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 September 30, 1995
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
September 30, 1995
Common Stock, $.10 Par Value 6,210,767
<PAGE>
GEHL COMPANY
FORM 10-Q
September 30, 1995
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three- and Nine-Month Periods Ended September 30, 1995
and October 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at September 30, 1995,
December 31, 1994, and October 1, 1994 . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Nine-Month Periods Ended September 30, 1995 and
October 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 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>
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 Nine Months Ended
Sept. 30, October 1, Sept. 30, October 1,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $ 36,901 $ 37,592 $ 117,899 $ 113,750
Cost of goods sold 26,175 26,335 83,796 79,946
-------- --------- -------- ---------
GROSS PROFIT 10,726 11,257 34,103 33,804
Selling, general and
administrative expenses 7,346 7,190 22,805 24,267
-------- -------- -------- ---------
INCOME FROM OPERATIONS 3,380 4,067 11,298 9,537
Interest expense (1,404) (1,667) (4,592) (5,310)
Interest income 462 470 1,409 1,327
Other (expense) income, net (177) (321) (393) (1,437)
-------- -------- ------- --------
INCOME BEFORE INCOME TAXES 2,261 2,549 7,722 4,117
Income tax provision 25 38 75 113
-------- -------- ------- --------
NET INCOME $ 2,236 $ 2,511 $ 7,647 $ 4,004
====== ======== ======= ========
EARNINGS PER SHARE $ .36 $ .41 $ 1.22 $ .65
</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>
September 30, December 31, October 1,
1995 1994 1994
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C> <C>
Cash $ 4,439 $ 2,570 $ 4,272
Accounts receivable-net 72,138 72,393 78,441
Finance contracts receivable-net 4,711 3,389 4,227
Inventories 22,631 21,452 19,802
Prepaid expenses and other assets 3,853 2,817 1,871
---------- ---------- ----------
107,772 102,621 108,613
Total Current Assets ---------- ---------- ----------
Property, plant and equipment-net 19,979 20,433 20,422
Finance contracts receivable-net, 2,879 2,258 2,459
non-current
Other assets 5,343 5,715 5,790
---------- ---------- ----------
TOTAL ASSETS $ 135,973 $ 131,027 $ 137,284
=========== ========== =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current portion of long-term debt $ 210 $ 180 $ 1,368
obligations
Accounts payable 13,890 14,477 13,231
Accrued liabilities 14,836 14,053 16,251
---------- ---------- ----------
Total Current Liabilities 28,936 28,710 30,850
---------- ---------- ----------
Line of credit facility 42,464 45,879 42,527
Long-term debt obligations 8,851 8,821 17,678
Other long-term liabilities 1,424 1,334 1,147
---------- ---------- ----------
Total Long-Term Liabilities 52,739 56,034 61,352
---------- ---------- ----------
Common stock, $.10 par value
25,000,000 shares authorized, 6,210,767,
6,169,523 and 6,145,857 shares outstanding,
respectively 621 617 614
Preferred stock, $.10 par value,
2,000,000 shares authorized, no
shares issued - - -
Capital in excess of par 26,497 26,133 26,002
Retained earnings 27,180 19,533 18,466
---------- ---------- ----------
Total Shareholders' Equity 54,298 46,283 45,082
---------- ---------- ----------
TOTAL LIABILITIES AND $ 135,973 $ 131,027 $ 137,284
SHAREHOLDERS' EQUITY ========= ========= =========
</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
September 30, October 1,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 7,647 $ 4,004
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,125 2,853
Increase in finance contracts receivable (24,957) (24,477)
Proceeds from sales of finance contracts 22,241 23,082
Cost of sales of finance contracts 418 663
Net changes in remaining working capital (1,836) 8,353
items
Other 137 179
---------- ----------
Net cash provided by operating 5,775 14,657
activities ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, (1,443) (1,794)
net
Other assets 571 837
---------- ----------
Net cash used for investing activities (872) (957)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt obligations 60 217
Increase in long-term liabilities 90 349
Repayments of credit facility (3,415) (11,452)
Proceeds from issuance of common stock 231 -
---------- ----------
Net cash used for financing activities (3,034) (10,886)
---------- ----------
Net increase in cash 1,869 2,814
Cash, beginning of period 2,570 1,458
---------- ----------
Cash, end of period $ 4,439 $ 4,272
======= =======
Supplemental disclosure of cash flow
information:
Cash paid for the following:
Interest $ 4,583 $ 4,344
Income Taxes $ 2,326 $ 41
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(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 September 30, 1995 and October 1, 1994 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 September 30,
1995 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, 1994 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 6,298,163 and
