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 July 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 July 2, 1994
Common Stock, $.10 Par Value 6,142,691
<PAGE>
GEHL COMPANY
FORM 10-Q
July 2, 1994
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three- and Six-Month Periods Ended July 2, 1994
and July 3, 1993 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at July 2, 1994,
December 31, 1993, and July 3, 1993 . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Six-Month Periods Ended July 2, 1994 and
July 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 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K . . . . . 12
SIGNATURES ................................................... 13
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET SALES $ 41,916 $ 37,569 $ 76,158 $ 67,286
Cost of goods sold 29,062 26,908 53,611 48,691
-------- -------- -------- ---------
GROSS PROFIT 12,854 10,661 22,547 18,595
Selling, general and
administrative expenses 9,143 7,601 17,077 15,033
-------- ------- ------- -------
INCOME FROM OPERATIONS 3,711 3,060 5,470 3,562
Interest expense (1,890) (2,254) (3,643) (4,572)
Interest income 529 420 857 833
Other (expense) income, net (557) (263) (1,116) (345)
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES 1,793 963 1,568 (522)
Income tax provision 38 13 75 25
------ ------- ------ -------
NET INCOME (LOSS) $ 1,755 $ 950 $ 1,493 $ (547)
======= ======= ======= ========
EARNINGS (LOSS) PER SHARE $ .28 $ .16 $ .24 $ (.09)
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
July 2, December 31, July 3,
1994 1993 1993
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash $ 4,566 $ 1,458 $ 3,759
Accounts receivable-net 81,885 84,969 93,310
Finance contracts receivable-net 5,707 4,223 4,997
Refundable income taxes - - 40
Inventories 21,239 21,633 25,981
Prepaid expenses and other assets 1,609 2,072 1,141
-------- ------- --------
Total Current Assets 115,006 114,355 129,228
-------- ------- --------
Property, plant and equipment-net 20,843 20,088 20,859
Finance contracts receivable-net, non-current 3,259 2,624 2,891
Other assets 6,398 7,213 6,656
-------- ------- -------
TOTAL ASSETS $ 145,506 $ 144,280 $ 159,634
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt
obligations $ 1,114 $ 549 $ 88,350
Accounts payable 14,589 15,784 16,089
Accrued liabilities 15,869 13,995 14,600
-------- -------- ---------
Total Current Liabilities 31,572 30,328 119,039
-------- -------- ---------
Line of credit facility 52,300 53,979 -
Long-term debt obligations 18,016 18,280 263
Other long-term liabilities 1,107 798 259
Common stock, $.10 par value
25,000,000 shares authorized, 6,142,691
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 25,942 25,820 25,610
Retained earnings 15,955 14,462 13,853
------- ------- -------
Total Shareholders' Equity 42,511 40,895 40,073
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 145,506 $ 144,280 $ 159,634
========= ========= =========
</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>
Six Months Ended
July 2, July 3,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ 1,493 $ (547)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,898 2,171
Increase in finance contracts receivable (16,785) (17,718)
Cost of sales of finance contracts 389 150
Proceeds from sales of finance contracts 13,727 19,473
Net changes in remaining working capital items 4,620 8,594
Other 183 215
-------- -------
Net cash provided by operating activities 5,525 12,338
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (1,525) (187)
Other assets 177 (964)
------- ------
Net cash used for investing activities (1,348) (1,151)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term debt obligations 301 (6,344)
Increase (decrease) in long-term liabilities 309 -
Repayments of credit facility (1,679) (2,719)
-------- -------
Net cash used for financing activities (1,069) (9,063)
-------- -------
Net increase in cash 3,108 2,124
Cash, beginning of period 1,458 1,635
------- -------
Cash, end of period $ 4,566 $ 3,759
========= =========
Supplemental disclosure of cash flow information:
Cash paid (received) for the following:
Interest $ 2,903 $ 3,796
Income Taxes $ 33 $ (2,596)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 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
and six month periods ended July 2, 1994 and July 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 six months ended July 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 income (loss) 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 6,170,707
and 6,104,175 for the three months ended July 2, 1994 and July 3, 1993,
respectively, and 6,170,346 and 6,038,823 for the six months ended July 2,
1994 and July 3, 1993, respectively.
