Alamo Group Inc. Announces 2002 Third Quarter Results
SEGUIN, Texas--Nov. 6, 2002--Alamo Group Inc. today reported results for the third quarter ended September 30, 2002.Net sales for the third quarter increased 2% to $65.2 million from $63.9 million for the same period last year. Net income for the quarter decreased 56% to $1.7 million, or $0.17 per diluted share, from $3.8 million, or $0.39 per diluted share, in the prior year period.
For the first nine months of 2002, net sales were $199.5 million compared with $187.5 million for the nine-month period last year, an increase of 6%. Net income for the nine-month period of 2002 was $6.9 million, or $.70 per diluted share, down from $10.1 million, or $1.04 per diluted share, for the same period last year. Included in 2001 results were net gains of $0.08 per diluted share relating to the sale of the Company's LaGrange, Illinois facility and Seguin, Texas trucking operations, partially offset by closure expenses at its Guymon, Oklahoma operation. The 2002 results include an increase of $0.09 per diluted share, compared to the previous year, relating to the adoption of the Statement of Financial Accounting Standards No. 142 under which the Company will no longer amortize goodwill. Excluding these items in both periods, net income per diluted share would have been $0.61 in 2002 compared to $0.96 in 2001.
Sales for Alamo's North American Agricultural business increased 17.2% in the quarter compared to last year, due to increased sales of Rhino branded products and the acquisitions of the assets of SMC Corporation in August 2001 and Valu-Bilt Tractor Parts in 2002. These acquisitions offset the effects of the continued softness in the agriculture industry and in particular the Company's hay making products, tillage products and spare parts, all of which were down for the quarter compared to last year. North American Industrial sales for the quarter declined 12.8% from last year reflecting severe weakness in sales to governmental entities and contractors who service governmental markets.
European sales improved 8.5% from the prior-year period. Sales in the quarter were boosted by increased activity in the Company's markets compared to the prior year quarter, which was negatively impacted by the foot and mouth epidemic in the U.K. The overall European market remains soft, but has improved in 2002 compared to 2001.
Ron Robinson, President and Chief Executive Officer of Alamo Group, commented, "We are disappointed with our third quarter results. In particular our North American Industrial Division was hurt by the reduced sales to governmental buyers and related contractors as nearly every state in the U.S. is being affected by budget cutbacks and revenue shortfalls. We knew the market was off, but did not foresee the 30% reduction in sales of mowers we have experienced in the last two quarters.
It appears the Industrial market will stay soft for the balance of 2002 and it is too early to tell if 2003 will show any improvement. This segment of our business has been very stable over the years and the degree of decline experienced in 2002 has not been experienced since Alamo Group was founded in 1969. While we cannot predict when this market will improve we are confident it will return to a more stable pattern in the future.
Our North American Agricultural business, excluding acquisitions, was soft reflecting continued weak conditions in this segment of our business. Of particular concern in the third quarter was the reduced level of spare parts sales, traditionally one of our more profitable business segments, due to a combination of market and weather conditions. On the positive side, we are starting to see some signs of a pickup in this sector for 2003. The Farm Bill that was enacted by Congress earlier this year is starting to have an effect; some crop prices such as corn are improving; and, dealer inventories have been reduced. We are seeing the results of this in our pre-season selling programs going on now, which are running ahead of last year.
Our European business was our bright spot as their sales and profitability have been consistently running ahead of last year. Not only has the effect of the foot and mouth epidemic which hurt our U.K. business last year abated; there has also been general improvement in the major markets we serve in Europe. We believe this trend will continue into 2003 and should be enhanced by expansion of our product line into front-end loaders as a result of our recent acquisition of Faucheux in France."
Mr. Robinson continued, "In response to the conditions we are facing we continue to streamline our business, reduce our costs, and improve our business systems to make us more competitive. While market conditions may continue to be difficult in the short-term, we are confident we are taking the right steps to effectively manage our business. During the third quarter, we completed the consolidation of our Valu-Bilt operations, which we acquired in April of this year, into our Hershel facilities in Indianola, Iowa. We also continued to invest in our ERP conversion to give us better, faster information to operate our business, and, we are continuing to implement lean initiatives in our manufacturing plants to lower costs and reduce inventory. However, we are concerned by some of the trends we are experiencing such as large increases in insurance costs combined with reductions in coverage and increased deductibles. These have eroded some of the progress we have made in recent years. As a result of these trends and the declines in our Industrial business, 2002 results will be below the levels achieved in 2001."
Mr. Robinson concluded, "In general we feel Alamo Group is on the right path, but the overall economic conditions and political turmoil in the world today has resulted in an increased level of uncertainty in the markets we serve, but we are committed to improving our results despite the market conditions."
Alamo Group is a leader in the design, manufacture, distribution and service of high quality equipment for right-of-way maintenance and agriculture. Our products include tractor and truck mounted mowing and other vegetation maintenance equipment, street sweepers, agricultural implements front-end loaders, backhoe and related after market parts and services. The Company, founded in 1969, has over 1,600 employees and operates thirteen plants in North America and Europe as of September 2002. The corporate offices of Alamo Group Inc. are located in Seguin, Texas and the headquarters for the Company's European operations are located in Salford Priors, England.
This release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: market demand, competition, weather, seasonality, currency-related issues, and other risk factors listed from time to time in the Company's SEC reports. The Company does not undertake any obligation to update the information contained herein, which speaks only as of this date.
ALAMO GROUP REPORTS 2002 THIRD QUARTER RESULTS
Alamo Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Third Quarter Ended Nine Months Ended
09/30/02 09/30/01 09/30/02 09/30/01
---------- ---------- ----------- -----------
American
Agricultural $27,883 $23,793 $86,362 $71,457
Industrial 25,272 28,985 79,107 85,090
European 12,058 11,114 34,041 30,941
---------- ----------- ----------- -----------
Total Sales 65,213 63,892 199,510 187,488
Cost of sales 51,083 47,115 155,604 140,115
---------- ----------- ----------- -----------
Gross margin 14,130 16,777 43,906 47,373
21.7% 26.3% 22.0% 25.3%
Operating
Expenses 11,116 10,355 31,883 29,890
---------- ----------- ----------- -----------
Income from
Operations 3,014 6,422 12,023 17,483
4.6% 10.1% 6.0% 9.3%
Interest Expense (557) (834) (1,990) (2,646)
Interest Income 134 151 387 457
Other Income
(Expense) (6) (48) 58 (63)
---------- ----------- ----------- -----------
Income before
income taxes 2,585 5,691 10,478 15,231
Provision for
income taxes 915 1,907 3,574 5,078
---------- ----------- ----------- -----------
Net Income $1,670 $3,784 $6,904 $10,153
========== =========== =========== ===========
Net income per
common share:
Basic $0.17 $0.39 $0.71 $1.05
========== =========== =========== ===========
Diluted $0.17 $0.39 $0.70 $1.04
========== =========== =========== ===========
Average common
shares:
Basic 9,713 9,705 9,712 9,704
========== =========== =========== ===========
Diluted 9,787 9,790 9,797 9,790
========== =========== =========== ===========
Summary Balance Sheet Data
09/30/02 12/31/01 09/30/01
--------------- -------------- ----------------
Receivables 55,454 57,768 59,270
Inventories 64,983 64,044 67,794
Current Liabilities 28,818 25,360 28,096
Long Term Debt 23,856 36,315 46,228
Equity 130,056 121,813 122,280