SEGUIN, Texas, May 4, 2022 /PRNewswire/ -- Alamo Group Inc. (NYSE: ALG) today reported results for the first quarter ended March 31, 2022.

Highlights for the Quarter

  • Net sales of $362.0 million, up 16.3%
    • Vegetation Management net sales of $221.0 million, up 20.2%
    • Industrial Equipment net sales of $141.0 million, up 10.8%
  • Income from operations of $29.1 million, up 14.5%
  • Net income of $18.5 million, or $1.55 per diluted share, up 5.8%
    • Adjusted net income of $19.4 million, or $1.63 per diluted share, up 11.4% (1)
  • Trailing twelve-month EBITDA of $165.7 million, up 2.2% from full year 2021(1)
  • Backlog of $917.8 million, up 102.8% compared to prior year first quarter-end

Results for the Quarter

First quarter 2022 net sales were $362.0 million compared to $311.2 million in the first quarter of 2021, an increase of 16.3%.  Gross margin improved in the quarter compared to the first quarter of 2021 but was negatively impacted by continued higher material and transportation costs and supply chain disruptions which resulted in material shortages throughout the quarter.  First quarter net income improved 5.8% to $18.5 million, or $1.55 per diluted share, compared to net income of $17.5 million, or $1.47 per diluted share in the first quarter of 2021.  The Company completed an excise tax audit covering a 5-year period which resulted in a one-time $1.3 million expense in the first quarter of 2022.  Excluding this charge, adjusted net income was $19.4 million or $1.63 per diluted share.(1)  The Company's backlog at the end of the first quarter of 2022 was $917.8 million, an increase of $465.3 million, or 102.8%, from the backlog at the end of the first quarter of 2021, and up 14.6% from the end of calendar year 2021.

The Company's results for the first quarter continued to be materially impacted by persistent pandemic-related headwinds including supply chain disruptions, cost inflation and, to a lesser extent, skilled labor shortages.

Results by Division

Vegetation Management

The Vegetation Management Division had a strong first quarter of 2022 as markets remained solid and orders increased compared to the first quarter of 2021.  The Division's first quarter net sales were $221.0 million, up 20.2% compared to $183.9 million for the same period in 2021.  The increase in sales was driven by strong retail demand for agricultural, forestry, tree care, and governmental mowing products in both North America and Europe. 

The Division's income from operations for the first quarter 2022 was $18.3 million, up 9.5% compared to $16.8 million for the first quarter of 2021.  Complementing a very strong performance from its North American operations, were positive results in the United Kingdom, France, Brazil and Australia.  The Division was negatively impacted by supply chain issues, higher material and freight costs and related surcharges which eroded margins and contributed to lower manufacturing efficiencies.

Industrial Equipment

The Industrial Equipment Division's first quarter 2022 net sales were $141.0 million, up 10.8% compared to the same period in 2021.  The increase was primarily attributable to higher sales of its excavators and vacuum truck products and, to a lesser extent, other product lines within the Division.  Net sales and new orders for both industrial and governmental customers were strong for the first quarter of 2022.  Delays in planned deliveries of medium duty truck chassis, other industrial engines, axles and transmissions significantly impacted the Division in the quarter.

The Division's income from operations for the first quarter of 2022 was $10.8 million, up 24.1%, compared to $8.7 million, for the first quarter of 2021.  The Division was negatively impacted by supply chain problems and higher material and inbound freight costs. 

Comments on Results

Jeff Leonard, Alamo Group's President and Chief Executive Officer, commented, "The Company continued to perform well, setting new records for sales and earnings for a first quarter.  First quarter net sales of $362 million set an all-time company record for sales in a quarter and both of our operating divisions reported healthy, double-digit sales growth compared to the first quarter of 2021. As has been the pattern in recent quarters, customer demand has remained quite strong in virtually every market we serve, as evidenced by the record order bookings received in the first quarter.  Strong order activity also resulted in our order backlog moving significantly higher and again setting a company record.

"However, in the first quarter of 2022, we did not experience improvement in the performance of our supply network.  In fact, in some areas, the supply chain situation became more difficult. In previous quarters, supply chain disruptions and resulting shortages had more of an impact on our Industrial Equipment Division.  During the first quarter of 2022, however, both of our operating divisions were negatively affected by component shortages.  This was partly due to the emerging wave of COVID in China and the resulting lockdowns in areas of the country that are significant producers of industrial equipment and parts.  These lockdowns exacerbated the backlog of cargo that is waiting to load in China's ports, a situation that is becoming increasingly critical. 

"Accelerating cost inflation also adversely impacted the Company and caused a seventy basis point compression of our first quarter operating margin compared to the first quarter of last year.  The impact of inflation we experienced across a wide spectrum of purchased materials and components was partially offset by reductions in steel prices during the quarter.  Rapidly rising freight costs and associated surcharges are a growing concern that also impacted our margin during the quarter.  The price increases we implemented at the end of 2021 helped to minimize the overall effect of supply chain cost inflation on our operating margin during the quarter but obviously, the situation is dynamic.   We continue to monitor our costs closely and will take further price actions, without hesitation, to protect margin.

