UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
Fiscal Year ended December 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-21220

ALAMO GROUP INC.
(Exact name of registrant as specified in its charter)

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

                       1502 E. WALNUT, SEGUIN, TEXAS 78155
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (830) 379-1480

Securities registered pursuant to Section 12(b) of the Act:

                                          NAME OF EACH EXCHANGE
  TITLE OF EACH CLASS                      ON WHICH REGISTERED
  -------------------                      -------------------
Common Stock, par value                  New York Stock Exchange
    $.10 per share

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of the Registrant as of February 27, 1998 (based upon the last reported sale price of $18.125 per share) was approximately $96,609,132 on such date.

The number of shares of the issuer's Common Stock, par value $.10 per share, outstanding as of February 27, 1998, was 9,684,874 shares.

Documents incorporated by reference: Portions of the Registrant's Proxy Statement relating to the 1998 Annual Meeting of Stockholders to be held on April 28, 1998, have been incorporated by reference herein (Part III).


ALAMO GROUP INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-K

TABLE OF CONTENTS

                                                                                      Page
                                     PART I
Item 1. Business.................................................................       3

Item 2. Properties...............................................................       6

Item 3. Legal Proceedings .......................................................       7

Item 4. Submission of Matters to a Vote of Security Holders .....................       7

Item 4a. Executive Officers of the Company.......................................       7

                                     PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.....       7

Item 6. Selected Financial Data..................................................       8

Item 7. Management's Discussion and Analysis of Financial Condition
         and Results of Operations...............................................       9

Item 8. Financial Statements.....................................................      11

Item 9. Changes in and Disagreements With Accountants
         on Accounting and Financial Disclosure..................................      11

                                    PART III

Item 10. Directors and Executive Officers........................................      11

Item 11. Executive Compensation..................................................      11

Item 12. Security Ownership of Certain Beneficial Owners and Management..........      12

Item 13. Certain Relationships and Related Transactions..........................      12

                                           PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........      12

Index to Consolidated Financial Statements.......................................      F-1

2

PART I

ITEM 1. BUSINESS

GENERAL

Alamo Group Inc. and its subsidiaries ("Alamo Group", "Alamo", or the "Company") is a leading manufacturer of high quality, tractor-mounted mowing and other vegetation maintenance equipment and replacement parts for industrial and agricultural end-users. The Company believes it is one of the only vegetation maintenance equipment manufacturers offering a comprehensive product line that employs the three primary heavy-duty cutting technologies: rotary, flail and sickle-bar. The Company's history of developing innovative products, its reputation for quality and service and its broad geographic market coverage, principally in North America and Europe, have enabled the Company to establish leadership positions in the niche markets it serves.

HISTORY

The predecessor corporation to the Company was incorporated in Texas in 1969 as successor to a business that began selling mowing equipment in 1955. The Company was reincorporated in Delaware in 1987.

Since its founding in 1969, the Company has focused on satisfying customer needs through geographic market expansion, product development and refinement and selected acquisitions. The Company's first products were based on the rotary cutting technology. Through acquisitions, the Company added the flail cutting technology in 1983 and the sickle-bar technology in 1984. The Company added to its presence in industrial and governmental markets with the acquisition of TIGER(R) at the end of 1994.

A major thrust into agricultural mowing markets was begun in 1986 with the acquisition of RHINO(R), a leading manufacturer in this field. With this acquisition, the Company embarked on an aggressive strategy to increase the RHINO dealer network during a period of industry contraction. Distribution network expansion remains a primary focus of the Company's marketing plans for agricultural and industrial uses. The addition of M&W GEAR COMPANY in early 1995 allowed the Company to enter into the manufacture of hay-making equipment that complements the RHINO products, while utilizing the same dealer network. Another strategic move was made in 1995 with the acquisition of HERSCHEL(R), a leading manufacturer and distributor of high wear, high turnover farm equipment replacement parts. Further, the Company has concentrated on developing new products which meet the needs of its niche market customers and on adapting its existing products to serve other applications.

In 1991, the Company began its international expansion with the acquisition of MCCONNEL(R), a United Kingdom manufacturer of vegetation maintenance equipment, principally hydraulic boom-mounted hedge and grass cutters and related parts. Later acquisitions added BOMFORD(R) in the U.K. and SMA(R) in France.

Other key acquisitions have expanded the Company's geographic coverage and product offerings. Alamo's development has been enhanced by approximately twenty acquisitions over its history.

The Company's initial public offering was in 1993, and in 1995 the Company completed an additional equity offering. Proceeds were used to pay off debt relating to acquisitions as well as to position the Company for further development through internal growth and acquisitions. Alamo Group's stock was listed on the New York Stock Exchange in 1995.

The Company emphasizes high quality, cost efficient products for its customers and strives to develop and market innovative products while constantly monitoring and containing its manufacturing and overhead costs. The Company has a long-standing policy of supplementing its internal growth through acquisitions of businesses or product lines that currently command, or have the potential to achieve, a leading share of their niche markets. The Company has successfully utilized its expertise in design, procurement, manufacturing and marketing to increase the profitability of its acquired businesses.

MARKETING AND MARKETING STRATEGY

The Company's products are sold through the Company's eight marketing organizations, and extensive, world-wide dealer networks under the ALAMO INDUSTRIAL(R), RHINO(R), M&W(R), MCCONNEL(R), BOMFORD(R), SMA(R), TIGER(R), HERSCHEL-ADAMS(R) and RHINO INTERNATIONAL(R) tradEMARKs.

ALAMO INDUSTRIAL equipment is principally sold to governmental end-users and, to a lesser extent, to the agricultural market and commercial turf market. Domestic governmental agencies and contractors that perform

3

services for such agencies purchase primarily hydraulically-powered, tractor-mounted mowers, including boom-mounted mowers, and replacement parts for heavy-duty, intensive use applications, including the maintenance of highway, airport, recreational and other public areas. Municipal park agencies, golf courses and landscape maintenance contractors purchase certain ALAMO INDUSTRIAL mowers that deliver a fine manicured cut.

RHINO and M&W equipment is generally sold to farmers and ranchers to clear brush, maintain pastures and unused farmland, shred crops and for hay-making. It is also sold to other customers, such as mowing contractors and construction contractors, for non-agricultural purposes. RHINO equipment consists principally of a comprehensive line of tractor-mounted equipment, including rotary cutters, finishing mowers, flail mowers and disc mowers. RHINO also sells post hole diggers, scraper blades and replacement parts for all RHINO equipment. Farm equipment dealers play the primary role in the sales of RHINO equipment. M&W hay-making equipment uses a fixed chamber, round bale technology. The MCCONNEL acquisition gave the Company an established presence in the European agricultural equipment industry and also facilitates the international marketing and sale of the Company's RHINO product line through MCCONNEL'S existing network of agricultural tractor dealers in the U.K.

MCCONNEL equipment principally includes a line of hydraulic, boom-mounted hedge and grass cutters, as well as other tractor attachments and implements such as hydraulic backhoes, cultivators, subsoilers, buckets and other digger implements and replacement parts. MCCONNEL also sells turf maintenance equipment to the golf course and leisure markets. MCCONNEL equipment is sold primarily in the U.K. and France, and to a lesser extent in other parts of Europe and Australia. MCCONNEL primarily focuses on the agricultural and commercial end-user. MCCONNEL products are sold in the U.K. through a network of agricultural tractor dealers, with exports sold primarily through distributors.

BOMFORD equipment includes hydraulic, boom-mounted hedge and hedgerow cutters, industrial grass mowers, agricultural seed bed preparation cultivators and replacement parts. BOMFORD equipment is sold to governmental agencies, contractors and agricultural end-users in the U.K., France, Germany, Scandinavia and, to a lesser extent, in North America, Australia and the Far East. BOMFORD'S sales network is very similar to that of MCCONNEL in the U.K.

SMA equipment includes hydraulic, boom-mounted hedge and hedgerow cutters and associated replacement parts. SMA'S principal customers are the French local authorities. SMA'S product offerings were expanded in 1994 to include certain quick-attach boom mowers manufactured by the Company in the U.K. to expand its presence in agricultural dealerships.

TIGER equipment includes heavy-duty, tractor-mounted mowing and growth maintenance equipment and replacement parts. A portion of TIGER sales includes tractors, which are not manufactured by TIGER. TIGER sells to state, county and local governmental entities through a network of dealers. In most cases, the larger dealers' principal product line is TIGER equipment. TIGER'S dealership network is independent of ALAMO'S dealership network.

HERSCHEL-ADAMS replacement parts are sold for all types of tillage equipment and tractors and certain types of mowing and construction equipment. HERSCHEL-ADAMS products include a full range of cutting parts, chromium carbide treated hard-faced and plain replacement tillage tools, disc blades and fertilizer application components. HERSCHEL-ADAMS replacement tools are sold throughout the United States, Canada and Mexico to five major customer groups:
farm equipment dealers, fleet distributors (which generally act as a buyer for a number of farm supply stores), wholesale distributors, original equipment manufacturers and construction equipment dealers.

RHINO INTERNATIONAL equipment includes economical, Chinese-manufactured tractors and related service parts. RHINO INTERNATIONAL has a separate dealer network.

In addition to the sales of HERSCHEL-ADAMS replacement parts, the Company derives a significant portion of its revenues from sales of replacement parts for each of its whole goods lines. Replacement parts represented approximately 34% of the Company's total sales for the year ended December 31, 1997. Replacement parts are more profitable and generally less cyclical than whole goods equipment.

While the Company believes that the end-user of its products evaluates the purchase of such products on the basis of product quality, such purchases are also based on a dealer's service and support and loyalty to the dealer based on previous purchases.

Demand for products tends to be strongest in the spring and summer growing seasons. The Company provides incentives for off-season purchases, including discounts, as a way to even out seasonal variations in its manufacturing cycles. Under incentive programs, there is no right of return.

4

PRODUCT DEVELOPMENT

The Company believes its ability to quickly provide innovative responses to customer needs, to continue to develop and manufacture new products and to enhance existing product lines is critical to its success. The Company continually conducts research and development activities in an effort to improve existing products and develop new products. The Company currently employs 76 people in its engineering department, 32 of whom are professionals and the balance of whom are support staff. Amounts expended on research and development activities aggregated approximately $1,712,000 in 1997, $1,747,000 in 1996, and $1,434,000 in 1995.

SEASONALITY

The vegetation maintenance equipment industry in general tends to follow the seasonal buying patterns of its major customers with peak sales occurring in May through August. Agricultural end-users generally purchase equipment in the early spring for the beginning of the mowing season. Governmental end-users typically wait to purchase new equipment until the first and second calendar quarters. The timing of these purchases, however, may be affected by weather conditions and general economic conditions. In order to achieve efficient utilization of manpower and facilities throughout the year, the Company must estimate seasonal demand months in advance, and equipment must be manufactured in anticipation of such demand. The Company utilizes a rolling monthly sales forecast from the Company's marketing divisions in order to develop a master production plan for its manufacturing facilities. Additionally, the Company attempts to equalize demand for its products throughout the calendar year by offering seasonal sales programs which provide additional discounts on equipment that is ordered during off-season periods.

COMPETITION

The Company's products are sold in markets where the principal competitive factors are price, quality, service and reputation. The Company competes with several large national and international companies that offer a broad range of agricultural equipment and replacement parts, as well as numerous small, privately-held manufacturers and suppliers of a limited number of products. However, the Company has fewer competitors in the wide-swath and boom-mounted mowing equipment and within the governmental niche. Some of the Company's competitors are significantly larger than the Company and have substantially greater financial and other resources at their disposal. The Company believes that it is able to compete successfully in its markets by containing its manufacturing costs, offering high quality products, developing and designing innovative products and, to some extent, by avoiding direct competition with significantly larger competitors. There can be no assurance that such competitors will not substantially increase the resources devoted to the development and marketing of products competitive with those of the Company. The Company believes that within the U.S. it is the largest supplier within governmental markets for its kind of equipment, the third largest supplier in the U.S. agricultural market for such equipment and one of the two largest suppliers in the European market for such equipment.

UNFILLED ORDERS

As of December 31, 1997, the Company had unfilled customer orders of $35.0 million compared to $31.6 million at the end of 1996. Management expects that substantially all of the Company's backlog as of December 31, 1997, will be shipped during fiscal year 1998. The amount of unfilled orders at a particular time is affected by a number of factors, including the scheduling of manufacturing and shipping of the product, which in most instances is dependent on the Company's seasonal sales programs and the needs of the customer. Certain of the Company's orders are generally subject to cancellation anytime before shipment; therefore, a comparison of unfilled orders from period to period is not necessarily meaningful and may not be indicative of eventual actual shipments.

SOURCES OF SUPPLY

The principal raw materials used by the Company include steel and purchased components. During 1997, the raw materials needed by the Company were available from a variety of sources in adequate quantities and at prevailing market prices. A number of the Company's units are mounted on and shipped with a tractor. Tractors are generally available, but in some periods delays have been experienced. No one supplier is responsible for supplying more than 10% of the principal raw materials used by the Company.

While the Company manufactures many of the parts for its products, a significant percentage of parts, including most drive lines, gear boxes and hydraulic pumps and motors, are purchased from outside suppliers which manufacture to the Company's specifications.

5

Approximately 15% of the aggregate dollar amount of parts purchased by the Company's U.S. operations are imported.

PATENTS AND TRADEMARKS

The Company owns numerous U.S. and foreign patents. While the Company considers its patents to be advantageous to its business, it is not dependent on any single patent or group of patents.

Products manufactured by the Company are advertised and sold under numerous trademarks. The ALAMO INDUSTRIAL(R), RHINO(R), M&W(R), MCCONNEL(R), BOMFORD(R), SMA(R), TIGER(R), HERSCHEL-ADAMS(R) and RHINO INTERNATIONAL(R) trademarks are the primary marks for the Company's products. ThE Company also owns other trademarks which it uses to a lesser extent such as TERRAIN KING(R), TRIUMPH(R), MOTT(R), TURNER(R), FUERST(R) and DANDL(R). Management believes that the COMPANY's trademarks are well known in its markets, are valuable and that their value is increasing with the development of its business, but that the business is not dependent on such trademarks. The Company, however, vigorously protects its trademarks against infringement. The Company has registered its trademarks in the appropriate jurisdictions.

ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS

The Company is subject to numerous environmental laws and regulations concerning air emissions, discharges into waterways and the generation, handling, storage, transportation, treatment and disposal of waste materials. These laws and regulations are constantly changing and it is impossible to predict with accuracy the effect they may have on the Company in the future. Like other industrial concerns, the Company's manufacturing operations entail the risk of future noncompliance, and there can be no assurance that material costs or liabilities will not be incurred by the Company as a result thereof. It is the Company's policy to comply with all applicable environmental, health and safety laws and regulations, and the Company believes it is currently in material compliance with all such applicable laws and regulations.

The Company is subject to various federal, state and local laws affecting its business, as well as a variety of regulations relating to such matters as working conditions, equal employment opportunities and product safety. A variety of state laws regulate the Company's contractual relationships with its dealers, some of which impose substantive standards on the relationship between the Company and its dealers, including events of default, grounds for termination, non-renewal of dealer contracts and equipment repurchase requirements. The Company believes it is currently in material compliance with all such applicable laws and regulations.

EMPLOYEES

As of December 31, 1997, the Company employed 1,414 full-time employees. A subsidiary has a collective bargaining agreement which covers approximately 75 employees. The company considers its employee relations to be satisfactory.

FOREIGN OPERATIONS

See Note 15 of the accompanying consolidated financial statements.

FORWARD-LOOKING INFORMATION

This report contains a number of forward-looking statements, each of which 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, currency-related issues and other risk factors listed and described in more detail from time to time in other SEC reports of the Company.

ITEM 2. PROPERTIES

At December 31, 1997, the Company utilized eight principal manufacturing plants located in seven U.S. states and four in Europe. In addition, there were four principal warehouse facilities located in the United States. About 83% of the manufacturing and office space is in owned facilities, the balance being leased. In total the Company operates in approximately 1,447,500 square feet of manufacturing and office space and 94,760 square feet of warehouse space. The Company considers each of its facilities to be well maintained, in good operating condition and adequate for its present level of operations.

6

ITEM 3. LEGAL PROCEEDINGS

The Company is subject to various unresolved legal actions which arise in the ordinary course of its business. The most prevalent of such actions relate to product liability, which are generally covered by insurance. While amounts claimed may be substantial, and the ultimate liability with respect to such litigation cannot be determined at this time, the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company's consolidated financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders of the Company during the fourth quarter of the fiscal year ended December 31, 1997.

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

Certain information is set forth below concerning the executive officers of the Company, each of whom has been selected to serve until the 1998 annual meeting of directors or until his successor is duly elected and qualified.

         NAME            AGE                         POSITION
  -------------------    -----     -------------------------------------------
                                 Chairman of the Board and Chief Executive
Donald J. Douglass       66      Officer

                                 President, Chief Operating Officer and a
Oran F. Logan            54      Director

                                 Executive Vice President, Chief Financial
Jim A. Smith             59      Officer

Robert H. George         51      Vice President, Secretary and Treasurer

Donald J. Douglass founded the Company in 1969 and has served as Chairman of the Board and Chief Executive Officer of the Company since 1969.

Oran F. Logan has been President and Chief Operating Officer of the Company since 1984. Prior thereto, Mr. Logan served as Vice President of the Company from 1972 to 1980. Mr. Logan was an Executive Vice President and General Manager from 1981 to 1984. Mr. Logan has been a Director of the Company since October, 1984.

Jim A. Smith joined the Company in April, 1996. Prior to joining the Company, Mr. Smith served as Chief Financial Officer and a Director of Tracor, Inc., a NYSE listed Company, from 1966 to 1987 (employed in 1966 as Controller). From 1987 to 1996, he served as financial advisor and was on the Boards of Directors of National Instruments Corp., Mobley Environmental Services, Inc. and Electrosource, Inc., as well as the Boards of Directors of several privately held companies.

Robert H. George joined the Company in 1987 as Vice President and Secretary and has served the Company in various executive capacities since then. Prior to joining the Company, Mr. George was Senior Vice President of Frost National Bank from 1978 to 1987.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's common stock trades on The New York Stock Exchange under the symbol: ALG. On February 27, 1998, there were 9,684,874 shares of common stock outstanding, held by approximately 1,800 holders of record. On February 27, 1998, the last reported sales price of the common stock on The New York Stock Exchange was $18.125 per share.

The following table sets forth for the period indicated, on a per share basis, the range of high and low sales prices for the Company's common stock as quoted by The New York Stock Exchange. These price quotations reflect inter-dealer prices, without adjustment for retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

7

HIGH AND LOW STOCK PRICES FOR THE LAST TWO FISCAL YEARS WERE:

                      1997                                           1996
------------------------------------------------- --------------------------------------------
                      SALES PRICE        CASH                         SALES PRICE       CASH
                  -------------------- DIVIDENDS                    ----------------- DIVIDENDS
  QUARTER ENDED     HIGH       LOW     DECLARED     QUARTER ENDED    HIGH     LOW     DECLARED
---------------------------- -------------------- --------------------------------------------
March 31, 1997       $18     $15-3/8     $.10     March 30, 1996    $18-1/2 $15-7/8   $.10
June 30, 1997      20-7/8     13-1/2      .10     June 29, 1996     19-7/8   17-3/8    .10
September 30,                 8-11/16             September 28,      8-1/4
1997               23-3/4    1            .10     1996               1       13-3/4    .10
December 31, 1997  23-1/4     19-5/8      .10     December 31, 1996 17-1/2   14-3/8    .10

On January 6, 1998, the Board of Directors of the Company declared a quarterly dividend of $.10 per share and on February 20, 1998, announced that it had approved a 10% increase in the regular quarterly dividend to $.11 per share, to be effective with the declaration and payment of the next quarterly dividend. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends as they depend on future earnings, capital requirements and financial condition. In addition, the payment of dividends is subject to restrictions under the Company's bank revolving credit agreement.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data is derived from the consolidated financial statements of Alamo Group Inc. and Subsidiaries. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

                                                          FISCAL YEAR ENDED(1)
                                        -------------------------------------------------------
                                         DECEMBER    DECEMBER   DECEMBER   DECEMBER   JANUARY
                                        31, 1997   31, 1996   31, 1995(2) 31, 1994(2) 1, 1994(2)
                                        ----------- -------------------------------- ----------
OPERATIONS:
Net sales.............................. $  203,092  $  183,595 $  163,852 $ 119,643  $  88,519
Income before income taxes.............     20,595      13,722     17,779    14,255     12,225
Net income.............................     13,600       8,762     11,615     9,166      7,785
Percent of sales.......................       6.7%        4.8%       7.1%      7.7%       8.8%
Earnings per share
  Basic................................       1.42        0.91       1.36      1.21       1.09
  Diluted..............................       1.41        0.91       1.35      1.21       1.08
Dividends per share....................       0.40        0.40       0.40      0.36       0.32
Average common shares
  Basic................................      9,602       9,585      8,541     7,547      7,159
  Diluted..............................      9,674       9,641      8,619     7,604      7,193

FINANCIAL POSITION:

Total assets........................... $  156,124  $  153,862 $  151,571 $  99,160  $  75,091
Short-term debt and current maturities.        454       1,031      1,290     8,441     13,990
Long-term debt, excluding current
maturities.............................     28,890      35,299     37,309    24,513      8,920
Stockholders' equity ..................    106,265      97,250     90,705    50,166     41,710

(1) All references to 1995, 1994 and 1993 herein are to the fiscal years ended December 30, 1995 (52 week period), December 31, 1994 (52 week period), and January 1, 1994 (52 week period), respectively. Until 1996, the Company's fiscal years comprised 52 or 53 week periods ending on the Saturday closest to December 31. In 1996, the Company changed to a calendar year basis. There were no material differences in the results presented that resulted from this change.

(2) Includes the results of operations of companies acquired in the respective year from the effective dates of acquisitions.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.

GENERAL

During 1997, the Company's sales grew by 11%, with margins returning to historical levels. Earnings in 1996 were adversely impacted by charges and expenses related to entities acquired in 1995. Weather patterns in 1997 returned to more normal conditions than were experienced in 1996. European business slowed markedly in the latter part of 1997. The Company's four 1995 acquisitions, which underperformed expectations in 1996, showed improved performance in 1997.

Approximately 34% of the Company's 1997 sales were attributable to replacement parts, comparable to 1996's 35%. The replacement parts business is generally less cyclical and more profitable than wholegoods business.

The following table sets forth, for the periods indicated, certain financial data as percentages of net sales:

                                                     FISCAL YEAR ENDED
                                            ------------------------------------
                                             DECEMBER    DECEMBER    DECEMBER
                                             31, 1997    31, 1996    30, 1995
                                            ----------- -----------  -----------
Income Statement Data:
  Net sales
    American
      Agricultural..........................   49.4%       46.8%       41.9%
      Industrial............................   27.8        27.3         31.8
    European................................   22.8        25.9         26.3
                                            ----------- -----------  -----------
  Total net sales...........................  100.0%      100.0%       100.0%
                                            =========== ===========  ===========

  Gross profit..............................   26.2%       24.6%        26.3%
  Selling, general and administrative
     expense................................   15.3        16.2         14.8
                                            ----------- -----------  -----------
  Income from operations....................   10.9         8.4         11.5
  Interest expense..........................   (1.1)       (1.4)        (1.6)
  Interest income...........................    0.3         0.3          0.3
  Other income (net) .......................    0.1         0.2          0.7
                                            ----------- -----------
                                                                     -----------
  Income before income taxes................   10.2         7.5         10.9
  Provision for income taxes................    3.4         2.7          3.8
                                            =========== ===========  ===========
  Net Income................................    6.8%        4.8%         7.1%
                                            =========== ===========  ===========

RESULTS OF OPERATIONS

1997 COMPARED TO 1996

NET SALES. Net sales in 1997 were $203,092,000, an increase of 11% from $183,595,000 in 1996. Sales from American agricultural markets grew 17%, and American industrial markets sales grew 12%. A return to more normal weather patterns benefited sales along with generally favorable market conditions; parts sales, up 8%, as well as wholegoods sales, showed increases.

European sales were down 3% year to year, with early in the year strength offset by late year weakness caused largely by competitive impacts on U.K. exports arising from the strength of the U.K. currency versus other European currencies. Also affecting European markets were general retrenchments of certain European economies and, in the U.K. the continuing impact of BSE (mad cow disease).

GROSS PROFIT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Gross Profit increased from 24.6% to 26.2%. Gross profit in 1996 had been negatively impacted by the year end charges described herein. Selling, general and administrative expense increased from $29,785,000 to $31,026,000 reflecting increased staffing related to growth and expenditures in strategic acquisition pursuits during 1997. Price increases during the year generally offset cost increases.

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INTEREST EXPENSE, INTEREST INCOME, OTHER INCOME (NET) AND INCOME TAXES. Interest Expense was reduced due to operating cash flows reducing borrowing levels. Interest income decreased mainly due to lower aged receivable balances. Other income (net) declined largely due to smaller realized gains on an investment in a marketable security. Income taxes as a percent of pre-tax income was less due primarily to reduced tax rates from state taxing entities.

1996 COMPARED TO 1995

NET SALES. 1996 sales of $183,595,000, in addition to being affected by sales additions from the acquisitions made during the year 1995, were adversely impacted by severe weather conditions in the U.S. during the first half of 1996, which shortened or diminished growing seasons, thereby reducing, particularly, replacement parts sales. American agriculture's sales of wholegoods in 1996 were also reduced by some softness in agriculture economics, particularly in ranching due to weak cattle prices. Further, in the final quarter of the year, shipments were deferred by tractor supply delays (certain of the Company's products ship with or are attached to a tractor) and by late year- end order patterns. European operations' sales in 1996 increased 10% due to expanded distribution throughout the markets served.

RESULTS OF OPERATIONS. Impacting costs and profitability in 1996 were slower than expected integration of and improvements in the 1995 acquisitions and, at one acquired company, disruptions to operations from flooding and litigation with the former owner.

Further, contributing significantly to the decline in 1996 profitability were charges and expenses, mainly related to inventory and accounts receivable, as well as litigation costs, incurred in the entities acquired by Alamo during 1995. These items total $3.2 million. Further, in the final quarter of 1996, the strength of the British Pound against the French Franc caused currency transaction losses in the U.K. operations' French Franc business.

GROSS PROFIT AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. The gross profit percentage decrease from 1995 and the operating costs percentage increase are driven largely by the factors described in the preceding paragraph, along with some margin impact from sales mix, caused largely by replacement parts sales declines due to weather, and fixed cost impacts, given the sales deferrals. Price increases during the year generally offset cost increases.

INTEREST EXPENSE, INTEREST INCOME, OTHER INCOME(NET) AND INCOME TAXES. The net impact of proceeds from the 1995 common stock offering, 1995 acquisition expenditures and working capital needs produced average borrowings during 1996 modestly below 1995 levels, thereby reducing interest expense accordingly. Other income (net) declined in 1996 due largely to charges in 1996 for currency transaction impacts. Income taxes as a percent of pre-tax income increased largely due to a non-recurring 1995 tax refund.

LIQUIDITY AND CAPITAL RESOURCES

1997 operating activities generated $12.3 million in cash flow allowing the Company to reduce debt by $6.3 million and return $3.8 million to shareholders through dividends. 1996 cash flow was similarly positive. 1995's cash flow and changes in balance sheet accounts were significantly impacted by acquisitions and a common stock offering.

Capital expenditures during 1997, 1996 and 1995 were, respectively, $4,685,000, $2,868,000 and $2,401,000. 1998 capital expenditures are expected to be approximately $5.0 million, and will be funded from operating cash flow. Because of seasonality in the Company's business, borrowings are heaviest in December to March.

In May 1997 the Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company's common stock to be funded through working capital and borrowing's under the bank revolving credit facility.

Future investments in working capital are expected to be required to fund sales growth, geographic expansion and new products. The Company's cash flow, strong financial position, and existing and available credit opportunities should be adequate for the Company's needs in the near and longer term.

