SEGUIN, Texas — Alamo Group Inc. today reported results for the second quarter ended June 30, 2018.

Highlights for the Quarter

• Record net income for a second quarter of $18.8 million, up 52.4%
• Record net sales for a second quarter of $257.1 million, up 20.6%
• Industrial Division net sales of $150.0 million, up 27.9%
• Agricultural Division net sales of $59.1 million, up 8.9%
• European Division net sales of $48.0 million, up 15.1%
• Record net income for the first six months of $33.4 million, up 36.2%
• Record net sales for the first six months of $495.2 million, up 15.5%
• Backlog remains strong at $220.2 million, up 40% compared to the previous year's second quarter
• Total effective income tax rate for the second quarter at 25.8% compared to 31.9% in the second quarter of 2017 resulting in a savings of approximately $1.5 million

Summary of Results

Alamo Group’s net sales for the second quarter of 2018 were $257.1 million compared to $213.3 million, in the second quarter of 2017, an increase of 20.6%.  Net income for the second quarter was $18.8 million, or $1.60 per diluted share, compared to net income of $12.3 million, or $1.05 per diluted share, in the second quarter of 2017.  This is an increase of 52.4% in both net income and earnings per share.

For the first six months of 2018 net sales were $495.2 million compared to $428.7 million in the six month period of the previous year, an increase of 15.5%.  Net income for the first half of 2018 was $33.4 million, or $2.84 per diluted share, versus $24.5 million, or $2.10 per diluted share, for the same period in 2017.  This is an increase of 36.2% in net income and 35.2% in earnings per share.  Net sales, net income and earnings per share for both the second quarter and first six months of 2018 were all at record levels for Alamo Group.

The results for the second quarter and first six months of 2018 benefited from the changes in the U.S. corporate tax rates following implementation of the U.S. tax reform measures. These changes contributed approximately $1.5 million to Alamo's second quarter net income and $3.1 million for the first six months of 2018, as the overall effective income rate was 25.8% in the second quarter and 26.4% for the first six months compared to 31.9% in the prior year second quarter and 33.3% for the first six months of 2017. The results for the second quarter and first six months of 2018 also included the effects of the acquisitions of Santa Izabel and Old Dominion Brush Company which were both completed in June 2017 and R.P.M. Tech which was completed in August 2017. Together, these three additions contributed $15.0 million in net sales and $0.8 million in net income to Alamo's second quarter results and $29.5 million in net sales and $1.5 million in net income in the first half of 2018.(1)

Results by Division

Alamo Group's Industrial Division net sales in the second quarter of 2018 were $150.0 million compared to $117.3 million in the prior year, an increase of 27.9%.  The Division's income from operations for the quarter was $16.2 million compared to $11.1 million in the previous year, an increase of 46.3%.  For the first six months of 2018 the Industrial Division's net sales were $282.2 million versus $243.2 million in 2017, an increase of 16.1%.  Income from operations in the Division were $28.0 million for the first six months of 2018 versus $23.6 million in the same period of the prior year, an increase of 18.4%.  The Industrial Division's results include the effects of the acquisitions of Old Dominion Brush Company and R.P.M. Tech which combined contributed $10.3 million in net sales and $0.7 million in income from operations in the second quarter of 2018 and $19.8 million in net sales and $0.9 million in income from operations in the first six months of the year. (1)

The Company's Agricultural Division net sales in the second quarter of 2018 were $59.1 million, an increase of 8.9% versus net sales of $54.2 million in the prior year.  The Division's income from operations for the quarter was $6.2 million compared to $5.9 million in 2017, an increase of 5.6%.  For the first six months of 2018, the Agricultural Division's net sales were $117.7 million versus $106.0 million in the prior year, an increase of 11.1%.  Income from operations was $11.4 million in the first half of 2018 compared to $10.7 million in the first half of 2017, an increase of 6.7%.  The Division&’;s results include the effects of the acquisition of Santa Izabel which contributed $4.7 million in net sales and $0.3 million in income from operations in the second quarter of 2018 and $9.7 million in net sales and $0.8 million in income from operations in the first six months of the year. (1)

Alamo’s European Division net sales were $48.0 million in the second quarter of 2018, a 15.1% increase compared to net sales of $41.7 million in the second quarter of 2017.  Income from operations for the quarter was $4.4 million compared to $3.4 million in the second quarter of the prior year, an increase of 30.6%.  For the first six months of 2018 net sales in the European Division were $95.3 million compared to $79.5 million in 2017, an increase of 19.9%.  Income from operations for the first half of 2018 was $8.7 million versus $6.2 million in 2017, an increase of 40.6%.

