Alamo Group Inc. (ALG) Q1 2017 Earnings Report, Transcript and Summary

Please standby. Good day, ladies and gentlemen. Welcome to the Alamo Group First Quarter 2017 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, May 4, 2017. I would now like to turn the conference over to Mr. Bob George, Vice President of Alamo Group. Please go ahead, Mr. George.

Thank you. 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 212-827-3746, and we will send you a release and make sure you're 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 will be accessed by dialling 188-203-1112 with a passcode 3509415. 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 and Chief Financial Officer; Richard Wehrle, Vice President and Corporate Controller; and Ed Rizzuti, Vice President and General Counsel. Management will make some opening remarks and then we'll 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 reports. The company does not undertake any obligation to update the information contained herein, which speaks only as of this date. I would now like to introduce Ron. Ron, please go ahead.

Thank you, Bob. And we want to thank all of you to joining us here today. Dan Malone, our CFO will begin our call with a review of our financial results for the first quarter of 2017. I will then provide a few more comments on the quarter results and following formal remarks we look forward to taking your questions. So, Dan, please go ahead.

Thank you, Ron. Our first quarter 2017 results set several all time first quarter records for Alamo. So that I don't sound like a broken record, I'll just say up front that sales, gross margin operating income, net income, earnings per share and EBITDA were all first quarter records. I should also mention to the extent that non-GAAP numbers are included in my remarks that we have already provided reconciliations to the applicable GAAP numbers and the attachments to our earnings release. First quarter 2017 sales of $215.4 million, beat the first quarter 2016 sales of $211 million. Our quarter to quarter sales comparisons were favourable in both the agricultural and industrial divisions, while Europe which was down in US dollars due to translation effects grew local currency sales by over 5 %. Industrial division first quarter 2017 sales of $125.8 million, represented a 2% increase over prior year first quarter sales of $123.4 million. Higher sales of sweepers, mowers and excavators were partially offset by lower shipments of vacuum trucks and snow removal equipment. Agricultural division first quarter 2017 sales were $51.8 million, up 6% over the prior year quarter, as we saw continued improvement in demand for our agricultural mowing products despite generally weak agricultural equipment market. European first quarter 2017 sales were $37.8 million or about 3% lower than the first quarter of 2016. As already mentioned, excluding the unfavourable currency translation effect, this division's local currency sales were up over 5% compared to the first quarter of 2016. As quarter-to-quarter comparisons in France remains favourable and the U.K. began to recover from its growth post Brexit vote slump. First quarter 2017 gross margin of $54.2 million grew by almost 8% over the prior year first quarter. Our first quarter 2017 gross margin was 25.1% of net sales which compares favourably to 23.8% of net sales for the prior quarter. These favourable comparisons were held by a mix of higher parts sales, improved production efficiencies and lower component material cost. First quarter 2017 operating income of $20.1 million was about 23% higher than the first quarter – the prior year first quarter. First quarter 2017 operating income was 9.3% of net sales which compares favourably to 7.7% of net sales for the prior year quarter. Net income for the first quarter of 2017 was $12.2 million or $1.05 per diluted chair, which is more than a 40% increase over net income of $8.7 billion or $0.75 per diluted chair for the first quarter of 2016. Our first quarter 2017 to first quarter 2016 net income and earnings per share comparisons were also held by a lower effective income tax rate. This favourable comparison was due in part to prior year foreign subsidiary losses for which we did not record a corresponding tax benefit. EBITDA grew at a double-digit rate compared to the prior year first quarter. The first quarter 2017 EBITDA of $25.1 million was up 16% over the first quarter of 2016, EBITDA of $21.7 million. This represents our first favourable quarterly EBITDA comparison since the first quarter of last year. Trailing 12 month EBITDA of $92.1 million is trending positively, up 4% over full year 2016, EBITDA of $88.6 million. Excluding the fourth quarter 2016, non-cash charge related to a pension plan termination, adjusted trailing 12 month EBITDA was $94.9 million, which is also trending up 4% over adjusted EBITDA of $91.5 million for a full year 2016. We continue to see strong growth in our trailing 12 month operating cash flow. As of the end of the first quarter to 2017, our trailing 12 month net cash provided by operating activities totalled $79.1 million, which is a 5% increase over the $75.6 million provided in the full year 2016, and over 30% better than the $60.4 million provided in the first quarter 2016 trailing 12 month period. As a result after making capital investments and paying interest in dividends, we were able to reduce our debt net of cash position by $66.5 million over the past 12 months. Our order backlog ended the first quarter 2017 at $147 million, about flat to year end 2016, but down 3.8% from the prior year first quarter, primarily due to lower backlogs for snow removal and moving equipment. New orders were up compared to the first quarter of 2016 due to a rebound in European orders despite currency headwinds and a continued recovery of agricultural division order rates. The same comparison for industrial division orders were slightly unfavourable, as a rebound in vacuum truck and sweeper orders did not completely offset lower demand for snow removal equipment, mowers and excavators. In summary, our first quarter 2017 results were highlighted by record first quarter sales and earnings, continued year-over-year improvements in percentage gross and net operating margins, a return to current over prior year quarter EBITDA growth, continued strong cash flows and net debt reduction approaching $70 million, positive trends in new orders and order backlog about flat to year end. I would now like to turn the call back over to Ron.

