Q4 2020 Alamo Group Inc Earnings Call
[music].
Good day and welcome to the Alamo Group, Inc. Fourth quarter 2020 conference call.
Today's conference is being recorded at this time I'd like to turn the conference over to Ed Rizzuti, Vice President General Counsel and Secretary. Please go ahead Sir.
Thank you bye.
By now you should have all received a copy of the press release.
If anyone is missing a copy and would like to receive one please contact us to wants to eight to 73746, and we'll send you a release and make sure you were on the Companys 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 18882 031112 with the pass code 6872 067.
Additionally, the call is being webcast on the company's website at Www Dot Alamo dashed group Dot com and a replay will be available for 60 days.
On the line with me today are Ron Robinson, President and Chief Executive Officer, Dan Malone, Executive Vice President and Chief Financial Officer, and Richard <unk>, Vice President Treasurer and corporate controller.
And it will make some opening remarks, and then we'll open up the line for your questions.
During the call today management may reference certain non-GAAP numbers in their remarks.
Reconciliations of these non-GAAP results to applicable GAAP numbers are included in the attachments to our earnings release.
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, Covid, 19 impacts, including operational and supply chain disruptions competition weather seasonality currency related issues geopolitical 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 day.
I would now like to introduce Ron Ron. Please go ahead.
Oh, Thank you Ed and we want to thank all of you for joining US today are Dan Malone, our CFO will begin our call with a review of our financial results for the fourth quarter and the year in 2020 and I will then provide a few more comments on these results and certainly following our formal remarks, we look forward to take from your.
Questions. So Dan. Please go ahead, thank you Ron.
The key takeaways from our fourth quarter and full year 2020 results, our fourth quarter sales were down three eight per cent.
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.
GAAP basis, and down about 6% on an adjusted basis flow.
Your 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 months result.
With adjusted EBITDA margins, expanding by nearly 100 basis points over prior year.
<unk> 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 from 2020.
And our debt net of cash position improved by $166 $5 million during the year.
Record backlog.
$354 $1 million was up 35, 6% over the prior year end.
Fourth quarter 2020, net sales of $288 6 million or three 8% lower than the prior year quarter, while we saw a strong rise in order rates and backlogs.
The COVID-19 pandemic continue 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 is limited the immediate topline impact.
For year 2020 net sales.
$116 billion were a company record and 4% higher than the prior year with the contribution of the more bark and Dutch power acquisitions with.
Without these acquisitions organic sales were down 11% from prior year.
Net income for the fourth quarter was $8 million were <unk> 68 per diluted share compared to prior year fourth quarter net income of $9 $6 million or <unk> 81 per diluted share.
Excluding the more of our inventory step up expense and.
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 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 from 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 per $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 eight 9% decrease decrease from the prior year quarter due to the pandemic related impact on customer our customer demand and disruptions to our supply chain and operations.
While this division ended the year with higher backlog than the previous year and the surge in orders that created this favorable comparison.
Largely concentrated in forestry and free care products other business units, notably those serving the municipal government sector finished the year with quarter backlog below pre pandemic levels.
AG Cultural 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 result.
Our adjusted 2020, EBITDA as a percentage of net sales improved by nearly 100 basis points over prior year.
Hire more of arc margins favorable product mix the benefits realized from facility consolidations and other cost containment measures more than offset the negative impact negative pandemic impacts 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 deleveraged 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 and during the fourth quarter, we saw an acceleration of customer demand, particularly for our forestry and agricultural products, while demand has grew.
One 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.
Quarter sales down three 8% record full year sales up 4%, but down 11% without acquisitions.
Fourth quarter, net income and EPS down, 16% on a GAAP basis and down six 8% on a on an adjusted basis.
Full year, adjusted EBITDA up 11, 6% from prior year and essentially flat.
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 in debt net of cash improvement over $166 million and record backlog up more than 35 percentage over the prior year and I would now like to turn the call back over to loans.
Thank you Dan.
I think.
You know, we're all sort of glad to see 'twenty and 'twenty come to an end.
