Alamo Group Inc.
Alamo Group Inc.
Incorporated: 1969 as Terrain King
Sales: $200.5 million (1998)
Stock Exchanges: New York
Ticker Symbol: ALG
NAIC: 333112 Lawn and Garden Tractor and Home Lawn and Garden Equipment Manufacturing; 333111 Farm Machinery and Equipment Manufacturing
Taking its name from the famous Texas landmark, Alamo Group Inc. of Seguin, Texas, has been building a solid reputation since 1969. Manufacturing and selling a wide range of agricultural and industrial mowing and maintenance equipment under trademarked brand names (Alamo Industrial, Herschel-Adams, Bomford, McConnel, M&W, Rhino, SMA, Tiger), Alamo’s products have proven both reliable and cost effective for customers worldwide. From maintaining federal and state highways throughout the United States, to manicuring the complex beauty of the Palace of Versailles’ gardens, to turf care at the Dallas-Fort Worth airport and Nolan Ryan’s Texas ranch, Alamo equipment has been getting the job done efficiently and professionally for the last 30 years.
In the Beginning: 1950s–70s
It could be said that the evolution of Alamo Group began back in the 1800s with several scientific breakthroughs, components of a larger whole none could foresee at the time. Inventors were experimenting with power in its myriad forms from Alexander Volta’s electric battery in 1800, Richard Trevithick’s steam railway locomotive in 1804, and Samuel Brown’s gas- powered car in 1826. Another like-minded inventor, Edward Budding, was working on a cutting implement to control the growth of grass. In 1830 Budding perfected his newfangled invention, the lawnmower—while a blacksmith named John Deere tinkered in his one-man shop pursuing similar technology. Both Budding and Deere were aimed in the same direction, one leading to the varied holdings of both the Alamo Group and Deere & Company, and what became the multibillion-dollar agricultural machinery industry of today.
In the early 1900s, several companies began cropping up around the globe, to maintain turf and vegetation in both commercial and residential settings. In 1903, the British company Bomford Turner, Limited was founded, producing tractor-mounted hedge and turf mowing equipment for farmers, ranchers, and governmental agencies throughout the United Kingdom. Another British company, McConnel, was founded in 1936, manufacturing and selling growth maintenance equipment, using hydraulically powered attachments. In 1939 a tractor company, Servis-Rhino, began manufacturing and selling a rugged line of agricultural equipment, and within in a few years Signalisation Moderne Autoroutière (SMA), and its subsidiaries of Orléans, France, began working with the French government to maintain highways and roadsides. The destinies of Bomford, McConnel, Rhino, and SMA all collided in the last decades of the 20th century as they became part of a relatively unknown Texas corporation intent on becoming a global leader in the agricultural and industrial vegetation maintenance market.
Though Donald J. Douglass was not even born when Bomford Turner was established, by the time he was in his mid-20s he had graduated from the University of Texas in 1954 and gone on to a three-year stint as a Navy fighter pilot. He then worked for a chemical manufacturer as well as a Houston-based venture capital company before earning an M.B.A. from Stanford University. His experiences led him to realize there were thousands of quiet, unexciting companies making millions of dollars. These were the companies without flashy advertising campaigns and well known products, but they were nonetheless selling items necessary for everyday industrial, agricultural, or corporate life. Unheralded though they might be, these companies had cornered their markets and were returning solid profits year after year for their stockholders. Douglass took his cues from the lesser known giants and began his entrepreneurial climb with turf maintenance, mowing in particular. He started by selling rotary-based mowing equipment in 1955. By 1969 Douglass knew enough about the market to buy the Engler Manufacturing Company of Houston, creator of the popular Terrain King wide-cutting mowers, for $2.1 million. To capitalize on Engler’s brand recognition, Douglass renamed his company Terrain King. Within months Douglass was on the move again, this time securing the patented Slopemower product line, which boasted another mowing breakthrough, a patented telescoping boom mower. By 1970, Terrain King was an official success, with $3 million in sales and $80,000 in earnings.
Douglass continued to expand Terrain King in the early 1970s with the purchase of D&D Bumper Works in 1971. D&D Bumper Works had perfected a line of pickup truck accessories, useful to Terrain King’s burgeoning business. With D&D came that company’s 75,000-square-foot manufacturing facility, located in Seguin, Texas. This acquisition was a harbinger of the future, as Seguin later became Terrain King’s North American headquarters, after the company began moving production of its mowing equipment into the plant in 1973.
