SEGUIN, Texas — Alamo Group (ALG) reported results for the fourth quarter and year ended Dec. 31, 2018.
- Record net sales for full year of $1 billion, up 10.6%
- Record net income for full year of $73.5 million, up 65.8%
- Margin improvement helped drive income from operations to the 10% level
- Record net sales for the fourth quarter of $256 million, up 5.3%
- Industrial Division net sales of $160.0 million, up 8.7%
- Agricultural Division net sales of $55.9 million, down 1%
- European Division net sales of $40.1 million, up 1.3%
- Record net income for the fourth quarter of $16.6 million, up 412%
- Backlog remains strong at $240 million, up 10.1% vs. prior year end
2018 4Q Results
Net sales for the fourth quarter of 2018 were $256 million compared to net sales of $243.3 million in the fourth quarter of 2017, an increase of 5.3%. Net income for the fourth quarter was $16.6 million compared to $3.2 million in the prior year. Fourth quarter 2017 net income included a one-time charge of $10.2 million related to the U.S. tax reform bill which was enacted in December 2017. Excluding this charge, adjusted net income in the fourth quarter of 2017 was $13.5 million.
2018 Full Year Results
Net sales for the full year of 2018 were $1,008.8 million, up 10.6% compared to net sales of $912.4 million in the prior year. Net income for the full year was $73.5 million vs. $44.3 million. The results for 2018 include a net $3.3 million favorable adjustment to the provisional tax reform expense recorded in 2017; the results for 2017 included the one-time net charge of $10.2 million referenced above. Excluding these two adjustments, net income for the full year of 2018 was $70.2 million compared to net income of $54.6 million for the prior year period, an increase of 28.6%.
The results for 2018 also included the effects of the acquisitions of Santa Izabel and Old Dominion Brush Co., which were both completed in June 2017, and R.P.M. Tech which was completed in August 2017. Together these three acquisitions added $64.9 million in net sales and $5 million in net income in 2018 compared to $25.5 million in net sales and $1 million in net income during the partial year they were with Alamo in 2017. Net sales and net income for both the fourth quarter and full year 2018 were at record levels for Alamo Group, marking the first time the Company achieved revenue exceeding $1 billion.
Alamo Group's Industrial Division net sales in the fourth quarter of 2018 were $160 million compared to $147.2 million in the fourth quarter of 2017, an increase of 8.7%. For the full year net sales in 2018 were $598.9 million compared to $522.7 million in 2017, an increase of 14.6%. The Division's income from operations for the full year was $64.2 million in 2018 compared to $51.9 million in 2017.
The company's Agricultural Division recorded net sales of $55.9 million in the fourth quarter of 2018 compared to $56.5 million in the same period of 2017, a decrease of 1%. For full year 2018 net sales were $235.1 million vs. $227.4 million in 2017, an increase of 3.4%. Full year income from operations was $22.6 million for the Division in 2018 compared to $24.1 million in the prior year.
Alamo's European Division net sales in the fourth quarter of 2018 were $40.1 million, an increase of 1.3% compared to net sales of $39.6 million in the fourth quarter of 2017. For the full year the Division's net sales were $174.8 million compared to $162.3 million in 2017, an increase of 7.7%. Income from operations for the full year was $14.2 million in 2018 compared to $12.8 million achieved in 2017.
Ron Robinson, Alamo Group's president and CEO commented, “Alamo delivered a robust finish to 2018 which propelled the full year results to record levels and marked the first time net sales for the company surpassed the one billion dollar mark. We believe this is a significant achievement and a testament to the strength of the company's total organization which has delivered record results for eight out of the last nine years.
“Our results reflect both the benefit we received from the U.S. corporate tax reform measures that took effect in 2018 and the full year contribution from acquisitions completed in 2017. The company's accomplishments for the year were realized against a backdrop of significant challenges including above average increases in many input costs such as energy, freight, steel and other components as well as higher tariffs that contributed to cost inflation. In addition, long lead times for many purchased commodities led to production challenges and higher inventory levels. However, despite these issues, our income from operations surpassed the 10% mark which has been one of our operational targets.
“Our Agricultural Division, which was affected by all the challenges referenced previously, also had to contend with weaker market conditions as a result of declining farm incomes. Yet, sales for the year were up modestly and margins held steady despite the market challenges. Our Bush Hog, Rhino and Schulte operations all produced solid results for the year though we are concerned the market conditions are likely to continue to constrain results as we move into 2019.
“While we did not complete any acquisitions in 2018, this remains a core part of our strategy moving ahead. In the past year, high valuations constrained our M&A activity though we remain very active in pursuing opportunities as evidenced by the recently announced pending acquisition of Dutch Power in the Netherlands.
“As we enter our 50th year, we continue to feel Alamo Group will benefit from our broad product portfolio and the diversity of the markets we serve.”
Alamo Group and Subsidiaries
Condensed Consolidated Balance Sheets (in thousands) (Unaudited)
|Current Assets||December 31, 2018||December 31, 2017|
|Cash and cash equivalents||$34,043||$25,373|
|Accounts receivable, net||$228,098||$205,767|
|Other current assets||$14,072||$5,819|
|Total current assets||$452,843||$392,527|
|Rental equipment, net||$43,978||$28,493|
|Property, plant and equipment||$87,230||$76,664|
|Other non-current assets||$5,482||$4,354|
Liabilities and Stockholders Equity
|Current Liabilities||December 31, 2018||December 31, 2017|
|Trade accounts payable||$54,083||$55,825|
|Income taxes payable||$2,865||$5,002|
Current maturities of long-term debt
|Total current liabilities||$100,852||$101,363|
net of current maturities
|Long-term tax payable||$6,120||$12,316|
|Deferred pension liability||$1,944||$1,225|
|Other long-term liabilities||$8,436||$7,291|
|Deferred income taxes||$11,731||$8,368|
|Total stockholders' equity||$507,371||$449,108|
|Total liabilities and stockholders' equity||$721,633||$639,671|
Alamo Group and Subsidiaries
Condensed Consolidated Statements of Income (in thousands)
Fourth Quarter Ended 12/31/2018
|Fourth Quarter, Ended 12/31/2017||Year Ended 12/31/2018||Year Ended 12/31/201|
|Total Net Sales||256,038||243,260||1,088,822||912,380|
|Cost of Sales||193,406||182,349||752,707||677,687|
|Income from Operations||24,692||20,869||101,088||88,738|
|Income before taxes||22,550||20,766||94,531||82,367|
|Provision for income taxes||5,961||17,526||21,045||38,052|
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