Comments on Results

Ron Robinson, Alamo Group’s President and Chief Executive Officer, commented, "We are very pleased with Alamo’s record second quarter results which added nicely to our strong first quarter showing.  While we continued to benefit from U.S. tax reform measures and the acquisitions we completed in 2017, we were able to produce record results even before these contributions as our core business continued to strengthen.  This was evident in both our top line sales, where organic growth was nearly 9 percent, as well as operating income levels, where our margins showed continued improvement.  We are particularly pleased with the growth in margin percentage given the cost increases we have experienced this year, which are above the pace of the last several years.  We feel we have been able to lessen the effects of these cost increases by reacting quickly, however this has been, and will continue to be, challenging given the magnitude and timing of some of these changes, particularly new tariffs recently imposed on imported components.  Our margin percentage was also helped by favorable production efficiencies and fixed cost leveraging which more than offset unfavorable mix effect which occurs when whole goods sales growth outpaces growth of aftermarket parts sales.

"Equally challenging has been the longer lead times we have experienced in obtaining certain input components, such as truck chassis.  So far this has not materially delayed our deliveries, but it remains a challenge.  Even arranging trucking for the transport of our products has gotten tighter.  Again, we have been able to manage this situation effectively so far, but we see no signs of relief in the near future.

"Alamo's Industrial Division has held up the strongest with growing sales, a strong backlog and the outlook remains positive.  In the first quarter of this year the Division was somewhat impacted by the strike at our Gradall facility in Ohio which was resolved early in the second quarter.  Since then Gradall has more than made up the shortfall of the first quarter and was a leading performer for us in the second quarter, though in general the whole Division had a good second quarter.  While we are concerned about longer lead times on input components and cost increases, including the effects of new tariffs, we feel good about the outlook for this part of our business.

"Our Agricultural Division has continued to perform well, though the market in general remains weak with farm incomes well below the peak levels of several years ago.  Some products in this sector have shown growth this year, particularly high horsepower tractors and combines, though this growth is coming off very low prior year comparables, and overall market demand remains significantly below the 2013 peak as well as levels seen as recently as 2015.  For Alamo, sales and margins have held up well, though our backlog in this Division is down and the product mix is a little less favorable due to softness in aftermarket spare and wear parts.

"Some of these same conditions are evident in our European operations.  While our results continue to improve in Europe and our backlog remains strong, lower farm incomes and higher input costs are creating some soft spots in the market.  Currency exchange rates are also an area of concern in our international operations.  Our results benefited by a weaker U.S. dollar in the translation of our international earnings during the second quarter of 2018 compared to the previous year, though this has been moving in an unfavorable direction as of late.

"Overall, we feel Alamo Group is in a good position and we remain optimistic about our outlook for the remainder of 2018.  Good markets, effective cost control measures, a strong backlog, the benefits of U.S. tax reform and the results from recent acquisitions should all contribute to another successful year for our Company."

Earnings Conference Call

Alamo Group will host a conference call to discuss the second quarter results on Thursday August 2, 2018 at 11:00 a.m. Eastern (10:00 a.m. Central, 9:00 a.m. Mountain and 8:00 a.m. Pacific).  Hosting the call will be members of senior management.

Individuals wishing to participate in the conference call should dial 877-260-1479 (domestic) or 334-323-0522 (international). For interested individuals unable to join the call, a replay will be available until Tuesday, August 7, 2018 by dialing 888-203-1112 (domestic) or 719-457-0820 (internationally), passcode 5765996.

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 & Presentations") on Thursday, August 2, 2018, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call ends and will be archived on the Company's website for 60 days.