But I'm certainly pleased and proud of the way our company perform given the many ongoing challenges we all face during the year.
Particularly pleased to see that the momentum what we are.
Which has been building over the last several quarters really since the <unk>.
Loans.
At the end of this so in the second quarter.
Built from the third continued infor.
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 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.
These included the spur.
Sporadic cases of Covid debt, while not large in not that a lot of locations, where you all have always had a book.
Ill follow on effect that you could have one person that went home sick and.
And then suddenly we closed down the whole department for several days, while we clean it and.
And and good thing.
Better and ready to go.
Sure everybody else then there is okay.
Yeah.
A couple of things like that we are also experiencing more supply chain issues that again can be small I mean, yeah.
Can not ship a product that you are missing a whole range.
But that's the kind of ripple effect. These can have all of this together called shipments in the fourth quarter to be a little below our expectations, but still good and end margins were even better.
When adjusted for the non cash charges that were above average in the fourth quarter from 'twenty 'twenty two.
Two major non cash charges.
The inventory step up charge related to the acquisition of more bar.
And the reorganization reserve related to the proposed plant consolidation, we've announced in the Netherlands.
We are now finished with the inventory step up charges at more bark.
Which affected us every quarter since.
Since we bought them, but there is other.
The end of the fourth quarter all of those are now finished and should not be affecting our results going forward.
Yeah.
<unk> consolidation in Europe, we're actually even though we took a charge in the fourth quarter.
Actually the timing was a little bad debt.
Because that actually within the next year, we'll have projected.
Projected payback of less than one year, all debt investment on debt.
Consolidated so it's a very very positive move in the long term, even though it affected the fourth quarter results.
Net of these two items net income from the quarter with just just below the previous years.
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-19 issues. All in all we were pleased.
On top of this we were extremely.
Pleased with our efforts in the fourth quarter and throughout 2020, and controlling costs and managing our assets, which as Dan pointed out.
Resulted in very strong levels of cash generation.
EBITDA and reductions in outstanding debt and during the company's solid financial stability. Despite this certainly challenging economic environment in which we are all operating.
In addition, we are pleased that even with the limitations imposed on us during most of the year of 2020, but that's certainly restricted all travel and calls many of our office personnel 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 more bar and debt power.
We also completed the construction of a new manufacturing plant for our simple products unit in Wisconsin that allows us to consolidate three facilities into one modern efficient facility and we were able to complete that project globally 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-19.
The biggest end user of their products are governmental entities.
Of which struggled with budgetary issues during the year and are still being impacted today, yet while organically. Our sales were all they still held up well due to the stable nature of the demand for our types of products that continue to be used through the year for infrastructure maintenance and.
And we are 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 budd.
Yes.
Certainly in total they're up and.
It's interesting I know like say like more Barker at one of our new units. They were probably hurt the most early on in Covid and they have come back amongst the strongest.
As things have continued to build back up so it's 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 than actually showed a small increase in sales for the year and margins did even better than we were.
The AG sector in general was helped by increased subsidies to farmers during the during the year end.
Actually we started.
Over the period started with.
The fairly low levels of dealer inventories going into the year 2020, due to the weak agricultural industry over the last several years so as a result.
We ended the year.
As I said, we have record backlogs dealer inventories are.
On the low end so there is still a.
More upside potential there, but we're also seeing improved commodity prices in the AG industry. So 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.
While the pandemic and its re protections as well as all the impacts it has had on the global economy are still far from over.
For us specifically ongoing COVID-19 infections are a spotty, but certainly are still causing challenges supply chain issues are.
Are affecting us and many multiple almost everybody in our industry I mean.
Everything from.
The truck chassis tractors and all are out.
The lead times on them have nearly doubled.
While many of our.
Our key inputs.
Certainly.
Even the AD worse adverse weather conditions over the last.
Several weeks, especially in Texas.
We're a couple of our plants closed for a couple of days, but.
We saw I mean, you know like one major supplier that.
They said they were closed for days and so now there are two weeks later.
