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 June 29, 1996
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 June 29, 1996
Common Stock, $.10 Par Value 6,143,289
<PAGE>
GEHL COMPANY
FORM 10-Q
June 29, 1996
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three- and Six-Month Periods Ended June 29, 1996
and July 1, 1995 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at June 29, 1996,
December 31, 1995, and July 1, 1995 . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Six-Month Periods Ended June 29, 1996 and
July 1, 1995 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 11
Item 6. Exhibits and Reports on Form 8-K . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
<CAPTION>
Three Six
Months Ended Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $ 44,474 $ 42,730 $ 83,639 $ 80,998
Cost of goods sold 31,122 30,033 59,271 57,621
------- -------- -------- --------
GROSS PROFIT 13,352 12,697 24,368 23,377
Selling, general and
administrative expenses 8,608 7,837 16,641 15,459
------- -------- -------- --------
INCOME FROM OPERATIONS 4,744 4,860 7,727 7,918
Interest expense (1,056) (1,672) (2,097) (3,188)
Interest income 399 477 808 947
Other expense, net (409) (42) (461) (216)
--------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 3,678 3,623 5,977 5,461
Income tax provision 745 25 1,148 50
--------- -------- --------- ---------
NET INCOME $ 2,933 $ 3,598 $ 4,829 $ 5,411
========= ======== ========= =========
EARNINGS PER SHARE $ .47 $ .58 $ .78 $ .87
</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>
June 29, December 31, July 1,
1996 1995 1995
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C> <C>
Cash $ 5,255 $ 3,266 $ 5,542
Accounts receivable-net 70,891 69,087 78,373
Finance contracts receivable-net 7,842 4,817 6,229
Inventories 18,791 23,320 21,678
Prepaid expenses and other assets 1,347 1,676 3,541
---------- ---------- ----------
Total Current Assets 104,126 102,166 115,363
---------- ---------- ----------
Property, plant and equipment-net 20,620 20,315 19,877
Finance contracts receivable-net,
non-current 4,604 2,899 3,665
Other assets 8,387 8,118 5,570
---------- ---------- ----------
TOTAL ASSETS $ 137,737 $ 133,498 $ 144,475
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current portion of long-term debt
obligations $ 191 $ 197 $ 173
Accounts payable 13,192 14,083 14,875
Accrued liabilities 17,865 15,281 14,938
---------- --------- ----------
Total Current Liabilities 31,248 29,561 29,986
---------- --------- ----------
Line of credit facility 36,102 37,848 52,529
Long-term debt obligations 8,832 8,818 8,724
Other long-term liabilities 1,574 1,592 1,393
---------- --------- ----------
Total Long-Term Liabilities 46,508 48,258 62,646
---------- --------- ----------
Common stock, $.10 par value,
25,000,000 shares authorized,
6,143,289, 6,216,765 and 6,181,518
shares outstanding, respectively 614 622 618
Preferred stock, $.10 par value,
2,000,000 shares authorized, no
shares issued - - -
Capital in excess of par 26,061 26,580 26,281
Retained earnings 33,306 28,477 24,944
---------- --------- ---------
Total Shareholders' Equity 59,981 55,679 51,843
---------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 137,737 $ 133,498 $ 144,475
========== ========= =========
</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
June 29, July 1,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 4,829 $ 5,411
Adjustments to reconcile net income to
net cash (used for) provided by operating
activities:
Depreciation and amortization 1,346 1,412
Increase in finance contracts receivable (20,038) (17,906)
Proceeds from sales of finance contracts 14,651 13,152
Cost of sales of finance contracts 408 199
Net changes in remaining working capital
items 3,679 (5,660)
Other - 91
--------- --------
Net cash provided by (used for)
operating activities 4,875 (3,301)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions,
net (1,579) (709)
Other assets 670 312
--------- --------
Net cash used for investing activities (909) (397)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term debt
obligations 8 (97)
Increase (decrease) in long-term
liabilities 288 59
(Repayments of) proceeds from credit
facility (1,746) 6,650
Treasury stock repurchase (535) -
Proceeds from issuance of common stock 8 58
--------- --------
Net cash (used for) provided by
financing activities (1,977) 6,670
--------- --------
Net increase in cash 1,989 2,972
Cash, beginning of period 3,266 2,570
---------- --------
Cash, end of period $ 5,255 $ 5,542
========== ========
Supplemental disclosure of cash flow
information:
Cash paid for the following:
Interest $ 2,081 $ 3,059
Income Taxes $ 1,122 $ 1,704
