Alamo Group, Inc. (NYSE:ALG) Q2 2019 Earnings Conference Call - Final Transcript

Aug 01, 2019 • 02:00 pm ET

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Alamo Group, Inc. (NYSE:ALG) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Dan Malone

Dutch Power acquisition organic sales growth was over 5% for the quarter and just short of 7% year to date.

Industrial Division second quarter 2019 sales of $168 million represented a nearly 12% increase over the prior year second quarter. First half sales of $326 million were up almost 16% over the prior year first half. All product groups except governmental mowing equipment contributed to this division's continued strong organic sales growth.

Agricultural Division second quarter 2019 sales were $55 million down more than 6% from the prior year second quarter. First half sales of $108 million were down 8% from the prior year first half. The prolonged downturn in the U.S. agricultural economy continues to negatively affect demand for new equipment. European Division second quarter 2019 sales were $62 million, up 29% from the second quarter of 2018, but essentially flat in U.S. dollars without the effect of the Dutch Power acquisition. First half sales of $112 million were up almost 18% over the prior year first half but down slightly in U.S. dollars without the acquisition.

Excluding an unfavorable currency translation effect this division's local currency, organic sales growth was about 6% in both the second quarter and first half of 2019. Second quarter 2019 gross margin of $73 million grew 10% over the prior year second quarter our second quarter gross margin was 25.6% of net sales, which compares to 25.8% of net sales for the prior year quarter.

In the second quarter of 2019, we saw a significant easing of the margin compression we experienced in the second half of 2018 and the first quarter of this year. We began to realize the full benefit of prior-year pricing actions, as well as lower steel cost and we saw a better mix of high margin aftermarket part sales. Partially offsetting this improvement was the negative leveraging of lower volume and the agricultural division and the shipment of some thin margin backlog at one of our French businesses.

Second quarter 2019 operating income exceeded $29 million and was about 10% higher than the prior year second quarter primarily due to strong industrial division organic sales growth, as well as the factors affecting gross margin already discussed. Second quarter 2019 operating income was 10.3% of net sales compared to 10.4% of net sales for the prior year quarter. Again, a much better year-to-year comparison than what we've seen in the past three quarters. Net income for the second quarter of 2019 was almost $21 million or $1 and $0.75 per diluted share, which favorably compares to the prior year second quarter net income of nearly $19 million or $1.60 per diluted share.

Second quarter 2019 EBITDA was $36 million, up 12% over the prior year quarter. Trailing 12-month EBITDA now exceeds $130 million and is up nearly 5% over the comparable prior-year result. Second quarter 2019 net cash provided by operating activities was above $30 million, which compares favorably $400,000 of operating cash flow in the prior year second