the Index to Exhibits.
INDEX TO EXHIBITS Incorporated by
Reference from the
Exhib Exhibit Title Following
its Documents
3.1 Certificate of Incorporation, as Form S-1, February
amended, of Alamo Group Inc. 5, 1993
3.2 By-Laws of Alamo Group Inc. Form 10-K, March
29, 1996
10.1 Warrant Agreement between Alamo Group Form S-1, February
Inc. and Capital Southwest 5, 1993
Corporation, dated November 25, 1991.
1982 Incentive Stock Option Plan, Form S-1, February
*10.2 adopted by the Board of Directors of 5, 1993
Alamo Group Inc. on April 26, 1982.
Amendment No. 2[sic] to the 1982 Form S-1, February
*10.3 Incentive Stock Option Plan, adopted 5, 1993
as of January 1, 1987.
1993 Non-Qualified Stock Option Plan, Form S-1, February
10.4 adopted by the Board of Directors on 5, 1993
February 2, 1993.
Alamo Group Inc. Executive Loan Form S-1, March
*10.5 Program of 1991. 18, 1993
1994 Incentive Stock Option Plan, Form 10-K, March
*10.6 adopted by the Board of Directors on 28, 1994
January 25, 1994.
10.7 Stock Purchase Agreement between N.J. Form S-1 , June
Dabekausen and Bomford Turned Limited, 29, 1995
dated June 29, 1995
10.8 Asset Purchase Agreement between Rhino Form S-1, June 29,
International and Mark Leonard and 1995
Alamo Group (WA) Inc., dated May 12,
1995
10.9 Stock Purchase Agreement between Hardy Form S-1, June 29,
W. Morningstar and Certified Power 1995
Inc., dated May 19, 1995
10.10 Asset Purchase Agreement between Form 8-K, December
Central Tractor Farm & Country and 14, 1995
Alamo Group (IA) Inc., dated November
25, 1995
10.11 Third Amended and Restated Revolving Form 10-K, March
Credit and Term Loan Agreement between 29, 1996
NationsBank of Texas, N.A. and Alamo
Group Inc. and certain subsidiaries
dated December 29, 1995
10.12 First Amendment to Third Amended Filed Herewith
and Restated Revolving Credit and Term
Loan Agreement dated April 10, 1996
10.13 Second Amendment to Third Amended Filed Herewith
and Restated Revolving Credit and Term
Loan Agreement dated December 23, 1966
Computation of Earnings Per Share. Filed Herewith
11.1
Subsidiaries of the Registrant. Filed Herewith
21.1
Consent of Ernst & Young LLP Filed Herewith
23.1
Financial Data Schedule Electronic Filing
27.1 Only
(b) The following Form 8-Ks were filed by the Company during the
last quarter of fiscal 1996:
(1) Form 8-K dated December 26, 1996, which reported the
Company's change in fiscal year from a 52-53 week year
ending in December to a calendar year basis.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 1997 By: /s/ DONALD J.
DOUGLASS Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title
Date
/s/ DONALD J. DOUGLASS Chairman of the Board
March 27, 1997
Donald J. Douglass Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ ORAN F. LOGAN President, Chief
Operating March 27, 1997
Oran F. Logan Officer and Director
(Principal Operating Officer)
/s/ JIM A. SMITH Executive Vice
President, March 27, 1997
Jim A. Smith Chief Financial Officer
(Principal Financial Officer)
/s/ JOSEPH C. GRAF Director
March 27, 1997
Joseph C. Graf
/s/ DAVID H. MORRIS Director
March 27, 1997
David H. Morris
/s/ O. S. SIMPSON, JR. Director
March 27, 1997
O.S. Simpson, Jr.
/s/ JAMES B. SKAGGS Director
March 27, 1997
James B. Skaggs
/s/ WILLIAM R. THOMAS Director
March 27, 1997
William R. Thomas
ALAMO GROUP INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst ampersand Young LLP, Independent Auditors
.................................................................
............ F-2
Consolidated Financial Statements
Consolidated Statements of Income
Years ended December 31, 1996, December 30, 1995, and
December 31, 1994
.................................................................
............................................................F-3
Consolidated Balance Sheets
December 31, 1996 and December 30, 1995
.................................................................
......................F-4
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, December 30, 1995, and
December 31, 1994
.................................................................
............................................................F-5
Consolidated Statements of Cash Flows
Years ended December 31, 1996, December 30, 1995, and
December 31, 1994
.................................................................
............................................................F-6
Notes to Consolidated Financial
Statements.......................................................
.......................................F-7
REPORT OF ERNST AMPERSAND YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Alamo Group Inc.
We have audited the accompanying consolidated balance sheets of
Alamo Group Inc. and subsidiaries as of December 31, 1996, and
December 30, 1995 and the related consolidated statements of
income, stockholders' equity, and cash flows for the years ended
December 31, 1996, December 30, 1995, and December 31, 1994.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Alamo Group Inc. and subsidiaries at
December 31, 1996 and December 30, 1995, and the consolidated
results of their operations and their cash flows for the years
ended December 31, 1996, December 30, 1995, and December 31,
1994, in conformity with generally accepted accounting
principles.
ERNST AMPERSAND YOUNG LLP
San Antonio, Texas
March 7, 1997
Alamo Group Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
Year Ended
Decemb Decemb Decemb
er 31, er 30, er 31,
1996 1995 1994
Net sales $ $ $
................................. 183,59 163,85 119,64
................................. 5 2 3
...........
Cost of 138,46 120,64 86,338
sales............................ 0 8
.................................
............
Gross 45,135 43,204 33,305
profit...........................
.................................
............
Selling, general and 29,785 24,301 18,133
administrative expense
........................
Income from operations 15,350 18,903 15,172
.................................
..................
Interest expense (2,631 (2,647 (1,777
................................. ) ) )
.................................
Interest income 664 441 322
.................................
.................................
.
Other income (net) 339 1,082 538
.................................
.............................
Income before income taxes 13,722 17,779 14,255
.................................
.............
Provision for income taxes 4,960 6,164 5,089
.................................
.................
Net income $ $ $
................................. 8,762 11,615 9,166
.................................
....
Net income per common share $ $ $
................................. 0.91 1.34 1.20
...........
Weighted average common shares 9,664 8,643 7,623
and equivalents .............
See accompanying notes.
Alamo Group Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
Decemb Decemb
er 31, er 30,
1996 1995
ASSETS
Current assets:
Cash and cash $ $
equivalents........................... 2,228 1,839
........................
Accounts receivable 43,925 45,509
......................................
......................
