Gehl Reports Second Quarter 2001 Results of $.58 Per Share
WEST BEND, Wis.--July 26, 2001--Gehl Company , a manufacturer of compact construction and agricultural equipment, today reported net income for the second quarter ended June 30, 2001 of $3.2 million, or $0.58 per diluted share, exceeding the Company's revised guidance of $.52 to $.57 per diluted share. Net sales were $77.4 million in the quarter, above guidance of $74.5 to $76.0 million. Second quarter 2001 results compare to net income of $5.1 million, or $0.90 per diluted share, and net sales of $79.1 million for the second quarter of 2000. For the first six months of 2001, Gehl reported net income of $4.2 million and net sales of $141.1 million."As we indicated in late June, second quarter results were clearly impacted by soft economic conditions and related weakness in the construction equipment market, particularly the steep drop in the North American telescopic handler market which is down 27% industry-wide through June - as well as currency trends that are dampening export shipments and a dealer community that continues to manage its inventory levels conservatively," said William D. Gehl, Chairman, President and CEO. "That said, we are pleased that Company-wide North American skid loader shipments in the second quarter increased 4% over the comparable period of 2000, in the face of the overall North American skid loader retail market being down 5% for the same period. Further, we are making significant strides in executing the series of strategic initiatives we identified previously to further enhance shareholder value, including the introduction of several new products in the first half of 2001."
Construction Equipment Sales
Sales of construction equipment in the second quarter of 2001 were $41.3 million, compared with $49.9 million in the second quarter of 2000. Company sales and industry markets continued to be unfavorably affected by the impacts of lower rental rates for compact construction equipment, particularly telescopic handlers - as well as the adverse effects of the weak Euro on export shipments and rental dealers' caution about adding to or replacing fleet units. Offsetting these industry-wide difficult conditions are some early successes for Gehl in selling telescopic handlers through its Mustang distribution channel and the continued favorable market acceptance of the four new skid loader models introduced earlier this year for Gehl and Mustang dealers.
Agricultural Equipment Sales
Gehl reported agricultural equipment sales of $36.1 million in the second quarter of 2001, compared with $29.2 million during the year-ago period. The Company experienced continued success in leveraging its agricultural equipment distribution network for shipments of compact construction equipment, including telescopic handlers, compact excavators and mini-loaders. The Company is encouraged by sales of its recently introduced round baler product line and new Agri-Loader telescopic handler products designed exclusively for the agricultural market. Improved domestic milk prices also contributed to the positive performance of the Company's agricultural equipment business.
Gross Margins and Expenses
For the second quarter of 2001, Gehl's gross margin was 25.4% versus 27.1% for the same period in 2000. Gross margin for construction equipment was 22.4% for the second quarter, compared with 25.2% for the second quarter of 2000. The decrease in construction equipment gross margin during the quarter was the result of competitive market conditions, lower production volumes and a less favorable mix of products. Gross margin for agricultural equipment was 28.9%, compared with 30.2% for the comparable period in 2000.
Operating expense levels in the second quarter of 2001 were $13.4 million, or 17.4% of net sales, compared with $11.4 million, or 14.4% of net sales, in the second quarter of 2000. Gehl continues to invest in revenue-enhancing projects to position the Company for future growth and market share expansion, which include its web-enabled attachment business, CE Attachments, Inc., new product development, implementation of its enterprise resource planning (ERP) system, and the centralization of service parts distribution. Such investments, combined with increased selling-related costs resulting from competitive market conditions, and a lower level of sales, contributed to the Company's increased operating expenses as a percentage of net sales. Lower interest and interest-related costs, such as costs of selling retail finance contracts receivable, due to the overall lower interest rate environment offset, in part, the operating expense increase.
Full Year Outlook
Commenting on the full year outlook, William D. Gehl stated, "We believe that we should be able to meet the lower end of previous guidance for the full year, notwithstanding the continuing soft economic conditions and related weakness in the construction market, particularly the steep drop in the telescopic handler market." The low end of the range for full year 2001 previously provided by the Company in February 2001 was $1.52 per diluted share.
Strategic Initiatives Update
The Company reported solid progress during the second quarter 2001 on the strategic initiatives the Board and management have undertaken to enhance shareholder value, including the expansion and leveraging of the Company's multiple distribution channels, the introduction of significant new products, and continuing research and development on products for the compact construction and agricultural equipment marketplaces.
Gehl reported significant progress in leveraging its existing distribution channels to sell products across the Company's two business segments. The Company added 13 new rural equipment dealers to its distribution network for compact excavators, nearly doubling the number of dealers offering the product, and introduced its mini-loaders to 7 new rural dealers in the second quarter. Gehl also introduced the telescopic handler product, previously only available through Gehl brand construction dealers, to 14 Mustang dealers during the second quarter.