Long-term debt as a percent of total capital at December 31, 1997 was 21% compared to 27% at year end 1996.

As of December 31, 1997, the Company had a $45,000,000 contractually committed, unsecured, long-term bank revolving credit facility under which the Company can borrow and repay until December 31, 2002, with interest at various rate options based upon Prime or Eurodollar rates, with such rates either floating on a daily basis or fixed for periods up to 180 days. Proceeds may be used for general corporate purposes or, subject to some limitations, acquisitions. The loan agreement contains certain financial covenants, customary in credit facilities of this nature,

10

including minimum financial ratio requirements and limitations on dividends, indebtedness, liens and investments. The Company is in compliance with all covenants at December 31, 1997. At December 31, 1997, $22,000,000 was drawn on the revolver at various interest rate options, with an average effective rate of 6.8%. At December 31, 1997, $2,441,000 of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by certain vendor contracts.

INFLATION

The Company believes that inflation generally has not had a material impact on its operations or liquidity to date.

NEW ACCOUNTING DISCLOSURES

DERIVATIVE FINANCIAL INSTRUMENTS ACCOUNTING POLICY DISCLOSURE REQUIREMENTS
AND MARKET RISK DISCLOSURE RULES. During 1997, the Securities and Exchange Commission issued expanded disclosure requirements on derivative accounting policy disclosures and the exposure to market risk. The new rules require enhanced descriptions of specific aspects of a registrant's accounting policies for derivatives, as well as qualitative and quantitative disclosures about each type of market risk. The increased policy disclosures on derivatives were effective for all public companies for periods ending after June 15, 1997. The qualitative and quantitative market risk disclosures must be provided in all filings that include audited financial statements for fiscal years ending after June 15, 1998. The Company expects compliance with these requirements to have no material impact on the Company's consolidated results of operations, financial position or cash flows.

ACCOUNTING AND OTHER IMPLICATIONS OF THE YEAR 2000. The Company is currently evaluating the Year 2000 readiness of its information systems and manufacturing equipment, as well as communicating with its significant customers and suppliers of raw materials regarding their readiness for the Year 2000. Work plans detailing any tasks and resources required to insure equipment and information system Year 2000 readiness are expected to be in place in 1998. Evaluation to date indicates that costs associated with any necessary upgrades are not expected to be material.

NEW ACCOUNTING STANDARDS. Financial Accounting Standards Board Statements No. 128, 130 and 131, relating to Earnings per Share, Reporting Comprehensive Income, and Disclosures About Segments of an Enterprise and Related Information, respectively, are described in Notes to Consolidated Financial Statements.

ITEM 8. FINANCIAL STATEMENTS

For the financial statements and supplementary data required by this Item 8, see the Index to Consolidated Financial Statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

There is incorporated herein, by reference, that portion of the Company's definitive proxy statement for the 1998 Annual Meeting of Stockholders, which appears therein under the captions "Item 1: Election of Directors," "Information Concerning Directors," and "Section 16(a) Beneficial Ownership Reporting Compliance." See also the information in Item 4a. of Part I of this Report.

ITEM 11. EXECUTIVE COMPENSATION

There is incorporated in this Item 11, by reference, that portion of the Company's definitive proxy statement for the 1998 Annual Meeting of Stockholders, which appears under the caption "Executive Compensation."

11

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

There is incorporated in this Item 12, by reference, that portion of the Company's definitive proxy statement for the 1998 Annual Meeting of Stockholders, which appears under the caption "Beneficial Owners of Common Stock."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There is incorporated in this Item 13, by reference, that portion of the Company's definitive proxy statement for the 1998 Annual Meeting of Stockholders, which appears under the captions "Certain Relationships and Related Transactions" and "Compensation Committee Interlocks and Insider Participation."

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)1. FINANCIAL STATEMENTS

The following consolidated financial statements of the Company are included following the Index to Consolidated Financial Statements on page F-1 of this Report.

PAGE

      Report of Ernst & Young LLP, Independent Auditors...............     F-2
      Consolidated Statements of Income...............................     F-3
      Consolidated Balance Sheets.....................................     F-4
      Consolidated Statements of Stockholders' Equity.................     F-5
      Consolidated Statements of Cash Flows...........................     F-6
      Notes to Consolidated Financial Statements......................     F-7

(A)2.   FINANCIAL  STATEMENT SCHEDULES

All schedules have been omitted because they are not applicable or not required under the instructions or the information requested is set forth in the consolidated financial statements or related notes thereto.

12

(A)3. EXHIBITS

The following Exhibits are incorporated by reference to the filing indicated or are included following the Index to Exhibits.

INDEX TO EXHIBITS

                                                                       INCORPORATED BY REFERENCE
                                                                          FROM THE FOLLOWING
EXHIBITS                          EXHIBIT TITLE                                DOCUMENTS
----------    -------------------------------------------------------  ---------------------------
    3.1    --  Certificate of Incorporation, as amended, of Alamo       Form S-1, February 5, 1993
               Group Inc.
    3.2    --  By-Laws of Alamo Group Inc.                              Form 10-K, March 29, 1996
               Warrant Agreement between Alamo Group Inc. and
   10.1    --  Capital Southwest Corporation, dated November 25,        Form S-1, February 5, 1993
               1991
  *10.2    --  1982 Incentive Stock Option Plan, adopted by the         Form S-1, February 5, 1993
               Board of Directors of Alamo Group Inc. on April 26,
               1982
  *10.3    --  Amendment No. 2[sic] to the 1982 Incentive Stock         Form S-1, February 5, 1993
               Option Plan, adopted as of January 1, 1987
  *10.4    --  1993 Non-Qualified Stock Option Plan, adopted by the     Form S-1, February 5, 1993
               Board of Directors on February 2, 1993
  *10.5    --  Alamo Group Inc. Executive Loan Program of 1991          Form S-1, March 18, 1993

  *10.6    --  1994 Incentive Stock Option Plan, adopted by the         Form 10-K, March 28, 1994
               Board of Directors on January 25, 1994
  10.7     --  Third Amended and Restated Revolving Credit and          Form 10-K, March 29, 1996
               Term Loan Agreement between NationsBank of Texas,
               N.A. and Alamo Group Inc. and certain subsidiaries
               dated December 29, 1995
  10.8     --  First Amendment to Third Amended and Restated            Form 10-K, March 17, 1997
               Revolving Credit and Term Loan Agreement dated
               April 10, 1996
  10.9     --  Second Amendment to Third Amended and Restated           Form 10-K, March 17, 1997
               Revolving Credit and Term Loan Agreement dated
               December 23, 1996
  10.10    --  Form of indemnification agreements with Directors        Form 10-Q, May 15, 1997
               of the Company
  10.11    --  Form of indemnification agreements with certain          Form 10-Q, May 15, 1997
               executive officers of the Company
  10.12    --  Third Amendment to Third Amended and Restated            Form 10-Q, August 15,
               Revolving Credit and Term Loan Agreement dated           1997
               June 23, 1997
  10.13    --  Fourth Amendment to Third Amended and Restated           Filed Herewith
               Revolving Credit and Term Loan Agreement dated
               December 31, 1997
 *10.14     -- Incentive Compensation Plan, adopted on December         Filed Herewith
               9, 1997 401(k) Restoration Plan for Highly Compensated
 *10.15    --  Employees, adopted on December 9, 1997                   Filed Herewith
  21.1     --  Subsidiaries of the Registrant.                          Filed Herewith
  23.1     --  Consent of Ernst & Young LLP                             Filed Herewith
  27.1     --  Financial Data Schedule                                  Electronic Filing Only

* Compensatory Plan

(B) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF 1997

None

13

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

ALAMO GROUP INC.

Date:  March 27, 1998                             By:/s/ DONALD J. DOUGLASS
                                                  ----------------------
                                                  Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

         SIGNATURE                                 TITLE                              DATE
----------------------------- ------------------------------------------------  ------------------
/s/ DONALD J. DOUGLASS        Chairman of the Board                             March 27, 1998
      Donald J. Douglass      Chief Executive Officer and Director
                              (Principal Executive Officer)

/s/   ORAN F. LOGAN           President, Chief Operating Officer and a          March 27, 1998
      Oran F. Logan           Director (Principal Operating Officer)

/s/ JIM A. SMITH              Executive Vice President,                         March 27, 1998
      Jim A. Smith            Chief Financial Officer (Principal Financial
                              Officer)

/s/ JOSEPH C. GRAF            Director                                          March 27, 1998
      Joseph C. Graf

/s/ DAVID H. MORRIS           Director                                          March 27, 1998
      David H. Morris

/s/ O. S. SIMPSON, JR.        Director                                          March 27, 1998
      O.S. Simpson, Jr.

/s/ JAMES B. SKAGGS           Director                                          March 27, 1998
      James B. Skaggs

/s/ WILLIAM R. THOMAS         Director                                          March 27, 1998
      William R. Thomas

14

ALAMO GROUP INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors.............................    F-2

CONSOLIDATED FINANCIAL STATEMENTS

   CONSOLIDATED STATEMENTS OF INCOME

      Years ended December 31, 1997, December 31, 1996 and December 30, 1995..    F-3

   CONSOLIDATED BALANCE SHEETS

      December 31, 1997 and December 31, 1996 ................................    F-4

   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

      Years ended December 31, 1997, December 31, 1996 and December 30, 1995..    F-5

   CONSOLIDATED STATEMENTS OF CASH FLOWS

      Years ended December 31, 1997, December 31, 1996 and December 30, 1995..    F-6

   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................    F-7

F-1

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Stockholders

Alamo Group Inc.

We have audited the accompanying consolidated balance sheets of Alamo Group Inc. and subsidiaries as of December 31, 1997 and December 31, 1996, and the related consolidated statements of income, stockholders' equity and cash flows for the years ended December 31, 1997, December 31, 1996 and December 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Alamo Group Inc. and subsidiaries at December 31, 1997 and December 31, 1996, and the consolidated results of their operations and their cash flows for the years ended December 31, 1997, December 31, 1996 and December 30, 1995, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

San Antonio, Texas
March 6, 1998

F-2

ALAMO GROUP INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                     YEAR ENDED
                                                   -----------------------------------------------
                                                   DECEMBER 31,     DECEMBER 31,    DECEMBER 30,
                                                       1997             1996            1995
                                                   --------------  --------------- ---------------
Net sales........................................  $    203,092    $    183,595    $   163,852
Cost of sales....................................       149,940         138,460        120,648
                                                   --------------  --------------- ---------------
  Gross profit...................................        53,152          45,135         43,204
Selling, general and administrative expense .....        31,026          29,785         24,301
                                                   --------------  --------------- ---------------
  Income from operations  .......................        22,126          15,350         18,903
Interest expense ................................        (2,262)         (2,631)        (2,647)
Interest income .................................           523             664            441
Other income (net) .............................            208             339          1,082
                                                   --------------  --------------- ---------------
    Income before income taxes..................         20,595          13,722         17,779
Provision for income taxes ......................         6,995           4,960          6,164
                                                   ==============  =============== ===============
  Net income  ...................................  $     13,600    $      8,762    $    11,615
                                                   ==============  =============== ===============
Net income per common share:

   Basic.....................................      $        1.42   $        0.91   $       1.36
                                                   ==============  =============== ===============
   Diluted.......................................  $        1.41   $        0.91   $       1.35
                                                   ==============  =============== ===============
Average common shares:

   Basic.....................................             9,602           9,585          8,541
                                                   ==============  =============== ===============
   Diluted.......................................         9,674           9,641          8,619
                                                   ==============  =============== ===============

See accompanying notes.

F-3

ALAMO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                 DECEMBER 31, DECEMBER 31,
                                                                      1997        1996
                                                                 ---------   ---------
ASSETS
     Current assets:
        Cash and cash equivalents .............................  $     789   $   2,228
        Accounts receivable ...................................     42,165      43,925
        Inventories ...........................................     65,752      60,171
        Deferred income taxes .................................      2,288       2,206
        Prepaid expenses and other ............................      2,152       1,327
                                                                 ---------   ---------
           Total current assets ...............................    113,146     109,857

    Property, plant and equipment .............................     51,693      48,932
        Less:  Accumulated depreciation .......................    (29,216)    (26,546)
                                                                 ---------   ---------
                                                                    22,477      22,386
    Goodwill ..................................................     12,632      14,237
    Other assets ..............................................      7,869       7,382
                                                                 ---------   ---------
           Total assets .......................................  $ 156,124   $ 153,862
                                                                 =========   =========
LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:

        Trade accounts payable ................................  $  12,787   $  11,066
        Income taxes payable ..................................        266         930
        Accrued liabilities ...................................      6,096       6,725
        Current maturities of long-term debt ..................        727       1,031
                                                                 ---------   ---------
           Total current liabilities ..........................     19,876      19,752

    Long-term debt, net of current maturities .................     28,617      35,299
    Deferred income taxes .....................................      1,366       1,561

    Stockholders' equity:
    Common stock, $.10 par value, 20,000,000 shares authorized;
      9,684,874 and 9,589,851 issued at December 31, 1997
      and December 31, 1996, respectively .....................        968         959
    Additional paid-in capital ................................     50,395      49,592
    Retained earnings .........................................     54,835      45,071
    Translation adjustment ....................................         67       1,628
                                                                 ---------   ---------
        Total stockholders' equity ............................    106,265      97,250
                                                                 ---------   ---------
        Total liabilities and stockholders' equity ............  $ 156,124   $ 153,862
                                                                 =========   =========

See accompanying notes.

