Alamo Group Inc. has a market cap of $296.9 million; its shares were traded at around $25.93 with a P/E ratio of 15.7 and P/S ratio of 0.6. The dividend yield of Alamo Group Inc. stocks is 0.9%. Alamo Group Inc. had an annual average earning growth of 8.8% over the past 10 years. GuruFocus rated Alamo Group Inc. the business predictability rank of 3.5-star.ALG is in the portfolios of Third Avenue Management, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:Selling, general and administrative expense (SG&A) was $21,273,000 (16.1% of net sales) during the third quarter of 2010 compared to $17,983,000 (16.3% of net sales) during the same period of 2009, an increase of $3,290,000. The acquisition of Bush Hog added $3,776,000 to SG&A expenses. Excluding Bush Hog, SG&A expenses were lower due to ongoing cost control initiatives.
The Companys net income after tax was $8,150,000 or $.68 per share on a diluted basis for the third quarter of 2010 compared to $4,583,000 or $.46 per share on a diluted basis for the third quarter of 2009. The increase of $3,567,000 resulted from the factors described above.
Gross profit for the first nine months of 2010 was $89,206,000 (22.6% of net sales) compared to $71,705,000 (21.5% of net sales) during the same period in 2009, a increase of $17,501,000. The increase was mainly due to the acquisition of Bush Hog in the amount of $15,619,000. Increases in replacement part sales supported higher margins as well as improved margin percentages. Gross margin percentages also improved over 2009 as a result of ongoing control initiatives which helped lower manufacturing costs.
Selling, general and administrative expense (SG&A) were $64,296,000 (16.3% of net sales) during the first nine months of 2010 compared to $55,478,000 (16.6% of net sales) during the same period of 2009, an increase of $8,818,000. The increase in SG&A for the nine months of 2010 was due to the acquisition of Bush Hog which added $10,999,000. Without Bush Hog, SG&A declined $2,181,000 mainly from the benefit of the 2009 reductions in workforce along with other cost saving initiatives.
The Companys net income after tax was $17,013,000 or $1.43 per share on a diluted basis for the first nine months of 2010 compared to $9,118,000 or $.91 per share on a diluted basis for the first nine months of 2009. The increase of $7,895,000 resulted from the factors described above.
The Company estimates the fair value of its reporting units using a discounted cash flow analysis. This analysis requires the Company to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The cash flows are estimated over a significant future period of time, which makes those estimates and assumptions subject to an even higher degree of uncertainty. The Company also utilizes market valuation models and other financial ratios, which require the Company to make certain assumptions and estimates regarding the applicability of those models to its assets and businesses. The Company believes that the assumptions and estimates used to determine the estimated fair values of each of its reporting units are reasonable. However, different assumptions could materially affect the estimated fair value. The Company recognized goodwill impairment in the North American Industrial segment of $14,104,000 in 2009 and $5,010,000 in the North American Agricultural segment in 2008. During the 2009 impairment analysis review, it was noted that even though the Schwarze reporting units fair value was above carrying value it was not materially different. At December 31, 2009, there was approximately $6.8 million of goodwill related to the Schwarze reporting unit. This reporting unit would be most likely affected by changes in the Companys assumptions and estimates. As of September 30, 2010, the Company had $34,598,000 of goodwill, which represents 9% of total assets. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, such as changes in the reporting units future growth rates, discount rates, etc.
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