-----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, EomQRhvtcU3lT5NDp985lHBhSCOCfRUmkF0FwzXkZaC4diWprFFXISxjxhAxvxFX OagQoVSjPeX2IKLo8FPITg== 0000905148-98-002005.txt : 19981113 0000905148-98-002005.hdr.sgml : 19981113 ACCESSION NUMBER: 0000905148-98-002005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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 SEC ACT: SEC FILE NUMBER: 001-13854 FILM NUMBER: 98744862 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: 78155 10-Q 1 T:\EDGAR\507489.TXT =============================================================================== 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 September 30, 1998 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) (830) 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 October 30, 1998, 9,735,759 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 Nine months ended September 30, 1998 and September 30, 1997......................................................2 Interim Condensed Consolidated Balance Sheets - September 30, 1998 and December 31, 1997................................3 Interim Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 1998 and September 30, 1997.............4 Notes to Interim Condensed Consolidated Financial Statements..........5-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................9-11 PART II. OTHER INFORMATION Item 1. None Item 2. None Item 3. None Item 4. None Item 5. None Item 6. Exhibits and Reports on Form 8-K...................................12 SIGNATURES..................................................................13 Alamo Group Inc. and Subsidiaries Interim Condensed Consolidated Statements of Income (in thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended ----------------------------------- ---------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ---------------- ---------------- --------------- --------------- Net sales...................................... $ 51,024 $ 52,220 $ 160,143 $162,296 Cost of sales.................................. 37,393 36,596 118,964 117,367 ---------------- ---------------- --------------- --------------- Gross profit............................... 13,631 15,624 41,179 44,929 Selling, general and administrative expense.... 10,266 7,900 26,087 22,966 ---------------- ---------------- --------------- --------------- Income from operations..................... 3,365 7,724 15,092 21,963 Interest expense............................... (636) (571) (2,090) (1,756) Interest income................................ 180 152 496 374 Other income (net)............................. 80 331 (139) 276 ---------------- ---------------- --------------- --------------- Income before income taxes................. 2,989 7,636 13,359 20,857 Provision for income taxes..................... 928 2,726 4,900 7,479 ---------------- ---------------- --------------- --------------- Net income................................. $ 2,061 $ 4,910 $ 8,459 $ 13,378 ================ ================ =============== =============== Net income per common share: Basic.......................................... $ 0.21 $ 0.52 $ 0.87 $ 1.39 ================ ================ =============== =============== Diluted........................................ $ 0.21 $ 0.51 $ 0.87 $ 1.38 ================ ================ =============== =============== Average common shares: Basic.......................................... 9,736 9,590 9,707 9,591 ================ ================ =============== =============== Diluted........................................ 9,747 9,687 9,727 9,663 ================ ================ =============== ===============
See accompanying notes. Alamo Group Inc. and Subsidiaries Interim Condensed Consolidated Balance Sheets (in thousands, except share amounts) (Unaudited)
September 30, December 31, 1998 1997 ---------------- ---------------- ASSETS Current assets: Cash and cash equivalents...................................... $ 769 $ 789 Accounts receivable............................................ 52,143 42,165 Inventories.................................................... 72,046 65,752 Deferred income taxes.......................................... 3,035 2,288 Prepaid expenses............................................... 1,517 2,152 ---------------- ---------------- Total current assets......................................... 129,510 113,146 Property, plant and equipment.................................... 55,044 51,693 Less: Accumulated depreciation................................ (32,206) (29,216) ---------------- ---------------- 22,838 22,477 Goodwill......................................................... 12,090 12,632 Other assets..................................................... 4,623 7,869 ---------------- ---------------- Total assets................................................. $ 169,061 $ 156,124 ================ ================ LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Trade accounts payable......................................... $ 14,556 $ 12,787 Income taxes payable........................................... 932 266 Accrued liabilities............................................ 7,860 6,096 Current maturities of long-term debt........................... 598 727 ---------------- ---------------- Total current liabilities.................................... 23,946 19,876 Long-term debt, net of current maturities........................ 30,654 28,617 Deferred income taxes............................................ 1,617 1,366 Stockholders' equity: Common stock, $.10 par value, 20,000,000 shares authorized; 9,735,759 and 9,684,874 issued and outstanding at September 30, 1998 and December 31, 1997, respectively................... 974 968 Additional paid-in capital....................................... 50,502 50,395 Retained earnings................................................ 60,189 54,835 Accumulated other comprehensive income........................... 1,179 67 ---------------- ---------------- Total stockholders' equity................................... 112,844 106,265 ---------------- ---------------- Total liabilities and stockholders' equity................... $ 169,061 $ 156,124 ================ ================
