ALAMO GROUP INC - 10-Q Quarterly Report

		September 30, 2002 (Unaudited)			December 31, 2001 (Audited)
ASSETS
Current assets:
Cash and cash equivalents ..................................................................	$	6,419	$	4,186
Accounts receivable .............................................................................		55,454		57,768
Inventories ..............................................................................................		64,983		64,044
Deferred income taxes ...........................................................................		3,971		4,307
Prepaid expenses ...................................................................................		1,209		1,773

Total current assets ...........................................................................		132,036		132,078

Property, plant and equipment ..............................................................		70,761		66,779
Less: Accumulated depreciation ....................................................		(41,998)		(37,961)

		28,763		28,818

Goodwill ....................................................................................................		18,765		18,470
Assets held for sale..................................................................................		1,595		1,595
Other assets ..............................................................................................		3,642		4,960


Total assets ......................................................................................	$	184,801	$	185,921


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable .......................................................................		13,988		12,860
Income taxes payable ............................................................................		1,007		161
Accrued liabilities ..................................................................................		11,272		9,326
Current maturities of long-term debt ...................................................		2,551		3,013

Total current liabilities ......................................................................		28,818		25,360

Long-term debt, net of current maturities ............................................		23,856		36,315
Deferred income taxes .............................................................................		2,071		2,433


Stockholders' equity:
Common stock, $.10 par value, 20,000,000 shares authorized; 9,759,909 and 9,753,409 issued and outstanding at September 30, 2002 and December 31, 2001, respectively ...............................................		976		975
Additional paid-in capital ...........................................................................		51,345		51,282
Treasury stock, at cost; 42,600 shares at September 30, 2002 and December 31, 2001 .......................................................................................		(426)		(426)
Retained earnings ........................................................................................		79,649		74,493
Accumulated other comprehensive income ............................................		(1,488)		(4,511)

Total stockholders' equity ...............................................................		130,056		121,813


Total liabilities and stockholders' equity .......................................	$	184,801	$	185,921

		Nine Months Ended
			September 30, 2002		September 30, 2001
Operating Activities
Net income ......................................................................................................	$		6,904	$	10,153
Adjustment to reconcile net income to net cash provided (used) by operating activities:
Provision for doubtful accounts .......................................................			514		1,363
Depreciation .........................................................................................			4,125		3,142
Amortization .........................................................................................			126		1,469
Provision for deferred income tax benefit..........................................			(24)		1,560
(Gain) loss on sale of equipment .......................................................			(92)		(1,421)
Changes in operating assets and liabilities:
Accounts receivable ...........................................................................			2,685		(6,582)
Inventories ................................................... ........................................			5,824		(4,568)
Prepaid expenses and other assets ...................................................			2,082		920
Trade accounts payable and accrued liabilities ..............................			2,390		(1,949)
Income taxes payable .........................................................................			776		951

Net cash provided by operating activities			25,310		5,038

Investing Activities
Acquisitions, net of cash acquired			(6,626)		(7,880)
Purchase of property, plant and equipment .............................................			(2,821)		(4,881)
Proceeds from sale of property, plant and equipment ............................			196		2,118
Purchase of long-term investment ............................................................			201		-

Net cash (used) by investing activities ...................................................			(9,050)		(10,643)

Financing Activities
Net change in bank revolving credit facility ............................................			(12,200)		16,200
Principal payments on long-term debt and capital leases ......................			(822)		(86)
Dividends paid ..............................................................................................			(1,748)		(1,747)
Proceeds from sale of common stock ........................................................			65		245
Cost of Common stock repurchased..........................................................			-		(26)

Net cash provided (used) by financing activities....................................			(14,705)		14,586

Effect of exchange rate changes on cash ..................................................			678		105

Net change in cash and cash equivalents .................................................			2,233		9,086
Cash and cash equivalents at beginning of the period ...........................			4,186		2,929

Cash and cash equivalents at end of the period .......................................	$		6,419	$	12,015


Cash paid during the period for:
Interest ...................................................................................................	$		1,619	$	2,772
Income taxes ...........................................................................................	$		3,328	$	3,345

The accompanying unaudited interim condensed consolidated financial statements of Alamo Group Inc. and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. The balance sheet at December 31, 2001, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2001.

Accounts Receivable is shown less allowance for doubtful accounts of $1,586,000 and $1,266,000 at September 30, 2002 and December 31, 2001, respectively.

Inventories valued at LIFO cost represented 63% of total inventory at September 30, 2002 and December 31, 2001. The excess of current costs over LIFO valued inventories were $4,464,000 at September 30, 2002 and 4,755,000 at December 31, 2001. Inventory obsolescence reserves were $4,515,000 at September 30, 2002 and $3,857,000 at December 31, 2001. The increase in obsolescence reserve was mainly from the acquisition of Valu-Bilt in the amount of $500,000 and to a lessor extent, differences in exchange rates on European obsolete inventory reserves. Net inventories consist of the following (in thousands):

DELAWARE		74-1621248
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

		PAGE


PART I.	FINANCIAL INFORMATION

Item 1.	Interim Condensed Consolidated Financial Statements (Unaudited)

	Interim Condensed Consolidated Balance Sheets	3
	September 30, 2002 and December 31, 2001 (Audited)

	Interim Condensed Consolidated Statements of Income	4
	Three months and Nine months ended September 30, 2002 and September 30, 2001

	Interim Condensed Consolidated Statements of Cash Flows	5
	Nine months ended September 30, 2002 and September 30, 2001

	Notes to Interim Condensed Consolidated Financial Statements	6


tem 2.	Management's Discussion and Analysis of Financial Condition	11
	and Results of Operations


Item 3.	Quantitative and Qualitative Disclosures about Market Risks	16
Item 4.
	Controls and Procedures	17

PART II.	OTHER INFORMATION

Item 1.	None
Item 2.	None
Item 3.	None
Item 4.	None
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K

	SIGNATURES

	Three Months Ended					Nine Months Ended
		September 30, 2002			September 30, 2001		September 30, 2002		September 30, 2001

Net sales:
North American
Agricultural................................................	$		27,883	$	23,793	$	86,362	$	71,457
Industrial.....................................................			25,272		28,985		79,107		85,090
European.........................................................			12,058		11,114		34,041		30,941

Total net sales...................................................			65,213		63,892		199,510		187,488

Cost of sales........................... ...........................			51,083		47,115		155,604		140,115

Gross profit.......................... ...............................			14,130		16,777		43,906		47,373
Selling, general and administrative expense.			11,116		10,355		31,883		29,890

Income from operations................................			3,014		6,422		12,023		17,483
Interest expense.................................................			(557)		(834)		(1,990)		(2,646)
Interest income..................................................			134		151		387		457
Other income (expense), net............................			(6)		(48)		58		(63)

Income before income taxes.........................			2,585		5,691		10,478		15,231
Provision for income taxes........			915		1,907		3,574		5,078

Net income.............. .........................................	$		1,670	$	3,784	$	6,904	$	10,153


Net income per common share:
Basic.................................................................	$		0.17	$	0.39	$	0.71	$	1.05

Diluted..............................................................	$		0.17	$	0.39	$	0.70	$	1.04

Average common shares
Basic................................................................			9,713		9,705		9,712		9,704

Diluted............................................................			9,787		9,790		9,797		9,790


Dividends declared...........................................	$		0.06	$	0.06	$	0.18	$	0.18

	September 30, 2002	December 31, 2001

Finished goods ...................................