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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020
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 or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

 1627 East Walnut, Seguin, Texas  78155
(Address of principal executive offices, including zip code)
 
830-379-1480
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, par value
$.10 per share
ALG New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At July 24, 2020, 11,864,170 shares of common stock, $.10 par value, of the registrant were outstanding.


1






































Alamo Group Inc. and Subsidiaries
 
INDEX
 
                                                                                                                                                                              
PART I.
FINANCIAL INFORMATION
PAGE
Item 1.
Interim Condensed Consolidated Financial Statements  (Unaudited)
3
June 30, 2020 and December 31, 2019
4
Three and Six Months Ended June 30, 2020 and June 30, 2019
5
Three and Six Months Ended June 30, 2020 and June 30, 2019
6
Three and Six Months Ended June 30, 2020 and June 30, 2019
7
Six Months Ended June 30, 2020 and June 30, 2019
8
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits

2






































Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Balance Sheets
(Unaudited) 
 
(in thousands, except share amounts)
June 30, 2020 December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$ 82,002    $ 42,311   
Accounts receivable, net
229,714    237,837   
Inventories, net
248,706    267,674   
Prepaid expenses and other current assets
7,625    10,099   
Income tax receivable
4,066    12,907   
Total current assets
572,113    570,828   
Rental equipment, net
48,583    56,467   
Property, plant and equipment
302,219    302,113   
Less:  Accumulated depreciation
(146,009)   (141,388)  
Total property, plant and equipment, net
156,210    160,725   
Goodwill
195,457    198,022   
Intangible assets, net
198,925    206,272   
Deferred income taxes
815    1,078   
Other non-current assets
17,585    19,371   
Total assets
$ 1,189,688    $ 1,212,763   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
$ 63,417    $ 81,986   
Income taxes payable
2,619    2,362   
Accrued liabilities
52,615    59,686   
Current maturities of long-term debt and finance lease obligations
15,072    18,840   
Total current liabilities
133,723    162,874   
Long-term debt and finance lease obligations, net of current maturities
423,723    425,141   
Long-term tax liability
6,778    7,432   
Deferred pension liability
1,464    1,844   
Other long-term liabilities
25,361    19,254   
Deferred income taxes
21,488    26,461   
Stockholders’ equity:
Common stock, $0.10 par value, 20,000,000 shares authorized; 11,786,895 and 11,752,509 outstanding at June 30, 2020 and December 31, 2019, respectively
1,179    1,175   
Additional paid-in-capital
115,594    113,666   
Treasury stock, at cost; 82,600 shares at June 30, 2020 and December 31, 2019, respectively
(4,566)   (4,566)  
Retained earnings
525,778    500,320   
Accumulated other comprehensive loss
(60,834)   (40,838)  
Total stockholders’ equity
577,151    569,757   
Total liabilities and stockholders’ equity
$ 1,189,688    $ 1,212,763   

See accompanying notes.
3






































Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Income
(Unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except per share amounts) 2020 2019 2020 2019
Net sales:
Industrial
$ 182,257    $ 194,304    $ 412,232    $ 367,834   
Agricultural
86,378    90,882    170,851    179,286   
Total net sales 268,635    285,186    583,083    547,120   
Cost of sales 200,810    212,053    436,318    410,679   
Gross profit 67,825    73,133    146,765    136,441   
Selling, general and administrative expenses 41,551    42,670    92,799    82,517   
Amortization expense 3,613    1,114    7,449    1,969   
Income from operations
22,661    29,349    46,517    51,955   
Interest expense (3,941)   (1,935)   (9,460)   (3,385)  
Interest income 306    330    662    503   
Other income (expense), net (1,288)   (295)   1,053    (684)  
Income before income taxes
17,738    27,449    38,772    48,389   
Provision for income taxes 4,749    6,782    10,255    12,469   
Net Income
$ 12,989    $ 20,667    $ 28,517    $ 35,920   
Net income per common share:
Basic
$ 1.10    $ 1.76    $ 2.42    $ 3.07   
Diluted
$ 1.10    $ 1.75    $ 2.41    $ 3.05   
Average common shares:
Basic
11,778    11,726    11,769    11,712   
Diluted
11,842    11,798    11,835    11,787   
Dividends declared $ 0.13    $ 0.12    $ 0.26    $ 0.24   
 
 See accompanying notes.
 
