Alamo (ALG) 4 May 182018 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Alamo Group First Quarter 2018 Earnings Conference Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be open for questions. [Operator Instructions] This conference is being recorded for today, Friday, May 4, 2018. I would now like to turn the conference over to Mr. of President Vice George, Alamo Group. Bob ahead, go Mr. Please George.

By Thank of have should good the everyone. you, morning, now, all release. you and press received a copy

However, you and we would send you copy please missing and us the will if make company's release receive sure contact XXX-XXXX, to on one, and XXX- at a anyone is are like a distribution can after X be which XXXX-XXX-XXXX, passcode will X replay hour call, week. dialing replay for be run the the accessed of a and with list. XXXXXXX. There'll call by be The in the

being on a XX is call the www.alamo-group.com, available at days. company's and Additionally, will for be webcast the website replay

and and and General Ron Ed line the President opening for Malone, your Executive President and Chief with Corporate Rizzuti, then Richard Vice will Chief the Management President remarks, Dan open Financial Vice Wehrle, Controller; and today On we'll Officer; line and President are some make Robinson, Officer; Counsel. Vice me questions. Executive up

the numbers call these applicable release. management to numbers non-GAAP the results non-GAAP Reconciliations certain GAAP their reference remarks. included to in our of in attachments earnings During are may today,

statements. the few I make Ron, Before comments over would to about like call turning to forward-looking a

We the will made Reform Litigation forward-looking of that the Securities pursuant today safe are be making statements to Private provisions XXXX. harbor Act of

Ron. currency-related forecasted not contained differ actual any are reports. from please to competition, which the speaks go date. cause seasonality, time company's as herein, The of would cause differ to obligation from to ahead. materially other materially may Among and actual company the which in known uncertainties, future market involve the time introduce information and like issues company's statements now in factors which periods I risks this demand, Ron, to only update listed SEC Forward-looking to undertake does risk unknown and those weather, results results following: could results. factors

you for remarks, financial thank then provide with the Dan formal taking our for following of joining our And and quarter Malone, a our all first us want Bob. of look CFO, more results your we will the you, and our questions. forward will Thank results, few of to we comments on to call review I XXXX, begin today. a

So ahead. Dan, please go

Thank you, Ron.

Philadelphia, began quarter results were first effects U.S. records results tax earnings and resolved as but line and the by on new pretax records Our overcame operations set the New of on reform, for at acquisitions strike, The strike XXXX normal business company in XX, of were even has March which helped to plant certainly Gradall recent returned and with the achieved, X-year and accretive These without Ohio. union X. been the well. facility contract, both our we April a top with

XXXX $XXX.X year by X.X%. quarter First by quarter sales the sales XX.X% first prior million and of without acquisitions, about beat of effects

the prior acquisitions sales Excluding the Gradall quarter Industrial X% million increase organic quarter year of X%. of would quarter first been $XXX.X represented the over first Division about for likely strike, most sales growth and XXXX have a the sales. effect

R.P.M. demand were products mowing strike, saw over Dominion the a year broader prior the continued by for XXXX to Agricultural the agricultural our farming down crop the about of despite the row negatively improvement first compared were Tech Brush prior Old XX.X% in the year which division's affected and Division Excluding sales, quarter Gradall this as quarter effect income. X.X% were first acquisitions, weakness quarter. in continued quarter million, up $XX.X sales we

this grew first $XX.X or by over sales XX.X% organically Division division's Excluding the about quarter, sales were first reflecting in tailwind, XXXX. the of quarter effect compared million were the higher year up first X.X% still than this acquisition, conditions the local Europe. year currency market X.X% of prior to XXXX first first without currency Izabel good translation division's Santa European sales quarter. Even favorable prior the quarter about quarter the

million first by over of quarter. grew the XX.X% First prior year quarter XXXX margin gross $XX.X

