Alamo Group last week reported results for the third quarter ended September 30, 2015.
Highlights for the Quarter
- Record net income of $14.8 million
- Record net earnings per diluted share of $1.28
- Operating profit margins over 10% for the quarter
Net sales down 1.4% due to currency translation
- Agricultural and Industrial sales up despite market headwinds
- European sales down due to exchange rates
- Record nine month sales of $655.1 million
- Record nine month net income of $31.8 million
- Backlog increases to a record $175.0 million
Net sales for the third quarter of 2015 were $231.6 million compared with net sales of $234.8 million for the third quarter of 2014, a decrease of 1.4%. Net income for the quarter was a record $14.8 million, or $1.28 per diluted share, versus net income of $13.4 million, or $1.10 per diluted share, for the comparable period in 2014. The sales for the quarter were negatively impacted by $9.8 million in currency translation effects as a result of the stronger U.S. dollar compared to other currencies in which the Company conducts business. The results for the quarter also include the effects of the acquisition of Herder in Brazil which occurred in March, 2015. This accounted for $0.6 million in net sales and $0.04 million in net earnings for the quarter. Also, impacting the earnings per share were the effects of a stock repurchase of 7.0% of the Company's outstanding shares completed in September, 2014.
For the first nine months of 2015, net sales were a record $655.1 million compared to $615.1 million in the previous year, an increase of 6.5%. Net income for the nine month period was a record $31.8 million, or $2.77 per diluted share, compared to $29.8 million, or$2.43 per diluted share, in 2014, an increase of 6.8% in net income and 14.0% in earnings per share. The results for the nine months include the effects of the acquisition of Herder described above, plus the acquisition of the units of Specialized Industries, which was completed in May, 2014, the acquisition of Fieldquip in Australia in April, 2014 and the acquisition of Kelland's in the U.K. in April, 2014. For the Company's nine month results, these acquisitions contributed $83.0 million in net sales and $2.2 million in net earnings for 2015 and $19.0 million in net sales and $1.6 million in net earnings for 2014 during the partial time the acquisitions were with Alamo Group.
Also impacting the nine month earnings per share results was the effect of the 2014 stock repurchase mentioned previously, and, as with the quarter, the nine month sales were negatively impacted by $27.8 million in currency translation. A summary outlining the effects the acquisitions, share repurchase and currency translation had on the third quarter and first nine months of 2015 is included as an attachment to this report.
Sales by Division
Alamo Group's Industrial Division net sales in the third quarter of 2015 were $127.4 million compared to $126.4 million in 2014, an increase of 0.8%. The majority of the sales in this Division are to governmental end users for infrastructure maintenance which held up well during the quarter, whereas sales to other end users by this Division remained soft. For the first nine months of 2015, net sales in the Division were $362.8 million versus $309.5 million in 2014, an increase of 17.2%. The majority of this increase related to the acquisition of the units of Specialized described previously. Excluding the effects of the Specialized acquisition, net sales for the first nine months were $284.4 million compared to $290.6 million in the previous year.
The Company's Agricultural Division reported net sales of $58.92 million in the third quarter, a slight increase compared to the $58.87 million achieved in 2014. For the first nine months, the Division's net sales were $160.4 million in 2015 versus $163.3 million for the comparable period in 2014, a decrease of 1.8%. Excluding the effects of the acquisition of Herder, net sales in the Division were$58.3 million in the third quarter of 2015 and $158.2 million for the first nine months of the year. Sales in the Agricultural Division held up well despite continued weakness in the agricultural market.
Alamo's European Division net sales in the third quarter of 2015 were $45.3 million versus $49.6 million in the prior year, a decrease of 8.6%. The decrease was primarily related to currency changes as sales in local currency were up 3.0%. For the first nine months of 2015, net sales were $132.0 million versus $142.3 million in the prior year, a decrease of 7.2%, though again, in local currency net sales were up 6.0%. Excluding the effects of the acquisition of Kellands, net sales in the Division were $129.5 millionfor the first nine months compared to $142.3 million in the previous year period. Despite continued weakness in the overall European economies, the Division continued to show positive improvement in local currency.
Ron Robinson, Alamo Group's President and CEO commented, "We were pleased with our third quarter results that included record earnings and continued improvement in operating margins, even though several of our markets remain soft. The third quarter results also provided a good indication of Alamo's potential since there was a minimal impact of the non-operating issues that sometimes affect results. For the quarter, there were only minor effects due to acquisitions, inventory step up costs, acquisition costs, etc., which helped reveal the Company's margin potential. These operating improvements were achieved even with slightly lower sales as we continue to face a variety of headwinds such as weak agricultural market conditions, a soft overall European economic situation and the currency translation declines due to the strong U.S. dollar.
"In light of these market conditions, we are pleased with the sales level we were able to achieve in the quarter as well. Though our sales were down 1.4% for the quarter, without the change in rates in currency translation compared to last year, our sales for the year would have been up 11.0%(1). This reflects the ongoing strength of our brands and stability of our core markets. In local currency our European sales are up despite the lingering softness in that market. And, while the agricultural sector continues to show double digit decreases, the fact that we were able to maintain sales at the same level as last year reflects both the broader applicability of our product range across all types of farming and ranching as well as the effectiveness of our marketing initiatives.
"Lastly, the increase in our backlog provides a positive indication of our ongoing ability to perform even with market conditions that remain less than ideal. We appreciate the determination and dedication of all of our people who continue to drive Alamo Group forward."