Alamo (ALG) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) The unaudited interim financial statements for the period ended September 30, 2023, show significant growth compared to the prior year, with total assets increasing to $1.46 billion, net sales rising 13% to $1.27 billion, and net income surging 44% to $104.6 million, resulting in a diluted EPS of $8.73 Interim Condensed Consolidated Balance Sheets As of September 30, 2023, the company's balance sheet reflects growth, with total assets reaching $1.46 billion, up from $1.31 billion at the end of 2022, driven by increased current assets, cash, receivables, and inventories, while total liabilities and stockholders' equity also grew Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $1,455,514 | $1,308,508 | +11.2% | | Cash and cash equivalents | $113,534 | $47,016 | +141.5% | | Accounts receivable, net | $378,107 | $317,581 | +19.1% | | Inventories, net | $371,748 | $352,553 | +5.4% | | Total Liabilities | $567,780 | $523,148 | +8.5% | | Total debt | $323,900 | $301,952 | +7.3% | | Total Stockholders' Equity | $887,734 | $785,360 | +13.0% | Interim Condensed Consolidated Statements of Income The company reported strong year-over-year growth in both the third quarter and the first nine months of 2023, with net sales increasing by 12.9% to $1.27 billion and net income rising by 43.8% to $104.6 million for the nine-month period Q3 2023 vs Q3 2022 Performance (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $419,644 | $368,793 | +13.8% | | Gross Profit | $114,143 | $92,365 | +23.6% | | Income from Operations | $49,753 | $35,840 | +38.8% | | Net Income | $34,915 | $25,821 | +35.2% | | Diluted EPS | $2.91 | $2.16 | +34.7% | Nine Months 2023 vs 2022 Performance (in thousands, except per share data) | Metric | Nine Months 2023 | Nine Months 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $1,272,109 | $1,127,012 | +12.9% | | Gross Profit | $344,724 | $278,723 | +23.7% | | Income from Operations | $153,169 | $105,875 | +44.7% | | Net Income | $104,638 | $72,763 | +43.8% | | Diluted EPS | $8.73 | $6.10 | +43.1% | - Dividends declared per share increased to $0.22 in Q3 2023 from $0.18 in Q3 2022, a 22.2% increase[10] Interim Condensed Consolidated Statements of Comprehensive Income For the nine months ended September 30, 2023, comprehensive income was $104.5 million, a significant increase from $33.2 million in the prior-year period, primarily driven by higher net income and a minimal other comprehensive loss of $0.2 million - Foreign currency translation adjustments had a much smaller negative impact in the first nine months of 2023, resulting in a loss of $0.6 million, compared to a loss of $43.1 million in the same period of 2022[13] Interim Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased by $102.4 million during the first nine months of 2023, reaching $887.7 million, primarily driven by net income of $104.6 million, partially offset by dividends paid of $7.9 million Changes in Stockholders' Equity (Nine Months Ended Sep 30, 2023, in thousands) | Component | Amount | | :--- | :--- | | Balance at Dec 31, 2022 | $785,360 | | Net Income | +$104,638 | | Other Comprehensive Loss | -$159 | | Dividends Paid | -$7,861 | | Stock-based compensation | +$7,753 | | Balance at Sep 30, 2023 | $887,734 | Interim Condensed Consolidated Statements of Cash Flows For the first nine months of 2023, the company generated $77.0 million in cash from operating activities, a significant turnaround from a $21.2 million use of cash in the same period of 2022, resulting in a $66.5 million increase in cash and cash equivalents Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $77,031 | $(21,179) | | Net cash used in investing activities | $(23,957) | $(24,972) | | Net cash provided by financing activities | $14,266 | $87,239 | | Net change in cash and cash equivalents | $66,518 | $33,193 | Notes to Interim Condensed Consolidated Financial Statements The notes provide details on key financial statement components, including increased inventories to $371.7 million, stable goodwill at $195.9 million, total debt rising to $323.9 million, and a significant subsequent acquisition of Royal Truck & Equipment, Inc. for approximately $28 million - Net inventories increased to $371.7 million at September 30, 2023, from $352.6 million at December 31, 2022, with finished goods making up the largest component[25][26] - Total debt stood at $323.9 million as of September 30, 2023, with $312.6 million in available borrowings under the bank revolving credit facility[37] Segment Performance (Nine Months Ended Sep 30, in thousands) | Segment | Net Sales 2023 | Net Sales 2022 | Income from Ops 2023 | Income from Ops 2022 | | :--- | :--- | :--- | :--- | :--- | | Vegetation Management | $764,683 | $704,520 | $102,320 | $78,261 | | Industrial Equipment | $507,426 | $422,492 | $50,849 | $27,614 | - On October 10, 2023, the Company acquired Royal Truck & Equipment, Inc. for approximately $28 million, marking an entry into the highway safety equipment market[48] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong performance in the first nine months of 2023 to robust customer demand, effective pricing actions, and improved manufacturing