Our higher gross by sales, net XX.X% and the the improvements, favorable net margin effects which These Gradall of purchasing part and year mix actions, comparisons helped of the XXXX unfavorable of partially XX.X% compares first quarter of strike sales, to were material pricing was by costs. quarter. prior for favorably aftermarket generally productivity sales offset initiatives an

operating $XX.X companies quarter, acquired year million of growth. first and the XXXX prior was sales income X.X% higher organic earnings due quarter from First primarily accretion than to

operating X.X% first of XXXX Gradall net quarter quarter. slightly quarter the largely income about at sales. of X This to strike, due on a is operating which sales X% expenses. sales, in of All for of level as X.X% as is the prior year income First spending divisions' higher projects below well R&D timing legal the was net net of came decrease

the and by U.S. income corporate rates. per were share net lower also XXXX quarter First earnings helped tax

$X.X XX% prior for Our effective XX.X% rate of was $XX.X XXXX per a first in $X.XX income quarter first diluted the from quarter. the is first first savings XXXX quarter or quarter, which per XX.X% increase million $X.XX of year share. diluted dropped prior over tax to million almost share, year the Net a or income

used million, million and the supplier increasing demand of X.X% quarter. million of year The first EBITDA first quarter quarter activities the of $XX.X XX-month first high was was of of as company-wide the inventories XXXX trend overseas repatriating XXXX, operations. of Since cash XXXX the full to difference million operating increased quarter, truck totaled of and vacuum compares to ended cash million $XXX of total fleet. end over due up $XXX.X million. will backlog In drove $XX.X the EBITDA prior careful from higher well but year we which X.X% continue continue May, times, Most year as funds. we moving and After order the our $XX not have positively, to prior continues that which first the of net First EBITDA in are trailing these lead only over process this the taxes end with our the $X.X in used to quarter. returned in being $XX.X $XX begun hand By we cash between in We million that, excess million. or quarter investment rental local incur on the we $XXX.X million the debt. will costs - have process expect and indirect other up we we

ended $XXX.X backlog up order XXXX of the the quarter. XX% from quarter million, Our first about prior year first at

$XX divisions XX%, prior the returning $XX first EBITDA outpaced sales were as quarter and by about record levels to continued rate would new back levels; record In margins; XXXX our well record our growth quarter million growth levels. sales of call our first boosting results quarter. of turn by summary, at exceeded during record earnings; all and bookings operating $X.XX, sales, during our EPS income first the dropping First quarter highlighted Ron. over sales XXXX year-over-year X% order over orders tax like as quarter the grew backlog nearly effective now gross to backlog percentage quarter continued in million I improvements new to

focus and business some on saw first developing operational the quarter. - at and in trend in growth this market once even in pleased started All improvement, see growth to see sales to years our to topline Thank nearly and positive no XXXX, quarter. we the show on better continues across sectors that bottom With all XXXX ongoing of general, second our and course, modest we improvement note of right. This the have a were after Dan. little to we the line, of see in record able in we the I off several We you, start first particularly growth. again in half, with are earnings which

reform we our had believe recent We of quarter see will million certainly tax would from to our we also results contributions at We we XXXX. as rates X%, average first first reform - operational tax our in the helped we to effect our that pleased about $X.X move measures results, by benefited with very during income quarter. adding tax continue And through significantly execution reform rate are the believe while nearly similar corporate from the after-tax quarter. to tax lowering U.S.

both increases particularly our facilities by at were our first in as period. winter active one our as ones are activity usually we where less weaker maintenance, said, respectively, with major almost and as we our we we're steel-related And is which automated into our production have products. this And actually, as really areas a work Our result, spending we areas. trucks. backlog we certain this, to are in this year beginning typically to capital to increase up overall ramp spare I'll produce strongest, increase of well in capacity mainly in comforting inflation and our staffing as deliveries of our higher-margin some our demand, it's of winter increased mention, quarter decline. wear bottlenecks Even above-average also to [indiscernible] our selectively our those extend a meet is plans maintenance a items, excavators be our acceleration with strong will a such of months next top and year, more sales because and modest, weather not pleased term. which was all all vacuum product Part was components, increasing main also one well starting where course, as certainly parts to business competitive we focusing serve. rates. our aimed businesses we bit economically as Certainly, the vegetation is in been time the of strong to upgrading have earnings purchased limited below want this have we want in we technology and at invest to of And this, and more And a production ensure and strike and affected to cost efficient is processes. longer-term just by Plus, broad-based, but historically shipments, and will slightly in equipment. reducing we during our aftermarket capabilities We but in increase affect more this technical been less sales on an Yet mix total our we're feel we we long steel reason business, as across even environment to very conditions repatriate vegetation consumed spare our to manner to these output in the VacAll we had stay later to Gradall it of having were the conditions. favorable ability of improvements operate. as had improving been less it's at believe as it's little see These we - in ability welcomed. our the despite and year, the this through a earnings but markets level invest of the even sectors a particularly of parts maybe expectation. move little up, and record too continued backlog is think Again, our in were in And favorable of we for international nearly on and more in which tax

