ALAMO GROUP ANNOUNCES RECORD 2023 SECOND QUARTER SALES AND EARNINGS
SEGUIN, Texas, Aug. 2, 2023 /PRNewswire/ -- Alamo Group Inc. (NYSE: ALG) today reported results for the second quarter ended June 30, 2023.
Highlights for the Quarter
Net sales of $440.7 million, up 11.2%
Income from operations of $54.4 million, up 32.9%
Net income of $36.4 million, or $3.03 per diluted share, up 26.8%
Trailing twelve-month EBITDA of $230.4 million, up 17.6% from full year 2022(1)
Backlog of $891.2 million, slightly down compared to prior year second quarter-end
Results for the Quarter
Record second quarter 2023 net sales of $440.7 million increased 11.2% compared to $396.2 million in the second quarter of 2022. Gross margin improved in the quarter versus the second quarter of 2022 by $18.4 million or 18.4%. Second quarter net income improved 27.8% to $36.4 million, or $3.03 per diluted share, compared to net income of $28.5 million, or $2.39 per diluted share in the second quarter of 2022. The Company's backlog at the end of the second quarter was $891.2 million, slightly down versus the backlog at the end of the second quarter of 2022, and was also down 11.5% compared to the Company's backlog at the end of calendar year 2022.
The record results reported for the quarter were achieved through a combination of effective price management, improvement in supply chain and higher manufacturing throughput. These positive results were achieved despite persistent supply chain challenges, tight labor markets, and to a lesser extent, negative currency impacts.
Results by Division
Vegetation Management
The Vegetation Management Division's second quarter net sales were $261.3 million, up 2.5% compared to $255.0 million for the same period in 2022. The increase in net sales was driven by strong shipments of forestry, tree care and governmental mowing products in North America, Europe and the UK. For the first six months of 2023, net sales in this Division were $517.8 million, compared to $476.0 million for the first six months of 2022, up 8.8%. The increase in net sales was driven by strong retail demand for forestry, tree care, agricultural and governmental mowing products in North America and Europe.
The Division's operating income for the second quarter 2023 was $35.6 million, up 8.4% compared to $32.8 million for the second quarter of 2022. For the first six months of 2023, operating income was $72.1 million versus $51.1 million for the first six months of 2022, an increase of 41.0%. The Division's performance benefited from improved pricing and effective cost controls, despite ongoing supply chain issues, continued labor shortages and currency translation effects. Outstanding performance in the Division's North American operations was complemented by strong results in the United Kingdom, France, Australia and to a lesser extent Brazil during the quarter.
Industrial Equipment
The Industrial Equipment Division's second quarter 2023 net sales were $179.3 million, up 27.0% compared to $141.2 million for the same period in 2022. The increase was attributable to higher sales in all product lines with vacuum trucks, snow removal equipment, as well as sweepers and debris collectors leading the way. For the first six months of 2023, net sales in this Division were $334.7 million, compared to $282.2 million for the first six months of 2022, an 18.6% increase. Strong net sales of excavators, snow removal equipment, street sweepers and vacuum trucks were the primary reasons for the increase.
The Division's operating income for the second quarter of 2023 was $18.8 million compared to $8.1 million for the second quarter of 2022, an increase of 131.9%. For the first six months of 2023, operating income was $31.3 million compared to $18.9 million for the first six months of 2022, an increase of 65.8%. Supply chain issues improved during the first six months of 2023, however, the Division continued to have constraints on labor availability.
Comments on Results
Jeff Leonard, Alamo Group's President and Chief Executive Officer commented, "Our second quarter results validated our expectation for further improvement in our operations, and once again marked the best quarter in Company history. Notably better supply chain performance supported higher sales, while moderated cost inflation, and improved efficiencies supported margin expansion. Gross margin percent relative to net sales improved 160 basis points compared to the second quarter of 2022. This was driven by price discipline over the past year, stabilized manufacturing flows and improved capacity utilization. Overall, it was an excellent quarter, with the Company delivering 12.3% operating income. Further demonstrating consistent execution of key strategic initiatives by our teams, we're extremely pleased that through the first six months of 2023 the Company's Operating income has exceeded our 12% operating income target that we established in early 2022.
