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 28, 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 September 28, 1996
Common Stock, $.10 Par Value 6,152,788
<PAGE>
GEHL COMPANY
FORM 10-Q
September 28, 1996
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three- and Nine-Month Periods Ended September 28, 1996
and September 30, 1995 . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at September 28, 1996,
December 31, 1995, and September 30, 1995 . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Nine-Month Periods Ended September 28, 1996 and
September 30, 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 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. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $ 40,550 $ 36,901 $ 124,189 $ 117,899
Cost of goods sold 28,298 26,175 87,569 83,796
------- -------- -------- --------
GROSS PROFIT 12,252 10,726 36,620 34,103
Selling, general and
administrative expenses 7,726 7,346 24,367 22,805
------- -------- ------- --------
INCOME FROM OPERATIONS 4,526 3,380 12,253 11,298
Interest expense (827) (1,404) (2,924) (4,592)
Interest income 385 462 1,193 1,409
Other expense, net (587) (177) (1,048) (393)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 3,497 2,261 9,474 7,722
Income tax provision 876 25 2,024 75
------- ------- ------- -------
NET INCOME $ 2,621 $2,236 $ 7,450 $ 7,647
========= ======== ======= =======
EARNINGS PER SHARE $.42 $.36 $1.20 $ 1.22
</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 28, December 31, September 30,
1996 1995 1995
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash $ 5,205 $ 3,266 $ 4,439
Accounts receivable-net 65,995 69,087 72,138
Finance contracts receivable-net 5,887 4,817 4,711
Inventories 16,238 23,320 22,631
Prepaid expenses and other assets 1,184 1,676 3,853
------- ------- -------
Total Current Assets 94,509 102,166 107,772
------- -------- --------
Property, plant and equipment-net 20,642 20,315 19,979
Finance contracts receivable-net,
non-current 3,579 2,899 2,879
Other assets 8,755 8,118 5,343
-------- -------- -------
TOTAL ASSETS $ 127,485 $ 133,498 $ 135,973
======== ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current portion of long-term debt $ 174 $ 197 $ 210
obligations
Accounts payable 14,571 14,083 13,890
Accrued liabilities 18,300 15,281 14,836
------- ------- -------
Total Current Liabilities 33,045 29,561 28,936
------- ------- -------
Line of credit facility 21,333 37,848 42,464
Long-term debt obligations 8,786 8,818 8,851
Other long-term liabilities 1,666 1,592 1,424
------- ------- -------
Total Long-Term Liabilities 31,785 48,258 52,739
------- ------- -------
Common stock, $.10 par value
25,000,000 shares authorized,
6,152,788, 6,216,765 and 6,210,767
shares outstanding, respectively 615 622 621
Preferred stock, $.10 par value,
2,000,000 shares authorized, no
shares issued - - -
Capital in excess of par 26,113 26,580 26,497
Retained earnings 35,927 28,477 27,180
------- ------- -------
Total Shareholders' Equity 62,655 55,679 54,298
------- ------- -------
TOTAL LIABILITIES AND $127,485 $ 133,498 $ 135,973
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 28, September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 7,450 $ 7,647
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,017 2,125
Increase in finance contracts receivable (30,053) (24,957)
Proceeds from sales of finance contracts 26,830 22,241
Cost of sales of finance contracts 973 418
Net changes in remaining working capital 12,952 (1,836)
items
Other - 137
------- -------
Net cash provided by operating activities 20,169 5,775
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (2,239) (1,443)
Other assets 520 571
------- -------
Net cash used for investing activities (1,719) (872)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt obligations 533 60
Increase in long-term liabilities (55) 90
Repayments of credit facility (16,515) (3,415)
Treasury stock repurchases (535) -
Proceeds from issuance of common stock 61 231
------- -------
Net cash used for financing activities (16,511) (3,034)
-------- -------
Net increase in cash 1,939 1,869
Cash, beginning of period 3,266 2,570
------- -------
Cash, end of period $ 5,205 $ 4,439
======== =======
Supplemental disclosure of cash flow
information:
Cash paid for the following:
Interest $ 2,920 $ 4,583
Income Taxes $ 1,810 $ 2,326
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 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 nine month periods ended September 28, 1996 and September 30,
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
nine months ended September 28, 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 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 6,221,449 and 6,298,163 for the three months ended September 28, 1996
and September 30, 1995, respectively, and 6,217,549 and 6,252,373 for the
nine months ended September 28, 1996 and September 30, 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):
September 28, December 31, September 30,
1996 1995 1995
Raw materials and $ 3,683 $ 4,151 $ 3,711
supplies
Work-in process 8,152 9,893 8,527
Finished machines 23,276 28,149 27,250
and parts ------ ------ ------
Total current cost 35,111 42,193 39,488
value
Adjustment to LIFO (18,873) (18,873) (16,857)
basis ------- ------ ------
$ 16,238 $ 23,320 $ 22,631
======= ====== ======
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Results of Operations
Three Months Ended September 28, 1996 Compared to Three Months Ended
September 30, 1995
Net sales for the third quarter of 1996 of $40.6 million were 10% higher
than the $36.9 million in the comparable period of 1995. Gehl
Construction's net sales increased 9% to $18.5 million in the third quarter
of 1996 from $17.0 million in the third quarter of 1995. The Gehl
Construction increase resulted from continued strong demand for skid steer
loaders and rough-terrain telescopic forklifts. Gehl Agriculture's net
sales increased 11% to $22.1 million in the third quarter of 1996 from
$19.9 million in the third quarter of 1995. The increase was primarily the
result of higher shipment levels of forage harvesting and haytool equipment
in the third quarter of 1996 than in the comparable period of 1995. The
Company believes that the higher shipment levels were, in part, the result
of the impact of near record high milk prices being earned by the Company's
dairy farm customers.