6,170,295 for the three months ended September 30, 1995 and October 1, 1994,
respectively, and 6,252,373 and 6,170,329 for the nine months ended September
30, 1995 and October 1, 1994, 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, permanent book/tax differences, tax credits and 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):
September 30, December 31,
1995 1994
Raw materials and $ 3,711 $ 3,711
supplies
Work-in process 8,527 10,252
Finished machines 27,250 24,346
and parts ---------- ----------
Total current cost 39,488 38,309
value
Adjustment to LIFO (16,857) (16,857)
basis ---------- ----------
$ 22,631 $ 21,452
========== ==========
NOTE 5 - CONTINGENCIES
The Company has received 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 September 30, 1995 Compared to Three Months Ended October
1, 1994
Net sales for the third quarter of 1995 of $36.9 million were $691,000, or
2%, lower than the $37.6 million in the comparable period of 1994. Gehl
Agriculture sales decreased 15% to $19.9 million in the third quarter of 1995
from $23.3 million in the third quarter of 1994. This decrease reflects both
the Company's overall strategy to further reduce equipment inventory at
agricultural dealers and market conditions less favorable than in comparable
1994. Gehl Construction's net sales increased 19% to $17.0 million in the
third quarter of 1995 from $14.3 million in the third quarter of 1994. This
increase resulted from strong demand for the Company's products, primarily
for skid steer loaders, rough-terrain telescoping boom forklifts and
service parts.
Gross profit decreased $531,000, or 5%, during the third quarter of 1995
versus the comparable period of 1994, primarily due to reduced sales, lower
related production volume, and a change in the product mix of shipments.
Gross profit as a percent of net sales decreased to 29.1% for the third
quarter of 1995 from 29.9% in the comparable period of 1994. Gross profit as
a percent of net sales for Gehl Agriculture decreased to 26.6% in the third
quarter of 1995 from 30.2% in the third quarter of 1994. The primary reasons
for the lower percentage were: 1) the impact of a change in the mix of
products shipped in the third quarter of 1995 versus products shipped in
comparable 1994; 2) export sales, typically made at a lower gross margin than
domestic sales, constituting a higher portion of third quarter sales in 1995
than in 1994; and 3) the impact of the lower shipment and related production
levels at the agricultural equipment manufacturing plants resulting in an
increase in unabsorbed overhead. The change in mix included a heavier
emphasis on shipments of certain products where over the past twelve months
vendor cost increases incurred by the Company exceeded the Company's price
increases to its customers. Gross profit as a percent of net sales for Gehl
Construction increased to 32.0% in the third quarter of 1995 from 29.5% in the
third quarter of 1994. The primary reasons for the percentage improvement
were: 1) the impact of a change in the mix of products shipped in the third
quarter of 1995 versus products shipped in comparable 1994; 2) export sales,
typically made at a lower gross margin than domestic sales, constituting a
smaller portion of third quarter sales in 1995 than in 1994; and 3) certain
economies of scale associated with the increased level of production at the
plants manufacturing construction equipment.
Selling, general and administrative expenses increased $156,000, or 2%,
during the third quarter of 1995 versus the comparable period of 1994. As a
percent of net sales, selling, general and administrative expenses increased
to 19.9% during the third quarter of 1995 versus 19.1% in the comparable
period of 1994.
Income from operations in the third quarter of 1995 was $3.4 million versus
$4.1 million in the third quarter of 1994. The decrease was primarily due to
reduced sales volume and the reduction in gross margin from 1994 levels.
Interest expense decreased $263,000, or 16%, to $1.4 million in the third
quarter of 1995 from $1.7 million in the third quarter of 1994. The decrease
was the result of a decrease in average debt outstanding to $56.7 million in
the third quarter of 1995 versus $65.2 million in the third quarter of 1994,
combined with a decrease in the average rate of interest paid by the Company
to 9.7% in the third quarter of 1995 from 10.0% in the comparable period of
1994. The decrease in the average debt outstanding was primarily the result
of cash flow generated from reduced accounts receivable levels and increased
shareholders' equity over the past twelve months. The rate decrease was due
to the impact of a decrease in the mark-up over the prime rate on the
Company's loans under its line of credit facility, which decrease was
effective in October 1994, more than offsetting the increase in the average
prime rate during the third quarter of 1995 versus the comparable period of
1994.
