GEHL
Gehl Company Tel: 262/334-9461
143 Water Street Fax: 262/334-6603
P.O. Box 179 http://www.gehl.com
West Bend, WI 53095-0179
USA
Contact:
Kenneth Hahn
Chief Financial Officer
262-334-6632
News Release
GEHL REPORTS NET INCOME OF 20 CENTS PER SHARE, BEFORE NON-
RECURRING ITEMS, FOR SECOND QUARTER 2002
WEST BEND, WI, July 25, 2002 - Gehl Company (NASDAQ NM: GEHL), a
manufacturer of light construction and agricultural equipment, today reported
sales of $66.7 million and net income, before non-recurring items, of $1.1
million or 20 cents per share for the second quarter 2002. For the first half of
the year, sales were $126.8 million and net income, before non-recurring items,
was $1.4 million or 25 cents per share.
"While the U.S. economy has showed some signs of improvement,
conditions in our markets continue to be challenging as we expected" said Gehl
Company Chairman, President and CEO William D. Gehl. "Our dealers and customers
are being cautious given the current uncertainties in the economy and the
negative news in the financial and credit markets. Lower commodity prices in the
agricultural markets have also dampened demand. Despite these negatives, Gehl's
and Mustang's solid position in the compact equipment markets has enabled us to
remain profitable."
Net Income was lower than the second quarter of 2001, due primarily to
reduced telescopic handler sales and lower agricultural equipment sales
reflecting the soft industry-wide conditions in these markets.
"On a positive note," said Mr. Gehl, "strong demand for the new compact
tracked loader product introduced in the second quarter, continued increasing
sales of telescopic handlers and compact excavators to Mustang dealers, and
sales from the Company's new attachment business benefited total Company sales."
(MORE)
Gehl Company
Gehl Reports Net Income of 20 Cents per Shares before Non-Recurring Items,
for Second Quarter 2002
July 25, 2002
page 2
"We continue," Mr. Gehl said, "to take aggressive steps to control
costs to improve future performance. We expect to see the full benefits of these
actions once the current tough economic conditions subside and our markets begin
to recover. We continue to make progress with our previously announced plant
rationalization project. We have successfully transferred production of two
models of Mustang skid loaders to our Madison, South Dakota skid loader plant,
with the remaining models expected to be transferred by year-end. As we stated
previously, we have closed our Lebanon, Pennsylvania plant and outsourced the
production of certain products formerly manufactured there. These changes to our
operations will help control costs and better position the Company to
participate in the upturn - when it does emerge and works its way through to our
key market segments."
Net income for the second quarter, ended June 29, 2002, of $1.1
million, or $.20 per diluted share, excluding non-recurring after-tax charges of
$195,000, compared to net income of $3.2 million, or $.58 per diluted share in
the second quarter 2001. Including the effect of non-recurring after-tax charges
of $195,000 related to previously announced restructuring and plant
rationalization initiatives, net income for the second quarter 2002 was
$895,000, or $.16 per diluted share. Second quarter 2001 results included
approximately $119,000 of goodwill amortization expense, or $.02 earnings per
diluted share.
For the first six months of 2002, Gehl reported net income of $1.4
million, or $.25 per diluted share, excluding non-recurring after-tax charges of
$255,000, compared to net income of $4.2 million, or $.77 per diluted share in
the first six months of 2001. Including the effect of non-recurring after-tax
charges of $255,000 related to previously announced restructuring and plant
rationalization initiatives, net income for the first six months of 2002 was
$1.1 million, or $.20 per diluted share. Results for the first six months of
2001 included approximately $238,000 of goodwill amortization expense, or $.04
earnings per diluted share.