- be And Our back quite quarter pockets we're We're cancellations, our will Industrial There quarter recover And X-year facility capabilities. even which expectations And was to is which strike at place, any most division's been nicely. we that trucks in in performer, certainly that delayed - were that had, but all a we and Ohio pleased of from in that year. have that this vacuum first we our orders stability. and up manufacturing soft to third has was the in but steady and the resolved, our some nearly further, and terms removal the quarter are talked in - which the are continuing or such related pace. the some and we've this to last facility. little from both has as were of few Division, new any about, snow able made years this within didn't of first operating well we been activity, the on weakness glad which exhibit a this shipments good feel lose that second we'll agreement of so results,

inventory such in and given Division to to last incomes it levels lower year, are - Agricultural in gains and see years. levels. as remain further several I good to direction, farm is well overall by nice dealer welcome dealer we us incomes also to feel for healthy But manufacturers had The below the the market severe a which expected this again, a sector aided conditions. record move Our generally agricultural is positive being downturn which modest, starts more start said, were as of was, the the farm

market new So even were U.S. in we're seeing. which we rates, the even had then quarter be tailwind our should are limited orders strengthening our exchange and the settled the strong they are after to further And our area resolved, the what where affected now some biggest for I that's of There's further improvement yet compounded Division, and the of accepting And flow-through more better, as - about improved. us down fully geopolitical to international and while everything. a economic European X turmoils we see finally several of headwind, first years demand. started such then currency be was months. of people economic of we been issues activity last - were the translation very activity. think has There's by and dollar, Brexit even are a overall been And some Brexit the all by are slow pleased some changes, of And earnings. more to like are which these that pent-up the then

by has. while of and our the this developments - our divisions believe market as we our the internal X or modest market improvements, to have own results benefited much So have more all contributed

we been excited introducing the have improved stream next will equipment, in of bought. has We we things year products of as may new favorable this interesting of increasing new new investing our And our our focus customers. more the developing expensive, well. got be well we are even with that a been environment we're and such by models early year I've down pike. acquisitions range some resulted have as and historically later which coming a received some about in steadily gotten things developments that And on and tax have have internal in more and

lot pleased the product sort And so certainly, key able have we we acquisitions recently, activity in allow lot returns looking and we're think - acquisitions are for prices and our still seeing us a We we of these at results for having despite believe actionable strategy, we're are business had make us our that with from X which to last a also small growth But still with find objectives. higher completed will efforts. still to commensurate the opportunities overall remain but we're kinds acquisitions in pleased area. a element and - year of this development of

have in and So the results of in the good summary, to a record it rest start with was quarter, year. first we nice about for the good to feel outlook XXXX the

all markets, a stronger a tax a strong of have We which Alamo improving growing favorable to Group. margins, contribute more environment, for XXXX backlog, should

might open your of for So we'd support questions we and any want to for And continued you thank you like our now to interest company. have. floor the

[Operator Global. question Seaport Instructions] Mike It with appears our Shlisky comes first from

Good morning, guys.