"Conditions in our markets remained relatively strong during the second quarter. Activity in our governmental and industrial contractor segments remained at a high level in the UK, Europe and North America. In North America, however, further softening in the hobby farm and ranch segment was evident. Order bookings were down 9% compared to the solid pace in the second quarter of 2022. The decline in bookings was related primarily to lower orders for forestry and tree care equipment, and mowers and other tractor attachments for hobby farm and ranch customers in North America. Vegetation management equipment orders from governmental customers increased nicely. Second quarter bookings in our Industrial Equipment Division were flat compared to the second quarter of 2022 although market activity remained strong. Higher orders for excavators and vacuum trucks were offset by somewhat lower orders for sweepers and snow removal equipment compared to the same period last year. Consolidated order backlog of $891 million was essentially unchanged versus the prior year's second quarter.
"As we anticipated, supply chain performance improved for the first six months of 2023. Truck chassis receipts improved again, as expected, but shortages of other industrial components including diesel engines and hydraulic fittings continued. We were able to complete manufacturing of additional machines that had been partially assembled previously, but we continued to have delays in key components which limited improvement in manufacturing efficiency.
"Moving forward, our outlook for the next several quarters remains positive. We expect that the trends evident in our results during the first half of this year will continue for the remainder of 2023. Our backlog remains very strong, and we anticipate continued, positive pricing contribution in the coming quarters. We also expect that several key trends that were evident this quarter, namely better supply chain performance, slowing inflation and sequential improvement of operational performance will continue for the foreseeable future. Our conservative approach to spending will also continue given the economic uncertainty that remains clear.
"Our longer-term outlook is a bit more cautious. We believe that the somewhat softer order activity we experienced in Vegetation Management this quarter was at least partly due to dealer concerns over rising inventories and higher interest rates. The drought in many areas of North America and Europe is expected to continue to adversely impact sales of mowers, agricultural attachments and related replacement parts for the remainder of 2023. U.S. net farm income is forecast to decline this year for the first time in several years, although it is expected to remain at historically high levels. A weakening U.S. housing market and rising biomass feedstock input costs are expected to continue to pressure margins for wood pellet producers and could indicate a more cautious near-term outlook for the forestry segment.
"More positively, the outlook for our governmental customers, who represent the majority of Company sales, remains quite positive. U.S. state finances remain in excellent shape, with historically elevated revenues, and healthy rainy-day funds. U.S. municipal finances also remain in good condition as tax receipts have risen in recent years due to asset price inflation. The longer-term outlook for municipalities is somewhat less bullish, as declining home prices will eventually result in lower property tax receipts. However, on balance, the financial condition of most governmental agencies appears to be quite good in both North America and Europe.
"I want to take this opportunity to thank all of our employees for their exceptional dedication as well as our many suppliers, who worked in close coordination with us to achieve these results. I would also like to thank our dealers and customers who have continued to support our company, and our family of well-known brands.
"In summary, given the continued strength and durability of our markets, our large and healthy backlog, and the strength of our balance sheet, we remain optimistic about the Company's prospects for the remainder of 2023 and beyond."
Earnings Conference Call
The Company will host a conference call to discuss the results on Thursday, August 3, 2023 at 9:00 a.m. ET. Hosting the call will be members of senior management.
Individuals wishing to participate in the conference call should dial 1-866-886-7786 (domestic) or 1-416-764-8658 (international). For interested individuals unable to join the call, a replay will be available until Thursday, August 10, 2023, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (internationally), passcode 97441743.
The live broadcast of Alamo Group Inc.'s quarterly conference call will be available online at the Company's website, www.alamo-group.com (under "Investor Relations/Events and Presentations") on Thursday, August 3, 2023 beginning at 9:00 a.m. ET. The online replay will follow shortly after the call ends and will be archived on the Company's website for 60 days.