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1996
(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 June 29, 1996 and July 1, 1995 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 June 29, 1996 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, 1995 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 shares 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 6,228,153
and 6,255,959 for the three months ended June 29, 1996 and July 1, 1995,
respectively, and 6,215,599 and 6,229,478 for the six months ended June 29,
1996 and July 1, 1995, 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, 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):
June 29, December 31, July 1,
1996 1995 1995
--------- ------------ ---------
Raw materials and
supplies $ 3,713 $ 4,151 $ 3,516
Work-in-process 7,907 9,893 8,658
Finished machines and
parts 26,044 28,149 26,361
--------- ------------- ---------
Total current cost value 37,664 42,193 38,535
Adjustments to LIFO basis (18,873) (18,873) (16,857)
---------- ------------- ----------
$ 18,791 $ 23,320 $ 21,678
========== ============= ==========
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 Company currently believes that its potential financial
obligation, if any, with respect to this site will not have a material adverse
effect on the Company's results of operations or financial condition. 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 June 29, 1996 Compared to Three Months Ended July 1, 1995
Net sales for the second quarter of 1996 of $44.5 million were 4%
higher than the $42.7 million in the comparable period of 1995. Gehl
Construction's net sales increased 19% to $19.4 million in the second quarter
of 1996 from $16.3 million in the second quarter of 1995. The Gehl
Construction increase resulted from increased demand for the Company's
products, particularly rough-terrain telescopic forklifts and skid steer
loaders. Gehl Agriculture's net sales decreased 5% to $25.1 million in the
second quarter of 1996 from $26.4 million in the second quarter of 1995. The
decrease was due in part to no new product introductions in the second quarter
of 1996, contrasted with the impact on the 1995 second quarter of two
redesigned product lines introduced in early 1995. Reduced shipments of
service parts and certain purchased finished goods also contributed to the
overall Agriculture sales reductions. Partially offsetting the Agricultural
shipment reductions was an increase in shipments of forage harvesters and skid
steer loaders.
Gross profit increased $655,000, or 5%, during the second quarter of
1996 versus the comparable period of 1995, due primarily to increased sales
volume. Gross profit as a percent of net sales increased to 30.0% for the
second quarter of 1996 from 29.7% in the comparable period of 1995. The shift
in product mix of sales to Gehl Construction resulted in the overall Company
increase in gross profit as a percent of net sales. Gross profit as a percent
of net sales for Gehl Construction decreased to 32.3% in the second quarter of
1996 from 32.7% for the second quarter of 1995. Gross profit as a percent of
net sales for Gehl Agriculture increased to 28.3% in the second quarter of
1996 from 27.9% for the second quarter of 1995.
Selling, general and administrative expenses increased $771,000, or
10%, during the second quarter of 1996 versus the comparable period of 1995.
As a percent of sales, selling, general and administrative expenses increased
to 19.4% during the second quarter of 1996 versus 18.3% in the comparable
period of 1995. Greater investment in research and development and increased
selling expenses accounted for the percentage increase.
Income from operations in the second quarter of 1996 of $4.7 million
was 2% lower than the $4.9 million in the second quarter of 1995.
Interest expense decreased $616,000, or 37%, to $1.1 million in the
second quarter of 1996 from $1.7 million in the second quarter of 1995. The
decrease was a result of a reduction in average debt outstanding to $49.9
million in the second quarter of 1996 versus $64.6 million in the second
quarter of 1995, combined with a decrease in the average rate of interest paid
by the Company to 8.3% in the second quarter of 1996 from 10.2% in the
comparable period of 1995. The decrease in the average debt outstanding was
primarily the result of cash flow generated from reduced accounts receivable
and inventory levels and increased shareholders' equity over the past twelve
months. The rate decrease was due to the impact of a reduced interest rate
structure negotiated by the Company in conjunction with the December 1, 1995
amendment to its line of credit facility.