F-4

ALAMO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

                                                                                                                     TOTAL
                                           COMMON STOCK      ADDITIONAL                                              STOCK-
                                         ----------------     PAID-IN      TREASURY      RETAINED    TRANSLATION    HOLDERS'
                                         SHARES     AMOUNT     CAPITAL       STOCK       EARNINGS     ADJUSTMENT     EQUITY
                                         ------      ----     --------      -------      --------      -------      ---------
Balance at December 31, 1994 .......      7,556      $756     $ 17,710      $  --        $ 31,954      $  (254)     $  50,166
  Sale of common stock and related .      2,021       202       32,372         --            --           --           32,574
  Net income .......................       --         --          --           --          11,615         --           11,615
  Dividends paid ($.40 per share) ..       --         --          --           --          (3,427)        --           (3,427)
  Change in unrealized gains on
     securities, net of
     income taxes ..................       --         --          (425)        --            --           --             (425)
  Translation adjustment ...........       --         --          --           --            --            202            202
                                         ------      ----     --------      -------      --------      -------      ---------
Balance at December 30, 1995 .......      9,577       958       49,657         --          40,142          (52)        90,705
  Sale of common stock and related .         13         1          224         --            --           --              225
  Net income .......................       --         --          --           --           8,762         --            8,762
  Dividends paid ($.40 per share) ..       --         --          --           --          (3,833)        --           (3,833)
  Change in unrealized gains on
     securities, net of income
     taxes .........................       --         --          (289)        --            --           --             (289)
  Translation adjustment ...........       --         --          --           --            --          1,680          1,680
                                                     ----     --------      -------      --------      -------      ---------

Balance at December 31, 1996 .......      9,590       959       49,592         --          45,071        1,628         97,250
  Purchase of treasury stock .......        (80)      --          --         (1,631)         --           --           (1,631)
  Sale of common stock and related .        175         9          893        1,631          --           --            2,533
  Net income .......................       --         --          --           --          13,600         --           13,600
  Dividends paid ($.40 per share) ..       --         --          --           --          (3,836)        --           (3,836)
  Change in unrealized gains on
     securities, net of income
     taxes .........................       --         --           (90)        --            --           --              (90)
  Translation adjustment ...........       --         --          --           --            --         (1,561)        (1,561)
                                         ------      ----     --------      -------      --------      -------      ---------
Balance at December 31, 1997 .......      9,685      $968     $ 50,395      $  --        $ 54,835      $    67      $ 106,265
                                         ======      ====     ========      =======      ========      =======      =========

See accompanying notes.

F-5

ALAMO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

                                                                          YEAR ENDED
                                                            ----------------------------------------
                                                               DECEMBER      DECEMBER   DECEMBER 30,
                                                               31, 1997      31, 1996      1995
                                                            ------------- ---------------------------
OPERATING ACTIVITIES
Net income ................................................    $ 13,600     $ 8,762     $ 11,615
Adjustments to reconcile net income to net cash provided by
  operating activities:

    Provision for doubtful accounts .......................         675         662          331
    Depreciation ..........................................       3,700       3,972        3,281
    Amortization ..........................................       1,364       1,369        1,096
    Provision for deferred income tax benefit .............        (286)       (128)        (396)
    Realized gain on marketable securities ................         (70)       (528)        (529)
    Gain on sale of  equipment ............................        (152)       (163)         (70)
Changes in operating assets and liabilities, net of effect
 of acquisitions:

    Accounts receivable ...................................         321       1,836       (8,343)
    Inventories ...........................................      (6,367)       (536)        (555)
    Prepaid expenses and other assets .....................      (1,655)     (2,241)      (5,642)
    Trade accounts payable and accrued liabilities ........       1,756      (2,431)        (606)
    Income taxes payable ..................................        (583)       (947)         (64)
                                                               --------     -------     --------
Net cash provided by operating activities .................      12,303       9,627          118

INVESTING ACTIVITIES

Acquisitions, net of cash acquired ........................        --          (941)     (17,593)
Purchase of property, plant and equipment .................      (4,685)     (2,868)      (2,401)
Proceeds from sale of property, plant and equipment .......         224         251          115
Purchases of long-term investments ........................        --          --         (2,480)
Proceeds from sale of marketable securities ...............         150         634          569
                                                               --------     -------     --------
Net cash (used) by investing activities ...................      (4,311)     (2,924)     (21,790)

FINANCING ACTIVITIES

Net change in bank revolving credit facility ..............      (5,500)     (1,100)      27,200
Principal payments on long-term debt and capital leases ...        (841)     (2,265)     (34,789)
Proceeds from issuance of long-term debt ..................        --           641         --

Dividends paid ............................................      (3,836)     (3,833)      (3,427)
Proceeds from sale of common stock and related ............       2,533         225       32,574
Cost of common stock repurchased ..........................      (1,631)       --           --
                                                               --------     -------     --------
Net cash provided (used) by financing activities ..........      (9,275)     (6,332)      21,558

Effect of exchange rate changes on cash ...................        (156)         18           80
                                                               --------     -------     --------
Net change in cash and cash equivalents ...................      (1,439)        389          (34)
Cash and cash equivalents at beginning of the year ........       2,228       1,839        1,873
                                                               --------     -------     --------
Cash and cash equivalents at end of the year ..............    $    789     $ 2,228     $  1,839
                                                               ========     =======     ========
Cash paid during the year for:

  Interest ................................................    $  2,215     $ 2,608     $  2,632
  Income taxes ............................................       6,979       6,400        6,707

See accompanying notes.

F-6

1. SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

The Company operates in one business segment referred to as the vegetation maintenance equipment industry in both America and Europe. The Company manufactures tractor-mounted mowing and vegetation maintenance equipment and replacement parts for industrial and agricultural end-users.

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Alamo Group Inc. and its subsidiaries (the Company), all of which are wholly owned. Other investments are accounted for under the equity method or the cost method, as appropriate. All significant intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform with the 1997 presentation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

FISCAL YEAR

Until 1996, the Company's fiscal year comprised either a 52 or 53 week period that ended on the Saturday closest to December 31. All references to 1995 herein are to the fiscal year ended December 30, 1995 (52 weeks). In 1996, the Company changed to a calendar year basis. There are no material differences in the results presented that result from this change.

FOREIGN CURRENCY

The Company translates the assets and liabilities of foreign-owned subsidiaries at rates in effect at the end of the year. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are treated as a separate component of stockholders' equity.

The Company enters into foreign currency forward contracts to hedge its exposure on material foreign currency transactions. The Company does not hold or issue financial instruments for trading purposes. Changes in the market value of the foreign currency instruments are recognized in the financial statements upon settlement of the hedged transaction. At December 31, 1997, the Company had contracts, maturing at various dates to June 1998, for $3,521,000. Foreign currency transaction gains or losses are included in Other income (net). For 1997 and 1996, such transactions netted a loss of $346,000 and $436,000, respectively.

CASH EQUIVALENTS

Cash equivalents are highly liquid investments with a maturity date no longer than 90 days.

MARKETABLE SECURITIES

Marketable securities are carried at fair market value in Prepaid expenses and other, with unrealized gains and losses, net of tax, reported in Stockholders' equity.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The credit risk is limited because of the large number and types of customers and their geographic dispersion.

F-7

INVENTORIES

Inventories of U.S. operating subsidiaries are principally stated at the lower of cost (last-in, first-out method) ("LIFO") or market and the Company's foreign subsidiaries' inventories are stated at the lower of cost (first-in, first-out) ("FIFO") or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated on the basis of cost. Major renewals and betterments are charged to the property accounts while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Depreciation is provided at amounts calculated to amortize the cost of the assets over their estimated useful economic lives using the straight-line method.

GOODWILL

Goodwill is related to purchase acquisitions and, with minor exceptions, is being amortized over fifteen years from respective acquisition dates. Goodwill is shown net of amortization of $3,531,000 and $2,630,000 for the years ended December 31, 1997 and December 31, 1996, respectively. The Company continually evaluates the existence of goodwill impairment on the basis of whether the goodwill is fully recoverable from projected, undiscounted net cash flows of the related business unit.

LONG-TERM INVESTMENTS

Included in other assets are long-term investments, accounted for under the equity method of accounting, which consist primarily of investments in common stocks of corporations, and other long-term investments for which no active secondary market exists. During 1995, the Company invested approximately $500,000 in a Small Business Investment Company; up to an additional $1,500,000 has been committed. Due to inherent risk factors in such investments, the ultimate realization of these amounts, included in other assets in the accompanying financial statements, is not determinable at this date.

RELATED PARTY TRANSACTIONS

Notes receivable from officers of the Company for $1,280,000 and $700,000 for the years ended 1997 and 1996, respectively, are included in other assets.

REVENUE RECOGNITION

Revenue is recognized when the product is shipped. Provisions for sales incentives and other sales related expenses are made at the time of the sale.

RESEARCH AND DEVELOPMENT

Product development and engineering costs charged to selling, general and administrative expense amounted to $1,712,000, $1,747,000 and $1,434,000 for the years ended December 31, 1997, December 31, 1996 and December 30, 1995, respectively.

FEDERAL INCOME TAXES

Deferred tax assets and liabilities are determined based on differences between the financial reporting basis and tax basis of assets and liabilities and are measured using presently enacted tax rates and laws.

STOCK BASED COMPENSATION

Effective January 1, 1996 the Company adopted Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION, and elected to continue to use the intrinsic value method in accounting for its stock option plans. Accordingly, no compensation cost has been recognized in the financial statements for these plans. The pro forma effects of fair value accounting for compensation costs related to options, on net income and earnings per share, would not be material.

F-8

EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128, EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented and, where appropriate, restated to conform to the Statement 128 requirements.

2. NEW ACCOUNTING STANDARDS AND DISCLOSURES

REPORTING COMPREHENSIVE INCOME. In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income." Statement 130 establishes new rules for the reporting and display of comprehensive income and its components which will, as required, be adopted in 1998. Statement 130, while having no impact on net income or stockholders' equity, requires changes such as reporting unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments, which are reported as line items in the Consolidated Statement of Stockholders' Equity, to be further disclosed in "other comprehensive income."

DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information." Statement 131 specifies the computation, presentation and disclosure requirements for business segment information, and requires that segments be identified based on, among other factors, reporting used by the Company's management in evaluating key business decisions. Statement 131 supersedes Statement 14, "Financial Reporting for Segments of a Business Enterprise." Statement 131 is effective for the Company's financial statements for the year ended December 31, 1998. The adoption of Statement 131 will not have a material impact on the Company.

DERIVATIVE FINANCIAL INSTRUMENTS ACCOUNTING POLICY DISCLOSURE REQUIREMENTS
AND MARKET RISK DISCLOSURE RULES. During 1997, the Securities and Exchange Commission issued expanded disclosure requirements of accounting policies for derivative financial instruments and the exposure to market risks. The new rules require enhanced descriptions of specific aspects of a registrant's accounting policies for derivatives as well as qualitative and quantitative disclosures about each type of market risk. The increased policy disclosures on derivatives were effective for all public companies for periods ending after June 15, 1997. The qualitative and quantitative market risk disclosures must be provided in all filings that include audited financial statements for fiscal years ending after June 15, 1998. The Company expects compliance with these requirements to have no material impact on the Company's consolidated results of operations, financial position, or cash flows.

3. EARNINGS PER SHARE

The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net income per common share. Net income for basic and diluted calculations do not differ. (In thousands, except per share).

                                                      1997          1996       1995
                                                 -----------    -----------    -------
Net Income ..................................    $    13,600    $     8,762    $11,615
                                                 ===========    ===========    =======
Average Common Shares:

  BASIC (weighted-average outstanding shares)          9,602          9,585      8,541
   Dilutive potential common shares from
     stock options and warrants .............             72             56         78
                                                 ===========    ===========    =======
  DILUTED (weighted-average outstanding
    shares) .................................          9,674          9,641      8,619
                                                 ===========    ===========    =======
Basic earnings per share ....................    $      1.42    $      0.91    $  1.36
                                                 ===========    ===========    =======
Diluted earnings per share ..................    $      1.41    $      0.91    $  1.35
                                                 ===========    ===========    =======

4. ACQUISITIONS

On April 27, 1995, the Company acquired M&W Gear Co. ("M&W"). The acquisition was effective as of April 2, 1995. The purchase price was $17,959,000. M&W is a manufacturer and distributor of primarily hay-making equipment for agricultural end-users.

On May 12, 1995, the Company acquired Rhino International, Inc. ("Rhino International"), an unaffiliated company which imports Chinese-manufactured tractors for a purchase price of $2,663,000.

On May 24, 1995, the Company invested $1,980,000 to purchase 49 1/2% of the outstanding capital stock (42% on a fully diluted basis) of Certified Power, Inc. ("CPI"), which in turn acquired 100% of the equity of Certified Power Train Specialists, Inc. ("CPTS") in a highly leveraged transaction. CPTS is a distributor of hydraulic components and automotive and truck drivetrain parts. This investment is carried in other assets and is accounted for by equity accounting. Subsequent to December 31, 1997 the Company sold its interest, substantially at book value.

On June 29, 1995, the Company purchased N J M Dabekausen Beheer BV and its subsidiaries (collectively, "Dabekausen") for a purchase price of $937,000. Dabekausen is a distributor of the Company's products in the Netherlands and Germany.

On December 6, 1995, the Company acquired Herschel Corporation ("Herschel"). The effective date of the acquisition was November 25, 1995. The purchase price was $14,041,000. Herschel manufactures and distributes primarily high wear, high turnover farm equipment replacement parts.

In December 1996, the Company made two small business purchases: Forges Gorce in France and a domestic production line (this purchase was completed in 1997), each of which makes mower blades.

The aggregate purchase price was $1,903,000.

The acquisitions have been accounted for by the purchase method of accounting, and accordingly, the approximate purchase prices, shown above, have been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the dates of acquisition, with the excess of purchase prices over assigned asset values recorded as goodwill which the Company amortizes over 15 years. The results of operations of the acquisitions have been included in the Company's consolidated financial statements since the acquisition dates.

The condensed pro forma results of operations presented below summarize on an unaudited basis approximate results of the Company's consolidated operations for the period presented assuming that the acquisitions shown above occurred at the beginning of the period. The two 1996 purchases were not material and 1996, therefore, is not shown.

YEAR ENDED
DECEMBER 30, 1995

                                      (in thousands,
                                     except per share
                                         amounts)
                                    ------------------
                                        (UNAUDITED)
Net sales.........................     $ 193,729
Income before income taxes........        17,991
Net income........................        11,983
Earnings per share (diluted)......          1.39

5. MARKETABLE SECURITIES

The estimated fair market value of marketable securities, included in Prepaid expenses and other, was $218,000 at December 31, 1996, and gross unrealized gains included in such amounts was $138,000. Realized gains on sales of such securities, included in other income, were $70,000, $528,000 and $529,000 for the years 1997, 1996 and 1995, respectively.

