-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EB7FT6j0axgjTogpOYOx2PZwcJkJ8zCH3kAH3RS1PTGjQdkvVNeOg5K48Hz8ujJY f7Z+Dz19LEzzTAXL6Swkrg== 0000897077-97-000016.txt : 19970407 0000897077-97-000016.hdr.sgml : 19970407 ACCESSION NUMBER: 0000897077-97-000016 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19970404 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALAMO GROUP INC CENTRAL INDEX KEY: 0000897077 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 741621248 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13854 FILM NUMBER: 97574518 BUSINESS ADDRESS: STREET 1: 1502 E WALNUT CITY: SEGUIN STATE: TX ZIP: 78155 BUSINESS PHONE: 2103791480 MAIL ADDRESS: STREET 1: P.O. BOX 549 STREET 2: 1502 EAST WALNUT CITY: SEGUIN STATE: TX ZIP: 78156 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 0-21220 ALAMO GROUP INC. (Exact name of registrant as specified in its charter) DELAWARE 74-1621248 (State of incorporation) (I.R.S. Employer Identification Number) 1502 E. Walnut, Seguin, Texas 78155 (Address of principal executive offices) (210) 379-1480 (Telephone number) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No ___ At August 13, 1996, 9,589,851 shares of common stock, $.10 par value, of the Registrant were outstanding. Alamo Group Inc. and Subsidiaries INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Interim Condensed Consolidated Statements of Income - Three months and six months ended June 29, 1996 and July 1, 1995 3 Interim Condensed Consolidated Balance Sheets - June 29, 1996 and December 30, 1995 4 Interim Condensed Consolidated Statements of Cash Flows - Six months ended June 29, 1996 and July 1, 1995 5 Notes to Interim Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. None Item 3. None Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. None Item 6. Exhibits and Reports on Form 8-K 10- 11 SIGNATURES 12 2 Alamo Group Inc. and Subsidiaries Interim Condensed Consolidated Statements of Income (in thousands, except per share amounts) (Unaudited) Three Six Months Months Ended Ended June July June July 29, 1, 29, 1, 1996 1995 1996 1995 Sales, net . . . . . . . . . . $50,72 $45,30 $95,77 $79,75 . . . . . . . . . . . . . . . . 7 3 3 1 . . . . . . . . . . . Cost of sales . . . . . . . . 36,288 32,847 71,117 59,003 . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross margin . . . . . . . . . 14,439 12,456 24,656 20,748 . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses: General and administrative 2,584 2,280 4,723 3,950 . . . . . . . . . . . . . . . . . . . . . Marketing . . . . . . . . 3,446 2,928 6,581 5,158 . . . . . . . . . . . . . . . . . . . . . . . . . . Engineering . . . . . . . 789 692 1,653 1,361 . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses before 6,819 5,900 12,957 10,469 amortization . . . . . . . . . . . . . Intangible amortization 376 359 600 529 expense. . . . . . . . . . . . . . . . . . . . Income from operations . . . . 7,244 6,197 11,099 9,750 . . . . . . . . . . . . . . . . . . . . . . Other income (expense): Net interest . . . . . . . (578) (845) (1,093 (1,350 . . . . . . . . . . . . . . . . ) ) . . . . . . . . . . . Other . . . . . . . . . . . 168 317 461 654 . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . 6,834 5,669 10,467 9,054 . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . 2,600 2,115 3,907 3,392 . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . $4,234 $3,554 $6,560 $5,662 . . . . . . . . . . . . . . . . . . . . . . . . . . Net income per common share . $0.44 $0.46 $0.68 $0.74 . . . . . . . . . . . . . . . . . . . . Weighted average common shares 9,699 7,682 9,680 7,667 and equivalents . . . . . See accompanying notes. 3 Alamo Group Inc. and Subsidiaries Interim Condensed Consolidated Balance Sheets (in thousands, except share amounts) (Unaudited) June Decemb 29, er 30, 1996 1995 ASSETS Current assets: Cash and cash equivalents. . . . $ 4,007 $ 1,839 . . . . . . . . . . . . . . . . . . . . . . Marketable securities. . . . . . 428 769 . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable. . . . . . . 50,782 45,509 . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories. . . . . . . . . . . 62,929 58,624 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes. . . . . . 1,707 1,782 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses. . . . . . . . 3,017 844 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . 122,87 109,36 . . . . . . . . . . . . . . . . . . . 0 7 . . . . . . . . . . . Property, plant and equipment. . . . . 46,506 46,158 . . . . . . . . . . . . . . . . . . . . . . Less: Accumulated depreciation . (23,67 (22,62 . . . . . . . . . . . . . . . . . . . 1) 0) . . . . 22,835 23,538 Receivables from officers and 700 700 employees. . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . 13,022 13,150 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets. . . . . . . . . . . . . 