"In January, several of our larger North American facilities lost production capacity temporarily as a number of our skilled employees fell ill with the Omicron variant of COVID-19.   Our facilities in Europe also experienced a further wave of COVID-related illness during the quarter.  By re-scheduling work shifts and adding modest overtime, we were able to recover some of the lost production time in February and more still in March.  It is worth mentioning that the skilled labor shortages that we experienced in previous quarters improved somewhat during the first quarter as our focus on retention and recruitment began to produce the benefits we have been targeting.

"Turning now to the performance of our two operating divisions. Our Vegetation Management Division produced strong results in the first quarter.  This Division's markets remained buoyant and order bookings improved by over 28% compared to the end of the first quarter of 2021.  Against the backdrop of the strong ordering activity and a constrained supply chain, backlog increased by 97% compared to the end of the first quarter of 2021.  Net sales in this division rose over 20% in the quarter with all of its business groups individually contributing double digit sales growth.  An outstanding performance by the Division's North American agricultural products operations was particularly gratifying, while another strong performance from its forestry and tree care businesses also contributed very nicely.  Governmental mower sales in Europe and North America were notably stronger, also up by double digits, in the first quarter.  Our South American operations, while smaller in scale, continued to develop positively with net sales that more than doubled compared to the first quarter of last year.   In spite of the strong reported sales growth, this Division's sales were constrained by supply chain issues to a greater extent than in previous quarters.  This Division sources more components from Europe and China relative to our Industrial Equipment Division.  Consequently, recent events in these regions had a more significant impact in this quarter which was reflected in the Division's gross margin that compressed by 145 basis points relative to the first quarter of 2021.  While a portion of the erosion in margin was attributable to lower efficiency due to the worsening supply chain situation, higher costs for inbound freight and related surcharges had a more significant, negative impact.  Still, driven by strong top line growth, the Division's operating income improved by 9% to $18.3 million, 8.3% of sales.

"Net sales in our Industrial Equipment Division increased nearly 11% in the quarter driven by a double-digit increase in shipments of its excavators and vacuum trucks and supported by solid, but more modest increases in sales of its street sweepers, debris collectors and snow removal equipment.  Demand for this Division's products and services remained strong among the industrial contractors and governmental agencies that are its most important customer segments.  Order bookings in the quarter increased by 14.5% and the Division's order backlog improved by 116% relative to the end of the first quarter of 2021.  Despite the positive increase in sales in the quarter, the Division's sales continued to be severely constrained across the full spectrum of its operations by the ongoing shortage of medium-duty truck chassis.  While the chassis shortage was initially caused primarily by shortages of semi-conductor chips, now, shortages of other components such as axles and transmissions are compounding the problem.  The tragic war in Ukraine that unfolded this quarter added further supply concerns as that country is a significant producer of industrial truck components.  European chassis manufacturers felt the effects of the war as well as the previously mentioned resurgence of COVID-19 in several EU member countries.  Consequently, our shipments of vacuum trucks in the European market declined in the quarter.  To address the worsening chassis supply situation, we have further diversified our purchases to secure sufficient supplies, although delivery times will remain extended for at least the balance of 2022.  This Division's gross margin improved by 40 basis points compared to the first quarter of 2021 as a result of good price discipline and improved operational efficiency.  Income from operations was $10.8 million, 7.6% of sales, an improvement of 24% compared to the prior year first quarter.

"Looking ahead to our second quarter, there seems to be no supply chain relief in sight nor do we anticipate any near-term moderation in the cost inflation we are experiencing.  In April, steel prices began moving higher again and that's obviously concerning.  We continue to monitor our cost structure closely and will implement further pricing measures to protect margins.  Realistically, with the COVID outbreak in China, worsening severe congestion at Chinese ports, and logistics problems generally, it is unlikely we will see meaningful supply side improvement during the second quarter and perhaps not for the rest of 2022.  

"Given the significant supply disruptions that were evident, I'm very pleased with the Company's record-setting sales and earnings performance in the first quarter.  The full credit for this performance goes to our thousands of dedicated employees around the world who continue to find creative ways to work through, or around, the many setbacks being presented by the turbulent supply chain situation.  While the operating environment remains very challenging, and new challenges continue to arise, I'm confident that we will continue to identify and quickly implement solutions that will allow Alamo Group to maintain good momentum in sales and earnings for the remainder of the year."

Earnings Conference Call

The Company will host a conference call to discuss the results on Thursday, May 5, 2022 at 4:00 p.m. ET. Hosting the call will be members of senior management.

Individuals wishing to participate in the conference call should dial 888-882-4478 (domestic) or 323-794-2590 (international). For interested individuals unable to join the call, a replay will be available until Thursday, May 12, 2022, by dialing 888-203-1112 (domestic) or 719-457-0820 (internationally), passcode 7515566.