F-10

6. VALUATION AND QUALIFYING ACCOUNTS

Valuation and qualifying accounts included the following (in thousands):

                                                 CHARGED                        NET
                                     BALANCE    TO COSTS     TRANSLATIONS,   WRITE-OFFS      BALANCE
                                   BEGINNING OF    AND     RECLASSIFICATION, OR DISCOUNTS    END OF
                                      YEAR       EXPENSES  AND ACQUISITIONS     TAKEN         YEAR
                                      ----       --------  ----------------     -----         ----
1997
Allowance for doubtful accounts.   $  1,521         675           (27)           (329)       $1,840
Reserve for sales discounts ....      3,866      14,177            (2)        (14,557)        3,484
Reserve for inventory
  obsolescence .................      4,110         281          (113)           (499)        3,779
                                                                                               1996
                                                                                              -----
Allowance for doubtful accounts.   $  1,192         662          (180)           (153)       $1,521
Reserve for sales discounts ....      4,303      12,883            25         (13,345)        3,866
Reserve for inventory
  obsolescence .................      4,157         450           567          (1,064)        4,110
                                                                                               1995
                                                                                              -----
Allowance for doubtful accounts.   $    592         331           467            (198)       $1,192
Reserve for sales discounts ....      2,016      12,906           452         (11,071)        4,303
Reserve for inventory
  obsolescence .................      2,485         368         1,322             (18)        4,157

7. INVENTORIES

Inventories valued at LIFO cost represented 81% and 80% of total inventory for the years ended December 31, 1997 and December 31, 1996, respectively. The excess of current costs over LIFO valued inventories was $3,310,000 and $3,221,000 at December 31, 1997 and December 31, 1996, respectively. Net inventories consist of the following (in thousands):

                                        DECEMBER 31,  DECEMBER 31,
                                           1997         1996
                                      ------------- --------------
Finished wholegoods and parts ....... $     57,804    $    53,748
Work in process......................        3,792          2,858
Raw materials........................        4,156          3,565
                                      ============= ==============
                                      $     65,752    $    60,171
                                      ============= ==============

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

                              DECEMBER       DECEMBER      USEFUL
                              31, 1997       31, 1996       LIVES
                            -------------  -------------  ---------
Land ...................... $      2,012   $     2,154
Buildings and improvements.       19,299        19,377    15-25 yrs
Machinery and equipment ...       22,413        20,081      5 yrs.
Office furniture and
equipment .................        4,781         4,408      5 yrs.
Transportation equipment  .        3,188         2,912     3-5 yrs.
                            -------------  -------------
                                  51,693        48,932
 Accumulative
depreciation ..............      (29,216)      (26,546)
                            -------------  -------------
                            $     22,477   $    22,386
                            -------------  -------------

Buildings and improvements at December 31, 1997 and December 31, 1996 include $7,070,000 and $7,735,000, respectively, for capitalized leases.

F-11

9. ACCRUED LIABILITIES

Accrued liabilities consist of the following balances (in thousands):

                                                            DECEMBER    DECEMBER
                                                            31, 1997    31, 1996
                                                            --------    --------
Salaries, wages and bonuses ............................      $2,876      $2,810
Warranty ...............................................       1,254       1,282
Other ..................................................       1,966       2,633
                                                              ======      ======
                                                              $6,096      $6,725
                                                              ======      ======

10. LONG-TERM DEBT

The components of long-term debt at December 31 are as follows (in thousands):

                                             1997         1996
                                           -------      -------
Bank revolving credit facility ........    $22,000      $27,500
Capital lease obligations .............      6,802        7,538
Other notes payable ...................        542        1,292
                                           -------      -------
Total long-term debt ..................    $29,344      $36,330
Less current maturities ...............        727        1,031
                                           -------      -------
                                           $28,617    $  35,299
                                           =======      =======

As of December 31, 1997, the Company had a $45,000,000 contractually committed, unsecured, long-term bank revolving credit facility under which the Company can borrow and repay until December 31, 2002, with interest at various rate options based upon Prime or Eurodollar rates, with such rates either floating on a daily basis or fixed for periods up to 180 days. Proceeds may be used for general corporate purposes or, subject to some limitations, acquisitions. The loan agreement contains certain financial covenants, customary in credit facilities of this nature, including minimum financial ratio requirements and limitations on dividends, indebtedness, liens and investments. The Company is in compliance with all covenants at December 31, 1997. At December 31, 1997, $22,000,000 was drawn on the revolver at various interest rate options, with an average effective rate of 6.8%. At December 31, 1997, $2,441,000 of the revolver capacity was committed to irrevocable standby letters of credit issued in the ordinary course of business as required by certain vendor contracts.

The aggregate maturities of long-term debt for the next five years, as of December 31, 1997, are as follows: $727,000 in 1998, $459,000 in 1999, $518,000 in 2000, $554,000 in 2001, and $22,600,000 (including the bank revolving credit facility) in 2002.

Long-term debt is substantially floating rate debt and is stated essentially at fair value.

11. INCOME TAXES

U. S. and non-U.S. income before income taxes is as follows (in thousands):

                                             1997           1996           1995
                                           -------        -------        -------
Income before income taxes
  Domestic ........................        $14,210        $ 7,359        $12,693
  Foreign .........................          6,385          6,363          5,086
                                           -------        -------        -------
                                           $20,595        $13,722        $17,779
                                           =======        =======        =======

F-12

The provision for income taxes consists of (in thousands):

                                             1997           1996           1995
                                           ------        -------        -------
Current:
  Federal...................$ ......        4,892        $ 2,860        $ 4,459
  Foreign ..........................        2,176          1,987          1,773
  State ............................          419            297            328
                                           ------        -------        -------
                                            7,487          5,144          6,560
Deferred:
  Federal ..........................         (492)          (550)          (133)
  Foreign ..........................         --              366           (263)
                                           ------        -------        -------
                                             (492)          (184)          (396)
                                           ------        -------        -------
        Total income taxes..$ ......        6,995        $ 4,960        $ 6,164
                                           ======        =======        =======

Reconciliation of the statutory U.S. federal rate to actual tax rate is as follows (in thousands):

                                        1997         1996        1995
                                     ----------- ------------- ----------
Statutory U.S. federal tax at 35%       $ 7,208  $     4,803   $  6,223
        Increase (reduction) from:
          Non-U.S. taxes..........         (292)         126       (270)
          U.S. State taxes........          272          193        213
          Other...................         (193)        (162)        (2)
                                     ----------- ------------- ----------
      Provision for income taxes..   $    6,995  $     4,960   $  6,164
                                     =========== ============= ==========
      Actual tax rate.............           34%          36%        35%

At December 31, 1997, the Company had unremitted earnings of foreign subsidiaries of approximately $14,465,000. These earnings, which reflect full provision for non-U.S. income taxes, are indefinitely reinvested in non-U.S. operations or can be remitted without substantial additional tax. Accordingly, no provision has been made for taxes that might be payable upon remittance of such earnings nor is it practicable to determine the amount of this liability.

The components of deferred tax assets and liabilities included in the balance sheets are as follows (in thousands):

                                                            1997           1996
                                                           ------         ------
Deferred tax asset:
   Inventory .....................................         $1,242         $1,282
   Accounts receivable ...........................            486            387
   Depreciation ..................................          1,005            925
   Net operating loss carryforwards ..............            374            638
   Insurance .....................................            280            290
   Other Current .................................            447            394
   Other Non-current .............................            783            316
                                                           ------         ------
    Total deferred asset .........................         $4,617         $4,232
                                                           ======         ======
Deferred tax liability:
   Difference between book basis and tax
basis of assets ..................................         $3,079          3,207
   Other .........................................            616            380
                                                           ------         ------
    Total deferred liability .....................         $3,695         $3,587
                                                           ======         ======

At December 31, 1997, net, current deferred tax assets were $2,288,000 ($2,206,000 in 1996). Net, non-current deferred tax liabilities were $1,366,000 ($1,561,000 in 1996).

F-13

12. COMMON STOCK

In conjunction with the issuance of debt in a prior year, the Company issued warrants to purchase 62,500 shares of common stock to the lender. The exercise price of $16 per share is subject to adjustment, and the warrants expire in January 2000. The Company has reserved 62,500 shares of common stock for the warrants.

The Company completed an offering of its stock and listed its shares on the New York Stock Exchange in July 1995, trading under the symbol ALG. The number of new shares issued was 2,000,000 at $17.50 per share, and the net proceeds to the Company were $32,574,000. Earnings per share (diluted), calculated on a supplemental basis as if the foregoing event had occurred at the beginning of the year, would have been $1.21 for the year ended December 30, 1995.

Subsequent to December 31, 1997, the Company declared and paid a dividend of $0.10 per share.

13. STOCK OPTIONS

INCENTIVE OPTIONS

In 1982, the stockholders of the Company adopted an incentive stock option plan for key employees, reserving 350,000 shares of common stock. Under the terms of this plan, the purchase price of the shares subject to each option granted will not be less than the fair market value at the time the option is granted. There are no more options available for grant under this plan.

On April 28, 1994, the stockholders approved an incentive stock option plan for key employees, reserving 300,000 shares of common stock. Each option becomes vested and exercisable for up to 20% of the total optioned shares each year after grant. Under the terms of this plan, the exercise price of the shares subject to each option granted will not be less than the fair market value of the common stock at the date the option is granted.

Following is a summary of activity in the incentive stock option plans for the periods indicated:

                                                        DECEMBER       DECEMBER       DECEMBER
                                                        31, 1997       31, 1996       30, 1995
                                                        --------       --------       --------
Options outstanding at beginning of
year .............................................       123,373        106,711        140,837
   Granted .......................................          --           43,000         13,000
   Exercised .....................................       (14,863)       (12,938)       (21,026)
   Cancelled .....................................       (25,125)       (13,400)       (26,100)
                                                        --------       --------       --------
Options outstanding at end of year ...............        83,385        123,373        106,711
                                                        --------       --------       --------
Options exercisable at end of year ...............        44,385         35,098         22,961
                                                        --------       --------       --------
Options available for grant at end of
year .............................................       224,400        199,950        230,200
                                                        ========       ========       ========

PER SHARE OPTION PRICES RANGED FROM $12.00 TO $18.75.

NON-QUALIFIED OPTIONS.

On February 2, 1993, the Company granted non-qualified options for 200,000 shares of common stock to key employees of the Company at $11.50 per share. Each option becomes vested and exercisable for up to 20% of the total optioned shares after one year following the grant of the option and for an additional 20% of the total optioned shares after each succeeding year until the option is fully exercisable at the end of the fifth year. During 1997, 160,000 shares were exercised. Options for 40,000 shares were outstanding, but not exercisable, at December 31, 1997.

F-14

14. RETIREMENT BENEFIT PLANS

The Company provides a defined contribution 401(k) retirement and savings plan for eligible U.S. employees. Company matching contributions are based on a percentage of employee contributions. Company contributions to the plan during 1997, 1996 and 1995 were approximately $399,000, $458,000 and $336,000, respectively.

Two of the Company's foreign subsidiaries also participate in a defined contribution and savings plan covering eligible employees. The Company's foreign subsidiaries contribute between 5.8% and 9.6% of the participant's salary up to a specific limit. Contributions were approximately $453,000 in 1997, $508,000 in 1996, and $427,000 in 1995.

15. FOREIGN OPERATIONS

Following is selected financial information on the Company's foreign operations (located in Europe) (in thousands):

                                     DECEMBER    DECEMBER     DECEMBER
                                     31, 1997    31, 1996     30, 1995
                                     -------      -------      -------
Net sales .......................... $46,241      $47,519      $43,183
Income from operations .............   7,053        7,406        5,978
Income before income taxes and
  allocated interest expense .......   6,385        6,363        5,086
Identifiable assets ................ $39,744      $43,480      $38,376

16. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases office space and transportation equipment under various operating leases which generally are expected to be renewed or replaced by other leases. The Company has certain capitalized leases consisting principally of leases of buildings. At December 31, 1997, future minimum lease payments under these noncancelable leases and the present value of the net minimum lease payments for the capitalized leases are (in thousands):

                                                       OPERATING  CAPITALIZED
                                                        LEASES      LEASES
                                                        ------      -------
1998 .............................................      $  661      $   944
1999 .............................................         471          944
2000 .............................................         400          964
2001 .............................................         379          965
2002 .............................................          92          965
Thereafter .......................................          74        5,936
                                                        ------      -------
Total minimum lease payments .....................      $2,077      $10,718
                                                        ======      =======
Less amount representing interest ................       3,916
                                                        ------
Present value of net minimum lease payments ......       6,802
Less current portion .............................         395
                                                        ======
Long-term portion ................................      $6,407
                                                        ======

Rental expense for operating leases was approximately $1,176,000 for 1997, $1,217,000 for 1996 and $1,013,000 for 1995.

F-15

OTHER

The Company is subject to various unresolved legal actions which arise in the ordinary course of its business. The most prevalent of such actions relate to product liability which are generally covered by insurance. While amounts claimed may be substantial and the ultimate liability with respect to such litigation cannot be determined at this time, the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company's consolidated financial position.

The Company has been named in litigation involving Rhino International which includes aggregate claims totaling $8.2 million. The Company believes it has meritorious defenses against these matters and will vigorously defend the pending claims and prosecute appropriate counterclaims. While the ultimate outcome of this litigation cannot be determined at this time, the Company believes these matters will not have a material adverse effect on the Company's consolidated financial position.

The Company has an executive loan program pursuant to which the Company may make loans to certain officers and employees of the Company as approved by the Compensation Committee of the Board of Directors to purchase stock of the Company. All loans are secured by the pledge of shares being purchased. The maximum aggregate amount which officers and employees may borrow is $400,000 and $200,000, respectively. Each loan bears interest at prime and is payable quarterly. As of December 31, 1997 and December 31, 1996, $46,000 was outstanding under the program and is included in stockholder equity.