5,289 4,816 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . $ 164,71 $ 151,57 . . . . . . . . . . . . . . . . . . . 6 1 . . . . . . . . . . . . . LIABILITIES AND STOCKHOLDERS ' EQUITY Current liabilities: Trade accounts payable. . . . . $ 15,813 $ 13,143 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable. . . . . . 4,507 1,570 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued liabilities. . . . . . . 6,546 6,045 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of capital lease 353 344 obligations. . . . . . . . . . . . . . Current maturities of long-term 1,124 946 debt. . . . . . . . . . . . . . . . . . . . . . Total current 28,343 22,048 liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital lease obligations, net of 6,970 7,243 current portion . . . . . . . . . . . . . . . . . Long-term debt. . . . . . . . . . . . 414 1,466 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank revolving credit facility. . . . 32,600 28,600 . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes and minority 1,336 1,509 interest . . . . . . . . . . . . . . . . . . . Total liabilities. . . 69,663 60,866 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders' equity: Common stock, $.10 par value, 20,000,000 shares authorized; 9,589,851 and 9,576,913 issued and outstanding at June 29, 1996 and December 30, 1995, respectively . . . . . . . . 959 958 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in- capital . . 49,499 49,278 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized holding gain on 206 379 securities. . . . . . . . . . . . . . . . . . . . . . Retained earnings. . . . . . . . 44,786 40,142 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Translation adjustment . . . . . (397) (52) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders' 95,053 90,705 equity . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and $ 164,71 $ 151,57 stockholders' equity . . . . . . . . . 6 1 . . . . . See accompanying notes. 4 Alamo Group Inc. and Subsidiaries Interim Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) Six Months Ended June July 29, 1, 1996 1995 Operating Activities Net income . . . . . . . . . . . . . . . $ 6,560 $ 5,662 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided (used) by operating activities: Allowance for doubtful accounts . 151 74 . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . 2,225 2,127 . . . . . . . . . . . . . . . . . . . . . . . . Provision for deferred income (53) 166 tax benefit . . . . . . . . . . . . . . . . . . . Realized gain on marketable (370) (337) securities . . . . . . . . . . . . . . . . . . . (Gain)/loss on sale of equipment (98) (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable . . . . . (5,597 (9,871 . . . . . . . . . . . . . . . . . . . . . ) ) . . . . . . Inventories . . . . . . . . . (4,458 (1,807 . . . . . . . . . . . . . . . . . . . . . ) ) . . . . . . . . . Prepaid expenses and other (3,038 (2,602 assets . . . . . . . . . . . . . . . . . ) ) . . . . Trade accounts payable and 3,312 291 accrued liabilities . . . . . . . . . . . Income taxes payable . . . . 2,922 896 . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided (used) by operating 1,556 (5,410 activities . . . . . . . . . . . . . . . ) Investing Activities Acquisitions, net of cash acquired. . . . (4,973 . . . . . . . . . . . . . . . . . . . . . - ) . . . . . Purchase of property, plant and equipment (1,326 (1,078 . . . . . . . . . . . . . . . . . . ) ) Proceeds from sale of property, plant and 134 76 equipment . . . . . . . . . . . Equity method investment. . . . . . . . (1,980 . . . . . . . . . . . . . . . . . . . . . - ) . . . . . Proceeds from sale of marketable 445 361 securities . . . . . . . . . . . . . . . . . . . Net cash provided (used) by investing (747) (7,594 activities . . . . . . . . . . . . . . . ) . . . . . . . . . Financing Activities Net change in bank revolving credit 4,000 13,134 facility . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . (1,916 (1,512 . . . . . . . . . . . . . . . . . . . . . ) ) . . . . . . . Proceeds from sale of common stock . . . 172 225 . . . . . . . . . . . . . . . . . . . . . - Principal payments on long-term debt (940) (773) and capital leases . . . . . . . Proceeds from issuance of long term debt. 318 . . . . . . . . . . . . . . . . . . . . - Cash received from stockholder for purchase of common stock . . . . . 51 . . . . . . . . . . . . . . . . . . . . . - . . . . . . Net cash provided (used) by financing 1,367 11,392 activities . . . . . . . . . . . . . . . Effect of exchange rate changes on cash (8) 78 . . . . . . . . . . . . . . . . . . . . . . Net change in cash and cash equivalents 2,168 (1,534 . . . . . . . . . . . . . . . . . . . . . ) Cash and cash equivalents at beginning of 1,839 1,873 the year . . . . . . . . . . . . . Cash and cash equivalents at end of the $ 4,007 $ 339 period . . . . . . . . . . . . . . . . . Cash paid during the period for: Interest . . . . . . . . . . . . $ 1,125 $ 1,453 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . 2,375 1,881 . . . . . . . . . . . . . . . . . . . . . - . . . . . . . See accompanying notes. 5 Alamo Group Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements - (Unaudited) June 29, 1996 1. Basis of Financial Statement Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ended December, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 30, 1995. 2. Acquisitions and Investments In 1995 the Company acquired the following entities, accounted for as purchase acquisitions: April 27, 1995, M&W Gear Co. ("M&W"); May 12, 1995, Rhino International, Inc. ("Rhino International"); June 29, 1995, N J M Dabekausen Beheer, BV and its subsidiaries ("Dakebausen"); December 6, 1995, Herschel Corporation ("Herschel"). On May 24, 1995, the Company invested $1,980,000 to purchase a 49.5% equity interest in Certified Power Inc. ("CPI"), in a highly leveraged transaction, accounted for under equity accounting rules. 3. Accounts Receivable Accounts Receivable is shown less allowance for doubtful accounts of $1,521,000 and $1,357,000 at June 29, 1996 and December 30, 1995, respectively. 4. Inventories Inventories valued at LIFO cost represented 83% and 67% of total inventory for the periods ended June 29, 1996 and December 30, 1995, respectively. The excess of current costs over LIFO valued inventories was $2,538,000 at June 29, 1996 and $2,618,000 at December 30, 1995. Inventory obsolescence reserves were $4,742,000 at June 29, 1996 and $4,157,000 at December 30, 1995. Net inventories consist of the following (in thousands): June 29, December 30, 1996 1995 Finished goods . . . . . . . $ 52,774 $ 51,613 . . . . . . . . . . . . . . . . . Work in process . . . . . . 5,487 3,234 . . . . . . . . . . . . . . . . . Raw materials. . . . . . . . 4,668 3,777 . . . . . . . . . . . . . . . . . $ 62,929 $ 58,624 An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO must necessarily be based on management's estimates of expected year- end inventory levels and costs. Because these are subject to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. 6 Alamo Group Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements - (Unaudited) June 29, 1996 - (Continued) 5. Common Stock and Dividends The Company completed a public offering of common stock on June 29, 1995 for 2,000,000 shares. Dividends declared and paid on a per share basis were as follows: Three Months Ended Six Months Ended June 29, July 1, June 29, July 1, 1996 1995 1996 1995 Dividends declared . . . . . $ 0.10 $ 0.10 $ 0.20 $ 0.20 . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . $ 0.10 $ 0.10 $ 0.20 $ 0.20 . . . . . . . . . . . . . . . . . . 6. Contingent Matters The Company is subject to various unresolved legal actions which arise in the normal course of its business, the most prevalent of which relate to product liability. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes these unresolved legal actions will not have a material affect on its financial position or results of operations. 7 Alamo Group Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations The following tables set forth, for the periods indicated, certain financial data: Three Months Six Months Ended Ended Sales Data In Thousands June July 1, June July 1, 29, 29, 1996 1995 1996 1995 American Agricultural . . . $ $ $ $ . . . . . . . . . . . . . . 21,751 18,435 44,368 31,170 . . . . . . Governmental . . . 16,311 15,343 27,532 27,442 . . . . . . . . . . . . . . . . . . European . . . . . . . 12,665 11,525 23,873 21,139 . . . . . . . . . . . . . . . . . . . . Total sales, net . . . . . $ $ $ $ . . . . . . . . . . . . . . 50,727 45,303 95,773 79,751 . . . . . Three Months Six Months Ended Ended Cost Trends and Profit June July 1, June July 1, Margins, as Percentages of 29, 29, Net Sales 1996 1995 1996 1995 Gross margin . . . . . . . 28.5 % 27.5 % 25.7 % 26.0 % . . . . . . . . . . . . . . . . . . . Income from operations . . 14.3 % 13.7 % 11.6 % 12.2 % . . . . . . . . . . . . . . . Income before income taxes 13.5 % 12.5 % 10.9 % 11.4 % . . . . . . . . . . . . . . Net income . . . . . . . . 8.3 % 7.8 % 6.8 % 7.1 % . . . . . . . . . . . . . . . . . . . Results of Operations Second Quarter Ended June 29, 1996 Compared to Second Quarter Ended July 1, 1995 Net sales increased $5,424,000, up 12% over 1995's second quarter. This increase is a result of acquisitions (see notes to financial statements) in 1995 and European sales volume increases, partially offset by decreases in sales volume in American operations, particularly in agricultural markets and replacement parts. The acquisitions primarily affected American agricultural sales. The sales volume decreases in American operations were due primarily to harsh weather conditions. Increases in the amounts of costs and expenses are also, generally, related to the acquisitions. Gross margin, up from 27.5% to 28.5 %, increased due to production efficiency