Inventories 60,171 58,624
......................................
...................................
Deferred income taxes 2,206 1,782
......................................
..................
Prepaid expenses and 1,327 1,613
other
......................................
...........
Total current 109,85 109,36
assets 7 7
......................................
................
Property, plant and 46,158
equipment 48,932
......................................
.........
Less: Accumulated (26,54 (22,62
depreciation.......................... 6) 0)
............
22,386 23,538
Goodwill 14,237 13,150
......................................
......................................
...
Other assets 7,382 5,516
......................................
.....................................
Total assets $153,8 $151,5
...................................... 62 71
............................
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ $
...................................... 11,066 13,143
...............
Income taxes payable 930 1,570
......................................
.................
Accrued liabilities 6,725 6,109
......................................
......................
Current maturities of 1,031 1,290
long-term debt
.................................
Total current 19,752 22,112
liabilities
......................................
..........
Long-term debt, net of 35,299 37,309
current maturities
...............................
Deferred income taxes 1,561 1,445
......................................
.....................
Stockholders' equity:
Common stock, $.10 par
value, 20,000,000 shares
authorized; 9,589,851
and 9,576,913 issued and
outstanding at December
31, 1996 and December 30, 959 958
1995, respectively
......................................
.......................
Additional paid-in capital 49,592 49,657
......................................
................
Retained earnings 45,071 40,142
......................................
............................
Translation adjustment 1,628 (52)
......................................
....................
Total stockholders' 97,250 90,705
equity
......................................
.......
Total liabilities $ $
and stockholders' 153,86 151,57
equity....................... 2 1
See accompanying notes.
Alamo Group Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in thousands)
Tota
Addit l
ional Stoc
k-
Common Paid- Retain Trans hold
Stock In ed latio ers'
n
Share Amou Capit Earn Adjus Equi
s nt al ings tment ty
Balance at January 1, 7,530 $ $ $ $ $
1994 753 16,59 25,5 (1,13 41,7
........................ 1 05 9) 10
.................
Adjustment to
beginning balance for
change in
accounting method for - - 1,321 - - 1,32
unrealized 1
gains on marketable
securities, net
of income taxes
........................
...
Sale of common stock 26 3 315 - - 318
and related
........................
..
Net income - - - 9,16 - 9,16
........................ 6 6
........................
.............
Dividends paid ($.36 - - - (2,7 - (2,7
per share) 17) 17)
........................
.....
Change in unrealized
holding gain on - - (517) - - (517
securities, net of )
income taxes
........................
......
Translation - - - - 885 885
adjustment
........................
...................
Balance at December 31, 7,556 17,71 50,1
1994 756 0 31,9 (254) 66
........................ 54
...........
Sale of common stock 2,021 202 32,37 - - 32,5
and 2 74
related.................
..........
Net income - - - 11,6 - 11,6
........................ 15 15
........................
.............
Dividends paid ($.40 - - - (3,4 - (3,4
per share) 27) 27)
........................
.....
Change in unrealized
holding gain on - - (425) - - (425
securities, net of )
income taxes
........................
......
Translation - - - - 202 202
adjustment
........................
...................
Balance at December 30, 9,577
1995 958 49,65 40,1 (52) 90,7
........................ 7 42 05
...........
Sale of common 13 1 224 - - 225
stock and related
........................
.
Net - - - 8,76 - 8,76
income.................. 2 2
........................
...................
Dividends paid - - - (3,8 - (3,8
($.40 per share) 33) 33)
........................
....
Change in
unrealized holding gain
on
securities, net - - (289) - - (289
of income taxes )
........................
....
Translation - - - - 1,680 1,68
adjustment 0
........................
..................
Balance at December 31, $ $ $ $ $
1996 9,590 959 49,59 45,0 1,628 97,2
........................ 2 71 50
...........
See accompanying notes.
Alamo Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year Ended
Decemb Decemb Decemb
er 31, er 30, er 31,
1996 1995 1994
Operating Activities
Net income $ $ $
................................ 8,762 11,615 9,166
................................
.............
Adjustments to reconcile net
income to net cash
provided (used) by
operating activities:
Provision for 662 331 20
doubtful accounts
................................
....
Depreciation 3,972 3,281 3,109
................................
................................
Amortization 1,369 1,096 651
................................
................................
Provision for (128) (396) (835)
deferred income tax benefit
.....................
Realized gain on (528) (529) (447)
marketable securities
.........................
Gain on sale of (163) (70) (194)
equipment
................................
..........
Changes in operating assets and
liabilities,
net of effect of
acquisitions:
Accounts receivable 1,836 (8,343 646
................................ )
.....................
Inventories (536) (555) (1,826
................................ )
................................
...
Prepaid exenses and (2,241 (5,642 (852)
other assets ) )
................................
..
Trade accounts (2,431 (606) (162)
payable and accrued )
liabilities..............
Income taxes payable (947) (64) 525
................................
...................
Net cash provided by operating 9,627 118 9,801
activities
Investing Activities
Acquisitions, net of cash (941) (17,59 (1,882
acquired 3) )
................................
...........
Purchase of property, plant and (2,868 (2,401 (2,927
equipment ) ) )
..............................
Proceeds from sale of property, 251 115 749
plant and equipment
...............
Purchases of long-term - (2,480 -
investments..................... )
....................
Proceeds from sale of marketable 634 569 480
securities
............................
Net cash (used) by investing (2,924 (21,79 (3,580
activities ) 0) )
Financing Activities
Net change in bank revolving (1,100 27,200 (12,20
credit facility ) 0)
............................
Principal payments on long-term (2,265 (34,78 (824)
debt and capital leases ) 9)
.........
Proceeds from issuance of long 641 - 10,498
term debt
................................
Dividends paid (3,833 (3,427 (2,717
................................ ) ) )
................................
.......
Proceeds from sale of common 225 32,574 318
stock
................................
.......
Net cash provided (used) by (6,332 21,558 (4,925
financing activities ) )
Effect of exchange rate changes 18 80 (235)
on cash
..............................
Net change in cash and cash 389 (34) 1,061
equivalents
................................
.
Cash and cash equivalents at 1,839 1,873 812
beginning of the year
.................
Cash and cash equivalents at end $ $ $
of the year 2,228 1,839 1,873
...........................
Cash paid during the year for:
Interest $ $ $
................................ 2,608 2,632 1,737
................................
..........
Income taxes 5,074 4,675 4,041
................................
................................
..
See accompanying notes.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
The Company operates in one business segment referred
to as the vegetation maintenance equipment industry in both
America and Europe. The Company manufactures tractor-mounted
mowing and vegetation maintenance equipment and replacement parts
for industrial and agricultural end-users.
