Commission file number 0-21220 | ||
ALAMO GROUP INC. | ||
(Exact name of registrant as specified in its charter) | ||
DELAWARE (State or other jurisdiction of incorporation or organization) | 74-1621248 (I.R.S. Employer Identification Number) |
PART I. | FINANCIAL INFORMATION | PAGE | |
Item 1. | Interim Condensed Consolidated Financial Statements (Unaudited) | ||
September 30, 2016 and December 31, 2015 | |||
Three and Nine Months Ended September 30, 2016 and September 30, 2015 | |||
Three and Nine Months Ended September 30, 2016 and September 30, 2015 | |||
Nine Months Ended September 30, 2016 | |||
Nine Months Ended September 30, 2016 and September 30, 2015 | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | |||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | None | ||
Item 3. | None | ||
Item 4. | None | ||
Item 5. | Other Information | ||
Item 6. | Exhibits | ||
(in thousands, except share amounts) | September 30, 2016 | December 31, 2015 | ||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 56,485 | $ | 26,922 | ||||||
Accounts receivable, net | 174,047 | 178,305 | ||||||||
Inventories, net | 154,604 | 150,758 | ||||||||
Prepaid expenses | 4,589 | 5,410 | ||||||||
Income tax receivable | 2,970 | 1,491 | ||||||||
Total current assets | 392,695 | 362,886 | ||||||||
Rental equipment, net | 32,506 | 37,564 | ||||||||
Property, plant and equipment | 179,727 | 178,044 | ||||||||
Less: Accumulated depreciation | (111,377 | ) | (107,094 | ) | ||||||
68,350 | 70,950 | |||||||||
Goodwill | 75,883 | 75,509 | ||||||||
Intangible assets, net | 50,921 | 52,950 | ||||||||
Deferred income taxes | 1,692 | 1,475 | ||||||||
Other assets | 2,835 | 2,169 | ||||||||
Total assets | $ | 624,882 | $ | 603,503 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Trade accounts payable | $ | 48,504 | $ | 45,486 | ||||||
Income taxes payable | 2,150 | 1,320 | ||||||||
Accrued liabilities | 32,567 | 38,141 | ||||||||
Current maturities of long-term debt and capital lease obligations | 1,372 | 77 | ||||||||
Total current liabilities | 84,593 | 85,024 | ||||||||
Long-term debt and capital lease obligations, net of current maturities | 134,018 | 144,006 | ||||||||
Deferred pension liability | 3,790 | 4,499 | ||||||||
Other long-term liabilities | 5,935 | 5,782 | ||||||||
Deferred income taxes | 9,030 | 3,723 | ||||||||
Stockholders’ equity: | ||||||||||
Common stock, $.10 par value, 20,000,000 shares authorized; 11,460,184 and 11,392,236 outstanding at September 30, 2016 and December 31, 2015, respectively | 1,146 | 1,139 | ||||||||
Additional paid-in-capital | 99,222 | 96,778 | ||||||||
Treasury stock, at cost; 42,600 shares at September 30, 2016 and December 31, 2015 | (426 | ) | (426 | ) | ||||||
Retained earnings | 328,432 | 299,057 | ||||||||
Accumulated other comprehensive loss, net | (40,858 | ) | (36,079 | ) | ||||||
Total stockholders’ equity | 387,516 | 360,469 | ||||||||
Total liabilities and stockholders’ equity | $ | 624,882 | $ | 603,503 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands, except per share amounts) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net sales: | |||||||||||||||
Industrial | $ | 121,205 | $ | 127,385 | $ | 361,629 | $ | 362,818 | |||||||
Agricultural | 56,443 | 58,919 | 156,950 | 160,357 | |||||||||||
European | 39,118 | 45,310 | 120,647 | 131,971 | |||||||||||
Total net sales | 216,766 | 231,614 | 639,226 | 655,146 | |||||||||||
Cost of sales | 162,055 | 174,105 | 482,060 | 501,435 | |||||||||||
Gross profit | 54,711 | 57,509 | 157,166 | 153,711 | |||||||||||
Selling, general and administrative expenses | 33,699 | 33,939 | 101,824 | 101,578 | |||||||||||
Income from operations | 21,012 | 23,570 | 55,342 | 52,133 | |||||||||||
Interest expense | (1,405 | ) | (1,671 | ) | (4,334 | ) | (5,142 | ) | |||||||
Interest income | 43 | 27 | 161 | 120 | |||||||||||
Other income (expense), net | 127 | 895 | (253 | ) | 2,243 | ||||||||||
Income before income taxes | 19,777 | 22,821 | 50,916 | 49,354 | |||||||||||
Provision for income taxes | 6,541 | 8,065 | 18,459 | 17,529 | |||||||||||
Net Income | $ | 13,236 | $ | 14,756 | $ | 32,457 | $ | 31,825 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 1.15 | $ | 1.30 | $ | 2.84 | $ | 2.81 | |||||||
Diluted | $ | 1.14 | $ | 1.28 | $ | 2.81 | $ | 2.77 | |||||||
Average common shares: | |||||||||||||||
Basic | 11,460 | 11,380 | 11,424 | 11,337 | |||||||||||
Diluted | 11,595 | 11,496 | 11,551 | 11,477 | |||||||||||
Dividends declared | $ | 0.09 | $ | 0.08 | $ | 0.27 | $ | 0.24 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||
Net Income | $ | 13,236 | $ | 14,756 | $ | 32,457 | $ | 31,825 | ||||||||||
Other comprehensive loss: | ||||||||||||||||||
Foreign currency translation adjustments | (1,702 | ) | (8,190 | ) | (5,283 | ) | (16,012 | ) | ||||||||||
Net gain on pension and other postretirement benefits | 266 | 277 | 799 | 848 | ||||||||||||||
Other comprehensive loss before income tax expense | (1,436 | ) | (7,913 | ) | (4,484 | ) | (15,164 | ) | ||||||||||
Income tax expense related to items of other comprehensive loss | (98 | ) | (94 | ) | (295 | ) | (282 | ) | ||||||||||
Other comprehensive loss | (1,534 | ) | (8,007 | ) | (4,779 | ) | (15,446 | ) | ||||||||||
Comprehensive Income | $ | 11,702 | $ | 6,749 | $ | 27,678 | $ | 16,379 |
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, 2015 | 11,350 | $ | 1,139 | $ | 96,778 | $ | (426 | ) | $ | 299,057 | $ | (36,079 | ) | $ | 360,469 | |||||||||||||
Net income | — | — | — | — | 32,457 | — | 32,457 | |||||||||||||||||||||
Translation adjustment | — | — | — | — | — | (5,283 | ) | (5,283 | ) | |||||||||||||||||||
Net actuarial gain arising during period | — | — | — | — | — | 504 | 504 | |||||||||||||||||||||
Tax effect of non-qualified stock options | — | — | 141 | — | — | — | 141 | |||||||||||||||||||||
Stock-based compensation | — | — | 1,075 | — | — | — | 1,075 | |||||||||||||||||||||