NOTE 3 - INCOME TAXES
The income tax provision is determined by applying an estimated annual
effective income tax rate to income (loss) 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):
July 2, December 31,
1994 1993
Raw materials and supplies $ 3,488 $ 3,598
Work-in-process 9,268 10,091
Finished machines and parts 24,474 23,935
-------- --------
Total current cost value 37,230 37,624
Adjustment to LIFO basis (15,991) (15,991)
--------- ---------
$ 21,239 $ 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 July 2, 1994 Compared to Three Months Ended July 3, 1993
Net sales for the second quarter of 1994 of $41.9 million were $4.3
million, or 12%, higher than the $37.6 million in the comparable period of
1993. Gehl Agriculture sales increased to $27.4 million in the second
quarter of 1994 from $23.4 million in the second quarter of 1993, or 17%. In
general, sales of agricultural equipment in North America benefitted from
improved demand due to a variety of factors, including a reduced stock of good
used equipment available in the marketplace and more appropriate dealer
inventory levels than a year ago which enabled the Company to ship more
product to its dealers. A substantial portion of the increase in Gehl
Agriculture's sales in the second quarter of 1994 as compared with the 1993
second quarter related to increased shipments of skid loaders, forage
equipment and haytools. Gehl Construction's net sales increased to $14.5
million in the second quarter of 1994 from $14.2 million in the second quarter
of 1993, or 2%.
Gross profit increased $2.2 million, or 21%, during the second 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 30.7% for the second quarter of 1994 from 28.4% in the comparable
period of 1993. Gross profit as a percent of net sales for Gehl Agriculture
increased to 31.2% in the second quarter of 1994 from 30.2% in the second
quarter of 1993. The primary reason for the percentage improvement was the
impact of a change in the mix of products shipped in the second quarter of
1994 versus products shipped in comparable 1993. Gross profit as a percent of
net sales for Gehl Construction increased to 29.7% in the second quarter of
1994 from 25.5% in the second 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
second quarter sales in 1994 than in 1993, service parts sales, typically made
at higher gross margin than wholegood sales, constituting a higher portion of
second 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 $1,542,000, or 20%,
during the second quarter 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 $1.1 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. As a
percent of net sales, selling, general and administrative expenses increased
to 21.8% during the second quarter of 1994 versus 20.2% in the comparable
period of 1993.
Income from operations in the second quarter of 1994 was $3.7 million
versus $3.1 million in the second quarter of 1993. The improvement was due
primarily to increased sales volume and the improvement in gross margin from
1993 levels.
Interest expense decreased $364,000, or 16%, to $1.9 million in the second
quarter of 1994 from $2.3 million in the second quarter of 1993. The decrease
was a result of reductions in average debt outstanding to $76.7 million in the
second quarter of 1994 versus $94.8 million in the second quarter of 1993
offset, in part, by an increase in the average rate of interest paid by the
Company to 9.6% in the second quarter of 1994 from 9.4% 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
average interest rate is a reflection of the higher bank prime rate, which
increased several times during the first half of 1994.
Other (expense) income, net was $557,000 of expense in the second quarter
of 1994 versus $263,000 of expense in the comparable period of 1993. The
increase in expense was due to increased costs of selling finance contracts
resulting from increases in U.S. Treasury bill rates, which are used to
determine the yield to the purchaser, and due to quarterly revaluations
required on previous sales of finance contracts made under variable interest
rate arrangements. Partly offsetting these increased costs was Canadian
foreign exchange income of $7,000 recorded in the second quarter of 1994
versus Canadian foreign exchange losses of $92,000 occurring during the second
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 second quarter net operating income due to the existence of net
operating loss carryforwards.
Six Months Ended July 2, 1994 Compared to Six Months Ended July 3, 1993
Net sales for the first six months of 1994 of $76.2 million were $8.9
million, or 13%, higher than the $67.3 million in the comparable period of
1993. Gehl Agriculture's net sales increased to $51.1 million in the first
six months of 1994 from $45.0 million in the first six months of 1993, or 14%.
In general, sales of agricultural equipment in North America benefitted from
improved demand due to a variety of factors, including a reduced stock of good
used equipment available in the marketplace, more appropriate dealer inventory
levels than a year ago which enabled the Company to ship more product to its
dealers, generally attractive interest rates, and relatively stable farm
income. Specifically, a substantial portion of the increase in Gehl
Agriculture's sales related to increased shipments of skid loaders from the
1993 levels. In addition, net sales for the first six months of 1994 were
positively impacted by an increase in sales of service parts. Gehl
Construction's net sales increased to $25.1 million in the first six months of
1994 from $22.3 million in the first six months of 1993, or 12%. Accounting
for the sales increase were increased shipments of rough terrain telescopic
handlers and domestic shipments of skid loaders which were offset, in part, by
lower shipments of earth moving equipment and paving products. In addition,
Gehl Construction's net sales for the first six months of 1994 were positively
impacted by an increase in service parts sales.
Gross profit increased $4.0 million, or 21%, during the first six 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 29.6% for the first six months of 1994 from 27.6% in the
comparable period of 1993. Gross profit as a percent of net sales for Gehl
Agriculture increased to 30.1% in the first six months of 1994 from 29.1% in
the comparable period of 1993. The primary reason for the percentage
improvement was the impact of a change in the mix of products shipped in the
first six months of 1994 versus products shipped in comparable 1993. Gross
profit as a percent of net sales for Gehl Construction increased to 28.6% in
the first six months of 1994 from 24.6% in the first six 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 six 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 six 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 $2,044,000, or 14%,
during the first six 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 $1.7 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 22.4% for the first six month periods of both 1994 and 1993.