Thank you, Dan. And you know we're obviously pleased with our first quarter results. It's always good to start a new year, new fiscal year off on a positive note and I think you know once again demonstrated our ability to turn a small growth in top line performance into a much stronger increase in bottom line performance. We certainly did this in the first quarter in a big way. It was a quarter where operationally a lot of things went right and not much went wrong. And while this is good and we're pleased and proud this is not quite the standard for us yet. So while we feel good that earnings were up 40% in the first quarter that should not be the expectation for the rest of the year. For instance we had you know, like as I said a lot of good things went right. We had favourable spare parts mix in total. We had very favourable purchase price variances in the first quarter and we already know we will be giving a little of that back as the year progresses, as certain inputs such as steel are already going up. Still I am pleased that our cost control efforts are paying off. And we believe they will continue to benefit us throughout the rest of the year. So again not quite at the pace we experienced in the first quarter. Our biggest concern remains sales. It was good to see sales go up in the first quarter, but the sales increase was a very modest 2%. I mean, as that's certainly better than the than the sales declines we experienced in the second half of 2016, but definitely at a 2% growth indicates the soft market conditions with which we have been facing are still with us. And so market headwinds are still there we believe they will continue to affect us through the years and our big concern is sales because sales growth has been very modest if at all for like 2, 3 years now. And other factors such as currency exchange rates are also still impacting our results. As Dan pointed out in our European operations, our net sales were up 5% in local currency and yet down 3% in US dollars. And we believe this will continue to impact this at least till about midyear, I think midyear that’s when the Brexit took place last year, following which there was the big drop in the UK £, so you know probably by about the time we get to the third quarter the comparables should be a little bit more favourable, but still it's not like they are definitely practice in the second quarter and we just hope the dollar doesn't continue to strengthen. But you know it will actually give us a little break. So – but we are at least pleased that in local currency as I said our year of operation are starting to show some positive momentum. All of our operations there are benefiting from this uptick and even our UK ones with you know following the Brexit vote as well there was a lot of end users who had delayed purchases due to the uncertainty following the vote. And we're seeing them sort of come back to the market and you know and as they saw that the world didn't fall apart. And so I think there's more stability returning to the market. And we saw that in our results. We just hope that there's you know there's now, this weekend we have the vote in France for President, which is kind of an interesting one to follow. So I hope this does not create another sort of round of uncertainty, but it's not looking that way at this time. In our North American agricultural division, we had a very strong quarter for the first quarter which was very encouraging. Sales were up over 6% and this outpaced certainly the overall Ag market which is forecasted to be fairly flat this year. I think you know farm incomes are expected to be flat. But I'm a little more optimistic. I think early indications from the first quarter results of other manufacturers in this sector showed a slightly more positive trend, which I think is encouraging. I also you know - I think that even if the farm incomes are flat in 2017 manufacturers could do a little bit better because dealer inventories have been coming down for the last couple of years. So if the end user sales are flat, actually manufacture sales could be up a little. And I think our Ag division will continue to perform well, as we benefit from sort of the range of the product offering or you know the breadth of the markets we serve with that, plus I think we're seeing that some new product introductions we have made are off to a good start. So we're pleased that our Ag group has continued to sort of outpace the overall Ag industry for these last few years when the Ag industry has been soft and we believe that we will continue to do that through ’17 and I think we all expect that the market itself will show some positive momentum as we move into 2018. And even our North American industrial division had a reasonable start to the current year with sales up over 2%. While this is a modest increase as the earlier it was a lot better than the declines we saw in the second half of last year in the segment. You know, overall sales to governmental related entities or infrastructure maintenance remain steady with the exception of snow removal products which are still a little soft following two straight winters that were milder than normal, but even the equipment sales were not off very much. So I mean they actually helped. They were off, but held up actually pretty reasonable. And the areas that we had been hurt the most was in sales of products to non-governmental end users, while a small part of the business. But that had been a growing part, particularly of vacuum trucks. And so they - that was where we were hurt the most in the second half of 2016. And then while we're certainly not back to the levels we were in 2015, there was some improvement there and it does appear both sales and rental activity in this sector are starting to slowly improve. So you know that was a welcome development, welcome home improvement there because that is not only our biggest division, but you know a very high margin part of our business. So in total while we continue to face some of the headwinds with which we have been dealing for the last several years, the outlook for most of our markets seems to be steady to slightly improving, though none are what I would call robust at this time. But we welcome certainly any improvement and feel we can continue to take modest sales growth and turn it into even better earnings results even if not quite as well as we did in the first quarter of 2017. In addition, we believe we will also get some incremental benefit from the acquisitions we have pending. We feel both the old Old Dominion Brush Company One and San Isabel, which is a new one we announced just this week in Brazil, we feel they will both close in the second quarter of 2017. And while neither of these acquisitions are very big they should both provide us with some good momentum in their respective markets. Old Dominion is a solid fit with our industrial divisions sweeper activity and so you know they're going to be not only some market benefits, but some synergistic benefits. The same with Santa Isabel which are more than double the small position we already have in Brazil. Plus give us a much better manufacturing capabilities which are very important in a country like Brazil that has a lot of barriers against imported products and yet is the - Brazil is also probably the third largest Ag cultural economy in the world. And while it too has been down already we're seeing some signs that market is showing some improvement, a modest improvement this year as well. So in summary and we're also pleased that the M&A activity in general continues to progress at a healthy pace, giving us exposure to a reasonable level of deal activity, which I believe will lead to more opportunities for Alamo group than while these were pretty small incremental ones, I think we've been - having the opportunity to look at a few, more sizable deals as well. So I think you know, M&A activity is the key part of our strategy and we think that we will be able to continue to add some other pieces in that sector as well. So in summary, sort of despite ongoing stock market conditions that continue to constrain sales, our first quarter 2017 was off to a very good start, thanks to very strong operational execution. So with stable markets, cost control and incremental acquisitions we're quite optimistic about the outlook for Alamo group in 2017 and beyond. So as I said the key focus is sales, that's going to be - they've been tighten and we hope to really do you know, focus everything both organically and acquisitions to help bolster our sales level because I think we have shown we can do real nice when we get some extra sales. So thank you for your continued support. And with that, we would now like to open the floor for any questions you may have.

