SEGUIN, Texas — Alamo Group today reported results for the second quarter ended June 30, 2016.

Highlights for the Quarter       

• Net income for the quarter up 8.8% to $10.6 million
• Net sales for the quarter down 2.0% at $211.5 million
• Net income for the first six months up 12.6% to a record $19.2 million
• Net sales for the first six months down 0.3% at $422.5 million

Alamo Group’s net sales for the second quarter of 2016 were $211.5 million compared to $215.7 million in the second quarter of 2015, a decrease of 2.0%. Net income for the quarter was $10.6 million, or $0.92 per diluted share, compared to net income of $9.7 million, or $0.84 per diluted share, in 2015. This is an increase of 8.8% in net income and 9.5% in earnings per share. Net sales in the second quarter were impacted by a variety of factors including currency translation effects as a result of the continued strong U.S. dollar, the weak worldwide agricultural market, and ongoing weakness in the European economy, which was further affected by uncertainty surrounding the Brexit vote in the U.K., among others. Even with the decrease in sales, net income was up as a result of higher gross margins despite higher effective tax rates.

For the first six months of 2016 net sales were $422.5 million compared to $423.5 million in the previous year, a decrease of 0.3%.  Net income for the first half of 2016 was $19.2 million, or $1.67 per diluted share, versus $17.1 million, or $1.49 per diluted share in 2015.  This is an increase of 12.6% in net income and 12.1% in earnings per diluted share.

Sales by Division

Alamo Group's Industrial Division net sales in the second quarter of 2016 were $117.1 million compared to $118.5 million in the second quarter of 2015, a decrease of 1.2%. The decrease was due to weakness in sales of vacuum trucks to non-governmental end users, as other products in the Division exhibited greater stability.  For the first six months of 2016, net sales in the Division were $240.4 million vs. $235.4 million in 2015, an increase of 2.1%.

The company's Agricultural Division recorded net sales of $51.8 million in the second quarter of 2016, a decrease of 2.1% compared with net sales of $53.0 million in the prior year.  This reflects the continuing softness in the overall agricultural market, which is anticipated to result in lower farm incomes in 2016.  For the first six months of the year, net sales in the Agricultural Division were $100.5 million compared to net sales of $101.4 million in the first half of 2015, a decrease of 0.9%

Alamo's European Division net sales in the second quarter of 2016 were $42.5 million, a decrease of 3.9% compared to net sales of $44.2 million in the comparable period of 2015. European general economic conditions have been stagnant for the last several years and the quarter was further impacted by delays related to uncertainty surrounding the recent Brexit vote in the U.K.  For the first six months of 2016, net sales in the Division were $81.5 million compared with $86.7 million in the first six months of 2015, a decrease of 5.9%.

Comments on Results

Ron Robinson, Alamo Group's president and CEO, commented, "We are pleased with the progress Alamo is making in 2016. While sales were essentially flat in the first half of the year as a result of the economic headwinds we continue to experience, earnings and cash flow are improving at a healthy rate as a result of our ongoing focus on operational improvement. These improvements come from a collective effort across all aspects of our business including, among others, improved manufacturing efficiencies, purchasing initiatives and control of overhead expenses that resulted in improved margins and a more than 12% increase in net income for the first six months of 2016, compared to the same period in 2015. These results were achieved despite the higher average tax rate that was primarily due to our units with the strongest earnings growth being in higher tax jurisdictions. Our income statement was not the only beneficiary of these efforts as our asset utilization showed similar improvements resulting in total debt, net of cash, at nearly $49 million below the previous year's level.  All in all, an admirable result."

Robinson further stated, "While we believe we can continue to show ongoing operational improvement, we remain concerned about the lack of growth in some of our markets and the overall economy in general. Our Industrial Division continues to show reasonable stability with our governmental end users, who are the main customers in this segment, but the sales of equipment to other types of end users such as those in the construction, mining and oilfield business remains challenged and there is little evidence of improvement for the balance of 2016. Similarly, our agricultural products, while holding up better than the overall sector, continue to be constrained by lower farm incomes that are unlikely to show improvement until 2017. Europe has also been affected for the last several years by general economic weakness that seemed to be further impacted by delays and uncertainty leading up to the Brexit vote in the U.K. There is certainly a lot of ongoing concern about how the U.K.'s decision to leave the European Union, will ultimately play out, but we are cautiously optimistic that our European markets will show some improvement in the second half of 2016 as the situation stabilizes and based on the relative stability in the demand for the types of products we manufacture. We also believe that in the longer term Alamo Group will not experience a material impact from this event, though there will certainly be some bumps along the way. The exit process itself could take several years to complete during which we believe business should continue as usual. There will be short-term effects such as currency fluctuations and longer term effects based on the ultimate trading arrangements established between the U.K., European Union and other trading partners which could have both positive and negative effects for our Company. However, we feel that demand for our types of equipment will be relatively stable throughout this process and, with operations in both the U.K. and France, we should be able to meet requirements both within and outside the European Union."

Robinson concluded, "As a result of the above factors, we do not see much strengthening in Alamo's sales in the second half of 2016, but feel the prospects for 2017 and beyond hold more reasonable growth potential. In addition, our backlog, though down more than we would have liked in the first half in 2016, remains at a healthy level of over $130 million. This backlog, plus the benefits of our ongoing improvement initiatives provide confidence in our outlook for the rest of 2016 and we believe overall market improvement will propel us beyond that. Finally, we believe acquisitions will continue to be a driving force in Alamo Group's ongoing development. Activity in this area remains strong and we are diligently pursuing reasonable opportunities. Accordingly, we remain optimistic about the future for Alamo Group."