SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.............. to ...................
Commission file number 0-18110
GEHL COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0300430
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
143 Water Street, West Bend, WI 53095
(Address of principal executive office) (zip code)
(414) 334-9461
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 2, 1994
Common Stock, $.10 Par Value 6,141,441
<PAGE>
GEHL COMPANY
FORM 10-Q
April 2, 1994
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three-Month Periods Ended April 2, 1994 and
April 3, 1993 3
Condensed Consolidated Balance Sheets at April 2, 1994,
December 31, 1993, and April 3, 1993 4
Condensed Consolidated Statements of Cash Flows for the
Three-Month Periods Ended April 2, 1994 and
April 3, 1993 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8
PART II. - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART I - FINANCIAL INFORMATION
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
Three Months Ended
April 2, April 3,
1994 1993
NET SALES $ 34,242 $ 29,717
Cost of goods sold 24,549 21,783
-------- --------
GROSS PROFIT 9,693 7,934
Selling, general and
administrative expenses 7,934 7,432
-------- -------
INCOME FROM OPERATIONS 1,759 502
Interest expense (1,753) (2,318)
Interest income 328 413
Other (expense) income, net (559) (82)
-------- --------
(LOSS) INCOME BEFORE INCOME TAXES (225) (1,485)
Income tax provision 37 12
-------- --------
NET (LOSS) INCOME $ (262) $ (1,497)
========= =========
(LOSS) EARNINGS PER SHARE $ (.04) $ (.25)
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
April 2, December 31, April 3,
1994 1993 1993
ASSETS (Unaudited) (Unaudited)
Cash $ 2,274 $ 1,458 $ 3,158
Accounts receivable-net 86,992 84,969 101,105
Finance contracts receivable-net 5,671 4,223 4,279
Inventories 24,146 21,633 27,927
Refundable income taxes - - 2,422
Prepaid expenses and other assets 2,050 2,072 1,526
--------- ------- --------
Total Current Assets 121,133 114,355 140,417
--------- ------- --------
Property, plant and equipment-net 19,359 20,088 21,519
Finance contracts receivable-net,
non-current 3,284 2,624 2,552
Other assets 6,941 7,213 6,280
-------- ------- --------
TOTAL ASSETS $ 150,717 $ 144,280 $ 170,768
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt
obligations $ 787 $ 549 $ 99,153
Accounts payable 15,320 15,784 16,875
Accrued liabilities 14,373 13,995 15,070
---------- --------- ---------
Total Current Liabilities 30,480 30,328 131,098
---------- --------- ---------
Line of credit facility 60,749 53,979 -
Long-term debt obligations 17,947 18,280 334
Other long-term liabilities 831 798 259
---------- --------- ---------
Total Long-Term Liabilities 79,527 73,057 593
---------- --------- ---------
Common stock, $.10 par value,
25,000,000 shares authorized,
6,141,441, 6,132,443 and 6,098,355
shares outstanding, respectively 614 613 610
Preferred stock, $.10 par value,
2,000,000 shares authorized, no
shares issued - - -
Capital in excess of par 25,896 25,820 25,564
Retained earnings 14,200 14,462 12,903
-------- ------- -------
Total Shareholders' Equity 40,710 40,895 39,077
-------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 150,717 $ 144,280 $ 170,768
========= ========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
<CAPTION>
Three Months Ended
April 2, April 3,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (262) $ (1,497)
Adjustments to reconcile net (loss)income to net cash
(used for) provided by operating activities:
Depreciation and amortization 957 1,089
Increase in finance contracts receivable (6,136) (6,618)
Cost of sales of finance contracts 67 95
Proceeds from sales of finance contracts 3,763 9,485
Net changes in remaining working capital items (4,570) (2,576)
Other 77 169
-------- ---------
Net cash (used for) provided by operating activities (6,104) 147
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net 52 (55)
Other assets 160 (380)
-------- ---------
Net cash provided by (used for) investing activities 212 (435)
======== =========
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term debt obligations (95) (1,632)
Increase (decrease) in long-term liabilities 33 -
Proceeds from line of credit facility 6,770 3,443
--------- --------
Net cash provided by financing activities 6,708 1,811
--------- --------
Net increase in cash 816 1,523
Cash, beginning of period 1,458 1,635
-------- --------
Cash, end of period $ 2,274 $ 3,158
======== ========
Supplemental disclosure of cash flow information:
Cash paid (received) for the following:
Interest $ 1,390 $ 1,951
Income Taxes $ 39 $ (12)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 2, 1994
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management believes that the
disclosures are adequate to make the information presented not misleading.
In the opinion of management, the information furnished for the three-month
periods ended April 2, 1994 and April 3, 1993 includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation of the results of operations and financial position of the
Company. The results of operations for the three months ended April 2, 1994
are not necessarily indicative of the results to be expected for the entire
year.