efficiencies, resulting in 13% net sales growth and 44% net income increase, while maintaining a strong liquidity position - For the first nine months of 2023, net sales increased by 13% and net income by 44% compared to the same period in 2022, driven by strong customer demand, positive pricing, and cost discipline[53] - The company's backlog at the end of the first nine months of 2023 was $890.9 million, slightly down from $908.9 million at the same point in 2022[55] Profitability Margins | Margin (% of Net Sales) | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Gross profit | 27.1% | 24.7% | | Income from operations | 12.0% | 9.4% | | Net income | 8.2% | 6.5% | Results of Operations Comparing the first nine months of 2023 to 2022, net sales rose 13% to $1.27 billion, gross profit increased by $66.0 million to $344.7 million with margin expanding from 25% to 27%, and net income increased by $31.8 million to $104.6 million despite nearly doubled interest expense - In Q3 2023, net sales increased 14% YoY to $419.6 million, driven by strong demand and pricing, with Vegetation Management sales growing 8% and Industrial Equipment sales growing 23%[57][58][60] - Gross profit margin for the first nine months of 2023 improved to 27% from 25% in the prior year period, attributed to higher sales volume, positive pricing, and improved efficiencies as supply chain conditions eased[66] - Interest expense for the first nine months of 2023 increased to $19.5 million from $9.6 million in the prior year, mainly due to higher interest rates[67] Liquidity and Capital Resources The company's liquidity remains strong, with working capital increasing by $117.3 million to $654.0 million as of September 30, 2023, and significant available borrowings of $312.6 million under its $655.0 million credit agreement - Working capital was $654.0 million at September 30, 2023, an increase of $117.3 million from year-end 2022, driven by volume and inflation-related increases in accounts receivable and inventory[71] - The company's 2022 Credit Agreement provides for $655.0 million in financing, consisting of a $255.0 million Term Facility and a $400.0 million Revolver Facility, expiring in October 2027[74] - As of September 30, 2023, $325.0 million was outstanding under the credit agreement, and the company was in compliance with all financial covenants[74] Item 3. Quantitative and Qualitative Disclosures About Market Risks The company is exposed to market risks primarily from foreign currency fluctuations and interest rate changes, with a hypothetical 10% strengthening of the U.S. dollar impacting gross profit by an estimated $9.6 million and a two-percentage-point change in interest rates altering Q3 interest expense by approximately $1.6 million - A uniform 10% strengthening of the U.S. dollar relative to currencies in which the company operates would result in a change in gross profit of $9.6 million for the nine months ended September 30, 2023[88] - A two percentage point change in the average interest rate on variable-rate borrowings would have changed the company's Q3 2023 interest expense by approximately $1.6 million[89] Item 4. Controls and Procedures Based on management's evaluation, including the CEO and CFO, the company's disclosure controls and procedures were effective as of the end of the reporting period, with no material changes to internal control over financial reporting during the last fiscal quarter - The President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the end of the reporting period[92] - No material changes to internal control over financial reporting occurred during the last fiscal quarter[93] PART II. OTHER INFORMATION Item 1. Legal Proceedings The report refers to the company's Annual Report on Form 10-K for the year ended December 31, 2022, for a description of legal proceedings - For information on legal proceedings, the company directs readers to its 2022 Form 10-K[93] Item 1A. Risk Factors There have been no material changes from the risk factors that were previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors have occurred since the filing of the 2022 Form 10-K[93] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its common stock during the three months ended September 30, 2023, with approximately $25.9 million remaining for purchase under its publicly announced repurchase plan Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Dollar Value Remaining for Purchase | | :--- | :--- | :--- | :--- | | July 2023 | — | — | $25,861,222 | | August 2023 | — | — | $25,861,222 | | September 2023 | — | — | $25,861,222 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[94] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[95] Item 5. Other Information The company did not file any reports on Form 8-K during the quarter, and no directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the period - No Form 8-K reports were filed during the period[95] - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the reporting period[96] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, which include certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files - Exhibits filed include CEO and CFO certifications and XBRL interactive data files[97]