Basis of Consolidation
The accompanying financial statements include the
accounts of Alamo Group Inc. and its subsidiaries, (the Company)
all of which are wholly owned. Other investments are accounted
for under the equity method or the cost method, as appropriate.
All significant intercompany accounts and transactions have been
eliminated. Certain prior year amounts have been reclassified to
conform with the 1996 presentation.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Fiscal Year
Until 1996, the Company's fiscal year comprised either
a 52 or 53 week period that ended on the Saturday closest to
December 31. All references to 1994 and 1995 herein are to the
fiscal years ended December 31, 1994 (52 weeks) and December 30,
1995 (52 weeks), respectively. For 1996, the Company has
changed to a calendar year basis. There are no material
differences in the results presented that result from this
change.
Foreign Currency
The Company translates the assets and liabilities of
foreign-owned subsidiaries at rates in effect at the end of the
year. Revenues and expenses are translated at average rates in
effect during the reporting period. Translation adjustments are
treated as a separate component of stockholders' equity.
The Company enters into foreign currency forward contracts
to hedge its exposure on material foreign currency transactions.
The company does not hold or issue financial instruments for
trading purposes. Changes in the market value of the foreign
currency instruments are recognized in the financial statements
upon settlement of the hedged transaction. At December 31, 1996,
the Company had contracts, maturing at various dates to March,
1997, for $1,400,000. Foreign currency transactions gains or
losses are included in other income (net). For 1996, such
transactions netted a loss of $436,000.
Cash Equivalents
Cash equivalents are highly liquid investments with a
maturity date no longer than 90 days.
Marketable Securities
Marketable securities are carried at fair market value,
with the unrealized gains and losses, net of tax, reported in
stockholders' equity.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
Concentrations of Credit Risk
Financial instruments which potentially subject the company
to concentrations of credit risk consist principally of accounts
receivable which are concentrated in the Company's single
business segment, vegetation maintenance equipment. The credit
risk associated with this segment is limited because of the large
number and types of customers and their geographic dispersion.
Inventories
Inventories of U.S. operating subsidiaries are principally
stated at the lower of cost (last-in, first-out method) ("LIFO")
or market and the Company's foreign subsidiaries are stated at
the lower of cost (first-in, first-out) ("FIFO") or market.
Property, Plant, and Equipment
Property, plant, and equipment are stated on the basis of
cost. Major renewals and betterments are charged to the property
accounts while replacements, maintenance, and repairs which do
not improve or extend the lives of the respective assets are
expensed currently. Depreciation is provided at amounts
calculated to amortize the cost of the assets over their
estimated useful economic lives using the straight-line method.
Goodwill
Goodwill is related to purchase acquisitions and, with
minor exceptions, is being amortized over fifteen years from
respective acquisition dates. Goodwill is shown net of
amortization of $2,630,000 and $1,531,000 for the years ended
December 31, 1996 and December 30, 1995, respectively. The
Company continually evaluates the existence of goodwill
impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted net cash flows of the
related business unit.
Long-Term Investments
Included in other assets are long-term investments,
accounted for under the equity method of accounting, which
consist primarily of investments in common stocks of
corporations, and other long-term investments for which no active
secondary market exists. During 1995, the Company invested
approximately $500,000 in a Small Business Investment Company; up
to an additional $1,500,000 has been committed. Due to inherent
risk factors in such investments, the ultimate realization of
these amounts, included in other assets in the accompanying
financial statements, is not determinable at this date.
Related Party Transactions
A note receivable from an officer of the Company for
$700,000 at year ends 1996 and 1995 is included in other assets.
Revenue Recognition
Revenue is recognized when the product is shipped.
Provisions for sales incentives and other sales related expenses
are made at the time of the sale.
Research and Development
Product development and engineering costs charged to
selling, general and administrative expense amounted to
$1,747,000, $1,434,000, and $1,354,000, and for the years ended
December 31, 1996, December 30, 1995, and December 31, 1994,
respectively.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
Federal Income Taxes
Deferred tax assets and liabilities are determined based on
differences between the financial reporting basis and tax basis
of assets and liabilities and are measured using presently
enacted tax rates and laws.
Stock Based Compensation
Effective January 1, 1996 the Company adopted Statement of
Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation and elected to continue to use the intrinsic
value method in accounting for its stock option plans.
Accordingly, no compensation cost has been recognized in the
financial statements for these plans. The pro forma effects of
fair value accounting for compensation costs related to options,
on net income and earnings per share, would not be material.
Earnings Per Share
Earnings per share are calculated by dividing net income by
the weighted average number of common and common equivalent
shares outstanding during the respective periods assuming the
exercise of the common stock options and warrants using the
treasury stock method except when antidilutive.
2. ACQUISITIONS
On March 10, 1994, the Company acquired Signalisation
Moderne Autoroutire S.M.A. S.A. and its subsidiary and related
entities (collectively "SMA"), a French manufacturer of boom-
mounted flail mowers sold principally to the French Government,
for a purchase price of $4,663,000.
On December 30, 1994, the Company acquired Tiger Corporation
("Tiger"), effective at December 31, 1994, for a purchase price
of $7,822,000. Tiger is a manufacturer principally of boom-
mounted, flail mowing equipment and replacement parts for
industrial end-users.
On April 27, 1995, the Company acquired M&W Gear Co.
("M&W"). The acquisition was effective as of April 2, 1995. The
purchase price was $17,959,000. M&W is a manufacturer and
distributor of primarily hay making equipment for agricultural
end-users.
On May 12, 1995, the Company acquired Rhino International,
Inc. ("Rhino International"), an unaffiliated company which
imports Chinese-manufactured tractors for a purchase price of
$2,663,000.
On May 24, 1995, the Company invested $1,980,000 to purchase
49 percent sign of the outstanding capital stock (42 percent
sign on a fully diluted basis) of Certified Power, Inc. ("CPI"),
which in turn acquired 100 percent sign of the equity of
Certified Power Train Specialists, Inc. ("CPTS") in a highly
leveraged transaction. CPTS is a distributor of hydraulic
components and automotive and truck drivetrain parts. The Company
and CPTS share a number of common suppliers and management
believes that CPTS will be able to provide the Company with
certain hydraulic systems and components at a cost savings to the
Company. This investment is carried in other assets and is
accounted for by equity accounting.
On June 29, 1995, the Company purchased N J M Dabekausen
Beheer BV and its subsidiaries (collectively, "Dabekausen") for a
purchase price of $937,000. Dabekausen is a distributor of the
Company's products in the Netherlands and Germany.