Other expense, net was $409,000 in the second quarter of 1996 versus
$42,000 in the second quarter of 1995. This increase was primarily due to
higher costs of selling finance contracts receivable in the second quarter of
1996 versus the comparable period of 1995. The increase in the costs of such
sales was primarily the result of selling approximately $1.7 million more
contracts in the second quarter of 1996, combined with lower weighted average
yields on such finance contracts sold due to lower financing rates offered to
retail customers.
The Company's effective income tax rate was 20.3% for the second
quarter of 1996. Under generally accepted accounting principles, the Company
was not required to record a federal income tax provision related to its 1995
second quarter operating income due to the existence of net operating loss
carryforwards. The Company has now utilized all of its federal net operating
loss carryforwards.
Six Months Ended June 29, 1996 Compared to Six Months Ended July 1, 1995
Net sales for the first six months of 1996 of $83.6 million were $2.6
million, or 3%, higher than the $81.0 million in the comparable period of
1995. Gehl Construction's net sales increased 20% to $36.4 million in the
first six months of 1996 from $30.3 million in the first six months of 1995.
The Gehl Construction increase resulted from increased demand for the
Company's products, particularly rough-terrain telescopic forklifts and skid
steer loaders. Gehl Agriculture's net sales decreased 7% to $47.2 million in
the first six months of 1996 from $50.7 in the first six months of 1995. The
decrease was due in part to no new product introductions in the first six
months of 1996, contrasted with the introduction of two redesigned product
lines in the first six months of 1995. The decrease was also due in part to
approximately $1 million of shipments, in the first six months of 1995, of
products which have since been discontinued. Partially offsetting the
Agricultural shipment reductions was an increase in shipments of forage
harvesters and skid steer loaders.
Gross profit increased $991,000, or 4%, during the first six months of
1996 versus the comparable period of 1995, primarily due to the increased
sales volume. Gross profit as a percent of net sales increased to 29.1% for
the first six months of 1996 from 28.9% in the comparable period of 1995. The
shift in product mix of sales to Gehl Construction resulted in the overall
Company increase in gross profit as a percent of net sales. Gross profit as a
percent of net sales for Gehl Construction decreased to 32.0% in the first six
months of 1996 from 32.6% in the first six months of 1995, primarily due to
the percentage of export sales, typically made at a lower gross margin than
domestic sales, constituting a larger portion of the first six months sales in
1996 compared with 1995. Gross profit as a percent of net sales for Gehl
Agriculture increased to 26.9% for the first six months of 1996 from 26.7% for
the first six months of 1995.
Selling, general and administrative expenses increased $1.2 million,
or 8%, during the first six months of 1996 versus the comparable period of
1995. The increase related to greater investment in research and development
costs and increased selling expenses. As a percent of net sales, selling,
general and administrative expenses increased to 19.9% during the first six
months of 1996 versus 19.1% in the comparable period of 1995.
Income from operations in the first six months of 1996 of $7.7 million
was 2% lower than the $7.9 million for the comparable period of 1995.
Interest expense decreased $1.1 million, or 34%, to $2.1 million in
the first six months of 1996 from $3.2 million in the first six months of
1995. The decrease was a result of a reduction in average debt outstanding to
$49.8 million in the first six months of 1996 versus $61.9 million in the
comparable period of 1995, combined with a decrease in the average rate of
interest paid by the Company to 8.2% in the first six months of 1996 from
10.1% in the comparable period of 1995. 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 reduced
interest rate structure negotiated by the Company in conjunction with the
December 1, 1995 amendment to its line of credit facility.
Other expense, net was $461,000 in the first six months of 1996 versus
$216,000 in the comparable period of 1995. The increase was primarily due to
higher costs of selling finance contracts receivable in the first six months
of 1996 versus the comparable period of 1995. The increase in the costs of
such sales was the result of selling approximately $1.6 million more contracts
in the first six months of 1996 combined with lower weighted average yields on
such finance contracts sold due to lower financing rates offered to retail
customers.
The Company's effective income tax rate was 19.2% for the first six
months of 1996. Under generally accepted accounting principles, the Company
was not required to record a federal income tax provision related to the
operating income recorded in the first six months of 1995 due to the existence
of net operating loss carryforwards. The Company has utilized, in years prior
to 1996, substantially all of its federal net operating loss carryforwards.
In years subsequent to 1996, the Company expects to provide for federal income
taxes at rates approximating statutory rates.