They they plan. So I mean, you know that that's causing some issues and we're also seeing a few inflationary pressures too and this was.
I think with our our reactions to that that will.
Most of that will flow through fairly quickly, but in the short term it can have.
It has some effect on our all of our operations. So all of these issues together, we will certainly dampened our first quarter performance, but we actually feel quite good about the year 2021 in total there is positive momentum in our markets stable demand for our types of products, which continue.
To be used daily and maintenance.
Operations and are wearing out on a regular basis and additional contributions from recent acquisitions ongoing operational improvement initiatives.
I've said such as the plant consolidation initiatives, we've taken on all together make the outlook for the full year of 2021 very bright for Alamo Group, Inc.
We certainly hope that the.
Greater availability of the new Covid vaccines will start.
The impact on the pandemic.
And we'll begin to abate and we can all returned to a little bit more normal conditions, but regardless, we are we actually feel quite good about the outlook for Alamo group from 2021.
So we want to thank you for your support during these trying times.
That I would now like to open the floor for any questions you might have.
If you would like to ask a question. Please press star one on your telephone keypad.
A speaker phone. Please make sure your mute function is turned off the legacy accounts.
Again Thats star one other question.
We'll go first to Chris Moore at C. J S Securities.
Hey, good morning, guys.
Alright, Chris.
Good morning.
Ron You had mentioned just mentioned net debt.
Q1 could be a little softer I'm, just trying to reconcile that with the.
The debt the.
The backlog that that's really building just trying to get a sense it's true.
Is that.
Most of those deals.
Deliveries are now a couple of quarters out or other.
Net.
Now match up against some other COVID-19 challenges and things like that you are seeing in Q1.
Yes.
It's not that the deliveries are out it's just that with the <unk>.
Covid issues and a few supply chain issues you know we think it's good.
That's one of the dampened results, it's sort of like a little bit like it did in the fourth quarter and that is yeah. Like I said I mean, it's not the backlogs longer term I mean, we would like.
So you reduce some of this backlog a little quicker, but I think just.
Some of these operational challenge supply chain, what we're working with our vendors when we're going to be getting stuff like I said.
Chassis and tractor deliveries of sort of doubled in and so I mean, it's really just getting geared up to that we can.
Europe production that we can meet this demand so I mean like I say backlog in some cases, almost a little bit too strong.
Stronger than I would like.
But I'm not too worried.
I'd like to say that you know any of what's at risk because everybody is lead times are pretty well getting stretched a little bit right now and it's just taken a little bit longer to gear up to to be able to meet this demand.
Got it and you had said it's more skewed towards the <unk>.
And then more block.
No no I think it's pretty well broad based you know all of our units are being affected somewhat similarly.
I think.
Probably the eggs being a little bit more affected by some of the port issues I mean, we've.
We've got a lot of product.
On the ocean late to be unlikely gearboxes drive lines that we source internationally our debt.
A little bit more of that sitting on the ocean than we would like right now.
Although it had been in our plants, but.
Is that that's affecting AG, a little bit more of the.
The port backed up but.
You know it was fairly broad based was it like I say, it's not a it's not big.
A lot is just like I said, all it takes us one items that would keep you from shipping a whole.
You know like being able to complete it.
The book.
Piece of equipment to ship.
Got it I appreciate that.
Our parts.
You know a much higher gross margins made up about 21 five per cent of.
Revenue in fiscal 'twenty from.
Hold it in person.
Person.
18, five of the last couple of years.
That's a trend back towards the high teens in 'twenty one.
Hum.
There's two things going on there one of which is we acquired more of our and more bark just the nature of the equipment. There is just a much higher level of clients. Then what was the company average prior to the acquisition so that will stay.
The part that May revert back as when cole good equipment sales recover then you know the percentage of parts that total sales will come down a little bit because whole goods will be increasing.
So we.
We will be operating at higher than 18, 5% because of Warburg.
So it may not be 'twenty, one two maybe its more in the vicinity of 20.
