Gehl Reports Record Fourth Quarter Sales
March 6, 2007 • Gehl Company, West Bend, Wis., reported record fourth-quarter 2006 sales to complete a record year. Net sales for the fourth quarter, which ended Dec. 31, 2006, were a record $103.6 million, an increase of 1 percent from the 2005 fourth quarter net sales of $102.4 million.
Net sales remained solid in the quarter, despite softening conditions in certain markets and product categories. The North American telehandler markets decreased 11.8 percent during the fourth quarter of 2006 when compared to the same quarter in 2005. During that time, Gehl experienced an increase in telehandler demand of 7.4 percent, demonstrating the continuation of its market share gains.
Full-year 2006 net sales were $486.2 million, an increase of 9 percent from 2005 net sales of $447 million. Strong demand throughout most of the year for its telehandlers and improved product price realization contributed to the company's growth.
Additional fourth quarter results
Income from operations was $7.9 million, or 7.7 percent of net sales, in the fourth quarter, compared to $9.5 million, or 9.2 percent of net sales, in the Q4 2005. Operating expenses were 13.3 percent of net sales in the fourth quarter of 2006, which was up from 10.7 percent in the fourth quarter of 2005. In addition to the current year adjustments, the 2005 fourth quarter was positively impacted by $2.3 million, or 2.2 percent of net sales, as a result of reversing a warranty charge that Gehl had recorded in its second quarter of 2005.
Gross margin improved to 20.9 percent in the fourth quarter of 2006, compared to 19.9 percen tin the fourth quarter of 2005. The increase in gross margin was primarily due to improved product price realization and reduced manufacturing spending. These increases were partially offset by the impact of changes in customer mix and cost increases associated with steel and components.
Net income from continuing operations was $4.9 million, or $0.40 per share, for the fourth quarter of 2006 compared with net income from continuing operations of $5.8 million, or $0.46 per share, for the fourth quarter of 2005.
Full year results
Income from operations was $46.1 million, or 9.5 percent of net sales, in 2006, compared to $38.8 million, or 8.7 percent of net sales, in 2005. Operating expenses as a percent of sales remained flat at 12 percent in 2006, compared to 2005. Gross margin improved to 21.5 percent in 2006, compared to 20.6 percent in 2005. The increases in gross margin was primarily due to improved product price realization and ongoing cost reduction initiatives, which were partially offset by the impact of changes in customer mix and cost increases associated with steel and components.
Net income from continuing operations was $28.1 million, or $2.26 per share, for 2006, compared with net income from continuing operations of $22.1 million, or $2.00 per share, for 2005.
“The employees of Gehl Company pulled together to produce another year of excellent financial results as we recorded record sales, income and earnings per share from continuing operations. We gained market share in our two largest product categories: skid loaders and telehandlers, despite the market for North American skid loaders being down from 2005,” said William D. Gehl, chairman and CEO. “We believe our focus on compact equipment, recent investments in the business and continued focus on cost savings are the right strategies to position the company for the future.”
2007 outlook
As new housing starts in North America declined in the second half of 2006, demand for Gehl's products slowed mid-way through the fourth quarter. As of Feb. 23, 2007, a $125 million backlog decreased 42 percent from the same time last year, but the backlog is up $71 million, or 131 percent, from the Dec. 31, 2006 level. Gehl said it believes additional industry manufacturing capacity and available inventory in the market resulted in customers delaying orders, due to a decrease in lead times.
North American markets are currently forecasted to be down through the first half of 2007 with some recovery anticipated over the second half of the year, Gehl reported last week. Industry forecasts for the first quarter project a reduction in demand between 5 and 30 percent, depending on the product category.
Based on current 2007 market forecasts, Gehl's current backlog position, new product acceptance rate, and targeted market share gains, Gehl expects 2007 net sales to be in the range of $465 million to $95 million. Despite improving gross margin, full-year operating margin is expected to decline slightly, due to incremental operating expense investments in product research and development and information technology projects totaling approximately $4.3 million.
