Good day, ladies and gentlemen. Welcome to Alamo Group Third Quarter 2015 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions] This conference is being recorded today, Thursday, November 5, 2015. I would now turn the conference over to Mr. Bob George, Vice President of Alamo Group. Please go ahead, Mr. George.

Thank you, and good morning. By now you should have all received a copy of the press release, however, if anyone is missing a copy and would like to receive one, please contact us at 212-827-3773 and we will send you a release and make sure you are on the company's distribution list. There will be a replay of the call which will begin one hour after the call and run for one week. The replay can be accessed by dialing 888-203-1112 with the passcode 986453. Additionally, the call is being webcast on the company's website at www.alamo-group.com, and a replay will be available for 60 days. On the line with me today are Ron Robinson, Chief Executive Officer and President; Dan Malone, Executive Vice President, Chief Financial Officer; and Richard Wehrle, Vice President and Corporate Controller. Management will make opening remarks and then we will open up the line for your questions. Before turning the call over to Ron, I'd like to make a few comments about forward-looking statements. We will be making forward-looking statements today that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following; market demand, competition, weather, seasonality, currency related issues, and other risk factors listed from time to time in the company's SEC report. The company does not undertake any obligation to update the information contained herein, which speaks only as of this date. The company will file its 10-Q on Friday, November 6, 2015. I would now like to introduce Ron. Ron, please go ahead.

Thank you, Bob, and we want to thank all of you for joining us today. Dan Malone will begin our call with the review of our financial results for the third quarter of 2015. I will then provide a little more detail on the performance of our various divisions. And following our formal remarks, we look forward to taking your questions. So, thank you again for being here. And Dan, please go ahead.

Thank you, Ron. Third quarter 2015 net sales of $231.6 million represents a 1.4% decrease from the prior year third quarter. This quarter-to-quarter comparison was slightly helped by the Herder acquisition and significantly hurt by the continued negative effect of a stronger U.S. dollar on the translation of non-U.S. entity sales for consolidated reporting purposes. Excluding $0.6 million of sales from the Herder acquisition, and $9.8 million of negative currency translation effect, our third quarter 2015 sales were up 2.6% over the prior year quarter. Excluding acquisition and translation effects, current year quarter to prior year quarters sales comparisons were positive in all three of our divisions. Nine month 2015 net sales of $655.1 million were $40 million higher than the first nine months of 2014. Acquisitions contributed a net $64.1 million to this increase but this was offset by $27.8 million of unfavorable currency translation effect. Excluding acquisition and translation effect, nine month 2015 sales were $3.7 million or 0.6% higher than the prior year nine month period. Net income for the third quarter 2015 was a record $14.8 million or $1.28 per diluted share compared to $13.4 million or $1.10 per diluted share in the third quarter of 2014. Nine month 2015 net income was also a record $31.8 million or $2.77 per diluted share compared to $29.8 million or $2.43 per diluted share in the first nine months of 2014. The operating results of the Herder acquisition were slightly accretive to third quarter 2015 net income. For the nine month period, the combined effects of the specialized Kallams field swip and Herder acquisitions added about $2,2 million to current year net income and about $1.6 million to prior year net income. The negative effect of changes in foreign currency translation reduced third quarter net income by about…

Thank you, Dan. All in all, I think we saw third quarter was a good one for Alamo Group. While we certainly felt that -- continued to be faced with some adverse market conditions, our AG certainly is, overall AG market remains soft. Europe is still weak, there certainly the ongoing negative impacts due to the exchange rates among -- certainly among the major concerns we have. And all of which is work to constrain our sales growth. Yet we still manage to produce record earnings in the quarter. And this was mainly as the result of operational improvement that I think we have been ongoing initiatives we have which has contributed to better efficiency, further aided by some determined cost control efforts, certainly we benefited a little bit in the quarter by not having the step-up in inventory valuations that affected the last several quarters. And I think we've been helped somewhat lower commodity prices -- positive purchase price variances internally which is one of the few positive effects of the stronger U.S. dollars that I think our costs have stayed in line. And on the top of all this, we -- I think it's really been a dedicated effort of all of our people to really manage and control our cost. And I think this is sort of -- as we have been saying for the last several years, I mean our -- that we believe we can continue to improve our margins but we need to improve our margins as we think there is levels they need to be, and think that we're showing that we can make progress in this regard even in the light of low to no sales growth. And certainly some of these weak market conditions we've been experiencing that have limited our…

Thank you. [Operator Instructions] And we'll take our first question from Mike Shlisky with Global. Please go ahead.