About Alamo Group
Alamo Group is a leader in the design, manufacture, distribution and service of high quality equipment for vegetation management, infrastructure maintenance and other applications. Our products include truck and tractor mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements, forestry equipment and related after-market parts and services. The Company, founded in 1969, has approximately 4,350 employees and operates 27 plants in North America, Europe, Australia and Brazil as of June 30, 2023. The corporate offices of Alamo Group Inc. are located in Seguin, Texas.
Forward Looking Statements
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: adverse economic conditions which could lead to a reduction in overall market demand, supply chain disruptions, labor constraints, increasing costs due to inflation, new or unanticipated effects of the COVID-19 pandemic, geopolitical risks, including effects of the war in Ukraine, 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.
(Tables Follow)
# # #
(1) This is a non-GAAP financial measure or other information relating to our GAAP financial measures that we have provided to investors in order to allow greater transparency and a deeper understanding of our financial condition and operating results. For a reconciliation of the non-GAAP financial measure or for a more detailed explanation of financial results, refer to "Non-GAAP Financial Measure Reconciliation" below and the Attachments thereto. |
Alamo Group Inc. and Subsidiaries | ||||||
Condensed Consolidated Balance Sheets | ||||||
(in thousands) | ||||||
(Unaudited) | ||||||
June 30, | June 30, | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ 112,061 | $ 75,894 | ||||
Accounts receivable, net | 378,675 | 306,967 | ||||
Inventories | 369,319 | 352,915 | ||||
Other current assets | 11,916 | 12,527 | ||||
Total current assets | 871,971 | 748,303 | ||||
Rental equipment, net | 36,375 | 31,168 | ||||
Property, plant and equipment | 163,434 | 153,907 | ||||
Goodwill | 197,445 | 196,068 | ||||
Intangible assets | 164,376 | 178,781 | ||||
Other non-current assets | 24,158 | 24,149 | ||||
Total assets | $ 1,457,759 | $ 1,332,376 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Trade accounts payable | $ 116,287 | $ 107,003 | ||||
Income taxes payable | 11,284 | 1,498 | ||||
Accrued liabilities | 72,266 | 66,100 | ||||
Current maturities of long-term debt and finance lease obligations | 15,008 | 15,015 | ||||
Total current liabilities | 214,845 | 189,616 | ||||
Long-term debt, net of current maturities | 332,576 | 356,149 | ||||
Long-term tax liability | 2,464 | 2,444 | ||||
Other long-term liabilities | 22,804 | 24,642 | ||||
Deferred income taxes | 19,128 | 23,083 | ||||
Total stockholders' equity | 865,942 | 736,442 | ||||
Total liabilities and stockholders' equity | $ 1,457,759 | $ 1,332,376 | ||||
Alamo Group Inc. and Subsidiaries | ||||||||
Condensed Consolidated Statements of Income | ||||||||
(in thousands, except per share amounts) | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
6/30/2023 | 6/30/2022 | 6/30/2023 | 6/30/2022 | |||||
Net sales: | ||||||||
Vegetation Management | $ 261,346 | $ 255,003 | $ 517,781 | $ 476,009 | ||||
Industrial Equipment | 179,348 | 141,211 | 334,684 | 282,210 | ||||
Total net sales | 440,694 | 396,214 | 852,465 | 758,219 | ||||
Cost of sales | 322,620 | 296,497 | 621,884 | 571,861 | ||||
Gross margin | 118,074 | 99,717 | 230,581 | 186,358 | ||||
26.8 % | 25.2 % | 27.0 % | 24.6 % | |||||
Selling, general and administration expense | 59,858 | 55,009 | 119,526 | 108,644 | ||||
Amortization expense | 3,824 | 3,792 | 7,639 | 7,679 | ||||
Income from operations | 54,392 | 40,916 | 103,416 | 70,035 | ||||
12.3 % | 10.3 % | 12.1 % | 9.2 % | |||||
Interest expense | (6,837) | (3,189) | (12,777) | (5,836) | ||||
Interest income | 357 | 57 | 740 | 129 | ||||
Other income (expense) | (1,046) | (134) | (44) | (1,886) | ||||
Income before income taxes | 46,866 | 37,650 | 91,335 | 62,442 | ||||
Provision for income taxes | 10,492 | 9,178 | 21,612 | 15,500 | ||||
Net Income | $ 36,374 | $ 28,472 | $ 69,723 | $ 46,942 | ||||
Net income per common share: | ||||||||
Basic | $ 3.05 | $ 2.39 | $ 5.85 | $ 3.95 | ||||
Diluted | $ 3.03 | $ 2.39 | $ 5.82 | $ 3.94 | ||||
Average common shares: | ||||||||
Basic | 11,921 | 11,880 | 11,910 | 11,870 | ||||
Diluted | 11,993 | 11,938 | 11,977 | 11,927 | ||||
Alamo Group Inc.