Exercise of stock options | 68 | 7 | 1,247 | — | — | — | 1,254 | |||||||||||||||||||||
Repurchased shares | — | — | (19 | ) | — | — | — | (19 | ) | |||||||||||||||||||
Dividends paid ($.27 per share) | — | — | — | — | (3,082 | ) | — | (3,082 | ) | |||||||||||||||||||
Balance at September 30, 2016 | 11,418 | $ | 1,146 | $ | 99,222 | $ | (426 | ) | $ | 328,432 | $ | (40,858 | ) | $ | 387,516 |
Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Operating Activities | |||||||
Net income | $ | 32,457 | $ | 31,825 | |||
Adjustment to reconcile net income to net cash provided by operating activities: | |||||||
Provision for doubtful accounts | 124 | 628 | |||||
Depreciation | 13,451 | 14,196 | |||||
Amortization of intangibles | 2,328 | 2,339 | |||||
Amortization of debt issuance costs | 159 | 159 | |||||
Stock-based compensation expense | 1,075 | 762 | |||||
Excess tax benefits from stock-based payment arrangements | (212 | ) | (80 | ) | |||
Provision for deferred income tax expense (benefit) | 5,111 | 8 | |||||
Gain on sale of property, plant and equipment | (367 | ) | (113 | ) | |||
Changes in operating assets and liabilities, net of amounts acquired: | |||||||
Accounts receivable | 2,552 | (5,721 | ) | ||||
Inventories | (4,265 | ) | (12,935 | ) | |||
Rental equipment | 199 | (14,427 | ) | ||||
Prepaid expenses and other assets | (2,216 | ) | (2,257 | ) | |||
Trade accounts payable and accrued liabilities | (1,895 | ) | 12,318 | ||||
Income taxes payable | (524 | ) | 4,989 | ||||
Other long-term liabilities | 59 | (473 | ) | ||||
Net cash provided by operating activities | 48,036 | 31,218 | |||||
Investing Activities | |||||||
Acquisitions, net of cash acquired | (188 | ) | (3,465 | ) | |||
Purchase of property, plant and equipment | (7,201 | ) | (7,030 | ) | |||
Proceeds from sale of property, plant and equipment | 899 | 197 | |||||
Purchase of patents | (50 | ) | — | ||||
Net cash used in investing activities | (6,540 | ) | (10,298 | ) | |||
Financing Activities | |||||||
Borrowings on bank revolving credit facility | 71,000 | 62,000 | |||||
Repayments on bank revolving credit facility | (81,000 | ) | (77,000 | ) | |||
Principal payments on long-term debt and capital leases | (37 | ) | (28 | ) | |||
Proceeds from issuance of debt | 1,149 | — | |||||
Dividends paid | (3,082 | ) | (2,719 | ) | |||
Proceeds from sale of common stock | 1,254 | 2,008 | |||||
Excess tax benefits from stock-based payment arrangements | 212 | 80 | |||||
Stock repurchased | (19 | ) | — | ||||
Net cash used in financing activities | (10,523 | ) | (15,659 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (1,410 | ) | (2,137 | ) | |||
Net change in cash and cash equivalents | 29,563 | 3,124 | |||||
Cash and cash equivalents at beginning of the period | 26,922 | 39,533 | |||||
Cash and cash equivalents at end of the period | $ | 56,485 | $ | 42,657 | |||
Cash paid during the period for: | |||||||
Interest | $ | 4,433 | $ | 5,075 | |||
Income taxes | 14,178 | 14,691 |
(in thousands) | September 30, 2016 | December 31, 2015 | ||||||||
Finished goods | $ | 133,396 | $ | 129,995 | ||||||
Work in process | 8,788 | 9,561 | ||||||||
Raw materials | 12,420 | 11,202 | ||||||||
Total inventory | $ | 154,604 | $ | 150,758 |
(in thousands) | |||
Balance at December 31, 2015 | $ | 75,509 | |
Goodwill acquired | — | ||
Translation adjustments | 374 | ||
Balance at September 30, 2016 | $ | 75,883 |
(in thousands) | Estimated Useful Lives | September 30, 2016 | December 31, 2015 | ||||||||
Definite: | |||||||||||
Trade names and trademarks | 25 years | $ | 21,942 | $ | 21,878 | ||||||
Customer and dealer relationships | 14 years | 28,910 | 28,715 | ||||||||
Patents and drawings | 3-12 years | 1,964 | 1,893 | ||||||||
Total at cost | 52,816 | 52,486 | |||||||||
Less accumulated amortization | (7,395 | ) | (5,036 | ) | |||||||
Total net | 45,421 | 47,450 | |||||||||
Indefinite: | |||||||||||
Trade names and trademarks | 5,500 | 5,500 | |||||||||
Total Intangible Assets | $ | 50,921 | $ | 52,950 |
(in thousands) | September 30, 2016 | December 31, 2015 | ||||||||
Current Maturities: | ||||||||||
Capital lease obligations | $ | — | $ | 17 | ||||||
Other notes payable | 1,372 | 60 | ||||||||
1,372 | 77 | |||||||||
Long-term debt: | ||||||||||
Bank revolving credit facility | 134,000 | 144,000 | ||||||||
Capital lease obligations | 1 | 6 | ||||||||
Other notes payable | 17 | — | ||||||||
134,018 | 144,006 | |||||||||
Total debt | $ | 135,390 | $ | 144,083 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Dividends declared | $ | 0.09 | $ | 0.08 | $ | 0.27 | $ | 0.24 | |||||||
Dividends paid | $ | 0.09 | $ | 0.08 | $ | 0.27 | $ | 0.24 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In thousands, except per share) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net Income | $ | 13,236 | $ | 14,756 | $ | 32,457 | $ | 31,825 | |||||||
Average Common Shares: | |||||||||||||||
Basic (weighted-average outstanding shares) | 11,460 | 11,380 | 11,424 | 11,337 | |||||||||||
Dilutive potential common shares from stock options | 135 | 116 | 127 | 140 | |||||||||||
Diluted (weighted-average outstanding shares) | 11,595 | 11,496 | 11,551 | 11,477 | |||||||||||
Basic earnings per share | $ | 1.15 | $ | 1.30 | $ | 2.84 | $ | 2.81 | |||||||
Diluted earnings per share | $ | 1.14 | $ | 1.28 | $ | 2.81 | $ | 2.77 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net Sales | |||||||||||||||
Industrial | $ | 121,205 | $ | 127,385 | $ | 361,629 | $ | 362,818 | |||||||
Agricultural | 56,443 | 58,919 | 156,950 | 160,357 | |||||||||||
European | 39,118 | 45,310 | 120,647 | 131,971 | |||||||||||
Consolidated | $ | 216,766 | $ | 231,614 | $ | 639,226 | $ | 655,146 | |||||||
Income from Operations | |||||||||||||||
Industrial | $ | 9,318 | $ | 11,741 | $ | 30,016 | $ | 31,178 | |||||||
Agricultural | 7,928 | 7,778 | 16,735 | 12,292 | |||||||||||
European | 3,766 | 4,051 | 8,591 | 8,663 | |||||||||||