Good morning guys, great quarter. A couple questions here, maybe because if you just tell us a little bit about what kind of products might be driving some this backlog growth, just one of the pure plays the company claims their ores are pretty decent, earlier this week is that part of it or in the category?

I think we're very fortunate that we've seen some fairly broad improvements and in the backlog and it's a little bit every place than a lot in one place look. So I mean I think mortars actually did pretty good in the quarter, street sweepers have done well, snow removal is in pretty good shape right now. As I said the good news is that it's fairly broad based, not a lot of any one place.

Great. And secondly Ron, did you craft that when said just a few moments AG o about margin clearly having 10% plus much is a great thing. Are you suggesting that could probably keep on going in 2015 or it will take a lot of effort to get double digits on a somewhat regular basis going forward?

First of all, yes, I think that the type of margin improvements we've been seeing is something I mean we've been saying we have the ability and are focused on improving our margins. Certainly the fourth quarter is generally one of our weaker quarters seasonally, so I mean I wouldn't say that the fourth quarter is going to be exactly in line with the third quarter but I think the fourth quarter itself should be like the fourth quarter of last year. So I think in generally we have some ability for continued margin improvement. But I mean you know we still have some seasonal factors involved. Certainly even things like we're being helped by the fact in the last 12-months we've had it's like that $5 million dollar ride up in inventory valuation, that is totally behind us now and there was a little bit in in the third quarter but that was that was the total in the of that. So things like that, like I said I mean where you're getting a little, a sister bunch of little things, little purchasing power with the strong dollar, certainly better operating efficiencies within our plants which would certainly be further help that we can get some more volume but now I think all in all, we feel good about the opportunities for continued gradual margin improvement.

Great. And I'm just following two more here. First, on the livestock business, I'm sure you've seen it, there's been plenty of great rain in the Texas area and another part of Oklahoma, last month or two here. So I missed topical weather. Do kind of saying that some dealers out there are looking to get some more mowing going with grass grow with better. Possible in 2016 years, they think any kind of growth if thinking the mowing business as far as orders in the very near term?

I think in general moisture levels across the country are actually at a healthy level. And you're right, I think that bodes well for us. I mean you some of the specific cases already -- we like rain, we don't like floods, and it somehow one the Texas where we've want a little overboard. We certainly like to see a little more moisture on the West Coast, that's a big part of the country that's still pretty way behind in moisture. But all-in-all, I think we feel it's a healthy level and good moisture across the country on average and I think that bodes well. It helped our mowing, like I said our mowing backlogs are up, our mowing equipment sales are doing well even though they started off the year a little on the soft side which we thought, kind of the heavy snows up in the northeast kind of limited that but. Like I said, one thing we found is always a drought, there's always a flood, and there's always a blizzard somewhere but on average moisture levels are a healthy level for us.

Great. And finally if we see a large long-term highway bill here coming out of Congress and even just passed Texas, process here, is there are car about that you're aware of in the road and drainage maintenance spending are in those bills or perhaps could we see any additional business in your either investment tracks or mowing? Over the long-term I guess could some state in the loan authorities do better about spending on machines and maintenance if some of the cash flow spending is supported more by Federal or Texas funds.

We're certainly not a direct beneficiary like the highway bill, I mean I think we're in -- like you said, indirect, maybe they'll have a little more money available at state level that they can spend on infrastructure maintenance versus having the spin that on new capital, road construction and maintenance. So it helps us indirectly but I mean it's not -- over the years it's not been a big major factor. I think as long as it's more just the overall help of the governmental budgets and all that since we're part of their infrastructure maintenance. Just very little direct effect from a highway bill, like I said, it's a little bit of an indirect but this is sort of two different animals.

Okay, Ron, thanks so much. I'm going to hop back in queue, I appreciate it.

Thanks.

We'll go next to North [ph], Piper Jaffray. Please go ahead.

Hey guys, thanks for taking my question, I appreciate it. First, kind of looking at your expectations for the year obviously, we were expecting some soft agriculture end markets but sales have held in pretty flat. These are budget that has expectations or is this kind of what you were expecting going into the year?

No, may be slightly better, I mean I think the last couple quarters we've been down a couple of percent and again, actually that's what I thought would continue. I think we've done a little bit better, I think the segments of AG market we serve are doing a little bit better. I mean we do well with ranchers and orchards and farmers and hobby farmers, all those sectors are holding up a little bit better than the big crop farms which is certainly the weakest sector of the overall AG market. Our diversity -- so I anticipate that we would hold up better. I mean we probably did the few percentage points better than we thought we would but it's not like we were shocked by the results at all.