The Company reported shipments of several new key products in the second quarter of 2001, including the Agri-Loader, which the Company shipped to several new rural equipment dealers, bringing the total number of dealers carrying the product to 34 nationwide. Gehl commenced shipments of its new large skid loader to both Gehl and Mustang dealers and began offering the new Personnel Work Platform System feature on all DL Series Dynalift telescopic handlers shipped during the second quarter. Looking ahead, Gehl plans to begin shipments of new forage harvesting equipment for the agricultural market and will introduce new mid-size models of compact excavators and a Net Wrap feature for round balers in late 2001.
On July 13, 2001, the Company officially launched its online attachment distribution company, CE Attachments, which operates as an independent web-enabled wholesale distributor of special purpose attachments used on skid loaders, compact excavators and other types of compact construction equipment. As an independent distributor, CE Attachments will market an extensive range of attachments to fit all major makes and models, including Gehl and Mustang brands. CE Attachments offers a range of strategic e-commerce capabilities including on-line product research, financing and technical support through its website, and will coordinate inventory and shipping from a distribution center located in Owatonna, MN. Initial market reception to CE Attachments has been positive.
Strategic Review Process Update
As announced on May 9, 2001, Gehl is engaged in the process of reviewing its strategic alternatives, including the possible sale of the Company. Various U.S. and international entities have expressed interest in pursuing a business combination transaction or other strategic relationship with the Company. Gehl is continuing the second stage of the review process.
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Second Quarter Ended For the Six Months Ended
(unaudited) (unaudited)
---------------------------- ------------------------
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
------- ------ ------- -----
NET SALES $ 77,363 $ 79,080 $ 141,079 $ 151,134
Cost of goods
sold 57,679 57,684 105,168 110,456
------- ------ ------- -------
GROSS PROFIT 19,684 21,396 35,911 40,678
Selling, general
& administrative
expenses 13,446 11,421 26,198 23,165
------- ------ ------- -------
INCOME FROM
OPERATIONS 6,238 9,975 9,713 17,513
Interest expense (1,146) (1,391) (2,342) (2,264)
Interest income 489 445 1,018 825
Other (expense)
income, net (673) (1,138) (1,904) (1,923)
------- ------ ------ ------
INCOME BEFORE
INCOME TAXES 4,908 7,891 6,485 14,151
Income tax
provision 1,718 2,762 2,270 4,953
------- ------ ------ ------
NET INCOME $ 3,190 $ 5,129 $ 4,215 $ 9,198
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EARNINGS PER SHARE
Diluted $ .58 $ .90 $ .77 $ 1.60
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Weighted average number
of common shares and
common stock
equivalents 5,529 5,685 5,508 5,737
Basic $ .60 $ .93 $ .79 $ 1.65
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Weighted average number
of common shares 5,341 5,520 5,337 5,560
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31, July 1,
2001 2000 2000
(unaudited) (audited) (unaudited)
--------- --------- ---------
ASSETS
Cash $ 4,268 $ 2,590 $ 3,885
Accounts receivable - net 99,169 69,546 86,093
Inventories 37,492 45,598 41,109
Deferred tax assets 8,078 8,078 8,431
Other current assets 9,900 17,185 16,496
--------- --------- ---------
Total current assets 158,907 142,997 156,014
Property, plant
and equipment - net 44,517 46,172 43,090
Intangible assets 12,759 13,086 15,334
Other assets 16,031 20,463 17,566
--------- --------- ---------
TOTAL ASSETS $ 232,214 $ 222,718 $ 232,004
========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Total current liabilities $ 56,227 $ 50,027 $ 56,641
Long-term debt obligations 59,571 60,885 62,233
Deferred income taxes 5,096 5,096 3,949
Other long-term obligations 3,940 3,692 6,017
Total shareholders' equity 107,380 103,018 103,164
--------- --------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 232,214 $ 222,718 $ 232,004
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GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months Ended
(unaudited)
----------------------
June 30, 2001 July 1, 2000
--------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,215 $ 9,198
Adjustments to reconcile net income to
net cash provided by (used for)
operating activities:
Depreciation 2,511 2,482
Amortization 369 438
Proceeds from sales of finance
contracts 57,874 40,656
Increase in finance contracts
receivable (47,980) (49,112)
Cost of sales of finance contracts 2,201 2,117
Net change in remaining working
capital items (16,006) (22,755)
------- -------
Net cash provided by (used for)
operating activities 3,184 (16,976)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment
additions, net (2,100) (8,544)
Other 1,485 284
------ -----
Net cash used for investing activities (615) (8,260)
------ -----
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment of) proceeds from line of
credit facility (1,150) 31,228
Proceeds from issuance of common stock 147 406
Purchase of treasury stock - (3,864)
Other 112 341
------ ------
Net cash (used for) provided by
financing activities (891) 28,111
------ ------
Net increase in cash 1,678 2,875
Cash, beginning of period 2,590 1,010
------ ------
Cash, end of period $ 4,268 $ 3,885
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