Consolidated | $ | 21,012 | $ | 23,570 | $ | 55,342 | $ | 52,133 |
(in thousands) | September 30, 2016 | December 31, 2015 | |||||
Goodwill | |||||||
Industrial | $ | 56,574 | $ | 56,293 | |||
Agricultural | 3,521 | 2,984 | |||||
European | 15,788 | 16,232 | |||||
Consolidated | $ | 75,883 | $ | 75,509 | |||
Total Identifiable Assets | |||||||
Industrial | $ | 362,430 | $ | 370,642 | |||
Agricultural | 116,768 | 110,489 | |||||
European | 145,684 | 122,372 | |||||
Consolidated | $ | 624,882 | $ | 603,503 |
Nine Months Ended September 30, 2016 | ||||||||||||||
(in thousands) | Hourly Employees’ Pension Plan | Employees’ Retirement Plan | Total | |||||||||||
Service cost | $ | 6 | $ | 3 | $ | 9 | ||||||||
Interest cost | 300 | 666 | 966 | |||||||||||
Expected return on plan assets | (486 | ) | (898 | ) | (1,384 | ) | ||||||||
Amortization of net loss | 213 | 330 | 543 | |||||||||||
Net periodic benefit cost | $ | 33 | $ | 101 | $ | 134 |
Nine Months Ended September 30, 2015 | ||||||||||||||
(in thousands) | Hourly Employees’ Pension Plan | Employees’ Retirement Plan | Total | |||||||||||
Service cost | $ | 6 | $ | 3 | $ | 9 | ||||||||
Interest cost | 303 | 651 | 954 | |||||||||||
Expected return on plan assets | (495 | ) | (921 | ) | (1,416 | ) | ||||||||
Amortization of net loss | 186 | 300 | 486 | |||||||||||
Net periodic benefit cost | $ | — | $ | 33 | $ | 33 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
As a Percent of Net Sales | 2016 | 2015 | 2016 | 2015 | |||||||
Industrial | 55.9 | % | 55.0 | % | 56.6 | % | 55.4 | % | |||
Agricultural | 26.0 | % | 25.4 | % | 24.5 | % | 24.5 | % | |||
European | 18.1 | % | 19.6 | % | 18.9 | % | 20.1 | % | |||
Total sales, net | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
Cost Trends and Profit Margin, as Percentages of Net Sales | 2016 | 2015 | 2016 | 2015 | |||||||
Gross profit | 25.2 | % | 24.8 | % | 24.6 | % | 23.5 | % | |||
Income from operations | 9.7 | % | 10.2 | % | 8.7 | % | 8.0 | % | |||
Income before income taxes | 9.1 | % | 9.9 | % | 8.0 | % | 7.5 | % | |||
Net income | 6.1 | % | 6.4 | % | 5.1 | % | 4.9 | % |
31.1 | — | Certification by Ronald A. Robinson under Section 302 of the Sarbanes-Oxley Act of 2002 | Filed Herewith | |
31.2 | — | Certification by Dan E. Malone under Section 302 of the Sarbanes-Oxley Act of 2002 | Filed Herewith | |
31.3 | — | Certification by Richard J. Wehrle under Section 302 of the Sarbanes-Oxley Act of 2002 | Filed Herewith | |
32.1 | — | Certification by Ronald A. Robinson under Section 906 of the Sarbanes-Oxley Act of 2002 | Filed Herewith | |
32.2 | — | Certification by Dan E. Malone under Section 906 of the Sarbanes-Oxley Act of 2002 | Filed Herewith | |
32.3 | — | Certification by Richard J. Wehrle under Section 906 of the Sarbanes-Oxley Act of 2002 | Filed Herewith | |
101.INS | — | XBRL Instance Document | Filed Herewith | |
101.SCH | — | XBRL Taxonomy Extension Schema Document | Filed Herewith | |
101.CAL | — | XBRL Taxonomy Extension Calculation Linkbase Document | Filed Herewith | |
101.DEF | — | XBRL Taxonomy Extension Definition Linkbase Document | Filed Herewith | |
101.LAB | — | XBRL Taxonomy Extension Label Linkbase Document | Filed Herewith | |
101.PRE | — | XBRL Taxonomy Extension Presentation Linkbase Document | Filed Herewith |
November 4, 2016 | Alamo Group Inc. |
(Registrant) | |
/s/ Ronald A. Robinson | |
Ronald A. Robinson | |
President & Chief Executive Officer |
/s/ Dan E. Malone | |
Dan E. Malone | |
Executive Vice President & Chief Financial Officer | |
(Principal Financial Officer) |
/s/ Richard J. Wehrle | |
Richard J. Wehrle | |
Vice President & Corporate Controller | |
(Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Alamo Group Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 4, 2016 | /s/ Ronald A. Robinson |
Ronald A. Robinson | ||
President & Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Alamo Group Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 4, 2016 | /s/ Dan E. Malone |
Dan E. Malone | ||
Executive Vice President & Chief Financial Officer | ||
(Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Alamo Group Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 4, 2016 | /s/ Richard J. Wehrle |
Richard J. Wehrle | ||
Vice President & Corporate Controller | ||
(Principal Accounting Officer) |
1. | The Form 10-Q fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
2. | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 4, 2016 | /s/ Ronald A. Robinson |
Ronald A. Robinson | ||
President & Chief Executive Officer |
1. | The Form 10-Q fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
2. | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 4, 2016 | /s/ Dan E. Malone |
Dan E. Malone | ||
Executive Vice President & Chief Financial Officer | ||
(Principal Financial Officer) |
1. | The Form 10-Q fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
2. | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 4, 2016 | /s/ Richard J. Wehrle |
Richard J. Wehrle | ||
Vice President & Corporate Controller | ||
(Principal Accounting Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 28, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ALAMO GROUP INC | |
Entity Central Index Key | 0000897077 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 11,510,631 |
Interim Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Stockholders' Equity: | ||
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares outstanding | 11,460,184 | 11,392,236 |
Treasury stock, shares | 42,600 | 42,600 |
Interim Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Net sales: | ||||
Net sales | $ 216,766 | $ 231,614 | $ 639,226 | $ 655,146 |
Cost of sales | 162,055 | 174,105 | 482,060 | 501,435 |
Gross profit | 54,711 | 57,509 | 157,166 | 153,711 |
Selling, general and administrative expenses | 33,699 | 33,939 | 101,824 | 101,578 |
Income from operations | 21,012 | 23,570 | 55,342 | 52,133 |
