UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-21220
ALAMO GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE
74-1621248
(State of incorporation)
(I.R.S. Employer Identification Number)
1502 E. Walnut, Seguin, Texas 78155
(Address of principal executive offices)
(210) 379-1480
(Telephone number)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirement
for the past 90 days.
Yes X No ___
At May 13, 1996, 1995, 9,577,813 shares of common stock, $.10 par
value, of the Registrant were outstanding.
Alamo Group Inc. and Subsidiaries
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Interim Condensed Consolidated Financial Statements
(Unaudited)
Consolidated Statements of Income -
Three months ended March 30, 1996 and April 1, 1995 3
Consolidated Balance Sheets -
March 30, 1996 and December 30, 1995 4
Consolidated Statements of Cash Flows -
Three months ended March 30, 1996 and April 1, 1995 5
Notes to Interim Condensed Consolidated Financial Statements
6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES
11
2
Alamo Group Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three
Months
Ended
March 30. April 1,
1996 1995
Sales, net . . . . . . . . . . . . . . . . . $45,046 $34,448
. . . . . . . . . . . . . . . . . . . . . .
. . . . . .
Cost of sales . . . . . . . . . . . . . . . 34,829 26,156
. . . . . . . . . . . . . . . . . . . . . .
. . .
Gross margin . . . . . . . . . . . . . . . . 10,217 8,292
. . . . . . . . . . . . . . . . . . . . . .
. .
Operating expenses:
General and administrative . . . . . . . 2,139 1,670
. . . . . . . . . . . . . . . . . .
Marketing . . . . . . . . . . . . . . . 3,135 2,230
. . . . . . . . . . . . . . . . . . . . . .
. . .
Engineering . . . . . . . . . . . . . . 864 669
. . . . . . . . . . . . . . . . . . . . . .
. . .
Operating expenses before amortization . . . 6,138 4,569
. . . . . . . . . . . . .
Intangible amortization expense. . . . . . . 224 170
. . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . 3,855 3,553
. . . . . . . . . . . . . . . . .
Other income (expense):
Net interest . . . . . . . . . . . . . . (515) (505)
. . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . 293 337
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
Income before income taxes . . . . . . . . . 3,633 3,385
. . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . 1,307 1,277
. . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . $2,326 $2,108
. . . . . . . . . . . . . . . . . . . . . .
. . .
Net income per common share . . . . . . . . $0.24 $0.28
. . . . . . . . . . . . . .
Weighted average common shares and 9,660 7,653
equivalents . . . . . . . . .
See accompanying notes.
3
Alamo Group Inc. and
Subsidiaries
Consolidated Balance Sheets
(in thousands, except share
amounts)
(Unaudited)
March 30, December
30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents. . . $ 845 $ 1,839
. . . . . . . . . . . . . . . . . . .
. . . .
Marketable securities. . . . . 682 769
. . . . . . . . . . . . . . . . . . .
. . . . . . . .
Accounts receivable. . . . . . 50,378 45,509
. . . . . . . . . . . . . . . . . . .
. . . . . . . .
Inventories. . . . . . . . . . 63,132 58,624
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Deferred income taxes. . . . . 1,707 1,782
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Prepaid expenses. . . . . . . . 1,077 844
. . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Total current assets 117,821 109,367
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Property, plant and equipment. . . . 46,231 46,158
. . . . . . . . . . . . . . . . . . .
. . . .
Less: Accumulated depreciation (23,077) (22,620)
. . . . . . . . . . . . . . . . . . .
. . . . .
23,154 23,538
Receivables from officers and 700 700
employees. . . . . . . . . . . . . .
. . . . .
Goodwill . . . . . . . . . . . . . . 12,867 13,150
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . 4,803 4,816
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Total assets . . . . $ 159,345 $ 151,571
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
LIABILITIES AND STOCKHOLDERS '
EQUITY
Current liabilities:
Trade accounts payable. . . . . $ 15,580 $ 13,143
. . . . . . . . . . . . . . . . . . .
. . . . . . . .
Income taxes payable. . . . . . 2,814 1,570
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Accrued liabilities. . . . . . 6,346 6,045
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Current portion of capital 344 344
lease obligations. . . . . . . . . .
. . . .
Current maturities of long-term 1,178 946
debt. . . . . . . . . . . . . . . . .