[Operator Instructions] We will go to our first question from Tyler Etten with Piper Jaffray. Please go ahead.

Good afternoon, Ron, Dan and Bob. Congrats once again on the right quarter.

Yes, thank you.

I guess, as much as we appreciate the caution on the outlook instead of getting very bold off, I guess as the order book continues to improve, is there anything really that you would need to see before you would start to get positive across the segment. I mean, we've been cautious on the agriculture side of things for a while and put a 6% growth rate for the quarter I believe was pretty good in a difficult market. And then maybe to build off of that, is this the same sentiment you're experiencing community [ph] dealers or are they a little bit more positive about the opportunities that come for the year?

Yeah, I believe especially the Ag sector, everyone is slightly positive but cautious. I mean like I said it's been a rough couple of years and I mean, certain things like I think mowers are doing better than columbines [ph] and so certain products are you know again probably products that serve than just roll crop farmers are doing better than products that are focused solely on road crop farmers. So you know there's still some mixed signals out there, but I would say like you know some of the bigger - you know there was the big lawyer [ph] with national farm machinery show in Louisville in February of this year that was actually up a little probably quite well received. I think that like the ConExpo [ph] show in March in you know, that covers more, you know other products like some of our industrial products that too was not a record. But a very strong you know like a very good show, very strong showing more good activities. Yeah I think there is a little optimism growing. But like I said I mean you know, we did good but still sales were only up 2%. And so I think sales were fairly optimistic and I think much more so for ‘18 than ‘17. But there's still just caution because I think it's going to be you know sales are key and while we – yeah, like you said I mean, you know the results were good and we do feel good about our outlook for the year. I think like an Ag, we’ve been help with some new product introductions, same in couple of our industrial units even in Europe as well. So I mean you know some of the things we're doing we do feel good about it. But I think there's still a little bit of uncertainty out there in the whole markets before we're really saying hey this is going to be a great year. I mean, it's going to be - we think it will be a good one, but how good it will be 10 more on sales than anything else.