(MORE)
Gehl Company
Gehl Reports Net Income of 20 Cents per Shares before Non-Recurring Items,
for Second Quarter 2002
July 25, 2002
page 3
Net sales were $66.7 million in the quarter ended June 29, 2002,
compared to net sales of $73.6 million for the second quarter of 2001. Net sales
for the first six months of 2002 were $126.8 million compared to net sales of
$134.9 million for the first six months of 2001. Effective January 1, 2002, Gehl
Company has accounted for its investment in Gehl GmbH, a German distribution
operation, as a consolidated subsidiary. Excluding the $2.8 million and $4.9
million of net sales included in the second quarter and first six months of
2002, respectively, resulting from the newly consolidated Gehl GmbH, net sales
were $63.9 million for the second quarter of 2002 and $121.9 million for the
first six months of 2002.
CONSTRUCTION EQUIPMENT SALES
Gehl construction equipment segment sales in the second quarter of 2002
were $41.1 million, up 3% compared with $39.9 million in the second quarter of
2001, in spite of challenging industry conditions. Although skid loader sales,
excluding those of Gehl GmbH, declined in the second quarter, the Company
believes it gained market share as its sales during that period declined less,
on a percentage basis, than did overall industry retail demand. The overall
market for telescopic handlers continued to be sluggish. Total Company
construction equipment sales benefited from the introduction of new compact
tracked loaders in the second quarter and contributions from telescopic handlers
and compact excavator models sold through the Mustang distribution channel. In
addition, sales benefited from the Company's new attachment business and
consolidating the results of Gehl GmbH.
AGRICULTURAL EQUIPMENT SALES
Gehl agricultural equipment segment sales in the second quarter of 2002
were $25.6 million, down from $33.7 million in the year-ago period. Milk prices
continued to weaken during the 2002 second quarter and were significantly below
prices in the second quarter of 2001. In addition, drought conditions in certain
regions of the country adversely impacted sales. The introduction of new compact
tracked loaders in the second quarter, increased shipments of compact excavators
to select rural equipment
(MORE)
Gehl Company
Gehl Reports Net Income of 20 Cents per Shares before Non-Recurring Items,
for Second Quarter 2002
July 25, 2002
page 4
dealers, and increased sales from the Company's new
attachment business partially offset reduced agricultural implement and skid
loader shipments in the quarter.
GROSS MARGINS AND OPERATING EXPENSES
For the second quarter of 2002, Gehl's gross margin was 21.3%, versus
21.7% during the same period in 2001. Gross margin for construction equipment
was 20.3% for the second quarter, compared with 19.6% for the second quarter of
2001. The increase in the gross margin for the construction equipment segment
was primarily due to the levels of discounts and sales incentives associated
with the mix of products shipped, and improved manufacturing efficiencies. Gross
margin for the agricultural equipment segment was 23.1%, compared with 24.1% for
the comparable period in 2001. The decrease in agricultural equipment gross
margin was due to continued significant competitive pressure resulting in higher
sales discounts and sales incentives, as well as a less favorable mix of product
shipments.
Selling, general and administrative expense levels in the second
quarter of 2002 were $11.3 million, or 17% of net sales, an increase from $9.7
million (including approximately $119,000 of goodwill amortization) or 13.2% of
net sales, in the second quarter of 2001. The increase in the dollar amount of
expenses is comprised primarily of operating costs associated with Gehl GmbH
which were not reflected in results for the comparable year-ago period; the full
operating impact of the enterprise resource planning ("ERP") system which was
successfully implemented during 2001; and the expenses related to CE Attachments
Inc., the Company's attachment business, which was formally launched in July
2001.
NEW ACCOUNTING PROCEDURES
Effective January 1, 2002, the Company adopted the provisions of
Emerging Issues Task Force ("EITF") 00-25 "Vendor Income Statement
Characterization of Consideration Paid to a Retailer of the Vendor's Products."
As a result of this adoption, the Company now classifies the costs associated
with sales incentives
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Gehl Company
Gehl Reports Net Income of 20 Cents per Shares before Non-Recurring Items,
for Second Quarter 2002
July 25, 2002
page 5
provided to dealers as a reduction of net sales. These costs were previously
included in selling, general and administrative expenses. Net sales and selling,
general and administrative expenses for the second quarter and the first six
months of 2001 have been restated to conform with the current year presentation.
This reclassification had no impact on reported income before income taxes, net
income or income per share amounts.