Income from operations was $5.5 million in the first six months of 1994
versus $3.6 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 $929,000, or 20%, to $3.6 million in the first
six months of 1994 from $4.6 million in the first six months of 1993. The
decrease was a result of a reduction in average debt outstanding to $75.7
million in the first six months of 1994 versus $95.5 million in the comparable
period of 1993 combined with a decrease in the average rate of interest paid
by the Company to 9.4% in the first six months of 1994 from 9.5% in the
comparable period of 1993. The decrease in average debt outstanding is
primarily the result of reduced accounts receivable and inventory levels.
Other (expense) income, net was $1,116,000 of expense in the first six
months of 1994 versus $345,000 of expense in the comparable period of 1993.
The increase in expense was due to increased costs of selling finance
contracts resulting from increases in U.S. Treasury bill rates, which are used
to determine the yield to the purchaser, and due to quarterly revaluations
required in previous sales of finance contracts made under variable interest
rate arrangements. The remainder of the increase in other expense, net was
the result of Canadian foreign exchange losses of $143,000 occurring in the
first six months of 1994 versus Canadian foreign exchange losses of $56,000
occurring 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 the net operating
income recorded for the first six months of 1994 nor was the Company permitted
to record a deferred tax benefit related to the net operating loss generated
in the comparable period of 1993.
Financial Condition
The Company's working capital was $83.4 million at July 2, 1994, as
compared to $84.0 million at December 31, 1993, and $10.2 million at July 3,
1993. At July 3, 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 restrictive covenants during 1993; if this debt had
been classified in accordance with its scheduled payment terms, working
capital at July 3, 1993 would have been $88.3 million. Since these
uncertainties no longer exist, the Company's debt at July 2, 1994 and December
31, 1993, has been classified according to its scheduled repayment terms.
The Company's second quarter 1994 cash flow provided by operating
activities was $11.6 million versus $12.2 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 second quarter was slightly less than in the comparable
1993 period, accounting for the reduction in cash flow provided by operating
activities. For the first six months of 1994, cash flow provided by
operations was $5.5 million versus $12.3 million in comparable 1993. The
reduction in positive cash flow was due primarily to less cash provided in
1994 by accounts receivable reductions and the decision to delay the sale of
$4.8 million of finance contracts until July 1994 whereas in 1993 all
available finance contracts were sold at the end of June.
Capital expenditures for property, plant and equipment during the first
six months of 1994 were approximately $1.5 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 July 2, 1994 totaled approximately $92,000. The Company
plans to make a total of approximately $2.9 million in capital expenditures in
1994.
As of July 2, 1994, the weighted average interest rate paid by the Company
on outstanding borrowings under its line of credit facility was 9.1%. The
Company had available unused borrowing capacity of $18.1 million, $14.5
million, and $5.6 million under the line of credit facility at July 2, 1994,
December 31, 1993, and July 3, 1993, respectively. At July 2, 1994, December
31, 1993, and July 3, 1993, the borrowings outstanding under the line of
credit facility were $52.3 million, $54.0 million and $55.2 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 July 2, 1994, Gehl serviced $58.4 million of such contracts, of
which $49.1 million were owned by other parties. The Company believes that it
has sufficient capacity to sell its finance contracts through 1995.
Shareholders' equity at July 2, 1994 was $42.5 million or $2.4 million
higher than the $40.1 million of shareholders' equity at July 3, 1993. This
increase was primarily the result of income earned from July 4, 1993 through
July 2, 1994.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's annual meeting of shareholders held on April 28, 1994,
John W. Findley, John W. Gehl and Arthur W. Nesbitt were elected as directors
of the Company for terms expiring in 1997. The following table sets forth
certain information with respect to the election of directors at the annual
meeting:
Shares Withholding
Name of Nominee Shares Voted For Authority
John W. Findley 5,091,266 230,668
John W. Gehl 5,099,681 222,253
Arthur W. Nesbitt 5,102,765 219,169
The following table sets forth the other directors of the Company whose
terms of office continued after the 1994 annual meeting:
Year in Which
Name of Director Term Expires
Peter A. Fischer 1995
William D. Gehl 1995
Roger E. Secrist 1996
Richard G. Sim 1996
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
July 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: August 1, 1994 By: /s/ William D. Gehl
William D. Gehl
President and Chief
Executive Officer
Date: August 1, 1994 By: /s/ Kenneth F. Kaplan
Kenneth F. Kaplan
Vice President of Finance and
Treasurer (Chief Financial
and Accounting Officer)