Gross profit increased $1.5 million, or 14%, during the third 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 30.2% for the
third quarter of 1996 from 29.1% in the comparable period of 1995. Gross
profit as a percent of net sales for Gehl Construction increased to 32.1%
in the third quarter of 1996 from 32.0% in the third quarter of 1995.
Gross profit as a percent of net sales for Gehl Agriculture increased to
28.6% in the third quarter of 1996 from 26.6% in the comparable period of
1995. 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
1996 versus products shipped in comparable 1995; 2) export sales, typically
made at a lower gross margin than domestic sales, constituting a lower
portion of third quarter sales in 1996 than in 1995; and 3) the impact of
favorable material purchase prices, especially steel, in the third quarter
of 1996.
Selling, general and administrative expenses increased $380,000, or 5%,
during the third quarter of 1996 versus the comparable period of 1995. As
a percent of sales, selling, general and administrative expenses decreased
to 19.1% during the third quarter of 1996 versus 19.9% in the comparable
period of 1995.
Income from operations in the third quarter of 1996 was $4.5 million
versus $3.4 million in the third quarter of 1995. The increase was
primarily due to increased sales volume, improved gross margin percentage
and a decline in selling, general and administrative expenses as a percent
of net sales.
Interest expense decreased $577,000, or 41%, to $827,000 in the third
quarter of 1996 from $1.4 million in the third quarter of 1995. The
decrease was a result of a reduction in average debt outstanding to $38.8
million in the third quarter of 1996 versus $56.7 million in the third
quarter of 1995, combined with a decrease in the average rate of interest
paid by the Company to 8.2% in the third quarter of 1996 versus 9.7% 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 interest 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 $587,000 in the third quarter of 1996 versus
$177,000 in the third quarter of 1995. The increase was primarily due to
higher costs of selling finance contracts receivable in the third quarter
of 1996 versus the comparable period of 1995. The increase in the costs of
such sales was primarily the result of selling approximately $3.6 million
more contracts in the third quarter of 1996, combined with lower weighted
average yields on such contracts sold due to low financing rates offered to
retail customers.
The Company's effective income tax rate was 25.1% for the third quarter
of 1996. Under generally accepted accounting principles, the Company was
not required to record a federal income tax provision related to its 1995
third quarter operating income due to existence of net operating loss
carryforwards. The Company has now utilized all of its federal net
operating loss carryforwards.
Nine Months Ended September 28, 1996 Compared to Nine Months Ended
September 30, 1995
Net sales for the first nine months of 1996 of $124.2 million were $6.3
million, or 5%, higher than the $117.9 million in the comparable period of
1995. Gehl Construction's net sales increased 16% to $54.9 million in the
first nine months of 1996 from $47.3 million in the first nine 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 2% to $69.3
million in the first nine months of 1996 from $70.6 million in the first
nine months of 1995. The decrease was due in part to the introduction of
two redesigned product lines in the first nine months of 1995 contrasted to
only one such introduction in the first nine months of 1996. The decrease
was also due in part to approximately $1.3 million of shipments, in the
first nine months of 1995, of products which have since been discontinued.
Partially offsetting the Gehl Agricultural shipment reductions was an
increase in shipments of forage harvesters and skid steer loaders.