Okay, great, thanks for that. And then looking at the European market is the weakness out of there going forward completely out of the strengthening dollar or is there any signs that some of those end markets might be weaker?

I mean it just might be weak, I'm not sure that many of the markets there are weaker, they are not strengthening as much. I mean Southern Europe I think has been suttely weak and is not showing signs of improvement. U.K. which has been nice and strong for us, their overall economy is showing some signs of weakness and yet I think we managed fairly consistently to have pretty steady performance there and sort of in Central Europe. So I don't really -- unfortunately I don't really see a lot of strengthening in the European economy, in fact like I said in some places it looks like it could even be weakening a little but I think our prospects are looking pretty steady, pretty stable and with a little bit of upside.

Okay. And then just one more for me, it seems nice work today from the earnings data I'm assuming but still lower then we started at the beginning of the year. Any thoughts on share buyback or if acquisitions are going to be purely the way of using capital going forward? Thanks guys.

Yes, I don't -- I mean we don't have any share buybacks contemplated, we're aiming for dividend this year, I mean it's another way of kind of returning a little more money to the shareholders but like last year we did a major share buyback but that was a fairly unique situation with 45-year shareholder that did own a big chunk in that, never sold any. So that was a fairly unique situation, as we generally said, buybacks are really -- I'm not saying we wouldn't do one in the future but I mean that's not really our focus, our focus is mainly acquisitions, the appreciation, try to make the company more valuable better for the shareholders to growing it and acquisitions are a key element in that. In the short-term, we did a major one last year, real small one this year but -- and we're looking, and I've been testing I think as I said last quarter, a lot of acquisition seems to be out there right now but the pricing is fairly is very unattractive. And I think -- but that's okay, we're patient there and I think as long we feel that we've shown in the last 10 years, we can find a steady stream of acquisitions at acceptable prices and so I can -- we're actively looking and well nothing's imminent, we feel reasonable that we will be able to find a steady stream of them. I'm sorry can't hear you. Operator, can you hear us?

I can hear you.

Tyler from Piper Jaffrey dropped off.

[Operator Instructions] We have him back, we have Tyler back now.

That answers my question perfectly, thank you.

Okay, thank you.

[Operator Instructions] We'll go next to Ross Skolardi [ph] with Bank of America. Please go ahead.

Hey guys, good morning, good afternoon gentlemen.

Good morning.

And now with the order, you just help us pretty well. Yes I just wanted to follow-up a little bit more on what you're seeing on state and municipal spending. I assume it's holding in pretty well, last quarter you've had flagged some weakness and if you have the more a commodity driven markets in oil and gas and mining and areas like that, but I'm just curious if you're seeing any differentiation by the different -- by the states on spending right now. Is that solely just divided by who is an oil & gas state versus another state or any interesting annularity there. I'd be curious about.

Yes, really low -- there is really little. I think governmental budgets in general are in pretty decent shape, I mean the state, county and local level, I think that -- like I said, the softness we've been seeing in the non -- even though it's a small part of our business, but non-governmental applications for our equipment, as I said in oil and gas, our vacuum trucks for oil and gas or Petrochem or something like that, those are those are still staying weak, and I think that they will but of course, there is a small part of our business in total. And the governmental part is holding up pretty steady. I think governmental budgets have to go through some fairly dramatic tightening before it starts affecting our equipment heavily because our equipment is allowing use in ongoing daily maintenance but it wears out on a pretty regular basis, I mean, used equipment mower five days a week or street sweeper five days a week, vacuum truck five days a week. Those kind of things wear out at a pretty regular rate and that have to be replaced. And as I've commented before I think even one governmental broke this, it has billions of dollars a day just on normal things and we're one of those normal things that have to maintain the infrastructure at some basic levels of. So I think we were seeing reasonably good stability at the governmental buying level across the country and across the products, various products that we sell, I mean even in a place like Texas which is certainly being hurt by the oil and gas declines and all, we're being helped by a little bit better moisture. So I think of our equipment sales here are holding up quite nicely even in regions like this. But I don't -- like I say at this point other than the continued softness in non-governmental applications for some of our industrial equipment, the governmental applications are holding up good stability across the products and across the markets.

Great, thanks Ron, and just pardon me with my voice, it's little harsh today. You commented on M&A before and I'm just curious as to whether or not you have a preference for international versus domestic businesses and Herder was a small acquisition but would that potentially – you've got a toe in the water in Brazil, be an area where you would want to continue to expand subject to the market multiples which you mentioned?