4






































Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2020 2019 2020 2019
Net income $ 12,989    $ 20,667    $ 28,517    $ 35,920   
Other comprehensive income (loss):
Foreign currency translation adjustment
5,604    1,194    (14,850)   1,914   
Net gain on pension and other post-retirement benefits
246    215    492    430   
Unrealized losses on derivative instruments
(1,144)   (12)   (5,534)   (12)  
Other comprehensive income (loss) before income tax expense
4,706    1,397    (19,892)   2,332   
Income tax expense related to items of other comprehensive income (52)   (45)   (104)   (90)  
Other comprehensive income (loss)
4,654    1,352    (19,996)   2,242   
Comprehensive income $ 17,643    $ 22,019    $ 8,521    $ 38,162   

See accompanying notes.


5







































Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Stockholders’ Equity
 (Unaudited)


For six months ended June 30, 2020
Common Stock
Additional
Paid-in Capital
Treasury Stock Retained Earnings
Accumulated
Other
Comprehensive Loss
Total Stock-
holders’ Equity
(in thousands)
Shares Amount
Balance at December 31, 2019 11,670    $ 1,175    $ 113,666    $ (4,566)   $ 500,320    $ (40,838)   $ 569,757   
Other comprehensive income
—    —    —    —    15,528    (24,650)   (9,122)  
Stock-based compensation expense
—    —    933    —    —    —    933   
Stock-based compensation transactions
    368    —    —    —    369   
Dividends paid ($0.13 per share)
—    —    —    —    (1,528)   —    (1,528)  
Balance at March 31, 2020 11,679    $ 1,176    $ 114,967    $ (4,566)   $ 514,320    $ (65,488)   $ 560,409   
Other comprehensive income —    —    —    —    12,989    4,654    17,643   
Stock-based compensation expense
—    —    1,103    —    —    —    1,103   
Stock-based compensation transactions
25      (476)   —    —    —    (473)  
Dividends paid ($0.13 per share)
—    —    —    —    (1,531)   —    (1,531)  
Balance at June 30, 2020 11,704    $ 1,179    $ 115,594    $ (4,566)   $ 525,778    $ (60,834)   $ 577,151   



For six months ended June 30, 2019
Common Stock
Additional Paid-in Capital
Treasury Stock Retained Earnings
Accumulated
Other
Comprehensive Loss
Total Stock-
holders’ Equity
(in thousands) Shares Amount
Balance at December 31, 2018 11,620    $ 1,166    $ 108,422    $ (426)   $ 443,040    $ (44,831)   $ 507,371   
Other comprehensive income
—    —    —    —    15,253    890    16,143   
Stock-based compensation expense
—    —    627    —    —    —    627   
Repurchased shares (15)   —    —    (1,490)   —    —    (1,490)  
Stock-based compensation transactions
11      236    —    —    —    237   
  Dividends paid ($0.12 per share)
—    —    —    —    (1,404)   —    (1,404)  
Balance at March 31, 2019 11,616    $ 1,167    $ 109,285    $ (1,916)   $ 456,889    $ (43,941)   $ 521,484   
Other comprehensive income —    —    —    —    20,667    1,352    22,019   
Stock-based compensation expense
—    —    948    —    —    —    948   
Repurchased shares (15)   —    —    (1,465)   —    —    (1,465)  
Stock-based compensation transactions
64      1,243    —    —    —    1,250   
Dividends paid ($0.12 per share)
—    —    —    —    (1,404)   —    (1,404)  
Balance at June 30, 2019 11,665    $ 1,174    $ 111,476    $ (3,381)   $ 476,152    $ (42,589)   $ 542,832   


See accompanying notes.