Sounds good alright, let me jump back in line I appreciate it guys.
Thanks.
We'll go next to Mike Smith.
At all your securities.
Hey, good morning, guys.
Good morning, Mike.
Speaking of sticking a mix.
He was mentioning that.
More breakfast and doing quite quite well from the order and backlog standpoint, if that kind of holds with how shipments go going forward is there a good.
Our gross margin or operating profit mix coming up in the industrial group.
Those are all those are often higher margin products is that going to stick in 2021.
Mike I think this is Richard I think what Ron was saying is I think we're seeing in day I'd put it in his comments that forestry and treat care, which is the more bark piece actually the orders are picked up on that area.
But as we said going into the when we bought more bark their margins actually were a little bit higher than our margins our average margins.
And so on and that has held true. So I mean, yes, we think plus with some of the synergies were able already getting from them. We think that's a.
You know that certainly the case that the margins will be good like I said I mean their backlog has grown nicely.
Yeah.
I like that they need we need to gear up there a little bit better.
Because they're they were like some of the ones that were a little bit short on shipments in December.
As they are.
They were one of the ones that I mentioned.
Had one a couple of cases of Covid in the shipping Department and.
And the whole shipping department was down for a week.
So.
So their EBITDA margins are.
Lot higher than they are a little higher than the company average.
If you look at their whole good equipment margins are about what we what ours are across the company, but they have a richer mix of parts sales and they are a little bit better relationship of margin to the SG&A component. So that's what's driving that.
At an EBITDA level theyre going to Hum.
We're going to drive a higher EBITDA margin.
The average Alamo Group company.
Michael just to add to that too is that just from that you know the backlog for industrial is solid but it's just we have weird mixes in there right now is ronald stating before it's just.
We have higher or stream free care, but you have other areas I can snow in some of the other areas. Some of the other business units themselves are probably below pandemic levels.
Got it but all of them are improving now I mean, they're all above and ended the year above where they were you know like in the mid year.
Of course sure that.
That makes sense.
Cash interest.
Quick question about the synergies you were getting at more block.
Can you give us some sense as to how that progressed during during 2020 and neither a lot left to go in 2021.
There's still more to go in and really truly milk the initiatives that we completed.
We identified I mean, you know like we got them converted to our operating system went live. It was day, we were little several months late in the process just because you know restrictions on travel and people working remotely made a little more challenging but that that's completed.
Also most of the purchasing initiatives, we identified one of them. We have those are now in place and and Inc.
Exactly where we thought they would be but we haven't we haven't gotten the benefit the full benefit because they've been purchasing less.
Sales being off and and then they had to work down and they've been working down inventories, though so it's now that we're starting to now they're back loans have really grown and we're starting to to purchase more.
For them, we're getting those benefits.
You know would you say that you know so they'll start to ramp up nicely.
We also completed one plant consolidation there as well they had three plants and we closed the smallest one.
Actually ahead of schedule and moved it into their there was the smallest of small the smallest of the three you up in Canada moving into their other two and.
So yeah, I mean, I think we still got more initiatives to go and we still get to get more money from the initiatives, we've already done to come but but I'm very pleased that that's pretty well been on track I, probably the one that we didn't get accomplished this year because of Covid was getting more bark.
Later exposure in an international sales we.
We didn't get that opportunity, we just couldn't get out and actually tried to you know.
Show that product internationally.
You don't really want to try to do this year from Canada and in fact, we still don't have anybody allowed to travel internationally.
Gotcha.
We tried to share maybe zero turns and and.
How that's going if anything you could tell us about Colorado How's. This chapter has been going on and it sounds like you. It turns over at all from a pushout.
Yeah, we haven't disclosed any numbers publicly specific numbers, but I mean, we can say that the Dixie chopper Hum the.
The acquisition has really been paying off it really has.
Grown quite a bit since we acquired it and it's really helping our agricultural division numbers as well it met our expectations for this past year, but we thought we'd probably cheated don't exceed it again, given the COVID-19 situation, even exceeded them and Fortunately that one in 2019, we got that plant.