Certainly, absolutely. I mean we want to expand both, domestically and internationally. Even in our core markets like Western Europe but in new markets, as well just said Brazil, now -- I would like to do another acquisition in Brazil but I'm not going to do a $100 million acquisition in Brazil like I would do in North America. So I think we would look at Brazil as sort of small incremental opportunities to build up on -- new President Suite has started there and actually in that market we've seen more organic growth in the next five years whereas I think we would like to do further consolidation type acquisitions in Western Europe and in North America. So I mean we're really looking across the wide geographically for acquisitions but we're fairly opportunistic as to what we can find, at what kind of price we can find that, and was staying within our core focus of the products and markets that we have pretty well been very, crude staying in over the years. So I don't really see that but having changing, as I said, I wouldn’t do, wouldn’t make a big spread in Brazil but would continue like to do more there, Australia, Eastern Europe, some of the newer markets, we would like to increase our presence in our core markets of Western Europe and North America. We like to look for all types of further acquisitions in AG and industrial.

Thanks Ron, and earlier you made a comment about Q4, you expect it to be up, was that a margin comment and EPS's, sales comment or all of the above?

Well, as I said, same things that are constraining in sales in the third quarter, those same market factors of weak euro, strong dollar, those are going to continue to affect the fourth quarter. Like I said, I think that's going to constrain growth in the fourth quarter. I think as I even said, margin improvement -- I think yes, we believe we can have ongoing margin improvement but more like compared to last year's fourth quarter not necessarily compared to this year's third quarter because like I said, we still have some seasonality in our businesses since we have such a heavy vegetation maintenance. There is different seasonality in some of our products. But yes, I mean I think we can continue to improve our margins and the more sales, the faster we can do it but even like I said, even with no sales growth this quarter we could still improve margins. And I think we can continue to do that.

And would you expect that the price cost relationship to improve for you in the next six months as you get more of the raw material benefit flowing through and ultimately, do you think you have to give that back in the next 12-months or so?

No, first of all, I don't see getting a huge benefit and having to give back any of it because I mean I think these are small incremental benefits. I mean still most of what like we build in North America, I mean we sell in North America, we build in North America while we may source components globally, most of our costs are dollar-based and same thing in Europe, most of our -- the only thing we're really getting hurt in Europe is not the sales, it's the translation of the results because most of what we build there, most of what we sell their we build there. But like I say, there are some incremental effects on like buying from China, certainly commodity prices for steel are holding barely steady and we're gaining from that. And I'm sure they'll try to raise prices when they can on steel and steel components but that's going to take some strengthening in the economy for they're going to make much headway in that. And I don't really see us giving back anything -- any gains because I think in the niche products, niche markets we serve we're still able to get reasonable passed along cost increases.

I got it. Thank you very much and best of luck for this quarter.

Thank you.

[Operator Instructions] We'll go next to trust Jeff Christine with Columbia [ph]. Please go ahead.

Hey guys, nice results this quarter. Ron, can you talk about the channel inventories what you're seeing, was there any stock or destock that you noticed?

Yes, the only place where that is significant factors in AG sector where the dealers do a lot of stocking, our industrial sectors dealers don't do a lot of stocking, for governmental there is more bill-to-order. So the AG is the only sector where that isn't issue. And I mean certainly in AG in general, that is a concern, I think there is an overhang of inventory at the dealer level on bigger ticket items, combines, big tractors that kind of stuff where we feel this is something we do monitor and we feel we're actually in pretty good shape on dealer inventory levels of our type products, we don't believe there is an overhang. In general, I think that the dealer -- and we see this -- number one, we do a lot of our own floor planning for dealers so I mean we monitor what inventory of our salespeople are watching the inventory levels every time they visit home. We also -- our pre-season, out of season ordering programs which are active right now as we take orders that will build in the learned have on the dealer lots first of the year, and our out of season ordering programs are proceeding at healthy levels, in line with our expectations. And that's as evidence by our backlogs that you see. And so while it's certainly a concern and something we watch, we don't feel that there is too much of an overhang -- any overhang of our type product at the dealer levels. I mean we're seeing some dealers -- you may, if you follow people like Titan [ph] who are really constraining purchases of AG inventory. But even with that we feel we're in pretty good shape with regards to -- that there is no overhang at our type of product inventory at the dealer levels.

So your backlog is up in the AG business?

Steady, steady. I won't say -- like I say, some sectors yes but -- yes, very steady.

Thanks.

And there are no other questions at this time. I'd like to turn it back over to management for any closing or additional remarks.

Well, again we thank everybody for joining us today on the call. Certainly we appreciate your interest and look forward to talking with you on our next -- on our fourth quarter conference call. Have a good day. Thank you.

Thank you. This does conclude today's conference. You may now disconnect. And have a wonderful day.