6






































Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
(in thousands) 2020 2019
Operating Activities
Net income $ 28,517    $ 35,920   
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts
416    157   
Depreciation - Property, plant and equipment
9,407    6,868   
Depreciation - Rental equipment
5,158    4,323   
Amortization of intangibles
7,449    1,969   
Amortization of debt issuance
334    110   
Stock-based compensation expense
2,036    1,575   
Provision for deferred income tax (benefit) expense (3,328)   2,306   
Gain on sale of property, plant and equipment
(883)   (284)  
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
3,408    (32,377)  
Inventories
15,283    (11,023)  
Rental equipment
2,726    (11,862)  
Prepaid expenses and other assets
2,834    (3,393)  
Trade accounts payable and accrued liabilities
(23,913)   5,555   
Income taxes payable
9,192    (477)  
Long-term tax payable (654)   258   
Other assets and long-term liabilities, net
728    1,274   
Net cash provided by operating activities
58,710    899   
Investing Activities
Acquisitions, net of cash acquired —    (52,499)  
Purchase of property, plant and equipment (12,545)   (12,423)  
Proceeds from sale of property, plant and equipment 3,163    661   
Net cash used in investing activities (9,382)   (64,261)  
Financing Activities
Borrowings on bank revolving credit facility 89,000    122,000   
Repayments on bank revolving credit facility (83,000)   (41,000)  
Principal payments on long-term debt and finance leases (11,320)   (76)  
Proceeds from issuance of long-term debt and finance leases —    38   
Dividends paid (3,059)   (2,808)  
Proceeds from exercise of stock options 606    2,077   
Treasury stock repurchased —    (2,955)  
Common stock repurchased (710)   (590)  
Net cash (used in) provided by financing activities (8,483)   76,686   
Effect of exchange rate changes on cash and cash equivalents (1,154)   823   
Net change in cash and cash equivalents 39,691    14,147   
Cash and cash equivalents at beginning of the year 42,311    34,043   
Cash and cash equivalents at end of the period $ 82,002    $ 48,190   
Cash paid during the period for:
Interest
$ 10,545    $ 3,285   
Income taxes
4,137    10,035   
See accompanying notes.
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Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements - (Unaudited)
June 30, 2020
 
1.  Basis of Financial Statement Presentation

General

The accompanying unaudited interim condensed consolidated financial statements of Alamo Group Inc. and its subsidiaries (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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 U.S. GAAP 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 ending December 31, 2020.  The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  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, 2019 (the "2019 10-K").

Accounting Pronouncements Adopted on January 1, 2020

In August 2018, the FASB issued Accounting Statement Update (ASU) No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosure requirements on fair value measurements. Among other things, the amendments added disclosures for changes in unrealized gains and losses on Level 3 fair value measurements and required additional disclosures on unobservable inputs associated with Level 3 assets. The guidance became effective for us on January 1, 2020. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” to improve information on credit losses for financial instruments. The ASU replaces the previous incurred loss impairment methodology with a methodology that reflects expected credit losses. This guidance became effective for us on January 1, 2020. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued Accounting Statement Update (ASU) No. 2018-14, “Compensation, Defined Benefit Plans", which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The update removes certain disclosures that are no longer considered cost beneficial and adds disclosure requirements identified as relevant. The guidance will become effective for us on January 1, 2021 with early adoption permitted for any financial statements that have not been issued. The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” to simplify the accounting for income taxes. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The guidance will become effective for us on January 1, 2021 with early adoption permitted for any financial statements that have not been issued. The impacts that adoption of the ASU is expected to have on our financial disclosures is being evaluated.


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2.  Business Combinations

Morbark, LLC.

On October 24, 2019, the Company completed the acquisition of 100% of the outstanding capital shares of Morbark, LLC. ("Morbark") a former portfolio company of Stellex Capital Management. Morbark manufacturers equipment and aftermarket parts for forestry, tree maintenance, biomass, land management and recycling markets. These products are marketed under the Morbark, Rayco, Denis Cimaf and Boxer Equipment brand names. The total consideration for the purchase was approximately $354.0 million on a debt free basis and subject to certain post-closing adjustments.

The primary reason for the acquisition was to expand and complement our range of vegetation maintenance equipment in an adjacent market along with accelerating Morbark's international growth using the Company's existing presence in Europe, Brazil and Australia.

The valuation of Morbark resulted in goodwill of $102.3 million, all of which has been assigned to the Company's Industrial reporting segment, $82.8 million of goodwill is tax deductible, the remaining balance is not.