When we bought that we didn't buy the facilities and we moved it into our facility and we got all that done at the end of 2019.
So.
You know everything but that consolidation was done, but we didn't really start getting the benefits until 2000 until 2020 and now.
So.
It's done well for us in 2020, it's small numbers, but very nice contributor how high payback to the small amount we had to buy pay for them.
But the overall strength in the order and backlog seeing price going forward is not strictly a zero turn base because it's more.
No it's across the board Bush hog.
Doing really well, we're even seeing you know order rates pick up in Europe. So yeah.
It's across the board across Europe, Europe, which has been lagging.
Now doing.
So their order rate has picked up.
Brazil strength.
Potatoes for us whichever book, but it picked up nicely and.
And certainly all of our North American units.
The benefit of it as well so.
No.
I think backlogs as well.
Where we've had the most growth in backlog.
Got it.
One last one from me you know I did notice that your leverage went down quite a bit from from this time last year.
Like cut in half.
That sounds very I mean, I thought that was a very strong result.
Does that mean, maybe it's time to start looking at some other sizable deals might be out there and could you give us some sense as to the M&A market in general for you.
Yeah, certainly the financial the M&A market is is coming back.
I think its lagging a little in industrials because of that because the true.
Industrials.
I mean I know in my case other I think.
Due diligence is hard to do due diligence virtually you can do it virtually to a point, but you really need to see feel and touch.
And I think valuations are going to be a bit of a challenge because I mean, it seems like it from the deals I'm seeing people are sort of just assuming total that's over with and never happened and.
I'm, a little more conservative and not quite there yet, but but it is to your point, yes, I think in the.
Second half of this year, we will be actively starting to look at opportunities and I think there's going to be.
A number of opportunities coming down the pike.
Yeah.
You know there was people who wanted to do stuff last year that got put on hold and other things.
They're starting to get geared up again, and so yeah. I think we will we will start looking and.
But you know I.
It could be a challenging environment to get a deal done in the short term.
For us.
Got it I guess I, just don't get tested by a stack.
You should be an average day.
Yeah, that's right I mean, there is a lot of money out there chasing deals and so I mean, you know like say, we we care what we pay for stuff in the.
We can get on the bandwagon.
Indeed, thanks, so much from.
Thank you thanks, Mike.
And as a reminder, if you would like to ask a question. Please press star one well go next to Greg Burns with Sidoti and company.
Good morning.
When you look at the debt.
The puts and takes between some of the maybe positive mix shifts for next year versus some of maybe the inflationary pressures maybe COVID-19.
C U E.
External parties.
In 2020 from them.
And in 2020.
And you you sort of broke up but I think you're talking about can we expand margins or what is the margin in fact impact due to inflationary pressure.
Pressures in every day in and there certainly is more inflation.
You know in in our call. The these days.
And but I mean, I think we have shown a pretty good ability I mean, we are you know we.
We took some of that into consideration, we saw it coming and put it into some of our pricing increases.
We also have you know in some cases, even put in selective surcharges like you know if you like steel surcharges energy surcharges.
So, yes, there'll be a little impact on the first quarter results I think are more so just because you know some of the backlog that we had as you know did.
Breaking sales backlog some of that didn't have all the all the inflation built into that that we would have liked but but I think over.
But as the year wears on that day will be I think what you will see that we will get the full benefits of our of our cost increases are surcharges in all in and you know and do backlog new backlog is already.
Taking into accounts some of these inflationary pressures. So I you know like say, maybe a little impact in the first quarter, but I think as the year wears on it will take US you know you'll see our margins won't be affected.
These inflationary pressures in fact, I think as historically, we've shown we can usually.
Take advantage of these situations and you know.
Total hold onto our margins.
And.
So I'm, okay I feel good about that other like I said as always when there's a big increase in a short period of time like steel has done lately.
It's hard to react real quick, but but I think we've shown over the years that we do react and maybe you know a little effect, but.
During the course of the year, we should be fine.