Gross profit increased $2.5 million, or 7%, in the first nine months of
1996 versus the comparable period of 1995, primarily due to increased sales
volume. Gross profit as a percent of net sales increased to 29.5% for the
first nine months of 1996 from 28.9% in the comparable period of 1995. The
shift in product mix of sales toward 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 32.1%
in the first nine months of 1996 from 32.3% in the first nine months of
1995. Gross profit as a percent of net sales for Gehl Agriculture
increased to 27.4% for the first nine months of 1996 from 26.6% for the
first nine months of 1995. The primary reasons for the Gehl Agriculture
percentage improvement were: 1) the impact of a change in the mix of
products shipped in the first nine months of 1996 versus products shipped
in comparable 1995, 2) export sales, typically made at a lower gross margin
than domestic sales, constituting a lower portion of sales in the first
nine months of 1996 than in 1995; and 3) the impact of favorable material
purchase prices, especially steel, in the first nine months of 1996.
Selling, general and administrative expenses increased $1.6 million, or
7%, during the first nine months of 1996 versus the comparable period of
1995. The increase related to a greater investment in research and
development costs and increased selling expenses. As a percent of net
sales, selling, general, and administrative expenses increased to 19.6%
during the first nine months of 1996 versus 19.3% in the comparable period
of 1995.
Income from operations in the first nine months of 1996 of $12.3
million was 8% higher than the $11.3 million for the comparable period of
1995.
Interest expense decreased $1.7 million, or 36%, to $2.9 million in
the first nine months of 1996 from $4.6 million in the first nine months of
1995. The decrease was a result of a reduction in average debt outstanding
to $45.9 million in the first nine months of 1996 versus $59.8 million in
the comparable period of 1995, combined with a decrease in the average rate
of interest paid by the Company to 8.3% in the first nine 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 receivables and inventory levels and increased
shareholders' equity over the past twelve months. The interest 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 $1,048,000 in the first nine months of 1996
versus $393,000 in the comparable period of 1995. The increase was
primarily due to higher costs of selling finance contracts receivable in
the first nine months of 1996 versus the comparable period of 1995. The
increase in the costs of such sales was the result of selling approximately
$5.3 million more contracts in the first nine 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 21.4% for the first nine
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 nine 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 $61.5 million at September 28, 1996,
as compared to $72.6 million at December 31, 1995, and $78.8 million at
September 30, 1995. The decrease since September 30, 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
nine months of 1996 was $20.2 million versus $5.8 million provided by
operations in comparable 1995. The third quarter 1996 cash flow provided
by operations was $15.3 million as compared to 1995's third quarter of $9.1
million. The cash flows provided by operations for the third quarter and
first nine months of 1996 were favorably impacted by declining accounts
receivable and inventory levels.
Capital expenditures for property, plant and equipment during the first
nine months of 1996 were approximately $2.2 million. Outstanding
commitments as of September 28, 1996 totaled approximately $518,000. The
Company expects to make approximately $4.0 million of capital expenditures
during 1996. The Company has announced plans to expand its two South Dakota
Construction plants, at an aggregate cost of approximately $5.2 million.
The majority of the expansion costs will be incurred in 1997.
As of September 28, 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 $42.5 million,
$27.4 million, and $27.2 million under the line of credit facility at
September 28, 1996, December 31, 1995, and September 30, 1995,respectively.
At September 28, 1996, December 31, 1995, and September 30,1995, the
borrowings outstanding under the line of credit facility were $21.3
million, $37.8 million, and $42.5 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 finance service companies to sell, with recourse, its
finance contracts receivable. The Company continues to service all
contracts whether or not sold. At September 28,1996, Gehl serviced $61.1
million of such contracts, of which $50.9 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 September 28, 1996 was $62.7 million. This was
$8.4 million higher than the $54.3 million of shareholders' equity at
September 30, 1995, due primarily to income earned from October 1, 1995
through September 28, 1996.
<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 28, 1996.
<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: November 1, 1996 By: /s/ William D. Gehl
William D. Gehl
Chairman of the Board,
President and Chief
Executive Officer
Date: November 1, 1996 By: /s/ Kenneth P. Hahn
Kenneth P. Hahn
Corporate Controller
<PAGE>
GEHL COMPANY
FORM 10-Q
September 28, 1996
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 28, 1996 and consolidated
statements of income for the nine month period ended September 28, 1996 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-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-28-1996
<CASH> 5205
<SECURITIES> 0
<RECEIVABLES> 71882
<ALLOWANCES> 0<F1>
<INVENTORY> 16238
<CURRENT-ASSETS> 94509
<PP&E> 55760
<DEPRECIATION> 35118
<TOTAL-ASSETS> 127485
<CURRENT-LIABILITIES> 33045
<BONDS> 30119<F2>
<COMMON> 615
0
0
<OTHER-SE> 62040
<TOTAL-LIABILITY-AND-EQUITY> 127485
<SALES> 124189
<TOTAL-REVENUES> 124189
<CGS> 87569
<TOTAL-COSTS> 87569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2924
<INCOME-PRETAX> 9474
<INCOME-TAX> 2024
<INCOME-CONTINUING> 7450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7450
<EPS-PRIMARY> 1.20
<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>