Mike. Morning,

high numbers sense here get trying just market here. to the your as fuel a out to might in play So in I prices was how the

of curious actually anything pressure the - have your up pricing year? of done increase re-priced the a half I'm a backlog, have companies been caught you And have just still surcharge by that as how surcharges. has will will day or price to of have Or their from back planned then? back kind be the there kind in. in forward and priced just I'm from Some so gone

probably our started more we divisions. Certainly, agricultural-related April adding of of surcharges, selective Xst about mainly in

a because price that's Our Industrial build-to-order more there, it's Division, business. increases of been more

higher. not are have so able flows turnaround. I to into once the orders. mean, prices X worked it's when get been quicken of quote steel a - the order, and order, we up, an buy we day And the new that is that - the the quicker the months flow-through like then are then, have quoting material and later, we new something stuff, So we usually one shorter get in We prices quicker. as the can we It's current selectively we prices

new prices of into building or it's So price least at the increases combination both steel costs. a and surcharges

like much anything not and - we're the we a I not from as even slightly we're we're got so not So result, getting favorable last variances price year, margin being our were away in quarter, as maybe a really as first margins up probably said, but point. giving

as a out. how I react I seen of which Selectively, think, but up where planning to going to sort think shape or out think of play said, we've what - the anything, we whatever steel going maybe been to last rest and off if stay - not think good for there, consideration. out. even to happens had the any able the on and think and enough up fine quick that matter down. of happens months to have a we're has positive is really we've But into like see they steel on no few enough it, be going react I the should in take flattened for that as just in come you little, I to we prices, we're long I been given so, X margin top certainly, we We're year. And haven't year for

I there bricks to greenfield and is automation things on new year can you and a CapEx for is say that mortar? real of this, secondly, the but got missed dollar are like CapEx in us? development share Then, that Okay. And robotics - perhaps this most some not just

will just and I'm for or - probably usually is the on this several over not be haul, been be run higher next things going year. below depreciation. what bit it year double or in our mean, it to higher than long be than or the for to certainly years be CapEx this mean so couple anything, had going I A saying that. mean, going it's higher. last little it's but I year, like - - of is to we a has next at saying And year Yes, depreciation I like

in I it mean, - we're in new cutter, a instance, to we had some plant France. - we're in you're putting we plant expand to tools. are mean, laser for machine putting our investing yes, is just put to - I I building right, the in started but other Rivard And new Some And at CapEx - but there in in. we automation, - know

a one. while And mortar year So small the one actually expenditures lease. facility I leased of Nite-Hawk Washington that mean, this was a bigger it's and in bricks that bought out we our is our little capital there already we of at we plant the in state had

So that brick so I payback mortar. - - that, was economically, good mean, and a that's - but to it's and us it's all do like for

operates of like very have again, - spread also a the equipment. is we're from plant in nice It year, but be we've has said, associated We equipment the in Division our with more wanting separate this - inefficient. end to mortar. again, kick state-of-the-art it of And long say X, put major - We'll hope doing will I before time I building new but that that. three expenditure Super talked been couple Milwaukee and actually but a years, And all because a talking will some about be That a consolidating facilities, X would everything. off will about brick we've - that. will into payback. over Products be to, which also able plants capital some so and I be And to a which be and

next continuing up some reasons in years. - there the the one is it's kicked of is is to but brick-and-mortar, couple which it for being invest So we're technology, of

it squeeze I Okay. don't in one would be mind. here, could a And you if more two-parter, if just

dividend, rate Dan, cash that there potential back we then, bring et there is now? it's something to about, the you Is special cetera? plan for share should the So, is for you a whether year out an secondly, thinking full us be to M&A actually or this can actual the U.S.? tax plan for And

part Well, of as we in mentioned, the - mentioned process are cash as question, second of in your for back. we now we bringing the the

tax certainly to the million. requires of bringing not between to brought want We million, end $XX expect some a money efficient There rest huge numbers, by month as it The back but in $XX be local are little they're issues, states. and analysis. this the as back more possible of then to we have

improvement the I for Yes, certainly. is as mean, course, I rate. in I about we are mean, say, get didn't I I that's our have the probably tax - like news us, said, I think it of was good quarter, the Yes, we rate up. outside also and first - mean, X% about U.S. international earnings picking tax reform

the is we the seeing give of think year. for I the we'll So take, X% about rate, be or most improvement think