Effective January 1, 2002, Gehl Company has accounted for its
investment in a German distribution operation, Gehl GmbH, as a consolidated
subsidiary, as a result of its controlling influence on the operation as of such
date.
Effective January 1, 2002, the Company adopted the provisions of
Financial Accounting Standard No. 142 ("FAS 142") "Goodwill and Other Intangible
Assets" which states that goodwill and intangible assets deemed to have
indefinite lives are no longer subject to amortization, but will be tested for
impairment at least annually and written down only in the period in which the
recorded value of such assets exceed the fair value. Upon adoption, Gehl
discontinued the amortization of goodwill. During the first six months of 2002,
Gehl completed the required initial impairment test in accordance with the
provisions of FAS 142 and determined that goodwill is not impaired.
FULL YEAR OUTLOOK
Visibility in the Company's market segments remains low, making it
difficult to predict the specific timing of the anticipated recovery. As such,
and in light of unsettled conditions surrounding the Company's market segments
and the overall U.S. business climate, the Company remains cautious relative to
the second half of 2002. Consequently, the Company now believes its full year
earnings per diluted share will be in the range of $.40 to $.50. This forecast
excludes restructuring expenses that will be incurred in 2002 which are
projected to lower the full-year 2002 earnings per diluted share by $.15 to $.20
for period costs, which are recorded as incurred.
(MORE)
Gehl Company
Gehl Reports Net Income of 20 Cents per Shares before Non-Recurring Items,
for Second Quarter 2002
July 25, 2002
page 6
FORWARD LOOKING STATEMENTS
Gehl Company intends that certain matters discussed in this press
release are "forward-looking statements" intended to qualify for the safe harbor
from liability established by the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact, including
statements regarding the Company's future financial position, business strategy,
targets, projected sales and earnings, and the plans and objectives of
management for future operations, are forward-looking statements. When used in
this press release, words such as the Company "believes," "anticipates,"
"expects" or "estimates" or words of similar meaning are generally intended to
identify forward-looking statements. These forwarding-looking statements are not
guarantees of future performance and are subject to certain risks,
uncertainties, assumptions and other factors, some of which are beyond the
Company's control, that could cause actual results to differ materially from
those anticipated as of the date of this press release. Factors that could cause
such a variance include, but are not limited to, unanticipated changes in
general economic and capital market conditions (including factors that could
affect a general economic recovery), the Company's ability to implement
successfully its strategic initiatives and plant rationalization actions, market
acceptance of newly introduced products, the cyclical nature of the Company's
business, the Company's and its customers' access to credit, competitive
pricing, product initiatives and other actions taken by competitors, disruptions
in production capacity, excess inventory levels, the effect of changes in laws
and regulations (including government subsidies and international trade
regulations), technological difficulties, changes in currency exchange rates,
the Company's ability to secure sources of liquidity necessary to fund its
operations, changes in environmental laws, the impact of any acquisition
effected by the Company, and employee and labor relations. Shareholders,
potential investors, and other readers are urged to consider these factors in
evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements
included in this release are only made as of the date of this release, and the
Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances. In addition, the
Company's expectations for fiscal year 2002 are based in part on certain
assumptions made by the Company, including those relating to commodities prices,
which are strongly affected by weather and other factors and can fluctuate
significantly, housing starts and other construction activities, which are
sensitive to, among other things, interest rates and government spending, and
the performance of the U.S. economy generally. The accuracy of these or other
assumptions could have a material effect on the Company's ability to achieve its
expectations.
(MORE)
Gehl Company
Gehl Reports Net Income of 20 Cents per Shares before Non-Recurring Items,
for Second Quarter 2002
July 25, 2002
page 7
ABOUT GEHL COMPANY
Gehl Company (Nasdaq NM: GEHL) 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; Madison and Yankton, SD; and Owatonna, MN. The Company markets its
products under the Gehl(R)and Mustang(R)brand names. Mustang product information
is available on the Mustang Manufacturing website at 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).