The acquisition was accounted for in accordance with ASC Topic 805 Business Combinations ("ASC Topic 805"). The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed, including deferred taxes, based on their estimated fair values as of October 24, 2019. Certain estimated values are not yet finalized and are subject to change. The Company will finalize goodwill and deferred tax amounts once the analysis is complete.

During the six months ended June 30, 2020, Morbark generated approximately $99.8 million of net sales and $4.3 million of net income. The Company has included the operating results of Morbark in its consolidated financial statements since the date of acquisition.

The following table reflects the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Accounts receivable $ 13,966   
Inventory 72,972   
Prepaid and other assets 5,180   
Rental Equipment 1,133   
Property, plant and equipment 42,969   
Intangible assets 149,790   
Deferred tax liability (6,464)  
Other liabilities assumed (32,275)  
Net assets assumed $ 247,271   
Goodwill 102,305   
Total Acquisition Price net cash $ 349,576   
Plus: Cash 4,735   
Total Consideration $ 354,311   

Dutch Power Company B.V.

On March 4, 2019, the Company acquired 100% of the issued and outstanding equity interests of Dutch Power Company B.V. ("Dutch Power"). Dutch Power designs, manufactures and sells a variety of landscape and vegetation management machines primarily in Europe. The primary reason for the Dutch Power acquisition was to enhance the Company's platform for growth by increasing both the Company's product portfolio and capabilities in the European market. The acquisition price was approximately $53.0 million.
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The Company completed its review of the valuation of the purchase price allocation for Dutch Power during the first quarter of 2020. The Company found that no additional changes were necessary and that the values disclosed in the 2019 10-K were final.

3.  Accounts Receivable
 
Accounts receivable is shown net of sales discounts and the allowance for credit losses.

At June 30, 2020 the Company had $17.8 million in reserves for sales discounts compared to $16.9 million at December 31, 2019 related to products shipped to our customers under various promotional programs. The
change was primarily due to additional discounts reserved related to sales of the Company's agricultural products sold during the first six months of 2020.
 
4.  Inventories
 
Inventories valued at LIFO cost represented 45% and 42% of total inventory at June 30, 2020 and December 31, 2019, respectively. The excess of current cost over LIFO valued inventories was approximately $10.9 million at June 30, 2020 and December 31, 2019. An actual valuation of inventory under the LIFO method is made only at the end of each year based on the inventory levels and costs at that time.  Accordingly, interim LIFO must be based, to some extent, on management's estimates at each quarter end. Net inventories consist of the following:
(in thousands)
June 30, 2020 December 31, 2019
Finished goods
$ 208,472    $ 227,823   
Work in process
25,705    21,918   
Raw materials
14,529    17,933   
Inventories, net $ 248,706    $ 267,674   
 
Inventory obsolescence reserves were $9.7 million at June 30, 2020 and $8.2 million at December 31, 2019.

5. Rental Equipment

Rental equipment is shown net of accumulated depreciation of $16.7 million and $14.6 million at June 30, 2020 and December 31, 2019, respectively. The Company recognized depreciation expense of $2.6 million and $2.2 million for the three months ended June 30, 2020 and June 30, 2019, respectively and $5.2 million and $4.3 million for the six months ended June 30, 2020 and June 30, 2019, respectively

6.  Fair Value Measurements
 
The carrying values of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate their fair value because of the short-term nature of these items. The carrying value of our debt approximates the fair value as of June 30, 2020 and December 31, 2019, as the floating rates on our outstanding balances approximate current market rates. This conclusion was made based on Level 2 inputs.