Other expense, net was $177,000 of expense in the third quarter of 1995
versus $321,000 of expense in the comparable period of 1994. The change was
due to a reduction in amortization expense and lower costs associated with
sales of retail paper which were offset, in part, by a $44,000 reduction in
Canadian foreign exchange income in the third quarter of 1995 versus the
comparable period of 1994.
Under generally accepted accounting principles, the Company was not
required to record a federal income tax provision related to either its 1995
or 1994 third quarter pre-tax income due to the existence of net operating
loss carryforwards.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended October 1,
1994
Net sales for the first nine months of 1995 of $117.9 million were $4.1
million, or 4%, higher than the $113.8 million in the comparable period of
1994. Gehl Agriculture's net sales decreased 5% to $70.6 million in the first
nine months of 1995 from $74.4 million in the first nine months of 1994. This
decrease reflects the Company's overall strategy to further reduce equipment
inventory at agricultural dealers and reflects 1995 market conditions less
favorable than in comparable 1994. Gehl Construction's net sales increased
20% to $47.3 million in the first nine months of 1995 from $39.4 million in
the first nine months of 1994. The sales increase was attributable to strong
demand for the Company's products in the residential and non-residential
construction markets.
Gross profit increased $299,000, or 1%, during the first nine months of
1995 versus the comparable period of 1994. Gross profit as a percent of net
sales decreased to 28.9% for the first nine months of 1995 from 29.7% in the
comparable period of 1994. Gross profit as a percent of net sales for Gehl
Agriculture decreased to 26.6% for the first nine months of 1995 from 30.1% in
the comparable period of 1994. The primary reasons for the lower percentage
were: 1) the impact of a change in the mix of products shipped in the first
nine months of 1995 versus products shipped in comparable 1994; and 2) export
sales, typically made at a lower gross margin than domestic sales,
constituting a higher portion of shipments in the first nine months of 1995
than in comparable 1994. The change in mix included a heavier emphasis on
shipments of certain products where over the past twelve months vendor cost
increases incurred by the Company exceeded the Company's price increases to
its customers. Gross profit as a percent of net sales for Gehl Construction
increased to 32.3% in the first nine months of 1995 from 28.9% in the first
nine months of 1994. The primary reasons for the percentage improvement were:
1) the impact of a change in the mix of products shipped in the first nine
months of 1995 versus products shipped in comparable 1994; 2) export sales,
typically made at a lower gross margin than domestic sales, constituting a
smaller portion of the first nine months sales in 1995 than in 1994; 3) the
full impact of lowering the overall cost structure of Gehl Construction as a
result of the first quarter 1994 transfer of paving products production to the
Yankton, South Dakota plant from the Lithonia, Georgia plant, which was closed
in January 1994; and 4) certain economies of scale associated with the
increased level of production at the plants manufacturing construction
equipment.
Selling general and administrative expenses decreased $1,462,000, or 6%,
during the first nine months of 1995 versus the comparable period of 1994.
The decrease related primarily to reductions associated with allowance for
doubtful accounts and product liability costs, offset, in part, by increased
sales promotion costs. As a percent of net sales, selling, general and
administrative expenses decreased to 19.3% for the first nine months of 1995
from 21.3% in the comparable period of 1994.
Income from operations was $11.3 million during the first nine months of
1995 versus $9.5 million in the comparable period of 1994. The improvement
was due primarily to a reduction in selling, general and administrative
expenses from 1994 levels.
Interest expense decreased $718,000, or 14%, to $4.6 million in the first
nine months of 1995 from $5.3 million in the first nine months of 1994. The
decrease was a result of a reduction in average debt outstanding to $59.8
million in the first nine months of 1995 versus $71.9 million in the
comparable period of 1994 offset, in part, by an increase in the average rate
of interest paid by the Company. The average rate of interest paid rose to
10.1% for the first nine months of 1995 from 9.6% in the first nine months of
1994, due to increases in the prime rate which serves as the base for the
Company's interest rate under its line of credit facility. The rate increase
was partially offset by the impact of a decrease in the mark-up over the prime
rate on the Company's loans under its line of credit facility, which decrease
was effective in October 1994.
