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Text: Before turning the call over to Ron, I'd like to make a few comments about forward-statements.
Dan Malone, our CFO, will begin our call with a review of our financial results for the fourth quarter and the year-end 2020, and I will then provide a few more comments on these results.
The key takeaways from our fourth quarter and full year 2020 results are: fourth quarter sales were down 3.8%, record full year sales were up 4% with the help of acquisitions, but down 11% without.
Fourth quarter net income and earnings per share were down 16% from the prior fourth quarter on a GAAP basis and down about 6% on an adjusted basis.
Full year net income and earnings per share were down 10% from prior year on a GAAP basis, but increased more than 2% year-over-year on an adjusted basis.
Full year adjusted EBITDA was up 11.6% from the prior year and essentially flat to the third quarter trailing 12-month result with adjusted EBITDA margins expanding by nearly 100 basis points over prior year.
Record full year operating cash flow of $184.3 million was up 108% over prior year, and fourth quarter operating cash flow exceeded an unusually strong operating cash flow performance in the prior year quarter.
Outstanding debt was reduced by $158.6 million in 2020, and our debt net of cash position improved by $166.5 million during the year.
Record backlog of $354.1 million was up 35.6% over the prior year-end.
Fourth quarter 2020 net sales of $288.6 million or 3.8% lower than the prior year quarter.
While we saw a strong rise in order rates and backlog, the COVID-19 pandemic continued to negatively impact our manufacturing efficiencies and inbound supply chain during the quarter.
Also the timing of these new orders and the fact that strong customer demand hasn't been consistent across all of our business segments has limited the immediate top line impact.
Full year 2020 net sales of $1.16 billion were a Company record and 4% higher than the prior year with the contribution of the Morbark and Dutch Power acquisitions.
Without these acquisitions, organic sales were down 11% from prior year.
Net income for the fourth quarter was $8 million or $0.68 per diluted share compared to prior year fourth quarter net income of $9.6 million or $0.81 per diluted share.
Excluding the Morbark inventory step-up expense, severance cost related to a plant closure, one-time acquisition transaction cost and acquisition-related amortization expense, adjusted fourth quarter 2020 net income was $13 million or $1.10 per diluted share compared to $13.8 million or $1.18 per diluted share in the prior year quarter.
Net income for full year 2020 was $56.6 million or $4.78 per diluted share compared to net income of $62.9 million or $5.33 per diluted share for the prior year.
Excluding the full year impact of the adjustments I just mentioned in the quarter comparison, adjusted full year net income was $70.3 million or $5.94 per diluted share compared to $68.4 million or $5.80 per diluted share in the prior year.
Industrial Division fourth quarter 2020 net sales of $202.7 million represented an 8.9% decrease from the prior year quarter due to the pandemic-related impact on customer demand and disruptions to our supply chain and operations.
While this division ended the year with higher backlog than the previous year-end, the surge in orders that created this favorable comparison is largely concentrated in forestry and tree care products.
Other business units, notably those serving the municipal government sector, finished the year with order backlog below pre-pandemic levels.
Agricultural Division fourth quarter 2020 sales were $85.9 million, up 10.5% from the prior year fourth quarter.
During the quarter, we continued to see strong organic growth across this division.
The immediate top line benefit of the surge in customer demand was constrained by the negative impact of the pandemic on inbound supply chain and manufacturing efficiencies, as previously mentioned.
Full year 2020 adjusted EBITDA was $145.2 million, up $15.1 million or about 11.6% over the prior year and was essentially flat to the third quarter trailing 12-month results.
Our adjusted 2020 EBITDA as a percentage of net sales improved by nearly 100 basis points over prior year.
Higher Morbark margins, favorable product mix, the benefits realized from facility consolidations and other cost containment measures more than offset the negative impact -- the negative pandemic impact previously mentioned.
During 2020, we generated $184.3 million of operating cash flow compared to $88.8 million in the prior year, an increase of 108%.
Strong operating cash flows continued during the most recent quarter, as we exceeded an unusually strong operating cash generation in the prior year fourth quarter and we further delevered our balance sheet.
We ended the fourth quarter with a record $354.1 million in order backlog, an increase of over 35% since the prior year-end.
During the fourth quarter, we saw an acceleration of customer demand, particularly for our forestry and agricultural products, while demand has grown overall for the Company and all of our units have seen improvements in customer demand since the pandemic impacted the second quarter.
Order rates for some of our businesses are still below pre-pandemic levels.
To recap our fourth quarter and full year 2020 results, fourth quarter sales down 3.8%; record full year sales, up 4%, but down 11% without acquisitions; fourth quarter net income and earnings per share down 16% on a GAAP basis and down 6.8% on an adjusted basis; full year adjusted EBITDA up 11.6% from prior year and essentially flat to the third quarter trailing 12-month result with adjusted EBITDA margins expanding by nearly 100 basis points over prior year; record full year operating cash flow, up 108% over prior year with favorable comparisons continuing in the fourth quarter; full year debt reduction of almost $159 million and debt net of cash improvement over $166 million; and record backlog, up more than 35% over the prior year-end.
We're particularly pleased to see that the momentum, which we have -- which has been building for the last several quarters, really since the slowness in the -- the end of this -- in the second quarter and -- but it's built in the third, continued into fourth and with strong bookings and a record backlog at the end of the year, and I'm pleased that this trend has continued even into the first quarter of 2021 with our backlog continuing to grow even further, and now it's over $400 million.
However, there were also issues related to the pandemic that impacted our operations in the fourth quarter.
These included sporadic cases of COVID that, while not large and not at a lot of locations, were -- always had a follow-on effect that like you could have one person that went home sick and then suddenly we close down the whole department for several days while we clean it and get things better and ready to make sure everybody else in there is OK.