On December 6, 1995, the Company acquired Herschel
Corporation ("Herschel"). The effective date of the acquisition
was November 25, 1995. The purchase price was $14,041,000.
Herschel manufactures and distributes primarily high wear, high
turnover farm equipment replacement parts.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
In December, 1996, the Company made two small business
purchases: Forges Gorce in France and a domestic production line
(this purchase to be completed in 1997), each of which makes
mower blades. The aggregate purchase price was $1,903,000.
The acquisitions have been accounted for by the purchase
method of accounting, and accordingly, the approximate purchase
prices, shown above, have been allocated to the assets acquired
and the liabilities assumed based on the estimated fair values at
the dates of acquisition, with the excess of purchase prices
over assigned asset values recorded as goodwill which the Company
amortizes over 15 years. The results of operations of the
acquisitions have been included in the Company's consolidated
financial statements since the acquisition dates. Adjustments to
purchase price allocations added $1,965,000 to goodwill during
1996.
The condensed pro forma results of operations presented
below summarize on an unaudited basis approximate results of the
Company's consolidated operations for the periods presented
assuming that the acquisitions shown above occurred at the
beginning of the respective periods presented. The two 1996
purchases are not material and 1996, therefore, is not shown.
Year Ended
(in thousands, except
per share amounts)
(Unaudited)
December December
30, 1995 31, 1994
Net $193,729 $184,454
sales
..........................
............
Income 17,991 14,215
before income taxes
..........
Net 11,983 9,007
income
..........................
.........
Earnings 1.38 1.18
per share
........................
3. MARKETABLE SECURITIES
On January 2, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (FAS No. 115). The
effect of adopting the new rules increased stockholders' equity
by $1,321,000, representing the recognition in stockholders'
equity of unrealized appreciation, net of taxes, for the
Company's investment in equity securities determined to be
available-for-sale, previously carried at lower of cost or
market.
The estimated fair market value of such securities, included
in prepaid expenses and other, was $218,000 at December 31, 1996
and $769,000 at December 30, 1995, and gross unrealized gains
included in such amounts were $138,000 and $583,000,
respectively. There were no unrealized losses. Realized gains
on sales of such securities, included in other income, were
$528,000, $529,000, and $447,000 for the years 1996, 1995, and
1994, respectively. There were no realized losses.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
4. VALUATION AND QUALIFYING ACCOUNTS
Valuation and qualifying accounts included the following (in
thousands):
Balanc Charg Translatio Net
e ed ns,
Beginn to Reclassifi Write- Balan
ing Costs cations, offs ce
of and and or End
Discoun of
ts
Year Expen Acquisitio Taken Year
ses ns
1996
Allowance for doubtful $ $
accounts ............... 1,192 662 (180) (153) 1,521
Reserve for cash 4,303 12,88 3,866
discounts 3 25 (13,345
........................ )
.
Reserve for inventory 4,157 450 4,110
obsolesence 567 (1,064)
..............
1995
Allowance for doubtful $ $
accounts 592 331 467 (198) 1,192
................
Reserve for cash 2,016 12,90 4,303
discounts 6 452 (11,071
........................ )
.
Reserve for inventory 2,485 368 4,157
obsolesence 1,322 (18)
..............
1994
Allowance for doubtful $ $
accounts 549 48 122 (127) 592
................
Reserve for cash 2,658 9,456 2,016
discounts 107 (10,205
........................ )
.
Reserve for inventory 2,015 104 2,485
obsolesence 509 (143)
..............
5. INVENTORIES
Inventories valued at LIFO cost represented 80 percent sign
and 67 percent sign of total inventory for the years ended
December 31, 1996, and December 30, 1995, respectively. The
excess of current costs over LIFO valued inventories was
$3,221,000 and $2,618,000 at December 31, 1996, and December 30,
1995, respectively. Net inventories consist of the following (in
thousands):
Decemb Decemb
er 31, er 30,
1996 1995
Finished $ $
wholegoods and parts 53,748 51,613
....................
Work in 2,858 3,234
process
.................................
..........
Raw 3,565 3,777
materials
.................................
.............
$ $
60,171 58,624
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment consist of the following (in
thousands):
Decemb Decemb Useful
er 31, er 30, Lives
1996 1995
Land $ $
............................... 2,154 1,924
..........................
Buildings 19,377 18,808 15-25
and improvements yrs.
....................
Machinery 20,081 18,626 5 yrs.
and equipment
........................
Office 4,408 4,389 5 yrs.
furniture and equipment
.................
2,912 2,411 3-5
Transportation equipment yrs.
........................
48,932 46,158
(26,54 (22,62
6) 0)
$ $
22,386 23,538
Buildings and improvements at December 31, 1996 and December
30, 1995 include $7,735,000 and $7,688,000, respectively, for
capitalized leases.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following balances (in
thousands):
Decemb Decemb
er 31, er 31,
1996 1995
Salaries, wages $ $
and bonuses 2,810 2,603
................................
Warranty 1,282 1,266
.................................
...........................
Other 2,633 2,240
.................................
.................................
$ $
6,725 6,109
8. LONG TERM DEBT
The components of long term debt are as follows (in
thousands):
1996 1995
Bank revolving $ $
credit facility 27,50 28,60
............................... 0 0
Capital lease 7,538 7,587
obligations
.................................
.....
Other notes payable 1,292 2,412
.................................
............
Total long $ $
term debt 36,33 38,59
................................. 0 9
......
Less current 1,031 1,290
maturities..
.................................
.
$ $
35,29 37,30
9 9
As of December 31, 1996, the Company had a $40,000,000
contractually committed, unsecured, long-term bank revolving
credit facility under which the Company can borrow and repay
until December 31, 1998, with interest at various rate options
based upon Prime or Eurodollar rates, with such rates either
floating on a daily basis or fixed for periods up to 180 days.
All of part of outstanding balances under the revolver may be
converted to term loans due December 2001. Proceeds may be used
for general corporate purposes or acquisitions. The agreement
contains certain financial covenants, customary in credit
facilities of this nature, including minimum financial ratio
requirements and limitations on dividends, indebtedness, liens,
and investments. The Company is in compliance with all covenants
at December 31, 1996. At December 31, 1996, $27,500,000 was
drawn on the revolver at various interest options, with an
average effective rate of 6.4 percent sign. At December 31,
1996, $2,245,000 of the revolver capacity was committed to
irrevocable standby letters of credit issued in the ordinary
course of business as required by certain vendor contracts.
