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 October 1, 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 October 1, 1994
Common Stock, $.10 Par Value 6,145,857
<PAGE>
GEHL COMPANY
FORM 10-Q
October 1, 1994
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three- and Nine-Month Periods Ended October 1, 1994
and October 2, 1993 . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at October 1, 1994,
December 31, 1993, and October 2, 1993 . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Nine-Month Periods Ended October 1, 1994 and
October 2, 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 . . . . . 12
SIGNATURES . 13
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET SALES $ 37,592 $ 35,860 $113,750 $103,146
Cost of goods sold 26,335 25,747 79,946 74,438
-------- -------- -------- --------
GROSS PROFIT 11,257 10,113 33,804 28,708
Selling, general and
administrative expenses 7,190 8,118 24,267 23,151
-------- -------- -------- --------
INCOME FROM OPERATIONS 4,067 1,995 9,537 5,557
Interest expense (1,667) (2,048) (5,310) (6,620)
Interest income 470 400 1,327 1,233
Other (expense) income, net (321) 263 (1,437) (82)
--------- -------- --------- -------
INCOME BEFORE INCOME TAXES 2,549 610 4,117 88
Income tax provision 38 13 113 38
-------- -------- --------- -------
NET INCOME $ 2,511 $ 597 $ 4,004 $ 50
======== ======= ======== ========
EARNINGS PER SHARE $ .41 $ .10 $ .65 $ .01
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
October 1, December 31, October 2,
1994 1993 1993
(Unaudited) (Unaudited)
<S>
ASSETS <C> <C> <C>
Cash $ 4,272 $ 1,458 $ 2,633
Accounts receivable-net 78,441 84,969 87,074
Finance contracts receivable-net 4,227 4,223 4,805
Refundable income taxes - - 40
Inventories 19,802 21,633 22,882
Prepaid expenses and other assets 1,871 2,072 824
--------- -------- ---------
Total Current Assets 108,613 114,355 118,258
--------- -------- ---------
Property, plant and equipment-net 20,422 20,088 20,280
Finance contracts receivable-net,
non-current 2,459 2,624 2,821
Other assets 5,790 7,213 6,876
--------- -------- ---------
TOTAL ASSETS $ 137,284 $ 144,280 $ 148,235
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt
obligations $ 1,368 $ 549 $ 76,468
Accounts payable 13,231 15,784 14,730
Accrued liabilities 16,251 13,995 15,867
--------- --------- ---------
Total Current Liabilities $ 30,850 $ 30,328 $ 107,065
--------- --------- ---------
Line of credit facility 42,527 53,979 -
Long-term debt obligations 17,678 18,280 195
Other long-term liabilities 1,147 798 259
Common stock, $.10 par value
25,000,000 shares authorized,
6,145,857, 6,132,443 and 6,098,773
shares outstanding, respectively 614 613 610
Preferred stock, $.10 par value,
2,000,000 shares authorized, no
shares issued - - -
Capital in excess of par 26,002 25,820 25,656
Retained earnings 18,466 14,462 14,450
--------- --------- --------
Total Shareholders' Equity 45,082 40,895 40,716
--------- --------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 137,284 $ 144,280 $ 148,235
========= ========= =========
</TABLE>
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>
Nine Months Ended
October 1, 1994 October 2, 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,004 $ 50
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,853 3,214
Increase in finance contracts receivable (24,477) (28,727)
Cost of sales of finance contracts 663 266
Proceeds from sales of finance contracts 23,082 30,628
Net changes in remaining working capital items 8,353 18,113
Other 179 261
-------- ---------
Net cash provided by operating activities 14,657 23,805
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (1,794) (359)
Other assets 837 (1,435)
--------- ----------
Net cash used for investing activities (957) (1,794)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt obligations 217 (8,161)
Increase in long-term liabilities 349 -
Repayments of credit facility (11,452) (12,852)
--------- ----------
Net cash used for financing activities (10,886) (21,013)
--------- ----------
Net increase in cash 2,814 998
Cash, beginning of period 1,458 1,635
--------- ----------
Cash, end of period $ 4,272 $ 2,633
========== ==========
Supplemental disclosure of cash flow
information:
Cash paid (received) for the following:
Interest $ 4,344 $ 5,518
Income Taxes $ 41 $ (2,538)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 1, 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
and nine month periods ended October 1, 1994 and October 2, 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 nine months ended October 1, 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 income by the weighted
average number of common stock 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 6,170,295 and
6,138,909 for the three months ended October 1, 1994 and October 2, 1993,
respectively, and 6,170,329 and 6,075,020 for the nine months ended October 1,
1994 and October 2, 1993, respectively.
