Revenues Increase as Second Quarter Results Revealed

August 4, 2004 - Across the board, construction equipment manufacturers and rental companies are showing an increase in second quarter earnings. Impressed with the results so far, many companies are seeing a continued recovery in North America and expect to generate more cash and improve operating efficiencies by the end of the year. United Rentals, Ingersoll-Rand, Genie Industries, Terex Cranes, and Gehl are among the manufacturers showing positive results for the quarter.

United Rentals

In its second quarter financial report, United Rentals, Greenwich , Conn. , showed an increase in equipment rentals, rental equipment sales, and sales of equipment and contractor supplies. Since the second quarter of 2003, an overall revenue increase of 6.6 percent was reported. Total revenue reached $776 million compared to $728.1 million reported this time last year.

Operating income for the second quarter of 2004 was $107.1 million, which is 13.2 percent more than the $94.6 million reported in the second quarter of 2003. Adjusted net income for the second quarter of 2004 was $41.5 million and adjusted diluted earnings was $0.42, which compares to the net income of $23.4 million and diluted earnings per share of $0.25 for the second quarter of 2003. The company reported generally accepted accounting practices, or GAAP, net income of $35 million and GAAP diluted earnings per share of $0.36 after recognizing a $6.5 million charge relating to the debt refinancing completed in the second quarter of 2004.

Rental fleet size, measured by the original equipment cost, was $3.7 billion at the end of the second quarter of 2004. The age of the rental fleet was 39 months. The general rentals segment, which makes up more than 600 types of construction, aerial, industrial, and homeowner equipment, accounted for 92 percent of total revenues, or $709.4 million, in the first half of 2004. This is an increase of 11.9 percent compared to $634.1 million from the second quarter of 2003. Rental rates also increased 7.9 percent, same-store rental revenues went up 9.6 percent, and rental revenues generated by sharing equipment between branches improved 13.2 percent in the second quarter. Segment operating income was $118.3 million, an increase of 33.6 percent compared to $88.5 million for the second quarter of 2003.

Chief Executive Officer Wayland Hicks said the diluted earnings per share this quarter was up 68 percent from last year's second quarter and exceeded the company's expectations. These results reflected the strong operating performance in the general rentals segment and a substantial reduction in interest expense due to recent refinancing. He said the general rentals "performance significantly outpaced our principal end market, private non-residential construction, which was up only slightly during the first five months of 2004."

He continued, "As a result of our positive rental rate trend and lower interest expense, we are raising our full year outlook for diluted earnings per share, excluding charges, to $1.20 from the previous range of $1.00 to $1.10."

Genie Industries, Terex Cranes

Sales for the Terex Aerial Work Platforms group, which includes Genie Industries, Redmond , Wash. , reached $238 million in the second quarter of 2004, an overall increase of $70.2 million since the second quarter of 2003. Backlogs in orders also increased to $916 million, which is up 125 percent from the second quarter of 2003. The company said the growth is from rental customers seeing improvement in their rental and utilization rates.

"Our sales were up meaningfully, compared to the second quarter of 2003," said Bob Wilkerson, president of Terex Aerial Work Platforms. "While cost pressures from many of our suppliers, particularly steel, negatively impacted our gross margin, our operating margin continued its positive trend as favorable volume leverage more than offset increased material costs.

"As we look forward, we expect the favorable performance trend to continue, especially given the increasing order backlog. As our customers continue to demonstrate improved financial performance, we expect many will look to expand their rental fleets to take advantage of the increase in demand for light duty rental equipment. The increase in our current performance continues to be mainly driven by replacement demand, as rental companies have stopped aging their fleets. Additionally, we continue to strengthen our geographic reach, most notably in Europe , where we have seen strengthening product demand in the United Kingdom , France and Germany ."

Net sales in the Terex Cranes group also increased $3.9 million to $276.9 million for the second quarter of 2004, compared to the second quarter of 2003. Despite weak sales in the North American markets, these sales were offset by increased performance in the small all-terrain crane and Italian tower crane businesses

"While North America remains a difficult market, we have made progress with regard to profitability and expect to continue to see modest improvements heading into 2005," said Steve Filipov, president of Terex Cranes. "Our international cranes businesses, most notably Terex-Demag, delivered improved operating margins on reduced net sales, mainly attributed to the lower volume of used crane sales in 2004. The tower crane business, although the smallest crane operating group, produced superb results for the quarter."

Although the North American crane market has seen a downturn in approximately 70 percent of its sales since 2000, Filipov said Terex Cranes will continue to focus on cost containment and positioning its franchise for a recovery in 2005.

Ingersoll-Rand

Ingersoll-Rand Co. Ltd., Hamilton, Bermuda , has announced its second quarter 2004 revenues significantly increased when compared to the second quarter of 2003. The company reported net earnings of $286.2 million, or $1.63 diluted earnings per share, for the quarter. These earnings included $250.4 million from continuing operations and $35.8 million from discontinued operations, such as the sale of its drilling solutions business. Excluding this sale, net income for the second quarter increased 79 percent, compared to $249.9 million net income in the second quarter of 2003.

The Infrastructure Sector, which includes Ingersoll-Rand construction equipment and Bobcat compact equipment, increased approximately 24 percent to $886.5 million, compared to $716.5 million in the second quarter of 2003. Operating margins also increased 15.3 percent.

"Activity in most of IR's major end markets continued to improve during the second quarter of 2004," said Herbert L. Henkel, chairman, president, and chief executive officer. "Second-quarter orders for the total company increased by approximately 16 percent compared to last year's activity. From our recent order pattern, we see a continuing recovery in most North American and European markets and continuing growth in Asia .

"We also expect operating margins to improve from higher volumes and operating efficiencies, and believe we are on track to generate free cash flow from operations in 2004 of approximately $600 million, which is $100 million higher than we had expected at the beginning of the year."

Gehl Co.

Gehl Co., West Bend , Wis. , reported record net sales of $95.5 million for the second quarter of 2004, an increase of $26.9 million, or 39 percent, from $68.6 million net sales for the second quarter of 2003. For the first six months of 2004, Gehl reported net sales of $180.2 million, an increase of $53.1 million, or 42 percent, from the first half of 2003. According to William Gehl, chairman and chief executive officer, said the second quarter was the highest quarterly net sales in the company's history.

Attributed to the increased demand for telescopic handlers by large rental customers, shipments for these machines increased more than 80 percent during the quarter. Overall construction equipment net sales in the second quarter were $61.6 million, a 40 percent increase from the second quarter of 2003. With first half sales stronger than Gehl expected, the company now predicts its net sales for the full year to be 42 to 45 percent more than 2003.

Offsetting this positive trend is the continued uncertainty of the duration of higher steel prices. If the situation continues, the increased costs may offset some of the higher sales benefits.