The aggregate maturities of long-term debt for the next five
years, as of December 31, 1996, are as follows: $1,031,000 in
1997, $865,000 in 1998, $469,000 in 1999, $533,000 in 2000, and
$582,000 in 2001. These amounts do not include the bank
revolving credit facility which is due in 1998 unless converted
to a term loan due in 2001.
Long-term debt is substantially floating rate debt and is
stated essentially at fair value.
9. INCOME TAXES
U. S. and non-U.S. income before income taxes is as follows (in
thousands):
1996 1995 1994
Income before
income taxes
Domestic $ $12, $11,
................................. 7,35 693 191
..................... 9
Foreign 6,36 5,08 3,06
................................. 3 6 4
........................
$13, $17, $14,
722 779 255
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
The provision for income taxes consists of (in thousands):
1996 1995 1994
Current:
Federal $2,8 $4,4 $4,2
................................. 04 59 42
.......................
Foreign 1,98 1,77 1,41
................................. 7 3 7
......................
State 297 328 265
.................................
...........................
5,08 6,56 5,92
8 0 4
Deferred:
Federal (494 (133 (617
................................. ) ) )
.......................
Foreign (263 (218
................................. 366 ) )
......................
(128 (396 (835
) ) )
$4,9 $6,1 $5,0
Total income taxes 60 64 89
.............................
Reconciliation of the statutory U.S. federal rate to actual tax
rate is as follows (in thousands):
1996 1995 1994
Statutory U.S. $4,8 $6,2 $4,9
federal tax at 35% 03 23 89
........................
Increase
(reduction) from:
................................
Non-U.S. 126 (270 127
taxes )
.................................
.............
Local U.S. 193 213 172
taxes
.................................
...........
Other (162 (2) (199
................................. ) )
...........................
Provision for $4,9 $6,1 $5,0
income taxes 60 64 89
.................................
.
Actual tax rate 36% 35% 36%
.................................
...................
At December 31, 1996, the Company had unremitted earnings of
foreign subsidiaries of approximately $10,256,000. These
earnings, which reflect full provision for non-U.S. income taxes,
are indefinitely reinvested in non-U.S. operations or can be
remitted without substantial additional tax. Accordingly, no
provision has been made for taxes that might be payable upon
remittance of such earnings nor is it practicable to determine
the amount of this liability.
The components of deferred tax assets and liabilities
included in the balance sheets are as follows (in thousands):
1996 1995
Deferred tax
asset:
Inventory $ $
................................. 1,28 1,04
................... 2 0
Accounts 387 256
receivable
.................................
...
925 688
Depreciation
.................................
..............
Net 638 840
operating loss carry forwards
................
290 180
Insurance........................
.............................
Other 710 490
.................................
.........................
$ $
Total deferred asset 4,23 3,49
.............................. 2 4
Deferred tax
liability:
Difference
between book basis and $ $
tax basis 3,20 2,95
of assets 7 3
.................................
.......
Other 380 204
.................................
.........................
$ $
Total deferred liability 3,58 3,15
.................... 7 7
At December 31, 1996, net, current deferred tax assets were
$2,206,000 ($1,782,000 in 1995). Net, non-current deferred tax
liabilities were $1,561,000 ($1,445,000 in 1995).
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
10. COMMON STOCK
In conjunction with the issuance of debt in a prior year,
the Company issued warrants to purchase 62,500 shares of common
stock to the lender. The exercise price of $16 per share is
subject to adjustment and the warrants expire in January 2000.
The Company has reserved 62,500 shares of common stock for the
warrants.
The Company completed an offering of its stock and became
listed on the New York Stock Exchange in July 1995, trading under
the symbol ALG. The number of new shares issued was 2,000,000 at
$17.50 per share and the net proceeds to the Company were
$32,574,000. Earnings per share, calculated on a supplemental
basis as if the foregoing event had occurred at the beginning of
the year, would have been $1.21 for the year ended December 30,
1995.
Subsequent to December 31, 1996, the Company declared and
paid a dividend of $0.10 per share.
11. STOCK OPTIONS
In 1982, the stockholders of the Company adopted an
incentive stock option plan for key employees, reserving 350,000
shares of common stock. Under the terms of this plan, the
purchase price of the shares subject to each option granted will
not be less than the fair market value at the time the option is
granted. There are no more options available for grant under
this plan.
On February 2, 1993, the Company granted non-qualified
options for 200,000 shares of common stock to key employees of
the Company at $11.50 per share. Each option becomes vested and
exercisable for up to 20 percent sign of the total optioned
shares after one year following the grant of the option and for
an additional 20 percent sign of the total optioned shares after
each succeeding year until the option is fully exercisable at the
end of the fifth year. Non-qualified options for 120,000 shares
were exercisable at December 31, 1996.
On April 28, 1994, the stockholders approved an incentive
stock option plan for key employees, reserving 300,000 shares of
common stock. Each option becomes vested and exercisable for up
to 20 percent sign of the total optioned shares each year after
grant. Under the terms of this plan, the exercise price of the
shares subject to each option granted will not be less than the
fair market value of the common stock at the date the option is
granted.
Following is a summary of activity in the incentive stock
option plans for the periods indicated:
Decembe Decembe Decembe
r 31, r 30, r 31,
1996 1995 1994
Options outstanding at 106,711 140,837 106,175
beginning of year
...............
Granted 43,000 13,000 79,000
.............................
.............................
.
Exercised (12,938 (21,026 (25,888
............................. ) ) )
...........................
Cancelled (13,400 (26,100 (18,450
............................. ) ) )
...........................
Options outstanding at end of 123,373 106,711 140,837
year
.........................
Options exercisable at end of 35,098 22,961 14,812
year
..........................
Options available for grant 199,950 230,200 224,000
at end of
year................
Per share option prices ranged from $12.00 to $18.75.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
Stock based compensation.
Pro forma net income and earnings per share, assuming that
the Company had accounted for its employee stock options using
the fair value method and amortized such to expense over the
options vesting period, would not be materially different from
those reported.
12. RETIREMENT BENEFIT PLANS
The Company provides a defined contribution 401(k) savings
plan for eligible U.S. employees. Company matching contributions
are based on a percentage of employee contributions. Company
contributions to the plan during 1996, 1995, and 1994 were
approximately $458,000, $336,000, and $296,000, respectively.
Two of the Company's foreign subsidiaries also participate
in a defined contribution and savings plan covering eligible
employees. The Company's foreign subsidiaries contribute between
5.8 percent sign and 9.6 percent sign of the participant's salary
up to a specific limit. Contributions were approximately
$508,000 in 1996, $427,000 in 1995, and $417,000 in 1994.