We've always had [Phonetic] a couple of things like that.
We are also experiencing more supply chain issues, but again can be small.
You cannot ship a product as you have -- are missing a [Indecipherable] O-ring, but that's the kind of ripple effect these can have.
All of this together caused shipments in the fourth quarter to be a little below our expectations, but still good.
And margins were even better, particularly when adjusted for the non-cash charges that were above average in the fourth quarter for 2020.
The two major non-cash charges were the inventory step-up charge related to the acquisition of Morbark and the reorganization reserve related to the proposed plant consolidation we've announced in the Netherlands.
We are not finished with the inventory step-up charges at Morbark, which affected us every quarter since we bought them.
But as of the end of the fourth quarter, all goals are now finished and should not be affecting our results going forward.
And the plant consolidation in Europe, we're actually -- even though we took a charge in the fourth quarter, it's actually -- the timing was a little bad because that actually, within the next year, will have a projected payback of less than one year on that investment -- on that the plant consolidation.
So, it's a very positive move in the long term, even though it impacted the fourth quarter results.
But net of these two items, net income from the quarter was just below the previous year's -- adjusted net income was just below the previous year's adjusted net income, despite soft sales and less organic sales and certainly the ongoing COVID issues.
So, all in all, we're pleased.
On top of this, we were extremely pleased with our efforts in the fourth quarter and throughout 2020 in controlling cost and managing our assets, which, as Dan pointed out, resulted in very strong levels of cash generation, record EBITDA and reductions in outstanding debt, ensuring the Company's solid financial stability despite the certainly challenging economic environment, which we are all operating.
In addition, we are pleased that even with the limitations imposed on us during most of the year 2020 that certainly restricted our travel and caused many of our office personnel to have to work remotely for some periods of time, we were able to complete many of our operational developments that we already had planned for the year.
These include most of the integration initiatives related to the 2019 acquisitions of Morbark and Dutch Power.
We also completed the construction of a new manufacturing plant for our Super Products unit in Wisconsin that allowed us to consolidate three facilities into one modern efficient facility, and we were able to complete that project totally in 2020.
And there was continuous progress on a range of other product development and operational improvement initiatives ongoing throughout the year.
So, actually, we really made a lot of progress in a very challenging year.
Alamo Group's Industrial Division performed well in both the fourth quarter of 2020 and for the full year, even though for us, they probably had the most market challenges due to COVID.
The biggest end user of their products are governmental entities, most of which struggled with budgetary issues during the year and are still being impacted today.
Yet while organically, our sales were off, they still held up well due to the stable nature of demand for our types of products that continued to be used through the year for infrastructure maintenance.
And we're pleased bookings, which were very soft in the second quarter and gradually and steadily increased each quarter since then, have continued this trend as we moved into 2021.
As Dan pointed out, some of it's a little spotty.
Some units are doing better than other units.
But certainly in total, they're up.
And it's interesting like -- say like Morbark, one of our new units, they were probably hurt the most early on COVID, and yet, they have come back the most -- the strongest, as things have continued to build back up.
So, it had been a little spotty but in total, as I said, it continues to be good and strong.
Certainly, our Agricultural Division has held up even better and actually showed a small increase in sales for the year and margins did even better.
We were -- I think the ag sector in general was helped by increased subsidies to farmers during the year, and actually we started -- COVID [Phonetic] period started with fairly low levels of dealer inventories going into the year 2020 due to the weak agricultural industry of the last several years.
So as a result, at the end of the year, as I said, we have record backlogs.
Dealer inventories are still fairly on the low end, so there's still more upside potential there.
But we're also seeing improved commodity prices in the ag industry.
So, the outlook for further growth in this division is very positive as we move into 2021.
In fact, we believe the positive trends we are seeing in both of our divisions bode well for Alamo Group's outlook for 2021, though the pandemic and its repercussions, as well as all the impacts it has had on the global economy are still far from over.
For us specifically, ongoing COVID infections are spotty, but certainly are still causing challenges.
Supply chain issues are affecting us and many -- almost everybody in our industry.
Everything from truck chassis, tractors and all are out -- the lead times on them have nearly doubled for many of our key inputs.
Certainly, even the adverse weather conditions of the last several weeks, especially in Texas, not only were a couple of our plants closed for couple days, but we saw like one major supplier that -- they said they were closed four days, and so now they are two weeks later than their plan.
So, that's causing some issues.
And we're also seeing a few inflationary pressures too in this which -- I think with our reactions to that, that will -- most of that will flow through fairly quickly.
But in the short term, it can have some effect on our -- all of our operations.
So, all these issues together will certainly dampen our first quarter performance, but we actually feel quite good about the year 2021 in total.
There is positive momentum in our markets.
There is stable demand for our types of products, which continue to be used daily in maintenance and operations and are wearing out on a regular basis.
In addition, contributions from recent acquisitions, ongoing operational improvement initiatives, as I've said, such as the plant consolidation initiatives we've taken on, altogether make the outlook for the full year of 2021 very bright for Alamo Group.
And we certainly hope that the greater availability of the new COVID vaccines will start to take -- have a impact on the pandemic and will begin to abate and we can all return to a little bit more conditions.
But regardless, we actually feel quite good about the outlook for Alamo for 2021.

user
compname reports q4 earnings per share of $0.68.
q4 earnings per share $0.68.
q4 sales $288.6 million versus refinitiv ibes estimate of $289.8 million.
q4 net sales of $288.6 million, down 3.8%.
backlog at $354.1 million at quarter end, up 35.6% compared to year end 2019.
qtrly acquisition adjusted diluted earnings per share non-gaap $1.10.

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