NOTE 3 - INCOME TAXES
The income tax provision is determined by applying an estimated annual
effective income tax rate to 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, tax credits and
utilization of net operating losses.
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):
October 1, December 31,
1994 1993
Raw materials and supplies $ 3,386 $ 3,598
Work-in-process 9,212 10,091
Finished machines and parts 23,195 23,935
--------- --------
Total current cost value 35,793 37,624
Adjustment to LIFO basis (15,991) (15,991)
---------- ---------
$ 19,802 $ 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 October 1, 1994 Compared to Three Months Ended October 2,
1993
Net sales for the third quarter of 1994 of $37.6 million were $1.7 million,
or 5%, higher than the $35.9 million in the comparable period of 1993. Gehl
Agriculture sales decreased to $23.3 million in the third quarter of 1994 from
$24.5 million in the third quarter of 1993, or 5%. While Gehl Agriculture's
retail sales continued to be good in the third quarter of 1994, shipments by
the Company were held below comparable 1993 levels to reduce
dealer inventory levels. Gehl Construction's net sales increased to $14.3
million in the third quarter of 1994 from $11.4 in the third quarter of 1993,
or 26%. The increase resulted from increased shipments due to strong
residential construction and non-residential construction markets.
Gross profit increased $1.1 million, or 11%, during the third quarter of
1994 versus the comparable period of 1993, primarily due to increased sales
volume, a 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 29.9% for the third quarter of 1994 from 28.2% in the comparable
period of 1993. Gross profit as a percent of net sales for Gehl Agriculture
increased to 30.2% in the third quarter of 1994 from 30.0% in the third
quarter of 1993. Gross profit as a percent of net sales for Gehl Construction
increased to 29.5% in the third quarter of 1994 from 24.4% in the third
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 third 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 decreased $928,000, or 11%,
during the third quarter of 1994 versus the comparable period of 1993. The
decease resulted from general cost control with reductions from 1993 third
quarter expense levels associated with compensation, allowance for doubtful
accounts, product liability, warranty and promotional costs. As a percent of
net sales, selling, general and administrative expenses decreased to 19.1%
during the third quarter of 1994 versus 22.6% in the comparable period of
1993.
Income from operations in the third quarter of 1994 was $4.1 million versus
$2.0 million in the third quarter of 1993. The improvement was primarily due
to a reduction in selling, general and administrative expenses, increased
sales volume and the improvement in gross margin from 1993 levels.
Interest expense decreased $381,000, or 19%, to $1.7 million in the third
quarter of 1994 from $2.0 million in the third quarter of 1993. The decrease
was a result of a decrease in average debt outstanding to $65.2 million in the
third quarter of 1994 versus $83.2 million in the third quarter of 1993
offset, in part, by an increase in the average rate of interest paid by the
Company to 10.0% in the third quarter of 1994 from 9.7% in the comparable
period of 1993. The decrease in the average debt outstanding was primarily
the result of reduced accounts receivable and inventory levels. The increased
interest rate is a reflection of a higher bank prime rate, which increased
several times during the first nine months of 1994.
Other (expense) income, net was $321,000 of expense in the third quarter of
1994 versus $263,000 of income in the comparable period of 1993. The change
is primarily the result of two 1993 third quarter non-recurring items: 1) a
gain of $505,000 associated with the Company granting, in exchange for a lump
sum amount, a paid up patent license agreement on one of its products in July,
1993, and 2) a gain of $253,000 on a favorable lawsuit settlement in
September, 1993. Additionally, the costs of selling finance contracts
increased in the third quarter of 1994 due to increases in U.S. Treasury bill
rates used to determine the yield to the purchaser. Partially offsetting the
aforementioned items was Canadian foreign exchange income of $126,000 recorded
in the third quarter of 1994 versus Canadian foreign exchange losses of
$139,000 incurred in the third quarter of 1993.