Another major force in Terrain King’s future arrived when Oran F. Logan, an engineer with a degree in accounting, was hired as vice-president in 1972. Logan installed the company’s first computerized manufacturing system. By 1974 Terrain King was gaining momentum and reached $5 million in annual revenues; the following year came the relocation from Houston to Seguin. The new headquarters was then expanded by another 125,000 square feet, just as the company began to gain a foothold in the governmental and industrial mowing and maintenance markets. To concentrate more fully on its core business, mowing, Terrain King sold off the truck accessories line to create more manufacturing space for its increasing highway mowing operations in 1977. On the heels of this decision came the acquisition of a large right-of-way mowing product line in 1978, and allocating funds for the research and development of more such equipment.
New Decade, New Focus: 1980s
With the new decade of the 1980s, Terrain King made another shift in business—away from road maintenance and focusing more on agricultural and governmental mowing. The move seemed precipitous, as the company celebrated a milestone in 1981 with sales surpassing the $10 million mark, reaching $11.1 million. In its efforts to continue to stay head-and-shoulders above the competition, Terrain King bought and installed its first CAD/CAM system in 1982 and began acquiring selected businesses again the following year. Mott Corporation, purchased in 1983, brought advanced and very profitable flail mowing technology to Terrain King, along with a 96,000-square-foot manufacturing facility. Through Mott’s varied distributors, Terrain King took its first foray into the international mowing marketplace.
Yet 1983 was most significant for the company’s move away from the Terrain King name in favor of the Alamo Group Inc. The new name reflected a parent company with several successful brand names (Terrain King, Slopemower, Mott) and the new directions Douglass and Logan foresaw in its future. Not only did the management team see increased exposure in Europe, but in North America as well with additional complementary product lines. One such development was the 1984 purchase of the Triumph Machinery Corporation of New Jersey, which designed and produced hydraulic sickle-bar mowing equipment. Alamo reached another milestone in 1984, climbing above the $20 million mark, with year-end revenues hitting nearly $25 million.
In the mid-1980s Logan was promoted to president and COO of the company, as well as a director, with Douglass remaining CEO and chairman. Further acquisitions came too, with both Servis-Rhino and the Kansas-based BMB Company in 1986. The former brought the heavy-duty Rhino agricultural line; the latter brought light-duty mowers and a 150,000-square-foot manufacturing facility, which the ever expanding company needed to maintain its growth. In 1987 Alamo reincorporated in Delaware, added onto its Kansas facility, and celebrated tremendous year-end numbers with $48.4 million in revenues, almost double its revenues of just three years earlier.
Blade Warriors: 1990s
By the dawn of the 1990s, Alamo had outgrown its skin several times and accommodated this growth by finding and acquiring companies with similar or needed technology. Using both acquired manufacturing facilities and adding onto its own several times, Alamo had succeeded beyond both Douglass and Logan’s expectations. Yet in 1990 came the first, although very slight, downturn in the company’s sales to $53.7 million from 1989’s $54 million. Though few viewed this with much alarm, certainly not the nation’s 7,600 agricultural dealers who relied heavily on Alamo’s brand names, it halted the company’s breakneck pace of the previous several years.
In 1991 the company turned its attentions to building an international presence as strong as its base operations in the United States. A major step in this direction was its announcement to acquire McConnel, a U.K. manufacturer of vegetation maintenance equipment; and to come to the rescue of the Adams Hard-Facing Company and AHF Corporation, which were operating under Chapter 11 federal bankruptcy laws. Alamo bought the Adams name and product line for $3.6 million, which consisted of new and replacement parts for tillage and construction equipment, sold throughout North America. By the end of the year, in November, Alamo had purchased all outstanding stock of McConnel and completed its acquisition.
Alamo Group Inc. is the world leader in the design, manufacture and distribution of rugged, high-quality, tractor-mounted mowing and other vegetation maintenance equipment.
