Alamo Group Inc. (NYSE: ALG) today reported results for the third quarter ended September 30, 2014.
Highlights for the Quarter
- Record net income of $13.4 million
- Record net earnings per diluted share of $1.10
Record net sales of $233.2 million
- North American Industrial Division up 75% with addition of Specialized units
- European Division up 19%
- North American Agricultural Division down 6%
Net sales for the third quarter of 2014 were $233.2 million compared to net sales of $174.7 million for the third quarter of 2013, an increase of 33%. Net income for the quarter rose 18% to $13.4 million, or $1.10 per diluted share, versus net income of $11.3 million, or $0.93 per diluted share, for the same period of 2013. Both net sales and net income for the quarter were records for Alamo Group. The results for the quarter included the effects of recent acquisitions, primarily the units of Specialized, which Alamo completed in May of this year and to a lesser extent Kellands, a UK company acquired in April, 2014 and two Australian companies, Superior and Fieldquip, acquired in September, 2013 and April, 2014, respectively. A summary outlining the effects these acquisitions had on the Company's results is included as Attachments 1 and 2 to this earnings release. Excluding these acquisitions, net sales for the quarter were $187.4 million, an increase of 7% (1).
Near the end of the quarter Alamo Group completed a repurchase and retirement of 849,690 shares of its common stock from Capital Southwest Venture Corporation for approximately $34.2 million in cash which was financed under the Company's Amended and Restated Revolving Credit Agreement.
Nine Month Results
For the first nine months of 2014, net sales were $610.8 million, a 19% increase compared to net sales of $511.2 million for the same period in 2013. Net income for the first nine months was $29.8 million versus $30.1 million in 2013, a decrease of 0.9%, primarily due to weakness in the Company's second quarter results.
Results by Division
Net sales for the Company's North American Industrial Division in the third quarter of 2014 were $126.0 million compared to $71.9 million in the prior year's third quarter, an increase of 75%. For the nine month period ending September 30, 2014, net sales for the Division were $308.3 million compared to $218.9 million in 2013, an increase of 41%. The Division's results include the effect of the acquisition of the Specialized units. Excluding this acquisition, net sales for the Division were up 17% in the third quarter of 2014 and 13% for the nine month period (1).
The Company's North American Agricultural Division reported net sales of $57.7 million in the third quarter of 2014, versus $61.2 million in the previous year, a decrease of 6%. This reflects the continued weak conditions in the overall U.S. agricultural market. For the first nine months of 2014, net sales in this Division were $160.1 million versus $168.0 million in 2013, a decrease of 5%. The acquisitions of Superior and Fieldquip are included in this Division's results. Excluding these acquisitions, net sales in the Division were down 7% in the third quarter and 7% for the nine month period (1).
Alamo Group's European Division net sales for the third quarter of 2014 were $49.6 million, an increase of 19% compared to net sales of $41.7 million in the previous year. For the first nine months of 2014 net sales in the Division were $142.3 million versus $124.3 million in 2013, an increase of 14%. The Division's results include the effect of the acquisition of Kellands. Excluding this acquisition, net sales in the Division were up 13% in the third quarter and 10% for the nine month period (1). These results reflect continued improvement in demand for the Company's products in Europe despite weak overall market conditions and were further aided by changes in exchange rates.
Alamo Group's President and Chief Executive Officer, Ron Robinson, commented, "We were pleased to see our third quarter rebound from the weak second quarter results. We feel this quarter's results more fully exhibit the positive contribution the units of Specialized should have on Alamo's results going forward. In the second quarter this potential was obscured by transactional costs and being part of Alamo for less than half of the quarter, but in the third quarter this potential was more fully revealed.
"However, our third quarter results were about more than just Specialized. Excluding acquisitions our Industrial Division showed strong progress with sales continuing to benefit from solid demand for our infrastructure maintenance products. We believe these same factors helped drive the growth experienced by our European Division as well. Our organic growth in Europe was particularly satisfying given the ongoing weak economic environment that still pervades that market in general. And while our North American Agricultural Division sales were down, the Division showed more strength than many other companies in this sector. We were much more proactive in managing this Division's costs to ensure they did not impact Alamo's overall results as negatively as they did in the second quarter.
"As a result we were able to deliver sales and earnings results at record levels for the third quarter making it the strongest quarter ever for Alamo Group. We feel this is a particularly noteworthy accomplishment given weak market conditions in both agriculture and Europe. Even our Industrial unit results were negatively affected by a $1.1 million non-cash pre-tax charge relating to the sale of acquired Specialized inventory which was subject to a step up to fair value in the initial purchase price allocation. This was recognized as additional cost of goods sold during the quarter. These step ups will affect our earnings, but not our cash flow, for the next few quarters. To be able to produce the results achieved despite the headwinds indicated above, we believe shows the true strength of Alamo Group, a strength that gives us confidence in our future."