Interest expense | (1,405) | (1,671) | (4,334) | (5,142) |
Interest income | 43 | 27 | 161 | 120 |
Other income (expense), net | 127 | 895 | (253) | 2,243 |
Income before income taxes | 19,777 | 22,821 | 50,916 | 49,354 |
Provision for income taxes | 6,541 | 8,065 | 18,459 | 17,529 |
Net Income | $ 13,236 | $ 14,756 | $ 32,457 | $ 31,825 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 1.15 | $ 1.30 | $ 2.84 | $ 2.81 |
Diluted (in dollars per share) | $ 1.14 | $ 1.28 | $ 2.81 | $ 2.77 |
Average common shares: | ||||
Basic (in shares) | 11,460 | 11,380 | 11,424 | 11,337 |
Diluted (in shares) | 11,595 | 11,496 | 11,551 | 11,477 |
Dividends declared (in dollars per share) | $ 0.09000 | $ 0.08000 | $ 0.27000 | $ 0.24000 |
Industrial | ||||
Net sales: | ||||
Net sales | $ 121,205 | $ 127,385 | $ 361,629 | $ 362,818 |
Income from operations | 9,318 | 11,741 | 30,016 | 31,178 |
Agricultural | ||||
Net sales: | ||||
Net sales | 56,443 | 58,919 | 156,950 | 160,357 |
Income from operations | 7,928 | 7,778 | 16,735 | 12,292 |
European | ||||
Net sales: | ||||
Net sales | 39,118 | 45,310 | 120,647 | 131,971 |
Income from operations | $ 3,766 | $ 4,051 | $ 8,591 | $ 8,663 |
Interim Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 13,236 | $ 14,756 | $ 32,457 | $ 31,825 |
Other comprehensive loss: | ||||
Foreign currency translation adjustments | (1,702) | (8,190) | (5,283) | (16,012) |
Net gain on pension and other postretirement benefits | 266 | 277 | 799 | 848 |
Other comprehensive loss before income tax expense | (1,436) | (7,913) | (4,484) | (15,164) |
Income tax expense related to items of other comprehensive loss | (98) | (94) | (295) | (282) |
Other comprehensive loss | (1,534) | (8,007) | (4,779) | (15,446) |
Comprehensive Income | $ 11,702 | $ 6,749 | $ 27,678 | $ 16,379 |
Interim Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Additional Paid-in Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
---|---|---|---|---|---|---|
Balance at Dec. 31, 2015 | $ 360,469 | $ 1,139 | $ 96,778 | $ (426) | $ 299,057 | $ (36,079) |
Balance (shares) at Dec. 31, 2015 | 11,350 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 32,457 | 32,457 | ||||
Translation adjustment | (5,283) | (5,283) | ||||
Net actuarial gain arising during period | 504 | 504 | ||||
Tax effect of non-qualified stock options | 141 | 141 | ||||
Stock-based compensation | 1,075 | 1,075 | ||||
Exercise of stock options | 1,254 | $ 7 | 1,247 | |||
Exercise of stock options (shares) | 68 | |||||
Repurchased shares | (19) | (19) | ||||
Dividends paid ($.27 per share) | (3,082) | (3,082) | ||||
Balance at Sep. 30, 2016 | $ 387,516 | $ 1,146 | $ 99,222 | $ (426) | $ 328,432 | $ (40,858) |
Balance (shares) at Sep. 30, 2016 | 11,418 |
Interim Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Stockholders' Equity [Abstract] | ||||
Dividends paid (in dollars per share) | $ 0.09000 | $ 0.08000 | $ 0.27000 | $ 0.24000 |
Basis of Financial Statement Presentation |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Financial Statement Presentation | Basis of Financial Statement Presentation 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, 2016. The balance sheet at December 31, 2015 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, 2015. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. This update is effective as of January 1, 2018, with early adoption permitted as of January 1, 2017. This update could impact the timing and amounts of revenue recognized. We are evaluating the effects, if any, that adoption of this guidance will have on our consolidated financial statements and have not yet selected a transition approach to implement the standard. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory,” as part of its simplification initiative. ASU 2015-11 amends existing guidance for measuring inventories. This amendment will require the Company to measure inventories recorded using the first-in, first-out method at the lower of cost and net realizable value. This amendment does not change the methodology for measuring inventories recorded using the last-in, first-out method. This amendment will be effective prospectively for the Company on January 1, 2017, with early adoption permitted. We are evaluating the effect this guidance will have on our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Similar to current guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. Early application is permitted. Entities are required to use a modified retrospective adoption, with certain relief provisions, for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements when adopted. The guidance will become effective for us on January 1, 2019. The impacts that adoption of the ASU is expected to have on our consolidated financial statements and related disclosures are being evaluated. Additionally, we have not determined the effect of the ASU on our internal control over financial reporting or other changes in business practices and processes. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation,” to simplify the accounting and reporting for employee share-based payments. This amendment involves several aspects of the accounting for share-based payment transactions, including accounting for income taxes as it pertains to the timing of when excess tax benefits are recognized and to the recognition of excess tax benefits and tax deficiencies in the statements of income, forfeitures, minimum statutory tax withholding requirements, as well as classification of excess tax benefits and employee taxes paid in the statement of cash flows. This amendment will be effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments provide specific transition and disclosure guidance for each provision. The Company has not yet evaluated the effect the adoption of this ASU will have on its 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 current incurred loss impairment methodology with a methodology that reflects expected credit losses. The ASU is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted beginning in fiscal years beginning after December 18, 2018. The Company has not yet evaluated the effect the adoption of this ASU will have on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments,” to address diversity in practice on certain specific cash flow issues. The ASU is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption to have an effect on the consolidated financial statements. |