Non-GAAP Financial Measures Reconciliation
From time to time, Alamo Group Inc. may disclose certain "non-GAAP financial measures" in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States. The Securities and Exchange Commission (SEC) defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude or include amounts from the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures disclosed by Alamo Group are provided as additional information to investors in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.
Attachment 1 discloses a non-GAAP financial presentation related to the impact of currency translation on net sales by division. Attachment 2 shows the net change in our total debt net of cash and earnings before interest, taxes, depreciation and amortization ("EBITDA") which is a non-GAAP financial measure. The Company considers this information useful to investors to allow better comparability of period-to-period operating performance.
Attachment 1 | |||||||||
Alamo Group Inc. | |||||||||
Non-GAAP Financial Reconciliation | |||||||||
(in thousands) | |||||||||
(Unaudited) | |||||||||
Impact of Currency Translation on Net Sales by Division | |||||||||
Three Months Ended June 30, | Change due to currency | ||||||||
2023 | 2022 | % change | $ | % | |||||
Vegetation Management | $ 261,346 | $ 255,003 | 2.5 % | $ (614) | (0.2) % | ||||
Industrial Equipment | 179,348 | 141,211 | 27.0 % | (1,165) | (0.8) % | ||||
Total net sales | $ 440,694 | $ 396,214 | 11.2 % | $ (1,779) | (0.4) % | ||||
Six Months Ended June 30, | Change due to currency | ||||||||
2023 | 2022 | % change | $ | % | |||||
Vegetation Management | $ 517,781 | $ 476,009 | 8.8 % | $ (5,882) | (1.2) % | ||||
Industrial Equipment | 334,684 | 282,210 | 18.6 % | (3,183) | (1.1) % | ||||
Total net sales | $ 852,465 | $ 758,219 | 12.4 % | $ (9,065) | (1.2) % | ||||
Attachment 2 | ||||||
Alamo Group Inc. | ||||||
Non-GAAP Financial Reconciliation | ||||||
(in thousands) | ||||||
(Unaudited) | ||||||
Consolidated Net Change of Total Debt, Net of Cash | ||||||
June 30, | June 30, | Net Change | ||||
Current maturities | $ 15,008 | $ 15,015 | ||||
Long-term debt,net of current | 332,576 | 356,149 | ||||
Total debt | $ 347,584 | $ 371,164 | ||||
Total cash | 112,061 | 75,894 | ||||
Total Debt Net of Cash | $ 235,523 | $ 295,270 | $ (59,747) | |||
EBITDA | ||||||||
Six Months Ended | Trailing Twelve Months Ended | |||||||
June 30, | June 30, | June 30, | December 31, | |||||
Income from operations | $ 103,416 | $ 70,035 | $ 181,973 | $ 148,592 | ||||
Depreciation | 15,529 | 14,413 | 32,528 | 31,412 | ||||
Amortization | 7,990 | 8,013 | 15,921 | 15,944 | ||||
EBITDA | $ 126,935 | $ 92,461 | $ 230,422 | $ 195,948 | ||||
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SOURCE Alamo Group Inc.