. . . .
Total current 26,262 22,048
liabilities. . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Capital lease obligations, net of 7,072 7,243
current portion . . . . . . . . . . .
. . . . .
Long-term debt. . . . . . . . . . . . 439 1,466
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Bank revolving credit facility. . . . 32,450 28,600
. . . . . . . . . . . . . . . . . . .
. . . . .
Deferred income taxes and minority 1,470 1,509
interest . . . . . . . . . . . . . .
. . . .
Total liabilities. . 67,693 60,866
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Stockholders' equity:
Common stock, $.10 par value,
20,000,000 shares
authorized; 9,577,813 and
9,576,913 issued and
outstanding at March 30,
1996 and December 30, 1995,
respectively . . . . . . . . 958 958
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Additional paid-in- capital . . 49,305 49,278
. . . . . . . . . . . . . . . . . . .
. . . . . . . .
Unrealized holding gain on 347 379
securities. . . . . . . . . . . . . .
. . . . . . .
Retained earnings. . . . . . . 41,511 40,142
. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Translation adjustment . . . . (469) (52)
. . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Total stockholders' 91,652 90,705
equity . . . . . . . . . . . . . . .
. . . . . . . . . .
Total liabilities and $ 159,345 $ 151,571
stockholders' equity . . . . . . . .
. . . . .
See accompanying notes.
4
Alamo Group Inc. and Subsidiaries
Consolidated Statements of Cash
Flows
(in thousands)
(Unaudited)
Thr
ee
Mon
ths
End
ed
March 30, April 1,
1996 1995
Operating Activities
Net income . . . . . . . . . . . . . . $ 2,326 $ 2,108
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Adjustments to reconcile net income to
net cash
provided (used) by operating
activities:
Allowances for doubtful 106 16
accounts . . . . . . . . . . . . . . .
. . . . . . .
Depreciation and amortization . 1,104 878
. . . . . . . . . . . . . . . . . . . .
. . . .
Provision for deferred income 20 140
tax benefit . . . . . . . . . . . . . .
. . . . .
Realized gain on marketable (167) (337)
securities . . . . . . . . . . . . . .
. . . . .
Gain/(loss) on sale of (67) 3
equipment . . . . . . . . . . . . . . .
. . . . . . . . . . .
Changes in operating assets and
liabilities,
net of effect of
acquisitions:
Accounts receivable . . . . (5,175) (6,736)
. . . . . . . . . . . . . . . . . . . .
. . . . . . . .
Inventories . . . . . . . . (4,716) (1,338)
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Prepaid expenses and other (216) 39
assets . . . . . . . . . . . . . . . .
. . . . .
Trade accounts payable and 2,900 1,680
accrued liabilities . . . . . . . . . .
.
Income taxes payable . . . 1,270 867
. . . . . . . . . . . . . . . . . . . .
. . . . . . .
Net cash provided (used) by operating (2,615) (2,680)
activities . . . . . . . . . . . . . .
.
Investing Activities
Purchase of property, plant and (786) (518)
equipment . . . . . . . . . . . . . . .
. . .
Proceeds from sale of property, plant 99 29
and equipment . . . . . . . . . . .
Proceeds from sale of marketable 204 361
securities . . . . . . . . . . . . . .
. . . . .
Net cash provided (used) by investing (483) (128)
activities . . . . . . . . . . . . . .
. . . .
Financing Activities
Net change in bank revolving credit 3,850 4,100
facility . . . . . . . . . . . . . . .
. . . .
Dividends paid . . . . . . . . . . . . (958) (756)
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Proceeds from sale of common stock . . 14
. . . . . . . . . . . . . . . . . . . . -
. .
Principal payments on long-term debt (791) (690)
and capital leases . . . . . . .
Cash received from stockholder for
purchase of common stock . . . . 13
. . . . . . . . . . . . . . . . . . . . -
. . . . . . . .
Net cash provided (used) by financing 2,128 2,654
activities . . . . . . . . . . . . . .
.
Effect of exchange rate changes on cash (24) 82
. . . . . . . . . . . . . . . . . . . .
. .
Net change in cash and cash equivalents (994) (72)
. . . . . . . . . . . . . . . . . . . .
.
Cash and cash equivalents at beginning 1,839 1,873
of the year . . . . . . . . . . . . .