Accounting Policies |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Accounting Policies | Accounting Policies There have been no changes or additions to our significant accounting policies described in Note 1 to the Consolidated Financial Statements in the Company’s 2015 10-K. |
Accounts Receivable |
9 Months Ended |
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Sep. 30, 2016 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts Receivable Accounts receivable is shown net of sales discounts and the allowance for doubtful accounts. At September 30, 2016 the Company had $13,000,000 in reserves for sales discounts compared to $15,094,000 at December 31, 2015 on products shipped to our customers under various promotional programs. The decrease was primarily due to additional discounts taken on the Company's agricultural products during the pre-season, which runs from August to December of each year and orders are shipped through the second quarter of 2016. The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time. The allowance for doubtful accounts was $3,380,000 at September 30, 2016 and $3,484,000 at December 31, 2015. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories valued at LIFO cost represented 49% and 45% of total inventory at September 30, 2016 and December 31, 2015, respectively. The excess of current cost over LIFO valued inventories was approximately $8,712,000 at September 30, 2016 and December 31, 2015. 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 necessarily be based, to some extent, on management's estimates at each quarter end. Net inventories consist of the following:
Inventory obsolescence reserves were $7,703,000 at September 30, 2016 and $9,675,000 at December 31, 2015. The decrease in reserve for obsolescence resulted from the Company's write-off of previously reserved inventory. |
Rental Equipment |
9 Months Ended |
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Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Rental Equipment | Rental Equipment Rental equipment is shown net of accumulated depreciation of $9,667,000 and $8,322,000 at September 30, 2016 and December 31, 2015, respectively. The Company recognized depreciation expense of $1,508,000 and $2,018,000 for the three months ended September 30, 2016 and September 30, 2015, respectively and $4,951,000 and $5,683,000 for the nine months ended September 30, 2016 and September 30, 2015, respectively. |
Fair Value Measurements |
9 Months Ended |
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Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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 September 30, 2016 and December 31, 2015, as the floating rates on our outstanding balances approximate current market rates. This conclusion was made based on Level 2 inputs. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets The following is the summary of changes to the Company's Goodwill for the nine months ended September 30, 2016:
As of September 30, 2016, the Company had $75,883,000 of goodwill, which represents 12% of total assets. The following is a summary of the Company's definite and indefinite-lived intangible assets net of the accumulated amortization:
The Company recognized amortization expense of $779,000 and $776,000 for the three months ending September 30, 2016 and 2015, respectively and $2,328,000 and $2,339,000 for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, the Company had $50,921,000 of intangible assets, which represents 8% of total assets. |
Warranty |
9 Months Ended |
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Sep. 30, 2016 | |
Product Warranties Disclosures [Abstract] | |
Warranty | Warranty Warranty reserve, as a percentage of sales, is generally calculated by looking at the current twelve months’ expenses and prorating that amount based on twelve months’ sales with a ninety-day to six-month lag period. The Company’s historical experience is that an end-user takes approximately 90 days to six months from the receipt of the unit to file a warranty claim. A warranty reserve is established for each different marketing group. Reserve balances are evaluated on a quarterly basis and adjustments made when required. The current liability warranty reserve balance was $5,235,000 at September 30, 2016 and $5,566,000 at December 31, 2015 and is included in Accrued liabilities on the Balance Sheet. The decrease was mainly from the Company's U.S. Operations. |
Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The components of long-term debt are as follows:
As of September 30, 2016, $1,311,000 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 $114,689,000 in available borrowings. As of September 30, 2016, the Company was in compliance with the covenants under the Agreement. |
Common Stock and Dividends |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock and Dividends | Common Stock and Dividends Dividends declared and paid on a per share basis were as follows:
On October 3, 2016, the Company announced that its Board of Directors had declared a quarterly cash dividend of $0.09 per share, which was paid on October 28, 2016, to shareholders of record at the close of business on October 14, 2016. |
Stock-Based Compensation |
9 Months Ended |