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, May 5, 2022, beginning at 4:00 p.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 4,300 employees and operates 29 plants in North America, Europe, Australia and Brazil as of March 31, 2022.  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: overall market demand, continuing impacts from the COVID-19 pandemic including more significant supply chain disruptions, reductions in customer demand, sales and profitability declines, operational disruptions, full or partial facility closures, and other similar impacts, geopolitical risks, including effects of the war in Ukraine, inflation, 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) 



March 31,
2022

March 31,
2021

ASSETS







     Current assets:







          Cash and cash equivalents


$     84,277



$   105,265


          Accounts receivable, net


296,857



242,971


          Inventories


355,389



262,780


          Other current assets


12,740



13,347


               Total current assets


749,263



624,363









     Rental equipment, net


31,850



39,693









     Property, plant and equipment


151,684



152,787









     Goodwill


198,726



194,025


     Intangible assets


182,305



188,955


     Other non-current assets


24,187



18,860









               Total assets


$ 1,338,015



$ 1,218,683









LIABILITIES AND STOCKHOLDERS' EQUITY







     Current liabilities:







          Trade accounts payable


$  114,312



$     93,899


          Income taxes payable


867



2,749


          Accrued liabilities


68,315



60,681


          Current maturities of long-term debt and finance lease obligations


15,022



15,078


               Total current liabilities


198,516



172,407









          Long-term debt, net of current maturities


357,834



338,605


          Long-term tax liability


4,416



4,408


          Other long-term liabilities


25,908



29,075


          Deferred income taxes


24,161



22,947









               Total stockholders' equity


727,180



651,241









               Total liabilities and stockholders' equity


$ 1,338,015



$ 1,218,683


 

Alamo Group Inc. and Subsidiaries 

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(Unaudited)




Three Months Ended



3/31/2022


3/31/2021

Net sales:





  Vegetation Management


$        221,006


$        183,884

  Industrial Equipment


140,999


127,305

     Total net sales


362,005


311,189






Cost of sales


275,364


234,763

Gross margin


86,641


76,426



23.9 %


24.6 %






Selling, general and administration expense


53,635


47,330

Amortization expense


3,887


3,658

Income from operations


29,119


25,438



8.0 %


8.2 %






Interest expense


(2,647)


(2,613)

Interest income


72


288

Other income (expense)


(1,752)


(630)






Income before income taxes


24,792


22,483

Provision for income taxes


6,322


5,021






Net Income


$          18,470


$          17,462






Net income per common share:










Basic


$              1.56


$              1.48






Diluted


$              1.55


$              1.47






Average common shares:





Basic


11,860


11,820






Diluted


11,916


11,882






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 Operating Income, Adjusted Net Income and Adjusted Diluted EPS,  related to the impact of non-recurring items, of which are non-GAAP financial measures. Attachment 2 discloses a non-GAAP financial presentation related to the impact of currency translation on net sales by division. Attachment 3 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, except per share numbers)

(Unaudited)

 


Impact of Non-recurring Items








Three Months Ended



March 31,



2022


2021






Operating Income - GAAP


$       29,119


$       25,438






Net Income - GAAP


$       18,470


$       17,462

     (add: excise tax)


974


          Adjusted Net Income - non-GAAP


$       19,444


$       17,462






Diluted EPS - GAAP


$           1.55


$           1.47

     (add: excise tax)


0.08


          Adjusted Diluted EPS - non-GAAP


$           1.63


$           1.47

 

Attachment 2
 

Alamo Group Inc.

Non-GAAP Financial Reconciliation

(in thousands)

(Unaudited)


Impact of Currency Translation on Net Sales by Division












Three Months Ended

March 31,




Change due to currency
translation


2022


2021


% change
from 2021


$


%











Vegetation Management

$           221,006


$           183,884


20.2 %


$              (1,560)


(0.8) %

Industrial Equipment

140,999


127,305


10.8 %


(1,003)


(0.8) %

     Total net sales

$           362,005


$           311,189


16.3 %


$              (2,563)


(0.8) %











 

Attachment 3
 

Alamo Group Inc.

Non-GAAP Financial Reconciliation

(in thousands)

(Unaudited)


Consolidated Net Change of Total Debt, Net of Cash



March 31, 2022


March 31, 2021


Net Change








Current maturities


$                   15,022


$                   15,078



Long-term debt,net of current


357,834


338,605



Total debt


$                372,856


$                353,683










Total cash


84,277


105,265



     Total Debt Net of Cash


$                288,579


$                248,418


$           40,161








 

EBITDA



Three Months Ended


Trailing Twelve Months Ended



March 31,
2022


March 31,
2021


March 31,
2022


December 31,
2021










Income from operations


$            29,119


$            25,438


$          120,619


$         116,938

Depreciation


7,126


7,454


29,514


29,842

Amortization


4,054


3,825


15,533


15,304

     EBITDA


$            40,299


$            36,717


$          165,666


$         162,084










 

 

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SOURCE Alamo Group Inc.

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