See accompanying notes. Alamo Group Inc. and Subsidiaries Interim Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
Nine Months Ended --------------------------------- September 30, September 30, 1998 1997 -------------- -------------- Operating Activities Net income................................................ $ 8,459 $ 13,378 Adjustment to reconcile net income to net cash provided (used) by operating activities: Provision for doubtful accounts...................... 593 542 Depreciation......................................... 2,897 2,763 Amortization......................................... 1,041 1,049 Provision for deferred income tax benefit............ (492) - Realized gain on marketable securities............... - (70) Gain on sale of equipment............................ (20) (125) Changes in operating assets and liabilities: Accounts receivable.................................. (10,109) (4,213) Inventories.......................................... (5,810) (2,530) Prepaid expenses and other assets.................... 3,648 (1,489) Trade accounts payable and accrued liabilities....... 3,210 2,145 Income taxes payable................................. 613 1,536 -------------- -------------- Net cash provided (used) by operating activities 4,030 12,986 Investing Activities Purchase of property, plant and equipment................. (3,069) (3,333) Proceeds from sale of property, plant and equipment....... 178 189 Proceeds from sale of marketable securities - 150 -------------- -------------- Net cash (used) by investing activities (2,891) (2,994) Financing Activities Net change in bank revolving credit facility.............. 2,300 (7,500) Principal payments on long-term debt and capital leases... (609) (462) Dividends paid............................................ (3,105) (2,878) Proceeds from sale of common stock........................ 113 201 Cost of common stock repurchased.......................... - (489) -------------- -------------- Net cash provided (used) by financing activities (1,301) (11,128) Effect of exchange rate changes on cash................... 142 (194) -------------- -------------- Net change in cash and cash equivalents................... (20) (1,330) Cash and cash equivalents at beginning of the period...... 789 2,228 -------------- -------------- Cash and cash equivalents at end of the period............ $ 769 $ 898 ============= ============== Cash paid during the period for: Interest.................................................. $ 1,968 $ 1,682 Income taxes.............................................. $ 5,031 $ 5,494
See accompanying notes. Alamo Group Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements - (Unaudited) September 30, 1998 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, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1997. 2. Accounts Receivable Accounts Receivable is shown less allowance for doubtful accounts of $2,107,000 and $1,840,000 at September 30, 1998 and December 31, 1997, respectively. 3. Inventories Inventories valued at LIFO cost represented 83% and 81% of total inventory at each of September 30, 1998 and December 31, 1997, respectively. The excess of current costs over LIFO valued inventories were $3,208,000 and $3,310,000 at September 30, 1998 and December 31, 1997, respectively. Inventory obsolescence reserves were $4,056,000 at September 30, 1998 and $3,779,000 at December 31, 1997. Net inventories consist of the following (in thousands): September 30, December 31, 1998 1997 ---------------- ---------------- Finished goods.......................... $ 60,993 $ 57,804 Work in process......................... 5,907 3,792 Raw materials........................... 5,146 4,156 ================ ================ $ 72,046 $ 65,752 ================ ================ 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. Alamo Group Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements - (Unaudited) September 30, 1998 - (Continued) 4. Common Stock and Dividends Dividends declared and paid on a per share basis were as follows:
Three Months Ended Nine Months Ended --------------------------------- ---------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 ---------------- ---------------- ---------------- ---------------- Dividends declared........................ $ 0.11 $ 0.10 $ 0.32 $ 0.30 Dividends paid............................ $ 0.11 $ 0.10 $ 0.32 $ 0.30
5. Earnings Per Share In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented and, where appropriate, restated to conform to the Statement 128 requirements. The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net income per common share. Net income for basic and diluted calculations do not differ. (In thousands, except per share).