Certain equipment receivables have been sold under financing agreements with third-party lending institutions whereby the Company is potentially subject to recourse. At December 31, 1997, $1,973,000 is outstanding under these arrangements and management has determined no reserve is required.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for 1997 and 1996 is presented below. Seasonal influences affect the Company's sales and profits with peak business occurring in May through August. (In thousands, except per share data).

                                                      1997                                               1996
                                ----------------------------------------------------------------------------------------------------
                                 FIRST       SECOND        THIRD       FOURTH        FIRST       SECOND       THIRD         FOURTH
                                ----------------------------------------------------------------------------------------------------
Sales......................   $  51,643      $58,433      $52,220      $40,796      $45,046      $50,727      $46,835      $ 40,987
Gross profit ..............      12,736       16,569       15,624        8,223       10,217       14,439       14,166         6,313
Net income ................       3,278        5,190        4,910          222        2,326        4,234        4,185        (1,983)
Earnings per share
  Diluted..................   $     .34      $   .54      $   .51      $   .02      $   .24      $   .44      $   .44      $   (.21)
Average shares
  Diluted .................       9,647        9,654        9,687        9,709        9,638        9,662        9,627         9,590
Dividends per
share......................   $     .10      $   .10      $   .10      $   .10      $   .10      $ .10 $          .10      $    .10
Market Price of
common stock
  High.....................   $      18      $20-7/8      $23-3/4      $23-1/4      $18-1/2      $ 19-7/8     $18-1/4      $ 17-1/2
  Low .....................      15-3/8       13-1/2       18-11/16     19-5/8       15-7/8       17-3/8       13-3/4        14-3/8

The 1996 fourth quarter data includes charges and expenses totaling $3.2 million, pre-tax or $0.21 per share after tax. These charges and expenses, primarily related to inventories and accounts receivable, were in the four companies acquired in 1995 and include litigation expenses of the Rhino International lawsuit described in Footnote 16.

F-16

EXHIBIT 10.13

FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

(WITH LETTER OF CREDIT FACILITY)

This Fourth Amendment to Third Amended And Restated Revolving Credit and Term Loan Agreement (With Letter of Credit Facility) (this "FOURTH AMENDMENT") is entered into effective the 31st day of December, 1997, by and between ALAMO GROUP INC., a Delaware corporation (the "COMPANY"), Alamo Group (USA) Inc., Alamo Group (TX) Inc., Alamo Group (KS) Inc., Alamo Group (IL) Inc., Alamo Sales Corp., Tiger Corporation f/k/a Alamo Group (SD) Inc. , Alamo Group (WA) Inc., M&W Gear Company, Adams Hard-Facing Company, Inc., Herschel-Adams Inc., Alamo Group (IA) Inc. (collectively, the "GUARANTORS") and NATIONSBANK OF TEXAS, N.A. (the "BANK").

R E C I T A L S

A. Company and Bank executed a Third Amended and Restated Revolving Credit and Term Loan Agreement (With Letter of Credit Facility), dated December 29, 1995 (the "THIRD AMENDED LOAN AGREEMENT"), pursuant to which Bank provided to Company a $35,000,000.00 loan facility to be used for general working capital purposes, financing new acquisitions, and to support letters of credit;

B. Among the credit support for this facility are the Guaranty Agreements, dated December 29, 1995 (collectively, the "GUARANTIES"), executed by Alamo Group (USA) Inc., Alamo Group (TX) Inc., Alamo Group (KS) Inc., Alamo Group (IL) Inc., Alamo Sales Corp., Tiger Corporation f/k/a Alamo Group (SD) Inc. , Alamo Group (WA) Inc., M&W Gear Company, Adams Hard-Facing Company, Inc., Herschel-Adams Inc., Alamo Group (IA) Inc. (collectively, the "GUARANTORS");

C. Effective April 10, 1996, Company and Bank executed First Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement (With Letter of Credit Facility) (the "FIRST AMENDMENT"), pursuant to which Bank increased the amount available under this facility to $40,000,000.00, on the terms and conditions stated in the First Amendment.

D. Effective December 23, 1996, Company and Bank executed Second Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement (with Letter of Credit Facility) (the "SECOND AMENDMENT"), pursuant to which Bank agreed to (i) give a one-year extension of the maturity of the term and revolving loans evidenced by this facility; (ii) reduce the interest rate margin on certain LIBOR-priced borrowings under the facility; and (iii) adjust the threshold for application of an unused facility fee and the timing of payment thereof.

E. Effective June 23, 1997, the Company and Bank executed Third Amendment to Third Amended and Restated Revolving Credit and Term Loan Agreement
(with Letter of Credit Facility) (the "THIRD AMENDMENT") pursuant to which (i) the loan and note amounts were increased to $45,000,000.00; (ii) the interest rate margin on certain LIBOR-priced borrowings under the facility was reduced;
(iii) the requirement for a separate Consolidated Tangible Net Worth Retention Percentage of 60% on Tier 1 pricing was eliminated; (iv) the minimum Consolidated Tangible Net Worth amount for calendar year 1996 was established at $80,000,000.00, less adjustments for certain Treasury stock additions; and (v) Bank consented to stock repurchases of up to $17,000,000.00.

F. Company and Bank have agreed to further amend the Third Amended Loan Agreement, including (i) to eliminate the Total Liabilities to Tangible Net Worth covenant, (ii) to replace the Current Maturity Coverage with a Fixed Charge Coverage, (iii) to eliminate all Interest Margin Factors other than Operating Leverage Ratio, (iv) to eliminate Company's ability to convert from revolving credit advances to a term loan, and (v) to extend the maturity of the Loan to December 31, 2002.

G. Although not required to do so for the Guaranties to continue to be fully effective, the Guarantors confirm by their execution of this Fourth Amendment that they acknowledge the amendments effected hereby and that their Guaranties are unaffected.

H. Each capitalized term used in this Fourth Amendment shall have the meaning given to it in the Third Amended Loan Agreement, as previously amended by the First Amendment, Second Amendment and Third Amendment.

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, Company and Bank agree as follows:


A G R E E M E N T:

1. RECITALS. The foregoing recitals are true and correct.

2. AMENDMENTS. The following provisions of the Third Amended Loan Agreement are hereby amended:

(a) The following changes and additions are made to the definitions contained in

SECTION 1.01 of the Third Amended Loan Agreement:
(I) "CAPITAL EXPENDITURES" MEANS ANY EXPENDITURES BY COMPANY AND ITS CONSOLIDATED SUBSIDIARIES FOR AN ASSET THAT WILL BE USED IN YEARS SUBSEQUENT TO THE YEAR IN WHICH THE EXPENDITURE IS MADE OR THAT IS PROPERLY CLASSIFIED IN RELEVANT FINANCIAL STATEMENTS IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS A CAPITAL ASSET.

(II) "INTEREST EXPENSE" MEANS, FOR COMPANY AND ITS CONSOLIDATED SUBSIDIARIES FOR ANY PERIOD, TOTAL INTEREST EXPENSE IN RESPECT OF CONSOLIDATED TOTAL LIABILITIES PAYABLE DURING SUCH PERIOD, INCLUDING, WITHOUT LIMITATION, ALL COMMISSIONS, DISCOUNTS, AND OTHER FEES AND CHARGES WITH RESPECT TO LETTERS OF CREDIT, ALL AS DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.

(III) "CASH TAXES" MEANS FOR COMPANY AND ITS CONSOLIDATED SUBSIDIARIES FOR ANY PERIOD, TAXES PAID OR PAYABLE BY THEM DURING SUCH PERIOD.

(IV) "CURRENT MATURITIES OF LONG-TERM DEBT AND CAPITAL LEASES" MEANS, AS OF ANY DATE, THE AGGREGATE AMOUNT OF ALL REGULARLY SCHEDULED PRINCIPAL PAYMENTS ON ALL OUTSTANDING CONSOLIDATED FUNDED DEBT OF COMPANY AND ITS CONSOLIDATED SUBSIDIARIES, AND ALL PAYMENTS OF RENT ON CAPITAL LEASES, THAT WERE DUE AND PAYABLE FOR THE PREVIOUS TWELVE (12) MONTHS ENDING ON SUCH DATE.

(V) "FIXED CHARGES" MEANS, FOR ANY PERIOD FOR COMPANY AND ITS CONSOLIDATED SUBSIDIARIES, THE SUM OF (A) INTEREST EXPENSE, (B) OPERATING LEASE EXPENSES, (C) RENT EXPENSES, (D) CURRENT MATURITIES OF LONG-TERM DEBT AND CAPITAL LEASES AND (E) CAPITAL EXPENDITURES.

(VI) "FIXED CHARGE COVERAGE RATIO" MEANS THE RATIO OF OPERATING CASH FLOW PLUS RENT EXPENSES PLUS OPERATING LEASE EXPENSES LESS CASH TAXES, TO FIXED CHARGES. (VII) "TERMINATION DATE" SHALL MEAN THE EARLIEST DATE ON WHICH ANY OF THE FOLLOWING EVENTS OCCURS: (A) DECEMBER 31, 2002; (B) THE DATE THAT BANK TERMINATES ITS COMMITMENT TO LEND HEREUNDER, AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT; OR (C) SUCH EARLIER DATE AS MAY BE AGREED UPON IN WRITING BY COMPANY AND BANK.

(b) SECTION 2.04(D) is amended and restated to read as follows:

(D) APPLICABLE MARGIN. AS USED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, "APPLICABLE MARGIN" MEANS, AS TO THE LOANS, A RATE PER ANNUM DETERMINED FOR EACH FISCAL QUARTER DURING COMPANY'S FISCAL YEAR, BEGINNING WITH THE QUARTER ENDING MARCH 31, 1998, BY REFERENCE TO THE OPERATING LEVERAGE RATIO (THE "INTEREST MARGIN FACTOR") AS OF THE END OF THE FISCAL QUARTER (HEREIN CALLED THE "DATE OF DETERMINATION"), AND THE TYPE OF ADVANCE, AS FOLLOWS:

(I) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE OPERATING LEVERAGE RATIO IS EQUAL TO OR LESS THAN 1.75 TO 1.0, THEN THE APPLICABLE MARGIN DURING THE FISCAL QUARTER FOLLOWING THE DATE OF DETERMINATION, EXPRESSED AS A RATE PER ANNUM, SHALL BE (- 1%) FOR FLOATING BASE ADVANCES, AND 5/8 OF 1% FOR EURODOLLAR ADVANCES; AND IF NOT, THEN

(II) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE OPERATING LEVERAGE RATIO IS GREATER THAN 1.75 TO 1.0 AND LESS THAN OR EQUAL TO 2.25 TO 1.0, THEN THE APPLICABLE MARGIN DURING THE FISCAL QUARTER FOLLOWING THE DATE OF DETERMINATION, EXPRESSED AS A RATE PER ANNUM, SHALL BE (-3/4 OF 1%) FOR FLOATING BASE ADVANCES, AND 1% FOR EURODOLLAR ADVANCES; AND IF NOT, THEN.

(III) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE OPERATING LEVERAGE RATIO IS GREATER THAN 2.25 TO 1.0 AND LESS THAN OR EQUAL TO 2.75 TO 1.0, THEN THE APPLICABLE MARGIN DURING THE FISCAL QUARTER FOLLOWING THE DATE OF DETERMINATION, EXPRESSED AS A RATE PER ANNUM, SHALL BE ZERO (0) FOR FLOATING BASE ADVANCES, AND 1-3/8% FOR EURODOLLAR ADVANCES.

THE PRICING PROVIDED IN SUBPARAGRAPH (III) SHALL BE APPLICABLE IF COMPANY FAILS TO SATISFY THE INTEREST MARGIN FACTOR STATED THEREIN, BUT HAS NOT SUFFERED AN EVENT OF DEFAULT (E.G. BY FAILING TO SATISFY EACH OF THE COVENANTS CONTAINED IN SECTIONS 8.15, AND 8.17).

FOR CONVENIENCE OF REFERENCE, SECTION 2.04(D) IS SUMMARIZED IN THE
PRICING GRID ATTACHED AS EXHIBIT "K".

FOR EURODOLLAR ADVANCES, THE APPLICABLE MARGIN FOR A LOAN YEAR APPLIES BOTH TO (I) ADVANCES MADE DURING THE CURRENT LOAN YEAR AND (II) ADVANCES OUTSTANDING DURING THE CURRENT LOAN YEAR THAT WERE MADE DURING A PRIOR LOAN YEAR.

If the interest rate changes hereunder because of a change in the Applicable Margin, interest shall accrue at the changed rate beginning the first day of the month after the earlier of the date on which the Company provides, or by which it was required to provide, pursuant to SECTION 8.01(D) of the Third Amended Loan Agreement, the financial information necessary to determine the Applicable Margin.

The foregoing change reflects that references to "Current Maturity Coverage Ratio," "Leverage Ratio" and "Consolidated Net Worth Retention Percentage" have been eliminated as Interest Margin Factors. The same adjustments shall be considered to have been made to the Pricing Grid attached to the Third Amended Loan Agreement as EXHIBIT "K."

(c) ARTICLE 3 of the Third Amended Loan Agreement is hereby deleted, thereby eliminating Company's option to convert any portion of the Revolving Credit Loan to a Term Loan. All portions of the Third Amended Loan Agreement shall be deemed hereafter to be construed consistently with this modification.

(d) SECTION 8.14 (Minimum Current Maturity Coverage Ratio) and

SECTION 8.16 (Maximum Leverage Ratio) are hereby deleted.

(e) A new SECTION 8.14 is hereby added to read as follows:

"8.14 MINIMUM FIXED CHARGE COVERAGE RATIO. THE COMPANY SHALL MAINTAIN A MINIMUM FIXED CHARGE COVERAGE RATIO OF (I) FOR THE PERIOD BEGINNING MARCH 31, 1998 AND ENDING DECEMBER 31, 1998, OF AT LEAST 1.25 TO 1.0 AND (II) FOR THE PERIODS BEGINNING WITH THE QUARTER ENDING MARCH 31, 1999, AT LEAST 1.5 TO 1.0. THE FOREGOING COVENANT SHALL BE MET BY THE COMPANY AT THE END OF EACH OF ITS FISCAL QUARTERS USING A ROLLING FOUR QUARTERS OF HISTORICAL OPERATING CASH FLOW AND FIXED CHARGES INFORMATION.