CapEx. far plan I more the be it point that bit. anything were on a little itself, spending back to bringing little one cash As No, this We we'll at bit dividend Certainly, said, or we one a up not kicking we is that. thing, thing. than as going do said special a as like be

as our we're now, than And valuations I spend that - looking debt, of in we're thing being a gone said, for the have focus mean, but the - and We I and a small we still acquisition. a main I but kind generating at R&D. use the of look pay looking is more we're returns. ones still do. understand couple initial increases I I main end in that have we year cash of we're But lot CapEx, yes, of of that. - looking the We'll very making find to focus said, - we're R&D, are CapEx the little I a Like going I of we what - last plenty probably think some bit year. little other more at I still did bit we than same at our mean, we'll in and - but will going obviously, is selective conscious but bit cash we're we're, meets like to spend the mean, on little to be the cash on down the of more the The think is - at of right up, on we're justifiable, at think main more of activity is more a growth we've said, But flow, focus as still acquisition the continue that think we'll like be growth to I I to been yes, organic way. we some anxious and able that But, criteria well. think focusing and

So - those that generate CapEx, that and acquisitions cash uses the we are repatriate R&D three of - the the internally. will main we are still but

Okay, great. Thanks for back the that hop color. in Ill queue.

you. Thank

Our comes & from next with Mondillo Sidoti question Company. Joe

everyone. morning, Good Hi.

Good morning, Joe.

materials I of last raw the just just quarter ask segments second in the to materials the Any a of more in become headwind - the wanted than first does one quarter? raw time. about

second No. like quarter. I until don't especially, we the I don't implement surcharges so, of because think any said, and like that, that the things

don't rest it say, that I year an in it I'd responded, second any we've an or the more see but in and the issue I first than even quarter. think amount was of So the the being it's issue, of quarter of

All right.

of material so to you how ongoing the would continue How - pricing-wise? that with deal And rise. prices sort

in One Well, we in almost as gone our that's little a in went time. has and purchased Like receivables we our month will inventory lag it up or you get lock usually, X. certainly, the first have of business all the And notice, them, material a suppliers, all, up. enough pricing. we although once for - our our thing we get can usually

even think we think think - go where increases we are not selectively, it's longer. lead getting where our we're a hydraulic so, inventory from the we're tractors, buying lead mean, some And out. Everything especially times ahead - seeing I chassis, demand, price I where so components, but only are coming, little truck more times of

so growing times So number not we our buy but have bit. I a need we little our one been we components, them know those for one, in only number them a responses when that that little pricing given mean, has ahead, that, so two, lead of is to stock are what

inventory inventory demand our in to So say the actually, response a up our longer - stayed - gone up and has same, absolute that's gone response little the but to why our I'd have market has turns lead in times. inventory

of so as need about mean, or delaying think able or being The seem selective. have to costs freight area plastics it steel has and non-steel those I just I like surge, it, other bit. think into be feel well. not A we're a soon tires looking to also holding said, more so - selectively by I fuel it we we as and steel inflation. with to of areas much, instead little things it's the like - or be types good main say, buying paint as I ahead, I - been we're steel-related. bit seem little - that But and on of think It's components. deal fairly being watching in So by ordering cost by - normal

it our I on will guys think situation impact the at top we're for I seem that So - year. all I'm think don't of that managing the margins to pleased be

the are what it the Okay. for, million, of looking strike? even still sure guys in the at outside expecting, slower first Industrial like then thoughts of saw looks segment, of at of that excluding And you the you Not workers' $X than strike your but on growth sort X% were what organic workers' I quarter that was that growth least. lighter was

there. think bookings - the on that was more and I better increased effect like And than strike, that. the the modest million actually $X up actually backlog maybe - say, our Well, a than was were I so little it

like spare actually, mean, just Division not that unexpected our I less we I all also think the said, year. parts were And I thing than highest-margin that it that growth said, less the - item. - - in parts spare amazing probably that was like are - - I was last - area the was Industrial were boy,