Three Months Ended Nine Months Ended --------------------------------- ---------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 --------------- --------------- --------------- ---------------- Net Income.................................. $ 2,061 $ 4,910 $ 8,459 $ 13,378 =============== ================ =============== =============== Average Common Shares:...................... BASIC (weighted-average outstanding shares).................................. 9,736 9,590 9,707 9,591 Dilutive potential common shares from . stock options and warrants.................. 11 97 20 72 --------------- ---------------- --------------- --------------- DILUTED (weighted-average outstanding shares) 9,747 9,687 9,727 9,663 =============== ================ =============== =============== Basic earnings per share.................... $ 0.21 $ 0.52 $ 0.87 $ 1.39 =============== ================ =============== =============== Diluted earnings per share.................. $ 0.21 $ 0.51 $ 0.87 $ 1.38 =============== ================ =============== ===============
Alamo Group Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements - (Unaudited) September 30, 1998 - (Continued) 6. New Accounting Standards and Disclosures Disclosures About Segments of an Enterprise and Related Information. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information." Statement 131 specifies the computation, presentation and disclosure requirements for business segment information, and requires that segments be identified based on, among other factors, reporting used by the Company's management in evaluating key business decisions. Statement 131 supersedes Statement 14, "Financial Reporting for Segments of a Business Enterprise." Statement 131 is effective for the Company's financial statements for the year ended December 31, 1998. The adoption of Statement 131 will not have a material impact on the Company. Derivative Financial Instruments Accounting Policy Disclosure Requirements and Market Risk Disclosure Rules. During 1997, the Securities and Exchange Commission issued expanded disclosure requirements of accounting policies for derivative financial instruments and the exposure to market risks. The new rules require enhanced descriptions of specific aspects of a registrant's accounting policies for derivatives as well as qualitative and quantitative disclosures about each type of market risk. The increased policy disclosures on derivatives were effective for all public companies for periods ending after June 15, 1997. The qualitative and quantitative market risk disclosures must be provided in all filings that include audited financial statements for fiscal years ending after June 15, 1998. The Company expects compliance with these requirements to have no material impact on the Company's consolidated results of operations, financial position, or cash flows. Accounting for Derivative Instruments and Hedging Activities. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is required to be adopted in years beginning after June 15, 1999. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of the new Statement will have a significant effect on earnings or the financial position of the Company. 7. Comprehensive Income As of January 1, 1998, the Company adopted Statement 130, Reporting Comprehensive Income. The adoption of this Statement has no impact on net income or shareholders' equity. Statement 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were reported in Shareholders' Equity, to be included, along with Net Income, in Comprehensive Income. Prior years data have been conformed to the requirements of Statement 130. During the third quarter of 1998 and 1997, the Company's Comprehensive Income was $3,067,000 and $4,218,000, respectively, and for the nine months ended September 30, 1998 and 1997, it was $9,571,000 and $11,244,000, respectively. Alamo Group Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements - (Unaudited) September 30, 1998 - (Continued) The components of Comprehensive Income, net of related tax, are as follows (in thousands):
Three Months Ended Nine Months Ended --------------------------------- --------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 --------------- --------------- --------------- --------------- Net Income....................................... $ 2,061 $ $ 8,459 $ 4,910 13,378 Unrealized gains on securities................... - (49) - (90) Foreign currency translation adjustments......... 1,006 (643) 1,112 (2,044) --------------- --------------- --------------- --------------- Comprehensive Income............................. $ 3,067 $ 4,218 $ 9,571 $ 11,244 =============== =============== =============== ===============
The components of Accumulated Other Comprehensive Income are as follows (in thousands): September 30, December 31, 1998 1997 ------------- ----------- Unrealized gains or securities................ $ - $ - Foreign currency translaction adjustments..... 1,179 67 ============= =========== Accumulated other comprehensive income........ $1,179 $ 67 ============= =========== 8. Contingent Matters 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 which are generally covered by insurance. 