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7. Goodwill and Intangible Assets

The following is the summary of changes to the Company's Goodwill for the six months ended June 30, 2020:
Industrial Agricultural Consolidated
(in thousands)
Balance at December 31, 2019 $ 183,307    $ 14,715    $ 198,022   
Translation adjustment (278)   (1,930)   (2,208)  
Goodwill adjustment (357)   —    (357)  
Balance at June 30, 2020 $ 182,672    $ 12,785    $ 195,457   

The following is a summary of the Company's definite and indefinite-lived intangible assets net of the accumulated amortization:
(in thousands)
Estimated Useful Lives
June 30, 2020 December 31, 2019
Definite:
Trade names and trademarks
15-25 years
$ 66,880    $ 67,222   
Customer and dealer relationships
8-15 years
122,037    121,508   
Patents and drawings
3-12 years
28,252    28,485   
Favorable leasehold interests
7 years
4,200    4,200   
Total at cost 221,369    221,415   
Less accumulated amortization (27,944)   (20,643)  
Total net 193,425    200,772   
Indefinite:
Trade names and trademarks 5,500    5,500   
Total Intangible Assets $ 198,925    $ 206,272   

The Company recognized amortization expense of $3.6 million and $1.1 million for the three months ending June 30, 2020 and 2019, respectively, and $7.4 million and $2.0 million for the six months ended June 30, 2020 and 2019, respectively. The increase in amortization is related to the intangible assets acquired in the Morbark acquisition.

As of June 30, 2020, the Company had $198.9 million of intangible assets, which represents 17% of total assets. 

8.  Leases
  
The Company leases office space and equipment under various operating and finance leases, which generally are expected to be renewed or replaced by other leases. The components of lease cost were as follows:
Components of Lease Cost
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2020 2019 2020 2019
Finance lease cost:
     Amortization of right-of-use assets $ 24    $ 34    $ 48    $ 65   
     Interest on lease liabilities        
Operating lease cost 1,183    1,088    2,408    2,112   
Short-term lease cost 223    180    458    232   
Variable lease cost 126    122    244    227   
Total lease cost $ 1,558    $ 1,427    $ 3,162    $ 2,641   

Rent expense for the three and six months ending June 30, 2020 and 2019 was immaterial.
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Maturities of lease liabilities were as follows:
Future Minimum Lease Payments
June 30, 2020 December 31, 2019
(in thousands) Operating Leases Finance Leases Operating Leases Finance Leases
2020 $ 2,023    (a) $ 46    (a) $ 4,305    $ 97   
2021 2,893    80    2,718    83   
2022 2,158    41    2,051    45   
2023 1,564    18    1,459    22   
2024 1,006    17    941    19   
Thereafter 2,611      2,587    14   
Total minimum lease payments $ 12,255    $ 207    $ 14,061    $ 280   
Less imputed interest (996)   (12)   (1,100)   (16)  
Total lease liabilities $ 11,259    $ 195    $ 12,961    $ 264   
(a) Amounts represent remaining three months of payments due for 2019.
Future Lease Commencements

As of June 30, 2020, there are additional operating leases that have not yet commenced in the amount of $4.7 million. Of the operating leases that have not commenced, $4.6 million relate to buildings and the remainder relates to equipment. These operating leases will commence in fiscal year 2020 with lease terms of 1 to 10 years.

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Supplemental balance sheet information related to leases was as follows:

Operating Leases
(in thousands) June 30, 2020 December 31, 2019
Other non-current assets
$ 11,159    $ 12,858   
Accrued liabilities 3,263    3,972   
Other long-term liabilities 7,996    8,989   
    Total operating lease liabilities $ 11,259    $ 12,961   
Finance Leases
(in thousands) June 30, 2020 December 31, 2019
Property, plant and equipment, gross $ 471    $ 524   
Accumulated Depreciation (263)   (265)  
    Property, plant and equipment, net $ 208    $ 259   
Current maturities of long-term debt and finance lease obligations $ 72    $ 90   
Long-term debt and finance lease obligations, net of current maturities 123    174   
    Total finance lease liabilities $ 195    $ 264   
Weighted Average Remaining Lease Term
    Operating leases 5.04 years 5.10 years
    Finance leases 3.29 years 3.47 years
Weighted Average Discount Rate
    Operating leases 3.20  % 3.29  %
    Finance leases 3.46  % 3.39  %

Supplemental Cash Flow information related to leases was as follows:
Six Months Ended
June 30,
(in thousands) 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from finance leases $   $  
     Operating cash flows from operating leases 2,236    2,108   
     Financing cash flows from finance leases 47    76   

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9. Debt

The components of long-term debt are as follows:
 
(in thousands)
June 30, 2020 December 31, 2019
Current Maturities:
    Finance lease obligations $ 72    $ 90   
    Term debt 15,000    18,750   
15,072    18,840   
Long-term debt:
     Finance lease obligations
123    174   
Term debt, net 272,600    279,967   
     Bank revolving credit facility 151,000    145,000   
         Total Long-term debt 423,723    425,141   
Total debt $ 438,795    $ 443,981   

As of June 30, 2020, $4.0 million of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by vendors' contracts, resulting in $122.3 million in available borrowings.