Cash and cash equivalents at end of the $ 845 $ 1,801
period . . . . . . . . . . . . . . . .
.
Cash paid during the period for:
Interest . . . . . . . . . . . $ 681 $ 541
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Income taxes . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . - -
. . . . . . . . .
See accompanying notes.
5
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements -
(Unaudited)
March 30, 1996 and April 1, 1995
1. Basis of Financial Statement Preparation
The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10
of Regulations S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the periods presented
are not necessarily indicative of the results that may be
expected for the year ended December, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and
Subsidiaries' annual report on Form 10-K for the year ended
December 30, 1995.
2. Acquisitions and Investments
In 1995 the Company acquired the following entities, accounted
for as purchase acquisitions: April 27, 1995, M&W Gear Co.
("M&W"); May 12, 1995, Rhino International, Inc. ("Rhino
International"); June 29, 1995, N J M Dabekausen Beheer, BV and
its subsidiaries ("Dakebausen"); December 6, 1995, Herschel
Corporation ("Herschel").
On May 24, 1995, the Company invested $1,980,000 to purchase a
49.5% equity interest in Certified Power Inc. ("CPI"), in a highly
leveraged transaction, accounted for under equity accounting
rules.
3. Accounts Receivable
Accounts Receivable is shown less allowance for doubtful accounts
of $1,399,000 and $1,357,000 at March 30, 1996 and December 30,
1995, respectively.
4. Inventories
Inventories valued at LIFO cost represented 82% and 67% of total
inventory for the periods ended March 30, 1996 and December 30,
1995, respectively. The excess of current costs over LIFO valued
inventories was $2,538,000 at March 30, 1996 and $2,618,000 at
December 30, 1995. Inventory obsolescence reserves were
$4,217,000 at March 30, 1996 and $4,157,000 at December 30, 1995.
Net inventories consist of the following (in thousands):
March December
30, 30,
1996 1995
Finished goods . . . . . . . $ 53,034 $ 51,613
. . . . . . . . . . . . . .
. . .
Work in process . . . . . . 5,821 3,234
. . . . . . . . . . . . . .
. . .
Raw materials. . . . . . . . 4,277 3,777
. . . . . . . . . . . . . .
. . .
$ 63,132 $ 58,624
An actual valuation of inventory under the LIFO method can be
made only at the end of each year based on the inventory levels
and costs at that time. Accordingly, interim LIFO must
necessarily be based on management's estimates of expected year-
end inventory levels and costs. Because these are subject to
many forces beyond management's control, interim results are
subject to the final year-end LIFO inventory valuation.
6
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements -
(Unaudited)
March 30, 1996 and April 1, 1995 - (Continued)
5. Common Stock and Dividends
The Company completed a public offering of common stock on June
29, 1995 for 2,000,000 shares.
Dividends declared and paid on a per share basis were as follows:
March April 1,
30,
1996 1995
Dividends declared . . . . . $ 0.10 $ 0.10
. . . . . . . . . . . . . .
. . .
Dividends paid . . . . . . . $ 0.10 $ 0.10
. . . . . . . . . . . . . .
. . . .
6. Contingent Matters
The Company is subject to various unresolved legal actions which
arise in the normal course of its business, the most prevalent of
which relate to product liability and retail credit matters.
Although it is not possible to predict with certainty the outcome
of these unresolved legal actions or the range of possible loss,
the Company believes these unresolved legal actions will not have
a material affect on its financial position or results of
operations.
7
Alamo Group Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following tables set forth, for the periods indicated,
certain financial data:
Sales Data In Thousands March April
30, 1,
1996 1995
American
Agricultural . . . $ $
. . . . . . . . . . . . . . 22,617 12,735
. . . . . .
Governmental . . . 11,221 12,099
. . . . . . . . . . . . . .
. . . .
European . . . . . . . 11,208 9,614
. . . . . . . . . . . . . .
. . . . . .
Total sales, net . . . . . $ $
. . . . . . . . . . . . . . 45,046 34,448
. . . . .
Cost Trends and Profit March April
Margins, as Percentages of 30, 1,
Net Sales 1996 1995
Gross margin . . . . . . . 22.7 % 24.1 %
. . . . . . . . . . . . . .
. . . . .
Income from operations . . 8.6 % 10.3 %
. . . . . . . . . . . . . .