( TABLES TO FOLLOW )
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)
----------------------------------- -----------------------------------
(1) (1)
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------------- -------------- -------------- -------------
NET SALES $ 66,689 $ 73,622 $ 126,757 $ 134,861
Cost of goods sold 52,462 57,679 99,171 105,168
------------- -------------- -------------- -------------
GROSS PROFIT 14,227 15,943 27,586 29,693
Selling, general
and administrative expenses 11,342 9,705 23,263 19,980
Restructuring and other charges 300 - 392 -
------------- -------------- -------------- -------------
Total operating expenses 11,642 9,705 23,655 19,980
INCOME FROM OPERATIONS 2,585 6,238 3,931 9,713
Interest expense (1,166) (1,146) (2,129) (2,342)
Interest income 498 489 980 1,018
Other expense, net (540) (673) (1,053) (1,904)
------------- -------------- -------------- -------------
INCOME BEFORE INCOME TAXES 1,377 4,908 1,729 6,485
Income tax provision 482 1,718 605 2,270
------------- -------------- -------------- -------------
NET INCOME $ 895 $ 3,190 $ 1,124 $ 4,215
============= ============== ============== =============
EARNINGS PER SHARE
Diluted $ 0.16 $ 0.58 $ 0.20 $ 0.77
Weighted average number of common
shares and common stock equivalents 5,513 5,529 5,516 5,508
Basic $ 0.17 $ 0.60 $ 0.21 $ 0.79
Weighted average number of common
shares 5,399 5,341 5,387 5,337
(1) Selling, general and administrative expenses for the quarter and six
months ended June 30, 2001 include $119, or $.02 diluted earnings per
share, and $238, or $.04 diluted earnings per share, respectively, of
goodwill amortization.
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
June 29, 2002 December 31, 2001 June 30, 2001
(unaudited) (audited) (unaudited)
-------------------- -------------------- --------------------
ASSETS
Cash $ 2,855 $ 2,248 $ 4,268
Accounts receivable - net 110,571 90,714 99,169
Finance contracts receivable - net 1,804 7,511 8,603
Inventories 45,714 52,161 37,492
Deferred tax asset 10,171 10,171 8,078
Prepaid expenses and other current assets 1,900 1,119 1,297
-------------------- -------------------- --------------------
Total current assets 173,015 163,924 158,907
Property, plant and equipment - net 47,091 43,431 44,517
Goodwill 12,556 12,248 12,503
Other assets 13,956 17,806 16,287
-------------------- -------------------- --------------------
Total assets $ 246,618 $ 237,409 $ 232,214
==================== ==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $ 56,560 $ 56,466 $ 56,227
Long-term debt obligations 71,530 64,237 59,571
Other long-term obligations 14,650 14,225 3,940
Deferred income taxes 2,460 2,460 5,096
Total shareholders' equity 101,418 100,021 107,380
-------------------- -------------------- --------------------
Total liabilities and shareholders' equity $ 246,618 $ 237,409 $ 232,214
==================== ==================== ====================
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months Ended
(unaudited)
--------------------------------------
June 29, 2002 June 30, 2001
--------------- ---------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,124 $ 4,215
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation 2,129 2,511
Amortization 118 369
Cost of sales of finance contracts 1,198 2,201
Proceeds from the sales of finance contracts 48,143 57,874
Increase in finance contracts receivable (41,252) (47,980)
Net change in remaining working capital items (9,813) (16,006)
-------------- --------------
Net cash provided by operating activities 1,647 3,184
CASH FLOW FROM INVESTING ACTIVITIES:
Property, plant and equipment additions - net (5,073) (2,100)
Other 1,223 1,485
-------------- --------------
Net cash used for investing activities (3,850) (615)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) revolving credit loans 3,590 (1,150)
Proceeds from (repayments of) long-term borrowings (1,775) -
Proceeds from issuance of common stock 532 147
Treasury stock purchases (190) -
Other 653 112
-------------- --------------
Net cash provided by (used for) financing activities 2,810 (891)
Net increase in cash 607 1,678
Cash, beginning of period 2,248 2,590
-------------- --------------
Cash, end of period $ 2,855 $ 4,268
============== ==============