10.  Common Stock and Dividends
 
Dividends declared and paid on a per share basis were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Dividends declared
$ 0.13    $ 0.12    $ 0.26    $ 0.24   
Dividends paid
$ 0.13    $ 0.12    $ 0.26    $ 0.24   

On July 2, 2020, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.13 per share, which was paid on July 29, 2020, to shareholders of record at the close of business on July 16, 2020.
 
11.  Earnings Per Share
 
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.
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except per share)
2020 2019 2020 2019
Net Income
$ 12,989    $ 20,667    $ 28,517    $ 35,920   
Average Common Shares:
Basic (weighted-average outstanding shares)
11,778    11,726    11,769    11,712   
Dilutive potential common shares from stock options
64    72    66    75   
Diluted (weighted-average outstanding shares)
11,842    11,798    11,835    11,787   
Basic earnings per share
$ 1.10    $ 1.76    $ 2.42    $ 3.07   
Diluted earnings per share
$ 1.10    $ 1.75    $ 2.41    $ 3.05   

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12. Income Taxes

Tax Rate Methodology

The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full year to income for the interim period. Given the significant uncertainty with respect to the impact of the COVID-19 outbreak on our business and results of operations, we are not currently able to estimate our annual effective income tax rate for 2020. If a reliable estimate of the estimated effective tax rate cannot be made, the actual effective tax rate for the year to date may be the best estimate of the annual effective tax rate.

The Company has calculated the actual effective tax rate for the period ending June 30, 2020.

13.  Revenue and Segment Information
 
Revenues from Contracts with Customers

Disaggregation of revenue is presented in the tables below by product type and by geographical location. Management has determined that this level of disaggregation would be beneficial to users of the financial statements.
Revenue by Product Type
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2020 2019 2020 2019
Net Sales
Wholegoods
$ 206,858    $ 229,069    $ 450,389    $ 437,103   
Parts
57,682    49,617    117,292    97,871   
Other
4,095    6,500    15,402    12,146   
Consolidated $ 268,635    $ 285,186    $ 583,083    $ 547,120   

Other includes rental sales, extended warranty sales and service sales as it is considered immaterial.

Revenue by Geographical Location
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2020 2019 2020 2019
Net Sales
United States
$ 200,517    $ 188,652    $ 434,676    $ 373,965   
France
16,528    27,619    38,611    53,554   
Canada
14,785    17,361    28,397    31,305   
United Kingdom
10,779    14,082    24,008    27,880   
Brazil
3,717    5,702    8,263    9,975   
Netherlands 6,239    10,132    13,886    12,806   
China 154    6,999    231    8,211   
Germany 2,504    2,452    4,848    3,341   
Australia
2,837    1,827    5,190    4,323   
Other
10,575    10,360    24,973    21,760   
Consolidated $ 268,635    $ 285,186    $ 583,083    $ 547,120   

Net sales are attributed to countries based on the location of the customer.

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Segment Information

The following includes a summary of the unaudited financial information by reporting segment at June 30, 2020:  
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)
2020 2019 2020 2019
Net Sales
Industrial
$ 182,257    $ 194,304    $ 412,232    $ 367,834   
Agricultural
86,378    90,882    170,851    179,286   
Consolidated $ 268,635    $ 285,186    $ 583,083    $ 547,120   
Income from Operations
Industrial
$ 13,898    $ 21,538    $ 32,215    $ 38,485   
Agricultural
8,763    7,811    14,302    13,470   
Consolidated $ 22,661    $ 29,349    $ 46,517    $ 51,955   