.
Income before income taxes 8.1 % 9.8 %
. . . . . . . . . . . . . .
Net income . . . . . . . . 5.2 % 6.1 %
. . . . . . . . . . . . . .
. . . . .
Results of Operations
The $10,598,000 first quarter, 31%, consolidated increase in net
sales and the increase in American agricultural sales are due
substantially to the acquisitions shown in footnotes to financial
statements. Additionally, sales volumes in American operations,
particularly in replacement parts, were reduced due to harsh
weather conditions. European operations achieved strong growth
in sales. Increases in the amounts of costs, expenses and
profitability are also, generally, related to the acquisitions.
Gross margins, down from 24.1% to 22.7 %, and net income margins,
down from 6.1% to 5.2%, were reduced due to lower volumes
described above, particularly parts volumes, and to lower than
expected performance of two of the acquired companies, M&W and
Rhino International. These declines were partially offset by
strong European margins and margins of the recently acquired
Herschel. Net income margin was benefited by the income tax rate
declining from 37.7% to 36.0%, which related to the calculation
of state income taxes. The 26% increase in average common shares
and equivalents related to the 2,000,000 share June 29, 1995
stock offering.
Liquidity and Capital Resources
Cash used by operations was $3,273,000 for the three-month period
ended March 30, 1996, with the net income cash flows for the
period offset by a net increase in working capital accounts
related primarily to seasonal effect.
As of March 30, 1996, $33,324,000 was utilized under the
Company's $35,000,000 Amended and Restated Revolving Credit and
Term Loan Agreement (the "Facility") of which $874,000 was for
standby letters of credit and $32,450,000 was borrowed under the
revolving credit line. The Company's borrowings are seasonal in
nature with the greatest utilization of the Facility occurring in
the spring. On April 10, 1996, the Facility was increased to
$40,000,000.
The Facility and the Company's ability to internally generate
funds from operations should be sufficient to meet the Company's
cash requirements in the near future.
8
Alamo Group Inc. and Subsidiaries
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
The Company is subject to various unresolved legal
actions which arise in the ordinary course of its
business. The most prevalent of such actions relate to
product liability. While amounts claimed may be
substantial and the ultimate liability with respect to
such litigation cannot be determined at this time, the
Company believes that the ultimate outcome of these
matters will not have a material adverse effect on the
Company's consolidated financial position.
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are included herein:
(11) Statement Re: Computation of Per Share
Earnings
(b) Reports on Form 8-K
None
9
Alamo Group Inc. and Subsidiaries
Exhibit (11) - Statement Re: Computation of
Per Share Earnings
Three Months
Ended
March April
30, 1,
1996 1995
(000's
omitted,
except per
share data)
Primary
Average shares outstanding . . . . 9,577 7,556
. . . . . . . . . . . . . . . . . .
. .
Net effect of dilutive stock
options -- based
on the treasury stock method
using
average market price . . . . . 83 97
. . . . . . . . . . . . . . . . . .
. . . .
Total . . . . . . . . . . . . . . . 9,660 7,653
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Net Income . . . . . . . . . . . . $ $
. . . . . . . . . . . . . . . . . . 2,326 2,108
. . . . . .
Per share amount . . . . . . . . . $ $
. . . . . . . . . . . . . . . . . . .24 .28
. . . .
Fully Diluted
Average shares outstanding . . . . 7,556
. . . . . . . . . . . . . . . . . .
. .
Net effect of dilutive stock
options -- based
on the treasury stock method
using the
period end market price, if
higher than
average market price . . . . . (1) 100
. . . . . . . . . . . . . . . . . .
. . . .
Total . . . . . . . . . . . . . . . 7,656
. . . . . . . . . . . . . . . . . .
. . . . . . . .
Net Income . . . . . . . . . . . . $2,108
. . . . . . . . . . . . . . . . . .
. . . . . .
Per share amount . . . . . . . . . $
. . . . . . . . . . . . . . . . . . .28
. . . .
(1) Not applicable as price at March 30, 1996 was
lower than the average for the three months
10
Alamo Group Inc. and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Alamo
Group Inc.
(Registrant)
/s/ Jim A. Smith
Jim A. Smith
Executive Vice President and
CFO
(Principal Accounting and
Financial Officer)
11