13. FOREIGN OPERATIONS
Following is selected financial information on the Company's
foreign operations (located in Europe) (in thousands):
Year Ended
Decembe Decembe Decembe
r 31, r 30, r 31,
1996 1995 1994
Net sales $47,519 $43,183 $36,141
.............................
.........................
Income from 6,979 5,978 4,114
operations
.............................
.
Income before
income taxes and allocated 6,363 5,086 3,064
interest expense
.............................
...........
Identifiable assets $35,863 $30,748 $28,009
.............................
...........
14. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space and transportation equipment
under various operating leases which generally are expected to be
renewed or replaced by other leases. The Company has certain
capitalized leases consisting principally of leases of buildings.
At December 31, 1996, future minimum lease payments under these
noncancelable leases and the present value of the net minimum
lease payments for the capitalized leases are (in thousands):
Operat Capita
ing lized
Leases Leases
1997 $ $
.................................... 635 999
....................................
.......
1998 517 999
....................................
....................................
.......
1999 325 999
....................................
....................................
.......
2000 251 1,020
....................................
....................................
.......
2001 237 1,020
....................................
....................................
.......
Thereafter 148 7,245
....................................
...................................
Total minimum lease $ $
payments 2,113 12,282
....................................
.
Less amount representing 4,744
interest
.................................
Present value of net 7,538
minimum lease payments
..............
Less current portion 381
....................................
...................
Long-term portion $
.................................... 7,157
.....................
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
Rental expense for operating leases was approximately
$1,217,000 for 1996, $1,013,000 for 1995, and $964,000 for 1994.
Other
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.
The Company has been named in a suit by the former owner of
Rhino International which includes aggregate claims totaling $8
million. The Company believes it has meritorious defenses
against these matters and will vigorously defend the pending
claims and prosecute appropriate counterclaims. While the
ultimate outcome of this litigation 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.
The Company has an executive loan program pursuant to which
the Company may make loans to certain officers and employees of
the Company as approved by the Compensation Committee of the
Board of Directors to purchase stock of the Company. All loans
are secured by the pledge of shares being purchased. The maximum
aggregate amount which officers and employees may borrow is
$400,000 and $200,000, respectively. Each loan bears interest at
prime and is payable quarterly. As of December 31, 1996, and
December 30, 1995, $46,000 and $99,000, respectively, were
outstanding under the program.
Certain equipment receivables have been sold (discounted)
under financing agreements with third-party lending institutions
whereby the Company is potentially subject to recourse. At
December 31, 1996, $702,000 is outstanding under these
arrangements and management has determined no reserve is
required.
ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, DECEMBER 30, 1995, AND DECEMBER
31, 1994
15. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1996 and 1995 is as
presented below. Seasonal influences affect the Company's sales
and profits with peak business occurring in May through August.
(In thousands, except per share data).
1996 1995
Firs Seco Thir Four Firs Seco Thir Four
t nd d th t nd d th
Sales $ $50, $46, $40, $34, $45, $43, $40,
........... 45,0 727 835 987 448 303 343 758
........... 46
.........
Gross 10,2 14,4 14,1 6,31 8,29 12,4 12,9 9,54
profit 17 39 66 3 2 56 09 7
...........
.........
Net income 2,32 4,23 4,18 (1,9 2,10 3,55 3,90 2,04
........... 6 4 5 83) 8 4 4 9
..........
Earnings $.24 $.44 $.43 $(.2 $ $ $ $
per share 0) .28 .46 .41 .21
..........
Average 9,66 9,69 9,64 9,65 7,65 7,68 9,56 9,67
shares..... 0 9 3 5 3 2 7 3
...........
Dividends $ $ $ $ $ $ $ $
per share .10 .10 .10 .10 .10 .10 .10 .10
........
Market
Price of
common
stock
High $18- $19- $18 $17- $17- $19- $18- $18-
........... 1/2 7/8 1/2 3/4 1/2 3/8 1/8
...........
.....
15- 17- 13- 14- 15- 17- 17- 16-
Low........ 7/8 1/2 3/4 5/8 3/4 1/4 1/4 1/8
...........
.........
The 1996 fourth quarter data includes charges and expenses
totaling $3.2 million, pre-tax or $0.21 per share after tax.
These charges and expenses, primarily related to inventories and
accounts receivable, were in the four companies acquired in 1995
and include litigation expenses of the Rhino International
lawsuit described in Footnote 14.
Exhibit 10.12
FIRST AMENDMENT TO THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
(WITH LETTER OF CREDIT FACILITY)
This First Amendment to Third Amended And Restated Revolving
Credit and Term Loan Agreement (With Letter of Credit Facility)
(this "Amendment") is entered into as of the 10th day of April,
1996, by and between ALAMO GROUP INC., a Delaware corporation
(the "Borrower"), Alamo Group (USA) Inc., Alamo Group (Tx) Inc.,
Alamo Group (Ks) Inc., Alamo Group (Il) Inc., Alamo Sales Corp.,
Tiger Corporation f/k/a Alamo Group (SD) Inc. , Alamo Group (WA)
Inc., M&W Gear Company, Adams Hard-Facing Company, Inc.,
Herschel-Adams Inc., Alamo Group (IA) Inc. (collectively, the
Guarantors ) and NATIONSBANK OF TEXAS, N.A. (the "Lender").
R E C I T A L S
A. Borrower and Lender executed a Third Amended and
Restated Revolving Credit and Term Loan Agreement (With Letter of
Credit Facility), dated December 29, 1995 (the "Third Amended
Loan Agreement"), pursuant to which Lender provided to Borrower a
$35,000,000.00 loan facility to be used for general working
capital purposes, financing new acquisitions, and to support
letters of credit;
B. Among the credit support for this facility are the
Guaranty Agreements, dated December 29, 1995 (collectively, the
Guaranties ), executed by Alamo Group (USA) Inc., Alamo Group
(Tx) Inc., Alamo Group (Ks) Inc., Alamo Group (Il) Inc., Alamo
Sales Corp., Tiger Corporation f/k/a Alamo Group (SD) Inc. ,
Alamo Group (WA) Inc., M&W Gear Company, Adams Hard-Facing
Company, Inc., Herschel-Adams Inc., Alamo Group (IA) Inc.
(collectively, the Guarantors );
C. Borrower has requested that Lender increase the amount
available under this facility to $40,000,000.00, and Lender is
willing to do so on the terms and conditions stated in this
Amendment.