Okay. Yeah, I can understand. And then maybe shifting to the new Brazil acquisition, relatively small acquisition, but could you kind of maybe lay out your strategy for Brazil if this is something that you would look to build off of maybe organically or look for other deals in the region or how do you see Alamo being a player in a country like Brazil?

Yeah, Brazil, like I said it's a very interesting economy. You know, I guess it's one of the biggest agricultural economies in the world due to the fact of the distance and freight and had very high tariffs on imported goods. It's you know, it's a market that is very hard to export too. So I mean you know, it's important that we build stuff, we maybe be able to build what we sell there locally. And so I mean we're trying you know this acquisition – our initial acquisition with Herder didn't bring a lot of manufacturing capability and Isabel does bring a lot of good manufacturing capabilities. And so that will benefit not only that Isabel, but also our Herder operation, as we move more production into that - into Santa Isabel facility, so decent synergies. But I mean you know Brazil has you know certainly had some as the country has had some ups and downs and I think we're a little cautious there. So you know we were not - we wouldn't make a real - a huge bet there. All at once, but, so I mean you know I think our focus is to go after organic growth. You know even with our small Herder operation last year even in a challenging market and with a small operation I mean our sales were up like 20% last year, so it was - you know so the focus is more organic growth. But Santa Isabel brought us better manufacturing, a little bit broader product line you know a little bit you know some will get better marketing capabilities. I mean you know we certainly - and we would look for some other sort of small incremental acquisitions to put into the mix to make us a bigger stronger. Give us more capabilities. But like I say, I mean even though we were looking at some acquisitions, our focus is really to go you know we're for organic growth to go after. It seems like there is a lot of and there are a lot of sort of implement manufacturers in Brazil and most of them carry a very fairly broad product line of lots of different implements none of which have a particular amount of volume. And our focus is going to be a little different. We want a little bit narrower product line where we really go after penetrate market penetration. So we really want you know, I’d say fewer products that have good volume where we can get some good manufacturing synergies, manufacturing economies of scale and really go after you know like say market penetration, sort of instead of a shotgun approach we want to much more of a rifle approach going after really certain segments of the market where we think we can become a reasonable size of volume players, so that's basically, like say while we're looking at acquisitions I mean our focus is very much organic growth there.

I appreciate the detail. I'll pass it on.

Thank you.

And we'll take our next question from Mike Shlisky with Seaport Global.

Hey, guys, good afternoon.

Hey, Mike.

So your margin did surprisingly well in the quarter considering the cost of ConExpo and your operating expenses didn't go up from the previous year. Could you maybe comment on whether that $34 million that we saw in Q1 is a good run rate going forward or whether kids [ph] on the trade show cost in Q1 whether it's operations is going to roll off in Q2 for the next three years I guess?

Yes. No I mean you know, certainly can't I - mean we a lot of great trade shows and you know, we had ConExpo, we had the National Farm Machinery Show , we had Clima [ph] in Europe. So it's big, but some of those calls are our spread earlier. I mean, like we pay for the booze [ph] several quarters ago. So they all the costs related to those shows did not fit in the in the first quarter. And so like you said I mean, I think our cost or operating expenses are put pretty nicely under control but you're not going to see any declines, any big decline just because we have some great shows in the first quarter, especially in the second third quarter. And the first quarter for us is actually historically one of our weaker ones and that's why you know like say I think we have a little bit better spare parts sales, whereas the second third quarter generally have better spare parts sales because there's more operating activity. And so I mean I think in those sales commissions will be a little higher in the second third quarters. But yeah, on the overheads I don't I don't see the - you know the level. I think we've got it under control and we're going to keep it. You know the cost expenses you know fairly modest growth in there. But you know I don't see any big changes to you know do to things like trade shows or anything else that was there in the first quarter. Like you said cost there were already under pretty good control.