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Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company’s stock-based compensation expense was $351,000 and $296,000 for the three months ended September 30, 2016 and 2015, respectively and $1,075,000 and $762,000 for the nine months ended September 30, 2016 and 2015, respectively. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 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.
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Segment Reporting |
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Segment Reporting | Segment Reporting At September 30, 2016 the following includes a summary of the unaudited financial information by reporting segment:
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Contingent Matters |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingent Matters | Contingent Matters 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. The Company knows that its Indianola, Iowa property is contaminated with chromium which most likely resulted from chrome plating operations which were discontinued before the Company purchased the property. Chlorinated volatile organic compounds have also been detected in water samples on the property, though the source is unknown at this time. The Company voluntarily worked with an environmental consultant and the state of Iowa with respect to these issues and believes it completed its remediation program in June 2006. The work was accomplished within the Company’s environmental liability reserve balance. We requested a “no further action” classification from the state. We received a conditional “no further action” letter in January of 2009. When we demonstrate stable or improving conditions below residential standards for a certain period of time by monitoring existing wells, we will request an unconditional “no further action” letter. Alamo Group Inc. and Bush Hog, Inc. were added as defendants in 2013 to litigation by Deere & Company as plaintiff against Bush Hog, LLC (now Duroc, LLC) and Great Plains Manufacturing Incorporated, in which Deere alleged infringement of a mower-related patent. The jury concluded that not only did the defendants not infringe the patent, but that the patent was invalid as well. The Company expensed $2,100,000 in legal fees related to this lawsuit in 2013. Deere & Company appealed and requested a new trial. A hearing on the appeal was held on October 8, 2015. On May 26, 2016 the Federal Circuit Court of Appeals affirmed the lower court ruling and validating the jury’s finding that the defendants did not infringe the patent, and that the Deere & Company patent was invalid. This matter has been finally adjudicated and is no longer subject to further appeal by Deere & Company or any other parties. Certain assets of the Company contain asbestos that may have to be remediated over time. The Company believes that any subsequent change in the liability associated with the asbestos removal will not have a material adverse effect on the Company’s consolidated financial position or results of operations. The Company is subject to various other federal, state, and local laws affecting its business, as well as a variety of regulations relating to such matters as working conditions, equal employment opportunities, and product safety. A variety of state laws regulate the Company’s contractual relationships with its dealers, some of which impose restrictive standards on the relationship between the Company and its dealers, including events of default, grounds for termination, non-renewal of dealer contracts, and equipment repurchase requirements. The Company believes it is currently in material compliance with all such applicable laws and regulations. |
Retirement Benefit Plans |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefit Plans | Retirement Benefit Plans Defined Benefit Plan The following tables present the components of net periodic benefit cost (gains are denoted with parentheses and losses are not):
The Company amortizes annual pension expense evenly over four quarters. Pension expense was $45,000 and $11,000 the three months ended September 30, 2016 and September 30, 2015, respectively. Pension expense for the nine months ended September 30, 2016 was $134,000 and $33,000 for the nine months ending September 30, 2015. The Company is not required to contribute to the pension plans for the 2016 plan year but may do so. On April 6, 2016 we notified all participants in the Gradall Company Hourly Employees’ Pension Plan of our decision to terminate the plan. Participants in the plan will not lose any benefits but will be given a choice between obtaining certain continued annuity benefits that match the benefits offered under the plan or receiving an immediate one-time lump sum payment in total settlement of benefits. We currently anticipate that we will be able to meet all legal requirements to effectuate a proper termination of the plan on or before December 31, 2016. Supplemental Retirement Plan In May of 2015, the Board amended the SERP to allow the Board to modify the retirement benefit percentage either higher or lower than 20%. In May of 2016, the Board added additional highly compensated employees to the plan. As of September 30, 2016, the current retirement benefit (as defined in the plan) for the participants ranges from 10% to 20%. The net period expense for the three months ended September 30, 2016 and 2015 was $148,000 and $150,000, respectively and $443,000 and $450,000 for the nine months ended September 30, 2016 and 2015, respectively. |
Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Financial Statement Presentation | 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, 2016. The balance sheet at December 31, 2015 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, 2015. |
New Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. This update is effective as of January 1, 2018, with early adoption permitted as of January 1, 2017. This update could impact the timing and amounts of revenue recognized. We are evaluating the effects, if any, that adoption of this guidance will have on our consolidated financial statements and have not yet selected a transition approach to implement the standard. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory,” as part of its simplification initiative. ASU 2015-11 amends existing guidance for measuring inventories. This amendment will require the Company to measure inventories recorded using the first-in, first-out method at the lower of cost and net realizable value. This amendment does not change the methodology for measuring inventories recorded using the last-in, first-out method. This amendment will be effective prospectively for the Company on January 1, 2017, with early adoption permitted. We are evaluating the effect this guidance will have on our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Similar to current guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. Early application is permitted. Entities are required to use a modified retrospective adoption, with certain relief provisions, for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements when adopted. The guidance will become effective for us on January 1, 2019. The impacts that adoption of the ASU is expected to have on our consolidated financial statements and related disclosures are being evaluated. Additionally, we have not determined the effect of the ASU on our internal control over financial reporting or other changes in business practices and processes. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation,” to simplify the accounting and reporting for employee share-based payments. This amendment involves several aspects of the accounting for share-based payment transactions, including accounting for income taxes as it pertains to the timing of when excess tax benefits are recognized and to the recognition of excess tax benefits and tax deficiencies in the statements of income, forfeitures, minimum statutory tax withholding requirements, as well as classification of excess tax benefits and employee taxes paid in the statement of cash flows. This amendment will be effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments provide specific transition and disclosure guidance for each provision. The Company has not yet evaluated the effect the adoption of this ASU will have on its 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 current incurred loss impairment methodology with a methodology that reflects expected credit losses. The ASU is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted beginning in fiscal years beginning after December 18, 2018. The Company has not yet evaluated the effect the adoption of this ASU will have on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments,” to address diversity in practice on certain specific cash flow issues. The ASU is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption to have an effect on the consolidated financial statements. |
Inventories (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current | Net inventories consist of the following:
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following is the summary of changes to the Company's Goodwill for the nine months ended September 30, 2016:
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Schedule of Definite and Indefinite Lived Intangible Assets | The following is a summary of the Company's definite and indefinite-lived intangible assets net of the accumulated amortization:
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Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The components of long-term debt are as follows:
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Common Stock and Dividends (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Dividends Declared and Paid | Dividends declared and paid on a per share basis were as follows:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | 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.
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | At September 30, 2016 the following includes a summary of the unaudited financial information by reporting segment:
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Retirement Benefit Plans (Tables) |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Cost | The following tables present the components of net periodic benefit cost (gains are denoted with parentheses and losses are not):
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Accounts Receivable (Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Allowance for doubtful accounts | $ 3,380 | $ 3,484 |
Reserves for sales discounts | ||
Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Reserves for sales discounts on products shipped under promotional programs | $ 13,000 | $ 15,094 |
Inventories (Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Inventory Disclosure [Abstract] | ||
Percentage of LIFO inventory | 49.00% | 45.00% |
Excess of current costs over stated LIFO value | $ 8,712 | $ 8,712 |
Inventory obsolescence reserves | $ 7,703 | $ 9,675 |
Inventories (Schedule of Inventory, Current) (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Inventory Disclosure [Abstract] | ||
Finished goods | $ 133,396 | $ 129,995 |
Work in process | 8,788 | 9,561 |
Raw materials | 12,420 | 11,202 |
Total inventory | $ 154,604 | $ 150,758 |
Rental Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
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Property, Plant and Equipment [Line Items] | |||||
Accumulated depreciation | $ (111,377) | $ (111,377) | $ (107,094) | ||
Depreciation | 13,451 | $ 14,196 | |||
Rental Equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Accumulated depreciation | (9,667) | (9,667) | $ (8,322) | ||
Depreciation | $ 1,508 | $ 2,018 | $ 4,951 | $ 5,683 |
Goodwill and Intangible Assets (Goodwill) (Details) $ in Thousands |