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. The Company is involved in a lawsuit between Rhino International and certain of its dealers and former dealers. This lawsuit involved claims against Rhino International totaling $3.8 million. In April, a judgment was entered requiring the Company to pay $110,000, net of its recovery. The judgment is being appealed by both parties. While the ultimate outcome of this matter cannot be determined at this time, the Company believes this matter will not have a material adverse effect on the Company's consolidated financial position. After September 30, 1998, the Company settled certain other litigation relating to the Company's acquisition of Rhino International. The cost to the Company of the settlement of this litigation is reflected in selling, general and administrative expense as of September 30, 1998. (A) 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 Ended Nine Months Ended -------------------------------- -------------------------------- Sales Data In Thousands September 30, September 30, September 30, September 30, 1998 1997 1998 1997 --------------- --------------- --------------- --------------- American Agricultural............................. $ 23,486 $ 25,494 $ 78,930 $ 79,722 Industrial............................... 16,502 15,406 48,698 44,790 European..................................... 11,036 11,320 32,515 37,784 --------------- --------------- --------------- --------------- Total sales, net......................... $ 51,024 $ 52,220 $ 160,143 $ 162,296 =============== =============== =============== ===============
Three Months Ended Nine Months Ended -------------------------------- -------------------------------- Cost Trends and Profit Margin, as September 30, September 30, September 30, September 30, Percentages of Net Sales 1998 1997 1998 1997 --------------- --------------- --------------- --------------- Gross margin................................ 26.7% 29.9 % 25.7% 27.7% Income from operations...................... 6.6% 14.8 % 9.4% 13.5% Income before income taxes.................. 5.9% 14.6 % 8.3% 12.9% Net income.................................. 4.0% 9.4 % 5.3% 8.2%
Results of Operations Three Months Ended September 30, 1998 Compared to Three Months Ended September 30, 1997 Net sales for the third quarter of 1998 were $51,024,000, a decrease of $1,196,000 or 2.3% compared to $52,220,000 for the same quarter last year. Domestic agricultural sales for the third quarter of 1998 were $23,486,000 compared to $25,494,000 for the third quarter of 1997, representing a $2,008,000 or 8.5% decrease due primarily to severe drought conditions in the Company's major domestic markets which reduced replacement part sales in such markets, a decrease in sales from the Company's Chinese tractor import operations (which are included in the Company's domestic agricultural sales) and what the Company believes is the beginning of a cyclical decline in the domestic agricultural market. Domestic industrial sales for the third quarter of 1998 were $16,502,000, an increase of $1,096,000 or 7.1% compared to $15,406,000 for the same quarter last year as a result of continued strength in customer orders. European sales for the third quarter of 1998 were $11,036,000, a decrease of $284,000 or 2.5% compared to $11,320,000 for the same quarter last year. The decrease in European sales was primarily due to continued weakness in farm income in the United Kingdom and the impact on sales and margins of currency movements, particularly the strength of the British Pound against the French Franc which negatively impacted sales of the Company's U.K. manufactured products. Although currency exposure continues, European sales showed some firming in the quarter. The cost of sales in the third quarter of 1998 was $37,393,000 or 73.3% of net sales compared to $36,596,000 or 70.1% of net sales in the third quarter of 1997. Selling, general and administrative expenses in the third quarter of 1998 were $10,266,000 or 20.1% of net sales compared to $7,900,000 or 15.1% of net sales for the third quarter of 1997. The increase in selling, general and administrative expenses of $2,366,000 was primarily attributable to the settlement of certain litigation relating to the Company's Rhino International subsidiary, which conducts the Company's Chinese tractor import operations. (A) Alamo Group Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) These operations have seen a decline in sales and profitability related to market factors. Operating losses and costs of certain litigation relating to Rhino International reduced the Company's diluted earnings per share by $0.18 per share for the quarter ended September 30, 1998 and $0.30 per share for the nine months ended September 30, 1998. Rhino International was acquired by the Company in 1995 and its operations are not related to the Company's core business. With the litigation related to the acquisition of Rhino International now settled, the Company is analyzing various strategic options for Rhino International that could result in a special charge in the fourth quarter of 1998. Net interest expense was $456,000 in the third quarter of 1998 compared to $419,000 in the third quarter of 1997. Net income for the third quarter of 1998 was $2,061,000 or $.21 per share compared to $4,910,000 or $.51 per share for the third quarter of 1997 as a result of the factors described above. Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30, 1997 Net sales for the first nine months of 1998 were $160,143,000, a decrease of $2,153,000 or 1.3% compared to $162,296,000 for the same period last year. Domestic agricultural sales were $78,930,000 compared to $79,722,000 for the first nine months of 1997, representing a $792,000 or 1.0% decrease in domestic agricultural sales. Domestic industrial sales for the first nine months of 1998 were $48,698,000, an increase of $3,908,000 or 8.7% compared to $44,790,000 for the first nine months last year. European sales for the first nine months of 1998 were $32,515,000, a decrease of $5,269,000 or 13.9% compared to $37,784,000 for the first nine months last year. In addition to the factors described for the third quarter, sales and profitability in both the first and second quarters were negatively impacted by a decrease in sales in such quarters (compared to the prior year's periods) in both the Company's European operations and Chinese tractor import operations. Sales