SECTIONS 8.15 (Minimum Consolidated Tangible Net Worth and Minimum Consolidated Tangible Net Worth Retention Percentage), 8.17 (Maximum Operating Leverage Ratio) and 8.18 (ERISA Compliance) shall retain their same numerical designations, and for now there shall be no SECTION 8.16.

3. GUARANTIES. The Guarantors hereby confirm that the Guaranties cover the entire amount of the Loans, as previously increased, are in full force and effect and are in no way diminished or adversely affected by this Fourth Amendment.

4. NO OTHER AMENDMENTS. All other provisions of the Third Amended Loan Agreement, as previously amended by the First Amendment, Second Amendment and Third Amendment, that are not specifically modified or amended by this Fourth Amendment, shall remain in full force and effect.

IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment as of the day and year first above written.


ALAMO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1997, DECEMBER 31, 1996 AND DECEMBER 30, 1995

COMPANY:
ALAMO GROUP INC.                             NATIONSBANK OF TEXAS, N.A.

By: /s/ Robert H. George                     By:/s/ D. Kirk McDonald
    Robert H. George                                 D. Kirk McDonald
    Vice President                                   Senior Vice President

GUARANTORS:

ALAMO GROUP (USA) INC.                       ALAMO GROUP (KS) INC.

By: /s/ Robert H. George                    By:/s/ Robert H. George
    Robert H. George                                 Robert H. George
    Vice President - Administration            Vice President - Administration

ALAMO GROUP (TX) INC.                       ALAMO SALES CORP.

By: /s/ Robert H. George                    By:/s/ Robert H. George
    Robert H. George                                 Robert H. George
    Vice President - Administration            Vice President - Administration

ALAMO GROUP (IL) INC.                       ADAMS HARD-FACING COMPANY, INC.

By: /s/ Robert H. George                   By:/s/ Robert H. George
    Robert H. George                             Robert H. George
    Vice President - Administration             Vice President - Administration

TIGER CORPORATION                           HERSCHEL-ADAMS INC.

By: /s/ Robert H. George                   By:/s/ Robert H. George
    Robert H. George                           Robert H. George
    Vice President - Administration            Vice President - Administration

ALAMO GROUP (WA) INC.                       ALAMO GROUP (IA) INC.

By: /s/ Robert H. George                   By:/s/ Robert H. George
    Robert H. George                           Robert H. George
    Vice President - Administration          Vice President - Administration

M&W GEAR COMPANY

By:/s/ Robert H. George
    Robert H. George

    Vice President - Administration


EXHIBIT 10.14
ALAMO GROUP INC.
INCENTIVE COMPENSATION PLAN

1. PURPOSE AND EFFECTIVE DATE. This Incentive Compensation Plan (the "Plan") has been adopted by the Compensation/Nomination Committee of the Board of Directors of Alamo Group Inc., a Delaware corporation (the "Company"), effective as of December 9, 1997. The purpose of the Plan is to provide objective and subjective incentive compensation benefits to the Chief Executive Officer of the Company, the Chief Operating Officer of the Company and selected other senior executives, senior managers and key employees of the Company and its Affiliates.

2. DEFINITIONS. As used in this Plan document, the following terms have the following meanings:

(a) " Affiliate" means any trade or business (whether or not incorporated) that is controlled by, controlling of or under common control with the Company.

(b) "Board" means the Board of Directors of the Company.

(c) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time.

(d) "Committee" means the Compensation/Nomination Committee of the Board.

(e) "Disability" means a medically determinable physical or mental impairment of a permanent nature which prevents a Participant from performing his customary employment duties.

(f) "EBIT" means the earnings of the Company or any Affiliate or operating unit before the payment of interest and taxes and after the payment of bonuses (other than Objective Bonuses), as determined by the Committee. In determining EBIT, the Committee may make appropriate adjustments to earnings to reflect reversals of reserves, acquisitions and divestitures, gains and losses from the sale of assets and similar nonrecurring items.

(g) "Executive" means a senior executive, senior manager or other key employee of the Company or any Affiliate.

(h) "Fiscal Year" means a fiscal year of the Company.

(i) "Net Income" means the earnings of the Company after the payment of interest, taxes and all bonuses, determined in accordance with generally accepted accounting practices.

(j) "Objective Bonus" means the bonus determined based on the EBIT target established by the Committee for a Fiscal Year. A Participant's target Objective Bonus for a Fiscal Year will equal two-thirds (2/3) of his Target Bonus for such Fiscal Year. A Participant's actual Objective Bonus for a Fiscal Year will equal the portion or multiple, if any, of his target Objective Bonus that is payable under Section 4(a) based on the actual EBIT for such Fiscal Year.

(k) "Participant" means the Chief Executive Officer of the Company, the Chief Operating Officer of the Company and any other Executive who has been selected to participate in the Plan in accordance with Section 3.

(l) "Subjective Bonus" means the bonus determined based on pre-established goals and objectives established by the Committee for a Fiscal Year. A Participant's target Subjective Bonus for a Fiscal Year will equal one-third (1/3) of his Target Bonus for such Fiscal Year. A Participant's actual Subjective Bonus for a Fiscal Year will equal the portion or multiple, if any, of his target Subjective Bonus that is payable under Section 4(b) based on the Participant's rated performance for such Fiscal Year.

(m) "Target Bonus" means the aggregate target bonus established by the Committee with respect to a Participant for a Fiscal Year and expressed as a percentage of the Participant's annual base salary.

3. DESIGNATION OF PARTICIPANTS AND TARGETS.

(a) PARTICIPANTS. The Chief Executive Officer of the Company and the Chief Operating Officer of the Company will be Participants with respect to each Fiscal Year that the Plan is in effect. In addition, the Committee, in its sole discretion, may designate any other Executive as a Participant for a Fiscal Year.

(b) TARGETS. No later than 90 days after the beginning of each Fiscal Year (other than the 1997 Fiscal Year), the Committee will establish with respect to each Participant a Target Bonus, target EBIT (specifying whether such EBIT will be determined based on the earnings of the Company or an Affiliate or operating unit) and all goals and objectives that will be considered in determining the Participant's Subjective Bonus. For the 1997 Fiscal Year, the Committee will establish such targets, goals and objectives as soon as practicable after the adoption of the Plan. In determining target EBIT for a Fiscal Year, the Committee may consider, without limitation, management's projections, the performance of comparable businesses, anticipated market conditions and appropriate goals for both earnings growth and return on capital.

4. DETERMINATION OF BONUSES.

(a) OBJECTIVE BONUS. If the actual EBIT for a Fiscal Year is equal to or greater than the target EBIT, the amount of a Participant's actual Objective Bonus will equal (i) his target Objective Bonus, multiplied by (ii) 100% plus (3 multiplied by the percentage by which actual EBIT exceeds target EBIT).

If the actual EBIT for a Fiscal Year is less than the target EBIT, the amount of a Participant's actual Objective Bonus will equal (i) his target Objective Bonus, multiplied by (ii) 100% minus (5 multiplied by the percentage by which actual EBIT is less than target EBIT).

Notwithstanding the foregoing, (i) a Participant's actual Objective Bonus may not be greater than 175% or less than 0% of his target Objective Bonus and (ii) if the aggregate amount of the actual Objective Bonuses for a Fiscal Year will cause Net Income to be less than 15% of shareholders' equity as of the beginning of such Fiscal Year, then all such Objective Bonuses will be reduced pro rata until Net Income equals 15% of shareholders' equity.

(b) SUBJECTIVE BONUSES. As soon as practicable after the end of each Fiscal Year, the performance of each Participant will be rated based on his achievement of the goals and objectives established by the Committee for such Fiscal Year. The Committee, in its sole discretion, will assign the Participant a rating of from 0% to 100%. In determining this rating, the Committee may consider evaluations of the Participant's performance by all appropriate Company managers, with due consideration to the long-term contributions and abilities of such managers. The amount of the Participant's actual Subjective Bonus will equal his target Subjective Bonus, multiplied by his rating percentage.

Notwithstanding the foregoing, (i) a Participant will not be entitled to a Subjective Bonus for a Fiscal Year if his rating for such Fiscal Year is less than 25% and (ii) no Participants will be entitled to Subjective Bonuses for a Fiscal Year if the actual EBIT of the Company for such Fiscal Year is less than 60% of the target EBIT for such Fiscal Year.

5. VESTING. No Participant will have a vested interest in his Objective Bonus or Subjective Bonus for a Fiscal Year until the date on which such Bonus is paid. If a Participant terminates employment with the Company and all Affiliates for any reason other than death, Disability or retirement prior to the date on which an Objective Bonus or Subjective Bonus is paid, the Participant will forfeit his entire interest in such Bonus.

6. PAYMENT OF BONUSES. A Participant's actual Objective Bonus for a Fiscal Year will be distributed to the Participant (or, in the event of his death, to his estate) in a single lump sum payment, less any withholding required under Section 8, during February of the immediately following year. A Participant's actual Subjective Bonus for a Fiscal Year will be distributed to the Participant (or, in the event of his death, to his estate) in a single lump sum payment, less any withholding required under Section 8, during April of the immediately following year.

7. FUNDING OF BONUSES. The Plan will be unfunded and each Participant will have the status of a general unsecured creditor with respect to the Company's obligation to make payments under this Plan. All Bonuses payable under the Plan will be paid from the Company's general assets, and nothing contained in the Plan will require the Company to set aside or hold in trust any funds for the benefit of a Participant.

8. WITHHOLDING OF TAXES. The Company will withhold from all payments made hereunder any taxes required to be withheld from such payments under any applicable federal, state or local law.

9. ADMINISTRATION OF THE PLAN. The Committee will administer the Plan. The Committee will keep a written record of its action and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee is authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan into effect. The powers and duties of the Committee will include, without limitation, the following: (a) selecting Participants and resolving all questions relating to the eligibility of an Executive to become a Participant; (b) making all determinations relating to Target Bonuses, target and actual EBIT, subjective goals and objectives, and target and actual Objective Bonuses and Subjective Bonuses; (c) authorizing and directing the Company with respect to the payment of Bonuses under the Plan; (d) construing and interpreting the Plan whenever necessary to carry out its intention and purpose and making and publishing such rules for the regulation of the Plan as are not inconsistent with the terms of the Plan; and (e) compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan.

Any action taken or determination made by the Committee will, except as otherwise provided in Section 10 below, be conclusive on all parties. No member of the Committee may vote on any matter relating specifically to such member. In the event that a majority of the members of the Committee will be specifically affected by any action proposed to be taken (as opposed to being affected in the same manner as each other Participant in the Plan), such action will be taken by the Board.

Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan.


10. CLAIMS PROCEDURE.

(a) If a Participant or beneficiary (a "Claimant") does not receive the timely payment of any Bonus which the Claimant believes is due under the Plan, the Claimant may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan must be made in writing and must be signed by the Claimant. Claims will be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." Each claim hereunder will be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.

If the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator will notify the Claimant in writing of the denial of the claim and notify the Claimant of his right to a review of the Claims Coordinator's decision by the Committee. Such notice by the Claims Coordinator will also set forth the specific reason for such denial, the specific provisions of the Plan on which the denial is based, a description of any additional information necessary to perfect the claim with an explanation of the Plan's appeals procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Claimant's claim within 60 days after receipt by the Claims Coordinator, such claim will be deemed to be denied for purposes of the following appeals procedure.

(b) Any Claimant whose claim for benefits is denied in whole or in part may appeal for a review of the decision by the Committee. Such appeal must be made within three months after the Claimant has received actual or constructive notice of the denial as provided above. An appeal must be submitted in writing within such period and must (i) request a review by the Committee of the claim for benefits under the Plan, (ii) set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof, and (iii) set forth any issues or comments which the Claimant deems pertinent to the appeal.

The Committee will act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision will be rendered by the Committee as soon as possible but not later than 120 days after the appeal is received by the Committee. The Committee will make a full and fair review of each appeal and any written materials submitted by the Claimant in connection therewith. On the basis of its review, the Committee will make an independent determination of the Claimant's eligibility for benefits under the Plan. The decision of the Committee on any claim for benefits will be final and conclusive upon all parties thereto. If the Committee denies an appeal in whole or in part, the Committee will give written notice of the decision to the Claimant, which notice will set forth the specific reasons for such denial and which will make specific reference to the pertinent provisions of the Plan on which the Committee's decision is based.


11. MISCELLANEOUS.

(a) Nothing in the Plan will confer upon a Participant the right to continue in the employ of the Company or any Affiliate or will limit or restrict the right of the Company or any Affiliate to terminate the employment of a Participant at any time with or without cause.

(b) No right or benefit under the Plan will be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit will be void. No such right or benefit will in any manner be liable for or subject to the debts, liabilities or torts of a Participant. In addition, none of the rights of a Participant are transferable by inter vivos gift or testamentary disposition.

(c) The Plan may be amended or terminated at any time by written action or resolution of the Board; provided, however, that no such amendment or termination will have the effect of decreasing any Bonus that is already payable to a Participant.

(d) If any Bonus hereunder becomes payable to a Participant determined by the Committee to be under any legal incapacity, payment under this Plan will be made instead to the guardian or legal representative of such person and such payment will constitute a full and complete discharge of all obligations under this Plan to the Participant.

(e) If multiple claims are received by the Committee with respect to any Bonus payable under this Plan, payment by the Committee to such person or persons as the Committee determines to be entitled to receive such payment will constitute a full and complete discharge of all obligations under this Plan with respect to such payment. Bonus payments under this Plan may be suspended by the Committee pending resolution of multiple claims to the satisfaction of the Committee.

(f) If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or invalidated in any way.

(g) Except where the context clearly indicates otherwise, masculine terms will include feminine and neuter terms, and singular terms will include plural terms.

(h) The Plan will be construed and governed in all respects in accordance with the law of the State of Texas.

Executed at Seguin, Texas this ___ day of __________, 1998.

ALAMO GROUP INC.