Other expense, net was $393,000 of expense in the first nine months of
1995 versus $1.4 million of expense in the comparable period of 1994. The
decrease in expense resulted, in part, from the quarterly revaluation of
certain previous sales of finance contracts made under variable interest rate
arrangements. Revaluations performed at the end of each quarter of 1995
resulted in $73,000 of income in 1995 due to lower U.S. Treasury bill rates
than at December 31, 1994. The quarterly revaluations performed during the
first nine months of 1994 had resulted in $401,000 of expense. The decrease
in other expense, net was also the result of a $244,000 reduction in costs of
selling finance contracts. The remainder of the decrease in other expense,
net was the result of Canadian foreign exchange income of $121,000 recorded in
the first nine months of 1995 versus Canadian foreign exchange losses of
$17,000 occurring in the comparable period of 1994, and a reduction in
amortization expense versus the comparable period of 1994.
Under generally accepted accounting principles, the Company was not
required to record a federal income tax provision related to the pre-tax
income recorded in the first nine months of either 1995 or 1994 due to the
existence of net operating loss carryforwards.
Financial Condition
The Company's working capital was $78.8 million at September 30, 1995, as
compared to $73.9 million at December 31, 1994, and $77.8 million at October
1, 1994. The Company's cash flow provided by operating activities in the
first nine months of 1995 was $5.8 million versus $14.7 million provided by
operating activities in comparable 1994. The third quarter 1995 cash flow
provided by operations approximated 1994's third quarter of $9.1 million
provided by operations. The 1995 nine month cash flow decreases from 1994
were due primarily to lower year-to-year reductions of accounts receivable, as
the levels of accounts receivable have been reduced to more appropriate
levels.
Capital expenditures for property, plant and equipment during the first
nine months of 1995 were approximately $1.4 million. Outstanding commitments
as of September 30, 1995 totaled approximately $663,000. The Company expects
to make approximately a total of $3.0 million of capital expenditures in 1995.
As of September 30, 1995, the weighted average interest rate paid by the
Company on outstanding borrowings under its line of credit facility was 9.3%.
The Company had available unused borrowing capacity of $27.2 million, $19.2
million, and $24.7 million under the line of credit facility at September 30,
1995, December 31, 1994, and October 1, 1994, respectively. At September 30,
1995, December 31, 1994, and October 1, 1994, the borrowings outstanding
under the line of credit facility were $42.5 million, $45.9 million, and $42.5
million, respectively. Total long-term debt outstanding was $51.5 million at
September 30, 1995, a $10.1 million, or 16%, reduction from $61.6 million at
October 1, 1994.
The sale of finance contracts is an important component of the Company's
overall liquidity. The Company 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 September 30, 1995, the Company serviced $56.1
million of such contracts, of which $47.9 million were owned by other parties.
The Company believes that it has sufficient capacity to sell its finance
contracts for the foreseeable future.
Shareholders' equity at September 30, 1995 was $54.3 million. This was
$9.2 million higher than the $45.1 million of shareholders' equity at October
1, 1994, due primarily to income earned from October 2, 1994 through September
30, 1995.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule [EDGAR version only]
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
September 30, 1995.
<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 26, 1995 By: /s/ William D. Gehl
William D. Gehl
President and Chief
Executive Officer
Date: October 26, 1995 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
September 30, 1995
EXHIBIT INDEX
Exhibit
Number Document Description
27 Financial Data Schedule [EDGAR version only]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Gehl
Company's consolidated balance sheet at September 30, 1995 and consolidated
statements of income for the nine month period ended September 30, 1995 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-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 4439
<SECURITIES> 0
<RECEIVABLES> 76849
<ALLOWANCES> 0<F1>
<INVENTORY> 22631
<CURRENT-ASSETS> 107772
<PP&E> 52824
<DEPRECIATION> 32845
<TOTAL-ASSETS> 135973
<CURRENT-LIABILITIES> 28936
<BONDS> 51315<F2>
<COMMON> 621
0
0
<OTHER-SE> 53677
<TOTAL-LIABILITY-AND-EQUITY> 135973
<SALES> 117899
<TOTAL-REVENUES> 117899
<CGS> 83796
<TOTAL-COSTS> 83796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4592
<INCOME-PRETAX> 7722
<INCOME-TAX> 75
<INCOME-CONTINUING> 7647
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7647
<EPS-PRIMARY> 1.22
<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>