programs and price increase effects. Partially offsetting these positive effects were the margin effects of sales volume reductions, particularly in replacement parts, and lower than expected performance from recently acquired companies. The 26% increase in average common shares and equivalents related to the 2,000,000 share June 29, 1995 stock offering. Six Months Ended June 29, 1996 Compared to Six Months Ended July 1, 1995 Net sales increased $16,022,000, up 20%. Acquisitions in 1995 were the primary factor in increases in sales and costs. European operations also contributed to sales growth. Six month results, like the second quarter, were impacted by negative impacts of harsh weather on sales volume, particularly in agricultural markets and replacement parts. Overall, margins and cost ratios were little changed with second quarter improvements generally having offset modest first quarter declines. The first quarter results reflected a 1.7% benefit to the income tax rate related to the calculation of state income taxes. 8 Liquidity and Capital Resources Cash provided by operations was $1,5556,000 for the six-month period ended June 29, 1996, with the net income cash flows for the period substantially offset by net increases in working capital accounts related primarily to seasonal effect. As of June 29, 1996, $34,104,000 was utilized under the Company's $40,000,000 Amended and Restated Revolving Credit and Term Loan Agreement (the "Facility") of which $1,504,000 was for standby letters of credit and $32,600,000 was borrowed under the revolving credit line. The Company's borrowings are seasonal in nature with the greatest utilization of the Facility generally occurring in the spring. The Facility and the Company's ability to internally generate funds from operations should be sufficient to meet the Company's cash requirements in the near future. 9 Alamo Group Inc. and Subsidiaries PART II. OTHER INFORMATION Item 1.Legal Proceedings The Company is subject to various unresolved legal actions which arise in the ordinary course of its business. The most prevalent of such actions relate to product liability. While amounts claimed may be substantial and the ultimate liability with respect to such litigation cannot be determined at this time, the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company's consolidated financial position. Item 4.Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on April 30, 1996, with the following results of elections and approvals Votes Cast __________________________________________ Against/ Abstentions/ For Withheld Non- Votes a.The following Directors were elected to serve until the next Annual Meeting of Stockholders. Donald J. Douglass 8,316,698 25,103 N/A Oran F. Logan 8,316,648 25,153 N/A Joseph C. Graf 8,314,398 27,403 N/A O.S. Simpson, Jr. 8,315,898 25,903 N/A William R. Thomas 8,185,798 156,003 N/A David Morris 8,316,198 25,603 N/A James B. Skaggs 8,316,198 25,603 N/A b.Ernst & Young was approved as the Company's auditors for the 1996 fiscal year. 8,238,970 265 102,566 Item 6.Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are included herein: (11) Statement Re: Computation of Per Share Earnings (b) Reports on Form 8-K None 10 Alamo Group Inc. and Subsidiaries Exhibit (11) - Statement Re: Computation of Per Share Earnings Three Months Six Months Ended Ended June July June July 29, 1, 29, 1, 1996 1995 1996 1995 (000's omitted, except per share data) Primary Average shares outstanding . . . . 9,590 7,563 9,577 7,559 . . . . . . . . . . . . . . . . . . . . Net effect of dilutive stock options -- based on the treasury stock method using average market price . . . . . 109 119 103 108 . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . 9,699 7,682 9,680 7,667 . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income . . . . . . . . . . . . $ $ $ $ . . . . . . . . . . . . . . . . . . 4,234 3,554 6,560 5,662 . . . . . . Per share amount . . . . . . . . . $ $ $ $ . . . . . . . . . . . . . . . . . . .44 .46 .68 .74 . . . . Fully Diluted Average shares outstanding . . . . 9,577 . . . . . . . . . . . . . . . . . . . . Net effect of dilutive stock options -- based on the treasury stock method using the period end market price, if higher than average market price . . . . . 112 . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . 9,689 . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income . . . . . . . . . . . . $ . . . . . . . . . . . . . . . . . . 6,560 . . . . . . Per share amount . . . . . . . . . (1) (1) $ (1) . . . . . . . . . . . . . . . . . . .68 . . . . (1) Not applicable as price at end of the period was lower than the average for the period. 11 Alamo Group Inc. and Subsidiaries SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Alamo Group Inc. (Registrant) /s/ Jim A. Smith Jim A. Smith Executive Vice President and CFO (Principal Accounting and Financial Officer) 12 -----END PRIVACY-ENHANCED MESSAGE-----