Alamo Group Inc. today reported results for the fourth quarter and year ended Dec. 31, 2020.
- Fourth quarter net sales of $288.6 million, down 3.8%
- Industrial Division net sales of $202.7 million, down 8.9%
- Agricultural Division net sales of $85.9 million, up 10.5%
- Net income for the fourth quarter of $8.1 million, down 15.5%
- Adjusted net income for the fourth quarter of $13 million
- Record net sales for the full year of $1.16 billion, up 4%
- Net income for the full year of $56.6 million, down 10%
- Adjusted net income for the full year, of $70.3 million
- EBITDA for the full year 2020 of $137.6 million, up 10.2%
- Reduced total debt outstanding by $158.6 million for the full year
- Record Backlog at $354.1 million, up 35.6% compared to year end 2019
Results for the Quarter
Net sales for the fourth quarter 2020 were $288.6 million compared to net sales of $300.2 million in the fourth quarter of 2019, a decrease of 3.8%. Net income for the fourth quarter was $8.1 million, or $0.68 per diluted share, compared to net income of $9.6 million, or $0.81 per diluted share, in the fourth quarter of 2019. While all Alamo Group manufacturing facilities are open, and functioning at various levels of operation based on demand, the Company’s 2020 fourth quarter results were adversely impacted by COVID-19 challenges that led to delayed shipments as a result of operational and supply chain disruptions.
The results for the fourth quarter of 2020 included the effects of the acquisitions of Dutch Power, which was completed in March of 2019, and Morbark, which was completed in October of 2019. These acquisitions contributed $55.2 million to net sales and a loss of $0.7 million to operating income in the fourth quarter of 2020 compared to $43.8 million in net sales and a loss of $2.8 million to operating income in the fourth quarter of 2019. The above results include negative effects of non-cash inventory step up charges and acquisition amortization expenses at Morbark totaling $1.3 million and $2.8 million respectively, in the fourth quarter of 2020 compared to $3.3 million and $1.7 million, respectively, in the fourth quarter of 2019. During the fourth quarter of 2020, the Company also recorded $2.7 million in restructuring charges at its Dutch Power operations, mostly related to redundancy costs, as part of Alamo Group's proposed consolidation of one of its plants in The Netherlands.
Results for the Full Year
Net sales for the full year of 2020 were $1.16 billion, a record for Alamo Group and up 4% compared to $1.12 billion in 2019. Net income for the full year was $56.6 million or $4.78 per diluted share, compared to $62.9 million, or $5.33 per diluted share in 2019, a decrease of 10% in net income.
The results for the full year included the effects of the acquisitions of Dutch Power, completed in March of 2019, and Morbark, completed in October 2019. Together these acquisitions contributed $230 million to net sales and $10 million to operating income in 2020 compared to $71.5 million to net sales and a loss of $1.7 million to operating income in 2019. Alamo's results for the full year include the negative effects of non-cash inventory step up charges and acquisition amortization expense at Morbark totaling $4.8 million and $11.3 million respectively in 2020 compared to $3.3 million and $2.2 million, respectively in 2019. In addition, 2020 results include a $2.7 million redundancy charge at the Company's Dutch Power unit in the Netherlands referenced previously.
Alamo Group's results for the fourth quarter and full year were adversely affected by the ongoing COVID-19 pandemic which began to materially impact the Company beginning in March of 2020. In addition to the Company experiencing temporary plant closures at multiple locations in late March and throughout most of April, the pandemic has caused disruptions to operations, supply chain, and to customers, as well as negatively impacting the overall global economy. The Company's operations are open and functioning in a near normal fashion and Alamo is able to meet most market demand in a timely manner. However, the repercussions of COVID-19 remain an unresolved challenge which will affect business and the global economy throughout 2021 and longer
Results by Division
The Company's Agricultural Division net sales in the fourth quarter of 2020 were $85.9 million compared to $77.7 million in the prior year, an increase of 10.5%. The Division's income from operations for the quarter was $7.3 million compared to $6.0 million in 2019, an increase of 20.7%. For the full year, net sales in the Division were $352.3 million 2020 versus $350.7 million in 2019, an increase of 0.5%. The Division's income from operations was $33.3 million for the full year 2020 compared to $29.4 million in 2019, an increase of 13.3%.
The Agricultural Division continues to benefit from somewhat improved overall market conditions that started in the second half of 2020 and has resulted in the Division finishing the year with a record level of backlog that bodes well for the 2021 outlook. However, as with the Industrial Division, the Agricultural Division is also experiencing some operational issues related to the pandemic as well as longer lead times and cost inflation in purchased components.
Comments on Results
Ron Robinson, Alamo Group’s president and CEO commented on 2020 results as follows, "We have been pleased to see that although our markets remained relatively soft, bookings have been steadily picking up to where we ended the year with record backlog. This bodes well for Alamo Group in 2021, despite ongoing issues related to the still unresolved COVID-19 situation.
"While operations have stabilized to a certain degree, new challenges continue to emerge. Lead times for input components are growing and we are seeing more inflationary pressures than we have seen for several years. The labor market is also tightening, particularly among certain skill sets such as engineers, mechanics and skilled shop floor workers. Transportation costs are rising and U.S. and international ports of entry are experiencing delays.
"Alamo Group's Agricultural Division has certainly led the way for our Company and actually exhibited some growth in 2020 as it benefited from stable demand for agricultural commodities that was further aided by an increased level of subsidies provided to farmers during the year. We were also helped by lower levels of dealer inventories going into the year due to weakness in the agricultural economy over the last several years. We think similar conditions will continue to help our agricultural business in 2021, further aided by improving commodity prices. Evidence of this outlook is reflected in our strong Agricultural Division backlog, which is at record levels. While we are pleased with this backlog level, we will need to maintain a strong focus on our operational execution to ensure timely deliveries, particularly given some of the supply chain challenges we are experiencing."
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