SEGUIN, Texas — Alamo Group (ALG) today reported results for the first quarter ended March 31, 2018.

Highlights for the Quarter:

• Record net income for a first quarter of $14.6 million, up 19.9%
• Record net sales for a first quarter of $238.1 million, up 10.5%
• Industrial Division up 5.0%
•  Agricultural Division up 13.3%
•  European Division up 25.1%
•  Backlog at $237.8 million, up 62% compared to previous year's first quarter
• Total effective income tax rate at 27% compared to 34.7% in the first quarter of 2017 resulting in a savings of approximately $1.5 million

Alamo Group's net sales for the first quarter of 2018 were $238.1 million compared to net sales of $215.4 million for the first quarter of 2017, an increase of 10.5%. Net income for the quarter was $14.6 million, or $1.24 per diluted share, compared to net income of $12.2 million, or $1.05 per diluted share in 2017, an increase of 19.9% in net income. Primarily as a result of the U.S. tax reform changes in U.S. corporate tax rates, which took effect beginning in 2018, the Company's total effective income tax rate for the first quarter of 2018 was 27.0% compared to 34.7% in 2017. This contributed approximately $1.5 million to Alamo’s first quarter net income. The results for the first quarter also included the effects of the acquisitions of Santa Izabel and Old Dominion Brush Co., which were both completed in June 2017, and R.P.M. Tech, which was completed in August 2017. Together these three acquisitions contributed $14.5 million in net sales and $0.7 million in net income to Alamo's first quarter results. Net sales and net income were records for a first quarter for Alamo Group.

Results by Division

Net sales for Alamo’s Industrial Division in the first quarter of 2018 were $132.2 million, an increase of 5% compared to net sales of $125.8 million in the first quarter of 2017. The Division’s income from operations for the quarter was $11.8 million compared to $12.6 million in the previous year’s first quarter, a decrease of 6.1%. The Industrial Division's results include the effects of the acquisitions of Old Dominion Brush Co. and R.P.M. Tech, which combined contributed $9.6 million in net sales and $0.3 million in income from operations in the first quarter.⁽¹⁾  The Division’s results were negatively impacted in the first quarter by a strike at the Company's Gradall plant, which resulted in sales being approximately $5 million below our estimates for the quarter. The strike, which commenced on March 12, 2018, has now been settled with a new 3-year contract agreed to on April 5th and the plant resumed normal operations on Monday, April 9th.

The Company's Agricultural Division net sales in the first quarter were $58.6 million compared to net sales of $51.8 million in 2017, an increase of 13.3%. Income from operations for the quarter was $5.3 million vs. $4.9 million in the first quarter of 2017, an increase of 8.1%. The Agricultural Division results include the effects of the acquisition of Santa Izabel, which contributed $5 million in net sales and $0.6 million in income from operations in the first quarter. ⁽¹⁾

Alamo's European Division net sales were $47.3 million in the first quarter of 2018, a 25.1% increase compared to net sales of $37.8 million in the prior year.  Income from operations for the quarter was $4.3 million compared to $2.8 million in the first quarter of 2017, an increase of 52.7%.

Comments on Results

Ron Robinson, Alamo Group's president and chief executive officer, commented, “We are pleased to have started off fiscal 2018 on a positive note with record sales and earnings for a first quarter. These results were achieved despite several challenges during the quarter, including a strike at one of our bigger operations, our Gradall/VacAll plant in Ohio. This situation has now been resolved and the plant has been back functioning normally since April 9th. We also experienced a higher level of input costs as steel and other purchased components increased at above expected rates. In addition, sales of high margin aftermarket spare parts in the quarter were weaker than we anticipated, partly we believe due to later winter weather conditions. But even with these issues our gross margin percentages were above those achieved in the first quarter of 2017. We feel this is a noteworthy accomplishment as last year’s first quarter net income was also at record levels. In response to increasing input costs, several Alamo Group units initiated selective surcharges on items most affected by the cost increases and this is being taken into consideration in price increases planned for the current year.  We are also seeing some longer lead times for certain input components, but this has not resulted in delayed shipments of our products so far.

“In the first quarter we definitely benefited from the strong backlog position we had at the end of 2017. And, even with record shipments, we finished the quarter with a backlog that was 62% above our backlog at the end of the first quarter of 2017. This is certainly a healthy level for us and in some areas a little too healthy as several of our units’ lead times are beginning to lengthen. To address this in the short term, we are adding personnel and using more outsourcing. We are also increasing our capital spending for the next few years above historical levels in order to improve our overall production capacity.

“Undoubtedly, in the first quarter we benefited from the U.S. tax reform measures enacted in December of 2017. This resulted in our total effective income tax rate in the first quarter of 2018 being more than 7% below last year’s rate resulting in an increase of net earnings of about $1.5 million. We believe the rest of the year should show improvements at nearly this same rate, all else being equal.

“In addition, we are pleased that our markets, while not being robust, are continuing to show signs of incremental improvement. This should benefit us throughout 2018, though it is uncertain how issues such as tariffs and geopolitical events will ultimately impact us. Our Industrial markets have remained steady and even our snow removal products in this segment, which have suffered in recent years due to milder winters, returned to more normal conditions this year. Our Agricultural markets were also up compared to the weak conditions of the last several years, though farm incomes are still well below record levels. Finally, Alamo's strongest sales growth came from our European Division where we are benefiting from continued improvement in the overall European economy as well as from more favorable currency exchange rates.

“All in all, we continue to like where Alamo Group is positioned. We have a strong backlog, modestly improving markets, growing margins, the benefits of our ongoing operational improvement initiatives and a more favorable tax environment which should all contribute to improved results for our Company throughout 2018.”

(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.