With 1992, Alamo leapt out of its two-year slowdown and was again on a roll. The year’s revenues, after 1991’s sedentary $58 million, brought a whopping 35 percent increase in sales to $78.1 million, due in large part to its increased European presence. The next year proved as heady, with the company’s first-quarter initial public offering (IPO) of 1.6 million shares, which sold at $11.50 per share. The IPO raised some $16 million to fuel Alamo’s continuing acquisitions, or what the company referred to as “potential inductees” into its growing family of brands. One such inductee was Bomford Turner, Limited of Salford Priors, England, in the fourth quarter. Bomford Turner’s clients were primarily European, with heavy concentration in the United Kingdom, as well as Germany, France, Scandinavia, Australia, the Far East, and North America. With the Bomford acquisition, Alamo made its European headquarters in Salford Priors, near Birmingham.
By the end of 1993, though Alamo’s business still rested primarily in U.S. agricultural sales (51 percent) and its stalwart governmental contracts (36 percent), European revenues had increased to 13 percent, though Douglass and Logan hoped to raise this figure to 25 percent over the next few years. To maintain its client base and attract new customers, Alamo had introduced some 21 new or improved products, many of which bolstered the Rhino brand of heavy equipment. While overall agricultural dealers declined by nearly 15 percent from 1990 to 1993, Rhino dealerships mushroomed nearly 27 percent in the same three-year period. Alamo’s revenues for 1993 rose to $88.5 million, while net income increased by 23 percent to $7.8 million.
In 1994 Alamo was again on the move, purchasing France’s SMA in March. The SMA family of products, combined with the earlier acquisitions of Bomford and McConnel, made Alamo the largest manufacturer of heavy-duty agricultural equipment in Europe. To continue its successful expansion outside North America, Alamo’s management turned its attentions to Asia, Mexico, and Central and South America for future possibilities, while adding to its presence in industrial and governmental markets with the acquisition of Tiger Corp. in the last quarter. Yearend sales surged to $120 million, a 35 percent jump over the previous year’s figures, with income following suit to reach nearly $9.2 million (an increase of 18 percent over 1993).
Alamo’s stock was listed on the New York Stock Exchange (ticker symbol ALG) and the company made a second public offering of two million shares at $17.50 each in July 1995. Proceeds of more than $33 million once again bolstered the company’s bottom line by lowering debt, and strengthened its position for further acquisitions. Throughout the year, Alamo pursued five acquisitions, beginning in April with M&W Gear Company, which took the company into hay-making equipment; May’s Rhino International, Inc., a Chinese manufacturer and distributor of tractors (not related to Alamo’s other Rhino line), and Certified Power Train Specialists, Inc. The remaining two acquisitions were NJM Dabekausen Beheer BV, a distributor for Bomford products in the Netherlands and Germany, which was integrated into Bomford in June, and the November acquisition of the Herschel Corporation, a leading manufacturer of farm equipment replacement parts, which was combined with the Adams product line and collectively referred to as Herschel-Adams. Alamo finished the year with sales of nearly $164 million, a robust 37 percent increase over 1994.
A Bumpy Road: 1996–99
Alamo’s near nonstop growth began to catch up with it in 1996. Though sales rose 12 percent over the previous year, fueled mostly by 1995 acquisitions, net income was affected by a series of concerns that plagued the company for several years to come. Severe weather, including drought conditions in the Southwest, snowstorms in the Northeast, and excess rain in Midwestern states, caused a fall in agricultural sales; charges related to its major growth spurt in 1995 also weighed heavily on profits for the year. A sizeable thorn was the recently acquired Rhino International, affected by floods in China, which required costly and extensive improvements, and a lawsuit filed by Rhino’s former owner. Alamo’s management, however, continued to strive for longer term goals and increased its research allocations to $1.7 million for new product development. Additionally, Douglass and Logan’s 1993 projection for the European market, to bring in a quarter of the company’s revenues within a few years, was realized with 26 percent of sales in 1996, and helped along by the acquisition of Forges Gorce in France in the last quarter. Yet Europe was not the only hot spot for Alamo, as sales in Asia had gained a foothold and the company had plans to open a new office in Thailand the next year.