it I believe snowing. million being to and winter the - fact so like mainly than We that, $X that it's the more us. was off that weather, And by - will still said, see due to bother

which Some - farmers because Chicago. said say, slower all we're was history feel really later in little weather us, getting say, just - - along for of concerned, are just April up say, late - freeways not started a in aren't just April be a us. things People of little We yes, for start. fine. the the believe guys they're aren't conditions getting all - a made think getting I snow like winter, were quick. that's that into fields getting mean, But - fields. the will - yet, - with these. like the getting we little I I we the people better believe that, we that And it's the coldest I'll may bit that's, freeways, the people delay buying worried we mowing we a but But into it helps think

the the good We are we the faster yes, in feel pickup. already think in sales shape backlog I said, - And of - grew starting to grew we we're rest - see we're quarter. our actually the for as year. good shape some in have while than mean, we

like terms looks it it's tracking in All the right. of then little And revenue. a faster of than sort SG&A,

anything revenue. to sort SG&A that's there's nature of Just the little if higher the you wondering what in there sort of onetime make a relative of or

Yes, there's couple things. of a

have didn't quarter all, year, in we the of three first acquisitions. First last the

was first quarter in first was - in year. this there of that the the there So acquisitions three quarter

expenses, Consolidating onetime things. Dominion, operation, and we cost. cost a Brazil, new of a was it which $X.XX - noticeable. - so another events had that a acquisition. little have here are time - our even we wasn't of to so things - Izabel. putting another and more there then anomaly, onetime in anything systems that that already this two or the sort there - we at We're very system, million being the And year operating also legal there In up again, head little - there's it and last them up putting there. Old extra had then a a was effort were is, this ODB, We we an there, I'd expenses it those of bought conversion when our sort million of some say, added actually womb, new $X.XX a again, above $X.XX sort on three of onetime million low These two - legal was drove Santa here, of couple what

there or Okay. be segment. looking growth, is organic there, comments European And Do what - sustainable? Anything your helpful. one volume Any for outpacing the for think what was last you're you growth currency, the The I would seeing? at me. is ex

- some Europe, It that to as well had demand, Certainly, this soft running. think, sustainable. as is - was several Yes. I they've fairly for a conditions of nice part demand some contributed little pent-up think, what I the I years think growth, - this pent-up year bit is

I at think up but were they XX%. they not like levels mean, are the I -

next years So few to grow rate is going for healthy likely. the we're not I but a growth XX%, think

had basically we think out the are now, sold where about major almost through that end talk Europe we've I there plants two of when I I some of - fact, backlog bottlenecks In got our is the mean, year. right

So the like to year. try this the like say, pushing want I feel we're say, we growth because there probably is meeting I we keep I going is just growth sustainable, mean, but backlog - capacity selectively this some to increase to

have just I last actually. question, one And Okay.

investment [indiscernible] here. of growth if that the any maybe growth, that will investment-related the of - there's In CapEx CapEx projects, I'm just terms the hit any wondering costs sort potentially

I'm sorry. I lost you.

costs... saying, doing CapEx the this year, are You're any we're there - with was

terms growth a just is wondering, related know hit that there sort there to any that maybe the I your sort year related I'm be projects, to of that will not P&L CapEx capitalized, of growth is In expenses of that, lot to investments? going but projects, last of were

be don't like expense with out have more be like R&D, will I I particularly associated a the level that see expenses anything these that up don't CapEx on little little. ordinary. should capitalized. most not that, a the not I most say, there's that that be No, Like mean, But CapEx CapEx, of like think are bit we're expensed that that be some are it's noticeable. I say, hit of R&D effect say, is of will material said of when will I I anything. noticeable. doing mean, I stuff a And some things the - these. a of will will I And on

Thanks. perfect. Okay,

Thank Joe. Okay. you,

have it And no we appears time. Instructions] [Operator other at questions this

with right. and forward quarter on thank look to and Group, And we for your second our speaking appreciate Alamo you did Well, have. August. in in All call the we questions joining the us on you today interest call you

Thank a good you. day. have Bye. So

conclude today's for That participation. conference. does you your Thank