9 Months Ended |
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Sep. 30, 2016
USD ($)
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Goodwill [Roll Forward] | |
Balance at December 31, 2015 | $ 75,509 |
Goodwill acquired | 0 |
Translation adjustments | 374 |
Balance at September 30, 2016 | $ 75,883 |
Goodwill | Total assets | |
Goodwill [Roll Forward] | |
Percentage of total assets | 12.00% |
Warranty (Details) - USD ($) $ in Thousands |
9 Months Ended | |
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Sep. 30, 2016 |
Dec. 31, 2015 |
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Product Warranty Liability [Line Items] | ||
Current liability warranty reserve balance | $ 5,235 | $ 5,566 |
Minimum | ||
Product Warranty Liability [Line Items] | ||
Warranty claim lag period | 90 days | |
Maximum | ||
Product Warranty Liability [Line Items] | ||
Warranty claim lag period | 6 months |
Debt (Schedule of Long Term Debt) (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Debt Instrument [Line Items] | ||
Current Maturities: | $ 1,372 | $ 77 |
Long-term debt: | 134,018 | 144,006 |
Total debt | 135,390 | 144,083 |
Capital lease obligations | ||
Debt Instrument [Line Items] | ||
Current Maturities: | 0 | 17 |
Long-term debt: | 1 | 6 |
Other notes payable | ||
Debt Instrument [Line Items] | ||
Current Maturities: | 1,372 | 60 |
Long-term debt: | 17 | 0 |
Bank revolving credit facility | ||
Debt Instrument [Line Items] | ||
Long-term debt: | $ 134,000 | $ 144,000 |
Debt (Narrative) (Details) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Bank revolving credit facility | |
Debt Instrument [Line Items] | |
Available borrowings | $ 114,689 |
Standby Letters of Credit | |
Debt Instrument [Line Items] | |
Amount of capacity | $ 1,311 |
Common Stock and Dividends (Details) - $ / shares |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Oct. 03, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Class of Stock [Line Items] | |||||
Dividends declared (in dollars per share) | $ 0.09000 | $ 0.08000 | $ 0.27000 | $ 0.24000 | |
Dividends paid (in dollars per share) | $ 0.09000 | $ 0.08000 | $ 0.27000 | $ 0.24000 | |
Subsequent Event | |||||
Class of Stock [Line Items] | |||||
Dividends declared (in dollars per share) | $ 0.09 |
Stock-Based Compensation (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Stock-based compensation expense | $ 351 | $ 296 | $ 1,075 | $ 762 |
Earnings Per Share (Calculation of Basic and Diluted EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 13,236 | $ 14,756 | $ 32,457 | $ 31,825 |
Average Common Shares: | ||||
Basic (weighted-average outstanding shares) | 11,460 | 11,380 | 11,424 | 11,337 |
Dilutive potential common shares from stock options, shares | 135 | 116 | 127 | 140 |
Diluted (weighted-average outstanding shares) | 11,595 | 11,496 | 11,551 | 11,477 |
Basic earnings per share (in dollars per share) | $ 1.15 | $ 1.30 | $ 2.84 | $ 2.81 |
Diluted earnings per share (in dollars per share) | $ 1.14 | $ 1.28 | $ 2.81 | $ 2.77 |
Segment Reporting (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Segment Reporting Information [Line Items] | |||||
Net Sales | $ 216,766 | $ 231,614 | $ 639,226 | $ 655,146 | |
Income from Operations | 21,012 | 23,570 | 55,342 | 52,133 | |
Goodwill | 75,883 | 75,883 | $ 75,509 | ||
Total Identifiable Assets | 624,882 | 624,882 | 603,503 | ||
Industrial | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 121,205 | 127,385 | 361,629 | 362,818 | |
Income from Operations | 9,318 | 11,741 | 30,016 | 31,178 | |
Goodwill | 56,574 | 56,574 | 56,293 | ||
Total Identifiable Assets | 362,430 | 362,430 | 370,642 | ||
Agricultural | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 56,443 | 58,919 | 156,950 | 160,357 | |
Income from Operations | 7,928 | 7,778 | 16,735 | 12,292 | |
Goodwill | 3,521 | 3,521 | 2,984 | ||
Total Identifiable Assets | 116,768 | 116,768 | 110,489 | ||
European | |||||
Segment Reporting Information [Line Items] | |||||
Net Sales | 39,118 | 45,310 | 120,647 | 131,971 | |
Income from Operations | 3,766 | $ 4,051 | 8,591 | $ 8,663 | |
Goodwill | 15,788 | 15,788 | 16,232 | ||
Total Identifiable Assets | $ 145,684 | $ 145,684 | $ 122,372 |
Contingent Matters (Narrative) (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2013
USD ($)
| |
Deere and Company v Bush Hog LLC and Great Plains Manufacturing Inc | |
Loss Contingencies [Line Items] | |
Legal fees expensed | $ 2,100 |
Retirement Benefit Plans (Components of Net Periodic Benefit Cost) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 9 | $ 9 | ||
Interest cost | 966 | 954 | ||
Expected return on plan assets | (1,384) | (1,416) | ||
Amortization of net loss | 543 | 486 | ||
Net periodic benefit cost | $ 45 | $ 11 | 134 | 33 |
Hourly Employees’ Pension Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 6 | 6 | ||
Interest cost | 300 | 303 | ||
Expected return on plan assets | (486) | (495) | ||
Amortization of net loss | 213 | 186 | ||
Net periodic benefit cost | 33 | 0 | ||
Employees’ Retirement Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 3 | 3 | ||
Interest cost | 666 | 651 | ||
Expected return on plan assets | (898) | (921) | ||
Amortization of net loss | 330 | 300 | ||
Net periodic benefit cost | $ 101 | $ 33 |
Retirement Benefit Plans (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Pension expense | $ 45 | $ 11 | $ 134 | $ 33 |
Supplemental Employee Retirement Plans, Defined Benefit | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Pension expense | $ 148 | $ 150 | $ 443 | $ 450 |
Supplemental Employee Retirement Plans, Defined Benefit | Minimum | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Retirement benefit percentage | 10.00% | |||
Supplemental Employee Retirement Plans, Defined Benefit | Maximum | ||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Retirement benefit percentage | 20.00% |
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