It is suggested that these interim financial statements be read in conjunction
with the financial statements and notes thereto, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993 as filed with
the Securities and Exchange Commission.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is computed by dividing net (loss) income by the weighted
average number of common shares and, if applicable, common stock equivalents
which would arise from the exercise of stock options and warrants. The
weighted average number of shares used in the computations was 6,135,067 and
5,979,291 for the three months ended April 2, 1994 and April 3, 1993,
respectively.
NOTE 3 - INCOME TAXES
The income tax provision is determined by applying an estimated annual
effective income tax rate to (loss) income before income taxes. The estimated
annual effective income tax rate is based on the most recent annualized
forecast of pretax income (loss), permanent book/tax differences, and tax
credits.
NOTE 4 - INVENTORIES
If all of the Company's inventories had been valued on a current cost
basis, which approximated FIFO value, estimated inventories by major
classification would have been as follows (in thousands):
April 2, December 31,
1994 1993
Raw materials and supplies $ 3,408 $ 3,598
Work-in-process 10,328 10,091
Finished machines and parts 26,401 23,935
------- -------
Total current cost value 40,137 37,624
Adjustment to LIFO basis (15,991) (15,991)
-------- --------
$24,146 $21,633
======= =======
NOTE 5 - CONTINGENCIES
The Company has received informal notification from the City of West Bend,
Wisconsin that it may have some financial responsibility with respect to the
closure of a landfill site used by the City of West Bend from the mid-1960's
through 1984. The amount of the Company's potential financial obligation, if
any, is not presently determinable. The City of West Bend is currently taking
remedial action with respect to the landfill site.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Results of Operations
Three Months Ended April 2, 1994 Compared to Three Months Ended April 3, 1993
Net sales for the first quarter of 1994 of $34.2 million were $4.5
million, or 15%, higher than the $29.7 million in the comparable period of
1993. Gehl Agriculture sales increased to $23.6 million in the first quarter
of 1994 from $21.6 million in the first quarter of 1993, or 9%. In general,
sales of agricultural equipment in North America benefited from improved
demand due to factors including low stock of good used equipment available in
the marketplace, stable to rising milk prices and low interest rates.
Specifically, a substantial portion of the increase relates to increased
shipments of skid loaders from the 1993 levels. In addition, net sales for
the 1994 first quarter were positively impacted by an increase in shipments of
service parts. Gehl Construction's net sales increased to $10.6 million in
the first quarter of 1994 from $8.1 million in the first quarter of 1993, or
31%, due to improving conditions in the construction sector of the economy.
Increased shipments of rough terrain telescopic handlers and domestic
shipments of skid loaders accounted for the higher net sales.
Gross profit increased $1.8 million, or 22%, during the first quarter of
1994 versus the comparable period of 1993, primarily due to the increased
sales volume, change in the product mix of shipments, and a reduction in the
Company's overall cost structure. Gross profit as a percent of net sales
increased to 28.3% for the first quarter of 1994 from 26.7% in the comparable
period of 1993. Gross profit as a percent of net sales for Gehl Agriculture
increased to 28.9% in the first quarter of 1994 from 28.0% in the first
quarter of 1993. The primary reason for the percentage improvement was the
impact of a change in the mix of products shipped in the first quarter of 1994
versus products shipped in comparable 1993. Gross profit as a percent of net
sales for Gehl Construction increased to 27.0% in the first quarter of 1994
from 23.1% in the first quarter of 1993. The primary reasons for Gehl
Construction's percentage increase include export sales, typically made at a
lower gross margin than domestic sales, constituting a smaller portion of
first quarter sales in 1994 than in 1993, and the impact of lowering the
overall cost structure of Gehl Construction as a result of transferring
production of paving products to the Yankton, South Dakota plant from the
Lithonia, Georgia plant, which was closed in January 1994.
Selling, general and administrative expenses increased $502,000, or 7%,
during the first quarter of 1994 versus the comparable period of 1993. This
increase was due to increased accruals for product liability costs and to
increased allowances for doubtful accounts. A partial offset to the increases
was a reduction in sales promotional expense required to stimulate retail
sales. As a result of improved market conditions and a reduction of older
units in dealers' inventories from 1993 levels, lower promotional expenses
were incurred in support of retail sales activity. As a percent of net sales,
selling, general and administrative expenses decreased to 23.2% during the
first quarter of 1994 versus 25.0% in the comparable period of 1993.
Income from operations in the first quarter of 1994 was $1.8 million
versus $502,000 in the first quarter of 1993. The improvement was due
primarily to increased sales volume and the improvement in gross margin from
1993 levels.