(in thousands)
June 30, 2020 December 31, 2019
Goodwill
Industrial
$ 182,672    $ 183,307   
Agricultural
12,785    14,715   
Consolidated $ 195,457    $ 198,022   
Total Identifiable Assets
       Industrial
$ 913,295    $ 922,738   
       Agricultural
276,393    290,025   
Consolidated $ 1,189,688    $ 1,212,763   

14.  Contingent Matters
  
The Company is subject to various legal actions which have arisen in the ordinary course of its business. The most prevalent of such actions relate to product liability, which is generally covered by insurance after various self-insured retention amounts. While amounts claimed might 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 or results of operations; however, the ultimate resolution cannot be determined at this time.

Like other manufacturers, the Company is subject to a broad range of federal, state, local and foreign laws and requirements, including those concerning air emissions, discharges into waterways, and the generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and off-site disposal locations, workplace safety and equal employment opportunities. These laws and regulations are constantly changing, and it is impossible to predict with accuracy the effect that changes to such laws and regulations may have on the Company in the future. Like other industrial concerns, the Company’s manufacturing operations entail the risk of noncompliance, and there can be no assurance that the Company will not incur material costs or other liabilities as a result thereof.

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Item 2.  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
June 30,
Six Months Ended
June 30,
As a
Percent of Net Sales
2020 2019 2020 2019
Industrial 67.8  % 68.1  % 70.7  % 67.2  %
Agricultural 32.2  % 31.9  % 29.3  % 32.8  %
Total sales, net
100.0  % 100.0  % 100.0  % 100.0  %
  
Three Months Ended
June 30,
Six Months Ended
June 30,
Cost Trends and Profit Margin, as
Percentages of Net Sales
2020 2019 2020 2019
Gross profit 25.2  % 25.6  % 25.2  % 24.9  %
Income from operations 8.4  % 10.3  % 8.0  % 9.5  %
Income before income taxes 6.6  % 9.6  % 6.6  % 8.8  %
Net income 4.8  % 7.2  % 4.9  % 6.6  %
 
Overview
 
This report contains forward-looking statements that are based on Alamo Group’s current expectations.  Actual results in future periods may differ materially from those expressed or implied because of a number of risks and uncertainties which are discussed below and in the Forward-Looking Information section. Unless the context otherwise requires, the terms the "Company", "we", "our" and "us" means Alamo Group Inc.
 
In March 2020, the World Health Organization categorized the current coronavirus disease (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The outbreak, which is continuing to spread worldwide, has adversely affected our operations, customers, suppliers, and the economies in which we operate. Thus far, we have continued to focus on the health and safety of our employees and have taken steps to ensure their continued well-being while we work on meeting the demands of our customers. Some of our facilities were forced to closed for varying periods of time due to government orders and other pandemic related reasons, but many of our products and/or operations fall within the "essential" designation which has allowed us to continue operations, albeit at a reduced capacity. Currently, all of our manufacturing plants are open and functioning at various levels of operation based on demand. While shelter-in-place or stay-at-home orders have been relaxed or eliminated in many locations, recent case surges could lead to new restrictions or lockdowns, which may limit our operational capabilities. This is dependent on future developments relating to the pandemic which are highly uncertain and unpredictable. As a result of the pandemic, both of our divisions have also experienced some softness in customer demand and we expect this trend to continue in the near term or even longer, should the pandemic continue unabated.

For the first six months of 2020, the Company's net sales increased by 6.6% but net income decreased by 20.6% when compared to the same period in 2019. The increase in net sales was due to the acquisitions of Morbark and Dutch Power. The decrease in net income was attributable to the COVID-19 pandemic which began to materially affect our operations in March of this year and continued to negatively impact the Company's overall financial performance during the first six months of 2020.

The Company's Industrial Division experienced a 12.1% increase in sales for the first six months of 2020 compared to the first six months of 2019 all due to the acquisitions of Morbark and Dutch Power. Without factoring in contributions from Morbark and Dutch Power, sales across all legacy Industrial product groups (with the exception of vegetation control, which was slightly up) were down during the first six months of 2020 compared to the same period in 2019, primarily as a result of adverse impacts from the COVID-19 pandemic which included
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