Alamo’s strategies appeared to be paying off with another bumper year in 1997, with overall revenue hitting $203.1 million and income leaping to $13.6 million after 1996’s disappointing $8.8 million. European sales were strong until the fourth quarter when they tapered off, yet this downturn was offset by solid returns in the United States. There were no acquisitions during the year and stock prices held steady in the $18 per share range, with a high of over $23 in the third quarter. Alamo was poised for a promising year in 1998 and caught the attention of the Woods Equipment Company and two of its own subsidiaries, the WEC Company and the AGI Acquisition Corp. Woods turned the tables on Douglass and Logan with an offer to buy Alamo and merge it into the Illinois-based company’s holdings. The privately held Woods made an offer of $180 million to buy Alamo in August.
- Company predecessor is founded by Donald J. Douglass.
- Douglass buys Engler Manufacturing Company and changes name to Terrain King.
- Terrain King becomes Alamo Group Inc.
- Alamo Group Inc. is reincorporated in Delaware.
- Alamo becomes publicly traded.
- Company issues a second public offering.
- Shareholders vote to be acquired/merged with subsidiaries of Woods Equipment Company of Illinois for $180 million.
- Acquisition/merger is called off in February; Douglass and Logan resign as CEO and COO, but remain as chairman and board member, respectively; Ronald Robinson takes over as president and CEO.
By November 1998, a special stockholder meeting convened and approved the terms to merge Alamo with WEC Company and AGI Corp. Yet internal problems began to take their toll on Alamo, as its ongoing troubles with Rhino International had led management to close the embattled manufacturer. The termination of Rhino International’s operations began to cost the company millions, along with several lawsuits filed by Rhino customers. In addition to the company’s vexations with Rhino International, weather conditions again brought down core agricultural sales while farming conditions and currency problems plagued European sales, which tumbled over 11 percent from 1997. Fourth quarter earnings were significantly down, and stock value fell 19 percent with a low of only $10 per share, compared to the previous year’s $19 per share. Alamo’s poor showing at the end of 1998 fueled a falling out with Woods Equipment Company and its subsidiaries, and the proposed and approved acquisition/merger was called off in February 1999. Neither participant had been able to agree on certain closing conditions, and Alamo’s poor year-end results became a major stumbling block. According to a Wall Street Journal article about the merger’s cancellation, Paul Wood, chairman of WEC, had declared that “Alamo’s condition, prospects and value are materially worse than a year ago and materially worse than the projections and forecasts made before and since the time of the merger agreement.”
The troubles continued in the first and second quarters of 1999. A pervasive drought throughout much of the United States and a continuing worldwide agricultural recession besieged Alamo from within and without. For the first six months of 1999 net sales were down 14.5 percent to $93.3 million from the previous year’s $109.1 million and net income fell for the first two quarters as well. The numbers reflected the downswing in agricultural sales, which were 51 percent of Alamo’s sales for the first six months in 1998 and fell to 42 percent in 1999, yet with upswings in both industrial (35 vs. 30 percent) and European sales (23 vs. 20 percent). Yet the most remarkable fallout of 1999 came in July with the resignation of founder Douglass as CEO, a post he had held since 1969. Logan also stepped down as COO, after 18 years in the position. Taking their places was Ronald A. Robinson (formerly president of Svedala Industries Inc.) as CEO and president, though Douglass remained Alamo’s chairman and Logan remained a board member.
The new Alamo, with Robinson at the helm, believed the worst times were behind. With the approach of a new century came a wiser, leaner Alamo, with Rhino’s disposal complete, and what the company had termed “cyclical” drought giving way to what all hoped was a bountiful year ahead for both domestic and European operations. From its first sale through late 1999, Alamo had concentrated on several key factors to further its business: geographic expansion, new product development, acquisitions, and customer satisfaction. It remained to be seen whether the same game plan would work in the years to come.
Alamo Industrial; Rhino; M&W; McConnel; Bomford; SMA; Tiger; and Herschel-Adams product lines.
Allied Products Corporation; Deere & Company; The Toro Company.
Bass, Frank, “Following a Rough Year, the Grass Looks Greener for Alamo Group,” Wall Street Journal, June 18, 1997.
Hardy, Eric S., “No Rust Here,” Forbes, December 30, 1996.
Opdyke, Jeff D., “Turning the Tide: Small Stocks Look Ready to Stage a Comeback,” Texas Journal, January 22, 1997.
Schifrin, Matthew, “Watching the Grass Grow,” Forbes, October 21, 1996, p. 182.