And I think that once our volumes recover and we get past some of these COVID-19 pandemic impacts that we you know obviously the bigger backlog should start driving some favorable operating leverage into our margins as well.
Okay makes sense.
The.
Demand in the.
The industrial side when you look at.
But he's still on the support.
Yes.
That you might be seeing for our state and local governments, how do you see that potentially benefiting.
Alamo group.
Well yeah.
You know its interesting state local governments, they all are having pressures.
I've been surprised at the stage seven they usually are haven't been hurt as much as the municipal budget itself.
Which I've been surprised I mean, I think involving can state budgets in general have held up a little bit better than I thought some of them that were a little bit better shape going into to this.
And so yeah.
It was interesting early on in the pandemic.
We saw.
As much affected by governmental.
The operational challenges.
You know like they they were trying to work remotely they were having offices closed and even though the equipment in the field will stay in fairly fairly busy on a fairly regular basis. You know the office people had had a few more challenges. So I think you know we're seeing down there now functioning.
They they were bumps being much better by mid year.
And that's when the orders started to pick back up again and things.
Picked up so I think.
The equipment generally is being used.
We had a little slow start to like the snow season, we were saying the backlogs there because why it wasn't cause issues. This year, there's a lot of snow, but last year there wasn't much so which meant they you know the orders going into weren't bad, but we're already starting to see.
Our spare parts orders pick up since the you know theres been heavy snows.
Sure.
So really in February around the country and that you know.
We think the orders will be strong going into next year. So.
You know some of that's you know like I said its seasonal some of that.
Government and other operational problems, but by and large they're operating pretty good their budgets are still though very tight.
And.
You know like say, but probably a little bit better shape than I thought.
And you know the good news is our equipment is being used regularly in being worn out on a fairly regular basis. So we're seeing a oh I think that that bodes well for us even if their budget stay stay tight.
But their budgets aren't quite as bad as I thought they were in our book.
I'm glad they are using our equipment on a pretty regular basis. These days.
Yeah.
Okay. Thank you.
Yeah.
And as a final reminder, if you have a question. Please press star one we'll take a follow up from Mike Smith.
Terry.
Hey, Thanks for taking my follow up questions here, one thing that has not been discussed Iran has been your upcoming retirement congrats.
Congrats first of all I guess I wanted to see first.
So we have one more quarter of your left here and then how does searches growing cash flow.
Have you heard anything from the board on that and and also more broadly what kind of person.
Do you think we're looking at here to take over.
She has a question you probably cannot be clones, Ron Robinson, [laughter], Oh, that's very true.
Very kind of you, but no I mean this is a process that even though.
We've been thinking about doing succession planning for a number of years lately and army.
I'm gonna be here forever and.
But I think.
I think you know like probably will come to conclusion with the process in the next month or so.
And Oh my.
Be ready to make announcements and then there'll be a smooth and orderly transition following that I think that the concerns of them, mostly we're looking internally and so I think you know people who are.
No no no what we do know how we do it in a virtu bought into our philosophy and strategy. So I think you would see not a lot of changes.
And a fairly smooth transition and then you know as you know it's not like them.
Walking out the door I mean, I'm, we still would be on the board in.
And following this and still be involved and have a very vested interest in making sure. The Alamo group was very successful so I feel very comfortable with that the board is doing a.
Very excellent methodical and I'm spending a lot of time in the process to make sure. It is but we're all dedicated to making sure. It's a good smooth orderly transition or not I feel still very.
Very good about the direction of the company.
And I think it will go very smooth even without me.
Okay, well I'll leave it there thanks, so much growth.
Thank you Mike Thanks, Mark.
And that does conclude today's question and answer session I will turn the conference back over to management for any closing remarks.
Okay well.
Again, we thank you for your joining us today and your questions and comments and your support of US as you know like I say these are still challenging times, but.
We're very optimistic about where we are and we look forward to speaking with you on our.
'twenty 'twenty, one first quarter results are in and and Mike. Thank you much and have a good day.
And that does conclude today's conference again, thank you for your participation.
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