Got you. And just to follow up on that. You know, I found out I have a pretty reliable seasonality to your earnings, especially since your boss took a couple of years ago. Is it fair to say that the first quarter could be the low point theory of this year as we've seen in previous years or is there a different path and you see this year to your earnings seasonality?

It will - because we don't give guidance or anything, but he is, historically that our second and third quarters are stronger just because there is more operating activity and more spare parts consumption in those quarters. Like I said, we were helped in the first quarter about a little bit more spare parts/ But yeah, our first and fourth quarters are typically our weakest. And like I said, a lot of things went right in this first quarter, but as also said, I mean sales went up to 2%. So it wasn't like I just think we you know like last year the fourth quarter sales being down we really - we really tighten the belt and so we didn't lose it as we went into the first quarter. And so you know, it was good to have positive sales growth when we were sort of geared up to have fairly you know flat the first quarter because that's what the outlook was for. So we outpaced that and I think we're cautiously feeling we're you know that you know we'll set up to have a nice year. But sales are the key. I mean and so I mean we still need to get sales and I don't see you know like I said I mean I think the trends are slightly positive, but they're not robust even as we move into the second quarter. We know there's not some great pickup in sales.

Got you. I also want to ask about your broad based efforts to centralize recruitment and get other efficiencies. It's been a long time - over a year maybe than two, as you go through this, are you finding that there are products in the visions that just can't fit in this or just aren't culturally up to the task of being a part of a larger organization. And at this point as you've seen all the other - all the efforts thus, just taking any products or business out of the portfolio behave sense at this time given where everyone's kind of you know accurate on this initiative so far?

No, based on this initiative, no there's no - there's no one unit you know like say some benefit more than others. As you said I mean almost every unit has benefited from these initiatives and every unit can benefit from these initiatives. Some of them our corporate purchasing where we're actually taking like, sort of negotiating purchases for everybody from the corporate and some of it is just a much more corporate led benchmarking that that you know even when we can't consolidate the purchases we can benchmark to make sure everybody's sort of you know getting - taking advantage of the best prices available even if you're buying from two separate vendors. So - and as I said I think one of the reasons the earnings were good is that we had some nice purchase price, the positive variances in the first quarter and some of which will continue and some of which are results of these programs. I mean like I said you know as I said the big the big jump in the first quarter was not sales increase, it was internal management initiatives on cost control and purchasing is a big factor of that. And I think yes, that's part of what's been driving our steady margin increase for the last couple of years and it is some of these purchasing related activities and taking advantage. And so we believe those will continue. Now like I said I mean, also we're seeing some pricing pressure out there, steel prices is probably the main one right now and we know that's going to you know that we won't get as favourable purchasing variances on steel in the second quarter as we got in the first quarter. So that you know, we didn't expect to get as much in the first quarter as we got in the first quarter. So as usual the improvements it was not one big thing. I mean it was a dozen little things, it was a little bit, it was some pricing, which we believe will continue in total even know like say give or take some on steel. It was certainly a little bit of a mix. Spare parts were better, it was certainly a little bit of volume. It was a little bit of pricing. You know we get a lot of our price increases go in the first quarter the early in the year. And so I mean it was a combination of those things. But you know like I said a lot of that you know, pricing is - the bottom line will certainly help our pricing and we believe that will continue to benefit us.

Great. As always, Ron, thanks for all the answers. I'll pass it along.

Thank you, Mike.

[Operator Instructions] And e will take our next question from Joe Mondello from Sidoti & Company. Please go ahead.

Hi, Guys. Good afternoon.

Hi, Joe.

So I wanted to ask about the margin at the industrial segments. So last year you saw revenue sort of flattish throughout the year on an absolute basis, but margin came from you know over 9% in the first quarter and it fell to around 8% in the second and third and then it fell off a cliff to 5% in the fourth quarter. And we know that you know back in profits and the oil and gas non-governmental part of the business certainly played a role in that. And then it just swung shot right up to 10% in the first quarter. So I'm wondering looking at that fourth quarter and that 5%, was there any sort of mix issue that got pushed into the first quarter that we just saw here and that's why the fourth quarter was so bad. Or just try to help me understand maybe the mix aspect of how that - sort of that going forward?