in the first quarter were also negatively impacted by production shortfalls in the Company's U.S. Operations arising largely from late deliveries from certain of the Company's suppliers. The cost of sales in the first nine months of 1998 was $118,964,000 or 74.3% of net sales compared to $117,367,000 or 72.3% of net sales in the first nine months of 1997. Selling, general and administrative expenses in the first nine months of 1998 were $26,087,000 or 16.3% of net sales compared to $22,966,000 or 14.2% of net sales for the first nine months of 1997. The increase for the nine months ended September 30, 1998 was primarily attributable to the factors discussed for the third quarter above. Net interest expense was $1,594,000 in the first nine months of 1998 compared to $1,382,000 in the first nine months of 1997. Net income for the first nine months of 1998 was $8,459,000 or diluted earnings per share of $.87 compared to $13,378,000 or diluted earnings per share of $1.38 per share for the first nine months of 1997 as a result of the factors described above. Liquidity and Capital Resources Net cash provided by operating activities was $4,030,000 for the first nine months of 1998 compared to $12,986,000 for the first nine months of 1997. The Interim Condensed Consolidated Balance Sheet at September 30, 1998 reflects net increases over December 31, 1997 in accounts receivable and inventories of $9,978,000 and $6,294,000, respectively. The increase in accounts receivable is largely attributable to changes in the Company's marketing programs while the increase in inventories is a result of decreased sales due to pervasive drought (A) Alamo Group Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) conditions in the Company's major domestic markets, seasonal effects and increased stocking of replacement parts in warehouses. As of September 30, 1998, $26,331,000 was utilized under the Company's $45,000,000 bank revolving credit facility, of which $2,031,000 was for standby letters of credit and $24,300,000 was borrowed. The Company's borrowings are seasonal in nature with the greatest utilization generally occurring in the first quarter and early spring. The bank credit 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. Year 2000 Many of the world's computer systems (including those in non-information technology equipment and systems) currently record years in a two-digit format. If not addressed, such computer systems will be unable to properly interpret dates beyond the year 1999, which could lead to business disruptions in the U.S. and internationally (the "Year 2000" issue). The potential costs and uncertainties associated with the Year 2000 issue will depend on a number of factors, including software, hardware and the nature of the industry in which a company operates. Additionally, companies must coordinate with other entities with which they electronically interact. Any of the Company's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. The Company does not believe that the impact of the recognition of the year 2000 by its information and operating technology systems will have a material adverse effect on the Company's financial condition and results of operations. The majority of any necessary system changes will be upgraded in the normal course of business. The Company has initiated formal communications with all of its significant suppliers and customers to determine the extent to which the Company could be vulnerable to those third parties' failure to remediate their own year 2000 issues. There can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. The total cost of the modifications and upgrades to date has not been material. Although no assurances can be given as to the Company's compliance, particularly as it relates to third-parties, including governmental entities, based upon the progress to date, the Company does not expect that either future costs of modifications or the consequences of any unsuccessful modifications will have a material adverse effect on the Company's financial position or results of operations. Accordingly, the Company believes that the most reasonably likely worst case Year 2000 scenario would not have a material adverse effect on the Company's financial position or results of operations. Forward Looking Statements Certain information included in Management's Discussion and Analysis of Financial Condition and Results of Operations constitute forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in such forward looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Additionally, the Company's financial results are sensitive to movement in interest rates and foreign currencies, as well as general and industry specific economic conditions, weather conditions, pricing and product actions taken by competitors, production disruptions and changes in environmental, international trade and other laws impact (A) Alamo Group Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) the way in which it conducts its business. Dealer's end users sales of replacement parts are especially effected by unusual weather conditions. (B) Alamo Group Inc. and Subsidiaries PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are included herein: (27.1) Financial Data Schedule (b) Reports on Form 8-K (1) A report on Form 8-K dated August 20, 1998 containing Items 5 and 7. 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) By:/s/ Jim A. Smith Jim A. Smith Executive Vice President and CFO (Principal Accounting and Financial Officer) EX-27 2 FDS
5 1000 U.S. DOLLARS 9-MOS DEC-31-1998 JUL-30-1998 SEP-30-1998 1 769 0 52,143 0 72,046 129,510 55,044 32,206 169,061 23,946 0 0 0 974 111,870 169,061 160,143 160,143 118,964 118,964 25,948 0 1,594 13,359 4,900 8,459 0 0 0 8,459 .87 .87
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