D. Although not required to do so for the Guaranties to
cover the increased loan amount, the Guarantors confirm by their
execution of this Amendment that they acknowledge the increase in
the amount of the Loan and that their Guaranties cover the entire
amount.
E. Each capitalized term used in this Amendment shall have
the meaning given to it in the Third Amended Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises
herein contained and for other valuable consideration, Borrower
and Lender agree as follows:
A G R E E M E N T:
1. Recitals. The foregoing recitals are true and correct.
2. Amendment. The definitions of Commitment and
Revolving Credit Commitment contained in Section 1.01 of the
Third Amended Loan Agreement are amended and restated to change
from $35,000,000 to $40,000,000, and any references in the Third
Amended Loan Agreement to $35,000,000 or to the total or
revolving commitment amounts are likewise deemed to now mean
$40,000,000.
3. Guaranties. The Guarantors hereby confirm that the
Guaranties cover the entire amount of the Loan, as increased to
$40,000,000, and as it may be increased in the future.
4. All other provisions of the Third Amended Loan
Agreement that are not specifically modified or amended by this
Amendment shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the day and year first above written.
BORROWER: LENDER:
ALAMO GROUP INC. NATIONSBANK OF TEXAS, N.A.
By: By:
Robert H. George D. Kirk McDonald, Senior
Vice President - Vice President
Administration
GUARANTORS:
Administration
ALAMO GROUP (USA) INC.
By:
Robert H. George
Vice President -
Administration
ALAMO GROUP (Tx) INC.
By:
Robert H. George
Vice President -
Administration
ALAMO GROUP (Ks) INC.
By:
Robert H. George
Vice President -
Administration
ALAMO GROUP(Il) INC.
By:
Robert H. George
Vice President -
Administration
ALAMO SALES CORP.
By:
Robert H. George
Vice President -
Administration
TIGER CORPORATION
By:
Robert H. George
Vice President -
ALAMO GROUP (WA) INC.
By:
Robert H. George
Vice President -
Administration
M&W GEAR COMPANY
By:
Robert H. George
Vice President -
Administration
ADAMS HARD-FAClNG COMPANY,
INC.
By:
Robert H. George
Vice President -
Administration
HERSCHEL-ADAMS INC.
By:
Robert H. George
Vice President -
Administration
ALAMO GROUP (IA) INC.
By:
Robert H. George
Vice President -
Administration
Exhibit 10.13
SECOND AMENDMENT TO THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
(WITH LETTER OF CREDIT FACILITY)
This Second Amendment to Third Amended And Restated
Revolving Credit and Term Loan Agreement (With Letter of Credit
Facility) (this "Second Amendment") is entered into effective
the 23rd day of December, 1996, by and between ALAMO GROUP INC.,
a Delaware corporation (the "Company"), Alamo Group (USA) Inc.,
Alamo Group (Tx) Inc., Alamo Group (Ks) Inc., Alamo Group (Il)
Inc., Alamo Sales Corp., Tiger Corporation f/k/a Alamo Group (SD)
Inc. , Alamo Group (WA) Inc., M&W Gear Company, Adams
Hard-Facing Company, Inc., Herschel-Adams Inc., Alamo Group (IA)
Inc. (collectively, the Guarantors ) and NATIONSBANK OF TEXAS,
N.A. (the "Bank").
R E C I T A L S
A. Company and Bank executed a Third Amended and Restated
Revolving Credit and Term Loan Agreement (With Letter of Credit
Facility), dated December 29, 1995 (the "Third Amended Loan
Agreement"), pursuant to which Bank provided to Company a
$35,000,000.00 loan facility to be used for general working
capital purposes, financing new acquisitions, and to support
letters of credit;
B. Among the credit support for this facility are the
Guaranty Agreements, dated December 29, 1995 (collectively, the
Guaranties ), executed by Alamo Group (USA) Inc., Alamo Group
(Tx) Inc., Alamo Group (Ks) Inc., Alamo Group (Il) Inc., Alamo
Sales Corp., Tiger Corporation f/k/a Alamo Group (SD) Inc. ,
Alamo Group (WA) Inc., M&W Gear Company, Adams Hard-Facing
Company, Inc., Herschel-Adams Inc., Alamo Group (IA) Inc.
(collectively, the Guarantors );
C. Effective April 10, 1996, Company and Bank executed
First Amendment to Third Amended and Restated Revolving Credit
and Term Loan Agreement (With Letter of Credit Facility) (the
First Amendment ), pursuant to which Bank increased the amount
available under this facility to $40,000,000.00, on the terms and
conditions stated in the First Amendment.
D. Company has requested, and Bank has agreed to give, a
one-year extension of the maturity of the term and revolving
loans evidenced by this facility. In addition, Bank has agreed
to reduce the interest rate margin on LIBOR-priced borrowings
under the facility and to adjust the threshold for application of
an unused facility fee and the timing of payment thereof.
E. Although not required to do so for the Guaranties to
continue to be fully effective, the Guarantors confirm by their
execution of this Second Amendment that they acknowledge the
amendments effected hereby and that their Guaranties are
unaffected.
F. Each capitalized term used in this Second Amendment
shall have the meaning given to it in the Third Amended Loan
Agreement, as previously amended by the First Amendment.
NOW, THEREFORE, in consideration of the mutual promises
herein contained and for other valuable consideration, Company
and Bank agree as follows:
A G R E E M E N T:
1. Recitals. The foregoing recitals are true and correct.
2. Amendments. The following provisions of the Third
Amended Loan Agreement are hereby amended:
(a) The following definitions contained in Section
1.01 of the Third Amended Loan Agreement are amended and restated
to read as follows:
(i) Fiscal Year shall mean the calendar year,
January 1 - December 31, of each year during the term
hereof.
(ii) Loan Year shall mean each January 1 -
December 31 during the term hereof.
(iii) Termination Date shall mean the earliest date
on which any of the following events occurs:
(a) December 31, 1998; (b) the date that Bank
terminates its commitment to lend hereunder, after the
occurrence of an Event of Default; or (c) such earlier
date as may be agreed upon in writing by Company and
Bank.
(b) Section 2.03 (b) is amended and restated to read
as follows:
(b) Revolving Credit Facility Fee. Company shall pay
to Bank annually in arrears, for the benefit of Bank,
beginning with the Loan Year ending December 31, 1997,
within ten (10) days after receiving a statement
therefor from Bank, a fee (the Facility Fee ) equal to
one-quarter percent (1/4%) multiplied times the average
unused, available portion of the Revolving Credit
Commitment for the prior Loan Year, to compensate Bank
for keeping those unused funds available for the
Company; provided, however, that no such Facility Fee
is payable unless the average principal amount
outstanding on the Revolving Credit Loan (including the
face amounts of issued and outstanding Letters of
Credit) for the Loan Year ending on the date with
respect to which the Facility Fee is computed is less
than $15,000,000.00.