Under generally accepted accounting principles, the Company was not
required to record a federal income tax provision related to either its 1994
or 1993 third quarter net operating income due to the existence of net
operating loss carryforwards.
Nine Months Ended October 1, 1994 Compared to Nine Months Ended October 2,
1993
Net sales for the first nine months of 1994 of $113.8 million were $10.6
million, or 10%, higher than the $103.2 million in the comparable period of
1993. Gehl Agriculture's net sales increased to $74.4 million in the first
nine months of 1994 from $69.5 million in the first nine months of 1993, or
7%. In general, sales of agricultural equipment in North America benefitted
from improved demand due to factors including generally attractive interest
rates, reasonably good commodity prices in the markets served by the Company
and relatively stable farm income. While Gehl Agriculture's retail sales
continued to be good in the first nine months of 1994, shipments by the
Company of certain products were held below comparable 1993 levels to reduce
dealer inventory levels. Gehl Construction's net sales increased to $39.4
million in the first nine months of 1994 from $33.7 million in the first nine
months of 1993, or 17%. The sales increase was attributable to strong
residential and non-residential construction markets.
Gross profit increased $5.1 million, or 18%, during the first nine months
of 1994 versus the comparable period of 1993, primarily due to the increased
sales volume, changes 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 29.7% for the first nine months of 1994 from 27.8% in the
comparable period of 1993. Gross profit as a percent of net sales for Gehl
Agriculture increased to 30.1% for the first nine months of 1994 from 29.4% in
the comparable period of 1993. The primary reasons for the percentage
improvement was the impact of a change in the mix of products shipped in the
first nine months of 1994 versus products shipped in comparable 1993. Gross
profit as a percent of net sales for Gehl Construction increased to 28.9% in
the first nine months of 1994 from 24.5% in the first nine months 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 sales in the first nine months of 1994 than
in the comparable period of 1993, service parts sales, typically made at
higher gross margin than wholegood sales, constituting a higher portion of
sales in the first nine months of 1994 than in the comparable period of 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 $1,116,000, or 5%,
during the first nine months of 1994 versus the comparable period of 1993.
This increase was due primarily to charges in excess of historic levels
associated with two accruals which totaled $1.3 million. These charges were
for specific product liability exposures identified during the period and for
increased allowances for doubtful accounts relating to a European distributor.
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 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
approximated 21.3% for the first nine months of 1994 versus 22.4% in the
comparable period of 1993.
Income from operations was $9.5 million in the first nine months of 1994
versus $5.6 million in the comparable period of 1993. The improvement was due
primarily to increased sales volume and the improvement in gross margin from
1993 levels.
Interest expense decreased $1.3 million, or 20%, to $5.3 million in the
first nine months of 1994 from $6.6 million in the first nine months of 1993.
The decrease was a result of a reduction in average debt outstanding to $71.9
million in the first nine months of 1994 versus $91.2 million in the
comparable period of 1993. The average rate of interest paid by the Company
was 9.6% in the first nine months of both 1994 and 1993. The decrease in
average debt outstanding was primarily the result of reduced accounts
receivable and inventory levels.
Other (expense) income, net was $1.4 million of expense in the first nine
months of 1994 versus $82,000 of expense in the comparable period of 1993.
The increase in expense is partially due to two 1993 third quarter non-
recurring items: 1) a gain of $505,000 associated with the Company granting,
in exchange for a lump sum amount, a paid-up patent license agreement on one
of its products in July, 1993, and 2) a gain of $253,000 on a favorable
lawsuit settlement in September, 1993. Additionally, a portion of the
increase in expense for the first nine months of 1994 was due to increased
costs of selling finance contracts resulting from increases in the U.S.
Treasury bill rates, which are used to determine the yield to the purchasers,
and due to quarterly revaluations required on previous sales of finance
contracts made under variable interest rate arrangements. Partially
offsetting the aforementioned items was a decrease in Canadian foreign
exchange expense in the first nine months of 1994 to $17,000 from $195,000
recorded in the comparable period of 1993.
Under generally accepted accounting principles, the Company was not
required to record a federal income tax provision related to either its 1994
or 1993 first nine months net operating income, due to the existence of net
operating loss carryforwards.