Yes, Joe. This is Dan. Did you back off the entire that pension charge remember that non-cash pension towards that was entirely in the industrial division segment earnings so you need to add that back end into that was that was the drop off in the fourth quarter was the pension adjustment which was 100% in the fourth quarter and 100% in the industrial division and that was I think almost $2 million.

$2.9 million

2.9 million pretax and so that that heavily impacted the you know the like you take that out and we did not have the big drop in margin guidance and...

I see. So going back to my question are you still at over 9% in the first quarter and it still fell to 7% I guess if you back that out in the fourth quarter, I guess your question looking at the mix in the first quarter on the industrial segments. I mean I know you highlighted on your prepared commentary that some you know favourable parts and whatnot, but looking at industrial alone you know was that 10% margin that you saw in the first quarter here. You know is that relatively sustainable when I look at that?

Yes, that's a little bit better than or better than we anticipated, but you know like say you know maybe I was looking for more like 9 instead of 10. Our industrial group has shown that they should be in that range fairly consistently. The fourth quarter, in addition to you know the one time the pension charge that was where you know we had the sales the biggest sales volume drops, especially in like a vacuum truck which were very you know very profitable products. So you know and snow removals down a little too so. So it was a volume related – I’d say even forgetting the pension, it was mostly volume related that we had dropped it at some very profitable areas. We you know like say, some of that volumes is not totally recovered and yet, I think we've got the margins under better control, our cost a little bit. You know when you have a downturn you know you never cut fast to that. And already as I think I even said in the last quarter you know we probably even overcut. So like even in vacuum profit right now we're actually trying to gear up production. You know our rental rate you know that's one area where we do some rental, our rental utilizations are up that we had where we don't have enough equipment on the lot turning down opportunities due to lack of equipment, plus our backlog of sales of vacuum truck has grown nicely. Still not back to where we were at the peak levels of 2015. And so - but I mean you know that has improved, so we're actually trying to gear up some production in that sector. But I think yeah we know this quarter was a little bit better than anticipated. Our margins in industrial, but you know really the top out of the 9 because it's the first quarter of it we ought to be at that in that 9 to 10, you know I think going to hit. As long his volumes you know, like I said, there we were down like what 6% in the fourth quarter in the industrial division, this quarter were up 2%. That's a nice one. And I mean, you know that's a lot of you know like say $0.5 billion dollar division. You know it's an eight point swing, that's a lot of money going to the bottom line. So yeah it was not any one like say other than the pension thing which you need to - it was a non-cash sort of you know operating item. Other than that, I think things are a little bit more stable and steady and that's why like I said, the key this year is volume and involving get some decent you know reasonable volumes are either hold steady or move up even slightly, we'll do just fine.

Okay. And then looking at the Ag segment, obviously very good volume there. Just wondering on the contribution margins, contribution margin was 66% in the quarter. Any way you can sort of distinguish between you know volume playing a role and the mix on the Ag segment or you know talk about the margins...

Yeah, like I said, again there, their volume was up in the fourth quarter of last year actually it's one of them was the right spot, even fourth quarter last year and we're up another 6% in the first quarter of this year. So volume certainly helped and there's the mix actually helped a little because you know usually the first quarter is not a big spare parts quarter for us. It's you know that because the operation activity is more limited is the second third quarter when the equipment is really being utilized, that spare parts to be a little better. So operationally you know like we had a little bit better mix, we had a little bit more spare parts in the first quarter and for our part or our margins for us and we had a little bit more volume. And then like I said I mean in our Ag sectors since it's been down for three years in a row, I mean you know we've got the cost pretty under control there. And so we certainly didn't release that. I mean our cost control efforts and I guess the last thing is I commented that we you know there we benefitted by some new product introductions and I would say in general with the new products are a little bit higher margin than some of the products we say replaced. And so I think you know new products again as I said, is not one thing, it's a dozen things and so helped a little bit about pricing, helped a little bit about mix, helped a little bit by new product introductions. So I mean, you know cost control efforts like I said, had some better price - purchase price variances - excuse we, input commodities which ones I can say, some of that will give back as steel prices go up in the second quarter. But I think you know we'll be able to keep their operating at a good level which should even get better in the second quarter.