Financial Condition
The Company's working capital was $72.9 million at June 29, 1996, as
compared to $72.6 million at December 31, 1995, and $85.4 million at July 1,
1995. The decrease since July 1, 1995 was due primarily to a reduction in
accounts receivable and inventory levels.
The Company's cash flow provided by operating activities in the first
six months of 1996 was $4.9 million versus $3.3 million used for operating
activities in comparable 1995. The second quarter 1996 cash flow provided by
operations was $8.1 million as compared to 1995's second quarter of $4.1
million provided by operations. The cash flows provided by operations for the
second quarter and first six months of 1996 were favorably impacted by more
stable accounts receivable balances and declining inventory levels.
Capital expenditures for property, plant and equipment during the
first six months of 1996 were approximately $1.6 million. Outstanding
commitments as of June 29, 1996 totaled approximately $420,000. The Company
expects to make approximately $4.0 million of capital expenditures during
1996.
As of June 29, 1996, the weighted average interest rate paid by the
Company on outstanding borrowings under its line of credit facility was 7.4%.
The Company had available unused borrowing capacity of $36.6 million, $27.4
million, and $20.2 million under the line of credit facility at June 29, 1996,
December 31, 1995, and July 1, 1995, respectively. At June 29, 1996, December
31, 1995, and July 1, 1995, the borrowings outstanding under the line of
credit facility were $36.1 million, $37.8 million and $52.5 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 June 29, 1996, Gehl serviced $59.2 million of such
contracts, of which $46.0 million were owned by other parties. The Company
believes that it has sufficient capacity to sell its retail finance contracts
for the foreseeable future.
Shareholders' equity at June 29, 1996 was $60.0 million. This was
$8.2 million higher than the $51.8 million of shareholders' equity at July 1,
1995, due primarily to income earned from July 2, 1995 through June 29, 1996.
<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 25, 1996,
Thomas J. Boldt, William P. Killian and Roger E. Secrist were elected as
directors of the Company for terms expiring in 1999. 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
Thomas J. Boldt 5,155,075 391,315
William P. Killian 5,155,865 390,525
Roger E. Secrist 5,133,514 412,876
The following table sets forth the other directors of the Company whose
terms of office continued after the 1996 annual meeting:
Year in Which
Name of Director Term Expires
John W. Findley 1997
John W. Gehl 1997
Arthur W. Nesbitt 1997
Fred M. Butler 1998
William D. Gehl 1998
John W. Splude 1998
In addition, at the 1996 annual meeting, shareholders approved the Gehl
Company 1995 Stock Option Plan. With respect to such approval, the number of
shares voted For and Against were 4,003,438 and 814,077, respectively. The
number of shares abstaining and the number of shares subject to broker non-
votes were 65,267 and 663,608, respectively.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Gehl Company 1995 Stock Option Plan [Incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995]
27 Financial Data Schedule [included in the EDGAR filing only]
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended June 29, 1996.
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: July 26, 1996 By: /s/ William D. Gehl
William D. Gehl
Chairman of the Board,
President and Chief
Executive Officer
Date: July 26, 1996 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
June 29, 1996
EXHIBIT INDEX
Exhibit
No. Document Description
10.1 Gehl Company 1995 Stock Option Plan [Incorporated by reference to
Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995]
27 Financial Data Schedule [included in the EDGAR filing only]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Gehl
Company's consolidated balance sheet at June 29, 1996 and consolidated
statements of income for the six month period ended June 29, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-29-1996
<CASH> 5255
<SECURITIES> 0
<RECEIVABLES> 78733
<ALLOWANCES> 0<F1>
<INVENTORY> 18791
<CURRENT-ASSETS> 104126
<PP&E> 55127
<DEPRECIATION> 34507
<TOTAL-ASSETS> 137737
<CURRENT-LIABILITIES> 31248
<BONDS> 44934<F2>
<COMMON> 614
0
0
<OTHER-SE> 59367
<TOTAL-LIABILITY-AND-EQUITY> 137737
<SALES> 83639
<TOTAL-REVENUES> 83639
<CGS> 59271
<TOTAL-COSTS> 59271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2097
<INCOME-PRETAX> 5977
<INCOME-TAX> 1148
<INCOME-CONTINUING> 4829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4829
<EPS-PRIMARY> .78
<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>