Interest expense decreased $565,000, or 24%, to $1.8 million in the first
quarter of 1994 from $2.3 million in the first quarter of 1993. The decrease
was a result of a reduction in average debt outstanding to $75.7 million in
the first quarter of 1994 versus $96.9 million in the first quarter of 1993
combined with a reduction in the average rate of interest paid by the Company
to 9.1% in the first quarter of 1994 versus 9.5% in the comparable period of
1993. The decrease in the average debt outstanding is primarily the result of
reduced accounts receivable levels.
Other (expense) income, net was $559,000 of expense in the first quarter
of 1994 versus $82,000 of expense in the comparable period of 1993. The
increase resulted, in part, due to required quarterly revaluing of certain
previous sales of retail contracts made under variable interest rate
arrangements. Under these variable interest rate arrangements, the remaining
stream of principal installments is rediscounted using an interest rate based
upon current U. S. Treasury rates. With the increase in U. S. Treasury rates
during the first quarter of 1994, the present value of such principal
installments has been reduced, resulting in additional cost to the Company.
The remainder of the increase in other expense, net is a result of Canadian
foreign exchange losses of $150,000 occurring during the first quarter of 1994
versus Canadian foreign exchange income of $36,000 recorded in the first
quarter of 1993.
Under generally accepted accounting principles, the Company was not
permitted to record a deferred tax benefit related to either its 1994 or 1993
first quarter net operating loss.
Financial Condition
The Company's working capital was $90.7 million at April 2, 1994, as
compared to $84.0 million at December 31, 1993, and $9.3 million at April 3,
1993. The increase since December 31, 1993 results primarily from seasonal
increases in accounts receivable and inventories financed with borrowings
under the Company's line of credit facility. The increase since April 3, 1993
primarily relates to certain debt being classified as current liabilities as
of April 3, 1993 due to uncertainties at that date associated with the
Company's ability to comply with restrictive covenants during 1993; if the
long-term debt had been classified in accordance with its scheduled repayment
terms, working capital at April 3, 1993 would have been $99.1 million. Since
these uncertainties no longer exist, the Company's debt at April 2, 1994 and
December 31, 1993, has been classified according to its scheduled repayment
terms.
The Company's first quarter 1994 cash flow used for operating activities
was $6.1 million versus $147,000 provided by operating activities in
comparable 1993. In the first quarter of 1993 proceeds from sales of finance
contracts were $9.5 million compared with only $3.8 million in 1994. The
Company decided not to make a sale at the end of March 1994 due to sufficient
borrowing availability. A $5 million sale of finance contracts was
subsequently made on April 28, 1994.
Capital expenditures for property, plant and equipment during the first
quarter of 1994 were approximately $70,000. Outstanding capital commitments
as of April 2, 1994 totaled approximately $41,000. The Company plans to make
approximately $2.4 million in capital expenditures in 1994. Included in the
1994 total is $900,000 allocated to the exercise of the Company's option to
purchase its leased Yankton, South Dakota manufacturing facility, which option
to purchase expires on June 30, 1994.
As of April 2, 1994, the weighted average interest rate paid by the
Company on outstanding borrowings under its line of credit facility was 8.0%.
The Company had available unused borrowing capacity of $12.7 million, $14.5
million and $4.2 million under the line of credit facility at April 2, 1994,
December 31, 1993, and April 3, 1993, respectively. At April 2, 1994,
December 31, 1993, and April 3, 1993, the borrowings outstanding under the
line of credit facility were $60.7 million, $54.0 million and $61.3 million,
respectively.
The sale of finance contracts is an important component of the Company's
overall liquidity. Gehl has arrangements with several financial institutions
and financial service companies to sell, with recourse, its finance contracts
receivable. The Company continues to service all contracts whether or not
sold. At April 2, 1994, Gehl serviced $57.6 million of such contracts, of
which $48.2 million were owned by other parties. The Company believes that it
has sufficient capacity to sell its retail finance contracts through 1994.
Shareholders' equity at April 2, 1994 was $40.7 million. This was $1.6
million higher than the $39.1 million of shareholders' equity at April 3,
1993, due primarily to income earned from April 4, 1993 through April 2, 1994.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Second Supplemental Loan Agreement between Pennsylvania Economic
Development Financing Authority and Gehl Company, dated as of
February 1, 1994 [Incorporated by reference to Exhibit 4.10 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1993]
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended April 2, 1994.
<PAGE> SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GEHL COMPANY
Date: May 10, 1994 By: /s/ William D. Gehl
William D. Gehl
President and Chief
Executive Officer
Date: May 10, 1994 By: /s/ Kenneth F. Kaplan
Kenneth F. Kaplan
Vice President of Finance
and Treasurer (Chief Financial
and Accounting Officer)