Okay. I also wanted to ask you about mild weather. I know you cited the snow equipment suffer because of that. But net-net, how do you think the weather played a role in the overall business and then can you comment on how what you're seeing across North America so far this year - this quarter here the spring. It seems like it's pretty good from my vantage point, but I know you're going to - there's a lot of rain in the Midwest. So just wondered how that's...

At this point, we were certainly hurt a little by the sort of the mild winter, especially in our snow removal segment. But in general I mean, you know we were probably helped the losses spare parts for a little bit better maybe because I mean they were mowing along highways a little bit earlier then because of the weather conditions so. So you know weather hurt by snow a little. In general I think if we get it, it’s sort of balanced out. You know and as you said there's actually pretty good moisture across the country right now, in some of area in southeast a little too much. But I mean you know we don't they don't seem to be many drought areas right now which helps, on hand it helps, the farmers but it actually sort of hurts. You know last year if anything the farm crop was too good because there weren't any. You know usually there's a drought here in the flood. They're the kind of help bolster crop prices because there's a little bit less volume. Last year that wasn't the case. There weren't the droughts and the floods. So though the crop came in very strong levels of production which actually hurt the farm or hurt pricing a little bit. This year it looks similar in that moisture looks good, no particular drought, no particular you know devastating hurt know like the hurricanes or this kind of stuff. So I actually like that that probably bodes well for us and for equipment needs and everything even though I am not- I’d say if the crop comes in quite as strong as last year it could still keep prices fairly constrained. But yeah, I think weather other than a little bit less snow, and like I said is sensing maybe our snow units were awful little, but they were better, healthy profitable level, but weather is actually you know probably in our favour right now.

All right. And then just lastly, the volume in the European part of the business was the best in a while, but that segment sort of also if you look at it over the last two years, you know, obviously Brexit played a role last year and you know the European economies have been I think a little more volatile than domestically here over the last few years. I'm just wondering your sort of take on sustainability of that volume that you saw in any certain product lines that you're seeing strength, that’s more in the Ag side of things or what you sort of thinking there?

In Europe, I mean, you said, it was a number of things that have sort of constrained the market. There's been very low growth in the European economy. There's been some pick up on you know like say the Brexit votes and this which has caused some uncertainty. But you know one of the main things that has been the strong U.S. dollar which is you know certainly made our sales and results in Europe were less. But actually I mean our European operations have actually stayed reasonably steady in local currency. Like Ag, they’ve been impacted just like in the U.S. that the AG cultural industry has been you know been down for a couple of years now. We're seeing slight improvements there. We're seeing like that I think their economy while you know they certainly are not robust. But you know there is slight improvements. I mean I think you know they're believing you know some of these votes like in the elections in England and France and Germany I mean you know they're saying hey, you know we need to get back to some growth and I think you're seeing a little bit more pro-growth people. So I think you know we're going to see a little bit of growth in the market. I think we'll see a little bit of return to the Ag. You know a little bit strengthening in Ag I think my view is I don't see the dollar getting much weaker. I just hope as long as it doesn't get much stronger then the comparables should start being better, comes the second half of this year. So for us in particular, yeah, you know like I say we were really hurt in the second half last year in the U.K. particularly where the farmers kind of took a wait and see attitude following the decision to leave the EU. We're seeing them come back to the market a little bit, some of the growth we saw in bookings and backlog in the first quarter was rebound there. But even our - the sales from you know all of our manufacturing, while we service you know mostly central Europe all of our manufacturing is in England and France and with even our French sales and our French operations showed improvement both in the Ag side and the industrial side. And so - and to be honest some of that was just the market. I think some of that was us that that you know I think we were helped last year, we closed the plant in France and got our call a little bit better under control. And that is – and I think are being a little bit more effective in the marketplace. So I think its internal actions and a little bit of market and a little bit of just some stability and some of the - you know, what's going on there from the macro point of view and a little bit better in Ag. Again its several things that I think are moving in the right direction. But it's nice to have, I’d say for us a better bookings and backlogs than we've had in a while there.

Okay. Thank you. Appreciate it.

Thank you, Joe.

It appears there are no further questions at this time. Mr. George, I'd like to turn the conference back to you for any additional or closing remarks.

Okay. Well, this is Ron. But again, thank you for the questions and thank you for joining us today and we look forward to speaking with you on our second quarter conference call in early August. Thank you everybody. And have a good day.

Ladies and gentlemen, this does conclude today's call. Thank you for your participation. You may now disconnect.