Gehl Company Reports Record Sales and a 75% increase in Earnings in Second Quarter; Revises 2004 Full Year Outlook
WEST BEND, Wis.--July 28, 2004--Gehl Company , a worldwide distributor and manufacturer of compact construction and agricultural equipment, today reported record net sales of $95.5 million in the quarter ended June 26, 2004, an increase of $26.9 million, or 39%, from second quarter 2003 net sales of $68.6 million. Significantly higher net income for the second quarter ended June 26, 2004, of $3.9 million, or $.69 per diluted share, compared to net income of $2.2 million, or $.42 per diluted share, in the second quarter of 2003, an increase of 75%.For the first six months of 2004, Gehl reported net sales of $180.2 million, compared to $127.1 million in the first half of 2003, an increase of $53.1 million, or 42%. Net income of $6.8 million, or $1.22 per diluted share, in the first six months of 2004 compared to net income of $2.7 million, or $.51 per diluted share, in the first half of 2003, an increase of 148%.
William D. Gehl, Chairman and CEO, said, "We are extremely pleased with our second quarter and first half results. The second quarter shipment level represents the highest quarterly net sales in the Company's history. The strong market acceptance of the new Gehl skid loader models introduced earlier this year, the increasing demand for telescopic handlers by large rental customers and the growing demand for compact track loaders combined to generate significant growth in net sales over last year's second quarter. For the second consecutive quarter, the sales increases were stronger than anticipated, improving our revenue outlook for the remainder of 2004". Mr. Gehl continued, "Though we continue to exert strong control over our cost structure, higher steel prices and availability issues have had a negative impact on margins in the first half of 2004, and these pressures on margins are expected to continue for the balance of the year."
Construction Equipment Sales up 40%
Construction equipment net sales in the second quarter of 2004 were $61.6 million, a 40% increase from second quarter 2003 net sales of $44.1 million. Shipments of skid loaders in the second quarter of 2004 were up significantly from 2003's comparable period due to demand for new Gehl skid loader models introduced in January 2004, as well as increased demand for Mustang brand skid loaders. Telescopic handler shipments increased over 80% during the quarter as demand from larger rental customers continued in the second quarter. Demand for compact track loaders, a product introduced in mid-2002, continued to grow and resulted in 2004 second quarter shipments which were up over 30% from the 2003 level. The Company's European subsidiary, Gehl Europe, also posted strong sales during the quarter.
Agricultural Equipment Sales up 39%
Agricultural equipment net sales in the second quarter of 2004 were $33.9 million, a 39% increase from $24.4 million in the year-ago period. Milk prices paid to dairy farmers in the second quarter of 2004 averaged nearly $17.75 per hundred weight, compared to approximately $9.43 per hundred weight in the comparable period of 2003. The significant increase in milk prices and the generally improved economic environment, compared to the second quarter of 2003, have combined to increase dairy farmers' willingness to purchase new equipment. Skid loader shipments during the second quarter of 2004 were up approximately 50% as demand for the new models of Gehl brand skid loaders introduced in January 2004 remained strong during the quarter. Shipments of agricultural implements increased 20% from the second quarter of 2003 levels.
Gross Margins and Expenses
For the second quarter of 2004, Gehl's gross margin was 19.9%, versus 21.1% during the same period in 2003. Gross margin for the construction equipment segment was 21.3% for the second quarter of 2004, compared with 23.2% in the year-ago period. Gross margin for the agricultural equipment segment was 17.5% for the second quarter of 2004, compared with 17.4% in 2003. The 2004 second quarter gross margin for both segments was adversely impacted by rising costs of steel and other component parts and increased costs of finished goods sourced from overseas due to the weak U.S. dollar versus the Euro and the yen. Gross margin has been, and will likely continue to be, adversely impacted by the steel price situation. The unfavorable impact of these issues on the agricultural segment gross margin was offset by a more favorable mix of products shipped, as well as lower levels of discounts and sales incentives incurred in the quarter. The construction segment gross margin further reflects the unfavorable mix of both product shipments and customers shipped to during the quarter.
Selling, general and administrative expense levels in the second quarter of 2004 were $12.3 million, or 12.9% of net sales, compared to $10.8 million, or 15.8% of net sales, in the second quarter of 2003. The increase in selling, general and administrative expenses is primarily the result of items that vary with sales levels. However, selling, general and administrative expenses as a percentage of net sales improved as the growth in net sales exceeded expense increases.
Higher costs of selling retail finance contracts, resulting from an increasing interest rate environment and a higher level of retail finance contracts being sold during the second quarter of 2004, and foreign exchange transaction expense in the second quarter of 2004 compared to foreign exchange transaction income in the comparable period of 2003, adversely impacted earnings in the 2004 second quarter compared to the 2003 second quarter. This unfavorable impact on earnings was partially offset by lower interest expense, due to lower average outstanding debt and lower average borrowing costs during the respective second quarters.