(c) The Applicable Margin for Eurodollar Advances is
reduced by 12.5 basis point (.125%) for each pricing tier
specified in Section 2.04(d), resulting in the following
Eurodollar Advance Applicable Margins for the indicated
subparagraphs:
2.04(d)(i) -- reduced from 7/8% to 3/4%
2.04(d)(ii) -- reduced from 1 3/8% to 1 1/4%
2.04(d)(iii) -- reduced from 1 7/8% to 1 3/4%
The same adjustments shall be considered to have been made to the
Pricing Grid attached to the Third Amended Loan Agreement as
Exhibit K.
(d) The maturity date of the Term Notes, as provided
in Section 4.03(b), is extended by one (1) year, and to the last
day of the Loan Year, to a date that is 6 years from the date of
the Third Amended Loan Agreement, plus the number of days between
that date and December 31 of that year. If any Term Notes have
been executed before the effective date of this Second Amendment,
then the maturity of any such Term Note shall automatically be
extended to give effect to this paragraph (d), regardless
whether the Term Note is separately amended.
3. Guaranties. The Guarantors hereby confirm that the
Guaranties are in full force and effect and are in no way
diminished or adversely affected by this Second Amendment.
4. No Other Amendments. All other provisions of the Third
Amended Loan Agreement, as previously amended by the First
Amendment, that are not specifically modified or amended by this
Second Amendment shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this
Second Amendment as of the day and year first above written.
COMPANY: BANK:
ALAMO GROUP INC. NATIONSBANK OF TEXAS, N.A.
By: By:
Robert H. George D. Kirk McDonald, Senior
Vice President Vice President
GUARANTORS:
Administration
ALAMO GROUP (USA) INC.
ALAMO GROUP (WA) INC.
By:
Robert H. George
Vice President - By:
Administration Robert H. George
Vice President -
Administration
ALAMO GROUP (Tx) INC.
M&W GEAR COMPANY
By:
Robert H. George
Vice President - By:
Administration Robert H. George
Vice President -
Administration
ALAMO GROUP (Ks) INC.
By:
Robert H. George
Vice President -
Administration
ALAMO GROUP(Il) INC.
By:
Robert H. George
Vice President -
Administration
ALAMO SALES CORP.
By:
Robert H. George
Vice President -
Administration
TIGER CORPORATION
By:
Robert H. George
Vice President -
ADAMS HARD-FAClNG COMPANY,
INC.
By:
Robert H. George
Vice President -
Administration
HERSCHEL-ADAMS INC.
By:
Robert H. George
Vice President -
Administration
ALAMO GROUP (IA) INC.
By:
Robert H. George
Vice President -
Administration
Exhibit 11.1
COMPUTATION OF PER-SHARE EARNINGS
(in thousands, except per-share data)
Year Ended
Decembe Decembe Decembe
r 31, r 30, r 31
1996 1995 1994
Primary
Average shares outstanding . . . . 9,585 8,541 7,547
. . . . . . . . . . . . . . . . . .
. . . . .
Net effect of dilutive stock
options and warrants --
based on the treasury stock 79 102 76
method using
average market price .. . . . .
. . . . . . . . . . . . . . . . . .
. . . . . . .
Total . . . . . . . . . . . . . . . 9,664 8,643 7,623
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Net Income . . . . . . . . . . . . $8,762 $11,615 $9,166
. . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Per-share amount . . . . . . . . . $ 0.91 $ $ 1.20
. . . . . . . . . . . . . . . . . . 1.34
. . . . . . . .
Fully Diluted
Average shares outstanding . . . . 9,585 8,541 7,547
. . . . . . . . . . . . . . . . . .
. . . . . .
Net effect of dilutive stock
options and warrants --
based on the treasury stock
method using the 83 107 82
year-end market price, if
higher than
average market price . . . . .
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Total . . . . . . . . . . . . . . . 9,668 8,648 7,629
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Net Income . . . . . . . . . . . . $8,762 $11,615 $9,166
. . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Per-share amount . . . . . . . . . $ 0.91 $ $ 1.20
. . . . . . . . . . . . . . . . . . 1.34
. . . . . . . .
Exhibit 21.1
SUBSIDIARIES OF ALAMO GROUP INC.
The following table sets forth information concerning significant
subsidiaries of the Registrant:
Jurisdiction
Name of Incorporation
Alamo Group (EUR) Limited United Kingdom
Alamo Group (USA) Inc. Delaware
Herschel-Adams Inc. Nevada
Alamo Group (IL) Inc. Illinois
Alamo Group (KS) Inc. Kansas
Alamo Group (TX) Inc. Nevada
Alamo Group (WA) Inc. Delaware
M&W Gear Company Delaware
Tiger Corporation Nevada
Adams Hard-Facing Company, Inc. Oklahoma
Alamo Group (IA) Inc. Nevada
Alamo Group (FR) S.A. France
Bomford Turner Limited United Kingdom
McConnel Limited United Kingdom
NJM Dabekausen Beheer B.V. Netherlands
Signalisation Moderne Autoroutiere S.A. France
Forges Gorce France
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No.
33-92986 pertaining to the Alamo Group Inc. 1994 Incentive Stock
Option Plan of our report dated March 7, 1997, with respect to
the consolidated financial statement of Alamo Group Inc. and
Subsidiaries included in the Form 10-K for the year ended
December 31, 1996.
ERNST AMPERSAND YOUNG LLP
San Antonio, Texas
March 27, 1997
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,228
<SECURITIES> 0
<RECEIVABLES> 43,925
<ALLOWANCES> 0
<INVENTORY> 60,171
<CURRENT-ASSETS> 109,857
<PP&E> 48,932
<DEPRECIATION> 26,546
<TOTAL-ASSETS> 153,862
<CURRENT-LIABILITIES> 19,752
<BONDS> 0
0
0
<COMMON> 959
<OTHER-SE> 96,291
<TOTAL-LIABILITY-AND-EQUITY> 153,862
<SALES> 183,595
<TOTAL-REVENUES> 183,595
<CGS> 138,460
<TOTAL-COSTS> 138,460
<OTHER-EXPENSES> 28,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,631
<INCOME-PRETAX> 13,722
<INCOME-TAX> 4,960
<INCOME-CONTINUING> 8,762
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,762
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