Financial Condition
The Company's working capital was $77.8 million at October 1, 1994, as
compared to $84.0 million at December 31, 1993, and $11.2 million at October
2, 1993. At October 2, 1993, the Company was required to classify certain
debt as current due to uncertainties at that date associated with the
Company's ability to comply with certain financial covenants; if this debt had
been classified in accordance with its scheduled payment terms, working
capital at October 2, 1993 would have been $76.4 million. Since these
uncertainties no longer exist, the Company's debt at October 1, 1994 and
December 31, 1993, has been classified according to its scheduled repayment
terms.
The Company's third quarter 1994 cash flow provided by operating activities
was $9.1 million versus $11.5 million provided by operating activities in
comparable 1993. Due to dealer inventories being at a more appropriate lower
level in 1994 than in 1993, the decrease in accounts receivable in 1994's
third quarter was less than in the comparable 1993 period, accounting for the
reduction in cash flow provided by operating activities. For the first nine
months of 1994, cash flow provided by operations was $14.7 million versus
$23.8 million in the comparable 1993 period. The reduction in positive cash
flow was due primarily to less cash provided in 1994 by accounts receivable
reductions.
Capital expenditures for property, plant and equipment during the first
nine months of 1994 were approximately $1.8 million, including $900,000 spent
in June 1994 to exercise the Company's option to purchase its previously
leased Yankton, South Dakota manufacturing facility. Outstanding capital
commitments as of October 1, 1994 totaled approximately $212,000. The Company
plans to make approximately $2.7 million in capital expenditures in 1994.
As of October 1, 1994, the weighted average interest rate paid by the
Company on outstanding borrowings under its line of credit facility was 9.4%.
The Company had available unused borrowing capacity of $24.7 million, $14.5
million, and $9.9 million under the line of credit facility at October 1,
1994, December 31, 1993, and October 2, 1993, respectively. At October 1,
1994, December 31, 1993, and October 2, 1993, the borrowings outstanding under
the line of credit facility were $42.5 million; $54.0 million, and $45.0
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 October 1, 1994, Gehl serviced $57.5 million of such contracts, of
which $50.5 million were owned by other parties. The Company believes that it
has sufficient capacity to sell its finance contracts through 1995.
Shareholders' equity at October 1, 1994 was $45.1 million or $4.4 million
higher than the $40.7 million of shareholders' equity at October 2, 1993. The
increase was primarily the result of income earned from October 3, 1993
through October 1, 1994.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
October 1, 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: October 25, 1994 By: /s/ William D. Gehl
William D. Gehl
President and Chief
Executive Officer
Date: October 25, 1994 By: /s/ Kenneth F. Kaplan
Kenneth F. Kaplan
Vice President of Finance
and Treasurer (Chief
Financial and Accounting
Officer)
<PAGE>
GEHL COMPANY
FORM 10-Q
October 1, 1994
EXHIBIT INDEX
Exhibit
Number Document Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Gehl
Company's consolidated balance sheet at October 1, 1994 and consolidated
statements of income for the nine month period ended October 1, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> OCT-1-1994
<CASH> 4272
<SECURITIES> 0
<RECEIVABLES> 82668
<ALLOWANCES> 0<F1>
<INVENTORY> 19802
<CURRENT-ASSETS> 108613
<PP&E> 51178
<DEPRECIATION> 30756
<TOTAL-ASSETS> 137284
<CURRENT-LIABILITIES> 30850
<BONDS> 60205<F2>
<COMMON> 614
0
0
<OTHER-SE> 44468
<TOTAL-LIABILITY-AND-EQUITY> 137284
<SALES> 113750
<TOTAL-REVENUES> 113750
<CGS> 79946
<TOTAL-COSTS> 79946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5310
<INCOME-PRETAX> 4117
<INCOME-TAX> 113
<INCOME-CONTINUING> 4004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4004
<EPS-PRIMARY> .65
<EPS-DILUTED> 0<F3>
<FN>
<F1>Company presents receivables on a net basis in compliance with Article 10 of
Regulation S-X.
<F2>Includes all non-current portion of debt obligations
<F3>Not reported
</FN>
</TABLE>
