Alamo Group Announces 2015 Second Quarter Results
SEGUIN, Texas, Aug. 5, 2015 /PRNewswire/ — Alamo Group Inc. (NYSE: ALG) today reported results for the second quarter ended June 30, 2015. Full Release
Highlights for the Quarter
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Record net sales for the quarter of $215.7 million
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Net income for the quarter grew 6% to $9.7 million
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Improvement in gross margins
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Weak agricultural market and strong U.S. dollar continue to impact results
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Currency translation negatively impacted net sales by $9.8 million
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Record net sales for first six months of $423.5 million
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Record backlog of $162.3 million
Net sales for the second quarter of 2015 were a record $215.7 million compared with net sales of $207.8 million for the previous year, an increase of 4%. Net income for the quarter was $9.7 million, or $0.84 per diluted share, compared to net income of $9.2 million, or $0.75 per share in 2014. This is an increase in net income of 6%; however, earnings per share were up 12% as a result of the share repurchase completed by the Company in the third quarter of 2014. The second quarter results include the net effect of the acquisition of the units of Specialized Industries which was completed in May 2014, and to a lesser extent, the effects of the acquisition of Herder in Brazil, which occurred in March 2015. The net effect of these acquisitions added$16.0 million to sales in the second quarter. Negatively impacting the quarter's sales was a $9.8 millioncurrency translation effect. A summary outlining the effects of the acquisitions and currency translation for the second quarter and first six months of 2015 is included as an attachment to this report.
Sales by Division
The Company's Agricultural Division reported net sales of $53.0 million in the second quarter of 2015, a decrease of 1% compared with net sales of $53.6 million in the previous year. This decrease reflects the continuing weakness of the overall agricultural market which is expected to remain soft for the balance of the year, though the Division's results are holding up much better than the overall agricultural market. For the first six months of 2015, net sales of the Division were $101.4 million, compared with 2014 net sales of $104.4 million, a decrease of 3%.
Ron Robinson, Alamo Group's President and CEO, commented, "While we did not have as much growth in the second quarter as we had hoped, all in all we felt it was a good quarter given the circumstances that included weak agricultural conditions, the strong U.S. dollar, the negative effect on margins from the inventory step up related to the acquisition of the Specialized units and weaker demand in non-governmental applications for our Industrial equipment. Despite all this, sales were still up due to acquisitions, and held up well excluding acquisitions and all the headwinds referenced above. More significantly, margins were up, even with the step up in inventory costs, mainly due to our ongoing focus on cost control and further aided by improved sales of spare and wear parts. As a result, we were able to take a 4% improvement in net sales and generate a 6% improvement in net earnings. The second quarter should be the last one in which margins are significantly impacted by the inventory step up as only about $0.2 million is left to be realized out of the more than $5 million originally added to the inventory valuation at the time of the acquisition of the units of Specialized in May 2014.
"Our Industrial Division continues to lead the way for Alamo, with sales benefiting from the acquisition of the units of Specialized Industries. This helped the six months results more than the quarter since these units were part of Alamo for nearly half the second quarter of 2014. There was some softness in the Division in the quarter as sales to non-governmental end users were off. This segment is a small part of the Division's overall sales, but had been growing nicely during recent years. This softness affected sales more than earnings as the Division benefited by ongoing improvements in operating efficiencies.
"Alamo's Agricultural Division also performed well during the quarter. While sales were down 1%, this significantly outperformed the overall agricultural market in general in which most companies are experiencing double-digit declines. In this sector, the Division continues to benefit from the broad applicability of its products across all types of farms and ranches.