By: ______________________


EXHIBIT 10.15
ALAMO GROUP INC.

401(K) RESTORATION PLAN

1. PURPOSE AND EFFECTIVE DATE. This 401(k) Restoration Plan (the "Plan") has been adopted by the Compensation/Nomination Committee of the Board of Directors of Alamo Group Inc., a Delaware corporation (the "Company"), effective as of December 9, 1997. The purpose of the Plan is to provide certain supplemental deferred compensation benefits to a select group of management and highly compensated employees of the Company and its Affiliates.

2. DEFINITIONS. As used in this Plan document, the following terms have the following meanings:

(a) "Account" means the record maintained by the Company in accordance with Section 4 for each Participant to determine the value of such Participant's interest in the Plan.

(b) "Affiliate" means any trade or business (whether or not incorporated) that is controlled by, controlling of or under common control with the Company.

(c) "Beneficiary" means the person or entity designated by a Participant as his death beneficiary under the 401(k) Plan.

(d) "Board" means the Board of Directors of the Company.

(e) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time.

(f)"Committee" means the Compensation/Nomination Committee of the Board.

(g) "Compensation" means an Employee's compensation, including salary and bonus, from the Company and all Affiliates for a Plan Year as reported on Form W-2, excluding any amounts attributable to (i) reimbursements and other expense allowances, (ii) fringe benefits including but not limited to employer provided automobiles and automobile allowances, club memberships and taxable life insurance coverage, (iii) moving expenses, (iv) welfare benefits,
(v) taxable income resulting from the receipt, vesting or exercise of stock options, restricted stock and other equity-based benefits and (vi) payments of benefits under this Plan.

(h) "Disability" means a medically determinable physical or mental impairment of a permanent nature which prevents an Employee from performing his customary employment duties.

(i) "Employee" means a management or highly compensated employee of the Company or any Affiliate who is a participant in the 401(k) Plan.

(j) "401(k) Plan" means the Alamo Group (USA) Inc. 401K Retirement and Savings Plan, as amended and in effect from time to time.

(k) "Matching Contributions" mean the employer matching contributions payable with respect to a Plan Year under the 401(k) Plan.

(l) "Participant" means an Employee who has been selected to participate in the Plan in accordance with Section 3.

(m) "Plan Year" means the 12-month period specified as the "Plan Year" in the 401(k) Plan.

3. ELIGIBILITY TO PARTICIPATE. The Committee, in its sole discretion, may designate any Employee as a Participant, and such Employee will begin participating in the Plan as of the date specified by the Committee. Such Employee will remain a Participant for purposes of Sections 4(b) and 4(c) until the date, if any, specified by the Committee and for all other purposes until the date on which he receives and/or forfeits his entire Account balance.

4. PLAN BENEFITS.

(a) ESTABLISHMENT OF ACCOUNTS. The Company, through its accounting records, will establish an Account for each Participant. The Company will clearly segregate each such Account and will maintain a separate and distinct record of the amounts credited to, forfeited under and distributed from the Account.

(b) DETERMINATION OF BENEFITS FOR PLAN YEARS BEGINNING AFTER 1997 AND CREDITING OF SUCH BENEFITS TO PARTICIPANTS' ACCOUNTS. As of the last day of each Plan Year beginning after 1997, the Company will credit to the Account of each Employee who is a Participant for such Plan Year an amount equal to the difference between:

(i)the amount of the Matching Contributions that could have been allocated to the Participant under the 401(k) Plan for such Plan Year, determined based on his total Compensation and without regard to the limitations on contributions and benefits under Sections 401(a)(17), 401(k), 401(m), 402(g) and 415 of the Code; and

(ii) the amount of any Matching Contributions actually allocated to the Participant under the 401(k) Plan for such Plan Year. Such amount will be credited to the Participant's Account as of the last day of such Plan Year.

(c) DETERMINATION OF BENEFITS FOR PLAN YEARS BEGINNING AFTER 1988 AND BEFORE 1998 AND CREDITING OF SUCH BENEFITS TO PARTICIPANTS' ACCOUNTS. As of the last day of each Plan Year beginning after 1988 and before 1998, the Company will credit to the Account of each Employee who is a Participant for such Plan Year an amount equal to the difference between:

(i) the amount of the Matching Contributions that could have been allocated to the Participant under the 401(k) Plan for such Plan Year, determined based on his total Compensation and without regard to the limitations on contributions and benefits under Sections 401(a)(17), 401(k), 401(m), 402(g) and 415 of the Code; and

(ii) the amount of any Matching Contributions actually allocated to the Participant under the 401(k) Plan for such Plan Year. Any such amounts will be credited to the Participant's Account as of the last day of the applicable Plan Year, and each amount so credited will also be credited with interest at the rate of 8% per annum (compounded annually) from such date until December 31, 1997.

5. VESTING. Subject to the rights of general creditors as set forth in
Section 7 and the right of the Company to discontinue the Plan as provided in
Section 11, a Participant's interest in any amounts credited to his Account as of December 31, 1997 will become vested and distributable on March 5, 1998; thereafter, a Participant's interest in any amounts credited to his Account as of the last day of a Plan Year will become vested and distributable on February 15th of the immediately following Plan Year. If a Participant terminates employment with the Company and all Affiliates for any reason other than death, Disability or retirement prior to the date on which his interest in an amount credited to his Account becomes vested, the Participant will forfeit his entire interest in such amount.

6. FORM AND COMMENCEMENT OF BENEFITS. Any vested amounts credited to a Participant's Account on February 15, 1998 will be distributed to the Participant (or, in the event of his death, to his Beneficiary) in a single lump sum payment, less any withholding required under Section 8, as soon as reasonably practicable following such date. Any vested amounts credited to a Participant's Account on any subsequent February 15th will be distributed to the Participant (or, in the event of his death, to his Beneficiary) in a single lump sum payment, less any withholding required under Section 8, as soon as reasonably practicable following such date.

7. FUNDING OF BENEFITS. The Plan will be unfunded and each Participant will have the status of a general unsecured creditor with respect to the Company's obligation to make payments under this Plan. All benefits payable under the Plan will be paid from the Company's general assets, and nothing contained in the Plan will require the Company to set aside or hold in trust any funds for the benefit of a Participant.

8. WITHHOLDING OF TAXES. The Company will withhold from all distributions made hereunder any taxes required to be withheld from such distributions under any applicable federal, state or local law.

9. ADMINISTRATION OF THE PLAN. The Committee will administer the Plan. The Committee will keep a written record of its action and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee is authorized to interpret the Plan, to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan, to make all other determinations necessary or advisable for the administration of the Plan and to correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan into effect. The powers and duties of the Committee will include, without limitation, the following: (a) selecting Participants and resolving all questions relating to the eligibility of an Employee to become a Participant; (b) determining the amount of benefits payable to Participants; (c) authorizing and directing the Company with respect to the payment of benefits under the Plan; (d) construing and interpreting the Plan whenever necessary to carry out its intention and purpose and making and publishing such rules for the regulation of the Plan as are not inconsistent with the terms of the Plan; and (e) compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan.

Any action taken or determination made by the Committee will, except as otherwise provided in Section 10 below, be conclusive on all parties. No member of the Committee may vote on any matter relating specifically to such member. In the event that a majority of the members of the Committee will be specifically affected by any action proposed to be taken (as opposed to being affected in the same manner as each other Participant in the Plan), such action will be taken by the Board.

Notwithstanding the foregoing, the Committee may delegate to one or more persons or entities any or all of the responsibilities, duties or powers of the Committee under this Plan.

10. CLAIMS PROCEDURE.

(a) If a Participant or Beneficiary (a "Claimant") does not receive the timely payment of any benefits which the Claimant believes are due under the Plan, the Claimant may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan must be made in writing and must be signed by the Claimant. Claims will be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." Each claim hereunder will be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.

If the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator will notify the Claimant in writing of the denial of the claim and notify the Claimant of his right to a review of the Claims Coordinator's decision by the Committee. Such notice by the Claims Coordinator will also set forth a description of any additional information necessary to perfect the claim with an explanation of the Plan's appeals procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Claimant's claim within 60 days after receipt by the Claims Coordinator, such claim will be deemed to be denied for purposes of the following appeals procedure.

(b) Any Claimant whose claim for benefits is denied in whole or in part may appeal for a review of the decision by the Committee. Such appeal must be made within three months after the Claimant has received actual or constructive notice of the denial as provided above. An appeal must be submitted in writing within such period and must (i) request a review by the Committee of the claim for benefits under the Plan, (ii) set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof, and (iii) set forth any issues or comments which the Claimant deems pertinent to the appeal.

The Committee will act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision will be rendered by the Committee as soon as possible but not later than 120 days after the appeal is received by the Committee. The Committee will make a full and fair review of each appeal and any written materials submitted by the Claimant in connection therewith. On the basis of its review, the Committee will make an independent determination of the Claimant's eligibility for benefits under the Plan. The decision of the Committee on any claim for benefits will be final and conclusive upon all parties thereto. If the Committee denies an appeal in whole or in part, the Committee will give written notice of the decision to the Claimant, which notice will set forth the specific reasons for such denial and make specific reference to the pertinent provisions of the Plan on which the Committee's decision is based.


11. MISCELLANEOUS.

(a) Nothing in the Plan will confer upon a Participant the right to continue in the employ of the Company or any Affiliate or will limit or restrict the right of the Company or any Affiliate to terminate the employment of a Participant at any time with or without cause.

(b) No right or benefit under the Plan will be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit will be void. No such right or benefit will in any manner be liable for or subject to the debts, liabilities or torts of a Participant. In addition, none of the rights of a Participant are transferable by inter vivos gift or testamentary disposition.

(c) The Plan may be amended or terminated at any time by written action or resolution of the Board; provided, however, that no such amendment or termination will have the effect of decreasing any benefits that a Participant has already accrued under the Plan.

(d) If any benefit payment hereunder becomes payable to a Participant determined by the Committee to be under any legal incapacity, payment under this Plan will be made instead to the guardian or legal representative of such person and such payment will constitute a full and complete discharge of all obligations under this Plan to the Participant.

(e) If multiple claims are received by the Committee with respect to any benefits payable under this Plan, payment by the Committee to such person or persons as the Committee determines to be entitled to receive such payment will constitute a full and complete discharge of all obligations under this Plan with respect to such payment. Benefit payments under this Plan may be suspended by the Committee pending resolution of multiple claims to the satisfaction of the Committee.

(f) If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or invalidated in any way.

(g) Except where the context clearly indicates otherwise, masculine terms will include feminine and neuter terms, and singular terms will include plural terms.

(h) The Plan will be construed and governed in all respects in accordance with the law of the State of Texas.

Executed at Seguin, Texas this ___ day of __________, 1998.

ALAMO GROUP INC.

By: ______________________


EXHIBIT 21.1

SUBSIDIARIES OF ALAMO GROUP INC.

The following table sets forth information concerning significant subsidiaries of the Registrant:

                                                          JURISDICTION

NAME                                                      OF INCORPORATION
----                                                      ----------------
Alamo Group (EUR) Limited                                 United Kingdom
Alamo Group (USA) Inc.                                    Delaware
Herschel-Adams Inc.                                       Nevada
Alamo Group (IL) Inc.                                     Illinois
Alamo Group (KS) Inc.                                     Kansas
Alamo Group (TX) Inc.                                     Nevada
Alamo Group (WA) Inc.                                     Delaware
M&W Gear Company                                          Delaware
Tiger Corporation                                         Nevada
Adams Hard-Facing Company, Inc.                           Oklahoma
Alamo Group (IA) Inc.                                     Nevada
Alamo Group (FR) S.A.                                     France
Bomford Turner Limited                                    United Kingdom
McConnel Limited                                          United Kingdom
NJM Dabekausen Beheer B.V.                                Netherlands
Signalisation Moderne Autoroutiere S.A.                   France
Forges Gorce                                              France


EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-92986) pertaining to the Alamo Group Inc. 1994 Incentive Stock Option Plan of our report dated March 10, 1998, with respect to the consolidated financial statements of Alamo Group Inc. and Subsidiaries included in the Form 10-K for the year ended December 31, 1997.

ERNST & YOUNG LLP

San Antonio, Texas

March 27, 1998


ARTICLE 5
MULTIPLIER: 1,000


PERIOD TYPE YEAR
FISCAL YEAR END DEC 31 1997
PERIOD END DEC 31 1997
CASH 789
SECURITIES 0
RECEIVABLES 42,165
ALLOWANCES 0
INVENTORY 65,752
CURRENT ASSETS 113,146
PP&E 51,693
DEPRECIATION 29,216
TOTAL ASSETS 156,124
CURRENT LIABILITIES 19,876
BONDS 0
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 968
OTHER SE 105,297
TOTAL LIABILITY AND EQUITY 156,124
SALES 203,092
TOTAL REVENUES 203,092
CGS 149,940
TOTAL COSTS 149,940
OTHER EXPENSES 30,295
LOSS PROVISION 0
INTEREST EXPENSE 2,262
INCOME PRETAX 20,595
INCOME TAX 6,995
INCOME CONTINUING 13,600
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 13,600
EPS PRIMARY 1.42
EPS DILUTED 1.41

ARTICLE 5
MULTIPLIER: 1,000


PERIOD TYPE YEAR
FISCAL YEAR END DEC 31 1996
PERIOD END DEC 31 1996
CASH 2,228
SECURITIES 0
RECEIVABLES 43,925
ALLOWANCES 0
INVENTORY 60,171
CURRENT ASSETS 109,857
PP&E 48,932
DEPRECIATION 26,546
TOTAL ASSETS 153,862
CURRENT LIABILITIES 19,752
BONDS 0
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 959
OTHER SE 96,291
TOTAL LIABILITY AND EQUITY 153,862
SALES 183,595
TOTAL REVENUES 183,595
CGS 138,460
TOTAL COSTS 138,460
OTHER EXPENSES 28,782
LOSS PROVISION 0
INTEREST EXPENSE 2,631
INCOME PRETAX 13,722
INCOME TAX 4,960
INCOME CONTINUING 8,762
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 8,762
EPS PRIMARY .91
EPS DILUTED .91