Full Year Outlook
First half sales were stronger than the Company had originally forecasted and order backlog remains robust, indicating that the Company's markets continue to show signs of strength. Offsetting this positive trend, however, is the continued uncertainty over the magnitude and duration of higher steel prices. If the situation continues as it is today, these increased costs may offset some of the benefits of higher sales. Based on actual results for the year to date, along with the current market outlook, the Company now expects its net sales for the full year 2004 to be in the range of 42% to 45% over 2003 levels. If the Company's sales levels meet projected forecasts, the Company expects to earn in the range of $1.90 to $2.05 per diluted share in 2004, after giving effect to the 961,768 newly issued shares purchased by Manitou in conjunction with a recently announced strategic alliance.
Forward Looking Statements
About Gehl Company
Gehl Company is a manufacturer of compact equipment used worldwide in construction and agricultural markets. Founded in 1859, the Company is headquartered in West Bend, WI, with manufacturing facilities in West Bend, WI; and Madison and Yankton, SD. The Company markets its products under the Gehl (R) and Mustang (R) brand names. Mustang product information is available on the Mustang Manufacturing website (www.mustangmfg.com). CE Attachments, Inc. information is available at (www.ceattach.com). Gehl Company information is available at (www.gehl.com) or contact: Gehl Company, 143 Water Street, West Bend, WI 53095 (telephone: 262-334-9461).
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Second For the Six Months
Quarter Ended Ended
(unaudited) (unaudited)
-------------------- ---------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
----------- ------- ----------- --------
NET SALES $ 95,499 $68,551 $ 180,186 $127,082
Cost of goods sold 76,472 54,085 143,763 100,353
----------- ------- ----------- --------
GROSS PROFIT 19,027 14,466 36,423 26,729
Selling, general and
administrative
expenses 12,278 10,818 25,060 21,852
Restructuring and
other charges - 121 - 281
----------- ------- ----------- --------
Total operating
expenses 12,278 10,939 25,060 22,133
----------- ------- -----------
INCOME FROM OPERATIONS 6,749 3,527 11,363 4,596
Interest expense (656) (984) (1,244) (1,883)
Interest income 474 528 900 1,031
Other (expense)
income, net (721) 275 (838) 384
----------- ------- ----------- --------
INCOME BEFORE INCOME TAXES 5,846 3,346 10,181 4,128
Provision for
income taxes 1,931 1,105 3,361 1,379
----------- ------- ----------- --------
NET INCOME $ 3,915 $ 2,241 $ 6,820 $ 2,749
=========== ======= =========== ========
NET INCOME PER SHARE
Diluted $ 0.69 $ 0.42 $ 1.22 $ 0.51
Weighted average
number of common
shares and common
stock equivalents 5,640 5,351 5,568 5,372
Basic $ 0.72 $ 0.42 $ 1.26 $ 0.51
Weighted average
number of common
shares 5,454 5,346 5,405 5,360
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
June December June
26, 31, 28,
2004 2003 2003
-------- --------- --------
ASSETS
Cash $ 2,597 $ 3,688 $ 4,742
Accounts receivable - net 132,277 92,474 118,098
Finance contracts receivable -
net 9,346 2,546 6,426
Inventories 29,341 31,598 36,550
Deferred income taxes 7,128 7,128 8,469
Prepaid expenses and other
current assets 4,374 4,503 1,877
-------- --------- --------
Total current assets 185,063 141,937 176,162
Property, plant and equipment -
net 33,960 35,316 45,056
Goodwill 11,748 11,748 11,748
Other assets 17,422 14,353 15,037
-------- --------- --------
Total assets $248,193 $ 203,354 $248,003
======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $ 72,602 $ 58,603 $ 64,273
Long-term debt obligations 46,756 26,340 64,426
Other long-term liabilities 20,878 18,669 18,981
Deferred income taxes 1,742 1,742 1,644
Total shareholders' equity 106,215 98,000 98,679
-------- --------- --------
Total liabilities and
shareholders' equity $248,193 $ 203,354 $248,003
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GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
For the Six
Months Ended
------------------
June June
26, 28,
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,820 $ 2,749
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation 2,467 2,550
Amortization 15 13
Gain on sale of property, plant and
equipment (86) -
Cost of sales of finance contracts 296 10
Proceeds from the sales of finance
contracts 57,318 46,979
Increase in finance contracts receivable (66,613) (49,312)
Net change in remaining working capital
items (21,979) (6,668)
-------- --------
Net cash used for operating
activities (21,762) (3,679)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions (1,337) (808)
Proceeds from the sale of property, plant and
equipment 378 -
Other (123) (112)
-------- --------
Net cash used for investing
activities (1,082) (920)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit loans 20,248 8,359
Repayments of other borrowings - net (103) (635)
Proceeds from issuance of common stock 1,608 102
Treasury stock purchases - (728)
-------- --------
Net cash provided by financing
activities 21,753 7,098
Net (decrease) increase in cash (1,091) 2,499
Cash, beginning of period 3,688 2,243
-------- --------
Cash, end of period $ 2,597 $ 4,742
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